Upland Software Reports Record Third Quarter 2017 Financial Results with 36% Revenue Growth and Raises Full Year 2017 Guidance
AUSTIN, Texas, Nov. 9, 2017 /PRNewswire/ -- Upland Software, Inc. (Nasdaq: UPLD), a leader in cloud-based Enterprise Work Management software, today announced financial and operating results for the third quarter of 2017 and provided increased guidance for its fourth quarter and full year of 2017.
Third Quarter 2017 Financial Highlights
-- Total revenue was $26.1 million, an increase of 36% from $19.2 million
in the third quarter of 2016.
-- Subscription and support revenue was $23.2 million, an increase of 36%
from $17.0 million in the third quarter of 2016.
-- GAAP net loss was $3.5 million compared to a net loss of $2.4 million in
the third quarter of 2016, principally as a result of one-time expenses
related to the accretive acquisition of Waterfall in the current quarter
that were not present in the third quarter of 2016 and a $0.7 million
non-cash charge for the write-down of an unnecessary office lease from a
recent acquisition.
-- Adjusted EBITDA was $8.3 million, an increase of 133% from $3.6 million
in the third quarter of 2016. A reconciliation of Adjusted EBITDA to net
loss, the most directly comparable GAAP measure, is provided in the
financial tables that accompany this release.
-- Cash on hand as of the end of the third quarter was $53.0 million.
"Q3 was another outstanding quarter with record 36% revenue growth, record Adjusted EBITDA, and the strategic and accretive acquisition of Waterfall," said Jack McDonald, chairman and chief executive officer of Upland Software. "We have now met or beat guidance in each of the 13 consecutive quarters since going public," he added. "Moreover, we are raising our guidance resulting in Q4 revenue growth of 35% and Adjusted EBITDA margins of 35% at the midpoints, continuing our strong momentum. Our pipeline of accretive acquisitions remains robust, and we have the operating and financial resources to execute."
Third Quarter Business Highlights
-- Expanded 173 existing customer relationships, including 23 major
expansions, and added 94 new customer relationships, including 14 major
accounts.
-- Delivered the first major release of our Upland RightAnswers Enterprise
Knowledge Management solution to improve overall agent and self-service
experience; improved the product foundation; and implemented the first
phase of Upland's consistent, intuitive UI/UX.
-- Delivered a new cloud cost and usage management module, integrated with
Amazon Web Services, for our ComSci ITFM offering.
-- Released seven customer-driven feature packs and product foundation
enhancements that included updates to the mobile app in our web content
management platform; multipart-SMS reporting improvements, new
legislator and geocoding data, and performance improvements in our
Upland Mobile Messaging platform; and performance and security
enhancements for our Workflow Automation product family.
-- Continued to transition from a colocation data center strategy to Amazon
Web Services to create a scalable, standard cloud environment in
anticipation of ongoing customer growth.
Business Outlook
Upland provides quarterly and annual revenue guidance, updated, as appropriate, at each quarterly reporting period. For the fourth quarter of 2017, Upland expects reported total revenue to be between $25.6 and $26.6 million, including subscription and support revenue between $23.0 and $23.8 million, for growth in recurring revenue of 37% at the mid-point over the fourth quarter ended December 31, 2016. Adjusted EBITDA is expected to be between $8.8 and $9.4 million, for an Adjusted EBITDA margin of 35% at the mid-point, representing growth of 114% at the mid-point over the quarter-ended December 31, 2016.
Upland raises its 2017 annual revenue guidance range and expects a total reported revenue to be between $95.8 and $96.8 million, including subscription and support revenue between $83.7 and $84.5 million, for growth in recurring revenue of 28% at the mid-point over the year ended December 31, 2016. Adjusted EBITDA is expected to be between $29.4 and $30.0 million, for an Adjusted EBITDA margin of 31% at the mid-point, representing growth of 135% at the mid-point over the year ended December 31, 2016.
Conference Call Details
Upland's executive team will host a live conference call and webcast at 4:00 p.m. Central Time, 5:00 p.m. Eastern Time today to review Upland's financial results and outlook for the business. The conference call may be accessed within North America by dialing 1.888.684.7501 and outside of North America by dialing 1.925.418.7884, referencing conference code 72803764. The conference call will be simultaneously webcast on Upland's investor relations website, which can be accessed at investor.uplandsoftware.com. This webcast will contain forward-looking statements and other material information regarding Upland's financial and operating results.
Following completion of the live call, a recorded replay of the webcast will be available on Upland's website at investor.uplandsoftware.com for three months.
About Upland Software
Upland Software (Nasdaq: UPLD) is a leading provider of cloud-based Enterprise Work Management software. Our family of applications enables users to manage their projects, professional workforce and IT investments; automate document-intensive business processes; and effectively engage with their customers, prospects and community via the web and mobile technologies. With more than 2,500 customers and over 250,000 users around the world, Upland Software solutions help customers run their operations smoothly, adapt to change quickly, and achieve better results every day. To learn more, visit www.uplandsoftware.com.
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: Adjusted EBITDA, non-GAAP net income (loss) and non-GAAP net income (loss) per share.
We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results, such as our revenues excluding the impact for foreign currency fluctuations or our operating performance excluding not only non-cash charges, but also discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to our historical performance and liquidity as well as comparisons to our competitors' operating results. We believe these non-GAAP financial measures are useful to investors both because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and they are used by our institutional investors and the analyst community to help them analyze the health of our business. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the tables provided below in this release.
Upland defines Adjusted EBITDA as net income (loss), calculated in accordance with GAAP, plus net income (loss) from discontinued operations, depreciation and amortization expense, interest expense, net, other expense (income), net, loss on debt extinguishment, provision for income taxes, stock-based compensation expense, acquisition-related expenses, non-recurring litigation costs, and purchase accounting adjustments for deferred revenue.
Upland defines non-GAAP net income (loss) as net income (loss), calculated in accordance with GAAP, plus, amortization of purchased intangible assets, amortization of debt discount, loss on debt extinguishment, stock-based compensation expenses, acquisition-related expenses, nonrecurring litigation expenses, purchase accounting adjustments for deferred revenue, and the related tax effect of the adjustments above.
Annualized recurring revenue value as of December 31 equals the monthly value of our recurring revenue contracts measured as of December 31 multiplied by 12. We define annual dollar renewal rate (also referred to as net dollar retention rate) as of December 31 as the aggregate annualized recurring revenue value at December 31 from those customers that were also customers as of December 31 of the prior fiscal year, divided by the aggregate annualized recurring revenue value from all customers as of December 31 of the prior fiscal year.
Upland's earnings press releases containing such non-GAAP reconciliations can be found on the Investor Relations section of Upland's website at investor.uplandsoftware.com.
Forward-looking Statements
This release contains forward-looking statements which are subject to substantial risks, uncertainties and assumptions. Accordingly, you should not place undue reliance on these forward-looking statements. Forward-looking statements include any statement that does not directly relate to any historical or current fact and often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "seek," "will," "may" or similar expressions. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including: our financial performance and our ability to achieve, sustain or increase profitability or predict financial results; our ability to attract and retain customers; our ability to deliver high-quality customer service; lack of demand growth for enterprise work management applications; our ability to effectively manage our growth; our ability to consummate and integrate acquisitions and mergers; maintaining our senior management and key personnel; our ability to maintain and expand our direct sales organization; our ability to obtain financing in the future on acceptable terms or at all; the performance of our resellers; our ability to adapt to changing market conditions and competition; our ability to successfully enter new markets and manage our international expansion; fluctuations in currency exchange rates; the operation and reliability of our third-party data centers and other service providers; and factors that could affect our business and financial results identified in Upland's filings with the Securities and Exchange Commission (the "SEC"), including Upland's most recent 10-K and our recent Quarterly Report on Form 10-Q filed with the SEC. Additional information will also be set forth in Upland's future quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings that Upland makes with the SEC. The forward-looking statements herein represent Upland's views as of the date of this press release and these views could change. However, while Upland may elect to update these forward-looking statements at some point in the future, Upland specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the views of Upland as of any date subsequent to the date of this press release.
Investor Relations Contact:
Mike Hill
Upland Software
512.960.1031
investor-relations@uplandsoftware.com
Media Contact:
Kaley Ganino
Upland Software
855-944-7526
media@uplandsoftware.com
Upland Software, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
---- ---- ---- ----
Revenue:
Subscription and support $23,169 $17,029 $60,711 $48,490
Perpetual license 856 332 3,296 1,108
--- --- ----- -----
Total product revenue 24,025 17,361 64,007 49,598
------ ------ ------ ------
Professional services 2,047 1,880 6,098 5,795
----- ----- ----- -----
Total revenue 26,072 19,241 70,105 55,393
------ ------ ------ ------
Cost of revenue:
Subscription and support 7,737 5,747 20,306 16,607
Professional services 1,376 1,045 3,838 3,775
----- ----- ----- -----
Total cost of revenue 9,113 6,792 24,144 20,382
Gross profit 16,959 12,449 45,961 35,011
Operating expenses:
Sales and marketing 4,258 3,097 11,516 9,119
Research and development 4,092 3,737 11,572 11,701
Refundable Canadian tax credits (195) (115) (424) (340)
General and administrative 5,084 4,670 17,564 13,340
Depreciation and amortization 1,648 1,322 4,111 4,270
Acquisition-related expenses 4,399 1,047 10,368 4,855
----- ----- ------ -----
Total operating expenses 19,286 13,758 54,707 42,945
Loss from operations (2,327) (1,309) (8,746) (7,934)
Other expense:
Interest expense, net (2,277) (709) (4,372) (1,932)
Loss on debt extinguishment 1,634 - - -
Other expense, net (130) (64) (260) (1,105)
Total other expense (773) (773) (4,632) (3,037)
---- ---- ------ ------
Loss before provision for income taxes (3,100) (2,082) (13,378) (10,971)
Provision for income taxes (406) (308) (1,553) (569)
---- ---- ------ ----
Net loss $(3,506) $(2,390) $(14,931) $(11,540)
======= ======= ======== ========
Net loss per common share:
Net loss per common share, basic and diluted $(0.18) $(0.14) $(0.83) $(0.71)
Weighted-average common shares outstanding, basic and diluted 19,380,519 16,702,062 18,043,365 16,339,983
Upland Software, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
September 30, 2017 December 31, 2016
------------------ -----------------
(unaudited) (audited)
Assets
Current assets:
Cash and cash equivalents $52,976 $28,758
Accounts receivable, net of allowance 19,129 15,254
Prepaid and other 2,970 3,287
Total current assets 75,075 47,299
Canadian tax credits receivable 1,715 978
Property and equipment, net 3,462 4,356
Intangible assets, net 47,512 28,512
Goodwill 122,904 69,097
Other assets 179 346
Total assets $250,847 $150,588
======== ========
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $3,976 $1,268
Accrued compensation 3,869 2,541
Accrued expenses and other 8,897 5,505
Deferred revenue 31,842 23,552
Due to sellers 8,305 4,642
Current maturities of notes payable 1,701 2,190
Total current liabilities 58,590 39,698
Commitments and contingencies
Canadian tax credit liability to sellers - 361
Notes payable, less current maturities 90,006 45,739
Deferred revenue 1,299 247
Noncurrent deferred tax liability, net 4,239 3,404
Other long-term liabilities 1,366 2,126
Total liabilities 155,500 91,575
Stockholders' equity:
Common stock 2 2
Additional paid-in capital 174,990 124,566
Accumulated other comprehensive loss (2,311) (3,152)
Accumulated deficit (77,334) (62,403)
Total stockholders' equity 95,347 59,013
------ ------
Total liabilities and stockholders' equity $250,847 $150,588
======== ========
Upland Software, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended September 30,
-------------------------------
2017 2016
---- ----
Operating activities
Net loss $(14,931) $(11,540)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 8,112 7,499
Deferred income taxes 698 251
Foreign currency re-measurement (gain) loss (422) (222)
Non-cash interest and other expense 416 196
Non-cash stock compensation expense 7,804 2,664
Loss on disposal of business - 686
Non-cash loss on retirement of fixed assets (18) -
Changes in operating assets and liabilities, net of purchase business combinations:
Accounts receivable 753 310
Prepaids and other 1,664 820
Accounts payable 1,736 (126)
Accrued expenses and other liabilities 789 (828)
Deferred revenue (793) 1,425
Net cash provided by operating activities 5,808 1,135
Investing activities
Purchase of property and equipment (443) (886)
Purchase of customer relationships (55) (408)
Purchase business combinations, net of cash acquired (61,108) (11,846)
Net cash used in investing activities (61,606) (13,140)
Financing activities
Payments on capital leases (1,098) (1,320)
Proceeds from notes payable, net of issuance costs 54,683 14,925
Payments on notes payable (11,319) (1,560)
Issuance of common stock, net of issuance costs 42,629 197
Additional consideration paid to sellers of businesses (5,361) (1,484)
Net cash provided by financing activities 79,534 10,758
Effect of exchange rate fluctuations on cash 482 254
Change in cash and cash equivalents 24,218 (993)
Cash and cash equivalents, beginning of period 28,758 18,473
Cash and cash equivalents, end of period $52,976 $17,480
======= =======
Supplemental disclosures of cash flow information:
Cash paid for interest $3,966 $1,707
Cash paid for taxes $1,463 $518
Noncash investing and financing activities:
Equipment acquired pursuant to capital lease obligations $121 $802
Issuance of common stock in business combination $ - $8,100
Upland Software, Inc.
Reconciliation of Adjusted EBITDA
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
---- ---- ---- ----
Reconciliation of Net loss to Adjusted EBITDA:
Net Loss $(3,506) $(2,390) $(14,931) $(11,540)
Add:
Depreciation and amortization expense 3,066 2,424 8,112 7,499
Interest expense, net 2,277 709 4,372 1,932
Other expense, net 130 64 260 1,105
Loss on debt extinguishment (1,634) - - -
Provision for income taxes 406 308 1,553 569
Stock-based compensation expense 1,884 1,100 7,804 2,664
Acquisition-related expense 4,399 1,047 10,368 4,855
Nonrecurring litigation expense - - - 25
Purchase accounting deferred revenue discount 1,294 313 3,032 1,245
Adjusted EBITDA $8,316 $3,575 $20,570 $8,354
====== ====== ======= ======
Upland Software, Inc.
Reconciliation of Non-GAAP Net Income (Loss) and Non-GAAP Diluted EPS
(in thousands, except share and per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
---- ---- ---- ----
Reconciliation of Net Loss to Non-GAAP net income
(loss):
Net loss $(3,506) $(2,390) $(14,931) $(11,540)
Add:
Stock-based compensation expense 1,884 1,100 7,804 2,664
Amortization of purchased intangibles 2,493 1,781 6,285 5,629
Amortization of debt discount 296 67 416 196
Acquisition-related expense 4,399 1,047 10,368 4,855
Loss on debt extinguishment (1,634) - - -
Nonrecurring litigation expense - - - 25
Purchase accounting deferred revenue discount 1,294 313 3,032 1,245
Tax effect of adjustments above (84) (81) (242) (240)
Non-GAAP net income (loss) $5,142 $1,837 $12,732 $2,834
====== ====== ======= ======
Weighted average ordinary shares outstanding, basic 19,380,519 16,702,062 18,043,365 16,339,983
Weighted average ordinary shares outstanding, diluted 20,633,820 17,250,700 19,169,180 16,721,515
Non-GAAP earnings per share, basic $0.27 $0.11 $0.71 $0.17
Non-GAAP earnings per share, diluted $0.25 $0.11 $0.66 $0.17
Upland Software, Inc.
Supplemental Financial Information
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
---- ---- ---- ----
Stock-based compensation:
Cost of revenue $147 $13 $277 $28
Research and development 219 38 560 80
Sales and marketing 73 21 149 66
General and administrative 1,445 1,028 6,818 2,490
Total $1,884 $1,100 $7,804 $2,664
====== ====== ====== ======
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
---- ---- ---- ----
Depreciation:
Cost of
revenue $443 $472 $1,461 $1,383
Operating
expense 130 171 366 487
Total $573 $643 $1,827 $1,870
==== ==== ====== ======
Amortization:
Cost of
revenue $975 $630 $2,540 $1,846
Operating
expense 1,518 1,151 3,745 3,783
Total $2,493 $1,781 $6,285 $5,629
====== ====== ====== ======
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SOURCE Upland Software, Inc.
