Business Wire | Aug 4, 2021 04:01PM EDT

Upland Software Reports Second Quarter 2021 Financial Results

Aug. 04, 2021

AUSTIN, Texas--(BUSINESS WIRE)--Aug. 04, 2021--Upland Software, Inc. (Nasdaq: UPLD), a leader in cloud-based tools for digital transformation, today announced financial and operating results for the second quarter of 2021 and issued guidance for its third quarter and full year of 2021.

Second Quarter 2021 Financial Highlights

* Total revenue was $76.3 million, an increase of 7% from $71.3 million in the second quarter of 2020. * Subscription and support revenue was $72.4 million, an increase of 7% from $67.7 million in the second quarter of 2020. * GAAP net loss was $19.0 million, or a loss of $0.63 cents per share, compared to a GAAP net loss of $14.2 million, or a loss of $0.57 cents per share, in the second quarter of 2020. * Adjusted EBITDA was $23.7 million, or 31% of total revenue, compared to $23.7 million, or 33% of total revenue, in the second quarter of 2020. * GAAP operating cash flow was $10.8 million, compared to GAAP operating cash flow of $0.8 million in the second quarter of 2020. Free cash flow was $10.6 million, compared to free cash flow of $0.4 million in the second quarter of 2020. * Cash on hand as of the end of the second quarter of 2021 was $176.5 million.

"In Q2, we closed the strategic and accretive acquisition of Panviva," said Jack McDonald, Upland's chairman and chief executive officer. "In addition, we posted strong free cash flow, while continuing to invest in our go-to-market growth initiatives," he added. "Our acquisition pipeline remains robust and we are active in the market for additional opportunities."

Second Quarter Business Highlights

* We expanded relationships with 311 existing customers, 51 of which were major expansions. We also welcomed 133 new customers to Upland in the second quarter, including 32 new major customers. * We completed the acquisition of Panviva, expanding our presence in the knowledge management market for regulated industries including utilities, healthcare, and financial services. * We welcomed Dan Doman as our new Chief Product Officer. Dan is focused on optimizing our product strategy and sharpening our R&D focus, all while working closely with our M&A and go-to-market functions.

Business Outlook

For the quarter ending September 30, 2021, Upland expects reported total revenue to be between $75.4 and $79.4 million, including subscription and support revenue between $72.2 and $75.8 million, for growth in recurring revenue of 4% at the mid-point over the quarter-ended September 30, 2020. Third quarter 2021 Adjusted EBITDA is expected to be between $23.9 and $25.9 million, for an Adjusted EBITDA margin of 32% at the mid-point. This Adjusted EBITDA guide at the mid-point is in line with the quarter-ended September 30, 2020.

For the full year ending December 31, 2021, Upland expects reported total revenue to be between $300.8 and $312.8 million, including subscription and support revenue between $287.1 and $297.1 million, for growth in recurring revenue of 5% at the mid-point over the year ended December 31, 2020. Full year 2021 Adjusted EBITDA is expected to be between $94.8 and $100.8 million, for an Adjusted EBITDA margin of 32% at the mid-point. This Adjusted EBITDA guide at the midpoint is a reduction of 2% over the year ended December 31, 2020, reflecting incremental investments in our go-to-market activities.

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 call can be accessed via a webcast on investor.uplandsoftware.com, or by dialing 1-866-270-1533 in the United States or +1-412-317-0797 if outside the United States, using the conference identification number: 10158078. This webcast will contain forward-looking statements and other material information regarding Upland's financial and operating results.

Following the completion of the conference call, a recording of the webcast will be made available at investor.uplandsoftware.com for twelve months.

About Upland Software

Upland helps global businesses accelerate digital transformation with a powerful cloud software library that provides choice, flexibility, and value. Our growing library of products delivers the "last mile" plug-in processes, reporting, and job specific workflows that major cloud platforms and homegrown systems don't provide. We focus on specific business challenges and support every corner of the organization, operating at scale and delivering quick time to value for our 1,700+ enterprise customers. 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), non-GAAP net income (loss) per share and free cash flow.

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.

We are unable to reconcile any forward-looking non-GAAP financial measures to their directly comparable GAAP financial measures because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort.

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, 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, non-recurring litigation expenses, purchase accounting adjustments for deferred revenue, non-recurring provision for income tax, and the related tax effect of the adjustments above.

Upland defines free cash flow as GAAP operating cash flow less purchases of property and equipment.

Upland defines major accounts as accounts with greater than or equal to $25,000 in annual recurring revenue.

Upland defines major expansions as existing customers who expanded the amount of annual recurring revenue under their contract by at least $25,000.

Upland defines cash gross margin as product revenue less subscription and support cost of sales, excluding depreciation & amortization.

Forward-looking Statements

This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events or our future financial or operating performance, including our guidance related to future performance, and are subject to substantial risks, uncertainties and assumptions. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make. 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," "hope," "predict," "could," "should," "would," "project," or the negative or plural of these words or similar expressions, although not all forward-looking statements contain these words. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including, but are not limited to: our financial performance and our ability to achieve, sustain or increase profitability or predict future results; our ability to attract and retain customers; our ability to deliver high-quality customer service; the growth of demand for enterprise work management applications; our plans regarding, and our ability to effectively manage, our growth; our plans regarding future acquisitions and our ability to consummate and integrate acquisitions; 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; the operation and reliability of our third-party data centers and other service providers; our ability to adapt to technological change and continue to innovate; our ability to integrate our applications with other software applications; our ability to comply with privacy laws and regulations; 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 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, except as required by law. 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.





Upland Software, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(unaudited) (unaudited) (unaudited) (unaudited)

Revenue:

Subscription and $ 72,405 $ 67,699 $ 143,058 $ 131,590 support

Perpetual license 415 491 767 852

Total product revenue 72,820 68,190 143,825 132,442

Professional services 3,444 3,125 6,408 6,905

Total revenue 76,264 71,315 150,233 139,347

Cost of revenue:

Subscription and 23,161 21,200 45,843 41,139 support

Professional services 1,851 2,472 3,596 4,734 and other

Total cost of revenue 25,012 23,672 49,439 45,873

Gross profit 51,252 47,643 100,794 93,474

Operating expenses:

Sales and marketing 14,298 11,820 26,730 22,751

Research and 11,113 10,294 22,053 19,412 development

General and 19,192 17,655 43,561 34,331 administrative

Depreciation and 10,278 9,037 20,021 18,308 amortization

Acquisition-related 5,534 5,781 15,120 20,939 expenses

Total operating 60,415 54,587 127,485 115,741 expenses

Income (loss) from (9,163 ) (6,944 ) (26,691 ) (22,267 )operations

Other expense:

Interest expense, net (7,942 ) (7,873 ) (15,729 ) (15,516 )

Other expense, net (399 ) (15 ) (162 ) (1,417 )

Total other expense (8,341 ) (7,888 ) (15,891 ) (16,933 )

Loss before benefitfrom (provision for) (17,504 ) (14,832 ) (42,582 ) (39,200 )income taxes

Benefit from(provision for) (1,538 ) 673 2,856 4,960 income taxes

Net loss $ (19,042 ) $ (14,159 ) $ (39,726 ) $ (34,240 )

Net loss per commonshare, basic and $ (0.63 ) $ (0.57 ) $ (1.32 ) $ (1.37 )diluted

Weighted-averagecommon shares 30,097,749 25,032,996 30,034,252 25,057,715 outstanding, basicand diluted

Upland Software, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

June 30,

December 31,

2021

2020

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

176,539

$

250,029

Accounts receivable, net of allowance

38,936

44,472

Deferred commissions, current

7,878

5,784

Unbilled receivables

5,652

4,561

Prepaid and other

13,579

12,694

Total current assets

242,584

317,540

Tax credits receivable

2,729

2,427

Property and equipment, net

3,161

2,778

Operating lease right-of-use asset

6,740

10,124

Intangible assets, net

304,752

279,975

Goodwill

470,182

383,598

Deferred commissions, noncurrent

14,444

12,962

Other assets

1,807

1,816

Total assets

$

1,046,399

$

1,011,220

Liabilities and stockholders' equity

Current liabilities:

Accounts payable

$

15,608

$

5,395

Accrued compensation

15,142

8,138

Accrued expenses and other current liabilities

13,361

13,438

Deferred revenue

95,245

87,552

Due to sellers

11,143

416

Operating lease liabilities, current

3,621

3,315

Current maturities of notes payable

3,153

3,166

Total current liabilities

157,273

121,420

Notes payable, less current maturities

516,751

518,437

Deferred revenue, noncurrent

1,667

1,587

Operating lease liabilities, noncurrent

8,537

8,387

Noncurrent deferred tax liability, net

31,774

24,092

Interest rate swap liabilities

17,754

30,032

Other long-term liabilities

1,206

650

Total liabilities

734,962

704,605

Stockholders' equity:

Common stock

3

3

Additional paid-in capital

546,771

515,219

Accumulated other comprehensive loss

(13,238

)

(26,234

)

Accumulated deficit

(222,099

)

(182,373

)

Total stockholders' equity

311,437

306,615

Total liabilities and stockholders' equity

$

1,046,399

$

1,011,220





Upland Software, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

June 30, December 31,

2021 2020

(unaudited)

Assets

Current assets:

Cash and cash equivalents $ 176,539 $ 250,029

Accounts receivable, net of allowance 38,936 44,472

Deferred commissions, current 7,878 5,784

Unbilled receivables 5,652 4,561

Prepaid and other 13,579 12,694

Total current assets 242,584 317,540

Tax credits receivable 2,729 2,427

Property and equipment, net 3,161 2,778

Operating lease right-of-use asset 6,740 10,124

Intangible assets, net 304,752 279,975

Goodwill 470,182 383,598

Deferred commissions, noncurrent 14,444 12,962

Other assets 1,807 1,816

Total assets $ 1,046,399 $ 1,011,220

Liabilities and stockholders' equity

Current liabilities:

Accounts payable $ 15,608 $ 5,395

Accrued compensation 15,142 8,138

Accrued expenses and other current liabilities 13,361 13,438

Deferred revenue 95,245 87,552

Due to sellers 11,143 416

Operating lease liabilities, current 3,621 3,315

Current maturities of notes payable 3,153 3,166

Total current liabilities 157,273 121,420

Notes payable, less current maturities 516,751 518,437

Deferred revenue, noncurrent 1,667 1,587

Operating lease liabilities, noncurrent 8,537 8,387

Noncurrent deferred tax liability, net 31,774 24,092

Interest rate swap liabilities 17,754 30,032

Other long-term liabilities 1,206 650

Total liabilities 734,962 704,605

Stockholders' equity:

Common stock 3 3

Additional paid-in capital 546,771 515,219

Accumulated other comprehensive loss (13,238 ) (26,234 )

Accumulated deficit (222,099 ) (182,373 )

Total stockholders' equity 311,437 306,615

Total liabilities and stockholders' equity $ 1,046,399 $ 1,011,220

Upland Software, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Operating activities

Net loss

$

(19,042

)

$

(14,159

)

$

(39,726

)

$

(34,240

)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

13,201

11,658

25,669

23,395

Change in fair value of liabilities to sellers of businesses

(2,729

)

155

(2,729

)

155

Deferred income taxes

1,951

(637

)

(3,389

)

(4,985

)

Amortization of deferred costs

2,081

1,026

3,848

1,920

Foreign currency re-measurement loss

(4

)

(90

)

10

497

Non-cash interest and other expense

561

556

1,115

1,108

Non-cash stock compensation expense

13,550

10,980

31,374

20,300

Changes in operating assets and liabilities, net of purchase business combinations:

Accounts receivable

6,599

6,852

10,174

5,188

Prepaids and other

(2,616

)

(3,965

)

(3,631

)

(6,743

)

Accounts payable

1,375

(2,819

)

5,915

(6,258

)

Accrued expenses and other liabilities

(648

)

(1,314

)

(2,424

)

(7,256

)

Deferred revenue

(3,474

)

(7,438

)

(2,898

)

2,415

Net cash provided by (used in) operating activities

10,805

805

23,308

(4,504

)

Investing activities

Purchase of property and equipment

(225

)

(400

)

(507

)

(696

)

Purchase of customer relationships

-

-

-

(201

)

Purchase business combinations, net of cash acquired

(19,799

)

-

(92,417

)

(67,651

)

Net cash used in investing activities

(20,024

)

(400

)

(92,924

)

(68,548

)

Financing activities

Payments on finance leases

-

(28

)

(4

)

(83

)

Proceeds from notes payable, net of issuance costs

(113

)

(70

)

(113

)

(142

)

Payments on notes payable

(1,350

)

(1,350

)

(2,700

)

(2,700

)

Taxes paid related to net share settlement of equity awards

-

(1,372

)

-

(2,140

)

Issuance of common stock, net of issuance costs

177

-

178

41

Additional consideration paid to sellers of businesses

-

(8,580

)

(742

)

(9,580

)

Net cash used in financing activities

(1,286

)

(11,400

)

(3,381

)

(14,604

)

Effect of exchange rate fluctuations on cash

372

217

(493

)

542

Change in cash and cash equivalents

(10,133

)

(10,778

)

(73,490

)

(87,114

)

Cash and cash equivalents, beginning of period

186,672

98,688

250,029

175,024

Cash and cash equivalents, end of period

$

176,539

$

87,910

$

176,539

$

87,910





Upland Software, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)



Three Months Ended June Six Months Ended June 30, 30,

2021 2020 2021 2020

(unaudited) (unaudited) (unaudited) (unaudited)

Operating activities

Net loss $ (19,042 ) $ (14,159 ) $ (39,726 ) $ (34,240 )

Adjustments to reconcilenet loss to net cash provided by operatingactivities:

Depreciation and 13,201 11,658 25,669 23,395 amortization

Change in fair value ofliabilities to sellers of (2,729 ) 155 (2,729 ) 155 businesses

Deferred income taxes 1,951 (637 ) (3,389 ) (4,985 )

Amortization of deferred 2,081 1,026 3,848 1,920 costs

Foreign currency (4 ) (90 ) 10 497 re-measurement loss

Non-cash interest and 561 556 1,115 1,108 other expense

Non-cash stock 13,550 10,980 31,374 20,300 compensation expense

Changes in operatingassets and liabilities, net of purchase businesscombinations:

Accounts receivable 6,599 6,852 10,174 5,188

Prepaids and other (2,616 ) (3,965 ) (3,631 ) (6,743 )

Accounts payable 1,375 (2,819 ) 5,915 (6,258 )

Accrued expenses and (648 ) (1,314 ) (2,424 ) (7,256 )other liabilities

Deferred revenue (3,474 ) (7,438 ) (2,898 ) 2,415

Net cash provided by(used in) operating 10,805 805 23,308 (4,504 )activities

Investing activities

Purchase of property and (225 ) (400 ) (507 ) (696 )equipment

Purchase of customer - - - (201 )relationships

Purchase businesscombinations, net of cash (19,799 ) - (92,417 ) (67,651 )acquired

Net cash used in (20,024 ) (400 ) (92,924 ) (68,548 )investing activities

Financing activities

Payments on finance - (28 ) (4 ) (83 )leases

Proceeds from notespayable, net of issuance (113 ) (70 ) (113 ) (142 )costs

Payments on notes payable (1,350 ) (1,350 ) (2,700 ) (2,700 )

Taxes paid related to netshare settlement of - (1,372 ) - (2,140 )equity awards

Issuance of common stock, 177 - 178 41 net of issuance costs

Additional considerationpaid to sellers of - (8,580 ) (742 ) (9,580 )businesses

Net cash used in (1,286 ) (11,400 ) (3,381 ) (14,604 )financing activities

Effect of exchange rate 372 217 (493 ) 542 fluctuations on cash

Change in cash and cash (10,133 ) (10,778 ) (73,490 ) (87,114 )equivalents

Cash and cashequivalents, beginning of 186,672 98,688 250,029 175,024 period

Cash and cashequivalents, end of $ 176,539 $ 87,910 $ 176,539 $ 87,910 period

Upland Software, Inc.

Reconciliation of Adjusted EBITDA

(in thousands, unaudited)

Three Months Ended June Six Months Ended June 30, 30,

2021 2020 2021 2020

Reconciliation of net loss to Adjusted EBITDA:

Net loss $ (19,042 ) $ (14,159 ) $ (39,726 ) $ (34,240 )

Add:

Depreciation and 13,201 11,658 25,669 23,395 amortization expense

Interest expense, net 7,942 7,873 15,729 15,516

Other expense (income), 399 15 162 1,417 net

Benefit from income taxes 1,538 (673 ) (2,856 ) (4,960 )

Stock-based compensation 13,550 10,980 31,374 20,300 expense

Acquisition-related 5,534 5,781 15,120 20,939 expense

Purchase accounting 606 2,272 1,100 5,973 deferred revenue discount

Adjusted EBITDA $ 23,728 $ 23,747 $ 46,572 $ 48,340





Upland Software, Inc.

Reconciliation of Non-GAAP Net Loss and Non-GAAP EPS

(in thousands, except share and per share data, unaudited)

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Reconciliation of netloss to non-GAAP net income:

Net loss $ (19,042 ) $ (14,159 ) $ (39,726 ) $ (34,240 )

Add:

Stock-based 13,550 10,980 31,374 20,300 compensation expense

Amortization of 12,732 11,160 24,745 22,365 purchased intangibles

Amortization of debt 561 556 1,115 1,108 discount

Acquisition-related 5,534 5,781 15,120 20,939 expense

Purchase accountingdeferred revenue 606 2,272 1,100 5,973 discount

Tax effect of (1,361 ) (1,440 ) (2,675 ) (3,308 )adjustments above

Non-GAAP net income $ 12,580 $ 15,150 $ 31,053 $ 33,137



Weighted averageordinary shares 30,097,749 25,032,996 30,034,252 25,057,715 outstanding, basic

Weighted averageordinary shares 30,695,700 25,419,592 30,648,957 25,470,778 outstanding, diluted

Non-GAAP earnings per $ 0.42 $ 0.61 $ 1.03 $ 1.32 share, basic

Non-GAAP earnings per $ 0.41 $ 0.60 $ 1.01 $ 1.30 share, diluted





Upland Software, Inc.

Reconciliation of Operating Cash Flow to Free Cash Flow

(in thousands, unaudited)

Three Months Ended Six Months Ended June June 30, 30,

2021 2020 2021 2020

Reconciliation of Operating Cash Flow to Free Cash Flow:

Net cash provided by (used in) $ 10,805 $ 805 $ 23,308 $ (4,504 )operating activities

Less: Purchase of Property and (225 ) (400 ) (507 ) (696 )Equipment

Free Cash Flow $ 10,580 $ 405 $ 22,801 $ (5,200 )





Upland Software, Inc.

Supplemental Financial Information

(in thousands)

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(unaudited) (unaudited) (unaudited) (unaudited)

Stock-based compensation:

Cost of revenue $ 563 $ 570 $ 1,005 $ 888

Research and development 942 1,019 1,656 1,634

Sales and marketing 1,619 898 2,756 1,447

General and 10,426 8,493 25,957 16,331 administrative

Total $ 13,550 $ 10,980 $ 31,374 $ 20,300

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Depreciation:

Cost of revenue

$

11

$

45

$

22

$

116

Operating expense

458

453

902

914

Total

$

469

$

498

$

924

$

1,030

Amortization:

Cost of revenue

$

2,912

$

2,576

$

5,626

$

4,971

Operating expense

9,820

8,584

19,119

17,394

Total

$

12,732

$

11,160

$

24,745

$

22,365

View source version on businesswire.com: https://www.businesswire.com/news/home/20210804006060/en/

CONTACT: Investor Relations Contact: Mike Hill investor-relations@uplandsoftware.com 512-960-1031

CONTACT: Media Contact: Kendell Kelton media@uplandsoftware.com 678-575-7428