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Upland Software Reports Fourth Quarter and Full Year 2020 Financial Results

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Upland Software, Inc. (Nasdaq: UPLD), a leader in cloud-based tools for digital transformation, today announced financial and operating results for the fourth quarter and full year of 2020 and issued guidance for its first quarter and full year of 2021.

Fourth Quarter 2020 Financial Highlights

  • Total revenue was $78.2 million, an increase of 18% from $66.1 million in the fourth quarter of 2019.

  • Subscription and support revenue was $74.9 million, an increase of 27% from $59.1 million in the fourth quarter of 2019.

  • GAAP net loss was $5.7 million, or a loss of $0.19 cents per share, compared to a GAAP net loss of $19.9 million, or a loss of $0.80 cents per share, in the fourth quarter of 2019.

  • Adjusted EBITDA was $26.6 million, or 34% of total revenue, an increase of 7% from $25.0 million, or 38% of total revenue, in the fourth quarter of 2019.

  • GAAP operating cash flow was $21.5 million, an increase from $7.0 million of GAAP operating cash flow in the fourth quarter of 2019. Free cash flow was $21.2 million, an increase from $6.7 million of free cash flow in the fourth quarter of 2019.

  • Cash on hand as of the end of the fourth quarter of 2020 was $250.0 million.

Full Year 2020 Financial Highlights

  • Total revenue was $291.8 million, an increase of 31% from $222.6 million in 2019.

  • Subscription and support revenue was $277.5 million, an increase of 36% from $203.9 million in 2019.

  • GAAP net loss was $51.2 million, or a loss of $1.92 cents per share, compared to a GAAP net loss of $45.4 million, or a loss of $1.96 cents per share, in 2019.

  • Adjusted EBITDA was $99.9 million, or 34% of total revenue, an increase of 21% from $82.5 million, or 37% of total revenue, in 2019.

  • GAAP operating cash flow was $35.6 million, an increase from $12.1 million of GAAP operating cash flow in 2019. Free cash flow was $34.5 million, an increase from $11.0 million of free cash flow in 2019.

"Q4 was a strong close to a year that demonstrated the strength and resilience of Upland’s business," said Jack McDonald, Upland’s chairman and chief executive officer. "We posted record organic growth and free cash flow, and after the end of the quarter, we announced the acquisition of Second Street, restarting our M&A engine," he added. "Our acquisition pipeline is robust, and our acquisition program is self-sustaining as our free cash flow and financial resources mean we are no longer dependent on the equity capital markets."

Fourth Quarter Business Highlights

  • Posted a strong 94% net dollar retention rate.

  • Expanded relationships with 242 existing customers, 55 of which were major expansions. We also welcomed 111 new customers to Upland in Q4, including 38 new major customers.

  • Focused on enhanced security features and customer collaboration, with five major releases and 11 feature packs across Upland's product portfolio. For example: in our Project & IT Management product suite, we expanded our Microsoft Teams integration to accelerate cross-team collaboration and communication for our users; and in our Document Workflow product suite, we announced new capabilities and integrations focused on in-demand security features, such as single sign-on.

  • After the close of the quarter, closed the acquisition of Second Street, expanding our audience engagement platform within our CXM Cloud.

  • Continued investment in go-to-market initiatives, including establishing the Global Account sales team focused on our top 175 customers in key industries like Financial Services, Healthcare, CPG, and High Tech, building a new, centralized lead generation Sales Development team, and, after the close of the quarter, launching a refreshed brand and streamlined website.

Business Outlook

For the quarter ending March 31, 2021, Upland expects reported total revenue to be between $70.6 and $74.6 million, including subscription and support revenue between $67.6 and $70.6 million, for growth in recurring revenue of 8% at the mid-point over the quarter-ended March 31, 2020. First quarter 2021 Adjusted EBITDA is expected to be between $21.6 and $23.6 million, for an Adjusted EBITDA margin of 31% at the mid-point, representing a reduction of 8% at the mid-point over the quarter-ended March 31, 2020, reflecting our incremental investment in our sales headcount and related lead generation activities.

For the full year ending December 31, 2021, Upland expects reported total revenue to be between $288.6 and $300.6 million, including subscription and support revenue between $276.3 and $286.3 million, for growth in recurring revenue of 1% at the mid-point over the year ended December 31, 2020. Full year 2021 Adjusted EBITDA is expected to be between $90.8 and $96.8 million, for an Adjusted EBITDA margin of 32% at the mid-point, representing a reduction of 6% at the mid-point over the year ended December 31, 2020, reflecting our incremental investment in our sales headcount and related lead generation 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: 10151107. 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 Software (Nasdaq: UPLD) is a leader in cloud-based tools for digital transformation. The Upland Cloud enables thousands of organizations to engage with customers on key digital channels, optimize sales team performance, manage projects and IT costs, and automate critical document workflows. The Upland Cloud is backed by a 100% customer success commitment and the UplandOne platform, which puts customers at the center of everything we do. 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.

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 December 31,

Twelve Months Ended December 31,

2020

2019

2020

2019

(unaudited)

(unaudited)

(unaudited)

Revenue:

Subscription and support

$

74,922

$

59,109

$

277,504

$

203,866

Perpetual license

621

3,531

1,884

5,738

Total product revenue

75,543

62,640

279,388

209,604

Professional services

2,704

3,426

12,390

13,033

Total revenue

78,247

66,066

291,778

222,637

Cost of revenue:

Subscription and support

25,179

18,891

89,880

61,465

Professional services

1,811

2,182

8,566

7,652

Total cost of revenue

26,990

21,073

98,446

69,117

Gross profit

51,257

44,993

193,332

153,520

Operating expenses:

Sales and marketing

11,566

11,490

46,077

35,170

Research and development

9,623

8,501

39,002

29,037

General and administrative

16,877

13,845

68,072

48,077

Depreciation and amortization

9,494

8,455

36,919

25,885

Acquisition-related expenses

2,562

15,213

27,075

39,657

Total operating expenses

50,122

57,504

217,145

177,826

Income (loss) from operations

1,135

(12,511

)

(23,813

)

(24,306

)

Other expense:

Interest expense, net

(7,935

)

(6,434

)

(31,529

)

(22,313

)

Loss on debt extinguishment

(2,317

)

Other income (expense), net

708

(1,559

)

(111

)

(3,240

)

Total other expense

(7,227

)

(7,993

)

(31,640

)

(27,870

)

Loss before benefit from income taxes

(6,092

)

(20,504

)

(55,453

)

(52,176

)

Benefit from income taxes

423

639

4,234

6,805

Net loss

$

(5,669

)

$

(19,865

)

$

(51,219

)

$

(45,371

)

Net loss per common share, basic and diluted

$

(0.19

)

$

(0.80

)

$

(1.92

)

$

(1.96

)

Weighted-average common shares outstanding, basic and diluted

29,403,603

24,726,132

26,632,116

23,099,549

Upland Software, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

December 31,

2020

2019

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

250,029

$

175,024

Accounts receivable, net of allowance

44,472

50,938

Deferred commissions, current

5,784

3,059

Unbilled receivables

4,561

5,111

Prepaid and other

12,694

4,748

Total current assets

317,540

238,880

Tax credits receivable

2,427

4,186

Property and equipment, net

2,778

3,917

Operating lease right-of-use asset

10,124

8,056

Intangible assets, net

279,975

282,727

Goodwill

383,598

346,134

Deferred commissions, noncurrent

12,962

8,763

Other assets

1,816

4,165

Total assets

$

1,011,220

$

896,828

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

5,395

$

5,904

Accrued compensation

8,138

11,559

Accrued expenses and other current liabilities

13,438

15,344

Deferred revenue

87,552

76,558

Due to sellers

416

14,276

Operating lease liabilities, current

3,315

2,533

Current maturities of notes payable

3,166

3,193

Total current liabilities

121,420

129,367

Notes payable, less current maturities

518,437

521,881

Deferred revenue, noncurrent

1,587

496

Operating lease liabilities, noncurrent

8,387

5,862

Noncurrent deferred tax liability, net

24,092

25,685

Interest rate swap liabilities

30,032

Other long-term liabilities

650

676

Total liabilities

704,605

683,967

Stockholders’ equity:

Common stock

3

3

Additional paid-in capital

515,219

345,127

Accumulated other comprehensive loss

(26,234

)

(1,223

)

Accumulated deficit

(182,373

)

(131,046

)

Total stockholders’ equity

306,615

212,861

Total liabilities and stockholders’ equity

$

1,011,220

$

896,828

Upland Software, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

Three Months Ended December 31,

Twelve Months Ended December 31,

2020

2019

2020

2019

(unaudited)

(unaudited)

(unaudited)

Operating activities

Net loss

$

(5,669

)

$

(19,865

)

$

(51,219

)

$

(45,371

)

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

Depreciation and amortization

12,073

10,899

47,164

34,621

Deferred income taxes

(4,187

)

1,744

(7,533

)

(9,432

)

Amortization of deferred costs

1,512

921

4,684

3,476

Foreign currency re-measurement loss

(39

)

(97

)

272

58

Non-cash interest and other expense

564

419

2,233

1,398

Non-cash stock compensation expense

10,429

7,038

41,692

25,754

Non-cash loss on divestiture of assets

1,988

1,988

Non-cash loss on retirement of fixed assets

162

635

Non-cash loss on debt extinguishment

2,317

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

Accounts receivable

(2,785

)

(3,245

)

10,355

3,160

Prepaids and other

1,511

(1,252

)

(8,582

)

(5,532

)

Accounts payable

(1,299

)

830

(3,081

)

(73

)

Accrued expenses and other liabilities

964

884

(7,825

)

(4,153

)

Deferred revenue

8,232

6,758

6,825

3,865

Net cash provided by operating activities

21,468

7,022

35,620

12,076

Investing activities

Purchase of property and equipment

(281

)

(317

)

(1,114

)

(1,040

)

Purchase of customer relationships

(258

)

(201

)

(696

)

Purchase business combinations, net of cash acquired

(4

)

(110,254

)

(67,655

)

(216,025

)

Net cash used in investing activities

(285

)

(110,829

)

(68,970

)

(217,761

)

Financing activities

Payments on finance leases

(2

)

(30

)

(88

)

(529

)

Proceeds from notes payable, net of issuance costs

(134

)

243,360

(303

)

625,666

Payments on notes payable

(1,350

)

(60,350

)

(5,400

)

(383,568

)

Taxes paid related to net share settlement of equity awards

1

(6,551

)

(2,139

)

(12,659

)

Issuance of common stock, net of issuance costs

365

2

130,539

151,551

Additional consideration paid to sellers of businesses

(3,058

)

(10,807

)

(14,710

)

(16,693

)

Net cash provided by financing activities

(4,178

)

165,624

107,899

363,768

Effect of exchange rate fluctuations on cash

52

(99

)

456

203

Change in cash and cash equivalents

17,057

61,718

75,005

158,286

Cash and cash equivalents, beginning of period

232,972

113,306

175,024

16,738

Cash and cash equivalents, end of period

$

250,029

$

175,024

$

250,029

$

175,024

Upland Software, Inc.

Reconciliation of Adjusted EBITDA

(in thousands, unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

2020

2019

2020

2019

Reconciliation of net loss to Adjusted EBITDA:

Net loss

$

(5,669

)

$

(19,865

)

$

(51,219

)

$

(45,371

)

Add:

Depreciation and amortization expense

12,073

10,899

47,164

34,621

Interest expense, net

7,935

6,434

31,529

22,313

Other expense (income), net

(708

)

1,559

111

3,240

Loss on debt extinguishment

2,317

Benefit from income taxes

(423

)

(639

)

(4,234

)

(6,805

)

Stock-based compensation expense

10,429

7,038

41,692

25,754

Acquisition-related expense

2,562

15,213

27,075

39,657

Purchase accounting deferred revenue discount

404

4,336

7,785

6,794

Adjusted EBITDA

$

26,603

$

24,975

$

99,903

$

82,520

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 December 31,

Twelve Months Ended December 31,

2020

2019

2020

2019

Reconciliation of net loss to non-GAAP net income:

Net loss

$

(5,669

)

$

(19,865

)

$

(51,219

)

$

(45,371

)

Add:

Stock-based compensation expense

10,429

7,038

41,692

25,754

Amortization of purchased intangibles

11,350

10,342

44,937

32,395

Amortization of debt discount

563

421

2,232

1,400

Non-cash loss on divestiture of assets

1,988

1,988

Acquisition-related expense

2,562

15,213

27,075

39,657

Loss on debt extinguishment

2,317

Purchase accounting deferred revenue discount

404

4,336

7,785

6,794

Tax effect of adjustments above

(1,233

)

(2,409

)

(5,671

)

(6,213

)

Non-GAAP net income

$

18,406

$

17,064

$

66,831

$

58,721

Weighted average ordinary shares outstanding, basic

29,403,603

24,726,132

26,632,116

23,099,549

Weighted average ordinary shares outstanding, diluted

30,275,963

25,465,083

27,159,114

23,906,901

Non-GAAP earnings per share, basic

$

0.63

$

0.69

$

2.51

$

2.54

Non-GAAP earnings per share, diluted

$

0.61

$

0.67

$

2.46

$

2.46

Upland Software, Inc.

Reconciliation of Operating Cash Flow to Free Cash Flow

(in thousands, unaudited)

Three Months Ended December 31,

Twelve Months Ended December 31,

2020

2019

2020

2019

Reconciliation of Operating Cash Flow to Free Cash Flow:

Net cash provided by operating activities

$

21,468

$

7,022

$

35,620

$

12,076

Less: Purchase of Property and Equipment

(281

)

(317

)

(1,114

)

(1,040

)

Free Cash Flow

$

21,187

$

6,705

$

34,506

$

11,036

Upland Software, Inc.

Supplemental Financial Information

(in thousands)

Three Months Ended December 31,

Twelve Months Ended December 31,

2020

2019

2020

2019

(unaudited)

(unaudited)

(unaudited)

Stock-based compensation:

Cost of revenue

$

439

$

237

$

1,951

$

1,000

Research and development

752

673

3,391

2,310

Sales and marketing

1,035

531

3,450

1,543

General and administrative

8,203

5,597

32,900

20,901

Total

$

10,429

$

7,038

$

41,692

$

25,754

Three Months Ended December 31,

Twelve Months Ended December 31,

2020

2019

2020

2019

(unaudited)

(unaudited)

(unaudited)

Depreciation:

Cost of revenue

$

17

$

118

$

170

$

834

Operating expense

706

439

2,057

1,392

Total

$

723

$

557

$

2,227

$

2,226

Amortization:

Cost of revenue

$

2,562

$

2,325

$

10,075

$

7,903

Operating expense

8,788

8,017

34,862

24,492

Total

$

11,350

$

10,342

$

44,937

$

32,395

View source version on businesswire.com: https://www.businesswire.com/news/home/20210224006027/en/

Contacts

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

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