EX-99.1 2 a3q17earningsrelease.htm EXHIBIT 99.1 Exhibit


EXHIBIT 99.1

Upland Software Reports Record Third Quarter 2017 Financial Results with 36% Revenue Growth and Raises Full Year 2017 Guidance
Company achieves greater than $100 million annualized revenue run rate for the first time.
AUSTIN, Texas, November 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 September 30,
 
Nine Months Ended 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 September 30,
 
Nine Months Ended 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 September 30,
 
Nine Months Ended 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 September 30,
 
Nine Months Ended 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