Upland Software (UPLD) 3 Nov 222022 Q3 Earnings call transcript

Thank you for standing by, and welcome to the Upland Software Third Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. The conference call will be recorded and simultaneously webcast at investor.uplandsoftware.com, and a replay will be available there for 12 months.

have was the p.m. distributed should earnings quarter everyone which release, today now, access third to XXXX By at X:XX Time. Eastern

If the website. received you available have Upland’s on release, it’s not

call I like and of Software. now Upland Jack go sir. to the CEO ahead, would Please McDonald, over turn Chairman to

XXXX around to some our joined QX and call. provide today product I’ll by you. Welcome earnings CFO. with Thank Mike around start and go-to-market color development. our QX I’m Hill, our results

the on the insights numbers some Q&A. provide will Mike that, open that, our on will After call QX guidance. Following and for we up

But Mike, the we you Safe please before read get started, Harbor statement? could

Certainly, Jack.

materially. risks, discussion include differ actual the as reports today’s the contained statements the securities filed to and we will in considered to Form uncertainties that updated with are Annual These risks meanings and on cause could statements and are assumptions During these results XX-K uncertainties our Report of our quarterly within on XX-Q forward-looking periodically laws. detailed our call, of Form A subject SEC. that are

today any made publicly updates Upland today. are statements. management or do to of on or and assumptions our statements release and available on as forward-looking The We intend any forward-looking not to duty views to information undertake currently based revisions any

operations. website. Investor Relations our reconciliations available our with its call, which quarter of Upland results, understand provide results, GAAP of Upland in combination has that, measures our tools and are management in to this On additional GAAP measures our used press non-GAAP will to third refer financial provided to when with release analytical announcing comparable measures non-GAAP the most Upland on section year-to-date

is we’re unreasonable forward-looking comparable this to measures without to at time needed unable their which complete effort. because measures non-GAAP Please directly financial the reconciliation a unavailable any information, that is note GAAP financial to reconcile

With turn to Jack. over I’ll that, back the call

right. Mike. Thanks, All

revenue headwind an and number announcements on talk adjusted moment. beat both. in We we outperformed with a the quarter. mid-points during guidance the on we EBITDA, on headlines And quarter, FX the beat in our a about product the more even So which I’ll so both of mid-points made QX, both on

of made Objectif the BA that that during is quarter, in and acquisitions as two QX, all we Insight, Lune our continued integration proceeding and planned. We of

on We over as quarter position. Cash quarter, closed hand equity in the the a strategic of from that so was XX, moment. more and $XXX investment cash September strong HGGC, as in of a just end a million, on the of

We in of in as moment, absorbing flow guidance, on to about $XX will the million keeping free And us for the QX, active unchanged after QX generation market in for Mike for constant remains strong we free expenses. a cash have course, talk $XX to that $XX generation million cash cash pace expected. of million is course, acquisitions. million of Our currency. should acquisition-related flow flow $XX see of XXXX And that free remain additional we in

were which third side, existing of in quarter, the with we relationships customers, expansions. major On XXX the expanded XX go-to-market

quarter, new verticals. We and customers also were The XX the major new in welcomed XXX products industry across distributed third Upland to our customers. customer deals new including

in a one-off. the see was lengthening this we be demand some of remains cycles of terms environment, In to whether did sales It seen QX.

would In here. highlight terms few of a I products, announcements that

two-way its and use SMS messages Kingdom. United into that text marketing SMS and Our of conversations as timely an brands Powering to automate the platform, and footprint Waterfall, it effective schedule to text Waterfall millions enables expanded notifications SMS messaging channel weekly, announced for promotions.

that which management. help tried-and-true modern the Products of products Trend-Setting KMWorld’s features list, in knowledge recognized challenges was Insight BA address addition, enterprises In XXXX of

been we’ve equity and HGGC, investment of leading to investment a a private plan offer August is pipe working which we on. XX, thoughts the from On on the equity want HGGC firm. value a couple $XXX that I closed creation million

of got attractive drive record It option. record at business on our a proven They’ve the a a growth or shareholder and value management a in an and growth. a partnering with dividend track software pipe was per clean with structure teams to build priced convert, cash $XX.XX great share track at to and pick

our focused of a on We’ve with The that with work more components plan products focus been HGGC bundles doing together also include behind those and putting key higher creation potential. more plan. to significant internally go-to-market value product bringing energy and growth

lot about in previously, a work of product, on be that come as as and we This to More excellence we’ll India-based investment as that marketing plan and on our this of our some go. demand well strengthening includes through doing center generation. also continued talked we’ve focused

Our roughly excited quarter, open third million I’m and energized. Personally, team personally and bought, $X believer, and of is I focused during the Upland stock the a on market. worth

going to now I’m call over the turn So to Mike. with that,

I’ll third you, the Thank financial quarter cover right. year and for and fourth Jack. XXXX. highlights the for outlook our the full All quarter

the $XX.X the impact, statement, recurring FX $XX.X revenue year-over-year. For million, growth X% year-over-year million have have would revenue impact, revenue an growth from FX would increase was the total for X%. third and Without X%. been subscription been the increased to quarter support X% representing and without income Recurring of

which million to million depreciation And third product the margin. remained Overall decline. gross for we quarter. $X.X year-over-year and XX% third the up at in is cash gross strong margin an was XX% gross adding quarter, XX%, the in which as margin revenue revenue And during $X.X of services refer amortization, quarter, to professional our when back $X.X million from increased XX% quarter license third was Perpetual XXXX. the

acquisition-related million generally amortization and for stock-based were the of or total excluding $XX.X depreciation, quarter, XX% expenses, as expenses, comp Operating all expected. revenue,

third XXXX, of Also, the quarter, by in in expect increase to revenue X% approximately our to we were were with $X.X Now which as acquisition-related move due structure wage cost we million line into X% total to inflation. expenses plan.

revenue, million, total million XX% $XX.X of adjusted third total $XX or Our quarter EBITDA compared for XXXX. quarter third of of revenue to the XXXX or XX% was

free cash was flow million, $X.X of $XX.X flow million cash free For was to million. cash GAAP year-to-date the XXXX, for and cash bringing flow, third flow operating $X.X quarter

we differences timing have generation free cash capital QX. temporary which our in expected, lowered flow working the in did accounts, temporarily As

million is generation as We addition balance $XXX of flow comprised revolver. our free existing should year sheet after approximately liquidity in flow expenses. $XXX $XX strong even cash plus XX the free for see to cash million generation free full our pace ongoing of still flow September QX, on cash $XX $XX in of of the generation acquisition-related million, of XXXX, for in absorbing This us million million undrawn keeping to cash our

in September the on net had XXXX, XX, of our after million outstanding As $XXX sheet. approximately of cash we debt balance factoring

Our X.X around net dropped on leverage adjusted times the based guide. debt our mid-point to of EBITDA XXXX

year that payments our million remaining debt X% debt interest term at current of rate our XXXX. is about in per or the principal levels. annual year, I our per our outstanding X.X%, with term the debt at million on payments approximately The are $XX interest locked on note will $X.X balance maturing August cash making

to to we around that financial income covenants year. of cash we NOL out will $X point no carryforwards. our regard current still And $XXX has estimate debt With expiration. total per million note I borrowings. on will approximately taxes $XXX has term tax expect be approximately utilization million taxes, of I Upland these, of currently million prior that that for will available Additionally,

Now for guidance.

fourth adjusted additional The the of be saying FX million to Let FX on that a XXXX, issued on fourth revenue guidance last fourth guidance by August impact a me headwind headwind and in $X.X X quarter currency. is start Upland’s currency on quarter. EBITDA. unchanged constant headwind strengthened, in in X.X% has remains the U.S. was forward resulting estimated our growth Since currency larger dollar quarter

the the The those following FX quarter. in headwinds adjusted guidance of includes fourth impact

to XX, December million XXXX, quarter between in of for over revenue support fourth $XX.X the including For and million, ended X% be mid-point million revenue December at quarter growth $XX.X expects total million, the total revenue XXXX. and XX, reported $XX.X subscription between the and $XX.X Upland ending

mid-point. to is for for $XX.X adjusted ended quarter – December quarter the the be XXXX. mid-point million XX, adjusted $XX.X EBITDA the X% at is XXXX and margin the decrease adjusted guide quarter EBITDA Fourth at from This a between an of of XX% expected million, EBITDA

full and $XXX.X year the million between XXXX, XX, million, including December XX, million, for ending revenue December the ended year expects over For Upland and the revenue $XXX.X mid-point to be reported between total XXXX. growth support of revenue and subscription total $XXX.X X% at in million $XXX.X

December XX, an Full year XXXX margin This the EBITDA mid-point million, $XX.X mid-point. to over for XX% increase million the an $XX.X X% and be at at adjusted is is ended guide EBITDA year expected of the adjusted EBITDA of between XXXX. adjusted

that, back with Jack. the pass And call I’ll to

Thanks, Mike. right. All

for the open questions. Let’s up call

comes today [Operator the Instructions] question Van Rhee from Jeff line with Your of Craig-Hallum. first

Your line is now open.

my taking Thanks Great. for questions.

just maybe on Jack, comp back couple. a of to change Actually, quarter. situation. sort during of rapid called of Just the pace out most the circle macro

like Just back else you. circle nothing definitive. anything circle It at to were any changes sounded wanted were if you back that just notable? that, to saying to jumped I behavioral that, out

Thanks. Yes.

sales we As a some or early I lengthening to it’s point, this was the the did quarter. general terms say see cycles one-off environment, really, of at whether of But not. it mentioned, in too in

want heard to I correctly. Mike, I I Okay. commented, just think you make sure it

pressure and What in I again? mentioned Can you pressures, wage about you of XXXX. talked you just there? think were that points XXX saying basis hit You

Yes.

You bet, Jeff.

wage due revenue. of of structural So to cost increases do XXXX to in X% X% we the inflation expect to total tune the

Got it.

shape. a bit great then And talk HGGC. Okay. Obviously, sheet’s balance in about

focus of you a I going some or bundles. products. in sales You particular, and referenced there the think talked of it’s to on but execution early, understanding about go-to-market things, – sort And go-to-market be couple

about talk there changing respect Just go-to-market. be early what on with to might the thinking

Yes.

would their management folks advisors. with follows. really together is a work a I HGGC great of as energized team been work and summarize with. think team been our and here And lot super I They’ve We’ve to doing of Upland it excited. at operating

identifying different to is have growth potential and a putting bringing on energy more focusing We go-to-market higher of products a more behind elements. that are our One and bundles product those. focus number really those

mentioned, product will although of take through continuation in what products of concerned. lot demand we’ve those piece of both staffing strategy doing efforts Indian obviously the terms with doing course, a I product as Excellence, in that’s investment and the a our and of of global focused couple forms, of that, more that our just gen Center is one And of on side been and where marketing

So early be more work on but will process, the we’re in thus subsequent and to pleased partnership quarters, with very it this said the be the and is there in far.

quarter. questions. Got for the Thanks taking it. Good [indiscernible]

the from of comes Jake with Roberge question next Blair. Your line William

Your now is open. line

congrats the on guys, Hey results. great

Would new XXX suite? a adding really the quarter front, the actually So more Or to range. logos what’s new or in it Was is strong love I acceleration quarter on so the recent by the any sales platform. your in driven of product some logos specific driving the customer investments? highest on new to that color more given, result was last that think, year XXX get in

So there. pretty acceleration big

Yes. I across across the our that and I well mentioned, say, verticals. – were distributed products would as bookings

So I call wouldn’t out any area. specific

as say, work on around We’re additional of continues. major so higher-growth new our work on, I driving continuing and products expansion and customers, – focus and bookings sharpening that both to

funnel now top deals then sales you’ve at months. pipeline in has the Are slowdown hear to to cadence the past taking this over how love few pace before, been still longer the there’s in entering tracking as And but been to the would seeing macro? just few Thanks. it close past kind hear a the Great. months. sounds what love of I’d uncertain been like over similar but cycles, a of and

Yes.

or we’ll working mean opportunities. more I early little too think it’s cycles to point QX. not. it into without is saw one-off whether and of to And putting we lengthening a too a we on say we’re team as of in third But it, number I that’s energized the have tell fine – of bit get on sales quarter. a the sales a really

the see a or is could in cycles further we’ll saw the so we see lengthening QX we that quarter. through of as we – whether So sales move not one-off

Thanks Great. my for taking questions.

the [Operator line with Instructions] James. Raymond today Your from comes Sklar Alex next of question

line open. Your now is

long about they’re a you know have Hi, see to And I’m global accounts? but I customers thinking if those thanks top how so customers XXX Alex. today, the quick some smaller for you retarget question. for your opportunity contributor a any moving much of then curious follow-up. John is forward. I your you’re on for outside opportunity the talk taking Can of of about tail This or

Well, both would the smaller One for e-commerce self-service accounts with in respect there that more we’ve customers is to for customers the capabilities a those and have been number highlight transact of I year. introducing to rolled initiatives order out that those in self-service. past

trying we’re we to customers most can. to serve yes, in So those the technology efficient leverage way

Okay. helpful coming but here, How thinking Jack. the pressure follow-up on lever renewals there. quick as forward? as seeing a pricing or the outsized maybe in years? a That’s inflation, just headcount So about on Perfect. for for color And for then growth you’re expense, pricing moving are obviously, Mike some increases any opportunity you

Well, yes.

have started out rolling So increases. John, we – price are we

going it’s an got a take course, to customer term. average We’ve Of contract years while. X.X

the normal those to get increases that takes that see it renewal They’re of outsized, the broadly and sort in inflation. environment macro with not we of have – take while price hold. the So a to context dates they’re

So a those, anyway, take while to nothing going to realize it’s outsized. but

very you Thank much. Okay.

our question Back you, to for last Jack. was today. That

Great. on will Well, we see next earnings Good and the you, thank all, afternoon. you call.

today’s you concludes attending. Thank This call. for conference

may disconnect. You now