Upland Software, Inc. (NASDAQ:UPLD), a leader in cloud-based tools for digital transformation, today announced financial and operating results for the fourth quarter 2023 and issued guidance for its first quarter and full year of 2024.

Fourth Quarter 2023 Financial Highlights

Total revenue was $72.2 million, a decrease of 8% from $78.8 million in the fourth quarter of 2022.
Subscription and support revenue was $68.2 million, a decrease of 8% from $74.1 million in the fourth quarter of 2022.
GAAP net loss was $16.0 million compared to a GAAP net loss of $22.7 million in the fourth quarter of 2022. GAAP net loss attributable to common stockholders was $17.4 million compared to GAAP net loss attributable to common stockholders of $24.0 million in the fourth quarter of 2022. GAAP net loss per share attributable to common stockholders was $0.56 per share, compared to a GAAP net loss per share attributable to common stockholders of $0.75 per share in the fourth quarter of 2022.
Adjusted EBITDA was $14.1 million, or 19% of total revenue, compared to $24.3 million, or 31% of total revenue, in the fourth quarter of 2022.
GAAP operating cash flow was $8.8 million, compared to GAAP operating cash flow of $5.8 million in the fourth quarter of 2022. Free cash flow was $8.6 million, compared to free cash flow of $5.7 million in the fourth quarter of 2022.
Cash on hand as of the end of the fourth quarter of 2023 was $236.6 million, after buying back $10.8 million of the Company's outstanding common stock in the quarter.

"We continue to make progress on our growth plan and remain focused on building great software and delivering value for customers," said Jack McDonald, Upland's chairman and chief executive officer. "We are proud to see continued and increasing recognition of our products as evidenced by the 44 badges earned in G2's Winter 2024 market reports."

Fourth Quarter Business Highlights

We expanded relationships with 307 existing customers, 33 of which were major expansions. We also welcomed 154 new customers to Upland in the fourth quarter, including 15 new major customers.
Upland was recognized, for the third year in a row, as a gold medalist and leader in the 2023 Enterprise Content Management Data Quadrant report from SoftwareReviews for our document management and workflow automation product, FileBound. The award is based on the combined knowledge of real users, and placement is based on overall satisfaction with product features, vendor experience, capabilities, and emotional sentiment.
Upland RO Innovation has launched an all-new Customer Reference Activity Hub to help sales, marketing, and customer success teams find and engage with their most influential customer references so they can boost brand awareness and generate more business.
In December, we hosted a webinar on content search intelligence featuring how Azure AI Search, when seamlessly integrated with BA Insight's cutting-edge technology, revolutionizes how organizations access, manage, and derive insights from their data.
Upland earned 44 badges in G2's Winter 2024 market reports across a variety of products. These included our knowledge management solutions, Upland RightAnswers and Upland Panviva, along with Upland Qvidian, our proposal management software, and digital marketing products, Upland Adestra and Upland Second Street. Rankings on G2 reports are based on independent data provided by real software buyers.

Business Outlook

The following guidance reflects another year of significant incremental sales, marketing and product investments that Upland is making as part of its comprehensive growth plan as well as the effects of decreasing revenue and expenses related to our previously announced decisions to sunset certain non-strategic product offerings and a limited number of non-strategic customer contracts (collectively referred to as our "Sunset Assets").

For the quarter ending March 31, 2024, Upland expects reported total revenue to be between $65.0 and $71.0 million, including subscription and support revenue between $62.5 and $67.5 million, for a decline in total revenue of 12% at the mid-point from the quarter-ended March 31, 2023. First quarter 2024 Adjusted EBITDA is expected to be between $11.3 and $14.3 million, for an Adjusted EBITDA margin of 19% at the mid-point. This Adjusted EBITDA guide at the mid-point is a decrease of 27% from the quarter-ended March 31, 2023.

For the full year ending December 31, 2024, Upland expects reported total revenue to be between $259.0 and $283.0 million, including subscription and support revenue between $247.0 and $267.0 million, for a decline in total revenue of 9% at the mid-point from the year ended December 31, 2023. Full year 2024 Adjusted EBITDA is expected to be between $49.0 and $61.0 million, for an Adjusted EBITDA margin of 20% at the mid-point. This Adjusted EBITDA guide at the midpoint is a decrease of 15% from the year ended December 31, 2023.

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 1-800-715-9871 in North America or 1-646-307-1963 if outside North America, international rates apply. Attendees will need to use access code 8422976 to join the call. 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, Inc. enables global businesses to work smarter with over 25 proven cloud software products that increase revenue, reduce costs, and deliver immediate value. Our solutions cover digital marketing, knowledge management, contact center service, sales productivity, content lifecycle automation, and more. Upland's powerful cloud products are trusted by more than 10,000 global customers. Learn how Upland helps businesses achieve outcomes that matter at 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. Additionally, we are unable to quantify the impact of foreign currency exchange fluctuations on components of our income statement beyond revenues because the information which is needed to do so is unavailable at this time without unreasonable effort.

Upland defines Adjusted EBITDA as net income (loss), calculated in accordance with GAAP, plus depreciation and amortization expense, interest expense, net, other expense (income), net, provision (benefit) for income taxes, stock-based compensation expense, acquisition-related expenses, non-recurring litigation costs, purchase accounting adjustments for deferred revenue and impairment of goodwill.

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, impairment of goodwill 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.

In connection with periodic reviews of our business, we have decided to discontinue the availability of certain non-strategic product offerings and a limited number of non-strategic customer contracts (collectively referred to as "Sunset Assets").

Overage Charges are subscription and support revenues earned in addition to contractual minimum customer commitments as a result of the usage volume of services including text and e-mail messaging and third-party pass-through costs that exceed the levels stipulated in contracts with the Company.

Upland defines Core Organic Growth Rate as the percentage change between two reported periods in subscription and support revenue, excluding subscription and support revenue from Sunset Assets and Overage Charges. We calculate our year-over-year Core Organic Growth Rate as though all acquisitions or dispositions closed as of the end of the latest period were closed as of the first day of the prior year period presented. Core Organic Growth Rate does not represent actual organic revenue generated by our business as it stood at the beginning of the respective period.

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 "anticipate," "believe," "may," "will," "continue," "seek," "estimate," "intend," "hope," "predict," "could," "should," "would," "project," "plan," "expect" 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 or sustain profitability or predict future results; our plans regarding future acquisitions, acquisition expense timing and our ability to consummate and integrate acquisitions; our ability to expand our go to market operations, including our marketing and sales organization and cross selling opportunities, and successfully increase sales of our products; our ability to obtain financing in the future on acceptable terms or at all; our expectations with respect to revenue, cost of revenue, average annual spend, margin expense and operating expenses in future periods; our expectations with regard to revenue from perpetual licenses and professional services; our ability to adapt to macroeconomic factors impacting the global economy, including foreign currency exchange risk, inflation and supply chain constraints; our ability to attract and retain customers; our ability to successfully enter new markets and manage our international expansion; our ability to comply with privacy laws and regulations; our ability to deliver high-quality customer service; our plans regarding, and our ability to effectively manage, our growth, including organic growth; maintaining our senior management team and key personnel; the performance of our resellers; our ability to adapt to changing market conditions and competition; our ability to adapt to technological change and continue to innovate; global economic and financial market conditions and uncertainties; the growth of demand for cloud-based, digital transformation applications; our ability to integrate our applications with other software applications; maintaining and expanding our relationships with third parties; costs associated with defending intellectual property infringement and other claims; our ability to maintain, protect and enhance our brand and intellectual property; our expectations with regard to trends, such as seasonality, which affect our business; impairments to goodwill and other intangible assets; our beliefs regarding how our applications benefit customers and what our competitive strengths are; the operation, reliability and security of our third-party data centers; our expectations as to the payment of dividends; our Share Repurchase Plan, including expectations regarding the timing and manner of repurchases made under the Share Repurchase Plan; our current level of indebtedness, including our exposure to variable interest rate risk; the potential elimination or limitation of tax incentives or tax losses and/or reductions of U.S. federal net operating losses; the risk that we did not consider another contingency included in this list; 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,
	2023			2022			2023			2022
	(unaudited)			(unaudited)
Revenue:
Subscription and support	$	68,184		$	74,148		$	281,554		$	297,887
Perpetual license		1,760			1,628			6,077			6,948
Total product revenue		69,944			75,776			287,631			304,835
Professional services		2,234			3,035			10,221			12,468
Total revenue		72,178			78,811			297,852			317,303
Cost of revenue:
Subscription and support		22,483			24,201			88,894			93,948
Professional services and other		1,226			2,506			7,467			9,793
Total cost of revenue		23,709			26,707			96,361			103,741
Gross profit		48,469			52,104			201,491			213,562
Operating expenses:
Sales and marketing		17,438			14,131			64,342			59,416
Research and development		11,662			10,799			49,375			46,187
General and administrative		13,895			14,352			61,264			70,462
Depreciation and amortization		14,405			11,699			58,614			43,669
Acquisition-related expenses		451			2,632			3,060			21,556
Impairment of goodwill		—			12,500			128,755			12,500
Total operating expenses		57,851			66,113			365,410			253,790
Loss from operations		(9,382	)		(14,009	)		(163,919	)		(40,228	)
Other expense:
Interest expense, net		(5,322	)		(6,275	)		(18,684	)		(29,145	)
Other income (expense), net		(675	)		(2,479	)		236			(781	)
Total other expense		(5,997	)		(8,754	)		(18,448	)		(29,926	)
Loss before benefit from (provision for) income taxes		(15,379	)		(22,763	)		(182,367	)		(70,154	)
Benefit from (provision for) income taxes		(633	)		87			2,493			1,741
Net loss	$	(16,012	)	$	(22,676	)	$	(179,874	)	$	(68,413	)
Preferred stock dividends		(1,359	)		(1,300	)		(5,347	)		(1,846	)
Net loss attributable to common stockholders	$	(17,371	)	$	(23,976	)	$	(185,221	)	$	(70,259	)
Net income (loss) per common share:
Net loss per common share, basic and diluted	$	(0.56	)	$	(0.75	)	$	(5.77	)	$	(2.23	)
Weighted-average common shares outstanding, basic and diluted		30,995,441			31,906,980			32,074,906			31,528,881

Upland Software, Inc.
Condensed Consolidated Balance Sheets
(in thousands)

	December 31,			December 31,
	2023			2022

ASSETS
Current assets:
Cash and cash equivalents	$	236,559		$	248,653
Accounts receivable, net of allowance		38,765			47,594
Deferred commissions, current		10,429			10,961
Unbilled receivables		2,701			5,313
Income tax receivable, current		3,775			542
Prepaid expenses and other current assets		8,004			8,232
Total current assets		300,233			321,295
Tax credits receivable		1,657			2,411
Property and equipment, net		1,932			1,830
Operating lease right-of-use asset		2,929			5,719
Intangible assets, net		182,349			248,851
Goodwill		353,778			477,043
Deferred commissions, noncurrent		12,568			13,794
Interest rate swap assets		14,270			41,168
Other assets		308			1,348
Total assets	$	870,024		$	1,113,459
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	8,137		$	14,939
Accrued compensation		7,174			7,393
Accrued expenses and other current liabilities		7,050			10,644
Deferred revenue		102,763			106,465
Liabilities due to sellers of businesses		—			5,429
Operating lease liabilities, current		2,351			3,205
Current maturities of notes payable		3,172			3,136
Total current liabilities		130,647			151,211
Notes payable, less current maturities		473,502			511,847
Deferred revenue, noncurrent		3,860			4,707
Operating lease liabilities, noncurrent		1,597			4,947
Noncurrent deferred tax liability, net		16,025			18,416
Other long-term liabilities		461			1,170
Total liabilities		626,092			692,298
Series A Convertible Preferred stock		117,638			112,291
Stockholders' equity:
Common stock		3			3
Additional paid-in capital		608,995			606,755
Accumulated other comprehensive loss		6,168			11,110
Accumulated deficit		(488,872	)		(308,998	)
Total stockholders' equity		126,294			308,870
Total liabilities, convertible preferred stock and stockholders' equity	$	870,024		$	1,113,459

Upland Software, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2023			2022			2023			2022
	(unaudited)			(unaudited)
Operating activities
Net loss	$	(16,012	)	$	(22,676	)	$	(179,874	)	$	(68,413	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		17,510			14,813			71,985			56,146
Change in fair value of liabilities due to sellers of businesses		—			—			—			(75	)
Deferred income taxes		(1,558	)		(3,784	)		(4,209	)		(7,075	)
Amortization of deferred costs		3,261			3,157			13,170			12,198
Foreign currency re-measurement loss		445			(52	)		(538	)		(12	)
Non-cash interest, net and other income, net		(896	)		569			(2,976	)		2,256
Non-cash stock-based compensation expense		4,682			7,579			22,874			41,602
Non-cash loss on impairment of goodwill		—			12,500			128,755			12,500
Non-cash loss on retirement of fixed assets		1			53			47			79
Changes in operating assets and liabilities, net of purchase business combinations:
Accounts receivable		(1,252	)		(8,496	)		8,916			9,691
Prepaid expenses and other current assets		4,934			4,922			(471	)		10,070
Other assets		(1,393	)		(2,608	)		10,866			(12,811	)
Accounts payable		(6,025	)		(5,711	)		(6,896	)		(7,175	)
Accrued expenses and other liabilities		(1,459	)		(2,757	)		(6,188	)		(14,013	)
Deferred revenue		6,551			8,332			(5,518	)		(4,989	)
Net cash provided by operating activities		8,789			5,841			49,943			29,979
Investing activities
Purchase of property and equipment		(186	)		(148	)		(1,220	)		(866	)
Purchase business combinations, net of cash acquired		—			—			—			(62,356	)
Net cash used in investing activities		(186	)		(148	)		(1,220	)		(63,222	)
Financing activities
Payments of debt costs		(31	)		(3	)		(221	)		(203	)
Payments on notes payable		(1,350	)		(1,350	)		(40,400	)		(5,400	)
Repurchase of shares		(10,845	)		—			(14,060	)		—
Issuance of Series A Convertible Preferred stock, net of issuance costs		—			(75	)		—			110,445
Taxes paid related to net share settlement of equity awards		(349	)		(417	)		(1,091	)		(1,576	)
Issuance of common stock, net of issuance costs		3			1			5			191
Additional consideration paid to sellers of businesses		(67	)		(1,132	)		(5,617	)		(9,306	)
Net cash provided by (used in) financing activities		(12,639	)		(2,976	)		(61,384	)		94,151
Effect of exchange rate fluctuations on cash		1,004			4,216			567			(1,413	)
Change in cash and cash equivalents		(3,032	)		6,933			(12,094	)		59,495
Cash and cash equivalents, beginning of period		239,591			241,720			248,653			189,158
Cash and cash equivalents, end of period	$	236,559		$	248,653		$	236,559		$	248,653
Supplemental disclosures of cash flow information:
Cash paid for interest, net of interest rate swaps	$	8,990		$	7,316		$	32,137		$	29,120
Cash paid for taxes	$	879		$	713		$	7,106		$	3,876
Non-cash investing and financing activities:
Business combination consideration including holdbacks and earnouts	$	—		$	306		$	—		$	8,126

Upland Software, Inc.
Reconciliation of Adjusted EBITDA
(in thousands, unaudited)

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2023			2022			2023			2022
Reconciliation of net loss to Adjusted EBITDA:
Net loss	$	(16,012	)	$	(22,676	)	$	(179,874	)	$	(68,413	)
Add:
Depreciation and amortization expense		17,510			14,813			71,985			56,146
Interest expense, net		5,322			6,275			18,684			29,145
Other expense (income), net		675			2,479			(236	)		781
Provision for (benefit from) income taxes		633			(87	)		(2,493	)		(1,741	)
Stock-based compensation expense		4,682			7,579			22,874			41,602
Acquisition-related expense		451			2,632			3,060			21,556
Non-recurring litigation costs		699			18			1,126			33
Purchase accounting deferred revenue discount		92			730			557			5,496
Impairment of goodwill		—			12,500			128,755			12,500
Adjusted EBITDA	$	14,052		$	24,263		$	64,438		$	97,105

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,
	2023			2022			2023			2022
Reconciliation of net loss to non-GAAP net income:
Net loss	$	(16,012	)	$	(22,676	)	$	(179,874	)	$	(68,413	)
Add:
Stock-based compensation expense		4,682			7,579			22,874			41,602
Amortization of purchased intangibles		17,184			14,473			70,566			54,609
Amortization of debt discount		581			569			2,313			2,256
Acquisition-related expense		451			2,632			3,060			21,556
Nonrecurring litigation expense		699			18			1,126			33
Purchase accounting deferred revenue discount		92			730			557			5,496
Impairment of goodwill		—			12,500			128,755			12,500
Tax effect of adjustments above		(2,302	)		(1,560	)		(11,509	)		(7,985	)
Non-GAAP net income	$	5,375		$	14,265		$	37,868		$	61,654

Weighted average ordinary shares outstanding, basic		30,995,441			31,906,980			32,074,906			31,528,881
Weighted average ordinary shares outstanding, diluted		37,992,837			38,639,536			38,920,323			34,059,394
Non-GAAP earnings per share, basic	$	0.17		$	0.45		$	1.18		$	1.96
Non-GAAP earnings per share, diluted	$	0.14		$	0.37		$	0.97		$	1.81

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,
	2023			2022			2023			2022
Reconciliation of operating cash flow to Free Cash Flow:
Net cash provided by operating activities	$	8,789		$	5,841		$	49,943		$	29,979
Less: Purchase of property and equipment		(186	)		(148	)		(1,220	)		(866	)
Free Cash Flow	$	8,603		$	5,693		$	48,723		$	29,113

Upland Software, Inc.
Supplemental Financial Information
(in thousands, unaudited)

	Three Months Ended December 31,				Twelve Months Ended December 31,
	2023		2022		2023		2022
Stock-based compensation:
Cost of revenue	$	102	$	497	$	952	$	1,984
Research and development		552		626		2,463		2,733
Sales and marketing		495		655		2,059		4,239
General and administrative		3,533		5,801		17,400		32,646
Total	$	4,682	$	7,579	$	22,874	$	41,602

Depreciation:
Cost of revenue	$	—	$	2	$	5	$	8
Operating expense		326		338		1,414		1,529
Total	$	326	$	340	$	1,419	$	1,537

Amortization:
Cost of revenue	$	3,105	$	3,112	$	13,366	$	12,469
Operating expense		14,079		11,361		57,200		42,140
Total	$	17,184	$	14,473	$	70,566	$	54,609

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