Upland Software, Inc. (UPLD) Q4 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents mixed signals. While there are positive aspects like AI innovations, improved EBITDA margins, and debt reduction, significant concerns exist. These include a projected revenue decline, divestitures impacting revenue guidance, high debt levels, and operational challenges. The Q&A reveals management's evasiveness on certain financial details, further adding to uncertainty. With these factors, despite some positive elements, the overall sentiment leans negative, likely resulting in a stock price decline of -2% to -8%.
Key Financial Performance
Q4 2024 Adjusted EBITDA $14.9 million, up from $14 million in Q3 2024, reflecting sequential growth across each quarter in 2024.
Q4 2024 Adjusted EBITDA Margin 22%, up from 19% in Q4 2023, indicating improved operational efficiency.
Q4 2024 Free Cash Flow $9 million, contributing to a full year 2024 free cash flow of $23.4 million, despite prior year benefiting from a $20.5 million one-time cash gain.
Net Dollar Retention Rate 96%, improved from 95% in the prior year, showing better customer retention.
2024 Total Revenue Guidance Impact Divestitures lowered 2025 revenue guidance by about $18 million but had no adjusted EBITDA impact.
2025 Adjusted EBITDA Margin Expected to be 24%, up from 20% in 2024, indicating a positive trend in profitability.
2025 Core Organic Growth Rate Projected at 2.5%, a turnaround from a negative 1% average quarterly growth rate in 2024, reflecting improved business performance.
Debt Pay Downs $33 million in 2025 to date, in addition to $189 million in 2024, indicating a strong focus on reducing leverage.
GAAP Operating Cash Flow Q4 2024 $9.3 million, reflecting stable cash generation.
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Operating Highlights
Product Recognition: Upland earned 76 badges in the G2 Winner 2025 Market Reports, an increase from the prior year, with notable recognitions for RightAnswers, Panviva, BA Insight, and Qvidian.
Customer Acquisition: Upland welcomed 110 new customers in Q4, including 21 major customers, and expanded relationships with 291 existing customers, including 42 major expansions.
Partnership Expansion: Upland InterFAX expanded its partnership with Konica Minolta Business Solutions, enhancing its position as a cloud fax solution for their customer base.
Free Cash Flow: Q4 free cash flow was $9 million, bringing full year 2024 free cash flow to $23.4 million.
Debt Reduction: Upland paid down $33 million in debt in 2025, in addition to $189 million in 2024.
Divestitures: Upland divested two non-strategic underperforming product lines, lowering the 2025 revenue guide by $18 million but having no adjusted EBITDA impact.
Core Organic Growth Guidance: Upland is guiding to 2.5% core organic growth for 2025, a turnaround from a negative 1% average quarterly growth rate in 2024.
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Risk or Challenges
Core Organic Growth: Core organic growth in Q4 was flat, with a projected improvement to 2.5% in 2025, indicating potential challenges in achieving growth targets.
Divestitures Impact: Divestitures of two non-strategic product lines lowered the 2025 revenue guidance by approximately $18 million, reflecting risks associated with product performance and strategic focus.
Debt Management: Gross debt currently sits at about $261 million, with ongoing plans to pay down debt by up to $2 million per month, indicating financial risk related to debt levels.
Revenue Decline: Projected total revenue decline of 12% at the midpoint for Q1 2025 and 11% for the full year 2025, highlighting ongoing revenue challenges.
Payroll Tax Burden: The first quarter of 2025 is expected to be heavily burdened by U.S. Payroll taxes, which may impact cash flow and operational costs.
Adjusted EBITDA Guidance: First quarter 2025 adjusted EBITDA is expected to decrease by 3% from the prior year, indicating potential operational challenges.
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Guidance & Outlook
Core Organic Growth: Guiding to 2.5% core organic growth in 2025, an improvement from flat growth in Q4 2024.
Adjusted EBITDA Margins: Adjusted EBITDA margins are expected to increase by 400 basis points to 24% in 2025.
Net Dollar Retention Rate: Targeting continued improvement in net dollar retention rate, which was 96% at the end of 2024.
Customer Growth: Welcomed 110 new customers in Q4 2024, including 21 major customers.
Divestitures: Divested two non-strategic underperforming product lines, lowering 2025 revenue guidance by $18 million but with no impact on adjusted EBITDA.
Debt Reduction: Paid down $33 million in debt in 2025, in addition to $189 million in 2024.
Q1 2025 Revenue Guidance: Expected total revenue between $59 million and $65 million, with subscription and support revenue between $56.4 million and $61.4 million.
Q1 2025 Adjusted EBITDA Guidance: Expected adjusted EBITDA between $11.2 million and $14.2 million, with a margin of 20%.
Full Year 2025 Revenue Guidance: Expected total revenue between $231.5 million and $255.5 million, with subscription and support revenue between $218 million and $238 million.
Full Year 2025 Adjusted EBITDA Guidance: Expected adjusted EBITDA between $53.5 million and $65.5 million, with a margin of 24%.
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Shareholder Return Plan
Free Cash Flow: Q4 free cash flow came in stronger than expected at $9 million, bringing full year 2024 free cash flow to $23.4 million.
Debt Paydown: With proceeds from divestitures and free cash flow, Upland paid down debt by $33 million in 2025, in addition to $189 million in 2024.
2025 Free Cash Flow Guidance: Targeting full year 2025 free cash flow in the range of $20 million to $25 million.
Adjusted EBITDA Guidance: Full year 2025 adjusted EBITDA is expected to be between $53.5 million and $65.5 million, with an adjusted EBITDA margin of 24% at the midpoint.
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Key Q&A
Q:Can you just talk a little bit about the AI strategy and key use cases you're seeing?
A:We have AI enabled 80% of our core content and knowledge management product portfolio. Products like BA Insight connect enterprise LLMs to proprietary data sources. Panviva Sidekick helps contact center agents with real-time knowledge, and Qvidian AI Assist automates RFP responses. We're seeing substantial sales opportunities, including a $5 million ARR sale for Qvidian.
Q:Where are we in the asset unwind strategy? How much recurring revenue is left?
A:The sale prices for divested businesses were about $10 million. The decline in Sunset asset revenues is projected to go from $32 million last year to about $14 million this year, and down to around $6 million in 2026.
Q:Can you provide a brief history lesson on the go-to-market strategy since the HGGC investment?
A:Since the HGGC investment, we've sold noncore products, built a software development function in India, invested in product capabilities, and upgraded our sales talent. This has led to improved organic growth rates and net renewal rates.
Q:How do you think about the timing of taking out the existing debt?
A:We're not in a rush to refinance because we have an attractive lock rate with our swaps. We plan to refinance towards the second half of this year.
Q:Why is the guidance range for Q1 so wide?
A:The width of the guidance range is consistent with previous quarters, and it's due to the lumpy nature of perpetual license and professional services revenue.
Q:Can you provide more color on the core net dollar retention improvement?
A:The improvement in net dollar retention is driven by an increase in gross dollar retention, thanks to product investments and divestitures. Our goal is to reach a net dollar retention rate closer to 98% by the end of 2025.
Q:Is the 2.5% core growth a constant currency figure?
A:There isn't much of an FX impact on the 2.5% core growth.
Q:Review of Unclear Management Responses
A:Management appeared to avoid giving a direct answer regarding the specific details of the $18 million divested businesses' net proceeds, as well as the exact impact of foreign exchange on the outlook.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI solution
Alexander Sklar
America Upland
Assessment IDC
Cash flow
Digital FAX
ET Upland
FAX Vendor
Founder Hill
Glance Knowledge
Hallum Alexander
IDC Market
IDC MarketScape
Insight recognition
InterFAX Konica
Jeff Van
Konica Minolta
Upland AI
Upland Software
calendar
date
divestiture guide
end product
improvement
line divestiture
measure release
midpoint margin
pay down
product line
retention rate
UPLD Transcript
Upland Software, Inc. (UPLD) Q3 2025 Earnings Call Transcript
Unknown11-7
The earnings call showed mixed signals. While adjusted EBITDA and margins improved, revenue guidance was lowered, and perpetual license revenue declined. Positive partnerships and AI integration offer growth potential, but financial risks remain due to high debt levels. The Q&A revealed confidence in growth from large deals and partnerships but lacked clarity on revenue retention trends. The overall sentiment is neutral, balancing strong financial metrics with uncertainties in revenue and competition.
Upland Software, Inc. (UPLD) Q2 2025 Earnings Call Transcript
Unknown8-1
The earnings call presents mixed signals. Positive aspects include increased EBITDA margins, AI-driven growth opportunities, and debt reduction. However, there are concerns over divestitures impacting revenue guidance and professional services challenges. The Q&A reveals optimism about AI and demand but lacks clarity on M&A plans. Overall, the sentiment is balanced, leading to a neutral prediction.
Upland Software, Inc. (NASDAQ:UPLD) Q1 2025 Earnings Call Transcript
Unknown5-13
The earnings call presents mixed signals. Financial performance shows improvement in EPS and EBITDA margins, but revenue guidance indicates a decline. The Q&A reveals management's optimistic outlook on growth and margins, but lacks specificity, leading to uncertainty. Debt reduction efforts are positive, yet net debt remains high, posing risks. Overall, the sentiment is balanced with positive financial metrics countered by revenue challenges and vague growth strategies. Without market cap data, a neutral prediction is prudent.
Earnings call transcript: Upland Software Q1 2025 earnings beat expectations, stock surges
Neutral5-12
UPLD Report
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