Upland Software, Inc. (UPLD) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Revenue Q3 revenue beat guidance midpoint. Revenue was as expected when considering recent divestitures.
Core Organic Growth Rate 3% in Q3 2025, showing positive growth.
Adjusted EBITDA $16 million in Q3 2025, with a margin of 32%, up from 21% in Q3 2024. This reflects a significant improvement in profitability.
Free Cash Flow $6.7 million in Q3 2025. Full-year target remains at $20 million.
Net Debt Leverage 3.8x in Q3 2025, down from previous levels, with a target of 3.7x by year-end.
Gross Margins Increased from Q2 2025 due to higher margins in ongoing product lines.
GAAP Operating Cash Flow $6.9 million in Q3 2025.
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Operating Highlights
AI-powered product portfolio: Welcomed 97 new customers, including 14 major ones, and expanded relationships with 168 existing customers, 13 of which were major expansions. Products like Upland RightAnswers and Upland BA Insight are now available in the AWS Marketplace, simplifying purchasing and accelerating enterprise AI adoption. InterFAX added AI features, Adestra enhanced bot-click detection and integrated Raiser's Edge NXT, and Second Street introduced a QR code generator.
AI deals: Closed a $2 million multiyear agreement with a Fortune 100 tech company for RightAnswers and a $1 million multiyear deal with a global pharmaceutical company for BA Insight, both leveraging AWS Bedrock AI.
Market recognition: Earned 49 badges in G2's Fall 2025 market reports and was recognized in Forrester's Customer Service Solutions Landscape Q3 2025 report, highlighting advancements in customer service operations.
Financial performance: Q3 adjusted EBITDA was $16 million with a 32% margin, and free cash flow was $6.7 million. Full-year 2025 adjusted EBITDA margin is expected to be 27%, up from 20% in 2024. Net debt leverage reduced to 3.8x, with a target of 3.7x by year-end.
Debt refinancing: Successfully refinanced debt, extending maturity to July 2031, and added a $30 million revolver, improving liquidity.
Portfolio focus: Streamlined product portfolio to focus on markets driving growth and profitability, targeting 3% core organic growth next year and 5%+ thereafter.
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Risk or Challenges
Revenue Decline: The company expects a year-over-year decline in total revenue of 27% for Q4 2025 and 21% for the full year 2025, primarily due to divestitures completed earlier in the year. This decline could impact financial performance and growth.
Debt Levels: Despite refinancing and extending debt maturity, the company still has a net debt of approximately $217 million, which could pose financial risks if cash flow generation does not meet expectations.
Lowered Guidance: The midpoint for full-year 2025 total revenue and adjusted EBITDA guidance ranges was lowered by $800,000, primarily due to lower forecasted perpetual license revenue, indicating potential challenges in revenue generation.
Market Competition: The company operates in competitive markets, particularly in AI and customer service solutions, which could pressure pricing and market share.
Economic Uncertainty: Broader economic uncertainties could impact customer spending and adoption of the company's solutions, particularly in AI and enterprise software.
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Guidance & Outlook
Q4 2025 Revenue Guidance: Expected total revenue between $46.4 million and $52.4 million, with subscription and support revenue between $44.1 million and $49.1 million. This represents a 27% year-over-year decline at the midpoint, primarily due to divestitures.
Q4 2025 Adjusted EBITDA Guidance: Expected adjusted EBITDA between $13.8 million and $16.8 million, representing a 3% increase year-over-year at the midpoint. Adjusted EBITDA margin is expected to be 31% at the midpoint, a 900 basis point increase from Q4 2024.
Full Year 2025 Revenue Guidance: Expected total revenue between $214 million and $220 million, with subscription and support revenue between $202.5 million and $207.5 million. This represents a 21% year-over-year decline at the midpoint, primarily due to divestitures.
Full Year 2025 Adjusted EBITDA Guidance: Expected adjusted EBITDA between $56.5 million and $59.5 million, representing a 4% increase year-over-year at the midpoint. Adjusted EBITDA margin is expected to be 27% at the midpoint, a 700 basis point increase from 2024.
Core Organic Growth Rate: Targeting 3% in 2026 and 5%+ thereafter, reflecting a positive multiyear uptrend from negative growth in prior years.
Adjusted EBITDA Margin Long-Term Targets: Targeting 29%+ in 2026, 31%+ in 2027, and a long-term operating model target of 32%.
Free Cash Flow Projections: Targeting approximately $20 million in 2025 and an increase of about 10% to $22 million in 2026.
Debt Leverage Goals: On track to achieve a net debt leverage ratio of 3.7x by the end of 2025, with continued deleveraging forecasted for 2026 and beyond.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What gives you confidence in achieving the targeted growth rates over the next year or two?
A:The long-term trend is positive, with growth rates improving from -2% in 2023 to a targeted 3% in 2026. Larger deals, such as a $2 million multiyear deal with a Fortune 100 tech company and a $1 million multiyear deal with a major pharmaceutical company, along with AI-enabled product portfolios and partnerships with major players like Microsoft, Amazon, and Google, contribute to this confidence.
Q:What caused the $800,000 reduction in fourth-quarter license revenue guidance?
A:The reduction is primarily due to a perpetual license revenue that was forecasted but is not expected to materialize. A small portion of professional services revenue also contributes to the reduction, which impacts EBITDA but not subscription support revenue guidance.
Q:Were there any changes to gross revenue retention trends that contributed to the 3% growth?
A:The company does not report net dollar retention rates during the year, but excluding divestitures, the rate was 99% at the end of 2024. The company is targeting to remain in the upper 90% range this year, indicating consistent trends.
Q:How much growth is expected from the installed base versus net new customers?
A:Growth from the installed base is solid, with net dollar retention rates improving from the low to mid-90s to the upper 90s. The company aims to add growth deals with new customers, focusing on its knowledge and content management product portfolio, which accounts for 75% of revenue.
Q:Does the presence of key products in the AWS Marketplace help more with existing customers or new customer acquisition?
A:The AWS Marketplace benefits both existing customers and new customer acquisition. It facilitates easier purchases for existing customers and enhances discoverability for new customers. Broader partnerships with major players like Amazon, Google, and Microsoft also contribute to enterprise AI implementations.
Q:What is working and not working in sales and sales execution?
A:Upgrading the sales force, implementing an SEO strategy, using intent data from platforms like 6sense, and investing in channel partnerships with Amazon, Google, and Microsoft are working well. However, sales cycles and quarterly fluctuations remain challenges.
Q:How is the company progressing in product development and innovation?
A:The company has made significant improvements, including establishing a center of excellence in India, enhancing product reliability, integrating AI into products, and prioritizing road map items. These efforts have led to larger deals and steady progress over the past 3-4 years.
Q:What caused the reduction in perpetual license revenue, and is it a competitive loss?
A:The reduction is not due to a competitive loss or a single customer. It reflects a general decline in perpetual license revenue, which typically sees a Q4 uptick but did not occur this year.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on net dollar retention rates during the year, citing it as a year-end metric. Additionally, the explanation for the reduction in perpetual license revenue lacked clarity, as it was described as a general decline without a detailed breakdown or specific reasons.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI Agents
AI adoption
AI customer
AI deal
AI discovery
AI margin
AI solution
AI support
AWS Bedrock
AWS Marketplace
Adestra bot
BA Insight
CEO President
Founder CEO
President Chairman
Upland RightAnswers
course
customer service
debt leverage
debt maturity
debt year
decline divestiture
enterprise AI
flow balance
flow generation
liquidity debt
maturity debt
midpoint basis
midpoint decline
platform
point increase
product market
productivity
revolver
search
sheet debt
tech
track
trend
win product
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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