Upland Software, Inc. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - August 11, 2016

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EXHIBIT 99.1

Upland Software Reports Second Quarter 2016 Financial Results

AUSTIN, Texas, August 11, 2016 /PRNewswire/ -- Upland Software, Inc. (Nasdaq: UPLD), a leader in cloud-based Enterprise Work Management software, today reported its financial results for the second quarter ended June 30, 2016, and provided guidance for its third quarter of 2016.
Second Quarter 2016 Financial Highlights
•
Total revenue was $18.6 million, compared to $17.7 million in the second quarter of 2015, or year-over-year growth of 5% .
•
Subscription and support revenue was $16.2 million, an increase of 16% from subscription and support revenue of $14.0 million in the second quarter of 2015.
•
GAAP net loss was $3.6 million, compared to a net loss of $3.3 million in the second quarter of 2015.
•
Adjusted EBITDA was $2.8 million, an increase of 267% compared to Adjusted EBITDA of $0.8 million, in the second quarter of 2015. 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 second quarter was $18.2 million.

“Q2 was another strong quarter, with 16% growth in recurring revenues, expanded 15% Adjusted EBITDA margins, and another acquisition," said Jack McDonald, chairman and CEO of Upland Software. "We have now met or exceeded guidance in each of the eight quarters we've reported since going public, and, as our strong Q3 guidance demonstrates, our quarterly ramp in Adjusted EBITDA is continuing nicely."

Second Quarter 2016 Business Highlights
•
Announced the acquisition of Advanced Processing and Imaging (API) which expanded our Workflow Automation product family. API is a highly effective content management platform driving workflow in governments and schools across North America.
•
Continued customer-driven innovation with three major feature releases, including:
◦
Project and IT Management applications, with a unified platform encapsulating IT financial management, call accounting, wireless visibility, VoIP analytics and cost avoidance, alerting and reporting systems.
◦
Workflow Automation applications with enhanced analytics and e-signature capabilities.
◦
Digital Engagement applications, with user-interface improvements and enhancements to performance and integration capabilities.
•
Expanded over 139 existing customer relationships, including 13 major expansions, and added 80 new customer relationships, including 4 major accounts.


Business Outlook
For the quarter ending September 30, 2016, Upland expects reported total revenue to be in the range of $17.7 million to $18.7 million including subscription and support revenue in the range of $15.9 million to $16.7 million, for growth in recurring revenue of 16% at the mid-point over the quarter ended September 30, 2015. Adjusted EBITDA is expected to be in the range of $2.9 million to $3.5 million, for an Adjusted EBITDA margin of 18% at the mid-point, representing growth of 173% at the mid-point over the quarter-ended September 30, 2015.

For the full year ending December 31, 2016, Upland expects reported total revenue to be in the range of $71.6 million to $73.6 million including subscription and support revenue in the range of $63.0 million to $65.0 million, for growth in recurring revenue of 12% at the mid-point over the year ended December 31, 2015. Adjusted EBITDA is expected to be in the range of $10.9 million to $12.3 million, for an Adjusted EBITDA


margin of 16% at the mid-point, representing growth of 172% at the mid-point over the year-ended December 31, 2015.

Conference Call Details
Upland's executive team will host a live conference call and webcast at 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 48995868. The conference call will be simultaneously webcast on the Company'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. A replay of the conference call will be available as of 8:30 p.m. Eastern Time on August 11, 2016 through 11:59 p.m. Eastern Time on August 25, 2016 at investor.uplandsoftware.com.
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 2,000 customers and over 235,000 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, and constant currency revenue.
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, 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 discontinued operations, plus the impact of amortization of purchased intangible assets, amortization debt discount, stock-based compensation expenses, acquisition-related costs, nonrecurring litigation expenses, purchase


accounting adjustments for deferred revenue, nonrecurring provision for income tax, and the related tax effect of the adjustments above.
Upland defines constant currency revenue as reported revenue adjusted for foreign currency exchange rates. In order to compute constant currency revenue, Upland converts the current period's local currency revenue using the average exchange rates from the equivalent prior period to arrive at constant currency revenue. The foreign exchange impact equals the difference between the current period revenue in U.S. dollars and the current period revenue in constant currency.
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; 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
512.960.1007
media@uplandsoftware.com


Upland Software, Inc.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share data)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Revenue:
 
 
 
 
 
 
 
Subscription and support
$
16,220

 
$
14,023

 
$
31,461

 
$
28,345

Perpetual license
458

 
846

 
776

 
1,657

Total product revenue
16,678

 
14,869

 
32,237

 
30,002

Professional services
1,892

 
2,809

 
3,915

 
5,204

Total revenue
18,570

 
17,678

 
36,152

 
35,206

Cost of revenue:
 
 
 
 
 
 
 
Subscription and support
5,634

 
4,841

 
10,860

 
9,573

Professional services
1,106

 
1,732

 
2,730

 
3,640

Total cost of revenue
6,740

 
6,573

 
13,590

 
13,213

Gross profit
11,830

 
11,105

 
22,562

 
21,993

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
2,953

 
3,446

 
6,022

 
6,978

Research and development
4,054

 
4,152

 
7,964

 
8,078

Refundable Canadian tax credits
(116
)
 
(122
)
 
(225
)
 
(243
)
General and administrative
4,547

 
4,714

 
8,670

 
9,833

Depreciation and amortization
1,476

 
1,063

 
2,948

 
2,077

Acquisition-related expenses
1,380

 
360

 
3,808

 
905

Total operating expenses
14,294

 
13,613

 
29,187

 
27,628

Loss from operations
(2,464
)
 
(2,508
)
 
(6,625
)
 
(5,635
)
Other expense:
 
 
 
 
 
 
 
Interest expense, net
(662
)
 
(576
)
 
(1,223
)
 
(923
)
Other expense, net
(293
)
 
(12
)
 
(1,041
)
 
(524
)
Total other expense
(955
)
 
(588
)
 
(2,264
)
 
(1,447
)
Loss before provision for income taxes
(3,419
)
 
(3,096
)
 
(8,889
)
 
(7,082
)
(Provision for) benefit from income taxes
(158
)
 
(238
)
 
(261
)
 
5

Loss from operations
(3,577
)
 
(3,334
)
 
(9,150
)
 
(7,077
)
Net loss
$
(3,577
)
 
$
(3,334
)
 
$
(9,150
)
 
$
(7,077
)
Net loss attributable to common shareholders
$
(3,577
)
 
(3,334
)
 
$
(9,150
)
 
(7,077
)
Net loss per common share:
 
 
 
 
 
 
 
Net loss per common share, basic and diluted
$
(0.22
)
 
$
(0.22
)
 
$
(0.58
)
 
$
(0.48
)
Weighted-average common shares outstanding, basic and diluted
16,269,808

 
14,867,947

 
15,851,106

 
14,854,139




Upland Software, Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands)
 
June 30, 2016
 
December 31, 2015
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
18,187

 
$
18,473

Accounts receivable, net of allowance
13,646

 
13,972

Prepaid and other
2,621

 
2,603

Total current assets
34,454

 
35,048

Canadian tax credits receivable
1,661

 
2,018

Property and equipment, net
5,745

 
6,001

Intangible assets, net
34,407

 
31,526

Goodwill
67,830

 
47,422

Other assets
466

 
399

Total assets
$
144,563

 
$
122,414

Liabilities and stockholders’ equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
1,216

 
$
2,548

Accrued compensation
1,835

 
2,441

Accrued expenses and other
6,033

 
5,173

Deferred revenue
23,985

 
19,931

Due to sellers
8,449

 
2,409

Current maturities of notes payable
1,504

 
1,500

Total current liabilities
43,022

 
34,002

Commitments and contingencies (Note 9)
 
 
 
Canadian tax credit liability to sellers
398

 
368

Notes payable, less current maturities
36,355

 
22,366

Deferred revenue
18

 
8

Noncurrent deferred tax liability, net
3,050

 
2,818

Other long-term liabilities
2,741

 
2,582

Total liabilities
85,584

 
62,144

Stockholders’ equity:
 
 
 
Common stock
2

 
2

Additional paid-in capital
119,825

 
112,447

Accumulated other comprehensive loss
(2,808
)
 
(3,289
)
Accumulated deficit
(58,040
)
 
(48,890
)
Total stockholders’ equity
58,979

 
60,270

Total liabilities and stockholders’ equity
$
144,563

 
$
122,414




Upland Software, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
 
 
 
 
 
Six Months Ended June 30,
 
2016
 
2015
 
(unaudited)
 
(unaudited)
Operating activities
 
 
 
Net loss
$
(9,150
)
 
$
(7,077
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
5,075

 
4,040

Deferred income taxes
102

 
335

Foreign currency re-measurement loss
(261
)
 
292

Non-cash interest and other expense
129

 
246

Non-cash stock compensation expense
1,564

 
1,335

Loss on disposal of business
731

 
—

Changes in operating assets and liabilities, net of purchase business combinations:
 
 
 
Accounts receivable
1,364

 
1,517

Prepaids and other
549

 
(36
)
Accounts payable
(1,509
)
 
414

Accrued expenses and other liabilities
258

 
(1,082
)
Deferred revenue
2,095

 
888

Net cash provided by (used in) operating activities
947

 
872

Investing activities
 
 
 
Purchase of property and equipment
(851
)
 
(325
)
Purchase of customer relationships
(408
)
 
(372
)
Purchase business combinations, net of cash acquired
(11,844
)
 
(2,820
)
Net cash provided by (used in) investing activities
(13,103
)
 
(3,517
)
Financing activities
 
 
 
Payments on capital leases
(908
)
 
(481
)
Proceeds from notes payable, net of issuance costs
14,987

 
23,824

Payments on notes payable
(1,122
)
 
(22,833
)
Issuance of common stock, net of issuance costs
113

 
98

Additional consideration paid to sellers of businesses
(1,484
)
 
—

Net cash provided by (used in) financing activities
11,586

 
608

Effect of exchange rate fluctuations on cash
284

 
101

Change in cash and cash equivalents
(286
)
 
(1,936
)
Cash and cash equivalents, beginning of period
18,473

 
30,988

Cash and cash equivalents, end of period
$
18,187

 
$
29,052

Supplemental disclosures of cash flow information:
 
 
 
Cash paid for interest
$
1,093

 
$
694

Cash paid for taxes
$
249

 
$
322

Noncash investing and financing activities:
 
 
 
Equipment acquired pursuant to capital lease obligations
$
340

 
$
1,085

Issuance of common stock in business combination
$
5,700

 
$
—




Upland Software, Inc.
Reconciliation of Non-GAAP Adjusted EBITDA and Adjusted EBITDA Diluted EPS
(Unaudited, in thousands)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
(dollars in thousands, except share and per share data)
 
(dollars in thousands, except share and per share data)
Reconciliation of GAAP Net loss to Non-GAAP Adjusted EBITDA:
 
 
 
 
 
 
 
Net Loss
$
(3,577
)
 
$
(3,334
)
 
$
(9,150
)
 
$
(7,077
)
Add:
 
 
 
 
 
 
 
Depreciation and amortization expense
2,560

 
2,039

 
5,075

 
4,040

Interest expense, net
662

 
576

 
1,223

 
923

Other expense (income), net
293

 
12

 
1,041

 
524

Provision for (benefit from) income taxes
158

 
238

 
261

 
(5
)
Stock-based compensation expense
870

 
781

 
1,564

 
1,335

Acquisition-related expense
1,380

 
360

 
3,808

 
905

Nonrecurring litigation expense
13

 
—

 
25

 
371

Purchase accounting deferred revenue discount
417

 
84

 
932

 
197

Adjusted EBITDA
$
2,776

 
$
756

 
$
4,779

 
$
1,213


Upland Software, Inc.
Reconciliation of Non-GAAP Net Income Loss
(Unaudited, in thousands, except share and per share data)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
 
(dollars in thousands, except share and per share data)
 
(dollars in thousands, except share and per share data)
Reconciliation of Net Loss to Non-GAAP net income (loss):
 
 
 
 
 
 
 
Net loss
$
(3,577
)
 
$
(3,334
)
 
$
(9,150
)
 
$
(7,077
)
Add:
 
 
 
 
 
 
 
Stock-based compensation expense
870

 
781

 
1,564

 
1,335

Amortization of purchased intangibles
1,927

 
1,479

 
3,848

 
2,915

Amortization of debt discount
65

 
220

 
129

 
252

Acquisition-related expense
1,380

 
360

 
3,808

 
905

Nonrecurring litigation expense
13

 
—

 
25

 
371

Purchase accounting deferred revenue discount
417

 
84

 
932

 
197

Tax effect on non-GAAP adjustments above
(82
)
 
(108
)
 
(159
)
 
(530
)
Non-GAAP net income (loss)
$
1,013

 
$
(518
)
 
$
997

 
$
(1,632
)
Weighted average ordinary shares outstanding - basic
16,269,808

 
14,867,947

 
15,851,106

 
14,854,139

Weighted average ordinary shares outstanding - diluted
16,623,849

 
15,155,047

 
16,164,234

 
15,141,389

Non-GAAP earnings (loss) per share - basic
0.06

 
(0.03
)
 
0.06

 
$
(0.11
)
Non-GAAP earnings (loss) per share - diluted
0.06

 
 na

 
0.06

 
 na





Upland Software, Inc.
Supplemental Financial Information
(Unaudited, in thousands)
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Stock-based compensation:
 
 
 
 
 
 
 
Cost of revenue
8

 
5

 
15

 
16

Sales and marketing
32

 
36

 
45

 
50

Research and development
28

 
109

 
42

 
120

General and administrative
802

 
631

 
1,462

 
1,149

Total
$
870

 
$
781

 
$
1,564

 
$
1,335



 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Depreciation:
 
 
 
 
 
 
 
Cost of revenue
$
466

 
$
449

 
$
911

 
$
910

Operating expense
167

 
111

 
316

 
215

Total
$
633

 
$
560

 
$
1,227

 
$
1,125

 
 
 
 
 
 
 
 
Amortization:
 
 
 
 
 
 
 
Cost of revenue
$
618

 
$
527

 
$
1,216

 
$
1,053

Operating expense
1,309

 
952

 
2,632

 
1,862

Total
$
1,927

 
$
1,479

 
$
3,848

 
$
2,915




Upland Software, Inc. Reports