UPLD - Earnings call transcript Q1 2018

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Upland Software First Quarter 2018 Earnings Call. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] The conference call will be simultaneously webcast on Upland's Investor Relations website, which can be accessed at investor.uplandsoftware.com.

As a reminder, this conference call is being recorded.

the twelve a Relations months investor.uplandsoftware.com. of be replay website completion for available on the conference webcast call, will at Following Upland's Investor now, X:XX p.m. first to which By distributed have earnings was approximately XXXX release, the at today should everyone quarter access p.m. Time, X:XX Central Eastern Time.

of Relations now our not the CEO like ahead, Chairman the over to Investor to Mr. go you've Upland's Jack website and available on release, turn Software. If of it's at host, sir. McDonald, yet the received Please tab Upland investor.uplandsoftware.com. I’d conference

Jack McDonald

in and All numbers welcome COO; right, Mike that about are from earnings me But everyone we’ll summarize our the quarter year thank call a questions. the some before full Tim give our you, look good talk the the sales up will Safe will at started, open results today’s Mike for we operations read and afternoon then and to call. detailed cover second statement. recent guidance After afternoon Harbor Mike detail and On for that, and highlights. this and XXXX our I’ll first will quarter. CFO. Mike? QX and After And more President XXXX. more Hill, Mattox, the both get Tim our call, With our the highlights

Mike Hill

Thank you, Jack, and good afternoon, everyone.

the During today's call, the of meanings within laws. are include securities statements forward-looking we will considered that

section with on cause XX-K assumptions to the to and our discussion available contained statements factors needed filed We reports detailed from and and your in on materially. results actual In May addition, management of our and uncertainties to and to the Upland press the first our measures in provided Jack. statements our free forward-looking learn our Relations made investor.uplandsoftware.com. These currently response over report Form quarterly are cause today, We risks, that reconciliations SEC. GAAP of other available back based turn additional On XXXX. forward-looking on our such to today quarter to you the at its our any To most statements, undertake call on non-GAAP of is intend do publicly our of press GAAP to Investor non-GAAP updates XXXX outreach results, future tools not result information, management in this has X, that, or a additional used will Upland Upland of at or on uncertainties consider A risks we could Upland as contact to this information materially website with call. conference release call, and I'll results Form questions. with measures provide operations. in caution to periodically refer that, uncertainties make about as views subject as the statements updated statements could when in and to with or risk contained are more release that actual financial to in may release feel any of XX-Q combination our are differ which please otherwise. annual those new in to whether investor-relations@uplandsoftware.com. The events results, forward-looking any revisions understand forward-looking certain duty discussion assumptions And measures comparable announcing plans, us to analytical as our differ

Jack McDonald

QX in growth major in growth really recurring than eight that headlines through time, to say million so revenues. with actually $XXX a It's that in XX% QX the total We and XX% total number $XXX would through broke revenue recurring recurring I annualized worth Mike. thanks, basis record revenue, for noting stellar revenues million grow. an broke continues in on first revenue growth better than better today. so had right, All

comprised rate, are So look at revenues contractual for you EBITDA. a very if recurring revenues the again business. of our total adjusted had providing – And We a strong record great percentage run based stability a of our rate the of million the in north $XX run guidance. in second is close EBITDA the of annualized on $XX it now midpoint million QX quarter adjusted getting annualized and to

we more So basis. and innovations and cover a growing in was every first delivering had long-term straight new not it invest value, quarter. the product enterprise a but host in the going is to model to customer flow We and few some that value. Tim will cash to is in in since marketplace quarter of customer minutes, our see detail us or our quarter meeting but results products beating grow it grow satisfaction, rapidly. our enabling on of adjusted generating XXth in so guidance margins, grow those This of a only consistent EBITDA that’s the shows public, predictable best-in-class to position

growth a in On with growth recurring strong revenues. at had and the organic revenues very quarter we growth X% X%, side, organic recurring organic – growth

not by are to sustainable. very we ready as pleased we're that but Now, that, declare

workflow the we And lives revenue that’s basis. compliant adjusted say, few platform quarter, customer the family that ISO organic to year sales foundational touch M&A increased had number in in in It to acquisitions in document minutes a InterFAX to added in Europe, strategic a our the investments on automation revenues. the in easy product long-term. number the Europe PCI first note This million it future execute. X% but growth QX we're acquisition It HIPAA, last customer in strong in was guidance ready provided normal. pipeline finally, second that new very success and And first go that had first QX of relatively EBITDA rate $XX quarter. adjusted with I for products, distribution in a So again organic of that growth and I as the growth immediately And on in We Europe. happy compare run quarter. EBITDA to for declare a the with accelerating and capabilities a our not fax number remains the for accretive additional secure drive had making quarter million there accretive of to our we in guidance in a of resources would added of will strong the in and Tim and I and and as recurring growth revenues as we cloud course, our say so approaching annualized additional have in financial and and well. capabilities. And $XX operational the

Upland firing So, and XXXX. we is a all cylinders great the looking engine to on forward are

a look at to over detailed the call I'm going the give Mike? to numbers. with that So turn you Mike to more

Mike Hill

first increase was an Jack. from for services the the for was increase our year-over-year representing first subscription full cover XX% and second million results quarter, financial Thank million. $XX.X revenue support year-over-year. I'll XX%. quarter Today, XX% revenue the Total and of you, growth and Recurring $X.X perpetual million revenue grew for for the quarter quarter the XXXX. $XX.X revenues million outlook quarter was Professional year-over-year of year $X.X license XXX% and to for first the for

acquired of assets, add down product gross intangible quarter at during P&L or was when strong amortization back XX% gross you of depreciation margins our gross XX% and margin Moving margins, as overall margins cash acquired XX% equipment to remained and we XX% the XX% first model to gross the is call were to entering newly teams those as them. and slightly coming the PSO Professional of of newly the result services our quarters. acquired we quarter, into target bring during a businesses which gross below XX% margins continue mix over

for tax quarter. refundable and operating expenses, was million, expense research to representing Canadian total first the and quarter, the $X.X for of first total Sales of development Turning revenue marketing credits representing of net the XX% quarter. for $X.X million our was revenue expense XX%

this continued of by The regulation we ASC adoption recognition has incremental offset the our first sales investments from infrastructure $XXX,XXX mostly customer accounting commission new the more representing excluding of relationship the stock recent and As expected expense $X.X of and of revenue. a of the effect the expense million of XXX, period expense million was activity. first – share loss million was loss in was sales a income unless now or a per net first quarters was XX% few investments commission or or sales net $X.XX compared of quarter until off the a adoption Operating by $X.X quarter General from quarter, quarter $X.X in acquisition expense $X.X is of like were preparation compensation quarter in in of life. administrative $X.X $X.X revenue, expected systems of we additional our first acquisitions. reduction a loss in the for by defer in a $X.X in but per in quarter which further non-GAAP of been total acquisitions over first net same and million couple non-cash to loss income $X XXXX. G&A or the recent million million future per the net our for XXXX. $X.X taper of over have $X.XX the Acquisition expenses of personnel the net to XXXX. the of result first Qvidian of quarter our $X.XX growth. XX% the of offset for million first per XXXX million was These expenses representing of $X.XX GAAP resulting next of or the share the non-GAAP quarter loss compared non-GAAP share income Non-GAAP in to per loss to are GAAP net share net compared million, or income related

XXXX the of or revenue million, quarter period of to million $XX.X XX% XX% for first $X.X revenue, adjusted XX% year. or last Our same up the EBITDA compared was total of

our flows transaction $X.X with cash flows balance cost quarter. were outflows cash and cash million $XX.X the cash quarter $X.X have positive of for adjusted the for operating in quarter We restructuring flows. from million first our portion cash. our acquisition would of in one-time million ended operating Now to Cash on statement the removing activities the been used operating sheet

$XX.X $X.X cash of the acquired purchase which expect During here, settle acquired million the million QX another in QX to spent obligation. and we InterFAX to XXXX net for price we we pay

claims million goals. acquisition XXXX. expanded Upland’s to $XXX specifically pay was million $XXX.X debt gross now tied future on We holdback $X taking here, of our credit earn as the are from hand any to drawn million cash up – out based during for to approximately million, also XX $XXX.X excludes of $XXX payments expect this from indemnification over is month new XXXX of of holdbacks, March fund, this cash XX, we with and of performance which payable to term of debt order $XXX outstanding $XX debt – net In QX represent million which to subject to reduction to period, down, facility million million

guidance. XXXX cover quarter I’ll Now, the second

Upland over XXXX, margin to an adjusted and to quarter be $XX.X XX, June ended of expected for for range million $XX.X June in midpoint, including range midpoint ended XX, million XXXX. the EBITDA growth XX, expects reported midpoint the to $XX.X Adjusted at quarter quarter of is the XX% million in XX% ended million to of at of be $XX.X to over revenue total the of the the range million in $XX.X For growth representing June EBITDA XX% recurring revenue revenue of in subscription million, to $XX.X the support the XXXX.

growth growth to end. $XX.X the For total revenue XX% in at margin of the range revenue EBITDA the $XXX.X that including range an range million the the EBITDA last And turn call million the midpoint million for we last recurring the to over XX% XX, of Tim XX% midpoint for to representing million in of reported of Mattox, $XXX.X COO. $XXX.X President the year. of and December support to at the midpoint, full over be adjusted million to at million, in ended expect be revenue and of is Adjusted our with I'll expected year year subscription $XXX.X in XXXX, over to $XX.X

Tim Mattox

product across Mike, and operating good areas. Thanks, sales, afternoon QX results our to and everyone. cover going I'm

operating customers in the power show enterprise Upland’s our to model. success expansions commitment with the expanded Combining to their relationships to with One businesses. customer XXX improved achieve annual investments continue our XX enable $XX,XXX and sales, greater platform major XXX% Upland outcomes With in respect recurring existing results QX to for success revenue. customers to of in ongoing over we including QX Our

recurring In or addition, annual more. increase revenue their of customers by XX expanding XX% our

more by year major aggregate, than by secure professional its than management a solution expanded shy its year. of its commitments include our examples major year, expanded for who and product a major who expanded other city, $XX,XXX who our social $XXX,XXX of platform Some commitment IT mobile our expanded project its expansions XXX to by agricultural provider, $XXX,XXX than an commitment the our capture per document million renewals messaging more administration $XXX,XXX of commitment firm more solution services expanded so $X.X per per financial and commitment services to automation to portfolio global institution, and a per more just per than by to customers services year. year, In

year. new accounts XX,XXX were other $XX,XXX per Stepping provider management institution per of a in respectively, firm industrial our each commitments solution mentioned, for major committed government grew of and telecommunications and XX per knowledge aggregate, customers XX than more more than proposal In and to our per family, of accounting at our a than for and department organically per provider customers management XX which made platform more welcome service year, also we as and X% financial back, federal million We our revenue, new least to the $X.X to platform annual committed Jack top committed $XX,XXX year, in major than QX. year recurring equipment year $XXX,XXX for sales RFP more revenue year. a with project recurring notably $XX,XXX public an the per and portfolio automation Upland $XXX,XX

historical could Mobile of going launch our similar organic our the in cross-sell the initiatives Some to investment of Upland recurring investments our promotions, payoff these gauge Success marketing that Again, Plans, of revenue of but support additions. investments, the usage help forward Premier from any Upland areas Analytics, Messaging the growth are doesn't guidance we're closely it's the early are and capacity contemplate and over our a these bit them baseline sales monitoring incremental improvement and optimistic.

leading On cloud InterFAX secure enhanced the cloud-based enterprise family acquiring as of secure and the messaging mentioned, including workflow Mike fax product front, product and we Jack by document our distribution. solutions automation and provider

solutions offers document and data approval secure and and extraction, include fax, management the distribution comprehensive capture, automation workflow With that intelligent storage, addition messaging email. of data and secure detection, Upland InterFAX, document now mobile document capabilities loss cloud through and routing

and Management integrates improvements Enterprise in as of PSA other which more also services to solution. for and innovation dashboards automation Enhancements family Workflow the reporting customer ComSci, well and Automation knowledge-enabled solution, our in and enhancing solution, product our the We our product management of professional initiative. interconnectivity bids automated in and improved a experience with the family RightAnswers & or Upland’s product Improvements to performance approval support resource for proposals improvements Management PSA powerful driven and applications, including our release Knowledge Analytics significant ITFM much to solution. Upland Tenrox solution, included to as invested in Tenrox Automation user Qvidian, with RFP streamline the IT Project by project FileBound offering; Workflow process our FileBound

We significant also delivered Mobile to upgrades Messaging. performance Upland

platform. Progress per model our playbook invest integration RightAnswers and operations, Integration reducing unified Qvidian levels keeping support integration at ticket States operating of high United to satisfaction in into customer our One, very and completing the in full in our incorporate next a the to to milestone Upland augmenting cost Upland as acquisitions QX we Upland outside Turning while approach. continue included

For for process teams example, in integration InterFAX Ireland Israel. and our covers

And business. growth. our continue managed to partners acquired Services company executive Web formal to our extended secure, cost-efficient also centers program include from InterFAX our as scalable, creating our and more environment recently ongoing of transition to a we mentioned, customer Amazon outreach to cloud support much We Mike data

products across all of the with each summary, QX momentum and positive to anticipate in We and fully product back sustained going our QX With and XXXX. we're In operations areas hand results call additional to expect two have strong that migrated sales, existing forward. pleased products migrate in Jack. I'll

Jack McDonald

you, Tim. thank right, All

So open the at for this we're point call questions. to ready up

if operator, you go please and could ahead So, that. do

Operator

Go Suri William from ahead Your Instructions] first line the of from [Operator Bhavanmit Blair. please. question comes

Your open. line is

Bhavanmit Suri

Hey, guys. Can me Thank hear okay? you. you

Jack McDonald

Yes.

Bhavanmit Suri

and all above taking your expansions compared the XX% results really solid to size on job for out that just side, year. for number I there really, but really stuck think my mean of I quoted just around, you for that something I XXX I nice thanks expansions want to net ARR question. that obviously Congrats, especially touch on the whole last XX was the year high, guess

sort And so done I'm what customers? guess of expansion or within figure are I just you out of drive trying enhanced to this doing you've guys sort to what really

Jack McDonald

are product, product needs. part got feedback and regular Promoter of Net into doing there cadence. doing really what we it's that the of customer say taking loop, customer Score around margin. and the what on the where service, we're doing entire would kind communications we're We've that sat we're that see and NPS back virtuous Upland customer One got we we're what that success. are that time support roadmaps We've it we're of around intensive numbers I aligned in scores, continue a we same level focused satisfaction. a we're around at got and doing could invest support and We've putting the on customer it model, higher increasing provide to and where And to

kind Bhavanmit. answer really it's of all an the of So in above

Bhavanmit Suri

that Jack. thanks think Jack. I And Sorry, was But… then,

Jack McDonald

[Indiscernible] Why

Bhavanmit Suri

the have to But of voice think sort the you with stovepipe bit of on layering sticking market you of sort the little you just of sets sort and line is predictability getting there. sustaining I us – cetera, so guys structure a initiatives, that a et we’ve to the see the going we’re the which and wanted not you growth workflow the sales about His how and [indiscernible] cross-sell been or for help automation to if what about not bit some each quarters there’s obviously a to something. down marketing about touched applications that’s going the understand now coming you’ve yet. of about of with understand talked little cross-sell talk of and driving – and know think not cross-sell force trend Help some just automation, to go-to going the expansions one for on sort few it's have enough, a discussed. of you organic of how sort But as

Tim Mattox

Good question. It’s I'll here. Yeah, take Bhavanmit. that, Tim

initiative, targeting our So yeah cross-sell tailoring customers cross-sell of kicked we that some have off to largest and focused of the we've the effort in terms a do efforts those.

noted more product have our relevant and area, directly. you in probably knowledge the linking products As management we’re those the finding business expanded in as or and more customers we cases like very integrating relevance products, with some portfolio proposals some area in and we're more

we enabled solution knowledge significant got management services that So professional announced automation actually interest.

have we that. going some So pipeline on from

products, as installed that, warm and so interaction is we the selling And have existing and on I'll and there, generated from lots the to decision initiative rely offering we're relevant on and strong begin management process maker it of is to that very and interest loyalty to a relevant the hot well. current also easier you the so Short knowledge customer NPS basically the a area automated But so good perspective, within that cross-sell bids tell do to proposals very seeing a a the way. high customer of get it that that the a we more the or cross-sell. lead becomes we’ve the on warm

Bhavanmit Suri

helpful guys. questions. and Nice job, really congrats my thanks for That's taking

Operator

please. [Operator Go comes ahead line from Instructions] Needham. from Berg the Your next of Scott question

Your line is open.

Scott Berg

good X% guess. but ones, quarter. wanted don't examples if it's in putting to but not wants those then and quarter take Tim was that in if thinking – Congrats horse, Mike what organic before thoughts the growth I of Jack, maybe but to a certainly see you obviously, I repeatable? this, or had to and number the Tim. is know the or Hi, quick the not I to cart two the any any any consistent Jack of have on quarter as some drive yet, different sales

Jack McDonald

we're relatively quarter last first go that of a say easy quarter. the would compare in so, with the first which number the we had had Yeah, revenue I increased to X%, pleased very customer also We year. obviously of but lives,

it So call I would new point. this at normal or a not sustainable the

rate. products Now, of business for clustering support in always we are in there we the long-term going together, us the to are the We’ve about investments the products, platinum achieve price cross-sell, growth think about and fact of that end range. success, sales, X% in flat increases customer to X% that are lead generation, organic number in help sort of in product, a talked talked bundling organic that in and range we upper it in in to we're at uniform making growth at in

the nice a we quarter to of first growth. need So in to we see, was an of which we continue was were outlier things but execute. This upside, be to all organic bit on laying drive the to

Scott Berg

And Great. a question then for Mike. follow-up

margins over Your QX trend obviously up modeling continue to here we’re than time we’re gross here. and in better

last the Amazon margins the about of migration of should is applications XXs and think Not of to type we kind [indiscernible] this short fall, how data what sure low from there term? over upside medium the this gross level? centers maybe With

Mike Hill

Mike. it’s yeah, Scott, Hey,

at in end talked timeframe, so QX the so about got those So, completed the to no be migration, slated which year, of change before, here what the we’ve that. AWS we've is

double a expect basis hopefully bit. costs more In see little margins shift, just expect do We sort we meantime to we maybe of once migrations. of improvement that making a in bubble point a lift bit and little margins those even through here, still XX improving the get

QX, of acquisition that’s improvement a the that we've acquired more to got going little at we since come QX bit the play them be Here so should here into InterFAX end improvement where incremental not should some that guidance standpoint, those improvement end from some we but then see We're things and one of a quantifying really year margins. in it's well. as in hopefully

Scott Berg

you Thank taking my all Okay, have. great. That’s questions. I

Operator

from Canaccord please. question next line Your Davis Richard ahead the Genuity. Go from of comes

open. is line Your

Richard Davis

Thanks.

thinking Is you seen well if a would you go there margins when you I kind not of – it have you obviously how this other save be? And cool, was gross would are be bit – with market we've on addition you benefit kind companies. but touched in best prepared you could AWS, doesn't – different out this around so to CapEx and of on the a the always bunch particular so a second found in but there touch put methodology? circle I is it of I'm just much that and as way then on products, logical and i.e., light a Thanks. question some So strategy, remarks, if inside go-to is of a to kind there developer – laid trying because one that have kind success of in is think seeing you're sales

Mike Hill

knowing we Richard. Mike. you're spending the for done, to quit take at our year when we products, I'll we've in the for CapEx historical migration at that did we can point CapEx. What hardware of continue CapEx and the that that much actually migrating buy exactly equipment see, And Hey, go really last not we want right. to and on one of beginning started were first and back that yeah, our to the that AWS really purpose. process It's you on see spending

understanding. what the So But couple everything we migration, go back AWS million if year, of to probably so continue we started in a $X.X from CapEx. seen it ourselves were probably should million up and was will down spending year a leaned drop fall, to you dollars last to quantification end CapEx in you've CapEx forms, when standpoint the million off, a per $X in server before with we the year as or as

don't CapEx a did in extra we spend that to thing QX, was repeat. one-time that we but an forward, here have Going expect

of yes lots from improvements So benefits and anyway AWS.

Tim Mattox

Hey, Richard, Tim it’s here.

the offering for terms a is type context. market Clearly, of really bit effective us. by a inside it and lower strategy, go-to most In vary in model of ARR does that product

field still is sales, component a sales complex for us. the For

of that using within that examples – and networks ROI remotely. with The customer to So case will studies and the the doing frequently by talking some do their for that point I themselves, able said capacity we own webinars, being visit building and that you say us and have in selling all that. on part in them sometimes customers as to only folks, a a need self-discovery payoff is That added strategy do that of area need critical area. see in our investment maybe process additional we demos

Richard Davis

That's it. helpful. you. Thank Got

Operator

comes ahead Your the please. from Peterson Go Brian from line James. of next question Raymond

Your line is open.

Vince Celentano

Thanks. differences Vince Celentano you Brian. one seen how some to these seeing the This is synergies have any for historically? about additional offer deals companies the talk on of you completing pace you've And complexity then larger to Can these done you’re with with compared of or larger that any them?

Jack McDonald

question. So, thanks the Jack. for This is

in ported have One model and every do developed acquisition Upland the a We we called platform. gets on to Upland operating One

to back to office. management way the to quote cash account management development customer entire support to from to product to consistent do it's a everything So to

a $XX those million that million synergies So $X are process whether revenue $XX or million $X and million revenue to it's acquisition same. or acquisition the

size M&A increase of we've generally, mentioned our facility. got, the we of In the terms right in the now. Mike credit like pipeline

We've M&A good very healthy here. got about we've a prospects after keeping to we the go feel got this rate deals. of and capacity our plenty going new growth So year for pipeline additional and

Vince Celentano

that Got group there near-term as you more think towards And suited any look best it, particular acquisitions? thanks. product M&As, you do for is

Jack McDonald

three families it, can fact take look $XXX families today those across about think the and revenue million product us products at talked it's say in we three business. If pretty we've that to the we through even I'd as a

within we've all today is and pretty The evenly product families continue three. got look And pipeline to those so, divided three them. of we each at will growth among targets

continue – from it's think an evenly to So M&A relatively standpoint. they’re weighted I

Vince Celentano

you very Great, much. thank

Operator

over at the back are questions I There to presenters. telephone time. call turn further the no this will

Jack McDonald

for Okay, today time thank year. you later so back great call, and your we to forward much getting you this with look QX well the together on

thank afternoon. good So and you

Operator

today's conference concludes This call.

disconnect. now may You

Upland Software (UPLD) 9 May 182018 Q1 Earnings call transcript