UPLD - Earnings call transcript Q3 2020

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Operator

Thank you for standing by, and welcome to the Upland Software Third Quarter 2020 Earnings Call. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session. Instruction will be given at that time. The conference call will be recorded, and simultaneously webcast at investor.uplandsoftware.com, and a replay will be available there for 12 months. have was the p.m. distributed should earnings quarter everyone which release, today now, access third to XXXX By at X:XX Time. Eastern

If Please now the Upland’s received McDonald, Chairman call you is of Jack sir. have on Upland CEO available Software. over release, to website. ahead, to like it would and turn go the I not

Jack McDonald

our Commercial and XXXX by Tim joined and you, Thank Chief Officer; our summarize call. Operating earnings CFO. and Chief and welcome recent our to I’m highlights. President Rod Hill, Mike results Favaron, our Officer; sales, our President and operations QX I’ll Mattox, product and

Following that, and open numbers we Mike QX will provide will the call on Q&A. the guidance, for than insights our up some

statement. Before we get started, Mike harbor Mike? will safe read the

Mike Hill

afternoon, Jack, Thank good you, and everyone.

are cause we within materially. results statements are call, will forward-looking of securities and that assumptions our could risks, statements include uncertainties laws. considered the today’s that actual subject These meanings the differ During to to

is call, in these currently information when will intend are any Form XX-Q that, discussion as The most GAAP duty our release this assumptions GAAP on non-GAAP We to Upland of forward-looking our refer analytical unavailable its Upland measures on to to directly measures updates in any to the at additional reports measures as that, section note release detailed Jack. third understand Relations Please that to turn our With on to with financial over used unable XXXX on are reconciliation to announcing Investor with contained quarterly unreasonable or without is do today which available complete information financial Upland to or quarter needed which measures time results, our periodically operations. of with management On on comparable press results, today. any statements. publicly updated has views and is our the management financial because XX-K, effort. non-GAAP non-GAAP not undertake made GAAP report a any combination provided upland revisions website. provide to annual of reconcile and to forward-looking filed I’ll SEC. our Form their reconciliations As call we’re based our of in comparable in forward-looking measures available the risks this the statements and tools uncertainties

Jack McDonald

All Mike. organic for on the adjusted our posted EBITDA right. also based the raised full and growth third and quarter, and in business, In raised seeing QX cash guidance flow. we're Thanks, year. we revenue record the we And free strength our

let's in QX So We go revenue. had growth we EBITDA through had the In XX% growth. numbers. adjusted XX% total

forward for flow to acquisitions dependent due markets the a the equity in no and we double-digits through even to on We able on. combination $XX.X free costs ongoing equity Now capital EBITDA now million. raise. organic $X also cash and our the are this our third volumes. on election a quarter generating from even messaging we quarter expense point and time very grow transformational had And longer long working program We positive changes. on over acquisition flow And only after well of had $X.X and little was of in marketing flow cash year to the uptick net million be and cash million we're based due in sales temporary back GAAP expenses, capitalized operating turn of CXM than we material revenue a was focused high acquisition growth the completed to growth and enough our cash QX growth free flow generation. lower a our after capital a investments acquisition are

came revenues organic QX in reported recurring Our growth at in XX%.

but all is usage driven than growth year, Now being to advocacy has this And usage bookings any we of for other we view offset that and date QX political as in bump COVID-related this don't by churn any organizations. impact. and CXM And normal we kind that campaigns in election organic a see new strengths as in organic acceleration more into move continued by growth. growth organic recent

to year will how a election issue this single-digits much results we of growth to maintain guidance. Some we're to revenue an XXXX create are for strong political kind organic continue spending. growth usage retention say of shifts our conservative our as to growth fact, normal in XXXX, outlook and spending so exactly But impacts advocacy combined headwind XXXX organic going versus net revenue going to bump in XXXX. And low- campaign organic can't rate COVID in

invest our guarantees in course, expecting growth addition, beyond. we're to no investments organic to and late we're that XXXX continuing until those around marketing not and of rates there be initiatives sales In while could impact. And impact

of which XXX were welcomed in also the we XX to And existing expansions. XXX major in On with sales quarter, new front major XX customers. expanded QX, Upland the customers, third we including relationships customers new

proposal users a and in request key to area, releases of integration that project side, feature sales in And management Excel. their proposal area, IT and allocation our new in six Word directly product utilization packs marketing requests introduced enables resulting greater we examples: users we help added streamline resource across and request our from and On new and to within set. the for major access library product had the and enterprise, workflow a we XX resource profitability. A Microsoft couple

back we And ago, no need moment acquisitions. On to strength in for I now acquisition our active and acquisition with the program the market markets. tap our the self-sustaining as referenced for due equity are now business, a again, front, M&A in we the to are turned our is program on

turn So with over that call to I'll Mike. the

Mike Hill

and cover highlights full quarter fourth for financial outlook Thank the you, and the for I'll the XXXX. quarter Jack. third year our

quarter. Professional X% Recurring $X.X million revenue growth from subscription services for XX%. million. our On remained and $XX.X of quarter, or an expenses total continue product call, around revenue be anticipate year-over-year the to margin the million and I COVID-XX adding acquisitions third XX% And travel XX% on at QX was mentioned without to when gross costs was margin we million, XX% the XX% Also decline due grew income expected was statement, gross third generally to which quarter's and the for to expected. in depreciation million revenue was expenses, we decline, were margins. quarter or will acquisition-related all refer for third support stock actually were these to $XX $XX.X amortization, further the representing as back excluding impacts. gross year-over-year third approximately revenue, as Operating amortization cash last quarter quarter which the and during as depreciation expenses XX% Overall strong $X.X acquisition-related comp, the $X.X million. dramatically and of total the

Our XX% third of up quarter volumes. third revenue compared due of increase year adjusted XX% election Adjusted marketing total our and XXXX temporary and XXXX. mobile continuing revenue quarter lower revenue CXM $XX.X $XX of in a investments to high sales million to EBITDA messaging for due was EBITDA or was or XX% to million of from the margin cost

do to will know continue. EBITDA the XXXX, As investment full the we a marketing of and where margins adjusted scenario In in we in would sales the year for result XXXX additional look acquisitions that low-XX%. out

business. to to turning strength XXXX. of mid-XX% adjusted are Jack by back margin as acquisitions, QX of on on back be With acquisitions the we our target based However, our is EBITDA the noted,

should acquisitions million a be of with forward over and flow depending For basis XXXX million. million should over before cash flow acquisitions. cash of the size on Free XX million $XX.X cash for additional was months flow, additional quarter $XX.X possibly cash flow third million And the and over was operating GAAP be timing acquisitions. $XX free and $XX upon even $XX future

prior regard revolver. balance $XXX $XXX of has undrawn to taxes, existing expiration. free is approximately $XXX this With balance cash flow sheet, of will total million note the of available our tax for on in approximately utilization generation million sheet approximately will our million, and of On cash million to of comprised I ongoing carryforwards, liquidity income $XX our million addition NOL Upland that $XXX and be these to currently of

we maturing per payments X.X%, at of year $XXX balance or The note remaining factoring the rate our per XXXX, interest our million after in year. locked about will interest XX that our term had net outstanding on million a of with the I year $XXX.X September August the debt annual $X.X of sheet. million cash on balance approximately payments on approximately $XX is XXXX. debt of making term our principal cash in million As are debt X%

that will And now has Additionally, borrowings. on financial term current no debt I to guidance. on covenants point out our

subscription including total reported between and ending $XX $XX $XX XXXX, be December million, between and and XX expects For $XX the support quarter million. revenue million million to revenue Upland

quarter recall, which a revenue recognized at December XX XXXX XXXX. you XX% quarter the in $XX.X as last for midpoint EBITDA it's that XX growth For is license million the margin spiked QX be midpoint reduction to adjusted midpoint, in in EBITDA we the of of $X.X adjusted over EBITDA between expected an outsized over recurring ended XX% ago December at of year, million the significantly and X% XXXX. may $XX.X the at Because adjusted representing quarter revenue, a Fourth million ended year quarter. perpetual

million And over and adjusted $XXX.X at growth Upland to I'll December EBITDA Full between at over is revenue expected Jack. XX% support over the XXXX. to $XX.X XX% expects between $XXX.X in XX% $XXX.X and adjusted million year the the with revenue XX ended year subscription December XXXX, For XXXX ended midpoint full the December midpoint EBITDA be million $XXX.X year an year XX for the between million midpoint the ending margin that, for of including revenue XX and of pass $XX.X recurring and reported growth the million, of to XXXX. back representing total call million be at

Jack McDonald

free ready the for to Q&A, Thanks Tim, please up call Mike. feel now open to me. Rod And we're questions direct or to Mike, and

Operator

Instructions] question-and-answer Suisse. from the Zelnick with Our Brad begin Credit today [Operator now will We question comes first session.

Brad Zelnick

QX. you might Great. given to your from strong of raise would And M&A, no what net your flywheel to is And point? bring on dependent question the cash great to deals bigger think have organic of leverage my longer company maybe about prepared to on it's Thanks the more of so the guess should frequency see flow you is I added upper how at generation. acquire framework with deviate you to perhaps more bounds a or this the markets remarks Mike, model equity? But much guys just at look back we the nicely and free for great for the see growth. in with working congratulations mentioned, benefit equity Jack, your that

Jack McDonald

below they of segment Those done revenue strong really right or And escape we're Brad. thanks great revenue, bid. achieve is the can't interested private equity facto that own PE range And segment for questions, of to we to company, think And products so of acquisitions there's bid and of of XX in out small. organic a $X equity have portfolios beautiful are We below companies that targeted the to not market got over consolidator venture the $XX growth, in that because customers, for to and that de really on growth be XX% the I that firms opportunity a the buying aren't category chip acquisitions. targets organic be of So growth million we've feel it's in million but category the velocity. on their up we've million of in, $XX XX% a the are companies. sort blue most

years that it consolidator think that investment these is over investment facto out. de past rapidly so years companies ago grow the see you're significantly companies to went out supply X begin to can next the is those VC the of up there year, we to trailing of and we quantity of started and a So because over X dollars those flow And know to and years going attractive five X XX in targets is that there. X, VC the of massive portfolios maturing of moved every going be corresponding age numbers funds of then as we course right,

on So the we we're acquire. to going knitting our companies of to size stick

years or comfortable of terms year we're X; deals quite year. million a the $XX be that's plus of some with X. it four it and are In some years category will in that quantity a Maybe we the in here. roughly will comfortable be in pace minus deals But

So that objects I see don't are shiny out distract that really going any there us course. to from

let me Mike leverage your of let part In answer multiples terms that of question.

Mike Hill

question. the for thanks Brad Yes,

boundary, of upper upper leverage, debt we see that sort net now So as leverage around X.Xx bound.

around B leverage. geared term credit Our loan is X.Xx facility

makes sense. that So

around that right area. So

more we down generate X. come that as time that below more flow on X.X over debt and and free to net and grow than down lower scale ultimately course we to and expect cash to will continue leverage Of X towards

Brad Zelnick

I Jack Thanks. could if follow-up just said. what you've on

market multiples public fair there M&A well about private public similarly? just very competition seeing cases are that the in we perfect you're sense is that in especially lot that to But we rich disconnect? and for think are Or deals on history out landscape tracking what the recent it in to a say some of it that that side relative the As now right is perhaps as when is there, there's companies criteria. meet your valuations actionable look at a makes

Jack McDonald

is get But there of spoke the Mike meat So I wanted about and that range. current answer, leverage our one to yes ago great below leverage into just bound thing. question disconnect. the a significantly say you of that. is make that Xx a as But let I clear that's before upper moment a me just

the Mike are today leverage? where And on net we so debt

Mike Hill

about we're Jack, today. Yes X.Xx

Jack McDonald

Right.

X.X X to that. below managing hopefully and it keeping up today it again So and

trading mean these In environment than the terms there the $X companies growing public of that million businesses obviously $XX a that yes, a I multiple. million set with of less particularly valuation, market ones public to market XX%. different respect enjoy a are to It's in is

two been that put current or is paid that across it's roughly to I And if once able on a EBITDA which the first Xx anything acquisition. happens to to enjoy so, we've And look see we're XX-plus the business Upland our pro That's platform in changing post acquisitions, process the the Xx quarter don't you environment. EBITDA. within forma that historically the the from

over are say years. Our bigger XX grew pipeline is portfolios there as trends as the these of I that some companies larger out strong. VC And secular come past

addition COVID. note to exits to transact bunch because the wanted bunched of that right a this kind of weren't year, specific now of impact I but basis In got would who the at of a on you've people more to able up

the arbitrage the to in EBITDA very at attractive you reasonable. longer both think keep So sort of paying is a to again look IRRs you at very that on supply-demand look in we're an we short-term the EBITDA if substantial. prices us term going are And and multiples multiple which characteristics we're forma those and relative getting for deals pro these

we So positioned. like where we're

Brad Zelnick

the workout. thorough so for Thanks do Excellent. explanations and much people

Jack McDonald

Thank you.

Operator

question Our next Suri William with from comes Bhavan Blair.

Unidentified Analyst

Hey is doing. But you Jake more to Bhavan. on dig sales that on the restructuring quarter. for the into love everyone. actually Congrats are This guys I'd

just you guys these XXXX, trying and initial of kind are know already? of impacted fruit have been understand how cross-selling So end I saying efforts that what's but you ACV? just where the to happening low-hanging see

Jack McDonald

Yes.

of pointing Favaron, being to Jake. lot initiatives exciting the by kind and They're our Officer. that be of Commercial thanks are to Chief led but early there's a So specific Rod underway. question is for President It impacts,

what doing So me a ask to give let broader of Rod you we're here. picture

Rod Favaron

thanks and for Jack the Thanks question.

QX progress here we was for this Jack quarter in put So to really quarter are evolution. early journey we're good X it mission But from this in progress a actually deep and it frankly. X as

a quite growing cross-sell nicely. the sort marketing The highlights, of pipeline is some bit. we're reshaping our So motion --

we're centralized more of we've just into So to our machine, presence. also get updated We've an digital efficient. gen lead well sort --

more and journey with is know pretty it's As now digital. the COVID, buyer's digital you

with digitally. of offices a a So time, of spend under the buyer's kind for of time us the sort remotely reengineering journey long of lot selling we

You'll as a see more from of but we XXXX, publicly lot get us lot of into progress that there. a

a added also We for new team. development leader our sales

it. So this catches that lead the team the qualifies is and flow

centralized we've new leader and updated motion. So team, hired that that a

That hired leader. visibility have accounts global top funnel. globally. manage mostly about our - we XXX more they we and lot is we've a So the And of funnel talked a initiative. then will added top to XXX accounts top And team

ramping all ground speed and to they're generally their our accounts. on and so, coming up on the now and products of And

XXXX, our see just that impact team as customers. our within anecdotal And we into to opportunities already of from of early cross-sell so seeing get an sort on But pipeline. expect finding biggest we we're impact

the So great. with the how building talent, going making -- operationally is on people honestly processes. we and sort excited I'm the of progress teams we're ground structurally the about the and

the year move encouraged sort as into XXXX. And exit we of, so and we're,

Unidentified Analyst

Thanks great. the great. That’s for again the Congrats color. on

Rod Favaron

Thank you.

Operator

Jefferies. from Our next will come Thill with question Brent

Brent Thill

sales drivers of Jack, feel give customer I'm open things give behavior of some guess Thank of if us a adding like the year up about XXXX? It are I you the Kind And expect curious how for how just better. XXXX could feels a changing. that us Rod level more build-out higher sense do last to on maybe to curious into talk specific? little and the little the in just is can I'm you you and starting you. over if roll and capacity you're a

Jack McDonald

Sure.

thank QX. assumptions third progressive than move for was bookings that most impact moved response into would be in improvement our And normal and and have precipitated we we question. as And that the the more would we When impact second to the you a some be was by the the we would better you time fourth going back belief seen that quarter to and and to better situation by the slowdown at the So churn. see went to we're that around COVID, made the quarter-to-quarter.

been impact some the areas So done course, driven of our growth. resilient. above to say immune organic trend have you lockdowns. it's from and well that the if this been of had it's spectacularly But And will not incredibly has we've business

a little to So Rod stage think of we're bit more from what specific customers. some insights you give that that's around setting I can a seeing

Rod Favaron

we're capacity capacity team. we've of, retooling it and current the evolving it, That some out right of incremental AEs. type out taking Brent global changing -- the more Yes. of other sort then swapped sort and isn't to account players adding and your but some because players for question, it to completely

just the would Really Nothing sure make So I humming. of, a sort in slight dramatic. modest capacity. say we to want is increase model it's,

a it a And would so really that increase, of until to get we retooling. call but I point modest kind

So in in we've but the right a lot year Do sets? more we we and folks do skill added And account capable. Do this to place field? right the upgraded players heads, incremental. the they players? even we've we we've have those number the training right So done the the then weren't of have have -- people right completely get weren't more global a

think So use -- as modest I is a it's the an XXXX. capacity head word that I we would into increased from

Brent Thill

Jack follow-up you a on just surprise seeing trend. above the upside? on the And are the Where biggest

Jack McDonald

QX. kind the kind bump But see right QX. strength into where terms So political really that's necessarily of we knew by in this we've growth growth unexpected on this very given And in we wasn't driven biggest the in that usage year, issue seen of of that trend campaign election and we're of strong above usage. It that quarter say advocacy business came would a now. and CXM four-year cycle again continuing in we would have opportunity a I

Brent Thill

you. Thank

Jack McDonald

Thank you.

Operator

with Scott question Berg Co. next from Our Needham & comes

Unidentified Analyst

business the on be wondering, some And in recently This to news is of if you restrictions some put would -- impact give us on European been more the countries we've was could as domestically? little I Congratulations that the bit Scott. experiencing seeing the if more a quarter. have Alex been of were what on color the shutdowns on for

Jack McDonald

question. So thanks for Alex, the

our do you As a revenue's but differential in of really we there. didn't Europe, we know see results any part -- in

In fact good. been the has business

our in sort So Phase business Europe. I'm resilient lockdowns the ability broad any and X that. seen through to of not a here U.S. anticipating changes We've those from be the of in as

to got of professional advocacy terms the the around in their businesses back-office and in that's And use services. help well-positioned our how cases products or we've whether market. operate going really terms of we're whether running think we're customers I remotely set it's to customer So products those and journey of or

be think to I we're resilient that. So well-positioned through

Unidentified Analyst

Great. Thank you.

Operator

Craig-Hallum. question Instructions] [Operator Van Jeff with from next Our comes Rhee

Jeff Van Rhee

would you it then be blow the I level Several growth congratulations. high questions. in dial I numbers Thank I it without XXXX taking sure commentary great closer my a add the for there. And would on mean two, question as make organic but Great. little moving Can what questions just my heard you're have clearly been me. the to I'll election XX% out for want you upside. That one. to quick fairly well. year Jack

mid-single-digit finer think just both maybe referenced print low- the to on a valid. not you I guide be little of may put But those.

Jack McDonald

Sure.

was bump performance outsized year that coming for political driven of usage this out election by CXM all campaigns. in So,

not mid-single-digits this above And so of standard absent to outlook Upland had that trend would of usage, in our of performance. have low we back be kind right? normal So, result. We'd range just

of we're seeing very in addition that repeats. said, to strength continuing advocacy And about year most assume XXXX we're as that into past get that fourth following. going mentioned spend into in issue opening in conservative echo that I moves portion the remarks, be the seen to and But an that for outlook is that we've the quarter. and of a what as in in little you I the do over Now, the this cases, of that

potential the that's is. impact what our take So, on

that got impacts earlier in as going for churn rate strong impact create XXXX. the you've any organic in and bookings in And year a as and around well growth our headwind Now, to XXXX. that are performance COVID particularly

a of in our to going fact quarters as recognizing create growth double-digit organic XXXX. for move terms next want these of conservative just -- that headwind us sort the we into be So, year to we in are

Jeff Van Rhee

And there know into You is -- roadmap or I you're global that kind have near-term to at new maybe or guess you're if said Rod. selling The as product two from all this be is then standpoint, close. And and of to helpful. answer Is that opportunities. -- then That's who's kind what might pretty other Tim what's where's for but be size needed motion best are to cross-selling done this don't team product there? just anything you roadmap goal the the done focused a product I you're that account the really prior not on with maximizing to those things respect that this from affecting of to getting integrations roadmap need where push?

Rod Favaron

this I'll So, start Rod. and is then pass Tim. it over to

global I'll group. a we this account Phase from year this X late So, perspective, the for have theme call of it for XXXX

We global have the XX so. completely leader a eight We're now. guys. account a plus almost leader or plus We're on at ground

be already -- So -- industry. will they and by are organized or

we've came they some so or our calling out of industry industries. of them get So that hires accounts industry can Many of these with top sort the industries by leverage. these got been had on

top messaging for our in tuning our So, we're expertise. of industries lot those vertical for brought And we accounts. a

number we So, don't amount all hope I then growing. be customer attention final these we're they'll XXX is XXX in paying It top territories a said as that their and that to still to IRR have reasonable and will of helps. be ramping I which that folks funded.

Jeff Van Rhee

And does. the then question? It product

Tim Mattox

handle It's that. Tim Jeff. Sure I'll here.

customer-informed. product things. roadmaps foremost few and our are One a So, heavily first is

customer our I existing that the what success are teams. support from our feedback customers what our teams advisory by our boards, telling So, mean customer us

hand retention. support and roadmaps customer working of our are So, high ensure levels that in to Rod glove I

if the add on point Upland where certainly cross-sell then And important integrations they vertical. will that's are you So, direct value. integrations purposeful intra

to of So, we'll looking as continue do as those record. integrate be third-party to systems well the

key customers. that's us You'd that value to to add another for find way

accomplish We relationship to that. a Dell have with Boomi

sometimes sometimes environment. their We helpful as That's into Salesforce also integrate into well. directly

So, those do to the really incremental to the that innovation. we're things looking customer-informed are in addition

that a Now. have adjacent in quiver arrow see gap or we a with also we've used past we particular M&A product few in the more strategically either our the years. where

roadmap look way we in to as fill well. So, that the

Jeff Van Rhee

you. Thank helpful. That's good. Sounds

Operator

to would the I remarks. This McDonald turn concludes over our like for back question-and-answer call any Jack session. to closing

Jack McDonald

Great.

and Okay. time on Well, we thank very Thank call. all your you you. for our to forward afternoon seeing you earnings much next this look

Operator

today's conference The for Thank attending you has presentation. now concluded.

disconnect. now may You

Upland Software (UPLD) 8 Nov 202020 Q3 Earnings call transcript