Upland Software, Inc. — Q1 2021 Form 10-Q
Business context and period: Cloud-based enterprise work management software provider; reporting period ended March 31, 2021, compared with the three months ended March 31, 2020. Results are unaudited. The company completed acquisitions of BlueVenn and Second Street during the quarter.
Financial results and position
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | $74.0 million | $68.0 million; up 9% |
| Subscription and support revenue | $70.7 million; 96% of revenue | $63.9 million; up 11% |
| Gross profit / margin | $49.5 million / 67% | $45.8 million / 67% |
| Operating loss | $17.5 million | $15.3 million |
| Net loss / diluted loss per share | $20.7 million / $0.69 | $20.1 million / $0.81 |
| Adjusted EBITDA (non-GAAP) | $22.8 million | $24.6 million |
| Operating cash flow | $12.5 million provided | $5.3 million used |
| Cash and cash equivalents | $186.7 million at March 31 | $250.0 million at December 31, 2020 |
| Debt | $531.9 million principal outstanding; $60.0 million revolver available and undrawn | Term-loan interest effectively fixed at 5.4% |
Cash used in investing activities was $72.9 million, primarily reflecting the two acquisitions. The company reported a $103.6 million working capital surplus, including $94.7 million of current deferred revenue. Management stated that cash, operating cash flows, available credit and access to its effective Form S-3 registration statement should fund operations for at least the next 12 months.
Changes versus the prior comparable period
- Revenue increased $6.0 million, but acquisitions not fully included in the prior-year period contributed $5.8 million. Organic Business revenue increased $0.7 million; the filing defines this measure to exclude recent acquisitions and Sunset Assets.
- Q1 2020 included $2.1 million of U.S. election-related customer experience usage revenue that did not recur and is not expected to recur during 2021.
- Professional services revenue fell 22% to $3.0 million, which management attributed primarily to reduced on-site work amid COVID-19 travel restrictions.
- Operating expenses rose to $67.1 million from $61.2 million. General and administrative expense increased 46%, including $6.3 million of incremental stock-based compensation expense related to the COO’s transition; total stock-based compensation rose to $17.8 million from $9.3 million.
- Acquisition-related expense declined 37% to $9.6 million, while Adjusted EBITDA declined to $22.8 million from $24.6 million.
Outlook, commentary and risks
- No specific revenue, profit or cash-flow guidance is provided in the filing. Management expects to continue pursuing acquisitions and reported renewed acquisition activity in Q1.
- Management said COVID-19 had affected new bookings and churn, with the continuing impact uncertain. It also noted that 2020 strength from digital-transformation demand and election campaigns may not persist.
- BlueVenn and Second Street purchase-price allocations were preliminary; earnout valuations and acquired-asset estimates may change. Goodwill was $448.6 million at quarter-end, and no goodwill or intangible-asset impairment was recorded.
- Debt is secured by substantially all company assets and carries customary restrictive covenants. The company reported covenant compliance; a leverage covenant applies if at least 35% of the revolver is drawn at quarter-end. Interest-rate swaps fix the term-loan rate, but the revolver remains floating-rate.
- Foreign-exchange exposure remains unhedged; management estimated that a hypothetical 10% currency-rate change could have changed quarterly revenue by $1.5 million. The company also identified uncertainty around COVID-19, customer retention, acquisition integration, competition, privacy, technology and third-party service reliability.
- The filing reports no current or pending litigation expected to materially affect the company. It discloses related-party purchases from DevFactory and Crossover, including a $9.6 million 2021 DevFactory commitment.
Key facts for investors to verify
- How much reported revenue growth and future performance depend on acquisitions versus organic growth, and how election-related revenue and customer churn evolve.
- Whether cash generation can support acquisition spending, debt obligations and operating needs as cash declined during the quarter.
- The impact of elevated stock-based compensation and acquisition costs on GAAP profitability and per-share dilution.
- Final purchase accounting, goodwill and earnout obligations for BlueVenn and Second Street, and integration results.
- Debt covenant headroom, refinancing considerations and the sensitivity of cash flows to interest rates and foreign exchange.