Upland (UPLD) Q4 Earnings Jump Y/Y, Subscriber Base Expands

Upland Software (NASDAQ:UPLD) reported fourth-quarter fiscal 2018 adjusted earnings of 58 cents per share, which surged 56.8% from the year-ago quarter.

Revenues of $45.2 million surged 62.2% year over year. Growth was driven by 64.5% jump in product revenues (94% of revenues). Moreover, professional services (6% of revenues) soared 33.6% year over year to $2.7 million.

Recurring revenue organic growth was 10% in the quarter. In the fourth quarter, Upland expanded 204 existing customer relationships, including 28 major expansions. The company added 134 new customer relationships, including 27 major accounts.

The Zacks Consensus Estimate for earnings was 25 cents. The consensus mark for revenues was $43 million.

At the end of the fourth quarter, proforma annualized run rate for revenues was more than $194 million and $72 million for adjusted EBITDA.

Moreover, net dollar retention rate (NDRR) improved 500 basis points (bps) year over year to 98% in 2018.

Top-Line Details

The product segment comprises subscription & support and perpetual license.

Subscription & support revenues jumped 68.8% from the year-ago quarter to $41.8 million. However, perpetual license revenues declined 35.4% year over year to $0.7 million.

Moreover, Upland launched 3 major releases and 16 feature packs that improved user experience, enhanced performance and streamlined interconnectivity across several of its solution suites.

Further, Upland made two accretive acquisitions, Adestra and Rant & Rave, which strengthened its Customer Experience Management (CXM) Solution Suite. The buyouts added capabilities like marketing automation and personalization, social media monitoring, and customer sentiment survey and analysis.

Operating Details

Gross margin expanded 90 bps on a year-over-year basis to 66.8% in fourth-quarter 2018.

Adjusted EBITDA margin expanded 200 bps to 37% in the reported quarter.

Total operating expenses as percentage of revenues increased 100 bps to 75.4%. Growth was primarily attributed to higher acquisition expenses and depreciation & amortization costs, which increased 320 bps and 180 bps, respectively.

This was partially offset by lower sales & marketing (S&M), research & development (R&D) and general & administrative (G&A) expenses, which declined 40 bps, 250 bps and 160 bps, respectively.

Loss from operations was $3.9 million compared with loss of $2.4 million.

Balance Sheet & Cash Flow

At the end of fourth-quarter 2018, cash in hand was $16.7 million. Cash flows provided by operating activities were $2.6 million.

Upland has approximately $283 million of gross debt outstanding and roughly $266 million in net debt primarily related to Rant & Rave and Adestra acquisitions in the reported quarter.

The company now has approximately $105 million in available capacity on its existing credit facility, including the uncommitted accordion.

Guidance

For first-quarter 2019, Upland expects total revenues between $47.9 million and $48.9 million. Subscription and support revenues are estimated between $44.4 million and $45.2 million. At mid-point, recurring revenue growth is expected to be 62% from the year-ago quarter.

Moreover, adjusted EBITDA is expected between $17.2 million and $17.8 million. Adjusted EBITDA margin is estimated to be roughly 36% at mid-point. Adjusted EBITDA is estimated to increase 62% at mid-point year over year.

For 2019, Upland expects total revenues between $194.8 million and $198.8 million. At mid-point, recurring revenue growth is expected to be 34% year over year. Subscription and support revenues are estimated between $181.8 million and $185.0 million.

Adjusted EBITDA is expected between $70.8 million and $73.2 million, representing growth of 36% at mid-point. Adjusted EBITDA margin is expected to be 37% at the mid-point.

Zacks Rank & Stocks to Consider

Currently, Upland carries a Zacks Rank #3 (Hold).

Alteryx (NYSE:AYX) , The Meet Group (NASDAQ:MEET) and eGain Corporation (NASDAQ:EGAN) are stocks worth considering in the same industry. All the three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Alteryx, The Meet Group and eGain Corporation are currently pegged at 15.4%, 20% and 30%, respectively.

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