What's In Store For Upland Software's (UPLD) Q4 Earnings?

Upland Software (NASDAQ:UPLD) is set to release fourth-quarter 2018 results on Mar 7.

In the last reported quarter, Upland’s adjusted earnings of 38 cents per share beat the Zacks Consensus Estimate by a penny. The figure jumped 52% year over year.

Revenues of $37.1 million surged 42.5% on a year-over-year basis. Growth was driven by a 46% increase in recurring revenues from subscription and support.

Following the Adestra acquisition on Dec 13, 2018, Upland revised its previous guidance for fourth-quarter 2018. The company now expects revenues between $42.5 million and $44.5 million (up from $41.8-$43.8 million), including subscription and support revenues of $39.4-$40.6 million (up from $38.8-$40 million).

Adjusted EBITDA is expected between $15.6 million and $16.4 million. At mid-point, adjusted EBITDA margin is almost 37%, up 64% year over year.

Notably, Adestra acquisition adds approximately $18 million in annualized revenues ($16.7 million is recurring) and is immediately accretive to Upland's adjusted EBITDA per share.

The Zacks Consensus Estimate for fourth-quarter earnings has remained steady at 48 cents over the past 30 days. The consensus mark for revenues is $43.2 million, reflecting year-over-year growth of almost 55%.

Let’s see how things are shaping up for this announcement.

Factors to Watch

Upland is expected to benefit from the strong adoption of UplandOne operating platform. The company continues to invest in analytics, automation, outsourcing and off-shoring. Moreover, improving cross-selling opportunity is expected to aid the top line.

Strong anticipated growth in recurring revenues is a key catalyst in the to-be-reported quarter. The company’s portfolio strength and improved product capabilities are helping it win new customers.

Notably, Upland has a broad clientele of more than 9,000, of which 1,300 are major customers across various industries, each accounting for roughly $106,000 in annual recurring revenues (ARR).

In the last reported quarter, Upland signed 130 new customers and expanded relationships with 208 existing customers.

Moreover, acquisitions (20 since 2012) continue to play a key role in driving Upland’s growth. Notably, the Rant & Rave acquisition expands Upland’s presence in Europe as the former serves almost 100 European and international brands.

Further, Adestra and Rant & Rave strengthen Upland Mobile Messaging platform and help the company rapidly penetrate the customer experience market (CXM).

However, higher acquisition expenses related to Rant & Rave and Adestra are expected to dent profitability.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) along with a positive Earnings ESP has a good chance of beating estimates. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Upland has a Zacks Rank #3 and an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Stocks With Favorable Combination

Here are a few stocks you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.

Momo (NASDAQ:MOMO) has an Earnings ESP of +1.55% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

IRIDEX Corporation (NASDAQ:IRIX) has an Earnings ESP of +2.04% and a Zacks Rank #3.

Tencent Holding (OTC:TCEHY) has an Earnings ESP of +3.57% and a Zacks Rank #3.

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