upld-20201105

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

The Securities Exchange Act of 1934

November 5, 2020

Date of Report (Date of earliest event reported)

UPLAND SOFTWARE, INC.

(Exact name of registrant as specified in its charter)

Delaware

001-36720

27-2992077

(State or other jurisdiction of incorporation)

(Commission File Number)

(IRS Employer
Identification No.)

401 Congress Avenue, Suite 1850

Austin, Texas 78701

(Address of principal executive offices, including zip code)

(512) 960-1010

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

UPLD

The Nasdaq Global Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

On November 5, 2020, Upland Software, Inc. issued a press release announcing its financial results for the three months ended September 30, 2020. The full text of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.


(d) Exhibits.
Exhibit No.						Description
99.1						Press Release of Upland Software, Inc. dated November 5 , 20 20
104						The cover page from this Current Report on Form 8-K, formatted as Inline XBRL

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			UPLAND SOFTWARE, INC.

By:			/s/ Kin Gill
			Kin Gill SVP, General Counsel and Secretary
Date: November 5, 2020

Document

EXHIBIT 99.1

Upland Software Reports Third Quarter 2020 Financial Results

November 5, 2020, 04:01 PM Eastern Standard Time

AUSTIN, Texas--(BUSINESS WIRE)-- Upland Software, Inc. (Nasdaq: UPLD), a leader in cloud-based tools for digital transformation, today announced financial and operating results for the third quarter of 2020 and raised guidance for its fourth quarter and full year of 2020.

Third Quarter 2020 Financial Highlights

•Total revenue was $74.2 million, an increase of 35% from $55.1 million in the third quarter of 2019.

•Subscription and support revenue was $71.0 million, an increase of 39% from $51.1 million in the third quarter of 2019.

•GAAP net loss was $11.3 million, or a loss of $0.42 cents per share, compared to a GAAP net loss of $12.3 million, or a loss of $0.50 cents per share, in the third quarter of 2019.

•Adjusted EBITDA was $25.0 million, or 34% of total revenue, an increase of 21% from $20.7 million, or 38% of total revenue, in the third quarter of 2019.

•GAAP operating cash flow was $18.7 million, an increase from negative $0.3 million of GAAP operating cash flow in the third quarter of 2019. Free cash flow was $18.5 million, an increase from negative $0.7 million of free cash flow in the third quarter of 2019.

•Completed follow-on equity offering raising $136.9 million ($130.1 million, net).

•Cash on hand as of the end of the third quarter of 2020 was $233.0 million.

"In Q3, we posted record organic growth and free cash flow,” said Jack McDonald, Upland’s chairman and chief executive officer. “We also completed a transformational equity raise - and are now capitalized well enough to be able to grow double digits through a combination of organic growth and acquisitions and are no longer dependent on the equity capital markets due to our free cash flow generation,” he said. “In particular, our goal in 2021 is to achieve our acquisition targets while also generating substantial free cash flow,” he added. “Finally, based on strength we are seeing in our business, we have raised our revenue and Adjusted EBITDA guidance for Q4 and the full year."

Third Quarter Business Highlights

•Expanded 247 existing customer relationships, including 37 major expansions, and added 108 new customer relationships, including 34 major accounts.

•Focused on accelerating customer productivity, with six major releases and 15 feature packs across Upland's cloud solutions. For example: in our Project & IT Management Cloud, we introduced a new resource request workflow to help users streamline resource allocation requests, resulting in greater utilization and profitability; and in our Enterprise Sales & Marketing Cloud, we added key Microsoft integrations that enable users to access their RFP and proposal library directly from within Word and Excel.

•Announced a new offering that will bring Upland's end-to-end cloud-based workflow solution for document capture, image processing, and data extraction onto HP Workpath. This new offering is intended to meet the urgent market demand to rapidly digitize the document lifecycle process as companies work through the challenges of balancing remote and in-office teams.

•Continued to invest in our go-to-market initiatives across sales, marketing, and customer success.

Business Outlook

For the quarter ending December 31, 2020, Upland expects reported total revenue to be between $70.0 and $74.0 million, including subscription and support revenue between $67.0 and $70.0 million, for growth in recurring revenue of 16% at the mid-point over the quarter-ended December 31, 2019. Fourth quarter 2020 Adjusted EBITDA is expected to be between $23.2 and $25.2 million, for an Adjusted EBITDA margin of 34% at the mid-point, representing a reduction of 3% at the mid-point over the quarter-ended December 31, 2019.

For the full year ending December 31, 2020, Upland expects reported total revenue to be between $283.5 and $287.5 million, including subscription and support revenue between $269.6 and $272.6 million, for growth in recurring revenue of 33% at the mid-point over the year ended December 31, 2019. Full year 2020 Adjusted EBITDA is expected to be between $96.5 and $98.5 million, for an Adjusted EBITDA margin of 34% at the mid-point, representing growth of 18% at the mid-point over the year ended December 31, 2019.

Conference Call Details

Upland's executive team will host a live conference call and webcast at 4:00 p.m. Central Time, 5:00 p.m. Eastern Time today to review Upland’s financial results and outlook for the business. The call can be accessed via a webcast on investor.uplandsoftware.com, or by dialing 1-866-270-1533 in the United States or +1-412-317-0797 if outside the United States. This webcast will contain forward-looking statements and other material information regarding Upland’s financial and operating results.

Following the completion of the conference call, a recording of the webcast will be made available at investor.uplandsoftware.com for twelve months.

About Upland Software

Upland Software (Nasdaq: UPLD) is a leader in cloud-based tools for digital transformation. The Upland Cloud enables thousands of organizations to engage with customers on key digital channels, optimize sales team performance, manage projects and IT costs, and automate critical document workflows. The Upland Cloud is backed by a 100% customer success commitment and the UplandOne platform, which puts customers at the center of everything we do. To learn more, visit www.uplandsoftware.com.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: Adjusted EBITDA, non-GAAP net income (loss), non-GAAP net income (loss) per share and free cash flow.

We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results, such as our revenues excluding the impact for foreign currency fluctuations or our operating performance excluding not only non-cash charges, but also discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to our historical performance and liquidity as well as comparisons to our competitors' operating results. We

believe these non-GAAP financial measures are useful to investors both because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and they are used by our institutional investors and the analyst community to help them analyze the health of our business. For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, see the tables provided below in this release.

We are unable to reconcile any forward-looking non-GAAP financial measures to their directly comparable GAAP financial measures because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort.

Upland defines Adjusted EBITDA as net income (loss), calculated in accordance with GAAP, plus net income (loss) from discontinued operations, depreciation and amortization expense, interest expense, net, other expense (income), net, provision for income taxes, stock-based compensation expense, acquisition-related expenses, non-recurring litigation costs, and purchase accounting adjustments for deferred revenue.

Upland defines non-GAAP net income (loss) as net income (loss), calculated in accordance with GAAP, plus, amortization of purchased intangible assets, amortization of debt discount, loss on debt extinguishment, stock-based compensation expenses, acquisition-related expenses, non-recurring litigation expenses, purchase accounting adjustments for deferred revenue, non-recurring provision for income tax, and the related tax effect of the adjustments above.

Upland defines free cash flow as GAAP operating cash flow less purchases of property and equipment.

Upland defines major accounts as accounts with greater than or equal to $25,000 in annual recurring revenue.

Upland defines major expansions as existing customers who expanded the amount of annual recurring revenue under their contract by at least $25,000.

Forward-looking Statements

This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements generally relate to future events or our future financial or operating performance, including our guidance related to future performance, and are subject to substantial risks, uncertainties and assumptions. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make. Accordingly, you should not place undue reliance on these forward-looking statements. Forward-looking statements include any statement that does not directly relate to any historical or current fact and often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "seek," "will," "may," "hope," "predict," "could," "should," "would," "project," or the negative or plural of these words or similar expressions, although not all forward-looking statements contain these words. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including, but are not limited to: our financial performance and our ability to achieve, sustain or increase profitability or predict future results; our ability to attract and retain customers; our ability to deliver high-quality customer service; the growth of demand for enterprise work management applications; our plans regarding, and our ability to effectively manage, our growth; our plans regarding future acquisitions and our ability to consummate and integrate acquisitions; maintaining our senior management and key personnel; our ability to maintain and expand our direct sales organization; our ability to obtain financing in the future on acceptable terms or at all; the performance of our resellers; our ability to adapt to changing market conditions and competition; our ability to successfully enter new markets and manage our international expansion; the

operation and reliability of our third-party data centers and other service providers; our ability to adapt to technological change and continue to innovate; our ability to integrate our applications with other software applications; our ability to comply with privacy laws and regulations; and factors that could affect our business and financial results identified in Upland's filings with the Securities and Exchange Commission (the "SEC"), including Upland's most recent 10-K and our recent Quarterly Report on Form 10-Q filed with the SEC. Additional information will also be set forth in Upland's future quarterly reports on Form 10-Q, annual reports on Form 10-K and other filings that Upland makes with the SEC. The forward-looking statements herein represent Upland's views as of the date of this press release, and these views could change. However, while Upland may elect to update these forward-looking statements at some point in the future, Upland specifically disclaims any obligation to do so, except as required by law. These forward-looking statements should not be relied upon as representing the views of Upland as of any date subsequent to the date of this press release.

###

Investor Relations Contact:

Mike Hill

investor-relations@uplandsoftware.com

512-960-1031

Media Contact:

Kendell Kelton

media@uplandsoftware.com

833-875-2631

Upland Software, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data, unaudited)



	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

Revenue:
Subscription and support	$	70,992	$	51,059	$	202,582	$	144,757
Perpetual license	411		975		1,263		2,207
Total product revenue	71,403		52,034		203,845		146,964
Professional services	2,781		3,031		9,686		9,607
Total revenue	74,184		55,065		213,531		156,571
Cost of revenue:
Subscription and support	23,562		14,678		64,701		42,574
Professional services	2,021		1,995		6,755		5,470
Total cost of revenue	25,583		16,673		71,456		48,044
Gross profit	48,601		38,392		142,075		108,527
Operating expenses:
Sales and marketing	11,760		8,709		34,511		23,680
Research and development	10,400		7,434		30,308		20,840
Refundable Canadian tax credits	(433)		(133)		(929)		(304)
General and administrative	16,864		12,196		51,195		34,232
Depreciation and amortization	9,117		6,427		27,425		17,430
Acquisition-related expenses	3,574		7,457		24,513		24,444
Total operating expenses	51,282		42,090		167,023		120,322
Loss from operations	(2,681)		(3,698)		(24,948)		(11,795)
Other expense:
Interest expense, net	(8,078)		(5,517)		(23,594)		(15,879)
Loss on debt extinguishment	—		(2,317)		—		(2,317)
Other income (expense), net	598		(228)		(819)		(1,681)
Total other expense	(7,480)		(8,062)		(24,413)		(19,877)
Loss before benefit from (provision for) income taxes	(10,161)		(11,760)		(49,361)		(31,672)
Benefit from (provision for) income taxes	(1,149)		(547)		3,811		6,166


Net loss	$	(11,310)	$	(12,307)	$	(45,550)	$	(25,506)



Net loss per common share, basic and diluted	$	(0.42)	$	(0.50)	$	(1.77)	$	(1.13)


Weighted-average common shares outstanding, basic and diluted	27,220,134		24,568,483		25,725,495		22,550,232

Upland Software, Inc.

Condensed Consolidated Balance Sheets

(in thousands)


	September 30,		December 31,
	2020		2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	232,972	$	175,024
Accounts receivable, net of allowance	41,126		50,938
Deferred commissions, current	4,758		3,059
Unbilled receivables	6,912		5,111
Prepaid and other	8,064		4,748
Total current assets	293,832		238,880
Tax credits receivable	4,175		4,186
Property and equipment, net	3,181		3,917
Operating lease right-of-use asset	10,831		8,056
Intangible assets, net	285,312		282,727
Goodwill	383,336		346,134
Deferred commissions, noncurrent	11,259		8,763
Other assets	2,394		4,165
Total assets	$	994,320	$	896,828
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	6,469	$	5,904
Accrued compensation	6,912		11,559
Accrued expenses and other current liabilities	13,228		15,344
Deferred revenue	78,503		76,558
Due to sellers	3,494		14,276
Operating lease liabilities, current	3,233		2,533
Current maturities of notes payable	3,185		3,193
Total current liabilities	115,024		129,367

Notes payable, less current maturities	519,339		521,881
Deferred revenue, noncurrent	1,493		496
Operating lease liabilities, noncurrent	9,224		5,862
Noncurrent deferred tax liability, net	27,299		25,685
Interest rate swap liabilities	33,073		—
Other long-term liabilities	624		676
Total liabilities	706,076		683,967







Stockholders’ equity:

Common stock	3		3
Additional paid-in capital	504,425		345,127
Accumulated other comprehensive loss	(39,480)		(1,223)
Accumulated deficit	(176,704)		(131,046)
Total stockholders’ equity	288,244		212,861
Total liabilities and stockholders’ equity	$	994,320	$	896,828

Upland Software, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands, unaudited)



	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

Operating activities
Net loss	$	(11,310)	$	(12,307)	$	(45,550)	$	(25,506)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	11,696		8,570		35,091		23,722

Deferred income taxes	1,639		848		(3,346)		(11,176)
Amortization of deferred costs	1,252		820		3,172		2,555
Foreign currency re-measurement loss	(186)		367		311		155
Non-cash interest and other expense	561		414		1,669		979
Non-cash stock compensation expense	10,963		7,187		31,263		18,716


Non-cash loss on retirement of fixed assets	473		—		473		—
Non-cash loss on debt extinguishment	—		2,317		—		2,317
Changes in operating assets and liabilities, net of purchase business combinations:
Accounts receivable	7,952		(2,005)		13,140		6,405
Prepaids and other	(3,350)		(6,695)		(10,093)		(4,280)
Accounts payable	4,476		(420)		(1,782)		(903)
Accrued expenses and other liabilities	(1,688)		719		(8,789)		(5,037)
Deferred revenue	(3,822)		(157)		(1,407)		(2,893)
Net cash provided by (used in) operating activities	18,656		(342)		14,152		5,054
Investing activities
Purchase of property and equipment	(137)		(359)		(833)		(723)
Purchase of customer relationships	—		(438)		(201)		(438)
Purchase business combinations, net of cash acquired	—		(22,947)		(67,651)		(105,771)

Net cash used in investing activities	(137)		(23,744)		(68,685)		(106,932)
Financing activities
Payments on finance leases	(3)		(142)		(86)		(499)
Proceeds from notes payable, net of issuance costs	(27)		342,967		(169)		382,306
Payments on notes payable	(1,350)		(309,469)		(4,050)		(323,218)



Taxes paid related to net share settlement of equity awards	—		(1,297)		(2,140)		(6,108)
Issuance of common stock, net of issuance costs	130,133		14		130,174		151,549

Additional consideration paid to sellers of businesses	(2,072)		(2,546)		(11,652)		(5,886)
Net cash provided by financing activities	126,681		29,527		112,077		198,144
Effect of exchange rate fluctuations on cash	(138)		(496)		404		302
Change in cash and cash equivalents	145,062		4,945		57,948		96,568
Cash and cash equivalents, beginning of period	87,910		108,361		175,024		16,738
Cash and cash equivalents, end of period	$	232,972	$	113,306	$	232,972	$	113,306

Upland Software, Inc.

Reconciliation of Adjusted EBITDA

(in thousands, unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Reconciliation of net loss to Adjusted EBITDA:
Net loss	$	(11,310)	$	(12,307)	$	(45,550)	$	(25,506)
Add:

Depreciation and amortization expense	11,696		8,570		35,091		23,722
Interest expense, net	8,078		5,517		23,594		15,879
Other expense (income), net	(598)		228		819		1,681
Loss on debt extinguishment	—		2,317		—		2,317
Provision for (benefit from) income taxes	1,149		547		(3,811)		(6,166)
Stock-based compensation expense	10,963		7,187		31,263		18,716
Acquisition-related expense	3,574		7,457		24,513		24,444


Purchase accounting deferred revenue discount	1,408		1,176		7,381		2,458

Adjusted EBITDA	$	24,960	$	20,692	$	73,300	$	57,545

Upland Software, Inc.

Reconciliation of Non-GAAP Net Income and Non-GAAP EPS

(in thousands, except share and per share data, unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Reconciliation of net loss to non-GAAP net income:
Net income (loss)	$	(11,310)	$	(12,307)	$	(45,550)	$	(25,506)
Add:

Stock-based compensation expense	10,963		7,187		31,263		18,716
Amortization of purchased intangibles	11,222		8,012		33,587		22,053
Amortization of debt discount	561		414		1,669		979

Acquisition-related expense	3,574		7,457		24,513		24,444
Loss on debt extinguishment	—		2,317		—		2,317


Purchase accounting deferred revenue discount	1,408		1,176		7,381		2,458

Tax effect of adjustments above	(1,275)		(1,065)		(4,660)		(3,804)

Non-GAAP net income	$	15,143	$	13,191	$	48,203	$	41,657

Weighted average ordinary shares outstanding, basic	27,220,134		24,568,483		25,725,495		22,550,232
Weighted average ordinary shares outstanding, diluted	27,751,221		25,425,335		26,149,617		23,383,406
Non-GAAP earnings per share, basic	$	0.56	$	0.54	$	1.87	$	1.85
Non-GAAP earnings per share, diluted	$	0.55	$	0.52	$	1.84	$	1.78

Upland Software, Inc.

Reconciliation of Operating Cash Flow to Free Cash Flow

(in thousands, unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Reconciliation of Operating Cash Flow to Free Cash Flow:
Net cash provided by (used in) operating activities	$	18,656	$	(342)	$	14,152	$	5,054
Less: Purchase of Property and Equipment	(137)		(359)		(833)		(723)
Free Cash Flow	$	18,519	$	(701)	$	13,319	$	4,331

Upland Software, Inc.

Supplemental Financial Information

(in thousands, unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

Stock-based compensation:
Cost of revenue	$	624	$	250	$	1,512	$	763
Research and development	1,005		683		2,639		1,637
Sales and marketing	968		508		2,415		1,012
General and administrative	8,366		5,746		24,697		15,304
Total	$	10,963	$	7,187	$	31,263	$	18,716


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019

Depreciation:
Cost of revenue	$	37	$	197	$	153	$	716
Operating expense	437		361		1,351		953
Total	$	474	$	558	$	1,504	$	1,669


Amortization:
Cost of revenue	$	2,542	$	1,946	$	7,513	$	5,576
Operating expense	8,680		6,066		26,074		16,477
Total	$	11,222	$	8,012	$	33,587	$	22,053

Cover	Nov. 05, 2020
Cover [Abstract]
Document Type	8-K
Document Period End Date	Nov. 05, 2020
Entity Registrant Name	UPLAND SOFTWARE, INC.
Entity Incorporation, State or Country Code	DE
Entity File Number	001-36720
Entity Tax Identification Number	27-2992077
Entity Address, Address Line One	401 Congress Avenue, Suite 1850
Entity Address, City or Town	Austin
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	78701
City Area Code	512
Local Phone Number	960-1010
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Trading Symbol	UPLD
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false
Entity Central Index Key	0001505155
Amendment Flag	false