Summary
Upland Software opened fiscal 2023 with soft top-line results and a much wider loss. Total revenue in the first quarter ended March 31, 2023 was $77.06 million, down 2.1% from the prior-year quarter. Foreign currency exchange rates cut total revenue growth by 2%, and without that FX impact total revenue growth would have been flat, according to the press release. Gross profit fell 4.5% to $51.52 million. Gross margin was 66.9%, down 1.7 percentage points. The operating loss widened sharply to $137.43 million. Net loss widened to $140.04 million. Diluted EPS was -$4.38, down from the prior-year quarter. Operating margin was -178.4%, down 159.6 percentage points. The press release attributes the larger loss mainly to a non-cash goodwill impairment charge.
Cash generation improved even as GAAP earnings fell. Operating cash flow rose 92.5% to $15.82 million in the quarter. Capital expenditures were $0.22 million, up 22.2%. Free cash flow, a non-GAAP measure, was $15.6 million, compared with $8.0 million in the first quarter of 2022. Adjusted EBITDA, also non-GAAP, was $17.6 million, or 23% of total revenue, compared with $23.4 million, or 30% of total revenue, in the prior-year quarter. Deferred revenue, current portion, stood at $106.97 million at March 31, 2023, down 6.6%.
Operationally, Upland said it added 207 new customers in the first quarter, including 20 new major customers. It expanded relationships with 333 existing customers, 38 of which were major expansions. The company hosted a webinar with Forrester on the future of knowledge management and released a beta of its AI Knowledge Assistant, which uses OpenAI's ChatGPT API and is available to RightAnswers customers. FileBound was recognized as a gold medalist and leader in the Enterprise Content Management Data Quadrant Report from SoftwareReviews. AccuRoute's latest release extends MFP integrations with Lexmark, and BA Insight was named to KMWorld's 2023 list of 100 companies that matter in knowledge management.
Guidance covers the next quarter and the full fiscal year. For the second quarter ending June 30, 2023, Upland expects a decline in total revenue of 9% at the midpoint over the quarter ended June 30, 2022, and an Adjusted EBITDA margin of 23% at the midpoint, which is a decrease of 33% from the quarter ended June 30, 2022. For the full year ending December 31, 2023, the company expects a decline in total revenue of 5% at the midpoint over the year ended December 31, 2022, and an Adjusted EBITDA margin of 23% at the midpoint, a decrease of 29% over the year ended December 31, 2022. Management says the outlook reflects significant incremental sales, marketing and product investments tied to its growth plan.
Risks remain substantial. The MD&A states that goodwill will keep being evaluated for impairment in 2023 and that future impairments could occur if the stock price continues to decline. Other named risks include foreign currency exchange risk, inflation, supply chain constraints, the ability to integrate acquisitions, attract and retain customers, maintain senior management and key personnel, adapt to changing market conditions and competition, and keep pace with technological change. The company also cites impairments to goodwill and other intangible assets and the operation, reliability and security of third-party data centers. On May 2, 2023, the board authorized a dividend of one preferred stock purchase right for each outstanding share of common stock under a Tax Benefit Preservation Plan, payable on May 12, 2023 to holders of record on that date. The wider loss, the reliance on non-GAAP profitability measures and the softer revenue trend leave the growth plan with plenty to prove in coming quarters.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2023 | Q4 FY2022 | QoQ | Q1 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $77.1M | $78.8M | -2.2% | $78.7M | -2.1% |
| Gross profit | $51.5M | $52.1M | -1.1% | $54.0M | -4.5% |
| Gross margin | 66.9% | 66.1% | +0.8 pp | 68.5% | -1.7 pp |
| Research & development | $12.5M | $10.8M | +16.0% | $12.1M | +3.8% |
| Sales & marketing | $14.3M | $14.1M | +1.1% | $15.6M | -8.4% |
| General & administrative | $17.2M | $14.4M | +19.8% | $19.6M | -12.4% |
| Total operating expenses | $189.0M | $66.1M | +185.8% | $68.7M | +174.9% |
| Operating income (loss) | -$137.4M | -$14.0M | -881.0% | -$14.8M | -830.0% |
| Operating margin | -178.3% | -17.8% | -160.6 pp | -18.8% | -159.6 pp |
| Net income (loss) | -$140.0M | -$22.7M | -517.6% | -$22.8M | -513.4% |
| Net margin | -181.7% | -28.8% | -153.0 pp | -29.0% | -152.7 pp |
| Diluted EPS | -$4.38 | -$0.76 | -$3.62 | -$0.73 | -$3.65 |
| Customers | 10,000 | 10,000 | ±0.0% | 10,000 | ±0.0% |
Risks
The company recorded a $128.8 million goodwill impairment in Q1 2023 as a result of a decline in its stock price, causing operating loss to widen to $137.4 million from $14.8 million in Q1 2022. Management said it will continue to evaluate goodwill in 2023 and future impairments could occur if the stock price continues to decline.
On May 2, 2023, the Board adopted a Tax Benefit Preservation Plan with a preferred stock purchase right dividend to protect approximately $147 million of U.S. federal net operating losses and other tax attributes. The filing states there can be no assurance the Plan will prevent an ownership change under Section 382, and any ownership change could substantially limit use of the tax assets and have a substantial adverse effect on cash flows and financial position.
The Tax Benefit Preservation Plan may have an anti-takeover effect because an acquiring person may be diluted upon a triggering event, potentially complicating or discouraging a merger, tender offer, or assumption of control by a substantial holder. The Board has significant discretion to consent to certain transactions.
Total revenue declined 2% to $77.1 million in Q1 2023 from $78.7 million in Q1 2022, with professional services revenue down 22% and subscription and support revenue down 1%. MD&A attributes part of the subscription decline to Sunset Assets, which reduced subscription and support revenue by $2.7 million, while core organic subscription and support revenue declined $0.3 million.
SaaS KPIs
All quarters →Adjusted EBITDA
Free Cash Flow
Major expansions
New customers
Adjusted EBITDA margin
New major customers
Total Customers
Enterprise Customers
Existing customers expanded
Users
Summary, forecast, risks and KPIs are extracted from Upland Software, Inc.'s SEC filings for Q1 FY2023 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 6, 2026.