Upland Software, Inc. Q1 FY2025 earnings

Upland Software reported FY2025 Q1 total revenue of $63.7 million, down 10% from $70.7 million in the prior-year quarter. Gross profit was $45.6 million, down 8.2% from $49.7 million. Gross margin was 71.6%, up from 70.2%. The company posted an operating loss of $1.05 million, compared with an operating loss of $91.64 million in the prior-year quarter, so the loss narrowed. Net loss was $25.85 million, compared with a net loss of $96.13 million, so the net loss narrowed. Diluted EPS was -$0.97, compared with -$3.37, so the per-share loss narrowed. Operating margin improved to -1.7% from -129.6%.

The cash flow picture improved. Operating cash flow rose to $8.30 million from $5.12 million. Capital expenditures were $0.42 million, up from $0.18 million. Free cash flow was $7.9 million, compared with $4.9 million. Adjusted EBITDA was $13.1 million, or 21% of total revenue, compared with $13.1 million, or 19% of total revenue, in the prior-year quarter. Deferred revenue, current portion, was $82.99 million, down 16.6% from $99.55 million. Remaining performance obligations were $215.00 million, down 16.8% from $258.40 million. Core Organic Growth Rate was 0.2%. The company said its Net Dollar Retention Rate for its Core business as of December 31, 2024 would have been 99% excluding divestitures, compared with a reported 96%.

Operational activity continued across the AI-powered product portfolio. Upland welcomed 107 new customers in the quarter, including 19 new major customers. It expanded relationships with 245 existing customers, 26 of which were major expansions. These new and expanded relationships occurred across the AI-powered product portfolio. The company earned 76 badges in G2's Spring 2025 market reports. Upland Panviva launched Sidekick, a modern way to deliver compliant and contextualized knowledge to contact center agents. Upland Adestra launched Audiences, bringing data-driven analytics to email marketers. Upland BA Insight, the AI enablement product, received recognitions, along with Upland InterFAX, an AI-enabled cloud fax service. AI knowledge management solutions Upland RightAnswers and Upland Panviva also continued to garner badges. Subsequent to March 31, 2025, Upland sold its mobile messaging product lines. That divestiture sharpened focus on markets where the company sees stronger competitive advantage, higher margins, and higher growth. The sale lowered 2025 total revenue guidance midpoint by approximately $25.0 million, but it had no impact on the Adjusted EBITDA guidance midpoint.

Guidance points to a smaller revenue base and higher margins. For the second quarter of 2025, Upland expects a decline in total revenue of 23% at the midpoint from the quarter ended June 30, 2024. Second quarter 2025 Adjusted EBITDA is expected to be between $12.1 million and $15.1 million, which at the midpoint is flat from the quarter ended June 30, 2024. Second quarter 2025 Adjusted EBITDA margin is expected to be 26% at the midpoint, up from 20% for the quarter ended June 30, 2024. For the full year ending December 31, 2025, Upland expects a decline in total revenue of 20% at the midpoint from the year ended December 31, 2024. Full year 2025 Adjusted EBITDA is expected to be between $55.0 million and $64.0 million, an increase of 7% at the midpoint from the year ended December 31, 2024. Full year Adjusted EBITDA margin is expected to be 27% at the midpoint, up from 20% for the year ended December 31, 2024. Risks include the revenue decline, lower deferred revenue and RPO, customer retention, execution on AI features, macroeconomic and foreign currency pressures, debt maturing on August 6, 2026, variable interest rate exposure, possible goodwill impairment if the stock price declines, the company's current level of indebtedness, potential elimination or limitation of tax incentives, and the need to maintain its senior management team and key personnel.