Summary
Upland Software reported second quarter 2023 total revenue of $74.5 million, down 7.1% from $80.2 million in the second quarter of 2022. Gross profit fell to $50.3 million from $53.7 million. Gross margin improved to 67.5% from 66.9%. The operating loss narrowed to $9.4 million from $10.9 million, and operating margin came in at negative 12.6% versus negative 13.6%. Net loss narrowed to $15.1 million from $16.4 million, and diluted loss per share improved to $0.51 from $0.52. Management tied the revenue decline to lower Sunset Assets revenue, weaker other recurring products and variable Overage Charges, and smaller perpetual license and professional services revenue. Foreign currency fluctuations added a small benefit in the quarter.
Operating cash flow was $7.0 million in the quarter, down 50.0% from $14.0 million a year earlier. Capital expenditures were $0.3 million, up from $0.1 million. Deferred revenue, current portion, stood at $102.3 million at June 30, 2023, down 1.1% from $103.4 million. Free cash flow was $6.7 million, compared with $13.9 million in the second quarter of 2022. Adjusted EBITDA was $16.6 million, or 22% of total revenue, compared with $24.5 million, or 31% of total revenue, in the prior-year quarter.
Through the first six months of 2023, revenue was $151.6 million, down 4.6% from $158.9 million. Gross profit was $101.8 million, down 5.4% from $107.6 million. The year-to-date operating loss widened to $146.8 million from $25.7 million, mostly because of a goodwill impairment recorded in the first quarter. Net loss widened to $155.2 million from $39.2 million, and diluted loss per share was $4.88 versus $1.25. Operating cash flow for the six months was $22.8 million, up 2.6% from $22.3 million. The year-to-date revenue drop included lower Sunset Assets revenue, lower perpetual license and professional services revenue, and a negative foreign currency effect, partly offset by revenue from acquisitions not fully reflected in the prior-year period.
Guidance for the third quarter ending September 30, 2023 points to a decline in total revenue of 8% at the mid-point compared with the quarter ended September 30, 2022. Third quarter Adjusted EBITDA is projected at $14.5 million to $17.5 million, a 22% margin at the mid-point and a decrease of 36% from the quarter ended September 30, 2022. For the full year ending December 31, 2023, the outlook calls for a decline in total revenue of 6% at the mid-point over the year ended December 31, 2022, with Adjusted EBITDA of $63.2 million to $69.2 million, a 22% margin at the mid-point and a decrease of 32% over the year ended December 31, 2022.
Upland added 155 new customers in the quarter, including 20 new major customers. It expanded relationships with 313 existing customers, 32 of which were major expansions. The Core Organic Growth Rate declined 2.0%. Management pointed to new product innovations across Altify and Qvidian, and Altify and Kapost were listed in recent Forrester landscape reports. Upland serves more than 10,000 customers with over 1,000,000 users and has completed 31 acquisitions from February 2012 through June 30, 2023. The company has closed no new acquisitions since the two deals completed in the first quarter of 2022, so growth now leans more on internal execution. The main risks are the revenue decline, the lower Adjusted EBITDA outlook, and the chance of further goodwill impairments if the stock price stays weak. Upland is also funding significant sales, marketing, and product investments as part of its growth plan, which weighs on near-term profitability.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $74.5M | $77.1M | -3.3% | $80.2M | -7.1% |
| Gross profit | $50.3M | $51.5M | -2.3% | $53.7M | -6.3% |
| Gross margin | 67.5% | 66.9% | +0.7 pp | 66.9% | +0.6 pp |
| Research & development | $12.4M | $12.5M | -0.7% | $11.7M | +6.6% |
| Sales & marketing | $15.8M | $14.3M | +10.3% | $15.3M | +2.8% |
| General & administrative | $15.6M | $17.2M | -9.3% | $21.8M | -28.6% |
| Total operating expenses | $59.7M | $189.0M | -68.4% | $64.6M | -7.5% |
| Operating income (loss) | -$9.4M | -$137.4M | +93.2% | -$10.9M | +13.8% |
| Operating margin | -12.6% | -178.3% | +165.8 pp | -13.6% | +1.0 pp |
| Net income (loss) | -$15.1M | -$140.0M | +89.2% | -$16.4M | +7.6% |
| Net margin | -20.3% | -181.7% | +161.4 pp | -20.4% | +0.1 pp |
| Diluted EPS | -$0.51 | -$4.38 | +$3.87 | -$0.52 | +$0.01 |
| Customers | 10,000 | 10,000 | ±0.0% | 10,000 | ±0.0% |
Risks
A $128.8 million goodwill impairment was recorded for the six months ended June 30, 2023, after a decline in the Company's stock price. MD&A states future impairments could occur if the stock price continues to decline.
Total revenue decreased 7% to $74.5 million in the three months ended June 30, 2023, compared with $80.2 million in the prior-year quarter. Core Organic Growth Rate declined 2.0% for the three-month period ended June 30, 2023, and Sunset Assets represented an estimated $27.9 million of 2023 annual total revenue with a net addition of approximately $5.0 million.
The Board adopted a Tax Benefit Preservation Plan on May 2, 2023, issuing one preferred stock purchase right per outstanding share, to protect approximately $147 million of NOLs as of March 31, 2023. The plan may not prevent an ownership change under Section 382 and may discourage takeover attempts.
As of June 30, 2023, the Company had $519.8 million of borrowings outstanding under its credit facility and $60.0 million available under its revolver. Interest expense, net was $5.4 million in the three months ended June 30, 2023, a decrease of 31% versus the prior-year quarter.
SaaS KPIs
All quarters →Adjusted EBITDA
Free Cash Flow
Major expansions
New customers
Adjusted EBITDA margin
New major customers
Total Customers
Enterprise Customers
Core Organic Growth Rate
Core organic revenue
Existing customers expanded
Users
Summary, forecast, risks and KPIs are extracted from Upland Software, Inc.'s SEC filings for Q2 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.