Summary
Upland Software reported total revenue of $79.5 million for the third quarter of 2022, up 4.6% from $76.1 million in the third quarter of 2021. The increase was $3.50 million. Foreign currency was a drag. The press release attributes a 3% negative impact on third quarter revenue growth to changes in exchange rates. For the first nine months of 2022, total revenue was $238.5 million, up 5.4% from $226.3 million in the first nine months of 2021.
The profitability picture improved at the operating line. Upland reported an operating loss of $0.55 million for the quarter, narrowed from a loss of $5.74 million a year earlier, and the operating margin rose to -0.7% from -7.5%. Gross profit was $53.8 million, up 5.0% from $51.2 million. Gross margin edged up to 67.7% from 67.4%. Net loss was $6.51 million, narrowed from $11.02 million, and diluted loss per share was $0.22, narrowed from $0.36. Over the first nine months of 2022, net loss was $45.74 million against $50.74 million in the prior-year period, and diluted loss per share was $1.47 against $1.68.
Non-GAAP results were flatter. Adjusted EBITDA was $24.9 million, or 31% of total revenue, compared with $25.0 million, or 33% of total revenue, in the third quarter of 2021. The company also reported that Non-GAAP Core Organic Revenue decreased by $2.0 million in the quarter. Strip out the FX impact and that decline was $0.5 million. Acquisitions are carrying the growth. Deals not fully in the prior-year comparative period contributed $7.5 million, while perpetual license and professional services revenue tied to the organic business declined by $1.0 million.
Customer activity stayed steady. Upland expanded relationships with 305 existing customers in the quarter, 28 of them major expansions, and welcomed 171 new customers, including 17 new major customers. On August 23, 2022, the company closed a $115 million strategic equity investment from HGGC, issued as preferred stock convertible into common stock at $17.50 per share. Management framed the capital as funding for potential M&A and additional operational support.
Guidance points to slower near-term growth. For the fourth quarter of 2022, Upland guided to growth of 2% at the midpoint over the quarter ended December 31, 2021, with Adjusted EBITDA of $22.9 to $25.9 million, a 32% margin at the midpoint and a decrease of 3% from the quarter ended December 31, 2021. For the full year 2022, guidance implies growth of 4% at the midpoint over the year ended December 31, 2021, with Adjusted EBITDA of $95.7 to $98.7 million, a 31% margin at the midpoint and an increase of 1% over the year ended December 31, 2021.
Cash generation slowed. Operating cash flow was $1.9 million for the quarter, down from $5.3 million a year earlier, and free cash flow was $1.5 million against $4.9 million. Cash on hand ended the quarter at $241.7 million, helped by the HGGC proceeds. Deferred revenue was $98.7 million, up 9.2% from $90.4 million.
The risk list is familiar but real. A stronger dollar added to the currency headwind. The company estimates a 2.2% currency headwind for fourth quarter 2022 revenue growth and a $0.5 million currency headwind for fourth quarter Adjusted EBITDA. The 10-Q also points to global economic and financial market conditions, inflation, foreign currency exchange risk, pandemic-related uncertainty, potential goodwill and intangible impairments, and the work of integrating a long string of deals. Upland has completed 31 acquisitions from February 2012 through September 30, 2022.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $79.5M | $80.2M | -0.8% | $76.1M | +4.6% |
| Gross profit | $53.8M | $53.7M | +0.3% | $51.2M | +5.0% |
| Gross margin | 67.7% | 66.9% | +0.8 pp | 67.4% | +0.3 pp |
| Research & development | $11.6M | $11.7M | -0.3% | $10.4M | +11.5% |
| Sales & marketing | $14.4M | $15.3M | -6.3% | $14.4M | -0.0% |
| General & administrative | $14.7M | $21.8M | -32.8% | $17.7M | -17.2% |
| Total operating expenses | $54.4M | $64.6M | -15.8% | $57.0M | -4.6% |
| Operating income (loss) | -$554.0K | -$10.9M | +94.9% | -$5.7M | +90.4% |
| Operating margin | -0.7% | -13.6% | +12.9 pp | -7.5% | +6.8 pp |
| Net income (loss) | -$6.5M | -$16.4M | +60.3% | -$11.0M | +40.9% |
| Net margin | -8.2% | -20.4% | +12.2 pp | -14.5% | +6.3 pp |
| Diluted EPS | -$0.22 | -$0.52 | +$0.30 | -$0.36 | +$0.14 |
| Customers | 10,000 | 10,000 | ±0.0% | 10,000 | ±0.0% |
Risks
MD&A reports Non-GAAP Core Organic Revenue decreased by $2.0 million in the three months ended September 30, 2022 and by $6.0 million in the nine months ended September 30, 2022, with Overage Charges declining $0.8 million in the quarter and $4.0 million year to date due to variable demand. Although reported revenue was up 4.6% in the quarter and up 5.4% year to date, acquisitions not fully in the prior-year comparable period contributed $7.5 million in the quarter and $25.8 million year to date, masking core organic declines.
The filing adds a risk factor that if goodwill or intangible assets become impaired, the company could record a significant charge to earnings; factors include declines in stock price, market capitalization or cash flows and slower industry growth. The company has completed 31 acquisitions from February 2012 through September 30, 2022 and carries significant acquisition-related intangible amortization, making impairment a material risk.
The company had 115,000 shares of Series A Preferred Stock outstanding as of September 30, 2022 with a 4.5% dividend that steps up to 7% after seven years, ranking senior to common stock in distributions and liquidation and carrying board nomination and observer rights. Because dividends may be paid in kind by increasing the liquidation preference, common stockholders face further dilution, and the fundamental change redemption feature may discourage takeover proposals.
A newly added risk factor states inflation may increase the company's overall cost structure, interest rates, labor costs, and supply shortages, and MD&A reports FX changes had a negative impact of 3% on total revenue growth in the three months ended September 30, 2022 and 2% in the nine months ended September 30, 2022. Foreign revenue was 30% of total revenue in the nine months ended September 30, 2022, up from 28% in the prior-year period.
Operating cash flow was down 64.8% to $1.88 million in the three months ended September 30, 2022 and down 15.7% to $24.14 million in the nine months ended September 30, 2022. MD&A attributes the year-to-date decrease partly to a $13.3 million decrease in deferred revenue and an $11.3 million decrease in accrued expenses, which could signal weaker bookings or collections.
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 Q3 FY2022 (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.