Summary
Upland Software's third quarter fiscal 2023 results show a business still shrinking on the top line while cost actions and cash generation improved. Total revenue was $74.1 million, down 6.8% from the prior-year quarter. Year-to-date revenue was $225.7 million, down 5.4%. Gross profit was $51.2 million, down 4.9%, and gross margin was 69.1%, up 1.4 percentage points from the prior-year quarter. Current deferred revenue was $94.7 million, down 4.0% from the prior-year quarter. Management tied the quarterly revenue decline to lower revenue from Sunset Assets and other recurring products, with some offset from foreign currency and acquisitions. Core Organic Growth Rate, a non-GAAP metric, was negative 1.9% for the three months ended September 30, 2023.
Profitability remained under pressure. GAAP operating loss was $7.7 million, and the loss widened from the prior-year quarter. Operating margin was negative 10.4%, down 9.7 percentage points. GAAP net loss was $8.7 million, and the loss widened from the prior-year quarter. GAAP net loss per diluted share was $0.31, and the loss widened. For the first nine months of fiscal 2023, operating loss was $154.5 million, and the loss widened. Net loss was $163.9 million, and the loss widened. Diluted EPS loss was $5.17, and the loss widened. A goodwill impairment recorded earlier in 2023 weighed on year-to-date results, and the company warned that future impairments could occur if the stock price continues to decline.
Cash generation was a bright spot. Operating cash flow was $18.3 million in the third quarter, up 874.8% from the prior-year quarter. Year-to-date operating cash flow was $41.2 million, up 70.5%. Free cash flow, a non-GAAP measure, was $17.8 million in the third quarter, compared with $1.5 million in the prior-year quarter. Capital expenditures were $0.5 million, up 25.9%. Operating cash flow and free cash flow benefited from a one-time cash benefit from the liquidation of a portion of interest rate swaps. Adjusted EBITDA, another non-GAAP measure, was $16.2 million, or 22% of total revenue, compared with $24.9 million, or 31% of total revenue, in the prior-year quarter.
Operational metrics showed some progress. Upland added 162 new customers in the third quarter, including 26 new major customers. It also expanded relationships with 279 existing customers, 28 of which were major expansions. Product and partner news included Qvidian being listed in a Forrester report, Panviva going live on the Genesys AppFoundry, and Altify releasing Altify Insights. Still, the core business is not growing, and the revenue base is expected to shrink further.
Guidance points to more contraction. For the fourth quarter ending December 31, 2023, Upland expects reported total revenue to decline 9% at the midpoint over the quarter ended December 31, 2022. Fourth quarter Adjusted EBITDA is expected to be $12.6 million to $15.6 million, for an Adjusted EBITDA margin of 20% at the midpoint, a decrease of 42% from the quarter ended December 31, 2022. For the full year ending December 31, 2023, reported total revenue is expected to decline 6% at the midpoint over the year ended December 31, 2022. Full year Adjusted EBITDA is expected to be $63.0 million to $66.0 million, for an Adjusted EBITDA margin of 22% at the midpoint, a decrease of 34% over the year ended December 31, 2022. The guidance reflects significant incremental sales, marketing and product investments and an estimated non-cash charge of $1.5 million related to Sunset Assets. Risks include continued revenue declines, goodwill impairments if the stock price falls further, macroeconomic uncertainty, foreign currency fluctuations, inflation, supply chain constraints, customer retention and competition.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $74.1M | $74.5M | -0.5% | $79.5M | -6.8% |
| Gross profit | $51.2M | $50.3M | +1.7% | $53.8M | -4.9% |
| Gross margin | 69.0% | 67.5% | +1.5 pp | 67.7% | +1.4 pp |
| Research & development | $12.7M | $12.4M | +2.4% | $11.6M | +9.4% |
| Sales & marketing | $16.9M | $15.8M | +7.0% | $14.4M | +17.4% |
| General & administrative | $14.6M | $15.6M | -6.3% | $14.7M | -0.5% |
| Total operating expenses | $58.9M | $59.7M | -1.3% | $54.4M | +8.3% |
| Operating income (loss) | -$7.7M | -$9.4M | +17.8% | -$554.0K | -1293.3% |
| Operating margin | -10.4% | -12.6% | +2.2 pp | -0.7% | -9.7 pp |
| Net income (loss) | -$8.7M | -$15.1M | +42.8% | -$6.5M | -33.1% |
| Net margin | -11.7% | -20.3% | +8.6 pp | -8.2% | -3.5 pp |
| Diluted EPS | -$0.31 | -$0.51 | +$0.20 | -$0.22 | -$0.09 |
| Customers | 10,000 | 10,000 | ±0.0% | 10,000 | ±0.0% |
Risks
The Board adopted a Tax Benefit Preservation Plan tied to approximately $147 million of NOLs as of March 31, 2023. An ownership change under Section 382 could substantially limit the Company's ability to use these tax attributes and could have a substantial adverse effect on cash flows and financial position.
The Company recorded a $128.8 million goodwill impairment in the first quarter of 2023 after its stock price declined. Management said future impairments could occur if the stock price continues to decline, and FY2023 year-to-date operating loss widened to $154.5 million from $26.2 million.
Total revenue was down 6.8% in FY2023 Q3 versus FY2022 Q3 and down 5.4% year to date, while the Core Organic Growth Rate was negative 1.9% for the three months ended September 30, 2023. MD&A attributes the decline partly to lower Sunset Assets revenue and other recurring revenue products and variable Overage Charges.
The Tax Benefit Preservation Plan may have an anti-takeover effect because an acquiring person may be diluted upon a triggering event, and it may complicate or discourage a merger, tender offer, or assumption of control by a substantial holder.
The Company is sunsetting non-strategic product offerings and customer contracts and has adjusted the Sunset Assets list, resulting in an estimated addition of approximately $5.0 million in 2023 annual total revenues. Future reviews may add or remove offerings and adjust prior-period revenue, creating execution and forecasting risk.
Sales and marketing expense increased 17% in FY2023 Q3 and 4% year to date tied to the announced investment in the go-to-market strategy, while total revenue was down. If the investment does not drive sufficient revenue growth, operating results could remain pressured.
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
Users
Existing customer expansions
Summary, forecast, risks and KPIs are extracted from Upland Software, Inc.'s SEC filings for Q3 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.