Summary
Upland Software finished fiscal 2023 with a fourth quarter that mixed a smaller top line with better margins. Total revenue was $72.2 million, down 8.4% from $78.8 million in the fourth quarter of 2022. Management points to declining revenue from Sunset Assets, the non-strategic products and customer contracts it is retiring, as the largest single drag, and to softer renewals across product lines and industries. Gross margin moved the other way, rising to 67.2% from 66.1%, a gain of 1.0 percentage point.
The bottom line improved in the quarter. The operating loss narrowed 33.0% to $9.4 million from $14.0 million, and operating margin improved 4.8 percentage points to negative 13.0% from negative 17.8%. Net loss narrowed 29.4% to $16.0 million from $22.7 million. The full year reads very differently. The year-to-date operating loss widened to $163.9 million from $40.2 million, and the year-to-date net loss widened to $179.9 million from $68.4 million. The company recorded a large non-cash goodwill impairment during 2023. Full-year diluted loss per share was $5.77, against $2.23 in 2022.
Cash generation held up. Fourth-quarter operating cash flow rose 50.5% to $8.8 million from $5.8 million, and full-year operating cash flow rose 66.6% to $49.9 million from $30.0 million. Free cash flow, which the company defines as operating cash flow less purchases of property and equipment, was $8.6 million in the quarter, against $5.7 million a year earlier. Capital expenditures were $0.19 million for the quarter. The company also spent $10.8 million repurchasing its own shares during the period. Backlog cooled. Deferred revenue, current portion only, was $102.8 million, down 3.5%, and remaining performance obligations were $268.6 million, down 1.4%, both measured against the prior-year quarter.
Adjusted EBITDA was $14.1 million, or 19% of total revenue, compared with $24.3 million, or 31% of total revenue, in the fourth quarter of 2022. Recurring revenue metrics point the same direction as the top line. Annualized recurring revenue at year-end was $242.1 million, down from $266.3 million at the end of 2022. Annual net dollar retention was 95%, level with the prior year. Core Organic Growth Rate for the fourth quarter was negative 0.9%. Demand activity continued: 307 existing customers expanded their relationships, 33 of them major expansions, and 154 new customers signed, including 15 major customers. Upland products earned 44 badges in G2's Winter 2024 market reports.
Guidance assumes more decline before any stabilization. For the first quarter of 2024, Upland guides to a decline in total revenue of 12% at the midpoint from the quarter ended March 31, 2023. First-quarter 2024 Adjusted EBITDA is guided to $11.3 million to $14.3 million, an Adjusted EBITDA margin of 19% at the midpoint and a 27% decrease from the quarter ended March 31, 2023. For the full year ending December 31, 2024, the company guides to a decline in total revenue of 9% at the midpoint from the year ended December 31, 2023. Full-year 2024 Adjusted EBITDA is guided to $49.0 million to $61.0 million, a 20% margin at the midpoint and a 15% decrease from the year ended December 31, 2023.
The plan carries clear risks. Sunset Assets are being wound down and the sales and marketing spend behind them was reduced in 2023, so reported revenue should keep shrinking faster than the core business. The guidance assumes another year of significant incremental sales, marketing and product investments. The 10-K flags goodwill impairment as a recurring exposure, notes a full valuation allowance against domestic net deferred tax assets, and points to variable interest rate risk on borrowings that is partly hedged by swaps fixing a portion of the rate at 5.4%. Deferred revenue and remaining performance obligations both declined year over year, which leaves coming quarters dependent on new bookings. The revolver had $60.0 million available at December 31, 2023.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2023 | Q3 FY2023 | QoQ | Q4 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $72.2M | $74.1M | -2.6% | $78.8M | -8.4% |
| Gross profit | $48.5M | $51.2M | -5.3% | $52.1M | -7.0% |
| Gross margin | 67.2% | 69.0% | -1.9 pp | 66.1% | +1.0 pp |
| Research & development | $11.7M | $12.7M | -8.5% | $10.8M | +8.0% |
| Sales & marketing | $17.4M | $16.9M | +3.4% | $14.1M | +23.4% |
| General & administrative | $13.9M | $14.6M | -4.8% | $14.4M | -3.2% |
| Total operating expenses | $57.9M | $58.9M | -1.8% | $66.1M | -12.5% |
| Operating income (loss) | -$9.4M | -$7.7M | -21.5% | -$14.0M | +33.0% |
| Operating margin | -13.0% | -10.4% | -2.6 pp | -17.8% | +4.8 pp |
| Net income (loss) | -$16.0M | -$8.7M | -84.7% | -$22.7M | +29.4% |
| Net margin | -22.2% | -11.7% | -10.5 pp | -28.8% | +6.6 pp |
| Diluted EPS | -$0.54 | -$0.31 | -$0.23 | -$0.76 | +$0.22 |
| Customers | 10,000 | 10,000 | ±0.0% | 10,000 | ±0.0% |
| Net retention rate | 95.0% | — | — | 95.0% | ±0.0 pp |
Risks
The company recorded a material goodwill impairment in 2023 after a decline in its stock price, and MD&A states it will continue to evaluate goodwill impairment in future periods. FY2023 year-to-date operating loss widened and net loss widened, increasing the risk of further impairment charges.
Total revenue declined 6.1% for FY2023 year to date, and MD&A attributes subscription and support declines to lower customer renewals and Sunset Assets. Annualized recurring revenue fell to $242.1 million at December 31, 2023 from $266.3 million at December 31, 2022, and annual net dollar retention was 95%.
The company has substantial outstanding variable-rate indebtedness under its Credit Facility, with only a portion of term debt hedged by floating-to-fixed swaps and the remainder plus the undrawn revolver not subject to interest rate instruments. Rising interest rates could increase debt service obligations and reduce cash flows.
The filing newly emphasizes that failure to timely and accurately implement AI in product offerings could materially harm competitive position and results. It warns that AI may introduce IP, cybersecurity, data protection, and regulatory risks, and that competitors may commercialize compatible technologies faster.
Series A Preferred Stock ranks senior to common stock in liquidation and distributions, pays dividends at 4.5% per annum until the seven-year anniversary, and gives holders approval rights and a board nomination right. This may discourage takeovers and dilute common stockholders.
Acquisitions remain a primary growth strategy, with 31 completed through December 31, 2023, but no acquisitions were completed in 2023. The company faces risks in identifying, consummating, and integrating targets, and acquisition-related expenses decreased significantly year over year.
As of December 31, 2023, the company had substantial net operating loss carryforwards and R&D credits subject to annual limitation under Sections 382 and 383, with a portion expected to expire before utilization. The Tax Benefit Preservation Plan expires on May 1, 2024, and may not prevent an ownership change.
The company continued to classify non-strategic product offerings as Sunset Assets during Q4 2023. This reduces revenue and requires reduced sales and marketing focus on those assets.
SaaS KPIs
All quarters →Adjusted EBITDA
Free Cash Flow
Major expansions
New customers
Adjusted EBITDA margin
New major customers
Total Customers
Core Organic Growth Rate
Annual Net Dollar Retention Rate
Summary, forecast, risks and KPIs are extracted from Upland Software, Inc.'s SEC filings for Q4 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.