Upland Software (NASDAQ:UPLD) Exceeds Q1 Expectations

Radek Strnad /
2022/05/04 4:10 pm EDT

Business automation software provider Upland Software (NASDAQ: UPLD) beat analyst expectations in Q1 FY2022 quarter, with revenue up 6.41% year on year to $78.7 million. The company expects that next quarter's revenue would be around $79.5 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Upland Software made a GAAP loss of $22.8 million, down on its loss of $20.6 million, in the same quarter last year.

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Upland Software (UPLD) Q1 FY2022 Highlights:

  • Revenue: $78.7 million vs analyst estimates of $76.7 million (2.53% beat)
  • EPS (non-GAAP): $0.41 vs analyst estimates of $0.41 (1.23% beat)
  • Revenue guidance for Q2 2022 is $79.5 million at the midpoint, roughly in line with what analysts were expecting
  • The company reconfirmed revenue guidance for the full year, at $321 million at the midpoint
  • Free cash flow of $8.04 million, down 37.8% from previous quarter
  • Gross Margin (GAAP): 68.5%, up from 66.9% same quarter last year

"We had a strong Q1, beating our guidance midpoints on revenue and Adjusted EBITDA, and outperforming our targets on operating and free cash flow," said Jack McDonald, Upland's chairman and chief executive officer.

Founder Jack McDonald’s second software rollup, Upland Software (NASDAQ:UPLD) is a one stop shop for sales and marketing software, project management, HR, and contact center services for small and medium sized businesses.

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Sales Growth

As you can see below, Upland Software's revenue growth has been slower over the last year, growing from quarterly revenue of $73.9 million, to $78.7 million.

Upland Software Total Revenue

Upland Software's quarterly revenue was only up 6.41% year on year. Revenue increased $2.98 million quarter on quarter, a strong improvement on the $323 thousand decrease in Q4 2021, and a sign of acceleration of growth, which is very nice to see indeed.

Guidance for the next quarter indicates Upland Software is expecting revenue to grow 4.24% year on year to $79.5 million, slowing down from the 6.93% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 5.42% over the next twelve months.

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What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Upland Software's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 68.5% in Q1.

Upland Software Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.68 left to spend on developing new products, marketing & sales and the general administrative overhead. While it improved significantly from the previous quarter this would still be considered a low gross margin for a SaaS company and we would like to see the improvements continue.

Key Takeaways from Upland Software's Q1 Results

With a market capitalization of $458.5 million Upland Software is among smaller companies, but its more than $130.4 million in cash and positive free cash flow over the last twelve months give us confidence that Upland Software has the resources it needs to pursue a high growth business strategy.

It was good to see Upland Software outperform Wall St’s revenue expectations this quarter. And we were also glad that the revenue guidance for the rest of the year exceeded expectations. On the other hand, revenue growth is still quite slow. The company is up 1.03% on the results and currently trades at $15.61 per share.

Should you invest in Upland Software right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.