Upland Software (NASDAQ:UPLD) Reports Q2 In Line With Expectations But Full Year Guidance Underwhelms

Kayode Omotosho /
2022/08/03 4:11 pm EDT

Business automation software provider Upland Software (NASDAQ: UPLD) reported results in line with analyst expectations in Q2 FY2022 quarter, with revenue up 5.19% year on year to $80.2 million. However, guidance for the next quarter was less impressive, coming in at $78.7 million at the midpoint, being 2.07% below analyst estimates. Upland Software made a GAAP loss of $16.3 million, improving on its loss of $19 million, in the same quarter last year.

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Upland Software (UPLD) Q2 FY2022 Highlights:

  • Revenue: $80.2 million vs analyst estimates of $79.5 million (0.89% beat)
  • EPS (non-GAAP): $0.55 vs analyst estimates of $0.43 (26.4% beat)
  • Revenue guidance for Q3 2022 is $78.7 million at the midpoint, below analyst estimates of $80.3 million
  • The company dropped revenue guidance for the full year, from $321 million to $316.5 million at the midpoint, a 1.4% decrease
  • Free cash flow of $13.9 million, up 72.9% from previous quarter
  • Gross Margin (GAAP): 66.9%, in line with same quarter last year

"We had a strong Q2, beating our guidance midpoints on revenue and Adjusted EBITDA, even after FX headwinds, 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 unimpressive over the last year, growing from quarterly revenue of $76.2 million, to $80.2 million.

Upland Software Total Revenue

Upland Software's quarterly revenue was only up 5.19% year on year, which might disappoint some shareholders. The growth slowed down compared to last quarter, as the revenue increased by just $1.51 million in Q2, compared to $2.98 million in Q1 2022. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates Upland Software is expecting revenue to grow 3.48% year on year to $78.7 million, improving on the 2.51% 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 4.54% 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 66.9% in Q2.

Upland Software Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.66 left to spend on developing new products, marketing & sales and the general administrative overhead. This would be considered a low gross margin for a SaaS company and it has dropped significantly from the previous quarter, which is probably the opposite of what shareholders would like it to do.

Key Takeaways from Upland Software's Q2 Results

With a market capitalization of $364 million Upland Software is among smaller companies, but its more than $138.2 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We struggled to find many strong positives in these results. On the other hand, it was unfortunate to see that Upland's revenue guidance for the full year missed analyst's expectations. Overall, this quarter's results could have been better. The company is flat on the results and currently trades at $11.92 per share.

Upland Software may have had a tough quarter, but does that actually create an opportunity to invest 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.