Business automation software provider Upland Software (NASDAQ: UPLD) reported results in line with analyst expectations in Q4 FY2021 quarter, with revenue down 3.21% year on year to $75.7 million. Guidance for the full year also exceeded estimates, however the guidance for the next quarter was less impressive, coming in at $77 million, 0.12% below analyst estimates. Upland Software made a GAAP loss of $7.47 million, down on its loss of $5.66 million, in the same quarter last year.
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Upland Software (UPLD) Q4 FY2021 Highlights:
- Revenue: $75.7 million vs analyst estimates of $75.4 million (small beat)
- EPS (non-GAAP): $0.60 vs analyst estimates of $0.45 (32.2% beat)
- Revenue guidance for Q1 2022 is $77 million at the midpoint, roughly in line with what analysts were expecting
- Management's revenue guidance for upcoming financial year 2022 is $321 million at the midpoint, beating analyst estimates by 1.54% and predicting 6.28% growth (vs 3.74% in FY2021)
- Free cash flow of $12.9 million, up 165% from previous quarter
- Gross Margin (GAAP): 66.7%, up from 65.5% same quarter last year
“We are pleased to share strong Q4 results and announce the acquisition of BA Insight,” 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, with quarterly sales declining from $78.2 million, to $75.7 million year on year.
Guidance for the next quarter indicates Upland Software is expecting revenue to grow 4.09% year on year to $77 million, slowing down from the 8.72% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $321 million at the midpoint, growing 6.28% compared to 3.74% in FY2021.
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Profitability
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 66.7% in Q4.
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 we would like to see it start improving.
Key Takeaways from Upland Software's Q4 Results
With a market capitalization of $485.3 million Upland Software is among smaller companies, but its more than $189.1 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 were impressed that Upland Software guided for revenue growth to accelerate next year. And we were also glad that the revenue guidance for the rest of the year exceeded expectations. On the other hand, it was less good to see that the revenue growth was quite weak and the revenue guidance for the next quarter missed analysts' expectations. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. But the market was likely expecting more and the company is down 1.59% on the results and currently trades at $17 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.