Upland's (NASDAQ:UPLD) Q1 Sales Top Estimates

Radek Strnad /
2023/05/04 4:06 pm EDT

Business automation software provider Upland Software (NASDAQ: UPLD) reported Q1 FY2023 results topping analyst expectations, with revenue down 2.11% year on year to $77.1 million. Guidance for the full year also exceeded estimates, however the guidance for the next quarter was less impressive, coming in at $72.8 million, 2.44% below analyst estimates. Upland made a GAAP loss of $140 million, down on its loss of $22.8 million, in the same quarter last year.

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Upland (UPLD) Q1 FY2023 Highlights:

  • Revenue: $77.1 million vs analyst estimates of $74.9 million (2.94% beat)
  • EPS (non-GAAP): $0.28 vs analyst estimates of $0.25 (10.7% beat)
  • Revenue guidance for Q2 2023 is $72.8 million at the midpoint, below analyst estimates of $74.6 million
  • The company reconfirmed revenue guidance for the full year, at $300 million at the midpoint
  • Free cash flow of $15.6 million, up 174% from previous quarter
  • Gross Margin (GAAP): 66.9%, down from 68.6% same quarter last year

"In Q1, we beat our revenue and Adjusted EBITDA guidance midpoints, even after FX headwinds and free cash flow came in stronger than expected," 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's revenue growth has been unimpressive over the last two years, growing from quarterly revenue of $74 million in Q1 FY2021, to $77.1 million.

Upland Total Revenue

But this quarter Upland's revenue was down 2.11% year on year, which might be a disappointment to some shareholders.

Upland is guiding for revenue to decline next quarter 9.26% year on year to $72.8 million, a further deceleration on the 5.2% year-over-year decrease in revenue the company had recorded in the same quarter last year. Before the earnings results were announced, Wall St analysts covering the company were estimating revenues to decline -5.36% 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'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 Q1.

Upland Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.67 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's Q1 Results

With a market capitalization of $117.1 million Upland is among smaller companies, but its more than $257.7 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see Upland outperform Wall St’s revenue expectations this quarter. And we were also glad to see the improvement in gross margin. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations and revenue was in absolute numbers in decline. Overall, it seems to us that this was a complicated quarter for Upland. The company is flat on the results and currently trades at $3.51 per share.

Upland 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.