Upland Software, Inc. Q3 FY2024 earnings call

• Beat Q3 revenue guidance midpoint and met adjusted EBITDA guidance midpoint. - Welcomed 122 new customers in Q3, including 18 major customers, and expanded relationships with 312 existing customers. - Upland earned 72 badges in G2's Fall 2024 market reports; Upland RightAnswers garnered 17 badges and was named to the 2024 KMWorld AI 100. - Announced Upland BA Insight for Microsoft Azure AI Search. - Recognized $9 million of deferred gain from the sale of half of interest rate swaps due to $177 million debt paydown in Q3.

Total revenue for Q3 2024 was $66.7 million, a 10% year-over-year decrease. Recurring revenue from subscription and support declined 9% year-over-year to $63.8 million. Perpetual license revenue was $1.1 million, down from $1.5 million in Q3 2023. Professional services revenue was $1.8 million, a 32% year-over-year decline. Overall gross margin was 70%, and product gross margin was 72% (or 75% when adding back depreciation and amortization). Adjusted EBITDA in Q3 was $14 million, up sequentially from $13.6 million in Q2.

• Q4 2024 total revenue expected between $65.9M and $71.9M, with subscription and support revenue between $60.2M and $65.2M. - Q4 2024 adjusted EBITDA expected between $13.4M and $16.4M, midpoint up 6% year-over-year. - Full year 2024 total revenue expected between $272.6M and $278.6M, subscription and support revenue between $256.6M and $261.6M. - Full year 2024 adjusted EBITDA expected between $54.1M and $57.1M. - Expects to exit 2024 in Q4 with adjusted EBITDA at midpoint of $14.9M, nearly $60M annualized run rate.

Q: Thoughts on OpEx cost cuts, if they're finished, and how to annualize for 2025?

A: Costs will continue to come down, with continuing cost refinements. There are cost efficiencies from reducing infrastructure related to fewer acquisitions. Within growth investments, they're turning up investment on areas with good return and adjusting spending in others to support expanded margins.

Q: Broad go-to-market changes and success areas?

A: Modern digital marketing function has improved lead generation and conversion. Built out sales capability with new sales management, leading to better bookings. Invested in customer success to drive product utilization and higher renewal rates.

Q: Strategic thinking on paying down debt and refinancing?

A: Paid down $177M of debt in Q3 for $7M annual interest savings. Timing for refi in fiscal 2025, with debt maturing August 2026; longer delay in refi means more interest savings from existing attractive credit facility rate.