Upland Software, Inc. Q2 FY2025 earnings call

• Q2 beat revenue and adjusted EBITDA guidance midpoint and returned to positive core organic growth. Divestitures of low - margin assets have led to adjusted EBITDA margin expansion.
• Q2 2025 adjusted EBITDA was $13.6 million with a 25% margin, and adjusted EBITDA margin is expected to be north of 30% in Q3.
• Free cash flow in Q2 was $2.7 million, affected by one - time divestiture - related expenses.
• Welcomed 100 new customers and expanded relationships with 263 existing customers in Q2.
• Upland earned 68 badges in G2's 2025 Summer reports with strong product portfolio performance.
• Continues to drive innovation across the portfolio with product enhancements like Upland InterFAX, Upland Panviva, Upland Adestra, Upland InGenius, and Upland RO Innovation having AI - related updates.
• Included in the 2025 Gartner Market Guide for Customer Service Knowledge Management Systems.
• Successfully refinanced debt, extending maturity to July 2031, paying down $18 million of debt principal, and establishing a $30 million revolving credit facility.

In Q2 2025, adjusted EBITDA was $13.6 million with an adjusted EBITDA margin of 25%, a 500 basis point increase from Q2 2024's 20%. Free cash flow for the second quarter was $2.7 million, burdened by about $7 million of one - time divestiture - related expenses. In Q2, 100 new customers were welcomed to Upland, including 12 new major customers, and 263 existing customers were expanded with relationships, 28 of which were major expansions. Upland earned 68 badges in G2's Summer 2025 reports, with AI - powered products like Upland Panviva, Upland RightAnswers, Upland BA Insight, Upland Qvidian showing strong performance.

• Core organic growth outlook is projected to improve to approximately 3% in the second half of 2025.
• For the quarter ending September 30, 2025, reported total revenue is expected to be between $46.8 million and $52.8 million, including subscription and support revenue between $44.6 million and $49.6 million, a 25% midpoint decline from Q2 2024 due to divestitures.
• Third quarter 2025 adjusted EBITDA is expected to be between $14.5 million and $17.5 million, a 14% midpoint increase from Q2 2024, with an adjusted EBITDA margin midpoint of 32%, an 1,100 basis point increase from Q2 2024.
• Full year 2025 reported total revenue is expected to be between $211.8 million and $223.8 million, including subscription and support revenue between $200 million and $210 million, a 21% midpoint decline from 2024.
• Full year 2025 adjusted EBITDA is expected to be between $55.8 million and $61.8 million, a 6% midpoint increase from 2024, with a full year adjusted EBITDA margin midpoint of 27%, a 700 basis point increase from 2024.
• Lowered the midpoint of full year 2025 total revenue and adjusted EBITDA guidance ranges due to lower forecasted professional services revenue, but subscription and support revenue guidance midpoint remains unchanged.

• During the call, statements considered forward - looking are mentioned, and a detailed discussion of risks and uncertainties associated with such statements is in periodic reports filed with the SEC.
• Unable to reconcile any forward - looking non - GAAP financial measures to their directly comparable GAAP financial measures because the information needed for reconciliation is unavailable without unreasonable effort.

Q: Both of them, I guess, kind of surround the refinancing in the quarter, and then I've got probably one quick one on the core business. On the refinance, why is private credit the right option versus maybe the other facilities that were out there? And then as you think about excess cash flow over the next, I don't know, a couple of years, do you save and reserve those for M&A? Or is the plan to probably use those to further pay down the debt?

A: Regarding private credit, our previous credit facility was a Term Loan B financing, and our current term facility is below the size range for the TLB credit market, so it made sense to move to private credit. Regarding capital allocation, cash flow is going to be directed toward deleveraging, and we don't anticipate M&A at this point.

Q: And your next question comes from the line of DJ Hynes with Canaccord. It was unclear to me if that was a near - term comment or if we look out a year from now, kind of dust has settled on the divestitures, the business is obviously in a much better spot, organically growing, nicely profitable. Is there a future in which you resume M&A activity? Or is this going to be kind of a perpetually organic growth story?

A: I think it's a near - term comment. We are focused on driving organic growth, AI enabling the portfolio and continuing to delever here over the next year. But as the dust settles from all of that, if we see attractive opportunities, then we would look at them together with our capital partners. And it is possible that we could look at M&A. I don't see it for this year, but as you say, it's possible a year or so out once the dust settles.

Q: A couple for you, Mike, and then one for you, Jack. Just Mike, on the free cash flow, I think the previous guide had been $15 million, so you're bumping it up here. Just walk me through what drove the change, kind of what were the puts and takes that impacted that number?

A: Yes. So we had a little bit less divestiture - related expenses than we were previously forecasting, two is we did sell our swaps here in Q3. And then three is that the cash taxes that we were investing to be around $10 million this year are probably going to be less than $9 million as a result of the new tax legislation in the new bill.

Q: And then, Jack, just curious, back to the prior question, kind of the sales org and maybe just a little more thoughts expansion around what's working, what's not, puts and takes on the sales organization, opportunities to further enhance top line organic growth? Is it really centered around, as you were talking about top of funnel sort of sales process optimization execution? Where does product innovation fall in the sort of the priority list of opportunities to accelerate top line growth? Just ultimately, what's going to drive that top line growth acceleration?

A: We've done a ton of work over the past year, 18 months to AI enable the product portfolio, particularly those key growth products that we think are going to drive organic growth for us going forward. I think from a product perspective, we're in pretty good shape. Now look, obviously, we're constantly innovating and moving the portfolio forward. But as it relates to near - term core organic growth, I think we've got a competitive set of products with which we can win in the marketplace and the actions we've taken to streamline and focus the business further support that. In terms of where we need to execute and frankly, where we can execute better, again, on pipeline generation, we've made big progress, and we're seeing that in increases in marketing sourced bookings. But frankly, I think we could be doing better on our outbound efforts. Around sales execution, the theme over the last 6 months, 9 months has been hiring in more domain expert sellers. And so we've added a significant number of new salespeople that have come out of direct competitors with a number of years of experience under their belt and really invigorating the sales force with that kind of domain expert talent.