Upland Software ((UPLD)) has held its Q4 earnings call. Read on for the main highlights of the call.
Upland Software’s recent earnings call presented a mixed sentiment, with notable achievements in financial metrics and product advancements, counterbalanced by challenges in revenue growth and divestitures. The company reported improvements in net dollar retention rate and adjusted EBITDA margins, alongside significant debt reduction and recognition for AI-enabled product developments. However, these positives were tempered by flat core organic growth in Q4 2024 and an anticipated revenue decline in early 2025, suggesting a balanced outlook for the upcoming year.
Improvement in Net Dollar Retention Rate
Upland Software reported an improvement in its net dollar retention rate, reaching 96% by the end of 2024, up from 95% the previous year. The company has set a target to further enhance this rate to 98% by the end of 2025, reflecting its focus on customer retention and revenue stability.
Increase in Adjusted EBITDA Margins
The company projects a significant increase in adjusted EBITDA margins, expecting a rise of 400 basis points from 20% in 2024 to 24% in 2025. This improvement underscores Upland Software’s commitment to enhancing profitability and operational efficiency.
Debt Reduction
Upland Software has made substantial progress in reducing its debt, paying down $33 million in 2025, in addition to $189 million in 2024. This effort has brought the company’s gross debt down to approximately $261 million, indicating a strong focus on financial health and stability.
New Customer Acquisition
In Q4 2024, Upland Software successfully acquired 110 new customers, including 21 major clients, and expanded relationships with 291 existing customers. This expansion reflects the company’s strategic efforts to grow its customer base and strengthen existing partnerships.
Recognition and Awards
Upland Software received significant recognition, earning 76 badges in the G2 Winner 2025 Market Reports and being acknowledged in the IDC MarketScape Worldwide Digital FAX 2024 Vendor Assessment. These accolades highlight the company’s industry leadership and product excellence.
AI-Enabled Product Developments
The company has made strides in AI technology, enabling 80% of its core content and knowledge management product portfolio with AI capabilities. This development is expected to drive future growth and enhance Upland Software’s competitive edge in the market.
Strong Free Cash Flow
Upland Software reported a strong free cash flow of $9 million in Q4, contributing to a full-year total of $23.4 million for 2024. This financial strength provides the company with flexibility to invest in growth initiatives and manage its operations effectively.
Flat Core Organic Growth
Despite flat core organic growth in Q4 2024, Upland Software is optimistic about 2025, projecting a 2.5% growth rate. This positive momentum is expected to support the company’s strategic objectives and market positioning.
Revenue Decline Due to Divestitures
The divestiture of non-strategic product lines is expected to reduce Upland Software’s 2025 revenue guidance by approximately $18 million. However, these divestitures are not anticipated to impact the company’s adjusted EBITDA, allowing for a continued focus on core business areas.
Expected Decline in Total Revenue
For Q1 2025, Upland Software anticipates a 12% decline in total revenue compared to Q1 2024, with an annual decline of 11% expected for the full year 2025. This forecast reflects the impact of divestitures and market conditions on the company’s revenue streams.
First Quarter Adjusted EBITDA Decline
The company expects Q1 2025 adjusted EBITDA to range between $11.2 million and $14.2 million, a decrease from Q1 2024. This decline is attributed to payroll taxes and costs associated with divested assets, highlighting the challenges in maintaining profitability amidst strategic changes.
Forward-Looking Guidance
Upland Software’s guidance for 2025 reflects a cautiously optimistic outlook, with a projected core organic growth rate of 2.5%, a significant improvement from the negative growth in 2024. The company aims to increase adjusted EBITDA margins by 400 basis points to 24% and improve its net dollar retention rate to 98% by the end of 2025. These targets, alongside strategic divestitures and AI advancements, position Upland Software for potential growth and enhanced profitability.
In summary, Upland Software’s earnings call conveyed a balanced sentiment, with positive developments in financial metrics and product innovation offset by challenges in revenue growth and strategic divestitures. The company’s forward-looking guidance suggests a cautiously optimistic outlook for 2025, with expectations for improved growth and profitability. Investors and stakeholders will be keen to see how Upland Software navigates these dynamics in the coming year.