Upland Software, Inc. Q1 FY2024 earnings call

• Headlines: Beat Q1 revenue and adjusted EBITDA guidance midpoints, free cash flow in line with expectations.
• Green shoots: Core bookings exceeded core churn, digital marketing metrics (SEO page ranks, cost per lead, sales/marketing qualified leads, sales pipeline) improving, inside sales teams closing 6 major customer deals with average ARR of 200,000.
• Product highlights: Earned 44 badges in G2's Spring 2024 Market Reports; partnerships with IBM (Watsonx and Qvidian) and Salesforce (Altify integration with Salesforce AI); 10 active AI initiatives underway, including guided proposal automation for Qvidian.

Total revenue for the first quarter was $70.7 million, a decrease of 8% year-over-year. Recurring revenue from subscription and support declined 8% year-over-year to $67.1 million. Perpetual license revenue was $1.5 million in Q1 2024, down from $1.6 million in Q1 2023. Professional services revenue was $2.2 million, a 15% year-over-year decline. Overall gross margin was 70% in Q1, and product gross margin was 71% or 75% when adding back depreciation and amortization (cash gross margin).

• Second quarter 2024: Reported total revenue expected $64.4M - $70.4M, subscription and support revenue $61.5M - $66.5M; adjusted EBITDA expected $11.8M - $14.8M.
• Full year 2024: Reported total revenue expected $264.7M - $282.7M, subscription and support revenue $251.6M - $266.6M; adjusted EBITDA expected $50.8M - $59.8M. Raised full year guidance midpoint due to Q1 guidance midpoint beats.

• Noncash goodwill impairment charge of $87.2 million in Q1 2024 triggered by decline in stock price. - Risks associated with executing growth plan, market conditions, and achieving organic growth goals.

Q: The first one is on the sequential and year-over-year weakness in customer expansion and new customer additions. Is there any color on what's driving that weakness? Are there some macro impacts you should be aware of? And then I have a follow-up.

A: The -- actually, in terms of renewals, expansions and bookings for the quarter, we had a good quarter. You're looking at just counts. It doesn't necessarily have deal size there. So that's the piece you're not factoring in.

Q: I know that last quarter, you mentioned like a new focus on potential acquisitions in 2024. Is there anything to call out on that? Any progress there?

A: Yes, we continue to be super active in the market looking at opportunities and a couple of things out there that are interesting, and I would like to get something done this year. Nothing to announce at this point, but we're actively looking.

Q: Can you update us on where you stand in terms of the pricing and packaging initiatives you've mentioned? I know you've been focused on the product groupings and bundles. Just curious kind of where you are in that process and if you found the right balance there yet.

A: Yes. I think we implemented last year price increase program to reflect the market realities of where pricing is amongst our competitors and the value we're delivering for customers. And so that has been fully rolled out, and we are seeing a positive impact from that in terms of ARR generation. So fully implemented and working.

Q: Can you give us an update on the sunsetting of assets timing? Is there the timeline there changed at all as you kind of more earnestly be on that process or still that same timeline there?

A: Yes. Same timeline 2, 3 years for that to wind down, so it will be a slow burn.