Upland Software is a Low-Bar Play

Enterprise cloud workflow software solutions provider Upland Software NASDAQ: UPLD stock may have put in a bottom heading into its earnings. The enterprise software company already set the bar low with lowered guidance set forth in its Q3 2021 earnings release. This sent shares plunging to a recent low of $17.35. In the meantime, Upland has acquired several companies to add to its product portfolio. With over 10,000 companies and a million users including Pepsi, Tableau, Frontier Airlines, Western Union and GE Healthcare, its reputation is solid. The Company offers 37 different software products across multiple cloud segments including customer experience, sales and marketing, project management, and document workflow. Shares are trading at a historically low forward P/E of 9. Prudent investors looking for exposure in a reputable one-stop-shop workplace management software Company can look for opportunistic pullbacks in shares of Upland Software.

Fiscal Q3 2021 Earnings Release

On Nov. 3, 2021, Upland released its fiscal third-quarter 2021 results for the quarter ended September 2021. The Company reported earnings-per-share (EPS) profits of $0.57 versus $0.47 consensus analyst estimates, a $0.10 beat. Revenues grew 2.5% year-over-year (YoY) to $76.05 million, missing analyst estimates for $77.71 million. Adjusted EBITDA was $25 million or 33% of total revenues. Subscription revenue grew 2% to $72.3 million. GAAP net loss was (-$0.36) per-share. The Company ended the quarter with $179.6 million in cash. GAAP operating cash flow was $5.3 million compared to $18.7 million in Q3 2020. Free cash flow was $4.9 million, compared to $18.5 million in the year ago period. Upland Software CEO Jack McDonald stated, “We did not see in Q3 the uptick in new logo bookings and renewals we had expected. We remain determined to improve our sales performance and note that our focus throughout this year on securing multi-year customer renewals and expansions means a higher percentage of our revenue is now contracted through 2022, which supports improved net dollar retention rates next year.”

Lowered Q4 2021 Guidance

Upland lowered its Q4 2021 revenues to come in between $73.2 million to $77.2 million versus $80 million consensus analyst estimates. Adjusted EBITDA is estimated between $23.4 million and $25.4 million for a 32% margin midpoint.

Conference Call Takeaways

CEO McDonald elaborated on the lowered guidance, “We are lowering our Q4 guidance revenue guidance by $3.9 million to reflect our reduced outlook on messaging volumes and also to reflect the fact that we didn't see the uptick in new logo bookings and net dollar retention rate that we had expected in the third quarter. The COVID impacts on the business of the last 18 months are now fully reflected in our Q4 outlook for $75 million quarterly revenue run rate and we will grow from that run rate as we move into and through 2022 because we see signs of real improvement in net dollar retention rate as we move through next year.” He implied that the worst was over as the impacts of the past year and half have been fully reflected in the Q4 outlook. The bar has been set low and the goal of continuing its acquisitions at a $40 million to $50 million clip is still on target.

Objectif Lune Acquisition

On Jan. 10, 2022, Upland acquired enterprise software leader Objectif Lune for $29 million in cash. Objectif Lune met Upland’s valuation target of 5X to 8X adjusted EBITDA and is expected to be immediately accretive generating over $5.2 million in adjusted EBITDA and annual revenues of $13 million once fully integrated. It will help expand Upland’s global document workflow product library enabling modernization and automated delivery of paper-based documents for large print production.

UPLD Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for UPLD stock. The weekly rifle chart triggered a pup breakdown on the $34.21 Fibonacci (fib) level break. This set off a multi month sell-off before bottoming at $17.35. The weekly 5-period moving average (MA) is rising at $19.27 towards the 15-period MA at $20.10. The weekly stochastic is attempting a mini pup at the 10-band. The weekly  market structure low (MSL) buy triggers above $19.32. The daily rifle chart has been consolidation with the 5-period MA flat at $19.08 on compressed Bollinger Bands (BBs) between $21.40 upper and $19.17 lower envelopes. The daily stochastic has crossed back above the 30-band. Prudent investors can monitor for opportunistic pullback levels at the $17.35 fib, $15.52, $14.20 fib, $12.80 fib, $11.67 and $10.71 fib level. Upside trajectories range from the $23.51 fib up towards the $34.21 fib level.