Upland Software(US:UPLD)2025-03-12 18:33Financial Data and Key Metrics Changes - The company reported a good Q4 2024, beating recurring revenue expectations and meeting adjusted EBITDA guidance midpoint [7] - Core organic growth in Q4 was flat, but the company is guiding for 2.5% core organic growth in 2025, representing a significant turnaround from a negative 1% average quarterly growth rate in 2024 [7][14] - Adjusted EBITDA margins are expected to increase by 400 basis points in 2025, from 20% in 2024 to 24% in 2025 [14] - The net dollar retention rate improved to 96% at the end of 2024, up from 95% in the prior year [8] - Q4 adjusted EBITDA was $14.9 million, showing sequential growth from Q3 [8][17] - Free cash flow for Q4 was $9 million, contributing to a total of $23.4 million for the full year 2024 [8][18] Business Line Data and Key Metrics Changes - The company welcomed 110 new customers in Q4, including 21 major customers, and expanded relationships with 291 existing customers, including 42 major expansions [9] - The company earned 76 badges in the G2 Winner 2025 Market Reports, indicating strong product performance [9] - AI-enabled solutions have been integrated into 80% of the core content and knowledge management product portfolio, enhancing product capabilities [28] Market Data and Key Metrics Changes - The company divested two non-strategic underperforming product lines, which lowered the 2025 revenue guidance by about $18 million but had no impact on adjusted EBITDA [11][20] - The divestitures are expected to simplify the business and improve core organic growth rates [12] Company Strategy and Development Direction - The company is focusing on AI-enabled solutions to improve knowledge sharing and business outcomes, which is seen as central to future growth [11][32] - The strategy includes enhancing product offerings and improving sales capabilities, particularly through investments in AI technologies [28][42] - The company aims to improve net dollar retention rates to closer to 98% by the end of 2025 [52] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improving organic growth outlook and the positive momentum in adjusted EBITDA margins [7][14] - The company is targeting full-year 2025 free cash flow in the range of $20 million to $25 million [18] - Management acknowledged the challenges posed by U.S. payroll taxes and costs related to divested assets in Q1 2025 [22] Other Important Information - The company plans to continue paying down debt, having already reduced it by $33 million in 2025, in addition to $189 million in 2024 [13][19] - The gross debt currently stands at approximately $261 million, with most of it hedged to lock the interest rate at 5.4% [19] Q&A Session Summary Question: Can you talk about the AI strategy at Upland? - The company has invested in AI, enabling 80% of its core content and knowledge management products, and sees strong enterprise search use cases for its products [28][32] Question: What is the status of the asset unwind strategy? - The company expects a decline in Sunset asset revenues from $32 million in 2024 to about $14 million in 2025, and then down to around $6 million in 2026 [34] Question: Can you provide insights on the major account expansions and net dollar retention? - The improvement in net dollar retention is driven by better gross dollar retention rates, with a goal to reach 98% by the end of 2025 [52] Question: What is the guidance for Q1 revenue? - The company expects reported total revenue for Q1 2025 to be between $59 million and $65 million, reflecting some lumpiness in perpetual license and professional services revenue [21][46]