Upland Software (UPLD) Q4 2025 Earnings Transcript

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DATE

Tuesday, March 3, 2026 at 11 a.m. ET

CALL PARTICIPANTS

• Chairman — Jack McDonald
• Chief Financial Officer — Michael D. Hill

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TAKEAWAYS

• Core Organic Growth Rate -- Flat in Q4, with management targeting a range of 1%-2% for the coming year, following a trajectory from -2% three years ago, to -1% two years ago, and approximately 1% last year.
• Annual Net Dollar Retention Rate -- 96% for 2025, unchanged from the previous year.
• Adjusted EBITDA -- $15.3 million and a 31% margin; margin increased from 22% in the fourth quarter of 2024.
• Free Cash Flow -- $7.2 million in Q4 and $24.4 million for 2025; full-year free cash flow exceeded the $20 million target due to accelerated receivables collection.
• Customer Expansion -- 110 new customers and 199 customer expansions in Q4, including 15 new major customers and 27 major expansions, with activity distributed across the AI-powered product suite.
• Gross Margin Improvement -- Q4 gross margin increased relative to earlier in 2025, attributed to higher-margin ongoing product lines.
• Net Debt -- Approximately $290 million at year-end, with net debt leverage at 3.6x trailing adjusted EBITDA. Management noted this as better than target.
• Product Validation -- 49 badges awarded in G2’s Winter 2026 reports; recognized as a Major Player in the IDC MarketScape and included in the 2025 Gartner Market Guide for RFP Response Management Applications.
• Revenue Guidance -- Q1 2026 revenue guidance is $47 million to $50 million; full-year 2026 revenue guidance is $194.2 million to $206.2 million, both reflecting year-over-year declines attributed to prior divestitures.
• Adjusted EBITDA Margin Guidance -- Q1 2026 midpoint margin expected at 26%, up 500 basis points from the prior year’s quarter; full-year 2026 midpoint margin expected at 28%, a 100 basis point increase over 2025.
• CEO Transition -- Sean Nathaniel was named incoming CEO, with Jack McDonald moving to Chairman. Management emphasized Nathaniel’s previous CTO and general management experience, and his alignment with the company's AI-centric strategy.

SUMMARY

Upland Software (NASDAQ:UPLD) management confirmed Q4 core organic growth was flat, attributing the outcome to difficult comparisons involving unique usage volume in the prior year. Customer and product recognition milestones included new client wins, industry awards, and product validations that management claims reinforce their AI-focused strategy. Guidance for 2026 anticipates revenue and adjusted EBITDA declines due to earlier divestitures, but implies further margin improvement and continued cash flow discipline.

• Chairman McDonald stated, "the Q4 numbers could have come in a little bit better" for bookings, but expressed confidence in the current pipeline, especially for core knowledge management offerings.
• CFO Hill attributed anticipated margin seasonality in 2026 to "Things like, you know, calendar-based payroll taxes kind of take a bigger hit in Q1 and Q2. So we have always had sort of a tilted, you know, if you will, calendar year ramp-up, and so that is mainly what we are seeing here this year again," explaining the pattern of lower margins in the first half.
• Management confirmed that roughly two-thirds to three-quarters of revenue now stems from growth products, most of which utilize AI capabilities, with an explicit focus on the knowledge and content management market.
• New CEO Sean Nathaniel’s strategic focus, according to McDonald, will be to "reinforcing Upland Software, Inc.’s role in enabling organizations to convert that knowledge and content and data into trusted operational intelligence to support AI- and agent-driven operating models."
• Chairman McDonald highlighted recent wins involving major hospitality and hyperscaler clients, positioning Upland’s trusted, auditable, governable knowledge layer as vital to enterprise AI implementation.

INDUSTRY GLOSSARY

• Net Dollar Retention Rate: Measures total recurring revenue retained from existing customers, including expansions and downgrades, over a one-year period, excluding new customers.
• Adjusted EBITDA: Earnings before interest, taxes, depreciation, and amortization, excluding certain non-recurring or non-cash items, used to evaluate core profitability.
• KCM (Knowledge and Content Management): Market segment focused on software solutions for organizing, managing, and leveraging enterprise knowledge and digital content.

Full Conference Call Transcript

Jack McDonald: Alright. Thank you, and welcome to our Q4 2025 earnings call. I am joined today by Michael D. Hill, our CFO. On today’s call, I will start with a Q4 review, and following that, Mike will provide some detail on the Q4 numbers and our guidance. We will then open the call up for Q&A. But before we get started, Mike will read the safe harbor statement. Mike?

Michael D. Hill: Yeah. Thank you, Jack. During today’s call, we will include statements that are considered forward-looking within the meanings of securities laws. Detailed discussion of the risks and uncertainties associated with such statements is contained in our periodic reports filed with the SEC. The forward-looking statements made today are based on our views and assumptions and on information currently available to Upland Software, Inc. management. We do not intend or undertake any duty to release publicly any updates or revisions to any forward-looking statements. On this call, Upland Software, Inc. will refer to non-GAAP financial measures that, when used in combination with GAAP results, provide Upland Software, Inc. management with additional analytical tools to understand its operations.

Upland Software, Inc. has provided reconciliations of non-GAAP measures to the most comparable GAAP measures in our press release announcing our financial results, which are available on the Investor Relations section of our website. Please note that we are unable to reconcile any forward-looking non-GAAP financial measures to their directly comparable GAAP financial measures because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort. And with that, I will turn the call back over to Jack.

Jack McDonald: Alright. Thanks, Mike. The headlines in Q4: revenue, adjusted EBITDA, and margins came in roughly as expected. Our Q4 core organic growth rate was flat due to a tough compare to Q4 2024 which contained some lumpy additional usage volume revenue. As we have said on previous calls, our core organic growth rate will bounce around a bit from quarter to quarter. The general trend has been improving. The growth rates were negative 2% three years ago, negative 1% two years ago, roughly 1% positive last year, and we are targeting 1% to 2% this year. So a generally improving trend. Annual net dollar retention rate was 96% in 2025, consistent with the prior year.

Q4 2025 adjusted EBITDA of $15,300,000 resulted in an adjusted EBITDA margin of 31%. Free cash flow for Q4 was $7,200,000, stronger than expected due to successful collection efforts, which brought our full-year 2025 free cash flow to $24,400,000, exceeding our $20,000,000 target. We welcomed 110 new customers to Upland Software, Inc. in Q4, including 15 new major customers. We also expanded relationships with 199 existing customers, 27 of which were major expansions. These new and expanded relationships continue to be spread across our AI-powered product portfolio.

On the product front in Q4, I would note that we continue to perform well based on insights from customers, as evidenced by earning 49 badges in G2’s Winter 2026 market reports, highlighting consistent value and customer validation for our products. Upland Software, Inc. was recognized as a Major Player in the IDC MarketScape Worldwide General-Purpose Knowledge Discovery Software, 2025 Vendor Assessment, which was published in November 2025. Upland Software, Inc. believes its recognition in this report highlights the value of our AI-powered knowledge management solution, Upland Right Answers, which is driving scalable, smarter support for enterprise contact centers and help desks.

Upland Software, Inc. was recognized in the Gartner Market Guide for RFP Response Management Applications, which was published in October 2025. We believe our inclusion in that report showcases the impact of our AI-powered RFP response and proactive sales proposal creation software of Qvidian. So our Q4 results support and illustrate improvements that we have made in the business. Adjusted EBITDA margins expanded from 2024 and 2025, again, up to north of 30% in the fourth quarter. We continue to see healthy cash flow. We are targeting continued strong cash flow in the $20,000,000 range for the year.

In other important news, last week we announced the fact that Sean Nathaniel is going to be joining Upland Software, Inc. as our new CEO. I will be transitioning to Chairman as a part of that. I am just super happy to announce this news. Sean has deep familiarity with our business and our operating model, and our customers and our products having been with Upland Software, Inc. from 2013 to 2020, and previously serving as our CTO, but also serving in senior general management roles across a significant chunk of our product portfolio. Significantly, Sean brings highly relevant experience, particularly around AI initiatives that are focused on enterprise knowledge and content and data.

I welcome folks to take a look at some of the materials that Sean has published over the last few years on AI and the importance of solid knowledge and content and data foundations as a prerequisite for successful enterprise AI implementations. Sean’s vision really centers on reinforcing Upland Software, Inc.’s role in enabling organizations to convert that knowledge and content and data into trusted operational intelligence to support AI- and agent-driven operating models, which is obviously where the market is going. Upland Software, Inc. already has meaningful capabilities aligned with this vision, and Sean’s priority moving forward is going to be to sharpen that execution and translate those capabilities into measurable customer and shareholder value.

So Sean will be joining us, will be on, I think, our next call, and then will be running the calls going forward. You will have an opportunity to hear directly from Sean his vision and for the business going forward, and I am just super happy to welcome Sean back to Upland Software, Inc. and to support him in executing his vision, and looking forward to that. So with that, I am going to turn the call back over to Mike.

Michael D. Hill: Alright. Thanks, Jack. I think Jack covered most of the main points in the financials for the quarter, so I will just take a few additional comments here. For the Q4 income statement, revenues were as expected when taking into consideration our divestitures in Q1 2025. Q4 gross margin continued to represent an increase from earlier in 2025, as expected, as a result of the higher margins realized on our ongoing product lines. Our adjusted EBITDA and adjusted EBITDA margin came in as expected with our adjusted EBITDA margin of 31%, up from 22% in the fourth quarter of 2024, so a big improvement there.

For the fourth quarter 2025, GAAP operating cash flow was $7,300,000 and free cash flow was $7,200,000, making our free cash flow for the full year 2025 of $24,400,000. That exceeded our target free cash flow of $20,000,000. On the balance sheet at the end of Q4, we had outstanding net debt of approximately $290,000,000, factoring in the approximately $29,000,000 of cash on our balance sheet. At year-end, our net debt leverage was 3.6x trailing adjusted EBITDA, which came in better than our target.

For guidance, for the quarter ending 03/31/2026, we expect reported total revenue to be between $47,000,000 and $50,000,000, including subscription and support revenue between $44,800,000 and $47,300,000, for a decline in total revenue of 24% at the midpoint from the quarter ended 03/31/2025. Just a reminder, this year-over-year decline is primarily due to the divestitures completed in Q1 2025. First quarter 2026 adjusted EBITDA is expected to be between $11,900,000 and $13,400,000, which at the midpoint is a decline of 3% from the quarter ended 03/31/2025. First quarter 2026 adjusted EBITDA margin is expected to be 26% at the midpoint, which is a 500 basis point increase from the 21% adjusted EBITDA margin in the year-ago quarter.

For the full year ending 12/31/2026, we expect reported total revenue to be between $194,200,000 and $206,200,000, including subscription and support revenue between $103,600,000 and $193,700,000, for a decline in total revenue of 8% at the midpoint from the year ended 12/31/2025. This year-over-year decline, as I mentioned earlier, is primarily due to divestitures that we completed in Q1 2025. Full year 2026 adjusted EBITDA is expected to be between $52,600,000 and $58,600,000, which at the midpoint is a decline of 4% from the year ended 12/31/2025. Full year 2026 adjusted EBITDA margin is expected to be 28% at the midpoint, which is a 100 basis point increase from the 27% adjusted EBITDA margin that we had for 2025.

And so to recap, our product portfolio is now much more focused around the KCM market, knowledge and content management market. As Jack mentioned, our core organic growth rate is in a positive multiyear uptrend from negative 2% three years ago to negative 1% two years ago to roughly positive 1% last year in 2025, and we are targeting 1% to 2% positive here for 2026. The big new customer wins during 2025 have validated our product-market fit in several key markets, and those major wins have validated our product AI strategies.

Our adjusted EBITDA margin is in a significant multiyear expansion trend with adjusted EBITDA margins expanding from 20% in 2024 to 27% last year in 2025 to our guidance midpoint of 28% here this year in 2026. Cash flows, as we mentioned, remained strong as we generated over $24,000,000 of free cash flow in 2025, and we are targeting around $20,000,000 of free cash flow here this year in 2026. I will note that we beat our 2025 free cash flow target by over $4,000,000 really due to early receivables collections, which would have otherwise occurred in 2026. So without those early collections, our 2026 free cash flow target would have actually been higher. Alright.

And with that, I will turn the call back to Jack.

Jack McDonald: Alright. Thanks, Mike. We are ready to open the call up for Q&A.

Operator: Press star and then the number one on your telephone keypad. Your first question comes from the line of David E. Hynes with Canaccord Genuity. Please go ahead.

David E. Hynes: Hey. Thank you, guys. Jack, congrats to you on the transition. I know you are still going to remain, you know, involved in the business, but appreciate all the help over the years. Maybe we can just start on the customer metrics a bit. So look, new customer adds flat year-over-year. Majors were down. Expansions down year-over-year. It is just hard to put context around those metrics, given the business is different than it was a year ago with the divestitures. So just how would you characterize sales execution in the quarter? Do you have comparable metrics for continuing ops? And I guess most importantly, like, what is the pipeline look like going into 2026?

And any color there would be helpful.

Jack McDonald: Yeah. We had a stronger Q3 in terms of, I would say, winning sizable major deals. When we look at the pipe, so a little bit disappointed in the Q4 bookings performance. But the pipeline for this year looks decent, particularly around some of the core knowledge management growth products where we are starting to build a healthier pipeline of larger deals. But, you know, we have got to execute against it. And, yeah, the Q4 numbers could have come in a little bit better.

David E. Hynes: Okay. And then, Mike, for you, just so EBITDA margins north of 31% the last couple of quarters obviously shows the earnings power of kind of the new leaner Upland Software, Inc. I look at the guide for 28% margins, it is obviously a bit of a step down from where the business has been running the last couple of quarters. Just talk about what is contemplated in that guide and why we would see a step down in margins from where the business has been running?

Michael D. Hill: Yeah, DJ. So, you know, as you may remember, typically our EBITDA margins through the course of the calendar year, we tend to exit the year at the highest margins, and we start the year at the lowest margins. Things like, you know, calendar-based payroll taxes kind of take a bigger hit in Q1 and Q2. So we have always had sort of a tilted, you know, if you will, calendar year ramp-up, and so that is mainly what we are seeing here this year again.

David E. Hynes: Okay. Alright. Got it. Thank you, guys.

Operator: Your next question comes from the line of Scott Randolph Berg with Needham & Company. Please go ahead.

Scott Randolph Berg: Hi, everyone. Thanks for taking my questions, and I hope you can hear me okay. It is quite windy where I am at. Two questions. First of all, Jack, why step down now? Why the change in CEO leadership today in particular? Did not know if there is anything that drove it specifically, or was it just time to maybe relax on the beach a little bit?

Jack McDonald: Well, I would say principal reason is that the business has changed. Right? At one point, we were really about growth through acquisitions. And now the focus is really more on advancing our AI-enabled product portfolio. And Sean is a product-centric and AI-focused CEO. And so I think he is the right person for the job. He knows our products and our markets and our customers. And so, you know, from an operating perspective, I think that is the kind of executive we need driving the business.

Scott Randolph Berg: Got it. Understood. And then I know you all made significant changes to your go-to-market strategy the last couple of years and with all the divestitures and whatnot. Do you think you are with those changes? Are we eighth to ninth inning? You are in full execution mode. Is there any more of that still gets some change that need to be unveiled? Just help us understand with everything that is going on as you enter 2026, is this the right, I guess, right horsepower, you know, properly framed to really drive the growth that, you know, you all are seeking?

Jack McDonald: Yeah. I mean, one of the things I wanted to get done before doing this transition was taking really the first phase of streamlining the business. And, obviously, we sold a number of assets. We got the debt refinanced. So really wanted to sort of clear the decks on that and hand over a business that is on firmer footing. It will be interesting to see what the next few years bring with AI and its impact on enterprise SaaS. I think we have got some products that can do well in this environment. We have got some other products that are going to face some headwinds.

But I like Sean’s vision, which I think aligns closely with what Dan Dohmen has been driving in the business and doing a great job on. And so, you know, I think we have got a core set of products that can do well in this environment. I think there is obviously execution that needs to happen, and, you know, we are here to support those guys.

Scott Randolph Berg: Well, understood. Thanks for taking my question.

Operator: Your last question comes from the line of Jeffrey Van Rhee with Craig-Hallum. Please go ahead.

Jeffrey Van Rhee: Great. Thanks. Thanks for taking the questions. Got a couple. First, maybe, Jack, just trying to get maybe a brief refresher on what the revenue mix is now in terms of the core capabilities. How would you bucket the revenue streams by the focus of the underlying software or the underlying capability?

Michael D. Hill: Well, Jeff, this is Mike. So roughly two-thirds to three-quarters of our revenue, maybe even a little bit more than that as I think about it, is really our growth products versus our specialized markets products. And those growth products, you know, most of those are AI-enabled. So really, the vast majority of our products are in this sort of knowledge and content management market area and using the AI winds as a tailwind as opposed to a headwind.

Jeffrey Van Rhee: Yep. Got it. And, Jack, when you look at AI, you mentioned it. I mean, it is front and center for all SaaS companies right now trying to figure out winners and losers. You know, high level, when you are looking at the SaaS landscape, and obviously we can compare to what you own, but when you look at the SaaS landscape, what models do you think are defensible, and what do you think will ultimately get consumed by AI?

Jack McDonald: Well, I think the products that we have that are systems of record I think are going to have the strongest moat. And there are opportunities there to become a key part and to be a key part of larger enterprise AI implementations. Also, the products that we have that form an enabling layer of infrastructure, that intelligence layer that Sean calls it. You think about products like BAI. And so I, you know, I look back over the past year, and it is funny, Jeff, because on the one hand, it has been a tougher market environment because of AI.

But on the other hand, we landed over the past 12 months some of the biggest bookings we have had in the past few years. When you look at major hospitality companies that are doing 40,000,000 customer touches a year and spending big on agentic AI implementations, and then bringing in products like Upland Right Answers because they need a trusted, auditable, governable knowledge layer to train that AI on so that you get the kind of output that you need. So that is one example. Or some of the work we have done with major consulting firms around global enterprise AI-driven portals for customers and for internal use.

Some of the bigger sales we have had to major hyperscalers for their own internal use, and then some of the partnerships that we have now got underway in the market with some of the brand name hyperscalers to bring the capabilities of products like Upland Right Answers and BAI into their customer base. So it is sort of a tale of two markets in that regard. So I think those products that can get positioned as enabling tech or systems of record or, you know, and in some cases, systems of process, will be more defensible, and others will not be.

Jeffrey Van Rhee: Yep. Got it. Great. I will leave it there. Thanks so much.

Operator: That concludes our Q&A session. I will now turn the call back over to Jack McDonald.

Jack McDonald: Alright. Thank you so much, and we will see you on our next earnings call.

Operator: Ladies and gentlemen, that does conclude our conference call. Thank you all for joining, and you may now disconnect. Everyone have a great day.

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