UPLD Q1 Earnings Call: Revenue Miss and Margin Expansion Amid Portfolio Reshaping

Business automation software provider Upland Software (NASDAQ: UPLD) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 10% year on year to $63.66 million. Its non-GAAP EPS of $0.23 per share was 32.7% above analysts’ consensus estimates.

Is now the time to buy UPLD? Find out in our full research report (it’s free).

StockStory’s Take

Upland’s first quarter results were driven by continued product portfolio narrowing and operational changes, as management focused on divesting lower-margin assets to sharpen its market focus. CEO Jack McDonald highlighted key wins for Upland’s AI-enabled offerings and noted that 107 new customers joined during the quarter, with 19 classified as major accounts. The company’s emphasis on recurring revenue and customer retention was apparent, as McDonald said, “93% of our revenue is recurring,” and pointed to a net dollar retention rate of 99% for the core business after recent divestitures. Management acknowledged the impact of divestitures on reported revenue, with CFO Mike Hill stating that some customer implementations allowed for earlier revenue recognition than expected, especially in the InterFAX product line, which saw increased usage.

Looking ahead, Upland’s guidance reflects an expectation for continued margin expansion and a renewed focus on high-growth, high-margin segments following recent asset sales. Management projects core organic growth turning positive in the second quarter and strengthening through the year, with adjusted EBITDA margins rising to 26% in the coming quarter and further in the second half. McDonald emphasized that “we have now turned the corner and anticipate, beginning here in Q2, positive core organic growth for the business, together with higher margins.” The company expects recurring revenue and improved product focus to support higher net retention and longer customer lifetimes, but acknowledged that macroeconomic headwinds, including potential tariff disruptions, could still affect the outlook. Continued debt reduction and disciplined investment in product development remain central to Upland’s strategy.

Key Insights from Management’s Remarks

Management attributed first quarter results to increased focus on core product lines, targeted divestitures, and strength in AI-enabled offerings, while highlighting improved operational efficiency and customer retention.

• AI product momentum: Upland saw notable expansion across its AI-powered product portfolio, with wins in sectors requiring compliance and knowledge management. The company reported new customer deals for its Panviva and RightAnswers platforms, which offer contextualized, AI-driven knowledge solutions tailored for regulated industries.
• Go-to-market realignment: Upland recently terminated its Chief Sales Officer and shifted sales responsibilities to general managers of product groups. Management stated this change enhances focus and efficiency, aligning sales efforts more closely with individual product lines and market needs.
• Divestiture impact: The sale of Upland’s mobile messaging product lines post-quarter-end sharpened the company’s focus on higher-margin, higher-retention products. Management noted that this move increased the net dollar retention rate for the core business to 99% while reducing reported revenue guidance.
• Product development leverage: The completion of Upland’s India-based development center at the end of last year has improved R&D productivity, allowing for continued product enhancements without increasing total R&D spend as a percentage of revenue.
• Operational discipline: Upland used proceeds from divestitures and free cash flow to pay down $34.2 million in debt during the quarter, with net leverage expected to decline further as cash generation continues. The company’s operational changes contributed to a significant improvement in adjusted EBITDA margin.

Drivers of Future Performance

Upland’s outlook is shaped by its renewed product focus, expanded AI capabilities, and continued operational streamlining, with margin expansion expected to offset revenue headwinds from divestitures.

• Refined portfolio strategy: Management expects the more focused product set—centered on AI-enabled solutions for compliance-heavy industries—to drive higher organic growth and retention. The company projects core organic growth rates of 2% in the next quarter, with internal targets for further acceleration.
• Margin expansion drivers: Divestitures of lower-margin businesses and increased development efficiency are expected to raise adjusted EBITDA margins to 26% in the second quarter and higher levels in the second half of the year, supported by stable R&D spend and operational discipline.
• Risks and uncertainties: Management flagged the potential for macroeconomic disruptions—such as new tariffs—to slow improvements in organic growth. Additionally, the transition to a more streamlined sales structure introduces some execution risk as general managers take on broader responsibilities.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) whether Upland’s core organic growth rates accelerate as projected, (2) if margin expansion materializes amid ongoing cost discipline and a streamlined product portfolio, and (3) the effectiveness of the decentralized sales model in driving new and expanded customer relationships. Additional attention will be given to execution of AI product enhancements and the company’s ability to sustain high net dollar retention rates.

Upland currently trades at a forward price-to-sales ratio of 0.3×. Should you double down or take your chips? The answer lies in our full research report (it’s free).

Now Could Be The Perfect Time To Invest In These Stocks

Donald Trump’s victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs.

While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today.