Upland (UPLD) Q2 Revenue Falls 23%

Upland Software (UPLD 9.76%), a cloud-based software provider, reported quarterly results showing significant changes due to strategic business divestitures and a sharpened focus on core operations. The second quarter earnings release, published on July 31, 2025, covers results for the period ended June 30. GAAP revenue of $53.4 million slightly topped analyst expectations of $53.2 million, while non-GAAP earnings per share reached $0.15. Year-over-year, revenue dropped as the company embraced a strategy of narrowing its business scope to boost margins and core organic growth. Free cash flow declined to $2.7 million from $5.2 million a year earlier. Overall, the quarter marked another step in Upland's transition to a leaner, higher-margin model even as top-line metrics continued to face pressure from divestitures.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

About Upland Software’s Business and Strategic Focus

Upland Software delivers cloud-based tools that help organizations manage projects, documents, and customer engagement workflows. Upland serves customers ranging from large global corporations and government agencies to small and medium-sized businesses, providing solutions for information and knowledge management, marketing automation, and customer support. The company’s product portfolio centers around both recurring software subscriptions and professional services, offering clients the ability to increase operational efficiency through the cloud.

In the last two years, Upland has heavily emphasized streamlining its business. Management concentrated resources on product families where it has a strong competitive edge, particularly by integrating artificial intelligence (AI) features across its applications. Its main focus areas include driving product innovation, customer retention, and operating a stable recurring revenue model. The company’s success hinges on sustaining high renewal rates, launching new AI-driven features, and maintaining a broad, stable customer base without exposure to any single large client. Upland’s “land-and-expand” strategy targets both cross-selling to existing customers and steady new account growth.

Quarter in Review: What Happened and Why

The period marked a continuation of Upland's transformation strategy, with notable impacts visible in the reported results. GAAP revenue declined by 23% year-over-year as the company finished a series of divestitures to focus on high-margin core businesses. Subscription and support revenue, which makes up the bulk of Upland’s income through predictable, recurring payments, fell at the same rate (23%). According to management, these declines directly reflect the planned portfolio slimming and do not indicate a loss in core business momentum.

Despite the revenue drop, adjusted EBITDA remained steady in absolute terms, matching the prior year’s total at $13.6 million (non-GAAP). This figure, which stands for earnings before interest, taxes, depreciation, and amortization -- adjusted for non-recurring costs -- is watched closely in software companies to gauge core profitability. The Adjusted EBITDA margin jumped from 20% in Q2 2024 to 25% in Q2 2025, demonstrating improved efficiency as less profitable business lines exited the portfolio. Supporting cost reductions, Upland trimmed operating expenses, particularly in sales and marketing and research and development, reflecting a tighter spending discipline. Cash generated from operations (GAAP operating cash flow) and free cash flow, both indicators of the company’s ability to fund itself without external financing, softened considerably, highlighting the transitional pressures still at work.

Product innovation saw measurable progress with deeper AI integration across several software offerings. Notably, the company’s Panviva knowledge management platform, InterFAX cloud fax service, and Adestra marketing automation tool all launched or enhanced features during the quarter, with Adestra introducing AI-powered subject line updates. For example, Adestra introduced AI-driven subject line updates and improved integration with third-party platforms like Salesforce. Upland secured 68 performance badges in G2’s Summer 2025 software marketplace report, underscoring recognition for its AI initiatives by real-world software buyers. These updates are crucial as the software-as-a-service (SaaS) sector increasingly competes on intelligence, integration, and automation.

Customer metrics offered a mixed picture. Upland cited the addition of 100 new customers, including 12 major accounts, and expanded relationships with 263 existing clients. While these figures demonstrate ongoing customer momentum, they slightly trail the pace set earlier this year and do not yet show a clear upward trend. Management previously reported a net dollar retention rate, a non-GAAP measure of recurring business stability, of 96% as of December 31, 2024, with the pro forma figure for the current business at 99%. Over 1,100 enterprise customers now rely on Upland, a sharp reduction from the “over 10,000” cited before recent divestitures, reflecting a narrowed business scope but still a solid, diverse base.

Importantly, much of Upland’s business remains rooted in software subscriptions, ensuring visibility on future revenue. For the year ended December 31, 2024, approximately 90% of recurring revenue came from major accounts, defined as customers with at least $25,000 annually in contracted subscriptions. The recurring model helps smooth earnings and supports future planning, but shrinking gross revenue adds pressure to demonstrate true growth in the new core product set. Initiatives to expand third-party integrations and marketplace presence also remain a growth priority for management.

Several material one-time items affected results. The quarter included $6.9 million in divestiture expenses, as well as a $2.5 million GAAP impairment charge related to portfolio adjustments. These costs contributed to the company’s GAAP net loss, which deepened to $13.0 million. Refinancing activity after the end of Q2 2025 saw Upland extend its debt maturity to July 2031 and pay down $18 million in principal. The company established a new revolving credit facility as part of a $240 million term loan arrangement, providing greater balance sheet flexibility moving forward.

Looking Forward: Guidance and Key Factors to Watch

Management provided guidance for both the current quarter and the full fiscal year. For Q3 2025, Upland expects reported total revenue in the range of $46.8 million to $52.8 million, with subscription revenue contributing the bulk. Adjusted EBITDA guidance for Q3 2025 is between $14.5 million and $17.5 million, representing possible improvement in margin. At the midpoint, reported revenue would be down 25% compared to the prior-year quarter, mainly due to the divestiture effect, but adjusted EBITDA margin would expand to a projected 32%.

For FY2025, Upland forecasts reported total revenue of $211.8 million to $223.8 million. Adjusted EBITDA is expected in the range of $55.8 million to $61.8 million for FY2025, with Adjusted EBITDA margin rising to a projected 27% for FY2025. This margin expansion—an increase of 700 basis points in Adjusted EBITDA margin over the prior year (from 20% in FY2024 to 27% in FY2025)—is a core part of the company’s new financial identity. The leadership team highlights a return to positive core organic growth, with pipeline momentum building and internal forecasts showing continued improvement. The transition to a smaller, more profitable company is close to completion.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.