Upland Software announces acquisition of RightAnswers, raises 2017 guidance and raises adjusted EBITDA margin target to 40%
Upland Software, Inc. (Nasdaq: UPLD), today announced that it has acquired RightAnswers, Inc., an award-winning, cloud-based knowledge management system. Upland today also raised its 2017 guidance to reflect the RightAnswers acquisition and raised its long-term Adjusted EBITDA margin target to 40%.
“We are pleased to welcome RightAnswers and their valued customers and partners to Upland,” said Jack McDonald, Chairman and CEO of Upland Software. “This strategic acquisition is a great product addition for current Upland customers looking to enhance their customer service, IT support, and enterprise-wide collaboration capabilities.”
“We’re excited to join Upland both because of the great product fit, and because of our shared vision of 100% customer success,” said Jeff Weinstein, President and CEO of RightAnswers. “The opportunity to leverage the UplandOne operating platform to amplify our product innovation, service, and support make this a great transaction for RightAnswers’ customers and partners,” said Mark Finkel, Chairman and Founder of RightAnswers.
The purchase price paid for RightAnswers was $17.2 million in cash at closing, net of cash acquired, and a $2.5 million cash holdback payable in one year (a portion of which is available to satisfy indemnification claims). The foregoing excludes any potential future earn-out payments tied to additional performance-based goals. Upland expects the acquisition to generate annual revenue of approximately $9 million, subject to reductions for a deferred revenue discount as a result of GAAP purchase accounting. The acquisition is within Upland’s target range of 5-8x pro forma Adjusted EBITDA and will be immediately accretive to Upland’s Adjusted EBITDA per share.
Upland today also announced that it has raised its full year 2017 guidance to reflect the RightAnswers acquisition, raising revenue, recurring revenue, and Adjusted EBITDA guidance ranges. The increase in 2017 revenue guidance below is net of an estimated $1.7 million reduction for a deferred revenue discount as a result of GAAP purchase accounting and all guidance adjustments are prorated for an effective closing date of April 30, 2017.
For the full year ending December 31, 2017, Upland expects reported total revenue to be in the range of $87.0 to $91.0 million including recurring revenue in the range of $76.0 to $79.0 million, for growth in recurring revenue of 19% at the mid-point over the year ended December 31, 2016. For the full year ending December 31, 2017, Adjusted EBITDA is expected to be in the range of $26.0 to $29.0 million, for an Adjusted EBITDA margin of 31% at the mid-point, representing growth of 118% at the mid-point over the year-ended December 31, 2016.
Finally, Upland today raised its long-term Adjusted EBITDA margin target from 35% to 40%.
“We are today raising our long-term Adjusted EBITDA margin target to 40% to reflect the increased customer loyalty and operating efficiency we are seeing with UplandOne and as we scale,” said Mr. McDonald.