Upland Software, Inc. (NASDAQ:UPLD) Q4 2022 Earnings Call Transcript

Jack McDonald: Yes. So as a part of this investment, we are going to be adding significant head count both in marketing and demand generation and in sales. The sales head count that we’re adding will be inside sales head count. There’ll also be additional outbound SCRs. And again, our existing field sales force continues to play an important role, and it’s going to be directed at larger opportunities in the market. So that’s the picture, and you can obviously get an idea of the scale of this from the fact that we’ll be investing roughly $15 million a year in growth.

Mike Hill: And then, yes, the second part of the question was the adjusted EBITDA guide that we just put out is a 23% margin. And we talked about our long-term goal at scale at 30% to 35% margin and how long that’s going to take. Of course, it’s going to take a while for these growth investments to take effect. So we’ll be waiting on that as well as when we mention at scale, that’s going to require some further inorganic growth, some acquisitive growth as well. So this is a multiyear plan, as Jack described, and it’s going to take us a while to get to those goals. I would say probably scale ultimately is going to be sort of double the size of the company now, call it, $500 million to $600 million of revenue. But again, we’re focused on increasing margins, focused on the organic growth piece first and then adding additive inorganic growth on top of that.

Jack McDonald: Yes. I think that’s a great way to put it, Mike. Because as we drive organic growth, that marginal dollar of revenue is going to be disproportionately more profitable than the dollar before it. And again, a key part of this growth plan is obviously that core organic growth, but this is also about enabling us to capture revenue synergies from acquisitions. And so we’ve got that engine as well. And those 2 things together driving a substantial growth rate, profitable growth, that will increase margins through time.

Operator: Your next question comes from the line of Jeff Van Rhee from Craig-Hallum. Your line is open.

Jeff Van Rhee: I got several. So maybe just quickly on the $15 million, can you break that down by the OpEx lines? Just give me a better sense of how that $15 million is going to be spent. And then on the sunset of the 10% of revenues, how quickly does that come out?

Jack McDonald: So on the $15 million, it is a mix between digital marketing and inside sales and additional investment in development. I’d say the go-to-market piece of it is roughly two-thirds and the product piece is roughly one-third. In terms of the sunset assets, I think a good working assumption is roughly 24 to 36 months.

Jeff Van Rhee: And then I guess, as you look back sort of stepping back to very high level and kind of reflect on the progression of the company like I think you started the call doing that, in 2018, you had $150 million of revenues, 35% EBITDA margins. And you’re resetting here to get to similar margins but at like $500 million, $550 million in revenues. And at that time, you were growing, growing modestly targeting low single digits. And you — obviously, you’re targeting a bit higher growth. But nonetheless, you were showing some growth — modest growth and really good margins. When you reflect back, what’s changed since then to make it that much more difficult to get the growth and get the margin?