UPLD provides cloud-based enterprise work management software. Basically, this software enables companies to plan, manage, and execute projects and work. The use of manual processes and traditional tools, such as paper-based techniques, spreadsheets, and email, as well as legacy on-premise enterprise systems, to manage knowledge work can lead to siloed and disparate information, limited visibility and transparency, poor collaboration among teams, lost productivity, and other issues. Upland’s suite of products for managing different aspects of operations, including IT, marketing, finance, and professional services, offers organizations more efficient solutions than were available with those traditional processes.
Adestra, meanwhile, develops and provides email marketing and automation software. More specifically, its platform helps over 400 brands to engage with customers, helping them to better understand what drives their decision-making and buying processes. This product seems like a natural fit for UPLD, which will be combining Adestra with its mobile messaging, customer engagement, and knowledge management solutions. UPLD will now have a fully-integrated, multi-channel suite that addresses the $5.9 bln customer experience market, which is expected to grow by 23% per year by 2022.
From a company-specific financial perspective, the acquisition is expected to provide $18 mln in annualized revenue, of which $16.7 mln will be recurring in nature. Furthermore, UPLD paid a very reasonable price for the company, as management stated in the related press release that the acquisition landed in its target range of 5-8x pro forma Adjusted EBITDA. As a result, UPLD believes that the acquisition will be immediately accretive to Adjusted EBITDA per share, while generating at least $8.0 mln in Adjusted EBITDA annually once fully integrated.
As mentioned above, UPLD has made acquisitions a key component of its growth strategy. Here is a quick run-down of its recent buy-outs:
- October 3, 2018: The company bought Rant & Rave, a provider of cloud-based customer engagement solutions, for $58.5 mln. Upland expected the acquisition to generate annual revenue of about $21.0 mln, of which $20.5 mln is recurring. Also, the acquisition was expected to be immediately accretive to Adjusted EBITDA per share.
- June 28, 2018: UPLD acquired RO Innovation for $12.5 mln. RO is a cloud-based customer reference solution for creating, deploying, managing, and measuring customer reference and sales enablement content. UPLD expected the acquisition to generate annual revenue of approximately $6.0 mln, of which $5.0 mln is recurring, and it expected the acquisition to be immediately accretive to Adjusted EBITDA per share.
- March 22, 2018: UPLD acquired InterFAX Communications, based in Dublin, Ireland, for $37.5 mln. This was UPLD's first acquisition in Europe. InterFAX generated $15 mln in annual revenue.
A common theme among these acquisitions is that they are
accretive, and therefore, UPLD has been steadily increasing its financial
guidance throughout the year. On that note, this morning, it again raised its
outlook, this time moving its Q4 forecast to revenue of $42.5-$44.5 mln versus
its original expectation for $41.8-$43.8 mln. Adjusted EBITDA is now expected
to be $15.6-$16.4 mln, up from $15.3-$16.1 mln. While these are only modest
increases, it is important to note that the Adestra acquisition likely will not
be fully integrated until later in the quarter -- or beyond that.
This acquisition looks like another winner for the company. It's a good strategic fit, and UPLD paid an attractive price for it, enabling it to generate positive EBITDA out of the chute. Although it is typically preferable to see a cloud software company generating most of its growth through organic means, UPLD has put together a successful track record of making acquisitions, bolstering its growth.