Upland Software Snaps up Panviva; Raises Guidance

Upland Software, Inc. (UPLD) acquired Panviva Pty Limited to boost its knowledge management capabilities.

Upland enables businesses to accelerate digital transformation with a powerful cloud software library. Panviva, a knowledge-management delivery platform, provides on-demand, real-time answers for employees and customers that reduce onboarding time and error rates in important processes.

Per the terms of the deal, Upland paid $19.8 million in cash and will pay another $3.5 million in cash within a year, subject to indemnification claims. The company utilized its available cash in hand to fund the transaction. (See UPLD stock chart on TipRanks)

The addition of Panviva will enhance Upland’s presence within the knowledge management market, giving customers improved contact center productivity in regulated industries, such as utilities, healthcare, and financial services.

Upon completion, Upland forecasts to generate annual recurring revenue of approximately $7.5 million. The revenue estimate is subject to reductions of $2 million for deferred revenue discounts for the remaining part of 2021, under GAAP purchase accounting.

Furthermore, the integration of Panviva is expected to generate at least $3.4 million in Adjusted EBITDA every year.

Upland CEO Jack McDonald commented, “There is robust growth in this (knowledge management) market, and Panviva is a strong strategic fit with Upland’s existing product library, enabling us to offer our customers knowledge-guided solutions, that address their specific needs.”

Raised Guidance

Based on expected synergies from the deal, management raised the financial guidance for FY2021. Revenues are forecast to be in the range of $300.8 to 312.8 million, driven by Subscription and Support revenue in the range of $287.1 to $297.1 million.

The company now forecasts adjusted EBITDA in the range of $94.8 to $100.8 million, while the adjusted EBITDA margin is expected to be 32%. However, guidance for the second quarter ended June remains unchanged.

Raymond James analyst Brian Peterson maintained a Buy rating on the stock with a price target of $55 (31.3% upside potential).

Peterson said, “With UPLD already meeting its pace of 3-5 deals per year in 2021, investors could see value creation in the $6-10 range over the next 12 months. This looks attractive for a stock that’s recently dipped into the low $40s. We would encourage investors to look at a small-cap story with company-specific catalysts for value creation.”

Overall, the stock has a Strong Buy consensus rating based on 5 unanimous Buys. The average Upland Software analyst price target of $56 implies 33.7% upside potential from current levels. Shares of UPLD have jumped 25% over the past year.

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