Upland Software (UPLD) Q3 2026 Earnings Call: Kundenabwanderung belastet Umsatz, Margenplan schreitet voran

Wichtigste Erkenntnisse

• Upland Software verzeichnete im dritten Quartal 2026 einen Umsatz von 47,5 Millionen US-Dollar, was einem Rückgang von 6 % im Vorjahresvergleich entspricht, jedoch über dem Mittelwert der Prognosespanne von 45,7 bis 48,7 Millionen US-Dollar lag.
• Die Umsätze aus Abonnements und Support gingen um 5 % auf 45,3 Millionen US-Dollar zurück und machten 95 % des Gesamtumsatzes aus. Das organische Kernwachstum lag bei minus 3,9 %.
• Das bereinigte EBITDA belief sich auf 12,6 Millionen US-Dollar bei einer Marge von 27 %. Die Marge verbesserte sich gegenüber 26 % im zweiten Quartal 2026, sank jedoch im Vergleich zu den 32 % des Vorjahreszeitraums.
• Drei Fälle von Kundenabwanderung belasteten das Quartal und trugen zu einem vorsichtigeren Ausblick für das vierte Quartal bei. Die Unternehmensführung führte die Kündigungen auf Kostensenkungen auf Kundenseite sowie auf die Stilllegung von Altanwendungen im Zuge der Umstellung auf KI-gestützte Anwendungsfälle zurück.
• Upland erwirtschaftete einen freien Cashflow von 2,7 Millionen US-Dollar und tilgte im Quartalsverlauf 4,2 Millionen US-Dollar an Festdarlehen. Der Nettoverschuldungsgrad lag zum Quartalsende bei 3,7x.
• Die Unternehmensleitung strebt für das erste Halbjahr 2028 eine bereinigte EBITDA-Marge von rund 35 % an und setzt dabei Schwerpunkte auf Kundenbindung, den Ausbau der Vertriebskanäle, KI-gestützte Anwendungsfälle sowie den weiteren Schuldenabbau.

Wichtigste Finanzdaten

In den ersten neun Monaten des Jahres 2026 belief sich der operative Cashflow auf 13,7 Millionen US-Dollar und der freie Cashflow auf 13,5 Millionen US-Dollar. Im selben Zeitraum tilgte Upland Schulden in Höhe von 13,1 Millionen US-Dollar.

Die abgegrenzten Umsatzerlöse beliefen sich zum Quartalsende auf 69,7 Millionen US-Dollar. Die verbleibenden Leistungsverpflichtungen beliefen sich auf insgesamt 164,4 Millionen US-Dollar, von denen voraussichtlich rund 65 % in den folgenden 12 Monaten als Umsatz erfasst werden.

Geschäftliche und operative Entwicklung

Upland gewann im Quartal 77 Kunden hinzu, darunter 10 Großkunden. Zudem baute das Unternehmen die Beziehungen zu 185 Bestandskunden aus, darunter 14 wesentliche Vertragserweiterungen.

Das Unternehmen hat sein Portfolio in drei Bereiche unterteilt: Wissens- und Contact-Center-Management, Automatisierung des Content-Lebenszyklus sowie Branchenlösungen. Nach Angaben der Unternehmensführung bedienen diese Bereiche mehr als 1.100 Unternehmenskunden und werden gezielt auf KI-gestützte Workflows für Unternehmenswissen, Inhalte und Daten ausgerichtet.

Im Bereich Wissens- und Contact-Center-Management hob das Management die Nachfrage nach verifiziertem, berechtigungsbasiertem Wissen hervor, das KI-Agenten unterstützen kann. Upland wurde im Juli 2026 in Gartners Magic Quadrant for Customer Service Knowledge Management Systems aufgenommen.

Im Bereich Automatisierung des Content-Lebenszyklus automatisierte der Einsatz einer KI-gestützten intelligenten Erfassungslösung für einen Kunden aus dem Gesundheitswesen 94 % von Millionen verarbeiteter Patientendokumente. Die Unternehmensleitung nannte dieses Projekt als Beleg für das Potenzial eines partnergeführten Vertriebs.

Zu den Erfolgen bei vertikalen Branchenlösungen zählte ein neuer ARR-Kunde im sechsstelligen Bereich bei einer großen kanadischen Polizeibehörde für Uplands Plattform zur Verwaltung von Telekommunikationsausgaben. Zudem vereinbarte das Unternehmen eine ARR-Erweiterung im sechsstelligen Bereich mit einer Big-Four-Wirtschaftsprüfungsgesellschaft, welche die Plattform BA Insight nutzt.

Upland ernannte Carahsoft im August zu seinem Master Government Aggregator und eröffnete damit den Vertrieb von vier Produkten im öffentlichen Sektor über das Reseller-Netzwerk und die Rahmenverträge von Carahsoft.

Prognose der Unternehmensleitung

Im Mittelwert entspricht die Umsatzprognose für das vierte Quartal einem Rückgang von 6 % gegenüber dem Vorjahr. Die Unternehmensleitung grenzte ihre Spannen für das Gesamtjahr ein, um den Auswirkungen der Kundenabwanderung Rechnung zu tragen, hielt jedoch an ihren Rentabilitätserwartungen fest.

Für 2027 erwartet die Geschäftsführung, dass Upland weiterhin einen soliden positiven freien Cashflow generiert, eine Umsatzstabilisierung durch bessere Kundenbindung und Vertriebspartnerschaften anstrebt, die Margen bei greifenden Kostensenkungsmaßnahmen ausweitet und in jedem Quartal kontinuierlich Schulden tilgt. Eine offizielle Prognose für 2027 wird zusammen mit den Ergebnissen für das vierte Quartal und das Gesamtjahr 2026 im März erwartet.

Der Dreiphasenplan des Unternehmens sieht eine Verschlankung und den Schuldenabbau bis Anfang 2027 vor, gefolgt von einer Stabilisierung und Expansion im Jahresverlauf 2027 sowie Wachstum durch neue KI-bezogene Anwendungsfälle im Jahr 2028 und darüber hinaus. Ein konkretes Umsatzziel für 2028 gab die Unternehmensleitung nicht bekannt.

Risiken und wichtige Beobachtungspunkte

Drei Fälle von Kundenabwanderung belasteten die Ergebnisse des dritten Quartals sowie den Ausblick für das vierte Quartal. Die Unternehmensleitung führte dies darauf zurück, dass finanziell unter Druck stehende Kunden ihre interne Anwendungsnutzung reduzierten und Kunden im Zuge der Einführung KI-gestützter Workflows Altanwendungen stilllegten.

Der Umsatz mit Kernprodukten ging im Vorjahresvergleich um 2,4 Millionen US-Dollar zurück; dies umfasste einen Rückgang von 1,8 Millionen US-Dollar beim Umsatz aus Abonnements und Support sowie von 0,6 Millionen US-Dollar bei den Professional Services. Weitere 0,6 Millionen US-Dollar des gesamten Umsatzrückgangs entfielen auf im Jahr 2025 veräußerte Produktlinien und auslaufende Vermögenswerte.

Die Kosten für Cloud-Hosting und Recheninfrastruktur stiegen, was zum Rückgang der Bruttomarge von 77 % auf 76 % beitrug.

Upland sieht sich zudem weiterhin mit einer Nichteinhaltung der Nasdaq-Börsenzulassungskriterien konfrontiert. Das Unternehmen hat bis zum 27. Januar 2027 Zeit, die Vorgaben des Nasdaq Global Market bezüglich eines Mindestmarktwerts der öffentlich gehaltenen Aktien von 15 Millionen US-Dollar wieder zu erfüllen. Das Management erklärte, es erwarte nicht, dass eine Änderung des Notierungsstatus die operative Geschäftstätigkeit oder die Beziehungen zu den Stakeholdern beeinträchtigen werde.

Wichtigste Punkte aus der Fragerunde für Analysten

Needham-Analyst Scott Berg erkundigte sich danach, wie Upland im Jahr 2028 auf den Wachstumspfad zurückkehren will. CEO Sean Nathaniel erklärte, die Chancen hingen davon ab, dass Kunden von bisherigen Arbeitsabläufen zu KI-gestützten Anwendungsfällen übergehen, bei denen Upland sie im Bereich Unternehmenswissen, Inhalte und Daten unterstützen könne. Er nannte keine konkreten Wachstumsziele und verwies darauf, dass sich im Zuge der Weiterentwicklung der Pläne für 2027 eine klarere Richtung abzeichnen dürfte.

Berg fragte außerdem, warum das Unternehmen sein bereinigtes EBITDA-Margenziel von rund 35 % nicht früher erreichen könne. CFO Jennifer Simon erklärte, die Kostenoptimierung müsse wohlüberlegt dosiert werden, um das Geschäft nicht zu gefährden. Upland wäge Kostensenkungen sorgfältig gegen Kundenbindung, KI-gestützte Chancen und den Ausbau der Vertriebskanäle ab; weitere Details würden bei der Vorlage der Prognose für 2027 im März erwartet.

Vollständiges Transkript der Telefonkonferenz zu den Quartalsergebnissen

Vollständiges Transkript der Telefonkonferenz

Ausführungen des Managements

Operator

Good morning, and welcome to the Upland Software Third Quarter 2026 Earnings Conference Call. My name is John, and I will be coordinating your call today. A question-and-answer session will follow the formal remarks. As a reminder, this conference is being recorded.

I will now turn the call over to the company's Chief Financial Officer, Jennifer Simon, to begin. Jennifer, please go ahead.

Jennifer Simon

Good morning. Thank you for joining us for today's conference call and review of our results for the third quarter ended September 30, 2026. Joining me today to review the results is Upland's President and CEO, Sean Nathaniel.

Yesterday afternoon, Upland issued its earnings release. As a reminder, the earnings release and statements made during today's call will include statements that are considered forward-looking within the meanings of the securities laws. A detailed discussion of the risks and uncertainties associated with such statements is contained in our periodic reports filed with the SEC. The forward-looking statements made today are based on our views and assumptions and on information currently available to Upland management. We do not intend or undertake any duty to release publicly any updates or revisions to any forward-looking statements.

On this call, we will refer to non-GAAP financial measures that, when used in combination with GAAP results, provide Upland management with additional analytical tools to understand its operations. Upland has provided reconciliations of non-GAAP measures to the most comparable GAAP measures in our press release announcing our financial results, which is available on the Investor Relations section of our website. Please note that we are unable to reconcile any forward-looking non-GAAP financial measures to their directly comparable GAAP financial measures because the information which is needed to complete a reconciliation is unavailable at this time without unreasonable effort.

And with that, I'll turn the call over to Sean. I will return later to discuss the Q3 financial results and updated financial outlook in more detail. Sean, over to you.

Sean Nathaniel

Thank you, Jennifer, and good morning, everyone. It's nice to be speaking with you today. It's been several quarters since Upland last hosted an earnings call and restoring a regular cadence of communication with our shareholders is a deliberate choice. Now, I returned to Upland as CEO on May 1 with an unusual vantage point. I know this company from the inside and have spent several of the last years working on the problem our customers most need solved. From 2013 to 2019, I was Upland's Chief Technology Officer and part of the leadership team that took Upland public in 2014 and the leader of our workflow automation solutions business, which exceeded $100 million in ARR when I left. Most recently, I was CEO of an enterprise data management company, helping some of the world's largest organizations get their unstructured content under control. I know our products, I know many of our customers personally, and I know what it takes to make enterprise data ready for the AI age.

So, let me start with where Upland is today. Our software is mission-critical. It's embedded inside the daily workflows of more than 1,100 enterprise customers across knowledge management, content lifecycle automation and vertical-specific business processes. That position is our foundation. We view Upland as the intelligence layer for the enterprise, one that unifies and contextualizes enterprise knowledge, content and data that our customers already trust us with and turn it into actionable AI-powered outcomes for every human and every agent. We've organized our portfolio into 3 product groupings, each aligned to the market and customers it serves. The product groupings are knowledge and contact center management, content lifecycle automation and vertical solutions. As I noted in my letter to shareholders in July, already being inside these accounts is a rare advantage in the AI era. Our customers' data, along with their valuable metadata, decades of business rules and permissions, already live in Upland products.

Rebuilding workflows and institutional knowledge to adopt AI can be a risky and costly proposition. Many are turning to us to activate what they already have to power AI and agentic strategies, and we're well positioned to help them do just that. I also want to remind everyone of how we got here. Upland's first chapter was built through acquisitions at attractive multiples with the business run for margin. That model served us well until multiples rose and niche consolidators crowded the market. Our second chapter focused on finding organic growth levers across a wide portfolio of acquired businesses. The chapter we're in now is about aligning to where the market is headed. Having HGGC as a long-term sponsor since 2022 gives us a stable foundation and the room to make deliberate choices. We have narrowed and focused our portfolio. And in the second quarter, we positioned our business around emerging AI use cases where we have a demonstrated right to win.

So, let me lay out our road map for this chapter and how it creates value for our stakeholders. We're executing a 3-phase plan. Phase 1 is simplify and delever, which runs from now through early 2027. It covers reorganizing into our product groupings, rightsizing our cost structure, tiering the portfolio so that each product gets the investment that matches its role and paying down debt. Phase 2 is stabilize and expand in 2027. The focus shifts to retention, ramping our channel partnerships, selling AI capabilities into our installed base and expanding adjusted EBITDA margins to our target of approximately 35% in the first half of 2028.

Phase 3 is growth in 2028 and beyond through expansion of the new AI-related use cases. Underpinning this plan are 4 operational pillars. They build directly on the priorities I laid out in my July shareholder letter, and they will guide our work for the rest of the year and into 2027.

First, we need to protect the current customer base and deepen trusted relationships. Retaining and expanding with existing customers is every bit as important as winning new logos. It's where AI gives us an advantage because deploying AI into an account we already serve costs a fraction of what new entrants pay to win that account. I've spent much of my first 6 months engaging with customers and partners directly, and we're expanding executive outreach across our entire installed base.

Second, we need to win new logos with emerging use cases, concentrating on areas where we have proven differentiation such as knowledge for AI agents and document AI in financial services and healthcare. Third, we need to scale our reach through channel partnerships. We see them as a primary near-term growth lever. Partners are often involved in customer initiatives from the earliest stages of exploration, and they bring early access, deep domain expertise and trusted customer relationships. As a result, they bring us into opportunities in the middle of the funnel rather than the top, which shortens sales cycles and puts our product in front of buyers we couldn't reach efficiently on our own. For example, in August, we named Carahsoft our master government aggregator, opening the public sector to 4 of our products through its reseller network and contract vehicles.

And fourth, expanding margins by reimagining how we operate with AI so that we continue to generate the cash to keep paying down debt.

Now on to the third quarter. Total revenue was $47.5 million, above the midpoint of our guidance range of $45.7 million to $48.7 million. Subscription and support revenue was $45.3 million, also above the midpoint of guidance. Adjusted EBITDA was $12.6 million, essentially at the midpoint of our $11.9 million to $13.4 million range for an adjusted EBITDA margin of 27%, which was a quarter-over-quarter improvement from 26%. We generated positive free cash flow again this quarter, and we continue to pay down debt. We also added 77 new customers in the quarter, including 10 new major customers, and we expanded our relationship with 185 existing customers, 14 of which were major expansions.

Equally, this quarter was also affected by 3 customer churn events. They came from 2 sources. First, some customers under financial pressure cut costs significantly, which led to large reduction in their use of internal applications. The second, as customers shift from legacy use cases to AI-driven use cases, we grow with them where our AI capabilities fit, but we can lose revenue where legacy applications are retired. This is reflected in a more measured fourth quarter outlook Jennifer will walk you through. But even with this impact, we delivered adjusted EBITDA at the midpoint of our guidance range and protecting the base, our first pillar is designed for exactly this situation.

Now let me turn to some highlights from each of our product groupings. In knowledge and contact center management, AI is bringing knowledge management back to the center of the enterprise. We were recently recognized in the Magic Quadrant for Customer Service Knowledge Management Systems published by Gartner in July 2026. The report evaluates vendors in the Customer Service Knowledge Management Systems, or CSKMS market. And according to the report, the CSKMS market is undergoing a structural shift from passive content repositories to active AI-driven reasoning layers powered by machine-readable knowledge. We have an important part to play in that shift. And we see that shift in many of our customer conversations every day.

The use case is moving from equipping human agents to equipping AI agents. In fact, one of the largest enterprises in the world now uses Upland as their verified knowledge source that ground its AI agents so that the answers those AI agents give are accurate, current and approved.

Moving to content lifecycle automation. We're seeing strong results when we combine our technology with partners that bring deep customer relationships and industry expertise. A great example is a major healthcare win where our AI-powered intelligent capture solution automated the intake, classification and routing of complex patient documents that previously required manual review.

By getting critical information into the right workflow more consistently and efficiently, the solution supports better patient safety while automating 94% of the millions of patient documents processed. It's a strong example of how our AI innovation and commitment to the channel can deliver measurable customer outcomes. In vertical solutions, a strong example this quarter was a new 6-figure ARR logo win with a large Canadian police force for our telecom expense management platform.

The Canadian public sector is a core vertical for this product, and the win shows our strategy at work. We lead from established domain strength to help government agencies manage and reduce their telecom spend, an area where we've helped Canadian government customers save millions. We're also seeing momentum with large enterprise customers. In fact, this quarter, we signed a 6-figure ARR expansion with a Big Four professional services firm with our BA Insight platform. Professional services firms are a core market for this product, and the win is another sign of our strategy at work. We start from established domain strength in secure permission-aware search and make the retrieval foundation for our customers' internal AI platform. Their employees get answers drawn from content across multiple systems and every result respects that individuals access rights.

And customers continue to validate our products. We earned 43 badges in G2's Fall 2026 market report that's based on customer reviews. RightAnswers and Panviva, our AI-powered knowledge management solution earned the most badges and BA Insight and Qvidian were also recognized.

Before I hand the call to Jennifer, I want to officially introduce her to our shareholder base. Jennifer joined us as CFO in mid-August, and she brings more than 20 years of finance leadership across software, technology and private equity-backed companies. She has led finance functions through growth, cost discipline and capital structure transformation at companies of every size, so she knows what scale looks like at both ends. Her background and experience will greatly benefit Upland as we move into this next chapter.

I will now turn the call over to Jennifer to further discuss our financial performance and outlook in even more detail. Jennifer?

Jennifer Simon

Thank you, Sean, and good morning, everyone. I am glad to be here. I have been at Upland for about 11 weeks, and I would like to share why I joined and what I've seen so far. Three things stood out. First, this business has a strong balance sheet, produces strong free cash flow and is servicing its debt at an accelerated pace. We have paid down our debt by approximately 6% over the last 12 months through a combination of required payments and additional voluntary prepayments. Second, a clear cost opportunity, which is where Sean's fourth pillar, reimagining how we operate with AI comes in. And third, our durable recurring revenue base.

Subscription and support revenue is 95% of our total revenue, and much of it comes from products that work as systems of record for our customers. I am focused on bringing financial discipline to all 3.

With that, let me walk through our third quarter results. Unless noted otherwise, all comparisons are to the third quarter of 2025. Total revenue was $47.5 million, down $3 million or 6% year-over-year and above the midpoint of our guidance range. Subscription and support revenue was $45.3 million, down 5% and made up of 95% of total revenue. Of the $3 million top line decrease, approximately $0.6 million came from product lines we divested in 2025 and from sunset assets, which are nonstrategic products and contracts we are winding down by design. The remaining $2.4 million came from our core products, $1.8 million in subscription and support revenue and $0.6 million in professional services, both driven by the increased churn in certain core products that Sean described.

Core organic growth was negative 3.9% in the third quarter. Please note, this is also the last quarter we plan to report our core organic growth rates as we designed this metric to show the underlying trend in the business where we were divesting product lines and winding down sunset assets. Our divestitures were completed in 2025 and starting in the fourth quarter, our year-over-year comparisons will no longer include any revenue from divested businesses. Sunset assets are also now a small part of the business at about $1.7 million of revenue this quarter. Gross profit was $36 million for a gross margin of 76% compared to 77% a year ago. Cost of revenue was roughly flat at $11.5 million, while revenue declined. With our core products, lower amortization of intangibles was offset by higher cloud hosting and computing infrastructure costs.

Turning to operating expenses. Total operating expenses, including depreciation and amortization, were $30.7 million, down $2.8 million or 8% from a year ago. Breaking that down further, sales and marketing expense was $9 million, down $0.7 million or 8%, primarily reflecting the disciplined cost management and continued alignment of our resources with the needs of our core product lines. R&D expense was $7.8 million, essentially flat. We are holding our investment in product development steady while using AI to get more out of every dollar. As Sean noted in his letter, our team recently finished an R&D project in about 8 days that would typically take 9 to 12 months.

General and administrative expense was $8.4 million, down $0.4 million or 4%. That reflects $1.4 million lower noncash stock-based compensation, partly offset by higher professional fees. Depreciation and amortization was $5.5 million, down $0.9 million, mainly from lower amortization of intangible assets tied to sunset assets. Taken together, income from operations was $5.3 million, essentially unchanged from a year ago as lower operating expenses offset the impact of $3.0 million less revenue.

Adjusted EBITDA was $12.6 million, essentially at the midpoint of our guidance range for a margin of 27% compared to $16 million or 32% a year ago. The year-over-year decline primarily reflects the impact of lower revenue. Sequentially, our adjusted EBITDA margin improved from 26% in the second quarter of 2026 to 27% in the third quarter.

Below operating income, net interest expense was $5.1 million, up $0.9 million from a year ago. That increase is entirely noncash. It reflects $1.3 million of higher noncash interest expense tied to the interest rate swaps we exited in 2025. Cash interest expense actually declined by $0.4 million because of our lower debt balance. GAAP net loss was $0.5 million compared to a net loss of $1.1 million a year ago. After preferred stock dividends, net loss attributable to common shareholders was $2.0 million or $0.67 per share. Non-GAAP net income was $6.4 million compared to $10.8 million a year ago.

Turning to cash flow and the balance sheet. Operating cash flow was $2.8 million and free cash flow was $2.7 million compared to $6.9 million and $6.7 million a year ago. Third quarter cash flow was lower year-over-year, primarily reflecting the $5.4 million benefit from the sale of an interest rate swap in Q3 2025. For the first 9 months of the year, operating cash flow was $13.7 million and free cash flow was $13.5 million. We continue to put that cash to work, paying down debt. In the third quarter, we repaid $4.2 million of term loan principal. That included $1.5 million of scheduled amortization and $2.7 million of additional payments. Year-to-date, we have repaid $13.1 million, and we ended the quarter with $225.4 million outstanding on our term loan, down from $238.5 million at year-end.

Beginning this quarter, our scheduled amortization steps down from 2.5% to 1.75% per year of the original principal, which leaves more of our free cash flow available for voluntary paydown. Our net leverage ratio was 3.7x at quarter end, and we remain in compliance with all of our covenants. We ended the quarter with $28.9 million of unrestricted cash and cash equivalents and an undrawn $30 million revolving credit facility, providing us with solid liquidity to support the business.

Total deferred revenue was $69.7 million at quarter end compared to $71.6 million at the end of the second quarter. Remaining performance obligations were $164.4 million, and we expect to recognize about 65% of that over the next 12 months. During the quarter, we repurchased approximately 98,000 shares at an average price of $3.59 for a total of $0.35 million in cash deployed. $9.65 million remained available for share repurchases under our existing stock repurchase plan as of September 30. Debt reduction remains our primary capital allocation priority, and we will continue to treat share repurchases as opportunistic.

Now I would also like to address our Nasdaq listing. As previously disclosed, in July 2026, we received a notice from Nasdaq that we no longer meet the $15 million minimum market value of publicly held shares requirement for continued listing on the Nasdaq Global Market, and we have until January 27, 2027, to regain compliance. I want to be clear about how we view this. As a smaller public company with a significant sponsor investment from HGGC, we have long recognized that our profile in the public markets looks different from many of our peers. We remain a sponsor-backed company with a healthy balance sheet, and we do not expect any change in our listing status to affect our operations or our stakeholder relationships.

Now to our outlook. For the fourth quarter, we expect total revenue of $44.7 million to $47.7 million, including subscription and support revenue of $42.3 million to $44.8 million. That is a decline of 6% at the midpoint compared to the fourth quarter of 2025. We expect adjusted EBITDA of $12.5 million to $14 million for a margin of 29% at the midpoint compared to 31% a year ago. For the full year 2026, we now expect total revenue of $190.1 million to $193.1 million, including subscription and support revenue of $179.8 million to $182.3 million. We expect adjusted EBITDA of $50.5 million to $52 million for a margin of about 27% at the midpoint, consistent with 2025.

Overall, compared to our prior outlook, we have narrowed both ranges to account for the revenue impact of the churn events without giving up profitability. That is the margin discipline we intend to show you every quarter.

Looking ahead to 2027, we will provide formal guidance when we report fourth quarter and full-year 2026 results in March. Directionally, here is how we are thinking about the year. We expect the business to remain solidly free cash flow positive. On revenue, our priority is stabilization by improving retention in the base and ramping our channel partnerships. We expect continued margin expansion as the cost actions underway take full effect, and we are targeting an adjusted EBITDA margin of approximately 35% in the first half of 2028, and we expect to keep paying down debt every quarter.

Before I hand it back, I want to say that I'm genuinely excited to be here. Upland has a durable recurring revenue base, healthy margin profile, strong cash generation and a clear strategic plan to improve all three areas. I'm looking forward to getting to know many of you in the months ahead.

With that, I will turn the call back to Sean.

Sean Nathaniel

Thank you, Jennifer. I'm very excited about where Upland is headed. We have a mission-critical set of products, more than 1,100 enterprise customers who trust us with their most important data and a market that is moving towards exactly what we do. Upland is the intelligence layer. We unify and contextualize enterprise knowledge, content and data and turn it into AI-powered outcomes for every human and every agent. The business generates free cash flow and services its debt responsibility, and we're building the next chapter.

With that, I'd like to pass the call back to the operator to begin the live Q&A portion of the call. Operator, please open the line for questions.

Operator

[Operator Instructions] Our first question comes from the line of Scott Berg with Needham.

Fragen und Antworten

Scott Berg

Lots to digest here. Obviously, Sean, it's your first kind of real public comments outside of the shareholder letter here. But let's take your fiscal '28 growth profile and -- or at least your goals there to get to growth in fiscal '28. How -- what does growth look like in your version of Upland here over the next 2 years? We certainly know what the growth profile on an organic basis has looked like historically. We've covered obviously, the stock since the IPO. But what's different or similar to how you start viewing '28 and beyond?

Sean Nathaniel

Scott, thanks for that question. It's great to be back at Upland and finish my first full quarter as CEO. Look, as we look at growth looking into 2028, we see our customer base going through a transition from legacy use cases and workflows into AI-driven use cases and workflows. And we see that the growth will come through those renewed use cases where we have a role to play in how enterprise knowledge content and data is used to feed those human and AI workflows. Specific to growth numbers, we're not publicizing numbers yet, but we expect to, as we -- the plans for 2027 materialize, you'll see more directionally where we're headed from a growth perspective.

Scott Berg

Understood. And then Jennifer, I realize you've been there 11 weeks. So this question might be a little bit heavy. But on your adjusted EBITDA targets for '28 of 35%, the business has generated mid-30s adjusted EBITDA margins historically. One of the questions I get frequently from different shareholders over the last year or 2 is, as the restructuring completes, why can't you get there, kind of, quicker and faster since it's been there. Help us understand what's required in that time frame over the next, what's roughly 15, 18 months to get to that target? And why can't we see those margin targets a little bit ahead of that schedule?

Jennifer Simon

Scott, any time you do a cost optimization, you have to be really thoughtful about how you do it. The last thing that you want to do is take cost out too quickly and jeopardize the business. Sean really went through our focus. Our focus right now is on our customers, gaining momentum with AI-enabled niche opportunities in the market, expanding through the channel and then really looking how we can wrap our cost structure around that to optimize it. So right now, we're working through FY '27 plans. You'll see more what that journey looks like when we release guidance in March.

Operator

Thank you. And at this time, we have no further questions. That concludes our conference call. Thank you all for joining. You may now disconnect. Everyone, have a great day.