Interfax Communications Ltd. acquired by Upland Software Inc.

Upland Software, Inc. (Nasdaq: UPLD), a leader in cloud-based Enterprise Work Management software, today announced that it has acquired InterFAX Communications Ltd., a leading provider of secure, cloud-based messaging solutions including enterprise cloud fax and secure document distribution. The acquisition of Dublin, Ireland-based InterFAX, Upland's first in Europe, adds $15.0 million in annualized recurring revenues and will be immediately accretive to Upland's Adjusted EBITDA per share.

InterFAX adds foundational capabilities to Upland's cloud-based Workflow Automation product family, including secure document distribution and enterprise cloud fax solutions that are compliant with Health Insurance Portability and Accountability Act (HIPAA) and certified under the Payment Card Industry Data Security Standard (PCI-DSS) and the International Organization for Standardization (ISO) 27001 Security Standard. Cloud fax alone is a $1.5B market forecasted to grow at 10% per year to $2.2B by 2022.1 With InterFAX added to Upland's existing Workflow Automation product family, Upland can now offer comprehensive document management and workflow automation solutions and capabilities that include document capture, data extraction, data loss detection, secure storage, intelligent routing and approval, and secure document distribution through cloud fax, mobile messaging, and email.

"We are pleased to welcome InterFAX and its valued customers, development community, and partners to Upland," said Jack McDonald, chairman and CEO of Upland Software. "This strategic and accretive acquisition builds on the investments we made in our Workflow Automation product family last year with the additions of Omtool (now branded as Upland product AccuRoute) and Qvidian, and it strengthens our presence in Europe to drive international expansion."

"InterFAX's secure document distribution and enterprise cloud fax capability allows us to deliver use-case-specific, end-to-end workflow management solutions that meet the industry compliance standards that our customers require," said Sean Nathaniel, CTO and SVP of Workflow Automation Solutions for Upland Software. "InterFAX technology also enables a smooth migration for customers moving from on-premises fax to a secure, auditable cloud fax and distribution solution."

Key use-cases served by Upland's Workflow Automation product family now include both vertical offerings such as secure and compliant regulated communications in financial services, including retail branch communications and loan processing, and in healthcare, including secure patient information management, claims processing and prescription routing, as well as many cross-vertical applications such as accounts payable and receivable, automated bids and proposals, employee records management, revenue cycle management, legal documents handling, and electronic court filing. Upland intends to develop and acquire additional products that expand the automated workflow use-cases offered to clients.

The purchase price paid for InterFAX and related entities (including operations in Ireland, Israel, and a United States reseller) was $37 million in cash at closing, net of cash acquired, and a $5.0 million cash holdback payable over 18 months and subject to reduction for indemnification claims. The foregoing excludes any potential future earn out payments tied to performance-based goals. Upland expects the acquisition to generate annual revenue of approximately $15.0 million, of which all is recurring, subject to reductions for a deferred revenue discount, as a result of GAAP purchase accounting, estimated at $0.7 million for the remainder of 2018. The acquisition is within Upland's target purchase price valuation multiple range of 5-8x pro forma Adjusted EBITDA and will generate an estimated $6.0 million in Adjusted EBITDA annually. The acquisition will be immediately accretive to Upland's Adjusted EBITDA per share.

In connection with the acquisition of InterFAX, Upland amended and expanded its credit facility from $200 million to $258.7 million. Specifically, $50 million of new term debt was drawn, taking Upland's gross debt outstanding from $113.7 million to $163.7 million, with debt, net of cash on hand, now at approximately $135 million. Further details regarding the transaction can be obtained in the Form 8-K filed March 22, 2018.

Business Outlook

Upland today also announced that it has raised its full year 2018 guidance to reflect the InterFAX acquisition, raising revenue, recurring revenue, and Adjusted EBITDA guidance ranges. The increase in 2018 revenue guidance below is net of an estimated $0.7 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 March 31, 2018.

For the full year ending December 31, 2018, Upland expects reported total revenue to be between $131.0 and $135.0 million, including subscription and support revenue between $118.4 and $121.6 million, for growth in recurring revenue of 40% at the mid-point over the year ended December 31, 2017. Adjusted EBITDA is expected to be between $46.5 and $48.5 million, representing growth of 57% at the mid-point over the year ended December 31, 2017. The transaction will be immediately accretive to Upland's Adjusted EBITDA per share.

About Upland Software

Upland Software (Nasdaq: UPLD) is a leading provider of cloud-based Enterprise Work Management software. Our family of applications enables users to manage their projects, professional workforce and IT investments; automate document-intensive business processes; and effectively engage with their customers, prospects and community via the web and mobile technologies. With more than 4,000 customers and over 450,000 users around the world, Upland Software solutions help customers run their operations smoothly, adapt to change quickly, and achieve better results every day. To learn more, visit www.uplandsoftware.com.

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