Jack McDonald - Chairman & CEO Timothy Mattox - President & COO Michael Hill - CFO

Bhavan Suri - William Blair Terry Tillman - Raymond James Richard Davis - Canaccord Genuity Richard Baldry - ROTH Capital

Thank you, good afternoon. Welcome to our 2016 Earnings Call.

I'm joined by Tim Mattox, our President and Chief Operating Officer; and Mike Hill, our CFO. On today's call, I'm going to summarize our results and some recent highlights and outlook in the 2017.

Following that Mike will give us a more detailed look at the numbers and share with you our guidance for the full year 2017. And then finally, Tim will cover sales and operations highlights from the fourth quarter of 2-16 and full year.

And after that we will then open it up for Q&A. But before we get started, I'm going to ask Mike Hill to read the Safe Harbor statement.

Mike?

Thank you, Jack, and good afternoon, everyone. The press release announcing our quarterly results and our business outlook, as well as a reconciliation of management's use of non-GAAP financial measures as compared to the most comparable GAAP measures is available on the Investor Relations section of our website at investor.uplandsoftware.com.

During today's call we may include statements that are considered forward-looking within the meanings of securities laws. In addition, we may make additional forward-looking statements in response to your questions.

These statements are subject to certain risks, assumptions and uncertainties that could cause our actual results to differ materially. We caution you to consider risk factors and other uncertainties that could cause actual results to differ materially from those in the forward-looking statements contained in the press release and in this conference call.

A detailed discussion of such risks and uncertainties are contained in our Annual Report on Form 10-K 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 as of today March 23, 2017.

We do not intend or undertake any duty to release publicly any updates or revisions to any forward-looking statements, whether as a result of new information, future events or otherwise. On this call, Upland will refer to non-GAAP 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 to the most comparable GAAP measures in our press release announcing our fourth quarter and full year 2016 results. To learn more about our outreach plans, please feel free to contact us at [email protected].

And with that, I'll turn the call back over to Jack.

Thanks, Mike. So I would say four major headlines from today's announcement; we had a record Q4, a record 2016, we issued positive updates to our previously announced Q1 guidance, so Q1 is coming in strong; and we expect to be at the upper end of our Q1 guidance ranges that we announced back in January.

And then finally record full year 2017 guidance with the stage set for a very, very strong 2017. I would say that upland is hitting its stride as an acquisitive growth platform company with a proven ability to acquire great class software products to do it thematically in our focus product families and to restructure them for improved profitability and sustainable growth and to do it, importantly while delivering a world class customer experience increasing customer loyalty and also driving consistent strong growth and revenues and best in class and expanding EBITDA margin.

So let me drill down a little bit on each of those four headlines to talk about them. So record Q4, we had 16% growth in recurring revenues.

22% adjusted EBITDA and important to note that doubled from 11% adjusting EBITDA margin in the first quarter of last year; so tremendous progress through the course of the year. Strong, new and expansion sales bookings and we're pleased to say that this is the tenth consecutive quarter of meeting or beating guidance.

So we've done it in every single quarter since going public which is a testament to our predictable, repeatable business model; also a record 2016, really a pivotal year for Upland. The UplandOne unified operating platform which consists of customer success, development and cloud [indiscernible] helped us to drive a 500 basis points improvement in net dollar renewal rate from 90% in 2015 to a 95% net dollar retention rate in 2016.

So great progress, and you really can't over estimate the value of the UplandOne platform. As that's really the foundation of our customer success model on which we can predictably and confidently continue to grow and it's all about 100% customer success and it also delivers great financial results and this is the way we think software companies should be run.

Some other 2016 highlights we announced three strategic and accretive acquisitions last year. For the full year, showed a 15% growth in recurring revenues and again doubled EBITDA margins through the course of the year.

Looking forward now to 2017 and a strong year. On Q1 again, a positive update to our previously announced Q1 guidance, so Q1 coming in strong and we expect to be at the upper end of our Q1 guidance ranges that we announced back in February.

And for the full year record guidance $85 million in revenues roughly $25 million in EBITDA at the midpoint of guidance and that's before additional acquisitions that will grow revenue and EBITDA even further. We've already announced a great acquisition in January of this year Omtool, which is a beautiful product fit in our work flow automation product family and that acquisition is already exceeding plan.

So very happy about that and of course we have raised our long term EBITDA margin target to 35% and we are committed to hitting that goal sooner rather than later. So that is a real world goal for us and we are committed to hitting it sooner rather than later and we continue to see strong M&A pipeline in 2017 as well.

So in sum this model is working, the engine is tuned, the opportunity that we see in front of us is a massive one both through organic growth and through acquisitive growth and we're really just getting started. So very excited about the strong completion of 2016 and pumped about the great opportunity we see in the coming year.

So with that, I'm going to turn the call over to Mike to give you a more detailed look at the Q4 numbers and 2016 numbers and share with you the details on our guidance Mike?

Thank you, Jack. So as Jack has said, I'll cover the financial results for the fourth quarter and our outlook for the first quarter and full year 2017.

Total revenue for the fourth quarter was $19.4 million representing growth of 10%. Recurring revenue from subscription and support grew 16% year-over-year to $17.1 million.

Professional services revenue was $1.8 million for the quarter a 22% year-over-year decline. Perpetual license revenue was $0.5 million for the fourth quarter for a decline of 11% year-over-year.

As planned professional services and perpetual license revenue had become a smaller portion of our overall revenue mix with recurring revenue now representing about 88% of total revenue in Q4. Moving down the P&L to gross margins; overall gross margin with 63% during the fourth quarter and our product gross margin remained strong at 65%or 72% when you add back depreciation of equipment and amortization of acquired intangible assets.

Professional services gross margin was 40% during the quarter, which was nice relative to our PSO margin target which was recently raised from 30% to 40%. Turning to our operating expenses research and development expense net of refundable Canadian tax credits was $3 million for the fourth quarter representing 16% of total revenues for the fourth quarter sales and marketing expense was $3 million representing 16% of total revenue for the fourth quarter.

General and administrative expense was $4.9 million in the fourth quarter representing 26% of revenue, but excluding non-cash stock compensation for the fourth quarter G&A expense was $3.5 million or 18% of total revenue. Acquisition related expenses were $0.7 million for the fourth quarter which were driven by our recent acquisition activity.

Property loss was $0.6 million for the fourth quarter compared to a loss of $2.8 million for the same period in 2015. GAAP net loss was $2 million or a loss of $0.12 per diluted share compared to a GAAP net loss of $4.3 million or a loss of $0.28 per diluted share in the fourth quarter of 2015.

Non-GAAP net income was $2.1 million or non GAAP net income of $0.12 per diluted share in the fourth quarter of 2016 compared to non-GAAP net loss of $0.3 million or non-GAAP net loss of$0.02 per diluted share in the fourth quarter of 2016. Our fourth quarter 2016 adjusted EBITDA was $4.3 million up 133% compared to $1.8 million for the same period last year.

Now onto our balance sheet statement of cash flows. We ended the fourth quarter with $28.8 million in cash.

Cash flows provided by operating activities were $3.9 million for the trailing 12 months ended December 31, 2016. Now I want to cover Q1 full year 2017 guidance.

For the quarter ending March 31, 2017 as announced back in January we expect our reported total revenue to be in the range $20.0 million to $20.8 million in subscription and including subscription and support revenue in a range of $17.5 million to $18.1 million. I would like to note that this would represent growth in recurring revenue of 17% at the midpoint over the quarter ended March 31, 2016.

Adjusted EBITDA is expected to be in the range of $5 million to $5.5 million for adjusted EBITDA margin 26% at the midpoint representing growth of 162% at the midpoint over the quarter ended March 31, 2016. And as Jack noted, due to strong operating results we expect to be at the upper end of our revenue and adjusted EBITDA guidance ranges here for Q1 2017.

For the full year ending December 31, 2017, we expect reported total revenue to be in the range of $82.5 million to $86.5 million including subscription and support revenue in the range of $71.7 million to $74.7 million. For growth in recurring revenue of 12% at the midpoint over the year ended December 31, 2016.

Adjusted EBITDA is expected to be in the range of $23.0 million to $26.0 million for an adjusted EBITDA margin of 29% at the midpoint. Representing growth of 94% at the midpoint over the year ended December 31, 2016.

And with that, I'll turn the call over to Timothy Mattox our President and COO.

Thanks Mike and good afternoon everyone. I'm going to cover our sales product in operating areas.

Results continue to show that our enterprise customers are achieving greater success and improved outcomes by relying on the Upland family of products. Upland continued to demonstrate to both new and existing customers why our products with a choice for those who require exceptional technology and service.

As Jack referenced earlier, we have continued to focus our efforts on those areas that customers value most driving for 100% customer success. On the sales front, we continue to focus our efforts on expanding our relationships with existing customers building our improvements in the net promoter score that we track closely.

We expanded relationships with 91 existing customers including 12 major expansions over $25,000 in annual recurring revenue. Further 44 of our expanding customers increased their annual recurring revenue by 25% or more.

Examples of major renewals and expansions were a global food and beverage company re-committing to our project and portfolio management platform for over $680,000 per year of recurring revenue. A large national TV station owner and operator recommitted to our web-content management platform for over $690,000 per year.

A global investment bank recommitted to our IT and financial management platform for over $650,000 per year. A leading manufacturer of electric motors expanded use of our supply chain management platform by over $200,000 per year.

A large nonprofit organization focused on higher education expanded use of our application to person text messaging platform by over $150,000 per year. In addition 10 other major customers expanded to the tune of over $500,000 in total as well.

We also acquired 106 new customers of which seven were major accounts, by leveraging references from our customer base. Some examples of major customers include a cross sell to a global pharmacy who committed over $200,000 per year of our IT financial management offering.

Also the across sell to a global food retailer who committed to over $160,000 per year to our professional services automation platform. A cross sell for our global financial institution who committed to over $60,000 per year of our project and portfolio management products.

A national marine terminal and port operation company committed to over $50,000 to our project and portfolio management products. So there is some good activity on the customer side.

With respect for operations we'll continue to focus on driving value through the UplandOne platform that Jack discussed earlier. Upland's unified platform has set the foundation for 100% customer success is key to this.

This value comes not only in the form of financial improvements that Jack described but also through great customer loyalty, high net promoter scores and strong net dollar retention rate. Intensely focusing on existing customers while driving operational improvements is how we believe software-company should be run.

In 2016 we made numerous platform improvements including the continued roll out of our high-touch customer success program adding premier success plans in quarterly customer virtual user conferences as two key additions to drive growth in our commitment to 100% customer success. In R&D we drove across the board improvements, in the reliability security performance and product foundations of our offering; enabling continuous value delivery.

We also were influenced by our customer advisory boards and the product feedback through the Upland community. We lost 11 major customer driven product releases in 2016, including improvements to user interfaces, reporting analytics, administration, integration, and performance all requested by our customers.

In our professional services organization, we increase profitability through improved resource utilization. And improve service delivery through various process optimization initiatives.

We expanded capacity in our 24 by 7 global customer support offering to guarantee response times as fast as one hour for platinum level customers and develop new self-service and troubleshooting content. We have continued the migration of our enterprise cloud from the spare data centers to a large global cloud infrastructure provider driving measurable improvements in platform up time, ease of deployment, configurations, scalability, flexibility, and security at significant long term cost saving.

In addition to our improvements to the UplandOne platform, we want several other initiatives designed to accelerate the improvement in efficiency, effectiveness, and scalability of our general business operations. In 2016, we consolidated our number of offices from 10 to 4 successfully implementing a flexible work environment.

We centralized the sales quoting and ordering process increasing sales capacity and we improved the overall efficiency of our sales and marketing organization by reducing cost while exceeding quarterly bookings targets. These operational changes in addition to the UplandOne platform enhancements that resulted in a sequential decline to our total operating expenses as a percentage of revenue in each quarter of 2016 and help to improve our profitability.

In summary, we have a lot of high impacting issues underway, we've made a lot of progress as well. There initiatives are yielding results and overtime we believe will enable us to scale the business even more effectively.

With that I'll turn the call back over to Jack.

Great. Thank you.

At this point, we're ready to open the call up for Q&A.

Hi guys, congratulations nice job on the quarter and on the EBITDA. I guess first question ties to UplandOne the platform there.

Obviously we've talked about integrating the technologies from a back-end perspective along the data movement the sort of similar interface. But if I actually look at some of your acquisition, what I love to understand is even if you could give us some examples of color what was the margin impact or what would have been the margin impact if bought in those acquisitions today on and put them on UplandOne?

So what do we benefit from, if we bought Mobile Commons or something like that and say UplandOne existed then, what will the margin benefit be for something like that?

Well I think it would be pretty significant Bhavan. If we look at our product today they are running at contribution margins 40% to 50%.

So through time with the platform, all of our products have gotten the average number. The difference now with UplandOne is our ability to achieve those results more quickly.

And it's really an exercise at this point in a very healthy way of looking at the acquisition, understanding how best we can serve the customer base and increase customer loyalty and how we can leverage the Upland platform to make that acquired product a better product in the marketplace. So from orders and renewals to account management to customer support and product management our R&D platform, back office, area by area we port those products over to our platform.

We find the best talent, the key folks within the acquired business and give them an opportunity to grow within a larger Upland and to leverage the power that platform to grow their careers and their ability to serve customers. And then you know really the happy result of that is very impressive return from a financial standpoint.

So then turning to that, I mean it feels like you feel even more confident about the acquisition pipeline and sort of what that will do given sort of your raise on the how long term EBITDA margins. Just some color what that pipeline looks like vis-à-vis last year, and certainly you have confidence in sort of closing deals at the price [indiscernible] have historically paid.

How he is feeling and how are you guys feeling about that? What does it look like vis-à-vis last year?

The pipeline is the effective sort of bottom of the funnel pipeline is bigger now than it was last year. I think we're seeing somewhat larger transaction sizes in the pipeline than we were at this period last year that's for sure we are seeing that.

I think receptivity is there. And frankly as Upland has developed and matured as a business in terms of our operating platform.

The success that we've made in the customer satisfaction area, the improvement in our net promoter scores, the ways in which we can leverage the platform to improve the products we've acquired, all of those things are resonating with sellers and making Upland a more attractive buyer to those sellers. Because really it's about providing a great home for those products and a great home for those customers and also solid career opportunity for those players there that choose to continue on with Upland.

So that message has just gotten stronger in the marketplace as we've grown and matured and that's part of what's driving a more robust pipeline than we've seen historically.

Yes, yes and obviously you had the net dollar retention rate ticking up nicely. And maybe one for Tim and I'll have a follow up for Mike.

But the one Tim, we've talked about cross sell in the past and your strategy has been to focus on taking the existing products and driving expansion of the existing product within the base and yet you've seen some nice cross sell, should we think of this as how pattern we can start looking at on a quarterly basis or is this still sort of early stages sort of more one offs on the cross sell side given so that team has been playing for a while. Would you guys sort of deemphasize that for a little while, how should we think about that Tim?

Yes. No, we've certainly saw some more favorable results in that area this quarter Bhavan and we are seeing a pipeline there.

I'd like to string a few more quarters together before I'd say let's count on it, but we are seeing some value proposition to current customers that are resonating an example of that would be someone who's invested in our project and portfolio management platform who perhaps once enhanced resource management capability and would want to use our professional services automation for time, expense, and utilization types of things related to the projects they are running. So with our Upland integration platform, we have the ability to share that data back and forth between us two products and that's resonating.

And so our sales teams are introducing that. We're talking about it in our virtual user conferences, so we're seeing some interest more top of funnel interest for those.

It's still a long sales cycle as we've discussed in past calls. So it's kind of the cycle of the new logo if you will.

But we are seeing opportunities there certainly then leverage the existing relationships we have to try and increase the chance of closing those deals. So again, we saw some good progress this quarter, hope there is more to come and then we can talk about other patterns and consistency.

Fair enough. Then one last one from me for Mike there.

Mike you gave guidance for subscription growth and it feels like it's deshelled [ph] a little bit and it feels like Q1 takes up a little bit. But the full year ‘17 growth in subscription has seemed to [indiscernible] just because you're sort of not adding any of the acquisitions or is there something else there we should be looking for that you're seeing in the business any color there would be helpful?

Yes. So first of all our guidance does not include future acquisitions, so to answer that question or make that clear secondly.

Secondly, I think we still see organic growth subscription in Q4 last year and all of 2016 was 2% organic growth and so we've modeled conservatively here for Upland for the full year guide. I think as we've talked about here where we're building a base.

Future years as we talk about will get into more organic focused growth. But it really feels like 2017 is just continuation of 2016 in terms of our, sort of consistent, predictable, recurring revenue.

Bhavan, Jack. I just kind of echo some of what Mike is saying there.

Our guidance methodology has always been conservative. Particularly when we look out full year and so we are continuing that practice since we think that's just the right way to do it.

And then also let's say, if you just look at that sort of chapters of Upland to-date. We started with M&A to acquire critical mass then we were cleaning up revenue as Mike talked about with the 2016 results deemphasizing PSL and services revenue increasing high margin recurring revenue.

The next piece was building out the platform and then finally increasing EBITDA margins which have grown dramatically and will continue to grow dramatically to and through the of 2017. And we are now at a point where we can start focusing more of our attention on organic growth.

We're not promising that overnight, but I would just note for you in this. $85 million cloud software business, we have three count them 3 full time field sales people.

So we have deemphasized that investment as we have been focused on the platform and on growth and margin because we wanted to really be singularly focused on success at our existing customer base. Now look we're landing new deals, new logo's every single quarter.

Right a 106 new relationship, 7 major accounts in just the fourth quarter. But now, I think we're going to have an opportunity with the enhanced profitability of the business to take some of that cash flow and reinvest it in organic growth which will start to, I think change the growth profile of the business as we look out in the 2018 and beyond.

That's great guys. Thanks for taking my questions and nice job thank you.

Hi, good afternoon. Sorry for the background noise.

Nice job as well. I'm going to be quick and just ask three questions.

I guess Jack you talked about three kind of hunters out there what does that look like in terms of by the end of ‘17 or early ‘18 in terms of the size of those hunters that are out there going for new logo?

Yes, I think it should be at least doubled by then. And I know one could argue it could be even more than that.

Now we do have inside sales capacity and we've got dedicated customer success managers that serve our client needs and also look for expansion opportunities and offer compelling upsell opportunities around platinum and gold support, but we need to and will be investing and increasing the size of that sales force. And I know Terry, you've been with us a long time and you know that sort of part we went through on that, I have to tell you the strength of the offerings today in the platform Tim alluded to the product experience architecture.

So to be able to go into the market now with a set of products across these three product families all of which have a consistent user interface that has single sign on. With Upland integration manager have that product, the data exchange architecture in place.

It's a compelling offering and so both from a new logo perspective and in terms of Upland cross sell, we're gaining confidence as we go there.

Got it, got it. In terms of -- it's nice to hear in terms of off to a good start and high end of guidance for one Q.

Jack if you have to look at where we are late March with the quarter almost over what's surprising you from the positive standpoint more business with net new customers or just the cross selling and upselling within an stall based account anything that stands out?

Yes Terry, its Tim here. I think some of the scenes that we touched on for 2016 and just carrying forward in 2017.

So certainly our improvement in net promoter scores, the enhanced customer loyalty or giving customers confidence to expand the relationships with us, so we're seeing some benefit from that. We're seeing some strength in our application to text messaging platform that got tremendous exposure during the campaign season and is carrying through into that nonprofit NGO market quite nicely.

So those are the areas of particular strength and these are things that I think will continue throughout the year.

Thanks Tim. And then I guess, I don't know if this is for Jack or Tim or even Mike.

But in terms of the premier success plan, let me get some specifics in terms of attach rate so far and I know it may still be earlier in that dynamic or that program, but just attach rate and how do we think about when somebody signs up for a premiere success plan. What kind of additional economics do you give to their account?

Thank you.

So I think just to put some context around it. As we look to increase organic growth rate overall from low single-digits to upper single digits or even 10% over a period of years.

We see platinum as having the potential to contribute at least 100 basis points, maybe 150 basis points to that overall organic growth rate. And we started piloting the program in Q4 across three products and added another five products through the course of Q1.

They weren't all added at the beginning of Q1. But the results that we're seeing to-date and remember platinum includes both the price increases associated with an enhanced of gold or platinum support but also some auto price increases around the standard product offering.

What we're seeing today leaves me to feel that that 100 basis points plus contribution of organic growth is a realistic target and my gut is it may take us the course of the year to get it fully out there and perfected. Most importantly, we're seeing a very positive reaction from customers among major customers in particular there is a real resonance and recognition of the enhanced value we're able to offer.

So this is really one of those win-win situations where it's accretive to the business from a financial perspective but the perceived value there is very, very high for the customers and it's an efficient marginal cost of delivering that for Upland. So Tim anything you want to add to that?

I think you hit on the key points Jack. The only thing I would also point out Terry is that as we launch these offerings, we do give customers the option of extending their existing agreement so that we call it like it's the lock in and that allows the customer to extend their relationship and we think over time will improve our renewal rates incrementally as well.

So some of the segmentation of the customer base was as Jack alluded to those that are seeking to get a greater level of service and support and some tailored premium offerings are willing to pay that out self. Those that are comfortable with the standard offering lock in for a longer period of time and therefore churn reduces.

And that combination allows to segment the base and deliver the right level of service to the right customer.

Thanks guys.

Thank you, Terry.

Okay, thanks. Sorry most of the questions have been asked.

But in terms if we kind of look back say fast forward say a year or two from now how will your sales efforts have evolved, in other words you have customer support -- customer success people you envision, either bifurcating or slicing that group up by kind of product type or anything like that or just in other words basically how do you plan to revolve your sales teams and sales motion? Thanks.

Thanks. So we have the three product families which we think, each of those could be $75 million to $100 million businesses.

So our growth from here to $200 million and beyond in revenue we feel we can do within these three product families. And when we look at what the growth opportunity is for the business, this is how we see it.

We had last year 500 basis point improvement in net dollar renewal rate, right. That's driven by a combination of increases in our gross dollar renewal rate and also increased up and cross-sell.

So continued investment in that area, the foundational elements, the product, performance, speed, scalability, and security, the mobile capabilities where relevant, the UI, the data exchange architecture those are the things that we are hearing from our customer base are helping to drive greater satisfaction, greater gross dollar renewal rate. So a part of that growth comes from continued improvement another 100 to 200 basis points in gross dollar renewal rate.

Second, expansion in cross sell, we do a great job with our customer success managers on identifying opportunities within existing accounts to expand, but frankly we could do a better job of I think by having a larger team a swat team or experienced field sales people that can take charge of a larger expansion opportunity. And also look for more enterprise license deals, I mean we've got a compelling product family.

And as Tim alluded to earlier there are many natural fits in terms of bundling products together and in some cases we go across product family. Just the fact that we've been a good vendor with a focus on customer success makes that client interested in picking up a product through us maybe in a different stack or different product family.

So another piece of how we organize to drive further growth is look at additional licensing and bundling opportunities. I think we've got some experimentation to do there to see how we can deliver the most value for clients in a way that helps drive growth.

Thirdly, we've had an effective inside sales operation again both as it relates to expansion within existing accounts but also as it relates to new logo acquisition. So that will be an area of additional investment very cost effective.

On the marketing side, we've brought on some good new marketing talent within the organization. Our search engine marketing and optimization capabilities are a way ahead of where they were as little as six or nine months ago and that's an area where frankly I think we were sub-optimal and we are moving aggressively now to improve that.

I would note we'll be launching a new website, a corporate website and website across all the products on April 10, which I think really captures where Upland is today as a business in terms of our commitment to customer success, how these products fit together. Highlights all the investments we've made in the product experience architecture from single sign on to the consistent UI's to the mobile capability, the Upland integration manager.

Really draws the whole bundle together for customers. And then finally geographic expansion.

You know one of our three sales people today is in Europe and we see an opportunity to add additional sales capacity there. Europe generally is a good market, particularly but not exclusively for our project in IT management products.

So the interesting thing, and I know it's a long winded answer so forgive me, we're excited about it internally. The interesting thing is none of this requires a massive dollar investment, the only component that we reviewed there that is not in historical budgets is the increase in the size of the sales force, and it's not like we need to go from three to 30.

I think we can move a lot of dirt going from three to six, seven, eight, nine, so we're confident that we can do this within an envelope of expanding EBITDA margins as we drive through 35% and I think ultimately beyond that.

That's super helpful. Thank you so much.

Thanks. Could you talk about how you're moving from the 35% target model to 35%.

Sort of where you see the moving parts in that, presumably it won't be as much of sales and marketing which should serve down there. So what are the areas you're really seeing that incremental leverage as you scale up?

Well Rich, this is Mike. I think as we scale up, we'll continue to see improvements throughout the P&L in the different areas.

Cost of revenue, we should see some improvements, maybe not as much here in 2017 due to our migration to Amazon Web Services Cloud platform and switching cost associated with that, but certainly into 2018 there. On the sales and marketing front Jack just talked about the forward evolution of that, but I still think relative to revenues we will be able to eke out some improvements there.

R&D of course there should be some economies as we scale in R&D. And then the biggest one probably is going to be G&A as we scale that top-line G&A will come down as the percentage of revenue of course as well because we got this shared service organization, we've got the Upland platform and we've built this organization to scale now as the top-line grows.

And just to echo Mike's point, you know we set that 35% EBITDA margin goal as the long term goal, but as I said it's the top of the call. We are committed to hitting that sooner rather than later.

And you know additional M&A helps us get there even faster, and ultimately to push beyond that.

Can you talk a bit about your office consolidations in - Something on the data centre side, I think there is an interim stage you're still taking down the number of datacenters before you move over AWS so how far you're long on that process?

Yes, it's gone very well. Obviously with the amount of M&A activity we've had, we acquired a lot of data center co-location contract and so at the peak it was 22 at I think year end 2015 that went to 13 year and, 2016 it'll be down to two at the end of this year and then zero next year as we move to an outsource solution around AWS.

And so we're moving nicely through that process. As Tim mentioned earlier in a way that increases service to customers as we go.

Lastly, if you look back around 2013, you basically doubled your run rate revenue. The organization is a lot bigger and you've done series of acquisitions.

Can you talk about how you feel about sort of the peace of acquisition you can absorb at this scale now maybe I'd write number or a price hills her revenues and still going to keep control of those while you are absorbing them?

Sure. We've continued to talk about a conservative target on acquired revenues of $15 million to $20 million a year because we just want to be conservative in terms of that setting expectations.

But you know the reality is this platform at this point could be doing twice, I mean there is no reason we couldn't do $40 million to $50 million and integrate it from an operational standpoint. If you had three $15 million companies for example there's no reason we couldn't be getting that done.

And as always, we remain disciplined in the market and are looking for quality companies where we got a good products there, a good cultural fit and an opportunity for that product to really fit strategically into our product family, as well as to obviously deliver the financial results we want. But I got to say Richard it feels like the market is coming our way on that and that we as an organization are hitting that critical mass phase.

I mean you know you and I have been talking from way back in the proficient days when you covered us there and where we are today feels to me like where we were our at proficient, at the $50 million level where zero to $50 million was so damn hard. And we sort of blinked and we went from $50 million to $250 million, because we hit a point of critical mass in terms of platform, and process, and people, and cost to capital an access to acquisition pipeline.

And I feel like we've hit a similar inflection point here and as a result of that I think we could - we've got the capacity to move more aggressively but again we have to temper that with our general conservatism and the fact that we're going to be measured and we'll never do deals just for the deal sake, right. Because that's the road to perdition in our view.

Okay. Thanks guys.

Okay. So I think that covers the questions from the analysts.

And so, I just want to thank everyone for their time this afternoon and we look forward to seeing you on the next earnings call. And I'll pass it back to the operator now to close.