I think we'll kick things off. I'm DJ Hynes. I'm the Senior Software Analyst here at Canaccord. This is the 45th year that we've done this event. We want to thank all the investors who continue to support it, the companies that bring all the great content. I've covered Upland for as long as I can remember. It's got to be 15 years anyhow. Mike Hill is the CFO. Upland is a really interesting story. There's been a business transformation to drive faster organic growth, improve profitability. Mike's going to walk through a lot of those changes and kind of where the business is headed. He's going to run through slides, do a presentation. We'll probably have some time for quick questions at the end. With that, I'll turn it over to Mike and tell you the Upland story. Thank you, Mike.
All right. Thank you, DJ. Thanks, everybody, for having me here today. We'll get right into it. I'll take you through some recent updates, company overview, talk about the products, talk about the customers a bit, management team, and some financial slides. For recent updates, as DJ just mentioned, the business has been transformed here over the last 18 months. We've divested the underperforming assets, and we've focused the business now in markets where we have the strongest competitive advantage, the highest margins, and the highest growth rate. We've completed the build-out of our India offshore development center for enabling efficient product innovation. In addition to improving and enhancing the product's performance and capabilities, we've also AI-enabled our product portfolio. We've repaid $242 million of debt since the beginning of last year, brought our net debt leverage down to 3.9x , now with a target for year-end of 3.7x .
We've refinanced our debt, recent development, pushed the maturity out six years to 2031, and added a $30 million undrawn revolver. That $30 million undrawn revolver plus the $20 million of cash on our balance sheet presents us with plenty of liquidity. That's in addition to our ongoing $20 million of free cash flow generation. That's $20 million of free cash flow generation even with servicing the interest on the debt. We've returned to core organic growth, and we've significantly expanded adjusted EBITDA margins, 20% last year to 27% this year, so 700 basis point improvement. Back half of 2025, expanding even further to 30%+ . For the company overview, really just focused now, the business is focused on AI-powered knowledge and content management cloud software. Upland empowers enterprises to optimize knowledge sharing in the enterprise and automate content workflows.
These are cloud software solutions that provide real ROI to enterprise customers. You can see the blue chip customers there, just a hodgepodge of logos. Our products are strongly rated on independent review sites like G2 and by analysts and the media. We're serving a large $11 billion market, growing at 15% per year. By the numbers, Upland is a little under $200 million of annual total core revenue. Again, growing at over 2.5% here in the back half of the year, approximately 3%, serving the 1,100 enterprise customers. High gross margin, close to 80%. High adjusted EBITDA margins at 27% this year. Back half of the year, 30%, like I mentioned. Adjusted EBITDA itself, last year approximately $56 million, growing this year to $59 million, midpoint of our guide. Adjusted EBITDA growing now. High visibility. 93% of our revenue is recurring by nature, 99% net dollar retention rates.
We take out those underperforming divested assets, 99% net dollar retention. That means that without adding any new logos, the business is almost flat year- over- year. With adding new logos, of course, that's the basis for our core organic growth. Predictability, average customer contract terms of two years, average customer relationships or duration over eight years, so sticky products. Upland's AI-powered product portfolio, we're solving complex problems, complex business problems for enterprises. In addition to that, we're also finding that Upland's products are a trusted path for AI adoption for these large enterprises. Large enterprises want to adopt AI, but they need to do it in ways that are secure, that are regulatory compliant, that tie into their own internal structured content, that are auditable, that are secure. AI is an enhancer to our business, to our products, and to our customers by extension.
Our customers are using our tools to adopt AI. Using a few use cases, again, I pointed out that the ROI for Upland's products is real, tangible, measurable, solving these complex problems for large businesses. On the left-hand side of the screen, self-service contact center portal, we've got a global payroll processor that uses our RightAnswers product, and they've successfully set up a self-service, customer self-service contact center portal, thereby redirecting 41% of their call volume to customer self-service. As a result, they're saving $4 million a year in cost. That customer pays us $400,000 a year, so $400,000 ARR, so high ROI. On the right-hand side of the screen, we've got a top-tier U.S. bank using our AccuRoute product. They're saving $6 million a year in eliminating unnecessary fax lines and telephony costs. They're paying us about $700,000 a year for that. Real, measurable, tangible ROI.
In the middle, a global tech company, top-tier tech company, name brand company, huge, using our Qvidian product for security and compliance questionnaires, responses, sales proposal generation, RFP response management. They've measured and quantified that using our tool, they've been able to increase their internal response times for those tasks by 8x. They're paying us well over $1 million a year for that product. Real, measurable ROI. As I mentioned, our customers love us, are highly rated on the independent review sites like G2. I encourage you to go out and take a look at that. Analysts praise our products and, of course, lots of media recognition. As I mentioned, 1,100 enterprise accounts. These 1,100 enterprise accounts average $137,000 of ARR. They represent almost 90% of our recurring revenue. As I mentioned, our recurring revenue is 93% of our total revenue. Upland serves major enterprise accounts, particularly these 1,100.
Again, 99% net dollar retention rate, so very sticky. As you can see by the industry verticals listed on the screen, very diverse. Technology, financial services, healthcare, manufacturing, serving across the board. I mentioned earlier, serving a large $11 billion market. This market's growing at 15% per year. This growing market provides a platform, or at least a background tailwind for Upland to increase our organic growth. As I mentioned, growing to 3% in the back half of this year, looking for longer-term organic growth in the mid-single digits to potentially upper single digits. Management team, experienced management team, Jack McDonald, our Chairman, CEO, and Founder, and I have been here since the beginning. I've worked with Jack for the past 25 years. Dan Doman, our Chief Product and Operating Officer. Dan's credited with that successful build-out of our India R&D center.
Dan will be the first one to tell you that it's not him. It's a team effort, and it really is at Upland throughout all the ranks. Management team here, Rick, Michael, Janssen, Jen, just a wonderful team to work with. I'm privileged to have them, to be able to work with them every day. For some financial highlights, we've got a little under $200 million of core total revenue. Growing at over 2.5% for the back half of the year and goals to increase that growth rate in the coming years. High retention rates, 99%, as I mentioned. High recurring revenue, high gross margins, high adjusted EBITDA margins, strong cash flow characteristics, $20 million of free cash flow, after servicing that debt. We've cleaned up the balance sheet, delevering the balance sheet, refinancing the debt, pushing that maturity out six years, adding an undrawn revolver for liquidity.
It's a transformed business. Again, divested the underperforming assets, focused now on knowledge and content management, the markets where we have the strongest competitive advantage, and really kind of a new launch of the company here post-transformation. Now, this slide is the core total revenue that I referenced on the previous slide, the $193 million you see for 2025. In the past couple of years, you can see that we were relatively flat but stable at $191 million. It's starting to inflect this year, starting to grow. This is total revenue, not just recurring revenue, total core revenue. You can see the core organic growth rate, which measures the recurring revenue, that has been flat in the past couple of years, now inflecting up at 2%- 3% this year. As I mentioned, growth goals of mid-single digits or better in the coming years.
This slide is the same core total revenue that we saw on the previous slide. If you look at the blue bars, the $191 million is inflecting to $193 million going forward. What we've done here is stacked on top in purple, you see the divested revenue, and then also in orange, the sunset asset revenue. This is to reconcile back to our reported total revenue in past years. The point here is that the decline in total revenue has been purposeful. We've purposely divested these assets. The divestitures are now complete. The sunset assets have burned down. You can see that there's really only a small stub period of orange there for fiscal year 2026, represents about $4 million or so of revenue from sunset assets. The sunset asset headwind is now pretty much behind us and out of the way.
This total revenue decline, this purposeful decline, it has happened while adjusted EBITDA itself is increasing, from approximately $56 million last year to the midpoint of our guide this year, $59 million. You can see the margins also expanding dramatically from 20% last year to 27% this year, back half of this year, closer to 30%. In future years, 30% or better. That's really the inflection in adjusted EBITDA and adjusted EBITDA margin. Lastly, operating targets. You can see the green row here, the rule of X, the rule of 40, as we say. Last couple of years, taking the core organic growth rate of being flat to a little bit negative, and then, of course, adjusted EBITDA at around 20% margin. We were a rule of 20 company.
This year, of course, with the expanded organic growth rate, the expanded adjusted EBITDA margin getting close to a rule of 29. Of course, in the back half of this year, as I've mentioned, higher adjusted EBITDA margins, higher growth rate, moving over a rule of 30 company, closer to a rule of 35. As we look out longer term, continuing to expand that adjusted EBITDA margin to a target model of 32%, core organic growth rate in the mid to upper single digits, getting us close to or to a goal of rule of 40. Those are the prepared slides that I had for you today. We can use the rest of the time for questions if you like.
Yeah, it's a pretty normal view of the business. We're happy to take any questions, but maybe I can tee you up for a couple just to get you going, Mike. Look, I think historically, people probably haven't thought of Upland as a kind of organic developer of product, right? That story's changed, my sense is, with the build-out of the Indian offshore development center. Just talk about what that's done for the business and the product portfolio and how that's going to fuel growth going forward.
Yeah, thanks, DJ. You're right. We had been known as a company that was growing through acquisitions, and we've sort of sunset that model. Now we're focused, as you correctly point out, on organic growth, focused on improving the products, which we've done, AI-enabling the products, and all of that is to, of course, fuel our core organic growth rate. You can see here on this slide that the margins are at 32%. We used to run at much higher margins. We're now more disciplined on that. We want to keep investing in the products, make sure that they stay fresh, again, keeping up with latest technologies, in particular AI, as I keep mentioning. That is our focus.
Our opportunity here is to execute, grow that core organic growth rate back to the mid to upper single digits, continue to expand that adjusted EBITDA margin, keeping it 30%, a little better, and essentially take our free cash flow and continue to pay down debt as opposed to doing acquisitions. No acquisitions on the horizon, really focused on just continuing to delever the business. It's a much more simple business. It's a much more product-focused business and, frankly, a much easier story now, I think.
Yeah, yeah. Certainly from a CFO management perspective, I assume.
Yes.
Maybe we could talk a little bit around the go-to-market investments that you've made and kind of what's, you know, obviously, that's fueling this renewed organic growth. What's working? What are the changes you've made and what's working?
Yeah, DJ, of course, you know, as you say, you've been around since the beginning or even before that. Over the last several years, we attempted to set up a centralized sales organization, a centralized sales leadership, big SDR, BDR programs, and frankly, for our products, that just didn't work. We're moving back to the motions that these products grew on their own before we acquired them and, you know, for a while after we acquired them, moving really to a field sales motion out at the edge. When I say at the edge, I'm talking about at the product level. Hiring in the field salespeople that really have experience in these niche markets for the competitors. Our solutions are highly competitive, but they're specific to pain points in large enterprises that are sort of niche. Otherwise, these products themselves would be significantly bigger.
Yeah.
As a result, you need, from a sales standpoint, folks that really understand those intricacies. They can find the customers that have those pain points, that have the budgets for those pain points, and that's how really these products get sold. From a go-to-market standpoint, moving sales back to the edge, we know we've had success there. We think that that's how these products need to run. From a marketing standpoint, we did centralize some of the marketing. We've talked about getting intent data, lots of sort of digital marketing motions that we had not had before that are now working. We've successfully done some improvements on the marketing side. That'll be a mix of both centralized and out at the edge on the marketing as well.
Yeah, yeah. To me, it certainly feels like there's more product cohesion than there has been in the past with the focus on kind of AI-driven knowledge and content management, which I'm sure makes it easier to put kind of marketing dollars behind that message and drive that lead flow. Maybe just a last one. The refinancing, the new term loan facility or revolver, just talk about kind of your partner there, how you landed on them, and kind of what that does from a capital standpoint for the business.
So Sound Point , private credit lender. We had had a relationship with Sound Point through our previous credit facility, the Term Loan B. Of course, that's the different side of the house. That's sort of the public side, and they don't really talk to the private side. We did have a good relationship there, met the private side folks. HGGC, our private equity partner that's been invested with us since 2022, had a great relationship with Sound Point as well. We had a lot of demand for the refi. We had some choices of partners, but really looking at Sound Point , knowing their reputation as a trusted, good long-term partner, as HGGC has been for us as well, we felt very comfortable that we'd feel very good about the terms of the facility.
We're just looking forward to a great relationship with them.
Yeah, good. Maybe that's a good spot to leave it. I mean, clearly, the business is on solid footing, return to positive growth, you know, north of 30% EBITDA margins in the second half. From my perspective, I think as the reported numbers now get a little bit easier to adjust next year with the divestitures and the sunset assets kind of in the rearview and we start to see some actual positive growth, I think it's going to get on more folks' radars. Mike, thank you very much for doing this and being here. We appreciate it.