Upland Overview December 2019 Safe Harbor Statement This presentation includes "forward-looking statements," which are subject to substantial risks, uncertainties and assumptions, subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Accordingly, you should not place undue reliance on these forward-looking statements. Forward-looking statements include any statement that does not directly relate to any historical or current fact and often include words such as "belie ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-36720 UPLAND SOFTWARE, INC. (Exact name of registrant as specified in its charter) State of Delaware 27-2992077 (Stat ...

Upland Software, Inc. (NASDAQ:UPLD) Q3 2019 Results Conference Call November 7, 2019 5:00 PM ET Company Participants Jack McDonald - Chairman and Chief Executive Officer Mike Hill - Chief Financial Officer Tim Mattox - President and Chief Operating Officer Conference Call Participants Brad Zelnick - Credit Suisse Bhavan Suri - William Blair Luv Sodha - Jefferies Brian Peterson - Raymond James Eric Lemus - SunTrust Operator Ladies and gentlemen thank you for standing by and welcome to the Upland Software Thi ...

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Part I. FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Upland Software, Inc.'s unaudited condensed consolidated financial statements for the period ended June 30, 2019, reflect significant asset and revenue growth, primarily from acquisitions, alongside increased operating losses and debt [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2019, total assets increased to **$657.6 million**, driven by cash from a stock offering and acquisition-related goodwill and intangibles, while total liabilities rose to **$424.6 million** due to higher notes payable Condensed Consolidated Balance Sheets (in thousands of USD) | | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Total current assets** | $157,014 | $67,288 | | **Goodwill** | $273,363 | $225,322 | | **Intangible assets, net** | $207,232 | $179,572 | | **Total assets** | **$657,580** | **$483,198** | | **Total current liabilities** | $107,472 | $107,649 | | **Notes payable, less current maturities** | $305,335 | $273,713 | | **Total liabilities** | **$424,608** | **$395,891** | | **Total stockholders' equity** | **$232,972** | **$87,307** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2019 total revenue increased **47%** to **$53.0 million**, but a significant rise in operating expenses, including **$9.3 million** in acquisition-related costs, led to a net loss of **$5.4 million** Condensed Consolidated Statements of Operations (in thousands of USD, except per share data) | | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | | :--- | :--- | :--- | | **Total revenue** | $53,013 | $35,946 | | **Gross profit** | $36,430 | $25,097 | | **Loss from operations** | $(5,532) | $(691) | | **Net loss** | **$(5,369)** | **$(5,230)** | | **Net loss per common share, basic and diluted** | $(0.24) | $(0.26) | [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) The company reported a comprehensive loss of **$7.1 million** for Q2 2019, including a **$5.4 million** net loss and a **$1.8 million** foreign currency translation adjustment loss Condensed Consolidated Statements of Comprehensive Loss (in thousands of USD) | | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | | :--- | :--- | :--- | | **Net loss** | $(5,369) | $(5,230) | | **Foreign currency translation adjustment** | $(1,757) | $(2,227) | | **Comprehensive loss** | **$(7,126)** | **$(7,457)** | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity significantly increased to **$233.0 million** by June 30, 2019, primarily due to a **$151.2 million** increase in additional paid-in capital from a common stock issuance - A public offering of 3,795,000 shares of common stock resulted in a **$151.2 million** increase in additional paid-in capital during the six months ended June 30, 2019[23](index=23&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2019, operating activities provided **$5.4 million** in cash, investing activities used **$83.2 million** for acquisitions, and financing activities provided **$168.6 million**, leading to a **$91.6 million** increase in cash and equivalents Condensed Consolidated Statements of Cash Flows (in thousands of USD) | | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $5,396 | $3,740 | | **Net cash used in investing activities** | $(83,188) | $(45,877) | | **Net cash provided by financing activities** | $168,617 | $39,220 | | **Change in cash and cash equivalents** | $91,623 | $(3,289) | | **Cash and cash equivalents, end of period** | **$108,361** | **$19,037** | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies and financial items, including two 2019 acquisitions contributing **$3.8 million** in revenue, the adoption of ASU 2016-02 recognizing **$6.3 million** in right-of-use assets, subsequent debt refinancing, and **$161.1 million** in remaining performance obligations - Completed the acquisitions of Postup Holdings and Kapost in Q2 2019, contributing approximately **$2.4 million** and **$1.4 million** in revenue, respectively, since their acquisition dates[45](index=45&type=chunk) - Adopted the new lease standard ASU 2016-02 on January 1, 2019, recognizing **$6.3 million** in right-of-use assets and corresponding lease liabilities[41](index=41&type=chunk)[42](index=42&type=chunk) - As of June 30, 2019, the company had approximately **$161.1 million** of revenue expected from remaining performance obligations, with **71%** anticipated in the next 12 months[116](index=116&type=chunk) - Subsequent to the quarter end, on August 6, 2019, the company entered into a new **$350 million** senior secured term loan B facility and a new **$60 million** revolving credit facility, replacing its existing credit facility[121](index=121&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q2 2019's **47%** revenue growth primarily to acquisitions, with Adjusted EBITDA rising to **$19.1 million**, while acquisition-related expenses increased **195%**, and liquidity improved significantly with cash reaching **$108.4 million** after a **$151.1 million** stock offering [Overview](index=32&type=section&id=Overview) Upland provides cloud-based enterprise work management software, driving growth primarily through **twenty-two acquisitions** from 2012 to 2019, increasing revenue from **$22.8 million** to **$149.9 million** and expanding international revenue share - The company's growth strategy involves acquiring complementary technologies and businesses to expand product families, customer base, and market access[133](index=133&type=chunk) - Revenue grew from **$22.8 million** in 2012 to **$149.9 million** in 2018, representing an approximate **558%** growth rate[132](index=132&type=chunk) [Key Metrics](index=33&type=section&id=Key%20Metrics) Adjusted EBITDA, a key non-GAAP metric, increased to **$19.1 million** for Q2 2019 and **$36.9 million** for the six months ended June 30, 2019, reflecting improved operational performance Reconciliation of Net Loss to Adjusted EBITDA (in thousands of USD) | | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | | :--- | :--- | :--- | | **Net loss** | $(5,369) | $(5,230) | | **Adjustments** | $24,452 | $17,775 | | **Adjusted EBITDA** | **$19,083** | **$12,545** | [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Q2 2019 total revenue increased **47%** to **$53.0 million**, driven by acquisitions, while operating expenses, particularly acquisition-related costs, rose **195%** to **$9.3 million**, reflecting the company's growth strategy - Q2 2019 total revenue increased by **$17.1 million** (**47%**) year-over-year, with **$15.2 million** attributed to acquisitions not fully in the comparative period[146](index=146&type=chunk) - Acquisition-related expenses for Q2 2019 were **$9.3 million**, a **195%** increase from **$3.1 million** in Q2 2018, reflecting recent transaction costs[178](index=178&type=chunk)[179](index=179&type=chunk) - A tax benefit of **$6.1 million** was recorded in Q2 2019, compared to a **$0.9 million** provision in Q2 2018, primarily due to the release of a valuation allowance from domestic entity acquisitions with deferred tax liabilities[187](index=187&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity significantly improved in H1 2019, with cash and cash equivalents rising to **$108.4 million** due to **$151.1 million** net proceeds from a May 2019 stock offering, and subsequent debt refinancing with a new **$350 million** term loan - Cash and cash equivalents increased to **$108.4 million** as of June 30, 2019, largely due to a public stock offering[191](index=191&type=chunk) - In May 2019, the company completed a public offering of 3,795,000 shares, raising net proceeds of **$151.1 million**[197](index=197&type=chunk) - On August 6, 2019, the company replaced its existing credit facility with a new **$350 million** term loan and a **$60 million** revolving credit facility[195](index=195&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company identifies interest rate risk on variable-rate debt, foreign currency exchange risk from international operations, and inflation as primary market risks, noting a **$0.3 million** impact from a 100 basis point interest rate change and a **$3.0 million** revenue impact from a 10% foreign exchange rate change - A hypothetical 100 basis point change in interest rates would result in a maximum potential change to annual interest expense of **$0.3 million** based on debt levels at June 30, 2019[213](index=213&type=chunk) - A hypothetical **10%** change in foreign currency exchange rates would have resulted in a change in revenue of **$3.0 million** for the six months ended June 30, 2019[214](index=214&type=chunk) [Item 4. Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2019 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2019[219](index=219&type=chunk) Part II. OTHER INFORMATION [Item 1A. Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors disclosed in the company's 2018 Annual Report on Form 10-K, referring stakeholders to that document for a comprehensive overview - There have been no material changes during 2019 to the risk factors included in the company's 2018 Annual Report on Form 10-K[222](index=222&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section indexes all exhibits filed with the Form 10-Q, including CEO and CFO certifications required by Sarbanes-Oxley Act and XBRL data files - The Exhibit Index lists certifications from the CEO and CFO pursuant to Sarbanes-Oxley Act Sections 302 and 906, along with XBRL instance and taxonomy documents[226](index=226&type=chunk)

Upland Software, Inc. (NASDAQ:UPLD) Q2 2019 Results Conference Call August 7, 2019 5:00 PM ET Company Participants Jack McDonald – Chairman and Chief Executive Officer Mike Hill – Chief Financial Officer Tim Mattox – President and Chief Operating Officer Conference Call Participants Bhavan Suri – William Blair John DiFucci – Jefferies Richard Davis – Canaccord Genuity Jeff Van Rhee – Craig-Hallum Joshua Reilly – Needham Brian Peterson – Raymond James Richard Baldry – Roth Capital Eric Lemus – SunTrust Robin ...

Company Overview - Upland Software is an Enterprise Work Management (EWM) cloud provider with headquarters in Austin, TX[10] - The company has over 9,000 customers and more than 1,000,000 global users[10] - Upland targets a $25 billion Total Addressable Market (TAM) with an average ARR (Annual Recurring Revenue) of over $100,000 per major account[10] - The company boasts a high recurring revenue model, with over 90% recurring revenue[10] - Upland has a high net dollar retention rate (DRR) of 98%[10, 43] Financial Performance - The company's annual revenue run-rate is over $205 million, based on the annualized run-rate of total revenue for the quarter ended March 31, 2019, plus pro-forma total revenue from the Post-Up acquisition[10] - Upland experienced 62% year-over-year recurring revenue growth for the quarter ended March 31, 2019[10, 43] - The company's Adjusted EBITDA margin is 37% of revenue, based on the quarter ending March 31, 2019[10, 43] - Upland has a revenue growth CAGR (Compound Annual Growth Rate) of 40% from 2016 to 2019 (estimated)[42] M&A Strategy - Upland aims to add $25-$50 million in revenue run-rate per year through acquisitions[28] - The company targets businesses with $5-25 million in revenue, a sticky customer base with 90%+ Net Dollar Retention Rate (NDRR), and 70%+ gross margins[28]

Upland Software (NASDAQ:UPLD) Q1 2019 Earnings Conference Call May 2, 2019 5:00 PM ET Company Participants John McDonald - Founder, CEO & Chairman Michael Hill - CFO, Treasurer & Secretary Timothy Mattox - President & COO Conference Call Participants Bhavan Suri - William Blair & Company L.L.C. Brian Peterson - Raymond James & Associates, Inc. Joshua Reilly - Needham & Company, LLC Richard Davis - Canaccord Genuity Limited Operator Ladies and gentlemen, thank you for standing by, and welcome to the Upland S ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2019 OR ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-36720 UPLAND SOFTWARE, INC. (Exact name of registrant as specified in its charter) State of Delaware 27-2992077 (State or other jurisdictio ...

Part I [Business](index=6&type=section&id=Item%201.%20Business) Upland Software provides cloud-based enterprise work management software, achieving 53% revenue growth in 2018 primarily through strategic acquisitions - Upland provides cloud-based enterprise work management software through seven main solution suites: Customer Experience Management (CXM), Sales Enablement, Professional Services Automation (PSA), Project and Financial Management, Enterprise Knowledge Management (KM), Secure Document Services, and Document Lifecycle Automation[18](index=18&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk) - The company's growth strategy is centered on acquiring complementary technologies and businesses, having completed **20 acquisitions** in the seven years ending December 31, 2018[31](index=31&type=chunk) - Upland utilizes a proprietary operating platform called UplandOne, which focuses on six key areas: High-Touch Customer Success, Quality-Focused R&D, Customer-Driven Innovation, Expert Professional Services, 24x7 Global Support, and an Enterprise Cloud Platform primarily using Amazon Web Services (AWS)[32](index=32&type=chunk)[38](index=38&type=chunk) - The company serves over **9,000 customers** across a diverse range of industries, with no single customer accounting for more than **3% of revenue** in 2018[40](index=40&type=chunk) Revenue Growth and Composition (2017-2018) | Revenue Type | 2018 | 2017 | Growth | % of 2018 Total Revenue | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $149.9M | $98.0M | 53% | 100% | | Subscription and Support | $136.6M | $85.5M | 60% | 91% | [Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from its acquisition-based growth strategy, customer retention, competition, cybersecurity, and debt covenants - A primary component of the growth strategy is acquisitions, which carries risks such as the inability to identify suitable candidates, consummate deals on acceptable terms, or successfully integrate acquired businesses[68](index=68&type=chunk) - Growth depends on retaining existing customers and securing renewals and upgrades, and failure to do so could harm operating results[64](index=64&type=chunk) - The company has a **$400.0 million** loan facility with Wells Fargo that contains operating and financial covenants restricting activities such as asset sales, mergers, and paying dividends, with a breach potentially resulting in default and acceleration of debt[84](index=84&type=chunk)[88](index=88&type=chunk) - Operations are subject to cybersecurity risks, as applications involve storing and transmitting customers' proprietary and confidential information, and a security breach could lead to reputational damage, litigation, and other liabilities[106](index=106&type=chunk) - As of December 31, 2018, the company had federal net operating loss carryforwards of approximately **$204.8 million**, but their usability may be limited under Sections 382 and 383 of the Internal Revenue Code due to ownership changes[133](index=133&type=chunk) - As of December 31, 2018, directors, executive officers, and principal stockholders beneficially owned a majority of the outstanding common stock, giving them significant influence over corporate matters, including a change of control[155](index=155&type=chunk) [Unresolved Staff Comments](index=32&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[161](index=161&type=chunk) [Properties](index=33&type=section&id=Item%202.%20Properties) The company's principal corporate offices are in Austin, Texas, with additional leased facilities domestically and internationally - The main corporate office is in Austin, Texas, with a lease through June 2025, and additional offices are leased domestically and internationally to support operations[162](index=162&type=chunk) [Legal Proceedings](index=33&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - Upland is not presently a party to any material legal proceedings[163](index=163&type=chunk) [Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[164](index=164&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=34&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Upland Software's common stock trades on NASDAQ, with no dividends paid or anticipated as earnings are reinvested for growth - The company's common stock trades on the NASDAQ Global Market under the ticker symbol "**UPLD**"[166](index=166&type=chunk) - Upland has never declared or paid dividends and does not expect to in the foreseeable future, with plans to retain all earnings for business operations and growth[168](index=168&type=chunk) [Selected Financial Data](index=35&type=section&id=Item%206.%20Selected%20Financial%20Data) Selected financial data from 2014-2018 shows significant acquisition-driven revenue growth and Adjusted EBITDA, despite consistent net losses Selected Consolidated Statements of Operations Data (2016-2018) | (in thousands) | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | **Total revenue** | **$149,885** | **$97,952** | **$74,767** | | Gross profit | $101,296 | $64,305 | $47,202 | | Loss from operations | $(5,594) | $(11,136) | $(8,524) | | **Net loss** | **$(10,839)** | **$(18,725)** | **$(13,513)** | | Net loss per common share | $(0.54) | $(1.02) | $(0.82) | Selected Consolidated Balance Sheet Data (as of Dec 31) | (in thousands) | 2018 | 2017 | | :--- | :--- | :--- | | Cash and cash equivalents | $16,738 | $22,326 | | Goodwill | $225,322 | $154,607 | | **Total assets** | **$483,198** | **$281,259** | | Total liabilities | $395,891 | $189,844 | | Total stockholders' equity | $87,307 | $91,415 | Other Financial Data & Reconciliation of Net Loss to Adjusted EBITDA (2016-2018) | (in thousands, except %) | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Annualized recurring revenue | $131,919 | $106,099 | $63,968 | | Annual net dollar retention rate | 98% | 93% | 95% | | **Adjusted EBITDA** | **$53,105** | **$30,316** | **$12,616** | | Net loss | $(10,839) | $(18,725) | $(13,513) | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes 2018's 53% revenue growth to acquisitions, with positive trends in ARR and Adjusted EBITDA, maintaining liquidity via credit facility [Overview and Acquisitions](index=40&type=section&id=Overview%20and%20Acquisitions) Upland's revenue grew significantly from 2012 to 2018, driven by a series of acquisitions, including four in 2018, expanding its product suites - In 2018, Upland completed four acquisitions: Interfax for **$33.6 million** plus a holdback, RO Innovation for **$12.3 million** plus a holdback and potential earn-out, Rant & Rave for **$58.5 million** plus a holdback, and Adestra for **$56.0 million** plus a holdback[200](index=200&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) - In 2017, Upland acquired Omtool, RightAnswers, Waterfall, and Qvidian, continuing its strategy of growth through acquisition[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) [Results of Operations](index=48&type=section&id=Results%20of%20Operations) Total revenue increased 53% in 2018 to $149.9 million, primarily due to acquisitions, with a narrowed net loss aided by an income tax benefit Revenue Comparison (2018 vs. 2017) | (in thousands) | 2018 | 2017 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Subscription and support | $136,578 | $85,467 | $51,111 | 60% | | Perpetual license | $3,902 | $4,346 | $(444) | (10)% | | Professional services | $9,405 | $8,139 | $1,266 | 16% | | **Total revenue** | **$149,885** | **$97,952** | **$51,933** | **53%** | - The **$51.9 million** increase in total revenue in 2018 was entirely attributed to acquisitions closed after January 11, 2017[239](index=239&type=chunk) - Acquisition-related expenses increased to **$18.7 million** in 2018 from **$15.1 million** in 2017, primarily due to the increased size and number of acquisitions[252](index=252&type=chunk) - The company recorded a **$9.8 million** benefit from income taxes in 2018, compared to a **$1.3 million** provision in 2017, principally due to the release of a valuation allowance related to deferred tax liabilities from acquisitions[257](index=257&type=chunk) [Liquidity and Capital Resources](index=59&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is maintained through cash from operations and a $400 million credit facility, primarily funding acquisitions, despite a working capital deficit - As of Dec 31, 2018, the company had **$16.7 million** in cash and cash equivalents and a working capital deficit of **$40.4 million**, which included **$57.6 million** of deferred revenue[280](index=280&type=chunk)[281](index=281&type=chunk) - The credit facility was expanded to **$400.0 million** in 2018, with **$283.2 million** outstanding at year-end, **$60.0 million** of committed capital, and a **$55.0 million** uncommitted accordion available[280](index=280&type=chunk)[283](index=283&type=chunk) Summary of Cash Flows (in thousands) | | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $7,347 | $7,716 | $3,875 | | Net cash used in investing activities | $(161,686) | $(110,775) | $(13,229) | | Net cash provided by financing activities | $149,923 | $96,178 | $19,525 | Contractual Obligations as of Dec 31, 2018 (in thousands) | Contractual Obligations | Total | Less than 1 Year | 1-3 Years | >3-5 Years | More Than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Debt Obligations | $283,218 | $7,125 | $23,156 | $252,937 | $— | | Interest on Debt Obligations | $61,915 | $18,045 | $34,474 | $9,396 | $— | | Operating Lease Obligations | $6,483 | $2,719 | $1,989 | $1,073 | $702 | | Purchase Commitments | $8,298 | $6,273 | $2,025 | $— | $— | | **Total** | **$360,527** | **$34,767** | **$61,652** | **$263,406** | **$702** | [Critical Accounting Policies and the Use of Estimates](index=63&type=section&id=Critical%20Accounting%20Policies%20and%20the%20Use%20of%20Estimates) Critical accounting policies involve significant judgment in revenue recognition (ASC 606 adoption), business combinations, goodwill impairment, and income taxes - Critical accounting policies requiring significant estimates include revenue recognition, stock-based compensation, income taxes, business combinations, and goodwill/intangibles[305](index=305&type=chunk) - The company adopted ASC 606 (Revenue from Contracts with Customers) on January 1, 2018, using the modified retrospective method, primarily impacting the timing of recognition for some perpetual licenses and requiring capitalization and amortization of sales commissions[394](index=394&type=chunk)[417](index=417&type=chunk) - For business combinations, the company allocates the purchase price to tangible and intangible assets (like customer relationships and developed technology) and liabilities based on estimated fair values, with the excess recorded as goodwill[323](index=323&type=chunk) - Goodwill is evaluated for impairment annually at the single reporting unit level, with no impairment identified in 2018, 2017, or 2016[329](index=329&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=67&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks from interest rate fluctuations on variable-rate debt and foreign currency exchange rates from international operations - The primary market risks are interest rate, foreign exchange, and inflation[335](index=335&type=chunk) - Interest rate risk is tied to the variable-rate credit facility, where a 100 basis point change in interest rates would result in a potential annual interest expense change of **$0.3 million** based on the **$283.2 million** balance at year-end 2018[337](index=337&type=chunk) - Foreign currency exchange risk exists due to international operations, and a hypothetical 10% change in foreign currency exchange rates would have impacted 2018 revenue by **$3.2 million**[339](index=339&type=chunk) [Financial Statements and Supplementary Data](index=69&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for 2018, detailing assets, liabilities, revenue, net loss, and cash flows, with explanatory notes [Consolidated Financial Statements](index=71&type=section&id=Consolidated%20Financial%20Statements) The 2018 consolidated financial statements show increased assets and liabilities due to acquisitions, with total revenue of $149.9 million and a net loss of $10.8 million Consolidated Balance Sheet Highlights (as of Dec 31) | (in thousands) | 2018 | 2017 | | :--- | :--- | :--- | | Total current assets | $67,288 | $51,686 | | Goodwill | $225,322 | $154,607 | | Intangible assets, net | $179,572 | $70,043 | | **Total assets** | **$483,198** | **$281,259** | | Total current liabilities | $107,649 | $75,139 | | Notes payable, less current | $273,713 | $108,843 | | **Total liabilities** | **$395,891** | **$189,844** | | **Total stockholders' equity** | **$87,307** | **$91,415** | Consolidated Statement of Operations Highlights (Year Ended Dec 31) | (in thousands) | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Total revenue | $149,885 | $97,952 | $74,767 | | Gross profit | $101,296 | $64,305 | $47,202 | | Loss from operations | $(5,594) | $(11,136) | $(8,524) | | **Net loss** | **$(10,839)** | **$(18,725)** | **$(13,513)** | [Notes to the Consolidated Financial Statements](index=76&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) Notes detail accounting policies, including ASC 606 adoption, purchase price allocations for 2018 acquisitions, debt facility terms, and stock-based compensation - The company adopted ASC 606 on January 1, 2018, using the modified retrospective method, resulting in a cumulative adjustment of **$6.3 million** to the opening balance of accumulated deficit, and increasing 2018 earnings per share by **$0.13**[417](index=417&type=chunk)[538](index=538&type=chunk)[539](index=539&type=chunk) - The 2018 acquisitions of Adestra, Rant & Rave, Interfax, and RO Innovation resulted in the recognition of **$70.1 million** in goodwill and significant intangible assets, primarily customer relationships and developed technology[443](index=443&type=chunk)[454](index=454&type=chunk) - As of Dec 31, 2018, the company had **$283.2 million** outstanding on its credit facility, which matures in August 2022 and contains various financial and operating covenants[468](index=468&type=chunk)[475](index=475&type=chunk) - The company recognized **$14.1 million** in stock-based compensation expense in 2018, up from **$10.0 million** in 2017[516](index=516&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=112&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting or financial disclosure matters - None[550](index=550&type=chunk) [Controls and Procedures](index=112&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2018 - The CEO and CFO concluded that disclosure controls and procedures were effective as of December 31, 2018[551](index=551&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2018[555](index=555&type=chunk) - The assessment of internal controls excluded the 2018 acquisitions of Interfax, Rant & Rave, and Adestra, which combined represented **38.6%** of total assets and **12.1%** of total revenue for the year[554](index=554&type=chunk) [Other Information](index=113&type=section&id=Item%209B.%20Other%20Information) A correction to 2018 financial results reclassified $890,000 in stamp taxes, increasing the reported GAAP net loss to $10.8 million - A correction was made to the initially reported 2018 financial results, reclassifying **$890,000** in stamp taxes from purchase consideration to acquisition-related expense[558](index=558&type=chunk) - The reclassification increased the full-year 2018 GAAP net loss from **$9.9 million** to **$10.8 million**, and the net loss per share from **$0.50** to **$0.54**[559](index=559&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=113&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2019 proxy statement - Required information is incorporated by reference from the 2019 Proxy Statement[561](index=561&type=chunk) [Executive Compensation](index=113&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation details are incorporated by reference, with amended employment agreements increasing target bonuses for top executives in March 2019 - On March 13, 2019, employment agreements were amended to increase target bonuses for top executives[562](index=562&type=chunk) Executive Target Bonus Amendments (as % of Base Salary) | Executive | Title | Old Target Bonus | New Target Bonus | | :--- | :--- | :--- | :--- | | John T. McDonald | CEO | 100% | 200% | | Timothy W. Mattox | COO | 100% | 150% | | Michael D. Hill | CFO | 100% | 125% | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=114&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information on security ownership and equity compensation plans is incorporated by reference from the 2019 proxy statement - Required information is incorporated by reference from the 2019 Proxy Statement[566](index=566&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=114&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the 2019 proxy statement - Required information is incorporated by reference from the 2019 Proxy Statement[566](index=566&type=chunk) [Principal Accountant Fees and Services](index=114&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services is incorporated by reference from the 2019 proxy statement - Required information is incorporated by reference from the 2019 Proxy Statement[567](index=567&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=114&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This item references financial statements in Item 8 and the Exhibit Index for a full list of filed exhibits - This item references the financial statements in Item 8 and the Exhibit Index for a full list of filed exhibits[567](index=567&type=chunk)[568](index=568&type=chunk) [Form 10-K Summary](index=114&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable - Not applicable[569](index=569&type=chunk)