[Part I. FINANCIAL INFORMATION](index=4&type=section&id=Part%20I.%20FINANCIAL%20INFORMATION) This part covers the unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Upland Software, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income (loss), stockholders' deficit, and cash flows, along with detailed notes on accounting policies and key financial items [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' deficit at specific dates Condensed Consolidated Balance Sheet Highlights (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change (Absolute) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :---------------- | :--------- | | Cash and cash equivalents | $41,011 | $56,426 | $(15,415) | -27.3% | | Accounts receivable (net) | $20,129 | $38,647 | $(18,518) | -47.9% | | Total current assets | $83,387 | $118,392 | $(35,005) | -29.6% | | Intangible assets, net | $76,513 | $123,903 | $(47,390) | -38.2% | | Total assets | $441,722 | $529,522 | $(87,800) | -16.6% | | Total current liabilities | $89,636 | $120,420 | $(30,784) | -25.6% | | Notes payable, less current maturities | $252,458 | $286,970 | $(34,512) | -12.0% | | Total liabilities | $357,989 | $424,597 | $(66,608) | -15.7% | | Total stockholders' deficit | $(42,389) | $(18,305) | $(24,084) | 131.6% | - Total assets decreased by **$87.8 million**, or **16.6%**, from December 31, 2024, to June 30, 2025, primarily driven by reductions in intangible assets and accounts receivable[9](index=9&type=chunk) - Total liabilities decreased by **$66.6 million**, or **15.7%**, mainly due to a reduction in notes payable and deferred revenue[9](index=9&type=chunk) - Stockholders' deficit significantly increased by **$24.1 million**, or **131.6%**, indicating a worsening equity position[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's financial performance over specific periods, including revenue, expenses, and net loss Condensed Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (Absolute) | Change (%) | | :-------------------------------- | :------------------------------- | :------------------------------- | :---------------- | :--------- | | Total revenue | $53,383 | $69,339 | $(15,956) | -23.0% | | Gross profit | $39,948 | $48,865 | $(8,917) | -18.2% | | Loss from operations | $(7,035) | $(5,371) | $(1,664) | 31.0% | | Net loss | $(13,029) | $(11,439) | $(1,590) | 13.9% | | Net loss per common share, basic and diluted | $(0.51) | $(0.47) | $(0.04) | 8.5% | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (Absolute) | Change (%) | | :-------------------------------- | :----------------------------- | :----------------------------- | :---------------- | :--------- | | Total revenue | $117,038 | $140,075 | $(23,037) | -16.4% | | Gross profit | $85,555 | $98,552 | $(12,997) | -13.2% | | Loss from operations | $(8,087) | $(97,012) | $88,925 | -91.7% | | Net loss | $(38,877) | $(107,569) | $68,692 | -63.9% | | Net loss per common share, basic and diluted | $(1.47) | $(3.92) | $2.45 | -62.5% | - Total revenue decreased by **23%** for the three months and **16.4%** for the six months ended June 30, 2025, primarily due to divested product lines and Sunset Assets[11](index=11&type=chunk) - Net loss increased by **13.9%** for the three months ended June 30, 2025, but significantly decreased by **63.9%** for the six months ended June 30, 2025, largely due to a substantial goodwill impairment in the prior year period[11](index=11&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section presents the company's net loss and other comprehensive income (loss) components, reflecting total comprehensive performance Condensed Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (Absolute) | Change (%) | | :-------------------------------- | :------------------------------- | :------------------------------- | :---------------- | :--------- | | Net loss | $(13,029) | $(11,439) | $(1,590) | 13.9% | | Other comprehensive income (loss) | $7,029 | $(2,907) | $9,936 | -341.8% | | Comprehensive loss | $(6,000) | $(14,346) | $8,346 | -58.2% | | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (Absolute) | Change (%) | | :-------------------------------- | :----------------------------- | :----------------------------- | :---------------- | :--------- | | Net loss | $(38,877) | $(107,569) | $68,692 | -63.9% | | Other comprehensive income (loss) | $12,616 | $(6,768) | $19,384 | -286.4% | | Comprehensive loss | $(26,261) | $(114,337) | $88,076 | -77.0% | - Other comprehensive income (loss) significantly improved, moving from a loss of **$2.9 million** in Q2 2024 to an income of **$7.0 million** in Q2 2025, primarily due to unrealized foreign currency translation adjustments and intercompany loan gains[14](index=14&type=chunk) - Comprehensive loss decreased by **58.2%** for the three months and **77.0%** for the six months ended June 30, 2025, driven by the improved net loss and positive other comprehensive income components[14](index=14&type=chunk) [Condensed Consolidated Statements of Stockholders' Deficit](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Deficit) This section details changes in the company's equity position, including preferred stock, common stock, and accumulated deficit Condensed Consolidated Statements of Stockholders' Deficit Highlights (in thousands, except share amounts) | Item | June 30, 2025 | December 31, 2024 | Change (Absolute) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :---------------- | :--------- | | Preferred Stock Amount | $126,122 | $123,230 | $2,892 | 2.3% | | Common Stock Shares | 28,708,922 | 28,168,267 | 540,655 | 1.9% | | Additional Paid-In Capital | $607,463 | $605,286 | $2,177 | 0.4% | | Accumulated Other Comprehensive Loss | $(9,374) | $(21,990) | $12,616 | -57.4% | | Accumulated Deficit | $(640,481) | $(601,604) | $(38,877) | 6.5% | | Total Stockholders' Deficit | $(42,389) | $(18,305) | $(24,084) | 131.6% | - The total stockholders' deficit increased by **$24.1 million**, or **131.6%**, from December 31, 2024, to June 30, 2025, primarily due to the accumulated deficit increasing by **$38.9 million**[17](index=17&type=chunk)[19](index=19&type=chunk) - Accumulated Other Comprehensive Loss improved by **$12.6 million**, or **57.4%**, mainly driven by positive foreign currency translation adjustments[17](index=17&type=chunk)[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (Absolute) | Change (%) | | :-------------------------------- | :----------------------------- | :----------------------------- | :---------------- | :--------- | | Net cash provided by operating activities | $11,594 | $10,591 | $1,003 | 9.5% | | Net cash provided by (used in) investing activities | $8,005 | $(457) | $8,462 | -1851.6% | | Net cash used in financing activities | $(36,262) | $(14,298) | $(21,964) | 153.6% | | Change in cash, cash equivalents and restricted cash | $(15,415) | $(4,184) | $(11,231) | 268.4% | | Cash, cash equivalents and restricted cash, end of period | $41,637 | $232,375 | $(190,738) | -82.1% | - Net cash provided by operating activities increased by **9.5%** to **$11.6 million** for the six months ended June 30, 2025[21](index=21&type=chunk) - Investing activities shifted from a net cash outflow of **$0.5 million** in 2024 to a net cash inflow of **$8.0 million** in 2025, primarily due to proceeds from divestitures[21](index=21&type=chunk) - Net cash used in financing activities significantly increased by **153.6%** to **$36.3 million**, mainly due to higher debt repayments[21](index=21&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Organization and Nature of Operations](index=11&type=section&id=1.%20Organization%20and%20Nature%20of%20Operations) This note describes Upland Software, Inc.'s business, its focus on AI-powered software, and its customer base - Upland Software, Inc. is a leader in AI-powered knowledge and content management software, headquartered in Austin, Texas[24](index=24&type=chunk) - The Company's solutions help enterprises unlock critical knowledge, automate content workflows, and drive measurable ROI, serving over **1,100 enterprise customers** across diverse industries[24](index=24&type=chunk) [2. Basis of Presentation and Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the accounting principles used in preparing the financial statements and key accounting policies - The condensed consolidated financial statements are prepared in conformity with GAAP and include all adjustments of a normal recurring nature necessary for fair presentation[25](index=25&type=chunk)[26](index=26&type=chunk) Restricted Cash (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Restricted cash | $626 | $626 | - No individual customer represented more than **10%** of total revenues for the six months ended June 30, 2025, or more than **10%** of accounts receivable as of June 30, 2025 or December 31, 2024, indicating diversified customer base[33](index=33&type=chunk) - The Company is evaluating the potential impact of recently issued accounting pronouncements, ASU 2024-04 (Debt-Debt with Conversions and Other Options), ASU 2024-03 (Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures), and ASU 2023-09 (Income Taxes), on its disclosures and financial statements[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) [3. Fair Value Measurements](index=13&type=section&id=3.%20Fair%20Value%20Measurements) This note details the valuation methodologies and fair value hierarchy used for financial assets and liabilities Assets Measured at Fair Value on a Recurring Basis (in thousands) | Item | June 30, 2025 (Level 1) | June 30, 2025 (Level 2) | December 31, 2024 (Level 1) | December 31, 2024 (Level 2) | | :-------------------------------- | :---------------------- | :---------------------- | :-------------------------- | :-------------------------- | | Cash equivalents - money market funds | $21,573 | — | $40,428 | — | | Interest rate swaps | — | $5,094 | — | $9,742 | - The fair value of the Company's long-term debt (before discount) was **$258.1 million** at June 30, 2025, and **$293.7 million** at December 31, 2024, based on valuation methodologies using Level 2 inputs[44](index=44&type=chunk) [4. Goodwill and Other Intangible Assets](index=14&type=section&id=4.%20Goodwill%20and%20Other%20Intangible%20Assets) This note provides information on the company's goodwill and other intangible assets, including changes and impairment charges Goodwill Balance (in thousands) | Item | Amount | | :-------------------------------- | :----- | | Balance at December 31, 2024 | $260,976 | | Divestitures of businesses | $(8,633) | | Foreign currency translation adjustment | $8,362 | | Balance at June 30, 2025 | $260,705 | Intangible Assets, Net (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Customer relationships | $67,383 | $108,961 | | Trade name | $421 | $1,380 | | Developed technology | $8,588 | $13,426 | | Favorable Leases | $121 | $136 | | Total intangible assets | $76,513 | $123,903 | - During the three months ended June 30, 2025, the Company recorded a **$2.5 million** impairment charge related to intangible assets associated with certain Sunset Assets[48](index=48&type=chunk) - Total amortization expense decreased to **$7.9 million** for Q2 2025 (from **$13.5 million** in Q2 2024) and **$17.3 million** for YTD 2025 (from **$27.0 million** in YTD 2024)[49](index=49&type=chunk) [5. Income Taxes](index=15&type=section&id=5.%20Income%20Taxes) This note details the company's income tax benefit or provision and related deferred tax assets and liabilities Income Tax Benefit (Provision) (in thousands) | Period | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Three Months Ended June 30 | $171 | $(1,210) | | Six Months Ended June 30 | $1,516 | $(663) | - The income tax benefit for 2025 periods is primarily related to the deferred tax benefit due to divestitures of businesses, offset by income taxes from U.S. and non-U.S. operations[51](index=51&type=chunk) - The Company has recorded a valuation allowance against its United States net deferred tax assets due to historical operating losses and limited history of profits[53](index=53&type=chunk) [6. Debt](index=17&type=section&id=6.%20Debt) This note provides details on the company's long-term debt, interest rates, covenants, and interest rate swap agreements Long-term Debt (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Senior secured loans | $255,698 | $290,194 | | Less current maturities | $(3,240) | $(3,224) | | Total long-term debt | $252,458 | $286,970 | - The Company's Term Loans accrue interest at a floating rate, which was **8.2%** at June 30, 2025[57](index=57&type=chunk) - The Company was in compliance with all covenants under its Credit Facility as of June 30, 2025[58](index=58&type=chunk) - Interest rate swaps, with notional amounts of **$216.3 million** at June 30, 2025, were de-designated in August 2024, with subsequent changes in fair value recorded to interest expense, net[60](index=60&type=chunk)[61](index=61&type=chunk) [7. Net Loss Per Share](index=18&type=section&id=7.%20Net%20Loss%20Per%20Share) This note presents the calculation of basic and diluted net loss per common share and anti-dilutive equivalents Net Loss Per Common Share (basic and diluted) | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss per common share | $(0.51) | $(0.47) | $(1.47) | $(3.92) | | Weighted-average common shares outstanding | 28,518,839 | 27,348,672 | 28,370,711 | 28,133,285 | Anti-Dilutive Common Share Equivalents (in thousands) | Item | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Stock options | 87,561 | 122,530 | | Restricted stock units | 2,338,055 | 2,716,299 | | Performance restricted stock units | 350,000 | 350,000 | | Series A Preferred Stock (if-converted) | 7,467,267 | 7,140,482 | | Total anti–dilutive common share equivalents | 10,242,883 | 10,329,311 | [8. Commitments and Contingencies](index=19&type=section&id=8.%20Commitments%20and%20Contingencies) This note outlines the company's contractual commitments, legal proceedings, and potential financial obligations - The Company has purchase commitments for hosting services and third-party technology, and is involved in various lawsuits and legal proceedings in the normal course of business, not anticipating a material adverse effect[68](index=68&type=chunk)[69](index=69&type=chunk) - A **$0.6 million** letter of credit is maintained as collateral for an operating lease, expiring July 2029[70](index=70&type=chunk) [9. Mezzanine Equity](index=19&type=section&id=9.%20Mezzanine%20Equity) This note details the Series A Convertible Preferred Stock, including issuance, dividends, and conversion terms - The Company issued **115,000 shares** of Series A Convertible Preferred Stock at **$1,000 per share** for an aggregate of **$115.0 million** in August 2022[71](index=71&type=chunk) - Series A Preferred Stock holders are entitled to a **4.5% annual dividend** (increasing to **7.0%** after seven years), which accrues and compounds quarterly, and can be paid in cash or in kind[72](index=72&type=chunk) - As of June 30, 2025, accrued unpaid dividends on Series A Preferred Stock totaled **$15.7 million**, representing **895,839 Common Stock shares** upon conversion at **$17.50 per share**[73](index=73&type=chunk) - The Series A Preferred Stock has a conversion price of **$17.50 per share**, subject to customary anti-dilution adjustments[79](index=79&type=chunk) [10. Stockholders' Deficit](index=23&type=section&id=10.%20Stockholders'%20Deficit) This note describes the company's common stock, share repurchase plan, tax benefit preservation plan, and stock-based compensation - The Company's common stock has a par value of **$0.0001 per share**, with each share entitled to one vote[81](index=81&type=chunk) - The Share Repurchase Plan, authorized in September 2023 for up to **$25 million**, expired in May 2024 after all authorized shares were repurchased[82](index=82&type=chunk) - The 2024 Tax Benefit Preservation Plan was adopted to protect the Company's ability to use net operating loss carryforwards (NOLs) by deterring any person from acquiring **4.9% or more** of outstanding stock without Board approval[83](index=83&type=chunk) Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenue | $143 | $199 | $264 | $385 | | Research and development | $318 | $638 | $608 | $1,244 | | Sales and marketing | $52 | $362 | $304 | $759 | | General and administrative | $2,561 | $3,934 | $4,573 | $6,267 | | Total | $3,074 | $5,133 | $5,749 | $8,655 | [11. Revenue Recognition](index=25&type=section&id=11.%20Revenue%20Recognition) This note explains the company's revenue recognition policies, performance obligations, and revenue breakdown by type and geography - Revenue is recognized when control of promised goods or services is transferred to customers, based on a five-step model, with performance obligations including subscription and support, perpetual licenses, and professional services[93](index=93&type=chunk)[94](index=94&type=chunk)[96](index=96&type=chunk) - As of June 30, 2025, approximately **$169.4 million** of revenue is expected to be recognized from remaining performance obligations, with about **72%** expected within the next 12 months[111](index=111&type=chunk) Total Revenue by Type and Geography (in thousands) | Revenue Type/Geography | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **Subscription and support:** | | | | | | United States | $37,046 | $47,342 | $80,770 | $95,066 | | United Kingdom | $5,207 | $8,397 | $12,788 | $17,472 | | Canada | $3,010 | $3,217 | $6,022 | $6,545 | | Other International | $5,204 | $6,548 | $11,069 | $13,499 | | Total subscription and support revenue | $50,467 | $65,504 | $110,649 | $132,582 | | **Perpetual license:** | | | | | | Total perpetual license revenue | $1,199 | $1,730 | $2,807 | $3,200 | | **Professional services:** | | | | | | Total professional service revenue | $1,717 | $2,105 | $3,582 | $4,293 | | **Total revenue** | **$53,383** | **$69,339** | **$117,038** | **$140,075** | [12. Divestitures](index=29&type=section&id=12.%20Divestitures) This note details the company's divestiture activities, including consideration received and related expenses - The Company completed divestitures of certain product lines for combined total consideration of **$10.0 million** for the three months and **$15.5 million** (plus up to **$4.0 million** in earn-outs) for the six months ended June 30, 2025[114](index=114&type=chunk) - A secured promissory note of **$5.5 million** (fair value **$4.9 million**) was received as part of the consideration, with a **$1.5 million** reserve provided against it[114](index=114&type=chunk) Loss on Divestitures and Related Expenses (in thousands) | Item | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------------------- | :------------------------------- | :----------------------------- | | Net losses on divestitures | $(434) | $(23,891) | | Divestiture-related expenses | $6,879 | $8,624 | - Divestiture-related expenses for the three months ended June 30, 2025, included a one-time termination fee of **$5.2 million** for a legacy vendor contract[116](index=116&type=chunk) [13. Segment Information](index=30&type=section&id=13.%20Segment%20Information) This note clarifies that the company operates as a single operating and reporting segment - The Company operates as a single operating and reporting segment, with the CEO managing the business as a multi-product cloud-based software application business[119](index=119&type=chunk) [14. Subsequent Events](index=30&type=section&id=14.%20Subsequent%20Events) This note discloses significant events occurring after the reporting period, including debt refinancing details - On July 25, 2025, the Company refinanced its outstanding Term Loans with a new **$240.0 million** senior secured term loan and a **$30.0 million** senior secured revolving credit facility[120](index=120&type=chunk)[121](index=121&type=chunk) - The new Term Loan matures on July 25, 2031, and bears interest at the secured overnight financing rate (not less than **1.5%**) plus a margin of **6.0% per annum**[121](index=121&type=chunk) - The Credit Facilities include a quarterly covenant limiting the consolidated secured leverage ratio to **6.0 to 1.0** or under and are secured by substantially all of the Company's assets[121](index=121&type=chunk)[123](index=123&type=chunk) [Item 2. 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) This section provides management's perspective on Upland Software, Inc.'s financial condition, results of operations, key metrics, and critical accounting policies [Forward Looking Statements](index=31&type=section&id=Forward%20Looking%20Statements) This section highlights the forward-looking nature of certain statements and cautions readers about inherent risks and uncertainties - The report contains forward-looking statements regarding future financial performance, acquisitions, divestitures, market expansion, AI integration, and other business aspects, subject to risks and uncertainties[124](index=124&type=chunk) - Readers are cautioned not to place undue reliance on these statements, as actual results may differ materially, and the Company undertakes no obligation to update them[125](index=125&type=chunk)[126](index=126&type=chunk) [Overview](index=33&type=section&id=Overview) This section provides a high-level description of Upland Software, Inc.'s business and its role in AI-powered software solutions - Upland Software, Inc. is a leader in AI-powered knowledge and content management software, helping over **1,100 enterprise customers** with critical knowledge, automated workflows, and regulatory compliance[128](index=128&type=chunk) [Key Metrics and Non-GAAP Financial Measures](index=33&type=section&id=Key%20Metrics%20and%20Non-GAAP%20Financial%20Measures) This section presents key performance indicators and non-GAAP financial measures used by management to evaluate the business - The Core Organic Growth Rate for the three-month period ended June 30, 2025, was **1.2%**[131](index=131&type=chunk) Reconciliation of Total Revenue to Core Organic Revenue (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Total revenue | $53,383 | $69,339 | | Less: Perpetual license revenue | $1,199 | $1,730 | | Less: Professional services revenue | $1,717 | $2,105 | | Less: Subscription and support revenue from Sunset Assets | $3,336 | $4,001 | | Less: Subscription and support revenue from divestitures | $2,170 | $15,434 | | Less: Overage Charges | $572 | $2,187 | | Core organic revenue | $44,389 | $43,882 | Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(13,029) | $(11,439) | $(38,877) | $(107,569) | | Adjusted EBITDA | $13,585 | $13,635 | $26,667 | $26,739 | [Consolidated Statements of Operations Data](index=38&type=section&id=Consolidated%20Statements%20of%20Operations%20Data) This section provides a summary of the company's consolidated statements of operations, including revenue breakdown and gross profit margins Revenue Breakdown as Percentage of Total Revenue | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Subscription and support | 95% | 94% | 95% | 95% | | Perpetual license | 2% | 2% | 2% | 2% | | Professional services | 3% | 4% | 3% | 3% | - Gross profit as a percentage of revenue increased to **75%** for the three months ended June 30, 2025 (from **70%** in 2024) and to **73%** for the six months ended June 30, 2025 (from **70%** in 2024)[144](index=144&type=chunk) [Comparison of the Three and Six Months Ended June 30, 2025 and 2024](index=39&type=section&id=Comparison%20of%20the%20Three%20and%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) This section provides a detailed comparative analysis of the company's financial performance for the specified periods [Revenue](index=39&type=section&id=Revenue) This section analyzes the changes in total revenue, attributing declines to divested product lines and Sunset Assets Total Revenue (in thousands) | Period | 2025 | 2024 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Three Months Ended June 30 | $53,383 | $69,339 | (23)% | | Six Months Ended June 30 | $117,038 | $140,075 | (16)% | - The decrease in total revenue for both periods is primarily due to declines from divested product lines (**$14.8 million** for Q2, **$19.8 million** for YTD) and Sunset Assets (**$0.7 million** for Q2, **$2.3 million** for YTD)[148](index=148&type=chunk)[149](index=149&type=chunk) [Cost of Revenue](index=40&type=section&id=Cost%20of%20Revenue) This section examines the changes in cost of revenue, highlighting reductions due to divestitures and personnel-related expenses Total Cost of Revenue (in thousands) | Period | 2025 | 2024 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Three Months Ended June 30 | $13,435 | $20,474 | (34)% | | Six Months Ended June 30 | $31,483 | $41,523 | (24)% | - Cost of subscription and support revenue decreased by **36%** for Q2 and **25%** for YTD, mainly due to divested product lines (**$5.7 million** for Q2, **$7.8 million** for YTD) and Sunset Assets[151](index=151&type=chunk)[153](index=153&type=chunk) - Cost of professional services and other revenue decreased by **17%** for Q2 and **13%** for YTD, primarily due to reduced personnel-related expenses in both divested and ongoing product lines[152](index=152&type=chunk)[154](index=154&type=chunk) [Operating Expenses](index=41&type=section&id=Operating%20Expenses) This section analyzes the various components of operating expenses, including sales and marketing, R&D, and G&A [Sales and Marketing Expense](index=41&type=section&id=Sales%20and%20Marketing%20Expense) This section details the changes in sales and marketing expense, attributing decreases to divestitures and personnel costs Sales and Marketing Expense (in thousands) | Period | 2025 | 2024 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Three Months Ended June 30 | $10,771 | $16,791 | (36)% | | Six Months Ended June 30 | $24,527 | $33,809 | (27)% | - The decrease in sales and marketing expense is attributed to divested product lines (**$3.2 million** for Q2, **$4.6 million** for YTD), Sunset Assets, and personnel-related costs in ongoing product lines[156](index=156&type=chunk)[157](index=157&type=chunk) [Research and Development Expense](index=41&type=section&id=Research%20and%20Development%20Expense) This section analyzes the changes in research and development expense, noting reductions from divested product lines and contract termination Research and Development Expense (in thousands) | Period | 2025 | 2024 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Three Months Ended June 30 | $9,781 | $12,185 | (20)% | | Six Months Ended June 30 | $21,323 | $24,640 | (13)% | - The decrease in R&D expense is primarily due to reduced personnel-related costs in divested product lines, Sunset Assets, and remaining product lines, along with the termination of an outsourced R&D contract[159](index=159&type=chunk)[160](index=160&type=chunk) [General and Administrative Expense](index=42&type=section&id=General%20and%20Administrative%20Expense) This section details the changes in general and administrative expense, primarily due to reduced personnel and divestiture-related costs General and Administrative Expense (in thousands) | Period | 2025 | 2024 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Three Months Ended June 30 | $10,219 | $13,880 | (26)% | | Six Months Ended June 30 | $21,840 | $27,112 | (19)% | - The decrease in G&A expense is mainly due to reduced personnel-related costs, including non-cash stock compensation, and lower costs related to divested product lines[162](index=162&type=chunk)[163](index=163&type=chunk) [Depreciation and Amortization Expense](index=42&type=section&id=Depreciation%20and%20Amortization%20Expense) This section analyzes the decrease in depreciation and amortization expense, driven by divested assets and fully amortized intangibles Total Depreciation and Amortization Expense (in thousands) | Period | 2025 | 2024 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Three Months Ended June 30 | $6,864 | $11,380 | (40)% | | Six Months Ended June 30 | $14,859 | $22,776 | (35)% | - The decrease in D&A expense is primarily due to the decline in amortization from intangible assets associated with divested product lines (**$7.8 million** for YTD) and some ongoing intangible assets becoming fully amortized[165](index=165&type=chunk)[166](index=166&type=chunk) [Divestiture-related Expenses](index=43&type=section&id=Divestiture-related%20Expenses) This section details the significant increase in divestiture-related expenses, including professional fees and a contract termination fee Divestiture-related Expenses (in thousands) | Period | 2025 | 2024 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Three Months Ended June 30 | $6,879 | $0 | 100% | | Six Months Ended June 30 | $8,624 | $0 | 100% | - Divestiture-related expenses significantly increased in 2025 due to professional fees, personnel costs, and a one-time **$5.2 million** termination fee for a legacy vendor contract[168](index=168&type=chunk)[169](index=169&type=chunk) [Impairment of goodwill and other intangibles](index=43&type=section&id=Impairment%20of%20goodwill%20and%20other%20intangibles) This section discusses impairment charges on intangible assets and goodwill, including a significant prior-year impairment Impairment of Goodwill and Other Intangibles (in thousands) | Period | 2025 | 2024 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Three Months Ended June 30 | $2,469 | $0 | N/A | | Six Months Ended June 30 | $2,469 | $87,227 | (97)% | - A **$2.5 million** impairment charge was recorded on intangible assets related to Sunset Assets during Q2 2025, following a triggering event and valuation[170](index=170&type=chunk) - A significant goodwill impairment of **$87.2 million** was recognized in Q1 2024 due to declines in the Company's stock price[171](index=171&type=chunk) [Other Expense](index=44&type=section&id=Other%20Expense) This section analyzes changes in other expenses, including interest expense and losses from business divestitures Total Other Expense (in thousands) | Period | 2025 | 2024 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Three Months Ended June 30 | $(6,165) | $(4,858) | 27% | | Six Months Ended June 30 | $(32,306) | $(9,894) | 227% | - Interest expense, net, decreased by **18%** for Q2 and **34%** for YTD, primarily due to debt prepayments, partially offset by changes in interest rate swap fair value and lower interest income[173](index=173&type=chunk)[176](index=176&type=chunk) - Loss on divestitures of businesses was **$0.4 million** for Q2 2025 and **$23.9 million** for YTD 2025, as the Company divested product lines to focus on higher-margin opportunities[174](index=174&type=chunk)[177](index=177&type=chunk) [Benefit from Income Taxes](index=45&type=section&id=Benefit%20from%20Income%20Taxes) This section explains the shift from an income tax provision to a benefit, primarily due to deferred tax benefits from divestitures Benefit from (Provision for) Income Taxes (in thousands) | Period | 2025 | 2024 | % Change | | :-------------------------------- | :----- | :----- | :------- | | Three Months Ended June 30 | $171 | $(1,210) | (114)% | | Six Months Ended June 30 | $1,516 | $(663) | (329)% | - The shift from an income tax provision in 2024 to a benefit in 2025 is primarily due to the deferred tax benefit from business divestitures[180](index=180&type=chunk)[181](index=181&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash flows from operating, investing, and financing activities, and overall liquidity [Cash Flows from Operating Activities](index=46&type=section&id=Cash%20Flows%20from%20Operating%20Activities) This section analyzes the increase in cash provided by operating activities, including a non-recurring cash gain Net Cash Provided by Operating Activities (in thousands) | Period | 2025 | 2024 | Change (Absolute) | Change (%) | | :-------------------------------- | :----- | :----- | :---------------- | :--------- | | Six Months Ended June 30 | $11,594 | $10,591 | $1,003 | 9.5% | - The increase in cash provided by operating activities is primarily due to a non-recurring **$1.2 million** cash gain from the sale of a portion of interest rate swaps[191](index=191&type=chunk) [Cash Flows from Investing Activities](index=46&type=section&id=Cash%20Flows%20from%20Investing%20Activities) This section details the shift to cash provided by investing activities, mainly driven by divestiture proceeds Net Cash Provided by (Used in) Investing Activities (in thousands) | Period | 2025 | 2024 | Change (Absolute) | Change (%) | | :-------------------------------- | :----- | :----- | :---------------- | :--------- | | Six Months Ended June 30 | $8,005 | $(457) | $8,462 | -1851.6% | - The shift to cash provided by investing activities is mainly due to **$9.1 million** in cash proceeds from divestitures of certain products[194](index=194&type=chunk) [Cash Flows from Financing Activities](index=46&type=section&id=Cash%20Flows%20from%20Financing%20Activities) This section analyzes the increased cash used in financing activities, primarily due to higher debt repayments Net Cash Used in Financing Activities (in thousands) | Period | 2025 | 2024 | Change (Absolute) | Change (%) | | :-------------------------------- | :----- | :----- | :---------------- | :--------- | | Six Months Ended June 30 | $(36,262) | $(14,298) | $(21,964) | 153.6% | - The increased cash used in financing activities is primarily due to **$32.9 million** in additional payments on Term Loans in 2025, partially offset by no common stock repurchases in 2025 compared to **$11.0 million** in 2024[196](index=196&type=chunk) [Critical Accounting Policies and the Use of Estimates](index=47&type=section&id=Critical%20Accounting%20Policies%20and%20the%20Use%20of%20Estimates) This section discusses the significant management judgments and estimates involved in the company's financial reporting - Critical accounting policies involve significant management judgments and estimates, particularly concerning income taxes and goodwill and other intangibles[197](index=197&type=chunk)[202](index=202&type=chunk) - No specific event or circumstance as of July 31, 2025, requires updates to estimates or revisions of asset/liability carrying values, but actual results may differ from estimates[198](index=198&type=chunk)[200](index=200&type=chunk) [Recent Accounting Pronouncements](index=47&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note 2 for information on recently issued accounting pronouncements and their potential impact - For information on recent accounting pronouncements and their impact, refer to Note 2 of the condensed consolidated financial statements[201](index=201&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines Upland Software, Inc.'s exposure to market risks, focusing on interest rate and foreign currency exchange risks and their management [Interest Rate Risk](index=48&type=section&id=Interest%20Rate%20Risk) This section details the company's exposure to interest rate fluctuations on its variable rate debt and mitigation strategies - The Company's exposure to interest rate risk primarily relates to its cash equivalents and variable rate indebtedness, with investment activities focused on preserving principal[204](index=204&type=chunk) - Interest rate swap agreements with a total notional value of **$216.3 million** at June 30, 2025, limit exposure to interest rate risk by converting variable interest payments to a fixed rate of **5.4%**[205](index=205&type=chunk) - A hypothetical **100 basis point** change in interest rates could result in a **$0.2 million** increase to total interest expense for the six months ended June 30, 2025[206](index=206&type=chunk) - Subsequent to quarter-end, the Company refinanced its Term Loans with a new **$240.0 million** term loan bearing interest at SOFR (not less than **1.50%**) plus a **6.00% margin**[207](index=207&type=chunk) [Foreign Currency Exchange Risk](index=48&type=section&id=Foreign%20Currency%20Exchange%20Risk) This section describes the company's exposure to foreign exchange rate fluctuations and their impact on operations - The Company is exposed to foreign exchange rate fluctuations as a portion of its operating expenses are incurred in foreign currencies (e.g., AUD, CAD, INR, GBP, EUR, ILS)[208](index=208&type=chunk) - A hypothetical **10%** change in foreign currency exchange rates could have resulted in a **$1.1 million** change in revenue for the six months ended June 30, 2025[208](index=208&type=chunk) - Foreign currency gains/losses from intercompany loans used to fund foreign subsidiaries are recognized in accumulated other comprehensive income (loss)[209](index=209&type=chunk) [Item 4. Controls and Procedures](index=49&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of Upland Software, Inc.'s disclosure controls and procedures, confirming their effectiveness and noting no material changes [Evaluation of Disclosure Controls and Procedures](index=49&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as of June 30, 2025 - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[212](index=212&type=chunk) - The condensed consolidated financial statements fairly present, in all material respects, the Company's financial condition, results of operations, and cash flows in conformity with GAAP[212](index=212&type=chunk) [Changes in Internal Control over Financial Reporting](index=49&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section confirms no material changes to internal control over financial reporting during the quarter ended June 30, 2025 - There were no changes to the Company's internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, its internal control over financial reporting[213](index=213&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=49&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) This section acknowledges the inherent limitations of internal control over financial reporting, including human error and circumvention - Internal control over financial reporting cannot provide absolute assurance due to inherent limitations such as human diligence, judgment lapses, and potential circumvention by collusion or improper management override[214](index=214&type=chunk) [Part II. OTHER INFORMATION](index=50&type=section&id=Part%20II.%20OTHER%20INFORMATION) This part includes risk factors, other information, and an index of exhibits [Item 1A. Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the comprehensive risk factors detailed in the 2024 Annual Report on Form 10-K, confirming no material changes in 2025 - Readers should consider the risk factors discussed in Part I, 'Item 1A. Risk Factors' of the 2024 Annual Report on Form 10-K[217](index=217&type=chunk) - There have been no material changes during 2025 to the risk factors included in the Company's Annual Report on Form 10-K[217](index=217&type=chunk) [Item 5. Other Information](index=50&type=section&id=Item%205.%20Other%20Information) This section reports on Rule 10b5-1 trading plans, confirming no adoption or termination by officers or directors during Q2 2025 - No officers or directors adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[218](index=218&type=chunk) [Item 6. Exhibits](index=50&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Quarterly Report on Form 10-Q, including CEO/CFO certifications and XBRL data - The exhibit index includes certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), and 18 U.S.C. Section 1350[221](index=221&type=chunk) - Inline XBRL (Extensible Business Reporting Language) formatted financial statements and notes are included as Exhibit 101[221](index=221&type=chunk)

Financial Data and Key Metrics Changes - In Q2 2025, the company beat its revenue and adjusted EBITDA guidance midpoints, achieving an adjusted EBITDA of $13.6 million, resulting in an adjusted EBITDA margin of 25%, a 500 basis point increase from 20% in 2024 [6][7][16] - Free cash flow for Q2 remained strong at $2.7 million, impacted by approximately $7 million of one-time divestiture-related expenses [8][17] - The company has paid down $242 million of debt since the beginning of last year and extended the maturity of its debt to July 2031 [13][14] Business Line Data and Key Metrics Changes - The company welcomed 100 new customers in Q2, including 12 major customers, and expanded relationships with 263 existing customers, with 28 major expansions [9][10] - The growth rate of retained core assets has turned positive, indicating a meaningful milestone for the business [7] Market Data and Key Metrics Changes - The company expects core organic growth to improve to approximately 3% in 2025, assuming no macro disruptions from tariffs [20] - For Q3 2025, reported total revenue is expected to be between $46.8 million and $52.8 million, reflecting a year-over-year decline primarily due to divestitures [20][21] Company Strategy and Development Direction - The company has streamlined its product portfolio, focusing on markets with consistent growth and higher margins, while AI enabling its product offerings [13][14] - The company aims to continue deleveraging and driving organic growth, with potential for M&A opportunities in the future once the business stabilizes [35][36] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand environment, noting improvements in marketing sourced bookings and the potential for AI to act as a tailwind for the business [38] - The company is focused on enhancing its sales execution and pipeline generation, with ongoing investments in demand generation [48] Other Important Information - The company successfully completed refinancing of its debt, establishing a new $30 million revolving credit facility, which strengthens its balance sheet and enhances liquidity [13][19] - The company earned 68 badges in G2's summer 2025 reports, reflecting strong performance across its product portfolio [10][12] Q&A Session Summary Question: Why is private credit the right option versus other facilities? - The company moved to private credit due to the size of its current term facility being below the range for the TLD market, and it is excited about the partnership with SoundPoint [26][27] Question: What is the plan for excess cash flow over the next couple of years? - The company plans to direct cash flow toward deleveraging rather than M&A at this point [28] Question: What products are selling well in the current macro environment? - The company is seeing opportunities in large enterprises, particularly with products like Upland Right Answers and Upland BAI Insight, which are integral to larger enterprise AI implementations [30][31] Question: Is there a future for M&A activity? - While the focus is currently on organic growth and deleveraging, the company may consider M&A opportunities in the future once the business stabilizes [35][36] Question: How is the demand environment and pipeline build? - The demand environment appears fine, with increasing marketing sourced bookings and investments in demand generation showing positive results [38] Question: What drove the change in free cash flow guidance? - The increase in free cash flow guidance was due to lower divestiture-related expenses, cash from the sale of swaps, and reduced tax liabilities [41][42] Question: How much revenue in Q2 was from divested businesses? - Revenue from divested businesses in Q2 was approximately $4 million to $5 million [43] Question: What are the priorities for accelerating top-line growth? - The company has focused on AI enabling its product portfolio and improving sales execution, particularly in outbound lead generation [48]

Financial Performance - Total revenue for Q2 2025 was $53.4 million, a decrease of 23% from $69.3 million in Q2 2024, primarily due to divestitures[6] - Subscription and support revenue was $50.5 million, down 23% from $65.5 million in Q2 2024, also primarily due to divestitures[6] - GAAP net loss was $13.0 million, compared to a loss of $11.4 million in Q2 2024, with a net loss per share of $0.51[6] - Net loss for Q2 2025 was $13.0 million, compared to a net loss of $11.4 million in Q2 2024[32] - Gross profit for the first half of 2025 was $85.6 million, a decline from $98.6 million in the same period of 2024[32] - Total operating expenses for Q2 2025 were $47.0 million, down from $54.2 million in Q2 2024[32] - The company reported a net loss per common share of $0.51 for Q2 2025, compared to $0.47 in Q2 2024[32] - Net loss for Q2 2025 was $13,029 thousand, compared to a net loss of $11,439 thousand in Q2 2024, representing a 13.9% increase in losses year-over-year[36] - Adjusted EBITDA for Q2 2025 was $13,585 thousand, slightly down from $13,635 thousand in Q2 2024, indicating a decrease of 0.4%[38] - Non-GAAP net income for Q2 2025 was $5,580 thousand, compared to $6,694 thousand in Q2 2024, reflecting a decrease of 16.7%[40] Future Projections - Upland expects Q3 2025 total revenue to be between $46.8 million and $52.8 million, reflecting a 25% decline at the midpoint from Q3 2024[7] - For the full year 2025, total revenue is expected to be between $211.8 million and $223.8 million, a 21% decline at the midpoint from 2024[8] - Third quarter 2025 Adjusted EBITDA is projected to be between $14.5 million and $17.5 million, a 14% increase at the midpoint from Q3 2024[7] Customer and Market Performance - Upland welcomed 100 new customers in Q2 2025, including 12 major customers, and expanded relationships with 263 existing customers[5] - Upland earned 68 badges in G2's Summer 2025 market reports, reflecting strong performance across its AI-powered product portfolio[9] Financial Position - Cash and cash equivalents decreased to $41.0 million as of June 30, 2025, from $56.4 million at the end of 2024[34] - Total assets decreased to $441.7 million as of June 30, 2025, compared to $529.5 million at the end of 2024[34] - Total liabilities were $358.0 million as of June 30, 2025, down from $424.6 million at the end of 2024[34] - Deferred revenue was $72.3 million as of June 30, 2025, a decrease from $93.7 million at the end of 2024[34] Cash Flow and Expenses - Free Cash Flow for the six months ended June 30, 2025, was $10,536 thousand, compared to $10,134 thousand for the same period in 2024, reflecting a 4% increase[42] - The company reported a net cash provided by operating activities of $3,289 thousand for Q2 2025, compared to $5,470 thousand in Q2 2024, a decline of 40%[36] - Stock-based compensation expense for Q2 2025 was $3,074 thousand, down from $5,133 thousand in Q2 2024, a reduction of 40%[44] - Total depreciation and amortization expense for Q2 2025 was $8,155 thousand, compared to $13,797 thousand in Q2 2024, a decrease of 41%[38] Debt and Financing - Upland completed a refinancing of its outstanding Term Loans, establishing a new $240 million term loan and a $30 million revolving credit facility, maturing July 24, 2031[9] Divestitures - The company recognized a non-cash loss on divestitures of businesses amounting to $434 thousand in Q2 2025, with a significant loss of $23,891 thousand recognized in the first half of 2025[40] Shareholder Information - The weighted average common shares outstanding for basic calculations in Q2 2025 was 28,518,839, compared to 27,348,672 in Q2 2024, an increase of 4.3%[40]

Financial Data and Key Metrics Changes - Q1 adjusted EBITDA was $13.1 million, resulting in an adjusted EBITDA margin of 21%, up from 20% reported in 2024 [6][16] - Free cash flow for Q1 was $7.9 million, which was higher than expected [7] - The company anticipates adjusted EBITDA margins to increase to 26% in Q2 and further expand in the second half of 2025 [12][20] Business Line Data and Key Metrics Changes - The core organic growth rate in Q1 was flat, but is expected to move to 2% in Q2, with further increases anticipated throughout 2025 [6][11] - The company welcomed 107 new customers in Q1, including 19 major customers, and expanded relationships with 245 existing customers [7][8] Market Data and Key Metrics Changes - The divestiture of mobile messaging product lines lowered the 2025 revenue guidance midpoint by $25 million but had no impact on adjusted EBITDA guidance [11][18] - The net dollar retention rate for the core business as of December 31, 2024, would have been 99% excluding divestitures, compared to the reported 96% [11] Company Strategy and Development Direction - The company is focusing on markets with the strongest competitive advantage, higher margins, and higher growth rates [11][27] - The divestitures are part of a strategy to streamline operations and enhance focus on core products [11][27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about positive core organic growth starting in Q2 and increasing throughout the year [12][27] - The company has seen improvements in digital marketing capabilities, contributing to increased marketing sourced bookings [36][38] Other Important Information - The company paid down $34.2 million of debt in Q1 2025, with total debt paydowns in 2025 reaching approximately $34.2 million [13][17] - The average customer lifetime for the core business is now over eight years, indicating strong customer retention [47] Q&A Session Summary Question: How should the market view the go-to-market strategy following the termination of the Chief Sales Officer? - Management noted significant progress in the go-to-market strategy, emphasizing a focus on markets with competitive advantages and realigning sales with product group general managers [27] Question: Should additional divestitures be expected as the company streamlines towards growth? - Management indicated that no material additional divestitures are anticipated, as the repositioning of the business is largely complete [29] Question: What is driving the faster organic growth and improving margins? - The primary driver of improvement is the focus on high-margin, high-growth products, along with investments in digital marketing and product enhancements [34][36] Question: When was the full build-out of the India development center completed, and what benefits have been seen? - The full build-out was completed at the end of the previous year, with increased productivity and throughput being observed [42][43] Question: What is the outlook for free cash flow and any one-time costs related to divestitures? - The company expects $20 million in free cash flow for the year, excluding one-time divestiture-related expenses [45] Question: What is the visibility into top-line acceleration and pipeline metrics? - Management reported strong visibility with 93% of revenue being recurring and a net dollar retention rate of 99%, indicating confidence in future growth [47][49]

Financial Data and Key Metrics Changes - Q1 adjusted EBITDA was $13.1 million, resulting in an adjusted EBITDA margin of 21%, up from 20% in 2024 [6][16] - Free cash flow for Q1 was $7.9 million, which was higher than expected [7] - The company anticipates adjusted EBITDA margins to increase to 26% in Q2 and further expand in the second half of 2025 [6][20] Business Line Data and Key Metrics Changes - The core organic growth rate in Q1 was flat, but is expected to improve to 2% in Q2, with further increases anticipated throughout 2025 [6][12] - The company welcomed 107 new customers in Q1, including 19 major customers, and expanded relationships with 245 existing customers [7][8] Market Data and Key Metrics Changes - The divestiture of mobile messaging product lines lowered the 2025 revenue guidance midpoint by $25 million but did not impact adjusted EBITDA guidance [12][18] - The net dollar retention rate for the core business as of December 31, 2024, would have been 99% excluding divestitures, compared to the reported 96% [12] Company Strategy and Development Direction - The company is focusing on markets with the strongest competitive advantage, higher margins, and higher growth rates [27] - The divestitures are part of a strategy to streamline operations and enhance focus on core products [29] - The company has realigned sales with general managers of product groups, eliminating the need for centralized sales management [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about positive growth momentum, projecting a core organic growth rate of 2% in Q2 and further increases in the second half of 2025 [6][12] - The company has seen improvements in digital marketing capabilities, contributing to increased marketing-sourced bookings [35] - Management noted strong visibility in revenue, with 93% being recurring and an average customer lifetime of nearly nine years [45] Other Important Information - The company paid down $34.2 million of debt in Q1 2025, with total paydowns in 2025 reaching approximately $34.2 million, in addition to $189 million in 2024 [14][17] - The full year 2025 adjusted EBITDA is expected to be between $55 million and $64 million, representing a 7% increase from 2024 [19][20] Q&A Session Summary Question: How should the market view the go-to-market strategy following the termination of the Chief Sales Officer? - Management highlighted progress in the go-to-market strategy, focusing on competitive advantages and higher growth rates, with a positive core organic growth rate expected [27] Question: Should additional divestitures be expected as the company streamlines towards growth? - Management indicated that substantial repositioning has been completed, and no material additional divestitures are anticipated at this time [29] Question: What is driving the faster organic growth and improving margins? - Management attributed the improvements primarily to focusing on high-margin, high-growth products and enhancing digital marketing capabilities [35] Question: When was the full build-out of the India development center completed, and when will benefits be seen? - The full build-out was completed at the end of the previous year, with increased productivity expected from ongoing R&D investments [42] Question: What is the outlook for free cash flow and any one-time costs related to divestitures? - Management confirmed a revised free cash flow outlook of $20 million, excluding one-time divestiture-related expenses [43] Question: What is the visibility into top-line acceleration and pipeline metrics? - Management reported strong visibility with a high net dollar retention rate and an average contract term of two years, indicating confidence in exceeding the 2% growth target [45]

Revenue Performance - Upland Software's revenue grew from $149.9 million in 2018 to $274.8 million in 2024, representing a compound annual growth rate of 11%[120]. - For the three-month period ended March 31, 2025, total revenue was $63.655 million, a decrease from $70.736 million in the same period of 2024[129]. - Total revenue for the three months ended March 31, 2025, was $63.7 million, a decrease of 10% from $70.7 million in the same period of 2024[139]. - Upland's subscription and support revenue from Sunset Assets was $4.481 million for the three-month period ended March 31, 2025[129]. - Subscription and support revenue decreased by $6.4 million, primarily due to a decline of $2.5 million from Sunset Assets and $3.9 million from divested businesses[139]. Profitability and Expenses - Adjusted EBITDA for the three-month period ended March 31, 2025, was $13.082 million, compared to $13.103 million in the same period of 2024[132]. - Total cost of revenue was $18.0 million, down 14% from $21.0 million in the prior year, resulting in a gross profit of $45.6 million, which is 72% of total revenue[140]. - Operating expenses totaled $46.7 million, a significant decrease from $141.3 million in the previous year, leading to a loss from operations of $1.1 million[140]. - Sales and marketing expenses decreased by 19% to $13.8 million, representing 22% of total revenue[144]. - Research and development expenses were $11.5 million, a decrease of 7% from $12.5 million, maintaining 18% of total revenue[146]. - General and administrative expenses decreased by 12% to $11.6 million, accounting for 18% of total revenue[148]. - Depreciation and amortization expenses were $8.0 million, down 30% from $11.4 million, primarily due to the decline in amortization from intangible assets associated with divested product lines[150]. - Divestiture-related expenses amounted to $1.7 million, representing 2% of total revenue, with no such expenses recorded in the prior year[152]. - Net loss attributable to common shareholders was $27.3 million, compared to a net loss of $97.5 million in the same period last year[139]. - The company reported a net loss of $25.848 million for the three-month period ended March 31, 2025, compared to a net loss of $96.130 million in the same period of 2024[132]. Cash Flow and Financial Position - Cash provided by operating activities was $8.3 million for the three months ended March 31, 2025, an increase of approximately $3.2 million from $5.1 million in 2024[165]. - Cash provided by investing activities was $3.8 million for the three months ended March 31, 2025, compared to cash used of $(0.2) million in 2024[168]. - Cash used in financing activities increased to $(34.7) million for the three months ended March 31, 2025, compared to $(9.6) million in 2024, primarily due to increased payments on Term Loans[170]. - As of March 31, 2025, the company had $33.7 million in cash and cash equivalents, down from $57.1 million as of December 31, 2024[160]. - The company had a working capital deficit of $17.1 million as of March 31, 2025, compared to a deficit of $2.0 million as of December 31, 2024[162]. Strategic Initiatives - Upland plans to pursue acquisitions of complementary technologies and businesses to expand its product library and market access[121]. - The company aims to incorporate AI functionality into its products to enhance customer experiences and drive measurable ROI[119]. - Upland's management emphasizes the importance of maintaining relationships with third parties and adapting to changing market conditions[122]. Foreign Operations and Currency Impact - Foreign revenue as a percentage of total revenue was 29% for the three months ended March 31, 2025, compared to 30% for the same period in 2024[120]. - The effect of a hypothetical 10% change in foreign currency exchange rates could have resulted in a change in revenue of $1.4 million for the three months ended March 31, 2025[181]. - The company incurs operating expenses in various foreign currencies, including Australian dollars, Canadian dollars, Indian Rupees, British pounds, Euros, and Israeli New Shekels[181]. - The translation adjustments of non-financial assets and liabilities of foreign subsidiaries are recorded in accumulated other comprehensive income (loss)[182]. - Foreign currency gains (losses) from intercompany loans used to fund acquisitions of foreign subsidiaries are recognized as a component of accumulated other comprehensive income (loss)[182]. Interest and Other Financial Metrics - Net interest income improved to $(2.4) million for the three months ended March 31, 2025, a 51% decrease from $(5.0) million in the same period of 2024[155]. - Total other expense increased by 419% to $(26.1) million for the three months ended March 31, 2025, compared to $(5.0) million in 2024[154]. - Benefit from income taxes increased by 146% to $0.5 million for the three months ended March 31, 2025, compared to $1.3 million in 2024[157]. - The effective cash interest rate for the three months ended March 31, 2025, was 5.9%[179]. - As of March 31, 2025, the outstanding balance of Term Loans is $259.4 million, maturing on August 6, 2026[180]. - A hypothetical change of 100 basis points in variable rate debt could have resulted in a $0.1 million increase in total interest expense for the three months ended March 31, 2025[180].

[Financial & Operational Highlights](index=1&type=section&id=Financial%20%26%20Operational%20Highlights) [Q1 2025 Financial Performance](index=1&type=section&id=First%20Quarter%202025%20Financial%20Highlights) In Q1 2025, Upland's total revenue decreased by 10% year-over-year to $63.7 million, though it surpassed internal guidance. The company significantly narrowed its GAAP net loss to $25.8 million from $96.1 million in the prior year. Adjusted EBITDA remained stable at $13.1 million, with the margin improving from 19% to 21% of total revenue. Free cash flow saw a notable increase to $7.9 million - The company exceeded its guidance for **Revenue** and **Adjusted EBITDA** in Q1 2025[3](index=3&type=chunk) | Financial Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $63.7M | $70.7M | -10% | | Subscription & Support Revenue | $60.2M | $67.1M | -10% | | GAAP Net Loss | ($25.8M) | ($96.1M) | +73.2% | | GAAP Net Loss per Share | ($0.97) | ($3.37) | +71.2% | | Adjusted EBITDA | $13.1M | $13.1M | 0% | | Adjusted EBITDA Margin | 21% | 19% | +2 p.p. | | GAAP Operating Cash Flow | $8.3M | $5.1M | +62.7% | | Free Cash Flow | $7.9M | $4.9M | +61.2% | - Cash on hand was **$34 million** at the end of Q1 2025 after making **$34 million** in debt paydowns during the quarter[4](index=4&type=chunk) [Q1 2025 Business & Operational Highlights](index=1&type=section&id=First%20Quarter%20Business%20Highlights) During the first quarter, Upland secured 107 new customers and expanded relationships with 245 existing ones. The company advanced its AI-powered portfolio with the launch of Panviva Sidekick and Adestra Audiences. Subsequent to the quarter's end, Upland divested its mobile messaging product lines to sharpen its focus on higher-margin, higher-growth markets, a move that would have improved its Core Net Dollar Retention Rate to 99% - Acquired **107 new customers** (19 major) and expanded relationships with **245 existing customers** (26 major expansions)[3](index=3&type=chunk) - Subsequent to Q1, the company sold its mobile messaging product lines to focus on markets with stronger competitive advantage, higher margins, and higher growth[9](index=9&type=chunk) - Excluding the divestiture, the Net Dollar Retention Rate for the Core business as of December 31, 2024, would have been **99%**, compared to the reported **96%**[9](index=9&type=chunk) - Key product launches included Panviva Sidekick for AI-powered agent guidance and Adestra Audiences for advanced email marketing analytics[9](index=9&type=chunk) - Upland's solutions earned **76 badges** in G2's Spring 2025 market reports, with notable recognition for AI-enabled products like Upland BA Insight and Upland InterFAX[9](index=9&type=chunk) [Financial Outlook](index=2&type=section&id=Business%20Outlook) [Q2 2025 Guidance](index=2&type=section&id=Q2%202025%20Guidance) For the second quarter of 2025, Upland anticipates total revenue between $50.3 million and $56.3 million, reflecting a 23% year-over-year decline at the midpoint, primarily due to a recent divestiture. Despite the revenue drop, Adjusted EBITDA is expected to be flat year-over-year at $12.1 million to $15.1 million, with the margin forecast to expand significantly to 26% from 20% in Q2 2024 | Metric | Q2 2025 Guidance (Midpoint) | YoY Change (Midpoint) | | :--- | :--- | :--- | | Total Revenue | $53.3M | -23% | | Subscription & Support Revenue | $50.0M | - | | Adjusted EBITDA | $13.6M | 0% | | Adjusted EBITDA Margin | 26% | +6 p.p. | [Full Year 2025 Guidance](index=2&type=section&id=Full%20Year%202025%20Guidance) For the full year 2025, Upland projects total revenue between $209.5 million and $227.5 million, a 20% decline at the midpoint from 2024, influenced by the sale of its mobile messaging lines. However, the company expects a 7% increase in Adjusted EBITDA to a range of $55.0 million to $64.0 million. This reflects a significant anticipated improvement in the full-year Adjusted EBITDA margin to 27% from 20% in the previous year - The sale of mobile messaging product lines reduced the full-year 2025 revenue guidance by approximately **$25.0 million** but did not impact the Adjusted EBITDA guidance[5](index=5&type=chunk) | Metric | Full Year 2025 Guidance (Midpoint) | YoY Change (Midpoint) | | :--- | :--- | :--- | | Total Revenue | $218.5M | -20% | | Subscription & Support Revenue | $205.0M | - | | Adjusted EBITDA | $59.5M | +7% | | Adjusted EBITDA Margin | 27% | +7 p.p. | [Financial Statements](index=7&type=section&id=Financial%20Statements) [Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q1 2025, total revenue was $63.7 million, a decrease from $70.7 million in Q1 2024. The company reported a net loss of $25.8 million, which was a substantial improvement from the $96.1 million loss in the prior-year period. The prior year's loss was heavily impacted by an $87.2 million goodwill impairment charge, which did not recur. The current quarter's loss includes a $23.5 million loss on the divestiture of businesses | (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenue | $63,655 | $70,736 | | Gross Profit | $45,607 | $49,687 | | Loss from Operations | ($1,052) | ($91,641) | | Impairment of Goodwill | $0 | $87,227 | | Loss on Divestitures | ($23,457) | $0 | | Net Loss | ($25,848) | ($96,130) | | Net Loss per Share | ($0.97) | ($3.37) | [Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, Upland's total assets were $457.0 million, down from $529.5 million at year-end 2024. This decrease was driven by a reduction in cash to $33.7 million (from $56.4 million) following debt repayments, and a decrease in intangible assets. Total liabilities also decreased to $370.1 million from $424.6 million, primarily due to a reduction in notes payable | (in thousands) | Mar 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $33,705 | $56,426 | | Total Assets | $456,972 | $529,522 | | Notes Payable (Current & Noncurrent) | $256,506 | $290,194 | | Total Liabilities | $370,127 | $424,597 | | Total Stockholders' Equity (Deficit) | ($37,823) | ($18,305) | [Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In Q1 2025, net cash from operating activities increased to $8.3 million from $5.1 million in Q1 2024. Investing activities provided $3.8 million in cash, mainly from proceeds from business divestitures. Financing activities used $34.7 million, almost entirely for the repayment of notes payable. This resulted in a net decrease in cash of $22.7 million for the quarter | (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $8,305 | $5,121 | | Net cash provided by (used in) investing activities | $3,789 | ($183) | | Net cash used in financing activities | ($34,723) | ($9,599) | | Change in cash, cash equivalents and restricted cash | ($22,721) | ($4,945) | [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) [Reconciliation of Net Loss to Adjusted EBITDA](index=10&type=section&id=Reconciliation%20of%20Adjusted%20EBITDA) Upland's Adjusted EBITDA for Q1 2025 was $13.1 million, consistent with the prior-year period. The reconciliation from a GAAP net loss of $25.8 million involved adding back several items, most notably a $23.5 million loss on divestitures, $9.7 million in depreciation and amortization, and $2.7 million in stock-based compensation | (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss | ($25,848) | ($96,130) | | Add: Depreciation and amortization | $9,661 | $13,802 | | Add: Stock-based compensation | $2,675 | $3,522 | | Add: Loss on divestitures | $23,457 | $0 | | Add: Impairment of goodwill | $0 | $87,227 | | **Adjusted EBITDA** | **$13,082** | **$13,103** | [Reconciliation of Net Loss to Non-GAAP Net Income](index=10&type=section&id=Reconciliation%20of%20Non-GAAP%20Net%20Loss%20and%20Non-GAAP%20EPS) Non-GAAP net income for Q1 2025 increased to $8.2 million from $6.8 million in Q1 2024, resulting in a diluted non-GAAP EPS of $0.23, up from $0.19. Key adjustments to the GAAP net loss included adding back amortization of purchased intangibles ($9.4 million), stock-based compensation ($2.7 million), and the loss on divestitures ($23.5 million) | (in thousands, except per share) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net loss | ($25,848) | ($96,130) | | Add: Amortization of purchased intangibles | $9,401 | $13,510 | | Add: Loss on divestitures of businesses | $23,457 | $0 | | Add: Impairment of goodwill | $0 | $87,227 | | **Non-GAAP net income** | **$8,211** | **$6,848** | | **Non-GAAP earnings per share, diluted** | **$0.23** | **$0.19** | [Reconciliation of Operating Cash Flow to Free Cash Flow](index=11&type=section&id=Reconciliation%20of%20Operating%20Cash%20Flow%20to%20Free%20Cash%20Flow) Free Cash Flow for Q1 2025 was $7.9 million, a significant increase from $4.9 million in the same period last year. This was calculated by taking the net cash provided by operating activities of $8.3 million and subtracting $0.4 million for the purchase of property and equipment | (in thousands) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $8,305 | $5,121 | | Less: Purchase of property and equipment | ($424) | ($183) | | **Free Cash Flow** | **$7,881** | **$4,938** |

Customer Base and Revenue - The company has over 10,000 customers, with no single customer accounting for more than 10% of revenue[5] - Approximately 90% of recurring revenue for the year ended December 31, 2024, was generated from major accounts, defined as those with contracted annual recurring revenue of $25,000 or more[23] - The annual net dollar retention rate was 96% as of December 31, 2024, indicating strong customer loyalty and success[5] - The company aims to increase sales to existing customers, as very few currently use more than one application, presenting significant cross-selling opportunities[5] Sales and Marketing Strategy - The company employs a land-and-expand go-to-market strategy, focusing on expanding the adoption of initial applications across customer organizations[24] - The customer success organization is dedicated to driving adoption, value realization, retention, and loyalty across the customer base[28] Employee and Organizational Structure - The company has a total of 998 full-time employees as of December 31, 2024, with a majority located in the United States and other countries[39] Financial Performance and Seasonality - The company has historically experienced seasonality, with a higher percentage of agreements signed in the fourth quarter, leading to increased cash flow in the first quarter[37] Research and Development - The company continues to invest in research and development to enhance applications and support third-party integrations[5] Tax and Valuation Considerations - As of December 31, 2024, the company recorded a valuation allowance of $50.4 million against its deferred tax assets, indicating potential future tax expense implications[252] - The company has adopted an indefinite reinvestment position for foreign earnings, resulting in no deferred tax liability accrued for anticipated future dividends from foreign subsidiaries[253] - The company assesses goodwill for impairment annually on October 1st, with evaluations based on qualitative and quantitative analyses of fair value compared to carrying value[255][256] - The company utilizes the asset and liability method for accounting income taxes, recognizing deferred tax assets and liabilities based on expected future tax consequences[251] - Significant estimates are made in determining the value of deferred tax assets, including expected reversal periods and the availability of net operating losses[251] - The company accounts for tax uncertainties based on a "more likely than not" threshold for recognition and derecognition of tax positions[254] - The company’s tax provision could be adversely affected by lower-than-anticipated earnings in jurisdictions with lower statutory rates[250] Debt and Lease Obligations - Future interest on debt obligations is calculated using the interest rate effective as of December 31, 2024, with floating-to-fixed interest rate swap agreements in place to mitigate interest rate risk[47] - The company leases office space under operating leases that expire between 2024 and 2033, with future rental income from subletting excess space not included in operating lease obligations[47] Currency and Business Changes - Changes in foreign currency exchange rates, entry into new businesses, and changes in existing businesses may affect the company's tax provision[250]

Financial Data and Key Metrics Changes - The company reported a good Q4 2024, beating recurring revenue expectations and meeting adjusted EBITDA guidance midpoint [7] - Core organic growth in Q4 was flat, but the company is guiding for 2.5% core organic growth in 2025, representing a significant turnaround from a negative 1% average quarterly growth rate in 2024 [7][14] - Adjusted EBITDA margins are expected to increase by 400 basis points in 2025, from 20% in 2024 to 24% in 2025 [14] - The net dollar retention rate improved to 96% at the end of 2024, up from 95% in the prior year [8] - Q4 adjusted EBITDA was $14.9 million, showing sequential growth from Q3 [8][17] - Free cash flow for Q4 was $9 million, contributing to a total of $23.4 million for the full year 2024 [8][18] Business Line Data and Key Metrics Changes - The company welcomed 110 new customers in Q4, including 21 major customers, and expanded relationships with 291 existing customers, including 42 major expansions [9] - The company earned 76 badges in the G2 Winner 2025 Market Reports, indicating strong product performance [9] - AI-enabled solutions have been integrated into 80% of the core content and knowledge management product portfolio, enhancing product capabilities [28] Market Data and Key Metrics Changes - The company divested two non-strategic underperforming product lines, which lowered the 2025 revenue guidance by about $18 million but had no impact on adjusted EBITDA [11][20] - The divestitures are expected to simplify the business and improve core organic growth rates [12] Company Strategy and Development Direction - The company is focusing on AI-enabled solutions to improve knowledge sharing and business outcomes, which is seen as central to future growth [11][32] - The strategy includes enhancing product offerings and improving sales capabilities, particularly through investments in AI technologies [28][42] - The company aims to improve net dollar retention rates to closer to 98% by the end of 2025 [52] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improving organic growth outlook and the positive momentum in adjusted EBITDA margins [7][14] - The company is targeting full-year 2025 free cash flow in the range of $20 million to $25 million [18] - Management acknowledged the challenges posed by U.S. payroll taxes and costs related to divested assets in Q1 2025 [22] Other Important Information - The company plans to continue paying down debt, having already reduced it by $33 million in 2025, in addition to $189 million in 2024 [13][19] - The gross debt currently stands at approximately $261 million, with most of it hedged to lock the interest rate at 5.4% [19] Q&A Session Summary Question: Can you talk about the AI strategy at Upland? - The company has invested in AI, enabling 80% of its core content and knowledge management products, and sees strong enterprise search use cases for its products [28][32] Question: What is the status of the asset unwind strategy? - The company expects a decline in Sunset asset revenues from $32 million in 2024 to about $14 million in 2025, and then down to around $6 million in 2026 [34] Question: Can you provide insights on the major account expansions and net dollar retention? - The improvement in net dollar retention is driven by better gross dollar retention rates, with a goal to reach 98% by the end of 2025 [52] Question: What is the guidance for Q1 revenue? - The company expects reported total revenue for Q1 2025 to be between $59 million and $65 million, reflecting some lumpiness in perpetual license and professional services revenue [21][46]

Financial Data and Key Metrics Changes - Upland Software reported a good Q4 2024, beating recurring revenue expectations and meeting adjusted EBITDA guidance midpoint [7] - Core organic growth in Q4 was flat, but the company is guiding for 2.5% core organic growth in 2025 [7][13] - Adjusted EBITDA margins are expected to increase by 400 basis points in 2025, from 20% in 2024 to 24% [14] - The net dollar retention rate improved to 96% at the end of 2024, up from 95% in the prior year [8] - Q4 adjusted EBITDA was $14.9 million, showing sequential growth from Q3 [8][17] - Free cash flow for Q4 was $9 million, contributing to a total of $23.4 million for the full year 2024 [8][18] Business Line Data and Key Metrics Changes - Upland welcomed 110 new customers in Q4, including 21 major customers, and expanded relationships with 291 existing customers [9] - The company earned 76 badges in the G2 Winner 2025 Market Reports, indicating strong product performance [9] - AI-enabled solutions have been integrated into 80% of the core content and knowledge management product portfolio [28] Market Data and Key Metrics Changes - The divestiture of two non-strategic product lines lowered the 2025 revenue guidance by approximately $18 million but had no impact on adjusted EBITDA [11][20] - The company expects reported total revenue for Q1 2025 to be between $59 million and $65 million, reflecting a decline of 12% at the midpoint from the previous year [21] Company Strategy and Development Direction - Upland is focusing on AI-enabled solutions to improve knowledge sharing and business outcomes, with a significant investment in product development [10][28] - The company aims to simplify its business by divesting underperforming products, which is expected to reduce execution risk and improve core organic growth [12][20] - The strategy includes enhancing the sales pipeline and upgrading sales talent to support new AI-enabled products [42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the improving core organic growth rate and retention rates, targeting a net dollar retention rate of 98% by the end of 2025 [52] - The company anticipates a turnaround in growth, with a projected improvement from a negative 1% average quarterly growth rate in 2024 to 2.5% in 2025 [14][13] - Management acknowledged the impact of U.S. payroll taxes and costs related to divested assets on Q1 2025 performance [22] Other Important Information - Upland has paid down $33 million in debt in 2025, in addition to $189 million in 2024 [13][19] - The company plans to continue paying down debt by up to $2 million per month [19] Q&A Session Summary Question: Insights on AI strategy and use cases - Management highlighted significant investments in AI, with 80% of core products now AI-enabled, and noted strong sales opportunities in AI-driven products [28][30] Question: Status of asset unwind strategy and revenue impact - The divestiture of two product lines generated about $10 million, with a decline in Sunset asset revenues projected to drop from $32 million in 2024 to around $14 million in 2025 [34] Question: Go-to-market strategy and sales traction - Management discussed improvements in sales talent and demand generation since the HGGC investment, leading to better core organic growth and net renewal rates [42][43] Question: Timing of debt refinancing - Management indicated plans to refinance debt in the second half of the year, benefiting from a lower principal amount despite potentially higher rates [45] Question: Guidance for Q1 revenue range - The wider revenue guidance range for Q1 was attributed to the variability in perpetual license and professional services revenue [47] Question: Core net dollar retention rate components - The improvement in net dollar retention was driven by better gross retention rates and the focus on strong products with high renewal rates [52]