[Part I. FINANCIAL INFORMATION](index=3&type=section&id=Part%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements and accompanying notes for the reporting periods [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Key Balance Sheet Items | Metric | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $138,284 | $189,158 | | Accounts receivable | $35,120 | $50,499 | | Total current assets | $205,812 | $262,991 | | Total assets | $1,030,046 | $1,029,007 | | Total current liabilities | $170,538 | $156,444 | | Total liabilities | $718,116 | $712,719 | | Total stockholders' equity | $311,930 | $316,288 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Key Operational Results | Metric (in thousands, except per share) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $80,227 | $76,264 | $158,943 | $150,233 | | Gross profit | $53,674 | $51,252 | $107,635 | $100,794 | | Loss from operations | $(10,888) | $(9,163) | $(25,665) | $(26,691) | | Net loss | $(16,393) | $(19,042) | $(39,224) | $(39,726) | | Net loss per common share, basic and diluted | $(0.52) | $(0.63) | $(1.25) | $(1.32) | [Condensed Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Comprehensive Loss Summary | Metric (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(16,393) | $(19,042) | $(39,224) | $(39,726) | | Other comprehensive income (loss) | $(14,703) | $(908) | $9,170 | $12,996 | | Comprehensive loss | $(31,096) | $(19,950) | $(30,054) | $(26,730) | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Changes in Stockholders' Equity | Metric (in thousands) | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Common Stock | $3 | $3 | | Additional Paid-In Capital | $594,080 | $568,384 | | Accumulated Other Comprehensive Loss | $(2,344) | $(11,514) | | Accumulated Deficit | $(279,809) | $(240,585) | | Total Stockholders' Equity | $311,930 | $316,288 | - The number of common shares issued and outstanding increased from **31,096,548** as of December 31, 2021, to **31,632,628** as of June 30, 2022[9](index=9&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summary of Cash Flows | Metric (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $22,260 | $23,308 | | Net cash used in investing activities | $(62,653) | $(92,924) | | Net cash used in financing activities | $(6,608) | $(3,381) | | Change in cash and cash equivalents | $(50,874) | $(73,490) | | Cash and cash equivalents, end of period | $138,284 | $176,539 | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Basis of Presentation and Summary of Significant Accounting Policies](index=11&type=section&id=1.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) - The financial statements are prepared in conformity with GAAP and include Upland Software, Inc and its wholly-owned subsidiaries[26](index=26&type=chunk)[27](index=27&type=chunk)[29](index=29&type=chunk) - The Company assessed the impact of COVID-19 on estimates and assumptions and determined there was **no material impact** as of August 9, 2022[30](index=30&type=chunk) - No individual customer represented **more than 10% of total revenues** for the six months ended June 30, 2022, or more than 10% of accounts receivable as of June 30, 2022 or December 31, 2021[32](index=32&type=chunk) - Interest rate swap agreements effectively converted **$540 million of variable interest debt to a fixed rate of 5.4%**, with the fair value of these swaps being a **$26.0 million asset** as of June 30, 2022[33](index=33&type=chunk) - ASU 2020-06 (debt with conversion options) was adopted in Q1 2022 with **no material impact**, while ASU 2021-08 (business combinations) is being evaluated[38](index=38&type=chunk)[40](index=40&type=chunk) [2. Acquisitions](index=13&type=section&id=2.%20Acquisitions) - In 2022, Upland acquired BA Insight and Objectif Lune, which contributed approximately **$2.8 million** and **$10.5 million** in revenue respectively since their acquisition dates[42](index=42&type=chunk) - In 2021, Upland completed acquisitions of Panviva, BlueVenn, and Second Street, with earnout payments for BlueVenn and Second Street resulting in **no payments made**[42](index=42&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[55](index=55&type=chunk) - **Goodwill of $126.6 million** from these acquisitions is primarily attributed to expected synergies and the value of the acquired workforce[50](index=50&type=chunk) Cash Consideration for Recent Acquisitions | Acquisition | Cash Consideration (in thousands) | | :--- | :--- | | BA Insight | $33,355 | | Objectif Lune | $29,750 | | Panviva | $19,931 | | BlueVenn | $53,535 | | Second Street | $25,436 | Transaction Related Expenses | Transaction Related Expenses (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total transaction related expenses | $400 | $2,000 | $4,900 | $6,100 | [3. Fair Value Measurements](index=16&type=section&id=3.%20Fair%20Value%20Measurements) - The fair value of the interest rate swap was a **$26.0 million asset** as of June 30, 2022, an increase from an $8.4 million liability at December 31, 2021, due to rising short-term interest rates[56](index=56&type=chunk)[57](index=57&type=chunk) - The carrying value of long-term debt (**$525.2 million** at June 30, 2022) approximates its fair value[58](index=58&type=chunk) [4. Goodwill and Other Intangible Assets](index=17&type=section&id=4.%20Goodwill%20and%20Other%20Intangible%20Assets) Goodwill and Intangible Asset Balances | Metric (in thousands) | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Goodwill | $492,481 | $457,472 | | Total intangible assets, net | $277,001 | $279,920 | Amortization Expense | Amortization Expense (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total amortization expense | $13,500 | $12,700 | $27,400 | $24,700 | Estimated Annual Amortization Expense | Estimated Annual Amortization Expense (in thousands) | | :--- | | Remainder of 2022 | $25,803 | | 2023 | $50,546 | | 2024 | $48,060 | | 2025 | $44,823 | | 2026 | $41,871 | | 2027 and thereafter | $65,898 | | Total | $277,001 | [5. Income Taxes](index=18&type=section&id=5.%20Income%20Taxes) - The Company recognized an income tax benefit of **$0.5 million** for Q2 2022 and **$0.6 million** for the six months ended June 30, 2022, primarily from foreign income taxes[63](index=63&type=chunk) - For the six months ended June 30, 2021, a tax benefit of **$2.9 million** was recognized, mainly from releasing a valuation allowance related to the Second Street acquisition[64](index=64&type=chunk) - A **valuation allowance** is recorded against U.S. net deferred tax assets due to historical operating losses[65](index=65&type=chunk) [6. Debt](index=19&type=section&id=6.%20Debt) - The Credit Facility includes a **$350 million Term Loan**, a **$190 million Incremental Term Loan**, and a **$60 million Revolving Credit Facility**, which was fully available as of June 30, 2022[69](index=69&type=chunk)[70](index=70&type=chunk)[79](index=79&type=chunk) - Interest rate swaps fix the interest rate for the Term Loans at **5.4%** for the full 7-year term[74](index=74&type=chunk) - The fair value of the interest rate swap was a **$26.0 million asset** at June 30, 2022, with an estimated **$6.4 million** expected to be reclassified to Interest expense in the next twelve months[75](index=75&type=chunk)[76](index=76&type=chunk) - The Company was in **compliance with all debt covenants** as of June 30, 2022[81](index=81&type=chunk) Long-Term Debt Summary | Metric (in thousands) | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Senior secured loans | $516,725 | $518,330 | | Less current maturities | $(3,167) | $(3,167) | | Total long-term debt | $513,558 | $515,163 | [7. Net Loss Per Share](index=21&type=section&id=7.%20Net%20Loss%20Per%20Share) - Due to net losses, **basic and diluted loss per share were the same** for all periods presented[83](index=83&type=chunk) Net Loss Per Share Calculation | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Loss per common share, basic and diluted | $(0.52) | $(0.63) | $(1.25) | $(1.32) | [8. Commitments and Contingencies](index=21&type=section&id=8.%20Commitments%20and%20Contingencies) - The Company has purchase commitments for hosting services, third-party technology, and other operational services[84](index=84&type=chunk) - No current or pending legal proceedings are anticipated to have a **material adverse effect** on the Company's financial statements[85](index=85&type=chunk) [9. Stockholders' Equity](index=22&type=section&id=9.%20Stockholders'%20Equity) - Accelerated stock-based compensation expense was **$4.4 million** for the three and six months ended June 30, 2022[94](index=94&type=chunk) - Unvested restricted units outstanding as of June 30, 2022, totaled **1,986,210 units**[97](index=97&type=chunk) Components of Accumulated Other Comprehensive Income (AOCI) | Component of AOCI (in thousands) | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Foreign currency translation adjustment | $(24,060) | $(5,657) | | Unrealized translation gain on intercompany loans | $(4,243) | $2,552 | | Unrealized gain (loss) on interest rate swaps | $25,959 | $(8,409) | | Total accumulated other comprehensive loss | $(2,344) | $(11,514) | Stock-Based Compensation Expense | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total | $14,877 | $13,550 | $26,496 | $31,374 | [10. Revenue Recognition](index=24&type=section&id=10.%20Revenue%20Recognition) - Revenue is recognized when control of goods or services is transferred to customers, following a five-step model in accordance with ASC 606[101](index=101&type=chunk)[102](index=102&type=chunk) - Subscription and support revenue is recognized **ratably over the contract term**, while perpetual license revenue is recognized **upfront**[104](index=104&type=chunk)[105](index=105&type=chunk) - Professional services revenue is recognized **over time** as services are performed[106](index=106&type=chunk) - As of June 30, 2022, approximately **$298.6 million of revenue** is expected to be recognized from remaining performance obligations, with **70% expected within the next 12 months**[119](index=119&type=chunk) Revenue by Geography | Revenue by Geography (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | United States | $55,482 | $53,350 | $109,258 | $108,602 | | United Kingdom | $10,952 | $13,460 | $23,459 | $23,529 | | Canada | $5,783 | $3,738 | $9,531 | $7,206 | | Other International | $8,010 | $5,716 | $16,695 | $10,896 | | Total revenue | $80,227 | $76,264 | $158,943 | $150,233 | [11. Related Party Transactions](index=28&type=section&id=11.%20Related%20Party%20Transactions) - The Company reported **no material related party transactions** for the three and six months ended June 30, 2022[123](index=123&type=chunk) [12. Subsequent Events](index=28&type=section&id=12.%20Subsequent%20Events) - On July 14, 2022, Upland entered into an agreement to issue and sell **115,000 shares of Series A Preferred Stock** for an aggregate purchase price of **$115.0 million**[124](index=124&type=chunk) - Holders of Series A Preferred Stock will receive dividends at **4.5% per annum** for the first seven years, increasing to **7% thereafter**[125](index=125&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition, operational results, and key business metrics [Overview](index=30&type=section&id=Overview) - Upland provides cloud-based software applications for digital transformation across various business functions[130](index=130&type=chunk)[139](index=139&type=chunk) - The Company employs a **'land-and-expand' go-to-market strategy**, selling primarily through a direct sales organization[132](index=132&type=chunk) - Revenue grew from $98.0 million in 2017 to $302.0 million in 2021, a **compound annual growth rate of 33%**[134](index=134&type=chunk) - Upland has completed **31 acquisitions** from February 2012 through June 30, 2022, as part of its growth strategy[135](index=135&type=chunk) - The COVID-19 pandemic's impact is ongoing, but the Company has seen improved market stability and resumed acquisition activity in 2021 and early 2022[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) [Revenue](index=33&type=section&id=Revenue) - Total revenue growth for Q2 2022 was negatively impacted by **3 percentage points** from foreign currency exchange rates (FX)[144](index=144&type=chunk)[148](index=148&type=chunk) - Acquisitions contributed **$10.0 million** to total revenue increase in Q2 2022 and **$18.4 million** in 6M 2022[144](index=144&type=chunk)[148](index=148&type=chunk) - Non-GAAP Core Organic Revenue **decreased by $3.0 million** for Q2 2022 and by **$3.9 million** for 6M 2022, primarily due to declines in several revenue categories[144](index=144&type=chunk)[145](index=145&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[151](index=151&type=chunk) Revenue by Category | Revenue Category (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | % Change | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Subscription and support | $75,017 | $72,405 | 4% | $148,644 | $143,058 | 4% | | Perpetual license | $1,858 | $415 | 348% | $3,636 | $767 | 374% | | Professional services | $3,352 | $3,444 | (3)% | $6,663 | $6,408 | 4% | | Total revenue | $80,227 | $76,264 | 5% | $158,943 | $150,233 | 6% | [Cost of Revenue and Gross Profit Percentage](index=35&type=section&id=Cost%20of%20Revenue%20and%20Gross%20Profit%20Percentage) - Acquisitions contributed **$1.6 million** to subscription and support cost of revenue in Q2 2022 and **$3.7 million** in 6M 2022[154](index=154&type=chunk)[156](index=156&type=chunk) - Acquisitions contributed **$0.7 million** to professional services cost of revenue in Q2 2022 and **$1.6 million** in 6M 2022[155](index=155&type=chunk)[157](index=157&type=chunk) Cost of Revenue Summary | Cost of Revenue (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | % Change | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Subscription and support | $24,125 | $23,161 | 4% | $46,194 | $45,843 | 1% | | Professional services and other | $2,428 | $1,851 | 31% | $5,114 | $3,596 | 42% | | Total cost of revenue | $26,553 | $25,012 | 6% | $51,308 | $49,439 | 4% | | Gross profit percentage | 67% | 67% | - | 68% | 67% | - | [Operating Expenses](index=37&type=section&id=Operating%20Expenses) - Sales and marketing expense increased due to acquisitions (**$1.8M in Q2**, **$3.9M in 6M**) and ongoing go-to-market investments[159](index=159&type=chunk)[160](index=160&type=chunk) - Research and development expense increased due to acquisitions (**$2.0M in Q2**, **$3.9M in 6M**), offset by lower organic personnel costs[162](index=162&type=chunk)[164](index=164&type=chunk) - General and administrative expense increased in Q2 2022 due to higher non-cash stock compensation but decreased in 6M 2022 due to overall lower compensation costs[166](index=166&type=chunk)[167](index=167&type=chunk) - Depreciation and amortization expense increased due to acquired intangible assets from recent acquisitions (**$1.5M in Q2**, **$3.3M in 6M**)[169](index=169&type=chunk)[171](index=171&type=chunk) - Acquisition-related expenses decreased in Q2 2022 due to lower transaction costs but increased slightly in 6M 2022 due to higher integration expenses[173](index=173&type=chunk)[174](index=174&type=chunk) Operating Expense Summary | Operating Expense (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | % Change | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Sales and marketing | $15,331 | $14,298 | 7% | $30,924 | $26,730 | 16% | | Research and development | $11,676 | $11,113 | 5% | $23,743 | $22,053 | 8% | | General and administrative | $21,828 | $19,192 | 14% | $41,442 | $43,561 | (5)% | | Depreciation and amortization | $10,802 | $10,278 | 5% | $21,853 | $20,021 | 9% | | Acquisition-related expenses | $4,925 | $5,534 | (11)% | $15,338 | $15,120 | 1% | [Other Income (Expense)](index=40&type=section&id=Other%20Income%20(Expense)) - Other income (expense), net, shifted from an expense to an income in both the three and six months ended June 30, 2022, primarily due to **currency exchange gains**[176](index=176&type=chunk)[177](index=177&type=chunk) Other Income (Expense) Summary | Other Income (Expense) (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | % Change | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Interest expense, net | $(7,754) | $(7,942) | (2)% | $(15,516) | $(15,729) | (1)% | | Other income (expense), net | $1,777 | $(399) | (545)% | $1,359 | $(162) | (939)% | [Benefit from (Provision for) Income Taxes](index=40&type=section&id=Benefit%20from%20(Provision%20for)%20Income%20Taxes) - The Company recorded an income tax benefit in Q2 2022, primarily from foreign operations, a significant change from a provision in Q2 2021[179](index=179&type=chunk)[181](index=181&type=chunk) Income Tax Summary | Income Taxes (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | % Change | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Benefit from (provision for) income taxes | $472 | $(1,538) | (131)% | $598 | $2,856 | (79)% | [Key Metrics](index=41&type=section&id=Key%20Metrics) - **Adjusted EBITDA**, a non-GAAP measure, **increased by 3%** for both the three and six months ended June 30, 2022, compared to the prior year periods[185](index=185&type=chunk) Adjusted EBITDA | Metric (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $24,508 | $23,728 | $47,954 | $46,572 | [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) - The Company believes current cash and available credit will be sufficient to fund operations and support continued growth through acquisitions for at least the next twelve months[189](index=189&type=chunk) - Cash and cash equivalents **decreased by $50.9 million** from December 31, 2021, to June 30, 2022, primarily due to **$62.4 million in cash paid for acquisitions**[190](index=190&type=chunk) - The recently announced Securities Purchase Agreement will provide an additional **$115.0 million in liquidity**[193](index=193&type=chunk) - Cash provided by operating activities **decreased by $1.0 million to $22.3 million** for the six months ended June 30, 2022[205](index=205&type=chunk) - Cash used in investing activities **decreased by $30.3 million to $62.7 million** for the six months ended June 30, 2022, due to fewer acquisitions[208](index=208&type=chunk) - Cash used in financing activities **increased by $3.2 million to $6.6 million** for the six months ended June 30, 2022[211](index=211&type=chunk) Key Liquidity Metrics | Metric (in thousands) | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $138,284 | $189,158 | | Available borrowings under credit facility | $60,000 | $60,000 | | Borrowings outstanding under credit facility | $525,200 | $527,900 | | Working capital surplus | $35,300 | $106,500 | [Critical Accounting Policies and the Use of Estimates](index=45&type=section&id=Critical%20Accounting%20Policies%20and%20the%20Use%20of%20Estimates) - Key accounting policies involving significant management judgment include revenue recognition, income taxes, business combinations, and stock-based compensation[215](index=215&type=chunk) - **No material changes** to critical accounting policies and estimates were reported for the six months ended June 30, 2022[214](index=214&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the Company's exposure to interest rate, foreign currency, and inflation risks - The Company's exposure to interest rate risk is mitigated by interest rate swaps that **fix the Term Loan rate at 5.4%**[218](index=218&type=chunk) - Foreign currency exchange risk arises from international operations; a hypothetical **10% change in exchange rates** could impact revenue by **$4.0 million** for the six months ended June 30, 2022[219](index=219&type=chunk) - Inflation has **not had a material effect** on the Company's business in the last three fiscal years, but future pressures could adversely affect financial results[221](index=221&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the Company's disclosure controls and internal financial reporting controls - Management concluded that the Company's disclosure controls and procedures were **effective** as of June 30, 2022[224](index=224&type=chunk) - There were **no changes in internal control** over financial reporting during the quarter ended June 30, 2022, that materially affected, or are reasonably likely to materially affect, internal controls[225](index=225&type=chunk) [Part II. OTHER INFORMATION](index=49&type=section&id=Part%20II.%20OTHER%20INFORMATION) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors related to inflation and the issuance of Series A Preferred Stock - **Inflation** has the potential to adversely affect the Company's liquidity and results of operations by increasing costs[230](index=230&type=chunk) - The newly issued **Series A Preferred Stock ranks senior to common stock**, carries corporate governance rights, and could lead to dilution of common stockholders' rights[231](index=231&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk) - A redemption feature of the Series A Preferred Stock may **discourage or delay potential takeovers** of the Company[234](index=234&type=chunk) [Item 6. Exhibits](index=50&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q - The exhibits include certifications from the CEO and CFO pursuant to the Sarbanes-Oxley Act of 2002 and Inline XBRL data[238](index=238&type=chunk) [SIGNATURES](index=52&type=section&id=SIGNATURES) This section contains the required signatures for the Quarterly Report on Form 10-Q - The report was signed on **August 9, 2022**, by Michael D. Hill, Chief Financial Officer of UPLAND SOFTWARE, INC[243](index=243&type=chunk)

Financial Data and Key Metrics Changes - Total revenue for Q2 2022 was $80.2 million, a 5% year-over-year increase, with an 8% growth without FX impact [21] - Recurring revenue from subscription and support increased 4% year-over-year to $75 million, with a 6% growth without FX impact [21] - Adjusted EBITDA for Q2 2022 was $24.5 million, maintaining a 31% margin, up from $23.7 million in Q2 2021 [23] - Free cash flow generated in Q2 was $13.9 million, contributing to a total of $22 million year-to-date [24] Business Line Data and Key Metrics Changes - Perpetual license revenue increased to $1.9 million in Q2 2022, up from $0.4 million in Q2 2021 [22] - Professional services revenue was $3.4 million for the quarter, reflecting a 3% year-over-year decline [22] - Strong expansion was noted in products such as Kapost, InGenius, Objectif Lune, and BA Insight [10][11] Market Data and Key Metrics Changes - The company expanded relationships with 403 existing customers, including 53 major expansions, and welcomed 123 new customers in Q2 [10] - The company experienced a strong quarter for selling Premier Success Plans, which provide high fidelity support to customers [11] Company Strategy and Development Direction - The company is committed to innovation, with product improvements announced for Altify and Objectif Lune [9] - A strategic equity investment of $115 million from HGGC was announced, aimed at strengthening the business and capitalizing on acquisition opportunities [14][16] - The company is actively pursuing additional acquisitions and sees a favorable market environment for such opportunities [14][54] Management's Comments on Operating Environment and Future Outlook - Management noted that the macro environment has not significantly impacted customer buying behaviors, with no deals pushed out [51] - The company remains conservative in its guidance, with expected revenue growth impacted by FX headwinds [28][44] - Management expressed confidence in the M&A pipeline, anticipating a favorable environment for acquisitions due to recent market turbulence [54] Other Important Information - The company has approximately $366 million in total tax NOL carry forwards, with an estimated $211 million available for utilization [27] - As of June 30, 2022, the company had outstanding net debt of approximately $387 million, which is expected to drop to around $277 million after the new investment closes [25] Q&A Session Summary Question: Could you elaborate on cross-selling and expansion success within existing customers? - Management highlighted strong expansion activity in Kapost, InGenius, Objectif Lune, and BA Insight, driven by investments in go-to-market strategies [34] Question: Are there specific products or regions facing macro impacts? - Management indicated no significant macro impacts affecting specific products or regions [35] Question: What benefits do you foresee from the HGGC partnership? - Management emphasized HGGC's expertise in M&A and go-to-market strategies, which will support Upland's growth and value creation [38][39] Question: Can you discuss the guidance and confidence in sequential growth? - Management stated that guidance is conservative, primarily affected by FX impacts, and expressed confidence in maintaining growth [44] Question: Any changes in investment focus regarding R&D and product development? - Management confirmed no major changes, maintaining a commitment to innovation and go-to-market investments [45] Question: What is the outlook for the M&A pipeline? - Management anticipates a favorable M&A environment due to market turbulence, with a strong pipeline but a patient approach to execution [54] Question: Is the cross-sell motion still a priority? - Management affirmed that expansion through customer success and product AEs remains a key focus [63] Question: Is there additional conservatism in the guidance due to the macroeconomic environment? - Management confirmed that a typical level of conservatism is embedded in the guidance [64] Question: What is the rationale for the recent equity raise? - Management highlighted the strategic partnership with HGGC and the validation of the business model as key reasons for the equity raise [66]

Upland Software, Inc. (NASDAQ:UPLD) Q1 2022 Earnings Conference Call May 4, 2022 5:00 PM ET Company Participants Jack McDonald – Chairman and Chief Executive Officer Rod Favaron – President Mike Hill – Chief Financial Officer Conference Call Participants Scott Berg – Needham & Company Luv Sodha – Jefferies Jake Roberge – William Blair Alex Sklar – Raymond James Operator Thank you for standing by and welcome to the Upland Software First Quarter 2022 Earnings Call. At this time, all participants are in listen ...

[Part I. FINANCIAL INFORMATION](index=3&type=section&id=Part%20I.%20FINANCIAL%20INFORMATION) This section presents Upland Software's comprehensive financial data and management's analysis for the reporting period [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents Upland Software's unaudited condensed consolidated financial statements for Q1 2022 and 2021, including balance sheets, statements of operations, comprehensive income, equity, cash flows, and detailed accounting notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This subsection provides a snapshot of the company's assets, liabilities, and equity at specific points in time | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------ | | Total Assets | $1,062,761 | $1,029,007 | | Total Liabilities | $734,177 | $712,719 | | Total Stockholders' Equity | $328,584 | $316,288 | | Cash and cash equivalents | $130,443 | $189,158 | - Total assets increased by **$33.75 million**, primarily driven by increases in intangible assets and goodwill, while cash and cash equivalents decreased by **$58.715 million**[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This subsection details the company's revenues, expenses, and net loss over a specific period | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Total Revenue | $78,716 | $73,969 | | Gross Profit | $53,961 | $49,542 | | Loss from Operations | $(14,777) | $(17,528) | | Net Loss | $(22,831) | $(20,684) | | Net Loss per Common Share, Basic and Diluted | $(0.73) | $(0.69) | - Total revenue increased by **6.4%** year-over-year, while net loss widened by **10.4%** due to higher operating expenses, despite an improvement in loss from operations[12](index=12&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This subsection presents the total comprehensive income or loss, including net loss and other comprehensive income items | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net Loss | $(22,831) | $(20,684) | | Other Comprehensive Income | $23,873 | $13,904 | | Comprehensive Income (Loss) | $1,042 | $(6,780) | - The company reported comprehensive income of **$1.042 million** for Q1 2022, a significant improvement from a comprehensive loss of **$6.780 million** in Q1 2021, primarily driven by a substantial unrealized gain on interest rate swaps[15](index=15&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This subsection outlines changes in the company's equity accounts over the reporting period | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------ | | Total Stockholders' Equity | $328,584 | $316,288 | | Additional Paid-In Capital | $579,638 | $568,384 | | Accumulated Other Comprehensive Income (Loss) | $12,359 | $(11,514) | | Accumulated Deficit | $(263,416) | $(240,585) | | Shares Outstanding | 31,320,765 | 31,096,548 | - Stockholders' equity increased by **$12.296 million**, largely due to a positive shift in accumulated other comprehensive income (loss) from a deficit to a gain, driven by unrealized gains on interest rate swaps[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This subsection details the cash inflows and outflows from operating, investing, and financing activities | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net Cash Provided by Operating Activities | $8,222 | $12,503 | | Net Cash Used in Investing Activities | $(62,509) | $(72,900) | | Net Cash Used in Financing Activities | $(4,211) | $(2,095) | | Change in Cash and Cash Equivalents | $(58,715) | $(63,357) | | Cash and Cash Equivalents, End of Period | $130,443 | $186,672 | - Net cash provided by operating activities decreased by **$4.281 million** year-over-year. Net cash used in investing activities decreased by **$10.391 million**, while net cash used in financing activities increased by **$2.116 million**[23](index=23&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This subsection provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Basis of Presentation and Summary of Significant Accounting Policies](index=11&type=section&id=1.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the foundational principles and key accounting methods used in preparing the financial statements - The financial statements are prepared in conformity with GAAP and include Upland Software, Inc. and its wholly-owned subsidiaries. Management's estimates and assumptions, particularly for revenue recognition, deferred commissions, stock-based compensation, and fair value of interest rate swaps, are crucial. The company assessed no material impact from COVID-19 on its estimates as of May 4, 2022[25](index=25&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) - The company uses floating-to-fixed interest rate swap agreements to hedge interest rate risk on its **$540 million** term loans, effectively fixing the rate at **5.4%**. As of March 31, 2022, the fair value of these swaps was a **$17.8 million asset**, up from an **$8.4 million liability** at December 31, 2021[32](index=32&type=chunk) [2. Acquisitions](index=13&type=section&id=2.%20Acquisitions) This section details the company's acquisition activities, including consideration paid and their financial impact - Upland completed two acquisitions in Q1 2022: BA Insight (cloud-based enterprise knowledge management) and Objectif Lune (cloud-based document workflow product). These acquisitions contributed **$0.8 million** and **$4.8 million** in revenue, respectively, through March 31, 2022[41](index=41&type=chunk) 2022 Acquisitions Consideration (in thousands) | Acquisition | Cash | Holdback | Contingent Consideration | Working Capital & Other Adjustments | Total Consideration | | :------------ | :--- | :------- | :----------------------- | :---------------------------------- | :------------------ | | BA Insight | $33,355 | $645 | — | $1,616 | $35,616 | | Objectif Lune | $29,750 | $5,250 | — | — | $35,000 | - Goodwill from these acquisitions totaled **$48.768 million** in Q1 2022, primarily attributed to expected synergies and the acquired workforce. Total transaction-related expenses for acquisitions were **$4.5 million** in Q1 2022, up from **$4.0 million** in Q1 2021[45](index=45&type=chunk)[46](index=46&type=chunk)[53](index=53&type=chunk) [3. Fair Value Measurements](index=15&type=section&id=3.%20Fair%20Value%20Measurements) This section describes how the company measures the fair value of its financial instruments and assets - The fair value of the company's interest rate swaps, categorized as Level 2, increased to a **$17.8 million asset** as of March 31, 2022, from an **$8.4 million liability** at December 31, 2021, due to rising short-term interest rates[50](index=50&type=chunk)[51](index=51&type=chunk) - As of March 31, 2022, and December 31, 2021, there were no accrued earnout business acquisition contingent consideration liabilities measured as Level 3 instruments, as earnout payments for BlueVenn and Second Street were finalized with no payments made[49](index=49&type=chunk) [4. Goodwill and Other Intangible Assets](index=16&type=section&id=4.%20Goodwill%20and%20Other%20Intangible%20Assets) This section provides details on the company's goodwill and other intangible assets, including changes and amortization Goodwill Balance (in thousands) | Metric | Amount | | :-------------------------------- | :------- | | Balance at December 31, 2021 | $457,472 | | Acquired in business combinations | $48,768 | | Adjustment related to prior year business combinations | $1,467 | | Foreign currency translation adjustment | $(2,461) | | Balance at March 31, 2022 | $505,246 | Net Intangible Assets (in thousands) | Intangible Asset | March 31, 2022 Net Carrying Amount | December 31, 2021 Net Carrying Amount | | :----------------- | :--------------------------------- | :---------------------------------- | | Customer relationships | $248,450 | $232,614 | | Trade name | $4,155 | $3,962 | | Developed technology | $47,831 | $43,344 | | Total | $300,436 | $279,920 | - Total amortization expense for intangible assets was **$13.8 million** in Q1 2022, up from **$12.0 million** in Q1 2021. The estimated annual amortization expense for the remainder of 2022 is **$40.45 million**[54](index=54&type=chunk)[55](index=55&type=chunk) [5. Income Taxes](index=17&type=section&id=5.%20Income%20Taxes) This section discusses the company's income tax benefit or provision and related factors - The income tax benefit for Q1 2022 was **$0.1 million**, primarily from foreign income taxes, offset by changes in deferred tax liabilities related to U.S. tax-deductible goodwill amortization and state taxes[57](index=57&type=chunk) - The Q1 2021 tax benefit of **$4.4 million** was mainly due to the release of a valuation allowance from acquired deferred tax liabilities in the Second Street business combination[58](index=58&type=chunk) [6. Debt](index=17&type=section&id=6.%20Debt) This section provides information on the company's debt obligations, including terms, covenants, and interest rates Long-term Debt (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------- | :---------------- | | Senior secured loans (net of discount) | $517,532 | $518,330 | | Less current maturities | $(3,166) | $(3,167) | | Total long-term debt | $514,366 | $515,163 | - The company's Credit Facility includes a **$350 million** Term Loan and a **$60 million** Revolver. An additional **$190 million** Incremental Term Loan was added in November 2019, bringing the total term loans to **$540 million**[62](index=62&type=chunk)[63](index=63&type=chunk)[171](index=171&type=chunk) - Interest rate swaps effectively fix the interest rate on the **$540 million** term loans at **5.4%** for the 7-year term. The Revolver's interest rate remains floating. As of March 31, 2022, the fair value of the interest rate swap was a **$17.8 million asset**[68](index=68&type=chunk)[69](index=69&type=chunk) - The company was in compliance with all covenants under the Credit Facility as of March 31, 2022. Cash interest costs averaged **5.4%** for both Q1 2022 and Q1 2021[75](index=75&type=chunk)[76](index=76&type=chunk) [7. Net Loss Per Share](index=19&type=section&id=7.%20Net%20Loss%20Per%20Share) This section presents the calculation of net loss per common share, both basic and diluted Net Loss Per Share (in thousands, except share and per share amounts) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net Loss | $(22,831) | $(20,684) | | Weighted-average common shares outstanding, basic and diluted | 31,163,273 | 29,970,050 | | Net loss per common share, basic and diluted | $(0.73) | $(0.69) | - Due to net losses, basic and diluted loss per share were identical for both periods. Anti-dilutive common share equivalents totaled **2,664,488** as of March 31, 2022[77](index=77&type=chunk) [8. Commitments and Contingencies](index=19&type=section&id=8.%20Commitments%20and%20Contingencies) This section discloses the company's contractual obligations and potential liabilities - The company has purchase commitments for hosting services and third-party technology. No material adverse legal proceedings are currently anticipated[78](index=78&type=chunk)[79](index=79&type=chunk) - Indemnification claims from acquisitions are managed through holdbacks or representation and warranty insurance policies, with gain contingencies not recognized until realized[80](index=80&type=chunk) [9. Stockholders' Equity](index=20&type=section&id=9.%20Stockholders'%20Equity) This section provides further details on the components of stockholders' equity, including accumulated other comprehensive income and stock-based compensation Accumulated Other Comprehensive Income (Loss) (in thousands) | Component | March 31, 2022 | December 31, 2021 | | :-------------------------------- | :------------- | :---------------- | | Foreign currency translation adjustment | $(6,704) | $(5,657) | | Unrealized translation gain on intercompany loans | $1,260 | $2,552 | | Unrealized gain (loss) on interest rate swaps | $17,803 | $(8,409) | | Total AOCI | $12,359 | $(11,514) | Stock-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------- | :-------------------------------- | :-------------------------------- | | Cost of revenue | $402 | $442 | | Research and development | $748 | $714 | | Sales and marketing | $1,474 | $1,137 | | General and administrative | $8,995 | $15,531 | | Total | $11,619 | $17,824 | - General and administrative stock-based compensation decreased significantly in Q1 2022, primarily due to a **$6.3 million** incremental expense in Q1 2021 related to the deemed modification of unvested grants for a former COO[86](index=86&type=chunk) [10. Revenue Recognition](index=22&type=section&id=10.%20Revenue%20Recognition) This section explains the company's policies and methods for recognizing revenue from various sources - Revenue is recognized when control of goods/services is transferred to customers, following a five-step model. Performance obligations include subscription and support, perpetual licenses, and professional services[93](index=93&type=chunk)[94](index=94&type=chunk) - Subscription and support revenue is recognized ratably over the contract term (typically 1-3 years). Perpetual license revenue is recognized upfront when software is made available. Professional services revenue is recognized over time as services are performed[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk) Disaggregated Revenue by Geography (in thousands) | Revenue Type | Geography | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----------------------- | :---------------- | :-------------------------------- | :-------------------------------- | | Subscription and support | United States | $51,344 | $52,955 | | | United Kingdom | $11,590 | $9,394 | | | Canada | $3,468 | $3,338 | | | Other International | $7,225 | $4,966 | | Perpetual license | United States | $737 | $253 | | | United Kingdom | $129 | $11 | | | Canada | $76 | $42 | | | Other International | $836 | $46 | | Professional services | United States | $1,695 | $2,044 | | | United Kingdom | $790 | $664 | | | Canada | $204 | $88 | | | Other International | $622 | $168 | | Total Revenue | | $78,716 | $73,969 | - As of March 31, 2022, approximately **$306.1 million** of revenue is expected to be recognized from remaining performance obligations, with about **70%** expected within the next 12 months[111](index=111&type=chunk) [11. Related Party Transactions](index=26&type=section&id=11.%20Related%20Party%20Transactions) This section discloses any transactions between the company and its related parties - The Company reported no material related party transactions for the three months ended March 31, 2022[115](index=115&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of Upland Software's financial performance and operational results for Q1 2022, covering revenue, expenses, key metrics, liquidity, and critical accounting policies, with a focus on acquisition impacts [Overview](index=28&type=section&id=Overview) This section provides a general description of Upland Software's business, strategy, and market position - Upland provides cloud-based software applications for digital transformation across marketing, sales, contact center, project management, information technology, business operations, and human resources/legal functions[121](index=121&type=chunk)[130](index=130&type=chunk) - The company employs a 'land-and-expand' go-to-market strategy, selling primarily through a direct sales organization and supporting over **10,000 customers** across various industries[123](index=123&type=chunk)[124](index=124&type=chunk) - Upland's revenue grew from **$98.0 million** in 2017 to **$302.0 million** in 2021, a **33% CAGR**. Foreign revenue increased to **32%** of total revenue in Q1 2022, up from **25%** in Q1 2021[125](index=125&type=chunk) - The company plans to continue growth through acquisitions, having completed **31 acquisitions** from February 2012 through March 31, 2022. Acquisition activity resumed in 2021 and Q1 2022 after a pause due to COVID-19[126](index=126&type=chunk)[128](index=128&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including revenue, cost of revenue, and operating expenses [Consolidated Statements of Operations Data](index=30&type=section&id=Consolidated%20Statements%20of%20Operations%20Data) This subsection presents a summary of the company's consolidated statements of operations, including key financial metrics | Metric | 3 Months Ended March 31, 2022 (Amount) | 3 Months Ended March 31, 2022 (% of Revenue) | 3 Months Ended March 31, 2021 (Amount) | 3 Months Ended March 31, 2021 (% of Revenue) | | :-------------------------------- | :------------------------------------- | :------------------------------------------- | :------------------------------------- | :------------------------------------------- | | Total Revenue | $78,716 | 100% | $73,969 | 100% | | Total Cost of Revenue | $24,755 | 31% | $24,427 | 33% | | Gross Profit | $53,961 | 69% | $49,542 | 67% | | Total Operating Expenses | $68,738 | 87% | $67,070 | 91% | | Loss from Operations | $(14,777) | (18)% | $(17,528) | (24)% | | Net Loss | $(22,831) | (29)% | $(20,684) | (28)% | [Comparison of the Three Months Ended March 31, 2022 and 2021](index=31&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20March%2031,%202022%20and%202021) This section provides a detailed comparative analysis of the company's financial performance between the two periods [Revenue](index=31&type=section&id=Revenue) This subsection analyzes the company's revenue performance, including breakdowns by type and contributing factors Revenue Breakdown (in thousands) | Revenue Type | 2022 | 2021 | % Change | | :-------------------- | :----- | :----- | :------- | | Subscription and support | $73,627 | $70,653 | 4% | | Perpetual license | $1,778 | $352 | 405% | | Professional services | $3,311 | $2,964 | 12% | | Total Revenue | $78,716 | $73,969 | 6% | - Total revenue increased by **$4.7 million (6%)** to **$78.7 million** in Q1 2022. Acquisitions contributed **$10.1 million** to this increase, while 'Sunset Assets' and 'Overage Charges' declined by **$0.3 million** and **$2.1 million**, respectively. Core Organic Business revenue decreased by **$2.1 million**[135](index=135&type=chunk) - Subscription and support revenue increased by **$2.9 million (4%)**, with acquisitions contributing **$8.1 million**. Perpetual license revenue saw a significant **405% increase**, primarily from the Objectif Lune acquisition[136](index=136&type=chunk)[137](index=137&type=chunk) [Cost of Revenue and Gross Profit Percentage](index=32&type=section&id=Cost%20of%20Revenue%20and%20Gross%20Profit%20Percentage) This subsection examines the costs associated with generating revenue and the resulting gross profit margin Cost of Revenue and Gross Profit (in thousands) | Metric | 2022 | 2021 | % Change | | :-------------------------- | :----- | :----- | :------- | | Cost of subscription and support | $22,069 | $22,682 | (3)% | | Cost of professional services and other | $2,686 | $1,745 | 54% | | Total Cost of Revenue | $24,755 | $24,427 | 1% | | Gross Profit | $53,961 | $49,542 | 9% | | Gross Profit Percentage | 69% | 67% | +2pp | - Cost of subscription and support revenue decreased by **$0.6 million (3%)**, with a **$2.5 million** decrease in Organic Business costs, mainly due to lower telecom messaging costs after cyclical highs in 2021[141](index=141&type=chunk) - Cost of professional services and other revenue increased by **$1.0 million (54%)**, entirely attributable to acquisitions[142](index=142&type=chunk) [Operating Expenses](index=33&type=section&id=Operating%20Expenses) This subsection analyzes the company's operating expenses, including sales and marketing, research and development, and general and administrative costs Operating Expenses (in thousands) | Expense Category | 2022 | 2021 | % Change | | :----------------------- | :----- | :----- | :------- | | Sales and marketing | $15,593 | $12,432 | 25% | | Research and development | $12,067 | $10,940 | 10% | | General and administrative | $19,614 | $24,369 | (20)% | | Depreciation and amortization | $11,051 | $9,743 | 13% | - Sales and marketing expense increased by **$3.2 million (25%)**, with **$2.1 million** from acquisitions and **$1.1 million** from organic business due to increased sales commissions[145](index=145&type=chunk) - General and administrative expense decreased by **$4.8 million (20%)**, primarily due to a **$5.5 million** reduction in Organic Business expenses, driven by lower non-cash stock compensation (a **$6.3 million** incremental expense in Q1 2021 did not recur)[150](index=150&type=chunk) - Depreciation and amortization expense increased by **$1.4 million (13%)**, with acquisitions contributing **$1.9 million**, partially offset by **$0.5 million** from fully depreciated/amortized assets[152](index=152&type=chunk) [Acquisition-related Expenses](index=35&type=section&id=Acquisition-related%20Expenses) This subsection details the expenses incurred in connection with business acquisitions Acquisition-related Expenses (in thousands) | Expense Type | 2022 | 2021 | % Change | | :----------------------- | :----- | :----- | :------- | | Acquisition-related expenses | $10,413 | $9,586 | 9% | | Transaction related expenses | $4,500 | $4,000 | 12.5% | | Transformational expenses | $5,900 | $5,600 | 5.4% | - Acquisition-related expenses increased by **$0.8 million (9%)**, driven by both transaction-related and transformational expenses from recent acquisitions in 2022 and 2021[155](index=155&type=chunk) [Other Income (Expense)](index=35&type=section&id=Other%20Income%20(Expense)) This subsection covers non-operating income and expenses, such as interest and other miscellaneous items Other Income (Expense) (in thousands) | Metric | 2022 | 2021 | % Change | | :----------------------- | :----- | :----- | :------- | | Interest expense, net | $(7,762) | $(7,787) | —% | | Other income (expense), net | $(418) | $237 | (276)% | | Total other expense | $(8,180) | $(7,550) | 8% | - Other income (expense), net shifted from an income of **$0.2 million** in Q1 2021 to an expense of **$0.4 million** in Q1 2022, primarily due to currency exchange gains (losses)[157](index=157&type=chunk) [Benefit from (Provision for) Income Taxes](index=36&type=section&id=Benefit%20from%20(Provision%20for)%20Income%20Taxes) This subsection discusses the company's income tax benefit or provision and the factors influencing it Benefit from Income Taxes (in thousands) | Metric | 2022 | 2021 | % Change | | :----------------------- | :----- | :----- | :------- | | Benefit from income taxes | $126 | $4,394 | (97)% | - The income tax benefit decreased significantly by **$4.3 million (97%)** in Q1 2022. The Q1 2022 benefit was mainly from foreign income taxes, while Q1 2021 included a substantial benefit from the release of a valuation allowance related to business combinations[159](index=159&type=chunk) [Key Metrics](index=36&type=section&id=Key%20Metrics) This section presents and reconciles key non-GAAP financial measures used by management to evaluate performance Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | 2022 | 2021 | | :-------------------------------- | :----- | :----- | | Net loss | $(22,831) | $(20,684) | | Depreciation and amortization expense | $14,262 | $12,468 | | Interest expense, net | $7,762 | $7,787 | | Other expense (income), net | $418 | $(237) | | Benefit from income taxes | $(126) | $(4,394) | | Stock-based compensation expense | $11,619 | $17,824 | | Acquisition-related expense | $10,413 | $9,586 | | Purchase accounting deferred revenue discount | $1,929 | $494 | | Adjusted EBITDA | $23,446 | $22,844 | - Adjusted EBITDA increased by **$0.602 million (2.6%)** to **$23.446 million** in Q1 2022, reflecting the company's operating performance excluding non-cash and acquisition-related items[164](index=164&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to generate and manage cash to meet its financial obligations and fund operations - As of March 31, 2022, Upland had **$130.4 million** in cash and cash equivalents, **$60.0 million** available under its revolving credit facility, and **$526.5 million** in outstanding borrowings[167](index=167&type=chunk) - Cash and cash equivalents decreased by **$58.7 million** from December 31, 2021, primarily due to **$62.3 million** in cash paid for two acquisitions in Q1 2022[167](index=167&type=chunk) - Working capital surplus decreased from **$106.5 million** at December 31, 2021, to **$29.9 million** at March 31, 2022, which includes **$114.5 million** of deferred revenue as a current liability[169](index=169&type=chunk) [Cash Flows from Operating Activities](index=39&type=section&id=Cash%20Flows%20from%20Operating%20Activities) This subsection analyzes the cash generated or used by the company's primary business operations - Net cash provided by operating activities decreased by **$4.3 million** to **$8.2 million** in Q1 2022, primarily due to increased acquisition-related cash outflows[179](index=179&type=chunk) - Working capital sources included a **$9.2 million** decrease in accounts receivable and a **$1.1 million** increase in deferred revenue, while uses included a **$4.1 million** decrease in accounts payable and a **$4.8 million** decrease in accrued expenses[179](index=179&type=chunk) [Cash Flows from Investing Activities](index=40&type=section&id=Cash%20Flows%20from%20Investing%20Activities) This subsection details the cash used for or generated from investments in assets, such as acquisitions and capital expenditures - Cash used in investing activities decreased by **$10.4 million** to **$62.5 million** in Q1 2022, mainly due to lower acquisition purchase prices compared to the prior year[182](index=182&type=chunk) - Investing activities primarily consist of acquisitions of complementary technologies, products, and businesses, and are expected to continue to expand the company's software library and infrastructure[181](index=181&type=chunk)[183](index=183&type=chunk) [Cash Flows from Financing Activities](index=40&type=section&id=Cash%20Flows%20from%20Financing%20Activities) This subsection analyzes the cash flows related to debt, equity, and other financing transactions - Cash used in financing activities increased by **$2.1 million** to **$4.2 million** in Q1 2022, driven by a **$1.8 million** increase in additional consideration paid to sellers (holdbacks) and a **$0.5 million** increase in net share employee payroll tax settlement payments[185](index=185&type=chunk) [Critical Accounting Policies and the Use of Estimates](index=40&type=section&id=Critical%20Accounting%20Policies%20and%20the%20Use%20of%20Estimates) This section highlights the accounting policies that require significant judgment and estimates by management - Key accounting policies requiring significant judgment and estimates include revenue recognition, income taxes, deferred sales commissions, business combinations (goodwill and long-lived assets), and stock-based compensation[187](index=187&type=chunk) - No material changes to critical accounting policies were reported in Q1 2022 compared to the 2021 Annual Report on Form 10-K[188](index=188&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details Upland Software's exposure to and management of market risks, including interest rate, foreign exchange, and inflation risks [Interest Rate Risk](index=42&type=section&id=Interest%20Rate%20Risk) This subsection describes the company's exposure to fluctuations in interest rates and its mitigation strategies - Upland's interest rate risk primarily relates to cash equivalents and variable rate indebtedness. Interest rate swap agreements fix the interest rate on **$540 million** of term loans at **5.4%**, mitigating exposure to variable rates[193](index=193&type=chunk) - As of March 31, 2022, with no outstanding debt under the revolving credit facility, a hypothetical **100 basis point** change in interest rates would not impact total interest expense[193](index=193&type=chunk) [Foreign Currency Exchange Risk](index=42&type=section&id=Foreign%20Currency%20Exchange%20Risk) This subsection outlines the company's exposure to foreign currency fluctuations and their potential impact - The company is exposed to foreign exchange rate fluctuations as it invoices customers and incurs operating expenses in various foreign currencies (e.g., AUD, CAD, GBP, EUR)[194](index=194&type=chunk) - A hypothetical **10%** change in foreign currency exchange rates could result in a **$2.0 million** change in revenue for the three months ended March 31, 2022. The company has not engaged in currency hedging strategies to date[194](index=194&type=chunk) [Inflation](index=42&type=section&id=Inflation) This subsection discusses the potential impact of inflation on the company's business and financial results - Inflation has not had a material effect on the business in the last three fiscal years, but potential future inflationary pressures could increase costs and adversely affect financial results if not offset by price increases[196](index=196&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) This section evaluates Upland Software's disclosure controls and internal control over financial reporting, confirming their effectiveness and reporting no material changes for Q1 2022 - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2022[199](index=199&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2022[200](index=200&type=chunk) [Part II. OTHER INFORMATION](index=44&type=section&id=Part%20II.%20OTHER%20INFORMATION) This section contains additional information not covered in Part I, including updated risk factors and exhibits [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) This section updates previously disclosed risk factors, emphasizing the potential adverse effects of inflation on the company's liquidity, business, financial condition, and operational results - The company may be adversely affected by inflation, which could increase overall cost structure, particularly if commensurate price increases cannot be achieved[205](index=205&type=chunk) - Inflation may lead to higher interest rates, capital costs, shipping costs, supply shortages, increased labor costs, and weakening exchange rates[205](index=205&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including CEO and CFO certifications and Inline XBRL financial data - Exhibits include 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[209](index=209&type=chunk) - The report also includes Inline XBRL formatted financial statements and notes, and a Cover Page Interactive Data File[209](index=209&type=chunk) [SIGNATURES](index=46&type=section&id=SIGNATURES) This section contains the official signatures, certifying the filing of the Quarterly Report on Form 10-Q by Upland Software, Inc. on May 4, 2022 - The report was duly signed on behalf of UPLAND SOFTWARE, INC. by Michael D. Hill, Chief Financial Officer, on May 4, 2022[213](index=213&type=chunk)

Upland Software, Inc. (NASDAQ:UPLD) Q4 2021 Earnings Conference Call February 24, 2022 5:00 PM ET Company Participants Jack McDonald - Chairman & Chief Executive Officer Mike Hill - Chief Financial Officer Rod Favaron - President Conference Call Participants Bhavan Suri - William Blair Joe Meares - Truist Luv Sodha - Jefferies Luke Morison - Canaccord Alex Sklar - Raymond James Operator Thank you for standing by and welcome to the Upland Software Fourth Quarter 2021 Earnings Call. . At this time, all part ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-36720 Upland Software, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) Delaware 27-2992077 (I.R.S. Empl ...

Financial Data and Key Metrics Changes - Total revenue for Q3 2021 was $76.1 million, representing a growth of 3% year-over-year [33] - Recurring revenue from subscription and support grew 2% year-over-year to $72.3 million [33] - Adjusted EBITDA for Q3 2021 was $25 million, consistent with the previous year, with an adjusted EBITDA margin of 33% [38] - Free cash flow for Q3 2021 was $4.9 million, with a year-to-date total of approximately $28 million [39][40] - The company lowered its Q4 revenue guidance by $3.9 million due to reduced messaging volumes and lower new logo bookings [10][12] Business Line Data and Key Metrics Changes - Organic growth in recurring revenues, excluding political, was flat in Q3 2021, with a full-year expectation of 2% growth [13] - Professional services revenue increased by 12% year-over-year to $3.1 million [33] - The messaging volumes from progressive advocacy organization customers were lower than expected, impacting revenue [12][58] Market Data and Key Metrics Changes - The company expects a quarterly revenue run rate of $75 million for Q4 2021, reflecting the impacts of COVID-19 on the business [11][17] - The net dollar retention rate is currently in the low to mid-90s, down from 94% in 2020, but expected to improve in 2022 due to multiyear renewals [16][25] Company Strategy and Development Direction - The company is targeting total revenue growth of 15% per year, combining organic growth and acquisitions, with a focus on self-funded growth [20][66] - The management remains committed to the current strategy of building a strong go-to-market and product organization, with no plans for a major pivot [62][67] - The company aims to add $40 million to $50 million in acquired revenues by the end of 2022 [11][91] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a mixed quarter with strong adjusted EBITDA but lower than expected messaging volumes [9] - There are positive early indicators for Q4 bookings, but the company is taking a conservative approach until sustained improvement is seen [57][110] - The management expressed confidence in the long-term growth potential and the effectiveness of the changes made in the sales and marketing structure [71][73] Other Important Information - The company has approximately $240 million in liquidity, including $180 million in cash and a $60 million undrawn revolver [41] - The net debt leverage is around 3.6, with outstanding net debt of approximately $350 million [43] Q&A Session Summary Question: Visibility and confidence in the pipeline - Management noted that the pipeline creation was impacted by the transition to a fully digital lead generation model during the pandemic, affecting new logo bookings [54][56] Question: Changes in competitive environment - Management indicated no material competitive changes but noted improved relationships with major platform players like Salesforce [70][72] Question: Impact of new logo and expansion sales on acquisition pace - Management confirmed that the pace of acquisitions remains unchanged at $40 million to $50 million per year, supported by internally generated cash flow [91] Question: Goodwill write-off clarification - Management clarified that there were no write-offs, only adjustments in purchase accounting related to acquisitions [87] Question: Drivers of lower messaging volume - The decline was primarily due to lower variable messaging volumes from progressive advocacy organization customers, not due to churn [112][123]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UPLAND SOFTWARE, INC. For the quarterly period ended September 30, 2021 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 (Exact name of registrant as specified in its charter) (State or other jurisdiction of in ...

Upland Software, Inc. (NASDAQ:UPLD) Q2 2021 Earnings Conference Call August 4, 2021 5:00 PM ET Company Participants Jack McDonald - Chairman and Chief Executive Officer Mike Hill - Chief Financial Officer Rod Favaron - President and Chief Commercial Officer Conference Call Participants Bhavan Suri - William Blair & Company LLC Luv Sodha - Jefferies LLC Michael Rackers - Needham & Company, LLC Joseph Meares - Truist Securities, Inc. Aaron Spychalla - Craig-Hallum Capital Group LLC Luke Hannan - Canaccord Gen ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 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 or other jurisdiction of incorpo ...