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 ...

Financial Data and Key Metrics Changes - Total revenue for Q1 2021 was $74 million, representing a 9% growth year-over-year [13] - Recurring revenue from subscription and support grew 11% year-over-year to $70.7 million [13] - Adjusted EBITDA for Q1 2021 was $22.8 million, or 31% of total revenue, down from $24.6 million or 36% of total revenue in Q1 2020 [15] - Free cash flow for Q1 2021 was $12.2 million, despite $9.6 million in acquisition-related expenses [15][16] - The company expects full-year 2021 free cash flow to exceed $30 million, potentially over $40 million depending on future acquisitions [16] Business Line Data and Key Metrics Changes - Professional Services revenue was $3 million for the quarter, a 20% year-over-year decline due to COVID-19 travel impacts [13] - Organic recurring revenue growth was 3%, and 6% when excluding political-related revenue from Q1 2020 [9] Market Data and Key Metrics Changes - The company reported a 9% total revenue growth, with a strong performance in recurring revenue [9][13] - The demand environment is showing signs of returning to pre-COVID levels, with a net dollar retention rate in the mid-90s [32] Company Strategy and Development Direction - The company restarted its M&A engine, completing two strategic acquisitions: Second Street and BlueVenn, which are expected to enhance its Customer Experience Management (CXM) suite [9][11] - The acquisition program is now self-sustaining, relying on free cash flow rather than equity capital markets [9] - The company is focusing on cross-selling opportunities and integrating acquired products into existing sales channels [23][25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand environment returning to normal, although they maintain a conservative outlook for the remainder of the year [32] - The company is actively pursuing additional acquisition opportunities across various product suites, including Contact Center and Document Workflow [26][64] Other Important Information - The company has approximately $246.7 million in liquidity, including $186.7 million in cash and a $60 million undrawn revolver [17] - Upland has about $356 million in total tax NOL carry-forwards, with an estimated $215 million available for utilization prior to expiration [17] Q&A Session Summary Question: Progress on BlueVenn and Second Street acquisitions - Management is excited about both acquisitions, which are strategic and accretive, enhancing the CXM product suite [22] Question: M&A funnel opportunities - The company has a strong pipeline across all key product suites, with potential acquisitions likely outside of CXM [26] Question: Cross-sell journey and organic revenue growth - Management indicated that foundational work is being done to support cross-sell efforts, with expectations for growth in 2022 [30][31] Question: Demand environment post-COVID - Management noted that the business proved resilient during COVID, and the demand environment is beginning to normalize [32] Question: Mobile messaging products usage - The company is seeing expected organic growth of 6% when excluding political revenue from the previous year [35] Question: Bookings and pipeline growth - Bookings are in line with expectations, with a mix of new versus expansion deals [39][40] Question: Retaining acquired sales talent - The company focuses on retaining top talent from acquisitions while integrating them into the larger sales organization [46] Question: Update on HP relationship - The relationship with HP is developing positively, with training and pipeline building underway [50][51] Question: Contact center market opportunities - The company sees significant potential in the contact center space and is looking to expand its solution suite in this area [64] Question: M&A pipeline and COVID impact - The COVID impact has led to an influx of potential acquisition targets, with a focus on quality and resilience during the pandemic [68][69]

Part I. FINANCIAL INFORMATION This section details Upland Software's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Upland Software's unaudited condensed consolidated financial statements and detailed notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table provides a snapshot of Upland Software's financial position at specific dates Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2021 | December 31, 2020 | | :----------------------------------- | :------------- | :---------------- | | **Assets** | | | | Cash and cash equivalents | $186,672 | $250,029 | | Total current assets | $250,823 | $317,540 | | Total assets | $1,035,117 | $1,011,220 | | **Liabilities** | | | | Total current liabilities | $147,245 | $121,420 | | Notes payable, less current maturities | $517,636 | $518,437 | | Interest rate swap liabilities | $14,581 | $30,032 | | Total liabilities | $717,457 | $704,605 | | **Stockholders' Equity** | | | | Total stockholders' equity | $317,660 | $306,615 | | Total liabilities and stockholders' equity | $1,035,117 | $1,011,220 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This table details Upland Software's financial performance over the reporting periods Condensed Consolidated Statements of Operations (Three Months Ended March 31, in thousands) | Metric | 2021 | 2020 | | :----------------------------------- | :----- | :----- | | Total revenue | $73,969 | $68,032 | | Gross profit | $49,542 | $45,831 | | Loss from operations | $(17,528) | $(15,323) | | Net loss | $(20,684) | $(20,081) | | Net loss per common share, basic and diluted | $(0.69) | $(0.81) | | Weighted-average common shares outstanding | 29,970,050 | 24,906,932 | - Total revenue increased by **9%** year-over-year, from **$68.0 million** in Q1 2020 to **$74.0 million** in Q1 2021. Subscription and support revenue, the largest component, grew **11%** from **$63.9 million** to **$70.7 million**[11](index=11&type=chunk) - Net loss slightly increased from **$(20.1) million** in Q1 2020 to **$(20.7) million** in Q1 2021, while net loss per common share improved from **$(0.81)** to **$(0.69)** due to an increase in weighted-average common shares outstanding[11](index=11&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This table presents Upland Software's comprehensive loss, including other comprehensive income items Condensed Consolidated Statements of Comprehensive Loss (Three Months Ended March 31, in thousands) | Metric | 2021 | 2020 | | :----------------------------------- | :----- | :----- | | Net loss | $(20,684) | $(20,081) | | Foreign currency translation adjustment | $(2,387) | $(3,459) | | Unrealized translation gain (loss) on foreign currency denominated intercompany loans | $840 | $(7,313) | | Unrealized gain (loss) on interest rate swaps | $15,451 | $(31,401) | | Comprehensive loss | $(6,780) | $(62,254) | - Comprehensive loss significantly improved from **$(62.3) million** in Q1 2020 to **$(6.8) million** in Q1 2021, primarily driven by a substantial unrealized gain on interest rate swaps in 2021 compared to a large loss in 2020[14](index=14&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This table outlines changes in Upland Software's stockholders' equity over the period Changes in Stockholders' Equity (Three Months Ended March 31, 2021, in thousands) | Metric | Balance at Dec 31, 2020 | Stock-based Compensation | Unrealized Gain on Interest Rate Swaps | Net Loss | Balance at Mar 31, 2021 | | :----------------------------------- | :---------------------- | :----------------------- | :----------------------------------- | :--------- | :---------------------- | | Additional Paid-In Capital | $515,219 | $17,824 | — | — | $533,044 | | Accumulated Other Comprehensive Loss | $(26,234) | — | $15,451 | — | $(12,330) | | Accumulated Deficit | $(182,373) | — | — | $(20,684) | $(203,057) | | Total Stockholders' Equity | $306,615 | $17,824 | $15,451 | $(20,684) | $317,660 | - Total stockholders' equity increased from **$306.6 million** at December 31, 2020, to **$317.7 million** at March 31, 2021, primarily due to stock-based compensation and unrealized gains on interest rate swaps, partially offset by the net loss[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table summarizes Upland Software's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31, in thousands) | Activity | 2021 | 2020 | | :----------------------------------- | :----- | :----- | | Net cash provided by (used in) operating activities | $12,503 | $(5,309) | | Net cash used in investing activities | $(72,900) | $(68,148) | | Net cash used in financing activities | $(2,095) | $(3,204) | | Effect of exchange rate fluctuations on cash | $(865) | $325 | | Change in cash and cash equivalents | $(63,357) | $(76,336) | | Cash and cash equivalents, end of period | $186,672 | $98,688 | - Net cash provided by operating activities significantly improved to **$12.5 million** in Q1 2021 from a use of **$5.3 million** in Q1 2020. Cash used in investing activities increased to **$72.9 million**, primarily due to acquisitions[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations for the condensed consolidated financial statements [1. Summary of Significant Accounting Policies](index=9&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the key accounting principles and estimates used in financial reporting - The financial statements are prepared in conformity with GAAP and include Upland Software, Inc. and its wholly-owned subsidiaries. Management's estimates are based on historical experience and assumptions, with no specific COVID-19 related updates to estimates as of May 5, 2021[22](index=22&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - The Company uses floating-to-fixed interest rate swap agreements to hedge exposure to interest rate risk on its **$540 million** term loans, effectively fixing the rate at **5.4%**. These derivatives are recognized at fair value as liabilities[29](index=29&type=chunk) - The fair value of interest rate swaps was **$14.6 million** as of March 31, 2021, down from **$30.0 million** at December 31, 2020[29](index=29&type=chunk) [2. Acquisitions](index=10&type=section&id=2.%20Acquisitions) This section details the company's business acquisitions and their financial impact - In Q1 2021, Upland acquired BlueVenn (cloud-based customer data platform) and Second Street (audience engagement platform), contributing approximately **$1.0 million** and **$2.0 million** in revenue, respectively, since their acquisition dates through March 31, 2021[39](index=39&type=chunk) Acquisition Consideration (in thousands) | Acquisition | Cash | Holdback | Contingent Consideration | Working Capital Adjustment | Total Consideration | | :---------- | :--- | :------- | :----------------------- | :------------------------- | :------------------ | | BlueVenn | $53,535 | $2,429 | $2,742 | — | $58,706 | | Second Street | $25,436 | $5,000 | $1,650 | $104 | $32,190 | | Localytics (2020) | $67,655 | $345 | $1,000 | $(5,238) | $63,762 | - The purchase accounting for BlueVenn and Second Street is preliminary, with finalization expected by Q1 2022. Goodwill of **$98.7 million** from these acquisitions is primarily attributed to expected synergies[38](index=38&type=chunk)[43](index=43&type=chunk) [3. Fair Value Measurements](index=13&type=section&id=3.%20Fair%20Value%20Measurements) This section describes the valuation methods and categories for financial instruments - The Company measures contingent accrued earnout business acquisition consideration liabilities as Level 3 instruments, remeasured periodically based on anticipated revenue levels, discount periods/rates, and foreign exchange rates[47](index=47&type=chunk) Liabilities Measured at Fair Value (March 31, 2021, in thousands) | Liability | Level 1 | Level 2 | Level 3 | Total | | :-------------------------- | :------ | :------ | :------ | :------ | | Earnout consideration liability | — | — | $4,350 | $4,350 | | Interest rate swap liabilities | — | $14,581 | — | $14,581 | - The fair value of interest rate swaps, categorized as Level 2, was a **$14.6 million** liability at March 31, 2021, reflecting a decline in short-term interest rates since the swap agreements were initiated[48](index=48&type=chunk) [4. Goodwill and Other Intangible Assets](index=14&type=section&id=4.%20Goodwill%20and%20Other%20Intangible%20Assets) This section provides details on the company's goodwill and other intangible assets Goodwill Balance (in thousands) | Metric | Amount | | :--------------------------- | :------- | | Balance at December 31, 2020 | $383,598 | | Acquired in business combinations | $65,190 | | Foreign currency translation adjustment | $(230) | | Balance at March 31, 2021 | $448,558 | Intangible Assets, Net (March 31, 2021, in thousands) | Asset Class | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | | :-------------------- | :-------------------- | :----------------------- | :------------------ | | Customer relationships | $348,678 | $98,022 | $250,656 | | Trade name | $9,700 | $4,992 | $4,708 | | Developed technology | $87,044 | $36,627 | $50,417 | | Non-compete agreements | $1,148 | $1,052 | $96 | | Total intangible assets | $446,570 | $140,693 | $305,877 | - Total amortization expense for Q1 2021 was **$12.0 million**, up from **$11.2 million** in Q1 2020. No impairments of intangible assets or goodwill were recorded[55](index=55&type=chunk) [5. Income Taxes](index=15&type=section&id=5.%20Income%20Taxes) This section explains the company's income tax provisions and deferred tax assets/liabilities - The Company recorded an income tax benefit of **$4.4 million** for Q1 2021, primarily due to the release of valuation allowance related to deferred tax liabilities from the Second Street acquisition and foreign income taxes[58](index=58&type=chunk) - As of March 31, 2021, Upland had **$355 million** in total net operating loss carryforwards, with approximately **$214 million** available for utilization prior to expiration[60](index=60&type=chunk) [6. Debt](index=16&type=section&id=6.%20Debt) This section details the company's long-term debt obligations and credit facilities Long-term Debt (in thousands) | Metric | March 31, 2021 | December 31, 2020 | | :----------------------------------- | :------------- | :---------------- | | Senior secured loans (net of discount) | $520,806 | $521,603 | | Less current maturities | $(3,170) | $(3,166) | | Total long-term debt | $517,636 | $518,437 | - The Company's Credit Facility includes a **$350 million** Term Loan and a **$190 million** Incremental Term Loan, both with interest rates effectively fixed at **5.4%** via interest rate swaps, and a **$60 million** revolving credit facility which remains floating[63](index=63&type=chunk)[64](index=64&type=chunk)[68](index=68&type=chunk) - As of March 31, 2021, the Company had **no outstanding borrowings** under the Revolver and was in compliance with all Credit Facility covenants[72](index=72&type=chunk)[75](index=75&type=chunk) [7. Net Loss Per Share](index=18&type=section&id=7.%20Net%20Loss%20Per%20Share) This section presents the calculation of net loss per common share Net Loss Per Share Computation (Three Months Ended March 31, in thousands, except share and per share amounts) | Metric | 2021 | 2020 | | :----------------------------------- | :----- | :----- | | Net Loss | $(20,684) | $(20,081) | | Weighted–average common shares outstanding, basic and diluted | 29,970,050 | 24,906,932 | | Net loss per common share, basic and diluted | $(0.69) | $(0.81) | - Due to net losses, basic and diluted loss per share were the same. Anti-dilutive common share equivalents totaled **2,660,192** as of March 31, 2021[77](index=77&type=chunk) [8. Commitments and Contingencies](index=18&type=section&id=8.%20Commitments%20and%20Contingencies) This section outlines the company's contractual commitments and potential liabilities - The Company has purchase commitments for hosting services, third-party technology, and software development services, including a remaining obligation of **$7.2 million** for DevFactory FZ-LLC through December 31, 2021[78](index=78&type=chunk)[79](index=79&type=chunk) - The Company is **not involved in any current or pending legal proceedings** that would materially adversely affect its financial statements[80](index=80&type=chunk) [9. Stockholders' Equity](index=19&type=section&id=9.%20Stockholders'%20Equity) This section provides further details on the components of stockholders' equity Accumulated Other Comprehensive Loss (in thousands) | Component | March 31, 2021 | December 31, 2020 | | :---------------------------------------------------- | :------------- | :---------------- | | Foreign currency translation adjustment | $(1,743) | $644 | | Unrealized translation gain on intercompany loans | $3,994 | $3,154 | | Unrealized loss on interest rate swaps | $(14,581) | $(30,032) | | Total accumulated other comprehensive loss | $(12,330) | $(26,234) | - Stock-based compensation expense totaled **$17.8 million** in Q1 2021, up from **$9.3 million** in Q1 2020, primarily due to a **$6.3 million** incremental expense related to the deemed modification of unvested grants for the former COO[88](index=88&type=chunk) - Unvested Restricted Stock Units (RSUs) increased from **1,261,290** at Dec 31, 2020, to **2,234,764** at March 31, 2021, with **1,096,662** units granted during the quarter[89](index=89&type=chunk) [10. Revenue Recognition](index=21&type=section&id=10.%20Revenue%20Recognition) This section explains the company's policies for recognizing revenue from various sources - Revenue is recognized when control of promised goods or services is transferred to customers, following a five-step model. Performance obligations include subscription and support, perpetual licenses, and professional services[95](index=95&type=chunk)[96](index=96&type=chunk) - Subscription and support revenue is recognized ratably over the contract term (generally 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[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk) Disaggregated Revenue by Geography (Three Months Ended March 31, 2021, in thousands) | Revenue Type | United States | United Kingdom | Canada | Other International | Total | | :----------------------- | :------------ | :------------- | :----- | :------------------ | :------ | | Subscription and support | $52,955 | $9,394 | $3,338 | $4,966 | $70,653 | | Perpetual license | $253 | $11 | $42 | $46 | $352 | | Professional services | $2,044 | $664 | $88 | $168 | $2,964 | | Total revenue | $55,252 | $10,069 | $3,468 | $5,180 | $73,969 | [11. Related Party Transactions](index=25&type=section&id=11.%20Related%20Party%20Transactions) This section details transactions with affiliated entities and related parties - The Company has an agreement with DevFactory FZ LLC (an affiliate of a non-management investor) for software development services, with a purchase commitment of **$9.6 million** in 2021. Payments were **$2.4 million** in Q1 2021[116](index=116&type=chunk) - Services were also purchased from Crossover, Inc. (controlled by the same investor) for approximately **$1.0 million** in Q1 2021, for identifying and connecting with technology software development resources[116](index=116&type=chunk) - An arrangement with former subsidiary Visionael Corporation, in which the CEO holds a significant interest, generated **no fees** in Q1 2021 (down from **$15,000** in Q1 2020). An allowance for credit loss of **$0.4 million** was recognized against advances to Visionael[118](index=118&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) Management discusses Upland Software's financial condition, operational results, and liquidity [Overview](index=28&type=section&id=Overview) This section provides a general description of Upland Software's business and strategy - Upland Software provides cloud-based enterprise work management software across various functional areas including Marketing, Sales, Contact Center, Project Management, Information Technology, Business Operations, and Human Resources/Legal[123](index=123&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[134](index=134&type=chunk) - The Company employs a 'land-and-expand' go-to-market strategy, serving over **10,000 customers** with more than **1,000,000 users**. Revenue grew from **$98.0 million** in 2017 to **$291.8 million** in 2020, a **44% CAGR**[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) - COVID-19 impacted new bookings and churn, but was offset by strength in cloud offerings and US election-year campaigns in 2020. Acquisition activity resumed in Q1 2021 after a pause in 2020[132](index=132&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) [Key Metrics](index=30&type=section&id=Key%20Metrics) This section defines and reconciles key non-GAAP financial metrics used for performance evaluation - Adjusted EBITDA is a key non-GAAP metric used to evaluate operational effectiveness and efficiency, defined as net income (loss) plus depreciation, amortization, interest, other expense, taxes, stock-based compensation, acquisition-related expenses, and purchase accounting adjustments for deferred revenue[137](index=137&type=chunk) Reconciliation of Net Loss to Adjusted EBITDA (Three Months Ended March 31, in thousands) | Metric | 2021 | 2020 | | :----------------------------------- | :----- | :----- | | Net loss | $(20,684) | $(20,081) | | Depreciation and amortization expense | $12,468 | $11,737 | | Interest expense, net | $7,787 | $7,643 | | Other expense (income), net | $(237) | $1,402 | | Benefit from income taxes | $(4,394) | $(4,287) | | Stock-based compensation expense | $17,824 | $9,320 | | Acquisition-related expense | $9,586 | $15,158 | | Purchase accounting deferred revenue discount | $494 | $3,701 | | Adjusted EBITDA | $22,844 | $24,593 | - Adjusted EBITDA decreased by **7.1%** from **$24.6 million** in Q1 2020 to **$22.8 million** in Q1 2021[139](index=139&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) This section analyzes Upland Software's financial performance, including revenue and expenses [Revenue](index=32&type=section&id=Revenue) This section details Upland Software's revenue streams and their year-over-year changes Revenue (Three Months Ended March 31, in thousands) | Revenue Type | 2021 | 2020 | % Change | | :----------------------- | :----- | :----- | :------- | | Subscription and support | $70,653 | $63,891 | 11 % | | Perpetual license | $352 | $361 | (2)% | | Professional services | $2,964 | $3,780 | (22)% | | Total revenue | $73,969 | $68,032 | 9 % | - Total revenue increased by **$6.0 million (9%)** to **$74.0 million** in Q1 2021. Acquisitions contributed **$5.8 million**, while organic business revenue increased by **$0.7 million**, despite a **$2.1 million** decline in CXM usage revenue from US election campaigns[146](index=146&type=chunk) - Professional services revenue decreased by **$0.8 million (22%)**, primarily due to reduced on-site work from COVID-19 travel impacts[149](index=149&type=chunk) [Cost of Revenue and Gross Profit Percentage](index=33&type=section&id=Cost%20of%20Revenue%20and%20Gross%20Profit%20Percentage) This section analyzes the costs associated with revenue and the resulting gross profit Cost of Revenue and Gross Profit (Three Months Ended March 31, in thousands) | Metric | 2021 | 2020 | % Change | | :----------------------------------- | :----- | :----- | :------- | | Cost of subscription and support | $22,682 | $19,939 | 14 % | | Cost of professional services and other | $1,745 | $2,262 | (23)% | | Total cost of revenue | $24,427 | $22,201 | 10 % | | Gross profit | $49,542 | $45,831 | 8 % | | Gross profit percentage | 67 % | 67 % | 0 pp | | Amortization included in cost of revenue | $2,714 | $2,395 | 13 % | | Stock Compensation included in cost of revenue | $442 | $318 | 39 % | - Cost of subscription and support revenue increased by **$2.8 million (14%)**, with acquisitions contributing **$1.8 million**. Cost of professional services decreased by **$0.6 million (23%)** due to planned operating efficiencies[151](index=151&type=chunk)[152](index=152&type=chunk) [Operating Expenses](index=34&type=section&id=Operating%20Expenses) This section details Upland Software's various operating expenses [Sales and Marketing Expense](index=34&type=section&id=Sales%20and%20Marketing%20Expense) This section analyzes sales and marketing expenditures and their drivers Sales and Marketing Expense (Three Months Ended March 31, in thousands) | Metric | 2021 | 2020 | % Change | | :----------------------- | :----- | :----- | :------- | | Sales and marketing | $12,432 | $10,931 | 14 % | | Percentage of total revenue | 17 % | 16 % | 1 pp | | Stock Compensation | $1,137 | $549 | 107 % | - Sales and marketing expense increased by **$1.5 million (14%)**, with **$0.4 million** from acquisitions and **$1.1 million** from organic business due to go-to-market investments[155](index=155&type=chunk) [Research and Development Expense](index=34&type=section&id=Research%20and%20Development%20Expense) This section details research and development investments and their changes Research and Development Expense (Three Months Ended March 31, in thousands) | Metric | 2021 | 2020 | % Change | | :----------------------- | :----- | :----- | :------- | | Research and development | $10,940 | $9,118 | 20 % | | Percentage of total revenue | 15 % | 14 % | 1 pp | | Stock Compensation | $714 | $615 | 16 % | - Research and development expense increased by **$1.8 million (20%)**, with **$0.8 million** from acquisitions and **$1.0 million** from organic business, primarily due to outsourced technology development services[157](index=157&type=chunk) [General and Administrative Expense](index=34&type=section&id=General%20and%20Administrative%20Expense) This section analyzes general and administrative costs, including significant one-time items General and Administrative Expense (Three Months Ended March 31, in thousands) | Metric | 2021 | 2020 | % Change | | :----------------------- | :----- | :----- | :------- | | General and administrative | $24,369 | $16,676 | 46 % | | Percentage of total revenue | 33 % | 25 % | 8 pp | | Stock Compensation | $15,531 | $7,838 | 98 % | - General and administrative expense increased by **$7.7 million (46%)**, driven primarily by a one-time **$7.6 million** increase in non-cash stock compensation expense related to the COO's departure[159](index=159&type=chunk)[160](index=160&type=chunk) [Depreciation and Amortization Expense](index=35&type=section&id=Depreciation%20and%20Amortization%20Expense) This section details depreciation and amortization expenses Depreciation and Amortization Expense (Three Months Ended March 31, in thousands) | Metric | 2021 | 2020 | % Change | | :----------------------------------- | :----- | :----- | :------- | | Depreciation | $444 | $461 | (4)% | | Amortization | $9,299 | $8,810 | 6 % | | Total depreciation and amortization | $9,743 | $9,271 | 5 % | - Total depreciation and amortization expense increased by **$0.4 million (5%)**, with acquisitions contributing **$1.0 million**, partially offset by a **$0.6 million** decrease in organic business due to fully amortized assets[162](index=162&type=chunk) [Acquisition-related Expenses](index=35&type=section&id=Acquisition-related%20Expenses) This section analyzes expenses incurred due to acquisition activities Acquisition-related Expenses (Three Months Ended March 31, in thousands) | Metric | 2021 | 2020 | % Change | | :----------------------- | :----- | :----- | :------- | | Acquisition-related expenses | $9,586 | $15,158 | (37)% | | Percentage of total revenue | 13 % | 21 % | (8) pp | | Transaction related expenses | $4,000 | $3,300 | 21 % | | Transformational expenses | $5,600 | $11,900 | (53)% | - Acquisition-related expenses decreased by **$5.6 million (37%)**, primarily due to a significant reduction in transformational expenses, despite an increase in transaction-related expenses from renewed acquisition activity[164](index=164&type=chunk) [Other Income (Expense)](index=36&type=section&id=Other%20Income%20(Expense)) This section details non-operating income and expenses, including interest and currency effects Other Income (Expense) (Three Months Ended March 31, in thousands) | Metric | 2021 | 2020 | % Change | | :----------------------- | :----- | :----- | :------- | | Interest expense, net | $(7,787) | $(7,643) | 2 % | | Other income (expense), net | $237 | $(1,402) | (117)% | | Total other expense | $(7,550) | $(9,045) | (17)% | - Total other expense decreased by **$1.5 million (17%)**, driven by a shift from other expense of **$1.4 million** in Q1 2020 to other income of **$0.2 million** in Q1 2021, primarily due to currency exchange gains[166](index=166&type=chunk)[168](index=168&type=chunk) [Benefit from Income Taxes](index=36&type=section&id=Benefit%20from%20Income%20Taxes) This section explains the income tax benefit recognized by the company Benefit from Income Taxes (Three Months Ended March 31, in thousands) | Metric | 2021 | 2020 | % Change | | :----------------------- | :----- | :----- | :------- | | Benefit from income taxes | $4,394 | $4,287 | 2 % | | Percentage of total revenue | 6 % | 6 % | 0 pp | - The income tax benefit slightly increased by **$0.1 million**, primarily due to deferred tax benefits from the release of valuation allowance related to business combinations in both periods[169](index=169&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses Upland Software's cash position, debt, and capital management - As of March 31, 2021, Upland had **$186.7 million** in cash and cash equivalents and **$60.0 million** available under its revolving credit facility, with **$531.9 million** outstanding under its credit facility[172](index=172&type=chunk) - Cash and cash equivalents decreased by **$63.3 million** from December 31, 2020, primarily due to **$77.9 million** in cash paid for two acquisitions in Q1 2021[172](index=172&type=chunk) - Net cash provided by operating activities was **$12.5 million** in Q1 2021, a significant increase from **$5.3 million** used in Q1 2020, driven by increased scale and favorable working capital changes[183](index=183&type=chunk) [Critical Accounting Policies and the Use of Estimates](index=39&type=section&id=Critical%20Accounting%20Policies%20and%20the%20Use%20of%20Estimates) This section highlights accounting policies requiring significant management judgment and estimates - Key accounting policies involving significant management judgments and estimates include revenue recognition, stock-based compensation, deferred sales commissions, income taxes, and business combinations (goodwill and long-lived assets)[192](index=192&type=chunk) - No **material changes** to critical accounting policies were reported for Q1 2021 compared to the 2020 Annual Report on Form 10-K[193](index=193&type=chunk) [Recent Accounting Pronouncements](index=40&type=section&id=Recent%20Accounting%20Pronouncements) This section outlines the impact of recently issued accounting standards - The Company is evaluating the impact of ASU 2020-04, Reference Rate Reform (Topic 848), which provides optional guidance to ease accounting burdens related to reference rate reform (e.g., LIBOR discontinuation)[34](index=34&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details Upland Software's exposure to market risks, including interest rate, foreign exchange, and inflation - The Company's exposure to interest rate risk is primarily from variable rate indebtedness. Interest rate hedge instruments effectively fix the interest rate on **$540 million** of term loans at **5.4%**, mitigating risk[197](index=197&type=chunk) - Foreign currency exchange risk arises from international operations and expenses in foreign currencies (CAD, GBP, EUR). A hypothetical **10%** change in exchange rates could impact Q1 2021 revenue by **$1.5 million**. No currency hedging strategies have been employed to date[198](index=198&type=chunk) - Inflation has not had a material effect on the business in the last three fiscal years, but significant inflationary pressures could harm financial results if not offset by price increases[200](index=200&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of Upland Software's disclosure controls and procedures - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of March 31, 2021[203](index=203&type=chunk) - No **material changes** to internal control over financial reporting occurred during the quarter ended March 31, 2021[204](index=204&type=chunk) - Internal controls have inherent limitations, including human diligence, judgment lapses, and potential circumvention by collusion or management override, which could lead to undetected material misstatements[205](index=205&type=chunk) Part II. OTHER INFORMATION This section includes additional information not covered in the financial statements [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the risk factors detailed in the Company's 2020 Annual Report on Form 10-K - No **material changes** to the risk factors included in the Company's 2020 Annual Report on Form 10-K were identified during 2021[208](index=208&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications and agreements - Exhibits include an Advisory Agreement with Tim Mattox, CEO and CFO certifications (pursuant to Exchange Act Rules 13a-14(a), 15d-14(a), and 18 U.S.C. Section 1350), and Inline XBRL documents[212](index=212&type=chunk) [Signature](index=45&type=section&id=Signature) The report was officially signed by the Chief Financial Officer on May 5, 2021 - The report was signed by **Michael D. Hill**, Chief Financial Officer, on **May 5, 2021**[216](index=216&type=chunk)

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, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Commission File Number 001-36720 Upland Software, Inc. (Exact name of registrant as specified in its charter) Delaware 27-2992077 (State or other jurisdiction of incorporation or organization) 401 Congress ...

Financial Data and Key Metrics Changes - In Q4 2020, total revenue grew by 18% to $78.2 million, with adjusted EBITDA increasing by 7% to $26.6 million, resulting in an adjusted EBITDA margin of 34% [9][20][17] - For the full year 2020, total revenue growth was 31%, and adjusted EBITDA growth was 21%, with free cash flow reaching a record $34.5 million despite $27.1 million in acquisition-related expenses [10][11][23] - The net dollar retention rate was reported at 94%, indicating strong retention despite the pandemic [11] Business Line Data and Key Metrics Changes - Recurring revenue from subscription and support increased by 27% year-over-year to $74.9 million, while professional services revenue declined by 21% to $2.7 million due to COVID-19 impacts [17] - Organic growth for Q4 was a record 21%, driven by election year CXM usage and deferred revenue discounts [12] Market Data and Key Metrics Changes - The company expanded relationships with 242 existing customers in Q4, including 55 major expansions, and welcomed 111 new customers, 38 of which were major [12][13] - The company is focusing on key verticals such as Financial Services, Healthcare, and High Tech through a newly established Global Account sales team [13] Company Strategy and Development Direction - The company announced the acquisition of Second Street, enhancing its Customer Experience Management (CXM) product suite and indicating a robust M&A pipeline [8][15] - The strategy includes a focus on organic growth while maintaining a conservative outlook for 2021, with expectations of mid-single-digit organic growth excluding political impacts [12][51] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the strong performance in Q4 but cautioned that the high growth rates driven by the election cycle may not be sustainable [33][96] - The company is optimistic about the CXM sector's growth potential beyond political applications, with plans to enhance omni-channel capabilities [78] Other Important Information - The company has approximately $310 million in liquidity, including $250 million in cash and a $60 million undrawn revolver, allowing for self-sustaining growth without reliance on equity markets [24] - The company expects Q1 2021 total revenue between $70.6 million and $74.6 million, with full-year revenue guidance of $288.6 million to $300.6 million [27][28] Q&A Session Summary Question: What drove the strong organic growth in Q4? - Management indicated that the growth was primarily due to increased usage during the presidential election cycle and some deferred revenue discounts [33] Question: What is the expected timeline for payback on investments made in 2021? - Management expects to see payback towards the end of 2021 and into 2022, as they invest in infrastructure and personnel [34] Question: How much of the organic growth was related to messaging? - Management noted that if the election year usage is excluded, organic growth would revert to mid-single-digit rates [38] Question: What is the focus of the global accounts team? - The team is focused on cross-selling and expansion within the top 175 customers, with early results already contributing to Q4 [46] Question: What is the outlook for net dollar retention? - Management aims to reach a net retention rate of 100% as they continue to enhance customer success efforts [87] Question: How does the company view its M&A strategy moving forward? - The focus remains on product synergy first, with a strong pipeline of strategic deals anticipated [82]