Upland Software(UPLD) - 2025 Q2 - Quarterly Report

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