What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-04 compared with 2021-05-05 · 162 added, 109 removed, 608 unchanged (31% of the section changed)

3 unchanged sentences

(in thousands, except for share and per share information)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Assets (unaudited)

1 unchanged sentence

Cash and cash equivalents $ 176,539 $ 250,029

Accounts receivable (net of allowance of $ 1,203 and $ 1,465 at March 31, 2021 and December 31, 2020, respectively)

Accounts receivable (net of allowance of $ 1,188 and $ 1,465 at June 30, 2021 and December 31, 2020, respectively)

38,936 44,472

19 unchanged sentences

Operating lease liabilities, current 3,621 3,315

Current maturities of notes payable (includes unamortized discount of $ 2,230 and $ 2,234 at March 31, 2021 and December 31, 2020, respectively)

Current maturities of notes payable (includes unamortized discount of $ 2,247 and $ 2,234 at June 30, 2021 and December 31, 2020, respectively)

Total current liabilities 157,273 121,420

Notes payable, less current maturities (includes unamortized discount of $ 8,864 and $ 9,414 at March 31, 2021 and December 31, 2020, respectively)

Notes payable, less current maturities (includes unamortized discount of $ 8,399 and $ 9,414 at June 30, 2021 and December 31, 2020, respectively)

516,751 518,437

8 unchanged sentences

50,000,000 shares authorized:

30,091,665 and 29,987,114 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively)

30,413,246 and 29,987,114 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively)

Additional paid-in capital 546,771 515,219

7 unchanged sentences

(in thousands, except for share and per share information)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Subscription and support $ 72,405 $ 67,699 $ 143,058 $ 131,590

18 unchanged sentences

Interest expense, net ( 7,942 ) ( 7,873 ) ( 15,729 ) ( 15,516 )

Other income (expense), net 237 ( 1,402 )

Other expense, net ( 399 ) ( 15 ) ( 162 ) ( 1,417 )

Total other expense ( 8,341 ) ( 7,888 ) ( 15,891 ) ( 16,933 )

Loss before benefit from income taxes ( 25,078 ) ( 24,368 )

Benefit from income taxes 4,394 4,287

Loss before benefit from (provision for) income taxes ( 17,504 ) ( 14,832 ) ( 42,582 ) ( 39,200 )

Benefit from (provision for) income taxes ( 1,538 ) 673 2,856 4,960

Net loss $ ( 19,042 ) $ ( 14,159 ) $ ( 39,726 ) $ ( 34,240 )

6 unchanged sentences

(in thousands)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Net loss $ ( 19,042 ) $ ( 14,159 ) $ ( 39,726 ) $ ( 34,240 )

7 unchanged sentences

(in thousands, except share amounts)

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Common Stock Additional

5 unchanged sentences

Shares Amount

Balance at March 31, 2021 30,091,665 $ 3 $ 533,044 $ ( 12,330 ) $ ( 203,057 ) $ 317,660

Issuance of stock under Company plans, net of shares withheld for tax 321,581 — 177 — — 177

Stock-based compensation — — 13,550 — — 13,550

Foreign currency translation adjustment — — — 1,324 — 1,324

Unrealized translation gain on intercompany loans with foreign subsidiaries — — — 940 — 940

Unrealized loss on interest rate swaps — — — ( 3,172 ) — ( 3,172 )

Net loss — — — — ( 19,042 ) ( 19,042 )

Balance at June 30, 2021 30,413,246 $ 3 $ 546,771 $ ( 13,238 ) $ ( 222,099 ) $ 311,437

Three Months Ended June 30, 2020

Common Stock Additional

Capital Accumulated

Comprehensive

Loss Accumulated

Deficit Total

Stockholders’

Shares Amount

Balance at March 31, 2020 25,305,427 $ 3 $ 353,720 $ ( 43,396 ) $ ( 151,235 ) $ 159,092

Issuance of stock under Company plans, net of shares withheld for tax 60,308 — ( 1,372 ) — — ( 1,372 )

Stock-based compensation — — 10,980 — — 10,980

Foreign currency translation adjustment — — — 1,219 — 1,219

Unrealized translation loss on intercompany loans with foreign subsidiaries — — — 132 — 132

Unrealized loss on interest rate swaps — — — ( 3,655 ) — ( 3,655 )

Net loss — — — — ( 14,159 ) ( 14,159 )

Balance at June 30, 2020 25,365,735 $ 3 $ 363,328 $ ( 45,700 ) $ ( 165,394 ) $ 152,237

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Six Months Ended June 30, 2021

Common Stock Additional

Capital Accumulated

Comprehensive

Loss Accumulated

Deficit Total

Stockholders’

Shares Amount

Balance at December 31, 2020 29,987,114 $ 3 $ 515,219 $ ( 26,234 ) $ ( 182,373 ) $ 306,615

5 unchanged sentences

Net loss — — — — ( 39,726 ) ( 39,726 )

Balance at March 31, 2021 30,091,665 $ 3 $ 533,044 $ ( 12,330 ) $ ( 203,057 ) $ 317,660

Three Months Ended March 31, 2020

Balance at June 30, 2021 30,413,246 $ 3 $ 546,771 $ ( 13,238 ) $ ( 222,099 ) $ 311,437

Six Months Ended June 30, 2020

Common Stock Additional

14 unchanged sentences

Net loss — — — — ( 34,240 ) ( 34,240 )

Balance at March 31, 2020 25,305,427 $ 3 $ 353,720 $ ( 43,396 ) $ ( 151,235 ) $ 159,092

Balance at June 30, 2020 25,365,735 $ 3 $ 363,328 $ ( 45,700 ) $ ( 165,394 ) $ 152,237

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities

2 unchanged sentences

Depreciation and amortization 25,669 23,395

Change in fair value of liabilities to sellers of businesses ( 2,729 ) 155

Deferred income taxes ( 3,389 ) ( 4,985 )

44 unchanged sentences

In the opinion of management of the Company, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements, in all material respects, and include all adjustments of a normal recurring nature necessary for a fair presentation.

The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other period.

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other period.

The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2020 Annual Report on Form 10-K filed with the SEC on February 25, 2021.

6 unchanged sentences

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets.

Upland is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of May 5, 2021, the date of issuance of this Quarterly Report on Form 10-Q.

Upland is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of August 4, 2021, the date of issuance of this Quarterly Report on Form 10-Q.

These estimates may change as new events occur and additional information is obtained.

6 unchanged sentences

To manage accounts receivable credit risk, the Company performs periodic credit evaluations of its customers and maintains current expected credit losses which considers such factors as historical loss information, geographic location of customers, current market conditions, and reasonable and supportable forecasts.

No individual customer represented more than 10% of total revenues three months ended March 31, 2021, or more than 10% of accounts receivable as of March 31, 2021 or December 31, 2020.

No individual customer represented more than 10% of total revenues for the three or six months ended June 30, 2021, or more than 10% of accounts receivable as of June 30, 2021 or December 31, 2020.

In connection with borrowing funds under the Company’s credit facility the Company has entered into a floating-to-fixed interest rate swap agreements to limit exposure to interest rate risk related to our debt.

6 unchanged sentences

All derivative financial instruments are recorded at fair value as a net asset or liability in the accompanying condensed consolidated balance sheets.

As of March 31, 2021 and December 31, 2020 the fair value of the interest rate swaps included in Interest rate swap liabilities in the Company's condensed consolidated balance sheets was $ 14.6 million and $ 30.0 million, respectively.

As of June 30, 2021 and December 31, 2020 the fair value of the interest rate swaps included in Interest rate swap liabilities in the Company's condensed consolidated balance sheets was $ 17.8 million and $ 30.0 million, respectively.

The change in the fair value of the hedging instruments is recorded in Other comprehensive income.

21 unchanged sentences

2021 Acquisitions

Acquisitions completed during the three months ended March 31, 2021 include the following:

Acquisitions completed during the six months ended June 30, 2021 include the following:

• Panviva - On June 24, 2021, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of Panviva Pty Ltd, an Australian proprietary company (“Panviva”), a cloud-based enterprise knowledge management solution.

Revenues recorded since the acquisition date through June 30, 2021 were approximately $ 0.1 million.

• BlueVenn - On February 28, 2021 the Company entered into an agreement to purchase the shares comprising the entire issued share capital of BlueVenn Group Limited, a company limited by shares organized and existing under the laws of England and Wales (“BlueVenn”), a cloud-based customer data platform.

Revenues recorded since the acquisition date through March 31, 2021 were approximately $ 1.0 million.

Revenues recorded since the acquisition date through June 30, 2021 were approximately $ 5.4 million.

Revenues recorded for BlueVenn for the quarter ended June 30, 2021 were approximately $ 4.4 million.

• Second Street - On January 19, 2021, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of Second Street Media, Inc., a Missouri corporation (“Second Street”), an audience engagement platform.

Revenues recorded since the acquisition date through March 31, 2021 were approximately $ 2.0 million.

Revenues recorded since the acquisition date through June 30, 2021 were approximately $ 4.7 million.

Revenues recorded for Second Street for the quarter ended June 30, 2021 were approximately $ 2.7 million.

2020 Acquisition

3 unchanged sentences

The following table summarizes the consideration transferred for the acquisitions described above (in thousands):

BlueVenn Second Street Localytics

Panviva BlueVenn Second Street Localytics

Cash $ 19,931 $ 53,535 $ 25,436 $ 67,655

5 unchanged sentences

Total consideration $ 23,448 $ 57,962 $ 32,086 $ 63,762

(1) Represents the cash holdbacks subject to indemnification claims that are payable 12 months following closing for Second Street and Localytics and 18 months following closing for BlueVenn.

(1) Represents the cash holdbacks subject to indemnification claims that are payable 12 months following closing for Panviva, Second Street and Localytics and 18 months following closing for BlueVenn.

In addition, the holdback payment to Panviva may be reduced by up to $ 1.6 million based on the future renewal of a specific customer.

The fair value of this potential reduction was $ 0.0 million as of the acquisition date.

(2) Represents the acquisition date fair value of anticipated earn-out payments, which are based on the estimated probability of attainment of the underlying future performance-based conditions at the time of acquisition.

5 unchanged sentences

The Company recorded the purchase of the acquisitions described above using the acquisition method of accounting and, accordingly, recognized the assets acquired and liabilities assumed at their fair values as of the date of the acquisition.

The purchase accounting for the 2021 acquisitions of BlueVenn and Second Street are preliminary as the Company has not finalized the purchase price allocations for these acquisitions and have not finalized the valuation of the earnout related to BlueVenn.

The purchase accounting for the 2021 acquisitions of Panviva, BlueVenn, and Second Street are preliminary as the Company has not finalized the tax impact of these acquisitions.

In addition, the purchase price allocation for Panviva is preliminary as we work to finalize the valuation of intangible assets.

Management has recorded the purchase price allocations based upon acquired company information that is currently available.

Management expects to complete its purchase price allocation for BlueVenn and Second Street no later than the first quarter of 2022.

The following condensed table presents the preliminary and finalized acquisition-date fair value of the assets acquired and liabilities assumed for the acquisitions during the year ended December 31, 2020 and through the three months ended March 31, 2021, as well as assets and liabilities (in thousands):

Management expects to complete the purchase accounting for BlueVenn and Second Street no later than the first quarter of 2022 and no later than the second quarter of 2022 for Panviva.

The following condensed table presents the preliminary and finalized acquisition-date fair value of the assets acquired and liabilities assumed for the acquisitions during the year ended December 31, 2020 and through the six months ended June 30, 2021, as well as assets and liabilities (in thousands):

Preliminary Final

BlueVenn Second Street Localytics

Panviva BlueVenn Second Street Localytics

Year Acquired 2021 2021 2021 2020

22 unchanged sentences

Developed technology and trade names are valued using the relief-from-royalty method.

The following table summarizes the weighted-average useful lives, by major finite-lived intangible asset class, for intangibles acquired during the three months ended March 31, 2021 and the year ended December 31, 2020 (in years):

March 31, 2021 December 31, 2020

The following table summarizes the weighted-average useful lives, by major finite-lived intangible asset class, for intangibles acquired during the six months ended June 30, 2021 and the year ended December 31, 2020 (in years):

June 30, 2021 December 31, 2020

Customer relationships 7.0 8.0

3 unchanged sentences

During the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill based on changes to management's estimates and assumptions.

The goodwill of $ 98.7 million for the above acquisitions is primarily attributable to the synergies expected to arise after the acquisition.

Goodwill deductible for tax purposes at the time of acquisition was $ 2.0 million.

Total transaction related expenses incurred with respect to acquisition activity during the three months ended March 31, 2021 and March 31, 2020 were $ 4.0 million and $ 3.3 million, respectively.

The goodwill of $ 119.1 million for the above acquisitions is primarily attributable to the synergies expected to arise after the acquisition and the value of the acquired workforce.

Goodwill that is deductible for tax purposes at the time of the acquisitions was $ 2.0 million.

Total transaction related expenses incurred with respect to acquisition activity during the three months ended June 30, 2021 and June 30, 2020 were $ 2.0 million and $ 0.2 million, respectively, and during the six months ended June 30, 2021 and June 30, 2020 were $ 6.1 million and $ 3.5 million, respectively.

Transaction related expenses, excluding transformation costs, include expenses such as banker fees, legal and professional fees, insurance costs, and deal bonuses.

9 unchanged sentences

and Level 3, defined as unobservable inputs in which little or no market data exists, which therefore requires an entity to develop its own assumptions.

As of March 31, 2021, the Company had contingent accrued earnout business acquisition consideration liabilities for which fair values are measured as Level 3 instruments.

As of June 30, 2021, the Company had contingent accrued earnout business acquisition consideration liabilities for which fair values are measured as Level 3 instruments.

These contingent consideration liabilities were recorded at fair value on the acquisition date and are remeasured periodically based on the then assessed fair value and adjusted if necessary.

7 unchanged sentences

As the fair value measure is based on the market approach, they are categorized as Level 2.

As of March 31, 2021 and December 31, 2020 the fair value of the interest rate swaps are included in Interest rate swap liabilities on the Company's condensed consolidated balance sheets.

As of June 30, 2021 and December 31, 2020 the fair value of the interest rate swaps are included in Interest rate swap liabilities on the Company's condensed consolidated balance sheets.

Liabilities measured at fair value on a recurring basis are summarized below (in thousands):

Fair Value Measurements at March 31, 2021

Fair Value Measurements at June 30, 2021

Level 1 Level 2 Level 3 Total

5 unchanged sentences

The following table presents additional information about earnout consideration liabilities measured at fair value on a recurring basis and for which the Company has utilized significant unobservable (Level 3) inputs to determine fair value (in thousands) (unaudited):

June 30, 2021

Balance at December 31, 2020 $ —

4 unchanged sentences

Foreign currency translation adjustments ( 2 )

Balance at March 31, 2021 $ 4,350

Balance at June 30, 2021 $ 1,454

Quantitative Information about Level 3 Fair Value Measurements

The significant unobservable inputs used in the fair value measurement of the Company's contingent consideration liabilities designated as Level 3 are as follows:

Fair Value at March 31, 2021 Valuation Technique Significant Unobservable Inputs

Fair Value at June 30, 2021 Valuation Technique Significant Unobservable Inputs

Contingent acquisition consideration:

3 unchanged sentences

Significant increases (decreases) in these unobservable inputs in isolation would likely result in a significantly (lower) higher fair value measurement.

The Company believes the carrying value of its long-term debt at March 31, 2021 approximates its fair value based on the variable interest rate feature or based upon interest rates currently available to the Company.

The estimated fair value and carrying value of the Company's debt, before debt discount, at March 31, 2021 and December 31, 2020 are $ 531.9 million and $ 533.3 million, respectively.

The Company believes the carrying value of its long-term debt at June 30, 2021 approximates its fair value based on the variable interest rate feature or based upon interest rates currently available to the Company.

The estimated fair value and carrying value of the Company's debt, before debt discount, at June 30, 2021 and December 31, 2020 are $ 530.6 million and $ 533.3 million, respectively.

Goodwill and Other Intangible Assets

Changes in the Company’s goodwill balance for the three months ended March 31, 2021 are summarized in the table below (in thousands):

Changes in the Company’s goodwill balance for the six months ended June 30, 2021 are summarized in the table below (in thousands):

Balance at December 31, 2020 $ 383,598

Acquired in business combinations 85,102

Adjustment related to finalization of current year business combinations 446

Foreign currency translation adjustment 1,036

Balance at March 31, 2021 $ 448,558

Balance at June 30, 2021 $ 470,182

Net intangible assets include the estimated acquisition-date fair values of customer relationships, marketing-related assets, developed technology, and non-compete agreements that the Company recorded as part of its business acquisitions.

4 unchanged sentences

Amortization Net Carrying

March 31, 2021:

June 30, 2021:

Customer relationships 1 - 10

22 unchanged sentences

The Company periodically reviews the estimated useful lives of its identifiable intangible assets, taking into consideration any events or circumstances that might result in either a diminished fair value or revised useful life.

Management recorded no impairments of intangible assets or goodwill during the three months ended March 31, 2021 or the year ended December 31, 2020.

Total amortization expense during the three months ended March 31, 2021 and March 31, 2020 was $ 12.0 million and $ 11.2 million, respectively.

As of March 31, 2021, the estimated annual amortization expense for the next five years and thereafter is as follows (in thousands):

Management recorded no impairments of intangible assets or goodwill during the three and six months ended June 30, 2021 or the year ended December 31, 2020.

Total amortization expense during the three months ended June 30, 2021 and June 30, 2020 was $ 12.7 million and $ 11.2 million, respectively, and during the six months ended June 30, 2021 and June 30, 2020 was $ 24.7 million and $ 22.4 million, respectively.

As of June 30, 2021, the estimated annual amortization expense for the next five years and thereafter is as follows (in thousands):

Year ending December 31:

2 unchanged sentences

Total $ 304,752

The Company’s income tax benefit for the three months ended March 31, 2021 and March 31, 2020 reflects its estimate of the effective tax rates expected to be applicable for the full years, adjusted for any discrete events that are recorded in the period in which they occur.

The Company’s income tax benefit for the three and six months ended June 30, 2021 and June 30, 2020 reflects its estimate of the effective tax rates expected to be applicable for the full years, adjusted for any discrete events that are recorded in the period in which they occur.

The estimates are re-evaluated each quarter based on the estimated tax expense for the full year.

The tax benefit of $ 4.4 million recorded for the three months ended March 31, 2021 is primarily related to the deferred tax benefit attributable to the release of valuation allowance related to the acquisition of deferred tax liabilities associated with the Second Street business combination, as discussed in Note 2.

The tax provision of $ 1.5 million and benefit of $ 2.9 million recorded for the three and six months ended June 30, 2021, respectively, are primarily related to the deferred tax benefit attributable to the release of valuation allowance related to the acquisition of deferred tax liabilities associated with the Company’s business combinations during the three months ended March 31, 2021, as discussed in Note 2.

Acquisitions, and foreign income taxes associated with our combined non-U.S.

The release of valuation allowance is attributable to ASC 805-740-30-3 and acquisitions of domestic entities with deferred tax liabilities that, upon acquisition, allowed us to recognize certain deferred tax assets of approximately $ 4.3 million during the three months ended March 31, 2021 that had previously been offset by a valuation allowance.

The tax benefit of $ 4.3 million recorded for the three months ended March 31, 2020 is primarily related to the deferred tax benefit attributable to the release of valuation allowance related to the acquisition of deferred tax liabilities associated with the Localytics business combination, as discussed in Note 2.

These tax benefits are offset by changes in deferred tax liabilities associated with amortization of United States tax deductible goodwill and state taxes in certain states in which the Company does not file on a consolidated basis or have net operating loss carryforwards and the impact, recorded as discrete, of enacted future changes in UK tax rates on the balance of deferred tax assets and liabilities per tax law enacted during the three months ended June 30, 2021.

The release of valuation

allowance is attributable to ASC 805-740-30-3 and acquisitions of domestic entities with deferred tax liabilities that, upon acquisition, allowed us to recognize certain deferred tax assets of approximately $ 4.3 million during the six months ended June 30, 2021 that had previously been offset by a valuation allowance.

The benefit for the release of valuation allowance was primarily recorded during the three months ended March 31, 2021.

The tax benefit of $ 0.7 million and $ 5.0 million recorded for the three and six months ended June 30, 2020, respectively, are primarily related to the deferred tax benefit attributable to the release of valuation allowance related to the acquisition of deferred tax liabilities associated with the Localytics business combination, as discussed in Note 2.

Acquisitions, and foreign income taxes associated with our combined non-U.S.

The Company has historically incurred operating losses in the United States and, given its cumulative losses and limited history of profits, has recorded a valuation allowance against its United States net deferred tax assets, exclusive of tax deductible goodwill, at March 31, 2021 and March 31, 2020, respectively.

As of March 31, 2021, Upland had $ 355 million of total net operating loss carryforwards of which approximately $ 214 million will be available for utilization prior to expiration.

These balances include the net operating losses disclosed as of December 31, 2020 and the estimated net operating losses acquired in the current year via acquisitions based on information available as of March 31, 2021.

The net operating loss carryforwards available for utilization prior to expiration consist of approximately $ 185 million and $ 29 million of U.S.

federal and foreign net operating loss carryforwards, respectively.

The Company has reflected any uncertain tax positions primarily within its long-term taxes payable and a portion within deferred tax assets.

2 unchanged sentences

The Company is no longer subject to U.S.

federal income tax examinations for years ending before December 31, 2017 and is no longer subject to state and local or foreign income tax examinations by tax authorities for years ending before December 31, 2016.

The Company is not currently under audit for federal, state or any foreign jurisdictions.

operating losses generated in years prior to 2017 remain open to adjustment until the statute of limitations closes for the tax year in which the net operating losses are utilized.

Long-term debt consisted of the following at March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021 December 31, 2020

Senior secured loans (includes unamortized discount of $ 11,094 and $ 11,648 based on an imputed interest rate of 5.8 % and 5.8 %, at March 31, 2021 and December 31, 2020, respectively)

Long-term debt consisted of the following at June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021 December 31, 2020

Senior secured loans (includes unamortized discount of $ 10,646 and $ 11,648 based on an imputed interest rate of 5.8 % and 5.8 %, at June 30, 2021 and December 31, 2020, respectively)

$ 519,904 $ 521,603

2 unchanged sentences

Credit Facility

On August 6, 2019, the Company entered into a credit agreement (the “Credit Facility”) which provides for (i) a fully-drawn $ 350 million, 7 year, senior secured term loan B facility (the “Term Loan”) and (ii) a new $ 60 million, 5 year, revolving credit facility (the “Revolver”) that was fully available as of March 31, 2021.

The Credit Facility replaced the Company's previous credit agreement.

13 unchanged sentences

The interest rate swap has been designated as a cash flow hedge and is valued using a market approach, which is a Level 2 valuation technique.

At March 31, 2021, the fair value of the interest rate swap was a $ 14.6 million liability as a result of a decline in short term interest rates since entering into the swap agreements.

The decrease in the fair value of the interest rate swap liability during the three months ended March 31, 2021 is the result of an increase in short term interest rates compared to December 31, 2020.

At June 30, 2021, the fair value of the interest rate swap was a $ 17.8 million liability as a result of a decline in short term interest rates since entering into the swap agreements.

The decrease in the fair value of the interest rate swap liability during the three months ended June 30, 2021 is the result of an increase in short term interest rates compared to December 31, 2020.

In the next twelve months, the Company estimates that $ 3.6 million will be reclassified from Accumulated other comprehensive income (loss) and recorded as an increase to Interest expense.

Three Months Ended March 31,

Increases/decreases in cash paid for interest as a result of the Company’s interest rate swaps are included cash flows from operations.

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

(Loss) gain recognized in Other comprehensive income on derivative financial instruments $ ( 3,172 ) $ ( 3,655 ) $ 12,279 $ ( 35,056 )

5 unchanged sentences

Loans under the Revolver may be borrowed, repaid and reborrowed until August 6, 2024 (the “Maturity Date”), at which time all amounts borrowed under the Revolver must be repaid.

As of March 31, 2021, the Company had no borrowings outstanding under the Revolver or related sub-facility.

As of June 30, 2021, the Company had no borrowings outstanding under the Revolver or related sub-facility.

The Credit Facility contains customary affirmative and negative covenants.

11 unchanged sentences

In addition, the Credit Facility contains customary events of default subject to customary cure periods for certain defaults that include, among others, non-payment defaults, inaccuracy of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness, change in control, bankruptcy and insolvency defaults and material judgment defaults.

The occurrence of an event of default could result in the acceleration of Term Loans and Revolver and a right by the agent and

lenders to exercise remedies.

The occurrence of an event of default could result in the acceleration of Term Loans and Revolver and a right by the agent and lenders to exercise remedies.

At the election of the lenders, a default interest rate shall apply on all obligations during an event of default, at a rate per annum equal to 2.00 % above the applicable interest rate.

The Term Loan and Revolver are secured by substantially all of the Company's assets.

As of March 31, 2021 the Company was in compliance with all covenants under the Credit Facility.

Cash interest costs averaged 5.4 % and 5.4 % for the three months ended March 31, 2021 and for the year ended December 31, 2020, respectively.

In addition, as of March 31, 2021 and December 31, 2020 the Company had $ 11.1 million and $ 11.6 million, respectively, of unamortized deferred financing costs associated with the Credit Facility.

As of June 30, 2021 the Company was in compliance with all covenants under the Credit Facility.

Cash interest costs averaged 5.4 % and 5.4 % for the six months ended June 30, 2021 and for the year ended December 31, 2020, respectively.

In addition, as of June 30, 2021 and December 31, 2020 the Company had $ 10.6 million and $ 11.6 million, respectively, of unamortized deferred financing costs associated with the Credit Facility.

These financing costs will be amortized to non-cash interest expense over the remaining term of the Credit Facility.

1 unchanged sentence

The following table sets forth the computations of loss per share (in thousands, except share and per share amounts):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Net Loss $ ( 19,042 ) $ ( 14,159 ) $ ( 39,726 ) $ ( 34,240 )

1 unchanged sentence

Net loss per common share, basic and diluted $ ( 0.63 ) $ ( 0.57 ) $ ( 1.32 ) $ ( 1.37 )

Due to the net losses for the three months ended March 31, 2021 and March 31, 2020, respectively, basic and diluted loss per share were the same.

The following table sets forth the anti–dilutive common share equivalents as of March 31, 2021 and March 31, 2020:

Due to the net losses for the three and six months ended June 30, 2021 and June 30, 2020, respectively, basic and diluted loss per share were the same.

The following table sets forth the anti–dilutive common share equivalents as of June 30, 2021 and June 30, 2020:

Stock options 251,360 320,840

8 unchanged sentences

In certain cases these arrangements require a minimum annual purchase commitment.

In addition, the Company purchased software development services pursuant to a technology services agreement with DevFactory FZ-LLC for the three months ended March 31, 2021 and March 31, 2020 totaling $ 2.4 million and $ 1.9 million, respectively.

The remaining purchase obligation after March 31, 2021 through December 31, 2021 is $ 7.2 million.

In addition, the Company purchased software development services pursuant to a technology services agreement with DevFactory FZ-LLC for the three months ended June 30, 2021 and June 30, 2020 totaling $ 2.4 million and $ 1.8 million, respectively, and for the six months ended June 30, 2021 and June 30, 2020 totaling $ 4.8 million and $ 3.7 million, respectively.

The remaining purchase obligation after June 30, 2021 through December 31, 2021 is $ 4.8 million.

Related Party Transactions for more information regarding our purchase commitment to this related party.

In the normal course of business, the Company may become involved in various lawsuits and legal proceedings.

At this time, the Company is not involved in any current or pending legal proceedings, and does not anticipate any legal proceedings, that may have a material adverse affect on the Company's condensed consolidated balances sheets or condensed consolidated statement of operations.

At this time, the Company is not involved in any current or pending legal proceedings, and does not anticipate any legal proceedings, that may have a material adverse effect on the Company's condensed consolidated balances sheets or condensed consolidated statement of operations.

In addition, when we acquire companies, we require that the sellers provide industry standard indemnification for breaches of representations and warranties contained in the acquisition agreement and we will withhold payment of a portion of the purchase price for a period of time in order to satisfy any claims that we may make for indemnification.

14 unchanged sentences

The following table shows the components of accumulated other comprehensive loss, net of income taxes, (“AOCI”) in the stockholders’ equity section of our condensed consolidated balance sheets at the dates indicated (in thousands):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Foreign currency translation adjustment $ ( 418 ) $ 644

2 unchanged sentences

Total accumulated other comprehensive loss $ ( 13,238 ) $ ( 26,234 )

The unrealized translation gain on intercompany loans with foreign subsidiaries as of March 31, 2021 is net of income tax expense of $ 2.2 million.

The tax expense related to unrealized translation gains on intercompany loans for the three months ended March 31, 2021 and March 31, 2020 was $ 0.2 million and $ 0.0 million, respectively.

The unrealized translation gain on intercompany loans with foreign subsidiaries as of June 30, 2021 is net of income tax expense of $ 2.3 million.

The tax expense related to unrealized translation gains on intercompany loans three and six months ended June 30, 2021 was $ 0.1 million and $ 0.3 million, respectively.

The income tax expense/benefit allocated to each component of other comprehensive income (loss) for all other periods and components is not material.

8 unchanged sentences

The Company recognizes stock-based compensation expense from all awards in the following expense categories (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Cost of revenue $ 563 $ 570 $ 1,005 $ 888

2 unchanged sentences

General and administrative (1)

10,426 8,493 25,957 16,331

Total $ 13,550 $ 10,980 $ 31,374 $ 20,300

(1) In March 2021 our former co-President and Chief Operating Officer (“COO”) resigned from his positions and entered into an advisory agreement with the Company pursuant to which he will serve as a strategic advisor to the Company through December 31, 2022.

Stock-based compensation for the three months ended March 31, 2021 includes $ 6.3 million in incremental stock-based compensation expense related to the deemed modification of the unvested portion of grants held by our former COO at the time of transition, even though these shares continue to vest over their existing vesting schedule through 2022.

Stock-based compensation for the six months ended June 30, 2021 includes $ 6.3 million in incremental stock-based compensation expense related to the deemed modification of the unvested portion of grants held by our former COO at the time of transition, even though these shares continue to vest over their existing vesting schedule through 2022.

In accordance with ASC 718, the fair value of these awards were modified and all related expense accelerated on the date of modification as a result of the reduction in required service.

1 unchanged sentence

Beginning in 2019, the Company began granting restricted stock units under its 2014 Stock Incentive Plan, in lieu of restricted stock awards, primarily for stock plan administrative purposes.

Restricted stock unit activity during the three months ended March 31, 2021 was as follows:

Restricted stock unit activity during the six months ended June 30, 2021 was as follows:

Restricted Stock Units Outstanding Weighted-Average Grant Date Fair Value

3 unchanged sentences

Awards forfeited ( 27,463 ) 40.48

Unvested balances at March 31, 2021 2,234,764 $ 44.35

Unvested balances at June 30, 2021 2,061,436 $ 44.70

Performance Based Restricted Stock Units

3 unchanged sentences

Compensation expense is recognized over the required service period of the grant and is determined based on the grant date fair value of the award and is not subject to fluctuation due to achievement of the underlying market-based target.

PRSU activity during the three months ended March 31, 2021 was as follows:

PRSU activity during the six months ended June 30, 2021 was as follows:

PRSUs Outstanding Weighted-Average Grant Date Fair Value

1 unchanged sentence

Units granted 61,437 86.56

Unvested balances at March 31, 2021 127,734 $ 83.01

Significant assumptions used in the Monte Carlo simulation model for the PRSUs granted during the three months ended March 31, 2021 and year ended December 31, 2020 are as follows:

March 31, 2021 December 31, 2020

Incremental PRSUs vested in period 69,048

Units vested ( 135,345 ) 79.72

Unvested balances at June 30, 2021 61,437 $ 86.56

Significant assumptions used in the Monte Carlo simulation model for the PRSUs granted during the six months ended June 30, 2021 and year ended December 31, 2020 are as follows:

June 30, 2021 December 31, 2020

Expected volatility 53.6 % 45.1 %

3 unchanged sentences

Restricted Stock Awards

Restricted share activity during the three months ended March 31, 2021 was as follows:

Restricted share activity during the six months ended June 30, 2021 was as follows:

Restricted Shares

3 unchanged sentences

Awards forfeited — —

Unvested balances at March 31, 2021 34,508 $ 30.13

Unvested balances at June 30, 2021 1,000 $ 30.61

Stock Option Activity

Stock option activity during the three months ended March 31, 2021 was as follows:

Stock option activity during the six months ended June 30, 2021 was as follows:

Outstanding Weighted–

2 unchanged sentences

Options expired ( 408 ) 1.56

Outstanding at March 31, 2021 263,186 $ 8.96

Outstanding at June 30, 2021 251,360 $ 8.67

Revenue Recognition

66 unchanged sentences

Unbilled receivables represent amounts for which the Company has recognized revenue, pursuant to its revenue recognition policy, for software licenses already delivered and professional services already performed, but invoiced in arrears and for which the Company believes it has an unconditional right to payment.

As of March 31, 2021 and December 31, 2020, unbilled receivables were $ 5.1 million and $ 4.6 million, respectively.

As of June 30, 2021 and December 31, 2020, unbilled receivables were $ 5.7 million and $ 4.6 million, respectively.

Deferred Commissions

8 unchanged sentences

indicate their carrying value may not be recoverable consistent with the Company's long-lived assets policy.

No indicators of impairment were identified during the three months ended March 31, 2021.

The following table presents the activity impacting deferred commissions for the three months ended March 31, 2021 (in thousands):

No indicators of impairment were identified during the six months ended June 30, 2021.

The following table presents the activity impacting deferred commissions for the six months ended June 30, 2021 (in thousands):

Balance at December 31, 2020 $ 18,746

1 unchanged sentence

Amortization of deferred commissions ( 3,725 )

Balance at March 31, 2021 $ 20,303

Balance at June 30, 2021 $ 22,322

Commissions capitalized in excess of amortization of deferred commissions for the three and six months ended June 30, 2021 were $ 2.0 million and $ 3.6 million, respectively.

Deferred Revenue

1 unchanged sentence

Deferred revenue is mainly unearned revenue related to subscription services and support services.

During the three months ended March 31, 2021, we recognized $ 39.4 million and $ 1.1 million of subscription services and professional services revenue, respectively, that was included in the deferred revenue balances at the beginning of the period.

In addition, during the three months ended March 31, 2021 we recognized $ 1.2 million in revenue that was included in the acquired deferred revenue balance of our 2021 acquisitions as disclosed in Note 2, Acquisitions.

During the six months ended June 30, 2021, we recognized $ 61.8 million and $ 1.6 million of subscription services and professional services revenue, respectively, that was included in the deferred revenue balances at the beginning of the period.

In addition, during the six months ended June 30, 2021 we recognized $ 3.2 million in revenue that was included in the acquired deferred revenue balance of our 2021 acquisitions as disclosed in Note 2, Acquisitions.

Remaining Performance Obligations

As of March 31, 2021, approximately $ 265.7 million of revenue is expected to be recognized from remaining performance obligations.

As of June 30, 2021, approximately $ 272.8 million of revenue is expected to be recognized from remaining performance obligations.

We expect to recognize revenue on approximately 68 % of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

5 unchanged sentences

Information about these operations is presented below (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Subscription and support:

7 unchanged sentences

United Kingdom — — 11 16

Canada 10 36 52 57

Other International 67 233 113 275

12 unchanged sentences

The effective date of the amendment is January 1, 2017.

DevFactory is an affiliate of ESW Capital LLC (a non-management investor), which holds more than 5 % of the Company's capital stock.

DevFactory is an affiliate of ESW Capital LLC (“ESW”) (a non-management investor), which held more than 5 % of the Company's capital stock as of June 30, 2021.

As of July 9, 2021 ESWs ownership in Upland was reduced to 4.8 %.

The Company has an outstanding purchase commitment in 2021 for software development services pursuant to this agreement in the amount of $ 9.6 million.

1 unchanged sentence

For example, if 2021 total revenues increase by 10% as compared to 2020 total revenues, then the 2022 purchase commitment will increase by approximately $ 1.0 million from the 2021 purchase commitment amount to approximately $ 10.6 million.

The Company purchased software development services pursuant to this agreement with DevFactory of $ 2.4 million and $ 1.9 million during the three months ended March 31, 2021 and March 31, 2020, respectively.

As of March 31, 2021 and December 31, 2020 amounts included in accounts payable and accrued liabilities owed to this company totaled $ 2.4 million and $ 1.9 million, respectively.

The Company purchased software development services pursuant to this agreement with DevFactory of $ 2.4 million and $ 1.8 million during the three months ended June 30, 2021 and June 30, 2020, respectively, and $ 4.8 million and $ 3.7 million during the six months ended June 30, 2021 and June 30, 2020, respectively.

As of June 30, 2021 and December 31, 2020 amounts included in accounts payable and accrued liabilities owed to this company totaled $ 2.4 million and $ 0.0 million, respectively.

• The Company purchased services from Crossover, Inc.

("Crossover"), a company controlled by ESW Capital, LLC during the three months ended March 31, 2021 and March 31, 2020 of approximately $ 1.0 million and $ 1.1 million, respectively.

Crossover provides a proprietary technology system to help the Company identify, screen, select, assign, and connect with necessary resources from time to time to perform technology software development and other services throughout the Company, and track productivity of such resources.

("Crossover"), a company controlled by ESW Capital, LLC during the three months ended June 30, 2021 and June 30, 2020 of approximately $ 0.9 million and $ 1.4 million, respectively, and $ 1.9 million and $ 2.5 million during the six months ended June 30, 2021 and June 30, 2020, respectively.

services throughout the Company, and track productivity of such resources.

While there are no purchase commitments with Crossover, the Company continues to use its services in 2021.

As of March 31, 2021 and

December 31, 2020 amounts included in accounts payable and accrued liabilities owed to this company totaled $ 0.8 million and $ 0.6 million, respectively.

As of June 30, 2021 and December 31, 2020 amounts included in accounts payable and accrued liabilities owed to this company totaled $ 0.7 million and $ 0.6 million, respectively.

The Company has an arrangement with a former subsidiary, Visionael Corporation ("Visionael"), to provide management, human resource, payroll and administrative services.

McDonald, the Company's Chief Executive Officer and Chairman of the Board, beneficially holds approximately 26.18 % interest in Visionael.

Fees earned from this arrangement for the three months ended March 31, 2021 and March 31, 2020 were $ 0 and $ 15,000 , respectively.

Fees earned from this arrangement for the three months ended June 30, 2021 and June 30, 2020 were $ 0 and $ 15,000 , respectively, and $ 0 and $ 30,000 during the six months ended June 30, 2021 and June 30, 2020, respectively.

In connection with its arrangement with Visionael, the Company has provided advances to Visionael to help cover short term working capital needs.

As of March 31, 2021 and December 31, 2020 advances to Visionael included in Prepaid and other on the Company’s condensed consolidated balance sheets totaled $ 0.0 million and $ 0.4 million, respectively, net of allowance for credit losses.

During the three months ended March 31, 2021 the Company recognized an allowance for credit loss of $ 0.4 million against the remaining outstanding balance.

As of June 30, 2021 and December 31, 2020 advances to Visionael included in Prepaid and other on the Company’s condensed consolidated balance sheets totaled $ 0.0 million and $ 0.4 million, respectively, net of allowance for credit losses.

During the six months ended June 30, 2021 the Company recognized an allowance for credit loss of $ 0.4 million against the remaining outstanding balance.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements