What changed in this filing

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Item 1. Financial Statements

2022-05-04 compared with 2021-11-03 · 150 added, 253 removed, 531 unchanged (43% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

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

September 30, 2021 December 31, 2020

(in thousands, except for share and per share information) March 31, 2022 December 31, 2021

Assets (unaudited)

1 unchanged sentence

Cash and cash equivalents $ 130,443 $ 189,158

Accounts receivable (net of allowance of $ 1,081 and $ 1,465 at September 30, 2021 and December 31, 2020, respectively)

Accounts receivable (net of allowance of $ 1,089 and $ 1,107 at March 31, 2022 and December 31, 2021, respectively)

48,725 50,499

1 unchanged sentence

Unbilled receivables 5,356 4,801

Prepaid and other 8,560 12,694

Prepaid expenses and other current assets 15,017 8,709

Total current assets 209,710 262,991

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Deferred commissions, noncurrent 15,418 14,808

Interest rate swap assets 17,803 —

Other assets 1,284 1,350

8 unchanged sentences

Operating lease liabilities, current 4,021 3,546

Current maturities of notes payable (includes unamortized discount of $ 2,243 and $ 2,234 at September 30, 2021 and December 31, 2020, respectively)

Current maturities of notes payable (includes unamortized discount of $ 2,234 and $ 2,233 at March 31, 2022 and December 31, 2021, respectively)

Total current liabilities 179,781 156,444

Notes payable, less current maturities (includes unamortized discount of $ 7,842 and $ 9,414 at September 30, 2021 and December 31, 2020, respectively)

Notes payable, less current maturities (includes unamortized discount of $ 6,735 and $ 7,287 at March 31, 2022 and December 31, 2021, respectively)

514,366 515,163

8 unchanged sentences

50,000,000 shares authorized:

30,516,350 and 29,987,114 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively)

31,320,765 and 31,096,548 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively)

Additional paid-in capital 579,638 568,384

Accumulated other comprehensive loss ( 18,338 ) ( 26,234 )

Accumulated other comprehensive income (loss) 12,359 ( 11,514 )

Accumulated deficit ( 263,416 ) ( 240,585 )

5 unchanged sentences

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Subscription and support $ 73,627 $ 70,653

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Total other expense ( 8,180 ) ( 7,550 )

Loss before benefit from (provision for) income taxes ( 14,363 ) ( 10,161 ) ( 56,945 ) ( 49,361 )

Benefit from (provision for) income taxes 3,348 ( 1,149 ) 6,204 3,811

Loss before benefit from income taxes ( 22,957 ) ( 25,078 )

Benefit from income taxes 126 4,394

Net loss $ ( 22,831 ) $ ( 20,684 )

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Upland Software, Inc.

Condensed Consolidated Statements of Comprehensive Loss

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Net loss $ ( 22,831 ) $ ( 20,684 )

Other comprehensive income:

Foreign currency translation adjustment ( 1,047 ) ( 2,387 )

Unrealized translation gain (loss) on intercompany loans with foreign subsidiaries ( 1,293 ) 840

Unrealized gain (loss) on interest rate swaps 2,112 ( 441 ) 14,391 ( 35,497 )

Comprehensive loss $ ( 16,115 ) $ ( 5,090 ) $ ( 42,845 ) $ ( 83,807 )

Unrealized gain on interest rate swaps 26,213 15,451

Other comprehensive income:

$ 23,873 $ 13,904

Comprehensive income (loss) $ 1,042 $ ( 6,780 )

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

Upland Software, Inc.

Consolidated Statement of Stockholders’ Equity

Condensed Consolidated Statement of Stockholders’ Equity

(in thousands, except share amounts)

Three Months Ended September 30, 2021

Common Stock Additional

Capital Accumulated

Comprehensive

Loss Accumulated

Deficit Total

Stockholders’

Shares Amount

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

Issuance of stock under Company plans, net of shares withheld for tax 103,104 — ( 323 ) — — ( 323 )

Stock-based compensation — — 12,047 — — 12,047

Foreign currency translation adjustment — — — ( 4,548 ) — ( 4,548 )

Unrealized translation loss on intercompany loans with foreign subsidiaries — — — ( 2,664 ) — ( 2,664 )

Unrealized gain on interest rate swaps — — — 2,112 — 2,112

Net loss — — — — ( 11,015 ) ( 11,015 )

Balance at September 30, 2021 30,516,350 $ 3 $ 558,495 $ ( 18,338 ) $ ( 233,114 ) $ 307,046

Three Months Ended September 30, 2020

Common Stock Additional

Capital Accumulated

Comprehensive

Loss Accumulated

Deficit Total

Stockholders’

Shares Amount

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

Issuance of stock under Company plans, net of shares withheld for tax 69,853 — 20 — — 20

Issuance of stock, net of issuance costs 4,025,000 — 130,114 — — 130,114

Stock-based compensation — — 10,963 — — 10,963

Foreign currency translation adjustment — — — 2,734 — 2,734

Unrealized translation loss on intercompany loans with foreign subsidiaries — — — 3,927 — 3,927

Unrealized loss on interest rate swaps — — — ( 441 ) — ( 441 )

Net loss — — — — ( 11,310 ) ( 11,310 )

Balance at September 30, 2020 29,460,588 $ 3 $ 504,425 $ ( 39,480 ) $ ( 176,704 ) $ 288,244

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

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Common Stock Additional

1 unchanged sentence

Comprehensive

Loss Accumulated

Income (Loss) Accumulated

Deficit Total

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Net loss — — — — ( 22,831 ) ( 22,831 )

Balance at September 30, 2021 30,516,350 $ 3 $ 558,495 $ ( 18,338 ) $ ( 233,114 ) $ 307,046

Nine Months Ended September 30, 2020

Balance at March 31, 2022 31,320,765 $ 3 $ 579,638 $ 12,359 $ ( 263,416 ) $ 328,584

Three Months Ended March 31, 2021

Common Stock Additional

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Issuance of stock under Company plans, net of shares withheld for tax 104,551 — 1 — — 1

Issuance of stock, net of issuance costs 4,025,000 — 130,101 — — 130,101

Stock-based compensation — — 17,824 — — 17,824

Cumulative adjustment related to adoption of accounting standard — — — — ( 108 ) ( 108 )

Foreign currency translation adjustment — — — ( 2,387 ) — ( 2,387 )

Unrealized translation loss on intercompany loans with foreign subsidiaries — — — ( 3,254 ) — ( 3,254 )

Unrealized loss on interest rate swaps — — — ( 35,497 ) — ( 35,497 )

Unrealized translation gain on intercompany loans with foreign subsidiaries — — — 840 — 840

Unrealized gain on interest rate swaps — — — 15,451 — 15,451

Net loss — — — — ( 20,684 ) ( 20,684 )

Balance at September 30, 2020 29,460,588 $ 3 $ 504,425 $ ( 39,480 ) $ ( 176,704 ) $ 288,244

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

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

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(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Operating activities

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Non-cash stock compensation expense 11,619 17,824

Non-cash loss on retirement of fixed assets 2 473

Changes in operating assets and liabilities, net of purchase business combinations:

Accounts receivable 9,182 3,575

Prepaids and other ( 3,672 ) ( 10,093 )

Prepaid expenses and other current assets 1,787 ( 1,015 )

Accounts payable ( 4,145 ) 4,540

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Purchase of property and equipment ( 176 ) ( 282 )

Purchase of customer relationships — ( 201 )

Purchase business combinations, net of cash acquired ( 62,333 ) ( 72,618 )

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Additional consideration paid to sellers of businesses ( 2,493 ) ( 742 )

Net cash provided by (used in) financing activities ( 5,096 ) 112,077

Net cash used in financing activities ( 4,211 ) ( 2,095 )

Effect of exchange rate fluctuations on cash ( 217 ) ( 865 )

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Notes to Unaudited Condensed Consolidated Financial Statements

Summary of Significant Accounting Policies

Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

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The condensed consolidated financial statements include the accounts of Upland Software, Inc.

and its wholly owned subsidiaries (collectively referred to as “Upland”, the “Company”, “we” or “us”).

and its wholly owned subsidiaries (collectively referred to as “Upland”, the “Company”, “we”, “us” or “our”).

All intercompany accounts and transactions have been eliminated in consolidation.

Certain prior period amounts have been reclassified to conform to the current period presentation.

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting.

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 and nine months ended September 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 results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 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 2021 Annual Report on Form 10-K filed with the SEC on February 24, 2022.

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however, actual results could differ from those estimates.

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 November 3, 2021, the date of issuance of this Quarterly Report on Form 10-Q.

We assessed the impact of COVID-19 on the estimates and assumptions and determined there was no material impact.

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 4, 2022, 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.

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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 for the three or nine months ended September 30, 2021, or more than 10% of accounts receivable as of September 30, 2021 or December 31, 2020.

No individual customer represented more than 10% of total revenues for the three months ended March 31, 2022, or more than 10% of accounts receivable as of March 31, 2022 or December 31, 2021.

Cash Flow Hedges— Interest Rate Swap Agreements

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.

These interest rate swaps effectively converted the entire balance of the Company's $ 540 million term loans from variable interest payments to fixed interest rate payments, based on an annualized fixed rate of 5.4 %, for a 7 year term of debt.

ASC 815 requires entities to recognize derivative instruments as either assets or liabilities in the statement of financial position at fair value.

These interest rate swaps effectively converted the entire balance of the Company's $ 540 million original principal term loans from variable interest payments to fixed interest rate payments, based on an annualized fixed rate of 5.4 %, for a 7 year term of debt.

ASC 815, Derivatives and Hedging , requires entities to recognize derivative instruments as either assets or liabilities in the statement of financial position at fair value.

The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship.

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

As of September 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 $ 15.6 million and $ 30.0 million, respectively.

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

Amounts deferred in Other comprehensive income will be reclassified to Interest expense in the accompanying condensed consolidated statements of operations in the period in which the hedged item affects earnings.

As of March 31, 2022, the fair value of the interest rate swaps included in assets in the Company's condensed consolidated balance sheets was $ 17.8 million.

As of December 31, 2021, the fair value of the interest rate swaps included in liabilities in the Company's condensed consolidated balance sheets was $ 8.4 million.

The interest rate swap has been designated as a cash flow hedge.

As such, the change in the fair value of the hedging instruments is recorded in Other comprehensive income (loss) in the accompanying condensed consolidated statements of comprehensive income (loss).

Amounts deferred in Other comprehensive income (loss) will be reclassified to Interest expense in the accompanying condensed consolidated statements of operations in the period in which the hedged item affects earnings.

Fair Value of Financial Instruments

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Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which creates an exception to the general recognition and measurement principle for contract assets and contract liabilities from contracts with customers acquired in a business combination.

The new guidance will require companies to apply the definition of a performance obligation under accounting standard codification (“ASC”) Topic 606 to recognize and measure contract assets and contract liabilities (i.e., deferred revenue) relating to contracts with customers that are acquired in a business combination.

The new guidance will require companies to apply the definition of a performance obligation under accounting standard codification

(“ASC”) Topic 606 to recognize and measure contract assets and contract liabilities (i.e., deferred revenue) relating to contracts with customers that are acquired in a business combination.

Under current GAAP, an acquirer in a business combination is generally required to recognize and measure the assets it acquires and the liabilities it assumes at fair value on the acquisition date.

The new guidance will result in the acquirer recording acquired contract assets and liabilities on the same

basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606.

The new guidance will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606.

These amendments are effective for fiscal years beginning after December 15, 2022, with early adoption permitted.

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2022 Acquisitions

Acquisitions completed during the nine months ended September 30, 2021 include the following:

Acquisitions completed during the three months ended March 31, 2022 include the following:

• BA Insight - On February 22, 2022, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of BA Insight Inc., (“BA Insight”), a cloud-based enterprise knowledge management solution.

Revenues recorded since the acquisition date through March 31, 2022 were approximately $ 0.8 million.

• Objectif Lune - On January 07, 2022, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of Objectif Lune Inc., a Quebec proprietary company (“Objectif Lune”), cloud-based document workflow product.

Revenues recorded since the acquisition date through March 31, 2022 were approximately $ 4.8 million.

2021 Acquisition

The acquisition completed during the year ended December 31, 2021 were:

• 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.

Revenue recorded since the acquisition date through September 30, 2021 were approximately $ 1.9 million.

Revenue recorded for Panviva for the quarter ended September 30, 2021 were approximately $ 1.8 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.

Revenue recorded since the acquisition date through September 30, 2021 were approximately $ 9.0 million.

Revenue recorded for BlueVenn for the quarter ended September 30, 2021 were approximately $ 3.6 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.

Revenue recorded since the acquisition date through September 30, 2021 were approximately $ 7.5 million.

Revenue recorded for Second Street for the quarter ended September 30, 2021 were approximately $ 2.8 million.

2020 Acquisition

The acquisition completed during the year ended December 31, 2020 were:

• Localytics - On February 6, 2020, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of Char Software, Inc (dba Localytics), a Delaware corporation (“Localytics”), a provider of mobile app personalization and analytics solutions.

Consideration

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

Panviva BlueVenn Second Street Localytics

BA Insight Objectif Lune Panviva BlueVenn Second Street

Cash $ 33,355 $ 29,750 $ 19,931 $ 53,535 $ 25,436

3 unchanged sentences

Working capital and other adjustments 1,616 — 379 ( 537 ) ( 1,365 )

379 ( 537 ) — ( 5,238 )

Total consideration $ 35,616 $ 35,000 $ 23,827 $ 57,962 $ 30,721

(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.

The maximum potential payout for the BlueVenn, Second Street and Localytics earn-outs were $ 22.4 million, $ 3.0 million, and $ 1.0 million, respectively.

The earn-out for Localytics was paid in full during the year ended December 31, 2020 based on an ending fair value of $ 1.0 million.

Refer to Note 3 for further discussion regarding the calculation of fair value of acquisition related earn-outs.

(3) In addition to working capital adjustments made to the purchase price of our acquisitions this line item includes a $ 5.2 million settlement in total consideration for Localytics related to a representation and warranty insurance settlement which is included in prepaids and other current assets on the Company’s consolidated balance sheets as of December 31, 2020.

(1) Represents the cash holdbacks subject to indemnification claims that are payable 12 months following closing for Objectif Lune, Panviva and Second Street, 15 months following closing for BA Insight and 18 months following closing for BlueVenn.

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

The maximum potential payout for the BlueVenn and Second Street earn-outs were $ 21.7 million and $ 3.0 million, respectively.

As of December 31, 2021, the fair value of the earnouts for BlueVenn and Second Street were zero .

As of March 31, 2022, the earnout payments for BlueVenn and Second Street were finalized resulting in no payments made.

Fair Value of Assets Acquired and Liabilities Assumed

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

The purchase accounting for the 2022 acquisitions of BA Insight and Objectif Lune and the 2021 acquisition of Panviva are preliminary as the Company has not finalized the overall impact of these acquisitions.

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

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 nine months ended September 30, 2021, as well as assets and liabilities (in thousands):

Management expects to complete the purchase accounting for BA Insight and Objectif Lune no later than the first quarter of 2023 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, 2021 and through the three months ended March 31, 2022, as well as assets and liabilities (in thousands):

Preliminary Final

Panviva BlueVenn Second Street Localytics

BA Insight Objectif Lune Panviva BlueVenn Second Street

Year Acquired 2022 2022 2021 2021 2021

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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 nine months ended September 30, 2021 and the year ended December 31, 2020 (in years):

September 30, 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 three months ended March 31, 2022 and the year ended December 31, 2021 (in years):

March 31, 2022 December 31, 2021

Customer relationships 7.0 7.0

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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 September 30, 2021 and September 30, 2020 were $ 0.1 million and $ 0.0 million , respectively, and during the nine months ended September 30, 2021 and September 30, 2020 were $ 6.2 million and $ 3.5 million, respectively.

Total transaction related expenses incurred with respect to acquisition activity during the three months ended March 31, 2022 and March 31, 2021 were $ 4.5 million and $ 4.0 million, respectively.

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

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From time to time we may purchase or sell customer relationships that meet certain criteria.

During the year ended December 31, 2020, we completed customer relationship acquisitions totaling $ 0.2 million.

We had no purchase or sale of customer relationships during the three months ended March 31, 2022 and March 31, 2021 .

Fair Value Measurements

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

As of March 31, 2022 and December 31, 2021, the Company had no accrued earnout business acquisition contingent 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.

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Any adjustment related to subsequent changes in the fair value of contingent consideration is recorded in acquisition-related expense or other income (expense) in the Company's condensed consolidated statement of operations based on management's assessment of the nature of the liability.

Earnout consideration liabilities are included in Due to sellers in the Company's condensed consolidated balance sheets.

In connection with entering into, and expanding, the Company's current credit facility, as discussed further in Note 6.

Debt, the Company entered into interest rate swaps for the full 7 year term of the Company's term loans, effectively fixing our interest rate at 5.4 % for the full value $ 540 million of the term loans.

Earnout consideration liabilities are reported in “Due to sellers in businesses” in the Company's condensed consolidated balance sheets.

As of March 31, 2022, the earnout payments for BlueVenn and Second Street were finalized resulting in no payments made.

In connection with entering into, and expanding, the Company's current credit facility, as discussed further in “Note 5—Debt”, the Company entered into interest rate swaps for the full 7 year term of the Company's term loans, effectively fixing our interest rate at 5.4 % for the full value $ 540 million of the original principal term loans.

The fair value of the Company's swaps are measured at the end of each interim reporting period based on the then assessed fair value and adjusted if necessary.

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

As of September 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.

As of March 31, 2022 the fair value of the interest rate swap is included in the “Interest rate swap assets” section compared to December 31, 2021 in which the fair value of the interest rate swaps included in the liabilities section 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 September 30, 2021

Fair Value Measurements at March 31, 2022

Level 1 Level 2 Level 3 Total

Earnout consideration liability $ — $ — $ 669 $ 669

Interest rate swap liabilities $ — $ 15,642 $ — $ 15,642

Interest rate swap assets $ — $ 17,803 $ — $ 17,803

Fair Value Measurements at December 31, 2021

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Interest rate swap liabilities $ — $ 8,409 $ — $ 8,409

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):

September 30, 2021

Balance at December 31, 2020 $ —

Acquisitions and settlements:

Acquisitions 4,185

Remeasurement adjustments:

Gain included in earnings

Foreign currency translation adjustments ( 13 )

Balance at September 30, 2021 $ 669

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 September 30, 2021 Valuation Technique Significant Unobservable Inputs

Contingent acquisition consideration:

(BlueVenn and Second Street) $ 669 Binary option model Expected future annual revenue streams and probability of achievement

Sensitivity to Changes in Significant Unobservable Inputs

As presented in the table above, the significant unobservable inputs used in the fair value measurement of contingent consideration related to business acquisitions are forecasts of expected future annual revenues as developed by the Company's management and the probability of achievement of those revenue forecast.

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 September 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 of the Company's debt, before debt discount, at September 30, 2021 and December 31, 2020 are $ 529.2 million and $ 533.3 million, respectively.

The Company believes the carrying value of its long-term debt at March 31, 2022 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 of the Company's debt, before debt discount, at March 31, 2022 and December 31, 2021 are $ 526.5 million and $ 527.9 million, respectively.

Goodwill and Other Intangible Assets

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

Changes in the Company’s goodwill balance for the three months ended March 31, 2022 are summarized in the table below:

($ in thousands) Goodwill

Balance at December 31, 2021 $ 457,472

Acquired in business combinations 48,768

Adjustment related to finalization of current year business combinations ( 4,146 )

Adjustment related to prior year business combinations 1,467

Foreign currency translation adjustment ( 2,461 )

Balance at September 30, 2021 $ 460,178

Balance at March 31, 2022 $ 505,246

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.

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Amortization Net Carrying

September 30, 2021:

March 31, 2022:

Customer relationships 1 - 10

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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 and nine months ended September 30, 2021 or the year ended December 31, 2020.

Total amortization expense during the three months ended September 30, 2021 and September 30, 2020 was $ 13.2 million and $ 11.2 million, respectively, and during the nine months ended September 30, 2021 and September 30, 2020 was $ 37.9 million and $ 33.6 million, respectively.

As of September 30, 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 months ended March 31, 2022 or the three months ended March 31, 2021.

Total amortization expense during the three months ended March 31, 2022 and March 31, 2021 was $ 13.8 million and $ 12.0 million, respectively.

As of March 31, 2022, the estimated annual amortization expense for the next five years and thereafter is as follows (in thousands):

Year ending December 31:

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Total $ 300,436

The Company’s income tax benefit for the three and nine months ended September 30, 2021 and September 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 Company’s income tax benefit for the three months ended March 31, 2022 and March 31, 2021 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 $ 3.3 million and $ 6.2 million recorded for the three and nine months ended September 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 occurring during the six months ended June 30, 2021, as discussed in Note 2.

Acquisitions, the deferred tax benefit attributable to the reduction in deferred tax liabilities associated with the transfer of intangibles between foreign and domestic jurisdictions, and foreign income taxes associated with our combined non-U.S.

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 in June 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, or shortly thereafter, allowed us to recognize certain deferred tax assets of approximately $ 6.5 million during the nine months ended September 30, 2021 that had previously been offset by a valuation allowance.

$ 4.3 million of the benefit for the release of valuation allowance was primarily recorded during the three months ended March 31, 2021, and $ 2.2 million was primarily recorded during the three months ended September 30, 2021.

The tax provision of $ 1.1 million and benefit of $ 3.8 million recorded for the three and nine months ended September 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.

The tax benefit of $ 0.1 million recorded for the three months ended March 31, 2022 is primarily related to foreign income taxes associated with our combined non-U.S.

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 the deferred tax provision attributable to the tax gain associated with the transfer of goodwill between foreign and domestic jurisdictions.

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.

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

These tax benefits are offset by changes in deferred tax liabilities associated with amortization of United States tax deductible goodwill, state taxes in certain states in which the Company does not file on a consolidated basis or have net operating loss carryforwards, and an increase in net deferred tax liabilities in the UK associated with the change in the applicable UK tax rate.

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 $ 4.2 million during the nine months ended September 30, 2020 that had previously been offset by a valuation allowance.

An adjustment reducing the benefit by approximately $ 0.2 million was recognized during the three months ended September 30, 2020.

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 September 30, 2021 and September 30, 2020, respectively.

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

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operating losses generated in years prior to 2018 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 September 30, 2021 and December 31, 2020 (in thousands):

September 30, 2021 December 31, 2020

Senior secured loans (includes unamortized discount of $ 10,085 and $ 11,648 based on an imputed interest rate of 5.8 % and 5.8 %, at September 30, 2021 and December 31, 2020, respectively)

Long-term debt consisted of the following at March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022 December 31, 2021

Senior secured loans (includes unamortized discount of $ 8,969 and $ 9,520 based on an imputed interest rate of 5.8 % and 5.8 %, at March 31, 2022 and December 31, 2021, respectively)

$ 517,532 $ 518,330

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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 September 30, 2021.

The Credit Facility replaced the Company's

previous credit agreement.

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

All outstanding balances under our previous credit facility were paid off using proceeds from our new Credit Facility.

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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 September 30, 2021, the fair value of the interest rate swap was a $ 15.6 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 and nine months ended September 30, 2021 is the result of an increase in short term interest rates during the respective periods.

In the next twelve months, the Company estimates that $ 3.3 million will be reclassified from Accumulated other comprehensive income (loss) and recorded as an increase to Interest expense.

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 September 30, Nine Months Ended September 30,

2021 2020 2021 2020

(Loss) gain recognized in Other comprehensive income on derivative financial instruments $ 2,112 $ ( 441 ) $ 14,391 $ ( 35,497 )

(Loss) gain on interest rate swap (included in Interest expense on our consolidated statement of operations) $ ( 2,090 ) $ ( 2,013 ) $ ( 6,158 ) $ ( 3,467 )

At March 31, 2022, the fair value of the interest rate swap was a $ 17.8 million asset as a result of an increase in short term interest rates since entering into the swap agreements.

The increase in the fair value of the interest rate swap asset during the three months ended March 31, 2022 is the result of an increase in short term interest rates during the respective periods.

In the next twelve months, the Company estimates that $ 4.1 million will be reclassified from Accumulated other comprehensive income (loss) to Interest expense, net on our condensed consolidated statement of operations.

Three Months Ended March 31,

Gain recognized in Other comprehensive income on derivative financial instruments $ 26,213 $ 15,451

Loss on interest rate swap (included in Interest expense on our consolidated statement of operations) $ ( 1,972 ) $ ( 2,010 )

Loans under the Revolver are available up to $ 60 million.

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

As of March 31, 2022, the Company had no borrowings outstanding under the Revolver or related sub-facility.

The Credit Facility contains customary affirmative and negative covenants.

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

As of September 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 nine months ended September 30, 2021 and for the year ended December 31, 2020, respectively.

In addition, as of September 30, 2021 and December 31, 2020 the Company had $ 10.1 million and $ 11.6 million, respectively, of unamortized deferred financing costs associated with the Credit Facility.

As of March 31, 2022 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, 2022 and 2021, respectively.

In addition, as of March 31, 2022 and December 31, 2021 the Company had $ 9.0 million and $ 9.5 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.

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Net Loss $ ( 22,831 ) $ ( 20,684 )

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Net loss per common share, basic and diluted $ ( 0.73 ) $ ( 0.69 )

Due to the net losses for the three and nine months ended September 30, 2021 and September 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 September 30, 2021 and September 30, 2020:

September 30,

Due to the net losses for the three months ended March 31, 2022 and March 31, 2021, 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, 2022 and March 31, 2021:

Stock options 191,212 263,186

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Total anti–dilutive common share equivalents 2,664,488 2,660,192

(1) All outstanding restricted stock awards became fully vested as of December 31, 2021.

Commitments and Contingencies

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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 September 30, 2021 and September 30, 2020 totaling $ 2.4 million and $ 1.8 million, respectively, and for the nine months ended September 30, 2021 and September 30, 2020 totaling $ 7.2 million and $ 5.5 million, respectively.

The remaining purchase obligation after September 30, 2021 through December 31, 2021 is $ 2.4 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.

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Comprehensive income (loss) consists of two elements, net income (loss) and other comprehensive income (loss).

Other comprehensive income (loss) items are recorded in the stockholders’ equity section of our condensed consolidated balance sheets and excluded from net income (loss).

Other comprehensive income (loss) items are recorded in the stockholders’ equity section of our condensed consolidated balance sheets and are excluded from net income (loss).

Our other comprehensive income (loss) consists primarily of foreign currency translation adjustments for subsidiaries with functional currencies other than the U.S.

dollar, unrealized translation gains (losses) on intercompany loans with foreign subsidiaries, and unrealized gains (losses) on interest rate swaps.

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):

September 30, 2021 December 31, 2020

The following table shows the components of accumulated other comprehensive income (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, 2022 December 31, 2021

Foreign currency translation adjustment $ ( 6,704 ) $ ( 5,657 )

Unrealized translation gain on intercompany loans with foreign subsidiaries 1,260 2,552

Unrealized loss on interest rate swaps ( 15,642 ) ( 30,032 )

Total accumulated other comprehensive loss $ ( 18,338 ) $ ( 26,234 )

The unrealized translation gain on intercompany loans with foreign subsidiaries as of September 30, 2021 is net of income tax expense of $ 1.8 million.

The tax benefit related to unrealized translation gains on intercompany loans for the three and nine months ended September 30, 2021 was $ 0.5 million and $ 0.2 million, respectively.

Unrealized gain (loss) on interest rate swaps 17,803 ( 8,409 )

Total accumulated other comprehensive income (loss) $ 12,359 $ ( 11,514 )

The unrealized translation gains (losses) on intercompany loans with foreign subsidiaries as of March 31, 2022 is net of income tax expense of $ 1.4 million.

The tax benefit related to unrealized translation gains (losses) on intercompany loans for the three months ended March 31, 2022 was $ 0.5 million and a tax expense of $ 0.2 million for the three months ended March 31, 2021.

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

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The functional currency of our foreign subsidiaries are primarily the local currencies.

Results of operations for foreign subsidiaries are translated into United States dollars using the average exchange rates on a monthly basis during the year.

The assets and liabilities of those subsidiaries are translated into United States dollars using the exchange rates in effect at the balance sheet date.

The related translation adjustments are recorded in a separate component of stockholders' equity in accumulated other comprehensive loss.

Results of operations for foreign subsidiaries are translated into United States dollars (“USD”) using the average exchange rates on a monthly basis during the year.

The assets and liabilities of those subsidiaries are translated into USD using the exchange rates in effect at the balance sheet date.

The related translation adjustments are recorded in a separate component of stockholders' equity in accumulated other comprehensive income (loss).

The Company has intercompany loans that were used to fund the acquisitions of foreign subsidiaries.

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Stock-Based Compensation

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

The Company recognizes stock-based compensation expense from all awards in the following expense categories included in our condensed consolidated statements of income were as follows (in thousands):

Three Months Ended March 31,

Cost of revenue $ 402 $ 442

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General and administrative (1)

9,201 8,366 35,158 24,697

Total $ 11,619 $ 17,824

(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 nine months ended September 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.

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.

In accordance with ASC 718, Compensation—Stock Compensation , 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.

2014 Equity Incentive Plan

Beginning in 2019, the Company began granting restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”) under its 2014 Equity Incentive Plan (the “2014 EIP”), in lieu of restricted stock awards, primarily for stock plan administrative purposes.

Restricted Stock Units

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 nine months ended September 30, 2021 was as follows:

RSU activity during the three months ended March 31, 2022 was as follows:

Restricted Stock Units Outstanding Weighted-Average Grant Date Fair Value

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Awards forfeited ( 73,633 ) 38.12

Unvested balances at September 30, 2021 2,034,186 $ 44.43

Unvested balances at March 31, 2022 2,318,089 $ 32.35

Performance-Based Restricted Stock Units

In 2020 and 2021 fifty percent of the awards made to our Chief Executive Officer were performance based restricted stock units ("PRSUs").

The PRSU agreements provide that the quantity of units subject to vesting may range from 0 % to 300 % of the units granted per the table below based on the Company's absolute total shareholder return at the end of the eighteen month performance periods.

In 2022 and 2021, fifty percent of the awards granted to our Chief Executive Officer were PRSUs.

The 2022 and 2021 PRSU agreements provide that the quantity of units subject to vesting may range from 0 % to 300 % of the units granted per the table below based on the Company's absolute total shareholder return (“TSR”) at the end of the eighteen month performance periods.

Units granted per the table below are based on a 100 % target payout.

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 nine months ended September 30, 2021 was as follows:

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 (valued using the Monte Carlo simulation model) and is not subject to fluctuation due to achievement of the underlying market-based target.

PRSU activity during the three months ended March 31, 2022 was as follows:

PRSUs Outstanding Weighted-Average Grant Date Fair Value

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Units granted 93,750 54.03

Incremental PRSUs vested in period 69,048

Units vested ( 135,345 ) 79.72

Unvested balances at September 30, 2021 63,537 $ 84.87

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

September 30, 2021 December 31, 2020

Awards forfeited ( 2,100 ) 35.45

Unvested balances at March 31, 2022 155,187 $ 66.91

Significant assumptions used in the Monte Carlo simulation model for the PRSUs granted during the three months ended March 31, 2022 and year ended December 31, 2021 are as follows:

March 31, 2022 December 31, 2021

Expected volatility 49.5 % 53.6 %

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Dividend yield — —

Restricted Stock Awards

Restricted share activity during the nine months ended September 30, 2021 was as follows:

Restricted Shares

Outstanding Weighted-Average Grant Date Fair Value

Unvested balances at December 31, 2020 34,508 $ 30.13

Awards vested ( 33,508 ) 30.11

Awards forfeited — —

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

Stock Option Activity

Stock option activity during the nine months ended September 30, 2021 was as follows:

Stock option activity during the three months ended March 31, 2022 was as follows:

Outstanding Weighted–

1 unchanged sentence

Options exercised ( 36,393 ) 4.99

Options expired ( 408 ) 1.56

Outstanding at September 30, 2021 242,984 $ 8.76

Outstanding at March 31, 2022 191,212 $ 9.95

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 September 30, 2021 and December 31, 2020, unbilled receivables were $ 5.8 million and $ 4.6 million, respectively.

As of March 31, 2022 and December 31, 2021, unbilled receivables were $ 5.4 million and $ 4.8 million, respectively.

Deferred Commissions

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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 nine months ended September 30, 2021.

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

No indicators of impairment were identified during the three months ended March 31, 2022.

The following table presents the activity impacting deferred commissions for the three months ended March 31, 2022 :

($ in thousands) Deferred Commissions

Balance at December 31, 2021 $ 24,632

1 unchanged sentence

Amortization of deferred commissions ( 2,833 )

Balance at September 30, 2021 $ 22,889

Commissions capitalized in excess of amortization of deferred commissions for the three and nine months ended September 30, 2021 were $ 0.6 million and $ 4.1 million, respectively.

Balance at March 31, 2022 $ 25,587

Commissions capitalized in excess of amortization of deferred commissions for the three months ended March 31, 2022 were $ 1.0 million.

Deferred Revenue

1 unchanged sentence

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

During the nine months ended September 30, 2021, we recognized $ 76.3 million and $ 1.9 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 nine months ended September 30, 2021 we recognized $ 5.9 million in revenue that was included in the acquired deferred revenue balance of our 2021 acquisitions as disclosed in Note 2.

During the three months ended March 31, 2022, we recognized $ 44.6 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 three months ended March 31, 2022 we recognized $ 3.2 million in revenue that was included in the acquired deferred revenue balance of our 2022 acquisitions as disclosed in “Note 2.

Acquisitions.”

Remaining Performance Obligations

As of September 30, 2021, approximately $ 263.2 million of revenue is expected to be recognized from remaining performance obligations.

As of March 31, 2022, approximately $ 306.1 million of revenue is expected to be recognized from remaining performance obligations.

We expect to recognize revenue on approximately 70 % of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

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

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Subscription and support:

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United Kingdom 129 11

Canada 1 14 53 71

Other International 836 46

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Related Party Transactions

We are a party to two agreements, as detailed below, with companies controlled by ESW Capital LLC (“ESW”), a non-management investor in the Company which historically held more than 5 % of the Company's capital stock.

As of July 9, 2021 ESWs ownership in Upland was reduced to 4.8 % at which point DevFactory was no longer considered a related party.

• On March 28, 2017, the Company entered into an amendment to the Amended and Restated Technology Services Agreement with DevFactory FZ LLC (“DevFactory”) to extend the initial term end date from December 31, 2017 to December 31, 2021.

Additionally, the Company amended the option for either party to renew annually for one additional year.

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

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

For years after 2021, the purchase commitment amount for software development services will be equal to the prior year purchase commitment increased (decreased) by the percentage change in total revenue for the prior year as compared to the preceding year.

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 $ 1.8 million during the three months ended September 30, 2021 and September 30, 2020, respectively, and $ 7.2 million and $ 5.5 million during the nine months ended September 30, 2021 and September 30, 2020, respectively.

As of September 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 September 30, 2021 and September 30, 2020 of approximately $ 1.0 million and $ 1.2 million, respectively, and $ 2.9 million and $ 3.7 million during the nine months ended September 30, 2021 and September 30, 2020, 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.

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

As of September 30, 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.

The Company previously had 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.

Visionael ceased operations effective July 31, 2021.

Fees earned from this arrangement for the three months ended September 30, 2021 and September 30, 2020 were $ 0 and $ 15,000 , respectively, and $ 0 and $ 45,000 during the nine months ended September 30, 2021 and September 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 September 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 nine months ended September 30, 2021 the Company recognized an allowance for credit loss of $ 0.4 million against the remaining outstanding balance.

The Company does not have any material related party transactions to report for the three months ended March 31, 2022.

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