What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-08-09 · 208 added, 128 removed, 613 unchanged (35% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(in thousands, except for share and per share information) June 30, 2022 December 31, 2021

(in thousands, except for share and per share information) September 30, 2022 December 31, 2021

ASSETS (unaudited)

1 unchanged sentence

Cash and cash equivalents $ 241,720 $ 189,158

Accounts receivable (net of allowance of $ 951 and $ 1,107 at June 30, 2022 and December 31, 2021, respectively)

Accounts receivable (net of allowance of $ 1,119 and $ 1,107 at September 30, 2022 and December 31, 2021, respectively)

38,174 50,499

12 unchanged sentences

Total assets $ 1,113,628 $ 1,029,007

Liabilities and stockholders’ equity

LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

Current liabilities:

5 unchanged sentences

Operating lease liabilities, current 3,601 3,546

Current maturities of notes payable (includes unamortized discount of $ 2,233 and $ 2,233 at June 30, 2022 and December 31, 2021, respectively)

Current maturities of notes payable (includes unamortized discount of $ 2,269 and $ 2,233 at September 30, 2022 and December 31, 2021, respectively)

Total current liabilities 152,214 156,444

Notes payable, less current maturities (includes unamortized discount of $ 6,192 and $ 7,287 at June 30, 2022 and December 31, 2021, respectively)

Notes payable, less current maturities (includes unamortized discount of $ 5,765 and $ 7,287 at September 30, 2022 and December 31, 2021, respectively)

512,635 515,163

5 unchanged sentences

Total liabilities 693,629 712,719

Series A Convertible Preferred stock, 0.0001 par value;

5,000,000 shares authorized:

115,000 shares issued and outstanding as of September 30, 2022;

no shares issued and outstanding as of December 31, 2021, respectively.

Stockholders’ equity:

1 unchanged sentence

50,000,000 shares authorized:

31,632,628 and 31,096,548 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively)

31,777,122 and 31,096,548 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively)

Additional paid-in capital 600,892 568,384

2 unchanged sentences

Total stockholders’ equity 308,933 316,288

Total liabilities and stockholders’ equity $ 1,030,046 $ 1,029,007

Total liabilities, convertible preferred stock and stockholders’ equity $ 1,113,628 $ 1,029,007

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

2 unchanged sentences

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

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

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

2022 2021 2022 2021

21 unchanged sentences

Total other expense ( 7,015 ) ( 8,621 ) ( 21,172 ) ( 24,512 )

Loss before benefit from (provision for) income taxes ( 16,865 ) ( 17,504 ) ( 39,822 ) ( 42,582 )

Benefit from (provision for) income taxes 472 ( 1,538 ) 598 2,856

Loss before benefit from income taxes ( 7,569 ) ( 14,363 ) ( 47,391 ) ( 56,945 )

Benefit from income taxes 1,056 3,348 1,654 6,204

Net loss $ ( 6,513 ) $ ( 11,015 ) $ ( 45,737 ) $ ( 50,741 )

Preferred stock dividends ( 546 ) — ( 546 ) —

Net loss attributable to common stockholders $ ( 7,059 ) $ ( 11,015 ) $ ( 46,283 ) $ ( 50,741 )

Net loss per common share:

5 unchanged sentences

(in thousands)

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

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

2022 2021 2022 2021

2 unchanged sentences

Foreign currency translation adjustment ( 13,869 ) ( 4,548 ) ( 32,272 ) ( 5,611 )

Unrealized translation gain (loss) on intercompany loans with foreign subsidiaries ( 5,503 ) 940 ( 6,796 ) 1,780

Unrealized gain (loss) on interest rate swaps 8,156 ( 3,172 ) 34,369 12,279

Unrealized translation loss on intercompany loans with foreign subsidiaries ( 7,415 ) ( 2,664 ) ( 14,211 ) ( 884 )

Unrealized gain on interest rate swaps 17,988 2,112 52,357 14,391

Other comprehensive income (loss):

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Upland Software, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

Condensed Consolidated Statements of Equity

(in thousands, except share amounts)

Three Months Ended June 30, 2022

Common Stock Additional

Three Months Ended September 30, 2022

Preferred Stock Common Stock Additional

Capital Accumulated

3 unchanged sentences

Stockholders’

Shares Amount

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

Shares Amount Shares Amount

Balance at June 30, 2022 — $ — 31,632,628 $ 3 $ 594,080 $ ( 2,344 ) $ ( 279,809 ) $ 311,930

Issuance of Convertible Preferred Stock 115,000 110,520 — — — — — —

Dividends accrued - Convertible Preferred Stock — 546 — — ( 546 ) — — ( 546 )

Issuance of stock under Company plans, net of shares withheld for tax — — 144,494 — ( 169 ) — — ( 169 )

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Net loss — — — — — — ( 6,513 ) ( 6,513 )

Balance at June 30, 2022 31,632,628 $ 3 $ 594,080 $ ( 2,344 ) $ ( 279,809 ) $ 311,930

Three Months Ended June 30, 2021

Common Stock Additional

Balance at September 30, 2022 115,000 $ 111,066 31,777,122 $ 3 $ 600,892 $ ( 5,640 ) $ ( 286,322 ) $ 308,933

Three Months Ended September 30, 2021

Preferred Stock Common Stock Additional

Capital Accumulated

Comprehensive

Loss Accumulated

Income (Loss) Accumulated

Deficit Total

Stockholders’

Shares Amount

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

Shares Amount 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 )

4 unchanged sentences

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

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

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

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

Six Months Ended June 30, 2022

Common Stock Additional

Nine Months Ended September 30, 2022

Preferred Stock Common Stock Additional

Capital Accumulated

3 unchanged sentences

Stockholders’

Shares Amount

Shares Amount Shares Amount

Balance at December 31, 2021 — 31,096,548 $ 3 $ 568,384 $ ( 11,514 ) $ ( 240,585 ) $ 316,288

Issuance of Convertible Preferred Stock 115,000 110,520 — — — — — —

Dividends accrued - Convertible Preferred Stock — 546 — — ( 546 ) — — ( 546 )

Issuance of stock under Company plans, net of shares withheld for tax — — 680,574 — ( 969 ) — — ( 969 )

4 unchanged sentences

Net loss — — — — — — ( 45,737 ) ( 45,737 )

Balance at June 30, 2022 31,632,628 $ 3 $ 594,080 $ ( 2,344 ) $ ( 279,809 ) $ 311,930

Six Months Ended June 30, 2021

Common Stock Additional

Balance at September 30, 2022 115,000 $ 111,066 31,777,122 $ 3 $ 600,892 $ ( 5,640 ) $ ( 286,322 ) $ 308,933

Nine Months Ended September 30, 2021

Preferred Stock Common Stock Additional

Capital Accumulated

3 unchanged sentences

Stockholders’

Shares Amount

Shares Amount Shares Amount

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

2 unchanged sentences

Foreign currency translation adjustment — — — — — ( 5,611 ) — ( 5,611 )

Unrealized translation gain on intercompany loans with foreign subsidiaries — — — 1,780 — 1,780

Unrealized translation loss on intercompany loans with foreign subsidiaries — — — — — ( 884 ) — ( 884 )

Unrealized gain on interest rate swaps — — — — — 14,391 — 14,391

Net loss — — — — — — ( 50,741 ) ( 50,741 )

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

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

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

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Operating activities

8 unchanged sentences

Non-cash stock compensation expense 34,023 43,421

Non-cash loss on retirement of fixed assets 26 2

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

13 unchanged sentences

Payments on notes payable ( 4,050 ) ( 4,050 )

Issuance of Series A Convertible Preferred stock, net of issuance costs 110,520 —

Taxes paid related to net share settlement of equity awards ( 1,159 ) ( 373 )

1 unchanged sentence

Additional consideration paid to sellers of businesses ( 8,174 ) ( 769 )

Net cash used in financing activities ( 6,608 ) ( 3,381 )

Net cash provided by (used in) financing activities 97,127 ( 5,096 )

Effect of exchange rate fluctuations on cash ( 5,629 ) ( 613 )

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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 six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other period.

The results of operations for the three and nine months ended September 30, 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.

1 unchanged sentence

The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses.

Significant items subject to such estimates include those related to revenue recognition, deferred commissions, allowance for credit losses, stock-based compensation, contingent consideration, acquired intangible assets, the useful lives of intangible assets and property and equipment, the fair value of the Company’s interest rate swaps and income taxes.

Significant items subject to such estimates include those related to revenue recognition, deferred commissions, allowance for credit losses, stock-based compensation, contingent consideration, acquired intangible assets, impairment of goodwill, intangibles and long-lived assets, the useful lives of intangible assets and property and equipment, the fair value of the Company’s interest rate swaps and income taxes.

In accordance with GAAP, management bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances.

2 unchanged sentences

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 August 9, 2022, 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 November 3, 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.

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 for the six months ended June 30, 2022, or more than 10% of accounts receivable as of June 30, 2022 or December 31, 2021.

No individual customer represented more than 10% of total revenues for the nine months ended September 30, 2022, or more than 10% of accounts receivable as of September 30, 2022 or December 31, 2021.

Cash Flow Hedges— Interest Rate Swap Agreements

7 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 June 30, 2022, the fair value of the interest rate swaps included in assets in the Company's condensed consolidated balance sheets was $ 26.0 million.

As of September 30, 2022, the fair value of the interest rate swaps included in assets in the Company's condensed consolidated balance sheets was $ 43.9 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.

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The carrying values of the Company’s debt instruments approximated their fair value based on rates currently available to the Company.

Preferred Stock

In August 2022, the Company closed on the issuance and sale of its Series A Convertible Preferred Stock (the “Series A Preferred Stock”).

The Company issued 115,000 shares of Series A Preferred Stock, par value $ 0.0001 per share, at a price of $ 1,000 per share, for an initial investment amount of $ 115.0 million.

Pursuant to the Certification of Designation, cumulative preferred dividends accrue quarterly on the Series A Preferred Stock at a rate of (i) 4.5 % per annum until but excluding the seven year anniversary of the closing, and (ii) 7 % per annum on and after the seven year anniversary of the closing .

See “ Note 9.

Series A Preferred Stock—Series A Convertible Preferred Stock” for further details.

The Series A Preferred Stock and cumulative preferred dividends, net of preferred issuance costs, is presented as Mezzanine Equity of $ 111.1 million as of September 30, 2022 in the Company’s condensed consolidated balance sheets.

The Series A Preferred Stock is classified as Mezzanine Equity because it is redeemable at the option of its holders (upon a deemed liquidation event as defined in “ Note 9.

Series A Preferred Stock—Series A Convertible Preferred Stock—Deemed Liquidation Event Redemption” ) and has a condition for redemption that is not solely within the control of the issuer.

Recent Accounting Pronouncements

Recently issued accounting pronouncements - Adopted

In August 2020, the Financial Standards Accounting Board (“FASB”) issued an accounting standard on the topic of debt with conversion and other options, accounting standards update (“ASU”) 2020-06.

The amendment in this update simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock.

This update also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions and requires the application of the if-converted method for calculating diluted earnings per share.

In August 2020, the Financial Standards Accounting Board (“FASB”) issued accounting standards update (“ASU”) 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

ASU 2020-06 simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock.

This update also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions.

ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments.

The update also requires entities to provide expanded disclosures about the terms and features of convertible instruments, how the instruments have been reported in the entity’s financial statements, and information about events, conditions, and circumstances that can affect how to assess the amount or timing of an entity’s future cash flows related to those instruments.

The guidance is effective for interim and annual periods beginning after December 15, 2021.

The Company adopted this guidance in the first quarter of fiscal 2022 and it did not have a material impact on its results of operations, financial position and disclosures as the fair value option accounting model used by the Company is not impacted by this ASU.

However, this standard may be applicable should the recently announced Securities Purchase Agreement as discussed in “ Note 12.

Subsequent Events ” close during the third quarter.

The Company adopted this guidance in the first quarter of fiscal 2022.

Recently issued accounting pronouncements - Not yet adopted

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2022 Acquisitions

Acquisitions completed during the six months ended June 30, 2022 include the following:

Acquisitions completed during the nine months ended September 30, 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 June 30, 2022 were approximately $ 2.8 million.

Revenues recorded for BA Insight for the quarter ended June 30, 2022 were approximately $ 2.0 million.

Revenues recorded since the acquisition date through September 30, 2022 were approximately $ 5.2 million.

Revenues recorded for BA Insight for the quarter ended September 30, 2022 were approximately $ 2.4 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 June 30, 2022 were approximately $ 10.5 million.

Revenues recorded for Objectif Lune for the quarter ended June 30, 2022 were approximately $ 5.6 million.

Revenues recorded since the acquisition date through September 30, 2022 were approximately $ 15.5 million.

Revenues recorded for Objectif Lune for the quarter ended September 30, 2022 were approximately $ 5.1 million.

2021 Acquisition

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

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

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Management expects to complete the purchase accounting for BA Insight and Objectif Lune no later than the first quarter of 2023.

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 six months ended June 30, 2022, as well as assets and liabilities (in thousands):

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 nine months ended September 30, 2022, (in thousands):

Preliminary Final

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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 six months ended June 30, 2022 and the year ended December 31, 2021 (in years):

June 30, 2022 December 31, 2021

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, 2022 and the year ended December 31, 2021 (in years):

September 30, 2022 December 31, 2021

Customer relationships 7.0 7.0

6 unchanged sentences

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, 2022 and June 30, 2021 were $ 0.4 million and $ 2.0 million, respectively, and during the six months ended June 30, 2022 and June 30, 2021 were $ 4.9 million and $ 6.1 million, respectively.

Transaction related expenses, excluding transformation costs,

include expenses such as banker fees, legal and professional fees, insurance costs, and deal bonuses.

Total transaction related expenses incurred with respect to acquisition activity during the three months ended September 30, 2022 and September 30, 2021 was a gain of $ 0.3 million and an expense of $ 0.1 million, respectively.

During the nine months ended September 30, 2022 and September 30, 2021, total transaction related expenses were $ 4.6 million and $ 6.2 million,

respectively.

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

Transaction costs are included in acquisition-related expenses in our condensed consolidated statement of operations.

1 unchanged sentence

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

We had no purchase or sale of customer relationships during the three and six months ended June 30, 2022 and June 30, 2021 .

We had no purchase or sale of customer relationships during the three and nine months ended September 30, 2022 and September 30, 2021 .

Fair Value Measurements

4 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 June 30, 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.

As of September 30, 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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As the fair value measure is based on the market approach, they are categorized as Level 2.

As of June 30, 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.

As of September 30, 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 June 30, 2022

Fair Value Measurements at September 30, 2022

Level 1 Level 2 Level 3 Total

3 unchanged sentences

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

The Company believes the carrying value of its long-term debt at June 30, 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 June 30, 2022 and December 31, 2021 are $ 525.2 million and $ 527.9 million, respectively.

The Company believes the carrying value of its long-term debt at September 30, 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 September 30, 2022 and December 31, 2021 are $ 523.8 million and $ 527.9 million, respectively.

Goodwill and Other Intangible Assets

Changes in the Company’s goodwill balance for the six months ended June 30, 2022 are summarized in the table below:

Changes in the Company’s goodwill balance for the nine months ended September 30, 2022 are summarized in the table below:

($ in thousands) Goodwill

4 unchanged sentences

Foreign currency translation adjustment and other ( 28,572 )

Balance at June 30, 2022 $ 492,481

Balance at September 30, 2022 $ 479,642

Goodwill is evaluated for impairment annually in October or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable.

The events and circumstances considered by the Company include the business climate, legal factors, operating performance indicators and competition.

Determining the fair value of goodwill is subjective in nature and often involves the use of estimates and assumptions including, without limitation, use of estimates of future prices and volumes for our products, capital needs, economic trends and other factors which are inherently difficult to forecast.

If actual results, or the plans and estimates used in future impairment analyses are lower than the original estimates used to assess the recoverability of these assets, we could incur impairment charges in a future period.

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

June 30, 2022:

September 30, 2022:

Customer relationships 1 - 10

4 unchanged sentences

90,186 51,848 38,338

Non-compete agreements 3

1,148 1,148 —

Favorable Leases 6.3 270 32 238

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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 six months ended June 30, 2022 or the year ended December 31, 2021.

Total amortization expense was $ 13.5 million and $ 12.7 million during the three months ended June 30, 2022 and June 30, 2021, respectively, and $ 27.4 million and $ 24.7 million during the six months ended June 30, 2022 and June 30, 2021, respectively.

As of June 30, 2022, 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 nine months ended September 30, 2022 or the year ended December 31, 2021.

Total amortization expense was $ 12.8 million and $ 13.2 million during the three months ended September 30, 2022 and September 30, 2021, respectively, and $ 40.1 million and $ 37.9 million during the nine months ended September 30, 2022 and September 30, 2021, respectively.

As of September 30, 2022, 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 $ 254,040

The Company’s income tax benefit for the three months ended June 30, 2022, six months ended June 30, 2022 and 2021 and provision for the three months ended June 30, 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 Company’s income tax benefit for the three and nine months ended September 30, 2022 and September 30, 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 from income taxes of $ 0.5 million and $ 0.6 million for the three and six months ended June 30, 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 for the three months ended March 31, 2022, of the deferred tax provision attributable to the tax gain associated with the transfer of goodwill between foreign and domestic jurisdictions.

The tax provision for incomes taxes of $ 1.5 million and benefit from income taxes of $ 2.9 million for the three and six months ended June 30, 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 benefit from income taxes of $ 1.1 million and $ 1.7 million for the three and nine months ended September 30, 2022 is primarily related to foreign income taxes associated with our combined non-U.S.

operations and 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 combination occurring during the nine months ended September 30, 2022, as discussed in “ Note 2.

Acquisitions .” 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 for the three months ended March 31, 2022, of the deferred tax provision attributable to the tax gain associated with the transfer of goodwill between foreign and domestic jurisdictions.

The tax benefit for incomes taxes of $ 3.3 million and benefit from income taxes of $ 6.2 million for the three and nine months ended September 30, 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.

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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 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 June 30, 2022 and June 30, 2021, respectively.

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 June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022 December 31, 2021

Senior secured loans (includes unamortized discount of $ 8,425 and $ 9,520 based on an imputed interest rate of 5.8 % and 5.8 %, at June 30, 2022 and December 31, 2021, respectively)

Long-term debt consisted of the following at September 30, 2022 and December 31, 2021 (in thousands):

September 30, 2022 December 31, 2021

Senior secured loans (includes unamortized discount of $ 8,034 and $ 9,520 based on an imputed interest rate of 5.8 % and 5.8 %, at September 30, 2022 and December 31, 2021, respectively)

$ 515,766 $ 518,330

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 June 30, 2022.

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

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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 June 30, 2022, the fair value of the interest rate swap was a $ 26.0 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 June 30, 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 $ 6.4 million will be reclassified from Accumulated other comprehensive income (loss) to Interest expense, net on our condensed consolidated statement of operations.

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

At September 30, 2022, the fair value of the interest rate swap was a $ 43.9 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 September 30, 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 $ 11.5 million will be reclassified from Accumulated other comprehensive income (loss) to Interest expense, net on our condensed consolidated statement of

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,

2022 2021 2022 2021

Unrealized Gain (loss) recognized in Other comprehensive income on derivative financial instruments $ 8,156 $ ( 3,172 ) $ 34,369 $ 12,279

Loss on interest rate swap (included in Interest expense on our consolidated statement of operations) $ ( 1,159 ) $ ( 2,058 ) $ ( 3,131 ) $ ( 4,068 )

Unrealized Gain recognized in Other comprehensive income on derivative financial instruments $ 17,988 $ 2,112 $ 52,357 $ 14,391

Gain (loss) on interest rate swap (included in Interest expense on our consolidated statement of operations) $ 757 $ ( 2,090 ) $ ( 2,374 ) $ ( 6,158 )

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 June 30, 2022, the Company had no borrowings outstanding under the Revolver or related sub-facility.

As of September 30, 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 June 30, 2022 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, 2022 and 2021, respectively.

In addition, as of June 30, 2022 and December 31, 2021 the Company had $ 8.4 million and $ 9.5 million, respectively, of unamortized deferred financing costs associated with the Credit Facility.

As of September 30, 2022 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, 2022 and 2021, respectively.

In addition, as of September 30, 2022 and December 31, 2021 the Company had $ 8.0 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.

Net Loss Per Share

We compute loss per share of our Common Stock and Series A Preferred Stock using the two-class method.

The two-class method requires income available to common stockholders for the period to be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

We consider our Series A Preferred Stock to be a participating security, as its holders are entitled to fully participate in any dividends or other distributions declared or paid on our Common Stock on an as-converted basis.

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

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

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

2022 2021 2022 2021

Net Loss $ ( 6,513 ) $ ( 11,015 ) $ ( 45,737 ) $ ( 50,741 )

Preferred stock dividends and accretion ( 546 ) — ( 546 ) —

Net loss attributable to common stockholders $ ( 7,059 ) $ ( 11,015 ) $ ( 46,283 ) $ ( 50,741 )

Weighted–average common shares outstanding, basic and diluted 31,655,206 30,428,675 31,401,463 30,167,171

Net loss per common share, basic and diluted $ ( 0.22 ) $ ( 0.36 ) $ ( 1.47 ) $ ( 1.68 )

Due to the net losses for the three and six months ended June 30, 2022 and June 30, 2021, 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, 2022 and June 30, 2021:

Due to the net losses for the three and nine months ended September 30, 2022 and September 30, 2021, respectively, basic and diluted loss per share were the same.

The Company adopted ASU 2020-06 on January 1, 2022 as detailed in “Note 1.

Basis of Presentation and Summary of Significant Accounting Policies—Recent Accounting Pronouncements—Recently issued accounting pronouncements - Adopted.” As such, the Company is required to use the application of the if-converted method for calculating diluted earnings per share on our Series A Preferred Stock.

The Company applies the treasury stock method for calculating diluted earnings per share on our stock options, restricted stock awards, restricted stock units and performance restricted stock units.

The following table sets forth the anti–dilutive common share equivalents as of September 30, 2022 and September 30, 2021:

September 30,

Stock options 155,895 242,984

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Performance restricted stock units 93,750 63,537

Series A Preferred Stock on an as-converted basis (2)

Total anti–dilutive common share equivalents 8,295,174 2,341,707

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

(2) Per ASU 2020-06, the Company is applying the if-converted method to calculated diluted earnings per share.

As of September 30, 2022 , the Series A Preferred Stock plus accumulated dividends totaled $ 115.5 million.

The Series A Preferred Stock has a conversion price of $ 17.50 per share, as detailed in “ Note 9.

Series A Preferred Stock ”

Commitments and Contingencies

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Gain contingencies related to indemnification claims are not recognized in our condensed consolidated financial statements until realized.

Series A Preferred Stock

On July 14, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Ulysses Aggregator, LP (the “Purchaser”), an affiliate of HGGC, LLC, to issue and sell at closing 115,000 shares of Series A Preferred Stock of the Company, par value $ 0.0001 per share, at a price of $ 1,000 per share (the “Initial Liquidation Preference”) for an aggregate purchase price of $ 115.0 million (the “Investment”).

The Company will use the proceeds of the Investment (a) for general corporate purposes and (b) for transaction-related fees and expenses.

On August 23, 2022 (the “Closing Date”), the closing of the Investment (the “Closing”) occurred, and the Series A Preferred Stock was issued to the Purchaser.

In connection with the issuance of the Series A Preferred Stock, the Company incurred direct and incremental expenses comprised of transaction fees, and financial advisory and legal expenses (the “Series A Preferred Stock Issuance Costs”), which reduced the carrying value of the Series A Preferred Stock.

As of September 30, 2022, the Series A Preferred Stock Issuance Costs totaled $ 4.5 million.

Cumulative preferred dividends accrue quarterly on the Series A Preferred Stock at a rate of 4.5 % per year within the first seven years after the Closing Date regardless of whether declared or assets are legally available for the payment.

Such dividends shall accrue and compound quarterly in arrears from the date of issuance of the shares.

The dividend rate will increase to 7.0 % on the seven-year anniversary of the Closing Date.

The Series A Preferred Stock had accrued unpaid dividends of $ 0.5 million as of September 30, 2022.

Contemporaneous with the Closing Date, the Company and the Purchaser entered into a Registration Rights Agreement (the “Registration Rights Agreement”) and the Company filed a Certificate of Designation (the “Certificate of Designation”) setting out the powers, designations, preferences, and other rights of the Series A Preferred Stock with the Secretary of State of the State of Delaware in connection with the Closing.

Pursuant to the Registration Rights Agreement, the Purchaser has certain customary registration rights with respect to any shares of Series A Preferred Stock or the common stock of the Company issuable upon conversion of the Series A Preferred Stock, including rights with respect to the filing of a shelf registration statement, underwritten offering rights and piggy back rights.

Dividend Provisions

The Series A Preferred Stock rank senior to the Company’s common stock with respect to payment of dividends and rights on the distribution of assets on any liquidation, dissolution or winding up of the affairs of the Company.

The Series A Preferred Stock has an Initial Liquidation Preference of $ 1,000 per share, representing an aggregate Liquidation Preference (as defined below) of $ 1,000 upon issuance.

Holders of the Series A Preferred Stock are entitled to the dividend at the rate of 4.5 % per annum, within first seven years after the Closing Date regardless of whether declared or assets are legally available for the payment.

Such dividends shall accrue and compound quarterly in arrears from the date of issuance of the shares.

The dividend rate will increase to 7.0 % on the seven-year anniversary of the Closing Date.

The dividend can be paid, in the Company’s sole discretion, in cash or dividend in kind by adding to the Liquidation Preference of each share of Series A Preferred Stock outstanding;

provided that, until the stockholder approvals contemplated by Nasdaq Global Market Listing Standard Rules 5635(a), (b) and (d) are obtained, as applicable, the Company may not pay in kind if doing so would cause the common shares issuable upon conversion of the Preferred Stock to exceed 19.9 % of the total outstanding common stock as of the Closing Date.

The Series A Preferred Stock is also entitled to fully participate in any dividends paid to the holders of common stock in cash, in stock or otherwise, on an as-converted basis.

Liquidation Rights

In the event of any Liquidation, holders of the Series A Preferred Stock are entitled to receive an amount per share equal to the greater of (1) the Initial Liquidation Preference per share plus any accrued or declared but unpaid dividends on such shares (the “Liquidation Preference”) or (2) the amount payable if the Series A Preferred Stock were converted into common stock.

The Series A Preferred Stock will have distribution and liquidation rights senior to all other equity interests of the Company.

As of September 30, 2022, the Liquidation Preference of the Series A Preferred Stock was $ 115.5 million.

Optional Redemption

On or after the 7th anniversary of the original issue date of the Series A Preferred Stock, the Company has the right to redeem any outstanding shares of the Series A Preferred Stock for a cash purchase price equal to 105 % of the Liquidation Preference plus accrued and unpaid dividends as of the date of redemption.

Deemed Liquidation Event Redemption

Upon a fundamental change, holders of the Series A Preferred Stock have the right to require the Company to repurchase any or all of its Series A Preferred Stock for cash equal to the greater of (1) 105 % of the Liquidation Preference plus the present value of the dividend payments the holders would have been entitled to through the fifth anniversary of the issue date and (2) the amount that such Preferred Stock would have been entitled to receive as if converted into common shares immediately prior to the fundamental change.

A fundamental change (“Deemed Liquidation Event”) is defined as either the direct or indirect sale, lease, transfer, conveyance or other disposition of all or substantially all the properties or assets of the Company and its subsidiaries to any third party or the consummation of any transaction, the result of which is that any third party or group of third parties become the beneficial owner of more than 50 % of the voting power of the Company.

Voting Rights

The Series A Preferred Stock will vote together with the Common Shares on all matters and not as a separate class (except as specifically provided in the Certificate of Designation or as otherwise required by law) on an as-if-converted basis.

The holders of the Series A Preferred Stock will have the right to elect one member of the Board of Directors for so long as holders of the Series A Preferred Stock own in the aggregate at least 5 % of the shares of common stock on a fully diluted basis.

In addition, the holders of the Series A Preferred Stock will have the right to elect one non-voting observer to the Board of Directors for so long as they hold at least 10 % of the shares of Convertible Preferred Stock outstanding as of the date of the issue date.

Conversion Feature

The Series A Preferred Stock may be converted, at any time in whole or in part at the option of the holder into a number of shares of common stock equal to the quotient obtained by dividing the sum of the Liquidation Preference plus all accrued and unpaid dividends by the conversion price of $ 17.50 (the “Conversion Price”).

The Conversion Price is subject to adjustment in the following events:

• Stock splits and combinations

• Tender offers or exchange offers

• Distribution of rights, options, or warrants at a price per share that is less than the average of the last reported sale prices per share of Common Stock for the ten consecutive trading days

• Spin-offs and other distributed property

• Issuance of equity-linked securities at a price per share less than the conversion price

Anti-Dilution Provisions

The Series A Preferred Stock has customary anti-dilution provisions for stock splits, stock dividends, mergers, sales of significant assets, and reorganization events and recapitalization transactions or similar events, and weighted average anti-dilution protection, subject to customary exceptions for issuances pursuant to current or future equity-based incentive plans or arrangements (including upon the exercise of employee stock options).

Stockholders' Equity

Registration Statement

Registration Statements

On October 21, 2022 we filed a resale registration statement on Form S-3 (File No.

333-267973) (the “2022 S-3”), on behalf of the Purchaser and pursuant to the Registration Rights Agreement, which became effective on November 1, 2022 and covers (i) the issued Series A Preferred Stock and (ii) the number of shares of the Company’s common stock issuable upon conversion of such Series A Preferred Stock, which amount includes and assumes that dividends on the Series A Preferred Stock are paid by increasing the Liquidation Preference of the Series A Preferred Stock for a period of sixteen dividend payment periods from the initial issuance date.

On August 10, 2020, we filed a registration statement on Form S-3 (File No.

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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):

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Foreign currency translation adjustment $ ( 37,929 ) $ ( 5,657 )

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Total accumulated other comprehensive loss $ ( 5,640 ) $ ( 11,514 )

The unrealized translation gains (losses) on intercompany loans with foreign subsidiaries as of June 30, 2022 is net of income tax expense of $ 0.4 million.

The tax benefit related to unrealized translation gains (losses) on intercompany loans for the three and six months ended June 30, 2022 was $ 1.0 million and $ 1.5 million, respectively.

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

The unrealized translation gains (losses) on intercompany loans with foreign subsidiaries as of September 30, 2022 is net of income tax expense of $ 2.3 million.

The tax provision to unrealized translation gains (losses) on intercompany loans for the three and nine months ended September 30, 2022 was $ 1.9 million and $ 0.4 million, respectively.

The tax expense 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.

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 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 June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

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General and administrative 5,704 9,201 26,845 35,158

12,146 10,426 21,141 25,957

Total $ 7,527 $ 12,047 $ 34,023 $ 43,421

(1) Includes accelerated stock-based compensation expense of $ 4.4 million for the three months ended June 30, 2022 and $ 4.4 million and $ 6.3 million for the six months ended June 30, 2022 and June 30, 2021, respectively, in accordance with ASC 718, Compensation—Stock Compensation.

2014 Equity Incentive Plan

4 unchanged sentences

At the end of the performance period, the 2021 PRSU resulted in no units granted.

The following table summarizes PRSU and RSU activity during the six months ended June 30, 2022 :

The following table summarizes PRSU and RSU activity during the nine months ended September 30, 2022 :

Number of Units Weighted-Average Grant Date Fair Value

4 unchanged sentences

( 644,190 ) 35.28

Unvested restricted units outstanding as of June 30, 2022 1,986,210 $ 31.21

Unvested restricted units outstanding as of September 30, 2022 1,536,636 $ 30.25

(1) Includes forfeited awards related to the 2021 PRSUs.

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The fair value of the PRSUs is determined using the Monte Carlo simulation model and is not subject to fluctuation due to achievement of the underlying market-based target.

Significant assumptions used in the Monte Carlo simulation model for the PRSUs granted during the six months ended June 30, 2022 and year ended December 31, 2021 are as follows:

June 30, 2022 December 31, 2021

Significant assumptions used in the Monte Carlo simulation model for the PRSUs granted during the nine months ended September 30, 2022 and year ended December 31, 2021 are as follows:

September 30, 2022 December 31, 2021

Expected volatility 49.5 % 53.6 %

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Stock Option Activity

Stock option activity during the six months ended June 30, 2022 was as follows:

Stock option activity during the nine months ended September 30, 2022 was as follows:

Outstanding Weighted–

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Options exercised ( 43,460 ) 4.38

Outstanding at June 30, 2022 190,894 $ 9.96

Options forfeited ( 28,226 ) 5.81

Options expired ( 24 ) 1.81

Outstanding at September 30, 2022 155,895 $ 11.09

Revenue Recognition

45 unchanged sentences

Where the Company is the principal, it first obtains control of the inputs to the specific good or service and directs their use to create the combined output.

Company's control is evidenced by its involvement in the integration of the good or service on its platform before it is transferred to its customers, and is further supported by the Company being primarily responsible to its customers and having a level of discretion in establishing pricing.

The Company's control is evidenced by its involvement in the integration of the good or service on its platform before it is transferred to its customers, and is further supported by the Company being primarily responsible to its customers and having a level of discretion in establishing pricing.

While none of the factors individually are considered presumptive or determinative, in reaching conclusions on gross versus net revenue recognition, the Company places the most weight on the analysis of whether or not it is the primary obligor in the arrangement.

Generally, the Company reports revenue from vendor reseller agreements on a gross basis, meaning the amounts billed to customers are recorded as revenue, and expenses incurred are recorded as cost of revenue.

As the Company is primarily obligated in its messaging-related subscription contracts, has latitude in establishing prices associated with its messaging program management services, is responsible for fulfillment of the transaction, and has credit risk, revenue is recorded on a gross basis with related telecom messaging costs incurred from third parties recorded as cost of revenue.

As the Company is primarily

obligated in its messaging-related subscription contracts, has latitude in establishing prices associated with its messaging program management services, is responsible for fulfillment of the transaction, and has credit risk, revenue is recorded on a gross basis with related telecom messaging costs incurred from third parties recorded as cost of revenue.

Revenue provided from agreements in which the Company is an agent are immaterial.

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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 June 30, 2022 and December 31, 2021, unbilled receivables were $ 5.2 million and $ 4.8 million, respectively.

As of September 30, 2022 and December 31, 2021, unbilled receivables were $ 6.0 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 six months ended June 30, 2022.

The following table presents the activity impacting deferred commissions for the six months ended June 30, 2022 :

No indicators of impairment were identified during the nine months ended September 30, 2022.

The following table presents the activity impacting deferred commissions for the nine months ended September 30, 2022 :

($ in thousands) Deferred Commissions

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Amortization of deferred commissions ( 8,845 )

Balance at June 30, 2022 $ 25,867

Commissions capitalized in excess of amortization of deferred commissions for the three and six months ended June 30, 2022 were $ 0.3 million and $ 1.2 million, respectively.

Balance at September 30, 2022 $ 24,412

Amortization of deferred commissions in excess of commissions capitalized for the three and nine months ended September 30, 2022 were $ 1.5 million and $ 0.2 million, respectively.

Deferred Revenue

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

During the six months ended June 30, 2022, we recognized $ 71.5 million and $ 2.3 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, 2022 we recognized $ 6.6 million in revenue that was included in the acquired deferred revenue balance of our 2022 acquisitions as disclosed in “ Note 2.

During the nine months ended September 30, 2022, we recognized $ 89.1 million and $ 2.7 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, 2022 we recognized $ 9.2 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 June 30, 2022, approximately $ 298.6 million of revenue is expected to be recognized from remaining performance obligations.

As of September 30, 2022, approximately $ 263.6 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 June 30, Six Months Ended June 30,

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

2022 2021 2022 2021

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Related Party Transactions

The Company does not have any material related party transactions to report for the three and six months ended June 30, 2022.

Subsequent Events

Securities Purchase Agreement

On July 14, 2022, Upland entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Ulysses Aggregator, LP (the “Purchaser”), an affiliate of HGGC, LLC, to issue and sell at closing 115,000 shares of a new designated Series A Preferred Stock, par value $ 0.0001 per share (the “Series A Preferred Stock”), at a price of $ 1,000 per share (the “Initial Liquidation Preference”) for an aggregate purchase price of $ 115.0 million (the “Investment”).

The holders of Series A Preferred Stock will be entitled to dividends (i) at the rate of 4.5 % per annum until but excluding the seven year anniversary of the closing, and (ii) at the rate of 7 % per annum on and after the seven year anniversary of the closing, and are also entitled to fully participate in any dividends or other distributions declared or paid on our common stock on an as-converted basis.

Dividends will be payable quarterly in arrears, and may be paid, at our option, in cash or by paying dividends in kind .

Our ability to pay cash dividends is subject to the restrictions under the Credit Facility.

The Company does not have any material related party transactions to report for the three and nine months ended September 30, 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