What changed in this filing

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Item 1A. Risk Factors

2023-03-01 compared with 2022-02-24 · 186 added, 126 removed, 410 unchanged (43% of the section changed)

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We may not be able to identify suitable acquisition candidates or consummate acquisitions on acceptable terms, or we may be unable to successfully integrate acquisitions, which could disrupt our operations and adversely impact our business and operating results.

• Our growth depends on our ability to retain existing customers and secure additional subscriptions and cross-sell opportunities from existing customers.

• We face various risks associated with operating as a multinational corporation and our growth depends on our ability to retain existing customers and secure additional subscriptions and cross-sell opportunities from existing customers.

• Failure to maintain and expand our sales organization may negatively impact our revenue growth.

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• Because we generally recognize revenue from our customers over the terms of their agreements, downturns or upturns in our business may not be immediately reflected in our operating results.

• Our growth and long-term success depends, in part, on our ability to expand our international sales and operations.

• We face various risks associated with operating as a multinational corporation and our growth and long-term success depends, in part, on our ability to expand our international sales and operations.

• Our sales cycles can be lengthy and variable, which may cause changes in our operating results.

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• Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

• We may be required to record charges to future earnings if our Goodwill or Intangible Assets become impaired.

• We may be adversely affected by the effects of inflation.

• Unanticipated challenges by tax authorities could harm our future results.

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• Taxing authorities could reallocate our taxable income among our subsidiaries, which could increase our consolidated tax liability.

• We are subject to privacy and data security obligations in the United States, United Kingdom and other foreign jurisdictions.

Any failure to comply with applicable laws, regulations or contractual obligations may harm our business, results of operations and financial condition.

If we are subject to an investigation or suffer a breach, we may incur costs or be subject to forfeitures and penalties that could reduce our profitability.

• New laws and increasing levels of regulation in the areas of privacy and protection of user data could harm our business.

• Any failure to comply with governmental export and import control laws and regulations could adversely affect our business.

• The uncertainty surrounding the implementation and effect of Brexit may continue to affect our operations and business.

• The ongoing COVID-19 pandemic could adversely affect our business, results of operations and financial condition.

• The market price of our common stock may be volatile, which could result in substantial losses for investors.

• Adverse economic conditions, including those related to the ongoing COVID-19 pandemic, may reduce our customers’ ability to spend money on information technology or enterprise work management software, or our customers may otherwise choose to reduce their spending on information technology or enterprise work management software, which may adversely impact our business.

• If securities or industry analysts do not publish, or cease publishing, research or reports about us, our business or our market, if they publish negative evaluations of our stock, or if we fail to meet the expectations of analysts, the price of our stock and trading volume could decline.

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• Anti-takeover provisions in our amended and restated certificate of incorporation and our amended and restated bylaws, as well as provisions of Delaware law, might discourage, delay or prevent a change in control of our company or changes in our board of directors or management and, therefore, depress the trading price of our common stock.

• Pursuant to the terms of the Purchase Agreement (as defined herein), we have issued shares of our Series A Preferred Stock that ranks senior to our common stock in priority of distribution rights and rights upon our liquidation, dissolution or winding up and has additional corporate governance rights.

• The fundamental change redemption feature of our Series A Preferred Stock may make it more difficult for a party to take over our company or discourage a party from taking over our company.

• An epidemic, pandemic or contagious diseases, including the ongoing COVID-19 pandemic, and measures intended to prevent the spread of such an event could adversely affect our business, results of operations and financial condition.

• Adverse economic conditions may reduce our customers’ ability to spend money on information technology or software, or our customers may otherwise choose to reduce their spending on information technology or software, which may adversely impact our business.

• The market price of our common stock may be volatile, which could result in substantial losses for investors.

Risks Related to Our Business

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• we compete with others to acquire complementary products, technologies, and businesses, which may result in decreased availability of, or increased price for, suitable acquisition candidates;

• we may not be able to obtain the necessary financing, on favorable terms or at all, to finance any or all of our potential acquisitions;

• we may not be able to obtain the necessary financing, on favorable terms, including as a result of rising interest rates, or at all, to finance any or all of our potential acquisitions;

• we may ultimately fail to consummate an acquisition even if we announce that we plan to acquire a technology, product, or business;

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Consummation of Targeted Acquisitions

If we fail to conduct due diligence on our potential targets effectively, we may not identify problems at target companies or fail to recognize incompatibilities or other obstacles to successful integration.

If we fail to adequately conduct due diligence on our potential targets effectively, we may not identify problems at target companies or fail to recognize incompatibilities or other obstacles to successful integration.

Additionally, the consummation of acquisition transactions involves the coordination of multiple personnel within Upland and at the third party partners that assist our acquisition strategy.

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These benefits may not be achieved within the anticipated time frame, or at all.

Our growth depends on our ability to retain existing customers and secure additional subscriptions and cross-sell opportunities from existing customers.

We face various risks associated with operating as a multinational corporation and our growth depends on our ability to retain existing customers and secure additional subscriptions and cross-sell opportunities from existing customers.

In order to improve our operating results, it is important that our customers renew or upgrade their agreements with us when the applicable contract term expires, and also purchase additional applications from us.

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We face intense competition for qualified individuals from numerous technology and software companies.

If we fail to attract

and retain suitably qualified individuals, including software engineers and sales personnel, our ability to implement our business plan and develop and maintain our applications could be adversely affected.

If we fail to attract and retain suitably qualified individuals, including software engineers and sales personnel, our ability to implement our

business plan and develop and maintain our applications could be adversely affected.

As a result, our ability to compete would decrease, our operating results would suffer, and our revenue would decrease.

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Similarly, it would be difficult for us to rapidly increase our revenue through new sales, renewals, and upgrades of existing customer agreements, or through additional cross-selling opportunities, in a given period due to the timing of revenue recognition inherent in our subscription model.

Our growth and long-term success depends, in part, on our ability to expand our international sales and operations.

As our operations have expanded, we have established and currently maintain offices in the United States, Australia, Canada, Ireland and the United Kingdom.

We have limited experience in operating in foreign jurisdictions and expect to continue to expand our relationship with international customers.

We face various risks associated with operating as a multinational corporation and our growth and long-term success depends, in part, on our ability to expand our international sales and operations.

As our operations have expanded, we have established and currently maintain offices in the United States, Australia, Canada, France, Germany, India, Ireland, Israel, Malaysia, Netherlands, Romania and the United Kingdom.

For the year ended December 31, 2022, we generated approximately 30% of our total revenue from customers outside of the U.S.

As a result, we are subject to a number of risks, including:

• inflation and actions taken by central banks to counter inflation;

• foreign currency fluctuations and controls;

• international and regional economic, political and labor conditions, including any instability or security concerns abroad, such as uncertainty caused by economic sanctions, trade disputes, armed conflicts and wars, including the Russia-Ukraine war;

• tax laws (including U.S.

taxes on foreign subsidiaries);

• increased financial accounting and reporting burdens and complexities;

• changes in, or impositions of, legislative or regulatory requirements;

• changes in laws governing the free flow of data across international borders;

• failure of laws to protect our intellectual property rights adequately;

• inadequate local infrastructure and difficulties in managing and staffing international operations;

• delays resulting from difficulty in obtaining export licenses for certain technology, tariffs, quotas and other trade barriers;

• the imposition of governmental economic sanctions on countries in which we do business or where we plan to expand our business;

• costs and delays associated with developing products in multiple languages;

• operating in locations with a higher incidence of corruption and fraudulent business practices;

• other factors beyond our control, such as terrorism, war, natural disasters, climate change and pandemics, including the COVID-19 pandemic and resulting restrictions on business activity, which may vary significantly by region.

Some of our third-party business partners have international operations and are also subject to these risks, and our business may be harmed if such partners are unable to appropriately manage these risks.

If sales to any of our customers outside of the Americas are reduced, delayed or canceled because of any of the above factors, our revenue may decline.

We have limited experience in operating in certain foreign jurisdictions and expect to continue to expand our relationship with international customers.

Managing a global organization is difficult, time-consuming and expensive.

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• the functionality demands of potential customers;

• fluctuations in the enterprise work management needs of potential customers;

• fluctuations in the software needs of potential customers;

• the announcement or planned introduction of new products by us or our competitors;

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We may be forced to change the prices we charge for our applications or the pricing models upon which they are based.

As the markets for our applications mature, or as competitors introduce products or services that compete with ours, including

bundling competing offerings with additional products or services, we may be unable to attract new customers at the same price or based on the same pricing models as we have used historically.

As the markets for our applications mature, or as competitors introduce products or services that compete with ours, including bundling competing offerings with additional products or services, we may be unable to attract new customers at the same price or based on the same pricing models as we have used historically.

As a result, in the future we may be required to reduce our prices, which could adversely affect our financial performance.

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These systems may be subject to damage or interruption from earthquakes, adverse weather conditions, other natural disasters, terrorist attacks, power loss, telecommunications failures, vendor limitations, computer viruses, computer denial of service attacks, or other attempts to harm these systems.

The COVID-19 pandemic has disrupted and may continue to disrupt the supply chain of hardware needed to maintain these third-party systems and services or to run our business.

In addition, supply chain disruptions stemming from the Russia-Ukraine war may harm our customers and suppliers and further complicate existing supply chain constraints.

Interruptions in these systems, or with the Internet in general, could make our service unavailable or degraded or otherwise hinder our ability to deliver application data to our customers.

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Our insurance does not cover expenses related to disruptions to our service or unauthorized access to our applications.

Any significant disruption to our service or access to our systems could result in a loss of customers and adversely affect our business and results of operation.

Any significant disruption to our service or access to our systems could result in a

loss of customers and adversely affect our business and results of operation.

We primarily utilize communications and computer hardware systems operated by third-party Web hosting providers.

In addition, we utilize third-party hosting services in connection with our business operations and have migrated most of our applications to AWS or Azure, a third-party hosting platform.

In addition, we utilize third-party hosting services in connection with our business operations and have migrated most of our applications to third-party hosting platforms.

Problems faced by us or our third-party hosting providers, including technological or business-related disruptions, could adversely impact the experience of our customers.

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Any security breaches, unauthorized access, unauthorized usage, virus, or similar breach or disruption could result in loss of confidential information, damage to our reputation, early termination of our contracts, litigation, regulatory investigations, indemnity obligations, or other liabilities.

If our security measures or those of our third-party software providers and data centers (such as AWS and Azure) are breached as a result of third-party action, employee error, malfeasance or otherwise, resulting in unauthorized access to customer data, our reputation will be damaged, our business may suffer, and we could incur significant liability.

If our security measures or those of our third-party software providers and data centers are breached as a result of third-party action, employee error, malfeasance or otherwise, resulting in unauthorized access to customer data, our reputation will be damaged, our business may suffer, and we could incur significant liability.

Unauthorized parties may attempt to misappropriate or compromise our confidential information or that of third parties, create system disruptions, product or service vulnerabilities or cause shutdowns.

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Our success depends on our ability to adapt to technological change and continue to innovate.

The overall market for enterprise work management software is rapidly evolving and subject to changing technology, shifting customer needs, and frequent introductions of new applications.

The overall market for software is rapidly evolving and subject to changing technology, shifting customer needs, and frequent introductions of new applications.

Our ability to attract new customers and increase revenue from existing customers will depend, in large part, on our ability to develop or acquire new applications and enhance and improve existing applications.

To achieve market acceptance for our applications, we must effectively anticipate and offer applications that meet changing customer demands in a timely manner.

Customers may require features and capabilities not

offered by our current applications.

Customers may require features and capabilities not offered by our current applications.

We may experience difficulties that could delay or prevent our development, acquisition, or implementation of new applications and enhancements.

If we are unable to successfully develop or acquire new enterprise work management capabilities and functionality, enhance our existing applications to anticipate and meet customer preferences, sell our applications into new markets, or adapt to changing industry standards in enterprise work management, our revenue and results of operations would be adversely affected.

If we are unable to successfully develop or acquire new software capabilities and functionality, enhance our existing applications to anticipate and meet customer preferences, sell our applications into new markets, or adapt to changing industry standards in software, our revenue and results of operations would be adversely affected.

If our applications contain serious errors or defects, we may lose revenue and market acceptance, and we may incur costs to defend or settle product-related claims.

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Litigation may be necessary in the future to enforce our intellectual property rights, protect our trade secrets, determine the validity and scope of the proprietary rights of others, or defend against claims of infringement or invalidity.

Such litigation could be costly, time-

consuming, and distracting to management, result in a diversion of resources or the narrowing or invalidation of portions of our intellectual property, and have a material adverse effect on our business, operating results, and financial condition.

Such litigation could be costly, time-consuming, and distracting to management, result in a diversion of resources or the narrowing or invalidation of portions of our intellectual property, and have a material adverse effect on our business, operating results, and financial condition.

Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights or alleging that we infringe the counterclaimant’s own intellectual property.

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Any loss of the right to use any software required for the development, maintenance, and delivery of our applications could result in delays in the provision of our applications until equivalent technology is either developed by us or, if available, is identified, obtained and integrated, which could harm our business.

Any errors or defects in third-party software could result in errors or a failure of our applications, which could harm our business.

Any errors or defects in third-party software could result in errors or a failure of our applications, which could harm our

The markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be adversely affected.

The overall market for enterprise work management software is rapidly evolving and subject to changing technology, shifting customer needs and frequent introductions of new applications.

The intensity and nature of our competition varies significantly across our family of enterprise work management software applications.

The overall market for software is rapidly evolving and subject to changing technology, shifting customer needs and frequent introductions of new applications.

The intensity and nature of our competition varies significantly across our family of software applications.

Many of our competitors and potential competitors are larger and have greater brand name recognition, longer operating histories, larger marketing budgets, and significantly greater resources than we do.

Some of our smaller competitors may offer applications on a stand-alone basis at a lower price than our price due to lower overhead or other factors, while some of our larger competitors may offer applications at a lower price in an attempt to cross-sell additional products in the future or retain a customer using a different application.

We believe there are a limited number of direct competitors that provide a comprehensive enterprise work management software offering.

However, we face competition both from point solution providers, including legacy on-premise enterprise systems, and other cloud-based work management software vendors that may address one or more of the functional elements of our applications, but are not designed to address a broad range of enterprise work management needs.

We believe there are a limited number of direct competitors that provide a comprehensive software offering.

In addition, we face competition from manual processes and traditional tools, such as paper-based techniques, spreadsheets, and email.

If our competitors’ products, service, or technologies become more accepted than our enterprise work management applications, if they are successful in bringing their products or services to market earlier than ours, or if their products or services are more technologically capable than ours, our revenues could be adversely affected.

If our competitors’ products, service, or technologies become more accepted than our software applications, if they are successful in bringing their products or services to market earlier than ours, or if their products or services are more technologically capable than ours, our revenues could be adversely affected.

Mergers of, or other strategic transactions by, our competitors could weaken our competitive position or reduce our revenue.

If one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could adversely affect our ability to compete effectively.

In order to take advantage of customer demand for cloud-based software applications, vendors of legacy systems are expanding their cloud-based enterprise workplace management applications through acquisitions and internal development.

A potential result of such expansion is that certain of our current or potential competitors may be acquired by third parties with greater available resources and the ability to further invest in

product improvements and initiate or withstand substantial price competition.

In order to take advantage of customer demand for cloud-based software applications, vendors of legacy systems are expanding their cloud-based software applications through acquisitions and internal development.

A potential result of such expansion is that certain of our current or potential competitors may be acquired by third parties with greater available resources and the ability to further invest in product improvements and initiate or withstand substantial price competition.

Our competitors also may establish or strengthen cooperative relationships with our current or future value-added resellers, third-party consulting firms or other parties with whom we have relationships, thereby limiting our ability to promote our applications.

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Our ability to obtain debt or equity funding will depend on a number of factors, including market conditions, our operating performance, and investor interest.

In addition, under the terms of our Series A Preferred Stock, holders of our Series A Preferred Stock have certain approval rights over additional financings.

Additional funding may not be available to us on acceptable terms or at all.

If adequate funds are not available, we may be required to reduce expenditures, including curtailing our growth strategies, reducing our product-development efforts, or foregoing acquisitions.

If we succeed in raising additional funds through the issuance of equity or convertible securities, it could result in substantial dilution to existing stockholders.

If we succeed in raising additional

funds through the issuance of equity or convertible securities, it could result in substantial dilution to existing stockholders.

If we raise additional funds through the issuance of debt securities or preferred stock, these new securities would have rights, preferences, and privileges senior to those of the holders of our common stock.

In addition, any debt financing obtained by us in the future or issuance of preferred stock could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.

Additionally, we may need to renegotiate the terms of our loan facility, and our lender may be unwilling to do so, or may agree to such changes subject to additional restrictive covenants on our operations and ability to raise capital.

For example, our Series A Preferred Stock contains a number of restrictive covenants.

See " —Risks Related to Our Common Stock .” Additionally, we may need to renegotiate the terms of our loan facility, and our lender may be unwilling to do so, or may agree to such changes subject to additional restrictive covenants on our operations and ability to raise capital.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

During the course of 2022, central banks across the globe raised benchmark interest rates to combat inflation and interest rate increases are expected to continue during the course of 2023.

As rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, could correspondingly decrease.

As of December 31, 2022, all of our outstanding debt under our Credit Facility (as defined herein) was variable rate debt.

We have entered into floating-to-fixed interest rate swap agreements in order to eliminate interest rate volatility in connection with the outstanding term debt portion of our Credit Facility, but our $60.0 million Revolver (as defined herein), which remains undrawn, is not currently subject to any interest rate instruments.

As of December 31, 2022, we have executed interest rate swaps to effectively convert the entire balance of the Company’s $540.0 million original principal term loans from variable interest payments to fixed interest rate payments, based on an annualized fixed rate of 5.4%, for the 7 year term of the term loans maturing in August 2026.

Our loan facility contains operating and financial covenants that may restrict our business and financing activities.

Our facility is comprised of $540.0 million in original principal term loans and a $60.0 million revolving credit facility.

Our Credit Facility is comprised of $540.0 million in original principal term loans and a $60.0 million revolving credit facility.

Our obligations under the loan facility are secured by a security interest in substantially all of our assets and assets of the co-borrowers’ and of any guarantors, including intellectual property.

The terms of the credit facility limits, among other things, our ability to

The terms of the credit facility limit, among other things, our ability to

• Incur additional indebtedness or guarantee indebtedness of others;

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The operating and other restrictions and covenants in the loan facility, and in any future financing arrangements that we may enter into, may restrict our ability to finance our operations, engage in certain business activities, or expand or fully pursue our business strategies, or otherwise limit our discretion to manage our business.

Our ability to comply with these restrictions and covenants may be affected by events beyond our control, and we may not be able

to meet those restrictions and covenants.

Our ability to comply with these restrictions and covenants may be affected by events beyond our control, and we may not be able to meet those restrictions and covenants.

A breach of any of the restrictions and covenants could result in a default under the loan facility or any future financing arrangements, which could cause any outstanding indebtedness under the loan facility or under any future financing arrangements to become immediately due and payable, and result in the termination of commitments to extend further credit.

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Our customers are generally invoiced in the currency of the country in which they are located.

In addition, we incur a portion of our operating expenses in foreign currencies, including Australian dollars, British pounds, Canadian dollars, Euros and Israeli New Shekels, and in the future, as we expand into other foreign countries, we expect to incur operating expenses in other foreign currencies.

In addition, we incur a portion of our operating expenses in foreign currencies, including Australian dollars, British pounds, Canadian dollars, Indian

Rupees, Euros and Israeli New Shekels, and in the future, as we expand into other foreign countries, we expect to incur operating expenses in other foreign currencies.

As a result, we are exposed to foreign exchange rate fluctuations as the financial results of our international operations and our revenue and operating results could be adversely affected.

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Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

As of December 31, 2021 the Company had total net operating loss carryforwards of approximately $365.8 million consisting of $327.3 million and $38.5 million related to the U.S federal and foreign net operating loss carryforwards, respectively.

As of December 31, 2022, the Company had total net operating loss carryforwards of approximately $357.8 million consisting of $301.6 million and $56.1 million related to the U.S.

federal and foreign net operating loss carryforwards, respectively.

In addition, as of December 31, 2022, the Company had research and development credit carryforwards of approximately $4.1 million.

federal net operating loss and credit carryforwards will expire beginning in 2023, if not utilized.

federal net operating loss and credit carryforwards will expired beginning in 2022, if not utilized, with $36.6 million of net operating losses carrying forward indefinitely.

The entirety of the $38.5 million of the foreign net operating loss carryforwards carry forward indefinitely.

The annual limitation will result in the expiration of approximately $155.0 million of U.S.

federal net operating losses and $4.1 million of credit carryforwards before utilization.

$50.3 million of foreign net operating loss carryforwards carry forward indefinitely, and the remainder will expire beginning in 2041.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited.

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Any such limitations on the ability to use our net operating loss carryforwards and other tax assets could adversely impact our business, financial condition, and operating results.

We may be required to record charges to future earnings if our Goodwill or Intangible Assets become impaired.

Accounting principles generally accepted in the United States of America (“GAAP”) require us to assess Goodwill for impairment at least annually.

In addition, we assess our Goodwill and Intangible Assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

Depending on the results of our review, we could be required to record a significant charge to earnings in our consolidated financial statements during the period in which any impairment of our goodwill or intangible assets were determined, negatively impacting our results of operations.

See “ Note 5.

Goodwill and Other Intangible Assets ” in the notes to our consolidated financial statements for more information regarding our fourth quarter 2022 Goodwill impairment.

We may be adversely affected by the effects of inflation.

Inflation has the potential to adversely affect our liquidity, business, financial condition and results of operations by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers.

The existence of inflation in the economy has resulted in, and may continue to result in, higher interest rates and capital costs, shipping costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects.

As a result of inflation, we have experienced and may continue to experience, cost increases.

Although we may take measures to mitigate the impact of this inflation, if these measures are not effective, our business, financial condition, results of operations and liquidity could be materially adversely affected.

Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost of inflation is incurred.

Legal and Regulatory Risks

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and foreign tax law changes, outcomes of current or future tax examinations, or by material differences between our forecasted and actual effective tax rates.

Our operations are subject to income and transaction taxes in the United States and in multiple foreign jurisdictions, with a significant amount of our foreign earnings generated by our subsidiaries organized in Australia, Canada, Ireland, Israel and the United Kingdom.

Any significant change in our future effective tax rates could adversely impact our results of operations for future periods.

Our future effective tax rates could be adversely affected by the following:

• changes in tax laws or the interpretation of such tax laws as applied to our business and corporate structure in the United States, Australia, Canada, Ireland, Israel, the United Kingdom, or other international locations where we have operations;

• changes in tax laws or the interpretation of such tax laws as applied to our business and corporate structure in the United States, Australia, Canada, France, Germany, India, Ireland, Israel, Malaysia, the Netherlands, Romania and the United Kingdom, or other international locations where we have operations;

• earnings being lower than anticipated in countries where we are taxed at lower rates as compared to the United States federal and state statutory tax rates;

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The IRS and other tax authorities regularly examine our income tax returns and other non-income tax returns, such as payroll, sales, use, value-added, net worth or franchise, property, goods and services, consumption, import, stamp, and excise taxes, in both the United States and foreign jurisdictions.

The calculation of our provision for income taxes and our accruals for other taxes requires us to use significant judgment and involves dealing with uncertainties in the application of complex tax laws and regulations.

The calculation of our provision for income taxes and our accruals for other

taxes requires us to use significant judgment and involves dealing with uncertainties in the application of complex tax laws and regulations.

In determining the adequacy of our provision for income taxes, we regularly assess the potential settlement outcomes resulting from income tax examinations.

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Should the IRS or other tax authorities assess additional taxes, penalties or interest as a result of a current or a future examination, we may be required to record charges to operations in future periods that could have a material impact on our results of operations, financial position or cash flows in the applicable period or periods.

subsidiaries in tax jurisdictions with a broad range of income tax rates, as well as benefits from available deferred tax assets, the impact of various accounting rules, our interpretations of changes in tax laws and results of tax audits.

Forecasts of our annual effective tax rate are complex and subject to uncertainty because our income tax position for each year combines the effects of estimating our annual income or loss, the mix of profits and losses earned by us and our subsidiaries in tax jurisdictions with a broad range of income tax rates, as well as benefits from available deferred tax assets, the impact of various accounting rules, our interpretations of changes in tax laws and results of tax audits.

Forecasts of our annual effective tax rate do not include the anticipation of future tax law changes.

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These revisions could materially affect our results of operations, cash flow and financial position.

Further, the Inflation Reduction Act of 2022 was enacted in August 2022, which contained provisions effective January 1, 2023, including a 15% corporate alternative minimum tax and a 1% excise tax on certain stock repurchases by public corporations, both of which we do not expect to have a material impact on our results of operations, financial condition or cash flows.

While we do not anticipate these changes to be significant, these revisions could materially affect our results of operations, cash flow and financial position.

Tax laws, regulations, and administrative practices in various jurisdictions are evolving and may be subject to significant changes due to economic, political and other conditions.

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We conduct integrated operations internationally through subsidiaries in various tax jurisdictions pursuant to transfer pricing arrangements between our subsidiaries and between our subsidiaries and us.

If two or more affiliated companies are located in different countries, the tax laws or regulations of each country generally require that transfer prices be the same as those between unrelated companies dealing at arms’ length and that contemporaneous documentation is maintained to support the transfer prices.

If two or more affiliated companies are located

in different countries, the tax laws or regulations of each country generally require that transfer prices be the same as those between unrelated companies dealing at arms’ length and that contemporaneous documentation is maintained to support the transfer prices.

While we believe that we operate in compliance with applicable transfer pricing laws and intend to continue to do so, our transfer pricing procedures are not binding on applicable tax authorities.

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Such reallocations may subject us to interest and penalties that would increase our consolidated tax liability, and could adversely affect our financial condition, results of operations, and cash flows.

We are subject to privacy and data security obligations in the United States, United Kingdom and other foreign jurisdictions.

New laws and increasing levels of regulation in the areas of privacy and protection of user data could harm our business

The regulatory framework for privacy and data security matters around the world is rapidly evolving and is likely to remain volatile for the foreseeable future.

We are subject to privacy and data security obligations in the United States, United Kingdom and other foreign jurisdictions relating to the collection, use, sharing, retention, security, transfer and other handling of personal data about individuals, including our users and employees around the world.

Data protection and privacy laws may differ, conflict and be interpreted and applied inconsistently, from country to country.

In many cases, these laws apply not only to user data, employee data and third-party transactions, but also to transfers of personal data between or among ourselves, our subsidiaries, and other parties with which we have commercial relations.

These laws continue to develop in the U.S.

and around the globe, including through regulatory and legislative action and judicial decisions, in ways we cannot predict and that may harm our business.

For example, a new Quebec data protection law will take effect in September 2023, and updates to Canadian federal privacy legislation are pending.

India is also expected to pass a new law in 2023.

Any failure to comply with applicable laws, regulations or contractual obligations may harm our business, results of operations and financial condition.

If we are subject to an investigation or suffer a breach, we may incur costs or be subject to forfeitures and penalties that could reduce our profitability.

We are subject to privacy and data security laws and regulations that impose obligations in connection with the collection, processing and use of personal data.

Federal and state laws or proposed laws impose limits on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiable information (“PII”) of individuals.

We see increased regulation of data privacy and security, including the adoption of more stringent subject matter specific state laws

in the United States.

For example, in 2018, California enacted the California Consumer Privacy Act (“CCPA”), which became effective on January 1, 2020.

The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used.

The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

The CCPA may increase our compliance costs and potential liability.

Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent state privacy legislation in the United States, which could increase our potential liability and adversely affect our business.

We also may be bound by contractual obligations relating to our collection, use and disclosure of personal data or may find it necessary or desirable to join industry or other self-regulatory bodies or other privacy or security related organizations that require compliance with their rules pertaining to privacy and data protection.

Any failure or perceived failure by us, our products to comply with new or existing U.S.

privacy or data security laws, regulations, policies, industry standards or contractual or legal obligations, or any security incident that results in the unauthorized access to, or acquisition, release or transfer of, PII or other customer data may result in governmental investigations, inquiries, enforcement actions and prosecutions, private litigation, fines and penalties, adverse publicity or potential loss of business.

If we are subject to an investigation or litigation or suffer a breach of security of personal data, we may incur costs or be subject to forfeitures and penalties that could reduce our profitability.

In addition, compliance with these laws may restrict our ability to provide services to our customers that they may find to be valuable.

For example, the General Data Protection Regulation (“GDPR”) became effective in May 2018.

The GDPR, which applies to personal data collected in the context of all of our activities conducted from an establishment in the European Union, related to products and services offered to individuals in the European Union or related to the monitoring of individuals’ behavior in Europe, imposes a range of significant compliance obligations regarding the handling of personal data.

Actions required to comply with these obligations depend in part on how particular and strict regulators interpret and apply them.

If we fail to comply with the GDPR, or if regulators assert we have failed to comply with the GDPR, we may be subject to, for example, regulatory enforcement actions, that can result in monetary penalties of up to 4% of our annual worldwide revenue or EUR 20 million (whichever higher), private lawsuits, class actions, regulatory orders to stop processing and delete data, and reputational damage.

In June 2021, the European Commission published new versions of the Standard Contractual Clauses, which are used as a legal cross-border mechanism allowing companies to transfer/allow access to personal data outside the European Economic Area.

Use of the previous versions of the Standard Contractual Clauses is no longer allowed and all contracts that include the earlier versions should have been amended to replace them with the new versions by December 27, 2022.

Also in June 2021, the European Data Protection Board finalized its recommendations regarding supplemental transfer measures to protect personal data during cross-border transfers.

We must incur costs and expenses to comply with the new requirements, which may impact the cross-border transfer of personal data throughout our organization and to/from third parties.

In the United States, several states, including California, Colorado, Connecticut, Utah and Virginia, have adopted generally applicable and comprehensive privacy laws.

These new and developing state laws provide a number of new privacy rights for residents of these states and impose corresponding obligations on organizations doing business in these states.

Not only do these laws require that we make new disclosures to consumers, business contacts, employees, job applicants and others about our data collection, use and sharing practices, but they also require that we provide new rights, such as the rights to access, delete and correct personal data.

While the California Consumer Privacy Act (the “CCPA”) became effective in 2020, it has already been amended significantly, and compliance with the amended law, the California Privacy Protection Act (the “CPRA”) was required as of January 2023.

Compliance with the other states’ laws will be required at different times during 2023.

In addition, a number of other U.S.

states are considering adopting laws and regulations imposing obligations regarding the handling of personal data.

Compliance with the GDPR, the new state laws, and other current and future applicable U.S.

and international privacy, data protection, cybersecurity, artificial intelligence and other data-related laws can be costly and time-consuming.

Complying with these varying requirements could cause us to incur substantial costs and/or require us to change our business practices in a manner adverse to our business.

Violations of data and privacy-related laws can result in significant penalties.

Australia recently amended its Privacy Act, increasing the maximum penalties available for serious or repeated data breaches from AUS 2.2 million to the greater of:

(i) AUS 50 million;

(ii) three times the value of any benefit obtained through misuse of the information;

or (iii) 30% of a company’s adjusted turnover in the relevant period.

We also may be bound by additional, more stringent contractual obligations relating to our collection, use and disclosure of personal data or may find it necessary or desirable to join industry or other self-regulatory bodies or other privacy or security related organizations that require compliance with their rules pertaining to privacy and data protection.

We post on our websites our privacy notices and practices concerning the collection, use, sharing, disclosure, deletion and retention of our user data.

Any failure, or perceived failure, by us to comply with our posted privacy notices or with any regulatory requirements or orders or other federal, state or international privacy -related laws and regulations, including the GDPR, CCPA and CPRA, could result in proceedings or actions against us by governmental entities or others (e.g., class action plaintiffs), subject us to significant penalties and negative publicity, require us to change our business practices, increase our costs and adversely affect our business.

We may also experience security breaches and likely will in the future, which themselves may result in a violation of these laws and give rise to regulatory enforcement and/or private litigation.

Any failure to comply with governmental export and import control laws and regulations could adversely affect our business.

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Any such shipment could have negative consequences, including government investigations, penalties and reputational harm.

The uncertainty surrounding the implementation and effect of Brexit may continue to affect our operations and business.

Effective January 31, 2020, the U.K.

commenced an exit from the E.U.

(referred to as Brexit).

During the transition period (set to expire on December 31, 2020), the British government will continue to negotiate the terms of the U.K.’s future relationship with the EU.

The outcome of these negotiations is uncertain, and we do not know to what extent Brexit will ultimately impact the business and regulatory environment in the U.K., the rest of the E.U., or other countries.

Changes impacting our ability to conduct business in the U.K.

or other E.U.

countries, or changes to the regulatory regime applicable to our operations in those countries may cause disruptions to, and create uncertainty surrounding, our business in the U.K.

and E.U., including affecting our relationships with our existing and future customers, suppliers and employees.

As a result, Brexit could have an adverse effect on our future business, financial results and operations.

Brexit has resulted in significant volatility in global stock market and currency exchange rate fluctuations.

The political and economic instability created by Brexit has caused and may continue to cause significant volatility in global financial markets and uncertainty regarding the regulation of data protection in the U.K.

Brexit could also have the effect of disrupting the free movement of goods, services, and people between the U.K., the E.U., and elsewhere.

The effects of Brexit will depend on any agreements the U.K.

makes to retain access to E.U.

markets either during the transition period or more permanently.

Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K.

determines which E.U.

laws to replace or replicate.

In particular, it is unclear how the U.K.’s vote to leave the European Union will affect the U.K.’s enactment of the European General Data Protection Regulation, and how data transfers to and from the U.K.

will be regulated.

Further, uncertainty around these and related issues could lead to adverse effects on the economy of the U.K.

and the other economies in which we operate.

There can be no assurance that any or all of these events will not have a material adverse effect on our business operations, results of operations and financial condition.

The ongoing COVID-19 pandemic could adversely affect our business, results of operations and financial condition.

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, which continues to spread throughout the U.S.

and the world.

The COVID-19 pandemic has resulted in travel restrictions prohibitions of non-essential activities, disruption and shutdown of businesses and greater uncertainty in global financial markets.

We cannot predict the extent to which the COVID-19 pandemic will impact our business or operating results, which is highly dependent on inherently uncertain future developments, including the severity of COVID-19 and the actions taken by governments and private businesses in relation to COVID-19 containment.

As our software applications are offered as subscription-based services, the effect of the outbreak may not be fully reflected in our operating results until future periods, if at all.

As of the date of this report, we do not yet know the extent of the negative impact on our ability to attract, serve, retain or upsell customers.

Furthermore, existing and potential customers may choose to reduce or delay technology spending in response to the coronavirus outbreak, or attempt to renegotiate contracts and obtain concessions, which may materially and negatively impact our operating results, financial condition and prospects.

Adverse economic conditions, including those related to the ongoing COVID-19 pandemic, may reduce our customers’ ability to spend money on information technology or enterprise work management software, or our customers may otherwise choose to reduce their spending on information technology or enterprise work management software, which may adversely impact our business.

Our business depends on the overall demand for information technology and enterprise work management software spend and on the economic health of our current and prospective customers.

If worldwide economic conditions become unstable, our existing customers and prospective customers may re-evaluate their decision to purchase our applications.

Weak global economic conditions or a reduction in information technology or enterprise work management software spending by our customers could harm our business in a number of ways, including longer sales cycles and lower prices for our applications.

Risks Related to Ownership of Our Common Stock

The market price of our common stock may be volatile, which could result in substantial losses for investors.

The market price of our common stock could be subject to significant fluctuations.

Some of the factors that may cause the market price of our common stock to fluctuate include:

• actual or anticipated changes in the estimates of our operating results that we provide to the public, our failure to meet these projections or changes in recommendations by securities analysts that elect to follow our common stock;

• price and volume fluctuations in the overall equity markets from time to time;

• significant volatility in the market price and trading volume of comparable companies;

• changes in the market perception of enterprise work management software generally or in the effectiveness of our applications in particular;

• disruptions in our services due to computer hardware, software or network problems;

• announcements of technological innovations, new products, strategic alliances or significant agreements by us or by our competitors;

• announcements of new customer agreements or upgrades and customer downgrades or cancellations or delays in customer purchases;

• litigation involving us;

• our ability to successfully consummate and integrate acquisitions;

• investors’ general perception of us;

• recruitment or departure of key personnel;

• sales of our common stock by us or our stockholders;

• fluctuations in the trading volume of our shares or the size of our public float;

• general economic, legal, industry and market conditions and trends, including those related to the ongoing COVID-19 pandemic, unrelated to our performance.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company.

Because of the potential volatility of our stock price, we may become the target of securities litigation in the future.

If we were to become involved in securities litigation, it could result in substantial costs, divert management’s attention and resources from our business and adversely affect our business.

If securities or industry analysts do not publish, or cease publishing, research or reports about us, our business or our market, if they publish negative evaluations of our stock, or if we fail to meet the expectations of analysts, the price of our stock and trading volume could decline.

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Instead, we plan to retain any earnings to maintain and expand our existing operations.

In addition, our ability to pay cash dividends is currently limited by the terms of our existing loan facility, which prohibits our payment of dividends on our capital stock without prior consent, and any future credit facility may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock.

In addition, our ability to pay cash dividends is currently limited by the terms of our existing Credit Facility (as defined herein), which prohibits our payment of dividends on our capital stock without prior consent, and any future credit facility may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock.

Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment.

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They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

Pursuant to the terms of the Purchase Agreement (as defined herein), we have issued shares of our Series A Preferred Stock that ranks senior to our common stock in priority of distribution rights and rights upon our liquidation, dissolution or winding up and has additional corporate governance rights.

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.

As of December 31, 2022, we had 115,000 shares of newly designated Series A Preferred Stock outstanding.

The holders of the Series A Preferred Stock are entitled to dividends payable quarterly in arrears, which may be paid, at our option, in cash or by increasing the Liquidation Preference (as defined below) of each share of Series A Preferred Stock by the amount of the applicable dividend.

The holders of Series A Preferred Stock (each, a “Holder” and collectively, the “Holders”) 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.

Our ability to pay cash dividends is subject to the restrictions under our existing credit agreement.

The Series A Preferred Stock has no mandatory conversion feature and is a perpetual security.

Although we have the ability to redeem the shares of Series A Preferred Stock beginning on the date that is seven years from the Closing date, we may be unable to do so at that time, and we will be forced to pay the higher dividend rate of 7% per annum until the time that the holders of Series A Preferred Stock convert their shares into shares of common stock or we obtain sufficient capital to redeem the Series A Preferred Stock.

The Series A Preferred Stock ranks senior to our common stock with respect to distribution rights and rights upon our liquidation, dissolution or winding up, on parity with any class or series of our capital stock expressly designated as ranking on parity with the Series A Preferred Stock with respect to distribution rights and rights upon our upon liquidation, dissolution or winding up, junior to any class or series of our capital stock expressly designated as ranking senior to the Series A Preferred Stock with respect to distribution rights and rights upon our upon liquidation, dissolution or winding up and junior in right of payment to our existing and future indebtedness.

Further, upon our liquidation, dissolution or winding up, holders of our Series A Preferred Stock will receive a distribution of our available assets before common stockholders in an amount equal to (i) the Initial Liquidation Preference, plus (ii) any accrued and unpaid dividends on such share of Series A Preferred Stock to, but excluding, the date of payment of such amounts (the “Liquidation Preference”).

The holders of Series A Preferred Stock generally are entitled to vote with the holders of our common stock on all matters submitted for a vote of holders of our common stock (voting together with the holders of our common stock as one class) on an as-converted basis.

In addition, so long as the Purchaser and its affiliates beneficially own in the aggregate at least 5% of the shares of our common stock on a fully diluted basis including the shares of common stock issuable upon conversion of shares of Series A Preferred Stock, the holders of a majority of the outstanding shares of Series A Preferred Stock, voting as a single class, are entitled to nominate and elect one individual to serve on our board of directors.

In addition, the holders of a majority of the outstanding shares of Series A Preferred Stock, voting as a separate class, will have the right to elect, for so long as the Purchaser and its affiliates own in the aggregate at least 10% of the shares of Series A Preferred Stock (or common stock into which it is convertible) outstanding as of the Closing, one non-voting observer to our board of directors.

Such governance rights may grant the holders of our Series A Preferred Stock additional control rights, which may impact our ability to run our business, and may adversely affect the trading price of our common stock.

Upon issuance of the Series A Preferred Stock, holders of our common stock will experience dilution of both economic and voting rights, and, because we may pay dividends in kind by increasing the liquidation value of each share of Series A Preferred Stock, holders of common stock will be further diluted at each regular dividend payment date.

The fundamental change redemption feature of our Series A Preferred Stock may make it more difficult for a party to take over our company or discourage a party from taking over our company.

Upon a “Fundamental Change” (involving a change of control as further described in the certificate of designation governing our Series A Preferred Stock), each holder of Series A Preferred Stock shall have the right to require us to redeem all or any part of the holder’s Series A Preferred Stock for an amount equal to greater of (i) the sum of 105% of the Liquidation Preference and a customary make-whole amount, and (ii) the amount that such Holder would have received had such Holder, immediately prior to such “Fundamental Change,” converted the Holder’s Series A Preferred Stock into common stock, without regard to the Issuance Limitation.

The mandatory redemption option conferred to holders of our Series A Preferred Stock upon certain events constituting a Fundamental Change (involving a change of control) under the Series A Preferred Stock, may have the effect of discouraging a third party from making an acquisition proposal for our company or of delaying, deferring or preventing certain change of control transactions of our company under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-current market price or that stockholders may otherwise believe is in their best interests.

General Risks

An epidemic, pandemic or contagious diseases, including the ongoing COVID-19 pandemic, and measures intended to prevent the spread of such an event could adversely affect our business, results of operations and financial condition.

We face risks related to an epidemic, pandemic or contagious diseases, including the ongoing COVID-19 pandemic, which has impacted, and in the future could impact, the markets in which we operate and could have a material adverse effect on our business, results of operations and financial condition.

The impact of an epidemic, pandemic or other health crisis, including the COVID-19 pandemic, and measures to prevent the spread of such an event could materially and adversely affect our business in a number of ways.

For example, existing and potential customers may choose to reduce or delay technology spending in response, or attempt to renegotiate contracts and obtain concessions, which could materially and negatively impact our operating results, financial condition and prospects.

Adverse economic conditions may reduce our customers’ ability to spend money on information technology or software, or our customers may otherwise choose to reduce their spending on information technology or software, which may adversely impact our business.

Our business depends on the overall demand for information technology and software spend and on the economic health of our current and prospective customers.

If worldwide economic conditions become unstable, including as a result of protectionism and nationalism, other unfavorable changes in economic conditions, such as inflation, rising interest rates, a U.S.

government default on its obligations or a recession, and other events beyond our control, such as economic sanctions, natural disasters, results of global epidemics, pandemics, or contagious diseases, such as COVID-19, political instability, and armed conflicts and wars, such as the Russia-Ukraine war, then our existing customers and prospective customers may re-evaluate their decision to purchase our applications.

Weak global economic conditions or a reduction in information technology or software spending by our customers could harm our business in a number of ways, including longer sales cycles and lower prices for our applications.

The market price of our common stock may be volatile, which could result in substantial losses for investors.

The market price of our common stock could be subject to significant fluctuations.

Some of the factors that may cause the market price of our common stock to fluctuate include:

• price and volume fluctuations in the overall equity markets from time to time;

• significant volatility in the market price and trading volume of comparable companies;

• changes in the market perception of software generally or in the effectiveness of our applications in particular;

• disruptions in our services due to computer hardware, software or network problems;

• announcements of technological innovations, new products, strategic alliances or significant agreements by us or by our competitors;

• announcements of new customer agreements or upgrades and customer downgrades or cancellations or delays in customer purchases;

• litigation involving us;

• our ability to successfully consummate and integrate acquisitions;

• investors’ general perception of us;

• recruitment or departure of key personnel;

• sales of our common stock by us or our stockholders;

• fluctuations in the trading volume of our shares or the size of our public float;

• general economic, legal, industry and market conditions and trends, including those related to the ongoing COVID-19 pandemic, unrelated to our performance.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company.

Because of the potential volatility of our stock price, we may become the target of securities litigation in the future.

If we were to become involved in securities litigation, it could result in substantial costs, divert management’s attention and resources from our business and adversely affect our business.

Unresolved Staff Comments

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-K

Item 1A. Risk Factors