What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-01 · 110 added, 139 removed, 566 unchanged (31% of the section changed)

Financial Statements

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

ASSETS (unaudited)

1 unchanged sentence

Cash and cash equivalents $ 59,739 $ 236,559

Accounts receivable (net of allowance of $ 383 and $ 572 at June 30, 2024, and December 31, 2023, respectively)

Accounts receivable (net of allowance of $ 385 and $ 572 at September 30, 2024, and December 31, 2023, respectively)

31,849 38,765

20 unchanged sentences

Operating lease liabilities, current 1,278 2,351

Current maturities of notes payable (includes unamortized discount of $ 2,087 and $ 2,228 at June 30, 2024, and December 31, 2023, respectively)

Current maturities of notes payable (includes unamortized discount of $ 2,022 and $ 2,228 at September 30, 2024, and December 31, 2023, respectively)

Total current liabilities 118,976 130,647

Notes payable, less current maturities (includes unamortized discount of $ 2,201 and $ 3,148 at June 30, 2024, and December 31, 2023, respectively)

Notes payable, less current maturities (includes unamortized discount of $ 1,688 and $ 3,148 at September 30, 2024, and December 31, 2023, respectively)

293,912 473,502

7 unchanged sentences

5,000,000 shares authorized;

115,000 shares issued and outstanding as of June 30, 2024, and December 31, 2023, respectively

115,000 shares issued and outstanding as of September 30, 2024, and December 31, 2023, respectively

121,809 117,638

2 unchanged sentences

75,000,000 shares authorized;

27,265,746 and 29,908,407 shares issued and outstanding as of June 30, 2024, and December 31, 2023, respectively

27,440,968 and 29,908,407 shares issued and outstanding as of September 30, 2024, and December 31, 2023, respectively

Additional paid-in capital 605,353 608,995

8 unchanged sentences

(in thousands, except for 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,

2024 2023 2024 2023

18 unchanged sentences

Loss from operations ( 3,311 ) ( 7,719 ) ( 100,323 ) ( 154,537 )

Other expense:

Interest expense, net ( 5,056 ) ( 5,376 ) ( 10,014 ) ( 10,837 )

Other income (expense):

Interest income (expense), net 2,337 ( 2,525 ) ( 7,677 ) ( 13,362 )

Other income (expense), net ( 229 ) 103 ( 109 ) 911

Total other expense ( 4,858 ) ( 5,993 ) ( 9,894 ) ( 10,029 )

Total other income (expense) 2,108 ( 2,422 ) ( 7,786 ) ( 12,451 )

Loss before benefit from (provision for) income taxes ( 1,203 ) ( 10,141 ) ( 108,109 ) ( 166,988 )

10 unchanged sentences

(in thousands)

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

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

2024 2023 2024 2023

11 unchanged sentences

(in thousands, except share amounts)

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

Preferred Stock Common Stock Additional

5 unchanged sentences

Shares Amount Shares Amount

Balance at March 31, 2024 115,000 $ 119,013 27,996,656 $ 3 $ 602,813 $ 2,307 $ ( 585,002 ) $ 20,121

Balance at June 30, 2024 115,000 $ 120,403 27,265,746 $ 3 $ 603,526 $ ( 600 ) $ ( 596,441 ) $ 6,488

Dividends accrued - Convertible Preferred Stock — 1,406 — — ( 1,406 ) — — ( 1,406 )

Issuance of stock under Company plans, net of shares withheld for tax — — 175,222 — ( 190 ) — — ( 190 )

Stock repurchases and retirements ( 966,051 ) ( 2,798 ) ( 2,798 )

Stock-based compensation — — — — 3,423 — — 3,423

3 unchanged sentences

Net loss — — — — ( 1,733 ) ( 1,733 )

Balance at June 30, 2024 115,000 $ 120,403 27,265,746 $ 3 $ 603,526 $ ( 600 ) $ ( 596,441 ) $ 6,488

Three Months Ended June 30, 2023

Balance at September 30, 2024 115,000 $ 121,809 27,440,968 $ 3 $ 605,353 $ ( 6,275 ) $ ( 598,174 ) $ 907

Three Months Ended September 30, 2023

Preferred Stock Common Stock Additional

5 unchanged sentences

Shares Amount Shares Amount

Balance at March 31, 2023 115,000 $ 113,606 32,441,010 $ 3 $ 611,667 $ 4,206 $ ( 449,043 ) $ 166,833

Balance at June 30, 2023 115,000 $ 114,935 32,654,615 $ 3 $ 616,556 $ 15,415 $ ( 464,190 ) $ 167,784

Dividends accrued - Convertible Preferred Stock — 1,344 — — ( 1,344 ) — — ( 1,344 )

Issuance of stock under Company plans, net of shares withheld for tax — — 269,754 — ( 353 ) — — ( 353 )

Stock repurchases and retirements — — ( 783,356 ) — ( 3,215 ) — — ( 3,215 )

Stock-based compensation — — — — 5,360 — — 5,360

3 unchanged sentences

Net loss — — — — — — ( 8,670 ) ( 8,670 )

Balance at June 30, 2023 115,000 $ 114,935 32,654,615 $ 3 $ 616,556 $ 15,415 $ ( 464,190 ) $ 167,784

Balance at September 30, 2023 115,000 $ 116,279 32,141,013 $ 3 $ 617,004 $ 5,228 $ ( 472,860 ) $ 149,375

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

2 unchanged sentences

(in thousands, except share amounts)

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Preferred Stock Common Stock Additional

8 unchanged sentences

Issuance of stock under Company plans, net of shares withheld for tax — — 741,266 — ( 753 ) — — ( 753 )

Stock repurchase and retirement ( 3,208,705 ) ( 10,796 ) ( 10,796 )

Stock repurchases and retirements — — ( 3,208,705 ) — ( 10,796 ) — — ( 10,796 )

Stock-based compensation — — — — 12,078 — — 12,078

3 unchanged sentences

Net loss — — — — — — ( 109,302 ) ( 109,302 )

Balance at June 30, 2024 115,000 $ 120,403 27,265,746 $ 3 $ 603,526 $ ( 600 ) $ ( 596,441 ) $ 6,488

Six Months Ended June 30, 2023

Balance at September 30, 2024 115,000 $ 121,809 27,440,968 $ 3 $ 605,353 $ ( 6,275 ) $ ( 598,174 ) $ 907

Nine Months Ended September 30, 2023

Preferred Stock Common Stock Additional

8 unchanged sentences

Issuance of stock under Company plans, net of shares withheld for tax — — 702,514 — ( 740 ) — — ( 740 )

Stock repurchases and retirements — — ( 783,356 ) — ( 3,215 ) — — ( 3,215 )

Stock-based compensation — — — — 18,192 — — 18,192

3 unchanged sentences

Net loss — — — — — — ( 163,862 ) ( 163,862 )

Balance at June 30, 2023 115,000 $ 114,935 32,654,615 $ 3 $ 616,556 $ 15,415 $ ( 464,190 ) $ 167,784

Balance at September 30, 2023 115,000 $ 116,279 32,141,013 $ 3 $ 617,004 $ 5,228 $ ( 472,860 ) $ 149,375

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

1 unchanged sentence

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30,

Nine Months Ended September 30,

(In thousands) 2024 2023

36 unchanged sentences

Cash paid for interest, net of interest rate swaps $ 24,409 $ 23,147

Cash paid for taxes $ 3,162 $ 4,972

Cash paid (received) for taxes, net of refunds $ 1,802 $ 6,227

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

18 unchanged sentences

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

The results of operations for the six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 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 2023 Annual Report on Form 10-K filed with the SEC on February 22, 2024.

The results of operations for the nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 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 2023 Annual Report on Form 10-K.

Use of Estimates

4 unchanged sentences

however, actual results could differ from those estimates.

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 1, 2024, 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 7, 2024, 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.

1 unchanged sentence

Concentrations of Credit Risk and Significant Customers

Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, accounts receivable and the Company’s interest rate swap hedges.

Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, accounts receivable and the Company’s interest rate swaps.

The Company’s cash and cash equivalents are placed with high quality financial institutions, which, at times, may exceed federally insured limits.

2 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, 2024, or more than 10% of accounts receivable as of June 30, 2024 or December 31, 2023.

No individual customer represented more than 10% of total revenues for the nine months ended September 30, 2024, or more than 10% of accounts receivable as of September 30, 2024 or December 31, 2023.

Recent Accounting Pronouncements

18 unchanged sentences

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

The Company’s financial instruments consist principally of cash and cash equivalents, money market funds, accounts receivable, accounts payable, interest rate swap hedges, and debt.

The Company’s financial instruments consist principally of cash and cash equivalents, money market funds, accounts receivable, accounts payable, interest rate swaps, and debt.

The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value, primarily due to short maturities.

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

Fair Value Measurements at June 30, 2024

Fair Value Measurements at September 30, 2024

Level 1 Level 2 Level 3 Total

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

The Company believes the carrying value of its long-term debt at June 30, 2024 approximates its fair value based on its variable interest rate feature and interest rates currently available to the Company.

The estimated fair value of the Company's debt, before debt discount, at June 30, 2024 and December 31, 2023 was $ 479.4 million and $ 482.1 million, respectively, based on valuation methodologies using interest rates currently available to the Company which are Level 2 inputs..

The Company believes the carrying value of its long-term debt at September 30, 2024 approximates its fair value based on its variable interest rate feature and interest rates currently available to the Company.

The estimated fair value of the Company's debt, before debt discount, at September 30, 2024 and December 31, 2023 was $ 301.0 million and $ 482.1 million, respectively, based on valuation methodologies using interest rates currently available to the Company which are Level 2 inputs.

Goodwill and Other Intangible Assets

Changes in the Company’s goodwill balance for the six months ended June 30, 2024 are summarized in the table below (in thousands):

Changes in the Company’s goodwill balance for the nine months ended September 30, 2024 are summarized in the table below (in thousands):

Balance at December 31, 2023 $ 353,778

1 unchanged sentence

Foreign currency translation adjustment 2,459

Balance at June 30, 2024 $ 264,164

Balance at September 30, 2024 $ 269,010

As a result of the decline of our stock price impacting our market capitalization during the quarter ended March 31, 2024, we performed a quantitative impairment evaluation, which resulted in a goodwill impairment of $ 87.2 million.

11 unchanged sentences

Amortization Net Carrying

June 30, 2024:

September 30, 2024:

Customer relationships 1 - 10

19 unchanged sentences

Total intangible assets $ 483,318 $ 300,969 $ 182,349

Management recorded no impairments of intangible assets during the three and six months ended June 30, 2024 and June 30, 2023.

Management recorded no impairments of intangible assets during the three and nine months ended September 30, 2024 and September 30, 2023.

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.

Total amortization expense was $ 13.5 million and $ 27.0 million during the three and six months ended June 30, 2024, respectively and $ 18.0 million and $ 36.1 million for the three and six months ended June 30, 2023, respectively.

The Company’s income tax benefit for the three and six months ended June 30, 2024 and June 30, 2023 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.

Total amortization expense was $ 13.5 million and $ 40.5 million during the three and nine months ended September 30, 2024, respectively and $ 17.2 million and $ 53.4 million for the three and nine months ended September 30, 2023, respectively.

The Company’s income tax expense (benefit) for the three and nine months ended September 30, 2024 and September 30, 2023 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 income tax expense of $ 1.2 million and $ 0.7 million for the three and six months ended June 30, 2024, respectively, is largely comprised of foreign income taxes associated with our combined non-U.S.

operations which is partially offset for the six months ended June 30, 2024 by the non-cash impact of deferred taxes related to the goodwill impairment recorded in the first quarter of 2024.

The income tax benefit of $ 0.2 million and $ 1.7 million for the three and six months ended June 30, 2023, respectively, is primarily related to the non-cash impact of deferred taxes related to the goodwill impairment recorded during the first quarter of 2023.

This tax benefit is offset by the foreign income taxes associated with our combined non-U.S.

operations, 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.

The Company historically incurred operating losses in the United States prior to 2021 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, 2024 and December 31, 2023, respectively.

The income tax expense of $ 0.5 million and $ 1.2 million for the three and nine months ended September 30, 2024, respectively, is largely comprised of foreign income taxes associated with our combined non-U.S.

operations which is partially offset for nine months ended September 30, 2024 by the non-cash impact of deferred taxes related to the goodwill impairment recorded in the first quarter of 2024.

The income tax benefit of $ 1.5 million and $ 3.1 million for the three and nine months ended September 30, 2023, respectively, is primarily related to foreign income taxes associated with our combined non U.S.

operations , the reduction of uncertain tax position due to expiration of related statutes of limitation specific to the quarter ended September 30, 2023 and the non-cash impact of deferred taxes related to the goodwill impairment recorded during the first quarter of 2023 impacting the year-to-date balance.

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.

The company has also recorded valuation allowances in Germany, Australia and the United Kingdom to offset larger losses in those jurisdictions.

The Company has reflected uncertain tax positions primarily within its long-term taxes payable and a portion within deferred tax assets for which the balance is immaterial at June 30, 2024.

The Company has reflected uncertain tax positions primarily within its long-term taxes payable and a portion within deferred tax assets for which the balance is immaterial at September 30, 2024.

The Company and its subsidiaries file tax returns in the U.S.

4 unchanged sentences

operating losses generated in years prior to 2020 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, 2024 and December 31, 2023 (in thousands):

June 30, 2024 December 31, 2023

Senior secured loans (includes unamortized discount of $ 4,288 and $ 5,376 based on an imputed interest rate of 7.6 % and 7.6 %, at June 30, 2024 and December 31, 2023, respectively)

Long-term debt consisted of the following at September 30, 2024 and December 31, 2023 (in thousands):

September 30, 2024 December 31, 2023

Senior secured loans (includes unamortized discount of $ 3,710 and $ 5,376 based on an imputed interest rate of 6.7 % and 7.6 %, at September 30, 2024 and December 31, 2023, respectively)

$ 297,290 $ 476,674

1 unchanged sentence

Total long-term debt $ 293,912 $ 473,502

In August 2019, the Company entered into a credit agreement (the “Credit Facility”) which provides for (i) fully-drawn, 7 year, senior secured term loans (the “Term Loans”) maturing August 6, 2026 and (ii) a $ 60 million, 5 year, revolving credit facility (the “Revolver”) maturing August 6, 2024 that was undrawn as of June 30, 2024.

The Term Loans are repayable on a quarterly basis beginning on December 31, 2019 by an amount equal to 0.25 % ( 1.00 % per annum) of the aggregate principal amount of such loan.

In August 2019, the Company entered into a credit agreement (the “Credit Facility”) which provided for (i) fully-drawn, 7 year, senior secured term loans (the “Term Loans”) and (ii) a $ 60 million, 5 year, revolving credit facility (the “Revolver”).

The Term Loans are repayable on a quarterly basis by an amount equal to 0.25 % ( 1.00 % per annum) of the aggregate principal amount of such loan.

Any amount remaining unpaid is due and payable in full on August 6, 2026.

The Revolver matured August 6, 2024.

No amounts were drawn on the Revolver at the time of its maturity.

On August 15, 2024, the Company prepaid $ 175.0 million of the Term Loans and on September 30, 2024, prepaid an additional $ 2.0 million principal payment.

At the option of the Company, the Term Loans accrue interest at a per annum rate based on (i) the Base Rate (as defined below) plus a margin of 2.75 % or (ii) the rate (not less than 0.00 %) published by CME Group Benchmark Administration Limited (CBA), or as otherwise determined in accordance with the Credit Facility (based on a period equal to 1, 2, 3 or 6 months or, if available and agreed to by all relevant Lenders and the Agent, 12 months or such period of less than 1 month) plus a margin of 3.75 %.

The Base Rate for any day is a rate per annum equal to the greatest of (i) the prime rate in effect on such day, (ii) the Federal Funds Effective Rate (not less than 0.00 %) in effect on such day plus ½ of 1.00%, and (iii) the Federal Funds Effective Rate for a one month interest period beginning on such day plus 1.00 %.

After giving effect to the interest rate swaps described below, $ 257.2 million of the Term Loans outstanding at June 30, 2024 has an effective annualized fixed interest rate of 5.4 %, and the remaining principal outstanding at June 30, 2024 has a floating interest rate of 9.2 % .

Accrued interest is paid quarterly or, with respect to Term Loans that are accruing interest based on the Federal Funds Effective Rate, at the end of the applicable interest rate period.

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

The Revolver provides a sub-facility whereby the Company may request letters of credit (the “Letters of Credit”) in an aggregate amount not to exceed, at any one time outstanding, $ 10 million for the Company.

The aggregate amount of outstanding Letters of Credit are reserved against the credit availability under the Maximum Revolver Amount.

As of June 30, 2024, the Company had no borrowings outstanding under the Revolver or related sub-facility.

The Company incurs a 0.50 % per annum unused line fee on the unborrowed balance of the Revolver which is paid quarterly.

Loans under the Revolver may be borrowed, repaid and reborrowed until its maturity date, August 6, 2024, at which time any amounts borrowed under the Revolver must be repaid.

At September 30, 2024, the floating interest rate was 9.1 % .

The Credit Facility contains customary affirmative and negative covenants.

The Credit Facility has no financial covenants as long as less than 35 % of the Revolver is drawn as of the last day of any fiscal quarter.

If 35 % of the Revolver is drawn as of the last day of a given fiscal quarter the Company will be required to maintain a Total Leverage Ratio (the ratio of funded indebtedness as of such date less the amount of unrestricted cash and cash equivalents of the Company and its guarantors in an amount not to exceed $ 50.0 million, to adjusted EBITDA (calculated on a pro forma basis including giving effect to any acquisition)), measured on a quarter-end basis for each four consecutive fiscal quarters then ended, of not greater than 6.00 to 1.00.

In addition, the Credit Facility contains customary events of default subject to customary cure periods.

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

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

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

As of June 30, 2024 the Company was in compliance with all covenants under the Credit Facility.

The Term Loans are secured by substantially all of the Company's assets.

As of September 30, 2024, the Company was in compliance with all covenants under the Credit Facility.

Interest rate swaps

In August 2019, the Company entered into floating-to-fixed interest rate swap agreements to limit exposure to interest rate risk related to our debt, effectively converting the entire balance of the Company's 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 debt.

The interest rate associated with our undrawn $ 60 million Revolver remains floating.

At the time the Company entered into the interest rate swap agreements, the Company designated all of the swaps as cash flow hedges and as such changes in fair value were recorded to accumulated other comprehensive income (loss) and reclassified to interest expense, net when the underlying transaction affected earnings.

In August 2023, the Company sold a portion of the notional amount of its interest rate swap assets back to the counterparties for $ 20.5 million.

At that time, a $ 20.5 million gain was recorded in accumulated other comprehensive income related to the notional amount sold.

That gain is being released to interest expense, net as interest is accrued on the Company’s variable-rate debt over the

remaining term of the Term Loans as a decrease to interest expense, net, the amortization of which totaled $ 1.5 million and $ 2.9 million for the three and six months ended June 30, 2024, respectively.

Amounts reported in accumulated other comprehensive income related to the Company's derivatives are reclassified to interest expense, net as interest is accrued on the Company’s variable-rate debt.

The impact of the Company’s derivative financial instruments on its condensed consolidated statements of comprehensive (loss) income for the three and six months ended June 30, 2024 and June 30, 2023 was as follows (in thousands):

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

That gain is being released to interest expense, net as interest is accrued on the Company’s variable-rate debt over the remaining term of the Term Loans as a decrease to interest expense, net.

In August 2024, the Company prepaid $ 175 million of the Term Loans and as a result, $ 9.0 million of the deferred gain was released to interest expense, net.

In August 2024, the Company de-designated all of the interest rate swaps in conjunction with the August 2024 debt prepayment.

The amount remaining in accumulated other comprehensive loss at the de-designation date was $ 11.4 million and is being amortized to interest expense, net over the effective period of the original interest rate swap agreements.

Subsequent to the de-designation, changes in the fair value of the interest rate swaps are recorded to interest expense, net.

For the three and nine months ended September 30, 2024, a decrease in the interest rate swaps fair value of $ 2.8 million was recognized in interest expense, net.

The impact of the Company’s derivative financial instruments on its condensed consolidated statements of comprehensive (loss) income for the three and nine months ended September 30, 2024 and September 30, 2023 was as follows (in thousands):

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

2024 2023 2024 2023

2 unchanged sentences

Total Other comprehensive income (loss) on interest rate swaps $ ( 14,428 ) $ ( 3,496 ) $ ( 16,707 ) $ ( 3,745 )

Cash interest costs averaged 7.2 % and 5.4 % for the six months ended June 30, 2024 and 2023, respectively.

In addition, as of June 30, 2024 and December 31, 2023 the Company had $ 4.3 million and $ 5.4 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.

Cash interest costs averaged 6.9 % and 5.7 % for the nine months ended September 30, 2024 and 2023, respectively.

Net Loss Per Share

3 unchanged sentences

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,

2024 2023 2024 2023

4 unchanged sentences

Net loss per common share, basic and diluted $ ( 0.12 ) $ ( 0.31 ) $ ( 4.07 ) $ ( 5.17 )

Due to the net losses for the three and six months ended June 30, 2024 and June 30, 2023, respectively, basic and diluted loss per share were the same.

Due to the net losses for the three and nine months ended September 30, 2024 and September 30, 2023, respectively, basic and diluted loss per share were the same.

The Company uses the application of the if-converted method for calculating diluted earnings per share on our Series A Preferred Stock.

5 unchanged sentences

Contingently issuable shares associated with outstanding performance-based restricted stock units (each, a “PSU”) were not included in the basic earnings per share calculations for the periods presented, as the applicable vesting conditions had not been satisfied.

September 30,

Stock options 103,561 151,718

5 unchanged sentences

Total anti–dilutive common share equivalents 10,090,424 9,314,176

(1) As of June 30, 2024 , the Series A Preferred Stock plus accumulated dividends totaled $ 125.0 million.

(1) As of September 30, 2024 , the Series A Preferred Stock plus accumulated dividends totaled $ 126.4 million.

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

10 unchanged sentences

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 of $ 4.6 million 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.

In connection with the issuance of the Series A Preferred Stock, the Company incurred direct and incremental expenses of $ 4.6 million comprised of transaction fees, and financial advisory and legal expenses which reduced the carrying value of the Series A Preferred Stock.

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.

9 unchanged sentences

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.

The Series A Preferred Stock had accrued unpaid dividends of $ 10.0 million as of June 30, 2024, representing 569,054 Common Stock shares upon conversion at $ 17.50 per share.

The Series A Preferred Stock had accrued unpaid dividends of $ 11.4 million as of September 30, 2024, representing 649,384 Common Stock shares upon conversion at $ 17.50 per share.

Liquidation Rights

1 unchanged sentence

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

As of June 30, 2024, the Liquidation Preference of the Series A Preferred Stock was $ 125.0 million.

As of September 30, 2024, the Liquidation Preference of the Series A Preferred Stock was $ 126.4 million.

Optional Redemption

23 unchanged sentences

Share repurchase program

In September 2023, the Board of Directors authorized a stock repurchase program (the “Share Repurchase Plan”) in the aggregate amount of up to $ 25 million that allowed the Company to repurchase shares of its issued and outstanding Common Stock, from time to time in the open market or otherwise including pursuant to a Rule 10b5-1 trading plan and in compliance with Rule10b-18 under the Exchange Act so long as the aggregate purchase price paid for such transactions does not exceed $ 25 million for all such purchases.

The Share Repurchase Plan expired in May 2024 when the Company had repurchased all shares authorized for repurchase.

1 unchanged sentence

In fiscal year 2024, the Company’s net stock repurchases are subject to a 1 percent excise tax under the Inflation Reduction Act.

The excise tax is included as a reduction to accumulated deficit in the condensed consolidated statements of stockholders equity.

Total accrued excise tax of $ 0.2 million is included in total cost of shares repurchased, excluded from average cost per share and excluded from total cash paid during the three months ended June 30, 2024 as amounts were unpaid at period end.

During the three and six months ended June 30, 2024, the Company repurchased and subsequently retired 966,051 and 3,208,705 shares of Common Stock, respectively, for a total of $ 2.8 million and $ 11.0 million, respectively, cash paid under the Share Repurchase Plan.

As of June 30, 2024, the Share Repurchase Plan was complete and no further amounts are available for share repurchases.

The excise tax is included as a reduction to accumulated deficit in the condensed consolidated statements of equity.

Total accrued excise tax of $ 0.2 million is included in total cost of shares repurchased, excluded from average cost per share and excluded from total cash paid during the nine month period ended September 30, 2024 as the amount was unpaid at period end.

No stock repurchases were made during the three months ended September 30, 2024.

During the nine months ended September 30, 2024, the Company repurchased and subsequently retired 3,208,705 shares of Common Stock, for a total of $ 11.0 million cash paid under the Share Repurchase Plan.

As of September 30, 2024, the Share Repurchase Plan was complete and no further amounts are available for share repurchases.

Tax Benefit Preservation Plan and Preferred Stock Purchase Rights

The preferred stock purchase rights (“the 2023 Rights”), as described in the Tax Benefit Preservation Plan dated as of May 2, 2023, by and between Upland Software, Inc.

and Broadridge Corporate Issuer Solutions, LLC, as Rights Agent, (the “2023 Tax Benefit Preservation Plan”), expired on May 1, 2024, pursuant to the terms of the 2023 Tax Benefit Preservation Plan.

The Company filed a Form 15-12G on May 29, 2024 to terminate the registration of the 2023 Rights.

On June 5, 2024 at the Company’s annual meeting of stockholders, the Company’s stockholders approved the 2024 Tax Benefit Preservation Plan between the Company and Broadridge Corporate Issuer Solutions, LLC, as Rights Agent (the “2024 Tax Benefit Preservation Plan”), which had previously been approved by the Company’s Board of Directors on April 12, 2024, subject to stockholder approval.

Also on April 12, 2024, the Board of Directors declared, subject to approval by the stockholders at the annual meeting, a dividend of one preferred stock purchase right (a “2024 Right”) for each outstanding share of Common Stock payable as of June 15, 2024.

Effective June 5, 2024, after approval of the Board and the Companys’ stockholders, the Company entered into the 2024 Tax Benefit Preservation Plan with Broadridge Corporate Issuer Solutions, LLC, as Rights Agent (the “2024 Tax Benefit Preservation Plan”).

By adopting the 2024 Tax Benefit Preservation Plan, the Company is seeking to protect its ability to use its net operating loss carryforwards (“NOLs”) and other tax attributes to offset potential future income tax liabilities.

The Company’s ability to use such NOLs and other tax attributes would be substantially limited if the Company experiences an “ownership change,” as defined in Section 382 of the Internal Revenue Code.

The 2024 Tax Benefit Preservation Plan is intended to make it more difficult for the Company to undergo an ownership change by deterring any person from acquiring 4.9% or more of the outstanding shares of stock without the approval of the Board of Directors.

As part of the 2024 Tax Benefit Preservation Plan, the Board declared a dividend of one preferred stock purchase right (a “2024 Right”) for each outstanding share of Common Stock payable as of June 15, 2024.

27,030,605 2024 Rights were issued to the holders of record of shares of Common Stock.

The description and terms of the 2024 Rights are set forth in the 2024 Tax Benefit Preservation Plan.

The Company filed a Form 8-A to register the 2024 Rights on June 5, 2024.

By adopting the 2024 Tax Benefit Preservation Plan, the Board of Directors is seeking to protect the Company’s ability to use its net operating loss carryforwards (“NOLs”) and other tax attributes to offset potential future income tax liabilities.

Generally, an “ownership change” occurs if the percentage of the Company’s stock owned by one or more “five percent stockholders” increases by more than fifty percentage points over the lowest percentage of stock owned by such stockholders at any time during the prior three-year period or, if sooner, since the last “ownership change” experienced by the Company.

The 2024 Tax Benefit Preservation Plan is intended to make it more difficult for the Company to undergo an ownership change by deterring any person from acquiring 4.9 % or more of the outstanding shares of stock without the approval of the Board of Directors.

The Board of Directors believes it is in the best interest of the Company and its stockholders to

reduce the likelihood of an ownership change, which could harm the Company’s future operating results by effectively increasing the Company future tax liabilities.

The 2024 Rights trade with, and are inseparable from, the Common Stock, and the record holders of shares of Common Stock are the record holders of the 2024 Rights.

The 2024 Rights are evidenced only by certificates (or, in the case of uncertificated shares, by notations in the book-entry account system) that represent shares of Common Stock.

2024 Rights will also be issued in respect of any shares of Common Stock that shall become outstanding after the Record Date (including upon conversion of any shares of Series A Preferred Stock of the Company) and, subject to certain exceptions specified in the 2024 Tax Benefit Preservation Plan, prior to the earlier of the Distribution Date (as defined below) and the Expiration Date (as defined below).

The 2024 Rights are not exercisable until the Distribution Date.

After the Distribution Date, each 2024 Right will be exercisable to purchase from the Company one one-thousandth of a share of Series B Junior Participating Preferred Stock, par value $ 0.0001 per share, of the Company (the “Series B Preferred”), at a purchase price of $15.25 per one one-thousandth of a share of Series B Preferred (the “Purchase Price”), subject to adjustment as provided in the 2024 Tax Benefit Preservation Plan.

The “Distribution Date” is the earlier of (i) the close of business on the tenth day after the public announcement that a person or group has become an Acquiring Person (as defined below) or that discloses information which reveals the existence of an Acquiring Person or such earlier date as a majority of the Board shall become aware of the existence of an Acquiring Person (the date described in this clause (i), the “Stock Acquisition Date”) and (ii) the close of business on the tenth business day (or such later date as the Board of Directors shall determine prior to such time as any person or group becomes an Acquiring Person) after the date that a tender or exchange offer by any person is commenced, the consummation of which would result in such person becoming an Acquiring Person.

A person or group becomes an “Acquiring Person” upon acquiring beneficial ownership of 4.9 % or more of the outstanding shares of Common Stock, except in certain situations specified in the 2024 Tax Benefit Preservation Plan.

The 2024 Rights will expire on the earliest of (a) the close of business on June 4, 2027, (b) the time at which the Rights are redeemed or exchanged pursuant to the 2024 Tax Benefit Preservation Plan, or (c) the time at which the Rights are exchanged as provided in the 2024 Tax Benefit Preservation Plan, or (d) the time at which the Board of Directors determines that the Tax Benefits are utilized in all material respects or that an ownership change under Section 382 of the Code would not adversely impact in any material respect the time period in which the Company could use the Tax Benefits, or materially impair the amount of the Tax Benefits that could be used by the Company in any particular time period, for applicable tax purposes (such earliest date, the “Expiration Date”).

The 2024 Rights are not exercisable until the Distribution Date, as defined in the 2024 Tax Benefit Preservation Plan.

After the Distribution Date, each 2024 Right will be exercisable to purchase from the Company one one-thousandth of a share of Series B Junior Participating Preferred Stock, par value $ 0.0001 per share, of the Company (the “Series B Preferred”), at a purchase price of $15.25 per one one-thousandth of a share of Series B Preferred, subject to adjustment as provided in the 2024 Tax Benefit Preservation Plan.

Until a 2024 Right is exercised or exchanged, the holder thereof, as such, will have no rights as a stockholder of the Company by virtue of holding such Right, including, without limitation, the right to vote and to receive dividends.

The Board of Directors may adjust the Purchase Price, the number of shares of Series B Preferred issuable and the number of outstanding 2024 Rights to prevent dilution that may occur from a stock dividend, a stock split, a reclassification of the Series B Preferred or Common Stock or certain other specified transactions.

The Board may adjust the Purchase Price, the number of shares of Series B Preferred issuable and the number of outstanding 2024 Rights to prevent dilution that may occur from a stock dividend, a stock split, a reclassification of the Series B Preferred or Common Stock or certain other specified transactions.

No adjustments to the Purchase Price of less than 1 % are required to be made.

In connection with the adoption of the 2023 Tax Benefit Preservation Plan, the Board of Directors approved a Certificate of Designations of the Series B Junior Participating Preferred Stock (the “Certificate of Designations”).

The Certificate of Designations was filed with the Secretary of State of the State of Delaware on May 2, 2023.

Each one one-thousandth of a share of Series B Preferred, if issued:

8 unchanged sentences

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

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

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

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, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Foreign currency translation adjustment $ ( 18,151 ) $ ( 19,947 )

Unrealized translation loss on intercompany loans with foreign subsidiaries, net of taxes ( 862 ) ( 3,330 )

Unrealized gain on interest rate swaps 14,933 14,270

Unrealized gain on interest rate swaps, net of amounts reclassified into interest expense, net 11,353 14,270

Realized gain on interest rate swap sale, net of amounts reclassified into interest expense, net 1,385 15,175

3 unchanged sentences

Due to the long-term nature of the loans, the unrealized translation gains (losses) resulting from re-measurement are recognized as a component of AOCI.

The unrealized translation gains (losses) on intercompany loans with foreign subsidiaries as of June 30, 2024 is net of income tax expense of $ 3.1 million.

The tax benefit related to unrealized translation gains (losses) on intercompany loans for the three and six months ended June 30, 2024 was $ 0.1 million and $ 0.2 million, respectively.

The tax provision related to unrealized translation gains (losses) on intercompany loans for the three and six months ended June 30, 2023 was $ 0.5 million and $ 1.0 million, respectively.

The unrealized translation gains (losses) on intercompany loans with foreign subsidiaries as of September 30, 2024 is net of income tax expense of $ 3.2 million.

The tax impact related to unrealized translation gains (losses) on intercompany loans for the three and nine months ended September 30, 2024 was $ 0.1 million expense and $ 0.3 million benefit, respectively.

The tax impact related to unrealized translation gains (losses) on intercompany loans for the three and nine months ended September 30, 2023 was a $ 0.8 million benefit and a $ 0.2 million provision, respectively.

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

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Key employees, officers and directors of the Company and its consultants or advisors are eligible to receive awards.

On June 5, 2024, the Company’s stockholders approved the Upland Software, Inc.

2024 Omnibus Incentive Plan (the “2024 Equity Plan”).

No further awards will be made under the Upland Software, Inc.

2014 Equity Incentive Plan (the “Prior Plan”) or the Amended and Restated Upland Software, Inc.

2010 Stock Option Plan (the “2010 Plan”).

As of June 30, 2024, there were 122,530 outstanding options that were previously granted under the 2010 Plan and the Prior Plan.

The Company no longer grants stock options;

however if the outstanding options were to be forfeited or otherwise canceled without the issuance of shares, the shares underlying those stock options will become available for issuance under the 2024 Equity Plan.

As of June 30, 2024, there were 3,066,299 outstanding RSU and PSU awards under the Prior Plan that will remain outstanding and subject to the terms of the Prior Plan and the respective award agreements, until the vesting, expiration or lapse of such awards in accordance with their terms.

Any shares covered by awards granted under the Prior Plan will become available for issuance under the 2024 Equity Plan if the award (or a portion of such award) is forfeited, canceled or expires without the issuance of shares.

The following table summarizes PSU and RSU activity during the six months ended June 30, 2024:

The following table summarizes PSU and RSU activity during the nine months ended September 30, 2024:

Number of Units Weighted-Average Grant Date Fair Value

3 unchanged sentences

Forfeited ( 184,887 ) 8.71

Unvested restricted units outstanding as of June 30, 2024 3,066,299 $ 6.07

Unvested restricted units outstanding as of September 30, 2024 2,766,050 $ 5.73

The PSU and RSU activity table above includes 100,000 PSUs granted in 2023 and 250,000 PSUs granted in 2024 based on a 100 % target payout.

3 unchanged sentences

The PSUs vest upon the achievement of specified market performance thresholds.

The PSUs have a vesting condition that is tied to the Company’s total shareholder return based on the Company’s stock performance up to a maximum of 200 % and 300 %, depending on the specified performance condition and the level of achievement obtained, for the 2023 PSUs and 2024

PSUs, respectively.

The fair value of PSUs is determined using the Monte Carlo simulation model.

Compensation expense for PSUs is recognized over the requisite service period and is not subject to adjustment regardless of whether the PSUs meet the performance metric.

The range of significant assumptions used in the Monte Carlo simulation model for the PSUs granted during the six months ended June 30, 2024 was as follows:

The range of significant assumptions used in the Monte Carlo simulation model for the PSUs granted during the nine months ended September 30, 2024 was as follows:

Expected volatility 74.6 % - 62.06 %

3 unchanged sentences

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

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

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

2024 2023 2024 2023

51 unchanged sentences

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, we have concluded it is appropriate to record revenue on a gross basis with related pass-through telecom messaging costs incurred from third parties recorded as cost of revenue.

a gross basis with related pass-through 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.

10 unchanged sentences

Our payment terms vary by the type and location of our customer and the products or services offered.

The term between invoicing and

when payment is due is not significant.

The term between invoicing and when payment is due is not significant.

For certain products or services and customer types, we require payment before the products or services are delivered to the customer.

1 unchanged sentence

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, 2024 and December 31, 2023, unbilled receivables were $ 3.5 million and $ 2.7 million, respectively.

As of September 30, 2024 and December 31, 2023, unbilled receivables were $ 3.5 million and $ 2.7 million, respectively.

Deferred Commissions

7 unchanged sentences

Deferred commissions are reviewed for impairment whenever events or circumstances 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, 2024.

Amortization of deferred commissions in excess of commissions capitalized for the three and six months ended June 30, 2024 was $ 0.3 million and $ 1.0 million, respectively.

No indicators of impairment were identified during the nine months ended September 30, 2024.

Amortization of deferred commissions in excess of commissions capitalized for the three and nine months ended September 30, 2024 was $ 0.9 million and $ 1.9 million, respectively.

Deferred Revenue

1 unchanged sentence

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

During the six months ended June 30, 2024, we recognized $ 72.7 million and $ 1.8 million of subscription services and professional services revenue, respectively, that was included in the deferred revenue balances at the beginning of the period.

During the nine months ended September 30, 2024, we recognized $ 90.2 million and $ 2.0 million of subscription services and professional services revenue, respectively, that was included in the deferred revenue balances at the beginning of the period.

Remaining Performance Obligations

As of June 30, 2024, approximately $ 252.7 million of revenue is expected to be recognized from remaining performance obligations.

As of September 30, 2024, approximately $ 242.7 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.

5 unchanged sentences

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,

2024 2023 2024 2023

19 unchanged sentences

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