What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-12 compared with 2024-11-07 · 120 added, 155 removed, 265 unchanged (51% of the section changed)

7 unchanged sentences

• our financial performance and our ability to achieve or sustain profitability or predict future results;

• our plans regarding future acquisitions and our ability to consummate and integrate acquisitions;

• our plans regarding future acquisitions or divestitures and our ability to consummate and operationalize acquisitions or divestitures;

• our ability to expand our go to market operations, including our marketing and sales organization, and successfully increase sales of our products;

2 unchanged sentences

• our expectations with regard to revenue from perpetual licenses, usage fees, and professional services;

• our ability to adapt to macroeconomic factors impacting the global economy, including foreign currency exchange risk, inflation and supply chain constraints;

• our ability to adapt to macroeconomic factors impacting the global economy, including the Russia-Ukraine conflict, the conflicts in the Middle East, foreign currency exchange risk, inflation and supply chain constraints;

• our ability to attract and retain customers;

1 unchanged sentence

• our ability to comply with privacy laws and regulations;

• our ability to incorporate and deliver artificial intelligence (“AI”) functionality into our products and services;

• our ability to incorporate and deliver artificial intelligence (“AI”) functionality into our products and services, including our ability to unlock critical knowledge, automate content workflows and drive measurable ROI;

• our ability to deliver high-quality customer service;

4 unchanged sentences

• our ability to adapt to technological change and continue to innovate;

• global economic and financial market conditions and uncertainties;

• the growth of demand for cloud-based, digital transformation applications;

7 unchanged sentences

• the operation, reliability and security of our third-party data centers;

• our expectations as to the timing of the discontinuation of any Sunset Assets, as well as the composition of Sunset Assets (as defined below);

• our expectations as to the timing of the discontinuation of any Sunset Assets (as defined below), as well as the composition of Sunset Assets;

• our expectations as to the payment of dividends;

13 unchanged sentences

Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

We enable global businesses to work smarter with over 25 cloud software products that help increase revenue, reduce costs, and deliver business value.

Our solutions offer many integrated AI capabilities and cover digital marketing, knowledge management, contact center service, sales productivity, and content lifecycle automation.

We service over 10,000 customers ranging from large global corporations and various government agencies as well as small and medium-sized businesses.

Our customers operate in a wide variety of industries, including financial services, consulting services, technology, manufacturing, media, telecommunications, government, insurance, non-profit, healthcare, life sciences, retail and hospitality.

Upland Software, Inc.

(“Upland,” “we,” “us,” “our,” or the “Company”), a Delaware corporation headquartered in Austin, Texas, is a leader in AI-powered knowledge and content management software.

Our solutions help enterprises unlock critical knowledge, automate content workflows, and drive measurable ROI—enhancing customer and employee experiences while supporting regulatory compliance.

More than 1,100 enterprise customers rely on Upland to solve complex challenges and provide a trusted path for AI adoption.

Through a series of acquisitions and integrations, we have established a library of diverse software applications under the Upland brand that address specific digital transformation needs.

Our revenue has grown from $149.9 million in the year ended December 31, 2018 to $274.8 million in the year ended December 31, 2024, representing a compound annual growth rate of 11%.

During the nine months ended September 30, 2024 and 2023, foreign revenue as a percent of total revenue was 29% and 30%, respectively.

During the three months ended March 31, 2025 and 2024, foreign revenue as a percent of total revenue was 29% and 30%, respectively.

To support continued growth, we may pursue acquisitions of complementary technologies and businesses.

5 unchanged sentences

We use Core Organic Growth Rate as a key performance measure to assess our consolidated operating performance over time and for planning and forecasting purposes.

Core Organic Growth Rate is the percentage change between two reported periods in subscription and support revenue, excluding subscription and support revenue from Sunset Assets and Overage Charges, each as defined below.

We calculate our year-over-year Core Organic Growth Rate as though all acquisitions or dispositions closed as of the end of the latest period were closed as of the first day of the prior year period presented.

Core Organic Growth Rate does not represent actual organic revenue generated by our business as it stood at the beginning of the respective period.

For the three-month period ended September 30, 2024, our Core Organic Growth Rate was negative 2.3%.

For the three-month period ended March 31, 2025, our Core Organic Growth Rate was 0.2%.

Core Organic Growth Rates are not necessarily indicative of either future results of operations or actual results that might have been achieved had certain Sunset Asset classifications not been made or had certain acquisitions or dispositions been consummated on the first day of the prior year period presented.

7 unchanged sentences

The following table represents a reconciliation of total revenue, the most comparable GAAP measure, to core organic revenue for each of the periods indicated.

Three Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands)

4 unchanged sentences

Subscription and support revenue from Sunset Assets 4,481 7,002

Subscription and support revenue from divestitures 3,937 7,818

Overage Charges 913 1,494

3 unchanged sentences

Adjusted EBITDA is a non-GAAP financial measure.

We define Adjusted EBITDA as net income (loss), calculated in accordance with GAAP, adjusted for depreciation and amortization expense, net interest expense, loss on debt extinguishment, net other expense, benefit from income taxes, stock-based compensation expense, acquisition-related expense, purchase accounting deferred revenue discount and impairment of goodwill.

We define Adjusted EBITDA as net income (loss), calculated in accordance with GAAP, adjusted for depreciation and amortization expense, net interest expense, loss on debt extinguishment, net other expense, benefit from income taxes, stock-based compensation expense, acquisition and divestiture related expense, purchase accounting deferred revenue discount, gains and losses on divestitures of businesses, and impairment of goodwill.

The following table represents a reconciliation of net loss from continuing operations, the most comparable GAAP measure, to Adjusted EBITDA for each of the periods indicated.

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

2024 2023 2024 2023

Three Months Ended March 31,

(dollars in thousands)

4 unchanged sentences

Other expense (income), net 241 78

Provision for (benefit from) income taxes 530 (1,471) 1,193 (3,126)

Benefit from income taxes (1,345) (547)

Stock-based compensation expense 2,675 3,522

Acquisition-related expense — 443 — 2,609

Divestiture-related expenses 1,745 —

Non-recurring litigation costs 18 118

Purchase accounting deferred revenue discount 35 75

Loss on divestitures of businesses 23,457 —

Impairment of goodwill — 87,227

17 unchanged sentences

The period-to-period comparisons of results of operations are not necessarily indicative of results for future periods.

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

2024 2023 2024 2023

Amount Percent of Revenue Amount Percent of Revenue Amount Percent of Revenue Amount Percent of Revenue

Three Months Ended March 31,

Amount Percent of Revenue Amount Percent of Revenue

(dollars in thousands, except share and per share data)

19 unchanged sentences

Depreciation and amortization 7,995 13 % 11,396 16 %

Acquisition-related expenses — — % 443 — % — — % 2,609 — %

Divestiture-related expenses 1,745 2 % — — %

Impairment of goodwill — — % 87,227 123 %

3 unchanged sentences

Interest expense, net (2,443) (4) % (4,958) (7) %

Loss on divestitures of businesses (23,457) (37) % — — %

Other income (expense), net (241) — % (78) — %

1 unchanged sentence

Loss before provision for income taxes (27,193) (42) % (96,677) (137) %

Benefit from (provision for) income taxes (530) (2) % 1,471 1 % (1,193) — % 3,126 1 %

Benefit from income taxes 1,345 1 % 547 1 %

Net loss (25,848) (41) % (96,130) (136) %

6 unchanged sentences

Financial Statements—Note 10.

Stockholders' Equity” .

(2) Includes general and administrative stock-based compensation of $2.4 million and $4.1 million for the three months September 30, 2024 and September 30, 2023, respectively, and $8.6 million and $13.9 million for the nine months ended September 30, 2024 and September 30, 2023, respectively.

General and administrative expense excluding stock-based compensation as a percentage of total revenues was 13% and 14% for the three months ended September 30, 2024 and September 30, 2023, respectively, and 14% and 15% for the nine months ended September 30, 2024 and September 30, 2023.

(3) Includes depreciation and amortization of $2.3 million and $3.4 million for the three months ended September 30, 2024 and September 30, 2023, respectively, and $7.1 million and $10.3 million for the nine months ended September 30, 2024 and September 30, 2023, respectively.

Comparison of the Three and Nine Months Ended September 30, 2024 and 2023

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

2024 2023 % Change 2024 2023 % Change

Stockholders' Equity (Deficit)” .

(2) Includes general and administrative stock-based compensation of $2.0 million and $2.3 million for the three months March 31, 2025 and March 31, 2024, respectively.

General and administrative expense excluding stock-based compensation as a percentage of total revenues was 15% and 15% for the three months ended March 31, 2025 and March 31, 2024, respectively.

(3) Includes depreciation and amortization of $1.7 million and $2.4 million for the three months ended March 31, 2025 and March 31, 2024, respectively.

Comparison of the Three Months Ended March 31, 2025 and 2024

Divestitures regarding product lines divested in the three months ended March 31, 2025.

Three Months Ended March 31,

2025 2024 % Change

(dollars in thousands)

10 unchanged sentences

Total revenue 100% 100%

For the Three Months Ended September 30, 2024

Total revenue was $66.7 million in the three months ended September 30, 2024, compared to $74.1 million in the three months ended September 30, 2023, a decrease of $7.4 million, or 10%.

This decrease is primarily due to the expected decline in revenue from Sunset Assets of $4.7 million.

The remaining decrease results from declines in core subscription and support revenue of $1.3 million, declines in overage charges related to core products of $0.1 million, declines in total professional services revenue of $0.9 million, and total perpetual license revenue of $0.4 million.

For the Nine Months Ended September 30, 2024

Total revenue was $206.8 million in the nine months ended September 30, 2024, compared to $225.7 million in the nine months ended September 30, 2023, a decrease of $18.9 million, or 8%.

This decrease is due to expected decline in revenue from Sunset Assets of $13.7 million.

The remaining decrease results from declines in core subscription and support revenue of $2.3 million, declines in overage charges related to core products of $1.0 million, and declines in total professional services revenue of $1.9 million due to fewer implementation projects.

For the Three Months Ended March 31, 2025

Total revenue was $63.7 million in the three months ended March 31, 2025, compared to $70.7 million in the three months ended March 31, 2024, a decrease of $7.0 million, or 10%.

This decrease is primarily due to the expected decline in subscription and support revenue from Sunset Assets of $2.5 million, and the decline in subscription and support revenue related to divested businesses of $3.9 million.

The remaining decrease results from declines in overage charges of approximately $0.5 million, declines in total professional services revenue of $0.3 million, offset by an increase in total perpetual license revenue of $0.1 million.

Cost of Revenue

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

2024 2023 % Change 2024 2023 % Change

Three Months Ended March 31,

2025 2024 % Change

(dollars in thousands)

7 unchanged sentences

Subscription and support (1)

28% 28% 28% 29%

Professional services and other 1% 2%

1 unchanged sentence

Gross profit 72% 70%

(1) Includes depreciation, amortization and stock compensation expense as follows:

Depreciation $ — $ 1 $ — $ 5

(1) Includes amortization and stock compensation expense as follows:

Amortization $ 1,666 $ 2,406

Stock Compensation $ 121 $ 186

For the Three Months Ended September 30, 2024

Cost of subscription and support revenue was $18.4 million in the three months ended September 30, 2024, compared to $20.9 million in the three months ended September 30, 2023, a decrease of $2.5 million, or 12%.

The decrease in cost of subscription and support revenue is primarily related to a decrease of $0.3 million in infrastructure costs, a $0.3 million decrease in variable telecom carrier costs, a $0.8 million decrease in personnel costs and a $1.1 million decrease in amortization of intangible assets related to our Sunset Assets.

Cost of professional services and other revenue was $1.3 million in the three months ended September 30, 2024, compared to $2.1 million in the three months ended September 30, 2023, a decrease of $0.8 million, or 40%.

The decrease in cost of professional services was related to a decrease in personnel-related expenses.

For the Nine Months Ended September 30, 2024

Cost of subscription and support revenue was $57.5 million in the nine months ended September 30, 2024, compared to $66.4 million in the nine months ended September 30, 2023, a decrease of $8.9 million, or 13%.

The decrease in cost of subscription and support revenue is primarily related to a decrease of $2.5 million in infrastructure costs, a $1.2 million decrease in variable telecom carrier costs, a decrease of $2.1 million in personnel-related costs, and a $3.1 million decrease in amortization of intangible assets related to our Sunset Assets.

Cost of professional services and other revenue was $3.7 million in the nine months ended September 30, 2024, compared to $6.2 million in the nine months ended September 30, 2023, a decrease of $2.5 million, or 41%.

The decrease in cost of professional services was related to a decrease in personnel-related expenses.

For the Three Months Ended March 31, 2025

Cost of subscription and support revenue was $17.0 million in the three months ended March 31, 2025, compared to $19.8 million in the three months ended March 31, 2024, a decrease of $2.8 million, or 15%.

$1.1 million of the decrease is attributable to infrastructure costs, personnel costs and amortization expense related to divested product lines.

The remaining decrease in cost of subscription and support revenue is due to a decrease of $0.3 million in variable telecom carrier costs, decreases of $0.8 million in personnel costs and a decrease of $0.6 million in amortization of intangible assets.

Cost of professional services and other revenue was $1.1 million in the three months ended March 31, 2025, compared to $1.2 million in the three months ended March 31, 2024, a decrease of $0.1 million, or 10%.

The decrease in cost of professional services was comprised of a decrease in personnel-related expenses in both our divested product lines and our remaining product lines.

Operating Expenses

Sales and Marketing Expense

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

2024 2023 % Change 2024 2023 % Change

Three Months Ended March 31,

2025 2024 % Change

(dollars in thousands)

4 unchanged sentences

Stock Compensation $ 252 $ 397

For the Three Months Ended September 30, 2024

Sales and marketing expense was $16.3 million in the three months ended September 30, 2024, compared to $16.9 million in the three months ended September 30, 2023, a decrease of $0.6 million, or 3%.

The decrease in sales and marketing expense is attributable to decreases in personnel costs of $0.6 million related to our Sunset Assets.

For the Nine Months Ended September 30, 2024

Sales and marketing expense was $50.1 million in the nine months ended September 30, 2024, compared to $46.9 million in the nine months ended September 30, 2023, an increase of $3.2 million, or 7%.

The increase in sales and marketing expense is attributable to an increase of $3.0 million in personnel costs and $1.0 million in marketing expense related to our core products and associated with the previously announced investments in our growth plan.

Partially offsetting these growth plan investments are decreases in sales and marketing costs related to our Sunset Assets.

For the Three Months Ended March 31, 2025

Sales and marketing expense was $13.8 million in the three months ended March 31, 2025, compared to $17.0 million in the three months ended March 31, 2024, a decrease of $3.2 million, or 19%.

The decrease in sales and marketing expense is attributable to decreases in personnel costs of $1.3 million related to our divested product lines and $1.6 million related to our remaining product lines as well as a decrease in on-going marketing spend of $0.3 million.

Research and Development Expense

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

2024 2023 % Change 2024 2023 % Change

Three Months Ended March 31,

2025 2024 % Change

(dollars in thousands)

4 unchanged sentences

Stock Compensation $ 290 $ 606

For the Three Months Ended September 30, 2024

Research and development expense was $11.4 million in the three months ended September 30, 2024, compared to $12.7 million in the three months ended September 30, 2023, a decrease of $1.3 million, or 10.3%.

The decline in research and development expense is attributable to a $0.9 million decrease in personnel-related costs as we continue to shift our spending focus to our India Center of Excellence, as well as a $0.4 million decline in expenses related to our Sunset Assets.

For the Nine Months Ended September 30, 2024

Research and development expense was $36.1 million in the nine months ended September 30, 2024, compared to $37.7 million in the nine months ended September 30, 2023 a decrease of $1.6 million, or 4.4%.

The decline in research and development expense is attributable to a $0.3 million decrease in personnel-related costs as we continue to shift our spending focus to our India Center of Excellence, as well as a $1.3 million decline in expenses related to our Sunset Assets.

For the Three Months Ended March 31, 2025

Research and development expense was $11.5 million in the three months ended March 31, 2025, compared to $12.5 million in the three months ended March 31, 2024, a decrease of $1.0 million, or 7.3%.

The decline in research and development expense is primarily attributable to a $0.4 million decrease in personnel-related costs in our divested product lines and $0.6 million in personnel-related costs in our remaining product lines as we continue to shift our spending focus to our India Center of Excellence, as well as decreases in third-party software costs.

General and Administrative Expense

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

2024 2023 % Change 2024 2023 % Change

Three Months Ended March 31,

2025 2024 % Change

(dollars in thousands)

4 unchanged sentences

Stock compensation $ 2,012 $ 2,333

For the Three Months Ended September 30, 2024

General and administrative expense was $11.1 million in the three months ended September 30, 2024, compared to $14.6 million in the three months ended September 30, 2023, a decrease of $3.5 million, or 24%.

This decrease is primarily due to a decrease of $2.8 million in personnel-related costs including a decrease of $1.7 million in non-cash stock compensation expense.

Decreases in non-recurring litigation costs and tax-related professional fees also contributed $0.7 million to the decline in general and administrative expense.

For the Nine Months Ended September 30, 2024

General and administrative expense was $38.2 million in the nine months ended September 30, 2024, compared to $47.4 million in the nine months ended September 30, 2023, a decrease of $9.2 million, or 19%.

This decrease is primarily due to reductions of $7.0 million in personnel-related costs including a decrease of $5.2 million in non-cash stock compensation expense.

Decreases in non-recurring ligitation costs, legal-related professional fees and tax-related professional fees also contributed $1.7 million to the decline while decreases in other expenses comprised the remaining $0.5 million decrease in general and administrative expense.

For the Three Months Ended March 31, 2025

General and administrative expense was $11.6 million in the three months ended March 31, 2025, compared to $13.2 million in the three months ended March 31, 2024, a decrease of $1.6 million, or 12%.

This decrease is primarily due to a decrease of $1.1 million in personnel-related costs related to our on-going product lines.

Decreases of $0.3 million in legal and HR-related professional fees, and $0.2 million in tax and accounting-related professional fees also contributed to the decline in general and administrative expense.

Depreciation and Amortization Expense

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

2024 2023 % Change 2024 2023 % Change

Three Months Ended March 31,

2025 2024 % Change

(dollars in thousands)

7 unchanged sentences

Total depreciation and amortization 13% 16%

For the Three Months Ended September 30, 2024

Depreciation and amortization expense was $11.5 million in the three months ended September 30, 2024, compared to $14.3 million in the three months ended September 30, 2023, a decrease of $2.8 million, or 19%.

This decrease resulted from certain intangible assets becoming fully amortized.

For the Nine Months Ended September 30, 2024

Depreciation and amortization expense was $34.3 million in the nine months ended September 30, 2024, compared to $44.2 million in the nine months ended September 30, 2023, a decrease of $9.9 million, or 22%.

This decrease resulted from certain intangible assets becoming fully amortized.

Acquisition-related Expenses

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

2024 2023 % Change 2024 2023 % Change

For the Three Months Ended March 31, 2025

Depreciation and amortization expense was $8.0 million in the three months ended March 31, 2025, compared to $11.4 million in the three months ended March 31, 2024, a decrease of $3.4 million, or 30%.

$2.7 million of the decrease resulted from the decline in amortization from intangible assets associated with the divested product lines.

The remainder of the decrease is due to remaining intangible assets becoming fully amortized in prior periods.

Divestiture-related Expenses

Three Months Ended March 31,

2025 2024 % Change

(dollars in thousands)

Acquisition-related expenses $ — $ 443 (100) % $ — $ 2,609 (100) %

Divestiture-related expenses $ 1,745 $ — 100 %

Percentage of total revenue 2% —%

For the Three Months Ended September 30, 2024

Acquisition-related expense was nil in the three months ended September 30, 2024, compared to $0.4 million in the three months ended September 30, 2023.

We have had no new acquisitions since our two acquisitions during 2022.

Acquisition-related expenses in the three months ended September 30, 2023 include expenses related to acquisitions closed in 2022.

For the Nine Months Ended September 30, 2024

Acquisition-related expense was nil in the nine months ended September 30, 2024, compared to $2.6 million in the nine months ended September 30, 2023.

We have had no new acquisitions since our two acquisitions during 2022.

Acquisition-related expenses in the nine months ended September 30, 2023 include expenses related to acquisitions closed in 2022.

For the Three Months Ended March 31, 2025

Divestiture-related expense was $1.7 million in the three months ended March 31, 2025, compared to nil in the three months ended March 31, 2024.

We incurred $1.7 million in divestiture-related expense in three months ended March 31, 2025.

No divestiture-related expenses were incurred in the three months ended March 31, 2024.

Impairment of goodwill

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

2024 2023 % Change 2024 2023 % Change

Three Months Ended March 31,

2025 2024 % Change

(dollars in thousands)

Impairment of goodwill $ — $ 87,227 N/A

$ 87,227 $ 128,755 (32) %

Goodwill impairment is recognized on a non-recurring basis when the carrying value (or GAAP basis book value) of our Company (which is our only reporting unit) exceeds the estimated fair value of our Company as determined by reference to a number of factors and assumptions, including the trends in the stock price of our Common Stock.

We assess goodwill for impairment annually on October 1st, or more frequently when an event occurs which could cause the carrying value of our Company to exceed the estimated fair value of our Company.

As a result of declines in our stock price during the three months ended March 31, 2024 and the three months ended March 31, 2023, we performed a goodwill impairment evaluations in each quarter, which resulted in a goodwill impairments of $87.2 million and $128.8 million for the three months ended March 31, 2024 and 2023, respectively.

Goodwill and Other Intangible Assets in the notes to our condensed consolidated financial statements for more information regarding our first quarter 2024 goodwill impairment.

We will continue to evaluate goodwill for impairment in 2024 and future impairments of goodwill could occur if our stock price declines.

As a result of declines in our stock price during the three months ended March 31, 2024, we performed a goodwill impairment evaluation which resulted in a goodwill impairment of $87.2 million for the three months ended March 31, 2024.

We will continue to evaluate goodwill for impairment in 2025 and future impairments of goodwill could occur if we experience significant stock price declines.

Other Income (Expense)

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

2024 2023 % Change 2024 2023 % Change

Three Months Ended March 31,

2025 2024 % Change

(dollars in thousands)

1 unchanged sentence

Interest income (expense), net $ (2,443) $ (4,958) (51) %

Loss on divestitures of businesses (23,457) — 100 %

Other income (expense), net (241) (78) 209 %

2 unchanged sentences

Interest income (expense), net (4)% (7)%

Loss on divestitures of businesses (37)% —%

Other income (expense), net —% —%

Total other expense (41)% (7)%

For the Three Months Ended September 30, 2024

Interest expense, net of interest income, was $2.3 million of net interest income in the three months ended September 30, 2024 compared to $2.5 million of net interest expense in the three months ended September 30, 2023, a change of $4.8 million or 193%.

This was due primarily to prepayments on the Company’s Term Loans during the three months ended September 30, 2024, which resulted in an additional $9.0 million of the realized deferred gain from August 2023 being released from accumulated other comprehensive income to interest expense, net.

In addition to this non-cash interest income, an additional $1.8 million of the deferred gain was amortized as a benefit to interest expense, net in the three months ended September 30, 2024.

These interest income amounts were partially offset by interest expense, net of amounts received from interest rate swaps.

Other income (expense), net recognized during the three months ended September 30, 2024 and 2023 were related primarily to foreign currency exchange fluctuations.

For the Nine Months Ended September 30, 2024

Interest expense, net of interest income was $7.7 million in the nine months ended September 30, 2024, compared to $13.4 million in the nine months ended September 30, 2023, a decrease of $5.7 million, or 43%.

The decrease in interest expense is primarily attributable to the recognition of $9.0 million of the realized deferred gain from August 2023 being released from accumulated other comprehensive income to interest expense, net due to prepayments on the Company’s Term Loans in August and September 2024.

In addition to this non-cash interest income, an additional $4.8 million of the deferred gain was amortized as a credit to interest expense, net in the nine months ended September 30, 2024.

These interest income amounts were offset by interest expense, net of amounts received from interest rate swaps.

Other expense, net was $0.1 million in the nine months ended September 30, 2024, compared to other income, net of $0.9 million in the nine months ended September 30, 2023.

Other income (expense), net recognized in the nine months ended September 30, 2024 and September 30, 2023 related primarily to foreign currency exchange fluctuations.

For the Three Months Ended March 31, 2025

Interest expense, net of interest income, was $2.4 million of net interest income in the three months ended March 31, 2025 compared to $5.0 million of net interest expense in the three months ended March 31, 2024, a change of $2.6 million or 51%.

This was due primarily to prepayments on the Company’s Term Loans during the three months ended March 31, 2025, which lowered cash interest expense by $5.3 million.

This reduction was offset by a decline in cash interest inflow related to our interest rate swaps of $0.8 million.

Amortization of realized and unrealized gains on interest rates swaps from accumulated other comprehensive income to interest expense, net was $3.9 million for the three months ended March 31, 2025 as compared to amortization of $1.5 million in the three months ended March 31, 2024.

The amortization effects on interest expense, net was offset by changes in the fair value of the interest rate swaps recorded to interest expense, net of $2.2 million in the three months ended March 31, 2025 with no such effects recorded to interest expense, net in the three months ended March 31, 2024.

Interest income for the three months ended March 31, 2025 declined $2.3 million from interest income in the three months ended March 31, 2024 due to lower cash and cash equivalents.

Other income (expense), net recognized during the three months ended March 31, 2025 and 2023 were related primarily to foreign currency exchange fluctuations.

Benefit from Income Taxes

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

2024 2023 % Change 2024 2023 % Change

Three Months Ended March 31,

2025 2024 % Change

(dollars in thousands)

Benefit from (provision for) income taxes $ (530) $ 1,471 (136) % $ (1,193) $ 3,126 (138) %

Benefit from income taxes $ 1,345 $ 547 146 %

Percentage of total revenue 1% 1%

For the Three Months Ended September 30, 2024

Provision for income taxes was $0.5 million in the three months ended September 30, 2024, compared to a benefit from income taxes of $1.5 million in the three months ended September 30, 2023, resulting in an increase in expense from income taxes of $2.0 million.

The increase for the three months ended September 30, 2024 related primarily to the foreign income taxes associated with our combined non-U.S.

For the Nine Months Ended September 30, 2024

The provision for income taxes was $1.2 million in the nine months ended September 30, 2024, compared to a benefit from income taxes of $3.1 million in the nine months ended September 30, 2023, an increase in the provision of $4.3 million.

This increase was largely comprised of foreign taxes associated with our combined non-U.S.

operations, and was partially offset by the non-cash impact of deferred taxes related to the goodwill impairment recorded in the first quarter of 2024.

For the Three Months Ended March 31, 2025

The benefit for income taxes was $1.3 million in the three months ended March 31, 2025, compared to a benefit from income taxes of $0.5 million in the three months ended March 31, 2024, resulting in an increase in benefit from income taxes of $0.8 million.

The benefit from income taxes for the three months ended March 31, 2025 relates primarily to the deferred tax benefit from the business divestitures in the first quarter of 2025.

This tax benefit is partially offset by the income tax from non-U.S.

Liquidity and Capital Resources

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We believe that current cash and cash equivalents, and cash flows from operating activities will be sufficient to fund our operations for at least the next twelve months.

As of September 30, 2024, we had cash and cash equivalents of $59.7 million and $301.0 million of borrowings outstanding under our Term Loans that mature August 6, 2026.

As of December 31, 2023, we had cash and cash equivalents of $236.6 million and $482.1 million of borrowings outstanding under our Term Loans.

The $176.8 million decrease in cash and cash equivalents from December 31, 2023 to September 30, 2024 was due primarily to $11.0 million paid to repurchase shares of the Company’s Common Stock, and $181.1 million in debt repayment which includes $177.0 million of prepayments made in the current quarter, offset by $14.9 million in cash flows from operations.

Our cash and cash equivalents held by our foreign subsidiaries was $33.8 million as of September 30, 2024 and $34.8 million as of December 31, 2023.

As of March 31, 2025, we had $33.7 million of cash, cash equivalents and restricted cash and $259.4 million of borrowings outstanding under our Term Loans that mature August 6, 2026.

As of December 31, 2024, we had $57.1 million of cash, cash equivalents and restricted cash and $293.7 million of borrowings outstanding under our Term Loans.

The $22.7 million decrease in cash, cash equivalents and restricted cash from December 31, 2024 to March 31, 2025 was due primarily $34.2 million in debt repayment which includes $30.2 million of prepayments made in the current quarter, offset by $4.2 million cash proceeds from divestitures of businesses and $8.3 million in cash inflows from operations.

Our cash and cash equivalents held by our foreign subsidiaries was $19.9 million as of March 31, 2025 and $32.4 million as of December 31, 2024.

Our intent is to permanently reinvest these funds outside the U.S.

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We do not provide for federal income taxes on the undistributed earnings of our foreign subsidiaries.

As of September 30, 2024 and December 31, 2023, we had a working capital deficit of $1.0 million and a working capital surplus of $169.6 million, respectively.

As of March 31, 2025 and December 31, 2024, we had a working capital deficit of $17.1 million and a working capital deficit of $2.0 million, respectively.

Credit Facility

As described in “ Note 6.

Debt—Credit Facility ”, the Company has a Credit Facility which includes the fully drawn Term Loans as of September 30, 2024.

Debt ”, the Company has a Credit Facility which includes the fully drawn Term Loans as of March 31, 2025.

The Term Loans mature on August 6, 2026.

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The following table summarizes our cash flows for the periods indicated:

Nine Months Ended September 30,

Three Months Ended March 31,

(dollars in thousands)

Consolidated Statements of Cash Flow data:

Consolidated Statements of Cash Flows data:

Net cash provided by operating activities $ 8,305 $ 5,121

Net cash used in investing activities (562) (1,034)

Net cash provided by (used in) investing activities 3,789 (183)

Net cash used in financing activities (34,723) (9,599)

Effect of exchange rate fluctuations on cash 1,682 (437)

Change in cash and cash equivalents (176,820) (9,062)

Cash and cash equivalents, beginning of period 236,559 248,653

Cash and cash equivalents, end of period $ 59,739 $ 239,591

Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash (92) (284)

Change in cash, cash equivalents and restricted cash (22,721) (4,945)

Cash, cash equivalents and restricted cash, beginning of period 57,052 236,559

Cash, cash equivalents and restricted cash, end of period $ 34,331 $ 231,614

Cash Flows from Operating Activities

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The volume of professional services rendered, the volume and timing of customer bookings and contract renewals, and the related timing of collections on those bookings and renewals, as well as the timing of spending commitments and payments of our accounts payable, accrued expenses, accrued payroll and related benefits, all affect these account balances.

Cash provided by operating activities was $14.9 million for the nine months ended September 30, 2024 compared to cash provided by operating activities of $41.2 million for the nine months ended September 30, 2023, a decrease of approximately $26.3 million driven by the $54.6 million decrease in net loss, and offset by the one-time $20.5 million cash gain on the sale of a portion of our interest rate swaps in the nine months ended September 30, 2023.

Other changes in cash provided by operating activities were due to a decrease in non-cash interest expense, net related to the $9.0 million deferred gain that was released to interest expense, net, upon the prepayment of $175 million of the Company’s debt in August 2024 as compared to the $2.8 million deferred gain that was released to interest expense, net upon prepayment of $35 million of the Company’s debt in August 2023 as well as changes in working capital for the nine months ended September 30, 2024 which include collections on accounts receivable, increases in prepaid and other current assets, payments of current liabilities and decreases in deferred revenue.

Cash provided by operating activities was $8.3 million for the three months ended March 31, 2025 compared to cash provided by operating activities of $5.1 million for the three months ended March 31, 2024, an increase of approximately $3.2 million comprised of a non-recurring $1.2 million cash gain on the sale of a portion of our interest rate swaps in the three months ended March 31, 2025.

as well as changes in working capital for the three months ended March 31, 2025 which include collections on accounts receivable, increases in prepaid and other current assets, payments of current liabilities and decreases in deferred revenue.

A substantial source of cash is invoicing for subscriptions and support fees in advance, which is recorded as deferred revenue, and is included on our condensed consolidated balance sheets as a liability.

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Cash Flows from Investing Activities

Historically, our primary investing activities have consisted of acquisitions of complementary technologies and businesses.

As our business grows and evolves, we expect our primary investing activities to continue to expand and refine our product library, customer base, and market access, as well as routine purchases of office equipment.

For the nine months ended September 30, 2024, cash used in investing activities consisted of purchases of property and equipment of $0.6 million compared to $1.0 million of purchases of property and equipment for the nine months ended September 30, 2023.

The decrease in purchases of property and equipment was related to a one-time purchase of office software during the nine months ended September 30, 2023.

Historically, our investing activities have consisted of investments in our product library and customer base through acquisitions of complementary technologies and businesses and the routine purchases of office equipment.

Other activities, such as divestitures of businesses and purchases of other equipment, may affect our cash flows from investing activities in such periods as these transactions occur.

Cash provided by investing activities was $3.8 million for the three months ended March 31, 2025 compared to cash used by investing activities of $0.2 million for the three months ended March 31, 2024, an increase of $4.0 million.

During the three months ended March 31, 2025, the Company divested of certain product lines and received cash proceeds of $4.2 million.

Cash used in investing activities consisted of purchases of property and equipment of $0.4 million for the three months ended March 31, 2025 compared to $0.2 million of purchases of property and equipment for the three months ended March 31, 2024.

Cash Flows from Financing Activities

Historically, our primary financing activities have consisted of capital raised to fund our acquisitions, proceeds from debt obligations incurred to finance our acquisitions, repayments and servicing of our debt obligations, share repurchases and share based employee payroll tax payment activity.

Cash used in financing activities was $192.8 million for the nine months ended September 30, 2024 compared to $48.7 million for the nine months ended September 30, 2023, an increase of $144.1 million of cash used due to $142.0 million in additional payments on the Company’s Term Loans in the nine months ended September 30, 2024 over payments made in the nine months ended September 30, 2023, and an additional $7.7 million used for Common Stock repurchases in the nine months ended September 30, 2024 over the nine months ended September 30, 2024.

These increases in cash used were offset by $5.6 million less cash used in nine months ended

September 30, 2024 for payments for additional consideration to sellers of businesses than in the nine months ended September 30, 2023.

Cash used in financing activities was $34.7 million for the three months ended March 31, 2025 compared to $9.6 million for the three months ended March 31, 2024, an increase of $25.1 million of cash used due to $32.9 million in additional payments on the Company’s Term Loans in the three months ended March 31, 2025 over payments made in the three months ended March 31, 2024, netted with $7.9 million used for Common Stock repurchases in the three months ended March 31, 2024 over the three months ended March 31, 2025.

Critical Accounting Policies and the Use of Estimates

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• goodwill and other intangibles.

We are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of November 7, 2024, the date of issuance of this Quarterly Report on Form 10-Q.

We are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of May 12, 2025, the date of issuance of this Quarterly Report on Form 10-Q.

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

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Other Key Accounting Policies

Our unaudited interim financial statements and other financial information for the three and nine months ended September 30, 2024, as presented herein and in “ Item 1.

Our unaudited interim financial statements and other financial information for the three months ended March 31, 2025, as presented herein and in “ Item 1.

Financial Statements ” to this Quarterly Report on Form 10-Q, reflect no material changes in our critical accounting policies and estimates as set forth in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “Annual Report”).

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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 2. Management’s Discussion and Analysis