Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes theret o included elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in “Item 1A. Risk Factors.” See “Part 1 - Special Note Regarding Forward Looking Statements”.
Overview
We have established a library of diverse, cloud-based software applications under the Upland brand that address specific digital transformation needs. 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.
Sunset Assets and Divestitures
In connection with periodic reviews of our business, we decided to discontinue the availability of certain non-strategic product offerings and a limited number of non-strategic customer contracts (collectively referred to as “Sunset Assets”). As a result of the discontinuation of these Sunset Assets, we established end of life targets and reduced certain expenditures related to the sales and marketing of the Sunset Assets. It is possible that during future reviews of our business we may determine to add additional non-strategic product offerings or non-strategic customer contracts to Sunset Assets or remove certain product offerings or customer contracts from the classification of Sunset Assets. In either case, we will adjust the revenues
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attributable to Sunset Assets for the then current period and properly reflect the year over year change for such addition or removal.
During 2025 we completed divestitures of certain product lines in order to streamline and focus our business. These divestitures had the effect of reducing revenue and expense in the near term. In conjunction with these divestitures, we terminated a legacy vendor contract related to out-sourced research and development. As a result of this termination, we believe we are able to efficiently use our R&D Center of Excellence and reduce overall R&D costs while maintaining our development capacity and product competitiveness.
Components of Operating Results
Revenue
Subscription and support revenue . We derive our subscription revenue from fees paid to us by our customers for use of our cloud-based applications. We recognize the revenue associated with subscription agreements ratably over the term of the agreement as the customer receives and consumes the benefits of the cloud services through the contract period. Our subscription agreements typically have terms of one to three years.
Our support revenue consists of maintenance fees associated with our perpetual licenses and hosting fees paid to us by our customers. Typically, when purchasing a perpetual license, a customer also purchases maintenance for which we charge a fee, priced as a percentage of the perpetual license fee. Maintenance agreements include the right to support and unspecified upgrades. We recognize the revenue associated with maintenance ratably over the term of the contract. In limited instances, at the customer’s option, we may host the software purchased by a customer under a perpetual license on systems at our third-party data centers.
Perpetual license revenue . Perpetual license revenue reflects the revenue recognized from sales of perpetual licenses to new customers and additional perpetual licenses to existing customers. We generally recognize the license fee portion of the arrangement up-front at a point in time when the software is made available to the customer.
Professional services revenue . Professional services revenue consists of fees related to implementation, data extraction, integration and configuration and training on our applications. We generally recognize the revenue associated with these professional services over time as services are performed. Revenues for fixed price services are generally recognized over time applying input methods to estimate progress to completion. Revenues for consumption-based services are generally recognized as the services are performed.
Cost of Revenue
Cost of product revenue . Cost of product revenue consists primarily of hosting costs, personnel-related costs of our customer success and cloud operations teams, including salaries, benefits, bonuses, payroll taxes, stock-based compensation, and allocated overhead, as well as software license fees, internet connectivity, depreciation expenses, amortization of acquired intangible assets, specifically developed technology, as a result of business combination purchase accounting adjustments and pass-through costs directly related to delivering our applications. We expect that cost of revenues may increase in the future depending on the growth rate of our new customers and billings and our need to support the implementation, hosting and support of those new customers. We intend to continue to invest additional resources in expanding the delivery capability of our applications. As we add hosting infrastructure capacity and support personnel in advance of anticipated growth, our cost of product revenue will increase, and if such anticipated revenue growth does not occur, our product gross profit will be adversely affected both in terms of absolute dollars and as a percentage of total revenues in any particular quarterly or annual period. Our cost of product revenue is generally expensed as the costs are incurred. Acquired developed technology is valued using a cost-to-recreate approach and is generally amortized over a four- to nine-year period.
Cost of professional services revenue . Cost of professional services revenue consists primarily of personnel-related costs, including salaries, benefits, bonuses, payroll taxes, stock-based compensation and allocated overhead, as well as the costs of contracted third-party vendors and reimbursable expenses. As most of our personnel are employed on a full-time basis, our cost of professional services revenue is largely fixed in the short-term, while our professional services revenue may fluctuate, leading to fluctuations in professional services gross profit. We expect that cost of professional services as a percentage of total revenues could fluctuate from period to period depending on the level of our professional services business, the timing of sales of applications, and any associated costs relating to the delivery of services. Our cost of professional services revenue is generally expensed as costs are incurred.
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Operating Expenses
Our operating expenses are classified into six categories: sales and marketing, research and development, general and administrative, depreciation and amortization, acquisition and divestiture related expenses and impairment of goodwill and other intangibles.
Sales and marketing . Sales and marketing expenses primarily consist of personnel-related costs for our sales and marketing staff, including salaries, benefits, deferred commission amortization, bonuses, payroll taxes, stock-based compensation and allocated overhead, as well as costs of promotional events, corporate communications, online marketing, product marketing and other brand-building activities. Sales commissions earned by our sales force, and related payroll taxes, are considered incremental and recoverable costs of obtaining a contract with a customer. Deferred commissions and other costs for a particular customer agreement for initial contracts are amortized over the expected life of the customer relationships while deferred commissions related to contract renewals are amortized over average renewal term. Sales commissions, and related payroll taxes, are earned when the initial customer contract is signed and upon any renewal as our obligation to pay a sales commission arises at these times. Sales and marketing expenses may fluctuate as a percentage of total revenues for a variety of reasons including the timing of such expenses, in any particular quarter or annual period.
Research and development . Research and development expenses primarily consist of personnel-related costs of our research and development staff, including salaries, benefits, bonuses, payroll taxes, stock-based compensation, and allocated overhead. Research and development costs related to the development of our software applications are generally recognized as incurred. We have devoted our product development efforts primarily to enhancing the functionality, and expanding the capabilities, of our applications. Investment tax credits are included as a reduction of research and development costs. Inves tment tax credits are recorded in the year in which the research and development costs of the capital expenditures are incurred, provided that we are reasonably certain that the credits will be received. The investment tax credit must be examined and approved by the tax authorities, and it is possible that the amounts granted will differ fro m the amounts recorded.
General and administrative . General and administrative expenses primarily consist of personnel-related costs for our executive, administrative, accounting and finance, information technology, legal, accounting and human resource staff, including salaries, benefits, bonuses, payroll taxes, stock-based compensation, allocated overhead, professional fees and other corporate expenses. General and administrative expenses may fluctuate as a percentage of revenue, and over time we expect that general and administrative expenses will decrease as a percent of revenue due to operational efficiencies.
Depreciation and amortization . Depreciation and amortization expenses primarily consist of depreciation and amortization of acquired intangible assets, specifically customer relationships and trade names, as a result of business combination purchase accounting adjustments.
Acquisition and divestiture related expenses . Acquisition and divestiture related expenses are transaction related expenses such as commissions, banker fees, legal and professional fees, and insurance costs. These expenses may also include transformational expenses such as severance, compensation for transitional personnel, office lease terminations and vendor cancellations. These expenses can vary based on the size, timing and location of each transaction. See “ Note 15. Divestitures” in the notes to our consolidated financial statements for more information regarding current divestiture related expenses.
Impairment of goodwill and other intangibles . Goodwill impairment is recognized on a non-recurring basis when the carrying value of the Company (which is our only reporting unit) exceeds the estimated fair value of the Company as determined by reference to a number of factors and assumptions, including the spot closing price of our common stock as of a certain reporting or measurement date. We assess goodwill for impairment annually on October 1st, or more frequently when an event occurs which could cause the carrying value of the Company to exceed the estimated fair value of the Company. We periodically review the estimated useful lives of our identifiable intangible assets, taking into consideration any events or circumstances that might result in either a diminished fair value or revised useful life. See “ Note 4. Goodwill and Other Intangible Assets ” in the notes to our consolidated financial statements for more information regarding our impairment charges. We will continue to evaluate goodwill and other intangibles for impairment in future periods.
Total Other Expense
Total other expense consists primarily of amortization of debt issuance costs over the term of the related term loan, revaluation of foreign subsidiaries, interest expense on outstanding debt, partially offset by amounts recognized related to our interest rate derivatives and interest income on our interest-bearing cash balances held in money market accounts. In addition, gains/losses on divested assets that meet the definition of a business under ASC 805 are included in total other expense.
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Income Taxes
Because we have not generated domestic net income in any period to date, we have recorded a full valuation allowance against our domestic net deferred tax assets, exclusive of tax deductible goodwill. We have historically not recorded any significant provision for U.S.federal or state income taxes, other than deferred taxes related to tax deductible goodwill and current taxes in certain separate company filing states and states in which loss carryforwards do not fully offset taxable income. The balance of the tax benefit (provision) for the years ended December 31, 2025, 2024 and 2023, outside of tax deductible goodwill and current taxes in separate filing states, is related to foreign income taxes, primarily operations of our subsidiaries in Canada and Ireland, and to the release of valuation allowances associated with acquisitions of domestic entities with a benefit generated in the UK and Australia fully offset by valuation allowances. Realization of any of our domestic deferred tax assets depends upon future earnings, the timing and amount of which are uncertain. Based on analysis of acquired net operating losses, utilization of our net operating losses will be subject to annual limitations due to the ownership change rules under the Internal Revenue Code of 1986, as amended, or the Code, and similar state provisions. In the event we have subsequent changes in ownership, the availability of net operating losses and research and development credit carryovers could be further limited.
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Results of Operations
Consolidated Statements of Operations Data
The following tables set forth our results of operations for the specified periods, as well as our results of operations for the specified periods as a percentage of revenue. The period-to-period comparisons of results of operations are not necessarily indicative of results for future periods ( dollars in thousands, except share and per share data ).
Year Ended December 31,
2025 2024 2023
Amount Percent of Revenue Amount Percent of Revenue Amount Percent of Revenue
Revenue:
Subscription and support $ 205,073 95% $ 260,685 95% $ 281,554 95%
Perpetual license 5,280 2% 5,837 2% 6,077 2%
Total product revenue 210,353 97% 266,522 97% 287,631 97%
Professional services 6,523 3% 8,272 3% 10,221 3%
Total revenue 216,876 100% 274,794 100% 297,852 100%
Cost of revenue:
Subscription and support (1)(2)
50,882 23% 76,037 28% 88,894 30%
Professional services and other 3,876 2% 5,055 2% 7,467 2%
Total cost of revenue 54,758 25% 81,092 30% 96,361 32%
Gross profit 162,118 75% 193,702 70% 201,491 68%
Operating expenses:
Sales and marketing (1)
44,113 20% 66,301 24% 64,342 22%
Research and development (1)
36,511 17% 47,365 17% 49,375 17%
General and administrative (1)
38,025 18% 49,463 18% 61,264 21%
Depreciation and amortization 26,850 12% 45,622 17% 58,614 20%
Acquisition and divestiture related expenses 9,720 5% 19 —% 3,060 —%
Impairment of goodwill and other intangibles 2,469 1% 87,227 32% 128,755 43%
Total operating expenses 157,688 73% 295,997 108% 365,410 123%
Income (loss) from operations 4,430 2% (102,295) (38)% (163,919) (55)%
Other expense:
Interest expense, net (15,785) (7)% (8,939) (3)% (18,684) (6)%
Loss on divestitures of businesses (24,364) (11)% — —% — —%
Loss on debt extinguishment (2,301) (1)% — —% — —%
Other expense, net (652) (1)% 1,142 —% 236 —%
Total other expense (43,102) (20)% (7,797) (3)% (18,448) (6)%
Loss before benefit from (provision for) income taxes (38,672) (18)% (110,092) (41)% (182,367) (61)%
Benefit from (provision for) income taxes (232) —% (2,640) —% 2,493 1%
Net loss (38,904) (18)% (112,732) (41)% (179,874) (60)%
Preferred stock dividends (5,848) (3)% (5,592) (2)% (5,347) (2)%
Net loss attributable to common stockholders $ (44,752) (21)% $ (118,324) (43)% $ (185,221) (62)%
Net loss per common share:
Loss from continuing operations per common share, basic and diluted $ (1.56) $ (4.26) $ (5.77)
Weighted-average common shares outstanding, basic and diluted 28,615,649 27,789,248 32,074,906
(1) Includes stock-based compensation as detailed below and under Note 12. Stockholders' Deficit - Stock-Based Compensation.
(2) Includes amortization expense as detailed below.
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Comparison of Years Ended December 31, 2025 and December 31, 2024
Revenue
Year Ended December 31,
2025 2024 Change
Amount Amount Amount % Change
(dollars in thousands)
Revenue:
Subscription and support $ 205,073 $ 260,685 $ (55,612) (21)%
Perpetual license 5,280 5,837 (557) (10)%
Total product revenue 210,353 266,522 (56,169) (21)%
Professional services 6,523 8,272 (1,749) (21)%
Total revenue $ 216,876 $ 274,794 $ (57,918) (21)%
Subscription and support revenue was $205.1 million in the year ended December 31, 2025, compared to $260.7 million in the year ended December 31, 2024, a decrease of $55.6 million, or 21%. The decrease is primarily due to the expected declines in subscription and support revenue related to divested product lines and Sunset Assets of $53.1 million and $3.3 million, respectively. These decreases are offset by an increase in subscription and support revenue of $0.8 million related to our core product lines.
Perpetual license revenue was $5.3 million in the year ended December 31, 2025, compared to $5.8 million in the year ended December 31, 2024, a decrease of $0.5 million, or 10%. The decrease is attributable to decreases in customer purchases of on-premise software of $0.1 million in divested product lines, $0.1 million in Sunset Assets and $0.3 million related to core product lines.
Professional services revenue was $6.5 million in the year ended December 31, 2025, compared to $8.3 million in the year ended December 31, 2024, a decrease of $1.7 million, or 21% due to fewer implementation services provided in the year ended December 31, 2025. Professional services revenue related to our divested product lines decreased by $0.6 million and Sunset Assets decreased by $0.1 million while professional services revenue related to our core product lines decreased by $1.0 million.
Cost of Revenue
Year Ended December 31,
2025 2024 Change
Amount Amount Amount % Change
(dollars in thousands)
Cost of revenue:
Subscription and support (1)
$ 50,882 $ 76,037 $ (25,155) (33)%
Professional services 3,876 5,055 (1,179) (23)%
Total cost of revenue 54,758 81,092 (26,334) (32)%
Gross profit $ 162,118 $ 193,702 $ (31,584) (16)%
(1) Includes amortization and stock-based compensation expense as follows:
Amortization $ 5,287 $ 9,364 $ (4,077) (44)%
Stock-based compensation $ 420 $ 765 $ (345) (45)%
Cost of subscription and support revenue was $50.9 million in the year ended December 31, 2025, compared to $76.0 million in the year ended December 31, 2024, a decrease of $25.1 million, or 33%. The decrease related to divested product lines was $22.3 million attributable to $6.1 million of infrastructure costs, $9.4 million of variable telecom carrier costs, $4.2 million of personnel costs and $2.6 million of non-cash amortization of divested intangibles. The decrease related to Sunset assets was $1.1 million total attributable to reduced infrastructure costs of $0.4 million, reduced personnel costs of $0.6 million and reduced non-cash amortization of intangibles of $0.1 million. The remaining decrease of $1.8 million related to a reduction of $1.4 million in non-cash amortization of intangibles, a decrease of $0.5 million personnel costs, and $0.3 million in professional services offset with an increase in $0.4 million of infrastructure costs in our on-going product lines.
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Cost of professional services revenue was $3.9 million in the year ended December 31, 2025, compared to $5.1 million in the year ended December 31, 2024, a decrease of $1.2 million, or 23%. The decrease in cost of professional services was comprised of a decrease in personnel-related expenses of $0.5 million in our divested product lines, $0.1 million in our Sunset Assets and $0.6 million in our on-going product lines.
Operating Expenses
Sales and Marketing Expense
Year Ended December 31,
2025 2024 Change
Amount Amount Amount % Change
(dollars in thousands)
Sales and marketing $ 44,113 $ 66,301 $ (22,188) (33)%
Includes stock-based compensation as follows:
Stock-based compensation $ 448 $ 1,512 $ (1,064) (70)%
Sales and marketing expense was $44.1 million in the year ended December 31, 2025, compared to $66.3 million in the year ended December 31, 2024, a decrease of $22.2 million, or 33%. The decrease related to divested product lines was $12.9 million comprised of $11.5 million in personnel-related costs and $1.4 million in marketing and other spend. The remaining decrease was related to decreases of $0.2 million in costs related to our Sunset Assets, and $9.1 million related to declines in personnel-related costs including non-cash stock-based compensation, facility costs, and marketing spend in our on-going product lines.
Research and Development Expense
Year Ended December 31,
2025 2024 Change
Amount Amount Amount % Change
(dollars in thousands)
Research and development $ 36,511 $ 47,365 $ (10,854) (23)%
Includes stock-based compensation as follows:
Stock-based compensation $ 785 $ 2,095 $ (1,310) (63)%
Research and development expense was $36.5 million in the year ended December 31, 2025, compared to $47.4 million in the year ended December 31, 2024, a decrease of $10.9 million, or 23%. The decrease in research and development expense is primarily attributable to a $7.0 million decrease in personnel-related costs in our divested product lines, a $0.3 million decrease in personnel-related costs in our Sunset Assets and a $3.6 million decrease in personnel-related costs including stock-based compensation in our remaining product lines. These decreases reflect the termination of our out-sourced research and development contract and the continued use of our efficient India Center of Excellence.
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General and Administrative Expense
Year Ended December 31,
2025 2024 Change
Amount Amount Amount % Change
(dollars in thousands)
General and administrative $ 38,025 $ 49,463 $ (11,438) (23)%
Includes stock-based compensation as follows:
Stock-based compensation $ 7,455 $ 10,898 $ (3,443) (32)%
General and administrative expense was $38.0 million in the year ended December 31, 2025, compared to $49.5 million in the year ended December 31, 2024, a decrease of $11.5 million, or 23%. This decrease is due to a decrease of $9.7 million related to our on-going product lines comprised of decreases of $7.4 million in personnel-related costs, $0.4 million in office lease expense and $1.9 million in legal and accounting professional fees. The remainder of the decrease was related to a $0.3 million decrease in personnel-related costs in our Sunset Assets and a $1.5 million decrease related to our divested product lines combined with the effects of divestiture-related transition services agreements which ended in July 2025.
Depreciation and Amortization Expense
Year Ended December 31,
2025 2024 Change
Amount Amount Amount % Change
(dollars in thousands)
Depreciation and amortization:
Depreciation $ 955 $ 1,222 $ (267) (22)%
Amortization 25,895 44,400 (18,505) (42)%
Total depreciation and amortization $ 26,850 $ 45,622 $ (18,772) (41)%
Depreciation and amortization expense was $26.9 million in the year ended December 31, 2025, compared to $45.6 million in the year ended December 31, 2024, a decrease of $18.7 million, or 41%. $17.9 million of the decrease resulted from the decline in amortization from intangible assets associated with the divested product lines, $0.6 million from Sunset assets, and $0.2 million related to intangible assets related to our ongoing product lines becoming fully amortized.
Acquisition and Divestiture related Expenses
Year Ended December 31,
2025 2024 Change
Amount Amount Amount % Change
(dollars in thousands)
Acquisition and divestiture related expenses $ 9,720 $ 19 $ 9,701 *NM
*NM - Not meaningful.
Acquisition and divestiture related expenses were $9.7 million in the year ended December 31, 2025, compared to nominal amounts for the year ended December 31, 2024, an increase of $9.7 million. Divestiture related expenses in 2025 consisted of $2.6 million in professional services fees related to the divestitures completed during the year ended December 31, 2025. We also recorded a one-time termination fee and other cancellation costs of $5.5 million in 2025 related to a legacy vendor contract for out-sourced research and development. Additional costs included severance of $1.0 million and $0.6 million of license, data center and other fees. Acquisition and divestiture related expenses were immaterial in 2024 as no acquisitions or divestitures occurred during 2023 or 2024.
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Impairment of goodwill and other intangibles
Year Ended December 31,
2025 2024 Change
Amount Amount Amount % Change
(dollars in thousands)
Impairment of goodwill and other intangibles $ 2,469 $ 87,227 $ (84,758) (97)%
During the year ended December 31, 2025, we identified a triggering event related to certain intangible assets related to divestitures and performed a valuation of certain long-lived assets in accordance with ASC 360. As a result of the valuation, we recorded $2.5 million of impairment expense related to certain intangible assets.
As a result of declines in our stock price during the year ended December 31, 2024, we performed a goodwill impairment evaluation which resulted in a goodwill impairment of $87.2 million in 2024.
Other Expense, net
Year Ended December 31,
2025 2024 Change
Amount Amount Amount % Change
(dollars in thousands)
Other Expense:
Interest expense, net $ (15,785) $ (8,939) $ (6,846) 77%
Loss on divestitures of businesses (24,364) — (24,364) NM
Loss on debt extinguishment (2,301) — (2,301) NM
Other expense, net (652) 1,142 (1,794) (157)%
Total other expense $ (43,102) $ (7,797) $ (35,305) 453%
*NM - Not meaningful.
Interest expense, net was $15.8 million in the year ended December 31, 2025, compared to $8.9 million for the year ended December 31, 2024, an increase of $6.9 million, or 77%. The increase in interest expense is primarily attributable to the effects of our interest rate derivatives which reduced interest expense, net by $23.7 million in 2024 but only reduced interest expense, net by $7.9 million in 2025. The effects of the interest rate derivatives were offset by decreased cash interest expense of $14.8 million due to the reduction of outstanding debt from 2024 to 2025. In addition, interest income declined by $6.4 million in 2025 compared to 2024 due to lower cash and cash equivalents. Other changes in interest expense, net were due to changes in amortization of debt costs.
Loss on divestitures of businesses was $24.4 million in the year ended December 31, 2025 as compared to nil in the year ended December 31, 2024. During 2025, we divested multiple product lines in order to focus on our higher margin and higher growth potential product lines. No such divestitures occurred in 2024.
Loss on debt extinguishment was $2.3 million in the year ended December 31, 2025 compared to nil in the year ended December 31, 2024. The non-cash loss on debt extinguishment was the result of the replacement of our previous credit facility with our new credit facility. As a result of paying down our previous credit facility, we were required to expense $2.3 million of remaining unamortized debt discount on our previous term loan. No debt was extinguished in 2024.
Other expense, net was $0.7 million in the year ended December 31, 2025, compared to other income, net of $1.1 million in the year ended December 31, 2024, a change of $1.8 million. The change in other expense is primarily due to foreign currency exchange fluctuations.
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Provision for Income Taxes
Year Ended December 31,
2025 2024 Change
Amount Amount Amount % Change
(dollars in thousands)
Provision for income taxes $ (232) $ (2,640) $ 2,408 (91)%
Effective income tax rate 0.6 % 2.4 %
Expense from income taxes was $0.2 million in the year ended December 31, 2025, compared to $2.6 million in the year ended December 31, 2024, a decrease in expense from income taxes of $2.4 million, or 91%. This decrease was related primarily to the the tax benefit recorded upon the current year divestiture in Ireland which was offset by increased tax expense in Canada.
Comparison of Years Ended December 31, 2024 and December 31, 2023
For a comparison of the years ended December 31, 2024 and 2023 refer to “ Item 7. Management’s Discussion and Analysis ” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 12, 2025.
Key Metrics and Non-GAAP Financial Measures
In addition to the GAAP financial measures described in “ Results of Operations ” above, we regularly review the following key metrics and non-GAAP financial measures to evaluate and identify trends in our business, measure our performance, prepare financial projections and make strategic decisions ( in thousands, except percentages ):
As of December 31,
2025 2024 2023
Other Financial Data (unaudited):
Annualized recurring revenue value at year-end $ 165,931 $ 225,620 $ 242,136
Annual net dollar retention rate 96% 96% 95%
Adjusted EBITDA $ 58,012 $ 55,638 $ 64,438
Key Metrics
Annualized recurring revenue value at year-end
We define annualized recurring revenue (“ARR”) as the value as of December 31 that equals the monthly value of our recurring revenue under support and subscription contracts excluding month-to-month contracts measured as of December 31 multiplied by 12. This measure excludes the revenue value of uncontracted overage fees, on-demand or monthly usage service fees. As a metric, ARR mitigates fluctuations in revenue recognition due to certain factors, including contract term and the sales mix of recurring revenue contracts and perpetual licenses. ARR does not have any standardized meaning and may not be comparable to similarly titled measures presented by other companies. ARR should be viewed independently of revenues and deferred revenues and is not intended to be combined with or to replace either of those elements of our financial statements. ARR is not a forecast and the active contracts at the end of a reporting period used in calculating ARR may or may not be extended or renewed by our clients.
Our ARR was $165.9 million, $225.6 million and $242.1 million as of December 31, 2025, 2024 and 2023, respectively.
Annual net dollar retention rate
We measure our ability to grow and retain ARR from existing clients using a metric we refer to as our annual net dollar retention rate. We define annual net dollar retention rate as of December 31 as the aggregate ARR as of December 31 from those customers that were also customers as of December 31 of the prior fiscal year, divided by the aggregate ARR value from all customers as of December 31 of the prior fiscal year. This measure excludes the revenue value of uncontracted overage fees, on-demand service fees, and our Sunset Assets. For purposes of calculating our annual net dollar retention rate as of December 31, 2025, ARR attributable to the divested businesses has been excluded from both the current and prior fiscal year amounts used in the calculation.
Our annual net dollar retention rate was 96%, 96% and 95% as of December 31, 2025, 2024 and 2023, respectively.
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Non-GAAP Financial Measures
Adjusted EBITDA
We monitor Adjusted EBITDA to help us evaluate the effectiveness and efficiency of our operations. We define Adjusted EBITDA as net loss, calculated in accordance with GAAP, adjusted for depreciation and amortization expense, net interest expense, loss on debt extinguishment, net other expense, benefit from (provision for) income taxes, stock-based compensation expense, acquisition and divestiture related expenses, non-recurring litigation costs, purchase accounting, deferred revenue discount, loss on divestitures of businesses and impairment of goodwill and other intangible assets.
Adjusted EBITDA is a non-GAAP financial measure that our management believes provides useful information to management, investors and others in understanding and evaluating our operating results for the following reasons:
• Adjusted EBITDA is widely used by our investors and securities analysts to measure a company’s operating performance without regard to items that can vary substantially from company to company depending upon their financing, capital structures and the method by which assets were acquired;
• Our management uses Adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, in the preparation of our annual operating budget, as a measure of our operating performance, to assess the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance because Adjusted EBITDA eliminates the impact of items that we do not consider indicative of our core operating performance;
• Adjusted EBITDA provides more consistency and comparability with our past financial performance, facilitates period-to-period comparisons of our operations and also facilitates comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and
• Adjusted EBITDA should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with GAAP.
The use of Adjusted EBITDA as an analytical tool has limitations such as:
• Adjusted EBITDA should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with GAAP.
• Impairment of goodwill and other intangible assets and depreciation and amortization are non-cash charges, and the assets being depreciated or amortized, which contribute to the generation of revenue, will often have to be replaced in the future and Adjusted EBITDA does not reflect cash requirements for such replacements; however, much of the depreciation and amortization relates to amortization of acquired intangible assets, as well as the goodwill as a result of business combination purchase accounting adjustments, which will not need to be replaced in the future;
• Adjusted EBITDA may not reflect changes in, or cash requirements for, our working capital needs or contractual commitments;
• Adjusted EBITDA does not reflect the potentially dilutive impact of stock-based compensation;
• Adjusted EBITDA does not reflect interest or tax payments that could reduce cash available for use; and,
• other companies, including companies in our industry, might calculate Adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as comparative measures.
Because of these limitations, you should consider Adjusted EBITDA together with other financial performance measures, including various cash flow metrics, net loss and our other GAAP results.
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The following table presents a reconciliation of Net loss from continuing operations to Adjusted EBITDA for each of the periods indicated (in thousands).
Year Ended December 31,
2025 2024 2023
(dollars in thousands)
Net loss $ (38,904) $ (112,732) $ (179,874)
Depreciation and amortization expense 32,137 54,986 71,985
Interest expense (income), net 15,785 8,939 18,684
Loss on debt extinguishment 2,301 — —
Other expense, net 652 (1,142) (236)
Benefit from (provision for) income taxes 232 2,640 (2,493)
Stock-based compensation expense 9,108 15,270 22,874
Acquisition and divestiture related expenses 9,720 19 3,060
Non-recurring litigation costs 35 187 1,126
Purchase accounting deferred revenue discount 113 244 557
Loss on divestitures of businesses 24,364 — —
Impairment of goodwill and other intangibles 2,469 87,227 128,755
Adjusted EBITDA $ 58,012 $ 55,638 $ 64,438
Core Organic Growth Rate
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, subscription and support revenue from divestitures, 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 December 31, 2025, our Core Organic Growth Rate was negative 0.1%.
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. We believe that this metric is useful to management and investors in analyzing our financial and operational performance period-over-period along with evaluating the growth of our business normalized for the impact of acquisitions and dispositions, as well as adjusting for the exclusion of Sunset Assets and non-committed Overage Charges.
Related Defined Terms
Overage Charges are subscription and support revenues earned in addition to contractual minimum customer commitments as a result of the usage volume of services including text and e-mail messaging and third-party pass-through costs that exceed the levels stipulated in contracts with the Company.
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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 December 31,
2025 2024
(dollars in thousands)
Reconciliation of total revenue to core organic revenue:
Total revenue $ 49,312 $ 68,027
Less:
Perpetual license revenue 1,313 1,531
Professional services revenue 1,300 2,164
Subscription and support revenue from Sunset Assets 2,124 2,848
Subscription and support revenue from divestitures — 15,408
Overage Charges 217 1,668
Core organic revenue $ 44,358 $ 44,408
Liquidity and Capital Resources
To date, we have financed our operations primarily through cash generated from operating activities, the raising of capital including sales of our common stock and our convertible preferred stock, and borrowings under our Credit Facilities (as hereinafter defined). 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.
The following table summarizes our liquidity for the periods indicated:
Year Ended December 31,
2025 2024
(dollars in thousands)
Cash, cash equivalents and restricted cash $ 30,024 $ 57,052
Available borrowings from our Revolving Facility 30,000 —
Total Liquidity $ 60,024 $ 57,052
The $27.0 million decrease in cash and cash equivalents from December 31, 2024 to December 31, 2025 was due primarily to the $55.2 million reduction of our outstanding debt and payment of fees related to the debt refinance of $7.1 million offset with cash inflows from operations of $25.8 million, and $9.8 million of proceeds divestitures of businesses.
Our cash and cash equivalents held by our foreign subsidiaries was $10.0 million as of December 31, 2025. If these funds held by our foreign subsidiaries are repatriated, we would be required to accrue and pay U.S. taxes. However, our intent is to either permanently reinvest these funds outside the U.S. or use these funds to repay certain long-term intercompany loans. We do not provide for federal income taxes on the undistributed earnings of our foreign subsidiaries.
As of December 31, 2025 and 2024, we had a working capital deficits of $18.5 million and $2.0 million respectively.
Credit Facility
On July 25, 2025, we entered into a Credit Agreement with (i) a new $240.0 million, six-year term loan and (ii) a $30.0 million revolving credit facility maturing in July 2031. We used the proceeds of the term loan, together with cash on hand, including proceeds from the sale of our interest rate swaps, to redeem all of our prior existing Term Loans. The proceeds of loans under the revolving credit facility will be used for working capital and other general corporate purposes. No amounts have been drawn on the revolving credit facility as of December 31, 2025. At December 31, 2025, the floating interest rate was 9.7%. As of December 31, 2025, we were in compliance with all covenants under the Credit Agreement.
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The following table summarizes our cash flows for the periods indicated:
Year Ended December 31,
2025 2024
(dollars in thousands)
Consolidated Statements of Cash Flow Data:
Net cash provided by operating activities $ 25,800 $ 24,239
Net cash provided by (used in) investing activities 8,800 (882)
Net cash used in financing activities (63,446) (202,307)
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash 1,818 (557)
Change in cash, cash equivalents and restricted cash (27,028) (179,507)
Cash, cash equivalents and restricted cash, beginning of period 57,052 236,559
Cash, cash equivalents and restricted cash, end of period $ 30,024 $ 57,052
Cash Flows from Operating Activities
Cash provided by operating activities is significantly influenced by the amount of cash we invest in personnel and infrastructure to support the anticipated growth of our business. Our working capital consists primarily of cash, receivables from customers, prepaid assets, unbilled professional services, deferred commissions, accounts payable, accrued compensation and other accrued expenses, lease liabilities and deferred revenues. The volume of professional services rendered, the volume and timing of customer bookings and contract renewals, and the related timing of collections and renewals on those bookings, 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 $25.8 million for 2025 compared to $24.2 million for 2024, an increase of $1.6 million. This increase in operating cash flow is generally attributable to differences in non-cash adjustments to net loss and timing differences in changes in working capital.
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 consolidated balance sheets as a liability. Deferred revenue consists of the unearned portion of booked fees for our software subscriptions and support and for professional services, which is amortized into revenue in accordance with our revenue recognition policy. We assess our liquidity, in part, through an analysis of new subscriptions invoiced, expected cash receipts on new and existing subscriptions, and our ongoing operating expense requirements.
Cash Flows from Investing Activities
Historically, our investing activities have consisted of routine purchases of office equipment. Other activities, such as divestitures of businesses including the collections on a note receivable from divested product lines, and purchases of other fixed assets, may affect our cash flows from investing activities in such periods as these transactions occur.
Cash provided by investing activities was $8.8 million for 2025 compared to cash used of $0.9 million for 2024, a change of $9.7 million. During 2025, the Company divested of certain products and received cash proceeds of $9.8 million. Other cash proceeds consisted $0.3 million in collections on the note receivable related to divestitures. Cash used in investing activities consisted of purchases of leasehold improvements and equipment of $1.4 million for 2025 compared to $0.9 million of purchases of property and equipment for 2024.
Cash Flows from Financing Activities
Historically, our primary financing activities have consisted of capital raises, proceeds from debt obligations, repayments of our debt obligations, share repurchases and share based employee payroll tax payment activity.
Cash used in financing activities was $63.4 million in 2025 compared to $202.3 million in 2024, a decrease in cash used of $138.9 million. Cash used in financing activities decreased primarily due to $55.2 million in payments on our outstanding debt in 2025 compared to $188.4 million in payments made in 2024 and less cash used in repurchases of Common Stock which totalled $0.1 million in 2025 as compared to $11.0 million in 2024. These decreases in cash used for financing activities were partially offset by additional cash paid for lender fees and debt issuance costs in 2025 of $7.1 million as compared to $0.4 million in 2024.
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Contractual Payment Obligations
The following table summarizes our future contractual obligations as of December 31, 2025 (in thousands):
Next 12 Months Beyond 12 Months Total
Debt Obligations (1)
$ 8,872 $ 229,628 $ 238,500
Interest on Debt Obligations (2)
22,921 99,979 122,900
Operating Lease Obligations (3)
1,053 2,355 3,408
Purchase Commitments (4)
9,597 30,652 40,249
Total $ 42,443 $ 362,614 $ 405,057
(1) Consists of contractual principal payments on our Credit Facility. See “ Liquidity and Capital Resources ” above for further discussion regarding our Credit Facility.
(2) Future interest on debt obligations is calculated using the interest rate effective as of December 31, 2025. We have entered into interest rate derivatives to limit exposure to interest rate risk related to a portion of our debt. See “ Item 7A. Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk ” for further discussion.
(3) We lease office space under operating leases that expire between 2025 and 2033. Operating lease obligations above do not include the impact of future rental income related to agreements we have entered into to sublet excess office space as a result of our transformation activities.
(4) We define a purchase commitment as an agreement that is enforceable and legally binding and that specifies all significant terms, including: fixed or minimum services to be used; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Obligations under contracts that we can cancel without a significant penalty are not included. In addition, purchase orders are not included as they represent authorizations to purchase rather than binding agreements.
The Company has purchase commitments related to hosting services, third-party technology used in the Company’s solutions and for other services the Company purchases as part of normal operations. In certain cases these arrangements require a minimum annual purchase commitment.
Critical Accounting Policies and the Use of Estimates
We prepare our consolidated financial statements in accordance with GAAP. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
While our significant accounting policies are more fully described in “ Note 2. Basis of Presentation and Summary of Significant Accounting Policies ” in the notes to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K , we believe that the accounting policy discussed below is critical to understanding our historical and future performance, as this policy relates to a more significant area involving management’s judgments and estimates.
Goodwill Impairment
We assess goodwill for impairment annually on October 1st, or more frequently when an event occurs which could cause the carrying value of the Company to exceed the estimated fair value of the Company.
As we operate as one reporting unit, the goodwill impairment evaluation is performed at the consolidated entity level by comparing the estimated fair value of the Company to its carrying value. We first assess qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying value. Qualitative factors considered include: industry and market considerations; macroeconomic conditions; and other relevant events and factors. Based on the qualitative assessment, if it is determined that it is more likely than not that the Company's fair value is less than its carrying value, then we perform a quantitative analysis using a fair-value-based approach to determine if the fair value of our reporting unit is less than its carrying value. Performing a quantitative goodwill impairment test includes the determination of the fair value of a reporting unit and involves significant estimates and assumptions. These estimates and assumptions include, among others, revenue growth rates and operating margins used to calculate projected future cash flows,
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weighted average cost of capital, and future economic and market conditions. See “ Note 4. Goodwill and Other Intangible Assets ” for more information.
Recent Accounting Pronouncements
For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, refer to “ Note 2. Basis of Presentation and Summary of Significant Accounting Policies ” in the notes to the consolidated financial statements included in “ Part II—Item 8. Financial Statements and Supplementary Data ” of this Annual Report on Form 10-K.