10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 001-36720

UPLAND SOFTWARE, INC.

(Exact name of registrant as specified in its charter)

Delaware	27-2992077
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

401 Congress Ave., Suite 1850

Austin, Texas 78701

(Address, including zip code, of registrant’s principal executive offices)

(512) 960-1010

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	UPLD	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒   No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒   No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒		Accelerated filer	☐
Non-accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☐
			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

As of October 29, 2021, 30,526,597 shares of the registrant’s Common Stock were outstanding. 

Upland Software, Inc.

Table of Contents 

		Page
Part I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	1
	Condensed Consolidated Statements of Operations for the Three and Nine months ended September 30, 2021 and September 30, 2020	2
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine months ended September 30, 2021 and September 30, 2020	3
	Condensed Consolidated Statements of Stockholders' Equity for the Three and Nine months ended September 30, 2021 and September 30, 2020	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and September 30, 2020	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	28
Part II.	OTHER INFORMATION	29
Item 6.	Exhibits	29
Exhibit Index		30
Signature		31

Item 1. Financial Statements

Upland Software, Inc.

Condensed Consolidated Balance Sheets

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

	September 30, 2021		December 31, 2020
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	179,584	$	250,029
Accounts receivable (net of allowance of $1,081 and $1,465 at September 30, 2021 and December 31, 2020, respectively)	37,076		44,472
Deferred commissions, current	8,721		5,784
Unbilled receivables	5,847		4,561
Prepaid and other	8,560		12,694
Total current assets	239,788		317,540
Tax credits receivable	3,054		2,427
Property and equipment, net	3,035		2,778
Operating lease right-of-use asset	6,990		10,124
Intangible assets, net	292,807		279,975
Goodwill	460,178		383,598
Deferred commissions, noncurrent	14,168		12,962
Other assets	1,691		1,816
Total assets	$	1,021,711	$	1,011,220
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	16,181	$	5,395
Accrued compensation	11,259		8,138
Accrued expenses and other current liabilities	9,960		13,438
Deferred revenue	90,368		87,552
Liabilities due to sellers of businesses	10,531		416
Operating lease liabilities, current	3,555		3,315
Current maturities of notes payable (includes unamortized discount of $2,243 and $2,234 at September 30, 2021 and December 31, 2020, respectively)	3,158		3,166
Total current liabilities	145,012		121,420
Notes payable, less current maturities (includes unamortized discount of $7,842 and $9,414 at September 30, 2021 and December 31, 2020, respectively)	515,958		518,437
Deferred revenue, noncurrent	2,075		1,587
Operating lease liabilities, noncurrent	7,650		8,387
Noncurrent deferred tax liability, net	27,484		24,092
Interest rate swap liabilities	15,642		30,032
Other long-term liabilities	844		650
Total liabilities	714,665		704,605
Stockholders’ equity:
Common stock, $0.0001 par value; 50,000,000 shares authorized: 30,516,350 and 29,987,114 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively)	3		3
Additional paid-in capital	558,495		515,219
Accumulated other comprehensive loss	(18,338)		(26,234)
Accumulated deficit	(233,114)		(182,373)
Total stockholders’ equity	307,046		306,615
Total liabilities and stockholders’ equity	$	1,021,711	$	1,011,220

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

1

Upland Software, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue:
Subscription and support	$	72,264	$	70,992	$	215,322	$	202,582
Perpetual license	684		411		1,451		1,263
Total product revenue	72,948		71,403		216,773		203,845
Professional services	3,105		2,781		9,513		9,686
Total revenue	76,053		74,184		226,286		213,531
Cost of revenue:
Subscription and support	22,968		23,562		68,811		64,701
Professional services and other	1,848		2,021		5,444		6,755
Total cost of revenue	24,816		25,583		74,255		71,456
Gross profit	51,237		48,601		152,031		142,075
Operating expenses:
Sales and marketing	14,364		11,760		41,094		34,511
Research and development	10,441		9,967		32,494		29,379
General and administrative	17,725		16,864		61,286		51,195
Depreciation and amortization	10,764		9,117		30,785		27,425
Acquisition-related expenses	3,685		3,574		18,805		24,513
Total operating expenses	56,979		51,282		184,464		167,023
Loss from operations	(5,742)		(2,681)		(32,433)		(24,948)
Other expense:
Interest expense, net	(7,971)		(8,078)		(23,700)		(23,594)
Other income (expense), net	(650)		598		(812)		(819)
Total other expense	(8,621)		(7,480)		(24,512)		(24,413)
Loss before benefit from (provision for) income taxes	(14,363)		(10,161)		(56,945)		(49,361)
Benefit from (provision for) income taxes	3,348		(1,149)		6,204		3,811
Net loss	$	(11,015)	$	(11,310)	$	(50,741)	$	(45,550)
Net loss per common share:
Net loss per common share, basic and diluted	$	(0.36)	$	(0.42)	$	(1.68)	$	(1.77)
Weighted-average common shares outstanding, basic and diluted	30,428,675		27,220,134		30,167,171		25,725,495

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

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Upland Software, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(unaudited)

(in thousands)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net loss	$	(11,015)	$	(11,310)	$	(50,741)	$	(45,550)
Foreign currency translation adjustment	(4,548)		2,734		(5,611)		494
Unrealized translation gain (loss) on intercompany loans with foreign subsidiaries	(2,664)		3,927		(884)		(3,254)
Unrealized gain (loss) on interest rate swaps	2,112		(441)		14,391		(35,497)
Comprehensive loss	$	(16,115)	$	(5,090)	$	(42,845)	$	(83,807)

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

3

Upland Software, Inc.

Consolidated Statement of Stockholders’ Equity

(unaudited)

(in thousands, except share amounts)

	Three Months Ended September 30, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at June 30, 2021	30,413,246	$	3	$	546,771	$	(13,238)	$	(222,099)	$	311,437
Issuance of stock under Company plans, net of shares withheld for tax	103,104	—		(323)		—		—		(323)
Stock-based compensation	—	—		12,047		—		—		12,047
Foreign currency translation adjustment	—	—		—		(4,548)		—		(4,548)
Unrealized translation loss on intercompany loans with foreign subsidiaries	—	—		—		(2,664)		—		(2,664)
Unrealized gain on interest rate swaps	—	—		—		2,112		—		2,112
Net loss	—	—		—		—		(11,015)		(11,015)
Balance at September 30, 2021	30,516,350	$	3	$	558,495	$	(18,338)	$	(233,114)	$	307,046

	Three Months Ended September 30, 2020
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at June 30, 2020	25,365,735	$	3	$	363,328	$	(45,700)	$	(165,394)	$	152,237
Issuance of stock under Company plans, net of shares withheld for tax	69,853	—		20		—		—		20
Issuance of stock, net of issuance costs	4,025,000	—		130,114		—		—		130,114
Stock-based compensation	—	—		10,963		—		—		10,963
Foreign currency translation adjustment	—	—		—		2,734		—		2,734
Unrealized translation loss on intercompany loans with foreign subsidiaries	—	—		—		3,927		—		3,927
Unrealized loss on interest rate swaps	—	—		—		(441)		—		(441)
Net loss	—	—		—		—		(11,310)		(11,310)
Balance at September 30, 2020	29,460,588	$	3	$	504,425	$	(39,480)	$	(176,704)	$	288,244

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

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	Nine Months Ended September 30, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2020	29,987,114	$	3	$	515,219	$	(26,234)	$	(182,373)	$	306,615
Issuance of stock under Company plans, net of shares withheld for tax	529,236	—		(145)		—		—		(145)
Stock-based compensation	—	—		43,421		—		—		43,421
Foreign currency translation adjustment	—	—		—		(5,611)		—		(5,611)
Unrealized translation loss on intercompany loans with foreign subsidiaries	—	—		—		(884)		—		(884)
Unrealized gain on interest rate swaps	—	—		—		14,391		—		14,391
Net loss	—	—		—		—		(50,741)		(50,741)
Balance at September 30, 2021	30,516,350	$	3	$	558,495	$	(18,338)	$	(233,114)	$	307,046

	Nine Months Ended September 30, 2020
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2019	25,250,120	$	3	$	345,127	$	(1,223)	$	(131,046)	$	212,861
Issuance of stock under Company plans, net of shares withheld for tax	185,468	—		(2,066)		—		—		(2,066)
Issuance of stock, net of issuance costs	4,025,000	—		130,101		—		—		130,101
Stock-based compensation	—	—		31,263		—		—		31,263
Cumulative adjustment related to adoption of accounting standard	—	—		—		—		(108)		(108)
Foreign currency translation adjustment	—	—		—		494		—		494
Unrealized translation loss on intercompany loans with foreign subsidiaries	—	—		—		(3,254)		—		(3,254)
Unrealized loss on interest rate swaps	—	—		—		(35,497)		—		(35,497)
Net loss	—	—		—		—		(45,550)		(45,550)
Balance at September 30, 2020	29,460,588	$	3	$	504,425	$	(39,480)	$	(176,704)	$	288,244

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

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Upland Software, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

	Nine Months Ended September 30,
	2021		2020
Operating activities
Net loss	$	(50,741)	$	(45,550)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	39,420		35,091
Change in fair value of liabilities due to sellers of businesses	(3,503)		155
Deferred income taxes	(7,726)		(3,346)
Amortization of deferred costs	6,283		3,172
Foreign currency re-measurement loss	18		311
Non-cash interest and other expense	1,682		1,669
Non-cash stock compensation expense	43,421		31,263
Non-cash loss on retirement of fixed assets	2		473
Changes in operating assets and liabilities, net of purchase business combinations:
Accounts receivable	11,748		13,140
Prepaids and other	(3,672)		(10,093)
Accounts payable	6,647		(1,782)
Accrued expenses and other liabilities	(8,111)		(8,944)
Deferred revenue	(6,822)		(1,407)
Net cash provided by operating activities	28,646		14,152
Investing activities
Purchase of property and equipment	(965)		(833)
Purchase of customer relationships	—		(201)
Purchase business combinations, net of cash acquired	(92,417)		(67,651)
Net cash used in investing activities	(93,382)		(68,685)
Financing activities
Payments on finance leases	(12)		(86)
Proceeds from notes payable, net of issuance costs	(120)		(169)
Payments on notes payable	(4,050)		(4,050)
Taxes paid related to net share settlement of equity awards	(373)		(2,140)
Issuance of common stock, net of issuance costs	228		130,174
Additional consideration paid to sellers of businesses	(769)		(11,652)
Net cash provided by (used in) financing activities	(5,096)		112,077
Effect of exchange rate fluctuations on cash	(613)		404
Change in cash and cash equivalents	(70,445)		57,948
Cash and cash equivalents, beginning of period	250,029		175,024
Cash and cash equivalents, end of period	$	179,584	$	232,972
Supplemental disclosures of cash flow information:
Cash paid for interest, net of interest rate swaps	$	22,043	$	22,456
Cash paid for taxes	$	1,772	$	2,220
Non-cash investing and financing activities:
Business combination consideration including holdbacks and earnouts	$	14,204	$	345

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

6

Upland Software, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(unaudited)

1. Summary of Significant Accounting Policies

Basis of Presentation

These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). The condensed consolidated financial statements include the accounts of Upland Software, Inc. and its wholly owned subsidiaries (collectively referred to as “Upland”, the “Company”, “we” or “us”). All intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation.

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. In the opinion of management of the Company, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements, in all material respects, and include all adjustments of a normal recurring nature necessary for a fair presentation. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other period.

The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2020 Annual Report on Form 10-K filed with the SEC on February 25, 2021.

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses. Significant items subject to such estimates include those related to revenue recognition, deferred commissions, allowance for credit losses, stock-based compensation, contingent consideration, acquired intangible assets, the useful lives of intangible assets and property and equipment, the fair value of the Company’s interest rate swaps and income taxes. In accordance with GAAP, management bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances. Management regularly evaluates its estimates and assumptions using historical experience and other factors; however, actual results could differ from those estimates.

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. Upland is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of November 3, 2021, 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. Actual results could differ materially from these estimates under different assumptions or conditions.

Concentrations of Credit Risk and Significant Customers

Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, accounts receivable and the Company’s interest rate swap hedges. The Company’s cash and cash equivalents are placed with high-quality financial institutions, which, at times, may exceed federally insured limits. The Company has not experienced any losses in these accounts, and the Company does not believe it is exposed to any significant credit risk related to cash and cash equivalents. The Company provides credit, in the normal course of business, to a number of its customers. To manage accounts receivable credit risk, the Company performs periodic credit evaluations of its customers and maintains current expected credit losses which considers such factors as historical loss information, geographic location of customers, current market conditions, and reasonable and supportable forecasts.

No individual customer represented more than 10% of total revenues for the three or nine months ended September 30, 2021, or more than 10% of accounts receivable as of September 30, 2021 or December 31, 2020.

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Derivatives

In connection with borrowing funds under the Company’s credit facility the Company has entered into a floating-to-fixed interest rate swap agreements to limit exposure to interest rate risk related to our debt. These interest rate swaps effectively converted the entire balance of the Company's $540 million term loans from variable interest payments to fixed interest rate payments, based on an annualized fixed rate of 5.4%, for a 7 year term of debt. ASC 815 requires entities to recognize derivative instruments as either assets or liabilities in the statement of financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. The Company assessed the effectiveness of the hedging relationship under the hypothetical derivative method and noted that all of the critical terms of the hypothetical derivative and hedging instrument were the same. The hedging relationship continues to limit the Company’s exposure to the variability in interest rates under the Company’s term loans and related cash outflows. As such, the Company has deemed this hedging relationship as highly effective in offsetting cash flows attributable to hedged risk (variability in forecasted monthly interest payments) for the term of the term loans and interest rate swap agreements. All derivative financial instruments are recorded at fair value as a net asset or liability in the accompanying condensed consolidated balance sheets. As of September 30, 2021 and December 31, 2020 the fair value of the interest rate swaps included in Interest rate swap liabilities in the Company's condensed consolidated balance sheets was $15.6 million and $30.0 million, respectively.

The change in the fair value of the hedging instruments is recorded in Other comprehensive income. Amounts deferred in Other comprehensive income will be reclassified to Interest expense in the accompanying condensed consolidated statements of operations in the period in which the hedged item affects earnings.

Fair Value of Financial Instruments

The Company recognizes financial instruments in accordance with the authoritative guidance on fair value measurements and disclosures for financial assets and liabilities. This guidance defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. The guidance also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

These tiers include Level 1, defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.

The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable and debt. The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value, primarily due to short maturities. The carrying values of the Company’s debt instruments approximated their fair value based on rates currently available to the Company.

Recent Accounting Pronouncements

Recently issued accounting pronouncements not yet adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is evaluating the impact of this standard on our consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which creates an exception to the general recognition and measurement principle for contract assets and contract liabilities from contracts with customers acquired in a business combination. The new guidance will require companies to apply the definition of a performance obligation under accounting standard codification (“ASC”) Topic 606 to recognize and measure contract assets and contract liabilities (i.e., deferred revenue) relating to contracts with customers that are acquired in a business combination. Under current GAAP, an acquirer in a business combination is generally required to recognize and measure the assets it acquires and the liabilities it assumes at fair value on the acquisition date. The new guidance will result in the acquirer recording acquired contract assets and liabilities on the same

8

basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606. These amendments are effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is evaluating the impact of this standard on our consolidated financial statements.

2. Acquisitions

The Company performs quantitative and qualitative analyses to determine the significance of each acquisition to the financial statements the Company. Based on these analyses the below acquisitions were deemed to be insignificant on an individual and cumulative basis.

2021 Acquisitions

Acquisitions completed during the nine months ended September 30, 2021 include the following:

•Panviva - On June 24, 2021, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of Panviva Pty Ltd, an Australian proprietary company (“Panviva”), a cloud-based enterprise knowledge management solution. Revenue recorded since the acquisition date through September 30, 2021 were approximately $1.9 million. Revenue recorded for Panviva for the quarter ended September 30, 2021 were approximately $1.8 million.

•BlueVenn - On February 28, 2021 the Company entered into an agreement to purchase the shares comprising the entire issued share capital of BlueVenn Group Limited, a company limited by shares organized and existing under the laws of England and Wales (“BlueVenn”), a cloud-based customer data platform. Revenue recorded since the acquisition date through September 30, 2021 were approximately $9.0 million. Revenue recorded for BlueVenn for the quarter ended September 30, 2021 were approximately $3.6 million.

•Second Street - On January 19, 2021, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of Second Street Media, Inc., a Missouri corporation (“Second Street”), an audience engagement platform. Revenue recorded since the acquisition date through September 30, 2021 were approximately $7.5 million. Revenue recorded for Second Street for the quarter ended September 30, 2021 were approximately $2.8 million.

2020 Acquisition

The acquisition completed during the year ended December 31, 2020 were:

•Localytics - On February 6, 2020, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of Char Software, Inc (dba Localytics), a Delaware corporation (“Localytics”), a provider of mobile app personalization and analytics solutions.

Consideration

The following table summarizes the consideration transferred for the acquisitions described above (in thousands):

	Panviva		BlueVenn		Second Street		Localytics
Cash	$	19,931	$	53,535	$	25,436	$	67,655
Holdback (1)	3,517		2,429		5,000		345
Contingent consideration (2)	—		2,535		1,650		1,000
Working capital and other adjustments (3)	379		(537)		—		(5,238)
Total consideration	$	23,827	$	57,962	$	32,086	$	63,762

(1)Represents the cash holdbacks subject to indemnification claims that are payable 12 months following closing for Panviva, Second Street and Localytics and 18 months following closing for BlueVenn. In addition, the holdback payment to Panviva may be reduced by up to $1.6 million based on the future renewal of a specific customer. The fair value of this potential reduction was $0.0 million as of the acquisition date.

(2)Represents the acquisition date fair value of anticipated earn-out payments, which are based on the estimated probability of attainment of the underlying future performance-based conditions at the time of acquisition. The maximum potential payout for the BlueVenn, Second Street and Localytics earn-outs were $22.4 million, $3.0 million, and $1.0 million, respectively. The earn-out for Localytics was paid in full during the year ended December 31, 2020 based on an ending fair value of $1.0 million. Refer to Note 3 for further discussion regarding the calculation of fair value of acquisition related earn-outs.

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(3)In addition to working capital adjustments made to the purchase price of our acquisitions this line item includes a $5.2 million settlement in total consideration for Localytics related to a representation and warranty insurance settlement which is included in prepaids and other current assets on the Company’s consolidated balance sheets as of December 31, 2020.

Fair Value of Assets Acquired and Liabilities Assumed

The Company recorded the purchase of the acquisitions described above using the acquisition method of accounting and, accordingly, recognized the assets acquired and liabilities assumed at their fair values as of the date of the acquisition. The purchase accounting for the 2021 acquisitions of Panviva, BlueVenn, and Second Street are preliminary as the Company has not finalized the tax impact of these acquisitions. Management has recorded the purchase price allocations based upon acquired company information that is currently available. Management expects to complete the purchase accounting for BlueVenn and Second Street no later than the first quarter of 2022 and no later than the second quarter of 2022 for Panviva.

The following condensed table presents the preliminary and finalized acquisition-date fair value of the assets acquired and liabilities assumed for the acquisitions during the year ended December 31, 2020 and through the nine months ended September 30, 2021, as well as assets and liabilities (in thousands):

	Preliminary						Final
	Panviva		BlueVenn		Second Street		Localytics
Year Acquired	2021		2021		2021		2020
Cash	$	132	$	1,115	$	—	$	—
Accounts receivable	2,122		1,289		1,105		3,648
Other current assets	4,986		1,983		89		6,323
Operating lease right-of-use asset	197		1,357		489		7,605
Property and equipment	26		611		156		409
Customer relationships	9,757		18,888		14,600		30,500
Trade name	76		238		200		300
Technology	1,967		4,337		3,400		6,600
Goodwill	17,729		45,273		17,954		33,543
Other assets	33		24		13		6
Total assets acquired	37,025		75,115		38,006		88,934
Accounts payable	(1,257)		(2,772)		(230)		(2,382)
Accrued expense and other	(5,163)		(2,198)		(377)		(6,761)
Deferred tax liabilities	(3,355)		(4,066)		(4,324)		(3,382)
Deferred revenue	(3,226)		(6,760)		(500)		(4,812)
Operating lease liabilities	(197)		(1,357)		(489)		(7,835)
Total liabilities assumed	(13,198)		(17,153)		(5,920)		(25,172)
Total consideration	$	23,827	$	57,962	$	32,086	$	63,762

The Company uses third party valuation consultants to determine the fair values of assets acquired and liabilities assumed. Tangible assets are valued at their respective carrying amounts, which approximates their estimated fair value. The valuation of identifiable intangible assets reflects management’s estimates based on, among other factors, the use of established valuation methods. Customer relationships are valued using the multi-period excess earnings method. Developed technology and trade names are valued using the relief-from-royalty method.

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The following table summarizes the weighted-average useful lives, by major finite-lived intangible asset class, for intangibles acquired during the nine months ended September 30, 2021 and the year ended December 31, 2020 (in years):

	Useful Life
	September 30, 2021	December 31, 2020
Customer relationships	7.0	8.0
Trade name	2.0	2.0
Developed technology	5.0	5.0
Total weighted-average useful life	6.6	7.4

During the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill based on changes to management's estimates and assumptions.

The goodwill of $114.5 million for the above acquisitions is primarily attributable to the synergies expected to arise after the acquisition and the value of the acquired workforce. Goodwill that is deductible for tax purposes at the time of the acquisitions was $2.0 million.

Total transaction related expenses incurred with respect to acquisition activity during the three months ended September 30, 2021 and September 30, 2020 were $0.1 million and $0.0 million, respectively, and during the nine months ended September 30, 2021 and September 30, 2020 were $6.2 million and $3.5 million, respectively. Transaction related expenses, excluding transformation costs, include expenses such as banker fees, legal and professional fees, insurance costs, and deal bonuses. Transaction costs are included in acquisition-related expenses in our condensed consolidated statement of operations.

Other Acquisitions and Divestitures

From time to time we may purchase or sell customer relationships that meet certain criteria. During the year ended December 31, 2020, we completed customer relationship acquisitions totaling $0.2 million.

3. Fair Value Measurements

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. GAAP sets forth a three–tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three tiers are Level 1, defined as observable inputs, such as quoted market prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, which therefore requires an entity to develop its own assumptions.

As of September 30, 2021, the Company had accrued earnout business acquisition contingent consideration liabilities for which fair values are measured as Level 3 instruments. These contingent consideration liabilities were recorded at fair value on the acquisition date and are remeasured periodically based on the then assessed fair value and adjusted if necessary. The increases or decreases in the fair value of contingent consideration payable can result from changes in anticipated revenue levels, changes in assumed discount periods and rates and changes in foreign exchange rates. As the fair value measure is based on significant inputs that are not observable in the market, they are categorized as Level 3. Any adjustment related to subsequent changes in the fair value of contingent consideration is recorded in acquisition-related expense or other income (expense) in the Company's condensed consolidated statement of operations based on management's assessment of the nature of the liability. Earnout consideration liabilities are included in Due to sellers in the Company's condensed consolidated balance sheets.

In connection with entering into, and expanding, the Company's current credit facility, as discussed further in Note 6. Debt, the Company entered into interest rate swaps for the full 7 year term of the Company's term loans, effectively fixing our interest rate at 5.4% for the full value $540 million of the term loans. The fair value of the Company's swaps are measured at the end of each interim reporting period based on the then assessed fair value and adjusted if necessary. As the fair value measure is based on the market approach, they are categorized as Level 2. As of September 30, 2021 and December 31, 2020 the fair value of the interest rate swaps are included in Interest rate swap liabilities on the Company's condensed consolidated balance sheets.

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

	Fair Value Measurements at September 30, 2021
	(unaudited)
	Level 1		Level 2		Level 3		Total
Liabilities:
Earnout consideration liability	$	—	$	—	$	669	$	669
Interest rate swap liabilities	$	—	$	15,642	$	—	$	15,642

	Fair Value Measurements at December 31, 2020
	Level 1		Level 2		Level 3		Total
Liabilities:
Interest rate swap liabilities	$	—	$	30,032	$	—	$	30,032

The following table presents additional information about earnout consideration liabilities measured at fair value on a recurring basis and for which the Company has utilized significant unobservable (Level 3) inputs to determine fair value (in thousands) (unaudited):

	September 30, 2021
	(unaudited)
Balance at December 31, 2020	$	—
Acquisitions and settlements:
Acquisitions	4,185
Remeasurement adjustments:
Gain included in earnings	(3,503)
Foreign currency translation adjustments	(13)
Balance at September 30, 2021	$	669

Quantitative Information about Level 3 Fair Value Measurements

The significant unobservable inputs used in the fair value measurement of the Company's contingent consideration liabilities designated as Level 3 are as follows:

	Fair Value at September 30, 2021		Valuation Technique	Significant Unobservable Inputs
Contingent acquisition consideration: (BlueVenn and Second Street)	$	669	Binary option model	Expected future annual revenue streams and probability of achievement

Sensitivity to Changes in Significant Unobservable Inputs

As presented in the table above, the significant unobservable inputs used in the fair value measurement of contingent consideration related to business acquisitions are forecasts of expected future annual revenues as developed by the Company's management and the probability of achievement of those revenue forecast. Significant increases (decreases) in these unobservable inputs in isolation would likely result in a significantly (lower) higher fair value measurement.

Debt

The Company believes the carrying value of its long-term debt at September 30, 2021 approximates its fair value based on the variable interest rate feature or based upon interest rates currently available to the Company. The estimated fair value of the Company's debt, before debt discount, at September 30, 2021 and December 31, 2020 are $529.2 million and $533.3 million, respectively.

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4. Goodwill and Other Intangible Assets

Changes in the Company’s goodwill balance for the nine months ended September 30, 2021 are summarized in the table below (in thousands):

Balance at December 31, 2020	$	383,598
Acquired in business combinations	85,102
Adjustment related to finalization of current year business combinations	(4,146)
Foreign currency translation adjustment	(4,376)
Balance at September 30, 2021	$	460,178

Net intangible assets include the estimated acquisition-date fair values of customer relationships, marketing-related assets, developed technology, and non-compete agreements that the Company recorded as part of its business acquisitions.

The following is a summary of the Company’s intangible assets, net (in thousands):

	Estimated Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
September 30, 2021:
Customer relationships	1-10	$	359,165	$	116,707	$	242,458
Trade name	1.5-10	9,722		5,494		4,228
Developed technology	4-9	88,387		42,266		46,121
Non-compete agreements	3	1,148		1,148		—
Total intangible assets		$	458,422	$	165,615	$	292,807

	Estimated Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
December 31, 2020:
Customer relationships	1-10	$	318,941	$	89,131	$	229,810
Trade name	1.5-10	9,283		4,763		4,520
Developed technology	4-9	79,382		33,929		45,453
Non-compete agreements	3	1,148		956		192
Total intangible assets		$	408,754	$	128,779	$	279,975

The Company periodically reviews the estimated useful lives of its identifiable intangible assets, taking into consideration any events or circumstances that might result in either a diminished fair value or revised useful life. Management recorded no impairments of intangible assets or goodwill during the three and nine months ended September 30, 2021 or the year ended December 31, 2020. Total amortization expense during the three months ended September 30, 2021 and September 30, 2020 was $13.2 million and $11.2 million, respectively, and during the nine months ended September 30, 2021 and September 30, 2020 was $37.9 million and $33.6 million, respectively.

As of September 30, 2021, the estimated annual amortization expense for the next five years and thereafter is as follows (in thousands):

	Amortization Expense
Year ending December 31:
Remainder of 2021	$	12,962
2022	49,281
2023	46,936
2024	44,588
2025	41,300
2026 and thereafter	97,740
Total	$	292,807

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5. Income Taxes

The Company’s income tax benefit for the three and nine months ended September 30, 2021 and September 30, 2020 reflects its estimate of the effective tax rates expected to be applicable for the full years, adjusted for any discrete events that are recorded in the period in which they occur. The estimates are re-evaluated each quarter based on the estimated tax expense for the full year.

The tax benefit of $3.3 million and $6.2 million recorded for the three and nine months ended September 30, 2021, respectively, are primarily related to the deferred tax benefit attributable to the release of valuation allowance related to the acquisition of deferred tax liabilities associated with the Company’s business combinations occurring during the six months ended June 30, 2021, as discussed in Note 2. Acquisitions, the deferred tax benefit attributable to the reduction in deferred tax liabilities associated with the transfer of intangibles between foreign and domestic jurisdictions, and foreign income taxes associated with our combined non-U.S. operations. These tax benefits are offset by changes in deferred tax liabilities associated with amortization of United States tax deductible goodwill and state taxes in certain states in which the Company does not file on a consolidated basis or have net operating loss carryforwards and the impact, recorded as discrete, of enacted future changes in UK tax rates on the balance of deferred tax assets and liabilities per tax law enacted in June 2021. The release of valuation allowance is attributable to ASC 805-740-30-3 and acquisitions of domestic entities with deferred tax liabilities that, upon acquisition, or shortly thereafter, allowed us to recognize certain deferred tax assets of approximately $6.5 million during the nine months ended September 30, 2021 that had previously been offset by a valuation allowance. $4.3 million of the benefit for the release of valuation allowance was primarily recorded during the three months ended March 31, 2021, and $2.2 million was primarily recorded during the three months ended September 30, 2021.

The tax provision of $1.1 million and benefit of $3.8 million recorded for the three and nine months ended September 30, 2020, respectively, are primarily related to the deferred tax benefit attributable to the release of valuation allowance related to the acquisition of deferred tax liabilities associated with the Localytics business combination, as discussed in Note 2. Acquisitions, and foreign income taxes associated with our combined non-U.S. operations. These tax benefits are offset by changes in deferred tax liabilities associated with amortization of United States tax deductible goodwill, state taxes in certain states in which the Company does not file on a consolidated basis or have net operating loss carryforwards, and an increase in net deferred tax liabilities in the UK associated with the change in the applicable UK tax rate. The release of valuation allowance is attributable to ASC 805-740-30-3 and acquisitions of domestic entities with deferred tax liabilities that, upon acquisition, allowed us to recognize certain deferred tax assets of approximately $4.2 million during the nine months ended September 30, 2020 that had previously been offset by a valuation allowance. An adjustment reducing the benefit by approximately $0.2 million was recognized during the three months ended September 30, 2020.

The Company has historically incurred operating losses in the United States and, given its cumulative losses and limited history of profits, has recorded a valuation allowance against its United States net deferred tax assets, exclusive of tax deductible goodwill, at September 30, 2021 and September 30, 2020, respectively.

The Company has reflected any uncertain tax positions primarily within its long-term taxes payable and a portion within deferred tax assets. The Company and its subsidiaries file tax returns in the U.S. federal jurisdiction and in several state and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations for years ending before December 31, 2017 and is no longer subject to state and local or foreign income tax examinations by tax authorities for years ending before December 31, 2016, other than where cross-border transactions extend the statute of limitations. The Company is not currently under audit for federal, state or any foreign jurisdictions. U.S. operating losses generated in years prior to 2017 remain open to adjustment until the statute of limitations closes for the tax year in which the net operating losses are utilized.

6. Debt

Long-term debt consisted of the following at September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021		December 31, 2020
Senior secured loans (includes unamortized discount of $10,085 and $11,648 based on an imputed interest rate of 5.8% and 5.8%, at September 30, 2021 and December 31, 2020, respectively)	$	519,116	$	521,603
Less current maturities	(3,158)		(3,166)
Total long-term debt	$	515,958	$	518,437

Credit Facility

On August 6, 2019, the Company entered into a credit agreement (the “Credit Facility”) which provides for (i) a fully-drawn $350 million, 7 year, senior secured term loan B facility (the “Term Loan”) and (ii) a new $60 million, 5 year, revolving credit facility (the “Revolver”) that was fully available as of September 30, 2021. The Credit Facility replaced the Company's

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previous credit agreement. All outstanding balances under our previous credit facility were paid off using proceeds from our new Credit Facility.

On November 26, 2019 (the “Closing Date”), the Company entered into a First Incremental Assumption Agreement (the “Incremental Assumption Agreement”) which provides for a term loan facility to be established under the Credit Facility in an aggregate principal amount of $190.0 million (the “2019 Incremental Term Loan”) which is in addition to the existing $350.0 million term loans outstanding under the Credit Facility and the $60.0 million revolving credit facility under the Credit Facility.

Payment terms

The Term Loans (including the 2019 Incremental Term Loan) are repayable on a quarterly basis beginning on December 31, 2019 by an amount equal to 0.25% (1.00% per annum) of the aggregate principal amount of such loan. Any amount remaining unpaid is due and payable in full on August 6, 2026 (the “Term Loan Maturity Date”).

At the option of the Company, the Term Loans (including the 2019 Incremental Term Loan) accrue interest at a per annum rate based on (i) the Base Rate plus a margin of 2.75% or (ii) the rate (not less than 0.00%) for Eurodollar deposits quoted on the LIBOR01 or LIBOR02 pages on the Reuters Screen, or as otherwise determined in accordance with the Credit Facility (based on a period equal to 1, 2, 3 or 6 months or, if available and agreed to by all relevant Lenders and the Agent, 12 months or such period of less than 1 month) plus a margin of 3.75%. The Base Rate for any day is a rate per annum equal to the greatest of (i) the prime rate in effect on such day, (ii) the federal funds effective rate (not less than 0.00%) in effect on such day plus ½ of 1.00%, and (ii) the Eurodollar rate for a one month interest period beginning on such day plus 1.00%.

Accrued interest on the loans will be paid quarterly or, with respect to loans that are accruing interest based on the Eurodollar rate, at the end of the applicable interest rate period.

Interest rate swaps

On August 6, 2019, the Company entered into an interest rate hedge instrument for the full 7 year term, effectively fixing our interest rate at 5.4% for the Term Loan. In addition, on November 26, 2019, the Company entered into interest rate swap agreements to hedge the interest rate risk associated with the Company’s floating rate obligations under the 2019 Incremental Term Loan. These interest rate swaps fix the Company's interest rate (including the hedge premium) at 5.4% for the term of the Credit Facility. The interest rate associated with our new $60 million, 5 year, Revolver remains floating.

The interest rate swap has been designated as a cash flow hedge and is valued using a market approach, which is a Level 2 valuation technique. At September 30, 2021, the fair value of the interest rate swap was a $15.6 million liability as a result of a decline in short term interest rates since entering into the swap agreements. The decrease in the fair value of the interest rate swap liability during the three and nine months ended September 30, 2021 is the result of an increase in short term interest rates during the respective periods. In the next twelve months, the Company estimates that $3.3 million will be reclassified from Accumulated other comprehensive income (loss) and recorded as an increase to Interest expense. Increases/decreases in cash paid for interest as a result of the Company’s interest rate swaps are included cash flows from operations.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
(Loss) gain recognized in Other comprehensive income on derivative financial instruments	$	2,112	$	(441)	$	14,391	$	(35,497)
(Loss) gain on interest rate swap (included in Interest expense on our consolidated statement of operations)	$	(2,090)	$	(2,013)	$	(6,158)	$	(3,467)

Revolver

Loans under the Revolver are available up to $60 million. The Revolver provides a sub-facility whereby the Company may request letters of credit (the “Letters of Credit”) in an aggregate amount not to exceed, at any one time outstanding, $10.0 million for the Company. The aggregate amount of outstanding Letters of Credit are reserved against the credit availability under the Maximum Revolver Amount. The Company incurs a 0.50% per annum unused line fee on the unborrowed balance of the Revolver which is paid quarterly.

Loans under the Revolver may be borrowed, repaid and reborrowed until August 6, 2024 (the “Maturity Date”), at which time all amounts borrowed under the Revolver must be repaid. As of September 30, 2021, the Company had no borrowings outstanding under the Revolver or related sub-facility.

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Covenants

The Credit Facility contains customary affirmative and negative covenants. The negative covenants limit the ability of the Loan Parties to, among other things (in each case subject to customary exceptions for a credit facility of this size and type):

•Incur additional indebtedness or guarantee indebtedness of others;

•Create liens on their assets;

•Make investments, including certain acquisitions;

•Enter into mergers or consolidations;

•Dispose of assets;

•Pay dividends and make other distributions on the Company’s capital stock, and redeem and repurchase the Company’s capital stock;

•Enter into transactions with affiliates; and

•Prepay indebtedness or make changes to certain agreements.

The Credit Facility has no financial covenants as long as less than 35% of the Revolver is drawn as of the last day of any fiscal quarter. If 35% of the Revolver is drawn as of the last day of a given fiscal quarter the Company will be required to maintain a Total Leverage Ratio (the ratio of funded indebtedness as of such date less the amount of unrestricted cash and cash equivalents of the Company and its guarantors in an amount not to exceed $50.0 million, to adjusted EBITDA (calculated on a pro forma basis including giving effect to any acquisition)), measured on a quarter-end basis for each four consecutive fiscal quarters then ended, of not greater than 6.00 to 1.00.

In addition, the Credit Facility contains customary events of default subject to customary cure periods for certain defaults that include, among others, non-payment defaults, inaccuracy of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness, change in control, bankruptcy and insolvency defaults and material judgment defaults. The occurrence of an event of default could result in the acceleration of Term Loans and Revolver and a right by the agent and lenders to exercise remedies. At the election of the lenders, a default interest rate shall apply on all obligations during an event of default, at a rate per annum equal to 2.00% above the applicable interest rate. The Term Loan and Revolver are secured by substantially all of the Company's assets. As of September 30, 2021 the Company was in compliance with all covenants under the Credit Facility.

Cash interest costs averaged 5.4% and 5.4% for the nine months ended September 30, 2021 and for the year ended December 31, 2020, respectively. In addition, as of September 30, 2021 and December 31, 2020 the Company had $10.1 million and $11.6 million, respectively, of unamortized deferred financing costs associated with the Credit Facility. These financing costs will be amortized to non-cash interest expense over the remaining term of the Credit Facility.

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7. Net Loss Per Share

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Numerator:
Net Loss	$	(11,015)	$	(11,310)	$	(50,741)	$	(45,550)
Denominator:
Weighted–average common shares outstanding, basic and diluted	30,428,675		27,220,134		30,167,171		25,725,495
Net loss per common share, basic and diluted	$	(0.36)	$	(0.42)	$	(1.68)	$	(1.77)

Due to the net losses for the three and nine months ended September 30, 2021 and September 30, 2020, respectively, basic and diluted loss per share were the same. The following table sets forth the anti–dilutive common share equivalents as of September 30, 2021 and September 30, 2020:

	September 30,
	2021	2020
Stock options	242,984	314,310
Restricted stock awards	1,000	168,124
Restricted stock units	2,034,186	1,744,595
Performance restricted stock units	63,537	66,297
Total anti–dilutive common share equivalents	2,341,707	2,293,326

8. Commitments and Contingencies

Purchase Commitments

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.

In addition, the Company purchased software development services pursuant to a technology services agreement with DevFactory FZ-LLC for the three months ended September 30, 2021 and September 30, 2020 totaling $2.4 million and $1.8 million, respectively, and for the nine months ended September 30, 2021 and September 30, 2020 totaling $7.2 million and $5.5 million, respectively. The remaining purchase obligation after September 30, 2021 through December 31, 2021 is $2.4 million. See Note 11. Related Party Transactions for more information regarding our purchase commitment to this related party.

Litigation

In the normal course of business, the Company may become involved in various lawsuits and legal proceedings. At this time, the Company is not involved in any current or pending legal proceedings, and does not anticipate any legal proceedings, that may have a material adverse effect on the Company's condensed consolidated balances sheets or condensed consolidated statement of operations.

In addition, when we acquire companies, we require that the sellers provide industry standard indemnification for breaches of representations and warranties contained in the acquisition agreement and we will withhold payment of a portion of the purchase price for a period of time in order to satisfy any claims that we may make for indemnification. In certain transactions, we agree with the sellers to purchase a representation and warranty insurance policy that will pay such claims for indemnification. From time to time we may have one or more claims for indemnification pending. Similarly, we may have one or more ongoing negotiations related to the amount of an earnout. Gain contingencies related to indemnification claims are not recognized in our condensed consolidated financial statements until realized.

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9. Stockholders' Equity

Registration Statement

On August 10, 2020, we filed a registration statement on Form S-3 (File No. 333-243728) (the “2020 S-3”), which became effective automatically upon its filing and covers an unlimited amount of securities. The 2020 S-3, will remain effective through August 2023.

Accumulated Other Comprehensive Income (Loss)

Comprehensive income (loss) consists of two elements, net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) items are recorded in the stockholders’ equity section of our condensed consolidated balance sheets and excluded from net income (loss). Our other comprehensive income (loss) consists primarily of foreign currency translation adjustments for subsidiaries with functional currencies other than the U.S. dollar, unrealized translation gains (losses) on intercompany loans with foreign subsidiaries, and unrealized gains (losses) on interest rate swaps.

The following table shows the components of accumulated other comprehensive loss, net of income taxes, (“AOCI”) in the stockholders’ equity section of our condensed consolidated balance sheets at the dates indicated (in thousands):

	September 30, 2021		December 31, 2020
Foreign currency translation adjustment	$	(4,966)	$	644
Unrealized translation gain on intercompany loans with foreign subsidiaries	2,270		3,154
Unrealized loss on interest rate swaps	(15,642)		(30,032)
Total accumulated other comprehensive loss	$	(18,338)	$	(26,234)

The unrealized translation gain on intercompany loans with foreign subsidiaries as of September 30, 2021 is net of income tax expense of $1.8 million. The tax benefit related to unrealized translation gains on intercompany loans for the three and nine months ended September 30, 2021 was $0.5 million and $0.2 million, respectively. The income tax expense/benefit allocated to each component of other comprehensive income (loss) for all other periods and components is not material. The Company reclassifies taxes from AOCI to earnings as the items to which the tax effects relate are similarly reclassified.

The functional currency of our foreign subsidiaries are primarily the local currencies. Results of operations for foreign subsidiaries are translated into United States dollars using the average exchange rates on a monthly basis during the year. The assets and liabilities of those subsidiaries are translated into United States dollars using the exchange rates in effect at the balance sheet date. The related translation adjustments are recorded in a separate component of stockholders' equity in accumulated other comprehensive loss.

The Company has intercompany loans that were used to fund the acquisitions of foreign subsidiaries. Due to the long-term nature of the loans, the unrealized translation gains (losses) resulting from re-measurement are recognized as a component of accumulated other comprehensive income (loss).

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Stock-Based Compensation

The Company recognizes stock-based compensation expense from all awards in the following expense categories (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Cost of revenue	$	539	$	624	$	1,544	$	1,512
Research and development	671		1,005		2,327		2,639
Sales and marketing	1,636		968		4,392		2,415
General and administrative (1)	9,201		8,366		35,158		24,697
Total	$	12,047	$	10,963	$	43,421	$	31,263

(1)In March 2021 our former co-President and Chief Operating Officer (“COO”) resigned from his positions and entered into an advisory agreement with the Company pursuant to which he will serve as a strategic advisor to the Company through December 31, 2022. Stock-based compensation for the nine months ended September 30, 2021 includes $6.3 million in incremental stock-based compensation expense related to the deemed modification of the unvested portion of grants held by our former COO at the time of transition, even though these shares continue to vest over their existing vesting schedule through 2022. In accordance with ASC 718, the fair value of these awards were modified and all related expense accelerated on the date of modification as a result of the reduction in required service.

Restricted Stock Units

Beginning in 2019, the Company began granting restricted stock units under its 2014 Stock Incentive Plan, in lieu of restricted stock awards, primarily for stock plan administrative purposes. Restricted stock unit activity during the nine months ended September 30, 2021 was as follows:

	Number of Restricted Stock Units Outstanding	Weighted-Average Grant Date Fair Value
Unvested balances at December 31, 2020	1,261,290	$	39.92
Units granted	1,220,066	47.67
Units vested	(383,371)	40.14
Awards forfeited	(63,799)	42.81
Unvested balances at September 30, 2021	2,034,186	$	44.43

Performance Based Restricted Stock Units

In 2020 and 2021 fifty percent of the awards made to our Chief Executive Officer were performance based restricted stock units ("PRSUs"). The PRSU agreements provide that the quantity of units subject to vesting may range from 0% to 300% of the units granted per the table below based on the Company's absolute total shareholder return at the end of the eighteen month performance periods. Units granted per the table below are based on a 100% target payout. Compensation expense is recognized over the required service period of the grant and is determined based on the grant date fair value of the award and is not subject to fluctuation due to achievement of the underlying market-based target.

PRSU activity during the nine months ended September 30, 2021 was as follows:

	Number of PRSUs Outstanding	Weighted-Average Grant Date Fair Value
Unvested balances at December 31, 2020	66,297	$	79.72
Units granted	63,537	84.87
Incremental PRSUs vested in period	69,048
Units vested	(135,345)	79.72
Unvested balances at September 30, 2021	63,537	$	84.87

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Significant assumptions used in the Monte Carlo simulation model for the PRSUs granted during the nine months ended September 30, 2021 and year ended December 31, 2020 are as follows:

	September 30, 2021	December 31, 2020
Expected volatility	53.6%	45.1%
Risk-free interest rate	0.1%	1.3%
Remaining performance period (in years)	1.35	1.35
Dividend yield	—	—

Restricted Stock Awards

Restricted share activity during the nine months ended September 30, 2021 was as follows:

	Number of Restricted Shares Outstanding	Weighted-Average Grant Date Fair Value
Unvested balances at December 31, 2020	34,508	$	30.13
Awards vested	(33,508)	30.11
Awards forfeited	—	—
Unvested balances at September 30, 2021	1,000	$	30.61

Stock Option Activity

Stock option activity during the nine months ended September 30, 2021 was as follows:

	Number of Options Outstanding	Weighted– Average Exercise Price
Outstanding at December 31, 2020	264,002	$	8.93
Options exercised	(20,610)	11.07
Options expired	(408)	1.56
Outstanding at September 30, 2021	242,984	$	8.76

10. Revenue Recognition

Revenue Recognition Policy

Revenues are recognized when control of the promised goods or services is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services over the term of the agreement, generally when made available to the customers. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenues are recognized net of sales credits and allowances. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

Revenue is recognized based on the following five step model in accordance with ASC 606, Revenue from Contracts with Customers:

•Identification of the contract with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations in the contract

•Recognition of revenue when, or as, the Company satisfies a performance obligation

Performance obligations under our contracts consist of subscription and support, perpetual licenses, and professional services revenues within a single operating segment.

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Subscription and Support Revenue

The Company's software solutions are available for use as hosted application arrangements under subscription fee agreements without licensing perpetual rights to the software. Subscription fees from these applications are recognized over time on a ratable basis over the customer agreement term beginning on the date the Company's solution is made available to the customer. As our customers have access to use our solutions over the term of the contract agreement we believe this method of revenue recognition provides a faithful depiction of the transfer of services provided. Our subscription contracts are generally 1 to 3 years in length. Amounts that have been invoiced are recorded in accounts receivable and deferred revenue or subscription and support revenue, depending on whether the revenue recognition criteria have been met. Additional fees for monthly usage above the levels included in the standard subscription fee are recognized as subscription and support revenue at the end of each month and is invoiced concurrently. Subscription and support revenue includes revenue related to the Company’s digital engagement application which provides short code connectivity for its two-way short message service (“SMS”) programs and campaigns. As discussed further in the “Principal vs. Agent Considerations” section below, the Company recognizes revenue related to these messaging-related subscription contracts on a gross basis.

Perpetual License Revenue

The Company also records revenue from the sales of proprietary software products under perpetual licenses. Revenue from distinct on-premises licenses is recognized upfront at the point in time when the software is made available to the customer. The Company’s products do not require significant customization.

Professional Services Revenue

Professional services provided with subscription and support licenses and perpetual licenses consist of implementation fees, data extraction, configuration, and training. The Company’s implementation and configuration services do not involve significant customization of the software and are not considered essential to the functionality. Revenue from professional services are recognized over time as such services are performed. Revenue for fixed price services are generally recognized over time applying input methods to estimate progress to completion. Revenue for consumption-based services are generally recognized as the services are performed.

Significant Judgments

Performance Obligations and Standalone Selling Price

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of accounting. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. The Company has contracts with customers that often include multiple performance obligations, usually including professional services sold with either individual or multiple subscriptions or perpetual licenses. For these contracts, the Company records individual performance obligations separately if they are distinct by allocating the contract's total transaction price to each performance obligation in an amount based on the relative standalone selling price (“SSP”), of each distinct good or service in the contract.

Judgment is required to determine the SSP for each distinct performance obligation. A residual approach is only applied in limited circumstances when a particular performance obligation has highly variable and uncertain SSP and is bundled with other performance obligations that have observable SSP. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. We determine the SSP based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, historical standalone sales, customer demographics, geographic locations, and the number and types of users within our contracts.

Principal vs. Agent Considerations

The Company evaluates whether it is the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis) for vendor reseller agreements and messaging-related subscription agreements. Where the Company is the principal, it first obtains control of the inputs to the specific good or service and directs their use to create the combined output. The Company's control is evidenced by its involvement in the integration of the good or service on its platform before it is transferred to its customers, and is further supported by the Company being primarily responsible to its customers and having a level of discretion in establishing pricing. While none of the factors individually are considered presumptive or determinative, in reaching conclusions on gross versus net revenue recognition, the Company places the most weight on the analysis of whether or not it is the primary obligor in the arrangement.

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

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

Contract Balances

The timing of revenue recognition, billings and cash collections can result in billed accounts receivable, unbilled receivables, and deferred revenue. Billings scheduled to occur after the performance obligation has been satisfied and revenue recognition has occurred result in unbilled receivables, which are expected to be billed during the succeeding twelve-month period and are recorded in Unbilled receivables in our condensed consolidated balance sheets. A contract liability results when we receive prepayments or deposits from customers in advance for implementation, maintenance and other services, as well as subscription fees. Customer prepayments are generally applied against invoices issued to customers when services are performed and billed. We recognize contract liabilities as revenue upon satisfaction of the underlying performance obligations. Contract liabilities that are expected to be recognized as revenue during the succeeding twelve-month period are recorded in Deferred revenue and the remaining portion is recorded in 'Deferred revenue noncurrent' on the accompanying condensed consolidated balance sheets at the end of each reporting period.

Deferred revenue primarily consists of amounts that have been billed to or received from customers in advance of revenue recognition and prepayments received from customers in advance for maintenance and other services, as well as initial subscription fees. We recognize deferred revenue as revenue when the services are performed, and the corresponding revenue recognition criteria are met. Customer prepayments are generally applied against invoices issued to customers when services are performed and billed. Our payment terms vary by the type and location of our customer and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customer types, we require payment before the products or services are delivered to the customer.

Unbilled Receivables

Unbilled receivables represent amounts for which the Company has recognized revenue, pursuant to its revenue recognition policy, for software licenses already delivered and professional services already performed, but invoiced in arrears and for which the Company believes it has an unconditional right to payment. As of September 30, 2021 and December 31, 2020, unbilled receivables were $5.8 million and $4.6 million, respectively.

Deferred Commissions

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 new customer contracts are capitalized upon contract signing and amortized on a systematic basis that is consistent with the transfer of goods and services over the expected life of the customer relationships, which has been determined to be approximately 6 years. The expected life of our customer relationships is based on historical data and management estimates, including estimated renewal terms and the useful life of the associated underlying technology. Commissions paid on renewal contracts are not commensurate with commissions paid on new customer contracts, as such, deferred commissions related to renewals are capitalized and amortized over the estimated average contractual renewal term of 18 months. We utilized the 'portfolio approach' practical expedient permitted under ASC 606-10-10-4, which allows entities to apply the guidance to a portfolio of contracts with similar characteristics as the effects on the financial statements of this approach would not differ materially from applying the guidance to individual contracts. The portion of capitalized costs expected to be amortized during the succeeding twelve-month period is recorded in current assets as deferred commissions, current, and the remainder is recorded in long-term assets as deferred commissions, net of current portion. Amortization expense is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations. Deferred commissions are reviewed for impairment whenever events or circumstances

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indicate their carrying value may not be recoverable consistent with the Company's long-lived assets policy. No indicators of impairment were identified during the nine months ended September 30, 2021.

The following table presents the activity impacting deferred commissions for the nine months ended September 30, 2021 (in thousands):

Balance at December 31, 2020	$	18,746
Capitalized deferred commissions	10,240
Amortization of deferred commissions	(6,097)
Balance at September 30, 2021	$	22,889

Commissions capitalized in excess of amortization of deferred commissions for the three and nine months ended September 30, 2021 were $0.6 million and $4.1 million, respectively.

Deferred Revenue

Deferred revenue represents either customer advance payments or billings for which the aforementioned revenue recognition criteria have not yet been met.

Deferred revenue is mainly unearned revenue related to subscription services and support services. During the nine months ended September 30, 2021, we recognized $76.3 million and $1.9 million of subscription services and professional services revenue, respectively, that was included in the deferred revenue balances at the beginning of the period. In addition, during the nine months ended September 30, 2021 we recognized $5.9 million in revenue that was included in the acquired deferred revenue balance of our 2021 acquisitions as disclosed in Note 2. Acquisitions.

Remaining Performance Obligations

As of September 30, 2021, approximately $263.2 million of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 69% of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

Disaggregated Revenue

The Company disaggregates revenue from contracts with customers by geography and revenue generating activity, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

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Revenue by geography is based on the ship-to address of the customer, which is intended to approximate where the customers' users are located. The ship-to country is generally the same as the billing country. The Company has operations primarily in the U.S., United Kingdom and Canada. Information about these operations is presented below (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues:
Subscription and support:
United States	$	50,866	$	53,356	$	154,683	$	149,946
United Kingdom	11,886		9,518		33,938		28,864
Canada	3,355		3,318		10,317		11,260
Other International	6,157		4,800		16,384		12,512
Total subscription and support revenue	72,264		70,992		215,322		202,582
Perpetual license:
United States	628		345		1,219		849
United Kingdom	—		—		11		16
Canada	1		14		53		71
Other International	55		52		168		327
Total perpetual license revenue	684		411		1,451		1,263
Professional services:
United States	2,014		1,865		6,208		6,773
United Kingdom	753		432		2,219		1,621
Canada	117		137		309		371
Other International	221		347		777		921
Total professional service revenue	3,105		2,781		9,513		9,686
Total revenue	$	76,053	$	74,184	$	226,286	$	213,531

11. Related Party Transactions

We are a party to two agreements, as detailed below, with companies controlled by ESW Capital LLC (“ESW”), a non-management investor in the Company which historically held more than 5% of the Company's capital stock. As of July 9, 2021 ESWs ownership in Upland was reduced to 4.8% at which point DevFactory was no longer considered a related party.

•On March 28, 2017, the Company entered into an amendment to the Amended and Restated Technology Services Agreement with DevFactory FZ LLC (“DevFactory”) to extend the initial term end date from December 31, 2017 to December 31, 2021. Additionally, the Company amended the option for either party to renew annually for one additional year. The effective date of the amendment is January 1, 2017. The Company has an outstanding purchase commitment in 2021 for software development services pursuant to this agreement in the amount of $9.6 million. For years after 2021, the purchase commitment amount for software development services will be equal to the prior year purchase commitment increased (decreased) by the percentage change in total revenue for the prior year as compared to the preceding year. For example, if 2021 total revenues increase by 10% as compared to 2020 total revenues, then the 2022 purchase commitment will increase by approximately $1.0 million from the 2021 purchase commitment amount to approximately $10.6 million. The Company purchased software development services pursuant to this agreement with DevFactory of $2.4 million and $1.8 million during the three months ended September 30, 2021 and September 30, 2020, respectively, and $7.2 million and $5.5 million during the nine months ended September 30, 2021 and September 30, 2020, respectively. As of September 30, 2021 and December 31, 2020 amounts included in accounts payable and accrued liabilities owed to this company totaled $2.4 million and $0.0 million, respectively.

•The Company purchased services from Crossover, Inc. ("Crossover"), a company controlled by ESW Capital, LLC during the three months ended September 30, 2021 and September 30, 2020 of approximately $1.0 million and $1.2 million, respectively, and $2.9 million and $3.7 million during the nine months ended September 30, 2021 and September 30, 2020, respectively. Crossover provides a proprietary technology system to help the Company identify, screen, select, assign, and connect with necessary resources from time to time to perform technology software

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development and other services throughout the Company, and track productivity of such resources. While there are no purchase commitments with Crossover, the Company continues to use its services in 2021. As of September 30, 2021 and December 31, 2020 amounts included in accounts payable and accrued liabilities owed to this company totaled $0.8 million and $0.6 million, respectively.

The Company previously had an arrangement with a former subsidiary, Visionael Corporation ("Visionael"), to provide management, human resource, payroll and administrative services. John T. McDonald, the Company's Chief Executive Officer and Chairman of the Board, beneficially holds approximately 26.18% interest in Visionael. Visionael ceased operations effective July 31, 2021. Fees earned from this arrangement for the three months ended September 30, 2021 and September 30, 2020 were $0 and $15,000, respectively, and $0 and $45,000 during the nine months ended September 30, 2021 and September 30, 2020, respectively. In connection with its arrangement with Visionael, the Company has provided advances to Visionael to help cover short term working capital needs. As of September 30, 2021 and December 31, 2020 advances to Visionael included in Prepaid and other on the Company’s condensed consolidated balance sheets totaled $0.0 million and $0.4 million, respectively, net of allowance for credit losses. During the nine months ended September 30, 2021 the Company recognized an allowance for credit loss of $0.4 million against the remaining outstanding balance.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the year ended December 31, 2020, filed on February 25, 2021. In addition to historical information, this Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements generally relate to future events or our future financial or operating performance. Forward-looking statements may be identified by the use of forward-looking words such as “anticipate,” “believe,” “may,” “will,” “continue,” “seek,” “estimate,” “intend,” “hope,” “predict,” “could,” “should,” “would,” “project,” “plan,” “expect” or the negative or plural of these words or similar expressions, although not all forward-looking statements contain these words. These forward-looking statements include, but are not limited to, statements concerning the following:

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

•our ability to obtain financing in the future on acceptable terms or at all;

•our expectations with respect to revenue, cost of revenue and operating expenses in future periods;

•our ability to adapt to the impacts on the global economy associated with the ongoing COVID-19 pandemic;

•our ability to attract and retain customers;

•our ability to successfully enter new markets and manage our international expansion;

•our ability to comply with privacy laws and regulations;

•our ability to deliver high-quality customer service;

•the growth of demand for enterprise work management applications;

•our plans regarding, and our ability to effectively manage, our growth;

•maintaining our senior management team and key personnel;

•the performance of our resellers;

•our ability to adapt to changing market conditions and competition;

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

•economic and financial conditions;

•our ability to integrate our applications with other software applications;

•maintaining and expanding our relationships with third parties;

•costs associated with defending intellectual property infringement and other claims;

•our ability to maintain, protect and enhance our brand and intellectual property;

•our expectations with regard to trends, such as seasonality, which affect our business;

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

•our plans with respect to foreign currency exchange risk and inflation;

•our beliefs regarding how our applications benefit customers and what our competitive strengths are;

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

•the risk that we did not consider another contingency included in this list;

•our expectations as to the payment of dividends; and

•other risk factors included under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 25, 2021, as updated by this Quarterly Report on Form 10-Q and periodically updated as necessary in our future quarterly reports on Form 10-Q and other filings that we make with the SEC.

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The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from our forward-looking statements, including risks and uncertainties detailed in this and our other reports and filings with the SEC. The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments may cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

Overview

We provide cloud-based enterprise work management software. We define enterprise work management software as software applications that enable organizations to plan, manage and execute projects and work. Our family of applications enables users to manage their projects, professional workforce and IT investments, automate document-intensive business processes, and effectively engage with their customers, prospects, and community via the web and mobile technologies.

The continued growth of an information-based economy has given rise to a large and growing group of knowledge workers who operate in dynamic work environments as part of geographically dispersed and virtual teams. We believe that manual processes and legacy on- premise enterprise systems are insufficient to address the needs of the modern work environment. In order for knowledge workers to be successful, they need to interact with intuitive enterprise work systems in a collaborative way, including real-time access. Today, legacy processes and systems are being disrupted and replaced by cloud-based enterprise work management software that improves visibility, collaboration and productivity.

In response to these changes, we are providing organizations and their knowledge workers with software applications that better align resources with business objectives and increase visibility, governance, collaboration, quality of customer experience, and responsiveness to changes in the business environment. This results in increased work capacity, higher productivity, better execution, and greater levels of customer engagement. Our applications are easy-to-use, scalable, and offer real-time collaboration for knowledge workers distributed on a local or global scale. Our software applications address diverse enterprise work challenges and our customers currently use our applications in the following functional areas:

•Marketing. Digital marketing, e-commerce, and customer service teams use our applications to interact with consumers across multiple channels to acquire new customers, drive product and service utilization, resolve issues, and build brand loyalty. Our applications deliver value to CX-focused organizations across a variety of use cases including mobile messaging, mobile application marketing, VoC, email marketing, knowledge management and call center productivity. Our teams bring deep industry experience in orchestrating campaigns and interactions that consumers want and value.

•Sales. Sales teams employ our applications to drive growth through deeper customer engagement, reduced sales cycle times, and overall improved collaboration between sales, marketing, and other customer-facing functions. We offer applications that help organizations optimize their sales opportunity and account management processes, coordinate proposal and reference activities, collaborate on the creation and publication of digital content, and gain increased control over key sales and marketing workflows, activities, and budgets.

•Contact Center. Customer service and support environments use our applications to enable agents to resolve issues and engage customers. We offer applications that improve customer experience and reduce call volume and cycle times through customer self-service products and VoC technology that captures customer sentiment in real-time. Upland also offers products that improve call center agent productivity by providing more direct access to knowledge and to customer sentiment thereby improving both inbound call outcomes and proactive outbound success. Additional solutions help call center leadership to manage agent performance and measure real-time performance relative to call resolution and customer sentiment, improve performance through gamification, and gather agent feedback to keep employee engagement high.

•Project Management. Business leaders and PMOs use our applications to optimize project portfolios, balance capacity against demand, improve financial-based decision making, align execution of projects to strategy across large organizations, and manage the entire project delivery lifecycle. Our applications deliver value to project management across a variety of use cases including continuous improvement, enterprise IT, new product development, and services departments along with industry depth in higher education, public sector, and healthcare IT.

•Information Technology. IT departments use our applications to manage a variety of IT activities and resources across the enterprise. Our applications help information technology departments ensure they are delivering against the objectives of the business by helping them select and prioritize the right investments, gain greater control of resource

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demand and allocation, and track and report benefit realization. Our applications enable executives to gain better insight into IT spending to help prevent cost overruns and understand the nature of consumption.

•Business Operations. Multiple functional departments use our applications to streamline operations and accelerate business performance across their value chains. Upland solutions in this area range from supply chain collaboration and factory management, back office document and vendor management, to applications that improve sales responsiveness.

•Human Resources and Legal. HR, legal departments, and law firms use our applications to improve collaboration and operational control and streamline routine processes. We offer applications that automate document management and workflow including, contracts, records, and other documentation that require enhanced security and compliance requirements. Other applications support HR-specific workflows including onboarding, employee management, termination, HR support, and time and expense management.

We sell our software applications primarily through a direct sales organization comprised of inside sales and field sales personnel. In addition to our direct sales organization, we have an indirect sales organization, which sells to distributors and value-added resellers. We employ a land-and-expand go-to-market strategy. After we demonstrate the value of an initial application to a customer, our sales and account management teams work to expand the adoption of that initial application across the customer, as well as cross-sell additional applications to address other enterprise work management needs of the customer. Our customer success organization supports our direct sales efforts by managing the post-sale customer lifecycle.

Our subscription agreements are typically sold either on a per-seat basis or on a minimum contracted volume basis with overage fees billed in arrears, depending on the application being sold. We service customers ranging from large global corporations and government agencies to small- and medium-sized businesses. We have more than 10,000 customers with over 1,000,000 users across a broad range of industries, including financial services, retail, technology, manufacturing, legal, education, consumer goods, media, telecommunications, government, non-profit, food and beverage, healthcare and life sciences.

Through a series of acquisitions and integrations, we have established a diverse family of software applications under the Upland brand and in the product solution categories listed above, each of which addresses a specific enterprise work management need. Our revenue has grown from $98.0 million in 2017 to $291.8 million in 2020, representing a compound annual growth rate of 44%. During the nine months ended September 30, 2021 foreign revenue as a percent of total revenue increased to 28% compared to 26% during the year ended December 31, 2020. See Note 10. Revenue Recognition in the notes to our unaudited condensed consolidated financial statements for more information regarding our revenue as it relates to domestic and foreign operations.

To support continued growth, we intend to pursue acquisitions within our core enterprise solution suites of complementary technologies and businesses. This will expand our product families, customer base, and market access resulting in increased benefits of scale. Consistent with our growth strategy, we have made twenty-nine acquisitions from February 2012 through September 30, 2021.

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COVID-19 Impact

In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, which has created significant economic uncertainty across the globe and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. As the administration of vaccine programs progresses and cases decline, we continue to evaluate our plans to reopen our facilities and resume business travel for our employees. We cannot predict the extent to which the COVID-19 outbreak will continue to impact our business or operating results, which is highly dependent on inherently uncertain future developments, including the severity of COVID-19 and the actions taken by governments and private businesses in relation to COVID-19 containment. As our platform is offered as a subscription-based service, the effect of the outbreak may not be fully reflected in our operating results until future periods, if at all.

While we have limited exposure to the industry verticals that have been hardest hit by the pandemic (including the travel, transportation, entertainment and retail industries) we have seen an impact to new bookings and churn which we attribute to COVID-19. The continued impact to bookings and churn is uncertain. In 2020, the impact to new bookings and churn attributable to Covid-19 was more than offset by strength in our cloud offerings that enable our customers to digitally transform their organizations at a time when they must adapt to remote work and digital engagement even more quickly and strong sales into political campaigns in the US in 2020 due to an increase in US presidential year related campaign activity. Generally, the campaign related increase experienced in 2020 is not repeating in 2021.

During the second, third and fourth quarters of 2020 we paused our acquisition activity in order to gauge the overall economic impact of the pandemic and focus on evaluating our pipeline of opportunities. This resulted in a steady decrease in acquisition related expenses over this period. With acquisition activity picking up again in the first quarter of 2021, including the acquisitions of Second Street, BlueVenn, and Panviva to date in 2021, acquisition-related expenses picked up again starting in the first quarter of 2021 and these acquisition related expenses will vary quarter to quarter in proportion to the size, timing and complexity of current and future acquisitions.

Key Metrics

In addition to the GAAP financial measures described below in “Components of Operating Results,” we regularly review the following key metrics to evaluate and identify trends in our business, measure our performance, prepare financial projections and make strategic decisions.

Adjusted EBITDA

We monitor our Adjusted EBITDA to help us evaluate the effectiveness and efficiency of our operations. Adjusted EBITDA is a non-GAAP financial measure. We define Adjusted EBITDA as net income (loss), calculated in accordance with GAAP, plus depreciation and amortization expense, interest expense, net, other expense (income), net, provision for (benefit from) income taxes, stock-based compensation expense, acquisition-related expenses, and purchase accounting adjustments for deferred revenue.

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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,
	2021		2020		2021		2020
	(dollars in thousands)
Reconciliation of net loss to Adjusted EBITDA:
Net loss	$	(11,015)	$	(11,310)	$	(50,741)	$	(45,550)
Add:
Depreciation and amortization expense	13,751		11,696		39,420		35,091
Interest expense, net	7,971		8,078		23,700		23,594
Other expense (income), net	650		(598)		812		819
Benefit from income taxes	(3,348)		1,149		(6,204)		(3,811)
Stock-based compensation expense	12,047		10,963		43,421		31,263
Acquisition-related expense	3,685		3,574		18,805		24,513
Purchase accounting deferred revenue discount	1,275		1,408		2,375		7,381
Adjusted EBITDA	$	25,016	$	24,960	$	71,588	$	73,300

We believe that Adjusted EBITDA 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 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.

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:

•Depreciation and amortization are non-cash charges, and the assets being depreciated or amortized 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 currently reflected relates to amortization of acquired intangible assets 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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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.

	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
	Amount		Percent of Revenue		Amount		Percent of Revenue		Amount		Percent of Revenue		Amount		Percent of Revenue
	(dollars in thousands, except share and per share data)
Revenue:
Subscription and support	$	72,264	95	%	$	70,992	96	%	$	215,322	95	%	$	202,582	95	%
Perpetual license	684		1	%	411		1	%	1,451		1	%	1,263		1	%
Total product revenue	72,948		96	%	71,403		97	%	216,773		96	%	203,845		96	%
Professional services	3,105		4	%	2,781		3	%	9,513		4	%	9,686		4	%
Total revenue	76,053		100	%	74,184		100	%	226,286		100	%	213,531		100	%
Cost of revenue:
Subscription and support (1)(3)	22,968		30	%	23,562		32	%	68,811		30	%	64,701		30	%
Professional services and other (1)	1,848		3	%	2,021		2	%	5,444		3	%	6,755		3	%
Total cost of revenue	24,816		33	%	25,583		34	%	74,255		33	%	71,456		33	%
Gross profit	51,237		67	%	48,601		66	%	152,031		67	%	142,075		67	%
Operating expenses:
Sales and marketing (1)	14,364		19	%	11,760		16	%	41,094		18	%	34,511		16	%
Research and development (1)	10,441		14	%	9,967		13	%	32,494		14	%	29,379		14	%
General and administrative (1)(2)	17,725		23	%	16,864		23	%	61,286		27	%	51,195		24	%
Depreciation and amortization	10,764		14	%	9,117		12	%	30,785		14	%	27,425		13	%
Acquisition-related expenses	3,685		5	%	3,574		5	%	18,805		9	%	24,513		11	%
Total operating expenses	56,979		75	%	51,282		69	%	184,464		82	%	167,023		78	%
Loss from operations	(5,742)		(8)	%	(2,681)		(3)	%	(32,433)		(15)	%	(24,948)		(11)	%
Other Expense:
Interest expense, net	(7,971)		(10)	%	(8,078)		(11)	%	(23,700)		(10)	%	(23,594)		(11)	%
Other income (expense), net	(650)		(1)	%	598		1	%	(812)		(1)	%	(819)		—	%
Total other expense	(8,621)		(11)	%	(7,480)		(10)	%	(24,512)		(11)	%	(24,413)		(11)	%
Loss before provision for income taxes	(14,363)		(19)	%	(10,161)		(13)	%	(56,945)		(26)	%	(49,361)		(22)	%
Benefit from (provision for) income taxes	3,348		5	%	(1,149)		(2)	%	6,204		4	%	3,811		1	%
Net loss	$	(11,015)	(14)	%	$	(11,310)	(15)	%	$	(50,741)	(22)	%	$	(45,550)	(21)	%
Net loss per common share, basic and diluted	$	(0.36)			$	(0.42)			$	(1.68)			$	(1.77)
Weighted-average common shares outstanding, basic and diluted	30,428,675				27,220,134				30,167,171				25,725,495
(1) Includes stock-based compensation detailed under Share-based Compensation in Note 9 — Stockholders' Equity.
(2) Includes General and administrative stock-based compensation of $9.2 million and $8.4 million for the three months September 30, 2021 and September 30, 2020, respectively, and $35.2 million and $24.7 million for the nine months ended September 30, 2021 and September 30, 2020, respectively. General and administrative expense excluding stock-based compensation as a percentage of total revenues was 11% and 11% for the three months ended September 30, 2021 and September 30, 2020, respectively, and 12% and 12% for the nine months ended September 30, 2021 and September 30, 2020, respectively.
(3) Includes depreciation and amortization of $3.0 million and $2.6 million for the three months ended September 30, 2021 and September 30, 2020, respectively, and $8.6 million and $7.7 million for the nine months ended September 30, 2021 and September 30, 2020, respectively.

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Comparison of the Three and Nine Months Ended September 30, 2021 and 2020

Revenue

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		% Change		2021		2020		% Change
	(dollars in thousands)
Revenue:
Subscription and support	$	72,264	$	70,992	2	%	$	215,322	$	202,582	6	%
Perpetual license	684		411		66	%	1,451		1,263		15	%
Total product revenue	72,948		71,403		2	%	216,773		203,845		6	%
Professional services	3,105		2,781		12	%	9,513		9,686		(2)	%
Total revenue	$	76,053	$	74,184	3	%	$	226,286	$	213,531	6	%
Percentage of revenue:
Subscription and support	95%		96%				95%		95%
Perpetual license	1%		1%				1%		1%
Total product revenue	96%		97%				96%		96%
Professional services	4%		3%				4%		4%
Total revenue	100%		100%				100%		100%

For the Three Months Ended September 30, 2021

Total revenue was $76.1 million in the three months ended September 30, 2021, compared to $74.2 million in the three months ended September 30, 2020, an increase of $1.9 million, or 3%. The acquisitions not fully in the comparative period contributed $8.2 million to the increase after the reduction of $1.3 million purchase accounting deferred revenue discount in the three months ended September 30, 2021. Total revenue related to the divestiture and sunset of certain minor non-strategic customer contracts and related website management and analytics assets (collectively referred to as “Sunset Assets”) declined by $0.3 million as a result of decreased sales and marketing focus on those Sunset Assets. Our organic business (the “Organic Business”) excludes acquisitions closed during or subsequent to the prior year comparable period and business operations related to Sunset Assets. Therefore, total revenue for our Organic Business decreased by $6.0 million. The three months ended September 30, 2020 included $6.0 million of CXM usage revenue from US election-year presidential campaigns which did not repeat in the current period and will not repeat for the remainder of 2021.

Subscription and support revenue was $72.3 million in the three months ended September 30, 2021, compared to $71.0 million in the three months ended September 30, 2020, an increase of $1.3 million, or 2%. The acquisitions not fully in the comparative period contributed $7.8 million to the increase in subscription and support revenue after the reduction of $1.3 million purchase accounting deferred revenue discount in the three months ended September 30, 2021. Subscription and support revenue related to our Sunset Assets decreased $0.3 million as a result of decreased sales and marketing focus on those Sunset Assets. Subscription and support revenue for our Organic Business decreased to $64.2 million from a basis of $70.4 million for the three months ended September 30, 2020. The three months ended September 30, 2020 included $6.0 million of CXM usage revenue from US election-year presidential campaigns which did not repeat in the current period and will not repeat for the remainder of 2021.

Perpetual license revenue was $0.7 million in the three months ended September 30, 2021, compared to $0.4 million in the three months ended September 30, 2020.

Professional services revenue was $3.1 million in the three months ended September 30, 2021, compared to $2.8 million in the three months ended September 30, 2020, an increase of $0.3 million, or 12%. The acquisitions not fully in the comparative period contributed $0.4 million to the increase in professional services revenue in the three months ended September 30, 2021. Professional services revenue for our Organic Business decreased by $0.1 million.

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For the Nine Months Ended September 30, 2021

Total revenue was $226.3 million in the nine months ended September 30, 2021, compared to $213.5 million in the nine months ended September 30, 2020, an increase of $12.8 million, or 6%. The acquisitions not fully in the comparative period contributed $20.3 million to the increase after the reduction of $2.3 million purchase accounting deferred revenue discount in the nine months ended September 30, 2021. Total Revenue related to Sunset Assets decreased by $1.1 million as a result of decreased sales and marketing focus on those Sunset Assets. Therefore, total revenue for the Organic Business decreased by $6.4 million. The nine months ended September 30, 2020 included $11.6 million of CXM usage revenue from US election-year presidential campaigns which did not repeat in the current period and will not repeat for the remainder of 2021.

Subscription and support revenue was $215.3 million in the nine months ended September 30, 2021, compared to $202.6 million in the nine months ended September 30, 2020, an increase of $12.7 million, or 6%. The acquisitions not fully in the comparative period contributed $18.9 million to the increase in subscription and support revenue after the reduction of $2.3 million purchase accounting deferred revenue discount in the nine months ended September 30, 2021. Subscription and support revenue related to our Sunset Assets decreased $1.2 million as a result of decreased sales and marketing focus on those Sunset Assets. Subscription and support revenue for our Organic Business decreased to $183.7 million from a basis of $188.7 million for the nine months ended September 30, 2020. The nine months ended September 30, 2020 included $11.6 million of CXM usage revenue from US election-year presidential campaigns which did not repeat in the current period and will not repeat for the remainder of 2021.

Perpetual license revenue was $1.5 million in the nine months ended September 30, 2021, compared to $1.3 million in the nine months ended September 30, 2020, an increase of $0.2 million.

Professional services revenue was $9.5 million in the nine months ended September 30, 2021, compared to $9.7 million in the nine months ended September 30, 2020, a decrease of $0.2 million, or 2%. The acquisitions not fully in the comparative period contributed $1.4 million to the increase in professional services revenue in the nine months ended September 30, 2021. Therefore, professional services revenue from our Organic Business decreased by $1.6 million due primarily to COVID-19 related travel impacts.

Cost of Revenue and Gross Profit Percentage

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		% Change		2021		2020		% Change
	(dollars in thousands)
Cost of revenue:
Subscription and support (1)	$	22,968	$	23,562	(3)	%	$	68,811	$	64,701	6	%
Professional services and other	1,848		2,021		(9)	%	5,444		6,755		(19)	%
Total cost of revenue	24,816		25,583		(3)	%	74,255		71,456		4	%
Gross profit	$	51,237	$	48,601			$	152,031	$	142,075
Percentage of total revenue:
Subscription and support (1)	30%		32%				30%		30%
Professional services and other	3%		2%				3%		3%
Total cost of revenue	33%		34%				33%		33%
Gross profit	67%		66%				67%		67%
(1) Includes depreciation, amortization and stock compensation expense as follows:
Depreciation	$	5	$	37			$	27	$	153
Amortization	$	2,982	$	2,542			$	8,608	$	7,513
Stock Compensation	$	539	$	624			$	1,544	$	1,512

For the Three Months Ended September 30, 2021

Cost of subscription and support revenue was $23.0 million in the three months ended September 30, 2021, compared to $23.6 million in the three months ended September 30, 2020, a decrease of $0.6 million, or 3%. The acquisitions not fully in the

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comparative period contributed $2.6 million to cost of subscription and support revenue, primarily related to costs associated with the delivery of the Second Street, BlueVenn, & Panviva products. Cost of subscription and support revenue related to our Sunset Assets decreased $0.2 million. Therefore, cost of subscription and support revenue for our Organic Business decreased by $3.0 million, primarily related to a decrease in telecom messaging costs related to a year over year reduction in CXM usage as a result of cyclical highs in 2020 related to US election-year presidential campaigns.

Cost of professional services and other revenue was $1.8 million in the three months ended September 30, 2021, compared to $2.0 million in the three months ended September 30, 2020, a decrease of $0.2 million, or 9%. The acquisitions not fully in the comparative period contributed $0.3 million in the cost of professional services revenue. Therefore, cost of professional services revenue for our Organic Business decreased by $0.5 million, primarily related to personnel and related costs, most of which were the result of our planned operating efficiencies.

For the Nine Months Ended September 30, 2021

Cost of subscription and support revenue was $68.8 million in the nine months ended September 30, 2021, compared to $64.7 million in the nine months ended September 30, 2020, an increase of $4.1 million, or 6%. The acquisitions not fully in the comparative period contributed $6.3 million to the increase to cost of subscription and support revenue, primarily related to costs associated with the delivery of the Localytics, Second Street, BlueVenn, and Panviva products. Cost of subscription and support revenue related to our Sunset Assets decreased $0.6 million primarily related to hosting and infrastructure costs. Therefore, cost of subscription and support revenue for the organic portion of our business decreased by $1.6 million, primarily related to a year over year reduction in CXM usage as a result of cyclical highs in 2020 related to US election-year presidential campaigns, which were partially offset by an increase in infrastructure and hosting costs.

Cost of professional services revenue was $5.4 million in the nine months ended September 30, 2021, compared to $6.8 million in the nine months ended September 30, 2020, a decrease of $1.4 million, or 19%. The acquisitions not fully in the comparative period contributed $0.6 million to cost of professional services revenue, primarily related to an increase in personnel and related costs. Therefore, cost of professional services revenue for our Organic Business decreased by $2.0 million, primarily related to personnel and related costs, most of which were the result of our planned operating efficiencies.

Operating Expenses

Sales and Marketing Expense

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		% Change		2021		2020		% Change
	(dollars in thousands)
Sales and marketing (1)	$	14,364	$	11,760	22	%	$	41,094	$	34,511	19	%
Percentage of total revenue	19%		16%				18%		16%
(1) Includes stock compensation expense as follows:
Stock Compensation	$	1,636	$	968			$	4,392	$	2,415

For the Three Months Ended September 30, 2021

Sales and marketing expense was $14.4 million in the three months ended September 30, 2021, compared to $11.8 million in the three months ended September 30, 2020, an increase of $2.6 million, or 22%. The acquisitions not fully in the comparative period contributed $1.3 million to the increase in sales and marketing expense, primarily consisting of personnel and related costs. Sales and marketing expense for our Organic Business increased $1.3 million in the comparative periods, primarily attributable to personnel and related costs associated with our continued go-to-market investments.

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For the Nine Months Ended September 30, 2021

Sales and marketing expense was $41.1 million in the nine months ended September 30, 2021, compared to $34.5 million in the nine months ended September 30, 2020, an increase of $6.6 million, or 19%. The acquisitions not fully in the comparative period contributed $2.4 million to the increase in sales and marketing expense, primarily consisting of personnel and related costs in the nine months ended September 30, 2021. Therefore, sales and marketing expense for the organic portion of our business increased by $4.2 million, primarily attributable to personnel and related costs associated with our continued go-to-market investments.

Research and Development Expense

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		% Change		2021		2020		% Change
	(dollars in thousands)
Research and development (1)	$	10,441	$	9,967	5	%	$	32,494	$	29,379	11	%
Percentage of total revenue	14%		13%				14%		14%
(1) Includes stock compensation expense as follows:
Stock Compensation	$	671	$	1,005			$	2,327	$	2,639

For the Three Months Ended September 30, 2021

Research and development expense was $10.4 million in the three months ended September 30, 2021, compared to $10.0 million in the three months ended September 30, 2020, an increase of $0.4 million, or 5%. The acquisitions not fully in the comparative period contributed $1.1 million to the increase in research and development expense primarily consisting of personnel and related costs. Therefore, research and development expense related to our Organic Business decreased by $0.7 million primarily related to personnel costs, including a reduction in non-cash stock compensation.

For the Nine Months Ended September 30, 2021

Research and development expense was $32.5 million in the nine months ended September 30, 2021, compared to $29.4 million in the nine months ended September 30, 2020, an increase of $3.1 million, or 11%. The acquisitions not fully in the comparative period contributed $2.5 million to the increase in research and development expense primarily consisting of personnel and related costs. Research and development costs related to our Sunset Assets decreased $0.2 million. Therefore, research and development costs for our Organic Business increased by $0.8 million primarily related to personnel and related costs.

General and Administrative Expense

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		% Change		2021		2020		% Change
	(dollars in thousands)
General and administrative (1)	$	17,725	$	16,864	5	%	$	61,286	$	51,195	20	%
Percentage of total revenue	23%		23%				27%		24%
(1) Includes stock compensation expense as follows:
Stock Compensation	$	9,201	$	8,366			$	35,158	$	24,697

For the Three Months Ended September 30, 2021

General and administrative expense was $17.7 million in the three months ended September 30, 2021, compared to $16.9 million in the three months ended September 30, 2020, an increase of $0.8 million, or 5%. An increase in general administrative expense of $0.2 million was due to the acquisitions not fully in the comparative period. Therefore, general and administrative expense for our Organic Business increased by $0.6 million, which was driven primarily by increased non-cash stock compensation expense.

35

For the Nine Months Ended September 30, 2021

General and administrative expense was $61.3 million in the nine months ended September 30, 2021, compared to $51.2 million in the nine months ended September 30, 2020, an increase of $10.1 million, or 20%. An increase in general administrative expense of $0.2 million was due to the acquisitions not fully in the comparative period. Therefore, general and administrative expense for our Organic Business increased by $9.9 million, which was driven primarily by increased non-cash stock compensation expense, including a one-time increase in non-cash stock compensation expense related to the departure of our former co-President and Chief Operating Officer in March 2021, and also includes investment in our new go-to-market leadership team and other personnel related costs.

Depreciation and Amortization Expense

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		% Change		2021		2020		% Change
	(dollars in thousands)
Depreciation and amortization:
Depreciation	$	545	$	437	25	%	$	1,447	$	1,351	7	%
Amortization	10,219		8,680		18	%	29,338		26,074		13	%
Total depreciation and amortization	$	10,764	$	9,117	18	%	$	30,785	$	27,425	12	%
Percentage of total revenue:
Depreciation	1%		—%				1%		1%
Amortization	13%		12%				13%		12%
Total depreciation and amortization	14%		12%				14%		13%

For the Three Months Ended September 30, 2021

Depreciation and amortization expense was $10.8 million in the three months ended September 30, 2021, compared to $9.1 million in the three months ended September 30, 2020, an increase of $1.7 million, or 18%. The acquisitions not fully in the comparative period increased depreciation and amortization expense by $1.9 million, primarily related to acquired intangible assets such as customer relationships, developed technology and tradenames. This increase was partially offset by a decrease of $0.2 million in depreciation and amortization expense from assets becoming fully depreciated and amortized.

For the Nine Months Ended September 30, 2021

Depreciation and amortization expense was $30.8 million in the nine months ended September 30, 2021, compared to $27.4 million in the nine months ended September 30, 2020, an increase of $3.4 million, or 12%. The acquisitions not fully in the comparative period increased depreciation and amortization expense by $4.2 million, primarily related to acquired intangible assets such as customer relationships, developed technology and tradenames. This increase was partially offset by a decrease of $0.8 million in depreciation and amortization expense from assets becoming fully depreciated and amortized.

Acquisition-related Expenses

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		% Change		2021		2020		% Change
	(dollars in thousands)
Acquisition-related expenses	$	3,685	$	3,574	3	%	$	18,805	$	24,513	(23)	%
Percentage of total revenue	5%		5%				9%		11%

Acquisition-related expenses are typically one-time expenses incurred for up to four quarters after each acquisition, with the majority of these costs being incurred within 6 to 9 months, to transform the acquired business into the Company's unified operating platform. These expenses can vary based on the size, timing and location of each acquisition. These acquisition-related expenses include transaction related expenses such as banker fees, legal and professional fees, insurance costs, and deal bonuses. These acquisition-related expenses also include transformational expenses such as severance, compensation for transitional personnel, office lease terminations, vendor cancellations, and adjustments to the fair value of earnouts due to sellers. Generally, without new acquisition activity, acquisition related expenses decline in subsequent sequential quarters and are no longer incurred after the first anniversary of the last closed acquisition.

36

For the Three Months Ended September 30, 2021

Acquisition-related expense was $3.7 million in the three months ended September 30, 2021, compared to $3.6 million in the three months ended September 30, 2020, an increase of $0.1 million, or 3%. During the three months ended September 30, 2021 and September 30, 2020 transaction related expenses were $0.1 million and $0.0 million, respectively, and transformational expenses were $3.6 million and $3.6 million, respectively. The transformational expenses in both the current and year ago periods were primarily related to temporary transitional personnel and related costs along with accelerated rent related expenses incurred in conjunction with the closures of offices of our acquired companies as we consolidate and integrate these acquisitions. Transformation expenses in 2020 include expenses related to acquisitions closed in 2019 as well as the one acquisition closed in 2020 compared to transformation expenses in 2021 related to the three acquisitions closed in 2021 and one acquisition closed in 2020. In addition, Acquisition-related expense for the three months ended September 30, 2021 includes a gain of $0.8 million related to a decrease in the fair value of earnout liabilities due to sellers related to the BlueVenn and Second Street acquisitions.

For the Nine Months Ended September 30, 2021

Acquisition related expense was $18.8 million the nine months ended September 30, 2021, compared to $24.5 million in the nine months ended September 30, 2020 a decrease of $5.7 million, or 23%. During the nine months ended September 30, 2021 and September 30, 2020 transaction related expenses were $6.2 million and $3.5 million, respectively, and transformational expenses were $12.6 million and $21.0 million, respectively. The increase in transaction costs is primarily related to an increase in acquisitions completed during 2021 to three compared to one acquisition completed during the same period in 2020 as a result of a slow-down in acquisition activity during 2020 as a result of the COVID-19 pandemic. The transformational expenses in both the current and year ago periods were primarily related to temporary transitional personnel and related costs along with accelerated rent related expenses incurred in conjunction with the closures of offices of our acquired companies as we consolidate and integrate these acquisitions. Transformation expenses in 2020 include expenses related to the five acquisitions closed in 2019 as well as the one acquisition closed in 2020 compared to transformation expenses in 2021 related to the three acquisitions closed in 2021 and one acquisition closed in February 2020. In addition, Acquisition-related expense for the nine months ended September 30, 2021 includes a gain of $3.5 million related to a decrease in the fair value of earnout liabilities due to sellers related to the BlueVenn and Second Street acquisitions.

Other Income (Expense)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		% Change		2021		2020		% Change
	(dollars in thousands)
Other expense:
Interest expense, net	$	(7,971)	$	(8,078)	(1)	%	$	(23,700)	$	(23,594)	—	%
Other income (expense), net	(650)		598		(209)	%	(812)		(819)		(1)	%
Total other expense	$	(8,621)	$	(7,480)	15	%	$	(24,512)	$	(24,413)	—	%
Percentage of total revenue:
Interest expense, net	(10)%		(11)%				(10)%		(11)%
Other income (expense), net	(1)%		1%				(1)%		—%
Total other expense	(11)%		(10)%				(11)%		(11)%

For the Three Months Ended September 30, 2021

Interest expense was $8.0 million in the three months ended September 30, 2021, compared to $8.1 million in the three months ended September 30, 2020.

Other expense was $0.7 million in the three months ended September 30, 2021, compared to other income of $0.6 million in the three months ended September 30, 2020. Other expense recognized during the three months ended September 30, 2021 related primarily to currency exchange gains (losses).

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For the Nine Months Ended September 30, 2021

Interest expense was virtually flat at $23.7 million in the nine months ended September 30, 2021, compared to $23.6 million in the nine months ended September 30, 2020.

Other expense was $0.8 million in the nine months ended September 30, 2021, compared to other expense of $0.8 million in the nine months ended September 30, 2020. Other expense recognized in the nine months ended September 30, 2021 and September 30, 2020 related primarily to foreign currency exchange losses in our UK entities.

Benefit from (Provision for) Income Taxes    

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021		2020		% Change		2021		2020		% Change
	(dollars in thousands)
Benefit from (provision for) income taxes	$	3,348	$	(1,149)	(391)	%	$	6,204	$	3,811	63	%
Percentage of total revenue	5%		(2)%				4%		1%

For the Three Months Ended September 30, 2021

Benefit from income taxes was $3.3 million in the three months ended September 30, 2021, compared to a provision for income taxes of $1.1 million in the three months ended September 30, 2020, an increase of $4.4 million. The benefit for income taxes for the three months ended September 30, 2021 related primarily to deferred tax benefits attributable to the release of valuation allowance related to acquired deferred tax liabilities associated with business combinations, the deferred tax benefit attributable to the reduction in deferred tax liabilities associated with the transfer of intangibles between foreign and domestic jurisdictions, and income tax benefits associated with our combined non-U.S. operations. The provision for the three months ended September 30, 2020 related primarily to the increase in deferred tax liabilities in our UK entities associated with the change in the applicable UK tax rate.

For the Nine Months Ended September 30, 2021

The benefit from income taxes was $6.2 million in the nine months ended September 30, 2021, compared to a benefit from income taxes of $3.8 million in the nine months ended September 30, 2020, an increase of $2.4 million. The benefits for each period are due primarily to deferred tax benefits attributable to the release of valuation allowance related to the acquisitions of deferred tax liabilities associated with business combinations completed during the respective periods, and foreign income taxes associated with our combined non-U.S. operations. The tax benefit for the nine months ended September 30, 2021 also includes a deferred tax benefit attributable to the reduction in deferred tax liabilities associated with the transfer of intangibles between foreign and domestic jurisdictions. The tax benefit for each period is primarily offset by the impact of expected future changes in UK tax rates on the balance of deferred tax assets and liabilities per tax law enacted during the three months ended June 30, 2021 and September 30, 2020, respectively.

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Liquidity and Capital Resources

To date, we have financed our operations primarily through the raising of capital including sales of our common stock, cash from operating activities, and borrowing under our credit facility. We believe that current cash and cash equivalents, cash flows from operating activities, availability under our existing credit facility, as discussed below, and the ability to offer and sell securities pursuant to our registration statement, as discussed below, will be sufficient to fund our operations for at least the next twelve months. In addition, we intend to utilize the sources of capital available to us under our Credit Facility and registration statement to support our continued growth via acquisitions within our core enterprise solution suites of complementary technologies and businesses.

As of September 30, 2021, we had cash and cash equivalents of $179.6 million, $60.0 million of available borrowings under our credit facility, as discussed below, and $529.2 million of borrowings outstanding under our credit facility. As of December 31, 2020, we had cash and cash equivalents of $250.0 million, $60.0 million of available borrowings under our Credit Facility, and $533.3 million of borrowings outstanding under our credit facility. The $70.4 million decrease in cash and cash equivalents from December 31, 2020 to September 30, 2021 includes $97.7 million in cash paid for our three acquisitions completed during 2021, net of $1.2 million in cash acquired, which was partially offset by a $5.2 million settlement in total consideration for Localytics related to a representation and warranty insurance settlement. Non-cash acquisition date consideration to be paid in future periods related to these acquisitions includes $10.9 million in holdback payments and $4.2 million in earnout payments that are due within 12 to 18 months of the closing dates of the underlying acquisitions. The earnouts are subject to attainment of future performance-based conditions.

Our cash and cash equivalents held by our foreign subsidiaries was $25.4 million as of September 30, 2021 and $15.3 million as of December 31, 2020. If these funds held by our foreign subsidiaries are needed for our domestic operations, a repatriation of these funds may require us to accrue and pay dividend withholding taxes in the foreign jurisdictions where applicable and accrue and pay U.S. taxes to the extent such dividend income exceeds our ability to utilize net operating losses. However, our intent is to permanently reinvest these funds outside the U.S. and our current plans do not demonstrate a need to repatriate them to fund our domestic operations. We do not provide for federal income taxes on the undistributed earnings of our foreign subsidiaries.

As of September 30, 2021 and December 31, 2020, we had a working capital surplus of $94.8 million and surplus of $196.1 million, respectively, which includes $90.4 million and $87.6 million of deferred revenue recorded as a current liability as of September 30, 2021 and December 31, 2020, respectively. This deferred revenue will be recognized as revenue in future periods in accordance with our revenue recognition policy.

Credit Facility

On August 6, 2019, we entered into a credit agreement (the “Credit Facility”) which provides for (i) a fully-drawn $350 million, 7 year, senior secured term loan B facility (the “Term Loan”) and (ii) a $60 million, 5 year, revolving credit facility (the “Revolver”) that was fully available as of September 30, 2021. The Credit Facility replaced our previous credit facility. All outstanding balances under our previous credit facility were paid off using proceeds from our current Credit Facility.

On November 26, 2019, the Company entered into a First Incremental Assumption Agreement (the “Incremental Assumption Agreement”) which provides for a term loan facility to be established under the Credit Facility in an aggregate principal amount of $190 million (the “2019 Incremental Term Loan”) which is in addition to the existing $350 million term loans outstanding under the Credit Facility and the $60 million Revolver under the Credit Facility.

The Credit Facility has no financial covenants as long as less than 35% of the Revolver is drawn as of the last day of any fiscal quarter. The credit facility is secured by a security interest in substantially all of our assets and requires us to maintain certain financial covenants. The Credit Facility contains certain non-financial restrictive covenants that limit our ability to transfer or dispose of assets, merge with other companies or consummate certain changes of control, acquire other companies, pay dividends, incur additional indebtedness and liens, effect changes in management and enter into new businesses. As of September 30, 2021 we were in compliance with all covenants under the Credit Facility. See Note 6. Debt for more information regarding our Credit Facility and outstanding debt as of September 30, 2021.

On August 6, 2019, the Company entered into an interest rate hedge instrument for the full 7 year term, effectively fixing our interest rate at 5.4% for the Term Loan. In addition, on November 26, 2019, the Company entered into interest rate swap agreements to hedge the interest rate risk associated with the Company’s floating rate obligations under the 2019 Incremental Term Loan. These interest rate swaps fix the Company's interest rate (including the hedge premium) at 5.4% for the term of the Credit Facility. The interest rate associated with our $60 million, 5 year, Revolver remains floating.

The interest rate swap has been designated as a cash flow hedge and is valued using a market approach, which is a Level 2 valuation technique. At September 30, 2021, the fair value of the interest rate swap was a $15.6 million liability as a result of a decline in short term interest rates since entering into the swap agreements. The decrease in the fair value of the interest rate

39

swap liability during the nine months ended September 30, 2021 is the result of an increase in short term interest rates compared to December 31, 2020.

Registration Statements

On August 10, 2020, we filed a registration statement on Form S-3 (File No. 333-243728) (the “2020 S-3”), which became effective automatically upon its filing and covers an unlimited amount of securities. The 2020 S-3, will remain effective through August 2023.

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

	Nine Months Ended September 30,
	2021		2020
	(dollars in thousands)
Consolidated Statements of Cash Flow Data:
Net cash provided by operating activities	$	28,646	$	14,152
Net cash used in investing activities	(93,382)		(68,685)
Net cash provided by (used in) financing activities	(5,096)		112,077
Effect of exchange rate fluctuations on cash	(613)		404
Change in cash and cash equivalents	(70,445)		57,948
Cash and cash equivalents, beginning of period	250,029		175,024
Cash and cash equivalents, end of period	$	179,584	$	232,972

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. Included in net cash provided by operations are one-time acquisition related expenses incurred for up to four quarters after each acquisition to transact and transform the acquired business into the Company's unified operating platform. Additionally, operating cash flows includes the impact of earn-outs payments in excess of original purchase accounting estimates. 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, acquisition related earnout and holdback liabilities, 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 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 $28.6 million for the nine months ended September 30, 2021 compared to cash provided by operating activities of $14.2 million for the nine months ended September 30, 2020, an increase of $14.4 million. This increase in operating cash flow is generally attributable to the Company’s increased size and scale. Working capital sources of cash for the nine months ended September 30, 2021 included a $11.7 million decrease in accounts receivable related to the timing of collections, and an increase of $6.6 million in accounts payable related to timing of payments. Working capital uses of cash for the nine months ended September 30, 2021 included a $3.7 million increase in prepaids and other related primarily to an increase in deferred commissions, a decrease of $6.8 million in deferred revenue, and a $8.1 million decrease in accrued expenses.

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. Deferred revenue consists of the unearned portion of booked fees for our software subscriptions and support, 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

Our primary investing activities have consisted of acquisitions of complementary technologies, products and businesses. As our business grows, we expect our primary investing activities to continue to further expand our family of software applications and infrastructure and support additional personnel.

For the nine months ended September 30, 2021, cash used in investing activities consisted of $97.7 million associated with the Company’s 2021 acquisitions, and the purchases of property and equipment of $1.0 million, partially offset by a

40

$5.2 million settlement in total consideration for Localytics related to a representation and warranty insurance settlement. Cash used in investing activities increased $24.7 million for the nine months ended September 30, 2021 compared to the same period in 2020 primarily as a result of closing three acquisitions during the period compared to one acquisition in the comparable prior year period.

Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced applications and professional service offerings, and acquisitions of complementary technologies, products and businesses.

Cash Flows from Financing Activities

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

Cash provided by financing activities decreased $117.2 million for the nine months ended September 30, 2021 compared to the same period in 2020. The decrease relates primarily to a decrease in cash generated from issuance of our common stock as the Company received net proceeds of $130.1 million related to a secondary stock offering completed in August 2020. This decrease in cash provided by financing activities was partially offset by a $10.9 million decrease in additional consideration paid to sellers (i.e. holdbacks and earnouts) compared to the same period in 2020. In addition, net share employee payroll tax settlement payments decreased $1.8 million during the nine months ended September 30, 2021 compared to the same period in 2020 as a result of the employee payroll tax election in mid-2020 to sell shares to cover employee payroll taxes on stock compensation vestings.

Critical Accounting Policies and the Use of Estimates

We prepare our condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States. The preparation of our condensed 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. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

The following critical accounting policies reflect significant judgments and estimates used in the preparation of our condensed consolidated financial statements:

• revenue recognition and deferred revenue;

• stock-based compensation;

• deferred sales commissions and sales commission expense;

• income taxes; and

• business combinations and the recoverability of goodwill and long-lived assets.

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. 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 3, 2021, 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. Actual results could differ materially from these estimates under different assumptions or conditions.

Other Key Accounting Policies

Our unaudited interim financial statements and other financial information for the three and nine months ended September 30, 2021, as presented herein and in Item 1 to this Quarterly Report on Form 10-Q, reflects 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, 2020 filed with the SEC on February 25, 2021. Please refer to this Annual Report for a detailed description of our critical accounting policies that involve significant management judgment.

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We evaluate our estimates, judgments and assumptions on an ongoing basis, and while we believe that our estimates, judgments and assumptions are reasonable, they are based upon information available at the time. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our condensed consolidated financial statements, refer to Note 1. Significant Accounting Policies to our condensed consolidated financial statements.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate, foreign exchange and inflation risks, as well as risks relating to changes in the general economic conditions in the countries where we conduct business. The statement of operations impact is mitigated by having an offsetting liability in deferred revenue to partially or completely offset against the outstanding receivable if an account should become uncollectible. Our cash balances are kept in customary operating accounts, a portion of which are insured by the Federal Deposit Insurance Corporation, and uninsured money market accounts. The majority of our cash balances in money market accounts are with the lender under our Credit Facility. To date, we have not used derivative instruments to mitigate the impact of our market risk exposures. We also have not used, nor do we intend to use, derivatives for trading or speculative purposes.

Interest Rate Risk

Our exposure to market risk for changes in interest rates primarily relates to our cash equivalents and any variable rate indebtedness. The primary objective of our investment activities is to preserve principal while maximizing yields without significantly increasing risk. This objective is accomplished currently by making diversified investments, consisting only of money market mutual funds and certificates of deposit. In conjunction with our $350 million, 7 year, term loan, and subsequent entry into an additional $190 million in incremental term loans under the Credit Facility, we entered into interest rate hedge instruments for the full 7 year term, effectively fixing our interest rate at 5.4%. However, the interest rate associated with our $60 million, 5 year, revolving credit facility remains floating. As of September 30, 2021, we had a principal balance of $529.2 million under our Credit Facility. As there was no debt outstanding under our revolving credit facility as of September 30, 2021, a hypothetical change of 100 basis points would result in no change to total interest expense.

Foreign Currency Exchange Risk

Our customers are generally invoiced in the currency of the country in which they are located. In addition, we incur a portion of our operating expenses in foreign currencies, including Australian dollars, Canadian dollars, British pounds, and Euros, and in the future as we expand into other foreign countries, we expect to incur operating expenses in other foreign currencies. As a result, we are exposed to foreign exchange rate fluctuations as the financial results of our international operations and our revenue and operating results could be adversely affected. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business could have resulted in a change in revenue of $5.0 million for the nine months ended September 30, 2021. To date, we have not engaged in any currency hedging strategies. If we decide to hedge our foreign currency exchange rate exposure, we may not be able to hedge effectively due to lack of experience, unreasonable costs, or illiquid markets. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in foreign currency exchange rates.

The non-financial assets and liabilities of our foreign subsidiaries are translated into United States dollars using the exchange rates in effect at the balance sheet date. The related translation adjustments are recorded in a separate component of stockholders' equity in accumulated other comprehensive loss. In addition, we have intercompany loans that were used to fund the acquisition of a foreign subsidiaries during the years ended December 31, 2019 and December 31, 2018. Due to the long-term nature of these loans, the foreign currency gains (losses) resulting from remeasurement are recognized as a component of accumulated other comprehensive income (loss).

Inflation

We do not believe that inflation had a material effect on our business, financial condition or results of operations in the last three fiscal years. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to a company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2021, the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of such date. Our management has concluded that the consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting (as defined in Rules 13a- 15(f) and 15d- 15(f) of the Exchange Act) during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, the risk.

44

PART II – OTHER INFORMATION

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our 2020 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. There have been no material changes during 2021 to the risk factors that were included in the Company's Form 10-K filed with the SEC on February 25, 2021.

Item 6. Exhibits

See the Exhibit Index immediately following this page, which is incorporated herein by reference.

45

EXHIBIT INDEX

Exhibit Number	Exhibit Description
31.1*	Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101)

*      Filed herewith.

**    Furnished herewith.

46

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.  

	UPLAND SOFTWARE, INC.
Dated: November 3, 2021	/s/ Michael D. Hill
	Michael D. Hill
	Chief Financial Officer

47

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULES 13A-14(A) AND 15D-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John T. McDonald, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Upland Software, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 3, 2021

/s/ John T. McDonald

 John T. McDonald

 Chief Executive Officer

 (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULES 13A-14(A) AND 15D-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael D. Hill, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Upland Software, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 3, 2021

/s/ Michael D. Hill

 Michael D. Hill

 Chief Financial Officer

 (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Upland Software, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John T. McDonald, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 3, 2021

/s/ John T. McDonald

John T. McDonald

Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Upland Software, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael D. Hill, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 3, 2021

/s/ Michael D. Hill

Michael D. Hill

Chief Financial Officer

XML

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	Sep. 30, 2021	Oct. 29, 2021
Cover [Abstract]
Document Type	10-Q
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Document Period End Date	Sep. 30, 2021
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Entity File Number	001-36720
Entity Registrant Name	UPLAND SOFTWARE, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	27-2992077
Entity Address, Address Line One	401 Congress Ave., Suite 1850
Entity Address, City or Town	Austin
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	78701
City Area Code	512
Local Phone Number	960-1010
Title of 12(b) Security	Common Stock, par value $0.0001 per share
Trading Symbol	UPLD
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
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Entity Common Stock, Shares Outstanding		30,526,597
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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 179,584	$ 250,029
Accounts receivable (net of allowance of $1,081 and $1,465 at September 30, 2021 and December 31, 2020, respectively)	37,076	44,472
Deferred commissions, current	8,721	5,784
Unbilled receivables	5,847	4,561
Prepaid and other	8,560	12,694
Total current assets	239,788	317,540
Tax credits receivable	3,054	2,427
Property and equipment, net	3,035	2,778
Operating lease right-of-use asset	6,990	10,124
Intangible assets, net	292,807	279,975
Goodwill	460,178	383,598
Deferred commissions, noncurrent	14,168	12,962
Other assets	1,691	1,816
Total assets	1,021,711	1,011,220
Current liabilities:
Accounts payable	16,181	5,395
Accrued compensation	11,259	8,138
Accrued expenses and other current liabilities	9,960	13,438
Deferred revenue	90,368	87,552
Liabilities due to sellers of businesses	10,531	416
Operating lease liabilities, current	3,555	3,315
Current maturities of notes payable (includes unamortized discount of $2,243 and $2,234 at September 30, 2021 and December 31, 2020, respectively)	3,158	3,166
Total current liabilities	145,012	121,420
Notes payable, less current maturities (includes unamortized discount of $7,842 and $9,414 at September 30, 2021 and December 31, 2020, respectively)	515,958	518,437
Deferred revenue, noncurrent	2,075	1,587
Operating lease liabilities, noncurrent	7,650	8,387
Noncurrent deferred tax liability, net	27,484	24,092
Interest rate swap liabilities	15,642	30,032
Other long-term liabilities	844	650
Total liabilities	714,665	704,605
Stockholders’ equity:
Common stock, $0.0001 par value; 50,000,000 shares authorized: 30,516,350 and 29,987,114 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively)	3	3
Additional paid-in capital	558,495	515,219
Accumulated other comprehensive loss	(18,338)	(26,234)
Accumulated deficit	(233,114)	(182,373)
Total stockholders’ equity	307,046	306,615
Total liabilities and stockholders’ equity	$ 1,021,711	$ 1,011,220

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Accounts receivable, allowance for credit loss, current	$ 1,081	$ 1,465
Unamortized discount, current	2,243	2,234
Unamortized discount, noncurrent	$ 7,842	$ 9,414
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	30,516,350	29,987,114
Common stock, shares outstanding (in shares)	30,516,350	29,987,114

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Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Revenue	$ 76,053	$ 74,184	$ 226,286	$ 213,531
Cost of revenue	24,816	25,583	74,255	71,456
Gross profit	51,237	48,601	152,031	142,075
Operating expenses:
Sales and marketing	14,364	11,760	41,094	34,511
Research and development	10,441	9,967	32,494	29,379
General and administrative	17,725	16,864	61,286	51,195
Depreciation and amortization	10,764	9,117	30,785	27,425
Acquisition-related expenses	3,685	3,574	18,805	24,513
Total operating expenses	56,979	51,282	184,464	167,023
Loss from operations	(5,742)	(2,681)	(32,433)	(24,948)
Other expense:
Interest expense, net	(7,971)	(8,078)	(23,700)	(23,594)
Other income (expense), net	(650)	598	(812)	(819)
Total other expense	(8,621)	(7,480)	(24,512)	(24,413)
Loss before benefit from (provision for) income taxes	(14,363)	(10,161)	(56,945)	(49,361)
Benefit from (provision for) income taxes	3,348	(1,149)	6,204	3,811
Net loss	$ (11,015)	$ (11,310)	$ (50,741)	$ (45,550)
Net loss per common share:
Net loss per common share, basic (in dollars per share)	$ (0.36)	$ (0.42)	$ (1.68)	$ (1.77)
Net loss per common share, diluted (in dollars per share)	$ (0.36)	$ (0.42)	$ (1.68)	$ (1.77)
Weighted-average common shares outstanding, basic (in shares)	30,428,675	27,220,134	30,167,171	25,725,495
Weighted-average common shares outstanding, diluted (in shares)	30,428,675	27,220,134	30,167,171	25,725,495
Total product revenue
Revenue	$ 72,948	$ 71,403	$ 216,773	$ 203,845
Subscription and support
Revenue	72,264	70,992	215,322	202,582
Cost of revenue	22,968	23,562	68,811	64,701
Perpetual license
Revenue	684	411	1,451	1,263
Professional services
Revenue	3,105	2,781	9,513	9,686
Cost of revenue	$ 1,848	$ 2,021	$ 5,444	$ 6,755

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Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Statement of Comprehensive Income [Abstract]
Net loss	$ (11,015)	$ (11,310)	$ (50,741)	$ (45,550)
Foreign currency translation adjustment	(4,548)	2,734	(5,611)	494
Unrealized translation gain (loss) on intercompany loans with foreign subsidiaries	(2,664)	3,927	(884)	(3,254)
Unrealized gain (loss) on interest rate swaps	2,112	(441)	14,391	(35,497)
Comprehensive loss	$ (16,115)	$ (5,090)	$ (42,845)	$ (83,807)

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Consolidated Statement of Stockholders' Equity - USD ($) $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit	Accumulated Deficit Cumulative Effect, Period of Adoption, Adjustment
Beginning balance (in shares) at Dec. 31, 2019			25,250,120
Beginning balance at Dec. 31, 2019	$ 212,861	$ (108)	$ 3	$ 345,127	$ (1,223)	$ (131,046)	$ (108)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of stock under Company plans, net of shares withheld for tax (in shares)			185,468
Issuance of stock under Company plans, net of shares withheld for tax	(2,066)			(2,066)
Issuance of stock, net of issuance costs (in shares)			4,025,000
Issuance of stock, net of issuance costs	130,101			130,101
Stock-based compensation	31,263			31,263
Foreign currency translation adjustment	494				494
Unrealized translation gain (loss) on intercompany loans with foreign subsidiaries	(3,254)				(3,254)
Unrealized gain (loss) on interest rate swaps	(35,497)				(35,497)
Net loss	(45,550)					(45,550)
Ending balance (in shares) at Sep. 30, 2020			29,460,588
Ending balance at Sep. 30, 2020	288,244		$ 3	504,425	(39,480)	(176,704)
Beginning balance (in shares) at Jun. 30, 2020			25,365,735
Beginning balance at Jun. 30, 2020	152,237		$ 3	363,328	(45,700)	(165,394)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of stock under Company plans, net of shares withheld for tax (in shares)			69,853
Issuance of stock under Company plans, net of shares withheld for tax	20			20
Issuance of stock, net of issuance costs (in shares)			4,025,000
Issuance of stock, net of issuance costs	130,114			130,114
Stock-based compensation	10,963			10,963
Foreign currency translation adjustment	2,734				2,734
Unrealized translation gain (loss) on intercompany loans with foreign subsidiaries	3,927				3,927
Unrealized gain (loss) on interest rate swaps	(441)				(441)
Net loss	(11,310)					(11,310)
Ending balance (in shares) at Sep. 30, 2020			29,460,588
Ending balance at Sep. 30, 2020	$ 288,244		$ 3	504,425	(39,480)	(176,704)
Beginning balance (in shares) at Dec. 31, 2020	29,987,114		29,987,114
Beginning balance at Dec. 31, 2020	$ 306,615		$ 3	515,219	(26,234)	(182,373)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of stock under Company plans, net of shares withheld for tax (in shares)			529,236
Issuance of stock under Company plans, net of shares withheld for tax	(145)			(145)
Stock-based compensation	43,421			43,421
Foreign currency translation adjustment	(5,611)				(5,611)
Unrealized translation gain (loss) on intercompany loans with foreign subsidiaries	(884)				(884)
Unrealized gain (loss) on interest rate swaps	14,391				14,391
Net loss	$ (50,741)					(50,741)
Ending balance (in shares) at Sep. 30, 2021	30,516,350		30,516,350
Ending balance at Sep. 30, 2021	$ 307,046		$ 3	558,495	(18,338)	(233,114)
Beginning balance (in shares) at Jun. 30, 2021			30,413,246
Beginning balance at Jun. 30, 2021	311,437		$ 3	546,771	(13,238)	(222,099)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of stock under Company plans, net of shares withheld for tax (in shares)			103,104
Issuance of stock under Company plans, net of shares withheld for tax	(323)			(323)
Stock-based compensation	12,047			12,047
Foreign currency translation adjustment	(4,548)				(4,548)
Unrealized translation gain (loss) on intercompany loans with foreign subsidiaries	(2,664)				(2,664)
Unrealized gain (loss) on interest rate swaps	2,112				2,112
Net loss	$ (11,015)					(11,015)
Ending balance (in shares) at Sep. 30, 2021	30,516,350		30,516,350
Ending balance at Sep. 30, 2021	$ 307,046		$ 3	$ 558,495	$ (18,338)	$ (233,114)

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Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Operating activities
Net loss	$ (50,741)	$ (45,550)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	39,420	35,091
Change in fair value of liabilities due to sellers of businesses	(3,503)	155
Deferred income taxes	(7,726)	(3,346)
Amortization of deferred costs	6,283	3,172
Foreign currency re-measurement loss	18	311
Non-cash interest and other expense	1,682	1,669
Non-cash stock compensation expense	43,421	31,263
Non-cash loss on retirement of fixed assets	2	473
Changes in operating assets and liabilities, net of purchase business combinations:
Accounts receivable	11,748	13,140
Prepaids and other	(3,672)	(10,093)
Accounts payable	6,647	(1,782)
Accrued expenses and other liabilities	(8,111)	(8,944)
Deferred revenue	(6,822)	(1,407)
Net cash provided by operating activities	28,646	14,152
Investing activities
Purchase of property and equipment	(965)	(833)
Purchase of customer relationships	0	(201)
Purchase business combinations, net of cash acquired	(92,417)	(67,651)
Net cash used in investing activities	(93,382)	(68,685)
Financing activities
Payments on finance leases	(12)	(86)
Proceeds from notes payable, net of issuance costs	(120)	(169)
Payments on notes payable	(4,050)	(4,050)
Taxes paid related to net share settlement of equity awards	(373)	(2,140)
Issuance of common stock, net of issuance costs	228	130,174
Additional consideration paid to sellers of businesses	(769)	(11,652)
Net cash provided by (used in) financing activities	(5,096)	112,077
Effect of exchange rate fluctuations on cash	(613)	404
Change in cash and cash equivalents	(70,445)	57,948
Cash and cash equivalents, beginning of period	250,029	175,024
Cash and cash equivalents, end of period	179,584	232,972
Supplemental disclosures of cash flow information:
Cash paid for interest, net of interest rate swaps	22,043	22,456
Cash paid for taxes	1,772	2,220
Non-cash investing and financing activities:
Business combination consideration including holdbacks and earnouts	$ 14,204	$ 345

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

Basis of Presentation

These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). The condensed consolidated financial statements include the accounts of Upland Software, Inc. and its wholly owned subsidiaries (collectively referred to as “Upland”, the “Company”, “we” or “us”). All intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation.

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. In the opinion of management of the Company, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements, in all material respects, and include all adjustments of a normal recurring nature necessary for a fair presentation. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other period.

The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2020 Annual Report on Form 10-K filed with the SEC on February 25, 2021.

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses. Significant items subject to such estimates include those related to revenue recognition, deferred commissions, allowance for credit losses, stock-based compensation, contingent consideration, acquired intangible assets, the useful lives of intangible assets and property and equipment, the fair value of the Company’s interest rate swaps and income taxes. In accordance with GAAP, management bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances. Management regularly evaluates its estimates and assumptions using historical experience and other factors; however, actual results could differ from those estimates.

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. Upland is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of November 3, 2021, 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. Actual results could differ materially from these estimates under different assumptions or conditions.

Concentrations of Credit Risk and Significant Customers

Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, accounts receivable and the Company’s interest rate swap hedges. The Company’s cash and cash equivalents are placed with high-quality financial institutions, which, at times, may exceed federally insured limits. The Company has not experienced any losses in these accounts, and the Company does not believe it is exposed to any significant credit risk related to cash and cash equivalents. The Company provides credit, in the normal course of business, to a number of its customers. To manage accounts receivable credit risk, the Company performs periodic credit evaluations of its customers and maintains current expected credit losses which considers such factors as historical loss information, geographic location of customers, current market conditions, and reasonable and supportable forecasts.

No individual customer represented more than 10% of total revenues for the three or nine months ended September 30, 2021, or more than 10% of accounts receivable as of September 30, 2021 or December 31, 2020.

Derivatives

In connection with borrowing funds under the Company’s credit facility the Company has entered into a floating-to-fixed interest rate swap agreements to limit exposure to interest rate risk related to our debt. These interest rate swaps effectively converted the entire balance of the Company's $540 million term loans from variable interest payments to fixed interest rate payments, based on an annualized fixed rate of 5.4%, for a 7 year term of debt. ASC 815 requires entities to recognize derivative instruments as either assets or liabilities in the statement of financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. The Company assessed the effectiveness of the hedging relationship under the hypothetical derivative method and noted that all of the critical terms of the hypothetical derivative and hedging instrument were the same. The hedging relationship continues to limit the Company’s exposure to the variability in interest rates under the Company’s term loans and related cash outflows. As such, the Company has deemed this hedging relationship as highly effective in offsetting cash flows attributable to hedged risk (variability in forecasted monthly interest payments) for the term of the term loans and interest rate swap agreements. All derivative financial instruments are recorded at fair value as a net asset or liability in the accompanying condensed consolidated balance sheets. As of September 30, 2021 and December 31, 2020 the fair value of the interest rate swaps included in Interest rate swap liabilities in the Company's condensed consolidated balance sheets was $15.6 million and $30.0 million, respectively.

The change in the fair value of the hedging instruments is recorded in Other comprehensive income. Amounts deferred in Other comprehensive income will be reclassified to Interest expense in the accompanying condensed consolidated statements of operations in the period in which the hedged item affects earnings.

Fair Value of Financial Instruments

The Company recognizes financial instruments in accordance with the authoritative guidance on fair value measurements and disclosures for financial assets and liabilities. This guidance defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. The guidance also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

These tiers include Level 1, defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.

The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable and debt. The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value, primarily due to short maturities. The carrying values of the Company’s debt instruments approximated their fair value based on rates currently available to the Company.

Recent Accounting Pronouncements

Recently issued accounting pronouncements not yet adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is evaluating the impact of this standard on our consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which creates an exception to the general recognition and measurement principle for contract assets and contract liabilities from contracts with customers acquired in a business combination. The new guidance will require companies to apply the definition of a performance obligation under accounting standard codification (“ASC”) Topic 606 to recognize and measure contract assets and contract liabilities (i.e., deferred revenue) relating to contracts with customers that are acquired in a business combination. Under current GAAP, an acquirer in a business combination is generally required to recognize and measure the assets it acquires and the liabilities it assumes at fair value on the acquisition date. The new guidance will result in the acquirer recording acquired contract assets and liabilities on the same

basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606. These amendments are effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is evaluating the impact of this standard on our consolidated financial statements.

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Acquisitions

9 Months Ended

Sep. 30, 2021

Business Combination and Asset Acquisition [Abstract]

Acquisitions

2. Acquisitions

The Company performs quantitative and qualitative analyses to determine the significance of each acquisition to the financial statements the Company. Based on these analyses the below acquisitions were deemed to be insignificant on an individual and cumulative basis.

2021 Acquisitions

Acquisitions completed during the nine months ended September 30, 2021 include the following:

•Panviva - On June 24, 2021, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of Panviva Pty Ltd, an Australian proprietary company (“Panviva”), a cloud-based enterprise knowledge management solution. Revenue recorded since the acquisition date through September 30, 2021 were approximately $1.9 million. Revenue recorded for Panviva for the quarter ended September 30, 2021 were approximately $1.8 million.

•BlueVenn - On February 28, 2021 the Company entered into an agreement to purchase the shares comprising the entire issued share capital of BlueVenn Group Limited, a company limited by shares organized and existing under the laws of England and Wales (“BlueVenn”), a cloud-based customer data platform. Revenue recorded since the acquisition date through September 30, 2021 were approximately $9.0 million. Revenue recorded for BlueVenn for the quarter ended September 30, 2021 were approximately $3.6 million.

•Second Street - On January 19, 2021, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of Second Street Media, Inc., a Missouri corporation (“Second Street”), an audience engagement platform. Revenue recorded since the acquisition date through September 30, 2021 were approximately $7.5 million. Revenue recorded for Second Street for the quarter ended September 30, 2021 were approximately $2.8 million.

2020 Acquisition

The acquisition completed during the year ended December 31, 2020 were:

•Localytics - On February 6, 2020, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of Char Software, Inc (dba Localytics), a Delaware corporation (“Localytics”), a provider of mobile app personalization and analytics solutions.

Consideration

The following table summarizes the consideration transferred for the acquisitions described above (in thousands):

	Panviva		BlueVenn		Second Street		Localytics
Cash	$	19,931	$	53,535	$	25,436	$	67,655
Holdback (1)	3,517		2,429		5,000		345
Contingent consideration (2)	—		2,535		1,650		1,000
Working capital and other adjustments (3)	379		(537)		—		(5,238)
Total consideration	$	23,827	$	57,962	$	32,086	$	63,762

(1)Represents the cash holdbacks subject to indemnification claims that are payable 12 months following closing for Panviva, Second Street and Localytics and 18 months following closing for BlueVenn. In addition, the holdback payment to Panviva may be reduced by up to $1.6 million based on the future renewal of a specific customer. The fair value of this potential reduction was $0.0 million as of the acquisition date.

(2)Represents the acquisition date fair value of anticipated earn-out payments, which are based on the estimated probability of attainment of the underlying future performance-based conditions at the time of acquisition. The maximum potential payout for the BlueVenn, Second Street and Localytics earn-outs were $22.4 million, $3.0 million, and $1.0 million, respectively. The earn-out for Localytics was paid in full during the year ended December 31, 2020 based on an ending fair value of $1.0 million. Refer to Note 3 for further discussion regarding the calculation of fair value of acquisition related earn-outs.

(3)In addition to working capital adjustments made to the purchase price of our acquisitions this line item includes a $5.2 million settlement in total consideration for Localytics related to a representation and warranty insurance settlement which is included in prepaids and other current assets on the Company’s consolidated balance sheets as of December 31, 2020.

Fair Value of Assets Acquired and Liabilities Assumed

The Company recorded the purchase of the acquisitions described above using the acquisition method of accounting and, accordingly, recognized the assets acquired and liabilities assumed at their fair values as of the date of the acquisition. The purchase accounting for the 2021 acquisitions of Panviva, BlueVenn, and Second Street are preliminary as the Company has not finalized the tax impact of these acquisitions. Management has recorded the purchase price allocations based upon acquired company information that is currently available. Management expects to complete the purchase accounting for BlueVenn and Second Street no later than the first quarter of 2022 and no later than the second quarter of 2022 for Panviva.

The following condensed table presents the preliminary and finalized acquisition-date fair value of the assets acquired and liabilities assumed for the acquisitions during the year ended December 31, 2020 and through the nine months ended September 30, 2021, as well as assets and liabilities (in thousands):

	Preliminary						Final
	Panviva		BlueVenn		Second Street		Localytics
Year Acquired	2021		2021		2021		2020
Cash	$	132	$	1,115	$	—	$	—
Accounts receivable	2,122		1,289		1,105		3,648
Other current assets	4,986		1,983		89		6,323
Operating lease right-of-use asset	197		1,357		489		7,605
Property and equipment	26		611		156		409
Customer relationships	9,757		18,888		14,600		30,500
Trade name	76		238		200		300
Technology	1,967		4,337		3,400		6,600
Goodwill	17,729		45,273		17,954		33,543
Other assets	33		24		13		6
Total assets acquired	37,025		75,115		38,006		88,934
Accounts payable	(1,257)		(2,772)		(230)		(2,382)
Accrued expense and other	(5,163)		(2,198)		(377)		(6,761)
Deferred tax liabilities	(3,355)		(4,066)		(4,324)		(3,382)
Deferred revenue	(3,226)		(6,760)		(500)		(4,812)
Operating lease liabilities	(197)		(1,357)		(489)		(7,835)
Total liabilities assumed	(13,198)		(17,153)		(5,920)		(25,172)
Total consideration	$	23,827	$	57,962	$	32,086	$	63,762

The Company uses third party valuation consultants to determine the fair values of assets acquired and liabilities assumed. Tangible assets are valued at their respective carrying amounts, which approximates their estimated fair value. The valuation of identifiable intangible assets reflects management’s estimates based on, among other factors, the use of established valuation methods. Customer relationships are valued using the multi-period excess earnings method. Developed technology and trade names are valued using the relief-from-royalty method.

The following table summarizes the weighted-average useful lives, by major finite-lived intangible asset class, for intangibles acquired during the nine months ended September 30, 2021 and the year ended December 31, 2020 (in years):

	Useful Life
	September 30, 2021	December 31, 2020
Customer relationships	7.0	8.0
Trade name	2.0	2.0
Developed technology	5.0	5.0
Total weighted-average useful life	6.6	7.4

During the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill based on changes to management's estimates and assumptions.

The goodwill of $114.5 million for the above acquisitions is primarily attributable to the synergies expected to arise after the acquisition and the value of the acquired workforce. Goodwill that is deductible for tax purposes at the time of the acquisitions was $2.0 million.

Total transaction related expenses incurred with respect to acquisition activity during the three months ended September 30, 2021 and September 30, 2020 were $0.1 million and $0.0 million, respectively, and during the nine months ended September 30, 2021 and September 30, 2020 were $6.2 million and $3.5 million, respectively. Transaction related expenses, excluding transformation costs, include expenses such as banker fees, legal and professional fees, insurance costs, and deal bonuses. Transaction costs are included in acquisition-related expenses in our condensed consolidated statement of operations.

Other Acquisitions and Divestitures

From time to time we may purchase or sell customer relationships that meet certain criteria. During the year ended December 31, 2020, we completed customer relationship acquisitions totaling $0.2 million.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. GAAP sets forth a three–tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three tiers are Level 1, defined as observable inputs, such as quoted market prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, which therefore requires an entity to develop its own assumptions.

As of September 30, 2021, the Company had accrued earnout business acquisition contingent consideration liabilities for which fair values are measured as Level 3 instruments. These contingent consideration liabilities were recorded at fair value on the acquisition date and are remeasured periodically based on the then assessed fair value and adjusted if necessary. The increases or decreases in the fair value of contingent consideration payable can result from changes in anticipated revenue levels, changes in assumed discount periods and rates and changes in foreign exchange rates. As the fair value measure is based on significant inputs that are not observable in the market, they are categorized as Level 3. Any adjustment related to subsequent changes in the fair value of contingent consideration is recorded in acquisition-related expense or other income (expense) in the Company's condensed consolidated statement of operations based on management's assessment of the nature of the liability. Earnout consideration liabilities are included in Due to sellers in the Company's condensed consolidated balance sheets.

In connection with entering into, and expanding, the Company's current credit facility, as discussed further in Note 6. Debt, the Company entered into interest rate swaps for the full 7 year term of the Company's term loans, effectively fixing our interest rate at 5.4% for the full value $540 million of the term loans. The fair value of the Company's swaps are measured at the end of each interim reporting period based on the then assessed fair value and adjusted if necessary. As the fair value measure is based on the market approach, they are categorized as Level 2. As of September 30, 2021 and December 31, 2020 the fair value of the interest rate swaps are included in Interest rate swap liabilities on the Company's condensed consolidated balance sheets.

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

	Fair Value Measurements at September 30, 2021
	(unaudited)
	Level 1		Level 2		Level 3		Total
Liabilities:
Earnout consideration liability	$	—	$	—	$	669	$	669
Interest rate swap liabilities	$	—	$	15,642	$	—	$	15,642

	Fair Value Measurements at December 31, 2020
	Level 1		Level 2		Level 3		Total
Liabilities:
Interest rate swap liabilities	$	—	$	30,032	$	—	$	30,032

The following table presents additional information about earnout consideration liabilities measured at fair value on a recurring basis and for which the Company has utilized significant unobservable (Level 3) inputs to determine fair value (in thousands) (unaudited):

	September 30, 2021
	(unaudited)
Balance at December 31, 2020	$	—
Acquisitions and settlements:
Acquisitions	4,185
Remeasurement adjustments:
Gain included in earnings	(3,503)
Foreign currency translation adjustments	(13)
Balance at September 30, 2021	$	669

Quantitative Information about Level 3 Fair Value Measurements

The significant unobservable inputs used in the fair value measurement of the Company's contingent consideration liabilities designated as Level 3 are as follows:

	Fair Value at September 30, 2021		Valuation Technique	Significant Unobservable Inputs
Contingent acquisition consideration: (BlueVenn and Second Street)	$	669	Binary option model	Expected future annual revenue streams and probability of achievement

Sensitivity to Changes in Significant Unobservable Inputs

As presented in the table above, the significant unobservable inputs used in the fair value measurement of contingent consideration related to business acquisitions are forecasts of expected future annual revenues as developed by the Company's management and the probability of achievement of those revenue forecast. Significant increases (decreases) in these unobservable inputs in isolation would likely result in a significantly (lower) higher fair value measurement.

Debt

The Company believes the carrying value of its long-term debt at September 30, 2021 approximates its fair value based on the variable interest rate feature or based upon interest rates currently available to the Company. The estimated fair value of the Company's debt, before debt discount, at September 30, 2021 and December 31, 2020 are $529.2 million and $533.3 million, respectively.

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Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

4. Goodwill and Other Intangible Assets

Changes in the Company’s goodwill balance for the nine months ended September 30, 2021 are summarized in the table below (in thousands):

Balance at December 31, 2020	$	383,598
Acquired in business combinations	85,102
Adjustment related to finalization of current year business combinations	(4,146)
Foreign currency translation adjustment	(4,376)
Balance at September 30, 2021	$	460,178

Net intangible assets include the estimated acquisition-date fair values of customer relationships, marketing-related assets, developed technology, and non-compete agreements that the Company recorded as part of its business acquisitions.

The following is a summary of the Company’s intangible assets, net (in thousands):

	Estimated Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
September 30, 2021:
Customer relationships	1-10	$	359,165	$	116,707	$	242,458
Trade name	1.5-10	9,722		5,494		4,228
Developed technology	4-9	88,387		42,266		46,121
Non-compete agreements	3	1,148		1,148		—
Total intangible assets		$	458,422	$	165,615	$	292,807

	Estimated Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
December 31, 2020:
Customer relationships	1-10	$	318,941	$	89,131	$	229,810
Trade name	1.5-10	9,283		4,763		4,520
Developed technology	4-9	79,382		33,929		45,453
Non-compete agreements	3	1,148		956		192
Total intangible assets		$	408,754	$	128,779	$	279,975

The Company periodically reviews the estimated useful lives of its identifiable intangible assets, taking into consideration any events or circumstances that might result in either a diminished fair value or revised useful life. Management recorded no impairments of intangible assets or goodwill during the three and nine months ended September 30, 2021 or the year ended December 31, 2020. Total amortization expense during the three months ended September 30, 2021 and September 30, 2020 was $13.2 million and $11.2 million, respectively, and during the nine months ended September 30, 2021 and September 30, 2020 was $37.9 million and $33.6 million, respectively.

As of September 30, 2021, the estimated annual amortization expense for the next five years and thereafter is as follows (in thousands):

	Amortization Expense
Year ending December 31:
Remainder of 2021	$	12,962
2022	49,281
2023	46,936
2024	44,588
2025	41,300
2026 and thereafter	97,740
Total	$	292,807

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Income Taxes

9 Months Ended

Sep. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

5. Income Taxes

The Company’s income tax benefit for the three and nine months ended September 30, 2021 and September 30, 2020 reflects its estimate of the effective tax rates expected to be applicable for the full years, adjusted for any discrete events that are recorded in the period in which they occur. The estimates are re-evaluated each quarter based on the estimated tax expense for the full year.

The tax benefit of $3.3 million and $6.2 million recorded for the three and nine months ended September 30, 2021, respectively, are primarily related to the deferred tax benefit attributable to the release of valuation allowance related to the acquisition of deferred tax liabilities associated with the Company’s business combinations occurring during the six months ended June 30, 2021, as discussed in Note 2. Acquisitions, the deferred tax benefit attributable to the reduction in deferred tax liabilities associated with the transfer of intangibles between foreign and domestic jurisdictions, and foreign income taxes associated with our combined non-U.S. operations. These tax benefits are offset by changes in deferred tax liabilities associated with amortization of United States tax deductible goodwill and state taxes in certain states in which the Company does not file on a consolidated basis or have net operating loss carryforwards and the impact, recorded as discrete, of enacted future changes in UK tax rates on the balance of deferred tax assets and liabilities per tax law enacted in June 2021. The release of valuation allowance is attributable to ASC 805-740-30-3 and acquisitions of domestic entities with deferred tax liabilities that, upon acquisition, or shortly thereafter, allowed us to recognize certain deferred tax assets of approximately $6.5 million during the nine months ended September 30, 2021 that had previously been offset by a valuation allowance. $4.3 million of the benefit for the release of valuation allowance was primarily recorded during the three months ended March 31, 2021, and $2.2 million was primarily recorded during the three months ended September 30, 2021.

The tax provision of $1.1 million and benefit of $3.8 million recorded for the three and nine months ended September 30, 2020, respectively, are primarily related to the deferred tax benefit attributable to the release of valuation allowance related to the acquisition of deferred tax liabilities associated with the Localytics business combination, as discussed in Note 2. Acquisitions, and foreign income taxes associated with our combined non-U.S. operations. These tax benefits are offset by changes in deferred tax liabilities associated with amortization of United States tax deductible goodwill, state taxes in certain states in which the Company does not file on a consolidated basis or have net operating loss carryforwards, and an increase in net deferred tax liabilities in the UK associated with the change in the applicable UK tax rate. The release of valuation allowance is attributable to ASC 805-740-30-3 and acquisitions of domestic entities with deferred tax liabilities that, upon acquisition, allowed us to recognize certain deferred tax assets of approximately $4.2 million during the nine months ended September 30, 2020 that had previously been offset by a valuation allowance. An adjustment reducing the benefit by approximately $0.2 million was recognized during the three months ended September 30, 2020.

The Company has historically incurred operating losses in the United States and, given its cumulative losses and limited history of profits, has recorded a valuation allowance against its United States net deferred tax assets, exclusive of tax deductible goodwill, at September 30, 2021 and September 30, 2020, respectively.

The Company has reflected any uncertain tax positions primarily within its long-term taxes payable and a portion within deferred tax assets. The Company and its subsidiaries file tax returns in the U.S. federal jurisdiction and in several state and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations for years ending before December 31, 2017 and is no longer subject to state and local or foreign income tax examinations by tax authorities for years ending before December 31, 2016, other than where cross-border transactions extend the statute of limitations. The Company is not currently under audit for federal, state or any foreign jurisdictions. U.S. operating losses generated in years prior to 2017 remain open to adjustment until the statute of limitations closes for the tax year in which the net operating losses are utilized.

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Debt

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Debt

6. Debt

Long-term debt consisted of the following at September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021		December 31, 2020
Senior secured loans (includes unamortized discount of $10,085 and $11,648 based on an imputed interest rate of 5.8% and 5.8%, at September 30, 2021 and December 31, 2020, respectively)	$	519,116	$	521,603
Less current maturities	(3,158)		(3,166)
Total long-term debt	$	515,958	$	518,437

Credit Facility

On August 6, 2019, the Company entered into a credit agreement (the “Credit Facility”) which provides for (i) a fully-drawn $350 million, 7 year, senior secured term loan B facility (the “Term Loan”) and (ii) a new $60 million, 5 year, revolving credit facility (the “Revolver”) that was fully available as of September 30, 2021. The Credit Facility replaced the Company's

previous credit agreement. All outstanding balances under our previous credit facility were paid off using proceeds from our new Credit Facility.

On November 26, 2019 (the “Closing Date”), the Company entered into a First Incremental Assumption Agreement (the “Incremental Assumption Agreement”) which provides for a term loan facility to be established under the Credit Facility in an aggregate principal amount of $190.0 million (the “2019 Incremental Term Loan”) which is in addition to the existing $350.0 million term loans outstanding under the Credit Facility and the $60.0 million revolving credit facility under the Credit Facility.

Payment terms

The Term Loans (including the 2019 Incremental Term Loan) are repayable on a quarterly basis beginning on December 31, 2019 by an amount equal to 0.25% (1.00% per annum) of the aggregate principal amount of such loan. Any amount remaining unpaid is due and payable in full on August 6, 2026 (the “Term Loan Maturity Date”).

At the option of the Company, the Term Loans (including the 2019 Incremental Term Loan) accrue interest at a per annum rate based on (i) the Base Rate plus a margin of 2.75% or (ii) the rate (not less than 0.00%) for Eurodollar deposits quoted on the LIBOR01 or LIBOR02 pages on the Reuters Screen, or as otherwise determined in accordance with the Credit Facility (based on a period equal to 1, 2, 3 or 6 months or, if available and agreed to by all relevant Lenders and the Agent, 12 months or such period of less than 1 month) plus a margin of 3.75%. The Base Rate for any day is a rate per annum equal to the greatest of (i) the prime rate in effect on such day, (ii) the federal funds effective rate (not less than 0.00%) in effect on such day plus ½ of 1.00%, and (ii) the Eurodollar rate for a one month interest period beginning on such day plus 1.00%.

Accrued interest on the loans will be paid quarterly or, with respect to loans that are accruing interest based on the Eurodollar rate, at the end of the applicable interest rate period.

Interest rate swaps

On August 6, 2019, the Company entered into an interest rate hedge instrument for the full 7 year term, effectively fixing our interest rate at 5.4% for the Term Loan. In addition, on November 26, 2019, the Company entered into interest rate swap agreements to hedge the interest rate risk associated with the Company’s floating rate obligations under the 2019 Incremental Term Loan. These interest rate swaps fix the Company's interest rate (including the hedge premium) at 5.4% for the term of the Credit Facility. The interest rate associated with our new $60 million, 5 year, Revolver remains floating.

The interest rate swap has been designated as a cash flow hedge and is valued using a market approach, which is a Level 2 valuation technique. At September 30, 2021, the fair value of the interest rate swap was a $15.6 million liability as a result of a decline in short term interest rates since entering into the swap agreements. The decrease in the fair value of the interest rate swap liability during the three and nine months ended September 30, 2021 is the result of an increase in short term interest rates during the respective periods. In the next twelve months, the Company estimates that $3.3 million will be reclassified from Accumulated other comprehensive income (loss) and recorded as an increase to Interest expense. Increases/decreases in cash paid for interest as a result of the Company’s interest rate swaps are included cash flows from operations.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
(Loss) gain recognized in Other comprehensive income on derivative financial instruments	$	2,112	$	(441)	$	14,391	$	(35,497)
(Loss) gain on interest rate swap (included in Interest expense on our consolidated statement of operations)	$	(2,090)	$	(2,013)	$	(6,158)	$	(3,467)

Revolver

Loans under the Revolver are available up to $60 million. The Revolver provides a sub-facility whereby the Company may request letters of credit (the “Letters of Credit”) in an aggregate amount not to exceed, at any one time outstanding, $10.0 million for the Company. The aggregate amount of outstanding Letters of Credit are reserved against the credit availability under the Maximum Revolver Amount. The Company incurs a 0.50% per annum unused line fee on the unborrowed balance of the Revolver which is paid quarterly.

Loans under the Revolver may be borrowed, repaid and reborrowed until August 6, 2024 (the “Maturity Date”), at which time all amounts borrowed under the Revolver must be repaid. As of September 30, 2021, the Company had no borrowings outstanding under the Revolver or related sub-facility.

Covenants

The Credit Facility contains customary affirmative and negative covenants. The negative covenants limit the ability of the Loan Parties to, among other things (in each case subject to customary exceptions for a credit facility of this size and type):

•Incur additional indebtedness or guarantee indebtedness of others;

•Create liens on their assets;

•Make investments, including certain acquisitions;

•Enter into mergers or consolidations;

•Dispose of assets;

•Pay dividends and make other distributions on the Company’s capital stock, and redeem and repurchase the Company’s capital stock;

•Enter into transactions with affiliates; and

•Prepay indebtedness or make changes to certain agreements.

The Credit Facility has no financial covenants as long as less than 35% of the Revolver is drawn as of the last day of any fiscal quarter. If 35% of the Revolver is drawn as of the last day of a given fiscal quarter the Company will be required to maintain a Total Leverage Ratio (the ratio of funded indebtedness as of such date less the amount of unrestricted cash and cash equivalents of the Company and its guarantors in an amount not to exceed $50.0 million, to adjusted EBITDA (calculated on a pro forma basis including giving effect to any acquisition)), measured on a quarter-end basis for each four consecutive fiscal quarters then ended, of not greater than 6.00 to 1.00.

In addition, the Credit Facility contains customary events of default subject to customary cure periods for certain defaults that include, among others, non-payment defaults, inaccuracy of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness, change in control, bankruptcy and insolvency defaults and material judgment defaults. The occurrence of an event of default could result in the acceleration of Term Loans and Revolver and a right by the agent and lenders to exercise remedies. At the election of the lenders, a default interest rate shall apply on all obligations during an event of default, at a rate per annum equal to 2.00% above the applicable interest rate. The Term Loan and Revolver are secured by substantially all of the Company's assets. As of September 30, 2021 the Company was in compliance with all covenants under the Credit Facility.

Cash interest costs averaged 5.4% and 5.4% for the nine months ended September 30, 2021 and for the year ended December 31, 2020, respectively. In addition, as of September 30, 2021 and December 31, 2020 the Company had $10.1 million and $11.6 million, respectively, of unamortized deferred financing costs associated with the Credit Facility. These financing costs will be amortized to non-cash interest expense over the remaining term of the Credit Facility.

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Net Loss Per Share

9 Months Ended

Sep. 30, 2021

Earnings Per Share [Abstract]

Net Loss Per Share

7. Net Loss Per Share

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Numerator:
Net Loss	$	(11,015)	$	(11,310)	$	(50,741)	$	(45,550)
Denominator:
Weighted–average common shares outstanding, basic and diluted	30,428,675		27,220,134		30,167,171		25,725,495
Net loss per common share, basic and diluted	$	(0.36)	$	(0.42)	$	(1.68)	$	(1.77)

Due to the net losses for the three and nine months ended September 30, 2021 and September 30, 2020, respectively, basic and diluted loss per share were the same. The following table sets forth the anti–dilutive common share equivalents as of September 30, 2021 and September 30, 2020:

	September 30,
	2021	2020
Stock options	242,984	314,310
Restricted stock awards	1,000	168,124
Restricted stock units	2,034,186	1,744,595
Performance restricted stock units	63,537	66,297
Total anti–dilutive common share equivalents	2,341,707	2,293,326

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

8. Commitments and Contingencies

Purchase Commitments

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.

In addition, the Company purchased software development services pursuant to a technology services agreement with DevFactory FZ-LLC for the three months ended September 30, 2021 and September 30, 2020 totaling $2.4 million and $1.8 million, respectively, and for the nine months ended September 30, 2021 and September 30, 2020 totaling $7.2 million and $5.5 million, respectively. The remaining purchase obligation after September 30, 2021 through December 31, 2021 is $2.4 million. See Note 11. Related Party Transactions for more information regarding our purchase commitment to this related party.

Litigation

In the normal course of business, the Company may become involved in various lawsuits and legal proceedings. At this time, the Company is not involved in any current or pending legal proceedings, and does not anticipate any legal proceedings, that may have a material adverse effect on the Company's condensed consolidated balances sheets or condensed consolidated statement of operations.

In addition, when we acquire companies, we require that the sellers provide industry standard indemnification for breaches of representations and warranties contained in the acquisition agreement and we will withhold payment of a portion of the purchase price for a period of time in order to satisfy any claims that we may make for indemnification. In certain transactions, we agree with the sellers to purchase a representation and warranty insurance policy that will pay such claims for indemnification. From time to time we may have one or more claims for indemnification pending. Similarly, we may have one or more ongoing negotiations related to the amount of an earnout. Gain contingencies related to indemnification claims are not recognized in our condensed consolidated financial statements until realized.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2021

Equity [Abstract]

Stockholders' Equity

9. Stockholders' Equity

Registration Statement

On August 10, 2020, we filed a registration statement on Form S-3 (File No. 333-243728) (the “2020 S-3”), which became effective automatically upon its filing and covers an unlimited amount of securities. The 2020 S-3, will remain effective through August 2023.

Accumulated Other Comprehensive Income (Loss)

Comprehensive income (loss) consists of two elements, net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) items are recorded in the stockholders’ equity section of our condensed consolidated balance sheets and excluded from net income (loss). Our other comprehensive income (loss) consists primarily of foreign currency translation adjustments for subsidiaries with functional currencies other than the U.S. dollar, unrealized translation gains (losses) on intercompany loans with foreign subsidiaries, and unrealized gains (losses) on interest rate swaps.

The following table shows the components of accumulated other comprehensive loss, net of income taxes, (“AOCI”) in the stockholders’ equity section of our condensed consolidated balance sheets at the dates indicated (in thousands):

	September 30, 2021		December 31, 2020
Foreign currency translation adjustment	$	(4,966)	$	644
Unrealized translation gain on intercompany loans with foreign subsidiaries	2,270		3,154
Unrealized loss on interest rate swaps	(15,642)		(30,032)
Total accumulated other comprehensive loss	$	(18,338)	$	(26,234)

The unrealized translation gain on intercompany loans with foreign subsidiaries as of September 30, 2021 is net of income tax expense of $1.8 million. The tax benefit related to unrealized translation gains on intercompany loans for the three and nine months ended September 30, 2021 was $0.5 million and $0.2 million, respectively. The income tax expense/benefit allocated to each component of other comprehensive income (loss) for all other periods and components is not material. The Company reclassifies taxes from AOCI to earnings as the items to which the tax effects relate are similarly reclassified.

The functional currency of our foreign subsidiaries are primarily the local currencies. Results of operations for foreign subsidiaries are translated into United States dollars using the average exchange rates on a monthly basis during the year. The assets and liabilities of those subsidiaries are translated into United States dollars using the exchange rates in effect at the balance sheet date. The related translation adjustments are recorded in a separate component of stockholders' equity in accumulated other comprehensive loss.

The Company has intercompany loans that were used to fund the acquisitions of foreign subsidiaries. Due to the long-term nature of the loans, the unrealized translation gains (losses) resulting from re-measurement are recognized as a component of accumulated other comprehensive income (loss).

Stock-Based Compensation

The Company recognizes stock-based compensation expense from all awards in the following expense categories (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Cost of revenue	$	539	$	624	$	1,544	$	1,512
Research and development	671		1,005		2,327		2,639
Sales and marketing	1,636		968		4,392		2,415
General and administrative (1)	9,201		8,366		35,158		24,697
Total	$	12,047	$	10,963	$	43,421	$	31,263

(1)In March 2021 our former co-President and Chief Operating Officer (“COO”) resigned from his positions and entered into an advisory agreement with the Company pursuant to which he will serve as a strategic advisor to the Company through December 31, 2022. Stock-based compensation for the nine months ended September 30, 2021 includes $6.3 million in incremental stock-based compensation expense related to the deemed modification of the unvested portion of grants held by our former COO at the time of transition, even though these shares continue to vest over their existing vesting schedule through 2022. In accordance with ASC 718, the fair value of these awards were modified and all related expense accelerated on the date of modification as a result of the reduction in required service.

Restricted Stock Units

Beginning in 2019, the Company began granting restricted stock units under its 2014 Stock Incentive Plan, in lieu of restricted stock awards, primarily for stock plan administrative purposes. Restricted stock unit activity during the nine months ended September 30, 2021 was as follows:

	Number of Restricted Stock Units Outstanding	Weighted-Average Grant Date Fair Value
Unvested balances at December 31, 2020	1,261,290	$	39.92
Units granted	1,220,066	47.67
Units vested	(383,371)	40.14
Awards forfeited	(63,799)	42.81
Unvested balances at September 30, 2021	2,034,186	$	44.43

Performance Based Restricted Stock Units

In 2020 and 2021 fifty percent of the awards made to our Chief Executive Officer were performance based restricted stock units ("PRSUs"). The PRSU agreements provide that the quantity of units subject to vesting may range from 0% to 300% of the units granted per the table below based on the Company's absolute total shareholder return at the end of the eighteen month performance periods. Units granted per the table below are based on a 100% target payout. Compensation expense is recognized over the required service period of the grant and is determined based on the grant date fair value of the award and is not subject to fluctuation due to achievement of the underlying market-based target.

PRSU activity during the nine months ended September 30, 2021 was as follows:

	Number of PRSUs Outstanding	Weighted-Average Grant Date Fair Value
Unvested balances at December 31, 2020	66,297	$	79.72
Units granted	63,537	84.87
Incremental PRSUs vested in period	69,048
Units vested	(135,345)	79.72
Unvested balances at September 30, 2021	63,537	$	84.87

Significant assumptions used in the Monte Carlo simulation model for the PRSUs granted during the nine months ended September 30, 2021 and year ended December 31, 2020 are as follows:

	September 30, 2021	December 31, 2020
Expected volatility	53.6%	45.1%
Risk-free interest rate	0.1%	1.3%
Remaining performance period (in years)	1.35	1.35
Dividend yield	—	—

Restricted Stock Awards

Restricted share activity during the nine months ended September 30, 2021 was as follows:

	Number of Restricted Shares Outstanding	Weighted-Average Grant Date Fair Value
Unvested balances at December 31, 2020	34,508	$	30.13
Awards vested	(33,508)	30.11
Awards forfeited	—	—
Unvested balances at September 30, 2021	1,000	$	30.61

Stock Option Activity

Stock option activity during the nine months ended September 30, 2021 was as follows:

	Number of Options Outstanding	Weighted– Average Exercise Price
Outstanding at December 31, 2020	264,002	$	8.93
Options exercised	(20,610)	11.07
Options expired	(408)	1.56
Outstanding at September 30, 2021	242,984	$	8.76

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Revenue Recognition

9 Months Ended

Sep. 30, 2021

Revenue from Contract with Customer [Abstract]

Revenue Recognition

10. Revenue Recognition

Revenue Recognition Policy

Revenues are recognized when control of the promised goods or services is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services over the term of the agreement, generally when made available to the customers. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenues are recognized net of sales credits and allowances. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

Revenue is recognized based on the following five step model in accordance with ASC 606, Revenue from Contracts with Customers:

•Identification of the contract with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations in the contract

•Recognition of revenue when, or as, the Company satisfies a performance obligation

Performance obligations under our contracts consist of subscription and support, perpetual licenses, and professional services revenues within a single operating segment.

Subscription and Support Revenue

The Company's software solutions are available for use as hosted application arrangements under subscription fee agreements without licensing perpetual rights to the software. Subscription fees from these applications are recognized over time on a ratable basis over the customer agreement term beginning on the date the Company's solution is made available to the customer. As our customers have access to use our solutions over the term of the contract agreement we believe this method of revenue recognition provides a faithful depiction of the transfer of services provided. Our subscription contracts are generally 1 to 3 years in length. Amounts that have been invoiced are recorded in accounts receivable and deferred revenue or subscription and support revenue, depending on whether the revenue recognition criteria have been met. Additional fees for monthly usage above the levels included in the standard subscription fee are recognized as subscription and support revenue at the end of each month and is invoiced concurrently. Subscription and support revenue includes revenue related to the Company’s digital engagement application which provides short code connectivity for its two-way short message service (“SMS”) programs and campaigns. As discussed further in the “Principal vs. Agent Considerations” section below, the Company recognizes revenue related to these messaging-related subscription contracts on a gross basis.

Perpetual License Revenue

The Company also records revenue from the sales of proprietary software products under perpetual licenses. Revenue from distinct on-premises licenses is recognized upfront at the point in time when the software is made available to the customer. The Company’s products do not require significant customization.

Professional Services Revenue

Professional services provided with subscription and support licenses and perpetual licenses consist of implementation fees, data extraction, configuration, and training. The Company’s implementation and configuration services do not involve significant customization of the software and are not considered essential to the functionality. Revenue from professional services are recognized over time as such services are performed. Revenue for fixed price services are generally recognized over time applying input methods to estimate progress to completion. Revenue for consumption-based services are generally recognized as the services are performed.

Significant Judgments

Performance Obligations and Standalone Selling Price

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of accounting. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. The Company has contracts with customers that often include multiple performance obligations, usually including professional services sold with either individual or multiple subscriptions or perpetual licenses. For these contracts, the Company records individual performance obligations separately if they are distinct by allocating the contract's total transaction price to each performance obligation in an amount based on the relative standalone selling price (“SSP”), of each distinct good or service in the contract.

Judgment is required to determine the SSP for each distinct performance obligation. A residual approach is only applied in limited circumstances when a particular performance obligation has highly variable and uncertain SSP and is bundled with other performance obligations that have observable SSP. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. We determine the SSP based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, historical standalone sales, customer demographics, geographic locations, and the number and types of users within our contracts.

Principal vs. Agent Considerations

The Company evaluates whether it is the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis) for vendor reseller agreements and messaging-related subscription agreements. Where the Company is the principal, it first obtains control of the inputs to the specific good or service and directs their use to create the combined output. The Company's control is evidenced by its involvement in the integration of the good or service on its platform before it is transferred to its customers, and is further supported by the Company being primarily responsible to its customers and having a level of discretion in establishing pricing. While none of the factors individually are considered presumptive or determinative, in reaching conclusions on gross versus net revenue recognition, the Company places the most weight on the analysis of whether or not it is the primary obligor in the arrangement.

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

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

Contract Balances

The timing of revenue recognition, billings and cash collections can result in billed accounts receivable, unbilled receivables, and deferred revenue. Billings scheduled to occur after the performance obligation has been satisfied and revenue recognition has occurred result in unbilled receivables, which are expected to be billed during the succeeding twelve-month period and are recorded in Unbilled receivables in our condensed consolidated balance sheets. A contract liability results when we receive prepayments or deposits from customers in advance for implementation, maintenance and other services, as well as subscription fees. Customer prepayments are generally applied against invoices issued to customers when services are performed and billed. We recognize contract liabilities as revenue upon satisfaction of the underlying performance obligations. Contract liabilities that are expected to be recognized as revenue during the succeeding twelve-month period are recorded in Deferred revenue and the remaining portion is recorded in 'Deferred revenue noncurrent' on the accompanying condensed consolidated balance sheets at the end of each reporting period.

Deferred revenue primarily consists of amounts that have been billed to or received from customers in advance of revenue recognition and prepayments received from customers in advance for maintenance and other services, as well as initial subscription fees. We recognize deferred revenue as revenue when the services are performed, and the corresponding revenue recognition criteria are met. Customer prepayments are generally applied against invoices issued to customers when services are performed and billed. Our payment terms vary by the type and location of our customer and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customer types, we require payment before the products or services are delivered to the customer.

Unbilled Receivables

Unbilled receivables represent amounts for which the Company has recognized revenue, pursuant to its revenue recognition policy, for software licenses already delivered and professional services already performed, but invoiced in arrears and for which the Company believes it has an unconditional right to payment. As of September 30, 2021 and December 31, 2020, unbilled receivables were $5.8 million and $4.6 million, respectively.

Deferred Commissions

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 new customer contracts are capitalized upon contract signing and amortized on a systematic basis that is consistent with the transfer of goods and services over the expected life of the customer relationships, which has been determined to be approximately 6 years. The expected life of our customer relationships is based on historical data and management estimates, including estimated renewal terms and the useful life of the associated underlying technology. Commissions paid on renewal contracts are not commensurate with commissions paid on new customer contracts, as such, deferred commissions related to renewals are capitalized and amortized over the estimated average contractual renewal term of 18 months. We utilized the 'portfolio approach' practical expedient permitted under ASC 606-10-10-4, which allows entities to apply the guidance to a portfolio of contracts with similar characteristics as the effects on the financial statements of this approach would not differ materially from applying the guidance to individual contracts. The portion of capitalized costs expected to be amortized during the succeeding twelve-month period is recorded in current assets as deferred commissions, current, and the remainder is recorded in long-term assets as deferred commissions, net of current portion. Amortization expense is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations. Deferred commissions are reviewed for impairment whenever events or circumstances

indicate their carrying value may not be recoverable consistent with the Company's long-lived assets policy. No indicators of impairment were identified during the nine months ended September 30, 2021.

The following table presents the activity impacting deferred commissions for the nine months ended September 30, 2021 (in thousands):

Balance at December 31, 2020	$	18,746
Capitalized deferred commissions	10,240
Amortization of deferred commissions	(6,097)
Balance at September 30, 2021	$	22,889

Commissions capitalized in excess of amortization of deferred commissions for the three and nine months ended September 30, 2021 were $0.6 million and $4.1 million, respectively.

Deferred Revenue

Deferred revenue represents either customer advance payments or billings for which the aforementioned revenue recognition criteria have not yet been met.

Deferred revenue is mainly unearned revenue related to subscription services and support services. During the nine months ended September 30, 2021, we recognized $76.3 million and $1.9 million of subscription services and professional services revenue, respectively, that was included in the deferred revenue balances at the beginning of the period. In addition, during the nine months ended September 30, 2021 we recognized $5.9 million in revenue that was included in the acquired deferred revenue balance of our 2021 acquisitions as disclosed in Note 2. Acquisitions.

Remaining Performance Obligations

As of September 30, 2021, approximately $263.2 million of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 69% of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.

Disaggregated Revenue

The Company disaggregates revenue from contracts with customers by geography and revenue generating activity, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Revenue by geography is based on the ship-to address of the customer, which is intended to approximate where the customers' users are located. The ship-to country is generally the same as the billing country. The Company has operations primarily in the U.S., United Kingdom and Canada. Information about these operations is presented below (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues:
Subscription and support:
United States	$	50,866	$	53,356	$	154,683	$	149,946
United Kingdom	11,886		9,518		33,938		28,864
Canada	3,355		3,318		10,317		11,260
Other International	6,157		4,800		16,384		12,512
Total subscription and support revenue	72,264		70,992		215,322		202,582
Perpetual license:
United States	628		345		1,219		849
United Kingdom	—		—		11		16
Canada	1		14		53		71
Other International	55		52		168		327
Total perpetual license revenue	684		411		1,451		1,263
Professional services:
United States	2,014		1,865		6,208		6,773
United Kingdom	753		432		2,219		1,621
Canada	117		137		309		371
Other International	221		347		777		921
Total professional service revenue	3,105		2,781		9,513		9,686
Total revenue	$	76,053	$	74,184	$	226,286	$	213,531

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Related Party Transactions

9 Months Ended

Sep. 30, 2021

Related Party Transactions [Abstract]

Related Party Transactions

11. Related Party Transactions

We are a party to two agreements, as detailed below, with companies controlled by ESW Capital LLC (“ESW”), a non-management investor in the Company which historically held more than 5% of the Company's capital stock. As of July 9, 2021 ESWs ownership in Upland was reduced to 4.8% at which point DevFactory was no longer considered a related party.

•On March 28, 2017, the Company entered into an amendment to the Amended and Restated Technology Services Agreement with DevFactory FZ LLC (“DevFactory”) to extend the initial term end date from December 31, 2017 to December 31, 2021. Additionally, the Company amended the option for either party to renew annually for one additional year. The effective date of the amendment is January 1, 2017. The Company has an outstanding purchase commitment in 2021 for software development services pursuant to this agreement in the amount of $9.6 million. For years after 2021, the purchase commitment amount for software development services will be equal to the prior year purchase commitment increased (decreased) by the percentage change in total revenue for the prior year as compared to the preceding year. For example, if 2021 total revenues increase by 10% as compared to 2020 total revenues, then the 2022 purchase commitment will increase by approximately $1.0 million from the 2021 purchase commitment amount to approximately $10.6 million. The Company purchased software development services pursuant to this agreement with DevFactory of $2.4 million and $1.8 million during the three months ended September 30, 2021 and September 30, 2020, respectively, and $7.2 million and $5.5 million during the nine months ended September 30, 2021 and September 30, 2020, respectively. As of September 30, 2021 and December 31, 2020 amounts included in accounts payable and accrued liabilities owed to this company totaled $2.4 million and $0.0 million, respectively.

•The Company purchased services from Crossover, Inc. ("Crossover"), a company controlled by ESW Capital, LLC during the three months ended September 30, 2021 and September 30, 2020 of approximately $1.0 million and $1.2 million, respectively, and $2.9 million and $3.7 million during the nine months ended September 30, 2021 and September 30, 2020, respectively. Crossover provides a proprietary technology system to help the Company identify, screen, select, assign, and connect with necessary resources from time to time to perform technology software

development and other services throughout the Company, and track productivity of such resources. While there are no purchase commitments with Crossover, the Company continues to use its services in 2021. As of September 30, 2021 and December 31, 2020 amounts included in accounts payable and accrued liabilities owed to this company totaled $0.8 million and $0.6 million, respectively.The Company previously had an arrangement with a former subsidiary, Visionael Corporation ("Visionael"), to provide management, human resource, payroll and administrative services. John T. McDonald, the Company's Chief Executive Officer and Chairman of the Board, beneficially holds approximately 26.18% interest in Visionael. Visionael ceased operations effective July 31, 2021. Fees earned from this arrangement for the three months ended September 30, 2021 and September 30, 2020 were $0 and $15,000, respectively, and $0 and $45,000 during the nine months ended September 30, 2021 and September 30, 2020, respectively. In connection with its arrangement with Visionael, the Company has provided advances to Visionael to help cover short term working capital needs. As of September 30, 2021 and December 31, 2020 advances to Visionael included in Prepaid and other on the Company’s condensed consolidated balance sheets totaled $0.0 million and $0.4 million, respectively, net of allowance for credit losses. During the nine months ended September 30, 2021 the Company recognized an allowance for credit loss of $0.4 million against the remaining outstanding balance.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). The condensed consolidated financial statements include the accounts of Upland Software, Inc. and its wholly owned subsidiaries (collectively referred to as “Upland”, the “Company”, “we” or “us”). All intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation.

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. In the opinion of management of the Company, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements, in all material respects, and include all adjustments of a normal recurring nature necessary for a fair presentation. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other period.

The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2020 Annual Report on Form 10-K filed with the SEC on February 25, 2021.

Use of Estimates

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses. Significant items subject to such estimates include those related to revenue recognition, deferred commissions, allowance for credit losses, stock-based compensation, contingent consideration, acquired intangible assets, the useful lives of intangible assets and property and equipment, the fair value of the Company’s interest rate swaps and income taxes. In accordance with GAAP, management bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances. Management regularly evaluates its estimates and assumptions using historical experience and other factors; however, actual results could differ from those estimates.

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. Upland is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of November 3, 2021, 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. Actual results could differ materially from these estimates under different assumptions or conditions.

Concentrations of Credit Risk and Significant Customers

Concentrations of Credit Risk and Significant Customers Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, accounts receivable and the Company’s interest rate swap hedges. The Company’s cash and cash equivalents are placed with high-quality financial institutions, which, at times, may exceed federally insured limits. The Company has not experienced any losses in these accounts, and the Company does not believe it is exposed to any significant credit risk related to cash and cash equivalents. The Company provides credit, in the normal course of business, to a number of its customers. To manage accounts receivable credit risk, the Company performs periodic credit evaluations of its customers and maintains current expected credit losses which considers such factors as historical loss information, geographic location of customers, current market conditions, and reasonable and supportable forecasts.

Derivatives

Derivatives

In connection with borrowing funds under the Company’s credit facility the Company has entered into a floating-to-fixed interest rate swap agreements to limit exposure to interest rate risk related to our debt. These interest rate swaps effectively converted the entire balance of the Company's $540 million term loans from variable interest payments to fixed interest rate payments, based on an annualized fixed rate of 5.4%, for a 7 year term of debt. ASC 815 requires entities to recognize derivative instruments as either assets or liabilities in the statement of financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. The Company assessed the effectiveness of the hedging relationship under the hypothetical derivative method and noted that all of the critical terms of the hypothetical derivative and hedging instrument were the same. The hedging relationship continues to limit the Company’s exposure to the variability in interest rates under the Company’s term loans and related cash outflows. As such, the Company has deemed this hedging relationship as highly effective in offsetting cash flows attributable to hedged risk (variability in forecasted monthly interest payments) for the term of the term loans and interest rate swap agreements. All derivative financial instruments are recorded at fair value as a net asset or liability in the accompanying condensed consolidated balance sheets. As of September 30, 2021 and December 31, 2020 the fair value of the interest rate swaps included in Interest rate swap liabilities in the Company's condensed consolidated balance sheets was $15.6 million and $30.0 million, respectively.

The change in the fair value of the hedging instruments is recorded in Other comprehensive income. Amounts deferred in Other comprehensive income will be reclassified to Interest expense in the accompanying condensed consolidated statements of operations in the period in which the hedged item affects earnings.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company recognizes financial instruments in accordance with the authoritative guidance on fair value measurements and disclosures for financial assets and liabilities. This guidance defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. The guidance also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

These tiers include Level 1, defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.

The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable and debt. The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value, primarily due to short maturities. The carrying values of the Company’s debt instruments approximated their fair value based on rates currently available to the Company.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Recently issued accounting pronouncements not yet adopted

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is evaluating the impact of this standard on our consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which creates an exception to the general recognition and measurement principle for contract assets and contract liabilities from contracts with customers acquired in a business combination. The new guidance will require companies to apply the definition of a performance obligation under accounting standard codification (“ASC”) Topic 606 to recognize and measure contract assets and contract liabilities (i.e., deferred revenue) relating to contracts with customers that are acquired in a business combination. Under current GAAP, an acquirer in a business combination is generally required to recognize and measure the assets it acquires and the liabilities it assumes at fair value on the acquisition date. The new guidance will result in the acquirer recording acquired contract assets and liabilities on the same

basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606. These amendments are effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is evaluating the impact of this standard on our consolidated financial statements.

Revenue Recognition Policy

Revenue Recognition Policy

Revenues are recognized when control of the promised goods or services is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services over the term of the agreement, generally when made available to the customers. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenues are recognized net of sales credits and allowances. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

Revenue is recognized based on the following five step model in accordance with ASC 606, Revenue from Contracts with Customers:

•Identification of the contract with a customer

•Identification of the performance obligations in the contract

•Determination of the transaction price

•Allocation of the transaction price to the performance obligations in the contract

•Recognition of revenue when, or as, the Company satisfies a performance obligation

Performance obligations under our contracts consist of subscription and support, perpetual licenses, and professional services revenues within a single operating segment.

Subscription and Support Revenue

The Company's software solutions are available for use as hosted application arrangements under subscription fee agreements without licensing perpetual rights to the software. Subscription fees from these applications are recognized over time on a ratable basis over the customer agreement term beginning on the date the Company's solution is made available to the customer. As our customers have access to use our solutions over the term of the contract agreement we believe this method of revenue recognition provides a faithful depiction of the transfer of services provided. Our subscription contracts are generally 1 to 3 years in length. Amounts that have been invoiced are recorded in accounts receivable and deferred revenue or subscription and support revenue, depending on whether the revenue recognition criteria have been met. Additional fees for monthly usage above the levels included in the standard subscription fee are recognized as subscription and support revenue at the end of each month and is invoiced concurrently. Subscription and support revenue includes revenue related to the Company’s digital engagement application which provides short code connectivity for its two-way short message service (“SMS”) programs and campaigns. As discussed further in the “Principal vs. Agent Considerations” section below, the Company recognizes revenue related to these messaging-related subscription contracts on a gross basis.

Perpetual License Revenue

The Company also records revenue from the sales of proprietary software products under perpetual licenses. Revenue from distinct on-premises licenses is recognized upfront at the point in time when the software is made available to the customer. The Company’s products do not require significant customization.

Professional Services Revenue

Professional services provided with subscription and support licenses and perpetual licenses consist of implementation fees, data extraction, configuration, and training. The Company’s implementation and configuration services do not involve significant customization of the software and are not considered essential to the functionality. Revenue from professional services are recognized over time as such services are performed. Revenue for fixed price services are generally recognized over time applying input methods to estimate progress to completion. Revenue for consumption-based services are generally recognized as the services are performed.

Significant Judgments

Performance Obligations and Standalone Selling Price

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of accounting. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. The Company has contracts with customers that often include multiple performance obligations, usually including professional services sold with either individual or multiple subscriptions or perpetual licenses. For these contracts, the Company records individual performance obligations separately if they are distinct by allocating the contract's total transaction price to each performance obligation in an amount based on the relative standalone selling price (“SSP”), of each distinct good or service in the contract.

Judgment is required to determine the SSP for each distinct performance obligation. A residual approach is only applied in limited circumstances when a particular performance obligation has highly variable and uncertain SSP and is bundled with other performance obligations that have observable SSP. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. We determine the SSP based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, historical standalone sales, customer demographics, geographic locations, and the number and types of users within our contracts.

Principal vs. Agent Considerations

The Company evaluates whether it is the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis) for vendor reseller agreements and messaging-related subscription agreements. Where the Company is the principal, it first obtains control of the inputs to the specific good or service and directs their use to create the combined output. The Company's control is evidenced by its involvement in the integration of the good or service on its platform before it is transferred to its customers, and is further supported by the Company being primarily responsible to its customers and having a level of discretion in establishing pricing. While none of the factors individually are considered presumptive or determinative, in reaching conclusions on gross versus net revenue recognition, the Company places the most weight on the analysis of whether or not it is the primary obligor in the arrangement.

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

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

Contract Balances

The timing of revenue recognition, billings and cash collections can result in billed accounts receivable, unbilled receivables, and deferred revenue. Billings scheduled to occur after the performance obligation has been satisfied and revenue recognition has occurred result in unbilled receivables, which are expected to be billed during the succeeding twelve-month period and are recorded in Unbilled receivables in our condensed consolidated balance sheets. A contract liability results when we receive prepayments or deposits from customers in advance for implementation, maintenance and other services, as well as subscription fees. Customer prepayments are generally applied against invoices issued to customers when services are performed and billed. We recognize contract liabilities as revenue upon satisfaction of the underlying performance obligations. Contract liabilities that are expected to be recognized as revenue during the succeeding twelve-month period are recorded in Deferred revenue and the remaining portion is recorded in 'Deferred revenue noncurrent' on the accompanying condensed consolidated balance sheets at the end of each reporting period.

Deferred revenue primarily consists of amounts that have been billed to or received from customers in advance of revenue recognition and prepayments received from customers in advance for maintenance and other services, as well as initial subscription fees. We recognize deferred revenue as revenue when the services are performed, and the corresponding revenue recognition criteria are met. Customer prepayments are generally applied against invoices issued to customers when services are performed and billed. Our payment terms vary by the type and location of our customer and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customer types, we require payment before the products or services are delivered to the customer.

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Acquisitions (Tables)

9 Months Ended

Sep. 30, 2021

Business Combination and Asset Acquisition [Abstract]

Schedule of Consideration Paid for Acquisitions

The following table summarizes the consideration transferred for the acquisitions described above (in thousands):

	Panviva		BlueVenn		Second Street		Localytics
Cash	$	19,931	$	53,535	$	25,436	$	67,655
Holdback (1)	3,517		2,429		5,000		345
Contingent consideration (2)	—		2,535		1,650		1,000
Working capital and other adjustments (3)	379		(537)		—		(5,238)
Total consideration	$	23,827	$	57,962	$	32,086	$	63,762

(1)Represents the cash holdbacks subject to indemnification claims that are payable 12 months following closing for Panviva, Second Street and Localytics and 18 months following closing for BlueVenn. In addition, the holdback payment to Panviva may be reduced by up to $1.6 million based on the future renewal of a specific customer. The fair value of this potential reduction was $0.0 million as of the acquisition date.

(2)Represents the acquisition date fair value of anticipated earn-out payments, which are based on the estimated probability of attainment of the underlying future performance-based conditions at the time of acquisition. The maximum potential payout for the BlueVenn, Second Street and Localytics earn-outs were $22.4 million, $3.0 million, and $1.0 million, respectively. The earn-out for Localytics was paid in full during the year ended December 31, 2020 based on an ending fair value of $1.0 million. Refer to Note 3 for further discussion regarding the calculation of fair value of acquisition related earn-outs.

(3)In addition to working capital adjustments made to the purchase price of our acquisitions this line item includes a $5.2 million settlement in total consideration for Localytics related to a representation and warranty insurance settlement which is included in prepaids and other current assets on the Company’s consolidated balance sheets as of December 31, 2020.

Schedule of Assets and Liabilities Assumed through Acquisition

The following condensed table presents the preliminary and finalized acquisition-date fair value of the assets acquired and liabilities assumed for the acquisitions during the year ended December 31, 2020 and through the nine months ended September 30, 2021, as well as assets and liabilities (in thousands):

	Preliminary						Final
	Panviva		BlueVenn		Second Street		Localytics
Year Acquired	2021		2021		2021		2020
Cash	$	132	$	1,115	$	—	$	—
Accounts receivable	2,122		1,289		1,105		3,648
Other current assets	4,986		1,983		89		6,323
Operating lease right-of-use asset	197		1,357		489		7,605
Property and equipment	26		611		156		409
Customer relationships	9,757		18,888		14,600		30,500
Trade name	76		238		200		300
Technology	1,967		4,337		3,400		6,600
Goodwill	17,729		45,273		17,954		33,543
Other assets	33		24		13		6
Total assets acquired	37,025		75,115		38,006		88,934
Accounts payable	(1,257)		(2,772)		(230)		(2,382)
Accrued expense and other	(5,163)		(2,198)		(377)		(6,761)
Deferred tax liabilities	(3,355)		(4,066)		(4,324)		(3,382)
Deferred revenue	(3,226)		(6,760)		(500)		(4,812)
Operating lease liabilities	(197)		(1,357)		(489)		(7,835)
Total liabilities assumed	(13,198)		(17,153)		(5,920)		(25,172)
Total consideration	$	23,827	$	57,962	$	32,086	$	63,762

Schedule of Weighted-Average Amortization Period

The following table summarizes the weighted-average useful lives, by major finite-lived intangible asset class, for intangibles acquired during the nine months ended September 30, 2021 and the year ended December 31, 2020 (in years):

	Useful Life
	September 30, 2021	December 31, 2020
Customer relationships	7.0	8.0
Trade name	2.0	2.0
Developed technology	5.0	5.0
Total weighted-average useful life	6.6	7.4

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2021

Fair Value Disclosures [Abstract]

Schedule of Liabilities Measured at Fair Value on a Recurring Basis

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

	Fair Value Measurements at September 30, 2021
	(unaudited)
	Level 1		Level 2		Level 3		Total
Liabilities:
Earnout consideration liability	$	—	$	—	$	669	$	669
Interest rate swap liabilities	$	—	$	15,642	$	—	$	15,642

	Fair Value Measurements at December 31, 2020
	Level 1		Level 2		Level 3		Total
Liabilities:
Interest rate swap liabilities	$	—	$	30,032	$	—	$	30,032

Schedule of Liabilities Measured at Fair Value on a Recurring Basis which Unobservable Inputs are Utilized

The following table presents additional information about earnout consideration liabilities measured at fair value on a recurring basis and for which the Company has utilized significant unobservable (Level 3) inputs to determine fair value (in thousands) (unaudited):

	September 30, 2021
	(unaudited)
Balance at December 31, 2020	$	—
Acquisitions and settlements:
Acquisitions	4,185
Remeasurement adjustments:
Gain included in earnings	(3,503)
Foreign currency translation adjustments	(13)
Balance at September 30, 2021	$	669

Schedule of Unobservable Inputs Used in Fair Value Measurement

The significant unobservable inputs used in the fair value measurement of the Company's contingent consideration liabilities designated as Level 3 are as follows:

	Fair Value at September 30, 2021		Valuation Technique	Significant Unobservable Inputs
Contingent acquisition consideration: (BlueVenn and Second Street)	$	669	Binary option model	Expected future annual revenue streams and probability of achievement

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Goodwill and Other Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

Changes in the Company’s goodwill balance for the nine months ended September 30, 2021 are summarized in the table below (in thousands):

Balance at December 31, 2020	$	383,598
Acquired in business combinations	85,102
Adjustment related to finalization of current year business combinations	(4,146)
Foreign currency translation adjustment	(4,376)
Balance at September 30, 2021	$	460,178

Schedule of Intangible Assets, Net

The following is a summary of the Company’s intangible assets, net (in thousands):

	Estimated Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
September 30, 2021:
Customer relationships	1-10	$	359,165	$	116,707	$	242,458
Trade name	1.5-10	9,722		5,494		4,228
Developed technology	4-9	88,387		42,266		46,121
Non-compete agreements	3	1,148		1,148		—
Total intangible assets		$	458,422	$	165,615	$	292,807

	Estimated Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
December 31, 2020:
Customer relationships	1-10	$	318,941	$	89,131	$	229,810
Trade name	1.5-10	9,283		4,763		4,520
Developed technology	4-9	79,382		33,929		45,453
Non-compete agreements	3	1,148		956		192
Total intangible assets		$	408,754	$	128,779	$	279,975

Schedule of Estimated Annual Amortization Expense

As of September 30, 2021, the estimated annual amortization expense for the next five years and thereafter is as follows (in thousands):

	Amortization Expense
Year ending December 31:
Remainder of 2021	$	12,962
2022	49,281
2023	46,936
2024	44,588
2025	41,300
2026 and thereafter	97,740
Total	$	292,807

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Debt (Tables)

9 Months Ended

Sep. 30, 2021

Debt Disclosure [Abstract]

Schedule of Long-term Debt

Long-term debt consisted of the following at September 30, 2021 and December 31, 2020 (in thousands):

	September 30, 2021		December 31, 2020
Senior secured loans (includes unamortized discount of $10,085 and $11,648 based on an imputed interest rate of 5.8% and 5.8%, at September 30, 2021 and December 31, 2020, respectively)	$	519,116	$	521,603
Less current maturities	(3,158)		(3,166)
Total long-term debt	$	515,958	$	518,437

Schedule of Debt, Interest Rate Swap

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
(Loss) gain recognized in Other comprehensive income on derivative financial instruments	$	2,112	$	(441)	$	14,391	$	(35,497)
(Loss) gain on interest rate swap (included in Interest expense on our consolidated statement of operations)	$	(2,090)	$	(2,013)	$	(6,158)	$	(3,467)

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Net Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2021

Earnings Per Share [Abstract]

Schedule of Computation of Loss Per Share

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Numerator:
Net Loss	$	(11,015)	$	(11,310)	$	(50,741)	$	(45,550)
Denominator:
Weighted–average common shares outstanding, basic and diluted	30,428,675		27,220,134		30,167,171		25,725,495
Net loss per common share, basic and diluted	$	(0.36)	$	(0.42)	$	(1.68)	$	(1.77)

Schedule of Anti–dilutive Common Share Equivalents

The following table sets forth the anti–dilutive common share equivalents as of September 30, 2021 and September 30, 2020:

	September 30,
	2021	2020
Stock options	242,984	314,310
Restricted stock awards	1,000	168,124
Restricted stock units	2,034,186	1,744,595
Performance restricted stock units	63,537	66,297
Total anti–dilutive common share equivalents	2,341,707	2,293,326

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2021

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

The following table shows the components of accumulated other comprehensive loss, net of income taxes, (“AOCI”) in the stockholders’ equity section of our condensed consolidated balance sheets at the dates indicated (in thousands):

	September 30, 2021		December 31, 2020
Foreign currency translation adjustment	$	(4,966)	$	644
Unrealized translation gain on intercompany loans with foreign subsidiaries	2,270		3,154
Unrealized loss on interest rate swaps	(15,642)		(30,032)
Total accumulated other comprehensive loss	$	(18,338)	$	(26,234)

Schedule of Allocated Share-Based Compensation Expense

The Company recognizes stock-based compensation expense from all awards in the following expense categories (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Cost of revenue	$	539	$	624	$	1,544	$	1,512
Research and development	671		1,005		2,327		2,639
Sales and marketing	1,636		968		4,392		2,415
General and administrative (1)	9,201		8,366		35,158		24,697
Total	$	12,047	$	10,963	$	43,421	$	31,263

(1)In March 2021 our former co-President and Chief Operating Officer (“COO”) resigned from his positions and entered into an advisory agreement with the Company pursuant to which he will serve as a strategic advisor to the Company through December 31, 2022. Stock-based compensation for the nine months ended September 30, 2021 includes $6.3 million in incremental stock-based compensation expense related to the deemed modification of the unvested portion of grants held by our former COO at the time of transition, even though these shares continue to vest over their existing vesting schedule through 2022. In accordance with ASC 718, the fair value of these awards were modified and all related expense accelerated on the date of modification as a result of the reduction in required service.

Schedule of Restricted Stock Unit Activity

Restricted stock unit activity during the nine months ended September 30, 2021 was as follows:

	Number of Restricted Stock Units Outstanding	Weighted-Average Grant Date Fair Value
Unvested balances at December 31, 2020	1,261,290	$	39.92
Units granted	1,220,066	47.67
Units vested	(383,371)	40.14
Awards forfeited	(63,799)	42.81
Unvested balances at September 30, 2021	2,034,186	$	44.43

Schedule of Performance Based Restricted Stock Unit Activity

PRSU activity during the nine months ended September 30, 2021 was as follows:

	Number of PRSUs Outstanding	Weighted-Average Grant Date Fair Value
Unvested balances at December 31, 2020	66,297	$	79.72
Units granted	63,537	84.87
Incremental PRSUs vested in period	69,048
Units vested	(135,345)	79.72
Unvested balances at September 30, 2021	63,537	$	84.87

Schedule of Valuation Assumptions

Significant assumptions used in the Monte Carlo simulation model for the PRSUs granted during the nine months ended September 30, 2021 and year ended December 31, 2020 are as follows:

	September 30, 2021	December 31, 2020
Expected volatility	53.6%	45.1%
Risk-free interest rate	0.1%	1.3%
Remaining performance period (in years)	1.35	1.35
Dividend yield	—	—

Schedule of Restricted Stock Awards

Restricted share activity during the nine months ended September 30, 2021 was as follows:

	Number of Restricted Shares Outstanding	Weighted-Average Grant Date Fair Value
Unvested balances at December 31, 2020	34,508	$	30.13
Awards vested	(33,508)	30.11
Awards forfeited	—	—
Unvested balances at September 30, 2021	1,000	$	30.61

Schedule of Stock Option Activity

Stock option activity during the nine months ended September 30, 2021 was as follows:

	Number of Options Outstanding	Weighted– Average Exercise Price
Outstanding at December 31, 2020	264,002	$	8.93
Options exercised	(20,610)	11.07
Options expired	(408)	1.56
Outstanding at September 30, 2021	242,984	$	8.76

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Revenue Recognition (Tables)

9 Months Ended

Sep. 30, 2021

Revenue from Contract with Customer [Abstract]

Schedule of Deferred Commissions

The following table presents the activity impacting deferred commissions for the nine months ended September 30, 2021 (in thousands):

Balance at December 31, 2020	$	18,746
Capitalized deferred commissions	10,240
Amortization of deferred commissions	(6,097)
Balance at September 30, 2021	$	22,889

Schedule of Disaggregation of Revenue

The Company has operations primarily in the U.S., United Kingdom and Canada. Information about these operations is presented below (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues:
Subscription and support:
United States	$	50,866	$	53,356	$	154,683	$	149,946
United Kingdom	11,886		9,518		33,938		28,864
Canada	3,355		3,318		10,317		11,260
Other International	6,157		4,800		16,384		12,512
Total subscription and support revenue	72,264		70,992		215,322		202,582
Perpetual license:
United States	628		345		1,219		849
United Kingdom	—		—		11		16
Canada	1		14		53		71
Other International	55		52		168		327
Total perpetual license revenue	684		411		1,451		1,263
Professional services:
United States	2,014		1,865		6,208		6,773
United Kingdom	753		432		2,219		1,621
Canada	117		137		309		371
Other International	221		347		777		921
Total professional service revenue	3,105		2,781		9,513		9,686
Total revenue	$	76,053	$	74,184	$	226,286	$	213,531

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Summary of Significant Accounting Policies (Details) - USD ($)		9 Months Ended
	Aug. 06, 2019	Sep. 30, 2021	Dec. 31, 2020	Nov. 26, 2019
Interest rate swap
Offsetting Assets [Line Items]
Derivative liability, fair value, gross liability		$ (15,600,000)	$ (30,000,000)
Secured Debt | Credit Facility
Offsetting Assets [Line Items]
Debt instrument, face amount	$ 350,000,000	$ 540,000,000		$ 190,000,000
Interest rate (percent)	5.40%	5.40%
Long-term debt, term	7 years	7 years

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Acquisitions - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended			7 Months Ended	8 Months Ended	9 Months Ended		12 Months Ended	21 Months Ended
	Sep. 30, 2021	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2021	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020	Sep. 30, 2021	Jun. 24, 2021	Feb. 28, 2021	Jan. 19, 2021
Business Acquisition [Line Items]
Goodwill	$ 460,178	$ 460,178		$ 460,178	$ 460,178	$ 460,178		$ 383,598	$ 460,178
Goodwill acquired during period						85,102			114,500
Goodwill deductible for tax purposes	2,000	2,000		2,000	2,000	2,000			$ 2,000
Transaction costs, excluding integration and transformation costs	100		$ 0			$ 6,200	$ 3,500
Customer relationships
Business Acquisition [Line Items]
Finite-lived intangible assets acquired								$ 200
Panviva
Business Acquisition [Line Items]
Revenues since acquisition date	1,800	$ 1,900
Goodwill										$ 17,729
BlueVenn
Business Acquisition [Line Items]
Revenues since acquisition date	3,600			$ 9,000
Goodwill											$ 45,273
Second Street
Business Acquisition [Line Items]
Revenues since acquisition date	$ 2,800				$ 7,500
Goodwill												$ 17,954

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Acquisitions - Consideration (Details) - USD ($) $ in Thousands					12 Months Ended
	Jun. 24, 2021	Feb. 28, 2021	Jan. 19, 2021	Feb. 06, 2020	Dec. 31, 2020	Sep. 30, 2021
Business Acquisition [Line Items]
Holdback					$ 416	$ 10,531
Panviva
Business Acquisition [Line Items]
Cash	$ 19,931
Holdback	3,517
Contingent consideration	0
Working capital and other adjustments	379
Total consideration	$ 23,827
Cash holdback payable, payment period	12 months
Business combination cash holdback payment	$ 1,600
Business combination fair value potential reduction	$ 0
BlueVenn
Business Acquisition [Line Items]
Cash		$ 53,535
Holdback		2,429
Contingent consideration		2,535
Working capital and other adjustments		(537)
Total consideration		$ 57,962
Cash holdback payable, payment period		18 months
Future earn out payments, maximum		$ 22,400
Second Street
Business Acquisition [Line Items]
Cash			$ 25,436
Holdback			5,000
Contingent consideration			1,650
Working capital and other adjustments			0
Total consideration			$ 32,086
Cash holdback payable, payment period			12 months
Future earn out payments, maximum			$ 3,000
Localytics
Business Acquisition [Line Items]
Cash				$ 67,655
Holdback				345
Contingent consideration				1,000
Working capital and other adjustments				(5,238)	(5,200)
Total consideration				$ 63,762
Cash holdback payable, payment period				12 months
Future earn out payments, maximum				$ 1,000
Earn out payment					$ 1,000

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Acquisitions - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 24, 2021	Feb. 28, 2021	Jan. 19, 2021	Dec. 31, 2020	Feb. 06, 2020
Assets Acquired
Operating lease right-of-use asset	$ 6,990				$ 10,124
Goodwill	$ 460,178				$ 383,598
Panviva
Assets Acquired
Cash		$ 132
Accounts receivable		2,122
Other current assets		4,986
Operating lease right-of-use asset		197
Property and equipment		26
Goodwill		17,729
Other assets		33
Total assets acquired		37,025
Liabilities Assumed
Accounts payable		(1,257)
Accrued expense and other		(5,163)
Deferred tax liabilities		(3,355)
Deferred revenue		(3,226)
Operating lease liabilities		(197)
Total liabilities assumed		(13,198)
Total consideration		23,827
Panviva | Customer relationships
Assets Acquired
Intangible assets		9,757
Panviva | Trade name
Assets Acquired
Intangible assets		76
Panviva | Technology
Assets Acquired
Intangible assets		$ 1,967
BlueVenn
Assets Acquired
Cash			$ 1,115
Accounts receivable			1,289
Other current assets			1,983
Operating lease right-of-use asset			1,357
Property and equipment			611
Goodwill			45,273
Other assets			24
Total assets acquired			75,115
Liabilities Assumed
Accounts payable			(2,772)
Accrued expense and other			(2,198)
Deferred tax liabilities			(4,066)
Deferred revenue			(6,760)
Operating lease liabilities			(1,357)
Total liabilities assumed			(17,153)
Total consideration			57,962
BlueVenn | Customer relationships
Assets Acquired
Intangible assets			18,888
BlueVenn | Trade name
Assets Acquired
Intangible assets			238
BlueVenn | Technology
Assets Acquired
Intangible assets			$ 4,337
Second Street
Assets Acquired
Cash				$ 0
Accounts receivable				1,105
Other current assets				89
Operating lease right-of-use asset				489
Property and equipment				156
Goodwill				17,954
Other assets				13
Total assets acquired				38,006
Liabilities Assumed
Accounts payable				(230)
Accrued expense and other				(377)
Deferred tax liabilities				(4,324)
Deferred revenue				(500)
Operating lease liabilities				(489)
Total liabilities assumed				(5,920)
Total consideration				32,086
Second Street | Customer relationships
Assets Acquired
Intangible assets				14,600
Second Street | Trade name
Assets Acquired
Intangible assets				200
Second Street | Technology
Assets Acquired
Intangible assets				$ 3,400
Localytics
Assets Acquired
Cash						$ 0
Accounts receivable						3,648
Other current assets						6,323
Operating lease right-of-use asset						7,605
Property and equipment						409
Goodwill						33,543
Other assets						6
Total assets acquired						88,934
Liabilities Assumed
Accounts payable						(2,382)
Accrued expense and other						(6,761)
Deferred tax liabilities						(3,382)
Deferred revenue						(4,812)
Operating lease liabilities						(7,835)
Total liabilities assumed						(25,172)
Total consideration						63,762
Localytics | Customer relationships
Assets Acquired
Intangible assets						30,500
Localytics | Trade name
Assets Acquired
Intangible assets						300
Localytics | Technology
Assets Acquired
Intangible assets						$ 6,600

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Acquisitions - Weighted Average Amortization Period (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average amortization period	6 years 7 months 6 days	7 years 4 months 24 days
Customer relationships
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average amortization period	7 years	8 years
Trade name
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average amortization period	2 years	2 years
Developed technology
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average amortization period	5 years	5 years

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Fair Value Measurements - Narrative (Details) - USD ($)		9 Months Ended
	Aug. 06, 2019	Sep. 30, 2021	Dec. 31, 2020	Nov. 26, 2019
Level 2 | Recurring Measurement Basis
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt instrument, fair value		$ 529,200,000	$ 533,300,000
Credit Facility | Secured Debt
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Long-term debt, term	7 years	7 years
Interest rate (percent)	5.40%	5.40%
Debt instrument, face amount	$ 350,000,000	$ 540,000,000		$ 190,000,000

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Fair Value Measurements - Changes to Fair Value of Earnout Liabilities (Details) - Recurring Measurement Basis - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Earnout consideration liability	$ 669
Interest rate swap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap liabilities	15,642	$ 30,032
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Earnout consideration liability	0
Level 1 | Interest rate swap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap liabilities	0	0
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Earnout consideration liability	0
Level 2 | Interest rate swap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap liabilities	15,642	30,032
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Earnout consideration liability	669
Level 3 | Interest rate swap
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate swap liabilities	$ 0	$ 0

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Fair Value Measurements - Liabilities which Unobservable Inputs are Utilized (Details) - Recurring Measurement Basis - Earnout Consideration $ in Thousands	9 Months Ended
	Sep. 30, 2021 USD ($)
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	$ 0
Acquisitions	4,185
Gain included in earnings	(3,503)
Foreign currency translation adjustments	(13)
Ending balance	$ 669

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Fair Value Measurements - Quantitative Information (Details) $ in Thousands	Sep. 30, 2021 USD ($)
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent consideration	$ 669

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Goodwill and Other Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands	9 Months Ended	21 Months Ended
	Sep. 30, 2021	Sep. 30, 2021
Goodwill [Roll Forward]
Beginning balance	$ 383,598
Acquired in business combinations	85,102	$ 114,500
Adjustment related to finalization of current year business combinations	(4,146)
Foreign currency translation adjustment	(4,376)
Ending balance	$ 460,178	$ 460,178

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Goodwill and Other Intangible Assets - Intangible Assets, Net (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 458,422	$ 408,754
Accumulated Amortization	165,615	128,779
Net Carrying Amount	292,807	279,975
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	359,165	318,941
Accumulated Amortization	116,707	89,131
Net Carrying Amount	$ 242,458	$ 229,810
Customer relationships | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	1 year	1 year
Customer relationships | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	10 years	10 years
Trade name
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 9,722	$ 9,283
Accumulated Amortization	5,494	4,763
Net Carrying Amount	$ 4,228	$ 4,520
Trade name | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	1 year 6 months	1 year 6 months
Trade name | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	10 years	10 years
Developed technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 88,387	$ 79,382
Accumulated Amortization	42,266	33,929
Net Carrying Amount	$ 46,121	$ 45,453
Developed technology | Minimum
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	4 years	4 years
Developed technology | Maximum
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	9 years	9 years
Noncompete agreements
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	3 years	3 years
Gross Carrying Amount	$ 1,148	$ 1,148
Accumulated Amortization	1,148	956
Net Carrying Amount	$ 0	$ 192

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Goodwill and Other Intangible Assets - Narrative (Details) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill and intangible asset impairment	$ 0		$ 0		$ 0
Amortization charge of intangible assets	$ 13,200,000	$ 11,200,000	$ 37,900,000	$ 33,600,000

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Goodwill and Other Intangible Assets - Estimated Annual Amortization Expense (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
Remainder of 2021	$ 12,962
2022	49,281
2023	46,936
2024	44,588
2025	41,300
2026	97,740
Net Carrying Amount	$ 292,807	$ 279,975

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Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2021	Mar. 31, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Income Tax Disclosure [Abstract]
Benefit from (provision for) income taxes	$ 3,348		$ (1,149)	$ 6,204	$ 3,811
Deferred tax assets recognized (reduced) by valuation allowance	$ 2,200	$ 4,300		$ 6,500	$ 4,200
Adjustment reducing the benefit from valuation allowance			$ 200

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Debt - Summary of Long-term Debt (Details) - Senior Secured Notes - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Debt instrument, unamortized discount	$ 10,085	$ 11,648
Debt instrument, imputed interest rate (percent)	5.80%	5.80%
Long-term debt	$ 519,116	$ 521,603
Less current maturities	(3,158)	(3,166)
Total long-term debt	$ 515,958	$ 518,437

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Debt - Narrative (Details) - USD ($)		9 Months Ended	12 Months Ended
	Aug. 06, 2019	Sep. 30, 2021	Dec. 31, 2020	Nov. 26, 2019
Line of Credit Facility [Line Items]
Interest rate cash flow hedge to be reclassified during next twelve months		$ 3,300,000
Cash interest costs (percent)		5.40%	5.40%
Unamortized deferred financing costs		$ 10,100,000	$ 11,600,000
Interest rate swap
Line of Credit Facility [Line Items]
Derivative liability, fair value, gross liability		15,600,000	$ 30,000,000
Credit Facility
Line of Credit Facility [Line Items]
Covenant compliance (percent)	35.00%
Debt instrument, covenant, leverage ratio, amount	$ 50,000,000
Debt instrument, covenant, leverage ratio, maximum	6.00
Debt instrument, debt default, increase in interest rate on obligations upon default (percent)	2.00%
Credit Facility | Revolving Credit Facility
Line of Credit Facility [Line Items]
Long-term debt, term	5 years
Maximum borrowing capacity	$ 60,000,000
Commitment fee (percent)	0.50%
Credit Facility | Letter of Credit
Line of Credit Facility [Line Items]
Maximum borrowing capacity	$ 10,000,000
Credit Facility | Secured Debt
Line of Credit Facility [Line Items]
Debt instrument, face amount	$ 350,000,000	$ 540,000,000		$ 190,000,000
Long-term debt, term	7 years	7 years
Debt instrument, repayment rate, quarterly (percent)	0.25%
Debt instrument, repayment rate, annual (percent)	1.00%
Interest rate (percent)	5.40%	5.40%
Credit Facility | Secured Debt | Base Rate
Line of Credit Facility [Line Items]
Basis points (percent)	2.75%
Credit Facility | Secured Debt | Eurodollar Deposits Rate
Line of Credit Facility [Line Items]
Basis points (percent)	3.75%
Credit Facility | Secured Debt | Eurodollar Deposits Rate | Minimum
Line of Credit Facility [Line Items]
Basis points (percent)	0.00%
Credit Facility | Secured Debt | Federal Funds Rate
Line of Credit Facility [Line Items]
Basis points (percent)	0.50%
Credit Facility | Secured Debt | Federal Funds Rate | Minimum
Line of Credit Facility [Line Items]
Basis points (percent)	0.00%
Credit Facility | Secured Debt | Eurodollar
Line of Credit Facility [Line Items]
Basis points (percent)	1.00%

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Debt - Summary of Debt, Interest Rate Swap (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Debt Instrument [Line Items]
Unrealized loss on interest rate swaps	$ 2,112	$ (441)	$ 14,391	$ (35,497)
Interest expense, net	(7,971)	(8,078)	(23,700)	(23,594)
Interest rate swap
Debt Instrument [Line Items]
Interest expense, net	$ (2,090)	$ (2,013)	$ (6,158)	$ (3,467)

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Net Loss Per Share - Computation of Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Numerator:
Net loss	$ (11,015)	$ (11,310)	$ (50,741)	$ (45,550)
Denominator:
Weighted-average common shares outstanding, basic (in shares)	30,428,675	27,220,134	30,167,171	25,725,495
Weighted-average common shares outstanding, diluted (in shares)	30,428,675	27,220,134	30,167,171	25,725,495
Net loss per common share, basic (in dollars per share)	$ (0.36)	$ (0.42)	$ (1.68)	$ (1.77)
Net loss per common share, diluted (in dollars per share)	$ (0.36)	$ (0.42)	$ (1.68)	$ (1.77)

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Net Loss Per Share - Anti-dilutive Common Share Equivalents (Details) - shares	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti–dilutive common share equivalents (in shares)	2,341,707	2,293,326
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti–dilutive common share equivalents (in shares)	242,984	314,310
Restricted stock awards
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti–dilutive common share equivalents (in shares)	1,000	168,124
Restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti–dilutive common share equivalents (in shares)	2,034,186	1,744,595
Performance restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti–dilutive common share equivalents (in shares)	63,537	66,297

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Commitments and Contingencies (Details) - Investor - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Long-term Purchase Commitment [Line Items]
Amount of related party transaction	$ 2.4	$ 1.8	$ 7.2	$ 5.5
Remaining purchase obligation	$ 2.4		$ 2.4

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Stockholders' Equity - Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Jun. 30, 2021	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Dec. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stockholders' equity attributable to parent	$ 307,046	$ 311,437	$ 306,615	$ 288,244	$ 152,237	$ 212,861
Accumulated Other Comprehensive Loss
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stockholders' equity attributable to parent	(18,338)	$ (13,238)	(26,234)	$ (39,480)	$ (45,700)	$ (1,223)
Foreign currency translation adjustment
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stockholders' equity attributable to parent	(4,966)		644
Unrealized translation gain on intercompany loans with foreign subsidiaries
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stockholders' equity attributable to parent	2,270		3,154
Unrealized loss on interest rate swaps
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stockholders' equity attributable to parent	$ (15,642)		$ (30,032)

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Stockholders' Equity - Narrative (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Sep. 30, 2021	Dec. 31, 2020
Class of Stock [Line Items]
Performance period			18 months
Target payout (percent)	100.00%	100.00%	100.00%
Performance restricted stock units
Class of Stock [Line Items]
Performance period		18 months
Minimum | Performance restricted stock units
Class of Stock [Line Items]
Award vesting rights (percent)		0.00%
Maximum | Performance restricted stock units
Class of Stock [Line Items]
Award vesting rights (percent)		300.00%
Chief Executive Officer | Performance restricted stock units
Class of Stock [Line Items]
Award vesting rights (percent)		50.00%	50.00%
Intercompany loans with foreign subsidiaries, accumulated tax
Class of Stock [Line Items]
Tax expense (benefit) recognized in OCI	$ (1.8)
Intercompany loans, accumulated tax
Class of Stock [Line Items]
Tax expense (benefit) recognized in OCI	$ (0.5)	$ (0.2)

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Stockholders' Equity - Shared Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share-based compensation expense	$ 12,047	$ 10,963	$ 43,421	$ 31,263
Incremental share-based compensation expense			6,300
Cost of revenue
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share-based compensation expense	539	624	1,544	1,512
Research and development
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share-based compensation expense	671	1,005	2,327	2,639
Sales and marketing
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share-based compensation expense	1,636	968	4,392	2,415
General and administrative
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Share-based compensation expense	$ 9,201	$ 8,366	$ 35,158	$ 24,697

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Stockholders' Equity - Restricted Stock Units Activity (Details) - Restricted stock units	9 Months Ended
	Sep. 30, 2021 $ / shares shares
Number of Restricted Stock Units Outstanding
Unvested balances at beginning of period (in shares) | shares	1,261,290
Units granted (in shares) | shares	1,220,066
Units vested (in shares) | shares	(383,371)
Awards forfeited (in shares) | shares	(63,799)
Unvested balances at end of period (in shares) | shares	2,034,186
Weighted-Average Grant Date Fair Value
Unvested balances at beginning of period (in dollars per share) | $ / shares	$ 39.92
Units granted (in dollars per share) | $ / shares	47.67
Units vested (in dollars per share) | $ / shares	40.14
Awards forfeited (in dollars per share) | $ / shares	42.81
Unvested balances at end of period (in dollars per share) | $ / shares	$ 44.43

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Stockholders' Equity - Performance Based Restricted Stock Unit Activity (Details) - Performance restricted stock units - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Number of PRSUs Outstanding
Unvested balances at beginning of period (in shares)	66,297
Units granted (in shares)	63,537
Incremental PRSUs vested in period (in shares)	69,048
Units vested (in shares)	(135,345)
Unvested balances at end of period (in shares)	63,537	66,297
Weighted-Average Grant Date Fair Value
Unvested balances at beginning of period (in dollars per share)	$ 79.72
Units granted (in dollars per share)	84.87
Units vested (in dollars per share)	79.72
Unvested balances at end of period (in dollars per share)	$ 84.87	$ 79.72
Expected volatility (percent)	53.60%	45.10%
Risk-free interest rate (percent)	0.10%	1.30%
Remaining performance period (in years)	1 year 4 months 6 days	1 year 4 months 6 days
Dividend yield (percent)	0.00%	0.00%

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Stockholders' Equity - Restricted Stock Award Activity (Details) - Restricted stock awards	9 Months Ended
	Sep. 30, 2021 $ / shares shares
Number of Restricted Stock Units Outstanding
Unvested balances at beginning of period (in shares) | shares	34,508
Awards vested (in shares) | shares	(33,508)
Awards forfeited (in shares) | shares	0
Unvested balances at end of period (in shares) | shares	1,000
Weighted-Average Grant Date Fair Value
Unvested balances at beginning of period (in dollars per share) | $ / shares	$ 30.13
Awards vested (in dollars per share) | $ / shares	30.11
Awards forfeited (in dollars per share) | $ / shares	0
Unvested balances at end of period (in dollars per share) | $ / shares	$ 30.61

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Stockholders' Equity - Stock Option Activity (Details)	9 Months Ended
	Sep. 30, 2021 $ / shares shares
Number of Options Outstanding
Outstanding at beginning of period (in shares) | shares	264,002
Options exercised (in shares) | shares	(20,610)
Options expired (in shares) | shares	(408)
Outstanding at end of period (in shares) | shares	242,984
Weighted– Average Exercise Price
Outstanding at beginning of period (in dollars per share) | $ / shares	$ 8.93
Options exercised (in dollars per share) | $ / shares	11.07
Options expired (in dollars per share) | $ / shares	1.56
Outstanding at end of period (in dollars per share) | $ / shares	$ 8.76

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Revenue Recognition - Narrative (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Revenue from External Customer [Line Items]
Performance obligation, description of timing	Our subscription contracts are generally 1 to 3 years in length
Unbilled receivables	$ 5,847	$ 4,561
Deferred commissions, amortization period	6 years
Deferred commissions renewal amortization period	18 months
Revenue recognized, previously in unearned revenue	$ 5,900
Subscription and support:
Revenue from External Customer [Line Items]
Revenue recognized, previously in unearned revenue	76,300
Professional services:
Revenue from External Customer [Line Items]
Revenue recognized, previously in unearned revenue	$ 1,900

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Revenue Recognition - Activity Impacting Deferred Commissions (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2021
Capitalized Contract Cost, Net [Roll Forward]
Beginning balance		$ 18,746
Capitalized deferred commissions		10,240
Amortization of deferred commissions		(6,097)
Ending balance	$ 22,889	22,889
Commissions capitalized in excess of amortization of deferred commissions	$ 600	$ 4,100

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Revenue Recognition - Remaining Performance Obligation (Details) $ in Millions	Sep. 30, 2021 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-10-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation (percent)	69.00%
Expected satisfaction period of performance obligations, in months	12 months
Subscription Contracts
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue expected to be recognized from performance obligations	$ 263.2

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Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Disaggregation of Revenue [Line Items]
Revenue	$ 76,053	$ 74,184	$ 226,286	$ 213,531
Subscription and support:
Disaggregation of Revenue [Line Items]
Revenue	72,264	70,992	215,322	202,582
Subscription and support: | United States
Disaggregation of Revenue [Line Items]
Revenue	50,866	53,356	154,683	149,946
Subscription and support: | United Kingdom
Disaggregation of Revenue [Line Items]
Revenue	11,886	9,518	33,938	28,864
Subscription and support: | Canada
Disaggregation of Revenue [Line Items]
Revenue	3,355	3,318	10,317	11,260
Subscription and support: | Other International
Disaggregation of Revenue [Line Items]
Revenue	6,157	4,800	16,384	12,512
Perpetual license:
Disaggregation of Revenue [Line Items]
Revenue	684	411	1,451	1,263
Perpetual license: | United States
Disaggregation of Revenue [Line Items]
Revenue	628	345	1,219	849
Perpetual license: | United Kingdom
Disaggregation of Revenue [Line Items]
Revenue	0	0	11	16
Perpetual license: | Canada
Disaggregation of Revenue [Line Items]
Revenue	1	14	53	71
Perpetual license: | Other International
Disaggregation of Revenue [Line Items]
Revenue	55	52	168	327
Professional services:
Disaggregation of Revenue [Line Items]
Revenue	3,105	2,781	9,513	9,686
Professional services: | United States
Disaggregation of Revenue [Line Items]
Revenue	2,014	1,865	6,208	6,773
Professional services: | United Kingdom
Disaggregation of Revenue [Line Items]
Revenue	753	432	2,219	1,621
Professional services: | Canada
Disaggregation of Revenue [Line Items]
Revenue	117	137	309	371
Professional services: | Other International
Disaggregation of Revenue [Line Items]
Revenue	$ 221	$ 347	$ 777	$ 921

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Related Party Transactions (Details)		3 Months Ended		9 Months Ended
	Mar. 28, 2017	Sep. 30, 2021 USD ($)	Sep. 30, 2020 USD ($)	Sep. 30, 2021 USD ($) agreement	Sep. 30, 2020 USD ($)	Jul. 09, 2021	Dec. 31, 2020 USD ($)
Related Party Transaction [Line Items]
Number of agreements | agreement				2
Purchase obligation increase in amount, if a 10% increase in revenue				$ 1,000,000
Purchase commitment, amount				10,600,000
Prepaid and other		$ 8,560,000		8,560,000			$ 12,694,000
Credit loss expense recognized				$ 400,000
Visionael Corporation | Chief Executive Officer and Board of Directors Chairman
Related Party Transaction [Line Items]
Equity method investment, ownership interest (percent)		26.18%		26.18%
Investor
Related Party Transaction [Line Items]
Amount of related party transaction		$ 2,400,000	$ 1,800,000	$ 7,200,000	$ 5,500,000
Accounts payable, related parties		$ 2,400,000		$ 2,400,000			0
Investor | Upland Software, Inc.
Related Party Transaction [Line Items]
Equity method investment, ownership interest (percent)						4.80%
Investor | Upland Software, Inc. | Minimum
Related Party Transaction [Line Items]
Equity method investment, ownership interest (percent)		5.00%		5.00%
Software Development Services | Investor
Related Party Transaction [Line Items]
Option to renew purchase commitment, term	1 year
Purchase obligation outstanding		$ 9,600,000		$ 9,600,000
Services | Investor
Related Party Transaction [Line Items]
Purchase obligation outstanding		0		0
Amount of related party transaction		1,000,000	1,200,000	2,900,000	3,700,000
Accounts payable, related parties		800,000		800,000			600,000
Management, HR/Payroll and Administrative Services | Former Subsidiary
Related Party Transaction [Line Items]
Revenue from related party		0	$ 15,000	0	$ 45,000
Management, HR/Payroll and Administrative Services | Former Subsidiary | Visionael Corporation
Related Party Transaction [Line Items]
Prepaid and other		$ (0)		$ (0)			$ 400,000

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Label	Element	Value
Accounting Standards Update [Extensible Enumeration]	us-gaap_AccountingStandardsUpdateExtensibleList	Accounting Standards Update 2016-13 [Member]