
~~Item 1A.~~	~~Risk Factors~~

Item 1A. Risk Factors

Risks Related to Our Business

~~We have a limited operating history and may be unable to achieve or sustain profitability or accurately predict our future results.~~

We were formed in July 2010 and acquired our first business and commenced operations in September 2011. Prior to September 2011, our business activity was devoted to raising capital, building infrastructure, and reviewing potential acquisitions. As such, we have a very limited operating history of selling our products and professional services to third parties. Our limited operating history makes it difficult to evaluate our current business and future prospects and may increase the risk of your investment. We incurred net losses of $18.7 million, $13.5 million, and $13.7 million in fiscal 2017, 2016, and 2015, respectively. As of December 31, 2017, we had an accumulated deficit of $81.1 million. Our losses in prior periods and accumulated deficit reflect the investments we have made to date to grow our business. We expect to have significant operating expenses in the future to further support and grow our business, including expanding the range of integrations between our software and third-party applications and platform, expanding our direct and indirect sales capabilities, pursuing acquisitions of complementary businesses, investing in our data center infrastructure and in research and development, and increasing our international presence. As a result, we may be unable to achieve or sustain profitability or accurately predict our future results. You should not consider our recent growth in revenue as indicative of our future performance, and we cannot assure you that we will achieve profitability in the future, nor that if we do become profitable, we will sustain profitability.

Our growth depends on our ability to retain existing customers, secure additional subscriptions, and cross-sell opportunities from existing customers, while nonrenewals and downgrades could harm our future operating results.

In order to improve our operating results, it is important that our customers renew or upgrade their agreements with us when the applicable contract term expires, and also purchase additional applications from us. Typically contract terms are one to three years for subscription agreements, and one year for perpetual license agreements. Upon expiration, customers can renew their existing subscriptions, upgrade their subscriptions to add more seats or additional minimum contracted volume, downgrade their subscriptions to fewer seats or lower minimum contracted volume, or not renew. A renewal constitutes renewing an existing contract for an application under the same terms, and an upgrade includes purchasing additional seats or volume under an existing contract. We may also cross-sell additional applications to existing customers. Our ability to grow revenue and achieve profitability depends, in part, on customer renewals, customer upgrades, and cross-sales to existing customers exceeding downgrades and non-renewals. However, we may not be able to increase our penetration within our existing customer base as anticipated, and we may not otherwise retain subscriptions from existing customers. Our customers may choose to not renew or upgrade their subscriptions, or may downgrade, because of several factors, including dissatisfaction with our prices, features or performance relative to competitive offerings, reductions in our customers’ spending levels, unused seats or volume, or limited adoption or use of our applications. In addition, we may not be successful in cross-selling new applications to our existing customers. If our customers do not upgrade or renew their subscriptions or purchase additional applications from us, or if they downgrade their subscriptions, our revenue may grow more slowly than expected or may decline, and our financial performance may be adversely affected.

Any failure to offer high-quality customer service may adversely affect our relationships with our customers and our financial results.

Our customers depend on our customer success organization to manage the post-sale customer lifecycle, including to implement new applications for our customers, provide training and ongoing education services, and resolve technical issues relating to our applications. We may be unable to respond quickly enough to accommodate short-term increases in demand for our customer success services. We also may be unable to modify the format of our customer success services to compete with changes in similar services provided by our competitors. Increased customer demand for these services, without corresponding revenue, could increase costs and adversely affect our

operating results. In addition, our sales process is highly dependent on the reliable functional operation of our applications, our business reputation, and positive recommendations from our existing customers. Any failure to maintain high-quality customer service, or a market perception that we do not maintain high-quality customer service, could adversely affect our reputation, our ability to sell our applications to existing and prospective customers, and our business, operating results, and financial position.

~~If the market for cloud-based enterprise work management applications develops more slowly than we expect, or declines, our business could be adversely affected.~~

The market for cloud-based enterprise work management applications is not as mature as the market for legacy on-premise enterprise systems, and it is uncertain whether cloud-based applications will achieve and sustain high levels of customer demand and market acceptance. Our success will depend, to a substantial extent, on increased adoption of cloud-based applications, particularly our enterprise work management software applications. Many large organizations have invested substantial personnel and financial resources to integrate legacy on-premise enterprise systems into their businesses and, therefore, may be reluctant or unwilling to migrate to cloud-based applications, away from their traditional vendors or to new practices, because of the organizational changes often required to successfully implement new enterprise work management systems. In addition, we do not know whether the adoption of enterprise work management software will continue to grow and displace manual processes and traditional tools, such as paper-based procedures, spreadsheets, and email. It is difficult to predict customer adoption rates and demand for our applications, the future growth rate and size of the cloud-based software application market, or the entry of competitive products. The expansion of the cloud-based software application market depends on a number of factors, including the cost, performance, and perceived value associated with cloud-based applications, as well as the ability of cloud-based application companies to address security and privacy concerns. If other cloud-based software application providers experience security incidents, loss of customer data, disruptions in delivery, or other problems, the market for cloud-based applications as a whole, including our enterprise work management applications, may be negatively affected. If cloud-based applications do not achieve widespread adoption, or there is a reduction in demand for cloud-based applications caused by a lack of customer acceptance, technological challenges, weakening economic conditions, security or privacy concerns, competing technologies and products, and decreases in corporate spending or otherwise, our revenues may decrease, and our business could be adversely affected.

If we fail to manage our growth effectively, we may be unable to execute our business plan and maintain high levels of customer satisfaction.

We have recently experienced a period of rapid growth in our personnel and operations. In particular, we increased our number of full-time employees from three as of December 31, 2011 to ~~375~~667 as of December 31, ~~2017,~~2018, and have also increased the size of our customer base. In addition, our revenue grew from $712,000 in ~~fiscal~~ 2011 to ~~$98.0~~$149.9 million in ~~fiscal 2017.~~2018. Acquisitions are a primary component of our growth strategy, and as a result, we anticipate that we will continue to experience further rapid growth in our personnel and operations in the future. Our growth has placed, and future growth will place, a significant strain on our managerial, administrative, operational, financial, and other resources. To manage the expected growth of our personnel and operations, we will need to continue to improve our operational, financial and management controls, and our reporting systems and procedures. Failure to effectively manage our growth could result in difficulty or delays in deploying our applications, declines in quality or customer satisfaction, increases in costs, and difficulties in introducing new features or other operational difficulties, and any of these difficulties could adversely impact our business performance and results of operations.

We have made, and expect to continue to make, acquisitions as a primary component of our growth strategy. We may not be able to identify suitable acquisition candidates or consummate acquisitions on acceptable terms, or we may be unable to successfully integrate acquisitions, which could disrupt our operations and adversely impact our business and operating results.

A primary component of our growth strategy has been to acquire complementary businesses to grow our company. For example, we acquired the businesses of PowerSteering Software, Inc., Tenrox Inc., and LMR Solutions, LLC dba EPM Live in ~~fiscal~~ 2012; the businesses of FileBound Solutions, Inc. and Marex Group Inc., ComSci, LLC, and Clickability Inc. in ~~fiscal~~ 2013; the businesses of Solution Q Inc. and Mobile Commons, Inc. in ~~fiscal~~ 2014; Ultriva Inc. in ~~fiscal~~ 2015; and the businesses of LeadLander, Inc., HipCricket, Inc., and Advanced

Processing and Imaging, Inc. in ~~fiscal~~ 2016. In ~~fiscal~~ 2017, we acquired the businesses of Omtool, Ltd., RightAnswers, Inc., Waterfall International, Inc., and Qvidian Corporation. In 2018, we acquired the businesses of Interfax Communications Ltd, References-Online, Inc., Rapide Communication Ltd. (“Rant & Rave”), and Adestra Ltd. We intend to continue to pursue acquisitions of complementary technologies, products, and businesses as a primary component of our growth strategy to enhance the features and functionality of our applications, expand our customer base, provide access to new markets, and increase benefits of scale. Acquisitions involve certain known and unknown risks that could cause our actual growth or operating results to differ from our expectations. For example:

we may not be able to identify suitable acquisition candidates or to consummate acquisitions on acceptable terms;

we may pursue international acquisitions, which inherently pose more risks than domestic acquisitions;

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

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

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

acquired technologies, products, or businesses may not perform as we expect, and we may fail to realize anticipated revenue and profits.

In addition, our acquisition strategy may divert management’s attention away from our existing business, resulting in the loss of key customers or employees, and expose us to unanticipated problems or legal liabilities, including responsibility as a successor for undisclosed or contingent liabilities of acquired businesses or assets.

If we fail to conduct due diligence on our potential targets effectively, we may, for example, not identify problems at target companies or fail to recognize incompatibilities or other obstacles to successful integration. Our inability to successfully integrate future acquisitions could impede us from realizing all of the benefits of those acquisitions and could severely weaken our business operations. The integration process may disrupt our business and, if new technologies, products, or businesses are not implemented effectively, may preclude the realization of

the full benefits expected by us and could harm our results or operations. In addition, the overall integration of new technologies, products, or businesses may result in unanticipated problems, expenses, liabilities, and competitive responses. The difficulties of integrating an acquisition include, among other things:

issues in integrating the target company’s technologies, products, or businesses with ours;

incompatibility of marketing and administration methods;

maintaining employee morale and retaining key employees;

integrating the cultures of both companies;

preserving important strategic customer relationships;

consolidating corporate and administrative infrastructures and eliminating duplicative operations; and

coordinating and integrating geographically separate organizations.

In addition, even if the operations of an acquisition are integrated successfully, we may not realize the full benefits of the acquisition, including the synergies, cost savings, or growth opportunities that we expect. These benefits may not be achieved within the anticipated time frame, or at all.

Further, acquisitions may cause us to:

issue common stock that would dilute our current stockholders’ ownership percentage;

use a substantial portion of our cash resources;

increase our interest expense, leverage, and debt service requirements if we incur additional debt to pay for an acquisition;

assume liabilities for which we do not have indemnification from the former owners; further, indemnification obligations may be subject to dispute or concerns regarding the creditworthiness of the former owners;

record goodwill and non-amortizable intangible assets that are subject to impairment testing and potential impairment charges;

experience volatility in earnings due to changes in contingent consideration related to acquisition earn-out liability estimates;

incur amortization expenses related to certain intangible assets;

lose existing or potential contracts as a result of conflict of interest issues;

become subject to adverse tax consequences or deferred compensation charges;

incur large and immediate write-offs; or

become subject to litigation.

We depend on our senior management team and the loss of one or more key personnel, or an inability to attract and retain highly skilled personnel may impair our ability to grow our business.

Our success depends, in part, upon the continued services of our key executive officers, including John T. McDonald, Michael D. Hill, and Timothy W. Mattox, as well as other key personnel. We do not have employment agreements with most of our executive officers or other key personnel that require them to continue to work for us for any specified period; therefore, they may terminate employment with us at any time with no advance notice. The replacement of our senior management team or other key personnel likely would involve significant time and costs, and the loss of these employees may significantly delay or prevent the achievement of our business objectives.

We face intense competition for qualified individuals from numerous technology and software companies. If we fail to attract and retain suitably qualified individuals, including software engineers and sales personnel, our ability to implement our business plan and develop and maintain our applications could be adversely affected. As a result, our ability to compete would decrease, our operating results would suffer, and our revenue would decrease.

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

We sell our applications primarily through a direct sales organization comprised of inside sales and field sales personnel. In addition, we have an indirect sales organization, which sells to distributors and value-added resellers. Growing sales to both new and existing customers is, in part, dependent on our ability to maintain and expand our

sales force. Identifying, recruiting and training additional sales personnel requires significant time, expense, and attention. It can take several quarters or longer before our sales representatives are fully-trained and productive. Our business may be adversely affected if our efforts to expand and train our sales organization do not generate a corresponding increase in revenue. In particular, if we are unable to hire, develop, and retain sales personnel, or if our new sales personnel are unable to achieve expected sales productivity levels in a reasonable period of time or at all, our revenue may grow more slowly than expected or decline and our business may be harmed.

Because we generally recognize revenue from our customers over the terms of their agreements but incur most costs associated with generating such agreements in advance, rapid growth in our customer base may increase our losses in the short-term.

Expenses associated with acquiring customers, such as the expenses related to our sales organizations and related commissions, are generally expensed as incurred, while most of our revenue is recognized ratably over the life of the applicable agreements. Therefore, increased sales will result in our recognition of more costs than revenue during the early periods covered by such agreements, even in cases where the agreements are expected to be profitable for us over their full terms. As a result, even if we are successful in increasing our customer base, our short-term operating results may suffer.

We recognize revenue from customers over the term of the related agreement; therefore, downturns or upturns in our business may not be immediately reflected in our operating results.

We recognize revenue from customer agreements ratably over the terms of these agreements. As a result, a significant portion of the revenue we report in each quarter is generated from customer agreements entered into during previous periods, which is reflected as deferred revenue on our balance sheet. Consequently, a decline in new or renewed agreements, or a downgrade of renewed agreements to fewer seats or less minimum contracted volume, in any one quarter may not be fully reflected in our revenue in that quarter. Such a decline, however, will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance

of our applications, and potential changes in our pricing policies or rates of renewals, may not be fully reflected in our results of operations until future periods. Similarly, it would be difficult for us to rapidly increase our revenue through new sales, renewals, and upgrades of existing customer agreements, or through additional cross-selling opportunities, in a given period due to the timing of revenue recognition inherent in our subscription model.

Perpetual license revenue is unpredictable, and a material increase or decrease in perpetual license revenue from period to period can produce substantial variation in the total revenue and earnings we recognize in a given period.

Perpetual license revenue reflects the revenue recognized from sales of perpetual licenses relating to our workflow automation and enterprise content management applications to new customers and additional licenses for such applications to existing customers. We generally recognize the license fee portion of the arrangement in advance. Perpetual licenses of our workflow automation and enterprise content management applications are sold through third-party resellers, and as such, the timing of sales of perpetual licenses is difficult to predict with the timing of recognition of associated revenue unpredictable. A material increase or decrease in the sale of perpetual licenses from period to period could produce substantial variation in the revenue we recognize. Accordingly, comparing our perpetual license revenue on a period to period basis may not be a meaningful indicator of a trend or future results.

Our quarterly operating results may fluctuate in the future. As a result, we may fail to meet or exceed the expectations of research analysts or investors, which could cause our stock price to decline, and you may lose part or all of your investment.

Our quarterly operating results may fluctuate as a result of a variety of factors, many of which are outside of our control. Accordingly, the results of any one quarter may not fully reflect the underlying performance of our business and should not be relied upon as an indication of future performance. If our quarterly operating results or outlook fall below the expectations of research analysts or investors, the price of our common stock could decline substantially. Fluctuations in our quarterly operating results or outlook may be due to a number of factors, including, but not limited to:

the extent to which our existing customers purchase additional seats or volume for our applications, and the timing and terms of those purchases;

the extent to which our existing customers renew their customer agreements for our applications and the timing and terms of those renewals;

the extent to which we cross-sell additional applications to our existing customers and the timing and terms of such cross-selling;

the addition or loss of customers, including through acquisitions or consolidations;

the extent to which new customers are attracted to our applications to satisfy their enterprise work management needs;

the rate of adoption and market acceptance of enterprise work management applications;

the mix of our revenue, particularly between product and professional services revenue, for which the timing of revenue recognition is substantially different;

changes in the gross profit we realize on our applications and professional services due to our differing revenue recognition policies applicable to subscription, product, and professional services revenue and other variables;

the extent to which we enter into multi-year contracts, in which the support fees are typically paid in advance;

the announcement or adoption of new regulations and policy mandates or changes to existing regulations and policy mandates;

future accounting pronouncements or changes in our accounting policies;

unforeseen litigation and intellectual property infringement;

the number and size of new customers and the number and size of renewals in a particular period;

changes in our pricing policies or those of our competitors;

the mix of applications sold during a period;

the timing and expenses related to the acquisition of technologies, products, or businesses, and potential future charges for impairment of goodwill from such acquisitions;

the amount and timing of operating expenses, including those related to the maintenance and expansion of our business, operations and infrastructure;

the amount and timing of expenses related to the development of new products and technologies, including enhancements to our applications;

the amount and timing of commissions earned by our sales personnel;

the timing and success of new applications introduced by us or new offerings offered by our competitors;

the length of our sales cycles;

changes in the competitive dynamics of our industry, including consolidation among competitors, customers, or strategic collaborators;

our ability to manage our existing business and future growth, including increases in the number of customers using our applications;

the seasonality of our business or cyclical fluctuations in our industry;

the timing and expenses related to any international expansion efforts we may undertake and the success of such efforts;

various factors related to disruptions in access and delivery of our cloud-based applications, errors or defects in our applications, privacy and data security, and exchange rate fluctuations, each of which is described elsewhere in these risk factors; and

general economic, industry, and market conditions.

We may need financing in the future, and any additional financing may result in restrictions on our operations or substantial dilution to our stockholders. We may seek to renegotiate or refinance our loan facility, and we may be unable to do so on acceptable terms or at all.

We have funded our operations since inception primarily through equity financings, cash from operations, and cash available under our loan facility. We may need to raise funds in the future, for example, to expand our business, acquire complementary businesses, develop new technologies, respond to competitive pressures, or react to unanticipated situations. We may try to raise additional funds through public or private financings, strategic relationships, or other arrangements. Our ability to obtain debt or equity funding will depend on a number of factors, including market conditions, our operating performance, and investor interest. Additional funding may not be available to us on acceptable terms or at all. If adequate funds are not available, we may be required to reduce expenditures, including curtailing our growth strategies, reducing our product-development efforts, or foregoing acquisitions. If we succeed in raising additional funds through the issuance of equity or convertible securities, it could result in substantial dilution to existing stockholders. If we raise additional funds through the issuance of debt securities or preferred stock, these new securities would have rights, preferences, and privileges senior to those of the holders of our common stock. In addition, any debt financing obtained by us in the future or issuance of preferred stock could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Additionally, we may need to renegotiate the terms of our loan facility, and our lender may be unwilling to do so, or may agree to such changes subject to additional restrictive covenants on our operations and ability to raise capital.

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

On ~~August 2, 2017,~~December 12, 2018, we expanded into a ~~$200.0~~$400.0 million loan facility with Wells Fargo Capital Finance. The facility is comprised of a ~~$95.0~~$285.0 million term loan, a ~~$10.0~~$30.0 million revolving credit facility and a ~~$40.0~~$30.0 million delayed draw term loan for acquisitions, of which ~~$20.0 million was~~none has been drawn ~~in November 2017.~~to date. Additionally, the facility provides for an uncommitted $55.0 million accordion loan to further support future acquisitions and an allowance of $20.0 million of subordinated seller notes for acquisitions.

Our obligations and the obligations of the co-borrowers and any guarantors under the Wells Fargo loan facility are secured by a security interest in substantially all of our assets and assets of the co-borrowers’ and of any guarantors, including intellectual property. The terms of the credit facility limits, among other things, our ability to

•sell, lease, license or otherwise dispose of assets;

•undergo a change in control;

•consolidate or merge with or into other entities;

•make or own loans, investments and acquisitions;

•create, incur or assume guarantees in respect of obligations of other persons;

•create, incur or assume liens and other encumbrances; or

•pay dividends or make distributions on, or purchase or redeem, our capital stock.

Furthermore, the Wells Fargo loan facility requires us and our subsidiaries to comply with certain financial covenants. The operating and other restrictions and covenants in the loan facility, and in any future financing arrangements that we may enter into, may restrict our ability to finance our operations, engage in certain business activities, or expand or fully pursue our business strategies, or otherwise limit our discretion to manage our business. Our ability to comply with these restrictions and covenants may be affected by events beyond our control, and we may not be able to meet those restrictions and covenants. A breach of any of the restrictions and covenants could result in a default under the loan facility or any future financing arrangements, which could cause any outstanding indebtedness under the loan facility or under any future financing arrangements to become immediately due and payable, and result in the termination of commitments to extend further credit.

If we are unable to increase market awareness of our company and our applications, our revenue may not continue to grow, or may decline.

Market awareness of our company and our applications is essential to our ability to generate new leads for expanding our business and our continued growth. If we fail to sufficiently invest in our marketing programs or they are unsuccessful in creating market awareness of our company and our applications, our revenue may grow more slowly than expected or may decline, and our financial performance may be adversely affected.

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

The overall market for enterprise work management software is rapidly evolving and subject to changing technology, shifting customer needs and frequent introductions of new applications. The intensity and nature of our competition varies significantly across our family of enterprise work management software applications. Many of our competitors and potential competitors are larger and have greater brand name recognition, longer operating histories, larger marketing budgets, and significantly greater resources than we do. Some of our smaller competitors may offer applications on a stand-alone basis at a lower price than our price due to lower overhead or other factors, while some of our larger competitors may offer applications at a lower price in an attempt to cross-sell additional products in the future or retain a customer using a different application.

We believe there are a limited number of direct competitors that provide a comprehensive enterprise work management software offering. However, we face competition both from point solution providers, including legacy on-premise enterprise systems, and other cloud-based work management software vendors that may address one or more of the functional elements of our applications, but are not designed to address a broad range of enterprise work management needs. In addition, we face competition from manual processes and traditional tools, such as paper-based techniques, spreadsheets, and email.

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

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

If one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could adversely affect our ability to compete effectively. In order to take advantage of customer demand for cloud-based software applications, vendors of legacy systems are expanding their cloud-based enterprise workplace management applications through acquisitions and internal development. A potential result of such expansion is that certain of our current or potential competitors may be acquired by third parties with greater available resources and the ability to further invest in product improvements and initiate or withstand substantial price competition. Our competitors also may establish or strengthen cooperative relationships with our current or future value-added resellers, third-party consulting firms or other parties with whom we have relationships, thereby limiting our ability to promote our applications. Disruptions in our business caused by these events could reduce our revenue.

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

As our operations have expanded, we have established and currently maintain offices in the United States, Canada, and the United Kingdom. We have limited experience in operating in foreign jurisdictions and expect to continue to expand our relationship with international customers. Managing a global organization is difficult, time-consuming and ~~expensive, and~~expensive. Because of our limited experiences with international operations, any international efforts that we may undertake may not be ~~successful.~~successful in creating demand for our applications outside of the U.S. or in effectively selling subscriptions to our solutions in all of the international markets that we enter. In addition, conducting international operations subjects us to risks, including the following:

uncertain political and economic climates;

lack of familiarity and burdens of complying with foreign laws, accounting and legal standards, regulatory requirements, tariffs and other barriers;

unexpected changes in regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions;

lack of experience in connection with the localization of our applications, including translation into foreign languages and adaptation for local practices, and associated expenses and regulatory requirements;

difficulties in adapting to differing technology standards;

different pricing environments, longer sales cycles and accounts receivable payment cycles and difficulties in collecting accounts receivable;

difficulties in managing and staffing international operations, including differing legal and cultural expectations for employee relationships, and increased travel, infrastructure and legal compliance costs associated with international operations;

fluctuations in exchange rates that may increase the volatility of our foreign-based revenue and expenses;

potentially adverse tax consequences, including the complexities of foreign value-added tax, goods and services tax and other transactional taxes;

reduced or varied protection for intellectual property rights in some countries;

difficulties in managing and adapting to differing cultures and customs;

data privacy laws that require customer data to be stored and processed in a designated territory subject to laws different than the United States;

sales and customer service challenges associated with operating in different countries;

data privacy laws that require certain opt-in steps and restrict use and sharing of personally identifiable information than those required by the U.S. privacy laws;

new and different sources of competition as well as laws and business practices favoring local competitors and local employees;

compliance with anti-bribery laws, including compliance with the Foreign Corrupt Practices Act;

increased financial accounting and reporting burdens and complexities; and

restrictions on the repatriation of earnings.

Further, our international expansion efforts may be hindered by lower levels of cloud adoption and increased price sensitivity for our applications or other cloud-based offerings in international markets. As a result of these and other factors, international expansion may be more difficult, take longer, and not generate the results we anticipate, which could negatively impact our growth and business.

Fluctuations in the exchange rate of foreign currencies could result in losses on currency transactions.

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 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 are translated from the local functional currency into U.S. dollars upon consolidation. A decline in the U.S. dollar relative to foreign functional currencies would increase our non-U.S. revenue and improve our operating results. Conversely, if the U.S. dollar strengthens relative to foreign functional currencies, our revenue and operating results would be adversely affected. We have not previously engaged in foreign currency hedging. 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.

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

Our sales cycle can vary substantially from customer to customer. A number of factors influence the length and variability of our sales cycles, including, for example:

the need to educate potential customers about the uses and benefits of our applications;

the duration of the commitment customers make in their agreements with us, which are typically one to three years;

the discretionary nature of potential customers’ purchasing and budget cycles and decisions;

the competitive nature of potential customers’ evaluation and purchasing processes;

the functionality demands of potential customers;

fluctuations in the enterprise work management needs of potential customers;

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

the purchasing approval processes of potential customers.

Our sales cycles can make it difficult to predict the quarter in which revenue from a new customer may first be recognized. We may incur significant sales and marketing expenses and invest significant time and effort in anticipation of a sale that may never occur or only occur in a smaller amount or at a later date than anticipated. Delays inherent to our sales cycles could cause significant variability in our revenue and operating results for any particular period.

We have a limited history with our pricing models, and as a result, we may be forced to change the prices we charge for our applications or the pricing models upon which they are based.

We have limited experience with respect to determining the optimal prices and pricing models for certain of our applications and certain geographic markets. As the markets for our applications mature, or as competitors introduce products or services that compete with ours, including bundling competing offerings with additional products or services, we may be unable to attract new customers at the same price or based on the same pricing models as we have used historically. As a result, in the future we may be required to reduce our prices, which could adversely affect our financial performance. In addition, we may offer volume price discounts based on the number of seats purchased by a customer or the number of our applications purchased by a customer, which would effectively reduce the prices we charge for our applications. Also, we may be unable to renew existing customer agreements or enter into new customer agreements at the same prices or upon the same terms that we have historically, which could have a material adverse effect on our financial position.

Any disruption of service at the data centers that house our equipment and deliver our applications or with our hosting service provider could harm our business.

Our reputation and ability to attract, retain, and serve our customer is dependent upon the reliable performance of our computer systems and those of third parties that we utilize in our operations. These systems may be subject to damage or interruption from earthquakes, adverse weather conditions, other natural disasters, terrorist attacks, power loss, telecommunications failures, computer viruses, computer denial of service attacks, or other attempts to harm these systems. Interruptions in these systems, or with the Internet in general, could make our service unavailable or degraded or otherwise hinder our ability to deliver application data to our customers. Service

interruptions, errors in our software, or the unavailability of computer systems used in our operations could diminish the overall attractiveness of our applications to existing and potential customers.

Our servers and those of third parties we use in our operations are vulnerable to computer viruses, physical or electronic break-ins, and similar disruptions. We have implemented security protocols within our applications; however, we have no assurance that our systems are completely secure. Our insurance does not cover expenses related to disruptions to our service or unauthorized access to our applications. Any significant disruption to our service or access to our systems could result in a loss of customers and adversely affect our business and results of operation.

We utilize our own communications and computer hardware systems located either in our facilities or in that of a third-party Web hosting provider. In addition, we utilize third-party hosting services in connection with our business operations and have migrated our applications to Amazon Web Services (AWS), a third-party hosting platform. Problems faced by us or our third-party hosting providers, including technological or business-related disruptions, could adversely impact the experience of our customers.

If we fail to adequately manage our data center or hosting infrastructure capacity, our existing customers may experience service outages, and our new customers may experience delays in the deployment of our applications.

We have experienced significant growth in the number of seats and volume of data that our hosting infrastructure supports. We seek to maintain sufficient excess capacity in our operations infrastructure to meet the needs of all of our customers. We also seek to maintain excess capacity to facilitate the rapid provision of new customer deployments and the expansion of existing customer deployments. However, obtaining new data center infrastructure requires lead time. If we do not accurately predict our infrastructure capacity requirements with sufficient lead time, our customers could experience service impairment that may subject us to financial penalties and liabilities and cause us to lose customers. If our data center infrastructure capacity fails to keep pace with increased subscriptions, customers may experience delays or reductions in the quality of our service as we seek to obtain additional capacity, which could harm our reputation and harm our business. As we add data center or hosting infrastructure capacity and support personnel in advance of anticipated growth, our cost of product revenue will increase, and if the anticipated revenue growth does not occur, our product gross profit will be adversely affected both in terms of absolute dollars and as a percentage of total revenues in any particular quarterly or annual period.

~~Security breaches may harm~~Actual or perceived security vulnerabilities in our ~~business.~~solutions and services or cyberattacks on our networks could have a material adverse impact on our business, results of operations and financial condition.

Our applications involve the storage and transmission of our customers’ proprietary and confidential information, including personal or identifying information regarding their employees and customers. Any security breaches, unauthorized access, unauthorized usage, virus, or similar breach or disruption could result in loss of confidential information, damage to our reputation, early termination of our contracts, litigation, regulatory investigations, indemnity obligations, or other liabilities. If our security measures or those of our third-party data centers, such as Amazon Web Services) are breached as a result of third-party action, employee error, malfeasance or otherwise, resulting in unauthorized access to customer data, our reputation will be damaged, our business may suffer, and we could incur significant liability. Unauthorized parties may attempt to misappropriate or compromise our confidential information or that of third parties, create system disruptions, product or service vulnerabilities or cause shutdowns. These perpetrators of cyberattacks also may be able to develop and deploy viruses, worms, malware and other malicious software programs that directly or indirectly attack our products, services or infrastructure (including our third party cloud service providers). Because the techniques used to obtain unauthorized access or sabotage systems change frequently and generally are not identified until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any or all of these issues could negatively affect our ability to attract new customers, cause existing customers to elect not to renew or upgrade their subscriptions, result in reputational damage, or subject us to third-party lawsuits, regulatory fines, or other action or liability, which could adversely affect our operating results. In addition, to the extent we are diverting our resources to address and mitigate these vulnerabilities, it may hinder our ability to deliver and support our solutions and customers in a timely manner. Despite our efforts to build secure services, we can make no assurance that we will be able to detect, prevent, timely and adequately address, or mitigate the negative effects of cyberattacks or other security breaches.

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

The overall market for enterprise work management software is rapidly evolving and subject to changing technology, shifting customer needs, and frequent introductions of new applications. Our ability to attract new customers and increase revenue from existing customers will depend, in large part, on our ability to develop or acquire new applications and enhance and improve existing applications. To achieve market acceptance for our applications, we must effectively anticipate and offer applications that meet changing customer demands in a timely manner. Customers may require features and capabilities not offered by our current applications. We may experience difficulties that could delay or prevent our development, acquisition, or implementation of new applications and enhancements.

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

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

Our business depends on the overall demand for information technology and enterprise work management software spend and on the economic health of our current and prospective customers. If worldwide economic conditions become unstable, our existing customers and prospective customers may re-evaluate their decision to purchase our applications. Weak global economic conditions or a reduction in information technology or enterprise work management software spending by our customers could harm our business in a number of ways, including longer sales cycles and lower prices for our applications.

We rely on third-party software that is required for the development and deployment of our applications, which may be difficult to obtain or which could cause errors or failures of our applications.

We rely on software licensed from or hosted by third parties to offer our applications. In addition, we may need to obtain licenses from third parties to use intellectual property associated with the development of our applications, which might not be available to us on acceptable terms, or at all. Any loss of the right to use any software required for the development, maintenance, and delivery of our applications could result in delays in the provision of our applications until equivalent technology is either developed by us or, if available, is identified, obtained and integrated, which could harm our business. Any errors or defects in third-party software could result in errors or a failure of our applications, which could harm our business.

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

Complex software applications such as ours often contain errors or defects, particularly when first introduced or when new versions or enhancements are released. Our current and future applications may contain serious defects.

Since our customers use our applications for critical business purposes, defects or other performance problems could negatively impact our customers and could result in:

loss or delayed market acceptance and sales;

breach of warranty or other claims for damages;

sales credits or refunds for prepaid amounts related to unused subscription services;

canceled contracts and loss of customers;

diversion of development and customer service resources; and

injury to our reputation.

The costs incurred in correcting any material errors or defects might be substantial and could adversely affect our operating results. Although our customer agreements typically contain provisions designed to limit our exposure

to certain of the claims above, existing or future laws or unfavorable judicial decisions could negate these limitations. Even if not successful, a breach of warranty or other claim brought against us would likely be a

distraction to management, time-consuming and costly to resolve, and could seriously damage our reputation in the marketplace, making it harder for us to sell our applications. Additionally, our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all, and our policy may not cover all claims made against us. Further, defending a suit, regardless of its merit, could be costly and divert management’s attention.

If we fail to integrate our applications with other software applications and competitive or adjacent offerings that are developed by others, or fail to make our applications available on mobile and other handheld devices, our applications may become less marketable, less competitive or obsolete, and our operating results could be harmed.

Our applications integrate with a variety of other software applications, and also with competing and adjacent third-party ~~offerings,.~~offerings. We need to continuously modify and enhance our platform to adapt to changes in cloud-enabled hardware, software, networking, browser and database technologies. Any failure of our applications to integrate effectively with other software applications and product offerings could reduce the demand for our applications or result in customer dissatisfaction and harm to our business. If we are unable to respond to changes in the applications and tools with which our applications integrate in a cost-effective manner, our applications may become less marketable, less competitive, or obsolete. Competitors may also impede our attempts to create integration between our applications and competitive offerings, which may decrease demand for our applications. In addition, an increasing number of individuals within organizations are utilizing devices other than personal computers, such as mobile phones, tablets and other handheld devices, to access the Internet and corporate resources and to conduct business. If we cannot effectively make our applications available on these devices, we may experience difficulty attracting and retaining customers.

If we fail to develop and maintain relationships with third parties, our business may be harmed.

Our business depends in part on the development and maintenance of technology integration, joint sales, and reseller relationships. Maintaining relationships with third parties requires significant time and resources, as does integrating third-party content and technology. Further, third parties may not perform as expected under any relationships into which we may enter, and we may have disagreements or disputes with third parties that could negatively affect our brand and reputation. If we are unsuccessful in establishing or maintaining relationships with third parties, our ability to compete in the marketplace or to grow our revenue could be impaired, and our operating results could suffer.

Our use of open source software could negatively affect our ability to sell our applications and subject us to possible litigation.

A portion of our applications incorporate open source software, and we expect to continue to incorporate open source software in the future. Few of the licenses applicable to open source software have been interpreted by courts, and their application to the open source software integrated into our proprietary software may be uncertain. Moreover, we cannot provide any assurance that we have not incorporated additional open source software in our applications in a manner that is inconsistent with the terms of the license or our current policies and procedures. If we fail to comply with these licenses, we may be subject to certain requirements, including requirements that we offer our applications that incorporate the open source software for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software, and that we license such modifications or derivative works under the terms of applicable open source licenses. If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of our applications that contained the open source software, and required to comply with the foregoing conditions, which could disrupt the distribution and sale of some of our applications. In addition, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their products. As a result, we could be subject to suits by parties claiming infringement due to the reliance by our applications on certain open source software. Litigation could be costly for us to defend, have a negative effect on our operating results and

financial condition, or require us to devote additional research and development resources to change our applications.

Certain of our operating results and financial metrics are difficult to predict as a result of seasonality.

We have historically experienced seasonality in terms of when we enter into customer agreements. We sign a significantly higher percentage of agreements with new customers, and renew agreements with existing customers, in the fourth quarter of each calendar year as our customers tend to follow budgeting cycles at the end of the calendar year. Our cash flow from operations has historically been higher in the first quarter of each calendar year than in other quarters. This seasonality is reflected to a much lesser extent, and sometimes is not immediately apparent, in our revenue, due to the fact that we defer revenue recognition. In addition, seasonality may be difficult to observe in our financial results during periods in which we acquire businesses, as such results typically are most significantly impacted by such acquisitions. We expect this seasonality to continue, or possibly increase in the future, which may cause fluctuations in our operating results and financial metrics. If our quarterly operating results or outlook fall below the expectations of research analysts or investors, the price of our common stock could decline substantially.

We could incur substantial costs as a result of any claim of infringement of another party’s intellectual property rights.

In recent years, there has been significant litigation involving patents and other intellectual property rights in our industry. Companies providing software are increasingly bringing and becoming subject to suits alleging infringement of proprietary rights, particularly patent rights, and to the extent we gain greater market visibility, we face a higher risk of being the subject of intellectual property infringement claims. We do not have a significant patent portfolio, which could prevent us from deterring patent infringement claims through our own patent portfolio, and our competitors and others may now and in the future have significantly larger and more mature patent portfolios than we have. The risk of patent litigation has been amplified by the increase in the number of a type of patent holder, which we refer to as a non-practicing entity, whose sole business is to assert such claims and against whom our own intellectual property portfolio may provide little deterrent value. We could incur substantial costs in prosecuting or defending any intellectual property litigation. If we sue to enforce our rights or are sued by a third-party that claims that our applications infringe its rights, the litigation could be expensive and could divert our management resources. Moreover, our acquisition strategy could expose us to additional risk of intellectual property litigation as we acquire new businesses with diverse software offerings and intellectual property assets.

In addition, in most instances, we have agreed to indemnify our customers against claims that our applications infringe the intellectual property rights of third parties. Our business could be adversely affected by any significant disputes between us and our customers as to the applicability or scope of our indemnification obligations to them. Any intellectual property litigation to which we might become a party, or for which we are required to provide indemnification, may require us to do one or more of the following:

cease selling or using applications that incorporate the intellectual property that we allegedly infringe;

make substantial payments for legal fees, settlement payments or other costs or damages;

obtain a license, which may not be available on reasonable terms or at all, to sell or use the relevant technology; or

redesign the allegedly infringing applications to avoid infringement, which could be costly, time-consuming or impossible.

If we are required to make substantial payments or undertake any of the other actions noted above as a result of any intellectual property infringement claims against us or any obligation to indemnify our customers for such claims, such payments or actions could harm our business.

We could incur substantial costs in protecting our intellectual property from infringement, and any failure to protect our intellectual property could impair our business.

Our success and ability to compete depend, in part, upon our intellectual property. We seek to protect the source code for our proprietary software and other proprietary technology and information under a combination of copyright, trade secrets, and patent law, and we seek to protect our brands through trademark law. Our policy is to

enter into confidentiality agreements, or agreements with confidentiality provisions, with our employees, consultants, vendors, and customers, and to control access to our software, documentation, and other proprietary

information. Despite these precautions, it may be possible for unauthorized parties to copy our software or other proprietary technology or information, or to develop similar software independently.

Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our applications or to obtain and use information that we regard as proprietary. Policing unauthorized use of our applications is difficult, and we are unable to determine the extent to which piracy of our software exists or will occur in the future. Litigation may be necessary in the future to enforce our intellectual property rights, protect our trade secrets, determine the validity and scope of the proprietary rights of others, or defend against claims of infringement or invalidity. Such litigation could be costly, time-consuming, and distracting to management, result in a diversion of resources or the narrowing or invalidation of portions of our intellectual property, and have a material adverse effect on our business, operating results, and financial condition. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights or alleging that we infringe the counterclaimant’s own intellectual property. These steps may be inadequate to protect our intellectual property. Third parties may challenge the validity or ownership of our intellectual property, and these challenges could cause us to lose our rights, in whole or in part, to such intellectual property or narrow its scope such that it no longer provides meaningful protection. We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property. Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create products and services that compete with ours. Some license provisions protecting against unauthorized use, copying, transfer, and disclosure of our applications may be unenforceable under the laws of certain jurisdictions and foreign countries. Further, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States. To the extent we expand our international activities, our exposure to unauthorized copying, transfer, and use of our applications and proprietary technology or information may increase.

There can be no assurance that our means of protecting our proprietary rights will be adequate or that our competitors will not independently develop similar technology. If we fail to meaningfully protect our intellectual property, our business, brands, operating results and financial condition could be materially harmed.

Unanticipated challenges by tax authorities could harm our future results.

We are subject to income taxes in the United States and various non-U.S. jurisdictions. We may be subject to income tax audits by various tax jurisdictions throughout the world, many of which have not established clear guidance on the tax treatment of cloud-based companies. The application of tax laws in such jurisdictions may be subject to diverging and sometimes conflicting interpretations by tax authorities in these jurisdictions. Although we believe our income tax liabilities are reasonably estimated and accounted for in accordance with applicable laws and principles, an adverse resolution of one or more uncertain tax positions in any period could have a material impact on the results of operations for that period.

Taxing authorities may successfully assert that we should have collected or, in the future, should collect additional sales and use taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our results of operations.

We have not historically filed sales and use tax returns or collected sales and use taxes in all jurisdictions in which we have sales, based on our belief that such taxes are not applicable. Taxing authorities may seek to impose such taxes on us, including for past sales, which could result in penalties and interest. Any such tax assessments may adversely affect the results of our operations.

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

We conduct integrated operations internationally through subsidiaries in various tax jurisdictions pursuant to transfer pricing arrangements between our subsidiaries and between our subsidiaries and us. If two or more affiliated companies are located in different countries, the tax laws or regulations of each country generally require that transfer prices be the same as those between unrelated companies dealing at arms’ length and that contemporaneous

documentation is maintained to support the transfer prices. While we believe that we operate in compliance with applicable transfer pricing laws and intend to continue to do so, our transfer pricing procedures are not binding on

applicable tax authorities. If tax authorities in any of these countries were to successfully challenge our transfer prices as not reflecting arms’ length transactions, they could require us to adjust our transfer prices and thereby reallocate our income to reflect these revised transfer prices, which could result in a higher tax liability to us. Such reallocations may subject us to interest and penalties that would increase our consolidated tax liability, and could adversely affect our financial condition, results of operations, and cash flows.

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

As of December 31, ~~2017,~~2018, we had federal net operating loss carryforwards of approximately ~~$181.9~~$204.8 million and research and development credit carryforwards of approximately ~~$3.9~~$3.5 million, which begin expiring in ~~2018.~~2019. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre- change tax attributes, such as research tax credits, to offset its post-change income and taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5% shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules apply under state tax laws. Based on analysis of acquired net operating losses and credits, utilization of our net operating losses and research and development credits will be subject to annual limitations. The annual limitation will result in the expiration of ~~$77~~$82.6 million of federal net operating losses and ~~$3.9~~$3.5 million of research and development credit carryforwards before utilization. In the event that it is determined that we have in the past experienced additional ownership changes, or if we experience one or more ownership changes as a result of future transactions in our stock, then we may be further limited in our ability to use our net operating loss carryforwards and other tax assets to reduce taxes owed on the net taxable income that we earn. Any such limitations on the ability to use our net operating loss carryforwards and other tax assets could adversely impact our business, financial condition, and operating results. As of December 31, 2018 we also had foreign net operating loss carryforwards of approximately $24.8 million, which carry forward indefinitely.

Changes in laws or regulations related to the Internet may diminish the demand for our applications, and any failure of the Internet infrastructure could have a negative impact on our business.

We deliver our cloud-based applications through the Internet. Federal, state or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting data privacy and the use of the Internet. In addition, government agencies or private organizations may begin to impose taxes, fees, or other charges for accessing the Internet or on commerce conducted via the Internet. Increased enforcement of existing laws and regulations, as well as any laws, regulations, or changes that may be adopted or implemented in the future, could limit the growth of the use of cloud-based applications or communications generally, result in a decline in the use of the Internet and the viability of cloud-based applications such as ours, and reduce the demand for our applications.

The success of our enterprise work management software applications depends on the development and maintenance of the Internet infrastructure. This includes maintenance of a reliable network backbone with the necessary speed, data capacity and security, as well as the timely development of complementary products for providing reliable Internet access and services. The Internet has experienced, and is likely to continue to experience, significant growth in the amount of traffic and may be unable to support such demands. In addition, problems caused by viruses, worms, malware, and similar programs may harm the performance of the Internet. Any outages and delays in the Internet could reduce the level of usage of our services, which could materially adversely affect our business, financial condition, results of operations, and prospects.

Privacy concerns and laws or other domestic or foreign regulations may reduce the effectiveness of our applications and adversely affect our business.

Our customers can use our applications to collect, use, and store personal or identifying information regarding their customers and employees. Federal, state and foreign government bodies and agencies have adopted, are considering adopting, or may adopt laws and regulations regarding the collection, use, storage, and disclosure of personal information obtained from individuals. The costs of compliance with, and other burdens imposed by, such laws and regulations that are applicable to the businesses of our customers may limit the use and adoption of our

applications and reduce overall demand, or lead to significant fines, penalties or liabilities for any noncompliance with such privacy laws. For example, the European Union and many countries in Europe have stringent privacy laws and regulations that may impact our ability to profitably operate in certain European countries. Furthermore, privacy

concerns may cause our customers to resist providing the personal data necessary to allow them to use our applications effectively. Even the perception of privacy concerns, whether or not valid, may inhibit market adoption of our applications in certain industries. All of these domestic and international legislative and regulatory initiatives may adversely affect our customers’ ability to process, handle, store, use, and transmit demographic and personal information from their customers and employees, which could reduce demand for our applications.

In addition to government activity, privacy advocacy groups and the technology and other industries are considering various new, additional, or different self-regulatory standards that may place additional burdens on us. If the processing of personal information were to be curtailed in this manner, our applications would be less effective, which may reduce demand for our applications and adversely affect our business.

We are subject to governmental export and import controls that could impair our ability to compete in international markets due to licensing requirements and subject us to liability if we are not in compliance with applicable laws.

Our applications are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. Exports of our applications must be made in compliance with these laws and regulations. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including: the possible loss of export or import privileges; fines, which may be imposed on us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers. Obtaining the necessary authorizations, including any required license, for a particular sale may be time-consuming, is not guaranteed, and may result in the delay or loss of sales opportunities. In addition, changes in our applications or changes in applicable export or import regulations may create delays in the introduction and sale of our applications in international markets, prevent our customers with international operations from deploying our applications, or, in some cases, prevent the export or import of our applications to certain countries, governments, or persons altogether. Any change in export or import regulations, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could also result in decreased use of our applications, or in our decreased ability to export or sell our applications to existing or potential customers with international operations. Any decreased use of our applications or limitation on our ability to export or sell our applications would likely adversely affect our business.

Furthermore, we incorporate encryption technology into certain of our applications. Various countries regulate the import of certain encryption technology, including through import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our applications or could limit our customers’ ability to implement our applications in those countries. Encrypted applications and the underlying technology may also be subject to export control restrictions. Governmental regulation of encryption technology and regulation of imports or exports of encryption products, or our failure to obtain required import or export approval for our applications, when applicable, could harm our international sales and adversely affect our revenue. Compliance with applicable regulatory requirements regarding the export of our applications, including with respect to new releases of our applications, may create delays in the introduction of our applications in international markets, prevent our customers with international operations from deploying our applications throughout their globally-distributed systems or, in some cases, prevent the export of our applications to some countries altogether.

Moreover, U.S. export control laws and economic sanctions programs prohibit the shipment of certain products and services to countries, governments, and persons that are subject to U.S. economic embargoes and trade sanctions. Even though we take precautions to prevent our applications from being shipped or provided to U.S. sanctions targets, our applications and services could be shipped to those targets or provided by third parties despite such precautions. Any such shipment could have negative consequences, including government investigations, penalties and reputational harm.

If we are unable to implement and maintain effective internal controls over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our common stock may be negatively affected.

As a public company, we are required to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal controls over financial reporting. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until the later of our second annual report or the first annual report required to be filed with the SEC following the date we are no longer an “emerging growth company” as defined in the JOBS Act. If we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis, and our financial statements may be materially misstated. We are in the process of designing and implementing the internal controls over financial reporting required to comply with this obligation, which process will be time consuming, costly and complicated. We may need additional finance and accounting personnel with certain skill sets to assist us with the reporting requirements we will encounter as a public company and to support our anticipated growth. In addition, implementing internal controls may distract our officers and employees, entail substantial costs to modify our existing processes, and take significant time to complete.

In the future, if we identify material weaknesses in our internal controls over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to assert that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is not required to express an opinion due to the provisions of the JOBS Act or is unable to express an opinion as to the effectiveness of our internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports; the market price of our common stock could be negatively affected; and we could become subject to investigations by the stock exchange on which our securities are listed, the Securities and Exchange Commission (SEC), or other regulatory authorities, which could require additional financial and management resources.

We incur significant costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could harm our operating results.

As a public company, we will incur significant legal, accounting, investor relations, and other expenses, including costs associated with public company reporting requirements. We also have incurred and will incur costs associated with current corporate governance requirements, including requirements under Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules implemented by the SEC and the exchange on which we list our common stock. These rules and regulations may substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. As a public company, it is more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantially higher costs to obtain coverage or to accept reduced policy limits and coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers.

We are an “emerging growth company,” and any decision on our part to comply with certain reduced disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act and, for as long as we continue to be an emerging growth company, we may choose to take advantage of certain exemptions from various reporting requirements applicable to other public companies including, but not limited to: not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act; reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and exemptions from the requirements to hold a nonbinding advisory vote on executive compensation and to obtain stockholder approval of any golden parachute payments not previously approved. We may take advantage of these provisions until such time that we are no longer an “emerging growth company.” We will cease to be an “emerging growth company” upon the earliest of ~~the first fiscal year following the fifth anniversary of the consummation of our initial public offering; the first fiscal year after our annual gross revenue is $1 billion~~December 31, 2019 or ~~more;~~ the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt ~~securities; or the date on which we are deemed to be a “large accelerated filer” as defined in the Securities Exchange Act of 1934, or the Exchange Act.~~securities. To the extent we take advantage of any of these reduced reporting burdens in this Annual Report or in future filings, the information that we provide our security holders may be different than you might get from other

public companies in which you hold equity interests. We cannot predict if investors will find our common stock less attractive because we may rely on these

exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile.

Under Section 107(b) of the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We are choosing to “opt out” of such extended transition period, however, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable. The requirements of being a public company may strain our resources and divert management’s attention.

The uncertainty surrounding the implementation and effect of Brexit may cause increased economic volatility, affecting our operations and business.

On June 23, 2016, voters in the United Kingdom (“UK”) approved an advisory referendum to withdraw from membership in the European Union (“E.U.”), this proposed exit (referred to as Brexit) could cause disruptions to, and create uncertainty surrounding, our business in the UK and E.U., including affecting our relationships with our existing and future customers, suppliers and employees. As a result, Brexit could have an adverse effect on our future business, financial results and operations. The formal process for the UK leaving the E.U. began in March 2017, when the UK served notice to the European Council under Article 50 of the Treaty of Lisbon. The long-term nature of the UK’s relationship with the E.U. is unclear and there is considerable uncertainty as to when any relationship will be agreed upon and implemented. The announcement of Brexit has resulted in significant volatility in global stock market and currency exchange rate fluctuations that resulted in strengthening of the U.S. dollar relative to other foreign currencies in which we conduct business. The political and economic instability created by Brexit has caused and may continue to cause significant volatility in global financial markets and uncertainty regarding the regulation of data protection in the UK. Brexit could also have the effect of disrupting the free movement of goods, services, and people between the UK, the E.U., and elsewhere. The effects of Brexit will depend on any agreements the UK makes to retain access to E.U. markets either during a transitional period or more permanently. Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which E.U. laws to replace or replicate. Further, uncertainty around these and related issues could lead to adverse effects on the economy of the UK and the other economies in which we operate. There can be no assurance that any or all of these events will not have a material adverse effect on our business operations, results of operations and financial condition.

Risks Related to Ownership of Our Common Stock

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

The market price of our common stock could be subject to significant fluctuations. Some of the factors that may cause the market price of our common stock to fluctuate include:

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

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

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

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

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

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

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

litigation involving us;

our ability to successfully consummate and integrate acquisitions;

investors’ general perception of us;

recruitment or departure of key personnel;

sales of our common stock by us or our stockholders;

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

general economic, legal, industry and market conditions and trends unrelated to our performance.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Because of the potential volatility of our stock price, we may become the target of securities litigation in the future. If we were to become involved in securities litigation, it could result in substantial costs, divert management’s attention and resources from our business and adversely affect our business.

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

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If few analysts commence coverage of us, the trading price of our stock would likely decrease if one or more of the analysts covering our business downgrade their evaluation of our stock, the price of our stock could decline. If one or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline. Furthermore, if our operating results fail to meet analysts’ expectations our stock price would likely decline.

Sales of a substantial number of shares of our common stock in the public market by our existing stockholders could cause our stock price to fall.

The price of our common stock could decline if there are substantial sales of our common stock in the public stock market. On ~~August 28, 2017,~~December 12, 2018, we filed a shelf registration statement on Form ~~S-3 on behalf of certain of our stockholders.~~S-3. If ~~the stockholders listed in that registration statement~~we sell a significant amount of stock at one time, our stock price could be negatively impacted by such sale. We also have registered shares of common stock that we may issue under our stock-based compensation plans, which can be freely sold in the public market upon ~~issuance, subject to the lock-up agreements and the restrictions imposed on our affiliates under Rule 144 under the Securities Act.~~issuance. Our 2014 Equity Incentive Plan provides for automatic increases to the number of shares available for issuance thereunder and we undertake each year to add those shares to a registration statement on Form S-8. These increases could have a negative effect on our stock price as the holders of such shares elect to sell their shares.

Our existing directors, executive officers and principal stockholders have substantial control over us, which could limit your ability to influence the outcome of key transactions, including a change of control.

As of December 31, ~~2017,~~2018, our directors, executive officers, principal stockholders and their affiliates beneficially owned or controlled, directly or indirectly, a majority of our outstanding common stock. As a result, these stockholders, acting together, could have significant influence over the outcome of matters submitted to our stockholders for approval, including the election or removal of directors, any amendments to our certificate of incorporation or bylaws and any merger, consolidation or sale of all or substantially all of our assets, and over the management and affairs of our company. This concentration of ownership may also have the effect of delaying or preventing a change in control of our company or discouraging others from making tender offers for our shares and might affect the market price of our common stock.

Because we do not expect to pay any dividends on our common stock for the foreseeable future, our investors may never receive a return on their investment.

We do not anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our existing operations. In addition, our ability to pay cash dividends is currently limited by the terms of our existing loan facility, which prohibits our payment of dividends on our capital stock without prior consent, and any future credit facility may contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. Accordingly,

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

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

Provisions in our certificate of incorporation and bylaws, as amended and restated, , will contain provisions that may depress the market price of our common stock by acting to discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock. These provisions may also prevent or

frustrate attempts by our stockholders to replace or remove members of our board of directors or our management. These provisions include the following:

our certificate of incorporation provides for a classified board of directors with staggered three-year terms so that not all members of our board of directors are elected at one time;

directors may be removed by stockholders only for cause;

our board of directors has the right to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

special meetings of our stockholders may be called only by our Chief Executive Officer, our board of directors or holders of not less than the majority of our issued and outstanding capital stock limiting the ability of minority stockholders to take certain actions without an annual meeting of stockholders;

our stockholders may not act by written consent unless the action to be effected and the taking of such action by written consent are approved in advance by our board of directors and, as a result, a holder, or holders, controlling a majority of our capital stock would generally not be able to take certain actions without holding a stockholders’ meeting;

our certificate of incorporation prohibits cumulative voting in the election of directors. This limits the ability of minority stockholders to elect director candidates;

stockholders must provide timely notice to nominate individuals for election to the board of directors or to propose matters that can be acted upon at an annual meeting of stockholders and, as a result, these provisions may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us; and

our board of directors may issue, without stockholder approval, shares of undesignated preferred stock, making it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock from engaging in certain business combinations with us.

Any provision of our certificate of incorporation and bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock. The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.


Item 1B.	Unresolved Staff Comments

None.


Item 2.	Properties

Our principal corporate offices are located in Austin, Texas, where we occupy approximately 9,900 square feet of space under a lease that expires in ~~March 2020.~~June 2025. We ~~occupy~~also lease office facilities domestically located in California, Massachusetts, Nebraska, New Jersey and Ohio. Internationally we lease office space in Australia, Canada, Ireland, Israel and the United Kingdom. We believe that our properties are generally suitable to meet our needs for the foreseeable future. In addition, to the extent we require additional ~~leased facilities for operations of approximately 16,900 square feet~~space in ~~Montreal, Quebec, and approximately 22,900 square feet in Lincoln, Nebraska.~~the future, we believe that it would be readily available on commercially reasonable terms.

Item 3. Legal Proceedings

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any legal proceedings that we believe would, individually or taken together, have a material adverse effect on our business, operating results, financial condition, or cash flows.


Item 4.	Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock is traded on the NASDAQ Global Market, or Nasdaq, under the symbol “UPLD”.

As of March 1, ~~2018,~~2019, the last reported sales price of our common stock on the Nasdaq Global Market was ~~$24.10~~$35.28 and there were 8139 stockholders of record of our common stock, including ~~Computershare Limited,~~Broadridge, which holds shares of our common stock on behalf of an indeterminate number of beneficial owners.

~~The table below sets forth the high and low sales prices per share of our common stock as reported on the Nasdaq Global Market for the periods indicated:~~

2017
Year Ended December 31, 2017 Low High
Fourth quarter $20.30 $24.62
Third Quarter $19.82 $25.33
Second Quarter $15.54 $23.95
First Quarter $8.90 $15.89

2016
Year Ended December 31, 2016 Low High
Fourth quarter $7.85 $9.74
Third Quarter $7.44 $9.90
Second Quarter $6.80 $7.77
First Quarter $6.00 $7.19

We have never declared or paid dividends on our common stock. We do not expect to pay dividends on our common stock for the foreseeable future. Instead, we anticipate that all of our earnings will be used for the operation and growth of our business. Any future determination to declare cash dividends would be subject to the discretion of our board of directors and would depend upon various factors, including our results of operations, financial condition and liquidity requirements, restrictions that may be imposed by applicable law and our contracts, and other factors deemed relevant by our board of directors. In addition, the terms of our loan facility currently restrict our ability to pay dividends.

Performance Graph

Notwithstanding any statement to the contrary in any of our filings with the SEC, the following information shall not be deemed “filed” with the SEC or “soliciting material” under the Securities Exchange Act of 1934 and shall not be incorporated by reference into any such filings irrespective of any general incorporation language contained in such filing.

The following graph compares the total cumulative stockholder return on our common stock with the total cumulative return of the Nasdaq Computer Technology Index (the “Computer Technology Index”) and the S&P 500 Composite Index during the period commencing on November 6, 2014, the initial trading day of our common stock, and ending on December 31, ~~2017.~~2018. The graph assumes a $100 investment at the beginning of the period in our common stock, the stocks represented in the S&P 500 Composite Index and the stocks represented in ~~Nasdaq~~ Computer Technology Index, and reinvestment of any dividends. The Computer Technology Index is designed to represent a cross section of widely-held U.S. corporations involved in various phases of the computer industry. The Computer Technology Index is market-value (capitalization) weighted, based on the aggregate market value of its 27 component stocks. Historical stock price performance should not be relied upon as an indication of future stock price performance.

Recent Sales of Unregistered Securities

In November 2016, the Company issued 24,587 shares of common stock valued at approximately $200,000 as a result of the escrow release in connection with the acquisition of Ultriva, Inc.

Issuer Purchases of Equity Securities

None.

Equity Compensation Plan Information

For information regarding securities authorized for issuance under equity compensation plans, see Part III, Item 12 of this Annual Report on Form 10-K.


Item 6.	Selected Financial Data

The following selected historical consolidated financial data below should be read in conjunction with Item 7: “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our consolidated financial statements and the related notes appearing in Item 8: “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K to fully understand factors that may affect the comparability of the information presented below.

The consolidated statements of operations data for the years ended December 31, 2018, 2017, ~~2016,~~ and ~~2015~~2016 and the selected consolidated balance sheet data as of December 31, ~~2017~~2018 and December 31, ~~2016~~2017 are derived from our audited consolidated financial statements appearing in Item 8: “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. The statement of operations data for the years ended December 31, ~~2014~~2015 and ~~2013~~2014 and the selected consolidated balance sheet data as of December 31, 2016, 2015, ~~2014,~~ and ~~2013~~2014 are derived from our consolidated financial statements not included in this Annual Report on Form 10-K. To obtain further information about our historical results, including our historical acquisitions, for which results of operations are included in our consolidated financial statements beginning on the dates of acquisition, you should read the following selected consolidated financial data in conjunction with our consolidated financial statements and related notes, the information in the section of this filing titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the other financial information included elsewhere in this filing. Our historical results are not necessarily indicative of the results to be expected in the future, and our interim results are not necessarily indicative of the results to be expected in the future.


																Year Ended December 31,
	2017			2016			2015			2014			2013			2018(1)			2017			2016			2015			2014
	(dollars in thousands, except share and per share data)															(dollars in thousands, except share and per share data)
Consolidated Statements of Operations Data:	Consolidated Statements of Operations Data:															Consolidated Statements of Operations Data:
Revenue:
Subscription and support	$	85,467		$	65,552		$	57,193		$	48,625		$	30,887		$	136,578		$	85,467		$	65,552		$	57,193		$	48,625
Perpetual license	4,346			1,650			2,805			2,787			2,003			3,902			4,346			1,650			2,805			2,787
Total product revenue	89,813			67,202			59,998			51,412			32,890			140,480			89,813			67,202			59,998			51,412
Professional services	8,139			7,565			9,913			13,162			8,303			9,405			8,139			7,565			9,913			13,162
Total revenue	97,952			74,767			69,911			64,574			41,193			149,885			97,952			74,767			69,911			64,574
Cost of revenue:
Subscription and support	28,454			22,734			19,586			14,042			7,787			42,881			28,454			22,734			19,586			14,042
Professional services	5,193			4,831			7,085			9,079			5,680			5,708			5,193			4,831			7,085			9,079
Total cost of revenue	33,647			27,565			26,671			23,121			13,467			48,589			33,647			27,565			26,671			23,121
Gross profit	64,305			47,202			43,240			41,453			27,726			101,296			64,305			47,202			43,240			41,453
Operating expenses:
Sales and marketing	15,307			12,160			12,965			14,670			10,625			20,935			15,307			12,160			12,965			14,670
Research and development	15,795			14,919			15,778			26,165			10,340			21,320			15,795			14,919			15,778			26,165
Refundable Canadian tax credits	(542		)	(513		)	(470		)	(1,094		)	(583		)	(406		)	(542		)	(513		)	(470		)	(1,094		)
General and administrative	23,291			18,286			18,201			13,561			6,832			32,041			23,291			18,286			18,201			13,561
Depreciation and amortization	6,498			5,291			4,534			4,310			3,670			14,272			6,498			5,291			4,534			4,310
Acquisition-related expenses	15,092			5,583			2,455			2,186			1,461			18,728			15,092			5,583			2,455			2,186
Total operating expenses	75,441			55,726			53,463			59,798			32,345			106,890			75,441			55,726			53,463			59,798
Loss from operations	(11,136		)	(8,524		)	(10,223		)	(18,345		)	(4,619		)	(5,594		)	(11,136		)	(8,524		)	(10,223		)	(18,345		)
Other expense:
Interest expense, net	(6,582		)	(2,781		)	(1,858		)	(1,951		)	(2,797		)	(13,273		)	(6,582		)	(2,781		)	(1,858		)	(1,951		)
Other income (expense), net	289			(678		)	(544		)	101			(431		)	(1,781		)	289			(678		)	(544		)	101
Total other expense	(6,293		)	(3,459		)	(2,402		)	(1,850		)	(3,228		)	(15,054		)	(6,293		)	(3,459		)	(2,402		)	(1,850		)
Loss before provision for income taxes	(17,429		)	(11,983		)	(12,625		)	(20,195		)	(7,847		)	(20,648		)	(17,429		)	(11,983		)	(12,625		)	(20,195		)
Provision for income taxes	(1,296		)	(1,530		)	(1,039		)	78			(708		)
Loss from continuing operations	(18,725		)	(13,513		)	(13,664		)	(20,117		)	(8,555		)
Income (loss) from discontinued operations	—			—			—			—			(642		)
Benefit from (provision for) income taxes																9,809			(1,296		)	(1,530		)	(1,039		)	78
Net loss	$	(18,725	)	$	(13,513	)	$	(13,664	)	$	(20,117	)	$	(9,197	)	(10,839		)	(18,725		)	(13,513		)	(13,664		)	(20,117		)
Preferred stock dividends and accretion	—			—			—			(1,524		)	(98		)	—			—			—			—			(1,524		)
Net loss attributable to common shareholders	$	(18,725	)	$	(13,513	)	$	(13,664	)	$	(21,641	)	$	(9,295	)	$	(10,839	)	$	(18,725	)	$	(13,513	)	$	(13,664	)	$	(21,641	)
Net loss per common share:
Loss from continuing operations per common share, basic and diluted	$	(1.02	)	$	(0.82	)	$	(0.91	)	$	(4.43	)	$	(7.23	)
Income (loss) from discontinued operations per common share, basic and diluted	$	—		$	—		$	—		$	—		$	(0.54	)
Net loss per common share, basic and diluted	$	(1.02	)	$	(0.82	)	$	(0.91	)	$	(4.43	)	$	(7.77	)	$	(0.54	)	$	(1.02	)	$	(0.82	)	$	(0.91	)	$	(4.43	)
Weighted-average common shares outstanding, basic and diluted	18,411,247			16,472,799			14,939,601			4,889,901			1,196,668			19,985,528			18,411,247			16,472,799			14,939,601			4,889,901

(1) We adopted the new revenue standard on January 1, 2018 using the modified retrospective method. Revenue for the twelve months ended December 31, 2018 increased $0.2 million as a result of the application of the new revenue standard. In addition, sales commissions, included in 'Sales and marketing', decreased $2.4 million due to the requirement under then new standard to capitalize costs associated with obtaining a contract. During the twelve months ended December 31, 2018, the effect on earnings per share of the adoption of ASC 606 was an increase in earnings per share of $0.13. Refer to Note 2. Summary of Significant Accounting Policies and Note 12. Revenue Recognition to our consolidated financial statements for further discussion regarding the adoption of ASC 606.


												Year Ended December 31,
	2017		2016		2015		2014		2013			2018		2017		2016		2015		2014
	(dollars in thousands)											(dollars in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	22,326	$	28,758	$	18,473	$	30,988	$	4,703		$	16,738	$	22,326	$	28,758	$	18,473	$	30,988
Property and equipment, net	2,927		4,356		6,001		3,930		3,942			2,827		2,927		4,356		6,001		3,930
Intangible assets, net	70,043		28,512		31,526		34,751		34,747			179,572		70,043		28,512		31,526		34,751
Goodwill	154,607		69,097		47,422		45,146		33,630			225,322		154,607		69,097		47,422		45,146
Total assets	281,259		150,588		122,414		135,686		94,847			483,198		281,259		150,588		122,414		135,686
Deferred revenue	45,377		23,799		19,939		21,376		17,036			58,204		45,377		23,799		19,939		21,376
Total liabilities	189,844		91,575		62,144		64,289		60,191			395,891		189,844		91,575		62,144		64,289
Redeemable convertible preferred stock	—		—		—		—		50,538
Total stockholders’ equity (deficit)	91,415		59,013		60,270		71,397		(15,882		)	87,307		91,415		59,013		60,270		71,397


																Year Ended December 31,
	2017			2016			2015			2014			2013			2018			2017			2016			2015			2014
	(dollars in thousands, except %)															(dollars in thousands, except %)
Other Financial Data:
Annualized recurring revenue value at year-end⁽¹⁾	$	106,099		$	63,968		$	58,918		$	56,800		$	49,061		$	131,919		$	106,099		$	63,968		$	58,918		$	56,800
Annual net dollar retention rate⁽²⁾	93		%	95		%	90		%	96		%	90		%	98		%	93		%	95		%	90		%	96		%
Adjusted EBITDA⁽³⁾	$	30,316		$	12,616		$	4,143		$	4,213		$	3,576		$	53,105		$	30,316		$	12,616		$	4,143		$	4,213

Other Expense, net



	Year Ended December 31,
	2017				2016				Change
	Amount			Percent of Revenue	Amount			Percent of Revenue	Amount			% Change
	(dollars in thousands)
Other Expense:
Interest expense, net	$	(6,582	)	(7)%	$	(2,781	)	(4)%	$	(3,801	)	137%
Other income (expense), net	289			1%	(678		)	(1)%	967			(143)%
Total other expense	$	(6,293	)	(6)%	$	(3,459	)	(5)%	$	(2,834	)	82%

Interest expense was $6.6 million in 2017, compared to $2.8 million for 2016, an increase of $3.8 million, or 137%. The increase is attributable to increased borrowing under our expanded debt facility to support acquisitions.

Other income was $0.3 million in 2017, compared to other expense of $0.7 million in 2016, a decrease of $1.0 million, or 143%. The decrease in expenses was driven by the loss on the ~~sale~~divestiture of EPM Live of $0.7 million in ~~the first quarter of~~February 2016.

(Provision for) Benefit from Income Taxes



	Year Ended December 31,
	2017				2016				Change
	Amount			Percent of Revenue	Amount			Percent of Revenue	Amount		% Change
	(dollars in thousands)
(Provision for) Benefit from Income Taxes	$	(1,296	)	(1)%	$	(1,530	)	(2)%	$	234	(15)%

Provision for income taxes was $1.3 million in 2017, compared to $1.5 million in 2016, ana decrease in provision for income taxes of $0.2 million, or 15%. In 2017 we recorded income taxes that were principally attributable to state and foreign taxes, other than deferred taxes related to tax deductible goodwill. The foreign provision for income taxes in 2017 is principally attributable to net income generated in Canada after reduction for tax credits generated and carried forward. Because we have not generated domestic net income in any period to date, we have recorded a full valuation allowance against our domestic net deferred tax assets, exclusive of tax deductible goodwill. Realization of any of our domestic deferred tax assets depends upon future earnings, the timing and amount of which are uncertain. Based on analysis of acquired net operating losses, utilization of our net operating losses will be subject to annual limitations due to the ownership change rules under the Code and similar state provisions. In the event we have subsequent changes in ownership, the availability of net operating losses and research and development credit carryovers could be further limited. See Note 6 Income Taxes, of the Notes to Consolidated Financial Statements for more information regarding our income taxes as they relate to foreign and domestic operations.

~~Comparison of Fiscal Years Ended December 31, 2016 and December 31, 2015~~

~~Revenue~~

Year Ended December 31,
2016 2015 Change
Amount Percent of Revenue Amount Percent of Revenue Amount % Change
(dollars in thousands)
Revenue:
Subscription and support $ 65,552
88% $ 57,193
82% $ 8,359
15%
Perpetual license 1,650
2% 2,805
4% (1,155 ) (41)%
Total product revenue 67,202
90% 59,998
86% 7,204
12%
Professional services 7,565
10% 9,913
14% (2,348 ) (24)%
Total revenue $ 74,767
100% $ 69,911
100% $ 4,856
7%

Total revenue was $74.8 million in 2016, compared to $69.9 million in 2015, an increase of $4.9 million, or 7%. Of the increase in total revenue, $11.7 million was due to the acquisitions we closed in 2015 and 2016. Total revenue also declined by $6.0 million due to the divestiture of the EPM Live product line at the end of February 2016 and by $0.7 million from organic total revenues, or 1% in 2016 compared to 2015 due the change in the foreign currency exchange rate between the Canadian dollar versus the U.S. dollar for those periods of $0.6 million. Therefore, on a constant currency basis, our organic total revenue decreased by $0.1 million.

Subscription and support revenue was $65.6 million in 2016, compared to $57.2 million in 2015, an increase of $8.4 million, or 15%. Of the increase in subscription and support revenue, $10.6 million was due to the acquisitions we closed in 2015 and 2016. Subscription and support revenue declined by $2.9 million due to the divestiture of the EPM Live product line at the end of February 2016. The organic subscription and support revenue increased by $0.7 million, which includes a negative impact of $0.6 million in 2016 compared to 2015 due to the change in the foreign currency exchange rate between the Canadian dollar versus the U.S. dollar. Therefore, on a constant currency basis, our organic subscription and support revenue increased by $1.3 million, or 2%.

Perpetual license revenue was $1.7 million in 2016, compared to $2.8 million in 2015, a decrease of $1.1 million, or 41%. The acquisitions we closed in 2015 and 2016 contributed a $0.1 million increase in perpetual license revenue. Perpetual license revenue declined by $0.6 million due to the divestiture of the EPM Live product line at the end of February 2016 . The organic perpetual revenue declined by $0.6 million, or 2% with an immaterial impact from changes in the foreign currency exchange rate between the Canadian dollar versus the U.S. dollar on perpetual license revenue.

Professional services revenue was $7.6 million in 2016, compared to $9.9 million in 2015, a decrease of $2.3 million, or 24%. The acquisitions we closed in 2015 and 2016 contributed a $1.0 million increase to professional services revenue. Professional services revenue declined by $2.5 million due to the divestiture of the EPM Live product line at the end of February 2016. The organic professional services revenue declined by $0.8 million which included a decline of $0.1 million due to the change in the foreign currency exchange rate between the Canadian dollar versus the U.S. dollar in 2016 compared to 2015. Therefore, on a constant currency basis, our organic professional services revenue decreased by $0.7 million, or 7%.

~~Cost of Revenue and Gross Profit Percentage~~

Year Ended December 31,
2016 2015 Change
Amount Percent of Revenue Amount Percent of Revenue Amount % Change
(dollars in thousands)
Cost of revenue:
Subscription and support ⁽¹⁾
$ 22,734
30% $ 19,586
28% $ 3,148
16%
Professional services 4,831
7% 7,085
10% (2,254 ) (32)%
Total cost of revenue 27,565
37% 26,671
38% 894
3%
Gross profit $ 47,202
63% $ 43,240
62% $ 3,962
9%

⁽¹⁾ Includes depreciation and amortization expense as follows:

Depreciation $ 2,030
3% $ 1,800
3% $ 230
13%
Amortization $ 2,473
3% $ 2,116
3% $ 357
17%

Cost of subscription and support revenue was $22.7 million in 2016, compared to $19.6 million in 2015, an increase of $3.1 million, or 16%. The organic portion of our business contributed to a $3.8 million increase. Of the $3.8 million increase, $3.5 million was due to mobile messaging and short code leasing costs driven by higher mobile messaging volume and activity with the remaining $0.3 million increase from one-time charges related to the remaining unused portion of certain data center contracts as our cloud infrastructure was consolidated. The divestiture of the EPM Live product line in Q1 2016 contributed to $1.7 million decrease in cost of subscription and support revenue. Of the $1.7 million decrease, $0.7 million was attributable to reduced personnel and related costs, $0.2 million from depreciation and amortization, $0.2 million from reduced third party software and equipment costs and the remaining $0.2 million from miscellaneous costs. The 2015 and 2016 acquisitions contributed to a $1.2 million increase in cost of subscription and support revenue. Of the $1.2 million increase, $0.4 million was due to higher amortization of intangibles, $0.4 million increase in personnel and related costs, $0.3 million increase in data center and hosting costs and the remaining $0.2 million from miscellaneous costs.

Cost of professional services revenue was $4.8 million in 2016, compared to $7.1 million in 2015, a decrease of $2.3 million, or 32%. Cost of professional services revenue for organic business decreased $1.0 million driven by a $0.7 million reduction in personnel and related costs, $0.2 million reduction in contractor fees and $0.1 million reduction in miscellaneous costs which are the result of our planned operating efficiencies. The divestiture of the EPM Live product line at the end of February 2016 contributed to $1.8 million decrease in cost. Of the $1.8 million decrease, $1.4 million was attributable to reduced personnel and related costs, $0.2 million from reduced facility expenses and $0.3 million from miscellaneous costs. The acquisitions we closed in 2015 and 2016 contributed a $0.6 million increase in cost of professional services revenue. Of the $0.6 million increase, $0.3 million was attributable to personnel and related costs, $0.1 million attributable to contractor fees, and $0.2 million attributable to miscellaneous costs.

~~Operating Expenses~~

~~Sales and Marketing Expense~~

Year Ended December 31,
2016 2015 Change
Amount Percent of Revenue Amount Percent of Revenue Amount % Change
(dollars in thousands)
Sales and marketing $ 12,160
16% $ 12,965
19% $ (805 ) (6)%

Sales and marketing expense was $12.2 million in 2016, compared to $13.0 million in 2015, a decrease of $0.8 million, or 6%. Of the decrease in sales and marketing expense, $1.5 million was attributable to the organic

business primarily due to a decrease in sales and solution consultant personnel and related cost of $1.2 million which is the result of our planned operating efficiencies, and reduced spend of $0.3 million for general marketing. The divestiture of the EPM Live product line in Q1 2016 contributed to a decrease of $1.4 million in sales and marketing expense comprised of $0.5 million reduction in personnel and related expenses, $0.3 million of bad debt, $0.2 million of commissions, $0.2 million of marketing program spend and $0.3 million of miscellaneous expenses. The acquisitions we closed in 2015 and 2016 contributed an increase of $2.1 million in sales and marketing expense comprised of $1.4 million of sales commission, $0.4 million of personnel and related costs, and $0.4 million of miscellaneous expenses.

~~Research and Development Expense~~

Year Ended December 31,
2016 2015 Change
Amount Percent of Revenue Amount Percent of Revenue Amount % Change
(dollars in thousands)
Research and development:
Research and development $ 14,919
20% $ 15,778
23% $ (859 ) (5)%
Refundable Canadian tax credits (513 ) (1)% (470 ) (1)% (43 ) 9%
Total research and development $ 14,406
19% $ 15,308
22% $ (902 ) (6)%

Research and development expense was $14.9 million in 2016, compared to $15.8 million in 2015, a decrease of $0.9 million, or 5%. The organic portion of our business contributed to a $0.9 million decrease in research and development costs from reduced personnel and related costs as a result of our planned operating efficiencies. The divestiture of the EPM Live product in February 2016 contributed a decrease of $0.9 million in research and development expense comprised of $0.6 million of personnel and related costs and $0.3 million of contractor fees. The $0.9 million reduction in research and development from the divestiture of the EPM Live product line was offset by $0.9 million increase in research and development from the acquisitions we closed in 2015 and 2016. This increase from acquisitions was comprised of $0.6 million in personnel and related costs, $0.1 million in contractor fees, and $0.2 million of miscellaneous expenses.

~~Refundable Canadian tax credits were $0.5 million in 2016, or flat compared to $0.5 million in 2015.~~

~~General and Administrative Expense~~

Year Ended December 31,
2016 2015 Change
Amount Percent of Revenue Amount Percent of Revenue Amount % Change
(dollars in thousands)
General and administrative $ 18,286
24% $ 18,201
26% $ 85
—%

General and administrative expense was $18.3 million in 2016, were flat compared to $18.2 million in 2015. General and administrative costs for the organic portion of our business was flat and included increases due to a $1.4 million increase in stock compensation expense and $0.2 million from facility costs, related to costs of closure for office locations acquired in acquisitions, offset by decreases of $0.5 million from lower use of third parties, $0.5 million reductions in people-related costs, a $0.4 million reduction in non-recurring litigation costs, and $0.2 million from other factors. The divestiture of the EPM Live product in February 2016 contributed a decrease of $0.3 million in general and administrative expense, which was offset by a $0.3 million increase in general and administrative expense from the acquisitions we closed in 2015 and 2016.

~~Depreciation and Amortization Expense~~

Year Ended December 31,
2016 2015 Change
Amount Percent of Revenue Amount Percent of Revenue Amount % Change
(dollars in thousands)
Depreciation and amortization:
Depreciation $ 657
1% $ 452
1% $ 205
45%
Amortization 4,634
6% 4,082
6% 552
14%
Total depreciation and amortization $ 5,291
7% $ 4,534
7% $ 757
17%

Depreciation and amortization expense was $5.3 million in 2016, compared to $4.5 million in 2015, an increase of $0.8 million, or 17%. The acquisitions we closed in 2015 and 2016 contributed a $0.7 million increase with the majority resulting from amortization of acquired intangible assets created from our purchase business combinations. The organic businesses saw a $0.5 million increase in depreciation primarily due to hardware and software additions. This increase was partially offset by a $0.4 million decrease in depreciation and amortization from the divestiture of our EPM Live product in February 2016.

~~Acquisition-related Expense~~

Year Ended December 31,
2016 2015 Change
Amount Percent of Revenue Amount Percent of Revenue Amount % Change
(dollars in thousands)
Acquisition-related expense $5,583 7% $2,455 4% $3,128 127%

One-time acquisition-related expense was $5.6 million in 2016, compared to $2.5 million in 2015, an increase of $3.1 million, or 127%. The Company made three acquisitions during 2016 and signed a fourth acquisition in December 2016 which subsequently closed in January 2017. This acquisition activity was substantially more than the one acquisition closed in 2015.. As a result, year-over-year comparisons of these expenses are not necessarily meaningful due to their one-time nature.

~~Other Expense, net~~

Year Ended December 31,
2016 2015 Change
Amount Percent of Revenue Amount Percent of Revenue Amount % Change
(dollars in thousands)
Other Expense:
Interest expense, net $ (2,781 ) (4)% $ (1,858 ) (3)% $ (923 ) 50%
Other income (expense), net (678 ) (1)% (544 ) —% (134 ) 25%
Total other expense $ (3,459 ) (5)% $ (2,402 ) (3)% $ (1,057 ) 44%

Interest expense was $2.8 million in 2016, compared to $1.9 million for 2014, an increase of $0.9 million, or 50%. The increase is attributable to increased borrowing under our expanded debt facility to support acquisitions.

Other expense was $0.7 million in 2016, compared to other expense of $0.5 million in 2015, an increase of $0.1 million, or 25%. Increases in expense were a loss on the sale of EPM Live of $0.7 million and a loss of $0.2 million from asset retirements over the prior period, offset by a $0.5 million gain associated with the reduction of earnout obligations to sellers and of $0.2 million from foreign currency gains from non-base currency assets and liabilities.

~~(Provision for) Benefit from Income Taxes~~

Year Ended December 31,
2016 2015 Change
Amount Percent of Revenue Amount Percent of Revenue Amount % Change
(dollars in thousands)
(Provision for) Benefit from Income Taxes $ (1,530 ) (2)% $ (1,039 ) (1)% $ (491 ) 47%

Provision for income taxes was $1.5 million in 2016, compared to $1.0 million in 2015, an increase in provision for income taxes of $0.5 million, or 47%. In 2016 we recorded income taxes that were principally attributable to state and foreign taxes, other than deferred taxes related to tax deductible goodwill. The foreign provision for income taxes in 2016 is attributable to net income generated in excess of net operating loss carryforwards and reduction of tax credit carryforwards in Canada. Because we have not generated domestic net income in any period to date, we have recorded a full valuation allowance against our domestic net deferred tax assets, exclusive of tax deductible goodwill. Realization of any of our domestic deferred tax assets depends upon future earnings, the timing and amount of which are uncertain. Based on analysis of acquired net operating losses, utilization of our net operating losses will be subject to annual limitations due to the ownership change rules under the Code and similar state provisions. In the event we have subsequent changes in ownership, the availability of net operating losses and research and development credit carryovers could be further limited. See Note 6 Income Taxes, of the Notes to Consolidated Financial Statements for more information regarding our income taxes as they relate to foreign and domestic operations.

Liquidity and Capital Resources

To date, we have financed our operations primarily through capital raising including sales of our common stock, cash from operating activities, borrowing under our credit facility, and the issuance of notes to sellers in some of our acquisitions.

~~On May 12, 2017,~~ We believe that current cash and cash equivalents, cash flows from operating activities, availability under our existing credit facility, as discussed below, and the ~~Company filed a~~ability to offer and sell securities pursuant to our registration statement, ~~on Form S-3 (File No. 333-217977) (the "S-3"),~~as discussed below, will be sufficient to ~~register Upland securities~~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 December 31, 2018, we had cash and cash equivalents of $16.7 million, $60.0 million of available committed capital under our credit facility, $55.0 million available under the uncommitted accordion in ~~an aggregate amount~~our credit facility, and $283.2 million of up to $75.0 million for offerings from time to time. The S-3 was amended on May 22, 2017, and declared effective on May 26, 2017. On June 6, 2017, pursuant to the S-3, the Company entered into an underwriting agreement (the "Underwriting Agreement") with Needham & Company, LLC and William Blair & Company, L.L.C., as representatives of the several underwriters named therein, relating to the sale and issuance of 2,139,534 common shares of the Company for an offering price to the public of $21.50 per share. The net proceeds of the registered public offering were approximately $42.7 million, net of issuance costs, in exchange for 2,139,534 shares of common stock.

borrowings outstanding under our credit facility. As of December 31, 2017 we had ~~cash and cash equivalents of $22.3 million, $30.0 million of available borrowings under our loan facility, and~~ $113.8 million of borrowings outstanding under our ~~loan~~credit facility. Our cash and ~~security agreements, and $49.4~~cash equivalents held by our foreign subsidiaries was $13.4 million as of December 31, ~~2016.~~2018. If these funds are needed for our domestic operations, we would be required to accrue and pay U.S. taxes to repatriate these funds. 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.

~~Fifth Amendment to~~ As of December 31, 2018 and December 31, 2017, we had a working capital deficit of $40.4 million and a deficit of $23.5 million, respectively, which included $57.6 million and $43.8 million of deferred revenue recorded as a current liability as of December 31, 2018 and December 31, 2017, respectively. This deferred revenue will be recognized in future periods as the underlying performance obligations are delivered in accordance with our revenue recognition policy.

Credit Facility

On ~~August 2, 2017, the Company~~May 14, 2015, we entered into a credit facility with Wells Fargo Capital Finance and CIT Bank, N.A. as joint lead arrangers, and including Goldman Sachs Bank USA, Regions Bank, and Citizens Bank, N.A., with a Fifth Amendment to Credit Agreement (the “Fifth Amendment”) that amends that certain Credit Agreement dated as of May 14, 2015agreement (the “Credit Facility”) ~~among~~ ~~inter alia~~ between the Company, certain of its subsidiaries, and each of the lenders named in the Credit Facility.

~~The~~ From time to time we enter into amendments to the Credit Facility typically to expand the available borrowing limit in order to fund the Company's acquisitions. Refer to the 'Amendments' section below for a summary of the significant changes made to our Credit Facility as a result of current year amendments.

As of December 31, 2018 the Credit Facility, as amended, now provides for a ~~$200.0~~$400.0 million credit facility, including a ~~$113.8~~$283.2 million outstanding term loan, a ~~$40.0~~$30.0 million delayed draw term loan commitment, ~~($20.0 million of which was drawn in conjunction with the acquisition of Qvidian in November, 2017),~~ a ~~$10.0~~$30.0 million revolving loan commitment, and a $55.0 million uncommitted accordion.

~~Specifically,~~Amendments

During the ~~Fifth Amendment provides~~year ended December 31, 2018 we entered into amendments six through nine (the “Amendments”) in connection with our 2018 acquisitions. The main provision of The Amendments provide for, among other ~~things, (i) the expansion~~things:

Expansion of the ~~Company’s delayed draw term facility~~Credit Facility from ~~$10.0~~$200 million as of December 31, 2017 to ~~$40.0~~$400.0 million ~~(ii)~~as of December 31, 2018;

A favorable adjustment to decrease the overall applicable interest rate for accounts outstanding under the Credit Facility by 50 to 150 basis points resulting in an ~~increase in~~effective interest rate as of December 31, 2018 6.40%, down from the Company’s uncommitted accordion amount from $20.0 million to $55.0 million, (iii) reduces principal installments to 2.5% per annum on or before June 30, 2019 with the existing 5.0% per annum due thereafter until the facility’s maturity dateprevious effective interest rate as of ~~August 2, 2022, (iv) a~~December 31, 2017 of approximately 7.0%;

A favorable adjustment to the leverage ratio ~~such that~~to increase the amount of funded indebtedness ~~used~~to EBITDA (as defined in the Amendment) to 4.75 to 1.00 during 2018, along with additional leverage ratio ~~is reduced by qualified cash in excess~~improvements throughout the remainder of ~~$2.5 million, not~~the loan term;

A favorable increase to ~~exceed $15.0 million,~~the recurring revenue ratio future draw condition to the delayed draw term loan facility from 1.25:1.0 to 1.50:1.0; and ~~(v) an~~

An increase in the ~~maximum amount~~fixed charge coverage ratio (as defined in the Credit Facility) from 1.10 to 1.25;

A waiver of ~~purchase consideration payable~~the requirement that Interfax Communications Limited, Data Guard Limited and Return Fax 2000 Limited become Canadian Guarantors and join the Canadian Guarantee and Security Agreement as Grantors; and

Clarification of certain definitions within the Credit Facility.

Credit Facility Covenants

The Credit Facility contains customary affirmative and negative covenants. The negative covenants limit the ability of the Company and its subsidiaries 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.

While the Credit Facility restricts us from incurring additional indebtedness, management believes the sources of debt and equity available to us under the S-3 and Credit Facility provide adequate sources of capital to fund our operations and support our continued growth. We were in ~~respect of an individual permitted acquisition from $20.0 million to $25.0 million, and in respect of~~compliance with all ~~permitted acquisitions from $75.0 million to $175.0 million.~~

As of December 31, 2017 and December 31, 2016, we had a working capital deficit of $23.5 million and a surplus of $7.6 million, respectively, which included $43.8 million and $23.6 million of deferred revenue recorded as a current liabilityCredit Facility covenants as of December 31, ~~2017~~2018.

See Note 7 - Debt, of the Notes to Consolidated Financial Statements for more information regarding our Credit Faciliy and outstanding debt as of December 31, ~~2016, respectively. This deferred revenue will be recognized as revenue~~2018.

Registration Statement

On December 12, 2018, the Company filed a registration statement on Form S-3 (File No. 333-228767) (the “S-3”), to register Upland securities in ~~accordance~~an aggregate amount of up to $250.0 million for offerings from time to time. In connection with ~~our revenue recognition policy.~~

the filing of the S-3 the Company withdrew its previous registration statement filed on May 12, 2017 which registered Upland securities in an aggregate amount of up to $75.0 million of which $29.0 million in aggregate offering price remained available for issuance at the time of withdrawal.

The following table summarizes our cash flows for the periods indicated (including cash flows from discontinued operations):


	Year Ended December 31,									Year Ended December 31,
	2017			2016			2015			2018			2017			2016
	(dollars in thousands)									(dollars in thousands)
Consolidated Statements of Cash Flow Data:
Net cash provided by (used in) operating activities	$	7,716		$	3,875		$	(1,503	)
Net cash provided by operating activities										$	7,347		$	7,716		$	3,875
Net cash used in investing activities	(110,775		)	(13,229		)	(9,411		)	(161,686		)	(110,775		)	(13,229		)
Net cash provided by (used in) financing activities	96,178			19,525			(1,221		)
Net cash provided by financing activities										149,923			96,178			19,525
Effect of exchange rate fluctuations on cash	449			114			(380		)	(1,172		)	449			114
Change in cash and cash equivalents	(6,432		)	10,285			(12,515		)	(5,588		)	(6,432		)	10,285
Cash and cash equivalents, beginning of period	28,758			18,473			30,988			22,326			28,758			18,473
Cash and cash equivalents, end of period	$	22,326		$	28,758		$	18,473		$	16,738		$	22,326		$	28,758

Critical Accounting Policies and the Use of Estimates

We prepare our consolidated financial statements in accordance with generally accepted accounting principles in the United States. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. 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 consolidated financial statements:

•revenue ~~recognition and deferred revenue;~~recognition;

•stock-based compensation;

•income taxes;

•business combinations; and

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

Revenue Recognition

~~The~~Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services over the term of the agreement. 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 ~~derives revenue from product revenue, consisting~~satisfies a performance obligation

Revenue-generating activities consist of subscription and support, ~~and~~ perpetual licenses, and professional services revenues. The Company recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists, delivery of the product or services has occurred, no Company obligations with regard to implementation considered essential to the functionality remain, the fee is fixed or determinable and collectability is probable.revenues within a single operating segment.

Subscription and Support ~~Revenue~~Revenues

~~The Company derives~~Our software solutions are available for use as hosted application arrangements under subscription ~~revenues by providing its software-as-a-service solution~~fee agreements without licensing perpetual rights to ~~customers in which~~the software. Subscription fees from these applications are recognized over time on a ratable basis over the customer ~~does not~~agreement term beginning on the date the our solution is made available to the customer. As our customers have ~~the right~~access to ~~take possession of the software, but can~~ use ~~the software for the contracted term. The Company accounts for these arrangements as service contracts. Subscription and support revenues are recognized on a straight-line basis~~our solutions over the term of the ~~contractual arrangement, typically one~~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 ~~three years.~~3 years in length. Amounts that have been invoiced ~~and that are due~~ are recorded in accounts receivable and deferred ~~revenue~~revenues or ~~revenue,~~revenues, depending on ~~when~~

whether the ~~criteria for~~ revenue recognition ~~are~~criteria have been met. ~~Revenue from usage-based services~~Additional fees for monthly usage above the levels included in the standard subscription fee are recognized inas revenue at the end of each month ~~in which such usage~~and is ~~reported.~~

The Company may provide hosting services to customers who purchased a perpetual license. Such hosting services are recognized ratably over the applicable term of the arrangement. These hosting arrangements are typically for a period of one to three years.

Software maintenance agreements provide technical support and the right to unspecified upgrades on an if-and-when-available basis. Revenue from maintenance agreements is recognized ratably over the life of the related agreement, which is typically one year.invoiced concurrently.

Perpetual License ~~Revenue~~Revenues

~~The Company~~We also records revenue from the sales of proprietary software products under perpetual licenses. ~~For license agreements~~Revenue from distinct on-premises licenses is recognized upfront at the point in ~~which customer acceptance~~time when the software is ~~a condition~~made available to ~~earning~~ the ~~license fees, revenue is not recognized until acceptance occurs. The Company’s~~customer. Our products do not require significant customization. Perpetual licenses are sold along with software maintenance and, sometimes, hosting agreements. When vendor specific objective evidence (VSOE) of fair value exists for the software maintenance and hosting agreement, the perpetual license is recognized under the residual method whereby the fair value of the undelivered software maintenance and hosting agreement is deferred and the remaining contract value is recognized immediately for the delivered perpetual license. When VSOE of fair value does not exist for the either the software maintenance or hosting agreement, the entire contract value is recognized ratably over the underlying software maintenance and/or hosting period.

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~~Our implementation and configuration services do not involve significant customization of the software and are not considered essential to the functionality. Revenues from professional services are recognized over time as such services are ~~provided when VSOE of fair value exists~~performed. Revenues for ~~such services and all undelivered elements such as software maintenance and/or hosting agreements. VSOE of fair value for services is based upon the~~fixed price ~~charged when these~~ services are ~~sold separately, and is typically an hourly rate. When VSOE of fair value does not exist~~generally recognized over time applying input methods to estimate progress to completion. Revenues for ~~software maintenance and/or hosting agreements, revenues from professional~~consumption-based services are ~~recognized ratably over the underlying software maintenance and/or hosting period.~~

Professional services, when sold with the subscription arrangements, are accounted for separately when these services have value to the customer on a standalone basis and there is objective and reliable evidence of fair value for each deliverable. When accounted for separately, revenues aregenerally recognized as the services are ~~rendered~~performed.

Messaging-related Revenue

We recognize subscription revenue for ~~time~~our digital engagement application which provides short code connectivity for its two-way SMS programs and ~~material contracts. For those arrangements where~~campaigns. We evaluate whether it is appropriate to recognize revenue based on the ~~elements do~~gross amount billed to its customers for these services. Since the we are primarily obligated in these transactions, have 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. While none of the factors individually are considered presumptive or determinative, in reaching conclusions on gross versus net revenue recognition, we place the most weight on the analysis of whether or not ~~qualify as~~we are the primary obligor in the arrangement.

Significant Judgments

Performance Obligations and Standalone Selling Price

A performance obligation is a ~~separate~~promise in a contract to transfer a distinct good or service to the customer and is the unit of ~~accounting, the Company recognizes professional~~accounting. Determining whether products and services ~~ratably over the contractual life of the related application subscription arrangement. Currently, all professional services~~ are considered distinct performance obligations that should be accounted for separately ~~as all~~versus together may require significant judgment. We have ~~value~~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, we account for 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 ~~customer on~~relative standalone selling price, or 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 ~~standalone basis.~~

~~Multiple Element Arrangements~~

~~The Company enters into arrangements~~particular performance obligation has highly variable and uncertain SSP and is bundled with ~~multiple-element~~other performance obligations that ~~generally include subscriptions and implementation and other professional services.~~

~~For multiple-element arrangements, arrangement consideration~~have observable SSP. A contract's transaction price is allocated to ~~deliverables~~each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. We determine the SSP based on their relative selling price. In order to treat deliverables in a multiple-element arrangement as separate units of accounting, the elements must have standalone value upon delivery. If the elements have standalone value upon delivery, each element must be accounted for separately. The Company’s subscription services have standalone value as such services are often sold separately. In determining whether implementationour overall pricing objectives, taking into consideration market conditions and other ~~professional services have standalone value apart from the subscription services, the Company considers various~~ factors, including the ~~availability~~value of the services from other vendors. The Company has concluded that the implementation services included in multiple-element arrangements have standalone value. As a result, when implementation and other professional services are sold in a multiple-element arrangement, the arrangement consideration is allocated to the identified separate units based on a relative selling price hierarchy. The selling price for a element is based on its VSOE of selling price, if available, third-party evidence of selling price, or TPE, if VSOE is not available or best

estimate of selling price, or BESP, if neither VSOE nor TPE is available. The Company has not established VSOE for its subscription services due to lack of pricing consistency, the introduction of new services and other factors. The Company has determined that TPE is not a practical alternative due to differences in its service offerings compared to other parties and the availability of relevant third-party pricing information. Accordingly, the Company uses BESP to determine the relative selling price.

The Company determined BESP by considering its overall pricing objectives and market conditions. Significant pricing practices taken into consideration include the Company’s discounting practices, the size and volume of its transactions, customer characteristics, price lists, go-to-market strategy,our contracts, historical standalone sales, customer demographics, geographic locations, and ~~agreement prices. As~~ the ~~Company’s go-to-market strategies evolve,~~number and types of users within our contracts.

Other Considerations

We evaluate whether we are the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis) for vendor reseller agreements. Generally, we report revenues from these types of contracts on a gross basis, meaning the amounts billed to customers are recorded as revenues, and expenses incurred are recorded as cost of revenues. Where we are the principal, it ~~may modify~~first obtains control of the inputs to the specific good or service and directs their use to create the combined output. We control is evidenced by its ~~pricing practices~~involvement in the ~~future,~~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. Revenues provided from agreements in which ~~could result in changes in relative selling prices,~~we are an agent are immaterial.

Payment terms and conditions vary by contract type, although terms generally include ~~both VSOE and BESP.~~

~~Deferred Revenue~~

~~Deferred revenue represents either customer advance payments or billings for which~~a requirement of payment within 30 to 60 days. In instances where the ~~aforementioned~~timing of revenue recognition ~~criteria~~differs from the timing of invoicing, we have determined our contracts generally do not ~~yet been met.~~

~~Stock-Based Compensation~~

~~Stock options awarded~~include a significant financing component. The primary purpose of our invoicing terms is to ~~employees~~provide customers with simplified and ~~directors are measured~~predictable ways of purchasing our products and services, not to receive financing from our customers or to provide customers with financing. Example includes invoicing at ~~fair value at each grant date. The Company accounts for stock-based compensation in accordance~~the beginning of a subscription term with authoritative accounting principles which require all share-based compensation to employees, including grants of employee stock options, to be recognized in the financial statements based on their estimated fair value. Compensation expense is determined under the fair value method using the Black-Scholes option pricing model andrevenue recognized ratably over the contract period.

Contract Balances

The timing of revenue recognition, billings and cash collections can result in billed accounts receivable, unbilled receivables (contract assets), and deferred revenues (contract liabilities). Billings scheduled to occur after the performance obligation has been satisfied and revenue recognition has occurred result in contract assets. Contract assets that are expected to be billed during the succeeding twelve-month period are recorded in 'Prepaid and other current assets', and the

remaining portion is recorded in 'Other assets' on the accompanying consolidated balance sheets at the end of each reporting period. A contract liability results when we receive prepayments or deposits from customers in advance for implementation, maintenance and other services, as well as initial subscription fees. Customer prepayments are generally applied against invoices issued to customers when services are performed and billed. We recognize contract liabilities as revenues upon satisfaction of the underlying performance obligations. Contract liabilities that are expected to be recognized as revenues during the succeeding twelve-month period are recorded in 'Deferred revenue' and the remaining portion is recorded in 'Deferred revenue noncurrent' on the accompanying consolidated balance sheets at the end of each reporting period.

Stock-Based Compensation

We measure all share-based payments, including grants of options to purchase common stock and the issuance of restricted stock or restricted stock units to employees, service providers and board members, using a fair-value based method. We record forfeitures as they occur. The cost of services received from employees and non-employees in exchange for awards ~~vest.~~ of equity instruments is recognized in the consolidated statement of operations based on the estimated fair value of those awards on the grant date and amortized on a straight-line basis over the requisite service period. We use the Black-Scholes option-pricing model to determine the fair values of stock option awards. For restricted stock and restricted stock units, fair value is based on the closing price of our common stock on the grant date.

The Black-Scholes option pricing model used to compute share-based compensation expense requires extensive use of accounting judgment and financial estimates. Items requiring estimation include the expected term option holders will retain their vested stock options before exercising them, the estimated volatility of the Company’s common stock price over the expected term of each stock option, and the number of stock options that will be forfeited prior to the completion of their vesting requirements. Application of alternative assumptions could result in significantly different share-based compensation amounts being recorded in the financial statements. The following table summarizes the weighted-average grant-date fair value of options granted in 2018, 2017, ~~2016,~~ and ~~2015~~2016 and the assumptions used to develop their fair values. As there was no public market for its common stock prior to November 2014, the Company estimates the volatility of its common stock based on the volatility of publicly traded shares of comparable companies' common stock. The Company's decision to use the volatility of comparable stock was based upon ~~the Company's~~our assessment that this information is more representative of future stock price trends than ~~the Company's~~our historical volatility. The Company estimates the expected term using the simplified method, which calculates the expected term as the midpoint between the vesting date and the contractual termination date of each award. The dividend yield assumption is based on historical and expected future dividend payouts. The risk-free interest rate is based on observed market interest rates appropriate for the term of each options.


	Year Ended December 31,			Year Ended December 31,
	2017	2016	2015	2018	2017	2016
Weighted average grant-date fair value of options	$7.47	$3.23	$3.01	$11.42	$7.47	$3.23
Expected volatility	35.0%	42.5%	42.5% - 44.0%	33.4%	35.0%	42.5%
Risk-free interest rate	1.1% - 2.0%	1.2%	1.7% - 1.9%	2.8%	1.1% - 2.0%	1.2%
Expected life in years	5.00	5.93	5.93	5.00	5.00	5.93
Dividend yield	—	—	—	—	—	—

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities will be recognized in the period that includes the enactment date. A valuation allowance is established against the deferred tax assets to reduce their carrying value to an amount that is more likely than not to be realized.

The Company has adopted a permanent reinvestment position whereby foreign earnings for foreign subsidiaries are

expected to be reinvested and future earnings are not expected to be repatriated. As a result of this policy, no tax

liability has been accrued in anticipation of future dividends from foreign subsidiaries.

The Company accounts for uncertainty of income taxes based on a “more likely than not” threshold for the recognition and derecognition of tax positions, which includes the accounting for interest and penalties.

Business Combinations

We apply the provisions of ASC 805, Business Combinations, in accounting for our acquisitions which requires the acquisition purchase price to be allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition dates. The excess of the purchase price over these estimated fair values is recorded to goodwill.

Significant estimates and assumptions, including fair value estimates, are used to determine the fair value of assets acquired, liabilities assumed and contingent consideration transfered as well as the useful lives of long-lived assets acquired. During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill based on changes to our initial estimates and assumptions. Upon conclusion of the measurement period or final determination of the values of assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments are recorded to acquisition related expenses in our consolidated statement of operations.

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, use of established valuation methods. Customer relationships are valued using an income approach, which estimates fair value based on the earnings and cash flow capacity of the subject asset. The value of the marketing-related intangibles is determined using a relief-from-royalty method, which estimates fair value based on the value the owner of the asset receives from not having to pay a royalty to use the asset. Developed technology is valued using a cost-to-recreate approach.

The purchase price transfered in our acquisitions often contain holdback and contingent consideration provisions. Holdbacks are subject to reduction for indemnification claims and are typically payable within 12 to 18 months of the acquisition date. Contingent consideration typically includes earnout payments payable within 12 to 18 months of the date of acquisition based on attainment of certain performance goals. Contingent consideration liabilities are recorded at fair value on the acquisition date and are remeasured periodically based on the then assessed fair value and adjusted if necessary. Holdback and contingent consideration liabilities are recorded in due to sellers in our consolidated balance sheet. Any changes in fair value of the contingent consideration subsequent to the measurement period are recorded to operating income (expense) in our statement of operations.

Goodwill and Other Intangibles

Goodwill arises from business combinations and is measured as the excess of the cost of the business acquired over the sum of the acquisition-date fair value of tangible and identifiable intangible assets acquired, less any liabilities assumed.

Goodwill is evaluated for impairment annually in October or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable. The events and circumstances considered by the Company include the business climate, legal factors, operating performance indicators and ~~competition.~~competition.The company adopted ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment during the first quarter of 2018 which eliminated step 2 from the goodwill impairment test.

The excess purchase price over the fair value of assets acquired is recorded as goodwill. We test goodwill for impairment annually in October, or whenever events or changes in circumstances indicate an impairment may have occurred. BecauseAs we operate ~~in a single~~as one reporting unit, the impairment test is performed at the consolidated entity level by comparing the estimated fair value of the ~~company~~Company to the its carrying ~~value of the company.~~value. We estimate the fair value of the reporting unit using a "step one" analysis using a fair-value-based approach based on the market capitalization or a discounted cash flow analysis of projected future resultshave elected to first assess qualitative factors to determine ifwhether it is more likely than not that the fair value of aour single reporting unit is less than its carrying ~~amount.~~ value. Based on the qualitative assessment, if it is determined that it is more likely than not that our fair value is less than its carrying value we would compare the carrying value of the Company's single reporting unit to its fair value and recognize any excess carrying value as an impairment loss.

Determining the fair value of goodwill is subjective in nature and often involves the use of estimates and assumptions including, without limitation, use of estimates of future prices and volumes for our products, capital needs, economic trends and other factors which are inherently difficult to forecast. If actual results, or the plans and estimates used in future impairment analyses are lower than the original estimates used to assess the recoverability of these assets, we could incur impairment charges in a future period. The annual impairment test was performed as of October 31, ~~2017.~~2018. No impairment of goodwill was identified during the years ended December 31, 2018, 2017, ~~2016,~~ or ~~2015.~~2016.

Identifiable intangible assets consist of customer relationships, marketing-related intangible assets and developed technology. Intangible assets with definite lives are amortized over their estimated useful lives on a straight-line basis. The straight-line method of amortization represents ~~the Company’s~~our best estimate of the distribution of the economic value of the identifiable intangible assets.

~~Intangible assets are reviewed for impairment whenever events or changes~~

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, refer to Note 2. Significant Accounting Policies to our consolidated financial statements included in ~~circumstances indicate the carrying amount~~Part II, Item 8, “Financial Statements and Supplementary Data” of intangible assets may not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable. The Company evaluates the recoverability of intangible assets by comparing their carrying amounts to the future net undiscounted cash flows expected to be generated by the intangible assets. If such intangible assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the intangible assets exceeds the fair value of the assets.

The Company determines fair value based on discounted cash flows using a discount rate commensurate with the risk inherent in the Company’s current business model for the specific intangible asset being valued. There were no such impairments during 2017, 2016, and 2015.

this Form 10-K.

Other Key Accounting Policies

We also have other key accounting policies, which involve the use of estimates, judgments, and assumptions that are significant to understanding our results. See Note 2 Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in this Annual Report. Of those policies, we believe that the accounting policies enumerated above involve the greatest degree of complexity and exercise of judgment by our management.

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.

Under Section 107(b) of the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We are choosing to “opt out” of such extended transition period, however, and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable. See Note 2 Summary of Significant Accounting Policies, of the Notes to Consolidated Financial Statement for more information.

Item 7A. 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 Wells Fargo, our lender under our loan 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.

Any draws under our loan and security agreements bear interest at a variable rate tied to the prime rate. As of December 31, 2018, we had a principal balance of $278.0 million under our U.S. Loan Agreement and $5.2 million under our Canadian Loan Agreement. As of December 31, 2017, we had a principal balance of $108.5 million under our U.S. Loan Agreement and $5.3 million under our Canadian Loan Agreement. AsBased on the principal balance outstanding on our Credit Facility as of December 31, ~~2016, we had~~2018, a ~~principal balance~~hypothetical change of ~~$43.8~~100 basis points would result in a maximum potential change to interest expense of $0.3 million ~~under our U.S. Loan Agreement and $5.6 million under our Canadian Loan Agreement.~~annually.

Foreign Currency Exchange Risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. In addition, we incur a portion of our operating expenses in foreign currencies, including 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. In addition, our customers are generally invoiced in the currency of the country in which they are located. We are exposed to foreign exchange rate fluctuations as the financial results of our international operations are translated from the local functional currency into U.S. dollars upon consolidation. A

decline in the U.S. dollar relative to foreign functional currencies would increase our non-U.S. revenue and improve our operating results. Conversely, if the U.S. dollar strengthens relative to foreign functional currencies, our revenue

and operating results would be adversely affected. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would have resulted in a change in revenue of ~~$2.1~~$3.2 million for the year ended December 31, ~~2017.~~2018. To date, we have not engaged in any hedging strategies. 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 a foreign currency denominated intercompany loan that was used to fund the acquisition of a foreign subsidiary during the year ended December 31, 2018. Due to the long-term nature of the loan, 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.


Item 8.	Financial Statements and Supplementary Data

UPLAND SOFTWARE, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




Report of Independent Registered Public Accounting Firm	7268
Consolidated Balance Sheets	7369
Consolidated Statements of Operations	7470
Consolidated Statements of Comprehensive Loss	7571
Consolidated Statements of Stockholders' Equity	7672
Consolidated Statements of Cash Flows	7773
Notes to Consolidated Financial Statements	7874

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Upland Software, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Upland Software, Inc. (the “Company“) as of December 31, ~~2017~~2018 and ~~2016,~~2017, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows, for each of the three years in the period ended December 31, ~~2017,~~2018, and the related notes (collectively referred to as the ~~“financial~~“consolidated financial statements“). In our opinion, the consolidated financial statements present fairly, in all material respects, the ~~consolidated~~ financial position of the Company as of December 31, 2018 and 2017, and ~~2016, and~~ the ~~consolidated~~ results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2017,~~2018, in conformity with U.S. generally accepted accounting principles.

Adoption of ASU No. 2014-09

As discussed in Note 12 to the consolidated financial statements, the Company changed its method for accounting for revenue in 2018 due to the adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the ~~Company‘s~~Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ~~(“PCAOB“)~~(PCAOB) and are required to be independent with respect to the Company in accordance with the USU.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company‘s auditor since 2013.

~~/s/ Ernst & Young LLP~~

Austin, Texas

March ~~8, 2018~~15, 2019

Upland Software, Inc.

Consolidated Balance Sheets


	December 31,						December 31,
(in thousands, except share and per share amounts)	2017			2016			2018				2017
Assets
Current assets:
Cash and cash equivalents	$	22,326		$	28,758		$	16,738			$	22,326
Accounts receivable (net of allowance of $1,069 and $658 at December 31, 2017 and December 31, 2016, respectively)	26,504			15,254
Accounts receivable (net of allowance of $1,405 and $1,069 at December 31, 2018 and December 31, 2017, respectively)							40,841				26,504
Deferred commissions, current							2,633				—
Unbilled receivables							3,694				891
Prepaid and other	2,856			3,287			3,382				1,965
Total current assets	51,686			47,299			67,288				51,686
Canadian tax credits receivable	1,196			978			1,573				1,196
Property and equipment, net	2,927			4,356			2,827			��	2,927
Intangible assets, net	70,043			28,512			179,572				70,043
Goodwill	154,607			69,097			225,322				154,607
Deferred commissions, noncurrent							6,292				—
Other assets	800			346			324				800
Total assets	$	281,259		$	150,588		$	483,198			$	281,259
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	3,887		$	1,268		$	3,494			$	3,887
Accrued compensation	5,157			2,541			6,581				5,157
Accrued expenses and other	12,148			5,505
Accrued expenses and other current liabilities							16,666				12,148
Deferred revenue	43,807			23,552			57,626				43,807
Due to sellers	7,839			4,642			17,267				7,839
Current maturities of notes payable (includes unamortized discount of $699 and $329 at December 31, 2017 and December 31, 2016, respectively)	2,301			2,190
Current maturities of notes payable (includes unamortized discount of $1,109 and $699 at December 31, 2018 and December 31, 2017, respectively)							6,015				2,301
Total current liabilities	75,139			39,698			107,649				75,139
Canadian tax credit liability to sellers	—			361
Notes payable, less current maturities (includes unamortized discount of $1,969 and $1,113 at December 31, 2017 and December 31, 2016, respectively)	108,843			45,739
Deferred revenue	1,570			247
Notes payable, less current maturities (includes unamortized discount of $2,381 and $1,969 at December 31, 2018 and December 31, 2017, respectively)							273,713				108,843
Deferred revenue, noncurrent							578				1,570
Noncurrent deferred tax liability, net	3,262			3,404			13,311				3,262
Other long-term liabilities	1,030			2,126			640				1,030
Total liabilities	189,844			91,575			395,891				189,844
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of December 31, 2017; no shares issued and outstanding as of December 31, 2016, respectively	—			—
Common stock, $0.0001 par value; 50,000,000 shares authorized: 20,768,401 and 17,785,288 shares issued and outstanding as of December 31, 2017 and December 31, 2016, respectively	2			2
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of December 31, 2018; no shares issued and outstanding as of December 31, 2017, respectively							—				—
Common stock, $0.0001 par value; 50,000,000 shares authorized: 21,489,112 and 20,768,401 shares issued and outstanding as of December 31, 2018 and December 31, 2017, respectively)							2				2
Additional paid-in capital	174,944			124,566			180,481				174,944
Accumulated other comprehensive loss	(2,403		)	(3,152		)	(7,501		)		(2,403		)
Accumulated deficit	(81,128		)	(62,403		)	(85,675		)		(81,128		)
Total stockholders’ equity	91,415			59,013			87,307				91,415
Total liabilities and stockholders’ equity	$	281,259		$	150,588		$	483,198			$	281,259


Item 9B.	Other Information

~~None.~~On March 7, 2019, we issued a press release and filed a Current Report on Form 8-K setting forth our 2018 financial results. Subsequent to the issuance of that press release and the filing of the related Form 8-K, the Company and its external auditors determined that the $890,000 paid in respect of stamp tax obligations for the acquisitions of InterFAX, Rant & Rave and Adestra should be accounted for as acquisition-related costs rather than purchase consideration.

After giving effect to this change, the Company’s acquisition-related expense for the fourth quarter ended December 31, 2018 was $10.0 million instead of $9.1 million as initially reported. The Company’s acquisition-related expense for the year ended December 31, 2018 was $18.7 million instead of $17.8 million as initially reported. This change affects the Company’s GAAP net income for the quarter as reported in its March 7^th press release, which was $1.8 million instead of $2.7 million as initially reported, and the GAAP net income per diluted share for the quarter, which was $0.09 per diluted share instead of $0.13 as initially reported. GAAP net loss for the year was $10.8 million instead of $9.9 million as initially reported, and GAAP net loss per diluted share for the year, was $0.54 per diluted share instead of $0.50 as initially reported.

PART III


Item 10.	Directors, Officers and Corporate Governance

We have adopted a code of ethics that applies to the Company’s directors, officers and employees, including the Chief Executive Officer and the Chief Financial Officer and any other persons performing similar functions. The text of our code of ethics, “Code of Business Conduct and Ethics,” has been posted on our website at http://investor.uplandsoftware.com/code-of-conduct. We will provide a copy of the code of ethics without charge upon request to Corporate Secretary, Upland Software, Inc., 401 Congress Ave., Suite 1850, Austin, Texas 78701.

Additional information required by this item is incorporated by reference from our definitive proxy statement for the ~~2018~~2019 Annual Meeting of Stockholders under the headings “Proposal One: Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Directors and Corporate Governance” and “Executive Officers.”


Item 11.	Executive Compensation

The information required by this item is incorporated by reference from our definitive proxy statement for the ~~2018~~2019 Annual Meeting of Stockholders, under the headings “Executive Compensation” and “Directors and Corporate Governance-Compensation Committee Interlocks and Insider Participation.”

Amendments to Executive Employment Agreements

On March 13, 2019, the Company entered amendments to each of those certain Executive Employment Agreements dated as of March 28, 2017, by and between the Company and each of (i) John T. McDonald, the Company’s Chief Executive Officer and Chairman of the Board (filed as Exhibit 10.21 to the Company’s Annual Report on Form 10-K filed on March 30, 2017) (the “McDonald Employment Agreement Amendment”), (ii) Timothy W. Mattox, the Company’s Chief Operating Officer and President (filed as Exhibit 10.22 to the Company’s Annual Report on Form 10-K filed on March 30, 2017) (the “Mattox Employment Agreement Amendment”) and (iii) Michael D. Hill, the Company’s Chief Financial Officer, Secretary and Treasurer (filed as Exhibit 10.23 to the Company’s Annual Report on Form 10-K filed on March 30, 2017) (the “Hill Employment Agreement Amendment” and together with the McDonald Employment Agreement Amendment and the Mattox Employment Agreement Amendment, the “Employment Agreement Amendments”).

The McDonald Employment Agreement Amendment increases Mr. McDonalds’s target bonus from 100 to 200 percent of Mr. McDonald’s base salary, with 75% of his bonus attributable to the Company’s achievement of its merger and acquisition objectives and 25% of his bonus attributable to the Company’s achievement of its corporate and financial objectives. The Mattox Employment Agreement Amendment increases Mr. Mattox’s target bonus from

100 to 150 percent of Mr. Mattox’s base salary, with 50% of his bonus attributable to the Company’s achievement of its merger and acquisition objectives and 50% of his bonus attributable to the Company’s achievement of its corporate and financial objectives. The Hill Employment Agreement Amendment increases Mr. Hill’s target bonus from 100 to 125 percent of Mr. Hill’s base salary, with 50% of his bonus attributable to the Company’s achievement of its merger and acquisition objectives and 50% of his bonus attributable to the Company’s achievement of its corporate and financial objectives.

The foregoing description of the Employment Agreement Amendments is not complete and is qualified in its entirety by reference to the complete text of the McDonald Employment Agreement Amendment, the Mattox Employment Agreement Amendment and the Hill Employment Agreement Amendment, copies of which are filed as Exhibit 10.23, 10.24 and 10.25, respectively to this Annual Report on Form 10-K and incorporated herein by reference.


Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is incorporated by reference from our definitive proxy statement for the ~~2018~~2019 Annual Meeting of Stockholders under the headings “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management.”


Item 13.	Certain Relationships, and Related Transactions, and Director Independence

The information required by this item is incorporated by reference from our definitive proxy statement for the ~~2018~~2019 Annual Meeting of Stockholders under the headings “Certain Relationships and Related Party Transactions” and “Directors and Corporate Governance-Director Independence.”


Item 14.	Principal Accounting Fees and Services

The information required by this item is incorporated by reference from our definitive proxy statement for the ~~2018~~2019 Annual Meeting of Stockholders under the heading “Proposal Two: Ratification of Selection of Independent Registered Public Accounting Firm.”

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) Financial Statements

The financial statements filed as part of this Annual Report on Form 10-K are listed on the ~~"Index~~“Index to Consolidated Financial ~~Statements"~~Statements” included in Item 8 herein.

(b) Exhibits

See Exhibit Index at the end of this Annual Report on Form 10-K, which is incorporated by reference.

Item 16. Form 10-K Summary

Not applicable.

Schedule II-Valuation and Qualifying Accounts

This schedule has been omitted as the required information has been included in the notes to the consolidated financial statements.

EXHIBIT INDEX

Incorporated by Reference

Exhibit
No.

Description of Exhibit

Form

File No.

Exhibit

Filing Date

Description of Exhibit

Form

File No.

Exhibit

Filing Date

2.1

Agreement and Plan of Merger by and among the Registrant, Steering Wheel Acquisition Corp., PowerSteering Software, Inc. and Michael Pehl, as Stockholder representative, dated February 3, 2012

S-1

333-198574

2.1

September 4, 2014

Agreement and Plan of Merger by and among the Registrant, Steering Wheel Acquisition Corp., PowerSteering Software, Inc. and Michael Pehl, as Stockholder representative, dated February 3, 2012

S-1

333-198574

2.1

September 4, 2014

2.2

Stock Purchase Agreement by and among the Registrant, Tenrox Inc., the stockholders named therein and Novacap II, L.P. and Aramazd Israilian, as representatives, dated February 10, 2012

S-1

333-198574

2.2

September 4, 2014

Stock Purchase Agreement by and among the Registrant, Tenrox Inc., the stockholders named therein and Novacap II, L.P. and Aramazd Israilian, as representatives, dated February 10, 2012

S-1

333-198574

2.2

September 4, 2014

2.3

Membership Interest Purchase Agreement by and among the Registrant, LMR Solutions, LLC, Joseph Larscheid and Cheryl Larscheid, dated November 13, 2012

S-1

333-198574

2.3

September 4, 2014

Membership Interest Purchase Agreement by and among the Registrant, LMR Solutions, LLC, Joseph Larscheid and Cheryl Larscheid, dated November 13, 2012

S-1

333-198574

2.3

September 4, 2014

2.4

Stock Purchase Agreement by and among the Registrant, Marex Group Inc., FileBound Solutions, Inc., the Selling Stockholders (as defined therein) and Rex Lamb, as representative of the Selling Stockholders, dated May 16, 2013

S-1

333-198574

2.4

September 4, 2014

S-1

333-198574

2.4

September 4, 2014

2.5

Membership Interest Purchase Agreement by and among the Registrant, Upland Software, Inc., ComSci, LLC and Robert Svec, dated November 7, 2013

S-1

333-198574

2.5

September 4, 2014

Membership Interest Purchase Agreement by and among the Registrant, Upland Software, Inc., ComSci, LLC and Robert Svec, dated November 7, 2013

S-1

333-198574

2.5

September 4, 2014

2.6

Stock Purchase Agreement by and among the Registrant, Clickability, Inc. and Limelight Networks, Inc. dated December 23, 2013

S-1

333-198574

2.6

September 4, 2014

Stock Purchase Agreement by and among the Registrant, Clickability, Inc. and Limelight Networks, Inc. dated December 23, 2013

S-1

333-198574

2.6

September 4, 2014

2.7

Agreement and Plan of Merger by and among Upland Software, Inc., Qvidian Corporation, Quest Acquisition Corporation I and Christian Meininger, as Securityholder Representative, dated as of November 16, 2017

8-K

001-36720

10.1

November 16, 2017

8-K

001-36720

10.1

November 16, 2017

2.8

Share Purchase Agreement by and among Powersteering Software Limited, Upland Software, Inc., Nigel Shanahan, Erica Shanahan and other sellers, dated as of October 3, 2018

8-K

001-36720

10.1

October 3, 2018

3.1

Amended and Restated Certificate of Incorporation, as currently in effect

10-K

001-36720

3.1

March 30, 2016

Amended and Restated Certificate of Incorporation, as currently in effect

10-K

001-36720

3.1

March 30, 2016

3.2

Amended and Restated Bylaws, as currently in effect

10-K

001-36720

3.2

March 30, 2016

Amended and Restated Bylaws, as currently in effect

10-K

001-36720

3.2

March 30, 2016

4.1

Amended and Restated Investors’ Rights Agreement among the Registrant and certain stockholders, dated December 20, 2013

S-1

333-198574

4.1

September 4, 2014

Amended and Restated Investors’ Rights Agreement among the Registrant and certain stockholders, dated December 20, 2013

S-1

333-198574

4.1

September 4, 2014

10.1+

Form of Indemnification Agreement for directors and officers

S-1

333-198574

10.2

October 27, 2014

Form of Indemnification Agreement for directors and officers

S-1

333-198574

10.2

October 27, 2014

10.2+

Amended and Restated 2010 Stock Plan, as amended September 2, 2014

S-1

333-198574

10.3.1

September 4, 2014

Amended and Restated 2010 Stock Plan, as amended September 2, 2014

S-1

333-198574

10.3.1

September 4, 2014

10.3+

Form of Stock Option Agreement under Amended and Restated 2010 Stock Plan (Standard)

S-1

333-198574

10.4

September 4, 2014

Form of Stock Option Agreement under Amended and Restated 2010 Stock Plan (Standard)

S-1

333-198574

10.4

September 4, 2014

10.3.1+

Form of Stock Option Agreement under Amended and Restated 2010 Stock Plan (Former ComSci, LLC Employees)

S-1

333-198574

10.4.1

September 4, 2014

Form of Stock Option Agreement under Amended and Restated 2010 Stock Plan (Former ComSci, LLC Employees)

S-1

333-198574

10.4.1

September 4, 2014

10.3.2+

Form of Stock Option Agreement under Amended and Restated 2010 Stock Plan (Executive)

S-1

333-198574

10.4.2

September 4, 2014

Form of Stock Option Agreement under Amended and Restated 2010 Stock Plan (Executive)

S-1

333-198574

10.4.2

September 4, 2014

10.3.3+

Form of Amendment to Stock Option Agreement under Amended and Restated 2010 Stock Plan with Certain Executives

S-1

333-198574

10.4.3

September 4, 2014

Form of Amendment to Stock Option Agreement under Amended and Restated 2010 Stock Plan with Certain Executives

S-1

333-198574

10.4.3

September 4, 2014

10.4+

Form of Restricted Stock Purchase Agreement under Amended and Restated 2010 Stock Plan

S-1

333-198574

10.5

September 4, 2014

Form of Restricted Stock Purchase Agreement under Amended and Restated 2010 Stock Plan

S-1

333-198574

10.5

September 4, 2014

10.4.1+

Form of Amendment to Restricted Stock Purchase Agreement under Amended and Restated 2010 Stock Plan

S-1

333-198574

10.5.1

September 4, 2014

10.5+

2014 Equity Incentive Plan

S-1

333-198574

10.6

October 27, 2014


		Incorporated by Reference					Incorporated by Reference
10.4.1+						Form of Amendment to Restricted Stock Purchase Agreement under Amended and Restated 2010 Stock Plan	S-1	333-198574	10.5.1	September 4, 2014
10.5+						2014 Equity Incentive Plan	S-1	333-198574	10.6	October 27, 2014
10.6+	Form of Stock Option Award Agreement under 2014 Equity Incentive Plan	S-1	333-198574	10.7	October 27, 2014	Form of Stock Option Award Agreement under 2014 Equity Incentive Plan	S-1	333-198574	10.7	October 27, 2014
10.6.1+	Form of Stock Option Award Agreement under 2014 Equity Incentive Plan (Executive)	S-1	333-198574	10.7.1	October 27, 2014	Form of Stock Option Award Agreement under 2014 Equity Incentive Plan (Executive)	S-1	333-198574	10.7.1	October 27, 2014
10.7+	Form of Restricted Stock Purchase Agreement under 2014 Equity Incentive Plan	S-1	333-198574	10.8	October 27, 2014	Form of Restricted Stock Purchase Agreement under 2014 Equity Incentive Plan	S-1	333-198574	10.8	October 27, 2014
10.7.1+	Form of Restricted Stock Purchase Agreement under 2014 Equity Incentive Plan (Executive)	S-1	333-198574	10.8.1	October 27, 2014	Form of Restricted Stock Purchase Agreement under 2014 Equity Incentive Plan (Executive)	S-1	333-198574	10.8.1	October 27, 2014
10.8+	Form of Restricted Stock Unit Award Agreement under 2014 Equity Incentive Plan	S-1	333-198574	10.9	October 27, 2014	Form of Restricted Stock Unit Award Agreement under 2014 Equity Incentive Plan	S-1	333-198574	10.9	October 27, 2014
10.8.1+	Form of Restricted Stock Unit Award Agreement under 2014 Equity Incentive Plan (Executive)	S-1	333-198574	10.9.1	October 27, 2014	Form of Restricted Stock Unit Award Agreement under 2014 Equity Incentive Plan (Executive)	S-1	333-198574	10.9.1	October 27, 2014
10.9+	Employment Agreement between the Registrant and John T. McDonald, dated May 9, 2014	S-1	333-198574	10.12	September 4, 2014	Employment Agreement between the Registrant and John T. McDonald, dated May 9, 2014	S-1	333-198574	10.12	September 4, 2014
10.10+	Offer of Employment between the Registrant and Timothy Mattox, dated July 7, 2014	10-K	001-36720	10.13	March 31, 2015	Offer of Employment between the Registrant and Timothy Mattox, dated July 7, 2014	10-K	001-36720	10.13	March 31, 2015
10.11	Office Lease between the Registrant and TPG-401 Congress LLC, dated February 27, 2014	S-1	333-198574	10.17	September 4, 2014	Office Lease between the Registrant and TPG-401 Congress LLC, dated February 27, 2014	S-1	333-198574	10.17	September 4, 2014
10.11.1	First Amendment to Office Lease between Registrant and TPG-401 Congress LLC	S-1	333-198574	10.17.1	September 4, 2014	First Amendment to Office Lease between Registrant and TPG-401 Congress LLC	S-1	333-198574	10.17.1	September 4, 2014
10.11.2*						Second Amendment to Office Lease between Registrant and CSHV-401 Congress LLC
10.12	Lease Agreement between Tenrox Inc. and A.R.E. Quebec, dated November 5, 2012, as amended	S-1	333-198574	10.18	September 4, 2014	Lease Agreement between Tenrox Inc. and A.R.E. Quebec, dated November 5, 2012, as amended	S-1	333-198574	10.18	September 4, 2014
10.13	Sublease Agreement between Marex Properties, LLC and Marex Group Inc., dated May 10, 2013	S-1	333-198574	10.19	September 4, 2014	Sublease Agreement between Marex Properties, LLC and Marex Group Inc., dated May 10, 2013	S-1	333-198574	10.19	September 4, 2014
10.14	Amended and Restated Technology Services Agreement between the Registrant and DevFactory FZ-LLC, dated January 1, 2014	S-1	333-198574	10.37	October 27, 2014	Amended and Restated Technology Services Agreement between the Registrant and DevFactory FZ-LLC, dated January 1, 2014	S-1	333-198574	10.37	October 27, 2014
10.14.1	Second Amended and Restated Technology Services Agreement between the Registrant and DevFactory FZ-LLC, dated January 1, 2017	10-K	001-36720	10.18.1	March 30, 2017	Second Amended and Restated Technology Services Agreement between the Registrant and DevFactory FZ-LLC, dated January 1, 2017	10-K	001-36720	10.18.1	March 30, 2017
10.15						Stock Purchase Agreement between the Registrant and DevFactory FZ-LLC, dated January 27, 2014	S-1	333-198574	10.39	September 4, 2014
10.16	Stock Purchase Agreement between the Registrant and DevFactory FZ-LLC, dated January 27, 2014	S-1	333-198574	10.39	September 4, 2014	Lease by and between Lincoln One, LLC and the Registrant dated June 19, 2015	8-K	001-36720	10.1	June 22, 2015
10.17	Lease by and between Lincoln One, LLC and the Registrant dated June 19, 2015	8-K	001-36720	10.1	June 22, 2015	Credit Agreement by and between the Registrant and Wells Fargo Finance, dated May 14, 2015	10-Q	001-36720	10.1	August 14, 2015
10.18	Credit Agreement by and between the Registrant and Wells Fargo Finance, dated May 14, 2015	10-Q	001-36720	10.1	August 14, 2015
10.18.1	First Amendment to Credit Agreement, among the Registrant, Wells Fargo Bank, N.A. and the other parties thereto, dated September 23, 2015.	10-K	001-36720	10.18.1	March 30, 2017
10.18.2	Second Amendment to Credit Agreement, among the Registrant, Wells Fargo Bank, N.A. and the other parties thereto, dated April 25, 2016.	10-K	001-36720	10.18.2	March 30, 2017
10.18.3	Third Amendment to Credit Agreement, among the Registrant, Wells Fargo Bank, N.A. and the other parties thereto, dated November 15, 2016.	10-K	001-36720	10.18.3	March 30, 2017
10.18.4	Fourth Amendment to Credit Agreement, among the Registrant, Wells Fargo Bank, N.A. and the other parties thereto, dated April 21, 2017	10-Q	001-36720	10.1	August 14, 2017
10.18.5	Fifth Amendment to Credit Agreement, among the Registrant, Wells Fargo Bank, N.A. and the other parties thereto, dated August 2, 2017	10-Q	001-36720	10.1	November 14, 2017
10.19	Guaranty and Security Agreement by and between the Registrant and Wells Fargo Capital Finance, dated May 14, 2015	10-Q	001-36720	10.2	August 14, 2015
10.17.1						First Amendment to Credit Agreement, among the Registrant, Wells Fargo Bank, N.A. and the other parties thereto, dated September 23, 2015.	10-K	001-36720	10.18.1	March 30, 2017
10.17.2						Second Amendment to Credit Agreement, among the Registrant, Wells Fargo Bank, N.A. and the other parties thereto, dated April 25, 2016.	10-K	001-36720	10.18.2	March 30, 2017
10.17.3						Third Amendment to Credit Agreement, among the Registrant, Wells Fargo Bank, N.A. and the other parties thereto, dated November 15, 2016.	10-K	001-36720	10.18.3	March 30, 2017
10.17.4						Fourth Amendment to Credit Agreement, among the Registrant, Wells Fargo Bank, N.A. and the other parties thereto, dated April 21, 2017	10-Q	001-36720	10.1	August 14, 2017



Delaware	27-2992077
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)



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



Large accelerated filer	¨	Accelerated filer	x

Non-accelerated filer	¨ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	¨

		Emerging growth company	x


Contractual Obligations	Payment Due by Period										Payment Due by Period
	Total		Less than 1 Year		1-3 Years		>3-5 Years		More Than 5 Years		Total		Less than 1 Year		1-3 Years		>3-5 Years		More Than 5 Years
Debt Obligations(1)	$	113,813	$	3,000	$	15,813	$	95,000	$	—	$	283,218	$	7,125	$	23,156	$	252,937	$	—
Interest on Debt Obligations ⁽²⁾											$	61,915	$	18,045	$	34,474	$	9,396	$	—
Capital Lease Obligations	$	1,844	$	1,150	$	694	$	—	$	—	$	613	$	605	$	8	$	—	$	—
Operating Lease Obligations	$	9,105	$	3,103	$	5,994	$	8	$	—
Purchase Commitments	$	3,238	$	3,238	$	—	$	—	$	—
Operating Lease Obligations ⁽³⁾											$	6,483	$	2,719	$	1,989	$	1,073	$	702
Purchase Commitments ⁽⁴⁾											$	8,298	$	6,273	$	2,025	$	—	$	—
Total	$	128,000	$	10,491	$	22,501	$	95,008	$	—	$	360,527	$	34,767	$	61,652	$	263,406	$	702



PART I
Item 1.	Business	4
Item 1A.	Risk Factors	1611
Item 1B.	Unresolved Staff Comments	3530
Item 2.	Properties	3531
Item 3.	Legal Proceedings	3631
Item 4.	Mine Safety Disclosures	3631

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3732
Item 6.	Selected Financial Data	3833
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4237
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	6965
Item 8.	Financial Statements and Supplementary Data	7167
	Report of Independent Registered Public Accounting Firm	7268
	Consolidated Financial Statements	7369
	Consolidated Balance Sheets	7369
	Consolidated Statements of Operations	7470
	Consolidated Statements of Comprehensive Loss	7571
	Consolidated Statements of Common Stockholders' Equity (Deficit)	7672
	Consolidated Statements of Cash Flows	7773
	Notes to the Consolidated Financial Statements	7874
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	~~108~~109
Item 9A.	Controls and Procedures	~~108~~109
Item 9B.	Other Information	~~108~~110

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	~~109~~110
Item 11.	Executive Compensation	~~109~~110
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~109~~111
Item 13.	Certain Relationships and Related Transactions and Director Independence
Item 14.	Principal Accountant Fees and Services	~~109~~111

PART IV
Item 15.	Exhibits and Financial Statement Schedules	~~109~~111
Item 16.	Form 10-K Summary	111
SIGNATURES		~~114~~116



	2017
Year Ended December 31, 2017	Low	High
Fourth quarter	$20.30	$24.62
Third Quarter	$19.82	$25.33
Second Quarter	$15.54	$23.95
First Quarter	$8.90	$15.89



	2016
Year Ended December 31, 2016	Low	High
Fourth quarter	$7.85	$9.74
Third Quarter	$7.44	$9.90
Second Quarter	$6.80	$7.77
First Quarter	$6.00	$7.19


~~(4)~~	~~Major Account. Upland defines major accounts as accounts with greater than or equal to $25,000 in annual recurring revenue.~~


(1)	Includes stock-based compensation. See 'Item 6. Selected Financial Data' herein for a detail of stock based compensation by operating expense line item.


(2)	Includes depreciation and amortization of $7,075,000, $5,416,000, and $4,503,000 in 2018, 2017, and ~~$3,916,000 in 2017,~~ 2016, ~~and 2015,~~ respectively.


(3)	See Note 8 Net Loss Per Share, of the Notes to Consolidated Financial Statements included elsewhere in this 10-K for a discussion and reconciliation of historical net loss attributable to common stockholders and weighted average shares outstanding for historical basic and diluted net loss per share calculations.


(1)	Future debt maturities of long-term debt exclude debt discounts and consist of obligations under our Credit Facility. See “Liquidity and Capital Resources” above for further discussion regarding our Credit Facility.


(2)	Future interest on debt obligations calculated using the interest rate effective as of December 31, 2018. To the extent interest rates change in future periods, our contractual obligations for interest payments will change. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” for further discussion.


(3)	We lease office equipment under capital leases that are substantially complete by the end of 2019.


(4)	We lease office space under operating leases that expire between 2019 and 2025. Operating lease obligations above do not include the impact of future rental income related to agreements we have entered into to sublet excess office space as a result of our transformation activities.


(in thousands)	Year Ended December 31,									Year Ended December 31,
	2017			2016			2015			2018			2017			2016
Net loss	$	(18,725	)	$	(13,513	)	$	(13,664	)	$	(10,839	)	$	(18,725	)	$	(13,513	)
Foreign currency translation adjustment	749			137			(1,573		)	(5,098		)	749			137
Comprehensive loss	$	(17,976	)	$	(13,376	)	$	(15,237	)	$	(15,937	)	$	(17,976	)	$	(13,376	)


(in thousands, except share amounts)	Common Stock			Preferred Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity			Common Stock			Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity			Shares	Amount		Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2015	15,746,288	$	2	—	$	—	$	112,447		$	(3,289	)	$	(48,890	)	$	60,270		15,746,288	$	2	$	112,447		$	(3,289	)	$	(48,890	)	$	60,270
Issuance of common stock in business combination	1,344,463	—		—	—		8,300			—			—			8,300			1,344,463	—		8,300			—			—			8,300
Issuance of stock under Company plans, net of shares withheld for tax	694,537	—		—	—		(514		)	—			—			(514		)	694,537	—		(514		)	—			—			(514		)
Stock-based compensation	—	—		—	—		4,333			—			—			4,333			—	—		4,333			—			—			4,333
Other comprehensive loss	—	—		—	—		—			137			—			137			—	—		—			137			—			137
Net loss	—	—		—	—		—			—			(13,513		)	(13,513		)	—	—		—			—			(13,513		)	(13,513		)
Balance at December 31, 2016	17,785,288	$	2	—	$	—	$	124,566		$	(3,152	)	$	(62,403	)	$	59,013		17,785,288	$	2	$	124,566		$	(3,152	)	$	(62,403	)	$	59,013
Issuance of stock under Company plans, net of shares withheld for tax	843,579			—	—		(2,163		)	—			—			(2,163		)	843,579	—		(2,163		)	—			—			(2,163		)
Issuance of stock, net of issuance costs	2,139,534			—	—		42,564			—			—			42,564			2,139,534	—		42,564			—			—			42,564
Stock-based compensation	—			—	—		9,977			—			—			9,977			—	—		9,977			—			—			9,977
Other comprehensive loss	—			—	—		—			749			—			749			—	—		—			749			—			749
Net loss	—			—	—		—			—			(18,725		)	(18,725		)	—	—		—			—			(18,725		)	(18,725		)
Balance at December 31, 2017	20,768,401	2		—	—		174,944			(2,403		)	(81,128		)	91,415			20,768,401	$	2	$	174,944		$	(2,403	)	$	(81,128	)	$	91,415
Issuance of common stock in business combination																			911	—		(61		)	—			—			(61		)
Issuance of stock under Company plans, net of shares withheld for tax																			719,800	—		(8,511		)	—			—			(8,511		)
Issuance of stock, net of issuance costs																			—	—		(21		)	—			—			(21		)
Stock-based compensation																			—	—		14,130			—			—			14,130
Cumulative ASC 606 adjustments																			—	—		—			—			6,292			6,292
Other comprehensive loss																			—	—		—			(5,098		)	—			(5,098		)
Net loss																			—	—		—			—			(10,839		)	(10,839		)
Balance at December 31, 2018																			21,489,112	$	2	$	180,481		$	(7,501	)	$	(85,675	)	$	87,307



Computer hardware and equipment	3 - 5 years
Purchased software and licenses	3 - 5 years
Furniture and fixtures	7 years
Leasehold improvements	Lesser of estimated useful life or lease term



	2018			2017
Revenue	$	167,450		$	118,696
Net loss⁽¹⁾	$	(14,086	)	$	(24,867	)


	Preliminary						Finalized																		Preliminary									Finalized
	Qvidian			Waterfall			RightAnswers			Omtool			API			LeadLander			HipCricket			Ultriva			Adestra			Rant & Rave			Interfax			RO Innovation			Qvidian			Waterfall			Right Answers			Omtool
Year Acquired	2017			2017			2017			2017			2016			2016			2016			2015			2018			2018			2018			2018			2017			2017			2017			2017

Cash	$	468		$	100		$	139		$	2,957		$	125		$	365		$	—		$	372		$	145		$	696		$	1,396		$	197		$	468		$	100		$	139		$	2,957
Accounts receivable	1,907			1,477			2,164			784			821			199			1,226			689			2,925			3,482			1,587			1,563			1,907			1,477			2,164			784
Other current assets	334			608			246			464			54			55			273			52			1,395			3,836			1,341			1,299			335			608			246			464
Property and equipment	108			23			408			58			68			5			—			16			796			131			286			15			108			23			408			58
Customer relationships	14,461			6,400			10,500			4,400			1,420			970			1,000			1,820			29,823			29,981			22,577			6,688			30,160			6,400			10,500			4,400
Trade name	319			110			180			170			40			70			70			140			992			1,099			649			111			227			110			180			170
Technology	5,622			2,800			2,300			3,180			810			1,410			900			960			6,696			6,565			5,236			1,670			5,739			2,800			2,300			3,180
Noncompetes																									—						—			1,148			—			—			—			—
Goodwill	36,261			18,565			15,680			14,081			3,420			13,104			8,531			4,739			26,363			32,575			13,832			7,568			29,199			18,575			15,680			14,081
Other assets	8			—			—			33			89			6			—			32			—			—			14			—			8			—			—			33
Total assets acquired	59,488			30,083			31,617			26,127			6,847			16,184			12,000			8,820			69,135			78,365			46,918			20,259			68,151			30,093			31,617			26,127
Accounts payable	(388		)	(605		)	(139		)	(219		)	(11		)	—			(44		)	(196		)	(543		)	(1,577		)	(737		)	(229		)	(388		)	(605		)	(139		)	(219		)
Accrued expense and other	(445		)	(1,126		)	(2,108		)	(915		)	(137		)	(254		)	—			(284		)	(1,916		)	(6,114		)	(2,817		)	(1,921		)	(403		)	(1,136		)	(2,108		)	(915		)
Deferred tax liabilities																									(5,680		)	(3,896		)	(3,364		)	(2,129		)	(7,971		)	—			—			—
Deferred revenue	(8,655		)	(1,220		)	(5,479		)	(2,779		)	(1,699		)	(910		)	(356		)	(760		)	(1,322		)	(2,019		)	—			(1,817		)	(9,389		)	(1,220		)	(5,479		)	(2,779		)
Total liabilities assumed	(9,488		)	(2,951		)	(7,726		)	(3,913		)	(1,847		)	(1,164		)	(400		)	(1,240		)	(9,461		)	(13,606		)	(6,918		)	(6,096		)	(18,151		)	(2,961		)	(7,726		)	(3,913		)
Total consideration	$	50,000		$	27,132		$	23,891		$	22,214		$	5,000		$	15,020		$	11,600		$	7,580		$	59,674		$	64,759		$	40,000		$	14,163		$	50,000		$	27,132		$	23,891		$	22,214


	Fair Value Measurements at December 31, 2017								Fair Value Measurements at December 31, 2018
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Liabilities:
Earnout consideration liability	$	—	$	—	$	3,576	$	3,576	$	—	$	—	$	1,396	$	1,396



~~Ending balance at December 31, 2016~~(1)	~~2,500~~
~~Additions - cash earnouts~~	~~5,598~~
~~Settlements - cash earnouts~~	~~(4,522~~	)
~~Ending balance at December 31, 2017~~	~~3,576~~	Recorded as a component of other operating income (expense) in the Company's statement of operations.



	Fair Value at December 31, 2018		Valuation Technique	Significant Unobservable Inputs
Contingent acquisition consideration: (Marketech and RO Innovation)	$	1,396	Binary option model	Expected future annual revenue streams and probability of achievement



	Fair Value at December 31, 2017		Valuation Technique	Significant Unobservable Inputs
Contingent acquisition consideration: (RightAnswers and Waterfall)	$	3,576	Binary option model	Expected future annual revenue streams and probability of achievement


Balance at December 31, 2015	47,422
Acquired in business combinations	25,037
Divestiture of business	(3,775		)
Adjustment due to prior year business combinations	57
Foreign currency translation adjustment	356
Balance at December 31, 2016	$	69,097		$	69,097
Acquired in business combinations	88,819			88,819
Adjustment due to prior year business combinations	17
Adjustment due to finalization of 2017 business combinations	(4,232		)
Adjustment related to prior year business combinations				17
Adjustment related to finalization of business combinations				(4,232		)
Foreign currency translation adjustment	906			906
Balance at December 31, 2017	$	154,607		$	154,607
Acquired in business combinations				70,139
Adjustment related to prior year business combinations				(7,051		)
Adjustment related to finalization of current year business combinations				8,685
Foreign currency translation adjustment				(1,058		)
Balance at December 31, 2018				$	225,322


	Estimated Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Estimated Useful Life (Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
December 31, 2017
December 31, 2018
Customer relationships	5-10	$	69,061	$	18,040	$	51,021	1-10	$	173,592	$	30,650	$	142,942
Trade name	1.5	3,431		2,900		531		1.5-10	6,113		3,334		2,779
Developed technology	4-7	29,308		10,817		18,491		4-7	48,943		16,049		32,894
Non-Compete Agreements								3	$	1,148	$	191	$	957
Total intangible assets		$	101,800	$	31,757	$	70,043		$	229,796	$	50,224	$	179,572


	Amortization Expense		Amortization Expense
Year ending December 31:
2018	12,847
2019	11,668		27,011
2020	10,605		24,912
2021	10,209		23,992
2022 and thereafter	24,714
2022			21,691
2023 and thereafter			81,966
Total	$	70,043	$	179,572


Balance at December 31, 2015	$	621
Additional based on tax positions related to the current year	—
Additions for tax positions of prior years	84
Reductions for tax positions of prior years	—
Settlements	—
Balance at December 31, 2016	$	705		$	705
Additional based on tax positions related to the current year	—			—
Additions for tax positions of prior years	—			—
Reductions for tax positions of prior years	(225		)	(225		)
Settlements	—			—
Balance at December 31, 2017	$	480		$	480
Additional based on tax positions related to the current year				—
Additions for tax positions of prior years				1,526
Reductions for tax positions of prior years				—
Settlements				—
Balance at December 31, 2018				$	2,006


	Capital Leases			Operating Leases		Purchase Commitments		Capital Leases			Operating Leases		Purchase Commitments
2018	$	1,150		$	3,103.00	$	3,238
2019	619			3,260.00		—		$	605		$	2,719	$	6,273
2020	75			1,969.00		—		8			1,269		1,350
2021	—			765.00		—		—			720		675
2022	—			8.00		—		—			584		—
2023								—			489		—
Thereafter	—			—		—		—			702		—
Total minimum lease payments	1,844			$	9,105	$	3,238	613			$	6,483	$	8,298
Less amount representing interest	(228		)					(81		)
Present value of capital lease obligations	1,616							532
Less current portion of capital lease obligations	(1,092		)					(544		)
Long-term capital lease obligations	$	524						$	(12	)


	Number of Options Outstanding		Weighted– Average Exercise Price		Weighted– Average Remaining Contractual Life (In Years)	Weighted- Average Fair Value per Share		Number of Options Outstanding		Weighted– Average Exercise Price		Weighted– Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2014	665,210		$	4.39	8.78	$	2.37
Options granted	420,616		6.93			6.93
Options exercised	(106,338	)	2.17			2.24
Options forfeited	(201,100	)	5.62			4.99
Outstanding at December 31, 2015	778,388		$	5.75	8.39	$	5.75
Outstanding at December 31, 2017								549,907		$	7.36
Options granted	137,586		7.74			3.23		4,378		33.39
Options exercised	(43,101	)	4.93			2.54		(145,313	)	6.12
Options forfeited	(75,251	)	7.01			3.69		—		—
Options expired	(37,903	)	4.94			4.90		(73	)	1.79
Outstanding at December 31, 2016	759,719		$	6.06	7.73	$	2.84
Options granted	44,514		22.23			7.47
Options exercised	(221,156	)	5.50			5.76
Options forfeited	(32,050	)	10.09			15.03
Options expired	(1,120	)	4.97			2.65
Outstanding at December 31, 2017	549,907		$	7.36	7.30	$	3.77

Options vested and expected to vest at December 31, 2015	769,142		$	5.72	8.37
Options vested and exercisable at December 31, 2015	244,631		$	3.78	6.91
Options vested and expected to vest at December 31, 2016	747,736		$	6.04	7.70
Options vested and exercisable at December 31, 2016	482,731		$	5.41	7.25
Options vested and expected to vest at December 31, 2017	545,122		$	7.31	7.28
Options vested and exercisable at December 31, 2017	470,368		$	6.46	7.10
Outstanding at December 31, 2018								408,899		$	8.09	6.53	$	7,835
Options vested and expected to vest at December 31, 2018								408,616		$	8.08	6.53	$	7,831
Options vested and exercisable at December 31, 2018								401,149		$	7.95	6.50	$	7,727


	Number of Restricted Shares Outstanding	Weighted-Average Remaining Vesting Term (Years)	Weighted-Average Grant Date Fair Value	Total Fair Value of Shares Vested During the Year	Number of Restricted Shares Outstanding	Weighted-Average Grant Date Fair Value
Unvested balances at December 31, 2015	513,943	2.4	$8.15
Unvested balances at December 31, 2017					1,047,480	$13.35
Awards granted	778,097		$7.13		840,241	$29.00
Awards vested	(385,895)		$7.72	$3,253,660	(873,706)	$16.18
Awards forfeited	(66,668)		$6.98		(17,001)	$21.04
Unvested balances at December 31, 2016	839,477	1.9	$7.55
Awards granted	855,665		$17.10
Awards vested	(588,214)		$10.78	$12,575,851
Awards forfeited	(59,448)		$10.89
Unvested balances at December 31, 2017	1,047,480	2.0	$13.35
Unvested balances at December 31, 2018					997,014	$23.93



	December 31,
	2018
Deferred commissions beginning balance	$	—
Adoption of ASC 606	6,517
Capitalized deferred commissions	4,775
Amortization of deferred commissions	(2,367		)
Deferred commissions ending balance	$	8,925



Balance Sheet	Balance at December 31, 2017			Adjustments Due to ASC 606		Balance at January 1, 2018
Assets
Deferred commissions, current	$	—		$	2,070	$	2,070
Deferred commissions, noncurrent	—			4,447		4,447

Liabilities
Deferred revenue (current)	43,807			225		44,032

Equity
Accumulated deficit	$	(81,128	)	$	6,292	$	(74,836	)



	As of December 31, 2018
Balance Sheet	As Reported			Balances Without Adoption of ASC 606			Effect of Change Higher/ (Lower)
Assets
Deferred commissions, current	$	2,633		$	—		$	2,633
Deferred commissions, noncurrent	6,292			—			6,292

Liabilities
Deferred revenue (current)	57,626			57,777			(151		)

Equity
Accumulated earnings (deficit)	$	(85,675	)	$	(89,464	)	$	3,789