Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20212022
OR
☐    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 001-36720
upld-20220630_g1.jpg
UPLAND SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
Delaware27-2992077
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
401 Congress Ave., Suite 1850
Austin, Texas 78701
(Address, including zip code, of registrant’s principal executive offices)
(512) 960-1010
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.0001 per shareUPLDThe Nasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x☒   No  ¨☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x☒   No  ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerx☒Accelerated filer¨☐
Non-accelerated filer¨☐(Do not check if a smaller reporting company)Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  x☒
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
As of July 30, 2021, 30,413,24629, 2022, 31,632,628 shares of the registrant’s Common Stock were outstanding. 

Table of Contents
Upland Software, Inc.
Table of Contents 
Page
FINANCIAL INFORMATION
Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 20212022 and December 31, 20202021
1
Condensed Consolidated Statements of Operations for the Three and Six months ended June 30, 20212022 and June 30, 20202021
2
Condensed Consolidated Statements of Comprehensive Loss for the Three and Six months ended June 30, 20212022 and June 30, 20202021
3
Condensed Consolidated Statements of Stockholders' Equity for the Three and Six months ended June 30, 20212022 and June 30, 20202021
4
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 20212022 and June 30, 20202021
6
Notes to Condensed Consolidated Financial Statements
7
Management’s Discussion and Analysis of Financial Condition and Results of Operations
925
Quantitative and Qualitative Disclosures About Market Risk
2643
Controls and Procedures
2744
OTHER INFORMATION
2845
Risk Factors
45
Exhibits
2846
2947
3048
 




Table of Contents
Item 1. Financial Statements
Upland Software, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except for share and per share information)
June 30, 2021December 31, 2020
(in thousands, except for share and per share information)(in thousands, except for share and per share information)June 30, 2022December 31, 2021
AssetsAssets(unaudited)Assets(unaudited)
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$176,539 $250,029 Cash and cash equivalents$138,284 $189,158 
Accounts receivable (net of allowance of $1,188 and $1,465 at June 30, 2021 and December 31, 2020, respectively)38,936 44,472 
Accounts receivable (net of allowance of $951 and $1,107 at June 30, 2022 and December 31, 2021, respectively)Accounts receivable (net of allowance of $951 and $1,107 at June 30, 2022 and December 31, 2021, respectively)35,120 50,499 
Deferred commissions, currentDeferred commissions, current7,878 5,784 Deferred commissions, current10,467 9,824 
Unbilled receivablesUnbilled receivables5,652 4,561 Unbilled receivables5,202 4,801 
Prepaid and other13,579 12,694 
Prepaid expenses and other current assetsPrepaid expenses and other current assets16,739 8,709 
Total current assetsTotal current assets242,584 317,540 Total current assets205,812 262,991 
Tax credits receivableTax credits receivable2,729 2,427 Tax credits receivable3,383 3,345 
Property and equipment, netProperty and equipment, net3,161 2,778 Property and equipment, net2,165 2,667 
Operating lease right-of-use assetOperating lease right-of-use asset6,740 10,124 Operating lease right-of-use asset6,566 6,454 
Intangible assets, netIntangible assets, net304,752 279,975 Intangible assets, net277,001 279,920 
GoodwillGoodwill470,182 383,598 Goodwill492,481 457,472 
Deferred commissions, noncurrentDeferred commissions, noncurrent14,444 12,962 Deferred commissions, noncurrent15,400 14,808 
Interest rate swap assetsInterest rate swap assets25,959 — 
Other assetsOther assets1,807 1,816 Other assets1,279 1,350 
Total assetsTotal assets$1,046,399 $1,011,220 Total assets$1,030,046 $1,029,007 
Liabilities and stockholders’ equityLiabilities and stockholders’ equityLiabilities and stockholders’ equity
Current liabilities:Current liabilities:Current liabilities:
Accounts payableAccounts payable$15,608 $5,395 Accounts payable$21,262 $20,362 
Accrued compensationAccrued compensation15,142 8,138 Accrued compensation12,841 9,829 
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities13,361 13,438 Accrued expenses and other current liabilities13,829 9,086 
Deferred revenueDeferred revenue95,245 87,552 Deferred revenue103,442 102,847 
Due to sellers11,143 416 
Liabilities due to sellers of businessesLiabilities due to sellers of businesses12,157 7,607 
Operating lease liabilities, currentOperating lease liabilities, current3,621 3,315 Operating lease liabilities, current3,840 3,546 
Current maturities of notes payable (includes unamortized discount of $2,247 and $2,234 at June 30, 2021 and December 31, 2020, respectively)3,153 3,166 
Current maturities of notes payable (includes unamortized discount of $2,233 and $2,233 at June 30, 2022 and December 31, 2021, respectively)Current maturities of notes payable (includes unamortized discount of $2,233 and $2,233 at June 30, 2022 and December 31, 2021, respectively)3,167 3,167 
Total current liabilitiesTotal current liabilities157,273 121,420 Total current liabilities170,538 156,444 
Notes payable, less current maturities (includes unamortized discount of $8,399 and $9,414 at June 30, 2021 and December 31, 2020, respectively)516,751 518,437 
Notes payable, less current maturities (includes unamortized discount of $6,192 and $7,287 at June 30, 2022 and December 31, 2021, respectively)Notes payable, less current maturities (includes unamortized discount of $6,192 and $7,287 at June 30, 2022 and December 31, 2021, respectively)513,558 515,163 
Deferred revenue, noncurrentDeferred revenue, noncurrent1,667 1,587 Deferred revenue, noncurrent3,967 2,058 
Operating lease liabilities, noncurrentOperating lease liabilities, noncurrent8,537 8,387 Operating lease liabilities, noncurrent6,369 6,773 
Noncurrent deferred tax liability, netNoncurrent deferred tax liability, net31,774 24,092 Noncurrent deferred tax liability, net22,678 22,793 
Interest rate swap liabilitiesInterest rate swap liabilities17,754 30,032 Interest rate swap liabilities— 8,409 
Other long-term liabilitiesOther long-term liabilities1,206 650 Other long-term liabilities1,006 1,079 
Total liabilitiesTotal liabilities734,962 704,605 Total liabilities718,116 712,719 
Stockholders’ equity:Stockholders’ equity:Stockholders’ equity:
Common stock, $0.0001 par value; 50,000,000 shares authorized: 30,413,246 and 29,987,114 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively)3 3 
Common stock, $0.0001 par value; 50,000,000 shares authorized: 31,632,628 and 31,096,548 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively)Common stock, $0.0001 par value; 50,000,000 shares authorized: 31,632,628 and 31,096,548 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively)3 3 
Additional paid-in capitalAdditional paid-in capital546,771 515,219 Additional paid-in capital594,080 568,384 
Accumulated other comprehensive lossAccumulated other comprehensive loss(13,238)(26,234)Accumulated other comprehensive loss(2,344)(11,514)
Accumulated deficitAccumulated deficit(222,099)(182,373)Accumulated deficit(279,809)(240,585)
Total stockholders’ equityTotal stockholders’ equity311,437 306,615 Total stockholders’ equity311,930 316,288 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$1,046,399 $1,011,220 Total liabilities and stockholders’ equity$1,030,046 $1,029,007 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Upland Software, Inc.
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except for share and per share information)
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Revenue:
Subscription and support$72,405 $67,699 $143,058 $131,590 
Perpetual license415 491 767 852 
Total product revenue72,820 68,190 143,825 132,442 
Professional services3,444 3,125 6,408 6,905 
Total revenue76,264 71,315 150,233 139,347 
Cost of revenue:
Subscription and support23,161 21,200 45,843 41,139 
Professional services and other1,851 2,472 3,596 4,734 
Total cost of revenue25,012 23,672 49,439 45,873 
Gross profit51,252 47,643 100,794 93,474 
Operating expenses:
Sales and marketing14,298 11,820 26,730 22,751 
Research and development11,113 10,294 22,053 19,412 
General and administrative19,192 17,655 43,561 34,331 
Depreciation and amortization10,278 9,037 20,021 18,308 
Acquisition-related expenses5,534 5,781 15,120 20,939 
Total operating expenses60,415 54,587 127,485 115,741 
Loss from operations(9,163)(6,944)(26,691)(22,267)
Other expense:
Interest expense, net(7,942)(7,873)(15,729)(15,516)
Other expense, net(399)(15)(162)(1,417)
Total other expense(8,341)(7,888)(15,891)(16,933)
Loss before benefit from (provision for) income taxes(17,504)(14,832)(42,582)(39,200)
Benefit from (provision for) income taxes(1,538)673 2,856 4,960 
Net loss$(19,042)$(14,159)$(39,726)$(34,240)
Net loss per common share:
Net loss per common share, basic and diluted$(0.63)$(0.57)$(1.32)$(1.37)
Weighted-average common shares outstanding, basic and diluted30,097,749 25,032,996 30,034,252 25,057,715 

 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Revenue:
Subscription and support$75,017 $72,405 $148,644 $143,058 
Perpetual license1,858 415 3,636 767 
Total product revenue76,875 72,820 152,280 143,825 
Professional services3,352 3,444 6,663 6,408 
Total revenue80,227 76,264 158,943 150,233 
Cost of revenue:
Subscription and support24,125 23,161 46,194 45,843 
Professional services and other2,428 1,851 5,114 3,596 
Total cost of revenue26,553 25,012 51,308 49,439 
Gross profit53,674 51,252 107,635 100,794 
Operating expenses:
Sales and marketing15,331 14,298 30,924 26,730 
Research and development11,676 11,113 23,743 22,053 
General and administrative21,828 19,192 41,442 43,561 
Depreciation and amortization10,802 10,278 21,853 20,021 
Acquisition-related expenses4,925 5,534 15,338 15,120 
Total operating expenses64,562 60,415 133,300 127,485 
Loss from operations(10,888)(9,163)(25,665)(26,691)
Other expense:
Interest expense, net(7,754)(7,942)(15,516)(15,729)
Other income (expense), net1,777 (399)1,359 (162)
Total other expense(5,977)(8,341)(14,157)(15,891)
Loss before benefit from (provision for) income taxes(16,865)(17,504)(39,822)(42,582)
Benefit from (provision for) income taxes472 (1,538)598 2,856 
Net loss$(16,393)$(19,042)$(39,224)$(39,726)
Net loss per common share:
Net loss per common share, basic and diluted$(0.52)$(0.63)$(1.25)$(1.32)
Weighted-average common shares outstanding, basic and diluted31,380,505 30,097,749 31,272,489 30,034,252 









The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
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Upland Software, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(unaudited)
(in thousands)
 Three Months Ended June 30,Six Months Ended June 30,
 2021202020212020
Net loss$(19,042)$(14,159)$(39,726)$(34,240)
Foreign currency translation adjustment1,324 1,219 (1,063)(2,240)
Unrealized translation gain (loss) on foreign currency denominated intercompany loans940 132 1,780 (7,181)
Unrealized gain (loss) on interest rate swaps(3,172)(3,655)12,279 (35,056)
Comprehensive loss$(19,950)$(16,463)$(26,730)$(78,717)



 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Net loss$(16,393)$(19,042)$(39,224)$(39,726)
Other comprehensive income (loss):
Foreign currency translation adjustment(17,356)1,324 (18,403)(1,063)
Unrealized translation gain (loss) on intercompany loans with foreign subsidiaries(5,503)940 (6,796)1,780 
Unrealized gain (loss) on interest rate swaps8,156 (3,172)34,369 12,279 
Other comprehensive income (loss):$(14,703)$(908)$9,170 $12,996 
Comprehensive loss$(31,096)$(19,950)$(30,054)$(26,730)









































The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
Table of Contents
Upland Software, Inc.
Condensed Consolidated StatementStatements of Stockholders’ Equity
(unaudited)
(in thousands, except share amounts)


Three Months Ended June 30, 2021Three Months Ended June 30, 2022
Common StockAdditional
Paid-In
Capital		Accumulated
Other
Comprehensive
Loss		Accumulated
Deficit		Total
Stockholders’
Equity		Common StockAdditional
Paid-In
Capital		Accumulated
Other
Comprehensive
Income (Loss)		Accumulated
Deficit		Total
Stockholders’
Equity
SharesAmount SharesAmount
Balance at March 31, 202130,091,665 $3 $533,044 $(12,330)$(203,057)$317,660 
Balance at March 31, 2022Balance at March 31, 202231,320,765 $3 $579,638 $12,359 $(263,416)$328,584 
Issuance of stock under Company plans, net of shares withheld for taxIssuance of stock under Company plans, net of shares withheld for tax321,581 — 177 — — 177 Issuance of stock under Company plans, net of shares withheld for tax311,863 — (435)— — (435)
Stock-based compensationStock-based compensation— — 13,550 — — 13,550 Stock-based compensation— — 14,877 — — 14,877 
Foreign currency translation adjustmentForeign currency translation adjustment— — — 1,324 — 1,324 Foreign currency translation adjustment— — — (17,356)— (17,356)
Unrealized translation gain on intercompany loans with foreign subsidiaries— — — 940 — 940 
Unrealized loss on interest rate swaps— — — (3,172)— (3,172)
Unrealized translation loss on foreign currency denominated intercompany loansUnrealized translation loss on foreign currency denominated intercompany loans— — — (5,503)— (5,503)
Unrealized gain on interest rate swapsUnrealized gain on interest rate swaps— — — 8,156 — 8,156 
Net lossNet loss— — — — (19,042)(19,042)Net loss— — — — (16,393)(16,393)
Balance at June 30, 202130,413,246 $3 $546,771 $(13,238)$(222,099)$311,437 
Balance at June 30, 2022Balance at June 30, 202231,632,628 $3 $594,080 $(2,344)$(279,809)$311,930 






Three Months Ended June 30, 2020
Common StockAdditional
Paid-In
Capital		Accumulated
Other
Comprehensive
Loss		Accumulated
Deficit		Total
Stockholders’
Equity
 SharesAmount
Balance at March 31, 202025,305,427 $3 $353,720 $(43,396)$(151,235)$159,092 
Issuance of stock under Company plans, net of shares withheld for tax60,308 — (1,372)— — (1,372)
Stock-based compensation— — 10,980 — — 10,980 
Foreign currency translation adjustment— — — 1,219 — 1,219 
Unrealized translation loss on intercompany loans with foreign subsidiaries— — — 132 — 132 
Unrealized loss on interest rate swaps— — — (3,655)— (3,655)
Net loss— — — — (14,159)(14,159)
Balance at June 30, 202025,365,735 $3 $363,328 $(45,700)$(165,394)$152,237 






Three Months Ended June 30, 2021
Common StockAdditional
Paid-In
Capital		Accumulated
Other
Comprehensive
Loss		Accumulated
Deficit		Total
Stockholders’
Equity
 SharesAmount
Balance at March 31, 202130,091,665 $3 $533,044 $(12,330)$(203,057)$317,660 
Issuance of stock under Company plans, net of shares withheld for tax321,581 — 177 — — 177 
Stock-based compensation— — 13,550 — — 13,550 
Foreign currency translation adjustment— — — 1,324 — 1,324 
Unrealized translation gain on foreign currency denominated intercompany loans— — — 940 — 940 
Unrealized loss on interest rate swaps— — — (3,172)— (3,172)
Net loss— — — — (19,042)(19,042)
Balance at June 30, 202130,413,246 $3 $546,771 $(13,238)$(222,099)$311,437 

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


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Six Months Ended June 30, 2021Six Months Ended June 30, 2022
Common StockAdditional
Paid-In
Capital		Accumulated
Other
Comprehensive
Loss		Accumulated
Deficit		Total
Stockholders’
Equity		Common StockAdditional
Paid-In
Capital		Accumulated
Other
Comprehensive
Loss		Accumulated
Deficit		Total
Stockholders’
Equity
SharesAmount SharesAmount
Balance at December 31, 202029,987,114 $3 $515,219 $(26,234)$(182,373)$306,615 
Balance at December 31, 2021Balance at December 31, 202131,096,548 $3 $568,384 $(11,514)$(240,585)$316,288 
Issuance of stock under Company plans, net of shares withheld for taxIssuance of stock under Company plans, net of shares withheld for tax426,132 — 178 — — 178 Issuance of stock under Company plans, net of shares withheld for tax536,080 — (800)— — (800)
Stock-based compensationStock-based compensation— — 31,374 — — 31,374 Stock-based compensation— — 26,496 — — 26,496 
Foreign currency translation adjustmentForeign currency translation adjustment— — — (1,063)— (1,063)Foreign currency translation adjustment— — — (18,403)— (18,403)
Unrealized translation gain on intercompany loans with foreign subsidiaries— — — 1,780 — 1,780 
Unrealized translation loss on intercompany loans with foreign subsidiariesUnrealized translation loss on intercompany loans with foreign subsidiaries— — — (6,796)— (6,796)
Unrealized gain on interest rate swapsUnrealized gain on interest rate swaps— — — 12,279 — 12,279 Unrealized gain on interest rate swaps— — — 34,369 — 34,369 
Net lossNet loss— — — — (39,726)(39,726)Net loss— — — — (39,224)(39,224)
Balance at June 30, 202130,413,246 $3 $546,771 $(13,238)$(222,099)$311,437 
Balance at June 30, 2022Balance at June 30, 202231,632,628 $3 $594,080 $(2,344)$(279,809)$311,930 



Six Months Ended June 30, 2020
Common StockAdditional
Paid-In
Capital		Accumulated
Other
Comprehensive
Loss		Accumulated
Deficit		Total
Stockholders’
Equity
 SharesAmount
Balance at December 31, 201925,250,120 $3 $345,127 $(1,223)$(131,046)$212,861 
Issuance of stock under Company plans, net of shares withheld for tax115,615 — (2,086)— — (2,086)
Issuance of stock, net of issuance costs— — (13)— — (13)
Stock-based compensation— — 20,300 — — 20,300 
Cumulative adjustment related to adoption of accounting standard— — — — (108)(108)
Foreign currency translation adjustment— — — (2,240)— (2,240)
Unrealized translation loss on intercompany loans with foreign subsidiaries— — — (7,181)— (7,181)
Unrealized loss on interest rate swaps— — — (35,056)— (35,056)
Net loss— — — — (34,240)(34,240)
Balance at June 30, 202025,365,735 $3 $363,328 $(45,700)$(165,394)$152,237 



Six Months Ended June 30, 2021
Common StockAdditional
Paid-In
Capital		Accumulated
Other
Comprehensive
Loss		Accumulated
Deficit		Total
Stockholders’
Equity
 SharesAmount
Balance at December 31, 202029,987,114 $3 $515,219 $(26,234)$(182,373)$306,615 
Issuance of stock under Company plans, net of shares withheld for tax426,132 — 178 — — 178 
Stock-based compensation— — 31,374 — — 31,374 
Foreign currency translation adjustment— — — (1,063)— (1,063)
Unrealized translation gain on intercompany loans with foreign subsidiaries— — — 1,780 — 1,780 
Unrealized gain on interest rate swaps— — — 12,279 — 12,279 
Net loss— — — — (39,726)(39,726)
Balance at June 30, 202130,413,246 $3 $546,771 $(13,238)$(222,099)$311,437 








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

5
Table of Contents
Upland Software, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
 Six Months Ended June 30,
 20212020
Operating activities
Net loss$(39,726)$(34,240)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization25,669 23,395 
Change in fair value of liabilities to sellers of businesses(2,729)155 
Deferred income taxes(3,389)(4,985)
Amortization of deferred costs3,848 1,920 
Foreign currency re-measurement loss10 497 
Non-cash interest and other expense1,115 1,108 
Non-cash stock compensation expense31,374 20,300 
Changes in operating assets and liabilities, net of purchase business combinations:
Accounts receivable10,174 5,188 
Prepaids and other(3,631)(6,743)
Accounts payable5,915 (6,258)
Accrued expenses and other liabilities(2,424)(7,256)
Deferred revenue(2,898)2,415 
Net cash provided by (used in) operating activities23,308 (4,504)
Investing activities
Purchase of property and equipment(507)(696)
Purchase of customer relationships0 (201)
Purchase business combinations, net of cash acquired(92,417)(67,651)
Net cash used in investing activities(92,924)(68,548)
Financing activities
Payments on finance leases(4)(83)
Proceeds from notes payable, net of issuance costs(113)(142)
Payments on notes payable(2,700)(2,700)
Taxes paid related to net share settlement of equity awards0 (2,140)
Issuance of common stock, net of issuance costs178 41 
Additional consideration paid to sellers of businesses(742)(9,580)
Net cash used in financing activities(3,381)(14,604)
Effect of exchange rate fluctuations on cash(493)542 
Change in cash and cash equivalents(73,490)(87,114)
Cash and cash equivalents, beginning of period250,029 175,024 
Cash and cash equivalents, end of period$176,539 $87,910 
Supplemental disclosures of cash flow information:
Cash paid for interest, net of interest rate swaps$14,623 $14,861 
Cash paid for taxes$1,741 $1,260 
Non-cash investing and financing activities:
Business combination consideration including holdbacks and earnouts$13,852 $345 

 Six Months Ended June 30,
 20222021
Operating activities
Net loss$(39,224)$(39,726)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization28,193 25,669 
Change in fair value of liabilities due to sellers of businesses(75)(2,729)
Deferred income taxes(2,407)(3,389)
Amortization of deferred costs5,883 3,848 
Foreign currency re-measurement loss3 10 
Non-cash interest and other expense1,115 1,115 
Non-cash stock compensation expense26,496 31,374 
Changes in operating assets and liabilities, net of purchase business combinations:
Accounts receivable22,087 10,174 
Prepaid expenses and other current assets(4,597)(3,631)
Accounts payable(898)5,915 
Accrued expenses and other liabilities(5,154)(2,424)
Deferred revenue(9,162)(2,898)
Net cash provided by operating activities22,260 23,308 
Investing activities
Purchase of property and equipment(297)(507)
Purchase business combinations, net of cash acquired(62,356)(92,417)
Net cash used in investing activities(62,653)(92,924)
Financing activities
Payments on finance leases— (4)
Proceeds from notes payable, net of issuance costs(20)(113)
Payments on notes payable(2,700)(2,700)
Taxes paid related to net share settlement of equity awards(982)— 
Issuance of common stock, net of issuance costs182 178 
Additional consideration paid to sellers of businesses(3,088)(742)
Net cash used in financing activities(6,608)(3,381)
Effect of exchange rate fluctuations on cash(3,873)(493)
Change in cash and cash equivalents(50,874)(73,490)
Cash and cash equivalents, beginning of period189,158 250,029 
Cash and cash equivalents, end of period$138,284 $176,539 
Supplemental disclosures of cash flow information:
Cash paid for interest, net of interest rate swaps$14,474 $14,623 
Cash paid for taxes$2,416 $1,741 
Non-cash investing and financing activities:
Business combination consideration including holdbacks and earnouts$7,820 $13,852 


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

Upland Software, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(unaudited)
1. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). The condensed consolidated financial statements include the accounts of Upland Software, Inc. and its wholly owned subsidiaries (collectively referred to as “Upland”, the “Company”, “we”, “us” or “us”“our”). All intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the current period presentation.
The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”(the “SEC”) for interim financial reporting. In the opinion of management of the Company, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements, in all material respects, and include all adjustments of a normal recurring nature necessary for a fair presentation. The results of operations for the three and six months ended June 30, 20212022 are not necessarily indicative of the results to be expected for the year ending December 31, 20212022 or for any other period.
The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 20202021 Annual Report on Form 10-K filed with the SEC on February 25, 2021.24, 2022.
Use of Estimates
The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses. Significant items subject to such estimates include those related to revenue recognition, deferred commissions, allowance for credit losses, stock-based compensation, contingent consideration, acquired intangible assets, the useful lives of intangible assets and property and equipment, the fair value of the Company’s interest rate swaps and income taxes. In accordance with GAAP, management bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances. Management regularly evaluates its estimates and assumptions using historical experience and other factors; however, actual results could differ from those estimates.
Due toWe assessed the impact of COVID-19 pandemic,on the estimates and assumptions and determined there has been uncertainty and disruption in the global economy and financial markets.was no material impact. Upland is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of August 4, 2021,9, 2022, the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
Concentrations of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents, accounts receivable and the Company’s interest rate swap hedges. The Company’s cash and cash equivalents are placed with high-quality financial institutions, which, at times, may exceed federally insured limits. The Company has not experienced any losses in these accounts, and the Company does not believe it is exposed to any significant credit risk related to cash and cash equivalents. The Company provides credit, in the normal course of business, to a number of its customers. To manage accounts receivable credit risk, the Company performs periodic credit evaluations of its customers and maintains current expected credit losses which considers such factors as historical loss information, geographic location of customers, current market conditions, and reasonable and supportable forecasts.
No individual customer represented more than 10% of total revenues for the three or six months ended June 30, 2021,2022, or more than 10% of accounts receivable as of June 30, 20212022 or December 31, 2020.2021.
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Derivatives
Cash Flow Hedges—Interest Rate Swap Agreements
In August 2019 and in connection with borrowing funds under the Company’s credit facility, the Company has entered into a floating-to-fixed interest rate swap agreements to limit exposure to interest rate risk related to our debt. These interest rate swaps effectively converted the entire balance of the Company's $540 million original principal term loans from variable interest payments to fixed interest rate payments, based on an annualized fixed rate of 5.4%, for a 7 year7-year term of debt. ASC 815,Derivatives and Hedging, requires entities to recognize derivative instruments as either assets or liabilities in the statement of financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. The Company assessed the effectiveness of the hedging relationship under the hypothetical derivative method and noted that all of the critical terms of the hypothetical derivative and hedging instrument were the same. The hedging relationship continues to limit the Company’s exposure to the variability in interest rates under the Company’s term loans and related cash outflows. As such, the Company has deemed this hedging relationship as highly effective in offsetting cash flows attributable to hedged risk (variability in forecasted monthly interest payments) for the term of the term loans and interest rate swap agreements. All derivative financial instruments are recorded at fair value as a net asset or liability in the accompanying condensed consolidated balance sheets. As of June 30, 2021 and December 31, 20202022, the fair value of the interest rate swaps included in Interestassets in the Company's condensed consolidated balance sheets was $26.0 million. As of December 31, 2021, the fair value of the interest rate swapswaps included in liabilities in the Company's condensed consolidated balance sheets was $17.8 million and $30.0 million, respectively.$8.4 million.

The interest rate swap has been designated as a cash flow hedge. As such, the change in the fair value of the hedging instruments is recorded in Other comprehensive income.income (loss) in the accompanying condensed consolidated statements of comprehensive income (loss). Amounts deferred in Other comprehensive income (loss) will be reclassified to Interest expense in the accompanying condensed consolidated statements of operations in the period in which the hedged item affects earnings.
Fair Value of Financial Instruments
The Company recognizes financial instruments in accordance with the authoritative guidance on fair value measurements and disclosures for financial assets and liabilities. This guidance defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. The guidance also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
These tiers include Level 1, defined as observable inputs, such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.
The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable and long–term debt. The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value, primarily due to short maturities. The carrying values of the Company’s debt instruments approximated their fair value based on rates currently available to the Company.
Recent Accounting Pronouncements
Recently issued accounting pronouncements - Adopted
In August 2020, the Financial Standards Accounting Board (“FASB”) issued an accounting standard on the topic of debt with conversion and other options, accounting standards update (“ASU”) 2020-06. The amendment in this update simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock. This update also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions and requires the application of the if-converted method for calculating diluted earnings per share. The update also requires entities to provide expanded disclosures about the terms and features of convertible instruments, how the instruments have been reported in the entity’s financial statements, and information about events, conditions, and circumstances that can affect how to assess the amount or timing of an entity’s future cash flows related to those instruments. The guidance is effective for interim and annual periods beginning after December 15, 2021. The Company adopted this guidance in the first quarter of fiscal 2022 and it did not have a material impact on its results of operations, financial position and disclosures as the fair value option accounting model used by the Company is not impacted by this ASU. However, this standard may be applicable should the recently announced Securities Purchase Agreement as discussed in “Note 12. Subsequent Events” close during the third quarter.
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Recently issued accounting pronouncements - Not yet adopted
In March 2020, the Financial Accounting Standards Board (“FASB”)FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company evaluated the impact of this standard and determined it did not have a material impact on on our consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which creates an exception to the general recognition and measurement principle for contract assets and contract liabilities from contracts with customers acquired in a business combination. The new guidance will require companies to apply the definition of a performance obligation under accounting standard codification (“ASC”) Topic 606 to recognize and measure contract assets and contract liabilities (i.e., deferred revenue) relating to contracts with customers that are acquired in a business combination. Under current GAAP, an acquirer in a business combination is generally required to recognize and measure the assets it acquires and the liabilities it assumes at fair value on the acquisition date. The new guidance will result in the acquirer recording acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC Topic 606. These amendments are effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is evaluating the impact of this standard on our consolidated financial statements.
2. Acquisitions
The Company performs quantitative and qualitative analyses to determine the significance of each acquisition to the financial statements the Company. Based on these analyses the below acquisitions were deemed to be insignificant on an individual and cumulative basis.
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20212022 Acquisitions
Acquisitions completed during the six months ended June 30, 20212022 include the following:
•BA Insight - On February 22, 2022, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of BA Insight Inc., (“BA Insight”), a cloud-based enterprise knowledge management solution. Revenues recorded since the acquisition date through June 30, 2022 were approximately $2.8 million. Revenues recorded for BA Insight for the quarter ended June 30, 2022 were approximately $2.0 million.
•Objectif Lune - On January 07, 2022, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of Objectif Lune Inc., a Quebec proprietary company (“Objectif Lune”), cloud-based document workflow product. Revenues recorded since the acquisition date through June 30, 2022 were approximately $10.5 million. Revenues recorded for Objectif Lune for the quarter ended June 30, 2022 were approximately $5.6 million.
2021 Acquisition
The acquisition completed during the year ended December 31, 2021 were:
•Panviva - On June 24, 2021, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of Panviva Pty Ltd, an Australian proprietary company (“Panviva”), a cloud-based enterprise knowledge management solution. Revenues recorded since the acquisition date through June 30, 2021 were approximately $0.1 million.
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•BlueVenn - On February 28, 2021 the Company entered into an agreement to purchase the shares comprising the entire issued share capital of BlueVenn Group Limited, a company limited by shares organized and existing under the laws of England and Wales (“BlueVenn”), a cloud-based customer data platform. Revenues recorded since the acquisition date through June 30, 2021 were approximately $5.4 million. Revenues recorded for BlueVenn for the quarter ended June 30, 2021 were approximately $4.4 million.
•Second Street - On January 19, 2021, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of Second Street Media, Inc., a Missouri corporation (“Second Street”), an audience engagement platform. Revenues recorded since the acquisition date through June 30, 2021 were approximately $4.7 million. Revenues recorded for Second Street for the quarter ended June 30, 2021 were approximately $2.7 million.
2020 Acquisition
The acquisition completed during the year ended December 31, 2020 were:
•Localytics - On February 6, 2020, the Company entered into an agreement to purchase the shares comprising the entire issued share capital of Char Software, Inc (dba Localytics), a Delaware corporation (“Localytics”), a provider of mobile app personalization and analytics solutions.
Consideration
The following table summarizes the consideration transferred for the acquisitions described above (in thousands):
PanvivaBlueVennSecond StreetLocalyticsBA InsightObjectif LunePanvivaBlueVennSecond Street
CashCash$19,931 $53,535 $25,436 $67,655 Cash$33,355 $29,750 $19,931 $53,535 $25,436 
Holdback (1)
Holdback (1)
3,517 2,429 5,000 345 
Holdback (1)
645 5,250 3,517 2,429 5,000 
Contingent consideration (2)
Contingent consideration (2)
0 2,535 1,650 1,000 
Contingent consideration (2)
— — — 2,535 1,650 
Working capital adjustment (3)
0 (537)0 (5,238)
Working capital and other adjustmentsWorking capital and other adjustments1,587 338 379 (537)(1,365)
Total considerationTotal consideration$23,448 $57,962 $32,086 $63,762 Total consideration$35,587 $35,338 $23,827 $57,962 $30,721 
(1)Represents the cash holdbacks subject to indemnification claims that are payable 12 months following closing for Objectif Lune, Panviva and Second Street, and Localytics15 months following closing for BA Insight and 18 months following closing for BlueVenn. In addition, the holdback payment to Panviva may be reduced by up to $1.6 million based on the future renewal of a specific customer. The fair value of this potential reduction was $0.0 million as of the acquisition date.
(2)Represents the acquisition date fair value of anticipated earn-outearnout payments, which are based on the estimated probability of attainment of the underlying future performance-based conditions at the time of acquisition. The maximum potential payout for the BlueVenn and Second Street and Localytics earn-outs were $22.4$21.7 million and $3.0 million, respectively. As of March 31, 2022, the earnout payments for BlueVenn and $1.0 million, respectively. The earn-out for Localytics was paidSecond Street were finalized resulting in full during the year ended December 31, 2020 based on an ending fair value of $1.0 million. Refer to Note 3 for further discussion regarding the calculation of fair value of acquisition related earn-outs.
(3)Working capital and other adjustments includes a $5.2 million settlement in total consideration for Localytics related to a representation and warranty insurance settlement which is included in prepaids and other current assets on the Company’s consolidated balance sheets as of December 31, 2020.no payments made.
Fair Value of Assets Acquired and Liabilities Assumed
The Company recorded the purchase of the acquisitions described above using the acquisition method of accounting and, accordingly, recognized the assets acquired and liabilities assumed at their fair values as of the date of the acquisition. The purchase accounting for the 20212022 acquisitions of Panviva, BlueVenn,BA Insight and Second StreetObjectif Lune are preliminary as the Company has not finalized the taxoverall impact of these acquisitions. In addition, the purchase price allocation for Panviva is preliminary as we work to finalize the valuation of intangible assets. Management has recorded the purchase price allocations based upon acquired company information that is currently available. Management expects to complete the purchase accounting for BlueVennBA Insight and Second StreetObjectif Lune no later than the first quarter of 2022 and no later than the second quarter of 2022 for Panviva.2023.
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The following condensed table presents the preliminary and finalized acquisition-date fair value of the assets acquired and liabilities assumed for the acquisitions during the year ended December 31, 20202021 and through the six months ended June 30, 2021,2022, as well as assets and liabilities (in thousands):
PreliminaryFinalPreliminaryFinal
PanvivaBlueVennSecond StreetLocalyticsBA InsightObjectif LunePanvivaBlueVennSecond Street
Year AcquiredYear Acquired2021202120212020Year Acquired20222022202120212021
CashCash$132 $1,115 $0 $0 Cash$4 $745 $132 $1,115 $— 
Accounts receivableAccounts receivable2,119 1,289 1,105 3,648 Accounts receivable2,466 5,289 2,122 1,289 1,105 
Other current assetsOther current assets4,986 2,145 89 6,323 Other current assets4,080 7,197 4,985 2,002 89 
Operating lease right-of-use assetOperating lease right-of-use asset197 1,357 489 7,605 Operating lease right-of-use asset110 1,905 197 1,357 489 
Property and equipmentProperty and equipment26 611 156 409 Property and equipment3 286 26 611 156 
Customer relationshipsCustomer relationships8,169 15,670 14,600 30,500 Customer relationships10,500 17,717 9,757 18,888 14,600 
Trade nameTrade name76 238 200 300 Trade name150 362 76 238 200 
TechnologyTechnology2,118 4,337 3,400 6,600 Technology2,000 5,512 2,194 4,337 3,400 
Favorable LeasesFavorable Leases— 291 — — — 
GoodwillGoodwill19,912 47,642 17,994 33,543 Goodwill25,605 22,937 16,604 44,892 16,586 
Other assetsOther assets33 24 13 6 Other assets25 744 33 24 13 
Total assets acquiredTotal assets acquired37,768 74,428 38,046 88,934 Total assets acquired44,943 62,985 36,126 74,753 36,638 
Accounts payableAccounts payable(1,249)(2,809)(230)(2,382)Accounts payable(236)(2,001)(1,257)(2,772)(230)
Accrued expense and otherAccrued expense and other(6,588)(2,196)(429)(6,761)Accrued expense and other(4,193)(9,437)(5,053)(2,429)(378)
Deferred tax liabilitiesDeferred tax liabilities(3,083)(3,468)(4,312)(3,382)Deferred tax liabilities— (5,726)(2,395)(3,640)(4,320)
Deferred revenueDeferred revenue(3,203)(6,636)(500)(4,812)Deferred revenue(4,817)(8,578)(3,397)(6,593)(500)
Operating lease liabilitiesOperating lease liabilities(197)(1,357)(489)(7,835)Operating lease liabilities(110)(1,905)(197)(1,357)(489)
Total liabilities assumedTotal liabilities assumed(14,320)(16,466)(5,960)(25,172)Total liabilities assumed(9,356)(27,647)(12,299)(16,791)(5,917)
Total considerationTotal consideration$23,448 $57,962 $32,086 $63,762 Total consideration$35,587 $35,338 $23,827 $57,962 $30,721 
The Company uses third party valuation consultants to determine the fair values of assets acquired and liabilities assumed. Tangible assets are valued at their respective carrying amounts, which approximates their estimated fair value. The valuation of identifiable intangible assets reflects management’s estimates based on, among other factors, the use of established valuation methods. Customer relationships are valued using the multi-period excess earnings method. Developed technology and trade names are valued using the relief-from-royalty method.
The following table summarizes the weighted-average useful lives, by major finite-lived intangible asset class, for intangibles acquired during the six months ended June 30, 20212022 and the year ended December 31, 20202021 (in years):
Useful LifeUseful Life
June 30, 2021December 31, 2020June 30, 2022December 31, 2021
Customer relationshipsCustomer relationships7.08.0Customer relationships7.07.0
Trade nameTrade name2.02.0Trade name2.02.0
Developed technologyDeveloped technology5.05.0Developed technology6.25.0
Favorable LeasesFavorable Leases6.30
Total weighted-average useful lifeTotal weighted-average useful life6.57.4Total weighted-average useful life6.86.6
During the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill based on changes to management's estimates and assumptions.
The goodwill of $119.1$126.6 million for the above acquisitions is primarily attributable to the synergies expected to arise after the acquisition and the value of the acquired workforce. Goodwill that is deductible for tax purposes at the time of the acquisitions was $2.0 million.
Total transaction related expenses incurred with respect to acquisition activity during the three months ended June 30, 20212022 and June 30, 20202021 were $2.0$0.4 million and $0.2$2.0 million, respectively, and during the six months ended June 30, 20212022 and June 30, 20202021 were $6.1$4.9 million and $3.5$6.1 million, respectively. Transaction related expenses, excluding transformation costs,
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include expenses such as banker fees, legal and professional fees, insurance costs, and deal bonuses. Transaction costs are included in acquisition-related expenses in our condensed consolidated statement of operations.
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Other Acquisitions and Divestitures
From time to time we may purchase or sell customer relationships that meet certain criteria. DuringWe had no purchase or sale of customer relationships during the yearthree and six months ended December 31, 2020, we completed customer relationship acquisitions totaling $0.2 million.June 30, 2022 and June 30, 2021.
3. Fair Value Measurements
Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. GAAP sets forth a three–tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three tiers are Level 1, defined as observable inputs, such as quoted market prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, which therefore requires an entity to develop its own assumptions.
As of June 30, 2022 and December 31, 2021, the Company had contingentno accrued earnout business acquisition contingent consideration liabilities for which fair values are measured as Level 3 instruments. These contingent consideration liabilities were recorded at fair value on the acquisition date and are remeasured periodically based on the then assessed fair value and adjusted if necessary. The increases or decreases in the fair value of contingent consideration payable can result from changes in anticipated revenue levels, changes in assumed discount periods and rates and changes in foreign exchange rates. As the fair value measure is based on significant inputs that are not observable in the market, they are categorized as Level 3. Any gain (loss)adjustment related to subsequent changes in the fair value of contingent consideration is recorded in acquisition-related expense or other income (expense) in the Company's condensed consolidated statement of operations based on management's assessment of the nature of the liability. Earnout consideration liabilities are includedreported in “Due to sellers in businesses” in the Company's condensed consolidated balance sheets. As of March 31, 2022, the earnout payments for BlueVenn and Second Street were finalized resulting in no payments made.
In connection with entering into, and expanding, the Company's current credit facility, as discussed further in “Note 6. Debt,Debt—Credit Facility”, the Company entered into interest rate swaps for the full 7 year term of the Company's term loans, effectively fixing our interest rate at 5.4% for the full value $540 million of the original principal term loans. The fair value of the Company's swaps are measured at the end of each interim reporting period based on the then assessed fair value and adjusted if necessary. As the fair value measure is based on the market approach, they are categorized as Level 2. As of June 30, 2021 and2022 the fair value of the interest rate swap is included in the “Interest rate swap assets” section compared to December 31, 20202021 in which the fair value of the interest rate swaps are included in Interest rate swapthe liabilities section on the Company's condensed consolidated balance sheets.
Liabilities measured at fair value on a recurring basis are summarized below (in thousands):
 Fair Value Measurements at June 30, 2021
(unaudited)
 Level 1Level 2Level 3Total
Liabilities:
Earnout consideration liability$0 $0 $1,454 $1,454 
Interest rate swap liabilities$0 $17,754 $0 $17,754 
 Fair Value Measurements at June 30, 2022
(unaudited)
 Level 1Level 2Level 3Total
Assets:
Interest rate swap assets$— $25,959 $— $25,959 
 Fair Value Measurements at December 31, 2020
 Level 1Level 2Level 3Total
Liabilities:
Interest rate swap liabilities$0 $30,032 $0 $30,032 

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The following table presents additional information about earnout consideration liabilities measured at fair value on a recurring basis and for which the Company has utilized significant unobservable (Level 3) inputs to determine fair value (in thousands) (unaudited):
June 30, 2021
(unaudited)
Balance at December 31, 2020$0 
Acquisitions and settlements:
Acquisitions4,185 
Remeasurement adjustments:
Gain included in earnings(2,729)
Foreign currency translation adjustments(2)
Balance at June 30, 2021$1,454 
Quantitative Information about Level 3 Fair Value Measurements
The significant unobservable inputs used in the fair value measurement of the Company's contingent consideration liabilities designated as Level 3 are as follows:
Fair Value at June 30, 2021Valuation TechniqueSignificant Unobservable Inputs
Contingent acquisition consideration:
(BlueVenn and Second Street)		$1,454 Binary option modelExpected future annual revenue streams and probability of achievement
Sensitivity to Changes in Significant Unobservable Inputs
As presented in the table above, the significant unobservable inputs used in the fair value measurement of contingent consideration related to business acquisitions are forecasts of expected future annual revenues as developed by the Company's management and the probability of achievement of those revenue forecast. Significant increases (decreases) in these unobservable inputs in isolation would likely result in a significantly (lower) higher fair value measurement.
 Fair Value Measurements at December 31, 2021
 Level 1Level 2Level 3Total
Liabilities:
Interest rate swap liabilities$— $8,409 $— $8,409 
Debt
The Company believes the carrying value of its long-term debt at June 30, 20212022 approximates its fair value based on the variable interest rate feature or based upon interest rates currently available to the Company. The estimated fair value and carrying value of the Company's debt, before debt discount, at June 30, 20212022 and December 31, 20202021 are $530.6$525.2 million and $533.3$527.9 million, respectively.
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4. Goodwill and Other Intangible Assets
Changes in the Company’s goodwill balance for the six months ended June 30, 20212022 are summarized in the table below (in thousands):below:
($ in thousands)Goodwill
Balance at December 31, 20202021$383,598457,472 
Acquired in business combinations85,10248,768 
Adjustment related to prior year business combinations1,466 
Adjustment related to finalization of current year business combinations446 (226)
Foreign currency translation adjustment and other1,036 (14,999)
Balance at June 30, 20212022$470,182492,481 
Net intangible assets include the estimated acquisition-date fair values of customer relationships, marketing-related assets, developed technology, and non-compete agreements that the Company recorded as part of its business acquisitions.
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The following is a summary of the Company’s intangible assets, net (in thousands):
Estimated Useful
Life (Years)		Gross
Carrying Amount		Accumulated
Amortization		Net Carrying
Amount		Estimated Useful
Life (Years)		Gross
Carrying Amount		Accumulated
Amortization		Net Carrying
Amount
June 30, 2021:
June 30, 2022:June 30, 2022:
Customer relationshipsCustomer relationships1-10$358,154 $107,792 $250,362 Customer relationships1-10$372,591 $142,416 $230,175 
Trade nameTrade name1.5-109,824 5,265 4,559 Trade name1.5-109,857 6,175 3,682 
Developed technologyDeveloped technology4-989,483 39,652 49,831 Developed technology4-993,064 50,184 42,880 
Non-compete agreementsNon-compete agreements31,148 1,148 0 Non-compete agreements31,148 1,148 — 
Favorable LeasesFavorable Leases6.3287 23 264 
Total intangible assetsTotal intangible assets$458,609 $153,857 $304,752 Total intangible assets$476,947 $199,946 $277,001 
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, 2020:
December 31, 2021:December 31, 2021:
Customer relationshipsCustomer relationships1-10$318,941 $89,131 $229,810 Customer relationships1-10$358,943 $126,329 $232,614 
Trade nameTrade name1.5-109,283 4,763 4,520 Trade name1.5-109,714 5,752 3,962 
Developed technologyDeveloped technology4-979,382 33,929 45,453 Developed technology4-988,548 45,204 43,344 
Non-compete agreementsNon-compete agreements31,148 956 192 Non-compete agreements31,148 1,148 — 
Total intangible assetsTotal intangible assets$408,754 $128,779 $279,975 Total intangible assets$458,353 $178,433 $279,920 
The Company periodically reviews the estimated useful lives of its identifiable intangible assets, taking into consideration any events or circumstances that might result in either a diminished fair value or revised useful life. Management recorded 0no impairments of intangible assets or goodwill during the three and six months ended June 30, 20212022 or the year ended December 31, 2020.2021. Total amortization expense was $13.5 million and $12.7 million during the three months ended June 30, 20212022 and June 30, 2020 was $12.72021, respectively, and $27.4 million and $11.2$24.7 million respectively, and during the six months ended June 30, 20212022 and June 30, 2020 was $24.7 million and $22.4 million,2021, respectively.
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As of June 30, 2021,2022, the estimated annual amortization expense for the next five years and thereafter is as follows (in thousands):
Amortization
Expense		Amortization
Expense
Year ending December 31:Year ending December 31:Year ending December 31:
Remainder of 2021$25,876 
202249,173 
Remainder of 2022Remainder of 2022$25,803 
2023202346,810 202350,546 
2024202444,428 202448,060 
2025202541,124 202544,823 
2026 and thereafter97,341 
2026202641,871 
2027 and thereafter2027 and thereafter65,898 
TotalTotal$304,752 Total$277,001 

5. Income Taxes
The Company’s income tax benefit for the three andmonths ended June 30, 2022, six months ended June 30, 2022 and 2021 and provision for the three months ended June 30, 20202021 reflects its estimate of the effective tax rates expected to be applicable for the full years, adjusted for any discrete events that are recorded in the period in which they occur. The estimates are re-evaluated each quarter based on the estimated tax expense for the full year.
The tax provisionbenefit from income taxes of $1.5$0.5 million and benefit of $2.9$0.6 million recorded for the three and six months ended June 30, 2021, respectively, are2022 is primarily related to the deferred tax benefit attributable to the release of valuation allowance related to the acquisition of deferred tax liabilities associated with the Company’s business combinations during the three months ended March 31, 2021, as discussed in Note 2. Acquisitions, and foreign income taxes associated with our combined non-U.S. operations. These tax benefits are offset by changes in deferred tax liabilities associated with amortization of United States tax deductible goodwill and state taxes in certain states in which the Company does not file on a consolidated basis or have net operating loss carryforwards and the impact, recorded as discrete of enacted future changes in UK tax rates on the balance of deferred tax assets and liabilities per tax law enacted duringfor the three months ended March 31, 2022, of the deferred tax provision attributable to the tax gain associated with the transfer of goodwill between foreign and domestic jurisdictions.
The tax provision for incomes taxes of $1.5 million and benefit from income taxes of $2.9 million for the three and six months ended June 30, 2021.2021 is primarily related to the deferred tax benefit attributable to the release of valuation allowance related to the acquisition of deferred tax liabilities associated with the Second Street business combination, as discussed in “Note 2. Acquisitions”, and foreign income taxes associated with our combined non-U.S. operations. These tax benefits are offset by changes in deferred tax liabilities associated with amortization of United States tax deductible goodwill, state taxes in certain states in which the Company does not file on a consolidated basis or have net operating loss carryforwards. The release of valuation
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allowance is attributable to ASC 805-740-30-3 and acquisitions of domestic entities with deferred tax liabilities that, upon acquisition, allowed us to recognize certain deferred tax assets of approximately $4.3 million during the sixthree months ended June 30,March 31, 2021 that had previously been offset by a valuation allowance. The benefit for the release of valuation allowance was primarily recorded during the three months ended March 31, 2021.
The tax benefit of $0.7 million and $5.0 million recorded for the three and six months ended June 30, 2020, respectively, are primarily related to the deferred tax benefit attributable to the release of valuation allowance related to the acquisition of deferred tax liabilities associated with the Localytics business combination, as discussed in Note 2. Acquisitions, and foreign income taxes associated with our combined non-U.S. operations. These tax benefits are offset by changes in deferred tax liabilities associated with amortization of United States tax deductible goodwill and state taxes in certain states in which the Company does not file on a consolidated basis or have net operating loss carryforwards.
The Company has historically incurred operating losses in the United States and, given its cumulative losses and limited history of profits, has recorded a valuation allowance against its United States net deferred tax assets, exclusive of tax deductible goodwill, at June 30, 20212022 and June 30, 2020,2021, respectively.
The Company has reflected any uncertain tax positions primarily within its long-term taxes payable and a portion within deferred tax assets. The Company and its subsidiaries file tax returns in the U.S. federal jurisdiction and in several state and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations for years ending before December 31, 20172018 and is no longer subject to state and local or foreign income tax examinations by tax authorities for years ending before December 31, 2016,2017, other than where cross-border transactions extend the statute of limitations. The Company is not currently under audit for federal, state or any foreign jurisdictions. U.S. operating losses generated in years prior to 20172018 remain open to adjustment until the statute of limitations closes for the tax year in which the net operating losses are utilized.
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6. Debt
Long-term debt consisted of the following at June 30, 20212022 and December 31, 20202021 (in thousands):
June 30, 2021December 31, 2020June 30, 2022December 31, 2021
Senior secured loans (includes unamortized discount of $10,646 and $11,648 based on an imputed interest rate of 5.8% and 5.8%, at June 30, 2021 and December 31, 2020, respectively)$519,904 $521,603 
Senior secured loans (includes unamortized discount of $8,425 and $9,520 based on an imputed interest rate of 5.8% and 5.8%, at June 30, 2022 and December 31, 2021, respectively)Senior secured loans (includes unamortized discount of $8,425 and $9,520 based on an imputed interest rate of 5.8% and 5.8%, at June 30, 2022 and December 31, 2021, respectively)$516,725 $518,330 
Less current maturitiesLess current maturities(3,153)(3,166)Less current maturities(3,167)(3,167)
Total long-term debtTotal long-term debt$516,751 $518,437 Total long-term debt$513,558 $515,163 

Credit Facility
On August 6, 2019, the Company entered into a credit agreement (the “Credit Facility”) which provides for (i) a fully-drawn $350 million, 7 year, senior secured term loan B facility (the “Term Loan”) and (ii) a new $60 million, 5 year, revolving credit facility (the “Revolver”) that was fully available as of June 30, 2021.2022. The Credit Facility replaced the Company's previous credit agreement. All outstanding balances under our previous credit facility were paid off using proceeds from our new Credit Facility.
On November 26, 2019 (the “Closing Date”), the Company entered into a First Incremental Assumption Agreement (the “Incremental Assumption Agreement”) which provides for a term loan facility to be established under the Credit Facility in an aggregate principal amount of $190.0 million (the “2019 Incremental Term Loan”) which is in addition to the existing $350.0 million term loans outstanding under the Credit Facility and the $60.0 million revolving credit facility under the Credit Facility.
Payment terms
The Term Loans (including the 2019 Incremental Term Loan) are repayable on a quarterly basis beginning on December 31, 2019 by an amount equal to 0.25% (1.00% per annum) of the aggregate principal amount of such loan. Any amount remaining unpaid is due and payable in full on August 6, 2026 (the “Term Loan Maturity Date”).
At the option of the Company, the Term Loans (including the 2019 Incremental Term Loan) accrue interest at a per annum rate based on (i) the Base Rate plus a margin of 2.75% or (ii) the rate (not less than 0.00%) for Eurodollar deposits quoted on the LIBOR01 or LIBOR02 pages on the Reuters Screen, or as otherwise determined in accordance with the Credit Facility (based on a period equal to 1, 2, 3 or 6 months or, if available and agreed to by all relevant Lenders and the Agent, 12 months or such period of less than 1 month) plus a margin of 3.75%. The Base Rate for any day is a rate per annum equal to the greatest of (i) the prime rate in effect on such day, (ii) the federal funds effective rate (not less than 0.00%) in effect on such day plus ½ of 1.00%, and (ii) the Eurodollar rate for a one month interest period beginning on such day plus 1.00%.
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Accrued interest on the loans will be paid quarterly or, with respect to loans that are accruing interest based on the Eurodollar rate, at the end of the applicable interest rate period.
Interest rate swaps
On August 6, 2019, the Company entered into an interest rate hedge instrument for the full 7 year term, effectively fixing our interest rate at 5.4% for the Term Loan. In addition, on November 26, 2019, the Company entered into interest rate swap agreements to hedge the interest rate risk associated with the Company’s floating rate obligations under the 2019 Incremental Term Loan. These interest rate swaps fix the Company's interest rate (including the hedge premium) at 5.4% for the term of the Credit Facility. The interest rate associated with our new $60 million, 5 year, Revolver remains floating.
The interest rate swap has been designated as a cash flow hedge and is valued using a market approach, which is a Level 2 valuation technique. At June 30, 2021,2022, the fair value of the interest rate swap was a $17.8$26.0 million liabilityasset as a result of a declinean increase in short term interest rates since entering into the swap agreements. The decreaseincrease in the fair value of the interest rate swap liabilityasset during the three months ended June 30, 20212022 is the result of an increase in short term interest rates compared to December 31, 2020.during the
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respective periods. In the next twelve months, the Company estimates that $3.6$6.4 million will be reclassified from Accumulated other comprehensive income (loss) and recorded as an increase to Interest expense. Increases/decreases in cash paid for interest as a resultexpense, net on our condensed consolidated statement of the Company’s interest rate swaps are included cash flows from operations.
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(Loss) gain recognized in Other comprehensive income on derivative financial instruments$(3,172)$(3,655)$12,279 $(35,056)
(Loss) gain on interest rate swap (included in Interest expense on our consolidated statement of operations)$(2,058)$(1,520)$(4,068)$(1,454)
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Unrealized Gain (loss) recognized in Other comprehensive income on derivative financial instruments$8,156 $(3,172)$34,369 $12,279 
Loss on interest rate swap (included in Interest expense on our consolidated statement of operations)$(1,159)$(2,058)$(3,131)$(4,068)
Revolver
Loans under the Revolver are available up to $60 million. The Revolver provides a sub-facility whereby the Company may request letters of credit (the “Letters of Credit”) in an aggregate amount not to exceed, at any one time outstanding, $10.0 million for the Company. The aggregate amount of outstanding Letters of Credit are reserved against the credit availability under the Maximum Revolver Amount. The Company incurs a 0.50% per annum unused line fee on the unborrowed balance of the Revolver which is paid quarterly.
Loans under the Revolver may be borrowed, repaid and reborrowed until August 6, 2024 (the “Maturity Date”), at which time all amounts borrowed under the Revolver must be repaid. As of June 30, 2021,2022, the Company had no borrowings outstanding under the Revolver or related sub-facility.
Covenants
The Credit Facility contains customary affirmative and negative covenants. The negative covenants limit the ability of the Loan Parties to, among other things (in each case subject to customary exceptions for a credit facility of this size and type):
•Incur additional indebtedness or guarantee indebtedness of others;
•Create liens on their assets;
•Make investments, including certain acquisitions;
•Enter into mergers or consolidations;
•Dispose of assets;
•Pay dividends and make other distributions on the Company’s capital stock, and redeem and repurchase the Company’s capital stock;
•Enter into transactions with affiliates; and
•Prepay indebtedness or make changes to certain agreements.

The Credit Facility has no financial covenants as long as less than 35% of the Revolver is drawn as of the last day of any fiscal quarter. If 35% of the Revolver is drawn as of the last day of a given fiscal quarter the Company will be required to maintain a Total Leverage Ratio (the ratio of funded indebtedness as of such date less the amount of unrestricted cash and cash equivalents of the Company and its guarantors in an amount not to exceed $50.0 million, to adjusted EBITDA (calculated on a pro forma basis including giving effect to any acquisition)), measured on a quarter-end basis for each four consecutive fiscal quarters then ended, of not greater than 6.00 to 1.00.
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In addition, the Credit Facility contains customary events of default subject to customary cure periods for certain defaults that include, among others, non-payment defaults, inaccuracy of representations and warranties, covenant defaults, cross-defaults to certain other material indebtedness, change in control, bankruptcy and insolvency defaults and material judgment defaults. The occurrence of an event of default could result in the acceleration of Term Loans and Revolver and a right by the agent and lenders to exercise remedies. At the election of the lenders, a default interest rate shall apply on all obligations during an event of default, at a rate per annum equal to 2.00% above the applicable interest rate. The Term Loan and Revolver are secured by substantially all of the Company's assets. As of June 30, 20212022 the Company was in compliance with all covenants under the Credit Facility.
Cash interest costs averaged 5.4% and 5.4% for the six months ended June 30, 20212022 and for the year ended December 31, 2020,2021, respectively. In addition, as of June 30, 20212022 and December 31, 20202021 the Company had $10.6$8.4 million and $11.6$9.5 million, respectively, of unamortized deferred financing costs associated with the Credit Facility. These financing costs will be amortized to non-cash interest expense over the remaining term of the Credit Facility.
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7. Net Loss Per Share
The following table sets forth the computations of loss per share (in thousands, except share and per share amounts):
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
Numerator:Numerator:Numerator:
Net LossNet Loss$(19,042)$(14,159)$(39,726)$(34,240)Net Loss$(16,393)$(19,042)$(39,224)$(39,726)
Denominator:Denominator:Denominator:
Weighted–average common shares outstanding, basic and dilutedWeighted–average common shares outstanding, basic and diluted30,097,749 25,032,996 30,034,252 25,057,715 Weighted–average common shares outstanding, basic and diluted31,380,505 30,097,749 31,272,489 30,034,252 
Net loss per common share, basic and dilutedNet loss per common share, basic and diluted$(0.63)$(0.57)$(1.32)$(1.37)Net loss per common share, basic and diluted$(0.52)$(0.63)$(1.25)$(1.32)
Due to the net losses for the three and six months ended June 30, 20212022 and June 30, 2020,2021, respectively, basic and diluted loss per share were the same. The following table sets forth the anti–dilutive common share equivalents as of June 30, 20212022 and June 30, 2020:2021:
June 30, June 30,
20212020 20222021
Stock optionsStock options251,360 320,840 Stock options190,894 251,360 
Restricted stock awards(1)Restricted stock awards(1)1,000 197,623 Restricted stock awards(1)— 1,000 
Restricted stock unitsRestricted stock units2,061,436 1,778,557 Restricted stock units1,892,460 2,061,436 
Performance restricted stock unitsPerformance restricted stock units61,437 66,297 Performance restricted stock units93,750 61,437 
Total anti–dilutive common share equivalentsTotal anti–dilutive common share equivalents2,375,233 2,363,317 Total anti–dilutive common share equivalents2,177,104 2,375,233 
(1) All outstanding restricted stock awards became fully vested as of December 31, 2021.

8. Commitments and Contingencies
Purchase Commitments
The Company has purchase commitments related to hosting services, third-party technology used in the Company's solutions and for other services the Company purchases as part of normal operations. In certain cases these arrangements require a minimum annual purchase commitment.
In addition, the Company purchased software development services pursuant to a technology services agreement with DevFactory FZ-LLC for the three months ended June 30, 2021 and June 30, 2020 totaling $2.4 million and $1.8 million, respectively, and for the six months ended June 30, 2021 and June 30, 2020 totaling $4.8 million and $3.7 million, respectively. The remaining purchase obligation after June 30, 2021 through December 31, 2021 is $4.8 million. See Note 11. Related Party Transactions for more information regarding our purchase commitment to this related party.
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Litigation
In the normal course of business, the Company may become involved in various lawsuits and legal proceedings. At this time, the Company is not involved in any current or pending legal proceedings, and does not anticipate any legal proceedings, that may have a material adverse effect on the Company's condensed consolidated balances sheets or condensed consolidated statement of operations.
In addition, when we acquire companies, we require that the sellers provide industry standard indemnification for breaches of representations and warranties contained in the acquisition agreement and we will withhold payment of a portion of the purchase price for a period of time in order to satisfy any claims that we may make for indemnification. In certain transactions, we agree with the sellers to purchase a representation and warranty insurance policy that will pay such claims for indemnification. From time to time we may have one or more claims for indemnification pending. Similarly, we may have one or more ongoing negotiations related to the amount of an earnout. Gain contingencies related to indemnification claims are not recognized in our condensed consolidated financial statements until realized.
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9. Stockholders' Equity
Registration Statement
On August 10, 2020, we filed a registration statement on Form S-3 (File No. 333-243728) (the “2020 S-3”), which became effective automatically upon its filing and covers an unlimited amount of securities. The 2020 S-3, will remain effective through August 2023.
Accumulated Other Comprehensive Income (Loss)
Comprehensive income (loss) consists of two elements, net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) items are recorded in the stockholders’ equity section of our condensed consolidated balance sheets and are excluded from net income (loss).loss. Our other comprehensive income (loss) consists primarily of foreign currency translation adjustments for subsidiaries with functional currencies other than the U.S. dollar, unrealized translation gains (losses) on intercompany loans with foreign subsidiaries, and unrealized gains (losses) on interest rate swaps.
The following table shows the components of accumulated other comprehensive loss,income (loss), net of income taxes, (“AOCI”) in the stockholders’ equity section of our condensed consolidated balance sheets at the dates indicated (in thousands):
June 30, 2021December 31, 2020June 30, 2022December 31, 2021
Foreign currency translation adjustmentForeign currency translation adjustment$(418)$644 Foreign currency translation adjustment$(24,060)$(5,657)
Unrealized translation gain on intercompany loans with foreign subsidiariesUnrealized translation gain on intercompany loans with foreign subsidiaries4,934 3,154 Unrealized translation gain on intercompany loans with foreign subsidiaries(4,243)2,552 
Unrealized loss on interest rate swaps(17,754)(30,032)
Unrealized gain (loss) on interest rate swapsUnrealized gain (loss) on interest rate swaps25,959 (8,409)
Total accumulated other comprehensive lossTotal accumulated other comprehensive loss$(13,238)$(26,234)Total accumulated other comprehensive loss$(2,344)$(11,514)
The unrealized translation gaingains (losses) on intercompany loans with foreign subsidiaries as of June 30, 20212022 is net of income tax expense of $2.3$0.4 million. The tax benefit related to unrealized translation gains (losses) on intercompany loans for the three and six months ended June 30, 2022 was $1.0 million and $1.5 million, respectively. The tax expense related to unrealized translation gains on intercompany loans for the three and six months ended June 30, 2021 was $0.1 million and $0.3 million, respectively. The income tax expense/benefit allocated to each component of other comprehensive income (loss) for all other periods and components is not material. The Company reclassifies taxes from AOCI to earnings as the items to which the tax effects relate are similarly reclassified.
The functional currency of our foreign subsidiaries are primarily the local currencies. Results of operations for foreign subsidiaries are translated into United States dollars (“USD”) using the average exchange rates on a monthly basis during the year. The assets and liabilities of those subsidiaries are translated into United States dollarsUSD 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.income (loss).
The Company has intercompany loans that were used to fund the acquisitions of foreign subsidiaries. Due to the long-term nature of the loans, the unrealized translation gains (losses) resulting from re-measurement are recognized as a component of accumulated other comprehensive income (loss).
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Stock-Based Compensation
The Company recognizes stock-based compensation expense from all awards in the following expense categories included in our condensed consolidated statements of income were as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
Cost of revenueCost of revenue$563 $570 $1,005 $888 Cost of revenue$575 $563 $977 $1,005 
Research and developmentResearch and development942 1,019 1,656 1,634 Research and development658 942 1,406 1,656 
Sales and marketingSales and marketing1,619 898 2,756 1,447 Sales and marketing1,498 1,619 2,972 2,756 
General and administrative (1)
General and administrative (1)
10,426 8,493 25,957 16,331 
General and administrative (1)
12,146 10,426 21,141 25,957 
TotalTotal$13,550 $10,980 $31,374 $20,300 Total$14,877 $13,550 $26,496 $31,374 
(1)In March 2021 our former co-PresidentIncludes accelerated stock-based compensation expense of $4.4 million for the three months ended June 30, 2022 and Chief Operating Officer (“COO”) resigned from his positions$4.4 million and entered into an advisory agreement with the Company pursuant to which he will serve as a strategic advisor to the Company through December 31, 2022. Stock-based compensation$6.3 million for the six months ended June 30, 2022 and June 30, 2021, includes $6.3 millionrespectively, in incremental stock-based compensation expense related to the deemed modification of the unvested portion of grants held by our former COO at the time of transition, even though these shares continue to vest over their existing vesting schedule through 2022. In accordance with ASC 718, the fair value of these awards were modified and all related expense accelerated on the date of modification as a result of the reduction in required service.Compensation—Stock Compensation.
Restricted Stock Units2014 Equity Incentive Plan
Beginning in 2019, the Company began granting restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”) under its 2014 StockEquity Incentive Plan (the “2014 EIP”), in lieu of restricted stock awards, primarily for stock plan administrative purposes. Restricted stock unit activity during the six months ended June 30, 2021 was as follows:
Number of
Restricted Stock Units Outstanding		Weighted-Average Grant Date Fair Value
Unvested balances at December 31, 20201,261,290 $39.92 
Units granted1,106,162 48.93 
Units vested(278,553)40.24 
Awards forfeited(27,463)40.48 
Unvested balances at June 30, 20212,061,436 $44.70 
Performance BasedPerformance-Based Restricted Stock Units (“PRSU”)
In 20202022 and 2021, 50 percent of the awards madegranted to our Chief Executive Officer were performance based restricted stock units ("PRSUs").PRSUs. The 2022 and 2021 PRSU agreements provide that the quantity of units subject to vesting may range from 0% to 300% of the units granted per the table below based on the Company's absolute total shareholder return (“TSR”) at the end of the eighteen month performance periods. UnitsAt the end of the performance period, the 2021 PRSU resulted in no units granted.

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The following table summarizes PRSU and RSU activity during the six months ended June 30, 2022 :
Number of UnitsWeighted-Average Grant Date Fair Value
Unvested restricted units outstanding as of December 31, 20211,443,284 $45.77 
Granted1,366,275 22.90 
Vested(563,899)41.40 
Forfeited(1)
(259,450)46.29 
Unvested restricted units outstanding as of June 30, 20221,986,210 $31.21 
(1) Includes forfeited awards related to the 2021 PRSUs. At June 30, 2022, or the end of the performance period for the 2021 PRSUs, none of the awards vested.
The PRSU and RSU activity table above includes PRSU units granted per the table belowthat are based on a 100% target payout. Compensation expense is recognized over the required service period of the grant andgrant. The fair value of the RSUs is determined based on the grant date fair value of the awardaward. The fair value of the PRSUs is determined using the Monte Carlo simulation model and is not subject to fluctuation due to achievement of the underlying market-based target.
PRSU activity during the six months ended June 30, 2021 was as follows:
Number of
PRSUs Outstanding		Weighted-Average Grant Date Fair Value
Unvested balances at December 31, 202066,297 $79.72 
Units granted61,437 86.56 
Incremental PRSUs vested in period69,048 
Units vested(135,345)79.72 
Unvested balances at June 30, 202161,437 $86.56 

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Significant assumptions used in the Monte Carlo simulation model for the PRSUs granted during the six months ended June 30, 20212022 and year ended December 31, 20202021 are as follows:
June 30, 2021December 31, 2020
Expected volatility53.6%45.1%
Risk-free interest rate0.1%1.3%
Remaining performance period (in years)1.351.35
Dividend yield00
Restricted Stock Awards
Restricted share activity during the six months ended June 30, 2021 was as follows:
Number of
Restricted Shares
Outstanding		Weighted-Average Grant Date Fair Value
Unvested balances at December 31, 202034,508 $30.13 
Awards vested(33,508)30.11 
Awards forfeited0 0 
Unvested balances at June 30, 20211,000 $30.61 
June 30, 2022December 31, 2021
Expected volatility49.5%53.6%
Risk-free interest rate0.7%0.1%
Remaining performance period (in years)1.461.35
Dividend yield——
Stock Option Activity
Stock option activity during the six months ended June 30, 20212022 was as follows:
Number of
Options
Outstanding		Weighted–
Average
Exercise
Price
Outstanding at December 31, 2020264,002 $8.93 
Options exercised(12,234)14.50 
Options expired(408)1.56 
Outstanding at June 30, 2021251,360 $8.67 
Number of
Options
Outstanding		Weighted–
Average
Exercise
Price
Outstanding at December 31, 2021227,605 $9.15 
Options exercised(36,711)4.96 
Outstanding at June 30, 2022190,894 $9.96 

10. Revenue Recognition
Revenue Recognition Policy
Revenues areRevenue is recognized when control of the promised goods or services is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services over the term of the agreement, generally when made available to the customers. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenues areRevenue is 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
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•Determination of the transaction price
•Allocation of the transaction price to the performance obligations in the contract
•Recognition of revenue when, or as, the Company satisfies a performance obligation
Performance obligations under our contracts consist of subscription and support, perpetual licenses, and professional services revenues within a single operating segment.
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Subscription and Support RevenuesRevenue
The Company's software solutions are available for use as hosted application arrangements under subscription fee agreements without licensing perpetual rights to the software. Subscription fees from these applications are recognized over time on a ratable basis over the customer agreement term beginning on the date the Company's solution is made available to the customer. As our customers have access to use our solutions over the term of the contract agreement we believe this method of revenue recognition provides a faithful depiction of the transfer of services provided. Our subscription contracts are generally 1 to 3 years in length. Amounts that have been invoiced are recorded in accounts receivable and deferred revenuesrevenue or subscription and support revenues,revenue, depending on whether the revenue recognition criteria have been met. Additional fees for monthly usage above the levels included in the standard subscription fee are recognized as subscription and support revenue at the end of each month and is invoiced concurrently. Subscription and support revenue includes revenue related to the Company’s digital engagement application which provides short code connectivity for its two-way short message service (“SMS”) programs and campaigns. As discussed further in the “Principal vs. Agent Considerations” section below, the Company recognizes revenue related to these messaging-related subscription contracts on a gross basis.
Perpetual License RevenuesRevenue
The Company also records revenue from the sales of proprietary software products under perpetual licenses. Revenue from distinct on-premises licenses is recognized upfront at the point in time when the software is made available to the customer. The Company’s products do not require significant customization.
Professional Services Revenue
Professional services provided with subscription and support licenses and perpetual licenses consist of implementation fees, data extraction, configuration, and training. The Company’s implementation and configuration services do not involve significant customization of the software and are not considered essential to the functionality. RevenuesRevenue from professional services are recognized over time as such services are performed. RevenuesRevenue for fixed price services are generally recognized over time applying input methods to estimate progress to completion. RevenuesRevenue for consumption-based services are generally recognized as the services are performed.
Significant Judgments
Performance Obligations and Standalone Selling Price
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of accounting. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. The Company has contracts with customers that often include multiple performance obligations, usually including professional services sold with either individual or multiple subscriptions or perpetual licenses. For these contracts, the Company records individual performance obligations separately if they are distinct by allocating the contract's total transaction price to each performance obligation in an amount based on the relative standalone selling price (“SSP”), of each distinct good or service in the contract.
Judgment is required to determine the SSP for each distinct performance obligation. A residual approach is only applied in limited circumstances when a particular performance obligation has highly variable and uncertain SSP and is bundled with other performance obligations that have observable SSP. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. We determine the SSP based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, historical standalone sales, customer demographics, geographic locations, and the number and types of users within our contracts.
Principal vs. Agent Considerations
The Company evaluates whether it is the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis) for vendor reseller agreements and messaging-related subscription agreements. Where the Company is the principal, it first obtains control of the inputs to the specific good or service and directs their use to create the combined output. The
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Company's control is evidenced by its involvement in the integration of the good or service on its platform before it is transferred to its customers, and is further supported by the Company being primarily responsible to its customers and having a level of discretion in establishing pricing. While none of the factors individually are considered presumptive or determinative, in reaching conclusions on gross versus net revenue recognition, the Company places the most weight on the analysis of whether or not it is the primary obligor in the arrangement.
Generally, the Company reports revenuesrevenue from vendor reseller agreements on a gross basis, meaning the amounts billed to customers are recorded as revenues,revenue, and expenses incurred are recorded as cost of revenues.revenue. As the Company is primarily
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obligated in its messaging-related subscription contracts, has latitude in establishing prices associated with its messaging program management services, is responsible for fulfillment of the transaction, and has credit risk, revenue is recorded on a gross basis with related telecom messaging costs incurred from third parties recorded as cost of revenues. Revenuesrevenue. Revenue provided from agreements in which the Company is an agent are immaterial.
Contract Balances
The timing of revenue recognition, billings and cash collections can result in billed accounts receivable, unbilled receivables, and deferred revenues.revenue. Billings scheduled to occur after the performance obligation has been satisfied and revenue recognition has occurred result in unbilled receivables, which are expected to be billed during the succeeding twelve-month period and are recorded in Unbilled receivables in our condensed consolidated balance sheets. A contract liability results when we receive prepayments or deposits from customers in advance for implementation, maintenance and other services, as well as subscription fees. Customer prepayments are generally applied against invoices issued to customers when services are performed and billed. We recognize contract liabilities as revenuesrevenue upon satisfaction of the underlying performance obligations. Contract liabilities that are expected to be recognized as revenuesrevenue during the succeeding twelve-month period are recorded in Deferred revenue and the remaining portion is recorded in 'Deferred“Deferred revenue noncurrent'noncurrent” on the accompanying condensed consolidated balance sheets at the end of each reporting period.
Deferred revenuesrevenue primarily consistconsists of amounts that have been billed to or received from customers in advance of revenue recognition and prepayments received from customers in advance for maintenance and other services, as well as initial subscription fees. We recognize deferred revenuesrevenue as revenuesrevenue when the services are performed, and the corresponding revenue recognition criteria are met. Customer prepayments are generally applied against invoices issued to customers when services are performed and billed. Our payment terms vary by the type and location of our customer and the products or services offered. The term between invoicing and when payment is due is not significant. For certain products or services and customer types, we require payment before the products or services are delivered to the customer.
Unbilled Receivables
Unbilled receivables represent amounts for which the Company has recognized revenue, pursuant to its revenue recognition policy, for software licenses already delivered and professional services already performed, but invoiced in arrears and for which the Company believes it has an unconditional right to payment. As of June 30, 20212022 and December 31, 2020,2021, unbilled receivables were $5.7$5.2 million and $4.6$4.8 million, respectively.
Deferred Commissions
Sales commissions earned by our sales force, and related payroll taxes, are considered incremental and recoverable costs of obtaining a contract with a customer. Deferred commissions and other costs for new customer contracts are capitalized upon contract signing and amortized on a systematic basis that is consistent with the transfer of goods and services over the expected life of the customer relationships, which has been determined to be approximately 6 years. The expected life of our customer relationships is based on historical data and management estimates, including estimated renewal terms and the useful life of the associated underlying technology. Commissions paid on renewal contracts are not commensurate with commissions paid on new customer contracts, as such, deferred commissions related to renewals are capitalized and amortized over the estimated average contractual renewal term of 18 months. We utilized the 'portfolio approach' practical expedient permitted under ASC 606-10-10-4, which allows entities to apply the guidance to a portfolio of contracts with similar characteristics as the effects on the financial statements of this approach would not differ materially from applying the guidance to individual contracts. The portion of capitalized costs expected to be amortized during the succeeding twelve-month period is recorded in current assets as deferred commissions, current, and the remainder is recorded in long-term assets as deferred commissions, net of current portion. Amortization expense is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations. Deferred commissions are reviewed for impairment whenever events or circumstances
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indicate their carrying value may not be recoverable consistent with the Company's long-lived assets policy. No indicators of impairment were identified during the six months ended June 30, 2021.2022.
The following table presents the activity impacting deferred commissions for the six months ended June 30, 2021 (in thousands)2022 :
($ in thousands)Deferred Commissions
Balance at December 31, 20202021$18,74624,632 
   Capitalized deferred commissions7,3017,051 
   Amortization of deferred commissions(3,725)(5,816)
Balance at June 30, 20212022$22,32225,867 
Commissions capitalized in excess of amortization of deferred commissions for the three and six months ended June 30, 20212022 were $2.0$0.3 million and $3.6$1.2 million, respectively.
Deferred Revenue
Deferred revenue represents either customer advance payments or billings for which the aforementioned revenue recognition criteria have not yet been met.
Deferred revenue is mainly unearned revenue related to subscription services and support services. During the six months ended June 30, 2021,2022, we recognized $61.8$71.5 million and $1.6$2.3 million of subscription services and professional services revenue, respectively, that was included in the deferred revenue balances at the beginning of the period. In addition, during the six months ended June 30, 20212022 we recognized $3.2$6.6 million in revenue that was included in the acquired deferred revenue balance of our 20212022 acquisitions as disclosed in “Note 2, Acquisitions.2. Acquisitions.”
Remaining Performance Obligations
As of June 30, 2021,2022, approximately $272.8$298.6 million of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 68%70% of these remaining performance obligations over the next 12 months, with the balance recognized thereafter.
Disaggregated Revenue
The Company disaggregates revenue from contracts with customers by geography and revenue generating activity, as it believes it best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
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Revenue by geography is based on the ship-to address of the customer, which is intended to approximate where the customers' users are located. The ship-to country is generally the same as the billing country. The Company has operations primarily in the U.S.,United States, United Kingdom and Canada. Information about these operations is presented below (in thousands):
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
Revenues:Revenues:Revenues:
Subscription and support:Subscription and support:Subscription and support:
United States United States$50,862 $50,619 $103,817 $96,590  United States$52,996 $50,862 $104,340 $103,817 
United Kingdom United Kingdom12,658 9,350 22,052 19,346  United Kingdom10,120 12,658 21,709 22,052 
Canada Canada3,624 3,360 6,962 7,942  Canada5,427 3,624 8,895 6,962 
Other International Other International5,261 4,370 10,227 7,712  Other International6,474 5,261 13,700 10,227 
Total subscription and support revenue Total subscription and support revenue72,405 67,699 143,058 131,590  Total subscription and support revenue75,017 72,405 148,644 143,058 
Perpetual license:Perpetual license:Perpetual license:
United States United States338 222 591 504  United States734 338 1,471 591 
United Kingdom United Kingdom0 0 11 16  United Kingdom162 — 291 11 
Canada Canada10 36 52 57  Canada101 10 177 52 
Other International Other International67 233 113 275  Other International861 67 1,697 113 
Total perpetual license revenue Total perpetual license revenue415 491 767 852  Total perpetual license revenue1,858 415 3,636 767 
Professional services:Professional services:Professional services:
United States United States2,150 2,197 4,194 4,907  United States1,752 2,150 3,447 4,194 
United Kingdom United Kingdom802 375 1,466 1,189  United Kingdom670 802 1,459 1,466 
Canada Canada104 96 192 234  Canada255 104 459 192 
Other International Other International388 457 556 575  Other International675 388 1,298 556 
Total professional service revenue Total professional service revenue3,444 3,125 6,408 6,905  Total professional service revenue3,352 3,444 6,663 6,408 
Total revenueTotal revenue$76,264 $71,315 $150,233 $139,347 Total revenue$80,227 $76,264 $158,943 $150,233 

11. Related Party Transactions
We are a party to 2 agreements with companies controlled by a non-management investor in the Company:
•On March 28, 2017, the Company entered into an amendment to the Amended and Restated Technology Services Agreement with DevFactory FZ LLC (“DevFactory”) to extend the initial term end date from December 31, 2017 to December 31, 2021. Additionally, the Company amended the option for either party to renew annually for one additional year. The effective date of the amendment is January 1, 2017. DevFactory is an affiliate of ESW Capital LLC (“ESW”) (a non-management investor), which held more than 5% of the Company's capital stock as of June 30, 2021. As of July 9, 2021 ESWs ownership in Upland was reduced to 4.8%. The Company has an outstanding purchase commitment in 2021 for software development services pursuantdoes not have any material related party transactions to this agreement in the amount of $9.6 million. For years after 2021, the purchase commitment amount for software development services will be equal to the prior year purchase commitment increased (decreased) by the percentage change in total revenuereport for the prior year as compared to the preceding year. For example, if 2021 total revenues increase by 10% as compared to 2020 total revenues, then the 2022 purchase commitment will increase by approximately $1.0 million from the 2021 purchase commitment amount to approximately $10.6 million. The Company purchased software development services pursuant to this agreement with DevFactory of $2.4 millionthree and $1.8 million during the three months ended June 30, 2021 and June 30, 2020, respectively, and $4.8 million and $3.7 million during the six months ended June 30, 2021 and June 30, 2020, respectively. As of June 30, 2021 and December 31, 2020 amounts included in accounts payable and accrued liabilities owed to this company totaled $2.4 million and $0.0 million, respectively.2022.
•The Company purchased services from Crossover, Inc. ("Crossover"), a company controlled by ESW Capital, LLC during the three months ended June 30, 2021 and June 30, 2020 of approximately $0.9 million and $1.4 million, respectively, and $1.9 million and $2.5 million during the six months ended June 30, 2021 and June 30, 2020, respectively. Crossover provides a proprietary technology system to help the Company identify, screen, select, assign, and connect with necessary resources from time to time to perform technology software development and other
2312. Subsequent Events

Securities Purchase Agreement
services throughout the Company, and track productivity of such resources. While there are 0 purchase commitments
On July 14, 2022, Upland entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Crossover, the Company continues to use its services in 2021. As of June 30, 2021 and December 31, 2020 amounts included in accounts payable and accrued liabilities owed to this company totaled $0.7 million and $0.6 million, respectively.
The Company has an arrangement with a former subsidiary, Visionael Corporation ("Visionael"Ulysses Aggregator, LP (the “Purchaser”), an affiliate of HGGC, LLC, to provide management, human resource, payrollissue and administrative services. John T. McDonald,sell at closing 115,000 shares of a new designated Series A Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), at a price of $1,000 per share (the “Initial Liquidation Preference”) for an aggregate purchase price of $115.0 million (the “Investment”).

The holders of Series A Preferred Stock will be entitled to dividends (i) at the Company's Chief Executive Officer and Chairmanrate of 4.5% per annum until but excluding the seven year anniversary of the Board, beneficially holds approximately 26.18% interestclosing, and (ii) at the rate of 7% per annum on and after the seven year anniversary of the closing, and are also entitled to fully participate in Visionael. Fees earned from this arrangement forany dividends or other distributions declared or paid on our common stock on an as-converted basis. Dividends will be payable quarterly in arrears, and may be paid, at our option, in cash or by paying dividends in kind. Our ability to pay cash dividends is subject to the three months ended June 30, 2021 and June 30, 2020 were $0 and $15,000, respectively, and $0 and $30,000 duringrestrictions under the six months ended June 30, 2021 and June 30, 2020, respectively. In connection with its arrangement with Visionael, the Company has provided advances to Visionael to help cover short term working capital needs. As of June 30, 2021 and December 31, 2020 advances to Visionael included in Prepaid and other on the Company’s condensed consolidated balance sheets totaled $0.0 million and $0.4 million, respectively, net of allowance for credit losses. During the six months ended June 30, 2021 the Company recognized an allowance for credit loss of $0.4 million against the remaining outstanding balance.

Credit Facility.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the year ended December 31, 2020,2021, filed on February 25, 2021.24, 2022. In addition to historical information, this Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements generally relate to future events or our future financial or operating performance. Forward-looking statements may be identified by the use of forward-looking words such as “anticipate,” “believe,” “may,” “will,” “continue,” “seek,” “estimate,” “intend,” “hope,” “predict,” “could,” “should,” “would,” “project,” “plan,” “expect” or the negative or plural of these words or similar expressions, although not all forward-looking statements contain these words. These forward-looking statements include, but are not limited to, statements concerning the following:

•our financial performance and our ability to achieve or sustain profitability or predict future results;
•our plans regarding future acquisitions and our ability to consummate and integrate acquisitions;
•our ability to expand our go to market operations, including our marketing and sales organization, and successfully increase sales of our products;
•our ability to obtain financing in the future on acceptable terms or at all;
•our expectations with respect to revenue, cost of revenue and operating expenses in future periods;
•our expectations with regard to revenue from perpetual licenses and professional services;
•our ability to adapt to the impacts on the global economy associated with the ongoing COVID-19 pandemic;
•our ability to attract and retain customers;
•our ability to successfully enter new markets and manage our international expansion;
•our ability to comply with privacy laws and regulations;
•our ability to deliver high-quality customer service;
•the growth of demand for enterprise work management applications;
•our plans regarding, and our ability to effectively manage, our growth;
•maintaining our senior management team and key personnel;
•the performance of our resellers;
•our ability to adapt to changing market conditions and competition;
•our ability to adapt to technological change and continue to innovate;
•economic and financial conditions;
•the growth of demand for cloud-based, digital transformation applications;
•our ability to integrate our applications with other software applications;
•maintaining and expanding our relationships with third parties;
•costs associated with defending intellectual property infringement and other claims;
•our ability to maintain, protect and enhance our brand and intellectual property;
•our expectations with regard to trends, such as seasonality, which affect our business;
•our expectations with regard to revenue from perpetual licenses and professional services;
•our plans with respect to foreign currency exchange risk and inflation;
•our beliefs regarding how our applications benefit customers and what our competitive strengths are;
•the operation, reliability and security of our third-party data centers;
•the risk that we did not consider another contingency included in this list;
•our expectations as to the payment of dividends; and
•other risk factors included under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020,2021, filed with the SEC on February 25, 2021,24, 2022, as updated by this Quarterly Report on Form 10-Q and periodically updated as necessary in our future quarterly reports on Form 10-Q and other filings that we make with the SEC.

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You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties, and other factors, including those described in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 24, 2022. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could causehave an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, toevents or circumstances could differ materially from ourthose described in the forward-looking statements.
The forward-looking statements including risks and uncertainties detailed in this and our other reports and filings with the SEC. The forward-looking statementsmade in this Quarterly Report on Form 10-Q represent our viewsrelate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We anticipate that subsequent eventsmay not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and developments may causeyou should not place undue reliance on our views to change. However, whileforward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.make.

Overview
We provideUpland provides cloud-based enterprise work management software. We define enterprise work management software as software applications that enable organizations to plan, manage and execute projects and work. Our family of applications enables users to manage their projects, professional workforce and IT investments, automate document-intensive business processes, and effectively engage with their customers, prospects, and community via the web and mobile technologies.
The continued growth of an information-based economy has given rise to a large and growing group of knowledge workers who operate in dynamic work environments as part of geographically dispersed and virtual teams. We believe that manual processes and legacy on- premise enterprise systems are insufficient to address the needs of the modern work environment. In order for knowledge workers to be successful, they need to interact with intuitive enterprise work systems in a collaborative way, including real-time access. Today, legacy processes and systems are being disrupted and replaced by cloud-based enterprise work management software that improves visibility, collaboration and productivity.
In response to these changes, we are providing organizations and their knowledge workers with software applications that better align resources with business objectives and increase visibility, governance, collaboration, quality of customer experience, and responsiveness to changes in the business environment. This results in increased work capacity, higher productivity, better execution, and greater levels of customer engagement. Our applications are easy-to-use, scalable, and offer real-time collaboration for knowledge workers distributed on a local or global scale. Our software applications address diverse enterprise work challenges and our customers currently use our applicationsto drive digital transformation in the following functional areas:business functions:
•Marketing. Digital marketing, e-commerce, and customer service teams use our applications to interact with consumers across multiple channels to acquire new customers, drive product and service utilization, resolve issues, and build brand loyalty. Our applications deliver value to CX-focusedcustomer experience, or CXM-focused organizations across a variety of use cases including mobile messaging, mobile application marketing, Voice of Customer engagement, or VoC, email marketing, knowledge management and call center productivity. Our teams bring deep industry experience in orchestrating campaigns and interactionsWe also offer customer data platform, or CDP, solutions that consumers want and value.provide organizations the ability to unify customer data stored across diverse systems to drive more personalized omnichannel campaigns.
•Sales. Sales teams employ our applications to drive growth through deeper customer engagement, reduced sales cycle times, and overall improved collaboration between sales, marketing, and other customer-facing functions. We offer applications that help organizations optimize their sales opportunity and account management processes, coordinate proposal and reference activities, collaborate on the creation and publication of digital content, and gain increased control over key sales and marketing workflows, activities, and budgets.
•Contact Center. Customer service and support environments use our applications to enable agents to resolve issues and engage customers. We offer applications that improve customer experience and reduce call volume and cycle times through customer self-service products and VoC technology that captures customer sentiment in real-time. UplandWe also offersoffer products that improve call center agent productivity by providing more direct access to knowledge and to customer sentiment thereby improving both inbound call outcomes and proactive outbound success. We also provide products that deliver knowledge-based, guided workflows for customer service environments supporting complex products in strict regulatory requirements. Additional solutions help call center leadership to manage agent performance and measure real-time performance relative to call resolution and customer sentiment, improve performance through gamification, and gather agent feedback to keep employee engagement high.
•Project Management. Business leaders and Project Management Offices, or PMOs use our applications to optimize project portfolios, balance capacity against demand, improve financial-based decision making, align execution of projects to strategy across large organizations, and manage the entire project delivery lifecycle. Our applications deliver value to project management across a variety of use cases including continuous improvement, enterprise information tech IT, new product development, and services departments along with industry depth in higher education, public sector, and healthcare IT.
•Information Technology. IT departments use our applications to manage a variety of IT activities and resources across the enterprise. Our applications help information technology departments ensure they are delivering against the objectives of the business by helping them select and prioritize the right investments, gain greater control of resource
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demand and allocation, and track and report benefit realization. Our applications enable executives to gain better insight into IT spending to help prevent cost overruns and understand the nature of consumption.
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•Business Operations. Multiple functional departments use our applications to streamline operations and accelerate business performance across their value chains. UplandOur solutions in this area range from supply chain collaboration and factory management, back office document and vendor management, to applications that improve sales responsiveness. In addition, our products help operations teams compose, automate and exchange documents based on content from existing back-office systems to produce interactive business communications, while maintaining compliance and reducing production costs.
•Human Resources and Legal. Human resources, or HR, legal departments, and law firms use our applications to improve collaboration and operational control and streamline routine processes. We offer applications that automate document management and workflow including, contracts, records, and other documentation that require enhanced security and compliance requirements. Other applications support HR-specific workflows including onboarding, employee management, termination, HR support, and time and expense management.
We sell our software applications primarily through a direct sales organization comprised of inside sales and field sales personnel. In addition to our direct sales organization, we have an indirect sales organization, which sells to distributors and value-added resellers. We employ a land-and-expand go-to-market strategy. After we demonstrate the value of an initial application to a customer, our sales and account management teams work to expand the adoption of that initial application across the customer, as well as cross-sell additional applications to address other enterprise work managementdigital transformation needs of the customer. Our customer success organization supports our direct sales efforts by managing the post-sale customer lifecycle.
Our subscription agreements are typically sold either on a per-seat basis or on a minimum contracted volume basis with overage fees billed in arrears, depending on the application being sold. We service customers ranging from large global corporations and government agencies to small- and medium-sized businesses. We have more than 10,000 customers with over 1,000,000 users across a broad range of industries, including financial services, retail, technology, manufacturing, legal, education, consumer goods, media, telecommunications, government, non-profit, food and beverage, healthcare and life sciences.
Through a series of acquisitions and integrations, we have established a library of diverse, family ofcloud-based software applications under the Upland brand and inthat support the product solution categoriesbusiness functions listed above each of which addresses aand address specific enterprise work management need.digital transformation needs. Our revenue has grown from $98.0 million in 2017 to $291.8$302.0 million in 2020,2021, representing a compound annual growth rate of 44%33%. During the six months ended June 30, 20212022 foreign revenue as a percent of total revenue increased to 28%31% compared to 26%28% during the yearsix months ended December 31, 2020.June 30, 2021. See “Note 10. Revenue Recognition” in the notes to our unaudited condensed consolidated financial statements for more information regarding our revenue as it relates to domestic and foreign operations.
To support continued growth, we intend to pursue acquisitions within our core enterprise solution suites of complementary technologies and businesses. This will expand our product families,library, customer base, and market access resulting in increased benefits of scale. Consistent with our growth strategy, we have made twenty-nine31 acquisitions from February 2012 through June 30, 2021.
2022.
COVID-19 Impact
In March 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic, which has created significant economic uncertainty across the globe and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns.
The ongoing spread of COVID-19 remains a global pandemic, compounded with the discovery of new COVID-19 variants (such as Delta and Omicron). However, with the gradual easing of COVID-19 lockdown restrictions globally and progress made in the development and distribution of vaccines and boosters, stability in the markets have continued to improve. As such, the administrationCompany gradually picked up acquisition activity in 2021 and continued into the first quarter of vaccine programs progresses and cases decline, we continue to evaluate our plans to reopen our facilities and resume business travel for our employees. 2022.

We cannot predict the extent to which the COVID-19 outbreak will continue to impact our business or operating results, which is highly dependent on inherently uncertain future developments, including the severity of COVID-19 and the actions taken by governments and private businesses in relation to COVID-19 containment. As our platform is offered as a subscription-based service, the effect of the outbreak may not be fully reflected in our operating results until future periods, if at all.
While we have limited exposure The persistence of COVID-19 and the preventative measures implemented to help limit the industry verticals that have been hardest hit by the pandemic (including the travel, transportation, entertainment and retail industries) we have seen an impact to new bookings and churn which we attribute to COVID-19. The continued impact to bookings and churn is uncertain. In 2020, the impact to new bookings and churn attributable to Covid-19 was more than offset by strength in our cloud offerings that enable our customers to digitally transform their organizations at a time when they must adapt to remote work and digital engagement even more quickly and strong sales into political campaigns in the US in 2020 due to an increase in US presidential year related campaign activity. Generally, the campaign related increase experienced in 2020 is not repeating in 2021.
During the second, third and fourth quarters of 2020 we paused our acquisition activity in order to gauge the overall economic impactspread of the pandemicillness, have impacted, and focus on evaluatingwill continue to impact, our pipelineability to operate our business and may materially and adversely impact our business, financial condition, and results of opportunities. This resulted in a steady decrease in acquisitionoperations.

The health and well-being of our employees, customers, partners and communities continues to be our main priority. As such, we support and continue the remote working arrangements for our employees.
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Results of Operations
Consolidated Statements of Operations Data
The following tables set forth our results of operations for the specified periods, as well as our results of operations for the specified periods as a percentage of revenue. The period-to-period comparisons of results of operations are not necessarily indicative of results for future periods.

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
AmountPercent of RevenueAmountPercent of RevenueAmountPercent of RevenueAmountPercent of Revenue
(dollars in thousands, except share and per share data)
Revenue:
Subscription and support$75,017 94 %$72,405 95 %$148,644 94 %$143,058 95 %
Perpetual license1,858 2 %415 1 %3,636 2 %767 1 %
Total product revenue76,875 96 %72,820 96 %152,280 96 %143,825 96 %
Professional services3,352 4 %3,444 4 %6,663 4 %6,408 4 %
Total revenue80,227 100 %76,264 100 %158,943 100 %150,233 100 %
Cost of revenue:
Subscription and support (1)(3)
24,125 30 %23,161 30 %46,194 29 %45,843 31 %
Professional services and other (1)
2,428 3 %1,851 3 %5,114 3 %3,596 2 %
Total cost of revenue26,553 33 %25,012 33 %51,308 32 %49,439 33 %
Gross profit53,674 67 %51,252 67 %107,635 68 %100,794 67 %
Operating expenses:
Sales and marketing (1)
15,331 19 %14,298 19 %30,924 19 %26,730 18 %
Research and development (1)
11,676 15 %11,113 15 %23,743 15 %22,053 15 %
General and administrative (1)(2)
21,828 27 %19,192 25 %41,442 26 %43,561 29 %
Depreciation and amortization10,802 13 %10,278 13 %21,853 14 %20,021 13 %
Acquisition-related expenses4,925 6 %5,534 7 %15,338 10 %15,120 10 %
Total operating expenses64,562 80 %60,415 79 %133,300 84 %127,485 85 %
Loss from operations(10,888)(13)%(9,163)(12)%(25,665)(16)%(26,691)(18)%
Other Expense:
Interest expense, net(7,754)(10)%(7,942)(10)%(15,516)(10)%(15,729)(10)%
Other income (expense), net1,777 2 %(399)(1)%1,359 1 %(162)(1)%
Total other expense(5,977)(8)%(8,341)(11)%(14,157)(9)%(15,891)(11)%
Loss before provision for income taxes(16,865)(21)%(17,504)(23)%(39,822)(25)%(42,582)(29)%
Benefit from (provision for) income taxes472 1 %(1,538)(2)%598 — %2,856 3 %
Net loss$(16,393)(20)%$(19,042)(25)%$(39,224)(25)%$(39,726)(26)%
Net loss per common share, basic and diluted$(0.52)$(0.63)$(1.25)$(1.32)
Weighted-average common shares outstanding, basic and diluted31,380,505 30,097,749 31,272,489 30,034,252 
(1) Includes stock-based compensation detailed under Share-based Compensation in “Item 1. Financial Statements—Note 9. Stockholders' Equity”.
(2) Includes General and administrative stock-based compensation of $12.1 million and $10.4 million for the three months June 30, 2022 and June 30, 2021, respectively, and $21.1 million and $26.0 million for the six months ended June 30, 2022 and June 30, 2021, respectively. General and administrative expense excluding stock-based compensation as a percentage of total revenues was 12% and 11% for the three months ended June 30, 2022 and June 30, 2021, respectively, and 13% and 12% for the six months ended June 30, 2022 and June 30, 2021, respectively.
(3) Includes depreciation and amortization of $3.1 million and $2.9 million for the three months ended June 30, 2022 and June 30, 2021, respectively, and $6.3 million and $5.6 million for the six months ended June 30, 2022 and June 30, 2021, respectively.


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Comparison of the Three and Six Months Ended June 30, 2022 and 2021
Revenue
Three Months Ended June 30,Six Months Ended June 30,
20222021% Change20222021% Change
(dollars in thousands)
Revenue:
Subscription and support$75,017$72,4054 %$148,644$143,0584 %
Perpetual license1,858415348 %3,636767374 %
Total product revenue76,87572,8206 %152,280143,8256 %
Professional services3,3523,444(3)%6,6636,4084 %
Total revenue$80,227$76,2645 %$158,943$150,2336 %
Percentage of revenue:
Subscription and support94%95%94%95%
Perpetual license2%1%2%1%
Total product revenue96%96%96%96%
Professional services4%4%4%4%
Total revenue100%100%100%100%
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(dollars in thousands)
Reconciliation of Total revenue to Non-GAAP Core Organic Revenue:
Total revenue (1)
$80,227$76,264$158,943$150,233
Less:
Subscription and support revenue from acquisitions not fully in the prior year comparative period7,29710423,2159,152
Perpetual license revenue1,8584153,636767
Professional services revenue3,3523,4446,6636,408
Subscription and support revenue from Sunset Assets (2)
160353342747
Overage Charges (3)
3,0054,1815,6498,879
Political Revenue (4)
—233—984
Non-GAAP Core Organic Revenue (5)
$64,555$67,534$119,438$123,296
(1) After the reduction of $1.7 million and $3.6 million purchase accounting deferred revenue discount for the three and six months ended June 30, 2022, respectively.
(2) Subscription and support revenue from Sunset Assets is revenue related to the divestiture and sunset of certain minor non-strategic customer contracts (collectively referred to as “Sunset Assets”).
(3) Overage Charges are amounts paid to the Company by a customer (in addition to such customer’s contractual minimum payment commitments) as a result of such customer’s number of users or level of usage of services including text and e-mail messaging and third party pass-through costs exceeding the levels stipulated in such customer’s license or related purchase agreements with the Company.
(4) Political Revenue is CXM usage revenue from US presidential campaigns.
(5) Non-GAAP Core Organic Revenue excludes revenues from acquisitions closed during or subsequent to the prior year comparable period, Perpetual license revenues, Professional services revenues, Revenue from Sunset Assets, Overage Charges and Political Revenue.


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Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(dollars in thousands)
Reconciliation of Subscription and support revenue to Non-GAAP Core Organic Revenue:
Subscription and support revenue (1)
$75,0170$72,405$148,644$143,058
Less:
Subscription and support revenue from acquisitions not fully in the prior year comparative period7,29710423,2159,152
Subscription and support revenue from Sunset Assets (2)
160353342747
Overage Charges (3)
3,0054,1815,6498,879
Political Revenue (4)
—233—984
Non-GAAP Core Organic Revenue (5)
$64,555$67,534$119,438$123,296
(1) After the reduction of $1.6 million and $3.6 million purchase accounting deferred revenue discount for the three and six months ended June 30, 2022, respectively.
(2) Subscription and support revenue from Sunset Assets is revenue related to the divestiture and sunset of certain minor non-strategic customer contracts (collectively referred to as “Sunset Assets”).
(3) Overage Charges are amounts paid to the Company by a customer (in addition to such customer’s contractual minimum payment commitments) as a result of such customer’s number of users or level of usage of services including text and e-mail messaging and third party pass-through costs exceeding the levels stipulated in such customer’s license or related purchase agreements with the Company.
(4) Political Revenue is CXM usage revenue from US presidential campaigns.
(5) Non-GAAP Core Organic Revenue excludes revenues from acquisitions closed during or subsequent to the prior year comparable period, Revenue from Sunset Assets, Overage Charges and Political Revenue.
For the Three Months Ended June 30, 2022
Total revenue was $80.2 million in the three months ended June 30, 2022, compared to $76.3 million in the three months ended June 30, 2021, an increase of $3.9 million, or 5%. Total revenue growth includes a negative impact of 3 percentage points from changes in foreign currency exchange rates (“FX”). Our organic business excludes acquisitions closed during or subsequent to the prior year comparable period and business operations related expenses over this period. Withto Sunset Assets (the “Organic Business”). The acquisitions not fully in the comparable period contributed $10.0 million to the increase in the three months ended June 30, 2022. Total revenue related to Perpetual license and Professional services related to our Organic Business declined by $1.4 million. Total revenue from Sunset Assets declined by $0.3 million in the quarter as a result of decreased sales and marketing focus on those Sunset Assets. Total revenue related to Overage Charges declined by $1.2 million as a result of variable demand in the quarter. The three months ended June 30, 2021 included $0.2 million of Political Revenue which did not repeat in the current quarter and will not repeat for the remainder of 2022. Therefore, net of these non-core revenues, our Non-GAAP Core Organic Revenue decreased by $3.0 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. After removing the negative FX impact on our revenue, net of these non-core revenues, our Non-GAAP Core Organic Revenue decreased by $1.7 million in the three months ended June 30, 2022 compared to the three months ended June 30, 2021.

Subscription and support revenue was $75.0 million in the three months ended June 30, 2022, compared to $72.4 million in the three months ended June 30, 2021, an increase of $2.6 million, or 4%. Subscription and support revenue growth includes a negative impact of 2 percentage points from changes in FX. The acquisitions not fully in the comparable period contributed $7.2 million to the increase in subscription and support revenue in the three months ended June 30, 2022. Subscription and support revenue related to our Sunset Assets decreased $0.3 million in the quarter as a result of decreased sales and marketing focus on those Sunset Assets. Subscription and support revenue related to Overage Charges declined by $1.2 million as a result of variable demand in the quarter. The three months ended June 30, 2021 included $0.2 million of Political Revenue which did not repeat in the current quarter and will not repeat for the remainder of 2022. Therefore, net of these non-core revenues, our Non-GAAP Core Organic Revenue decreased by $3.0 million for the three months ended June 30, 2022 compared to the three months ended June 30, 2021. After removing the negative FX impact on our revenue, net of these non-core revenues, our Non-GAAP Core Organic Revenue decreased by $1.7 million in the three months ended June 30, 2022 compared to the three months ended June 30, 2021.
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Perpetual license revenue was $1.9 million in the three months ended June 30, 2022, compared to $0.4 million in the three months ended June 30, 2021. The acquisitions not fully in the comparable period contributed $1.5 million to the increase in perpetual license revenue in the three months ended June 30, 2022 primarily from the acquisition activity picking up again startingof Objectif Lune. Therefore, perpetual license revenue for our Organic Business for the three months ended June 30, 2022 was flat compared to the three months ended June 30, 2021.
Professional services revenue was relatively flat at $3.4 million in both the three months ended June 30, 2022 as well as in the three months ended June 30, 2021. The acquisitions not fully in the comparable period contributed $1.3 million to the increase in professional services revenue in the three months ended June 30, 2022. Therefore, professional services revenue for our Organic Business decreased by $1.3 million in the three months ended June 30, 2022 compared to the three months ended June 30, 2021 primarily related to our discipline around not accepting unprofitable professional services projects.
For the Six Months Ended June 30, 2022
Total revenue was $158.9 million in the six months ended June 30, 2022, compared to $150.2 million in the six months ended June 30, 2021, an increase of $8.7 million, or 6%. Total revenue growth includes a negative impact of 1.5 percentage points from changes in FX. The acquisitions not fully in the comparable period contributed $18.4 million to the increase in the six months ended June 30, 2022. Total revenue related to Perpetual license and Professional services related to our Organic Business declined by $1.1 million. Total revenue related to Sunset Assets decreased by $0.5 million as a result of decreased sales and marketing focus on those Sunset Assets. Total revenues related to Overage Charges declined by $3.2 million as a result of variable demand during the first half of 2022. The six months ended June 30, 2021 included $1.0 million in Political Revenue, which did not repeat in the first quarterhalf of 2022 and will not repeat for the remainder of 2022. Therefore, net of these non-core revenues, our Non-GAAP Core Organic Revenue decreased by $3.9 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021. After removing the negative FX impact on our revenue, net of these non-core revenues, our Non-GAAP Core Organic Revenue decreased by $2.6 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.
Subscription and support revenue was $148.6 million in the six months ended June 30, 2022, compared to $143.1 million in the six months ended June 30, 2021, includingan increase of $5.5 million, or 4%. Subscription and support revenue growth includes a negative impact of 1.6 percentage points from changes in FX.  The acquisitions not fully in the comparable period contributed $14.0 million to the increase in subscription and support revenue in the six months ended June 30, 2022. Subscription and support revenue related to our Sunset Assets decreased $0.4 million as a result of decreased sales and marketing focus on those Sunset Assets. Subscription and support revenues related to Overage Charges declined by $3.2 million as a result of variable demand in the six months ended June 30, 2022. The six months ended June 30, 2021 included $1.0 million of Political Revenues which did not repeat in the first half of 2022 and will not repeat for the remainder of 2022. Therefore, net of these non-core revenues, our Non-GAAP Core Organic Revenue decreased by $3.9 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021. After removing the negative FX impact on our revenue, net of these non-core revenues, our Non-GAAP Core Organic Revenue decreased by $2.6 million for the six months ended June 30, 2022 compared to the six months ended June 30, 2021.
Perpetual license revenue was $3.6 million in the six months ended June 30, 2022, compared to $0.8 million in the six months ended June 30, 2021, an increase of $2.8 million, or 374%. Perpetual license revenue related to our Sunset Assets decreased by $0.1 million as a result of decreased sales and marketing focus on those Sunset Assets. The acquisitions not fully in the comparable period contributed $3.0 million to the increase in perpetual license revenue in the six months ended June 30, 2022. Therefore, perpetual license revenue from our Organic Business decreased by $0.1 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021.
Professional services revenue was $6.7 million in the six months ended June 30, 2022, compared to $6.4 million in the six months ended June 30, 2021, an increase of $0.3 million, or 4%. The acquisitions not fully in the comparable period contributed $1.4 million to the increase in professional services revenue in the six months ended June 30, 2022. Professional services revenue related to our Sunset Assets decreased by $0.1 million as a result of decreased sales and marketing focus on those Sunset Assets. Therefore, professional services revenue from our Organic Business decreased by $1.1 million in the six months ended June 30, 2022 compared to the six months ended June 30, 2021 primarily related to our discipline around not accepting unprofitable professional services projects.
Cost of Revenue and Gross Profit Percentage
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Three Months Ended June 30,Six Months Ended June 30,
20222021% Change20222021% Change
(dollars in thousands)
Cost of revenue:
Subscription and support (1)
$24,125$23,1614 %$46,194$45,8431 %
Professional services and other2,4281,85131 %5,1143,59642 %
Total cost of revenue26,55325,0126 %51,30849,4394 %
Gross profit$53,674$51,252$107,635$100,794
Percentage of total revenue:
Subscription and support (1)
30%30%29%31%
Professional services and other3%3%3%2%
Total cost of revenue33%33%32%33%
Gross profit67%67%68%67%
(1) Includes depreciation, amortization and stock compensation expense as follows:
Depreciation$2$11$4$22
Amortization$3,127$2,912$6,336$5,626
Stock Compensation$575$563$977$1,005
For the Three Months Ended June 30, 2022
Cost of subscription and support revenue was $24.1 million in the three months ended June 30, 2022, compared to $23.2 million in the three months ended June 30, 2021, an increase of $0.9 million, or 4%. The acquisitions not fully in the comparable period contributed $1.6 million to cost of subscription and support revenue, primarily related to costs associated with the delivery of the newly acquired products. Cost of subscription and support revenue related to our Sunset Assets decreased $0.1 million. Therefore, cost of subscription and support revenue for our Organic Business decreased by $0.6 million, primarily related to a decrease in telecom messaging costs related to a year over year reduction in CXM usage as a result of cyclical highs in 2021 related to US presidential campaigns.
Cost of professional services and other revenue was $2.4 million in the three months ended June 30, 2022, compared to $1.9 million in the three months ended June 30, 2021, an increase of $0.6 million, or 31%. The acquisitions not fully in the comparable period contributed $0.7 million in the cost of professional services revenue. Therefore, the cost of professional services for our Organic Business decreased by $0.1 million.
For the Six Months Ended June 30, 2022
Cost of subscription and support revenue was $46.2 million in the six months ended June 30, 2022, compared to $45.8 million in the six months ended June 30, 2021, an increase of $0.4 million, or 1%. The acquisitions not fully in the comparable period contributed $3.7 million to the increase to cost of subscription and support revenue, primarily related to costs associated with the delivery of the BA Insight, Objectif Lune, Panviva and BlueVenn products. Cost of subscription and support revenue related to our Sunset Assets decreased $0.1 million primarily related to decreased hosting and infrastructure costs. Therefore, cost of subscription and support revenue for the organic portion of our business decreased by $3.2 million, primarily related to decreases in personnel and related costs and messaging costs related to an increase in CXM usage from US presidential campaigns, partially offset by an increase in hosting and infrastructure costs.
Cost of professional services revenue was $5.1 million in the six months ended June 30, 2022, compared to $3.6 million in the six months ended June 30, 2021, an increase of $1.5 million, or 42%. The acquisitions not fully in the comparable period contributed $1.6 million to the increase to cost of professional services revenue, primarily related to an increase in personnel and related costs. Therefore, cost of professional services revenue for our Organic Business decreased by $0.1 million.
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Operating Expenses
Sales and Marketing Expense
Three Months Ended June 30,Six Months Ended June 30,
20222021% Change20222021% Change
(dollars in thousands)
Sales and marketing (1)
$15,331$14,2987 %$30,924$26,73016 %
Percentage of total revenue19%19%19%18%
(1) Includes stock compensation expense as follows:
Stock Compensation$1,498$1,619$2,972$2,756
For the Three Months Ended June 30, 2022
Sales and marketing expense was $15.3 million in the three months ended June 30, 2022, compared to $14.3 million in the three months ended June 30, 2021, an increase of $1.0 million, or 7%. The acquisitions not fully in the comparable period contributed $1.8 million to the increase in sales and marketing expense, primarily consisting of personnel and related costs. Therefore, sales and marketing expense for our Organic Business decreased $0.8 million primarily attributable to decreases in personnel and related costs, partially offset by increases related to sales commissions expense associated with our continued go-to-market investments.
For the Six Months Ended June 30, 2022
Sales and marketing expense was $30.9 million in the six months ended June 30, 2022, compared to $26.7 million in the six months ended June 30, 2021, an increase of $4.2 million, or 16%. The acquisitions not fully in the comparable period contributed $3.9 million to the increase in sales and marketing expense, primarily consisting of personnel and related costs. Therefore, sales and marketing expense for our Organic Business increased by $0.3 million, primarily attributable to sales commission expense associated with our ongoing go-to-market investments.
Research and Development Expense
Three Months Ended June 30,Six Months Ended June 30,
20222021% Change20222021% Change
(dollars in thousands)
Research and development (1)
$11,676$11,1135 %$23,743$22,0538 %
Percentage of total revenue15%15%15%15%
(1) Includes stock compensation expense as follows:
Stock Compensation$658$942$1,406$1,656
For the Three Months Ended June 30, 2022
Research and development expense was $11.7 million in the three months ended June 30, 2022, compared to $11.1 million in the three months ended June 30, 2021, an increase of $0.6 million, or 5%. The acquisitions not fully in the comparable period contributed $2.0 million to the increase in research and development expense primarily consisting of personnel and related costs. Therefore, research and development expense related to our Organic Business decreased by $1.4 million primarily related to personnel and related costs.
For the Six Months Ended June 30, 2022
Research and development expense was $23.7 million in the six months ended June 30, 2022, compared to $22.1 million in the
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six months ended June 30, 2021, an increase of $1.6 million, or 8%. The acquisitions not fully in the comparable period contributed $3.9 million to the increase in research and development expense primarily consisting of personnel and related costs. Research and development expense related to our Sunset Assets decreased by $0.1 million primarily due to reductions in personnel costs. Therefore, research and development costs for our Organic Business decreased by $2.2 million primarily related to personnel and related costs.
General and Administrative Expense
Three Months Ended June 30,Six Months Ended June 30,
20222021% Change20222021% Change
(dollars in thousands)
General and administrative (1)
$21,828$19,19214 %$41,442$43,561(5)%
Percentage of total revenue27%25%26%29%
(1) Includes stock compensation expense as follows:
Stock Compensation$12,146$10,426$21,141$25,957
For the Three Months Ended June 30, 2022
General and administrative expense was $21.8 million in the three months ended June 30, 2022, compared to $19.2 million in the three months ended June 30, 2021, an increase of $2.6 million, or 14%. An increase in general administrative expense of $0.7 million was due to the acquisitions not fully in the comparable period. In addition, general and administrative expense increased incrementally by $1.9 million, which was driven primarily by higher non-cash stock compensation expense, primarily as a result of Panviva,the acceleration of stock-based compensation expense. See “Note 9. Stockholders' Equity—Stock-Based Compensation”, for further details.
For the Six Months Ended June 30, 2022
General and administrative expense was $41.4 million in the six months ended June 30, 2022, compared to $43.6 million in the six months ended June 30, 2021, a decrease of $2.2 million, or 5%. An increase in general administrative expense of $1.7 million was due to the acquisitions not fully in the comparable period, which consisted primarily of personnel and related costs and administrative expenses. Therefore, general and administrative expense decreased by $3.9 million, which was driven primarily by overall decrease in non-cash stock compensation expense and personnel and related costs.
Depreciation and Amortization Expense
Three Months Ended June 30,Six Months Ended June 30,
20222021% Change20222021% Change
(dollars in thousands)
Depreciation and amortization:
    Depreciation$393$458(14)%$828$902(8)%
    Amortization10,4099,8206 %21,02519,11910 %
Total depreciation and amortization$10,802$10,2785 %$21,853$20,0219 %
Percentage of total revenue:
    Depreciation—%—%1%—%
    Amortization13%13%13%13%
Total depreciation and amortization13%13%14%13%
For the Three Months Ended June 30, 2022
Depreciation and amortization expense was $10.8 million in the three months ended June 30, 2022, compared to $10.3 million in the three months ended June 30, 2021, an increase of $0.5 million, or 5%. The acquisitions not fully in the comparable period increased depreciation and amortization expense by $1.5 million, primarily related to acquired intangible assets such as
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customer relationships, developed technology and tradenames. This increase was partially offset by a decrease of $1.0 million in depreciation and amortization expense from assets becoming fully depreciated and amortized.
For the Six Months Ended June 30, 2022
Depreciation and amortization expense was $21.9 million in the six months ended June 30, 2022, compared to $20.0 million in the six months ended June 30, 2021, an increase of $1.9 million, or 9%. The acquisitions not fully in the comparable period increased depreciation and amortization expense by $3.3 million, primarily related to acquired intangible assets such as customer relationships, developed technology and tradenames. Therefore, depreciation and amortization expense for our Organic Business decreased by $1.4 million in the comparative periods.
Acquisition-related Expenses
Three Months Ended June 30,Six Months Ended June 30,
20222021% Change20222021% Change
(dollars in thousands)
Acquisition-related expenses$4,925$5,534(11)%$15,338$15,1201 %
Percentage of total revenue6%7%10%10%
Acquisition-related expenses are typically one-time expenses incurred for up to four quarters after each acquisition, with the majority of these costs being incurred within 6 to 9 months, to transform the acquired business into the Company's unified operating platform. These expenses can vary based on the size, timing and location of each acquisition. These acquisition-related expenses include transaction related expenses such as banker fees, legal and professional fees, insurance costs, and deal bonuses. These acquisition-related expenses also include transformational expenses such as severance, compensation for transitional personnel, office lease terminations, vendor cancellations, and adjustments to the fair value of earnouts due to sellers. Generally, without new acquisition activity, acquisition related expenses decline in subsequent sequential quarters and are no longer incurred after the first anniversary of the last closed acquisition.
For the Three Months Ended June 30, 2022
Acquisition-related expense was $4.9 million in the three months ended June 30, 2022, compared to $5.5 million in the three months ended June 30, 2021, a decrease of $0.6 million, or 11%. During the three months ended June 30, 2022 and June 30, 2021 transaction related expenses were $0.4 million and $2.0 million, respectively, and transformational expenses were $4.5 million and $3.5 million, respectively. The transformational expenses in both the current and year ago periods were primarily related to temporary transitional personnel and related costs along with accelerated rent related expenses incurred in conjunction with the closures of offices of our acquired companies as we consolidate and integrate these acquisitions. We had no new acquisitions during the three months ended June 30, 2022 and closed one acquisition during the three months ended June 30, 2021. Transformation expenses in the three months ended June 30, 2022 include expenses related to acquisitions closed in 2022 as well the three acquisitions closed in 2021 compared to transformation expenses in the three months ended June 30, 2021, which included expenses related to the two acquisitions closed as of March 31, 2021 and one acquisition from 2020. In addition, Acquisition-related expense for the three months ended June 30, 2021 includes a gain of $2.7 million related to a decrease in the fair value of earnout liabilities due to sellers related to the BlueVenn and Second Street acquisitions which was partially offset by a loss on sublease of $1.9 million related to datethe change in 2021, acquisition-related expenses picked up again startingunderlying assumptions related to a subtenant.
For the Six Months Ended June 30, 2022
Acquisition related expense was $15.3 million the six months ended June 30, 2022, compared to $15.1 million in the first quartersix months ended June 30, 2021 an increase of $0.2 million, or 1%. During the six months ended June 30, 2022 and June 30, 2021 and these quarterly acquisitiontransaction related expenses will vary quarterwere $4.9 million and $6.1 million, respectively, and transformational expenses were $10.4 million and $9.0 million, respectively. The transformational expenses in both the current and year ago periods were primarily related to quartertemporary transitional personnel and related costs along with accelerated rent related expenses incurred in proportionconjunction with the closures of offices of our acquired companies as we consolidate and integrate these acquisitions. These accelerated rent related expenses decreased $3.5 million to $1.2 million during the six months ended June 30, 2022 from $4.8 million during the same period in 2021. In addition, Acquisition-related expense for the six months ended June 30, 2021 includes a gain of $2.7 million related to a decrease in the fair value of earnout liabilities due to sellers related to the size, timingBlueVenn and complexitySecond Street acquisitions.
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Other Income (Expense)
Three Months Ended June 30,Six Months Ended June 30,
20222021% Change20222021% Change
(dollars in thousands)
Other expense:
Interest expense, net$(7,754)$(7,942)(2)%$(15,516)$(15,729)(1)%
Other income (expense), net1,777(399)(545)%1,359(162)(939)%
Total other expense$(5,977)$(8,341)(28)%$(14,157)$(15,891)(11)%
Percentage of total revenue:
Interest expense, net(10)%(10)%(10)%(10)%
Other income (expense), net2%(1)%1%(1)%
Total other expense(8)%(11)%(9)%(11)%
For the Three Months Ended June 30, 2022
Interest expense, net was $7.8 million in the three months ended June 30, 2022 compared to $7.9 million in the three months ended June 30, 2021 a decrease in interest expense of $0.1 million or 2%.
Other income was $1.8 million in the three months ended June 30, 2022, compared to other expense of $0.4 million in the three months ended June 30, 2021. Other income recognized during the three months ended June 30, 2022 were related primarily to currency exchange gains.
For the Six Months Ended June 30, 2022
Interest expense was $15.5 million in the six months ended June 30, 2022, compared to $15.7 million in the six months ended June 30, 2021, a decrease in interest expense of $0.2 million, or 1%.
Other income was $1.4 million in the six months ended June 30, 2022, compared to other expense of $0.2 million in the six months ended June 30, 2021. Other income recognized during the six months ended June 30, 2022 were related primarily to currency exchange gains.
Benefit from (Provision for) Income Taxes

Three Months Ended June 30,Six Months Ended June 30,
20222021% Change20222021% Change
(dollars in thousands)
Benefit from (provision for) income taxes$472$(1,538)(131)%$598$2,856(79)%
Percentage of total revenue1%(2)%—%3%
For the Three Months Ended June 30, 2022
Benefit from income taxes was $0.5 million in the three months ended June 30, 2022, compared to a provision for income taxes of $1.5 million in the three months ended June 30, 2021, resulting in a decrease in provision for income taxes of $2.0 million. The benefit from income taxes for the three months ended June 30, 2022 related primarily to foreign income taxes associated with our combined non-U.S. operations. These tax benefits are offset by changes in deferred tax liabilities associated with amortization of United States tax deductible goodwill and state taxes in certain states in which the Company does not file on a consolidated basis or have net operating loss. The expense for the three months ended June 30, 2021 related
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primarily to the release of valuation allowance related to the acquisition of deferred tax liabilities associated with business combinations completed during the period.

For the Six Months Ended June 30, 2022

The benefit from income taxes was $0.6 million in the six months ended June 30, 2022, compared to a benefit from income taxes of $2.9 million in the six months ended June 30, 2021, resulting in a decrease of benefit from income taxes of $2.3 million. This decrease was due primarily to decreased benefits recognized during the current period attributable to the release of valuation allowances associated with acquisitions of domestic entities with deferred tax liabilities that, upon acquisition, allow us to recognize certain deferred tax assets that had previously been offset by a valuation allowances.
Key Metrics
In addition to the GAAP financial measures described below in “Components“Results of Operating Results,Operations,” we regularly review the following key metrics to evaluate and identify trends in our business, measure our performance, prepare financial projections and make strategic decisions.
Adjusted EBITDA
We monitor our Adjusted EBITDA to help us evaluate the effectiveness and efficiency of our operations. Adjusted EBITDA is a non-GAAP financial measure. We define Adjusted EBITDA as net income (loss),loss, calculated in accordance with GAAP, plus depreciation and amortization expense, interest expense, net, other expense (income), net, provision for (benefit from) income taxes, stock-based compensation expense, acquisition-related expenses, and purchase accounting adjustments for deferred revenue.
The following table represents a reconciliation of net loss from continuing operations, the most comparable GAAP measure, to Adjusted EBITDA for each of the periods indicated.
Three Months Ended June 30,Six Months Ended June 30,Three Months Ended June 30,Six Months Ended June 30,
20212020202120202022202120222021
(dollars in thousands)(dollars in thousands)
Reconciliation of net loss to Adjusted EBITDA:Reconciliation of net loss to Adjusted EBITDA:Reconciliation of net loss to Adjusted EBITDA:
Net lossNet loss$(19,042)$(14,159)$(39,726)$(34,240)Net loss$(16,393)$(19,042)$(39,224)$(39,726)
Add:Add:Add:
Depreciation and amortization expenseDepreciation and amortization expense13,201 11,658 25,669 23,395 Depreciation and amortization expense13,931 13,201 28,193 25,669 
Interest expense, netInterest expense, net7,942 7,873 15,729 15,516 Interest expense, net7,754 7,942 15,516 15,729 
Other expense (income), netOther expense (income), net399 15 162 1,417 Other expense (income), net(1,777)399 (1,359)162 
Benefit from income taxes1,538 (673)(2,856)(4,960)
Provision for (benefit from) income taxesProvision for (benefit from) income taxes(472)1,538 (598)(2,856)
Stock-based compensation expenseStock-based compensation expense13,550 10,980 31,374 20,300 Stock-based compensation expense14,877 13,550 26,496 31,374 
Acquisition-related expenseAcquisition-related expense5,534 5,781 15,120 20,939 Acquisition-related expense4,925 5,534 15,338 15,120 
Purchase accounting deferred revenue discountPurchase accounting deferred revenue discount606 2,272 1,100 5,973 Purchase accounting deferred revenue discount1,663 606 3,592 1,100 
Adjusted EBITDAAdjusted EBITDA$23,728 $23,747 $46,572 $48,340 Adjusted EBITDA$24,508 $23,728 $47,954 $46,572 
We believe that Adjusted EBITDA provides useful information to management, investors and others in understanding and evaluating our operating results for the following reasons:
•Adjusted EBITDA is widely used by investors and securities analysts to measure a company’s operating performance without regard to items that can vary substantially from company to company depending upon their financing, capital structures and the method by which assets were acquired;
•Our management uses Adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, in the preparation of our annual operating budget, as a measure of our operating performance, to assess the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance because Adjusted EBITDA eliminates the impact of items that we do not consider indicative of our core operating performance;
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•Adjusted EBITDA provides more consistency and comparability with our past financial performance, facilitates period-to-period comparisons of our operations and also facilitates comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.
Adjusted EBITDA should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with GAAP. The use of Adjusted EBITDA as an analytical tool has limitations such as:
•Depreciation and amortization are non-cash charges, and the assets being depreciated or amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect cash requirements for such replacements; however, much of the depreciation and amortization currently reflected relates to amortization of acquired intangible assets as a result of business combination purchase accounting adjustments, which will not need to be replaced in the future;
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•Adjusted EBITDA may not reflect changes in, or cash requirements for, our working capital needs or contractual commitments;
•Adjusted EBITDA does not reflect the potentially dilutive impact of stock-based compensation;
•Adjusted EBITDA does not reflect interest or tax payments that could reduce cash available for use; and,
•Other companies, including companies in our industry, might calculate Adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as comparative measures.
Because of these limitations, you should consider Adjusted EBITDA together with other financial performance measures, including various cash flow metrics, net loss and our other GAAP results.

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Results of Operations
Consolidated Statements of Operations Data
The following tables set forth our results of operations for the specified periods, as well as our results of operations for the specified periods as a percentage of revenue. The period-to-period comparisons of results of operations are not necessarily indicative of results for future periods.
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
AmountPercent of RevenueAmountPercent of RevenueAmountPercent of RevenueAmountPercent of Revenue
(dollars in thousands, except share and per share data)
Revenue:
Subscription and support$72,405 95 %$67,699 95 %$143,058 95 %$131,590 94 %
Perpetual license415 1 %491 1 %767 1 %852 1 %
Total product revenue72,820 96 %68,190 96 %143,825 96 %132,442 95 %
Professional services3,444 4 %3,125 4 %6,408 4 %6,905 5 %
Total revenue76,264 100 %71,315 100 %150,233 100 %139,347 100 %
Cost of revenue:
Subscription and support (1)(3)
23,161 30 %21,200 30 %45,843 31 %41,139 30 %
Professional services and other (1)
1,851 3 %2,472 3 %3,596 2 %4,734 3 %
Total cost of revenue25,012 33 %23,672 33 %49,439 33 %45,873 33 %
Gross profit51,252 67 %47,643 67 %100,794 67 %93,474 67 %
Operating expenses:
Sales and marketing (1)
14,298 19 %11,820 17 %26,730 18 %22,751 16 %
Research and development (1)
11,113 15 %10,294 14 %22,053 15 %19,412 14 %
General and administrative (1)(2)
19,192 25 %17,655 25 %43,561 29 %34,331 25 %
Depreciation and amortization10,278 13 %9,037 13 %20,021 13 %18,308 13 %
Acquisition-related expenses5,534 7 %5,781 8 %15,120 10 %20,939 15 %
Total operating expenses60,415 79 %54,587 77 %127,485 85 %115,741 83 %
Loss from operations(9,163)(12)%(6,944)(10)%(26,691)(18)%(22,267)(16)%
Other Expense:
Interest expense, net(7,942)(10)%(7,873)(11)%(15,729)(10)%(15,516)(11)%
Other income (expense), net(399)(1)%(15)— %(162)(1)%(1,417)(1)%
Total other expense(8,341)(11)%(7,888)(11)%(15,891)(11)%(16,933)(12)%
Loss before provision for income taxes(17,504)(23)%(14,832)(21)%(42,582)(29)%(39,200)(28)%
Benefit from (provision for) income taxes(1,538)(2)%673 1 %2,856 3 %4,960 3 %
Net loss$(19,042)(25)%$(14,159)(20)%$(39,726)(26)%$(34,240)(25)%
Net loss per common share, basic and diluted$(0.63)$(0.57)$(1.32)$(1.37)
Weighted-average common shares outstanding, basic and diluted30,097,749 25,032,996 30,034,252 25,057,715 
(1) Includes stock-based compensation detailed under Share-based Compensation in Note 9 — Stockholders' Equity.
(2) Includes General and administrative stock-based compensation of $10.4 million and $8.5 million for the three months June 30, 2021 and June 30, 2020, respectively, and $26.0 million and $16.3 million for the six months ended June 30, 2021 and June 30, 2020, respectively. General and administrative expense excluding stock-based compensation as a percentage of total revenues was 11% and 13% for the three months ended June 30, 2021 and June 30, 2020, respectively, and 12% and 13% for the six months ended June 30, 2021 and June 30, 2020, respectively.
(3) Includes depreciation and amortization of $2.9 million and $2.6 million for the three months ended June 30, 2021 and June 30, 2020, respectively, and $5.6 million and $5.1 million for the six months ended June 30, 2021 and June 30, 2020, respectively.

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Comparison of the Three and Six Months Ended June 30, 2021 and 2020
Revenue
Three Months Ended June 30,Six Months Ended June 30,
20212020% Change20212020% Change
(dollars in thousands)
Revenue:
Subscription and support$72,405$67,6997 %$143,058$131,5909 %
Perpetual license415491(15)%767852(10)%
Total product revenue72,82068,1907 %143,825132,4429 %
Professional services3,4443,12510 %6,4086,905(7)%
Total revenue$76,264$71,3157 %$150,233$139,3478 %
Percentage of revenue:
Subscription and support95%95%95%94%
Perpetual license1%1%1%1%
Total product revenue96%96%96%95%
Professional services4%4%4%5%
Total revenue100%100%100%100%
For the Three Months Ended June 30, 2021
Total revenue was $76.3 million in the three months ended June 30, 2021, compared to $71.3 million in the three months ended June 30, 2020, an increase of $5.0 million, or 7%. The acquisitions not fully in the comparative period contributed $7.2 million to the increase after the reduction of $0.6 million purchase accounting deferred revenue discount in the three months ended June 30, 2021. Total revenue related to the divestiture and sunset of certain minor non-strategic customer contracts and related website management and analytics assets (collectively referred to as “Sunset Assets”) declined by $0.4 million as a result of decreased sales and marketing focus on those Sunset Assets. Our organic business (the “Organic Business”) excludes acquisitions closed during or subsequent to the prior year comparable period and business operations related to Sunset Assets. Therefore, total revenue for our Organic Business decreased by $1.8 million. The three months ended June 30, 2020 included $3.6 million of CXM usage revenue from US election-year presidential campaigns which did not repeat in the current period and will not repeat for the remainder of 2021.
Subscription and support revenue was $72.4 million in the three months ended June 30, 2021, compared to $67.7 million in the three months ended June 30, 2020, an increase of $4.7 million, or 7%. The acquisitions not fully in the comparative period contributed $6.3 million to the increase in subscription and support revenue after the reduction of $0.6 million purchase accounting deferred revenue discount in the three months ended June 30, 2021. Subscription and support revenue related to our Sunset Assets decreased $0.4 million as a result of decreased sales and marketing focus on those Sunset Assets. Subscription and support revenue for our Organic Business decreased to $65.7 million from a basis of $66.9 million for the three months ended June 30, 2020. The three months ended June 30, 2020 included $3.6 million of CXM usage revenue from US election-year presidential campaigns which did not repeat in the current period and will not repeat for the remainder of 2021.
Perpetual license revenue was $0.4 million in the three months ended June 30, 2021, compared to $0.5 million in the three months ended June 30, 2020.
Professional services revenue was $3.4 million in the three months ended June 30, 2021, compared to $3.1 million in the three months ended June 30, 2020, an increase of $0.3 million, or 10%. The acquisitions not fully in the comparative period contributed $0.9 million to the increase in professional services revenue in the three months ended June 30, 2021. Professional services revenue for our Organic Business decreased by $0.6 million.
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For the Six Months Ended June 30, 2021
Total revenue was $150.2 million in the six months ended June 30, 2021, compared to $139.3 million in the six months ended June 30, 2020, an increase of $10.9 million, or 8%. The acquisitions not fully in the comparative period contributed $12.7 million to the increase after the reduction of $1.0 million purchase accounting deferred revenue discount in the six months ended June 30, 2021. Total Revenue related to Sunset Assets decreased by $0.9 million as a result of decreased sales and marketing focus on those Sunset Assets. Therefore, total revenue for the Organic Business decreased by $0.9 million. The six months ended June 30, 2020 included $5.7 million of CXM usage revenue from US election-year presidential campaigns which did not repeat in the current period and will not repeat for the remainder of 2021.
Subscription and support revenue was $143.1 million in the six months ended June 30, 2021, compared to $131.6 million in the six months ended June 30, 2020, an increase of $11.5 million, or 9%. The acquisitions not fully in the comparative period contributed $11.8 million to the increase in subscription and support revenue after the reduction of $1.0 million purchase accounting deferred revenue discount in the six months ended June 30, 2021. Subscription and support revenue related to our Sunset Assets decreased $1.0 million as a result of decreased sales and marketing focus on those Sunset Assets. Subscription and support revenue for our Organic Business increased to $123.6 million from a basis of $122.9 million for the six months ended June 30, 2020. The six months ended June 30, 2020 included $5.7 million of CXM usage revenue from US election-year presidential campaigns which did not repeat in the current period and will not repeat for the remainder of 2021.
Perpetual license revenue was $0.8 million in the six months ended June 30, 2021, compared to $0.9 million in the six months ended June 30, 2020, a decrease of $0.1 million.
Professional services revenue was $6.4 million in the six months ended June 30, 2021, compared to $6.9 million in the six months ended June 30, 2020, a decrease of $0.5 million, or 7%. The acquisitions not fully in the comparative period contributed $1.0 million to the increase in professional services revenue in the six months ended June 30, 2021. Therefore, professional services revenue from our Organic Business decreased by $1.5 million due primarily to COVID-19 related travel impacts.
Cost of Revenue and Gross Profit Percentage
Three Months Ended June 30,Six Months Ended June 30,
20212020% Change20212020% Change
(dollars in thousands)
Cost of revenue:
Subscription and support (1)
$23,161$21,2009 %$45,843$41,13911 %
Professional services and other1,8512,472(25)%3,5964,734(24)%
Total cost of revenue25,01223,6726 %49,43945,8738 %
Gross profit$51,252$47,643$100,794$93,474
Percentage of total revenue:
Subscription and support (1)
30%30%31%30%
Professional services and other3%3%2%3%
Total cost of revenue33%33%33%33%
Gross profit67%67%67%67%
(1) Includes depreciation, amortization and stock compensation expense as follows:
Depreciation$11$45$22$116
Amortization$2,912$2,576$5,626$4,971
Stock Compensation$563$570$1,005$888
For the Three Months Ended June 30, 2021
Cost of subscription and support revenue was $23.2 million in the three months ended June 30, 2021, compared to $21.2 million in the three months ended June 30, 2020, an increase of $2.0 million, or 9%. The acquisitions not fully in the comparative period contributed $1.8 million to the increase to cost of subscription and support revenue, primarily related to
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costs associated with the delivery of the Second Street, BlueVenn, & Panviva products. Cost of subscription and support revenue related to our Sunset Assets decreased $0.2 million. Therefore, cost of subscription and support revenue for our Organic Business increased by $0.4 million, primarily related to personnel and related expenses and infrastructure and hosting costs, which were partially offset by a decrease in telecom messaging costs related to a year over year reduction in CXM usage as a result of cyclical highs in 2020 related to US election-year presidential campaigns.
Cost of professional services and other revenue was $1.9 million in the three months ended June 30, 2021, compared to $2.5 million in the three months ended June 30, 2020, a decrease of $0.6 million, or 25%. The acquisitions not fully in the comparative period contributed $0.4 million to the increase in the cost of professional services revenue. Therefore, cost of professional services revenue for our Organic Business decreased by $1.0 million, primarily related to personnel and related costs, most of which were the result of our planned operating efficiencies.
For the Six Months Ended June 30, 2021
Cost of subscription and support revenue was $45.8 million in the six months ended June 30, 2021, compared to $41.1 million in the six months ended June 30, 2020, an increase of $4.7 million, or 11%. The acquisitions not fully in the comparative period contributed $3.7 million to the increase to cost of subscription and support revenue, primarily related to costs associated with the delivery of the Localytics, Second Street, BlueVenn, and Panviva products. Cost of subscription and support revenue related to our Sunset Assets decreased $0.3 million primarily related to hosting and infrastructure costs. Therefore, cost of subscription and support revenue for the organic portion of our business increased by $1.3 million, primarily related to personnel and related costs and infrastructure and hosting costs, which were partially offset by a decrease in telecom messaging costs related to a year over year reduction in CXM usage as a result of cyclical highs in 2020 related to US election-year presidential campaigns.
Cost of professional services revenue was $3.6 million in the six months ended June 30, 2021, compared to $4.7 million in the six months ended June 30, 2020, a decrease of $1.1 million, or 24%. The acquisitions not fully in the comparative period contributed $0.4 million to the increase to cost of professional services revenue, primarily related to an increase in personnel and related costs. Therefore, cost of professional services revenue for our Organic Business decreased by $1.5 million, primarily related to personnel and related costs, most of which were the result of our planned operating efficiencies.
Operating Expenses
Sales and Marketing Expense
Three Months Ended June 30,Six Months Ended June 30,
20212020% Change20212020% Change
(dollars in thousands)
Sales and marketing (1)
$14,298$11,82021 %$26,730$22,75117 %
Percentage of total revenue19%17%18%16%
(1) Includes stock compensation expense as follows:
Stock Compensation$1,619$898$2,756$1,447
For the Three Months Ended June 30, 2021
Sales and marketing expense was $14.3 million in the three months ended June 30, 2021, compared to $11.8 million in the three months ended June 30, 2020, an increase of $2.5 million, or 21%. The acquisitions not fully in the comparative period contributed $1.0 million to the increase in sales and marketing expense, primarily consisting of personnel and related costs. Sales and marketing expense for our Organic Business increased $1.5 million in the comparative periods, primarily attributable to personnel and related costs associated with our continued go-to-market investments.
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For the Six Months Ended June 30, 2021
Sales and marketing expense was $26.7 million in the six months ended June 30, 2021, compared to $22.8 million in the six months ended June 30, 2020, an increase of $3.9 million, or 17%. The acquisitions not fully in the comparative period contributed $1.0 million to the increase in sales and marketing expense, primarily consisting of personnel and related costs in the six months ended June 30, 2021. Therefore, sales and marketing expense for the organic portion of our business increased by $2.9 million, primarily attributable to personnel and related costs associated with our continued go-to-market investments.
Research and Development Expense
Three Months Ended June 30,Six Months Ended June 30,
20212020% Change20212020% Change
(dollars in thousands)
Research and development (1)
$11,113$10,2948 %$22,053$19,41214 %
Percentage of total revenue15%14%15%14%
(1) Includes stock compensation expense as follows:
Stock Compensation$942$1,019$1,656$1,634
For the Three Months Ended June 30, 2021
Research and development expense was $11.1 million in the three months ended June 30, 2021, compared to $10.3 million in the three months ended June 30, 2020, an increase of $0.8 million, or 8%. The acquisitions not fully in the comparative period contributed $0.8 million to the increase in research and development expense primarily consisting of personnel and related costs. Therefore, research and development expense related to our Organic Business remained flat.
For the Six Months Ended June 30, 2021
Research and development expense was $22.1 million in the six months ended June 30, 2021, compared to $19.4 million in the six months ended June 30, 2020, an increase of $2.7 million, or 14%. The acquisitions not fully in the comparative period contributed $1.5 million to the increase in research and development expense primarily consisting of personnel and related costs. Therefore, research and development costs for our Organic Business increased by $1.2 million primarily related to personnel and related costs.
General and Administrative Expense
Three Months Ended June 30,Six Months Ended June 30,
20212020% Change20212020% Change
(dollars in thousands)
General and administrative (1)
$19,192$17,6559 %$43,561$34,33127 %
Percentage of total revenue25%25%29%25%
(1) Includes stock compensation expense as follows:
Stock Compensation$10,426$8,493$25,957$16,331
For the Three Months Ended June 30, 2021
General and administrative expense was $19.2 million in the three months ended June 30, 2021, compared to $17.7 million in the three months ended June 30, 2020, an increase of $1.5 million, or 9%. An increase in general administrative expense of $0.1 million was due to the acquisitions not fully in the comparative period Therefore, general and administrative expense for our Organic Business increased by $1.4 million, which was driven primarily by increased non-cash stock compensation expense.
For the Six Months Ended June 30, 2021
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General and administrative expense was $43.6 million in the six months ended June 30, 2021, compared to $34.3 million in the six months ended June 30, 2020, an increase of $9.3 million, or 27%. An increase in general administrative expense of $0.3 million was due to the acquisitions not fully in the comparative period. Therefore, general and administrative expense for our Organic Business increased by $9.0 million, which was driven primarily by increased non-cash stock compensation expense, including a one-time increase in non-cash stock compensation expense related to the departure of our former co-President and Chief Operating Officer, and also includes investment in our new go-to-market leadership team and other personnel related costs.
Depreciation and Amortization Expense
Three Months Ended June 30,Six Months Ended June 30,
20212020% Change20212020% Change
(dollars in thousands)
Depreciation and amortization:
    Depreciation$458$4531 %$902$914(1)%
    Amortization9,8208,58414 %19,11917,39410 %
Total depreciation and amortization$10,278$9,03714 %$20,021$18,3089 %
Percentage of total revenue:
    Depreciation—%1%—%1%
    Amortization13%12%13%12%
Total depreciation and amortization13%13%13%13%
For the Three Months Ended June 30, 2021
Depreciation and amortization expense was $10.3 million in the three months ended June 30, 2021, compared to $9.0 million in the three months ended June 30, 2020, an increase of $1.3 million, or 14%. The acquisitions not fully in the comparative period increased depreciation and amortization expense by $1.3 million, primarily related to acquired intangible assets such as customer relationships, developed technology and tradenames.
For the Six Months Ended June 30, 2021
Depreciation and amortization expense was $20.0 million in the six months ended June 30, 2021, compared to $18.3 million in the six months ended June 30, 2020, an increase of $1.7 million, or 9%. The acquisitions not fully in the comparative period increased depreciation and amortization expense by $2.3 million, primarily related to acquired intangible assets such as customer relationships, developed technology and tradenames. Therefore, depreciation and amortization expense for our Organic Business decreased by $0.6 million in the comparative periods.
Acquisition-related Expenses
Three Months Ended June 30,Six Months Ended June 30,
20212020% Change20212020% Change
(dollars in thousands)
Acquisition-related expenses$5,534$5,781(4)%$15,120$20,939(28)%
Percentage of total revenue7%8%10%15%
Acquisition-related expenses are one-time expenses typically incurred for up to four quarters after each acquisition, with the majority of these costs being incurred within 6 to 9 months, to transform the acquired business into the Company's unified operating platform. These expenses can vary based on the size, timing and location of each acquisition. These acquisition-related expenses include transaction related expenses such as banker fees, legal and professional fees, insurance costs, and deal bonuses. These acquisition-related expenses also include transformational expenses such as severance, compensation for transitional personnel, office lease terminations, vendor cancellations, and adjustments to the fair value of earnouts due to sellers. Generally, without new acquisition activity, acquisition related expenses decline in subsequent sequential quarters and are no longer incurred after the first anniversary of the last closed acquisition.
For the Three Months Ended June 30, 2021
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Acquisition-related expense was $5.5 million in the three months ended June 30, 2021, compared to $5.8 million in the three months ended June 30, 2020, a decrease of $0.3 million, or 4%. During the three months ended June 30, 2021 and June 30, 2020 transaction related expenses were $2.0 million and $0.2 million, respectively, and transformational expenses were $3.5 million and $5.6 million, respectively. Transaction costs increased compared to the same period in 2020 as a result of the resumption of our acquisition activity in 2021 after halting acquisitions activity beginning in early 2021 as a result of the COVID-19 pandemic. We closed one transaction during the three months ended June 30, 2021 compared to zero transactions during the same period in prior year. The transformational expenses in both the current and year ago periods were primarily related to temporary transitional personnel and related costs along with accelerated rent related expenses incurred in conjunction with the closures of offices of our acquired companies as we consolidate and integrate these acquisitions. Transformation expenses in 2020 include expenses related to the five acquisitions closed in 2019 as well as the one acquisition closed in 2020 compared to transformation expenses in 2021 related to the three acquisitions closed in 2021 and one acquisition closed in 2020. In addition, Acquisition-related expense for the three months ended June 30, 2021 includes a gain of $2.7 million related to a decrease in the fair value of earnout liabilities due to sellers related to the BlueVenn and Second Street acquisitions which was partially offset by a loss on sublease of $1.9 million related to the change in underlying assumptions related to a subtenant.
For the Six Months Ended June 30, 2021
Acquisition related expense was $15.1 million the six months ended June 30, 2021, compared to $20.9 million in the six months ended June 30, 2020 a decrease of $5.8 million, or 28%. During the six months ended June 30, 2021 and June 30, 2020 transaction related expenses were $6.1 million and $3.5 million, respectively, and transformational expenses were $9.0 million and $17.4 million, respectively. The transformational expenses in both the current and year ago periods were primarily related to temporary transitional personnel and related costs along with accelerated rent related expenses incurred in conjunction with the closures of offices of our acquired companies as we consolidate and integrate these acquisitions. Acquisition-related expense for the six months ended June 30, 2021 includes a gain of $2.7 million related to a decrease in the fair value of earnout liabilities due to sellers related to the BlueVenn and Second Street acquisitions which was partially offset by a loss on sublease of $1.9 million related to the change in underlying assumptions related to a subtenant.
Other Income (Expense)
Three Months Ended June 30,Six Months Ended June 30,
20212020% Change20212020% Change
(dollars in thousands)
Other expense:
Interest expense, net$(7,942)$(7,873)1 %$(15,729)$(15,516)1 %
Other income (expense), net(399)(15)2,560 %(162)(1,417)(89)%
Total other expense$(8,341)$(7,888)6 %$(15,891)$(16,933)(6)%
Percentage of total revenue:
Interest expense, net(10)%(11)%(10)%(11)%
Other income (expense), net(1)%—%(1)%(1)%
Total other expense(11)%(11)%(11)%(12)%
For the Three Months Ended June 30, 2021
Interest expense was $7.9 million in the three months ended June 30, 2021, compared to $7.9 million in the three months ended June 30, 2020.
Other expense was $0.4 million in the three months ended June 30, 2021, compared to other expense of $0.0 million in the three months ended June 30, 2020. Other expense recognized during the three months ended June 30, 2021 related primarily to currency exchange gains (losses) in our foreign entities.
For the Six Months Ended June 30, 2021
Interest expense was $15.7 million in the six months ended June 30, 2021, compared to $15.5 million in the six months ended June 30, 2020, an increase in interest expense of $0.2 million, or 1%.
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Other expense was $0.2 million in the six months ended June 30, 2021, compared to other expense of $1.4 million in the six months ended June 30, 2020. Other expense recognized in the six months ended June 30, 2021 and June 30, 2020 related primarily to foreign currency exchange losses in our UK entities.
Benefit from (Provision for) Income Taxes
Three Months Ended June 30,Six Months Ended June 30,
20212020% Change20212020% Change
(dollars in thousands)
Benefit from (provision for) income taxes$(1,538)$673(329)%$2,856$4,960(42)%
Percentage of total revenue(2)%1%3%3%
For the Three Months Ended June 30, 2021
Provision for income taxes was $1.5 million in the three months ended June 30, 2021, compared to a benefit from income taxes of $0.7 million in the three months ended June 30, 2020, an increase of $2.2 million. The provision for income taxes for the three months ended June 30, 2021 related primarily to the impact of expected future changes in UK tax rates on the balance of deferred tax assets and liabilities per tax law enacted during the three months ended June 30, 2021, and was partially offset by income tax benefits associated with our combined non-U.S. operations. The benefit for the three months ended June 30, 2020 related primarily to deferred tax benefits attributable to the release of valuation allowance related to the acquisitions of deferred tax liabilities associated with business combinations.
For the Six Months Ended June 30, 2021
The benefit from income taxes was $2.9 million in the six months ended June 30, 2021, compared to a benefit from income taxes of $5.0 million in the six months ended June 30, 2020, a decrease of $2.1 million. The benefits for each period are due primarily to deferred tax benefits attributable to the release of valuation allowance related to the acquisitions of deferred tax liabilities associated with business combinations completed during the respective periods. The tax benefit for the six months ended June 30, 2021 is primarily offset by the impact of expected future changes in UK tax rates on the balance of deferred tax assets and liabilities per tax law enacted during the three months ended June 30, 2021.
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Liquidity and Capital Resources
To date, we have financed our operations primarily through the raising of capital including sales of our common stock, cash from operating activities, borrowingand borrowings under our credit facility, and the issuance of notes to sellers in some of our acquisitions.facility. We believe that current cash and cash equivalents, cash flows from operating activities, availability under our existing credit facility, as discussed below, and the ability to offer and sell securities pursuant to our registration statement, as discussed below, will be sufficient to fund our operations for at least the next twelve months. In addition, we intend to utilize the sources of capital available to us under our Credit Facility and registration statement to support our continued growth via acquisitions within our core enterprise solution suites of complementary technologies and businesses.
As of June 30, 2021,2022, we had cash and cash equivalents of $176.5$138.3 million, $60.0 million of available borrowings under our credit facility, as discussed below, and $530.6$525.2 million of borrowings outstanding under our credit facility. As of December 31, 2020,2021, we had cash and cash equivalents of $250.0$189.2 million, $60.0 million of available borrowings under our Credit Facility, and $533.3$527.9 million of borrowings outstanding under our credit facility. The $73.5$50.9 million decrease in cash and cash equivalents from December 31, 20202021 to June 30, 20212022 includes $97.7$62.4 million in cash paid for our threetwo acquisitions completed during 2021,2022, net of $1.2$0.7 million in cash acquired, which was partially offset by a $5.2 million settlement in total consideration for Localytics related to a representation and warranty insurance settlement.acquired. Non-cash acquisition date consideration to be paid in future periods related to these acquisitions includes $10.9$5.9 million in holdback payments and $4.2 million in earnout payments that are due within 12 to 1815 months of the closing dates of the underlying acquisitions. The earnouts are subject to attainment of future performance-based conditions.

Our cash and cash equivalents held by our foreign subsidiaries was $19.3$24.5 million as of June 30, 20212022 and $15.3$24.8 million as of December 31, 2020.2021. If these funds held by our foreign subsidiaries are needed for our domestic operations, a repatriation of these funds wouldmay require us to accrue and pay dividend withholding taxes in the foreign jurisdictions where applicable and accrue and pay U.S. taxes to the extent such dividend income exceeds our ability to utilize net operating losses. However, our intent is to permanently reinvest these funds outside the U.S. and our current plans do not demonstrate a need to repatriate them to fund our domestic operations. We do not provide for federal income taxes on the undistributed earnings of our foreign subsidiaries.
As of June 30, 20212022 and December 31, 2020,2021, we had a working capital surplus of $85.3$35.3 million and surplus of $196.1$106.5 million, respectively, which includes $95.2$103.4 million and $87.6$102.8 million of deferred revenue recorded as a current liability as of June 30, 20212022 and December 31, 2020,2021, respectively. This deferred revenue will be recognized as revenue in future periods in accordance with our revenue recognition policy.

Securities Purchase Agreement

The Securities Purchase Agreement as discussed in “Note 12. Subsequent Events” will provide us an additional $115.0 million in liquidity, which we intend to use for (a) for general corporate purposes and (b) for transaction-related fees and expenses. The closing is expected promptly following the satisfaction of customary terms and conditions, including the expiration of the
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Hart-Scott-Rodino Act notice period. However, we can provide no assurances that the transaction will close on the expected timeline or at all.

The holders of Series A Preferred Stock will be entitled to dividends (i) at the rate of 4.5% per annum until but excluding the seven year anniversary of the closing, and (ii) at the rate of 7% per annum on and after the seven year anniversary of the closing, and are also entitled to fully participate in any dividends or other distributions declared or paid on our common stock on an as-converted basis. Dividends will be payable quarterly in arrears, and may be paid, at our option, in cash or by paying dividends in kind. Our ability to pay cash dividends is subject to the restrictions under the Credit Facility (as defined below).

The Series A Preferred Stock will rank senior to our common stock with respect to distribution rights and rights upon our liquidation, dissolution or winding up (“Liquidation”), on parity with any class or series of our capital stock expressly designated as ranking on parity with the Series A Preferred Stock with respect to distribution rights and rights upon Liquidation, junior to any class or series of our capital stock expressly designated as ranking senior to the Series A Preferred Stock with respect to distribution rights and rights upon Liquidation and junior in right of payment to our existing and future indebtedness, including the Credit Facility.
Credit Facility
On August 6, 2019, we entered into a credit agreement (the “Credit Facility”) which provides for (i) a fully-drawn $350 million, 7 year, senior secured term loan B facility (the “Term Loan”) and (ii) a $60 million, 5 year, revolving credit facility (the “Revolver”) that was fully available as of June 30, 2021. The Credit Facility replaced our previous credit facility. All outstanding balances under our previous credit facility were paid off using proceeds from our current Credit Facility.2022.
On November 26, 2019, the Company entered into a First Incremental Assumption Agreement (the “Incremental Assumption Agreement”) which provides for a term loan facility to be established under the Credit Facility in an aggregate principal amount of $190 million (the “2019 Incremental Term Loan”) which is in addition to the existing $350 million term loans outstanding under the Credit Facility and the $60 million Revolver under the Credit Facility.
The Credit Facility has no financial covenants as long as less than 35% of the Revolver is drawn as of the last day of any fiscal quarter. The credit facility is secured by a security interest in substantially all of our assets and requires us to maintain certain financial covenants. The Credit Facility contains certain non-financial restrictive covenants that limit our ability to transfer or dispose of assets, merge with other companies or consummate certain changes of control, acquire other companies, pay dividends, incur additional indebtedness and liens, effect changes in management and enter into new businesses. As of June 30, 20212022 we were in compliance with all covenants under the Credit Facility. See “Note 6. DebtDebt—Credit Facility” for more information regarding our Credit Facility and outstanding debt as of June 30, 2021.2022.
On August 6, 2019, the Company entered into an interest rate hedge instrument for the full 7 year term, effectively fixing our interest rate at 5.4% for the Term Loan. In addition, on November 26, 2019, the Company entered into interest rate swap agreements to hedge the interest rate risk associated with the Company’s floating rate obligations under the 2019 Incremental Term Loan. These interest rate swaps fix the Company's interest rate (including the hedge premium) at 5.4% for the term of the Credit Facility. The interest rate associated with our $60 million, 5 year, Revolver remains floating.
The interest rate swap has been designated as a cash flow hedge and is valued using a market approach, which is a Level 2 valuation technique. At June 30, 2021,2022, the fair value of the interest rate swap was a $17.8$26.0 million liability as a result of a decline in short term interest rates since entering into the swap agreements.asset. The decreaseincrease in the fair value of the interest rate
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value of the interest rate swap liabilityassets during the threesix months ended June 30, 20212022 is the result of an increase in short term interest rates compared to December 31, 2020.
Registration Statements2021.
On August 10, 2020, we filed a registration statement on Form S-3 (File No. 333-243728) (the “2020 S-3”), which became effective automatically upon its filing and covers an unlimited amount of securities. The 2020 S-3 will remain effective through August 2023.

The following table summarizes our cash flows for the periods indicated:
Six Months Ended June 30,Six Months Ended June 30,
2021202020222021
(dollars in thousands)(dollars in thousands)
Consolidated Statements of Cash Flow Data:Consolidated Statements of Cash Flow Data:Consolidated Statements of Cash Flow Data:
Net cash provided by (used in) operating activities$23,308 $(4,504)
Net cash provided by operating activitiesNet cash provided by operating activities$22,260 $23,308 
Net cash used in investing activitiesNet cash used in investing activities(92,924)(68,548)Net cash used in investing activities(62,653)(92,924)
Net cash used in financing activitiesNet cash used in financing activities(3,381)(14,604)Net cash used in financing activities(6,608)(3,381)
Effect of exchange rate fluctuations on cashEffect of exchange rate fluctuations on cash(493)542 Effect of exchange rate fluctuations on cash(3,873)(493)
Change in cash and cash equivalentsChange in cash and cash equivalents(73,490)(87,114)Change in cash and cash equivalents(50,874)(73,490)
Cash and cash equivalents, beginning of periodCash and cash equivalents, beginning of period250,029 175,024 Cash and cash equivalents, beginning of period189,158 250,029 
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$176,539 $87,910 Cash and cash equivalents, end of period$138,284 $176,539 
Cash Flows from Operating Activities
Cash provided by (used in) operating activities is significantly influenced by the amount of cash we invest in personnel and infrastructure to support the anticipated growth of our business. Included in net cash provided by operations are one-time acquisition related expenses incurred for up to four quarters after each acquisition to transact and transform the acquired business into the Company's unified operating platform. Additionally, operating cash flows includes the impact of earn-outs payments in excess of original purchase accounting estimates. Our working capital consists primarily of cash, receivables from customers, prepaid assets, unbilled professional services, deferred commissions, accounts payable, accrued compensation and other accrued expenses, acquisition related earnout and holdback liabilities, lease liabilities, and deferred revenues. The volume of professional services rendered, the volume and timing of customer bookings and contract renewals, and the related timing of collections on those bookings and renewals, as well as the timing of spending commitments and payments of our accounts payable, accrued expenses, accrued payroll and related benefits, all affect these account balances.
Cash provided by operating activities was $22.3 million for the six months ended June 30, 2022 compared to cash provided by operating activities of $23.3 million for the six months ended June 30, 2021, compared to a usedecrease of $4.5 million of cash for the six months ended June 30, 2020, an increase of $27.8$1.0 million. This increase in operating cash flow is generally attributable to the Company’s increased size and scale. Working capital sources of cash for the six months ended June 30, 20212022 included a $10.2$22.1 million decrease in accounts receivable related to the timing of collections, and an increase of $5.9 million in accounts payable related to timing of payments.collections. Working capital uses of cash for the six months ended June 30, 20212022 included a $3.6 million increase in prepaids and other related primarily to an increase in deferred commissions, a decrease of $2.9$0.9 million in accounts payable related to timing of payments, a decrease of $9.2 million in deferred revenue, a $4.6 million increase in prepaid expenses and other current assets and a $2.4$5.2 million decrease in accrued expenses.
A substantial source of cash is invoicing for subscriptions and support fees in advance, which is recorded as deferred revenue, and is included on our condensed consolidated balance sheets as a liability. Deferred revenue consists of the unearned portion of booked fees for our software subscriptions and support, which is amortized into revenue in accordance with our revenue recognition policy. We assess our liquidity, in part, through an analysis of new subscriptions invoiced, expected cash receipts on new and existing subscriptions, and our ongoing operating expense requirements.
Cash Flows from Investing Activities
Our primary investing activities have consisted of acquisitions of complementary technologies, products and businesses. As our business grows, we expect our primary investing activities to continue to further expand our familylibrary of cloud-based software applications and infrastructure and support additional personnel.
For the six months ended June 30, 2021,2022, cash used in investing activities consisted of $97.7$62.4 million associated with the Company’s 20212022 acquisitions, partially offset by a $5.2 million settlement in total consideration for Localytics related to a representation and warranty insurance settlement, and the purchases of property and equipment of $0.5$0.3 million. Cash used in investing activities decreased $30.3 million for the six months ended June 30, 2022 compared to the same period in 2021 primarily as a result of the two acquisitions closed during the period compared to the three acquisitions in the comparable prior year period.
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investing activities increased $24.4 million for the six months ended June 30, 2021 compared to the same period in 2020 primarily as a result of closing three acquisitions during the period compared to one acquisition in the comparable prior year period.
Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced applications and professional service offerings, and acquisitions of complementary technologies, products and businesses.
Cash Flows from Financing Activities
Our primary financing activities have consisted of capital raised to fund our acquisitions, proceeds from debt obligations incurred to finance our acquisitions, repayments of our debt obligations, and share based employee payroll tax payment activity.
Cash used in financing activities increased $11.2$3.2 million for the six months ended June 30, 20212022 compared to the same period in 2020.2021. The increase in cash used in financing activities relates primarily to a $8.8$2.3 million decreaseincrease in additional consideration paid to sellers (i.e. holdbacksholdbacks) and earnouts) compared to the same perioda $1.0 million increase in 2020. In addition, net share employee payroll tax settlement payments decreased $2.1 million during the six months ended June 30, 2021 compared to the same period in 2020 as a result of the employee payroll tax election in mid-2020 to sell shares to cover employee payroll taxes on stock compensation vestings.2021.

Critical Accounting Policies and the Use of Estimates
We prepare our condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States.States (“GAAP”). The preparation of our condensed consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
The following critical accounting policies reflect significant judgments and estimates used in the preparation of our condensed consolidated financial statements:
• revenue recognition and deferred revenue;
• stock-based compensation;income taxes;
• deferred sales commissions and sales commission expense;
• income taxes; and
• business combinations and the recoverability of goodwill and long-lived assets.assets; and
• stock-based compensation.
Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. We are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of August 4, 2021,9, 2022, the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
Other Key Accounting Policies
Our unaudited interim financial statements and other financial information for the three and six months ended June 30, 2021,2022, as presented herein and in “Item 11. Financial Statements” to this Quarterly Report on Form 10-Q, reflectsreflect no material changes in our critical accounting policies and estimates as set forth in our Annual reportReport on Form 10-K for the year ended December 31, 20202021 filed with the SEC on February 25, 2021.24, 2022 (the “Annual Report”). Please refer to thisour Annual Report for a detailed description of our critical accounting policies that involve significant management judgment.
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.
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Recent Accounting Pronouncements
For information with respect to recent accounting pronouncements and the impact of these pronouncements on our condensed consolidated financial statements, refer to “Note 1. Basis of Presentation and Summary of Significant Accounting PoliciesPolicies—Recent Accounting Pronouncements” to our condensed consolidated financial statements.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate, foreign exchange and inflation risks, as well as risks relating to changes in the general economic conditions in the countries where we conduct business. The statement of operations impact is mitigated by having an offsetting liability in deferred revenue to partially or completely offset against the outstanding receivable if an account should become uncollectible. Our cash balances are kept in customary operating accounts, a portion of which are insured by the Federal Deposit Insurance Corporation, and uninsured money market accounts. The majority of our cash balances in money market accounts are with the lender under our Credit Facility. To date, we have not used derivative instruments to mitigate the impact of our market risk exposures. We also have not used, nor do we intend to use, derivatives for trading or speculative purposes.
Interest Rate Risk
Our exposure to market risk for changes in interest rates primarily relates to our cash equivalents and any variable rate indebtedness. The primary objective of our investment activities is to preserve principal while maximizing yields without significantly increasing risk. This objective is accomplished currently by making diversified investments, consisting only of money market mutual funds and certificates of deposit. In conjunction with our $350 million, 7 year, term loan, and subsequent entry into an additional $190 million in incremental term loans under the Credit Facility, we entered into interest rate hedge instrumentsswap agreement for the full 7 yearseven-year term, effectively fixing our interest rate at 5.4%. However, the interest rate associated with our $60 million, 5 year, revolving credit facility remains floating. As of June 30, 2021,2022, we had a principalan outstanding balance of $530.6$525.2 million under our Credit Facility. As there was no debt outstanding under our revolving credit facility as of June 30, 2021,2022, a hypothetical change of 100 basis points would result in no change to total interest expense.
Foreign Currency Exchange Risk
Our customers are generally invoiced in the currency of the country in which they are located. In addition, we incur a portion of our operating expenses in foreign currencies, including Australian dollars, Canadian dollars, British pounds, and Euros, and in the future as we expand into other foreign countries, we expect to incur operating expenses in other foreign currencies. As a result, we are exposed to foreign exchange rate fluctuations as the financial results of our international operations and our revenue and operating results could be adversely affected. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business could have resulted in a change in revenue of $3.3$4.0 million for the six months ended June 30, 2021.2022. To date, we have not engaged in any currency hedging strategies. If we decide to hedge our foreign currency exchange rate exposure, we may not be able to hedge effectively due to lack of experience, unreasonable costs, or illiquid markets. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in foreign currency exchange rates.
The non-financial assets and liabilities of our foreign subsidiaries are translated into United States dollars using the exchange rates in effect at the balance sheet date. The related translation adjustments are recorded in a separate component of stockholders' equity in accumulated other comprehensive loss.income (loss). In addition, we have intercompany loans that wereare used to fund the acquisition of a foreign subsidiaries during the years ended December 31, 2019 and December 31, 2018.subsidiaries. Due to the long-term nature of these loans, the foreign currency gains (losses) resulting from remeasurement are recognized as a component of accumulated other comprehensive income (loss).

Inflation
We do not believe that inflation has had a material effect on our business, financial condition or results of operations in the last three fiscal years. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to a company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2021,2022, the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of such date. Our management has concluded that the condensed consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.GAAP.
Changes in Internal Control over Financial Reporting
There were no changes to our internal control over financial reporting (as defined in Rules 13a- 15(f) and 15d- 15(f) of the Exchange Act) during the quarter ended June 30, 20212022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, the risk.
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PART II – OTHER INFORMATION
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our 20202021 Annual Report on Form 10-K, which could materially affect our business, financial condition or future results. ThereExcept as set forth below, there have been no material changes during 20212022 to the risk factors that were included in the Company's Annual Report on Form 10-K filed with the SEC on February 25, 2021.24, 2022.
We may be adversely affected by the effects of inflation.

Inflation has the potential to adversely affect our liquidity, business, financial condition and results of operations by increasing our overall cost structure, particularly if we are unable to achieve commensurate increases in the prices we charge our customers. The existence of inflation in the economy has resulted in, and may continue to result in, higher interest rates and capital costs, shipping costs, supply shortages, increased costs of labor, weakening exchange rates and other similar effects. As a result of inflation, we have experienced and may continue to experience, cost increases. Although we may take measures to mitigate the impact of this inflation, if these measures are not effective, our business, financial condition, results of operations and liquidity could be materially adversely affected. Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost of inflation is incurred.

Pursuant to the terms of the Purchase Agreement, we will issue shares of our Series A Preferred Stock that ranks senior to our common stock in priority of distribution rights and rights upon our liquidation, dissolution or winding up and has additional corporate governance rights.

As of June 30, 2022, we had no shares of preferred stock outstanding. Pursuant to the terms of the Purchase Agreement, we will issue and sell at the Closing 115,000 shares of new designated Series A Preferred Stock at a price of $1,000 per share for an aggregate purchase price of $115,000,000. The holders of the Series A Preferred Stock are entitled to dividends payable quarterly in arrears, which may be paid, at our option, in cash or by increasing the Liquidation Preference of each share of Series A Preferred Stock by the amount of the applicable dividend. The holders of Series A Preferred Stock (each, a “Holder” and collectively, the “Holders”) will be entitled to dividends (i) at the rate of 4.5% per annum until but excluding the seven year anniversary of the Closing, and (ii) at the rate of 7% per annum on and after the seven year anniversary of the Closing. Our ability to pay cash dividends is subject to the restrictions under our existing credit agreement. The Series A Preferred Stock has no mandatory conversion feature and is a perpetual security. Although we have the ability to redeem the shares of Series A Preferred Stock beginning on the date that is seven years from the Closing date, we may be unable to do so at that time, and we will be forced to pay the higher dividend rate of 7% per annum until the time that the holders of Series A Preferred Stock convert their shares into shares of common stock or we obtain sufficient capital to redeem the Series A Preferred Stock.

The Series A Preferred Stock will rank senior to our common stock with respect to distribution rights and rights upon our liquidation, dissolution or winding up, on parity with any class or series of our capital stock expressly designated as ranking on parity with the Series A Preferred Stock with respect to distribution rights and rights upon our upon liquidation, dissolution or winding up, junior to any class or series of our capital stock expressly designated as ranking senior to the Series A Preferred Stock with respect to distribution rights and rights upon our upon liquidation, dissolution or winding up and junior in right of payment to our existing and future indebtedness. Further, upon our liquidation, dissolution or winding up, holders of our Series A Preferred Stock will receive a distribution of our available assets before common stockholders in an amount equal to (i) the Initial Liquidation Preference, plus (ii) any accrued and unpaid dividends on such share of Series A Preferred Stock to, but excluding, the date of payment of such amounts.

The holders of Series A Preferred Stock generally will be entitled to vote with the holders of our common stock on all matters submitted for a vote of holders of our common stock (voting together with the holders of our common stock as one class) on an as-converted basis. In addition, so long as the Purchaser and its affiliates beneficially own in the aggregate at least 5% of the shares of our common stock on a fully diluted basis including the shares of common stock issuable upon conversion of shares of Series A Preferred Stock, the holders of a majority of the outstanding shares of Series A Preferred Stock, voting as a single class, are entitled to nominate and elect one individual to serve on our board of directors. In addition, the holders of a majority of the outstanding shares of Series A Preferred Stock, voting as a separate class, will have the right to elect, for so long as the Purchaser and its affiliates own in the aggregate at least 10% of the shares of Series A Preferred Stock (or common stock into which it is convertible) outstanding as of the Closing, one non-voting observer to our board of directors. Such governance rights may grant the holders of our Series A Preferred Stock additional control rights, which may impact our ability to run our business, and may adversely affect the trading price of our common stock. Upon issuance of the Series A Preferred Stock, holders of our common stock will experience dilution of both economic and voting rights, and, because we may pay dividends in kind by increasing the liquidation value of each share of Series A Preferred Stock, holders of common stock will be further diluted at each regular dividend payment date.

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The fundamental change redemption feature of our Series A Preferred Stock may make it more difficult for a party to take over our company or discourage a party from taking over our company.

Upon a “Fundamental Change” (involving a change of control as further described in the certificate of designation governing our Series A Preferred Stock), each holder of Series A Preferred Stock shall have the right to require us to redeem all or any part of the holder’s Series A Preferred Stock for an amount equal to greater of (i) the sum of 105% of the Liquidation Preference and a customary make-whole amount, and (ii) the amount that such Holder would have received had such Holder, immediately prior to such “Fundamental Change,” converted the Holder’s Series A Preferred Stock into common stock, without regard to the Issuance Limitation. The mandatory redemption option conferred to holders of our Series A Preferred Stock upon certain events constituting a Fundamental Change (involving a change of control) under the Series A Preferred Stock, may have the effect of discouraging a third party from making an acquisition proposal for our company or of delaying, deferring or preventing certain change of control transactions of our company under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-current market price or that stockholders may otherwise believe is in their best interests.

Item 6. Exhibits
See the Exhibit Index immediately following this page, which is incorporated herein by reference.
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EXHIBIT INDEX
Exhibit NumberExhibit Description
31.1*
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*101*Inline XBRL Instance Document (the(Extensible Business Reporting Language). The following materials from this Quarterly Report on Form 10-Q for the periods ended June 30, 2022, formatted in Inline XBRL: (i) condensed consolidated balance sheets of Upland Software, Inc., (ii) condensed consolidated statements of operations of Upland Software, Inc., (iii) condensed consolidated statements of comprehensive income/(loss) of Upland Software, Inc., (iv) condensed consolidated statement of stockholders’ equity of Upland Software, Inc., (v) condensed consolidated statements of cash flows of Upland Software, Inc. and (vi) notes to unaudited condensed consolidated financial statements of Upland Software, Inc. The instance document does not appear in the Interactive Data Fileinteractive data file because its XBRL tags are embedded within the Inline XBRL document)
101.SCH*Inline XBRL Taxonomy Extension Schema Document
101.CAL*Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*Inline XBRL Taxonomy Extension Presentation Linkbase Documentdocument.
104*Cover Page Interactive Data File (formatted as Inline XBRL and contained in ExhibitsExhibit 101)
*      Filed herewith.

**    Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.  
UPLAND SOFTWARE, INC.
Dated: August 4, 20219, 2022/s/ Michael D. Hill
Michael D. Hill
Chief Financial Officer

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