10q10k10q10k.net

What changed in Upland Software, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Upland Software, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+276 added−263 removedSource: 10-K (2024-02-22) vs 10-K (2023-03-01)

Top changes in Upland Software, Inc.'s 2023 10-K

276 paragraphs added · 263 removed · 171 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

35 edited+15 added−45 removed32 unchanged
Biggest changeRevenues recorded since the acquisition date through December 31, 2022 were approximately $20.9 million. 2021 Acquisitions • 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. • 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. • 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. 2020 Acquisitions • 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.
Biggest changeConsistent with our growth strategy, we have completed a total of 31 acquisitions from February 2012 through December 31, 2023. 37 Acquisitions completed during the years ended December 31, 2023, 2022 and 2021 include the following: Acquisitions 2023 Acquisitions • None 2022 Acquisitions • 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. • Objectif Lune - On January 7, 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”), a cloud-based document workflow product. 2021 Acquisitions • 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. • 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. • 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.
In addition, gains/losses on divested assets that meet the definition of a business under ASC 805-10, Business Combination—Overall , are included in Total other expense. Income Taxes Because we have not generated domestic net income in any period to date, we have recorded a full valuation allowance against our domestic net deferred tax assets, exclusive of tax deductible goodwill.
In addition, gains/losses on divested assets that meet the definition of a business under ASC 805-10, Business Combination—Overall , are included in Total other expense. 40 Income Taxes Because we have not generated domestic net income in any period to date, we have recorded a full valuation allowance against our domestic net deferred tax assets, exclusive of tax deductible goodwill.
Total Other Expense Total other expense consists primarily of amortization of debt issuance costs over the term of the related term loan, revaluation of foreign subsidiaries, interest expense on outstanding debt, partially offset by interest income on our interest- 36 bearing cash balances held in money market accounts.
Total Other Expense Total other expense consists primarily of amortization of debt issuance costs over the term of the related term loan, revaluation of foreign subsidiaries, interest expense on outstanding debt, partially offset by interest income on our interest-bearing cash balances held in money market accounts.
Sales and marketing expenses may fluctuate as a percentage of total revenues for a variety of reasons including the timing of such expenses, in any particular quarter or annual period. Research and development .
Sales and marketing expenses may fluctuate as a percentage of total revenues for a variety of reasons including the timing of such expenses, in any particular quarter or annual period. 39 Research and development .
In the event we have subsequent changes in ownership, the availability of net operating losses and research and development credit carryovers could be further limited. 37 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.
In the event we have subsequent changes in ownership, the availability of net operating losses and research and development credit carryovers could be further limited. 41 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.
We participate in interest rate swap agreements for the purpose of reducing variability in interest rate payments on the Company’s outstanding term loans. These interest rate swaps fix the Company's interest rate (including the hedge premium) at 5.4% for the term of the Credit Facility (as hereinafter defined in “ —Liquidity and Capital Resources—Credit Facility ”).
We participate in interest rate swap agreements for the purpose of reducing variability in interest rate payments on the Company’s outstanding term loans. These interest rate swaps fix a portion of the Company's interest rate (including the hedge premium) at 5.4% for the term of the Credit Facility (as hereinafter defined in “ Liquidity and Capital Resources—Credit Facility ”).
For each category, other than depreciation and amortization and impairment of goodwill, the largest expense component is primarily personnel related costs, which includes salaries, employee benefit costs, bonuses, commissions, stock-based compensation, and payroll taxes. Operating expenses also include allocated overhead costs for facilities, which are allocated to each department based on relative department headcount.
For each category, other than depreciation and amortization and impairment of goodwill, the largest expense component is primarily personnel-related costs, which includes salaries, employee benefit costs, bonuses, commissions, stock-based compensation, and payroll taxes. Operating expenses also include allocated overhead costs for facilities, which are allocated to each department based on relative department headcount. Operating expenses are generally recognized as incurred.
Goodwill and Other Intangible Assets ” in the notes to our consolidated financial statements for more information regarding our fourth quarter 2022 Goodwill impairment. We will continue to evaluate Goodwill impairment in future periods.
Goodwill and Other Intangible Assets ” in the notes to our consolidated financial statements for more information regarding our first quarter 2023 and our fourth quarter 2022 Goodwill impairment charges. We will continue to evaluate Goodwill impairment in future periods.
We assess Goodwill for impairment annually on October 1st, or more frequently when an event occurs which could cause the Carrying Value of our Company to exceed the estimated fair value of our Company.
We assess Goodwill for impairment annually on October 1st, or more frequently when an event occurs which could cause the Carrying Value of our Company to exceed the estimated fair value of our Company. See “ Note 5.
Operating expenses are generally recognized as incurred. 35 Sales and marketing . Sales and marketing expenses primarily consist of personnel related costs for our sales and marketing staff, including salaries, benefits, deferred commission amortization, bonuses, payroll taxes, stock-based compensation and allocated overhead, as well as costs of promotional events, corporate communications, online marketing, product marketing and other brand-building activities.
Sales and marketing . Sales and marketing expenses primarily consist of personnel-related costs for our sales and marketing staff, including salaries, benefits, deferred commission amortization, bonuses, payroll taxes, stock-based compensation and allocated overhead, as well as costs of promotional events, corporate communications, online marketing, product marketing and other brand-building activities.
We recognize the revenue associated with maintenance ratably over the term of the contract. In limited instances, at the customer’s option, we may host the software purchased by a customer under a perpetual license on systems at our third-party data centers. Perpetual license revenue .
Maintenance agreements include the right to support and unspecified upgrades. We recognize the revenue associated with maintenance ratably over the term of the contract. In limited instances, at the customer’s option, we may host the software purchased by a customer under a perpetual license on systems at our third-party data centers. Perpetual license revenue .
The balance of the tax benefit for the years ended December 31, 2022, 2021 and 2020, outside of tax deductible goodwill and current taxes in separate filing states, is related to foreign income taxes, primarily operations of our subsidiaries in Australia, Canada, Ireland and the United Kingdom, and to the release of valuation allowances associated with acquisitions of domestic entities with deferred tax liabilities.
The balance of the tax benefit for the years ended December 31, 2023, 2022 and 2021, outside of tax deductible goodwill and current taxes in separate filing states, is related to foreign income taxes, primarily operations of our subsidiaries in Canada and Ireland, and to the release of valuation allowances associated with acquisitions of domestic entities with a benefit generated in the UK and Australia fully offset by valuation allowances.
Our support revenue consists of maintenance fees associated with our perpetual licenses and hosting fees paid to us by our customers. Typically, when purchasing a perpetual license, a customer also purchases maintenance for which we charge a fee, priced as a percentage of the perpetual license fee. Maintenance agreements include the right to support and unspecified upgrades.
Our subscription agreements typically have terms of one to three years. 38 Our support revenue consists of maintenance fees associated with our perpetual licenses and hosting fees paid to us by our customers. Typically, when purchasing a perpetual license, a customer also purchases maintenance for which we charge a fee, priced as a percentage of the perpetual license fee.
Year Ended December 31, 2022 2021 2020 (dollars in thousands) Stock-based compensation: Cost of revenue $ 1,984 $ 2,088 $ 1,951 Research and development 2,733 3,085 3,391 Sales and marketing 4,239 5,957 3,450 General and administrative 32,646 42,743 32,900 Total $ 41,602 $ 53,873 $ 41,692 (2) Includes depreciation and amortization of $12.5 million, $11.6 million and $10.2 million in the years ended December 31, 2022, 2021 and 2020, respectively.
Year Ended December 31, 2023 2022 2021 (dollars in thousands) Stock-based compensation: Cost of revenue $ 952 $ 1,984 $ 2,088 Research and development 2,463 2,733 3,085 Sales and marketing 2,059 4,239 5,957 General and administrative 17,400 32,646 42,743 Total $ 22,874 $ 41,602 $ 53,873 (2) Includes depreciation and amortization of $13.4 million, $12.5 million and $11.6 million in the years ended December 31, 2023, 2022 and 2021, respectively.
We recognize the revenue associated with subscription agreements ratably over the term of the agreement as the customer receives and consumes the benefits of the cloud services through the contract period. Our subscription agreements typically have terms of one to three years.
We recognize the revenue associated with subscription agreements ratably over the term of the agreement as the customer receives and consumes the benefits of the cloud services through the contract period.
Year Ended December 31, 2022 2021 2020 Amount Percent of Revenue Amount Percent of Revenue Amount Percent of Revenue Revenue: Subscription and support $ 297,887 94% $ 287,621 95% $ 277,504 95% Perpetual license 6,948 2% 2,150 1% 1,884 1% Total product revenue 304,835 96% 289,771 96% 279,388 96% Professional services 12,468 4% 12,245 4% 12,390 4% Total revenue 317,303 100% 302,016 100% 291,778 100% Cost of revenue: Subscription and support (1)(2) 93,948 30% 92,168 31% 89,880 31% Professional services and other 9,793 3% 7,285 2% 8,566 3% Total cost of revenue 103,741 33% 99,453 33% 98,446 34% Gross profit 213,562 67% 202,563 67% 193,332 66% Operating expenses: Sales and marketing (1) 59,416 19% 55,097 18% 46,077 16% Research and development (1) 46,187 15% 42,693 14% 39,002 13% General and administrative (1) 70,462 22% 76,901 25% 68,072 23% Depreciation and amortization 43,669 14% 41,315 14% 36,919 13% Acquisition-related expenses 21,556 6% 21,234 8% 27,075 9% Impairment of goodwill 12,500 4% — —% — —% Total operating expenses 253,790 80% 237,240 79% 217,145 74% Loss from operations (40,228) (13)% (34,677) (12)% (23,813) (8)% Other Expense: Interest expense, net (29,145) (9)% (31,626) (10)% (31,529) (11)% Other expense, net (781) —% (253) (1)% (111) —% Total other expense (29,926) (9)% (31,879) (11)% (31,640) (11)% Loss before benefit from income taxes (70,154) (22)% (66,556) (23)% (55,453) (19)% Benefit from income taxes 1,741 —% 8,344 4% 4,234 1% Net loss (68,413) (22)% (58,212) (19)% (51,219) (18)% Preferred stock dividends and accretion (1,846) (1)% — —% — —% Net loss attributable to common stockholders (3) $ (70,259) (22)% $ (58,212) (19)% $ (51,219) (18)% Net loss per common share: Loss from continuing operations per common share, basic and diluted (3) $ (2.23) $ (1.92) $ (1.92) Weighted-average common shares outstanding, basic and diluted (3) 31,528,881 30,295,769 26,632,116 38 (1) Includes stock-based compensation.
Year Ended December 31, 2023 2022 2021 Amount Percent of Revenue Amount Percent of Revenue Amount Percent of Revenue Revenue: Subscription and support $ 281,554 95% $ 297,887 94% $ 287,621 95% Perpetual license 6,077 2% 6,948 2% 2,150 1% Total product revenue 287,631 97% 304,835 96% 289,771 96% Professional services 10,221 3% 12,468 4% 12,245 4% Total revenue 297,852 100% 317,303 100% 302,016 100% Cost of revenue: Subscription and support (1)(2) 88,894 30% 93,948 30% 92,168 31% Professional services and other 7,467 2% 9,793 3% 7,285 2% Total cost of revenue 96,361 32% 103,741 33% 99,453 33% Gross profit 201,491 68% 213,562 67% 202,563 67% Operating expenses: Sales and marketing (1) 64,342 22% 59,416 19% 55,097 18% Research and development (1) 49,375 17% 46,187 15% 42,693 14% General and administrative (1) 61,264 21% 70,462 22% 76,901 25% Depreciation and amortization 58,614 20% 43,669 14% 41,315 14% Acquisition-related expenses 3,060 —% 21,556 6% 21,234 8% Impairment of goodwill 128,755 43% 12,500 4% — —% Total operating expenses 365,410 123% 253,790 80% 237,240 79% Loss from operations (163,919) (55)% (40,228) (13)% (34,677) (12)% Other Expense: Interest expense, net (18,684) (6)% (29,145) (9)% (31,626) (10)% Other expense, net 236 —% (781) —% (253) (1)% Total other expense (18,448) (6)% (29,926) (9)% (31,879) (11)% Loss before benefit from income taxes (182,367) (61)% (70,154) (22)% (66,556) (23)% Benefit from income taxes 2,493 1% 1,741 —% 8,344 4% Net loss (179,874) (60)% (68,413) (22)% (58,212) (19)% Preferred stock dividends and accretion (5,347) (2)% (1,846) (1)% — —% Net loss attributable to common stockholders (3) $ (185,221) (62)% $ (70,259) (22)% $ (58,212) (19)% Net loss per common share: Loss from continuing operations per common share, basic and diluted (3) $ (5.77) $ (2.23) $ (1.92) Weighted-average common shares outstanding, basic and diluted (3) 32,074,906 31,528,881 30,295,769 42 (1) Includes stock-based compensation.
General and Administrative Expense Year Ended December 31, 2022 2021 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) General and administrative $ 70,462 22% $ 76,901 25% $ (6,439) (8)% General and administrative expense was $70.5 million in 2022, compared to $76.9 million in 2021, a decrease of $6.4 million, or 8%.
General and Administrative Expense Year Ended December 31, 2023 2022 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) General and administrative $ 61,264 21% $ 70,462 22% $ (9,198) (13)% General and administrative expense was $61.3 million in 2023, compared to $70.5 million in 2022, a decrease of $9.2 million, or 13%.
Other expense, net was $0.8 million in 2022, compared to other expense of $0.3 million in 2021, an increase of $0.5 million, or 209%. The difference in other expense is primarily due to an increase in foreign currency exchange losses compared to 2021.
Other income, net was $0.2 million in 2023, compared to other expense of $0.8 million in 2022, a change $1.0 million. The difference in other expense is primarily due to an increase in foreign currency exchange gains compared to 2022.
Sunset Assets During the fourth quarter of 2022, in connection with the periodic review of its business, the Company decided to sunset certain non-strategic product offerings and customer contracts (collectively referred to as “Sunset Assets”).
Sunset Assets In connection with periodic reviews of our business, we have decided to discontinue the availability of certain non-strategic product offerings and a limited number of non-strategic customer contracts (collectively referred to as “Sunset Assets”).
Benefit from Income Taxes Year Ended December 31, 2022 2021 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) Loss before provision for income taxes (70,154) (22)% (66,556) (23)% (3,598) (5)% Benefit from (provision for) income taxes $ 1,741 —% $ 8,344 4% $ (6,603) (79)% Effective income tax rate (2.5) % (12.5) % Benefit from income taxes was $1.7 million in 2022, compared to a benefit for income taxes of $8.3 million in 2021, a decrease in the benefit from income taxes of $6.6 million, or 79%.
Benefit from Income Taxes Year Ended December 31, 2023 2022 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) Benefit from (provision for) income taxes $ 2,493 1% $ 1,741 —% $ 752 43% Effective income tax rate (1.4) % (2.5) % Benefit from income taxes was $2.5 million in 2023, compared to a benefit for income taxes of $1.7 million in 2022, an increase in the benefit from income taxes of $0.8 million, or 43%.
Therefore, perpetual license revenue from our Organic Business decreased by $0.3 million in the year ended December 31, 2022 compared to the year ended December 31, 2021. Professional services revenue was $12.5 million in the year ended December 31, 2022, compared to $12.2 million in the year ended December 31, 2021, an increase of $0.3 million, or 2%.
Professional services revenue was $10.2 million in the year ended December 31, 2023, compared to $12.5 million in the year ended December 31, 2022, a decrease of $2.3 million, or 18%. Professional services revenue related to our Sunset Assets decreased by $0.4 million.
Depreciation and Amortization Expense 43 Year Ended December 31, 2022 2021 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) Depreciation and amortization: Depreciation $ 1,529 1% $ 1,968 1% $ (439) (22)% Amortization 42,140 13% 39,347 13% 2,793 7% Total depreciation and amortization $ 43,669 14% $ 41,315 14% $ 2,354 6% Depreciation and amortization expense was $43.7 million in 2022, compared to $41.3 million in 2021, an increase of $2.4 million, or 6%.
Depreciation and Amortization Expense Year Ended December 31, 2023 2022 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) Depreciation and amortization: Depreciation $ 1,414 1% $ 1,529 1% $ (115) (8)% Amortization 57,200 19% 42,140 13% 15,060 36% Total depreciation and amortization $ 58,614 20% $ 43,669 14% $ 14,945 34% Depreciation and amortization expense was $58.6 million in 2023, compared to $43.7 million in 2022, an increase of $14.9 million, or 34%.
Subscription and support revenues related to Overage Charges decreased by $3.8 million as a result of variable demand in the year ended December 31, 2022. The year ended December 31, 2021 included $1.0 million of subscription and support Political Revenues which did not repeat in the year ended December 31, 2022.
Subscription and support revenues related to overage charges decreased by $1.1 million as a result of variable demand fluctuations in the year ended December 31, 2023. The subscription and support revenue decline includes a negative impact of $0.3 million from changes in foreign currency exchange rates.
Cost of Revenue and Gross Profit Margin Year Ended December 31, 2022 2021 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) Cost of revenue: Subscription and support (1) $ 93,948 30% $ 92,168 31% $ 1,780 2% Professional services 9,793 3% 7,285 2% 2,508 34% Total cost of revenue 103,741 33% 99,453 33% 4,288 4% Gross profit $ 213,562 67% $ 202,563 67% $ 10,999 5% (1) Includes depreciation and amortization expense as follows: Depreciation $ 8 —% $ 30 —% $ (22) (73)% Amortization $ 12,469 4% $ 11,583 4% $ 886 8% Cost of subscription and support revenue was $93.9 million in the year ended December 31, 2022, compared to $92.2 million in the year ended December 31, 2021, an increase of $1.7 million, or 2%.
The remaining decrease in professional services revenue is attributable to fewer implementation projects in the year ended December 31, 2023. 43 Cost of Revenue and Gross Profit Margin Year Ended December 31, 2023 2022 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) Cost of revenue: Subscription and support (1) $ 88,894 30% $ 93,948 30% $ (5,054) (5)% Professional services 7,467 2% 9,793 3% (2,326) (24)% Total cost of revenue 96,361 32% 103,741 33% (7,380) (7)% Gross profit $ 201,491 68% $ 213,562 67% $ (12,071) (6)% (1) Includes depreciation and amortization expense as follows: Depreciation $ 5 —% $ 8 —% $ (3) (38)% Amortization $ 13,366 4% $ 12,469 4% $ 897 7% Cost of subscription and support revenue was $88.9 million in the year ended December 31, 2023, compared to $93.9 million in the year ended December 31, 2022, a decrease of $5.0 million, or 5%.
Therefore, cost of professional services revenue for our Organic Business decreased by $0.7 million primarily related to a decrease in personnel related costs. 42 Operating Expenses Sales and Marketing Expense Year Ended December 31, 2022 2021 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) Sales and marketing $ 59,416 19% $ 55,097 18% $ 4,319 8% Sales and marketing expense was $59.4 million in the year ended December 31, 2022, compared to $55.1 million in the year ended December 31, 2021, an increase of $4.3 million, or 8%.
Operating Expenses Sales and Marketing Expense Year Ended December 31, 2023 2022 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) Sales and marketing $ 64,342 22% $ 59,416 19% $ 4,926 8% Sales and marketing expense was $64.3 million in the year ended December 31, 2023, compared to $59.4 million in the year ended December 31, 2022, an increase of $4.9 million, or 8%.
Research and Development Expense Year Ended December 31, 2022 2021 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) Research and development $ 46,187 15% $ 42,693 14% $ 3,494 8% Research and development expense was $46.2 million in 2022, compared to $42.7 million in 2021, an increase of $3.5 million, or 8%.
This increase is partially offset by a $2.1 million decrease in stock based compensation expense and a decrease of $1.8 million in sales and marketing expense related to our Sunset Assets. 44 Research and Development Expense Year Ended December 31, 2023 2022 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) Research and development $ 49,375 17% $ 46,187 15% $ 3,188 7% Research and development expense was $49.4 million in 2023, compared to $46.2 million in 2022, an increase of $3.2 million, or 7%.
Goodwill and Other Intangible Assets ” in the notes to our consolidated financial statements for more information regarding our fourth quarter 2022 Goodwill impairment. 44 Other Expense, net Year Ended December 31, 2022 2021 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) Other Expense: Interest expense, net $ (29,145) (9)% $ (31,626) (10)% $ 2,481 (8)% Other expense, net (781) —% (253) (1)% (528) 209% Total other expense $ (29,926) (9)% $ (31,879) (11)% $ 1,953 (6)% Interest expense, net was $29.1 million in 2022, compared to $31.6 million for 2021, a decrease of $2.5 million, or 8%, due primarily to higher interest income on our interest-bearing cash balances as well as a decrease in outstanding borrowings on our Credit Facility.
Other Expense, net Year Ended December 31, 2023 2022 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) Other Expense: Interest expense, net $ (18,684) (6)% $ (29,145) (9)% $ 10,461 (36)% Other expense, net 236 —% (781) —% 1,017 (130)% Total other expense $ (18,448) (6)% $ (29,926) (9)% $ 11,478 (38)% Interest expense, net was $18.7 million in 2023, compared to $29.1 million for 2022, a change of $10.4 million, or 36%, due primarily to higher interest income on our interest-bearing cash balances, a decrease in outstanding borrowings on our Credit Facility and the $2.5 million amortization of the deferred gain on the liquidation of a portion of our interest rate swaps as well as a $2.8 million benefit related to the deferred gain recognized immediately into earnings upon the $35 million prepayment on our Term Loans.
Therefore, cost of subscription and support revenue for our Organic Business decreased by $1.1 million mainly due to decreased messaging costs. Cost of professional services revenue was $9.8 million in the year ended December 31, 2022, compared to $7.3 million in the year ended December 31, 2021, an increase of $2.5 million, or 34%.
Cost of professional services revenue was $7.5 million in the year ended December 31, 2023, compared to $9.8 million in the year ended December 31, 2022, a decrease of $2.3 million, or 24%. The decrease in cost of professional services revenue is primarily related to a decrease in personnel-related costs resulting from decreased professional services delivered.
(5) 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. 40 Comparison of Years Ended December 31, 2022 and December 31, 2021 Revenue Year Ended December 31, 2022 2021 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) Revenue: Subscription and support $ 297,887 94% $ 287,621 95% $ 10,266 4% Perpetual license 6,948 2% 2,150 1% 4,798 223% Total product revenue 304,835 96% 289,771 96% 15,064 5% Professional services 12,468 4% 12,245 4% 223 2% Total revenue $ 317,303 100% $ 302,016 100% $ 15,287 5% Total revenue was $317.3 million in the year ended December 31, 2022, compared to $302.0 million in the year ended December 31, 2021, an increase of $15.3 million, or 5%.
Comparison of Years Ended December 31, 2023 and December 31, 2022 Revenue Year Ended December 31, 2023 2022 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) Revenue: Subscription and support $ 281,554 95% $ 297,887 94% $ (16,333) (5)% Perpetual license 6,077 2% 6,948 2% (871) (13)% Total product revenue 287,631 97% 304,835 96% (17,204) (6)% Professional services 10,221 3% 12,468 4% (2,247) (18)% Total revenue $ 297,852 100% $ 317,303 100% $ (19,451) (6)% Subscription and support revenue was $281.6 million in the year ended December 31, 2023, compared to $297.9 million in the year ended December 31, 2022, a decrease of $16.3 million, or 5%. $13.9 million of the decrease relates to declining revenue from Sunset Assets as a result of reduced sales and marketing focus on those assets.
Income Taxes ”, in the notes to the consolidated financial statements for more information regarding our income taxes as they relate to foreign and domestic operations. Comparison of Years Ended December 31, 2021 and December 31, 2020 For a comparison of the years ended December 31, 2021 and 2020 refer to “
Comparison of Years Ended December 31, 2022 and December 31, 2021 For a comparison of the years ended December 31, 2022 and 2021 refer to “
The acquisitions not fully in the comparable period increased depreciation and amortization expense by $6.0 million, primarily related to acquired intangible assets such as customer relationships and tradenames. Therefore, depreciation and amortization expense for our Organic Business decreased by $3.6 million in the comparative periods due to assets becoming fully depreciated or amortized during the period.
The increase in amortization relates to the reduced useful life expected for the acquired intangible assets such as customer relationships and tradenames for our Sunset Assets. The offsetting decrease in depreciation is due to assets becoming fully depreciated during the period.
Refer to “Adjusted Operating Measures” detail located in this section for further breakdown for adjusted amounts. 34 Components of Operating Results Revenue Subscription and support revenue . We derive our subscription revenue from fees paid to us by our customers for use of our cloud-based applications.
In either case, we will adjust the revenues attributable to Sunset Assets for the then current period and properly reflect the year over year change for such addition or removal. Components of Operating Results Revenue Subscription and support revenue . We derive our subscription revenue from fees paid to us by our customers for use of our cloud-based applications.
As a result of the decline of our stock price during the quarter ended December 31, 2022, we performed a Goodwill impairment evaluation as of December 31, 2022, which resulted in a Goodwill impairment of $12.5 million. See “ Note 5.
This increase was a result of the goodwill impairment evaluation we performed as of March 31, 2023 due to the decline of our stock price.
General and administrative expense for our Sunset Assets decreased by $0.9 million. This was partially offset by an increase in general administrative expense of $4.3 million due to costs related to the acquisitions not fully in the comparable period, which consisted primarily of higher personnel related costs and administrative expenses.
This decrease was driven primarily by $15.2 million in lower non-cash stock compensation expense due to lower grant date fair values partially offset by an increase in general and administrative expense of $3.7 million due to higher personnel-related costs and an increase in legal and professional fees of $2.3 million, which includes $1.1 million in non-recurring litigation costs.
Sales and marketing expense for our Organic Business decreased by $1.2 million, primarily as a result of a reduction in personnel related costs which were partially offset by increased commission costs. We expect to see an increase in sales and marketing expense in 2023 as we increase our go to market investments.
Sales and marketing expense increased approximately $8.8 million as a direct result of our intentional investment in our go to market strategy, including increased marketing spend and increased sales headcount and personnel-related costs to strengthen our marketing and demand generation.
Removed
Consistent with our growth strategy, we have completed a total of 31 acquisitions in the 11 years ending December 31, 2022. 33 Acquisitions completed during the years ended December 31, 2022, 2021 and 2020 include the following: Acquisitions 2022 Acquisitions • 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.
Added
During the three months ended December 31, 2022, we decided to classify as Sunset Assets certain non-strategic product offerings representing an estimated $27.9 million of 2023 annual total revenue.
Removed
Revenues recorded since the acquisition date through December 31, 2022 were approximately $7.6 million. • Objectif Lune - On January 7, 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”), a cloud-based document workflow product.
Added
During the second quarter of 2023, we determined that certain product offerings that had previously been placed in Sunset Assets did have use cases that would be strategic and, as a result, we removed them from our Sunset Assets. At the same time, we identified other product offerings and certain non-strategic customer contracts to include in Sunset Assets.
Removed
Adjusted Operating Measures In the following discussion of results of operations, we refer to “Core Organic Revenue” and “Organic Revenue” as non-GAAP financial measures. We believe that, in addition to our financial results determined in accordance with GAAP, these non-GAAP financial measures are useful in evaluating our business, results of operations, and financial condition.
Added
The net effect of these actions in the second quarter of 2023 resulted in the estimated addition of approximately $5.0 million in 2023 annual total revenues to our Sunset Assets.
Removed
However, our use of non-GAAP financial measures may vary from that of others in our industry. Non-GAAP financial measures should not be considered as an alternative to the performance measures derived in accordance with GAAP. There are limitations to the use of non-GAAP measures, as non-GAAP measures may not present complete financial results.
Added
Subsequently, during the three months ended December 31, 2023, a non-strategic product offering was identified and included in Sunset Assets adding an additional estimated $9.9 million in 2023 annual total revenues to our Sunset Assets.
Removed
We compensate for these limitations by using these non-GAAP financial measures along with other comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include revenue, gross profit, net loss, net loss per share and other performance measures.
Added
As a result of the discontinuation of these Sunset Assets, the Company has established end of life targets and reduced certain expenditures related to the sales and marketing of the Sunset Assets.
Removed
In evaluating these financial measures, you should be aware that in the future we may incur expenses similar to those eliminated in the presentation of our non-GAAP financial measures. Our presentation of non-GAAP financial measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
Added
It is possible that during future periodic reviews of our business we may determine to add additional non-strategic product offerings or non-strategic customer contracts to Sunset Assets or remove certain product offerings or customer contracts from the classification of Sunset Assets.
Removed
When evaluating our performance, you should consider these non-GAAP financial measures alongside other financial performance measures, including the most directly comparable GAAP measures set forth in the reconciliation tables below and our other GAAP results.
Added
Additional decreases in Subscription and support revenue of $4.6 million are due to decreases in customer renewals across product lines and industries. These decreases are offset by revenue of $3.7 million from prior year acquisitions not fully reflected in the year ended December 31, 2022.
Removed
See “—Non-GAAP Financial Measures” for the definitions of the non-GAAP financial measures included herein, as well as a statement disclosing the reasons management believes certain non-GAAP financial measures provide useful information to investors regarding the Company’s financial condition and results of operations.
Added
Perpetual license revenue was $6.1 million in the year ended December 31, 2023, compared to $6.9 million in the year ended December 31, 2022, a decrease of $0.8 million, or 13%. The decrease is attributable to decreases in customer purchases of on-premise software.
Removed
The following table presents a reconciliation of Total revenue to Core Organic Revenue for each of the periods indicated. 39 Years Ended December 31, 2022 2021 (dollars in thousands) Reconciliation of Total revenue to Core Organic Revenue: Total revenue $ 317,303 $ 302,016 Less: Subscription and support revenue from acquisitions not fully in the prior year comparative period (1) 49,624 24,943 Perpetual license revenue 6,948 2,150 Professional services revenue 12,468 12,246 Subscription and support revenue from Sunset Assets (2) 29,958 35,782 Overage Charges (3) 12,287 16,124 Political Revenue (4) — 980 Core Organic Revenue (5) $ 206,018 $ 209,791 (1) After the reduction of $5.5 million purchase accounting deferred revenue discount for the year ended December 31, 2022.
Added
Variable telecom carrier costs decreased $6.5 million as a result of reduced customer demand and non-cash stock based compensation decreased $1.1 million. These decreases were offset by increased hosting expenses for all of our products and increased non-cash amortization of intangible assets associated with our Sunset Assets.
Removed
(2) Subscription and support revenue from Sunset Assets is revenue related to Sunset Assets. This excludes Overage Charges, Professional services revenue, Perpetual license revenue and subscription and support revenue from acquisitions not fully in the prior year comparative period all shown separately.
Added
Research and development expense increased approximately $5.4 million due to product investments as part of our growth initiative by building our India Center of Excellence. This increase was partially offset by a decrease of $2.2 million of research and development costs related to our Sunset Assets.
Removed
(3) Overage Charges are subscription and support revenue representing 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.
Added
Acquisition-related Expense Year Ended December 31, 2023 2022 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) Acquisition-related expense $ 3,060 —% $ 21,556 6% $ (18,496) (86)% Acquisition-related expense was $3.1 million in 2023, compared to $21.6 million for 2022, a decrease of $18.5 million, or 86%.
Removed
(4) Political Revenue is subscription and support usage revenue from US presidential campaigns. (5) 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.
Added
The decrease in expense was a result of no acquisitions in 2023 compared to two acquisitions in 2022.
Removed
The following table presents a reconciliation of Subscription and support revenue to Core Organic Revenue for each of the periods indicated.
Added
Expense in 2023 primarily related to final settlements of the 2022 acquisitions. 45 Impairment of goodwill Year Ended December 31, 2023 2022 Change Amount Percent of Revenue Amount Percent of Revenue Amount % Change (dollars in thousands) Impairment of goodwill $ 128,755 43% $ 12,500 4% $ 116,255 930% Impairment of goodwill was $128.8 million in 2023, compared to $12.5 million for 2022.
Removed
Years Ended December 31, 2022 2021 (dollars in thousands) Reconciliation of Subscription and support revenue to Core Organic Revenue: Subscription and support revenue $ 297,887 $ 287,621 Less: Subscription and support revenue from acquisitions not fully in the prior year comparative period (1) 49,624 24,943 Subscription and support revenue from Sunset Assets (2) 29,958 35,782 Overage Charges (3) 12,287 16,124 Political Revenue (4) — 980 Core Organic Revenue (5) $ 206,018 $ 209,791 (1) After the reduction of $5.5 million purchase accounting deferred revenue discount for the year ended December 31, 2022 .
Added
This increased benefit was related primarily to the reduction of uncertain tax positions due to expiration of related statute of limitation for a Canadian exposure and foreign income taxes associated with our combined non-U.S. operations which is offset in Australia and the UK by valuation allowances.
Removed
(2) Subscription and support revenue from Sunset Assets is revenue related to Sunset Assets. This excludes Overage Charges, Professional services revenue, Perpetual license revenue and subscription and support revenue from acquisitions not fully in the prior year comparative period all shown separately.
Added
These tax benefits are offset by the impact of a material goodwill impairment in 2023, changes in deferred tax liabilities associated with amortization of U.S. tax deductible goodwill and U.S. state taxes in certain states in which the Company does not file on a consolidated basis or have net operating loss carryforwards.
Removed
(3) Overage Charges are subscription and support revenue representing 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 volume of usage 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.
Removed
(4) Political Revenue is subscription and support usage revenue from US presidential campaigns.
Removed
Total revenue growth includes a negative impact of 2% from changes in foreign currency exchange rates. Our organic revenue excludes acquisitions closed during or subsequent to the prior year comparable period and business operations related to Sunset Assets (the “Organic Revenue”).
Removed
The acquisitions not fully in the comparable period contributed $32.8 million to the increase in total revenue for the year ended December 31, 2022. Total revenue related to Perpetual license and Professional services related to our Organic Business decreased by $3.0 million.
Removed
Subscription and support revenue related to Sunset Assets decreased by $5.8 million as a result of decreased sales and marketing focus on those Sunset Assets. Total revenues related to Overage Charges decreased by $3.8 million as a result of variable demand in the year ended December 31, 2022.
Removed
The year ended December 31, 2021 included $1.0 million in Political Revenue, which did not repeat in the year ended December 31, 2022. Therefore, net of these non-core revenues, our Core Organic Revenue decreased by $3.8 million in the year ended December 31, 2022 compared to the year ended December 31, 2021.
Removed
After removing the negative foreign currency exchange impact on our revenue, net of these non-core revenues, our Core Organic Revenue decreased by $2.6 million in the year ended December 31, 2022 compared to the year ended December 31, 2021.
Removed
Subscription and support revenue was $297.9 million in the year ended December 31, 2022, compared to $287.6 million in the year ended December 31, 2021, an increase of $10.3 million, or 4%. Subscription and support revenue growth includes a negative impact of 2% from changes in foreign currency exchange rates.
Removed
The acquisitions not fully in the comparable period contributed $24.7 million to the increase in subscription and support revenue in the year ended December 31, 2022. Subscription and support revenue related to our Sunset Assets decreased $5.8 million as a result of decreased sales and marketing focus on those Sunset Assets.
Removed
Therefore, net of these non-core revenues, our Core Organic Revenue decreased by $3.8 million in the year ended December 31, 2022 compared to the year ended December 31, 2021.
Removed
After removing the negative foreign currency exchange impact on our revenue, net of these non-core revenues, our Core Organic Revenue decreased by $2.6 million in the year ended December 31, 2022 compared to the year ended December 31, 2021. 41 Perpetual license revenue was $6.9 million in the year ended December 31, 2022, compared to $2.2 million in the year ended December 31, 2021, an increase of $4.7 million, or 223%.
Removed
The acquisitions not fully in the comparable period contributed $5.0 million to the increase in perpetual license revenue in the year ended December 31, 2022. Perpetual license revenue related to our Sunset Assets was nil.
Removed
The acquisitions not fully in the comparable period contributed $3.1 million to the increase in professional services revenue in the year ended December 31, 2022. Professional services revenue related to our Sunset Assets decreased by $0.1 million.
Removed
Therefore, professional services revenue from our Organic Business decreased by $2.7 million in the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily related to our discipline around not accepting unprofitable professional services projects.
Removed
The acquisitions not fully in the comparable period contributed $5.4 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 and Panviva products. Cost of subscription and support revenue related to our Sunset Assets decreased $2.6 million, primarily related to hosting and infrastructure costs.

… 15 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

76 edited+65 added−3 removed203 unchanged
Biggest changeWe may seek to renegotiate or refinance our loan facility, and we may be unable to do so on acceptable terms or at all. • Our loan facility contains operating and financial covenants that may restrict our business and financing activities. • Fluctuations in the exchange rate of foreign currencies could result in losses on currency transactions. • If we are unable to implement and maintain effective internal controls over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports, and the market price of our common stock may be negatively affected. • Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. • We may be required to record charges to future earnings if our Goodwill or Intangible Assets become impaired. • We may be adversely affected by the effects of inflation. • Unanticipated challenges by tax authorities could harm our future results. • Taxing authorities may successfully assert that we should have collected or, in the future, should collect additional sales and use taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our results of operations. • Our operating results could be adversely affected by an increase in our effective tax rate as a result of U.S. and foreign tax law changes, outcomes of current or future tax examinations, or by material differences between our forecasted and actual effective tax rates. • Tax laws, regulations, and compliance practices are evolving and may have a material adverse effect on our results of operations, cash flows and financial position. • Taxing authorities could reallocate our taxable income among our subsidiaries, which could increase our consolidated tax liability. • New laws and increasing levels of regulation in the areas of privacy and protection of user data could harm our business. • Any failure to comply with governmental export and import control laws and regulations could adversely affect our business. • If securities or industry analysts do not publish, or cease publishing, research or reports about us, our business or our market, if they publish negative evaluations of our stock, or if we fail to meet the expectations of analysts, the price of our stock and trading volume could decline. • Because we do not expect to pay any dividends on our common stock for the foreseeable future, our investors may never receive a return on their investment. • Anti-takeover provisions in our amended and restated certificate of incorporation and our amended and restated bylaws, as well as provisions of Delaware law, might discourage, delay or prevent a change in control of our company or changes in our board of directors or management and, therefore, depress the trading price of our common stock. • Pursuant to the terms of the Purchase Agreement (as defined herein), we have issued 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. • 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. • An epidemic, pandemic or contagious diseases, including the ongoing COVID-19 pandemic, and measures intended to prevent the spread of such an event could adversely affect our business, results of operations and financial condition. • Adverse economic conditions may reduce our customers’ ability to spend money on information technology or software, or our customers may otherwise choose to reduce their spending on information technology or software, which may adversely impact our business. • The market price of our common stock may be volatile, which could result in substantial losses for investors. 12 Risks Related to Our Business We have made, and expect to continue to make, acquisitions as a primary component of our growth strategy.
Biggest changeRisks Related to Ownership of Our Common Stock • If securities or industry analysts do not publish, or cease publishing, research or reports about us, our business or our market, if they publish negative evaluations of our stock, or if we fail to meet the expectations of analysts, the price of our stock and trading volume could decline. 12 • Because we do not expect to pay any dividends on our common stock for the foreseeable future, our investors may never receive a return on their investment. • Anti-takeover provisions in our amended and restated certificate of incorporation and our amended and restated bylaws, as well as provisions of Delaware law, might discourage, delay or prevent a change in control of our company or changes in our board of directors or management and, therefore, depress the trading price of our common stock. • Pursuant to the terms of the Purchase Agreement (as defined herein), we have issued 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. • 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. • Our Board has adopted a Tax Benefit Preservation Plan, which may not protect the future availability of the Company’s tax assets in all circumstances and which could delay or discourage takeover attempts that some shareholders may consider favorable. • We cannot guarantee that our stock repurchase program will be fully implemented or that it will enhance long-term stockholder value.
Further, in the course of acquiring companies, we may: • issue common stock that would dilute our current stockholders’ ownership percentage; • use a substantial portion of our cash resources; • increase our interest expense, leverage, and debt service requirements if we incur additional debt to pay for an acquisition; • assume liabilities for which we do not have indemnification from the former owners; further, indemnification obligations may be subject to dispute or concerns regarding the creditworthiness of the former owners; • record goodwill and non-amortizable intangible assets that are subject to impairment testing and potential impairment charges; • experience volatility in earnings due to changes in contingent consideration related to acquisition earnout liability estimates; • incur amortization expenses related to certain intangible assets; • lose existing or potential contracts as a result of conflict of interest issues; • become subject to adverse tax consequences or deferred compensation charges; 13 • incur large and immediate write-offs; or • become subject to litigation.
Further, in the course of acquiring companies, we may: • issue common stock that would dilute our current stockholders’ ownership percentage; • use a substantial portion of our cash resources; • increase our interest expense, leverage, and debt service requirements if we incur additional debt to pay for an acquisition; • assume liabilities for which we do not have indemnification from the former owners; further, indemnification obligations may be subject to dispute or concerns regarding the creditworthiness of the former owners; • record goodwill and non-amortizable intangible assets that are subject to impairment testing and potential impairment charges; • experience volatility in earnings due to changes in contingent consideration related to acquisition earnout liability estimates; • incur amortization expenses related to certain intangible assets; • lose existing or potential contracts as a result of conflict of interest issues; • become subject to adverse tax consequences or deferred compensation charges; • incur large and immediate write-offs; or • become subject to litigation.
Acquisition Candidate Identification As we seek to find the best candidates for acquisition: • we may not be able to identify suitable acquisition candidates or to consummate acquisitions on acceptable terms; • we may pursue international acquisitions, which inherently pose more risks than domestic acquisitions; • we compete with others to acquire complementary products, technologies, and businesses, which may result in decreased availability of, or increased price for, suitable acquisition candidates; • we may not be able to obtain the necessary financing, on favorable terms, including as a result of rising interest rates, or at all, to finance any or all of our potential acquisitions; • we may ultimately fail to consummate an acquisition even if we announce that we plan to acquire a technology, product, or business; and • acquired technologies, products, or businesses may not perform as we expect, and we may fail to realize anticipated revenue and profits.
Acquisition Candidate Identification As we seek to find the best candidates for acquisition: • we may not be able to identify suitable acquisition candidates or to consummate acquisitions on acceptable terms; • we may pursue international acquisitions, which inherently pose more risks than domestic acquisitions; • we compete with others to acquire complementary products, technologies, and businesses, which may result in decreased availability of, or increased price for, suitable acquisition candidates; • we may not be able to obtain the necessary financing, on favorable terms, including as a result of rising interest rates, or at all, to finance any or all of our potential acquisitions; • we may ultimately fail to consummate an acquisition even if we announce that we plan to acquire a technology, product, or business; and 13 • acquired technologies, products, or businesses may not perform as we expect, and we may fail to realize anticipated revenue and profits.
Further, the Inflation Reduction Act of 2022 was enacted in August 2022, which contained provisions effective January 1, 2023, including a 15% corporate alternative minimum tax and a 1% excise tax on certain stock repurchases by public corporations, both of which we do not expect to have a material impact on our results of operations, financial condition or cash flows.
Further, the Inflation Reduction Act of 2022 was enacted in August 2022, which contained provisions effective January 1, 25 2023, including a 15% corporate alternative minimum tax and a 1% excise tax on certain stock repurchases by public corporations, both of which we do not expect to have a material impact on our results of operations, financial condition or cash flows.
The terms of the credit facility limit, among other things, our ability to • 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 terms of the Credit Facility limit, among other things, our ability to • 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; 22 • Enter into transactions with affiliates; and • Prepay indebtedness or make changes to certain agreements.
Our competitors also may establish or strengthen cooperative relationships with our current or future value-added resellers, third-party consulting firms or other parties with whom we have relationships, thereby limiting our ability to promote our applications. Disruptions in our business caused by these events could reduce our revenue. Our quarterly operating results may fluctuate in the future.
Our competitors also may establish or strengthen cooperative relationships with our current or future value-added resellers, third-party consulting firms or other parties with whom we have relationships, thereby limiting our ability to promote our applications. Disruptions in our business caused by these events could reduce our revenue. 21 Our quarterly operating results may fluctuate in the future.
If adequate funds are not available, we may be required to reduce expenditures, including curtailing our growth strategies, reducing our product-development efforts, or foregoing acquisitions. If we succeed in raising additional 20 funds through the issuance of equity or convertible securities, it could result in substantial dilution to existing stockholders.
If adequate funds are not available, we may be required to reduce expenditures, including curtailing our growth strategies, reducing our product-development efforts, or foregoing acquisitions. If we succeed in raising additional funds through the issuance of equity or convertible securities, it could result in substantial dilution to existing stockholders.
Moreover, our acquisition strategy could expose us to additional risk of intellectual property litigation as we acquire new businesses with diverse software offerings and intellectual property assets. 18 In addition, in most instances, we have agreed to indemnify our customers against claims that our applications infringe the intellectual property rights of third parties.
Moreover, our acquisition strategy could expose us to additional risk of intellectual property litigation as we acquire new businesses with diverse software offerings and intellectual property assets. In addition, in most instances, we have agreed to indemnify our customers against claims that our applications infringe the intellectual property rights of third parties.
Any such tax assessments may adversely affect the results of our operations. Our operating results could be adversely affected by an increase in our effective tax rate as a result of U.S. and foreign tax law changes, outcomes of current or future tax examinations, or by material differences between our forecasted and actual effective tax rates.
Any such tax assessments may adversely affect the results of our operations. 24 Our operating results could be adversely affected by an increase in our effective tax rate as a result of U.S. and foreign tax law changes, outcomes of current or future tax examinations, or by material differences between our forecasted and actual effective tax rates.
If we are subject to an investigation or litigation or suffer a breach of security of personal data, we may incur costs or be subject to forfeitures and penalties that could reduce our profitability. In addition, compliance with these laws may restrict our ability to provide services to our customers that they may find to be valuable.
If we are subject to an investigation or litigation or suffer a breach of security of personal data, we may incur costs or be subject to forfeitures and penalties that could reduce our profitability. In addition, compliance 26 with these laws may restrict our ability to provide services to our customers that they may find to be valuable.
Growing sales to both new and existing customers is, in part, dependent on our ability to maintain and expand our sales force. Identifying, recruiting and training additional sales personnel requires significant time, expense, and attention. It can take several quarters or longer before our sales representatives are fully-trained and productive.
Growing sales to both new and existing customers is, in part, dependent on our ability to maintain, expand and enhance our sales force. Identifying, recruiting and training additional sales personnel requires significant time, expense, and attention. It can take several quarters or longer before our sales representatives are fully-trained and productive.
If two or more affiliated companies are located 24 in different countries, the tax laws or regulations of each country generally require that transfer prices be the same as those between unrelated companies dealing at arms’ length and that contemporaneous documentation is maintained to support the transfer prices.
If two or more affiliated companies are located in different countries, the tax laws or regulations of each country generally require that transfer prices be the same as those between unrelated companies dealing at arms’ length and that contemporaneous documentation is maintained to support the transfer prices.
In addition, seasonality may be difficult to observe in our financial results during periods in which we acquire businesses, as such results typically are most significantly impacted by such acquisitions. We expect this seasonality to continue, or possibly increase in the future, which may cause fluctuations in our operating results and financial metrics.
In addition, seasonality may be difficult to observe in our financial results during periods in which we acquire businesses, as such results typically are most significantly impacted by such acquisitions. We expect this seasonality 19 to continue, or possibly increase in the future, which may cause fluctuations in our operating results and financial metrics.
Any errors or defects in third-party software could result in errors or a failure of our applications, which could harm our 19 business. Market Risks The markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be adversely affected.
Any errors or defects in third-party software could result in errors or a failure of our applications, which could harm our business. Market Risks The markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be adversely affected.
The calculation of our provision for income taxes and our accruals for other 23 taxes requires us to use significant judgment and involves dealing with uncertainties in the application of complex tax laws and regulations. In determining the adequacy of our provision for income taxes, we regularly assess the potential settlement outcomes resulting from income tax examinations.
The calculation of our provision for income taxes and our accruals for other taxes requires us to use significant judgment and involves dealing with uncertainties in the application of complex tax laws and regulations. In determining the adequacy of our provision for income taxes, we regularly assess the potential settlement outcomes resulting from income tax examinations.
Risks Related to Ownership of Our Common Stock 26 If securities or industry analysts do not publish, or cease publishing, research or reports about us, our business or our market, if they publish negative evaluations of our stock, or if we fail to meet the expectations of analysts, the price of our stock and trading volume could decline.
Risks Related to Ownership of Our Common Stock If securities or industry analysts do not publish, or cease publishing, research or reports about us, our business or our market, if they publish negative evaluations of our stock, or if we fail to meet the expectations of analysts, the price of our stock and trading volume could decline.
The Series A Preferred Stock ranks 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.
The Series A Preferred Stock ranks senior to our common stock with respect to distribution rights and rights upon our 29 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.
If we fail to attract and retain suitably qualified individuals, including software engineers and sales personnel, our ability to implement our 14 business plan and develop and maintain our applications could be adversely affected. As a result, our ability to compete would decrease, our operating results would suffer, and our revenue would decrease.
If we fail to attract and retain suitably qualified individuals, including software engineers and sales personnel, our ability to implement our business plan and develop and maintain our applications could be adversely affected. As a result, our ability to compete would decrease, our operating results would suffer, and our revenue would decrease.
Failure to maintain and expand our sales organization may negatively impact our revenue growth. We sell our applications primarily through a direct sales organization comprised of inside sales and field sales personnel. In addition, we have an indirect sales organization, which sells to distributors and value-added resellers.
Failure to maintain, expand and enhance our sales organization may negatively impact our revenue growth. We sell our applications primarily through a direct sales organization comprised of inside sales and field sales personnel. In addition, we have an indirect sales organization, which sells to distributors and value-added resellers.
In addition, we incur a portion of our operating expenses in foreign currencies, including Australian dollars, British pounds, Canadian dollars, Indian 21 Rupees, Euros and Israeli New Shekels, and in the future, as we expand into other foreign countries, we expect to incur operating expenses in other foreign currencies.
In addition, we incur a portion of our operating expenses in foreign currencies, including Australian dollars, British pounds, Canadian dollars, Indian Rupees, Euros and Israeli New Shekels, and in the future, as we expand into other foreign countries, we expect to incur operating expenses in other foreign currencies.
Obtaining the necessary authorizations, including any required license, for a particular sale may be time-consuming, is not guaranteed, and may result in the delay or loss of sales opportunities.
Obtaining the necessary authorizations, including any required license, for a particular sale may be time- 27 consuming, is not guaranteed, and may result in the delay or loss of sales opportunities.
As a result, we are subject to a number of risks, including: • inflation and actions taken by central banks to counter inflation; • foreign currency fluctuations and controls; • international and regional economic, political and labor conditions, including any instability or security concerns abroad, such as uncertainty caused by economic sanctions, trade disputes, armed conflicts and wars, including the Russia-Ukraine war; • tax laws (including U.S. taxes on foreign subsidiaries); • increased financial accounting and reporting burdens and complexities; • changes in, or impositions of, legislative or regulatory requirements; • changes in laws governing the free flow of data across international borders; • failure of laws to protect our intellectual property rights adequately; • inadequate local infrastructure and difficulties in managing and staffing international operations; • delays resulting from difficulty in obtaining export licenses for certain technology, tariffs, quotas and other trade barriers; • the imposition of governmental economic sanctions on countries in which we do business or where we plan to expand our business; • costs and delays associated with developing products in multiple languages; • operating in locations with a higher incidence of corruption and fraudulent business practices; and • other factors beyond our control, such as terrorism, war, natural disasters, climate change and pandemics, including the COVID-19 pandemic and resulting restrictions on business activity, which may vary significantly by region.
As a result, we are subject to a number of risks, including: • inflation and actions taken by central banks to counter inflation; 15 • foreign currency fluctuations and controls; • international and regional economic, political and labor conditions, including any instability or security concerns abroad, such as uncertainty caused by economic sanctions, trade disputes, armed conflicts and wars, including the Russia-Ukraine and Israeli-Hamas wars; • tax laws (including U.S. taxes on foreign subsidiaries); • increased financial accounting and reporting burdens and complexities; • changes in, or impositions of, legislative or regulatory requirements; • changes in laws governing the free flow of data across international borders; • failure of laws to protect our intellectual property rights adequately; • inadequate local infrastructure and difficulties in managing and staffing international operations; • delays resulting from difficulty in obtaining export licenses for certain technology, tariffs, quotas and other trade barriers; • the imposition of governmental economic sanctions on countries in which we do business or where we plan to expand our business; • costs and delays associated with developing products in multiple languages; • operating in locations with a higher incidence of corruption and fraudulent business practices; and • other factors beyond our control, such as terrorism, war, natural disasters, climate change and pandemics and resulting restrictions on business activity, which may vary significantly by region.
Furthermore, the loan facility requires us and our subsidiaries to comply with certain financial covenants if greater than 35% of revolving credit facility is drawn.
Furthermore, the Credit Facility requires us and our subsidiaries to comply with certain financial covenants if greater than 35% of revolving credit facility is drawn.
We will not be able to protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property.
We will not be able to 20 protect our intellectual property if we are unable to enforce our rights or if we do not detect unauthorized use of our intellectual property.
These provisions may also prevent or frustrate attempts by our stockholders to replace or remove members of our board of directors or our management.
These provisions may also prevent or frustrate attempts by our stockholders to replace or 28 remove members of our board of directors or our management.
The operating and other restrictions and covenants in the loan facility, and in any future financing arrangements that we may enter into, may restrict our ability to finance our operations, engage in certain business activities, or expand or fully pursue our business strategies, or otherwise limit our discretion to manage our business.
The operating and other restrictions and covenants in the Credit Facility, and in any future financing arrangements that we may enter into, may restrict our ability to finance our operations, engage in certain business activities, or expand or fully pursue our business strategies, or otherwise limit our discretion to manage our business.
We are subject to privacy and data security obligations in the United States, United Kingdom and other foreign jurisdictions relating to the collection, use, sharing, retention, security, transfer and other handling of personal data about individuals, including our users and employees around the world.
We are subject to privacy and data security obligations in the United States, United Kingdom, European Union and other foreign jurisdictions relating to the collection, use, sharing, retention, security, transfer and other handling of personal data about individuals, including our users and employees around the world.
Based on analysis of acquired net operating losses and credits, utilization of our net operating losses and research and development credits will be subject to annual limitations. The annual limitation will result in the expiration of $155.0 million of federal net operating losses and $4.1 million of research and development credit carryforwards before utilization.
Based on analysis of acquired net operating losses and credits, utilization of our net operating losses and research and development credits will be subject to annual limitations. The 23 annual limitation will result in the expiration of $155.0 million of federal net operating losses and $4.0 million of research and development credit carryforwards before utilization.
These laws continue to develop in the U.S. and around the globe, including through regulatory and legislative action and judicial decisions, in ways we cannot predict and that may harm our business. For example, a new Quebec data protection law will take effect in September 2023, and updates to Canadian federal privacy legislation are pending.
These laws continue to develop in the U.S. and around the globe, including through regulatory and legislative action and judicial decisions, in ways we cannot predict and that may harm our business. For example, a new Quebec data protection law took effect in September 2023, and updates to Canadian federal privacy legislation are pending.
Some of the factors that may cause the market price of our common stock to fluctuate include: • actual or anticipated changes in the estimates of our operating results that we provide to the public, our failure to meet these projections or changes in recommendations by securities analysts that elect to follow our common stock; • price and volume fluctuations in the overall equity markets from time to time; • significant volatility in the market price and trading volume of comparable companies; • changes in the market perception of software generally or in the effectiveness of our applications in particular; • disruptions in our services due to computer hardware, software or network problems; • announcements of technological innovations, new products, strategic alliances or significant agreements by us or by our competitors; • announcements of new customer agreements or upgrades and customer downgrades or cancellations or delays in customer purchases; • litigation involving us; • our ability to successfully consummate and integrate acquisitions; 29 • investors’ general perception of us; • recruitment or departure of key personnel; • sales of our common stock by us or our stockholders; • fluctuations in the trading volume of our shares or the size of our public float; and • general economic, legal, industry and market conditions and trends, including those related to the ongoing COVID-19 pandemic, unrelated to our performance.
Some of the factors that may cause the market price of our common stock to fluctuate include: • actual or anticipated changes in the estimates of our operating results that we provide to the public, our failure to meet these projections or changes in recommendations by securities analysts that elect to follow our common stock; • price and volume fluctuations in the overall equity markets from time to time; • significant volatility in the market price and trading volume of comparable companies; • changes in the market perception of software generally or in the effectiveness of our applications in particular; • disruptions in our services due to computer hardware, software or network problems; • announcements of technological innovations, new products, strategic alliances or significant agreements by us or by our competitors; • announcements of new customer agreements or upgrades and customer downgrades or cancellations or delays in customer purchases; • litigation involving us; • our ability to successfully consummate and integrate acquisitions; • investors’ general perception of us; • recruitment or departure of key personnel; • sales of our common stock by us or our stockholders; • fluctuations in the trading volume of our shares or the size of our public float; and • general economic, legal, industry and market conditions and trends unrelated to our performance.
If worldwide economic conditions become unstable, including as a result of protectionism and nationalism, other unfavorable changes in economic conditions, such as inflation, rising interest rates, a U.S. government default on its obligations or a recession, and other events beyond our control, such as economic sanctions, natural disasters, results of global epidemics, pandemics, or contagious diseases, such as COVID-19, political instability, and armed conflicts and wars, such as the Russia-Ukraine war, then our existing customers and prospective customers may re-evaluate their decision to purchase our applications.
If worldwide economic conditions become unstable, including as a result of protectionism and nationalism, other unfavorable changes in economic conditions, such as inflation, rising interest rates, a U.S. government default on its obligations or a recession, and other events beyond our control, such as economic sanctions, natural disasters, results of global epidemics, pandemics, or contagious diseases, political instability, and armed conflicts and wars, such as the Russia-Ukraine and Israeli-Hamas wars, then our existing customers and prospective customers may re- 31 evaluate their decision to purchase our applications.
We have completed 31 acquisitions in the 11 years ending December 31, 2022. We intend to continue to pursue acquisitions of complementary technologies, products, and businesses as a primary component of our growth strategy to enhance the features and functionality of our applications, expand our customer base, provide access to new markets, and increase benefits of scale.
We have completed 31 acquisitions in the 12 years ending December 31, 2023. We intend to continue to pursue acquisitions of complementary technologies, products, and businesses as a primary component of our growth strategy to enhance the features and functionality of our applications, expand our customer base, provide access to new markets, and increase benefits of scale.
Actual or perceived security vulnerabilities in our solutions and services or cyberattacks on our networks could have a material adverse impact on our business, results of operations and financial condition. Our applications involve the storage and transmission of our customers’ proprietary and confidential information, including personal or identifying information regarding their employees and customers.
Actual or perceived security vulnerabilities in our solutions and services or cyberattacks on our networks could have a material adverse impact on our business, results of operations and financial condition. Our applications involve the storage and transmission of our customers’ proprietary and confidential information, including personal or identifying information regarding their employees and customers and are subject to attempted cyberattacks.
For the year ended December 31, 2022, we generated approximately 30% of our total revenue from customers outside of the U.S.
For the year ended December 31, 2023, we generated approximately 30% of our total revenue from customers outside of the U.S.
The impact of an epidemic, pandemic or other health crisis, including the COVID-19 pandemic, and measures to prevent the spread of such an event could materially and adversely affect our business in a number of ways.
The impact of an epidemic, pandemic or other health crisis and measures to prevent the spread of such an event could materially and adversely affect our business in a number of ways.
The annual limitation will result in the expiration of approximately $155.0 million of U.S. federal net operating losses and $4.1 million of credit carryforwards before utilization. $50.3 million of foreign net operating loss carryforwards carry forward indefinitely, and the remainder will expire beginning in 2041.
The annual limitation will result in the expiration of approximately $155.0 million of U.S. federal net operating losses and $4.0 million of credit carryforwards before utilization. $48.0 million of foreign net operating loss carryforwards carry forward indefinitely, and the remainder will expire beginning in 2041.
As of December 31, 2022, we had 115,000 shares of newly designated Series A Preferred Stock outstanding.
As of December 31, 2023, we had 115,000 shares of newly designated Series A Preferred Stock outstanding.
We may not be able to identify suitable acquisition candidates or consummate acquisitions on acceptable terms, or we may be unable to successfully integrate acquisitions, which could disrupt our operations and adversely impact our business and operating results. • We face various risks associated with operating as a multinational corporation and our growth depends on our ability to retain existing customers and secure additional subscriptions and cross-sell opportunities from existing customers. • Failure to maintain and expand our sales organization may negatively impact our revenue growth. • We depend on our senior management team and the loss of one or more key personnel, or an inability to attract and retain highly skilled personnel may impair our ability to grow our business. • Because we generally recognize revenue from our customers over the terms of their agreements, downturns or upturns in our business may not be immediately reflected in our operating results. • We face various risks associated with operating as a multinational corporation and our growth and long-term success depends, in part, on our ability to expand our international sales and operations. • Our sales cycles can be lengthy and variable, which may cause changes in our operating results. • Perpetual license revenue is unpredictable, and a material increase or decrease in perpetual license revenue from period to period can produce substantial variation in the total revenue and earnings we recognize in a given period. • We may be forced to change the prices we charge for our applications or the pricing models upon which they are based. • Any disruption of service at the data centers that house our equipment and deliver our applications or with our hosting service provider could harm our business. • Actual or perceived security vulnerabilities in our solutions and services or cyberattacks on our networks could have a material adverse impact on our business, results of operations and financial condition. • Our success depends on our ability to adapt to technological change and continue to innovate. • If our applications contain serious errors or defects, we may lose revenue and market acceptance, and we may incur costs to defend or settle product-related claims. • If we fail to integrate our applications with other software applications and competitive or adjacent offerings that are developed by others, or fail to make our applications available on mobile and other handheld devices, our applications may become less marketable, less competitive or obsolete, and our operating results could be harmed. • Our use of open source software could negatively affect our ability to sell our applications and subject us to possible litigation. • Certain of our operating results and financial metrics are difficult to predict as a result of seasonality. • We could incur substantial costs as a result of any claim of infringement of another party’s intellectual property rights. • We could incur substantial costs in protecting our intellectual property from infringement, and any failure to protect our intellectual property could impair our business. • We rely on third-party software that is required for the development and deployment of our applications, which may be difficult to obtain or which could cause errors or failures of our applications. • The markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be adversely affected. • Mergers of, or other strategic transactions by, our competitors could weaken our competitive position or reduce our revenue. 11 • Our quarterly operating results may fluctuate in the future.
We may not be able to identify suitable acquisition candidates or consummate acquisitions on acceptable terms, or we may be unable to successfully integrate acquisitions, which could disrupt our operations and adversely impact our business and operating results. • We face various risks associated with operating as a multinational corporation and our growth depends on our ability to retain existing customers and secure additional subscriptions and cross-sell opportunities from existing customers. • Failure to maintain, expand and enhance our sales organization may negatively impact our revenue growth. • We depend on our senior management team and the loss of one or more key personnel, or an inability to attract and retain highly skilled personnel may impair our ability to grow our business. • Because we generally recognize revenue from our customers over the terms of their agreements, downturns or upturns in our business may not be immediately reflected in our operating results. • We face various risks associated with operating as a multinational corporation and our growth and long-term success depends, in part, on our ability to expand our international sales and operations. • Our sales cycles can be lengthy and variable, which may cause changes in our operating results. • The failure to timely and accurately implement AI, and other new technologies, successfully in our product offerings could have a material adverse effect on our business, competitive position, results of operations, financial condition and prospects, and also result in reputational harm or liability. • Perpetual license revenue is unpredictable, and a material increase or decrease in perpetual license revenue from period to period can produce substantial variation in the total revenue and earnings we recognize in a given period. • We may be forced to change the prices we charge for our applications or the pricing models upon which they are based. • Any disruption of service at the data centers that house our equipment and deliver our applications or with our hosting service provider could harm our business. • Actual or perceived security vulnerabilities in our solutions and services or cyberattacks on our networks could have a material adverse impact on our business, results of operations and financial condition. • Our success depends on our ability to adapt to technological change and continue to innovate. • If our applications contain serious errors or defects, we may lose revenue and market acceptance, and we may incur costs to defend or settle product-related claims. • If we fail to integrate our applications with other software applications and competitive or adjacent offerings that are developed by others, or fail to make our applications available on mobile and other handheld devices, our applications may become less marketable, less competitive or obsolete, and our operating results could be harmed. • Our use of open source software could negatively affect the performance of our applications and our ability to sell our applications and subject us to possible litigation. • Certain of our operating results and financial metrics are difficult to predict as a result of seasonality. • We could incur substantial costs as a result of any claim of infringement of another party’s intellectual property rights. • We could incur substantial costs in protecting our intellectual property from infringement, and any failure to protect our intellectual property could impair our business. 11 • We rely on third-party software that is required for the development and deployment of our applications, which may be difficult to obtain or which could cause errors or failures of our applications.
In addition, as of December 31, 2022, the Company had research and development credit carryforwards of approximately $4.1 million. The U.S. federal net operating loss and credit carryforwards will expire beginning in 2023, if not utilized.
In addition, as of December 31, 2023, the Company had research and development credit carryforwards of approximately $4.0 million. The U.S. federal net operating loss and credit carryforwards will expire beginning in 2024, if not utilized.
Goodwill and Other Intangible Assets ” in the notes to our consolidated financial statements for more information regarding our fourth quarter 2022 Goodwill impairment. 22 We may be adversely affected by the effects of inflation.
Goodwill and Other Intangible Assets ” in the notes to our consolidated financial statements for more information regarding our first quarter 2023 and fourth quarter 2022 Goodwill impairments. We may be adversely affected by the effects of inflation.
We face risks related to an epidemic, pandemic or contagious diseases, including the ongoing COVID-19 pandemic, which has impacted, and in the future could impact, the markets in which we operate and could have a material adverse effect on our business, results of operations and financial condition.
We face risks related to an epidemic, pandemic or contagious disease which has impacted, and in the future could impact, the markets in which we operate and could have a material adverse effect on our business, results of operations and financial condition.
Violations of data and privacy-related laws can result in significant penalties. 25 Australia recently amended its Privacy Act, increasing the maximum penalties available for serious or repeated data breaches from AUS 2.2 million to the greater of: (i) AUS 50 million; (ii) three times the value of any benefit obtained through misuse of the information; or (iii) 30% of a company’s adjusted turnover in the relevant period.
Australia recently amended its Privacy Act, increasing the maximum penalties available for serious or repeated data breaches from AUS 2.2 million to the greater of: (i) AUS 50 million; (ii) three times the value of any benefit obtained through misuse of the information; or (iii) 30% of a company’s adjusted turnover in the relevant period.
If we fail to integrate our applications with other software applications and competitive or adjacent offerings that are developed by others, or fail to make our applications available on mobile and other handheld devices, our applications may become less marketable, less competitive or obsolete, and our operating results could be harmed. 17 Our applications integrate with a variety of other software applications, and also with competing and adjacent third-party offerings.
If we fail to integrate our applications with other software applications and competitive or adjacent offerings that are developed by others, or fail to make our applications available on mobile and other handheld devices, our applications may become less marketable, less competitive or obsolete, and our operating results could be harmed.
General Risks An epidemic, pandemic or contagious diseases, including the ongoing COVID-19 pandemic, and measures intended to prevent the spread of such an event could adversely affect our business, results of operations and financial condition.
General Risks An epidemic, pandemic or contagious disease and measures intended to prevent the spread of such an event could adversely affect our business, results of operations and financial condition.
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. 28 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.
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.
We must incur costs and expenses to comply with the new requirements, which may impact the cross-border transfer of personal data throughout our organization and to/from third parties. In the United States, several states, including California, Colorado, Connecticut, Utah and Virginia, have adopted generally applicable and comprehensive privacy laws.
We must incur costs and expenses to comply with the new requirements, which may impact the cross-border transfer of personal data throughout our organization and to/from third parties. In the United States, at least thirteen states have adopted generally applicable and comprehensive privacy laws.
Our insurance does not cover expenses related to disruptions to our service or unauthorized access to our applications. Any significant disruption to our service or access to our systems could result in a 16 loss of customers and adversely affect our business and results of operation. We primarily utilize communications and computer hardware systems operated by third-party Web hosting providers.
Any significant disruption to our service or access to our systems could result in a loss of customers and adversely affect our business and results of operation. We primarily utilize communications and computer hardware systems operated by third-party Web hosting providers.
We could incur substantial costs in prosecuting or defending any intellectual property litigation. If we sue to enforce our rights or are sued by a third-party that claims that our applications infringe its rights, the litigation could be expensive and could divert our management resources.
We could incur substantial costs in prosecuting or defending any intellectual property litigation and may not have adequate insurance coverage for these types of actions. If we sue to enforce our rights or are sued by a third-party that claims that our applications infringe its rights, the litigation could be expensive and could divert our management resources.
In addition, even if the operations of an acquisition are integrated successfully, we may not realize the full benefits of the acquisition, including the synergies, cost savings, or growth opportunities that we expect. These benefits may not be achieved within the anticipated time frame, or at all.
In addition, even if the operations of an acquisition are integrated successfully, we may not realize the full benefits of the acquisition, including the synergies, cost savings, or growth opportunities that we expect.
Because of our limited experiences with international operations, any international efforts that we may undertake may not be successful in creating demand for our applications outside of the U.S. or in effectively selling subscriptions to our cloud offerings in all of the international markets that we enter. 15 Our sales cycles can be lengthy and variable, which may cause changes in our operating results.
Because of our limited experiences with international operations, any international efforts that we may undertake may not be successful in creating demand for our applications outside of the U.S. or in effectively selling subscriptions to our cloud offerings in all of the international markets that we enter.
We have entered into floating-to-fixed interest rate swap agreements in order to eliminate interest rate volatility in connection with the outstanding term debt portion of our Credit Facility, but our $60.0 million Revolver (as defined herein), which remains undrawn, is not currently subject to any interest rate instruments.
We have floating-to-fixed interest rate swap agreements in order to reduce interest rate volatility in connection with $258.5 million of the outstanding term debt on our Credit Facility, but $223.5 million of our outstanding term debt and all our $60.0 million Revolver (as defined herein), which remains undrawn, are not currently subject to any interest rate instruments.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. As of December 31, 2022, the Company had total net operating loss carryforwards of approximately $357.8 million consisting of $301.6 million and $56.1 million related to the U.S. federal and foreign net operating loss carryforwards, respectively.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited. As of December 31, 2023, the Company had total net operating loss carryforwards of approximately $304.2 million consisting of $256.0 million and $48.2 million related to the U.S. federal and foreign net operating loss carryforwards, respectively.
As a result, we may fail to meet or exceed the expectations of research analysts or investors, which could cause our stock price to decline, and you may lose part or all of your investment. • We may need financing in the future, and any additional financing may result in restrictions on our operations or substantial dilution to our stockholders.
As a result, we may fail to meet or exceed the expectations of research analysts or investors, which could cause our stock price to decline, and you may lose part or all of your investment.
If we are unable to successfully develop or acquire new software capabilities and functionality, enhance our existing applications to anticipate and meet customer preferences, sell our applications into new markets, or adapt to changing industry standards in software, our revenue and results of operations would be adversely affected.
If we are unable to successfully develop or acquire new software capabilities and functionality, enhance our existing applications to anticipate and meet customer preferences, sell our applications into new markets, or adapt to changing industry standards in software, our revenue and results of operations would be adversely affected. 18 If our applications contain serious errors or defects, we may lose revenue and market acceptance, and we may incur costs to defend or settle product-related claims.
If we were to become involved in securities litigation, it could result in substantial costs, divert management’s attention and resources from our business and adversely affect our business. Item 1B. Unresolved Staff Comments None.
If we were to become involved in securities litigation, it could result in substantial costs, divert management’s attention and resources from our business and adversely affect our business. Item 1B. Unresolved Staff Comments None. Item 1C. Cybersecurity Cybersecurity represents a critical component of the Company’s overall approach to risk management.
Complying with these varying requirements could cause us to incur substantial costs and/or require us to change our business practices in a manner adverse to our business.
Complying with these varying requirements could cause us to incur substantial costs and/or require us to change our business practices in a manner adverse to our business. Violations of data and privacy-related laws can result in significant penalties.
Data protection and privacy laws may differ, conflict and be interpreted and applied inconsistently, from country to country. In many cases, these laws apply not only to user data, employee data and third-party transactions, but also to transfers of personal data between or among ourselves, our subsidiaries, and other parties with which we have commercial relations.
In many cases, these laws apply not only to user data, employee data and third-party transactions, but also to transfers of personal data between or among ourselves, our subsidiaries, and other parties with which we have commercial relations, in addition to methods of communication and consent for such communication.
Our obligations under the loan facility are secured by a security interest in substantially all of our assets and assets of the co-borrowers’ and of any guarantors, including intellectual property.
Our Credit Facility contains operating and financial covenants that may restrict our business and financing activities. Our obligations under our Credit Facility are secured by a security interest in substantially all of our assets and assets of the co-borrowers’ and of any guarantors, including intellectual property.
Also, we may be unable to renew existing customer agreements or enter into new customer agreements at the same prices or upon the same terms that we have historically, which could have a material adverse effect on our financial position.
Also, we may be unable to renew existing customer agreements or enter into new customer agreements at the same prices or upon the same terms that we have historically, which could have a material adverse effect on our financial position. 17 Any disruption of service at the data centers that house our equipment and deliver our applications or with our hosting service providers could harm our business.
We face various risks associated with operating as a multinational corporation and our growth depends on our ability to retain existing customers and secure additional subscriptions and cross-sell opportunities from existing customers.
These benefits may not be achieved within the anticipated time frame, or at all. 14 We face various risks associated with operating as a multinational corporation and our growth depends on our ability to retain existing customers and secure additional subscriptions and cross-sell opportunities from existing customers.
Delays inherent to our sales cycles could cause significant variability in our revenue and operating results for any particular period. Perpetual license revenue is unpredictable, and a material increase or decrease in perpetual license revenue from period to period can produce substantial variation in the total revenue and earnings we recognize in a given period.
Perpetual license revenue is unpredictable, and a material increase or decrease in perpetual license revenue from period to period can produce substantial variation in the total revenue and earnings we recognize in a given period.
Any of the following risks could have a material adverse effect on our business, operating results and financial condition and cause the trading price of our common stock to decline. Among these important risks are the following: • We have made, and expect to continue to make, acquisitions as a primary component of our growth strategy.
Any of the following risks could have a material adverse effect on our business, operating results and financial condition and cause the trading price of our common stock to decline.
We need to continuously modify and enhance our platform to adapt to changes in cloud-enabled hardware, software, networking, browser and database technologies. Any failure of our applications to integrate effectively with other software applications and product offerings could reduce the demand for our applications or result in customer dissatisfaction and harm to our business.
Any failure of our applications to integrate effectively with other software applications and product offerings could reduce the demand for our applications or result in customer dissatisfaction and harm to our business.
Any such limitations on the ability to use our net operating loss carryforwards and other tax assets could adversely impact our business, financial condition, and operating results. We may be required to record charges to future earnings if our Goodwill or Intangible Assets become impaired.
Any such limitations on the ability to use our net operating loss carryforwards and other tax assets could adversely impact our business, financial condition, and operating results.
The costs incurred in correcting any material errors or defects might be substantial and could adversely affect our operating results. Although our customer agreements typically contain provisions designed to limit our exposure to certain of the claims above, existing or future laws or unfavorable judicial decisions could negate these limitations.
Although our customer agreements typically contain provisions designed to limit our exposure to certain of the claims above, existing or future laws or unfavorable judicial decisions could negate these limitations.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders owning in excess of 15% of our outstanding voting stock from engaging in certain business combinations with us. 27 Any provision of our certificate of incorporation and bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
Any provision of our certificate of incorporation and bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
Any disruption of service at the data centers that house our equipment and deliver our applications or with our hosting service provider could harm our business. Our reputation and ability to attract, retain, and serve our customer is dependent upon the reliable performance of our computer systems and those of third parties that we utilize in our operations.
Our reputation and ability to attract, retain, and serve our customer is dependent upon the reliable performance of our computer systems and those of third parties that we utilize in our operations.
To achieve market acceptance for our applications, we must effectively anticipate and offer applications that meet changing customer demands in a timely manner. Customers may require features and capabilities not offered by our current applications. We may experience difficulties that could delay or prevent our development, acquisition, or implementation of new applications and enhancements.
Customers may require features and capabilities not offered by our current applications. We may experience difficulties that could delay or prevent our development, acquisition, or implementation of new applications and enhancements.
The overall market for software is rapidly evolving and subject to changing technology, shifting customer needs, and frequent introductions of new applications. Our ability to attract new customers and increase revenue from existing customers will depend, in large part, on our ability to develop or acquire new applications and enhance and improve existing applications.
Our ability to attract new customers and increase revenue from existing customers will depend, in large part, on our ability to develop or acquire new applications and enhance and improve existing applications. To achieve market acceptance for our applications, we must effectively anticipate and offer applications that meet changing customer demands in a timely manner.
Our servers and those of third parties we use in our operations are vulnerable to computer viruses, physical or electronic break-ins, and similar disruptions. We have implemented security protocols within our applications; however, we have no assurance that our systems are completely secure.
Service interruptions, errors in our software, or the unavailability of computer systems used in our operations could diminish the overall attractiveness of our applications to existing and potential customers. Our servers and those of third parties we use in our operations are vulnerable to computer viruses, physical or electronic break-ins, and similar disruptions.
If our applications contain serious errors or defects, we may lose revenue and market acceptance, and we may incur costs to defend or settle product-related claims. Complex software applications such as ours often contain errors or defects, particularly when first introduced or when new versions or enhancements are released. Our current and future applications may contain serious defects.
Complex software applications such as ours often contain errors or defects, particularly when first introduced or when new versions or enhancements are released. Our current and future applications may contain serious defects. The costs incurred in correcting any material errors or defects might be substantial and could adversely affect our operating results.
Interruptions in these systems, or with the Internet in general, could make our service unavailable or degraded or otherwise hinder our ability to deliver application data to our customers. Service interruptions, errors in our software, or the unavailability of computer systems used in our operations could diminish the overall attractiveness of our applications to existing and potential customers.
Supply chain disruptions stemming from the Russia-Ukraine or Israeli-Hamas wars may harm our customers and suppliers and further complicate existing supply chain constraints. Interruptions in these systems, or with the Internet in general, could make our service unavailable or degraded or otherwise hinder our ability to deliver application data to our customers.
As rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, could correspondingly decrease. As of December 31, 2022, all of our outstanding debt under our Credit Facility (as defined herein) was variable rate debt.
Interest rates may remain at existing levels or may further increase in the near term which could cause our debt service obligations and interest expense to increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, could correspondingly decrease.
Our sales cycle can vary substantially from customer to customer.
Our sales cycles can be lengthy and variable, which may cause changes in our operating results. Our sales cycle can vary substantially from customer to customer.
India is also expected to pass a new law in 2023. Any failure to comply with applicable laws, regulations or contractual obligations may harm our business, results of operations and financial condition.
As the particulars of these regulations are unknown at this time, these new consumer protection regulations could impact our organization’s corporate go-to-market sales initiatives, as well as certain feature sets in our current product stack. Any failure to comply with applicable laws, regulations or contractual obligations may harm our business, results of operations and financial condition.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. During the course of 2022, central banks across the globe raised benchmark interest rates to combat inflation and interest rate increases are expected to continue during the course of 2023.
Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations and interest expense to increase significantly. At December 31, 2023, the total outstanding indebtedness under our Credit Facility (as defined herein) was $482.1 million.
Removed
The COVID-19 pandemic has disrupted and may continue to disrupt the supply chain of hardware needed to maintain these third-party systems and services or to run our business. In addition, supply chain disruptions stemming from the Russia-Ukraine war may harm our customers and suppliers and further complicate existing supply chain constraints.
Added
Among these important risks are the following: Risks Related to Our Business • We have made, and expect to continue to make, acquisitions as a primary component of our growth strategy.
Removed
As of December 31, 2022, we have executed interest rate swaps to effectively convert the entire balance of the Company’s $540.0 million original principal term loans from variable interest payments to fixed interest rate payments, based on an annualized fixed rate of 5.4%, for the 7 year term of the term loans maturing in August 2026.
Added
Market Risks • The markets in which we participate are intensely competitive, and if we do not compete effectively, our operating results could be adversely affected. • Mergers of, or other strategic transactions by, our competitors could weaken our competitive position or reduce our revenue. • Our quarterly operating results may fluctuate in the future.

… 64 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeItem 2. Properties Our principal corporate offices are located in Austin, Texas, where we occupy approximately 9,900 square feet of space under a lease that expires in June 2025. We also lease office facilities domestically, some of which we sublease, located in Massachusetts, Nebraska, North Carolina, Ohio, Texas and Washington.
Biggest changeItem 2. Properties Our principal corporate offices are located in Austin, Texas, where we occupy approximately 15,400 square feet of space under leases that expire in 2025. We also lease office facilities domestically, some of which we sublease, located in Massachusetts, Nebraska, North Carolina, Texas and Washington.
Internationally, we lease office space in Australia, Canada, France, Germany, India, Ireland, Israel, Malaysia, Netherlands, Romania and the United Kingdom. We believe that our properties are generally suitable to meet our needs for the foreseeable future.
Internationally, we lease office space in Australia, Canada, India, Ireland, Israel, Malaysia, Netherlands, Romania and the United Kingdom. We believe that our properties are generally suitable to meet our needs for the foreseeable future. 33

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeMine Safety Disclosures Not applicable. 30 PART II
Biggest changeMine Safety Disclosures Not applicable. 34 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

11 edited+7 added−1 removed14 unchanged
Biggest changeOur revenue has grown from $149.9 million in the year ended December 31, 2018 to $317.3 million in the year ended December 31, 2022, representing a compound annual growth rate of 21%. During the year ended December 31, 2022, domestic revenue as a percent of total revenue decreased to 70% compared to 71% in the year ended December 31, 2021.
Biggest changeThrough a series of acquisitions and integrations, we have established a library of diverse, cloud-based software applications under the Upland brand that address specific digital transformation needs. Our revenue has grown from $149.9 million in the year ended December 31, 2018 to $297.9 million in the year ended December 31, 2023, representing a compound annual growth rate of 15%.
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. For a comparison of the years ended December 31, 2021 and 2020 refer to “Item 7.
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. For a comparison of the years ended December 31, 2022 and 2021 refer to “Item 7.
For each of the years ended December 31, 2022, 2021 and 2020, our professional services revenue accounted for 4% of our total revenue . To support continued growth, we intend to pursue acquisitions of complementary technologies, products and businesses. This will expand our product families, customer base and market access, resulting in increased benefits of scale.
For the years ended December 31, 2023, 2022 and 2021, our professional services revenue accounted for 3%, 4%, and 4% of our total revenue, respectively. To support continued growth, we intend to pursue acquisitions of complementary technologies, products and businesses. This will expand our product families, customer base and market access, resulting in increased benefits of scale.
Overview 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, consulting services, technology, manufacturing, media, telecommunications, government, political, non-profit, healthcare, life sciences, retail and hospitality.
Overview We service customers ranging from large global corporations and government agencies to small- and medium-sized businesses. We have more than 10,000 customers across a broad range of industries, including financial services, consulting services, technology, manufacturing, media, telecommunications, government, insurance, non-profit, healthcare, life sciences, retail and hospitality.
The following graph compares the total cumulative stockholder return on our common stock with the total cumulative return of the Nasdaq Computer Technology Index (the “Computer Technology Index”) and the S&P 500 Composite Index during the period commen cing on December 29, 2017 and ending on December 30, 2022.
The following graph compares the total cumulative stockholder return on our common stock with the total cumulative return of the Nasdaq Computer Technology Index (the “Computer Technology Index”) and the S&P 500 Composite Index during the period commencing on December 29, 2017 and ending on December 29, 2023.
Management’s Discussion and Analysis” in the Company’s Annual Report on Form 10-K for the years ended December 31, 2021 filed with the SEC on February 24 , 2022. All information presented herein is based on our fiscal calendar.
Management’s Discussion and Analysis” in the Company’s Annual Report on Form 10-K for the years ended December 31, 2022 filed with the SEC on February 28, 2023. All in formation presented herein is based on our fiscal calendar.
As of February 21, 2023, the last reported sales price of our common stock on the Nasdaq Global Market was $8.52 and there were 29 stockholders of record of our common stock, including Broadridge Financial Solutions, Inc., which holds shares of our common stock on behalf of an indeterminable number of beneficial owners.
As of February 20, 2024, the last reported sales price of our common stock on the Nasdaq Global Market was $4.74 and there were 30 stockholders of record of our common stock, including Broadridge Financial Solutions, Inc., which holds shares of our common stock on behalf of an indeterminable number of beneficial owners.
Historically, we have sold certain of our applications under perpetual licenses, which also are paid in advance. For the years ended December 31, 2022, 2021 and 2020, our perpetual license revenue accounted for 2% , 1% and 1% of our total revenue, respectively.
For the years ended December 31, 2023, 2022 and 2021, our subscription and support revenue represented 95%, 94% and 95% of our total revenue, respectively. Historically, we have sold certain of our applications under perpetual licenses, which also are paid in advance.
The support agreements related to our perpetual licenses are one-year in duration and entitle the customer to support and unspecified upgrades. The revenue related to such support agreements is included as part of our subscription and support revenue. Professional services revenue consists of fees related to implementation, data extraction, integration and configuration and training on our applications.
The revenue related to such support agreements is included as part of our subscription and support revenue. Professional services revenue consists of fees related to implementation, data extraction, integration and configuration and training on our applications.
Our operating results in a given period can fluctuate based on the mix of subscription and support, perpetual license and professional services revenue. For the years ended December 31, 2022, 2021 and 2020, our subscription and support revenue represented 94% , 95% and 95% of our total revenue, respectively.
During each of the years ended December 31, 2023 and December 31, 2022, non-US revenue as a percent of total revenue was 30% . Our operating results in a given period can fluctuate based on the mix of subscription and support, perpetual license and professional services revenue.
Historical stock price performance should not be relied upon as an indication of future stock price performance. 31 Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities None. Item 6. [Reserved] 32 Item 7.
Historical stock price performance should not be relied upon as an indication of future stock price performance. 35 Recent Sales of Unregistered Securities None Issuer Purchases of Equity Securities On September 1, 2023 and October 31, 2023, the Board of Directors authorized the Stock Repurchase Plan (as defined in Note 13.
Removed
Through a series of acquisitions and integrations, we have established a diverse family of software applications under the Upland brand and in the product solution categories listed above, each of which addresses a specific software needs.
Added
Stockholders' Equity ) in the aggregate amount of up to $15,000,000 and $10,000,000, respectively, for a total of $25,000,000 authorized, which allows the Company to repurchase shares of its issued and outstanding Common Stock, from time to time in the open market or otherwise including pursuant to a Rule 10b5-1 trading plan and in compliance with Rule10b-18 under the Exchange Act.
Added
The authorization does not have a specified expiration date. Accordingly, unless terminated earlier by resolution of the Board, the stock repurchase program will expire when the Company has repurchased all shares authorized for repurchase.
Added
The Company is not obligated to acquire any particular amount of Common Stock and may modify or suspend the repurchases at any time in the Company’s discretion. In September 2023, the Company purchased 783,356 shares at an average price of $4.10 under the Share Repurchase Plan. Disclosures of repurchased amounts and related average costs exclude the impact of excise taxes.
Added
The following table provides information about purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act during the three months ended December 31, 2023.
Added
Period Total number of shares purchased (1) Average price paid per share (2) Total number of shares purchased as part of the publicly announced plan Maximum approximate dollar value of shares that may yet be purchased under the plan 10/01/2023 - 10/31/2023 752,968 $ 4.07 752,968 11/01/2023 - 11/30/2023 830,915 $ 4.57 830,915 12/01/2023 - 12/31/2023 953,648 $ 4.54 877,861 Total 2,537,531 $ 4.41 2,461,744 $ 10,798,936 (1) The total number of shares repurchased during the three months ended December 31, 2023 includes 75,787 shares withheld from employees to satisfy either the exercise price of stock options or the statutory withholding tax liability upon the vesting of share-based awards, which are not part of the Share Repurchase Program.
Added
(2) Average price paid per share excludes costs and excise taxes associated with the above mentioned repurchases. Item 6. [Reserved] 36 Item 7.
Added
For the years ended December 31, 2023, 2022 and 2021, our perpetual license revenue accounted for 2%, 2% and 1% of our total revenue, respectively. The support agreements related to our perpetual licenses are one-year in duration and entitle the customer to support and unspecified upgrades.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

2 edited+0 added−0 removed0 unchanged
Biggest changeFinancial Statements and Supplementary Data 56 Report of Independent Registered Public Accounting Firm 57 Consolidated Financial Statements 60 Consolidated Balance Sheets 60 Consolidated Statements of Operations 62 Consolidated Statements of Comprehensive Loss 63 Consolidated Statements of Equity 64 Consolidated Statements of Cash Flows 65 Notes to the Consolidated Financial Statements 66
Biggest changeFinancial Statements and Supplementary Data 55 Report of Independent Registered Public Accounting Firm 56 Consolidated Financial Statements 58 Consolidated Balance Sheets 58 Consolidated Statements of Operations 59 Consolidated Statements of Comprehensive Loss 60 Consolidated Statements of Equity 61 Consolidated Statements of Cash Flows 62 Notes to the Consolidated Financial Statements 63
Item 6. Selected Financial Data 32 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 32 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 54 Item 8.
Item 6. [ R eserved ] 36 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 36 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 53 Item 8.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

22 edited+13 added−20 removed9 unchanged
Biggest changeManagement’s Discussion and Analysis ” in the Company’s Annual Report on Form 10-K for the years ended December 31, 2021 filed with the SEC on February 24 , 2022. 45 Non-GAAP Financial Measures Key Metrics In addition to the GAAP and non-GAAP financial measures described in “ —Results of Operations ” above, 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 (in thousands, except percentages): As of December 31, 2022 2021 2020 Other Financial Data (unaudited): Annualized recurring revenue value at year-end $ 266,278 $ 257,056 $ 220,535 Annual net dollar retention rate 95 % 94 % 94 % Adjusted EBITDA (1) $ 97,105 $ 96,657 $ 99,903 (1) Adjusted EBITDA is presented for the years ended December 31, 2022, 2021 and 2020.
Biggest changeManagement’s Discussion and Analysis ” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 28 , 2023. 46 Key Metrics and Non-GAAP Financial Measures In addition to the GAAP financial measures described in “ Results of Operations ” above, we regularly review the following key metrics and non-GAAP financial measures to evaluate and identify trends in our business, measure our performance, prepare financial projections and make strategic decisions (in thousands, except percentages): As of December 31, 2023 2022 2021 Other Financial Data (unaudited): Annualized recurring revenue value at year-end $ 242,136 $ 266,278 $ 257,056 Annual net dollar retention rate 95% 95% 94% Adjusted EBITDA $ 64,438 $ 97,105 $ 96,657 Annualized recurring revenue value at year-end We define annualized recurring revenue (“ARR”) as the value as of December 31 that equals the monthly value of our recurring revenue under support and subscription contracts excluding month-to-month contracts measured as of December 31 multiplied by 12.
Adjusted EBITDA is a non-GAAP financial measure that our management believes provides useful information to management, investors and others in understanding and evaluating our operating results for the following reasons: • Adjusted EBITDA is widely used by our investors and securities analysts to measure a company’s operating performance without regard to items that can vary substantially from company to company depending upon their financing, capital structures and the method by which assets were acquired; 46 • Our management uses Adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, in the preparation of our annual operating budget, as a measure of our operating performance, to assess the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance because Adjusted EBITDA eliminates the impact of items that we do not consider indicative of our core operating performance; • Adjusted EBITDA provides more consistency and comparability with our past financial performance, facilitates period-to-period comparisons of our operations and also facilitates comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and • Adjusted EBITDA should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with GAAP.
Adjusted EBITDA is a non-GAAP financial measure that our management believes provides useful information to management, investors and others in understanding and evaluating our operating results for the following reasons: • Adjusted EBITDA is widely used by our investors and securities analysts to measure a company’s operating performance without regard to items that can vary substantially from company to company depending upon their financing, capital structures and the method by which assets were acquired; • Our management uses Adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, in the preparation of our annual operating budget, as a measure of our operating performance, to assess the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance because Adjusted EBITDA eliminates the impact of items that we do not consider indicative of our core operating performance; • Adjusted EBITDA provides more consistency and comparability with our past financial performance, facilitates period-to-period comparisons of our operations and also facilitates comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results; and 47 • 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.
This measure excludes the revenue value of uncontracted overage fees, on-demand service fees and our Sunset Assets. Our annual net dollar retention rate was 95%, 94% and 94% as of December 31, 2022, 2021 and 2020. Adjusted EBITDA We monitor Adjusted EBITDA to help us evaluate the effectiveness and efficiency of our operations.
This measure excludes the revenue value of uncontracted overage fees, on-demand service fees and our Sunset Assets. Our annual net dollar retention rate was 95%, 95% and 94% as of December 31, 2023, 2022 and 2021. Adjusted EBITDA We monitor Adjusted EBITDA to help us evaluate the effectiveness and efficiency of our operations.
See “ Note 12. Series A Preferred Stock ” for further details.
See “ Note 12. Series A Convertible Preferred Stock ” for further details.
See “ —Liquidity and Capital Resources ” above for further discussion regarding our Credit Facility. (2) Future interest on debt obligations is calculated using the interest rate effective as of December 31, 2022. We have entered into floating-to-fixed interest rate swap agreements to limit exposure to interest rate risk related to our debt.
See “ Liquidity and Capital Resources ” above for further discussion regarding our Credit Facility. (2) Future interest on debt obligations is calculated using the interest rate effective as of December 31, 2023. We have entered into floating-to-fixed interest rate swap agreements to limit exposure to interest rate risk related to a portion of our debt. See “
Our ARR was $266.3 million, $257.1 million and $220.5 million as of December 31, 2022, 2021 and 2020. Annual net dollar retention rate We measure our ability to grow and retain ARR from existing clients using a metric we refer to as our annual net dollar retention rate.
Our ARR was $242.1 million, $266.3 million and $257.1 million as of December 31, 2023, 2022 and 2021, respectively. Annual net dollar retention rate We measure our ability to grow and retain ARR from existing clients using a metric we refer to as our annual net dollar retention rate.
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 tax payment activity. Cash provided by financing activities increased $102.3 million in 2022 compared to 2021.
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 tax payment activity. Cash from financing activities decreased $155.5 million in 2023 compared to 2022.
The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2022 2021 (dollars in thousands) Consolidated Statements of Cash Flow Data: Net cash provided by operating activities $ 29,979 $ 41,738 Net cash used in investing activities (63,222) (93,532) Net cash provided by (used in) financing activities 94,151 (8,180) Effect of exchange rate fluctuations on cash (1,413) (897) Change in cash and cash equivalents 59,495 (60,871) Cash and cash equivalents, beginning of period 189,158 250,029 Cash and cash equivalents, end of period $ 248,653 $ 189,158 Cash Flows from Operating Activities Cash provided by operating activities is significantly influenced by the amount of cash we invest in personnel and infrastructure to support the anticipated growth of our business.
The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2023 2022 (dollars in thousands) Consolidated Statements of Cash Flow Data: Net cash provided by operating activities $ 49,943 $ 29,979 Net cash used in investing activities (1,220) (63,222) Net cash provided by (used in) financing activities (61,384) 94,151 Effect of exchange rate fluctuations on cash 567 (1,413) Change in cash and cash equivalents (12,094) 59,495 Cash and cash equivalents, beginning of period 248,653 189,158 Cash and cash equivalents, end of period $ 236,559 $ 248,653 Cash Flows from Operating Activities Cash provided by operating activities is significantly influenced by the amount of cash we invest in personnel and infrastructure to support the anticipated growth of our business.
Other than the foregoing, the material terms of the Credit Agreement remains unchanged. 2022 S-3 On October 21, 2022 we filed a resale registration statement on Form S-3 (File No. 333-267973) (the “2022 S-3”), on behalf of the Purchaser and pursuant to the Registration Rights Agreement, which became effective on November 1, 2022 and covers (i) the issued Series A Preferred Stock and (ii) the number of shares of the Company’s common stock issuable upon conversion of such Series A Preferred Stock, which amount includes and assumes that dividends on the Series A Preferred Stock are paid by increasing the Liquidation Preference of the Series A Preferred Stock for a period of sixteen dividend payment periods from the initial issuance date.
Debt” , is comprised of fully drawn Term Loans as of December 31, 2023 and a $60.0 million revolving credit facility which was fully available as of December 31, 2023. 2022 S-3 On October 21, 2022 we filed a resale registration statement on Form S-3 (File No. 333-267973) (the “2022 S-3”), on behalf of the Purchaser and pursuant to the Registration Rights Agreement, which became effective on November 1, 2022 and covers (i) the issued Series A Convertible Preferred Stock and (ii) the number of shares of the Company’s common stock issuable upon conversion of such Series A Convertible Preferred Stock, which amount includes and assumes that dividends on the Series A Preferred Stock are paid by increasing the Liquidation Preference of the Series A Convertible Preferred Stock for a period of sixteen dividend payment periods from the initial issuance date.
We believe that current cash and cash equivalents, cash flows from operating activities and availability under our existing Credit Facility will be sufficient to fund our operations for at least the next twelve months.
We believe that current cash and cash equivalents, cash flows from operating activities and availability under our existing Credit Facility 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 Revolver to support our continued growth via acquisitions.
If these funds held by our foreign subsidiaries are needed for our domestic operations, we would be required to accrue and pay U.S. taxes to repatriate these funds to the U.S. 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.
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.
Working capital sources of cash for 2022 included a decrease of $9.7 million decrease in accounts receivable related to the timing of collections. A substantial source of cash is invoicing for subscriptions and support fees in advance, which is recorded as deferred revenue, and is included on our consolidated balance sheet as a liability.
A substantial source of cash is invoicing for subscriptions and support fees in advance, which is recorded as deferred revenue, and is included on our consolidated balance sheet as a liability.
The volume of professional services rendered, the volume and timing of customer bookings and contract renewals, and the related timing of collections and renewals on those bookings, as well as the timing of spending commitments and payments of our accounts payable, accrued expenses, accrued payroll and related benefits, all affect these account balances. 50 Cash provided by operating activities was $30.0 million for 2022 compared to $41.7 million for 2021, a decrease of $11.8 million.
The volume of professional services rendered, the volume and timing of customer bookings and contract renewals, and the related timing of collections and renewals on those bookings, as well as the timing of spending commitments and payments of our accounts payable, accrued expenses, accrued payroll and related benefits, all affect these account balances.
Deferred revenue consists of the unearned portion of booked fees for our software subscriptions and support and for professional services, which is amortized into revenue in accordance with our revenue recognition policy. We assess our liquidity, in part, through an analysis of new subscriptions invoiced, expected cash receipts on new and existing subscriptions, and our ongoing operating expense requirements.
Deferred revenue consists of the unearned portion of booked fees for our software subscriptions and support and for professional services, which is amortized into revenue in accordance with our revenue recognition policy.
This decrease in operating cash flow is generally attributable to the working capital uses of cash outweighing the working capital sources of cash outlined below.
Cash provided by operating activities was $49.9 million for 2023 compared to $30.0 million for 2022, an increase of $20.0 million. This increase in operating cash flow is generally attributable to the working capital sources of cash outweighing the working capital uses of cash outlined below.
Year Ended December 31, 2022 2021 2020 Net loss $ (68,413) $ (58,212) $ (51,219) Depreciation and amortization expense 56,146 52,928 47,164 Interest expense, net 29,145 31,626 31,529 Other expense, net 781 253 111 Benefit from income taxes (1,741) (8,344) (4,234) Stock-based compensation expense 41,602 53,873 41,692 Acquisition-related expense 21,556 21,234 27,075 Non-recurring litigation costs 33 — — Purchase accounting deferred revenue discount 5,496 3,299 7,785 Impairment of goodwill 12,500 — — Adjusted EBITDA $ 97,105 $ 96,657 $ 99,903 Core Organic Revenue Core Organic Revenue is defined as total revenue, less revenue 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.
Year Ended December 31, 2023 2022 2021 Net loss $ (179,874) $ (68,413) $ (58,212) Depreciation and amortization expense 71,985 56,146 52,928 Interest expense, net 18,684 29,145 31,626 Other expense, net (236) 781 253 Benefit from income taxes (2,493) (1,741) (8,344) Stock-based compensation expense 22,874 41,602 53,873 Acquisition-related expense 3,060 21,556 21,234 Non-recurring litigation costs 1,126 33 — Purchase accounting deferred revenue discount 557 5,496 3,299 Impairment of goodwill 128,755 12,500 — Adjusted EBITDA $ 64,438 $ 97,105 $ 96,657 Core Organic Growth Rate Beginning with the three months ended June 30, 2023, we began disclosing our Core Organic Growth Rate, a non-GAAP financial measure.
We do not provide for federal income taxes on the undistributed earnings of our foreign subsidiaries. As of December 31, 2022 and 2021, we had a working capital surplus of $170.1 million and $106.5 million, respectively. Series A Preferred Stock The Series A Preferred Stock as discussed in “ Note 12.
As of December 31, 2023 and 2022, we had a working capital surplus of $169.6 million and $170.1 million, respectively. 49 Series A Convertible Preferred Stock In August of 2022, we issued Series A Preferred Stock as discussed in “ Note 12.
Cash used in investing activities decreased $30.3 million in 2022 compared to 2021 primarily as a result of closing two acquisitions during the period compared to three acquisition in the comparable prior year period.
As our business grows, we expect our primary investing activities to continue to further expand our family of software applications and infrastructure and support additional personnel. Cash used in investing activities decreased $62.0 million in 2023 compared to 2022 primarily as a result of closing no acquisitions during the period compared to two acquisition in the comparable prior year period.
Series A Preferred Stock ” provided us an additional $115.0 million in liquidity during the year ended December 31, 2022, which we intend to use for (a) for general corporate purposes and (b) for transaction-related fees and expenses. As of December 31, 2022, the Series A Preferred Stock Issuance Costs totaled $4.6 million.
Series A Convertible Preferred Stock ” which provided us an additional $110.4 million in liquidity, net of issuance costs of $4.6 million, that we are using for general corporate purposes and intend to use for future acquisitions. Credit Facility Our Credit Facility, as defined and described in “Note 7.
The following table summarizes our liquidity for the periods indicated: Year Ended December 31, 2022 2021 (dollars in thousands) Cash and cash equivalents $ 248,653 $ 189,158 Available borrowings from our Revolving Credit Facility 60,000 60,000 Total Liquidity $ 308,653 $ 249,158 The $59.5 million increase in cash and cash equivalents from December 31, 2021 to December 31, 2022 includes $110.4 million in cash proceeds related to our Series A Preferred Stock, net of issuance costs which closed in August 2022.
The following table summarizes our liquidity for the periods indicated: Year Ended December 31, 2023 2022 (dollars in thousands) Cash and cash equivalents $ 236,559 $ 248,653 Available borrowings from our Revolving Credit Facility (1) 60,000 60,000 Total Liquidity $ 296,559 $ 308,653 (1) Loans under the Revolver may be borrowed, repaid and reborrowed until August 6, 2024.
Contractual Payment Obligations The following table summarizes our future contractual obligations as of December 31, 2022 (in thousands): Next 12 Months Beyond 12 Months Total Debt Obligations (1) $ 5,400 $ 517,050 $ 522,450 Interest on Debt Obligations (2) 28,335 72,644 100,979 Operating Lease Obligations (3) 3,711 5,872 9,583 Purchase Commitments (4) 23,158 18,262 41,420 Total $ 60,604 $ 613,828 $ 674,432 (1) Consists of contractual principal payments on our Credit Facility.
Contractual Payment Obligations The following table summarizes our future contractual obligations as of December 31, 2023 (in thousands): Next 12 Months Beyond 12 Months Total Debt Obligations (1) $ 5,400 $ 476,650 $ 482,050 Interest on Debt Obligations (2) 35,240 54,994 90,234 Operating Lease Obligations (3) 2,540 1,719 4,259 Purchase Commitments (4) 22,852 7,326 30,178 Total $ 66,032 $ 540,689 $ 606,721 (1) Consists of contractual principal payments on our Credit Facility.
For reconciliations of total revenue to Core Organic Revenue and subscription and support revenue to Core Organic Revenue, see “ —Results of Operations—Adjusted Operating Measures. ” 47 48 Liquidity and Capital Resources To date, we have financed our operations primarily through the raising of capital including sales of our common stock and preferred stock or our convertible preferred stock, cash from operating activities and borrowings under our Credit Facility (as hereinafter defined).
Three Months Ended December 31, 2023 2022 (dollars in thousands) Reconciliation of total revenue to core organic revenue: Total revenue $ 72,178 $ 78,811 Less: Perpetual license revenue 1,760 1,628 Professional services revenue 2,234 3,035 Subscription and support revenue from Sunset Assets 10,211 14,982 Overage Charges 1,422 2,089 Core organic revenue $ 56,551 $ 57,077 Liquidity and Capital Resources To date, we have financed our operations primarily through cash generated from operating activities, the raising of capital including sales of our common stock and our convertible preferred stock, and borrowings under our Credit Facility (as hereinafter defined).
Removed
Annualized recurring revenue value at year-end We define annualized recurring revenue (“ARR”) as the value as of December 31 that equals the monthly value of our recurring revenue under support and subscription contracts excluding month-to-month contracts measured as of December 31 multiplied by 12.
Added
We use Core Organic Growth Rate as a key performance measure to assess our consolidated operating performance over time and for planning and forecasting purposes. Core Organic Growth Rate is the percentage change between two reported periods in subscription and support revenue, excluding subscription and support revenue from Sunset Assets and Overage Charges, as defined below.
Removed
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. We do not intend to offer for sale any common stock at current market prices.
Added
We calculate our year-over-year Core Organic Growth Rate as though all acquisitions or dispositions closed as of the end of the latest period were closed as of the first day of the prior year period presented. Core Organic Growth Rate does not represent actual organic revenue generated by our business as it stood at the beginning of the respective period.
Removed
This was partially offset by $62.4 million in cash paid for our two acquisitions closed in January and February 2022, net of $0.7 million in cash acquired.
Added
For the three-month period ended December 31, 2023, our Core Organic Growth Rate was negative 0.9%.
Removed
Non-cash acquisition date consideration to be paid in future periods related to these acquisitions includes $5.9 million in holdback payments and that are due within 12 to 18 months of the closing dates of the underlying acquisitions. Our cash and cash equivalents held by our foreign subsidiaries was $34.8 million as of December 31, 2022.
Added
Core Organic Growth Rates are not necessarily indicative of either future results of operations or actual results that might have been achieved had certain Sunset Asset classifications not been made or had certain acquisitions or dispositions been consummated on the first day of the prior year period presented.
Removed
The holders of Series A Convertible Preferred Stock are 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 7.0% 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.
Added
We believe that this metric is useful to management and investors in analyzing our financial and operational performance period-over-period along with evaluating the growth of our 48 business normalized for the impact of acquisitions and dispositions, as well as adjusting for the exclusion of non-core Sunset Assets and non-committed Overage Charges.
Removed
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 had accrued unpaid dividends of $1.8 million as of December 31, 2022.
Added
For example, by including pre-acquisition revenue, Core Organic Growth Rate allows us to measure the underlying revenue growth of our business as of the end of the period presented, which we believe provides insight into our current performance.
Removed
The Series A Preferred Stock ranks 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.
Added
Related Defined Terms Overage Charges are subscription and support revenues earned in addition to contractual minimum customer commitments as a result of the usage volume of services including text and e-mail messaging and third-party pass-through costs that exceed the levels stipulated in contracts with the Company.
Removed
Credit Facility Our facility is comprised of $540.0 million in original principal term loans and a $60.0 million revolving credit facility. 49 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 December 31, 2022.
Added
The following table represents a reconciliation of total revenue, the most comparable GAAP measure, to core organic revenue for each of the periods indicated.
Removed
The Credit Facility replaced our previous credit facility. All outstanding balances under our previous credit facility were paid off using proceeds from our Credit Facility.
Added
The $12.1 million decrease in cash and cash equivalents from December 31, 2022 to December 31, 2023 was due primarily to the $35 million pay down on our outstanding borrowings and the $14.1 million paid to repurchase shares of the Company’s Common Stock, partially offset by the cash gain of $20.5 million from the sale of a portion of our interest rate swaps and other cash flows from operations.
Removed
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 i n an aggregate principal amount of $190 million (the “2019 Incremental Term Loan”) which is in addition to the existing $350 million Term Loan outstanding und er the Credit Facility and the $60 million Revolver under t he Credit Facility.
Added
Our cash and cash equivalents held by our foreign subsidiaries was $29.2 million as of December 31, 2023. If these funds held by our foreign subsidiaries are needed for our domestic operations, we would be required to accrue and pay U.S. taxes to repatriate these funds to the U.S.
Removed
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.
Added
Working capital sources of cash for the year ended December 31, 2023 included a one-time $20.5 million cash gain on the sale of a portion of our interest rate swaps in August 2023.
Removed
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.
Added
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. 50 Cash Flows from Investing Activities Our primary investing activities have consisted of acquisitions of complementary technologies, products and businesses.
Removed
As of December 31, 2022, we were in compliance with all covenants under the Credit Facility. See “ Note 7. Debt ” in the notes to the consolidated financial statements for more information regarding our Credit Facility and outstanding debt as of December 31, 2022. On February 21, 2023, the Company entered into an amendment to its Credit Facility.
Added
The decrease in cash provided by financing activities relates primarily to 2022 net cash proceeds of $110.4 million related to our Series A Preferred Stock, which did not reoccur in 2023, and by the use of $35 million used to pay down our Credit Facility in 2023 and $14.1 million of cash used for Common Stock repurchases in 2023.
Removed
The amendment amended the interest rate benchmark from LIBOR to SOFR.
Removed
Working capital uses of cash for the year ended December 31, 2022 included a $14.0 million decrease in accrued expenses, a decrease of $7.2 million in accounts payable related to timing of payments, a $2.7 million increase in prepaids and other related primarily to an increase in deferred sales commission and a decrease of $5.0 million in deferred revenue.
Removed
Cash Flows from Investing Activities Our primary investing activities have consisted of acquisitions of complementary technologies, products and businesses. As our business grows, we expect our primary investing activities to continue to further expand our family of software applications and infrastructure and support additional personnel.
Removed
For 2022, cash used in investing activities consisted of $62.4 million associated with the Company’s 2022 acquisitions, and the purchases of property and equipment of $0.9 million.
Removed
The increase in cash provided by financing activities relates primarily to a $110.4 million in cash proceeds related to our Series A Preferred Stock, net of issuance costs, partially offset by a $7.4 million increase in additional consideration paid to sellers (i.e. holdbacks) and a $0.6 million increase in net share employee payroll tax settlement payments compared to the same period in 2021.
Removed
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 the 7 year term of the debt.
Removed
In conjunction with our $350 million, 7-year, Credit Facility and our $190 million 2019 Incremental Term Loan, we entered into interest rate hedge instruments for the full 7 year term, effectively fixing our interest rate at 5.4%. However, the interest rate associated with our $60 million, 5 year, undrawn Revolver remains floating. See “

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

22 edited+5 added−23 removed18 unchanged
Biggest changeThe statement of operations impact is mitigated by having an offsetting liability in deferred revenue to partially or completely offset against the 54 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.
Biggest changeOur 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 are with top tier banks held in investment grade money market accounts and short term US treasury bills.
To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. While our significant accounting policies are more fully described in “ Note 2.
To the extent that there are differences between our estimates and actual results, our future financial 51 statement presentation, financial condition, results of operations and cash flows will be affected. While our significant accounting policies are more fully described in “ Note 2.
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.
Interest Rate Risk Our exposure to market risk for changes in interest rates primarily relates to our cash equivalents in money market funds and any variable rate indebtedness. The primary objective of our investment activities is to preserve principal while maximizing yields without significantly increasing risk.
These estimates are inherently uncertain and unpredictable, and if different estimates were used, it would impact the value of our deferred tax assets and the income tax benefit recognized in fiscal 2022 and in future periods when the deferred taxes are realized.
These estimates are inherently uncertain and unpredictable, and if different estimates were used, it would impact the value of our deferred tax assets and the income tax benefit recognized in fiscal 2023 and in future periods when the deferred taxes are realized.
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 loss. 55
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 loss. 54
Goodwill and Other Intangibles Goodwill We assess Goodwill for impairment annually on October 1st, or more frequently when an event occurs which could cause the Carrying Value (or GAAP basis book value) of our Company to exceed the estimated fair value of our Company.
Goodwill Impairment We assess Goodwill for impairment annually on October 1st, or more frequently when an event occurs which could cause the Carrying Value (or GAAP basis book value) of our Company to exceed the estimated fair value of our Company.
Based on the qualitative assessment, if it is determined that it is more likely than not that the Company's fair value is less than its Carrying Value, then we perform a quantitative analysis using a fair-value-based approach to determine if the fair value of our reporting unit is less than its Carrying Value. See “ Note 5.
Based on the qualitative assessment, if it is determined that it is more likely than not that the Company's fair value is less than its Carrying Value, then we perform a quantitative analysis using a fair-value-based approach to determine if the fair value of our reporting unit is less than its Carrying Value.
The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would have resulted in a change in revenue of $7.5 million for the year ended December 31, 2022. To date, we have not engaged in any hedging strategies.
The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would have resulted in a change in revenue of $7.3 million for the year ended December 31, 2023. To date, we have not engaged in any hedging strategies.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk ” for further discussion. 51 (3) We lease office space under operating leases that expire between 2023 and 2028.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk—Interest Rate Risk ” for further discussion. (3) We lease office space under operating leases that expire between 2024 and 2029.
A valuation allowance is established against our deferred tax assets to reduce their carrying value to an amount that is more likely than not to be realized. As of December 31, 2022 we recorded a valuation allowance of $20.5 million against our deferred tax assets.
A valuation allowance is established against our deferred tax assets to reduce their carrying value to an amount that is more likely than not to be realized. As of December 31, 2023 we recorded a valuation allowance of $41.3 million against our deferred tax assets.
However, the interest rate associated with our $60 million, 5 year, term Revolver remains floating. As of December 31, 2022, we had an outstanding debt balance of $522.5 million under our Credit Facility.
The interest rate associated with our $60 million, 5 year, revolving credit facility remains floating. As of December 31, 2023, we had an outstanding balance of $482.1 million under our Credit Facility.
We first assess qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its Carrying Value.
We first assess qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its Carrying Value. qualitative factors considered include: industry and market considerations; macroeconomic conditions; and other relevant events and factors.
This objective is accomplished currently by making diversified investments, consisting only of money market mutual funds and certificates of deposit.
This objective is accomplished currently by making diversified investments, consisting only of money market mutual funds and certificates of deposit. As of December 31, 2023, we had $211.7 million in money market mutual funds.
The Company adopted ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment during the first quarter of 2018. As we operate as one reporting unit, the Goodwill impairment evaluation is performed at the consolidated entity level by comparing the estimated fair value of the Company to its Carrying Value.
As we operate as one reporting unit, the Goodwill impairment evaluation is performed at the consolidated entity level by comparing the estimated fair value of the Company to its Carrying Value.
Financial Statements and Supplementary Data ” of this Annual Report on Form 10-K. Item 7A. Quantitative and Qualitative Disclosures About Market Risk We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our business.
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.
Significant judgment is required in evaluating and estimating our provision for these taxes. There are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain. The Tax Act has provisions that require additional guidance on specific interpretations of the tax law changes.
Income Taxes We are subject to income taxes in the United States and several foreign jurisdictions. Significant judgment is required in evaluating and estimating our provision for these taxes. There are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain.
Basis of Presentation and Summary of Significant Accounting Policies—Business Combinations ” in the notes to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for a detailed description of business combinations.
Basis of Presentation and Summary of Significant Accounting Policies ” in the notes to the consolidated financial statements included in “ Part II—Item 8. Financial Statements and Supplementary Data ” of this Annual Report on Form 10-K. Item 7A.
The majority of our cash balances are with top tier banks held in investment grade money market accounts and short term US treasury bills. 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.
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.
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.
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.
As there was no debt outstanding under our Revolver as of December 31, 2022, a hypothetical change of 100 basis points would result in no change to interest expense. Foreign Currency Exchange Risk Our customers are generally invoiced in the currency of the country in which they are located.
Based on the Company’s outstanding balance of variable rate debt at December 31, 2023, a hypothetical change of 100 basis points could have resulted in a $1.0 million increase to total interest expense for the year ended December 31, 2023. 53 Foreign Currency Exchange Risk Our customers are generally invoiced in the currency of the country in which they are located.
Recent Accounting Pronouncements For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, refer to “ Note 2. Basis of Presentation and Summary of Significant Accounting Policies ” in the notes to the consolidated financial statements included in “ Part II—Item 8.
See “ Note 5. Goodwill and Other Intangible Assets ” for more information regarding our 2022 and 2023 Goodwill impairments. 52 Recent Accounting Pronouncements For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, refer to “ Note 2.
In conjunction with entering into our $350 million, 7 year, term Credit Facility, and subsequent entry into an additional $190 million 2019 Incremental Term Loan under the Credit Facility, we entered into interest rate hedge instruments for the full 7 year term, effectively fixing our interest rate at 5.4%.
In conjunction with our Term Loans under the Credit Facility, we had entered into interest rate swaps for the total outstanding Term Loans for the full seven-year term, effectively fixing the interest rate of our Term Loans at 5.4% prior to August 2023.
Removed
Revenue Recognition Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services over the term of the agreement.
Added
The Tax Act has provisions that require additional guidance on specific interpretations of the tax law changes.
Removed
We recognize revenues based on the five-step model in accordance with ASC 606, Revenue from Contracts with Customers . We derive our revenues primarily from subscription and support revenues. Other revenue-generating activities include perpetual licenses and professional services revenues.
Added
Performing a quantitative goodwill impairment test includes the determination of the fair value of a reporting unit and involves significant estimates and assumptions. These estimates and assumptions include, among others, revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rates, future economic and market conditions, and the determination of appropriate market comparables.
Removed
Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. In addition, significant judgments are made when determining the standalone selling price (“SSP”) in situations where we have a contract that have multiple performance obligations.
Added
Based on the Company’s balance of money market mutual funds at December 31, 2023, a hypothetical change of 100 basis point could have resulted in a $2.1 million change in interest income.
Removed
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.
Added
On August 24, 2023, the Company sold a portion of their interest rate swaps with a total notional amount of $259.9 million and received $20.5 million of net cash proceeds.
Removed
For revenue generated from arrangements that involve vendor reseller agreements and messaging-related subscription agreements, there is significant judgment in evaluating whether we are the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis).
Added
After giving effect to such sale and principal payments on the Term Loans, $258.5 million of the Term Loans has an effective annualized fixed interest rate of 5.4%, and the remaining principal outstanding at December 31, 2023 of $223.5 million has a floating interest rate of 9.2% based on the interest rate as described in “Note 7. Debt.
Removed
In this assessment, we consider if we obtain control of the specified goods or services before they are transferred to the customer. In reaching conclusions on gross versus net revenue recognition, we place the most weight on the analysis of whether or not we are the primary obligor in the arrangement.
Removed
Generally, we report revenue from vendor reseller agreements on a gross basis, meaning the amounts billed to customers are recorded as revenue, and expenses incurred are recorded as cost of revenue. See “ Note 14.
Removed
Revenue Recognition ” in the notes to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for a detailed description of our revenue recognition policy.
Removed
Deferred Commissions Sales commissions for new customer contracts are capitalized upon contract signing and amortized over the expected life of the customer relationships, which has been determined to be approximately 6 years, consistent with the prior year.
Removed
Sales commissions paid on renewal contracts are deferred and amortized over the average renewal term, which was determined to 52 be approximately 18 months, consistent with the prior year. Determining the period of expected life of customer relationships and average renewal term requires judgment for which we take into consideration our customer contracts, our technology life cycle and other factors.
Removed
See “ Note 14. Revenue Recognition—Deferred Commissions ” in the notes to the consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K for a detailed description of our deferred commissions. Income Taxes We are subject to income taxes in the United States and several foreign jurisdictions.
Removed
Business Combinations The allocation of the purchase price in a business combination requires management to make significant estimates in determining the fair value of acquired assets and assumed liabilities, especially with respect to intangible assets. The excess of the purchase price over these estimated fair values is recorded to goodwill.
Removed
Estimated fair values of acquired assets and assumed liabilities that are separately identifiable from goodwill are generally based on available historical information, future expectations, available market data, and assumptions determined to be reasonable, but inherently uncertain, with respect to future events, including economic conditions, competition, technological obsolescence, the useful life of the acquired assets, and other factors.
Removed
Significant estimates and assumptions, including fair value estimates, are used to determine the fair value of assets acquired, liabilities assumed, and contingent consideration transferred as well as the useful lives of long-lived assets acquired.
Removed
The valuation of identifiable intangible assets reflects management’s estimates based on, among other factors, use of established valuation methods, including, but not limited to, the multi-period excess earnings method income approach method and the relief-from-royalty method. The purchase price transferred in our acquisitions often contain purchase price holdback and contingent consideration provisions, such as earnout payments.
Removed
The Company utilizes a third-party valuation specialist to estimate the acquisition date fair value of potential earnout payments. Subsequent remeasurements of potential earnout payments require significant judgements and estimates including, but not limited to, (and if applicable in the 53 circumstances) customer renewals, new customers, ARR growth, forecasted bookings, forecasted churn and other factors. See “ Note 2.
Removed
Stock-Based Compensation We measure all share-based payments, including grants of options to purchase common stock and the issuance of restricted stock or restricted stock units to employees, service providers and board members, using the fair-value at grant date. We record forfeitures as they occur.
Removed
The cost of services received from employees and non-employees in exchange for awards of equity instruments is recognized on our consolidated statement of operations based on the estimated fair value of those awards on the grant date and amortized on a straight-line basis over the requisite service period.
Removed
We value restricted stock and restricted stock units at the closing price of our common stock on the grant date. We value stock option awards using the Black-Scholes option-pricing model. For the years ended December 31, 2022, 2021, and 2020 stock-based compensation awards consisted primarily of restricted stock and restricted stock units.
Removed
From time to time, we grant restricted stock units that also include performance or market-based conditions (“PRSUs”). For PRSUs granted with a market condition, we use a Monte Carlo simulation analysis to value the award.
Removed
Compensation expense for awards with marked-based conditions is recognized over the required service period of the grant based on the grant date fair value of the award and is not subject to fluctuation due to achievement of the underlying market-based condition.
Removed
Goodwill and Other Intangible Assets ” for more information regarding our fourth quarter 2022 Goodwill impairment. Identifiable intangible assets Identifiable intangible assets consist of customer relationships, marketing-related intangible assets and developed technology. Intangible assets with definite lives are amortized over their estimated useful lives on a straight-line basis.
Removed
The straight-line method of amortization represents our best estimate of the distribution of the economic value of the identifiable intangible assets. 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.

Other UPLD 10-K year-over-year comparisons