Upland Software Inc.
05/01/2026 | Press release | Distributed by Public on 05/01/2026 07:19
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statements
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission ("SEC"), including our Annual Report on Form 10-K for the year ended December 31, 2025. In addition to historical information, this Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements generally relate to future events or our future financial or operating performance. Forward-looking statements may be identified by the use of forward-looking words such as "anticipate," "believe," "may," "will," "continue," "seek," "estimate," "intend," "hope," "predict," "could," "should," "would," "project," "plan," "expect" or the negative or plural of these words or similar expressions, although not all forward-looking statements contain these words.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described in the section titled "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
Overview
Upland Software, Inc. is a leader in AI-powered knowledge and content management software. Our solutions help enterprises unlock critical knowledge, automate content workflows, and drive measurable ROI-enhancing customer and employee experiences while supporting regulatory compliance. More than 1,100 enterprise customers rely on Upland to solve complex challenges and provide a trusted path for AI adoption.
Key Metrics and Non-GAAP Financial Measures
In addition to the GAAP financial measures described below in "Results of Operations," 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.
Core Organic Growth Rate
We use Core Organic Growth Rate as a key performance measure to assess our consolidated operating performance over time and for planning and forecasting purposes. Core Organic Growth Rate is the percentage change between two reported periods in subscription and support revenue, excluding subscription and support revenue from Sunset Assets, subscription and support revenue from divestitures, and Overage Charges, each as defined below. We calculate our year-over-year Core Organic Growth Rate as though all acquisitions or dispositions closed as of the end of the latest period were closed as of the first day of the prior year period presented. Core Organic Growth Rate does not represent actual organic revenue generated by our business as it stood at the beginning of the respective period.
For the three-month period ended March 31, 2026, our Core Organic Growth Rate was 0.25%.
Core Organic Growth Rates are not necessarily indicative of either future results of operations or actual results that might have been achieved had certain Sunset Asset classifications not been made or had certain acquisitions or dispositions been consummated on the first day of the prior year period presented. We believe that this metric is useful to management and investors in analyzing our financial and operational performance period-over-period along with evaluating the growth of our business normalized for the impact of acquisitions and dispositions, as well as adjusting for the exclusion of non-core Sunset Assets and non-committed Overage Charges.
Related Defined Terms
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"). 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. In either case, we will adjust the revenues attributable to Sunset Assets and properly reflect the year over year change for such addition or removal.
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.
The following table represents a reconciliation of total revenue, the most comparable GAAP measure, to core organic revenue for each of the periods indicated.
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (dollars in thousands) | |||||||||||
| Reconciliation of total revenue to core organic revenue: | |||||||||||
| Total revenue | $ | 48,690 | $ | 63,655 | |||||||
| Less: | |||||||||||
| Perpetual license revenue | 1,295 | 1,608 | |||||||||
| Professional services revenue | 1,304 | 1,865 | |||||||||
| Subscription and support revenue from Sunset Assets | 1,901 | 2,368 | |||||||||
| Subscription and support revenue from divestitures | - | 12,433 | |||||||||
| Overage Charges | 27 | 1,328 | |||||||||
| Core organic revenue | $ | 44,163 | $ | 44,053 | |||||||
Adjusted EBITDA
We monitor our Adjusted EBITDA to help us evaluate the effectiveness and efficiency of our operations. Adjusted EBITDA is a non-GAAP financial measure. We define Adjusted EBITDA as net income (loss), calculated in accordance with GAAP, adjusted for depreciation and amortization expense, net interest expense, loss on debt extinguishment, net other expense (income), benefit from (provision for) income taxes, stock-based compensation expense, acquisition and divestiture related expense, purchase accounting deferred revenue discount, gains and losses on divestitures of businesses, and impairment charges.
The following table represents a reconciliation of net loss from continuing operations, the most comparable GAAP measure, to Adjusted EBITDA for each of the periods indicated.
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (dollars in thousands) | |||||||||||
| Reconciliation of Net Loss to Adjusted EBITDA: | |||||||||||
| Net loss | $ | (1,230) | $ | (25,848) | |||||||
| Add: | |||||||||||
| Depreciation and amortization expense | 6,624 | 9,661 | |||||||||
| Interest expense (income), net | 4,459 | 2,443 | |||||||||
| Other expense (income), net | 834 | 241 | |||||||||
| Provision for (benefit from) income taxes | 986 | (1,345) | |||||||||
| Stock-based compensation expense | 961 | 2,675 | |||||||||
| Divestiture-related expenses | 22 | 1,745 | |||||||||
| Non-recurring litigation costs | 1 | 18 | |||||||||
| Purchase accounting deferred revenue discount | 13 | 35 | |||||||||
| Loss on divestitures of businesses | - | 23,457 | |||||||||
| Adjusted EBITDA | $ | 12,670 | $ | 13,082 | |||||||
We believe that Adjusted EBITDA provides useful information to management, investors and others in understanding and evaluating our operating results for the following reasons:
•Adjusted EBITDA is widely used by investors and securities analysts to measure a company's operating performance without regard to items that can vary substantially from company to company depending upon their financing, capital structures and the method by which assets were acquired;
•Our management uses Adjusted EBITDA in conjunction with GAAP financial measures for planning purposes, in the preparation of our annual operating budget, as a measure of our operating performance, to assess the effectiveness of our business strategies and to communicate with our board of directors concerning our financial performance because Adjusted EBITDA eliminates the impact of items that we do not consider indicative of our core operating performance;
•Adjusted EBITDA provides more consistency and comparability with our past financial performance, facilitates period-to-period comparisons of our operations and also facilitates comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.
Adjusted EBITDA should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with GAAP. The use of Adjusted EBITDA as an analytical tool has limitations such as:
•Impairment of goodwill and other intangibles and depreciation and amortization are non-cash charges, and the assets being depreciated or amortized, which contribute to the generation of revenue, will often have to be replaced in the future and Adjusted EBITDA does not reflect cash requirements for such replacements; however, much of the depreciation and amortization relates to amortization of acquired intangible assets as well as the goodwill as a result of business combination purchase accounting adjustments, which will not need to be replaced in the future;
•Adjusted EBITDA may not reflect changes in, or cash requirements for, our working capital needs or contractual commitments;
•Adjusted EBITDA does not reflect the potentially dilutive impact of stock-based compensation;
•Adjusted EBITDA does not reflect interest or tax payments that could reduce cash available for use; and
•Other companies, including companies in our industry, might calculate Adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as comparative measures.
Because of these limitations, you should consider Adjusted EBITDA together with other financial performance measures, including various cash flow metrics, net loss and our other GAAP results.
Results of Operations
Consolidated Statements of Operations Data
The following table set forth our results of operations for the specified periods, as well as our results of operations for the specified periods as a percentage of revenue. The period-to-period comparisons of results of operations are not necessarily indicative of results for future periods.
| Three Months Ended March 31, | ||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||
| Amount | Percent of Revenue | Amount | Percent of Revenue | |||||||||||||||||||||||
| (dollars in thousands, except share and per share data) | ||||||||||||||||||||||||||
| Revenue: | ||||||||||||||||||||||||||
| Subscription and support | $ | 46,091 | 95 | % | $ | 60,182 | 95 | % | ||||||||||||||||||
| Perpetual license | 1,295 | 3 | % | 1,608 | 3 | % | ||||||||||||||||||||
| Total product revenue | 47,386 | 98 | % | 61,790 | 98 | % | ||||||||||||||||||||
| Professional services | 1,304 | 2 | % | 1,865 | 2 | % | ||||||||||||||||||||
| Total revenue | 48,690 | 100 | % | 63,655 | 100 | % | ||||||||||||||||||||
| Cost of revenue: | ||||||||||||||||||||||||||
|
Subscription and support (1)(3)
|
11,112 | 23 | % | 16,950 | 27 | % | ||||||||||||||||||||
|
Professional services and other (1)
|
822 | 2 | % | 1,098 | 1 | % | ||||||||||||||||||||
| Total cost of revenue | 11,934 | 25 | % | 18,048 | 28 | % | ||||||||||||||||||||
| Gross profit | 36,756 | 75 | % | 45,607 | 72 | % | ||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
|
Sales and marketing (1)
|
9,472 | 19 | % | 13,756 | 22 | % | ||||||||||||||||||||
|
Research and development (1)
|
8,044 | 16 | % | 11,542 | 18 | % | ||||||||||||||||||||
|
General and administrative (1)(2)
|
8,538 | 18 | % | 11,621 | 18 | % | ||||||||||||||||||||
| Depreciation and amortization | 5,631 | 12 | % | 7,995 | 13 | % | ||||||||||||||||||||
| Divestiture-related expenses | 22 | - | % | 1,745 | 2 | % | ||||||||||||||||||||
| Total operating expenses | 31,707 | 65 | % | 46,659 | 73 | % | ||||||||||||||||||||
| Income (loss) from operations | 5,049 | 10 | % | (1,052) | (1) | % | ||||||||||||||||||||
| Other expense: | ||||||||||||||||||||||||||
| Interest expense, net | (4,459) | (9) | % | (2,443) | (4) | % | ||||||||||||||||||||
| Loss on divestitures of businesses | - | - | % | (23,457) | (37) | % | ||||||||||||||||||||
| Other income (expense), net | (834) | (2) | % | (241) | - | % | ||||||||||||||||||||
| Total other expense | (5,293) | (11) | % | (26,141) | (41) | % | ||||||||||||||||||||
| Loss before benefit from (provision for) income taxes | (244) | (1) | % | (27,193) | (42) | % | ||||||||||||||||||||
| Benefit from (provision for) income taxes | (986) | (2) | % | 1,345 | 1 | % | ||||||||||||||||||||
| Loss from operations | (1,230) | (3) | % | (25,848) | (41) | % | ||||||||||||||||||||
| Preferred stock dividends and accretion | (1,503) | (3) | % | (1,438) | (2) | % | ||||||||||||||||||||
| Net loss attributable to common shareholders | $ | (2,733) | (6) | % | $ | (27,286) | (43) | % | ||||||||||||||||||
| Net loss per common share: | ||||||||||||||||||||||||||
| Net loss per common share, basic and diluted | $ | (0.09) | $ | (0.97) | ||||||||||||||||||||||
| Weighted-average common shares outstanding, basic and diluted | 29,159,015 | 28,220,936 | ||||||||||||||||||||||||
|
(1) Includes stock-based compensation detailed under Share-based Compensation in "Item 1. Financial Statements-Note 10. Stockholders' Deficit".
|
||||||||||||||||||||||||||
|
(2) Includes general and administrative stock-based compensation of $0.8 million and $2.0 million for the three months ended March 31, 2026 and March 31, 2025, respectively. General and administrative expense excluding stock-based compensation as a percentage of total revenues was 16% and 15% for the three months ended March 31, 2026 and March 31, 2025, respectively.
|
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|
(3) Includes depreciation and amortization of $1.0 million and $1.7 million for the three months ended March 31, 2026 and March 31, 2025, respectively.
|
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Comparison of the Three Months Ended March 31, 2026 and 2025
See Note 12. Divestitures regarding product lines divested in the three months ended March 31, 2025.
Revenue
| Three Months Ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | % Change | ||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||
| Revenue: | ||||||||||||||||||||
| Subscription and support | $ | 46,091 | $ | 60,182 | (23) | % | ||||||||||||||
| Perpetual license | 1,295 | 1,608 | (19) | % | ||||||||||||||||
| Total product revenue | 47,386 | 61,790 | (23) | % | ||||||||||||||||
| Professional services | 1,304 | 1,865 | (30) | % | ||||||||||||||||
| Total revenue | $ | 48,690 | $ | 63,655 | (24) | % | ||||||||||||||
For the Three Months Ended March 31, 2026
Total revenue was $48.7 million in the three months ended March 31, 2026, compared to $63.7 million in the three months ended March 31, 2025, a decrease of $15.0 million, or 24%. This decrease is primarily due to the expected declines in revenue related to divested product lines of $14.0 million and Sunset Assets of $0.5 million. Declines in perpetual license revenue of $0.3 million and professional services revenue of $0.3 million in core products were partially offset by an increase in subscription and support revenue of $0.1 million related to core products.
Cost of Revenue
| Three Months Ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | % Change | ||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||
| Cost of revenue: | ||||||||||||||||||||
|
Subscription and support (1)
|
$ | 11,112 | $ | 16,950 | (34) | % | ||||||||||||||
| Professional services and other | 822 | 1,098 | (25) | % | ||||||||||||||||
| Total cost of revenue | 11,934 | 18,048 | (34) | % | ||||||||||||||||
| Gross profit | $ | 36,756 | $ | 45,607 | (19) | % | ||||||||||||||
|
(1) Includes amortization and stock-based compensation expense as follows:
|
||||||||||||||||||||
| Amortization | $ | 993 | $ | 1,666 | ||||||||||||||||
| Stock-based compensation | $ | 86 | $ | 121 | ||||||||||||||||
For the Three Months Ended March 31, 2026
Cost of subscription and support revenue was $11.1 million in the three months ended March 31, 2026, compared to $17.0 million in the three months ended March 31, 2025, a decrease of $5.9 million, or 34%. The decrease related to divested product lines was $5.7 million attributable to infrastructure costs, variable telecom carrier costs, personnel costs and non-cash amortization of divested intangibles. The decrease related to Sunset assets was $0.2 million, primarily attributable to personnel-related costs. A decrease of $0.3 million in non-cash amortization of intangibles in our on-going product lines was offset by a $0.3 million increase in infrastructure costs.
Cost of professional services and other revenue was $0.8 million in the three months ended March 31, 2026, compared to $1.1 million in the three months ended March 31, 2025, a decrease of $0.3 million, or 25%. The decrease in cost of professional services and other revenue was comprised of a decrease in personnel-related expenses of $0.1 million in our divested product lines and $0.2 million in our on-going product lines due to lower professional services revenue in our core products.
Operating Expenses
Sales and Marketing Expense
| Three Months Ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | % Change | ||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||
|
Sales and marketing (1)
|
$ | 9,472 | $ | 13,756 | (31) | % | ||||||||||||||
|
(1) Includes stock-based compensation expense as follows:
|
||||||||||||||||||||
| Stock-based compensation | $ | 30 | $ | 252 | ||||||||||||||||
For the Three Months Ended March 31, 2026
Sales and marketing expense was $9.5 million in the three months ended March 31, 2026, compared to $13.8 million in the three months ended March 31, 2025, a decrease of $4.3 million, or 31%. The decrease related to divested product lines was $2.9 million in personnel-related costs. The remaining decrease was due to declines in personnel-related costs of $0.1 million related to our Sunset Assets, and declines in personnel-related costs of $1.3 million related to our core product lines.
Research and Development Expense
| Three Months Ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | % Change | ||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||
|
Research and development (1)
|
$ | 8,044 | $ | 11,542 | (30) | % | ||||||||||||||
|
(1) Includes stock-based compensation expense as follows:
|
||||||||||||||||||||
| Stock-based compensation | $ | 83 | $ | 290 | ||||||||||||||||
For the Three Months Ended March 31, 2026
Research and development expense was $8.0 million in the three months ended March 31, 2026, compared to $11.5 million in the three months ended March 31, 2025, a decrease of $3.5 million, or 30%. The decrease in research and development expense is primarily attributable to a $2.1 million decrease in personnel-related costs in our divested product lines and a $1.4 million decrease in personnel-related and contractor costs in our remaining product lines. The decrease in research and development expense in our core product lines reflects the 2025 termination of our out-sourced research and development contract and the continued use of our India Center of Excellence.
General and Administrative Expense
| Three Months Ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | % Change | ||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||
|
General and administrative (1)
|
$ | 8,538 | $ | 11,621 | (27) | % | ||||||||||||||
|
(1) Includes stock-based compensation expense as follows:
|
||||||||||||||||||||
| Stock-based compensation | $ | 762 | $ | 2,012 | ||||||||||||||||
For the Three Months Ended March 31, 2026
General and administrative expense was $8.5 million in the three months ended March 31, 2026, compared to $11.6 million in the three months ended March 31, 2025, a decrease of $3.1 million, or 27%. This decrease is primarily due to a decrease of $2.5 million in personnel-related costs related to our on-going product lines due to decreased headcount including a decrease of $1.2 million in non-cash stock-based compensation expense. Software costs related to core product lines declined $0.2 million due to cost savings and professional fees declined $0.1 million. The decrease related to our divested product lines was $0.3 million.
Depreciation and Amortization Expense
| Three Months Ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | % Change | ||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||
| Depreciation and amortization: | ||||||||||||||||||||
| Depreciation | $ | 213 | $ | 260 | (18) | % | ||||||||||||||
| Amortization | 5,418 | 7,735 | (30) | % | ||||||||||||||||
| Total depreciation and amortization | $ | 5,631 | $ | 7,995 | (30) | % | ||||||||||||||
For the Three Months Ended March 31, 2026
Depreciation and amortization expense was $5.6 million in the three months ended March 31, 2026, compared to $8.0 million in the three months ended March 31, 2025, a decrease of $2.4 million, or 30%. $0.7 million of the decrease resulted from the decline in amortization from intangible assets associated with Sunset Assets and $1.7 million of the decrease resulted from the decline in amortization from intangible assets associated with our divested product lines.
Divestiture-related Expenses
| Three Months Ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | % Change | ||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||
| Divestiture-related expenses | $ | 22 | $ | 1,745 | (100) | % | ||||||||||||||
For the Three Months Ended March 31, 2026
Divestiture-related expenses were nominal in the three months ended March 31, 2026, compared to $1.7 million in the three months ended March 31, 2025. In conjunction with the divestitures completed in the first quarter of 2025, we incurred $1.7 million in legal, accounting and other professional fees. Limited divestiture-related expenses were incurred in the three months ended March 31, 2026 as final expenses were incurred related to the 2025 divestitures and no divestitures were executed in 2026.
Other Expense
| Three Months Ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | % Change | ||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||
| Other expense: | ||||||||||||||||||||
| Interest expense, net | $ | (4,459) | $ | (2,443) | (83) | % | ||||||||||||||
| Loss on divestitures of businesses | - | (23,457) | (100) | % | ||||||||||||||||
| Other income (expense), net | (834) | (241) | 246 | % | ||||||||||||||||
| Total other expense | $ | (5,293) | $ | (26,141) | (80) | % | ||||||||||||||
For the Three Months Ended March 31, 2026
Interest expense, net was $4.5 million in the three months ended March 31, 2026 compared to $2.4 million in the three months ended March 31, 2025, an increase of $2.1 million in net interest expense. This was primarily due to the effects of our interest rate derivatives which reduced interest expense by $1.2 million in the three months ended March 31, 2026 and by $3.4 million in the three months ended March 31, 2025, resulting in a $2.2 million year over year increase in interest expense. In addition, interest income for the three months ended March 31, 2026 declined $0.1 million from interest income in the three months ended March 31, 2025 due to lower cash and cash equivalents. These increases were offset by a $0.1 million decline in interest expense, driven by the decrease in our outstanding debt balance, which more than offset the impact of higher interest rates, as well as a $0.2 million reduction related to the amortization of deferred financing costs.
No divestitures were closed in the three months ended March 31, 2026. In the three months ended March 31, 2025, we finalized the divestitures of certain product lines in order to focus on our higher margin and higher growth potential product lines.
Other income (expense), net recognized during the three months ended March 31, 2026 and 2025 was related primarily to foreign currency exchange fluctuations.
Benefit from Income Taxes
| Three Months Ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | % Change | ||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||
| Benefit from (provision for) income taxes | $ | (986) | $ | 1,345 | (173) | % | ||||||||||||||
For the Three Months Ended March 31, 2026
The provision for income taxes was $1.0 million in the three months ended March 31, 2026, compared to a benefit from income taxes of $1.3 million in the three months ended March 31, 2025, resulting in an additional expense from income taxes of $2.3 million. The provision for income taxes for the three months ended March 31, 2026 relates primarily to income tax from non-U.S. operations. The benefit from income taxes in the three months ended March 31, 2025 relates primarily to the deferred tax benefit from the business divestitures in the first quarter of 2025. This tax benefit is partially offset by the income tax from non-U.S. and U.S. operations.
Liquidity and Capital Resources
We have financed our operations primarily through cash generated from operating activities, the raising of capital including sales of our Common Stock or our convertible preferred stock, and borrowings under credit facilities.
As of March 31, 2026, we had $30.4 million of cash, cash equivalents and restricted cash and $233.7 million of debt outstanding under our Credit Agreement. As of December 31, 2025, we had $30.0 million of cash, cash equivalents and restricted cash and $238.5 million of borrowings outstanding under our previous senior secured credit facility. The $0.4 million increase in cash, cash equivalents and restricted cash from December 31, 2025 to March 31, 2026 was primarily due to $5.6 million in cash inflows from operations netted with $4.8 million in debt repayments made in the three months ended March 31, 2026. Other uses of cash included $0.1 million in purchases of leasehold improvements and equipment and $0.2 million negative effect of exchange rates during the three months ended March 31, 2026.
Our cash and cash equivalents held by our foreign subsidiaries was $13.2 million as of March 31, 2026 and $10.0 million as of December 31, 2025. Our intent is to either permanently reinvest these funds outside the U.S. or use these funds to repay certain long-term intercompany loans. We do not provide for federal income taxes on the undistributed earnings of our foreign subsidiaries.
We believe our available cash and cash equivalents, together with our positive cash flows from operations and the liquidity provided by our $30 million revolving credit facility will be sufficient to meet our anticipated cash needs.
The following table summarizes our cash flows for the periods indicated:
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| (dollars in thousands) | |||||||||||
| Consolidated Statements of Cash Flows data: | |||||||||||
| Net cash provided by operating activities | $ | 5,603 | $ | 8,305 | |||||||
| Net cash provided by investing activities | 96 | 3,789 | |||||||||
| Net cash used in financing activities | (5,109) | (34,723) | |||||||||
| Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash | (207) | (92) | |||||||||
| Change in cash, cash equivalents and restricted cash | 383 | (22,721) | |||||||||
| Cash, cash equivalents and restricted cash, beginning of period | 30,024 | 57,052 | |||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 30,407 | $ | 34,331 | |||||||
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 growth of our business. Our working capital consists primarily of cash, receivables from customers, prepaid assets, unbilled professional services, deferred commissions, accounts payable, accrued compensation and other accrued expenses, lease liabilities, and deferred revenues. The volume of professional services rendered, the volume and timing of customer bookings and contract renewals, and the related timing of collections on those bookings and renewals, as well as the timing of spending commitments and payments of our accounts payable, accrued expenses, accrued payroll and related benefits, all affect these account balances.
Cash provided by operating activities was $5.6 million for the three months ended March 31, 2026 compared to cash provided by operating activities of $8.3 million for the three months ended March 31, 2025, a decrease of approximately $2.7 million. This decrease was primarily due to a reduction in accrued compensation and other accrued expenses combined with reduced accounts receivable due to the divestitures completed in 2025.
A substantial source of cash is invoicing for subscriptions and support fees in advance, which is recorded as deferred revenue, and is included on our condensed consolidated balance sheets as a liability. Deferred revenue consists of the unearned portion of booked fees for our software subscriptions and support, which is amortized into revenue in accordance with our revenue recognition policy. We assess our liquidity, in part, through an analysis of new subscriptions invoiced, expected cash receipts on new and existing subscriptions, and our ongoing operating expense requirements.
Cash Flows from Investing Activities
Historically, our investing activities have consisted of routine purchases of office equipment. Other activities, such as divestitures of businesses including the collections on note receivable from divested product lines, and purchases of other fixed assets, may affect our cash flows from investing activities in such periods as these transactions occur.
Cash provided by investing activities was $0.1 million for the three months ended March 31, 2026 compared to cash provided by investing activities of $3.8 million for the three months ended March 31, 2025, a decrease of $3.7 million. Cash activity consisted of $0.2 million in collections on the note receivable related to divestitures and $0.1 million in purchases of leasehold improvements and equipment for the three months ended March 31, 2026 compared to cash proceeds from divestitures of businesses of $4.2 million and $0.4 million in purchases of leasehold improvements and equipment for the three months ended March 31, 2025.
Cash Flows from Financing Activities
Historically, our primary financing activities have consisted of capital raises, proceeds from debt obligations, repayments and servicing of our debt obligations, share repurchases and share based employee payroll tax payment activity.
Cash used in financing activities was $5.1 million for the three months ended March 31, 2026 compared to $34.7 million for the three months ended March 31, 2025, a decrease of $29.6 million of cash used primarily due to $4.8 million in payments on our outstanding debt in the three months ended March 31, 2026 as compared to $34.2 million in payments made in the three months ended March 31, 2025.
Critical Accounting Policies and the Use of Estimates
We prepare our condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States ("GAAP"). The preparation of our condensed consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policy discussed below is critical to understanding our historical and future performance, as this policy relates to a more significant area involving management's judgments and estimates.
Goodwill Impairment
We assess goodwill for impairment annually on October 1st, or more frequently when an event occurs which could cause the carrying value of the Company to exceed the estimated fair value of the Company.
As we operate as one reporting unit, the goodwill impairment evaluation is performed at the consolidated entity level by comparing the estimated fair value of the Company to its carrying value. We first assess qualitative factors to determine whether it is more likely than not that the fair value of our single reporting unit is less than its carrying value. Qualitative factors considered include: industry and market considerations; macroeconomic conditions; and other relevant events and factors. Based on the qualitative assessment, if it is determined that it is more likely than not that the Company's fair value is less than its carrying value, then we perform a quantitative analysis using a fair-value-based approach to determine if the fair value of our reporting unit is less than its carrying value. Performing a quantitative goodwill impairment test includes the determination of the fair value of a reporting unit and involves significant estimates and assumptions. These estimates and assumptions include, among others, revenue growth rates and operating margins used to calculate projected future cash flows, weighted average cost of capital, and future economic and market conditions. See "Note 4. Goodwill and Other Intangible Assets for more information.
We are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of May 1, 2026, the date of issuance of this Quarterly Report on Form 10-Q. Estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
Other Key Accounting Policies
Our unaudited interim financial statements and other financial information for the three months ended March 31, 2026, as presented herein and in "Item 1. Financial Statements" to this Quarterly Report on Form 10-Q, reflect no material changes in our critical accounting policies and estimates as set forth in our Annual Report on Form 10-K for the year ended December 31, 2025 (the "Annual Report"). Please refer to our Annual Report for a detailed description of our critical accounting policies that involve significant management judgment.
We evaluate our estimates, judgments and assumptions on an ongoing basis, and while we believe that our estimates, judgments and assumptions are reasonable, they are based upon information available at the time. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions.
Recent Accounting Pronouncements
For information with respect to recent accounting pronouncements and the impact of these pronouncements on our condensed consolidated financial statements, refer to "Note 2. Basis of Presentation and Summary of Significant Accounting Policies-Recent Accounting Pronouncements" to our condensed consolidated financial statements.
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