Upland Software Inc.

11/06/2025 | Press release | Distributed by Public on 11/06/2025 10:42

Quarterly Report for Quarter Ending September 30, 2025 (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, 2024. 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. These forward-looking statements include, but are not limited to, statements concerning the following:
•our financial performance and our ability to achieve or sustain profitability or predict future results;
•our plans regarding future acquisitions or divestitures and our ability to consummate and operationalize acquisitions or divestitures;
•our ability to expand our go to market operations, including our marketing and sales organization, and successfully increase sales of our products;
•our ability to obtain financing in the future on acceptable terms or at all;
•our expectations with respect to revenue, cost of revenue and operating expenses in future periods;
•our expectations with regard to revenue from perpetual licenses, usage fees, and professional services;
•our ability to adapt to macroeconomic factors impacting the global economy, including the Russia-Ukraine conflict, the conflicts in the Middle East, changes in trade policy, foreign currency exchange risk, inflation and supply chain constraints;
•our ability to attract and retain customers;
•our ability to successfully enter new markets and manage our international expansion;
•our ability to comply with privacy laws and regulations;
•our ability to incorporate and deliver artificial intelligence ("AI") functionality into our products and services, including our ability to unlock critical knowledge, automate content workflows and drive measurable ROI;
•our ability to deliver high-quality customer service;
•our plans regarding, and our ability to effectively manage, our growth, including with respect to our growth investments;
•maintaining our senior management team and key personnel;
•the performance of our resellers;
•our ability to adapt to changing market conditions and competition;
•our ability to adapt to technological change and continue to innovate;
•the growth of demand for cloud-based, digital transformation applications;
•our ability to integrate our applications with other software applications;
•maintaining and expanding our relationships with third parties;
•costs associated with defending intellectual property infringement and other claims;
•our ability to maintain, protect and enhance our brand and intellectual property;
•our expectations with regard to trends, such as seasonality, which affect our business;
•impairments to goodwill and other intangible assets;
•our beliefs regarding how our applications benefit customers and what our competitive strengths are;
•the operation, reliability and security of our third-party data centers;
•our expectations as to the timing of the discontinuation of any Sunset Assets (as defined below), as well as the composition of Sunset Assets;
•our 2025 Share Repurchase Plan (as defined in Note 10. Stockholders' Deficit), including expectations regarding the timing and manner of repurchases made under the 2025 Share Repurchase Plan;
•our expectations as to the payment of dividends;
•our current level of indebtedness, including our exposure to variable interest rate risk;
•potential elimination or limitation of tax incentives or tax losses and/or reduction of U.S. federal net operating loss carryforwards ("NOLs"); and
•other risk factors included under "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2024, as updated by this Quarterly Report on Form 10-Q and periodically updated as necessary in our future quarterly reports on Form 10-Q and other filings that we make with the SEC.
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, 2024. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, 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.
U.S. tax legislation titled the One Big Beautiful Bill Act ("OBBBA") was signed into law on July 4, 2025 which makes permanent with modifications many of the provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were scheduled to expire at the end of 2025. The legislation primarily impacted the deferred tax liability and income tax payable related to the provisions for the elimination of the capitalization of onshore research and development costs (Section 174), the business interest deduction limitation (Section 163j) and the reintroduction of 100% bonus depreciation for qualified property (Section 168). We are continuing to monitor additional provisions of the OBBBA that become effective through 2027 for potential future impact.
The financial impact of the OBBBA impacting the 2025 tax year is included in the Company's operating results for the three and nine months ended September 30, 2025.
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 September 30, 2025, our Core Organic Growth Rate was 2.6%.
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 September 30,
2025 2024
(dollars in thousands)
Reconciliation of total revenue to core organic revenue:
Total revenue $ 50,526 $ 66,692
Less:
Perpetual license revenue 1,160 1,106
Professional services revenue 1,641 1,815
Subscription and support revenue from Sunset Assets 2,139 2,643
Subscription and support revenue from divestitures 231 15,379
Overage Charges 179 1,720
Core organic revenue $ 45,176 $ 44,029
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 September 30, Nine Months Ended September 30,
2025 2024 2025 2024
(dollars in thousands)
Reconciliation of Net Loss to Adjusted EBITDA:
Net loss $ (1,122) $ (1,733) $ (39,999) $ (109,302)
Add:
Depreciation and amortization expense 7,552 13,807 25,367 41,406
Interest expense (income), net 4,204 (2,337) 10,783 7,677
Loss on debt extinguishment 2,301 - 2,301 -
Other expense (income), net (249) 229 1,587 109
Provision for (benefit from) income taxes (259) 530 (1,775) 1,193
Stock-based compensation expense 2,323 3,423 8,072 12,078
Divestiture-related expenses 778 - 9,402 -
Non-recurring litigation costs 4 24 34 152
Purchase accounting deferred revenue discount 27 57 93 198
Loss on divestitures of businesses 473 - 24,364 -
Impairment of goodwill and other intangibles - - 2,469 87,227
Adjusted EBITDA $ 16,032 $ 14,000 $ 42,698 $ 40,738
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 September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Amount Percent of Revenue Amount Percent of Revenue Amount Percent of Revenue Amount Percent of Revenue
(dollars in thousands, except share and per share data)
Revenue:
Subscription and support $ 47,725 94 % $ 63,771 96 % $ 158,374 95 % $ 196,353 95 %
Perpetual license 1,160 2 % 1,106 2 % 3,967 2 % 4,306 2 %
Total product revenue 48,885 96 % 64,877 98 % 162,341 97 % 200,659 97 %
Professional services 1,641 4 % 1,815 2 % 5,223 3 % 6,108 3 %
Total revenue 50,526 100 % 66,692 100 % 167,564 100 % 206,767 100 %
Cost of revenue:
Subscription and support (1)(3)
10,774 21 % 18,449 28 % 40,136 24 % 57,525 28 %
Professional services and other (1)
903 2 % 1,256 2 % 3,024 2 % 3,703 2 %
Total cost of revenue 11,677 23 % 19,705 30 % 43,160 26 % 61,228 30 %
Gross profit 38,849 77 % 46,987 70 % 124,404 74 % 145,539 70 %
Operating expenses:
Sales and marketing (1)
9,707 19 % 16,325 24 % 34,234 20 % 50,134 24 %
Research and development (1)
7,872 16 % 11,432 17 % 29,195 17 % 36,072 17 %
General and administrative (1)(2)
8,787 17 % 11,051 17 % 30,627 18 % 38,163 18 %
Depreciation and amortization 6,357 13 % 11,490 17 % 21,216 13 % 34,266 17 %
Divestiture-related expenses 778 1 % - - % 9,402 7 % - 1 %
Impairment of goodwill and other intangibles - - % - - % 2,469 1 % 87,227 42 %
Total operating expenses 33,501 66 % 50,298 75 % 127,143 76 % 245,862 119 %
Income (loss) from operations 5,348 11 % (3,311) (5) % (2,739) (2) % (100,323) (49) %
Other expense:
Interest expense, net (4,204) (8) % 2,337 4 % (10,783) (6) % (7,677) (4) %
Loss on divestitures of businesses (473) (1) % - - % (24,364) (15) % - - %
Loss on debt extinguishment (2,301) (5) % - - % (2,301) (1) % - - %
Other income (expense), net 249 - % (229) - % (1,587) (16) % (109) - %
Total other expense (6,729) (14) % 2,108 4 % (39,035) (23) % (7,786) (4) %
Loss before provision for income taxes (1,381) (3) % (1,203) (1) % (41,774) (25) % (108,109) (53) %
Benefit from (provision for) income taxes 259 1 % (530) (2) % 1,775 1 % (1,193) - %
Net loss (1,122) (2) % (1,733) (3) % (39,999) (24) % (109,302) (53) %
Preferred stock dividends and accretion (1,470) (3) % (1,406) (2) % (4,362) (3) % (4,171) (2) %
Net loss attributable to common shareholders $ (2,592) (5) % $ (3,139) (5) % $ (44,361) (26) % $ (113,473) (55) %
Net loss per common share:
Net loss per common share, basic and diluted $ (0.09) $ (0.12) $ (1.56) $ (4.07)
Weighted-average common shares outstanding, basic and diluted 28,784,856 27,292,410 28,510,276 27,850,947
(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 $2.1 million and $2.4 million for the three months September 30, 2025 and September 30, 2024, respectively, and $6.7 million and $8.6 million for the nine months ended September 30, 2025 and September 30, 2024, respectively. General and administrative expense excluding stock-based compensation as a percentage of total revenues was 13% and 13% for the three months ended September 30, 2025 and September 30, 2024, respectively, and 14% and 14% for the nine months ended September 30, 2025 and September 30, 2024.
(3)Includes depreciation and amortization of $1.2 million and $2.3 million for the three months ended September 30, 2025 and September 30, 2024, respectively, and $4.2 million and $7.1 million for the nine months ended September 30, 2025 and September 30, 2024, respectively.
Comparison of the Three and Nine Months Ended September 30, 2025 and 2024
See Note 12. Divestituresregarding product lines divested in the nine months ended September 30, 2025.
Revenue
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
(dollars in thousands)
Revenue:
Subscription and support $ 47,725 $ 63,771 (25) % $ 158,374 $ 196,353 (19) %
Perpetual license 1,160 1,106 5 % 3,967 4,306 (8) %
Total product revenue 48,885 64,877 (25) % 162,341 200,659 (19) %
Professional services 1,641 1,815 (10) % 5,223 6,108 (14) %
Total revenue $ 50,526 $ 66,692 (24) % $ 167,564 $ 206,767 (19) %
Percentage of total revenue:
Subscription and support 94% 96% 95% 95%
Perpetual license 2% 2% 2% 2%
Total product revenue 96% 98% 97% 97%
Professional services 4% 2% 3% 3%
Total revenue 100% 100% 100% 100%
For the Three Months Ended September 30, 2025
Total revenue was $50.5 million in the three months ended September 30, 2025, compared to $66.7 million in the three months ended September 30, 2024, a decrease of $16.2 million, or 24%. This decrease is primarily due to the expected declines in revenue related to divested product lines of $16.8 million and revenue related to Sunset Assets of $0.5 million. These decreases are offset by an increase in subscription and support revenue of $1.1 million related to core products.
For the Nine Months Ended September 30, 2025
Total revenue was $167.6 million in the nine months ended September 30, 2025, compared to $206.8 million in the nine months ended September 30, 2024, a decrease of $39.2 million, or 19%. This decrease is primarily due to the expected declines in revenue related to divested product lines of $36.8 million and related to Sunset Assets of $2.7 million. The remaining decrease results from declines in perpetual license revenue of $0.1 million and professional services revenue of $0.4 million, offset by an increase in subscription and support revenue of $0.8 million related to core products.
Cost of Revenue
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
(dollars in thousands)
Cost of revenue:
Subscription and support (1)
$ 10,774 $ 18,449 (42) % $ 40,136 $ 57,525 (30) %
Professional services and other 903 1,256 (28) % 3,024 3,703 (18) %
Total cost of revenue 11,677 19,705 (41) % 43,160 61,228 (30) %
Gross profit $ 38,849 $ 46,987 (17) % $ 124,404 $ 145,539
Percentage of total revenue:
Subscription and support (1)
21% 28% 24% 28%
Professional services and other 2% 2% 2% 2%
Total cost of revenue 23% 30% 26% 30%
Gross profit 77% 70% 74% 70%
(1)Includes amortization and stock compensation expense as follows:
Amortization $ 1,195 $ 2,317 $ 4,151 $ 7,140
Stock Compensation $ 69 $ 199 $ 333 $ 584
For the Three Months Ended September 30, 2025
Cost of subscription and support revenue was $10.8 million in the three months ended September 30, 2025, compared to $18.4 million in the three months ended September 30, 2024, a decrease of $7.6 million, or 42%. The decrease related to divested product lines was $7.0 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 and the remaining decrease related to a reduction of $0.4 million in non-cash amortization of intangibles in our on-going product lines.
Cost of professional services and other revenue was $0.9 million in the three months ended September 30, 2025, compared to $1.3 million in the three months ended September 30, 2024, a decrease of $0.4 million, or 28%. 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 $0.3 million in our on-going product lines.
For the Nine Months Ended September 30, 2025
Cost of subscription and support revenue was $40.1 million in the nine months ended September 30, 2025, compared to $57.5 million in the nine months ended September 30, 2024, a decrease of $17.4 million, or 30%. The decrease related to divested product lines was $15.0 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 $0.8 million and the remaining decrease related to a reduction of $0.6 million in personnel-related expenses and $1.0 million in non-cash amortization of intangibles in our on-going product lines.
Cost of professional services and other revenue was $3.0 million in the nine months ended September 30, 2025, compared to $3.7 million in the nine months ended September 30, 2024, a decrease of $0.7 million, or 18%. The decrease in cost of professional services and other revenue was comprised of a decrease in personnel-related expenses of $0.3 million in our divested product lines and $0.4 million in our on-going product lines.
Operating Expenses
Sales and Marketing Expense
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
(dollars in thousands)
Sales and marketing (1)
$ 9,707 $ 16,325 (41) % $ 34,234 $ 50,134 (32) %
Percentage of total revenue 19% 24% 20% 24%
(1)Includes stock compensation expense as follows:
Stock Compensation $ 80 $ 398 $ 384 $ 1,156
For the Three Months Ended September 30, 2025
Sales and marketing expense was $9.7 million in the three months ended September 30, 2025, compared to $16.3 million in the three months ended September 30, 2024, a decrease of $6.6 million, or 41%. The decrease related to divested product lines was $3.9 million comprised of $3.5 million in personnel-related costs and $0.4 million in marketing spend. The remaining decrease was related to decreases of $0.1 million in costs related to our Sunset Assets, and $2.6 million related to declines in personnel-related costs and marketing spend in our on-going product lines.
For the Nine Months Ended September 30, 2025
Sales and marketing expense was $34.2 million in the nine months ended September 30, 2025, compared to $50.1 million in the nine months ended September 30, 2024, a decrease of $15.9 million, or 32%. The decrease related to divested product lines was $9.2 million comprised of $8.1 million in personnel-related costs and $1.1 million in marketing spend and other sales costs. The remaining decrease was related to decreases of $0.2 million in costs related to our Sunset Assets, and $5.8 million in personnel-related costs and $0.7 million in marketing and other spend in our on-going product lines.
Research and Development Expense
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
(dollars in thousands)
Research and development (1)
$ 7,872 $ 11,432 (31) % $ 29,195 $ 36,072 (19) %
Percentage of total revenue 16% 17% 17% 17%
(1)Includes stock compensation expense as follows:
Stock Compensation $ 89 $ 470 $ 697 $ 1,714
For the Three Months Ended September 30, 2025
Research and development expense was $7.9 million in the three months ended September 30, 2025, compared to $11.4 million in the three months ended September 30, 2024, a decrease of $3.5 million, or 31.1%. The decrease in research and development expense is primarily attributable to a $2.4 million decrease in personnel-related costs in our divested product lines and a $1.1 million decrease in personnel-related costs in our remaining product lines. These decreases reflect the termination of our out-sourced research and development contract and the continued use of our efficient India Center of Excellence.
For the Nine Months Ended September 30, 2025
Research and development expense was $29.2 million in the nine months ended September 30, 2025, compared to $36.1 million in the nine months ended September 30, 2024 a decrease of $6.9 million, or 19.1%. The decrease in research and development expense is primarily attributable to a $4.8 million decrease in personnel-related costs in our divested product lines, a $0.3 million decrease in personnel-related costs in our Sunset Assets and a $1.8 million decrease in personnel-related costs in our remaining product lines. These decreases reflect the termination of our out-sourced research and development contract and the continued use of our efficient India Center of Excellence.
General and Administrative Expense
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
(dollars in thousands)
General and administrative (1)
$ 8,787 $ 11,051 (20) % $ 30,627 $ 38,163 (20) %
Percentage of total revenue 17% 17% 18% 18%
(1)Includes stock compensation expense as follows:
Stock compensation $ 2,085 $ 2,356 $ 6,658 $ 8,624
For the Three Months Ended September 30, 2025
General and administrative expense was $8.8 million in the three months ended September 30, 2025, compared to $11.1 million in the three months ended September 30, 2024, a decrease of $2.3 million, or 20%. This decrease is primarily due to a decrease of $1.2 million in personnel-related costs related to our on-going product lines including a decrease of $0.3 million in non-cash stock compensation expense. Other decreases related to core product lines were decreased office lease expense of $0.4 million and decreased professional fees of $0.3 million. The decrease related to our divested product lines was $0.4 million inclusive of the effects of the TSA agreements related to divestitures which ended in July 2025.
For the Nine Months Ended September 30, 2025
General and administrative expense was $30.6 million in the nine months ended September 30, 2025, compared to $38.2 million in the nine months ended September 30, 2024, a decrease of $7.5 million, or 20%. This decrease is due to decreases of $4.9 million in personnel-related costs, $0.4 million in office lease expense and $1.0 million million in professional fees related to our on-going product lines and a $1.2 million decrease related to our divested product lines inclusive of the effects of the TSA agreements related to divestitures which ended in July 2025.
Depreciation and Amortization Expense
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
(dollars in thousands)
Depreciation and amortization:
Depreciation $ 217 $ 332 (35) % $ 740 $ 909 (19) %
Amortization 6,140 11,158 (45) % 20,476 33,357 (39) %
Total depreciation and amortization $ 6,357 $ 11,490 (45) % $ 21,216 $ 34,266 (38) %
Percentage of total revenue:
Depreciation 1% -% 1% 1%
Amortization 12% 17% 12% 16%
Total depreciation and amortization 13% 17% 13% 17%
For the Three Months Ended September 30, 2025
Depreciation and amortization expense was $6.4 million in the three months ended September 30, 2025, compared to $11.5 million in the three months ended September 30, 2024, a decrease of $5.1 million, or 45%. All of the decrease resulted from the decline in amortization from intangible assets associated with the divested product lines.
For the Nine Months Ended September 30, 2025
Depreciation and amortization expense was $21.2 million in the nine months ended September 30, 2025, compared to $34.3 million in the nine months ended September 30, 2024, a decrease of $13.1 million, or 38%. $12.9 million of the decrease resulted from the decline in amortization from intangible assets associated with the divested product lines, $0.1 million from Sunset assets, and $0.1 million related to intangible assets related to our ongoing product lines becoming fully amortized.
Divestiture-related Expenses
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
(dollars in thousands)
Divestiture-related expenses $ 778 $ - 100 % $ 9,402 $ - 100 %
Percentage of total revenue 1% -% 7% 1%
For the Three Months Ended September 30, 2025
Divestiture-related expenses were $0.8 million in the three months ended September 30, 2025, compared to nil in the three months ended September 30, 2024. In conjunction with the divestitures completed in 2025, we incurred an additional $0.2 million in professional fees, accrued $0.3 million in expected data center fees and recorded an additional cost of $0.3 million related to the cancellation of a legacy vendor contract for out-sourced research and development. No divestiture-related expenses were incurred in the three months ended September 30, 2024.
For the Nine Months Ended September 30, 2025
Divestiture-related expenses were $9.4 million in the nine months ended September 30, 2025, compared to nil in the nine months ended September 30, 2024. The divestiture-related expenses incurred in the nine months ended September 30, 2025 consisted of $2.6 million in professional services fees related to the divestitures completed in the nine months ended September 30, 2025. We also recorded a one-time termination fee and other cancellation costs of $5.5 million related to a legacy vendor contract for out-sourced research and development. Additional costs included severance of $0.8 million and $0.5 million of license and data center fees. No divestiture-related expenses were incurred in the nine months ended September 30, 2024.
Impairment of goodwill and other intangibles
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
(dollars in thousands)
Impairment of goodwill and other intangibles $ - $ - N/A $ 2,469 $ 87,227 (97) %
We periodically review the estimated useful lives of our identifiable intangible assets, taking into consideration any events or circumstances that might result in either a diminished fair value or revised useful life. During the nine months ended September 30, 2025, we identified a triggering event related to certain intangible assets related to Sunset Assets and performed a valuation of certain long-lived assets in accordance with ASC 360 Impairment and Disposal of Long-Lived Assets. We used a discounted cash flow analysis to estimate the fair value of the long-lived asset group. As a result of the valuation, we recorded $2.5 million of impairment expense related to certain Sunset intangible assets.
Goodwill impairment is recognized on a non-recurring basis when the carrying value (or GAAP basis book value) of our Company (which is our only reporting unit) exceeds the estimated fair value of our Company as determined by reference to a number of factors and assumptions, including the trends in the stock price of our Common Stock. 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. As a result of declines in our stock price during the three months ended March 31, 2024, we performed a goodwill impairment evaluation which resulted in a goodwill impairment of $87.2 million in the nine months ended September 30, 2024. We will continue to evaluate goodwill for impairment in 2025 and future impairments of goodwill could occur if we experience significant stock price declines.
Other Expense
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
(dollars in thousands)
Other expense:
Interest expense, net $ (4,204) $ 2,337 280 % $ (10,783) $ (7,677) 40 %
Loss on divestitures of businesses (473) - 100 % (24,364) $ - 100 %
Loss on debt extinguishment (2,301) - 100 % (2,301) - 100 %
Other income (expense), net 249 (229) (209) % (1,587) (109) 1,356 %
Total other expense $ (6,729) $ 2,108 (419) % $ (39,035) $ (7,786) 401 %
Percentage of total revenue:
Interest expense, net (8)% 4% (6)% (4)%
Loss on divestitures of businesses (1)% -% (15)% -%
Loss on debt extinguishment (5)% -% (1)% -%
Other income (expense), net -% -% (16)% -%
Total other expense (14)% 4% (23)% (4)%
For the Three Months Ended September 30, 2025
Interest expense, net of interest income, was $4.2 million of net interest expense in the three months ended September 30, 2025 compared to $2.3 million of net interest income in the three months ended September 30, 2024, reflecting additional expense of $6.5 million. This was primarily due to the effects of our interest rate derivatives which reduced interest expense, net by $1.9 million in the three months ended September 30, 2025 and reduced interest expense, net by $10.6 million in the three months ended September 30, 2024, an increase in net interest expense of $8.7 million. In addition, interest income for the three months ended September 30, 2025 declined $1.3 million from interest income in the three months ended September 30, 2024 due to lower cash and cash equivalents. These changes were offset by a decrease in cash interest expense of $3.2 million due to the reduction of our outstanding debt balance which lowered cash interest expense. The remaining decrease in expense related to the amortization of deferred financing costs.
Loss on divestitures of businesses was $0.5 million in the three months ended September 30, 2025 compared to nil in the three months ended September 30, 2024. In the three months ended September 30, 2025, we finalized the divestitures of certain product lines in order to focus on our higher margin and higher growth potential product lines. No divestitures were closed in the three months ended September 30, 2024.
Loss on debt extinguishment was $2.3 million in the three months ended September 30, 2025 compared to nil in the three months ended September 30, 2024. In the three months ended September 30, 2025, the non-cash loss on debt extinguishment was the result of the replacement of our previous credit facility with our new credit facility. As a result of replacing our previous credit facility, we were required to expense the $2.3 million of remaining unamortized debt discount and debt costs on our previous credit facility. No debt was extinguished in the three months ended September 30, 2024.
Other income (expense), net recognized during the three months ended September 30, 2025 and 2024 was related primarily to foreign currency exchange fluctuations.
For the Nine Months Ended September 30, 2025
Interest expense, net of interest income was $10.8 million in the nine months ended September 30, 2025, compared to $7.7 million in the nine months ended September 30, 2024, an increase in net interest expense of $3.1 million, or 40%. The increase in interest expense is primarily attributable to the effects of our interest rate derivatives which reduced interest expense, net by $6.8 million in the nine months ended September 30, 2025 and decreased interest expense by $18.4 million in the nine months ended September 30, 2024, an increase in net interest expense of $11.6 million. In addition, interest income declined by $6.2 million in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 due to lower cash and cash equivalents. These changes were offset by a decline of $14.3 million in cash interest expense due to less outstanding debt as compared to the prior year.
Loss on divestitures of businesses was $24.4 million for the nine months ended September 30, 2025 as compared to nil in the nine months ended September 30, 2024. During the nine months ended September 30, 2025, we divested multiple product lines in order to focus on our higher margin and higher growth potential product lines. No such divestitures occurred in the nine months ended September 30, 2024.
Loss on debt extinguishment was $2.3 million in the nine months ended September 30, 2025 compared to nil in the nine months ended September 30, 2024. In the nine months ended September 30, 2025, the non-cash loss on debt extinguishment was the result of the replacement of our previous credit facility with our new credit facility. As a result of paying down our previous credit facility, we were required to expense $2.3 million of remaining unamortized debt discount on our previous term loan. No debt was extinguished in the nine months ended September 30, 2024.
Other expense, net was $1.6 million in the nine months ended September 30, 2025, compared to other expense, net of $0.1 million in the nine months ended September 30, 2024. Other income (expense), net recognized in the nine months ended September 30, 2025 and September 30, 2024 related primarily to foreign currency exchange fluctuations.
Benefit from Income Taxes
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 % Change 2025 2024 % Change
(dollars in thousands)
Benefit from (provision for) income taxes $ 259 $ (530) (149) % $ 1,775 $ (1,193) (249) %
Percentage of total revenue 1% (2)% 1% -%
For the Three Months Ended September 30, 2025
The benefit from income taxes was $0.3 million in the three months ended September 30, 2025, compared to a provision for income taxes of $0.5 million in the three months ended September 30, 2024, resulting in an increase in benefit from income taxes of $0.8 million. The benefit from income taxes for the three months ended September 30, 2025 relates primarily to the tax benefit due to divestiture of businesses in the third quarter and the impact of U.S. tax legislation, the One Big Beautiful Bill Act, passed in July 2025. This tax benefit is partially offset by the income tax from non-U.S. and U.S. operations.
For the Nine Months Ended September 30, 2025
The benefit from income taxes was $1.8 million in the nine months ended September 30, 2025, compared to a provision for income taxes of $1.2 million in the nine months ended September 30, 2024, an increase of benefit of $3.0 million. This increase was primarily due to the deferred tax benefit from the business divestitures in the nine months ended September 30, 2025 and the impact of U.S. tax legislation, the One Big Beautiful Bill Act, passed in July 2025.
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 September 30, 2025, we had $23.4 million of cash, cash equivalents and restricted cash and $240.0 million of borrowings outstanding under our Credit Agreement. As of December 31, 2024, we had $57.1 million of cash, cash equivalents and restricted cash and $293.7 million of borrowings outstanding under our previous senior secured credit facility. The $33.7 million decrease in cash, cash equivalents and restricted cash from December 31, 2024 to September 30, 2025 was primarily due to $293.7 million in debt repayments made in the nine months ended September 30, 2025, netted with the proceeds of our new Credit Facility of $234.6 million. Other uses of cash included $1.3 million in purchases of leasehold improvements and equipment and $1.0 million taxes paid related to net settlement of shares which were offset by $9.1 million cash proceeds from divestitures of businesses, $18.5 million in cash inflows from operations and $1.5 million positive effect of exchange rates during the nine months ended September 30, 2025.
Our cash and cash equivalents held by our foreign subsidiaries was $14.3 million as of September 30, 2025 and $32.4 million as of December 31, 2024. 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.
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.
Credit Facility
On July 25, 2025, we entered into a Credit Agreement with (i) a new $240.0 million, six-year term loan and (ii) a $30.0 million revolving credit facility maturing in July 2031. We used the proceeds of the term loan, together with cash on hand, including proceeds from the sale of our interest rate swaps, to redeem all of our prior existing Term Loans. The proceeds of loans under the revolving
credit facility will be used for working capital and other general corporate purposes. No amounts have been drawn on the revolving credit facility as of September 30, 2025.
The following table summarizes our cash flows for the periods indicated:
Nine Months Ended September 30,
2025 2024
(dollars in thousands)
Consolidated Statements of Cash Flows data:
Net cash provided by operating activities $ 18,482 $ 14,898
Net cash provided by (used in) investing activities 7,965 (562)
Net cash used in financing activities (61,589) (192,838)
Effect of exchange rate fluctuations on cash, cash equivalents and restricted cash 1,471 1,682
Change in cash, cash equivalents and restricted cash (33,671) (176,820)
Cash, cash equivalents and restricted cash, beginning of period 57,052 236,559
Cash, cash equivalents and restricted cash, end of period $ 23,381 $ 59,739
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. 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 $18.5 million for the nine months ended September 30, 2025 compared to cash provided by operating activities of $14.9 million for the nine months ended September 30, 2024, an increase of approximately $3.6 million. This increase was primarily due to non-recurring $6.6 million of cash gains on the sales of our interest rate swaps in the nine months ended September 30, 2025. This cash gain was offset by payment of non-recurring divestiture-related expenses of $9.4 million and changes in our working capital for the nine months ended September 30, 2025 related to collections on accounts receivable, increases in prepaid expenses, increases in other assets, payments of current liabilities and changes in deferred revenue.
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 $8.0 million for the nine months ended September 30, 2025 compared to cash used by investing activities of $0.6 million for the nine months ended September 30, 2024, an increase of $8.5 million. During the nine months ended September 30, 2025, the Company divested of certain products and received cash proceeds of $9.1 million. Other cash proceeds consisted $0.2 million in collections on the note receivable related to divestitures. Cash used in investing activities consisted of purchases of leasehold improvements and equipment of $1.3 million for the nine months ended September 30, 2025 compared to $0.6 million of purchases of property and equipment for the nine months ended September 30, 2024.
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 $61.6 million for the nine months ended September 30, 2025 compared to $192.8 million for the nine months ended September 30, 2024, an decrease of $131.2 million of cash used due to $53.7 million in payments on our previous senior secured credit facility in the nine months ended September 30, 2025 compared to $181.1 million in payments made in the nine months ended September 30, 2024. Common Stock repurchases totalled $0.1 million for the nine months ended September 30, 2025 as
compared to $11.0 million for the nine months ended September 30, 2024. Cash paid for lender fees and debt issuance costs was $6.8 million for the nine months ended September 30, 2025 as compared to $0.1 million for the nine months ended September 30, 2024.
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 policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.
The following critical accounting policies reflect significant judgments and estimates used in the preparation of our condensed consolidated financial statements:
•income taxes; and
•goodwill and other intangibles.
We are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of November 6, 2025, the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
Other Key Accounting Policies
Our unaudited interim financial statements and other financial information for the three and nine months ended September 30, 2025, 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, 2024 (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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