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•	our financial performance and our ability to achieve or sustain profitability or predict future results;

•	our plans regarding future acquisitions and our ability to consummate and integrate acquisitions;

•	our ability to 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 ability to attract and retain customers;

•	our ability to successfully enter new markets and manage our international expansion;

•	our ability to comply with privacy laws and regulations;

•	our ability to deliver high-quality customer service;

•	the growth of demand for enterprise work management applications;

•	our plans regarding, and our ability to effectively manage, our growth;

•	maintaining our senior management team and key personnel;

•	our ability to maintain and expand our direct sales organization;

•	the performance of our resellers;

•	our ability to adapt to changing market conditions and competition;

•	our ability to adapt to technological change and continue to innovate;

•	economic and financial conditions;

•	our ability to integrate our applications with other software applications;

•	maintaining and expanding our relationships with third parties;

•	costs associated with defending intellectual property infringement and other claims;

•	our ability to maintain, protect and enhance our brand and intellectual property;

•	our expectations with regard to trends, such as seasonality, which affect our business;

•	our expectations with regard to revenue from perpetual licenses and professional services;

•	our beliefs regarding the sufficient duration of our patents;

•	our plans with respect to foreign currency exchange risk and inflation;

•	our beliefs regarding how our applications benefit customers and what our competitive strengths are; and

•	other risk factors included under “Risk Factors” in this Annual Report on Form 10-K.

•	the operation and reliability of our third-party data centers; and

•	our expectations as to the payment of dividends;

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•

Large, diversified customer base. Our customer base is highly diverse and spans a broad array of industries, including financial services, retail, technology, manufacturing, legal, education, consumer goods, media, telecommunications, government, non-profit, food and beverage, healthcare and life sciences. We service customers of varying size, ranging from large global corporations and government agencies to small- and medium-sized businesses. We have over 9,000 customers, with no customer accounting for more than 3% of our revenue.

•	Diversified family of software solutions. We offer a family of cloud-based enterprise work management software solutions that addresses a broad range of enterprise needs. We believe this benefits our customers as compared to many of our cloud-based competitors who offer only a single point solution for a more limited and discrete need.

•

Recurring revenue model with high visibility. We believe we have an attractive operating model due to the recurring nature of our subscription revenue, which results in greater visibility and predictability of future revenue and enhances our ability to effectively manage our business. In addition, the cloud-based nature of our model accommodates significant additional business volume with limited incremental costs, providing us with opportunities to improve our operating margins.

•

Proven M&A capability. We have a proven ability to successfully identify, acquire and integrate complementary businesses to grow our company, as evidenced by the 20 acquisitions we have completed since the beginning of 2012. We believe that our acquisition experience and strategy give us a competitive advantage in identifying additional opportunities to expand our family of software applications to better serve our customers.

•	Experienced, proven management team. Our management team has significant operating experience and previously occupied key leadership roles at both private and public companies. In addition, our management’s extensive knowledge of the industry and experience in building businesses has enabled us to quickly establish a leading position within the enterprise software market.

•	Cloud-based delivery. We deliver our software applications and functionality primarily through the cloud, with no hardware or software installation required by our customers. This delivery model allows us to provide reliable, cost-effective applications to our customers, add subscribers with minimal incremental effort and deploy new functionality and upgrades quickly and efficiently. We

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Commitment to customer success. We have a dedicated customer success organization whose mission is to drive adoption, value realization, retention, and loyalty across our customer base. Our focus on enabling our customers’ success is a key reason our annual net dollar retention rate, as defined in “Item 7. - Management's Discussion and Analysis” herein, was 98% as of December 31, 2018. Our commitment to customer success has enabled us to expand our footprint within customer organizations and facilitate the ongoing adoption of our enterprise software applications. We utilize NPS methodology to track our progress and drive continuous improvement.

•

Acquire complementary software businesses. We intend to pursue acquisitions of complementary technologies, products, and businesses to expand our product families and customer base, and to provide access to new markets and increased benefits of scale. Our experienced corporate development team continually monitors a pipeline of potential acquisition candidates, many of which are smaller in scale or address only limited enterprise challenges, which often operate outside the scope of some of our larger competitors. We believe that our acquisition experience and strategy give us a competitive advantage in identifying additional opportunities to expand our family of cloud-based applications to better serve our customers. We intend to prioritize acquisitions within the solution categories we currently offer.

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Increase sales to existing customers. We believe there is a significant opportunity to expand the adoption of our applications within our existing customer organizations, particularly within divisions or departments that have not previously used our applications. We also intend to cross-sell additional applications to our existing customers, as very few of our customers currently use more than one of our applications. In addition, we intend to add new applications to our family of applications that will address additional functions within the enterprise spectrum. We believe these initiatives will significantly increase the value of our platform to our customers, further strengthen our competitive position, and drive increased adoption of multiple applications by our customers.

•

Add new customers. We maintain direct sales and marketing capabilities to further grow our customer base. We also maintain indirect sales channels through alliances with strategic partners that can leverage our applications with their complementary services and technologies. In addition, we continue to expand the range of integrations between our software and third-party applications and platforms, which we believe make our applications more attractive to a broader audience of potential customers.

•

Expand globally. We believe there is an opportunity to grow sales of our applications globally. During the years ended December 31, 2018, 2017, and 2016, approximately 22%, 18%, and 16%, respectively, of our revenue was derived from sales outside the United States. Over the next several years, we plan to continue to evaluate growth opportunities outside the United States through selective acquisitions, the hiring of additional sales personnel, and entering into strategic partnerships.

•

Improve and enhance applications. We intend to continue to invest in research and development and work closely with our customers to identify and improve new applications, features and functionalities that address customer requirements across the enterprise spectrum. We also intend to continue to expand the breadth of our applications with additional analytics, third-party integrations, and social and mobile capabilities to meet the evolving needs of today’s knowledge workers.

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•	use of our website to provide information about us and our software applications, as well as educational opportunities for potential customers;

•	field marketing events for customers and prospective customers;

•	participation in, and sponsorship of, executive events, trade shows, and industry events;

•	our online virtual user conferences;

•	integrated digital marketing campaigns, including email, online advertising, blogs, and webinars;

•	public relations, analyst relations, and social media initiatives; and

•	sales representatives who respond to incoming leads to convert them into new sales opportunities.

•	Customer Care. Our customer care team assists customers throughout their lifecycle with the Upland family of applications by making service offerings available to all customers as part of their standard customer agreements, including webinars, virtual user conferences, and online community engagement.

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Professional Services. Our professional services team is responsible for coordinating all activities relating to the implementation, transition, and on-boarding of new customers and assisting new customers with the addition of new applications to their accounts. Typical professional services engagements vary in length from a few weeks to several months depending on the size and scope of the engagement and are in addition to services provided under our standard customer agreement and are fee-

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•	Account Management. We assign each customer an account team with a relationship manager who functions as the customer’s single point of contact and advocate within Upland. Our account management teams are trained on all of our applications and work closely with the relationship manager to ensure that our customers receive high-quality consultative service.

•	Customer Support. We offer support from all of our office locations to help our customers maximize the return on their investment in our applications. We provide 24/7/365 customer support around the world through our online customer support portal. In addition, our customer support team manages and administers the Upland customer community forum and knowledge base repository.

•	Health Checks and Program Reviews where we engage core users and business buyer sponsors to deliver a detailed scorecard and recommendation report.

•	Advisory and Retained Services that provide our customers with access to a specific customer success contact with priority scheduling and periodic checkpoints.

•	System Deployment and Adoption Analysis programs to analyze system configuration and usage patterns, resulting in best practice recommendations on improving user adoption and compliance.

•	Consumption Review and Recommendations designed to deliver best practice recommendations for implementation strategy and a roadmap proposal for aligning the system with customers’ evolving process maturity to increase application usage.

•	Premier Success Plans that provide a bundled services, support, and product experience offering with three tiers (standard, gold and platinum) designed to provide maximum customer value.

•	Executive Outreach where we promote open communication between the Upland leadership team, which is fully committed to making sure customers are delighted with their Upland experience, and customer executives.

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•	breadth and depth of application functionality;

•	ease of deployment and use of applications;

•	total cost of ownership;

•	levels of customer support satisfaction;

•	brand awareness and reputation;

•	capability for configurability, integration, scalability, and reliability of applications;

•	ability to innovate and respond to customer needs rapidly; and

•	level of integration among applications and with other enterprise systems.

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

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

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

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

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

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

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

•	incompatibility of marketing and administration methods;

•	maintaining employee morale and retaining key employees;

•	integrating the cultures of both companies;

•	preserving important strategic customer relationships;

•	consolidating corporate and administrative infrastructures and eliminating duplicative operations; and

•	coordinating and integrating geographically separate organizations.

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

•	use a substantial portion of our cash resources;

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

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

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

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

•	incur amortization expenses related to certain intangible assets;

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

•	become subject to adverse tax consequences or deferred compensation charges;

•	incur large and immediate write-offs; or

•	become subject to litigation.

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

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

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

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

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

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

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

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

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

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

•	future accounting pronouncements or changes in our accounting policies;

•	unforeseen litigation and intellectual property infringement;

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

•	changes in our pricing policies or those of our competitors;

•	the mix of applications sold during a period;

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

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

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

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

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

•	the length of our sales cycles;

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

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

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

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

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

•	general economic, industry, and market conditions.

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•	uncertain political and economic climates;

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

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

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

•	difficulties in adapting to differing technology standards;

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

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

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

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

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

•	difficulties in managing and adapting to differing cultures and customs;

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

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

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

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

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

•	increased financial accounting and reporting burdens and complexities; and

•	restrictions on the repatriation of earnings.

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

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

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

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

•	the functionality demands of potential customers;

•	fluctuations in the enterprise work management needs of potential customers;

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

•	the purchasing approval processes of potential customers.

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•	loss or delayed market acceptance and sales;

•	breach of warranty or other claims for damages;

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

•	canceled contracts and loss of customers;

•	diversion of development and customer service resources; and

•	injury to our reputation.

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

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

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

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

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

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

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

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

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

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

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

•	litigation involving us;

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•	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.

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

•	directors may be removed by stockholders only for cause;

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

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

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

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

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

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

Item 1B.	Unresolved Staff Comments

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Item 2.	Properties

Item 4.	Mine Safety Disclosures

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Item 6.	Selected Financial Data

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(1)

Annualized recurring revenue value at year-end. The value as of December 31 equals the monthly value of our recurring revenue contracts measured as of December 31 multiplied by 12. This measure excludes the revenue value of certain uncontracted overage fees and on-demand service fees. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Key Metrics” for additional discussion of this key metric.

(2)

Annual net dollar retention rate. We define annual net dollar retention rate as of December 31 as the aggregate annualized recurring revenue value at December 31 from those customers that were also customers as of December 31 of the prior fiscal year, divided by the aggregate annualized recurring revenue value from all customers as of December 31 of the prior fiscal year. This measure excludes the revenue value of certain uncontracted overage fees and on-demand service fees. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Key Metrics” for additional discussion of this key metric.

(3)

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, plus net income (loss) from discontinued operations, depreciation and amortization expense, interest expense, net, other expense (income), net, provision for income taxes, stock-based compensation expense, acquisition-related expenses, stock-based compensation expense granted to related party vendors, non-recurring litigation costs, and purchase accounting adjustments for deferred revenue.

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•	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; and

•	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.

•

depreciation and amortization are non-cash charges, and the assets being depreciated or amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect cash requirements for such replacements; however, much of the depreciation and amortization currently reflected relates to amortization of acquired intangible assets as a result of business combination purchase accounting adjustments, which will not need to be replaced in the future;

•	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.

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Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

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(1)

Annualized recurring revenue value at year-end. The value as of December 31 equals the monthly value of our recurring revenue contracts measured as of December 31 multiplied by 12. This measure excludes the revenue value of uncontracted overage fees and on-demand service fees. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Key Metrics” for additional discussion of this key metric.

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(2)

Annual net dollar retention rate. We define annual net dollar retention rate as of December 31 as the aggregate annualized recurring revenue value at December 31 from those customers that were also customers as of December 31 of the prior fiscal year, divided by the aggregate annualized recurring revenue value from all customers as of December 31 of the prior fiscal year. This measure excludes the revenue value of uncontracted overage fees and on-demand service fees. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Key Metrics” for additional discussion of this key metric.

(3)

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, plus net income (loss) from discontinued operations, depreciation and amortization expense, interest expense, net, other expense (income), net, provision for income taxes, stock-based compensation expense, acquisition-related expenses, non-recurring litigation costs, and purchase accounting adjustments for deferred revenue. Prior to the filing of the Annual Report on Form 10-K for the year ended December 31, 2017, we did not include purchase accounting adjustments for deferred revenue as a component of Adjusted EBITDA, and as such, prior year Adjusted EBITDA amounts for years ended prior to December 31, 2017 presented herein have been recast to reflect the inclusion of purchase accounting adjustments for deferred revenue.

•	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; and

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•	Adjusted EBITDA should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with GAAP. The use of Adjusted EBITDA as an analytical tool has limitations such as:

•

depreciation and amortization are non-cash charges, and the assets being depreciated or amortized will often have to be replaced in the future and Adjusted EBITDA does not reflect cash requirements for such replacements; however, much of the depreciation and amortization currently reflected relates to amortization of acquired intangible assets as a result of business combination purchase accounting adjustments, which will not need to be replaced in the future;

•	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.

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

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

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

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•	Expansion of the Credit Facility from $200 million as of December 31, 2017 to $400.0 million as of December 31, 2018;

•	A favorable adjustment to decrease the overall applicable interest rate for accounts outstanding under the Credit Facility by 50 to 150 basis points resulting in an effective interest rate as of December 31, 2018 6.40%, down from the previous effective interest rate as of December 31, 2017 of approximately 7.0%;

•	A favorable adjustment to the leverage ratio to increase the amount of funded indebtedness to EBITDA (as defined in the Amendment) to 4.75 to 1.00 during 2018, along with additional leverage ratio improvements throughout the remainder of the loan term;

•	A favorable increase to the recurring revenue ratio future draw condition to the delayed draw term loan facility from 1.25:1.0 to 1.50:1.0; and

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

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

•	Clarification of certain definitions within the Credit Facility.

•	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.

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

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

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

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

(5)

We define a purchase commitment as an agreement that is enforceable and legally binding and that specifies all significant terms, including: fixed or minimum services to be used; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Obligations under contracts that we can cancel without a significant penalty are not included. In addition, Purchase orders are not included as they represent authorizations to purchase rather than binding agreements.

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•	Identification of the contract with a customer

•	Identification of the performance obligations in the contract

•	Determination of the transaction price

•	Allocation of the transaction price to the performance obligations in the contract

•	Recognition of revenue when, or as, the Company satisfies a performance obligation

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Item 8.	Financial Statements and Supplementary Data

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(1)	Recorded as a component of other operating income (expense) in the Company's statement of operations.

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•	Expansion of the Credit Facility from $200 million as of December 31, 2017 to $400.0 million as of December 31, 2018;

•	A favorable adjustment to decrease the overall applicable interest rate for accounts outstanding under the Credit Facility;

•	A favorable adjustment to the leverage ratio to increase the amount of funded indebtedness to EBITDA (as defined in the Credit Facility);

•	A favorable increase to the recurring revenue ratio future draw condition to the delayed draw term loan facility;

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

•	Clarification of certain definitions within the Credit Facility; and

•	An increase in the fixed charge coverage ratio (as defined in the Credit Facility).

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•	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.

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•	In March 2016, the Company issued 1,000,000 shares of common stock valued at approximately $5,700,000 in connection with the acquisition of HipCricket, Inc.

•	In July, 2016, the Company issued 318,302 shares of common stock valued at approximately $2,400,000 in connection with the acquisition of LeadLander, Inc.

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

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On May 12, 2017, the Company filed a registration statement on Form S-3 (File No. 333-217977) (the “S-3”), to register Upland securities in an aggregate amount of up to $75.0 million for offerings from time to time. The S-3 was amended on May 22, 2017 and declared effective on May 26, 2017. On June 6, 2017, the Company completed a registered underwritten public offering pursuant to the S-3. The net proceeds of the offering were approximately $42.7 million, net of issuance costs, in exchange for 2,139,534 shares of common stock.

•	On December 12, 2018, the Company filed a registration statement on Form S-3 (File No. 333-228767) (the “Form S-3”), to register Upland securities in an aggregate amount of up to $250.0 million for offerings from time to time. In connection with the filing of the Form S-3 the Company withdrew its previous registration statement filed on May 12, 2017.

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•	Identification of the contract with a customer

•	Identification of the performance obligations in the contract

•	Determination of the transaction price

•	Allocation of the transaction price to the performance obligations in the contract

•	Recognition of revenue when, or as, the Company satisfies a performance obligation

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•

On March 28, 2017, the Company and DevFactory executed an amendment to the agreement to extend the initial term to December 31, 2021. Additionally, the Company amended the option for either party to renew annually for one additional year. The effective date of the amendment was January 1, 2017. DevFactory is an affiliate of ESW Capital LLC, which holds more than 5% of the Company's capital stock. The Company has an outstanding purchase commitment in 2019 for software development services pursuant to a technology services agreement in the amount of $4.9 million. For years after 2019, the purchase commitment amount for software development services will be equal to the prior year purchase commitment increased (decreased) by the percentage change in total revenue for the prior year as compared to the preceding year. For example, if 2019 total revenues increase by 10% as compared to 2018 total revenues, then the 2020 purchase commitment will increase by approximately $0.5 million from the 2019 purchase commitment amount to approximately $5.4 million. During the years ended December 31, 2018, 2017, and 2016, the Company purchased software development services pursuant to a technology services

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The Company purchased services from Crossover, Inc. (“Crossover”), a company controlled by ESW Capital, LLC (a non-management investor) of approximately $3.2 million, $3.0 million, and $1.8 million during the years ended December 31, 2018, 2017, and 2016, respectively. Crossover provides a proprietary technology system to help the Company identify, screen, select, assign, and connect with necessary resources from time to time to perform technology software development and other services throughout the Company, and track productivity of such resources. While there are no purchase commitments with Crossover, the Company will continue to use their services in 2019. Invoicing is based on hourly contractor rates that management believes is in line with industry pricing.

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On March 14, 2016, Upland completed its purchase of substantially all of the assets of HipCricket, Inc., a cloud-based mobile messaging software provider, and completed the transfer of its EPM Live product business. Prior to the transaction, HipCricket was owned by an affiliate of ESW Capital, LLC, which is a shareholder of Upland. Raymond James & Co. provided a fairness opinion to Upland in connection with the transaction. Refer to Note 3 - Acquisitions for a description of the transaction. Relating to this transaction, the Company provided certain transition services to and received certain transition services from the affiliate. The cost offsets earned by the Company for these services during the year ended December 31, 2016 totaled $0.7 million and the fees owed to the affiliate by the Company for these services during the year ended December 31, 2016 totaled $0.1 million. The Company has had no transactions with the affiliate subsequent to the year ended December 31, 2016.

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(1)

During the fourth quarter of 2018 we recorded income tax benefits primarily related to our acquisition of companies with deferred tax liabilities that we recorded at the time of acquisition. These deferred tax liabilities enabled us to recognize $10.1 million of our historic deferred tax assets that had previously been offset by our valuation allowance. This reduction in our valuation allowance was recorded as a tax benefit on our consolidated statement of operations.

(2)	For all quarters, with the exception of the quarter ended December 31, 2018, basic and diluted net loss per share and weighted average common shares outstanding were the same as any additional common stock equivalents would have been anti-dilutive due to the net losses incurred during these periods.

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Item 9A.	Controls and Procedures

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Item 9B.	Other Information

Item 10.	Directors, Officers and Corporate Governance

Item 11.	Executive Compensation

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

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

Item 14.	Principal Accounting Fees and Services

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