State of Delaware | 27-2992077 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
401 Congress Avenue, Suite 1850 Austin, Texas | 78701 |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ¨ | Accelerated filer | x | |
Non-accelerated filer | ¨ | (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Emerging growth company | x |
Class | Shares Outstanding at May 2, 2018 | |
Common Stock, $0.0001 par value | 21,532,565 |
Page | ||
Condensed Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017 | ||
Condensed Consolidated Statements of Operations for the Three months ended March 31, 2018 and March 31, 2017 | ||
Condensed Consolidated Statements of Comprehensive Loss for the Three months ended March 31, 2018 and March 31, 2017 | ||
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and March 31, 2017 | ||
March 31, 2018 | December 31, 2017 | ||||||
(unaudited) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 32,505 | $ | 22,326 | |||
Accounts receivable (net of allowance of $985 and $1,069 at March 31, 2018 and December 31, 2017, respectively) | 27,578 | 26,504 | |||||
Deferred commissions, current | 2,062 | — | |||||
Prepaid and other | 3,892 | 2,856 | |||||
Total current assets | 66,037 | 51,686 | |||||
Canadian tax credits receivable | 1,388 | 1,196 | |||||
Property and equipment, net | 3,081 | 2,927 | |||||
Intangible assets, net | 115,199 | 70,043 | |||||
Goodwill | 148,051 | 154,607 | |||||
Deferred commissions, noncurrent | 4,676 | — | |||||
Other assets | 201 | 800 | |||||
Total assets | $ | 338,633 | $ | 281,259 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 3,446 | $ | 3,887 | |||
Accrued compensation | 3,379 | 5,157 | |||||
Accrued expenses and other | 13,503 | 12,148 | |||||
Deferred revenue | 45,370 | 43,807 | |||||
Due to sellers | 11,462 | 7,839 | |||||
Current maturities of notes payable (includes unamortized discount of $843 and $699 at March 31, 2018 and December 31, 2017, respectively) | 3,282 | 2,301 | |||||
Total current liabilities | 80,442 | 75,139 | |||||
Notes payable, less current maturities (includes unamortized discount of $2,260 and $1,969 at March 31, 2018 and December 31, 2017, respectively) | 156,584 | 108,843 | |||||
Deferred revenue | 1,301 | 1,570 | |||||
Noncurrent deferred tax liability, net | 3,353 | 3,262 | |||||
Other long-term liabilities | 865 | 1,030 | |||||
Total liabilities | 242,545 | 189,844 | |||||
Stockholders’ equity: | |||||||
Common stock, $0.0001 par value; 50,000,000 shares authorized: 21,526,426 and 20,768,401 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively) | 2 | 2 | |||||
Additional paid-in capital | 176,939 | 174,944 | |||||
Accumulated other comprehensive loss | (2,856 | ) | (2,403 | ) | |||
Accumulated deficit | (77,997 | ) | (81,128 | ) | |||
Total stockholders’ equity | 96,088 | 91,415 | |||||
Total liabilities and stockholders’ equity | $ | 338,633 | $ | 281,259 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Revenue: | |||||||
Subscription and support | $ | 27,729 | $ | 18,135 | |||
Perpetual license | 1,626 | 694 | |||||
Total product revenue | 29,355 | 18,829 | |||||
Professional services | 2,260 | 1,923 | |||||
Total revenue | 31,615 | 20,752 | |||||
Cost of revenue: | |||||||
Subscription and support | 9,249 | 5,893 | |||||
Professional services | 1,396 | 1,135 | |||||
Total cost of revenue | 10,645 | 7,028 | |||||
Gross profit | 20,970 | 13,724 | |||||
Operating expenses: | |||||||
Sales and marketing | 4,408 | 3,221 | |||||
Research and development | 4,891 | 3,477 | |||||
Refundable Canadian tax credits | (102 | ) | (117 | ) | |||
General and administrative | 7,000 | 5,904 | |||||
Depreciation and amortization | 2,130 | 1,164 | |||||
Acquisition-related expenses | 3,102 | 3,691 | |||||
Total operating expenses | 21,429 | 17,340 | |||||
Loss from operations | (459 | ) | (3,616 | ) | |||
Other expense: | |||||||
Interest expense, net | (2,494 | ) | (935 | ) | |||
Other income (expense), net | 303 | (112 | ) | ||||
Total other expense | (2,191 | ) | (1,047 | ) | |||
Loss before provision for income taxes | (2,650 | ) | (4,663 | ) | |||
Provision for income taxes | (511 | ) | (951 | ) | |||
Net loss | $ | (3,161 | ) | $ | (5,614 | ) | |
Net loss per common share: | |||||||
Net loss per common share, basic and diluted | $ | (0.16 | ) | $ | (0.33 | ) | |
Weighted-average common shares outstanding, basic and diluted | 19,759,203 | 16,971,393 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
(unaudited) | (unaudited) | ||||||
Net loss | $ | (3,161 | ) | $ | (5,614 | ) | |
Foreign currency translation adjustment | (453 | ) | 78 | ||||
Comprehensive loss | $ | (3,614 | ) | $ | (5,536 | ) |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Operating activities | |||||||
Net loss | $ | (3,161 | ) | $ | (5,614 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 4,172 | 2,398 | |||||
Deferred income taxes | 132 | 178 | |||||
Amortization of deferred costs | 539 | — | |||||
Foreign currency re-measurement (gain) loss | 142 | (59 | ) | ||||
Non-cash interest and other expense | 190 | 75 | |||||
Non-cash stock compensation expense | 2,577 | 2,304 | |||||
Changes in operating assets and liabilities, net of purchase business combinations: | |||||||
Accounts receivable | 555 | 3,935 | |||||
Prepaids and other | (1,811 | ) | 6 | ||||
Accounts payable | (1,124 | ) | 460 | ||||
Accrued expenses and other liabilities | (3,569 | ) | 1,211 | ||||
Deferred revenue | 883 | 33 | |||||
Net cash provided by (used in) operating activities | (475 | ) | 4,927 | ||||
Investing activities | |||||||
Purchase of property and equipment | (426 | ) | (348 | ) | |||
Purchase of customer relationships | — | (55 | ) | ||||
Purchase business combinations, net of cash acquired | (34,320 | ) | (19,256 | ) | |||
Net cash used in investing activities | (34,746 | ) | (19,659 | ) | |||
Financing activities | |||||||
Payments on capital leases | (298 | ) | (331 | ) | |||
Proceeds from notes payable, net of issuance costs | 49,375 | 15,927 | |||||
Payments on notes payable | (844 | ) | (6,755 | ) | |||
Taxes paid related to net share settlement of equity awards | (668 | ) | (73 | ) | |||
Issuance of common stock, net of issuance costs | 87 | 171 | |||||
Additional consideration paid to sellers of businesses | (1,978 | ) | (3,585 | ) | |||
Net cash provided by financing activities | 45,674 | 5,354 | |||||
Effect of exchange rate fluctuations on cash | (274 | ) | 37 | ||||
Change in cash and cash equivalents | 10,179 | (9,341 | ) | ||||
Cash and cash equivalents, beginning of period | 22,326 | 28,758 | |||||
Cash and cash equivalents, end of period | $ | 32,505 | $ | 19,417 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid for interest | $ | 2,316 | $ | 864 | |||
Cash paid for taxes | $ | 1,044 | $ | 591 | |||
Noncash investing and financing activities: | |||||||
Equipment acquired pursuant to capital lease obligations | $ | — | $ | 144 |
Balance Sheet | Balance at December 31, 2017 | Adjustments Due to ASC 606 | Balance at January 1, 2018 | ||||||||
Assets | |||||||||||
Deferred commissions, current | $ | — | $ | 2,070 | $ | 2,070 | |||||
Deferred commissions, noncurrent | — | 4,447 | 4,447 | ||||||||
Liabilities | |||||||||||
Deferred revenue (current) | 43,807 | 225 | 44,032 | ||||||||
Equity | |||||||||||
Accumulated deficit | $ | (81,128 | ) | $ | 6,292 | $ | (74,836 | ) |
Three months ending March 31, 2018 | |||||||||||
Income statement | As Reported | Balances Without Adoption of ASC 606 | Effect of Change Higher/ (Lower) | ||||||||
Revenues | |||||||||||
Perpetual license | $ | 1,626 | $ | 1,307 | $ | 319 | |||||
Operating expenses | |||||||||||
Sales & marketing | $ | 4,408 | $ | 4,629 | $ | (221 | ) |
As of March 31, 2018 | |||||||||||
Balance Sheet | As Reported | Balances Without Adoption of ASC 606 | Effect of Change Higher/ (Lower) | ||||||||
Assets | |||||||||||
Deferred commissions, current | $ | 2,062 | $ | — | $ | 2,062 | |||||
Deferred commissions, noncurrent | 4,676 | — | 4,676 | ||||||||
Liabilities | |||||||||||
Deferred revenue (current) | 45,370 | 45,053 | (317 | ) | |||||||
Equity | |||||||||||
Accumulated deficit | $ | (77,997 | ) | $ | (83,749 | ) | $ | (5,752 | ) |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Revenue | $ | 31,615 | $ | 25,135 | |||
Loss from continuing operations (1) | $ | (3,161 | ) | $ | (4,511 | ) |
Preliminary | Finalized | ||||||||||||||||||
Interfax | Qvidian | Waterfall | RightAnswers | Omtool | |||||||||||||||
Year Acquired | 2018 | 2017 | 2017 | 2017 | 2017 | ||||||||||||||
Cash | $ | 2,680 | $ | 468 | $ | 100 | $ | 139 | $ | 2,957 | |||||||||
Accounts receivable | 1,708 | 1,907 | 1,477 | 2,164 | 784 | ||||||||||||||
Other current assets | 100 | 334 | 608 | 246 | 464 | ||||||||||||||
Property and equipment | 292 | 108 | 23 | 408 | 58 | ||||||||||||||
Customer relationships | 28,142 | 30,160 | 6,400 | 10,500 | 4,400 | ||||||||||||||
Trade name | 191 | 227 | 110 | 180 | 170 | ||||||||||||||
Technology | 4,822 | 5,739 | 2,800 | 2,300 | 3,180 | ||||||||||||||
Goodwill | 8,628 | 21,414 | 18,575 | 15,680 | 14,081 | ||||||||||||||
Other assets | 14 | 8 | — | — | 33 | ||||||||||||||
Total assets acquired | 46,577 | 60,365 | 30,093 | 31,617 | 26,127 | ||||||||||||||
Accounts payable | (689 | ) | (388 | ) | (605 | ) | (139 | ) | (219 | ) | |||||||||
Accrued expense and other | (3,088 | ) | (460 | ) | (1,136 | ) | (2,108 | ) | (915 | ) | |||||||||
Deferred revenue | — | (9,517 | ) | (1,220 | ) | (5,479 | ) | (2,779 | ) | ||||||||||
Total liabilities assumed | (3,777 | ) | (10,365 | ) | (2,961 | ) | (7,726 | ) | (3,913 | ) | |||||||||
Total consideration | $ | 42,800 | $ | 50,000 | $ | 27,132 | $ | 23,891 | $ | 22,214 |
Fair Value Measurements at December 31, 2017 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Earnout consideration liability | $ | — | $ | — | $ | 3,576 | $ | 3,576 |
Fair Value Measurements at March 31, 2018 | |||||||||||||||
(unaudited) | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Earnout consideration liability | $ | — | $ | — | $ | 2,398 | $ | 2,398 |
Ending balance at December 31, 2017 | $ | 3,576 | |
Additions - cash earnouts | 800 | ||
Settlements - cash earnouts | (1,978 | ) | |
Ending balance at March 31, 2018 | $ | 2,398 |
Balance at December 31, 2017 | $ | 154,607 | |
Acquired in business combinations | 8,629 | ||
Adjustment due to prior year business combinations | (14,837 | ) | |
Foreign currency translation adjustment | (348 | ) | |
Balance at March 31, 2018 | $ | 148,051 |
Estimated Useful Life (Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
March 31, 2018: | |||||||||||||
Customer relationships | 1-10 | $ | 112,693 | $ | 20,337 | $ | 92,356 | ||||||
Trade name | 1.5-3 | 3,524 | 2,990 | 534 | |||||||||
Developed technology | 4-7 | 34,179 | 11,870 | 22,309 | |||||||||
Total intangible assets | $ | 150,396 | $ | 35,197 | $ | 115,199 |
Estimated Useful Life (Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||
December 31, 2017: | |||||||||||||
Customer relationships | 5-10 | $ | 69,061 | $ | 18,040 | $ | 51,021 | ||||||
Trade name | 1.5 | 3,431 | 2,900 | 531 | |||||||||
Developed technology | 4-7 | 29,308 | 10,817 | 18,491 | |||||||||
Total intangible assets | $ | 101,800 | $ | 31,757 | $ | 70,043 |
March 31, 2018 | December 31, 2017 | ||
Customer relationships | 9.5 | 9.0 | |
Trade name | 0.8 | 1.5 | |
Developed technology | 6.6 | 6.4 | |
Total weighted-average amortization period | 8.6 | 8.2 |
Amortization Expense | |||
Year ending December 31: | |||
Remainder of 2018 | $ | 13,162 | |
2019 | 16,518 | ||
2020 | 15,371 | ||
2021 | 14,961 | ||
2021 | 12,815 | ||
2022 and thereafter | 42,372 | ||
Total | $ | 115,199 |
March 31, 2018 | December 31, 2017 | ||||||
Senior secured loans (includes unamortized discount of $3,103 and $2,668 based on an imputed interest rate of 7.0% and 7.5%, at March 31, 2018 and December 31, 2017, respectively) | $ | 159,866 | $ | 111,144 | |||
Less current maturities | (3,282 | ) | (2,301 | ) | |||
Total long-term debt | $ | 156,584 | $ | 108,843 |
• | 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. |
Year ending December 31: | |||
Remaining 2018 | $ | 3,094 | |
2019 | 6,188 | ||
2020 | 8,250 | ||
2021 | 8,250 | ||
2022 | 137,187 | ||
Thereafter | — | ||
Total debt maturities | 162,969 | ||
Less current maturities | (3,282 | ) | |
Less unamortized debt discount | (3,103 | ) | |
Notes Payable, less current maturities and unamortized debt discount | $ | 156,584 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Numerator: | |||||||
Net Loss | $ | (3,161 | ) | $ | (5,614 | ) | |
Denominator: | |||||||
Weighted–average common shares outstanding, basic and diluted | 19,759,203 | 16,971,393 | |||||
Net loss per common share, basic and diluted | $ | (0.16 | ) | $ | (0.33 | ) |
March 31, | |||||
2018 | 2017 | ||||
Stock options | 530,099 | 731,971 | |||
Restricted stock | 1,748,481 | 1,410,247 | |||
Total anti–dilutive common share equivalents | 2,278,580 | 2,142,218 |
Number of Restricted Shares Outstanding | Weighted-Average Grant Date Fair Value | |||||
Unvested balances at December 31, 2017 | 1,047,480 | $ | 13.35 | |||
Awards granted | 762,250 | 28.79 | ||||
Awards vested | (60,249 | ) | 22.01 | |||
Awards forfeited | (1,000 | ) | 23.60 | |||
Unvested balances at March 31, 2018 | 1,748,481 | $ | 19.78 |
Number of Options Outstanding | Weighted– Average Exercise Price | |||||
Outstanding at December 31, 2017 | 549,907 | $ | 7.36 | |||
Options exercised | (19,808 | ) | 5.46 | |||
Outstanding at March 31, 2018 | 530,099 | $ | 7.44 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Cost of revenue | $ | 77 | $ | 18 | |||
Research and development | 113 | 60 | |||||
Sales and marketing | 46 | 23 | |||||
General and administrative | 2,341 | 2,203 | |||||
Total | $ | 2,577 | $ | 2,304 |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
Revenues: | |||||||
U.S. | $ | 24,527 | $ | 17,609 | |||
Canada | 1,525 | 845 | |||||
Other International | 5,563 | 2,298 | |||||
Total Revenues | $ | 31,615 | $ | 20,752 |
• | During the three months ended March 31, 2018 and March 31, 2017, the Company purchased software development services pursuant to a technology services agreement with DevFactory FZ-LLC ("DevFactory"), in the amount of $0.8 million and $0.6 million, respectively. On March 28, 2017, the Company entered into an amendment to the Amended and Restated Technology Services Agreement to extend the initial term end date from December 31, 2017 to December 31, 2021. Additionally, the Company amended the option for either party to renew annually for one additional year. The effective date of the amendment is January 1, 2017. DevFactory is an affiliate of ESW Capital LLC, which holds more than 5% of the Company's capital stock. The Company has an outstanding purchase commitment in 2018 for software development services pursuant to a technology services agreement in the amount of $3.2 million. For years after 2018, 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 2018 total revenues increase by 10% as compared to 2017 total revenues, then the 2019 purchase commitment will increase by approximately $0.4 million from the 2018 purchase commitment amount to approximately $3.6 million. |
• | The Company purchased approximately $0.8 million in services from Crossover, Inc. ("Crossover"), a company controlled by ESW Capital, LLC (a non-management investor), during the three months ended March 31, 2018 and |
• | our financial performance and our ability to achieve or sustain profitability or predict future results; |
• | our ability to attract and retain customers; |
• | our ability to deliver high-quality customer service; |
• | the growth of demand for enterprise work management applications; |
• | our ability to effectively manage our growth; |
• | our ability to consummate and integrate acquisitions; |
• | 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 obtain financing in the future on acceptable terms or at all; |
• | our ability to adapt to changing market conditions and competition; |
• | our ability to successfully enter new markets and manage our international expansion; |
• | the operation and reliability of our third-party data centers and hosting providers; |
• | our ability to manage our consultants and contractors; |
• | 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 ability to comply with privacy laws and regulations; and |
• | other risk factors included under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 9, 2018, 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. |
• | Project & Information Technology (IT) Management. Enables users to manage their organization’s projects, professional workforce and IT costs. |
• | Workflow Automation. Enables users to streamline, optimize, automate and secure document-intensive workflow business processes across their enterprise and supply chain. |
• | Digital Engagement. Enables users to effectively engage with their customers, prospects and community via the web and mobile technologies. |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
(dollars in thousands) | |||||||
Reconciliation of Net loss to Adjusted EBITDA: | |||||||
Net Loss | $ | (3,161 | ) | $ | (5,614 | ) | |
Add: | |||||||
Depreciation and amortization expense | 4,172 | 2,398 | |||||
Interest expense, net | 2,494 | 935 | |||||
Other expense (income), net | (303 | ) | 112 | ||||
Provision for income taxes | 511 | 951 | |||||
Stock-based compensation expense | 2,577 | 2,304 | |||||
Acquisition-related expense | 3,102 | 3,691 | |||||
Purchase accounting deferred revenue discount | 1,389 | 679 | |||||
Adjusted EBITDA | $ | 10,781 | $ | 5,456 | |||
Weighted average ordinary shares outstanding - basic | 19,759,203 | 16,971,393 | |||||
Weighted average ordinary shares outstanding - diluted | 20,952,589 | 17,761,803 | |||||
Adjusted EBITDA per share - basic | $ | 0.55 | $ | 0.32 | |||
Adjusted EBITDA per share - diluted | $ | 0.51 | $ | 0.31 | |||
Total revenue- plus purchase accounting deferred revenue discount | $ | 33,004 | $ | 21,431 | |||
Adjusted EBITDA margin (using Total revenue plus purchase accounting deferred revenue discount) | 33 | % | 26 | % | |||
Total revenue | $ | 31,615 | $ | 20,752 | |||
Adjusted EBITDA margin | 34 | % | 26 | % |
• | 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 |
• | 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. |
Three Months Ended March 31, | |||||||||||||
2018 | 2017 | ||||||||||||
Amount | Percent of Revenue | Amount | Percent of Revenue | ||||||||||
(dollars in thousands, except share and per share data) | |||||||||||||
Revenue: | |||||||||||||
Subscription and support | $ | 27,729 | 88 | % | $ | 18,135 | 87 | % | |||||
Perpetual license | 1,626 | 5 | % | 694 | 3 | % | |||||||
Total product revenue | 29,355 | 93 | % | 18,829 | 90 | % | |||||||
Professional services | 2,260 | 7 | % | 1,923 | 10 | % | |||||||
Total revenue | 31,615 | 100 | % | 20,752 | 100 | % | |||||||
Cost of revenue: | |||||||||||||
Subscription and support (1)(3) | 9,249 | 29 | % | 5,893 | 28 | % | |||||||
Professional services (1) | 1,396 | 5 | % | 1,135 | 6 | % | |||||||
Total cost of revenue | 10,645 | 34 | % | 7,028 | 34 | % | |||||||
Gross profit | 20,970 | 66 | % | 13,724 | 66 | % | |||||||
Operating expenses: | |||||||||||||
Sales and marketing (1) | 4,408 | 14 | % | 3,221 | 16 | % | |||||||
Research and development (1) | 4,891 | 15 | % | 3,477 | 17 | % | |||||||
Refundable Canadian tax credits | (102 | ) | — | % | (117 | ) | (1 | )% | |||||
General and administrative (1)(2) | 7,000 | 22 | % | 5,904 | 28 | % | |||||||
Depreciation and amortization | 2,130 | 7 | % | 1,164 | 6 | % | |||||||
Acquisition-related expenses | 3,102 | 10 | % | 3,691 | 18 | % | |||||||
Total operating expenses | 21,429 | 68 | % | 17,340 | 84 | % | |||||||
Loss from operations | (459 | ) | (2 | )% | (3,616 | ) | (18 | )% | |||||
Other Expense: | |||||||||||||
Interest expense, net | (2,494 | ) | (8 | )% | (935 | ) | (5 | )% | |||||
Other income (expense), net | 303 | 1 | % | (112 | ) | — | % | ||||||
Total other expense | (2,191 | ) | (7 | )% | (1,047 | ) | (5 | )% | |||||
Loss before provision for income taxes | (2,650 | ) | (9 | )% | (4,663 | ) | (23 | )% | |||||
Provision for income taxes | (511 | ) | (1 | )% | (951 | ) | (4 | )% | |||||
Net loss | $ | (3,161 | ) | (10 | )% | $ | (5,614 | ) | (27 | )% | |||
Net loss per common share, basic and diluted | $ | (0.16 | ) | $ | (0.33 | ) | |||||||
Weighted-average common shares outstanding, basic and diluted | 19,759,203 | 16,971,393 | |||||||||||
(1) Includes stock-based compensation detailed under Share-based Compensation in Note 9 — Stockholders' Equity. | |||||||||||||
(2) Includes General and administrative stock-based compensation of $2,341 and $2,203 for the three months ended March 31, 2018 and March 31, 2017, respectively. General and administrative expense excluding stock-based compensation as a percentage of total revenues is 15% and 18% for the three months March 31, 2018 and March 31, 2017, respectively. | |||||||||||||
(3) Includes depreciation and amortization of $2,042 and $1,234 for the three months ended March 31, 2018 and March 31, 2017, respectively. |
Three Months Ended March 31, | ||||||||||
2018 | 2017 | % Change | ||||||||
(dollars in thousands) | ||||||||||
Revenue: | ||||||||||
Subscription and support | $ | 27,729 | $ | 18,135 | 53 | % | ||||
Perpetual license | 1,626 | 694 | 134 | % | ||||||
Total product revenue | 29,355 | 18,829 | 56 | % | ||||||
Professional services | 2,260 | 1,923 | 18 | % | ||||||
Total revenue | $ | 31,615 | $ | 20,752 | 52 | % | ||||
Percentage of revenue: | ||||||||||
Subscription and support | 88 | % | 87 | % | ||||||
Perpetual license | 5 | % | 3 | % | ||||||
Total product revenue | 93 | % | 90 | % | ||||||
Professional services | 7 | % | 10 | % | ||||||
Total revenue | 100 | % | 100 | % |
Three Months Ended March 31, | ||||||||||
2018 | 2017 | % Change | ||||||||
(dollars in thousands) | ||||||||||
Cost of revenue: | ||||||||||
Subscription and support (1) | $ | 9,249 | $ | 5,893 | 57 | % | ||||
Professional services | 1,396 | 1,135 | 23 | % | ||||||
Total cost of revenue | 10,645 | 7,028 | 51 | % | ||||||
Gross profit | $ | 20,970 | $ | 13,724 | 53 | % | ||||
Percentage of total revenue: | ||||||||||
Subscription and support (1) | 29 | % | 28 | % | ||||||
Professional services | 5 | % | 6 | % | ||||||
Total cost of revenue | 34 | % | 34 | % | ||||||
Gross profit | 66 | % | 66 | % | ||||||
(1) Includes depreciation, amortization and stock compensation expense as follows: | ||||||||||
Depreciation | $ | 436 | $ | 449 | ||||||
Amortization | $ | 1,606 | $ | 785 | ||||||
Stock Compensation | $ | 77 | $ | 18 |
Three Months Ended March 31, | ||||||||||
2018 | 2017 | % Change | ||||||||
(dollars in thousands) | ||||||||||
Sales and marketing (1) | $ | 4,408 | $ | 3,221 | 37 | % | ||||
Percentage of total revenue | 14 | % | 16 | % | ||||||
(1) Includes stock compensation expense as follows: | ||||||||||
Stock Compensation | $ | 46 | $ | 23 |
Three Months Ended March 31, | ||||||||||
2018 | 2017 | % Change | ||||||||
(dollars in thousands) | ||||||||||
Research and development (1) | $ | 4,891 | $ | 3,477 | 41 | % | ||||
Refundable Canadian tax credits | (102 | ) | (117 | ) | (13 | )% | ||||
Total research and development | $ | 4,789 | $ | 3,360 | 43 | % | ||||
Percentage of total revenue: | ||||||||||
Research and development | 15 | % | 17 | % | ||||||
Refundable Canadian tax credits | — | % | (1 | )% | ||||||
Total research and development | 15 | % | 16 | % | ||||||
(1) Includes stock compensation expense as follows: | ||||||||||
Stock Compensation | $ | 113 | $ | 60 |
Three Months Ended March 31, | ||||||||||
2018 | 2017 | % Change | ||||||||
(dollars in thousands) | ||||||||||
General and administrative (1) | $ | 7,000 | $ | 5,904 | 19 | % | ||||
Percentage of total revenue | 22 | % | 28 | % | ||||||
(1) Includes stock compensation expense as follows: | ||||||||||
Stock Compensation | $ | 2,341 | $ | 2,203 |
Three Months Ended March 31, | ||||||||||
2018 | 2017 | % Change | ||||||||
(dollars in thousands) | ||||||||||
Depreciation and amortization: | ||||||||||
Depreciation | $ | 120 | $ | 113 | 6 | % | ||||
Amortization | 2,010 | 1,051 | 91 | % | ||||||
Total depreciation and amortization | $ | 2,130 | $ | 1,164 | 83 | % | ||||
Percentage of total revenue: | ||||||||||
Depreciation | 1 | % | 1 | % | ||||||
Amortization | 6 | % | 5 | % | ||||||
Total depreciation and amortization | 7 | % | 6 | % |
Three Months Ended March 31, | ||||||||||
2018 | 2017 | % Change | ||||||||
(dollars in thousands) | ||||||||||
Acquisition-related expenses | $ | 3,102 | $ | 3,691 | (16 | )% | ||||
Percentage of total revenue | 10 | % | 18 | % |
Three Months Ended March 31, | ||||||||||
2018 | 2017 | % Change | ||||||||
(dollars in thousands) | ||||||||||
Other expense: | ||||||||||
Interest expense, net | $ | (2,494 | ) | $ | (935 | ) | 167 | % | ||
Other income (expense), net | 303 | (112 | ) | (371 | )% | |||||
Total other expense | $ | (2,191 | ) | $ | (1,047 | ) | 109 | % | ||
Percentage of total revenue: | ||||||||||
Interest expense, net | (8 | )% | (5 | )% | ||||||
Other income (expense), net | 1 | % | — | % | ||||||
Total other expense | (7 | )% | (5 | )% |
Three Months Ended March 31, | ||||||||
2018 | 2017 | % Change | ||||||
(dollars in thousands) | ||||||||
Provision for income taxes | (511 | ) | (951 | ) | (46 | )% | ||
Percentage of total revenue | — | — |
Three Months Ended March 31, | |||||||
2018 | 2017 | ||||||
(dollars in thousands) | |||||||
Consolidated Statements of Cash Flow Data: | |||||||
Net cash provided by operating activities | $ | (475 | ) | $ | 4,927 | ||
Net cash used in investing activities | (34,746 | ) | (19,659 | ) | |||
Net cash provided by financing activities | 45,674 | 5,354 | |||||
Effect of exchange rate fluctuations on cash | (274 | ) | 37 | ||||
Change in cash and cash equivalents | 10,179 | (9,341 | ) | ||||
Cash and cash equivalents, beginning of period | 22,326 | 28,758 | |||||
Cash and cash equivalents, end of period | $ | 32,505 | $ | 19,417 |
• | sell, lease, license or otherwise dispose of assets; |
• | undergo a change in control; |
• | consolidate or merge with or into other entities; |
• | make or own loans, investments and acquisitions; |
• | create, incur or assume guarantees in respect of obligations of other persons; |
• | create, incur or assume liens and other encumbrances; or |
• | pay dividends or make distributions on, or purchase or redeem, our capital stock. |
Exhibit Number | Exhibit Description | ||
101.INS*** | XBRL Instance Document | ||
101.SCH*** | XBRL Taxonomy Extension Schema Document | ||
101.CAL*** | XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF*** | XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB*** | XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE*** | XBRL Taxonomy Extension Presentation Linkbase Document |
* | Filed herewith. |
** | Furnished herewith. |
*** | The financial information contained in these XBRL documents is unaudited and these are not the official publicly filed financial statements of Upland Software, Inc. Investors should continue to rely on the official filed version of the furnished documents and not rely on this information in making investment decisions. In accordance with Rule 402 of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. |
UPLAND SOFTWARE, INC. | |
Dated: May 10, 2018 | /s/ Michael D. Hill |
Michael D. Hill | |
Chief Financial Officer |
Date | Installment Amount |
March 31, 2018 | $685,000 |
June 30, 2018 | $997,500 |
September 30, 2018 | $997,500 |
December 31, 2018 | $997,500 |
March 31, 2019 | $997,500 |
June 30, 2019 | $997,500 |
September 30, 2019 | $1,995,000 |
December 31, 2019 | $1,995,000 |
March 31, 2020 | $1,995,000 |
June 30, 2020 | $1,995,000 |
September 30, 2020 | $1,995,000 |
December 31, 2020 | $1,995,000 |
March 31, 2021 | $1,995,000 |
June 30, 2021 | $1,995,000 |
September 30, 2021 | $1,995,000 |
December 31, 2021 | $1,995,000 |
March 31, 2022 | $1,995,000 |
June 30, 2022 | $1,995,000 |
Applicable Date | Applicable Ratio |
March 31, 2018 | 4.25 to 1.00 |
June 30, 2018 | 4.25 to 1.00 |
September 30, 2018 | 4.25 to 1.00 |
December 31, 2018 | 4.25 to 1.00 |
March 31, 2019 | 4.00 to 1.00 |
June 30, 2019 | 4.00 to 1.00 |
September 30, 2019 | 4.00 to 1.00 |
December 31, 2019 | 4.00 to 1.00 |
March 31, 2020 | 3.75 to 1.00 |
June 30, 2020 | 3.75 to 1.00 |
September 30, 2020 | 3.75 to 1.00 |
December 31, 2020 | 3.50 to 1.00 |
March 31, 2021 | 3.50 to 1.00 |
June 30, 2021 | 3.25 to 1.00 |
September 30, 2021 | 3.25 to 1.00 |
December 31, 2021 | 3.25 to 1.00 |
March 31, 2022 and each June 30, September 30 and December 31 thereafter | 3.00 to 1.00 |
Level | Leverage Ratio Calculation | Applicable Margin Relative to Base Rate Loans (the "Base Rate Margin") | Applicable Margin Relative to Non-Base Rate Loans (the "Non-Base Rate Margin") |
I | If the Leverage Ratio is less than or equal to 3.00:1.0 | 3.00 percentage points | 4.00 percentage points |
II | If the Leverage Ratio is less than or equal to 3.50:1.00 but greater than 3.00:1.00 | 3.50 percentage points | 4.50 percentage points |
III | If the Leverage Ratio is greater than 3.50:1.00 | 4.00 percentage points | 5.00 percentage points |
PARENT AND A US BORROWER: | UPLAND SOFTWARE, INC., a Delaware corporation By:/s/ Michael D. Hill Name: Michael D. Hill Title: Secretary |
US BORROWERS: | UPLAND SOFTWARE I, INC., a Delaware corporation By:/s/ Michael D. Hill Name: Michael D. Hill Title: Secretary |
UPLAND SOFTWARE II, LLC, a Delaware limited liability company By:/s/ Michael D. Hill Name: Michael D. Hill Title: Secretary | |
UPLAND SOFTWARE IV, LLC, a Nebraska limited liability company By:/s/ Michael D. Hill Name: Michael D. Hill Title: Secretary | |
UPLAND SOFTWARE V, INC., a Delaware corporation By:/s/ Michael D. Hill Name: Michael D. Hill Title: Secretary | |
UPLAND SOFTWARE VI, LLC, a New Jersey limited liability company By:/s/ Michael D. Hill Name: Michael D. Hill Title: Secretary |
UPLAND SOFTWARE VII, LLC, a Delaware limited liability company By:/s/ Michael D. Hill Name: Michael D. Hill Title: Secretary | |
UPLAND IX, LLC, a Delaware limited liability company By:/s/ Michael D. Hill Name: Michael D. Hill Title: Secretary | |
ULTRIVA, LLC, a California limited liability company By:/s/ Michael D. Hill Name: Michael D. Hill Title: Secretary | |
ADVANCED PROCESSING & IMAGING, INC., a Florida corporation By:/s/ Michael D. Hill Name: Michael D. Hill Title: Secretary | |
OMTOOL, LTD., a Delaware corporation By:/s/ Michael D. Hill Name: Michael D. Hill Title: Secretary | |
RIGHTANSWERS, INC., a Delaware corporation By:/s/ Michael D. Hill Name: Michael D. Hill Title: Secretary | |
WATERFALL INTERNATIONAL INC., a Delaware corporation By:/s/ Michael D. Hill Name: Michael D. Hill Title: Secretary |
QVIDIAN CORPORATION, a Delaware corporation By:/s/ Michael D. Hill Name: Michael D. Hill Title: Secretary |
CANADIAN BORROWER: | UPLAND SOFTWARE INC. / LOGICIELS UPLAND INC., a Canadian federal corporation By:/s/ Michael D. Hill Name: Michael D. Hill Title: Secretary |
WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as Agent, US Agent and as a Lender By:/s/ Tiffany Ormon Name: Tiffany Ormon Title: Director |
WELLS FARGO CAPITAL FINANCE CORPORATION CANADA, an Ontario corporation, as Canadian Agent and as a Lender By:/s/ David G. Phillips Name: David G. Phillips Title: Senior Vice President |
CIT BANK, N.A., a national banking association, as a Lender By:/s/ Christopher O’Keefe Name: Christopher O’Keefe Title: Authorized Signatory |
STRATEGIC CREDIT PARTNERS II, LLC, as a Lender By:/s/ Craig Transue Name: Craig Transue Title: Authorized Signatory |
GOLDMAN SACHS BANK USA, as a Lender By:/s/ Justin Betzen Name: Justin Betzen Title: Authorized Signatory |
REGIONS BANK, as a Lender By:/s/ Steven Dixon Name: Steven Dixon Title: Director |
CITIZENS BANK, N.A., as a Lender By:/s/ Ryan McGeary Name: Ryan McGeary Title: Vice President |
AC LOAN SOURCING LTD, as a Lender By:/s/ Thomas E. Bancroft Name: Thomas E. Bancroft Title: Portfolio Manager |
(1) | THE PERSONS whose names and addresses are set out in Schedule 1 (the “Sellers”) |
(2) | POWERSTEERING SOFTWARE LIMITED (registered in England and Wales under number 5887016) whose registered office is at 16 Great Queen Street, Covent Garden, London WC2B 5AH (the “Buyer”) |
(A) | The Company (as defined below) is a private company limited by shares. Certain details of the Company are set out in Schedule 2. |
(B) | The Sellers have agreed to sell and the Buyer has agreed to buy the Shares (as defined below) on the terms and subject to the conditions of this Agreement. |
• | DEFINITIONS AND INTERPRETATION |
• | SALE AND PURCHASE |
• | CONSIDERATION AND BUYER’S OBLIGATIONS |
• | COMPLETION |
• | HOLDBACK |
• | WARRANTIES |
• | SPECIFIC INDEMNITIES |
• | RESTRICTIONS ON THE SELLERS |
• | RELEASE BY SELLERS |
• | MATTERS FOLLOWING COMPLETION |
• | TRANSITIONARY SERVICES |
• | TAXATION |
• | ANNOUNCEMENTS AND CONFIDENTIALITY |
• | ASSIGNMENT |
• | GENERAL |
• | NOTICES |
1.1 | Any notice or other communication to be given under this Agreement to a Party shall be in writing and shall be delivered personally or sent by post or email to the Party to be served at its address set out below: |
1.1.1 | to the Buyer at: |
1.1.2 | to Yehuda Alon at: |
1.2 | Any such notice shall be deemed to have been received: |
1.2.1 | if delivered personally, at the time of delivery; |
1.2.2 | in the case of registered post, 24 hours from the date of posting; |
1.2.3 | in the case of airmail, five days from the date of posting; and |
1.2.4 | in the case of email, at the time of delivery, |
1.3 | In proving service of a notice or document it shall be sufficient to prove that delivery was made and recorded or that the facsimile message was properly addressed and despatched or that an email address was properly addressed and despatched and the sender did not receive notification of a failure to deliver, as the case may be. |
• | ENTIRE AGREEMENT |
• | GOVERNING LAW AND JURISDICTION |
Lender | Canadian Revolver Commitment | US Revolver Commitment | Canadian Term Loan Commitment | US Term Loan Commitment | Delayed Draw Term Loan Commitment |
Wells Fargo Bank, National Association | $0 | $2,181,818.18 | $0 | $42,844,583.38 | $8,163,825.77 |
Wells Fargo Capital Finance Corporation Canada | $1,000,000 | $0 | $5,332,500 | $0 | $0 |
CIT Bank, N.A. | $0 | $2,110,389.61 | $0 | $22,168,335.12 | $5,523,088.01 |
Strategic Credit Partners II, LLC | $0 | $0 | $0 | $7,406,249.97 | $0 |
Goldman Sachs Bank USA | $0 | $2,110,389.61 | $0 | $40,234,532.83 | $7,655,077.56 |
Regions Bank | $0 | $1,558,441.56 | $0 | $27,420,779.22 | $5,194,805.19 |
Citizens Bank, N.A. | $0 | $1,038,961.04 | $0 | $9,280,519.49 | $3,463,203.46 |
AC Loan Sourcing Ltd | $0 | $0 | $0 | $9,000,000 | $0 |
TOTAL | $1,000,000 | $9,000,000 | $5,332,500 | $158,355,000.00 | $30,000,000 |
I. | Parties: |
A. | Wells Fargo Bank, National Association, as Agent, US Agent, and as a Lender One Boston Place, 20th Floor |
B. | Wells Fargo Capital Finance Corporation Canada, as Canadian Agent and as a Lender |
C. | Upland Software, Inc. ("Parent") Upland Software I, Inc. ("Upland I") Upland Software II, LLC ("Upland II") |
D. | Upland Software Inc. / Logiciels Upland Inc. ("Upland Canada") 275 Armand-Frappier Boulevard |
E. | Interfax Communications Limited ("Interfax Target") |
F. | Marketech Corporation ("Marketech Target") |
II. | Counsel to Parties: |
A. | US Counsel to Agent: Goldberg Kohn Ltd. |
B. | Canadian Counsel to Agent: |
C. | US Counsel to Borrowers: |
D. | Canadian Counsel to Borrowers: Borden Ladner Gervais LLP |
III. | Closing Documents: |
A. | Loan Documents |
1. | Consent and Sixth Amendment to Credit Agreement |
2. | Amendment No. 1 to Second Amended and Restated Fee Letter |
3. | Disbursement Letter, together with wire disbursement details |
4. | Promissory Note (Citizens) |
B. | InterFax Acquisition Documents |
6. | Solicitor's Undertaking in favor of Wells Fargo Bank, National Association |
7. | Solicitor's Underaking in favor of Lavelle Solicitors |
8. | Interfax |
a) | Share Purchase Agreement, with exhibits and schedules |
b) | Disclosure Letter1 |
c) | License to Occupy |
d) | Compromise and Settlement Agreement (Adam Marash) |
e) | Compromise and Settlement Agreement (Yehuda Alon) |
f) | Letters of Termination for Israeli Employees (4) |
g) | Termination of Non-Executive Consultancy Services (Rooska Management and Financial Services Limited) |
h) | Termination of Non-Executive Consultancy Services (Rest Cloud Limited) |
i) | Proprietary Information Agreements (15) |
C. | Marketech Acquisition Documents |
9. | Asset Purchase Agreement, with exhibits and schedules |
10. | Bill of Sale (Seller) |
11. | Assignment and Assumption Agreement |
12. | Consulting Agreement with Seller and Avi Tessler |
D. | Payoff/Release Documentation |
13. | UCC-3 Terminations with respect to the filings set forth on Exhibit A |
E. | Other Items |
14. | Summary of UCC searches conducted with respect to Marketech Target and Interfax Target and their respective Subsidiaries |
15. | Summary of US IP searches conducted against Marketech Target and Interfax Target and their respective Subsidiaries |
IV. | Post-Acquisition Documents: |
A. | Loan Documents |
16. | Supplement to Perfection Certificate (Omtool re Marketech Target) |
B. | Post-Closing Documents |
17. | Post-Closing UCC Searches |
Secured Party | Debtor | Jurisdiction | Date of Filing | Filing Number |
HSBC Bank USA, N.A. | Interfax US Inc. | DE SOS | 10/02/2017 | 2017 6573247 |
1. | I have reviewed this Quarterly Report on Form 10-Q of Upland Software, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | May 10, 2018 |
/s/ John T. McDonald |
John T. McDonald |
Chief Executive Officer |
(Principal Executive Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Upland Software, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Michael D. Hill |
Michael D. Hill |
Chief Financial Officer |
(Principal Financial Officer) |
/s/ John T. McDonald |
John T. McDonald |
Chief Executive Officer |
/s/ Michael D. Hill |
Michael D. Hill |
Chief Financial Officer |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
May 02, 2018 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Upland Software, Inc. | |
Entity Central Index Key | 0001505155 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 21,532,565 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 985 | $ 1,069 |
Unamortized discount, current | 843 | 699 |
Unamortized discount, noncurrent | $ 2,260 | $ 1,969 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Common stock, shares issued (in shares) | 21,526,426 | 20,768,401 |
Common stock, shares outstanding (in shares) | 21,526,426 | 20,768,401 |
Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||
Net loss | $ (3,161) | $ (5,614) |
Foreign currency translation adjustment | (453) | 78 |
Comprehensive loss | $ (3,614) | $ (5,536) |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | 1. Summary of Significant Accounting Policies Basis of Presentation These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("GAAP"). The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial reporting. In the opinion of management of the Company, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments of a normal recurring nature necessary for a fair presentation. The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or for any other period. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2017 Annual Report on Form 10-K filed with the SEC on March 9, 2018. Use of Estimates The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses. Significant items subject to such estimates include allowance for doubtful accounts, stock-based compensation, contingent consideration, acquired intangible assets, the useful lives of intangible assets and property and equipment, and income taxes. In accordance with GAAP, management bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances. Management regularly evaluates its estimates and assumptions using historical experience and other factors; however, actual results could differ from those estimates. Concentrations of Credit Risk and Significant Customers Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents and accounts receivable. The Company’s cash and cash equivalents are placed with high-quality financial institutions, which, at times, may exceed federally insured limits. The Company has not experienced any losses in these accounts, and the Company does not believe it is exposed to any significant credit risk related to cash and cash equivalents. The Company provides credit, in the normal course of business, to a number of its customers. The Company performs periodic credit evaluations of its customers and generally does not require collateral. No individual customer represented more than 10% of total revenues in the three months ended March 31, 2018 or for the year ended December 31, 2017, or more than 10% of accounts receivable as of March 31, 2018 or December 31, 2017. Fair Value of Financial Instruments The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, and accounts payable, and long–term debt. The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value, primarily due to short maturities. The carrying values of the Company’s debt instruments approximated their fair value based on rates currently available to the Company. Recent Accounting Pronouncements Recently issued accounting pronouncements not yet adopted In February 2016, the FASB issued ASU 2016-02, Leases. The core change with ASU 2016-2 is the requirement for the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect that the adoption of ASU 2016-02 will have on its financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019 and early adoption is permitted for annual and interim periods beginning after December 15, 2018. The Company is currently evaluating the effect that the adoption of ASU 2016-13 will have on its financial statements. Recently adopted accounting pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Updated (“ASU”) 2014-09, “Revenue from Contracts with Customers”, to replace existing revenue recognition rules with a single comprehensive model to use in accounting for revenue arising from contracts with customers. Under this ASU and the associated subsequent amendments (collectively, “ASC 606”), revenue is recognized when a customer obtains control of promised goods or services for an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In addition, ASC 606 requires expanded disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted ASC 606 on January 1, 2018 for all contracts using the modified retrospective method. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of accumulated deficit. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. We expect the impact of the adoption of the new revenue standard to be immaterial to our net income on an ongoing basis. A majority of our sales revenue continues to be recognized ratably over the applicable term of the respective subscription or maintenance contracts. For most sales commissions formerly expensed as incurred, other than for perpetual license commissions which will continue to be expensed as incurred, we are now amortizing these costs to the consolidated statements of income over the shorter of 1) the expected life of our customer relationships, which we have determined to be approximately 6 years, or 2) the life of the related technology. For further discussion about changes to Significant Accounting Policies impacted by the adoption of 2014-09 (Topic 606), see Note 10. Revenue. The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of ASC 606 were as follows (in thousands):
In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our consolidated income statement and balance sheet for the periods ended March 31, 2018 was as follows (in thousands):
During the three months ended March 31, 2018, the effect on earnings per share of the adoption of ASC 606 was an increase in earnings per share of $.03.
In January 2017, the FASB issued ASU 2017-01, Clarifying the Definition of a Business, which revises the definition of a business and assists in the evaluation of when a set of transferred assets and activities is a business. ASU 2017-01 is effective for interim and annual reporting periods beginning after December 15, 2017, and should be applied prospectively. Early adoption is permitted under certain circumstances. The Company adopted ASU 2017-01 during the first quarter of 2018. No impact on the financial statements was recorded as a result of the adoption of ASU 2017-01. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates step two of the goodwill impairment test and specifies that goodwill impairment should be measured by comparing the fair value of a reporting unit with its carrying amount. Additionally, the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount of net assets should be disclosed. ASU 2017-04 is effective for annual or interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019; early adoption is permitted. The Company adopted ASU 2017-04 during the first quarter of 2018. No impact on the financial statements was recorded as a result of the adoption of ASU 2017-04. In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 is intended to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows and to eliminate the diversity in practice related to such classifications. The guidance in ASU 2016-15 is required for annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company adopted ASU 2016-15 during the first quarter of 2017. No additional disclosure was deemed necessary upon the adoption of ASU 2016-15. No impact on the financial statements was recorded as a result of the adoption of ASU 2016-15. |
Acquisitions |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | 2. Acquisitions 2018 Acquisitions On March 21, 2018, the Company’s wholly owned subsidiary, PowerSteering Software Limited, a limited company organized and existing under the laws of England and Wales (“PowerSteering UK”), completed its purchase of the shares comprising the entire issued share capital of Interfax Communications Limited ("Interfax"), an Irish-based software company providing secured cloud-based messaging solutions, including enterprise cloud fax and secure document distribution. In connection with this acquisition, the Company also acquired certain assets related to Interfax’s business from a United States based reseller of Interfax’s products. The purchase price consideration paid for Interfax and the U.S. reseller's assets was $37.0 million in cash at closing, net of cash acquired, and a $5.0 million cash holdback payable over 18 months (subject to reduction for indemnification claims). The foregoing excludes any potential earnout payments tied to performance-based goals. No revenues have been recorded since the acquisition of Interfax through March 31, 2018. 2017 Acquisitions On January 10, 2017, the Company completed its purchase of Omtool, Ltd ("Omtool"), a document capture, fax and workflow solution company. The purchase price consideration paid was approximately $19.3 million in cash payable at closing (net of $3.0 million of cash acquired). On April 21, 2017, the Company acquired RightAnswers, Inc. ("RightAnswers"), a cloud-based knowledge management system. The purchase price was $17.4 million, in cash at closing (net of $0.1 million cash acquired) and a $2.5 million cash holdback payable in one year (subject to reduction for indemnification claims) and excludes potential future earn-out payments tied to additional performance-based goals. On July 12, 2017, the Company acquired Waterfall International Inc. (“Waterfall”), a cloud-based mobile messaging platform. The purchase price consideration paid was approximately $24.4 million in cash at closing (net of $0.4 million of cash acquired) and a $1.5 million cash holdback payable in 18 months (subject to reduction for indemnification claims). The foregoing excludes additional potential $3.0 million in earnout payments tied to performance-based conditions. On November 16, 2017, the Company completed its acquisition of Qvidian Corporation, a Delaware corporation (“Qvidian”), a Massachusetts-based provider of cloud-based RFP and sales-proposal automation software. The purchase price consideration paid by the Company was $50 million in cash. The pro forma statements of operations data for three months ended March 31, 2018 and March 31, 2017, shown in table below, give effect to the Qvidian acquisition, described above, as if it had occurred at January 1, 2016. These amounts have been calculated after applying our accounting policies and adjusting the results of Qvidian to reflect: the costs of debt financing incurred to acquire Qvidian, the additional intangible amortization and the adjustments to acquired deferred revenue that would have been occurred assuming the fair value adjustments had been applied and incurred since January 1, 2016. This pro forma data is presented for informational purposes only and does not purport to be indicative of our future results of operations. The table below shows the Pro forma statements of operations data for the respective years ending December 31 (in thousands):
(1) While some recurring adjustments impact the pro forma figures presented, the decrease in pro forma loss from continuing operations compared to our loss from continuing operations presented on the consolidated statements of operations for the three months ended March 31, 2018 and March 31, 2017 includes nonrecurring adjustments removing acquisition costs from 2017 and reflects these costs in the year ended 2016, the year the acquisition was assumed to be completed for pro forma purposes. The following condensed table presents the preliminary and finalized acquisition-date fair value of the assets acquired and liabilities assumed for the acquisitions in 2017 and through the three months ended March 31, 2018, as well as assets and liabilities (in thousands):
Tangible assets were valued at their respective carrying amounts, which approximates their estimated fair value. The valuation of identifiable intangible assets reflects management’s estimates based on, among other factors, use of established valuation methods. Customer relationships were valued using an income approach, which estimates fair value based on the earnings and cash flow capacity of the subject asset. The value of the marketing-related intangibles was determined using a relief-from-royalty method, which estimates fair value based on the value the owner of the asset receives from not having to pay a royalty to use the asset. Developed technology was valued using a cost-to-recreate approach. The Company recorded the purchase of the acquisitions described above using the acquisition method of accounting and, accordingly, recognized the assets acquired and liabilities assumed at their fair values as of the date of the acquisition. The purchase price allocations for the 2017 acquisitions of Omtool, RightAnswers are final, and Waterfall, Qvidian, and Interfax are preliminary as the Company has not obtained and evaluated all of the detailed information necessary to finalize the opening balance sheet amounts in all respects. Management has recorded the purchase price allocations based upon acquired company information that is currently available. Management expects to complete its purchase price allocations for Waterfall and Qvidian during the first half of 2018 and for Interfax in the second half of 2018. The goodwill of $78.4 million for the above acquisitions is primarily attributable to the synergies expected to arise after the acquisition. Goodwill deductible for tax purposes is $3.7 million for Waterfall. The Company expects there will be tax deductible goodwill for Interfax, however, the final value should be determined during the second quarter of 2018. There was no Goodwill deductible for tax purposes for our Omtool, RightAnswers, and Qvidian acquisitions. Total transaction costs incurred with respect to acquisition activity in the three months ended March 31, 2018 and the three months ended March 31, 2017 were $1.4 million and $1.6 million, respectively. |
Fair Value Measurements |
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Fair Value Measurements | 3. Fair Value Measurements Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. GAAP sets forth a three–tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three tiers are Level 1, defined as observable inputs, such as quoted market prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, which therefore requires an entity to develop its own assumptions. Changes to the fair value of earnout liabilities are recorded to other expense, net. Liabilities measured at fair value on a recurring basis are summarized below (in thousands):
The Level 3 earnout consideration liability consists of amounts associated with the acquisitions of RightAnswers in April 2017, and Waterfall in July 2017. The December 31, 2017 Level 3 earnout consideration liability associated with RightAnswers of $2.0 million was settled in February 2018. In addition, the December 31, 2017 Level 3 earnout consideration liability associated with Waterfall of $1.6 million was unchanged during the three months ended March 31, 2018, which is primarily based on the achievement of maintaining certain revenue during a limited period after the acquisition. Finally, a Level 3 earnout consideration liability of $0.8 million was added associated with the acquisition of Interfax in March 2018, the basis of which is entirely the achievement of certain revenue growth rates during a limited period after the acquisition. The following table presents additional information about liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value (in thousands):
The fair value of the cash earnout consideration was determined using the Binary Option model based on the present value of the probability-weighted earnout consideration. Debt The Company believes the carrying value of its long-term debt at March 31, 2018 approximates its fair value based on the variable interest rate feature or based upon interest rates currently available to the Company. The estimated fair value and carrying value of the Company's debt at March 31, 2018 and December 31, 2017 are $163.0 million and $113.8 million, respectively, based on valuation methodologies using interest rates currently available to the Company, which are Level 2 inputs. |
Goodwill and Other Intangible Assets |
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Goodwill and Other Intangible Assets | 4. Goodwill and Other Intangible Assets Changes in the Company’s goodwill balance for the three months ended March 31, 2018 are summarized in the table below (in thousands):
Net intangible assets include the estimated acquisition-date fair values of customer relationships, marketing-related assets, and developed technology that the Company recorded as part of its business acquisitions. The $14.8 million adjustment due to prior year business combinations was primarily related to a change in the ASC 805 value of Qvidian customer relationships during the three months ended March 31, 2018. The following is a summary of the Company’s intangible assets, net (in thousands):
The following table summarizes the Company's weighted-average amortization period, in total and by major finite-lived intangible asset class (in years):
The Company periodically reviews the estimated useful lives of its identifiable intangible assets, taking into consideration any events or circumstances that might result in either a diminished fair value or revised useful life. There have been no indicators of impairment or change in the useful life during the three months ended March 31, 2018 and March 31, 2017, respectively. Total amortization expense during the three months ended March 31, 2018 and March 31, 2017 was $3.6 million and $1.8 million, respectively. Estimated annual amortization expense for the next five years and thereafter is as follows (in thousands):
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Income Tax Disclosure [Abstract] | |
Income Taxes | 5. Income Taxes The Company’s income tax provision for the three months ended March 31, 2018 and March 31, 2017 reflects its estimate of the effective tax rates expected to be applicable for the full years, adjusted for any discrete events that are recorded in the period in which they occur. The estimates are re-evaluated each quarter based on the estimated tax expense for the full year. The tax provision for the three months ended March 31, 2018 and March 31, 2017 is primarily related to foreign income taxes associated with our Canadian operations, changes in deferred tax liabilities associated with amortization of United States tax deductible goodwill and state taxes in certain states in which the Company does not file on a consolidated basis or have net operating loss carryforwards. The Company has historically incurred operating losses in the United States and, given its cumulative losses and limited history of profits, has recorded a valuation allowance against its United States net deferred tax assets, exclusive of tax deductible goodwill, at March 31, 2018 and March 31, 2017, respectively. The Company has reflected any uncertain tax positions within its current taxes payable, but none in deferred taxes. Federal, state, and foreign income tax returns have been filed in jurisdictions with varying statutes of limitations. Varying among the separate companies, tax years 1998 through 2017 remain subject to examination by federal and most state tax authorities due to our net operating loss carryforwards. In foreign jurisdictions, tax years 2008 through 2017 remain subject to examination. The Tax Act enacted in December 2017 introduced significant changes to U.S. income tax law. Effective 2018, the Tax Act reduced the U.S. statutory tax rate from 35% to 21% and created new taxes on certain foreign-sourced earnings and certain intercompany payments. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, we made reasonable estimates of the effects and recorded provisional amounts in our financial statements as of December 31, 2017. As we collect and prepare necessary data, and interpret the Tax Act and any additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service (IRS), and other standard-setting bodies, we may make adjustments to the provisional amounts. Those adjustments may materially affect our provision for income taxes and effective tax rate in the period in which the adjustments are made. The adjustments made in the first quarter of 2018 were not significant. The accounting for the tax effects of the Tax Act will be completed later in 2018. |
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Debt | 6. Debt Long-term debt consisted of the following at March 31, 2018 and December 31, 2017 (in thousands):
Loan and Security Agreements Sixth Amendment to Credit Facility On March 21, 2018, the Company amended and expanded its Credit Agreement dated May 14, 2015, as amended, among, inter alia, the Company, certain of its subsidiaries, and each of the lenders named in the Credit Agreement (the “Credit Facility”). The Company entered into a sixth amendment to the Credit Facility with Wells Fargo Capital Finance and CIT Bank, N.A. as joint lead arrangers, and including Goldman Sachs Bank USA, Regions Bank, and Citizens Bank, N.A. (collectively, the "Lenders"), with a Consent and Sixth Amendment to Credit Agreement (the “Sixth Amendment”). Loans The Sixth Amendment to the Credit Facility provides for a $258.7 million credit facility, including (i) a fully drawn $163.0 million term loan, (ii) a fully available $30.0 million delayed draw term loan commitment (the "DDTL"), (iii) a fully available $10.0 million revolving loan commitment, and (iv) a $55.0 million uncommitted accordion. Specifically, the Credit Facility provides for $163.7 million of term debt comprised of (i) a fully drawn U.S. term loan facility in an aggregate principal amount of $158.4 million (the “U.S. Term Loan”), (ii) a fully drawn Canadian term loan facility in an aggregate principal amount of $5.3 million (the “Canadian Term Loan” together with the U.S. and Canadian Term Loans, the “Term Loans”). In addition, the Credit Facility also provides for revolvers of $10.0 million, comprised of (i) a U.S. revolving credit facility in an aggregate principal amount of up to $9.0 million (the “U.S. Revolver”), (ii) a Canadian revolving credit facility in an aggregate principal amount of up to $1.0 million (the “Canadian Revolver” and, together with the U.S. Revolver, the “Revolver”). As of March 31, 2018, there were no amounts drawn on its U.S. Revolver or Canadian Revolver loans outstanding under the Credit Facility, and there was $163.0 million outstanding on the Term Loans comprised of (i) $157.7 million in the U.S. Term Loans outstanding under the Credit Facility; and (ii) $5.3 million in the Canadian Term Loans outstanding under the Credit Facility. Terms of Term Loans Under the terms of the Sixth Amendment, the Term Loans are repayable, on a quarterly basis by an amount equal to 2.5% per annum on or before June 30, 2019, after which the existing 5.0% per annum is due thereafter until the facility’s maturity date of August 2, 2022. The Sixth Amendment also provides for other improvements including, among other things, (i) a favorable adjustment to decrease the overall applicable interest rate for accounts outstanding under the Credit Agreement by 50 to 150 basis points resulting in a current effective interest rate of approximately 6.15% down from the previous effective interest rate of approximately 7.1%; (ii) a favorable adjustment to the leverage ratio to increase the amount of funded indebtedness to EBITDA (as defined in the Amendment) to 4.25 to 1.00 as of March 31, 2018, along with additional leverage ratio improvements throughout the remainder of the loan term; and (iii) 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. Also, the maximum amount of purchase consideration payable in respect of an individual permitted acquisition is $25.0 million and in respect of all permitted acquisitions is $175.0 million. In addition, the amount of permitted indebtedness to sellers of businesses increased is $20.0 million. Terms of Delay Draw Term Loan Pursuant to the terms of the Credit Facility, the undrawn $30.0 million DDTL is to be used to finance acquisitions. The DDTL, if all or a portion is drawn, is repayable, on a quarterly basis, by an amount equal to 2.5% per annum on or before June 30, 2019, after which the existing 5.0% per annum is due thereafter until the facility’s maturity date of August 2, 2022. Terms of Revolver Loans under the Revolver are available up to the lesser of (i) $10.0 million (the “Maximum Revolver Amount”) or (ii) the maximum facility amount of $203.7 million, less the sum of any amount of Revolver usage plus the outstanding balance of the Term Loans and other uses of the capacity made under the Credit Facility (such amount, the “Credit Amount”). The Revolver provides a subfacility whereby the Company may request letters of credit (the “Letters of Credit”) in an aggregate amount not to exceed, at any one time outstanding, $0.5 million and $0.25 million, from the U.S and Canadian facilities, respectively. The aggregate amount of outstanding Letters of Credit is reserved against the credit availability under the Maximum Revolver Amount and the Credit Amount. Loans under the Revolver may be borrowed, repaid and reborrowed until August 2, 2022 (the “Maturity Date”), at which time all amounts borrowed under the Credit Facility must be repaid. Other Terms of Credit Facility At the option of the Company, U.S. loans accrue interest at a per annum rate based on (i) the U.S. base rate plus a margin ranging from 3.00% to 4.00% depending on the leverage ratio or (ii) the U.S. LIBOR rate determined in accordance with the Credit Facility (based on 1, 2, 3 or 6-month interest periods) plus a margin ranging from 4.00% to 5.00% depending on the leverage ratio. The U.S. base rate is a rate equal to the highest of (i) the federal funds rate plus a margin equal to 0.5%, the U.S. LIBOR rate for a 1-month interest period plus 1.0%, and (ii) Wells Fargo Capital Finance’s prime rate. At the option of the Company, the Canadian loans accrue interest at a per annum rate based on (i) the Canadian prime rate or the U.S. base rate plus a margin ranging from 3.00% to 4.00% depending on the leverage ratio or (ii) the U.S. LIBOR rate determined in accordance with the Credit Facility (based on 1, 2, 3 or 6-month interest periods) (or the Canadian Bankers' Acceptance ("Canadian BA") rate determined in accordance with the Credit Facility for obligations in Canadian dollars) plus a margin ranging from 4.00% to 5.00% depending on the leverage ratio. Accrued interest on the loans will be paid monthly, or, with respect to loans that are accruing interest based on the U.S. LIBOR rate or Canadian BA rate, at the end of the applicable U.S. LIBOR or Canadian BA interest rate period. Lenders are entitled to a premium (the “Prepayment Premium”) in the event of certain prepayments of the outstanding loans in place at the time of the Sixth Amendment totaling in an amount equal to $113.0 million (i) August 2, 2017 to August 1, 2018, 2.0% times the sum of (a) the Maximum Revolver Amount plus (b) the outstanding principal amount of the Term Loans and DDTL on the date immediately prior to the date of the prepayment (such sum, the “Prepayment Amount”) (ii) from August 2, 2018 to August 1, 2019, 1.0% times the Prepayment Amount and (iii) from August 2, 2019 to the Maturity Date, 0.0% times the Prepayment Amount. The Company may also be subject to prepayment fees in the case of commitment reductions of the Revolver and also may be obligated to prepay loans upon the occurrence of certain events. The Company is also obligated to pay other customary servicing fees, letter of credit fees and unused credit facility fees. The Credit Facility contains customary affirmative and negative covenants. The negative covenants limit the ability of the Company and its subsidiaries to, among other things (in each case subject to customary exceptions for a credit facility of this size and type):
There are certain financial covenants that became more restrictive starting March 31, 2019. If an event of default occurs, at the election of the Lenders, a default interest rate shall apply on all obligations during an event of default, at a rate per annum equal to 2.00% above the applicable interest rate. The Credit Facility permits the Company to buyback up to $10.0 million of its capital stock, subject to restrictions including a minimum liquidity requirement of $25.0 million before and after any such buyback. Interest Rate and Debt Discount Cash interest costs averaged 7.1% and 6.3% under the Credit Facility for the three months ended March 31, 2018 and for the year ended December 31, 2017, respectively. In addition, the Company has $3.1 million and $2.7 million of unamortized debt discount associated with the Credit Facility as of March 31, 2018 and December 31, 2017, respectively. These debt discount costs will be amortized to non-cash interest expense over the term of the Credit Facility. Debt Maturities Under the terms of the Sixth Amendment, future debt maturities of long-term debt (excluding financing costs) at March 31, 2018 are as follows (in thousands):
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Net Loss Per Share |
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Net Loss Per Share | 7. Net Loss Per Share The following table sets forth the computations of loss per share (in thousands, except share and per share amounts):
Due to the net losses for the three months ended March 31, 2018 and March 31, 2017, respectively, basic and diluted loss per share were the same, as the effect of all potentially dilutive securities would have been anti–dilutive. The following table sets forth the anti–dilutive common share equivalents as of March 31, 2018 and March 31, 2017:
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Commitments and Contingencies |
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Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 8. Commitments and Contingencies Purchase Commitments During the three months ended March 31, 2018 and March 31, 2017, the Company purchased software development services pursuant to a technology services agreement with DevFactory FZ-LLC, in the amount of $0.8 million and $0.6 million, respectively. See Note 12 — Related Party Transactions for more information regarding our purchase commitment to this related party. Litigation In the normal course of business, the Company may become involved in various lawsuits and legal proceedings. At this time, the Company is not involved in any current or pending legal proceedings, and does not anticipate any legal proceedings, that may have a material adverse affect on the consolidated financial position or results of operations of the Company. |
Stockholders' Equity |
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Stockholders' Equity | 9. Stockholders' Equity 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. See Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources for more information related to the public underwritten offering. As of March 31, 2018, the Company may issue up to approximately $29.0 million of securities under the remaining capacity of its S-3 shelf registration. Restricted Stock Awards Restricted share activity during the three months ended March 31, 2018 was as follows:
Stock Option Activity Stock option activity during the three months ended March 31, 2018 was as follows:
Share-based Compensation The Company recognized share-based compensation expense from all awards in the following expense categories (in thousands):
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Revenue |
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Mar. 31, 2018 | |
Revenue from Contract with Customer [Abstract] | |
Revenue | 10. Revenue Revenues are recognized when control of the promised goods or services is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services over the term of the agreement, generally when made available to the customers. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenues are recognized net of sales credits and allowances. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. Revenue-generating activities consist of subscription and support, perpetual licenses, and professional services revenues within a single operating segment. Subscription and Support Revenues The Company's software solutions are available for use as hosted application arrangements under subscription fee agreements without licensing perpetual rights to the software. Subscription fees from these applications are recognized over time on a ratable basis over the customer agreement term beginning on the date the Company's solution is made available to the customer. Our subscription contracts are generally one to three years in length. Amounts that have been invoiced are recorded in accounts receivable and deferred revenues or revenues, depending on whether the revenue recognition criteria have been met. Additional fees for monthly usage above the levels included in the standard subscription fee are recognized as revenue at the end of each month and is invoiced concurrently. Perpetual License Revenues The Company also records revenue from the sales of proprietary software products under perpetual licenses. Revenue from distinct on-premises licenses is recognized upfront at the point in time when the software is made available to the customer. The Company’s products do not require significant customization. Professional Services Revenue Professional services provided with subscription and support licenses and perpetual licenses consist of implementation fees, data extraction, configuration, and training. The Company’s implementation and configuration services do not involve significant customization of the software and are not considered essential to the functionality. Revenues from professional services are recognized over time as such services are performed. Significant Judgments Performance Obligations and Standalone Selling Price A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of accounting in the new revenue standard. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. The Company has contracts with customers that often include multiple performance obligations, usually including perpetual licenses, multiple subscriptions and professional services. For these contracts, the Company accounts for individual performance obligations separately if they are distinct by allocating the contract's total transaction price to each performance obligation in an amount based on the relative standalone selling price, or SSP, of each distinct good or service in the contract. Judgment is required to determine the SSP for each distinct performance obligation. A residual approach would only be applied when a particular performance obligation has highly variable and uncertain SSP and such is bundled with other performance obligations that have observable SSP. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. We determine the SSP based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, historical standalone sales, customer demographics, geographic locations, and the number and types of users within our contracts. Other Considerations The Company evaluates whether it is the principal (i.e., report revenues on a gross basis) or agent (i.e., report revenues on a net basis) for vendor reseller agreements. Generally, the Company reports revenues from these types of contracts on a gross basis, meaning the amounts billed to customers are recorded as revenues, and expenses incurred are recorded as cost of revenues. Where the Company is the principal, it first obtains control of the inputs to the specific good or service and directs their use to create the combined output. The Company's control is evidenced by its involvement in the integration of the good or service on its platform before it is transferred to its customers, and is further supported by the Company being primarily responsible to its customers and having a level of discretion in establishing pricing. Revenues provided from agreements in which the Company is an agent are immaterial. Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. The primary purpose of our invoicing terms is to provide customers with simplified and predictable ways of purchasing our products and services, not to receive financing from our customers or to provide customers with financing. Example includes invoicing at the beginning of a subscription term with revenue recognized ratably over the contract period. Unearned revenue comprises mainly unearned revenue related to subscription services. During the three months ended March 31, 2018, we recognized $22.5 million of subscription services revenue, that was included in the unearned revenue balances at the beginning of the period. Professional services revenue recognized in the same period from unearned revenue balances at the beginning of the period was not material. Remaining Performance Obligations As of March 31, 2018, approximately $92.4 million of revenue is expected to be recognized from remaining performance obligations for subscription contracts. We expect to recognize revenue on approximately 85% of these remaining performance obligations over the next 21 months, with the balance recognized thereafter. Revenue from remaining performance obligations for professional services contracts as of March 31, 2018 was not material. Deferred Commissions The Company capitalizes sales commissions related to its customer agreements. Under the new revenue standard, the Company capitalizes commissions and bonuses for those involved in the sale, as these are incremental to the sale. The Company begins amortizing deferred solution and other costs for a particular customer agreement once the revenue recognition criteria are met and amortizes those deferred costs over the expected life of the customer relationships, which has been determined to be approximately 6 years. The portion of capitalized costs expected to be amortized during the succeeding twelve-month period is recorded in current assets as deferred commissions, current, and the remainder is recorded in long-term assets as deferred commissions, net of current portion. Amortization expense is included in sales and marketing expenses in the accompanying condensed consolidated statements of operations. |
Domestic and Foreign Operations |
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Domestic and Foreign Operations | 11. Domestic and Foreign Operations Revenue by geography is based on the ship-to address of the customer, which is intended to approximate where the customer’s users are located. The ship-to country is generally the same as the billing country. The Company has operations in the U.S., Canada and Europe. Information about these operations is presented below (in thousands):
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Related Party Transactions |
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Related Party Transactions [Abstract] | |||||||||
Related Party Transactions | 12. Related Party Transactions We are a party to two agreements with companies controlled by a non-management investor in the Company:
The Company has an arrangement with a former subsidiary, Visionael Corporation ("Visionael"), to provide management, human resource, payroll and administrative services. John T. McDonald, the Company's Chief Executive Officer and Chairman of the Board, beneficially holds an approximate 26.18% interest in Visionael. The Company received fees from this arrangement during the three months ended March 31, 2018 and March 31, 2017 totaling $15,000 and $90,000, respectively. |
Summary of Significant Accounting Policies (Policies) |
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Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("GAAP"). The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial reporting. In the opinion of management of the Company, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments of a normal recurring nature necessary for a fair presentation. The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or for any other period. The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2017 Annual Report on Form 10-K filed with the SEC on March 9, 2018. |
Use of Estimates | Use of Estimates The preparation of the accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses. Significant items subject to such estimates include allowance for doubtful accounts, stock-based compensation, contingent consideration, acquired intangible assets, the useful lives of intangible assets and property and equipment, and income taxes. In accordance with GAAP, management bases its estimates on historical experience and on various other assumptions that management believes are reasonable under the circumstances. Management regularly evaluates its estimates and assumptions using historical experience and other factors; however, actual results could differ from those estimates. |
Concentrations of Credit Risk and Significant Customers | Concentrations of Credit Risk and Significant Customers Financial instruments that potentially subject the Company to credit risk consist of cash and cash equivalents and accounts receivable. The Company’s cash and cash equivalents are placed with high-quality financial institutions, which, at times, may exceed federally insured limits. The Company has not experienced any losses in these accounts, and the Company does not believe it is exposed to any significant credit risk related to cash and cash equivalents. The Company provides credit, in the normal course of business, to a number of its customers. The Company performs periodic credit evaluations of its customers and generally does not require collateral. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, and accounts payable, and long–term debt. The carrying value of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value, primarily due to short maturities. The carrying values of the Company’s debt instruments approximated their fair value based on rates currently available to the Company. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently issued accounting pronouncements not yet adopted In February 2016, the FASB issued ASU 2016-02, Leases. The core change with ASU 2016-2 is the requirement for the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the effect that the adoption of ASU 2016-02 will have on its financial statements. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets. The new model uses a forward-looking expected loss method, which will generally result in earlier recognition of allowances for losses. ASU 2016-13 is effective for annual and interim periods beginning after December 15, 2019 and early adoption is permitted for annual and interim periods beginning after December 15, 2018. The Company is currently evaluating the effect that the adoption of ASU 2016-13 will have on its financial statements. Recently adopted accounting pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Updated (“ASU”) 2014-09, “Revenue from Contracts with Customers”, to replace existing revenue recognition rules with a single comprehensive model to use in accounting for revenue arising from contracts with customers. Under this ASU and the associated subsequent amendments (collectively, “ASC 606”), revenue is recognized when a customer obtains control of promised goods or services for an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In addition, ASC 606 requires expanded disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted ASC 606 on January 1, 2018 for all contracts using the modified retrospective method. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of accumulated deficit. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. We expect the impact of the adoption of the new revenue standard to be immaterial to our net income on an ongoing basis. A majority of our sales revenue continues to be recognized ratably over the applicable term of the respective subscription or maintenance contracts. For most sales commissions formerly expensed as incurred, other than for perpetual license commissions which will continue to be expensed as incurred, we are now amortizing these costs to the consolidated statements of income over the shorter of 1) the expected life of our customer relationships, which we have determined to be approximately 6 years, or 2) the life of the related technology. |
Revenue Recognition | Revenues are recognized when control of the promised goods or services is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services over the term of the agreement, generally when made available to the customers. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenues are recognized net of sales credits and allowances. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities. Revenue-generating activities consist of subscription and support, perpetual licenses, and professional services revenues within a single operating segment. Subscription and Support Revenues The Company's software solutions are available for use as hosted application arrangements under subscription fee agreements without licensing perpetual rights to the software. Subscription fees from these applications are recognized over time on a ratable basis over the customer agreement term beginning on the date the Company's solution is made available to the customer. Our subscription contracts are generally one to three years in length. Amounts that have been invoiced are recorded in accounts receivable and deferred revenues or revenues, depending on whether the revenue recognition criteria have been met. Additional fees for monthly usage above the levels included in the standard subscription fee are recognized as revenue at the end of each month and is invoiced concurrently. Perpetual License Revenues The Company also records revenue from the sales of proprietary software products under perpetual licenses. Revenue from distinct on-premises licenses is recognized upfront at the point in time when the software is made available to the customer. The Company’s products do not require significant customization. Professional Services Revenue Professional services provided with subscription and support licenses and perpetual licenses consist of implementation fees, data extraction, configuration, and training. The Company’s implementation and configuration services do not involve significant customization of the software and are not considered essential to the functionality. Revenues from professional services are recognized over time as such services are performed. |
Summary of Significant Accounting Policies (Tables) |
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements and Changes in Accounting Principles | In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our consolidated income statement and balance sheet for the periods ended March 31, 2018 was as follows (in thousands):
During the three months ended March 31, 2018, the effect on earnings per share of the adoption of ASC 606 was an increase in earnings per share of $.03.
The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of ASC 606 were as follows (in thousands):
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Acquisitions (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pro Forma Statements of Operations | The table below shows the Pro forma statements of operations data for the respective years ending December 31 (in thousands):
(1) While some recurring adjustments impact the pro forma figures presented, the decrease in pro forma loss from continuing operations compared to our loss from continuing operations presented on the consolidated statements of operations for the three months ended March 31, 2018 and March 31, 2017 includes nonrecurring adjustments removing acquisition costs from 2017 and reflects these costs in the year ended 2016, the year the acquisition was assumed to be completed for pro forma purposes. |
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Schedule of Assets and Liabilities Assumed Through Acquisition | The following condensed table presents the preliminary and finalized acquisition-date fair value of the assets acquired and liabilities assumed for the acquisitions in 2017 and through the three months ended March 31, 2018, as well as assets and liabilities (in thousands):
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Fair Value Measurements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Liabilities Measured at Fair Value on a Recurring Basis | Liabilities measured at fair value on a recurring basis are summarized below (in thousands):
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Schedule of Liabilities Measured at Fair Value on a Recurring Basis which Unobservable Inputs are Utilized | The following table presents additional information about liabilities measured at fair value on a recurring basis and for which we have utilized significant unobservable (Level 3) inputs to determine fair value (in thousands):
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Goodwill and Other Intangible Assets (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of goodwill | Changes in the Company’s goodwill balance for the three months ended March 31, 2018 are summarized in the table below (in thousands):
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Summary of intangible assets, net | The following is a summary of the Company’s intangible assets, net (in thousands):
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Schedule of weighted-average amortization period | The following table summarizes the Company's weighted-average amortization period, in total and by major finite-lived intangible asset class (in years):
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Estimated annual amortization expense | Estimated annual amortization expense for the next five years and thereafter is as follows (in thousands):
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Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt | Long-term debt consisted of the following at March 31, 2018 and December 31, 2017 (in thousands):
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Schedule of future debt maturities of long-term debt (excluding financing costs) | Under the terms of the Sixth Amendment, future debt maturities of long-term debt (excluding financing costs) at March 31, 2018 are as follows (in thousands):
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Net Loss Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computations of loss per share | The following table sets forth the computations of loss per share (in thousands, except share and per share amounts):
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Schedule of anti–dilutive common share equivalents | The following table sets forth the anti–dilutive common share equivalents as of March 31, 2018 and March 31, 2017:
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Stockholders' Equity (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of restricted stock activity | Restricted share activity during the three months ended March 31, 2018 was as follows:
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Schedule of stock option activity | Stock option activity during the three months ended March 31, 2018 was as follows:
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Schedule of allocated share-based compensation expense | The Company recognized share-based compensation expense from all awards in the following expense categories (in thousands):
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Domestic and Foreign Operations (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of revenues by geographical area | The Company has operations in the U.S., Canada and Europe. Information about these operations is presented below (in thousands):
|
Acquisitions (Schedule of Pro Forma Statements of Operations) (Details) - Qvidian Corporation [Member] - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items] | ||
Pro forma revenue | $ 31,615 | $ 25,135 |
Pro forma loss from continuing operations | $ (3,161) | $ (4,511) |
Goodwill and Other Intangible Assets (Schedule of Goodwill) (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Goodwill [Roll Forward] | |
Beginning balance | $ 154,607 |
Acquired in business combinations | 8,629 |
Adjustment due to prior year business combinations | (14,837) |
Foreign currency translation adjustment | (348) |
Ending balance | $ 148,051 |
Goodwill and Other Intangible Assets (Narrative) (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Adjustment due to prior year business combinations | $ 14,837 |
Goodwill and Other Intangible Assets (Weighted-Average Amortization Period) (Details) |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Weighted average amortization period | 8 years 7 months | 8 years 2 months |
Customer Relationships [Member] | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Weighted average amortization period | 9 years 6 months | 9 years |
Trade Name [Member] | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Weighted average amortization period | 9 months | 1 year 6 months |
Developed Technology [Member] | ||
Acquired Finite-Lived Intangible Assets [Line Items] | ||
Weighted average amortization period | 6 years 7 months | 6 years 5 months |
Goodwill and Other Intangible Assets (Estimated Annual Amortization Expense) (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Amortization charge of intangible assets | $ 3,600 | $ 1,800 | |
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract] | |||
Remainder of 2018 | 13,162 | ||
2019 | 16,518 | ||
2020 | 15,371 | ||
2021 | 14,961 | ||
2022 | 12,815 | ||
2023 and thereafter | 42,372 | ||
Net Carrying Amount | $ 115,199 | $ 70,043 |
Debt (Long-term Debt) (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Debt Instrument [Line Items] | ||
Notes Payable, less current maturities and unamortized debt discount | $ 156,584 | |
Less current maturities | (3,282) | $ (2,301) |
Total long-term debt | 156,584 | 108,843 |
Less unamortized debt discount | 3,103 | 2,700 |
Senior Secured Notes [Member] | ||
Debt Instrument [Line Items] | ||
Notes Payable, less current maturities and unamortized debt discount | 159,866 | 111,144 |
Less unamortized debt discount | $ 3,103 | $ 2,668 |
Implied interest rate | 7.00% | 7.50% |
Debt (Terms of Term Loans) (Details) $ in Millions |
Mar. 31, 2018 |
Mar. 21, 2018
USD ($)
|
Mar. 20, 2018 |
Jun. 30, 2019 |
---|---|---|---|---|
Line of Credit Facility [Line Items] | ||||
Decrease in basis points percentage | 0.50% | |||
Basis points, percentage | 1.50% | |||
Credit Facility [Member] | ||||
Line of Credit Facility [Line Items] | ||||
Effective interest rate percentage | 7.10% | |||
Leverage ratio | 4.25 | |||
Revenue ratio | 1.50 | 1.25 | ||
Line of Credit [Member] | Credit Facility [Member] | ||||
Line of Credit Facility [Line Items] | ||||
Interest rate percentage | 2.50% | |||
Maximum purchase consideration payable | $ 25.0 | |||
Permitted acquisition | 175.0 | |||
Indebtedness to sellers of businesses | $ 20.0 | |||
Medium-term Notes [Member] | Credit Facility [Member] | ||||
Line of Credit Facility [Line Items] | ||||
Effective interest rate percentage | 6.15% | |||
Scenario, Forecast [Member] | Line of Credit [Member] | Credit Facility [Member] | ||||
Line of Credit Facility [Line Items] | ||||
Interest rate percentage | 5.00% |
Debt (Terms of Delay Draw Term Loan) (Details) - Delayed Draw Term Loan [Member] - Credit Facility [Member] - USD ($) |
Jun. 30, 2019 |
Mar. 21, 2018 |
---|---|---|
Line of Credit Facility [Line Items] | ||
Delay draw term loan | $ 30,000,000 | |
Interest rate percentage | 2.50% | |
Scenario, Forecast [Member] | ||
Line of Credit Facility [Line Items] | ||
Interest rate percentage | 5.00% |
Debt (Terms of Revolver) (Details) - USD ($) |
Mar. 31, 2018 |
Mar. 21, 2018 |
---|---|---|
Line of Credit [Member] | ||
Line of Credit Facility [Line Items] | ||
Delay draw term loan | $ 203,700,000 | |
Line of Credit [Member] | Credit Facility [Member] | ||
Line of Credit Facility [Line Items] | ||
Delay draw term loan | $ 258,700,000 | |
Letter of Credit [Member] | Credit Facility [Member] | Domestic Line of Credit [Member] | ||
Line of Credit Facility [Line Items] | ||
Delay draw term loan | 500,000.0 | |
Letter of Credit [Member] | Credit Facility [Member] | Foreign Line of Credit [Member] | ||
Line of Credit Facility [Line Items] | ||
Delay draw term loan | $ 250,000.00 |
Debt (Interest Rate and Debt Discount) (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Line of Credit Facility [Line Items] | ||
Less unamortized debt discount | $ 3,103 | $ 2,700 |
Credit Facility [Member] | ||
Line of Credit Facility [Line Items] | ||
Cash interest costs | 7.10% | 6.30% |
Debt (Future Debt Maturities of Long-term Debt) (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Debt Disclosure [Abstract] | ||
Remaining 2018 | $ 3,094 | |
2019 | 6,188 | |
2020 | 8,250 | |
2021 | 8,250 | |
2022 | 137,187 | |
Thereafter | 0 | |
Long-term debt | 162,969 | |
Less current maturities | (3,282) | $ (2,301) |
Less unamortized debt discount | (3,103) | $ (2,700) |
Notes Payable, less current maturities and unamortized debt discount | $ 156,584 |
Net Loss Per Share (Computation of Loss Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Numerator: | ||
Net loss | $ (3,161) | $ (5,614) |
Denominator: | ||
Weighted-average common shares outstanding, basic and diluted (in shares) | 19,759,203 | 16,971,393 |
Net loss per common share, basic and diluted (in USD per share) | $ (0.16) | $ (0.33) |
Net Loss Per Share (Anti–Dilutive Common Share Equivalents) (Details) - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti–dilutive common share equivalents (in shares) | 2,278,580 | 2,142,218 |
Employee Stock Option [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti–dilutive common share equivalents (in shares) | 530,099 | 731,971 |
Restricted Stock [Member] | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti–dilutive common share equivalents (in shares) | 1,748,481 | 1,410,247 |
Commitments and Contingencies (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Investor [Member] | ||
Long-term Purchase Commitment [Line Items] | ||
Amount of related party transaction | $ 0.8 | $ 0.6 |
Stockholders' Equity (Details) - USD ($) |
3 Months Ended | |||
---|---|---|---|---|
Jun. 06, 2017 |
Mar. 31, 2018 |
Mar. 31, 2017 |
May 12, 2017 |
|
Class of Stock [Line Items] | ||||
Net proceeds of public offering | $ 42,700,000 | $ 87,000 | $ 171,000 | |
Public Offering [Member] | ||||
Class of Stock [Line Items] | ||||
Additional registration of shares of aggregate amount (up to) | $ 29,000,000 | $ 75,000,000.0 | ||
Shares issued for public offering | 2,139,534 |
Stockholders' Equity (Restricted Stock Activity) (Details) - Restricted Stock [Member] - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Number of Restricted Shares Outstanding | ||
Unvested balances at beginning of period (in shares) | 1,047,480 | |
Awards granted (in shares) | 762,250 | |
Awards vested (in shares) | (60,249) | |
Awards forfeited (in shares) | (1,000) | |
Unvested balances at end of period (in shares) | 1,748,481 | |
Weighted-Average Grant Date Fair Value | ||
Weighted-average grant date fair value (in dollars per share) | $ 19.78 | $ 13.35 |
Weighted average grant date fair value, awards granted (in dollars per share) | 28.79 | |
Weighted average grant date fair value, awards vested (in dollars per share) | 22.01 | |
Weighted average grant date fair value, awards forfeited (in dollars per share) | $ 23.60 |
Stockholders' Equity (Stock Option Activity) (Details) |
3 Months Ended |
---|---|
Mar. 31, 2018
$ / shares
shares
| |
Number of Options Outstanding | |
Options exercised (in shares) | shares | (19,808) |
Weighted Average Exercise Price | |
Options exercised (in USD per share) | $ / shares | $ 5.46 |
Outstanding at end of period (in USD per share) | $ / shares | $ 7.44 |
Employee Stock Option [Member] | |
Number of Options Outstanding | |
Outstanding at beginning of period (in shares) | shares | 549,907 |
Outstanding at end of period (in shares) | shares | 530,099 |
Weighted Average Exercise Price | |
Outstanding at beginning of period (in USD per share) | $ / shares | $ 7.36 |
Revenue (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognized, previously in unearned revenue | $ 22.5 |
Revenue expected to be recognized from performance obligations | $ 92.4 |
Expected satisfaction period of performance obligations, in months | 21 months |
Revenue Remaining Performance Obligation (Details) |
Mar. 31, 2018 |
---|---|
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-04-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Remaining performance obligation, percentage | 85.00% |
Domestic and Foreign Operations (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenue | $ 31,615 | $ 20,752 |
U.S. [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenue | 24,527 | 17,609 |
Canada [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenue | 1,525 | 845 |
Other International [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Revenue | $ 5,563 | $ 2,298 |
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