8-K: Upland Software: Series A Dividend Waiver Bolsters Strategic Plan

Upland Software, Inc. announced that its Series A Preferred Stock holder has agreed to waive dividend accruals, a move designed to support the company's deleveraging strategy and enhance value for common stockholders.

Summary

• Upland Software, Inc. has entered into a Dividend Waiver Agreement with Ulysses Aggregator, LP, the holder of all its Series A Convertible Preferred Stock.
• Effective October 1, 2026, the investor has waived the accumulation and accrual of dividends on the Series A Preferred Stock, which normally accrue at 4.5% per annum and are paid in kind.
• These waived dividends are permanently forgiven and will not be reinstated or become payable, even if the waiver is revoked.
• The waiver supports Upland's strategic plan to 'Simplify and Delever' through early 2027, aiming to reduce debt and position the business for sustainable growth.
• The company expects to see improved net income (loss) attributable to common stockholders and related per-share results starting in the fourth quarter of 2026.
• The waiver will also maintain the preferred stock's liquidation preference at its current level and limit the number of common shares issuable upon conversion.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive development, as the waiver of preferred stock dividends directly supports the company's strategic plan to simplify and deleverage, which is beneficial for common stockholders.

Positives

• The waiver of Series A preferred stock dividends directly supports Upland's 'Simplify and Delever' strategic plan.
• Permanent forgiveness of waived dividends removes future obligations and improves financial flexibility.
• Expected improvement in net income (loss) attributable to common stockholders and EPS starting Q4 2026.
• Maintains the preferred stock's liquidation preference at its current level.
• Limits the number of common shares issuable upon conversion, potentially reducing dilution.
• Demonstrates continued support from HGGC as a long-term sponsor.

Negatives

• While the waiver is indefinite, the holders of a majority of the Series A Preferred Stock can revoke it prospectively with 30 days' notice.
• The waiver does not impact other terms of the Series A Preferred Stock, such as conversion rights or voting rights.

Risks

• The waiver can be revoked prospectively by the holders of a majority of the Series A Preferred Stock, which would lead to the re-accrual of dividends.
• While waived dividends are permanently forgiven, the potential for future dividend accrual upon revocation remains a factor.
• The company's ability to execute its strategic plan, including deleveraging and future growth, is subject to various business and market risks outlined in its SEC filings.

Future Outlook

The waiver is expected to improve net income (loss) attributable to common stockholders and related per-share results beginning in the fourth quarter of 2026. The company's long-term plan includes phases to Simplify and Delever through early 2027, Stabilize and Expand in 2027, and Grow in 2028 and beyond, with a focus on reducing debt, expanding margins, and leveraging AI for revenue growth.

Management Comments

• "We laid out a clear vision with our third quarter results, and we are executing on it. This waiver further supports our Simplify and Delever strategy as we continue to reduce debt and position the business for sustainable growth. With HGGCs continued support as a long-term sponsor, we are focused on executing our plan, expanding margins and turning our AI capabilities into long-term revenue growth."
• "Sean and the team have put forward a clear and credible plan, and they are executing against it. HGGC is fully behind Uplands management team and its strategy, and this waiver reflects our long-term support for where the Company is headed, from simplifying the business today to driving growth through its AI-powered intelligence layer."

Industry Context

StockSavvy.ai notes that the strategic waiver of preferred stock dividends is a common tactic employed by companies seeking to improve their financial flexibility and focus on core operational improvements or debt reduction, particularly when supported by a significant investor like HGGC.

Related Party Transactions

• The Dividend Waiver Agreement is between Upland Software, Inc. and Ulysses Aggregator, LP, an affiliate of HGGC, LLC. David Chung, Co-Chief Investment Officer and Managing Partner of HGGC, serves on Upland's Board of Directors as the Series A Director designated by the holders of the Series A Preferred Stock.

Stakeholder Impact

• Common Stockholders: Expected positive impact due to improved net income (loss) and EPS, and reduced potential dilution from preferred stock conversion.
• Series A Preferred Stockholders: Dividends are waived and permanently forgiven for the waiver period, but other rights remain. The waiver can be prospectively revoked.
• Lenders: The waiver supports the company's deleveraging strategy, which is generally viewed positively by lenders.

Next Steps

• The company will realize the full quarterly benefit of the dividend waiver beginning in the fourth quarter of 2026.
• Upland Software will continue to execute its strategic plan: Simplify and Delever through early 2027, Stabilize and Expand in 2027, and Grow in 2028 and beyond.
• The investor may prospectively revoke the waiver with at least 30 days' notice.

Key Dates

Recommendation

The waiver is a positive step supporting the company's strategic plan and improving common stockholder metrics. However, it does not fundamentally alter the company's business operations or growth trajectory in the immediate term. A 'hold' recommendation reflects the supportive nature of the announcement while awaiting further execution of the longer-term strategic plan and evidence of sustainable growth.

Keywords

Dividend Waiver, Series A Preferred Stock, Upland Software, HGGC, Deleveraging, Corporate Finance, Preferred Stock, Capital Structure