SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


☑
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended March 31, 2024


☐
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to .

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

~~YES~~ þ NO ¨Yes☑No☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

~~YES~~ þ NO ¨Yes☑No☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filerþ

☑

Accelerated filer

¨☐

Non-accelerated filer¨ ~~(Do not check if a smaller reporting company)~~

☐

Smaller reporting company

¨☐

Emerging growth company

¨☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨☐

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

~~YES~~ ¨ NO þYes☐No☑

The number of shares of the registrant’s Common Stock outstanding as of ~~October 23, 2017~~April 29, 2024 was ~~48,089,595.~~51,626,076.

TABLE OF CONTENTS



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		2

PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial statements
	Condensed Consolidated ~~balance sheets as of September 30, 2017 and December 31, 2016 (unaudited)~~Balance Sheets (Unaudited)	3
	Condensed Consolidated ~~statements~~Statements of ~~comprehensive income for the three and nine months ended September 30, 2017 and 2016 (unaudited)~~Comprehensive Income (Loss) (Unaudited)	4
	Condensed Consolidated ~~statements~~Statements of ~~cash flows for the nine months ended September 30, 2017 and 2016 (unaudited)~~Cash Flows (Unaudited)	5
	Condensed Consolidated ~~statement~~Statements of ~~stockholders’ equity for the nine months ended September 30, 2017 (unaudited)~~Stockholders’ Equity (Unaudited)	6
	Notes to ~~consolidated financial statements (unaudited)~~Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management's discussion and analysis of financial condition and results of operations	2324
Item 3.	Quantitative and qualitative disclosures about market risk	4143
Item 4.	Controls and procedures	4143

PART II.	OTHER INFORMATION	4245

Item ~~1A.~~1.	~~Risk factors~~Legal proceedings	4245
Item 1A.	Risk factors	45
Item 2.	Unregistered sales of equity securities and use of proceeds	4249
Item 5.	Other information	50

Item 6.	Exhibits	4351

SIGNATURES		4452



~~Third~~First Quarter ~~2017~~2024 Form 10-Q				1

Table of Contents

Blackbaud, Inc.



				CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the documents incorporated herein by reference, contains forward-looking statements that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These "forward-looking statements" are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements consist of, among other things, trend analyses, statements regarding future events, future financial performance, our anticipated growth, the effect of general economic and market conditions, our business strategy and our plan to build and grow our business, our operating results, our ability to successfully integrate acquired businesses and technologies, the effect of foreign currency exchange rate and interest rate fluctuations on our financial results, the impact of expensing stock-based compensation, the sufficiency of our capital resources, our ability to meet our ongoing debt and obligations as they become due, cybersecurity and data protection risks and related liabilities, and current or potential ~~litigation~~legal proceedings involving us, all of which are based on current expectations, estimates, and forecasts, and the beliefs and assumptions of our management. Words such as “believes,” “seeks,” “expects,” “may,” “might,” “should,” “intends,” “could,” “would,” “likely,” “will,” “targets,” “plans,” “anticipates,” “aims,” “projects,” “estimates” or any variations of such words and similar expressions are also intended to identify such forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions that are difficult to predict. Accordingly, they should not be viewed as assurances of future performance, and actual results may differ materially and adversely from those expressed in any forward-looking statements.

Important factors that could cause actual results to differ materially from our expectations expressed in forward-looking statements include, but are not limited to, those summarized under ~~“Item~~“Part II, Item 1A. Risk factors” and elsewhere in this report, in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2023 and in our other ~~SEC filings.~~filings made with the United States Securities & Exchange Commission ("SEC"). Forward-looking statements represent our management's beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statement, whether as a result of new information, future events or otherwise.



2						~~Third~~First Quarter ~~2017~~2024 Form 10-Q



				PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

										Blackbaud, Inc. Consolidated balance sheets (Unaudited)
(dollars in thousands)	September 30, 2017			December 31, 2016
Blackbaud, Inc. Condensed Consolidated Balance Sheets (Unaudited)							Blackbaud, Inc. Condensed Consolidated Balance Sheets (Unaudited)
(dollars in thousands, except per share amounts)							(dollars in thousands, except per share amounts)	March 31, 2024	December 31, 2023
Assets
Current assets:
Current assets:
Current assets:
Cash and cash equivalents	$	17,050		$	16,902
Restricted cash due to customers	139,095			353,771
Accounts receivable, net of allowance of $4,540 and $3,291 at September 30, 2017 and December 31, 2016, respectively	100,868			88,932
Cash and cash equivalents
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowance of $6,204 and $6,907 at March 31, 2024 and December 31, 2023, respectively
Customer funds receivable
Prepaid expenses and other current assets	50,082			48,314
Total current assets	307,095			507,919
Property and equipment, net	43,903			50,269
Software development costs, net	48,618			37,582
Operating lease right-of-use assets
Software and content development costs, net
Goodwill	472,776			438,240
Intangible assets, net	252,713			253,676
Other assets	21,889			22,524
Total assets	$	1,146,994		$	1,310,210
Liabilities and stockholders’ equity
Current liabilities:
Current liabilities:
Current liabilities:
Trade accounts payable
Trade accounts payable
Trade accounts payable	$	17,830		$	23,274
Accrued expenses and other current liabilities	45,650			54,196
Due to customers	139,095			353,771
Debt, current portion	8,576			4,375
Deferred revenue, current portion	277,008			244,500
Total current liabilities	488,159			680,116
Debt, net of current portion	329,380			338,018
Deferred tax liability	39,352			29,558
Deferred revenue, net of current portion	5,412			6,440
Operating lease liabilities, net of current portion
Other liabilities	7,799			8,533
Total liabilities	870,102			1,062,665
Commitments and contingencies (see Note 10)
Commitments and contingencies (see Note 9)							Commitments and contingencies (see Note 9)
Stockholders’ equity:
Preferred stock; 20,000,000 shares authorized, none outstanding	—			—
Common stock, $0.001 par value; 180,000,000 shares authorized, 58,503,687 and 57,672,401 shares issued at September 30, 2017 and December 31, 2016, respectively	59			58
Preferred stock; 20,000,000 shares authorized, none outstanding
Preferred stock; 20,000,000 shares authorized, none outstanding
Common stock, $0.001 par value; 180,000,000 shares authorized, 70,861,507 and 69,188,304 shares issued at March 31, 2024 and December 31, 2023, respectively; 51,624,243 and 53,625,440 shares outstanding at March 31, 2024 and December 31, 2023, respectively
Additional paid-in capital	341,476			310,452
Treasury stock, at cost; 10,426,122 and 10,166,801 shares at September 30, 2017 and December 31, 2016, respectively	(234,329		)	(215,237		)
Accumulated other comprehensive loss	(1,013		)	(457		)
Treasury stock, at cost; 19,237,264 and 15,562,864 shares at March 31, 2024 and December 31, 2023, respectively
Accumulated other comprehensive income (loss)
Retained earnings	170,699			152,729
Total stockholders’ equity	276,892			247,545
Total liabilities and stockholders’ equity	$	1,146,994		$	1,310,210

The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.



~~Third~~First Quarter ~~2017~~2024 Form 10-Q				3

Blackbaud, Inc.
Consolidated statements of comprehensive income
(Unaudited)
(dollars in thousands, except per share amounts) Three months ended
September 30, Nine months ended
September 30,
2017
2016
2017
2016
Revenue
Subscriptions $ 127,492
$ 105,440
$ 370,923
$ 306,330
Maintenance 31,486
36,410
98,184
111,019
Services and other 36,535
41,213
102,222
115,161
Total revenue 195,513
183,063
571,329
532,510
Cost of revenue
Cost of subscriptions 58,045
51,943
170,336
153,772
Cost of maintenance 5,698
5,531
17,551
16,547
Cost of services and other 23,262
25,843
71,595
76,499
Total cost of revenue 87,005
83,317
259,482
246,818
Gross profit 108,508
99,746
311,847
285,692
Operating expenses
Sales, marketing and customer success 44,193
40,690
129,394
115,707
Research and development 22,071
22,510
67,647
67,973
General and administrative 23,545
22,319
67,350
62,089
Amortization 734
687
2,164
2,147
Total operating expenses 90,543
86,206
266,555
247,916
Income from operations 17,965
13,540
45,292
37,776
Interest expense (3,092 ) (2,641 ) (8,685 ) (8,037 )
Other income (expense), net 468
(15 ) 1,581
(185 )
Income before provision for income taxes 15,341
10,884
38,188
29,554
Income tax provision 2,793
1,950
2,964
5,323
Net income $ 12,548
$ 8,934
$ 35,224
$ 24,231
Earnings per share
Basic $ 0.27
$ 0.19
$ 0.76
$ 0.53
Diluted $ 0.26
$ 0.19
$ 0.74
$ 0.51
Common shares and equivalents outstanding
Basic weighted average shares 46,711,709
46,159,956
46,627,213
46,078,306
Diluted weighted average shares 47,846,997
47,394,106
47,679,103
47,268,469
Dividends per share $ 0.12
$ 0.12
$ 0.36
$ 0.36
Other comprehensive (loss) income
Foreign currency translation adjustment (188 ) 289
(467 ) 261
Unrealized (loss) gain on derivative instruments, net of tax (267 ) 409
(89 ) (378 )
Total other comprehensive (loss) income (455 ) 698
(556 ) (117 )
Comprehensive income $ 12,093
$ 9,632
$ 34,668
$ 24,114

The accompanying notes are an integral part of these consolidated financial statements.


Blackbaud, Inc. Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
	Three months ended March 31,
(dollars in thousands, except per share amounts)		2024		2023
Revenue
Recurring		$	271,518	$	252,748
One-time services and other		7,732		9,005
Total revenue		279,250		261,753
Cost of revenue
Cost of recurring		119,188		114,500
Cost of one-time services and other		7,018		8,612
Total cost of revenue		126,206		123,112
Gross profit		153,044		138,641
Operating expenses
Sales, marketing and customer success		50,865		54,385
Research and development		42,802		40,591
General and administrative		47,754		52,838
Amortization		904		774

Total operating expenses		142,325		148,588
Income (loss) from operations		10,719		(9,947)
Interest expense		(10,276)		(10,662)
Other income, net		3,347		2,007
Income (loss) before benefit for income taxes		3,790		(18,602)
Income tax benefit		(1,456)		(3,901)
Net income (loss)		$	5,246	$	(14,701)
Earnings (loss) per share
Basic		$	0.10	$	(0.28)
Diluted		$	0.10	$	(0.28)
Common shares and equivalents outstanding
Basic weighted average shares		52,052,370		52,132,999
Diluted weighted average shares		53,414,495		52,132,999
Other comprehensive income (loss)
Foreign currency translation adjustment		$	(1,185)	$	2,158
Unrealized gain (loss) on derivative instruments, net of tax		4,095		(10,692)
Total other comprehensive income (loss)		2,910		(8,534)
Comprehensive income (loss)		$	8,156	$	(23,235)

The accompanying notes are an integral part of these condensed consolidated financial statements.



4						~~Third~~First Quarter ~~2017~~2024 Form 10-Q

										Blackbaud, Inc. Consolidated statements of cash flows (Unaudited)
Blackbaud, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited)							Blackbaud, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited)
	Nine months ended September 30,							Three months ended March 31,
(dollars in thousands)	2017			2016			(dollars in thousands)	2024	2023
Cash flows from operating activities
Net income	$	35,224		$	24,231
Adjustments to reconcile net income to net cash provided by operating activities:
Net income (loss)
Net income (loss)
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	54,765			53,109
Provision for doubtful accounts and sales returns	7,246			3,139
Depreciation and amortization
Depreciation and amortization
Provision for credit losses and sales returns
Stock-based compensation expense	31,055			25,005
Deferred taxes	(2,511		)	(225		)
Amortization of deferred financing costs and discount	650			718
Loss on disposition of business
Other non-cash adjustments	572			(634		)
Changes in operating assets and liabilities, net of acquisition and disposal of businesses:
Accounts receivable
Accounts receivable
Accounts receivable	(17,169		)	(9,288		)
Prepaid expenses and other assets	596			(934		)
Trade accounts payable	(2,891		)	267
Accrued expenses and other liabilities	(9,522		)	(12,837		)
Restricted cash due to customers	214,244			119,291
Due to customers	(214,244		)	(119,291		)
Deferred revenue	25,370			17,593
Net cash provided by operating activities	123,385			100,144
Cash flows from investing activities
Purchase of property and equipment	(8,417		)	(15,459		)
Capitalized software development costs	(20,605		)	(19,078		)
Purchase of net assets of acquired companies, net of cash acquired	(49,729		)	(3,377		)
Purchase of derivative instruments	(516		)	—
Proceeds from settlement of derivative instruments	1,030			—
Purchase of property and equipment
Purchase of property and equipment
Capitalized software and content development costs

Net cash used in disposition of business
Net cash used in disposition of business
Net cash used in disposition of business

Net cash used in investing activities
Net cash used in investing activities
Net cash used in investing activities	(78,237		)	(37,914		)
Cash flows from financing activities
Proceeds from issuance of debt	588,300			179,000
Proceeds from issuance of debt
Proceeds from issuance of debt
Payments on debt	(594,144		)	(212,581		)
Debt issuance costs	(3,085		)	—

Employee taxes paid for withheld shares upon equity award settlement	(19,092		)	(10,497		)
Proceeds from exercise of stock options	14			10
Dividend payments to stockholders	(17,299		)	(17,108		)

Employee taxes paid for withheld shares upon equity award settlement

Employee taxes paid for withheld shares upon equity award settlement

Change in due to customers
Change in due to customers
Change in due to customers
Change in customer funds receivable
Purchase of treasury stock
Net cash used in financing activities	(45,306		)	(61,176		)
Effect of exchange rate on cash and cash equivalents	306			46
Net increase in cash and cash equivalents	148			1,100
Cash and cash equivalents, beginning of period	16,902			15,362
Cash and cash equivalents, end of period	$	17,050		$	16,462

The accompanying notes are an integral part of these consolidated financial statements.
Effect of exchange rate on cash, cash equivalents and restricted cash
Net decrease in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of period
Cash, cash equivalents and restricted cash, end of period

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown above in the condensed consolidated statements of cash flows:


(dollars in thousands)	March 31, 2024		December 31, 2023
Cash and cash equivalents	$	26,376	$	31,251
Restricted cash	356,493		697,006
Total cash, cash equivalents and restricted cash in the statement of cash flows	$	382,869	$	728,257

The accompanying notes are an integral part of these condensed consolidated financial statements.



~~Third~~First Quarter ~~2017~~2024 Form 10-Q				5

Blackbaud, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited)

Blackbaud, Inc.
Consolidated statement of stockholders' equity
(Unaudited)
(dollars in thousands) Common stock
Additional
paid-in
capital

Treasury
stock

Accumulated
other
comprehensive
loss

Retained
earnings

Total stockholders' equity
Shares
Amount
Balance at December 31, 2016 57,672,401
$ 58
$ 310,452
$ (215,237 ) $ (457 ) $ 152,729
$ 247,545
Net income —
—
—
—
—
35,224
35,224
Payment of dividends —
—
—
—
—
(17,299 ) (17,299 )
Exercise of stock options and stock appreciation rights and vesting of restricted stock units 349,713
—
14
—
—
—
14
Employee taxes paid for 259,321 withheld shares upon equity award settlement —
—
—
(19,092 ) —
—
(19,092 )
Stock-based compensation —
—
31,010
—
—
45
31,055
Restricted stock grants 549,589
1
—
—
—
—
1
Restricted stock cancellations (68,016 ) —
—
—
—
—
—
Other comprehensive loss —
—
—
—
(556 ) —
(556 )
Balance at September 30, 2017 58,503,687
$ 59
$ 341,476
$ (234,329 ) $ (1,013 ) $ 170,699
$ 276,892

The accompanying notes are an integral part of these consolidated financial statements.


(dollars in thousands)	Common stock			Treasury stock			Additional paid-in capital		Accumulated other comprehensive income (loss)		Retained earnings		Total stockholders' equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2023	69,188,304	$	69	(15,562,864)	$	(591,557)	$	1,203,012	$	(1,688)	$	198,869	$	808,705
Net income	—	—		—	—		—		—		5,246		5,246
Purchase of treasury shares under stock repurchase program	—	—		(2,954,211)	(211,412)		(52,244)		—		—		(263,656)
Vesting of restricted stock units	1,357,125	—		—	—		—		—		—		—
Shares withheld to satisfy tax withholdings	—	—		(720,189)	(52,723)		—		—		—		(52,723)
Stock-based compensation	—	—		—	—		33,570		—		—		33,570
Restricted stock grants	335,237	2		—	—		—		—		—		2
Restricted stock cancellations	(19,159)	—		—	—		—		—		—		—
Other comprehensive income	—	—		—	—		—		2,910		—		2,910
Balance at March 31, 2024	70,861,507	$	71	(19,237,264)	$	(855,692)	$	1,184,338	$	1,222	$	204,115	$	534,054


(dollars in thousands)	Common stock			Treasury stock			Additional paid-in capital		Accumulated other comprehensive income		Retained earnings		Total stockholders' equity
	Shares	Amount		Shares	Amount
Balance at December 31, 2022	67,814,044	$	68	(14,745,230)	$	(537,287)	$	1,075,264	$	8,938	$	197,049	$	744,032
Net loss	—	—		—	—		—		—		(14,701)		(14,701)



Vesting of restricted stock units	954,147	—		—	—		—		—		—		—
Shares withheld to satisfy tax withholdings	—	—		(533,597)	(30,990)		—		—		—		(30,990)
Stock-based compensation	—	—		—	—		29,925		—		—		29,925
Restricted stock grants	427,941	1		—	—		—		—		—		1
Restricted stock cancellations	(41,269)	—		—	—		—		—		—		—
Other comprehensive loss	—	—		—	—		—		(8,534)		—		(8,534)
Balance at March 31, 2023	69,154,863	$	69	(15,278,827)	$	(568,277)	$	1,105,189	$	404	$	182,348	$	719,733


The accompanying notes are an integral part of these condensed consolidated financial statements.



6						~~Third~~First Quarter ~~2017~~2024 Form 10-Q

Table of Contents

Blackbaud, Inc.

Notes to ~~consolidated financial statements~~Condensed Consolidated Financial Statements

(Unaudited)



1. Organization

We are the ~~world’s~~ leading ~~cloud~~ software ~~company~~provider exclusively dedicated to powering social ~~good.~~impact. Serving the ~~entire~~nonprofit and education sectors, companies committed to social ~~good community—nonprofits, foundations, corporations, education institutions, healthcare institutions~~responsibility and individual change ~~agents—we connect and empower organizations~~makers, our essential software is built to ~~increase their~~accelerate impact ~~through software, services, expertise and data intelligence. Our portfolio is tailored to the unique needs of vertical markets, with solutions for~~in fundraising, ~~and CRM, marketing, advocacy, peer-to-peer fundraising,~~nonprofit financial management, digital giving, grantmaking, corporate social responsibility ~~school management, ticketing, grantmaking, financial management, payment processing,~~ and ~~analytics. Serving the industry for more than three decades,~~education management. A remote-first company, we ~~are headquartered in Charleston, South Carolina and~~ have operations in the United States, Australia, Canada, Costa Rica and the United ~~Kingdom. As of September 30, 2017, we had approximately 35,000 customers.~~Kingdom, supporting users in 100+ countries.



2. Basis of Presentation

Unaudited condensed consolidated interim ~~consolidated~~ financial statements

The accompanying condensed consolidated interim ~~consolidated~~ financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC") for interim financial reporting. These condensed consolidated statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to state fairly the consolidated balance sheets, consolidated statements of comprehensive income, consolidated statements of cash flows and consolidated statements of stockholders’ equity, for the periods presented in accordance with accounting principles generally accepted in the United States ("U.S.") ("GAAP"). The condensed consolidated balance sheet at December 31, ~~2016,~~2023 has been derived from the audited consolidated financial statements at that date. Operating results and cash flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, ~~2017,~~2024, or any other future period. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted in accordance with the rules and regulations for interim reporting of the SEC. These unaudited, condensed consolidated interim ~~consolidated~~ financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2023, and other forms filed with the SEC from time to time.

~~Reclassifications~~

Due to the insignificance of our revenue from "license fees and other," we have combined that revenue with our "services" revenue beginning in 2017. In order to provide comparability between periods presented, "services" and "license fees and other" have been combined within "services and other" in the previously reported consolidated statements of comprehensive income to conform to presentation of the current period. Similarly, "cost of services" and "cost of license fees and other" have been combined within "cost of services and other" in the previously reported consolidated statements of comprehensive income to conform to presentation of the current period.

Basis of consolidation

The unaudited, condensed consolidated financial statements include the accounts of Blackbaud, Inc. and its ~~wholly-owned~~wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

~~Recently adopted accounting pronouncements~~Reportable segment

~~In May 2017,~~We report our operating results and financial information in one operating and reportable segment. Our chief operating decision maker uses consolidated financial information to make operating decisions, assess financial performance and allocate resources. Our chief operating decision maker is our chief executive officer.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the ~~FASB issued ASU 2017-09,~~ ~~Compensation-Stock Compensation (Topic 718) - Scope~~reported amounts of ~~Modification Accounting ("ASU 2017-09"), which provides guidance about which changes to~~assets and liabilities and disclosure of contingent assets and liabilities at the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Under ASU 2017-09, modification accounting is required only if the fair value, the vesting conditions, or the classificationdate of the ~~award (as equity~~financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, we reconsider and evaluate our estimates and assumptions, including those that impact revenue recognition, long-lived and intangible assets, income taxes, business combinations, stock-based compensation, capitalization of software and content development costs, our allowances for credit losses and sales returns, costs of obtaining contracts, valuation of derivative instruments, loss contingencies and insurance recoveries, among others. Changes in the facts or ~~liability)~~circumstances underlying these estimates could result in material changes ~~as a result of the change in terms or conditions. ASU 2017-09 is effective for all companies for annual~~ and ~~interim periods beginning after December 15, 2017, with early adoption permitted in any interim period for reporting periods for~~

actual results could materially differ from these estimates.



~~Third~~First Quarter ~~2017~~2024 Form 10-Q				7

Table of Contents

Blackbaud, Inc.

Notes to ~~consolidated financial statements (continued)~~Condensed Consolidated Financial Statements

(Unaudited)

Recently issued accounting pronouncements

which financial statements have not been issued. ASU 2017-09 should be applied prospectively to an award modified on or after the adoption date. We early adopted ASU 2017-09 as of April 1, 2017. As this standard is prospective in nature, the impact to our financial statements will depend on the nature of our future award modifications.

~~In January 2017, the FASB~~There are no recently issued ~~ASU 2017-01,~~ ~~Business Combinations (Topic 805) Clarifying the Definition of a Business ("ASU 2017-01"), which provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires~~accounting pronouncements that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. ASU 2017-01 is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted, and applied prospectively. We early adopted ASU 2017-01 as of July 1, 2017 and do notwe expect ~~the standard~~ to have a material impact on our consolidated financial ~~statements.~~statements when adopted in the future.

~~In January 2017,~~Summary of significant accounting policies

There have been no material changes to our significant accounting policies described in our Annual Report on Form 10-K for the ~~FASB issued ASU 2017-04,~~ ~~Intangibles - Goodwill and Other (Topic 350): Simplifying~~year ended December 31, 2023, filed with the ~~Accounting for Goodwill Impairment("ASU 2017-04")~~,SEC on February 21, 2024.


3. Business Combinations and Dispositions

2024 Disposition

On March 2, 2024, we completed a transaction to divest our U.K.-based creative services business EVERFI Limited, formerly a wholly-owned subsidiary of EVERFI Inc, which ~~removes the requirement to perform~~is a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carryingwholly-owned subsidiary of Blackbaud, Inc. EVERFI Limited's total revenue during 2023 was $8.4 million. We incurred an insignificant amount of ~~goodwill. ASU 2017-04 is effective for annual and interim periods beginning after December 15, 2019,~~legal costs associated with ~~early adoption permitted, and applied prospectively. We early adopted ASU 2017-04 as of July 1, 2017 for use in our fourth quarter annual goodwill impairment testing and do not expect~~ the ~~standard to have a material impact on our consolidated financial statements.~~

~~Recently issued accounting pronouncements~~

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Statement of Cash Flows (Topic 230) - Restricted Cash ("ASU 2016-18")~~, which requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted, including adoption in an interim period, but any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. The new standard must be adopted retrospectively. We are currently evaluating the impactdisposition of this ~~standard on our consolidated statements of cash flows.~~

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases (Topic 842) (ASU 2016-02)~~. ASU 2016-02 will require lessees to record most leases on their balance sheets but recognize expenses in the income statement in a manner similar to current guidance. The updated guidance also eliminates certain real estate-specific provisions and changes the guidance on sale-leaseback transactions, initial direct costs and lease executory costs for all entities. For lessors, the standard modifies the classification criteria and the accounting for sales-type and direct financing leases. All entities will classify leases to determine how to recognize lease-related revenue and expense. Classification will continue to affect amounts that lessors record on the balance sheet. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, and interim periods within those years. Early adoption is permitted. Upon adoption, entities will be required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. We expect ASU 2016-02 will impact our consolidated financial statements and are currently evaluating the extent of the impact that implementation of this standard will have on adoption.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606) (ASU 2014-09)~~. ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The standard also provides guidance on the recognition of costs related to obtaining customer contracts. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. ASU 2014-09 will be effective for us beginning in the first quarter of 2018 and we anticipate using the full retrospective transition method. We are currently evaluating the impact that the adoption of ASU 2014-09 will have on our consolidated financial statements and related disclosures. As a result of our evaluation to date, we expect that ASU 2014-09 will generally result in the deferral of more costs to obtain a contract over a longer period using the expected period of benefit as compared with our current practice of using our average initial contract term. We also anticipate incremental disclosures, including, but not limited to, the opening and closing balances of contract assets and liabilities, revenue recognized in the reporting period that was included in the contract liability balance at the beginning of the period, and the aggregate amount of the transaction price allocated to remaining performance obligations at the end of each reporting period including when we expect to recognize that amount.



8		~~Third Quarter 2017 Form 10-Q~~

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~Notes to consolidated financial statements (continued)~~

~~(Unaudited)~~

~~3. Business Combinations~~

~~AcademicWorks acquisition~~

On April 3, 2017, we acquired all of the outstanding shares of capital stock, including all voting equity interests, of AcademicWorks, Inc., a Texas corporation ("AcademicWorks"), pursuant to a stock purchase agreement. AcademicWorks is the market leader in scholarship management for higher education and K-12 institutions, foundations, and grant-making institutions. The acquisition extends our offerings for our higher education, K-12, and corporate and foundation customers. We acquired AcademicWorks for $52.1 million in cash, net of closing adjustments. We financed the acquisition through a draw down of a revolving credit loan under our then-existing credit facility.business. As a result of the ~~acquisition, AcademicWorks has become~~disposition, we recorded a wholly-owned subsidiary of ours. The operating results of AcademicWorks have been included in our consolidated financial statements within our EMG and GMG reportable segments (as defined in Note 14 below) from the date of acquisition. During the three and nine months ended September 30, 2017, we incurred insignificant acquisition-related expenses associated with the acquisition of AcademicWorks,$1.6 million loss, which ~~were~~was recorded in general and administrative ~~expense.~~

~~The fair values assigned to the assets acquired and liabilities assumed~~expense in the ~~table below are based on our best estimates and assumptions as~~unaudited, condensed consolidated statement of comprehensive income for the reporting date and are considered preliminary pending finalization. The estimates and assumptions are subject to change as we obtain additional information during the measurement period, which may be up to one year from the acquisition date. The assets and liabilities, pending finalization, include the valuation of acquired finite-lived intangible assets as well as the assumed deferred revenue and deferred income tax balances.three months ended March 31, 2024.

(in thousands) Purchase price allocation
Net working capital, excluding deferred revenue $ 2,949
Property and equipment 290
Finite-lived intangible assets 30,900
Deferred revenue (3,950 )
Deferred tax liability (12,350 )
Goodwill 34,305
Total purchase price $ 52,144

The estimated fair value of accounts receivable acquired approximates the contractual value of $1.0 million. The estimated goodwill recognized is attributable primarily to the opportunities for expected synergies from combining operations and the assembled workforce of AcademicWorks, with $20.6 million and $13.7 million assigned to our EMG and GMG reportable segments, respectively. None of the goodwill arising in the acquisition is deductible for income tax purposes.

~~The AcademicWorks acquisition resulted in the identification of the following identifiable finite-lived intangible assets:~~

Intangible assets acquired
Weighted average amortization period
AcademicWorks (in thousands)
(in years)
Acquired technology $ 22,500
9
Customer relationships 8,000
15
Marketing assets 320
2
Non-compete agreements 80
3
Total intangible assets $ 30,900
10

The estimated fair values of the finite-lived intangible assets were based on variations of the income approach, which estimates fair value based upon the present value of cash flows that the assets are expected to generate, and which included the relief-from-royalty method, incremental cash flow method, including the comparative (with and without) method and multi-period excess earnings method, depending on the intangible asset being valued. The method of amortization of



~~Third Quarter 2017 Form 10-Q~~		9

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~Notes to consolidated financial statements (continued)~~

~~(Unaudited)~~

identifiable finite-lived intangible assets is based on the expected pattern in which the estimated economic benefits of the respective assets are consumed or otherwise used up. Customer relationships and acquired technology are being amortized on an accelerated basis. Marketing assets and non-compete agreements are being amortized on a straight-line basis.

We determined that the impact of this acquisition was not material to our consolidated financial statements; therefore, revenue and earnings since the acquisition date and pro forma information are not required or presented.

4. ~~Goodwill and Other Intangible Assets~~

~~The change in goodwill for each reportable segment (as defined in Note 14 below) during the nine months ended September 30, 2017, consisted of the following:~~

(dollars in thousands) EMG GMG IMG Total
Balance at December 31, 2016 $ 241,334
$ 192,238
$ 4,668
$ 438,240
Additions related to current year business combination⁽¹⁾
20,583
13,722
—
34,305
Adjustments related to prior year business combination⁽²⁾
(29 ) (58 ) (1 ) (88 )
Effect of foreign currency translation —
—
319
319
Balance at September 30, 2017 $ 261,888
$ 205,902
$ 4,986
$ 472,776


~~(1)~~	~~See~~ ~~Note 3~~ ~~to these consolidated financial statements for details regarding our acquisition of AcademicWorks.~~


~~(2)~~	The change in goodwill was related to a post-closing working capital adjustment associated with the prior year acquisition of Good+Geek, Inc. ("Attentive.ly"), as well as an immaterial measurement period adjustment.

5. Earnings (Loss) Per Share

We compute basic earnings (loss) per share by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares and dilutive potential common shares outstanding during the period. Diluted earnings (loss) per share ~~reflect~~reflects the assumed exercise, settlement and vesting of all dilutive securities using the “treasury stock method” except when the effect is anti-dilutive. Potentially dilutive securities consist of shares issuable upon ~~the exercise of stock options, settlement of stock appreciation rights and~~ vesting of restricted stock awards and units.



10		~~Third Quarter 2017 Form 10-Q~~

~~Table~~ Diluted loss per share for the three months ended March 31, 2023 was the same as basic loss per share as there was a net loss in the period and inclusion of ~~Contents~~

~~Blackbaud, Inc.~~

~~Notes to consolidated financial statements (continued)~~

~~(Unaudited)~~

potentially dilutive securities was anti-dilutive.

The following table sets forth the computation of basic and diluted earnings (loss) per share:

Three months ended
September 30, Nine months ended
September 30,
(dollars in thousands, except per share amounts) 2017
2016
2017
2016
Numerator:
Net income $ 12,548
$ 8,934
$ 35,224
$ 24,231
Denominator:
Weighted average common shares 46,711,709
46,159,956
46,627,213
46,078,306
Add effect of dilutive securities:
Stock-based awards 1,135,288
1,234,150
1,051,890
1,190,163
Weighted average common shares assuming dilution 47,846,997
47,394,106
47,679,103
47,268,469
Earnings per share:
Basic $ 0.27
$ 0.19
$ 0.76
$ 0.53
Diluted $ 0.26
$ 0.19
$ 0.74
$ 0.51

Anti-dilutive shares excluded from calculations of diluted earnings per share 1,719
1,723
4,938
3,766


	Three months ended March 31,
(dollars in thousands, except per share amounts)		2024		2023
Numerator:
Net income (loss)		$	5,246	$	(14,701)
Denominator:
Weighted average common shares		52,052,370		52,132,999
Add effect of dilutive securities:
Restricted stock and units		1,362,125		—
Weighted average common shares assuming dilution		53,414,495		52,132,999
Earnings (loss) per share
Basic		$	0.10	$	(0.28)
Diluted		$	0.10	$	(0.28)

Anti-dilutive shares excluded from calculations of diluted earnings (loss) per share		622,902		1,638,453


8						First Quarter 2024 Form 10-Q

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)


6.5. Fair Value Measurements

We use a three-tier fair value hierarchy to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

•Level 1 - Quoted prices for identical assets or liabilities in active markets;

•Level 2 - Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

•Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable.



~~Third Quarter 2017 Form 10-Q~~		11

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~Notes to consolidated financial statements (continued)~~

~~(Unaudited)~~

Recurring fair value measurements

Financial assets and liabilities that are measured at fair value on a recurring basis consisted of the following, as of the dates indicated below:


	Fair value measurement using
(dollars in thousands)	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Fair value as of March 31, 2024
Financial assets:
Interest rate swaps	$	—	$	16,293	$	—	$	16,293
Foreign currency forward contracts	—		260		—		260
Total financial assets	$	—	$	16,553	$	—	$	16,553

Fair value as of March 31, 2024
Financial liabilities:

Foreign currency forward contracts	$	—	$	92	$	—	$	92
Contingent consideration obligations	—		—		1,403		1,403
Total financial liabilities	$	—	$	92	$	1,403	$	1,495

Fair value as of December 31, 2023
Financial assets:
Interest rate swaps	$	—	$	16,198	$	—	$	16,198
Foreign currency forward contracts	—		—		—		—
Total financial assets	$	—	$	16,198	$	—	$	16,198

Fair value as of December 31, 2023
Financial liabilities:
Interest rate swaps	$	—	$	5,004	$	—	$	5,004
Foreign currency forward contracts	—		536		—		536
Contingent consideration obligations	—		—		1,403		1,403
Total financial liabilities	$	—	$	5,540	$	1,403	$	6,943

Fair value measurement using
(dollars in thousands) Level 1
Level 2
Level 3
Total
Fair value as of September 30, 2017
Financial assets:
Derivative instruments $ —
$ 223
$ —
$ 223
Total financial assets $ —
$ 223
$ —
$ 223

Fair value as of September 30, 2017
Financial liabilities:
Derivative instruments $ —
$ 369
$ —
$ 369
Total financial liabilities $ —
$ 369
$ —
$ 369

Fair value as of December 31, 2016
Financial assets:
Derivative instruments $ —
$ 206
$ —
$ 206
Total financial assets $ —
$ 206
$ —
$ 206

Fair value as of December 31, 2016
Financial liabilities:
Derivative instruments $ —
$ 163
$ —
$ 163
Total financial liabilities $ —
$ 163
$ —
$ 163


First Quarter 2024 Form 10-Q						9

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Our derivative instruments within the scope of ~~ASC~~Accounting Standards Codification ("ASC") 815, Derivatives and Hedging, are required to be recorded at fair value. Our derivative instruments that are recorded at fair value include interest rate swaps ~~as well as~~and foreign currency forward ~~and option~~ contracts. See Note 8 to these unaudited, condensed consolidated financial statements for additional information about our derivative instruments.

The fair value of our interest rate swaps ~~was~~and foreign currency forward contracts are based on model-driven valuations using ~~LIBOR~~Secured Overnight Financing Rate ("SOFR") rates and foreign currency forward rates, respectively, which are observable at commonly quoted intervals. Accordingly, our interest rate swaps and foreign currency forward contracts are classified within Level 2 of the fair value hierarchy.

~~Our foreign currency forward~~Contingent consideration obligations arise from business acquisitions. The fair values are based on discounted cash flow analyses reflecting a probability-weighted assessment approach derived from the likelihood of possible achievement of specified performance measures or events and ~~option contracts are valued using standard calculations/models that use as their basis readily observable market parameters including, foreign currency exchange rates, volatilities,~~captures the contractual nature of the contingencies, commercial risk, and ~~interest rates. Therefore,~~the time value of money. As the fair value measurements for our ~~foreign currency forward and option contracts~~contingent consideration obligations contain significant unobservable inputs, they are classified within Level 23 of the fair value hierarchy.

We believe the carrying amounts of our cash and cash equivalents, restricted cash, ~~due to customers,~~ accounts receivable, trade accounts payable, accrued expenses and other current liabilities and due to customers approximate their fair values at ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016,~~2023, due to the immediate or short-term maturity of these instruments.

We believe the carrying amount of our debt approximates its fair value at ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016,~~2023, as the debt bears interest rates that approximate market value. As ~~LIBOR~~SOFR rates are observable at commonly quoted intervals, our debt under the 2020 Credit Facility (as defined below) is classified within Level 2 of the fair value hierarchy. The fair value of our fixed rate debt does not exceed the carrying amount.

We did not transfer any assets or liabilities among the levels within the fair value hierarchy during the ~~nine~~three months ended ~~September 30, 2017. Additionally, we did not hold any Level 3 assets or liabilities during the nine months ended September 30, 2017.~~



12		~~Third Quarter 2017 Form 10-Q~~

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~Notes to consolidated financial statements (continued)~~

~~(Unaudited)~~

March 31, 2024.

Non-recurring fair value measurements

Assets and liabilities that are measured at fair value on a non-recurring basis include long-lived assets, intangible assets, goodwill and ~~goodwill, which~~operating lease right-of-use ("ROU") assets. These assets are recognized at fair value during the period in which an acquisition is completed or at lease commencement, from updated estimates and assumptions during the measurement period, or when they are considered to be impaired. These non-recurring fair value measurements, primarily for long-lived assets, intangible assets acquired and operating lease ROU assets, are based on Level 3 unobservable inputs. In the event of an impairment, we determine the fair value of ~~the~~these assets other than goodwill ~~and intangible assets~~ using a discounted cash flow approach, which contains significant unobservable inputs and, therefore, is considered a Level 3 fair value measurement. The unobservable inputs in the analysis generally include future cash flow projections and a discount rate. For goodwill impairment testing, we estimate fair value using market-based methods including the use of market capitalization and consideration of a control premium.

There were no significant non-recurring fair value adjustments to our long-lived assets, intangible assets, goodwill and ~~goodwill~~operating lease ROU assets during the ~~nine~~three months ended September 30, 2017, except for an insignificant business combination accounting adjustment to the initial fair value estimates of the Attentive.ly assets acquired and liabilities assumed at the acquisition date from updated information obtained during the measurement period. See Note 4 to these consolidated financial statements for additional details. The measurement period of a business combination may be up to one year from the acquisition date. We record any measurement period adjustments to the fair value of assets acquired and liabilities assumed, with the corresponding offset to goodwill.March 31, 2024.



7.6. Consolidated Financial Statement Details

Restricted cash


(dollars in thousands)	March 31, 2024		December 31, 2023
Restricted cash due to customers	$	355,307	$	695,489

Real estate escrow balances and other	1,186		1,517
Total restricted cash	$	356,493	$	697,006


10						First Quarter 2024 Form 10-Q

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Prepaid expenses and other assets


(dollars in thousands)	March 31, 2024		December 31, 2023
Costs of obtaining contracts(1)(2)	$	61,313	$	62,377
Prepaid software maintenance and subscriptions(3)	34,668		35,169
Derivative instruments	16,553		16,198
Implementation costs for cloud computing arrangements, net(4)(5)	9,792		9,259
Prepaid insurance	8,617		3,940
Unbilled accounts receivable	6,432		5,615
Taxes, prepaid and receivable	3,407		3,418
Deferred tax assets	617		644
Other assets	13,073		13,702
Total prepaid expenses and other assets	154,472		150,322
Less: Long-term portion	59,883		51,037
Prepaid expenses and other current assets	$	94,589	$	99,285

(1)Amortization expense from costs of obtaining contracts was $4.8 million and $8.3 million for the three months ended March 31, 2024 and 2023, respectively.

(2)The current portion of costs of obtaining contracts as of March 31, 2024 and December 31, 2023 was $18.8 million and $25.3 million, respectively.

(3)The current portion of prepaid software maintenance and subscriptions as of March 31, 2024 and December 31, 2023 was $31.6 million and $32.4 million, respectively.

(4)These costs primarily relate to the multi-year implementations of our new global enterprise resource planning and customer relationship management systems.

(5)Amortization expense from capitalized cloud computing implementation costs was insignificant for the three months ended March 31, 2024 and 2023, respectively. Accumulated amortization for these costs was $8.4 million and $7.7 million as of March 31, 2024 and December 31, 2023, respectively.

Accrued expenses and other liabilities


(dollars in thousands)	March 31, 2024		December 31, 2023
Taxes payable	$	29,753	$	21,282
Accrued legal costs(1)	11,713		3,659
Customer credit balances	9,102		10,238
Operating lease liabilities, current portion	6,714		6,701
Accrued commissions and salaries	2,987		4,413
Accrued health care costs	2,387		3,865
Accrued vacation costs	2,349		2,452
Accrued transaction-based costs related to payments services	1,917		4,323
Contingent consideration liability	1,403		1,403
Derivative instruments	92		5,540


Other liabilities	11,017		10,704
Total accrued expenses and other liabilities	79,434		74,580
Less: Long-term portion	4,163		10,258
Accrued expenses and other current liabilities	$	75,271	$	64,322

(dollars in thousands) September 30,
2017
December 31,
2016
Accrued bonuses $ 14,581
$ 19,217
Accrued commissions and salaries 5,429
9,352
Lease incentive obligations 4,780
5,604
Customer credit balances 5,246
5,148
Deferred rent liabilities 4,400
4,110
Taxes payable 2,584
3,452
Unrecognized tax benefit 3,609
3,295
Accrued subscriptions 2,638
2,840
Accrued vacation costs 2,626
2,214
Accrued health care costs 2,479
1,495
Other liabilities 5,077
6,002
Total accrued expenses and other liabilities 53,449
62,729
Less: Long-term portion 7,799
8,533
Accrued expenses and other current liabilities $ 45,650
$ 54,196

~~Other income (expense), net~~

Three months ended
September 30, Nine months ended
September 30,
(dollars in thousands) 2017
2016
2017
2016
Components of Other Income (Expense), Net
Interest income $ 393
$ 224
$ 771
$ 463
(Loss) gain on derivative instrument (3 ) —
472
—
Loss on debt extinguishment (137 ) —
(299 ) —
Other income (expense), net 215
(239 ) 637
(648 )
Other income (expense), net $ 468
$ (15 ) $ 1,581
$ (185 )

(1)All accrued legal costs are classified as current. See Note 9 to these unaudited, condensed consolidated financial statements for additional information about our loss contingency accruals and other legal expenses.



~~Third~~First Quarter ~~2017~~2024 Form 10-Q				1311

Table of Contents

Blackbaud, Inc.

Notes to ~~consolidated financial statements (continued)~~Condensed Consolidated Financial Statements

(Unaudited)

Other income, net


	Three months ended March 31,
(dollars in thousands)		2024		2023
Interest income		$	2,048	$	1,236
Currency revaluation gains (losses)		283		(245)
Other income, net		1,016		1,016
Other income, net		$	3,347	$	2,007



8.7. Debt

The following table summarizes our debt balances and the related weighted average effective interest rates, which includes the effect of interest rate swap agreements.


	Debt balance at				Weighted average effective interest rate at
(dollars in thousands)	March 31, 2024		December 31, 2023		March 31, 2024		December 31, 2023
Credit facility:
Revolving credit loans	$	379,000	$	114,100	7.10	%	7.52	%
Term loans	603,438		607,500		3.48	%	3.51	%
Real estate loans	56,364		56,745		5.22	%	5.22	%
Other debt	2,231		2,800		8.50	%	8.42	%
Total debt	1,041,033		781,145		4.90	%	4.24	%
Less: Unamortized discount and debt issuance costs	1,211		1,481
Less: Debt, current portion	19,302		19,259		6.99	%	7.02	%
Debt, net of current portion	$	1,020,520	$	760,405	4.86	%	4.17	%

Debt balance at
Weighted average
effective interest rate at

(dollars in thousands) September 30,
2017
December 31,
2016
September 30,
2017
December 31,
2016
Credit facility:
    Revolving credit loans $ 39,900
$ 180,900
3.38 % 2.36 %
    Term loans 298,125
162,969
2.64 % 2.62 %
Other debt 2,151
—
4.50 % — %
        Total debt 340,176
343,869
2.74 % 2.48 %
Less: Unamortized discount and debt issuance costs 2,220
1,476

Less: Debt, current portion 8,576
4,375
2.74 % 2.50 %
Debt, net of current portion $ 329,380
$ 338,018
2.74 % 2.48 %

~~Financing for AcademicWorks acquisition~~

As discussed in Note 3 to these consolidated financial statements, on April 3, 2017 we acquired AcademicWorks for $52.1 million in cash, net of closing adjustments. We financed the acquisition through a draw down of a revolving credit loan under the 2014 Credit Facility (defined below).

~~2017 refinancing~~

~~We were previously party to a $325.0 million five-year~~2020 credit facility entered into during February 2014. The credit facility included: a dollar and a designated currency revolving credit facility with sublimits for letters of credit and swingline loans (the “2014 Revolving Facility”) and a term loan facility (the “2014 Term Loan”), together, (the “2014 Credit Facility”).

In ~~June 2017,~~October 2020, we entered into a five-year ~~$700.0~~$900.0 million senior credit facility (the ~~“2017~~"2020 Credit ~~Facility”~~Facility"). The 2017 Credit Facility includes a $400.0 million revolving credit facility (the “2017 Revolving Facility”) and a $300.0 million term loan facility (the “2017 Term Loan”). Upon closing we drew $300.0 million on a term loan and $110.0 million in revolving credit loans, which was used to repay all amounts outstanding under the 2014 Credit Facility, fees and expenses incurred in connection with the 2017 Credit Facility, and for other general corporate purposes.

Certain lenders of the 2014 Term Loan participated in the 2017 Term Loan and the change in the present value of our future cash flows to these lenders under the 2014 Term Loan and under the 2017 Term Loan was less than 10%. Accordingly, we accounted for the refinancing event for these lenders as a debt modification. Certain lenders of the 2014 Term Loan did not participate in the 2017 Term Loan. Accordingly, we accounted for the refinancing event for these lenders as a debt extinguishment. Certain lenders of the 2014 Revolving Facility participated in the 2017 Revolving Facility and provided increased borrowing capacities. Accordingly, we accounted for the refinancing event for these lenders as a debt modification. Certain lenders of the 2014 Revolving Facility did not participate in the 2017 Revolving Facility. Accordingly, we accounted for the refinancing event for these lenders as a debt extinguishment.

We recorded an insignificant loss on debt extinguishment related to the write-off of debt discount and deferred financing costs for the portions of the 2014 Credit Facility considered to be extinguished. This loss was recognized in the consolidated statements of comprehensive income within other income (expense), net.

In connection with our entry into the 2017 Credit Facility, we paid $3.1 million in financing costs, of which $1.0 million was capitalized in other assets and, together with a portion of the unamortized deferred financing costs from the 2014 Credit Facility and prior facilities, are being amortized into interest expense ratably over the term of the new facility. As of September 30, 2017, deferred financing costs totaling $1.3 million were included in other assets on our consolidated balance sheets. As of DecemberAt March 31, 2016, deferred financing costs included in other assets on our consolidated balance sheets were insignificant. We recorded aggregate financing costs of $1.8 million as a direct deduction from the carrying



14		~~Third Quarter 2017 Form 10-Q~~

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~Notes to consolidated financial statements (continued)~~

~~(Unaudited)~~

~~amount of our debt liability, which related to debt discount (fees paid to lenders) and debt issuance costs for the 2017 Term Loan.~~

~~Summary of the 2017 Credit Facility~~

The 2017 Revolving Facility includes (i) a $50.0 million sublimit available for the issuance of standby letters of credit, (ii) a $50.0 million sublimit available for swingline loans, and (iii) a $100.0 million sublimit available for multicurrency borrowings.

~~The 2017 Credit Facility is secured by the stock and limited liability company interests of certain of our subsidiaries and any of our material domestic subsidiaries.~~

Amounts borrowed under the dollar tranche revolving credit loans and term loan under the 2017 Credit Facility bear interest at a rate per annum equal to, at our option, (a) a base rate equal to the highest of (i) the prime rate announced by Bank of America, N.A., (ii) the Federal Funds Rate plus 0.50% and (iii) the Eurocurrency Rate (which varies depending on the currency in which the loan is denominated) plus 1.00% (the “Base Rate”), in addition to a margin of 0.00% to 0.75%, or (b) Eurocurrency Rate plus a margin of 1.00% to 1.75%.

We also pay a quarterly commitment fee on the unused portion of the 2017 Revolving Facility from 0.15% to 0.25% per annum, depending on our net leverage ratio. At September 30, 2017, the commitment fee was 0.20%.

The term loan under the 2017 Credit Facility requires periodic principal payments. The balance of the term loan and any amounts drawn on the revolving credit loans are due upon maturity of the 2017 Credit Facility in June 2022. We evaluate the classification of our debt as current or non-current based on the required annual maturities of the 2017 Credit Facility.

The 2017 Credit Facility includes financial covenants related to the net leverage ratio and interest coverage ratio, as well as restrictions on our ability to declare and pay dividends and our ability to repurchase shares of our common stock. At September 30, 2017,2024, we were in compliance with our debt covenants under the ~~2017~~2020 Credit Facility.

Real estate loans

~~The 2017 Credit Facility also includes an option to request increases in~~In August 2020, we completed the ~~revolving commitments and/or request additional term loans in an aggregate~~purchase of our global headquarters facility. As part of the purchase price, we assumed the seller’s obligations under two senior secured notes with a then-aggregate outstanding principal amount of ~~up to $200.0~~$61.1 million ~~plus an amount, if any, such that~~(collectively, the ~~Net Leverage Ratio shall be no greater than 3.00 to 1.00.~~

“Real Estate Loans”). At March 31, 2024, we were in compliance with our debt covenants under the Real Estate Loans.

Other debt

~~In September 2017,~~From time to time, we ~~entered~~enter into ~~a two-year $2.2 million agreement to finance our purchase~~third-party financing agreements for purchases of software ~~licenses~~ and related ~~services. The agreement is a non-interest bearing note~~services for our internal use. Generally, the agreements are non-interest-bearing notes requiring annual ~~payments, with the first payment due in November 2017.~~payments. Interest associated with the ~~note~~notes is imputed at the rate we would incur for amounts borrowed under our then-existing credit facility at the ~~2017 Credit Facility.~~

Asinception of ~~September 30, 2017,~~ the ~~required annual maturities related to the 2017 Credit Facility and other debt were as follows:~~

Years ending December 31,
(dollars in thousands)
Annual maturities
2017 - remaining $ 2,950
2018 8,576
2019 7,500
2020 7,500
2021 7,500
Thereafter 306,150
Total required maturities $ 340,176

notes.


12
~~Third~~First Quarter ~~2017~~2024 Form 10-Q		15

Table of Contents

Blackbaud, Inc.

Notes to ~~consolidated financial statements (continued)~~Condensed Consolidated Financial Statements

(Unaudited)

The following table summarizes our currently effective supplier financing agreements as of March 31, 2024:


(dollars in thousands)	Term in Months	Number of Annual Payments	First Annual Payment Due	Original Loan Value
Effective dates of agreements (1):
December 2022	39	3	January 2023	$	1,710
January 2023	36	3	April 2023	$	2,491

(1)Represent noncash investing and financing transactions during the periods indicated as we purchased software and services by assuming directly related liabilities.

The changes in supplier financing obligations during the three months ended March 31, 2024, consisted of the following:


(dollars in thousands)	Total
Balance at December 31, 2023	$	2,800
~~9. Derivative Instruments~~Additions	—
Settlements	(569)
Balance at March 31, 2024	$	2,231

~~Cash flow hedges~~


8. Derivative Instruments

We generally use derivative instruments to manage our ~~variable~~ interest rate and foreign currency exchange risk. InWe currently have derivatives classified as cash flow hedges and net investment hedges. We do not enter into any derivatives for trading or speculative purposes.

All of our derivative instruments are governed by International Swap Dealers Association, Inc. master agreements with our counterparties. As of March ~~2014,~~31, 2024 and December 31, 2023, we have presented the fair value of our derivative instruments at the gross amounts in the condensed consolidated balance sheets as the gross fair values of our derivative instruments equaled their net fair values.

Cash flow hedges

We have entered into an interest rate swap ~~agreement (the "March 2014 Swap Agreement"),~~agreements, which effectively ~~converts~~convert portions of our variable rate debt under ~~our credit facility~~the 2020 Credit Facility to a fixed rate for the term of the swap ~~agreement. The initial notional value~~agreements. We designated each of the March 2014 Swap Agreement was $125.0 million with an effective date beginning in March 2014. In March 2017, the notional value of the March 2014 Swap Agreement decreased to $75.0 million for the remaining term through February 2018. We designated the March 2014 Swap Agreementinterest rate swaps as a cash flow ~~hedge~~hedges at the inception of the ~~contract.~~contracts. As of March 31, 2024 and December 31, 2023, the aggregate notional values of the interest rate swaps were $935.0 million and $935.0 million, respectively. All of the contracts have maturities on or before October 2028.

~~In October 2015, we~~We have entered into ~~an additional interest~~foreign currency forward contracts to hedge revenues denominated in the Canadian Dollar ("CAD") against changes in the exchange rate ~~swap agreement (the "October 2015 Swap Agreement"), which effectively converts portions of our variable rate debt under our credit facility to a fixed rate for~~with the ~~term of the October 2015 Swap Agreement. The notional value of the October 2015 Swap Agreement was $75.0 million with an effective date beginning in October 2015 and maturing in February 2018.~~United States Dollar ("USD"). We designated ~~the October 2015 Swap Agreement~~each of these foreign currency forward contracts as a cash flow ~~hedge~~hedges at the inception of the ~~contract.~~contracts. As of March 31, 2024 and December 31, 2023, the aggregate notional values of the foreign currency forward contracts designated as cash flow hedges that we held to buy USD in exchange for Canadian Dollars were $30.6 million CAD and $29.9 million CAD, respectively. All of the contracts have maturities of 12 months or less.

~~In July 2017, we~~


First Quarter 2024 Form 10-Q						13

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Net investment hedges

We have entered into ~~an additional interest rate swap agreement (the "July 2017 Swap Agreement"), which effectively converts portions~~foreign currency forward contracts to hedge a portion of the foreign currency exposure that arises on translation of our ~~variable rate debt under our credit facility to a fixed rate for the term of the swap agreement. The notional value of the July 2017 Swap Agreement was $150.0 million with an effective date beginning~~investments denominated in ~~July 2017 through July 2021.~~British Pounds ("GBP") into USD. We designated ~~the July 2017 Swap Agreement~~each of these foreign currency forward contracts as ~~a cash flow hedge~~net investment hedges at the inception of the ~~contract.~~

~~Undesignated contracts~~

~~In June 2017, we entered into a foreign currency option contract to hedge our exposure to currency fluctuations in connection with our acquisition~~contracts. As of ~~JustGiving because~~March 31, 2024 and December 31, 2023, the ~~purchase price was denominated in British Pounds. The~~aggregate notional value of the instrument was £100.0 million with an effective date beginning in June 2017 and maturing in September 2017. We settled the foreign currency option contract in September 2017. We did not designate the foreign currency option contract as a cash flow hedge for accounting purposes since it involved a business combination. As such, changes in the fair value of this derivative are recognized currently in earnings. The insignificant premium paid for this option and the $1.0 million in proceeds from the settlement are shown within cash flows from investing activities in our consolidated statements of cash flows.

~~As the closing date of our acquisition of JustGiving extended beyond the settlement date~~values of the foreign currency ~~option contract, we entered into a foreign currency~~ forward ~~contract in September 2017 with settlement in October 2017. The notional~~contracts designated as net investment hedges to reduce the volatility of the U.S. dollar value of ~~the instrument~~a portion of our GBP-denominated investments was £103.5 million. We did not designate the foreign currency forward contract as a cash flow hedge for accounting purposes since it involved a business combination. As such, changes in the fair value of this derivative are recognized currently in earnings.£16.6 million and £13.2 million, respectively.



16		~~Third Quarter 2017 Form 10-Q~~

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~Notes to consolidated financial statements (continued)~~

~~(Unaudited)~~

The fair values of our derivative instruments were as follows as of:

Asset Derivatives Liability Derivatives
(dollars in thousands) Balance sheet location September 30,
2017
December 31,
2016
Balance sheet location September 30,
2017
December 31,
2016
Derivative instruments designated as hedging instruments:
Interest rate swaps, current portion
Prepaid expenses
and other current assets
$ 223
$ —

Accrued expenses
and other current liabilities
$ —
$ —
Interest rate swaps, long-term portion Other assets —
206
Other liabilities 328
163
Total derivative instruments designated as hedging instruments $ 223
$ 206
$ 328
$ 163

Derivative instruments not designated as hedging instruments:

Foreign currency forward contracts Prepaid expenses
and other current assets $ —
$ —

Accrued expenses
and other current liabilities
$ 41
$ —
Total derivative instruments not designated as hedging instruments
$ —
$ —
$ 41
$ —

Total derivative instruments $ 223
$ 206
$ 369
$ 163


		Asset derivatives					Liability derivatives
(dollars in thousands)	Balance sheet location	March 31, 2024		December 31, 2023		Balance sheet location	March 31, 2024		December 31, 2023
Derivative instruments designated as hedging instruments:
Interest rate swaps, current portion	Prepaid expenses and other current assets	$	12,328	$	16,198	Accrued expenses and other current liabilities	$	—	$	—
Foreign currency forward contracts, current portion	Prepaid expenses and other current assets	260		—		Accrued expenses and other current liabilities	92		536
Interest rate swaps, long-term	Other assets	3,965		—		Other liabilities	—		5,004
Total derivative instruments designated as hedging instruments		$	16,553	$	16,198		$	92	$	5,540

The effects of derivative instruments in cash flow and net investment hedging relationships were as follows:


	Gain (loss) recognized in accumulated other comprehensive income (loss) as of		Location of gain (loss) reclassified from accumulated other comprehensive income (loss) into income (loss)	Gain reclassified from accumulated other comprehensive income (loss) into income (loss)
(dollars in thousands)	March 31, 2024			Three months ended March 31, 2024
Cash Flow Hedges
Interest rate swaps	$	16,293	Interest expense	$	5,473
Foreign currency forward contracts	$	260	Revenue	$	34
Net Investment Hedges
Foreign currency forward contracts	$	(92)		$	—

	March 31, 2023			Three months ended March 31, 2023
Cash Flow Hedges
Interest rate swaps	$	17,594	Interest expense	$	4,499
Foreign currency forward contracts	$	14	Revenue	$	125
Net Investment Hedges
Foreign currency forward contracts	$	(417)		$	—

Gain (loss) recognized
in accumulated other
comprehensive
loss as of

Location
of gain (loss)
reclassified from
accumulated other
comprehensive
loss into income
Gain (loss) reclassified from accumulated
other comprehensive loss into income

(dollars in thousands) September 30,
2017
Three months ended
September 30, 2017
Nine months ended
September 30, 2017
Interest rate swaps $ (105 ) Interest expense $ (88 ) $ (192 )

September 30,
2016
Three months ended
September 30, 2016
Nine months ended
September 30, 2016
Interest rate swaps $ (654 ) Interest expense $ (265 ) $ (875 )


14						First Quarter 2024 Form 10-Q

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Our policy requires that derivatives used for hedging purposes be designated and effective as a hedge of the identified risk exposure at the inception of the contract. Accumulated other comprehensive income (loss) includes unrealized gains or losses from the change in fair value measurement of our derivative instruments each reporting period and the related income tax expense or benefit. ~~Changes~~Excluding net investment hedges, changes in the fair value measurements of the derivative instruments and the related income tax expense or benefit are reflected as adjustments to accumulated other comprehensive income (loss) until the actual hedged expense is incurred or until the hedge is terminated at which point the unrealized gain (loss) isand related tax effects are reclassified from accumulated other comprehensive income (loss) to current earnings. For net investment hedges, changes in the fair value measurements of the derivative instruments and the related income tax expense or benefit are reflected as adjustments to translation adjustment, a component of accumulated other comprehensive income (loss), and recognized in earnings only when the hedged GBP investment is liquidated. The estimated accumulated other comprehensive income as of ~~September 30, 2017~~March 31, 2024 that is expected to be reclassified into earnings within the next twelve months is ~~insignificant.~~$14.7 million. There were no ineffective portions of our interest rate swap or foreign currency forward derivatives during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016.~~2023. See Note 1311 to these unaudited, condensed consolidated financial statements for a summary of the changes in accumulated other comprehensive income (loss) by component. We classify cash flows related to derivative instruments as operating activities in the condensed consolidated statements of cash flows.



~~Third Quarter 2017 Form 10-Q~~		179. Commitments and Contingencies

Leases

~~Table~~We have operating leases for corporate offices, subleased offices and certain equipment and furniture. As of ~~Contents~~

~~Blackbaud, Inc.~~

~~Notes to consolidated financial statements (continued)~~

~~(Unaudited)~~

WeMarch 31, 2024, we did not have any ~~undesignated derivative instruments during 2016.~~ operating leases that had not yet commenced.

The ~~effects~~following table summarizes the components of ~~undesignated derivative instruments during the three and nine months ended September 30, 2017~~our lease expense:


	Three months ended March 31,
(dollars in thousands)		2024		2023
Operating lease cost(1)		$	1,986	$	2,385
Variable lease cost		313		432
Sublease income		(698)		(811)
Net lease cost		$	1,601	$	2,006

(1)Includes short-term lease costs, which were ~~as follows:~~

Location of gain (loss)
recognized in income on derivative
Gain (loss) recognized in income
(dollars in thousands) Three months ended
September 30, 2017
Nine months ended
September 30, 2017
Foreign currency option contracts Other income (expense), net $ 38
$ 513
Foreign currency forward contracts Other income (expense), net $ (41 ) $ (41 )
Total (loss) gain⁽¹⁾
$ (3 ) $ 472

~~10. Commitments and Contingencies~~

Total rent expense was $3.8 million and $3.1 million for the three months ended September 30, 2017 and 2016, respectively, and $11.9 million and $8.6 million for the nine months ended September 30, 2017 and 2016, respectively. The quarterly South Carolina state incentive payments we received as a result of locating our headquarters facility in Berkeley County, South Carolina, ended in the fourth quarter of 2016. These amounts were recorded as a reduction of rent expense upon receipt and were insignificant during the three months ended September 30, 2016 and $2.2 million during the nine months ended September 30, 2016.immaterial.

The term loans under the ~~2017~~2020 Credit Facility require periodic principal payments. The balance of the term loans and any amounts drawn on the revolving credit loans are due upon maturity of the ~~2017~~2020 Credit Facility in ~~June 2022.~~October 2025. The Real Estate Loans also require periodic principal payments and the balance of the Real Estate Loans are due upon maturity in April 2038.

We have contractual obligations for third-party technology used in our solutions and for other services we purchase as part of our normal operations. In certain cases, these arrangements require a minimum annual purchase commitment by us. As of ~~September 30, 2017,~~March 31, 2024, the remaining aggregate minimum purchase commitment under these arrangements was approximately ~~$51.9~~$239.8 million through ~~2021.~~2029.

Solution and service indemnifications

In the ordinary course of business, we provide certain indemnifications of varying scope to customers against claims of intellectual property infringement made by third parties arising from the use of our solutions or services. ~~If we determine that it is probable that a loss has been incurred related to solution or service indemnifications, any such loss that could be reasonably estimated would be recognized.~~ We have not identified any losses ~~and, accordingly, we have not recorded a liability related~~that might be covered by these indemnifications.


First Quarter 2024 Form 10-Q						15

Table of Contents

Blackbaud, Inc.

Notes to ~~these indemnifications.~~Condensed Consolidated Financial Statements

(Unaudited)

We are subject to legal proceedings and claims that arise in the ordinary course of ~~business.~~business, as well as certain other non-ordinary course proceedings, claims and investigations, as described below. We make a provision for a loss contingency when it is both probable that a material liability has been incurred and the amount of the loss can be reasonably estimated. ~~These~~If only a range of estimated losses can be determined, we accrue an amount within the range that, in our judgment, reflects the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, we accrue the low end of the range. For proceedings in which an unfavorable outcome is reasonably possible but not probable and an estimate of the loss or range of losses arising from the proceeding can be made, we disclose such an estimate, if material. If such a loss or range of losses is not reasonably estimable, we disclose that fact. We review any such loss contingency provisions ~~are reviewed~~ at least quarterly and ~~adjusted~~adjust them to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. ~~Unless otherwise specifically disclosed in this note, we have determined as~~We recognize insurance recoveries, if any, when they are probable of ~~September 30, 2017, that no provision for liability nor disclosure is required related~~receipt. All associated costs due to any claim against us because (a) there is not a reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim; (b) a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is immaterial.

~~All~~third-party service providers and consultants, including legal ~~costs associated with litigation~~fees, are expensed as incurred. ~~Litigation is~~

Legal proceedings are inherently unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending or threatened against ~~us.~~us and intend to defend ourselves vigorously against all claims asserted. It is possible ~~nevertheless,~~ that our consolidated financial position, results of operations or cash flows could be materially negatively affected in any particular period by an unfavorable resolution of one or more of such legal proceedings.

As previously disclosed, we are subject to risks and uncertainties as a result of a ransomware attack against us in May 2020 in which a cybercriminal removed a copy of a subset of data from our self-hosted environment (the "Security Incident"). Based on the nature of the Security Incident, our research and third party (including law enforcement) investigation, we do not believe that any data went beyond the cybercriminal, has been misused, or has been disseminated or otherwise made available publicly. Our investigation into the Security Incident remains ongoing.

As a result of the Security Incident, we are currently subject to certain legal proceedings, claims and investigations, as discussed below, and could be the subject of additional legal proceedings, claims, inquiries and investigations in the future that might result in adverse judgments, settlements, fines, penalties or ~~investigations.~~other resolution. To limit our exposure to losses related to claims against us, including data breaches such as the Security Incident, we maintain $50 million of insurance above a $250 thousand deductible payable by us. As noted below, this coverage reduced our financial exposure related to the Security Incident in prior years.

We recorded expenses and offsetting insurance recoveries related to the Security Incident as follows:


	Three months ended March 31,
(dollars in thousands)		2024		2023
Gross expense		$	10,323	$	17,783
Offsetting insurance recoveries		—		—
Net expense		$	10,323	$	17,783



1816				~~Third~~First Quarter ~~2017~~2024 Form 10-Q

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following summarizes our cumulative expenses, insurance recoveries recognized and insurance recoveries paid as of:


(dollars in thousands)	March 31, 2024		December 31, 2023
Cumulative gross expense	$	171,754	$	161,431
Cumulative offsetting insurance recoveries recognized	(50,000)		(50,000)
Cumulative net expense	$	121,754	$	111,431

Cumulative offsetting insurance recoveries paid	$	(50,000)	$	(50,000)

Recorded expenses have consisted primarily of payments to third-party service providers and consultants, including legal fees, settlement of the previously disclosed SEC and multi-state Attorneys General investigations (discussed below), settlements of customer claims and accruals for certain loss contingencies. Not included in the expenses discussed above were costs associated with enhancements to our cybersecurity program. We present expenses and insurance recoveries related to the Security Incident in general and administrative expense on our unaudited, condensed consolidated statements of comprehensive income (loss) and as operating activities on our unaudited, condensed consolidated statements of cash flows. Total costs related to the Security Incident exceeded the limit of our insurance coverage during the first quarter of 2022. We expect to continue to experience significant expenses related to our response to the Security Incident, resolution of legal proceedings, claims and investigations, including those discussed below, and our efforts to further enhance our cybersecurity measures. For the three months ended March 31, 2024, we incurred net pre-tax expenses of $10.3 million related to the Security Incident, which included $3.3 million for ongoing legal fees and additional accruals for loss contingencies of $7.0 million. During the three months ended March 31, 2024, we had net cash outlays of $2.0 million related to the Security Incident for ongoing legal fees. In line with our policy, legal fees are expensed as incurred. For full year 2024, we currently expect pre-tax expenses of approximately $5.0 million to $10.0 million and cash outlays of approximately $8.0 million to $13.0 million for ongoing legal fees related to the Security Incident. Not included in these ranges are our previous settlements or current accruals for loss contingencies related to the matters discussed below.

As of March 31, 2024, we have recorded approximately $8.5 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain customers and governmental agencies related to the Security Incident that we believed we could reasonably estimate in accordance with our loss contingency procedures described above. Our liabilities for loss contingencies are recorded in accrued expenses and other current liabilities on our unaudited, condensed consolidated balance sheets. It is reasonably possible that our estimated actual losses may change in the near term for those matters and be materially in excess of the amounts accrued, but we are unable at this time to reasonably estimate the possible additional loss.

There are other Security Incident-related matters, including customer claims, customer constituent class actions and governmental investigations, for which we have not recorded a liability for a loss contingency as of March 31, 2024 because we are unable at this time to reasonably estimate the possible loss or range of loss. Each of these matters could, separately or in the aggregate, result in an adverse judgment, settlement, fine, penalty or other resolution, the amount, scope and timing of which we are currently unable to predict, but could have a material adverse impact on our results of operations, cash flows or financial condition.

Customer claims.To date, we have received approximately 260 specific requests from customers for reimbursement of expenses incurred by them related to the Security Incident, approximately 214 (or 82%) of which have been fully resolved and closed and approximately 39 (or 15%) are inactive and are considered by us to have been abandoned by the customers. We have also received approximately 400 reservations of the right to seek expense recovery in the future from customers or their attorneys in the U.S., U.K. and Canada related to the Security Incident, none of which resulted in claims submitted to us and are considered by us to have been abandoned by the customers. We have also received notices of proposed claims on behalf of a number of U.K. data subjects, which we are reviewing. In addition, insurance companies representing various customers’ interests through subrogation claims have contacted us, and certain insurance companies have filed subrogation claims in court, of which 3 cases remain active and unresolved.


First Quarter 2024 Form 10-Q						17

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Customer constituent class actions. Presently, we are a defendant in putative consumer class action cases in U.S. federal courts (most of which have been consolidated under multi district litigation to a single federal court) and in Canadian courts alleging harm from the Security Incident. The plaintiffs in these cases, who purport to represent various classes of individual constituents of our customers, generally claim to have been harmed by alleged actions and/or omissions by us in connection with the Security Incident and assert a variety of common law and statutory claims seeking monetary damages, injunctive relief, costs and attorneys’ fees and other related relief.

Lawsuits that are putative class actions require a plaintiff to satisfy a number of procedural requirements before proceeding to trial. These requirements include, among others, demonstration to a court that the law proscribes in some manner our activities, the making of factual allegations sufficient to suggest that our activities exceeded the limits of the law and a determination by the court—known as class certification—that the law permits a group of individuals to pursue the case together as a class. If these procedural requirements are not met, the lawsuit cannot proceed as a class action and the plaintiff may lose the financial incentive to proceed with the case. We are currently engaged in court proceedings to determine whether this will proceed as a class action. Frequently, a court’s determination as to these procedural requirements is subject to appeal to a higher court. As a result of these uncertainties, we may be unable to determine the probability of loss until, or after, a court has finally determined that a plaintiff has satisfied the applicable class action procedural requirements.

Furthermore, for putative class actions, it is often not possible to reasonably estimate the possible loss or a range of loss amounts, even where we have determined that a loss is reasonably possible. Generally, class actions involve a large number of people and raise complex legal and factual issues that result in uncertainty as to their outcome and, ultimately, making it difficult for us to estimate the amount of damages that a plaintiff might successfully prove. This analysis is further complicated by the fact that the plaintiffs lack contractual privity with us.

Governmental investigations. We have received a Civil Investigative Demand from the office of the California Attorney General relating to the Security Incident and are in discussions with the Attorney General about potential resolution of issues arising from this investigation. Although we are hopeful that we can resolve this matter on acceptable terms, there is no assurance that we will be able to do so on terms acceptable to us and the state of California.

We also are subject to the following pending governmental actions:

•an investigation by the U.S. Federal Trade Commission (the "FTC"), as further described below; and

•an investigation by the U.S. Department of Health and Human Services.

We also responded to inquiries from the Office of the Australian Information Commissioner in September 2020 and the Office of the Privacy Commissioner of Canada in October 2020.

As previously disclosed, on February 1, 2024, the FTC announced its approval of an Agreement Containing Consent Order (the “Proposed Order”) evidencing itssettlement with the Company in connection with the Security Incident. Pursuant to its rules, the FTC placed the Proposed Order and related draft complaint on the public record for a period of 30 days for the receipt of public comments after which the FTC will consider any comments received from interested persons prior to determining whether and in what form to finalize the Proposed Order. The 30-day comment period expired on March 14, 2024. As part of the FTC’s proposed order, the Company has not been fined and is not otherwise required to make any payment. Furthermore, the Company has agreed to the FTC’s proposed order without admitting or denying any of the FTC’s allegations, except as expressly stated otherwise in the Proposed Order. If finalized, the settlement described in the Proposed Order will fully resolve the FTC investigation. Although we believe the Proposed Order will be finalized in substantially its current form, there can be no assurances as to whether that will occur or its timing. For more information, see the form of Proposed Order that was furnished as Exhibit 99.2 to the Company’s Current Report on Form 8-K filed with the SEC on February 2, 2024 and in Note 11 to our audited consolidated financial statements ~~(continued)~~contained in our Annual Report on Form 10-K filed with the SEC on February 21, 2024.

As previously disclosed, on October 5, 2023, we entered into separate, substantially similar Administrative Orders with each of 49 state Attorneys General and the District of Columbia relating to the Security Incident which fully resolved the previously disclosed multi-state Civil Investigative Demand and the separate Civil Investigative Demand from the Office of the Indiana Attorney General relating to the Security Incident.


18						First Quarter 2024 Form 10-Q

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

On March 9, 2023, we reached a settlement with the SEC in connection with the Security Incident that fully resolved the previously disclosed SEC investigation of the Security Incident.

On September 28, 2021, the Information Commissioner’s Office in the United Kingdom under the U.K. Data Protection Act 2018 notified us that it has closed its investigation of the Security Incident.

On September 24, 2021, we received notice from the Spanish Data Protection Authority that it has concluded its investigation of the Security Incident.

On January 15, 2021, we were notified by the Data Protection Commission of Ireland that it has concluded its investigation of the Security Incident.

For more information about these completed government investigations and related actions, see Note 11 to our audited consolidated financial statements contained in our Annual Report on Form 10-K filed with the SEC on February 21, 2024.

We continue to cooperate with all ongoing investigations, which include various requests for documents, policies, narratives and communications, as well as requests to interview or depose various Company-related personnel. As noted above, each of these separate governmental investigations could result in adverse judgments, settlements, fines, penalties or other resolution, the amount, scope and timing of which we are currently unable to predict, but could have a material adverse impact on our results of operations, cash flows or financial condition.


~~11.~~10. Income Taxes

Our income tax ~~provision~~benefit and effective income tax rates, including the effects of period-specific events, were:


	Three months ended March 31,
(dollars in thousands)		2024			2023
Income tax benefit		$	(1,456)		$	(3,901)
Effective income tax rate		(38.4)		%	21.0		%

Three months ended
September 30, Nine months ended
September 30,
(dollars in thousands) 2017
2016
2017
2016
Income tax provision $ 2,793
$ 1,950
$ 2,964
$ 5,323
Effective income tax rate 18.2 % 17.9 % 7.8 % 18.0 %

~~Our~~The change in our effective income tax rate ~~during~~for the three months ended ~~September 30, 2017 remained relatively unchanged~~March 31, 2024 when compared to the same period in ~~2016. The decrease in our effective income tax rate during the nine months ended September 30, 2017, when compared to the same period in 2016,~~2023 was primarily ~~due~~attributable to ~~a $9.0 million discrete tax benefit to expense relating~~favorable impacts of benefits attributable to stock-based compensation ~~items,~~and research and development tax credits.


11. Stockholders' Equity

Stock repurchase program

Under our stock repurchase program, we are authorized to repurchase shares from time to time in accordance with applicable laws both on the open market, including under trading plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as ~~compared~~amended, and in privately negotiated transactions. The timing and amount of repurchases depends on several factors, including market and business conditions, the trading price of our common stock and the nature of other investment opportunities. The repurchase program does not have an expiration date and may be limited, suspended or discontinued at any time without prior notice. Under the 2024 Credit Agreement (as defined below), we have restrictions on our ability to a $4.3 million discrete tax benefit for the same period in 2016. The increase in the discrete tax benefit for the nine months ended September 30, 2017, as compared to the same period in 2016, was attributable to an increase in the market price forrepurchase shares of our common stock, ~~as reported~~which are summarized on page 40 in this report.

We account for purchases of treasury stock under the cost method. On January 17, 2024, our Board of Directors reauthorized, expanded and replenished our stock repurchase program by expanding the ~~NASDAQ Stock Market LLC ("NASDAQ"), as well as~~total capacity under the program from $250.0 million to $500.0 million available for repurchases.

In March 2024, we entered into an ~~increase in the number~~issuer forward repurchase transaction with a large financial institution to repurchase an aggregate $200 million of ~~stock awards that vested and were exercised. Most~~shares of our ~~equity awards are granted during~~common stock (the "ASR Transaction"). Pursuant to the terms of the ASR Transaction, we provided the financial institution with a prepayment of $200 million and received an initial delivery of 2.1 million shares of our ~~first quarter and vest in subsequent years during~~common stock, representing approximately 70% of the ~~same quarter.~~

~~12. Stock-based Compensation~~

~~Stock-based compensation expense is allocated~~total shares then-expected to ~~cost of revenue and operating expenses on~~be repurchased under the ~~consolidated statements of comprehensive income based on where the associated employee’s compensation is recorded. The following table summarizes stock-based compensation expense:~~



~~Third~~First Quarter ~~2017~~2024 Form 10-Q				19

Table of Contents

Blackbaud, Inc.

Notes to ~~consolidated financial statements (continued)~~Condensed Consolidated Financial Statements

(Unaudited)

~~13. Stockholders' Equity~~

~~Our Board~~Transaction. The final number of ~~Directors has adopted a dividend policy, which provides for~~shares of common stock delivered to us under the ~~distribution to stockholders~~ASR Transaction will be based on the average of ~~a portion~~the daily volume-weighted average prices of ~~cash generated by us that is in excess of operational needs and capital expenditures. The 2017 Credit Facility limits~~ the ~~amount of dividends payable and certain state laws restrict the amount of dividends distributed.~~

In February 2017, our Board of Directors approved an annual dividend rate of $0.48 per share to be made in quarterly payments. Dividend payments are not guaranteed and our Board of Directors may decide, in its absolute discretion, at any time and for any reason, not to declare and pay further dividends. The following table provides information with respect to quarterly dividends of $0.12 per share paid on common stock during the ~~nine months ended September 30, 2017.~~

Declaration Date
Dividend
per Share

Record Date Payable Date
February 8, 2017 $ 0.12
February 28 March 15
May 1, 2017 $ 0.12
May 26 June 15
July 31, 2017 $ 0.12
August 28 September 15

~~On October 25, 2017,~~term of the ASR Transaction, less a discount and subject to customary adjustments upon events affecting the common stock (e.g., dilutive or concentrative events, mergers and acquisitions, and market disruptions). At settlement, the financial institution may be required to deliver additional shares of our ~~Board~~common stock to us or, under certain circumstances, we may be required to deliver a cash payment or shares of ~~Directors declared a~~our common stock to the financial institution, with the method of settlement at our election. The final settlement of the ASR Transaction is scheduled to occur by the fourth quarter ~~dividend~~ of ~~$0.12 per share payable on December 15, 2017 to stockholders of record on November 28, 2017.~~

~~Changes in accumulated other comprehensive loss by component~~

~~The changes in accumulated other comprehensive loss by component, consisted~~2024, unless settled earlier at the election of the ~~following:~~

financial institution.

Three months ended
September 30, Nine months ended
September 30,
(dollars in thousands) 2017
2016
2017
2016
Accumulated other comprehensive loss, beginning of period $ (558 ) $ (1,640 ) $ (457 ) $ (825 )
By component:
Gains and losses on cash flow hedges:
Accumulated other comprehensive income (loss) balance, beginning of period $ 203
$ (806 ) $ 25
$ (19 )
Other comprehensive (loss) income before reclassifications, net of tax effects of $209, $(161), $135 and $589 (320 ) 248
(205 ) (909 )
Amounts reclassified from accumulated other comprehensive loss to interest expense 88
265
192
875
Tax benefit included in provision for income taxes (35 ) (104 ) (76 ) (344 )
Total amounts reclassified from accumulated other comprehensive loss 53
161
116
531
Net current-period other comprehensive (loss) income (267 ) 409
(89 ) (378 )
Accumulated other comprehensive loss balance, end of period $ (64 ) $ (397 ) $ (64 ) $ (397 )
Foreign currency translation adjustment:
Accumulated other comprehensive loss balance, beginning of period $ (761 ) $ (834 ) $ (482 ) $ (806 )
Translation adjustments (188 ) 289
(467 ) 261
Accumulated other comprehensive loss balance, end of period (949 ) (545 ) (949 ) (545 )
Accumulated other comprehensive loss, end of period $ (1,013 ) $ (942 ) $ (1,013 ) $ (942 )



20		~~Third Quarter 2017 Form 10-Q~~

~~Table~~The difference of ~~Contents~~

~~Blackbaud, Inc.~~

~~Notes~~$52.2 million between the prepayment of $200 million and the value of the shares repurchased on the ASR Transaction date represents an unsettled prepaid forward contract indexed to ~~consolidated financial statements (continued)~~

~~(Unaudited)~~

~~14. Segment Information~~

~~During~~our common stock and met all of the ~~first quarter~~applicable criteria for equity classification; therefore, it was not accounted for as a derivative instrument as of ~~2017, we changed the names~~March 31, 2024. Because of our ~~reportable segments. However, there~~ability to settle in shares, the $52.2 million prepaid forward contract was ~~no change in~~classified as a reduction to additional paid-in capital within our unaudited, condensed consolidated statement of stockholders' equity. We funded the determination of our reportable segments or our reporting units at that time. As of September 30, 2017, our reportable segments were the General Markets Group ("GMG"), the Emerging Markets Group ("EMG"), and the International Markets Group ("IMG"). The following is a description of each reportable segment:

Our chief operating decision maker is our chief executive officer ("CEO"). Currently, our CEO reviews financial information presented on an operating segment basis for the purposes of making certain operating decisions and assessing financial performance. The CEO uses internal financial reports that provide segment revenues and operating income, as adjusted, which excludes stock-based compensation expense, amortization expense, depreciation expense, research and development expense and certain corporate sales, marketing, general and administrative expenses. Segment operating income, as adjusted, includes direct, controllable costs related to the sale of our solutions and services, and our customer success program.

~~The CEO does not review any segment balance sheet information. Summarized reportable segment financial results, were as follows:~~

Segment operating income, as adjusted⁽²⁾:

Corporate unallocated costs⁽³⁾



~~Third Quarter 2017 Form 10-Q~~		21

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~Notes to consolidated financial statements (continued)~~

~~(Unaudited)~~

In light of the ongoing and anticipated increasing centralization of our operations, including without limitation marketing, customer support, customer success and professional services, we are evaluating whether changes may need to be made to our internal reporting structure to better support and assess the operations of our business going forward. If changes are made, we will assess the resulting effect on our reportable segments, operating segments and reporting units, if any.

~~15. Subsequent Events~~

~~JustGiving acquisition~~

On October 2, 2017, Blackbaud Global Limited (“Blackbaud Global”), a United Kingdom limited liability company and wholly-owned subsidiary of ours, acquired the entire issued share capital, including all voting equity interests, of Giving Limited, a United Kingdom private limited company doing business as “JustGiving” for an aggregate purchase price of £95.0 million, or approximately $127.4 million, in cash, subject to certain adjustments set forth in the stock purchase agreement. JustGiving is a market leading social platform for giving, and the acquisition is expected to enhance our capabilities to serve both individual donors and nonprofits, expanding the peer-to-peer fundraising capabilities we offer today. As a result of the acquisition, JustGiving has become a wholly-owned subsidiary of ours. We will include the operating results of JustGiving as well as the net assets acquired and liabilities assumed in our consolidated financial statements from the date of acquisition. During the three and nine months ended September 30, 2017, we incurred acquisition-related expenses associatedASR Transaction prepayment with the acquisition of JustGiving of $0.7 million and $2.2 million, respectively, which are recorded in general and administrative expense. Due to the timing of the transaction, the initial accounting for this acquisition, including the measurement of assets acquired, liabilities assumed and goodwill, is not complete and is pending detailed analyses of the facts and circumstances that existed as of the October 2, 2017 acquisition date.

~~On October 2, 2017, we borrowed $138.7 million~~borrowings pursuant to a revolving credit loan under the ~~2017~~2020 Credit ~~Facility~~Facility.

During the three months ended March 31, 2024, we repurchased an aggregate of 2,954,211 shares for $262.6 million, including the initial delivery of shares repurchased pursuant to ~~finance~~ the ~~acquisition of JustGiving. Following the borrowing, approximately $178.6 million was outstanding~~ASR Transaction. The remaining amount available to purchase stock under the ~~revolving credit loans~~approved stock repurchase program was $259.7 million as of March 31, 2024.

Changes in accumulated other comprehensive income (loss) by component

The changes in accumulated other comprehensive income (loss) by component, consisted of the following:


	Three months ended March 31,
(in thousands)		2024		2023
Accumulated other comprehensive (loss) income, beginning of period		$	(1,688)	$	8,938
By component:
Gains and losses on cash flow hedges:
Accumulated other comprehensive income balance, beginning of period		$	8,158	$	23,833
Other comprehensive income (loss) before reclassifications, net of tax effects of $(2,966) and $2,566		8,121		(7,289)
Amounts reclassified from accumulated other comprehensive income (loss)		(5,507)		(4,624)
Tax expense included in provision for income taxes		1,481		1,221
Total amounts reclassified from accumulated other comprehensive income (loss)		(4,026)		(3,403)
Net current-period other comprehensive income (loss)		4,095		(10,692)
Accumulated other comprehensive income balance, end of period		$	12,253	$	13,141
Foreign currency translation adjustment:
Accumulated other comprehensive loss balance, beginning of period		$	(9,846)	$	(14,895)
Translation adjustment		(1,185)		2,158
Accumulated other comprehensive loss balance, end of period		(11,031)		(12,737)
Accumulated other comprehensive income, end of period		$	1,222	$	404


12. Revenue Recognition

Transaction price allocated to the remaining performance obligations

As of March 31, 2024, approximately $1.2 billion of revenue under contract is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 50% of these remaining performance obligations over the next 12 months, with ~~approximately $169.8 million of available borrowing capacity under~~ the ~~2017 Credit Facility.~~

remainder recognized thereafter.



2220				~~Third~~First Quarter ~~2017~~2024 Form 10-Q

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

We applied the practical expedient in ASC 606-10-50-14 and have excluded the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less (one-time services); and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed (transactional revenue).

Our contract assets as of March 31, 2024 and December 31, 2023 were insignificant. Our closing balances of deferred revenue were as follows:


(in thousands)	March 31, 2024		December 31, 2023
Total deferred revenue	$	367,187	$	394,927

The decrease in deferred revenue during the three months ended March 31, 2024 was primarily due to a seasonal decrease in customer contract renewals. Historically, due to the timing of customer budget cycles, we have an increase in customer contract renewals at or near the beginning of our third quarter. Generally, our lowest balance of deferred revenue during the year is at the end of our first quarter. The amount of revenue recognized during the three months ended March 31, 2024 that was included in the deferred revenue balance at the beginning of the period was approximately $173 million. The amount of revenue recognized during the three months ended March 31, 2024 from performance obligations satisfied in prior periods was insignificant.

Disaggregation of revenue

We sell our cloud solutions and related services in three primary geographical markets: to customers in the United States, to customers in the United Kingdom and to customers located in other countries. The following table presents our revenue by geographic area based on the address of our customers:


	Three months ended March 31,
(dollars in thousands)		2024		2023
United States		$	238,109	$	221,669
United Kingdom		26,129		26,048
Other countries		15,012		14,036
Total revenue		$	279,250	$	261,753

The Social Sector and Corporate Sector market groups comprised our go-to-market organizations as of March 31, 2024. The following is a description of each market group as of that date:

•The Social Sector market group focuses on sales to customers and prospects in the social sector, such as nonprofits, foundations, education institutions, healthcare organizations and other not-for-profit entities globally, and includes JustGiving; and

•The Corporate Sector market group focuses on sales to customers and prospects in the corporate sector globally, and includes EVERFI and YourCause.


First Quarter 2024 Form 10-Q						21

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table presents our revenue by market group:


	Three months ended March 31,
(dollars in thousands)		2024		2023
Social Sector		$	244,444	$	224,897
Corporate Sector		34,806		36,856

Total revenue		$	279,250	$	261,753

The following table presents our recurring revenue by type:


	Three months ended March 31,
(dollars in thousands)		2024		2023
Contractual recurring		$	190,855	$	177,603
Transactional recurring		80,663		75,145
Total recurring revenue		$	271,518	$	252,748


13. Subsequent Events

April 2024 credit agreement refinancing

On April 30, 2024, we entered into the Third Amendment to Credit Agreement (the "Amendment"), by and among us, the lenders party thereto and Bank of America N.A., as administrative agent (the "Agent"). The Amendment amends the Amended and Restated Credit Agreement, dated as of October 30, 2020 (as previously amended, the "Existing Credit Agreement" and the Existing Credit Agreement as amended by the Amendment, the “2024 Credit Agreement”), by and among us, the lenders from time-to-time party thereto and the Agent.

The Amendment amends the Existing Credit Agreement to, among other things, (a) refinance the existing $1.1 billion credit facilities under the Existing Credit Agreement to provide for new credit facilities in the aggregate principal amount of $1.5 billion consisting of (i) a $700.0 million revolving credit facility with a $50.0 million letter of credit subfacility, a $50.0 million swingline subfacility and a $150.0 million sublimit available for multicurrency borrowings (the “2024 Revolving Facility”) and (ii) a $800.0 million term loan facility (the “2024 Term Facility” and together with the 2024 Revolving Facility, the “2024 Credit Facilities”), (b) extend the maturity date to April 30, 2029, (c) modify the definition of Applicable Margin (as defined below) and (iv) modify certain negative and financial covenants to provide additional operational flexibility.

Under the 2024 Credit Facilities, dollar tranche revolving loans and term loans bear interest at a rate per annum equal to, at the option of the Company: (a) a base rate equal to the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the prime rate announced by Bank of America, N.A., and (iii) Term SOFR plus 1.00% (the “Base Rate”), plus an applicable margin as specified in the 2024 Credit Agreement (the “Applicable Margin”); (b) Term SOFR plus the Applicable Margin; or (c) the Daily SOFR Rate plus the Applicable Margin. The Applicable Margin shall be adjusted quarterly, varies based on our net leverage ratio and varies based on whether the loan is a Base Rate Loan (0.375% to 1.500%), or a Term SOFR Loan/Daily SOFR Loan (1.375% to 2.500%). The 2024 Credit Agreement also provides for a commitment fee of between 0.250% and 0.500% of the unused commitment under the 2024 Revolving Facility depending on our net leverage ratio.

Under the 2024 Credit Facilities, designated currency tranche revolving loans bear interest at a rate per annum equal to, at the option of the Company: (a) the Designated Currency Daily Rate (as defined in the 2024 Credit Agreement) plus the Applicable Margin; or (b) the Designated Currency Term Rate (as defined in the 2024 Credit Agreement) plus the Applicable Margin. The Applicable Margin shall be adjusted quarterly and varies based on our net leverage ratio for both Designated Currency Daily Rate Loans and Designated Currency Term Rate Loans (1.375% to 2.500%).

We may prepay the 2024 Credit Agreement in whole or in part at any time without premium or penalty, other than customary breakage costs with respect to certain types of loans.


22						First Quarter 2024 Form 10-Q

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Under the terms of the 2024 Credit Agreement, we are entitled on one or more occasion, subject to the satisfaction of certain conditions, to request an increase in the commitments under the 2024 Revolving Facility and/or request additional incremental term loans in the aggregate principal amount of up to the sum of (i)(x) the greater of (A) $360.0 million and (B) 100% of EBITDA (as defined in the 2024 Credit Agreement), plus (ii) at our option, up to an amount such that the net leverage ratio shall be no greater than 3.50 to 1.00.

The 2024 Credit Agreement contains various representations, warranties and affirmative, negative and financial covenants customary for financings of this type. Financial covenants include a net leverage ratio and an interest coverage ratio.

The Amendment is filed as Exhibit 10.1 of this Quarterly Report on Form 10-Q. The descriptions of the Amendment and the 2024 Credit Agreement contained herein do not purport to be complete and are subject to, and qualified in their entirety by, the full and complete terms contained in the Amendment, a copy of which is filed as Exhibit 10.1 and is incorporated herein by reference.


First Quarter 2024 Form 10-Q						23

Table of Contents

Blackbaud, Inc.

(Unaudited)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited, condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. The following discussion and analysis presents financial information denominated in millions of dollars which can lead to differences from rounding when compared to similar information contained in the unaudited, condensed consolidated financial statements and related notes which are primarily denominated in thousands of dollars.

We are the ~~world’s~~ leading ~~cloud~~ software ~~company~~provider exclusively dedicated to powering social ~~good.~~impact. Serving the ~~entire~~nonprofit and education sectors, companies committed to social ~~good community—nonprofits, foundations, corporations, education institutions, healthcare institutions~~responsibility and individual change ~~agents—we connect and empower organizations~~makers, our essential software is built to ~~increase their~~accelerate impact ~~through software, services, expertise, and data intelligence. Our portfolio is tailored to the unique needs of vertical markets, with solutions for~~in fundraising, ~~and CRM, marketing, advocacy, peer-to-peer fundraising,~~nonprofit financial management, digital giving, grantmaking, corporate social responsibility ~~school management, ticketing, grantmaking, financial management, payment processing,~~ and ~~analytics. Serving the industry for more than three decades,~~education management. A remote-first company, we ~~are headquartered in Charleston, South Carolina and~~ have operations in the United States, Australia, Canada, Costa Rica and the United ~~Kingdom. As of September 30, 2017, we had approximately 35,000 customers.~~Kingdom, supporting users in 100+ countries.

Our revenue is primarily generated from the following sources: (i) charging for the use of our software solutions in ~~cloud-based~~cloud and hosted environments; (ii) providing payment and transaction services; and ~~payment processing services;~~ (iii) providing ~~professional services including implementation, training, consulting, analytic~~Impact-as-a-Service™ digital educational content.

Update on Select Key Operational Initiatives

Product Innovation and ~~other services; and (iv) providing software maintenance and support services.~~Delivery

~~During~~To maintain our market leadership position, we are accelerating the ~~third quarter~~pace of ~~2017, we continued to execute on our four-point growth strategy targeted to drive an extended period of quality enhancement, solution and service~~ innovation and ~~increasing operating efficiency and financial performance:~~

~~We continue to transition our business to predominantly serve customers through a subscription-based cloud~~new feature delivery ~~model, enabling lower cost of entry, greater scalability and lower total cost of ownership~~ to our customers. Our focus has been on two areas, generative artificial intelligence (AI) and enhancements that continue to improve the connectivity of our suite of solutions. These enhancements are aimed at improving fundraising outcomes while reducing the administrative burden of our end users. Some examples include:

•We have released a number of AI capabilities over the past few quarters, including new generative AI functionality for our JustGiving platform. During the first quarter of 2024, we released generative AI capabilities for Raiser’s Edge NXT®, and we expect that Blackbaud Co-pilot will be available to our Raiser's Edge NXT customers soon. Using Blackbaud Co-pilot, users can ask ad hoc questions such as “How can I improve my average donation size?” and the tool will provide intelligent responses as well as recommended actions intended to drive that outcome.

•During the first quarter of 2024, our Online Giving and Prospect Insights capabilities were natively integrated into Raiser's Edge NXT. With these integrations, fundraising administrators can now drive a viral giving campaign, keep records of each donor interaction, identify new donation opportunities, and provide personalized messaging, all in one integrated experience.

•Last quarter, we announced our new optimized donation forms were coming to Raiser's Edge NXT. We now have a few hundred customers up and running with nearly a thousand more experimenting. We expect these forms to drive higher revenue for our customers and for Blackbaud.

We include these exciting new features in our products at no additional cost, to increase the value our customers receive from their existing subscription. We are delivering more innovation, evolving our products and ensuring our customers receive more value from our solutions.


24						First Quarter 2024 Form 10-Q

Table of Contents

Blackbaud, Inc.

(Unaudited)

Modernized Approach to Pricing and Multi-Year Contracts

In the summer of 2022, we put in place an updated renewal pricing policy primarily for our social sector customers that directly reflects the value we provide to them, is in-line with the broader market and reflects the inflationary pressures that all businesses are facing. This program is designed to deliver sustained revenue growth beyond the initial three-year renewal cycle and will provide us with improved revenue visibility. As previously disclosed, this new approach has three main components:

1.offering 3-year contract renewal terms as our standard, which the vast majority of customers are adopting;

2.embedded annual price increases within the 3-year renewal term, which we have not had previously and are beginning to take effect; and

3.a larger first year price increase to bring our pricing in-line with the broader market.

The first two components, as well as a portion of the third, will continue on beyond the initial renewal cycle, creating what we believe will be a sustainable source of revenue growth. Approximately one half of our 2024 total company revenue growth is expected to be impacted by this modernized contract and pricing initiative, and by the end of 2024, we anticipate we will renew approximately two-thirds of that base into the new model. During the first and second quarters of 2024, we expect a larger contribution to our total revenue growth to come from this initiative.


Total revenue ($M)						Income (Loss) from operations ($M)
YoY Growth (%)						YoY Growth (%)

Total revenue increased by $17.5 million during the three months ended March 31, 2024, when compared to the same period in 2023, driven largely by the following:


			+						Growth in recurring revenue primarily related to: •an increase in contractual recurring revenue of $13.3 million related to the impact of our modernized contract initiative and pricing within the Social Sector as well as the performance of our cloud solutions; partially offset by a decrease in revenue from EVERFI as discussed below •an increase in transactional recurring revenue of $5.5 million primarily due to positive results related to pricing initiatives we implemented at the beginning of 2023 and, to a lesser extent, increases in volume for our Blackbaud Tuition Management and JustGiving solutions
			-						Decrease in one-time service and other revenue primarily related to: •decrease in one-time consulting revenue due primarily due to less revenue from implementation and customization services, in line with our multi-year strategic shift from a license-based and one-time services business model to a cloud subscription business model. Our cloud subscription offerings generally require less implementation and customization services


First Quarter 2024 Form 10-Q						25

Table of Contents

Blackbaud, Inc.

(Unaudited)

As previously disclosed and discussed above, we have a number of multi-year pricing initiatives underway, some to bring our pricing in line with the market while others are model changes that are expected to drive greater revenue for both us and our customers. We expect that the decline in our non-strategic one-time services and other revenue will slow in 2024 compared to the previous two years.

Our Social Sector revenue (which represents approximately 88% of our total revenue) increased $19.5 million, or 8.7%, during the three months ended March 31, 2024, when compared to the same period in 2023, driven primarily by the increases in contractual recurring revenue and transactional recurring revenue discussed above.

Our Corporate Sector revenue (which represents approximately 12% of our total revenue) decreased $2.1 million, or 5.6%, during the three months ended March 31, 2024, when compared to the same period in 2023, driven primarily by EVERFI. EVERFI has faced macroeconomic challenges in the form of tightening corporate CSR budgets, especially in the financial services market where EVERFI has a significant position. While we expect our Corporate Sector revenue to decline for the full year 2024, we are working on plans to ensure it contributes to shareholder value.

Income from operations increased by $20.7 million during the three months ended March 31, 2024, when compared to the same period in 2023, driven largely by the following:


			+						Increase in total revenue, as described above
			+						Decrease in Security Incident-related expenses of $7.5 million. See "Security Incident update" below.
			+						Decrease in employee severance costs of $4.3 million primarily due to our targeted workforce reductions during the fourth quarter of 2022 and the first quarter of 2023
			+						Decrease in commission expense of $3.4 million due to fewer sales headcount and a prospective increase in the period of benefit over which we amortized costs of obtaining contracts with customers from 5 to 6 years beginning in the year ending December 31, 2024
			+						Decrease in corporate costs of $2.2 million primarily related to the release of certain accrued tax liabilities due to favorable sales tax rulings and a decrease in bad debt expense
			-						Increase in stock-based compensation expense of $3.6 million primarily due to overall Company performance against targets for certain performance-based equity awards
			-						Increase in advertising costs of $2.0 million primarily due to timing differences compared to 2023
			-						Decrease of $2.0 million due to an increase in amortization of capitalized software and content development costs and a decrease in software and content development costs that were required to be capitalized under the internal-use software guidance
			-						Increase in amortization of intangible assets from business combinations of $1.7 million due to our acquisition of EVERFI

			-						Increase in acquisition and disposition-related costs of $1.6 million primarily related to the disposition of EVERFI Limited; see Note 3 of our unaudited, condensed consolidated financial statements in this report for more information
			-						Increase in transaction-based costs of $1.4 million related to the increase in the volume of transactions for which we process payments and, to a lesser extent, increases in vendor rates
			-						Increase in hosting and data center costs of $1.3 million as we continue to migrate our cloud infrastructure to leading public cloud service providers and make investments in security; currently, we expect our cloud infrastructure migration efforts and increased level of cybersecurity investments to continue for the foreseeable future

We are continuing to make critical investments in the business in areas such as innovation, cybersecurity, and our continued shift of cloud infrastructure to leading public cloud service providers. Our profitability during the first quarter of 2024 reflects some of these incremental investments.

We continuously seek opportunities to optimize our portfolio of solutions to focus time and integrate powerful capabilities — such as built in data, analytics, artificial intelligence, payment processing and tailored user-specific experiences — to bring even greater value and performance to our customers.

~~The Blackbaud SKY™ cloud platform is allowing us to innovate at a more rapid pace, including delivering enhanced integrated analytics capabilities~~resources on innovation that ~~surface directly in our customers’ software through SKY AI and SKY Analytics—components of our broader Intelligence for Good approach that combines AI, analytics, one of~~will have the ~~industry’s most robust data sets and expertise to drive powerful insights~~greatest impact for our ~~customers. These embedded, cloud-delivered insights provide high impact, workflow-integrated intelligence~~customers and the markets we serve, and drive the highest return on investment. To that ~~drives fundraising, advocacy, event participation and other purpose driven constituent interactions.~~

~~At our annual user conference,~~ ~~bbcon,~~ we announced a joint-partnership with Microsoft to couple together Microsoft's horizontal solutions with our industry-leading vertical solutions. We now intend to fully power Blackbaud SKY in the Microsoft Azure environment, andend, we will ~~become a Cloud Solution Provider Partner for the Microsoft platform.~~

continue to simplify and rationalize our portfolio through product sunsets and divestitures of non-core businesses and technologies.


26
~~Third~~First Quarter ~~2017~~2024 Form 10-Q		23

Table of Contents

Blackbaud, Inc.

We continue to invest in a world-class sales organization to accelerate revenue growth and penetrate our large and expanding total addressable market ("TAM"), which is currently estimated to be over $7.0 billion. During the first three quarters of 2017, we created a new Senior Vice President of Global Sales position to lead this effort across the organization and we have focused on enabling our expanding sales teams with training, processes, and tools to improve effectiveness and drive revenue growth. The further development of our customer success program is allowing our sales teams to focus on closing sales rather than account management. The move to selling pre-integrated solution suites instead of individual point-solutions continues to be successful, and we have furthered our go-to-market shift with a concentrated sales focus by sub-vertical, including K-12 private schools, foundations, corporations, arts & cultural, higher education and healthcare.

We continue to evaluate compelling opportunities to acquire companies, technologies and/or services. We are guided by our acquisition criteria for considering attractive assets that expand our TAM, provide entry into new and near adjacencies, accelerate our shift to the cloud, accelerate revenue growth, are accretive to margins and present synergistic opportunities.

During the third quarter, we launched Blackbaud Labs as a means to incubate new ideas and foster our strong culture of innovation and creativity within Blackbaud, with the sole focus of bringing new capabilities to market organically. We previously announced the promotion of our new Senior Vice President of Corporate Strategy and Business Development, who led the effort for many of our acquisitions, including AcademicWorks in April 2017 and, most recently, JustGiving.

AcademicWorks is the market leader in scholarship management for higher education and K-12 institutions, foundations, and grant-making institutions. Their cloud platform enables students to apply for all awards at an institution using one intuitive and streamlined process, while offering schools and awarding institutions a common platform for improved awarding, reporting, compliance, communication and stewardship of those awards. Additional details regarding our acquisition of AcademicWorks are provided in Note 3 to our consolidated financial statements in this report. During the third quarter, we focused on integrating AcademicWorks' solutions and operations as well as cross-selling.

In October 2017, we closed our acquisition of the United Kingdom-based online fundraising services provider JustGiving, whose online social giving platform has played a powerful role in the growth of peer-to-peer fundraising. The acquisition enhances our capability to serve both individual donors and nonprofits, expanding the peer-to-peer fundraising capabilities we currently offer today through TeamRaiser and everydayhero, which are used by leading nonprofit organizations to connect their causes to the individuals who support them. JustGiving also adds personal crowdfunding to our portfolio, which is an offering we did not previously provide and a fast growing segment of charitable giving. Additional details regarding our acquisition of JustGiving are provided below and in Note 15 to our consolidated financial statements in this report.

Both AcademicWorks and JustGiving meet the acquisition criteria discussed above. We remain active in the evaluation of acquisition opportunities to broaden our portfolio, provide better integrated solutions for our customers, differentiate ourselves from the competition and improve our financial performance.

We are also focused on operational efficiency to deliver improved profitability. Our organizational model has evolved in recent years allowing us to gain efficiency and consistency in how we execute. We have centralized our operations, including marketing, product management, finance, customer support, customer success and professional services. In 2014, we set a long-term aspirational goal to improve operating margins annually, and increase our non-GAAP operating margins by at least 300 basis points on a constant currency basis from our 2014 baseline of 17.5%, by the end of 2017. Since setting that goal, we have improved margins annually, inclusive of heightened investments to drive future growth and in the midst of migrating our customer base to the cloud. We expect to deliver on our goal, and we see future opportunity ahead to further improve profitability through the infrastructure investments we have made in our back office for scale, focus on operational excellence, and achieving our productivity initiatives.

We have included the results of operations of AcademicWorks in our consolidated results of operations from the date of acquisition. We determined that the AcademicWorks acquisition was not a material business combination; therefore, revenue and earnings since the acquisition date are not required or presented.


Gross dollar retention
24		~~Third Quarter 2017 Form 10-Q~~

~~Table of Contents~~

~~Blackbaud, Inc.~~

Total revenue
Three months ended
September 30, Nine months ended
September 30,
(dollars in millions) 2017
2016
Change
2017
2016
Change
Total revenue $ 195.5
$ 183.1
6.8 % $ 571.3
$ 532.5
7.3 %

The increases in total revenue during the three and nine months ended September 30, 2017, when compared to the same periods in 2016, were primarily driven by growth in subscriptions revenue as our business model continues to shift towards providing predominantly cloud-basedOur recurring subscription solutions. Subscriptions revenue also grew as a result of increases in the number of customers and the volume of transactions for which we process payments. Services and other revenue as well as maintenance revenue declined during the three and nine months ended September 30, 2017 from our continued shift in focus towards selling cloud-based subscription solutions. In general, our NXT and other cloud-based solutions require less implementation services, which we expect to continue to negatively impact services and other revenue over time. In addition, we have also used promotions and discounts for our consulting services as incentives to accelerate the migration of our existing customer base from on-premises solutions toward our cloud-based subscriptions. In the near-term, the transition to subscription-based solutions also negatively impacts total revenue growth, as time-based revenue from subscription arrangements is deferred and recognized ratably over the subscription period, typically three years at contract inception, whereas on-premises license revenue from arrangements that include perpetual licenses is recognized up-front.

Income from operations
Three months ended
September 30, Nine months ended
September 30,
(dollars in millions) 2017
2016
Change
2017
2016
Change
Income from operations $ 18.0
$ 13.5
32.7 % $ 45.3
$ 37.8
19.9 %

Income from operations increased during the three and nine months ended September 30, 2017, when compared to the same periods in 2016. The positive impact of growth in total revenue driven by subscriptions as discussed above was partially offset primarily by investments we are making in our sales organization and customer success program and, to a lesser extent, increases in stock based compensation expense of $2.1 million and $6.1 million, respectively, rent expense of $0.7 million and $3.3 million, respectively, and net increases in acquisition-related expenses and integration costs of $0.8 million and $2.8 million, respectively. An increase of $2.5 million in employee severance costs during the nine months ended September 30, 2017 also negatively impacted income from operations. The increase in rent expense was primarily driven by the end in the fourth quarter of 2016 of the South Carolina state incentive payments we received as a result of locating our headquarters facility in Berkeley County, South Carolina. These amounts were recorded as a reduction of rent expense upon receipt. Also contributing to the increase in rent expense were new operating leases for equipment that we have historically purchased.

~~Customer retention~~

~~Subscription~~ contracts are typically for a term of three years at contract ~~inception with one~~inception. A key factor to ~~three year renewals thereafter. Over time, we anticipate a decrease in maintenance contract renewals as we transition~~ our ~~solution portfolio~~overall success is the renewal and maintenance customers from a perpetual license-based model to a cloud-based subscription delivery model. We also anticipate an increase in subscription contract renewals as we continue focusing on innovation, quality and the integrationexpansion of our existing subscription ~~solutions which we believe will provide value-adding capabilities to better address~~agreements with our ~~customers' needs. Due primarily to these factors, we believe a recurring revenue customer~~customers. Management uses gross dollar retention ~~measure that combines subscription and maintenance customer contracts provides an accurate representation of~~in analyzing our ~~customers' overall behavior. For the year ended September 30, 2017, approximately 93% of~~success at delighting our customers with innovative and cloud solutions. Gross dollar retention is defined as contracted annual recurring ~~subscription or maintenance contracts were retained.~~revenue ("CARR") divided by beginning CARR with a measurement period of twelve months. For the twelve months ended March 31, 2024, our gross dollar retention was approximately 89%. This ~~customer~~gross dollar retention rate ~~is relatively unchanged from~~was slightly lower than our rate for the full year ~~2016.~~ended December 31, 2023, primarily due to EVERFI. Excluding EVERFI, our gross dollar retention during the twelve months ended March 31, 2024 was slightly higher than our rate for the full year ended December 31, 2023. We are continually investing in innovation, which we believe will increase gross dollar retention over the long-term.



~~Third Quarter 2017 Form 10-Q~~		25

~~Table of Contents~~

~~Blackbaud, Inc.~~

Balance sheet and cash flow

At ~~September 30, 2017,~~March 31, 2024, our cash and cash equivalents were ~~$17.1~~$26.4 million. Under the 2020 Credit Facility, the carrying amount of our debt was $981.7 million and ~~outstanding borrowings under the 2017 Credit Facility were $340.2 million.~~ our net leverage ratio was 2.72 to 1.00.

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2024, we generated ~~$123.4~~$64.6 million in cash ~~flow~~ from operations, ~~reduced our~~had a net increase in borrowings ~~by $5.8~~of $260.5 million, ~~inclusive of the incremental borrowings needed to finance the acquisition of AcademicWorks,~~ returned ~~$17.3~~$262.6 million to stockholders by way of ~~dividends~~share repurchases and had aggregate cash outlays of ~~$29.0~~$13.3 million for purchases of property and equipment and capitalized software and content development costs.

~~Recent development - JustGiving acquisition~~

~~On October 2, 2017, we acquired the entire issued share capital of JustGiving for an aggregate purchase price of £95.0 million, or approximately $127.4 million,~~Security Incident update

As discussed in ~~cash, subject~~Note 9 to certain adjustments set forth in the stock purchase agreement. We financed the acquisition through borrowings under the 2017 Credit Facility. As a result of the acquisition, JustGiving has become a wholly-owned subsidiary of ours. We will include the operating results of JustGiving as well as the net assets acquired and liabilities assumed in our unaudited, condensed consolidated financial statements ~~from the date of acquisition. Due~~in this report, total costs related to the ~~timing~~Security Incident exceeded the limit of our insurance coverage in the first quarter of 2022. Accordingly, the Security Incident has negatively impacted, and we expect it to continue for the foreseeable future to negatively impact, our GAAP profitability and GAAP cash flow (see discussion regarding non-GAAP free cash flow and non-GAAP adjusted free cash flow on page 37). For the three months ended March 31, 2024, we incurred net pre-tax expenses of $10.3 million related to the Security Incident, which included $3.3 million for ongoing legal fees and additional accruals for loss contingencies of $7.0 million. During the three months ended March 31, 2024, we had cash outlays of $2.0 million related to the Security Incident for ongoing legal fees. In line with our policy, legal fees are expensed as incurred. For full year 2024, we currently expect pre-tax expenses of approximately $5.0 million to $10.0 million and cash outlays of approximately $8.0 million to $13.0 million for ongoing legal fees related to the Security Incident. Not included in these ranges are our previous settlements or current accruals for loss contingencies related to the matters discussed below.



Delaware		11-2617163


~~Delaware~~	~~11-2617163~~
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)



Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol(s)	Name of Each Exchange on which Registered
Common Stock, $0.001 Par Value	BLKB	Nasdaq Global Select Market



	Three months ended September 30,				Nine months ended September 30,
(dollars in thousands)	2017		2016		2017		2016
Included in cost of revenue:
Cost of subscriptions	$	331	$	318	$	963	$	904
Cost of maintenance	103		137		294		391
Cost of services and other	500		461		1,418		1,308
Total included in cost of revenue	934		916		2,675		2,603
Included in operating expenses:
Sales, marketing and customer success	1,686		1,055		4,906		2,972
Research and development	2,093		1,674		5,877		4,874
General and administrative	6,213		5,173		17,597		14,556
Total included in operating expenses	9,992		7,902		28,380		22,402
Total stock-based compensation expense	$	10,926	$	8,818	$	31,055	$	25,005



	Three months ended September 30,						Nine months ended September 30,
(dollars in thousands)	2017			2016			2017			2016
Revenue by segment:
GMG	$	102,838		$	97,621		$	296,954		$	279,543
EMG	81,836			74,351			243,713			220,887
IMG	10,846			11,030			30,632			31,926
Other⁽¹⁾	(7		)	61			30			154
Total revenue	$	195,513		$	183,063		$	571,329		$	532,510
Segment operating income, as adjusted⁽²⁾:
GMG	$	49,971		$	46,540		$	143,658		$	134,408
EMG	44,375			38,696			130,887			113,186
IMG	2,888			1,064			7,084			3,126
Other⁽¹⁾	(58		)	(157		)	(113		)	(109		)
	97,176			86,143			281,516			250,611
Less:
Corporate unallocated costs⁽³⁾	(57,575		)	(53,236		)	(173,102		)	(156,013		)
Stock-based compensation costs	(10,926		)	(8,818		)	(31,055		)	(25,005		)
Amortization expense	(10,710		)	(10,549		)	(32,067		)	(31,817		)
Interest expense	(3,092		)	(2,641		)	(8,685		)	(8,037		)
Other income (expense), net	468			(15		)	1,581			(185		)
Income before provision for income taxes	$	15,341		$	10,884		$	38,188		$	29,554



(in thousands)	Purchase price allocation
Net working capital, excluding deferred revenue	$	2,949
Property and equipment	290
Finite-lived intangible assets	30,900
Deferred revenue	(3,950		)
Deferred tax liability	(12,350		)
Goodwill	34,305
Total purchase price	$	52,144



	Intangible assets acquired		Weighted average amortization period
AcademicWorks	(in thousands)		(in years)
Acquired technology	$	22,500	9
Customer relationships	8,000		15
Marketing assets	320		2
Non-compete agreements	80		3
Total intangible assets	$	30,900	10



(dollars in thousands)	EMG			GMG			IMG			Total
Balance at December 31, 2016	$	241,334		$	192,238		$	4,668		$	438,240
Additions related to current year business combination⁽¹⁾	20,583			13,722			—			34,305
Adjustments related to prior year business combination⁽²⁾	(29		)	(58		)	(1		)	(88		)
Effect of foreign currency translation	—			—			319			319
Balance at September 30, 2017	$	261,888		$	205,902		$	4,986		$	472,776



	Fair value measurement using
(dollars in thousands)	Level 1		Level 2		Level 3		Total
Fair value as of September 30, 2017
Financial assets:
Derivative instruments	$	—	$	223	$	—	$	223
Total financial assets	$	—	$	223	$	—	$	223

Fair value as of September 30, 2017
Financial liabilities:
Derivative instruments	$	—	$	369	$	—	$	369
Total financial liabilities	$	—	$	369	$	—	$	369

Fair value as of December 31, 2016
Financial assets:
Derivative instruments	$	—	$	206	$	—	$	206
Total financial assets	$	—	$	206	$	—	$	206

Fair value as of December 31, 2016
Financial liabilities:
Derivative instruments	$	—	$	163	$	—	$	163
Total financial liabilities	$	—	$	163	$	—	$	163



Years ending December 31, (dollars in thousands)	Annual maturities
2017 - remaining	$	2,950
2018	8,576
2019	7,500
2020	7,500
2021	7,500
Thereafter	306,150
Total required maturities	$	340,176



	Gain (loss) recognized in accumulated other comprehensive loss as of			Location of gain (loss) reclassified from accumulated other comprehensive loss into income	Gain (loss) reclassified from accumulated other comprehensive loss into income
(dollars in thousands)	September 30, 2017				Three months ended September 30, 2017			Nine months ended September 30, 2017
Interest rate swaps	$	(105	)	Interest expense	$	(88	)	$	(192	)

	September 30, 2016				Three months ended September 30, 2016			Nine months ended September 30, 2016
Interest rate swaps	$	(654	)	Interest expense	$	(265	)	$	(875	)



	Location of gain (loss) recognized in income on derivative	Gain (loss) recognized in income
(dollars in thousands)	Location of gain (loss) recognized in income on derivative	Three months ended September 30, 2017			Nine months ended September 30, 2017
Foreign currency option contracts	Other income (expense), net	$	38		$	513
Foreign currency forward contracts	Other income (expense), net	$	(41	)	$	(41	)
Total (loss) gain⁽¹⁾		$	(3	)	$	472


~~(1)~~	~~The individual amounts for each year may not sum to total gain (loss) due to rounding.~~



Declaration Date	Dividend per Share		Record Date	Payable Date
February 8, 2017	$	0.12	February 28	March 15
May 1, 2017	$	0.12	May 26	June 15
July 31, 2017	$	0.12	August 28	September 15


~~(1)~~	~~Other includes revenue and the related costs from the sale of solutions and services not directly attributable to a reportable segment.~~


~~(2)~~	~~Segment operating income, as adjusted, includes direct, controllable costs related to the sale of our solutions and service, and our customer success program.~~


~~(3)~~	~~Corporate unallocated costs include research and development, depreciation expense, and certain corporate sales, marketing, general and administrative expenses.~~


3.	~~Expand TAM into Near Adjacencies through Acquisitions and Product Investments~~



Income from operations
	Three months ended September 30,						Nine months ended September 30,
(dollars in millions)	2017		2016		Change		2017		2016		Change
Income from operations	$	18.0	$	13.5	32.7	%	$	45.3	$	37.8	19.9	%



Revenue by segment
	Three months ended September 30,						Nine months ended September 30,
(dollars in millions)	2017		2016		Change		2017		2016		Change
GMG	$	102.8	$	97.6	5.3	%	$	297.0	$	279.5	6.2	%
EMG	81.8		74.4		10.1	%	243.7		220.9		10.3	%
IMG	10.8		11.0		(1.7	)%	30.6		31.9		(4.1	)%
Total revenue⁽¹⁾	$	195.5	$	183.1	6.8	%	$	571.3	$	532.5	7.3	%



Subscriptions
	Three months ended September 30,								Nine months ended September 30,
(dollars in millions)	2017			2016			Change		2017			2016			Change
Subscriptions revenue	$	127.5		$	105.4		20.9	%	$	370.9		$	306.3		21.1	%
Cost of subscriptions	58.0			51.9			11.7	%	170.3			153.8			10.8	%
Subscriptions gross profit⁽¹⁾	$	69.4		$	53.5		29.8	%	$	200.6		$	152.6		31.5	%
Subscriptions gross margin	54.5		%	50.7		%			54.1		%	49.8		%



Maintenance
	Three months ended September 30,								Nine months ended September 30,
(dollars in millions)	2017			2016			Change		2017			2016			Change
Maintenance revenue	$	31.5		$	36.4		(13.5	)%	$	98.2		$	111.0		(11.6	)%
Cost of maintenance	5.7			5.5			3.0	%	17.6			16.5			6.1	%
Maintenance gross profit⁽¹⁾	$	25.8		$	30.9		(16.5	)%	$	80.6		$	94.5		(14.6	)%
Maintenance gross margin	81.9		%	84.8		%			82.1		%	85.1		%


			+						Increase in contractual recurring revenue of $13.3 million related to the impact of our modernized contract initiative and pricing within the Social Sector as well as the performance of our cloud solutions; partially offset by a decrease in revenue from EVERFI as discussed above
			+						Increase in transactional recurring revenue of $5.5 million primarily due to positive results related to pricing initiatives we implemented at the beginning of 2023 and, to a lesser extent, increases in volume for our Blackbaud Tuition Management and JustGiving solutions.



Services and other
	Three months ended September 30,								Nine months ended September 30,
(dollars in millions)	2017			2016			Change		2017			2016			Change
Services and other revenue	$	36.5		$	41.2		(11.4	)%	$	102.2		$	115.2		(11.2	)%
Cost of services and other	23.3			25.8			(10.0	)%	71.6			76.5			(6.4	)%
Services and other gross profit⁽¹⁾	$	13.3		$	15.4		(13.6	)%	$	30.6		$	38.7		(20.8	)%
Services and other gross margin	36.3		%	37.3		%			30.0		%	33.6		%


			-						Decrease in one-time consulting revenue of $1.1 million primarily due to less sales of creative services and implementation and customization services. As discussed in Note 3 to our unaudited, condensed consolidated financial statements in this report, our sale of EVERFI Limited contributed to the decrease in creative services will continue to negatively impact services and other revenue over time. We have also used promotions and discounts for our consulting services as incentives to accelerate the migration of our existing customer base from on-premises solutions toward our cloud-based subscriptions. The maturation of our Blackbaud Enterprise CRM solution is lessening the extent of implementation services required for that solution. In addition, we are increasingly selling our Blackbaud CRM solution as a subscription offering, which has resulted in less license fees revenue. Also contributing to the decrease in one-time consulting revenue is an increase in utilization of third-party service delivery partners. For several years, we have been strategically shifting away from a one-time services business model towards sales of retained and managed services and also embedding services in our renewable cloud solution contracts. Retained and managed services contracts that we expect to have a term consistent with our cloud solution contracts, and embedded services are recorded as recurring revenue.


			-						Decrease in compensation costs of $1.2 million primarily related to our prior period targeted workforce reductions discussed above and a continued shift in resources historically supporting one-time services and other towards recurring revenue


	-		Decrease in commission expense of $3.5 million due to fewer sales headcount and a prospective increase in the period of benefit over which we amortized costs of obtaining contracts with customers from 5 to 6 years beginning in the year ending December 31, 2024
~~(1)~~	-	~~Not included~~	Decrease in ~~research and development expense for the~~ ~~three months ended September 30, 2017~~ ~~and~~ ~~2016~~ ~~were $7.0~~employee severance costs of $1.6 million ~~and $6.9 million, respectively, of qualifying costs associated with development activities that are required~~primarily due to ~~be capitalized under the internal-use software accounting guidance such as those related to development of~~ our next generation cloud-based solutions. Qualifying capitalized software development costs associated with our cloud-based solutions are subsequently amortized to cost of subscriptions revenue over the related asset's estimated useful life, which generally range from three to seven years.

	prior period targeted workforce reductions discussed above
~~(2)~~		+	~~Not included~~	Increase in ~~research and development expense for the~~ ~~nine months endedSeptember 30, 2017~~ ~~and~~ ~~2016~~ ~~were $20.6~~advertising costs of $2.0 million ~~and $18.9 million, respectively, of qualifying costs associated with development activities that are required~~primarily due to ~~be capitalized under the internal-use software accounting guidance.~~timing differences compared to 2023


			+						Increase in compensation costs of $2.4 million primarily related to an increase in resources dedicated to the security-related compliance of our solutions

			-						Decrease in employee severance costs of $1.1 million primarily due to our prior period targeted workforce reductions discussed above


Interest expense ($M)
Percentages indicate expenses as a percentage of total revenue


Other income ($M)
Percentages indicate other income as a percentage of total revenue



(dollars in millions)	Timing of recognition	September 30, 2017		Change		December 31, 2016
Subscriptions	Over the period billed in advance, generally one year	$	179.9	24.4	%	$	144.6
Maintenance	Over the period billed in advance, generally one year	68.5		(10.8	)%	76.8
Services and other	As services are delivered	34.0		15.2	%	29.5
Total deferred revenue⁽¹⁾		282.4		12.5	%	250.9
Less: Long-term portion		5.4		(16.0	)%	6.4
Current portion⁽¹⁾		$	277.0	13.3	%	$	244.5


Income tax benefit ($M)
Percentages indicate effective income tax rates



Income tax provision
	Three months ended September 30,								Nine months ended September 30,
(dollars in millions)	2017			2016			Change		2017			2016			Change
Income tax provision	$	2.8		$	2.0		43.2	%	$	3.0		$	5.3		(44.3	)%
Effective income tax rate	18.2		%	17.9		%			7.8		%	18.0		%


~~(1)~~First Quarter 2024 Form 10-Q			~~The individual amounts for each year may not sum to non-GAAP revenue, subtotal or non-GAAP gross profit due to rounding.~~			33