What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-04 compared with 2021-08-06 · 200 added, 147 removed, 387 unchanged (47% of the section changed)

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COVID-19 Impact

The economic impact of COVID-19 on the social good industry remains uncertain, although we are beginning to see signs of recovery in the industry.

The economic impact of COVID-19 on the social good industry remains somewhat uncertain, although we are seeing signs of recovery in the industry.

We believe the COVID-19 pandemic has accelerated the shift to a digital-first world.

The percentage of giving done online grew by approximately 40% in 2020 with roughly a quarter of that giving taking place on mobile device.

If our existing and prospective customers remain cautious in their purchase decisions, our operating environment may continue to be challenging for the remainder of 2021 and potentially beyond.

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Acquisitions are an important element of our strategy going forward.

Second Quarter 2021 Form 10-Q

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

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In support of this strategy, during the second quarter of 2021, we merged our EMG and GMG to create one U.S.

Market Group ("UMG") to better align our resources toward customer retention and growth.

Market Group to better align our resources toward customer retention and growth.

For more information, see Note 13 to our condensed consolidated financial statements in this report.

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We have carried that momentum into 2021.

For example, as arts and cultural organizations begin to open their doors, maintaining high standards for the safety and security of their patrons is a top priority;

therefore, we recently announced the general availability of Payment Terminal™.

This solution allows organizations to receive secure, contactless chip and tap payments for tickets and donations through Blackbaud Altru® and Blackbaud Merchant Services™.

Not only does this minimize staff handling of credit cards during point-of-sale, but it enables them to process payments faster than with a magnetic swipe device and helps to better protect their constituents and their organization from credit card fraud with EMV-certified card readers that offer end-to-end encryption.

During the second quarter, we also announced the general availability of Blackbaud Peer-to-Peer Fundraising™, powered by JustGiving® in Australia, New Zealand and Canada bringing this turnkey solution to even more organizations with no subscription fees or setup costs and furthering our efforts to globalize our products.

For example, we recently released an entirely new experience for Blackbaud Grantmaking which provides the relevant capabilities to users from their Blackbaud fundraising, fund management, and grant making solutions all in one interface.

It also delivers purpose-built automation capabilities and maximizes the value of relationships by giving our customers a holistic view of the relationships driving their grant making - highlighting connections between grantees, and the relationships between individuals and the organizations they are funding.

Another example is a recent release within Financial Edge NXT where we're transforming the entire accounts receivable experience.

This provides a modern experience and new streamlined workflows and controls in areas such as invoice creation, billing and receiving payments, as well as holistic relationship management across vendors, customers, and sponsors.

Focus on Employees, Culture and ESG Initiatives

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We are fully committed to continuing to create a diverse and inclusive environment at all levels of the organization.

During May 2021, we held a month-long celebration of our 40th anniversary with our employees, some of whom have been around to watch our business grow from just one product to providing purpose-built solutions for the entire social good industry.

In the second quarter of 2021, we furthered our efforts to create a best-in-class candidate and employee experience with the launch of our new careers site.

This enables us to lift our social presence and visibility, create personalized experiences for candidates via artificial intelligence, reduce the time to apply, and accept applications start to finish from a mobile device.

It also enables us to leverage data analytics to better understand the talent marketplace and inform future investments.

Second Quarter 2021 Form 10-Q

Early in 2021, we established an ESG Steering Committee with our CEO as the executive sponsor, and our Board of Directors are also involved in this initiative.

Building on our culture of innovation, we launched a new ideation initiative called "Imagine Week," inviting employees across the globe to pitch their ideas directly to the executive leadership team.

Employees at every level and length of tenure in the company made proposals ranging from fundraising to customer service improvements.

These ideas are making their way into our go-forward plans.

In addition, we recently decided, effective December 1, 2021, to permanently close our fixed office locations (with the exception of our global headquarters facility in Charleston, South Carolina) to align our real estate footprint with our transition to a remote-first workforce.

We may enter into arrangements for smaller more flexible workspaces where necessary.

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

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YoY Growth (%) YoY Growth (%)

Total revenue decreased by $2.6 million and $7.0 million during the three and six months ended June 30, 2021, respectively, when compared to the same periods in 2020, driven largely by the following:

- Decreases in one-time consulting revenue due primarily to less implementation and customization services.

We changed our commission plans during the first quarter of 2020 to intentionally shift our sales teams' focus towards selling our cloud solutions.

Additionally, the bookings shortfalls during 2020 caused by the COVID-19 pandemic contributed to the decreases in one-time consulting revenue.

Total revenue increased by $16.2 million and $9.2 million during the three and nine months ended September 30, 2021, respectively, when compared to the same periods in 2020, driven largely by the following:

+ Growth in recurring revenue related to increases in transactional revenue from the continued shift toward virtual fundraising and online charitable giving and, to a lesser extent, early progress in initiatives to bring our pricing in line with the market;

also included in the increases in total revenue are increases related to fluctuations in foreign currency exchange rates of $1.9 million and $7.8 million, respectively

- Decreases in one-time consulting revenue due primarily to less 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.

- Decreases in one-time analytics revenue as analytics are generally integrated in our cloud solutions

+ Growth in recurring revenue related to increases in contractual revenue related to the performance of our cloud software solutions and, to a lesser extent, early progress in initiatives to bring our pricing in line with the market

Second Quarter 2021 Form 10-Q

For additional information on the impact of foreign currency fluctuations on our financial results, see Foreign Currency Exchange Rates below on page 44.

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

Income from operations decreased by $6.5 million and $8.3 million during the three and six months ended June 30, 2021, respectively, when compared to the same periods in 2020, driven largely by the following:

- Increases in stock-based compensation expense of $10.4 million and $26.8 million, respectively, due to:

Income from operations increased by $1.8 million during the three months ended September 30, 2021, when compared to the same period in 2020, driven largely by the following:

+ Increase in total revenue, as described above

+ Decrease in restructuring and other real estate costs of $7.4 million due to our workforce strategy changes made in the third quarter of 2020

+ Decrease in rent expense of $2.3 million related to the purchase of our global headquarters facility during the third quarter of 2020 and our exit of certain other office leases globally during the second half of 2020 in-line with the changes to our workforce strategy at that time

- Increase in stock-based compensation expense of $8.1 million primarily due to:

• Certain changes to our compensation program that are expected to cause stock-based compensation expense to remain higher than historical levels, including

◦ decrease in the vesting period for our annual long-term incentive time-based equity awards from 4 years (1/4 per year) to 3 years (1/3 per year), beginning in February 2021;

◦ replacement of cash sign-on and retention bonuses with time-based equity awards.

• Increases in the grant date fair values of our annual equity awards granted to employees;

• Overall year-to-date Company performance against 2021 goals.

- Increase in transaction-based costs of $5.5 million related to payment services integrated in our cloud solutions

- Increase in third-party contractor costs of $4.1 million as we continue to migrate our cloud infrastructure to leading public cloud service providers and invest in security

- Increase in compensation costs other than stock-based compensation of $3.9 million primarily due to base salary merit increases in July 2021 and the return of our 401(k)-match program effective January 1, 2021

- Increase in marketing costs of $1.3 million primarily due to incremental spending on advertising campaigns and, to a lesser extent, investments in digital marketing

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

Income from operations decreased by $6.6 million during the nine months ended September 30, 2021, when compared to the same period in 2020, driven largely by the following:

- Increase in stock-based compensation expense of $34.9 million, respectively, due to:

• Certain changes to our compensation program that are expected to cause stock-based compensation expense to remain higher than historical levels, including

◦ replacement of our annual cash bonus plans with a short-term performance-based equity award plan

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• Increases in the grant date fair values of our annual equity awards granted to employees;

• As a one-time response to COVID-19, replacement of our 2020 base salary merit increases with one-year time-based equity awards, which vested and were recognized as expense between May 1, 2020 and May 1, 2021;

• Overall Company performance against 2020 goals.

- Decreases in total revenue, as described above

- Increases in transaction-based costs of $1.9 million and $1.7 million, respectively, related to payment services integrated in our cloud solutions

- Increases in hosting and data center costs of $0.8 million and $1.5 million, respectively, as we continue to migrate our cloud infrastructure to leading public cloud service providers

+ Decreases in rent expense of $4.1 million and $7.2 million, respectively, related to the purchase of our global headquarters facility during the third quarter of 2020 and our exit of certain other office leases globally during the second half of 2020 in-line with our new workforce strategy

+ Decreases in employee severance of $3.8 million and $2.9 million, related to a modest and targeted headcount reduction during the three months ended June 30, 2020, in response to the COVID-19 pandemic

+ Decreases in amortization of intangible assets from business combinations of $1.0 million and $3.0 million, respectively

+ Decrease in compensation costs other than stock-based compensation of $13.2 million, during the six months ended June 30, 2021, primarily due to a decrease in headcount

+ Decrease in travel costs of $3.5 million, during the six months ended June 30, 2021, due to our restriction on non-essential employee travel in response to the COVID-19 pandemic

• Overall Company performance against 2020 and year-to-date Company performance against 2021 goals.

- Increase in transaction-based costs of $7.1 million related to payment services integrated in our cloud solutions

- Increase in marketing costs of $2.7 million primarily due to investments in digital marketing and, to a lesser extent, incremental spending on advertising campaigns

- Increases in third-party contractor and hosting costs of $2.5 million and $2.1 million, respectively, as we continue to migrate our cloud infrastructure to leading public cloud service providers and invest in security

- Increase in corporate costs of $1.8 million primarily related to increases in third-party consulting fees and insurance costs, partially offset by a decrease in bad debt expense

+ Increase in total revenue, as described above

+ Decrease in compensation costs other than stock-based compensation of $9.2 million primarily due to a decrease in headcount, partially offset by base salary merit increases in July 2021 and the return of our 401(k)-match program effective January 1, 2021

+ Decrease in rent expense of $7.7 million related to the purchase of our global headquarters facility during the third quarter of 2020 and our exit of certain other office leases globally during the second half of 2020 in-line with the changes to our workforce strategy at that time

+ Decrease in real estate activity costs of $7.4 million due to our workforce strategy changes made in the third quarter of 2020

+ Decrease in amortization of intangible assets from business combinations of $3.8 million

+ Decrease in travel costs of $3.5 million due to our restriction on non-essential employee travel in response to the COVID-19 pandemic

+ Decrease in employee severance of $3.1 million, related to a modest and targeted headcount reduction during the three months ended June 30, 2020, in response to the COVID-19 pandemic

We are continuing to make critical investments in the business in areas such as digital marketing, engineering, security, customer success and our continued shift of cloud infrastructure to leading public cloud service providers.

We expect the level of investment in these areas to increase in the second half of 2021.

Second Quarter 2021 Form 10-Q

While we are making good progress, some of these investments are likely to push into early 2022, particularly in areas where we are increasing headcount.

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

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Due primarily to these factors, we believe a recurring revenue customer retention measure that combines recurring subscription, maintenance and service customer contracts provides a better representation of our customers' overall behavior.

For the twelve months ended June 30, 2021, approximately 92% of our customers with recurring revenue contracts were retained.

For the twelve months ended September 30, 2021, approximately 93% of our customers with recurring revenue contracts were retained.

This customer retention rate is materially unchanged from our rate for the full year ended December 31, 2020.

Balance sheet and cash flow

At June 30, 2021, our cash and cash equivalents were $28.3 million and the carrying amount of our debt under the 2020 Credit Facility was $483.1 million.

At September 30, 2021, our cash and cash equivalents were $27.6 million and the carrying amount of our debt under the 2020 Credit Facility was $465.9 million.

Our net leverage ratio was 1.70 to 1.00 .

During the six months ended June 30, 2021, we generated $99.9 million in cash from operations, had a net increase in borrowings of $14.8 million, returned $58.1 million to stockholders by way of share repurchases and had aggregate cash outlays of $26.0 million for purchases of property and equipment and capitalized software development costs.

Security Incident

As discussed in Note 9 to our unaudited, condensed consolidated financial statements included in this report, we believe it is probable that total losses related to the Security Incident will ultimately exceed the limits of our insurance coverage.

However, as we are currently unable to determine when that will be the case and the approximate amount or range of any such excess, we are unable to determine the effect the Security Incident will have on our results of operations, liquidity, or financial condition.

Second Quarter 2021 Form 10-Q

During the nine months ended September 30, 2021, we generated $169.8 million in cash from operations, had a net decrease in borrowings of $3.0 million, returned $98.4 million to stockholders by way of share repurchases and had aggregate cash outlays of $38.0 million for purchases of property and equipment and capitalized software development costs.

Security Incident update

As discussed in Note 9 to our unaudited, condensed consolidated financial statements included in this report, we believe that total costs related to the Security Incident will exceed the limits of our insurance coverage during the fourth quarter of 2021 .

Accordingly, we expect that the Security Incident could negatively impact our GAAP profitability and cash flow during the fourth quarter of 2021 and will negatively impact our GAAP profitability and cash flow for the foreseeable future.

As we are currently unable to estimate the approximate amount or range of any such excess , we are unable to determine the effect the Security Incident will have on our results of operations, cash flows, or financial condition.

Recent development - workforce strategy actions

In October 2021, we made the decision to permanently close our fixed office locations (with the exception of our global headquarters facility in Charleston, South Carolina), effective December 1, 2021.

This change was intended to align our real estate footprint with our transition to a remote-first workforce.

We may enter into arrangements for smaller more flexible workspaces where necessary.

We currently expect to incur between $13.0 million and $14.0 million of pre-tax costs related to these actions during the fourth quarter of 2021.

We expect that the costs associated with these actions will be largely noncash impairment charges, primarily for operating lease ROU assets in the office locations we have determined to exit.

These actions are expected to result in future annual before-tax expense savings of between approximately $3.0 mill ion and $5.0 million beginning in 2022.

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

Results of Operations

Comparison of the three and six months ended June 30, 2021 and 2020

Comparison of the three and nine months ended September 30, 2021 and 2020

Revenue and Cost of Revenue

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We intend to continue focusing on innovation, quality and integration of our cloud solutions, which we believe will drive future revenue growth.

Second Quarter 2021 Form 10-Q

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

Recurring revenue increased by $0.7 million, or 0.3%, during the three months ended June 30, 2021, when compared to the same period in 2020, driven primarily by the following:

+ Increase in contractual recurring revenue of $2.9 million related to the performance of our cloud solutions and, to a lesser extent, early progress in initiatives to bring our pricing in line with the market, partially offset by a decrease in maintenance revenue as customers migrate to our cloud solutions

- Decrease in transactional revenue of $2.2 million primarily due to a decrease in the volume of transactions for which we process payments when compared to the elevated online charitable giving, mainly related to COVID-19, during the second quarter of 2020

Recurring revenue increased by $2.6 million, or 0.6%, during the six months ended June 30, 2021, when compared to the same period in 2020, driven primarily by the following:

+ Increase in contractual recurring revenue of $2.0 million related to the performance of our cloud solutions, partially offset by a decrease in maintenance revenue as customers migrate to our cloud solutions

+ Increase in transactional revenue of $0.6 million, primarily due to the continued shift toward virtual fundraising and online charitable giving, partially offset by the second quarter 2021 decrease in the volume of transactions for which we process payments, as discussed above

Cost of recurring revenue increased by $3.1 million, or 3.4%, and $2.4 million, or 1.3%, during the three and six months ended June 30, 2021, respectively, when compared to the same periods in 2020, driven primarily by the following:

+ Increases in compensation costs of $2.8 million and $4.2 million, respectively, primarily related to stock-based compensation due to the factors discussed above on page 26

Recurring revenue increased by $18.4 million, or 9.2%, and $21.0 million, or 3.4%, during the three and nine months ended September 30, 2021, when compared to the same periods in 2020, driven primarily by the following:

+ Increases in transactional revenue of $15.3 million and $15.9 million, respectively, primarily due to the continued shift toward virtual fundraising and online charitable giving;

also included in the increases in transactional revenue are increases related to fluctuations in foreign currency exchange rates of $1.2 million and $4.2 million, respectively

+ Increases in contractual recurring revenue of $3.1 million and $5.1 million, respectively, related to the performance of our cloud solutions, partially offset by a decrease in maintenance revenue as customers migrate to our cloud solutions;

also included in the increases in contractual recurring revenue are increases related to fluctuations in foreign currency exchange rates of $0.7 million and $3.6 million, respectively

For additional information on the impact of foreign currency fluctuations on our financial results, see Foreign Currency Exchange Rates below on page 44.

Cost of recurring revenue increased by $11.6 million, or 13.7%, and $14.0 million, or 5.3%, during the three and nine months ended September 30, 2021, respectively, when compared to the same periods in 2020, driven primarily by the following:

+ Increases in transaction-based costs of $5.5 million and $7.2 million, respectively, related to payment services integrated in our cloud solutions

+ Increases in hosting and data center costs of $0.6 million and $1.1 million, respectively, as we continue to migrate our cloud infrastructure to leading public cloud service providers

+ Increase in third-party contractor costs of $0.8 million during the three months ended June 30, 2021;

the increase in third-party contractor costs during the six months ended June 30, 2021 was insignificant

- Decreases in amortization of software development costs of $2.6 million and $1.6 million, respectively, due to an impairment charge in Q2 2020 which did not occur during the same period in 2021

- Decreases in amortization of intangible assets from business combinations of $0.7 million and $2.5 million, respectively

Recurring gross margin decreased by 1.3% for the three months ended June 30, 2021, when compared to the same period in 2020, primarily due to the decrease in higher margin transactional revenue.

Recurring gross margin remained relatively consistent during the six months ended June 30, 2021, when compared to the same period in 2020.

Second Quarter 2021 Form 10-Q

+ Increases in compensation costs of $3.4 million and $7.6 million, respectively, primarily related to stock-based compensation due to the factors discussed above on page 26 and a shift in resources historically supporting one-time services and other towards recurring revenue

+ Increases in third-party contractor and hosting costs of $3.2 million and $4.7 million, respectively, as we continue to migrate our cloud infrastructure to leading public cloud service providers and make investments in security

- Decrease in amortization of intangible assets from business combinations of $2.0 million during the nine months ended September 30, 2021

- Decrease in amortization of software development costs of $1.7 million, during the nine months ended September 30, 2021 due to an impairment charge in Q2 2020 which did not recur in 2021

- Decrease in rent expense of $0.8 million, during the nine months ended September 30, 2021, largely due to a decrease in leased hardware, including servers, network gear and storage

Recurring gross margin decreased by 1.7% and 0.8% for the three and nine months ended September 30, 2021, respectively, when compared to the same periods in 2020, primarily due to the increases in cost of recurring revenue outpacing the increases in recurring revenue.

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

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Cost of one-time services and other is primarily comprised of compensation costs for professional services and onsite training personnel, other costs incurred in providing onsite customer training, third-party contractor expenses, data expense incurred to perform one-time analytic services, third-party software royalties, costs of user conferences, allocated depreciation, facilities and IT support costs and amortization of intangible assets from business combinations.

One-time services and other revenue decreased by $3.3 million, or 20.8%, and $9.6 million, or 27.8%, during the three and six months ended June 30, 2021, respectively, when compared to the same periods in 2020, driven primarily by the following:

- Decreases in one-time consulting revenue of $2.4 million and $7.1 million, respectively, due primarily to less 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, we changed our commission plans during the first quarter of 2020 to intentionally shift our sales teams' focus towards selling our cloud solutions.

Additionally, the bookings shortfalls during 2020 caused by the COVID-19 pandemic contributed to the decreases in one-time consulting revenue.

One-time services and other revenue decreased by $2.2 million, or 14.8%, and $11.8 million, or 23.9%, during the three and nine months ended September 30, 2021, respectively, when compared to the same periods in 2020, driven primarily by the following:

- Decreases in one-time consulting revenue of $1.4 million and $8.5 million, respectively, due primarily to less 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.

- Decreases in one-time analytics revenue of $1.2 million and $3.0 million, respectively, as analytics are generally integrated in our cloud solutions

Second Quarter 2021 Form 10-Q

Cost of one-time services and other decreased by $2.6 million, or 17.8%, during the three months ended September 30, 2021, when compared to the same period in 2020, driven primarily by the following:

- Decrease in amortization of intangible assets from business combinations of $1.1 million

- Decrease in compensation costs of $1.0 million largely due to a decrease in headcount, as well as a shift in resources historically supporting one-time services and other towards recurring revenue

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

Cost of one-time services and other remained relatively consistent during the three months ended June 30, 2021, when compared to the same period in 2020.

Cost of one-time services and other decreased by $0.7 million, or 2.5%, during the six months ended June 30, 2021, when compared to the same period in 2020, driven primarily by a decrease in third-party contractor costs of $1.0 million due to the timing of our spending.

One-time services and other gross margin decreased by 23.2% and 29.3% during the three and six months ended June 30, 2021, respectively, when compared to the same periods in 2020, primarily due to the significant reductions in one-time consulting and analytics revenue discussed above.

Cost of one-time services and other decreased by $3.3 million, or 7.6%, during the nine months ended September 30, 2021, when compared to the same period in 2020, driven primarily by the following:

- Decrease in amortization intangible assets from business combinations of $1.3 million

- Decrease in third-party contractor costs of $1.2 million, primarily due to a decrease in partners delivering services

- Decrease in compensation costs other than stock-based compensation of $0.7 million largely due to a decrease in headcount, as well as a shift in resources historically supporting one-time services and other towards recurring revenue

- Decrease in allocated costs of $1.4 million primarily related to a decrease in rent expense, as discussed below in General and Administrative

+ Increase in stock-based compensation costs of $2.1 million due to the factors discussed above on page 23

One-time services and other gross margin increased by 3.4% during the three months ended September 30, 2021, when compared to the same period in 2020, primarily due to the decrease in cost of one-time services and other outpacing the decrease in one-time services and other revenue.

One-time services and other gross margin decreased by 18.8% during the nine months ended September 30, 2021, when compared to the same period in 2020, primarily due to the significant reductions in one-time consulting and analytics revenue discussed above.

Operating Expenses

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Sales, marketing and customer success expense includes compensation costs, variable sales commissions, travel-related expenses, advertising and marketing materials, public relations costs, variable reseller commissions and allocated depreciation, facilities and IT support costs.

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

We see a large market opportunity in the long-term and will continue to make investments to drive sales effectiveness.

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As a result, we do not expect our sales, marketing and customer success expense to return to pre-pandemic levels.

Second Quarter 2021 Form 10-Q

Blackbaud, Inc.

Sales, marketing and customer success expense decreased by $6.5 million, or 12.5%, and $16.4 million, or 14.9%, during the three and six months ended June 30, 2021, respectively, when compared to the same periods in 2020, primarily driven by the following:

- Decreases in compensation costs other than stock-based compensation of $5.4 million and $14.0 million, respectively, due to the targeted reduction in sales headcount during the second quarter of 2020, discussed above

Sales, marketing and customer success expense decreased by $3.8 million, or 7.8%, and $20.2 million, or 12.7%, during the three and nine months ended September 30, 2021, respectively, when compared to the same periods in 2020, primarily driven by the following:

- Decreases in compensation costs other than stock-based compensation of $3.9 million and $17.9 million, respectively, primarily due to the targeted reduction in sales headcount during the second quarter of 2020, discussed above

- Decreases in allocated costs of $1.5 million and $5.8 million, respectively, primarily related to a decrease in rent expense and the impact of the targeted reduction in sales headcount during the second quarter of 2020, as discussed above

- Decrease in travel costs of $2.1 million, during the six months ended June 30, 2021, due to our restriction on non-essential employee travel in response to the COVID-19 pandemic, which went into effect during March 2020

+ Increases in stock-based compensation costs of $1.1 million and $4.0 million, respectively, due to the factors discussed above on page 26

- Decrease in travel costs of $2.0 million, during the nine months ended September 30, 2021, due to our restriction on non-essential employee travel in response to the COVID-19 pandemic, which went into effect during March 2020

- Decrease in commissions expense of $1.4 million, during the nine months ended September 30, 2021, related to a decrease in overall commissionable bookings during 2020 due to the COVID-19 pandemic and a decrease in commissionable one-time services and other bookings during 2021

+ Increases in advertising costs of $1.3 million and $2.7 million, respectively, primarily due to incremental spending on advertising campaigns and investments in digital marketing

+ Increases in stock-based compensation costs of $0.9 million and $5.0 million, respectively, due to the factors discussed beginning on page 25

Research and development

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We increased engineering hiring beginning in the fourth quarter of 2020.

Research and development expenses increased by $5.3 million or 21.4%, and $9.5 million or 19.1%, during the three and six months ended June 30, 2021, respectively, when compared to the same periods in 2020, primarily driven by the following:

Research and development expenses increased by $8.8 million or 38.6%, and $18.3 million or 25.2%, during the three and nine months ended September 30, 2021, respectively, when compared to the same periods in 2020, primarily driven by the following:

+ Increases in compensation costs of $6.1 million and $14.2 million, respectively, primarily related to stock-based compensation due to the factors discussed above on page 26

+ Decrease in software development costs of $1.9 million, during the six months ended June 30, 2021, that were required to be capitalized under the internal-use software guidance

Not included in research and development expense for the three months ended June 30, 2021 and 2020 were $10.4 million and $10.6 million, respectively, and for the six months ended June 30, 2021 and 2020 were $19.5 million and $21.4 million, respectively, of qualifying costs associated with development activities that are required to be capitalized under the internal-use software accounting guidance such as those for our cloud solutions, as well as development costs associated with acquired companies.

Qualifying capitalized software development costs associated with our cloud 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.

+ Increases in third-party contractor costs of $1.6 million and $2.1 million, respectively, as we continue to migrate our cloud infrastructure to leading public cloud service providers and make investments in security

+ Decrease in software development costs of $2.5 million, during the nine months ended September 30, 2021, that were required to be capitalized under the internal-use software guidance

Not included in research and development expense for the three months ended September 30, 2021 and 2020 were $9.7 million and $10.2 million, respectively, and for the nine months ended September 30, 2021 and 2020 were $29.2 million and $31.6 million, respectively, of qualifying costs associated with development activities that are required to be capitalized under the internal-use software accounting guidance such as those for our cloud solutions, as well as development costs associated with acquired companies.

Qualifying capitalized software development costs associated with our cloud solutions are subsequently amortized to cost of subscriptions revenue over the related asset's estimated

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

useful life, which generally range from three to seven years.

We expect that the amount of software development costs capitalized will be relatively consistent in the near-term as we continue making investments in innovation, quality and the integration of our solutions, which we believe will drive long-term revenue growth.

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General and administrative expense consists primarily of compensation costs for general corporate functions, including senior management, finance, accounting, legal, human resources and corporate development, third-party professional fees, insurance, allocated depreciation, facilities and IT support costs, acquisition-related expenses and other administrative expenses.

During the third quarter of 2020, we adjusted our workforce strategy to provide more flexibility to our employees and we now have more employees working remotely either part-time or full-time, even within our hub locations.

This change has created efficiencies within our real estate footprint as we have shifted toward more collaborative workspaces within our offices.

Second Quarter 2021 Form 10-Q

Blackbaud, Inc.

General and administrative expense increased by $2.2 million, or 7.3%, and $6.9 million, or 12.4%, during the three and six months ended June 30, 2021, respectively, when compared to the same periods in 2020, primarily driven by the following:

General and administrative expense increased by $0.6 million, or 1.8%, and $7.5 million, or 8.3%, during the three and nine months ended September 30, 2021, respectively, when compared to the same periods in 2020, primarily driven by the following:

+ Increases in stock-based compensation costs of $4.6 million and $13.7 million, respectively, due to the factors discussed above on page 25

- Decreases in rent expense, net of allocated costs, of $2.0 million and $0.9 million, respectively, primarily related to the purchase of our global headquarters facility during the third quarter of 2020 and our exit of certain other office leases globally during the second half of 2020 in-line with our new workforce strategy

- Decrease in third-party contractor costs of $1.5 million during the six months ended June 30, 2021

+ Increases in compensation expense, excluding stock-based compensation costs, of $1.9 million and $1.8 million, respectively, due to base salary merit increases on July 2021, as well as an increase in headcount

+ Increases in corporate costs of $1.6 million and $2.0 million, respectively, primarily related to increases in third-party consulting fees and insurance costs, partially offset by decreases in bad debt expense

- Decreases in real estate activity costs of $6.6 million and $7.4 million, respectively, due to our workforce strategy changes made in the third quarter of 2020

- Decreases in rent expense, net of allocated costs, of $1.0 million and $1.9 million, respectively, primarily related to the purchase of our global headquarters facility during the third quarter of 2020 and our exit of certain other office leases globally during the second half of 2020 in-line with changes to our workforce strategy at that time

- Decrease in third-party contractor costs of $1.1 million during the nine months ended September 30, 2021

Interest Expense

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Percentages indicate expenses as a percentage of total revenue

The increases in interest expense in dollars and as a percentage of total revenue during the three and six months ended June 30, 2021, respectively, when compared to the same periods in 2020, was primarily due to the Real Estate Loans assumed for the purchase of our global headquarters facility in August 2020 and the deferred financing costs and debt discount associated with the 2020 Credit Facility, which was entered into in October 2020.

Interest expense in dollars and as a percentage of total revenue during the three months ended September 30, 2021 was relatively in line with the same period in 2020.

The increase in interest expense in dollars and as a percentage of total revenue during the nine months ended September 30, 2021, when compared to the same periods in 2020, was primarily due to the Real Estate Loans assumed for the purchase of our global headquarters facility in August 2020 and the deferred financing costs and debt discount associated with the 2020 Credit Facility, which was entered into in October 2020.

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

Deferred Revenue

The table below compares the components of deferred revenue from our consolidated balance sheets:

(dollars in millions) Timing of recognition June 30,

(dollars in millions) Timing of recognition September 30,

2021 December 31,

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We generally invoice our customers with recurring revenue contracts in annual cycles 30 days prior to the end each one-year period.

Deferred revenue from recurring revenue contracts increased during the six months ended June 30, 2021, primarily due a seasonal increase in customer contract renewals and, to a lesser extent, early progress in initiatives to bring our pricing in line with the market.

Deferred revenue from recurring revenue contracts increased during the nine months ended September 30, 2021, primarily due a seasonal increase in customer contract renewals and, to a lesser extent, early progress in initiatives to bring our pricing in line with the market.

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.

Deferred revenue from one-time services and other

Second Quarter 2021 Form 10-Q

Blackbaud, Inc.

increased during the six months ended June 30, 2021, primarily due to a seasonal increase in one-time service billings during the second quarter.

Deferred revenue from one-time services and other increased during the nine months ended September 30, 2021, primarily due to a seasonal increase in one-time service billings during the second and third quarters.

Income tax provision ($M)

Percentages indicate effective income tax rates

The decrease in our effective income tax rate for the three months ended June 30, 2021, when compared to the same period in 2020, was primarily attributable to a 2021 discrete tax benefit against lower pre-tax income.

The 2020 effective income tax rate was negatively impacted by discrete adjustments comprised of tax expense attributable to stock-based compensation and unrecognized tax benefits net of benefit attributable to deferred tax adjustment.

The 2021 effective income tax rate was positively impacted by increased tax benefit attributable to stock-based compensation offset against tax expense attributable to a corporate income tax rate increase enacted during the period against lower pre-tax income.

The increase in our effective income tax rate for the six months ended June 30, 2021 when compared to the same periods in 2020, was primarily attributable to the impact of non deductible expenses against lower pre-tax income.

The increase in our effective income tax rate for the three months ended September 30, 2021, when compared to the same period in 2020, was primarily attributable to higher 2021 non-deductible stock-based compensation and reduced state tax credits.

Furthermore, the 2020 effective tax rate was positively impacted by a favorable return to provision adjustment offset against tax expense attributable to a corporate income tax rate increase enacted during the period.

The increase in our effective income tax rate for the nine months ended September 30, 2021 when compared to the same period in 2020, was primarily attributable to the impact of non-deductible expenses against lower pre-tax income.

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

Non-GAAP Financial Measures

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We believe that these non-GAAP financial measures reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business.

Second Quarter 2021 Form 10-Q

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(dollars in millions, except per share amounts) 2021

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(1) The individual amounts for each year may not sum to non-GAAP gross profit, subtotal, non-GAAP income from operations or non-GAAP net income due to rounding.

(2) Includes Security Incident-related costs incurred during the three and six months ended June 30, 2021 of $11.7 million and $24.4 million, respectively, net of probable insurance recoveries during the same periods of $11.2 million and $23.9 million, respectively.

(2) Includes Security Incident-related costs incurred during the three and nine months ended September 30, 2021 of $11.4 million and $35.9 million, respectively, net of probable insurance recoveries during the same periods of $10.6 million and $34.5 million, respectively.

Recorded expenses consisted primarily of payments to third-party service providers and consultants, including legal fees, as well as settlements of customer claims.

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(3) We apply a non-GAAP effective tax rate of 20.0% when calculating non-GAAP net income and non-GAAP diluted earnings per share.

Second Quarter 2021 Form 10-Q

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

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(dollars in millions) Three months ended

Six months ended

September 30,

Nine months ended

September 30,

GAAP revenue $ 231.2 $ 215.0 $ 679.8 $ 670.6

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The primary foreign currencies creating the impact are the Australian Dollar, British Pound, Canadian Dollar and EURO.

Second Quarter 2021 Form 10-Q

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

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Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(dollars in millions) 2021

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29.5 28.1 5.0 % 92.0 66.3 38.7 %

Adjusted Non-GAAP EBITDA (2)

Non-GAAP Adjusted EBITDA (2)

$ 62.4 $ 59.4 5.0 % $ 185.4 $ 173.0 7.1 %

Adjusted Non-GAAP EBITDA margin 28.7 % 27.4 %

Non-GAAP Adjusted EBITDA margin 27.0 % 27.3 %

Rule of 40 (4)

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(1) Includes amortization expense related to software development costs and amortization expense from capitalized cloud computing implementation costs.

(2) The individual amounts for each year may not sum to subtotal, non-GAAP EBITDA or adjusted non-GAAP EBITDA due to rounding.

(2) The individual amounts for each year may not sum to subtotal, non-GAAP EBITDA or non-GAAP adjusted EBITDA due to rounding.

(3) Includes Security Incident-related costs incurred, net of probable insurance recoveries.

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Non-GAAP free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software development, and capital expenditures for property and equipment.

Six months ended

Nine months ended

September 30,

(dollars in millions) 2021

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Non-GAAP free cash flow $ 131.8 $ 51.3 156.9 %

Second Quarter 2021 Form 10-Q

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

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The following table presents selected financial information about our financial position:

(dollars in millions) June 30,

(dollars in millions) September 30,

2021 December 31,

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The following table presents selected financial information about our cash flows:

Six months ended June 30,

Nine months ended September 30,

(dollars in millions) 2021

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Net cash used in financing activities (533.1) (393.8) 35.4 %

Second Quarter 2021 Form 10-Q

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

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Based on current estimates of revenue and expenses, we believe that the currently available sources of funds and anticipated cash flows from operations will be adequate for at least the next twelve months to finance our operations, fund anticipated capital expenditures and meet our debt obligations.

To the extent we undertake future material acquisitions, investments or unanticipated capital expenditures, we may require additional capital.

To the extent we undertake future material acquisitions or, investments or incur unusually high capital or operating expenditures, we may require additional capital.

In that context, we regularly evaluate opportunities to enhance our capital structure including through potential debt or equity issuances.

At June 30, 2021, our total cash and cash equivalents balance included approximately $14.4 million of cash that was held by operations outside the U.S.

At September 30, 2021, our total cash and cash equivalents balance included approximately $15.4 million of cash that was held by operations outside the U.S.

While these funds may not be needed to fund our U.S.

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Operating Cash Flow

Net cash provided by operating activities increased by $62.4 million during the six months ended June 30, 2021, when compared to the same period in 2020, primarily due to a $54.6 million increase in cash flow from operations associated with working capital and an $7.9 million increase in net income adjusted for non-cash expenses.

Net cash provided by operating activities increased by $60.6 million during the nine months ended September 30, 2021, when compared to the same period in 2020, primarily due to a $48.3 million increase in cash flow from operations associated with working capital and an $12.4 million increase in net income adjusted for non-cash expenses.

Throughout both periods, our cash flows from operations were derived principally from:

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Working capital changes are composed of changes in accounts receivable, prepaid expenses and other assets, trade accounts payable, accrued expenses and other liabilities, and deferred revenue.

The increase in cash flow from operations associated with working capital during the six months ended June 30, 2021, when compared to the sa me period in 2020, was primarily due to:

• the payment of our 2019 cash bonus plans in 2020 and the replacement of our 2020 cash bonus plans with performance-based equity awards (which we expect will continue going forward);

• an increase in the collection of our accounts receivable balances, including early progress in initiatives to bring our pricing in line with the market;

The increase in cash flow from operations associated with working capital during the nine months ended September 30, 2021, when compared to the sa me period in 2020, was primarily due to:

• fluctuations in the timing of vendor payments;

• the payment of our 2019 cash bonus plans in 2020 and the replacement of our 2020 cash bonus plans with performance-based equity awards (which we expect will continue going forward).

Security Incident update

As we are currently unable to estimate the approximate amount or range of any such excess, we are unable to determine the effect the Security Incident will have on our results of operations, cash flows, or financial condition.

Investing Cash Flow

Net cash used in investing activities of $26.0 million decreased by $1.6 million during the six months ended June 30, 2021, when compared to the same period in 2020.

During the six months ended June 30, 2021, we used $19.9 million for software development costs, which was down $1.8 million from cash spent during the same period in 2020, primarily due to less costs qualifying for capitalization under the internal-use software accounting guidance.

Net cash used in investing activities of $38.0 million decreased by $19.9 million during the nine months ended September 30, 2021, when compared to the same period in 2020.

During the nine months ended September 30, 2021, we used $29.7 million for software development costs, which was down $2.4 million from cash spent during the same period in 2020, primarily due to less costs qualifying for capitalization under the internal-use software accounting guidance.

We increased engineering hiring beginning in the fourth quarter of 2020 and continue to invest in our innovative cloud solutions, as well as development activities for Blackbaud SKY, our modern cloud platform.

We also spent $6.1 million of cash for purchases of property and equipment during the six months ended June 30, 2021, which was in line with what we spent during the same period in 2020.

We also spent $8.3 million of cash for purchases of property and equipment during the nine months ended September 30, 2021, which was an decrease of $17.5 million when compared to the same period in 2020.

The additional cash expended during the nine months ended 2020 was primarily used to purchase our global headquarters facility.

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

Financing Cash Flow

During the six months ended June 30, 2021, we had a net increase in borrowings of $14.8 million.

We paid $38.7 million to satisfy tax obligations of employees upon settlement of equity awards during the six months ended June 30, 2021 compared to $21.0 million during the same period in 2020.

During the nine months ended September 30, 2021, we had a net decrease in borrowings of $3.0 million.

We paid $39.0 million to satisfy tax obligations of employees upon settlement of equity awards during the nine months ended September 30, 2021 compared to $21.3 million during the same period in 2020.

The amount of taxes paid by us on behalf of employees related to the settlement of equity awards varies from period to period based upon the timing of grants and vesting, as well as the market price for shares of our common stock at the time of settlement.

While most of

Second Quarter 2021 Form 10-Q

Blackbaud, Inc.

our equity awards currently vest in our first quarter, the equity awards that we granted in May 2020 to replace our 2020 cash bonus plans and base salary merit increases vested in May 2021.

During the six months ended June 30, 2020, we paid dividends of $6.0 million and we did not pay dividends during the same period in 2021, as we discontinued the declaration and payment of all cash dividends, beginning with the second quarter of 2020.

Cash used in financing activities associated with changes in restricted cash due to customers increased $48.4 million during the six months ended June 30, 2021 when compared to the same period in 2020, as the amount of restricted cash held and payable by us to customers as of December 31, 2020 was larger than at the same date in 2019 primarily due to the timing of year-end donations.

Most of our equity awards currently vest in our first quarter.

During the nine months ended September 30, 2020, we paid dividends of $6.0 million and we did not pay dividends during the same period in 2021, as we discontinued the declaration and payment of all cash dividends, beginning with the second quarter of 2020.

Cash used in financing activities associated with changes in restricted cash due to customers increased $49.2 million during the nine months ended September 30, 2021 when compared to the same period in 2020, as the amount of restricted cash held and payable by us to customers as of December 31, 2020 was larger than at the same date in 2019 primarily due to the timing of year-end donations.

Stock repurchase program

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The repurchase program may be limited, suspended or discontinued at any time without prior notice.

During the three and six months ended June 30, 2021, we purchased 405,047 and 870,868 shares for $30.0 million and $58.1 million, respectively.

The remaining amount available to purchase stock under the stock repurchase program was $150.9 million as of June 30, 2021.

During the three and nine months ended September 30, 2021, we purchased 583,280 and 1,454,148 shares for $40.3 million and $98.4 million, respectively.

The remaining amount available to purchase stock under the stock repurchase program was $110.6 million as of September 30, 2021.

2020 Credit Facility

Historically, we have drawn on our credit facility from time to time to help us meet financial needs, primarily due to the seasonality of our cash flows from operations and financing for business acquisitions.

At June 30, 2021, our available borrowing capacity under the 2020 Credit Facility was $409.6 million.

At September 30, 2021, our available borrowing capacity under the 2020 Credit Facility was $424.6 million.

The 2020 Credit Facility matures in October 2025.

At June 30, 2021, the carrying amount of our debt under the 2020 Credit Facility was $483.1 million.

Our average daily borrowings during the three and six months ended June 30, 2021 were $495.6 million and $492.6 million, respectively.

At September 30, 2021, the carrying amount of our debt under the 2020 Credit Facility was $465.9 million.

Our average daily borrowings during the three and nine months ended September 30, 2021 were $471.0 million and $485.3 million, respectively.

The following is a summary of the financial covenants under the 2020 Credit Facility:

Financial covenant Requirement Ratio as of June 30, 2021

Financial covenant Requirement Ratio as of September 30, 2021

Net leverage ratio ≤ 4.00 to 1.00 1.70 to 1.00

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(i) no default or event of default shall have occurred and be continuing under the 2020 Credit Facility, and (ii) our pro forma net leverage ratio, as set forth in the 2020 Credit Facility, must be 0.25 less than the net leverage ratio requirement at the time of dividend declaration or share repurchase.

At June 30, 2021, we were in compliance with our debt covenants under the 2020 Credit Facility.

Second Quarter 2021 Form 10-Q

At September 30, 2021, we were in compliance with our debt covenants under the 2020 Credit Facility.

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

Commitments and Contingencies

As of June 30, 2021, we had contractual obligations with future minimum commitments as follows:

As of September 30, 2021, we had contractual obligations with future minimum commitments as follows:

Payments due by period

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(2) Represents principal payments only, under the following assumptions:

(i) that the amounts outstanding under the 2020 Credit Facility, our Real Estate Loans and our other debt at June 30, 2021 will remain outstanding until maturity, with minimum payments occurring as currently scheduled, and (ii) that there are no assumed future borrowings on the 2020 Credit Facility for the purposes of determining minimum commitment amounts.

(i) that the amounts outstanding under the 2020 Credit Facility, our Real Estate Loans and our other debt at September 30, 2021 will remain outstanding until maturity, with minimum payments occurring as currently scheduled, and (ii) that there are no assumed future borrowings on the 2020 Credit Facility for the purposes of determining minimum commitment amounts.

(3) Represents interest payment obligations related to our interest rate swap agreements.

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The Real Estate Loans also require periodic principal payments and the balance of the Real Estate Loans are due upon maturity in April 2038.

The total liability for uncertain tax positions as of June 30, 2021 and December 31, 2020, was $4.7 million and $4.6 million, respectively.

Our accrued interest and penalties related to tax positions taken on our tax returns was $1.2 million and $1.1 million as of June 30, 2021 and December 31, 2020, respectively.

The total liability for uncertain tax positions as of September 30, 2021 and December 31, 2020, was $4.9 million and $4.6 million, respectively.

Our accrued interest and penalties related to tax positions taken on our tax returns was $1.2 million and $1.1 million as of September 30, 2021 and December 31, 2020, respectively.

In the fourth quarter of 2021, we entered into settlement discussions with the IRS Appeals Office in relation to one of our uncertain tax positions, which is not material to the financial statements.

Successful settlement is expected to result in release of corresponding liability for uncertain tax positions within next twelve months.

Security Incident

As discussed in Note 9 to our unaudited, condensed consolidated financial statements included in this report, we believe that total losses related to the Security Incident will exceed the limits of our insurance coverage during the fourth quarter of 2021 .

As we are currently unable to determine the approximate amount or range of any such excess , we are unable to determine the effect the Security Incident will have on our results of operations, liquidity, or financial condition.

Off-Balance Sheet Arrangements

As of June 30, 2021, we did not have any off-balance sheet arrangements as previously defined by Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Second Quarter 2021 Form 10-Q

As of September 30, 2021, we did not have any off-balance sheet arrangements as previously defined by Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Third Quarter 2021 Form 10-Q

Blackbaud, Inc.

Foreign Currency Exchange Rates

Approximately 16% of our total revenue for the six months ended June 30, 2021 was generated from operations outside the U.S.

Approximately 17% of our total revenue for the nine months ended September 30, 2021 was generated from operations outside the U.S.

We do not have significant operations in countries in which the economy is considered to be highly inflationary.

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dollars for purposes of reporting our consolidated financial results.

The accumulated currency translation adjustment, recorded within accumulated other comprehensive loss as a component of stockholders’ equity, was a gain of $4.9 million as of June 30, 2021 and a gain of $0.6 million as of December 31, 2020.

The accumulated currency translation adjustment, recorded within accumulated other comprehensive loss as a component of stockholders’ equity, was a gain of $1.7 million as of September 30, 2021 and a gain of $0.6 million as of December 31, 2020.

The vast majority of our contracts are entered into by our U.S.

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dollar strengthened, foreign currency translation resulted in a decrease in our revenue and expenses denominated in non-U.S.

During the six months ended June 30, 2021, foreign translation resulted in increases in our revenues and expenses denominated in non-U.S.

During the nine months ended September 30, 2021, foreign translation resulted in increases in our revenues and expenses denominated in non-U.S.

Though we have exposure to fluctuations in currency exchange rates, primarily those between the U.S.

dollar and both the British Pound and Canadian dollar, the impact has generally not been material to our consolidated results of operations or financial position.

For the six months ended June 30, 2021, the fluctuation in foreign currency exchange rates increased our total revenue and our income from operations by $6.3 million and $2.3 million, respectively.

For the nine months ended September 30, 2021, the fluctuation in foreign currency exchange rates increased our total revenue and our income from operations by $8.4 million and $3.2 million, respectively.

We will continue monitoring such exposure and take action as appropriate.

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Critical Accounting Policies and Estimates

There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2021 as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

There have been no significant changes in our critical accounting policies and estimates during the nine months ended September 30, 2021 as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Recently Issued Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis