What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-01 compared with 2021-02-23 · 428 added, 372 removed, 1126 unchanged (42% of the section changed)

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Index to consolidated financial statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Consolidated Balance Sheets

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Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts

for leases in 2019.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Controls Over Financial Reporting appearing under Item 9A.

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

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We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded EVERFI, Inc.

from its assessment of internal control over financial reporting as of December 31, 2021, because it was acquired by the Company in a purchase business combination during 2021.

We have also excluded EVERFI, Inc.

from our audit of internal control over financial reporting.

is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent approximately 6% and 0%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2021.

2021 Form 10-K

generally accepted accounting principles.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

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Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Acquisition of EVERFI, Inc.

- Valuation of the Customer Relationships, Certain Developed Technology Assets, Marketing Assets, and Content Intangible Assets

As described in Notes 2 and 3 to the consolidated financial statements, on December 31, 2021, the Company acquired EVERFI, Inc.

for an aggregate purchase price of $743.8 million, which resulted in $326.6 million of customer relationships, $72.0 million of developed technology, $40.9 million of marketing assets, and $17.9 million of content intangible assets being recorded.

Management estimated the fair values of the customer relationships, marketing assets, and a substantial portion of the developed technology 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 and multi-period excess earnings method, depending on the intangible asset being valued.

Management estimated the fair value of content and a portion of the developed technology using the replacement cost method.

Management applied significant judgment in estimating the fair value of intangible assets acquired, which involved the use of significant assumptions including future revenue and operating expenses, customer attrition rates, contributory asset charges, tax amortization benefit, and discount rates used in the valuation of customer relationships;

future revenue, proprietary technology obsolescence curve, royalty rate, and discount rate used in the valuation of certain developed technology assets;

assumptions about the period of time the brand will continue to be valuable, royalty rate, and discount rate used in the valuation of marketing assets;

and cost-based assumptions used in the valuation of content intangible assets.

The principal considerations for our determination that performing procedures relating to the valuation of customer relationships, certain developed technology assets, marketing assets, and content intangible assets related to the acquisition of EVERFI, Inc.

is a critical audit matter are the significant judgment by management in developing the fair value of the customer relationships, certain developed technology assets, marketing assets, and content intangible assets, which led to significant auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s aforementioned significant assumptions used in the valuation of the customer relationships, certain developed technology assets, marketing assets, and content intangible assets.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the customer relationships, developed technology assets, marketing assets, and content intangible assets, as well as controls over the development

2021 Form 10-K

of the aforementioned significant assumptions related to the valuation of these intangible assets.

These procedures also included, among others, reading the purchase agreement and testing management’s process for estimating the fair value of the customer relationships, certain developed technology assets, marketing assets, and content intangible assets.

Testing management’s process included (i) evaluating the appropriateness of the valuation methods, (ii) testing the completeness and accuracy of data provided by management, and (iii) evaluating the reasonableness of the aforementioned significant assumptions used in the valuation of the customer relationships, certain developed technology assets, marketing assets, and content intangible assets.

Evaluating the reasonableness of the future revenue used in the valuation of the customer relationships and certain developed technology assets, operating expenses, customer attrition rates, and contributory asset charges used in the valuation of the customer relationships, and the cost-based assumptions used in the valuation of content intangible assets involved considering the past performance of the acquired business, consistency with external market and industry data, and whether these assumptions were consistent with evidence obtained in other areas of the audit.

Evaluating the reasonableness of the proprietary technology obsolescence curve used in the valuation of certain developed technology assets and royalty rates used in the valuation of certain developed technology assets and marketing assets involved evaluating the consistency of these assumptions with external market and industry data.

Evaluating the reasonableness of the discount rates used in the valuation of the customer relationships, certain developed technology assets, and marketing assets involved considering the cost of capital of comparable benchmark rates and other industry factors.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the Company’s relief-from-royalty, multi-period excess earnings, and replacement cost methods and in evaluating the reasonableness of the significant assumptions related to customer attrition rates and tax amortization benefit used in the valuation of the customer relationships, assumptions about the period of time the brand will continue to be valuable used in the valuation of marketing assets, cost-based assumptions used in the valuation of content intangible assets, royalty rates used in the valuation of certain developed technology assets and marketing assets, and discount rates used in the valuation of the customer relationships, certain developed technology assets, and marketing assets.

Revenue recognition - Contracts with Multiple Performance Obligations

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For the year ended December 31, 2021, the Company’s total revenue was $927.7 million.

The principal considerations for our determination that performing procedures relating to revenue recognition, contracts with multiple performance obligations, is a critical audit matter are the significant judgment by management in identifying, evaluating and accounting for performance obligations in contracts with multiple performance obligations, which led to significant auditor judgment and effort in performing procedures to evaluate whether contracts with multiple performance obligations were appropriately identified, evaluated and accounted for by management.

The principal considerations for our determination that performing procedures relating to revenue recognition, contracts with multiple performance obligations, is a critical audit matter are the significant judgment by management in identifying, evaluating and accounting for performance obligations in contracts with multiple performance obligations, which led to significant auditor judgment and effort in performing procedures and evaluating whether contracts with multiple performance obligations were appropriately identified, evaluated and accounted for by management.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

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These procedures also included, among others, testing management’s process for identifying, evaluating and accounting for performance obligations.

This included, (i) examining revenue arrangements on a test basis, including evaluating the terms and conditions of the arrangements and testing the identification, evaluation and accounting of the performance obligations;

Testing management’s process included, (i) examining revenue arrangements on a test basis, including evaluating the terms and conditions of the arrangements and testing the identification, evaluation and accounting of the performance obligations;

(ii) testing the allocation of the transaction price between performance obligations based on the estimated standalone selling prices on a test basis;

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and (iv) evaluating the reasonableness of the approach used to determine stand-alone selling price.

/ S / P RICEWATERHOUSE C OOPERS LLP

/s/ PricewaterhouseCoopers LLP

Atlanta, Georgia

February 23, 2021

March 1, 2022

We have served as the Company's auditor since 2000.

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( 500,911 ) ( 353,091 )

Accumulated other comprehensive loss ( 2,497 ) ( 5,290 )

Accumulated other comprehensive income (loss) 6,522 ( 2,497 )

Retained earnings 242,456 236,714

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Foreign currency translation adjustment 661 4,571 2,641

Unrealized (loss) gain on derivative instruments, net of tax ( 1,778 ) ( 2,821 ) 583

Unrealized gain (loss) on derivative instruments, net of tax 8,358 ( 1,778 ) ( 2,821 )

Total other comprehensive income (loss) 9,019 2,793 ( 180 )

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Dividend payments to stockholders — ( 5,960 ) ( 23,607 )

Net cash (used in) provided by financing activities ( 10,679 ) 111,213 ( 291,908 )

Net cash provided by (used in) financing activities 264,108 ( 10,679 ) 111,213

Effect of exchange rate on cash, cash equivalents and restricted cash 297 2,245 978

Net increase (decrease) in cash, cash equivalents and restricted cash 67,674 127,449 ( 190,328 )

Net increase in cash, cash equivalents and restricted cash 6,793 67,674 127,449

Cash, cash equivalents and restricted cash, beginning of year 644,969 577,295 449,846

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Non-cash investing and financing activities:

Purchase of EVERFI through the issuance of stock (see Note 3) ( 303,633 ) — —

Purchase of property and equipment by assuming directly related liabilities — ( 61,064 ) —

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Other comprehensive loss — — — — ( 180 ) — ( 180 )

Reclassification upon adoption of ASU 2018-02 (1)

— — — — 167 ( 167 ) —

Balance at December 31, 2019 60,206,091 $ 60 $ 457,804 $ ( 290,665 ) $ ( 5,290 ) $ 234,855 $ 396,764

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— — — — — ( 5,960 ) ( 5,960 )

Exercise of stock options and stock appreciation rights and vesting of restricted stock units 267,455 — 7 — — — 7

Purchase of 714,000 treasury shares under stock repurchase program

— — — ( 41,001 ) — — ( 41,001 )

Exercise of stock options and vesting of restricted stock units 218,141 — 4 — — — 4

Employee taxes paid for 273,914 withheld shares upon equity award settlement

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Restricted stock cancellations ( 177,077 ) — — — — — —

Other comprehensive loss — — — — ( 180 ) — ( 180 )

Other comprehensive income — — — — 2,793 — 2,793

Balance at December 31, 2020 60,904,638 $ 61 $ 544,963 $ ( 353,091 ) $ ( 2,497 ) $ 236,714 $ 426,150

Net income — — — — — 5,698 5,698

Payment of dividends ($ 0.12 per share) (2)

Common stock issued in purchase of EVERFI (see Note 3)

3,844,423 4 303,629 — — — 303,633

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— — — ( 108,416 ) — — ( 108,416 )

Exercise of stock options and vesting of restricted stock units 218,141 — 4 — — — 4

Vesting of restricted stock units 1,014,562 1 — — — — 1

Employee taxes paid for 535,604 withheld shares upon equity award settlement

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Balance at December 31, 2021 66,165,666 $ 66 $ 968,927 $ ( 500,911 ) $ 6,522 $ 242,456 $ 717,060

(1) Refer to the discussion of recently adopted accounting pronouncements in Note 2 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the SEC on February 20, 2019.

(1) Represents dividends paid in Q1 2020.

See Note 14 of these consolidated financial statements for a discussion of our Board of Directors' decision to discontinue the declaration and payments of all cash dividends beginning in Q2 2020.

Refer to the discussion of our Board of Directors' decision to discontinue the declaration and payments of all cash dividends beginning in Q2 2020 in Note 14 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the SEC on February 23, 2021.

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

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We are the world’s leading cloud software company powering social good.

Serving the entire social good community—nonprofits, higher education institutions, K–12 schools, healthcare organizations, faith communities, arts and cultural organizations, foundations, companies and individual change agents—we connect and empower organizations and individuals to increase their impact through cloud software, services, expertise and data intelligence.

Our portfolio is tailored to the unique needs of vertical markets, with solutions for fundraising and CRM, marketing, advocacy, peer-to-peer fundraising, corporate social responsibility, school management, ticketing, grantmaking, financial management, payment processing and analytics.

Serving the industry for nearly four decades, we are headquartered in Charleston, South Carolina, and have operations in the United States, Australia, Canada, Costa Rica and the United Kingdom.

As of December 31, 2020, we had over 45,000 global customers.

Serving the entire social good community—nonprofits, higher education institutions, K–12 schools, healthcare organizations, faith communities, arts and cultural organizations, foundations, companies and individual change agents—we connect and empower organizations to increase their impact through cloud software, services, expertise and data intelligence.

Our portfolio is tailored to the unique needs of vertical markets, with solutions for fundraising and CRM, marketing, advocacy, peer-to-peer fundraising, corporate social responsibility (CSR) and environmental, social and governance (ESG), school management, ticketing, grantmaking, financial management, payment processing and analytics.

Serving the industry for more than four decades, we are a remote-first company headquartered in Charleston, South Carolina, with operations in the United States, Australia, Canada, Costa Rica and the United Kingdom.

Basis of Presentation

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We are subject to risks and uncertainties as a result of the global COVID-19 pandemic.

We believe that COVID-19 has impacted and will continue to impact all of our vertical markets across all of our geographies to some degree, but the significance and duration of the impact on our business cannot be determined at this time due to numerous uncertainties, including, the duration of the outbreak, travel restrictions and business closures, the effectiveness of vaccination programs and other actions taken to contain the disease and other unforeseeable consequences.

We believe that COVID-19 may continue to impact our vertical markets and geographies, but the magnitude of the impact on our business cannot be determined at this time due to numerous uncertainties, including the duration of the outbreak, the severity of variants which may develop, travel restrictions and business closures, the effectiveness of vaccination programs and other actions taken to contain the disease and other unforeseeable consequences.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the 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 development costs, our allowances for credit losses and sales returns, costs of obtaining contracts, valuation of derivative instruments and loss contingencies, among others.

Changes in the facts or circumstances underlying these estimates, including due to COVID-19, could result in material changes and actual results could materially differ from these estimates.

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Notes to Consolidated Financial Statements

Response to COVID-19

To better enable us to weather the extraordinary business challenges brought about by the global COVID-19 pandemic, to protect the safety and welfare of our employees, and to further effect our long-term strategy to deliver the greatest value to our stockholders, we have taken several actions.

These measures taken are expected to provide us the financial flexibility needed to manage a wide array of outcomes that may result from the pandemic.

Some of these actions include the following:

• Temporarily closed our offices worldwide and transitioned our employees to work remotely;

• Rescinded our previously announced policy to pay an annual dividend at a rate of $ 0.48 per share of common stock and discontinued the declaration and payment of all cash dividends, beginning with the second quarter of 2020 and thereafter until such time, if any, as our Board of Directors may otherwise determine in its sole discretion;

• Suspended our 401(k)-match program, whereby we have historically matched 50 % of qualified U.S.

employees' contributions to our 401(k) plan up to 6 % of their salaries, between April 1, 2020 and December 31, 2020;

• Made a discretionary matching contribution to eligible employees 401(k) plans in December 2020 totaling $ 1.2 million, given our financial performance during the fourth quarter;

• Temporarily froze our hiring efforts and implemented a modest and targeted headcount reduction, though we have since begun backfilling key roles, including engineering positions;

• Michael Gianoni, our President and Chief Executive Officer, elected to forego receipt of all but that portion of his base salary necessary to fund, on a pre-tax basis, his contributions to continue to participate in our health benefits plan, between April 1, 2020 and June 16, 2020;

• Restricted non-essential employee travel and put in place other operating cost containment actions;

• All of our employees with a base salary equal to or less than $ 75 thousand received financial support in the form of a one-time bonus of $ 1 thousand on April 30, 2020;

• On May 1, 2020, we granted restricted stock units with a total grant date fair value of $ 8.3 million to our employees that were eligible for base salary merit increases in lieu of such increases, which will vest on May 1, 2021 subject to the recipient's continued employment with us;

• On May 1, 2020, we granted performance-based restricted stock units with a total grant date fair value of $ 34.4 million to our employees that were eligible for a 2020 cash bonus plan in lieu of such cash bonus, which may be earned and become eligible for vesting on May 1, 2021 subject to meeting certain performance conditions and the recipient's continued employment with us;

• During the third quarter of 2020, we adjusted our workforce strategy to provide more flexibility for our employees to work remotely when our offices reopen.

This change also expands our access to a larger and more diverse talent pool, empowers our leaders to make decisions based on skills and business need rather than location, and it is expected to create efficiencies within our real estate strategy as we optimize our footprint and shift toward more collaborative workspaces within our offices.

Most of the transactions related to these real estate activities closed during the fourth quarter of 2020 with an aggregate one-time cash outlay of $ 21.9 million during the third and fourth quarters of 2020.

We incurred approximately $ 23.1 million of pre-tax costs related to these real estate activities during the third and fourth quarters of 2020.

These activities are expected to result in future annual before-tax savings of approximately $ 14.0 million beginning in 2021.

Recently adopted accounting pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

ASU 2016-13 requires certain types of financial instruments, including trade receivables, to be presented at the net amount expected to be collected based on historical events, current conditions and forward-looking information.

We adopted ASU 2016-13 as of the January 1, 2020 effective date and the adoption did not have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”).

ASU 2018-15 aligns the accounting for implementation costs related to a hosting arrangement that is a service contract with the guidance on capitalizing costs associated with developing or obtaining internal-use software.

We adopted ASU 2018-15 prospectively as of the January 1, 2020 effective date and the adoption did not have a material impact on our consolidated financial statements.

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02").

ASU 2016-02 requires lessees to record most leases on their balance sheet but recognize expenses in the income statement in a manner similar to previous guidance.

The way in which entities classify leases determines how to recognize lease-related revenue and expense.

We adopted ASU 2016-02 as of January 1, 2019 using the transition method that allowed us to initially apply the guidance at the adoption date of January 1, 2019 without adjusting comparative periods presented.

We elected to use the package of practical expedients that allowed us to not reassess:

(1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any existing leases.

We did not elect to use the hindsight practical expedient, which permits entities to use hindsight in determining the lease term and assessing impairment.

Additionally, we elected not to apply the recognition requirements of the new lease accounting standard to short-term leases.

Adopting ASU 2016-02 had a material impact on our consolidated balance sheet as of January 1, 2019, as we recognized $ 121.6 million of lease liabilities and $ 113.4 million of right-of-use ("ROU") assets for those leases classified as operating leases.

In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2021-08, Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ("ASU 2021-08").

ASU 2021-08 requires that an entity recognize and measure contract assets and deferred revenue (a contract liability) acquired in a business combination in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts from Customers (“ASC 606”).

At the acquisition date, an acquirer should account for the related revenue contracts in accordance with ASC 606 as if it had originated the contracts.

To achieve this, an acquirer may assess how the acquiree applied ASC 606 to determine what to record for the acquired revenue contracts.

Generally, this should result in an acquirer recognizing and measuring the acquired contract assets and deferred revenue consistent with how they were recognized and measured in the acquiree’s financial statements (if the acquiree financial statements were prepared in accordance with GAAP).

We early adopted ASU 2021-08 as of October 1, 2021 and applied the guidance to the deferred revenue recorded for EVERFI as of December 31, 2021.

See Note 3 to these consolidated financial statements for further information on our acquisition of EVERFI.

Recently issued accounting pronouncements

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Recurring revenue also includes fees from maintenance services for our on-premises solutions, services included in our renewable subscription contracts, retained and managed services contracts that we expect to have a term consistent with our cloud solution contracts, and variable transaction revenue associated with the use of our solutions.

Our payment services are offered with the assistance of third-party vendors.

In general, when we are the principal in a transaction based on the factors identified in ASC 606-10-55-36 through 55-40, we record the revenue and related

2021 Form 10-K

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Notes to Consolidated Financial Statements

costs on a gross basis.

Our payment services are offered with the assistance of third-party vendors.

In general, when we are the principal in a transaction based on the factors identified in ASC 606-10-55-36 through 55-40, we record the revenue and related costs on a gross basis.

Otherwise, we net the cost of revenue associated with the service against the gross revenue (amount billed to the customer) and record the net amount as revenue.

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Fixed price consulting engagements are generally billed as milestones towards completion are reached.

Revenue for all consulting services is recognized over time as the services are performed.

Revenue for one-time consulting services is generally recognized over time as the services are performed.

We generally recognize analytic services revenue from donor prospect research engagements, the sale of lists of potential donors, data enrichment engagements and benchmarking studies at a point in time (upon delivery).

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Our accounts receivable is derived from sales to customers who primarily operate in the nonprofit sector.

With respect to accounts receivable, we perform ongoing evaluations of our customers and maintain an allowance for credit losses based on historical experience and our

With respect to accounts receivable, we perform ongoing evaluations of our customers and maintain an allowance for credit losses based on historical experience and our expectations of future credit losses.

As of and for the years ended December 31, 2021, 2020 and 2019, there were no significant concentrations with respect to our consolidated revenues or accounts receivable.

2021 Form 10-K

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Notes to Consolidated Financial Statements

expectations of future credit losses.

As of and for the years ended December 31, 2020, 2019 and 2018, there were no significant concentrations with respect to our consolidated revenues or accounts receivable.

Property and equipment

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Goodwill as of the acquisition date represents the excess of the purchase consideration of an acquired business over the fair value of the underlying net tangible and intangible assets acquired and liabilities assumed.

This allocation and valuation require management to make significant estimates and assumptions, especially with respect to long-lived and intangible assets.

Critical estimates in valuing intangible assets include, but are not limited to, estimates about:

expected future cash flows from customers, including revenue and operating expenses;

royalty and customer attrition rates;

proprietary technology obsolescence curve;

the acquired company's brand awareness and market position, the market awareness of the acquired company's branded technology solutions and services;

assumptions about the period of time the brand will continue to be valuable;

as well as expected costs to develop any in-process research and development into commercially viable solutions and estimated cash flows from the projects when completed, and discount rates.

We apply significant judgement in estimating the fair value of intangible assets acquired, which involves the use of significant assumptions.

Significant assumptions used in the valuation of customer relationships include future revenue and operating expenses, customer attrition rates, contributory asset charges, tax amortization benefit, and discount rates.

Significant assumptions used in the valuation of certain developed technology assets include future revenue, proprietary technology obsolescence curve, royalty rate, and discount rate.

Significant assumptions used in the valuation of marketing assets include assumptions about the period of time the brand will continue to be valuable, royalty rate, and discount rate.

Significant assumptions used in the valuation of content intangible assets include cost-based assumptions.

Our estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain and unpredictable, and unanticipated events and changes in circumstances may occur.

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Customer relationships Straight-line and accelerated (1)

Marketing assets Straight-line 2 - 15

Acquired software and technology Straight-line and accelerated (1)

(1) Certain of the customer relationships and acquired software and technology assets are amortized on an accelerated basis.

Marketing assets Straight-line and accelerated (1)

Developed technology Straight-line and accelerated (1)

Content Straight-line

(1) Certain of the customer relationships, marketing assets and developed technology assets are amortized on an accelerated basis.

We write off the gross carrying amount and accumulated amortization balances for all fully amortized intangible assets.

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Substantially all of our intangible assets were acquired in business combinations.

See Note 6 to these consolidated financial statements for a discussion of our impairment of certain acquired intangible assets during 2019.

There were no impairments of acquired intangible assets during 2021 and 2020.

See Note 6 to these consolidated financial statements for a discussion of our impairment of certain acquired intangible assets during 2019.

Impairment of long-lived assets

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See Note 6 to these consolidated financial statements for a discussion of our impairment of certain long-lived assets during 2021 and 2019.

There was no impairment of long-lived assets during 2018.

There were no impairments of long-lived assets during 2020.

Deferred financing costs and debt discount

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Previously recognized compensation cost for an award is reversed in the period that the award is forfeited.

Income tax benefits resulting from

Income tax benefits resulting from the vesting and exercise of stock-based compensation awards are recognized in the period the unit or award is vested or option or right is exercised.

2021 Form 10-K

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Notes to Consolidated Financial Statements

the vesting and exercise of stock-based compensation awards are recognized in the period the unit or award is vested or option or right is exercised.

We make estimates and judgments in accounting for income taxes.

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Gains and losses resulting from foreign currency transactions denominated in currency other than the functional currency are recorded at the approximate rate of exchange at the transaction date in other income, net.

For the years ended December 31, 2020 and 2018, we recorded net foreign currency losses of $ 1.1 million and $ 0.9 million, respectively.

For the year ended 2019, we recorded a net foreign currency loss that was insignificant.

For the years ended December 31, 2021, 2020 and 2019, we recorded net foreign currency losses that were $ 1.6 million, $ 1.1 million and insignificant, respectively.

Research and development

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Qualifying costs capitalized during the application development stage include those related to specific upgrades and enhancements when it is probable that those costs incurred will result in additional functionality.

Overhead costs, including general and administrative costs, as well as maintenance, training and all other costs associated with post-implementation stage

Overhead costs, including general and administrative costs, as well as maintenance, training and all other costs associated with post-implementation stage activities are expensed as incurred.

In addition, internal costs that cannot be reasonably separated between maintenance and relatively minor upgrades and enhancements are expensed as incurred.

2021 Form 10-K

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Notes to Consolidated Financial Statements

activities are expensed as incurred.

In addition, internal costs that cannot be reasonably separated between maintenance and relatively minor upgrades and enhancements are expensed as incurred.

Qualifying capitalized software development costs are amortized on a straight-line basis over the software asset's estimated useful life, which is generally 3 to 7 years.

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See Note 6 to these consolidated financial statements for a discussion of our impairment of certain capitalized software development costs during 2020.

There were no impairment charges related to capitalized software development costs during the years ended December 31, 2019 and 2018.

There were no impairment charges related to capitalized software development costs during 2021 and 2019.

We write off the gross carrying amount and accumulated amortization balances for all fully amortized software development cost assets.

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The amount reclassified was $ 2.1 million.

The increase in our allowance for credit losses during the year ended December 31, 2020 was primarily due to an increase in the aging of our receivables during the second and third quarters of 2020 associated with the COVID-19 pandemic.

We saw some improvement in our customers' payment behavior during the fourth quarter.

The amount of write-offs during the year ended December 31, 2020 was lower than the amount of write-offs during the same period in 2019 as we temporarily suspended sending past due customer accounts to collections during the second and third quarters due to payment delays related to COVID-19.

Our allowance for credit losses remained relatively unchanged during the year ended December 31, 2021.

The amount of write-offs during the year ended December 31, 2021 was higher than during 2020 as we temporarily suspended sending past due customer accounts to collections during the second and third quarters of 2020 due to payment delays related to COVID-19.

Allowance for sales returns

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The amount reclassified was $ 2.1 million.

Advertising costs

We expense advertising costs as incurred , which were $ 7.1 million, $ 3.0 million and $ 3.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

2021 Form 10-K

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Notes to Consolidated Financial Statements

Advertising costs

We expense advertising costs as incurred , which were $ 3.0 million, $ 3.1 million and $ 4.0 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Restructuring costs

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We determine if an arrangement is a lease at inception.

Operating leases are included in operating lease ROU assets, accrued expense and other current liabilities, and operating lease liabilities, net of current portion in our consolidated balance sheet as of December 31, 2020.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

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2021 Acquisition

On December 31, 2021, we acquired all of the outstanding equity securities, including all voting equity interests, of EVERFI, Inc., a Delaware corporation ("EVERFI"), pursuant to an agreement and plan of merger.

The acquisition advances our position as a leader in the rapidly evolving ESG and CSR spaces.

We acquired the equity securities for approximately $ 440.1 million in cash consideration and 3,844,423 shares of the company's common stock, valued at approximately $ 303.6 million, for an aggregate purchase price of approximately $ 743.8 million, subject to closing adjustments.

The cash consideration and related expenses were funded primarily through cash on hand and new borrowings under the 2020 Credit Facility (as defined below).

As a result of the acquisition, EVERFI has become a wholly owned subsidiary of ours.

The operating results of EVERFI have been included in our consolidated financial statements from the date of acquisition.

During the year ended December 31, 2021, we incurred $ 2.9 million of acquisition-related expenses associated with the acquisition, which were recorded in general and administrative expense.

In accordance with applicable accounting rules, 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.

The fair values assigned to the assets acquired and liabilities assumed in the table below are based on our best estimates and assumptions as of 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 intangible assets as well as the assumed deferred income tax balances.

(in thousands) Purchase price allocation

Net working capital, excluding deferred revenue $ ( 3,279 )

Operating lease ROU assets 44,845

Other long-term assets 10,322

Identifiable intangible assets 457,449

Deferred tax liability ( 93,925 )

Deferred revenue ( 51,770 )

Operating lease liabilities, net of current portion ( 42,068 )

Other long-term liabilities ( 645 )

Goodwill 422,846

Total purchase price $ 743,775

The estimated fair value of accounts receivable acquired approximates the contractual value of $ 12.9 million and $ 14.7 million of EVERFI's historic carryover goodwill is deductible for income tax purposes.

The estimated goodwill recognized is attributable primarily to the opportunities for expected synergies from combining the operations and assembled workforce of EVERFI.

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

The EVERFI acquisition resulted in the identification of the following identifiable intangible assets:

Intangible assets acquired Weighted average amortization period

EVERFI (in thousands) (in years)

Developed technology $ 72,000 7

Customer relationships 326,649 16

Marketing assets 40,900 14

Content 17,900 9

Total intangible assets $ 457,449 14

The estimated fair values of the customer relationships, marketing assets, and a substantial portion of the developed technology 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 and multi-period excess earnings method, depending on the intangible asset being valued.

The estimated fair value of the content intangible asset and a small portion of the developed technology was based on the cost approach and included the replacement cost method.

The method of amortization of 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, marketing assets and a substantial portion of the developed technology assets are being amortized on an accelerated basis.

A small portion of the developed technology and content assets are being amortized on a straight-line basis.

2019 Acquisition

On January 2, 2019, we acquired all of the outstanding equity securities, including all voting equity interests, of YourCause Holdings, LLC, a Delaware limited liability company ("YourCause"), pursuant to a purchase agreement and plan of merger.

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We acquired the equity securities for an aggregate purchase price of $ 157.7 million in cash, net of closing adjustments.

The purchase price and related expenses were funded primarily through borrowings under the 2017 Credit Facility.

The purchase price and related expenses were funded primarily through borrowings under the 2017 Credit Facility (as defined below).

As a result of the acquisition, YourCause became a wholly owned subsidiary of ours.

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All measurement period adjustments were insignificant.

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.

2018 Acquisition

On April 30, 2018, we acquired all of the outstanding equity securities, including all voting equity interests, of Reeher LLC, a Minnesota limited liability company (“Reeher”), pursuant to a securities purchase agreement.

The acquisition expanded our fundraising performance management capabilities with the goal of driving more effective fundraising and greater social good outcomes for our customers.

We acquired the equity securities for an aggregate purchase price of $ 41.2 million in cash, net of closing adjustments.

The purchase price and related expenses were funded primarily through borrowings under the 2017 Credit Facility.

As a result of the acquisition, Reeher became a wholly owned subsidiary of ours.

We finalized the purchase price allocation of Reeher, including the valuation of assets acquired and liabilities assumed, during the second quarter of 2019.

All measurement period adjustments were insignificant.

We determined that the impact of this acquisition was not material to our consolidated financial statements;

In accordance with applicable accounting rules, 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.

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Balance at December 31, 2020 $ 635,854

Additions related to current year business combinations 422,846

Effect of foreign currency translation ( 60 )

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Marketing assets 74,731 34,642

Acquired software and technology 232,339 233,094

Non-compete agreements — 2,200

Developed technology 211,552 232,339

Content 17,900 —

Total finite-lived gross carrying amount 910,592 554,097

2 unchanged sentences

Marketing assets ( 7,269 ) ( 5,918 )

Acquired software and technology ( 132,038 ) ( 115,048 )

Non-compete agreements — ( 1,869 )

Developed technology ( 54,013 ) ( 132,038 )

Total accumulated amortization ( 212,540 ) ( 276,591 )

Intangible assets, net $ 698,052 $ 277,506

During the year ended December 31, 2020, changes to the gross carrying amounts of intangible asset classes were primarily related to write-offs of fully amortized intangible assets and the effect of foreign currency translation.

During the year ended December 31, 2021, changes to the gross carrying amounts of intangible asset classes were primarily related to our acquisition of EVERFI as described in Note 3 to these consolidated financial statements, write-offs of fully amortized intangible assets and the effect of foreign currency translation.

During the year ended December 31, 2019, we recorded an impairment charge of $ 0.9 million against an acquired marketing asset that reduced the carrying value of the asset to zero.

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Fair value as of December 31, 2021

Financial liabilities:

Financial assets:

Derivative instruments $ — $ 7,160 $ — $ 7,160

Total financial liabilities $ — $ 4,159 $ — $ 4,159

Total financial assets $ — $ 7,160 $ — $ 7,160

Fair value as of December 31, 2020

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The Financial Conduct Authority in the U.K.

has stated that it plans to phase out LIBOR by the end of calendar year 2021.

has stated that it plans to phase out all tenors of LIBOR by June 2023.

We do not currently anticipate a significant impact to our financial position or results of operations as a result of this action as we expect that our financial contracts currently indexed to LIBOR will either expire or be modified without significant financial impact before the phase out occurs.

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As LIBOR 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.

Our fixed rate debt is also classified within Level 2 of the fair value hierarchy.

Our fixed rate debt is classified within Level 2 of the fair value hierarchy.

We did not transfer any assets or liabilities among the levels within the fair value hierarchy during the years ended December 31, 2021, 2020 and 2019.

Additionally, we did not hold any Level 3 assets or liabilities during the years ended December 31, 2021, 2020 and 2019.

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

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 operating lease ROU assets, which 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.

Assets and liabilities that are measured at fair value on a non-recurring basis include long-lived assets, intangible assets, goodwill and operating lease 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.

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The unobservable inputs in the analysis generally include future cash flow projections and a discount rate.

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

impairment testing, we estimate fair value using market-based methods including the use of market capitalization and consideration of a control premium.

As more fully described in Note 7 and Note 11, during the year ended December 31, 2020, we recorded impairment charges of $ 4.3 million against certain previously capitalized software development costs and $ 4.0 million against our operating lease ROU assets.

For goodwill impairment testing, we estimate fair value using market-based methods including the use of market capitalization and consideration of a control premium.

As more fully described in Note 7 and Note 11 to these consolidated financial statements, during the year ended December 31, 2021, we recorded impairment charges of $ 1.7 million against certain property and equipment assets and $ 3.6 million against our operating lease ROU assets.

During the year ended December 31, 2020, we recorded impairment charges of $ 4.3 million against certain previously capitalized software development costs and $ 4.0 million against our operating lease ROU assets.

See Notes 7 and 11, respectively, to these consolidated financial statements for additional details.

During the year ended December 31, 2019, we recorded impairment charges of $ 3.8 million against our operating lease ROU assets, $ 1.4 million against certain property and equipment assets and $ 0.9 million against certain finite-lived intangible assets.

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Property and Equipment and Software Development Costs

Purchase of Global Headquarters Facility

In August 2020, we completed the purchase of the building, fixtures and other improvements and parcels of land of our Global Headquarters Facility in Charleston, South Carolina, pursuant to a Purchase and Sale Agreement (the "PSA") with HPBB1, LLC, a Georgia limited liability company (the "Seller") (the "Transaction").

Prior to the completion of the Transaction, we leased the Global Headquarters Facility from the Seller.

We paid the Seller a purchase price that included the assumption of the Seller's obligations of $ 61.1 million, cash of $ 15.2 million and certain lender fees, closing costs, adjustments and prorations as set forth in the PSA.

We funded the cash portion of the purchase price through borrowings under our then-existing credit facility.

We capitalized the insignificant direct transaction costs we incurred as a component of the assets acquired.

As a result of the Transaction, we derecognized the ROU asset and lease liability associated with the former lease and recorded the following long-lived assets on a relative fair value basis in property and equipment, net upon closing:

(dollars in thousands) Assets

acquired Estimated useful life (years)

Land $ 9,548 —

Building 61,284 39

Building improvements 4,393 7 - 15

Total long-lived assets $ 75,225

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Property and equipment

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(1) Upon acquisition of our global headquarters facility in August 2020, we reclassified related leasehold improvement costs of $ 5.5 million to building improvements given the acquisition of the underlying assets.

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Depreciation expense was $ 14.4 million, $ 19.2 million and $ 15.0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

During the year ended December 31, 2021, we recorded impairment char ges of $ 1.7 million against certain property and equipment assets.

These impairment charges resulted primarily from our decision to close our Austin office.

This impairment charge is reflected in general and administrative expense on the statements of comprehensive income.

During the year ended December 31, 2019, we recorded impairment charges of $ 1.4 million against certain property and equipment assets that reduced the carrying value of the assets to zero.

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During the year ended December 31, 2020, we recorded an impairment charge of $ 4.3 million against certain previously capitalized software development costs that reduced the carrying value of those assets to zero.

The impairment charge is reflected in cost of recurring revenue and resulted primarily from our decision to accelerate the end of customer support for certain solutions.

The impairment charge was reflected in cost of recurring revenue and resulted primarily from our decision to accelerate the end of customer support for certain solutions.

Other changes to the gross carrying amount of software development costs were primarily related to 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, write-offs of fully amortized assets, and the effect of foreign currency translation.

Amortization expense related to software development costs was $ 31.0 million, $ 31.7 million and $ 20.7 million for the years ended December 31, 2021, 2020 and 2019, respectively, and is included primarily in cost of recurring.

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Consolidated Financial Statement Details

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Restricted cash due to customers $ 593,296 $ 607,943

Letters of credit for operating leases 2,256 —

Real estate escrow balances 1,064 1,276

Total restricted cash $ 596,616 $ 609,219

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Prepaid expenses and other assets

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28,880 24,471

Receivables for probable insurance recoveries (4)

Implementation costs for cloud computing arrangements, net (5)(6)

11,892 11,298

Derivative instruments 7,160 —

Unbilled accounts receivable 5,443 10,385

Receivables for probable insurance recoveries (6)

Prepaid insurance 5,363 1,426

Taxes, prepaid and receivable 3,986 1,891

Security deposits 754 885

Deferred tax assets 1,546 1,592

Other assets 11,835 8,740

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(3) The current portion of prepaid software maintenance and subscriptions as of December 31, 2021 and December 31, 2020 was $ 24.7 million and $ 19.8 million, respectively.

(4) These costs, which were previously included in prepaid software maintenance and subscriptions, 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 $ 0.8 million for the year ended December 31, 2020 and insignificant for the year ended December 31, 2019.

Accumulated amortization for these costs was $ 1.1 million as of December 31, 2020 and insignificant as of December 31, 2019.

(6) See discussion of the Security Incident at Note 11.

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

(4) See discussion of the Security Incident at Note 11 to these consolidated financial statements.

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

(6) Amortization expense from capitalized cloud computing implementation costs was $ 1.9 million, $ 0.8 million and insignificant for the years ended December 31, 2021, 2020 and 2019, respectively.

Accumulated amortization for these costs was $ 3.0 million and $ 1.1 million as of December 31, 2021 and 2020, respectively.

Accrued expenses and other liabilities

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2021 December 31,

Operating lease liabilities, current portion $ 9,359 $ 19,784

Accrued bonuses (1)

Taxes payable (1)

$ 19,777 $ 19,577

Amounts payable to former EVERFI option holders (2)

Accrued legal costs (3)

Operating lease liabilities, current portion 9,170 9,359

Customer credit balances 8,403 5,874

Accrued commissions and salaries 7,872 5,010

Accrued legal costs 4,808 87

Derivative instruments 4,159 1,757

Unrecognized tax benefit 3,351 3,758

Accrued bonuses 5,829 —

Accrued transaction-based costs related to payments services 5,427 —

Accrued health care costs 3,042 2,341

Accrued vacation costs 2,234 2,311

Unrecognized tax benefit 1,248 3,351

Derivative instruments — 4,159

Other liabilities 9,310 6,304

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Accrued expenses and other current liabilities $ 100,096 $ 52,228

(1) In March 2020, we reduced our accrued bonuses due to the payment of bonuses from the prior year and, in response to COVID-19, determined to replace our 2020 cash bonus plans with performance-based equity awards (see Note 2) .

(2) We deferred payments of the employer's portion of Social Security taxes during 2020 under the Coronavirus, Aid, Relief and Economic Security Act ("CARES Act"), half of which is due by the end of calendar year 2021 with the remainder due by the end of calendar year 2022.

(1) We deferred payments of the employer's portion of Social Security taxes during 2020 under the Coronavirus, Aid, Relief and Economic Security Act ("CARES Act"), half of which was due by the end of calendar year 2021 with the remainder due by the end of calendar year 2022.

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

(2) Represents amounts not yet paid by EVERFI to its former option holders as of December 31, 2021, solely due to the timing of the acquisition on the last day of 2021.

See Note 3 to these consolidated financial statements for additional information regarding our acquisition of EVERFI.

(3) All accrued legal costs are classified as current.

The increase in accrued legal costs from December 31, 2020 was primarily due to the Security Incident.

See Note 11 to these consolidated financial statements.

Deferred revenue

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Other income, net $ 180 $ 1,658 $ 4,058

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

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

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a dollar and a designated currency revolving credit facility with sublimits for letters of credit, swingline loans and multicurrency borrowings (the “2017 Revolving Facility”) and a term loan (the “2017 Term Loan”) together, (the “2017 Credit Facility”).

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

In October 2020, we entered into a 5 -year $ 900.0 million Amended and Restated Credit Agreement (the “2020 Credit Facility”).

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Upon closing, we borrowed $ 400.0 million pursuant to the 2020 Term Loan and used the proceeds to repay the outstanding principal balance of the term loan under the 2017 Credit Facility, and repay $ 124.4 million of outstanding revolving credit loans under the 2017 Revolving Facility.

In connection with the amendment and restatement of the 2017 Credit Facility, the existing Pledge Agreement dated June 2, 2017 (as amended, supplemented or modified from time to time, the “2017 Pledge Agreement”), by us in favor of Bank of Am erica, N.A., as administrative agent, was likewise amended and restated.

In connection with the amendment and restatement of the 2017 Credit Facility, the existing Pledge Agreement dated June 2, 2017, by us in favor of Bank of Am erica, N.A., as administrative agent, was likewise amended and restated.

Certain lenders of the 2020 Term Loan participated in the 2017 Term Loan and the change in present value of our future cash flows to these lenders under the 2017 Term Loan and under the 2020 Term Loan was less than 10%.

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This loss was recognized in the consolidated statements of comprehensive income within other income, net.

In connection with our entry into the 2020 Credit Facility, we paid $ 4.0 million in financing costs, of which $ 1.2 million were capitalized in other assets and, together with a portion of the unamortized deferred financing costs from the 2017 Credit Facility and prior facilities, are being amortized into interest expense over the term of the new facility.

As of December 31, 2020, deferred financing costs totaling $ 1.5 million were included in other assets on our consolidated balance sheets.

We recorded aggregate financing costs of $ 2.0 million as a direct deduction from the carrying amount

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

of our debt liability, which related to debt discount (fees paid to lenders) and debt issuance costs for the 2020 Term Loan.

Summary of the 2020 Credit Facility

The 2020 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.

Our obligations under the 2020 Credit Facility are secured by the stock and limited liability company interests of certain of our direct subsidiaries and any of our material domestic subsidiaries, if any, and the proceeds therefrom pledged pursuant to an Amended and Restated Pledge Agreement dated as of October 30, 2020 (the “2020 Pledge Agreement”), by us in favor of Bank of America, N.A., as administrative agent, for the ratable benefit of itself and the secured parties referred to therein.

Our obligations under the 2020 Credit Facility are secured by the stock and limited liability company interests of certain of our direct subsidiaries and any of our material domestic subsidiaries, if any, and the proceeds therefrom pledged pursuant to an Amended and Restated Pledge Agreement dated as of October 30, 2020, by us in favor of Bank of America, N.A., as administrative agent, for the ratable benefit of itself and the secured parties referred to therein.

Dollar tranche loans under the 2020 Revolving Facility and 2020 Term Loan bear interest at a rate per annum equal to (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) the Eurocurrency Rate (which varies depending on the currency in which the loan is denominated) plus 1.00 % (the “Base Rate”), plus (b) an applicable margin as specified in the 2020 Credit Facility (the “Applicable Margin”).

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At December 31, 2021, we were in compliance with our debt covenants under the 2020 Credit Facility.

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Under the terms of the 2020 Credit Facility, we are entitled on one or more occasions, subject to the satisfaction of certain conditions, to request an increase in the commitments under the Revolving Credit Facility and/or request additional incremental term loans in the aggregate principal amount of up to $ 250.0 million plus an amount, if any, such that the net leverage ratio shall be no greater than 3.25 to 1.00.

At December 31, 2021, our available borrowing capacity under the 2020 Credit Facility was $ 239.5 million.

First incremental term loan

In December 2021, we entered into the First Incremental Term Loan Agreement (the "Incremental Amendment").

The Incremental Amendment amends the 2020 Credit Facility and, among other things, provides for a $ 250.0 million incremental term loan (the “2021 Incremental Term Loan”).

The 2021 Incremental Term Loan bears 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) the Daily SOFR rate plus 1.00 % (the “Base Rate”), plus an applicable margin as specified in the Incremental Amendment (the “Applicable Margin”);

(b) the Daily SOFR rate plus a SOFR adjustment rate as specified in the Incremental Amendment (the “SOFR Adjustment”) plus the Applicable Margin;

or (c) the Term SOFR rate plus the SOFR Adjustment 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 1.50 %) or a SOFR Rate loan ( 1.375 % to 2.50 %).

The SOFR Adjustment varies based on the applicable interest period and equals 0.10 % for Daily SOFR loans and for Term SOFR loans with a one-month interest period, 0.15 % for Term SOFR loans with a three-month interest period and 0.25 % for Term SOFR loans with a six-month interest period.

The 2021 Incremental Term Loan matures in October 2025, which is the maturity date of the existing term loan under the 2020 Credit Facility, and is otherwise subject to substantially the same terms and conditions as the existing term loan under the 2020 Credit Facility.

Financing costs

We recorded aggregate financing costs of $ 2.0 million as a direct deduction from the carrying amount of our debt liability, which related to debt discount (fees paid to lenders) and debt issuance costs for the 2020 Term Loan.

In connection with our entry into the 2021 Incremental Term Loan, we paid $ 3.1 million in financing costs which were recorded as a direct deduction from the carrying amount of our debt liability.

As of December 31, 2021, deferred financing costs totaling $ 1.2 million were included in other assets on our consolidated balance sheets.

Financing for EVERFI acquisition

On December 31, 2021, we acquired EVERFI for approximately $ 440.1 million in cash consideration and 3,844,423 shares of the company's common stock, valued at approximately $ 303.6 million, for an aggregate purchase price of approximately $ 743.8 million, subject to closing adjustments.

We financed the cash consideration and related expenses through cash on hand and new borrowings u nder the 2020 Credit Facility , including $ 250.0 million under the First Incremental Term Loan (as defined above).

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Real estate loans

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At December 31, 2021, we were in compliance with our debt covenants under the Real Estate Loans.

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

In December 2019, we entered into a 51-month $ 2.2 million agreement to finance our purchase of software and related services for our internal use.

The agreement is a non-interest-bearing note requiring four equal annual payments, where the first payment was due in January 2020.

Interest associated with the note has been imputed at the rate we would incur for amounts borrowed under our then-existing credit facility.

In January 2020, we entered into an additional 39-month $ 3.5 million agreement to finance our purchase of software and related services for our internal use.

The agreement is a non-interest-bearing note requiring three equal annual payments, where the first payment was due in March 2020.

Interest associated with the note has been imputed at the rate we would incur for amounts borrowed under our then-existing credit facility.

From time to time, we enter into third-party financing agreements for purchases of software and related services for our internal use.

Generally, the agreements are non-interest-bearing notes requiring annual payments.

Interest associated with the notes is imputed at the rate we would incur for amounts borrowed under our then-existing credit facility at the inception of the notes.

The following table summarizes our currently effective financing agreements as of December 31, 2021:

(dollars in thousands) Term

in Months Number of

Annual Payments First Annual

Payment Due Original Loan

Effective dates of agreements:

December 2019 51 4 January 2020 $ 2,150

January 2020 39 3 March 2020 3,470

As of December 31, 2021, the required annual maturities related to the 2020 Credit Facility, the Real Estate Loans and our other debt were as follows:

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We designated each of the interest rate swap agreements as a cash flow hedge at the inception of the contracts.

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

The terms and notional values of our derivative instruments were as follows as of December 31, 2021:

1 unchanged sentence

Derivative instruments designated as hedging instruments:

Interest rate swap July 2017 - July 2021 $ 150,000

Interest rate swap February 2018 - June 2021 50,000

Interest rate swap June 2019 - June 2021 75,000

Interest rate swap November 2020 - October 2024 $ 60,000

Interest rate swap November 2020 - October 2024 60,000

Forward-starting interest rate swap June 2021 - October 2024 120,000

Forward-starting interest rate swap July 2021 - October 2024 120,000

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Interest rate swap June 2021 - October 2024 120,000

Interest rate swap July 2021 - October 2024 120,000

Interest rate swap July 2021 - October 2024 75,000

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

Liability Derivatives

Asset Derivatives Liability Derivatives

(dollars in thousands) Balance sheet location December 31,

2021 December 31,

2020 Balance sheet location December 31,

2021 December 31,

Derivative instruments designated as hedging instruments:

Interest rate swaps, current portion Accrued expenses

Interest rate swaps, current portion Prepaid expenses

and other current assets $ — $ — Accrued expenses

and other current liabilities $ — $ 2,698

Interest rate swaps, long-term portion Other liabilities 1,461 1,757

Interest rate swaps,

long-term portion

Other assets 7,160 — Other liabilities — 1,461

Total derivative instruments designated as hedging instruments $ 7,160 $ — $ — $ 4,159

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Interest rate swaps $ ( 1,757 ) Interest expense $ 573

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

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.

1 unchanged sentence

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) is reclassified from accumulated other comprehensive income (loss) to current earnings.

The estimated accumulated other comprehensive loss as of December 31, 2020 that is expected to be reclassified into earnings within the next twelve months is $ 3.4 million.

The estimated accumulated other comprehensive income as of December 31, 2021 that is expected to be reclassified into earnings within the next twelve months is insignificant.

There were no ineffective portions of our interest rate swap derivatives during the years ended December 31, 2021, 2020 and 2019.

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We have operating leases for corporate offices, subleased offices and certain equipment and furniture.

In August 2020, we completed the purchase of our Global Headquarters Facility that we previously leased (see Note 7).

As of December 31, 2020, we had operating leases for office space that had not yet commenced with future rent payments of $ 3.5 million with a lease term of approximately 3 years.

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

The components of lease expense for the year ended December 31, 2020, were as follows:

In August 2020, we completed the purchase of our global headquarters facility that we previously leased.

As of December 31, 2021, we did not have any operating leases that had not yet commenced.

With the acquisition of EVERFI, we assumed a lease for office space in Washington, D.C.

At December 31, 2021, we had a standby letter of credit of $ 2.1 million for a security deposit for this lease.

The following table summarizes the components of our lease expense:

(dollars in thousands) 2021 2020 2019

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(1) Includes short-term lease costs, which were immaterial.

During the third quarter of 2020, we adjusted our workforce strategy to provide more flexibility for our employees to work remotely when our offices reopen.

This change is expected to create efficiencies within our real estate strategy as we optimize our footprint and shift toward more collaborative workspaces within our offices.

As a result, during the three months ended September 30, 2020, we reduced the estimate d useful lives of our operating lease ROU assets for certain of our office locations we expected to exit.

We recorded $ 16.2 million in incremental operating lease costs during 2020 related to this change in accounting estimate, which accounts for a substantial portion of the increase in operating lease costs during 2020.

For these same office locations, we also reduced the estimated useful lives of certain facilities-related fixed assets, which resulted in incremental depreciation expense of $ 4.6 million during 2020 (see Note 7).

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 in December 2021.

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

We enter into arrangements for smaller more flexible workspaces where ne cessary.

As a result, during the twelve months ended December 31, 2021, we reduced the estimated useful lives of our operating lease ROU assets for certain of our office locations we expected to exit.

We recorded $ 5.3 million in incremental operating lease costs during 2021 related to this change in accounting estimate.

During the twelve months ended December 31, 2021, we also recorded $ 3.6 million in impairments of op erating lease ROU assets associated with certain leased office spaces we have ceased using as a result of our adjusted workforce strategy.

These impairment charges are reflected in general and administrative expense.

During the twelve months ended December 31, 2020, we reduced the estimated useful lives of our operating lease ROU assets for certain of our office locations we expected to exit.

During the twelve months ended December 31, 2020 , we also recorded $ 4.0 million in impairments of op erating lease ROU assets associated with certain leased office spaces we ceased using.

These impairment charges are reflected in general and administrative expense.

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

During the twelve months ended December 31, 2019, we recorded $ 3.8 million in impairments of operating lease ROU assets associated with certain leased office spaces we ceased using as part of our facilities optimization restructuring.

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See Note 18 to these consolidated financial statements for additional details regarding our facilities optimization restructuring.

Total rent expense as determined under ASC 840 was $ 22.2 million for the year ended December 31, 2018.

Maturities of our operating lease liabilities as of December 31, 2021 were as follows:

5 unchanged sentences

Present value of future payments $ 62,556

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Our ROU assets and lease liabilities are included in the following line items in our consolidated balance sheet:

2 unchanged sentences

Operating leases

Operating lease right-of-use assets $ 22,671 $ 104,400

Operating lease ROU assets

$ 53,883 $ 22,671

Accrued expenses and other current liabilities $ 9,170 $ 9,359

1 unchanged sentence

Total operating lease liabilities $ 62,556 $ 26,716

As of December 31, 2020, the weighted average remaining lease terms and discount rates were as follows:

The increase in operating lease ROU assets and operating lease liabilities during 2021 was primarily due to leases for office space we assumed with our acquisition of EVERFI.

See Note 3 to these consolidated financial statements for details.

The weighted average remaining lease terms and discount rates were as follows:

(dollars in thousands) December 31,

2021 December 31,

2020 December 31,

Operating leases

1 unchanged sentence

Weighted average discount rate 4.68 % 5.70 % 5.96 %

Supplemental cash flow information related to leases during the year ended December 31, 2020, was as follows:

Supplemental cash flow information related to leases was as follows:

(dollars in thousands) 2021 2020 2019

1 unchanged sentence

Operating cash flows from operating leases (1)

$ 11,338 $ 26,713 $ 24,569

Right-of-use assets obtained in exchange for lease obligations (non-cash):

Operating leases 5,358 11,002 102,245

(1) The 2020 amount was revised to correct an immaterial disclosure error in the previously filed consolidated financial statements.

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Other commitments

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We have not identified any losses and, accordingly, we have not recorded a liability related to these indemnifications.

Guarantees and indemnification obligations

We enter into agreements in the ordinary course of business with, among others, customers, creditors, vendors and service providers.

Pursuant to certain of these agreements we have agreed to indemnify the other party for certain matters, such as property damage, personal injury, acts or omissions of ours, or our employees, agents or representatives, or third-party claims alleging that the activities of its contractual partner pursuant to the contract infringe a patent, trademark or copyright of such third party.

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Legal proceedings

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We recognize insurance recoveries, if any, when they are probable of receipt.

All associated legal costs are expensed as incurred.

All associated costs due to third-party service providers and consultants, including legal fees, are expensed as incurred.

Legal proceedings are inherently unpredictable.

However, we believe that we have valid defenses with respect to the legal matters pending or threatened against us and intend to defend ourselves vigorously against all claims asserted.

We further believe that the amount or range of reasonably possible losses related to such pending or threatened legal proceedings will not have a material adverse effect on our business, operating results, cash flows, or financial condition should such litigation be resolved unfavorably.

It is possible, nevertheless, that our consolidated financial position, results of operations or cash flows could be negatively affected in any particular period by an unfavorable resolution of one or more of such legal proceedings.

It is possible 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.

Security incident

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Our investigation into the Security Incident by our cybersecurity team and third-party forensic advisors remains ongoing.

During 2020, we recorded $ 10.4 million of expenses related to the Security Incident and offsetting probable insurance recoveries of $ 9.4 million.

Due to the time required to submit and process such insurance claims, we have not yet received all of the accrued insurance recoveries.

Of the insurance recoveries recorded, $ 3.1 million had been paid as of December 31, 2020.

Recorded expenses consisted primarily of payments to third-party service providers and consultants, including legal fees, and enhancements to our cybersecurity measures.

We present expenses and insurance recoveries related to the Security Incident in general and administrative expense on our condensed consolidated statements of comprehensive income.

We expect to continue to experience increased costs related to our response to the Security Incident and our efforts to further enhance our security measures, which may or may not be material.

As a result of the Security Incident, we are currently subject to certain legal proceedings, claims, inquiries and investigations, as discussed below, and could be the subject of additional legal proceedings, claims, inquires and investigations in the future that might result in adverse judgments, settlements, fines, penalties, or other resolution.

Although we carry insurance policies that we believe will provide coverage for a significant portion of our current and expected future losses and expenses related to the Security Incident, there can be no assurance that they will do so.

Based on our analysis of the factors described above, we have not recorded a liability related to the Security Incident as of December 31, 2020 because we are unable at this time to reasonably estimate the possible loss or range of loss.

Customer claims.

To date, we have received approximately 570 claims for reimbursement of expenses from customers or their attorneys in the U.S., U.K.

and Canada related to the Security Incident (none of which have as yet been filed in court or in arbitration).

Possible exposure could result from our customers’ costs and expenses associated with notifying their own customers of the Security Incident and taking steps to assure that personal information has not been compromised as a result of the Security Incident.

We are in the process of analyzing individual customer contracts into which we have entered, the specific claims made and applicable law.

At this time we cannot determine what, if any, exposure we have in the context of customer claims.

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 abo ve a $ 250 thousand deductible payable by us.

As noted below, this coverage has reduced our financial exposure related to the Security Incident, and we will continue to seek recoveries under these insurance policies.

2021 Form 10-K

1 unchanged sentence

Notes to Consolidated Financial Statements

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

Years ended December 31,

(dollars in thousands) 2021 2020

Gross expense (1)

$ 40,560 $ 9,831

Offsetting probable insurance recoveries ( 38,746 ) ( 9,363 )

Net expense $ 1,814 $ 468

(1) The 2020 amount has been revised to exclude costs associated with enhancements to our cybersecurity program.

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

(dollars in thousands) December 31,

2021 December 31,

Cumulative gross expense (1)

$ 50,391 $ 9,831

Cumulative offsetting insurance recoveries ( 48,109 ) ( 9,363 )

Cumulative net expense $ 2,282 $ 468

Cumulative offsetting insurance recoveries paid $ ( 29,968 ) $ ( 3,075 )

(1) The 2020 amount has been revised to exclude costs associated with enhancements to our cybersecurity program.

Due to the time required to submit and process such insurance claims, we have not yet received all of the accrued insurance recoveries.

Recorded expenses consisted primarily of payments for legal fees related to governmental inquiries and investigations and customer constituent class actions.

We present expenses and insurance recoveries related to the Security Incident in general and administrative expense on o ur consolidated statements of comprehensive income and as operating activities on our consolidated statements of cash flows.

Based on our review of expenses incurred to date, total costs related to the Security Incident have 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, inquiries and investigations discussed below, and our efforts to further enhance our security measures.

For full year 2022, we currently expect net cash outlays of approximately $ 25.0 million to $ 35.0 million for ongoing legal fees related to the Security Incident.

In line with our policy as discussed above, legal fees, are expensed as incurred.

Based on our analysis of the factors described above, we have not recorded a liability for a loss contingency related to the Security Incident as of December 31, 2021 because we are unable at this time to reasonably estimate the possible loss or range of loss.

Customer claims.

To date, we have received approximately 260 specific requests for reimbursement of expenses ("Customer Reimbursement Requests") and 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 have as yet been filed in court).

Of the Customer Reimbursement Requests received to date, approximately 180 have been fully resolved and closed.

In addition, insurance companies representing various customers’ interests through subrogation claims have contacted us.

One insurance company has filed a subrogation claim in court.

Customer and insurer subrogation claims generally seek reimbursement of their costs and expenses associated with notifying their own customers of the Security Incident and taking steps to assure that personal information has not been compromised as a result of the Security Incident.

Our review of customer and subrogation claims includes analyzing individual customer contracts into which we have entered, the specific claims made and applicable law.

Customer constituent class actions .

Presently, we are a defendant in 19 putative consumer class action cases [ 17 in U.S.

federal courts (some of which have been consolidated under multi district litigation to a single federal court), 1 in a U.S.

state court and 2 in Canadian courts] alleging harm from the Security Incident.

federal courts (which have been consolidated under multi district litigation to a single federal court) and 2 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.

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Lawsuits that are putative class actions require a plaintiff to satisfy a number of procedural requirements before proceeding to trial.

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This analysis is further complicated by the fact that the plaintiffs lack contractual privity with us.

Governmental inquiries.

To date, we have received a consolidated, multi-state Civil Investigative Demand issued on behalf of 44 state Attorneys General and the District of Columbia relating to the Security Incident.

In addition, we have received communications, inquires and requests from the U.S.

Federal Trade Commission, the U.S.

Department of Health and Human Services, the U.S.

Securities and Exchange Commission, the Information Commissioner’s Office in the United Kingdom (the “ICO”) under the U.K.

Data Protection Act 2018, the Office of the Australian Information Commissioner and the Office of the Privacy Commissioner of Canada.

We are cooperating with these offices and responding to their inquiries.

Governmental inquiries and investigations.

To date, we have received a consolidated, multi-state Civil Investigative Demand issued on behalf of 48 state Attorneys General and the District of Columbia and separate Civil Investigative Demands from the offices of the Illinois Attorney General and the California Attorney General relating to the Security Incident.

We also are subject to the following pending governmental actions:

• an investigation by the U.S.

Federal Trade Commission;

• a formal investigation by the SEC;

• an investigation by the U.S.

Department of Health and Human Services;

• an investigation by the Office of the Australian Information Commissioner;

• an investigation by the Office of the Privacy Commissioner of Canada.

On September 28, 2021, the Information Commissioner’s Office in the United Kingdom under the U.K.

Data Protection Act 2018 (the "ICO") notified us that it has closed its investigation of the Security Incident.

Based on its investigation and having considered our actions before, during and after the Security Incident, the ICO issued our European subsidiary a reprimand in accordance with Article 58(2)(b) of the U.K.

General Data Protection Regulation ("U.K.

GDPR") due to our non-compliance, in the ICO's view, with the requirements set out in Article 32 of the U.K.

GDPR regarding the processing of personal data.

The ICO did not impose a penalty related to the Security Incident, nor did it impose any requirements for further action by us.

On September 24, 2021, we received notice from the Spanish Data Protection Authority that it has concluded its investigation of the Security Incident, pursuant to which our European subsidiary paid a penalty of € 60,000 in relation to the alleged late notification of two Spanish data controllers regarding 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 without taking any action against us.

We continue to cooperate with all ongoing inquiries and 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 inquiries and investigations could result in adverse judgements, 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.

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

We file income tax returns in the U.S.

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federal income tax examination for calendar tax years 2018 through 2021 as well as state and foreign income tax examinations for various years depending on statutes of limitations of those jurisdictions.

We are currently under U.S.

federal income tax examination for the calendar year 2016.

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

We entered into settlement with the IRS Appeals Office in relation to one of our uncertain tax positions which resulted in release of the corresponding liability for uncertain tax position.

The following summarizes the components of income tax expense (benefit):

28 unchanged sentences

Change in state income tax rate applied to deferred tax balances 2.3 0.1 ( 3.1 )

Change in valuation reserve (primarily state credit reserves) 38.2 3.7 0.4

Section 162(m) limitation 75.0 17.5 30.8

Change in valuation reserve (primarily state credit reserves) 26.1 38.2 3.7

Acquisition costs 8.7 — —

Nondeductible meals, entertainment and transportation 1.1 3.3 11.3

Unrecognized tax benefit 1.3 4.4 ( 2.6 )

GILTI inclusion — 1.3 5.9

FDII benefit — — ( 1.5 )

Stock-based compensation ( 1.2 ) ( 20.2 ) ( 17.4 )

Foreign tax rate ( 1.7 ) 0.3 0.2

State credits, net of federal benefit ( 2.3 ) ( 15.4 ) ( 1.9 )

DTA Adjustment – NOLs — ( 3.3 ) —

Return to accrual adjustment ( 4.2 ) ( 4.1 ) ( 10.6 )

Foreign tax rate ( 6.0 ) ( 1.7 ) 0.3

State credits, net of federal benefit ( 32.6 ) ( 2.3 ) ( 15.4 )

Unrecognized tax benefit ( 32.7 ) 1.3 4.4

Stock-based compensation ( 36.2 ) ( 1.2 ) ( 20.2 )

Federal credits generated ( 54.5 ) ( 17.4 ) ( 37.6 )

1 unchanged sentence

Income tax provision (benefit) effective rate 19.6 % 64.3 % ( 12.5 ) %

The increase in our effective tax rate in 2020 when compared to 2019, was primarily due to increase in valuation allowance attributable to state tax credit carryforwards for which we do not expect to realize benefit.

Furthermore, our 2020 effective tax rate was negatively impacted by reduced benefit attributable to research tax credit and stock based compensation deduction.

Lastly, higher 2020 earnings lessened impact of other non-deductible items.

The decrease in our effective income tax rate in 2021 when compared to 2020, was primarily due to prior year increase in valuation allowance attributable to state tax credit carryforwards for which we do not expect to realize benefit.

Furthermore, our 2021 effective income tax rate was positively impacted by increased benefit attributable to stock based compensation deduction and a reduction to the unrecognized tax benefit as a result of IRS audit settlement and statute of limitation lapses offset against negative impacts of the U.K.-enacted tax rate increase and an increase in non-deductible compensation.

2021 Form 10-K

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If not utilized, the federal net operating loss carryforwards will begin to expire in 2028 and the state net operating loss carryforwards will expire over various periods beginning in 2022.

Our foreign net operating loss carryforwards have an unlimited carryforward period.

As of December 31, 2020, our foreign tax credit carryforwards for income tax purposes were insignificant.

Of our foreign net operating loss carryforwards, $ 425 thousand expires in 2024 with the remainder having an unlimited carryforward period.

Our federal tax credit carryforwards for income tax purposes were approximately $ 22.1 million.

2 unchanged sentences

A portion of the foreign and state net operating loss carryforwards and state credit carryforwards have a valuation reserve due to management's uncertainty regarding the future ability to use such carryforwards.

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets.

As of December 31, 2020, in part because requisite tax planning strategies are no longer considered feasible and prudent, management determined that it is more likely than not that the benefit from certain state tax credit carryforwards will not be realized.

In recognition of this risk, we have provided a valuation allowance of $ 28.2 million on the deferred tax assets related to these state tax credit carryforwards.

The increase in valuation allowance resulted in $ 8.3 million charge to income tax expense and non-recognition of benefit attributable to credits generated in the current year.

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

The following table illustrates the change in our deferred tax asset valuation allowance:

7 unchanged sentences

2019 6,855 — ( 402 ) 6,453

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

The following table sets forth the change to our unrecognized tax benefit for the years ended December 31, 2021, 2020 and 2019:

5 unchanged sentences

Increases from current period positions 1,751 491 456

Settlements (payments) ( 1,192 ) — —

Lapse of statute of limitations ( 1,482 ) ( 12 ) ( 612 )

3 unchanged sentences

We recognize accrued interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense.

The total amount of accrued interest and penalties included in the consolidated balance sheet as of December 31, 2020 and December 31, 2019 was $ 1.1 million and $ 1.0 million, respectively.

The total amount of accrued interest and penalties included in the consolidated balance sheet as of December 31, 2021 and December 31, 2020 was insignificant and $ 1.1 million, respectively.

The total amount of interest and penalties included in the consolidated statements of comprehensive income as an increase or decrease in income tax expense for 2021, 2020 and 2019 was insignificant.

1 unchanged sentence

This possible decrease could result from the expiration of statutes of limitations.

The reasonably possible decrease at December 31, 2020 was $ 1.1 million.

The reasonably possible decrease at December 31, 2021 was insignificant.

For our undistributed earnings of foreign subsidiaries, which we do not consider to be significant, we concluded that these earnings would be permanently reinvested in the local jurisdictions and not repatriated to the United States.

5 unchanged sentences

Under the 2016 Equity and Incentive Compensation Plan Amended and Restated as of June 10, 2021 (the "2016 Equity Plan"), we may grant incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, other stock awards and cash incentive awards to employees, directors and consultants.

We maintain other stock-based compensation plans including the 2008 Equity Incentive Plan (the “2008 Equity Plan”), under which no additional grants may be made.

In connection with the acquisition of Convio in May 2012, we maintain the Convio, Inc.

1999 Stock Option/Stock Issuance Plan, as amended (the “Convio 1999 Plan”) and Convio, Inc.

2009 Stock Incentive Plan, as amended (the “Convio 2009 Plan”), which we assumed upon the acquisition of Convio.

Our Compensation Committee of the Board of Directors administers all of these plans and the stock-based awards are granted under terms determined by them.

Our Compensation Committee of the Board of Directors administers this plan and the stock-based awards are granted under terms determined by it.

The total number of authorized stock-based awards available under our plan was 3,500,423 as of December 31, 2021.

We issue common stock from our pool of authorized stock upon exercise of stock options and stock appreciation rights, vesting of restricted stock units or upon granting of restricted stock.

2021 Form 10-K

1 unchanged sentence

Notes to Consolidated Financial Statements

The total number of authorized stock-based awards available under our plans was 4,779,951 as of December 31, 2020.

We issue common stock from our pool of authorized stock upon exercise of stock options and stock appreciation rights, vesting of restricted stock units or upon granting of restricted stock.

Historically, we have issued four types of awards under these plans:

Historically, we have issued four types of awards under our plans:

restricted stock awards, restricted stock units, stock options and stock appreciation rights ("SARs").

5 unchanged sentences

Restricted stock units 1,279,270 1,170,885

Stock options — 206

The majority of the stock-based awards granted under these plans have a 10 -year contractual term.

Options and SARs granted under the 2016 Equity Plan have a 10 -year contractual term.

Awards granted to our executive officers and certain members of management are subject to accelerated vesting upon a change in control as defined in the employees’ retention agreement.

18 unchanged sentences

Total stock-based compensation expense $ 120,379 $ 87,257 $ 58,633

See Note 2 for discussion of the additional equity award grants we made in response to COVID-19.

The total amount of compensation cost related to unvested awards not recognized was $ 97.8 million at December 31, 2021.

It is expected that this amount will be recognized over a weighted average period of 1.3 years.

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Restricted stock awards

We have granted shares of common stock subject to certain restrictions under the 2016 Equity Plan and the 2008 Equity Plan.

We have granted shares of common stock subject to certain restrictions under the 2016 Equity Plan.

Restricted stock awards granted to employees vest in equal annual installments generally over 3 years from the grant date subject to the recipient’s continued employment with us.

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Recipients of restricted stock awards have the right to vote such shares and receive dividends, if declared.

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

The following table summarizes our unvested restricted stock awards as of December 31, 2021, and changes during the year then ended:

1 unchanged sentence

stock awards Weighted

fair value Weighted

(in years) Aggregate

fair value Aggregate

intrinsic value (1)

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Restricted stock units

We have also granted restricted stock units subject to certain restrictions under the 2016 Equity Plan and the 2008 Equity Plan.

We have also granted restricted stock units subject to certain restrictions under the 2016 Equity Plan.

Restricted stock units granted to employees vest in equal annual installments generally over 3 years from the grant date subject to the recipient’s continued employment with us.

5 unchanged sentences

stock units Weighted

fair value Weighted

(in years) Aggregate

fair value Aggregate

intrinsic value (1)

6 unchanged sentences

(1) The intrinsic value is calculated as the market value as of the end of the fiscal period.

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

The total fair value of restricted stock units that vested during the years ended December 31, 2021, 2020 and 2019 was $ 54.3 million, $ 18.9 million, and $ 19.2 million, respectively.

2 unchanged sentences

All SARs previously granted were fully vested as of December 31, 2017.

The total intrinsic value of SARs exercised during the years ended December 31, 2019 and 2018 was $ 3.6 million and $ 12.4 million, respectively.

There were no SARs exercised during 2021 and 2020.

The total intrinsic value of SARs exercised during the year ended December 31, 2019 was $ 3.6 million.

SARs granted with a market condition had a fair market value assigned at the grant date based on the use of a Monte Carlo simulation model.

All other SARs granted had a fair market value assigned at the grant date based on the use of the Black-Scholes option pricing model.

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Stockholders' Equity

1 unchanged sentence

Our Board of Directors may fix the relative rights and preferences of each series of preferred stock in a resolution of the Board of Directors.

In March 2020, in response to the global COVID-19 pandemic, our Board of Directors rescinded its previously announced policy to pay an annual dividend at a rate of $ 0.48 per share of common stock and discontinued the declaration and payment of all cash dividends beginning with the second quarter of 2020 and thereafter until such time, if any, as it may otherwise determine in its sole discretion.

The following table provides information with respect to quarterly dividends paid on common stock during the year ended December 31, 2020.

Declaration Date Dividend

per Share Record Date Payable Date

February 10, 2020 $ 0.12 February 28 March 13

Stock repurchase program

In November 2020, our Board of Directors reauthorized and expanded a stock repurchase program that authorizes us to purchase up to $ 250.0 million of our outstanding shares of common stock.

The program does not have an expiration date.

Under the 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 amended, and in privately negotiated transactions.

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

Under the 2020 Credit Facility, we have restrictions on our ability to repurchase shares of our common stock.

The repurchase program does not have an expiration date and may be limited, suspended or discontinued at any time without prior notice.

Under the 2020 Credit Facility, we have restrictions on our ability to repurchase shares of our common stock, which are summarized on page 56 in this report.

We account for purchases of treasury stock under the cost method.

During the year ended December 31, 2021, we purchased 1,592,933 shares for $ 108.4 million.

In December 2021, our Board of Directors reauthorized and replenished our stock repurchase program that authorizes us to purchase up to $ 250.0 million of our outstanding shares of common stock.

The remaining amount available to purchase stock under the stock repurchase program was $ 250.0 million as of December 31, 2021.

Between January 1, 2021 and February 19, 2021, we repurchased an additional 465,821 shares for $ 28.1 million.

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Changes in accumulated other comprehensive loss by component

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5,617 ( 4,602 ) ( 2,399 )

Amounts reclassified from accumulated other comprehensive (loss) income to interest expense 3,827 ( 573 ) ( 118 )

Amounts reclassified from accumulated other comprehensive income (loss) to interest expense 3,714 3,827 ( 573 )

Tax (benefit) expense included in provision for income taxes ( 973 ) ( 1,003 ) 151

Total amounts reclassified from accumulated other comprehensive (loss) income 2,824 ( 422 ) ( 87 )

Net current-period other comprehensive (loss) income ( 1,778 ) ( 2,821 ) 583

Reclassification upon adoption of ASU 2018-02 — — 167

Accumulated other comprehensive (loss) income balance, end of period $ ( 3,101 ) $ ( 1,323 ) $ 1,498

Total amounts reclassified from accumulated other comprehensive income (loss) 2,741 2,824 ( 422 )

Net current-period other comprehensive income (loss) 8,358 ( 1,778 ) ( 2,821 )

Accumulated other comprehensive income (loss) balance, end of period $ 5,257 $ ( 3,101 ) $ ( 1,323 )

Foreign currency translation adjustment:

Accumulated other comprehensive loss balance, beginning of period $ ( 3,967 ) $ ( 6,608 ) $ ( 1,390 )

Accumulated other comprehensive income (loss) balance, beginning of period $ 604 $ ( 3,967 ) $ ( 6,608 )

Translation adjustments 661 4,571 2,641

Accumulated other comprehensive income (loss) balance, end of period 1,265 604 ( 3,967 )

Accumulated other comprehensive loss, end of period $ ( 2,497 ) $ ( 5,290 ) $ ( 5,110 )

Accumulated other comprehensive income (loss), end of period $ 6,522 $ ( 2,497 ) $ ( 5,290 )

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Defined Contribution Plan

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Total matching contributions to the 401K Plan for the years ended December 31, 2021, 2020 and 2019 were $ 6.5 million, $ 1.9 million and $ 8.7 million, respectively.

We made a discretionary matching contribution to eligible employees 401(k) plans in December 2020 totaling $ 1.2 million, given our financial performance during the fourth quarter.

In December 2020, we made a discretionary matching contribution to eligible employees 401(k) plans totaling $ 1.2 million, given our financial performance during the fourth quarter.

There were no discretionary contributions by us to the 401K Plan in 2021 and 2019.

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Segment Information

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Transaction price allocated to the remaining performance obligations

As of December 31, 2020, approximately $ 755 million of revenue is expected to be recognized from remaining performance obligations.

As of December 31, 2021, approximately $ 1.0 billion of revenue is expected to be recognized from remaining performance obligations.

We expect to recognize revenue on approximately 60 % of these remaining performance obligations over the next 12 months, with the remainder recognized thereafter.

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We also applied the practical expedient in ASC 606-10-65-1-(f)(3), whereby the transaction price allocated to the remaining performance obligations, or an explanation of when we expect to recognize that amount as revenue for all reporting periods presented before the date of the initial application, is not disclosed.

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Contract balances

4 unchanged sentences

Total deferred revenue $ 378,746 $ 316,914

Deferred revenue was held flat during 2020, primarily due to declines in our 2020 bookings performance compared to our budgeted expectations as a result of COVID-19.

Deferred revenue increased during 2021, primarily due to the inclusion of EVERFI deferred revenue balances and, to a much lesser extent, early progress in initiatives to bring our pricing in line with the market.

The amount of revenue recognized during the 2021 that was included in the deferred revenue balance at the beginning of the period was approximately $ 288 million .

The amount of revenue recognized during the 2021 from performance obligations satisfied in prior periods was insignificant .

2020 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Disaggregation of revenue

7 unchanged sentences

Total revenue $ 927,740 $ 913,219 $ 900,423

The General Markets Group ("GMG"), the Enterprise Markets Group ("EMG"), and the International Markets Group ("IMG") comprise our go-to-market organizations.

The following is a description of each market group as of December 31, 2020:

• The GMG focuses on sales to all K-12 private schools, faith communities and arts and cultural organizations, as well as emerging and mid-sized prospects in the U.S.;

• The EMG focuses on sales to all healthcare and higher education institutions, corporations and foundations, as well as large and/or strategic prospects in the U.S.;

• The IMG focuses on sales to all prospects and customers outside of the U.S.

Beginning in the second quarter of 2021, we combined our General Markets Group and Enterprise Markets Group into a single U.S.

Markets Group ("UMG") and moved our Corporations vertical under our International Markets Group ("IMG").

This change was made to better align our resources toward customer retention and growth, which are key objectives as we progress toward our long-term aspirational goals.

The UMG and the IMG comprised our go-to-market organizations as of December 31, 2021 .

The following is a description of each market group as of that date:

• The UMG focuses on sales primarily to all prospects and customers inside of the U.S.;

• The IMG focuses on sales primarily to all prospects and customers outside of the U.S, as well as corporations.

The following table presents our revenue by market group:

(dollars in thousands) 2021

GMG $ 376,762 $ 378,384 $ 362,585

$ 733,663 $ 730,482 $ 750,007

2 unchanged sentences

Total revenue $ 927,740 $ 913,219 $ 900,423

(1) The operating results of YourCause have been included in EMG from the date of acquisition.

See Note 3 to these consolidated financial statements for details regarding this acquisition.

(2) Beginning in the first quarter of 2019, all of our Canadian operations are included in IMG.

We have recast our revenue by market group for the twelve months ended December 31, 2018, to present them on a consistent basis with the current year.

(1) Due to the market group changes discussed above, we have recast our revenue by market group for the years ended December 31, 2020 and 2019 to present them on a consistent basis with the current year.

2021 Form 10-K

1 unchanged sentence

Notes to Consolidated Financial Statements

Quarterly Results (Unaudited)

(dollars in thousands, except per share data) December 31,

2020 September 30,

2020 June 30,

2020 March 31,

Total revenue $ 242,606 $ 215,001 $ 231,991 $ 223,621

Gross profit 123,030 116,316 127,052 118,756

(Loss) income from operations ( 850 ) 10,087 19,582 8,424

(Loss) income before provision for income taxes ( 6,672 ) 6,632 16,319 5,335

Net (loss) income ( 13,621 ) 4,876 11,823 4,639

(Loss) earnings per share

Basic $ ( 0.28 ) $ 0.10 $ 0.25 $ 0.10

Diluted ( 0.28 ) 0.10 0.24 0.10

(dollars in thousands, except per share data) December 31,

2019 September 30,

2019 June 30,

2019 March 31,

Total revenue $ 237,839 $ 221,120 $ 225,634 $ 215,830

Gross profit 121,302 119,323 124,827 116,547

Income from operations 3,586 7,883 13,491 2,185

(Loss) income before provision for income taxes ( 1,262 ) 4,930 9,873 ( 2,956 )

Net income (loss) 1,324 4,566 7,140 ( 1,122 )

Earnings (loss) per share

Basic $ 0.03 $ 0.10 $ 0.15 $ ( 0.02 )

Diluted 0.03 0.09 0.15 ( 0.02 )

The individual amounts for each quarter may not sum to full year totals due to rounding.

The results of operations of acquired companies are included in the consolidated results of operations from the date of their respective acquisition.

See Note 3 of these consolidated financial statements for details related to our business acquisitions.

The following table presents our recurring revenue by type:

(dollars in thousands) 2021

Contractual recurring $ 601,397 $ 591,272 $ 590,464

Transactional recurring 279,453 259,473 241,145

Total recurring revenue $ 880,850 $ 850,745 $ 831,609

Restructuring

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We substantially completed our facilities optimization restructuring plan as of December 2019.

During the years ended December 31, 2019 and 2018, we incurred $ 5.8 million and $ 4.6 million, respectively, in before-tax restructuring charges related to these activities.

Such charges during the year ended December 31, 2020 were insignificant.

Restructuring costs incurred prior to our adoption of ASU 2016-02 on January 1, 2019 consisted primarily of costs to terminate lease agreements, contractual lease payments, net of estimated sublease income, upon vacating space as part of the plan, as well as insignificant costs to relocate affected employees and write-off facilities-related fixed assets that we would no longer use.

During the year ended December 31, 2019, we incurred $ 5.8 million in before-tax restructuring charges related to these activities.

Such charges during the years ended December 31, 2021 and 2020 were insignificant.

Restructuring costs incurred prior to our adoption of ASU 2016-02 Leases (Topic 842) ("ASU 2016-02") on January 1, 2019 consisted primarily of costs to terminate lease agreements, contractual lease payments, net of estimated sublease income, upon vacating space as part of the plan, as well as insignificant costs to relocate affected employees and write-off facilities-related fixed assets that we would no longer use.

Upon adoption of ASU 2016-02 at January 1, 2019, we reduced our operating lease ROU assets recognized at transition by the carrying amounts of the restructuring liabilities for certain leased office spaces that we ceased using prior to December 31, 2018.

Restructuring costs incurred during the year ended December 31, 2019 consisted primarily of operating lease ROU asset impairment costs and, to a lesser extent, lease payments for offices we had ceased using and write-offs of facilities-related fixed assets that we would no longer use.

Subsequent Events

Shelf registration statement

As a well-known seasoned issuer, we filed an automatic shelf registration statement for an undetermined amount of debt and equity securities with the SEC on January 14, 2022.

Under this universal shelf registration statement we may offer, from time to time, debt securities, common stock, preferred stock, depositary shares, warrants, stock purchase contracts and stock purchase units.

Subject to certain conditions, this registration statement will be effective through January 13, 2024.

First amendment to 2020 Credit Facility

On January 31, 2022, we entered into the First Amendment to Credit Agreement (the “ Amendment ”).

The Amendment amends the 2020 Credit Facility to, among other things, (i) modify the definition of “Applicable Margin”, (ii) modify the net leverage ratio financial covenant to require a net leverage ratio of (A) 4.00 :1.00 or less for the fiscal quarter ended December 31, 2021 and for fiscal quarters ending thereafter through December 31, 2023 and (B) 3.75 :1.00 or less for the fiscal quarters ending March 31, 2024 and thereafter, (iii) reset the $ 250.0 fixed dollar basket with respect to the accordion feature and (iv) modify certain negative covenants to provide additional operational flexibility.

2021 Form 10-K

Blackbaud, Inc.

Notes to Consolidated Financial Statements

Under the Amended Credit Agreement, revolving loans and term loans (other than the $ 250.0 million 2021 Incremental Term Loan incurred in December 2021 (as defined above)) 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) Eurocurrency Rate plus 1.00 % (the “Base Rate”), plus an applicable margin as specified in the Amendment (the “ Applicable Margin ”);

or (b) Eurocurrency Rate plus the Applicable Margin.

The Incremental Term Loan bear interest at a rate per annum equal to, at the option of the Company, the Base Rate, the Daily SOFR rate plus a SOFR adjustment rate as specified in the Amendment (the “ SOFR Adjustment ”) plus the Applicable Margin or the Term SOFR rate plus the SOFR Adjustment 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 1.50 %), a Eurocurrency Rate loan ( 1.375 % to 2.50 %) or, solely in the case of the Incremental Term Loan, a SOFR Rate loan ( 1.375 % to 2.50 %).

With respect to the Incremental Term Loan, the SOFR Adjustment varies based on the applicable interest period and equals 0.10 % for Daily SOFR loans and for Term SOFR loans with a one-month interest period, 0.15 % for Term SOFR loans with a three-month interest period and 0.25 % for Term SOFR loans with a six-month interest period.

2021 Form 10-K

Blackbaud, Inc.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On October 11, 2021, we decided to dismiss PricewaterhouseCoopers LLP (“PwC”), as our independent registered public accounting firm, effective upon the completion of PwC’s audit of our consolidated financial statements for the fiscal year ended December 31, 2021 (the “2021 Audit”), which occurred on March 1, 2022.

Also, on October 11, 2021, we decided to engage Ernst & Young LLP as our new independent registered public accountants for the fiscal year ending December 31, 2022, which became effective immediately following the completion by PwC of the 2021 Audit.

The disclosure required under this Item 9 was previously reported on a Current Report on Form 8-K filed with the SEC on October 14, 2021.

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-K

Item 8. Financial Statements and Supplementary Data