BLACKBAUD INC 10-K

ITEM 1. BUSINESS Description of Business 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, data intelligence and expertise. Blackbaud brings over four decades of leadership to this sector: since originally incorporating in New York in 1982 and later reincorporating as a South Carolina corporation in 1991 and as a Delaware corporation in 2004, our tailored portfolio of software and services has grown to support 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. Our solutions are designed to meet the needs of virtually all types of organizations in the social good community, from major global institutions to small charities to individuals. During 2021, we had nearly 40,000 customers with contractual billing arrangements and nearly 100,000 customers that paid Blackbaud through transactional fees. Through our customers and our solutions, Blackbaud supports millions of users and we connect millions of supporters to over 150,000 organizations and causes in over 100 countries. We are deeply proud to play a part in our customers’ success in their missions to provide healthcare and cure diseases, advance education, preserve and share arts and culture, protect the environment, support those in need and much more. Market Overview The social good industry is significant, spanning far beyond philanthropy, and our addressable market is substantial and growing Worldwide there are millions of social good organizations including nonprofits, foundations, companies involved in corporate social responsibility and ESG, education institutions and healthcare organizations. Billions of individuals are also active participants in the social good community by donating funds, volunteering their time, advocating for a cause, receiving services from or otherwise engaging with social good organizations. Our estimated current total addressable market ("TAM") is greater than $20 billion. This includes our acquisition of EVERFI, Inc. ("EVERFI") in December 2021, as described in Note 3 to our consolidated financial statements in this report. EVERFI is an international technology company driving social impact through education to address the most challenging issues affecting society ranging from financial wellness to mental health to workplace conduct and other critical topics. EVERFI's educational solutions reach both adult and K-12 learners. To date, EVERFI has reached more than 45 million learners globally. Traditional methods of fundraising and organizational management are often costly and inefficient Many social good organizations use manual methods or software applications not specifically designed for fundraising and organizational management for institutions like theirs. Such methods are often costly and inefficient because of the difficulties in effectively collecting, sharing and using donation-related information. Furthermore, general purpose software applications frequently have limited functionality for the unique needs of our customer base and do not efficiently integrate multiple databases. Some social good organizations have developed proprietary software, but doing so is expensive, requiring on-site technical personnel for development, implementation and maintenance. 2021 Form 10-K 3 Table of Contents Blackbaud, Inc. The nonprofit industry faces particular operational challenges Nonprofit organizations, education institutions, healthcare organizations and houses of worship must efficiently: • Solicit funds and build relationships with major and institutional donors; • Garner small cash contributions from numerous contributors; • Manage and develop complex relationships with large numbers of constituents; • Advocate for policies and behaviors that advance their cause or institution; • Communicate their accomplishments and the importance of their mission online and offline; • Comply with complex accounting, tax and reporting requirements that differ from those for for-profit businesses; • Solicit cash and in-kind contributions from businesses to help raise money or deliver products and services; • Provide a wide array of programs and services to individual constituents and beneficiaries; and • Improve the data collection and information sharing capabilities of their employees, volunteers and donors by creating and providing distributed access to centralized databases. Because of these challenges, we believe nonprofits, education institutions, healthcare organizations and houses of worship can benefit from software applications and services specifically designed to serve their particular needs and workflows to grow revenue, work effectively and accomplish their missions. Companies, grantmaking institutions and foundations also face unique challenges Companies, grantmaking institutions and foundations, face their own unique challenges in their social good efforts, including the need to: • Quantify and improve the impact of their grants; • Cultivate better relationships with grantees; • Achieve better internal collaboration and alignment with board members, reviewers and other stakeholders; • Illustrate the impact of their corporate philanthropy and education efforts to the communities they serve; • Engage employees in meaningful volunteering, giving and other activities; • Ensure that their philanthropic efforts align with their business initiatives; • Manage all of a foundation's activities, including fundraising and accounting; • Expand the reach of their fundraising efforts; and • Cultivate new and existing donors. Strategy Our objective is to maintain and extend our position as the leading provider of cloud software and services for the global social good community, supporting our customers' missions from securing resources and managing their operations, to delivering their programs and measuring their impact. Our key strategies for achieving this objective are described below. 4 2021 Form 10-K Table of Contents Blackbaud, Inc. Execute on our Four-Point Growth Strategy During 2021, we continued to execute our four-point growth strategy targeted to drive solution and service innovation, quality enhancement, increased operating efficiency and improved financial performance: 1. Expand Total Addressable Market ("TAM") In December 2021, we doubled our TAM when we acquired EVERFI, an industry leader in global social impact technology. Adding EVERFI advances our position as a leader in the rapidly evolving ESG and CSR spaces and offers cross-selling and upselling opportunities through complementary product offerings with YourCause® solutions. Our TAM now stands at over $20 billion, and we remain active in the evaluation of opportunities to further expand our addressable market through acquisitions and internal product development. 2. Lead with World Class Teams and Operations We have been investing in sales and marketing to better address our market opportunity with a focus on digital lead generation. One way we are equipping our salesforce to be more effective is by investing in the necessary technology and resources to efficiently drive an increased number of quality leads and better cover our large addressable market. We have implemented software tools to enhance our digital footprint and drive lead generation across the company. We are taking a multi-touch attribution approach to measuring the effectiveness of our marketing campaigns to drive efficiency in our go-to-market efforts and improve returns on our marketing dollars. This is just one of many examples of how we are optimizing our structure, tools and processes to better address our large vertical market opportunities. We have also taken lessons learned throughout the pandemic and re-evaluated elements of our go-to-market strategy with a digital-first mindset, and we have a significant opportunity to leverage the investments into digital to reduce our customer acquisition cost and increase our sales velocity, ultimately, driving a more scalable and cost-effective go-to-market model. 3. Delight Customers with Innovative Cloud Solutions This strategy reflects our relentless focus on driving value and outcomes for our customers through our solutions. Blackbaud SKY®, our platform for cloud innovation, is a core tenant of this strategy and continues to power an elevated level of innovation by our engineers. It is also enabling our growing ecosystem of partners who are also passionate about social good, to extend and expand the capabilities available to our customers. During 2021, we continued making critical investments in research and development. Through our commitment to giving customers the flexibility to benefit, not just from Blackbaud's innovation, but the innovation happening outside of our walls, we developed more tools designed to create new capabilities that extend Blackbaud solutions. We now have over 6,000 non-Blackbaud developers registered in our ecosystem and we have seen substantial growth in the Blackbaud marketplace, where over 6,500 organizations have found a curated app to help them work smarter. Some of the use cases we have seen in the market include: an app that integrates Shopify with Raiser's Edge NXT® and a new API integrating YourCause with Workday, enabling our customers to easily connect employee data into the YourCause platform for more effective employee engagement. We have also enabled non-developers with low-code or no-code tools, such as our Microsoft Power Platform connector, to build automated workflows with our APIs without having to be seasoned developers and we continue to innovate as online gifts become a greater share of our customers' total donations. The customers we serve require vertical specific business solutions to automate their operations. In 2021, we released a variety of enhancements enabling them to maximize their time, team, and relationships, including substantial updates to Blackbaud Grantmaking and a significant release for accounts receivable functionality in Blackbaud Financial Edge NXT® is now with early adopters. 2021 Form 10-K 5 Table of Contents Blackbaud, Inc. 4. Focus on Employees, Culture and ESG Initiatives During the first quarter of 2021, we elevated a specific strategy focused on our employees, culture and ESG initiatives. This is not new for us. It is something that is in our DNA and is a big advantage as we look to attract and retain top talent. This is evident in our 2020 social responsibility report, which was released in April 2021. We are fully committed to continuing to create a diverse and inclusive environment at all levels of the organization. Early in 2021, we established an ESG Steering Committee with our CEO as the executive sponsor, and Board of Directors involvement. During the first quarter of 2021, we also joined the United Nations Global Compact. Building on our culture of innovation, we launched a new ideation initiative called "Imagine Week," inviting employees across the globe to pitch their ideas directly to the executive leadership team. Employees at every level and length of tenure in the company made proposals ranging from fundraising to customer service improvements. These ideas are making their way into our go-forward plans. In addition, we recently decided, effective in December 2021, to permanently close our fixed office locations (with the exception of our global headquarters facility in Charleston, South Carolina) to align our real estate footprint with our transition to a remote-first workforce. We may enter into arrangements for smaller more flexible workspaces where necessary. This decision did not include EVERFI's office locations. Delight Our Customers We intend to make our customers' experience with us effective, efficient and satisfying from their initial interest in our solutions and services through their decision to purchase, engage with customer support and implement and use our solutions. We continue to focus on initiatives aimed at improving the consistency and quality of user experience across our offerings. We also continue to evolve the way we package and sell our offerings to provide high quality and value combined with flexibility to meet the unique needs of our existing and prospective customers. For example, we have increased the number of our cloud solutions sold under a subscription pricing model, which can make it easier for customers to purchase our solutions. In addition, we are continuing to integrate value-adding capabilities such as payment services, analytics and business intelligence into our suite of solutions to better address our customers' needs with comprehensive offerings. We will continue to focus on providing the highest level of solution support, enhancing our existing solutions, extending our solutions through open APIs and developing new solutions and services designed to help our customers be more effective and achieve their missions. Attract and Retain Top Talent and Actively Engage Employee Base Our higher purpose is to help good take over the world, and we have incredible customers whose missions make the world a better place. Driven by this purpose, our employees work knowing they make a real difference. Collaboration, innovation and high standards are core to our culture and help to enable the great work we do. We strive to hire, develop and retain the best employees and provide a supportive and inclusive environment where their talents and potential are realized. During 2021, we expanded our workforce strategy to become "Remote First" which signals Blackbaud's goal to attract talent globally. For additional information, see “Human Capital Resources” below. Drive Strength in Our Sector as an Industry Thought Leader In our over 40 years of operation, we have gained significant insight into the overall market and industry segments in which we operate. We produce a wide range of thought leadership resources, including blogs, monthly indices and white papers, which provide insights and guidance to the social good community. We also participate in and convene a number of industry forums, where we exchange views and engage with industry and government leaders. Our annual user conference, bbcon ® , serves in part as a forum to offer thought leadership to our customers, as do other market-specific user conferences, events and customer gatherings. The Blackbaud Institute for Philanthropic Impact (the "Blackbaud Institute") brings together leading experts in philanthropy to develop and share leading-edge research and insight that accelerates the impact of the social good community. The research and reports the Blackbaud Institute produces serve to strengthen the social good community as a whole. sgENGAGE, our blog and podcast, provides free best practices resources that drive impact across the social good community, as well. In 2020, we announced Blackbaud Social Good Startup Program, a year-long accelerator designed to support innovative startups with the potential to impact the ecosystem of good. In alignment with our commitment to diversity in the tech community, we focused our January 2021 cohort on founders from underrepresented backgrounds. 6 2021 Form 10-K Table of Contents Blackbaud, Inc. Solutions and Services We offer the social good community comprehensive cloud solutions to advance their missions, backed by our data intelligence services, which deliver insights powered by what we believe to be the world's most robust philanthropic data set. Our solutions can be combined with a range of payment processing, analytic and business intelligence services, consulting, training and professional services, as well as maintenance and technical support. The Blackbaud portfolio is delivered primarily through cloud solutions tailored to the unique needs of vertical markets, offering fundraising and relationship management, marketing and engagement, financial management, grant and award management, organizational and program management (such as education management, church management and ticketing), social responsibility, payment services and analytics. Our specific solutions and services include: Fundraising and Relationship Management Blackbaud Raiser's Edge NXT® is our flagship cloud fundraising and relationship management solution. Blackbaud Raiser's Edge NXT is the first and only cloud fundraising and relationship management solution that is all-inclusive, fully integrated with data, analytics, marketing tools, payment processing and tailored user-specific experiences. Blackbaud Raiser's Edge NXT is, we believe, the most advanced technology available to nonprofits seeking to operate more efficiently and raise more support for their missions. Blackbaud CRM™ is a comprehensive, configurable fundraising and relationship management solution. It is our lead offering for enterprise-level organizations seeking a powerful, yet adaptable solution for fundraising, marketing, and program management across the engagement lifecycle, specializing in supporting sophisticated major giving, membership and high-volume direct marketing programs. Blackbaud CRM helps organizations build deeper and more personalized relationships with constituents, build their brands through online engagement and multichannel communication tools, and more effectively fundraise, leveraging campaign management, business intelligence and analytics. Blackbaud CRM can be sold as an integrated solution with our enterprise online solutions to enable multi-channel marketing, online engagement and event fundraising. Blackbaud eTapestry® is a simple, cloud fundraising and donor management solution built specifically for smaller, developing nonprofits in need of a cloud solution to support basic fundraising needs. It offers nonprofit organizations a cost-effective way to manage donors, process gifts, create reports, accept online donations and communicate with constituents. This technology provides a system that is simple to maintain, efficient to operate and is intuitively easy to learn without extensive training. Blackbaud TeamRaiser® is the industry’s most comprehensive cloud solution designed specifically for event fundraising. Powering thousands of events each year, Blackbaud TeamRaiser allows nonprofits’ supporters to create personal or team fundraising web pages and send email donation appeals in support of events such as walks, runs and rides. JustGiving® from Blackbaud® is one of the world's leading social platforms for giving. JustGiving provides world-class technology and innovative tools to connect people with the causes they care about. By making giving more simple, social and rewarding, this platform helps all causes, charities and people in need to reach more people and raise more money. Blackbaud Guided Fundraising™ and Blackbaud Volunteer Network Fundraising™ can work together or independently to help higher education institutions meet their advancement targets and development campaign goals. Blackbaud Guided Fundraising is used by institutions seeking to manage all the details behind the sophisticated, person-to-person solicitation strategies that drive fundraising results. Blackbaud Volunteer Network Fundraising helps institutions manage volunteer fundraising campaigns with tools for project management, communication and reporting. 2021 Form 10-K 7 Table of Contents Blackbaud, Inc. Marketing and Engagement Blackbaud Luminate Online®, delivered in the cloud, helps our customers better understand their online supporters, make the right ask at the right time and raise money online. It includes tools to build online fundraising campaigns as part of an organization's existing website or as a stand-alone fundraising site. Donation forms, gift processing and tools for communicating through web pages and email give our customers the essentials for building sustainable donor relationships. Blackbaud Online Express ™ is a simple, cloud fundraising and marketing tool designed for smaller nonprofit organizations using Blackbaud Raiser's Edge NXT. It provides nonprofits with easy-to-use, fully integrated features and functionality such as email marketing, donation forms, event registrations and dashboard metrics. Blackbaud School Website System™ is a content management system that gives schools the flexibility to build and edit webpages, with easy access to content types including photos, videos, downloads, text and more. It allows users to share material and contribute content across an entire school community. Financial Management Blackbaud Financial Edge NXT® is the first-of-its-kind cloud accounting solution for nonprofits that is intuitive, fully integrated, and built the way nonprofits need it on our modern Blackbaud SKY cloud platform. Blackbaud Financial Edge NXT is advanced technology with powerful reporting tools to help accounting teams drive transparency, stewardship, and compliance while enabling them to seamlessly manage transactions and eliminate manual processes. It seamlessly integrates with Blackbaud Raiser's Edge NXT to simplify gift entry processing and relates information from both systems in an informative manner to eliminate redundant tasks and manual processes. Blackbaud Financial Edge NXT provides nonprofit organizations with the means to help manage fiscal and fiduciary responsibility, enabling them to be more accountable to their constituents. Blackbaud Tuition Management™ benefits schools by giving administrators better access to financial data and payment services, and by giving parents more ways to remit tuition payments. The solution helps ease the burden for administrative staff by offering invoicing, payment processing, customer service, enhanced communication with parents and later payer follow-up services. Blackbaud Financial Aid Management™ offers schools the ability to accept online, customized applications for financial aid and to make better financial aid decisions with a proprietary Hobbies, Interest and Lifestyles ("HIL") profile. The HIL profile provides in-depth information on an applicant, delivering to the school a way to make more informed decisions on how they distribute financial aid awards. Grant and Award Management Blackbaud Grantmaking™ is a cloud solution built with core functions that provide comprehensive grant making capabilities, but with many additional capabilities and features, such as visual dashboards. It has a modern user interface, is user friendly and can be highly personalized. Coupled with Blackbaud Outcomes ™ funders and nonprofits are empowered to collaborate around their intended outcomes and work together to achieve impact. Both the funder and the nonprofit can tell an impact story using ROI-focused results and a common outcomes measurement language. Blackbaud Award Management™ is a comprehensive, integrated scholarship management platform for higher education and K-12 institutions and foundations, allowing students to apply for all awards using one intuitive and streamlined application process and eliminating many time-consuming administrative tasks. This leads to improved awarding, reporting, compliance, communication and stewardship. Organizational and Program Management Blackbaud Student Information System™ makes it easy for schools to manage schedules, transcripts and GPAs. A new Student Information System that works directly with Blackbaud Learning Management System™, Blackbaud Student Information System simplifies the process of sharing student data and academic records securely. 8 2021 Form 10-K Table of Contents Blackbaud, Inc. Blackbaud Learning Management System™ is a learning management system that makes it easy to manage, connect, and share information with students, parents, and an entire school community. Developed with direct input from our customers, Blackbaud Learning Management System gives teachers the tools to meet the demands of a modern private school. Blackbaud Enrollment Management System™ is an enrollment management system that simplifies a school’s admissions process. Blackbaud Enrollment Management System helps admissions teams and prospective families manage and track their progress, from inquiry and application through acceptance and enrollment. Blackbaud Altru® is a cloud solution that helps arts and cultural organizations consolidate admissions, membership, fundraising, merchandise, marketing and more, giving users a comprehensive view of their supporters. By helping general admissions arts and cultural organizations gain a clear, 360-degree view of their organization, it enables them to operate more efficiently, engage and cultivate patrons and supporters, streamline external and internal communication efforts, and reduce IT costs. Blackbaud Altru contains tools for constituent and membership management, program sales, retail sales and ticketing, volunteer management and events management. It also has sophisticated reporting functionality and tools to manage marketing, communications and fundraising. Blackbaud Church Management™ is a comprehensive, end-to-end cloud solution to manage church operations, relationships with congregants, and essential financial management needs. With Blackbaud Church Management, faith communities can track gifts and tithing, assimilate new members, directly communicate with congregations through multiple channels, enable members to make online and mobile contributions, manage small groups and volunteers, implement secure child check-in, conduct background checks, provide bulk tax statements, manage facilities, and more. Faith communities can also add other Blackbaud capabilities from the new Cloud Solution for Faith Communities as their needs scale all through one integrated experience. Social Responsibility and ESG YourCause GrantsConnect® and YourCause CSRconnect® are cloud solutions for employee giving, volunteering, and grantmaking used to support corporate philanthropy by building meaningful connections between corporations, employees and nonprofits. After implementing YourCause solutions, customers typically show significant growth in volunteers, donations, engagement and more. These reported successes demonstrate a larger trend: overall ability to attract employees and customers alike by strengthening a company's reputation. EVERFI is a SaaS software platform building digital education content that addresses the Missing Learning Layer and equips organizations to deliver Impact as a Service in their communities, empowering individuals with the tools and skills to drive ecosystems of change and inspire lifelong success. EVERFI offers programs on important societal topics such as financial literacy, health and well-being, social and emotional learning, STEM and digital literacy, among many others. EVERFI also delivers adult-focused content in the HR and compliance training space for companies and institutions. Through the platform and program offerings, EVERFI is able to yield anonymized learner data to reflect the true impact of their educational offerings. Payment Services Our solutions provide our customers payment processing capabilities that enable their donors to make donations and purchase goods and services using numerous payment options, including credit card and automated clearing house (“ACH”) checking transactions, through secure online transactions. Blackbaud Merchant Services™ is a value-added service integrated with our solutions that makes credit card processing simple and secure. Customers are charged one rate for credit card transactions, making Blackbaud Merchant Services a competitive option. The service also provides customers with a payment card industry (“PCI”) compliant process and streamlined bank reconciliation. We also provide our K-12 private school customers with student tuition payment processing services. Blackbaud Purchase Cards provide an efficient and convenient alternative to traditional procurement methods and paper-based payables processes such as checks, purchase orders and invoices for travel and operational purchases. Organizations can also set spend controls for individual cardholders, track business expenses across the organization and ensure that policies are being enforced—all managed online and integrated with Blackbaud Financial Edge NXT. 2021 Form 10-K 9 Table of Contents Blackbaud, Inc. Data Intelligence Our data intelligence offerings provide solutions for data health, insights and performance, enabling nonprofits to define effective campaign strategies and maximize fundraising results. These services either integrate with or are already integrated into our software solutions to give our customers a comprehensive view of their supporters and the market and provide information essential to making well-informed operating decisions. Blackbaud’s Intelligence for Good® is our unique, comprehensive approach through which we combine artificial intelligence, analytics, big data, and expertise to deliver high-impact data intelligence. This powerful approach enables social good organizations to transform data into insights and outcomes. Data Intelligence is the Blackbaud portfolio of solutions and services that use data science and AI to turn customer data into valuable insights that inform decision-making and help them achieve their goals efficiently. Blackbaud's Data Intelligence portfolio consists of three key outcome areas: Data Health solutions enhance and maintain constituent data so the customer is always working with accurate and up-to-date information. Examples of these solutions include: identifying outdated or invalid constituent addresses in the database and making corrections based on United States Postal Service data and using name and address matching to append additional contact or demographic data points to constituent records to support better segmentation and engagement. Insights inform strategic decision-making and actions that increase efficiency and drive successful outcomes. Insights are extracted by combining customer data with licensed and proprietary data before leveraging advanced AI capabilities and expertise from Blackbaud’s dedicated team of data scientists. Some examples of constituent insights include: numerical scores that predict the likelihood of a constituent making a gift to a customer, wealth screening software that allows customers to screen their affluent constituents against publicly available records to build detailed wealth profiles and persona cluster segmentation that sorts constituents into groups based on shared traits with guidance for how to craft targeted messaging for each group. Performance solutions help customers to assess their fundraising performance across donor segments, benchmark themselves against peer organizations and understand industry trends. These solutions provide a holistic view of donor performance that goes beyond standard campaign-based reporting, with KPIs related to acquisition, upgrading, retention and reactivation. Customers use our performance solutions to identify areas of weakness and opportunities for improvement, track the donor impact of strategic initiatives, understand and respond to industry trends, set realistic benchmarks and fundraising goals and maintain a consistent reporting methodology to assess growth over time. Customer Success Our Customer Success organization is responsible for ensuring our customers are able to achieve their desired outcomes through Blackbaud solutions, starting at onboarding and continuing through the customer lifecycle. Our Customer Success team develops and fosters relationships within all levels of the customer organization to build more demonstrated value in our solutions and services, while helping customers achieve their desired outcomes. Our customer success resources work to proactively communicate to drive overall satisfaction and retention of our customer's business. They work to collect and analyze actionable information, whether that is through direct customer relationships or through aggregated analytics that drives future one-to-one or one-to-many interactions. Their goal is to partner with customers to ensure that they are fully engaged and have an advocate within Blackbaud who works to meet their needs. Customer success resources bring industry knowledge and expertise to the customer relationship and strive to help our customers achieve positive growth and outcomes. Customer Support For our cloud subscription solutions, access to Customer Support is included as part of the solution with no additional charge. Benefits, such as priority routing or additional support channels, are continuously enhanced. Customers enrolled in the programs enjoy fast, reliable customer support, receive regular software updates, stay up-to-date with regular communication and can leverage a unified customer portal for quick and easy access to these resources. Customers also have around-the-clock access to support resources for mission-critical needs. 10 2021 Form 10-K Table of Contents Blackbaud, Inc. Professional and Managed Services Our expert consultants, and those in our partner program, provide data conversion, implementation and customization services for each of our software solutions. These services include: • System implementation; • Data conversion, business process analysis and application customization; • Database merging and enrichment, and secure credit card transaction processing; • Database production activities; and • Website design services. In addition, we, and our delivery partners, apply our industry knowledge and experience, combined with expert knowledge of our solutions, to evaluate an organization's needs and consult on how to improve a business process. Training We provide a variety of onsite, instructor-led online and on-demand training services to our customers relating to the use of our solutions and application of best practices, including our highly-rated Blackbaud University curriculum, through which customers can achieve certifications on Blackbaud software, which can serve as important catalysts for professional growth in the nonprofit industry. Our instructors have extensive training in the use of our solutions and present course material that is designed to include hands-on lab exercises, as well as course materials with examples and problems to solve. Customers We have updated our methodology for counting customers to better represent our current offerings and our growing population of customers with contractual billing arrangements and customers that pay us through solutions usage or transaction fees, some of which are in lieu of contractual billing arrangements. During 2021, we had nearly 40,000 customers with contractual billing arrangements and nearly 100,000 customers that paid us through transactional fees. Through our customers and our solutions, we support millions of users and we connect millions of supporters to over 150,000 organizations and causes in over 100 countries. Our largest single customer accounted for less than 0.2% of our 2021 consolidated revenue. Sales and Marketing Most of our solutions and related services are sold through our direct sales force. Our direct sales force is complemented by a team of business development representatives responsible for sales lead generation and qualification. These sales and marketing professionals are primarily located throughout the United States, the U.K., Canada and Australia. As of December 31, 2021, we had 330 direct sales employees. Our marketing organization, which includes brand, digital, content, product, event and demand generation marketing and corporate communications, develops and launches multi-channel campaigns designed to create brand recognition and market awareness for our solutions and services. Through the Blackbaud Institute, we also give back to the social good community by developing in-depth research and thought leadership content to help to drive better outcomes for their organizations with data, technology and expertise. Our digital demand generation motion focuses on targeted account-based marketing plays, as well as intent-based programs including paid search, retargeting, social and content syndication programs. We supplement the digital motion with select participation at virtual and in-person third-party trade shows, technical conferences, and technology seminars. We also target publication of our thought leadership content and position our subject matter experts in industry journals and publications. We have a large base of loyal customers and strategic partners that provide references and recommendations often featured in our advertising and promotional activities. 2021 Form 10-K 11 Table of Contents Blackbaud, Inc. Competition The market for software and related services targeting philanthropic-focused for-profit and nonprofit organizations is competitive and highly fragmented. For certain areas of the market, entry barriers are low, as general tools for small businesses can usually be configured to manage the most basic marketing, contact management, and accounting needs of social good organizations. In parallel, as software development evolves from a highly-complex tradecraft with nuanced understanding of architectural patterns and discrete languages, to click-to-code and drag-and-drop development with natively cloud-based infrastructure, it becomes easier for competitors to quickly spin up basic applications to solve common nonprofit problems. However, once basic needs are met, programs unique to social good organizations like the stewardship of relationships critical to major gift fundraising, the cultivation and management of gifts and grants, the multi-level networking required for peer-to-peer activism and the sensitive data behind critical programs run by healthcare and education institutions ensure the ongoing need for highly specialized tools. These specialized applications have a higher barrier of entry as they require industry insight to accurately articulate the business workflow that generates the requirements for software products. Moreover, because social good organizations rely heavily on relationships with and among their supporters, integration of systems drives value beyond mere efficiency. Hence, we believe our insight, the full spectrum of our current solutions and our ability to deliver future solutions make us a strong competitor. We expect to continue to see new entrants as focus on social investment solutions increases to satisfy Millennial and Gen Z donors, the barriers of entry continue to decline with natively cloud solutions and social good organizations more readily require digital transformation of business processes and data-driven decision making. Our competition falls into four primary categories: • Niche products are usually developed as a solution for a single problem at an organization and are adopted by similar organizations to solve a specialized need. These are typically offered by vendors who may have deep industry expertise but may not have the resources to expand beyond a specialized area. We believe we compete against these solutions by offering a set of integrated solutions rather than a single point solution, which we believe improves the overall customer experience. In addition, our open platform allows integration to specialized applications so the opportunity for disruption from these competitors is minimized. • Vertical-specific solutions are offered by competitors seeking to meet the enterprise-wide needs of a specific sub-segment of the social good community. Typically, these solutions are offered by vendors who may offer either a point solution or integrated suite of products used by a vertical. We believe we compete successfully against these competitors through a combination of our integrated suite of offerings within verticals where we compete, offering solutions with market leading robustness as well as the scale, reach, and reputation of our organization. • General business software vendors , such as Microsoft, Oracle and Salesforce.com, compete with us in certain areas of our business. While there is a growing trend toward social investment that is prompting philanthropic solutions from these general business vendors, most do not have a complete nonprofit specific focus and, therefore, do not offer or intend to offer nonprofit-specific versions for outside sales. However, there is a subset of general business software competitors who have introduced nonprofit-specific versions of their products. These products generally do not satisfy the needs of nonprofits from end-to-end as they were not designed to support the specific needs of nonprofits during the original architecture, design, and requirements elicitation phases; therefore, we believe that because these products were not originally designed for nonprofits, they are not yet fully capable of meeting market needs without significant customization. The significant customization required to transform general business products into nonprofit solutions often requires the use of consultants to guide the implementation, without which, leave the adoption of general business software limited to very basic operations and simple needs. We believe our solutions compete successfully against general business software as a nonprofit’s needs grow more complex. As a result, we believe we can compete successfully to meet nonprofit-specific requirements, often integrating with general business platforms used for their more generalized operations. • Consumer-oriented fundraising platforms , such as GoFundMe and Facebook compete with our business where consumers raise funds directly. To drive adoption of their platforms, these vendors rely on a combination of direct-to-consumer marketing, marketing to nonprofits who in turn market to their supporters, and marketing to intermediate entities such as an event sponsor who will market to participants. We believe we compete well in this market through a combination of positive brand recognition among all three of these groups and the combination of our consumer- and organization-oriented tools relative to those of the competition. 12 2021 Form 10-K Table of Contents Blackbaud, Inc. Less frequently, we compete with providers of traditional, non-automated fundraising service providers, including parties providing services in support of traditional direct mail or email campaigns, special events fundraising, peer to peer, telemarketing and personal solicitations. We believe we compete successfully against these traditional fundraising service providers, primarily because our solutions and services are more automated, more robust, more tailored to the needs of nonprofit organizations and more efficient. Technology and Architecture Blackbaud SKY forms the foundation of our technology strategy. The SKY platform consists of several key building blocks including cloud operations, developer tools, data intelligence and core services. The SKY Engineering System, architecture and integrated core shared services empower our developers to create highly available and easy-to-use cloud capabilities that surface to our customers as modern, effective, purpose-built functionality within most current products as well as new solutions. The best-in-class infrastructure of SKY enables rapid innovation with high levels of reliability, availability and security, and lets Blackbaud evolve services over time at asymmetric paces as tech trends and tools emerge. Overall, Blackbaud SKY prioritizes customer value, including risk management, and speed of delivery. It enables continuous releases, scalable and high-quality services, and speedy time to market. Blackbaud SKY also provides a toolset for customers, partners, and developers to create and deploy self-contained services within the Blackbaud SKY ecosystem. SKY API enables developers to augment Blackbaud solutions with industry-standard REST APIs, standards-based authentication protocols, and a best-in-class developer experience. SKY UX allows developers to create applications with the same consistent, cohesive user interface as Blackbaud’s native solutions using an open-source framework that implements Blackbaud design patterns and provides guidelines and tooling for the entire application lifecycle. Additionally, the Blackbaud Marketplace features a curated list of applications that can help amplify an organization's impact in the Social Good sector. Blackbaud customers can discover applications in the Marketplace that extend new capabilities to their Blackbaud solutions. These tools enable Blackbaud customers to benefit not just from the innovation of Blackbaud’s own large team of developers, but also from an exponentially larger community of partners and third-party developers. The development strategy for all Blackbaud cloud solutions emphasizes: • Flexibility: Customers and partners can extend our component-based architecture to accommodate changing demands without modifying source code. • Adaptability: The architecture of our applications allows us to easily add functionality or integrate with third-party applications to adapt to customer needs and market demands. • Scalability: Scalable architecture and the performance, capacity and load balancing of our customers' industry-standard web servers and databases ensure that applications can scale to meet the needs of large organizations. Intellectual Property and Other Proprietary Rights To protect our intellectual property, we rely on a combination of patent, trademark, copyright and trade secret laws in various jurisdictions, as well as employee and third-party nondisclosure agreements and confidentiality procedures. We maintain many trademarks, including, but not limited to “Blackbaud,” “Raiser's Edge NXT” and “Luminate.” We currently have two active patents on our technology and have one pending patent application. Human Capital Resources As of December 31, 2021, we had over 3,600 employees, none of whom are represented by unions or are covered by collective bargaining agreements. We are not involved in any material disputes with any of our employees, and we believe that relations with our employees are strong. 2021 Form 10-K 13 Table of Contents Blackbaud, Inc. We benefit from an engaged and driven employee base motivated to join the Company by our higher purpose, which is "to help good take over the world." Our purpose attracts and retains talented, competitive applicants, with 91% of employees saying the fact that Blackbaud operates in a socially responsible manner is important to them. This differentiator not only builds stronger employee engagement, but also helps us provide a higher level of service to our customers across the social good community, with 72% of employees report that they continued to volunteer during the pandemic despite its unique challenges and one in five serve on a nonprofit board or committee—direct experience that enables them to better serve our customer base. Blackbaud also attracts and promotes talented employees through effective and targeted recruiting strategies. In 2020, Blackbaud announced the launch of a new workforce strategy, allowing for many employees to have the option to work from other geographic locations within the country of the position, helping to expand the pool of qualified applicants for roles and internal career progression. In 2021, we expanded our workforce strategy to become permanently "Remote First" which signals Blackbaud's goal to attract talent globally. Employee engagement is a focus at Blackbaud, and we continually work to understand what matters and to make our workplace better to attract, develop, and retain talent. In 2021, nearly every employee at Blackbaud participated in "the Blackbaud Way" — a training designed to connect employees with Blackbaud's mission, values and expectations for our customers and Company culture for the best experience for all. Employee feedback on this experience was overwhelmingly positive. Every manager at Blackbaud is required to take a multi-course "Engagement Labs" training designed to equip them with the practical skills to ensure their teams are highly engaged. We assess and measure progress on engagement and growth opportunities at the individual level through quarterly check-ins, which focus on impact and learnings, and a global career framework that guides employee progression on both management and individual contributor career paths; we also assess engagement on the team and company level through regular employee surveying as well as "Ask Anything" sessions with senior leaders and dedicated "live" Q&A sessions in our company-wide All Hands meetings. We enable employees to have opportunities for career development through on-demand and company-led trainings. Our compensation framework is designed so that employees are compensated equitably and competitively, including through base salary, variable pay, equity awards and benefits. We also seek to support the whole person, through benefits that support overall wellness and financial health. Ultimately, we believe that Blackbaud is an excellent place to work due to our active participation in the Ecosystem of Good®: we govern our business ethically, contribute to causes and communities that matter to our employees through corporate philanthropy, we pursue sustainability, and we work every day to ensure our workplace is supportive, inclusive and engaging. We offer an array of philanthropy programs aimed at engaging our employees as agents of good, including matching gifts, competitive grants that honor noteworthy examples of volunteerism, employee-led grant committees, skills-based volunteerism initiatives, as well as science, technology, engineering and mathematics focused community programs. Our commitment to diversity, inclusion and belonging supports our efforts to attract, develop and retain a high-performing employee base. In September 2020, we welcomed our first Diversity and Inclusion Officer, as part of our strategy to further accelerate our diversity, inclusion and belonging efforts, while continuing to strengthen relationships with our people and the communities in which we operate. This new leadership focus will amplify and accelerate the significant initiatives already in place at Blackbaud, including: ongoing workshops on creating an inclusive culture; respect in the workplace training for all employees and enhanced training for managers; affinity groups, including veterans, LGBTQ employees, women in technology, women in sales, Black employees, employees interested in sustainability and, our newest team, those employees with a disability. Additional information related to our human capital strategy can be found in our 2020 Social Responsibility Report, which is available on the Corporate Social Responsibility section of our website. Information contained on or accessible through our websites is not incorporated into, and does not form a part of, this Annual Report or any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. Seasonality For a discussion of seasonal variations in our business, see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations — Seasonality” in Item 7 in this report. 14 2021 Form 10-K Table of Contents Blackbaud, Inc. Working Capital For a discussion of our working capital practices, see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations — Liquidity and Capital Resources” in Item 7 in this report. Available Information Our website address is www.blackbaud.com . We make available, free of charge through our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC, but other information on our website is not incorporated into this report. The SEC maintains an Internet site that contains these reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov . Information About Our Executive Officers The following table sets forth information concerning our executive officers as of February 15, 2022: Name Age Title Michael P. Gianoni 61 President and Chief Executive Officer Anthony W. Boor 59 Executive Vice President and Chief Financial Officer Kevin P. Gregoire 54 Executive Vice President and President, U.S. Markets Kevin R. McDearis 54 Executive Vice President and Chief Products Officer Kevin W. Mooney 63 Executive Vice President, Strategy and Corporate Development Jon W. Olson 58 Senior Vice President and General Counsel Michael P. Gianoni joined us as President and Chief Executive Officer in January 2014. Prior to joining us, he served as Executive Vice President and Group President, Financial Institutions at Fiserv, Inc., a global technology provider serving the financial services industry, from January 2010 to December 2013. He joined Fiserv as President of its Investment Services division in December 2007. Mr. Gianoni was Executive Vice President and General Manager of CheckFree Investment Services, which provided investment management solutions to financial services organizations, from June 2006 until December 2007 when CheckFree was acquired by Fiserv. From May 1994 to November 2005, he served as Senior Vice President of DST Systems Inc., a global provider of technology-based service solutions. Mr. Gianoni is a member of the Board of Directors of Teradata Corporation, a publicly traded global big data analytics company. Mr. Gianoni has served on several nonprofit boards across several segments, including relief organizations, hospitals and higher education. He currently is a board member of the International African American Museum. He holds an AS in electrical engineering from Waterbury State Technical College, a BS with a business concentration from Charter Oak State College, and an MBA and an honorary Doctorate from the University of New Haven. Anthony W. Boor joined us as Executive Vice President and Chief Financial Officer in November 2011 and served as our interim President and Chief Executive Officer from August 2013 to January 2014. Prior to joining us, he served as an executive with Brightpoint, Inc., a global provider of device lifecycle services to the wireless industry, beginning in 1999, most recently as its Executive Vice President, Chief Financial Officer and Treasurer. He also served as the interim President of Europe, Middle East and Africa during Brightpoint's significant restructuring of that region. Mr. Boor served as Director of Business Operations for Brightpoint North America from August 1998 to July 1999. Prior to joining Brightpoint, Mr. Boor was employed in various financial positions with Macmillan Computer Publishing, Inc., a Viacom owned book publishing company specializing in computer hardware and software related topics, Day Dream Publishing, Inc., a publishing company specializing in calendars, posters and time management materials, Ernst & Young LLP, an accounting firm, Expo New Mexico, a state-owned fair and expo grounds and live pari-mutual horse racing venue, KPMG LLP, an accounting firm, and Ernst & Whinney LLP, an accounting firm. He holds a BS in Accounting from New Mexico State University. 2021 Form 10-K 15 Table of Contents Blackbaud, Inc. Kevin P. Gregoire has served as our Executive Vice President and President of U.S. Markets since April 2021. He joined us as Executive Vice President and President, Enterprise Markets Group in April 2018. Prior to joining us, Mr. Gregoire was Group President of the Financial Institutions Group at Fiserv, a global technology provider serving the financial services industry, from March 2014 until February 2018. He joined Fiserv in December 2002 and served in other key leadership roles including Division President and Chief Operating Officer, Card Services, and Senior Vice President of Product and Network Strategy. Mr. Gregoire is also a veteran of the United States Army, where he served as Lieutenant in the Corps of Engineers and was awarded three Army Commendation Medals. He holds a BS from the United States Military Academy at West Point, and an MBA from the F.W. Olin School of Business at Babson College. Kevin R. McDearis has served as our Executive Vice President and Chief Products Officer since October 2016. He joined us in August 2014 as our Senior Vice President of Global Product Development. Prior to joining us, Mr. McDearis was the Chief Information Officer at Manhattan Associates, Inc., a technology leader in supply chain and omnichannel commerce, from August 2012 to July 2014. He was responsible for leading a global IT organization in strategy development, organization development, portfolio and project management, software and infrastructure engineering, service delivery and operations. Prior to that, Mr. McDearis served as Chief Technology Officer for the Enterprise Technology Group and other key leadership positions at Fiserv (formerly CheckFree), a global technology provider serving the financial services industry, from October 1996 to August 2012. Mr. McDearis serves on the Board of Directors for the USS Yorktown Foundation. He also served on the Board of Directors of the Technology Association of Georgia ("TAG") from 2011 to 2016 and as Vice Chairman of the Board in 2014. He holds a BS in Management from The Georgia Institute of Technology. Kevin W. Mooney has served as our Executive Vice President of Strategy and Business Development since April 2021. Before that he was the Executive Vice President and President, General Markets Group since January 2010. He joined us in July 2008 as our Chief Commercial Officer. Before joining Blackbaud, Mr. Mooney was a senior executive at Travelport GDS from August 2007 to May 2008. As Chief Commercial Officer of Travelport GDS, one of the world's largest providers of information services and transaction processing to the travel industry, Mr. Mooney was responsible for global sales, marketing, training, service and support activities. Prior to that he was Chief Financial Officer for Worldspan from March 2005 until it was acquired by Travelport in August 2007. Mr. Mooney has also held key executive positions in the telecommunications industry and he served as a member of the Board of Directors of Level 3 Communications, Inc., a publicly traded global managed network services company, from October 2014 to November 2017. Prior to that he served on the Board of Directors of tw telecom from August 2005 until it was acquired by Level 3 in October 2014. He holds a BS in Finance from Seton Hall University, and an MBA in Finance from Georgia State University. Jon W. Olson joined us as Senior Vice President and General Counsel in September 2008. Mr. Olson is responsible for Blackbaud's legal and real estate activities. Prior to joining us, he was an attorney with Alcatel-Lucent USA, the U.S. subsidiary of France-based Alcatel-Lucent (now owned by Nokia Corporation) that designs, develops, and builds wireline, wireless, and converged communications networks, from July 1997 to September 2008. Prior to joining Alcatel-Lucent, Mr. Olson was employed in legal positions with MCI, Inc., a global business and residential communications company, from September 1996 to July 1997, and Unisys Corporation, a global information technology company, from July 1992 to September 1996. Mr. Olson is a member of the MUSC (Medical University of South Carolina) Hollings Cancer Center Advisory Board and is on the board of the Charleston Symphony and Charleston Jazz. He holds a BS from Georgetown University, a JD from Dickinson School of Law and an MBA from Seton Hall University. 16 2021 Form 10-K Table of Contents Blackbaud, Inc.