What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-08-04 · 310 added, 177 removed, 558 unchanged (47% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(dollars in thousands) June 30,

(dollars in thousands) September 30,

2022 December 31,

2 unchanged sentences

Restricted cash 343,928 596,616

Accounts receivable, net of allowance of $ 9,764 and $ 11,155 at June 30, 2022 and December 31, 2021, respectively

Accounts receivable, net of allowance of $ 7,444 and $ 11,155 at September 30, 2022 and December 31, 2021, respectively

86,704 102,726

28 unchanged sentences

Common stock, $ 0.001 par value;

180,000,000 shares authorized, 67,755,374 and 66,165,666 shares issued at June 30, 2022 and December 31, 2021, respectively

180,000,000 shares authorized, 67,830,914 and 66,165,666 shares issued at September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 1,048,688 968,927

Treasury stock, at cost;

14,731,484 and 14,182,805 shares at June 30, 2022 and December 31, 2021, respectively

14,739,744 and 14,182,805 shares at September 30, 2022 and December 31, 2021, respectively

( 536,968 ) ( 500,911 )

4 unchanged sentences

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

Second Quarter 2022 Form 10-Q

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

1 unchanged sentence

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

(dollars in thousands, except per share amounts) 2022 2021 2022 2021

14 unchanged sentences

Total operating expenses 147,372 111,691 426,379 329,180

Income (loss) from operations 54 13,043 ( 5,925 ) 19,687

(Loss) income from operations ( 7,012 ) 11,846 ( 12,937 ) 31,533

Interest expense ( 9,337 ) ( 4,003 ) ( 25,912 ) ( 14,171 )

Other income (expense), net 3,133 487 4,254 ( 523 )

Other income, net 4,454 862 8,708 339

(Loss) income before provision for income taxes ( 11,895 ) 8,705 ( 30,141 ) 17,701

13 unchanged sentences

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

Second Quarter 2022 Form 10-Q

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

Condensed Consolidated Statements of Cash Flows

Six months ended

Nine months ended

September 30,

(dollars in thousands) 2022 2021

19 unchanged sentences

Purchase of net assets of acquired companies, net of cash and restricted cash acquired ( 20,945 ) —

Cash received in sale of business 6,426 —

Net cash used in investing activities ( 67,788 ) ( 37,993 )

13 unchanged sentences

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

(dollars in thousands) June 30,

(dollars in thousands) September 30,

2022 December 31,

3 unchanged sentences

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

Second Quarter 2022 Form 10-Q

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

4 unchanged sentences

comprehensive

loss (income)

earnings Total

28 unchanged sentences

Balance at June 30, 2022 67,755,374 $ 68 $ 1,020,835 $ ( 536,511 ) $ 7,455 $ 228,627 $ 720,474

Net loss — — — — — ( 10,319 ) ( 10,319 )

Stock issuance costs related to purchase of EVERFI (see Note 3)

— — ( 87 ) — — — ( 87 )

Retirements of common stock (1)

( 65 ) — ( 5 ) — — — ( 5 )

Vesting of restricted stock units 12,655 — — — — — —

Employee taxes paid for 8,260 withheld shares upon equity award settlement

— — — ( 457 ) — — ( 457 )

Stock-based compensation — — 27,945 — — — 27,945

Restricted stock grants 107,906 — — — — — —

Restricted stock cancellations ( 44,956 ) — — — — — —

Other comprehensive loss — — — — ( 4,739 ) — ( 4,739 )

Balance at September 30, 2022 67,830,914 $ 68 $ 1,048,688 $ ( 536,968 ) $ 2,716 $ 218,308 $ 732,812

(1) Represents shares retired after determining certain EVERFI's selling shareholders would be paid in cash, rather than shares of our common stock.

See Note 3 for additional information regarding our acquisition of EVERFI.

Second Quarter 2022 Form 10-Q

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

31 unchanged sentences

Balance at June 30, 2021 62,332,714 $ 62 $ 605,486 $ ( 449,877 ) $ 6,291 $ 243,312 $ 405,274

Net income — — — — — 6,188 6,188

Purchase of 583,280 treasury shares under stock repurchase program

( 40,279 ) — — ( 40,279 )

Vesting of restricted stock units 908 — — — — — —

Employee taxes paid for 4,313 withheld shares upon equity award settlement

— — — ( 300 ) — — ( 300 )

Stock-based compensation — — 28,920 — — 6 28,926

Restricted stock grants 54,132 — — — — — —

Restricted stock cancellations ( 34,111 ) — — — — — —

Other comprehensive loss — — — — ( 2,972 ) — ( 2,972 )

Balance at September 30, 2021 62,353,643 $ 62 $ 634,406 $ ( 490,456 ) $ 3,319 $ 249,506 $ 396,837

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

Second Quarter 2022 Form 10-Q

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

9 unchanged sentences

The consolidated balance sheet at December 31, 2021 has been derived from the audited consolidated financial statements at that date.

Operating results and cash flows for the six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022, or any other future period.

Operating results and cash flows for the nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022, or any other future period.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted in accordance with the rules and regulations for interim reporting of the SEC.

9 unchanged sentences

We acquired EVERFI (as defined below) on December 31, 2021.

As we are working to integrate EVERFI into our business, it had not yet been included in one of our market groups as of June 30, 2022.

During the third quarter of 2022, we reorganized our market groups and EVERFI is now included in the Corporate Sector market group.

See Note 13 to these condensed consolidated financial statements for additional information about our market groups.

This change did not impact our conclusions that we have one operating and reportable segment and one goodwill reporting unit.

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

Risks and uncertainties related to COVID-19

1 unchanged sentence

We believe that COVID-19 may continue to significantly 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.

Second Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

Use of estimates

2 unchanged sentences

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.

Recently adopted accounting pronouncements

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04") .

This update provides for optional financial reporting alternatives to reduce cost and complexity associated with accounting for contracts, hedging relationships, and other transactions affected by reference rate reform.

This update applies only to contracts, hedging relationships, and other transactions that reference the London Interbank Offer Rate ("LIBOR") or other reference rates expected to be discontinued because of reference rate reform.

The accommodations are available for all entities through December 31, 2022, with early adoption permitted.

We adopted ASU 2020-04 prospectively as of July 1, 2022, and the adoption did not have a material impact on our consolidated financial statements.

Recently issued accounting pronouncements

2 unchanged sentences

There have been no material changes to our significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 1, 2022.

Business Combinations

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

Business Combinations and Dispositions

2022 Disposition

Blackbaud FIMS™ and DonorCentral® NXT

On September 9, 2022, we sold our Foundation Information Management System ("FIMS") and DonorCentral NXT solutions to Fusion Laboratories, LLC for cash proceeds of approximately $ 6.4 million, subject to closing adjustments.

We expect the sale of these solutions to allow us to reduce complexity and focus on innovation within our core products as we execute our strategic growth plans.

During the three months ended June 30, 2022, we recognized a noncash impairment charge of $ 2.0 million against certain insignificant FIMS customer relationship intangible assets that were then held for sale.

The impairment charge was recorded in general and administrative expense in our condensed consolidated statements of comprehensive income.

During the three and nine months ended September 30, 2022, we recognized an insignificant loss on the disposal of FIMS held for sale assets and liabilities.

2022 Acquisition

On August 19, 2022, we acquired all of the outstanding stock of Kilter, Inc.

("Kilter"), a Delaware corporation, pursuant to an agreement and plan of merger, for approximately $ 2.9 million in cash, subject to closing adjustments.

The acquisition of Kilter's mobile application will allow us to expand activity-based peer-to-peer fundraising engagement, to support activity-based health and wellness initiatives for socially responsible companies, and to grow the ways individuals can connect with the causes they care about most through the activities they love.

In addition to the consideration paid at closing, we may be required to pay up to a maximum of $ 3.0 million in additional cash consideration if during the two-year period commencing January 1, 2023 Kilter meets certain application participation targets.

A liability for the contingent consideration was recorded at its acquisition-date fair value of $ 2.7 million in other liabilities in our condensed consolidated balance sheet.

Any change in the fair value of the contingent liability, or any change upon final settlement, will be recognized in income from operations.

Fair values were also assigned to the other assets acquired and liabilities assumed, primarily consisting of goodwill and a finite-lived developed technology intangible asset, which will be amortized over an estimated useful life of three years.

The fair values are based on our best estimates and assumptions as of the reporting date and are considered preliminary pending finalization.

Insignificant acquisition-related costs, which primarily consisted of legal services, were recorded as general and administrative expense during the nine months ended September 30, 2022.

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 advanced our position as a leader in the rapidly evolving ESG and CSR spaces.

We acquired the equity securities for approximately $ 441.8 million in cash consideration and 3,810,953 shares of the company's common stock, valued at approximately $ 301.0 million, for an aggregate purchase price of approximately $ 742.8 million, net of closing adjustments.

We acquired the equity securities for approximately $ 441.8 million in cash consideration and 3,810,888 shares of our common stock, valued at approximately $ 301.0 million, for an aggregate purchase price of approximately $ 742.8 million, net of 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).

6 unchanged sentences

The assets and liabilities, pending finalization, include the valuation of intangible assets as well as the assumed deferred income tax balances.

During the six months ended June 30, 2022, we recorded insignificant measurement period adjustments to the estimated fair value of the EVERFI assets acquired and liabilities assumed following the receipt of new information.

The adjustments resulted in an increase to net working capital, excluding deferred revenue, with the corresponding offset to goodwill.

Second Quarter 2022 Form 10-Q

During the nine months ended September 30, 2022, we recorded insignificant measurement period adjustments to the estimated fair value of the EVERFI assets acquired and liabilities

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

assumed following the receipt of new information.

The adjustments resulted in an increase to net working capital, excluding deferred revenue, with the corresponding offset to goodwill.

Goodwill and Other Intangible Assets

The change in goodwill during the six months ended June 30, 2022, consisted of the following:

The change in goodwill during the nine months ended September 30, 2022, consisted of the following:

(dollars in thousands) Total

Balance at December 31, 2021 $ 1,058,640

Additions related to business combination (1)

Adjustments related to prior year business combination (2)

Adjustments related to dispositions (3)

Effect of foreign currency translation ( 11,460 )

Balance at June 30, 2022 $ 1,051,230

(1) See Note 3 to these condensed consolidated financial statements for a discussion of the measurement period adjustments during the three and six months ended June 30, 2022 to the estimated fair value of the EVERFI assets acquired and liabilities assumed.

Balance at September 30, 2022 $ 1,047,178

(1) See Note 3 to these condensed consolidated financial statements for a discussion of our acquisition of Kilter.

(2) See Note 3 to these condensed consolidated financial statements for a discussion of the measurement period adjustments during the nine months ended September 30, 2022 to the estimated fair value of the EVERFI assets acquired and liabilities assumed .

(3) See Note 3 to these condensed consolidated financial statements for a summary of our disposition of Blackbaud FIMS and DonorCentral NXT.

(Loss) Earnings Per Share

3 unchanged sentences

Potentially dilutive securities consist of shares issuable upon the exercise of stock options, settlement of stock appreciation rights and vesting of restricted stock awards and units.

Diluted loss per share for the three and six months ended June 30, 2022 was the same as basic loss per share as there was a net loss in the period and inclusion of potentially dilutive securities was anti-dilutive.

Diluted loss per share for the three and nine months ended September 30, 2022 was the same as basic loss per share as there was a net loss in the period and inclusion of potentially dilutive securities was anti-dilutive.

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

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(dollars in thousands, except per share amounts) 2022

8 unchanged sentences

Anti-dilutive shares excluded from calculations of diluted (loss) earnings per share 936,214 904,100 1,195,709 1,034,091

Second Quarter 2022 Form 10-Q

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

7 unchanged sentences

Recurring fair value measurements

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

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

Fair value measurement using

(dollars in thousands) Level 1 Level 2 Level 3 Total

Fair value as of June 30, 2022

Financial assets:

(dollars in thousands) Quoted Prices in Active Markets for Identical Assets and Liabilities

(Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

(Level 3) Total

Fair value as of September 30, 2022

Derivative instruments:

Interest rate swaps $ — $ 33,120 $ — $ 33,120

Foreign currency forward contracts — 1,464 — 1,464

Total financial assets $ — $ 34,584 $ — $ 34,584

Fair value as of September 30, 2022

Contingent consideration obligations $ — $ — $ 2,710 $ 2,710

Total financial liabilities $ — $ — $ 2,710 $ 2,710

Fair value as of December 31, 2021

Financial assets:

Derivative instruments:

Interest rate swaps $ — $ 7,160 $ — $ 7,160

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

Our derivative instruments within the scope of Accounting Standards Codification ("ASC") 815, Derivatives and Hedging , are required to be recorded at fair value.

Our derivative instruments that are recorded at fair value include interest rate swaps.

Our derivative instruments that are recorded at fair value include interest rate swaps and foreign currency forward contracts.

See Note 9 to these condensed consolidated financial statements for additional information about our derivative instruments.

The fair value of our interest rate swaps was based on model-driven valuations using LIBOR rates, which are observable at commonly quoted intervals.

Accordingly, our interest rate swaps are classified within Level 2 of the fair value hierarchy.

The Financial Co nduct Authority in the U.K.

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 p hase out occurs.

We believe the carrying amounts of our cash and cash equivalents, restricted cash, accounts receivable, trade accounts payable, accrued expenses and other current liabilities and due to customers approximate their fair values at June 30, 2022 and December 31, 2021, due to the immediate or short-term maturity of these instruments.

We believe the carrying amount of our debt approximates its fair value at June 30, 2022 and December 31, 2021, as the debt bears interest rates that approximate market value.

As LIBOR and SOFR rates are observable at commonly quoted intervals, our debt under the 2020 Credit Facility (as defined below) is classified within Level 2 of the fair value hierarchy.

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

Second Quarter 2022 Form 10-Q

The fair value of our interest rate swaps and foreign currency forward contracts are based on model-driven valuations using Secured Overnight Financing Rate ("SOFR") rates and foreign currency forward rates, respectively, which are observable at commonly quoted intervals.

Accordingly, our interest rate swaps and foreign currency forward contracts are classified within Level 2 of the fair value hierarchy.

Our financial contracts that were indexed to LIBOR were modified to reference SOFR during the three months ended September 30, 2022.

These modifications did not have a significant financial impact.

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

We did not transfer any assets or liabilities among the levels within the fair value hierarchy during the six months ended June 30, 2022.

Additionally, we did not hold any Level 3 assets or liabilities during the six months ended June 30, 2022.

Contingent consideration obligations arise from business acquisitions.

The fair values are based on discounted cash flow analyses reflecting a probability-weighted assessment approach derived from the likelihood of possible achievement of specified performance measures or events and captures the contractual nature of the contingencies, commercial risk, and the time value of money.

As the fair value measurements for our contingent consideration obligations contain significant unobservable inputs, they are classified within Level 3 of the fair value hierarchy.

See Note 3 to these condensed consolidated financial statements for additional information about our contingent consideration obligations.

We believe the carrying amounts of our cash and cash equivalents, restricted cash, accounts receivable, trade accounts payable, accrued expenses and other current liabilities and due to customers approximate their fair values at September 30, 2022 and December 31, 2021, due to the immediate or short-term maturity of these instruments.

We believe the carrying amount of our debt approximates its fair value at September 30, 2022 and December 31, 2021, as the debt bears interest rates that approximate market value.

As SOFR and 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.

We did not transfer any assets or liabilities among the levels within the fair value hierarchy during the nine months ended September 30, 2022.

Non-recurring fair value measurements

5 unchanged sentences

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

During the three and six months ended June 30, 2022, we recorded a noncash impairment charge of $ 2.3 million against certain previously capitalized software development costs that reduced the carrying value of those assets to zero.

During the three and nine months ended September 30, 2022, we recorded noncash impairment charges of $ 1.0 million against certain operating lease ROU assets and $ 0.3 million against certain property and equipment assets.

These impairment charges resulted primarily from our decision to cease using a portion of our leased office space, and the charges are reflected in general and administrative expense on the statements of comprehensive income.

During the nine months ended September 30, 2022, we recorded a noncash impairment charge of $ 2.3 million against certain previously capitalized software development costs that reduced the carrying value of those assets to zero.

The impairment charge is reflected in general and administrative expense and resulted primarily from our decision to end customer support for certain solutions.

During the three and six months ended June 30, 2022, we recorded a noncash impairment charge of $ 2.0 million against certain insignificant customer relationship intangible assets that were held for sale.

During the nine months ended September 30, 2022, we recorded a noncash impairment charge of $ 2.0 million against certain insignificant customer relationship intangible assets that were held for sale.

Those assets were subsequently sold during the third quarter as part of our disposition of FIMS.

See Note 3 to these condensed consolidated financial statements for additional information.

The impairment charge is reflected in general and administrative expense.

There were no other non-recurring fair value adjustments during the six months ended June 30, 2022 except for certain insignificant business combination accounting adjustments to the initial fair value estimates of assets acquired and liabilities assumed at the acquisition date from updated estimates and assumptions during the measurement period.

See Note 3 to these condensed consolidated financial statements for additional details.

There were no other non-recurring fair value adjustments during the nine months ended September 30, 2022 except for certain insignificant business combination accounting adjustments to the initial fair value estimates of assets acquired and liabilities assumed at the acquisition date from updated estimates and assumptions during the measurement period.

See Note 3 to these condensed consolidated financial statements for additional information.

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

Consolidated Financial Statement Details

Restricted cash

(dollars in thousands) June 30,

(dollars in thousands) September 30,

2022 December 31,

3 unchanged sentences

Total restricted cash $ 343,928 $ 596,616

Second Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

Prepaid expenses and other assets

(dollars in thousands) June 30,

(dollars in thousands) September 30,

2022 December 31,

1 unchanged sentence

$ 72,673 $ 78,465

Derivative instruments 34,584 7,160

Prepaid software maintenance and subscriptions (3)

27,392 28,880

Derivative instruments 25,412 7,160

Implementation costs for cloud computing arrangements, net (4)(5)

1 unchanged sentence

Receivables for probable insurance recoveries (6)(7)

10,000 18,202

Prepaid insurance 7,155 5,363

6 unchanged sentences

Prepaid expenses and other current assets $ 83,639 $ 95,506

(1) Amortization expense from costs of obtaining contracts was $ 8.5 million and $ 17.0 million for the three and six months ended June 30, 2022, respectively, and $ 9.0 million and $ 18.2 million for the three and six months ended June 30, 2021.

(2) The current portion of costs of obtaining contracts as of June 30, 2022 and December 31, 2021 was $ 29.1 million and $ 30.2 million, respectively.

(3) The current portion of prepaid software maintenance and subscriptions as of June 30, 2022 and December 31, 2021 was $ 28.2 million and $ 24.7 million, respectively.

(1) Amortization expense from costs of obtaining contracts was $ 8.4 million and $ 25.4 million for the three and nine months ended September 30, 2022, respectively, and $ 8.8 million and $ 26.9 million for the three and nine months ended September 30, 2021.

(2) The current portion of costs of obtaining contracts as of September 30, 2022 and December 31, 2021 was $ 28.6 million and $ 30.2 million, respectively.

(3) The current portion of prepaid software maintenance and subscriptions as of September 30, 2022 and December 31, 2021 was $ 24.8 million and $ 24.7 million, respectively.

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

(5) Amortization expense from capitalized cloud computing implementation costs was insignificant for the three months ended June 30, 2022 and 2021, respectively, and $ 1.1 million and $ 0.9 million for the six months ended June 30, 2022 and 2021, respectively.

Accumulated amortization for these costs was $ 4.1 million and $ 3.0 million as of June 30, 2022 and December 31, 2021, respectively.

(6) All receivables for probable insurance recoveries are classified as current.

(5) Amortization expense from capitalized cloud computing implementation costs was insignificant for the three months ended September 30, 2022 and 2021, respectively, and $ 1.6 million and $ 1.3 million for the nine months ended September 30, 2022 and 2021, respectively.

Accumulated amortization for these costs was $ 4.6 million and $ 3.0 million as of September 30, 2022 and December 31, 2021, respectively.

(6) All receivables for probable insurance recoveries were classified as current.

(7) See discussion of the Security Incident at Note 10 to these condensed consolidated financial statements.

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

Accrued expenses and other liabilities

(dollars in thousands) June 30,

(dollars in thousands) September 30,

2022 December 31,

6 unchanged sentences

Accrued commissions and salaries 4,503 7,872

Accrued health care costs 2,676 3,042

Contingent consideration liability (3)

Accrued vacation costs 2,369 2,234

Accrued health care costs 2,305 3,042

Accrued transaction-based costs related to payments services 2,142 5,427

6 unchanged sentences

Accrued expenses and other current liabilities $ 78,471 $ 100,096

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

Second Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(1) We deferred payments of the employer's portion of Social Security taxes during 2020 under the Coronavirus, Aid, Relief and Economic Security Act, half of which was due by t he end of calendar year 2021 with the remainder due by the end of calendar year 2022.

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

(3) See discussion of our acquisition of Kilter at Note 3 to these condensed consolidated financial statements.

(4) Represents amounts that had not been 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 condensed consolidated financial statements for additional information regarding our acquisition of EVERFI.

Other income (expense), net

Other income, net

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(dollars in thousands) 2022

2 unchanged sentences

Other income, net 792 171 1,957 586

Other income (expense), net $ 3,133 $ 487 $ 4,254 $ ( 523 )

Other income, net $ 4,454 $ 862 $ 8,708 $ 339

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed 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.

1 unchanged sentence

effective interest rate at

(dollars in thousands) June 30,

(dollars in thousands) September 30,

2022 December 31,

2021 June 30,

2021 September 30,

2022 December 31,

10 unchanged sentences

In October 2020, we entered into a five-year $ 900.0 million senior credit facility (the "2020 Credit Facility").

At June 30, 2022, we were in compliance with our debt covenants under the 2020 Credit Facility.

At September 30, 2022, we were in compliance with our debt covenants under the 2020 Credit Facility.

First incremental term loan

2 unchanged sentences

Financing for EVERFI acquisition

On December 31, 2021, we acquired EVERFI for approximately $ 441.8 million in cash consideration and 3,810,953 shares of the company's common stock, valued at approximately $ 301.0 million, for an aggregate purchase price of approximately $ 742.8 million, net of 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 2021 Incremental Term Loan (as defined above).

Second Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

On December 31, 2021, we acquired EVERFI for approximately $ 441.8 million in cash consideration and 3,810,888 shares of our common stock, valued at approximately $ 301.0 million, for an aggregate purchase price of approximately $ 742.8 million, net of 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 2021 Incremental Term Loan.

First amendment to 2020 Credit Facility

1 unchanged sentence

The Amendment amended 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 million fixed dollar basket with respect to the accordion feature and (iv) modify certain negative covenants to provide additional operational flexibility.

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

LIBOR transition amendment

On August 26, 2022, we entered into a LIBOR Transition Amendment (the "LIBOR Amendment").

The LIBOR Amendment amended the 2020 Credit Facility, as previously amended, to change the interest rate benchmark from LIBOR to SOFR, as defined in the LIBOR Amendment.

The LIBOR Amendment does not change any terms of the 2020 Credit Facility unrelated to reference rate reform.

Real estate loans

1 unchanged sentence

As part of the purchase price, we assumed the seller’s obligations under two senior secured notes with a then-aggregate outstanding principal amount of $ 61.1 million (collectively, the “Real Estate Loans”).

At June 30, 2022, we were in compliance with our debt covenants under the Real Estate Loans.

At September 30, 2022, we were in compliance with our debt covenants under the Real Estate Loans.

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

1 unchanged sentence

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 June 30, 2022:

The following table summarizes our currently effective financing agreements as of September 30, 2022:

(dollars in thousands) Term

5 unchanged sentences

Derivative Instruments

We generally use derivative instruments to manage our interest rate and foreign currency exchange risk.

We currently have derivatives classified as cash flow hedges and net investment hedges.

We do not enter into any derivatives for trading or speculative purposes.

All of our derivative instruments are governed by International Swap Dealers Association, Inc.

("ISDA") master agreements with our counterparties.

As of September 30, 2022 and December 31, 2021, we have presented the fair value of our derivative instruments at the gross amounts in the condensed consolidated balance sheet as the gross fair values of our derivative instruments equaled their net fair values.

Cash flow hedges

We generally use derivative instruments to manage our variable interest rate risk.

We have entered into interest rate swap agreements, which effectively convert portions of our variable rate debt under the 2020 Credit Facility to a fixed rate for the term of the swap agreements.

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

The terms and notional values of our derivative instruments were as follows as of June 30, 2022:

(dollars in thousands) Term of derivative instrument Notional

Derivative instruments designated as hedging instruments:

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

Interest rate swap November 2020 - October 2024 60,000

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

Second Quarter 2022 Form 10-Q

We designated each of the interest rate swaps as cash flow hedges at the inception of the contracts.

As of September 30, 2022 and December 31, 2021, the aggregate notional values of the interest rate swaps were $ 435.0 million.

All of the contracts have maturities on or before October 2024.

During the three months ended September 30, 2022, we entered into foreign currency forward contracts to hedge revenues denominated in the Canadian Dollar ("CAD") against changes in the exchange rate with the United States Dollar ("USD").

We designated each of the forwards as cash flow hedges at the inception of the contracts.

As of September 30, 2022, the aggregate notional values of the foreign currency forward contracts designated as cash flow hedges that we held to buy USD in exchange for Canadian Dollars were $ 23.6 million CAD.

All of the contracts have maturities of 12 months or less.

We did not have foreign currency forward contracts as of December 31, 2021.

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

Net investment hedges

We have entered into foreign currency forward contracts to hedge a portion of the foreign currency exposure that arises on translation of our investments denominated in British Pounds ("GBP") into USD.

We designated each of these foreign currency forward contracts as net investment hedges at the inception of the contracts.

As of September 30, 2022, we had £ 10.7 million of foreign currency forward contracts designated as net investment hedges to reduce the volatility of the U.S.

dollar value of a portion of our GBP-denominated investments.

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

Asset derivatives

(dollars in thousands) Balance sheet location June 30,

(dollars in thousands) Balance sheet location September 30,

2022 December 31,

Derivative instruments designated as hedging instruments:

Foreign currency forward contracts, current portion

Prepaid expenses

and other current assets

Interest rate swaps, long-term

1 unchanged sentence

Total derivative instruments designated as hedging instruments $ 34,584 $ 7,160

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

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

Gain recognized

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other comprehensive income into (loss) income

(dollars in thousands) June 30,

(dollars in thousands) September 30,

2022 Three months ended

June 30, 2022

Six months ended

June 30, 2022

September 30, 2022

Nine months ended

September 30, 2022

Cash Flow Hedges

Interest rate swaps $ 33,120 Interest expense $ 1,935 $ 1,900

Foreign currency forward contracts $ 879 Revenue $ 22 $ 22

Net Investment Hedges

Foreign currency forward contracts $ 585 $ — $ —

September 30,

2021 Three months ended

June 30, 2021

Six months ended

June 30, 2021

September 30, 2021

Nine months ended

September 30, 2021

Cash Flow Hedges

Interest rate swaps $ 2,283 Interest expense $ ( 505 ) $ ( 3,289 )

1 unchanged sentence

Accumulated other comprehensive income (loss) includes unrealized gains or losses from the change in fair value measurement of our derivative instruments each reporting period and the related income tax expense or benefit.

Changes 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 income as of June 30, 2022 that is expected to be reclassified into earnings within the next twelve months is $ 11.3 million.

There were no ineffective portions of our interest rate swap derivatives during the six months ended June 30, 2022 and 2021.

See Note 12 for a summary of the changes in accumulated other comprehensive income (loss) by component.

Excluding net investment hedges, changes in the fair value measurements of the derivative instruments and the related income tax expense or benefit are reflected as adjustments to accumulated other comprehensive income (loss) until the actual hedged expense is incurred or until the hedge is terminated at which point the unrealized gain (loss) is reclassified from accumulated other comprehensive income (loss) to current earnings.

For net investment hedges, changes in the fair value measurements of the derivative instruments and the related income tax expense or benefit are reflected as adjustments to translation adjustment, a component of accumulated other comprehensive income (loss), and recognized in earnings only when the hedged GBP investment is liquidated.

The estimated accumulated other comprehensive income as of September 30, 2022 that is expected to be reclassified into earnings within the next twelve months is $ 17.1 million.

There were no ineffective portions of our interest rate swap or foreign currency forward derivatives during the nine months ended September 30, 2022 and 2021.

See Note 12 to these condensed consolidated financial statements for a summary of the changes in accumulated other comprehensive income (loss) by component.

We classify cash flows related to derivative instruments as operating activities in the condensed consolidated statements of cash flows.

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

Commitments and Contingencies

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

As of June 30, 2022, we did not have any operating leases that had not yet commenced.

As of September 30, 2022, we had operating leases for equipment that had not yet commenced with future rent payments of $ 3.0 million.

These operating leases are expected to commence during 2022 with lease terms of 3 years.

The following table summarizes the components of our lease expense:

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September 30,

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September 30,

(dollars in thousands) 2022

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

Second Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

Other commitments

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In certain cases, these arrangements require a minimum annual purchase commitment by us.

As of June 30, 2022, the remaining aggregate minimum purchase commitment under these arrangements was approximately $ 241.3 million through 2027.

As of September 30, 2022, the remaining aggregate minimum purchase commitment under these arrangements was approximately $ 236.0 million through 2027.

Solution and service indemnifications

In the ordinary course of business, we provide certain indemnifications of varying scope to customers against claims of intellectual property infringement made by third parties arising from the use of our solutions or services.

If we determine that it is probable that a loss has been incurred related to solution or service indemnifications, any such loss that could be reasonably estimated would be recognized.

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

We have not identified any losses that might be covered by these indemnifications.

Legal proceedings

We are subject to legal proceedings and claims that arise in the ordinary course of business, as well as certain other non-ordinary course proceedings, claims and inquiries, as described below.

We are subject to legal proceedings and claims that arise in the ordinary course of business, as well as certain other non-ordinary course proceedings, claims and investigations, as described below.

We make a provision for a loss contingency when it is both probable that a material liability has been incurred and the amount of the loss can be reasonably estimated.

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

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

Legal proceedings are inherently unpredictable.

3 unchanged sentences

As previously disclosed, we are subject to risks and uncertainties as a result of a ransomware attack against us in May 2020 in which a cybercriminal removed a copy of a subset of data from our self-hosted environment (the "Security Incident").

Based on the nature of the Security Incident, our research and third party (including law enforcement) investigation, we have no reason to believe that any data went beyond the cybercriminal, was or will be misused, or will be disseminated or otherwise made available publicly.

Based on the nature of the Security Incident, our research and third party (including law enforcement) investigation, we do not believe that any data went beyond the cybercriminal, was or will be misused, or will be disseminated or otherwise made available publicly.

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

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.

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

To limit our exposure to losses related to claims against us, including data breaches such as the Security Incident, we maintain $ 50 million of insurance above a $ 250 thousand deductible payable by us.

As noted below, this coverage has reduced our fina ncial exposure related to the Security Incident, and we will continue to seek recoveries under these insurance policies for claims we have submitted but have not yet been reimbursed.

Second Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

As noted below, this coverage has reduced our fina ncial exposure related to the Security Incident.

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

Three months ended

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September 30,

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September 30,

(dollars in thousands) 2022

2 unchanged sentences

Net expense $ 13,658 $ 851 $ 29,207 $ 1,322

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

(dollars in thousands) June 30,

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

(dollars in thousands) September 30,

2022 December 31,

Cumulative gross expense $ 81,489 $ 50,391

Cumulative offsetting insurance recoveries ( 50,000 ) ( 48,109 )

Cumulative offsetting insurance recoveries recognized ( 50,000 ) ( 48,109 )

Cumulative net expense $ 31,489 $ 2,282

Cumulative offsetting insurance recoveries paid $ ( 50,000 ) $ ( 29,968 )

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 have 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 (loss) income and as operating activities on our consolidated statements of cash flows.

T otal costs related to the Security Incident that we expect will be recoverable has exceeded the limit of our insurance coverage.

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.

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

Not included in the expenses discussed above were costs associated with enhancements to our cybersecurity program.

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

Total costs related to the Security Incident have exceeded the limit of our insurance coverage.

We expect to continue to experience significant expenses related to our response to the Security Incident, resolution of legal proceedings, claims and investigations, including those discussed below, and our efforts to further enhance our cybersecurity measures.

For full year 2022, we currently expect net pre-tax expense of approximately $ 30.0 million to $ 35.0 million for ongoing legal fees related to the Security Incident.

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For full year 2022, we currently expect net cash outlays of approximately $ 15.0 million to $ 25.0 million for ongoing legal fees related to the Security Incident.

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 June 30, 2022 because we are unable at this time to reasonably estimate the possible loss or range of loss.

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

As of September 30, 2022, we have recorded approximately $ 5.0 million in aggregate liabilities for loss contingencies related to the Security Incident that we believe we can reasonably estimate.

In accordance with our policy described above, certain of these recorded charges reflect the low end of a range of estimated losses based on our determination that no estimate within that range was better than any other amount.

It is reasonably possible that actual losses in the future for those matters will be in excess of the amounts accrued, but we are unable at this time to reasonably estimate the possible additional loss.

There are other Security Incident-related matters, including customer claims, customer constituent class actions and governmental investigations, for which we have not recorded a liability for a loss contingency as of September 30, 2022 because we are unable at this time to reasonably estimate the possible loss or range of loss.

Customer claims.

12 unchanged sentences

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.

Second Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

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

3 unchanged sentences

As a result of these uncertainties, we may be unable to determine the probability of loss until, or after, a court has finally determined that a plaintiff has satisfied the applicable class action procedural requirements.

Furthermore, for putative class actions, it is often not possible to estimate the possible loss or a range of loss amounts, even where we have determined that a loss is reasonably possible.

Furthermore, for putative class actions, it is often not possible to reasonably estimate the possible loss or a range of loss amounts, even where we have determined that a loss is reasonably possible.

Generally, class actions involve a large number of people and raise complex legal and factual issues that result in uncertainty as to their outcome and, ultimately, making it difficult for us to estimate the amount of damages that a plaintiff might successfully prove.

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

Governmental inquiries and investigations.

Governmental investigations.

To date, we have received a consolidated, multi-state Civil Investigative Demand issued on behalf of 49 state Attorneys General and the District of Columbia and a separate Civil Investigative Demand from the office of the California Attorney General relating to the Security Incident.

7 unchanged sentences

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

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

We have been having discussions with the SEC Staff about potential resolution of issues arising from their investigation.

While we are hopeful that we can resolve the matter on acceptable terms, there is no assurance that we will be able to resolve the matter on terms acceptable to us and the SEC.

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.

6 unchanged sentences

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.

Second Quarter 2022 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

We continue to cooperate with all ongoing investigations, which include various requests for documents, policies, narratives and communications, as well as requests to interview or depose various Company-related personnel.

As noted above, each of these separate governmental investigations could result in adverse 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.

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

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September 30,

(dollars in thousands) 2022

1 unchanged sentence

Effective income tax rate 13.2 % 28.9 % 19.9 % 27.9 %

For the three and six months ended June 30, 2022, we have utilized the discrete effective tax rate method, as allowed by ASC 740-270-30-18, Income Taxes—Interim Reporting , to calculate our interim income tax provision.

During the six months ended June 30, 2022, we utilized the discrete effective tax rate method, as allowed by ASC 740-270-30-18, Income Taxes—Interim Reporting , to calculate our interim income tax provision.

The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate.

The discrete method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis.

We believe that, at this time, the use of this discrete method is more appropriate than the annual effective tax rate method as our full-year forecasted pre-tax income, relative to our forecasted permanent differences, has the potential to distort our estimated annual effective tax rate.

The increase in our effective income tax rate for the three months ended June 30, 2022 when compared to the same period in 2021 was primarily due to 2022 tax benefit attributable to foreign-derived intangible income ("FDII") deduction not generated in the prior year.

Furthermore, the 2021 effective tax rate was positively impacted by benefit attributable to stock based compensation partially offset against expense attributable to an income tax rate increase enacted during the period.

The decrease in our effective income tax rate for the six months ended June 30, 2022 when compared to the same period in 2021 was primarily attributable to 2022 tax benefit attributable to FDII deduction not generated in the prior year.

Furthermore, the 2022 effective tax rate was negatively impacted by tax expense attributable to stock-based compensation against pre-tax loss for the period.

The 2021 effective tax rate was positively impacted by benefit attributable to stock-based compensation, partially offset against expense attributable to an income tax rate increase enacted during the period.

Second Quarter 2022 Form 10-Q

We believe that, at this time, the use of this discrete method is no longer more appropriate than the annual effective tax rate method.

The decrease in our effective income tax rate for the three and nine months ended September 30, 2022 when compared to the same periods in 2021 was primarily due to the effect of year-to-date losses relative to our forecasted permanent items, including foreign-derived intangible income deduction not generated in the prior year.

Furthermore, the 2022 effective income tax rate was negatively impacted by expenses attributable to stock based compensation.

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

4 unchanged sentences

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(dollars in thousands) 2022

5 unchanged sentences

8,241 ( 109 ) 21,678 2,329

Amounts reclassified from accumulated other comprehensive income (loss) to interest expense ( 323 ) 1,408 35 2,784

Amounts reclassified from accumulated other comprehensive income (loss) ( 1,957 ) 505 ( 1,922 ) 3,289

Tax expense (benefit) included in provision for income taxes 513 ( 134 ) 504 ( 862 )

4 unchanged sentences

Accumulated other comprehensive (loss) income balance, beginning of period $ ( 11,265 ) $ 4,898 $ 1,265 $ 604

Translation adjustments ( 10,398 ) 1,783 ( 12,530 ) 4,294

Translation adjustment ( 11,536 ) ( 3,234 ) ( 24,066 ) 1,060

Accumulated other comprehensive (loss) income balance, end of period ( 22,801 ) 1,664 ( 22,801 ) 1,664

2 unchanged sentences

Transaction price allocated to the remaining performance obligations

As of June 30, 2022, approximately $ 1.0 billion of revenue is expected to be recognized from remaining performance obligations.

As of September 30, 2022, 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.

1 unchanged sentence

and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed (transactional revenue).

Second Quarter 2022 Form 10-Q

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

1 unchanged sentence

Contract balances

Our contract assets as of June 30, 2022 and December 31, 2021 were insignificant.

Our opening and closing balances of deferred revenue were as follows:

(in thousands) June 30,

Our contract assets as of September 30, 2022 and December 31, 2021 were insignificant.

Our closing balances of deferred revenue were as follows:

(in thousands) September 30,

2022 December 31,

Total deferred revenue $ 396,599 $ 378,746

The increase in deferred revenue during the six months ended June 30, 2022 was primarily due to a seasonal increase in customer contract renewals.

The increase in deferred revenue during the nine months ended September 30, 2022 was primarily due to a seasonal increase in customer contract renewals .

Historically, due to the timing of customer budget cycles, we have an increase in customer contract renewals at or near the beginning of our third quarter.

Generally, our lowest balance of deferred revenue during the year is at the end of our first quarter.

The amount of revenue recognized during the six months ended June 30, 2022 that was included in the deferred reven ue balance at the beginning of the period was approximately $ 273 million.

The amount of revenue recognized during the six months ended June 30, 2022 from performance obligations satisfied in prior periods was insignificant .

The amount of revenue recognized during the nine months ended September 30, 2022 that was included in the deferred reven ue balance at the beginning of the period was approximately $ 303 million.

The amount of revenue recognized during the nine months ended September 30, 2022 from performance obligations satisfied in prior periods was insignificant .

Disaggregation of revenue

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Three months ended

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September 30,

(dollars in thousands) 2022

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Total revenue $ 261,297 $ 231,218 $ 783,348 $ 679,849

The UMG, IMG and EVERFI comprised our go-to-market organizations as of June 30, 2022.

During the third quarter of 2022, we reorganized our market groups.

The Social Sector and Corporate Sector market groups comprised our go-to-market organizations as of September 30, 2022.

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.

• We acquired EVERFI as of December 31, 2021 as discussed in Note 3 to these condensed consolidated financial statements.

As we are working to integrate EVERFI into our business, it had not yet been included in one of our market groups as of June 30, 2022.

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

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

The following table presents our revenue by market group:

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September 30,

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September 30,

(dollars in thousands) 2022

UMG $ 184,761 $ 179,436 $ 367,250 $ 352,903

53,567 50,028 101,621 95,797

Social Sector $ 223,809 $ 221,194 $ 672,182 $ 651,215

Corporate Sector

37,334 8,596 111,634 27,275

1 unchanged sentence

Total revenue $ 261,297 $ 231,218 $ 783,348 $ 679,849

Second Quarter 2022 Form 10-Q

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

2 unchanged sentences

Three months ended

Six months ended

September 30,

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September 30,

(dollars in thousands) 2022

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Total recurring revenue $ 249,387 $ 218,530 $ 746,560 $ 642,266

Second Quarter 2022 Form 10-Q

Subsequent Events

Rights Agreement

On October 7, 2022 , our Board of Directors declared a dividend of one preferred share purchase right (a “Right”) for each of our issued and outstanding shares of common stock, which was paid to the stockholders of record at the close of business on October 17, 2022 (the “Record Date”).

Each Right entitles the registered holder, subject to the terms of the Rights Agreement (as defined below), to purchase us one one-thousandth of a share of our Series A Junior Participating Preferred Stock, par value $ 0.001 per share (the “Preferred Stock”) at a price of $ 313.00 , subject to certain adjustments (as adjusted from time to time, the “Exercise Price”).

The description and terms of the Rights are set forth in the Stockholder Rights Agreement, dated as of October 7, 2022 (the “Rights Agreement”), by and between us and American Stock Transfer & Trust Company, LLC.

Under the Rights Agreement, the Rights will become exercisable if an entity, person or group acquires beneficial ownership of 20 % or more of our outstanding common stock in a transaction not approved by our Board of Directors.

In the event that the Rights become exercisable due to the ownership threshold being crossed, each Right will entitle its holder (other than the person, entity or group triggering the Rights Plan, whose rights will become void and will not be exercisable) to purchase additional shares of common stock having a then-current market value of twice the Exercise Price.

Each share of Preferred Stock will be entitled, when, as and if declared, to a minimum preferential per share quarterly dividend payment equal to the greater of (i) $1.00 per share and (ii) an amount equal to 1,000 times the dividend declared per share of common stock.

In the event of liquidation, dissolution or winding up of the Company, the holders of the Preferred Stock will be entitled to a minimum preferential payment of the greater of (i) $1,000.00 per share (plus any accrued but unpaid dividends), and (ii) an amount equal to 1,000 times the payment made per share of common stock.

Each share of Preferred Stock will have 1,000 votes, voting together with the common stock.

In the event of any merger, consolidation or other transaction in which outstanding shares of common stock are converted or exchanged, each share of Preferred Stock will be entitled to receive 1,000 times the amount received per share of common stock.

These Rights are protected by customary antidilution provisions.

Subject to the terms of the Rights Agreement, the Rights will expire on October 2, 2023.

Additional information regarding the Rights Agreement, including a copy of the Rights Agreement, is contained in a Form 8-K filed with the SEC on October 11, 2022.

Third Quarter 2022 Form 10-Q

Blackbaud, Inc.

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

What changed 10-Q

Item 1. Financial Statements