What changed in this filing

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Item 1. Financial Statements

2024-10-30 compared with 2024-07-31 · 193 added, 159 removed, 665 unchanged (35% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(dollars in thousands, except per share amounts) June 30,

(dollars in thousands, except per share amounts) September 30,

2024 December 31,

2 unchanged sentences

Restricted cash 428,095 697,006

Accounts receivable, net of allowance of $ 6,006 and $ 6,907 at June 30, 2024 and December 31, 2023, respectively

Accounts receivable, net of allowance of $ 6,307 and $ 6,907 at September 30, 2024 and December 31, 2023, respectively

97,988 101,862

28 unchanged sentences

Common stock, $ 0.001 par value;

180,000,000 shares authorized, 70,883,488 and 69,188,304 shares issued at June 30, 2024 and December 31, 2023, respectively;

51,623,951 and 53,625,440 shares outstanding at June 30, 2024 and December 31, 2023, respectively

180,000,000 shares authorized, 70,955,940 and 69,188,304 shares issued at September 30, 2024 and December 31, 2023, respectively;

50,869,218 and 53,625,440 shares outstanding at September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 1,227,198 1,203,012

Treasury stock, at cost;

19,259,537 and 15,562,864 shares at June 30, 2024 and December 31, 2023, respectively

20,086,722 and 15,562,864 shares at September 30, 2024 and December 31, 2023, respectively

( 922,516 ) ( 591,557 )

Accumulated other comprehensive income (loss) 175 ( 1,688 )

Accumulated other comprehensive loss ( 6,887 ) ( 1,688 )

Retained earnings 246,461 198,869

2 unchanged sentences

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

Second Quarter 2024 Form 10-Q

Third Quarter 2024 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) 2024 2023 2024 2023

13 unchanged sentences

Total operating expenses 115,385 133,816 378,204 431,677

Income (loss) from operations 42,092 294 52,811 ( 9,653 )

Income from operations 43,825 22,044 96,636 12,391

Interest expense ( 14,140 ) ( 9,620 ) ( 40,131 ) ( 31,449 )

9 unchanged sentences

Diluted weighted average shares 51,632,569 54,089,897 52,107,147 52,495,556

Other comprehensive (loss) income

Other comprehensive loss

Foreign currency translation adjustment $ 6,463 $ ( 4,794 ) $ 5,617 $ 419

Unrealized (loss) gain on derivative instruments, net of tax ( 13,525 ) 4,093 ( 10,816 ) ( 1,216 )

Total other comprehensive (loss) income ( 1,047 ) 8,438 1,863 ( 96 )

Total other comprehensive loss ( 7,062 ) ( 701 ) ( 5,199 ) ( 797 )

Comprehensive income (loss) $ 13,480 $ 8,316 $ 42,393 $ ( 4,376 )

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

Second Quarter 2024 Form 10-Q

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

Condensed Consolidated Statements of Cash Flows

Six months ended

Nine months ended

September 30,

(dollars in thousands) 2024 2023

19 unchanged sentences

Capitalized software and content development costs ( 42,882 ) ( 44,664 )

Purchase of net assets of acquired companies, net of cash and restricted cash acquired — ( 13 )

Net cash used in disposition of business ( 1,179 ) —

9 unchanged sentences

Purchase of treasury stock ( 325,408 ) —

Net cash provided by financing activities 25,657 10,443

Net cash used in financing activities ( 435,117 ) ( 496,746 )

Effect of exchange rate on cash, cash equivalents and restricted cash 3,527 ( 311 )

Net increase in cash, cash equivalents and restricted cash 102,851 56,399

Net decrease in cash, cash equivalents and restricted cash ( 265,529 ) ( 343,244 )

Cash, cash equivalents and restricted cash, beginning of period 728,257 733,931

1 unchanged sentence

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,

2024 December 31,

3 unchanged sentences

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

Second Quarter 2024 Form 10-Q

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

3 unchanged sentences

comprehensive

income (loss)

(loss) income

earnings Total

3 unchanged sentences

Net income — — — — — — 5,246 5,246

Purchase of treasury shares under stock repurchase program — — ( 2,954,211 ) ( 211,412 ) ( 52,244 ) — — ( 263,656 )

Purchase of treasury shares under stock repurchase program, inclusive of excise tax — — ( 2,954,211 ) ( 211,412 ) ( 52,244 ) — — ( 263,656 )

Vesting of restricted stock units 1,357,125 — — — — — — —

13 unchanged sentences

Balance at June 30, 2024 70,883,488 $ 71 ( 19,259,537 ) $ ( 857,452 ) $ 1,208,624 $ 175 $ 225,919 $ 577,337

Second Quarter 2024 Form 10-Q

Net income — — — — — — 20,542 20,542

Purchase of treasury shares under stock repurchase program, inclusive of excise tax — — ( 807,774 ) ( 63,597 ) — — — ( 63,597 )

Vesting of restricted stock units 20,659 — — — — — — —

Shares withheld to satisfy tax withholdings — — ( 19,411 ) ( 1,467 ) — — — ( 1,467 )

Stock-based compensation — — — — 18,574 — — 18,574

Restricted stock grants 62,998 — — — — — — —

Restricted stock cancellations ( 11,205 ) — — — — — — —

Other comprehensive loss — — — — — ( 7,062 ) — ( 7,062 )

Balance at September 30, 2024 70,955,940 $ 71 ( 20,086,722 ) $ ( 922,516 ) $ 1,227,198 $ ( 6,887 ) $ 246,461 $ 544,327

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

23 unchanged sentences

Balance at June 30, 2023 69,164,244 $ 69 ( 15,311,367 ) $ ( 570,547 ) $ 1,138,553 $ 8,842 $ 184,453 $ 761,370

Net income — — — — — — 9,017 9,017

Retirements of common stock (1)

( 143 ) — — — ( 13 ) — — ( 13 )

Vesting of restricted stock units 26,662 — — — — — — —

Shares withheld to satisfy tax withholdings — — ( 25,710 ) ( 1,881 ) — — — ( 1,881 )

Stock-based compensation — — — — 32,379 — — 32,379

Restricted stock grants 27,913 — — — — — — —

Restricted stock cancellations ( 30,909 ) — — — — — — —

Other comprehensive loss — — — — — ( 701 ) — ( 701 )

Balance at September 30, 2023 69,187,767 $ 69 $ ( 15,337,077 ) $ ( 572,428 ) $ 1,170,919 $ 8,141 $ 193,470 $ 800,171

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

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

Second Quarter 2024 Form 10-Q

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

2 unchanged sentences

Serving the nonprofit and education sectors, companies committed to social responsibility and individual change makers, our essential software is built to accelerate impact in fundraising, nonprofit financial management, digital giving, grantmaking, corporate social responsibility and education management.

A remote-first company, we have operations in the United States, Australia, Canada, Costa Rica and the United Kingdom, supporting users in 100+ countries.

A remote-first company, we have operations in the United States, Australia, Canada, Costa Rica, India and the United Kingdom, supporting users in 100+ countries.

Basis of Presentation

1 unchanged sentence

The accompanying condensed consolidated interim financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC") for interim financial reporting.

These condensed consolidated statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to state fairly the consolidated balance sheets, consolidated statements of comprehensive income, consolidated statements of cash flows and consolidated statements of stockholders’ equity, for the periods presented in accordance with accounting principles generally accepted in the United States ("U.S.") ("GAAP").

These condensed consolidated statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to state fairly the condensed consolidated balance sheets, condensed consolidated statements of comprehensive income, consolidated statements of cash flows and consolidated statements of stockholders’ equity, for the periods presented in accordance with accounting principles generally accepted in the United States ("U.S.") ("GAAP").

The condensed consolidated balance sheet at December 31, 2023 has been derived from the audited consolidated financial statements at that date.

Operating results and cash flows for the six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024, or any other future period.

Operating results and cash flows for the three and/or nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024, or any other future period.

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

12 unchanged sentences

Changes in the facts or circumstances underlying these estimates could result in material changes and actual results could materially differ from these estimates.

Second Quarter 2024 Form 10-Q

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

9 unchanged sentences

We incurred an insignificant amount of legal costs associated with the disposition of this business.

As a result of the disposition, we recorded a $ 1.6 million loss, which was recorded in general and administrative expense in the unaudited, condensed consolidated statement of comprehensive income for the six months ended June 30, 2024.

Earnings (Loss) Per Share

We compute basic earnings (loss) per share by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period.

Diluted earnings (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares and dilutive potential common shares outstanding during the period.

Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares and dilutive potential common shares outstanding during the period.

Diluted earnings (loss) per share reflects the assumed exercise, settlement and vesting of all dilutive securities using the “treasury stock method,” except when the effect is anti-dilutive.

Potentially dilutive securities consist of shares issuable upon vesting of restricted stock awards and units.

Diluted loss per share for the six months ended June 30, 2023 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 nine months ended September 30, 2023 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 earnings (loss) per share:

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(dollars in thousands, except per share amounts) 2024

8 unchanged sentences

Anti-dilutive shares excluded from calculations of diluted earnings (loss) per share 47,210 21,660 380,392 474,150

Second Quarter 2024 Form 10-Q

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

13 unchanged sentences

(Level 3) Total

Fair value as of June 30, 2024

Fair value as of September 30, 2024

Financial assets:

2 unchanged sentences

Total financial assets $ — $ 1,753 $ — $ 1,753

Fair value as of June 30, 2024

Fair value as of September 30, 2024

Financial liabilities:

Interest rate swaps $ — $ 5,490 $ — $ 5,490

Foreign currency forward contracts — 504 — 504

13 unchanged sentences

See Note 8 to these unaudited, condensed consolidated financial statements for additional information about our derivative instruments.

Second Quarter 2024 Form 10-Q

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

5 unchanged sentences

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.

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, 2024 and December 31, 2023, due to the immediate or short-term maturity of these instruments.

We believe the carrying amount of our debt approximates its fair value at June 30, 2024 and December 31, 2023, as the debt bears interest rates that approximate market value.

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, 2024 and December 31, 2023, due to the immediate or short-term maturity of these instruments.

We believe the carrying amount of our debt approximates its fair value at September 30, 2024 and December 31, 2023, as the debt bears interest rates that approximate market value.

As SOFR rates are observable at commonly quoted intervals, our debt under the 2024 Credit Facilities (as defined below) is classified within Level 2 of the fair value hierarchy.

The fair value of our fixed rate debt does not exceed the carrying amount.

We did not transfer any assets or liabilities among the levels within the fair value hierarchy during the six months ended June 30, 2024.

We did not transfer any assets or liabilities among the levels within the fair value hierarchy during the nine months ended September 30, 2024.

Non-recurring fair value measurements

7 unchanged sentences

We considered our entry into the sublease an impairment indicator.

As a result, during the three and six months ended June 30, 2024, we recorded noncash impairment charges of $ 3.1 million against certain operating lease ROU assets and noncash impairment charges against certain property and equipment assets which were insignificant.

As a result, during the nine months ended September 30, 2024, we recorded noncash impairment charges of $ 3.1 million against certain operating lease ROU assets and noncash impairment charges against certain property and equipment assets which were insignificant.

We present these impairment charges in general and administrative expense on our unaudited, condensed consolidated statements of comprehensive income (loss) and as other non-cash adjustments within operating activities on our unaudited condensed consolidated statements of cash flows.

There were no other significant non-recurring fair value adjustments to our long-lived assets, intangible assets, goodwill or operating lease ROU assets during the six months ended June 30, 2024.

There were no other significant non-recurring fair value adjustments to our long-lived assets, intangible assets, goodwill or operating lease ROU assets during the nine months ended September 30, 2024.

Consolidated Financial Statement Details

Restricted cash

(dollars in thousands) June 30,

(dollars in thousands) September 30,

2024 December 31,

2 unchanged sentences

Total restricted cash $ 428,095 $ 697,006

Second Quarter 2024 Form 10-Q

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

1 unchanged sentence

Prepaid expenses and other assets

(dollars in thousands) June 30,

(dollars in thousands) September 30,

2024 December 31,

3 unchanged sentences

34,500 35,169

Derivative instruments 14,534 16,198

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

Prepaid insurance 7,078 3,940

Unbilled accounts receivable 5,789 5,615

Equity method investment (6)

Taxes, prepaid and receivable 7,376 3,418

Unbilled accounts receivable 6,427 5,615

Investment in equity securities (6)

Prepaid insurance 5,026 3,940

Derivative instruments 1,753 16,198

Other assets 16,847 14,346

2 unchanged sentences

Prepaid expenses and other current assets $ 87,499 $ 99,285

(1) Amortization expense from costs of obtaining contracts was $ 4.9 million and $ 9.7 million for the three and six months ended June 30, 2024, respectively, and $ 8.1 million and $ 16.4 million for the three and six months ended June 30, 2023, respectively.

(2) The current portion of costs of obtaining contracts as of June 30, 2024 and December 31, 2023 was $ 19.6 million and $ 25.3 million, respectively.

(3) The current portion of prepaid software maintenance and subscriptions as of June 30, 2024 and December 31, 2023 was $ 32.1 million and $ 32.4 million, respectively.

(1) Amortization expense from costs of obtaining contracts was $ 5.1 million and $ 14.8 million for the three and nine months ended September 30, 2024, respectively, and $ 7.9 million and $ 24.3 million for the three and nine months ended September 30, 2023, respectively.

(2) The current portion of costs of obtaining contracts as of September 30, 2024 and December 31, 2023 was $ 19.8 million and $ 25.3 million, respectively.

(3) The current portion of prepaid software maintenance and subscriptions as of September 30, 2024 and December 31, 2023 was $ 31.8 million and $ 32.4 million, respectively.

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

(5) Amortization expense from capitalized cloud computing implementation costs was $ 0.7 million and insignificant for the three months ended June 30, 2024 and 2023, respectively, and $ 1.4 million and $ 1.1 million for the six months ended June 30, 2024 and 2023, respectively.

Accumulated amortization for these costs was $ 9.1 million and $ 7.7 million as of June 30, 2024 and December 31, 2023, respectively.

(5) Amortization expense from capitalized cloud computing implementation costs was $ 0.8 million and insignificant for the three months ended September 30, 2024 and 2023, respectively, and $ 2.1 million and $ 1.8 million for the nine months ended September 30, 2024 and 2023, respectively.

Accumulated amortization for these costs was $ 9.8 million and $ 7.7 million as of September 30, 2024 and December 31, 2023, respectively.

(6) Represents a strategic investment that did not result in Blackbaud having significant influence over the investee.

Accrued expenses and other liabilities

(dollars in thousands) June 30,

(dollars in thousands) September 30,

2024 December 31,

Accrued legal costs (1)

$ 10,473 $ 3,659

Taxes payable

1 unchanged sentence

Customer credit balances 9,746 10,238

Unrecognized tax benefit 6,221 2,954

Derivative instruments 5,994 5,540

Operating lease liabilities, current portion 4,707 6,701

Accrued commissions and salaries 3,086 4,413

Accrued vacation costs 2,594 2,452

Accrued health care costs 3,029 3,865

Accrued vacation costs 2,810 2,452

Accrued transaction-based costs related to payments services 2,290 4,323

Derivative instruments 56 5,540

Accrued legal costs (1)

Contingent consideration liability

5 unchanged sentences

See Note 9 to these unaudited, condensed consolidated financial statements for additional information about our loss contingency accruals and other legal expenses.

Second Quarter 2024 Form 10-Q

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

2 unchanged sentences

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(dollars in thousands) 2024

Interest income $ 3,118 $ 3,012 $ 7,981 $ 6,556

Currency revaluation losses ( 380 ) ( 535 ) ( 97 ) ( 779 )

Currency revaluation (losses) gains ( 1,315 ) 1,674 ( 1,412 ) 894

Other income, net 1,194 976 3,085 2,997

3 unchanged sentences

effective interest rate at

(dollars in thousands) June 30,

(dollars in thousands) September 30,

2024 December 31,

2023 June 30,

2023 September 30,

2024 December 31,

21 unchanged sentences

Accordingly, we accounted for the refinancing event for these lenders as a debt extinguishment.

Second Quarter 2024 Form 10-Q

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

3 unchanged sentences

In connection with our entry into the 2024 Credit Agreement, we paid $ 6.5 million in financing costs, of which $ 1.6 million were capitalized in other assets and, together with a portion of the unamortized deferred financing costs from the 2020 Credit Agreement and prior agreements, are being amortized into interest expense over the term of the new facility.

As of June 30, 2024, deferred financing costs totaling $ 1.9 million were included in other assets on our consolidated balance sheets.

As of September 30, 2024, deferred financing costs totaling $ 1.8 million were included in other assets on our consolidated balance sheets.

We recorded aggregate financing costs of $ 3.6 million as a direct deduction from the carrying amount of our debt liability, which related to debt discount (fees paid to lenders) and debt issuance costs for the 2024 Term Facility.

15 unchanged sentences

Financial covenants include a net leverage ratio and an interest coverage ratio.

At June 30, 2024, we were in compliance with our debt covenants under the 2024 Credit Facilities.

At September 30, 2024, we were in compliance with our debt covenants under the 2024 Credit Facilities.

Real estate loans

2 unchanged sentences

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

At June 30, 2024, we were in compliance with our debt covenants under the Real Estate Loans.

At September 30, 2024, 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.

Second Quarter 2024 Form 10-Q

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

The following table summarizes our currently effective supplier financing agreements as of June 30, 2024:

The following table summarizes our currently effective supplier financing agreements as of September 30, 2024:

(dollars in thousands) Term

7 unchanged sentences

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

The changes in supplier financing obligations during the six months ended June 30, 2024, consisted of the following:

The changes in supplier financing obligations during the nine months ended September 30, 2024, consisted of the following:

(dollars in thousands) Total

Balance at December 31, 2023 $ 2,800

Balance at June 30, 2024 $ 2,782

As of June 30, 2024, the required annual maturities related to the 2024 Credit Facilities, the Real Estate Loans and our other debt were as follows:

Balance at September 30, 2024 $ 2,782

As of September 30, 2024, the required annual maturities related to the 2024 Credit Facilities, the Real Estate Loans and our other debt were as follows:

Years ending December 31,

9 unchanged sentences

master agreements with our counterparties.

As of June 30, 2024 and December 31, 2023, we have presented the fair value of our derivative instruments at the gross amounts in the condensed consolidated balance sheets as the gross fair values of our derivative instruments equaled their net fair values.

As of September 30, 2024 and December 31, 2023, we have presented the fair value of our derivative instruments at the gross amounts in the condensed consolidated balance sheets as the gross fair values of our derivative instruments equaled their net fair values.

Cash flow hedges

2 unchanged sentences

Our entry into the 2024 Credit Agreement in April 2024 did not affect our interest rate swap agreements, including their designation as cash flow hedges, as the 2024 Credit Agreement has substantially the same critical terms as the the 2020 Credit Agreement.

As of June 30, 2024 and December 31, 2023, the aggregate notional values of the interest rate swaps were $ 935.0 million and $ 935.0 million, respectively.

All of the contracts have maturities on or before October 2028.

Second Quarter 2024 Form 10-Q

In September 2024, we entered into two additional forward-starting interest rate swap agreements each with a notional value of $ 100.0 million with effective dates beginning in March 2025 through September 2026 and March 2027 (the "September 2024 Swap Agreements").

We designated the September 2024 Swap Agreements as cash flow hedges at the inception of the contracts.

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

As of September 30, 2024 and December 31, 2023, the aggregate notional values of the interest rate swaps were $ 1.1 billion and $ 935.0 million, respectively.

All of the contracts have maturities on or before October 2028.

The aggregate notional value as of September 30, 2024 includes the two additional forward-starting interest rate swap agreements discussed above.

We have 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 these foreign currency forward contracts as cash flow hedges at the inception of the contracts.

As of June 30, 2024 and December 31, 2023, the aggregate notional values of the foreign currency forward contracts designated as cash flow hedges that we held to buy USD in exchange for Canadian Dollars were $ 32.1 million CAD and $ 29.9 million CAD, respectively.

As of September 30, 2024 and December 31, 2023, the aggregate notional values of the foreign currency forward contracts designated as cash flow hedges that we held to buy USD in exchange for Canadian Dollars were $ 32.5 million CAD and $ 29.9 million CAD, respectively.

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

2 unchanged sentences

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

As of June 30, 2024 and December 31, 2023, the aggregate notional values of the foreign currency forward contracts designated as net investment hedges to reduce the volatility of the U.S.

As of September 30, 2024 and December 31, 2023, the aggregate notional values of the 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 was £ 10.5 million and £ 13.2 million, respectively.

1 unchanged sentence

Asset derivatives Liability derivatives

(dollars in thousands) Balance sheet location June 30,

(dollars in thousands) Balance sheet location September 30,

2024 December 31,

2023 Balance sheet location June 30,

2023 Balance sheet location September 30,

2024 December 31,

11 unchanged sentences

Total derivative instruments designated as hedging instruments $ 1,753 $ 16,198 $ 5,994 $ 5,540

Second Quarter 2024 Form 10-Q

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

1 unchanged sentence

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

Gain (loss) recognized

(Loss) gain recognized

in accumulated other

comprehensive

income (loss) as of

of gain (loss)

of (loss) gain

reclassified from

1 unchanged sentence

comprehensive

income (loss) into

income (loss)

Gain reclassified from accumulated

other comprehensive income (loss) into income (loss)

(dollars in thousands) June 30,

other comprehensive loss into income (loss)

(dollars in thousands) September 30,

2024 Three months ended

June 30, 2024

Six months ended

June 30, 2024

September 30, 2024

Nine months ended

September 30, 2024

Cash Flow Hedges

3 unchanged sentences

Foreign currency forward contracts $ ( 444 ) $ — $ —

September 30,

2023 Three months ended

June 30, 2023

Six months ended

June 30, 2023

September 30, 2023

Nine months ended

September 30, 2023

Cash Flow Hedges

7 unchanged sentences

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 June 30, 2024 that is expected to be reclassified into earnings within the next twelve months is $ 11.6 million.

There were no ineffective portions of our interest rate swap or foreign currency forward derivatives during the six months ended June 30, 2024 and 2023.

The estimated accumulated other comprehensive income as of September 30, 2024 that is expected to be reclassified into earnings within the next twelve months is $ 2.7 million.

There were no ineffective portions of our interest rate swap or foreign currency forward derivatives during the nine months ended September 30, 2024 and 2023.

See Note 11 to these unaudited, condensed consolidated financial statements for a summary of the changes in accumulated other comprehensive income (loss) by component.

2 unchanged sentences

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

As of June 30, 2024, we did not have any operating leases that had not yet commenced.

Second Quarter 2024 Form 10-Q

As of September 30, 2024, we did not have any operating leases that had not yet commenced.

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

2 unchanged sentences

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(dollars in thousands) 2024

5 unchanged sentences

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

Maturities of our operating lease liabilities as of June 30, 2024 were as follows:

Maturities of our operating lease liabilities as of September 30, 2024 were as follows:

Years ending December 31,

11 unchanged sentences

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

As of June 30, 2024, the remaining aggregate minimum purchase commitment under these arrangements was approximately $ 228.0 million through 2029.

As of September 30, 2024, the remaining aggregate minimum purchase commitment under these arrangements was approximately $ 206.8 million through 2029.

Solution and service indemnifications

1 unchanged sentence

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

Second Quarter 2024 Form 10-Q

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

16 unchanged sentences

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

Our investigation into the Security Incident remains ongoing.

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

3 unchanged sentences

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

(dollars in thousands) 2024

3 unchanged sentences

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

(dollars in thousands) June 30,

(dollars in thousands) September 30,

2024 December 31,

3 unchanged sentences

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

Second Quarter 2024 Form 10-Q

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

5 unchanged sentences

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

For the three and six months ended June 30, 2024, we incurred net pre-tax expenses of $ 1.8 million and $ 12.1 million, respectively, related to the Security Incident, which included $ 1.8 million and $ 5.1 million, respectively, for ongoing legal fees and additional accruals for loss contingencies of $ 0.0 million and $ 7.0 million, respectively.

During the six months ended June 30, 2024, we had net cash outlays of $ 5.8 million related to the Security Incident for ongoing legal fees.

For the three months ended September 30, 2024, we incurred net pre-tax expenses which were insignificant.

For the nine months ended September 30, 2024, we incurred net pre-tax expenses of $ 12.8 million related to the Security Incident, which included $ 6.0 million for ongoing legal fees and a settlement of loss contingencies of $ 6.8 million.

During the nine months ended September 30, 2024, we had net cash outlays of $ 15.1 million related to the Security Incident for ongoing legal fees and the $ 6.8 million paid during the third quarter of 2024 related to our settlement with the Attorney General of the State of California.

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

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Not included in these ranges are our previous settlements or current accruals for loss contingencies related to the matters discussed below.

As of June 30, 2024, we have recorded approximately $ 8.5 million in aggregate liabilities for loss contingencies, which included $ 6.8 million for our settlement with the Attorney General of the State of California on June 13, 2024, and other accruals based primarily on recent negotiations with certain customers related to the Security Incident that we believed we could reasonably estimate in accordance with our loss contingency procedures described above.

As of September 30, 2024, we have recorded approximately $ 0.7 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain customers related to the Security Incident that we believed we could reasonably estimate in accordance with our loss contingency procedures described above.

Our liabilities for loss contingencies are recorded in accrued expenses and other current liabilities on our unaudited, condensed consolidated balance sheets.

It is reasonably possible that our estimated actual losses may change in the near term for those matters and be materially in excess of the amounts accrued, but we are unable at this time to reasonably estimate the possible additional loss.

There are other Security Incident-related matters, including customer claims, customer constituent class actions and governmental investigations, for which we have not recorded a liability for a loss contingency as of June 30, 2024 because we are unable at this time to reasonably estimate the possible loss or range of 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, 2024 because we are unable at this time to reasonably estimate the possible loss or range of loss.

Each of these matters could, separately or in the aggregate, result in an adverse judgment, settlement, fine, penalty or other resolution, the amount, scope and timing of which we are currently unable to predict, but could have a material adverse impact on our results of operations, cash flows or financial condition.

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data subjects, which we are reviewing.

In addition, insurance companies representing various customers’ interests through subrogation claims have contacted us, and certain insurance companies have filed subrogation claims in court, of which three cases remain active and unresolved.

Customer constituent class actions.

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We are currently engaged in court proceedings to

Second Quarter 2024 Form 10-Q

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

determine whether this will proceed as a class action.

determine whether this will proceed as a class action, as described below.

Frequently, a court’s determination as to these procedural requirements is subject to appeal to a higher court.

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

As previously disclosed, on June 13, 2024, we agreed to a Final Judgment and Permanent Injunction with the Attorney General of the State of California (the "Final Judgment") relating to the Security Incident.

On June 13, 2024, we agreed to a Final Judgment and Permanent Injunction with the Attorney General of the State of California (the "Final Judgment") relating to the Security Incident.

This settlement fully resolved the last remaining U.S.

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For more information, see the form of proposed order that was furnished as Exhibit 99.2 to our Current Report on Form 8-K filed with the SEC on February 2, 2024 and is identical in substance to the final FTC Order, and in Note 11 to our audited consolidated financial statements contained in our Annual Report on Form 10-K filed with the SEC on February 21, 2024.

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

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

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

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

Second Quarter 2024 Form 10-Q

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

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Effective income tax rate 37.1 % 50.1 % 28.1 % 58.4 %

The change in our effective income tax rate for the three and six months ended June 30, 2024, when compared to the same periods in 2023 were largely driven by prior year pre-tax losses versus current year pre-tax income.

Additionally, the 2024 periods were favorably impacted by benefits attributable to stock-based compensation and research and development tax credits whereas stock-based compensation negatively impacted our effective income tax rates for the 2023 periods.

Lastly, the 2023 periods were negatively impacted by non-deductible accruals related to security incident, which have impacted the 2024 periods to a much lesser degree.

The changes in our effective income tax rates for the three and nine months ended September 30, 2024, when compared to the same periods in 2023 were primarily attributable the negative impact in 2023 of non-deductible accruals related to the Security Incident that did not recur in 2024 to the same extent.

Additionally, there were favorable impacts of benefits attributable to stock-based compensation.

Partially offsetting these items were unfavorable impacts of our United Kingdom liability for uncertain tax positions.

Stockholders' Equity

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The final number of shares of common stock delivered to us under the ASR Transaction will be based on the average of the daily volume-weighted average prices of the common stock during the term of the ASR Transaction, less a discount and subject to customary adjustments upon events affecting the common stock (e.g., dilutive or concentrative events, mergers and acquisitions, and market disruptions).

At settlement, the financial institution may be required to deliver

Second Quarter 2024 Form 10-Q

At settlement, the financial institution may be required to deliver additional shares of our common stock to us or, under certain circumstances, we may be required to deliver a cash payment

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

additional shares of our common stock to us or, under certain circumstances, we may be required to deliver a cash payment or shares of our common stock to the financial institution, with the method of settlement at our election.

The final settlement of the ASR Transaction is scheduled to occur by the fourth quarter of 2024, unless settled earlier at the election of the financial institution.

or shares of our common stock to the financial institution, with the method of settlement at our election.

See Note 13 to these unaudited, condensed consolidated financial statements for additional information about the final settlement of the ASR Transaction which occurred in October 2024.

The difference of $ 52.2 million between the prepayment of $ 200 million and the value of the shares repurchased on the ASR Transaction date represents an unsettled prepaid forward contract indexed to our common stock and met all of the applicable criteria for equity classification;

therefore, it was not accounted for as a derivative instrument as of June 30, 2024.

therefore, it was not accounted for as a derivative instrument as of September 30, 2024.

Because of our ability to settle in shares, the $ 52.2 million prepaid forward contract was classified as a reduction to additional paid-in capital within our unaudited, condensed consolidated statement of stockholders' equity.

We funded the ASR Transaction prepayment with borrowings pursuant to a revolving credit loan under the 2020 Credit Agreement.

During the three months ended June 30, 2024, we did no t repurchase any shares.

During the six months ended June 30, 2024, we repurchased an aggregate of 2,954,211 shares for $ 262.6 million, including the initial delivery of shares repurchased pursuant to the ASR Transaction.

The remaining amount available to purchase stock under the approved stock repurchase program was $ 259.7 million as of June 30, 2024.

On July 16, 2024, our Board of Directors reauthorized, expanded and replenished our stock repurchase program by expanding the total capacity under the program from $ 500.0 million to $ 800.0 million available for repurchases.

As of July 16, 2024, the amount available to purchase stock under the Company's repurchase program was $ 800.0 million.

See Note 13 to these unaudited, condensed financial statements for additional information.

During the three months ended September 30, 2024, we repurchased 807,774 shares for $ 62.8 million.

During the nine months ended September 30, 2024, we repurchased an aggregate of 3,761,985 shares for $ 325.4 million, including the initial delivery of shares repurchased pursuant to the ASR Transaction.

The remaining amount available to purchase stock under the approved stock repurchase program was $ 737.2 million as of September 30, 2024.

Changes in accumulated other comprehensive income (loss) by component

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Accumulated other comprehensive income balance, beginning of period $ 10,867 $ 18,524 $ 8,158 $ 23,833

Other comprehensive income before reclassifications, net of tax effects of $( 974 ), $( 3,238 ), $( 3,940 ) and $( 672 )

Other comprehensive (loss) income before reclassifications, net of tax effects of $ 3,315 , $( 2,873 ), $( 625 ) and $( 3,545 )

( 9,294 ) 8,124 1,558 10,066

Amounts reclassified from accumulated other comprehensive income ( 5,585 ) ( 5,192 ) ( 11,092 ) ( 9,816 )

Amounts reclassified from accumulated other comprehensive (loss) income ( 5,740 ) ( 5,456 ) ( 16,832 ) ( 15,272 )

Tax expense included in provision for income taxes 1,509 1,425 4,458 3,990

Total amounts reclassified from accumulated other comprehensive income ( 4,117 ) ( 3,848 ) ( 8,143 ) ( 7,251 )

Total amounts reclassified from accumulated other comprehensive (loss) income ( 4,231 ) ( 4,031 ) ( 12,374 ) ( 11,282 )

Net current-period other comprehensive (loss) income ( 13,525 ) 4,093 ( 10,816 ) ( 1,216 )

Accumulated other comprehensive income balance, end of period $ 10,867 $ 18,524 $ 10,867 $ 18,524

Accumulated other comprehensive (loss) income balance, end of period $ ( 2,658 ) $ 22,617 $ ( 2,658 ) $ 22,617

Foreign currency translation adjustment:

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Accumulated other comprehensive loss balance, end of period ( 4,229 ) ( 14,476 ) ( 4,229 ) ( 14,476 )

Accumulated other comprehensive income, end of period $ 175 $ 8,842 $ 175 $ 8,842

Second Quarter 2024 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

Accumulated other comprehensive (loss) income, end of period $ ( 6,887 ) $ 8,141 $ ( 6,887 ) $ 8,141

Revenue Recognition

Transaction price allocated to the remaining performance obligations

As of June 30, 2024, approximately $ 1.3 billion of revenue under contract is expected to be recognized from remaining performance obligations.

As of September 30, 2024, approximately $ 1.2 billion of revenue under contract is expected to be recognized from remaining performance obligations.

We expect to recognize revenue on approximately 55 % of these remaining performance obligations over the next 12 months, with the remainder recognized thereafter.

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

We applied the practical expedient in ASC 606-10-50-14 and have excluded the value of unsatisfied performance obligations for contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed (transactional revenue).

Contract balances

Our contract assets as of June 30, 2024 and December 31, 2023 were insignificant.

Our contract assets as of September 30, 2024 and December 31, 2023 were insignificant.

Our closing balances of deferred revenue were as follows:

(in thousands) June 30,

(in thousands) September 30,

2024 December 31,

Total deferred revenue $ 413,259 $ 394,927

The increase in deferred revenue during the six months ended June 30, 2024 was primarily due to a seasonal increase in customer contract renewals.

The increase in deferred revenue during the nine months ended September 30, 2024 was primarily due to the impact of our contract pricing initiatives within the Social Sector, as well as a seasonal increase in customer contract billings and 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, 2024 that was included in the deferred reven ue balance at the beginning of the period was approximately $ 279 million.

The amount of revenue recognized during the six months ended June 30, 2024 from performance obligations satisfied in prior periods was insignificant .

The amount of revenue recognized during the nine months ended September 30, 2024 that was included in the deferred reven ue balance at the beginning of the period was approximately $ 321 million.

The amount of revenue recognized during the nine months ended September 30, 2024 from performance obligations satisfied in prior periods was insignificant .

Disaggregation of revenue

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Total revenue $ 286,727 $ 277,626 $ 853,263 $ 810,421

The Social Sector and Corporate Sector market groups comprised our go-to-market organizations as of June 30, 2024.

The Social Sector and Corporate Sector market groups comprised our go-to-market organizations as of September 30, 2024.

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

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

Second Quarter 2024 Form 10-Q

Third Quarter 2024 Form 10-Q

Blackbaud, Inc.

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Subsequent Events

Stock Repurchase Program

On July 16, 2024, our Board of Directors reauthorized, expanded and replenished our existing stock repurchase program.

The expansion raised the total capacity under the stock repurchase program from $ 500.0 million to $ 800.0 million available for repurchases.

The program does not have an expiration date.

From January 1, 2024 and prior to the replenishment on July 16, 2024, we repurchased 2,954,211 shares of our stock for $ 262.6 million under the stock repurchase program, representing approximately 5.5% of our common stock outstanding as of December 31, 2023.

As of July 16, 2024, the amount available to purchase stock under our repurchase program was $ 800.0 million.

Repurchases by us will be subject to available liquidity, general market and economic conditions, alternate uses for the capital and other factors.

Stock repurchases may be made from time to time in open market transactions, in private transactions or otherwise in accordance with applicable securities laws and regulations and other legal requirements, including compliance with our finance agreements.

There is no minimum number of shares that we are required to repurchase and the repurchase program may be suspended or discontinued at any time without prior notice.

All shares purchased will be held in our treasury for possible future use.

We anticipate funding any stock repurchases from its cash flow from operations, though we may fund repurchases through borrowings or otherwise in our discretion.

Additional information regarding the stock repurchase program reauthorization is contained in our Current Report on Form 8-K filed with the SEC on July 18, 2024.

Second Quarter 2024 Form 10-Q

ASR Transaction Settlement

On October 29, 2024, we settled the previously announced ASR Transaction described in Note 11.

In connection with the settlement of the ASR Transaction, we received approximately 490,000 shares of our common stock, in addition to the 2.1 million shares received in March 2024.

No cash was exchanged as part of the settlement of the ASR Transaction.

Third Quarter 2024 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