What changed in this filing

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Item 1A. Risk Factors

2026-02-18 compared with 2025-02-21 · 151 added, 132 removed, 285 unchanged (50% of the section changed)

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These competitive pressures could cause our revenue and market share to decline.

In addition, the introduction of solutions encompassing new technologies, such as AI, can render existing solutions obsolete and unmarketable.

In addition, the introduction of solutions encompassing new technologies, such as AI (as discussed below), can render existing solutions obsolete and unmarketable.

As a result, our future success will depend, in part, upon our ability to continue to enhance existing solutions and develop and introduce in a timely manner or acquire new solutions that keep pace with technological developments, satisfy increasingly sophisticated customer requirements and achieve market acceptance.

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Because competition for highly qualified personnel is intense, we might not be able to attract and retain key personnel needed to support our planned growth.

To meet our objectives successfully, we must attract and retain highly qualified personnel with specialized skill sets.

To meet our objectives successfully, we must attract and retain highly qualified personnel with specialized skill sets, including with regard to our AI products and our expansion in India, each as discussed in more detail below.

If we are unable to attract and retain suitably qualified management, there could be a material adverse impact on our business.

Further, we use equity incentive programs and equity awards in lieu of cash as part of our overall employee compensation agreements to both attract and retain personnel.

A decline in our stock price could negatively impact the effectiveness of these equity incentive and related compensation programs as retention and recruiting tools.

Declines in our stock price may have in the past negatively impacted, and could again in the future negatively impact, the effectiveness of these equity incentive and related compensation programs as retention and recruiting tools.

We may need to create new or additional equity incentive programs and/or compensation packages to remain competitive, which could be dilutive to our existing stockholders and/or adversely affect our results of operations.

The market for software and services for the social impact community might not grow and the organizations in that community might not continue to adopt, or renew their subscriptions for, our solutions and services.

The market for software and services for the social impact community might not grow as expected, which would negatively impact the growth of our business.

Many organizations in the social impact community, including nonprofits, foundations, companies, education institutions, and healthcare organizations, have not traditionally used integrated and comprehensive software and services for their specific needs.

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If demand for and market acceptance of our solutions and services does not increase, we might not grow our business as we expect.

Furthermore, our subscription arrangements are generally for a term of three years at contract inception with three-year renewals thereafter.

Our maintenance arrangement renewals are generally for a term of three years.

As the end of the contract term approaches, we seek the renewal of the agreement with the customer.

Historically, subscription and maintenance renewals have represented a significant portion of our total revenue.

Because of this characteristic of our

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business, if our customers choose not to renew their subscriptions or maintenance arrangements with us on beneficial terms or at all, our business, operating results and financial condition could be harmed.

Our customers' renewal rates may decline or fluctuate as a result of a number of factors, including their level of satisfaction with our solutions and services and their ability to continue their operations and spending levels due to general economic conditions, extraordinary business interruptions, client-specific financial issues or otherwise.

Changes in the US federal or state governmental grant, award or other funding programs could negatively impact the operations of our nonprofit customers, which could have a material adverse effect on our business, results of operations, financial condition and liquidity.

Many of our customers depend in significant part on the US federal and state governments for grants, awards and other funding to maintain their operations.

Our existing customers may not continue to adopt, or renew their subscriptions for, our solutions and services, which could have a material adverse effect on our business, results of operations and financial liquidity.

Our subscription arrangements are generally for a term of three years at contract inception with three-year renewals thereafter, and our maintenance arrangement renewals are generally for a term of three years.

While three‑year terms remain the standard minimum under our renewal program, a portion of our customers elect to renew for longer terms, including four‑year or longer arrangements, which extends the duration over which renewals occur.

As the end of the contract term approaches, we seek the renewal of the agreement with the customer.

For example, approximately 40% of our existing customer contracts are due for renewal in 2026, approximately 30% in 2027 and approximately 30% in 2028.

To the extent a greater proportion of customers enter into extended‑term arrangements, the timing of renewals may become more concentrated in later periods, and while our extended-term arrangements typically include embedded price increases and other contractual terms designed to support economics over the contract term, we may have fewer opportunities in any given year to comprehensively re‑price or renegotiate customer relationships.

Historically, subscription and maintenance renewals have represented a significant portion of our total revenue.

Because of this characteristic of our business, if our customers choose not to renew their subscriptions or maintenance arrangements with us on beneficial terms or at all, our business, operating results and financial condition could be harmed.

Our customers' renewal rates may decline or fluctuate as a result of a number of factors, including their level of satisfaction with our solutions, services and pricing strategies and their ability to continue their operations and spending levels due to general economic conditions, extraordinary business interruptions, client-specific financial issues or otherwise.

Changes in the U.S.

federal or state governmental grant, award or other funding programs could negatively impact the operations of our nonprofit customers, which could have a material adverse effect on our business, results of operations, financial condition and liquidity.

Many of our customers depend in significant part on the U.S.

federal and state governments for grants, awards and other funding to maintain their operations.

Changes in, or uncertainty regarding, the availability, amount or conditions and restrictions related to such funding could negatively impact our customers’ willingness or ability to purchase our various software solutions due to resulting budgetary or investment capital concerns.

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Certain proposals or changes could, if implemented, have an adverse, material impact on our business, results of operations, financial condition or liquidity.

We are incorporating generative AI technology into certain of our solutions and services.

This technology is new and developing, and while we aim to adopt known best practices, it may result in operational, financial and reputational harm and other adverse consequences to our business.

We are implementing AI features in certain of our solutions and services.

The technologies underpinning these features are in the early stages of commercial use and exist in an emerging regulatory environment, which presents regulatory, litigation, ethical, reputational, operational and financial risks.

and international governmental bodies and regulators have adopted, or are in the process of developing, new regulations related to the use of AI and machine learning technologies.

We are increasingly incorporating AI technology into many of our solutions and services, and evolving regulatory requirements, technological complexity, competitive pressures, market perception and investment demands related to AI could result in operational, financial, reputational and stock price volatility risks to our business.

We are implementing AI features, including generative, predictive, interactive and agentic AI technologies, in many of our solutions and services.

The technologies underpinning these features are evolving rapidly and exist in an emerging regulatory environment, which presents regulatory, litigation, ethical, reputational, operational and financial risks, some of which are still unknown.

federal, U.S.

state and international governmental bodies and regulators have adopted, or are in the process of developing, new laws and regulations related to the use of AI and machine learning technologies.

These have imposed, and may in the future further impose, obligations related to our development, offering and use of AI technologies and expose us to increased risk of regulatory enforcement and litigation.

Many of our generative AI features include the processing of personal data and are, and may be further, subject to laws, policies, legal obligations and codes of conduct related to privacy and data protection.

Many of our AI features include the processing of personal data and are, and may be further, subject to laws, policies, legal obligations and codes of conduct related to privacy and data protection.

There is uncertainty about the extent to which privacy and data protection laws apply to AI technologies, and any delay in addressing privacy or data protection concerns relating to our AI features may result in liability or regulatory investigations and fines, as well as harm to our sales and reputation.

In addition, issues relating to intellectual property rights in AI-generated content have not been fully addressed by the courts, laws or regulations.

Accordingly, the implementation of generative AI technologies into our products and services may result in exposure to claims related to copyright infringement or other intellectual property misappropriation.

Furthermore, many of our AI features may rely on third-party service providers.

As such, any improper processing of personal data by these service providers could harm our reputation, business or customers, or expose us to legal liability.

Accordingly, the implementation of AI technologies into our products and services may result in exposure to claims related to copyright infringement or other intellectual property misappropriation.

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Blackbaud, Inc.

Our use of AI technology may also present additional security risks due to embedded security vulnerabilities.

Furthermore, many of our AI features may rely on third-party developers and other service providers, and any improper processing of personal data by these service providers could harm our reputation, business or customers, or expose us to legal liability.

Also, our sensitive information could be leaked, disclosed or revealed as a result of or in connection with company or vendor use of these technologies generally.

Any disruption or failure in our AI systems or infrastructure could result in delays or errors in our operations, which could harm our business and financial results.

Our generative AI technology features may also generate output that is misleading, insecure, inaccurate, harmful or otherwise flawed, which may harm our reputation, business or customers, or expose us to legal liability.

See also “Item 1A.

Risk Factors.

Operational Risks” related to breaches of our software and failure to safeguard confidential data in this report.

Blackbaud is actively leveraging agentic AI in the AI features of our solutions and deploying agentic AI for our internal business purposes.

Agentic AI differs from traditional AI technologies by making decisions and pursuing business goals autonomously without prompting by humans, sometimes across multiple steps and over time, which may require deployers to give agentic AI access to systems for the purpose of taking such initiative.

This presents additional risks, including the possibility of opaque decision making, unique security concerns due to agent permissioning, challenges with monitoring actions and assigning and enforcing accountability.

Our AI technology features may also generate output that is misleading, inaccurate, harmful or otherwise flawed, which may harm our reputation, business or customers, or expose us to legal liability.

Also, some AI scenarios present ethical issues.

If we enable or offer AI solutions that are controversial because of their purported or actual impact on human rights, privacy, employment or other social issues, we may experience reputational harm.

New and emerging AI technologies may require additional investment in the development and maintenance of various models, approaches and processes, as well as development of protections and safeguards for the use of AI technologies, which may be expensive and could impact our financial results if we decide to further expand generative AI into our products and services.

Likewise, the use of AI involves significant technical complexity and requires specialized expertise.

If we enable or offer AI solutions that are controversial because of their purported or actual impact on human rights, privacy, employment or other social issues, we may experience reputational harm and legal liability.

AI technologies require substantial additional investment in the development and maintenance of various models, approaches and processes, as well as development of protections and safeguards for the use of AI technologies, which is expensive and could negatively impact our financial results as we further expand AI technology into our products and services.

Likewise, the use of AI technology involves significant technical complexity and requires specialized expertise, which is expected to require increased investment in infrastructure and headcount.

The success of any enhancement or new product depends on many factors, including its relevance to our customers, timely implementation and market acceptance.

If our enhanced products and services do not achieve widespread market adoption or there is a reduction in demand due to a lack of customer acceptance, technology challenges, strengthening competition, weakening economic conditions, or security or privacy concerns, our business could be harmed and our financial results could be adversely affected.

If our AI-enhanced products and services do not achieve widespread market adoption or there is a reduction in demand due to a lack of customer acceptance, technology challenges, strengthening competition, weakening economic conditions, or security or privacy concerns, our business could be harmed and our financial results could be adversely affected.

We face significant competition from other companies that are developing their own AI-enhanced products and services.

Such AI features and technologies may be similar or superior to ours and may be more cost-effective.

Furthermore, other parties could have proprietary rights that would interfere with our ability to implement our own AI features.

Our AI features also may require access to specific third-party equipment or infrastructure, which availability or pricing we may not be able to control.

Market perception of the role and impact of AI on technology companies may adversely affect our stock price, regardless of our actual operating performance.

Investor sentiment regarding artificial intelligence has become a significant driver of valuation for technology companies, and perceptions about whether a company is effectively developing, deploying, or monetizing AI technologies may materially influence market expectations and our stock price.

If investors, analysts, customers or other market participants believe that our AI strategy, capabilities, pace of innovation or competitive positioning are insufficient, less differentiated than those of our competitors, or fail to keep pace with rapidly evolving AI technologies, our stock price could decline, even if our business performance and financial results remain strong.

Conversely, heightened expectations regarding the benefits of AI could result in increased volatility in our stock price if our actual AI‑related results, timelines, adoption rates, or financial returns differ from market expectations.

Shifts in broader market sentiment regarding AI technologies, including changes in investor confidence, regulatory developments, high‑profile failures or controversies involving AI, or a reassessment of the economic value of AI investments across the technology sector, could also negatively impact our valuation and increase stock price volatility independent of our operating results.

It is not possible to predict all of the risks related to the use of AI technology.

Although we aim to develop and use AI responsibly and attempt to identify and mitigate ethical and legal issues presented by its use, we may be unsuccessful in identifying or resolving issues before they arise, which may affect our ability to develop and use AI or subject us to legal liability.

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If we do not successfully address the risks inherent in the expansion of our international operations, our business could suffer.

If we do not successfully address the risks inherent in the expansion of our international operations, including in India, our business could suffer.

We currently have non-U.S.

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In some cases, our costs of sales might increase if our customers require us to sell through local distributors.

In addition, there is intense competition in India for skilled technology personnel, and we expect such competition to increase.

As a result, we may be unable to retain our current employees in India or to hire additional new employees in India.

If we are unable to grow our international operations in a cost-effective and timely manner, our business and operating results could be harmed.

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• the imposition of, or unexpected adverse changes in, foreign laws or regulatory requirements, including those pertaining to export restrictions, privacy and data protection, trade and employment restrictions and intellectual protections;

• general business disruptions caused by geopolitical situations and developments.

• general business disruptions caused by geopolitical situations and developments including, for example, in India, which has experienced in the past, and may again experience, civil unrest and terrorism and has, and may again, been involved in conflicts with other countries, such as the recent conflict with Pakistan.

Unfavorable media coverage related to peer-to-peer fundraising campaigns on our social platforms could negatively impact our business.

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• failure to realize anticipated returns on investment, cost savings and synergies;

• difficulty in assimilating the operations, policies and personnel of the acquired company;

• unanticipated costs associated with acquisitions;

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Blackbaud, Inc.

• difficulty in assimilating the operations, policies and personnel of the acquired company;

• unanticipated costs associated with acquisitions;

• challenges in combining product offerings and entering into new markets in which we may not have experience;

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• issues not discovered in due diligence, which may include product quality issues or legal or other contingencies.

For example, following our acquisition of EVERFI, Inc ("EVERFI") in December 2021, we experienced the loss of certain employees and were unable to realize the anticipated returns on our investment prior to our disposition of the business in December 2024.

For example, following our acquisition of EVERFI, Inc ("EVERFI") in December 2021, we were unable to realize the anticipated returns on our investment prior to our disposition of the business in December 2024 due to certain of the reasons listed above.

Acquisitions may also result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, the expenditure of available cash, and amortization expenses or write-downs related to intangible assets such as goodwill, any of which could have a material adverse effect on our operating results or financial condition.

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If charitable giving, including online giving, does not continue to grow or declines, it could limit our current and potential customers' ability to use and pay for our solutions and services, which could adversely affect our operating results and financial condition.

In addition, we derive a significant portion of our revenue from transaction-based payment processing fees that we collect from our customers through our Blackbaud Merchant Services solution, which enables our customers' donors to make donations and purchase goods and services using various payment options.

In addition, we derive a significant portion of our revenue from transaction-based payment processing fees that we collect from our customers through our Blackbaud Integrated Payments solution, which enables our customers' donors to make donations and purchase goods and services using various payment options.

A reduction in the growth of, or a decline in, charitable giving to these customers, whether due to deteriorating general economic conditions, the impact of past or future changes to applicable tax laws, or otherwise, could negatively impact the volume and size of such payment processing transactions and thereby adversely affect our operating results and financial condition.

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(See Note 11 to our consolidated financial statements in this report for information regarding litigation, government investigations, fines and penalties related to the Security Incident.) We have been, and in the future might be, required to expend significant additional capital and other resources to rectify problems caused by a security breach, including notification under data privacy laws and regulations, and incur expenses related to remediating our information security systems.

Even though we may carry cyber-technology insurance policies that provide insurance coverage under certain circumstances, we have in the past suffered losses and may in the future suffer losses as a result of a security breach that exceed the coverage available under our insurance policies or for which we do not have coverage.

Even though we carry cyber-technology insurance policies that provide insurance coverage under certain circumstances, we have in the past suffered losses and may in the future suffer losses as a result of a security breach that significantly exceed the coverage available under our insurance policies or for which we do not have coverage.

(See Note 11 to our consolidated financial statements in this report for expense and insurance coverage information related to the Security Incident.) Furthermore, in the future such insurance may not be available on commercially reasonable terms, or at all.

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The steps we take may not be sufficient to prevent future significant incidents and, as a result, such incidents may occur again.

The Security Incident has had, and may continue to have, numerous adverse effects on our business, results of operations, financial condition and cash flows.

As previously disclosed, on July 16, 2020, we contacted certain customers to inform them about the Security Incident.

To date, we have received approximately 260 specific requests from customers for reimbursement of expenses incurred by them related to the Security Incident, all of which have been fully resolved and closed or are inactive and are considered by us to have been abandoned by the customers.

We have also received approximately 400 reservations of the right to seek expense recovery in the future from customers or their attorneys in the U.S., U.K.

and Canada related to the Security Incident,

A material example of the foregoing risks is the ransomware attack that in May 2020 during which a cybercriminal removed a copy of a subset of data from our self-hosted environment (the “Security Incident”).

As a result of the Security Incident, we received approximately 260 specific requests from customers for reimbursement of expenses incurred by them related to the Security Incident, approximately 400 reservations of the right to seek expense recovery in the future from customers or their attorneys in the U.S., U.K.

and Canada related to the Security Incident and notices of proposed claims on behalf of a number of U.K.

data subjects, all of which have been fully resolved and closed or are inactive and are considered by us to have been abandoned.

In addition, insurance companies representing various customers’ interests through subrogation claims contacted us, and certain insurance companies filed subrogation claims in court, of

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Blackbaud, Inc.

none of which resulted in claims submitted to us and are considered by us to have been abandoned by the customers.

We have also received notices of proposed claims on behalf of a number of U.K.

data subjects, which have been fully resolved and closed or are inactive and are considered by us to have been abandoned by the data subjects.

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 two cases remain active and unresolved.

We also were a defendant in putative consumer class action cases in Canadian courts alleging harm from the Security Incident which have now been resolved.

In addition, presently, we are a defendant in putative consumer class action cases in U.S.

federal courts (most of which have been consolidated under multi district litigation to a single federal court) alleging harm from the Security Incident.

The plaintiffs in these cases, who generally 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.

On May 14, 2024, the Court issued a memorandum opinion and order (1) denying the multi district litigation plaintiffs' motion for class certification, (2) granting our motion to exclude the multi district litigation plaintiffs' expert, (3) denying the multi district litigation plaintiffs' motion to exclude our expert and (4) denying all other pending motions.

On July 30, 2024, the Fourth Circuit Court of Appeals denied the plaintiffs' petition for permission to appeal the Court's ruling.

This litigation remains ongoing.

• On March 9, 2023, the Company reached a settlement with the SEC that fully resolved the previously disclosed SEC investigation of the Security Incident;

• On October 5, 2023, the Company entered into separate, substantially similar Administrative Orders with each of 49 state Attorneys General and the District of Columbia that 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 May 20, 2024, the U.S.

Federal Trade Commission (the "FTC") finalized an Order (the “FTC Order”) evidencing its settlement with us in connection with 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 "California Judgment") relating to the Security Incident;

• We previously received notices of governmental actions or investigations by the U.S.

which two cases remain active and unresolved.

We also were a defendant in putative consumer class action cases in U.S.

and Canadian courts alleging harm from the Security Incident, all of which have now been resolved.

In addition, the Company reached a settlement with the SEC that fully resolved an SEC investigation of the Security Incident;

entered into separate, substantially similar Administrative Orders with each of 49 state Attorneys General and the District of Columbia that fully resolved a multi-state Civil Investigative Demand and the separate Civil Investigative Demand from the Office of the Indiana Attorney General relating to the Security Incident;

reached a settlement with the U.S.

Federal Trade Commission (the "FTC") in connection with the Security Incident;

and agreed to a Final Judgment and Permanent Injunction with the Attorney General of the State of California (the "California Judgment") relating to the Security Incident.

In addition, we received notices of governmental actions or investigations by the U.S.

Department of Health and Human Services, the Office of the Australian Information Commissioner and the Office of the Privacy Commissioner of Canada, each of which we now believe are now longer active actions or investigations.

See Note 11 to our consolidated financial statements included in this report for a more detailed description of the Security Incident and related matters.

The terms of the California Judgment, FTC Order, the Attorneys General Administrative Orders and our settlement with the SEC require that we implement and maintain certain processes and programs and comply with certain legal requirements related to cybersecurity and data protection.

Any future regulatory investigation or litigation settlements may also contain such requirements.

Effectively implementing, monitoring and updating these requirements has been, and is expected to be over an extended period of time, expensive and time-consuming.

Our failure to do so in accordance with the terms of our agreements with FTC, the Attorneys General and with the SEC, and possibly others, could expose us to additional material liability under the terms of the Administrative Orders, the SEC settlement, or otherwise.

We may be named as a party in additional lawsuits, other claims may be asserted by or on behalf of our customers or their constituents, and we may be subject to additional governmental inquiries, requests or investigations.

Responding to and resolving these current and any future lawsuits, claims and/or investigations could result in material remedial and other expenses that will not be covered by insurance.

It is reasonably possible that our estimated or actual losses may change in the near term for those matters and be materially in excess of the amounts accrued.

Certain governmental authorities have imposed, and others may in the future impose, undertakings, injunctive relief, consent decrees, or other civil or criminal penalties, which have materially increased our data security costs or otherwise required us to alter how we operate our business, and could further do so in the future.

Although we intend to defend ourselves vigorously against the claims asserted against us, we cannot predict the potential outcomes, cost and expenses associated with current and any future claims, lawsuits, inquiries and investigations.

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In addition, any legislative or regulatory changes adopted in reaction to the Security Incident or other companies’ data breaches could require us to make modifications to the operation of our business that could have an adverse effect and/or increase or accelerate our compliance costs.

Significant management time and Company resources have been, and are expected to continue to be, devoted to the Security Incident.

For example, for full year 2024, we incurred net pre-tax expenses of $13.7 million related to the Security Incident, which included $7.0 million for ongoing legal fees and $6.8 million for settlements and recorded liabilities for loss contingencies.

During 2024, we had net cash outlays of $15.9 million related to the Security Incident, which included 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 (as discussed in Note 11).

Although we carry insurance against certain losses related to the Security Incident, we exceeded the limit of that insurance coverage in the first quarter of 2022.

As a result, we will be responsible for all expenses or other losses (including penalties, fines or other judgments) or all types of claims that may arise in connection with the Security Incident, which could materially and adversely affect our liquidity and results of operations.

(See Note 11 to our consolidated financial statements included in this report.) If any such fines or penalties were great enough that we could not pay them through funds generated from operating activities and/or cause a default under the 2024 Credit Facilities, we may be forced to renegotiate or obtain a waiver under the 2024 Credit Facilities and/or seek additional debt or equity financing.

Such renegotiation or financing may not be available on acceptable terms, or at all.

In these circumstances, if we were unable to obtain sufficient financing, we may not be able to meet our obligations as they come due.

Furthermore, significant management time and Company resources have been, and are expected to continue to be, devoted to the Security Incident.

In addition, publicity or developments related to the Security Incident could in the future have a range of other adverse effects on our business or prospects, including causing or contributing to loss of customer confidence, reduced customer demand, reduced customer retention, strategic growth opportunities, and associated retention and recruiting difficulties, some or all of which could be material.

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Climate change increases the severity and frequency of extreme weather events such as hurricanes, wildfires, floods, heat waves or power shortages, all of which could lead to business disruptions.

The locations of our principal executive offices and our data centers are vulnerable to the effects of climate events and other natural disasters, including hurricanes, heat waves and earthquakes, which we have experienced in the past.

In addition, the effects of climate change are harder to mitigate for our remote-first workforce, which exposes the Company to business disruption.

The locations of our principal executive offices, our data centers and our operations in India are vulnerable to the effects of climate events and other natural disasters, including hurricanes, heat waves, floods and earthquakes, which we have experienced in the past.

In addition, the effects of climate change are harder to mitigate for our Remote-Flexible workforce, which exposes the Company to business disruption.

Even though we carry business interruption insurance policies and typically have provisions in our commercial contracts that protect us in certain events, we might suffer losses as a result of business interruptions that exceed the coverage available under our insurance policies or for which we do not have coverage.

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Any damage to, or failure of, these data center systems generally could result in interruptions in service to our customers, notwithstanding any business continuity or disaster recovery agreements that may currently be in place at these facilities.

As noted above, our executive offices and some of our data centers are located in areas that are vulnerable to the effects of climate change and could be subject to increased interruptions as a result of the severity and increased frequency of extreme weather events such as hurricanes, wildfires, floods, heat waves, or power shortages.

Because our cloud solutions and hosting service offerings are complex and we have incorporated a variety of new computer hardware and software systems at our data centers, our services might have errors or defects that users identify after they begin using our services.

This could result in unanticipated downtime for our customers and harm to our reputation and business results.

Internet-based services sometimes contain undetected errors when first

As noted above, our executive offices, some of our data centers and our operations in India are located in areas that are vulnerable to the effects of climate change and could be subject to increased interruptions as a result of the severity and increased frequency of extreme weather events such as

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Blackbaud, Inc.

introduced or when new versions or enhancements are released.

hurricanes, wildfires, floods, heat waves, or power shortages.

This could result in unanticipated downtime for our customers and harm to our reputation and business results.

Internet-based services sometimes contain undetected errors when first introduced or when new versions or enhancements are released.

We have from time to time found defects in our web-based services and new errors might again be detected in the future.

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Furthermore, we continue to undertake system upgrades designed to improve the availability, reliability, resiliency and speed of our payments systems.

These efforts are costly and time-consuming, involve significant technical complexity and risk, may divert our resources from new features and products and may ultimately not be effective.

The rules of payment card associations in which we participate require that we comply with Payment Card Industry Data Security Standard ("PCI DSS") in order to preserve security of payment card data.

Under PCI DSS, we are required to adopt and implement internal controls over the use, storage and security of payment card data to help prevent card fraud.

These efforts are costly and time-

2025 Form 10-K

Blackbaud, Inc.

our solutions and services to PCI DSS or other payment services related regulations or requirements imposed by payment networks or our customers or payment processing partners is expensive and time-consuming.

consuming, involve significant technical complexity and risk, may divert our resources from new features and products and may ultimately not be effective.

The rules of payment card associations in which we participate require that we comply with Payment Card Industry Data Security Standard ("PCI DSS") in order to preserve security of payment card data.

Under PCI DSS, we are required to adopt and implement internal controls over the use, storage and security of payment card data to help prevent card fraud.

Conforming our solutions and services to PCI DSS or other payment services related regulations or requirements imposed by payment networks or our customers or payment processing partners is expensive and time-consuming.

However, failure to comply may subject us to fines, penalties, damages and civil liability, may impair the security of payment card data in our possession, and may harm our reputation and our business prospects, including by limiting our ability to process transactions.

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Consequently, a decline in sales to new customers, renewals by existing customers or market acceptance of our solutions in any one quarter will not necessarily be fully reflected in the revenues in that quarter and could negatively affect our revenues and profitability in future quarters.

We significantly increased our leverage in connection with stock repurchases, and may increase our leverage in the future in connection with acquisitions, Security Incident costs or other business purposes, which could adversely impact our business and financial performance.

We incurred a substantial amount of indebtedness to fund the ASR Transaction (as defined on page 105 ) and other stock repurchases.

As a result of this indebtedness and other borrowings, our interest payment obligations have increased.

In addition, we have been named as a party in various lawsuits in connection with the Security Incident, claims have been asserted by or on behalf of our customers or their constituents, and we are subject to various governmental inquiries, requests or investigations.

Responding to and resolving these current and any future lawsuits, claims and/or investigations has resulted, and may continue to result, in material remedial and other expenses.

Although we have defended, and intend to continue to defend, ourselves vigorously against the claims asserted against us, we cannot predict the potential outcomes, cost and expenses associated with current and any future claims, lawsuits, inquiries and investigations, which could require that we incur additional indebtedness to fund.

(See Note 11 to our consolidated financial statements in this report for additional information regarding the Security Incident.)

We have maintained an elevated leverage position, primarily due to stock repurchases, and we may increase our leverage in the future in connection with acquisitions or other business purposes, which could adversely impact our business and financial performance.

As part of our capital allocation strategy and stock repurchase program, we incurred a substantial amount of indebtedness to fund the ASR Transaction in March 2024 and other stock repurchases.

As a result of this indebtedness and other borrowings, our interest payment obligations increased and our leverage ratio (as defined in our 2024 Credit Facilities) rose during 2024 and continued to increase into early 2025, reaching a peak of 2.91 to 1.00 as of March 31, 2025.

Although our leverage ratio declined modestly during the remainder of 2025, it remained elevated at 2.52 to 1.00 as of December 31, 2025.

Absent our ongoing repurchase activity, our leverage ratio would have declined further, as such activity continues to contribute to maintaining a higher level of leverage.

In addition, we incurred certain operating expenses associated with our Security Incident, some of which were funded through borrowings.

The degree to which we are leveraged could have adverse effects on our business, including the following:

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• Decreasing our ability to compete effectively or operate successfully under adverse economic and industry conditions.

If we incur additional debt, these risks may intensify.

Our ability to meet our debt service obligations will depend upon our future performance, which will be subject to the financial, business and other factors affecting our operations, many of which are beyond our control.

2025 Form 10-K

Blackbaud, Inc.

If we incur additional debt, these risks may intensify.

In addition, additional leverage could impact our ability to meet certain financial and other covenants contained in our 2024 Credit Facilities, which increased our total borrowing capacity from $1.1 billion to $1.5 billion.

(See Note 9 to our consolidated financial statements included in this report for a more detailed description of our 2024 Credit Facilities.) There can be no assurance that we will be able to remain in compliance with the covenants to which we are now subject or may be subject in the future and, if we fail to do so, that we will be able to obtain waivers from our lenders or amend the covenants.

(See Note 9 to our consolidated financial statements in this report for a more detailed description of our 2024 Credit Facilities.) There can be no assurance that we will be able to remain in compliance with the covenants to which we are now subject or may be subject in the future and, if we fail to do so, that we will be able to obtain waivers from our lenders or amend the covenants.

In the event of a default under our 2024 Credit Facilities, we could be required to immediately repay all outstanding borrowings, which we might not be able to do and which would materially negatively affect our business, operations and financial condition.

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We cannot accurately predict the likelihood or potential amount and timing of any impairment of goodwill or other intangible assets.

An impairment of a significant portion of goodwill or intangible assets, such as the EVERFI impairment charges discussed in Note 4 to our consolidated financial statements in this report, could materially and negatively affect our results of operations and financial condition.

An impairment of a significant portion of goodwill or intangible assets, such as the EVERFI impairment charges discussed in Note 4 to our consolidated financial statements in this report, have in the past, and could in the future, materially and negatively affect our results of operations and financial condition.

Restrictions in our credit facility limit certain of our activities, including dividend payments, stock repurchases and acquisitions.

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The program could affect the trading price of our stock and increase volatility, and any announcement of a termination of this program may result in a decrease in the trading price of our stock.

In addition, implementation of some or all of this program diminishes our cash reserves and/or increases our debt, which may impact our ability to finance future growth, to pursue possible future strategic opportunities and acquisitions and fund liabilities and expenses related to the Security Incident.

In addition, implementation of some or all of this program diminishes our cash reserves and/or increases our debt, which may impact our ability to finance future growth and to pursue possible future strategic opportunities and acquisitions.

(See Note 14 to our consolidated financial statements in this report for additional information related to our stock repurchase program, including authorization amount, shares purchased, amounts paid and shares remaining available for purchase.)

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Blackbaud, Inc.

During 2025, we have continued to be subject to 1% U.S.

federal excise taxes on share repurchases.

This tax liability will vary depending on various factors, including the amount and frequency of any stock repurchases and any permitted reductions or exceptions to the amount subject to the tax.

Any resulting increase in our tax obligation or cash taxes paid could adversely affect our financial position and cash flows.

We have recorded significant deferred tax assets, and we might never realize their full value, which would result in a charge against our earnings.

As of December 31, 2025, we had deferred tax assets of $125.6 million.

As of December 31, 2025, we have retained a valuation allowance against our U.S.

net deferred tax assets.

Realization of our deferred tax assets is dependent upon our generating sufficient taxable income in future years to realize the tax benefit from those assets.

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Moreover, we may be exposed to liability under existing or new consumer privacy or data protection legislation.

For example, when providing our solutions to certain customers in the healthcare industry, we must comply with applicable provisions of the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), and might be subject to similar provisions of other legislation, including, without limitation, the Gramm-Leach-Bliley Act and related regulations, and the California Consumer Privacy Act of 2018, and may apply to some of our customers and areas of business.

For example, when providing our solutions to certain customers in the healthcare industry, we must comply with applicable provisions of the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), and might be subject to similar provisions of other legislation, including, without limitation, the Gramm-Leach-Bliley Act and related regulations, and the California Consumer Privacy Act of 2018 and related regulations, and may apply to some of our customers and areas of business.

Even technical violations of these laws may result in penalties that are assessed for each non-compliant transaction.

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Furthermore, actions and investigations by regulatory authorities related to data security incidents and privacy violations continue to increase, which have impacted us, and could in the future further impact us, through increased costs or restrictions on our business, and noncompliance could result in significant regulatory penalties and legal liability.

If our customers or we were found to be subject to and in violation of any privacy or data protection laws or regulations, our business may be materially and adversely impacted and we and/or our customers would likely have to change our business practices.

In addition, these laws and regulations could impose significant costs on our customers and us and make it more difficult for donors to make online donations.

(See Note 11 to our consolidated financial statements included in this report for a description of the Security Incident and related legal proceedings and regulatory matters.)

2025 Form 10-K

Blackbaud, Inc.

In addition, these laws and regulations could impose significant costs on our customers and us and make it more difficult for donors to make online donations.

(See "Item 1A.

Risk Factors.

Operational Risks" in this report regarding the Security Incident and related risks.)

We are in the information technology business, and our solutions and services store, retrieve, transfer, manipulate and manage our customers’ information and data.

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While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose the source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur and we may be required to release proprietary source code, pay damages for breach of contract, re-engineer our applications, discontinue sales in the event re-engineering cannot be accomplished on a timely basis, or take other remedial action that may divert resources away from our development efforts, any of which could adversely affect our business.

We rely upon trademark, copyright, patent and trade secret laws to protect our proprietary rights, which might not provide us with adequate protection.

Our success and ability to compete depends to a significant degree upon the protection of our proprietary technology rights.

We might not be successful in protecting our proprietary technology and our proprietary rights might not provide us with a meaningful competitive advantage.

To protect our core proprietary technology, we rely on a combination of patent,

2025 Form 10-K

Blackbaud, Inc.

trademark, copyright and trade secret laws, as well as nondisclosure agreements, each of which affords only limited protection.

We rely upon trademark, copyright, patent and trade secret laws to protect our proprietary rights, which might not provide us with adequate protection.

Our success and ability to compete depends to a significant degree upon the protection of our proprietary technology rights.

We might not be successful in protecting our proprietary technology, particularly in non-U.S.

jurisdictions, and our proprietary rights might not provide us with a meaningful competitive advantage.

To protect our core proprietary technology, we rely on a combination of patent, trademark, copyright and trade secret laws, as well as nondisclosure agreements, each of which affords only limited protection.

Changing domestic and international laws, government regulations and policies, laws limiting or restricting our ability to pass card charges on to customers and other similar laws and regulations, could adversely affect our business and operating results by increasing compliance costs, reducing customer demand for our solutions or damaging our reputation.

Certain of our solutions, in particular our financial management and payment services solutions, relate to activity heavily regulated by government agencies in the U.S., the U.K.

and other countries in which we operate.

Certain of our solutions, in particular our financial management and payment services solutions, relate to activity heavily regulated by government agencies in the U.S., the U.K., Canada and other countries in which we operate.

The laws and regulations enforced by these agencies are proposed or enacted to deter fraud and other illicit financial transactions and to protect consumers and the financial system and are often revised or increased in scope.

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This preferred stock could have terms that may discourage a potential acquirer from making, without first negotiating with the Board of Directors, an acquisition attempt through which such acquirer may be able to change the composition of the Board of Directors, including a tender offer or other takeover attempt.

See below for a discussion of our previously issued and subsequently cancelled Series A Preferred Stock.

The Board of Directors possesses the authority to call and hold emergency special meetings of the Board of Directors with less than forty-eight hours’ notice.

This power to hold an emergency special meeting of the Board of Directors on short notice could discourage a potential acquirer from launching a bid to acquire majority ownership of the Company, a proxy solicitation in order to replace the current Board of Directors, or otherwise attempting to obtain control of the Company.

For example, the Company issued in 2022 to holders of Common Stock, and subsequently cancelled in 2024, rights to acquire shares of its Series A Junior Participating Preferred Stock (the “Series A Preferred Stock”).

The Rights would have become exercisable if an

2025 Form 10-K

Blackbaud, Inc.

Stockholder Rights Agreement (the "Rights Agreement").

On October 7, 2022, the Company declared a dividend of one preferred share purchase right for each of the Company’s issued and outstanding shares of Common Stock.

The description and terms of these Rights are set forth in the Rights Agreement by and between the Company and American Stock Transfer & Trust Company, LLC.

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

Under the Rights Agreement, the Rights would have become exercisable if an entity, person or group acquires beneficial ownership of 20% or more of the outstanding Common Stock in a transaction not approved by the Board of Directors.

In the event that the Rights became exercisable due to the ownership threshold being crossed, each Right would have entitled its holder (other than the person, entity or group triggering the Rights Plan, whose rights would have become void and not exercisable) to purchase additional shares of Common Stock having a then-current market value of twice the Exercise Price, which would have likely made any takeover or change of control attempt by such entity, person or group prohibitively expensive.

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

On October 2, 2023, the Company amended the Rights Agreement to extend the final expiration date from October 2, 2023 to October 2, 2024.

On January 26, 2024, the Company amended the Rights Agreement to substitute Broadridge Corporate Issuer Solutions, LLC as the new rights agent under the Rights Agreement.

On March 18, 2024, the Company terminated the Rights Agreement and eliminated the Series A Preferred Stock as a series of stock under its Amended and Restated Certificate of Incorporation.

At the time of the termination of the Rights Agreement, all of the Rights expired.

entity, person or group acquires beneficial ownership of 20% or more of the outstanding Common Stock in a transaction not approved by the Board of Directors at a price, and in a manner, that would have likely made any takeover or change of control attempt by such entity, person or group prohibitively expensive.

Additional information regarding the Rights Agreement and its termination is contained in the Company’s Current Reports on Form 8-K filed with the SEC on October 2, 2023, January 26, 2024 and March 18, 2024 and in the Company's Form 8-A/A filed with the SEC on March 18, 2024.

The Board of Directors possesses the authority to call and hold emergency special meetings of the Board of Directors with less than forty-eight hours’ notice.

Officer Compensation Arrangements.

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Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or is an affiliate or associate of the corporation, and within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock.

Changes in our effective tax rate and additional tax liabilities and global tax developments may impact our financial results.

Changes in our effective tax rate and additional tax liabilities, including those related to our stock repurchases, and global tax developments may impact our financial results.

We are subject to income taxes in the United States and various other jurisdictions.

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Any changes, ambiguity or uncertainty in taxing jurisdictions’ administrative interpretations, decisions, policies and positions could also materially impact our income tax liabilities.

We may also be subject to additional tax liabilities and penalties due to changes in non-income-based taxes resulting from changes in federal, state, local or international tax laws, changes in taxing jurisdictions’ administrative interpretations, decisions, policies and positions, results of tax examinations, settlements or judicial decisions, changes in accounting principles, or changes to our business operations, including as a result of acquisitions.

For example, the U.S.

Inflation Reduction Act of 2022 created an excise tax of 1% on the value of any stock repurchased by us after December 31, 2022.

During 2024, we have been subject to this excise tax, but the amount will vary depending on various factors, including the amount and frequency of any stock repurchases and any permitted reductions or exceptions to the amount subject to the tax.

Any resulting increase in our tax obligation or cash taxes paid could adversely affect our financial position and cash flows.

2024 Form 10-K

Blackbaud, Inc.

We may also be subject to additional tax liabilities and penalties due to changes in non-income-based taxes resulting from changes in U.S.

federal, state, provincial, local or international tax laws, changes in tax laws in taxing jurisdictions’ administrative interpretations, decisions, policies and positions, results of tax examinations, settlements or judicial decisions, changes in accounting principles, or changes to our business operations, including as a result of acquisitions and dispositions.

For example, recent U.S.

federal tax legislation continues to create uncertainty in our tax position, cash tax obligations, and financial results.

The One Big Beautiful Bill Act (“OBBBA”), enacted on July 4, 2025, represents the most recent example of how rapidly evolving tax laws can materially affect our tax profile.

Under Accounting Standards Codification ("ASC") 740, we recognized the impact of the first phase of OBBBA in the third quarter of 2025, including a downward adjustment to our valuation allowance and a reduction in our estimated annual effective tax rate due to the permanent restoration of immediate expensing of U.S.

research and development expenditures.

OBBBA also affected our deferred tax assets and liabilities, with an immediate net impact and expected material effects in fiscal years 2026 and 2027 as additional phases become effective.

We are also subject to tax examinations or engaged in alternative resolutions in multiple jurisdictions.

While we regularly evaluate new information that may change our judgment resulting in recognition, derecognition or changes in measurement of a tax position taken, there can be no assurance that the final determination of any examinations will not have an adverse effect on our operating results or financial position.

2025 Form 10-K

Blackbaud, Inc.

As we utilize our tax credits and net operating loss carryforwards, we may be unable to mitigate our tax obligations to the same extent as in prior years, which could have a material impact to our future cash flows.

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Global tax developments applicable to multinational businesses may have a material impact to our business, cash flow from operating activities, or financial results.

Such developments, for example, may include certain United States’ proposals as well as the Organization for Economic Co-operation and Development’s, the European Commission’s and certain major jurisdictions’ heightened interest in and taxation of companies participating in the digital economy.

Such developments, for example, may include certain United States’ proposals as well as the Organization for Economic Co-operation and Development’s ("the OECD"), the European Commission’s and certain major jurisdictions’ heightened interest in and taxation of companies participating in the digital economy.

The OECD’s Pillar Two global minimum tax framework may materially impact our effective tax rate, cash tax obligations, and financial results.

More than 140 jurisdictions have endorsed the OECD/G20 Inclusive Framework’s Pillar Two rules, implementing a 15% global minimum tax through the Income Inclusion Rule, Undertaxed Profits Rule, and Qualified Domestic Minimum Top‑Up Taxes ("QDMTTs").

Several jurisdictions in which we operate have enacted or are in the process of enacting these rules, and others may do so in future years.

As these rules continue to evolve, our global tax profile may be subject to significant variability and additional compliance burden.

We currently expect to qualify for at least one of the OECD Transitional Safe Harbors, which include the simplified effective tax rate ("ETR") test, routine profits test, and de minimis test.

If we qualify, this would reduce or defer Pillar Two exposure during the transition period.

However, qualification depends on jurisdiction‑level financial data, ongoing interpretations, and annual testing requirements.

Safe‑harbor eligibility may change from year to year based on operating performance, local statutory developments, or new administrative guidance.

Accordingly, there can be no assurance that we will qualify for one or more safe harbors in future periods.

In addition, the United States has entered into “side‑by‑side” agreements with other Inclusive Framework members, under which each jurisdiction may apply its domestic minimum‑tax regime (such as the U.S.

corporate alternative minimum tax ["CAMT"] under the Inflation Reduction Act) in parallel with Pillar Two rules.

These agreements do not provide an exemption from Pillar Two for U.S.‑headed multinational groups;

instead, they increase the likelihood that U.S.

rules and foreign QDMTTs will apply concurrently.

This new regime goes into effect for years starting in 2026.

Because Pillar Two calculations rely on jurisdiction‑specific adjusted financial statement income, deferred‑tax adjustments, substance‑based exclusions, and intercompany‑transaction rules, the application of these rules may significantly increase the complexity of our global tax computations.

Future guidance, data‑requirements, safe‑harbor expirations, or differences in local implementation may result in additional tax expense, increased volatility in our effective tax rate, or new compliance and reporting obligations.

Any such developments could materially impact our provision for income taxes, cash flows, and overall financial results.

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What changed 10-K

Item 1A. Risk Factors