BLACKBAUD INC 10-Q

ITEM 1. FINANCIAL STATEMENTS Blackbaud, Inc. Condensed Consolidated Balance Sheets (Unaudited) (dollars in thousands, except per share amounts) March 31, 2026 December 31, 2025 Assets Current assets: Cash and cash equivalents $ 34,096 $ 38,914 Restricted cash 418,671 720,061 Accounts receivable, net of allowance of $ 5,924 and $ 5,876 at March 31, 2026 and December 31, 2025, respectively 75,691 80,517 Customer funds receivable 7,605 1,308 Prepaid expenses and other current assets 106,158 89,290 Total current assets 642,221 930,090 Property and equipment, net 85,053 85,076 Software development costs, net 156,628 155,842 Goodwill 1,055,777 1,056,815 Intangible assets, net 99,279 106,654 Other assets 70,340 56,205 Total assets $ 2,109,298 $ 2,390,682 Liabilities and stockholders’ equity Current liabilities: Trade accounts payable $ 46,884 $ 27,344 Accrued expenses and other current liabilities 37,515 43,272 Due to customers 425,124 719,833 Debt, current portion 23,160 22,660 Deferred revenue, current portion 333,996 368,986 Total current liabilities 866,679 1,182,095 Debt, net of current portion 1,163,182 1,087,037 Deferred tax liability 27,333 21,981 Deferred revenue, net of current portion 6,054 2,778 Other liabilities 11,496 11,737 Total liabilities 2,074,744 2,305,628 Commitments and contingencies (see Note 8) Stockholders’ equity: Preferred stock; 20,000,000 shares authorized, no ne outstanding — — Common stock, $ 0.001 par value; 180,000,000 shares authorized, 74,015,631 and 72,312,354 shares issued at March 31, 2026 and December 31, 2025, respectively; 46,297,968 and 46,705,325 shares outstanding at March 31, 2026 and December 31, 2025, respectively 74 72 Additional paid-in capital 1,415,521 1,391,641 Treasury stock, at cost; 27,717,663 and 25,607,029 shares at March 31, 2026 and December 31, 2025, respectively ( 1,423,843 ) ( 1,316,224 ) Accumulated other comprehensive loss ( 3,850 ) ( 5,948 ) Retained earnings 46,652 15,513 Total stockholders’ equity 34,554 85,054 Total liabilities and stockholders’ equity $ 2,109,298 $ 2,390,682 The accompanying notes are an integral part of these condensed consolidated financial statements. First Quarter 2026 Form 10-Q 3 Blackbaud, Inc. Condensed Consolidated Statements of Comprehensive Income (Unaudited) (dollars in thousands, except per share amounts) Three months ended March 31, 2026 2025 Revenue $ 281,140 $ 269,936 Cost of revenue 114,581 114,815 Gross profit 166,559 155,121 Operating expenses Sales, marketing and customer success 47,349 44,644 Research and development 36,916 33,559 General and administrative 30,261 56,679 Amortization of intangible assets 588 534 Total operating expenses 115,114 135,416 Income from operations 51,445 19,705 Interest expense ( 16,036 ) ( 16,945 ) Other income, net 2,396 2,105 Income before provision for income taxes 37,805 4,865 Income tax provision 6,666 542 Net income $ 31,139 $ 4,323 Earnings per share Basic $ 0.68 $ 0.09 Diluted $ 0.67 $ 0.09 Common shares and equivalents outstanding Basic weighted average shares 45,562,304 48,429,061 Diluted weighted average shares 46,351,379 49,445,079 Other comprehensive income (loss) Foreign currency translation adjustment $ ( 1,480 ) $ 3,259 Unrealized gain (loss) on derivative instruments, net of tax 3,578 ( 6,692 ) Total other comprehensive income (loss) 2,098 ( 3,433 ) Comprehensive income $ 33,237 $ 890 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 First Quarter 2026 Form 10-Q Blackbaud, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (dollars in thousands) Three months ended March 31, 2026 2025 Cash flows from operating activities Net income $ 31,139 $ 4,323 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 20,551 21,647 Net provision for credit losses and sales returns 1,128 788 Stock-based compensation expense 23,880 22,170 Deferred taxes 4,257 ( 221 ) Amortization of deferred financing costs and discount 486 699 Other non-cash adjustments — ( 5,384 ) Changes in operating assets and liabilities, net of acquisition and disposal of businesses: Accounts receivable 3,613 4,770 Prepaid expenses and other assets ( 18,048 ) ( 5,192 ) Trade accounts payable 19,258 ( 4,651 ) Accrued expenses and other liabilities ( 3,186 ) ( 8,134 ) Deferred revenue ( 31,619 ) ( 29,427 ) Net cash provided by operating activities 51,459 1,388 Cash flows from investing activities Purchase of property and equipment ( 1,668 ) ( 688 ) Capitalized software development costs ( 12,798 ) ( 12,970 ) Cash used in disposition of business — ( 12,235 ) Net cash used in investing activities ( 14,466 ) ( 25,893 ) Cash flows from financing activities Proceeds from issuance of debt 139,900 216,200 Payments on debt ( 74,968 ) ( 85,523 ) Employee taxes paid for withheld shares upon equity award settlement ( 25,112 ) ( 37,948 ) Change in due to customers ( 294,090 ) ( 320,248 ) Change in customer funds receivable ( 6,395 ) ( 2,483 ) Purchase of treasury stock, including excise tax payments ( 82,103 ) ( 100,030 ) Net cash used in financing activities ( 342,768 ) ( 330,032 ) Effect of exchange rate on cash, cash equivalents and restricted cash ( 433 ) 1,668 Net decrease in cash, cash equivalents and restricted cash ( 306,208 ) ( 352,869 ) Cash, cash equivalents and restricted cash, beginning of period 758,975 809,512 Cash, cash equivalents and restricted cash, end of period $ 452,767 $ 456,643 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) March 31, 2026 December 31, 2025 Cash and cash equivalents $ 34,096 $ 38,914 Restricted cash 418,671 720,061 Total cash, cash equivalents and restricted cash in the statement of cash flows $ 452,767 $ 758,975 The accompanying notes are an integral part of these condensed consolidated financial statements. First Quarter 2026 Form 10-Q 5 Blackbaud, Inc. Condensed Consolidated Statements of Stockholders' Equity (Unaudited) (dollars in thousands) Common stock Treasury stock Additional paid-in capital Accumulated other comprehensive loss Retained earnings Total stockholders' equity Shares Amount Shares Amount Balance at December 31, 2025 72,312,354 $ 72 ( 25,607,029 ) $ ( 1,316,224 ) $ 1,391,641 $ ( 5,948 ) $ 15,513 $ 85,054 Net income — — — — — — 31,139 31,139 Purchase of treasury shares under stock repurchase program, inclusive of excise tax — — ( 1,601,057 ) ( 82,507 ) — — — ( 82,507 ) Vesting of restricted stock units 1,032,903 — — — — — — — Shares withheld to satisfy tax withholdings — — ( 509,577 ) ( 25,112 ) — — — ( 25,112 ) Stock-based compensation — — — — 23,880 — — 23,880 Restricted stock grants 684,889 2 — — — — — 2 Restricted stock cancellations ( 14,515 ) — — — — — — — Other comprehensive income — — — — — 2,098 — 2,098 Balance at March 31, 2026 74,015,631 $ 74 ( 27,717,663 ) $ ( 1,423,843 ) $ 1,415,521 $ ( 3,850 ) $ 46,652 $ 34,554 (dollars in thousands) Common stock Treasury stock Additional paid-in capital Accumulated other comprehensive loss Accumulated deficit Total stockholders' equity Shares Amount Shares Amount Balance at December 31, 2024 70,943,373 $ 71 ( 21,697,785 ) $ ( 1,060,348 ) $ 1,291,442 $ ( 4,869 ) $ ( 99,457 ) $ 126,839 Net income — — — — — — 4,323 4,323 Purchase of treasury shares under stock repurchase program, inclusive of excise tax — — ( 1,513,022 ) ( 100,425 ) — — — ( 100,425 ) Vesting of restricted stock units 1,023,958 — — — — — — — Shares withheld to satisfy tax withholdings — — ( 532,179 ) ( 37,948 ) — — — ( 37,948 ) Stock-based compensation — — — — 28,120 — — 28,120 Restricted stock grants 299,136 1 — — — — — 1 Restricted stock cancellations ( 8,166 ) — — — — — — — Other comprehensive loss — — — — — ( 3,433 ) — ( 3,433 ) Balance at March 31, 2025 72,258,301 $ 72 ( 23,742,986 ) $ ( 1,198,721 ) $ 1,319,562 $ ( 8,302 ) $ ( 95,134 ) $ 17,477 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 First Quarter 2026 Form 10-Q Table of Contents Blackbaud, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Organization We are the world's leading provider of AI-powered solutions for social impact. Serving nonprofits, educational institutions, companies committed to corporate social responsibility and individual change makers, we propel impact at scale with the sector’s most intelligent solutions for fundraising and engagement, education solutions, financial management and CSR and grantmaking. We have operations in the United States, Australia, Canada, Costa Rica, India and the United Kingdom, supporting users in 100+ countries. 2. Basis of Presentation Unaudited condensed consolidated interim financial statements 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 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, 2025 has been derived from the audited consolidated financial statements at that date. Operating results and cash flows for the three months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2026, 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. These unaudited, condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025, and other forms filed with the SEC from time to time. Reclassifications In order to provide comparability between periods presented, our “operating lease right-of-use assets“ line has been combined within “other assets" in the previously reported condensed consolidated balance sheets to conform to the presentation of the current period. Similarly, "operating lease liabilities, net of current portion" has been combined within "other liabilities" in the previously reported condensed consolidated balance sheets to conform to the presentation of the current period. Basis of consolidation The unaudited, condensed consolidated financial statements include the accounts of Blackbaud, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Use of estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, we reconsider and evaluate our estimates and assumptions, including those that impact revenue recognition, long-lived and intangible assets, income taxes, business combinations, stock-based compensation, software development costs, our allowances for credit losses and sales returns, costs of obtaining contracts, valuation of derivative instruments, loss contingencies and insurance recoveries, among others. Changes in the facts or circumstances underlying these estimates could result in material changes and actual results could materially differ from these estimates. First Quarter 2026 Form 10-Q 7 Table of Contents Blackbaud, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) Recently issued accounting pronouncements In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This update is intended to improve transparency by requiring entities to disclose, in the notes to the financial statements, a disaggregation of certain expense categories that are included within the line items presented on the face of the income statement. The standard is effective for our annual reporting period beginning in 2027 and for interim reporting periods beginning in 2028, with early adoption permitted. The standard may be applied either prospectively or retrospectively, with early adoption permitted. We are currently evaluating the timing and method of adoption and assessing the impact of this ASU on the preparation of our financial statement disclosures. Summary of significant accounting policies There have been no material changes to our significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 18, 2026. 3. Earnings Per Share We compute basic earnings per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares and dilutive potential common shares outstanding during the period. Diluted earnings 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. The following table sets forth the computation of basic and diluted earnings per share: Three months ended March 31, (dollars in thousands, except per share amounts) 2026 2025 Numerator: Net income $ 31,139 $ 4,323 Denominator: Weighted average common shares 45,562,304 48,429,061 Add effect of dilutive securities: Restricted stock and units 789,075 1,016,018 Weighted average common shares assuming dilution 46,351,379 49,445,079 Earnings per share Basic $ 0.68 $ 0.09 Diluted $ 0.67 $ 0.09 Anti-dilutive shares excluded from calculations of diluted earnings per share 1,551,926 633,805 8 First Quarter 2026 Form 10-Q Table of Contents Blackbaud, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 4. Fair Value Measurements We use a three-tier fair value hierarchy to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: • Level 1 - Quoted prices for identical assets or liabilities in active markets; • Level 2 - Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and • Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable. Recurring fair value measurements Financial assets and liabilities that are measured at fair value on a recurring basis consisted of the following, as of the dates indicated below: Fair value measurement using (dollars in thousands) Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Fair value as of March 31, 2026 Financial assets: Interest rate swaps $ — $ 1,805 $ — $ 1,805 Foreign currency forward contracts — 692 — 692 Total financial assets $ — $ 2,497 $ — $ 2,497 Fair value as of March 31, 2026 Financial liabilities: Interest rate swaps $ — $ 140 $ — $ 140 Total financial liabilities $ — $ 140 $ — $ 140 Fair value as of December 31, 2025 Financial assets: Interest rate swaps $ — $ 501 $ — $ 501 Foreign currency forward contracts — 77 — 77 Total financial assets $ — $ 578 $ — $ 578 Fair value as of December 31, 2025 Financial liabilities: Interest rate swaps $ — $ 3,257 $ — $ 3,257 Foreign currency forward contracts — 265 — 265 Total financial liabilities $ — $ 3,522 $ — $ 3,522 Our derivative instruments within the scope of Accounting Standards Codification ("ASC") 815, Derivatives and Hedging , are required to be recorded at fair value. Our derivative instruments that are recorded at fair value include interest rate swaps and foreign currency forward contracts. See Note 7 to these unaudited, condensed consolidated financial statements for additional information about our derivative instruments. First Quarter 2026 Form 10-Q 9 Table of Contents Blackbaud, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) The fair value of our interest rate swaps and foreign currency forward contracts are based on model-driven valuations using Secured Overnight Financing Rate ("SOFR") rates and foreign currency forward rates, respectively, which are observable at commonly quoted intervals. Accordingly, our interest rate swaps and foreign currency forward contracts are classified within Level 2 of the fair value hierarchy. 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 March 31, 2026 and December 31, 2025, due to the immediate or short-term maturity of these instruments. We believe the carrying amount of our debt approximates its fair value at March 31, 2026 and December 31, 2025, 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 three months ended March 31, 2026. Non-recurring fair value measurements Assets and liabilities that are measured at fair value on a non-recurring basis include long-lived assets, intangible assets, goodwill and operating lease right-of-use ("ROU") assets. These assets are recognized at fair value during the period in which an acquisition is completed or at lease commencement, from updated estimates and assumptions during the measurement period, or when they are considered to be impaired. These non-recurring fair value measurements, primarily for long-lived assets, intangible assets acquired and operating lease ROU assets, are based on Level 3 unobservable inputs. For long-lived assets, intangible assets and operating lease ROU assets, in the event of an impairment, we determine the fair value of these assets other than goodwill using a discounted cash flow approach, which contains significant unobservable inputs and, therefore, is considered a Level 3 fair value measurement. The unobservable inputs in the analysis generally include future cash flow projections and a discount rate. For goodwill impairment testing, we estimate fair value using market-based methods including the use of market capitalization and consideration of a control premium. There were no significant non-recurring fair value adjustments during the three months ended March 31, 2026. 5. Consolidated Financial Statement Details Restricted cash (dollars in thousands) March 31, 2026 December 31, 2025 Restricted cash due to customers $ 417,519 $ 718,525 Real estate escrow balances and other 1,152 1,536 Total restricted cash $ 418,671 $ 720,061 10 First Quarter 2026 Form 10-Q Table of Contents Blackbaud, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) Prepaid expenses and other assets (dollars in thousands) March 31, 2026 December 31, 2025 Costs of obtaining contracts (1)(2) $ 55,861 $ 56,002 Prepaid software maintenance and subscriptions (3) 52,752 31,014 Taxes, prepaid and receivable 12,091 11,871 Implementation costs for cloud computing arrangements, net (4)(5) 10,667 11,055 Unbilled accounts receivable 9,875 8,763 Operating lease right-of-use assets 6,746 4,630 Prepaid insurance 5,123 2,164 Investment in equity securities (6) 4,943 4,943 Derivative instruments 2,497 578 Other assets 15,943 14,475 Total prepaid expenses and other assets 176,498 145,495 Less: Long-term portion 70,340 56,205 Prepaid expenses and other current assets $ 106,158 $ 89,290 (1) Amortization expense from costs of obtaining contracts was $ 5.2 million and $ 5.0 million for the three months ended March 31, 2026 and 2025, respectively. (2) The current portion of costs of obtaining contracts as of March 31, 2026 and December 31, 2025 was $ 18.6 million and $ 18.5 million, respectively. (3) The current portion of prepaid software maintenance and subscriptions as of March 31, 2026 and December 31, 2025 was $ 41.2 million and $ 30.4 million, respectively. (4) These costs primarily relate to the multi-year implementations of our global enterprise resource planning, customer relationship management systems and other cloud-based systems. (5) Amortization expense from capitalized cloud computing implementation costs was insignificant for the three months ended March 31, 2026 and 2025. Accumulated amortization for these costs was $ 12.7 million and $ 14.0 million as of March 31, 2026 and December 31, 2025, respectively. (6) Represents a strategic investment that did not result in Blackbaud having significant influence over the investee. First Quarter 2026 Form 10-Q 11 Table of Contents Blackbaud, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) Accrued expenses and other liabilities (dollars in thousands) March 31, 2026 December 31, 2025 Taxes payable $ 10,722 $ 9,945 Customer credit balances 8,432 9,975 Operating lease liabilities 8,113 6,164 Accrued commissions and salaries 3,562 3,849 Accrued health care costs 3,349 3,173 Unrecognized tax benefit 3,215 3,051 Accrued vacation costs 2,768 2,462 Accrued transaction-based costs related to payments services 431 2,775 Derivative instruments 140 3,522 Other liabilities 8,279 10,093 Total accrued expenses and other liabilities 49,011 55,009 Less: Long-term portion 11,496 11,737 Accrued expenses and other current liabilities $ 37,515 $ 43,272 Other income, net Three months ended March 31, (dollars in thousands) 2026 2025 Interest income $ 1,679 $ 1,655 Currency revaluation losses ( 166 ) ( 877 ) Other income, net 883 1,327 Other income, net $ 2,396 $ 2,105 6. Debt The following table summarizes our debt balances and the related weighted average effective interest rates, which includes the effect of interest rate swap agreements. Debt balance at Weighted average effective interest rate at (dollars in thousands) March 31, 2026 December 31, 2025 March 31, 2026 December 31, 2025 Credit facility: Revolving credit loans $ 356,800 $ 286,400 5.66 % 5.50 % Term loans 765,000 770,000 5.46 % 5.21 % Real estate loans 52,884 53,352 5.23 % 5.23 % Other debt 14,493 691 7.70 % 9.13 % Total debt 1,189,177 1,110,443 5.54 % 5.29 % Less: Unamortized discount and debt issuance costs 2,835 746 Less: Debt, current portion 23,160 22,660 5.84 % 5.49 % Debt, net of current portion $ 1,163,182 $ 1,087,037 5.53 % 5.28 % 2024 Credit Facilities In April 2024, we entered into a five-year $ 1.5 billion senior credit facility (the "2024 Credit Facilities"). At March 31, 2026, we were in compliance with our debt covenants under the 2024 Credit Facilities. 12 First Quarter 2026 Form 10-Q Table of Contents Blackbaud, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) Real estate loans In August 2020, we completed the purchase of our global headquarters facility. As part of the purchase price, we assumed the seller’s obligations under two senior secured notes with a then-aggregate outstanding principal amount of $ 61.1 million (collectively, the “Real Estate Loans”). The Real Estate Loans require periodic principal payments and the balance of the Real Estate Loans are due upon maturity in April 2038. At March 31, 2026, we were in compliance with our debt covenants under the Real Estate Loans. Other debt From time to time, we enter into third-party financing agreements for purchases of software and related services for our internal use. Generally, the agreements are non-interest-bearing notes requiring periodic payments. Interest associated with the notes is imputed at the rate we would incur for amounts borrowed under our then-existing credit facility at the inception of the notes. The following table summarizes our currently effective supplier financing agreements as of March 31, 2026: (dollars in thousands) Term in Months Number of Payments First Payment Due Original Loan Value Effective dates of agreements (1) : April 2024 36 3 May 2024 $ 2,073 January 2026 60 7 October 2026 13,802 (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 three months ended March 31, 2026, consisted of the following: (dollars in thousands) Total Balance at December 31, 2025 $ 691 Additions 13,802 Balance at March 31, 2026 $ 14,493 7. Derivative Instruments We generally use derivative instruments to manage our interest rate and foreign currency exchange risk. We currently have derivatives classified as cash flow hedges and net investment hedges. We do not enter into any derivatives for trading or speculative purposes. All of our derivative instruments are governed by International Swap Dealers Association, Inc. master agreements with our counterparties. As of March 31, 2026 and December 31, 2025, we have presented the fair value of our derivative instruments at the gross amounts in the unaudited, condensed consolidated balance sheets as the gross fair values of our derivative instruments equaled their net fair values. Cash flow hedges We have entered into interest rate swap agreements, which effectively convert portions of our variable rate debt under the 2024 Credit Facilities to a fixed rate for the term of the swap agreements. We designated each of the interest rate swaps as cash flow hedges at the inception of the contracts. 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 2020 Credit Agreement. In February 2026, we entered into an additional forward-starting interest rate swap agreement with a notional value of $ 100.0 million with effective dates beginning in August 2026 through February 2029 (the "February 2026 Swap Agreement"). We designated the February 2026 Swap Agreement as a cash flow hedge at the inception of the contract. As of March 31, 2026 and December 31, 2025, the aggregate notional values of the interest rate swaps were $ 800.0 million and $ 700.0 million, respectively. All of the contracts have maturities on or before February 2029. First Quarter 2026 Form 10-Q 13 Table of Contents Blackbaud, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 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 March 31, 2026 and December 31, 2025, 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 $ 34.3 million CAD and $ 32.9 million CAD, respectively. All of the contracts have maturities of 12 months or less. Net investment hedges We have entered into foreign currency forward contracts to hedge a portion of the foreign currency exposure that arises on translation of our investments denominated in British Pounds ("GBP") into USD. We designated each of these foreign currency forward contracts as net investment hedges at the inception of the contracts. As of March 31, 2026 and December 31, 2025, 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 £ 13.5 million and £ 12.0 million, respectively. The fair values of our derivative instruments were as follows as of: Asset derivatives Liability derivatives (dollars in thousands) Balance sheet location March 31, 2026 December 31, 2025 Balance sheet location March 31, 2026 December 31, 2025 Derivative instruments designated as hedging instruments: Interest rate swaps, current portion Prepaid expenses and other current assets $ 777 $ 239 Accrued expenses and other current liabilities $ — $ — Foreign currency forward contracts, current portion Prepaid expenses and other current assets $ 692 $ 77 Accrued expenses and other current liabilities $ — $ 265 Interest rate swaps, long-term Other assets 1,028 262 Other liabilities 140 3,257 Total derivative instruments designated as hedging instruments $ 2,497 $ 578 $ 140 $ 3,522 14 First Quarter 2026 Form 10-Q Table of Contents Blackbaud, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) The effects of derivative instruments in cash flow and net investment hedging relationships were as follows: Gain (loss) recognized in accumulated other comprehensive loss as of Location of gain (loss) reclassified from accumulated other comprehensive loss into income Gain reclassified from accumulated other comprehensive loss into income (dollars in thousands) March 31, 2026 Three months ended March 31, 2026 Cash Flow Hedges Interest rate swaps $ 1,665 Interest expense $ 386 Foreign currency forward contracts $ 371 Revenue $ ( 41 ) Net Investment Hedges Foreign currency forward contracts $ 321 $ — March 31, 2025 Three months ended March 31, 2025 Cash Flow Hedges Interest rate swaps $ 2,798 Interest expense $ 919 Foreign currency forward contracts $ 615 Revenue $ 296 Net Investment Hedges Foreign currency forward contracts $ ( 160 ) $ — Our policy requires that derivatives used for hedging purposes be designated and effective as a hedge of the identified risk exposure at the inception of the contract. Accumulated other comprehensive income (loss) includes unrealized gains or losses from the change in fair value measurement of our derivative instruments each reporting period and the related income tax expense or benefit. Excluding net investment hedges, changes in the fair value measurements of the derivative instruments and the related income tax expense or benefit are reflected as adjustments to accumulated other comprehensive income (loss) until the actual hedged expense is incurred or until the hedge is terminated at which point the unrealized gain (loss) and related tax effects are reclassified from accumulated other comprehensive income (loss) to current earnings. For net investment hedges, changes in the fair value measurements of the derivative instruments and the related income tax expense or benefit are reflected as adjustments to translation adjustment, a component of accumulated other comprehensive income (loss), and recognized in earnings only when the hedged GBP investment is liquidated. The estimated accumulated other comprehensive income as of March 31, 2026 that is expected to be reclassified into earnings within the next twelve months is $ 1.6 million. There were no ineffective portions of our interest rate swap or foreign currency forward derivatives during the three months ended March 31, 2026 and 2025. See Note 10 to these unaudited, condensed consolidated financial statements for a summary of the changes in accumulated other comprehensive income (loss) by component. We classify cash flows related to derivative instruments as operating activities in the unaudited, condensed consolidated statements of cash flows. 8. Commitments and Contingencies Leases We have operating leases for corporate offices and subleased offices. As of March 31, 2026, we did not have any operating leases that had not yet commenced. Lease costs for the three months ended March 31, 2026 and 2025 were insignificant. As a result, we have not presented a tabular summary of the components of lease costs for the period. "Operating lease right-of-use assets" are included within "other assets" in our unaudited, condensed consolidated balance sheets. "Operating lease liabilities, current portion" are included in "accrued expenses and other current liabilities," while "operating lease liabilities, net of current portion" are included in "other liabilities" in our unaudited, condensed consolidated balance sheets. See Note 5 to these unaudited, condensed consolidated financial statements for additional information. First Quarter 2026 Form 10-Q 15 Table of Contents Blackbaud, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) Other commitments The term loans under the 2024 Credit Facilities require periodic principal payments. The balance of the term loans and any amounts drawn on the revolving credit loans are due upon maturity of the 2024 Credit Facilities in April 2029. The Real Estate Loans also require periodic principal payments and the balance of the Real Estate Loans are due upon maturity in April 2038. We have contractual obligations for third-party technology used in our solutions and for other services we purchase as part of our normal operations. In certain cases, these arrangements require a minimum annual purchase commitment by us. As of March 31, 2026, the remaining aggregate minimum purchase commitment under these arrangements was approximately $ 142.3 million through 2030. We have a multi-year arrangement for third-party technology and related services, financed through a third-party installment arrangement, that requires fixed payments through April 2030. See discussion of "Other debt" at Note 6 to these unaudited, condensed consolidated financial statements for additional information. Solution and service indemnifications In the ordinary course of business, we provide certain indemnifications of varying scope to customers against claims of intellectual property infringement made by third parties arising from the use of our solutions or services. We have not identified any losses that might be covered by these indemnifications. Legal proceedings We are subject to legal proceedings and claims that arise in the ordinary course of business, as well as certain other non-ordinary course proceedings, claims and investigations. We make a provision for a loss contingency when it is both probable that a material liability has been incurred and the amount of the loss can be reasonably estimated. If only a range of estimated losses can be determined, we accrue an amount within the range that, in our judgment, reflects the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, we accrue the low end of the range. For proceedings in which an unfavorable outcome is reasonably possible but not probable and an estimate of the loss or range of losses arising from the proceeding can be made, we disclose such an estimate, if material. If such a loss or range of losses is not reasonably estimable, we disclose that fact. We review any such loss contingency provisions at least quarterly and adjust them to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. We recognize insurance recoveries, if any, when they are probable of receipt. All associated costs due to third-party service providers and consultants, including legal fees, are expensed as incurred. We have determined as of March 31, 2026, that no provision for liability nor disclosure is required related to any pending or anticipated legal proceeding or claim against us because (a) there is not a reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim; (b) a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is immaterial. Legal proceedings are inherently unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending or threatened against us and intend to defend ourselves vigorously against all claims asserted. It is possible that our consolidated financial position, results of operations or cash flows could be materially negatively affected in any particular period by an unfavorable resolution of one or more of such legal proceedings. 9. Income Taxes Our income tax provision and effective income tax rates, including the effects of period-specific events, were: Three months ended March 31, (dollars in thousands) 2026 2025 Income tax provision $ 6,666 $ 542 Effective income tax rate 17.6 % 11.1 % The increase in our effective income tax rate for the three months ended March 31, 2026 when compared to the same period in 2025 was primarily due to an increase in pre-tax book income. 16 First Quarter 2026 Form 10-Q Table of Contents Blackbaud, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The legislation makes permanent certain provisions of the 2017 Tax Cuts and Jobs Act, including 100% bonus depreciation and restoring immediate expensing of research and development expenditures for activities performed within the United States. Under ASC 740, we recognized the impact of the first phase of the law in the third quarter of 2025 and continue to recognize its impacts in 2026. The impacts of OBBBA on our deferred tax assets continue to result in a net downward adjustment of the valuation allowance. We currently expect a material impact from future phases in fiscal years 2026 and 2027, but not beyond. 10. Stockholders' Equity Stock repurchase program Under our stock repurchase program, we are authorized to repurchase shares from time to time in accordance with applicable laws both on the open market, including under trading plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, and in privately negotiated transactions. The timing and amount of repurchases depends on several factors, including market and business conditions, the trading price of our common stock and the nature of other investment opportunities. The repurchase program does not have an expiration date and may be limited, suspended or discontinued at any time without prior notice. Under the 2024 Credit Agreement, we have restrictions on our ability to repurchase shares of our common stock, which are summarized on page 36 in this report. We account for purchases of treasury stock under the cost method. On December 1, 2025, our Board of Directors reauthorized, expanded and replenished our stock repurchase program by expanding the total capacity under the program to $ 1.0 billion available for repurchases. During the three months ended March 31, 2026, we repurchased an aggregate of 1,601,057 shares for $ 82.1 million. The remaining amount available to purchase stock under the approved stock repurchase program was $ 878.5 million as of March 31, 2026. Changes in accumulated other comprehensive loss by component The changes in accumulated other comprehensive loss by component, consisted of the following: Three months ended March 31, (in thousands) 2026 2025 Accumulated other comprehensive loss, beginning of period $ ( 5,948 ) $ ( 4,869 ) By component: Gains and losses on cash flow hedges: Accumulated other comprehensive (loss) income balance, beginning of period $ ( 2,147 ) $ 7,799 Other comprehensive income (loss) before reclassifications, net of tax effects of $( 649 ) and $ 2,763 4,572 ( 2,714 ) Amounts reclassified from accumulated other comprehensive (loss) income ( 345 ) ( 1,215 ) Tax benefit included in provision for income taxes ( 649 ) ( 2,763 ) Total amounts reclassified from accumulated other comprehensive (loss) income ( 994 ) ( 3,978 ) Net current-period other comprehensive income (loss) 3,578 ( 6,692 ) Accumulated other comprehensive income balance, end of period $ 1,431 $ 1,107 Foreign currency translation adjustment: Accumulated other comprehensive loss balance, beginning of period $ ( 3,801 ) $ ( 12,668 ) Translation adjustment ( 1,480 ) 3,259 Accumulated other comprehensive loss balance, end of period ( 5,281 ) ( 9,409 ) Accumulated other comprehensive loss, end of period $ ( 3,850 ) $ ( 8,302 ) First Quarter 2026 Form 10-Q 17 Table of Contents Blackbaud, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 11. Segment Information We have one operating segment and one reportable segment. Our chief operating decision maker is our chief executive officer ("CEO"), who reviews financial information presented on a consolidated basis, accompanied by disaggregated information about our revenue, for purposes of making decisions about assessing financial performance and allocating resources. Our CEO considers costs of revenue, sales, marketing and customer success, research and development, and general and administrative expense categories on our consolidated statements of comprehensive income as significant. Our CEO uses consolidated operating margin and net income as the primary measures of profit or loss. These financial metrics are used by our CEO to make key operating decisions, such as the allocation of budget between costs of revenues and our different operating expense categories. Our other segment items include amortization, interest expense, other income, net, and income tax provision on our consolidated statements of comprehensive income. 12. Revenue Recognition Transaction price allocated to the remaining performance obligations As of March 31, 2026, approximately $ 1.4 billion of revenue under contract is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 45 % of these remaining performance obligations over the next 12 months, with the remainder recognized thereafter. We applied the practical expedient in ASC 606-10-50-14 and have excluded the value of unsatisfied performance obligations for which we recognize revenue at the amount to which we have the right to invoice for services performed (transactional revenue). Contract balances Our closing balances of deferred revenue were as follows: (in thousands) March 31, 2026 December 31, 2025 Total deferred revenue $ 340,050 $ 371,764 The decrease in deferred revenue during the three months ended March 31, 2026 was primarily due to a seasonal decrease in customer contract billings. Historically, due to the timing of customer budget cycles, we have an increase in billings and 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 three months ended March 31, 2026 that was included in the deferred reven ue balance at the beginning of the period was approximately $ 161 million. The amount of revenue recognized during the three months ended March 31, 2026 from performance obligations satisfied in prior periods was insignificant . Disaggregation of revenue We sell our cloud solutions and related services in three primary geographical markets: to customers in the United States, to customers in the United Kingdom and to customers located in other countries. The following table presents our revenue by geographic area based on the location of our customers: Three months ended March 31, (dollars in thousands) 2026 2025 United States $ 233,095 $ 228,492 United Kingdom 29,550 26,122 Other countries 18,495 15,322 Total revenue $ 281,140 $ 269,936 18 First Quarter 2026 Form 10-Q Table of Contents Blackbaud, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) The following table presents our revenue by type: Three months ended March 31, (dollars in thousands) 2026 2025 Contractual recurring $ 182,314 $ 175,465 Transactional recurring 94,171 87,860 Total recurring revenue $ 276,485 $ 263,325 One-time services and other 4,655 6,611 Total revenue $ 281,140 $ 269,936 First Quarter 2026 Form 10-Q 19 Table of Contents Blackbaud, Inc. (Unaudited)