What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-07-29 compared with 2026-04-29 · 182 added, 119 removed, 405 unchanged (43% of the section changed)

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Business Update

We delivered solid execution against our operating plan to start 2026, with a continued focus on efficiency and a strong pace of product innovation.

We delivered another quarter of solid execution against our operating plan, with continued focus on operational efficiency and product innovation.

AI initiatives remain an important area of emphasis—both in the capabilities we are delivering to customers and in the way we operate the business.

During the first quarter, we expanded the availability of AI‑enabled capabilities across our product portfolio and launched our first agentic AI solution, the Blackbaud fundraising development agent, into general availability.

During the first half of 2026, we expanded the availability of AI-enabled capabilities across our product portfolio and launched our first agentic AI solution, the Blackbaud fundraising development agent, into general availability.

This solution is designed to assist fundraising teams by automating certain outreach and stewardship activities within existing workflows, using customer-permissioned data and operating under defined governance and user controls.

The fundraising development agent is expected to be offered under a subscription pricing model.

While commercialization remains in the early stages, we currently anticipate that annual subscription pricing would generally be in the tens of thousands of dollars, depending on customer size and use case.

The fundraising development agent is currently being offered under a subscription pricing model.

While commercialization remains in the early stages, annual subscription pricing is generally in the tens of thousands of dollars, depending on customer size and use case.

We expect this offering to be marketed both to existing customers as an incremental subscription and to prospective new customers as part of our broader product portfolio.

We continue to evaluate customer adoption, operational impacts, and potential financial contributions as part of our ongoing planning and investment process.

During the second quarter, we continued to expand customer deployments and evaluate adoption trends, operational impacts and potential financial contributions as part of our ongoing planning and investment process.

Recently, we also announced four additional Agents for Good solutions planned for future release, including the Data Health Agent, Admissions Agent, Digital Marketing Agent and Accounts Payable Agent.

These solutions are intended to help customers automate administrative processes, improve productivity and make more informed decisions within existing workflows.

Together, these planned offerings reflect our continued investment in agentic AI and a significant opportunity to deliver innovative capabilities across our portfolio, with the potential to help customers increase capacity, improve operational efficiency and advance their missions within the solutions they already use.

Adoption of AI-enabled functionality continued across portions of our customer base during the quarter.

A significant portion of our Raiser’s Edge NXT customers utilize machine‑learning‑enabled donor prospecting capabilities, which leverage historical and behavioral data to support fundraising activities.

More than half of our Raiser's Edge NXT customers utilize machine-learning-enabled donor prospecting capabilities, which leverage historical and behavioral data to support fundraising activities.

These capabilities are supported by proprietary Blackbaud data, licensed datasets, benchmarking data and other philanthropic datasets, all subject to our cybersecurity and data governance framework.

We recently disclosed that more than 20% of our renewing customers have elected to enter into four-year or longer contracts.

To date in the current renewal cycle, we have seen an increasing number of customers request five-year contracts.

We believe this reflects continued customer engagement with our solutions and our ability to support them and their missions into the future.

We also continued to apply AI internally to improve efficiency across engineering, marketing, customer success and the back office.

We also continued to apply AI internally to improve efficiency across engineering, sales and marketing, customer success and the back office.

During the quarter, our engineering teams increased their use of approved generative AI development tools to accelerate software development and issue remediation, contributing to productivity improvements and faster delivery of enhancements.

First Quarter 2026 Form 10-Q

We are also applying AI to support lead qualification, sales development, customer support and other operational processes.

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

In February 2026, we announced our intention to repurchase between 5% and 10% of our outstanding common stock as of December 31, 2025 during the course of 2026 under our stock repurchase program.

During the three months ended March 31, 2026, we repurchased an aggregate of 1,601,057 shares for $82.1 million.

During the three months ended June 30, 2026, we repurchased an aggregate of 797,795 shares for $28.0 million.

During the six months ended June 30, 2026, we repurchased an aggregate of 2,398,852 shares for $110.1 million.

Including net share settlement of employee stock compensation, these repurchases represent approximately 6.2% of our outstanding common stock as of December 31, 2025.

As of March 31, 2026, $878.5 million remained available under our stock repurchase program.

As of June 30, 2026, $850.4 million remained available under our stock repurchase program.

Over the long term, we expect stock repurchases to remain an important component of our capital allocation strategy, subject to market conditions, business performance, leverage considerations, and other factors.

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YoY Growth (%) YoY Growth (%)

Revenue increased by $11.2 million, during the three months ended March 31, 2026, when compared to the same period in 2025, driven largely by the following:

Increase in contractual recurring revenue of $6.8 million primarily related to the positive impact of our pricing initiatives and the demand of our cloud solutions.

Increase in transactional recurring revenue of $6.3 million primarily due to positive results related to pricing initiatives and, to a lesser extent, increases in volume for our Blackbaud Integrated Payments;

also contributing to the increase in transactional recurring revenue during the three months ended March 31, 2026 was an increase related to fluctuations in foreign currency exchange rates of $1.3 million.

Decrease in one-time consulting revenue of $2.0 million, primarily due to fewer sales of implementation and customization services.

First Quarter 2026 Form 10-Q

Revenue increased by $8.6 million and $19.8 million, during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025, driven largely by the following:

Increases in contractual recurring revenue of $6.2 million and $13.1 million, respectively, primarily related to the positive impact of our pricing initiatives and the demand of our cloud solutions

Increases in transactional recurring revenue of $2.8 million and $9.1 million, respectively, primarily due to increases in volume for our Blackbaud Integrated Payments and Blackbaud Tuition Management offerings and, to a lesser extent, positive results related to pricing initiatives;

also contributing to the increases in transactional recurring revenue during the six months ended June 30, 2026 was an increase related to fluctuations in foreign currency exchange rates of $1.6 million

Decrease in one-time consulting revenue of $2.4 million, for the six months ended June 30, 2026, primarily due to fewer sales of implementation and customization services

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

Income from operations increased by $31.7 million, during the three months ended March 31, 2026, when compared to the same period in 2025, driven largely by the following:

Decrease in acquisition and disposition-related costs within general and administrative expenses of $25.0 million primarily related to our release from our lease for office space in Washington, DC, which occurred during February 2025 and did not reoccur in 2026

Increase in total revenue, as described above

Decrease in third-party contractor costs of $3.3 million primarily due to transition of work to employees in our Global Capability Center ("GCC") in Hyderabad, India, decreased use of outside contractors and completion of prior year investments, partially offset by an increase in investment in AI innovation

Decrease in Security Incident-related expenses of $2.2 million that occurred during 2025 that did not reoccur in 2026.

Income from operations increased by $4.7 million and $36.4 million, during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025, driven largely by the following:

Decrease in acquisition and disposition-related costs within general and administrative expenses of $24.4 million, during the six months ended June 30, 2026, primarily related to our release from our lease for office space in Washington, DC, which occurred during February 2025 and did not reoccur in 2026

Increases in total revenue, as described above

Decreases in third-party contractor costs of $4.7 million and $8.1 million, respectively, primarily due to transition of work to employees in our Global Capability Center ("GCC") in Hyderabad, India, decreased use of outside contractors and completion of prior year investments.

For the six months ended June 30, 2026, the decrease was partially offset by an increase in investment in AI innovation.

Decreases in stock-based compensation expense of $4.5 million and $2.8 million, respectively, primarily due to estimated overall Company performance against 2026 goals at target levels compared to prior-year expectations above target.

For the six months ended June 30, 2026, the decrease was partially offset by certain executive retirements in the first quarter.

Decrease in Security Incident-related expenses of $2.6 million, during the six months ended June 30, 2026, that occurred during 2025 that did not reoccur in 2026.

For more information, see Note 11 to our audited consolidated financial statements contained in our Annual Report on Form 10-K filed with the SEC on February 18, 2026.

Increase of $1.6 million due to the non recurrence of a first quarter 2025 contra expense for transition services associated with the EVERFI disposition in December 2024.

Increase in third-party software costs of $2.4 million related to internal solutions we use to run our business

Increase in stock-based compensation expense of $1.7 million primarily due to certain executive retirements

Increases in advertising costs of $2.1 million and $2.8 million, respectively, primarily due to increased digital marketing spend related to our consumer-facing fundraising platform, JustGiving, as well as increased marketing related to raising awareness for our new AI offerings

Increases in third-party software costs of $2.0 million and $4.4 million, respectively, related to internal solutions we use to run our business

Increases in compensation costs other than stock-based compensation of $1.6 million and $2.7 million, respectively, primarily due to transition of work previously performed by third-party contractors to employees in our GCC in Hyderabad, India (as discussed above), and prior year merit-based salary increases

Increases in hosting and data center costs of $1.4 million and $2.1 million, respectively, as we continue to migrate our cloud infrastructure to leading public cloud service providers and make investments in security

Increase of $2.4 million, during the six months ended June 30, 2026, due to the nonrecurrence of a first half 2025 contra expense for transition services associated with the EVERFI disposition in December 2024

We are continuing to make critical investments in the business in areas such as innovation, AI, cybersecurity, and our continued shift of cloud infrastructure to leading public cloud service providers.

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To that end, we will continue to simplify and rationalize our portfolio through product sunsets and divestitures of non-core businesses and technologies.

First Quarter 2026 Form 10-Q

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

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Our recurring subscription contracts are typically for a term of three years at contract inception with standard three-year renewals thereafter.

In recent periods, we have experienced an increase in longer‑term customer contracts.

We now have approximately 90% of our contractual recurring revenue on 3-year or longer contracts and approximately 25% on 4-year or longer contracts.

A key factor to our overall success is the renewal and expansion of our existing subscription agreements with our customers.

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Gross dollar retention is defined as contracted annual recurring revenue ("CARR") divided by beginning CARR with a measurement period of twelve months.

For the twelve months ended March 31, 2026, our gross dollar retention was approximately 92%.

This gross dollar retention rate is relatively unchanged from our rate for the twelve months ended December 31, 2025.

Changes in the amount of contractual annual recurring revenue up for renewal in a given period may impact absolute churn dollars even when customer renewal rates remain relatively consistent from year-to-year.

We are continually investing in innovation, which we believe will support gross dollar retention over the long-term.

For the twelve months ended June 30, 2026, our gross dollar retention was approximately 91%.

This gross dollar retention rate was lower than our rate for the twelve months ended December 31, 2025.

Renewal performance can vary from year to year due to the size and composition of renewal cohorts.

As previously disclosed, the contractual annual recurring revenue dollars up for renewal associated with the 2026 renewal cohort are approximately 40% higher than those up for renewal in 2025, reflecting the normal progression of our multi-year contract renewal cycle and the timing of customer renewals.

As a result, we expect some temporary pressure on our gross dollar retention as a greater amount of recurring revenue contracts come up for renewal during 2026.

We currently expect our gross dollar retention to improve as we move past this larger 2026 renewal cohort and ultimately return to levels more consistent with our recent historical performance by the end of 2027.

Finally, we are continually investing in innovation, which we believe will support gross dollar retention over the long-term.

Balance sheet and cash flow

At March 31, 2026, our cash and cash equivalents were $34.1 million.

At June 30, 2026, our cash and cash equivalents were $34.4 million.

Under the 2024 Credit Facilities, the carrying amount of our debt was $1.1 billion and our net leverage ratio was 2.58 to 1.00 .

During the three months ended March 31, 2026, we generated $51.5 million in cash from operations, had a net increase in borrowings of $64.9 million, returned $82.1 million to stockholders by way of share repurchases, and had aggregate cash outlays of $14.5 million for purchases of property and equipment and capitalized software development costs.

During the six months ended June 30, 2026, we generated $142.5 million in cash from operations, had a net increase in borrowings of $28.6 million, returned $110.1 million to stockholders by way of share repurchases, and had aggregate cash outlays of $30.2 million for purchases of property and equipment and capitalized software development costs.

On July 4, 2025, the United States enacted the OBBBA, which introduced significant changes to U.S.

See Note 9 to our unaudited, condensed consolidated financial statements in this report for more information.

OBBBA impacts meaningfully contributed to reducing U.S.

cash taxes in 2025 and we expect to continue to see meaningful reductions to cash taxes through 2027.

state OBBBA conformity considerations (which continue to evolve as the states address the new Federal tax legislation) and the phase-in of the OBBBA international tax provisions in 2026 may continue to affect this cash reduction.

First Quarter 2026 Form 10-Q

OBBBA's restoration of 100% bonus depreciation and immediate expensing of domestic research and experimental expenditures, together with our utilization of net operating loss carryforwards, meaningfully reduced U.S.

cash taxes in 2025 and 2026.

state OBBBA conformity considerations (which continue to evolve as the states address the 2025 Federal tax legislation) and the phase-in of the OBBBA international tax provisions in 2026 are expected to, in part, offset these cash tax reductions in 2026 and 2027.

We currently expect a material impact from future phases in fiscal years 2026 and 2027, but not beyond, before considering any impacts of any potential future valuation allowance release (described further in Note 9).

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

Results of Operations

Comparison of the three months ended March 31, 2026 and 2025

Comparison of the three and six months ended June 30, 2026 and 2025

Revenue and Cost of Revenue

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We intend to continue focusing on innovation, quality and integration of our cloud solutions, which we believe will drive future revenue growth.

First Quarter 2026 Form 10-Q

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

Revenue increased by $11.2 million, or 4.2%, during the three months ended March 31, 2026, when compared to the same period in 2025.

Revenue increased by $8.6 million, or 3.0%, and $19.8 million, or 3.6%, during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025.

For a discussion of our changes in revenue, see "Revenue" above starting on page 22 in this report.

Cost of revenue decreased by $0.2 million, or 0.2%, during the three months ended March 31, 2026, when compared to the same period in 2025, driven primarily by the following:

Decrease in third-party contractor costs of $1.7 million primarily related to transition of work to employees in our GCC, decreased use of outside contractors and completion of prior year investments

Decrease in compensation costs of $1.5 million primarily due to a shift in resources from supporting cost of revenue to research and development

Increase in direct costs of revenue of $2.3 million primarily due to an increase in the volume of transactions for which we process payments and data center costs

Gross margin increased by 180 basis points for the three months ended March 31, 2026, when compared to the same period in 2025, due to the increase in revenue combined with the decrease in cost of revenue.

Cost of revenue decreased by $1.2 million, or 1.1%, and $1.4 million, or 0.6%, during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025, driven primarily by the following:

Decreases in amortization of intangible assets from business combinations of $1.6 million and $2.4 million, respectively

Decreases in third-party contractor costs of $1.4 million and $3.1 million, respectively, primarily related to transition of work to employees in our GCC, decreased use of outside contractors and completion of prior year investments

Decreases in compensation costs of $1.3 million and $2.7 million, respectively, primarily due to transition of work to employees in our GCC in Hyderabad, India, and a shift in resources from supporting cost of revenue to research and development

Increase in amortization of software development costs of $1.2 million, for the six months ended June 30, 2026, due to our continued investments in the innovation and security of our solutions

Gross margin increased by 160 basis points and 170 basis points for the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025, due to the increase in revenue combined with the decrease in cost of revenue.

Operating Expenses

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Percentages indicate expenses as a percentage of total revenue

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

Sales, marketing and customer success

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The enhancements we are making in our go-to-market approach are intended to reduce our average customer acquisition cost per customer as well as the related payback period while increasing sales velocity.

Sales, marketing and customer success expense during the three months ended March 31, 2026 was relatively in-line with the same period in 2025.

Sales, marketing and customer success expense increased by $2.2 million, or 5.0%, and $4.9 million, or 5.5%, during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025.

The increases in dollars and as a percentage of revenue were primarily driven by the following:

Research and development

Research and development expense includes compensation costs for engineering and product management personnel, third-party contractor expenses, software development tools and other expenses related to developing new solutions or upgrading and enhancing existing solutions that do not qualify for capitalization, and allocated depreciation, facilities and IT support (including cybersecurity) costs.

First Quarter 2026 Form 10-Q

Blackbaud, Inc.

We continue to make investments intended to delight our customers with innovative and secure cloud solutions, including AI technology.

Research and development expenses increased by $3.4 million, or 10.0%, during the three months ended March 31, 2026, when compared to the same period in 2025.

Research and development expenses increased by $1.3 million, or 3.8%, and $4.6 million, or 6.9%, during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025.

The increases in dollars and as a percentage of revenue were primarily driven by the following:

Increase in compensation costs of $3.7 million primarily due to a shift in resources from supporting cost of revenue to research and development, merit-based salary increases and increased engineering headcount to support our innovation focus

Decrease in third-party contractor costs of $1.9 million primarily related to transition of work to employees in our GCC and prior year investments ramping down, partially offset by an increase in investment in AI innovation

Not included in research and development expense for the three months ended March 31, 2026 and 2025 were $12.2 million and $12.4 million, respectively, of qualifying costs associated with software development activities that are required to be capitalized under GAAP, such as those for our cloud solutions.

Increases in compensation costs of $2.3 million and $5.9 million, respectively, primarily due to transition of work previously performed by third-party contractors to employees in our GCC in Hyderabad, India, and a shift in resources from supporting cost of revenue to research and development and prior year merit-based salary increases

Decreases in third-party contractor costs of $3.6 million and $5.5 million, respectively, primarily related to transition of work to employees in our GCC (as discussed above) and prior year investments ramping down, partially offset by an increase in investment in AI innovation

Decreases in software development costs that were capitalized of $1.4 million and $1.6 million, respectively

Not included in research and development expense for the three months ended June 30, 2026 and 2025 were $13.0 million and $14.4 million, respectively, and for the six months ended June 30, 2026 and 2025 were $25.2 million and $26.8 million, respectively, of qualifying costs associated with software development activities that were capitalized, such as those for our cloud solutions.

Qualifying capitalized development costs associated with our cloud solutions are subsequently amortized to cost of revenue over the related assets' estimated useful life, which generally range from two to seven years.

We expect that the amount of software development costs capitalized will be relatively consistent in the near-term as we continue making investments in innovation, quality, security and the integration of our solutions, which we believe will drive long-term revenue growth.

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

General and administrative

General and administrative expense consists primarily of compensation costs for general corporate functions, including senior management, finance, accounting, legal, human resources and corporate development, Security Incident-related expenses (including legal fees, settlements and loss contingency accruals), third-party professional fees, insurance, allocated depreciation, facilities and IT support (including cybersecurity) costs, acquisition-related expenses and other administrative expenses.

General and administrative expense decreased by $26.4 million, or 46.6%, during the three months ended March 31, 2026, when compared to the same period in 2025.

General and administrative expense increased by $1.6 million, or 4.8%, during the three months ended June 30, 2026, when compared to the same period in 2025.

The increases in dollars and as a percentage of revenue were primarily driven by the following:

Increase in third-party software costs of $2.0 million primarily related to internal solutions we use to run our business

Increase in corporate costs of $1.7 million primarily related to an increase in bad debt expense and, to a lesser extent, legal fees

Decrease in stock-based compensation costs of $3.1 million primarily due to due to estimated overall Company performance against 2026 goals at target levels compared to prior-year expectations above target

General and administrative expense decreased by $24.8 million, or 27.7%, during the six months ended June 30, 2026, when compared to the same period in 2025.

The decreases in dollars and as a percentage of revenue were primarily driven by the following:

Decrease in acquisition and disposition-related costs of $24.4 million primarily related to our release from our lease for office space in Washington, DC, which occurred during February 2025 and did not reoccur in 2026.

Decrease in stock-based compensation costs of $2.8 million primarily due to estimated overall Company performance against 2026 goals at target levels compared to prior-year expectations above target.

The decrease was partially offset by certain executive retirements in the first quarter.

Decrease in Security Incident-related expenses of $2.6 million that occurred during 2025 that did not reoccur in 2026.

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Increase in third-party software costs of $3.7 million primarily related to internal solutions we use to run our business

Increase of $1.6 million due to the non recurrence of a first quarter 2025 contra expense for transition services associated with the EVERFI disposition in December 2024.

Increase in corporate costs of $1.8 million primarily related to an increase in bad debt expense, legal fees and tax-related expense

Interest Expense

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Percentages indicate expenses as a percentage of total revenue

First Quarter 2026 Form 10-Q

Blackbaud, Inc.

The decrease in interest expense in dollars and as a percentage of total revenue during the three months ended March 31, 2026, when compared to the same period in 2025, was primarily due to a decrease in portfolio effective interest rate on relatively flat average daily borrowing.

The decreases in interest expense in dollars and as a percentage of total revenue during the three and six months ended June 30, 2026, when compared to the same periods in 2025, were primarily due to a decrease in portfolio effective interest rate on relatively flat average daily borrowing.

We currently expect interest expense for the full year 2026 to be approximately $62 million to $66 million.

Our interest expense in connection with the variable rate portion of our outstanding debt could increase in a rising interest rate environment.

See Note 7 to our unaudited, condensed consolidated financial statements in this report for more information regarding our derivative instruments, which we use to manage our variable interest rate risk, and Item 3.

See Note 7 to our unaudited, condensed consolidated financial

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

statements in this report for more information regarding our derivative instruments, which we use to manage our variable interest rate risk, and Item 3.

Quantitative and Qualitative Disclosures about Market Risk:

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Percentages indicate other income, net as a percentage of total revenue

Other income, net in dollars and as a percentage of total revenue during the three months ended March 31, 2026, was relatively consistent with the same period in 2025.

The increases in other income, net in dollars and as a percentage of total revenue during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025, were primarily due to decreases in current year losses in currency revaluation compared to prior year losses.

See Note 5 to our unaudited, condensed consolidated financial statements in this report for more information regarding our other income.

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The table below compares the components of deferred revenue from our unaudited, condensed consolidated balance sheets:

(dollars in millions) March 31,

(dollars in millions) June 30,

2026 December 31,

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Our recurring revenue contracts are generally for a term of three years at contract inception with three-year renewals thereafter, billed annually in advance and non-cancelable.

In recent periods, we have experienced an increase in longer‑term customer contracts, with more than 20% of new and renewing contracts having initial terms of four years or longer.

We now have approximately 90% of our contractual recurring revenue on 3-year or longer contracts and approximately 25% on 4-year or longer contracts.

We generally invoice our customers with recurring revenue contracts in annual cycles 30 days prior to the end of each one-year period.

The decrease in deferred revenue during the three months ended March 31, 2026 was primarily due to a seasonal decrease in customer contract billings.

The increase in deferred revenue during the six months ended June 30, 2026 was primarily due to a seasonal increase 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.

First Quarter 2026 Form 10-Q

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

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Percentages indicate effective income tax rates

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.

The decreases in our effective income tax rate for the three and six months ended June 30, 2026 when compared to the same periods in 2025 were primarily due to a decrease in our valuation allowance and increased deductions from OBBBA implementation, partially offset by discrete tax expense recognized in 2026.

See Note 9 to our unaudited, condensed consolidated financial statements in this report for more information.

On July 4, 2025, the United States enacted the OBBBA, which introduced significant changes to U.S.

See Note 9 to our unaudited, condensed consolidated financial statements in this report for more information.

OBBBA impacts meaningfully contributed to reducing U.S.

cash taxes in 2025 and we expect to continue to see meaningful reductions to cash taxes through 2027.

First Quarter 2026 Form 10-Q

Blackbaud, Inc.

cash taxes in 2025 and 2026.

Non-GAAP Financial Measures

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We believe that these non-GAAP financial measures reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business.

First Quarter 2026 Form 10-Q

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

Three months ended

Six months ended

(dollars in millions, except per share amounts) 2026

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Stock-based compensation expense

2.7 3.3 5.8 5.9

Amortization of intangibles from business combinations

5.4 7.0 11.7 14.1

Employee severance

GCC workforce transition costs (1)

8.4 10.6 18.0 20.3

Non-GAAP gross profit (2)

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Stock-based compensation expense

22.7 27.3 46.6 49.4

Amortization of intangibles from business combinations

6.0 7.6 12.8 15.2

Employee severance

GCC workforce transition costs (1)

Acquisition and disposition-related costs (3)

0.9 0.3 1.0 25.4

Security Incident-related costs

Impairment of capitalized software development costs

32.6 37.6 64.5 94.7

Non-GAAP income from operations (2)

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Non-GAAP income before provision for income taxes (2)

79.0 77.7 148.7 139.6

Assumed non-GAAP income tax provision (4)

19.4 19.0 36.4 34.2

Non-GAAP net income (2)

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(2) The individual amounts for each year may not sum to subtotal, non-GAAP gross profit, non-GAAP income from operations, non-GAAP income before provision for income taxes or non-GAAP net income due to rounding.

(3) Includes charges of $24.3 million incurred during the three months ended March 31, 2025 related to the release from our lease for office space in Washington, DC.

(3) Includes charges of $24.3 million incurred during the six months ended June 30, 2025 related to the release from our lease for office space in Washington, DC.

(4) We use a non-GAAP effective tax rate of 24.5% when calculating non-GAAP net income and non-GAAP diluted earnings per share.

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Because the tax treatment of non-GAAP adjustments differs from GAAP and because of our methodology for estimating the annual tax rate, the non-GAAP tax rate may differ from the GAAP tax rate and from our actual tax liabilities.

First Quarter 2026 Form 10-Q

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

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(dollars in millions) Three months ended

Six months ended

$ 290.6 $ 282.0 $ 571.7 $ 552.0

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Foreign currency impact on Non-GAAP organic revenue (3)

(0.7) — (2.9) —

Non-GAAP organic revenue on constant currency basis (3)

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Foreign currency impact on non-GAAP organic recurring revenue (3)

(0.7) — (2.9) —

Non-GAAP organic recurring revenue on constant currency basis (3)

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The primary foreign currencies creating the impact are the Australian Dollar, British Pound, Canadian Dollar and Euro.

First Quarter 2026 Form 10-Q

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

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Three months ended

Six months ended

(dollars in millions) 2026

3 unchanged sentences

GAAP income tax provision

11.1 13.6 17.7 14.1

2.8 2.7 5.1 5.6

Amortization of intangibles from business combinations 6.0 7.6 12.8 15.2

Amortization of software development costs (1)

12.8 12.3 25.2 24.2

48.4 52.6 90.9 90.8

Non-GAAP EBITDA (2)

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Non-GAAP EBITDA margin (3)

28.8 % 27.5 %

Non-GAAP adjustments:

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$ 22.7 $ 27.3 $ 46.6 $ 49.4

Employee severance

GCC workforce transition costs (4)

Acquisition and disposition-related costs (4)

0.9 0.3 1.0 25.4

Security Incident-related costs (4)

Impairment of capitalized software development costs

26.6 30.1 51.7 79.5

Non-GAAP adjusted EBITDA (2)

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Non-GAAP adjusted EBITDA margin (5)

38.0 % 36.6 %

Rule of 40 (6)

41.0 % 40.2 %

Non-GAAP adjusted EBITDA $ 110.3 $ 109.1 $ 209.0 $ 201.2

Foreign currency impact on Non-GAAP adjusted EBITDA (7)

(0.2) (1.1) (1.2) (0.9)

Non-GAAP adjusted EBITDA on constant currency basis (7)

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Rule of 40 on constant currency basis (8)

40.8 % 39.6 %

(1) Includes amortization expense related to software development costs and amortization expense from capitalized cloud computing implementation costs.

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See Non-GAAP organic revenue growth table above.

First Quarter 2026 Form 10-Q

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

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We believe non-GAAP free cash flow provides a useful measure of the Company's operating performance.

Three months ended

Six months ended

(dollars in millions) 2026

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Due to the timing of customer contract renewals and student enrollments, many of which take place at or near the beginning of our third quarter, our cash flow from operations has generally been lower in our second quarter as compared to our third and fourth quarters.

Partially offsetting these favorable drivers of cash flow from operations in our third and fourth quarters are base salary merit increases, which occur in July.

Partially offsetting these favorable drivers of cash flow from operations in our third and fourth quarters are base salary merit increases, which occur in December.

In addition, deferred revenues can vary on a seasonal basis due to the timing of customer contract billings and renewals and student enrollments or significant acquisitions.

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These patterns may change as a result of the continued shift to online giving, growth in volume of transactions for which we process payments, large dollar customer bookings and contract renewals, fluctuations in the timing of vendor payments, or as a result of acquisitions, new market opportunities, new solution introductions or other factors.

First Quarter 2026 Form 10-Q

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

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The following table presents selected financial information about our financial position:

(dollars in millions) March 31,

(dollars in millions) June 30,

2026 December 31,

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The following table presents selected financial information about our cash flows:

Three months ended March 31,

Six months ended June 30,

(dollars in millions) 2026

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Net cash used in investing activities

Net cash used in financing activities

Net cash provided by financing activities

Our principal sources of liquidity are our operating cash flow, funds available under the 2024 Credit Facilities and cash on hand.

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Subject to certain conditions and pursuant to applicable SEC regulations, this registration statement is effective for three years from its date of filing with the SEC, or through January 9, 2028.

At March 31, 2026, our total cash and cash equivalents balance included approximately $14.0 million of cash that was held by operations outside the U.S.

At June 30, 2026, our total cash and cash equivalents balance included approximately $14.9 million of cash that was held by operations outside the U.S.

While these funds may not be needed to fund our U.S.

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We currently do not intend nor anticipate a need to repatriate our cash held outside the U.S.

First Quarter 2026 Form 10-Q

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

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Working capital changes are composed of changes in accounts receivable, prepaid expenses and other assets, trade accounts payable, accrued expenses and other liabilities, and deferred revenue.

Net cash provided by operating activities increased by $50.1 million during the three months ended March 31, 2026, when compared to the same period in 2025, primarily due to a $37.4 million increase in net income adjusted for non-cash expenses and a $12.7 million increase in cash flow from operations associated with working capital.

The increase in cash flow from operations associated with working capital during the three months ended March 31, 2026, when compared to the same period in 2025, was primarily due to fluctuations in the timing of vendor payments.

Net cash provided by operating activities increased by $74.2 million during the six months ended June 30, 2026, when compared to the same period in 2025, primarily due to a $47.5 million increase in net income adjusted for non-cash expenses and a $26.6 million increase in cash flow from operations associated with working capital.

The increase in cash flow from operations associated with working capital during the six months ended June 30, 2026, when compared to the same period in 2025, was primarily due to:

• fluctuations in the timing of vendor payments;

• a smaller increase in prepaid income taxes and a modest increase in income taxes payable.

On July 4, 2025, the United States enacted the OBBBA, which introduced significant changes to U.S.

See Note 9 to our unaudited, condensed consolidated financial statements in this report for more information.

OBBBA impacts meaningfully contributed to reducing U.S.

cash taxes in 2025 and we expect to continue to see meaningful reductions to cash taxes through 2027.

cash taxes in 2025 and 2026.

Investing Cash Flow

Net cash used in investing activities of $14.5 million decreased by $11.4 million during the three months ended March 31, 2026, when compared to the same period in 2025.

During the three months ended March 31, 2026, we used cash of $12.8 million and $1.7 million for software development costs and purchases of property and equipment, respectively, which was relatively in line with the same period in 2025.

During the three months ended March 31, 2025, we used net cash of $12.2 million for the disposition of a business.

Net cash used in investing activities of $38.9 million decreased by $2.4 million during the six months ended June 30, 2026, when compared to the same period in 2025.

During the six months ended June 30, 2026, we used cash of $26.1 million for software development costs, which was a decrease of $1.7 million when compared to the same period in 2025.

We spent $4.1 million for purchases of property and equipment during the six months ended June 30, 2026, which was an increase of $2.8 million when compared to the same period in 2025.

Also, we used $8.7 million for a minor investment in a business during the six months ended June 30, 2026.

During the six months ended June 30, 2025, we used net cash of $12.2 million for the disposition of a business.

Financing Cash Flow

During the three months ended March 31, 2026, we had a net increase in borrowings of $64.9 million, primarily due to our stock repurchase program and to satisfy tax obligations of employees upon settlement of equity awards (see discussion below).

We paid $25.1 million to satisfy tax obligations of employees upon settlement of equity awards during the three months ended March 31, 2026 compared to $37.9 million during the same period in 2025.

During the six months ended June 30, 2026, we had a net increase in borrowings of $28.6 million, primarily due to our stock repurchase program and to satisfy tax obligations of employees upon settlement of equity awards (see discussion below).

We paid $25.3 million to satisfy tax obligations of employees upon settlement of equity awards during the six months ended June 30, 2026 compared to $38.7 million during the same period in 2025.

The amount of taxes paid by us on behalf of employees related to the settlement of equity awards varies from period to period based upon the timing of grants and vesting, as well as the market price for shares of our common stock at the time of settlement.

Most of our equity awards currently vest in our first quarter.

During the three months ended March 31, 2026, cash flow from financing activities associated with changes in restricted cash due to customers decreased $294.1 million, compared to a decrease of $320.2 million during the same period in 2025.

During the six months ended June 30, 2026, cash flow from financing activities associated with changes in restricted cash due to customers increased $132.6 million, compared to an increase of $128.6 million during the same period in 2025.

This line in the statement of cash flows represents the change in the amount of restricted cash held and payable by us to customers from one period to the next.

This restricted cash due to customers is not available to us for operational purposes.

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

Stock repurchase program

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The repurchase program may be limited, suspended or discontinued at any time without prior notice.

First Quarter 2026 Form 10-Q

Blackbaud, Inc.

In February 2026, we announced our intention to repurchase between 5% and 10% of our outstanding common stock as of December 31, 2025 during the course of 2026 under our stock repurchase program.

During the three months ended March 31, 2026, we repurchased an aggregate of 1,601,057 shares for $82.1 million.

During the three months ended June 30, 2026, we repurchased an aggregate of 797,795 shares for $28.0 million.

During the six months ended June 30, 2026, we repurchased an aggregate of 2,398,852 shares for $110.1 million.

Including net share settlement of employee stock compensation, these repurchases represent approximately 6.2% of our outstanding common stock as of December 31, 2025.

As of March 31, 2026, $878.5 million remained available under our stock repurchase program.

As of June 30, 2026, $850.4 million remained available under our stock repurchase program.

Over the long term, we expect stock repurchases to remain an important component of our capital allocation strategy, subject to market conditions, business performance, leverage considerations, U.S.

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Historically, we have drawn on our credit facility from time to time to help us meet financial needs, primarily due to the seasonality of our cash flows from operations and financing for business acquisitions.

At March 31, 2026, our available borrowing capacity under the 2024 Credit Facilities was $343.2 million.

At June 30, 2026, our available borrowing capacity under the 2024 Credit Facilities was $374.0 million.

The 2024 Credit Facilities mature in April 2029.

At March 31, 2026, the carrying amount of our debt under the 2024 Credit Facilities was $1.1 billion.

Our average daily borrowings during the three months ended March 31, 2026 were $1.1 billion.

At June 30, 2026, the carrying amount of our debt under the 2024 Credit Facilities was $1.1 billion.

Our average daily borrowings during the three and six months ended June 30, 2026 were $1.1 billion and $1.1 billion, respectively.

The following is a summary of the financial covenants under the 2024 Credit Facilities:

Financial covenant Requirement Ratio as of March 31, 2026

Financial covenant Requirement Ratio as of June 30, 2026

Net leverage ratio (1)

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(i) no default or event of default shall have occurred and be continuing under the 2024 Credit Facilities, and (ii) our pro forma net leverage ratio, as set forth in the 2024 Credit Facilities, must be 0.25 less than the net leverage ratio requirement at the time of dividend declaration or share repurchase.

At March 31, 2026, we were in compliance with our debt covenants under the 2024 Credit Facilities.

At June 30, 2026, we were in compliance with our debt covenants under the 2024 Credit Facilities.

See Note 6 to our unaudited, condensed consolidated financial statements in this report for additional information regarding the 2024 Credit Facilities.

First Quarter 2026 Form 10-Q

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

Commitments and Contingencies

As of March 31, 2026, we had contractual obligations with future minimum commitments as follows:

As of June 30, 2026, we had contractual obligations with future minimum commitments as follows:

Payments due by period

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(1) The individual amounts may not sum to the total due to rounding.

As of March 31, 2026, we had total remaining principal payments of approximately $1.2 billion.

As of June 30, 2026, we had total remaining principal payments of approximately $1.2 billion.

These payments represent principal payments only, under the following assumptions:

(i) that the amounts outstanding under the 2024 Credit Facilities, our real estate loans and our other debt at March 31, 2026 will remain outstanding until maturity, with minimum payments occurring as currently scheduled, and (ii) that there are no assumed future borrowings on the revolving credit loans under the 2024 Revolving Facility for the purposes of determining minimum commitment amounts.

(i) that the amounts outstanding under the 2024 Credit Facilities, our real estate loans and our other debt at June 30, 2026 will remain outstanding until maturity, with minimum payments occurring as currently scheduled, and (ii) that there are no assumed future borrowings on the revolving credit loans under the 2024 Revolving Facility for the purposes of determining minimum commitment amounts.

See Note 6 to our unaudited, condensed consolidated financial statements in this report for more information.

Interest payments on debt

In addition to principal payments, as of March 31, 2026, we expect to pay interest expense over the life of our debt obligations of approximately $213.5 million.

These payments represent our estimated future interest payments on debt using our debt balances and the related weighted average effective interest rates as of March 31, 2026, which includes the effect of interest rate swap agreements.

In addition to principal payments, as of June 30, 2026, we expect to pay interest expense over the life of our debt obligations of approximately $194.7 million.

These payments represent our estimated future interest payments on debt using our debt balances and the related weighted average effective interest rates as of June 30, 2026, which includes the effect of interest rate swap agreements.

The actual interest expense recognized in our unaudited, condensed consolidated statements of comprehensive income will depend on the amount of debt, the length of time the debt is outstanding and the interest rate, which could be different from our assumptions on our remaining principal payments described above.

Operating leases

As of March 31, 2026, we had remaining operating lease payments of $9.3 million.

As of June 30, 2026, we had remaining operating lease payments of $8.6 million.

These payments have not been reduced by sublease income, incentive payments, reimbursement of leasehold improvements or the amount representing imputed interest.

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Purchase obligations

As of March 31, 2026, we had remaining purchase obligations of $142.3 million.

As of June 30, 2026, we had remaining purchase obligations of $84.5 million.

These purchase obligations are 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.

Our purchase obligations are not recorded as liabilities on our unaudited, condensed consolidated balance sheets as of March 31, 2026, as we had not received the related services.

Our purchase obligations are not recorded as liabilities on our unaudited, condensed consolidated balance sheets as of June 30, 2026, as we had not received the related services.

See Note 8 to our unaudited, condensed consolidated financial statements in this report for more information.

First Quarter 2026 Form 10-Q

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

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Foreign Currency Exchange Rates

Approximately 17% of our total revenue for the three months ended March 31, 2026 was generated from operations outside the U.S.

Approximately 18% of our total revenue for the six months ended June 30, 2026 was generated from operations outside the U.S.

We do not have significant operations in countries in which the economy is considered to be highly inflationary.

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dollars for purposes of reporting our consolidated financial results.

The accumulated currency translation adjustment, recorded within accumulated other comprehensive loss as a component of stockholders’ equity, was a loss of $5.3 million as of March 31, 2026 and a loss of $3.8 million as of December 31, 2025.

The accumulated currency translation adjustment, recorded within accumulated other comprehensive loss as a component of stockholders’ equity, was a loss of $5.4 million as of June 30, 2026 and a loss of $3.8 million as of December 31, 2025.

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 into U.S.

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dollar strengthened, foreign currency translation resulted in a decrease in our revenues and expenses denominated in non-U.S.

During the three months ended March 31, 2026, foreign translation resulted in increases in our revenues and expenses denominated in non-U.S.

During the six months ended June 30, 2026, foreign translation resulted in increases in our revenues and expenses denominated in non-U.S.

Though we have exposure to fluctuations in currency exchange rates, primarily those between the U.S.

dollar and both the British Pound and Canadian dollar, the impact has generally not been material to our consolidated results of operations or financial position.

For the three months ended March 31, 2026, the fluctuation in foreign currency exchange rates increased our total revenue and our income from operations by $2.2 million and $1.1 million, respectively.

For the six months ended June 30, 2026, the fluctuation in foreign currency exchange rates increased our total revenue and our income from operations by $2.9 million and $2.5 million, respectively.

We have entered into foreign currency forward contracts to hedge revenues denominated in the Canadian dollar against changes in the exchange rate with the U.S.

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Critical Accounting Policies and Estimates

There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2026 as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2026 as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

Recently Issued Accounting Pronouncements

For a discussion of the impact that recently issued accounting pronouncements are expected to have on our financial position and results of operations when adopted in the future, see Note 2 to our unaudited, condensed consolidated financial statements in this report.

First Quarter 2026 Form 10-Q

Second Quarter 2026 Form 10-Q

Blackbaud, Inc.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis