2020 Annual Report
Included in the 2020 Annual Report:
Form 10-K filed with the U.S. Securities and Exchange Commission on
February 23, 2021
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number: 000-50600
Blackbaud, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
11-2617163
(I.R.S. Employer Identification No.)
65 Fairchild Street
Charleston, South Carolina 29492
(Address of principal executive offices, including zip code)
(843) 216-6200
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, $0.001 Par Value
Trading Symbol(s)
BLKB
Securities Registered Pursuant to Section 12(g) of the Act: None
Name of Each Exchange on which Registered
Nasdaq Global Select Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
"emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☑
☐
Accelerated filer
Smaller reporting company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report. ☑
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The aggregate market value of the registrant's common stock held by non-affiliates of the registrant on June 30, 2020 (based on the closing sale
price of $57.08 on that date) was approximately $2,458,658,098. Common stock held by each officer and director and by each person known to
the registrant who owned 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
The number of shares of the registrant’s common stock outstanding as of February 10, 2021 was 48,381,440.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement for the 2021 Annual Meeting of Stockholders currently scheduled to be held June 9, 2021
are incorporated by reference into Part III hereof. Such definitive Proxy Statement will be filed with the U.S. Securities and Exchange Commission
no later than 120 days after the conclusion of the registrant's fiscal year ended December 31, 2020.
TABLE OF CONTENTS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
PART I.
Item 1.
Business
Item 1A. Risk factors
Item 1B. Unresolved staff comments
Item 2.
Properties
Item 3.
Legal proceedings
Item 4. Mine safety disclosures
PART II.
Item 5. Market for registrant's common equity, related stockholder matters and issuer purchases of equity
securities
Selected financial data
Item 6.
Item 7. Management's discussion and analysis of financial condition and results of operations
Item 7A. Quantitative and qualitative disclosures about market risk
Item 8.
Financial statements and supplementary data
Item 9. Changes in and disagreements with accountants on accounting and financial disclosure
Item 9A. Controls and procedures
Item 9B. Other information
PART III.
Item 10. Directors, executive officers and corporate governance
Item 11. Executive compensation
Item 12. Security ownership of certain beneficial owners and management and related stockholder matters
Item 13. Certain relationships and related transactions, and director independence
Item 14. Principal accountant fees and services
PART IV.
Item 15. Exhibits and financial statement schedules
Item 16. Form 10-K Summary
SIGNATURES
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CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, including the documents incorporated herein by reference, contains forward-looking
statements that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These
"forward-looking statements" are made subject to the safe-harbor provisions of the Private Securities Litigation Reform
Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Forward-looking statements consist of, among other things, trend analyses,
statements regarding future events, future financial performance, our anticipated growth, the effect of general
economic and market conditions, our business strategy and our plan to build and grow our business, our operating
results, impacts of the COVID-19 global pandemic ("COVID-19") on our financial condition and results of operations
and on the markets and communities in which we and our customers and partners operate, our ability to successfully
integrate acquired businesses and technologies, the effect of foreign currency exchange rate and interest rate
fluctuations on our financial results, the impact of expensing stock-based compensation, the sufficiency of our capital
resources, our ability to meet our ongoing debt and obligations as they become due, the adequacy of our data security
procedures, cybersecurity and data protection risks and potential legal proceedings involving us and uncertainty
regarding existing legal proceedings, all of which are based on current expectations, estimates, and forecasts, and the
beliefs and assumptions of our management. Words such as “believes,” “seeks,” “expects,” “may,” “might,”
“should,” “intends,” “could,” “would,” “likely,” “will,” “targets,” “plans,” “anticipates,” “aims,” “projects,”
“estimates,” or any variations of such words and similar expressions are also intended to identify such forward-looking
statements. These forward-looking statements are subject to risks, uncertainties and assumptions that are difficult to
predict. Accordingly, they should not be viewed as assurances of future performance, and actual results may differ
materially and adversely from those expressed in any forward-looking statements.
Important factors that could cause actual results to differ materially from our expectations expressed in forward-looking
statements include, but are not limited to, those summarized under “Item 1A. Risk factors” and elsewhere in this report
and in our other SEC filings. Forward-looking statements represent our management's beliefs and assumptions only as
of the date of this Annual Report on Form 10-K. We undertake no obligation to update or revise any forward-looking
statements, or to update the reasons actual results could differ materially from those anticipated in any forward-looking
statements, whether as a result of new information, future events or otherwise.
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PART I.
ITEM 1. BUSINESS
Description of Business
We are the world’s leading cloud software company powering social good. Serving the entire social good community—
nonprofits, higher education institutions, K–12 schools, healthcare organizations, faith communities, arts and cultural
organizations, foundations, companies and individual change agents—we connect and empower organizations and
individuals to increase their impact through cloud software, services, data intelligence and expertise. Blackbaud brings
nearly four decades of leadership to this sector: since originally incorporating in New York in 1982 and later
reincorporating as a South Carolina corporation in 1991 and as a Delaware corporation in 2004, our tailored portfolio
of software and services has grown to support the unique needs of vertical markets, with solutions for fundraising and
CRM, marketing, advocacy, peer-to-peer fundraising, corporate social responsibility, school management, ticketing,
grantmaking, financial management, payment processing and analytics. Our solutions are designed to meet the needs
of virtually all types of organizations in the social good community, from major global institutions to small charities to
individuals. At the end of 2020, we had over 45,000 customers located in over 100 countries, with millions of users. We
are deeply proud to play a part in our customers’ success in their missions to provide healthcare and cure diseases,
advance education, preserve and share arts and culture, protect the environment, support those in need and much
more.
Market Overview
The social good industry is significant, spanning far beyond philanthropy, and our addressable market is
substantial and growing
Worldwide there are millions of social good organizations including nonprofits, foundations, companies, education
institutions and healthcare organizations. Billions of individuals are also active participants in the social good community
by donating funds, volunteering their time, advocating for a cause, receiving services from or otherwise engaging with
social good organizations.
Our estimated current total addressable market ("TAM") is greater than $10 billion. This includes expansions into new
and near adjacencies in 2019, including our Cloud Solution for Faith Communities, our expanded Cloud Solution for
Higher Education, as well as our acquisition of YourCause Holdings, LLC ("YourCause") in January 2019.
Traditional methods of fundraising and organizational management are often costly and inefficient
Many social good organizations use manual methods or software applications not specifically designed for fundraising
and organizational management for institutions like theirs. Such methods are often costly and inefficient because of the
difficulties in effectively collecting, sharing and using donation-related information. Furthermore, general purpose
software applications frequently have limited functionality for the unique needs of our customer base and do not
efficiently integrate multiple databases. Some social good organizations have developed proprietary software, but doing
so is expensive, requiring on-site technical personnel for development, implementation and maintenance.
The nonprofit industry faces particular operational challenges
Nonprofit organizations, education institutions, healthcare organizations and houses of worship must efficiently:
•
Solicit funds and build relationships with major donors;
• Garner small cash contributions from numerous contributors;
• Manage and develop complex relationships with large numbers of constituents;
• Advocate for policies and behaviors that advance their cause or institution;
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• Communicate their accomplishments and the importance of their mission online and offline;
• Comply with complex accounting, tax and reporting requirements that differ from those for traditional
businesses;
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•
•
Solicit cash and in-kind contributions from businesses to help raise money or deliver products and services;
Provide a wide array of programs and services to individual constituents and beneficiaries; and
Improve the data collection and information sharing capabilities of their employees, volunteers and donors by
creating and providing distributed access to centralized databases.
Because of these challenges, we believe nonprofits, education institutions, healthcare organizations and houses of
worship can benefit from software applications and services specifically designed to serve their particular needs and
workflows to grow revenue, work effectively and accomplish their missions.
Companies, grantmaking institutions and foundations also face unique challenges
Companies, grantmaking institutions and foundations, face their own unique challenges in their social good efforts,
including the need to:
• Quantify and improve the impact of their grants;
• Cultivate better relationships with grantees;
• Achieve better internal collaboration and alignment with board members, reviewers and other stakeholders;
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Illustrate the impact of their corporate philanthropy efforts to the communities they serve;
Engage employees in meaningful volunteering, giving and other activities;
Ensure that their philanthropic efforts align with their business initiatives;
• Manage all of a foundation's activities, including fundraising and accounting;
•
Expand the reach of their fundraising efforts; and
• Cultivate new and existing donors.
Strategy
Our objective is to maintain and extend our position as the leading provider of cloud software and services for the
global social good community, supporting our customers' missions from securing resources, managing their operations,
to delivering their programs and measuring their impact. Our key strategies for achieving this objective are described
below.
Execute on our Four-Point Growth Strategy
During 2020, we continued to execute our four-point growth strategy targeted to drive solution and service innovation,
quality enhancement, increased operating efficiency and improved financial performance:
1. Delight Customers with Innovative Cloud Solutions
This strategy reflects our relentless focus on driving value and outcomes for our customers through our solutions.
Blackbaud SKY®, our platform for cloud innovation, is a core tenant of this strategy and continues to power an
elevated level of innovation by our engineers. It is also enabling our growing ecosystem of partners who are also
passionate about social good, to extend and expand the capabilities available to our customers. During 2020, we
continued making critical investments in research and development and increased our engineering hiring during the
fourth quarter. We also released the Blackbaud Marketplace during 2020, offering curated third-party apps,
enabling organizations of all types and sizes to discover new ways to amplify their impact by enhancing their best-
of-breed Blackbaud solutions with specialized capabilities like connecting bidders at fundraising auctions, tracking
branded merchandise purchased in an online store or texting volunteers about an upcoming event.
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The customers we serve require vertical specific business solutions to automate their operations. Throughout 2020,
we have remained focused on driving value and outcomes for our customers. We reprioritized and expedited
product enhancements to support our customers' needs, especially in light of COVID-19 and the continued shift to
virtual, digital-first operating models. For example, we released fitness tracking integration in Blackbaud’s peer-to-
peer fundraising portfolio, a new virtual prayer wall enabling congregants at houses of worship to share and
respond to prayer requests online, text messaging capabilities for scholarship directors and higher education
institutions to ensure no funds were going unutilized and expanded the global capabilities of YourCause
CSRConnect making it easier for companies to bring employees across geographies together in support of causes
around the world.
Blackbaud Peer-to-Peer Fundraising powered by JustGiving continues to gain traction. During 2020, we migrated
everydayhero customers over to Blackbaud Peer-to-Peer Fundraising powered by JustGiving and sunset the
everydayhero product as we continue to rationalize our portfolio while continuing to delight our customers with
innovative cloud solutions.
2. Drive Sales Effectiveness
We have been investing in sales and marketing to better address our market opportunity with a focus on digital
lead generation. One way we are equipping our salesforce to be more effective is by investing in the necessary
technology and resources to efficiently drive an increased number of quality leads and better cover our large
addressable market. We have implemented software tools to enhance our digital footprint and drive lead
generation across the company. We are taking a multi-touch attribution approach to measuring the effectiveness of
our marketing campaigns to drive efficiency in our go-to-market efforts and improve returns on our marketing
dollars. This is just one of many examples of how we are optimizing our structure, tools and processes to better
address our large vertical market opportunities. We have also taken lessons learned throughout 2020 and re-
evaluated elements of our go-to-market strategy with a digital-first mindset and we have a significant opportunity
to leverage the investments into digital to reduce our customer acquisition cost and increase our sales velocity,
ultimately, driving a more scalable and cost-effective go-to-market model.
3. Expand TAM
We did not complete any acquisitions during 2020 as we have remained vigilantly focused on supporting our
customers and employees during this time. We remain active in the evaluation of opportunities to further expand
our addressable market through acquisitions and internal product development. We believe we have significant
opportunities in front of us as we are less than 10% penetrated into a total addressable market of over $10 billion.
4.
Improve Operating Efficiency
We are also focused on operational efficiency to strengthen the business and position us for long-term success.
During 2020, we pivoted to place a greater emphasis on profit in alignment with the balanced approach
management takes to operating the business. As a result of the pandemic, our near term visibility into revenue
growth was impacted and we took certain actions early on to ensure our liquidity (see Note 2 to our consolidated
financial statements in this report for a discussion of some of these actions) and shifted more of our focus to
profitability. Our employees switched to working fully remote at the onset of the pandemic and the business
continued operating smoothly. This caused us to re-evaluate our workforce strategy and when employees return to
the office, we will have more employees working remotely either part-time or full-time, even within our hub
locations. As a result, we revisited our real estate strategy with a focus on optimizing our footprint for the future of
work at Blackbaud, including the purchase of our LEED (Leadership in Energy & Environmental Design) Gold
certified global headquarters facility in Charleston, South Carolina ("Global Headquarters Facility") and exit of
certain office leases globally, as we will not need as much of an office footprint going forward. Our aim is
optimizing our office utilization, improving our geographic sales coverage and enhancing our employees' daily
experience to improve productivity and effectiveness.
Delight Our Customers
We intend to make our customers' experience with us effective, efficient and satisfying from their initial interest in our
solutions and services through their decision to purchase, engage with customer support and implement and use our
solutions. We continue to focus on initiatives aimed at improving the consistency and quality of user experience across
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our offerings. We also continue to evolve the way we package and sell our offerings to provide high quality and value
combined with flexibility to meet the unique needs of our existing and prospective customers. For example, we have
increased the number of our cloud solutions sold under a subscription pricing model, which can make it easier for
customers to purchase our solutions. In addition, we are continuing to integrate value-adding capabilities such as
payment services, analytics and business intelligence into our suite of solutions to better address our customers' needs
with comprehensive offerings. We will continue to focus on providing the highest level of solution support, enhancing
our existing solutions, extending our solutions through open APIs and developing new solutions and services designed
to help our customers be more effective and achieve their missions.
Attract and Retain Top Talent and Actively Engage Employee Base
Our higher purpose is to help good take over the world, and we have incredible customers whose missions make the
world a better place. Driven by this purpose, our employees come to work every day knowing that they can make a real
difference with our customers as they pursue their missions. Collaboration, innovation and high standards are core to
our culture and help to enable the great work we do. We strive to hire and retain the best employees and provide a
workplace where their talents and potential are realized. For additional information, see “Human Capital Resources”
below.
Drive Strength in Our Sector as an Industry Thought Leader
In our nearly 40 years of operation, we have gained significant insight into the overall market and industry segments in
which we operate. We produce a wide range of thought leadership resources, including blogs, monthly indices and
white papers, which provide insights and guidance to the social good community. We also participate in and convene a
number of industry forums, where we exchange views and engage with industry and government leaders. Our annual
user conference, bbcon®, serves in part as a forum to offer thought leadership to our customers, as do other market-
specific user conferences, events and customer gatherings. The Blackbaud Institute for Philanthropic Impact (the
"Blackbaud Institute") brings together leading experts in philanthropy to develop and share leading-edge research and
insight that accelerates the impact of the social good community. The research and reports the Blackbaud Institute
produces serve to strengthen the social good community as a whole. sgENGAGE, our blog and podcast, provides free
best practices resources that drive impact across the social good community, as well.
Last year, we announced our partnership with One Million by One Million ("1Mby1M") to launch the Social Good Start-
up Challenge focused on tech start-ups on a mission to solve problems that matter to the social good community. In
2020, we announced we’ve expanded this initiative into the Blackbaud Social Good Startup Program, a year-long
accelerator designed to support innovative startups with the potential to impact the ecosystem of good. In alignment
with our commitment to diversity in the tech community, we focused our January 2021 cohort on founders from
underrepresented backgrounds. Last year, we also announced The Explorer by Blackbaud Institute, the premier online
knowledge base for information and statistics about social good. Content is updated regularly and is provided free of
charge to the public as a part of Blackbaud’s give-back philosophy. We intend to expand these activities and further
build our reputation as a thought leader within the industry.
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Solutions and Services
We offer the social good community comprehensive cloud solutions to advance their missions, backed by our data
intelligence services, which deliver insights powered by what we believe to be the world's most robust philanthropic
data set. Our solutions can be combined with a range of payment processing, analytic and business intelligence services,
consulting, training and professional services, as well as maintenance and technical support. The Blackbaud portfolio is
delivered primarily through cloud solutions tailored to the unique needs of vertical markets, offering fundraising and
relationship management, marketing and engagement, financial management, grant and award management,
organizational and program management (such as education management, church management and ticketing), social
responsibility, payment services and analytics.
Our specific solutions and services include:
Fundraising and Relationship Management
Blackbaud Raiser's Edge NXT® is our flagship cloud fundraising and relationship management solution. Blackbaud
Raiser's Edge NXT is the first and only cloud fundraising and relationship management solution that is all-inclusive, fully
integrated with data, analytics, marketing tools, payment processing and tailored user-specific experiences. Blackbaud
Raiser's Edge NXT is, we believe, the most advanced technology available to nonprofits seeking to operate more
efficiently and raise more support for their missions.
Blackbaud CRM™ is a comprehensive, configurable fundraising and relationship management solution. It is our lead
offering for enterprise-level organizations seeking a powerful, yet adaptable solution for fundraising, marketing, and
program management across the engagement lifecycle, specializing in supporting sophisticated major giving,
membership and high-volume direct marketing programs. Blackbaud CRM helps organizations build deeper and more
personalized relationships with constituents, build their brands through online engagement and multichannel
communication tools, and more effectively fundraise, leveraging campaign management, business intelligence and
analytics. Blackbaud CRM can be sold as an integrated solution with our enterprise online solutions to enable multi-
channel marketing, online engagement and event fundraising.
Blackbaud eTapestry® is a simple, cloud fundraising and donor management solution built specifically for smaller,
developing nonprofits in need of a cloud solution to support basic fundraising needs. It offers nonprofit organizations a
cost-effective way to manage donors, process gifts, create reports, accept online donations and communicate with
constituents. This technology provides a system that is simple to maintain, efficient to operate and is intuitively easy to
learn without extensive training.
Blackbaud TeamRaiser® is the industry’s most comprehensive cloud solution designed specifically for event
fundraising. Powering thousands of events each year, Blackbaud TeamRaiser allows nonprofits’ supporters to create
personal or team fundraising web pages and send email donation appeals in support of events such as walks, runs and
rides.
Blackbaud Peer-to-Peer Fundraising™, powered by JustGiving™ is one of the world's leading social platforms for
giving. Blackbaud Peer-to-Peer Fundraising, powered by JustGiving provides world-class technology and innovative tools
to connect people with the causes they care about. By making giving more simple, social and rewarding, this platform
helps all causes, charities and people in need to reach more people and raise more money.
Blackbaud Guided Fundraising™ and Blackbaud Volunteer Network Fundraising™ can work together or
independently to help higher education institutions meet their advancement targets and development campaign goals.
Blackbaud Guided Fundraising is used by institutions seeking to manage all the details behind the sophisticated, person-
to-person solicitation strategies that drive fundraising results. Blackbaud Volunteer Network Fundraising helps
institutions manage volunteer fundraising campaigns with tools for project management, communication and reporting.
Marketing and Engagement
Blackbaud Luminate Online®, delivered in the cloud, helps our customers better understand their online supporters,
make the right ask at the right time and raise money online. It includes tools to build online fundraising campaigns as
part of an organization's existing website or as a stand-alone fundraising site. Donation forms, gift processing and tools
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for communicating through web pages and email give our customers the essentials for building sustainable donor
relationships. Customers can also purchase additional modules including Blackbaud Luminate Advocacy™, which
combines online marketing tools and legislative data to mobilize supporters and influence policy-makers.
Blackbaud Online Express™ is a simple, cloud fundraising and marketing tool designed for smaller nonprofit
organizations using Blackbaud Raiser's Edge NXT. It provides nonprofits with easy-to-use, fully integrated features and
functionality such as email marketing, donation forms, event registrations and dashboard metrics.
Blackbaud School Website System™ is a content management system that gives schools the flexibility to build and
edit webpages, with easy access to content types including photos, videos, downloads, text and more. It allows users to
share material and contribute content across an entire school community.
Financial Management
Blackbaud Financial Edge NXT® is the first-of-its-kind cloud accounting solution for nonprofits that is intuitive, fully
integrated, and built the way nonprofits need it on our modern Blackbaud SKY cloud platform. Blackbaud Financial
Edge NXT is advanced technology with powerful reporting tools to help accounting teams drive transparency,
stewardship, and compliance while enabling them to seamlessly manage transactions and eliminate manual processes. It
seamlessly integrates with Blackbaud Raiser's Edge NXT to simplify gift entry processing and relates information from
both systems in an informative manner to eliminate redundant tasks and manual processes. Blackbaud Financial Edge
NXT provides nonprofit organizations with the means to help manage fiscal and fiduciary responsibility, enabling them
to be more accountable to their constituents.
Blackbaud Tuition Management™ benefits schools by giving administrators better access to financial data and
payment services, and by giving parents more ways to remit tuition payments. The solution helps ease the burden for
administrative staff by offering invoicing, payment processing, customer service, enhanced communication with parents
and later payer follow-up services.
Blackbaud Financial Aid Management™ offers schools the ability to accept online, customized applications for
financial aid and to make better financial aid decisions with a proprietary Hobbies, Interest and Lifestyles ("HIL") profile.
The HIL profile provides in-depth information on an applicant, delivering to the school a way to make more informed
decisions on how they distribute financial aid awards.
Grant and Award Management
Blackbaud Grantmaking™ is a cloud solution built with core functions that provide comprehensive grant making
capabilities, but with many additional capabilities and features, such as visual dashboards. It has a modern user
interface, is user friendly and can be highly personalized. Coupled with Blackbaud Outcomes™ funders and nonprofits
are empowered to collaborate around their intended outcomes and work together to achieve impact. Both the funder
and the nonprofit can tell an impact story using ROI-focused results and a common outcomes measurement language.
Blackbaud Award Management™ is a comprehensive, integrated scholarship management platform for higher
education and K-12 institutions and foundations, allowing students to apply for all awards using one intuitive and
streamlined application process and eliminating many time-consuming administrative tasks. This leads to improved
awarding, reporting, compliance, communication and stewardship.
Organizational and Program Management
Blackbaud Student Information System™ makes it easy for schools to manage schedules, transcripts and GPAs. A
new Student Information System that works directly with Blackbaud Learning Management System™, Blackbaud
Student Information System simplifies the process of sharing student data and academic records securely.
Blackbaud Learning Management System™ is a learning management system that makes it easy to manage,
connect, and share information with students, parents, and an entire school community. Developed with direct input
from our customers, Blackbaud Learning Management System gives teachers the tools to meet the demands of a
modern private school.
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Blackbaud Enrollment Management System™ is an enrollment management system that simplifies a school’s
admissions process. Blackbaud Enrollment Management System helps admissions teams and prospective families
manage and track their progress, from inquiry and application through acceptance and enrollment.
Blackbaud Altru® is a cloud solution that helps arts and cultural organizations consolidate admissions, membership,
fundraising, merchandise, marketing and more, giving users a comprehensive view of their supporters. By helping
general admissions arts and cultural organizations gain a clear, 360-degree view of their organization, it enables them
to operate more efficiently, engage and cultivate patrons and supporters, streamline external and internal
communication efforts, and reduce IT costs. Blackbaud Altru contains tools for constituent and membership
management, program sales, retail sales and ticketing, volunteer management and events management. It also has
sophisticated reporting functionality and tools to manage marketing, communications and fundraising.
Blackbaud Church Management™ is a comprehensive, end-to-end cloud solution to manage church operations,
relationships with congregants, and essential financial management needs. With Blackbaud Church Management, faith
communities can track gifts and tithing, assimilate new members, directly communicate with congregations through
multiple channels, enable members to make online and mobile contributions, manage small groups and volunteers,
implement secure child check-in, conduct background checks, provide bulk tax statements, manage facilities, and more.
Faith communities can also add other Blackbaud capabilities from the new Cloud Solution for Faith Communities as
their needs scale all through one integrated experience.
Social Responsibility
YourCause® Grants Connect® and YourCause CSR Connect® are cloud solutions for employee giving,
volunteering, and communication used to support corporate philanthropy by building meaningful connections between
corporations, employees and nonprofits. After implementing YourCause solutions, customers typically show significant
growth in volunteers, donations, engagement and more. These reported successes demonstrate a larger trend: overall
ability to attract employees and customers alike by strengthening a company's reputation.
Payment Services
Our solutions provide our customers payment processing capabilities that enable their donors to make donations and
purchase goods and services using numerous payment options, including credit card and automated clearing house
(“ACH”) checking transactions, through secure online transactions.
Blackbaud Merchant Services™ is a value-added service integrated with our solutions that makes credit card
processing simple and secure. Customers are charged one rate for credit card transactions, making Blackbaud Merchant
Services a competitive option. The service also provides customers with a payment card industry (“PCI”) compliant
process and streamlined bank reconciliation. We also provide our K-12 private school customers with student tuition
payment processing services.
Blackbaud Purchase Cards provide an efficient and convenient alternative to traditional procurement methods and
paper-based payables processes such as checks, purchase orders and invoices for travel and operational purchases.
Organizations can also set spend controls for individual cardholders, track business expenses across the organization
and ensure that policies are being enforced—all managed online and integrated with Blackbaud Financial Edge NXT.
Analytics
Our analytics offerings provide comprehensive solutions for donor acquisition, prospect research, data enrichment and
performance management, enabling nonprofits to define effective campaign strategies and maximize fundraising
results. These services either integrate with or are already integrated into our software solutions to give our customers a
comprehensive view of their supporters and the market and provide information essential to making well-informed
operating decisions.
Blackbaud’s Intelligence for Good® is a unique, comprehensive approach through which we combine artificial
intelligence, analytics, big data, and expertise in cloud services and other channels. This powerful approach enables
social good organizations to transform data into insights. We embed the value of Intelligence for Good directly in our
solutions through SKY Intelligence®.
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Our analytics offerings include subscription solutions and services within the following areas:
Donor Acquisition - Our donor acquisition solutions leverage unique data assets to create acquisition mailing lists and
predictive models that identify donor populations that meet the affinity, value and response criteria of our nonprofit
customers. Nonprofit organizations use our prospect lists to solicit gifts and other support.
Prospect Research - Our prospect research solutions include: custom data modeling that delivers critical information on
a prospect's likelihood to make a gift to an organization; wealth screenings that deliver detailed wealth information and
giving capacity data on prospects; and web-based prospect management software that combines public data with
donor information from a nonprofit's database to build a complete view of prospects for targeting and securing gifts.
Data Enrichment - Our data enrichment solutions enhance the quality of the data in our customers' databases. These
solutions include: identifying outdated address files in the database and making corrections based on United States
Postal Service data, as well as appending data by using known fields in an organization's constituent records to search
and identify key demographic and contact information.
Benchmarking and Performance Management - Our performance management solutions create relevant and
insightful reports that benchmark performance and illustrate key industry trends based on performance attributes
provided by our nonprofit customers. Nonprofit organizations use our performance and industry analysis reports to
assess marketing and operational effectiveness, and to influence operational planning.
Customer Success
Our Customer Success organization is responsible for managing the post-sale relationship with our customers, starting
at onboarding and continuing through the customer lifecycle. Our Customer Success team develops and fosters
relationships within all levels of the customer organization to build more demonstrated value in our solutions and
services, while helping customers achieve their desired outcomes. Customer Success Managers work to proactively
communicate to drive overall satisfaction and retention of our customer's business. They work to collect and analyze
actionable information, whether that is through direct customer relationships or through aggregated analytics that
drives future one-to-one or one-to-many interactions. Their goal is to partner with customers to ensure that they are
fully engaged and have an advocate within Blackbaud who works to meet their needs. Customer Success Managers
bring industry knowledge and expertise to the customer relationship and strive to help our customers achieve positive
growth and outcomes.
Customer Support & Maintenance
Most customers that purchase our solutions also enroll in one of our support and maintenance programs. For all our
cloud subscription solutions, customer support is automatically included as part of the solution with no additional
charge. Customers enrolled in the programs enjoy fast, reliable customer support, receive regular software updates, stay
up-to-date with regular communication and have unlimited, around-the-clock access to support resources, including our
extensive knowledgebase and forums. Customers who enroll in upgraded support and maintenance plans receive
enhanced benefits such as call support priority and dedicated support resources for an additional charge.
Professional and Managed Services
Our expert consultants provide data conversion, implementation and customization services for each of our software
solutions. These services include:
•
System implementation;
• Data conversion, business process analysis and application customization;
• Database merging and enrichment, and secure credit card transaction processing;
• Database production activities; and
• Website design services.
In addition, we apply our industry knowledge and experience, combined with expert knowledge of our solutions, to
evaluate an organization's needs and consult on how to improve a business process.
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Training
We provide a variety of onsite, instructor-led online and on-demand training services to our customers relating to the
use of our solutions and application of best practices, including our highly-rated Blackbaud University curriculum,
through which customers can achieve certifications on Blackbaud software, which can serve as important catalysts for
professional growth in the nonprofit industry. Our instructors have extensive training in the use of our solutions and
present course material that is designed to include hands-on lab exercises, as well as course materials with examples
and problems to solve.
Customers
At the end of 2020, we had over 45,000 global customers including nonprofits, foundations, companies, education
institutions, healthcare organizations and other social good entities. There are millions of users of our solutions in more
than 100 countries. Our largest single customer accounted for less than 1% of our 2020 consolidated revenue.
Sales and Marketing
Most of our solutions and related services are sold through our direct sales force. Our direct sales force is complemented
by a team of business development representatives responsible for sales lead generation and qualification. These sales
and marketing professionals are primarily located throughout the United States, the U.K., Canada and Australia. As of
December 31, 2020, we had 367 direct sales employees.
We conduct marketing programs to create brand recognition and market awareness for our solutions and services. Our
marketing efforts include participation at trade shows, technical conferences and technology seminars, publication of
technical and educational articles in industry journals, preparation of competitive analyses and the use of software tools
to enhance our digital footprint and drive lead generation. Our customers and strategic partners provide references and
recommendations that we often feature in our advertising and promotional activities.
We believe relationships with third parties can enhance our sales and marketing efforts. We have and will continue to
establish additional relationships with companies that provide services to the philanthropic industry, such as consultants,
educators, publishers, financial service providers, complementary technology providers and data providers. These
companies promote or complement our solutions and provide us access to new customers.
Competition
The market for software and related services in the philanthropic industry is competitive and highly fragmented. For
certain areas of the market, entry barriers are low, as general tools for small businesses can usually be configured to
manage the most basic marketing, contact management, and accounting needs of social good organizations. In
parallel, as software development evolves from a highly-complex tradecraft with nuanced understanding of architectural
patterns and discrete languages, to click-to-code and drag-and-drop development with natively cloud-based
infrastructure, it becomes easier for competitors to quickly spin up basic applications with embedded security and
functionality. However, once basic needs are met, programs unique to social good organizations like fundraising, gift
and grant management, and peer-to-peer activism require highly specialized tools to configure and transform general
business software to match the complexities of the industry. These specialized applications have a higher barrier of entry
as they require industry insight to accurately articulate the business workflow that generates the requirements for
software products. Moreover, because social good organizations rely heavily on relationships with and among their
supporters, integration of systems drives value beyond mere efficiency. Hence, we believe our insight, the full spectrum
of our current solutions and our ability to deliver on future solutions makes us a strong competitor. We expect to
continue to see new entrants as focus on social investment solutions increases to satisfy Millennial and Gen Z donors,
the barriers of entry continue to decline with natively cloud solutions and social good organizations more readily require
digital transformation of business processes and data-driven decision making.
Our competition falls into four primary categories:
• Niche products are usually developed as a solution for a single problem at an organization and are adopted by
similar organizations to solve a specialized need. These are typically offered by vendors who may have deep industry
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expertise but may not have the resources to expand beyond a specialized area. We believe we compete against
these solutions by offering a set of integrated solutions rather than a single point solution, which we believe
improves the overall customer experience. In addition, our open platform allows integration to specialized
applications so the opportunity for disruption from these competitors is minimized.
• Vertical-specific solutions are offered by competitors seeking to meet the enterprise-wide needs of a specific sub-
segment of social good community. Typically, these solutions are offered by vendors who may offer either a point
solution or integrated suite of products used by a vertical. We believe we compete successfully against these
competitors through a combination of our integrated suite of offerings within verticals where we compete, offering
solutions with market leading robustness as well as the scale, reach, and reputation of our organization.
• General business software vendors, such as Salesforce.com and Oracle, compete with us in certain areas of our
business. While there is a growing trend toward social investment that is prompting philanthropic solutions from
these general business vendors, most do not have a complete nonprofit specific focus and, therefore, do not offer
or intend to offer nonprofit-specific versions for outside sales. However, there is a subset of general business
software competitors who have introduced nonprofit-specific versions of their products. These products generally
do not satisfy the needs of nonprofits from end-to-end as they were not designed to support the specific needs of
nonprofits during the original architecture, design, and requirements elicitation phases; therefore, we believe that
because these products were not originally designed for nonprofits, they are not yet fully capable of meeting
market needs without significant customization. The significant customization required to transform general
business products into nonprofit solutions often requires the use of consultants to guide the implementation,
without which, leave the adoption of general business software limited to very basic operations and simple needs.
We believe our solutions compete successfully against general business software as a nonprofit’s needs grow more
complex. As a result, we believe we can compete successfully to meet nonprofit-specific requirements, often
integrating with general business platforms used for their more generalized operations.
•
Consumer-oriented fundraising platforms, such as GoFundMe, Virgin Money Giving and Facebook compete
with our business where consumers raise funds directly. To drive adoption of their platforms, these vendors rely on
a combination of direct-to-consumer marketing, marketing to nonprofits who in turn market to their supporters,
and marketing to intermediate entities such as an event sponsor who will market to participants. We believe we
compete well in this market through a combination of positive brand recognition among all three of these groups
and the combination of our consumer- and organization-oriented tools relative to those of the competition.
Less frequently, we compete with providers of traditional, non-automated fundraising service providers, including
parties providing services in support of traditional direct mail or email campaigns, special events fundraising, peer to
peer, telemarketing and personal solicitations. We believe we compete successfully against these traditional fundraising
service providers, primarily because our solutions and services are more automated, more robust, more tailored to the
needs of nonprofit organization and more efficient.
Technology and Architecture
Blackbaud SKY provides the foundation for all of Blackbaud’s cloud solutions, enabling highly available and easy-to-use
cloud capabilities that integrate seamlessly and offering best-in-class infrastructure, integrated shared services, and
modern, effective, purpose-built solutions. The platform’s service-oriented architecture organizes application features
into independently deployable services and then leverages these self-contained services as integrated capabilities across
our solution portfolio. This enables rapid innovation with high levels of reliability, availability and security, and lets
Blackbaud evolve services over time at asymmetric paces as tech trends and tools emerge. Blackbaud SKY prioritizes
customer value, including risk management, and speed of delivery. It enables rapid releases, scalable and high-quality
services, and speedy time to market. Blackbaud SKY also provides a toolset for customers, partners, and developers to
create and deploy self-contained services within the Blackbaud SKY ecosystem. SKY API enables developers to augment
Blackbaud solutions with industry-standard REST APIs, standards-based authentication protocols, and a best-in-class
developer experience. SKY UX allows developers to create applications with the same consistent, cohesive user interface
as Blackbaud’s native solutions using an open source framework that implements Blackbaud design patterns and
provides guidelines and tooling for the entire application lifecycle. These tools enable Blackbaud customers to benefit
not just from the innovation of Blackbaud’s own large team of developers, but also from an exponentially larger
community of partners and third-party developers.
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The development strategy for all Blackbaud cloud solutions emphasizes:
•
Flexibility: Customers can extend our component-based architecture to accommodate changing demands without
modifying source code.
• Adaptability: The architecture of our applications allows us to easily add functionality or integrate with third-party
applications to adapt to customer needs and market demands.
•
Scalability: Scalable architecture and the performance, capacity and load balancing of our customers' industry-
standard web servers and databases ensure that applications can scale to meet the needs of large organizations.
Intellectual Property and Other Proprietary Rights
To protect our intellectual property, we rely on a combination of patent, trademark, copyright and trade secret laws in
various jurisdictions, as well as employee and third-party nondisclosure agreements and confidentiality procedures. We
maintain many trademarks, including, but not limited to “Blackbaud,” “Raiser's Edge NXT” and “Luminate.” We
currently have one active patent on our technology and have two pending patent applications.
Human Capital Resources
As of December 31, 2020, we had over 3,100 employees, none of whom are represented by unions or are covered by
collective bargaining agreements. We are not involved in any material disputes with any of our employees, and we
believe that relations with our employees are strong.
We benefit from an engaged and driven employee base motivated to join the company by our higher purpose, which is
"to help good take over the world." Our purpose attracts talented, competitive applicants, with 92% of employees
saying our focus on social good organizations was a driver in their decision to join the company. This differentiator not
only builds stronger employee engagement, but it helps us to provide a higher level of service to our customers across
the social good community, with 92% of employees reporting that they actively serve as volunteers and 23% serving on
a nonprofit board or committee — direct experience that enables them to better serve our customer base.
Blackbaud also attracts talented employees through effective and targeted recruiting strategies. In 2020, Blackbaud
announced the launch of a new workforce strategy, allowing for many employees to have the option to work from
other geographic locations within the country of the position, helping to expand the pool of qualified applicants for
roles.
Employee engagement is a focus at Blackbaud, and we continually work to understand what matters and to make our
workplace better to attract, develop, and retain talent. Every manager at Blackbaud is required to take a multi-course
"Engagement Labs" training designed to equip them with the practical skills to ensure their teams are highly engaged.
We assess and measure progress on engagement and growth opportunities at the individual level through quarterly
check-ins and a global career framework that guides employee progression on both management and individual
contributor career paths; we also assess engagement on the team and company level through regular employee
surveying. We enable employees to have opportunities for career development through on-demand and company-led
trainings. Our compensation framework is designed so that employees are compensated equitably and competitively,
including through base salary, variable pay, equity awards and benefits. We also seek to support the whole person,
through benefits that support wellness and financial health.
Ultimately, we believe that Blackbaud is an excellent place to work due to our active participation in the Ecosystem of
Good®: we govern our business ethically, contribute to causes and communities that matter to our employees through
corporate philanthropy, we pursue sustainability, and we work every day to ensure our workplace is supportive,
inclusive and engaging. We offer an array of philanthropy programs aimed at engaging our employees as agents of
good, including matching gifts, competitive grants that honor noteworthy examples of volunteerism, employee-led
grant committees, skills-based volunteerism initiatives, as well as science, technology, engineering and mathematics
focused community programs.
Our commitment to diversity, equity and inclusion supports our efforts to attract, develop and retain a high-performing
employee base. In September 2020, we welcomed our first Diversity and Inclusion Officer, as part of our strategy to
further accelerate our diversity, inclusion and belonging efforts, while continuing to strengthen relationships with our
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Blackbaud, Inc.
people and the communities in which we operate. This new leadership focus will amplify and accelerate the significant
initiatives already in place at Blackbaud, including: ongoing unconscious bias workshops; respect in the workplace
training for all employees and enhanced training for managers; business networking affinity groups, including veterans,
LGBTQ employees, women in technology, women in sales, African American employees and employees interested in
sustainability.
Seasonality
For a discussion of seasonal variations in our business, see “Management’s Discussion and Analysis of Financial
Conditions and Results of Operations — Seasonality” in Item 7 in this report.
Working Capital
For a discussion of our working capital practices, see “Management’s Discussion and Analysis of Financial Conditions
and Results of Operations — Liquidity and Capital Resources” in Item 7 in this report.
Available Information
Our website address is www.blackbaud.com. We make available, free of charge through our website, our annual report
on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports
pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the SEC, but other information on our website is not incorporated into this report. The
SEC maintains an Internet site that contains these reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC at www.sec.gov.
Information About Our Executive Officers
The following table sets forth information concerning our executive officers as of February 15, 2021:
Name
Michael P. Gianoni
Anthony W. Boor
Kevin P. Gregoire
Kevin R. McDearis(1)
Kevin W. Mooney
Jon W. Olson
Age
60
58
53
53
62
57
Title
President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
Executive Vice President and President, Enterprise Markets Group
Executive Vice President and Chief Products Officer
Executive Vice President and President, General Markets Group
Senior Vice President and General Counsel
(1) Mr. McDearis was designated by our Board of Directors as an executive officer as defined in Rule 3b-7 of the Exchange Act effective January 1,
2021.
Michael P. Gianoni joined us as President and Chief Executive Officer in January 2014. Prior to joining us, he served as
Executive Vice President and Group President, Financial Institutions at Fiserv, Inc., a global technology provider serving
the financial services industry, from January 2010 to December 2013. He joined Fiserv as President of its Investment
Services division in December 2007. Mr. Gianoni was Executive Vice President and General Manager of CheckFree
Investment Services, which provided investment management solutions to financial services organizations, from June
2006 until December 2007 when CheckFree was acquired by Fiserv. From May 1994 to November 2005, he served as
Senior Vice President of DST Systems Inc., a global provider of technology-based service solutions. Mr. Gianoni is a
member of the Board of Directors of Teradata Corporation, a publicly traded global big data analytics company. Mr.
Gianoni has served on several nonprofit boards across several segments, including relief organizations, hospitals and
higher education. He currently is a board member of the International African American Museum. He holds an AS in
electrical engineering from Waterbury State Technical College, a BS with a business concentration from Charter Oak
State College, and an MBA and an honorary Doctorate from the University of New Haven.
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Anthony W. Boor joined us as Executive Vice President and Chief Financial Officer in November 2011 and served as
our interim President and Chief Executive Officer from August 2013 to January 2014. Prior to joining us, he served as an
executive with Brightpoint, Inc., a global provider of device lifecycle services to the wireless industry, beginning in 1999,
most recently as its Executive Vice President, Chief Financial Officer and Treasurer. He also served as the interim
President of Europe, Middle East and Africa during Brightpoint's significant restructuring of that region. Mr. Boor served
as Director of Business Operations for Brightpoint North America from August 1998 to July 1999. Prior to joining
Brightpoint, Mr. Boor was employed in various financial positions with Macmillan Computer Publishing, Inc., a Viacom
owned book publishing company specializing in computer hardware and software related topics, Day Dream Publishing,
Inc., a publishing company specializing in calendars, posters and time management materials, Ernst & Young LLP, an
accounting firm, Expo New Mexico, a state-owned fair and expo grounds and live pari-mutual horse racing venue,
KPMG LLP, an accounting firm, and Ernst & Whinney LLP, an accounting firm. He holds a BS in Accounting from New
Mexico State University.
Kevin P. Gregoire joined us as Executive Vice President and President, Enterprise Markets Group in April 2018. Prior to
joining us, Mr. Gregoire was Group President of the Financial Institutions Group at Fiserv, a global technology provider
serving the financial services industry, from March 2014 until February 2018. He joined Fiserv in December 2002 and
served in other key leadership roles including Division President and Chief Operating Officer, Card Services, and Senior
Vice President of Product and Network Strategy. Mr. Gregoire is also a veteran of the United States Army, where he
served as Lieutenant in the Corps of Engineers and was awarded three Army Commendation Medals. He holds a BS
from the United States Military Academy at West Point, and an MBA from the F.W. Olin School of Business at Babson
College.
Kevin R. McDearis has served as our Executive Vice President and Chief Products Officer since October 2016. He joined
us in August 2014 as our Senior Vice President of Global Product Development. Prior to joining us, Mr. McDearis was
the Chief Information Officer at Manhattan Associates, Inc., a technology leader in supply chain and omnichannel
commerce, from August 2012 to July 2014. He was responsible for leading a global IT organization in strategy
development, organization development, portfolio and project management, software and infrastructure engineering,
service delivery and operations. Prior to that, Mr. McDearis served as Chief Technology Officer for the Enterprise
Technology Group and other key leadership positions at Fiserv (formerly CheckFree), a global technology provider
serving the financial services industry, from October 1996 to August 2012. Mr. McDearis serves on the Board of
Directors for the USS Yorktown Foundation. He also served on the Board of Directors of the Technology Association of
Georgia ("TAG") from 2011 to 2016 and as Vice Chairman of the Board in 2014. He holds a BS in Management from
The Georgia Institute of Technology.
Kevin W. Mooney has served as our Executive Vice President and President, General Markets Group since January
2010. He joined us in July 2008 as our Chief Commercial Officer. Before joining Blackbaud, Mr. Mooney was a senior
executive at Travelport GDS from August 2007 to May 2008. As Chief Commercial Officer of Travelport GDS, one of
the world's largest providers of information services and transaction processing to the travel industry, Mr. Mooney was
responsible for global sales, marketing, training, service and support activities. Prior to that he was Chief Financial
Officer for Worldspan from March 2005 until it was acquired by Travelport in August 2007. Mr. Mooney has also held
key executive positions in the telecommunications industry and he served as a member of the Board of Directors of
Level 3 Communications, Inc., a publicly traded global managed network services company, from October 2014 to
November 2017. Prior to that he served on the Board of Directors of tw telecom from August 2005 until it was acquired
by Level 3 in October 2014. He holds a BS in Finance from Seton Hall University, and an MBA in Finance from Georgia
State University.
Jon W. Olson joined us as Senior Vice President and General Counsel in September 2008. Mr. Olson is responsible for
Blackbaud's legal and real estate activities. Prior to joining us, he was an attorney with Alcatel-Lucent USA, the U.S.
subsidiary of France-based Alcatel-Lucent (now owned by Nokia Corporation) that designs, develops, and builds
wireline, wireless, and converged communications networks, from July 1997 to September 2008. Prior to joining
Alcatel-Lucent, Mr. Olson was employed in legal positions with MCI, Inc., a global business and residential
communications company, from September 1996 to July 1997, and Unisys Corporation, a global information
technology company, from July 1992 to September 1996. Mr. Olson is a member of the MUSC (Medical University of
South Carolina) Hollings Cancer Center Citizens Advisory Council and is on the board of the Charleston Symphony and
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Blackbaud, Inc.
Charleston Jazz. He holds a BS from Georgetown University, a JD from Dickinson School of Law and an MBA from
Seton Hall University.
ITEM 1A. RISK FACTORS
Our business operations face a number of risks. These risks should be read and considered with other information
provided in this report.
Strategic Risks
Our failure to compete successfully could cause our revenue or market share to decline.
Our market is highly competitive and rapidly evolving, and there are limited barriers to entry for many segments of this
market.
The companies we compete with and other potential competitors may have greater financial, technical and marketing
resources and generate greater revenue and better name recognition than we do. Also, a large diversified software
enterprise could decide to enter the market directly, including through acquisitions. Competitive pressures can adversely
impact our business by limiting the prices we can charge our customers and making the adoption and renewal of our
solutions more difficult.
Our competitors might also establish or strengthen cooperative relationships with resellers and third-party consulting
firms or other parties with whom we have had relationships, thereby limiting our ability to promote our solutions.
These competitive pressures could cause our revenue and market share to decline.
Because competition for highly qualified personnel is intense, we might not be able to attract and retain key
personnel needed to support our planned growth.
To meet our objectives successfully, we must attract and retain highly qualified personnel with specialized skill sets. If
we are unable to attract and retain suitably qualified management, there could be a material adverse impact on our
business.
Further, we use equity incentive programs and equity awards in lieu of cash as part of our overall employee
compensation agreements to both attract and retain personnel. A decline in our stock price could negatively impact the
value of these equity incentive and related compensation programs as retention and recruiting tools. We may need to
create new or additional equity incentive programs and/or compensation packages to remain competitive, which could
be dilutive to our existing stockholders and/or adversely affect our results of operations.
More rapid than expected success in implementing our strategic shift from a license-based and one-time
services business model to a cloud subscription business model could negatively impact our total revenue
growth and financial performance.
We continue to intentionally shift our focus towards selling cloud subscription solutions, which generally require less
customization services. Also, our cloud solution contracts now frequently include subscription-based professional,
analytic and training services. This strategic shift to migrate our existing customers and sell new customers our cloud
subscription solutions results in a decrease in our one-time services contracts and revenue. Although our business model
seeks to anticipate the rate of migration and resulting negative impact on our total revenue growth, more rapid than
expected success in implementing this strategic shift could negatively impact our total revenue growth and financial
performance.
The market for software and services for the social good community might not grow and the organizations
in that community might not continue to adopt our solutions and services.
Many organizations in the social good community, including nonprofits, foundations, companies, education institutions
and healthcare organizations, have not traditionally used integrated and comprehensive software and services for their
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specific needs. We cannot be certain that the market for such solutions and services will continue to develop and grow
or that these organizations will elect to adopt our solutions and services rather than continue to use traditional, less
automated methods, attempt to develop software internally, rely upon legacy software systems, or use software
solutions not specifically designed for this market. Organizations that have already invested substantial resources in
other fundraising methods or other non-integrated software solutions might be reluctant to adopt our solutions and
services to supplement or replace their existing systems or methods. In addition, the implementation of one or more of
our software solutions can involve significant capital commitments by our customers, which they may be unwilling or
unable to make, especially due to disruption in the social good community due to COVID-19. If demand for and market
acceptance of our solutions and services does not increase, we might not grow our business as we expect.
If we fail to respond to technological changes or successfully introduce new and improved solutions, our
competitive position may be harmed and our business may suffer.
The introduction of solutions encompassing new technologies can render existing solutions obsolete and unmarketable.
As a result, our future success will depend, in part, upon our ability to continue to enhance existing solutions and
develop and introduce in a timely manner or acquire new solutions that keep pace with technological developments,
satisfy increasingly sophisticated customer requirements and achieve market acceptance. If we are unable to develop or
acquire on a timely and cost-effective basis new software solutions or enhancements to existing solutions or if such new
solutions or enhancements do not achieve market acceptance, our business, results of operations and financial
condition may be materially adversely affected.
If we do not successfully address the risks inherent in the expansion of our international operations, our
business could suffer.
We currently have non-U.S. operations primarily in the U.K., Canada, Australia and Costa Rica, and we intend to expand
further into international markets. Expansion of our international operations will require a significant amount of
attention from our management and substantial financial resources and might require us to add qualified management
in these markets. Our direct sales model requires us to attract, retain and manage qualified sales personnel capable of
selling into markets outside the United States. In some cases, our costs of sales might increase if our customers require
us to sell through local distributors. If we are unable to grow our international operations in a cost-effective and timely
manner, our business and operating results could be harmed.
We expect that an increasing portion of our international revenues will be denominated in foreign currencies, subjecting
us to fluctuations in foreign currency exchange rates. If we expand our international operations, exposures to gains and
losses on foreign currency transactions may increase.
Doing business internationally involves additional risks that could harm our operating results. Along with risks similar to
those faced by our U.S. operations, our international operations are also subject to risks related to differing legal,
political, social and regulatory requirements and economic conditions, including:
•
•
•
the imposition of additional withholding taxes or other tax on our foreign income, tariffs or restrictions on
foreign trade or investment, including currency exchange controls;
greater risk of a failure of our employees and partners to comply with both U.S. and foreign laws, including
antitrust regulations, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act of 2010, and any trade
regulations ensuring fair trade practices; and
the imposition of, or unexpected adverse changes in, foreign laws or regulatory requirements, including those
pertaining to export restrictions, privacy and data protection, trade and employment restrictions and intellectual
protections.
Unfavorable media coverage related to peer-to-peer fundraising campaigns on our social platforms could
negatively impact our business.
Our online social giving platforms receive a high degree of media coverage for particularly news-worthy or controversial
fundraising campaigns, as well as for our fee-based business model. Although our terms of service provide express
limitations on the platforms' user-initiated fundraising campaigns and reserve our right to remove content that violates
our terms of service, it may not always be possible to remove such content prior to it receiving attention in the media.
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Negative publicity related to our online social giving platforms could have an adverse effect on the size, engagement
and loyalty of our user base and could result in decreased revenue, which could adversely affect our business and
financial results.
Acquisitions could be difficult to consummate and integrate into our operations, and they could disrupt our
business, dilute stockholder value or impair our financial results.
As part of our business strategy, we will continue from time to time to seek to grow our business through acquisitions
of new or complementary businesses, technologies or products that we believe can improve our ability to compete in
our existing customer markets or allow us to enter new markets. The potential risks associated with acquisitions and
investment transactions include, but are not limited to:
•
•
•
•
•
•
•
•
•
failure to realize anticipated returns on investment, cost savings and synergies;
difficulty in assimilating the operations, policies and personnel of the acquired company;
unanticipated costs associated with acquisitions;
challenges in combining product offerings and entering into new markets in which we may not have
experience;
distraction of management’s attention from normal business operations;
potential loss of key employees of the acquired company;
difficulty implementing effective internal controls over financial reporting and disclosure controls and
procedures;
impairment of relationships with customers or suppliers; and
issues not discovered in due diligence, which may include product quality issues or legal or other contingencies.
Acquisitions may also result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent
liabilities, the expenditure of available cash, and amortization expenses or write-downs related to intangible assets such
as goodwill, any of which could have a material adverse effect on our operating results or financial condition. We may
experience risks relating to the challenges and costs of closing a business combination and the risk that an announced
business combination may not close. There can be no assurance that we will be successful in making additional
acquisitions in the future or in integrating or executing on our business plan for existing or future acquisitions.
A reduction in the growth or amount of charitable giving could adversely affect our operating results and
financial condition.
A large percentage of our customers are nonprofits, foundations, education institutions, healthcare organizations and
other members of the social good community that fully or partially rely on charitable donations. If charitable giving,
including online giving, does not continue to grow or declines, it could limit our current and potential customers' ability
to use and pay for our solutions and services, which could adversely affect our operating results and financial condition.
In addition, we derive a significant portion of our revenue from transaction-based payment processing fees that we
collect from our customers through our Blackbaud Merchant Services solution, which enables our customers' donors to
make donations and purchase goods and services using various payment options. A reduction in the growth of, or a
decline in, charitable giving to these customers, whether due to deteriorating general economic conditions, the impact
of recent or future changes to applicable tax laws, or otherwise, could negatively impact the volume and size of such
payment processing transactions and thereby adversely affect our operating results and financial condition.
Our failure to obtain licenses for, or our use of, third-party technologies could harm our business.
We expect to continue licensing technologies from third parties, including applications used in our research and
development activities, technologies which are integrated into our solutions and solutions that we resell. We believe
that the loss of any third-party technologies currently integrated into our solutions could have a material adverse effect
on our business. Our inability in the future to obtain any third-party licenses on commercially reasonable terms, or at all,
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could delay future solution development until equivalent technology can be identified, licensed or developed and
integrated. This inability in turn could harm our business and operating results.
Our use of third-party technologies also exposes us to increased risks including, but not limited to, risks associated with
the integration of new technology into our solutions, the diversion of our resources from development of our own
proprietary technology and our inability to generate revenue from licensed technology sufficient to offset associated
acquisition and maintenance costs.
The U.K.'s departure from the European Union ("E.U.") could adversely affect us.
The U.K. held a referendum on June 23, 2016 on its membership in the E.U., in which a majority of U.K. voters voted to
exit the E.U. (commonly referred to as "Brexit"). Thereafter, the E.U. and the U.K. engaged in extensive negotiations
designed to reach agreement regarding the future terms of the U.K.'s relationship with the E.U. Effective January 31,
2020, the U.K. is no longer a member of the E.U., and an agreed post-Brexit transition period expired on December 31,
2020. Effective January 1, 2021, the relationship between the U.K. and the E.U. is governed primarily by the new Trade
and Cooperation Agreement (the “TCA”), which sets forth, among other things, terms regarding the trade of goods
and services, workers’ rights and social and environmental matters. Separate negotiations are expected to continue
regarding, among other things, data sharing, data privacy and financial services, and certain terms of the TCA contain
agreed expiration dates. Because we currently conduct business in the U.K. and in Europe, the U.K.’s exit from the E.U.
under such circumstances creates uncertainty and could affect the business of and/or our relationships with our
customers and partners as well as the value of the British Pound and the Euro relative to the U.S. dollar. The ultimate
effects of Brexit on us, including those mentioned above and others we cannot now anticipate, are difficult to predict
and could adversely affect our business, business opportunities, results of operations or financial condition in both the
short-term and thereafter.
Operational Risks
The COVID-19 pandemic has disrupted, and is expected to continue to disrupt, our business, which is likely
to adversely affect our operations and financial performance.
The outbreak of COVID-19 in countries across the globe, including each country in which we currently operate, has
adversely impacted the U.S. and global economies. We have experienced disruptions to our business thus far from
COVID-19, and the pandemic continues to impact each of our markets. Governmental authorities have taken, and
continue to take, countermeasures to slow the outbreak, including shelter-in-place and business closure orders and
large-scale restrictions on travel. Furthermore, because the pandemic is a rapidly evolving situation, we cannot
anticipate with certainty the length, scope or severity of such restrictions in the jurisdictions in which we operate.
Certain vertical markets we serve are especially vulnerable to the ongoing global business disruption. For example:
• Many arts and cultural organizations, including museums, zoos, performing arts centers and theaters, among
others, have had to cancel events or have seen a significant decline in attendance due to COVID-19. Many of
these organizations have also suspended their operations temporarily.
• We believe that a number of K-12 private schools, that would have ordinarily considered purchasing our cloud
solutions for the 2020-2021 academic school year, have delayed their expenditure decisions due to the
uncertainty of COVID-19.
• A number of our nonprofit customers have also been negatively impacted by the postponement or cancellation
of mass-participation events, such as marathons and other endurance sporting events, galas, auctions and
other fundraisers.
We believe that COVID-19 has impacted and will continue to impact all of our vertical markets across all of our
geographies to some degree, but the significance and duration of the impact on our business cannot be determined at
this time due to numerous uncertainties, including the duration of the outbreak, travel restrictions and business
closures, the effectiveness of vaccination programs and other actions taken to contain the disease and other
unforeseeable consequences. This impact could include:
2020 Form 10-K
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Blackbaud, Inc.
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further declines in customer demand and our ability to build pipeline of new customer contracts;
continued elongated sales cycles;
our relationship with, and the financial and operational capacities of, our service providers, suppliers and
business partners, including their ability to fulfill their obligations to us;
further declines in our customers' ability to pay for our solutions and services;
reduced workforce availability and productivity due to working remotely using different technologies and
potential health effects and concerns;
risks associated with our indebtedness (including available borrowing capacity, compliance with financial
covenants and ability to refinance or repay indebtedness on favorable terms);
the adequacy of our cash flows and earnings and other conditions that may affect our liquidity;
disruptions to our technology network and other critical systems; and
impairment charges against our goodwill and other intangible assets, operating lease right-of-use assets and
other long-lived assets.
We believe that business disruption relating to COVID-19 will continue to negatively impact the U.S. and global
economies and may continue to materially adversely impact our business, financial condition and results of operations.
Defects, delays or interruptions in our cloud solutions and hosting services could diminish demand for these
services and subject us to substantial liability.
We currently utilize data center hosting facilities to provide cloud solutions to most of our subscription customers and
hosting services to our on-premise license customers. Any damage to, or failure of, these data center systems generally
could result in interruptions in service to our customers, notwithstanding any business continuity or disaster recovery
agreements that may currently be in place at these facilities. Because our cloud solutions and hosting service offerings
are complex and we have incorporated a variety of new computer hardware and software systems at our data centers,
our services might have errors or defects that users identify after they begin using our services. This could result in
unanticipated downtime for our customers and harm to our reputation and business results. Internet-based services
sometimes contain undetected errors when first introduced or when new versions or enhancements are released. We
have from time to time found defects in our web-based services and new errors might again be detected in the future.
In addition, our customers might use our Internet-based offerings in unanticipated ways that cause a disruption in
service for other customers attempting to access their data.
Because our customers use these services for important aspects of their businesses, any defects, delays or disruptions in
service or other performance problems with our services could hurt our reputation and damage our customers'
businesses. If that occurs, customers could elect to cancel their service, delay or withhold payment to us, not purchase
from us in the future or make claims against us, which could result in an increase in our provision for credit losses, an
increase in collection cycles for accounts receivable or the expense and risk of litigation. Any of these could harm our
business and reputation.
Material defects or errors in the software we use to deliver our services could harm our reputation, result in
significant costs to us and impair our ability to sell our services.
The software applications underlying our services are inherently complex and may contain material defects or errors,
particularly when first introduced or when new versions or enhancements are released. We have from time to time
found defects in our software, and new errors in our existing software may be detected in the future.
After the release of our software, defects or errors may also be identified from time to time by our internal team and
our customers. The costs incurred in correcting any material defects or errors in our software may be substantial and
could harm our operating results. Furthermore, our customers may use our software together with solutions from other
companies. As a result, when problems occur, it might be difficult to identify the source of the problem. Even when our
software does not cause these problems, the existence of these errors might cause us to incur significant costs, divert
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2020 Form 10-K
Blackbaud, Inc.
the attention of our technical personnel from our solution development efforts, impact our reputation and cause
significant customer relations problems.
If we are unable, or our customers believe we may be unable, to detect and prevent unauthorized use of
payment card or other private financial or personal information, we could be subject to financial liability,
our reputation could be harmed and customers may be reluctant to use our solutions and services.
The rules of payment card associations in which we participate require that we comply with Payment Card Industry Data
Security Standard ("PCI DSS") in order to preserve security of payment card data. Under PCI DSS, we are required to
adopt and implement internal controls over the use, storage and security of payment card data to help prevent card
fraud. Conforming our solutions and services to PCI DSS or other payment services related regulations or requirements
imposed by payment networks or our customers or payment processing partners is expensive and time-consuming.
However, failure to comply may subject us to fines, penalties, damages and civil liability, may impair the security of
payment card data in our possession, and may harm our reputation and our business prospects, including by limiting
our ability to process transactions. All Blackbaud products in scope for PCI DSS compliance meet applicable PCI DSS
security requirements.
In addition, we routinely subject our various data protection processes and controls to voluntary third-party review,
audit or reporting, including, for example, the American Institute of Certified Public Accountants’ System and
Organization Controls (“SOC”) reporting. Failure to conduct these voluntary data protection process and control
reviews or to obtain and maintain unqualified audits or reports covering our data protection processes and controls may
harm our reputation or our business prospects and our ability to market our solutions to our customers.
If the security of our software is breached, we fail to securely collect, store and transmit customer
information, or we fail to safeguard confidential donor data, we could be exposed to liability, litigation,
penalties and remedial costs and our reputation and business could suffer.
Fundamental to the use of our solutions is the secure collection, storage and transmission of confidential donor and end
user data and transaction data, including in our payment services. Despite the network, application and physical security
procedures and internal control measures we employ to safeguard our systems, we may still be vulnerable to a security
breach, intrusion, loss or theft of confidential donor data and transaction data, which may harm our business,
reputation and future financial results. Furthermore, our increased reliance on remote access to information systems and
global disruptions in response to COVID-19, as described above, increase our exposure to potential cybersecurity
incidents.
Like many major businesses, we are, from time to time, a target of cyberattacks, phishing and social engineering
schemes, such as the Security Incident (as described in Note 11 to our consolidated financial statements in this report),
and we expect these threats to continue, some of which may be successful to varying degrees. Because the numerous
and evolving cybersecurity threats used to obtain unauthorized access, disable, degrade or sabotage systems have
become increasingly more complex and sophisticated, it may be difficult to anticipate these acts or to detect them for
periods of time, as with the Security Incident, and we may be unable to respond adequately or timely. As these threats
continue to evolve and increase, we may be required to devote significant additional resources in order to modify and
enhance our security controls and to identify and remediate any security vulnerabilities.
A compromise of our data security, such as the Security Incident, that results in customer or customer constituent
personal or payment card data being obtained by unauthorized persons could adversely affect our reputation with our
customers and others, as well as our operations, results of operations, financial condition and liquidity and could result
in litigation against us or the imposition of fines and penalties. We might be required to expend significant additional
capital and other resources to rectify problems caused by a security breach, including notification under data privacy
laws and regulations, and incur expenses related to remediating our information security systems. (See Note 11 to our
consolidated financial statements in this report for such information related to the Security Incident.) Even though we
carry cyber-technology insurance policies that may provide insurance coverage under certain circumstances, we might
suffer losses as a result of a security breach that exceed the coverage available under our insurance policies or for which
we do not have coverage. A security breach and any efforts we make to address such breach could also result in a
disruption of our operations, particularly our online sales operations.
2020 Form 10-K
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Blackbaud, Inc.
The occurrence of actual cyber security events, such as the Security Incident, could magnify the severity of the adverse
effects of future incidents on our business. The techniques used to obtain unauthorized access, disable or degrade
service, or sabotage information systems can be difficult to detect for long periods of time and can involve difficult or
prolonged assessment or remediation periods even once detected. We, therefore, cannot assure you that all potential
causes of past significant incidents, including the Security Incident, have been fully identified and remediated. The steps
we take may not be sufficient to prevent future significant incidents and, as a result, such incidents may occur again.
The Security Incident could have numerous adverse effects on our business.
As previously disclosed, on July 16, 2020, we first contacted certain customers to inform them about the Security
Incident, including that in May 2020 we discovered and stopped a ransomware attack. Prior to our successfully
preventing the cybercriminal from blocking our system access and fully encrypting files, and ultimately expelling them
from our system with no significant disruption to our operations, the cybercriminal removed a copy of a subset of data
from our self-hosted environment. Although the nature of the incident, our research and third party (including law
enforcement) investigation have provided no reason to believe that any data went beyond the cybercriminal, was or will
be misused, or will be disseminated or otherwise made available publicly, our investigation into the Security Incident
remains ongoing and may provide additional information.
To date, we have received approximately 570 claims for reimbursement of expenses from customers or their attorneys
related to the Security Incident (none of which have as yet been filed in court or in arbitration) and are in the process of
assessing what, if any, liability may exist pursuant to such claims. Possible exposure could result from our customers’
costs and expenses associated with notifying their own constituents of the Security Incident and taking steps to assure
that personal information has not been compromised as a result of the Security Incident. In addition, presently, we are a
defendant in 30 putative consumer class action cases [27 in U.S. federal courts (some of which have been consolidated
under multi district litigation to a single federal court), 1 in a U.S. state court and 2 in Canadian courts] alleging harm
from the Security Incident. The plaintiffs in these cases, who generally purport to represent various classes of individual
constituents of our customers, generally claim to have been harmed by alleged actions and/or omissions by us in
connection with the Security Incident and assert a variety of common law and statutory claims seeking monetary
damages, injunctive relief, costs and attorneys’ fees, and other related relief. To date, we also have received a
consolidated, multi-state Civil Investigative Demand issued on behalf of 44 state Attorneys General and the District of
Columbia relating to the Security Incident. In addition, we have received communications, inquires and requests from
the U.S. Federal Trade Commission, the U.S. Department of Health and Human Services, the U.S. Securities and
Exchange Commission, the Information Commissioner’s Office in the United Kingdom (the “ICO”) under the U.K. Data
Protection Act 2018, the Office of the Australian Information Commissioner and the Office of the Privacy Commissioner
of Canada. (See Note 11 to our consolidated financial statements included in this report for a more detailed description
of the Security Incident and related matters.)
We may be named as a party in additional lawsuits, other claims may be asserted by or on behalf of our customers or
their constituents, and we may be subject to additional governmental inquires, requests or investigations. Responding to
and resolving these current and any future lawsuits, claims and/or investigations could result in material remedial and
other expenses that may not be covered by insurance. Governmental authorities also may seek to impose undertakings,
injunctive relief, consent decrees, or other civil or criminal penalties, which could, among other things, materially
increase our data security costs or otherwise require us to alter how we operate our business. Although we intend to
defend ourselves vigorously against the claims asserted against us, we cannot predict the potential outcomes, cost and
expenses associated with current and any future claims, lawsuits, inquiries and investigations.
Significant management time and Company resources have been, and are expected to continue to be, devoted to the
Security Incident. (See Note 11 to our consolidated financial statements included in this report.) Although we carry
cyber-technology insurance designed to protect us against certain losses related to cybersecurity events, that insurance
coverage may not be sufficient to cover all expenses or other losses (including fines) or all types of claims that may arise
in connection with cyberattacks, security compromises and other related incidents. Furthermore, in the future such
insurance may not be available on commercially reasonable terms, or at all.
Future publicity or developments related to the Security Incident could have a range of other adverse effects on our
business or prospects, including causing or contributing to loss of customer confidence, reduced customer demand,
reduced customer retention, strategic growth opportunities, and associated retention and recruiting difficulties.
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Blackbaud, Inc.
Our operations might be affected by the occurrence of a natural disaster or other catastrophic event.
We depend on our principal executive offices and other facilities for the continued operation of our business. Although
we have contingency plans in effect for natural disasters or other catastrophic events, these events, including terrorist
attacks, computer hacker attacks and natural disasters such as hurricanes, flooding and earthquakes, could disrupt one
or more of these facilities and adversely affect our operations. Our principal executive offices are located in a coastal
region that has experienced hurricanes and earthquakes in the past. Even though we carry business interruption
insurance policies and typically have provisions in our commercial contracts that protect us in certain events, we might
suffer losses as a result of business interruptions that exceed the coverage available under our insurance policies or for
which we do not have coverage. Any natural disaster or catastrophic event affecting us could have a significant negative
impact on our operations.
Complications with the design or implementation of our new global enterprise resource planning ("ERP")
system could adversely affect our operations and operating results
We rely extensively on information systems and technology to manage our business and summarize our operating
results. We are in the process of a multi-year implementation of a new ERP system, which will replace our existing core
financial systems. Such an implementation is a major undertaking, both financially and from a management and
personnel perspective. The new ERP system is designed to accurately maintain our financial records, enhance the flow of
financial information, improve data management, and provide timely information to our management team. We may
not be able to successfully implement the ERP system without experiencing delays, unexpected additional costs and
other difficulties. Failure to successfully design and implement the new ERP system as planned could harm our business,
financial condition and operating results. Additionally, if we do not effectively implement the ERP system as planned or
the ERP system does not operate as intended, the effectiveness of our internal control over financial reporting could be
negatively affected.
Financial Risks
Because a significant portion of our revenue is recognized over time on a ratable basis over the contract
term, downturns in sales may not be immediately reflected in our revenue.
We generally recognize our subscription and maintenance revenue ratably over time over the contract term. Our
subscription arrangements are generally for a term of three years at contract inception with one to three-year renewals
thereafter. Most of our maintenance arrangements are for a one-year term. As a result, much of the revenue we report
in each quarter is attributable to arrangements entered into during previous quarters. Consequently, a decline in sales to
new customers, renewals by existing customers or market acceptance of our solutions in any one quarter will not
necessarily be fully reflected in the revenues in that quarter and could negatively affect our revenues and profitability in
future quarters.
If our customers do not renew their subscriptions for our solutions or annual maintenance and support
arrangements or if they do not renew them on terms that are favorable to us, our business might suffer.
Our subscription arrangements are generally for a term of three years at contract inception with one to three-year
renewals thereafter. Most of our maintenance arrangements are for a one-year term. As the end of the contract term
approaches, we seek the renewal of the agreement with the customer. Historically, subscription and maintenance
renewals have represented a significant portion of our total revenue. Because of this characteristic of our business, if our
customers choose not to renew their subscriptions or maintenance and support arrangements with us on beneficial
terms or at all, our business, operating results and financial condition could be harmed. Our customers' renewal rates
may decline or fluctuate as a result of a number of factors, including their level of satisfaction with our solutions and
services and their ability to continue their operations and spending levels due to COVID-19 or otherwise.
2020 Form 10-K
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Blackbaud, Inc.
We significantly increased our leverage in connection with acquisitions.
We incurred a substantial amount of indebtedness in connection with acquisitions and the purchase of our Global
Headquarters Facility. As a result of this indebtedness, our interest payment obligations have increased. The degree to
which we are leveraged could have adverse effects on our business, including the following:
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Requiring us to dedicate a substantial portion of our cash flow from operations to payments on our
indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures,
acquisitions, dividends, share repurchases and other general corporate purposes;
Limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we
operate;
Restricting us from making additional strategic acquisitions or exploiting business opportunities;
Placing us at a competitive disadvantage compared to our competitors that have less debt;
Limiting our ability to borrow additional funds; and
• Decreasing our ability to compete effectively or operate successfully under adverse economic and industry
conditions.
If we incur additional debt, these risks may intensify. Our ability to meet our debt service obligations will depend upon
our future performance, which will be subject to the financial, business and other factors affecting our operations,
many of which are beyond our control.
Our balance sheet includes significant amounts of goodwill and intangible assets. The impairment of a
significant portion of these assets could negatively affect our operating results.
As of December 31, 2020, we had $635.9 million and $277.5 million of goodwill and intangible assets, respectively. On
at least an annual basis, we assess whether there have been impairments in the carrying value of goodwill and
intangible assets. If the carrying value of an asset is determined to be impaired, then it is written down to fair value by a
non-cash charge to operating earnings. Changes in circumstances that could indicate that the carrying value of goodwill
or intangible assets may not be recoverable include declines in our stock price, market capitalization, cash flows and
slower growth rates in our industry. We cannot accurately predict the likelihood or potential amount and timing of any
impairment of goodwill or other intangible assets. An impairment of a significant portion of goodwill or intangible
assets could materially and negatively affect our results of operations and financial condition.
Restrictions in our credit facility may limit our activities, including dividend payments, share repurchases and
acquisitions.
Our credit facility contains restrictions, including covenants limiting our ability to incur additional debt, grant liens, make
acquisitions and other investments, prepay specified debt, consolidate, merge or acquire other businesses, sell assets,
pay dividends and other distributions, repurchase stock and enter into transactions with affiliates. There can be no
assurance that we will be able to remain in compliance with the covenants to which we are subject in the future and, if
we fail to do so, that we will be able to obtain waivers from our lenders or amend the covenants.
In the event of a default under our credit facility, we could be required to immediately repay all outstanding borrowings,
which we might not be able to do. In addition, certain of our material domestic subsidiaries are required to guarantee
amounts borrowed under the credit facility, and we have pledged the shares of certain of our subsidiaries as collateral
for our obligations under the credit facility. Any such default could have a material adverse effect on our ability to
operate, including allowing lenders under the credit facility to enforce guarantees of our subsidiaries, if any, or exercise
their rights with respect to the shares pledged as collateral.
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2020 Form 10-K
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We cannot guarantee that our stock repurchase program will be fully consummated or that it will enhance
long-term stockholder value. Share repurchases could also increase the volatility of the trading price of our
stock and will diminish our cash reserves.
Although our board of directors has authorized a stock repurchase program that does not have an expiration date, the
program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares of
our common stock. We cannot guarantee that the program will be fully consummated or that it will enhance long-term
stockholder value. The program could affect the trading price of our stock and increase volatility, and any
announcement of a termination of this program may result in a decrease in the trading price of our stock. In addition,
this program will diminish our cash reserves, which may impact our ability to finance future growth and to pursue
possible future strategic opportunities and acquisitions. (See Note 14 to our consolidated financial statements in this
report for additional information related to our stock repurchase program.)
We have recorded significant deferred tax assets, and we might never realize their full value, which would
result in a charge against our earnings.
As of December 31, 2020, we had deferred tax assets of $92.7 million. Realization of our deferred tax assets is
dependent upon our generating sufficient taxable income in future years to realize the tax benefit from those assets.
Deferred tax assets are reviewed at least annually for realizability. A charge against our earnings would result if, based
on the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized
beyond our existing valuation allowance. This could be caused by, among other things, deterioration in performance,
adverse market conditions, adverse changes in applicable laws or regulations, including changes that restrict the
activities of or affect the solutions sold by our business and a variety of other factors. For example, during 2020, we
recorded an increase in our valuation allowance attributable to state tax credit carryforwards for which we do not
expect to realize benefit. (See Note 12 to our consolidated financial statements in this report for additional details.) If a
deferred tax asset net of our valuation allowance was determined to be not realizable in a future period, the charge to
earnings would be recognized as an expense in our results of operations in the period the determination is made.
Additionally, if we are unable to utilize our deferred tax assets, our cash flow available to fund operations could be
adversely affected.
Depending on future circumstances, it is possible that we might never realize the full value of our deferred tax assets.
Any future impairment charges related to a significant portion of our deferred tax assets would have an adverse effect
on our financial condition and results of operations.
Legal and Compliance Risks
Privacy and data protection concerns, including evolving domestic and international government regulation
in the area of consumer data privacy or data protection, could adversely affect our business and operating
results.
The effectiveness of our software solutions relies on our customers' storage and use of data concerning their customers,
including financial, personally identifying or other sensitive data. Our customers' collection and use of this data for
donor profiling, data analytics or communications outreach might raise privacy and data protection concerns and
negatively impact the demand for our solutions and services. For example, our custom modeling and analytical services
rely heavily on processing and using of data we gather from customers and various sources. Privacy and data protection
laws could add restrictions or regulatory burdens, which could limit to our ability to market and profit from those
services.
Governments in some jurisdictions have enacted or are considering enacting consumer data privacy or data protection
legislation, including laws and regulations applying to the solicitation, collection, transfer, processing and use of
personal data. This legislation could reduce the demand for our software solutions if we fail to design or enhance our
solutions to enable our customers to comply with the privacy and data protection measures required by the legislation.
Moreover, we may be exposed to liability under existing or new consumer privacy or data protection legislation. For
example, when providing our solutions to certain customers in the healthcare industry, we must comply with applicable
provisions of the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), and might be subject to similar
provisions of other legislation, including, without limitation, the Gramm-Leach-Bliley Act and related regulations, and
2020 Form 10-K
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Blackbaud, Inc.
the California Consumer Privacy Act of 2018, which became effective January 1, 2020, and may apply to some of our
customers and areas of business. Even technical violations of these laws may result in penalties that are assessed for
each non-compliant transaction.
Blackbaud, and some of our customers, may be subject to the E.U. General Data Protection Regulation (“GDPR”), which
became effective in the E.U. in May 2018 and its provisions continue to apply in the U.K. after Brexit by virtue of
legislation incorporating the GDPR into U.K. data protection law, known as the "UK GDPR." The law requires
companies to meet requirements regarding the handling of personal data, including rights such as the portability of
personal data. We completed an extensive program of product and operational changes to address GDPR requirements
and all future solutions sold to customers subject to GDPR must include GDPR features. The implementation of GDPR
has affected our ability to offer some features and services to customers in the E.U. and U.K. Furthermore, actions and
investigations by regulatory authorities related to data security incidents and privacy violations continue to increase,
which could impact us through increased costs or restrictions on our business, and noncompliance could result in
significant regulatory penalties and legal liability.
If our customers or we were found to be subject to and in violation of any privacy or data protection laws or
regulations, our business may be materially and adversely impacted and we and/or our customers would likely have to
change our business practices. In addition, these laws and regulations could impose significant costs on our customers
and us and make it more difficult for donors to make online donations. (See Note 11 to our consolidated financial
statements included in this report for a description of the Security Incident and related legal proceedings and regulatory
matters.)
We are in the information technology business, and our solutions and services store, retrieve, transfer, manipulate and
manage our customers’ information and data. The effectiveness of our software solutions relies on our customers’
storage and use of data concerning their donors, including financial, personally identifying and other sensitive data and
our business uses similar systems that require us to store and use data with respect to our customers and personnel. Our
collection and our customers’ collection and use of this data might raise privacy and data protection concerns and
negatively impact our business or the demand for our solutions and services. If a breach of data security, such as the
Security Incident, were to occur, or other violation of privacy or data protection laws and regulations were to be alleged,
our business may be materially and adversely impacted and solutions may be perceived as less desirable, which would
negatively affect our business and operating results.
Claims that we or our technologies infringe upon the intellectual property or other proprietary rights of a
third party may require us to incur significant costs, enter into royalty or licensing agreements or develop or
license substitute technology.
We may be subject to claims that the technologies in our solutions and services infringe upon the intellectual property
or other proprietary rights of a third party. In addition, the vendors providing us with technology that we use in our own
solutions could become subject to similar infringement claims. Although we believe that our solutions and services do
not infringe any intellectual property or other proprietary rights, we cannot be certain that our solutions and services do
not, or that they will not in the future, infringe intellectual property or other proprietary rights held by others. Any
claims of infringement could cause us to incur substantial costs to defend against the claim, even if the claim is without
merit, and could distract our management from our business. Moreover, any settlement or adverse judgment resulting
from the claim could require us to pay substantial amounts, or obtain a license to continue to use the technology and
services that are the subject of the claim, and/or otherwise restrict or prohibit our use of the same. There can be no
assurance that we would be able to obtain a license on commercially reasonable terms from the third party asserting
any particular claim, or that we would be able to successfully develop alternative technology on a timely basis, or that
we would be able to obtain a license from another provider of suitable alternative technology to permit us to continue
offering, and our customers to continue using, the solutions and services. In addition, we generally provide in our
customer arrangements for certain solutions and services that we will indemnify our customers against third-party
infringement claims relating to technology we provide to those customers, which could obligate us to pay damages if
the solutions and services were found to be infringing. Infringement claims asserted against us, our vendors or our
customers may have a material adverse effect on our business, prospects, financial condition and results of operations.
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Our solutions utilize open source software, which may subject us to litigation, require us to re-engineer our
solutions, or otherwise divert resources away from our development efforts.
We use open source software in connection with certain of our solutions. Such open source software is generally
licensed by its authors or other third parties under open source licenses, including, for example, the GNU General Public
License, the GNU Lesser General Public License, “Apache-style” licenses, “BSD-style” licenses and other open source
licenses. There is little legal precedent governing the interpretation of many of the terms of some of these licenses and,
therefore, the potential impact of these terms on our business is currently unable to be determined and may result in
unanticipated obligations regarding our solutions and technologies. From time to time, companies that incorporate
open source software into their products have faced claims challenging the ownership of open source software and/or
compliance with open source license terms. Therefore, we could be subject to litigation by parties claiming ownership of
open source software or noncompliance with open source licensing terms. Some open source software licenses require
users who distribute open source software as part of their own software to publicly disclose all or part of the source
code to such software and/or make available any derivative works of the open source code on unfavorable terms or at
no cost. While we monitor our use of open source software and try to ensure that none is used in a manner that would
require us to disclose the source code or that would otherwise breach the terms of an open source agreement, such use
could inadvertently occur and we may be required to release proprietary source code, pay damages for breach of
contract, re-engineer our applications, discontinue sales in the event re-engineering cannot be accomplished on a timely
basis, or take other remedial action that may divert resources away from our development efforts, any of which could
adversely affect our business.
We rely upon trademark, copyright, patent and trade secret laws to protect our proprietary rights, which
might not provide us with adequate protection.
Our success and ability to compete depends to a significant degree upon the protection of our proprietary technology
rights. We might not be successful in protecting our proprietary technology and our proprietary rights might not provide
us with a meaningful competitive advantage. To protect our core proprietary technology, we rely on a combination of
patent, trademark, copyright and trade secret laws, as well as nondisclosure agreements, each of which affords only
limited protection.
Increasing and evolving domestic and international government financial regulation could adversely affect
our business and operating results.
Certain of our solutions, in particular, our financial management and payment services solutions, relate to activity
heavily regulated in the U.S. by federal and state government regulatory agencies and in other countries in which we
operate by local regulatory agencies. The laws and regulations enforced by these agencies are proposed or enacted to
deter fraud and other illicit financial transactions and to protect consumers and the financial system. We have
procedures and controls in place to monitor compliance with numerous federal, state and foreign laws and regulations.
However, because these laws and regulations are complex, differ between jurisdictions, and are often subject to
interpretation, or as a result of unintended errors, we may, from time to time, inadvertently violate these laws and
regulations. Compliance with these laws and regulations is expensive and requires the time and attention of
management. These costs divert capital and focus away from efforts intended to grow our business. If we do not
successfully comply with laws, regulations, or policies, we could incur fines or penalties, be subject to litigation, lose
existing or new customer contracts or other business, and suffer damage to our reputation. Changes in these laws and
regulations can alter our business environment, limit business operations, require substantial investments to achieve
compliance and increase costs of doing business, and we cannot predict the impact such changes would have on our
operating results and financial condition.
Anti-takeover provisions in our charter documents and Delaware law may delay or prevent an acquisition of
our company.
Provisions of Delaware law, our certificate of incorporation and bylaws may have the effect of delaying or preventing a
change in control of our company or deterring tender offers for our common stock that other stockholders may
consider in their best interests. Our certificate of incorporation authorizes “blank check” preferred stock, which could
be issued by the board of directors without stockholder approval and may contain voting, liquidation, dividend and
other rights superior to our common stock. Stockholder approval is not necessary to issue preferred stock in this
2020 Form 10-K
27
Blackbaud, Inc.
manner. Issuance of these shares of preferred stock could have the effect of making it more difficult and more
expensive for a person or group to acquire control of us, and could effectively be used as an anti-takeover device.
Currently there are no shares of our preferred stock issued or outstanding. Our bylaws provide for an advance notice
procedure for stockholders to nominate director candidates for election or to bring business before an annual meeting
of stockholders, including proposed nominations of persons for election to our board of directors, and limit the persons
who may call special meetings of stockholders. The anti-takeover provisions of Delaware law and provisions in our
organizational documents may prevent our stockholders from receiving the benefit from any premium to the market
price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the
existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as
discouraging takeover attempts in the future.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We own our LEED Gold certified Global Headquarters Facility in Charleston, South Carolina, which consists of
approximately 172,000 square feet. During 2020, we purchased the building, fixtures and other improvements and
parcels of land that constitute our Global Headquarter Facilities. In addition, we terminated the lease of our Customer
Operations Center (which was our former headquarters facility) in Charleston, South Carolina, on December 31, 2020.
We lease or have purchased the right to use additional office space in Austin, Texas; Bedford, New Hampshire;
Glasgow, Scotland; London, England; Plano, Texas; St. Paul, Minnesota; Sydney, Australia; and Toronto, Canada,
among other locations. We believe that our properties are in good operating condition and adequately serve our current
business operations. We also anticipate that suitable additional or alternative space, including those under lease options,
will be available at commercially reasonable terms for future expansion.
ITEM 3. LEGAL PROCEEDINGS
For a discussion of our legal proceedings, see Note 11 to our condensed consolidated financial statements in this report.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
28
2020 Form 10-K
Blackbaud, Inc.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Our common stock is trading on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “BLKB.” As of February
10, 2021, there were approximately 96 stockholders of record of our common stock. Because many of our shares of
common stock are held by brokers and other institutions on behalf of stockholders, this number is not representative of
the total number of beneficial owners of our stock. On February 10, 2021, the closing price of our common stock was
$78.34.
Stock Performance Graph
The following performance graph shall not be deemed to be “soliciting material” or “filed” or incorporated by
reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act except as shall be
expressly set forth by specific reference in such filing. The performance graph compares the performance of our
common stock to the Nasdaq Composite Index and the Nasdaq Computer and Data Processing Index. The graph covers
the most recent five-year period ended December 31, 2020. The graph assumes that the value of the investment in our
common stock and each index was $100.00 at December 31, 2015, and that all dividends are reinvested.
December 31,
Blackbaud, Inc.
Nasdaq Composite Index
2015
2016
2017
2018
2019
2020
$ 100.00 $ 97.92 $ 145.40 $ 97.30 $ 123.87 $ 89.73
100.00
108.87
141.13
137.12
187.44
271.64
Nasdaq Computer & Data Processing Index
100.00
107.35
150.04
152.52
213.66
305.01
2020 Form 10-K
29
Blackbaud, Inc.Nasdaq Composite IndexNasdaq Computer &Data Processing Index12/31/1512/31/1612/31/1712/31/1812/31/1912/31/20$0$100$200$300$400$500 Blackbaud, Inc.
Common Stock Acquisitions and Repurchases
The following table provides information about shares of common stock acquired or repurchased during the three
months ended December 31, 2020 under the stock repurchase program then in effect, as well as common stock
withheld by us to satisfy the minimum tax obligations of employees due upon vesting of restricted stock awards and
units.
Period
Beginning balance, October 1, 2020
October 1, 2020 through October 31, 2020
November 1, 2020 through November 30, 2020
December 1, 2020 through December 31, 2020
Total
Total
number
of shares
purchased(1)
— $
2,733
714,049
716,782 $
Average
price
paid
per
share
—
50.01
57.42
57.40
Total number
of shares
purchased as
part of
publicly
announced
plans or
programs(2)
—
—
714,000
Approximate
dollar value
of shares
that may yet
be purchased
under the
plans or
programs
(in thousands)
$
50,000
50,000
250,000
208,999
714,000 $
208,999
(1)
(2)
Includes 2,782 shares (2,733 in November and 49 in December) withheld by us to satisfy the minimum tax obligations of employees due upon
vesting of restricted stock awards and units. The level of this acquisition activity varies from period to period based upon the timing of award
grants and vesting.
In November 2020, our Board of Directors reauthorized and expanded our stock repurchase program to authorize us to purchase up to $250.0
million of our outstanding shares of common stock. The program does not have an expiration date.
Dividends
Our Board of Directors had previously adopted a dividend policy which reflected an intention to distribute to our
stockholders a portion of the cash generated by our business that exceeds our operating needs and capital expenditures
as regular quarterly dividends.
In accordance with our previous dividend policy, we paid quarterly dividends at an annual rate of $0.48 per share in
2019, resulting in aggregate dividend payments to stockholders of $23.6 million in 2019.
As a part of a series of measures to better enable us to weather the extraordinary business challenges occasioned by
COVID-19 and further effect our long-term strategy to deliver the greatest value to our stockholders, we announced on
April 6, 2020 that our Board of Directors had rescinded its previously announced policy to pay an annual dividend at a
rate of $0.48 per share of common stock and discontinued the declaration and payment of all cash dividends beginning
with the second quarter of 2020 and thereafter until such time, if any, as the Board of Directors may determine in its
sole discretion. As a result, we paid a first quarter dividend of $0.12 per share in 2020 resulting in aggregate dividend
payments to stockholders of $6.0 million, but no further dividends were declared or paid in 2020. We currently do not
anticipate declaring or paying any cash dividends for the foreseeable future.
30
2020 Form 10-K
Blackbaud, Inc.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” in Item 7 in this report and our financial statements and the related
notes included elsewhere in this report to fully understand factors, including our business acquisitions and dispositions,
that may affect the comparability of the information presented below.
(in thousands, except per share data)
SUMMARY OF OPERATIONS
Total revenue
Total cost of revenue
Gross profit
Total operating expenses
Income from operations
Net income
PER SHARE DATA
Basic net income
Diluted net income
Cash dividends
BALANCE SHEET DATA
Total assets
2020
Year ended December 31,
2019(1)
2018
2017(2)
2016(2)
$ 913,219 $ 900,423 $ 848,606 $ 788,487 $ 731,642
428,065
485,154
447,911
37,243
7,717
418,424
481,999
454,854
27,145
11,908
381,742
466,864
407,447
59,417
44,841
361,904
426,583
358,405
68,178
73,633
$
0.16 $
0.25 $
0.95 $
1.58 $
0.16
0.12
0.25
0.48
0.93
0.48
1.54
0.48
339,220
392,422
324,198
68,224
45,404
0.98
0.96
0.48
$ 2,044,734 $ 1,992,963 $ 1,615,305 $ 1,797,846 $ 1,345,009
Deferred revenue, including current portion
Total debt, including current portion
Total long-term liabilities
316,914
531,033
605,180
316,137
467,100
607,362
298,555
387,124
435,867
278,706
438,224
486,946
250,289
342,393
396,466
(1)
(2)
Reflects the impact of adopting Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) in 2019, on a prospective basis. See Note 2
of our consolidated financial statements in this report for further discussion.
Reflects the impact of adopting ASU 2014-09, Revenue from Contracts with Customers (Topic 606) in 2018, on a retrospective basis.
2020 Form 10-K
31
Blackbaud, Inc.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in
conjunction with Item 1A Risk factors and our consolidated financial statements and related notes included
elsewhere in this Annual Report on Form 10-K. The following discussion and analysis presents financial
information denominated in millions of dollars which can lead to differences from rounding when compared
to similar information contained in the consolidated financial statements and related notes, which are
primarily denominated in thousands of dollars.
Executive Summary
We are the world’s leading cloud software company powering social good. Serving the entire social good community—
nonprofits, higher education institutions, K–12 schools, healthcare organizations, faith communities, arts and cultural
organizations, foundations, companies and individual change agents—we connect and empower organizations and
individuals to increase their impact through cloud software, services, expertise and data intelligence. Our portfolio is
tailored to the unique needs of vertical markets, with solutions for fundraising and CRM, marketing, advocacy, peer-to-
peer fundraising, corporate social responsibility, school management, ticketing, grantmaking, financial management,
payment processing and analytics. Serving the industry for nearly four decades, we are headquartered in Charleston,
South Carolina, and have operations in the United States, Australia, Canada, Costa Rica and the United Kingdom. As of
December 31, 2020, we had over 45,000 global customers.
Our revenue is primarily generated from the following sources: (i) charging for the use of our software solutions in cloud
and hosted environments; (ii) providing payment and transaction services; (iii) providing software maintenance and
support services; and (iv) providing professional services, including implementation, consulting, training, analytic and
other services.
COVID-19 Impact
The outbreak of COVID-19 in countries across the globe, including each country in which we currently operate, has
adversely impacted the U.S. and global economies. We began 2020 with strong execution against our financial plan. In
March 2020, we began to experience disruptions to our business from COVID-19, and the pandemic continues to
impact each of our markets.
To better enable us to weather the extraordinary business challenges brought about by the global COVID-19 pandemic,
to protect the safety and welfare of our employees, and to further effect our long-term strategy to deliver the greatest
value to our stockholders, we have taken several actions. These measures taken are expected to provide us the financial
flexibility needed to manage a wide array of outcomes that may result from COVID-19. See Note 2 to our condensed
consolidated financial statements in this report for a discussion of some of these actions. In addition to the actions we
have taken to date, we are continuously evaluating further possible actions in order to respond quickly to rapidly
changing conditions, if needed.
The economic impact of COVID-19 on the social good industry remains uncertain. With our existing and prospective
customers remaining cautious in their purchase decisions, we expect that our operating environment may continue to
be challenging in 2021 and potentially beyond, as discussed below. Notwithstanding these conditions, we remain
focused on continuing to execute our four-point growth strategy and strengthening our leadership position.
32
2020 Form 10-K
Blackbaud, Inc.
Four-Point Growth Strategy
1
2
3
4
Delight Customers with Innovative Cloud Solutions
Drive Sales Effectiveness
Expand Total Addressable Market
Improve Operating Efficiency
1. Delight Customers with Innovative Cloud Solutions
This strategy reflects our relentless focus on driving value and outcomes for our customers through our solutions.
Blackbaud SKY®, our platform for cloud innovation, is a core tenant of this strategy and continues to power an
elevated level of innovation by our engineers. It is also enabling our growing ecosystem of partners who are also
passionate about social good, to extend and expand the capabilities available to our customers. During 2020, we
continued making critical investments in research and development and increased our engineering hiring during the
fourth quarter. We also released the Blackbaud Marketplace during 2020, offering curated third-party apps,
enabling organizations of all types and sizes to discover new ways to amplify their impact by enhancing their best-
of-breed Blackbaud solutions with specialized capabilities like connecting bidders at fundraising auctions, tracking
branded merchandise purchased in an online store or texting volunteers about an upcoming event.
The customers we serve require vertical specific business solutions to automate their operations. Throughout 2020
we have remained focused on driving value and outcomes for our customers. We reprioritized and expedited
product enhancements to support our customers needs, especially in light of COVID-19 and the continued shift to
virtual, digital-first operating models. For example, we released fitness tracking integration in Blackbaud’s peer-to-
peer fundraising portfolio, a new virtual prayer wall enabling congregants at houses of worship to share and
respond to prayer requests online, text messaging capabilities for scholarship directors and higher education
institutions to ensure no funds were going unutilized and expanded the global capabilities of YourCause
CSRConnect making it easier for companies to bring employees across geographies together in support of causes
around the world.
Blackbaud Peer-to-Peer Fundraising powered by JustGiving continues to gain traction. During 2020, we migrated
everydayhero customers over to Blackbaud Peer-to-Peer Fundraising powered by JustGiving and sunset the
everydayhero product as we continue to rationalize our portfolio while continuing to delight our customers with
innovative cloud solutions.
2. Drive Sales Effectiveness
We have been investing in sales and marketing to better address our market opportunity with a focus on digital
lead generation. One way we are equipping our salesforce to be more effective is by investing in the necessary
technology and resources to efficiently drive an increased number of quality leads and better cover our large
addressable market. We have implemented software tools to enhance our digital footprint and drive lead
generation across the company. We are taking a multi-touch attribution approach to measuring the effectiveness of
our marketing campaigns to drive efficiency in our go-to-market efforts and improve returns on our marketing
dollars. This is just one of many examples of how we are optimizing our structure, tools and processes to better
address our large vertical market opportunities. We have also taken lessons learned throughout 2020 and re-
evaluated elements of our go-to-market strategy with a digital-first mindset and we have a significant opportunity
to leverage the investments into digital to reduce our customer acquisition cost and increase our sales velocity,
ultimately, driving a more scalable and cost-effective go-to-market model.
3. Expand TAM
We did not complete any acquisitions during 2020 as we have remained vigilantly focused on supporting our
customers and employees during this time. We remain active in the evaluation of opportunities to further expand
2020 Form 10-K
33
Blackbaud, Inc.
our addressable market through acquisitions and internal product development. We believe we have significant
opportunities in front of us as we are less than 10% penetrated into a total addressable market of over $10 billion.
4.
Improve Operating Efficiency
We are also focused on operational efficiency to strengthen the business and position us for long-term success.
During 2020, we pivoted to place a greater emphasis on profit in alignment with the balanced approach
management takes to operating the business. As a result of the pandemic, our near term visibility into revenue
growth was impacted and we took certain actions early on to ensure our near-term liquidity (as discussed above)
and shifted more of our focus to profitability. Our employees switched to working fully remote at the onset of the
pandemic and the business continued operating smoothly. This caused us to re-evaluate our workforce strategy and
when employees return to the office, we expect to have more employees working remotely either part-time or full
time, even within our hub locations. As a result, we revisited our real estate strategy with a focus on optimizing our
footprint for the future of work at Blackbaud, including the purchase of our LEED Gold certified Global
Headquarters Facility and exit of certain office leases globally. Our aim is optimizing our office utilization, improving
our geographic sales coverage and enhancing our employees' daily experience to improve productivity and
effectiveness.
Financial Summary
Total Revenue ($M)
YoY Growth (%)
Income from Operations ($M)
YoY Growth (%)
Total revenue increased by $12.8 million during 2020, driven largely by the following:
+ Increase in transactional revenue, including an accelerated shift toward virtual and online fundraising and
charitable giving related to COVID-19
+ Increase in contractual recurring revenue related to positive demand from customers across our portfolio of
cloud solutions
- Decrease in one-time consulting revenue primarily from less one-time sales related to changes in our
compensation plans to place greater emphasis on subscription sales of our cloud solutions
- Decrease in one-time analytics revenue as analytics are generally integrated in our cloud solutions
34
2020 Form 10-K
$900.4$913.21.4%20192020$27.1$37.237.2%20192020
Blackbaud, Inc.
Income from operations increased by $10.1 million during 2020, driven largely by the following:
+ Growth in total revenue, as described above
+ Decrease in compensation costs (excluding stock-based compensation expense) of $43.7 million primarily
associated with the decision to replace our 2020 cash bonus plans with grants of performance-based equity
awards, which are being recognized as stock-based compensation expense between May 1, 2020 and May 1,
2021. These awards may be earned and become eligible for vesting on May 1, 2021 subject to meeting certain
performance conditions and the recipient's continued employment with us
+ Decrease in travel costs of $11.0 million due to our restriction on non-essential employee travel in response to
the COVID-19 pandemic
+ Decrease in amortization of intangible assets from business combinations of $8.2 million
+ Decrease in restructuring costs of $5.6 million as our facilities optimization restructuring plan was largely
completed as of December 31, 2019
+ Decrease in acquisition-related expenses and integration costs of $3.3 million
-
Increase in stock-based compensation expense of $28.6 million primarily related to the decision to replace our
2020 cash bonus plans with grants of performance-based equity awards
Increase in real estate activity costs of $23.1 million due to our workforce strategy changes in response to the
COVID-19 pandemic. For additional details, see "Results of Operations - General and administrative" below.
Increase in corporate costs of $6.3 million primarily related to increases in bad debt expense; for additional
details, see Note 2 to our consolidated financial statements in this report
Increase in cost of revenue from a $4.3 million impairment charge during the three months ended June 30,
2020, against certain previously capitalized software development costs, resulting from our decision to
accelerate the end of customer support for certain solutions
-
-
-
- Other increases in cost of revenue related to increases in data center costs, amortization of software
development costs and transaction-based costs
There are three primary revenue categories with related business drivers that we continue to monitor closely in light of
the COVID-19 pandemic:
1. Contractual Recurring Revenue (approximately two thirds of total revenue in 2020)
Recurring subscription contracts are typically for a term of three years at contract inception, billed annually in
advance, and we have been for several years successfully shifting our legacy customer base away from annual
renewals and moving them onto multi-year renewal contracts. Our contracted recurring revenue has performed
well as our renewal rate during 2020 finished favorable to our original plan. We expect the shortfall in bookings
during 2020 to put pressure on our revenue growth during 2021. We are closely monitoring our customer
receivable balances, payment terms, and creditworthiness. While we experienced an increase in our aging of
receivables during the second and third quarters of 2020 primarily associated with the COVID-19 pandemic, we
have seen some improvement in our customers' payment behavior since that time. We also saw fewer of our
customers go out of business during 2020 than 2019, which demonstrated the resiliency of our market.
2. Transactional Revenue (approximately one quarter of total revenue in 2020)
Transactional revenue is non-contractual and less predictable given the susceptibility to certain drivers such as
timing and number of events and marketing campaigns, as well as fluctuations in donation volumes and tuition
payments. We have historically experienced seasonal highs during the fourth quarter due to year-end giving
campaigns and during the second quarter when a large number of events are held. During the fourth quarter, we
saw our payments transaction volumes exceed our expectations due primarily to year-end giving to our customers.
For the full year, we saw the negative impact of many in-person events being postponed or canceled. Social good
organizations have been forced to employ new strategies to maintain momentum with current supporters while
capturing the attention of potential new donors. We continue to support our customers in adapting to these
circumstances through virtual campaigns and events.
2020 Form 10-K
35
Blackbaud, Inc.
3. Bookings
Our first quarter has historically been the seasonal low for bookings, with the second and fourth quarters
historically being seasonally higher, and our bookings tend to be back-end loaded within individual quarters given
our quarterly quota plans. During 2020, we had a significant shortfall in bookings compared to both our original
plan for the year and our prior year performance, as we experienced challenges in building pipeline after the start
of the pandemic. Given our ratable revenue recognition model for our recurring subscription contracts and
implementation periods, we expect that the declines in our 2020 bookings performance will have a greater
negative impact on our 2021 revenue than it did our 2020 revenue. We believe the current environment has put a
greater emphasis on investing in digital and cloud solutions and are optimistic this may result in an increase in
pipeline and bookings at some point in 2021.
Our strategy has historically relied on a balanced approach to growth and profitability. As discussed above, the
pandemic has created short-term uncertainty in our revenue outlook and the early impacts on pipeline and bookings
will likely limit our ability to drive near-term revenue growth at our originally planned levels. Therefore, in line with our
strategy, we have made a pivot to greater emphasis on delivering shareholder value through increased profitability and
cash flow, which are more controllable.
Customer Retention
Our recurring revenue contracts are generally for a term of three years at contract inception with one to three-year
renewals thereafter. We anticipate a continued decrease in maintenance contract renewals as we transition our solution
portfolio and maintenance customers from a perpetual license-based model to a cloud subscription delivery model. In
the long term, we also anticipate an increase in recurring subscription contract renewals as we continue focusing on
innovation, quality and the integration of our cloud solutions, which we believe will provide value-adding capabilities to
better address our customers' needs. Due primarily to these factors, we believe a recurring revenue customer retention
measure that combines recurring subscription, maintenance and service customer contracts provides a better
representation of our customers' overall behavior. During 2020 and 2019, approximately 93% and 92%, respectively,
of our customers with recurring revenue contracts were retained. This customer retention rate reflects our efforts to
rationalize our portfolio of solutions and migrate customers from legacy solutions towards our next generation cloud
solutions. We are investing in innovation, which we believe will increase customer retention over the long-term.
Balance Sheet and Cash Flow
At December 31, 2020, our cash and cash equivalents were $35.8 million and the carrying amount of our debt under
the 2020 Credit Facility was $467.1 million. Our net leverage ratio was 1.75 to 1.00.
During 2020, we generated $148.0 million in cash flow from operations, primarily from operating cost reductions put in
place in response to COVID-19 and the increased use of stock-based compensation. During 2020, we had a net increase
in borrowings of $0.9 million, we returned $47.0 million to stockholders by way of share repurchases and dividends,
and had cash outlays of $71.8 million for purchases of property and equipment and capitalized software development
costs. A larger amount of cash was spent on property and equipment during 2020 primarily due to the purchase of our
Global Headquarters Facility.
36
2020 Form 10-K
92%93%20192020
Blackbaud, Inc.
Results of Operations
Reportable segment
We report our operating results and financial information in one operating and reportable segment. See Note 16 of our
consolidated financial statements in this report for additional information.
Comparison of 2020 vs. 2019 and 2019 vs. 2018
Acquisitions
During 2019 and 2018, we acquired companies that provided us with strategic opportunities to expand our TAM and
share of the philanthropic giving market through the integration of complementary solutions and services to serve the
changing needs of our customers. The following are the companies we acquired and their respective acquisition dates:
• YourCause Holdings, LLC ("YourCause") on January 2, 2019
• Reeher LLC ("Reeher") on April 30, 2018
We have included the results of operations of acquired companies in our consolidated results of operations from the
date of their respective acquisition. We determined that the YourCause and Reeher acquisitions were not material
business combinations; therefore, revenue and earnings since the acquisition dates and pro forma information are not
required or presented. See Note 3 to our consolidated financial statements in this report for a summary of these
acquisitions.
Revenue and Cost of Revenue
Recurring
Revenue ($M)
YoY Growth (%)
Cost of revenue ($M)
YoY Growth (%)
Gross profit ($M)
and gross margin (%)
Recurring revenue is comprised of fees for the use of our subscription-based software solutions, which includes
providing access to cloud solutions, hosting services, payment services, online training programs, subscription-based
analytic services, such as donor acquisitions and data enrichment services. Recurring revenue also includes fees from
maintenance services for our on-premises solutions, services included in our renewable subscription contracts, retained
and managed services contracts that we expect to have a term consistent with our cloud solution contracts, and variable
transaction revenue associated with the use of our solutions.
Cost of recurring revenue is primarily comprised of compensation costs for customer support and production IT
personnel, hosting and data center costs, third-party contractor expenses, third-party royalty and data expenses,
allocated depreciation, facilities and IT support costs, amortization of intangible assets from business combinations,
amortization of software development costs, transaction-based costs related to payments services including remittances
of amounts due to third-parties and other costs incurred in providing support and recurring services to our customers.
2020 Form 10-K
37
$762.2$831.6$850.72.3%201820192020$305.5$358.0$369.73.3%201820192020$456.7$473.6$481.159.9%57.0%56.5%201820192020 Blackbaud, Inc.
Our customers continue to prefer cloud subscription offerings with integrated analytics, training and payment services.
Recurring subscription contracts are typically for a term of three years at contract inception with one to three-year
renewals thereafter. We intend to continue focusing on innovation, quality and integration of our cloud solutions,
which we believe will drive future revenue growth.
2020 vs. 2019
Recurring revenue increased by $19.1 million, or 2.3%, driven primarily by the following:
+ Increase in transactional revenue of $18.3 million, including an accelerated shift toward virtual and online
fundraising and charitable giving related to COVID-19
+ Increase in contractual recurring revenue of $15.5 million related to positive demand from customers across our
portfolio of cloud solutions
- Decrease in maintenance revenue of $14.7 million primarily related to our continuing efforts to migrate
customers from legacy on-premises solutions onto our solutions powered by Blackbaud SKY, our modern cloud
platform
Partially offsetting contractual recurring revenue was a decrease in the mix of retained and managed services contracts
we present in recurring revenue. Revenue from retained and managed service contracts that we do not expect to have a
term consistent with our cloud solution contracts is included in one-time services and other revenue beginning January
1, 2020. This change in presentation resulted in a decrease in recurring revenue and an offsetting increase to one-time
services and other revenue of $16.7 million during the twelve months ended December 31, 2020.
Cost of recurring revenue increased by $11.7 million, or 3.3%, driven primarily by the following:
+ Increase in transaction-based costs of $7.5 million related to payment services integrated in our cloud solutions
+ Increase in amortization of software development costs of $6.8 million due to investments made on innovation,
quality and the integration of our cloud solutions
+ Impairment charge of $4.3 million during the three months ended June 30, 2020, against certain previously
capitalized software development costs that reduced the carrying value of those assets to zero. The impairment
charge resulted primarily from our decision to accelerate the end of customer support for certain solutions.
+ Increase in hosting and data center costs of $3.8 million as we are migrating our cloud infrastructure to leading
public cloud service providers
- Decrease in amortization of intangible assets from business combinations of $5.7 million
- Decrease in compensation costs primarily associated with the decision to replace our 2020 cash bonus plans
with grants of performance-based equity awards, which are being recognized as stock-based compensation
expense between May 1, 2020 and May 1, 2021. These awards may be earned and become eligible for vesting
on May 1, 2021 subject to meeting certain performance conditions and the recipient's continued employment
with us
- Decrease in costs associated with certain retained and managed services contracts for which revenue is included
in one-time services and other revenue beginning January 1, 2020, as discussed above
Recurring gross margin decreased by 0.4%, driven primarily by an increase in the mix of payments revenue, which
generally have lower gross margins than our contractual recurring revenue, the impairment of previously capitalized
software development costs, and incremental costs associated with our continued shift toward selling cloud solutions,
including data center costs and amortization of software development costs. We expect continued pressure on recurring
gross margin largely driven by duplicate data center costs as we migrate our cloud infrastructure to leading cloud service
providers.
2019 vs. 2018
Recurring revenue increased by $69.4 million, or 9.1%, driven primarily by the following:
+ Increase in subscriptions revenue of $87.8 million related to positive demand across our portfolio of cloud
solutions and, to a lesser extent, the inclusion of YourCause, an increase in services embedded in our renewable
cloud solution contracts and increased sales of subscription-based retained professional services
- Decrease in maintenance revenue of $18.4 million primarily related to our continuing efforts to migrate
customers from legacy on-premises solutions onto our solutions powered by Blackbaud SKY, our modern cloud
platform
38
2020 Form 10-K
Blackbaud, Inc.
Cost of recurring revenue increased by $52.5 million, or 17.2%, driven primarily by the following:
+ Increase in transaction-based costs of $13.0 million, related to payment services integrated in our cloud
solutions
+ Increase in compensation costs of $11.2 million, primarily attributable to an increasing portion of our resources
providing subscription-based retained services as opposed to one-time
+ Increase in hosting and data center costs of $5.4 million due to the migration of our cloud infrastructure to
leading public cloud service providers
+ Increase in third-party data and tool costs of $5.1 million
+ Increase in allocated corporate costs of $5.1 million primarily due to investments in corporate IT, including cyber
security and increases in related headcount
+ Increase in amortization of software development costs of $4.1 million due to investments made on innovation,
quality and the integration of our cloud solutions
Recurring gross margin decreased by 3.0%, driven primarily by incremental costs associated with our continued shift
toward selling cloud solutions and retained services, including hosting and data center costs, compensation costs and
amortization of software development costs.
One-time services and other
Revenue ($M)
YoY Growth (%)
Cost of revenue ($M)
YoY Growth (%)
Gross profit ($M)
and gross margin (%)
One-time services and other revenue is comprised of fees for one-time consulting, analytic and onsite training services,
fees for retained and managed services contracts that we do not expect to have a term consistent with our cloud
solution contracts, revenue from the sale of our software sold under perpetual license arrangements, fees from user
conferences and third-party software referral fees.
Cost of one-time services and other is primarily comprised of compensation costs for professional services and onsite
training personnel, other costs incurred in providing onsite customer training, third-party contractor expenses, data
expense incurred to perform one-time analytic services, third-party software royalties, costs of user conferences,
allocated depreciation, facilities and IT support costs and amortization of intangible assets from business combinations.
2020 Form 10-K
39
$86.4$68.8$62.5(9.2)%201820192020$76.3$60.4$58.4(3.4)%201820192020$10.2$8.4$4.111.8%12.2%6.5%201820192020 Blackbaud, Inc.
2020 vs. 2019
One-time services and other revenue decreased by $6.3 million, or 9.2%, driven primarily by the following:
+ Increase in the mix of retained and managed services contracts we present in one-time services and other.
Revenue from retained and managed service contracts that we do not expect to have a term consistent with our
cloud solution contracts is included in one-time services and other revenue beginning January 1, 2020. This
change in presentation resulted in an increase to one-time services and other revenue and an offsetting
decrease in recurring revenue of $16.7 million during the twelve months ended December 31, 2020.
- Decrease in one-time consulting revenue of $12.1 million primarily from less one-time sales related to changes
in our compensation plans to place greater emphasis on subscription sales of our cloud solutions. Services
increasingly being embedded in our renewable cloud solution contracts also contributed to the decrease in one-
time services revenue. Our embedded services are recorded as recurring revenue.
- Decrease in one-time analytics revenue of $4.2 million as analytics are generally integrated in our cloud
solutions
- Decrease in conference revenue of $3.6 million as our annual conference, bbcon, was held virtually and
provided free of charge
- Decrease in onsite training revenue of $1.3 million due to COVID-19
Cost of one-time services and other decreased $2.1 million or 3.4%, primarily driven by the following:
+ Increase in compensation costs of $3.4 million primarily related to an increase in stock-based compensation
expense as we replaced our 2020 cash bonus plans and annual merit-based salary increases for our employees
with grants of equity awards
- Decrease of $4.2 million in costs related to providing our annual user conference, bbcon, virtually
-
Insignificant decrease in travel costs due to our restriction on non-essential employee travel in response to
COVID-19
One-time services and other gross margin decreased by 5.6%, primarily as the reductions in one-time consulting and
analytics revenue discussed above outpaced the decrease in related costs.
2019 vs. 2018
One-time services and other revenue decreased by $17.6 million, or 20.4%, driven primarily by the following:
- Decrease in one-time consulting revenue of $12.6 million. Services are increasingly embedded in our renewable
cloud solution contracts and we are selling more subscription-based contracts for retained professional services.
Our embedded services are recorded as recurring revenue.
- Decrease in one-time analytics revenue of $3.8 million as analytics are generally integrated in our cloud solutions
Cost of one-time services and other decreased by $15.8 million, or 20.8%, driven primarily by a decrease in
compensation costs of $13.3 million. The decrease in compensation costs was in line with the decrease in one-time
services sold and delivered as an increasing portion of our resources provided subscription-based retained services as
opposed to one-time.
One-time services and other gross margin increased by 0.4%, as the reductions in costs of one-time services and other
discussed above slightly outpaced the declines in one-time consulting revenue and analytics revenue associated with the
shift in our go-to-market strategy.
40
2020 Form 10-K
Blackbaud, Inc.
Operating Expenses
Sales, marketing and
customer success ($M)
Research and development ($M)
General and administrative ($M)
Percentages indicate expenses as a percentage of total revenue
Sales, marketing and customer success
Sales, marketing and customer success expense includes compensation costs, variable sales commissions, travel-related
expenses, advertising and marketing materials, public relations costs, variable reseller commissions and allocated
depreciation, facilities and IT support costs.
We see a large market opportunity in the long-term and will continue to make investments to drive sales effectiveness,
which is a component of our four-point growth strategy. We have also implemented software tools to enhance our
digital footprint and drive lead generation. In response to the COVID-19 pandemic, we implemented a modest and
targeted headcount reduction during the second quarter, including a reduction in our sales headcount with a focus on
retaining our most highly productive sales executives. The enhancements we are making in our go-to-market approach
are expected to significantly reduce the payback period for our customer acquisition costs while increasing sales velocity.
As a result, we do not expect our sales, marketing and customer success expense to return to pre-pandemic levels.
2020 vs. 2019
Sales, marketing and customer success expenses decreased by $14.4 million, or 6.4%. The decreases in dollars and as a
percentage of total revenue were primarily driven by the following:
- Decrease in compensation costs of $6.5 million primarily related to the decision to replace our 2020 cash bonus
plans with grants of performance-based equity awards, which are being recognized as stock-based
compensation expense between May 1, 2020 and May 1, 2021. These awards may be earned and become
eligible for vesting on May 1, 2021 subject to meeting certain performance conditions and the recipient's
continued employment with us
- Decrease in travel costs of $5.7 million due to our restriction on non-essential employee travel in response to
COVID-19
- Decrease in commissions costs of $1.4 million related to a decrease in commissionable sales
2019 vs. 2018
Sales, marketing and customer success expenses increased by $31.3 million, or 16.2%. The increases in dollars and as a
percentage of total revenue were primarily driven by the following:
+ Increase in compensation costs of $21.2 million primarily associated with our efforts beginning in the second
half of 2018 to increase our direct sales force as well as incremental headcount associated with the inclusion of
YourCause. As a result, our direct sales headcount increased 8% during 2019.
+ Increases in allocated corporate costs of $7.0 million primarily driven by investments made in corporate IT,
including cyber security and increases in related headcount
+ Increase in commission expense of $2.2 million primarily driven by an increase in commissionable sales
2020 Form 10-K
41
$192.8$224.2$209.822.7%24.9%23.0%201820192020$98.8$106.2$100.111.6%11.8%11.0%201820192020$106.4$113.4$134.912.5%12.6%14.8%201820192020 Blackbaud, Inc.
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 costs.
2020 vs. 2019
We continue to make investments to delight our customers with innovative cloud solutions, which is a component of
our four-point growth strategy. We also increased engineering hiring during the fourth quarter of 2020. Research and
development expenses decreased by $6.0 million, or 5.7%. The decreases in dollars and as a percentage of total
revenue were primarily driven by the following:
- Decrease in compensation costs of $5.8 million primarily associated with the decision to replace our 2020 cash
bonus plans with grants of performance-based equity awards, which are being recognized as stock-based
compensation expense between May 1, 2020 and May 1, 2021. These awards may be earned and become
eligible for vesting on May 1, 2021 subject to meeting certain performance conditions and the recipient's
continued employment with us
- Decrease in third-party contractor costs of $1.5 million
- Decrease in travel costs of $1.2 million due to our restriction on non-essential employee travel in response to
COVID-19
+ Partially offset by a decrease in software development costs of $4.5 million that were required to be capitalized
under the internal-use software guidance
Not included in research and development expense for 2020 and 2019 were $41.5 million and $46.0 million,
respectively, of qualifying costs associated with development activities that are required to be capitalized under the
internal-use software accounting guidance such as those for our cloud solutions, as well as development costs
associated with acquired companies. Qualifying capitalized software development costs associated with our cloud
solutions are subsequently amortized to cost of subscriptions revenue over the related asset's estimated useful life,
which generally range from three 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 and the
integration of our solutions, which we believe will drive long-term revenue growth.
2019 vs. 2018
Research and development expenses increased by $7.4 million, or 7.4%, primarily driven by the following:
+ Increase in compensation costs of $11.6 million primarily associated with the inclusion of YourCause's
engineering resources
+ Increases in allocations of depreciation, facilities and IT support costs of $3.5 million primarily driven by
-
investments made in corporate IT, including cyber security and increases in related headcount
Partially offset by an increase in software development costs of $9.5 million that were required to be capitalized
under the internal-use software guidance
Not included in research and development expense for 2019 and 2018 were $46.0 million and $36.5 million,
respectively, of qualifying costs associated with development activities that are required to be capitalized under the
internal-use software accounting guidance such as those for our cloud solutions, as well as development costs
associated with acquired companies. Qualifying capitalized software development costs associated with our cloud
solutions are subsequently amortized to cost of subscriptions revenue over the related asset's estimated useful life,
which generally range from three to seven years.
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, third-party professional
fees, insurance, allocated depreciation, facilities and IT support costs, acquisition-related expenses and other
administrative expenses.
42
2020 Form 10-K
Blackbaud, Inc.
During the third quarter of 2020, we adjusted our workforce strategy to provide more flexibility for our employees after
our offices reopen and we expect to have more employees working remotely either part-time or full time, even within
our hub locations. This change is expected to create efficiencies within our real estate footprint as we shift toward more
collaborative workspaces within our offices. As a result, during the three months ended September 30, 2020, we
reduced the estimated useful lives of our operating lease ROU assets for certain of our office locations we expected to
exit, which resulted in an increase in operating lease costs during the third and fourth quarters of 2020. For these same
office locations, we also reduced the estimated useful lives of certain facilities-related fixed assets, which resulted in an
increase in depreciation expense. We incurred approximately $23.1 million of pre-tax costs related to these real estate
activities during the third and fourth quarters of 2020, which we do not expect to recur in 2021. These activities are
expected to result in future annual before-tax savings of approximately $14.0 million beginning in 2021.
2020 vs. 2019
General and administrative expenses increased by $21.4 million, or 18.9%. The increases in dollars and as a percentage
of total revenue were primarily driven by the following:
+ Increase in real estate activity costs of $23.1 million due to our workforce strategy changes in response to
COVID-19, as discussed above
+ Increase in corporate costs $5.9 million primarily related to an increase in bad debt expense; for additional
details, see Note 2 to our consolidated financial statements in this report
- Decrease in rent expense of $4.1 million primarily related to the purchase of our Global Headquarters Facility,
see Note 7 to our consolidated financial statements in this report
- Decrease in travel costs of $2.4 million due to our restriction on non-essential employee travel in response to
COVID-19
- Decrease in compensation costs of $1.8 million primarily related to the decision to replace our 2020 cash bonus
plans with grants of performance-based equity awards, which are being recognized as stock-based
compensation expense between May 1, 2020 and May 1, 2021. These awards may be earned and become
eligible for vesting on May 1, 2021 subject to meeting certain performance conditions and the recipient's
continued employment with us
2019 vs. 2018
General and administrative expenses increased by $7.1 million, or 6.6%, primarily driven by the following:
+ Increase in compensation costs of $13.2 million primarily related to stock-based compensation and our
acquisition of YourCause. The increase in stock-based compensation was primarily driven by increases in the
grant date fair values of our annual equity awards granted to employees between 2017 and 2019 as our
headcount had grown.
- Decrease in acquisition-related expenses and integration costs of $3.0 million related to our purchase of
YourCause
Restructuring
During 2017, in an effort to further our organizational objectives including, improved operating efficiency, customer
outcomes and employee satisfaction, we initiated a multi-year plan to consolidate and relocate some of our existing
offices to highly modern and more collaborative workspaces with short-term financial commitments. We substantially
completed our facilities optimization restructuring plan as of December 2019. During the years ended December 31,
2019 and 2018, we incurred $5.8 million and $4.6 million, respectively, in before-tax restructuring charges related to
these activities. Such charges during the year ended December 31, 2020 were insignificant.
Restructuring costs incurred prior to our adoption of ASU 2016-02 on January 1, 2019 consisted primarily of costs to
terminate lease agreements, contractual lease payments, net of estimated sublease income, upon vacating space as part
of the plan, as well as insignificant costs to relocate affected employees and write-off facilities-related fixed assets that
we would no longer use.
Upon adoption of ASU 2016-02 at January 1, 2019, we reduced our operating lease ROU assets recognized at transition
by the carrying amounts of the restructuring liabilities for certain leased office spaces that we ceased using prior to
December 31, 2018. Restructuring costs incurred during the year ended December 31, 2019 consisted primarily of
2020 Form 10-K
43
Blackbaud, Inc.
operating lease ROU asset impairment costs and, to a lesser extent, lease payments for offices we had ceased using and
write-offs of facilities-related fixed assets that we would no longer use.
Interest Expense
(dollars in millions)
Interest expense
% of total revenue
2020 vs. 2019
Years ended December 31,
2020
17.3
$
Change
(16.2) % $
2019
20.6
Change
29.7 % $
2018
15.9
1.9 %
2.3 %
1.9 %
Interest expense decreased in dollars and as a percentage of revenue during 2020, when compared to 2019, primarily
due to a decrease in our average daily borrowings. Our acquisition of YourCause in January 2019 drove the increase in
borrowings during 2019 and no business acquisitions were made in 2020.
2019 vs. 2018
Interest expense increased during 2019, when compared to 2018, primarily due to an increase in our average daily
borrowings related to our acquisition of YourCause in January 2019.
Deferred Revenue
The table below compares the components of deferred revenue from our consolidated balance sheets:
(dollars in millions)
Recurring
Timing of recognition
Over the period billed in advance,
December 31,
2020
December 31,
2019
One-time services and other
Total deferred revenue(1)
Less: Long-term portion
Current portion(1)
generally one year $
303.8 $
As services are delivered
13.1
316.9
4.7
$
312.2 $
302.8
13.4
316.1
1.8
314.3
Change
0.4 %
(2.3) %
0.2 %
159.6 %
(0.7) %
(1)
The individual amounts for each year may not sum to total deferred revenue or current portion of deferred revenue due to rounding.
To the extent that our customers are billed for our solutions and services in advance of delivery, we record such
amounts in deferred revenue. Our recurring revenue contracts are generally for a term of three years at contract
inception with one to three-year renewals thereafter, billed annually in advance and non-cancelable. We generally
invoice our customers with recurring revenue contracts in annual cycles 30 days prior to the end of the contract term.
Deferred revenue from recurring revenue contracts as well as one-time services and other were held flat during 2020,
primarily due to declines in our 2020 bookings performance compared to our budgeted expectations as a result of
COVID-19.
We have acquired businesses whose net tangible assets include deferred revenue. In accordance with GAAP reporting
requirements, we recorded write-downs of deferred revenue from customer arrangements predating the acquisition to
fair value, which resulted in lower recorded deferred revenue as of the acquisition date than the actual amounts paid in
advance for solutions and services under those customer arrangements. Therefore, our deferred revenue after an
acquisition will not reflect the full amount of deferred revenue that would have been reported if the acquired deferred
revenue was not written down to fair value. Further explanation of this impact is included below under the caption
"Non-GAAP financial measures".
44
2020 Form 10-K
Blackbaud, Inc.
Income Taxes
Our income tax expense (benefit) and effective income tax rates, including the effects of period-specific events, were:
(dollars in millions)
Income tax expense (benefit)
Effective income tax rate
Years ended December 31,
2020
13.9
$
2019
$
(1.3) $
2018
(0.2)
64.3 %
(12.5) %
(0.5) %
Our effective income tax rate may fluctuate quarterly and annually as a result of factors, including changes in tax law in
jurisdictions where we conduct business, transactions entered into, changes in the geographic distribution of our
earnings or losses, and our assessment of certain tax contingencies and valuation allowances.
We have deferred tax assets for federal, state, and international net operating loss carryforwards and tax credits. The
federal and state net operating loss carryforwards are subject to various Internal Revenue Code limitations and
applicable state tax laws. A portion of the foreign and state net operating loss carryforwards and a portion of state tax
credits have a valuation reserve due to the uncertainty of realizing such carryforwards and credits in the future.
We file income tax returns in the U.S. for federal and various state jurisdictions as well as in foreign jurisdictions
including Canada, the U.K., Australia, Ireland and Costa Rica. We are generally subject to U.S. federal income tax
examination for calendar tax years ending 2016 through 2020, as well as state and foreign income tax examinations for
various years depending on statute of limitations of those jurisdictions.
We have taken federal and state tax positions for which it is reasonably possible that the total amount of unrecognized
tax benefits may decrease within the next twelve months. The possible decrease could result from the expiration of
statutes of limitations. The reasonably possible decrease at December 31, 2020 was $1.1 million.
We recognize accrued interest and penalties, if any, related to unrecognized tax benefits as a component of income tax
expense.
2020 vs. 2019
The increase in our effective tax rate in 2020 when compared to 2019, was primarily due to increase in valuation
allowance attributable to state tax credit carryforwards for which we do not expect to realize benefit. Furthermore, our
2020 effective tax rate was negatively impacted by reduced benefit attributable to research tax credit and stock based
compensation deduction. Lastly, higher 2020 earnings lessened impact of other non-deductible items.
The total amount of unrecognized tax benefit that, if recognized, would favorably affect the effective income tax rate,
was $4.2 million and $3.9 million at December 31, 2020 and December 31, 2019, respectively.
2019 vs. 2018
The decrease in our effective income tax rate in 2019, when compared to 2018, was primarily due to the heightened
impact of research credit generation net of Section 162(m) nondeductible compensation. Furthermore, the 2019
effective tax rate was favorably impacted by other state tax credits net of an overall increase to uncertain tax positions.
Lastly, the effective tax rate was negatively impacted by Global Intangible Low-Tax Income ("GILTI"), net of Foreign-
Derived Intangible Income ("FDII") benefit, resulting from an increase in non-US earnings. The reduced base further
magnified the impact of other nondeductible items.
Non-GAAP Financial Measures
The operating results analyzed below are presented on a non-GAAP basis. We use non-GAAP financial measures
internally in analyzing our operational performance. Accordingly, we believe these non-GAAP measures are useful to
investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. While we believe
these non-GAAP measures provide useful supplemental information, non-GAAP financial measures should not be
considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. In addition,
these non-GAAP financial measures may not be completely comparable to similarly titled measures of other companies
due to potential differences in the exact method of calculation between companies.
2020 Form 10-K
45
Blackbaud, Inc.
We have acquired businesses whose net tangible assets include deferred revenue. In accordance with GAAP reporting
requirements, we recorded write-downs of deferred revenue under arrangements predating the acquisition to fair value,
which resulted in lower recognized revenue than the contributed purchase price until the related obligations to provide
services under such arrangements are fulfilled. Therefore, our GAAP revenues after the acquisitions will not reflect the
full amount of revenue that would have been reported if the acquired deferred revenue was not written down to fair
value. The non-GAAP measures described below reverse the acquisition-related deferred revenue write-downs so that
the full amount of revenue booked by the acquired companies is included, which we believe provides a more accurate
representation of a revenue run-rate in a given period and, therefore, will provide more meaningful comparative results
in future periods.
The non-GAAP financial measures discussed below exclude the impact of certain transactions because we believe they
are not directly related to our operating performance in any particular period, but are for our long-term benefit over
multiple periods. 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.
(dollars in millions)
GAAP Revenue
Non-GAAP adjustments:
Add: Acquisition-related deferred revenue write-
down
Non-GAAP revenue(1)
GAAP gross profit
GAAP gross margin
Non-GAAP adjustments:
2020
$ 913.2
Change
1.4 % $ 900.4
2019
Change
6.1 % $ 848.6
2018
Years ended December 31,
—
(100.0) %
1.9
(19.8) %
2.4
$ 913.2
1.2 % $ 902.4
6.0 % $ 851.0
$ 485.2
0.7 % $ 482.0
3.2 % $ 466.9
53.1 %
53.5 %
55.0 %
Add: Acquisition-related deferred revenue write-
down
Add: Stock-based compensation expense
Add: Amortization of intangibles from business
combinations
Add: Employee severance
Subtotal(1)
Non-GAAP gross profit(1)
Non-GAAP gross margin
—
13.4
39.0
0.9
53.2
(100.0) %
297.3 %
(13.0) %
(25.7) %
3.8 %
1.9
3.4
44.8
1.2
51.3
(19.8) %
(35.8) %
6.0 %
33.0 %
0.9 %
2.4
5.2
42.2
0.9
50.8
$ 538.4
1.0 % $ 533.3
3.0 % $ 517.7
59.0 %
59.1 %
60.8 %
(1)
The individual amounts for each year may not sum to non-GAAP revenue, subtotal or non-GAAP gross profit due to rounding.
46
2020 Form 10-K
Blackbaud, Inc.
Years ended December 31,
(dollars in millions, except per share amounts)
2020
Change
2019
Change
2018
GAAP income from operations
$
37.2
37.2 % $
27.1
(54.3) % $
59.4
GAAP operating margin
Non-GAAP adjustments:
4.1 %
3.0 %
7.0 %
Add: Acquisition-related deferred revenue write-
down
Add: Stock-based compensation expense
Add: Amortization of intangibles from business
combinations
Add: Employee severance
Add: Acquisition-related integration costs
Add: Acquisition-related expenses
Add: Restructuring and other real estate activities
Subtotal(1)
—
87.3
41.9
4.9
(0.1)
0.4
23.3
157.5
(100.0) %
48.8 %
1.9
58.6
(19.8) %
21.5 %
2.4
48.3
(16.4) %
50.1
6.4 %
47.1
10.2 %
(105.6) %
(69.6) %
301.0 %
26.6 %
4.4
2.4
1.2
5.8
124.4
97.0 %
(35.0) %
(59.2) %
26.5 %
12.0 %
2.2
3.7
2.8
4.6
111.1
Non-GAAP income from operations(1)
$ 194.8
28.5 % $ 151.6
(11.1) % $ 170.5
Non-GAAP operating margin
21.3 %
16.8 %
20.0 %
GAAP income before provision for income
taxes
GAAP net income
Shares used in computing GAAP diluted earnings
per share
$
$
21.6
7.7
104.2 % $
(35.2) % $
10.6
11.9
(76.3) % $
(73.4) % $
44.6
44.8
48,696,341
0.8 % 48,312,271
0.6 % 48,045,084
GAAP diluted earnings per share
$
0.16
(36.0) % $
0.25
(73.1) % $
0.93
Non-GAAP adjustments:
Add: GAAP income tax provision (benefit)
Add: Total Non-GAAP adjustments affecting loss
from operations
Non-GAAP income before provision for
income taxes
Assumed non-GAAP income tax provision(2)
Non-GAAP net income(1)
Shares used in computing Non-GAAP diluted
earnings per share
13.9
(1,150.4) %
(1.3)
504.1 %
(0.2)
157.5
26.6 %
124.4
12.0 %
111.1
179.1
35.8
32.7 %
135.0
(13.3) %
155.7
32.7 %
27.0
(13.3) %
31.1
$ 143.3
32.7 % $ 108.0
(13.3) % $ 124.6
48,696,341
0.8 % 48,312,271
0.6 % 48,045,084
Non-GAAP diluted earnings per share
$
2.94
31.3 % $
2.24
(13.5) % $
2.59
(1)
The individual amounts for each year may not sum to subtotal, non-GAAP income from operations, non-GAAP income before provision for
income taxes or non-GAAP net income due to rounding.
(2) We apply a non-GAAP effective tax rate of 20.0% when calculating non-GAAP net income and non-GAAP diluted earnings per share.
2020 Form 10-K
47
Blackbaud, Inc.
Non-GAAP free cash flow
Non-GAAP free cash flow is defined as operating cash flow less capital expenditures, including costs required to be
capitalized for software development, and capital expenditures for property and equipment.
(dollars in millions)
GAAP net cash provided by operating
activities
Less: purchase of property and equipment
Less: capitalized software development costs
Non-GAAP free cash flow
$
Non-GAAP organic revenue growth
2020
Change
2019
Change
2018
Years ended December 31,
$
148.0
(18.9) % $
182.5
(9.4) % $
201.4
(29.7)
(42.2)
76.1
158.4 %
(10.1) %
(11.5)
(46.9)
(21.9) %
24.6 %
(14.7)
(37.6)
(38.7) % $
124.1
(16.7) % $
149.0
In addition, we use non-GAAP organic revenue growth, non-GAAP organic revenue growth on a constant currency
basis and non-GAAP organic recurring revenue growth, in analyzing our operating performance. We believe that these
non-GAAP measures are useful to investors, as a supplement to GAAP measures, for evaluating the periodic growth of
our business on a consistent basis. Each of these measures of non-GAAP organic revenue growth excludes incremental
acquisition-related revenue attributable to companies acquired in the current fiscal year. For companies, if any, acquired
in the immediately preceding fiscal year, each of these non-GAAP organic revenue growth measures reflects
presentation of full year incremental non-GAAP revenue derived from such companies as if they were combined
throughout the prior period, and they include the non-GAAP revenue attributable to those companies, as if there were
no acquisition-related write-downs of acquired deferred revenue to fair value as required by GAAP. In addition, each of
these non-GAAP organic revenue growth measures excludes prior period revenue associated with divested businesses.
The exclusion of the prior period revenue is to present the results of the divested businesses within the results of the
combined company for the same period of time in both the prior and current periods. We believe this presentation
provides a more comparable representation of its current business’ organic revenue growth and revenue run-rate.
48
2020 Form 10-K
Blackbaud, Inc.
(dollars in millions)
GAAP revenue
GAAP revenue growth
(Less) Add: Non-GAAP acquisition-related revenue (1)
Non-GAAP organic revenue (2)
Non-GAAP organic revenue growth
Non-GAAP organic revenue (2)
Foreign currency impact on Non-GAAP organic revenue (3)
Non-GAAP organic revenue on constant currency basis (3)
Non-GAAP organic revenue growth on constant currency basis
GAAP recurring revenue
GAAP recurring revenue growth
(Less) Add: Non-GAAP acquisition-related revenue (1)
Non-GAAP organic recurring revenue
Non-GAAP organic recurring revenue growth
Years ended December 31,
2020
$
913.2
$
1.4 %
—
913.2
1.2 %
913.2
0.8
914.0
1.3 %
$
$
$
$
2019
900.4
1.9
902.4
902.4
—
902.4
$
850.7
$
831.6
2.3 %
—
850.7
2.1 %
$
$
1.9
833.5
(1) Non-GAAP acquisition-related revenue excludes incremental acquisition-related revenue calculated in accordance with GAAP that is attributable
to companies acquired in the current fiscal year. For companies acquired in the immediately preceding fiscal year, non-GAAP acquisition-related
revenue reflects presentation of full-year incremental non-GAAP revenue derived from such companies, as if they were combined throughout the
prior period, and it includes the current period non-GAAP revenue from the acquisition-related deferred revenue write-down attributable to
those companies.
(2) Non-GAAP organic revenue for the prior year periods presented herein will not agree to non-GAAP organic revenue presented in the respective
(3)
prior period quarterly financial information solely due to the manner in which non-GAAP organic revenue growth is calculated.
To determine non-GAAP organic revenue growth on a constant currency basis, revenues from entities reporting in foreign currencies were
translated to U.S. Dollars using the comparable prior period's quarterly weighted average foreign currency exchange rates. The primary foreign
currencies creating the impact are the Australian Dollar, British Pound, Canadian Dollar and EURO.
2020 Form 10-K
49
Blackbaud, Inc.
Rule of 40
Rule of 40 is defined as non-GAAP organic revenue growth plus non-GAAP adjusted EBITDA margin. Non-GAAP
adjusted EBITDA is defined as GAAP net income plus interest, net; income tax provision (benefit); depreciation;
amortization of intangible assets from business combinations; amortization of software development costs; acquisition-
related deferred revenue write-down; stock-based compensation; acquisition-related integration costs; acquisition-
related expenses; employee severance; and restructuring and other real estate activities.
(dollars in millions)
GAAP net income
Non-GAAP adjustments:
Add: Interest, net
Add: GAAP income tax provision (benefit)
Add: Depreciation(1)
Add: Amortization of intangibles from business combinations
Add: Amortization of software development costs(2)
Subtotal
Non-GAAP EBITDA
Non-GAAP EBITDA margin
Non-GAAP adjustments:
Add: Acquisition-related deferred revenue write-down
Add: Stock-based compensation expense
Add: Employee severance
Add: Acquisition-related integration costs
Add: Acquisition-related expenses
Add: Restructuring and other real estate activities
Subtotal
Adjusted Non-GAAP EBITDA
Adjusted Non-GAAP EBITDA margin
Rule of 40(3)
Years ended December 31,
2019
11.9
17.8
(1.3)
15.0
50.1
21.0
102.6
114.5
1.9
58.6
4.4
2.4
1.2
5.8
74.4
188.8
2020
$
7.7
$
15.6
13.9
14.6
41.9
32.5
118.5
126.3
13.8 %
—
87.3
4.9
(0.1)
0.4
23.3
115.6
241.9
26.5 %
27.7 %
$
$
$
$
(1) During the third quarter of 2020, we reduced the estimated useful lives of our operating lease right-of-use assets for certain of our office
locations we expected to exit. For these same office locations, we also reduced the estimated useful lives of certain facilities-related fixed assets,
which resulted in an increase in depreciation expense. The accelerated portion of the fixed asset depreciation expense related to these activities
of $4.6 million for the year ended December 31, 2020 was presented in the "Restructuring and other real estate activities" line of the
reconciliation of GAAP to non-GAAP financial measures. Total depreciation expense for the year ended December 31, 2020 was $19.2 million.
Includes amortization expense related to software development costs and amortization expense from capitalized cloud computing
implementation costs.
(2)
(3) Measured by non-GAAP organic revenue growth plus non-GAAP adjusted EBITDA margin. See Non-GAAP organic revenue growth table above.
Seasonality
Our revenues normally fluctuate as a result of certain seasonal variations in our business. Our transaction revenue has
historically been at its lowest in the first quarter due to the timing of customer fundraising initiatives and events. Our
revenue from payment services has historically increased during the fourth quarter due to year-end giving. Our revenue
from professional services has historically been lower in the first quarter when many of those services commence and in
the fourth quarter due to the holiday season. As a result of these and other factors, our total revenue has historically
been lower in the first quarter than in the remainder of our fiscal year, with the fourth quarter historically achieving the
highest total revenue. Our expenses, however, do not vary significantly as a result of these factors, but do fluctuate on a
quarterly basis due to varying timing of expenditures. Our cash flow from operations normally fluctuates quarterly due
to the combination of the timing of customer contract renewals including renewals associated with customers of
50
2020 Form 10-K
Blackbaud, Inc.
acquired companies, delivery of professional services and occurrence of customer events, the payment of bonuses, as
well as merit-based salary increases, among other factors. Historically, due to lower revenues in our first quarter,
combined with the payment of bonuses from the prior year in our first quarter and the payment of certain annual
vendor contracts, our cash flow from operations has been lowest in our first quarter. 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 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 merit-based salary
increases, which have historically been effective in April each year. Annual merit-based salary increases are expected to
return in July 2021. In addition, deferred revenues can vary on a seasonal basis for the same reasons. Our cash flow
from financing is negatively impacted in our first quarter when most of our equity awards vest, as we pay taxes on
behalf of our employees related to the settlement or exercise of equity awards. These patterns may change as a result of
the continued shift to online giving, growth in volume of transactions for which we process payments, or as a result of
acquisitions, new market opportunities, new solution introductions, the COVID-19 pandemic or other factors.
Liquidity and Capital Resources
The following table presents selected financial information about our financial position:
(dollars in millions)
Cash and cash equivalents
Property and equipment, net
Software development costs, net
Total carrying value of debt
Working capital
December 31,
2020
35.8 $
December 31,
2019
31.8
$
105.2
111.8
531.0
(194.3)
35.5
101.3
467.1
(254.3)
Change
12.4 %
195.9 %
10.4 %
13.7 %
23.6 %
The following table presents selected financial information about our cash flows:
Years ended December 31,
(dollars in millions)
Net cash provided by operating activities
Net cash used in investing activities
Net cash (used in) provided by financing activities
$
2020
148.0
(71.8)
(10.7)
Change
(18.9) % $
2019
182.5
Change
(9.4) % $
(57.0) %
(167.2)
(71.0) %
2018
201.4
(97.8)
(109.6) %
111.2
(138.1) %
(291.9)
Our principal sources of liquidity are operating cash flow, funds available under the 2020 Credit Facility and cash on
hand. Our operating cash flow depends on continued customer renewal of our subscription and maintenance
arrangements and market acceptance of our solutions and services. Based on current estimates of revenue and
expenses, we believe that the currently available sources of funds and anticipated cash flows from operations will be
adequate for at least the next twelve months to finance our operations, fund anticipated capital expenditures and meet
our debt obligations. To the extent we undertake future material acquisitions, investments or unanticipated capital
expenditures, we may require additional capital. In that context, we regularly evaluate opportunities to enhance our
capital structure including through potential debt or equity issuances.
2020 Form 10-K
51
Blackbaud, Inc.
To better enable us to weather the extraordinary business challenges brought about by the global COVID-19 pandemic,
to protect the safety and welfare of our employees, and to further effect our long-term strategy to deliver the greatest
value to our stockholders, we have taken several actions. These initial measures taken are expected to provide us the
financial flexibility needed to manage a wide array of outcomes that may result from the pandemic. Some of these
actions include the following:
• Temporarily closed our offices worldwide and transitioned our employees to work remotely;
• Rescinded our previously announced policy to pay an annual dividend at a rate of $0.48 per share of common
stock and discontinued the declaration and payment of all cash dividends, beginning with the second quarter of
2020 and thereafter until such time, if any, as our Board of Directors may otherwise determine in its sole
discretion;
• Suspended our 401(k)-match program, whereby we have historically matched 50% of qualified U.S. employees'
contributions to our 401(k) plan up to 6% of their salaries, between April 1, 2020 and December 31, 2020;
• Made a discretionary matching contribution to eligible employees 401(k) plans in December 2020 totaling $1.2
million, given our financial performance during the fourth quarter;
• Temporarily froze our hiring efforts and implemented a modest and targeted headcount reduction, though we
have since begun backfilling key roles, including engineering positions;
• Michael Gianoni, our President and Chief Executive Officer, elected to forego receipt of all but that portion of his
base salary necessary to fund, on a pre-tax basis, his contributions to continue to participate in our health benefits
plan, between April 1, 2020 and June 16, 2020;
• Restricted non-essential employee travel and put in place other operating cost containment actions;
• All of our employees with a base salary equal to or less than $75 thousand received financial support in the form
of a one-time bonus of $1 thousand on April 30, 2020;
• On May 1, 2020, we granted RSUs to our employees that were eligible for base salary merit increases in lieu of
such increases, which will vest on May 1, 2021 subject to the recipient's continued employment with us;
• On May 1, 2020, we granted PRSUs to our employees that were eligible for a 2020 cash bonus plan in lieu of
such cash bonus, which may be earned and become eligible for vesting on May 1, 2021 subject to meeting
certain performance conditions and the recipient's continued employment with us; and
• During the third quarter of 2020, we adjusted our workforce strategy to provide more flexibility for our
employees to work remotely when our offices reopen. This change also expands our access to a larger and more
diverse talent pool, empowers our leaders to make decisions based on skills and business need rather than
location, and it is expected to create efficiencies within our real estate strategy as we optimize our footprint and
shift toward more collaborative workspaces within our offices. Most of the transactions related to these real
estate activities closed during the fourth quarter of 2020 with an aggregate one-time cash outlay of $21.9 million
during the third and fourth quarters of 2020. We incurred approximately $23.1 million of pre-tax costs related to
these real estate activities during the third and fourth quarters of 2020. These activities are expected to result in
future annual before-tax savings of approximately $14.0 million beginning in 2021.
In addition to the initial actions we have taken to date, we are continuously evaluating further possible actions in order
to respond quickly to rapidly changing conditions, if needed.
While we experienced an increase in our aging of receivables during the second and third quarters of 2020 primarily
associated with the COVID-19 pandemic, we have seen some improvement in our customers' payment behavior since
that time. We have received short-term payment relief requests as a result of COVID-19, most often in the form of
payment deferral
the
customer's ability to pay. Not all customer requests ultimately result in modified payment terms, nor are we forgoing
our contractual rights under customer agreements. During 2020, our bad debt expense increased by $4.6 million,
terms,
compared
and creditworthiness for changes that could have a significant impact on the collectability of our accounts receivables,
our operating results and financial position.
to 2019. We are continually monitoring our customer
requests. We are evaluating each
request on a case-by-case basis
receivable balances, payment
to assess
At December 31, 2020, our total cash and cash equivalents balance included approximately $18.5 million of cash that
was held outside the U.S. While these funds may not be needed to fund our U.S. operations for at least the next twelve
months, if we need these funds, we may be required to accrue and pay taxes to repatriate a portion of the funds. We
currently do not intend or anticipate a need to repatriate our cash held outside the U.S.
52
2020 Form 10-K
Blackbaud, Inc.
Operating Cash Flow
During 2021, we expect our total operating cash flow to increase when compared to 2020, primarily due to:
•
•
•
•
•
•
the replacement of our 2020 cash bonus plans with performance-based equity awards (which we expect will
continue going forward);
the one-time cash payments associated with the exit of a number of our leases in 2020 that will not recur in
2021; and
improvements to working capital management (an expected increase in trade accounts payable); partially offset
by
an increase in the payment of payroll taxes as we deferred payments of the employer's portion of Social
Security taxes during 2020 under the Coronavirus, Aid, Relief and Economic Security Act ("CARES Act");
the return of annual merit-based salary increases to our employees in July 2021; and
the return of our 401(k)-match program effective January 1, 2021.
Throughout 2020, 2019 and 2018, our cash flows from operations were derived principally from: (i) our earnings from
on-going operations prior to non-cash expenses such as depreciation, amortization, stock-based compensation,
deferred income taxes, amortization of deferred financing costs and debt discount and adjustments to our provision for
credit losses and sales returns; and (ii) changes in our working capital.
Working capital changes are comprised of changes in accounts receivable, prepaid expenses and other assets, trade
accounts payable, accrued expenses and other liabilities and deferred revenue.
2020 vs. 2019
Net cash provided by operating activities decreased by $34.5 million during the year ended December 31, 2020, when
compared to the same period in 2019, primarily due a $81.0 million decrease in cash flow from operations associated
with working capital, partially offset by a $46.5 million increase in net income adjusted for non-cash expenses.
The decrease in cash flow from operations associated with working capital during 2020, when compared to 2019, was
primarily due to:
•
•
•
•
•
•
an increase in current period bonus payments as a result of an increase in amounts accrued as of December 31,
2019 for over-performance against 2019 targets;
a decrease in current period bonus accrual due to our decision to replace cash payments for our 2020 bonus
plans with performance-based equity awards;
a decrease in customer billings and payment collections due to the declines in our 2020 bookings performance
compared to 2019 as a result of the COVID-19 pandemic;
an increase in the aging of customer receivable balances, primarily due to COVID-19;
an increase in one-time cash payments associated with the exit of a number of our leases; and
fluctuations in the timing of vendor payments.
2019 vs. 2018
Net cash provided by operating activities decreased by $18.9 million during the year ended December 31, 2019, when
compared to the same period in 2018, primarily due to a $10.8 million decrease in net income adjusted for non-cash
expenses, and a decrease in cash flow from operations associated with working capital.
2020 Form 10-K
53
Blackbaud, Inc.
Cash flow from operations associated with working capital decreased $8.1 million during 2019, when compared to
2018, primarily due to:
•
•
•
•
•
an increase in the amount of deferred revenue recognized slightly outpacing customer billings;
an increase in collection of customer account balances in 2018 from an aging improvement initiative; and
an income tax refund received in 2018 which did not recur in 2019; partially offset by
an increase in accrued bonuses as of December 31, 2019 when compared the same date in 2018; and
fluctuations in the timing of vendor payments.
Investing Cash Flow
During 2021, we expect our total capital expenditures to decrease when compared to 2020, primarily due to the
purchase of our Global Headquarters Facility in 2020 that will not recur in 2021.
2020 vs. 2019
Net cash used in investing activities of $71.8 million decreased by $95.4 million during 2020, when compared to 2019.
We spent $109.4 million for our acquisition of YourCause in 2019 and we did not make any similar investments during
2020. We used $42.2 million for software development costs, which was down $4.7 million from cash spent during
2019. We continue to invest in our innovative cloud solutions, as well as development activities for Blackbaud SKY, our
modern cloud platform.
We also spent $29.7 million of cash for purchases of property and equipment during 2020, which was up $18.2 million
from cash spent in 2019. The additional cash expended was primarily used to purchase our Global Headquarters Facility.
2019 vs. 2018
Net cash used in investing activities of $167.2 million increased by $69.4 million during 2019, when compared to 2018.
During 2019, we used net cash of $109.4 million, for our acquisition of YourCause, while we spent $44.9 million on
investments in acquired companies in 2018. We used $46.9 million for software development costs, which was up $9.2
million from cash spent during 2018. The increase in cash outlays for software development costs was primarily related
to our innovative cloud solutions as well as development activities for Blackbaud SKY, our modern cloud platform.
We also spent $11.5 million of cash for purchases of property and equipment during 2019, which was down $3.2
million from cash spent in 2018. The higher cash outlays for property and equipment during 2018 was primarily driven
by leasehold improvements for our Global Headquarters Facility.
Financing Cash Flow
2020 vs. 2019
During 2020, we had a net increase in borrowings of $0.9 million, compared to a net increase in borrowings of $79.5
million in 2019, which was primarily attributable to our acquisition of YourCause. During 2020, we spent $41.0 million
on repurchases of our common stock (see additional details below regarding our stock repurchase program). In
addition, during 2020, we paid dividends of $6.0 million, which was down compared to 2019, as we discontinued the
declaration and payment of all cash dividends beginning with the second quarter of 2020.
We paid $21.4 million to satisfy tax obligations of employees upon settlement or exercise of equity awards during 2020
compared to $23.8 million during 2019. The amount of taxes paid by us on behalf of employees related to the
settlement or exercise of equity awards varies from period to period based upon the timing of grants and vesting,
employee exercise decisions, 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.
54
2020 Form 10-K
Blackbaud, Inc.
Cash flow from financing activities associated with changes in restricted cash due to customers decreased $16.6 million
during 2020, when compared to 2019, as the amount of restricted cash held and payable by us to customers as of
December 31, 2019 was significantly larger than at the same date in 2018 primarily due to the timing of year-end
donations. Additionally, effective August 3, 2020, a significant amount of restricted cash related to charitable giving
transacted through our social responsibility and grantmaking solutions is now held and disbursed by the Blackbaud
Giving Fund, an independent nonprofit organization, strategic partner of ours, and sponsoring organization for a donor
advised fund. This change was made primarily to better support our YourCause CSR Connect and YourCause Grants
Connect solutions.
2019 vs. 2018
During 2019, we had a net increase in borrowings of $79.5 million, which was primarily attributable to our acquisition
of YourCause, compared to a net decrease in borrowings of $51.6 million in 2018.
We paid $23.8 million to satisfy tax obligations of employees upon settlement or exercise of equity awards during 2019
compared to $27.7 million during 2018. In addition, during 2019, we paid dividends of $23.6 million, which was
relatively consistent with 2018.
Cash flow from financing activities associated with changes in restricted cash due to customers increased $266.3 million
during 2019, when compared to 2018. The amount of restricted cash held and payable by us to customers as of
December 31, 2017 was significantly larger than at the same date in 2018 primarily due to the timing of year-end
donations.
Stock repurchase program
In November 2020, our Board of Directors reauthorized and expanded a stock repurchase program that authorizes us to
purchase up to $250.0 million of our outstanding shares of common stock. The program does not have an expiration
date. Under the 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 may be limited, suspended or
discontinued at any time without prior notice. During the year ended December 31, 2020, we purchased 714,000
shares for $41.0 million. Between January 1, 2021 and February 19, 2021, we repurchased an additional 465,821
shares for $28.1 million.
2020 Credit Facility
In October 2020, we entered into a 5-year $900.0 million Amended and Restated Credit Agreement (the “2020 Credit
Facility”). Upon closing, we drew $400.0 million on a term loan and used the proceeds to repay the outstanding
principal balance of the term loan under the previous credit facility, and repay $124.4 million of outstanding revolving
credit loans under the previous credit facility.
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 December 31, 2020, our
available borrowing capacity under the 2020 Credit Facility was $429.3 million. The 2020 Credit Facility matures in
October 2025.
At December 31, 2020, the carrying amount of our debt under the 2020 Credit Facility was $467.1 million. Our average
daily borrowings were $482.4 million during 2020.
Following is a summary of the financial covenants under the 2020 Credit Facility:
Financial Covenant
Net Leverage Ratio
Interest Coverage Ratio
Requirement
≤ 4.00 to 1.00
≥ 2.50 to 1.00
Ratio as of December 31, 2020
1.75 to 1.00
15.95 to 1.00
2020 Form 10-K
55
Blackbaud, Inc.
Under the 2020 Credit Facility, we also have restrictions on our ability to declare and pay dividends and our ability to
repurchase shares of our common stock. In order to pay any cash dividends and/or repurchase shares of stock: (i) no
default or event of default shall have occurred and be continuing under the 2020 Credit Facility, and (ii) our pro forma
net leverage ratio, as set forth in the 2020 Credit Facility, must be 0.25 less than the net leverage ratio requirement at
the time of dividend declaration or share repurchase. At December 31, 2020, we were in compliance with our debt
covenants under the 2020 Credit Facility.
Commitments and Contingencies
As of December 31, 2020, we had contractual obligations with future minimum commitments as follows:
(in millions)
Recorded contractual obligations:
Debt(2)
Operating leases(3)
Interest payments on debt(4)
Unrecorded contractual obligations:
Purchase obligations(5)
Interest payments on debt(6)
Total contractual obligations(1)
Payments due by period
Total(1)
Less than 1
year
1-3 years
3-5 years
More than 5
years
$
534.2 $
12.8 $
25.0 $
443.0 $
29.5
4.5
94.8
79.5
10.4
3.4
59.1
11.5
10.2
1.1
34.6
23.4
5.1
—
1.0
21.0
$
742.5 $
97.2 $
94.3 $
470.2 $
53.4
3.8
—
—
23.6
80.8
(1)
(2)
The individual amounts for each obligation may not sum to total or total contractual obligations due to rounding.
Represents principal payments only, under the following assumptions: (i) that the amounts outstanding under the 2020 Credit Facility, our real
estate loans and our other debt at December 31, 2020 will remain outstanding until maturity, with minimum payments occurring as currently
scheduled, and (ii) that there are no assumed future borrowings on the 2020 Revolving Facility for the purposes of determining minimum
commitment amounts.
(3) Our commitments related to operating leases have not been reduced by sublease income, incentive payments, reimbursement of leasehold
improvements and the amount representing imputed interest of $2.8 million.
Represents interest payment obligations related to our interest rate swap agreements.
(4)
(5) We have contractual obligations for third-party technology used in our solutions and for other services we purchase as part of our normal
(6)
operations. In certain cases, these arrangements require a minimum annual purchase commitment by us.
The actual interest expense recognized in our 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 described in (2) above.
The term loan under the 2020 Credit Facility and our other debt 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 2020 Credit Facility in
October 2025. The Real Estate Loans also require periodic principal payments and the balance of the real estate loans
are due upon maturity in April 2038.
The total liability for uncertain tax positions as of December 31, 2020 and December 31, 2019, was $4.6 million and
$4.3 million, respectively. Our accrued interest and penalties related to tax positions taken on our tax returns was $1.1
million and $1.0 million as of December 31, 2020 and 2019, respectively.
Off-Balance Sheet Arrangements
As of December 31, 2020, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of
Regulation S-K promulgated by the SEC, that have or are reasonably likely to have, a current or future effect on our
financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
56
2020 Form 10-K
Blackbaud, Inc.
Foreign Currency Exchange Rates
Approximately 15% of our total revenue for 2020 was generated by operations outside the U.S. We do not have
significant operations in countries in which the economy is considered to be highly inflationary. Our consolidated
financial statements are denominated in U.S. dollars and, accordingly, changes in the exchange rate between foreign
currencies and the U.S. dollar will affect the translation of our subsidiaries’ financial results into U.S. dollars for purposes
of reporting our consolidated financial results. The accumulated currency translation adjustment, recorded within other
comprehensive loss as a component of stockholders’ equity, was a gain of $0.6 million as of December 31, 2020 and a
loss of $4.0 million as of December 31, 2019.
The vast majority of our contracts are entered into by our U.S. or U.K. entities. The contracts entered into by the U.S.
entity are almost always denominated in U.S. dollars or Canadian dollars, and contracts entered into by our U.K.,
Australian and Irish subsidiaries are generally denominated in British Pounds, Australian dollars and Euros, respectively.
Historically, as the U.S. dollar weakened, foreign currency translation resulted in an increase in our revenues and
expenses denominated in non-U.S. currencies. Conversely, as the U.S. dollar strengthened, foreign currency translation
resulted in a decrease in our revenues and expenses denominated in non-U.S. currencies. During 2020, foreign
translation resulted in decreases in our revenues and expenses denominated in non-U.S. currencies. Though we have
exposure to fluctuations in currency exchange rates, the impact has generally not been material to our consolidated
results of operations or financial position. During 2020, the fluctuation in foreign currency exchange rates reduced our
total revenue and our income from operations by $0.8 million and $0.7 million, respectively. We will continue
monitoring such exposure and take action as appropriate. To determine the impacts on revenue (or income from
operations) from fluctuations in currency exchange rates, current period revenues (or income from operations) from
entities reporting in foreign currencies were translated into U.S. dollars using the comparable prior year period's
weighted average foreign currency exchange rates. These impacts are non-GAAP financial information and are not in
accordance with, or an alternative to, information prepared in accordance with GAAP.
Inflation
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If
our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher
costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of
operations. In addition, if inflationary pressures impact the rate of giving to our customers, there could be adverse
impacts to our business, financial condition and results of operations.
Critical Accounting Estimates
Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with accounting principles generally accepted in the United States
("GAAP"). The preparation of these financial statements requires us 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.
We base our estimates on historical experience, current trends and various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results could materially differ from any
of our estimates under different assumptions or conditions. Our significant accounting policies are discussed in Note 2
to our consolidated financial statements in this report. We believe the accounting estimates listed below are the most
critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult,
subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are
inherently uncertain.
2020 Form 10-K
57
Blackbaud, Inc.
Revenue Recognition
Description
Judgments and Uncertainties
See Note 2 to our consolidated financial
statements in this report for a complete
discussion of our revenue recognition
policies.
Our revenue recognition accounting methodology
contains uncertainties because it requires us to make
significant estimates and assumptions, and to apply
judgment.
Revenues are recognized when control of our
services is transferred to our customers, in an
amount that reflects the consideration we
expect to be entitled to in exchange for those
services.
We determine revenue recognition through
the following steps:
(1) Identification of the contract, or contracts,
with a customer;
For example, for arrangements that have multiple
performance obligations, we must exercise judgment
and use estimates in order to (1) determine whether
performance obligations are distinct and should be
accounted for separately; (2) determine the
standalone selling price of each performance
obligation; (3) allocate the transaction price among
the various performance obligations on a relative
standalone selling price basis; and (4) determine
whether revenue for each performance obligation
should be recognized at a point in time or over time.
In addition, we exercise judgment in certain
transactions when determining whether we should
recognize revenue based on the gross amount billed
to a customer (as a principal) or the net amount
retained (as an agent). These judgments are based on
our determination of whether or not we control the
service before it is transferred to the customer.
(2) Identification of the performance
obligations in the contract;
(3) Determination of the transaction price;
(4) Allocation of the transaction price to the
performance obligations in the contract; and
(5) Recognition of revenue when, or as, we
satisfy a performance obligation.
Costs of Obtaining Contracts
Description
Judgments and Uncertainties
We pay sales commissions at the time
contracts with customers are signed or
shortly thereafter, depending on the size and
duration of the sales contract. Sales
commissions and related fringe benefits
earned by our sales force are considered
incremental and recoverable costs of
obtaining a contract with a customer. These
costs are deferred and then amortized in a
manner that aligns with the expected period
of benefit, which we have determined to be
five years. We do not generally pay
commissions for contract renewals. The
related amortization expense is included in
sales, marketing and customer success
expense in our consolidated statements of
comprehensive income.
Our accounting methodology for determining the
period over which we amortize costs of obtaining
contracts with customers contains uncertainties
because it requires us to make significant estimates
and assumptions, and to apply judgment.
For example, we must exercise judgment and use
estimates in order to determine the expected period
of benefit of our sales commissions. We take into
consideration our customer contracts, including
renewals, retention, our technology and other
factors.
Effect if Actual Results Differ
From Assumptions
If we were to change any of these judgments
or estimates, it could cause a material increase
or decrease in the amount of revenue or
deferred revenue that we report in a particular
period.
Effect if Actual Results Differ
From Assumptions
If we were to change any of these judgments
or estimates, it could cause a material increase
or decrease in the amount of assets, operating
expenses or income that we report in a
particular period.
58
2020 Form 10-K
Business Combinations
Description
We allocate the purchase price of an
acquired business to its identifiable assets
acquired and liabilities assumed at the
acquisition date based upon their estimated
fair values. The excess of the purchase price
over the amount allocated to the identifiable
assets acquired and liabilities assumed, if any,
is recorded as goodwill.
We use available information to estimate fair
values. We typically engage outside appraisal
firms to assist in the fair value determination
of long-lived and identifiable intangible
assets, and any other significant assets or
liabilities. We adjust the preliminary purchase
price allocation, as necessary, up to one year
after the acquisition closing date as we
obtain new information about facts and
circumstances that existed as of the closing
date.
Income Taxes
Description
We make estimates and judgments in
accounting for income taxes. Our income tax
returns, like those of most companies, are
periodically audited by domestic and foreign
tax authorities.
We measure and recognize uncertain tax
positions. To recognize uncertain tax
positions, we must first determine if it is
more likely than not that the position will be
sustained upon audit. We must then measure
the benefit as the largest amount that is
more than 50% likely of being realized upon
ultimate settlement.
We make estimates in determining tax assets
and liabilities, which arise from differences in
the timing of recognition of revenue and
expense for tax and financial reporting
purposes. We record valuation allowances to
reduce our deferred tax assets to the amount
expected to be realized.
Blackbaud, Inc.
Judgments and Uncertainties
Our purchase price allocation methodology contains
uncertainties because it requires us to make
significant estimates and assumptions, and to apply
judgment to estimate the fair value of assets acquired
and liabilities assumed, especially with respect to
long-lived and intangible assets.
Management estimates the fair value of assets
acquired and liabilities assumed based on quoted
market prices, the carrying value of the acquired
assets and widely accepted valuation techniques,
including discounted cash flows and market multiple
analyses.
Critical estimates in valuing intangible assets include,
but are not limited to, estimates about: expected
future cash flows from customers, including revenue
and operating expenses; royalty and customer
attrition rates; proprietary technology obsolescence
curve; the acquired company's brand awareness and
market position; the market awareness of the
acquired company's branded technology solutions
and services; assumptions about the period of time
the brands will continue to be valuable; as well as
expected costs to develop any in-process research
and development into commercially viable solutions
and estimated cash flows from the projects when
completed, and discount rates. Our estimates of fair
value are based upon assumptions we believe to be
reasonable, but which are inherently uncertain and
unpredictable. Assumptions may be incomplete or
inaccurate, and unanticipated events and
circumstances may occur.
Judgments and Uncertainties
The calculation of our income tax provision requires
estimates due to transactions, credits and calculations
where the ultimate tax determination is uncertain.
Uncertainties arise as a consequence of the actual
source of taxable income between domestic and
foreign locations, the outcome of tax audits and the
ultimate utilization of tax credits.
Our effective income tax rate is also affected by
changes in the geographic distribution of our
earnings or losses, changes in tax law in jurisdictions
where we conduct business.
Significant judgment is required in the identification
and measurement of uncertain tax positions. Our
liability for unrecognized tax benefits contains
uncertainties because management is required to
make assumptions and to apply judgment to
estimate the exposures associated with our various
filing positions.
In assessing the adequacy of a recorded valuation
allowance significant judgment is required. We
consider all positive and negative evidence and a
variety of factors including the scheduled reversal of
deferred tax liabilities, historical and projected future
taxable income, and prudent and feasible tax
planning strategies.
Effect if Actual Results Differ
From Assumptions
If actual results are materially different than
the assumptions we used to determine fair
value of the assets acquired and liabilities
assumed through a business combination as
well as the estimated useful lives of the
acquired intangible assets, it is possible that
adjustments to the carrying values of such
assets and liabilities will have a material
impact on our financial position and results of
operations.
See Note 3 to our consolidated financial
statements in this report for information
regarding our business acquisitions.
Effect if Actual Results Differ
From Assumptions
Although we believe that the judgments and
estimates discussed herein are reasonable,
actual results could differ, and we may be
exposed to losses or gains that could be
material.
To the extent actual results differ from
estimated amounts recorded, such differences
will impact the income tax provision in the
period in which the determination is made.
If we determine there is less than a 50%
likelihood that we will be able to use a
deferred tax asset in the future in excess of its
net carrying value, then an adjustment to the
deferred tax asset valuation allowance is made
to increase income tax expense, thereby
reducing net income in the period such
determination was made.
2020 Form 10-K
59
Blackbaud, Inc.
Long-lived Assets and Intangible Assets Other Than Goodwill
Description
Judgments and Uncertainties
When measuring impairment of an asset using
discounted cash flows, we make assumptions and
apply judgment in estimating future cash flows and
asset fair values, including annual revenue growth
rates, a terminal year growth rate and selecting a
discount rate that reflects the risk inherent in future
cash flows.
We review our long-lived assets and
intangible assets other than goodwill for
impairment when events or changes in
circumstances indicate the carrying amount
may not be recoverable. If such events or
changes in circumstances occur, we use the
undiscounted cash flow method to determine
whether our long-lived and intangible assets
other than goodwill are impaired. To the
extent that the carrying value of the asset
exceeds the undiscounted cash flows over
the estimated remaining life of the asset, we
measure the impairment using discounted
cash flows.
Effect if Actual Results Differ
From Assumptions
We have not made any material changes in
the accounting methodology we use to assess
impairment loss during the year ended
December 31, 2020.
During 2020, we recorded impairment
charges against certain property and
equipment assets and certain operating lease
ROU assets. For additional information, see
Notes 7 and 11 to our consolidated financial
statements in this report.
We do not believe there is a reasonable
likelihood that there will be a material change
in the future estimates or assumptions we use
to assess impairment losses. However, if actual
results are not consistent with our estimates
or assumptions, we may be exposed to an
impairment charge that could materially
adversely impact our consolidated financial
position and results of operations.
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 consolidated financial statements in
this report.
60
2020 Form 10-K
Blackbaud, Inc.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
We have market rate sensitivity for interest rates and foreign currency exchange rates.
Interest Rate Risk
Our variable rate debt is our primary financial instrument with market risk exposure for changing interest rates. We
manage our variable rate interest rate risk through a combination of short-term and long-term borrowings and the use
of derivative instruments entered into for hedging purposes. Our interest rate exposure includes LIBOR rates. The
Financial Conduct Authority in the U.K. has stated that it plans to phase out LIBOR by the end of calendar year 2021.
We do not currently anticipate a significant impact to our financial position or results of operations as a result of this
action as we expect that our financial contracts currently indexed to LIBOR will either expire or be modified without
significant financial impact before the phase out occurs. Due to the nature of our debt, the materiality of the fair values
of the derivative instruments and the highly liquid, short-term nature and level of our cash and cash equivalents as of
December 31, 2020, we believe there is no material risk of exposure to changing interest rates for those positions.
There were no significant changes in how we manage interest rate risk between December 31, 2019 and December 31,
2020.
Foreign Currency Risk
For a discussion of our exposure to foreign currency exchange rate fluctuations, see “Management’s Discussion and
Analysis of Financial Condition and Results of Operations — Foreign Currency Exchange Rates” in Item 7 of this report.
2020 Form 10-K
61
Blackbaud, Inc.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BLACKBAUD, INC.
Index to consolidated financial statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders’ Equity
Notes to Consolidated Financial Statements
Page No.
63
65
66
67
68
69
62
2020 Form 10-K
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Blackbaud, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Blackbaud, Inc. and its subsidiaries (the
"Company") as of December 31, 2020 and 2019, and the related consolidated statements of comprehensive income,
of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2020, including
the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the
Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts
for leases in 2019.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in Management's Report on Internal Controls Over Financial Reporting appearing under Item 9A.
Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's
internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting
was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. Our audit of internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide
a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
2020 Form 10-K
63
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that (i) relates
to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way
our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which
it relates.
Revenue recognition - Contracts with Multiple Performance Obligations
As described in Note 2 to the consolidated financial statements, the Company has some contracts with customers that
contain multiple performance obligations. For these contracts, management accounts for individual performance
obligations separately if they are distinct. As described by management, management exercises judgment and uses
estimates in order to (1) determine whether performance obligations are distinct and should be accounted for
separately; (2) determine the standalone selling price of each performance obligation; (3) allocate the transaction price
among the various performance obligations on a relative standalone selling price basis; and (4) determine whether
revenue for each performance obligation should be recognized at a point in time or over time. For the year ended
December 31, 2020, the Company’s total revenue was $913.2 million.
The principal considerations for our determination that performing procedures relating to revenue recognition, contracts
with multiple performance obligations, is a critical audit matter are the significant judgment by management in
identifying, evaluating and accounting for performance obligations in contracts with multiple performance obligations,
which led to significant auditor judgment and effort in performing procedures to evaluate whether contracts with
multiple performance obligations were appropriately identified, evaluated and accounted for by management.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to the revenue recognition process, including controls over the identification, evaluation and accounting for
contracts with multiple performance obligations. These procedures also included, among others, testing management’s
process for identifying, evaluating and accounting for performance obligations. This included, (i) examining revenue
arrangements on a test basis, including evaluating the terms and conditions of the arrangements and testing the
identification, evaluation and accounting of the performance obligations; (ii) testing the allocation of the transaction
price between performance obligations based on the estimated standalone selling prices on a test basis; (iii) performing
procedures to test the completeness and accuracy of the data used to determine stand-alone selling price; and (iv)
evaluating the reasonableness of the approach used to determine stand-alone selling price.
/S/ PRICEWATERHOUSECOOPERS LLP
Atlanta, Georgia
February 23, 2021
We have served as the Company's auditor since 2000.
64
2020 Form 10-K
Blackbaud, Inc.
Consolidated Balance Sheets
(dollars in thousands)
Assets
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowance of $10,292 and $5,529 at December
31, 2020 and December 31, 2019, respectively
Customer funds receivable
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Software development costs, net
Goodwill
Intangible assets, net
Other assets
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable
Accrued expenses and other current liabilities
Due to customers
Debt, current portion
Deferred revenue, current portion
Total current liabilities
Debt, net of current portion
Deferred tax liability
Deferred revenue, net of current portion
Operating lease liabilities, net of current portion
Other liabilities
Total liabilities
Commitments and contingencies (see Note 9)
Stockholders’ equity:
December 31,
2020
December 31,
2019
$
35,750 $
609,219
31,810
545,485
$
$
95,404
321
78,366
819,060
105,177
22,671
111,827
635,854
277,506
72,639
2,044,734 $
27,836 $
52,228
608,264
12,840
312,236
1,013,404
518,193
54,086
4,678
17,357
10,866
1,618,584
88,868
524
67,852
734,539
35,546
104,400
101,302
634,088
317,895
65,193
1,992,963
47,676
73,317
546,009
7,500
314,335
988,837
459,600
44,594
1,802
95,624
5,742
1,596,199
Preferred stock; 20,000,000 shares authorized, none outstanding
Common stock, $0.001 par value; 180,000,000 shares authorized,
60,904,638 and 60,206,091 shares issued at December 31, 2020 and
December 31, 2019, respectively
Additional paid-in capital
Treasury stock, at cost; 12,054,268 and 11,066,354 shares at December 31,
2020 and December 31, 2019, respectively
Accumulated other comprehensive loss
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
—
—
61
544,963
60
457,804
(353,091)
(2,497)
236,714
426,150
2,044,734 $
(290,665)
(5,290)
234,855
396,764
1,992,963
$
The accompanying notes are an integral part of these consolidated financial statements.
2020 Form 10-K
65
Blackbaud, Inc.
Consolidated Statements of Comprehensive Income
(dollars in thousands, except per share amounts)
2020
2019
2018
Years ended December 31,
Revenue
Recurring
One-time services and other
Total revenue
Cost of revenue
Cost of recurring
Cost of one-time services and other
Total cost of revenue
Gross profit
Operating expenses
Sales, marketing and customer success
Research and development
General and administrative
Amortization
Restructuring
Total operating expenses
Income from operations
Interest expense
Other income, net
Income before provision for income taxes
Income tax provision (benefit)
Net income
Earnings per share
Basic
Diluted
Common shares and equivalents outstanding
Basic weighted average shares
Diluted weighted average shares
Other comprehensive income (loss)
Foreign currency translation adjustment
Unrealized (loss) gain on derivative instruments, net of tax
Total other comprehensive income (loss)
Comprehensive income
$ 850,745 $ 831,609 $ 762,181
86,425
848,606
68,814
900,423
62,474
913,219
369,681
58,384
428,065
485,154
357,988
60,436
418,424
481,999
305,481
76,261
381,742
466,864
209,762
100,146
134,852
2,915
236
447,911
37,243
(17,287)
1,658
21,614
13,897
7,717 $
224,152
106,164
113,414
5,316
5,808
454,854
27,145
(20,618)
4,058
10,585
(1,323)
11,908 $
192,848
98,811
106,354
4,844
4,590
407,447
59,417
(15,898)
1,103
44,622
(219)
44,841
0.16 $
0.16 $
0.25 $
0.25 $
0.95
0.93
$
$
$
48,184,714 47,695,383 47,206,669
48,696,341 48,312,271 48,045,084
4,571
2,641
(1,778)
2,793
10,510 $
(2,821)
(180)
11,728 $
(5,218)
583
(4,635)
40,206
$
The accompanying notes are an integral part of these consolidated financial statements.
66
2020 Form 10-K
Blackbaud, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Provision for credit losses and sales returns
Stock-based compensation expense
Deferred taxes
Amortization of deferred financing costs and discount
Other non-cash adjustments
Changes in operating assets and liabilities, net of acquisition and disposal of businesses:
Years ended December 31,
2020
2019
2018
$
7,717 $ 11,908 $ 44,841
92,735
13,230
87,257
8,837
781
2,958
85,693
8,725
58,633
(3,600)
752
4,906
79,566
6,890
48,274
(619)
752
(1,912)
Accounts receivable
Prepaid expenses and other assets
Trade accounts payable
Accrued expenses and other liabilities
Deferred revenue
Net cash provided by operating activities
Cash flows from investing activities
Purchase of property and equipment
Capitalized software development costs
Purchase of net assets of acquired companies, net of cash and restricted cash acquired
Other investing activities
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of debt
Payments on debt
Debt issuance costs
Employee taxes paid for withheld shares upon equity award settlement
Proceeds from exercise of stock options
Change in due to customers
Change in customer funds receivable
Purchase of treasury stock
Dividend payments to stockholders
Net cash (used in) provided by financing activities
Effect of exchange rate on cash, cash equivalents and restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of year
Cash, cash equivalents and restricted cash, end of year
Supplemental disclosure of cash flow information
Cash (paid) received during the year for:
Interest
Taxes, net of refunds
Non-cash investing and financing activities:
Purchase of property and equipment by assuming directly related liabilities
Purchase of equipment and other assets included in accounts payable
Acquired restricted cash liabilities due to customers
(18,414)
22,568
(19,997)
(49,232)
(485)
2,166
(5,217)
9,487
(2,027)
19,184
147,955 182,477 201,385
(6,569)
6,383
12,900
(9,718)
12,464
(29,690)
(42,157)
—
—
(71,847)
(11,492)
(46,874)
(109,353)
500
(167,219)
(14,719)
(37,629)
(44,943)
(500)
(97,791)
(747,563)
(4,586)
(21,425)
4
61,214
138
(41,001)
(5,960)
(344,500)
—
(23,781)
7
77,793
1,301
—
(23,607)
(10,679) 111,213
978
67,674 127,449
748,500 424,000 270,900
(322,476)
—
(27,685)
11
(188,502)
(844)
—
(23,312)
(291,908)
(2,014)
(190,328)
577,295 449,846 640,174
$ 644,969 $ 577,295 $ 449,846
2,245
$
(15,716) $
(3,563)
(19,926) $
(383)
(15,261)
7,138
(61,064)
(840)
—
—
(794)
46,838
—
(882)
—
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated
balance sheets that sum to the total of the same such amounts shown above in the consolidated statements of cash flows:
(dollars in thousands)
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash in the statement of cash flows
December 31,
2020
35,750 $
609,219
644,969 $
December 31,
2019
31,810
545,485
577,295
$
$
The accompanying notes are an integral part of these consolidated financial statements.
2020 Form 10-K
67
Blackbaud, Inc.
Consolidated Statements of Stockholders' Equity
Common stock
Shares
Amount
Additional
paid-in
capital
Treasury
stock
Accumulated
other
comprehensive
loss
Retained
earnings
(dollars in thousands)
Balance at December 31, 2017
Net income
Payment of dividends ($0.48 per share)
Exercise of stock options and stock appreciation rights and vesting of
restricted stock units
Employee taxes paid for 284,780 withheld shares upon equity award
settlement
Stock-based compensation
Restricted stock grants
Restricted stock cancellations
Other comprehensive loss
Reclassification upon adoption of ASU 2018-02(1)
Balance at December 31, 2018
Net income
Payment of dividends ($0.48 per share)
Exercise of stock options and stock appreciation rights and vesting of
restricted stock units
Employee taxes paid for 305,780 withheld shares upon equity award
settlement
Stock-based compensation
Restricted stock grants
Restricted stock cancellations
Other comprehensive loss
Balance at December 31, 2019
Net income
Payment of dividends ($0.12 per share)(2)
Purchase of 714,000 treasury shares under stock repurchase program
Exercise of stock options and vesting of restricted stock units
58,551,761 $
—
—
59 $ 351,042 $ (239,199) $
—
—
—
—
—
—
349,248
—
11
—
—
—
541,786
(115,162)
—
—
59,327,633 $
—
—
(27,685)
—
—
—
—
—
—
—
48,188
—
—
—
—
—
—
—
—
—
59 $ 399,241 $ (266,884) $
—
—
—
—
—
—
267,455
—
7
—
—
—
723,868
(112,865)
—
60,206,091 $
—
—
—
218,141
(23,781)
—
—
—
—
—
—
58,556
—
—
1
—
—
—
—
60 $ 457,804 $ (290,665) $
—
—
—
—
—
—
—
—
—
(41,001)
4
—
Employee taxes paid for 273,914 withheld shares upon equity award
settlement
Stock-based compensation
Restricted stock grants
Restricted stock cancellations
Other comprehensive income
Balance at December 31, 2020
(1) Refer to the discussion of recently adopted accounting pronouncements in Note 2 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the SEC on February 20, 2019.
—
—
87,155
—
—
1
—
—
—
—
61 $ 544,963 $ (353,091) $
—
—
657,483
(177,077)
—
(21,425)
—
—
—
—
60,904,638 $
(2) Represents dividends paid in Q1 2020. See Note 14 of these consolidated financial statements for a discussion of our Board of Directors' decision to discontinue the declaration and payments of all cash dividends beginning in Q2 2020.
The accompanying notes are an integral part of these consolidated financial statements.
68
2020 Form 10-K
(642) $ 225,029 $
—
—
—
—
—
—
—
(4,635)
167
44,841
(23,312)
—
—
86
—
—
—
(167)
(5,110) $ 246,477 $
—
—
—
—
—
—
—
(180)
11,908
(23,607)
—
—
77
—
—
—
(5,290) $ 234,855 $
—
—
—
—
7,717
(5,960)
—
—
—
—
—
—
2,793
(2,497) $ 236,714 $
—
102
—
—
—
Total
stockholders'
equity
336,289
44,841
(23,312)
11
(27,685)
48,274
—
—
(4,635)
—
373,783
11,908
(23,607)
7
(23,781)
58,633
1
—
(180)
396,764
7,717
(5,960)
(41,001)
4
(21,425)
87,257
1
—
2,793
426,150
Blackbaud, Inc.
Notes to Consolidated Financial Statements
1. Organization
We are the world’s leading cloud software company powering social good. Serving the entire social good community—
nonprofits, higher education institutions, K–12 schools, healthcare organizations, faith communities, arts and cultural
organizations, foundations, companies and individual change agents—we connect and empower organizations and
individuals to increase their impact through cloud software, services, expertise and data intelligence. Our portfolio is
tailored to the unique needs of vertical markets, with solutions for fundraising and CRM, marketing, advocacy, peer-to-
peer fundraising, corporate social responsibility, school management, ticketing, grantmaking, financial management,
payment processing and analytics. Serving the industry for nearly four decades, we are headquartered in Charleston,
South Carolina, and have operations in the United States, Australia, Canada, Costa Rica and the United Kingdom. As of
December 31, 2020, we had over 45,000 global customers.
2. Basis of Presentation
Basis of presentation
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States (“GAAP”).
Basis of consolidation
The consolidated financial statements include the accounts of Blackbaud, Inc. and its wholly owned subsidiaries. All
intercompany balances and transactions have been eliminated in consolidation.
Risks and uncertainties related to COVID-19
We are subject to risks and uncertainties as a result of the global COVID-19 pandemic. We believe that COVID-19 has
impacted and will continue to impact all of our vertical markets across all of our geographies to some degree, but the
significance and duration of the impact on our business cannot be determined at this time due to numerous
uncertainties, including, the duration of the outbreak, travel restrictions and business closures, the effectiveness of
vaccination programs and other actions taken to contain the disease and other unforeseeable consequences.
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,
capitalization of software development costs, our allowances for credit losses and sales returns, costs of obtaining
contracts, valuation of derivative instruments and loss contingencies, among others. Changes in the facts or
circumstances underlying these estimates, including due to COVID-19, could result in material changes and actual
results could materially differ from these estimates.
2020 Form 10-K
69
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Response to COVID-19
To better enable us to weather the extraordinary business challenges brought about by the global COVID-19 pandemic,
to protect the safety and welfare of our employees, and to further effect our long-term strategy to deliver the greatest
value to our stockholders, we have taken several actions. These measures taken are expected to provide us the financial
flexibility needed to manage a wide array of outcomes that may result from the pandemic. Some of these actions
include the following:
• Temporarily closed our offices worldwide and transitioned our employees to work remotely;
• Rescinded our previously announced policy to pay an annual dividend at a rate of $0.48 per share of common
stock and discontinued the declaration and payment of all cash dividends, beginning with the second quarter of
2020 and thereafter until such time, if any, as our Board of Directors may otherwise determine in its sole
discretion;
• Suspended our 401(k)-match program, whereby we have historically matched 50% of qualified U.S. employees'
contributions to our 401(k) plan up to 6% of their salaries, between April 1, 2020 and December 31, 2020;
• Made a discretionary matching contribution to eligible employees 401(k) plans in December 2020 totaling $1.2
million, given our financial performance during the fourth quarter;
• Temporarily froze our hiring efforts and implemented a modest and targeted headcount reduction, though we
have since begun backfilling key roles, including engineering positions;
• Michael Gianoni, our President and Chief Executive Officer, elected to forego receipt of all but that portion of his
base salary necessary to fund, on a pre-tax basis, his contributions to continue to participate in our health benefits
plan, between April 1, 2020 and June 16, 2020;
• Restricted non-essential employee travel and put in place other operating cost containment actions;
• All of our employees with a base salary equal to or less than $75 thousand received financial support in the form
of a one-time bonus of $1 thousand on April 30, 2020;
• On May 1, 2020, we granted restricted stock units with a total grant date fair value of $8.3 million to our
employees that were eligible for base salary merit increases in lieu of such increases, which will vest on May 1,
2021 subject to the recipient's continued employment with us;
• On May 1, 2020, we granted performance-based restricted stock units with a total grant date fair value of $34.4
million to our employees that were eligible for a 2020 cash bonus plan in lieu of such cash bonus, which may be
earned and become eligible for vesting on May 1, 2021 subject to meeting certain performance conditions and
the recipient's continued employment with us; and
• During the third quarter of 2020, we adjusted our workforce strategy to provide more flexibility for our
employees to work remotely when our offices reopen. This change also expands our access to a larger and more
diverse talent pool, empowers our leaders to make decisions based on skills and business need rather than
location, and it is expected to create efficiencies within our real estate strategy as we optimize our footprint and
shift toward more collaborative workspaces within our offices. Most of the transactions related to these real
estate activities closed during the fourth quarter of 2020 with an aggregate one-time cash outlay of $21.9 million
during the third and fourth quarters of 2020. We incurred approximately $23.1 million of pre-tax costs related to
these real estate activities during the third and fourth quarters of 2020. These activities are expected to result in
future annual before-tax savings of approximately $14.0 million beginning in 2021.
Recently adopted accounting pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial
Instruments (“ASU 2016-13”). ASU 2016-13 requires certain types of financial instruments, including trade receivables,
to be presented at the net amount expected to be collected based on historical events, current conditions and forward-
looking information. We adopted ASU 2016-13 as of the January 1, 2020 effective date and the adoption did not have
a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic
350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That
Is a Service Contract (“ASU 2018-15”). ASU 2018-15 aligns the accounting for implementation costs related to a
hosting arrangement that is a service contract with the guidance on capitalizing costs associated with developing or
obtaining internal-use software. We adopted ASU 2018-15 prospectively as of the January 1, 2020 effective date and
the adoption did not have a material impact on our consolidated financial statements.
70
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 requires lessees
to record most leases on their balance sheet but recognize expenses in the income statement in a manner similar to
previous guidance. The way in which entities classify leases determines how to recognize lease-related revenue and
expense.
We adopted ASU 2016-02 as of January 1, 2019 using the transition method that allowed us to initially apply the
guidance at the adoption date of January 1, 2019 without adjusting comparative periods presented. We elected to use
the package of practical expedients that allowed us to not reassess: (1) whether any expired or existing contracts are or
contain leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any existing leases.
We did not elect to use the hindsight practical expedient, which permits entities to use hindsight in determining the
lease term and assessing impairment. Additionally, we elected not to apply the recognition requirements of the new
lease accounting standard to short-term leases. Adopting ASU 2016-02 had a material impact on our consolidated
balance sheet as of January 1, 2019, as we recognized $121.6 million of lease liabilities and $113.4 million of right-of-
use ("ROU") assets for those leases classified as operating leases.
Recently issued accounting pronouncements
There are no recently issued accounting pronouncements that are expected to have a material impact on our financial
position or results of operations when adopted in the future.
Summary of significant accounting policies
Revenue recognition
Our revenue is primarily generated from the following sources: (i) charging for the use of our software solutions in cloud
and hosted environments; (ii) providing payment and transaction services; (iii) providing software maintenance and
support services; and (iv) providing professional services, including implementation, consulting, training, analytic and
other services. Revenues are recognized when control of these services is transferred to our customers, in an amount
that reflects the consideration we expect to be entitled to in exchange for those services.
We determine revenue recognition through the following steps:
Identification of the contract, or contracts, with a customer;
Identification of the performance obligations in the contract;
Determination of the transaction price;
Allocation of the transaction price to the performance obligations in the contract; and
Recognition of revenue when, or as, we satisfy a performance obligation.
•
•
•
•
•
Recurring
Recurring revenue represents stand-ready performance obligations in which we are making our solutions or services
available to our customers continuously over time or the value of the contract renews. Therefore, recurring revenue is
generally recognized over time on a ratable basis over the contract term, beginning on the date that the solution or
service is made available to the customer. Our recurring revenue contracts are generally for a term of 3 years at contract
inception with 1 to 3-year renewals thereafter, billed annually in advance and non-cancelable.
Recurring revenue is comprised of fees for the use of our subscription-based software solutions, which includes
providing access to cloud solutions, hosting services, payment services, online training programs, subscription-based
analytic services, such as donor acquisitions and data enrichment services. Recurring revenue also includes fees from
maintenance services for our on-premises solutions, services included in our renewable subscription contracts, retained
and managed services contracts that we expect to have a term consistent with our cloud solution contracts, and variable
transaction revenue associated with the use of our solutions.
Our payment services are offered with the assistance of third-party vendors. In general, when we are the principal in a
transaction based on the factors identified in ASC 606-10-55-36 through 55-40, we record the revenue and related
2020 Form 10-K
71
Blackbaud, Inc.
Notes to Consolidated Financial Statements
costs on a gross basis. Otherwise, we net the cost of revenue associated with the service against the gross revenue
(amount billed to the customer) and record the net amount as revenue. For payment and transaction services, we have
the right to invoice the customer in an amount that directly corresponds with the value to the customer of our
performance to date. Therefore, we recognize revenue for these services over time based on the amount billable to the
customer in accordance with the 'as invoiced' practical expedient in ASC 606-10-55-18.
One-time services and other
One-time services and other revenue is primarily comprised of fees for one-time consulting, analytic and onsite training
services, fees for retained and managed services contracts that we do not expect to have a term consistent with our
cloud solution contracts, and fees from user conferences.
We generally bill consulting services based on hourly rates plus reimbursable travel-related expenses. Fixed price
consulting engagements are generally billed as milestones towards completion are reached. Revenue for all consulting
services is recognized over time as the services are performed.
We generally recognize analytic services revenue from donor prospect research engagements, the sale of lists of
potential donors, data enrichment engagements and benchmarking studies at a point in time (upon delivery).
In certain cases, we sell training at a fixed rate for each specific class at a per attendee price or at a packaged price for
several attendees, and recognize the related revenue upon the customer attending and completing training.
Fees for retained and managed services contracts are generally billed in advance and recognized over time on a ratable
basis over the contract term, beginning on the date the service is made available to the customer.
Contracts with multiple performance obligations
Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for
individual performance obligations separately if they are distinct. The transaction price is allocated to the separate
performance obligations on a relative standalone selling price basis. Standalone selling prices of our solutions and
services are typically estimated based on observable transactions when the solutions or services are sold on a standalone
basis.
Costs of obtaining contracts, contract assets and deferred revenue
We pay sales commissions at the time contracts with customers are signed or shortly thereafter, depending on the size
and duration of the sales contract. Sales commissions and related fringe benefits earned by our sales force are
considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and
then amortized in a manner that aligns with the expected period of benefit, which we have determined to be 5 years.
We determined the period of benefit by taking into consideration our customer contracts, including renewals, retention,
our technology and other factors. We do not generally pay commissions for contract renewals. The related amortization
expense is included in sales, marketing and customer success expense in our consolidated statements of comprehensive
income.
A contract asset is recorded when revenue is recognized in advance of our right to receive consideration (i.e., we must
satisfy additional performance obligations in order to receive consideration). Amounts are recorded as receivables when
our right to consideration is unconditional (i.e., only the passage of time is required before payment of the
consideration is due). Our contract assets are recorded within prepaid expenses and other current assets on our
consolidated balance sheets. To the extent that our customers are billed for our solutions and services in advance of us
satisfying the related performance obligations, we record such amounts in deferred revenue.
Sales taxes
We present sales taxes and other taxes collected from customers and remitted to governmental authorities on a net
basis and, as such, exclude them from revenues.
72
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Fair value measurements
We measure certain financial assets and liabilities at fair value on a recurring basis, including derivative instruments. Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an
orderly transaction between market participants at the measurement date. An active market is defined as a market in
which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing
information on an ongoing basis. 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.
Our financial assets and liabilities are classified in their entirety within the hierarchy based on the lowest level of input
that is significant to fair value measurement. Changes to a financial asset's or liability's level within the fair value
hierarchy are determined as of the end of a reporting period. All methods of assessing fair value result in a general
approximation of value, and such value may never actually be realized.
Derivative instruments
We generally use derivative instruments to manage interest rate risk. We view derivative instruments as risk
management tools and do not use them for trading or speculative purposes. 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. Accordingly, changes in fair value of the derivative contract must be highly correlated with changes in the fair
value of the underlying hedged item at inception of the hedge and over the life of the hedge contract.
We record all derivative instruments on our consolidated balance sheets at fair value as either an asset or liability. If the
derivative is designated as a cash flow hedge, the effective portions of the changes in fair value of the derivative are
recorded in other comprehensive income and reclassified to earnings in a manner that matches the timing of the
earnings impact of the hedged transactions. Ineffective portions of the changes in the fair value of cash flow hedges are
recognized currently in earnings. See Note 10 to these consolidated financial statements for further discussion of our
derivative instruments.
Cash and cash equivalents
We consider all highly liquid investments purchased with an original maturity of three months or less and cash items in
transit to be cash equivalents.
Restricted cash due to customers; Customer funds receivable; Due to customers
Restricted cash due to customers consists of monies collected by us and payable to our customers, net of the associated
transaction fees earned. Monies associated with amounts due to customers are segregated in separate bank accounts
and used exclusively for the payment of amounts due to customers. This usage restriction is either legally or internally
imposed and reflects our intention with regard to such deposits. Customer funds receivable consists of monies we
expect to collect and remit to our customers.
Concentration of credit risk
Financial instruments that potentially subject us to concentrations of credit risk consist of cash and cash equivalents,
restricted cash due to customers and accounts receivable. Our cash and cash equivalents and restricted cash due to
customers are placed with high credit-quality financial institutions. Our accounts receivable is derived from sales to
customers who primarily operate in the nonprofit sector. With respect to accounts receivable, we perform ongoing
evaluations of our customers and maintain an allowance for credit losses based on historical experience and our
2020 Form 10-K
73
Blackbaud, Inc.
Notes to Consolidated Financial Statements
expectations of future credit losses. As of and for the years ended December 31, 2020, 2019 and 2018, there were no
significant concentrations with respect to our consolidated revenues or accounts receivable.
Property and equipment
We record property and equipment assets at cost and depreciate them over their estimated useful lives using the
straight-line method. Leasehold improvements are depreciated over the lesser of the term of the lease or the estimated
useful life of the asset. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation
are removed from the accounts and any resulting gain or loss is credited or charged to earnings. Repair and
maintenance costs are expensed as incurred.
Construction-in-progress primarily related to purchases of facilities and information technology assets which had not
been placed in service at the respective balance sheet dates. We transfer these assets to the applicable property and
equipment category on the date they are placed in service. There was no capitalized interest applicable to construction-
in-progress for the years ended December 31, 2020, 2019 and 2018.
Business combinations
We include the operating results of acquired companies as well as the net assets acquired and liabilities assumed in our
consolidated financial statements from the date of acquisition. We are required to allocate the purchase price of
acquired companies to the tangible and intangible assets acquired and liabilities assumed at the acquisition date based
upon their estimated fair values. Goodwill as of the acquisition date represents the excess of the purchase consideration
of an acquired business over the fair value of the underlying net tangible and intangible assets acquired and liabilities
assumed. This allocation and valuation require management to make significant estimates and assumptions, especially
with respect to long-lived and intangible assets.
Critical estimates in valuing intangible assets include, but are not limited to, estimates about: expected future cash flows
from customers, including revenue and operating expenses; royalty and customer attrition rates; proprietary technology
obsolescence curve; the acquired company's brand awareness and market position, the market awareness of the
acquired company's branded technology solutions and services; assumptions about the period of time the brand will
continue to be valuable; as well as expected costs to develop any in-process research and development into
commercially viable solutions and estimated cash flows from the projects when completed, and discount rates. Our
estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain and
unpredictable, and unanticipated events and changes in circumstances may occur.
Goodwill
Goodwill represents the purchase price in excess of the net amount assigned to assets acquired and liabilities assumed
by us in a business combination. Goodwill is not amortized, but tested annually for impairment on the first day of our
fourth quarter, or more frequently if indicators of potential impairment arise.
Accounting guidance permits entities to first assess qualitative factors to determine whether it is more likely than not
that the fair value of a reporting unit is less than its carrying amount as a basis to determine whether it is necessary to
perform the quantitative impairment test. Significant judgment is required in the assessment of qualitative factors,
including but not limited to an evaluation of macroeconomic conditions as they relate to our business, industry and
market trends, as well as the overall future financial performance of identified reporting units and future opportunities
in the markets in which we operate.
The quantitative impairment test compares the fair values of identified reporting units with their respective carrying
amounts. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an
amount equal to that excess. Based on our current internal reporting structure, we currently have one operating
segment, one reportable segment, and one reporting unit. In each of 2020, 2019 and 2018, we performed the
quantitative impairment test, which indicated that the estimated fair values of the identified reporting units significantly
exceeded their respective carrying values. There was no impairment of goodwill during 2020, 2019 and 2018.
74
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Intangible assets other than goodwill
We amortize finite-lived intangible assets over their estimated useful lives as follows.
Customer relationships
Marketing assets
Acquired software and technology
Basis of amortization
Straight-line and accelerated(1)
Straight-line
Straight-line and accelerated(1)
Amortization
period
(in years)
8-17
2-15
5-14
(1) Certain of the customer relationships and acquired software and technology assets are amortized on an accelerated basis.
We write off the gross carrying amount and accumulated amortization balances for all fully amortized intangible assets.
We evaluate the estimated useful lives and the potential for impairment of finite and indefinite-lived intangible assets on
an annual basis or more frequently if events or circumstances indicate revised estimates of useful lives may be
appropriate or that the carrying amount may be impaired. If the carrying amount of a finite-lived intangible asset is no
longer recoverable based upon the undiscounted cash flows of the asset, the amount of impairment is the difference
between the carrying amount and the fair value of the asset. Substantially all of our intangible assets were acquired in
business combinations. See Note 6 to these consolidated financial statements for a discussion of our impairment of
certain acquired intangible assets during 2019. There were no impairments of acquired intangible assets during 2020
and 2018.
Impairment of long-lived assets
We review long-lived assets for impairment when events change or circumstances indicate the carrying amount may not
be recoverable. Events or changes in circumstances that indicate the carrying amount may not be recoverable include,
but are not limited to, a significant decrease in the market value of the business or asset acquired, a significant adverse
change in the extent or manner in which the business or asset acquired is used or significant adverse change in the
business climate. If such events or changes in circumstances are present, the undiscounted cash flow method is used to
determine whether the asset is impaired. See Note 6 to these consolidated financial statements for a discussion of our
impairment of certain long-lived assets during 2020 and 2019. There was no impairment of long-lived assets during
2018.
Deferred financing costs and debt discount
Deferred financing costs included in other assets represent the direct third-party costs of entering into the revolving
(line-of-credit) portion of our credit facility in October 2020 and portions of the unamortized deferred financing costs
from prior facilities. These costs are amortized ratably over the term of the credit facility as interest expense.
Other debt issuance costs, as well as the debt discount associated with our 2020 Credit facility (as defined below) and
portions of the unamortized balances from prior facilities, are recorded as a direct deduction from debt. These costs are
amortized over the term of the credit facility as interest expense.
Stock-based compensation
We measure stock-based compensation cost at the grant date based on the fair value of the award and recognize it as
expense over the requisite service period, which is the vesting period. We determine the fair value of stock options and
stock appreciation rights using a Black-Scholes option pricing model, which requires us to use significant judgment to
make estimates regarding the life of the award, volatility of our stock price, the risk-free interest rate and the dividend
yield of our stock over the life of the award. We determine the fair value of awards that contain market conditions
using a Monte Carlo simulation model. Changes to these estimates would result in different fair values of awards.
We recognize the effect of awards for which the requisite service period is not rendered when the award is forfeited
(that is, we recognize the effect of forfeitures in compensation cost when they occur). Previously recognized
compensation cost for an award is reversed in the period that the award is forfeited. Income tax benefits resulting from
2020 Form 10-K
75
Blackbaud, Inc.
Notes to Consolidated Financial Statements
the vesting and exercise of stock-based compensation awards are recognized in the period the unit or award is vested
or option or right is exercised.
Income taxes
We make estimates and judgments in accounting for income taxes. The calculation of the income tax provision requires
estimates due to transactions, credits and calculations where the ultimate tax determination is uncertain. Uncertainties
arise as a consequence of the actual source of taxable income between domestic and foreign locations, the outcome of
tax audits and the ultimate utilization of tax credits. To the extent actual results differ from estimated amounts
recorded, such differences will impact the income tax provision in the period in which the determination is made.
We make estimates in determining tax assets and liabilities, which arise from differences in the timing of recognition of
revenue and expense for tax and financial statement purposes. We record valuation allowances to reduce our deferred
tax assets to the amount expected to be realized. In assessing the adequacy of a recorded valuation allowance
significant judgment is required. We consider all positive and negative evidence and a variety of factors including the
scheduled reversal of deferred tax liabilities, historical and projected future taxable income, and prudent and feasible tax
planning strategies. If we determine there is less than a 50% likelihood that we will be able to use a deferred tax asset
in the future in excess of its net carrying value, then an adjustment to the deferred tax asset valuation allowance is
made to increase income tax expense, thereby reducing net income in the period such determination was made.
We measure and recognize uncertain tax positions. To recognize such positions, we must first determine if it is more
likely than not that the position will be sustained upon audit. We must then measure the benefit as the largest amount
that is more than 50% likely of being realized upon ultimate settlement. Significant judgment is required in the
identification and measurement of uncertain tax positions.
Foreign currency
Net assets recorded in a foreign currency are translated at the exchange rate on the balance sheet date. Revenue and
expense items are translated using an average of monthly exchange rates. The resulting translation adjustments are
recorded in accumulated other comprehensive income.
Gains and losses resulting from foreign currency transactions denominated in currency other than the functional
currency are recorded at the approximate rate of exchange at the transaction date in other income, net. For the years
ended December 31, 2020 and 2018, we recorded net foreign currency losses of $1.1 million and $0.9 million,
respectively. For the year ended 2019, we recorded a net foreign currency loss that was insignificant.
Research and development
Research and development costs are expensed as incurred except as noted below under Software development costs.
These costs include compensation costs for engineering and product management personnel, third-party contractor
expenses, software development tools and other expenses related to researching and developing new solutions or
upgrading and enhancing existing solutions that do not qualify for capitalization, and allocated depreciation, facilities
and IT support costs.
Software development costs
We incur certain costs associated with the development of internal-use software, which are primarily related to activities
performed to develop our cloud solutions. Internal and external costs incurred in the preliminary project stage of
internal-use software development are expensed as incurred. Once the software being developed has reached the
application development stage, qualifying internal costs including payroll and payroll-related costs of employees who
are directly associated with and devote time to the software project as well as external direct costs of materials and
services are capitalized. Capitalization ceases at the point at which the developed software is substantially complete and
ready for its intended use, which is typically upon completion of all substantial testing. Qualifying costs capitalized
during the application development stage include those related to specific upgrades and enhancements when it is
probable that those costs incurred will result in additional functionality. Overhead costs, including general and
administrative costs, as well as maintenance, training and all other costs associated with post-implementation stage
76
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
activities are expensed as incurred. In addition, internal costs that cannot be reasonably separated between
maintenance and relatively minor upgrades and enhancements are expensed as incurred.
Qualifying capitalized software development costs are amortized on a straight-line basis over the software asset's
estimated useful life, which is generally 3 to 7 years. We evaluate the useful lives of these assets on an annual basis and
test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these
assets. See Note 6 to these consolidated financial statements for a discussion of our impairment of certain capitalized
software development costs during 2020. There were no impairment charges related to capitalized software
development costs during the years ended December 31, 2019 and 2018. We write off the gross carrying amount and
accumulated amortization balances for all fully amortized software development cost assets.
Allowance for credit losses
Our accounts receivable consist of a single portfolio segment. Accounts receivable are recorded at original invoice
amounts less an allowance for credit losses, an amount we estimate to be sufficient to provide adequate protection
against lifetime expected losses resulting from extending credit to our customers. In judging the adequacy of the
allowance for credit losses, we consider multiple factors including historical bad debt experience, the current aging of
our receivables and current economic conditions that may affect our customers' ability to pay. A considerable amount
of judgment is required in assessing these factors and if any receivables were to deteriorate, an additional provision for
credit losses could be required. Accounts are written off after all means of collection are exhausted and recovery is
considered remote. Provisions for credit losses are recorded in general and administrative expense.
Below is a summary of the changes in our allowance for credit losses.
Years ended December 31,
(in thousands)
2020(1)
2019
2018
$
Balance at
beginning of year
Provision/
adjustment
Write-off
Recovery
4,011 $
1,345
741
6,787 $
2,476
2,446
(2,363) $
(2,617)
(2,663)
581 $
679
821
Balance at
end of year
9,016
1,883
1,345
(1) Upon adoption of ASU 2016-13 at January 1, 2020, we reclassified certain balances previously disclosed within the allowance for sales returns to
the allowance for credit losses, as these amounts reflect the credit risk associated with our accounts receivable. The amount reclassified was $2.1
million.
The increase in our allowance for credit losses during the year ended December 31, 2020 was primarily due to an
increase in the aging of our receivables during the second and third quarters of 2020 associated with the COVID-19
pandemic. We saw some improvement in our customers' payment behavior during the fourth quarter. The amount of
write-offs during the year ended December 31, 2020 was lower than the amount of write-offs during the same period
in 2019 as we temporarily suspended sending past due customer accounts to collections during the second and third
quarters due to payment delays related to COVID-19.
Allowance for sales returns
We maintain a reserve for returns and credits which is estimated based on several factors including historical experience,
known credits yet to be issued, the aging of customer accounts and the nature of service level commitments. A
considerable amount of judgment is required in assessing these factors. Provisions for sales returns and credits are
charged against the related revenue items.
Below is a summary of the changes in our allowance for sales returns.
Years ended December 31,
(in thousands)
2020(1)
2019
2018
$
Balance at
beginning of year
Provision/
adjustment
1,518 $
3,377
4,400
6,443 $
6,232
4,952
Deduction
(6,685) $
(5,963)
(5,975)
Balance at
end of year
1,276
3,646
3,377
(1) As discussed above, we reclassified certain balances previously disclosed within the allowance for sales returns to the allowance for credit losses
upon adoption of ASU 2016-13 at January 1, 2020. The amount reclassified was $2.1 million.
2020 Form 10-K
77
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Advertising costs
We expense advertising costs as incurred, which were $3.0 million, $3.1 million and $4.0 million for the years ended
December 31, 2020, 2019 and 2018, respectively.
Restructuring costs
Restructuring costs include charges for the costs of exit or disposal activities. The liability for costs associated with exit or
disposal activities is measured initially at fair value and only recognized when the liability is incurred. For details of our
restructuring activities, see Note 19 to these consolidated financial statements.
Leases
We determine if an arrangement is a lease at inception. Operating leases are included in operating lease ROU assets,
accrued expense and other current liabilities, and operating lease liabilities, net of current portion in our consolidated
balance sheet as of December 31, 2020.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation
to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease
commencement date based on the present value of lease payments over the lease term. As most of our leases do not
provide an implicit rate, we generally use our incremental borrowing rate in determining the present value of lease
payments. Our incremental borrowing rate is based on the estimated rate of interest for collateralized borrowing over a
similar term of the lease payments at the commencement date. We use the implicit rate when readily determinable. The
operating lease ROU asset also includes any initial direct costs and lease payments made and excludes lease incentives.
Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise
that option. Lease expense for lease payments related to our operating leases is recognized on a straight-line basis over
the lease term. We have lease agreements with lease and non-lease components, which are generally accounted for
separately. We do not recognize short-term leases (those that, at the commencement date, have a lease term of 12
months or less) on our consolidated balance sheets. Variable lease payments, which are primarily comprised of
common-area maintenance, utilities and real estate taxes that are passed on from the lessor in proportion to the space
leased by us, are recognized in operating expenses in the period in which the obligation for those payments is incurred.
Contingencies
We are subject to the possibility of various loss contingencies in the normal course of business. We record an accrual for
a contingency when it is both probable that a liability has been incurred and the amount of the loss can be reasonably
estimated. Often these issues are subject to substantial uncertainties and, therefore, the probability of loss and the
estimation of damages are difficult to ascertain. These assessments can involve a series of complex judgments about
future events and can rely heavily on estimates and assumptions that have been deemed reasonable by us. Although we
believe we have substantial defenses in these matters, we could incur judgments or enter into settlements of claims that
could have a material adverse effect on our consolidated financial position, results of operations or cash flows in any
particular period.
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 available to common stockholders by the weighted average number of common shares and dilutive
potential common shares outstanding during the period. Diluted earnings per share reflect 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 the exercise of stock options and stock appreciation rights
and vesting of restricted stock awards and units.
78
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
3. Business Combinations
2019 Acquisition
YourCause
On January 2, 2019, we acquired all of the outstanding equity securities, including all voting equity interests, of
YourCause Holdings, LLC, a Delaware limited liability company ("YourCause"), pursuant to a purchase agreement and
plan of merger. The acquisition expanded our footprint in corporate social responsibility and employee engagement and
enhanced our position as a leader in providing solutions to both nonprofit organizations and for-profit companies
committed to addressing social issues. We acquired the equity securities for an aggregate purchase price of $157.7
million in cash, net of closing adjustments. The purchase price and related expenses were funded primarily through
borrowings under the 2017 Credit Facility. As a result of the acquisition, YourCause became a wholly owned subsidiary
of ours. We finalized the purchase price allocation of YourCause, including the valuation of assets acquired and
liabilities assumed, during the fourth quarter of 2019. All measurement period adjustments were insignificant. We
determined that the impact of this acquisition was not material to our consolidated financial statements; therefore,
revenue and earnings since the acquisition date and pro forma information are not required or presented.
2018 Acquisition
Reeher
On April 30, 2018, we acquired all of the outstanding equity securities, including all voting equity interests, of Reeher
LLC, a Minnesota limited liability company (“Reeher”), pursuant to a securities purchase agreement. The acquisition
expanded our fundraising performance management capabilities with the goal of driving more effective fundraising and
greater social good outcomes for our customers. We acquired the equity securities for an aggregate purchase price of
$41.2 million in cash, net of closing adjustments. The purchase price and related expenses were funded primarily
through borrowings under the 2017 Credit Facility. As a result of the acquisition, Reeher became a wholly owned
subsidiary of ours. We finalized the purchase price allocation of Reeher, including the valuation of assets acquired and
liabilities assumed, during the second quarter of 2019. All measurement period adjustments were insignificant. We
determined that the impact of this acquisition was not material to our consolidated financial statements; therefore,
revenue and earnings since the acquisition date and pro forma information are not required or presented.
4. Goodwill and Other Intangible Assets
The change in our goodwill during 2020 consisted of the following:
(dollars in thousands)
Balance at December 31, 2019
Effect of foreign currency translation
Balance at December 31, 2020
Total
$ 634,088
1,766
$ 635,854
2020 Form 10-K
79
Blackbaud, Inc.
Notes to Consolidated Financial Statements
We have recorded intangible assets acquired in various business combinations based on their fair values at the date of
acquisition. The table below sets forth the balances of each class of intangible asset and related amortization as of:
(dollars in thousands)
Finite-lived gross carrying amount
Customer relationships
Marketing assets
Acquired software and technology
Non-compete agreements
Total finite-lived gross carrying amount
Accumulated amortization
Customer relationships
Marketing assets
Acquired software and technology
Non-compete agreements
Total accumulated amortization
Intangible assets, net
December 31,
2020
2019
$ 287,116 $ 286,951
34,642
34,246
232,339
233,094
—
2,200
554,097
556,491
(138,635)
(118,031)
(5,918)
(132,038)
(3,648)
(115,048)
—
(1,869)
(276,591)
(238,596)
$ 277,506 $ 317,895
During the year ended December 31, 2020, changes to the gross carrying amounts of intangible asset classes were
primarily related to write-offs of fully amortized intangible assets and the effect of foreign currency translation.
During the year ended December 31, 2019, we recorded an impairment charge of $0.9 million against an acquired
marketing asset that reduced the carrying value of the asset to zero. The impairment charge resulted from our decision
during the year to rebrand the solution to which the asset related. This impairment charge was recorded as amortization
on our consolidated statements of comprehensive income.
Amortization expense
Amortization expense related to finite-lived intangible assets acquired in business combinations is allocated to cost of
revenue on the consolidated statements of comprehensive income based on the revenue stream to which the asset
contributes, except for marketing assets and non-compete agreements, for which the associated amortization expense
is included in operating expenses.
The following table summarizes amortization expense of our finite-lived intangible assets:
(dollars in thousands)
Included in cost of revenue:
Cost of recurring
Cost of one-time services and other
Total included in cost of revenue
Included in operating expenses
Years ended December 31,
2020
2019
2018
$
36,835 $
42,565 $
39,877
2,133
2,204
2,356
38,968
44,769
42,233
2,915
5,316
4,844
Total amortization of intangibles from business combinations
$
41,883 $
50,085 $
47,077
80
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
The following table outlines the estimated future amortization expense for each of the next five years for our finite-lived
intangible assets as of December 31, 2020:
Years ending December 31,
(dollars in thousands)
2021
2022
2023
2024
2025
Total
Amortization
expense
36,933
34,739
33,735
33,222
30,482
$
169,111
5. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share:
(dollars in thousands, except per share amounts)
Numerator:
Net income
Denominator:
Weighted average common shares
Add effect of dilutive securities:
Stock-based awards
Weighted average common shares assuming dilution
Earnings per share:
Basic
Diluted
Years ended December 31,
2020
2019
2018
$
7,717 $
11,908 $
44,841
48,184,714 47,695,383 47,206,669
511,627
616,888
838,415
48,696,341 48,312,271 48,045,084
$
$
0.16 $
0.16 $
0.25 $
0.25 $
0.95
0.93
Anti-dilutive shares excluded from calculations of diluted earnings per share
956,303
241,336
48,881
2020 Form 10-K
81
Blackbaud, Inc.
Notes to Consolidated Financial Statements
6. Fair Value Measurements
Recurring fair value measurements
Assets and liabilities that are measured at fair value on a recurring basis consisted of the following, as of the dates
indicated below:
(dollars in thousands)
Fair value as of December 31, 2020
Financial liabilities:
Derivative instruments
Total financial liabilities
Fair value as of December 31, 2019
Financial liabilities:
Derivative instruments
Total financial liabilities
$
$
$
$
Fair value measurement using
Level 1
Level 2
Level 3
Total
— $
— $
4,159 $
4,159 $
— $
— $
4,159
4,159
— $
— $
1,757 $
1,757 $
— $
— $
1,757
1,757
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.
The fair value of our interest rate swaps was based on model-driven valuations using LIBOR rates, which are observable
at commonly quoted intervals. Accordingly, our interest rate swaps are classified within Level 2 of the fair value
hierarchy. The Financial Conduct Authority in the U.K. has stated that it plans to phase out LIBOR by the end of calendar
year 2021. We do not currently anticipate a significant impact to our financial position or results of operations as a
result of this action as we expect that our financial contracts currently indexed to LIBOR will either expire or be modified
without significant financial impact before the phase out occurs.
We believe the carrying amounts of our cash and cash equivalents, restricted cash, accounts receivable, trade accounts
payable, accrued expenses and other current liabilities and due to customers approximate their fair values at December
31, 2020 and December 31, 2019, due to the immediate or short-term maturity of these instruments.
We believe the carrying amount of our debt approximates its fair value at December 31, 2020 and December 31, 2019,
as the debt bears interest rates that approximate market value. As LIBOR rates are observable at commonly quoted
intervals, our debt under the 2020 Credit Facility (as defined below) is classified within Level 2 of the fair value
hierarchy. Our fixed rate debt is also classified within Level 2 of the fair value hierarchy.
We did not transfer any assets or liabilities among the levels within the fair value hierarchy during the years ended
December 31, 2020, 2019 and 2018. Additionally, we did not hold any Level 3 assets or liabilities during the years
ended December 31, 2020, 2019 and 2018.
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 ROU assets, which 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. 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
82
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
impairment testing, we estimate fair value using market-based methods including the use of market capitalization and
consideration of a control premium.
As more fully described in Note 7 and Note 11, during the year ended December 31, 2020, we recorded impairment
charges of $4.3 million against certain previously capitalized software development costs and $4.0 million against our
operating lease ROU assets.
During the year ended December 31, 2019, we recorded impairment charges of $3.8 million against our operating lease
ROU assets, $1.4 million against certain property and equipment assets and $0.9 million against certain finite-lived
intangible assets. See Notes 11, 7 and 4, respectively, to these consolidated financial statements for additional details.
There were no other non-recurring fair value adjustments during 2020, 2019 and 2018 except for certain business
combination accounting adjustments to the initial fair value estimates of the assets acquired and liabilities assumed at
the acquisition date from updated estimates and assumptions during the measurement period. See Note 3 to these
consolidated financial statements for additional details.
7. Property and Equipment and Software Development Costs
Purchase of Global Headquarters Facility
In August 2020, we completed the purchase of the building, fixtures and other improvements and parcels of land of our
Global Headquarters Facility in Charleston, South Carolina, pursuant to a Purchase and Sale Agreement (the "PSA")
with HPBB1, LLC, a Georgia limited liability company (the "Seller") (the "Transaction"). Prior to the completion of the
Transaction, we leased the Global Headquarters Facility from the Seller. We paid the Seller a purchase price that
included the assumption of the Seller's obligations of $61.1 million, cash of $15.2 million and certain lender fees,
closing costs, adjustments and prorations as set forth in the PSA. We funded the cash portion of the purchase price
through borrowings under our then-existing credit facility. We capitalized the insignificant direct transaction costs we
incurred as a component of the assets acquired.
As a result of the Transaction, we derecognized the ROU asset and lease liability associated with the former lease and
recorded the following long-lived assets on a relative fair value basis in property and equipment, net upon closing:
(dollars in thousands)
Land
Building
Building improvements
Total long-lived assets
Assets
acquired
9,548
61,284
4,393
75,225
Estimated useful
life (years)
—
39
7 - 15
$
$
2020 Form 10-K
83
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Property and equipment
Property and equipment consisted of the following as of:
(dollars in thousands)
Land
Building
Building improvements(1)
Equipment
Computer hardware
Computer software
Construction in progress
Furniture and fixtures
Leasehold improvements
Total property and equipment
Less: accumulated depreciation
Property and equipment, net
Estimated
useful life
(years)
December 31,
2020
2019
— $
39
7 - 20
1 - 5
1 - 5
1 - 5
—
1 - 7
Lesser of lease term or estimated useful life
9,548 $
61,284
9,942
2,865
56,202
23,116
3,435
2,796
6,044
—
—
—
4,512
67,045
35,726
213
7,823
24,295
175,232
139,614
(70,055)
(104,068)
$
105,177 $
35,546
(1) Upon acquisition of our Global Headquarters Facility in August 2020, we reclassified related leasehold improvement costs of $5.5 million to
building improvements given the acquisition of the underlying assets.
Depreciation expense was $19.2 million, $15.0 million and $15.9 million for the years ended December 31, 2020, 2019
and 2018, respectively.
During the year ended December 31, 2019, we recorded impairment charges of $1.4 million against certain property
and equipment assets that reduced the carrying value of the assets to zero. These impairment charges are reflected in
restructuring on the statements of comprehensive income and resulted primarily from our facilities optimization
restructuring as we wrote-off facilities-related fixed assets that we would no longer use. See Note 19 to these
consolidated financial statements for additional details regarding our facilities optimization restructuring.
Software development costs
Software development costs consisted of the following as of:
(dollars in thousands)
Software development costs
Less: accumulated amortization
Software development costs, net
Estimated
useful life
(years)
3 - 7 $
December 31,
2020
164,665 $
2019
139,014
(52,838)
(37,712)
$
111,827 $
101,302
During the year ended December 31, 2020, we recorded an impairment charge of $4.3 million against certain
previously capitalized software development costs that reduced the carrying value of those assets to zero. The
impairment charge is reflected in cost of recurring revenue and resulted primarily from our decision to accelerate the
end of customer support for certain solutions. Other changes to the gross carrying amount of software development
costs were primarily related to qualifying costs associated with development activities that are required to be capitalized
under the internal-use software accounting guidance such as those for our cloud solutions, write-offs of fully amortized
assets, and the effect of foreign currency translation.
Amortization expense related to software development costs was $31.7 million, $20.7 million and $16.6 million for the
years ended December 31, 2020, 2019 and 2018, respectively, and is included primarily in cost of recurring.
84
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
8. Consolidated Financial Statement Details
Restricted cash
(dollars in thousands)
Restricted cash due to customers
Real estate escrow balances
Total restricted cash
Prepaid expenses and other assets
(dollars in thousands)
Costs of obtaining contracts(1)(2)
Prepaid software maintenance and subscriptions(3)
Implementation costs for cloud computing arrangements, net(4)(5)
Unbilled accounts receivable
Receivables for probable insurance recoveries(6)
Prepaid insurance
Taxes, prepaid and receivable
Security deposits
Other assets
Total prepaid expenses and other assets
Less: Long-term portion
Prepaid expenses and other current assets
December 31,
2020
December 31,
2019
$
$
607,943 $
545,485
1,276
—
609,219 $
545,485
December 31,
2020
December 31,
2019
$
84,914 $
24,471
11,298
10,385
6,288
1,426
1,891
754
9,578
151,005
72,639
$
78,366 $
90,764
17,384
7,294
6,233
—
1,585
849
885
8,051
133,045
65,193
67,852
(2)
(3)
(1) Amortization expense from costs of obtaining contracts was $37.4 million, $38.1 million and $35.7 million for the years ended December 31,
2020, 2019 and 2018, respectively, and is included in sales, marketing and customer success expense in our consolidated statements of
comprehensive income.
The current portion of costs of obtaining contracts as of December 31, 2020 and 2019 was $31.9 million and $33.0 million, respectively.
The current portion of prepaid software maintenance and subscriptions as of December 31, 2020 and December 31, 2019 was $19.8 million and
$16.1 million, respectively.
These costs, which were previously included in prepaid software maintenance and subscriptions, primarily relate to the multi-year
implementations of our new global enterprise resource planning and customer relationship management systems.
(4)
(5) Amortization expense from capitalized cloud computing implementation costs was $0.8 million for the year ended December 31, 2020 and
insignificant for the year ended December 31, 2019. Accumulated amortization for these costs was $1.1 million as of December 31, 2020 and
insignificant as of December 31, 2019.
See discussion of the Security Incident at Note 11.
(6)
2020 Form 10-K
85
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Accrued expenses and other liabilities
(dollars in thousands)
Operating lease liabilities, current portion
Accrued bonuses(1)
Taxes payable(2)
Customer credit balances
Accrued commissions and salaries
Accrued legal costs
Derivative instruments
Unrecognized tax benefit
Accrued health care costs
Accrued vacation costs
Other liabilities
Total accrued expenses and other liabilities
Less: Long-term portion
Accrued expenses and other current liabilities
December 31,
2020
December 31,
2019
$
9,359 $
—
19,577
5,874
5,010
4,808
4,159
3,351
2,341
2,311
6,304
63,094
10,866
$
52,228 $
19,784
24,617
6,835
4,505
6,980
87
1,757
3,758
2,399
2,232
6,105
79,059
5,742
73,317
(1)
In March 2020, we reduced our accrued bonuses due to the payment of bonuses from the prior year and, in response to COVID-19, determined
to replace our 2020 cash bonus plans with performance-based equity awards (see Note 2).
(2) We deferred payments of the employer's portion of Social Security taxes during 2020 under the Coronavirus, Aid, Relief and Economic Security
Act ("CARES Act"), half of which is due by the end of calendar year 2021 with the remainder due by the end of calendar year 2022.
December 31,
2020
December 31,
2019
$
303,840 $
302,751
13,074
316,914
4,678
13,386
316,137
1,802
$
312,236 $
314,335
$
$
2020
1,660 $
(2)
1,658 $
Years ended December 31,
2019
2,802 $
1,256
4,058 $
2018
2,008
(905)
1,103
Deferred revenue
(dollars in thousands)
Recurring
One-time services and other
Total deferred revenue
Less: Long-term portion
Deferred revenue, current portion
Other income, net
(dollars in thousands)
Interest income
Other (expense) income, net
Other income, net
86
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
9. 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.
(dollars in thousands)
Credit facility:
Revolving credit loans
Term loans
Real estate loans
Other debt
Total debt
Less: Unamortized discount and debt issuance costs
Less: Debt, current portion
Debt, net of current portion
$
2020 refinancing
Debt balance at
Weighted average
effective interest rate at
December 31,
2020
December 31,
2019
December 31,
2020
December 31,
2019
$
69,625 $
400,000
60,626
3,926
534,177
3,144
12,840
518,193 $
187,000
281,250
—
—
468,250
1,150
7,500
459,600
1.83 %
3.12 %
5.22 %
5.00 %
3.21 %
2.61 %
3.22 %
3.11 %
3.22 %
— %
— %
3.18 %
3.05 %
3.18 %
We were previously party to a 5-year $700.0 million credit facility entered into during June 2017. The credit facility
included: a dollar and a designated currency revolving credit facility with sublimits for letters of credit, swingline loans
and multicurrency borrowings (the “2017 Revolving Facility”) and a term loan (the “2017 Term Loan”) together, (the
“2017 Credit Facility”).
In October 2020, we entered into a 5-year $900.0 million Amended and Restated Credit Agreement (the “2020 Credit
Facility”). The 2020 Credit Facility matures in October 2025 and replaced the 2017 Credit Facility by amending and
restating it to include a $500.0 million revolving credit facility (the “2020 Revolving Facility”) and a $400.0 million term
loan facility (the “2020 Term Loan”). Upon closing, we borrowed $400.0 million pursuant to the 2020 Term Loan and
used the proceeds to repay the outstanding principal balance of the term loan under the 2017 Credit Facility, and repay
$124.4 million of outstanding revolving credit loans under the 2017 Revolving Facility.
In connection with the amendment and restatement of the 2017 Credit Facility, the existing Pledge Agreement dated
June 2, 2017 (as amended, supplemented or modified from time to time, the “2017 Pledge Agreement”), by us in favor
of Bank of America, N.A., as administrative agent, was likewise amended and restated.
Certain lenders of the 2020 Term Loan participated in the 2017 Term Loan and the change in present value of our
future cash flows to these lenders under the 2017 Term Loan and under the 2020 Term Loan was less than 10%.
Accordingly, we accounted for the refinancing event as a debt modification. Certain lenders of the 2017 Term Loan did
not participate in the 2020 Term Loan. Accordingly, we accounted for the refinancing event for these lenders as a debt
extinguishment. Certain lenders of the 2017 Revolving Facility participated in the 2020 Revolving Facility and provided
increased borrowing capacities. Accordingly, we accounted for the refinancing event for these lenders as a debt
modification. Certain lenders of the 2017 Revolving Facility did not participate in the 2020 Revolving Facility.
Accordingly, we accounted for the refinancing event for these lenders as a debt extinguishment.
We recorded an insignificant loss on debt extinguishment related to the write-off of debt discount and deferred
financing costs for the portions of the 2017 Credit Facility considered to be extinguished. This loss was recognized in
the consolidated statements of comprehensive income within other income, net.
In connection with our entry into the 2020 Credit Facility, we paid $4.0 million in financing costs, of which $1.2 million
were capitalized in other assets and, together with a portion of the unamortized deferred financing costs from the 2017
Credit Facility and prior facilities, are being amortized into interest expense over the term of the new facility. As of
December 31, 2020, deferred financing costs totaling $1.5 million were included in other assets on our consolidated
balance sheets. We recorded aggregate financing costs of $2.0 million as a direct deduction from the carrying amount
2020 Form 10-K
87
Blackbaud, Inc.
Notes to Consolidated Financial Statements
of our debt liability, which related to debt discount (fees paid to lenders) and debt issuance costs for the 2020 Term
Loan.
Summary of the 2020 Credit Facility
The 2020 Revolving Facility includes (i) a $50.0 million sublimit available for the issuance of standby letters of credit, (ii)
a $50.0 million sublimit available for swingline loans, and (iii) a $100.0 million sublimit available for multicurrency
borrowings.
Our obligations under the 2020 Credit Facility are secured by the stock and limited liability company interests of certain
of our direct subsidiaries and any of our material domestic subsidiaries, if any, and the proceeds therefrom pledged
pursuant to an Amended and Restated Pledge Agreement dated as of October 30, 2020 (the “2020 Pledge
Agreement”), by us in favor of Bank of America, N.A., as administrative agent, for the ratable benefit of itself and the
secured parties referred to therein.
Dollar tranche loans under the 2020 Revolving Facility and 2020 Term Loan bear interest at a rate per annum equal to
(a) a base rate equal to the highest of (i) the Federal Funds Rate plus 0.50%, (ii) the prime rate announced by Bank of
America, N.A., and (iii) the Eurocurrency Rate (which varies depending on the currency in which the loan is
denominated) plus 1.00% (the “Base Rate”), plus (b) an applicable margin as specified in the 2020 Credit Facility (the
“Applicable Margin”). Each Eurocurrency Rate Loan under the 2020 Credit Facility shall bear interest at a rate per
annum equal to the Eurocurrency Rate, plus the Applicable Margin. The Applicable Margin shall be adjusted quarterly,
varies based on our net leverage ratio and varies based on whether the loan is a Base Rate Loan (0.375% to 1.125%) or
a Eurocurrency Rate Loan (1.375% to 2.125%).
We also pay a quarterly commitment fee on the unused portion of the 2020 Revolving Facility from 0.250% to 0.375%
per annum, depending on our net leverage ratio. At December 31, 2020, the commitment fee was 0.25%.
The term loan under the 2020 Credit Facility requires periodic principal payments. The balance of the term loan and any
amounts drawn on the revolving credit loans are due upon maturity of the 2020 Credit Facility in October 2025. We
evaluate the classification of our debt as current or non-current based on the required annual maturities of the 2020
Credit Facility. We may prepay the 2020 Credit Facility in whole or in part at any time without premium or penalty,
other than customary breakage costs with respect to certain types of loans.
The 2020 Credit Facility contains various representations, warranties and affirmative, negative and financial covenants
customary for financings of this type. Financial covenants include a net leverage ratio and an interest coverage ratio. At
December 31, 2020, we were in compliance with our debt covenants under the 2020 Credit Facility.
Under the terms of the 2020 Credit Facility, we are entitled on one or more occasions, subject to the satisfaction of
certain conditions, to request an increase in the commitments under the Revolving Credit Facility and/or request
additional incremental term loans in the aggregate principal amount of up to $250.0 million plus an amount, if any,
such that the net leverage ratio shall be no greater than 3.25 to 1.00. At December 31, 2020, our available borrowing
capacity under the 2020 Credit Facility was $429.3 million.
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 (i) a 5.12% Senior Secured Note, Series A1, in the outstanding principal amount
of $49.1 million, dated May 2, 2018, and (ii) a 5.61% Senior Secured Note, Series A2, in the outstanding principal
amount of $12.0 million, dated May 2, 2018, or an aggregate outstanding principal amount of $61.1 million
(collectively, the “Real Estate Loans”). The Series A1 Note provides that we will pay the remaining principal amount due
thereunder together with interest thereon at the rate indicated above, in monthly installments until it matures in April
2038. The Series A2 Note provides that we pay interest only in monthly installments at the rate indicated above with the
principal amount due at maturity in April 2038. The Real Estate Loans are secured by a first priority lien on the real
property constituting the Global Headquarters Facility. Our assumption of the Real Estate Loans was a noncash investing
and financing transaction and is reflected in our supplemental disclosure of cash flow information. At December 31,
2020, we were in compliance with our debt covenants under the Real Estate Loans.
88
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Other debt
In December 2019, we entered into a 51-month $2.2 million agreement to finance our purchase of software and
related services for our internal use. The agreement is a non-interest-bearing note requiring four equal annual
payments, where the first payment was due in January 2020. Interest associated with the note has been imputed at the
rate we would incur for amounts borrowed under our then-existing credit facility.
In January 2020, we entered into an additional 39-month $3.5 million agreement to finance our purchase of software
and related services for our internal use. The agreement is a non-interest-bearing note requiring three equal annual
payments, where the first payment was due in March 2020. Interest associated with the note has been imputed at the
rate we would incur for amounts borrowed under our then-existing credit facility.
As of December 31, 2020, the required annual maturities related to the 2020 Credit Facility, the Real Estate Loans and
our other debt were as follows:
Years ending December 31,
(dollars in thousands)
2021
2022
2023
2024
2025
Thereafter
Total required maturities
10. Derivative Instruments
Cash flow hedges
$
Annual
maturities
12,840
12,985
11,983
11,609
431,408
53,352
$ 534,177
We generally use derivative instruments to manage our variable interest rate risk. We have entered into interest rate
swap agreements, which effectively convert portions of our variable rate debt under the 2020 Credit Facility to a fixed
rate for the term of the swap agreements. We designated each of the interest rate swap agreements as a cash flow
hedge at the inception of the contracts.
The terms and notional values of our derivative instruments were as follows as of December 31, 2020:
(dollars in thousands)
Derivative instruments designated as hedging instruments:
Interest rate swap
Interest rate swap
Interest rate swap
Interest rate swap
Interest rate swap
Forward-starting interest rate swap
Forward-starting interest rate swap
Term of derivative instrument
Notional
value
February 2018 - June 2021
June 2019 - June 2021
November 2020 - October 2024
November 2020 - October 2024
July 2017 - July 2021 $ 150,000
50,000
75,000
60,000
60,000
$ 395,000
June 2021 - October 2024
July 2021 - October 2024
120,000
120,000
$ 240,000
2020 Form 10-K
89
Blackbaud, Inc.
Notes to Consolidated Financial Statements
The fair values of our derivative instruments were as follows as of:
(dollars in thousands)
Derivative instruments designated as hedging instruments:
Interest rate swaps, current portion
Interest rate swaps, long-term portion
Total derivative instruments designated as hedging
instruments
Balance sheet location
December 31,
2020
December 31,
2019
Liability Derivatives
Accrued expenses
and other current
liabilities $
2,698 $
—
Other liabilities
1,461
1,757
$
4,159 $
1,757
The effects of derivative instruments in cash flow hedging relationships were as follows:
Gain (loss) recognized
in accumulated other
comprehensive
loss as of
(dollars in thousands)
Interest rate swaps
$
Interest rate swaps
$
Interest rate swaps
$
December 31,
2020
(4,159)
December 31,
2019
(1,757)
December 31,
2018
2,074
Location
of gain (loss)
reclassified from
accumulated other
comprehensive
loss into income
Interest expense $
Interest expense $
Interest expense $
Gain (loss) reclassified from accumulated
other comprehensive loss into income
Year ended
December 31, 2020
(3,827)
Year ended
December 31, 2019
573
Year ended
December 31, 2018
118
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. Changes in the fair value measurements of the derivative instruments and the related
income tax expense or benefit are reflected as adjustments to accumulated other comprehensive income (loss) until the
actual hedged expense is incurred or until the hedge is terminated at which point the unrealized gain (loss) is reclassified
from accumulated other comprehensive income (loss) to current earnings. The estimated accumulated other
comprehensive loss as of December 31, 2020 that is expected to be reclassified into earnings within the next twelve
months is $3.4 million. There were no ineffective portions of our interest rate swap derivatives during the years ended
December 31, 2020, 2019 and 2018. See Note 14 to these consolidated financial statements for a summary of the
changes in accumulated other comprehensive income (loss) by component.
We did not have any undesignated derivative instruments during 2020, 2019 and 2018.
11. Commitments and Contingencies
Leases
We have operating leases for corporate offices, subleased offices and certain equipment and furniture. In August 2020,
we completed the purchase of our Global Headquarters Facility that we previously leased (see Note 7). As of December
31, 2020, we had operating leases for office space that had not yet commenced with future rent payments of $3.5
million with a lease term of approximately 3 years.
90
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
The components of lease expense for the year ended December 31, 2020, were as follows:
(dollars in thousands)
Operating lease cost(1)
Variable lease cost
Sublease income
Net lease cost
$
$
2020
41,210 $
4,266
(3,120)
42,356 $
Year ended
December 31,
2019
27,519
4,035
(3,189)
28,365
(1)
Includes short-term lease costs, which were immaterial.
During the third quarter of 2020, we adjusted our workforce strategy to provide more flexibility for our employees to
work remotely when our offices reopen. This change is expected to create efficiencies within our real estate strategy as
we optimize our footprint and shift toward more collaborative workspaces within our offices. As a result, during the
three months ended September 30, 2020, we reduced the estimated useful lives of our operating lease ROU assets for
certain of our office locations we expected to exit. We recorded $16.2 million in incremental operating lease costs
during 2020 related to this change in accounting estimate, which accounts for a substantial portion of the increase in
operating lease costs during 2020. For these same office locations, we also reduced the estimated useful lives of certain
facilities-related fixed assets, which resulted in incremental depreciation expense of $4.6 million during 2020 (see Note
7). During the twelve months ended December 31, 2020, we also recorded $4.0 million in impairments of operating
lease ROU assets associated with certain leased office spaces we have ceased using as a result of our adjusted workforce
strategy. These impairment charges are reflected in general and administrative expense.
During the twelve months ended December 31, 2019, we recorded $3.8 million in impairments of operating lease ROU
assets associated with certain leased office spaces we ceased using as part of our facilities optimization restructuring.
These impairments, which were based on our estimates about our inability to sublease the office spaces, were recorded
as restructuring expense on our consolidated statements of comprehensive income. See Note 19 to these consolidated
financial statements for additional details regarding our facilities optimization restructuring.
Total rent expense as determined under ASC 840 was $22.2 million for the year ended December 31, 2018.
Maturities of our operating lease liabilities as of December 31, 2020 were as follows:
Years ending December 31,
(dollars in thousands)
2021
2022
2023
2024
2025
Thereafter
Total lease payments
Less: Amount representing interest
Present value of future payments
Operating leases
10,353
5,796
4,417
3,211
1,905
3,847
29,529
2,813
26,716
$
2020 Form 10-K
91
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Our ROU assets and lease liabilities are included in the following line items in our consolidated balance sheet:
(dollars in thousands)
Operating leases
Operating lease right-of-use assets
Accrued expenses and other current liabilities
Operating lease liabilities, net of current portion
Total operating lease liabilities
December 31,
2020
December 31,
2019
$
$
$
22,671 $
104,400
9,359 $
17,357
26,716 $
19,784
95,624
115,408
As of December 31, 2020, the weighted average remaining lease terms and discount rates were as follows:
(dollars in thousands)
Operating leases
Weighted average remaining lease term (years)
Weighted average discount rate
December 31,
2020
December 31,
2019
4.6
5.70 %
12.5
5.96 %
Supplemental cash flow information related to leases during the year ended December 31, 2020, was as follows:
(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Year ended
December 31,
2020
2019
Operating cash flows from operating leases
$
25,120 $
24,569
Right-of-use assets obtained in exchange for lease obligations (non-cash):
Operating leases
Other commitments
11,002
102,245
The term loans under the 2020 Credit Facility 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 2020 Credit Facility in October 2025.
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 December 31, 2020, the remaining aggregate minimum purchase commitment under these arrangements
was approximately $94.8 million through 2024.
Solution and service indemnifications
In the ordinary course of business, we provide certain indemnifications of varying scope to customers against claims of
intellectual property infringement made by third parties arising from the use of our solutions or services. If we determine
that it is probable that a loss has been incurred related to solution or service indemnifications, any such loss that could
be reasonably estimated would be recognized. We have not identified any losses and, accordingly, we have not
recorded a liability related to these indemnifications.
Guarantees and indemnification obligations
We enter into agreements in the ordinary course of business with, among others, customers, creditors, vendors and
service providers. Pursuant to certain of these agreements we have agreed to indemnify the other party for certain
matters, such as property damage, personal injury, acts or omissions of ours, or our employees, agents or
representatives, or third-party claims alleging that the activities of its contractual partner pursuant to the contract
infringe a patent, trademark or copyright of such third party.
92
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Legal proceedings
We are subject to legal proceedings and claims that arise in the ordinary course of business, as well as certain other
non-ordinary course proceedings, claims and inquiries, as described below. We 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 legal costs are expensed as
incurred.
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. We
further believe that the amount or range of reasonably possible losses related to such pending or threatened legal
proceedings will not have a material adverse effect on our business, operating results, cash flows, or financial condition
should such litigation be resolved unfavorably. It is possible, nevertheless, that our consolidated financial position,
results of operations or cash flows could be negatively affected in any particular period by an unfavorable resolution of
one or more of such legal proceedings.
Security incident
As previously disclosed, we are subject to risks and uncertainties as a result of a ransomware attack against us in May
2020 in which a cybercriminal removed a copy of a subset of data from our self-hosted environment (the "Security
Incident"). Based on the nature of the Security Incident, our research and third party (including law enforcement)
investigation, we have no reason to believe that any data went beyond the cybercriminal, was or will be misused, or will
be disseminated or otherwise made available publicly. Our investigation into the Security Incident by our cybersecurity
team and third-party forensic advisors remains ongoing.
During 2020, we recorded $10.4 million of expenses related to the Security Incident and offsetting probable insurance
recoveries of $9.4 million. Due to the time required to submit and process such insurance claims, we have not yet
received all of the accrued insurance recoveries. Of the insurance recoveries recorded, $3.1 million had been paid as of
December 31, 2020. Recorded expenses consisted primarily of payments to third-party service providers and
consultants, including legal fees, and enhancements to our cybersecurity measures. We present expenses and insurance
recoveries related to the Security Incident in general and administrative expense on our condensed consolidated
statements of comprehensive income. We expect to continue to experience increased costs related to our response to
the Security Incident and our efforts to further enhance our security measures, which may or may not be material.
As a result of the Security Incident, we are currently subject to certain legal proceedings, claims, inquiries and
investigations, as discussed below, and could be the subject of additional legal proceedings, claims, inquires and
investigations in the future that might result in adverse judgments, settlements, fines, penalties, or other resolution.
Although we carry insurance policies that we believe will provide coverage for a significant portion of our current and
expected future losses and expenses related to the Security Incident, there can be no assurance that they will do so.
Based on our analysis of the factors described above, we have not recorded a liability related to the Security Incident as
of December 31, 2020 because we are unable at this time to reasonably estimate the possible loss or range of loss.
Customer claims. To date, we have received approximately 570 claims for reimbursement of expenses from customers
or their attorneys in the U.S., U.K. and Canada related to the Security Incident (none of which have as yet been filed in
court or in arbitration). Possible exposure could result from our customers’ costs and expenses associated with notifying
their own customers of the Security Incident and taking steps to assure that personal information has not been
compromised as a result of the Security Incident. We are in the process of analyzing individual customer contracts into
which we have entered, the specific claims made and applicable law. At this time we cannot determine what, if any,
exposure we have in the context of customer claims.
2020 Form 10-K
93
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Customer constituent class actions. Presently, we are a defendant in 30 putative consumer class action cases [27 in
U.S. federal courts (some of which have been consolidated under multi district litigation to a single federal court), 1 in a
U.S. state court and 2 in Canadian courts] alleging harm from the Security Incident. The plaintiffs in these cases, who
purport to represent various classes of individual constituents of our customers, generally claim to have been harmed by
alleged actions and/or omissions by us in connection with the Security Incident and assert a variety of common law and
statutory claims seeking monetary damages, injunctive relief, costs and attorneys’ fees, and other related relief.
Lawsuits that are putative class actions require a plaintiff to satisfy a number of procedural requirements before
proceeding to trial. These requirements include, among others, demonstration to a court that the law proscribes in
some manner our activities, the making of factual allegations sufficient to suggest that our activities exceeded the limits
of the law and a determination by the court—known as class certification—that the law permits a group of individuals
to pursue the case together as a class. If these procedural requirements are not met, the lawsuit cannot proceed as a
class action and the plaintiff may lose the financial incentive to proceed with the case. Frequently, a court’s
determination as to these procedural requirements is subject to appeal to a higher court. As a result of these
uncertainties, we may be unable to determine the probability of loss until, or after, a court has finally determined that a
plaintiff has satisfied the applicable class action procedural requirements.
Furthermore, for putative class actions, it is often not possible to estimate the possible loss or a range of loss amounts,
even where we have determined that a loss is reasonably possible. Generally, class actions involve a large number of
people and raise complex legal and factual issues that result in uncertainty as to their outcome and, ultimately, making
it difficult for us to estimate the amount of damages that a plaintiff might successfully prove. This analysis is further
complicated by the fact that the plaintiffs lack contractual privity with us.
Governmental inquiries. To date, we have received a consolidated, multi-state Civil Investigative Demand issued on
behalf of 44 state Attorneys General and the District of Columbia relating to the Security Incident. In addition, we have
received communications, inquires and requests from the U.S. Federal Trade Commission, the U.S. Department of
Health and Human Services, the U.S. Securities and Exchange Commission, the Information Commissioner’s Office in
the United Kingdom (the “ICO”) under the U.K. Data Protection Act 2018, the Office of the Australian Information
Commissioner and the Office of the Privacy Commissioner of Canada. We are cooperating with these offices and
responding to their inquiries.
12. Income Taxes
We file income tax returns in the U.S. for federal and various state jurisdictions as well as in foreign jurisdictions
including Canada, the U.K., Australia, Ireland and Costa Rica. We are generally subject to U.S. federal income tax
examination for calendar tax years 2016 through 2020 as well as state and foreign income tax examinations for various
years depending on statutes of limitations of those jurisdictions. We are currently under U.S. federal income tax
examination for the calendar year 2016.
94
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
The following summarizes the components of income tax expense (benefit):
(dollars in thousands)
Current taxes:
U.S. Federal
U.S. State and local
International
Total current taxes
Deferred taxes:
U.S. Federal
U.S. State and local
International
Total deferred taxes
Years ended December 31,
2020
2019
2018
$
(407) $
1,534 $
1,563
3,904
5,060
(1,064)
7,725
2,176
8,837
13,897 $
613
130
2,277
(1,724)
(2,235)
359
(3,600)
(1,323) $
(1,088)
1,182
306
400
659
45
(1,323)
(619)
(219)
Total income tax provision (benefit)
$
The following summarizes the components of income before provision for income taxes:
(dollars in thousands)
U.S.
International
Income before provision for income taxes
Years ended December 31,
2020
(4,112) $
25,726
2019
5,149 $
5,436
21,614 $
10,585 $
2018
47,532
(2,910)
44,622
$
$
2020 Form 10-K
95
Blackbaud, Inc.
Notes to Consolidated Financial Statements
A reconciliation between the effect of applying the federal statutory rate and the effective income tax rate used to
calculate our income tax provision (benefit) is as follows:
Federal statutory rate
Effect of:
State income taxes, net of federal benefit
Change in foreign income tax rate applied to deferred tax balances
Change in state income tax rate applied to deferred tax balances
Change in valuation reserve (primarily state credit reserves)
Section 162(m) limitation
Nondeductible meals, entertainment and transportation
Unrecognized tax benefit
GILTI inclusion
FDII benefit
Stock-based compensation
Foreign tax rate
State credits, net of federal benefit
DTA Adjustment – NOLs
Return to accrual adjustment
Federal credits generated
Other
Years ended December 31,
2020
21.0 %
2019
21.0 %
2018
21.0 %
5.9
4.0
0.1
38.2
17.5
3.3
1.3
1.3
—
(1.2)
(1.7)
(2.3)
(3.3)
(4.1)
(17.4)
1.7
(1.7)
2.0
(3.1)
3.7
30.8
11.3
4.4
5.9
(1.5)
(20.2)
0.3
(15.4)
—
(10.6)
(37.6)
(1.8)
4.1
—
(0.4)
0.4
4.2
2.6
(2.6)
—
(0.7)
(17.4)
0.2
(1.9)
—
(1.6)
(10.4)
2.0
Income tax provision (benefit) effective rate
64.3 %
(12.5) %
(0.5) %
The increase in our effective tax rate in 2020 when compared to 2019, was primarily due to increase in valuation
allowance attributable to state tax credit carryforwards for which we do not expect to realize benefit. Furthermore, our
2020 effective tax rate was negatively impacted by reduced benefit attributable to research tax credit and stock based
compensation deduction. Lastly, higher 2020 earnings lessened impact of other non-deductible items.
96
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
The significant components of our deferred tax assets and liabilities were as follows:
(dollars in thousands)
Deferred tax assets relating to:
December 31,
2020
2019
Federal and state and foreign net operating loss carryforwards
$
5,592 $
Federal, state and foreign tax credits
Stock-based compensation
Operating leases
Allowance for credit losses
Intangible assets
Deferred revenue
Accrued bonuses
Other
Total deferred tax assets
Deferred tax liabilities relating to:
Intangible assets
Capitalized software development costs
Costs of obtaining contracts
Operating leases
Fixed assets
Other
Total deferred tax liabilities
Valuation allowance
Net deferred tax liability
42,598
17,434
13,375
2,399
1,663
524
—
9,111
92,696
(45,757)
(28,804)
(20,256)
(12,333)
(8,458)
(398)
9,203
24,435
11,717
35,620
1,374
1,560
682
1,713
7,487
93,791
(46,569)
(26,107)
(21,128)
(32,888)
(4,446)
(315)
(116,006)
(131,453)
(29,184)
(6,453)
$
(52,494) $
(44,115)
As of December 31, 2020, our federal, foreign and state net operating loss carryforwards for income tax purposes were
approximately $18.5 million, $2.1 million and $21.4 million, respectively. The federal and state net operating loss
carryforwards are subject to various Internal Revenue Code limitations and applicable state tax laws. If not utilized, the
federal net operating loss carryforwards will begin to expire in 2028 and the state net operating loss carryforwards will
expire over various periods beginning in 2021. Our foreign net operating loss carryforwards have an unlimited
carryforward period. As of December 31, 2020, our foreign tax credit carryforwards for income tax purposes were
insignificant. Our federal tax credit carryforwards for income tax purposes were approximately $14.1 million. Our state
tax credit carryforwards for income tax purposes were approximately $30.9 million, net of federal benefit. If not utilized,
the federal tax credit carryforwards will begin to expire in 2036 and the state tax credit carryforwards will begin to
expire in 2021. A portion of the foreign and state net operating loss carryforwards and state credit carryforwards have a
valuation reserve due to management's uncertainty regarding the future ability to use such carryforwards.
As of each reporting date, management considers new evidence, both positive and negative, that could affect its view
of the future realization of deferred tax assets. As of December 31, 2020, in part because requisite tax planning
strategies are no longer considered feasible and prudent, management determined that it is more likely than not that
the benefit from certain state tax credit carryforwards will not be realized. In recognition of this risk, we have provided a
valuation allowance of $28.2 million on the deferred tax assets related to these state tax credit carryforwards. The
increase in valuation allowance resulted in $8.3 million charge to income tax expense and non-recognition of benefit
attributable to credits generated in the current year.
2020 Form 10-K
97
Blackbaud, Inc.
Notes to Consolidated Financial Statements
The following table illustrates the change in our deferred tax asset valuation allowance:
Years ended December 31,
(dollars in thousands)
2020
2019
2018
Balance
at beginning
of year
Acquisition-
related
change
Charges to
expense
Balance at
end of
year
$
6,453 $
— $
22,731 $
29,184
6,855
7,205
—
16
(402)
(366)
6,453
6,855
The following table sets forth the change to our unrecognized tax benefit for the years ended December 31, 2020,
2019 and 2018:
(dollars in thousands)
Balance at beginning of year
Increases from prior period positions
Decreases in prior year positions
Increases from current period positions
Lapse of statute of limitations
Balance at end of year
$
$
2020
4,346 $
414
(614)
491
(12)
4,625 $
Years ended December 31,
2019
3,704 $
1,183
(385)
456
(612)
4,346 $
2018
5,160
104
(413)
58
(1,205)
3,704
The total amount of unrecognized tax benefit that, if recognized, would favorably affect the effective tax rate was $4.2
million at December 31, 2020. Certain prior period amounts relating to our 2014 acquisitions are covered under
indemnification agreements and, therefore, we have recorded a corresponding indemnification asset. We recognize
accrued interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. The
total amount of accrued interest and penalties included in the consolidated balance sheet as of December 31, 2020 and
December 31, 2019 was $1.1 million and $1.0 million, respectively. The total amount of interest and penalties included
in the consolidated statements of comprehensive income as an increase or decrease in income tax expense for 2020,
2019 and 2018 was insignificant.
We have taken federal and state tax positions for which it is reasonably possible that the total amounts of unrecognized
tax benefits might decrease within the next twelve months. This possible decrease could result from the expiration of
statutes of limitations. The reasonably possible decrease at December 31, 2020 was $1.1 million.
For our undistributed earnings of foreign subsidiaries, which we do not consider to be significant, we concluded that
these earnings would be permanently reinvested in the local jurisdictions and not repatriated to the United States.
Accordingly, we have not provided for U.S. state income taxes and foreign withholding taxes on those undistributed
earnings of our foreign subsidiaries. If some or all of such earnings were to be remitted, the amount of taxes payable
would be insignificant.
13. Stock-based Compensation
Employee stock-based compensation plans
Under the 2016 Equity and Incentive Compensation Plan Amended and Restated as of June 13, 2019 (the "2016 Equity
Plan"), we may grant incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock,
restricted stock units, other stock awards and cash incentive awards to employees, directors and consultants. We
maintain other stock-based compensation plans including the 2008 Equity Incentive Plan (the “2008 Equity Plan”),
under which no additional grants may be made.
In connection with the acquisition of Convio in May 2012, we maintain the Convio, Inc. 1999 Stock Option/Stock
Issuance Plan, as amended (the “Convio 1999 Plan”) and Convio, Inc. 2009 Stock Incentive Plan, as amended (the
“Convio 2009 Plan”), which we assumed upon the acquisition of Convio. Our Compensation Committee of the Board
of Directors administers all of these plans and the stock-based awards are granted under terms determined by them.
98
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
The total number of authorized stock-based awards available under our plans was 4,779,951 as of December 31, 2020.
We issue common stock from our pool of authorized stock upon exercise of stock options and stock appreciation rights,
vesting of restricted stock units or upon granting of restricted stock.
Historically, we have issued four types of awards under these plans: restricted stock awards, restricted stock units, stock
options and stock appreciation rights ("SARs"). There have been no new stock options or SARs granted since 2005 and
2013, respectively. The following table sets forth the number of awards outstanding for each award type as of:
Award type
Restricted stock awards
Restricted stock units
Stock options
Outstanding at December 31,
2020
1,277,109
1,170,885
—
2019
1,316,764
501,487
206
The majority of the stock-based awards granted under these plans have a 10-year contractual term. Awards granted to
our executive officers and certain members of management are subject to accelerated vesting upon a change in control
as defined in the employees’ retention agreement.
Expense recognition
We recognize compensation expense associated with stock options and awards with performance or market based
vesting conditions on an accelerated basis over the requisite service period of the individual grantees, which generally
equals the vesting period. We recognize compensation expense associated with restricted stock awards and SARs on a
straight-line basis over the requisite service period of the individual grantees, which generally equals the vesting period.
We recognize the effect of awards for which the requisite service period is not rendered when the award is forfeited
(that is, we recognize the effect of forfeitures in compensation cost when they occur). Previously recognized
compensation cost for an award is reversed in the period that the award is forfeited.
Stock-based compensation expense is allocated to cost of revenue and operating expenses on the consolidated
statements of comprehensive income based on where the associated employee’s compensation is recorded. The
following table summarizes stock-based compensation expense:
(in thousands)
Included in cost of revenue:
Cost of recurring
Cost of one-time services and other
Total included in cost of revenue
Included in operating expenses:
Sales, marketing and customer success
Research and development
General and administrative
Total included in operating expenses
Total stock-based compensation expense
Years ended December 31,
2020
2019
2018
$
$
5,793 $
7,581
13,374
15,514
18,527
39,842
73,883
87,257 $
1,879 $
1,487
3,366
11,203
11,115
32,949
55,267
58,633 $
2,464
2,778
5,242
9,285
9,048
24,699
43,032
48,274
See Note 2 for discussion of the additional equity award grants we made in response to COVID-19.
The total amount of compensation cost related to unvested awards not recognized was $98.7 million at December 31,
2020. It is expected that this amount will be recognized over a weighted average period of 1.4 years.
2020 Form 10-K
99
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Restricted stock awards
We have granted shares of common stock subject to certain restrictions under the 2016 Equity Plan and the 2008
Equity Plan. Restricted stock awards granted to employees vest in equal annual installments generally over 4 years from
the grant date subject to the recipient’s continued employment with us. Restricted stock awards granted to non-
employee directors vest after one year from the date of grant or, if earlier, immediately prior to the next annual election
of directors, provided the non-employee director is serving as a director at that time. The fair market value of the stock
at the time of the grant is amortized on a straight-line basis to expense over the period of vesting. Recipients of
restricted stock awards have the right to vote such shares and receive dividends, if declared.
The following table summarizes our unvested restricted stock awards as of December 31, 2020, and changes during the
year then ended:
Restricted stock awards
Unvested at January 1, 2020
Granted
Vested
Forfeited
Unvested at December 31, 2020
Restricted
stock awards
1,316,764 $
657,718
(520,296)
(177,077)
1,277,109
Weighted
average
grant-date
fair value
79.92
77.16
76.66
80.71
79.54
Weighted
average
remaining
contractual
term
(in years)
Aggregate
intrinsic value(1)
(in thousands)
8.4 $
73,510
(1)
The intrinsic value is calculated as the market value as of the end of the fiscal period.
The total fair value of restricted stock awards that vested during the years ended December 31, 2020, 2019 and 2018
was $39.9 million, $37.5 million and $24.2 million, respectively. The weighted average grant-date fair value of restricted
stock awards granted during the years ended December 31, 2019 and 2018 was $78.39 and $94.51, respectively.
Restricted stock units
We have also granted restricted stock units subject to certain restrictions under the 2016 Equity Plan and the 2008
Equity Plan. Restricted stock units granted to employees vest in equal annual installments generally over 3 years from
the grant date subject to the recipient’s continued employment with us. We have also granted restricted stock units for
which vesting is subject to meeting certain performance and/or market conditions. Restricted stock units granted with a
market condition had a fair market value assigned at the grant date based on the use of a Monte Carlo simulation
model. The fair market value of the stock at the time of the grant is amortized to expense on a straight-line basis over
the period of vesting except for awards with market or performance conditions, which are amortized on an accelerated
basis over the period of vesting.
The following table summarizes our unvested restricted stock units as of December 31, 2020, and changes during the
year then ended:
Restricted stock units
Unvested at January 1, 2020
Granted
Forfeited
Vested
Unvested at December 31, 2020
Restricted
stock units
501,487 $
1,020,381
(111,450)
(239,533)
1,170,885
Weighted
average
grant-date
fair value
80.49
59.59
67.75
78.97
63.62
Weighted
average
remaining
contractual
term
(in years)
Aggregate
intrinsic value(1)
(in thousands)
9.0 $
67,396
(1)
The intrinsic value is calculated as the market value as of the end of the fiscal period.
100
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
The total fair value of restricted stock units that vested during the years ended December 31, 2020, 2019 and 2018 was
$18.9 million, $19.2 million, and $13.7 million, respectively. The weighted average grant date fair value of restricted
stock units granted for the years ended December 31, 2019 and 2018 was $77.90 and $95.59, respectively.
Stock appreciation rights
All SARs previously granted were fully vested as of December 31, 2017. The total intrinsic value of SARs exercised
during the years ended December 31, 2019 and 2018 was $3.6 million and $12.4 million, respectively. SARs granted
with a market condition had a fair market value assigned at the grant date based on the use of a Monte Carlo
simulation model. All other SARs granted had a fair market value assigned at the grant date based on the use of the
Black-Scholes option pricing model.
14. Stockholders' Equity
Preferred stock
Our Board of Directors may fix the relative rights and preferences of each series of preferred stock in a resolution of the
Board of Directors.
Dividends
In March 2020, in response to the global COVID-19 pandemic, our Board of Directors rescinded its previously
announced policy to pay an annual dividend at a rate of $0.48 per share of common stock and discontinued the
declaration and payment of all cash dividends beginning with the second quarter of 2020 and thereafter until such
time, if any, as it may otherwise determine in its sole discretion.
The following table provides information with respect to quarterly dividends paid on common stock during the year
ended December 31, 2020.
Declaration Date
February 10, 2020
Stock repurchase program
Dividend
per Share
0.12
$
Record Date
February 28
Payable Date
March 13
In November 2020, our Board of Directors reauthorized and expanded a stock repurchase program that authorizes us to
purchase up to $250.0 million of our outstanding shares of common stock. The program does not have an expiration
date. Under the 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 may be limited, suspended or
discontinued at any time without prior notice. Under the 2020 Credit Facility, we have restrictions on our ability to
repurchase shares of our common stock.
We account for purchases of treasury stock under the cost method. During the year ended December 31, 2020, we
purchased 714,000 shares for $41.0 million. The remaining amount available to purchase stock under the stock
repurchase program was $209.0 million as of December 31, 2020.
Between January 1, 2021 and February 19, 2021, we repurchased an additional 465,821 shares for $28.1 million.
2020 Form 10-K
101
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Changes in accumulated other comprehensive loss by component
The changes in accumulated other comprehensive loss by component, consisted of the following:
Years ended December 31,
(in thousands)
2020
2019
Accumulated other comprehensive loss, beginning of period
$
(5,290) $
(5,110) $
2018
(642)
By component:
Gains and losses on cash flow hedges:
Accumulated other comprehensive (loss) income balance, beginning of
period
Other comprehensive (loss) income before reclassifications, net of tax
effects of $1,625, $860 and $(239)
Amounts reclassified from accumulated other comprehensive (loss)
income to interest expense
Tax (benefit) expense included in provision for income taxes
Total amounts reclassified from accumulated other comprehensive (loss)
income
Net current-period other comprehensive (loss) income
Reclassification upon adoption of ASU 2018-02
$
(1,323) $
1,498 $
748
(4,602)
(2,399)
670
3,827
(1,003)
(573)
151
2,824
(422)
(1,778)
(2,821)
—
—
(118)
31
(87)
583
167
Accumulated other comprehensive (loss) income balance, end of period
$
(3,101) $
(1,323) $
1,498
Foreign currency translation adjustment:
Accumulated other comprehensive loss balance, beginning of period
Translation adjustments
Accumulated other comprehensive income (loss) balance, end of period
$
(3,967) $
(6,608) $
(1,390)
4,571
2,641
604
(3,967)
(5,218)
(6,608)
Accumulated other comprehensive loss, end of period
$
(2,497) $
(5,290) $
(5,110)
15. Defined Contribution Plan
We have a defined contribution 401(k) plan (the "401K Plan") covering substantially all employees. Employees were
able to contribute between 1% and 75% of their salaries in 2020, 2019 and 2018. We match 50% of qualified
employees’ contributions up to 6% of their salary. The 401K Plan also provides for additional employer contributions to
be made at our discretion. We suspended our 401(k) match program between April 1, 2020 and December 31, 2020 in
response to COVID-19. Total matching contributions to the 401K Plan for the years ended December 31, 2020, 2019
and 2018 were $1.9 million, $8.7 million and $8.1 million, respectively.
We made a discretionary matching contribution to eligible employees 401(k) plans in December 2020 totaling $1.2
million, given our financial performance during the fourth quarter. There were no discretionary contributions by us to
the 401K Plan in 2019 and 2018.
102
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
16. Segment Information
Our chief operating decision maker is our chief executive officer ("CEO"). Our chief operating decision maker uses
consolidated financial information to make operating decisions, assess financial performance and allocate resources. We
have one operating segment and one reportable segment.
The following table presents long-lived assets by geographic region based on the location of the assets.
(dollars in thousands)
United States
Other countries
Total property and equipment
Years ended
December 31,
2020
$ 103,123 $
2,054
$ 105,177 $
2019
32,606
2,940
35,546
See Note 17 to these consolidated financial statements for information about our revenues by geographic region.
17. Revenue Recognition
Transaction price allocated to the remaining performance obligations
As of December 31, 2020, approximately $755 million of revenue is expected to be recognized from remaining
performance obligations. We expect to recognize revenue on approximately 60% of these remaining performance
obligations over the next 12 months, with the remainder recognized thereafter.
We applied the practical expedient in ASC 606-10-50-14 and have excluded the value of unsatisfied performance
obligations for (i) contracts with an original expected length of one year or less (one-time services); and (ii) contracts for
which we recognize revenue at the amount to which we have the right to invoice for services performed (payment
services and usage).
We also applied the practical expedient in ASC 606-10-65-1-(f)(3), whereby the transaction price allocated to the
remaining performance obligations, or an explanation of when we expect to recognize that amount as revenue for all
reporting periods presented before the date of the initial application, is not disclosed.
Contract balances
Our contract assets as of December 31, 2020 and December 31, 2019 were insignificant. Our opening and closing
balances of deferred revenue were as follows:
(in thousands)
Total deferred revenue
December 31,
2020
December 31,
2019
$
316,914 $
316,137
Deferred revenue was held flat during 2020, primarily due to declines in our 2020 bookings performance compared to
our budgeted expectations as a result of COVID-19. The amount of revenue recognized during the 2020 that was
included in the deferred revenue balance at the beginning of the period was approximately $311 million. The amount
of revenue recognized during the 2020 from performance obligations satisfied in prior periods was insignificant.
2020 Form 10-K
103
Blackbaud, Inc.
Notes to Consolidated Financial Statements
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 address of our customers:
(dollars in thousands)
United States
United Kingdom
Other countries
Total revenue
Years ended
December 31,
2020
2019
2018
$ 772,188 $ 775,308 $ 727,366
84,121
65,176
59,898
56,910
59,939
61,342
$ 913,219 $ 900,423 $ 848,606
The General Markets Group ("GMG"), the Enterprise Markets Group ("EMG"), and the International Markets Group
("IMG") comprise our go-to-market organizations. The following is a description of each market group as of December
31, 2020:
•
•
•
The GMG focuses on sales to all K-12 private schools, faith communities and arts and cultural organizations, as
well as emerging and mid-sized prospects in the U.S.;
The EMG focuses on sales to all healthcare and higher education institutions, corporations and foundations, as
well as large and/or strategic prospects in the U.S.; and
The IMG focuses on sales to all prospects and customers outside of the U.S.
The following table presents our revenue by market group:
Years ended
December 31,
(dollars in thousands)
GMG
EMG(1)
IMG
Other
Total revenue
2020
2018(2)
$ 376,762 $ 378,384 $ 362,585
2019
393,061 392,258 360,873
142,607 126,511 123,522
789
3,270
1,626
$ 913,219 $ 900,423 $ 848,606
(1)
(2)
The operating results of YourCause have been included in EMG from the date of acquisition. See Note 3 to these consolidated financial
statements for details regarding this acquisition.
Beginning in the first quarter of 2019, all of our Canadian operations are included in IMG. We have recast our revenue by market group for the
twelve months ended December 31, 2018, to present them on a consistent basis with the current year.
104
2020 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
18. Quarterly Results (Unaudited)
(dollars in thousands, except per share data)
Total revenue
Gross profit
(Loss) income from operations
(Loss) income before provision for income taxes
Net (loss) income
(Loss) earnings per share
Basic
Diluted
December 31,
2020
September 30,
2020
June 30,
2020
$
242,606 $
215,001 $
231,991 $
123,030
(850)
(6,672)
(13,621)
116,316
10,087
6,632
4,876
127,052
19,582
16,319
11,823
March 31,
2020
223,621
118,756
8,424
5,335
4,639
$
(0.28) $
(0.28)
0.10 $
0.10
0.25 $
0.24
0.10
0.10
(dollars in thousands, except per share data)
Total revenue
Gross profit
Income from operations
(Loss) income before provision for income taxes
Net income (loss)
Earnings (loss) per share
Basic
Diluted
December 31,
2019
237,839 $
September 30,
2019
221,120 $
$
121,302
119,323
3,586
(1,262)
1,324
7,883
4,930
4,566
June 30,
2019
225,634 $
124,827
13,491
9,873
7,140
March 31,
2019
215,830
116,547
2,185
(2,956)
(1,122)
$
0.03 $
0.03
0.10 $
0.09
0.15 $
0.15
(0.02)
(0.02)
Note: The individual amounts for each quarter may not sum to full year totals due to rounding.
The results of operations of acquired companies are included in the consolidated results of operations from the date of
their respective acquisition. See Note 3 of these consolidated financial statements for details related to our business
acquisitions.
19. Restructuring
During 2017, in an effort to further our organizational objectives, including improved operating efficiency, customer
outcomes and employee satisfaction, we initiated a multi-year plan to consolidate and relocate some of our existing
offices to highly modern and more collaborative workspaces with short-term financial commitments. We substantially
completed our facilities optimization restructuring plan as of December 2019. During the years ended December 31,
2019 and 2018, we incurred $5.8 million and $4.6 million, respectively, in before-tax restructuring charges related to
these activities. Such charges during the year ended December 31, 2020 were insignificant.
Restructuring costs incurred prior to our adoption of ASU 2016-02 on January 1, 2019 consisted primarily of costs to
terminate lease agreements, contractual lease payments, net of estimated sublease income, upon vacating space as part
of the plan, as well as insignificant costs to relocate affected employees and write-off facilities-related fixed assets that
we would no longer use.
Upon adoption of ASU 2016-02 at January 1, 2019, we reduced our operating lease ROU assets recognized at transition
by the carrying amounts of the restructuring liabilities for certain leased office spaces that we ceased using prior to
December 31, 2018. Restructuring costs incurred during the year ended December 31, 2019 consisted primarily of
operating lease ROU asset impairment costs and, to a lesser extent, lease payments for offices we had ceased using and
write-offs of facilities-related fixed assets that we would no longer use.
2020 Form 10-K
105
Blackbaud, Inc.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) are designed only to
provide reasonable assurance that they will meet their objectives. As of the end of the period covered by this report, we
carried out an evaluation, under the supervision and with the participation of our management, including our Chief
Executive Officer (principal executive officer) and Chief Financial Officer (principal financial and accounting officer), of
the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)) pursuant to
Exchange Act Rule 13a-15(b). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that our disclosure controls and procedures are effective to provide the reasonable assurance discussed
above.
Changes in Internal Control Over Financial Reporting
No change in internal control over financial reporting occurred during the fiscal quarter ended December 31, 2020 with
respect to our operations that has materially affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes
those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts
and expenditures are being made only in accordance with authorizations of our management and directors; and (iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of our assets that could have a material effect on the financial statements.
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of
December 31, 2020, based on the framework in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this
evaluation under the Internal Control - Integrated Framework, management concluded that our internal control
over financial reporting was effective as of December 31, 2020.
The effectiveness of our internal control over financial reporting as of December 31, 2020, has been audited by our
independent registered public accounting firm, as stated in their attestation report, which is included in Item 8 of this
Annual Report on Form 10-K.
ITEM 9B. OTHER INFORMATION
None.
106
2020 Form 10-K
Blackbaud, Inc.
PART III.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
The information required by Item 10 with respect to Directors and Executive Officers is incorporated by reference from
the information under the captions “Election of Directors,” “Information Regarding Meetings of the Board and
Committees,” “Delinquent Section 16(a) Reports,” and “Code of Business Conduct and Ethics and Code of Ethics,”
contained in Blackbaud’s Proxy Statement for the 2021 Annual Meeting of Stockholders expected to be held on June 9,
2021, except for "Information about our Executive Officers" which is set forth in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from the information under the captions "Director
Compensation," “Executive Compensation,” “Compensation Discussion and Analysis,” “2020 Summary Compensation
Table” and "CEO Pay Ratio" contained in Blackbaud’s Proxy Statement for the 2021 Annual Meeting of Stockholders
expected to be held on June 9, 2021.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by Item 12 is incorporated by reference from information under the captions “Stock
Ownership” and "Equity Compensation Plan Information" contained in Blackbaud’s Proxy Statement for the 2021
Annual Meeting of Stockholders expected to be held on June 9, 2021.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
The information required by Item 13 is incorporated by reference from the information under the captions
“Transactions with Related Persons,” and “Independence of Directors” contained in Blackbaud’s Proxy Statement for
the 2021 Annual Meeting of Stockholders expected to be held on June 9, 2021.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by Item 14 is incorporated by reference from the information under the caption “Audit
Committee Report,” contained in Blackbaud’s Proxy Statement for the 2021 Annual Meeting of Stockholders expected
to be held on June 9, 2021.
2020 Form 10-K
107
Blackbaud, Inc.
PART IV.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are included as part of the Annual Report on Form 10-K:
1.
Financial statements
See the "Index to consolidated financial statements" in Part II Item 8 of this report.
2. Financial statement schedules
Schedules not listed above have been omitted because the information required to be set forth therein is not applicable
or is shown in the financial statements thereto.
3. Exhibits
The exhibits listed below are filed or incorporated by reference as part of this report:
Exhibit
Number
2.1
2.5 *
2.6
2.7
2.8
2.9
2.10
3.4
3.5
4.1
10.1 †
Description of Document
Agreement and Plan of Merger and
Reincorporation dated April 6, 2004
Stock Purchase Agreement dated as of February
1, 2011 by and among Public Interest Data, Inc.,
all for the stockholders of Public Interest Data,
Inc., Stephen W. Zautke, as stockholder
representative and Blackbaud, Inc.
Agreement and Plan of Merger dated as of
January 16, 2012 by and among Blackbaud, Inc.,
Caribou Acquisition Corporation and Convio, Inc.
Stock Purchase Agreement dated as of October
6, 2011 by and among Everyday Hero Pty. Ltd.,
all of the stockholders of Everyday Hero Pty. Ltd.,
Nathan Betteridge as stockholder representative
and Blackbaud Pacific Pty. Ltd.
Purchase Agreement, dated August 30, 2014, by
and among MicroEdge Holdings, LLC, Blackbaud,
Inc, direct and indirect holders of all of the
outstanding equity interests of MicroEdge
Holdings, LLC, and VFF I AIV I, L.P., as Sellers’
Representative.
Unit Purchase Agreement, dated as of August 10,
2015, by and between Smart Tuition Holdings,
LLC and Blackbaud, Inc.
Amendment, Consent and Waiver, Agreement
dated as of October 2, 2015, by and between
Smart Tuition Holdings, LLC and Blackbaud, Inc.
Amended and Restated Certificate of
Incorporation of Blackbaud, Inc.
Amended and Restated Bylaws of Blackbaud, Inc.
Description of Capital Stock
Form of Notice of Grant and Stock Option
Agreement under Blackbaud, Inc. 2008 Equity
Incentive Plan
Filed In
Registrant’s
Form
S-1/A
Dated
4/6/2004
Filed
Herewith
Exhibit
Number
2.1
10-Q
5/10/2011
2.3
8-K
1/17/2012
10-K
2/29/2012
2.4
2.7
8-K
10/2/2014
10.76
8-K
10/8/2015
10.78
8-K
10/8/2015
10.79
DEF 14A
4/30/2009
8-K
10-K
S-8
6/14/2019
2/20/2020
8/4/2008
3.1
4.1
10.34
108
2020 Form 10-K
Blackbaud, Inc.
Exhibit
Number
10.2 †
10.3 †
10.4
Description of Document
Form of Notice of Grant and Restricted Stock
Agreement under Blackbaud, Inc. 2008 Equity
Incentive Plan
Form of Notice of Grant and Stock Appreciation
Rights Agreement under Blackbaud, Inc. 2008
Equity Incentive Plan
Triple Net Lease Agreement dated as of October
1, 2008 between Blackbaud, Inc. and Duck Pond
Creek-SPE, LLC
Filed In
Registrant’s
Form
S-8
Dated
8/4/2008
Filed
Herewith
Exhibit
Number
10.35
S-8
8/4/2008
10.36
8-K
12/11/2008
10.37
10.5 †** Convio, Inc. 1999 Stock Option/Stock Issuance
S-1
1/22/2010
10.2
Plan, as amended, and forms of stock option
agreements
10.6 †** Convio, Inc. 2009 Amended and Restated Stock
Incentive Plan, as amended, and forms of stock
option agreements
10.7 †** Convio, Inc. Form of Nonstatutory Stock Option
Notice (Double Trigger)
10.8 †** Convio, Inc. Form of Restricted Stock Unit Notice
10.9 †
10.10 †
10.11 †
10.12 †
10.13
10.14 †
10.15
10.16
10.17
10.18
(Double Trigger) and Agreement
Blackbaud, Inc. 2008 Equity Incentive Plan, as
amended
Amendment to the Blackbaud, Inc. 2008 Equity
Incentive Plan
Form of Employment Agreement between
Blackbaud, Inc. and each of Anthony W. Boor
and Kevin W. Mooney
Form of Employment Agreement between
Blackbaud, Inc. and Jon W. Olson
Lease Amendment and Remediation Agreement
entered into as of March 22, 2013, by and
between Blackbaud, Inc. and Duck Pond Creek-
SPE, LLC.
Blackbaud, Inc. 2016 Equity and Incentive
Compensation Plan
Lease Agreement dated May 16, 2016 between
Blackbaud, Inc. and HPBB1, LLC
First Amendment to Lease Agreement, dated as
of August 22, 2016, between HPBB1, LLC and
Blackbaud, Inc.
Credit Agreement, dated as of June 2, 2017, by
and among Blackbaud, Inc. and certain of its
subsidiaries, as Borrowers, the lenders referred to
therein, Bank of America, N.A., as Administrative
Agent, Swingline Lender and Issuing Lender, PNC
Bank, National Association, as Syndication Agent,
and Wells Fargo Bank, National Association and
Regions Bank, as Co-Documentation Agents,
with Merrill Lynch, Pierce, Fenner & Smith
Incorporated, PNC Capital Markets LLC, Wells
Fargo Securities, LLC and Regions Capital
Markets, a division of Regions Bank, as Joint Lead
Arrangers and Joint Bookrunners.
Pledge Agreement, dated as of June 2, 2017, by
Blackbaud, Inc. in favor of Bank of America, N.A.,
as administrative agent, for the ratable benefit of
itself and the secured parties referred to therein.
S-1/A
3/19/2010
10.1
8-K
8-K
8-K
8-K
2/28/2011
2/28/2011
6/26/2012
6/26/2012
10-K
2/27/2013
10-K
2/27/2013
8-K
3/28/2013
10.1
10.2
10.59
10.60
10.65
10.65
10.66
DEF 14A
4/26/2016 Appendix C
10-Q
8/4/2016
10-Q
11/4/2016
10.84
10.87
8-K
6/5/2017
10.90
8-K
6/5/2017
10.91
2020 Form 10-K
109
Blackbaud, Inc.
Description of Document
Form of Retention Agreement dated as of August
1, 2017 between Blackbaud, Inc. and each of
Anthony W. Boor, Kevin W. Mooney and Jon W.
Olson.
Form of Retention Agreement between
Blackbaud, Inc. and Kevin P. Gregoire
Second Amendment to Lease Agreement, dated
as of May 18, 2017, between HPBB1, LLC and
Blackbaud, Inc.
Third Amendment to Lease Agreement, dated as
of December 11, 2017, between HPBB1, LLC and
Blackbaud, Inc.
Fourth Amendment to Lease Agreement, dated
as of February 28, 2018, between HPBB1, LLC
and Blackbaud, Inc.
Amended and Restated Blackbaud, Inc. 2016
Equity and Incentive Compensation Plan
Offer Letter Agreement between Blackbaud, Inc.
and Kevin P. Gregoire
Form of Employee Agreement between
Blackbaud, Inc. and Kevin P. Gregoire
Amended and Restated Employment and
Noncompetition Agreement dated December 11,
2019 between Blackbaud, Inc. and Michael P.
Gianoni
Fifth Amendment to Lease Agreement, dated as
of February 18, 2020, between HPBB1, LLC and
Blackbaud, Inc.
Sixth Amendment to Lease Agreement, dated as
of March 17, 2020, between HPBB1, LLC and
Blackbaud, Inc.
Seventh Amendment to Lease Agreement, dated
as of April 14, 2020, between HPBB1, LLC and
Blackbaud, Inc.
Eighth Amendment to Lease Agreement, dated
as of May 26, 2020, between HPBB1, LLC and
Blackbaud, Inc.
Ninth Amendment to Lease Agreement, dated as
of June 8, 2020, between HPBB1, LLC and
Blackbaud, Inc.
Purchase and Sale Agreement dated June 17,
2020, between HPBB1, LLC and Blackbaud, Inc.
Tenth Amendment to Lease Agreement, dated as
of June 26, 2020, between HPBB1, LLC and
Blackbaud, Inc.
to Purchase and Sale
First Amendment
Agreement, dated July 8, 2020, between HPBB1,
LLC and BBHQ1, LLC.
Second Amendment
to Purchase and Sale
Agreement, dated July 21, 2020, between
HPBB1, LLC and BBHQ1, LLC.
Eleventh Amendment to Lease Agreement, dated
as of August 13, 2020, between BBHQ1, LLC and
Blackbaud, Inc.
Exhibit
Number
10.19 †
10.20 †
10.21
10.22
10.23
10.24 †
10.25 †
10.26 †
10.27 †
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
Filed In
Registrant’s
Form
10-Q
Dated
8/4/2017
Filed
Herewith
Exhibit
Number
10.92
10-Q
8/4/2017
10-K
2/20/2018
10.92
10.93
10-K
2/20/2018
10.94
10-Q
5/4/2018
10.95
DEF 14A
4/24/2019 Appendix B
10-Q
10-Q
5/3/2019
5/3/2019
8-K
12/13/2019
10.96
10.97
10.99
10-Q
8/4/2020
10.1
10-Q
8/4/2020
10.2
10-Q
8/4/2020
10.3
10-Q
8/4/2020
10.4
10-Q
8/4/2020
10.5
10-Q
10-Q
8/4/2020
8/4/2020
10.6
10.7
10-Q
11/3/2020
10.1
10-Q
11/3/2020
10.2
10-Q
11/3/2020
10.3
110
2020 Form 10-K
Blackbaud, Inc.
Description of Document
Amended and Restated Credit Agreement, dated
as of October 30, 2020, by and among
Blackbaud, Inc., and certain of its subsidiaries, as
Borrowers, the lenders referred to therein, Bank
of America, N.A., as Administrative Agent,
Swingline Lender and Issuing Lender, PNC Bank,
National Association, as Syndication Agent, and
Regions Bank, BBVA USA and Fifth Third Bank,
National Association, as Co-Documentation
Agents, with BofA Securities, Inc., PNC Bank,
National Association, Regions Capital Markets,
BBVA USA and Fifth Third Bank, National
Association as Joint Lead Arrangers and Joint
Bookrunners.
Amended and Restated Pledge Agreement, dated
as of October 30, 2020, by Blackbaud, Inc. in
favor of Bank of America, N.A., as Administrative
Agent, for the ratable benefit of itself and the
secured parties referred to therein.
Termination of Triple Net Lease and Mutual
Release Agreement, dated as of November 4,
2020, between Blackbaud, Inc. and HP 2000DI,
LLC.
Subsidiaries of Blackbaud, Inc.
Consent of Independent Registered Public
Accounting Firm
Certification by the Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
Certification by the Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
Certification by the Chief Executive Officer
pursuant to 18 U.S.C. 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
Certification by the Chief Financial Officer
pursuant to 18 U.S.C. 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit
Number
10.38
10.39
10.40
21.1
23.1
31.1
31.2
32.1
32.2
Filed In
Registrant’s
Form
10-Q
Dated
11/3/2020
Filed
Herewith
Exhibit
Number
10.4
10-Q
11/3/2020
10.5
X
X
X
X
X
X
X
2020 Form 10-K
111
Blackbaud, Inc.
Exhibit
Number
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Description of Document
Inline XBRL Instance Document - the Instance
Document does not appear in the interactive data
file because its XBRL tags are embedded within
the Inline XBRL Document.
Inline XBRL Taxonomy Extension Schema
Document
Inline XBRL Taxonomy Extension Calculation
Linkbase Document
Inline XBRL Taxonomy Extension Definition
Linkbase Document
Inline XBRL Taxonomy Extension Label Linkbase
Document
Inline XBRL Taxonomy Extension Presentation
Linkbase Document
Cover Page Interactive Data File (formatted as
Inline XBRL and contained in Exhibit 101).
Registrant’s
Form
Filed In
Dated
Exhibit
Number
Filed
Herewith
X
X
X
X
X
X
X
*
**
The registrant has applied for an extension of the confidential treatment it was previously granted with respect
to portions of this exhibit. Those portions have been omitted from the exhibit and filed separately with the U.S.
Securities and Exchange Commission.
The Convio, Inc. 2009 Amended and Restated Stock Incentive Plan, as amended, and forms of stock option
agreements thereunder (“Convio 2009 Original Plan Documents”) and the Convio, Inc. 1999 Stock Option/
Stock Issuance Plan, as amended, and forms of stock option agreements thereunder (“Convio 1999 Plan
Documents”) were filed by Convio in its Forms S-1/A and S-1, filed March 19, 2010 and January 25, 2010 as
exhibits 10.1 and 10.2, respectively. The Convio, Inc. Form of Nonstatutory Stock Option Notice (Double
Trigger) and Convio, Inc. Form of Restricted Stock Unit Notice (Double Trigger) and Agreement were filed by
Convio in its Form 8-K on February 28, 2011 as exhibits 10.1 and 10.2 (together with the Convio 2009 Original
Plan Documents, the “Convio 2009 Plan Documents”). We assumed the Convio 2009 Plan Documents and
Convio 1999 Plan Documents when we acquired Convio in May 2012. We filed the Convio 2009 Plan
Documents and Convio 1999 Plan Documents by incorporation by reference as exhibits 10.59, 10.60, 10.61
and 10.62 in our Form S-8 on May 7, 2012.
†
Indicates management contract or compensatory plan, contract or arrangement.
ITEM 16. Form 10-K Summary
Not applicable.
112
2020 Form 10-K
Blackbaud, Inc.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly
caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
Signed: February 23, 2021
Blackbaud, Inc.
/S/ MICHAEL P. GIANONI
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this Form 10-K has been signed below by the
following persons on behalf of the Registrant and on the dates indicated.
/S/ MICHAEL P. GIANONI
Michael P. Gianoni
President, Chief Executive Officer and
Director (Principal Executive Officer)
Date: February 23, 2021
/S/ ANTHONY W. BOOR
Anthony W. Boor
Executive Vice President and Chief
Financial Officer (Principal Financial
and Accounting Officer)
Date: February 23, 2021
/S/ ANDREW M. LEITCH
Andrew M. Leitch
/S/
TIMOTHY CHOU
Timothy Chou
/S/ GEORGE H. ELLIS
George H. Ellis
/S/
/S/
/S/
THOMAS R. ERTEL
Thomas R. Ertel
SARAH E. NASH
Sarah E. Nash
JOYCE M. NELSON
Joyce M. Nelson
Chairman of the Board of Directors
Date: February 23, 2021
Director
Director
Director
Director
Director
Date: February 23, 2021
Date: February 23, 2021
Date: February 23, 2021
Date: February 23, 2021
Date: February 23, 2021
2020 Form 10-K
113
SUBSIDIARIES OF BLACKBAUD, INC.
As of February 23, 2021
Blackbaud, Inc.
Subsidiaries
ACN 161 644 328 Pty. Ltd.
BB Real Property Development, LLC
BBHQ1, LLC
Blackbaud Asia, Ltd.
Blackbaud Canada, Inc.
Blackbaud Europe Ltd.
Blackbaud Global Ltd.
Blackbaud Latin America, S.R.L.
Blackbaud Pacific Pty. Ltd.
Everyday Hero Ltd.
Everyday Hero Pty. Ltd.
Giving.com Limited
Giving Limited
JGCrowdfunding USA, LLC
JG US Inc.
MyCharity, Ltd.
Smart, LLC
YC Blocker 1, LLC
YourCause Holdings, LLC
YourCause, LLC
EXHIBIT 21.1
Organized Under
Laws of:
Delaware
Australia
Delaware
Delaware
Hong Kong
Canada
Scotland
England and Wales
Costa Rica
Australia
England and Wales
Australia
England and Wales
England and Wales
Delaware
Delaware
Ireland
Delaware
Delaware
Delaware
Texas
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No.
333-181210, No. 333-182407, No. 333-212057 and No. 333-232111) of Blackbaud, Inc., of our report
dated February 23, 2021, relating to the financial statements and the effectiveness of internal control over
financial reporting, which appears in this Form 10-K.
/S/ PRICEWATERHOUSECOOPERS LLP
Atlanta, Georgia
February 23, 2021
Blackbaud, Inc.
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Michael P. Gianoni, certify that:
1.
I have reviewed this annual report on Form 10-K of Blackbaud, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c.
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a.
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: February 23, 2021
By:
/s/ Michael P. Gianoni
Michael P. Gianoni
President and Chief Executive Officer
(Principal Executive Officer)
Blackbaud, Inc.
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Anthony W. Boor, certify that:
1.
I have reviewed this annual report on Form 10-K of Blackbaud, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
b. designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
c.
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s
internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of
directors (or persons performing the equivalent functions):
a.
all significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process,
summarize and report financial information; and
b. any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting.
Date: February 23, 2021
By:
/s/ Anthony W. Boor
Anthony W. Boor
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Blackbaud, Inc.
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Blackbaud, Inc. (the “Company”) for the period ended
December 31, 2020 as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”),
I, Michael P. Gianoni, President and Chief Executive Officer, hereby certify, pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Date: February 23, 2021
By:
/s/ Michael P. Gianoni
Michael P. Gianoni
President and Chief Executive Officer
(Principal Executive Officer)
Blackbaud, Inc.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Blackbaud, Inc. (the “Company”) for the period ended
December 31, 2020 as filed with the Securities and Exchange Commission on or about the date hereof (the “Report”),
I, Anthony W. Boor, Executive Vice President and Chief Financial Officer, hereby certify, pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of
1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
Date: February 23, 2021
By:
/s/ Anthony W. Boor
Anthony W. Boor
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Blackbaud, Inc.
65 Fairchild Street
Charleston, South Carolina 29492
Phone: 800-443-9441
Fax: 843-216-6100
www.blackbaud.com