2022 Annual Report
Included in the 2022 Annual Report:
Form 10-K filed with the U.S. Securities and Exchange Commission on
February, 24, 2023
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, 2022
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
Preferred Stock Purchase Rights
Trading Symbol(s)
BLKB
N/A
Name of Each Exchange on which Registered
Nasdaq Global Select Market
Nasdaq Global Select Market
Securities Registered Pursuant to Section 12(g) of the Act: None
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. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-
based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to
§240.10D-1(b). ☐
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, 2022 (based on
the closing sale price of $58.07 on that date) was approximately $2,497,064,121. 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 17, 2023 was 53,215,892.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders currently scheduled to be held
June 14, 2023 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,
2022.
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
Item 6.
securities
[Reserved]
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
Item 9C. Disclosure regarding foreign jurisdictions that prevent inspections
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. 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, 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, cybersecurity and data protection risks and related liabilities, and current
or potential legal proceedings involving us, 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 over 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 (CSR) and environmental, social and governance (ESG), 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 impact community, from major global institutions to small charities to
individuals. During 2022, we had more than 40,000 customers with contractual billing arrangements and nearly 100,000
customers that paid Blackbaud through transactional fees. Through our customers and our solutions, Blackbaud supports
millions of users and we connect millions of supporters to over 150,000 organizations and causes in over 100 countries. 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 impact market is significant, spanning far beyond philanthropy, and our addressable market is substantial and
growing
There are millions of organizations globally focused on social impact including nonprofits, foundations, companies involved in
corporate social responsibility and ESG, education institutions and healthcare organizations. Billions of individuals also engage
by donating funds, volunteering their time, advocating for a cause, receiving services from or otherwise engaging with social
impact organizations.
Traditional methods of fundraising and organizational management are often costly and inefficient
Many social impact 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 impact 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:
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Solicit funds and build relationships with major and institutional donors;
Garner small cash contributions from numerous contributors;
• Manage and develop complex relationships with large numbers of constituents;
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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 for-profit businesses;
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
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•
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 impact efforts,
including the need to:
• Quantify and improve the impact of their grants;
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Cultivate better relationships with grantees;
Achieve better internal collaboration and alignment with board members, reviewers and other stakeholders;
Illustrate the impact of their corporate philanthropy and education 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;
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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 impact community, supporting our customers' missions from securing resources and 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 Strategy
During 2022, we continued to execute our four-point strategy targeted to drive solution and service innovation, quality
enhancement, increased operating efficiency and improved financial performance:
1.
Expand Total Addressable Market ("TAM")
In December 2021, we doubled our TAM when we acquired EVERFI, Inc. ("EVERFI"), an industry leader in global social
impact technology. Adding EVERFI advances our position as a leader in the rapidly evolving ESG and CSR spaces and offers
cross-selling and upselling opportunities through complementary product offerings with YourCause® solutions. Our TAM
now stands at over $20 billion, and we remain active in the evaluation of opportunities to further expand our addressable
market through acquisitions and internal product development.
2.
Lead with World Class Teams and Operations
This strategy expands upon our previous strategies to drive sales effectiveness and improve operating efficiency to
include improving overall company performance as measured by the Rule of 40 (see discussion of Non-GAAP Financial
Measures below). During 2022, we announced a series of strategic organizational updates to streamline our business
operations and become even more customer centric. We created three new roles: Chief Operating Officer, Chief
Commercial Officer and Executive Vice President of Corporations. We believe these new roles will: ensure consistency in
our approach to the customer experience; further streamline and simplify our go-to-market efforts to maximize our
outcomes as a global company; and further align our YourCause and EVERFI offerings and continue our investment in
being the partner of choice for corporations focused on social responsibility and impact. Additionally, we took steps to
better align our workforce with our strategic priorities, including further elimination of open positions as well as the
difficult decision to reduce our workforce (see additional discussion regarding our workforce reduction below). We also
appointed three new members to our board of directors, providing not only new business perspectives but also adding
important skills in cybersecurity, enterprise software, digital transformation and global operations.
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3. Delight Customers with Innovative Cloud Solutions
During our annual user conference, bbcon, we shared how our purpose-built solutions bring together the capabilities
essential to our customers in managing their data, making their teams more productive, motivating their audiences to
act, and ultimately driving outcomes. During the third quarter, we acquired Kilter, an intuitive, gamified, activity-based
engagement app. We will initially pair Kilter with our Blackbaud TeamRaiser solution to serve nonprofits by expanding the
ways they can engage with their supporters to prepare for their existing fundraising walks, runs and rides, and to create
new types of engagement opportunities that are not tied to a specific date or place. Kilter will also provide a unique
solution with YourCause CSRConnect platform for companies as employers take a more active role in supporting their
employees’ health and wellness pursuits across their remote and distributed workforces.
4.
Focus on Employees, Culture and ESG Initiatives
During 2022, we announced that we achieved carbon neutrality for 2021. This is a goal we have been striving towards and
our shift to a remote-first workforce enabled us to accelerate our timeline. Since 2019, Blackbaud has reduced its global
real estate footprint by 50%, energy emissions to run office space by 63% and employee commute emissions by 75%.
With a multi-pronged climate strategy, Blackbaud is focused on reducing emissions, using energy efficiently and investing
in environmental projects for a more sustainable future. We shared more about our ESG strategy on our Corporate Social
Responsibility website during the second quarter. Our mission driven culture has been in our DNA since inception and is
very attractive in a competitive labor market. We continue to foster a diverse and inclusive environment focused on
employee engagement and connectedness with our remote-first workforce strategy. We have a significant role to play in
driving advances in the social impact space, and we are proud of the strong corporate culture we have built and continue
to cultivate in today's environment.
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 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 employees are energized by our opportunity to fuel social impact. Collaboration, innovation, authentic passion for the
customers we serve and high standards are core to our culture and help to enable the great work we do. We strive to hire,
develop and retain the best employees and provide a supportive and inclusive environment where their talents and potential
are realized. In 2021, we formally went Remote First as a company which signals Blackbaud's goal to attract talent globally.
For additional information, see “Human Capital Resources” below.
Drive Strength in Our Sector as an Industry Thought Leader
In our over 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 impact 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
impact community. The research and reports the Blackbaud Institute produces serve to strengthen the social impact
community as a whole. ENGAGE, our blog and podcast, provides free best practices resources that drive impact across the
social impact community, as well.
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In 2020, we announced Blackbaud Social Good Startup Program, a year-long accelerator designed to support innovative
startups with the potential to drive social impact. In alignment with our commitment to diversity in the tech community, we
emphasize supporting founders from underrepresented backgrounds.
Solutions and Services
We build the essential software that frees customers to focus on what matters most: delivering impact. With powerful data
intelligence and expertise inside, and an ever-growing network of partners and developers outside, our software is the
foundational infrastructure that expands what's possible for anyone dedicated to purpose-driven work.
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, education management,
ticketing, social responsibility, payment services and analytics.
Our specific solutions and services include:
Fundraising and Engagement
Blackbaud Raiser's Edge NXT® is our flagship fundraising and relationship management solution. Raiser's Edge NXT is the first
and only cloud fundraising and relationship management solution that is all-inclusive, fully integrated with data health,
analytics, email marketing, donation forms, event management, payment processing and process automation to create
tailored, user-specific experiences. Built on our Blackbaud SKY Platform, 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. Raiser’s Edge
NXT includes access to Blackbaud Online Express™, a simple, efficient, cloud-based fundraising and marketing tool designed
for smaller nonprofit organizations.
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 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 for
communicating through web pages and email give our customers the essentials for building sustainable donor relationships.
Blackbaud TeamRaiser® is the industry’s most comprehensive cloud solution designed specifically for peer-to-peer event
fundraising. Powering thousands of events each year, 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.
JustGiving® from Blackbaud® is one of the world's leading social platforms for giving. 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.
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Blackbaud Fundraiser Performance Management™ is a multi-pronged solution that combines easy to use data-driven software
for fundraisers and managers, predictive modeling insights, and high-touch strategic consulting. Built for higher education
institutions, healthcare and large nonprofit organizations, the SaaS tools increase transparency into fundraising performance,
and direct fundraiser and talent manager action. Both fundraisers and leaders benefit from the tailored consulting to address
weaknesses and enhance strengths to comprehensively improve the fundraising team performance.
Blackbaud Guided Fundraising™ and Blackbaud Volunteer Network Fundraising™ can work together with Fundraiser
Performance Management 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.
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.
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 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 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. 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 modern cloud solution, built on our Blackbaud SKY Platform, that supports the end-to-end
grantmaking process from application through review and resolution. Blackbaud Grantmaking provides core functionality to
efficiently disperse funds, maintain compliance with due diligence requirements and measure and demonstrate impact. The
system has collaborative tools to help strengthen relationships with grantees and other community partners. 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.
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Education Solutions
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.
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 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.
Social Responsibility and ESG
YourCause GrantsConnect® and YourCause CSRconnect® are cloud solutions for employee giving, volunteering, and
grantmaking 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.
EVERFI is a SaaS software platform building digital education content that addresses the Missing Learning Layer and equips
organizations to deliver Impact-as-a-Service™ in their communities, empowering individuals with the tools and skills to drive
ecosystems of change and inspire lifelong success. EVERFI offers programs on important societal topics such as financial
literacy, health and well-being, social and emotional learning, STEM and digital literacy, among many others. EVERFI also
delivers adult-focused content in the HR and compliance training space for companies and institutions. Through the platform
and program offerings, EVERFI is able to yield anonymized learner data to reflect the true impact of their educational
offerings.
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.
Data Intelligence
Our data intelligence offerings provide solutions for data health, insights and performance, 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.
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Blackbaud’s Intelligence for Good® is our unique, comprehensive approach through which we combine artificial intelligence,
analytics, big data, and expertise to deliver high-impact data intelligence. This powerful approach enables social impact
organizations to transform data into insights and outcomes.
Data Intelligence is the Blackbaud portfolio of solutions and services that use data science and AI to turn customer data into
valuable insights that inform decision-making and help them achieve their goals efficiently. Blackbaud's Data Intelligence
portfolio consists of three key outcome areas:
Data Health solutions enhance and maintain constituent data so the customer is always working with accurate and up-to-date
information. Examples of these solutions include: identifying outdated or invalid constituent addresses in the database and
making corrections based on United States Postal Service data and using name and address matching to append additional
contact or demographic data points to constituent records to support better segmentation and engagement.
Insights inform strategic decision-making and actions that increase efficiency and drive successful outcomes. Insights are
extracted by combining customer data with licensed and proprietary data before leveraging advanced AI capabilities and
expertise from Blackbaud’s dedicated team of data scientists. Examples of constituent insights include: predictive modeling
that gives numerical scores indicating the likelihood and capacity of a constituent making a gift, wealth screening software
that uses publicly available records to build detailed wealth profiles of constituents and persona cluster segmentation that
groups constituents based on shared traits with guidance for optimizing messaging to each group.
Performance solutions help customers to assess their fundraising performance across donor segments, benchmark
themselves against peer organizations and understand industry trends. These solutions provide a holistic view of donor
performance that goes beyond standard campaign-based reporting, with KPIs related to acquisition, upgrading, retention and
reactivation. Customers use our performance solutions to identify areas of weakness and opportunities for improvement,
track the donor impact of strategic initiatives, understand and respond to industry trends, set realistic benchmarks and
fundraising goals and maintain a consistent reporting methodology to assess growth over time.
Customer Success
Our Customer Success organization is responsible for ensuring our customers achieve their desired outcomes through
Blackbaud solutions, 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. Our customer success resources 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 resources bring industry
knowledge and expertise to the customer relationship and strive to help our customers achieve positive growth and
outcomes.
Customer Support
Customer Support provides assistance to customers using Blackbaud Solutions, helping them understand the capabilities of
their subscription, including how to navigate their subscription and answering related questions for core concepts of features
and functionality. Benefits, such as priority routing or additional support channels, are continuously enhanced. Customers
enrolled in the programs enjoy fast, reliable customer support, receive regular software updates, stay up-to-date with regular
communication and can leverage a unified customer portal for quick and easy access to these resources. Customers also are
empowered with self-help resources such as Knowledgebase articles, user guides, Blackbaud Community, our on-demand
library of enablement sessions and have around-the-clock access to support resources for mission-critical needs.
2022 Form 10-K
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Blackbaud, Inc.
Professional and Managed Services
Our expert consultants, and those in our partner program, provide implementation, optimization, data conversion and
customization services for 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;
• Outcome-based and prescriptive services.
In addition, we, and our delivery partners, 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.
Training
We provide a variety of onsite, instructor-led online and on-demand training services to our customers on our solutions and
application of best practices. This includes our highly-rated Blackbaud University curriculum. Blackbaud University provides
certifications for our products and industry best practices. These certifications serve as important catalysts for professional
growth in the nonprofit industry. Our instructors and designers have deep knowledge in the social impact arena and in the use
of our solutions. Instructor-led courses are designed to include hands-on lab exercises, as well as course materials with
examples and problems to solve.
Customers
We have updated our methodology for counting customers to better represent our current offerings and our growing
population of customers with contractual billing arrangements and customers that pay us through solutions usage or
transaction fees, some of which are in lieu of contractual billing arrangements. During 2022, we had more than 40,000
customers with contractual billing arrangements and nearly 100,000 customers that paid us through transactional fees.
Through our customers and our solutions, we support millions of users and we connect millions of supporters to nearly
150,000 organizations and causes in over 100 countries. Our largest single customer accounted for approximately 0.9% of our
2022 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, 2022, we had approximately 290 direct sales employees.
Our marketing organization, which includes brand, digital, content, product, event and demand generation marketing and
corporate communications, develops and launches multi-channel campaigns designed to create brand recognition and market
awareness for our solutions and services. Through the Blackbaud Institute, we also give back to the social impact community
by developing in-depth research and thought leadership content to help to drive better outcomes for their organizations with
data, technology and expertise.
Our digital demand generation motion focuses on targeted account-based marketing plays, as well as intent-based programs
including paid search, retargeting, social and content syndication programs. We supplement the digital motion with select
participation at virtual and in-person third-party trade shows, technical conferences, and technology seminars. We also target
publication of our thought leadership content and position our subject matter experts in industry journals and publications.
We have a large base of loyal customers and strategic partners that provide references and recommendations often featured
in our advertising and promotional activities.
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Competition
The market for software and related services targeting philanthropic-focused for-profit and nonprofit organizations 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 impact 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 to solve common problems.
However, once basic needs are met, programs unique to social impact organizations like the stewardship of relationships and
partnerships critical to major gift fundraising, community and employee education; the cultivation and management of gifts,
grants and K12 digital education sponsorship; the multi-level networking required for peer-to-peer activism and employee
engagement; and the sensitive data and reporting behind critical programs run by and for healthcare and education
institutions ensure the ongoing need for highly specialized tools. 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 impact 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 future solutions make 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, customers and employees, the
barriers of entry continue to decline with natively cloud solutions and social impact 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
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 the social impact 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 and nationwide community networks within
verticals where we compete, offering solutions with market leading robustness and reporting as well as the scale,
reach, and reputation of our organization.
General business software vendors, such as Microsoft, Oracle and Salesforce.com, 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. 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 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.
2022 Form 10-K
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Blackbaud, Inc.
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 organizations and more efficient.
Technology and Architecture
Our technology strategy consists of several key building blocks including cloud operations, developer tools, data intelligence
and core services. We leverage multiple clouds in our architectures (including AWS and Azure) and have both single and multi-
tenant solutions. The best-in-class infrastructure enables rapid innovation with high levels of reliability, availability and
security, and lets Blackbaud evolve services over time at independent paces as tech trends and tools emerge. Blackbaud also
provides a toolset for customers, partners, and developers to extend 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.
The development strategy for all Blackbaud cloud solutions emphasizes:
•
•
•
Flexibility: Customers and partners 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 two
active patents on our technology and have one pending patent application.
Human Capital Resources
As of December 31, 2022, we had over 3,200 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 work to support organizations
and individuals driving social impact. Our purpose attracts and retains talented, competitive applicants, with approximately
90% of employees saying the fact that Blackbaud operates in a socially responsible manner is important to them. This
differentiator not only builds stronger employee engagement, but also helps us provide a higher level of service to our
customers, with almost 70% of employees reporting that they continued to volunteer during the pandemic despite its unique
challenges and one in seven serve on a nonprofit board or committee—direct experience that enables them to better serve
our customer base.
Blackbaud also attracts and promotes talented employees through effective and targeted recruiting strategies. In 2020,
Blackbaud announced the launch of a new workforce strategy, allowing for employees to have the option to work from home
or other geographic locations within the country to further support the overall well-being during the COVID-19 pandemic. In
2021, we formally went Remote First as a company which expanded our pool of qualified applicants for roles and internal
career progression and signals Blackbaud's goal to attract talent globally.
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
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2022 Form 10-K
Blackbaud, Inc.
"Engagement Labs" training designed to equip them with the practical skills to ensure their teams are highly engaged. During
2022, all employees participated in a new, expanded Respect at Work training. We assess and measure progress on
engagement and growth opportunities at the individual level through quarterly check-ins, which focus on impact and
learnings, 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 as well as "Ask
Anything" sessions with senior leaders and dedicated Q&A sessions in our company-wide All Hands meetings. We enable
employees to have opportunities for career development through on-demand and company-led trainings in our internal
DevelopU platform. 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 increased benefits and focus on well-being.
Ultimately, we believe that Blackbaud is an excellent place to work because we are energized by our opportunity to fuel social
impact and committed to running our business in a way that amplifies the difference we make in the world: 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 (STEM) 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 people and the
communities in which we operate. This new leadership focus has amplified and accelerated the significant initiatives already
in place at Blackbaud, including: ongoing workshops on creating an inclusive culture; respect in the workplace training for all
employees and enhanced training for managers; and affinity groups. We now have 14 employee-led affinity groups, including,
but not limited to those that represent veterans, LGBTQ+, women in technology, women in sales, Black employees, those
interested in sustainability and those with a disability.
During 2022, Blackbaud achieved carbon neutrality and committed to new, transparent ESG reporting. Blackbaud was
recognized by Newsweek as one of America's Most Responsible Companies 2023, by Quartz as one of the Best Companies for
Remote Workers and was named to Forbes' list of America's Best Employers 2022.
Additional information related to our human capital strategy can be found in our 2021 Social Responsibility Report, which is
available on the Corporate Social Responsibility section of our website. Information contained on or accessible through our
websites is not incorporated into, and does not form a part of, this Annual Report or any other report or document we file
with the SEC, and any references to our websites are intended to be inactive textual references only.
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.
2022 Form 10-K
13
Blackbaud, Inc.
Information About Our Executive Officers
The following table sets forth information concerning our executive officers as of February 15, 2023:
Name
Michael P. Gianoni
Anthony W. Boor
David J. Benjamin
Kevin P. Gregoire
Kevin R. McDearis
Kevin W. Mooney
Jon W. Olson
Age
62
60
51
55
55
64
59
Title
President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
Executive Vice President and Chief Commercial Officer
Executive Vice President and Chief Operating Officer
Executive Vice President and Chief Technology Officer
Executive Vice President, Strategy and Business Development
Senior Vice President and General Counsel
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, and has been Chairman of the Board since
February 2020. 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.
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.
David J. Benjamin has served as our Executive Vice President and Chief Commercial Officer since July 2022. He joined us as
Executive Vice President and President, International Markets Group in April 2018. Prior to joining us, Mr. Benjamin was
Senior Vice President and General Manager at Box, a cloud content management platform for businesses, from October 2016
to March 2022. Prior to that, he was Vice President of Global Services at British Telecom, a multinational telecommunications
holding company, from October 2007 to September 2016. Prior to that, he was at Guardian Media Group, a mass media
company owning various media operations company, where he served as Divisional Chief Operating Officer, among other
leadership roles, from June 1995 to September 2007. He holds a BA in European Business from London Metropolitan
University and an MBA from The Manchester Metropolitan University.
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2022 Form 10-K
Blackbaud, Inc.
Kevin P. Gregoire has served as our Executive Vice President and Chief Operating Officer since July 2022. Prior to that, he was
the Executive Vice President and President of U.S. Markets since April 2021. He 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 Technology 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, Strategy and Business Development since April 2021. Before
that he was the 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 Advisory Board and is on the board of
the Charleston Symphony and Charleston Jazz. He holds a BS from Georgetown University, a JD from Dickinson School of Law
and an MBA from Seton Hall University.
2022 Form 10-K
15
Blackbaud, Inc.
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, generate greater revenue and have 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 with partners delivering some of our services 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 or those services can be delivered through our partner program. This strategic shift to migrate our
existing customers, sell new customers our cloud subscription solutions and have some services delivered by our partners
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.
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The market for software and services for the social impact community might not grow and the organizations in that
community might not continue to adopt our solutions and services.
Many organizations in the social impact community, including nonprofits, foundations, companies, education institutions, and
healthcare organizations, have not traditionally used integrated and comprehensive software and services for their specific
needs. 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. 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. (See Foreign Currency Exchange Rates on page 58 for more information regarding
the impact of foreign currency exchange rates on our operations.)
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.
2022 Form 10-K
17
Blackbaud, Inc.
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. 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, disclosure controls and procedures and
data protection 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.
For example, following our acquisition of EVERFI, Inc. (as further described in Note 3 to our consolidate financial statements in
this report) we experienced the loss of certain employees and unexpected delays in realizing anticipated returns on our
investment.
Acquisitions, including for example our recent acquisition of EVERFI, Inc., 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 due to deteriorating general economic conditions, a recession or
otherwise 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 impact 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 past or future
changes to applicable tax laws, or otherwise, could negatively impact the volume and size of such payment processing
transactions and thereby adversely affect our operating results and financial condition.
18
2022 Form 10-K
Blackbaud, Inc.
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 that 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, 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.
Effective January 31, 2020, the U.K. is no longer a member of the E.U. Effective January 1, 2021, the relationship between the
U.K. and the E.U. is governed primarily by certain trade and cooperation agreements, that set forth, among other things,
terms regarding the trade of goods and services, workers’ rights, social and environmental matters, data sharing, data privacy
and financial services. 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 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
Breaches of our software, our failure to securely collect, store and transmit customer information, or our failure to
safeguard confidential donor data, exposes us to liability, litigation, government investigations, 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 have been, and in the future may be,
vulnerable to a security breach, intrusion, loss or theft of confidential donor data and transaction data, which has in the past
harmed and may in the future harm our business, reputation and future financial results. Furthermore, our reliance on
remote access to information systems increases 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 below and in Note 11 to our consolidated financial statements in this report), and
we expect these threats to continue, some of which have been, and in the future 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 have already devoted and expect to continue to devote significant 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 has resulted in, and could in the future
result in, litigation against us, government investigations or the imposition of fines and penalties. (See Note 11 to our
consolidated financial statements in this report for information regarding litigation, government investigations, fines and
penalties related to the Security Incident.) We 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.
2022 Form 10-K
19
Blackbaud, Inc.
Even though we may carry cyber-technology insurance policies that provide insurance coverage under certain circumstances,
we have in the past suffered losses and may in the future suffer losses as a result of a security breach that exceed the
coverage available under our insurance policies or for which we do not have coverage. (See Note 11 to our consolidated
financial statements in this report for expense and insurance coverage information related to the Security Incident.)
Furthermore, in the future such insurance may not be available on commercially reasonable terms, or at all. 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.
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 has had, and may continue to have, numerous adverse effects on our business, results of operations,
financial condition and cash flows.
As previously disclosed, on July 16, 2020, we contacted certain customers to inform them about the Security Incident,
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. Based on the nature of the incident, our research and third party (including law enforcement) investigation we
believe that no data went beyond the cybercriminal, was or will be misused, or will be disseminated or otherwise made
available publicly. However, our investigation into the Security Incident remains ongoing and may provide additional
information.
To date, we have received approximately 260 customer reimbursement requests and approximately 400 reservations of the
right to seek expense recovery in the future from customers or their attorneys in the U.S., U.K. and Canada related to the
Security Incident. We have also received notices of proposed claims on behalf of a number of UK data subjects, which we are
reviewing. In addition, insurance companies representing various customers’ interests through subrogation claims have
contacted us, and certain insurance companies have filed subrogation claim in court. Customer and insurer subrogation claims
generally seek reimbursement of their 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.
In addition, presently, we are a defendant in 19 putative consumer class action cases [17 in U.S. federal courts (which have
been consolidated under multi district litigation to a single federal 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 49 state Attorneys General and the District of Columbia and a separate Civil Investigative Demand
from the office of the California Attorney General relating to the Security Incident. In addition, we are subject to pending
governmental actions or investigations by the U.S. Federal Trade Commission, the U.S. Department of Health and Human
Services, the U.S. Securities and Exchange Commission (the "SEC"), 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 will not be covered by insurance. For example, we have recorded approximately $23.0 million in aggregate
liabilities for loss contingencies related to the Security Incident that we believe we can reasonably estimate as of December
31, 2022. Certain governmental authorities are seeking 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.
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2022 Form 10-K
Blackbaud, Inc.
In addition, any legislative or regulatory changes adopted in reaction to the Security Incident or other companies’ data
breaches could require us to make modifications to the operation of our business that could have an adverse effect and/or
increase or accelerate our compliance costs.
Significant management time and Company resources have been, and are expected to continue to be, devoted to the Security
Incident. For example, for full year 2022, we incurred net pre-tax expense of $32.7 million and had net cash outlays of $20.9
million for ongoing legal fees related to the Security Incident. For full year 2023, we currently expect pre-tax expense of
approximately $20 million to $30 million and net cash outlays of approximately $25 million to $35 million for ongoing legal
fees related to the Security Incident. Inclusive of accrued liabilities for loss contingencies discussed above, we incurred a total
of $55.7 million of net pre-tax expense related to the Security Incident during 2022. Although we carry insurance against
certain losses related to the Security Incident, we have exceeded the limit of that insurance coverage. As a result, we will be
responsible for all expenses or other losses (including penalties, fines or other judgments) or all types of claims that may arise
in connection with the Security Incident, which could materially and adversely affect our liquidity and results of operations.
(See Note 11 to our consolidated financial statements included in this report.) If any such fines or penalties were great enough
that we could not pay them through funds generated from operating activities and/or cause a default under the 2020 Credit
Facility, we may be forced to renegotiate or obtain a waiver under the 2020 Credit Facility and/or seek additional debt or
equity financing. Such renegotiation or financing may not be available on acceptable terms, or at all. In these circumstances, if
we were unable to obtain sufficient financing, we may not be able to meet our obligations as they come due.
In addition, publicity or developments related to the Security Incident could in the future have a range of other adverse
effects on our business or prospects, including causing or contributing to loss of customer confidence, reduced customer
demand, reduced customer retention, strategic growth opportunities, and associated retention and recruiting difficulties,
some or all of which could be material.
Climate change and other natural disasters, new regulations and standards and climate-related goals have impacted, and
may in the future impact, our operations and financial performance.
The long-term effects of climate change on the global economy and our industry may impact our business operations and
those of our suppliers, customers and partners. Climate change increases the severity and frequency of extreme weather
events such as hurricanes, wildfires, floods, heat waves, or power shortages, all of which could lead to business disruptions.
The locations of our principal executive offices and our data centers are vulnerable to the effects of climate events and other
natural disasters, including hurricanes, heat waves and earthquakes, which we have experienced in the past. In addition, the
effects of climate change are harder to mitigate for our remote-first workforce, which exposes the Company to business
disruption. 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.
Expected new regulations and standards relating to public disclosure, including those related to climate change, could
adversely could impose significant costs on us to comply with such regulations.
Finally, a failure to meet our climate-related goals, such as our commitment and progress towards reduction of greenhouse
gas emissions, could damage our reputation, affect our financial performance and ability to attract and retain talent.
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. As noted above, our executive offices and some of our data centers are located in
areas that are vulnerable to the effects of climate change and could be subject to increased interruptions as a result of the
severity and increased frequency of extreme weather events such as hurricanes, wildfires, floods, heat waves, or power
shortages. Because our cloud solutions and hosting service offerings are complex and we have incorporated a variety of new
computer hardware and software systems at our data centers, our services might have errors or defects that users identify
after they begin using our services. This could result in unanticipated downtime for our customers and harm to our reputation
and business results. Internet-based services sometimes contain undetected errors when first 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
2022 Form 10-K
21
Blackbaud, Inc.
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 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
reporting. Failure to conduct these voluntary data protection process and control reviews or to obtain and maintain 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.
We are subject to payment processing risk that could negatively impact our results of operation and business if not
adequately controlled and managed.
Our solutions provide our customers payment processing capabilities that enable their constituents to make donations and
purchase services using numerous payment options, including credit card and automated clearing house (“ACH”) checking
transactions, through secure online transactions. The provision of convenient, trusted, fast and effective payment processing
services to our customers and potential customers is critical to our business, and revenue from payments processing
constitutes a significant percentage of our total revenue. Increases in payment processing fees, material changes in our
payment processing systems, changes to rules or regulations concerning payments or disruptions or failures in our payment
processing systems or payment products, including products we use to update payment information, could materially
adversely impact our customer retention and results of operation. In addition, from time to time, we encounter fraudulent
use of payment methods that could result in substantial additional costs or delay, preclude planned transactions, product
launches or improvements, require significant and costly operational changes, impose restrictions, limitations, or additional
requirements on our business, products and services, prevent or limit us from providing our products or services in a given
market and adversely impact customer retention. Furthermore, we continue to undertake system upgrades designed to
22
2022 Form 10-K
Blackbaud, Inc.
improve the availability, reliability, resiliency and speed of our payments systems. These efforts are costly and time-
consuming, involve significant technical complexity and risk, may divert our resources from new features and products and
may ultimately not be effective.
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 general economic conditions, extraordinary business interruptions, client-specific
financial issues or otherwise.
We significantly increased our leverage in connection with acquisition of EVERFI and may increase our leverage in the
future in connection with additional acquisitions, Security Incident costs or other business purposes, which could adversely
impact our business and financial performance, as described below.
We incurred a substantial amount of indebtedness in connection with acquisitions, including our acquisition of EVERFI, Inc. (as
described in Note 3 to our consolidated financial statements included in this report). As a result of this indebtedness, our
interest payment obligations have increased. In addition, we have been named as a party in various lawsuits in connection
with the Security Incident, claims have been asserted by or on behalf of our customers or their constituents, and we are
subject to various governmental 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. 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, which could require that we
incur additional indebtedness to fund. (See Note 11 to our consolidated financial statements in this report for additional
information regarding the Security Incident.)
The degree to which we are leveraged could have adverse effects on our business, including the following:
•
•
•
•
•
•
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;
Reducing our currently available borrowing capacity or limiting our ability to borrow additional funds; and
Decreasing our ability to compete effectively or operate successfully under adverse economic and industry
conditions.
2022 Form 10-K
23
Blackbaud, Inc.
If we incur additional debt, these risks may intensify, particularly if interest rates increase in the future. 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.
In addition, additional leverage could impact our ability to meet certain financial and other covenants contained in our 2020
Credit Facility. (See Note 9 to our consolidated financial statements included in this report for a more detailed description of
our 2020 Credit Facility.) There can be no assurance that we will be able to remain in compliance with the covenants to which
we are now subject or may be subject in the future and, if we fail to do so, that we will be able to obtain waivers from our
lenders or amend the covenants.
In the event of a default under our 2020 Credit Facility, we could be required to immediately repay all outstanding
borrowings, which we might not be able to do and which would materially negatively affect our business, operations and
financial condition.
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, 2022, we had $1.1 billion and $635.1 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.
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, to pursue possible future strategic opportunities
and acquisitions and fund liabilities and expenses related to the Security Incident. (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, 2022, we had deferred tax assets of $118.9 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
24
2022 Form 10-K
Blackbaud, Inc.
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 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 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, are 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 "U.K. 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.)
2022 Form 10-K
25
Blackbaud, Inc.
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 have been, and may in the future 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.
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,
26
2022 Form 10-K
Blackbaud, Inc.
trademark, copyright and trade secret laws, as well as nondisclosure agreements, each of which affords only limited
protection.
Changing domestic and international laws, government regulations and policies, including, without limitation, California
AB488 and other similar laws and regulations, could adversely affect our business and operating results by increasing
compliance costs, reducing customer demand for our solutions or damaging our reputation.
Certain of our solutions, in particular our financial management and payment services solutions, relate to activity heavily
regulated by government agencies in the U.S., the U.K. and other countries in which we operate. The laws and regulations
enforced by these agencies are proposed or enacted to deter fraud and other illicit financial transactions and to protect
consumers and the financial system and are often revised or increased in scope. 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.
In addition, changes in certain laws, regulations or policies could impact our customers, alter our business environment and
limit our operations. For example, various financial institutions subscribe to our EVERFI training solution, which they may then
provide free of charge to schools in low-income and moderate-income communities as a means of satisfying their obligations
under the Community Reinvestment Act of 1977, as amended (the “CRA”). Repeal or significant modification of the CRA or the
many government agency regulations and policies implementing its provisions could cause financial institutions to limit or
eliminate their purchases of these EVERFI solutions and thereby negatively impact our operating results and financial
condition.
Anti-takeover provisions in our charter documents, our Stockholder Rights Agreement (as described below, the "Rights
Agreement") and Delaware law may delay or prevent an acquisition of our Company.
Provisions of Delaware law, our certificate of incorporation and bylaws and our Rights Agreement 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 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.
On October 7, 2022, we declared a dividend of one preferred share purchase right (a “Right”) for each of our issued and
outstanding shares of common stock. Each Right entitles the registered holder, subject to the terms of the Rights Agreement,
to purchase from us one one-thousandth of a share of our Series A Junior Participating Preferred Stock, par value $0.001 per
share (the “Preferred Stock”) at a price of $313.00, subject to certain adjustments (as adjusted from time to time, the
“Exercise Price”). Under the Rights Agreement, the Rights will become exercisable if an entity, person or group acquires
beneficial ownership of 20% or more of our outstanding common stock in a transaction not approved by our Board of
Directors. In the event that the Rights become exercisable due to the ownership threshold being crossed, each Right will
entitle its holder (other than the person, entity or group triggering the Rights Plan, whose rights will become void and will not
be exercisable) to purchase additional shares of common stock having a then-current market value of twice the Exercise Price.
Subject to the terms of the Rights Agreement, the Rights will expire on October 2, 2023. Additional information regarding the
Rights Agreement is contained in a Form 8-K filed with the SEC on October 11, 2022.
The anti-takeover provisions of Delaware law and provisions in our organizational documents and the Rights Agreement 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.
2022 Form 10-K
27
Blackbaud, Inc.
Unanticipated changes in our effective tax rate and additional tax liabilities and global tax developments may impact our
financial results.
We are subject to income taxes in the United States and various other jurisdictions. Significant judgment is often required in
the determination of our worldwide provision for income taxes. Our effective tax rate could be impacted by changes in our
earnings and losses in countries with differing statutory tax rates, changes in operations, changes in non-deductible expenses,
changes in excess tax benefits of stock-based compensation, changes in the valuation of deferred tax assets and liabilities and
our ability to utilize them, the applicability of withholding taxes, effects from acquisitions, and changes in accounting
principles and tax laws. Any changes, ambiguity or uncertainty in taxing jurisdictions’ administrative interpretations, decisions,
policies and positions could also materially impact our income tax liabilities.
We may also be subject to additional tax liabilities and penalties due to changes in non-income based taxes resulting from
changes in federal, state, local or international tax laws, changes in taxing jurisdictions’ administrative interpretations,
decisions, policies and positions, results of tax examinations, settlements or judicial decisions, changes in accounting
principles, or changes to our business operations, including as a result of acquisitions. Any resulting increase in our tax
obligation or cash taxes paid could adversely affect our cash flows and financial results.
We are also subject to tax examinations or engaged in alternative resolutions in multiple jurisdictions. While we regularly
evaluate new information that may change our judgment resulting in recognition, derecognition or changes in measurement
of a tax position taken, there can be no assurance that the final determination of any examinations will not have an adverse
effect on our operating results or financial position.
As our business continues to grow, increasing our brand recognition and profitability, we may be subject to increased scrutiny
and corresponding tax disputes, which may impact our cash flows and financial results. Furthermore, our growing prominence
may bring public attention to our tax profile, and if perceived negatively, may cause brand or reputational harm.
As we utilize our tax credits and net operating loss carryforwards, we may be unable to mitigate our tax obligations to the
same extent as in prior years, which could have a material impact to our future cash flows. In addition, changes to our
operating structure, including changes related to acquisitions, may result in cash tax obligations.
Global tax developments applicable to multinational businesses may have a material impact to our business, cash flow from
operating activities, or financial results. Such developments, for example, may include certain United States’ proposals as well
as the Organization for Economic Co-operation and Development’s, the European Commission’s and certain major
jurisdictions’ heightened interest in and taxation of companies participating in the digital economy.
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. We believe that it is in good operating condition and adequately serves our current business operations.
In December 2021, we acquired EVERFI and assumed a lease for office space in Washington, D.C. and an office in London, U.K.
In February 2023, we closed our Washington, DC office location to align with our remote-first workforce strategy. We are
pursuing strategic alternatives for the Washington, DC office space, including sublease, and we have the intent and ability to
sublease this office space.
ITEM 3. LEGAL PROCEEDINGS
For a discussion of our legal proceedings, see Note 11 to our consolidated financial statements in this report.
28
2022 Form 10-K
Blackbaud, Inc.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
2022 Form 10-K
29
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 17, 2023,
there were approximately 138 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 17, 2023, the closing price of our common stock was $58.61.
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, the Nasdaq Computer Index and the Nasdaq Computer and Data Processing Index. The Nasdaq Computer
Index has replaced the the Nasdaq Computer and Data Processing Index in this analysis as the Nasdaq Computer and Data
Processing Index is no longer considered widely recognized and used. The graph covers the most recent five-year period
ended December 31, 2022. The graph assumes that the value of the investment in our common stock and each index was
$100.00 at December 31, 2017, and that all dividends are reinvested.
December 31,
Blackbaud, Inc.
Nasdaq Composite Index
Nasdaq Computer Index
Nasdaq Computer & Data Processing Index
2017
$100.00
100.00
100.00
100.00
2018
$66.92
97.16
96.27
91.84
2019
$85.19
132.81
142.73
125.86
2020
$61.71
192.47
224.55
184.56
2021
$84.67
235.15
285.17
234.05
2022
$63.10
158.65
185.29
144.30
30
2022 Form 10-K
Blackbaud, Inc.Nasdaq Composite IndexNasdaq Computer IndexNasdaq Computer &Data Processing Index12/31/1712/31/1812/31/1912/31/2012/31/2112/31/22$0$100$200$300$400$500 Blackbaud, Inc.
Issuer Purchases of Equity Securities
The following table provides information about shares of common stock acquired or repurchased during the three months
ended December 31, 2022 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, 2022
October 1, 2022 through October 31, 2022
November 1, 2022 through November 30, 2022
December 1, 2022 through December 31, 2022
Total
Total
number
of shares
purchased(1)
— $
5,486
—
5,486 $
Average
price
paid
per
share
—
58.22
—
58.22
Total number
of shares
purchased as
part of
publicly
announced
plans or
programs(2)
Approximate
dollar value
of shares
that may yet
be purchased
under the
plans or programs
(in thousands)(2)
$
—
—
—
— $
250,000
250,000
250,000
250,000
250,000
(1)
(2)
Includes 5,486 shares in November 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 December 2021, our Board of Directors reauthorized and replenished 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
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, 2021 or 2022. We currently do not anticipate declaring
or paying any cash dividends for the foreseeable future.
ITEM 6. [RESERVED]
2022 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 (CSR) and environmental, social and governance (ESG), school management, ticketing,
grantmaking, financial management, payment processing and analytics. Serving the industry for more than four decades, we
are a remote-first company headquartered in Charleston, South Carolina, with operations in the United States, Australia,
Canada, Costa Rica and the United Kingdom. During 2022, we had more than 40,000 customers with contractual billing
arrangements and nearly 100,000 customers that paid us through transactional fees. Through our customers and our
solutions, we support millions of users and we connect millions of supporters to nearly 150,000 organizations and causes in
over 100 countries.
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.
Four-Point Strategy
1
2
3
4
Expand Total Addressable Market
Lead with World Class Teams and Operations
Delight Customers with Innovative Cloud Solutions
Focus on Employees, Culture and ESG Initiatives
1.
Expand TAM
In December 2021, we doubled our TAM when we acquired EVERFI, an industry leader in global social impact technology.
Adding EVERFI advances our position as a leader in the rapidly evolving ESG and CSR spaces and offers cross-selling and
upselling opportunities through complementary product offerings with YourCause® solutions. Our TAM now stands at
over $20 billion, and we remain active in the evaluation of opportunities to further expand our addressable market
through acquisitions and internal product development.
32
2022 Form 10-K
Blackbaud, Inc.
2.
Lead with World Class Teams and Operations
This strategy expands upon our previous strategies to drive sales effectiveness and improve operating efficiency to
include improving overall company performance as measured by the Rule of 40 (see discussion of Non-GAAP Financial
Measures below). During 2022, we announced a series of strategic organizational updates to streamline our business
operations and become even more customer centric. We created three new roles: Chief Operating Officer, Chief
Commercial Officer and Executive Vice President of Corporations. We believe these new roles will: ensure consistency in
our approach to the customer experience; further streamline and simplify our go-to-market efforts to maximize our
outcomes as a global company; and further align our YourCause and EVERFI offerings and continue our investment in
being the partner of choice for corporations focused on social responsibility and impact. Additionally, we took steps to
better align our workforce with our strategic priorities, including further elimination of open positions as well as the
difficult decision to reduce our workforce (see additional discussion regarding our workforce reduction below). We also
appointed three new members to our board of directors, providing not only new business perspectives but also adding
important skills in cybersecurity, enterprise software, digital transformation and global operations.
3. Delight Customers with Innovative Cloud Solutions
During our annual user conference, bbcon, we shared how our purpose-built solutions bring together the capabilities
essential to our customers in managing their data, making their teams more productive, motivating their audiences to
act, and ultimately driving outcomes. During the third quarter, we acquired Kilter, an intuitive, gamified, activity-based
engagement app. We will initially pair Kilter with our Blackbaud TeamRaiser solution to serve nonprofits by expanding the
ways they can engage with their supporters to prepare for their existing fundraising walks, runs and rides, and to create
new types of engagement opportunities that are not tied to a specific date or place. Kilter will also provide a unique
solution with YourCause CSRConnect platform for companies as employers take a more active role in supporting their
employees’ health and wellness pursuits across their remote and distributed workforces.
4.
Focus on Employees, Culture and ESG Initiatives
During 2022, we announced that we achieved carbon neutrality for 2021. This is a goal we have been striving towards and
our shift to a remote-first workforce enabled us to accelerate our timeline. Since 2019, Blackbaud has reduced its global
real estate footprint by 50%, energy emissions to run office space by 63% and employee commute emissions by 75%.
With a multi-pronged climate strategy, Blackbaud is focused on reducing emissions, using energy efficiently and investing
in environmental projects for a more sustainable future. We shared more about our ESG strategy on our Corporate Social
Responsibility website during the second quarter. Our mission driven culture has been in our DNA since inception and is
very attractive in a competitive labor market. We continue to foster a diverse and inclusive environment focused on
employee engagement and connectedness with our remote-first workforce strategy. We have a significant role to play in
driving advances in the social impact space, and we are proud of the strong corporate culture we have built and continue
to cultivate in today's environment.
2022 Form 10-K
33
Blackbaud, Inc.
Financial Summary
Total Revenue ($M)
YoY Growth (%)
Income from Operations ($M)
YoY Growth (%)
Total revenue increased by $130.4 million during 2022, driven largely by the following:
+ Growth in recurring revenue primarily related to:
•
•
an increase in contractual revenue of $107.7 million related to the performance of our cloud solutions, of
which $96.2 million was attributable to EVERFI; partially offset by a decrease in maintenance revenue as
customers migrate to our cloud solutions and a decrease related to fluctuations in foreign currency exchange
rates of $3.4 million.
an increase in transactional recurring revenue of $23.2 million primarily due to an increase in enrollment for
our Blackbaud Tuition Management solution resulting in higher transactional volumes, an increase in online
charitable giving; and new pricing initiatives. The increase in transactional recurring revenue was partially
offset by a decrease related to fluctuations in foreign currency exchange rates of $7.5 million.
-
Decrease in one-time services and other revenue primarily related to:
•
•
decrease in one-time analytics revenue as analytics now are generally integrated in our cloud solutions; and
increase in one-time consulting revenue primarily attributable to EVERFI, largely offset by less revenue from
implementation and customization services, in line with our multi-year strategic shift from a license-based
and one-time services business model to a cloud subscription business model. Our cloud subscription
offerings generally require less implementation and customization services.
For additional information on the impact of foreign currency fluctuations on our financial results, see Foreign Currency
Exchange Rates below on page 58.
While our 2022 bookings for EVERFI were lower than expected, and we experienced some unexpected EVERFI employee
attrition following the acquisition, we have taken action to bolster management and fill account executive vacancies, which
are now fully staffed and ramping to drive future bookings. We have a number of multi-year pricing initiatives underway,
some to bring our pricing in line with the market while others are model changes that are expected to drive greater revenue
for both us and our customers. As a result, we expect to see an acceleration in growth in the second half of 2023 when
compared to the first half of the year as we begin to see the full-year effect of some of these pricing initiatives.
We also expect that the one-time services and other revenue will continue to significantly decrease during 2023 compared to
2022 driven by our continued migration to the cloud in our core business as well as our opportunity to shift EVERFI one-time
revenue to a recurring model.
34
2022 Form 10-K
$927.7$1,058.114.1%20212022$24.9$(28.5)(214.4)%20212022 Blackbaud, Inc.
Income from operations decreased by $53.4 million during 2022, driven largely by the following:
-
-
-
-
-
-
-
-
-
-
-
-
+
+
+
+
Increase in compensation costs other than stock-based compensation of $75.7 million primarily due to increased
employee headcount due to our acquisition of EVERFI
Increase in Security Incident-related expenses, net of insurance, of $53.9 million. See "Security Incident update"
below on page 37.
Increases in third-party contractor and hosting costs of $26.9 million and $6.6 million, respectively, primarily
attributable to our acquisition of EVERFI and, to a lesser extent, our continued migration of our cloud infrastructure to
leading public cloud service providers and investments in cybersecurity
Increase in amortization of intangible assets from business combinations of $14.4 million due to our acquisition of
EVERFI
Increase in transaction-based costs of $12.0 million related to the increase in the volume of transactions for which we
process payments
Increase in infrastructure costs of $8.4 million primarily related to our acquisition of EVERFI and investments in
security tools
Increase in marketing costs of $7.7 million primarily due to our acquisition of EVERFI
Increase in travel costs of $4.5 million due to our easing of restrictions on non-essential employee travel, which went
into effect during March 2020 in response to the COVID-19 pandemic
Increase in other direct costs of revenue of $4.3 million primarily due to our acquisition of EVERFI
Increase in employee severance of $3.7 million due to our targeted workforce reduction during the fourth quarter of
2022, as discussed below
Increase in acquisition and disposition-related costs of $3.1 million primarily related to aggregate noncash impairment
charges of $1.3 million against certain operating lease right-of-use assets and property and equipment assets
resulting from our decision to cease using a portion of EVERFI's leased office space. We also recorded a $2.0 million
noncash impairment of certain insignificant intangible assets that were held for sale.
Increase in cost of revenue from a $2.3 million impairment charge during the three months ended June 30, 2022,
against previously capitalized software development costs that reduced the carrying value of those assets to zero. The
impairment charge resulted primarily from our decision to end customer support for certain solutions
Increase in total revenue, as described above
Net increase of $12.9 million related to an increase in software and content development costs that were required to
be capitalized under the internal-use software guidance, largely driven by our acquisition of EVERFI, partially offset by
an increase in amortization of capitalized software and content development costs
Decrease in real estate activity costs of $12.0 million due to our workforce strategy changes that began in the third
quarter of 2020
Decrease in stock-based compensation expense of $10.1 million attributable to:
•
As a one-time response to COVID-19, replacement of our 2020 base salary merit increases with one-year
time-based equity awards, which vested and were recognized as expense between May 1, 2020 and May 1,
2021;
• Over performance against overall Company goals was higher in 2021 than 2022 goals; and
• Our targeted workforce reduction during the fourth quarter of 2022, as discussed below
+
Decrease in corporate costs of $2.5 million primarily related to a decrease in bad debt expense
We are continuing to make critical investments in the business in areas such as digital marketing, engineering, security,
customer success and our continued shift of cloud infrastructure to leading public cloud service providers. Our profitability
during 2022 reflects the addition of EVERFI and some of these incremental investments.
We have taken steps to better align our workforce with our strategic priorities to drive efficiencies and minimize any potential
impacts from the current uncertain macroeconomic environment. During the fourth quarter of 2022, this included further
elimination of open positions as well as the decision to reduce our workforce. As a result of the targeted workforce reduction,
we incurred $4.5 million in pre-tax employee severance costs during the fourth quarter of 2022. During the first quarter of
2023, we have remained focused on improving operating performance and driving efficiencies in the Company, including
further reducing our workforce. Following the planned action during the fourth quarter of 2022, we experienced a slowdown
in voluntary attrition relative to expectations leading to a further reduction in force to achieve our original plan. While we
2022 Form 10-K
35
Blackbaud, Inc.
have eliminated positions in some areas, we will continue to hire in other areas. Most of these reductions are in areas of the
business that are not customer facing or in sales. When combined with the cost actions we took in the fourth quarter of 2022,
we expect our total headcount will be reduced by approximately 14% since the third quarter 2022. We expect these
workforce reductions and other cost actions to significantly reduce our pre-tax costs in 2023, partially offset by continued
investments in cybersecurity and innovation.
In 2023, we expect our financial performance to improve with each successive quarter, starting with meaningful improvement
in the second quarter as our pricing and cost initiatives take hold.
We continuously seek opportunities to optimize our portfolio of solutions to focus time and resources on innovation that will
have the greatest impact for our customers and the markets we serve, and drive the highest return on investment. To that
end, we will continue to simplify and rationalize our portfolio through product sunsets and divestitures of non-core businesses
and technologies.
Customer retention
Gross dollar 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 have historically used a recurring revenue customer retention measure that
combines recurring subscription, maintenance and service customer contracts, as we believed it provided a better
representation of our customers' overall behavior. During 2022 and 2021, approximately 91% and 93%, respectively, of our
customers with recurring revenue contracts were retained. This customer retention rate reflects our efforts to rationalize our
portfolio of solutions through product sunsets and divestitures, and migrate customers from legacy solutions towards our
next generation cloud solutions.
A key factor to our overall success is the renewal and expansion of our existing subscription agreements with our customers.
Management now uses gross dollar retention in analyzing our success at delighting our customers with innovative and cloud
solutions. Gross dollar retention is defined as contracted annual recurring revenue ("CARR") divided by beginning CARR with a
measurement period of twelve months. During 2022, our gross dollar retention was approximately 91%. This gross dollar
retention rate is relatively unchanged from our rate for the full year ended December 31, 2021. We are continually investing
in innovation, which we believe will increase gross dollar retention over the long-term.
Balance sheet and cash flow
At December 31, 2022, our cash and cash equivalents were $31.7 million and the carrying amount of our debt under the 2020
Credit Facility was $799.1 million. Our net leverage ratio was 3.22 to 1.00.
During 2022, we generated $203.9 million in cash flow from operations and had a net decrease in borrowings of $99.7 million,
had aggregate cash outlays of $71.1 million for purchases of property and equipment and capitalized software and content
development costs, spent $20.9 million for our purchases of EVERFI and Kilter and received cash proceeds of $6.4 million from
our sale of certain solutions. See Note 3 of our consolidated financial statements in this report for additional information.
36
2022 Form 10-K
93%91%2021202290%91%20212022
Blackbaud, Inc.
Security Incident update
As discussed in Note 11 to our consolidated financial statements included in this report, total costs related to the Security
Incident have exceeded the limit of our insurance coverage. Accordingly, we expect that the Security Incident will continue to
negatively impact our GAAP profitability and GAAP cash flow for the foreseeable future (see discussion regarding non-GAAP
adjusted free cash flow on page 47). For full year 2022, we incurred net pre-tax expense of $32.7 million and had net cash
outlays of $20.9 million for ongoing legal fees related to the Security Incident. In line with our policy, legal fees are expensed
as incurred. For full year 2023, we currently expect net pre-tax expense of approximately $20 million to $30 million and net
cash outlays of approximately $25 million to $35 million for ongoing legal fees related to the Security Incident.
As of December 31, 2022, we have recorded approximately $23.0 million in aggregate liabilities for loss contingencies based
primarily on recent negotiations with certain governmental agencies related to the Security Incident that we believe we can
reasonably estimate. It is reasonably possible that our estimated or actual losses may change in the near term for those
matters and be materially in excess of the amounts accrued, but we are unable at this time to reasonably estimate the
possible additional loss.
There are other Security Incident-related matters, including customer claims, customer constituent class actions and
governmental investigations, for which we have not recorded a liability for a loss contingency as of December 31, 2022
because we are unable at this time to reasonably estimate the possible loss or range of loss. Each of these matters could,
separately or in the aggregate, result in an adverse judgement, settlement, fine, penalty or other resolution, the amount,
scope and timing of which we are currently unable to predict, but could have a material adverse impact on our results of
operations, cash flows or financial condition.
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 2022 vs. 2021 and 2021 vs. 2020
Acquisitions
During 2022 and 2021, 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:
• Kilter, Inc. ("Kilter") on August 19, 2022
• EVERFI, Inc. on December 31, 2021
We have included the results of operations of acquired companies in our consolidated results of operations from the date of
their respective acquisitions. In accordance with applicable accounting rules, we determined that the Kilter and EVERFI
acquisitions were not material to our consolidated financial statements; therefore, revenue and earnings since the acquisition
date 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.
2021 vs. 2020 Stock-based Compensation
Stock-based compensation expense increased $31.1 million in 2021 due to:
•
Certain changes to our compensation program that were expected to cause stock-based compensation expense to
remain higher than historical levels, including:
◦
◦
◦
replacement of our annual cash bonus plans with a short-term performance-based equity award plan
decrease in the vesting period for our annual long-term incentive time-based equity awards from 4 years
(1/4 per year) to 3 years (1/3 per year), beginning in February 2021; and
replacement of cash sign-on and retention bonuses with time-based equity awards.
•
Increases in the grant date fair values of our annual equity awards granted to employees; and
2022 Form 10-K
37
Blackbaud, Inc.
• Overall Company performance against 2020 and 2021 goals
Revenue and Cost of Revenue
Recurring
Revenue ($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 and subscription-based analytic
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 and
content 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.
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.
2022 vs. 2021
Recurring revenue increased by $130.9 million, or 14.9%, driven primarily by the following:
+
+
Increase in contractual recurring revenue of $107.7 million related to the performance of our cloud solutions, of
which $96.2 million was attributable to EVERFI; partially offset by a decrease in maintenance revenue as customers
migrate to our cloud solutions; also included in the increase in contractual recurring revenue is a decrease related to
fluctuations in foreign currency exchange rates of $3.4 million
Increase in transactional recurring revenue of $23.2 million primarily due to:
•
•
•
an increase in enrollment for our Blackbaud Tuition Management solution resulting in higher transactional
volumes;
an increase in online charitable giving; and
new pricing initiatives.
The increase in transactional recurring revenue was partially offset by a decrease related to fluctuations in foreign
currency exchange rates of $7.5 million
38
2022 Form 10-K
$850.7$880.9$1,011.714.9%202020212022$369.7$390.8$463.418.6%202020212022$481.1$490.0$548.356.5%55.6%54.2%202020212022 Blackbaud, Inc.
For additional information on the impact of foreign currency fluctuations on our financial results, see Foreign Currency
Exchange Rates below on page 58.
Cost of recurring revenue increased by $72.6 million, or 18.6%, driven primarily by the following:
+
+
+
+
+
+
+
+
Increase in compensation costs of $19.5 million primarily related to an increase in headcount due to our acquisition
of EVERFI, and a continued shift in resources historically supporting one-time services and other towards recurring
revenue
Increase in amortization of intangible assets from business combinations of $14.0 million due to our acquisition of
EVERFI
Increase in transaction-based costs of $12.0 million related to the increase in the volume of transactions for which we
process payments
Increase in third-party contractor and hosting costs of $11.1 million as we continue to migrate our cloud
infrastructure to leading public cloud service providers and make investments in security; currently, we expect our
cloud infrastructure migration efforts and increased level of cybersecurity investments to continue for the
foreseeable future. Also contributing to the increase was our acquisition of EVERFI.
Increase in amortization of software and content development costs of $5.8 million due to our continued investments
in the innovation and security of our solutions
Increase in third-party software costs of $3.9 million primarily related to a higher number of licenses needed and also
price increases
Increase in allocated overhead costs of $3.7 million related to the increased headcount discussed above
Increase in depreciation expense of $1.5 million primarily related to investments in our cloud data centers and
refresh of certain internal hardware
Recurring gross margin decreased by 1.4% primarily due to the increase in cost of recurring revenue outpacing the increase in
recurring revenue.
2021 vs. 2020
Recurring revenue increased by $30.1 million, or 3.5%, driven primarily by the following:
+
+
Increase in transactional revenue of $20.0 million primarily due to the continued shift toward virtual fundraising and
online charitable giving; also included in the increase in transactional revenue is an increase related to fluctuations in
foreign currency exchange rates of $4.7 million
Increase in contractual recurring revenue of $10.1 million related to the performance of our cloud solutions and early
progress in initiatives to bring our pricing in line with the market, partially offset by a decrease in maintenance
revenue as customers migrate to our cloud solutions; also included in the increase in contractual recurring revenue is
an increase related to fluctuations in foreign currency exchange rates of $3.9 million
Cost of recurring revenue increased by $21.1 million, or 5.7%, driven primarily by the following:
+
+
+
-
-
-
Increase in compensation costs of $10.3 million primarily related to the stock-based compensation due to the factors
discussed above on page 37 and a shift in resources historically supporting one-time services and other towards
recurring revenue
Increase in transaction-based costs of $9.6 million related to payment services integrated in our cloud solutions
Increase in third-party contractor and hosting costs of $7.8 million as we continue to migrate our cloud infrastructure
to leading public cloud service providers and make investments in security
Decrease in amortization of intangible assets from business combinations of $3.7 million
Decrease in rent expense of $1.3 million largely due to a decrease in leased hardware, including servers, network gear
and storage
Decrease in amortization of software development costs of $0.8 million
Recurring gross margin decreased by 0.9% primarily due to the increase in cost of recurring revenue outpacing the increase in
recurring revenue.
2022 Form 10-K
39
Blackbaud, Inc.
One-time services and other
Revenue ($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, and
fees for retained and managed services contracts that we do not expect to have a term consistent with our cloud solution
contracts.
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, amortization of intangible assets from business combinations, and allocated
depreciation, facilities and IT support costs.
We expect that the one-time services and other revenue will continue to significantly decrease during 2023 compared to 2022
driven by our continued migration to the cloud in our core business as well as our opportunity to shift EVERFI one-time
revenue to a recurring model.
2022 vs. 2021
One-time services and other revenue decreased by $0.5 million, or 1.1%, driven primarily by the following:
-
+
Decrease in one-time analytics revenue of $3.1 million as analytics are generally integrated in our cloud solutions
Increase in one-time consulting revenue of $2.8 million, of which $12.3 million was attributable to EVERFI, partially
offset by a decrease in revenue from implementation and customization services, in line with our multi-year strategic
shift from a license-based and one-time services business model to a cloud subscription business model. Our cloud
subscription offerings generally require less implementation and customization services.
Cost of one-time services and other decreased $10.5 million or 19.9%, primarily driven by the following:
-
-
-
+
Decrease in compensation costs of $8.8 million largely due to a continued shift in resources historically supporting
one-time services and other towards recurring revenue as well as a decrease in professional services headcount
Decrease in allocated overhead costs of $1.9 million primarily related to the decreased headcount discussed above
Decrease in third-party contractor costs of $1.1 million primarily due to a decrease in partners delivering services
Increase in employee severance of $1.6 million primarily due to our targeted workforce reduction, as discussed above
One-time services and other gross margin increased by 21.3%, primarily due to the significant reductions in compensation
costs discussed above.
40
2022 Form 10-K
$62.5$46.9$46.4(1.1)%202020212022$58.4$52.4$41.9(19.9)%202020212022$4.1$(5.5)$4.46.5%(11.7)%9.6%202020212022 Blackbaud, Inc.
2021 vs. 2020
One-time services and other revenue decreased by $15.6 million, or 24.9%, driven primarily by the following:
-
-
-
Decrease in one-time consulting revenue of $10.5 million due primarily to less implementation and customization
services, in line with our multi-year strategic shift from a license-based and one-time services business model to a
cloud subscription business model. Our cloud subscription offerings generally require less implementation and
customization services.
Decrease in one-time analytics revenue of $4.2 million as analytics are generally integrated in our cloud solutions
Decrease in onsite training revenue of $0.7 million due to COVID-19
Cost of one-time services and other decreased $6.0 million or 10.3%, primarily driven by the following:
-
-
-
-
Decrease in allocated costs of $2.0 million primarily related to a decrease in rent expense, as discussed below in
General and Administrative
Decrease in third-party contractor costs of $1.5 million, primarily due to a decrease in partners delivering services
Decrease in compensation costs other than stock-based compensation of $1.1 million largely due to a decrease in
headcount, as well as a shift in resources historically supporting one-time services and other towards recurring
revenue
Decreases in amortization intangible assets from business combinations and employee severance
One-time services and other gross margin decreased by 18.3%, primarily due to the significant reductions in one-time
consulting and analytics revenue discussed.
Operating Expenses
Sales, marketing and
customer success ($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. We
have also implemented software tools to enhance our digital footprint and drive lead generation. The enhancements we are
making in our go-to-market approach are expected to reduce our average customer acquisition cost as well as the related
payback period while increasing sales velocity.
2022 Form 10-K
41
$209.8$186.3$221.523.0%20.1%20.9%202020212022$100.1$124.6$156.911.0%13.4%14.8%202020212022$134.9$146.3$199.914.8%15.8%18.9%202020212022 Blackbaud, Inc.
2022 vs. 2021
Sales, marketing and customer success expenses increased by $35.1 million, or 18.9%. The increases in dollars and as a
percentage of total revenue were primarily driven by the following:
+
+
+
+
+
Increase in compensation costs of $20.0 million primarily related to increased employee headcount due to our
acquisition of EVERFI
Increase in advertising costs of $7.7 million primarily due to our acquisition of EVERFI
Increase in third-party contractor costs of $4.0 million primarily related to strategic consulting
Increase in travel costs of $2.1 million due to our easing of restrictions on non-essential employee travel in response
to the COVID-19 pandemic, which went into effect during March 2020
Increase in software costs of $1.7 million primarily related to our acquisition of EVERFI and our use of digital
marketing tools
In response to the COVID-19 pandemic, we implemented a modest and targeted headcount reduction during the second
quarter of 2020, including a reduction in our sales headcount with a focus on retaining our most highly productive sales
executives.
2021 vs. 2020
Sales, marketing and customer success expenses decreased by $23.4 million, or 11.2%. The decreases in dollars and as a
percentage of total revenue were primarily driven by the following:
-
-
-
-
+
+
Decrease in compensation costs other than stock-based compensation of $20.7 million primarily due to the targeted
reduction in sales headcount during the second quarter of 2020
Decrease in allocated costs of $7.0 million primarily related to a decrease in rent expense and the impact of the
targeted reduction in sales headcount during the second quarter of 2020
Decrease in travel costs of $1.9 million due to our restriction on non-essential employee travel in response to the
COVID-19 pandemic, which went into effect during March 2020
Decrease in commissions expense of $1.9 million related to a decrease in overall commissionable bookings during
2020 due to the COVID-19 pandemic and a decrease in commissionable one-time services and other bookings during
2021
Increase in stock-based compensation costs of $4.8 million due to the factors discussed on page 37
Increase in advertising costs of $3.5 million primarily due to incremental spending on advertising campaigns and
investments in digital marketing
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.
42
2022 Form 10-K
Blackbaud, Inc.
2022 vs. 2021
We continue to make investments to delight our customers with innovative cloud solutions. We also continue to invest
heavily in the security of our solutions. Research and development expense increased by $32.3 million, or 26.0%. The
increases in dollars and as a percentage of total revenue were primarily driven by the following:
+
+
+
-
Increase in compensation costs of $26.1 million primarily related to increased employee headcount due to our
increased hiring of engineers, and to a lesser extent, our acquisition of EVERFI
Increase in third-party contractor costs of $19.8 million primarily due to an increase in our use of third-party software
developers and, to a lesser extent, our acquisition of EVERFI
Increase in allocated overhead costs of $2.7 million primarily related to increased headcount discussed above
Increase in software and content development costs of $19.0 million that were required to be capitalized under the
internal-use software guidance, largely driven by our acquisition of EVERFI
Not included in research and development expense for 2022 and 2021 were $58.5 million and $39.4 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 and content development costs associated with our cloud solutions and online educational
courses are subsequently amortized to cost of recurring revenue over the related asset's estimated useful life, which generally
range from three to seven years. We expect that the amount of software and content development costs capitalized will be
relatively consistent in the near-term as we continue making investments in innovation, quality, security and the integration
of our solutions, which we believe will drive long-term revenue growth.
2021 vs. 2020
Research and development expense increased by $24.4 million, or 24.4%. The increases in dollars and as a percentage of total
revenue were primarily driven by the following:
+
+
Increase in compensation costs of $18.9 million primarily related to our increased engineering hiring and, to a lesser
extent, stock-based compensation due to the factors discussed above on page 37
Increase in third-party contractor costs of $3.5 million as we continue to migrate our cloud infrastructure to leading
public cloud service providers and make investments in security
+ Decrease in software development costs of $2.1 million that were required to be capitalized under the internal-use
software guidance
Not included in research and development expense for 2021 and 2020 were $39.4 million and $41.5 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.
2022 Form 10-K
43
Blackbaud, Inc.
2022 vs. 2021
General and administrative expenses increased by $53.6 million, or 36.7%. The increases in dollars and as a percentage of
total revenue were primarily driven by the following:
+
+
+
+
+
+
+
-
-
-
Increases in Security Incident-related expenses, net of insurance, of $53.9 million. See "Security Incident update"
above on page 37
Increase in compensation costs of $8.9 million primarily related to increased employee headcount due to our
acquisition of EVERFI and increased cybersecurity hiring
Increase in acquisition and disposition-related costs of $3.1 million primarily related to aggregate noncash impairment
charges of $1.3 million against certain operating lease right-of-use assets and property and equipment assets
resulting from our decision to cease using a portion of EVERFI's leased office space. We also recorded a $2.0 million
noncash impairment of certain insignificant intangible assets that were held for sale.
A $2.3 million noncash impairment charge during the three months ended June 30, 2022 against previously
capitalized software development costs that reduced the carrying value of those assets to zero. The impairment
charge resulted primarily from our decision to end customer support for certain solutions
Increase in rent expense of $2.0 million primarily related to leases assumed from our acquisition of EVERFI
Increase in travel costs of $1.3 million due to our easing of restrictions on non-essential employee travel in response
to the COVID-19 pandemic, which went into effect during March 2020
Increase in third-party contractor costs of $1.2 million
Decrease in corporate costs of $2.8 million primarily related to a decrease in bad debt expense
Increases in total costs allocated from general and administrative expense of $6.4 million primarily related to
investments in security tools. Depreciation, facilities and IT support costs are pooled and recorded to general and
administrative expense and allocated to other lines of our statements of comprehensive income based on headcount.
Decreases in real estate activity costs of $11.8 million due to our workforce strategy changes that began in the third
quarter of 2020 (see discussion below)
During the third quarter of 2020, we adjusted our workforce strategy to provide more flexibility for our employees to work
remotely. As a result, during the three months ended September 30, 2020, we reduced the estimated useful lives of our
operating lease right-of-use ("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.
In October 2021, we made the decision to permanently close our fixed office locations (with the exception of our global
headquarters facility in Charleston, South Carolina), effective in December 2021. This change was intended to align our real
estate footprint with our transition to a remote-first workforce. As a result, during the three months ended December 31,
2021, 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 incremental operating lease costs during the fourth quarter of 2021. For these same office locations,
we also reduced the estimated useful lives of certain facilities-related fixed assets, which resulted in incremental depreciation
expense during the fourth quarter of 2021. During the three months ended December 31, 2021, we also recorded
impairments of operating lease ROU assets and certain facilities-related fixed assets we ceased using as a result of our
adjusted workforce strategy. These impairment charges were reflected in general and administrative expense. We incurred
approximately $12.5 million of pre-tax costs related to these real estate activities during the fourth quarter of 2021.
44
2022 Form 10-K
Blackbaud, Inc.
2021 vs. 2020
General and administrative expenses increased by $11.4 million, or 8.5%. The increases in dollars and as a percentage of total
revenue were primarily driven by the following:
+
+
+
+
-
-
-
Increase in stock-based compensation costs of $13.2 million due to the factors discussed above on page 37
Increase in compensation expense, excluding stock-based compensation costs, of $4.3 million due to base salary merit
increases on July 2021, as well as an increase in headcount
Increase in corporate costs of $3.9 million primarily related to increases in third-party consulting fees and insurance
costs, partially offset by decreases in bad debt expense
Increases in amortization expense of capitalized cloud computing implementation costs and third-party contractor
costs of $1.0 million and $0.6 million, respectively
Decrease in real estate activity costs of $7.7 million due to our workforce strategy changes made in the third quarter
of 2020
Decrease in rent expense, net of allocated costs, of $2.4 million primarily related to the purchase of our global
headquarters facility during the third quarter of 2020 and our exit of certain other office leases globally during the
second half of 2020 in-line with changes to our workforce strategy at that time
Decreases in depreciation expense and travel costs of $1.9 million and $0.9 million, respectively
Interest Expense
Interest expense ($M)
Percentages indicate expenses as a percentage of total revenue
2022 vs. 2021
Interest expense increased in dollars and as a percentage of total revenue during 2022 when compared to 2021, due to the
new borrowings used to finance our acquisition of EVERFI. We currently expect interest expense for the full year 2023 to be
approximately $40 million to $44 million although our interest expense in connection with the variable rate portion of our
outstanding debt could increase in a rising interest rate environment. See Note 10 to our consolidated financial statements in
this report for more information regarding our derivative instruments, which we use to manage our variable interest rate risk,
and Item 7A. Quantitative and Qualitative Disclosures about Market Risk: Interest Rate Risk on page 63 for more information
about our variable interest rate exposure and related risk.
2021 vs. 2020
Interest expense increased during 2021 when compared to 2020, primarily due to the Real Estate Loans assumed in
connection with the purchase of our global headquarters facility in August 2020 and the deferred financing costs and debt
discount associated with the 2020 Credit Facility, which was entered into in October 2020.
2022 Form 10-K
45
$17.3$18.0$35.81.9%1.9%3.4%202020212022
Blackbaud, Inc.
Deferred Revenue
The table below compares the components of deferred revenue from our consolidated balance sheets:
(dollars in millions)
Total deferred revenue(1)
Less: Long-term portion
Current portion(1)
December 31,
2022
December 31,
2021
385.2
2.8
382.4 $
378.7
4.2
374.5
$
Change
1.7 %
(33.7) %
2.1 %
(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 each one-year period.
The increase in deferred revenue during the year ended December 31, 2022 was primarily due to primarily due to new
subscription sales of our cloud solutions and, to a lesser extent, progress in initiatives to bring our pricing in line with the
market.
Income Taxes
Income tax (benefit) provision ($M)
Percentages indicate effective income tax rates
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 2019 through 2022, 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, 2022 was insignificant.
46
2022 Form 10-K
$13.9$1.4$(10.2)64.3%19.6%18.3%202020212022
Blackbaud, Inc.
We recognize accrued interest and penalties, if any, related to unrecognized tax benefits as a component of income tax
expense.
2022 vs. 2021
The decrease in our effective income tax rate for year ended December 31, 2022, when compared to the same period in 2021,
was primarily attributable to current-year non-deductible accruals for loss contingencies related to the Security Incident,
stock-based compensation shortfall partially offset by increased tax credits and impact of tax rate decreases. The 2021
effective income tax rate was positively impacted by benefit attributable to stock-based compensation windfall net of tax
expense resulting from impact of UK corporate rate increase.
2021 vs. 2020
The decrease in our effective income tax rate in 2021 when compared to 2020, was primarily due to prior year increase in
valuation allowance attributable to state tax credit carryforwards for which we do not expect to realize benefit. Furthermore,
our 2021 effective income tax rate was positively impacted by increased benefit attributable to stock-based compensation
deduction and a reduction to unrecognized tax benefit as a result of IRS audit settlement and statute of limitation lapses
offset against negative impacts of the U.K.-enacted tax rate increase and increase in non-deductible compensation.
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.
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.
2022 Form 10-K
47
Blackbaud, Inc.
(dollars in millions, except per share amounts)
2022
Change
2021
Change
2020
Years ended December 31,
GAAP Revenue
GAAP gross profit
GAAP gross margin
Non-GAAP adjustments:
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
GAAP income from operations
GAAP operating margin
Non-GAAP adjustments:
Add: Stock-based compensation expense
Add: Amortization of intangibles from business combinations
Add: Employee severance
Add: Acquisition and disposition-related costs(2)
Add: Restructuring and other real estate activities
Add: Security Incident-related costs, net of insurance(3)
Add: Impairment of capitalized software development costs
Subtotal(1)
Non-GAAP income from operations(1)
Non-GAAP operating margin
GAAP income before provision for income taxes
GAAP net income
Shares used in computing GAAP diluted earnings per share
GAAP diluted earnings per share
Non-GAAP adjustments:
$
$
$
$
$
$
$
1,058.1
14.1 % $
927.7
1.6 % $
913.2
552.7
52.2 %
14.4
48.5
2.1
65.1
617.8
58.4 %
(28.5)
(2.7) %
110.3
51.4
5.2
6.1
0.1
55.7
2.3
231.1
202.6
19.1 %
(55.6)
(45.4)
14.1 % $
484.5
(0.1) % $
485.2
(27.6) %
39.3 %
7,262.1 %
18.7 %
14.5 % $
(214.4) % $
(8.4) %
38.8 %
242.0 %
100.9 %
(99.4) %
2,968.4 %
100.0 %
31.4 %
0.9 % $
52.2 %
20.0
34.8
—
54.8
539.3
58.1 %
24.9
2.7 %
120.4
37.0
1.5
3.1
12.1
1.8
—
175.9
200.8
21.6 %
49.2 %
(10.7) %
(96.8) %
2.9 %
0.2 % $
(33.1) % $
38.0 %
(11.6) %
(69.0) %
1,294.5 %
(48.0) %
100.0 %
— %
11.7 %
3.1 % $
53.1 %
13.4
39.0
0.9
53.2
538.4
59.0 %
37.2
4.1 %
87.3
41.9
4.9
0.2
23.3
—
—
157.5
194.8
21.3 %
(884.6) % $
(896.9) % $
7.1
5.7
(67.2) % $
(26.2) % $
21.6
7.7
51,569,148
$
(0.88)
6.9 % 48,230,438
(1.0) % 48,696,341
(833.3) % $
0.12
(25.0) % $
0.16
Add: GAAP income tax (benefit) provision
(10.2)
(834.2) %
1.4
(90.0) %
13.9
Add: Total Non-GAAP adjustments affecting loss from operations
Non-GAAP income before provision for income taxes
Assumed non-GAAP income tax provision(4)
Non-GAAP net income(1)
231.1
175.5
35.1
140.4
$
31.4 %
(4.1) %
(4.1) %
(4.1) % $
175.9
183.0
36.6
146.4
Shares used in computing Non-GAAP diluted earnings per share
52,207,573
8.2 % 48,230,438
Non-GAAP diluted earnings per share
$
2.69
(11.5) % $
3.04
11.7 %
2.1 %
2.1 %
2.1 % $
157.5
179.1
35.8
143.3
(1.0) % 48,696,341
3.4 % $
2.94
(1)
(2)
(3)
The individual amounts for each year may not sum to subtotal, non-GAAP gross profit, non-GAAP income from operations, non-GAAP income before
provision for income taxes or non-GAAP net income due to rounding.
Includes a $2.0 million noncash impairment of intangible assets held for sale during the twelve months ended December 31, 2022.
Includes Security Incident-related costs incurred during the twelve months ended December 31, 2022 of $57.6 million, which includes approximately
$23.0 million in recorded aggregate liabilities for loss contingencies, net of probable insurance recoveries during the same period of $1.9 million and
during the twelve months ended December 31, 2021 of $40.6 million, net of probable insurance recoveries during the same period of $38.7 million.
Recorded expenses consisted primarily of payments to third-party service providers and consultants, including legal fees, as well as settlements of
customer claims and accruals for certain loss contingencies. Not included in this adjustment were costs associated with enhancements to our
cybersecurity program. For full year 2023, we currently expect net pre-tax expense of approximately $20 million to $30 million and net cash outlays of
approximately $25 million to $35 million for ongoing legal fees related to the Security Incident. In line with our policy, legal fees, are expensed as
incurred. As of December 31, 2022, we have recorded approximately $23.0 million in aggregate liabilities for loss contingencies based primarily on
recent negotiations with certain governmental agencies related to the Security Incident that we believe we can reasonably estimate. It is reasonably
possible that our estimated or actual losses may change in the near term for those matters and be materially in excess of the amounts accrued, but we
are unable at this time to reasonably estimate the possible additional loss. There are other Security Incident-related matters, including customer claims,
customer constituent class actions and governmental investigations, for which we have not recorded a liability for a loss contingency as of December 31,
2022 because we are unable at this time to reasonably estimate the possible loss or range of loss. Each of these matters could, separately or in the
48
2022 Form 10-K
Blackbaud, Inc.
aggregate, result in an adverse judgement, settlement, fine, penalty or other resolution, the amount, scope and timing of which we are currently unable
to predict, but could have a material adverse impact on our results of operations, cash flows or financial condition.
(4) We apply a non-GAAP effective tax rate of 20.0% when calculating non-GAAP net income and non-GAAP diluted earnings per share.
2022 Form 10-K
49
Blackbaud, Inc.
Non-GAAP organic revenue growth
In addition, we use non-GAAP organic revenue growth, non-GAAP organic revenue growth on a constant currency basis, non-
GAAP organic recurring revenue growth 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. 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 our current business’ organic revenue
growth and revenue run-rate.
Years ended December 31,
(dollars in millions)
GAAP revenue
GAAP revenue growth
Add: Non-GAAP acquisition-related revenue(1)
Less: Non-GAAP revenue from divested businesses(2)
Total Non-GAAP adjustments
Non-GAAP organic revenue(3)
Non-GAAP organic revenue growth
Non-GAAP organic revenue(3)
Foreign currency impact on Non-GAAP organic revenue(4)
Non-GAAP organic revenue on constant currency basis(4)
Non-GAAP organic revenue growth on constant currency basis
GAAP recurring revenue
GAAP recurring revenue growth
Add: Non-GAAP acquisition-related revenue(1)
Less: Non-GAAP recurring revenue from divested businesses(2)
Total Non-GAAP adjustments
Non-GAAP organic recurring revenue
Non-GAAP organic recurring revenue growth
Non-GAAP organic recurring revenue(3)
Foreign currency impact on non-GAAP organic recurring revenue(4)
Non-GAAP organic recurring revenue on constant currency basis(4)
Non-GAAP organic recurring revenue growth on constant currency basis
2022
$
1,058.1
$
14.1 %
—
—
—
1,058.1
2.7 %
$
$
1,058.1
12.3
1,070.4
$
3.9 %
2021
927.7
104.4
(1.9)
102.5
1,030.2
1,030.2
—
1,030.2
1,011.7
$
880.9
14.9 %
—
—
—
1,011.7
4.0 %
1,011.7
10.9
$
$
$
1,022.6
$
5.2 %
93.5
(1.9)
91.6
972.5
972.5
—
972.5
$
$
$
$
$
$
$
$
(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.
(2) Non-GAAP revenue from divested businesses excludes revenue associated with divested businesses. The exclusion of the prior period revenue is to
present the results of the divested business with the results of the combined company for the same period of time in both the prior and current periods.
(3) Non-GAAP organic revenue and non-GAAP organic recurring revenue for the prior year periods presented herein may not agree to non-GAAP organic
revenue and non-GAAP organic recurring revenue presented in the respective prior period quarterly financial information solely due to the manner in
which non-GAAP organic revenue growth and non-GAAP organic recurring revenue growth are calculated.
To determine non-GAAP organic revenue growth and non-GAAP organic recurring 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.
(4)
50
2022 Form 10-K
Blackbaud, Inc.
Rule of 40
We previously defined Rule of 40 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 and content development costs; stock-based
compensation; employee severance; acquisition and disposition-related costs; restructuring and other real estate activities;
Security Incident-related costs, net of insurance; and impairment of capitalized software development costs. Beginning in the
fiscal quarter ended June 30, 2022, we now also include in non-GAAP adjusted EBITDA impairment of capitalized software
development costs because we believe it is not directly related to our operating performance in any particular period.
Years ended December 31,
(dollars in millions)
GAAP net (loss) income
Non-GAAP adjustments:
Add: Interest, net
Add: GAAP income tax (benefit) provision
Add: Depreciation(1)
Add: Amortization of intangibles from business combinations
Add: Amortization of software and content development costs(2)
Subtotal(3)
Non-GAAP EBITDA(3)
Non-GAAP EBITDA margin
Non-GAAP adjustments:
Add: Stock-based compensation expense
Add: Employee severance
Add: Acquisition and disposition-related costs
Add: Restructuring and other real estate activities
Add: Security Incident-related costs, net of insurance(4)
Add: Impairment of capitalized software development costs
Subtotal(3)
Non-GAAP Adjusted EBITDA(3)
Non-GAAP Adjusted EBITDA margin
Rule of 40(5)
Non-GAAP adjusted EBITDA
Foreign currency impact on Non-GAAP adjusted EBITDA(6)
Non-GAAP adjusted EBITDA on constant currency basis(6)
Non-GAAP adjusted EBITDA margin on constant currency basis
Rule of 40 on constant currency basis(7)
$
$
2022
(45.4) $
34.1
(10.2)
14.1
51.4
39.0
128.4
83.0
$
7.8 %
110.3
5.2
6.1
0.1
55.7
2.3
179.7
$
262.6
$
24.8 %
27.5 %
262.6
6.3
268.9
25.1 %
29.0 %
2021
5.7
17.6
1.4
12.7
37.0
32.8
101.5
107.2
120.4
1.5
3.1
12.1
1.8
—
138.9
246.1
246.1
(3.6)
242.5
(1) During the third quarter of 2020 and the fourth quarter of 2021, 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 increases in depreciation expense. The accelerated portions of the fixed asset depreciation expense related to these
activities of $1.7 million for the three months and twelve months ended December 31, 2021, respectively, were presented in the "Restructuring and
other real estate activities" line of the reconciliation of GAAP to non-GAAP financial measures. Total depreciation expense was $4.9 million and $14.4
million for the three and twelve months ended December 31, 2021, respectively.
Includes amortization expense related to software development costs and amortization expense from capitalized cloud computing implementation
costs.
The individual amounts for each year may not sum to subtotal, non-GAAP EBITDA, non-GAAP adjusted EBITDA or non-GAAP adjusted EBITDA on a
constant currency basis due to rounding.
Includes Security Incident-related costs incurred, net of probable insurance recoveries. See additional details in the reconciliation of GAAP to Non-GAAP
operating income above.
(3)
(2)
(4)
(5) Measured by non-GAAP organic revenue growth plus non-GAAP adjusted EBITDA margin. See Non-GAAP organic revenue growth table above.
(6)
To determine non-GAAP adjusted EBITDA on a constant currency basis, non-GAAP adjusted EBITDA 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.
(7) Measured by non-GAAP organic revenue growth on constant currency basis plus non-GAAP adjusted EBITDA margin on constant currency basis. See
Non-GAAP organic revenue growth table above.
2022 Form 10-K
51
Blackbaud, Inc.
Non-GAAP free cash flow and non-GAAP adjusted 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.
Non-GAAP adjusted 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, plus cash outflows, net of
insurance, related to the Security Incident.
We believe non-GAAP free cash flow and non-GAAP adjusted free cash flow provides useful measures of the Company's
operating performance. Non-GAAP adjusted free cash flow is not intended to represent and should not be viewed as the
amount of residual cash flow available for discretionary expenditures.
(dollars in millions)
GAAP net cash provided by operating activities
Less: purchase of property and equipment
Less: capitalized software and content development costs
Non-GAAP free cash flow(1)
Add: Security Incident-related cash flows, net of insurance
Non-GAAP adjusted free cash flow(1)
2022
203.9
(12.3)
(58.8)
132.8
20.9
153.7
$
$
$
Change
(4.6) % $
5.4 %
45.2 %
(17.8) % $
209.6 %
(8.6) % $
2021
213.7
(11.7)
(40.5)
161.5
6.7
168.2
Years ended December 31,
Change
44.4 % $
(60.7) %
(4.0) %
112.2 % $
226.5 %
115.2 % $
2020
148.0
(29.7)
(42.2)
76.1
2.1
78.2
(1)
The individual amounts for each year may not sum to non-GAAP free cash flow or non-GAAP adjusted free cash flow due to rounding.
Seasonality
Our revenues normally fluctuate as a result of certain seasonal variations in our business. 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. 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. Our transactional revenue has historically been
at its lowest in the first quarter due to the timing of customer fundraising initiatives and events. 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. 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, other than transaction-based costs related to our
payments services, 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 acquired companies, delivery of professional services and
occurrence of customer events, as well as merit-based salary increases, among other factors. Historically, due to lower
revenues in our first quarter, combined with 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 generally been lower in our second
quarter as compared to our third and fourth quarters. Partially offsetting these favorable drivers of cash flow from operations
in our third and fourth quarters are base salary merit increases, which were replaced in 2020 with performance-based equity
awards due to COVID-19, but returned in July 2021. In addition, deferred revenues can vary on a seasonal basis due to the
timing of customer contract renewals and student enrollments or significant acquisitions. 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. During the second quarter of 2021, however, we experienced an
increase in the amount of taxes we paid on behalf of our employees related to the settlement of equity awards when
compared to the same period in 2020, as the equity granted in May 2020 in lieu of cash bonus plans and base salary merit
increases vested.
52
2022 Form 10-K
Blackbaud, Inc.
These patterns may change as a result of the continued shift to online giving, growth in volume of transactions for which we
process payments, large dollar customer bookings and contract renewals, or as a result of acquisitions, new market
opportunities, new solution introductions 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 and content development costs, net
Total carrying value of debt
Working capital
December 31,
2022
December 31,
2021
$
31.7 $
107.4
141.0
859.0
(312.0)
55.1
111.4
121.4
956.2
(258.7)
Change
(42.5) %
(3.6) %
16.2 %
(10.2) %
(20.6) %
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
2022
203.9
(85.5)
(25.7)
Change
(4.6) % $
2021
213.7
Change
44.4 % $
(81.8) %
(471.3)
(555.9) %
(109.7) %
264.1
(2,573.2) %
2020
148.0
(71.8)
(10.7)
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, the volume and size of transactions for which we process payments and our
customers' ability to pay. 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. We also believe that we will be able to
continue to meet our long-term cash requirements due to our anticipated cash flow from operations, solid financial position
and ability to access capital from financial markets. To the extent we undertake future material acquisitions, investments or
unanticipated capital or operating expenditures, including in connection with the Security Incident, we may require additional
capital. In that context, we regularly evaluate opportunities to enhance our capital structure including through potential debt
or equity issuances.
As a well-known seasoned issuer, we filed an automatic shelf registration statement for an undetermined amount of debt and
equity securities with the SEC on January 14, 2022. Under this universal shelf registration statement we may offer and sell,
from time to time, debt securities, common stock, preferred stock, depositary shares, warrants, stock purchase contracts and
stock purchase units. Subject to certain conditions, this registration statement will be effective through January 13, 2024.
At December 31, 2022, our total cash and cash equivalents balance included approximately $14.4 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.
Operating Cash Flow
Throughout 2022, 2021 and 2020, 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.
2022 Form 10-K
53
Blackbaud, Inc.
2022 vs. 2021
Net cash provided by operating activities decreased by $9.8 million during the year ended December 31, 2022, when
compared to the same period in 2021, primarily due a $65.1 million increase in cash flow from operations associated with
working capital, and a $74.9 million decrease in net income adjusted for non-cash expenses.
The increase in cash flow from operations associated with working capital during 2022, when compared to 2021, was
primarily due to:
•
•
•
fluctuations in the timing of vendor payments;
a decrease in probable insurance recoveries related to the Security Incident as we have received payment for all of
the related insurance claims; and
an increase in accrued expenses related to the Security Incident.
2021 vs. 2020
Net cash provided by operating activities increased by $65.7 million during the year ended December 31, 2021, when
compared to the same period in 2020, primarily due a $49.7 million increase in cash flow from operations associated with
working capital, and a $16.1 million increase in net income adjusted for non-cash expenses.
The increase in cash flow from operations associated with working capital during 2021, when compared to 2020, was
primarily due to:
•
•
•
•
the payment of our 2019 cash bonus plans in 2020 and the replacement of our 2020 cash bonus plans with
performance-based equity awards (which we expect will continue going forward);
an increase in the collection of our accounts receivable balances, including early progress in initiatives to bring our
pricing in line with the market; and
fluctuations in the timing of vendor payments; partially offset by
an increase in income tax payments.
Workforce reductions
We have taken steps to better align our workforce with our strategic priorities to drive efficiencies and minimize any potential
impacts from the current uncertain macroeconomic environment. During the fourth quarter of 2022, this included further
elimination of open positions as well as the decision to reduce our workforce. As a result of the targeted workforce reduction,
we incurred $4.5 million in pre-tax employee severance costs during the fourth quarter of 2022. During the first quarter of
2023, we have remained focused on improving operating performance and driving efficiencies in the Company, including
further reducing our workforce. Following the planned action during the fourth quarter of 2022, we experienced a slowdown
in voluntary attrition relative to expectations leading to a further reduction in force to achieve our original plan. While we
have eliminated positions in some areas, we will continue to hire in other areas. Most of these reductions are in areas of the
business that are not customer facing or in sales. When combined with the cost actions we took in the fourth quarter of 2022,
we expect our total headcount will be reduced by approximately 14% since the third quarter 2022. We expect these
workforce reductions and other cost actions to significantly reduce our pre-tax costs in 2023, partially offset by continued
investments in cybersecurity and innovation.
Security Incident update
As discussed in Note 11 to our consolidated financial statements included in this report, total costs related to the Security
Incident have exceeded the limit of our insurance coverage. Accordingly, we expect that the Security Incident will negatively
impact our GAAP profitability and GAAP cash flow for the foreseeable future (see discussion regarding non-GAAP financial
measures beginning on page 47). For full year 2022, we incurred net pre-tax expense of $32.7 million and had net cash outlays
of $20.9 million for ongoing legal fees related to the Security Incident. In line with our policy, legal fees are expensed as
incurred. For full year 2023, we currently expect net pre-tax expense of approximately $20 million to $30 million and net cash
outlays of approximately $25 million to $35 million for ongoing legal fees related to the Security Incident.
54
2022 Form 10-K
Blackbaud, Inc.
As of December 31, 2022, we have recorded approximately $23.0 million in aggregate liabilities for loss contingencies based
primarily on recent negotiations with certain governmental agencies related to the Security Incident that we believe we can
reasonably estimate. It is reasonably possible that our estimated or actual losses may change in the near term for those
matters and be materially in excess of the amounts accrued, but we are unable at this time to reasonably estimate the
possible additional loss.
There are other Security Incident-related matters, including customer claims, customer constituent class actions and
governmental investigations, for which we have not recorded a liability for a loss contingency as of December 31, 2022
because we are unable at this time to reasonably estimate the possible loss or range of loss. Each of these matters could,
separately or in the aggregate, result in an adverse judgement, settlement, fine, penalty or other resolution, the amount,
scope and timing of which we are currently unable to predict, but could have a material adverse impact on our results of
operations, cash flows or financial condition.
Investing Cash Flow
During 2023, we expect our total capital expenditures, including estimated outlays for capitalized software development
costs, to be between approximately $65.0 million and $75.0 million.
2022 vs. 2021
Net cash used in investing activities of $85.5 million decreased by $385.7 million during 2022, when compared to 2021.
During 2022, we used $20.9 million of net cash for our acquisitions of EVERFI and Kilter, comprised primarily of (i) $17.4
million that had not been paid by EVERFI to its former option holders as of December 31, 2021, solely due to the timing of the
acquisition on the last day of 2021; (ii) $2.9 million that was paid to acquire Kilter; and (iii) $2.6 million that was paid to a
number of EVERFI's selling shareholders after determining they would be paid in cash, rather than shares of our common
stock. During 2022, we also received cash proceeds of $6.4 million from our sale of certain solutions. See Note 3 of our
consolidated financial statements in this report for additional information.
We used $58.8 million for software and content development costs, which was up $18.3 million from cash spent during 2021,
primarily due to the inclusion of EVERFI's software and content development activities.
We also spent $12.3 million of cash for purchases of property and equipment during 2022, which was an increase $0.6 million
from cash spent in 2021.
2021 vs. 2020
Net cash used in investing activities of $471.3 million increased by $399.4 million during 2021, when compared to 2020.
We spent $419.1 million for our acquisition of EVERFI in 2021 and we did not make any similar investments during 2020. We
used $40.5 million for software development costs, which was relatively consistent with cash spent during 2020. We continue
to invest in our innovative cloud solutions, as well as development activities for Blackbaud SKY, our modern cloud platform.
We also spent $11.7 million of cash for purchases of property and equipment during 2021, which was down $18.0 million
from cash spent in 2020. The decrease in cash expended was primarily due to our purchase of our global headquarters facility
in 2020.
Financing Cash Flow
2022 vs. 2021
During 2022, we had a net decrease in borrowings of $99.7 million compared to a net increase in borrowings of $429.2 million
attributable to our acquisition of EVERFI in 2021. During 2022, we did not repurchase any of our common stock while we
repurchased $108.4 million during 2021 (see additional details below regarding our stock repurchase program).
We paid $36.4 million to satisfy tax obligations of employees upon settlement or exercise of equity awards during 2022
compared to $39.4 million during 2021. The amount of taxes paid by us on behalf of employees related to the settlement or
2022 Form 10-K
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Blackbaud, Inc.
exercise of equity awards varies from period to period based upon the timing of grants and vesting, as well as the market
price for shares of our common stock at the time of settlement. Most of our equity awards currently vest in our first quarter.
During 2022, cash flow from financing activities associated with changes in restricted cash due to customers increased $111.4
million, compared to a decrease of $13.5 million during 2021. This line in the statement of cash flows represents the change in
the amount of restricted cash held and payable by us to customers from one period to the next. This restricted cash due to
customers is not available to us for operational purposes.
2021 vs. 2020
During 2021, we had a net increase in borrowings of $429.2 million attributable to our acquisition of EVERFI, compared to a
net increase in borrowings of $0.9 million in 2020. During 2021, we spent $108.4 million on repurchases of our common stock
compared to $41.0 million during 2020 (see additional details below regarding our stock repurchase program which began in
the fourth quarter of 2020). During 2020, we paid dividends of $6.0 million and we did not pay dividends during 2021, as we
discontinued the declaration and payment of all cash dividends beginning with the second quarter of 2020.
We paid $39.4 million to satisfy tax obligations of employees upon settlement or exercise of equity awards during 2021
compared to $21.4 million during 2020. The increase was primarily attributable to our decision to replace our annual cash
bonus plans with a short-term performance-based equity award plan.
During 2021, cash flow from financing activities associated with changes in restricted cash due to customers decreased $13.5
million, compared to an increase of $61.2 million during 2020. This line in the statement of cash flows represents the change
in the amount of restricted cash held and payable by us to customers from one period to the next.
Stock repurchase program
In December 2021, our Board of Directors reauthorized and replenished our 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, 2022, we did not purchase any shares. The remaining amount available to
purchase stock under the stock repurchase program was $250.0 million as of December 31, 2022.
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 our 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, 2022, our available
borrowing capacity under the 2020 Credit Facility was $319.8 million. The 2020 Credit Facility matures in October 2025.
At December 31, 2022, the carrying amount of our debt under the 2020 Credit Facility was $799.1 million. Our average daily
borrowings were $863.2 million during 2022.
The term loans 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 balances of the real estate loans are due upon
maturity in April 2038.
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2022 Form 10-K
Blackbaud, Inc.
Following is a summary of the financial covenants under the 2020 Credit Facility:
Financial Covenant
Net Leverage Ratio(1)
Interest Coverage Ratio
Requirement
≤ 4.00 to 1.00
≥ 2.50 to 1.00
Ratio as of December 31, 2022
3.22 to 1.00
7.43 to 1.00
(1) Under the terms of the 2020 Credit Facility, the Net Leverage Ratio requirement may be increased by up to 0.50 provided we satisfy certain
requirements, including a permitted business acquisition, and provided that the maximum Net Leverage Ratio shall not exceed 4.25 to 1.00.
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, 2022, we were in compliance with our debt covenants under the 2020
Credit Facility.
First amendment to 2020 Credit Facility
On January 31, 2022, we entered into the First Amendment to Credit Agreement which amends the 2020 Credit Facility to,
among other things, (i) modify the definition of “Applicable Margin”, (ii) modify the net leverage ratio financial covenant to
require a net leverage ratio of (A) 4.00:1.00 or less for the fiscal quarter ended December 31, 2021 and for fiscal quarters
ending thereafter through December 31, 2023 and (B) 3.75:1.00 or less for the fiscal quarters ending March 31, 2024 and
thereafter, (iii) reset the $250.0 million fixed dollar basket with respect to the accordion feature, and (iv) modify certain
negative covenants to provide additional operational flexibility. See Note 9 to our consolidated financial statements included
in this report for additional information regarding the 2020 Credit Facility.
Commitments and Contingencies
As of December 31, 2022, we had contractual obligations with future minimum commitments as follows:
(in millions)
Recorded contractual obligations:
Debt
Operating leases
Contingent consideration
Unrecorded contractual obligations:
Purchase obligations
Interest payments on debt
Total contractual obligations(1)
(1)
The individual amounts may not sum to the total due to rounding.
Debt
Payments due by period
Less than
1 year
More than
1 year
Total(1)
843.2 $
862.0
$
18.8 $
10.0
—
53.5
2.7
70.0
38.8
224.4
109.8
$
137.6 $
1,233.5 $
1,371.1
63.4
2.7
294.4
148.6
As of December 31, 2022, we had total remaining principal payments of $862.0 million. These payments represent 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, 2022 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. See Note 9 to our consolidated financial statements in this report
for more information.
Interest payments on debt
In addition to principal payments, as of December 31, 2022, we expect to pay interest expense over the life of our debt
obligations of approximately $148.6 million. These payments represent our estimated future interest payments on debt using
2022 Form 10-K
57
Blackbaud, Inc.
our debt balances and the related weighted average effective interest rates as of December 31, 2022, which includes the
effect of interest rate swap agreements. 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 on our remaining principal payments described above.
Operating leases
As of December 31, 2022, we had remaining operating lease payments of $63.4 million. These payments have not been
reduced by sublease income, incentive payments, reimbursement of leasehold improvements or the amount representing
imputed interest of $10.8 million. Our operating leases are generally for corporate offices, subleased offices and certain
equipment and furniture. Given our remote-first workforce strategy and real estate footprint optimization efforts, as
discussed above, we do not anticipate entering any new, material operating leases for offices for the foreseeable future. See
Note 11 to our consolidated financial statements in this report for more information.
Purchase obligations
As of December 31, 2022, we had remaining purchase obligations of $294.4 million. These purchase obligations are for third-
party technology used in our solutions and for other services we purchase as part of our normal operations. In certain cases,
these arrangements require a minimum annual purchase commitment by us. Our purchase obligations are not recorded as
liabilities on our consolidated balance sheets as of December 31, 2022, as we had not received the related services. See Note
11 to our consolidated financial statements in this report for more information.
The total liability for uncertain tax positions as of December 31, 2022 and December 31, 2021, was $3.1 million and $3.7
million, respectively. Our accrued interest and penalties related to tax positions taken on our tax returns was insignificant as
of December 31, 2022 and 2021.
Contingent consideration
In connection with our acquisition of Kilter, we are obligated to pay contingent consideration upon the achievement of certain
milestones. For information regarding our contingent consideration obligations, see Note 3 to our consolidated financial
statements in this report.
Foreign Currency Exchange Rates
Approximately 15% of our total revenue for 2022 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 income (loss) as a
component of stockholders’ equity, was a loss of $14.9 million as of December 31, 2022 and income of $1.3 million as of
December 31, 2021. We have entered into foreign currency forward contracts to hedge a portion of the foreign currency
exposure that arises on translation of our investments denominated in British Pounds into U.S. dollars.
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 2022, 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 2022, the
fluctuation in foreign currency exchange rates reduced our total revenue and our income from operations by $12.3 million
and $2.6 million, respectively. We have entered into foreign currency forward contracts to hedge revenues denominated in
the Canadian dollar against changes in the exchange rate with the U.S. dollar. 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
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2022 Form 10-K
Blackbaud, Inc.
impacts are non-GAAP financial information and are not in accordance with, or an alternative to, information prepared in
accordance with GAAP.
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.
Revenue Recognition
Description
Judgments and Uncertainties
Effect if Actual Results Differ
From Assumptions
Our revenue recognition accounting methodology
contains uncertainties because it requires us to make
significant estimates and assumptions, and to apply
judgment.
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.
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.
See Note 2 to our consolidated financial
statements in this report for a complete
discussion of our revenue recognition policies.
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;
(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.
We have not made any material changes in the
accounting methodology we use to recognize
revenue during the year ended December 31,
2022.
2022 Form 10-K
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Blackbaud, Inc.
Costs of Obtaining Contracts
Description
Judgments and Uncertainties
Effect if Actual Results Differ
From Assumptions
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.
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.
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.
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 primarily determined to
be 5 years. We generally do not pay
commissions for contract renewals that are
commensurate with the commission paid on
the initial contract. The related amortization
expense is included in sales, marketing and
customer success expense in our consolidated
statements of comprehensive income.
We have not made any material changes in the
accounting methodology we use to record costs
of obtaining contracts during the year ended
December 31, 2022.
Business Combinations
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.
Description
Judgments and Uncertainties
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.
We have not made any material changes in the
accounting methodology we use for business
combinations during the year ended December
31, 2022.
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, market multiple analyses and replacement
cost.
We apply significant judgement in estimating the fair
value of intangible assets acquired, which involves the
use of significant assumptions. Significant assumptions
used in the valuation of customer relationships include
future revenue and operating expenses, customer
attrition rates, contributory asset charges, tax
amortization benefit, and discount rates. Significant
assumptions used in the valuation of certain developed
technology assets include future revenue, proprietary
technology obsolescence curve, royalty rate, and
discount rate. Significant assumptions used in the
valuation of marketing assets include assumptions
about the period of time the brand will continue to be
valuable, royalty rate, and discount rate. Significant
assumptions used in the valuation of content intangible
assets include cost-based assumptions. 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.
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2022 Form 10-K
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Income Taxes
Description
Judgments and Uncertainties
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.
We have not made any material changes in the
accounting methodology we use to assess
income tax during the year ended December
31, 2022.
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.
Long-lived Assets and Intangible Assets Other Than Goodwill
Description
Judgments and Uncertainties
In estimating future cash flows, assets are grouped at
the lowest level for which there is identifiable cash
flows that are largely independent of cash flows from
other asset groups.
When measuring impairment of an asset or asset group
using discounted cash flows, we make assumptions and
apply judgment in estimating future cash flows and
asset or asset group 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 or asset group
exceeds the undiscounted cash flows over the
estimated remaining life of the asset, we
measure the impairment using discounted cash
flows.
We have not made any material changes in the
accounting methodology we use to assess
impairment loss during the year ended
December 31, 2022.
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.
Effect if Actual Results Differ
From Assumptions
During 2022, we recorded impairment charges
against certain previously capitalized software
development costs, certain insignificant
customer relationship intangible assets that
were held for sale, our operating lease ROU
assets and certain property and equipment
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.
2022 Form 10-K
61
Blackbaud, Inc.
Loss Contingencies
Description
Judgments and Uncertainties
We review any such loss contingency accruals 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.
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.
We are subject to the possibility of various loss
contingencies, including legal proceedings and
claims, that arise in the normal course of
business, as well as certain other non-ordinary
course proceedings, claims and investigations,
as described in Note 11 to the consolidated
financial statements in this report. We record
an accrual 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 have not made any material changes in the
accounting methodology we use to assess loss
contingencies during the year ended December
31, 2022.
Effect if Actual Results Differ
From Assumptions
With the exception of the 2020 Security
Incident, 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
determine loss contingencies. However, if facts
and circumstances change in the future that
change our belief regarding assumptions used to
determine our estimates, we may be exposed to
losses that could be material.
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.
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.
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2022 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 SOFR rates. The Financial Conduct
Authority in the U.K. has stated that it plans to phase out all tenors of LIBOR by June 2023, therefore, we modified our
financial contracts that were indexed to LIBOR to reference SOFR during 2022. These modifications did not have a significant
financial impact. 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, 2022, we believe that the risk of
exposure to changing interest rates for those positions is immaterial. There were no significant changes in how we manage
interest rate risk between December 31, 2021 and December 31, 2022.
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.
2022 Form 10-K
63
Blackbaud, Inc.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BLACKBAUD, INC.
Index to Consolidated Financial Statements
Reports of Independent Registered Public Accounting Firms (PCAOB IDs 42 and 238)
Consolidated Balance Sheets
Consolidated Statements of Comprehensive (Loss) Income
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders’ Equity
Notes to Consolidated Financial Statements
Page No.
65
69
70
71
72
73
64
2022 Form 10-K
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Blackbaud, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Blackbaud, Inc. (the Company) as of December 31, 2022,
the related consolidated statements of comprehensive loss, cash flows, and stockholders’ equity for the year ended
December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion,
the consolidated financial statements present fairly, in all material respects, the financial position of the Company at
December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework) and our report dated February 24, 2023, expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audit. We are a public accounting firm registered with the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the 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 financial statements. Our audit also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the
overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex
judgments. The communication of the critical audit matter 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 account or disclosure to which it relates.
Description of
the Matter
Revenue Recognition - Payment Processing Services
The Company recorded transactional recurring revenues of $302.6 million for the year ended
December 31, 2022. Included in transactional recurring revenues are revenues related to payment
processing services provided to customers that enable donations and the purchase of goods and
services. As discussed in Note 2 to the consolidated financial statements, the Company recognizes
revenue for payment processing services over time based on the amount billable to the customer
since it has the right to invoice the customer in an amount that directly corresponds with the value
to the customer for the Company’s performance to date. The processing of transactions and
recording of revenues for these services involves a significant volume of transactions that are highly
automated and are based on contractual terms with the customer and the Company’s third-party
vendors.
Auditing the revenues for these payment processing services is complex because the processes are
highly automated and involve multiple IT systems with a significant volume of transactions and
related underlying data. Further, auditing the revenues for these payment processing services
required the involvement of data professionals to assist in validating the integrity of the underlying
data and recalculating the revenues recorded during the period.
2022 Form 10-K
65
How We Addressed the
Matter in Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of the
Company’s controls over its payment processing services provided to customers that enable
donations and the purchase of goods and services. We identified the relevant systems used in these
payment processing services, including relevant third-party service organization systems, and
evaluated the IT general controls over each of these systems. We also tested the relevant
automated controls and other business processes controls.
To test revenue recognized for payment processing services, our procedures included, among
others, the involvement of data professionals to recalculate the revenue recognized. For a selection
of payment processing transactions, we also agreed the amount of revenues recognized for
processing fees retained by the Company to source documents and tested the mathematical
accuracy of the recorded revenue. We also evaluated if the transactions were processed, and funds
received prior to December 31, 2022, including sending confirmations directly to financial
institutions.
/s/ Ernst & Young LLP
We have served as the Company's auditor since 2021.
Raleigh, North Carolina
February 24, 2023
66
2022 Form 10-K
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Blackbaud, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Blackbaud, Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 Framework) (the COSO criteria). In our opinion, Blackbaud, Inc. (the Company) maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheet of the Company as of December 31, 2022, and the related consolidated statements
of comprehensive loss, cash flows, and stockholders' equity for the year-ended December 31, 2022, and the related notes
(collectively referred to as the “consolidated financial statements”) and our report dated February 24, 2023 expressed an
unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s
Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s
internal control over financial reporting based on our audit. We are a public accounting firm registered with the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
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 generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) 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 (3) 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.
/s/ Ernst & Young LLP
Raleigh, North Carolina
February 24, 2023
2022 Form 10-K
67
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Blackbaud, Inc.
Opinion on the Financial Statements
We have audited the consolidated balance sheet of Blackbaud, Inc. and its subsidiaries (the “Company”) as of December 31,
2021, and the related consolidated statements of comprehensive income, of stockholders’ equity and of cash flows for each
of the two years in the period ended December 31, 2021, including the related notes (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 2021 in conformity with accounting principles generally accepted
in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on the Company’s consolidated financial statements 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 of these consolidated financial statements in accordance with the standards of the PCAOB. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud.
Our audits 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. We believe that our audits provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Atlanta, Georgia
March 1, 2022
We served as the Company’s auditor from 2000 to 2022.
68
2022 Form 10-K
Blackbaud, Inc.
Consolidated Balance Sheets
(dollars in thousands, except per share amounts)
Assets
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable, net of allowance of $7,318 and $11,155 at December 31, 2022 and
December 31, 2021, respectively
Customer funds receivable
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Software and content 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 11)
Stockholders’ equity:
Preferred stock; 20,000,000 shares authorized, none outstanding
Common stock, $0.001 par value; 180,000,000 shares authorized, 67,814,044 and
66,165,666 shares issued at December 31, 2022 and December 31, 2021, respectively
Additional paid-in capital
Treasury stock, at cost; 14,745,230 and 14,182,805 shares at December 31, 2022 and
December 31, 2021, respectively
Accumulated other comprehensive income
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
December 31,
2022
December 31,
2021
$
31,691 $
702,240
55,146
596,616
102,809
249
81,654
918,643
107,426
45,899
141,023
1,050,272
635,136
94,304
2,992,703 $
42,559 $
86,002
700,860
18,802
382,419
1,230,642
840,241
125,759
2,817
44,918
4,294
2,248,671
—
68
1,075,264
(537,287)
8,938
197,049
744,032
2,992,703 $
102,726
977
95,506
850,971
111,428
53,883
121,377
1,058,640
698,052
77,266
2,971,617
22,067
100,096
594,273
18,697
374,499
1,109,632
937,483
148,465
4,247
53,386
1,344
2,254,557
—
66
968,927
(500,911)
6,522
242,456
717,060
2,971,617
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
2022 Form 10-K
69
Blackbaud, Inc.
Consolidated Statements of Comprehensive (Loss) Income
(dollars in thousands, except per share amounts)
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
(Loss) income from operations
Interest expense
Other income, net
(Loss) income before provision for income taxes
Income tax (benefit) provision
Net (loss) income
(Loss) earnings per share
Basic
Diluted
Common shares and equivalents outstanding
Basic weighted average shares
Diluted weighted average shares
Other comprehensive income
Years ended December 31,
2022
2021
2020
$
1,011,733 $
880,850 $
850,745
46,372
1,058,105
463,449
41,940
505,389
552,716
221,455
156,913
199,908
2,925
—
581,201
(28,485)
(35,803)
8,713
(55,575)
(10,168)
46,890
927,740
390,803
52,392
443,195
484,545
186,314
124,573
146,262
2,227
263
459,639
24,906
62,474
913,219
369,681
58,384
428,065
485,154
209,762
100,146
134,852
2,915
236
447,911
37,243
(18,003)
(17,287)
180
7,083
1,385
1,658
21,614
13,897
7,717
$
$
$
(45,407) $
5,698 $
(0.88) $
(0.88) $
0.12 $
0.12 $
0.16
0.16
51,569,148
47,412,306
48,184,714
51,569,148
48,230,438
48,696,341
Foreign currency translation adjustment
Unrealized gain (loss) on derivative instruments, net of tax
Total other comprehensive income
Comprehensive (loss) income
$
(16,160) $
661 $
18,576
2,416
8,358
9,019
$
(42,991) $
14,717 $
4,571
(1,778)
2,793
10,510
The accompanying notes are an integral part of these consolidated financial statements.
70
2022 Form 10-K
Blackbaud, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
Cash flows from operating activities
Net (loss) income
Adjustments to reconcile net (loss) 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:
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 and content development costs
Purchase of net assets of acquired companies, net of cash and restricted cash acquired
Cash received in sale of business
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of debt
Payments on debt
Debt issuance costs
Stock 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 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 during the year for:
Interest
Taxes, net of refunds
Non-cash investing and financing activities:
Purchase of EVERFI through the issuance of stock (see Note 3)
Purchase of property and equipment by assuming directly related liabilities
Purchase of software and services by assuming directly related liabilities
Purchase of equipment and other assets included in accounts payable
Years ended December 31,
2022
2021
2020
$
(45,407) $
5,698 $
7,717
102,369
6,066
110,294
(26,644)
2,364
5,676
(7,340)
26,235
21,607
(2,386)
11,059
203,893
(12,289)
(58,774)
(20,912)
6,426
(85,549)
82,410
11,450
120,379
(2,429)
1,570
10,490
(6,525)
(2,048)
(9,670)
(8,190)
10,526
213,661
(11,664)
(40,489)
(419,120)
—
(471,273)
92,735
13,230
87,257
8,837
781
2,958
(18,414)
22,568
(19,997)
(49,232)
(485)
147,955
(29,690)
(42,157)
—
—
(71,847)
748,500
(747,563)
(4,586)
—
(21,425)
4
61,214
138
211,000
(310,740)
—
(1,339)
(36,376)
—
111,386
380
—
—
(25,689)
(10,486)
82,169
651,762
582,200
(152,971)
(3,106)
—
(39,404)
—
(13,464)
(731)
(108,416)
—
264,108
297
6,793
644,969
(41,001)
(5,960)
(10,679)
2,245
67,674
577,295
$ 733,931 $ 651,762 $ 644,969
$
(33,371) $
(9,670)
(16,386) $
(10,073)
(15,716)
(3,563)
—
—
(1,710)
(158)
(303,633)
—
—
(1,747)
—
(61,064)
(5,620)
(840)
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,
2022
31,691 $
702,240
733,931 $
December 31,
2021
55,146
596,616
651,762
$
$
The accompanying notes are an integral part of these consolidated financial statements.
2022 Form 10-K
71
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72
2022 Form 10-K
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 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 (CSR) and environmental, social and governance (ESG), school management, ticketing, grantmaking, financial
management, payment processing and analytics. Serving the industry for more than four decades, we are a remote-first
company headquartered in Charleston, South Carolina, with operations in the United States, Australia, Canada, Costa Rica and
the United Kingdom.
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.
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
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, loss contingencies and insurance recoveries, among others. Changes in the facts or circumstances underlying
these estimates could result in material changes and actual results could materially differ from these estimates.
intangible assets,
Recently adopted accounting pronouncements
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04,
Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU
2020-04"). This update provides for optional financial reporting alternatives to reduce cost and complexity associated with
accounting for contracts, hedging relationships, and other transactions affected by reference rate reform. This update applies
only to contracts, hedging relationships, and other transactions that reference the London Interbank Offer Rate ("LIBOR") or
other reference rates expected to be discontinued because of reference rate reform. The accommodations are available for all
entities through December 31, 2022, with early adoption permitted. We adopted ASU 2020-04 prospectively as of July 1,
2022, and the adoption did not have a material impact on our consolidated financial statements.
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.
2022 Form 10-K
73
Blackbaud, Inc.
Notes to Consolidated Financial Statements
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, and subscription-based analytic
services, such as donor insight 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 costs on a
gross basis. Otherwise, we net the cost of revenue associated with the service against the gross revenue (amount withheld for
the transaction fees) 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 we withhold for the transaction fees 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 and fees for retained and managed services contracts that we do not expect to have a term consistent with our cloud
solution contracts.
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 one-time consulting services is
generally recognized over time as the services are performed.
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.
74
2022 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
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 primarily 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 generally do not pay commissions for contract renewals that are commensurate with the commission paid
on the initial contract. 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.
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 and foreign currency exchange 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.
2022 Form 10-K
75
Blackbaud, Inc.
Notes to Consolidated Financial Statements
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. If the derivative is designated as a net investment hedge, the effective portions of the changes in fair
value of the derivative are recorded to translation adjustment, a component of other comprehensive income, and recognized
in earnings only when the hedged investment is liquidated. 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 (or in transit) 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. 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 expectations of future credit losses. As of and for the years ended
December 31, 2022, 2021 and 2020, 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, 2022, 2021 and 2020.
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.
76
2022 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
We apply significant judgement in estimating the fair value of intangible assets acquired, which involves the use of significant
assumptions. Significant assumptions used in the valuation of customer relationships include future revenue and operating
expenses, customer attrition rates, contributory asset charges, tax amortization benefit, and discount rates. Significant
assumptions used in the valuation of certain developed technology assets include future revenue, proprietary technology
obsolescence curve, royalty rate, and discount rate. Significant assumptions used in the valuation of marketing assets include
assumptions about the period of time the brand will continue to be valuable, royalty rate, and discount rate. Significant
assumptions used in the valuation of content intangible assets include cost-based assumptions. 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 2022, 2021 and 2020, 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 2022, 2021 and 2020.
Intangible assets other than goodwill
We amortize finite-lived intangible assets over their estimated useful lives as follows.
Customer relationships
Marketing assets
Developed technology
Content
Basis of amortization
Straight-line and accelerated(1)
Straight-line and accelerated(1)
Straight-line and accelerated(1)
Straight-line
Amortization
period
(in years)
8-17
14-15
3-14
9
(1)
Certain of the customer relationships, marketing assets and developed 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 intangible assets during 2022.
There were no impairments of acquired intangible assets during 2021 and 2020.
2022 Form 10-K
77
Blackbaud, Inc.
Notes to Consolidated Financial Statements
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
or asset group is impaired. See Note 6 to these consolidated financial statements for a discussion of our impairment of certain
long-lived assets during 2022, 2021 and 2020.
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 2021 Incremental Term Loan (as defined below),
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 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 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.
78
2022 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
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 year ended December 31,
2022, we recorded a net foreign currency gain of $4.6 million. During the years ended December 31, 2021 and 2020, we
recorded net foreign currency losses that were $1.6 million and $1.1 million, respectively.
Research and development
Research and development costs are expensed as incurred except as noted below under Software and content 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 and content development costs
We incur certain costs associated with the development of internal-use software and content, which are primarily related to
activities performed to develop our cloud solutions and the development of online education curriculum to be delivered on
the Company's cloud platform. Internal and external costs incurred in the preliminary project stage of internal-use software
development and content are expensed as incurred. Once the software or content 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 or content project as well as external direct costs of materials and
services are capitalized. Capitalization ceases at the point at which the developed software or content 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 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. In certain circumstances, content development costs are considered
deferred costs, when ownership of developed content belongs to the customer.
Qualifying capitalized software and content 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 2022 and 2020. There were no impairment charges related to capitalized software or content
development costs during 2021. We write off the gross carrying amount and accumulated amortization balances for all fully
amortized software and content 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.
2022 Form 10-K
79
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Below is a summary of the changes in our allowance for credit losses.
Years ended December 31,
(in thousands)
2022
2021
2020
$
Balance at
beginning of year
Provision/
adjustment
9,375 $
9,016
4,011
1,281 $
4,483
6,787
Write-off
(5,162) $
(4,565)
(2,363)
Recovery
528 $
441
581
Balance at
end of year
6,022
9,375
9,016
Our allowance for credit losses decreased during the year ended December 31, 2022, primarily due to improvement in the
aging of accounts receivable and write-offs during 2022 of aged receivables primarily generated during the COVID-19
pandemic. The amount of write-offs during the year ended December 31, 2021 was higher than during 2020 as we
temporarily suspended sending past due customer accounts to collections during the second and third quarters of 2020 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)
2022
2021
2020
Advertising costs
$
Balance at
beginning of year
1,780 $
1,276
1,518
Provision/
adjustment
4,785 $
6,967
6,443
Deduction
(5,269) $
(6,463)
(6,685)
Balance at
end of year
1,296
1,780
1,276
We expense advertising costs as incurred, which were $16.5 million, $7.1 million and $3.0 million for the years ended
December 31, 2022, 2021 and 2020, 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.
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, 2022 and 2021.
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.
80
2022 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Loss contingencies
We are subject to the possibility of various loss contingencies, including legal proceedings and claims, that arise in the normal
course of business, as well as certain other non-ordinary course proceedings, claims and investigations, as described in Note
11 to these consolidated financial statements. We record an accrual for a loss 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.
(Loss) earnings per share
We compute basic (loss) earnings per share by dividing net (loss) income attributable to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted (loss) earnings per share is computed by
dividing net (loss) income attributable to common stockholders by the weighted average number of common shares and
dilutive potential common shares outstanding during the period. Diluted (loss) 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.
3. Business Combinations and Dispositions
2022 Disposition
Blackbaud FIMS™ and DonorCentral® NXT
On September 9, 2022, we sold our Foundation Information Management System ("FIMS") and DonorCentral NXT solutions to
Fusion Laboratories, LLC for cash proceeds of approximately $6.4 million, subject to closing adjustments. We expect the sale
of these solutions to allow us to reduce complexity and focus on innovation within our core products as we execute our
strategic growth plans. During the year ended December 31, 2022, we recognized a noncash impairment charge of $2.0
million against certain insignificant FIMS customer relationship intangible assets that were then held for sale. The impairment
charge was recorded in general and administrative expense in our consolidated statements of comprehensive loss. During the
year ended December 31, 2022, we recognized an insignificant loss on the disposal of FIMS held for sale assets and liabilities.
2022 Acquisition
Kilter
On August 19, 2022, we acquired all of the outstanding stock of Kilter, Inc., a Delaware corporation, pursuant to an agreement
and plan of merger, for approximately $2.9 million in cash, subject to closing adjustments. The acquisition of Kilter's mobile
application will allow us to expand activity-based peer-to-peer fundraising engagement, to support activity-based health and
wellness initiatives for socially responsible companies, and to grow the ways individuals can connect with the causes they care
about most through the activities they love. In addition to the consideration paid at closing, we may be required to pay up to
a maximum of $3.0 million in additional cash consideration if during the two-year period commencing January 1, 2023 Kilter
meets certain application participation targets. A liability for the contingent consideration was recorded at its acquisition-date
fair value of $2.7 million in other liabilities in our consolidated balance sheet. Any change in the fair value of the contingent
liability, or any change upon final settlement, will be recognized in income from operations. Fair values were also assigned to
the other assets acquired and liabilities assumed, primarily consisting of goodwill and a finite-lived developed technology
intangible asset, which will be amortized over an estimated useful life of three years. The fair values are based on our best
estimates and assumptions as of the reporting date and are considered preliminary pending finalization. Insignificant
acquisition-related costs, which primarily consisted of legal services, were recorded as general and administrative expense
during the year ended December 31, 2022.
2022 Form 10-K
81
Blackbaud, Inc.
Notes to Consolidated Financial Statements
2021 Acquisition
EVERFI
On December 31, 2021, we acquired all of the outstanding equity securities, including all voting equity interests, of EVERFI,
Inc., a Delaware corporation, pursuant to an agreement and plan of merger. The acquisition advanced our position as a leader
in the rapidly evolving ESG and CSR spaces. We acquired the equity securities for approximately $441.8 million in cash
consideration and 3,810,888 shares of our common stock, valued at approximately $301.0 million, for an aggregate purchase
price of approximately $742.8 million, net of closing adjustments. The cash consideration and related expenses were funded
primarily through cash on hand and new borrowings under the 2020 Credit Facility (as defined below). As a result of the
acquisition, EVERFI has become a wholly owned subsidiary of ours. The operating results of EVERFI have been included in our
consolidated financial statements from the date of acquisition. During the year ended December 31, 2021, we incurred
insignificant acquisition-related expenses associated with the acquisition, which were recorded in general and administrative
expense. In accordance with applicable accounting rules, 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. We finalized the purchase price allocation of EVERFI, including the valuation of
assets acquired and liabilities assumed, during the fourth quarter of 2022.
4. Goodwill and Other Intangible Assets
The change in goodwill during 2022 consisted of the following:
(dollars in thousands)
Balance at December 31, 2021
Additions related to business combination(1)
Adjustments related to prior year business combination(2)
Adjustments related to dispositions(3)
Effect of foreign currency translation
Balance at December 31, 2022
Total
$ 1,058,640
3,610
(2,232)
(2,501)
(7,245)
$ 1,050,272
(1)
(2)
(3)
See Note 3 to these consolidated financial statements for a discussion of our acquisition of Kilter.
See Note 3 to these consolidated financial statements for a discussion of the measurement period adjustments during the year ended December 31,
2022 to the estimated fair value of the EVERFI assets acquired and liabilities assumed.
See Note 3 to these consolidated financial statements for a summary of our disposition of Blackbaud FIMS and DonorCentral NXT.
82
2022 Form 10-K
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
Developed technology
Content
Total finite-lived gross carrying amount
Accumulated amortization
Customer relationships
Marketing assets
Developed technology
Content
Total accumulated amortization
Intangible assets, net
December 31,
2022
2021
$
569,009 $
606,409
69,643
74,731
182,463
211,552
17,900
17,900
839,015
910,592
(146,948)
(151,258)
(8,371)
(7,269)
(46,571)
(54,013)
(1,989)
—
(203,879)
(212,540)
$
635,136 $
698,052
During the year ended December 31, 2022, changes to the gross carrying amounts of intangible asset classes were primarily
related to our business acquisitions and disposals as described in Note 3 to these consolidated financial statements, write-offs
of fully amortized intangible assets and the effect of foreign currency translation.
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,
2022
2021
2020
$
47,085 $
33,132 $
36,835
1,407
48,492
2,925
1,680
34,812
2,227
2,133
38,968
2,915
Total amortization of intangibles from business combinations
$
51,417 $
37,039 $
41,883
2022 Form 10-K
83
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, 2022:
Years ending December 31,
(dollars in thousands)
2023
2024
2025
2026
2027
Total
5. (Loss) Earnings Per Share
Amortization
expense
55,426
62,015
65,552
63,915
59,755
$
306,663
The following table sets forth the computation of basic and diluted (loss) earnings per share:
(dollars in thousands, except per share amounts)
Numerator:
Net (loss) income
Denominator:
Weighted average common shares
Add effect of dilutive securities:
Stock-based awards
Weighted average common shares assuming dilution
(Loss) earnings per share:
Basic
Diluted
Years ended December 31,
2022
2021
2020
$
(45,407) $
5,698 $
7,717
51,569,148 47,412,306 48,184,714
—
818,132
511,627
51,569,148 48,230,438 48,696,341
$
$
(0.88) $
(0.88) $
0.12 $
0.12 $
0.16
0.16
Anti-dilutive shares excluded from calculations of diluted (loss) earnings per
share
1,046,307
974,110
956,303
Diluted loss per share for the year ended December 31, 2022 was the same as basic loss per share as there was a net loss in
the period and inclusion of potentially dilutive securities was anti-dilutive.
84
2022 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
6. Fair Value Measurements
Recurring fair value measurements
Financial assets and liabilities that are measured at fair value on a recurring basis consisted of the following, as of the dates
indicated below:
(dollars in thousands)
Fair value as of December 31, 2022
Derivative instruments:
Interest rate swaps
Foreign currency forward contracts
Total financial assets
Fair value as of December 31, 2022
Derivative instruments:
Foreign currency forward contracts
Contingent consideration obligations
Total financial liabilities
Fair value as of December 31, 2021
Derivative instruments:
Interest rate swaps
Total financial assets
Fair value measurement using
Quoted Prices in
Active Markets for
Identical Assets
and Liabilities
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
$
$
$
$
$
$
— $
—
— $
31,870 $
247
32,117 $
— $
—
— $
31,870
247
32,117
— $
—
— $
323 $
—
— $
2,710
323 $
2,710 $
323
2,710
3,033
— $
— $
7,160 $
7,160 $
— $
— $
7,160
7,160
Our derivative instruments within the scope of Accounting Standards Codification ("ASC") 815, Derivatives and Hedging, are
required to be recorded at fair value. Our derivative instruments that are recorded at fair value include interest rate swaps
and foreign currency forward contracts. See Note 10 to these consolidated financial statements for additional information
about our derivative instruments.
The fair value of our interest rate swaps and foreign currency forward contracts are based on model-driven valuations using
Secured Overnight Financing Rate ("SOFR") rates and foreign currency forward rates, respectively, which are observable at
commonly quoted intervals. Accordingly, our interest rate swaps and foreign currency forward contracts are classified within
Level 2 of the fair value hierarchy. Our financial contracts that were indexed to LIBOR were modified to reference SOFR during
the three months ended September 30, 2022. These modifications did not have a significant financial impact.
Contingent consideration obligations arise from business acquisitions. The fair values are based on discounted cash flow
analyses reflecting a probability-weighted assessment approach derived from the likelihood of possible achievement of
specified performance measures or events and captures the contractual nature of the contingencies, commercial risk, and the
time value of money. As the fair value measurements for our contingent consideration obligations contain significant
unobservable inputs, they are classified within Level 3 of the fair value hierarchy. See Note 3 to these consolidated financial
statements for additional information about our contingent consideration obligations.
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,
2022 and December 31, 2021, due to the immediate or short-term maturity of these instruments.
2022 Form 10-K
85
Blackbaud, Inc.
Notes to Consolidated Financial Statements
We believe the carrying amount of our debt approximates its fair value at December 31, 2022 and December 31, 2021, as the
debt bears interest rates that approximate market value. As SOFR and 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, 2022, 2021 and 2020.
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. These assets are recognized at fair value during the period in which an acquisition is
completed or at lease commencement, from updated estimates and assumptions during the measurement period, or when
they are considered to be impaired. These non-recurring fair value measurements, primarily for long-lived assets, intangible
assets acquired and operating lease ROU assets, are based on Level 3 unobservable inputs. In the event of an impairment, we
determine the fair value of these assets other than goodwill using a discounted cash flow approach, which contains significant
unobservable inputs and, therefore, is considered a Level 3 fair value measurement. The unobservable inputs in the analysis
generally include future cash flow projections and a discount rate. For goodwill impairment testing, we estimate fair value
using market-based methods including the use of market capitalization and consideration of a control premium.
As more fully described in Note 7 and Note 11 to these consolidated financial statements, during the year ended December
31, 2022, we recorded noncash impairment charges of $2.3 million against certain previously capitalized software
development costs, $2.0 million against certain insignificant customer relationship intangible assets that were held for sale,
$1.0 million against certain operating lease ROU assets and insignificant impairment charges against certain property and
equipment assets.
During the year ended December 31, 2021, we recorded impairment charges of $1.7 million against certain property and
equipment assets and $3.6 million against certain operating lease ROU assets. See Notes 7 and 11, respectively, to these
consolidated financial statements for additional details.
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. See Notes 7 and 11,
respectively, to these consolidated financial statements for additional details.
There were no other non-recurring fair value adjustments during 2022, 2021 and 2020 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.
86
2022 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
7. Property and Equipment and Software and Content Development Costs
Property and equipment
Property and equipment consisted of the following as of:
(dollars in thousands)
Land
Building
Building improvements
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)
— $
39
7 - 20
1 - 5
1 - 5
1 - 5
—
2 - 7
December 31,
2022
9,548 $
61,284
10,874
2,312
47,886
20,299
3,500
3,264
2021
9,548
61,284
10,874
2,320
47,768
21,347
2,135
2,658
Lesser of lease term or estimated useful life
11,822
12,086
170,789
170,020
(63,363)
(58,592)
$
107,426 $
111,428
Depreciation expense was $14.1 million, $14.4 million and $19.2 million for the years ended December 31, 2022, 2021 and
2020, respectively.
During the year ended December 31, 2022, we recorded insignificant noncash impairment charges against certain property
and equipment assets. These impairment charges resulted primarily from our decision to cease using a portion of our leased
office space and are reflected in general and administrative expense on the statements of comprehensive income.
During the year ended December 31, 2021, we recorded impairment charges of $1.7 million against certain property and
equipment assets. These impairment charges resulted primarily from our decision to close our Austin office and are reflected
in general and administrative expense on the statements of comprehensive income.
Software and content development costs
Software and content development costs consisted of the following as of:
(dollars in thousands)
Software development costs
Content development costs
Less: accumulated amortization
Software and content development costs, net
Estimated
useful life
(years)
December 31,
2022
2021
3 - 7 $
250,551 $
196,337
5
3,409
—
(112,937)
(74,960)
$
141,023 $
121,377
During the years ended December 31, 2022 and 2020, we recorded noncash impairment charges of $2.3 million and $4.3
million, respectively, against certain previously capitalized software development costs that reduced the carrying value of
those assets to zero. The impairment charges were reflected in general and administrative expense and cost of recurring
revenue, respectively, on the statements of comprehensive income. These impairment charges resulted primarily from our
decision to accelerate the end of customer support for certain solutions.
2022 Form 10-K
87
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Other changes to the gross carrying amount of software and content 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 and online education curriculum, write-offs of fully amortized assets, and the
effect of foreign currency translation.
Amortization expense related to software and content development costs was $36.8 million, $31.0 million and $31.7 million
for the years ended December 31, 2022, 2021 and 2020, respectively, and is included primarily in cost of recurring.
8. Consolidated Financial Statement Details
Restricted cash
(dollars in thousands)
Restricted cash due to customers
Letters of credit for operating leases
Real estate escrow balances and other
Total restricted cash
Prepaid expenses and other assets
(dollars in thousands)
Costs of obtaining contracts(1)(2)
Prepaid software maintenance and subscriptions(3)
Derivative instruments
Implementation costs for cloud computing arrangements, net(4)(5)
Unbilled accounts receivable
Prepaid insurance
Taxes, prepaid and receivable
Deferred tax assets
Receivables for probable insurance recoveries(6)(7)
Other assets
Total prepaid expenses and other assets
Less: Long-term portion
Prepaid expenses and other current assets
December 31,
2022
December 31,
2021
700,611 $
593,296
—
1,629
2,186
1,134
702,240 $
596,616
$
$
December 31,
2022
December 31,
2021
$
74,272 $
34,766
32,117
10,189
5,775
4,902
1,855
1,153
—
10,929
175,958
94,304
$
81,654 $
78,465
28,880
7,160
11,892
5,443
5,363
3,986
1,546
18,202
11,835
172,772
77,266
95,506
(2)
(3)
(1) Amortization expense from costs of obtaining contracts was $33.6 million, $35.5 million and $37.4 million for the years ended December 31, 2022, 2021
and 2020, 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, 2022 and 2021 was $29.1 million and $30.2 million, respectively.
The current portion of prepaid software maintenance and subscriptions as of December 31, 2022 and December 31, 2021 was $31.7 million and $24.7
million, respectively.
These costs 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 $2.2 million, $1.9 million and $0.8 million for the years ended
December 31, 2022, 2021 and 2020, respectively. Accumulated amortization for these costs was $5.2 million and $3.0 million as of December 31, 2022
and 2021, respectively.
(6) All receivables for probable insurance recoveries were classified as current.
(7)
See discussion of the Security Incident at Note 11 to these consolidated financial statements.
88
2022 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Accrued expenses and other liabilities
(dollars in thousands)
Accrued legal costs(1)
Taxes payable(2)
Customer credit balances
Operating lease liabilities, current portion
Accrued commissions and salaries
Accrued transaction-based costs related to payments services
Contingent consideration liability(3)
Accrued health care costs
Accrued vacation costs
Accrued bonuses
Unrecognized tax benefit
Amounts payable to former EVERFI option holders(4)
Other liabilities
Total accrued expenses and other liabilities
Less: Long-term portion
Accrued expenses and other current liabilities
December 31,
2022
December 31,
2021
$
28,448 $
16,667
8,257
7,723
6,944
5,059
2,710
2,467
2,156
2,026
266
—
7,573
90,296
4,294
11,724
19,777
8,403
9,170
7,872
5,427
—
3,042
2,234
5,829
1,248
17,404
9,310
101,440
1,344
$
86,002 $
100,096
(1) All accrued legal costs are classified as current.
(2) We deferred payments of the employer's portion of Social Security taxes during 2020 under the Coronavirus, Aid, Relief and Economic Security Act
(3)
(4)
("CARES Act"), half of which was due by the end of calendar year 2021 with the remainder due by the end of calendar year 2022.
See discussion of our acquisition of Kilter at Note 3 to these consolidated financial statements.
Represents amounts that had not been paid by EVERFI to its former option holders as of December 31, 2021, solely due to the timing of the acquisition
on the last day of 2021. See Note 3 to these consolidated financial statements for additional information regarding our acquisition of EVERFI.
Other income, net
(dollars in thousands)
Interest income
Currency revaluation gains (losses)
Other income, net
Other income, net
Years ended December 31,
$
$
2022
1,746 $
4,635
2,332
8,713 $
2021
392 $
(1,644)
1,432
180 $
2020
1,660
(1,065)
1,063
1,658
2022 Form 10-K
89
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
December 31,
2022
Debt balance at
December 31,
2021
Weighted average
effective interest rate at
December 31,
2021
December 31,
2022
$
$
177,800 $
623,750
58,189
2,247
861,986
2,943
18,802
840,241 $
260,000
640,000
59,480
1,694
961,174
4,994
18,697
937,483
5.18 %
4.26 %
5.22 %
7.38 %
4.52 %
6.45 %
4.48 %
3.27 %
3.02 %
5.22 %
5.00 %
3.23 %
3.11 %
3.23 %
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, 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.
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, 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.
90
2022 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
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, 2022, 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, 2022, our available borrowing capacity under the 2020
Credit Facility was $319.8 million.
First Amendment to 2020 Credit Facility
On January 31, 2022, we entered into the First Amendment to Credit Agreement (the “Amendment”). The Amendment
amended the 2020 Credit Facility to, among other things, (i) modify the definition of “Applicable Margin”, (ii) modify the net
leverage ratio financial covenant to require a net leverage ratio of (A) 4.00:1.00 or less for the fiscal quarter ended December
31, 2021 and for fiscal quarters ending thereafter through December 31, 2023 and (B) 3.75:1.00 or less for the fiscal quarters
ending March 31, 2024 and thereafter, (iii) reset the $250.0 million fixed dollar basket with respect to the accordion feature
and (iv) modify certain negative covenants to provide additional operational flexibility.
LIBOR Transition Amendment
On August 26, 2022, we entered into a LIBOR Transition Amendment (the "LIBOR Amendment"). The LIBOR Amendment
amended the 2020 Credit Facility, as previously amended, to change the interest rate benchmark from LIBOR to SOFR (as
defined therein). The LIBOR Amendment did not change any terms of the 2020 Credit Facility unrelated to reference rate
reform.
After giving effect to both the First Amendment and the LIBOR Transition Amendment, dollar denominated loans under the
2020 Revolving Facility and the 2020 Term Loan bear interest based on, at our election, either (a) the Base Rate (as defined
below) or (b) Term SOFR (as defined below), in each case, plus an applicable margin. "Base Rate" is defined as a rate per
annum 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) Term SOFR plus 1.00%. "Term SOFR" is defined as a rate per annum equal to the forward-looking term rate based on
the secured overnight financing rate plus a credit sensitive adjustment of 0.11448% for a one month tenor, 0.26161% for a
three month tenor or 0.42826% for a six month tenor, as applicable, in each case, per annum. The applicable margin is
adjusted quarterly based on our net leverage ratio and ranges from 0.375% to 1.50% for Base Rate loans and 1.375% to 2.50%
for Term SOFR loans, in each case, per annum.
Sterling denominated loans under the 2020 Revolving Facility bear interest based on SONIA plus an applicable margin.
"SONIA" is defined as a rate per annum equal to the Sterling Overnight Index Average Reference Rate published on the fifth
Business Day preceding such date on the applicable Reuters screen page plus a credit sensitive adjustment of 0.0326% per
annum. The applicable margin is adjusted quarterly based on our net leverage ratio and ranges from 1.375% to 2.50% per
annum.
We also pay a quarterly commitment fee on the unused portion of the 2020 Revolving Facility from 0.250% to 0.50% per
annum, depending on our net leverage ratio.
At December 31, 2022, the applicable margin for Term SOFR, SONIA and other Eurocurrency Rate loans under the 2020 Credit
Facility was 2.125% and the commitment fee applicable to the 2020 Revolving Facility was 0.375%.
First Incremental Term Loan
On December 31, 2021, we entered into the First Incremental Term Loan Agreement (the "Incremental Amendment"). The
Incremental Amendment amends the 2020 Credit Facility and, among other things, provides for a $250.0 million incremental
term loan (the “2021 Incremental Term Loan”).
2022 Form 10-K
91
Blackbaud, Inc.
Notes to Consolidated Financial Statements
The 2021 Incremental Term Loan bears interest based on, at our election, either (a) the Base Rate (2021 Incremental) (as
defined below), (b) Daily SOFR Rate (as defined below) or (c) Term SOFR (2021 Incremental) (as defined below), in each case,
plus an applicable margin. "Base Rate (2021 Incremental)" is defined as a rate per annum 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) Daily SOFR Rate plus 1.00%.
“Daily SOFR Rate” is defined as a rate per annum equal to secured overnight financing rate plus a credit sensitive adjustment
of 0.10%. "Term SOFR (2021 Incremental)" is defined as a rate per annum equal to the forward-looking term rate based on the
secured overnight financing rate plus a credit sensitive adjustment of 0.10% for a one month tenor, 0.15% for a three month
tenor or 0.25% for a six month tenor, as applicable, in each case, per annum. The applicable margin is adjusted quarterly
based on our net leverage ratio and ranges from 0.375% to 1.50% for Base Rate (2021 Incremental) loans and 1.375% to
2.50% for Daily SOFR Rate loans and Term SOFR (2021 Incremental) loans, in each case, per annum. The 2021 Incremental
Term Loan matures in October 2025, which is the maturity date of the existing term loan under the 2020 Credit Facility, and is
otherwise subject to substantially the same terms and conditions as the existing term loan under the 2020 Credit Facility.
Financing costs
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. We recorded aggregate
financing costs of $2.0 million as a direct deduction from the carrying amount of our debt liability, which related to debt
discount (fees paid to lenders) and debt issuance costs for the 2020 Term Loan.
In connection with our entry into the 2021 Incremental Term Loan, we paid $3.1 million in financing costs which were
recorded as a direct deduction from the carrying amount of our debt liability.
As of December 31, 2022, deferred financing costs totaling $0.9 million were included in other assets on our consolidated
balance sheets.
Financing for EVERFI acquisition
On December 31, 2021, we acquired EVERFI for approximately $441.8 million in cash consideration and 3,810,888 shares of
the company's common stock, valued at approximately $301.0 million, for an aggregate purchase price of approximately
$742.8 million, net of closing adjustments. We financed the cash consideration and related expenses through cash on hand
and new borrowings under the 2020 Credit Facility, including $250.0 million under the First Incremental Term Loan (as
defined above).
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, 2022, we were in compliance with our debt covenants under the Real
Estate Loans.
Other debt
From time to time, we enter into third-party financing agreements for purchases of software and related services for our
internal use. Generally, the agreements are non-interest-bearing notes requiring annual payments. Interest associated with
the notes is imputed at the rate we would incur for amounts borrowed under our then-existing credit facility at the inception
of the notes. Our assumption of these loans are noncash financing transactions and are reflected in our supplemental
disclosure of cash flow information.
92
2022 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
The following table summarizes our currently effective financing agreements as of December 31, 2022:
(dollars in thousands)
Effective dates of agreements:
December 2019
December 2022
Term
in Months
Number of
Annual Payments
First Annual
Payment Due
Original Loan
Value
51
39
4
3
January 2020 $
January 2023
2,150
1,710
As of December 31, 2022, 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)
2023
2024
2025
2026
2027
Thereafter
Total required maturities
10. Derivative Instruments
Annual
maturities
18,802
18,429
771,403
1,969
2,166
49,217
861,986
$
$
We generally use derivative instruments to manage our interest rate and foreign currency exchange risk. We currently have
derivatives classified as cash flow hedges and net investment hedges. We do not enter into any derivatives for trading or
speculative purposes.
All of our derivative instruments are governed by International Swap Dealers Association, Inc. ("ISDA") master agreements
with our counterparties. As of December 31, 2022 and December 31, 2021, we have presented the fair value of our derivative
instruments at the gross amounts in the consolidated balance sheet as the gross fair values of our derivative instruments
equaled their net fair values.
Cash flow hedges
We have entered into interest rate swap agreements, which effectively convert portions of our variable rate debt under the
2020 Credit Facility to a fixed rate for the term of the swap agreements. We designated each of the interest rate swaps as
cash flow hedges at the inception of the contracts. As of December 31, 2022 and December 31, 2021, the aggregate notional
values of the interest rate swaps were $435.0 million. All of the contracts have maturities on or before October 2024.
During the three months ended September 30, 2022, we entered into foreign currency forward contracts to hedge revenues
denominated in the Canadian Dollar ("CAD") against changes in the exchange rate with the United States Dollar ("USD"). We
designated each of the forwards as cash flow hedges at the inception of the contracts. As of December 31, 2022, the
aggregate notional values of the foreign currency forward contracts designated as cash flow hedges that we held to buy USD
in exchange for Canadian Dollars were $22.6 million CAD. All of the contracts have maturities of 12 months or less. We did not
have foreign currency forward contracts as of December 31, 2021.
Net investment hedges
We have entered into foreign currency forward contracts to hedge a portion of the foreign currency exposure that arises on
translation of our investments denominated in British Pounds ("GBP") into USD. We designated each of these foreign currency
forward contracts as net investment hedges at the inception of the contracts. As of December 31, 2022, we had £11.2 million
of foreign currency forward contracts designated as net investment hedges to reduce the volatility of the U.S. dollar value of a
portion of our GBP-denominated investments.
2022 Form 10-K
93
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:
Foreign currency forward
contracts, current portion
Interest rate swaps, long-
term
Total derivative instruments
designated as hedging
instruments
Balance sheet
location
December 31,
2022
December 31,
2021
Balance sheet
location
December 31,
2022
December 31,
2021
Asset derivatives
Liability Derivatives
Prepaid expenses
and other
current assets $
Accrued expenses
and other current
247 $
—
liabilities $
323 $
Other assets
31,870
7,160
Other liabilities
—
$
32,117 $
7,160
$
323 $
—
—
—
The effects of derivative instruments in cash flow hedging relationships were as follows:
Gain (loss) recognized
in accumulated other
comprehensive
income as of
December 31,
2022
Location
of gain (loss)
reclassified from
accumulated other
comprehensive
income into
(loss) income
$
$
$
$
$
31,870
247
Interest expense $
Revenue $
(323)
December 31,
2021
$
7,160
Interest expense $
December 31,
2020
(4,159)
Interest expense $
(dollars in thousands)
Cash Flow Hedges
Interest rate swaps
Foreign currency forward contracts
Net Investment Hedge
Foreign currency forward contracts
Cash Flow Hedges
Interest rate swaps
Interest rate swaps
Gain (loss) reclassified from accumulated
other comprehensive income into (loss) income
Year ended
December 31, 2022
5,520
165
—
Year ended
December 31, 2021
(3,714)
Year ended
December 31, 2020
(3,827)
Our policy requires that derivatives used for hedging purposes be designated and effective as a hedge of the identified risk
exposure at the inception of the contract. Accumulated other comprehensive income (loss) includes unrealized gains or losses
from the change in fair value measurement of our derivative instruments each reporting period and the related income tax
expense or benefit. Excluding net investment hedges, changes in the fair value measurements of the derivative instruments
and the related income tax expense or benefit are reflected as adjustments to accumulated other comprehensive income
(loss) until the actual hedged expense is incurred or until the hedge is terminated at which point the unrealized gain (loss) is
reclassified from accumulated other comprehensive income (loss) to current earnings. For net investment hedges, changes in
the fair value measurements of the derivative instruments and the related income tax expense or benefit are reflected as
adjustments to translation adjustment, a component of accumulated other comprehensive income (loss), and recognized in
earnings only when the hedged GBP investment is liquidated. The estimated accumulated other comprehensive income as of
December 31, 2022 that is expected to be reclassified into earnings within the next twelve months is $19.5 million. There
were no ineffective portions of our interest rate swap or foreign currency forward derivatives during the years ended
December 31, 2022, 2021 and 2020. See Note 14 to these consolidated financial statements for a summary of the changes in
accumulated other comprehensive income (loss) by component. We classify cash flows related to derivative instruments as
operating activities in the consolidated statements of cash flows.
We did not have any undesignated derivative instruments during 2022, 2021 and 2020.
94
2022 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
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. As of December 31, 2022, we had
operating leases for equipment that had not yet commenced with future rent payments of $3.1 million. These operating
leases are expected to commence during 2023 with lease terms of 3 years.
With the acquisition of EVERFI, we assumed a lease for office space in Washington, D.C. At December 31, 2022, we had a
standby letter of credit of $2.1 million for a security deposit for this lease.
The following table summarizes the components of our lease expense:
(dollars in thousands)
Operating lease cost(1)
Variable lease cost
Sublease income
Net lease cost
Year ended
December 31,
2022
2021
9,501 $
9,636 $
1,670
(2,763)
2,478
(1,516)
8,408 $
10,598 $
2020
41,210
4,266
(3,120)
42,356
$
$
(1)
Includes short-term lease costs, which were immaterial.
During the twelve months ended December 31, 2022, we recorded noncash impairment charges of $1.0 million against
certain operating lease ROU assets resulting primarily from our decision to cease using a portion of our leased office space.
These charges are reflected in general and administrative expense on the statements of comprehensive income.
In October 2021, we made the decision to permanently close our fixed office locations (with the exception of our global
headquarters facility in Charleston, South Carolina), effective in December 2021. This change was intended to align our real
estate footprint with our transition to a remote-first workforce. We enter into arrangements for smaller more flexible
workspaces where necessary. As a result, during the twelve months ended December 31, 2021, we reduced the estimated
useful lives of our operating lease ROU assets for certain of our office locations we expected to exit. We recorded $5.3 million
in incremental operating lease costs during 2021 related to this change in accounting estimate. 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 $1.7 million during 2021 (see Note 7 to these consolidated financial statements). During the twelve
months ended December 31, 2021, we also recorded $3.6 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, 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 to
these consolidated financial statements). 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 ceased using. These impairment
charges are reflected in general and administrative expense.
2022 Form 10-K
95
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Maturities of our operating lease liabilities as of December 31, 2022 were as follows:
Years ending December 31,
(dollars in thousands)
2023
2024
2025
2026
2027
Thereafter
Total lease payments
Less: Amount representing interest
Present value of future payments
Operating leases
$
$
9,978
7,699
6,659
6,104
6,207
26,790
63,437
10,796
52,641
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 ROU assets
Accrued expenses and other current liabilities
Operating lease liabilities, net of current portion
Total operating lease liabilities
December 31,
2022
December 31,
2021
$
$
$
45,899 $
53,883
7,723 $
44,918
52,641 $
9,170
53,386
62,556
The weighted average remaining lease terms and discount rates were as follows:
(dollars in thousands)
Operating leases
December 31,
2022
December 31,
2021
December 31,
2020
Weighted average remaining lease term (years)
Weighted average discount rate
8.5
4.63 %
8.9
4.68 %
4.6
5.70 %
Supplemental cash flow information related to leases was as follows:
(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases(1)
Year ended
December 31,
2022
2021
2020
$
11,439 $
11,338 $
26,713
Right-of-use assets obtained in exchange for lease obligations (non-cash):
Operating leases
—
5,358
11,002
(1)
The 2020 amount was revised to correct an immaterial disclosure error in the previously filed consolidated financial statements.
Other commitments
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.
96
2022 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
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, 2022, the remaining aggregate minimum purchase commitment under these arrangements was approximately
$294.4 million through 2027.
Solution and service indemnifications
In the ordinary course of business, we provide certain indemnifications of varying scope to customers against claims of
intellectual property infringement made by third parties arising from the use of our solutions or services. We have not
identified any losses that might be covered by these indemnifications
Legal proceedings
We are subject to legal proceedings and claims that arise in the ordinary course of business, as well as certain other non-
ordinary course proceedings, claims and investigations, as described below. We record an accrual 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 accruals at least
quarterly and adjust them to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other
information and events pertaining to a particular case. We recognize insurance recoveries, if any, when they are probable of
receipt. All associated costs due to third-party service providers and consultants, including legal fees, are expensed as
incurred.
Legal proceedings are inherently unpredictable. However, we believe that we have valid defenses with respect to the legal
matters pending or threatened against us and intend to defend ourselves vigorously against all claims asserted. It is possible
that our consolidated financial position, results of operations or cash flows could be materially negatively affected in any
particular period by an unfavorable resolution of one or more of such legal proceedings.
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 do not
believe that any data went beyond the cybercriminal, has been misused, or has been disseminated or otherwise made
available publicly. Our investigation into the Security Incident by our cybersecurity team and third-party forensic advisors
remains ongoing.
As a result of the Security Incident, we are currently subject to certain legal proceedings, claims and investigations, as
discussed below, and could be the subject of additional legal proceedings, claims, inquiries and investigations in the future
that might result in adverse judgments, settlements, fines, penalties or other resolution. To limit our exposure to losses
related to claims against us, including data breaches such as the Security Incident, we maintain $50 million of insurance above
a $250 thousand deductible payable by us. As noted below, this coverage has reduced our financial exposure related to the
Security Incident.
We recorded expenses and offsetting probable insurance recoveries related to the Security Incident as follows:
(dollars in thousands)
Gross expense
Offsetting probable insurance recoveries
Net expense
Years ended December 31,
2022
2021
57,614 $
40,561 $
2020
9,830
(1,891)
(38,745)
(9,364)
55,723 $
1,816 $
466
$
$
2022 Form 10-K
97
Blackbaud, Inc.
Notes to Consolidated Financial Statements
The following summarizes our cumulative expenses, insurance recoveries recognized and insurance recoveries paid as of:
(dollars in thousands)
Cumulative gross expense
Cumulative offsetting insurance recoveries recognized
Cumulative net expense
Cumulative offsetting insurance recoveries paid
December 31,
2022
December 31,
2021
December 31,
2020
108,005 $
50,391 $
(50,000)
(48,109)
58,005 $
2,282 $
9,830
(9,364)
466
(50,000) $
(29,968) $
(3,075)
$
$
$
Recorded expenses have consisted primarily of payments to third-party service providers and consultants, including legal fees,
as well as settlements of customer claims and accruals for certain loss contingencies. Not included in the expenses discussed
above were costs associated with enhancements to our cybersecurity program. We present expenses and insurance
recoveries related to the Security Incident in general and administrative expense on our consolidated statements of
comprehensive income and as operating activities on our consolidated statements of cash flows. Total costs related to the
Security Incident exceeded the limit of our insurance coverage during the first quarter of 2022. We expect to continue to
experience significant expenses related to our response to the Security Incident, resolution of legal proceedings, claims and
investigations, including those discussed below, and our efforts to further enhance our cybersecurity measures. For full year
2022, we incurred net pre-tax expense of $32.7 million and had net cash outlays of $20.9 million for ongoing legal fees related
to the Security Incident. In line with our policy, legal fees, are expensed as incurred. For full year 2023, we currently expect
net pre-tax expense of approximately $20.0 million to $30.0 million and net cash outlays of approximately $25.0 million to
$35.0 million for ongoing legal fees related to the Security Incident.
As of December 31, 2022, we have recorded approximately $23.0 million in aggregate liabilities for loss contingencies based
primarily on recent negotiations with certain governmental agencies related to the Security Incident that we believe we can
reasonably estimate. It is reasonably possible that our estimated or actual losses may change in the near term for those
matters and be materially in excess of the amounts accrued, but we are unable at this time to reasonably estimate the
possible additional loss.
There are other Security Incident-related matters, including customer claims, customer constituent class actions and
governmental investigations, for which we have not recorded a liability for a loss contingency as of December 31, 2022
because we are unable at this time to reasonably estimate the possible loss or range of loss. Each of these matters could,
separately or in the aggregate, result in an adverse judgement, settlement, fine, penalty or other resolution, the amount,
scope and timing of which we are currently unable to predict, but could have a material adverse impact on our results of
operations, cash flows or financial condition.
Customer claims. To date, we have received approximately 260 specific requests for reimbursement of expenses,
approximately 200 (or 77%) of which have been fully resolved and closed. We have also received approximately 400
reservations of the right to seek expense recovery in the future from customers or their attorneys in the U.S., U.K. and Canada
related to the Security Incident. We have also received notices of proposed claims on behalf of a number of UK data subjects,
which we are reviewing. In addition, insurance companies representing various customers’ interests through subrogation
claims have contacted us, and certain insurance companies have filed subrogation claims in court. Customer and insurer
subrogation claims generally seek reimbursement of their 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. Our review of customer and subrogation claims includes analyzing individual customer contracts into which
we have entered, the specific claims made and applicable law.
Customer constituent class actions. Presently, we are a defendant in 19 putative consumer class action cases [17 in U.S.
federal courts (which have been consolidated under multi district litigation to a single federal 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.
98
2022 Form 10-K
Blackbaud, Inc.
Notes to Consolidated Financial Statements
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. We are currently engaged in court proceedings to
determine whether this will proceed as a class action. 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 reasonably 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 investigations. To date, we have received a consolidated, multi-state Civil Investigative Demand issued on
behalf of 49 state Attorneys General and the District of Columbia, a separate Civil Investigative Demand from the office of the
Indiana Attorney General and a separate Civil Investigative Demand from the office of the California Attorney General relating
to the Security Incident. We have been in discussions, directly with certain Attorneys General or indirectly through an
executive committee of the multi-state group of Attorneys General, about potential resolution of issues arising from these
investigations. Although we are hopeful that we can resolve these matters on acceptable terms, there is no assurance that we
will be able to do so on terms acceptable to us and to any or all such states.
We also are subject to the following pending governmental actions:
•
•
•
•
•
an investigation by the U.S. Federal Trade Commission;
a formal investigation by the SEC;
an investigation by the U.S. Department of Health and Human Services;
an investigation by the Office of the Australian Information Commissioner; and
an investigation by the Office of the Privacy Commissioner of Canada.
We have been in discussions with the SEC Staff about potential resolution of issues arising from their investigation. Although
we are hopeful that we can resolve the matter on acceptable terms, there is no assurance that we will be able to resolve the
matter on terms acceptable to us and the SEC.
On September 28, 2021, the Information Commissioner’s Office in the United Kingdom under the U.K. Data Protection Act
2018 (the "ICO") notified us that it has closed its investigation of the Security Incident. Based on its investigation and having
considered our actions before, during and after the Security Incident, the ICO issued our European subsidiary a reprimand in
accordance with Article 58(2)(b) of the U.K. General Data Protection Regulation ("U.K. GDPR") due to our non-compliance, in
the ICO's view, with the requirements set out in Article 32 of the U.K. GDPR regarding the processing of personal data. The
ICO did not impose a penalty related to the Security Incident, nor did it impose any requirements for further action by us.
On September 24, 2021, we received notice from the Spanish Data Protection Authority that it has concluded its investigation
of the Security Incident, pursuant to which our European subsidiary paid a penalty of €60,000 in relation to the alleged late
notification of two Spanish data controllers regarding the Security Incident.
On January 15, 2021, we were notified by the Data Protection Commission of Ireland that it has concluded its investigation of
the Security Incident without taking any action against us.
We continue to cooperate with all ongoing investigations, which include various requests for documents, policies, narratives
and communications, as well as requests to interview or depose various Company-related personnel. As noted above, each of
these separate governmental investigations could result in adverse judgements, settlements, fines, penalties or other
resolution, the amount, scope and timing of which we are currently unable to predict, but could have a material adverse
impact on our results of operations, cash flows or financial condition.
2022 Form 10-K
99
Blackbaud, Inc.
Notes to Consolidated Financial Statements
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 2019 through 2022 as well as state and foreign income tax examinations for various years depending on
statutes of limitations of those jurisdictions.
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,
2022
2021
2020
$
3,485 $
(2,499) $
5,708
7,283
16,476
(16,880)
(9,319)
(445)
(26,644)
(257)
6,570
3,814
(4,615)
222
1,964
(2,429)
(407)
1,563
3,904
5,060
(1,064)
7,725
2,176
8,837
Total income tax (benefit) provision
$
(10,168) $
1,385 $
13,897
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,
2022
2021
(91,493) $
(23,180) $
35,918
30,263
(55,575) $
7,083 $
$
$
2020
(4,112)
25,726
21,614
100
2022 Form 10-K
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:
Years ended December 31,
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
Nondeductible security incident-related fines or penalties
Section 162(m) limitation
Stock-based compensation
Change in valuation reserve (primarily state credit reserves)
GILTI inclusion
Nondeductible meals, entertainment and transportation
Acquisition costs
DTA Adjustment – NOLs
Unrecognized tax benefit
Foreign tax rate
Return to accrual adjustment
FDII benefit
State credits, net of federal benefit
Federal credits generated
Other
Income tax provision effective rate
2022
21.0 %
1.5
0.1
1.8
(8.7)
(6.4)
(6.3)
(5.4)
(2.6)
(0.7)
—
—
0.5
1.0
1.4
2.3
7.2
11.5
0.1
18.3 %
2021
21.0 %
4.4
42.6
2.3
—
75.0
(36.2)
26.1
—
1.1
8.7
—
(32.7)
(6.0)
(4.2)
—
(32.6)
(54.5)
4.6
19.6 %
2020
21.0 %
5.9
4.0
0.1
—
17.5
(1.2)
38.2
1.3
3.3
—
(3.3)
1.3
(1.7)
(4.1)
—
(2.3)
(17.4)
1.7
64.3 %
The decrease in our effective income tax rate for year ended December 31, 2022, when compared to the same period in 2021,
was primarily attributable to current-year non-deductible accruals for loss contingencies related to the Security Incident,
stock-based compensation shortfall partially offset by increased tax credits and impact of tax rate decreases. The 2021
effective income tax rate was positively impacted by benefit attributable to stock-based compensation windfall net of tax
expense resulting from impact of UK corporate rate increase. The year-on-year comparison is further impacted by 2022 pre-
tax loss versus income in prior periods.
2022 Form 10-K
101
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,
2022
2021
Federal and state and foreign net operating loss carryforwards
$
10,369 $
Federal, state and foreign tax credits
Stock-based compensation
Operating leases
Allowance for credit losses
Intangible assets
Deferred revenue
Accrued bonuses
Capitalized R&D and software costs
Other
Total deferred tax assets
Deferred tax liabilities relating to:
Intangible assets
Capitalized software and content development costs
Costs of obtaining contracts
Operating leases
Fixed assets
Other
Total deferred tax liabilities
Valuation allowance
Net deferred tax liability
50,194
21,166
14,024
1,803
561
1,820
455
12,166
6,293
21,456
52,283
21,432
23,795
2,524
1,070
1,057
218
—
13,515
118,851
137,350
(161,836)
(168,392)
—
(16,287)
(11,721)
(9,827)
(9,016)
(31,326)
(18,046)
(23,582)
(8,483)
(2,515)
(208,687)
(252,344)
(34,769)
(31,974)
$
(124,605) $
(146,968)
As of December 31, 2022, our federal, foreign and state net operating loss carryforwards for income tax purposes were
approximately $31.1 million, $5.3 million and $38.3 million, respectively. Of our federal net operating loss carryforwards,
$13.8 million are subject to expiration beginning in 2023 while the remainder have an unlimited carryforward period. The
state net operating loss carryforwards are subject to various applicable state tax laws. If not utilized, the state net operating
loss carryforwards will expire over various periods beginning in 2023. Of our foreign net operating loss carryforwards, $62
thousand expires in 2024 with the remainder having an unlimited carryforward period. Our federal tax credit carryforwards
for income tax purposes were approximately $16.9 million. Our state tax credit carryforwards for income tax purposes were
approximately $36.1 million, net of federal benefit. If not utilized, the federal tax credit carryforwards will begin to expire in
2039 and the state tax credit carryforwards will begin to expire in 2023. 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.
The Tax Cuts and Jobs Act requires taxpayers to capitalize and amortize research and experimental expenditures under
Section 174 of the Internal Revenue Code for tax years beginning after December 31, 2021. Accordingly, our historic deferred
tax liability attributable to capitalized software has become a deferred tax asset as a result of capitalization for tax purposes.
102
2022 Form 10-K
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)
2022
2021
2020
Balance
at beginning
of year
Acquisition-
related
change
$
31,974 $
29,184
6,453
— $
893
—
Charges to
expense
2,795 $
1,897
22,731
Balance at
end of
year
34,769
31,974
29,184
The following table sets forth the change to our unrecognized tax benefit for the years ended December 31, 2022, 2021 and
2020:
(dollars in thousands)
Balance at beginning of year
Increases from prior period positions
Decreases in prior year positions
Increases from current period positions
Settlements (payments)
Lapse of statute of limitations
Balance at end of year
Years ended December 31,
2022
3,651 $
89
(908)
629
—
(378)
3,083 $
2021
4,625 $
6
(57)
1,751
(1,192)
(1,482)
3,651 $
2020
4,346
414
(614)
491
—
(12)
4,625
$
$
The total amount of unrecognized tax benefit that, if recognized, would favorably affect the effective tax rate was $3.1 million
at December 31, 2022. Certain prior period amounts relating to our 2014 acquisitions were covered under indemnification
agreements and, therefore, had a corresponding indemnification asset. Due to lapse of statute of limitations, the indemnified
unrecognized tax benefit was released in 2022 resulting in income tax benefit with offsetting expense included in pretax
income from corresponding release of 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, 2022 and December 31, 2021 was insignificant. 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 2022, 2021 and 2020 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, 2022 was insignificant.
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 9, 2022 (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. Our Compensation Committee
of the Board of Directors administers this plan and the stock-based awards are granted under terms determined by it.
The total number of authorized stock-based awards available under our plan was 2,875,892 as of December 31, 2022. 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.
2022 Form 10-K
103
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Recently, we have issued three types of awards under our plans: restricted stock awards, time-based restricted stock units,
and performance-based restricted stock units. The following table sets forth the number of awards outstanding for each
award type as of:
Award type
Restricted stock awards
Time-based restricted stock units
Performance-based restricted stock units
Outstanding at December 31,
2022
1,345,608
455,708
1,104,260
2021
1,192,810
336,199
943,071
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,
2022
2021
2020
$
$
11,258 $
3,178
14,436
12,405 $
7,547
19,952
21,409
24,207
50,242
95,858
110,294 $
20,283
27,080
53,064
100,427
120,379 $
5,793
7,581
13,374
15,514
18,527
39,842
73,883
87,257
The total amount of compensation cost related to unvested awards not recognized was $93.0 million at December 31, 2022. It
is expected that this amount will be recognized over a weighted average period of 1.3 years.
104
2022 Form 10-K
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. Restricted stock awards
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. 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, 2022, and changes during the year
then ended:
Restricted stock awards
Unvested at January 1, 2022
Granted
Forfeited
Vested
Aggregate
intrinsic value(1)
(in thousands)
Restricted
stock awards
1,192,810 $
846,295
(179,686)
(513,811)
Weighted
average
grant-date
fair value
78.73
60.90
69.29
79.83
Unvested at December 31, 2022
1,345,608
68.09 $
79,202
(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, 2022, 2021 and 2020 was
$41.0 million, $38.5 million and $39.9 million, respectively. The weighted average grant-date fair value of restricted stock
awards granted during the years ended December 31, 2021 and 2020 was $77.39 and $77.16, respectively.
Restricted stock units
We have also granted restricted stock units subject to certain restrictions under the 2016 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 conditions. 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 performance conditions, which are amortized on an accelerated basis
over the period of vesting.
The following table summarizes our unvested, time-based restricted stock units as of December 31, 2022, and changes during
the year then ended:
Time-based restricted stock units
Unvested at January 1, 2022
Granted
Forfeited
Vested
Unvested at December 31, 2022
Restricted
stock units
336,199 $
287,198
(48,343)
(119,346)
455,708
Aggregate
intrinsic value(1)
(in thousands)
Weighted
average
grant-date
fair value
77.99
62.38
65.80
77.59
68.81 $
26,823
(1)
The intrinsic value is calculated as the market value as of the end of the fiscal period.
The total fair value of time-based restricted stock units that vested during the years ended December 31, 2022, 2021 and
2020 was $9.3 million, $9.4 million and $1.7 million, respectively. The weighted average grant date fair value of time-based
restricted stock units granted for the years ended December 31, 2021 and 2020 was $77.74 and $56.66, respectively.
2022 Form 10-K
105
Blackbaud, Inc.
Notes to Consolidated Financial Statements
The following table summarizes our unvested, performance-based restricted stock units as of December 31, 2022, and
changes during the year then ended:
Performance-based restricted stock units
Unvested at January 1, 2022
Granted
Forfeited
Vested
Aggregate
intrinsic value(1)
(in thousands)
Restricted
stock units
943,071 $
977,377
(114,071)
(702,117)
Weighted
average
grant-date
fair value
73.62
61.79
63.47
71.93
Unvested at December 31, 2022
1,104,260
64.94 $
64,997
(1)
The intrinsic value is calculated as the market value as of the end of the fiscal period.
The total fair value of performance-based restricted stock units that vested during the years ended December 31, 2022, 2021
and 2020 was $50.5 million, $44.9 million, and $17.2 million, respectively. The weighted average grant date fair value of
performance-based restricted stock units granted for the years ended December 31, 2021 and 2020 was $71.91 and $60.21,
respectively.
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.
Stock repurchase program
Under our stock repurchase program, we are authorized to repurchase shares from time to time in accordance with applicable
laws both on the open market, including under trading plans established pursuant to Rule 10b5-1 under the Securities
Exchange Act of 1934, as amended, and in privately negotiated transactions. The timing and amount of repurchases depends
on several factors, including market and business conditions, the trading price of our common stock and the nature of other
investment opportunities. The repurchase program does not have an expiration date and may be limited, suspended or
discontinued at any time without prior notice. Under the 2020 Credit Facility, we have restrictions on our ability to repurchase
shares of our common stock, which are summarized on page 56 in this report.
We account for purchases of treasury stock under the cost method. During the year ended December 31, 2022, we did not
purchase any shares. In December 2021, our Board of Directors reauthorized and replenished our stock repurchase program
that authorizes us to purchase up to $250.0 million of our outstanding shares of common stock. The remaining amount
available to purchase stock under the stock repurchase program was $250.0 million as of December 31, 2022.
106
2022 Form 10-K
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:
(in thousands)
Years ended December 31,
2022
2021
2020
Accumulated other comprehensive income (loss), beginning of period
$
6,522 $
(2,497) $
(5,290)
By component:
Gains and losses on cash flow hedges:
Accumulated other comprehensive income (loss) balance, beginning of period
$
5,257 $
(3,101) $
(1,323)
Other comprehensive (loss) income before reclassifications, net of tax effects of
$(8,068), $(1,982) and $1,625
Amounts reclassified from accumulated other comprehensive income (loss)
Tax expense (benefit) included in provision for income taxes
Total amounts reclassified from accumulated other comprehensive income
(loss)
Net current-period other comprehensive income (loss)
22,772
(5,685)
1,489
(4,196)
18,576
5,617
3,714
(973)
2,741
8,358
(4,602)
3,827
(1,003)
2,824
(1,778)
Accumulated other comprehensive income (loss) balance, end of period
$
23,833 $
5,257 $
(3,101)
Foreign currency translation adjustment:
Accumulated other comprehensive income (loss) balance, beginning of period
$
1,265 $
604 $
(3,967)
Translation adjustment
Accumulated other comprehensive (loss) income balance, end of period
(16,160)
(14,895)
661
1,265
4,571
604
Accumulated other comprehensive income (loss), end of period
$
8,938 $
6,522 $
(2,497)
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 2022, 2021 and 2020. 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, 2022, 2021 and 2020 were $9.3 million, $6.5
million and $1.9 million, respectively.
In December 2020, we made a discretionary matching contribution to eligible employees 401(k) plans totaling $1.2 million,
given our financial performance during the fourth quarter. There were no discretionary contributions by us to the 401K Plan in
2022 and 2021.
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.
2022 Form 10-K
107
Blackbaud, Inc.
Notes to Consolidated Financial Statements
The following table presents long-lived assets by geographic region based on the location of the assets. For purposes of this
disclosure, long-lived assets includes property and equipment, net and operating lease ROU assets.
(dollars in thousands)
United States
Other countries
Total long-lived assets
Years ended
December 31,
2022
151,656 $
1,669
153,325 $
2021
163,241
2,070
165,311
$
$
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, 2022, approximately $1.0 billion 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 (transactional revenue).
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, 2022 and December 31, 2021 were insignificant. Our closing balances of deferred
revenue were as follows:
(in thousands)
Total deferred revenue
December 31,
2022
December 31,
2021
$
385,236 $
378,746
The increase in deferred revenue during 2022 was primarily due to new subscription sales of our cloud solutions and, to a
lesser extent, progress in initiatives to bring our pricing in line with the market. The amount of revenue recognized during
2022 that was included in the deferred revenue balance at the beginning of the period was approximately $339 million. The
amount of revenue recognized during 2022 from performance obligations satisfied in prior periods was insignificant.
Disaggregation of revenue
We sell our cloud solutions and related services in three primary geographical markets: to customers in the United States, to
customers in the United Kingdom and to customers located in other countries. The following table presents our revenue by
geographic area based on the address of our customers:
(dollars in thousands)
United States
United Kingdom
Other countries
Total revenue
108
2022 Form 10-K
Years ended
December 31,
2022
2021
2020
$ 896,116 $ 777,333 $ 772,188
101,026
89,688
60,963
60,719
84,121
56,910
$ 1,058,105 $ 927,740 $ 913,219
Blackbaud, Inc.
Notes to Consolidated Financial Statements
During the third quarter of 2022, we reorganized our market groups. The Social Sector and Corporate Sector market groups
comprised our go-to-market organizations as of December 31, 2022. The following is a description of each market group as of
that date:
•
•
The Social Sector market group focuses on sales to customers and prospects in the social sector, such as nonprofits,
foundations, education institutions, healthcare organizations and other not-for-profit entities globally, and includes
JustGiving from Blackbaud; and
The Corporate Sector market group focuses on sales to customers and prospects in the corporate sector globally, and
includes EVERFI from Blackbaud and YourCause from Blackbaud.
The following table presents our revenue by market group:
(dollars in thousands)
Social Sector
Corporate Sector
Total revenue
Years ended
December 31,
2022
2021(1)
2020(1)
$ 907,197 $ 889,755 $ 873,878
150,908
39,341
$ 1,058,105 $ 927,740 $ 913,219
37,985
(1) Due to the market group changes discussed above, we have recast our revenue by market group for the years ended December 31, 2021 and 2020 to
present them on a consistent basis with the current year.
The following table presents our recurring revenue by type:
(dollars in thousands)
Contractual recurring
Transactional recurring
Total recurring revenue
Years ended
December 31,
2022
2021
2020
$ 709,097 $ 601,397 $ 591,272
302,636
279,453
259,473
$ 1,011,733 $ 880,850 $ 850,745
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 changes in internal control over financial reporting occurred during the most recent fiscal quarter ended December 31,
2022 with respect to our operations that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
2022 Form 10-K
109
Blackbaud, Inc.
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, 2022, 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, 2022.
The effectiveness of our internal control over financial reporting as of December 31, 2022, 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.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS
Not applicable.
110
2022 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 2023 Annual Meeting of Stockholders expected to be held on June 14, 2023, 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,” “2022 Summary Compensation Table,”
"CEO Pay Ratio" and "Pay Versus Performance" contained in Blackbaud’s Proxy Statement for the 2023 Annual Meeting of
Stockholders expected to be held on June 14, 2023.
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 2023 Annual Meeting of
Stockholders expected to be held on June 14, 2023.
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 2023 Annual Meeting of
Stockholders expected to be held on June 14, 2023.
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 2023 Annual Meeting of Stockholders expected to be held on June
14, 2023.
2022 Form 10-K
111
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.
There were no retrospective changes to the Consolidated Statement of Operations for any quarters in the two most recent
fiscal years that would require disclosure under Item 302, as amended.
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
2.2
2.3
2.4
2.5
3.1
3.2
3.3
4.1
4.2
Description of Document
Agreement and Plan of Merger and Reincorporation
dated April 6, 2004
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.
Agreement and Plan of Merger, dated as of
December 30, 2021, by and among Blackbaud, Inc.,
Project Montessori Acquisition, Inc., EverFi, Inc. and
Eon Stockholder Representative, LLC
Amended and Restated Certificate of Incorporation
of Blackbaud, Inc.
Certificate of Designation of Series A Junior
Participating Preferred Stock of Blackbaud, Inc.
Amended and Restated Bylaws of Blackbaud, Inc.
dated August 24, 2022
Description of Capital Stock
Stockholder Rights Agreement, dated as of October
7, 2022, between Blackbaud, Inc. and American
Stock Transfer & Trust Company, LLC, as Rights
Agent
Filed In
Registrant’s
Form
S-1/A
Dated
4/6/2004
Exhibit
Number
Filed
Herewith
2.1
8-K
10/2/2014
10.76
8-K
10/8/2015
10.78
8-K
10/8/2015
10.79
8-K
1/3/2022
2.1
DEF 14A
4/30/2009
8-K
8-K
10/11/2022
8/25/2022
8-K
10/11/2022
3.1
3.1
4.1
X
112
2022 Form 10-K
Blackbaud, Inc.
Description of Document
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
Blackbaud, Inc. 2016 Equity and Incentive
Compensation Plan
Lease Agreement dated May 16, 2016 between
BBHQ1, LLC (a subsidiary of Blackbaud, Inc.) and
HPBB1, LLC
First Amendment to Lease Agreement, dated as of
August 22, 2016, between HPBB1, LLC and BBHQ1,
LLC (a subsidiary of Blackbaud, Inc.)
Form of Retention Agreement dated as of August 1,
2017 between Blackbaud, Inc. and each of Anthony
W. Boor, Kevin P. Gregoire, Kevin R. McDearis, Kevin
W. Mooney and Jon W. Olson
Second Amendment to Lease Agreement, dated as
of May 18, 2017, between HPBB1, LLC and BBHQ1,
LLC (a subsidiary of Blackbaud, Inc.)
Third Amendment to Lease Agreement, dated as of
December 11, 2017, between HPBB1, LLC and
BBHQ1, LLC (a subsidiary of Blackbaud, Inc.)
Fourth Amendment to Lease Agreement, dated as
of February 28, 2018, between HPBB1, LLC and
BBHQ1, LLC (a subsidiary of 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
Fifth Amendment to Lease Agreement, dated as of
February 18, 2020, between HPBB1, LLC and
BBHQ1, LLC (a subsidiary of Blackbaud, Inc.)
Sixth Amendment to Lease Agreement, dated as of
March 17, 2020, between HPBB1, LLC and BBHQ1,
LLC (a subsidiary of Blackbaud, Inc.)
Seventh Amendment to Lease Agreement, dated as
of April 14, 2020, between HPBB1, LLC and BBHQ1,
LLC (a subsidiary of Blackbaud, Inc.)
Eighth Amendment to Lease Agreement, dated as of
May 26, 2020, between HPBB1, LLC and BBHQ1, LLC
(a subsidiary of Blackbaud, Inc.)
Ninth Amendment to Lease Agreement, dated as of
June 8, 2020, between HPBB1, LLC and BBHQ1, LLC
(a subsidiary of Blackbaud, Inc.)
Exhibit
Number
10.1 †
10.2 †
10.3 †
10.4
10.5
10.6 †
10.7
10.8
10.9
10.10 †
10.11 †
10.12 †
10.13
10.14
10.15
10.16
10.17
Filed In
Registrant’s
Form
10-K
Dated
2/27/2013
Exhibit
Number
Filed
Herewith
10.65
10-K
2/27/2013
10.65
DEF 14A
4/26/2016
Appendix C
10-Q
8/4/2016
10.84
10-Q
11/4/2016
10.87
10-Q
8/4/2017
10.92
10-K
2/20/2018
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
10-Q
5/3/2019
5/3/2019
8/4/2020
10.96
10.97
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
2022 Form 10-K
113
Blackbaud, Inc.
Description of Document
Tenth Amendment to Lease Agreement, dated as of
June 26, 2020, between HPBB1, LLC and BBHQ1, LLC
(a subsidiary of Blackbaud, Inc.)
Eleventh Amendment to Lease Agreement, dated as
of August 13, 2020, between BBHQ1, LLC and
BBHQ1, LLC (a subsidiary of Blackbaud, Inc.)
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
Form of Employment Agreement between
Blackbaud, Inc. and Kevin McDearis
LIBOR Transition Amendment, dated as of
September 20, 2021, between Blackbaud, Inc. and
Bank of America, N.A.
First Incremental Term Loan Agreement, dated as of
December 31, 2021, by and among Blackbaud, Inc.,
the lenders party thereto and Bank of America N.A.,
as administrative agent
Registration Rights Agreement, dated as of
December 31, 2021, by and among Blackbaud, Inc.,
EverFi, Inc., TPG Eon, L.P., each other shareholder
party thereto and Eon Stockholder Representative,
LLC
First Amendment to Credit Agreement, dated as of
January 31, 2022, by and among Blackbaud, Inc., the
lenders party thereto and Bank of America N.A., as
administrative agent
Amended and Restated Blackbaud, Inc. 2016 Equity
and Incentive Compensation Plan
Amended and Restated Employment and
Noncompetition Agreement dated September 20,
2022 between Blackbaud, Inc. and Michael P.
Gianoni
Exhibit
Number
10.18
10.19
10.20
10.21
10.22 †
10.23
10.24
10.25
10.26
10.27 †
10.28 †
Filed In
Registrant’s
Form
10-Q
Dated
8/4/2020
Exhibit
Number
Filed
Herewith
10.7
10-Q
11/3/2020
10.3
10-Q
11/3/2020
10.4
10-Q
11/3/2020
10.5
10-Q
5/4/2021
10-Q
11/4/2021
10.1
10.1
8-K
1/3/2022
10.1
8-K
1/3/2022
10.2
8-K
2/3/2022
10.1
DEF 14A
4/19/2022
Appendix B
8-K
9/21/2022
10.1
114
2022 Form 10-K
Blackbaud, Inc.
Description of Document
LIBOR Transition Amendment, dated as of August
26, 2022, between Blackbaud, Inc. and Bank of
America, N.A.
Consent Agreement, dated as of January 23, 2023,
between Blackbaud, Inc. and Bank of America, N.A.
Subsidiaries of Blackbaud, Inc.
Consent of Independent Registered Public
Accounting Firm
Consent of Independent Registered Public
Accounting Firm
Consent of Sidley Austin LLP
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
Inline XBRL Instance Document - the Instance
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file because its XBRL tags are embedded within the
Inline XBRL Document.
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Cover Page Interactive Data File (formatted as Inline
XBRL and contained in Exhibit 101).
Exhibit
Number
10.29
10.30
21.1
23.1
23.2
23.3
31.1
31.2
32.1
32.2
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
†
Indicates management contract or compensatory plan, contract or arrangement.
ITEM 16. FORM 10-K SUMMARY
Not applicable.
Filed In
Registrant’s
Form
10-Q
Dated
3/1/2022
Exhibit
Number
Filed
Herewith
10.2
8-K
4/1/2022
23.1
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
2022 Form 10-K
115
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.
Blackbaud, Inc.
Signed: February 24, 2023
/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 24, 2023
Executive Vice President and Chief
Financial Officer (Principal Financial
and Accounting Officer)
Date: February 24, 2023
Chairman of the Board of Directors
Date: February 24, 2023
Director
Director
Director
Director
Director
Director
Date: February 24, 2023
Date: February 24, 2023
Date: February 24, 2023
Date: February 24, 2023
Date: February 24, 2023
Date: February 24, 2023
/S/ ANTHONY W. BOOR
Anthony W. Boor
/S/ ANDREW M. LEITCH
Andrew M. Leitch
/S/ DENEEN DEFIORE
Deneen DeFiore
/S/ GEORGE H. ELLIS
George H. Ellis
/S/ YOGESH K. GUPTA
Yogesh K. Gupta
/S/ RUPAL S. HOLLENBECK
Rupal S. Hollenbeck
/S/ D. ROGER NANNEY
D. Roger Nanney
/S/
SARAH E. NASH
Sarah E. Nash
116
2022 Form 10-K
SUBSIDIARIES OF BLACKBAUD, INC.
As of February 24, 2023
Blackbaud, Inc.
Subsidiaries
ACN 161 644 328 Pty. Ltd.
BB Real Property Development, LLC
BBHQ1, LLC
BB US-DCL, LLC
BB US-SIS, LLC
Blackbaud Asia, Ltd.
Blackbaud Canada, Inc.
Blackbaud Europe Ltd.
Blackbaud Global Ltd.
Blackbaud Latin America, S.R.L.
Blackbaud Pacific Pty. Ltd.
Click 4 Compliance, LLC
Ed Comms Pty Ltd.
Educational Communications Ltd.
EverFi, Inc.
EverFi Canada, Inc.
EVERFI International Ltd.
EVERFI Middle East Ltd.
Everyday Hero Pty. Ltd.
Giving.com Limited
Giving Limited
JGCrowdfunding USA, LLC
JG US Inc.
Lawroom.com
MyCharity, Ltd.
Blackbaud Tuition Management, LLC
YC Blocker 1, LLC
YourCause Holdings, LLC
YourCause, LLC
EXHIBIT 21.1
Organized Under Laws of:
Delaware
Australia
Delaware
Delaware
Delaware
Delaware
Hong Kong
Canada
Scotland
England and Wales
Costa Rica
Australia
Virginia
Australia
England and Wales
Delaware
Canada
England and Wales
England and Wales
Australia
England and Wales
England and Wales
Delaware
Delaware
CA C-Corp
Ireland
Delaware
Delaware
Delaware
Texas
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following registration statements:
1. Registration Statement (Form S-8 No. 333-265527) pertaining to the Blackbaud, Inc. 2016 Equity and
Incentive Compensation Plan Amended and Restated as of June 9, 2022;
2. Registration Statement (Form S-3 No. 333-262190) of Blackbaud, Inc.;
3. Registration Statement (Form S-8 No. 333-257030) pertaining to the Blackbaud, Inc. 2016 Equity and
Incentive Compensation Plan Amended and Restated as of June 10, 2021;
4. Registration Statement (Form S-8 No. 333-232111) pertaining to the Blackbaud, Inc. 2016 Equity and
Incentive Compensation Plan Amended and Restated as of June 13, 2019; and
5. Registration Statement (Form S-8 No. 333-212057) pertaining to the Blackbaud, Inc. 2016 Equity and
Incentive Compensation Plan;
of our reports dated February 24, 2023, with respect to the consolidated financial statements of Blackbaud, Inc.
and the effectiveness of internal control over financial reporting of Blackbaud, Inc. included in this Annual Report
(Form 10-K) of Blackbaud, Inc. for the year ended December 31, 2022.
/S/ Ernst & Young LLP
Raleigh, North Carolina
February 24, 2023
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-262190)
and Form S-8 (No. 333-212057, No. 333-232111, No. 333-257030 and No. 333-265527) of Blackbaud, Inc. of our
report dated March 1, 2022 relating to the financial statements, which appears in this Form 10-K.
EXHIBIT 23.2
/S/ PricewaterhouseCoopers LLP
Atlanta, Georgia
February 24, 2023
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.
b.
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
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 24, 2023
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.
b.
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
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 24, 2023
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,
2022 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.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: February 24, 2023
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,
2022 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.
2.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: February 24, 2023
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