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, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transi on period from to .
Commission file number: 000-50600
Blackbaud, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdic on of incorpora on or organiza on)
11-2617163
(I.R.S. Employer Iden fica on No.)
65 Fairchild Street
Charleston, South Carolina 29492
(Address of principal execu ve offices, including zip code)
(843) 216-6200
(Registrant's telephone number, including area code)
Securi es Registered Pursuant to Sec on 12(b) of the Act:
Title of Each Class
Common Stock, $0.001 Par Value
Preferred Stock Purchase Rights
Trading Symbol(s)
Name of Each Exchange on which Registered
BLKB
N/A
Nasdaq Global Select Market
Nasdaq Global Select Market
Securi es Registered Pursuant to Sec on 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 Securi es Act. Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Sec on 13 or Sec on 15(d) of the Act. Yes ☐ No ☑
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sec on 13 or 15(d) of the Securi es 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 submi ed electronically every Interac ve Data File required to be submi ed pursuant to Rule 405 of
Regula on S-T (Sec on 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 repor ng company, or an
emerging growth company. See the defini ons of “large accelerated filer,” “accelerated filer,” “smaller repor ng company,” and "emerging growth company"
in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
☑
☐
Accelerated filer
Smaller repor ng company
Emerging growth company
☐
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transi on period for complying with any new or
revised financial accoun ng standards provided pursuant to Sec on 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and a esta on to its management’s assessment of the effec veness of its internal control
over financial repor ng under Sec on 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accoun ng firm that prepared or issued its
audit report. ☑
If securi es are registered pursuant to Sec on 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correc on of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error correc ons are restatements that required a recovery analysis of incen ve-based compensa on received
by any of the registrant’s execu ve 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, 2023 (based on the closing sale price of
$71.18 on that date) was approximately $2,292,286,984. 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 determina on of affiliate
status is not necessarily a conclusive determina on for other purposes.
The number of shares of the registrant’s common stock outstanding as of February 14, 2024 was 53,475,414.
DOCUMENTS INCORPORATED BY REFERENCE
Por ons of the registrant's defini ve Proxy Statement for the 2024 Annual Mee ng of Stockholders currently scheduled to be held June 12, 2024 are
incorporated by reference into Part III hereof. Such defini ve Proxy Statement will be filed with the U.S. Securi es and Exchange Commission no later than
120 days a er the conclusion of the registrant's fiscal year ended December 31, 2023.
TABLE OF CONTENTS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
PART I.
Item 1.
Business
Item 1A.
Risk factors
Item 1B.
Unresolved staff comments
Item 1C.
Cybersecurity
Item 2.
Item 3.
Item 4.
PART II.
Item 5.
Item 6.
Item 7.
Proper es
Legal proceedings
Mine safety disclosures
Market for registrant's common equity, related stockholder ma ers and issuer purchases of equity securi es
[Reserved]
Management's discussion and analysis of financial condi on and results of opera ons
Item 7A.
Quan ta ve and qualita ve disclosures about market risk
Item 8.
Item 9.
Financial statements and supplementary data
Changes in and disagreements with accountants on accoun ng and financial disclosure
Item 9A.
Controls and procedures
Item 9B.
Other informa on
Item 9C.
Disclosure regarding foreign jurisdic ons that prevent inspec ons
PART III.
Item 10.
Directors, execu ve officers and corporate governance
Item 11.
Execu ve compensa on
Item 12.
Security ownership of certain beneficial owners and management and related stockholder ma ers
Item 13.
Certain rela onships and related transac ons, 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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Blackbaud, Inc.
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 an cipate results
based on our es mates, assump ons and plans that are subject to uncertainty. These "forward-looking statements" are made subject to the safe-harbor
provisions of the Private Securi es Li ga on Reform Act of 1995, Sec on 27A of the Securi es Act of 1933, as amended, and Sec on 21E of the Securi es
Exchange Act of 1934, as amended. Forward-looking statements consist of, among other things, trend analyses, statements regarding future events, future
financial performance, our an cipated growth, the effect of general economic and market condi ons, our business strategy and our plan to build and grow
our business, our opera ng results, our ability to successfully integrate developed and acquired businesses and technologies, including genera ve ar ficial
intelligence ("AI"), the effect of our stock repurchase program, the effect of foreign currency exchange rate and interest rate fluctua ons on our financial
results, the impact of expensing stock-based compensa on, the sufficiency of our capital resources, our ability to meet our ongoing debt and obliga ons as
they become due, cybersecurity and data protec on risks and related liabili es, and current or poten al legal proceedings involving us, all of which are based
on current expecta ons, es mates, and forecasts, and the beliefs and assump ons of our management. Words such as “believes,” “seeks,” “expects,” “may,”
“might,” “should,” “intends,” “could,” “would,” “likely,” “will,” “targets,” “plans,” “an cipates,” “aims,” “projects,” “es mates,” or any varia ons of such words
and similar expressions are also intended to iden fy such forward-looking statements. These forward-looking statements are subject to risks, uncertain es
and assump ons 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 expecta ons 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 assump ons only as of the date of this Annual Report on Form 10-K. We undertake no obliga on to update or revise any
forward-looking statements, or to update the reasons actual results could differ materially from those an cipated in any forward-looking statements, whether
as a result of new informa on, future events or otherwise.
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Blackbaud, Inc.
PART I.
ITEM 1. BUSINESS
Descrip on of Business
We are the leading so ware provider exclusively dedicated to powering social impact. Serving the nonprofit and educa on sectors, companies commi ed to
social responsibility and individual change makers, our essen al so ware is built to accelerate impact in fundraising, nonprofit financial management, digital
giving, grantmaking, corporate social responsibility and educa on management. Blackbaud brings over four decades of leadership to this sector: since
originally incorpora ng in New York in 1982 and later reincorpora ng as a South Carolina corpora on in 1991 and as a Delaware corpora on in 2004. Millions
of people across more than 100 countries connect, give, learn and engage through Blackbaud pla orms. During 2023, we had nearly 100,000 customers that
paid Blackbaud through transac onal fees and more than 40,000 customers with contractual billing arrangements. We are deeply proud to play a part in our
customers’ success in their missions to provide healthcare and cure diseases, advance educa on, 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 substan al and growing
There are millions of organiza ons globally focused on social impact including nonprofits, founda ons, educa on ins tu ons and healthcare organiza ons. In
the corporate sector, demonstra ng posi ve social impact has become a business impera ve. Countless individuals also engage in social impact by dona ng
funds, volunteering their me, advoca ng for a cause, receiving services from or otherwise engaging with social impact organiza ons.
Tradi onal methods of fundraising and organiza onal management are o en costly and inefficient
Many social impact organiza ons use manual methods or so ware applica ons not specifically designed for fundraising and organiza onal management for
ins tu ons like theirs. Such methods are o en costly and inefficient because of the difficul es in effec vely collec ng, sharing and using dona on-related
informa on. Furthermore, general purpose so ware applica ons frequently have limited func onality for the unique needs of our customer base and do not
efficiently integrate mul ple databases. Some social impact organiza ons have developed proprietary so ware, but doing so is expensive, requiring on-site
technical personnel for development, implementa on and maintenance.
The nonprofit industry faces par cular opera onal challenges
Nonprofit organiza ons — and any other en ty that includes fundraising as a revenue source, including educa on ins tu ons, healthcare organiza ons and
houses of worship — must efficiently:
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Solicit funds and build rela onships with major and ins tu onal donors;
Garner small cash contribu ons from numerous contributors;
• Manage and develop complex rela onships with large numbers of cons tuents;
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Communicate their accomplishments and the importance of their mission online and offline;
Comply with complex accoun ng, tax and repor ng requirements that differ from those for for-profit businesses;
Solicit cash and in-kind contribu ons from businesses to help raise money or deliver products and services;
Provide a wide array of programs and services to individual cons tuents and beneficiaries; and
Improve the data collec on and informa on sharing capabili es of their employees, volunteers and donors by crea ng and providing distributed
access to centralized databases.
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Blackbaud, Inc.
Because of these challenges, we believe nonprofits, educa on ins tu ons, healthcare organiza ons and houses of worship can benefit from so ware
applica ons and services specifically designed to serve their par cular needs and workflows to grow revenue, work effec vely and accomplish their missions.
Companies, grantmaking ins tu ons and founda ons also face unique challenges
Companies, grantmaking ins tu ons and founda ons, face their own unique challenges in their social impact efforts, including the need to:
• Quan fy and improve the impact of their grants;
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Cul vate be er rela onships with grantees;
Achieve be er internal collabora on and alignment with board members, reviewers and other stakeholders;
Illustrate the impact of their corporate philanthropy and educa on efforts to the communi es they serve;
Engage employees in meaningful volunteering, giving and other ac vi es;
Ensure that their philanthropic efforts align with their business ini a ves;
• Manage all of a founda on's ac vi es, including fundraising and accoun ng;
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Expand the reach of their fundraising efforts; and
Cul vate new and exis ng donors.
Strategy
Our objec ve is to maintain and extend our posi on as the leading provider of cloud so ware and services for the global social impact community, suppor ng
our customers' missions from securing resources and managing their opera ons, to delivering their programs and measuring their impact. Our key strategies
for achieving this objec ve are described below.
Execute on our Five Key Opera onal Ini a ves
In early 2023, we outlined five key opera onal ini a ves targeted to drive innova on, bookings growth, revenue expansion and lower costs. During 2023, we
have executed on these key ini a ves.
1. Product Innova on and Delivery
Product is core at Blackbaud, and we strive to bring increased value to our customers with improved and innova ve capabili es. We have recently
announced or released a number of product enhancements as well as new solu ons that enable our customers to be er deliver on their missions. Some
examples include:
• Op mized Online Dona on Capabili es: New online dona on capabili es that fully integrate with Blackbaud’s payment processing and CRM
so ware and enable customers to raise more money while reducing processing costs. We recently began an early adopter program for the new
dona on capabili es with a small sample of RE NXT customers across charity, educa on, and arts and cultural organiza ons. We expect to make
them generally available in the first half of 2024.
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Prospect Insights Pro for Raiser’s Edge NXT®: New add-on capability within Raiser’s Edge NXT® that gives fundraisers access to AI-driven insights to
support planned and major gi fundraising
TM
Impact Edge : A first-of-its-kind AI-powered, social impact repor ng and storytelling solu on for corporate social responsibility (CSR) and social
impact teams of all sizes. This new solu on is currently in an early adopter program with our planned full roll out in the second half of 2024.
JustGiving Storywriter: With new genera ve AI capabili es, fundraisers on JustGiving are able to quickly and easily create personal stories to share
with their networks. Company research has shown that JustGiving pages that include a clear and personal story raise approximately 65% more than
those that do not.
TM
Good Move : New development transformed the Good Move ac vity-tracking mobile app into a powerful mobile par cipant center for Blackbaud
TeamRaiser® peer-to-peer fundraising events. The new expansive feature for Blackbaud TeamRaiser® became generally available in the U.S. and
Canada in March 2023.
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Blackbaud, Inc.
•
Intelligence for Good®: In summer 2023, we launched next genera on Intelligence for Good® strategy with an extensive agenda of ini a ves and
investments targeted at making ar ficial intelligence more accessible, powerful and responsible across the social impact sector
2. Bookings Growth and Accelera on
We maintain a keen focus on accelera ng bookings growth by signing new logos as well as upselling and cross-selling our exis ng customer base. Our
sales team is split between prospect account execu ves dedicated to prospec ng for new clients and customer account execu ves who focus on selling
addi onal products to current customers. Given the breadth of our product por olio, this “land and expand” model has proven successful for us over
me. As previously disclosed, there can be vola lity quarter-to-quarter on bookings.
3. Transac onal Revenue Op miza on and Expansion
Transac onal revenue, which is about one-third of total revenue, is comprised of four primary components: dona on processing (~55% of total
transac onal revenue); consumer giving (~20%); tui on management (~20%); and event-based usage (~5%). The diversity of the underlying transac on
volumes from these four sources has resulted in consistent transac onal recurring revenue growth in the mid-to-high single digits over the past several
years. Strong momentum in consumer giving and tui on management, rate increases on Blackbaud Merchant Services, and increased dona ons ed to
global events drove con nued solid transac onal recurring revenue growth in 2023. Going forward we will con nue to implement addi onal payments
solu ons op miza on to drive enhanced donor experience.
4. Modernized Approach to Pricing and Mul -Year Contracts
Last summer, we put in place an updated pricing policy primarily for our social sector customers that directly reflects the value we provide to them, is in-
line with the broader market and reflects the infla onary pressures that all businesses are facing. In November 2022, we started no fying customers with
a March 2023 contract renewal that we would be making important contract changes. First, we are offering 3-year contract renewal terms as our
standard, replacing one-year renewal terms. This process was already being implemented outside of the pricing changes. Second, we are implemen ng a
more significant rate increase on the 1-year renewal op on versus the 3-year renewal op on. And third, the 3-year renewal op on includes embedded
annual rate increases. Our 3-year renewal op ons did not historically include annual rate increases.
We have now completed the 2023 renewal cohort, which represented approximately 35% of the total contractual revenue eligible for this program.
Approximately another 30% of the renewable base is up for renewal in 2024, another 25% in 2025, and the remaining 10% in the beginning of 2026. The
close day-to-day management of renewals, the mix of 3-year and 1-year contracts, and the impact of pricing are progressing well, and we expect more
impact from the compounding effect of these rate increases over me as we layer in future year contract renewals and annual rate increases.
Addi onally, the adop on of 3-year renewals as a standard, with more customers op ng for this op on than we originally expected, are expected to have
an added benefit of higher reten on which provides greater revenue assurance and predictability. Looking even further ahead, the cycle starts fresh in
2026 as the 2023 signed contracts will begin to renew. We expect that this will be a sustainable and meaningful revenue growth stream for us.
5. Keen A en on to Cost Management
Cost management ini a ves already completed drove a significant improvement in profitability during 2023. These ini a ves included:
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A reduc on in headcount from approximately 3,600 in the third quarter of 2022 to approximately 3,000 as of December 31, 2023
Con nued IT consolida on as we migrate customers from legacy private data centers to leading public cloud service providers. We closed four legacy
data centers during 2022 and two in 2023.
Renego ated key vendor contracts including Microso Azure and AWS
Reduced our real estate footprint as part of the shi to a remote first workforce
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Blackbaud, Inc.
Going forward, our goal is to run the business at about this headcount level for the foreseeable future, while con nuing to drive efficiencies in other
areas of the business.
Delight Our Customers
We intend to make our customers' experience with us effec ve, efficient and sa sfying from their ini al interest in our solu ons and services through their
decision to purchase, engage with customer support and implement and use our solu ons. We con nue to focus on ini a ves aimed at improving the
consistency and quality of user experience across our offerings. We also con nue 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 exis ng and prospec ve customers. In addi on, we are con nuing to integrate value-
adding capabili es such as payment services, analy cs and business intelligence into our suite of solu ons to be er address our customers' needs to raise
more revenue with comprehensive offerings. We will con nue to focus on providing the highest level of solu on support, enhancing our exis ng solu ons,
extending our solu ons through open APIs and developing new solu ons and services designed to help our customers be more effec ve and achieve their
missions.
A ract and Retain Top Talent and Ac vely Engage Employee Base
Our employees are energized by our opportunity to fuel social impact. Collabora on, innova on, authen c 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 suppor ve
and inclusive environment where their talents and poten al are realized. In 2021, we formally adopted a "Remote First" model as a company, which supports
Blackbaud's goal to a ract top talent globally. For addi onal informa on, see “Human Capital Resources” below.
Drive Strength in Our Sector as an Industry Thought Leader
In our over 40 years of opera on, 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, webinars and white papers, which provide insights and guidance to the social impact community. We
also par cipate in and convene 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 Ins tute is a research lab that leverages Blackbaud's unique data resources, along with original research, to drive insight that
accelerates the impact of the social impact community. The research and reports the Blackbaud Ins tute produces serve to strengthen the social impact
community as a whole. ENGAGE, our blog and podcast, provides free best prac ces resources that drive impact across the social impact community, as well.
The Blackbaud Social Good Startup Program is a year-long accelerator designed to support innova ve startups with the poten al to drive social impact. In
alignment with our commitment to diversity in the tech community, we emphasize suppor ng founders from underrepresented backgrounds.
Solu ons and Services
We build so ware for our customers' essen al business opera ons to free them to focus on what ma ers most: delivering impact. With powerful data
intelligence and exper se inside, and an ever-growing network of partners and developers outside, our so ware is the founda onal infrastructure that
expands what is possible for anyone dedicated to purpose-driven work.
We augment our so ware with a range of payment processing, analy c and business intelligence services, consul ng, training and professional services, as
well as maintenance and technical support. The Blackbaud por olio is delivered primarily through cloud solu ons tailored to the unique needs of nonprofits
and founda ons, educa onal ins tu ons, individual change makers and corporate social impact programs built specifically for fundraising and rela onship
management, marke ng and engagement, financial management, grant and award management, educa on management, cke ng, social responsibility,
payment services and analy cs.
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Blackbaud, Inc.
Our specific solu ons and services include:
Fundraising and Engagement
Blackbaud Raiser's Edge NXT® is our flagship fundraising and rela onship management solu on. Raiser's Edge NXT is the first and only cloud fundraising and
rela onship management solu on that is all-inclusive, fully integrated with data health, analy cs, email marke ng, dona on forms, event management,
payment processing and process automa on to create tailored, user-specific experiences. Built on our Blackbaud SKY Pla orm, 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 marke ng tool designed for smaller nonprofit
organiza ons.
Blackbaud CRM™ is a comprehensive, configurable fundraising and rela onship management solu on. It is our lead offering for enterprise-level organiza ons
seeking a powerful, yet adaptable solu on for fundraising, marke ng and program management across the engagement lifecycle, specializing in suppor ng
sophis cated major giving, membership and high-volume direct marke ng programs. Blackbaud CRM helps organiza ons build deeper and more personalized
rela onships with cons tuents, build their brands through online engagement and mul channel communica on tools, and more effec vely fundraise,
leveraging campaign management, business intelligence and analy cs. Blackbaud CRM can be sold as an integrated solu on with our enterprise online
solu ons to enable mul -channel marke ng, online engagement and event fundraising.
Blackbaud eTapestry® is a simple, cloud fundraising and donor management solu on built specifically for smaller, developing nonprofits in need of a cloud
solu on to support basic fundraising needs. It offers nonprofit organiza ons a cost-effec ve way to manage donors, process gi s, create reports, accept
online dona ons and communicate with cons tuents. This technology provides a system that is simple to maintain, efficient to operate and is intui vely easy
to learn without extensive training.
Blackbaud Luminate Online®, delivered in the cloud, helps our customers be er understand their online supporters, make the right ask at the right me and
raise money online. It includes tools to build online fundraising campaigns as part of an organiza on's exis ng website or as a stand-alone fundraising site.
Dona on forms, gi processing and tools for communica ng through web pages and email give our customers the essen als for building sustainable donor
rela onships.
Blackbaud TeamRaiser® is the industry’s most comprehensive cloud solu on designed specifically for peer-to-peer event fundraising. Powering thousands of
major events each year, TeamRaiser allows nonprofits’ supporters to create personal or team fundraising web pages and send email dona on appeals in
support of events such as walks, runs and rides.
JustGiving® from Blackbaud® is one of the world's leading social pla orms for giving. JustGiving provides world-class technology and innova ve tools to
connect people with the causes they care about. By making giving more simple, social and rewarding, this pla orm helps all causes, chari es and people in
need to reach more people and raise more money.
Blackbaud Fundraiser Performance Management™ is a mul -pronged solu on that combines easy to use data-driven so ware for fundraisers and managers,
predic ve modeling insights, and high-touch strategic consul ng. Built for higher educa on ins tu ons, healthcare and large nonprofit organiza ons, the
SaaS tools increase transparency into fundraising performance, and direct fundraiser and talent manager ac on. Both fundraisers and leaders benefit from
the tailored consul ng to address weaknesses and enhance strengths to comprehensively improve the fundraising team performance.
Blackbaud Altru® is a cloud solu on that helps arts and cultural organiza ons consolidate admissions, membership, fundraising, merchandise, marke ng and
more, giving users a comprehensive view of their supporters. By helping general admissions arts and cultural organiza ons gain a clear, 360-degree view of
their organiza on, it enables them to operate more efficiently, engage and cul vate patrons and supporters, streamline external and internal communica on
efforts, and reduce IT costs. Blackbaud Altru contains tools for cons tuent and membership management, program sales, retail sales and cke ng, volunteer
management and events management. It also has sophis cated repor ng func onality and tools to manage marke ng, communica ons and fundraising.
Blackbaud Guided Fundraising™ and Blackbaud Volunteer Network Fundraising™ can work together with Fundraiser Performance Management or
independently to help higher educa on ins tu ons meet their advancement targets and development campaign goals. Blackbaud Guided Fundraising is used
by ins tu ons seeking to manage all the details behind the sophis cated, person-to-person solicita on strategies that drive fundraising results. Blackbaud
Volunteer Network Fundraising helps ins tu ons manage volunteer fundraising campaigns with tools for project management, communica on and repor ng.
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Financial Management
Blackbaud, Inc.
Blackbaud Financial Edge NXT® is the first-of-its-kind cloud accoun ng solu on for nonprofits that is intui ve, fully integrated, and built the way nonprofits
need it. Blackbaud Financial Edge NXT is advanced technology with powerful repor ng tools to help accoun ng teams drive transparency, stewardship, and
compliance while enabling them to seamlessly manage transac ons and eliminate manual processes. It seamlessly integrates with Raiser's Edge NXT to
simplify gi entry processing and relates informa on from both systems in an informa ve manner to eliminate redundant tasks and manual processes.
Financial Edge NXT provides nonprofit organiza ons with the means to help manage fiscal and fiduciary responsibility, enabling them to be more accountable
to their cons tuents.
Blackbaud Tui on Management™ benefits schools by giving administrators be er access to financial data and payment services, and by giving parents more
ways to remit tui on payments. The solu on helps ease the burden for administra ve staff by offering invoicing, payment processing, customer service,
enhanced communica on with parents and later payer follow-up services.
Blackbaud Financial Aid Management™ offers schools the ability to accept online, customized applica ons for financial aid and to make be er financial aid
decisions with a proprietary Hobbies, Interest and Lifestyles ("HIL") profile. The HIL profile provides in-depth informa on on an applicant, delivering to the
school a way to make more informed decisions on how they distribute financial aid awards.
Blackbaud Billing Management™ makes it easy for school administrators to manage tui on and billing processes and for parents to manage their payments to
the school. It gives families flexible payment op ons, provides the school visibility into payments and billing with metrics for suppor ng cash flow, one view of
financial performance, 24/7 bill access on all devices, and removes manual processes from admissions to finance and merchant services.
Grant and Award Management
Blackbaud Grantmaking™ is a modern cloud solu on, built on our Blackbaud SKY Pla orm, that supports the end-to-end grantmaking process from
applica on through review and resolu on. Blackbaud Grantmaking provides core func onality to efficiently disperse funds, maintain compliance with due
diligence requirements and measure and demonstrate impact. The system has collabora ve tools to help strengthen rela onships 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 pla orm for higher educa on and K-12 ins tu ons and
founda ons, allowing students to apply for all awards using one intui ve and streamlined applica on process and elimina ng many me-consuming
administra ve tasks. This leads to improved awarding, repor ng, compliance, communica on and stewardship.
Educa on Solu ons
Blackbaud Student Informa on System™ makes it easy for schools to manage schedules, transcripts and GPAs. A new Student Informa on System that works
directly with Blackbaud Learning Management System™, Blackbaud Student Informa on 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 informa on with students,
parents, and an en re 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 prospec ve families manage and track their progress, from inquiry and applica on 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 en re school community.
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Social Responsibility and ESG
Blackbaud, Inc.
YourCause GrantsConnect® and YourCause CSRconnect® are cloud solu ons for employee giving, volunteering, and grantmaking used to support corporate
philanthropy by building meaningful connec ons between corpora ons, employees and nonprofits. A er implemen ng YourCause solu ons, customers
typically show significant growth in volunteers, dona ons, engagement and more. These reported successes demonstrate a larger trend: overall ability to
a ract employees and customers alike by strengthening a company's reputa on.
EVERFI® from Blackbaud® delivers educa onal content that transforms what is possible for learners while enabling companies to achieve their social impact
and business goals. EVERFI’s robust library of courses connect students with real-world skills to navigate life’s most important challenges, from financial
capability to mental wellness — all made possible through the generous support of brands that believe in the las ng results of community investment.
Trusted by educators at over 25,000 K-12 schools, EVERFI’s curriculum reaches over 7 million students a year. Thousands of the world’s leading brands have
engaged with their communi es and achieved their social impact goals by sponsoring EVERFI’s trusted courses to empower students with the knowledge they
need to succeed in life.
Payment Services
Our solu ons provide our customers payment processing capabili es that enable their donors to make dona ons and purchase goods and services using
numerous payment op ons, including credit card and automated clearing house (“ACH”) checking transac ons, through secure online transac ons.
Blackbaud Merchant Services™ is a value-added service integrated with our solu ons that makes credit card processing simple and secure. Customers are
charged one rate for credit card transac ons, making Blackbaud Merchant Services a compe ve op on. The service also provides customers with a payment
card industry (“PCI”) compliant process and streamlined bank reconcilia on. We also provide our K-12 private school customers with student tui on payment
processing services.
Blackbaud Purchase Cards provide an efficient and convenient alterna ve to tradi onal procurement methods and paper-based payables processes such as
checks, purchase orders and invoices for travel and opera onal purchases. Organiza ons can also set spend controls for individual cardholders, track business
expenses across the organiza on and ensure that policies are being enforced—all managed online and integrated with Blackbaud Financial Edge NXT.
Data Intelligence
Our data intelligence offerings provide solu ons for data health, insights and performance, enabling nonprofits to define effec ve campaign strategies and
maximize fundraising results. These services either integrate with or are already integrated into our so ware solu ons to give our customers a comprehensive
view of their supporters and the market and provide informa on essen al to making well-informed opera ng decisions.
Blackbaud’s Intelligence for Good® is our comprehensive strategy to deliver ar ficial intelligence that is accessible, powerful and responsible. Our ar ficial
intelligence capabili es enable social impact organiza ons to transform data into insights and outcomes.
Blackbaud's data intelligence solu ons and services 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 por olio consists of three key outcome areas:
Data Health solu ons enhance and maintain cons tuent data so the customer is always working with accurate and up-to-date informa on. Examples of these
solu ons include: iden fying outdated or invalid cons tuent addresses in the database and making correc ons based on United States Postal Service data
and using name and address matching to append addi onal contact or demographic data points to cons tuent records to support be er segmenta on and
engagement.
Insights inform strategic decision-making and ac ons that increase efficiency and drive successful outcomes. Insights are extracted by combining customer
data with licensed and proprietary data before leveraging advanced AI capabili es and exper se from Blackbaud’s dedicated team of data scien sts. Examples
of cons tuent insights include: predic ve modeling that indicates the likelihood and capacity of a cons tuent making a gi , wealth screening so ware that
uses publicly available records to build detailed wealth profiles of cons tuents and persona cluster segmenta on that groups cons tuents based on shared
traits with guidance for op mizing messaging to each group.
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Blackbaud, Inc.
Performance solu ons help customers to assess their fundraising performance across donor segments, benchmark themselves against peer organiza ons and
understand industry trends. These solu ons provide a holis c view of donor performance that goes beyond standard campaign-based repor ng, with key
performance indicators related to acquisi on, upgrading, reten on and reac va on. Customers use our performance solu ons to iden fy areas of weakness
and opportuni es for improvement, track the donor impact of strategic ini a ves, understand and respond to industry trends, set realis c benchmarks and
fundraising goals and maintain a consistent repor ng methodology to assess growth over me.
Customer Success
Our Customer Success organiza on is responsible for ensuring our customers achieve their desired outcomes through Blackbaud solu ons, star ng at
onboarding and con nuing through the customer lifecycle. Our Customer Success team develops and fosters rela onships within all levels of the customer
organiza on to build more demonstrated value in our solu ons and services, while helping customers achieve their desired outcomes. Our customer success
resources work to proac vely communicate to drive overall sa sfac on and reten on of our customers' business. They work to collect and analyze ac onable
informa on, whether that is through direct customer rela onships or through aggregated analy cs that drives future one-to-one or one-to-many interac ons.
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 exper se to the customer rela onship and strive to help our customers achieve posi ve growth
and outcomes.
Customer Support
Customer Support provides assistance to customers using Blackbaud Solu ons, helping them understand the capabili es of their subscrip on, including how
to navigate their subscrip on and answering related ques ons for core concepts of features and func onality. Benefits, such as priority rou ng or addi onal
support channels, are con nuously enhanced. Customers enrolled in the programs enjoy fast, reliable customer support, receive regular so ware updates,
stay up-to-date with regular communica on 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 ar cles, user guides, Blackbaud Community, our on-demand library of enablement sessions and
have around-the-clock access to support resources for mission-cri cal needs.
Professional and Managed Services
Our expert consultants, and those in our partner program, provide implementa on, op miza on, data conversion and customiza on services for our so ware
solu ons. These services include:
•
•
•
•
System implementa on;
Data conversion, business process analysis and applica on customiza on;
Database merging and enrichment, and secure credit card transac on processing;
Database produc on ac vi es; and
• Website design services;
• Outcome-based and prescrip ve services.
In addi on, we, and our delivery partners, apply our industry knowledge and experience, combined with expert knowledge of our solu ons, to evaluate an
organiza on'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 solu ons and applica on of best prac ces. This
includes our highly-rated Blackbaud University curriculum. Blackbaud University provides cer fica ons for our products and industry best prac ces. These
cer fica ons 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 solu ons. Instructor-led courses are designed to include hands-on lab exercises, as well as course materials with examples
and problems to solve.
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Customers
Blackbaud, Inc.
Millions of people across more than 100 countries connect, give, learn and engage through Blackbaud pla orms. During 2023, we had nearly 100,000
customers that paid Blackbaud through transac onal fees and more than 40,000 customers with contractual billing arrangements. Our largest single customer
accounted for less than 1% of our 2023 consolidated revenue.
Sales and Marke ng
Most of our solu ons and related services are sold through our direct sales force. Our direct sales force is complemented by a team of sales development
representa ves responsible for sales lead genera on and qualifica on. In addi on, lead genera on is supplemented by our customer success organiza on via
employee-generated sales leads. These sales and customer success professionals are primarily located throughout the United States, the U.K., Canada and
Australia. As of December 31, 2023, we had approximately 250 direct sales employees.
Our marke ng organiza on, which includes brand, digital, content, product, event and demand genera on marke ng and corporate communica ons,
develops and launches mul -channel campaigns designed to create brand recogni on and market awareness for our solu ons and services.
Our digital demand genera on mo on focuses on targeted account-based marke ng plays, as well as intent-based programs including paid search,
retarge ng, social and content syndica on programs. We supplement the digital mo on with our annual user conference, bbcon® (which was held in
November 2023 in-person for the first me since the pandemic), select par cipa on at virtual and in-person third-party trade shows, technical conferences,
and technology seminars. We also target publica on of our thought leadership content and posi on our subject ma er experts in industry journals and
publica ons. We have a large base of loyal customers and strategic partners that provide references and recommenda ons o en featured in our adver sing
and promo onal ac vi es.
Compe on
The market for so ware and related services targe ng philanthropic-focused for-profit and nonprofit organiza ons is compe ve 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 marke ng,
contact management, and accoun ng needs of social impact organiza ons. In parallel, as so ware development evolves from a highly-complex tradecra
with nuanced understanding of architectural pa erns and discrete languages, to click-to-code and drag-and-drop development with na vely cloud-based
infrastructure, it becomes easier for compe tors to quickly spin up basic applica ons to solve common problems. However, once basic needs are met,
programs unique to social impact organiza ons like the stewardship of rela onships and partnerships cri cal to major gi fundraising, community and
employee educa on; the cul va on and management of gi s, grants and K12 digital educa on sponsorship; the mul -level networking required for peer-to-
peer ac vism and employee engagement; and the sensi ve data and repor ng behind cri cal programs run by and for healthcare and educa on ins tu ons
ensure the ongoing need for highly specialized tools. These specialized applica ons have a higher barrier of entry as they require industry insight to accurately
ar culate the business workflow that generates the requirements for so ware products. Moreover, because social impact organiza ons rely heavily on
rela onships with and among their supporters, integra on of systems drives value beyond mere efficiency. Hence, we believe our insight, the full spectrum of
our current solu ons and our ability to deliver future solu ons make us a strong compe tor. We expect to con nue to see new entrants as focus on social
investment solu ons increases to sa sfy Millennial and Gen Z donors, customers and employees, the barriers of entry con nue to decline with na vely cloud
solu ons and social impact organiza ons more readily require digital transforma on of business processes and data-driven decision making.
Our compe on falls into four primary categories:
• Niche products are usually developed as a solu on for a single problem at an organiza on and are adopted by similar organiza ons to solve a
specialized need. These are typically offered by vendors who may have deep industry exper se but may not have the resources to expand beyond a
specialized area. We believe we compete against these solu ons by offering a set of integrated solu ons rather than a single point solu on, which
we believe improves the overall customer experience. In addi on, our open pla orm allows integra on to specialized applica ons so the
opportunity for disrup on from these compe tors is minimized.
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Blackbaud, Inc.
•
•
•
Ver cal-specific solu ons are offered by compe tors seeking to meet the enterprise-wide needs of a specific sub-segment of the social impact
community. Typically, these solu ons are offered by vendors who may offer either a point solu on or integrated suite of products used by a ver cal.
We believe we compete successfully against these compe tors through a combina on of our integrated suite of offerings and na onwide
community networks within ver cals where we compete, offering solu ons with market leading robustness and repor ng as well as the scale, reach,
and reputa on of our organiza on.
General business so ware vendors, such as Microso , Oracle and Salesforce.com, compete with us in certain areas of our business. While there is a
growing trend toward social investment that is promp ng philanthropic solu ons from these general business vendors, most do not have a complete
nonprofit specific focus and, therefore, do not offer, or to our knowledge do not intend to offer, nonprofit-specific versions. However, there is a
subset of general business so ware compe tors who have introduced nonprofit-specific versions of their products. These products generally do not
sa sfy 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 elicita on phases; therefore, we believe that because these products were not originally designed for
nonprofits, they are not yet fully capable of mee ng market needs without significant customiza on. The significant customiza on required to
transform general business products into nonprofit solu ons o en requires the use of consultants to guide the implementa on, without which,
leave the adop on of general business so ware limited to very basic opera ons and simple needs. We believe our solu ons compete successfully
against general business so ware as a nonprofit’s needs grow more complex. As a result, we believe we can compete successfully to meet nonprofit-
specific requirements, o en integra ng with general business pla orms used for their more generalized opera ons.
Consumer-oriented fundraising pla orms, such as GoFundMe and Facebook compete with our business where consumers raise funds directly. To
drive adop on of their pla orms, these vendors rely on a combina on of direct-to-consumer marke ng, marke ng to nonprofits who in turn market
to their supporters, and marke ng to intermediate en es such as an event sponsor who will market to par cipants. We believe we compete well in
this market through a combina on of posi ve brand recogni on among all three of these groups and the combina on of our consumer- and
organiza on-oriented tools rela ve to those of the compe on.
Less frequently, we compete with providers of tradi onal, non-automated fundraising service providers, including par es providing services in support of
tradi onal direct mail or email campaigns, special events fundraising, peer-to-peer, telemarke ng and personal solicita ons. We believe we compete
successfully against these tradi onal fundraising service providers, primarily because our solu ons and services are more automated, more robust, more
tailored to the needs of nonprofit organiza ons and more efficient.
Technology and Architecture
Our technology strategy consists of several key building blocks including cloud opera ons, developer tools, data intelligence and core services. We leverage
mul ple clouds in our architectures (including AWS and Azure) and have both single and mul -tenant solu ons. The best-in-class infrastructure enables rapid
innova on with high levels of reliability, availability and security, and lets Blackbaud evolve services over me 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 solu ons with industry-standard REST APIs, standards-based authen ca on protocols, and a best-in-class developer experience. SKY UX
allows developers to create applica ons with the same consistent, cohesive user interface as Blackbaud’s na ve solu ons using an open-source framework
that implements Blackbaud design pa erns and provides guidelines and tooling for the en re applica on lifecycle.
The development strategy for all Blackbaud cloud solu ons emphasizes:
•
•
•
Flexibility: Customers and partners can extend our component-based architecture to accommodate changing demands without modifying source
code.
Adaptability: The architecture of our applica ons allows us to easily add func onality or integrate with third-party applica ons 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 applica ons can scale to meet the needs of large organiza ons.
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Blackbaud, Inc.
Intellectual Property and Other Proprietary Rights
To protect our intellectual property, we rely on a combina on of patent, trademark, copyright and trade secret laws in various jurisdic ons, as well as
employee and third-party nondisclosure agreements and confiden ality procedures. We maintain many trademarks, including, but not limited to
“Blackbaud,” “Raiser's Edge NXT” and “Luminate.” We currently have two ac ve patents on our technology and have one pending patent applica on.
Human Capital Resources
As of December 31, 2023, we had approximately 3,000 employees, none of whom are represented by unions or are covered by collec ve bargaining
agreements. We are not involved in any material disputes with any of our employees, and we believe that rela ons with our employees are strong.
We benefit from an engaged and driven employee base mo vated to join the Company by our work to support organiza ons and individuals driving social
impact. Our purpose a racts and retains talented, compe ve applicants, with approximately 90% of employees ci ng the fact that Blackbaud operates in a
socially responsible manner is important to them. This differen ator not only builds strong employee engagement, but also helps us provide a higher level of
service to our customers. With over 70% of employees volunteering with nonprofits annually and one in seven serving on a nonprofit board or commi ee,
our direct experience enables our teams to be er serve our customer base.
Blackbaud also a racts and promotes talented employees through effec ve and targeted recrui ng strategies. In 2020, Blackbaud announced the launch of a
temporary workforce strategy, allowing employees to work from home or other geographic loca ons within the country to further support their overall well-
being during the COVID-19 pandemic. In 2021, we formally rolled out our Remote First Work-strategy as a company which expanded our pool of qualified
applicants for roles and internal career progression and enabled Blackbaud's goal to a ract and develop talent globally.
Employee engagement is a focus at Blackbaud, and we con nually work to understand what ma ers and to make our workplace be er to a ract, develop,
and retain talent. Every manager at Blackbaud is required to take a mul -course "Engagement Labs" training designed to equip them with the prac cal skills
to ensure their teams are highly engaged. We assess and measure progress on engagement and growth opportuni es at the individual level through quarterly
check-ins focused on impact and learnings, as well as through 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 surveys as well as "Ask Anything"
sessions with senior leaders and dedicated Q&A sessions during our global, company-wide Connect and Engage mee ngs. We enable employees to have
opportuni es for career development through on-demand and company-led trainings in our Learning Management System pla orm: DevelopU.
Our compensa on framework is designed so that employees are compensated equitably and compe vely, including through base salary, variable pay, equity
award opportuni es and comprehensive benefit offerings. We also seek to support the whole person, through increased benefits and focus on overall well-
being.
Ul mately, we believe that Blackbaud is an excellent place to work because we are energized by our opportunity to fuel social impact and commi ed to
running our business in a way that amplifies the difference we make in the world. We govern our business ethically and contribute to causes and communi es
that ma er to our employees through corporate philanthropy. We pursue sustainability, and we work every day to ensure our workplace is suppor ve,
inclusive and engaging.
We offer an array of philanthropy programs aimed at engaging our employees as agents of good, including matching gi s, compe ve grants that honor
noteworthy examples of volunteerism, employee-led grant commi ees, skills-based volunteerism ini a ves, as well as science, technology, engineering and
mathema cs (STEM) focused community programs.
Our commitment to inclusion and sustainability supports our efforts to a ract, develop and retain a high-performing employee base. In 2023, we brought
together the talent acquisi on team with Inclusion and Corporate Social Responsibility teams under one leader within People and Culture. The company
believes that it is essen al to foster inclusion from the moment a candidate considers Blackbaud. This alignment con nues our focus to amplify and
accelerate the significant ini a ves already in place at Blackbaud, including: a focus on allyship, mentoring and affinity groups. We have 11 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.
2023 Form 10-K
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Blackbaud, Inc.
We believe we have a responsibility to act in the fight against climate change—it is both the right thing to do and necessary to ensure the future stability of
our business and customers. For these reasons, Blackbaud takes proac ve measures to protect the environment, both in our internal sustainable business
prac ces and our external engagements. As we did in 2021 and 2022, in 2023 we plan to achieve carbon neutrality across our business opera ons. We are
commi ed to our con nued efforts to reduce our emissions footprint and provide transparent annual social responsibility and sustainability repor ng.
Blackbaud was recognized by Newsweek as one of America's Most Responsible Companies 2024, Built In's Best Places to Work, Forbes' list of America's Best
Employers 2023 and won Governance Team of the Year for small to mid-cap companies in Governance Intelligence's annual Corporate Governance Awards.
Addi onal informa on related to our human capital strategy can be found in our 2022 ESG Report which is available on the Corporate Social Responsibility
sec on of our website. Informa on 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 inac ve textual references only.
Seasonality
For a discussion of seasonal varia ons in our business, see “Management’s Discussion and Analysis of Financial Condi ons and Results of Opera ons —
Seasonality” in Item 7 in this report.
Working Capital
For a discussion of our working capital prac ces, see “Management’s Discussion and Analysis of Financial Condi ons and Results of Opera ons — Liquidity
and Capital Resources” in Item 7 in this report.
Available Informa on
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 Sec on 13(a) or 15(d) of the Exchange Act as soon as reasonably
prac cable a er we electronically file such material with, or furnish it to, the SEC, but other informa on on our website is not incorporated into this report.
The SEC maintains an Internet site that contains these reports, proxy and informa on statements, and other informa on regarding issuers that file
electronically with the SEC at www.sec.gov.
Informa on About Our Execu ve Officers
The following table sets forth informa on concerning our execu ve officers as of February 15, 2024:
Name
Michael P. Gianoni
Anthony W. Boor
David J. Benjamin
Kevin P. Gregoire
Kevin R. McDearis
Jon W. Olson
14
2023 Form 10-K
Age
63
61
52
56
56
60
Title
Chief Execu ve Officer, President and Vice Chairman of the Board
Execu ve Vice President and Chief Financial Officer
Execu ve Vice President and Chief Commercial Officer
Execu ve Vice President and Chief Opera ng Officer
Execu ve Vice President and Chief Technology Officer
Senior Vice President and General Counsel
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Blackbaud, Inc.
Michael P. Gianoni joined us as Chief Execu ve Officer and President in January 2014 and was appointed Vice Chairman of the Board in January 2024. Prior to
joining us, he served as Execu ve Vice President and Group President, Financial Ins tu ons 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
Execu ve Vice President and General Manager of CheckFree Investment Services, which provided investment management solu ons to financial services
organiza ons, from June 2006 un l 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 solu ons. Mr. Gianoni is a member of the Board of Directors of Teradata
Corpora on, a publicly traded global big data analy cs company, and has been Chairman of the Board since February 2020. Mr. Gianoni has served on several
nonprofit boards across several segments, including relief organiza ons, hospitals and higher educa on. He currently is a board member of the Interna onal
African American Museum and a member of the President's Advisory Group at the Medical University of South Carolina. He holds an AS in electrical
engineering from Waterbury State Technical College, a BS with a business concentra on from Charter Oak State College, and an MBA and an honorary
Doctorate from the University of New Haven.
Anthony W. Boor joined us as Execu ve Vice President and Chief Financial Officer in November 2011 and served as our interim President and Chief Execu ve
Officer from August 2013 to January 2014. Prior to joining us, he served as an execu ve with Brightpoint, Inc., a global provider of device lifecycle services to
the wireless industry, beginning in 1999, most recently as its Execu ve 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 Opera ons for
Brightpoint North America from August 1998 to July 1999. Prior to joining Brightpoint, Mr. Boor was employed in various financial posi ons with Macmillan
Computer Publishing, Inc., a Viacom owned book publishing company specializing in computer hardware and so ware related topics, Day Dream Publishing,
Inc., a publishing company specializing in calendars, posters and me management materials, Ernst & Young LLP, an accoun ng firm, Expo New Mexico, a
state-owned fair and expo grounds and live pari-mutual horse racing venue, KPMG LLP, an accoun ng firm, and Ernst & Whinney LLP, an accoun ng firm. He
holds a BS in Accoun ng from New Mexico State University.
David J. Benjamin has served as our Execu ve Vice President and Chief Commercial Officer since July 2022. He joined us as Execu ve Vice President and
President, Interna onal Markets Group in April 2018. Prior to joining us, Mr. Benjamin was Senior Vice President and General Manager at Box, a cloud content
management pla orm for businesses, from October 2016 to March 2022. Prior to that, he was Vice President of Global Services at Bri sh Telecom, a
mul na onal telecommunica ons holding company, from October 2007 to September 2016. Prior to that, he was at Guardian Media Group, a mass media
company owning various media opera ons company, where he served as Divisional Chief Opera ng 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.
Kevin P. Gregoire has served as our Execu ve Vice President and Chief Opera ng Officer since July 2022. Prior to that, he was the Execu ve Vice President and
President of U.S. Markets since April 2021. He joined us as Execu ve Vice President and President, Enterprise Markets Group in April 2018. Prior to joining us,
Mr. Gregoire was Group President of the Financial Ins tu ons Group at Fiserv, a global technology provider serving the financial services industry, from March
2014 un l February 2018. He joined Fiserv in December 2002 and served in other key leadership roles including Division President and Chief Opera ng
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 Commenda on 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 Execu ve Vice President and Chief Technology Officer since October 2016 and is responsible for the company’s global
product and technology por olio, including cybersecurity. He joined us in August 2014 as our Senior Vice President of Global Product Development. Prior to
joining us, Mr. McDearis was the Chief Informa on Officer at Manha an 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 organiza on in strategy development, organiza on development, por olio and
project management, so ware and infrastructure engineering, service delivery and opera ons. Prior to that, Mr. McDearis served as Chief Technology Officer
for the Enterprise Technology Group and other key leadership posi ons 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 Founda on. He also served on the
Board of Directors of the Technology Associa on of Georgia from 2011 to 2016 and as Vice Chairman of the Board in 2014. He holds a BS in Management
from The Georgia Ins tute of Technology.
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Blackbaud, Inc.
Jon W. Olson joined us as Senior Vice President and General Counsel in September 2008. Mr. Olson is responsible for Blackbaud's legal ac vi es. Prior to
joining us, he was an a orney with Alcatel-Lucent USA, the U.S. subsidiary of Alcatel-Lucent (now owned by Nokia Corpora on) that designs, develops, and
builds wireline, wireless, and converged communica ons networks, from July 1997 to September 2008. Prior to joining Alcatel-Lucent, Mr. Olson was
employed in legal posi ons with MCI, Inc., a global business and residen al communica ons company, from September 1996 to July 1997, and Unisys
Corpora on, a global informa on 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 Charleston Jazz. He holds a BS from Georgetown University, a JD from Dickinson School
of Law and an MBA from Seton Hall University.
ITEM 1A. RISK FACTORS
Our business opera ons face a number of risks. These risks should be read and considered with other informa on provided in this report.
Strategic Risks
Our failure to compete successfully, including through technology innova ons or new and improved solu ons, could cause our revenue or market share to
decline.
Our market is highly compe ve and rapidly evolving, and there are limited barriers to entry for many segments of this market. The companies we compete
with and other poten al compe tors may have greater financial, technical and marke ng resources, generate greater revenue and have be er name
recogni on than we do. Also, a large, diversified so ware enterprise could decide to enter the market directly, including through acquisi ons. Compe ve
pressures can adversely impact our business by limi ng the prices we can charge our customers and making the adop on and renewal of our solu ons more
difficult. Our compe tors might also establish or strengthen coopera ve rela onships with resellers and third-party consul ng firms or other par es with
whom we have had rela onships, thereby limi ng our ability to promote our solu ons. These compe ve pressures could cause our revenue and market
share to decline.
In addi on, the introduc on of solu ons encompassing new technologies can render exis ng solu ons obsolete and unmarketable. As a result, our future
success will depend, in part, upon our ability to con nue to enhance exis ng solu ons and develop and introduce in a mely manner or acquire new
solu ons that keep pace with technological developments, sa sfy increasingly sophis cated customer requirements and achieve market acceptance. If we are
unable to develop or acquire on a mely and cost-effec ve basis new so ware solu ons or enhancements to exis ng solu ons or if such new solu ons or
enhancements do not achieve market acceptance, we may be unable to compete successfully and our business, results of opera ons and financial condi on
may be materially adversely affected.
Because compe on for highly qualified personnel is intense, we might not be able to a ract and retain key personnel needed to support our planned
growth.
To meet our objec ves successfully, we must a ract and retain highly qualified personnel with specialized skill sets. If we are unable to a ract and retain
suitably qualified management, there could be a material adverse impact on our business.
Further, we use equity incen ve programs and equity awards in lieu of cash as part of our overall employee compensa on agreements to both a ract and
retain personnel. A decline in our stock price could nega vely impact the value of these equity incen ve and related compensa on programs as reten on and
recrui ng tools. We may need to create new or addi onal equity incen ve programs and/or compensa on packages to remain compe ve, which could be
dilu ve to our exis ng stockholders and/or adversely affect our results of opera ons.
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The market for so ware and services for the social impact community might not grow and the organiza ons in that community might not con nue to
adopt, or renew their subscrip ons for, our solu ons and services.
Many organiza ons in the social impact community, including nonprofits, founda ons, companies, educa on ins tu ons, and healthcare organiza ons, have
not tradi onally used integrated and comprehensive so ware and services for their specific needs. We cannot be certain that the market for such solu ons
and services will con nue to develop and grow or that these organiza ons will elect to adopt our solu ons and services rather than con nue to use
tradi onal, less automated methods, a empt to develop so ware internally, rely upon legacy so ware systems, or use so ware solu ons not specifically
designed for this market. Organiza ons that have already invested substan al resources in other fundraising methods or other non-integrated so ware
solu ons might be reluctant to adopt our solu ons and services to supplement or replace their exis ng systems or methods. In addi on, the implementa on
of one or more of our so ware solu ons 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 solu ons and services does not increase, we might not grow our business as we expect.
Furthermore, our subscrip on arrangements are generally for a term of three years at contract incep on with three-year renewals therea er. Our
maintenance arrangement renewals are generally for a term of three years. As the end of the contract term approaches, we seek the renewal of the
agreement with the customer. Historically, subscrip on and maintenance renewals have represented a significant por on of our total revenue. Because of this
characteris c of our business, if our customers choose not to renew their subscrip ons or maintenance arrangements with us on beneficial terms or at all,
our business, opera ng results and financial condi on could be harmed. Our customers' renewal rates may decline or fluctuate as a result of a number of
factors, including their level of sa sfac on with our solu ons and services and their ability to con nue their opera ons and spending levels due to general
economic condi ons, extraordinary business interrup ons, client-specific financial issues or otherwise.
We are incorpora ng genera ve ar ficial intelligence, or AI, technology into certain of our products and services. This technology is new and developing,
and while we aim to adopt known best prac ces, it may result in opera onal, financial and reputa onal harm and other adverse consequences to our
business.
We are implemen ng AI features in certain of our products and services. The technologies underpinning these features are in the early stages of commercial
use and exist in an emerging regulatory environment, which presents regulatory, li ga on, ethical, reputa onal, opera onal and financial risks. Many U.S. and
interna onal governmental bodies and regulators have proposed, or are in the process of developing, new regula ons related to the use of AI and machine
learning technologies. The final form of these may impose obliga ons related to our development, offering and use of AI technologies and expose us to
increased risk of regulatory enforcement and li ga on. We also expect that many of our genera ve AI features will include the processing of personal data
and may be subject to laws, policies, legal obliga ons and codes of conduct related to privacy and data protec on. There is uncertainty about the extent to
which privacy and data protec on laws apply to AI technologies, and any delay in addressing privacy or data protec on concerns rela ng to our AI features
may result in liability or regulatory inves ga ons and fines, as well as harm to our sales and reputa on. In addi on, issues rela ng to intellectual property
rights in AI-generated content have not been fully addressed by the courts, laws or regula ons. Accordingly, the implementa on of genera ve AI technologies
into our products and services may result in exposure to claims related to copyright infringement or other intellectual property misappropria on.
Furthermore, many of our AI features may rely on third-party service providers. As such, any improper processing of personal data by these service providers
could harm our reputa on, business or customers, or expose us to legal liability. Any disrup on or failure in our AI systems or infrastructure could result in
delays or errors in our opera ons, which could harm our business and financial results.
Our genera ve AI technology features may also generate output that is misleading, insecure, inaccurate, harmful or otherwise flawed, which may harm our
reputa on, business or customers, or expose us to legal liability. Also, some AI scenarios present ethical issues. If we enable or offer AI solu ons that are
controversial because of their purported or actual impact on human rights, privacy, employment or other social issues, we may experience reputa onal harm.
New and emerging AI technologies may require addi onal investment in the development and maintenance of various models, approaches and processes, as
well as development of protec ons and safeguards for the use of AI technologies, which may be expensive and could impact our financial results if we decide
to further expand genera ve AI into our products and services. Likewise, the use of AI involves significant technical complexity and requires specialized
exper se. The success of any enhancement or new product depends on many factors, including its relevance to our customers, mely implementa on and
market acceptance. If our enhanced products and services do not achieve widespread market adop on
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or there is a reduc on in demand due to a lack of customer acceptance, technology challenges, strengthening compe on, weakening economic condi ons,
or security or privacy concerns, our business could be harmed and our financial results could be adversely affected.
Although we aim to develop and use AI responsibly and a empt to iden fy and mi gate ethical and legal issues presented by its use, we may be unsuccessful
in iden fying or resolving issues before they arise.
If we do not successfully address the risks inherent in the expansion of our interna onal opera ons, our business could suffer.
We currently have non-U.S. opera ons primarily in the U.K., Canada, Australia and Costa Rica, and we intend to expand further into interna onal markets.
Expansion of our interna onal opera ons will require a significant amount of a en on from our management and substan al financial resources and might
require us to add qualified management in these markets. Our direct sales model requires us to a ract, 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 interna onal opera ons in a cost-effec ve and mely manner, our business and opera ng results could be harmed.
Increases in our interna onal revenues denominated in foreign currencies subject us to fluctua ons in foreign currency exchange rates. If we expand our
interna onal opera ons, exposures to gains and losses on foreign currency transac ons may increase. (See Foreign Currency Exchange Rates on page 59 for
more informa on regarding the impact of foreign currency exchange rates on our opera ons.)
Doing business interna onally involves addi onal risks that could harm our opera ng results. Along with risks similar to those faced by our U.S. opera ons,
our interna onal opera ons are also subject to risks related to differing legal, poli cal, social and regulatory requirements and economic condi ons,
including:
•
•
•
•
the imposi on of addi onal withholding taxes or other tax on our foreign income, tariffs or restric ons 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 an trust regula ons, the U.S. Foreign
Corrupt Prac ces Act, the U.K. Bribery Act of 2010, and any trade regula ons ensuring fair trade prac ces;
the imposi on of, or unexpected adverse changes in, foreign laws or regulatory requirements, including those pertaining to export restric ons,
privacy and data protec on, trade and employment restric ons and intellectual protec ons; and
general business disrup ons caused by geopoli cal situa ons and developments.
Unfavorable media coverage related to peer-to-peer fundraising campaigns on our social pla orms could nega vely impact our business.
Our online social giving pla orms receive a high degree of media coverage for par cularly news-worthy or controversial fundraising campaigns, as well as for
our fee-based business model. Although our terms of service provide express limita ons on the pla orms' user-ini ated 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 a en on in the
media. Nega ve publicity related to our online social giving pla orms 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.
Acquisi ons could be difficult to consummate and integrate into our opera ons, and they could disrupt our business, dilute stockholder value or impair our
financial results.
As part of our business strategy, we, from me to me, seek to grow our business through acquisi ons of new or complementary businesses, technologies or
products that we believe can improve our ability to compete in our exis ng customer markets or allow us to enter new markets. The poten al risks associated
with acquisi ons and investment transac ons include, but are not limited to:
•
•
•
failure to realize an cipated returns on investment, cost savings and synergies;
difficulty in assimila ng the opera ons, policies and personnel of the acquired company;
unan cipated costs associated with acquisi ons;
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•
•
•
•
•
•
challenges in combining product offerings and entering into new markets in which we may not have experience;
distrac on of management’s a en on from normal business opera ons;
poten al loss of key employees of the acquired company;
difficulty implemen ng effec ve internal controls over financial repor ng, disclosure controls and procedures and cybersecurity and data protec on
procedures;
impairment of rela onships with customers or suppliers; and
issues not discovered in due diligence, which may include product quality issues or legal or other con ngencies.
For example, following our acquisi on 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 an cipated returns on our investment.
Acquisi ons, including for example our acquisi on of EVERFI, Inc., may also result in poten ally dilu ve issuances of equity securi es, the incurrence of debt
and con ngent liabili es, the expenditure of available cash, and amor za on expenses or write-downs related to intangible assets such as goodwill, any of
which could have a material adverse effect on our opera ng results or financial condi on. We may experience risks rela ng to the challenges and costs of
closing a business combina on and the risk that an announced business combina on may not close. There can be no assurance that we will be successful in
making addi onal acquisi ons in the future or in integra ng or execu ng on our business plan for exis ng or future acquisi ons.
A reduc on in the growth or amount of charitable giving due to deteriora ng general economic condi ons, a recession or otherwise could adversely affect
our opera ng results and financial condi on.
A large percentage of our customers are nonprofits, founda ons, educa on ins tu ons, healthcare organiza ons and other members of the social impact
community that fully or par ally rely on charitable dona ons. If charitable giving, including online giving, does not con nue to grow or declines, it could limit
our current and poten al customers' ability to use and pay for our solu ons and services, which could adversely affect our opera ng results and financial
condi on.
In addi on, we derive a significant por on of our revenue from transac on-based payment processing fees that we collect from our customers through our
Blackbaud Merchant Services solu on, which enables our customers' donors to make dona ons and purchase goods and services using various payment
op ons. A reduc on in the growth of, or a decline in, charitable giving to these customers, whether due to deteriora ng general economic condi ons, the
impact of past or future changes to applicable tax laws, or otherwise, could nega vely impact the volume and size of such payment processing transac ons
and thereby adversely affect our opera ng results and financial condi on.
Our failure to obtain licenses for, or our use of, third-party technologies could harm our business.
We expect to con nue licensing technologies from third par es, including applica ons used in our research and development ac vi es, technologies that are
integrated into our solu ons and solu ons that we resell. We believe that the loss of any third-party technologies currently integrated into our solu ons 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 solu on development un l equivalent technology can be iden fied, licensed or developed and integrated. This inability in turn could harm our
business and opera ng results.
Our use of third-party technologies also exposes us to increased risks including, but not limited to, risks associated with the integra on of new technology
into our solu ons, 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 acquisi on and maintenance costs.
Opera onal Risks
Breaches of our so ware, our failure to securely collect, store and transmit customer informa on, or our failure to safeguard confiden al donor data,
including, for example, the Security Incident described below, exposes us to liability, li ga on, government inves ga ons, penal es and remedial costs
and our reputa on and business could suffer.
Fundamental to the use of our solu ons is the secure collec on, storage and transmission of confiden al donor, customer and end user data, personally
iden fiable informa on and transac on data, including in our payment services. Despite the
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network, applica on 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 the of confiden al donor data and transac on data, which has in the past harmed and may in the
future harm our business, reputa on and future financial results. Furthermore, our reliance on remote access to informa on systems increases our exposure
to poten al cybersecurity incidents.
Like virtually all major businesses, we are, from me to me, a target of cybera acks, such as the Security Incident (as described below and in Note 11 to our
consolidated financial statements in this report), informa on systems interrup ons, phishing, social engineering schemes and other systems disrup ons. We
expect these threats to con nue, 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 sophis cated, it
may be difficult to an cipate these acts or to detect them for periods of me, as with the Security Incident, and we may be unable to respond adequately or
mely. As these threats con nue to evolve and increase, we have already devoted and expect to con nue to devote significant resources in order to modify
and enhance our security controls and to iden fy and remediate any security vulnerabili es.
A compromise of our data security, such as the Security Incident, that results in customer or customer cons tuent personal or payment card data being
obtained by unauthorized persons could adversely affect our reputa on with our customers and others, as well as our opera ons, results of opera ons,
financial condi on and liquidity and has resulted in, and could in the future result in, li ga on against us, government inves ga ons or the imposi on of fines
and penal es. (See Note 11 to our consolidated financial statements in this report for informa on regarding li ga on, government inves ga ons, fines and
penal es related to the Security Incident.) We have been, and in the future might be, required to expend significant addi onal capital and other resources to
rec fy problems caused by a security breach, including no fica on under data privacy laws and regula ons, and incur expenses related to remedia ng our
informa on security systems.
Even though we may carry cyber-technology insurance policies that provide insurance coverage under certain circumstances, we have in the past suffered
losses and may in the future suffer losses as a result of a security breach that exceed the coverage available under our insurance policies or for which we do
not have coverage. (See Note 11 to our consolidated financial statements in this report for expense and insurance coverage informa on 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 disrup on of our opera ons, par cularly our online sales opera ons.
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 informa on systems can be difficult to detect for long
periods of me and can involve difficult or prolonged assessment or remedia on periods even once detected. We, therefore, cannot assure you that all
poten al causes of past significant incidents, including the Security Incident, have been fully iden fied 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 con nue to have, numerous adverse effects on our business, results of opera ons, financial condi on 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 a ack. Prior to our successfully preven ng the cybercriminal from blocking our system access and fully encryp ng
files, and ul mately expelling them from our system with no significant disrup on to our opera ons, the cybercriminal removed a copy of a subset of data
from our self-hosted environment that affected over 13,000 customers. Based on the nature of the incident, our research and third party (including law
enforcement) inves ga on 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 inves ga on into the Security Incident remains ongoing and may provide addi onal informa on.
To date, we have received approximately 260 specific requests for reimbursement of expenses, approximately 214 (or 82%) of which have been fully resolved
and closed and approximately 39 (or 15%) are inac ve and are considered by us to have been abandoned by the customers. We have also received
approximately 400 reserva ons of the right to seek expense recovery in the future from customers or their a orneys in the U.S., U.K. and Canada related to
the Security Incident, none of which resulted in claims submi ed to us and are considered by us to have been abandoned by the customers. We have also
received no ces of proposed claims on behalf of a number of U.K. data subjects, which we are reviewing. In addi on, insurance
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Blackbaud, Inc.
companies represen ng various customers’ interests through subroga on claims have contacted us, and certain insurance companies have filed subroga on
claims in court, of which 3 cases remain ac ve and unresolved. Customer and insurer subroga on claims generally seek reimbursement of their costs and
expenses associated with no fying their own customers of the Security Incident and taking steps to assure that personal informa on has not been
compromised as a result of the Security Incident. In addi on, presently, we are a defendant in puta ve consumer class ac on cases in U.S. federal courts
(most of which have been consolidated under mul district li ga on to a single federal court) and in Canadian courts alleging harm from the Security
Incident. The plain ffs in these cases, who generally purport to represent various classes of individual cons tuents of our customers, generally claim to have
been harmed by alleged ac ons and/or omissions by us in connec on with the Security Incident and assert a variety of common law and statutory claims
seeking monetary damages, injunc ve relief, costs and a orneys’ fees, and other related relief. We have received a Civil Inves ga ve Demand from the office
of the California A orney General rela ng to the Security Incident. In addi on, we are subject to pending governmental ac ons or inves ga ons by the U.S.
Federal Trade Commission, the U.S. Department of Health and Human Services, the Office of the Australian Informa on 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 descrip on of the Security
Incident and related ma ers.)
On March 9, 2023, the Company reached a se lement with the SEC in connec on with the Security Incident. This se lement fully resolves the previously
disclosed SEC inves ga on of the Security Incident and is further described in the SEC Order. Under the terms of the SEC Order, the Company agreed to cease-
and-desist from commi ng or causing any viola ons or any future viola ons of Sec ons 17(a)(2) and (3) of the Securi es Act and Sec on 13(a) of the
Exchange Act, and Rules 12b-20, 13a-13 and 13a-15(a) thereunder. As part of the SEC Order, the Company also agreed to pay, and has paid, a civil penalty in
the amount of $3.0 million.
On October 5, 2023, the Company reached a se lement with each of 49 state A orneys General and the District of Columbia in connec on with the Security
Incident. This se lement fully resolves the previously disclosed mul -state Civil Inves ga ve Demand and the separate Civil Inves ga ve Demand from the
Office of the Indiana A orney General rela ng to the Security Incident, which is further described in the substan ally similar Administra ve Orders filed in
each of the 49 states and the District of Columbia. Under the terms of the Administra ve Orders, we have agreed: (i) to comply with state consumer
protec on laws, data breach no fica on laws, and HIPAA; (ii) not to make misleading misrepresenta ons to our customers or the individuals whose data is
stored by us concerning (a) the extent to which we protect the privacy, security, confiden ality, or integrity of certain data, (b) the likelihood that data
impacted by a security incident may be subject to unauthorized access, disclosure, or other misuse, or (c) the data breach no fica on requirements; and (iii)
to implement and improve certain cybersecurity programs and tools. As part of the Administra ve Orders, we also agreed to pay, and have paid, a total of
$49.5 million to the 49 states and District of Columbia. We paid the full se lement amount to each state and the District of Columbia during the fourth
quarter of 2023 from our exis ng liquidity. This amount was fully accrued as a con ngent liability in our financial statements as of June 30, 2023. We entered
into the Administra ve Orders without admi ng fault of liability in connec on with the ma ers subject to the Mul state Inves ga on. The form of
Administra ve Order was furnished as Exhibit 99.2 to the Company’s Current Report on Form 8-K filed with the SEC on October 5, 2023.
As previously disclosed, on February 1, 2024, the FTC announced its approval of an Agreement Containing Consent Order (the “Proposed Order”) evidencing
its se lement with the Company in connec on with the Security Incident. Pursuant to its rules, the FTC placed the Proposed Order and related dra
complaint on the public record for a period of 30 days for the receipt of public comments a er which the FTC will consider any comments received from
interested persons prior to determining whether and in what form to finalize the Proposed Order. The 30-day comment period is scheduled to expire on
March 14, 2024. As part of the FTC’s proposed order, the Company has not been fined and is not otherwise required to make any payment. Furthermore, the
Company has agreed to the FTC’s proposed order without admi ng or denying any of the FTC’s allega ons, except as expressly stated otherwise in the
Proposed Order. If finalized, the se lement described in the Proposed Order will fully resolve the FTC inves ga on. Although we believe the Proposed Order
will be finalized in substan ally its current form, there can be no assurances as to whether that will occur or its ming. Under the terms of the Proposed
Order, we have agreed (i) to not misrepresent (a) the extent to which we maintain, use, delete or disclose certain customer informa on, (b) the extent to
which we protect the privacy, security, availability, confiden ality or integrity of such informa on or (c) the extent of any security incident or unauthorized
disclosure, misuse, loss, the , altera on, destruc on or other compromise of such informa on, and (ii) to delete certain data, adopt and make public certain
record reten on limits, establish, implement and maintain a specified informa on security program, obtain regular independent assessments of the
mandated informa on security program, provide to the FTC specified cer fica ons regarding our compliance with the Proposed Order, provide to the FTC
reports of any future security incidents and create and maintain specified recordkeeping. The form of Proposed Order was furnished as Exhibit 99.2 to the
Company’s Current Report on Form 8-K filed with the SEC on February 2, 2024.
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As noted above, the terms of the FTC Proposed Order, the A orneys General Administra ve Orders and our se lement with the SEC require that we
implement and maintain certain processes and programs and comply with certain legal requirements related to cybersecurity and data protec on. Any future
regulatory inves ga on or li ga on se lements may also contain such requirements. Effec vely implemen ng, monitoring and upda ng these requirements
is expected to be expensive and me-consuming over an extended period. Our failure to do so in accordance with the terms of our agreements with FTC, the
A orneys General and with the SEC, and possibly others, could expose us to addi onal material liability under the terms of the Administra ve Orders, the SEC
se lement, or otherwise.
We may be named as a party in addi onal lawsuits, other claims may be asserted by or on behalf of our customers or their cons tuents, and we may be
subject to addi onal governmental inquires, requests or inves ga ons. Responding to and resolving these current and any future lawsuits, claims and/or
inves ga ons could result in material remedial and other expenses that will not be covered by insurance. It is reasonably possible that our es mated or
actual losses may change in the near term for those ma ers and be materially more than the amounts accrued. Certain governmental authori es are seeking
to impose undertakings, injunc ve relief, consent decrees, or other civil or criminal penal es, 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 poten al outcomes, cost and expenses associated with current and any future claims, lawsuits, inquiries and inves ga ons.
In addi on, any legisla ve or regulatory changes adopted in reac on to the Security Incident or other companies’ data breaches could require us to make
modifica ons to the opera on of our business that could have an adverse effect and/or increase or accelerate our compliance costs.
Significant management me and Company resources have been, and are expected to con nue to be, devoted to the Security Incident. For example, for full
year 2023, we incurred net pre-tax expenses of $53.4 million related to the Security Incident, which included $22.4 million for ongoing legal fees and $31.0
million for se lements and recorded liabili es for loss con ngencies. During 2023, we had net cash outlays of $78.0 million related to the Security Incident,
which included ongoing legal fees, the $3.0 million civil penalty paid during the first quarter of 2023 related to the SEC se lement and the $49.5 million civil
penalty paid during the fourth quarter of 2023 related to the Mul state Inves ga on (as discussed in Note 11). Although we carry insurance against certain
losses related to the Security Incident, we exceeded the limit of that insurance coverage in the first quarter of 2022. As a result, we will be responsible for all
expenses or other losses (including penal es, fines or other judgments) or all types of claims that may arise in connec on with the Security Incident, which
could materially and adversely affect our liquidity and results of opera ons. (See Note 11 to our consolidated financial statements included in this report.) If
any such fines or penal es were great enough that we could not pay them through funds generated from opera ng ac vi es and/or cause a default under
the 2020 Credit Facility, we may be forced to renego ate or obtain a waiver under the 2020 Credit Facility and/or seek addi onal debt or equity financing.
Such renego a on 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 obliga ons as they come due.
In addi on, 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 contribu ng to loss of customer confidence, reduced customer demand, reduced customer reten on, strategic growth opportuni es, and
associated reten on and recrui ng difficul es, some or all of which could be material.
Climate change and other natural disasters, new regula ons and standards and climate-related goals have impacted, and may in the future impact, our
opera ons and financial performance.
The long-term effects of climate change on the global economy and our industry may impact our business opera ons 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 disrup ons. The loca ons of our principal execu ve 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 addi on, the effects
of climate change are harder to mi gate for our remote-first workforce, which exposes the Company to business disrup on. Even though we carry business
interrup on 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 interrup ons that exceed the coverage available under our insurance policies or for which we do not have coverage. Any natural disaster or
catastrophic event affec ng us could have a significant nega ve impact on our opera ons.
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Expected new regula ons and standards rela ng to public disclosure, including those related to climate change, could adversely impose significant costs on us
to comply with such regula ons.
Finally, a failure to meet our climate-related goals, such as our commitment and progress towards reduc on of greenhouse gas emissions, could damage our
reputa on, affect our financial performance and impact our ability to a ract and retain talent.
Defects, delays or interrup ons in our cloud solu ons and hos ng services could diminish demand for these services and subject us to substan al liability.
We currently u lize data center hos ng facili es to provide cloud solu ons to a significant number of our subscrip on customers and hos ng services to our
on-premise license customers. Any damage to, or failure of, these data center systems generally could result in interrup ons in service to our customers,
notwithstanding any business con nuity or disaster recovery agreements that may currently be in place at these facili es. As noted above, our execu ve
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 interrup ons
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 solu ons and hos ng service offerings are complex and we have incorporated a variety of new computer hardware and so ware systems at our
data centers, our services might have errors or defects that users iden fy a er they begin using our services. This could result in unan cipated down me for
our customers and harm to our reputa on and business results. Internet-based services some mes contain undetected errors when first introduced or when
new versions or enhancements are released. We have from me to me found defects in our web-based services and new errors might again be detected in
the future. In addi on, our customers might use our Internet-based offerings in unan cipated ways that cause a disrup on in service for other customers
a emp ng to access their data.
Because our customers use these services for important aspects of their businesses, any defects, delays or disrup ons in service or other performance
problems with our services could hurt our reputa on 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 collec on cycles for accounts receivable or the expense and risk of li ga on. Any of these could harm our business and reputa on.
Material defects or errors in the so ware we use to deliver our services could harm our reputa on, result in significant costs to us and impair our ability to
sell our services.
The so ware applica ons underlying our services are inherently complex and may contain material defects or errors, par cularly when first introduced or
when new versions or enhancements are released. We have from me to me found defects in our so ware, and new errors in our exis ng so ware may be
detected in the future.
A er the release of our so ware, defects or errors may also be iden fied from me to me by our internal team and our customers. The costs incurred in
correc ng any material defects or errors in our so ware may be substan al and could harm our opera ng results. Furthermore, our customers may use our
so ware together with solu ons from other companies. As a result, when problems occur, it might be difficult to iden fy the source of the problem. Even
when our so ware does not cause these problems, the existence of these errors might cause us to incur significant costs, divert the a en on of our technical
personnel from our solu on development efforts, impact our reputa on and cause significant customer rela ons 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 informa on, or are otherwise unable to effec vely manage our payment processing business, we could be subject to financial liability, our
reputa on could be harmed and customers may be reluctant to use our solu ons and services.
Our solu ons provide our customers payment processing capabili es that enable their cons tuents to make dona ons and purchase services using numerous
payment op ons, including credit card and automated clearing house (“ACH”) checking transac ons, through secure online transac ons. The provision of
convenient, trusted, fast and effec ve payment processing services to our customers and poten al customers is cri cal to our business, and revenue from
payments processing cons tutes a significant percentage of our total revenue. Increases in payment processing fees, material changes in our payment
processing systems, changes to rules or regula ons concerning payments or disrup ons or failures in our payment processing systems or payment products,
including products we use to update payment informa on, could materially adversely impact our customer reten on and results of opera on. In addi on,
from me to me, we encounter fraudulent
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use of payment methods that could result in substan al addi onal costs or delay, preclude planned transac ons, product launches or improvements, require
significant and costly opera onal changes, impose restric ons, limita ons, or addi onal 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 reten on. Furthermore, we con nue to undertake system
upgrades designed to improve the availability, reliability, resiliency and speed of our payments systems. These efforts are costly and me-consuming, involve
significant technical complexity and risk, may divert our resources from new features and products and may ul mately not be effec ve.
The rules of payment card associa ons in which we par cipate 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 solu ons and services to PCI DSS or other payment services related regula ons or
requirements imposed by payment networks or our customers or payment processing partners is expensive and me-consuming. However, failure to comply
may subject us to fines, penal es, damages and civil liability, may impair the security of payment card data in our possession, and may harm our reputa on
and our business prospects, including by limi ng our ability to process transac ons. All Blackbaud products in scope for PCI DSS compliance meet applicable
PCI DSS security requirements.
In addi on, we rou nely subject our various data protec on processes and controls to voluntary third-party review, audit or repor ng, including, for example,
the American Ins tute of Cer fied Public Accountants’ System and Organiza on Controls repor ng. Failure to conduct these voluntary data protec on
process and control reviews or to obtain and maintain audits or reports covering our data protec on processes and controls may harm our reputa on or our
business prospects and our ability to market our solu ons to our customers.
Financial Risks
Because a significant por on of our revenue is recognized over me on a ratable basis over the contract term, downturns in sales may not be immediately
reflected in our revenue.
We generally recognize our subscrip on and maintenance revenue ratably over me over the contract term. Our subscrip on arrangements are generally for
a term of three years at contract incep on with three-year renewals therea er. Our maintenance arrangement renewals are generally for a term of three
years. As a result, much of the revenue we report in each quarter is a ributable to arrangements entered into during previous quarters. Consequently, a
decline in sales to new customers, renewals by exis ng customers or market acceptance of our solu ons in any one quarter will not necessarily be fully
reflected in the revenues in that quarter and could nega vely affect our revenues and profitability in future quarters.
We significantly increased our leverage in connec on with acquisi on of EVERFI and may increase our leverage in the future in connec on with addi onal
acquisi ons, Security Incident costs or other business purposes, which could adversely impact our business and financial performance.
We incurred a substan al amount of indebtedness in connec on with acquisi ons, including our acquisi on 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 obliga ons have increased. In addi on, we
have been named as a party in various lawsuits in connec on with the Security Incident, claims have been asserted by or on behalf of our customers or their
cons tuents, and we are subject to various governmental inquires, requests or inves ga ons. Responding to and resolving these current and any future
lawsuits, claims and/or inves ga ons 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 poten al outcomes, cost and expenses associated with current and any future claims, lawsuits, inquiries and
inves ga ons, which could require that we incur addi onal indebtedness to fund. (See Note 11 to our consolidated financial statements in this report for
addi onal informa on 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 substan al por on of our cash flow from opera ons to payments on our indebtedness, thereby reducing the availability of
our cash flow to fund working capital, capital expenditures, acquisi ons, dividends, stock repurchases and other general corporate purposes;
Increasing the amount of interest we pay, par cularly if interest rates increase;
Limi ng our flexibility in planning for, or reac ng to, changes in our business and the industries in which we operate;
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•
•
•
•
Restric ng us from making addi onal strategic acquisi ons or exploi ng business opportuni es;
Placing us at a compe ve disadvantage compared to our compe tors that have less debt;
Reducing our currently available borrowing capacity or limi ng our ability to borrow addi onal funds; and
Decreasing our ability to compete effec vely or operate successfully under adverse economic and industry condi ons.
If we incur addi onal debt, these risks may intensify. Our ability to meet our debt service obliga ons will depend upon our future performance, which will be
subject to the financial, business and other factors affec ng our opera ons, many of which are beyond our control.
In addi on, addi onal 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 descrip on 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 nega vely affect our business, opera ons and financial condi on.
Our balance sheet includes significant amounts of goodwill and intangible assets. The impairment of a significant por on of these assets could nega vely
affect our opera ng results.
As of December 31, 2023, we had $1.1 billion and $581.9 million of goodwill and intangible assets, respec vely. 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 wri en down to fair value by a non-cash charge to opera ng 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 capitaliza on, cash flows and slower growth rates in our
industry. We cannot accurately predict the likelihood or poten al amount and ming of any impairment of goodwill or other intangible assets. An impairment
of a significant por on of goodwill or intangible assets could materially and nega vely affect our results of opera ons and financial condi on.
Restric ons in our credit facility limit certain of our ac vi es, including dividend payments, stock repurchases and acquisi ons.
Our credit facility contains restric ons, including covenants limi ng our ability to incur addi onal debt, grant liens, make acquisi ons and other investments,
prepay specified debt, consolidate, merge or acquire other businesses, sell assets, pay dividends and other distribu ons, repurchase stock and enter into
transac ons 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
addi on, certain of our material domes c 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 obliga ons 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. Stock repurchases
could also increase the vola lity 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 expira on 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 have, from me to me, repurchased stock
under this program and re-ini ated repurchases under the program in the fourth quarter of 2023 a er a two-year hiatus. 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
vola lity, and any announcement of a termina on of this program may result in a decrease in the trading price of our
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stock. In addi on, implementa on of some or all of this program diminishes our cash reserves, which may impact our ability to finance future growth, to
pursue possible future strategic opportuni es and acquisi ons and fund liabili es and expenses related to the Security Incident. (See Note 14 to our
consolidated financial statements in this report for addi onal informa on 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, 2023, we had deferred tax assets of $143.3 million. Realiza on of our deferred tax assets is dependent upon our genera ng sufficient
taxable income in future years to realize the tax benefit from those assets. Deferred tax assets are reviewed at least annually for realizability. A charge against
our earnings would result if, based on the available evidence, it is more likely than not that some por on of the deferred tax asset will not be realized beyond
our exis ng valua on allowance. This could be caused by, among other things, deteriora on in performance, adverse market condi ons, adverse changes in
applicable laws or regula ons, including changes that restrict the ac vi es of or affect the solu ons sold by our business and a variety of other factors. If a
deferred tax asset net of our valua on 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 opera ons in the period the determina on is made. Addi onally, if we are unable to u lize our deferred tax assets, our cash flow
available to fund opera ons 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 por on of our deferred tax assets would have an adverse effect on our financial condi on and results of opera ons.
Legal and Compliance Risks
Privacy and data protec on concerns, including evolving domes c and interna onal government regula on in the area of consumer data privacy or data
protec on, could adversely affect our business and opera ng results.
The effec veness of our so ware solu ons relies on our customers' storage and use of data concerning their customers, including financial, personally
iden fying or other sensi ve data. Our customers' collec on and use of this data for donor profiling, data analy cs or communica ons outreach might raise
privacy and data protec on concerns and nega vely impact the demand for our solu ons and services. For example, our custom modeling and analy cal
services rely heavily on processing and using of data we gather from customers and various sources. Privacy and data protec on laws could add restric ons or
regulatory burdens, which could limit our ability to market and profit from those services.
Governments in some jurisdic ons have enacted or are considering enac ng consumer data privacy or data protec on legisla on, including laws and
regula ons applying to the solicita on, collec on, transfer, processing and use of personal data. This legisla on could reduce the demand for our so ware
solu ons if we fail to design or enhance our solu ons to enable our customers to comply with the privacy and data protec on measures required by the
legisla on. Moreover, we may be exposed to liability under exis ng or new consumer privacy or data protec on legisla on. For example, when providing our
solu ons 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 legisla on, including, without limita on, the Gramm-Leach-Bliley Act and related
regula ons, and the California Consumer Privacy Act of 2018, which became effec ve January 1, 2020, and may apply to some of our customers and areas of
business. Even technical viola ons of these laws may result in penal es that are assessed for each non-compliant transac on.
We, and some of our customers, are subject to the E.U. General Data Protec on Regula on (“GDPR”) and U.K. data protec on 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. All
solu ons we sell to customers subject to GDPR must include GDPR features. The implementa on of GDPR has affected our ability to offer some features and
services to customers in the E.U. and U.K. Furthermore, ac ons and inves ga ons by regulatory authori es related to data security incidents and privacy
viola ons con nue to increase, which have impacted us, and could in the future further impact us, through increased costs or restric ons on our business,
and noncompliance could result in significant regulatory penal es and legal liability.
If our customers or we were found to be subject to and in viola on of any privacy or data protec on laws or regula ons, our business may be materially and
adversely impacted and we and/or our customers would likely have to change our business prac ces. In addi on, these laws and regula ons could impose
significant costs on our customers and us and make it more
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Blackbaud, Inc.
difficult for donors to make online dona ons. (See Note 11 to our consolidated financial statements included in this report for a descrip on of the Security
Incident and related legal proceedings and regulatory ma ers.)
We are in the informa on technology business, and our solu ons and services store, retrieve, transfer, manipulate and manage our customers’ informa on
and data. The effec veness of our so ware solu ons relies on our customers’ storage and use of data concerning their donors, including financial, personally
iden fying and other sensi ve data and our business uses similar systems that require us to store and use data with respect to our customers and personnel.
Our collec on and our customers’ collec on and use of this data might raise privacy and data protec on concerns and nega vely impact our business or the
demand for our solu ons and services. If a breach of data security, such as the Security Incident, were to occur, or other viola on of privacy or data
protec on laws and regula ons were to be alleged, our business may be materially and adversely impacted and solu ons may be perceived as less desirable,
which would nega vely affect our business and opera ng 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 subs tute technology.
We have been, and may in the future be, subject to claims that the technologies in our solu ons and services infringe upon the intellectual property or other
proprietary rights of a third party. In addi on, the vendors providing us with technology that we use in our own solu ons could become subject to similar
infringement claims. Although we believe that our solu ons and services do not infringe any intellectual property or other proprietary rights, we cannot be
certain that our solu ons 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 substan al costs to defend against the claim, even if the claim is without merit, and could distract our
management from our business. Moreover, any se lement or adverse judgment resul ng from the claim could require us to pay substan al amounts, or
obtain a license to con nue 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 asser ng any par cular claim, or
that we would be able to successfully develop alterna ve technology on a mely basis, or that we would be able to obtain a license from another provider of
suitable alterna ve technology to permit us to con nue offering, and our customers to con nue using, the solu ons and services. In addi on, we generally
provide in our customer arrangements for certain solu ons and services that we will indemnify our customers against third-party infringement claims rela ng
to technology we provide to those customers, which could obligate us to pay damages if the solu ons 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 condi on and results of
opera ons.
Our solu ons u lize open source so ware, which may subject us to li ga on, require us to re-engineer our solu ons, or otherwise divert resources away
from our development efforts.
We use open source so ware in connec on with certain of our solu ons. Such open source so ware is generally licensed by its authors or other third par es
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 li le legal precedent governing the interpreta on of many of the terms of some of these licenses and,
therefore, the poten al impact of these terms on our business is currently unable to be determined and may result in unan cipated obliga ons regarding our
solu ons and technologies. From me to me, companies that incorporate open source so ware into their products have faced claims challenging the
ownership of open source so ware and/or compliance with open source license terms. Therefore, we could be subject to li ga on by par es claiming
ownership of open source so ware or noncompliance with open source licensing terms. Some open source so ware licenses require users who distribute
open source so ware as part of their own so ware to publicly disclose all or part of the source code to such so ware and/or make available any deriva ve
works of the open source code on unfavorable terms or at no cost. While we monitor our use of open source so ware 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 applica ons,
discon nue sales in the event re-engineering cannot be accomplished on a mely basis, or take other remedial ac on that may divert resources away from
our development efforts, any of which could adversely affect our business.
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We rely upon trademark, copyright, patent and trade secret laws to protect our proprietary rights, which might not provide us with adequate protec on.
Our success and ability to compete depends to a significant degree upon the protec on of our proprietary technology rights. We might not be successful in
protec ng our proprietary technology and our proprietary rights might not provide us with a meaningful compe ve advantage. To protect our core
proprietary technology, we rely on a combina on of patent, trademark, copyright and trade secret laws, as well as nondisclosure agreements, each of which
affords only limited protec on.
Changing domes c and interna onal laws, government regula ons and policies, laws limi ng or restric ng our ability to pass card charges on to
customers and other similar laws and regula ons, could adversely affect our business and opera ng results by increasing compliance costs, reducing
customer demand for our solu ons or damaging our reputa on.
Certain of our solu ons, in par cular our financial management and payment services solu ons, relate to ac vity heavily regulated by government agencies
in the U.S., the U.K. and other countries in which we operate. The laws and regula ons enforced by these agencies are proposed or enacted to deter fraud
and other illicit financial transac ons and to protect consumers and the financial system and are o en revised or increased in scope. We have procedures and
controls in place to monitor compliance with numerous federal, state and foreign laws and regula ons. However, because these laws and regula ons are
complex, differ between jurisdic ons, and are o en subject to interpreta on, or as a result of unintended errors, we may, from me to me, inadvertently
violate these laws and regula ons. Compliance with these laws and regula ons is expensive and requires the me and a en on of management. These costs
divert capital and focus away from efforts intended to grow our business. If we do not successfully comply with laws, regula ons, or policies, we could incur
fines or penal es, be subject to li ga on, lose exis ng or new customer contracts or other business, and suffer damage to our reputa on.
In addi on, changes in certain laws, regula ons or policies could impact our customers, alter our business environment and limit our opera ons. For example,
various financial ins tu ons subscribe to our EVERFI training solu on, which they may then provide free of charge to schools in low-income and moderate-
income communi es as a means of sa sfying their obliga ons under the Community Reinvestment Act of 1977, as amended (the “CRA”). Repeal or significant
modifica on of the CRA or the many government agency regula ons and policies implemen ng its provisions could cause financial ins tu ons to limit or
eliminate their purchases of these EVERFI solu ons and thereby nega vely impact our opera ng results and financial condi on.
Provisions in our organiza onal documents, our Stockholder Rights Agreement (as described below, the "Rights Agreement"), certain officer compensa on
arrangements and Delaware law may delay or prevent an acquisi on or change of control of our Company that could be deemed beneficial to our
stockholders.
Certain provisions in our organiza onal documents, the Rights Agreement, compensa on arrangements with our officers and Delaware law (as summarized
below) may have the effect of delaying, deferring, discouraging or preven ng an acquisi on or change in control of the Company or a change in our
management. This includes tender offers for our common stock, proxy contests or other takeover a empts. These an -takeover effects may discourage
transac ons that might result in the payment of a premium over the market price for shares of our common stock. Even in the absence of a takeover a empt,
the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover a empts
in the future.
Cer ficate of Incorpora on and Bylaw provisions. The Board of Directors is divided into three classes of directors, as nearly equal in number as possible, with
each class serving a staggered term of three years. The classifica on of directors will have the effect of making it more difficult and me-consuming for
stockholders to change the composi on of the Board of Directors, could discourage a third-party from making a tender offer or otherwise a emp ng to
obtain control of the Company and may maintain the incumbency of the Board of Directors.
Our Bylaws contain an advance no ce procedure for stockholders' proposals to be brought before a mee ng of stockholders, including any proposed
nomina ons of persons for elec on to the Board of Directors. The Bylaws may have the effect of precluding the conduct of business at a mee ng if the proper
procedures are not followed and may discourage or deter a poten al acquirer from conduc ng a solicita on of proxies to elect its own slate of directors or
otherwise a emp ng to obtain control of the Company.
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The Board of Directors has the authority to issue up to an aggregate of 20,000,000 shares of preferred stock in one or more classes or series and to
determine, with respect to any such class or series, the designa ons, powers, preferences and rights of such class or series, and the qualifica ons, limita ons
and restric ons thereof, including dividend rights, dividend rates, conversion rights, vo ng rights, terms of redemp on (including sinking fund provisions),
redemp on prices, liquida on preferences, and the number of shares cons tu ng any class or series or the designa on of such class or series, without
further vote or ac on by the stockholders. This preferred stock, including the Series A Preferred Stock described below, could have terms that may discourage
a poten al acquirer from making, without first nego a ng with the Board of Directors, an acquisi on a empt through which such acquirer may be able to
change the composi on of the Board of Directors, including a tender offer or other takeover a empt.
The Board of Directors possesses the authority to call and hold emergency special mee ngs of the Board of Directors with less than forty-eight hours’ no ce.
This power to hold an emergency special mee ng of the Board of Directors on short no ce could discourage a poten al acquirer from launching a bid to
acquire majority ownership of the Company, a proxy solicita on in order to replace the current Board of Directors, or otherwise a emp ng to obtain control
of the Company.
Stockholder Rights Agreement. On October 7, 2022, the Company declared a dividend of one preferred share purchase right (a "Right") for each of the
Company’s issued and outstanding shares of our common stock. The descrip on and terms of these Rights are set forth in the Rights Agreement by and
between the Company and American Stock Transfer & Trust Company, LLC. Each Right en tles the registered holder, subject to the terms of the Rights
Agreement, to purchase from us one one-thousandth of a share of the Series A Junior Par cipa ng Preferred Stock, par value $0.001 per share (the “Series A
Preferred Stock”) at a price of $313.00, subject to certain adjustments (as adjusted from me to me, the “Exercise Price”). Under the Rights Agreement, the
Rights will become exercisable if an en ty, person or group acquires beneficial ownership of 20% or more of the outstanding common stock in a transac on
not approved by the Board of Directors. In the event that the Rights become exercisable due to the ownership threshold being crossed, each Right will en tle
its holder (other than the person, en ty or group triggering the Rights Plan, whose rights will become void and will not be exercisable) to purchase addi onal
shares of our common stock having a then-current market value of twice the Exercise Price, which would likely make any takeover or change of control
a empt by such en ty, person or group prohibi vely expensive. Subject to the terms of the Rights Agreement, the Rights were scheduled to expire on
October 2, 2023. On October 2, 2023, the Company amended the Rights Agreement to extend the final expira on date from October 2, 2023 to October 2,
2024. The Company expects to submit this amendment to the Company’s stockholders for ra fica on at the Company’s 2024 annual mee ng of stockholders.
On January 26, 2024, the Company amended the Rights Agreement to reflect a change in rights agent. Addi onal informa on regarding the Rights Agreement
and it amendments, including copies thereof, is contained in the Company’s Current Reports on Form 8-K filed with the SEC on October 7, 2022, October 2,
2023 and January 26, 2024.
Officer Compensa on Arrangements. We have entered into an employment agreement with our Chief Execu ve Officer and reten on agreements with
certain of our officers, which provide that, upon the occurrence of a change in control of us and either the termina on of their employment without cause (as
defined) or their resigna on for good reason (as defined), such persons would be en tled to certain termina on or severance payments made by us (which
may include a lump sum payment equal to defined percentages of compensa on and accelerated ves ng of certain equity stock awards paid in accordance
with the terms and condi ons of the respec ve agreement). Such provisions could significantly increase the costs to a third-party acquirer and/or deter such
third-party from acquiring us.
Delaware an -takeover law. We are subject to Sec on 203 of the Delaware General Corpora on Law, an an -takeover law. In general, Sec on 203 prohibits a
publicly held Delaware corpora on, such as the Company, from engaging in a “business combina on” with an “interested stockholder” for a period of three
years following the date the person became an interested stockholder, unless certain criteria are met. Generally, a “business combina on” includes a merger,
asset or stock sale, or other transac on resul ng in a financial benefit to the interested stockholder. Generally, an “interested stockholder” is a person who,
together with affiliates and associates, owns, or is an affiliate or associate of the corpora on, and within three years prior to the determina on of interested
stockholder status did own, 15% or more of a corpora on’s vo ng stock.
Changes in our effec ve tax rate and addi onal tax liabili es and global tax developments may impact our financial results.
We are subject to income taxes in the United States and various other jurisdic ons. Significant judgment is o en required in the determina on of our
worldwide provision for income taxes. Our effec ve tax rate could be impacted by changes in our earnings and losses in countries with differing statutory tax
rates, changes in opera ons, changes in non-deduc ble expenses, changes in excess tax benefits of stock-based compensa on, changes in the valua on of
deferred tax assets and liabili es and our ability to u lize them, the applicability of withholding taxes, effects from acquisi ons, and changes in accoun ng
2023 Form 10-K
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Blackbaud, Inc.
principles and tax laws. Any changes, ambiguity or uncertainty in taxing jurisdic ons’ administra ve interpreta ons, decisions, policies and posi ons could
also materially impact our income tax liabili es.
We may also be subject to addi onal tax liabili es and penal es due to changes in non-income-based taxes resul ng from changes in federal, state, local or
interna onal tax laws, changes in taxing jurisdic ons’ administra ve interpreta ons, decisions, policies and posi ons, results of tax examina ons, se lements
or judicial decisions, changes in accoun ng principles, or changes to our business opera ons, including as a result of acquisi ons. For example, the U.S.
Infla on Reduc on Act of 2022 created an excise tax of 1% on the value of any stock repurchased by us a er December 31, 2022. We could be subject to this
excise tax, but the amount will vary depending on various factors, including the amount and frequency of any stock repurchases and any permi ed reduc ons
or excep ons to the amount subject to the tax. Any resul ng increase in our tax obliga on or cash taxes paid could adversely affect our financial posi on and
cash flows.
We are also subject to tax examina ons or engaged in alterna ve resolu ons in mul ple jurisdic ons. While we regularly evaluate new informa on that may
change our judgment resul ng in recogni on, derecogni on or changes in measurement of a tax posi on taken, there can be no assurance that the final
determina on of any examina ons will not have an adverse effect on our opera ng results or financial posi on.
As we u lize our tax credits and net opera ng loss carryforwards, we may be unable to mi gate our tax obliga ons to the same extent as in prior years, which
could have a material impact to our future cash flows. In addi on, changes to our opera ng structure, including changes related to acquisi ons, may result in
cash tax obliga ons.
Global tax developments applicable to mul na onal businesses may have a material impact to our business, cash flow from opera ng ac vi es, or financial
results. Such developments, for example, may include certain United States’ proposals as well as the Organiza on for Economic Co-opera on and
Development’s, the European Commission’s and certain major jurisdic ons’ heightened interest in and taxa on of companies par cipa ng in the digital
economy.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
Because technology, data and informa on security is a top priority at Blackbaud, we maintain and con nuously assess and strengthen our cybersecurity
program. Comprehensive cybersecurity risk management, including iden fica on, analysis and response to risks affec ng our business and its customers,
provides the founda on for our program.
We u lize a four-prong strategy for assessing, iden fying and managing material risks from cybersecurity threats:
1. Opera onal security: We leverage the industry standard CIA Triad Model in conjunc on with comprehensive industry control frameworks,
compliance regula ons, privacy requirements and best prac ces, including: the Na onal Ins tute of Standards and Technology ("NIST")
Cybersecurity Framework, PCI DSS, System and Organiza on Controls ("SOC") 1, SOC 2, GDPR, HIPAA, the Trans-Atlan c Data Privacy Framework and
Cloud Security Alliance.
2. Product security: Our development teams take part in regular training and use industry best prac ces to build security into our solu ons.
3.
Incident response: We monitor the threat landscape 24/7 in coordina on with a third-party firm, rou nely test our incident response capabili es
and preparedness and maintain proac ve rela onships with law enforcement.
4. Ongoing landscape analysis: We con nually evaluate upcoming and changing data privacy regula ons and provide thought leadership for our
customers on the opera onal impacts of these regula ons and compliance requirements.
We believe that informa on and technology security is a shared responsibility and, therefore, incorporate data and privacy protec on educa on into the
customer experience through ongoing resources such as best prac ces content, one-on-one consulta ons with customer success managers and bbcon®
sessions. We also par cipate in global communi es and
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Blackbaud, Inc.
conference pla orms to share informa on and present on best prac ces to improve the industry’s security awareness posture. In addi on, Blackbaud
employees are all engaged in on-going security and privacy awareness training campaigns to ensure they are empowered to protect both Blackbaud’s and our
customers’ data.
Blackbaud also maintains a defined program and dedicated team that provides security oversight of its third-party service providers. This program assesses
and manages risk at the onboarding phase of engagement with third-party vendors and partners as well as oversight throughout the lifecycle of the vendor
rela onship.
We regularly engage outside consultants and experts to assist us regarding our cybersecurity program. Engagements include an annual NIST Cybersecurity
Framework assessment to ensure a reasonable cybersecurity program and retained leading external cybersecurity Incident Response (IR) experts.
Consistent with our priori za on of informa on and technology protec on, cybersecurity risk management has been and remains a key aspect of our overall
business strategy, financial planning and capital alloca on and a point of ongoing emphasis at all levels of our Company.
In addi on, we con nuously learn from and leverage experience gained from previous cybersecurity incidents that we, like many other companies, have
experienced. As previously disclosed, we have been and remain subject to risks and uncertain es as a result of a ransomware a ack against us in May 2020 in
which a cybercriminal removed a copy of a subset of data from our self-hosted environment. As a result of the Security Incident, we are currently subject to
certain legal proceedings, claims and inves ga ons and could be the subject of addi onal legal proceedings, claims, inquiries and inves ga ons in the future
that might result in adverse judgments, se lements, fines, penal es or other resolu on. See Note 11 to the consolidated audited financial statements
contained in this Annual Report on Form 10-K for addi onal informa on regarding the Security Incident and its past and poten al impact on the Company.
Notwithstanding our strong commitment to cybersecurity, we may not be successful in preven ng or mi ga ng a cybersecurity incident that could have a
material adverse effect on us. See Item 1A. "Risk Factors" for a discussion of our cybersecurity risks.
Governance
Our mul -level cybersecurity governance and risk management structure begins with our Opera onal Risk Compliance and Security (“ORCAS”) Commi ee
consis ng of cross-func onal management representa ves throughout our Company. The ORCAS Commi ee receives detailed cybersecurity informa on from
key security personnel and reports at least quarterly up through our Risk Steering Commi ee, which is made up of execu ves and senior management from
various Blackbaud departments: Chief Execu ve Officer, Chief Opera ng Officer, Chief Financial Officer, Chief Technology Officer, General Counsel, Chief
Privacy Officer and Chief Informa on Security Officer ("CISO"), who has extensive informa on technology and program management experience. Our CISO
has served in various roles of increasing responsibility in informa on technology and informa on security for more than 25 years, including serving in various
cybersecurity leadership roles within public and private companies. He holds two undergraduate degrees—one in business administra on and the other in
computer informa on systems, a graduate degree in informa on systems and maintains two cybersecurity industry recognized cer fica ons: Cer fied
Informa on Systems Security Professional (CISSP) and Cer fied Cloud Security Professional (CCSP), both from the Interna onal Informa on System Security
Cer fica on Consor um. Cybersecurity leaders repor ng to our CISO also have significant informa on technology and informa on security experience and
industry recognized cer fica ons.
The Risk Steering Commi ee reports to the Risk Oversight Commi ee of our Board of Directors at the regular quarterly mee ngs, or more frequently as
needed. The Risk Oversight Commi ee's du es include, among other things, oversight of risks related to informa on technology security. The Risk Oversight
Commi ee communicates as appropriate with the full Board of Directors, which is ul mately responsible for cybersecurity risk oversight.
Addi onally, our cybersecurity Incident Response plan mely informs our Cybersecurity Incident Subcommi ee on ac ve cybersecurity incidents that are
poten ally material. The Cybersecurity Subcommi ee determines cybersecurity materiality and is made up of our General Counsel, Chief Informa on
Security Officer, Chief Accoun ng Officer and Director of SEC Repor ng. Our Cybersecurity Incident Subcommi ee is part of our Disclosure Commi ee, which
is appointed by Chief Execu ve Officer and Chief Financial Officer to assist our execu ves in their responsibility for oversight of the accuracy and meliness of
the disclosures made by Blackbaud.
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ITEM 2. PROPERTIES
We own our LEED Gold cer fied global headquarters facility in Charleston, South Carolina, which consists of approximately 172,000 square feet. We believe
that it is in good opera ng condi on and adequately serves our current business opera ons.
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 loca on to align with our remote-first workforce strategy and have since that me subleased a por on of the space. We con nue
to pursue strategic alterna ves for our Washington, DC office space, including addi onal subleases. 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.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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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.” According to the records of our transfer agent, as of
February 14, 2024, there were approximately 109 stockholders of record of our common stock. Because many of our shares of common stock are held by
brokers and other ins tu ons on behalf of stockholders, this number is not representa ve of the total number of beneficial owners of our stock. On
February 14, 2024, the closing price of our common stock was $71.61.
Stock Performance Graph
The following performance graph shall not be deemed to be “solici ng material” or “filed” or incorporated by reference in future filings with the SEC, or
subject to the liabili es of Sec on 18 of the Exchange Act except as shall be expressly set forth by specific reference in such filing. The performance graph
compares the performance of our common stock to the Nasdaq Composite Index and the Nasdaq Computer Index. The graph covers the most recent five-
year period ended December 31, 2023. The graph assumes that the value of the investment in our common stock and each index was $100.00 at
December 31, 2018, and that all dividends are reinvested.
December 31,
Blackbaud, Inc.
Nasdaq Composite Index
Nasdaq Computer Index
2018
$100.00
100.00
100.00
2019
$127.30
136.69
148.27
2020
$92.21
198.10
233.26
2021
$126.53
242.03
296.23
2022
$94.30
163.28
192.48
2023
$138.90
236.17
315.60
2023 Form 10-K
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Blackbaud, Inc.
Issuer Purchases of Equity Securi es
The following table provides informa on about shares of common stock acquired or repurchased during the three months ended December 31, 2023 under
our stock repurchase program as then in effect, as well as common stock withheld by us to sa sfy the minimum tax obliga ons of employees due upon
ves ng of restricted stock awards and units.
Period
Beginning balance, October 1, 2023
October 1, 2023 through October 31, 2023
November 1, 2023 through November 30, 2023
December 1, 2023 through December 31, 2023
Total
Total
number
of shares
(1)
purchased
— $
3,194
222,593
225,787 $
Average
price
paid
per
share
—
73.02
84.89
84.72
Total number
of shares
purchased as
part of
publicly
announced
plans or
(2)
programs
$
—
—
221,836
221,836 $
Approximate
dollar value
of shares
that may yet
be purchased
under the
plans or
programs
(2)
(in thousands)
250,000
250,000
250,000
231,169
231,169
(1)
(2)
Includes 3,951 shares (3,194 in November and 757 in December) withheld by us to sa sfy the minimum tax obliga ons of employees due upon ves ng of restricted stock awards and
units. The level of this acquisi on ac vity varies from period to period based upon the ming of award grants and ves ng.
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. On January 17, 2024, our Board of Directors reauthorized, expanded and replenished our stock repurchase program by raising the total capacity under the program from
$250.0 million to $500.0 million available for repurchases. The program does not have an expira on date.
Dividends
We have not declared or paid any cash dividends on our common stock since the first quarter of 2020, and we do not presently plan to pay cash dividends on
our common stock in the foreseeable future. Payment of future cash dividends, if any, will be at the discre on of our board of directors a er taking into
account various factors, including our financial condi on, opera ng results, current and an cipated cash needs, outstanding indebtedness, plans for
expansion and restric ons imposed by our debt arrangements, if any.
ITEM 6. [RESERVED]
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of our financial condi on and results of opera ons should be read in conjunc on 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 informa on denominated in millions of dollars which can lead to differences from rounding when compared to similar informa on contained in the
consolidated financial statements and related notes, which are primarily denominated in thousands of dollars.
Execu ve Summary
We are the leading so ware provider exclusively dedicated to powering social impact. Serving the nonprofit and educa on sectors, companies commi ed to
social responsibility and individual change makers, our essen al so ware is built to accelerate impact in fundraising, nonprofit financial management, digital
giving, grantmaking, corporate social responsibility and educa on management. A remote-first company, we have opera ons in the United States, Australia,
Canada, Costa Rica and the United Kingdom, suppor ng users in 100+ countries. Millions of people across more than 100 countries connect, give, learn and
engage through Blackbaud pla orms. During 2023, we had nearly 100,000 customers that paid Blackbaud through transac onal fees and more than 40,000
customers with contractual billing arrangements.
Our revenue is primarily generated from the following sources: (i) charging for the use of our so ware solu ons in cloud and hosted environments; (ii)
providing payment and transac on services; and (iii) providing Impact-as-a-Service™ digital educa onal content.
Update on Five Key Opera onal Ini a ves
1
2
3
4
5
Product Innova on and Delivery
Bookings Growth and Accelera on
Transac onal Revenue Op miza on and Expansion
Modernized Approach to Pricing and Mul -Year Customer Contracts
Keen A en on to Cost Management
1. Product Innova on and Delivery
Product is core at Blackbaud, and we strive to bring increased value to our customers with improved and innova ve capabili es. We have recently
announced or released a number of product enhancements as well as new solu ons that enable our customers to be er deliver on their missions. Some
examples include:
• Op mized Online Dona on Capabili es: New online dona on capabili es that fully integrate with Blackbaud’s payment processing and CRM
so ware and enable customers to raise more money while reducing processing costs. We recently began an early adopter program for the new
dona on capabili es with a small sample of RE NXT customers across charity, educa on, and arts and cultural organiza ons. We expect to make
them generally available in the first half of 2024.
•
•
Prospect Insights Pro for Raiser’s Edge NXT®: New add-on capability within Raiser’s Edge NXT® that gives fundraisers access to AI-driven insights to
support planned and major gi fundraising
TM
Impact Edge : A first-of-its-kind AI-powered, social impact repor ng and storytelling solu on for corporate social responsibility (CSR) and social
impact teams of all sizes. This new solu on is currently in an early adopter program with our planned full roll out in the second half of 2024.
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•
•
•
JustGiving Storywriter: With new genera ve AI capabili es, fundraisers on JustGiving are able to quickly and easily create personal stories to share
with their networks. Company research has shown that JustGiving pages that include a clear and personal story raise approximately 65% more than
those that don’t.
TM
Good Move : New development transformed the Good Move ac vity-tracking mobile app into a powerful mobile par cipant center for Blackbaud
TeamRaiser® peer-to-peer fundraising events. The new expansive feature for Blackbaud TeamRaiser® became generally available in the U.S. and
Canada in March 2023.
Intelligence for Good®: In summer 2023, we launched next genera on Intelligence for Good® strategy with an extensive agenda of ini a ves and
investments targeted at making ar ficial intelligence more accessible, powerful and responsible across the social impact sector
2. Bookings Growth and Accelera on
We maintain a keen focus on accelera ng bookings growth by signing new logos as well as upselling and cross-selling our exis ng customer base. Our
sales team is split between prospect account execu ves dedicated to prospec ng for new clients and customer account execu ves who focus on selling
addi onal products to current customers. Given the breadth of our product por olio, this “land and expand” model has proven successful for us over
me. As previously disclosed, there can be vola lity quarter-to-quarter on bookings.
3. Transac onal Revenue Op miza on and Expansion
Transac onal revenue, which is about one-third of total revenue, is comprised of four primary components: dona on processing (~55% of total
transac onal revenue); consumer giving (~20%); tui on management (~20%); and event-based usage (~5%). The diversity of the underlying transac on
volumes from these four sources has resulted in consistent transac onal recurring revenue growth in the mid-to-high single digits over the past several
years. Strong momentum in consumer giving and tui on management, rate increases on Blackbaud Merchant Services, and increased dona ons ed to
global events drove con nued solid transac onal recurring revenue growth in 2023. Going forward we will con nue to implement addi onal payments
solu ons op miza on to drive enhanced donor experience.
4. Modernized Approach to Pricing and Mul -Year Contracts
Last summer, we put in place an updated pricing policy primarily for our social sector customers that directly reflects the value we provide to them, is in-
line with the broader market and reflects the infla onary pressures that all businesses are facing. In November 2022, we started no fying customers with
a March 2023 contract renewal that we would be making important contract changes. First, we are offering 3-year contract renewal terms as our
standard, replacing one-year renewal terms. This process was already being implemented outside of the pricing changes. Second, we are implemen ng a
more significant rate increase on the 1-year renewal op on versus the 3-year renewal op on. And third, the 3-year renewal op on includes embedded
annual rate increases. Our 3-year renewal op ons did not historically include annual rate increases.
These efforts are well on their way and we have now completed the 2023 renewal cohort, which represented approximately 35% of the total contractual
revenue eligible for this program. Approximately another 30% of the renewable base is up for renewal in 2024, another 25% in 2025, and the remaining
10% in the beginning of 2026. The close day-to-day management of renewals, the mix of 3-year and 1-year contracts, and the impact of pricing are
progressing well, and we expect more impact from the compounding effect of these rate increases over me as we layer in future year contract renewals
and annual rate increases. Addi onally, the adop on of 3-year renewals as a standard, with more customers op ng for this op on than we originally
expected, are expected to have an added benefit of higher reten on which provides greater revenue assurance and predictability. Looking even further
ahead, the cycle starts fresh in 2026 as the 2023 signed contracts will begin to renew. We expect that this will be a sustainable and meaningful revenue
growth stream for us.
5. Keen A en on to Cost Management
Cost management ini a ves already completed drove a significant improvement in profitability during 2023. These ini a ves included:
•
A reduc on in headcount from approximately 3,600 in the third quarter of 2022 to approximately 3,000 as of December 31, 2023
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Blackbaud, Inc.
•
•
•
Con nued IT consolida on as we migrate customers from legacy private data centers to leading public cloud service providers. We closed four legacy
data centers during 2022 and two in 2023.
Renego ated key vendor contracts including Microso Azure and AWS
Reduced our real estate footprint as part of the shi to a remote first workforce
Going forward, our goal is to run the business at about this headcount level for the foreseeable future, while con nuing to drive efficiencies in other
areas of the business.
Financial Summary
Total Revenue ($M)
YoY Growth (%)
Income from Opera ons ($M)
YoY Growth (%)
Total revenue increased by $47.3 million during 2023, driven largely by the following:
+
-
Growth in recurring revenue primarily related to:
an increase in transac onal recurring revenue of $30.5 million primarily due to posi ve results related to pricing ini a ves we implemented
during 2023 and increases in volume for our Blackbaud Tui on Management, JustGiving and Blackbaud Merchant Services solu ons; and
an increase in contractual revenue of $29.3 million related to the performance of our cloud solu ons and, to a lesser extent, the early impact of
our pricing ini a ves; par ally offset by a decrease in maintenance revenue as customers migrate to our cloud solu ons.
Decrease in one- me services and other revenue primarily related to:
decrease in one- me consul ng revenue due primarily to less sales of crea ve services and implementa on and customiza on services. Also
contribu ng is an increase in u liza on of third-party service delivery partners. For several years, we have been strategically shi ing away from
a one- me services business model towards sales of retained and managed services and also embedding services in our renewable cloud
solu on contracts. Retained and managed services contracts that we expect to have a term consistent with our cloud solu on contracts, and
embedded services are recorded as recurring revenue; and
decrease in one- me analy cs revenue as analy cs now are generally integrated in our cloud solu ons.
For informa on on the impact of foreign currency fluctua ons on our financial results, see Foreign Currency Exchange Rates below on page 59.
We have a number of mul -year pricing ini a ves 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 a con nued accelera on in revenue growth during 2024 as we
begin to see the full-year effect of some of these pricing ini a ves.
We expect that the decline in our non-strategic one- me services and other revenue will slow in 2024 compared to the previous two years.
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Income from opera ons increased by $73.2 million during 2023, driven largely by the following:
+
+
+
+
+
+
-
-
-
-
Increase in total revenue, as described above
Net decreases in the following costs primarily due to our targeted workforce reduc ons discussed below:
•
•
Decrease in compensa on costs other than stock-based compensa on of $35.4 million; and
Decrease in commission expense of $1.1 million
Decrease in third-party contractor costs of $12.2 million primarily due to our focus on cost management
Decrease in hos ng and data center costs of $5.0 million as we con nue to migrate our cloud infrastructure to leading public cloud service
providers and make investments in security; currently, we expect our cloud infrastructure migra on efforts and increased level of cybersecurity
investments to con nue for the foreseeable future
Decrease in Security Incident-related expenses, net of insurance, of $2.3 million. See "Security Incident update" below on page 39.
Decrease in cost of revenue from a $2.3 million impairment charge during the three months ended June 30, 2022, against previously capitalized
so ware 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 solu ons
Increase in stock-based compensa on expense of $17.5 million a ributable to primarily due to overall Company performance against 2023 goals
and 2022 performance-based equity award adjustments, par ally offset by the targeted workforce reduc ons during the fourth quarter of 2022 and
first quarter of 2023
Increase in transac on-based costs of $9.2 million related to the increase in the volume of transac ons for which we process payments and, to a
lesser extent, increases in vendor rates
Increase in amor za on of intangible assets from business combina ons of $4.2 million due to our acquisi on of EVERFI
Net decrease of $4.0 million due to an increase in amor za on of capitalized so ware and content development costs, par ally offset by an
increase in so ware and content development costs that were required to be capitalized under the internal-use so ware guidance
We are con nuing to make investments in the business in areas such as innova on, ar ficial intelligence, cybersecurity, and our con nued shi of cloud
infrastructure to leading public cloud service providers. Our profitability during 2023 reflects some of these incremental investments. We plan to accelerate
some of the cybersecurity investments during 2024, which is expected to modestly impact our profitability in the near term.
We con nuously seek opportuni es to op mize our por olio of solu ons to focus me and resources on innova on 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 con nue to simplify and ra onalize our por olio
through product sunsets and dives tures of non-core businesses and technologies.
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Gross dollar reten on
Our recurring subscrip on contracts are typically for a term of three years at contract incep on with standard three year renewals therea er. A key factor to
our overall success is the renewal and expansion of our exis ng subscrip on agreements with our customers. Management uses gross dollar reten on in
analyzing our success at deligh ng our customers with innova ve and cloud solu ons. Gross dollar reten on is defined as contracted annual recurring
revenue ("CARR") divided by beginning CARR with a measurement period of twelve months. During 2023, our gross dollar reten on was approximately 90%.
This gross dollar reten on rate was slightly lower than our rate for the full year ended December 31, 2022 primarily due to the inclusion of EVERFI beginning
in 2023. Excluding EVERFI, our gross dollar reten on during 2023 was slightly higher than our rate for the full year ended December 31, 2022. We are
con nually inves ng in innova on, which we believe will increase gross dollar reten on over the long-term. Although some customer a ri on is normal, our
new contract pricing and renewal model (as described above on page 36) does not appear to have had a significant impact on customer a ri on to date.
Balance sheet and cash flow
At December 31, 2023, our cash and cash equivalents were $31.3 million. Under the 2020 Credit Facility, the carrying amount of our debt was $720.6 million
and our net leverage ra o was 1.97 to 1.00.
During 2023, we generated $199.6 million in cash flow from opera ons, had a net decrease in borrowings of $81.4 million and had aggregate cash outlays of
$64.1 million for purchases of property and equipment and capitalized so ware and content development costs.
We resumed stock repurchases during the fourth quarter of 2023 under our then exis ng stock repurchase program that authorized us to purchase up to
$250.0 million of our outstanding shares of common stock. On January 17, 2024, our Board of Directors reauthorized, expanded and replenished our stock
repurchase program by raising the total capacity under the program from $250.0 million to $500.0 million available for repurchases. We plan to repurchase
shares going forward to at least offset the dilu on from our annual stock-based compensa on and possibly beyond that amount as market condi ons and our
strategic plans permit. See addi onal details regarding our stock repurchase program below on page 56.
Security Incident update
As discussed in Note 11 to our consolidated financial statements included in this report, total costs related to the Security Incident exceeded the limit of our
insurance coverage in the first quarter of 2022. Accordingly, the Security Incident has nega vely impacted, and we expect it to con nue for the foreseeable
future to nega vely impact, our GAAP profitability and GAAP cash flow (see discussion regarding non-GAAP free cash flow and non-GAAP adjusted free cash
flow on page 53). For full year 2023, we incurred net pre-tax expenses of $53.4 million related to the Security Incident, which included $22.4 million for
ongoing legal fees. It also includes se lements and recorded liabili es for loss con ngencies of $31.0 million. Also, for full year 2023, we had net cash outlays
of $78.0 million related to the Security Incident, which included ongoing legal fees, the $3.0 million civil penalty paid during the first quarter of 2023 related
to the SEC se lement and the $49.5 million civil penalty paid during the fourth quarter of 2023 related to the mul -state A orneys General se lement (as
discussed in Note 11). In line with our policy, legal fees are expensed as incurred. For full year 2024, we currently expect net pre-tax expense of approximately
$5.0 million to $10.0 million and net cash outlays of approximately $8.0 million to $13.0 million for ongoing legal fees related to the Security Incident.
2023 Form 10-K
39
Table of Contents
Blackbaud, Inc.
As of December 31, 2023, we have recorded approximately $1.5 million in aggregate liabili es for loss con ngencies based primarily on recent nego a ons
with certain customers related to the Security Incident that we believe we can reasonably es mate in accordance with our loss con ngency procedures
described in Note 11. It is reasonably possible that our es mated or actual losses may change in the near term for those ma ers and be materially in excess
of the amounts accrued, but we are unable at this me to reasonably es mate the possible addi onal loss.
There are other Security Incident-related ma ers, including customer claims, customer cons tuent class ac ons and governmental inves ga ons, for which
we have not recorded a liability for a loss con ngency as of December 31, 2023 because we are unable at this me to reasonably es mate the possible loss or
range of loss. Each of these ma ers could, separately or in the aggregate, result in an adverse judgement, se lement, fine, penalty or other resolu on, the
amount, scope and ming of which we are currently unable to predict, but could have a material adverse impact on our results of opera ons, cash flows or
financial condi on.
Results of Opera ons
Reportable segment
We report our opera ng results and financial informa on in one opera ng and reportable segment. See Note 16 of our consolidated financial statements in
this report for addi onal informa on.
Comparison of 2023 vs. 2022
For informa on regarding the comparison of 2022 to 2021, please refer to Part II Item 7 of our Annual Report on Form 10-K for the year ended December 31,
2022 filed with the SEC on February 24, 2023.
Acquisi ons
During 2022 and 2021, we acquired companies that provided us with strategic opportuni es to expand our TAM and share of the philanthropic giving market
through the integra on of complementary solu ons and services to serve the changing needs of our customers. The following are the companies we acquired
and their respec ve acquisi on dates:
• Kilter, Inc. ("Kilter") on August 19, 2022
• EVERFI, Inc. on December 31, 2021
We have included the results of opera ons of acquired companies in our consolidated results of opera ons from the date of their respec ve acquisi ons. In
accordance with applicable accoun ng rules, we determined that the Kilter and EVERFI acquisi ons were not material to our consolidated financial
statements; therefore, revenue and earnings since the acquisi on date and pro forma informa on are not required or presented. See Note 3 to our
consolidated financial statements in this report for a summary of these acquisi ons.
40
2023 Form 10-K
Table of Contents
Blackbaud, Inc.
Revenue and Cost of Revenue
Recurring
Revenue ($M)
YoY Growth (%)
Cost of revenue ($M)
YoY Growth (%)
Gross profit ($M)
and gross margin (%)
Recurring revenue includes two components: contractual recurring and transac onal recurring.
Contractual recurring revenue is primarily comprised of fees for the use of our subscrip on-based so ware solu ons, which includes providing access to
cloud solu ons, Impact-as-a-Service™ digital educa onal content, online training programs and subscrip on-based analy c services. Contractual recurring
revenue also includes fees from maintenance services for our on-premises solu ons.
Transac onal recurring revenue is comprised of transac on fees associated with the use of our solu ons, including dona on processing, tui on management,
consumer giving and event-based usage.
Cost of recurring revenue is primarily comprised of compensa on costs for customer support and produc on IT personnel, hos ng and data center costs,
third-party contractor expenses, third-party royalty and data expenses, allocated deprecia on, facili es and IT support costs, amor za on of intangible assets
from business combina ons, amor za on of so ware development costs, transac on-based costs related to payments services including remi ances of
amounts due to third-par es and other costs incurred in providing support and recurring services to our customers.
Our customers con nue to prefer cloud subscrip on offerings with integrated analy cs, training and payment services. We intend to con nue focusing on
innova on, quality and integra on of our cloud solu ons, which we believe will drive future revenue growth.
2023 vs. 2022
Recurring revenue increased by $59.8 million, or 5.9%, driven primarily by the following:
+
+
Increase in transac onal recurring revenue of $30.5 million primarily due to posi ve results related to pricing ini a ves we implemented during
2023 and increases in volume for our Blackbaud Tui on Management, JustGiving and Blackbaud Merchant Services solu ons; and
Increase in contractual recurring revenue of $29.3 million related to the performance of our cloud solu ons and, to a lesser extent, the early impact
of our pricing ini a ves; par ally offset by a decrease in maintenance revenue as customers migrate to our cloud solu ons.
2023 Form 10-K
41
Table of Contents
Blackbaud, Inc.
For addi onal informa on on the impact of foreign currency fluctua ons on our financial results, see Foreign Currency Exchange Rates below on page 59.
Cost of recurring revenue increased by $7.0 million, or 1.5%, driven primarily by the following:
+
+
+
+
-
-
-
Increase in transac on-based costs of $9.2 million related to the increase in the volume of transac ons for which we process payments and, to a
lesser extent, increases in vendor rates
Increase in amor za on of so ware development costs of $5.6 million due to our con nued investments in the innova on and security of our
solu ons
Increase in amor za on of intangible assets from business combina ons of $4.0 million primarily due to our acquisi on of EVERFI in December
2021
Increase in stock-based compensa on costs of $2.8 million primarily due to overall Company performance against 2023 goals and 2022
performance-based equity award adjustments, par ally offset by the targeted workforce reduc ons during the fourth quarter of 2022 and first
quarter of 2023
Decrease in compensa on costs other than stock-based compensa on of $8.7 million primarily due to our targeted workforce reduc ons discussed
above
Decrease in hos ng and data center costs of $5.1 million as we con nue to migrate our cloud infrastructure to leading public cloud service
providers and make investments in security; currently, we expect our cloud infrastructure migra on efforts and increased level of cybersecurity
investments to con nue for the foreseeable future
Decrease in third-party contractor costs of $1.1 million primarily due to our focus on cost management
Recurring gross margin increased by 190 basis points primarily due to the increase in recurring revenue outpacing the increase in cost of recurring revenue.
One- me services and other
Revenue ($M)
YoY Growth (%)
Cost of revenue ($M)
YoY Growth (%)
Gross profit ($M)
and gross margin (%)
One- me services and other revenue is comprised of fees for one- me consul ng (including crea ve services), analy c 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 solu on contracts.
Cost of one- me services and other is primarily comprised of compensa on 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- me analy c services, third-party so ware
royal es, allocated deprecia on, facili es and IT support costs and amor za on of intangible assets from business combina ons.
42
2023 Form 10-K
Table of Contents
2023 vs. 2022
Blackbaud, Inc.
One- me services and other revenue decreased by $12.5 million, or 26.9%, driven primarily by the following:
-
-
Decrease in one- me consul ng revenue of $9.2 million primarily due to less sales of crea ve services and implementa on and customiza on
services. Also contribu ng is an increase in u liza on of third-party service delivery partners. For several years, we have been strategically shi ing
away from a one- me services business model towards sales of retained and managed services and also embedding services in our renewable
cloud solu on contracts. Retained and managed services contracts that we expect to have a term consistent with our cloud solu on contracts, and
embedded services are recorded as recurring revenue.
Decrease in one- me analy cs revenue of $3.0 million as analy cs are generally integrated in our cloud solu ons
Cost of one- me services and other decreased $10.2 million or 24.3%, primarily driven by the following:
-
-
-
+
Decrease in compensa on costs of $7.9 million primarily related to our targeted workforce reduc ons during the fourth quarter of 2022 and first
quarter of 2023 and a con nued shi in resources historically suppor ng one- me services and other towards recurring revenue
Decrease in employee severance of $1.2 million primarily due to our targeted workforce reduc ons discussed above, the majority of which were
recorded in cost of one- me services and other in the fourth quarter of 2022
Decrease in direct costs of revenue of $1.2 million primarily related to our decrease in sales of crea ve services
Increase in third-party contractor costs of $1.2 million primarily due to an increase in partners delivering services
One- me services and other gross margin decreased by 320 basis points primarily due to the decrease in one- me services and other revenue outpacing the
decrease in cost of one- me services and other revenue.
Opera ng Expenses
Sales, marke ng and
customer success ($M)
Research and
development ($M)
General and
administra ve ($M)
Percentages indicate expenses as a percentage of total revenue
Sales, marke ng and customer success
Sales, marke ng and customer success expense includes compensa on costs, variable sales commissions, travel-related expenses, adver sing and marke ng
materials, public rela ons costs, variable reseller commissions and allocated deprecia on, facili es and IT support costs.
We see a large market opportunity in the long-term and will con nue to make investments to drive sales effec veness. We have also implemented so ware
tools to enhance our digital footprint and drive lead genera on. The enhancements we are making in our go-to-market approach are expected to reduce our
average customer acquisi on cost per customer as well as the related payback period while increasing sales velocity.
2023 Form 10-K
43
Table of Contents
2023 vs. 2022
Blackbaud, Inc.
Sales, marke ng and customer success expenses decreased by $9.3 million, or 4.2%. The decreases in dollars and as a percentage of total revenue were
primarily driven by the following:
-
Net decreases in the following costs primarily due to our targeted workforce reduc ons discussed above:
•
•
•
Decrease in compensa on costs other than stock-based compensa on of $10.5 million; and
Decrease in commissions expense of $1.3 million; par ally offset by
Increase in severance costs of $1.5 million
-
+
+
Decrease in third-party contractor costs of $3.1 million primarily related to strategic consul ng costs incurred during 2022
Increase in stock-based compensa on costs of $3.5 million primarily due to overall Company performance against 2023 goals and 2022
performance-based equity award adjustments, par ally offset by the targeted workforce reduc ons during the fourth quarter of 2022 and first
quarter of 2023
Increase in conference and travel costs of $1.0 million primarily due to our annual user conference, bbcon®, which was held in-person in November
2023 for the first me since the pandemic
Research and development
Research and development expense includes compensa on costs for engineering and product management personnel, third-party contractor expenses,
so ware development tools and other expenses related to developing new solu ons or upgrading and enhancing exis ng solu ons that do not qualify for
capitaliza on, and allocated deprecia on, facili es and IT support costs.
2023 vs. 2022
We con nue to make investments to delight our customers with innova ve cloud solu ons. We also con nue to invest heavily in the security of our solu ons.
Research and development expense decreased by $3.6 million, or 2.3%. The decreases in dollars and as a percentage of total revenue were primarily driven
by the following:
-
-
+
Decrease in third-party contractor costs of $6.5 million primarily due to a decrease in our use of third-party so ware developers
Decrease in compensa on costs other than stock-based compensa on of $3.9 million primarily due to our targeted workforce reduc ons discussed
above
Increase in stock-based compensa on of $6.6 million primarily due to overall Company performance against 2023 goals and 2022 performance-
based equity award adjustments, par ally offset by the targeted workforce reduc ons during the fourth quarter of 2022 and first quarter of 2023
Not included in research and development expense for 2023 and 2022 were $60.7 million and $58.5 million, respec vely, of qualifying costs associated with
so ware and content development ac vi es that are required to be capitalized under GAAP, such as those for our cloud solu ons, as well as development
costs associated with acquired companies. Qualifying capitalized so ware and content development costs associated with our cloud solu ons and online
educa onal courses are subsequently amor zed to cost of recurring revenue over the related asset's es mated useful life, which generally range from three
to seven years. We expect that the amount of so ware and content development costs capitalized will be rela vely consistent in the near-term as we
con nue making investments in innova on, quality, security and the integra on of our solu ons, which we believe will drive long-term revenue growth.
44
2023 Form 10-K
Table of Contents
General and administra ve
Blackbaud, Inc.
General and administra ve expense consists primarily of compensa on costs for general corporate func ons, including senior management, finance,
accoun ng, legal, human resources and corporate development, Security Incident-related expenses (including legal fees, se lements and loss con ngency
accruals), third-party professional fees, insurance, allocated deprecia on, facili es and IT support costs, acquisi on-related expenses and other administra ve
expenses.
2023 vs. 2022
General and administra ve expenses decreased by $10.0 million, or 5.0%. The decreases in dollars and as a percentage of total revenue were primarily driven
by the following:
-
-
-
-
-
-
+
+
Decrease in compensa on costs other than stock-based compensa on of $5.0 million primarily due to our targeted workforce reduc ons discussed
above
Decrease in third-party contractor costs of $2.7 million primarily due to our focus on cost management
Decrease in Security Incident-related expenses of $2.3 million. See "Security Incident update" above on page 39
A $2.3 million noncash impairment charge during the second quarter of 2022 against previously capitalized so ware 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
solu ons and did not reoccur in 2023
Decrease in corporate costs of $1.3 million primarily related to the release of certain accrued tax liabili es due to favorable sales tax rulings,
par ally offset by an increase in bad debt expense
Decrease in rent expense of $1.1 million
Increase in stock-based compensa on costs of $5.2 million primarily due to overall Company performance against 2023 goals and 2022
performance-based equity award adjustments, par ally offset by the targeted workforce reduc ons during the fourth quarter of 2022 and first
quarter of 2023
Increase in acquisi on and disposi on-related costs of $1.3 million primarily related to the noncash impairment charges against certain opera ng
lease right-of-use assets and property and equipment assets resul ng from the sublease of our Washington, DC office loca on; par ally offset by
the release of $1.4 million in accrued con ngent considera on related to our Kilter acquisi on during the second quarter of 2023 and a $2.0 million
noncash impairment of certain insignificant intangible assets that were held for sale during the second quarter of 2022 which did not reoccur in
2023
2023 Form 10-K
45
Blackbaud, Inc.
Table of Contents
Interest Expense
Interest expense ($M)
Percentages indicate expenses as a percentage of total revenue
2023 vs. 2022
Interest expense increased in dollars and as a percentage of total revenue during 2023 when compared to 2022, primarily due to an increase in our weighted
average effec ve interest rates. We currently expect interest expense for the full year 2024 to be approximately $34 million to $38 million although our
interest expense in connec on with the variable rate por on of our outstanding debt could increase in a rising interest rate environment. See Note 10 to our
consolidated financial statements in this report for more informa on regarding our deriva ve instruments, which we use to manage our variable interest rate
risk, and Item 7A. Quan ta ve and Qualita ve Disclosures about Market Risk: Interest Rate Risk on page 64 for more informa on about our variable interest
rate exposure and related risk.
Other Income
Other income ($M)
Percentages indicate expenses as a percentage of total revenue
2023 vs. 2022
Other income increased in dollars and as a percentage of total revenue during 2023 when compared to 2022, primarily due to an increase in interest income.
Interest income increased primarily due to higher interest earned on restricted cash held and payable by us to customers for our payment processing
solu ons. See Note 8 to our consolidated financial statements in this report for more informa on regarding our other income.
46
2023 Form 10-K
Table of Contents
Deferred Revenue
Blackbaud, Inc.
The table below compares the components of deferred revenue from our consolidated balance sheets:
(dollars in millions)
Total deferred revenue
(1)
Less: Long-term por on
Current por on
(1)
December 31,
2023
December 31,
2022
394.9
2.4
392.5 $
385.2
2.8
382.4
$
Change
2.5 %
(14.9)%
2.6 %
(1)
The individual amounts for each year may not sum to total deferred revenue or current por on of deferred revenue due to rounding.
To the extent that our customers are billed for our solu ons 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 incep on with three-year renewals therea er, 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, 2023 was primarily due to new subscrip on sales of our cloud solu ons and progress
in ini a ves to bring our pricing in line with the market. Historically, due to the ming of customer budget cycles, we have an increase in customer contract
renewals at or near the beginning of our third quarter. Generally, our lowest balance of deferred revenue during the year is at the end of our first quarter.
Income Taxes
Income tax provision (benefit) ($M)
Percentages indicate effec ve income tax rates
Our effec ve income tax rate may fluctuate quarterly and annually as a result of factors, including changes in tax law in jurisdic ons where we conduct
business, transac ons entered into, changes in the geographic distribu on of our earnings or losses, and our assessment of certain tax con ngencies and
valua on allowances.
We have deferred tax assets for federal, state, and interna onal net opera ng loss carryforwards and tax credits. The federal and state net opera ng loss
carryforwards are subject to various Internal Revenue Code limita ons and applicable state tax laws. A por on of the foreign and state net opera ng loss
carryforwards and a por on of state tax credits have a valua on 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 jurisdic ons as well as in foreign jurisdic ons including Canada, the U.K., Australia, Ireland
and Costa Rica. We are generally subject to U.S. federal income tax examina on for calendar tax years ending 2020 through 2023, as well as state and foreign
income tax examina ons for various years depending on statute of limita ons of those jurisdic ons.
We have taken federal and state tax posi ons 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 expira on of statutes of limita ons. The reasonably possible decrease at December 31, 2023
was insignificant.
2023 Form 10-K
47
Table of Contents
Blackbaud, Inc.
We recognize accrued interest and penal es, if any, related to unrecognized tax benefits as a component of income tax expense.
2023 vs. 2022
The increase in our effec ve income tax rate for year ended December 31, 2023, when compared to the same period in 2022, was primarily a ributable to
higher 2023 non-deduc ble accruals for loss con ngencies related to the Security Incident and other non-deduc ble expenses and tax rate changes, par ally
offset by increased tax credits. Furthermore, our 2023 effec ve tax rate was nega vely impacted by higher tax rates in foreign jurisdic ons in which we
operate which were predominantly due to UK tax rate increases.
48
2023 Form 10-K
Table of Contents
Blackbaud, Inc.
Non-GAAP Financial Measures
The opera ng results analyzed below are presented on a non-GAAP basis. We use non-GAAP financial measures internally in analyzing our opera onal
performance. Accordingly, we believe these non-GAAP measures are useful to investors, as a supplement to GAAP measures, in evalua ng our ongoing
opera onal performance. While we believe these non-GAAP measures provide useful supplemental informa on, non-GAAP financial measures should not be
considered in isola on from, or as a subs tute for, financial informa on prepared in accordance with GAAP. In addi on, these non-GAAP financial measures
may not be completely comparable to similarly tled measures of other companies due to poten al differences in the exact method of calcula on between
companies.
The non-GAAP financial measures discussed below exclude the impact of certain transac ons because we believe they are not directly related to our
opera ng performance in any par cular period, but are for our long-term benefit over mul ple periods. We believe that these non-GAAP financial measures
reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business.
(dollars in millions, except per share amounts)
GAAP Revenue
GAAP gross profit
GAAP gross margin
Non-GAAP adjustments:
Add: Stock-based compensa on expense
Add: Amor za on of intangibles from business combina ons
Add: Employee severance
Subtotal
(1)
Non-GAAP gross profit
(1)
Non-GAAP gross margin
GAAP income (loss) from opera ons
GAAP opera ng margin
Non-GAAP adjustments:
Add: Stock-based compensa on expense
Add: Amor za on of intangibles from business combina ons
Add: Employee severance
Add: Acquisi on and disposi on-related costs
(2)(3)
Add: Restructuring and other real estate ac vi es
Add: Security Incident-related costs, net of insurance
(4)
Add: Impairment of capitalized so ware development costs
Subtotal
(1)
Non-GAAP income from opera ons
(1)
Non-GAAP opera ng margin
GAAP income (loss) before provision (benefit) for income taxes
GAAP net income (loss)
Shares used in compu ng GAAP diluted earnings (loss) per share
GAAP diluted earnings (loss) per share
Non-GAAP adjustments:
Add: GAAP income tax provision (benefit)
Add: Total non-GAAP adjustments affec ng income from opera ons
Non-GAAP income before provision for income taxes
Assumed non-GAAP income tax provision
(5)
Non-GAAP net income
(1)
Shares used in compu ng Non-GAAP diluted earnings per share
Non-GAAP diluted earnings per share
Years ended December 31,
2023
2022
1,105.4 $
1,058.1
603.2 $
54.6 %
16.7
52.5
0.8
69.9
673.2 $
60.9 %
44.7 $
4.0 %
127.8
55.6
5.1
7.5
—
53.4
—
249.4
294.1 $
26.6 %
17.6 $
1.8 $
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)
53,721,342
51,569,148
0.03 $
15.8
249.4
267.0
53.4
213.6 $
(0.88)
(10.2)
231.1
175.5
35.1
140.4
53,721,342
52,207,573
3.98 $
2.69
$
$
$
$
$
$
$
$
$
$
2023 Form 10-K
49
Table of Contents
Blackbaud, Inc.
(1)
(2)
(3)
(4)
The individual amounts for each year may not sum to subtotal, non-GAAP gross profit, non-GAAP income from opera ons, non-GAAP income before provision for income taxes or non-
GAAP net income due to rounding.
Includes a $2.0 million noncash impairment of certain intangible assets held for sale during the twelve months ended December 31, 2022.
Includes noncash impairment charges incurred during the twelve months ended December 31, 2023 related to the sublease of our Washington, DC office loca on the lease of which was
acquired during the EVERFI acquisi on.
Includes Security Incident-related costs incurred during the twelve months ended December 31, 2023 of $53.4 million, which includes approximately $31.0 million in se lements and
recorded aggregate liabili es for loss con ngencies, net of insurance recoveries during the same period of $0.0 million and during the twelve months ended December 31, 2022 of $57.6
million, which included approximately $23.0 million in recorded aggregate liabili es for loss con ngencies, net of insurance recoveries during the same period of $1.9 million. Recorded
expenses consisted primarily of payments to third-party service providers and consultants, including legal fees, as well as se lements of customer claims, nego ated se lements and
accruals for certain loss con ngencies. Not included in this adjustment were costs associated with enhancements to our cybersecurity program. For full year 2024, we currently expect net
pre-tax expense of approximately $5 million to $10 million and net cash outlays of approximately $8 million to $13 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, 2023, we have recorded approximately $1.5 million in aggregate liabili es for loss con ngencies based primarily
on recent nego a ons with certain customers related to the Security Incident that we believe we can reasonably es mate. In connec on with the se lement of the mul -state A orneys
General inves ga on (as previously disclosed on October 5, 2023), we paid $49.5 million during the fourth quarter of 2023. There are other Security Incident-related ma ers, including
customer claims, customer cons tuent class ac ons and governmental inves ga ons, for which we have not recorded a liability for a loss con ngency as of December 31, 2023 because
we are unable at this me to reasonably es mate the possible loss or range of loss. Each of these ma ers could, separately or in the aggregate, result in an adverse judgement, se lement,
fine, penalty or other resolu on, the amount, scope and ming of which we are currently unable to predict, but could have a material adverse impact on our results of opera ons, cash
flows or financial condi on.
(5) We apply a non-GAAP effec ve tax rate of 20.0% when calcula ng non-GAAP net income and non-GAAP diluted earnings per share.
Beginning in 2024, we intend to update the non-GAAP tax rate we apply when calcula ng non-GAAP net income and non-GAAP diluted earnings per share in
future periods. Since the first quarter of 2018, for the purposes of determining non-GAAP net income, we have u lized a non-GAAP tax rate of 20.0% in our
calcula on of the assumed non-GAAP income tax provision. We intend to adjust this rate to 24.5% to be er reflect our periodic effec ve tax rate calculated in
accordance with GAAP and our current expecta ons. The increase in our non-GAAP tax rate is primarily driven by increases in income tax rates in jurisdic ons
we operate in. Furthermore, as profitability increases, the effect of tax impac ng items, including research and development credits, lessens such that our
assumed non-GAAP tax rate moves closer to the statutory rate. The increase in our non-GAAP tax rate is primarily driven by increases in income tax rates in
jurisdic ons we operate in. Furthermore, as our non-GAAP profitability increases, the effect of tax impac ng items lessens such that our assumed non-GAAP
tax rate moves closer to the statutory tax rate. The non-GAAP tax rate u lized in future periods will be reviewed annually to determine whether it remains
appropriate in considera on of our financial results including our periodic effec ve tax rate calculated in accordance with GAAP, our opera ng environment
and related tax legisla on in effect and other factors deemed necessary. All measures of the tax impact related to non-GAAP net income and non-GAAP
diluted earnings per share included above are calculated under our historical methodology.
50
2023 Form 10-K
Table of Contents
Blackbaud, Inc.
Non-GAAP organic revenue growth
In addi on, 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 on a constant currency basis in analyzing our opera ng performance. We believe that these non-
GAAP measures are useful to investors, as a supplement to GAAP measures, for evalua ng the periodic growth of our business on a consistent basis. Each of
these measures of non-GAAP organic revenue growth excludes incremental acquisi on-related revenue a ributable 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
presenta on of full year incremental non-GAAP revenue derived from such companies as if they were combined throughout the prior period. In addi on,
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 me in both the prior
and current periods. We believe this presenta on provides a more comparable representa on of our current business’ organic revenue growth and revenue
run-rate.
(dollars in millions)
GAAP revenue
GAAP revenue growth
Less: Non-GAAP revenue from divested businesses
(1)
Non-GAAP organic revenue
(2)
Non-GAAP organic revenue growth
Non-GAAP organic revenue
(2)
Foreign currency impact on Non-GAAP organic revenue
(3)
Non-GAAP organic revenue on constant currency basis
(3)
Non-GAAP organic revenue growth on constant currency basis
GAAP recurring revenue
GAAP recurring revenue growth
Less: Non-GAAP recurring revenue from divested businesses
(1)
Non-GAAP organic recurring revenue
Non-GAAP organic recurring revenue growth
Non-GAAP organic recurring revenue
(2)
Foreign currency impact on non-GAAP organic recurring revenue
(3)
Non-GAAP organic recurring revenue on constant currency basis
(3)
Non-GAAP organic recurring revenue growth on constant currency basis
$
$
$
$
$
$
$
Years ended December 31,
2023
1,105.4
$
4.5 %
—
1,105.4
$
4.8 %
1,105.4
0.4
1,105.9
$
4.9 %
2022
1,058.1
(3.5)
1,054.6
1,054.6
—
1,054.6
1,071.5
$
1,011.7
5.9 %
—
1,071.5
$
6.3 %
1,071.5
$
0.5
1,072.0
$
6.3 %
(3.4)
1,008.3
1,008.3
—
1,008.3
(1) 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 me in both the prior and current periods.
(2) 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 respec ve prior period quarterly financial informa on 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 en es repor ng 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 crea ng the impact are the
Australian Dollar, Bri sh Pound, Canadian Dollar and Euro.
(3)
2023 Form 10-K
51
Table of Contents
Rule of 40
Blackbaud, Inc.
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); deprecia on; amor za on of intangible assets from business combina ons; amor za on
of so ware and content development costs; stock-based compensa on; employee severance; acquisi on and disposi on-related costs; restructuring and
other real estate ac vi es; Security Incident-related costs, net of insurance; and impairment of capitalized so ware development costs. Beginning in the fiscal
quarter ended June 30, 2022, we now also include in non-GAAP adjusted EBITDA impairment of capitalized so ware and content development costs because
we believe it is not directly related to our opera ng performance in any par cular period.
Years ended December 31,
(dollars in millions)
GAAP net income (loss)
Non-GAAP adjustments:
Add: Interest, net
Add: GAAP income tax provision (benefit)
Add: Deprecia on
Add: Amor za on of intangibles from business combina ons
Add: Amor za on of so ware and content development costs
(1)
Subtotal
(2)
Non-GAAP EBITDA
(2)
Non-GAAP EBITDA margin
(3)
Non-GAAP adjustments:
Add: Stock-based compensa on expense
Add: Employee severance
Add: Acquisi on and disposi on-related costs
(4)
Add: Restructuring and other real estate ac vi es
Add: Security Incident-related costs, net of insurance
(4)
Add: Impairment of capitalized so ware development costs
Subtotal
(2)
Non-GAAP Adjusted EBITDA
(2)
Non-GAAP Adjusted EBITDA margin
(5)
Rule of 40
(6)
Non-GAAP adjusted EBITDA
Foreign currency impact on Non-GAAP adjusted EBITDA
Non-GAAP adjusted EBITDA on constant currency basis
(7)
Non-GAAP adjusted EBITDA margin on constant currency basis
(7)
Rule of 40 on constant currency basis
(8)
$
$
$
2023
1.8
$
31.1
15.8
13.0
55.6
45.3
160.9
162.7
$
14.7 %
127.8
5.1
7.5
—
53.4
—
193.8
356.5
$
32.2 %
37.0 %
356.5
—
356.5
32.2 %
37.1 %
2022
(45.4)
34.1
(10.2)
14.1
51.4
39.0
128.4
83.0
110.3
5.2
6.1
0.1
55.7
2.3
179.7
262.6
262.6
6.3
268.9
Includes amor za on expense related to so ware and content development costs and amor za on expense from capitalized cloud compu ng implementa on 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.
(1)
(2)
(3) Measured by GAAP revenue divided by non-GAAP EBITDA.
(4)
(5) Measured by non-GAAP organic revenue divided by non-GAAP adjusted EBITDA.
(6) Measured by non-GAAP organic revenue growth plus non-GAAP adjusted EBITDA margin. See Non-GAAP organic revenue growth table above.
(7)
See addi onal details in the reconcilia on of GAAP to Non-GAAP opera ng income above.
To determine non-GAAP adjusted EBITDA on a constant currency basis, non-GAAP adjusted EBITDA from en es repor ng 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 crea ng the impact are the Australian Dollar, Bri sh Pound,
Canadian Dollar and Euro.
(8) 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.
52
2023 Form 10-K
Table of Contents
Blackbaud, Inc.
Non-GAAP free cash flow and non-GAAP adjusted free cash flow
Non-GAAP free cash flow is defined as opera ng cash flow less capital expenditures, including costs required to be capitalized for so ware and content
development, and capital expenditures for property and equipment.
Non-GAAP adjusted free cash flow is defined as opera ng cash flow less capital expenditures, including costs required to be capitalized for so ware and
content development and capital expenditures for property and equipment, plus cash ou lows, 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 opera ng 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 discre onary expenditures.
(dollars in millions)
GAAP net cash provided by opera ng ac vi es
GAAP opera ng cash flow margin
Non-GAAP adjustments:
Less: purchase of property and equipment
Less: capitalized so ware and content development costs
Non-GAAP free cash flow
(1)
Non-GAAP free cash flow margin
Non-GAAP adjustments:
Add: Security Incident-related cash flows, net of insurance
Non-GAAP adjusted free cash flow
(1)
Non-GAAP adjusted free cash flow margin
$
$
$
Years ended December 31,
2023
199.6 $
18.1 %
(4.7)
(59.4)
135.5 $
12.3 %
78.0
213.5 $
19.3 %
2022
203.9
19.3 %
(12.3)
(58.8)
132.8
12.6 %
20.9
153.7
14.5 %
(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 varia ons 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. Transac onal revenue is non-contractual and less predictable given the suscep bility to certain drivers such as ming and number of
events and marke ng campaigns, as well as fluctua ons in dona on volumes and tui on payments. Our transac onal revenue has historically been at its
lowest in the first quarter due to the ming of customer fundraising ini a ves 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 transac on-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 ming of expenditures.
Our cash flow from opera ons normally fluctuates quarterly due to the combina on of the ming 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 opera ons has been lowest in our first quarter. Due to the ming 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 opera ons has generally been lower in our second quarter as compared to our third
and fourth quarters. Par ally offse ng these favorable drivers of cash flow from opera ons in our third and fourth quarters are base salary merit increases,
which occur in July. In addi on, deferred revenues can vary on a seasonal basis due to the ming of customer contract renewals and student enrollments or
significant acquisi ons. Our cash flow from financing is nega vely impacted in our first quarter when most of our equity awards vest, as we pay taxes on
behalf of our employees related to the se lement or exercise of equity awards.
2023 Form 10-K
53
Table of Contents
Blackbaud, Inc.
These pa erns may change as a result of the con nued shi to online giving, growth in volume of transac ons for which we process payments, large dollar
customer bookings and contract renewals, or as a result of acquisi ons, new market opportuni es, new solu on introduc ons or other factors.
Liquidity and Capital Resources
The following table presents selected financial informa on about our financial posi on:
(dollars in millions)
Cash and cash equivalents
Property and equipment, net
So ware and content development costs, net
Total carrying value of debt
Working capital
The following table presents selected financial informa on about our cash flows:
(dollars in millions)
Net cash provided by opera ng ac vi es
Net cash used in inves ng ac vi es
Net cash used in financing ac vi es
December 31,
2023
December 31,
2022
$
31.3 $
98.7
160.2
779.7
(267.4)
2023
199.6 $
(64.4)
(143.0)
$
31.7
107.4
141.0
859.0
(312.0)
2022
203.9
(85.5)
(25.7)
Change
(1.4)%
(8.1)%
13.6 %
(9.2)%
14.3 %
Years ended December 31,
Change
(2.1)%
(24.7)%
456.5 %
Our principal sources of liquidity are our opera ng cash flow, funds available under the 2020 Credit Facility and cash on hand. Our opera ng cash flow
depends on con nued customer renewal of our subscrip on and maintenance arrangements, market acceptance of our solu ons and services, the volume
and size of transac ons for which we process payments and our customers' ability to pay. Based on current es mates of revenue and expenses, we believe
that the currently available sources of funds and an cipated cash flows from opera ons will be adequate for at least the next twelve months to finance our
opera ons, fund an cipated capital expenditures and meet our debt obliga ons. We also believe that we will be able to con nue to meet our long-term cash
requirements due to our an cipated cash flow from opera ons, solid financial posi on and ability to access capital from financial markets. To the extent we
undertake future material acquisi ons, investments or unan cipated capital or opera ng expenditures, including in connec on with the Security Incident, we
may require addi onal capital. In that context, we regularly evaluate opportuni es to enhance our capital structure, including through poten al debt or
equity issuances.
As a well-known seasoned issuer, we filed an automa c shelf registra on statement for an undetermined amount of debt and equity securi es with the SEC
on January 14, 2022. Under this universal shelf registra on statement we may offer and sell, from me to me, debt securi es, common stock, preferred
stock, depositary shares, warrants, stock purchase contracts and stock purchase units. Subject to certain condi ons, this registra on statement will be
effec ve through January 13, 2025.
We resumed stock repurchases during the fourth quarter of 2023 under our then exis ng stock repurchase program that authorized us to purchase up to
$250.0 million of our outstanding shares of common stock. On January 17, 2024, our Board of Directors reauthorized, expanded and replenished our stock
repurchase program by raising the total capacity under the program from $250.0 million to $500.0 million available for repurchases. The remaining amount
available to purchase stock under the stock repurchase program was $499.4 million as of February 16, 2024. We plan to repurchase shares going forward to at
least offset the dilu on from our annual stock-based compensa on and possibly beyond that amount as market condi ons and our strategic plans permit. See
addi onal details regarding our stock repurchase program below on page 56.
At December 31, 2023, our total cash and cash equivalents balance included approximately $13.2 million of cash that was held by opera ons outside the U.S.
While these funds may not be needed to fund our U.S. opera ons for at least the next twelve months, if we need these funds, we may be required to accrue
and pay taxes to repatriate the funds. We currently do not intend nor an cipate a need to repatriate our cash held outside the U.S.
54
2023 Form 10-K
Table of Contents
Opera ng Cash Flow
Blackbaud, Inc.
Throughout 2023 and 2022, our cash flows from opera ons were derived principally from: (i) our earnings from on-going opera ons prior to non-cash
expenses such as deprecia on, amor za on, stock-based compensa on, deferred income taxes, amor za on 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 liabili es and deferred revenue.
2023 vs. 2022
Net cash provided by opera ng ac vi es decreased by $4.3 million during the year ended December 31, 2023, when compared to the same period in 2022,
primarily due to a $71.3 million increase in net income adjusted for non-cash expenses and a $75.5 million decrease in cash flow from opera ons associated
with working capital.
The decrease in cash flow from opera ons associated with working capital during 2023, when compared to 2022, was primarily due to:
•
•
fluctua ons in the ming of vendor payments; and
a decrease in accrued expenses related to the Security Incident.
Security Incident update
As discussed in Note 11 to our consolidated financial statements included in this report, total costs related to the Security Incident exceeded the limit of our
insurance coverage in the first quarter of 2022. Accordingly, the Security Incident has nega vely impacted, and we expect it to con nue for the foreseeable
future to nega vely impact, our GAAP profitability and GAAP cash flow (see discussion regarding non-GAAP free cash flow and non-GAAP adjusted free cash
flow on page 53). For full year 2023, we had net cash outlays of $78.0 million related to the Security Incident, which included ongoing legal fees, the $3.0
million civil penalty paid during the first quarter of 2023 related to the SEC se lement and the $49.5 million civil penalty paid during the fourth quarter of
2023 related to the mul -state A orneys General se lement. For full year 2024, we currently expect net pre-tax expense of approximately $5.0 million to
$10.0 million and net cash outlays of approximately $8.0 million to $13.0 million for ongoing legal fees related to the Security Incident.
As of December 31, 2023, we have recorded approximately $1.5 million in aggregate liabili es for loss con ngencies based primarily on recent nego a ons
with certain customers related to the Security Incident that we believe we can reasonably es mate in accordance with our loss con ngency procedures
described in Note 11. It is reasonably possible that our es mated or actual losses may change in the near term for those ma ers and be materially in excess
of the amounts accrued, but we are unable at this me to reasonably es mate the possible addi onal loss.
There are other Security Incident-related ma ers, including customer claims, customer cons tuent class ac ons and governmental inves ga ons, for which
we have not recorded a liability for a loss con ngency as of December 31, 2023 because we are unable at this me to reasonably es mate the possible loss or
range of loss. Each of these ma ers could, separately or in the aggregate, result in an adverse judgement, se lement, fine, penalty or other resolu on, the
amount, scope and ming of which we are currently unable to predict, but could have a material adverse impact on our results of opera ons, cash flows or
financial condi on.
2023 Form 10-K
55
Table of Contents
Inves ng Cash Flow
Blackbaud, Inc.
During 2024, we expect our total capital expenditures, including es mated outlays for capitalized so ware development costs, to be between approximately
$65.0 million and $75.0 million.
2023 vs. 2022
Net cash used in inves ng ac vi es of $64.4 million decreased by $21.2 million during 2023, when compared to 2022.
During 2022, we received net cash of $6.4 million related to our disposi on of Blackbaud FIMS™ and DonorCentral® NXT.
During 2022, we used $20.9 million of net cash for our acquisi ons of EVERFI and Kilter, comprised primarily of (i) $17.4 million that had not been paid by
EVERFI to its former op on holders as of December 31, 2021, solely due to the ming of the acquisi on 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 a er determining they would be paid in cash, rather than
shares of our common stock.
During 2023, we used $59.4 million for so ware and content development costs, which was up $0.7 million from cash spent during 2022. We also spent $4.7
million of cash for purchases of property and equipment during 2023, which was a decrease of $7.6 million from cash spent in 2022.
Financing Cash Flow
2023 vs. 2022
During 2023, we had a net decrease in borrowings of $81.4 million. During 2023, we repurchased $18.8 million of our common stock while we did not
repurchase any of our common stock during 2022 (see addi onal details below regarding our stock repurchase program).
We paid $35.9 million to sa sfy tax obliga ons of employees upon se lement or exercise of equity awards during 2023 compared to $36.4 million during
2022. The amount of taxes paid by us on behalf of employees related to the se lement or exercise of equity awards varies from period to period based upon
the ming of grants and ves ng, as well as the market price for shares of our common stock at the me of se lement. Most of our equity awards currently
vest in our first quarter.
During 2023, cash flow from financing ac vi es associated with changes in restricted cash due to customers decreased $6.8 million, compared to an increase
of $111.4 million during 2022. 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 opera onal purposes.
Stock repurchase program
In December 2021, our Board of Directors reauthorized, expanded 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 expira on date. Under the stock repurchase program, we are authorized
to repurchase shares from me to me in accordance with applicable laws both on the open market, including under trading plans established pursuant to
Rule 10b5-1 under the Securi es Exchange Act of 1934, as amended, and in privately nego ated transac ons. The ming and amount of repurchases
depends on several factors, including market and business condi ons, the trading price of our common stock and the nature of other investment
opportuni es. The repurchase program may be limited, suspended or discon nued at any me without prior no ce. During the year ended December 31,
2023, we repurchased 221,836 shares for $18.8 million. The remaining amount available to purchase stock under the then approved stock repurchase
program was $231.2 million as of December 31, 2023.
On January 17, 2024, our Board of Directors reauthorized, expanded and replenished our stock repurchase program by raising the total capacity under the
program from $250.0 million to $500.0 million available for repurchases. Between January 1, 2024 and January 17, 2024, we repurchased $22.3 million under
the prior authoriza on. Between January 18, 2024 and February 16, 2024, we repurchased an addi onal 7,114 shares for $0.6 million under the new
authoriza on. The remaining amount available to purchase stock under the stock repurchase program was $499.4 million as of February 16, 2024. We plan
56
2023 Form 10-K
Table of Contents
Blackbaud, Inc.
to repurchase shares going forward to at least offset the dilu on from our annual stock-based compensa on and possibly beyond that amount as market
condi ons and our strategic plans permit.
2020 Credit Facility
Historically, we have drawn on our credit facility from me to me to help us meet financial needs primarily due to the seasonality of our cash flows from
opera ons and financing for business acquisi ons. At December 31, 2023, our available borrowing capacity under the 2020 Credit Facility was $384.5 million.
The 2020 Credit Facility matures in October 2025.
At December 31, 2023, the carrying amount of our debt under the 2020 Credit Facility was $720.6 million. Our average daily borrowings were $760.2 million
during 2023.
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. Certain real estate loans (as described in Note 9 to our
audited consolidated financial statements included in this report) also require periodic principal payments and the balances of the real estate loans are due
upon maturity in April 2038.
The following is a summary of the financial covenants under the 2020 Credit Facility:
Financial Covenant
Net Leverage Ra o
(1)
Interest Coverage Ra o
Requirement
≤ 4.00 to 1.00
≥ 2.50 to 1.00
Ra o as of December 31, 2023
1.97 to 1.00
9.67 to 1.00
(1) Under the terms of the 2020 Credit Facility, the Net Leverage Ra o requirement may be increased by up to 0.50 provided we sa sfy certain requirements, including a permi ed business
acquisi on, and provided that the maximum Net Leverage Ra o shall not exceed 4.25 to 1.00.
Under the 2020 Credit Facility, we also have restric ons 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 con nuing under the 2020
Credit Facility, and (ii) our pro forma net leverage ra o, as set forth in the 2020 Credit Facility, must be 0.25 less than the net leverage ra o requirement at the
me of dividend declara on or stock repurchase. At December 31, 2023, we were in compliance with our debt covenants under the 2020 Credit Facility. See
Note 9 to our consolidated financial statements included in this report for addi onal informa on regarding the 2020 Credit Facility.
Commitments and Con ngencies
As of December 31, 2023, we had contractual obliga ons with future minimum commitments as follows:
(in millions)
Recorded contractual obliga ons:
Debt
Opera ng leases
Interest payments on debt
Con ngent considera on
Unrecorded contractual obliga ons:
Purchase obliga ons
Interest payments on debt
Total contractual obliga ons
(1)
(1)
The individual amounts may not sum to the total due to rounding.
Payments due by period
Less than
1 year
More than
1 year
$
19.3 $
761.9 $
8.7
—
—
88.1
35.1
46.8
5.5
1.4
169.5
55.9
Total
(1)
781.1
55.5
5.5
1.4
257.6
90.9
$
151.1 $
1,040.9 $
1,192.0
2023 Form 10-K
57
Table of Contents
Debt
Blackbaud, Inc.
As of December 31, 2023, we had total remaining principal payments of $781.1 million. These payments represent principal payments only, under the
following assump ons: (i) that the amounts outstanding under the 2020 Credit Facility, our real estate loans and our other debt at December 31, 2023 will
remain outstanding un l 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 informa on.
Interest payments on debt
In addi on to principal payments, as of December 31, 2023, we expect to pay interest expense over the life of our debt obliga ons of approximately $96.4
million. These payments represent our es mated future interest payments on debt using our debt balances and the related weighted average effec ve
interest rates as of December 31, 2023, 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 me the debt is outstanding and the interest rate, which
could be different from our assump ons on our remaining principal payments described above.
Opera ng leases
As of December 31, 2023, we had remaining opera ng lease payments of $55.5 million. These payments have not been reduced by sublease income,
incen ve payments, reimbursement of leasehold improvements or the amount represen ng imputed interest of $8.7 million. Our opera ng leases are
generally for corporate offices, subleased offices and certain equipment and furniture. Given our remote-first workforce strategy and real estate footprint
op miza on efforts, as discussed above, we do not an cipate entering any new, material opera ng leases for offices for the foreseeable future. See Note 11
to our consolidated financial statements in this report for more informa on.
Purchase obliga ons
As of December 31, 2023, we had remaining purchase obliga ons of $257.6 million. These purchase obliga ons are for third-party technology used in our
solu ons and for other services we purchase as part of our normal opera ons. In certain cases, these arrangements require a minimum annual purchase
commitment by us. Our purchase obliga ons are not recorded as liabili es on our consolidated balance sheets as of December 31, 2023, as we had not
received the related services. See Note 11 to our consolidated financial statements in this report for more informa on.
The total liability for uncertain tax posi ons as of December 31, 2023 was $3.2 million. Our accrued interest and penal es related to tax posi ons taken on
our tax returns was insignificant as of December 31, 2023.
In connec on with the se lement of the mul -state A orneys General inves ga on rela ng to the Security Incident, as discussed in Note 11 to our
consolidated financial statements in this report, we have agreed to implement and improve certain of our cybersecurity programs and tools through October
2030. The currently an cipated costs in connec on with these efforts are expected to be expensed as incurred.
Con ngent considera on
In connec on with our acquisi on of Kilter, we are obligated to pay con ngent considera on upon the achievement of certain milestones. For informa on
regarding our con ngent considera on obliga ons, see Note 3 to our consolidated financial statements in this report.
58
2023 Form 10-K
Table of Contents
Blackbaud, Inc.
Foreign Currency Exchange Rates
Approximately 14% of our total revenue for 2023 was generated from opera ons outside the U.S. We do not have significant opera ons in countries in which
the economy is considered to be highly infla onary. 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 transla on of our subsidiaries’ financial results into U.S. dollars for purposes of
repor ng our consolidated financial results. The accumulated currency transla on adjustment, recorded within accumulated other comprehensive (loss)
income as a component of stockholders’ equity, was a loss of $9.8 million as of December 31, 2023 and a loss of $14.9 million as of December 31, 2022. We
have entered into foreign currency forward contracts to hedge a por on of the foreign currency exposure that arises on transla on of our investments
denominated in Bri sh Pounds into U.S. dollars.
The vast majority of our contracts are entered into by our U.S. or U.K. en es. The contracts entered into by the U.S. en ty 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 Bri sh Pounds,
Australian dollars and Euros, respec vely. Historically, as the U.S. dollar weakened, foreign currency transla on resulted in an increase in our revenues and
expenses denominated in non-U.S. currencies. Conversely, as the U.S. dollar strengthened, foreign currency transla on resulted in a decrease in our revenues
and expenses denominated in non-U.S. currencies. During 2023, foreign transla on had an insignificant impact on our revenues and expenses denominated in
non-U.S. currencies. Though we have exposure to fluctua ons in currency exchange rates, primarily those between the U.S. dollar and both the Bri sh Pound
and Canadian dollar, the impact has generally not been material to our consolidated results of opera ons or financial posi on. During 2023, the fluctua on in
foreign currency exchange rates impacted our total revenue and our income from opera ons by insignificant amounts. 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 con nue
monitoring such exposure and take ac on as appropriate. To determine the impacts on revenue (or income from opera ons) from fluctua ons in currency
exchange rates, current period revenues (or income from opera ons) from en es repor ng in foreign currencies were translated into U.S. dollars using the
comparable prior year period's weighted average foreign currency exchange rates. These impacts are non-GAAP financial informa on and are not in
accordance with, or an alterna ve to, informa on prepared in accordance with GAAP.
Cri cal Accoun ng Es mates
Our discussion and analysis of financial condi on and results of opera ons are based upon our consolidated financial statements, which have been prepared
in accordance with accoun ng principles generally accepted in the United States ("GAAP"). The prepara on of these financial statements requires us to make
es mates and assump ons that affect the reported amounts of assets and liabili es and disclosure of con ngent assets and liabili es at the date of the
financial statements, as well as the reported amounts of revenues and expenses during the repor ng periods. On an ongoing basis, we reconsider and
evaluate our es mates and assump ons.
We base our es mates on historical experience, current trends and various other assump ons 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 liabili es that are not readily apparent from other sources.
Actual results could materially differ from any of our es mates under different assump ons or condi ons. Our significant accoun ng policies are discussed in
Note 2 to our consolidated financial statements in this report. We believe the accoun ng es mates listed below are the most cri cal to aid in fully
understanding and evalua ng our reported financial results, and they require our most difficult, subjec ve or complex judgments, resul ng from the need to
make es mates about the effect of ma ers that are inherently uncertain.
2023 Form 10-K
59
Table of Contents
Revenue Recogni on
Blackbaud, Inc.
Descrip on
Judgments and Uncertain es
Effect if Actual Results Differ
From Assump ons
See Note 2 to our consolidated financial statements in this
report for a complete discussion of our revenue recogni on
policies.
Our revenue recogni on accoun ng methodology may contain
uncertain es because it could require us to make significant
es mates and assump ons, and to apply judgment for certain
customer contracts.
If we were to change any of these judgments or es mates, it
could cause a material increase or decrease in the amount of
revenue or deferred revenue that we report in a par cular
period.
For example, for certain arrangements that have mul ple
performance obliga ons, we may need to exercise judgment and use
es mates in order to (1) determine whether performance obliga ons
are dis nct and should be accounted for separately; (2) determine
the standalone selling price of each performance obliga on; (3)
allocate the transac on price among the various performance
obliga ons on a rela ve standalone selling price basis; and (4)
determine whether revenue for each performance obliga on should
be recognized at a point in me or over me.
Revenues are recognized when control of our services is
transferred to our customers, in an amount that reflects the
considera on we expect to be en tled to in exchange for
those services.
We determine revenue recogni on through the following
steps:
(1) Iden fica on of the contract, or contracts, with a
customer;
(2) Iden fica on of the performance obliga ons in the
contract;
(3) Determina on of the transac on price;
(4) Alloca on of the transac on price to the performance
obliga ons in the contract; and
(5) Recogni on of revenue when, or as, we sa sfy a
performance obliga on.
We have not made any material changes in the accoun ng
methodology we use to recognize revenue during the year
ended December 31, 2023.
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2023 Form 10-K
Table of Contents
Business Combina ons
Blackbaud, Inc.
Descrip on
Judgments and Uncertain es
We allocate the purchase price of an acquired business to
its iden fiable assets acquired and liabili es assumed at
the acquisi on date based upon their es mated fair values.
The excess of the purchase price over the amount allocated
to the iden fiable assets acquired and liabili es assumed, if
any, is recorded as goodwill.
Our purchase price alloca on methodology contains uncertain es
because it requires us to make significant es mates and assump ons,
and to apply judgment to es mate the fair value of assets acquired
and liabili es assumed, especially with respect to long-lived and
intangible assets.
We use available informa on to es mate fair values. We
typically engage outside appraisal firms to assist in the fair
value determina on of long-lived and iden fiable
intangible assets, and any other significant assets or
liabili es. We adjust the preliminary purchase price
alloca on, as necessary, up to one year a er the acquisi on
closing date as we obtain new informa on about facts and
circumstances that existed as of the closing date.
We have not made any material changes in the accoun ng
methodology we use for business combina ons during the
year ended December 31, 2023.
Management es mates the fair value of assets acquired and liabili es
assumed based on quoted market prices, the carrying value of the
acquired assets and widely accepted valua on techniques, including
discounted cash flows, market mul ple analyses and replacement
cost.
We apply significant judgement in es ma ng the fair value of
intangible assets acquired, which involves the use of significant
assump ons. Significant assump ons used in the valua on of
customer rela onships include future revenue and opera ng
expenses, customer a ri on rates, contributory asset charges, tax
amor za on benefit, and discount rates. Significant assump ons
used in the valua on of certain developed technology assets include
future revenue, proprietary technology obsolescence curve, royalty
rate, and discount rate. Significant assump ons used in the valua on
of marke ng assets include assump ons about the period of me the
brand will con nue to be valuable, royalty rate, and discount rate.
Significant assump ons used in the valua on of content intangible
assets include cost-based assump ons. Our es mates of fair value are
based upon assump ons we believe to be reasonable, but which are
inherently uncertain and unpredictable, and unan cipated events and
changes in circumstances may occur.
Effect if Actual Results Differ
From Assump ons
If actual results are materially different than the
assump ons we used to determine fair value of the assets
acquired and liabili es assumed through a business
combina on as well as the es mated useful lives of the
acquired intangible assets, it is possible that adjustments to
the carrying values of such assets and liabili es will have a
material impact on our financial posi on and results of
opera ons.
See Note 3 to our consolidated financial statements in this
report for informa on regarding our business acquisi ons.
2023 Form 10-K
61
Table of Contents
Income Taxes
Blackbaud, Inc.
Descrip on
Judgments and Uncertain es
We make es mates and judgments in accoun ng for
income taxes. Our income tax returns, like those of most
companies, are periodically audited by domes c and
foreign tax authori es.
We measure and recognize uncertain tax posi ons. To
recognize uncertain tax posi ons, we must first determine
if it is more likely than not that the posi on 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 ul mate se lement.
We make es mates in determining tax assets and liabili es,
which arise from differences in the ming of recogni on of
revenue and expense for tax and financial repor ng
purposes. We record valua on allowances to reduce our
deferred tax assets to the amount expected to be realized.
We have not made any material changes in the accoun ng
methodology we use to assess income tax during the year
ended December 31, 2023.
The calcula on of our income tax provision requires es mates due to
transac ons, credits and calcula ons where the ul mate tax
determina on is uncertain. Uncertain es arise as a consequence of
the actual source of taxable income between domes c and foreign
loca ons, the outcome of tax audits and the ul mate u liza on of tax
credits.
Our effec ve income tax rate is also affected by changes in the
geographic distribu on of our earnings or losses, changes in tax law in
jurisdic ons where we conduct business.
Significant judgment is required in the iden fica on and
measurement of uncertain tax posi ons. Our liability for
unrecognized tax benefits contains uncertain es because
management is required to make assump ons and to apply judgment
to es mate the exposures associated with our various filing posi ons.
In assessing the adequacy of a recorded valua on allowance
significant judgment is required. We consider all posi ve and nega ve
evidence and a variety of factors including the scheduled reversal of
deferred tax liabili es, historical and projected future taxable income,
and prudent and feasible tax planning strategies.
Long-lived Assets and Intangible Assets Other Than Goodwill
Descrip on
Judgments and Uncertain es
In es ma ng future cash flows, assets are grouped at the lowest level
for which there is iden fiable 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 assump ons and apply judgment in
es ma ng future cash flows and asset or asset group fair values,
including annual revenue growth rates, a terminal year growth rate
and selec ng 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 es mated remaining life
of the asset, we measure the impairment using discounted
cash flows.
We have not made any material changes in the accoun ng
methodology we use to assess impairment loss during the
year ended December 31, 2023.
62
2023 Form 10-K
Effect if Actual Results Differ
From Assump ons
Although we believe that the judgments and es mates
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 es mated amounts
recorded, such differences will impact the income tax
provision in the period in which the determina on 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 valua on allowance is made to increase income tax
expense, thereby reducing net income in the period such
determina on was made.
Effect if Actual Results Differ
From Assump ons
During 2023, we recorded immaterial noncash impairment
charges against certain opera ng lease ROU assets and
certain property and equipment assets. For addi onal
informa on, 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 es mates or
assump ons we use to assess impairment losses. However, if
actual results are not consistent with our es mates or
assump ons, we may be exposed to an impairment charge
that could materially adversely impact our consolidated
financial posi on and results of opera ons.
Table of Contents
Loss Con ngencies
Blackbaud, Inc.
Descrip on
Judgments and Uncertain es
We review any such loss con ngency accruals at least quarterly and
adjust them to reflect the impacts of nego a ons, se lements,
rulings, advice of legal counsel and other informa on and events
pertaining to a par cular case.
O en these issues are subject to substan al uncertain es and,
therefore, the probability of loss and the es ma on of damages are
difficult to ascertain. These assessments can involve a series of
complex judgments about future events and can rely heavily on
es mates and assump ons that have been deemed reasonable by us.
We are subject to the possibility of various loss
con ngencies, including legal proceedings and claims, that
arise in the normal course of business, as well as certain
other non-ordinary course proceedings, claims and
inves ga ons, as described in Note 11 to the consolidated
financial statements in this report. We record an accrual for
a loss con ngency when it is both probable that a material
liability has been incurred and the amount of the loss can
be reasonably es mated. If only a range of es mated losses
can be determined, we accrue an amount within the range
that, in our judgment, reflects the most likely outcome; if
none of the es mates within that range is a be er es mate
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 es mate of
the loss or range of losses arising from the proceeding can
be made, we disclose such an es mate, if material. If such a
loss or range of losses is not reasonably es mable, we
disclose that fact.
We have not made any material changes in the accoun ng
methodology we use to assess loss con ngencies during
the year ended December 31, 2023.
Effect if Actual Results Differ
From Assump ons
With the excep on of the 2020 Security Incident, we do not
believe there is a reasonable likelihood that there will be a
material change in the future es mates or assump ons we
use to determine loss con ngencies. However, if facts and
circumstances change in the future that change our belief
regarding assump ons used to determine our es mates, we
may be exposed to losses that could be material.
Although we believe we have substan al defenses in these
ma ers, we could incur judgments or enter into se lements
of claims that could have a material adverse effect on our
consolidated financial posi on, results of opera ons or cash
flows in any par cular period. For addi onal informa on,
see Note 11 to our consolidated financial statements in this
report.
Recently Issued Accoun ng Pronouncements
For a discussion of the impact that recently issued accoun ng pronouncements are expected to have on our financial posi on and results of opera ons when
adopted in the future, see Note 2 to our consolidated financial statements in this report.
2023 Form 10-K
63
Table of Contents
Blackbaud, Inc.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have market rate sensi vity 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 combina on of short-term and long-term borrowings and the use of deriva ve instruments entered into for hedging purposes. Addi onally, our
interest income that we primarily earn on restricted cash held and payable by us to customers for our payment processing solu ons acts as a par al natural
hedge against our interest rate risk. Our interest rate exposure includes SOFR rates. Because the Financial Conduct Authority in the U.K. previously stated that
it would phase out all tenors of LIBOR by June 2023, we modified our financial contracts that were indexed to LIBOR to reference SOFR during 2022. These
modifica ons did not have a significant financial impact. Due to the nature of our debt, the materiality of the fair values of the deriva ve instruments and the
highly liquid, short-term nature and level of our cash and cash equivalents as of December 31, 2023, we believe that the risk of exposure to changing interest
rates for those posi ons is immaterial. There were no significant changes in how we manage interest rate risk between December 31, 2022 and December 31,
2023.
Foreign Currency Risk
For a discussion of our exposure to foreign currency exchange rate fluctua ons, see “Management’s Discussion and Analysis of Financial Condi on and
Results of Opera ons — Foreign Currency Exchange Rates” in Item 7 of this report.
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2023 Form 10-K
Table of Contents
Blackbaud, Inc.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BLACKBAUD, INC.
Index to Consolidated Financial Statements
Reports of Independent Registered Public Accoun ng 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.
66
70
71
72
73
74
65
2023 Form 10-K
To the Stockholders and the Board of Directors of Blackbaud, Inc.
Opinion on the Financial Statements
Report of Independent Registered Public Accoun ng Firm
We have audited the accompanying consolidated balance sheets of Blackbaud, Inc. (the Company) as of December 31, 2023 and 2022, the related
consolidated statements of comprehensive loss, cash flows, and stockholders’ equity for each of the two years in the period ended December 31, 2023, and
the related notes (collec vely referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial posi on of the Company at December 31, 2023 and 2022, and the results of its opera ons and its cash flows for each of the
two years in the period ended December 31, 2023, in conformity with U.S. generally accepted accoun ng principles.
We also have audited, in accordance with the standards of the Public Company Accoun ng Oversight Board (United States) (PCAOB), the Company's internal
control over financial repor ng as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Commi ee of
Sponsoring Organiza ons of the Treadway Commission (2013 framework) and our report dated February 21, 2024, 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 audits. We are a public accoun ng firm registered with the PCAOB and are required to be independent with respect to the Company
in accordance with the U.S. federal securi es laws and the applicable rules and regula ons of the Securi es and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the 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 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 audits
also included evalua ng the accoun ng principles used and significant es mates made by management, as well as evalua ng the overall presenta on of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Cri cal Audit Ma er
The cri cal audit ma er communicated below is a ma er arising from the current period audit of the financial statements that was communicated or
required to be communicated to the audit commi ee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjec ve or complex judgments. The communica on of the cri cal audit ma er does not alter in any way our opinion on
the consolidated financial statements, taken as a whole, and we are not, by communica ng the cri cal audit ma er below, providing a separate opinion on
the cri cal audit ma er or on the account or disclosure to which it relates.
Descrip on of
the Ma er
Revenue Recogni on - Payment Processing Services
The Company recorded transac onal recurring revenues of $333 million for the year ended December 31, 2023. Included in
transac onal recurring revenues are revenues related to payment processing services provided to customers that enable
dona ons 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 me 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 transac ons and recording of revenues for these services involves a
significant volume of transac ons that are highly automated and are based on contractual terms with the customer and the
Company’s third-party vendors.
Audi ng the revenues for these payment processing services is complex because the processes are highly automated and
involve mul ple IT systems with a significant volume of transac ons and related underlying data. Further, audi ng the
revenues for these payment processing services required the involvement of data professionals to assist in valida ng the
integrity of the underlying data and recalcula ng the revenues recorded during the period.
66
2023 Form 10-K
How We Addressed the
Ma er in Our Audit
We obtained an understanding, evaluated the design, and tested the opera ng effec veness of the Company’s controls over
its payment processing services provided to customers that enable dona ons and the purchase of goods and services. We
iden fied the relevant systems used in these payment processing services, including relevant third-party service organiza on
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 selec on of payment processing transac ons, we also agreed the
amount of revenues recognized for processing fees retained by the Company to source documents and tested the
mathema cal accuracy of the recorded revenue. We also evaluated if the transac ons were processed, and funds received
prior to December 31, 2023, including sending confirma ons directly to financial ins tu ons.
/s/ Ernst & Young LLP
We have served as the Company's auditor since 2021.
Raleigh, North Carolina
February 21, 2024
2023 Form 10-K
67
Report of Independent Registered Public Accoun ng Firm
To the Stockholders and the Board of Directors of Blackbaud, Inc.
Opinion on Internal Control Over Financial Repor ng
We have audited Blackbaud, Inc.’s internal control over financial repor ng as of December 31, 2023, based on criteria established in Internal Control—
Integrated Framework issued by the Commi ee of Sponsoring Organiza ons of the Treadway Commission (2013 Framework) (the COSO criteria). In our
opinion, Blackbaud, Inc. (the Company) maintained, in all material respects, effec ve internal control over financial repor ng as of December 31, 2023, based
on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accoun ng Oversight Board (United States) (PCAOB), the consolidated balance
sheets of the Company as of December 31, 2023 and 2022, and the related consolidated statements of comprehensive loss, cash flows, and stockholders'
equity for the two years in the period ended December 31, 2023, and the related notes and our report dated February 21, 2024 expressed an unqualified
opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effec ve internal control over financial repor ng and for its assessment of the effec veness of
internal control over financial repor ng included in the accompanying Management’s Annual Report on Internal Control Over Financial Repor ng. Our
responsibility is to express an opinion on the Company’s internal control over financial repor ng based on our audit. We are a public accoun ng firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securi es laws and the
applicable rules and regula ons of the Securi es 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 effec ve internal control over financial repor ng was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial repor ng, assessing the risk that a material weakness exists, tes ng and
evalua ng the design and opera ng effec veness 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.
Defini on and Limita ons of Internal Control Over Financial Repor ng
A company’s internal control over financial repor ng is a process designed to provide reasonable assurance regarding the reliability of financial repor ng and
the prepara on of financial statements for external purposes in accordance with generally accepted accoun ng principles. A company’s internal control over
financial repor ng includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transac ons and disposi ons of the assets of the company; (2) provide reasonable assurance that transac ons are recorded as necessary to permit
prepara on of financial statements in accordance with generally accepted accoun ng principles, and that receipts and expenditures of the company are being
made only in accordance with authoriza ons of management and directors of the company; and (3) provide reasonable assurance regarding preven on or
mely detec on of unauthorized acquisi on, use, or disposi on of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limita ons, internal control over financial repor ng may not prevent or detect misstatements. Also, projec ons of any evalua on of
effec veness to future periods are subject to the risk that controls may become inadequate because of changes in condi ons, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Raleigh, North Carolina
February 21, 2024
68
2023 Form 10-K
Report of Independent Registered Public Accoun ng Firm
To the Board of Directors and Stockholders of Blackbaud, Inc.
Opinion on the Financial Statements
We have audited the consolidated statements of comprehensive (loss) income, of stockholders' equity and of cash flows of Blackbaud, Inc. and its subsidiaries
(the “Company”) for the year ended December 31, 2021 including the related notes (collec vely referred to as the “consolidated financial statements”). In
our opinion, the consolidated financial statements present fairly, in all material respects, the results of opera ons and cash flows of the Company for the year
ended December 31, 2021 in conformity with accoun ng 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 audit. We are a public accoun ng firm registered with the Public Company Accoun ng Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securi es laws and the
applicable rules and regula ons of the Securi es and Exchange Commission and the PCAOB.
We conducted our audit 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 audit 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 audit also included evalua ng the accoun ng principles used and significant es mates made by
management, as well as evalua ng the overall presenta on of the consolidated financial statements. We believe that our audit 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.
2023 Form 10-K
69
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 $6,907 and $7,318 at December 31, 2023 and December 31, 2022,
respec vely
Customer funds receivable
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Opera ng lease right-of-use assets
So ware and content development costs, net
Goodwill
Intangible assets, net
Other assets
Total assets
Liabili es and stockholders’ equity
Current liabili es:
Trade accounts payable
Accrued expenses and other current liabili es
Due to customers
Debt, current por on
Deferred revenue, current por on
Total current liabili es
Debt, net of current por on
Deferred tax liability
Deferred revenue, net of current por on
Opera ng lease liabili es, net of current por on
Other liabili es
Total liabili es
Commitments and con ngencies (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; 69,188,304 and 67,814,044 shares issued at
December 31, 2023 and December 31, 2022, respec vely; 53,625,440 and 53,068,814 shares outstanding at
December 31, 2023 and December 31, 2022, respec vely
Addi onal paid-in capital
Treasury stock, at cost; 15,562,864 and 14,745,230 shares at December 31, 2023 and December 31, 2022,
respec vely
Accumulated other comprehensive (loss) income
Retained earnings
Total stockholders’ equity
Total liabili es and stockholders’ equity
$
$
$
December 31,
2023
December 31,
2022
31,251 $
697,006
101,862
353
99,285
929,757
98,689
36,927
160,194
1,053,738
581,937
51,037
2,912,279 $
25,184 $
64,322
695,842
19,259
392,530
1,197,137
760,405
93,292
2,397
40,085
10,258
31,691
702,240
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
2,103,574
2,248,671
—
—
69
1,203,012
(591,557)
(1,688)
198,869
808,705
$
2,912,279 $
68
1,075,264
(537,287)
8,938
197,049
744,032
2,992,703
The accompanying notes are an integral part of these consolidated financial statements.
70
2023 Form 10-K
Blackbaud, Inc.
Consolidated Statements of Comprehensive (Loss) Income
(dollars in thousands, except per share amounts)
2023
2022
2021
Years ended December 31,
Revenue
Recurring
One- me services and other
Total revenue
Cost of revenue
Cost of recurring
Cost of one- me services and other
Total cost of revenue
Gross profit
Opera ng expenses
Sales, marke ng and customer success
Research and development
General and administra ve
Amor za on
Restructuring
Total opera ng expenses
Income (loss) from opera ons
Interest expense
Other income, net
Income (loss) before provision for income taxes
Income tax provision (benefit)
Net income (loss)
Earnings (loss) per share
Basic
Diluted
Common shares and equivalents outstanding
Basic weighted average shares
Diluted weighted average shares
Other comprehensive (loss) income
Foreign currency transla on adjustment
Unrealized (loss) gain on deriva ve instruments, net of tax
Total other comprehensive (loss) income
Comprehensive (loss) income
$
1,071,520 $
33,912
1,011,733 $
46,372
1,105,432
1,058,105
470,455
31,733
502,188
603,244
212,158
153,304
189,938
3,139
—
558,539
44,705
(39,922)
12,861
17,644
15,824
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)
1,820 $
(45,407) $
0.03 $
0.03 $
(0.88) $
(0.88) $
880,850
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
(18,003)
180
7,083
1,385
5,698
0.12
0.12
52,546,406
53,721,342
51,569,148
51,569,148
47,412,306
48,230,438
5,049 $
(15,675)
(10,626)
(16,160) $
18,576
2,416
(8,806) $
(42,991) $
661
8,358
9,019
14,717
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
2023 Form 10-K
71
Blackbaud, Inc.
Consolidated Statements of Cash Flows
(dollars in thousands)
Cash flows from opera ng ac vi es
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by opera ng ac vi es:
Deprecia on and amor za on
Provision for credit losses and sales returns
Stock-based compensa on expense
Deferred taxes
Amor za on of deferred financing costs and discount
Other non-cash adjustments
Changes in opera ng assets and liabili es, net of acquisi on and disposal of businesses:
Accounts receivable
Prepaid expenses and other assets
Trade accounts payable
Accrued expenses and other liabili es
Deferred revenue
Net cash provided by opera ng ac vi es
Cash flows from inves ng ac vi es
Purchase of property and equipment
Capitalized so ware and content development costs
Purchase of net assets of acquired companies, net of cash and restricted cash acquired
Cash received in sale of business
Other inves ng ac vi es
Net cash used in inves ng ac vi es
Cash flows from financing ac vi es
Proceeds from issuance of debt
Payments on debt
Debt issuance costs
Stock issuance costs
Employee taxes paid for withheld shares upon equity award se lement
Change in due to customers
Change in customer funds receivable
Purchase of treasury stock
Net cash (used in) provided by financing ac vi es
Effect of exchange rate on cash, cash equivalents and restricted cash
Net (decrease) 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 informa on
Cash paid for interest
Cash (paid) for taxes, net of refunds
Non-cash inves ng and financing ac vi es:
Purchase of EVERFI through the issuance of stock (see Note 3)
Purchase of so ware and services by assuming directly related liabili es
Purchase of equipment and other assets included in accounts payable
Years ended December 31,
2023
2022
2021
$
1,820 $
(45,407) $
5,698
109,487
4,500
127,762
(24,368)
1,775
5,023
(3,237)
16,851
(18,576)
(30,275)
8,872
199,634
(4,685)
(59,443)
(13)
—
(250)
(64,391)
293,200
(374,595)
—
—
(35,867)
(6,812)
(60)
(18,831)
(142,965)
2,048
(5,674)
733,931
102,369
6,066
110,294
(26,644)
2,364
5,676
(7,340)
26,235
21,607
(2,386)
11,059
82,410
11,450
120,379
(2,429)
1,570
10,490
(6,525)
(2,048)
(9,670)
(8,190)
10,526
203,893
213,661
(12,289)
(58,774)
(20,912)
6,426
—
(85,549)
211,000
(310,740)
—
(1,339)
(36,376)
111,386
380
—
(25,689)
(10,486)
82,169
651,762
(11,664)
(40,489)
(419,120)
—
—
(471,273)
582,200
(152,971)
(3,106)
—
(39,404)
(13,464)
(731)
(108,416)
264,108
297
6,793
644,969
651,762
$
$
728,257 $
733,931 $
(38,052) $
(35,619)
(33,371) $
(9,670)
(16,386)
(10,073)
—
(2,491)
(837)
—
(1,710)
(158)
(303,633)
—
(1,747)
The following table provides a reconcilia on 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,
2023
December 31,
2022
$
$
31,251 $
697,006
728,257 $
31,691
702,240
733,931
The accompanying notes are an integral part of these consolidated financial statements.
72
2023 Form 10-K
Blackbaud, Inc.
Consolidated Statements of Stockholders' Equity
(dollars in thousands)
Balance at December 31, 2020
Net income
Common stock issued in purchase of EVERFI (see Note
3)
Purchase of treasury shares under stock repurchase
program
Ves ng of restricted stock units
Shares withheld to sa sfy tax withholdings
Stock-based compensa on
Restricted stock grants
Restricted stock cancella ons
Other comprehensive income
Balance at December 31, 2021
Net loss
Stock issuance costs related to purchase of EVERFI (see
Note 3)
(1)
Re rements of common stock
Ves ng of restricted stock units
Shares withheld to sa sfy tax withholdings
Stock-based compensa on
Restricted stock grants
Restricted stock cancella ons
Other comprehensive income
Balance at December 31, 2022
Net income
Re rements of common stock
Purchase of treasury shares under stock repurchase
program
(1)
Ves ng of restricted stock units
Shares withheld to sa sfy tax withholdings
Stock-based compensa on
Restricted stock grants
Restricted stock cancella ons
Other comprehensive loss
Balance at December 31, 2023
Common stock
Treasury stock
Shares
Amount
Shares
Amount
Addi onal
paid-in
capital
Accumulated
other
comprehensive
(loss) income
Retained
earnings
Total
stockholders'
equity
60,904,638 $
—
3,844,423
—
1,014,562
—
—
596,763
(194,720)
—
66,165,666 $
—
—
(33,535)
1,015,304
—
—
846,295
(179,686)
—
67,814,044 $
—
(143)
—
1,007,921
—
—
473,341
(106,859)
—
61
—
4
—
1
—
—
—
—
—
66
—
—
—
—
—
—
2
—
—
68
—
—
—
—
—
—
1
—
—
(12,054,268) $ (353,091) $ 544,963 $
(2,497) $ 236,714 $
—
—
—
—
(1,592,933)
—
(535,604)
—
—
—
(108,416)
—
(39,404)
—
—
—
—
—
—
303,629
—
—
—
120,335
—
—
—
—
—
—
—
—
—
—
—
9,019
5,698
—
—
—
—
44
—
—
—
(14,182,805) $ (500,911) $ 968,927 $
6,522 $ 242,456 $
—
—
—
—
(45,407)
—
—
—
(562,425)
—
—
—
—
—
—
—
(36,376)
—
—
—
—
(1,352)
(2,605)
—
—
110,294
—
—
—
—
—
—
—
—
—
—
2,416
—
—
—
—
—
—
—
—
(14,745,230) $ (537,287) $ 1,075,264 $
8,938 $ 197,049 $
—
—
—
—
—
(14)
(221,836)
—
(595,798)
—
—
—
—
(18,831)
—
(35,439)
—
—
—
—
—
—
—
127,762
—
—
—
—
—
—
—
—
—
—
—
(10,626)
1,820
—
—
—
—
—
—
—
—
426,150
5,698
303,633
(108,416)
1
(39,404)
120,379
—
—
9,019
717,060
(45,407)
(1,352)
(2,605)
—
(36,376)
110,294
2
—
2,416
744,032
1,820
(14)
(18,831)
—
(35,439)
127,762
1
—
(10,626)
69,188,304 $
69
(15,562,864) $ (591,557) $ 1,203,012 $
(1,688) $ 198,869 $
808,705
(1) Represents shares re red a er determining certain EVERFI's selling shareholders would be paid in cash, rather than shares of our common stock. See Note 3 for addi onal informa on regarding our acquisi on of
EVERFI.
The accompanying notes are an integral part of these consolidated financial statements.
2023 Form 10-K
73
Table of Contents
1. Organiza on
Blackbaud, Inc.
Notes to Consolidated Financial Statements
We are the leading so ware provider exclusively dedicated to powering social impact. Serving the nonprofit and educa on sectors, companies commi ed to
social responsibility and individual change makers, our essen al so ware is built to accelerate impact in fundraising, nonprofit financial management, digital
giving, grantmaking, corporate social responsibility and educa on management. A remote-first company, we have opera ons in the United States, Australia,
Canada, Costa Rica and the United Kingdom, suppor ng users in 100+ countries.
2. Basis of Presenta on
Basis of presenta on
The consolidated financial statements have been prepared in accordance with accoun ng principles generally accepted in the United States (“GAAP”).
Basis of consolida on
The consolidated financial statements include the accounts of Blackbaud, Inc. and its wholly owned subsidiaries. All intercompany balances and transac ons
have been eliminated in consolida on.
Use of es mates
The prepara on of financial statements in conformity with GAAP requires management to make es mates and assump ons that affect the reported amounts
of assets and liabili es and disclosure of con ngent assets and liabili es at the date of the financial statements, as well as the reported amounts of revenues
and expenses during the repor ng periods. On an ongoing basis, we reconsider and evaluate our es mates and assump ons, including those that impact
revenue recogni on, long-lived and intangible assets, income taxes, business combina ons, stock-based compensa on, capitaliza on of so ware
development costs, our allowances for credit losses and sales returns, costs of obtaining contracts, valua on of deriva ve instruments, loss con ngencies and
insurance recoveries, among others. Changes in the facts or circumstances underlying these es mates could result in material changes and actual results
could materially differ from these es mates.
Recently adopted accoun ng pronouncements
In September 2022, the Financial Accoun ng Standards Board issued Accoun ng Standards Update 2022-04, Liabili es-Supplier Finance Programs (Subtopic
405-50): Disclosure of Supplier Finance Program Obliga ons ("ASU 2022-04"). This update requires en es that use supplier finance programs in connec on
with the purchase of goods and services to disclose key terms of the programs and informa on about obliga ons outstanding at the end of the repor ng
period, including a rollforward of those obliga ons. The guidance does not affect the recogni on, measurement, or financial statement presenta on of
supplier finance programs. We adopted ASU 2022-04 on January 1, 2023 and the adop on did not have a material impact on our condensed consolidated
financial statements.
Recently issued accoun ng pronouncements
There are no recently issued accoun ng pronouncements that are expected to have a material impact on our financial posi on or results of opera ons when
adopted in the future.
Summary of significant accoun ng policies
Revenue recogni on
Our revenue is primarily generated from the following sources: (i) charging for the use of our so ware solu ons in cloud and hosted environments; (ii)
providing payment and transac on services; and (iii) providing Impact-as-a-Service™ digital educa onal content. Revenue is recognized when control of these
services is transferred to our customers, in an amount that reflects the considera on we expect to be en tled to in exchange for those services.
74
2023 Form 10-K
Table of Contents
Blackbaud, Inc.
Notes to Consolidated Financial Statements
We determine revenue recogni on through the following steps:
•
•
•
•
•
Iden fica on of the contract, or contracts, with a customer;
Iden fica on of the performance obliga ons in the contract;
Determina on of the transac on price;
Alloca on of the transac on price to the performance obliga ons in the contract; and
Recogni on of revenue when, or as, we sa sfy a performance obliga on.
Our recurring revenue includes two components: contractual recurring and transac onal recurring.
Contractual recurring
Contractual recurring revenue is primarily comprised of fees for the use of our subscrip on-based so ware solu ons, which includes providing access to
cloud solu ons, Impact-as-a-Service™ digital educa onal content, online training programs and subscrip on-based analy c services. Contractual recurring
revenue also includes fees from maintenance services for our on-premises solu ons.
Contractual recurring revenue represents stand-ready performance obliga ons in which we are making our solu ons or services available to our customers
con nuously over me or the value of the contract renews. Therefore, recurring revenue is generally recognized over me on a ratable basis over the contract
term, beginning on the date that the solu on or service is made available to the customer. Our recurring revenue contracts are generally for a term of three
years at contract incep on with three-year renewals therea er, billed annually in advance and non-cancelable.
Transac onal recurring
Transac onal recurring revenue is comprised of transac on fees associated with the use of our solu ons, including dona on processing, tui on management,
consumer giving and event-based usage.
Our payment services are offered with the assistance of third-party vendors. In general, when we are the principal in a transac on based on the factors
iden fied 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 transac on fees) and record the net amount as revenue. For payment and transac on
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 me based on the amount we withhold for the transac on fees in accordance with the 'as invoiced'
prac cal expedient in ASC 606-10-55-18.
One- me services and other
One- me services and other revenue is primarily comprised of fees for one- me consul ng, analy c 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 solu on contracts.
We generally bill consul ng services based on hourly rates plus reimbursable travel-related expenses. Fixed price consul ng engagements are generally billed
as milestones towards comple on are reached. Revenue for one- me consul ng services is generally recognized over me as the services are performed.
Fees for retained and managed services contracts are generally billed in advance and recognized over me on a ratable basis over the contract term,
beginning on the date the service is made available to the customer.
Contracts with mul ple performance obliga ons
Some of our contracts with customers contain mul ple performance obliga ons. For these contracts, we account for individual performance obliga ons
separately if they are dis nct. The transac on price is allocated to the separate performance obliga ons on a rela ve standalone selling price basis.
Standalone selling prices of our solu ons and services are typically es mated based on observable transac ons when the solu ons or services are sold on a
standalone basis.
2023 Form 10-K
75
Table of Contents
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Costs of obtaining contracts, contract assets and deferred revenue
We pay sales commissions at the me contracts with customers are signed or shortly therea er, depending on the size and dura on 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 amor zed in a manner that aligns with the expected period of benefit, which we have historically determined to
be five years. We determined the period of benefit by taking into considera on our customer contracts, including renewals, reten on, our technology and
other factors. We generally do not pay commissions for contract renewals that are commensurate with the commission paid on the ini al contract. The
related amor za on expense is included in sales, marke ng 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 considera on (i.e., we must sa sfy addi onal performance
obliga ons in order to receive considera on). Amounts are recorded as receivables when our right to considera on is uncondi onal (i.e., only the passage of
me is required before payment of the considera on 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 solu ons and services in advance of us sa sfying the related performance
obliga ons, we record such amounts in deferred revenue.
Sales taxes
We present sales taxes and other taxes collected from customers and remi ed to governmental authori es on a net basis and, as such, exclude them from
revenues.
Fair value measurements
We measure certain financial assets and liabili es at fair value on a recurring basis, including deriva ve 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 transac on between market par cipants at the measurement date.
An ac ve market is defined as a market in which transac ons for the asset or liability take place with sufficient frequency and volume to provide pricing
informa on on an ongoing basis. We use a three- er fair value hierarchy to measure fair value. This hierarchy priori zes the inputs into three broad levels as
follows:
•
•
•
Level 1 - Quoted prices for iden cal assets or liabili es in ac ve markets;
Level 2 - Quoted prices for similar assets and liabili es in ac ve markets, quoted prices for iden cal or similar assets in markets that are not ac ve,
and model-derived valua ons in which all significant inputs and significant value drivers are observable in ac ve markets; and
Level 3 - Valua ons derived from valua on techniques in which one or more significant inputs are unobservable.
Our financial assets and liabili es are classified in their en rety 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 repor ng period. All methods
of assessing fair value result in a general approxima on of value, and such value may never actually be realized.
Deriva ve instruments
We generally use deriva ve instruments to manage interest rate and foreign currency exchange risk. We view deriva ve instruments as risk management
tools and do not use them for trading or specula ve purposes. Our policy requires that deriva ves used for hedging purposes be designated and effec ve as a
hedge of the iden fied risk exposure at the incep on of the contract. Accordingly, changes in fair value of the deriva ve contract must be highly correlated
with changes in the fair value of the underlying hedged item at incep on of the hedge and over the life of the hedge contract.
We record all deriva ve instruments on our consolidated balance sheets at fair value as either an asset or liability. If the deriva ve is designated as a cash flow
hedge, the effec ve por ons of the changes in fair value of the deriva ve are recorded in other comprehensive income and reclassified to earnings in a
manner that matches the ming of the earnings impact of the hedged transac ons. If the deriva ve is designated as a net investment hedge, the effec ve
por ons of the changes in fair value of the deriva ve are recorded to transla on adjustment, a component of other comprehensive income, and recognized in
earnings only when the hedged investment is liquidated. Ineffec ve por ons 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 deriva ve instruments.
76
2023 Form 10-K
Table of Contents
Cash and cash equivalents
Blackbaud, Inc.
Notes to Consolidated Financial Statements
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 transac on 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 restric on is either legally or internally imposed and reflects our inten on with regard to such deposits. Customer funds receivable
consists of monies we expect to collect and remit to our customers.
Concentra on of credit risk
Financial instruments that poten ally subject us to concentra ons 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 ins tu ons. Our
accounts receivable is derived from sales to customers. With respect to accounts receivable, we perform ongoing evalua ons of our customers and maintain
an allowance for credit losses based on historical experience and our expecta ons of future credit losses. As of and for the years ended December 31, 2023,
2022 and 2021, there were no significant concentra ons 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 es mated useful lives using the straight-line method. Leasehold
improvements are depreciated over the lesser of the term of the lease or the es mated useful life of the asset. Upon re rement or sale, the cost of assets
disposed of and the related accumulated deprecia on are removed from the accounts and any resul ng gain or loss is credited or charged to earnings. Repair
and maintenance costs are expensed as incurred.
Construc on-in-progress primarily related to purchases of informa on technology assets which had not been placed in service at the respec ve 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 construc on-in-progress for the years ended December 31, 2023 and 2022.
Business combina ons
We include the opera ng results of acquired companies as well as the net assets acquired and liabili es assumed in our consolidated financial statements
from the date of acquisi on. We are required to allocate the purchase price of acquired companies to the tangible and intangible assets acquired and
liabili es assumed at the acquisi on date based upon their es mated fair values. Goodwill as of the acquisi on date represents the excess of the purchase
considera on of an acquired business over the fair value of the underlying net tangible and intangible assets acquired and liabili es assumed.
We apply significant judgement in es ma ng the fair value of intangible assets acquired, which involves the use of significant assump ons. Significant
assump ons used in the valua on of customer rela onships include future revenue and opera ng expenses, customer a ri on rates, contributory asset
charges, tax amor za on benefit, and discount rates. Significant assump ons used in the valua on of certain developed technology assets include future
revenue, proprietary technology obsolescence curve, royalty rate, and discount rate. Significant assump ons used in the valua on of marke ng assets include
assump ons about the period of me the brand will con nue to be valuable, royalty rate, and discount rate. Significant assump ons used in the valua on of
content intangible assets include cost-based assump ons. Our es mates of fair value are based upon assump ons we believe to be reasonable, but which are
inherently uncertain and unpredictable, and unan cipated events and changes in circumstances may occur.
Goodwill
Goodwill represents the purchase price in excess of the net amount assigned to assets acquired and liabili es assumed by us in a business combina on.
Goodwill is not amor zed, but tested annually for impairment on the first day of our fourth quarter, or more frequently if indicators of poten al impairment
arise.
2023 Form 10-K
77
Table of Contents
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Accoun ng guidance permits en es to first assess qualita ve factors to determine whether it is more likely than not that the fair value of a repor ng unit is
less than its carrying amount as a basis to determine whether it is necessary to perform the quan ta ve impairment test. Significant judgment is required in
the assessment of qualita ve factors, including but not limited to an evalua on of macroeconomic condi ons as they relate to our business, industry and
market trends, as well as the overall future financial performance of iden fied repor ng units and future opportuni es in the markets in which we operate.
The quan ta ve impairment test compares the fair values of iden fied repor ng units with their respec ve carrying amounts. If the carrying amount of a
repor ng unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. Based on our current internal repor ng structure, we
have one opera ng segment, one reportable segment, and one repor ng unit. In each of 2023, 2022 and 2021, we performed the quan ta ve impairment
test, which indicated that the es mated fair values of the iden fied repor ng units significantly exceeded their respec ve carrying values. There were no
impairments of goodwill during 2023, 2022 and 2021.
Intangible assets other than goodwill
We amor ze finite-lived intangible assets over their es mated useful lives as follows.
Customer rela onships
Marke ng assets
Developed technology
Content
Basis of amor za on
Straight-line and Curve of Economic Benefit
(1)
Straight-line and Curve of Economic Benefit
(1)
Straight-line and Curve of Economic Benefit
(1)
Straight-line
Amor za on
period
(in years)
10-17
14-15
3-14
9
(1)
Certain of the customer rela onships, marke ng assets and developed technology assets are amor zed on a curve that represents the expected period of economic benefit.
We write off the gross carrying amount and accumulated amor za on balances for all fully amor zed intangible assets. We evaluate the es mated useful
lives and the poten al for impairment of finite and indefinite-lived intangible assets on an annual basis or more frequently if events or circumstances indicate
revised es mates 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. All of our intangible assets were acquired in business combina ons. 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 2023 and 2021.
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 2023,
2022 and 2021.
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) por on of our credit
facility in October 2020 and por ons of the unamor zed deferred financing costs from prior facili es. These costs are amor zed ratably over the term of the
credit facility as interest expense.
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
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 por ons of the unamor zed balances from prior facili es, are recorded as a direct deduc on from debt. These costs are amor zed over the term
of the credit facility as interest expense.
Stock-based compensa on
We measure stock-based compensa on 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 ves ng 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 compensa on cost when they occur). Previously recognized compensa on cost for an award is reversed in the period that the award is forfeited.
Income tax benefits resul ng from the ves ng and exercise of stock-based compensa on awards are recognized in the period the unit or award is vested or
op on or right is exercised.
Income taxes
We make es mates and judgments in accoun ng for income taxes. The calcula on of the income tax provision requires es mates due to transac ons, credits
and calcula ons where the ul mate tax determina on is uncertain. Uncertain es arise as a consequence of the actual source of taxable income between
domes c and foreign loca ons, the outcome of tax audits and the ul mate u liza on of tax credits. To the extent actual results differ from es mated
amounts recorded, such differences will impact the income tax provision in the period in which the determina on is made.
We make es mates in determining tax assets and liabili es, which arise from differences in the ming of recogni on of revenue and expense for tax and
financial statement purposes. We record valua on allowances to reduce our deferred tax assets to the amount expected to be realized. In assessing the
adequacy of a recorded valua on allowance significant judgment is required. We consider all posi ve and nega ve evidence and a variety of factors including
the scheduled reversal of deferred tax liabili es, 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 valua on allowance is made to increase income tax expense, thereby reducing net income in the period such
determina on was made.
We measure and recognize uncertain tax posi ons. To recognize such posi ons, we must first determine if it is more likely than not that the posi on 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 ul mate se lement.
Significant judgment is required in the iden fica on and measurement of uncertain tax posi ons.
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 resul ng transla on adjustments are recorded in accumulated other comprehensive income.
Gains and losses resul ng from foreign currency transac ons denominated in currency other than the func onal currency are recorded at the approximate
rate of exchange at the transac on date in other income, net. For the years ended December 31, 2023 and 2021, we recorded net foreign currency losses that
were insignificant and $1.6 million, respec vely. During the year ended December 31, 2022, we recorded a net foreign currency gain of $4.6 million.
Research and development
Research and development costs are expensed as incurred except as noted below under So ware and content development costs. These costs include
compensa on costs for engineering and product management personnel, third-party contractor expenses, so ware development tools and other expenses
related to researching and developing new solu ons or upgrading and enhancing exis ng solu ons that do not qualify for capitaliza on, and allocated
deprecia on, facili es and IT support costs.
So ware and content development costs
We incur certain costs associated with the development of internal-use so ware and content, which are primarily related to ac vi es performed to develop
our cloud solu ons and the development of online educa on curriculum to be delivered on
2023 Form 10-K
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
the Company's cloud pla orm. Internal and external costs incurred in the preliminary project stage of internal-use so ware development and content are
expensed as incurred. Once the so ware or content being developed has reached the applica on development stage, qualifying internal costs including
payroll and payroll-related costs of employees who are directly associated with and devote me to the so ware or content project as well as external direct
costs of materials and services are capitalized. Capitaliza on ceases at the point at which the developed so ware or content is substan ally complete and
ready for its intended use, which is typically upon comple on of all substan al tes ng. Qualifying costs capitalized during the applica on development stage
include those related to specific upgrades and enhancements when it is probable that those costs incurred will result in addi onal func onality. Overhead
costs, including general and administra ve costs, as well as maintenance, training and all other costs associated with post-implementa on stage ac vi es are
expensed as incurred. In addi on, internal costs that cannot be reasonably separated between maintenance and rela vely 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 so ware and content development costs are amor zed on a straight-line basis over the so ware asset's es mated useful life, which is
generally three to seven 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 so ware development costs during 2022. There were no impairments of capitalized so ware assets during 2023 and 2021.
We write off the gross carrying amount and accumulated amor za on balances for all fully amor zed capitalized so ware and content development cost
assets.
Allowance for credit losses
Our accounts receivable consist of a single por olio segment. Accounts receivable are recorded at original invoice amounts less an allowance for credit losses,
an amount we es mate to be sufficient to provide adequate protec on against life me expected losses resul ng from extending credit to our customers. In
judging the adequacy of the allowance for credit losses, we consider mul ple factors including historical bad debt experience, the current aging of our
receivables and current economic condi ons 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 addi onal provision for credit losses could be required. Accounts are wri en off a er all means of
collec on are exhausted and recovery is considered remote. Provisions for credit losses are recorded in general and administra ve expense.
Below is a summary of the changes in our allowance for credit losses.
Years ended December 31,
(in thousands)
Balance at
beginning of year
Provision/
adjustment
2023
2022
2021
$
6,022 $
9,375
9,016
2,012 $
1,281
4,483
Write-off
(2,539) $
(5,162)
(4,565)
Recovery
601 $
528
441
Balance at
end of year
6,096
6,022
9,375
The amount of write-offs during the year ended December 31, 2023 was lower than during the same periods in 2022 and 2021 as we experienced payment
delays during those years related to the COVID-19 pandemic.
Allowance for sales returns
We maintain a reserve for returns and credits which is es mated 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)
Balance at
beginning of year
2023
2022
2021
$
1,296 $
1,780
1,276
80
2023 Form 10-K
Provision/
adjustment
2,488 $
4,785
6,967
Deduc on
(2,973) $
(5,269)
(6,463)
Balance at
end of year
811
1,296
1,780
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Adver sing costs
Blackbaud, Inc.
Notes to Consolidated Financial Statements
We expense adver sing costs as incurred, which were $14.0 million, $16.5 million and $7.1 million for the years ended December 31, 2023, 2022 and 2021,
respec vely.
Restructuring costs
Restructuring costs include charges for the costs of exit or disposal ac vi es. The liability for costs associated with exit or disposal ac vi es is measured
ini ally at fair value and only recognized when the liability is incurred.
Leases
We determine if an arrangement is a lease at incep on. Opera ng leases are included in opera ng lease right-of-use ("ROU") assets, accrued expense and
other current liabili es, and opera ng lease liabili es, net of current por on in our consolidated balance sheet as of December 31, 2023 and 2022.
ROU assets represent our right to use an underlying asset for the lease term and lease liabili es represent our obliga on to make lease payments arising from
the lease. Opera ng lease ROU assets and liabili es 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 es mated 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 opera ng lease ROU asset also includes any ini al direct costs and lease
payments made and excludes lease incen ves. Our lease terms may include op ons to extend or terminate the lease when it is reasonably certain that we
will exercise that op on. Lease expense for lease payments related to our opera ng 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, u li es and real estate taxes that are passed on from the lessor in propor on to the space leased by us, are
recognized in opera ng expenses in the period in which the obliga on for those payments is incurred.
Loss con ngencies
We are subject to the possibility of various loss con ngencies, including legal proceedings and claims, that arise in the normal course of business, as well as
certain other non-ordinary course proceedings, claims and inves ga ons, as described in Note 11 to these consolidated financial statements. We record an
accrual for a loss con ngency when it is both probable that a liability has been incurred and the amount of the loss can be reasonably es mated. O en these
issues are subject to substan al uncertain es and, therefore, the probability of loss and the es ma on of damages are difficult to ascertain. These
assessments can involve a series of complex judgments about future events and can rely heavily on es mates and assump ons that have been deemed
reasonable by us. Although we believe we have substan al defenses in these ma ers, we could incur judgments or enter into se lements of claims that could
have a material adverse effect on our consolidated financial posi on, results of opera ons or cash flows in any par cular period.
Earnings (loss) per share
We compute basic earnings (loss) per share by dividing net (loss) income a ributable to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted earnings per share is computed by dividing net income a ributable to common stockholders by the weighted
average number of common shares and dilu ve poten al common shares outstanding during the period. Diluted earnings per share reflects the assumed
exercise, se lement and ves ng of all dilu ve securi es using the “treasury stock method” except when the effect is an -dilu ve. Poten ally dilu ve
securi es consist of shares issuable upon the exercise of stock op ons and stock apprecia on rights and ves ng of restricted stock awards and units. In
periods where there are net losses and the inclusion of poten ally dilu ve securi es would be an -dilu ve, diluted loss per share is the same as basic loss per
share.
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
3. Business Combina ons and Disposi ons
2022 Disposi on
Blackbaud FIMS™ and DonorCentral® NXT
On September 9, 2022, we sold our Founda on Informa on Management System ("FIMS") and DonorCentral NXT solu ons to Fusion Laboratories, LLC for
cash proceeds of approximately $6.4 million, subject to closing adjustments. During the year ended December 31, 2022, we recognized a noncash impairment
charge of $2.0 million against certain insignificant FIMS customer rela onship intangible assets that were then held for sale. The impairment charge was
recorded in general and administra ve expense in our consolidated statements of comprehensive loss.
2022 Acquisi on
Kilter
On August 19, 2022, we acquired all of the outstanding stock of Kilter, Inc., a Delaware corpora on, pursuant to an agreement and plan of merger, for
approximately $2.9 million in cash, net of closing adjustments. In addi on to the considera on paid at closing, we may be required to pay up to a maximum of
$3.0 million in addi onal cash considera on if during the two-year period commencing January 1, 2023 Kilter meets certain applica on par cipa on targets.
As of December 31, 2023, a liability for the con ngent considera on is recorded at its current es mated fair value of $1.4 million in other liabili es in our
consolidated balance sheet. Any change in the fair value of the con ngent liability, or any change upon final se lement, will be recognized in income from
opera ons. Fair values were also assigned to the other assets acquired and liabili es assumed, primarily consis ng of goodwill and a finite-lived developed
technology intangible asset, which will be amor zed over an es mated useful life of three years. We finalized the purchase price alloca on of Kilter, including
the valua on of assets acquired and liabili es assumed, during the third quarter of 2023. Insignificant acquisi on-related costs, which primarily consisted of
legal services, were recorded as general and administra ve expense during the year ended December 31, 2023.
2021 Acquisi on
EVERFI
On December 31, 2021, we acquired all of the outstanding equity securi es, including all vo ng equity interests, of EVERFI, Inc., a Delaware corpora on,
pursuant to an agreement and plan of merger. We acquired the equity securi es for approximately $441.8 million in cash considera on 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 considera on 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 acquisi on, EVERFI became a wholly owned subsidiary of ours. The opera ng results of EVERFI have been included in our
consolidated financial statements from the date of acquisi on. During the year ended December 31, 2021, we incurred insignificant acquisi on-related
expenses associated with the acquisi on, which were recorded in general and administra ve expense. In accordance with applicable accoun ng rules, we
determined that the impact of this acquisi on was not material to our consolidated financial statements; therefore, revenue and earnings since the
acquisi on date and pro forma informa on are not required or presented. We finalized the purchase price alloca on of EVERFI, including the valua on of
assets acquired and liabili es assumed, during the fourth quarter of 2022.
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
4. Goodwill and Other Intangible Assets
The change in goodwill during 2023 consisted of the following:
(dollars in thousands)
Balance at December 31, 2022
Adjustments related to prior year business combina on
(1)
Effect of foreign currency transla on
Balance at December 31, 2023
Total
$
1,050,272
36
3,430
$
1,053,738
(1)
Represents immaterial measurement period adjustments during the year ended December 31, 2023 to the fair value of the Kilter assets acquired and liabili es assumed.
We have recorded intangible assets acquired in various business combina ons based on their fair values at the date of acquisi on. The table below sets forth
the balances of each class of intangible asset and related amor za on as of:
(dollars in thousands)
Finite-lived gross carrying amount
Customer rela onships
Marke ng assets
Developed technology
Content
Total finite-lived gross carrying amount
Accumulated amor za on
Customer rela onships
Marke ng assets
Developed technology
Content
Total accumulated amor za on
Intangible assets, net
December 31,
2023
2022
$
570,104 $
71,308
182,956
17,900
842,268
569,009
69,643
182,463
17,900
839,015
(174,982)
(146,948)
(11,985)
(69,386)
(3,978)
(260,331)
$
581,937 $
(8,371)
(46,571)
(1,989)
(203,879)
635,136
During the year ended December 31, 2023, changes to the gross carrying amounts of intangible asset classes were primarily related to write-offs of fully
amor zed intangible assets and the effect of foreign currency transla on.
Amor za on expense
Amor za on expense related to finite-lived intangible assets acquired in business combina ons 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 marke ng assets and non-compete
agreements, for which the associated amor za on expense is included in opera ng expenses.
2023 Form 10-K
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
The following table summarizes amor za on expense of our finite-lived intangible assets:
(dollars in thousands)
Included in cost of revenue:
Cost of recurring
Cost of one- me services and other
Total included in cost of revenue
Included in opera ng expenses
Total amor za on of intangibles from business combina ons
Years ended December 31,
2023
2022
2021
$
$
51,079 $
47,085 $
1,384
52,463
3,139
1,407
48,492
2,925
55,602 $
51,417 $
33,132
1,680
34,812
2,227
37,039
The following table outlines the es mated future amor za on expense for each of the next five years for our finite-lived intangible assets as of December 31,
2023:
Years ending December 31,
(dollars in thousands)
2024
2025
2026
2027
2028
Total
5. Earnings (Loss) Per Share
The following table sets forth the computa on of basic and diluted earnings (loss) per share:
(dollars in thousands, except per share amounts)
Numerator:
Net income (loss)
Denominator:
Weighted average common shares
Add effect of dilu ve securi es:
Stock-based awards
Weighted average common shares assuming dilu on
Earnings (loss) per share
Basic
Diluted
Amor za on
expense
62,332
65,873
64,234
60,038
52,544
$
305,021
Years ended December 31,
2023
2022
2021
$
1,820 $
(45,407) $
5,698
52,546,406
51,569,148
47,412,306
1,174,936
—
818,132
53,721,342
51,569,148
48,230,438
$
$
0.03 $
0.03 $
(0.88) $
(0.88) $
0.12
0.12
An -dilu ve shares excluded from calcula ons of diluted earnings (loss) per share
45,614
1,046,307
974,110
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
poten ally dilu ve securi es was an -dilu ve.
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6. Fair Value Measurements
Recurring fair value measurements
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Financial assets and liabili es 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, 2023
Financial assets:
Interest rate swaps
Total financial assets
Fair value as of December 31, 2023
Financial liabili es:
Interest rate swaps
Foreign currency forward contracts
Con ngent considera on obliga ons
Total financial liabili es
Fair value as of December 31, 2022
Financial assets:
Interest rate swaps
Foreign currency forward contracts
Total financial assets
Fair value as of December 31, 2022
Financial liabili es:
Foreign currency forward contracts
Con ngent considera on obliga ons
Total financial liabili es
Fair value measurement using
Quoted Prices in Ac ve
Markets for Iden cal
Assets and Liabili es
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable Inputs
(Level 3)
Total
$
$
$
$
$
$
$
$
— $
— $
16,198 $
16,198 $
— $
— $
16,198
16,198
— $
—
—
— $
— $
—
— $
— $
—
— $
5,004 $
— $
536
—
—
1,403
5,540 $
1,403 $
31,870 $
247
32,117 $
— $
—
— $
323 $
—
323 $
— $
2,710
2,710 $
5,004
536
1,403
6,943
31,870
247
32,117
323
2,710
3,033
Our deriva ve instruments within the scope of Accoun ng Standards Codifica on ("ASC") 815, Deriva ves and Hedging, are required to be recorded at fair
value. Our deriva ve 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 addi onal informa on about our deriva ve instruments.
The fair value of our interest rate swaps and foreign currency forward contracts are based on model-driven valua ons using Secured Overnight Financing Rate
("SOFR") rates and foreign currency forward rates, respec vely, 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 modifica ons did not have a significant financial impact.
Con ngent considera on obliga ons arise from business acquisi ons. The fair values are based on discounted cash flow analyses reflec ng 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 con ngencies, commercial risk, and the
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
me value of money. As the fair value measurements for our con ngent considera on obliga ons contain significant unobservable inputs, they are classified
within Level 3 of the fair value hierarchy. See Note 3 to these consolidated financial statements for addi onal informa on about our con ngent considera on
obliga ons.
We believe the carrying amounts of our cash and cash equivalents, restricted cash, accounts receivable, trade accounts payable, accrued expenses and other
current liabili es and due to customers approximate their fair values at December 31, 2023 and December 31, 2022, due to the immediate or short-term
maturity of these instruments.
We believe the carrying amount of our debt approximates its fair value at December 31, 2023 and December 31, 2022, as the debt bears interest rates that
approximate market value. As SOFR 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. The fair value of our fixed rate debt does not exceed the carrying amount.
We did not transfer any assets or liabili es among the levels within the fair value hierarchy during the years ended December 31, 2023, 2022 and 2021.
Non-recurring fair value measurements
Assets and liabili es that are measured at fair value on a non-recurring basis include long-lived assets, intangible assets, goodwill and opera ng lease ROU
assets. These assets are recognized at fair value during the period in which an acquisi on is completed or at lease commencement, from updated es mates
and assump ons 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 opera ng 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 projec ons and a
discount rate. For goodwill impairment tes ng, we es mate fair value using market-based methods including the use of market capitaliza on and
considera on of a control premium.
During the year ended December 31, 2023, we recorded noncash impairment charges of $5.6 million against certain opera ng lease ROU assets and $1.1
million impairment charges against certain property and equipment assets. See Notes 11 and 7, respec vely, to these consolidated financial statements for
addi onal details.
During the year ended December 31, 2022, we recorded noncash impairment charges of $2.3 million against certain previously capitalized so ware
development costs, $2.0 million against certain insignificant customer rela onship intangible assets that were held for sale, $1.0 million against certain
opera ng lease ROU assets and insignificant impairment charges against certain property and equipment assets. See Notes 11 and 7, respec vely, to these
consolidated financial statements for addi onal details.
During the year ended December 31, 2021, we recorded noncash impairment charges of $3.6 million against certain opera ng lease ROU assets and $1.7
million against certain property and equipment assets. See Notes 11 and 7, respec vely, to these consolidated financial statements for addi onal details.
There were no other non-recurring fair value adjustments during 2023, 2022 and 2021 except for certain business combina on accoun ng adjustments to the
ini al fair value es mates of the assets acquired and liabili es assumed at the acquisi on date from updated es mates and assump ons during the
measurement period. See Note 3 to these consolidated financial statements for addi onal details.
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
7. Property and Equipment and So ware 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 so ware
Construc on in progress
Furniture and fixtures
Leasehold improvements
Total property and equipment
Less: accumulated deprecia on
Property and equipment, net
Es mated
useful life
(years)
— $
39
7 - 20
1 - 5
1 - 5
1 - 5
—
2 - 7
Lesser of lease term or es mated useful life
2023
9,548 $
61,284
11,720
2,646
50,064
21,982
1,611
3,187
10,345
172,387
(73,698)
$
98,689 $
December 31,
2022
9,548
61,284
10,874
2,312
47,886
20,299
3,500
3,264
11,822
170,789
(63,363)
107,426
Deprecia on expense was $13.0 million, $14.1 million and $14.4 million for the years ended December 31, 2023, 2022 and 2021, respec vely.
During the year ended December 31, 2023, we recorded noncash impairment charges of $1.1 million against certain property and equipment assets. These
impairment charges resulted primarily from our entry into a sublease in July 2023 for a por on of our Washington, DC office loca on, which we previously
closed in February 2023 to align with our remote-first workforce strategy and are reflected in general and administra ve expense on the statements of
comprehensive income.
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 por on of our leased office space and are reflected in general and administra ve
expense on the statements of comprehensive income.
During the year ended December 31, 2021, we recorded noncash impairment charges of $1.7 million against certain property and equipment assets. These
impairment charges resulted primarily from our decision to close our Aus n office and are reflected in general and administra ve expense on the statements
of comprehensive income.
So ware and content development costs
So ware and content development costs consisted of the following as of:
(dollars in thousands)
So ware development costs
Content development costs
Less: accumulated amor za on
So ware and content development costs, net
Es mated
useful life
(years)
December 31,
2023
2022
3 - 7 $
287,519 $
250,551
5
6,945
(134,270)
3,409
(112,937)
$
160,194 $
141,023
2023 Form 10-K
87
Table of Contents
Blackbaud, Inc.
Notes to Consolidated Financial Statements
During the year ended December 31, 2022, we recorded noncash impairment charges of $2.3 million against certain previously capitalized so ware
development costs that reduced the carrying value of those assets to zero. The impairment charges were reflected in general and administra ve expense and
cost of recurring revenue, respec vely, on the statements of comprehensive income. These impairment charges resulted primarily from our decision to
accelerate the end of customer support for certain solu ons.
Other changes to the gross carrying amount of so ware and content development costs were primarily related to qualifying costs associated with
development ac vi es that are required to be capitalized under the internal-use so ware accoun ng guidance such as those for our cloud solu ons and
online educa on curriculum, write-offs of fully amor zed assets, and the effect of foreign currency transla on.
Amor za on expense related to so ware and content development costs was $42.8 million, $36.8 million and $31.0 million for the years ended
December 31, 2023, 2022 and 2021, respec vely, and is included primarily in cost of recurring.
8. Consolidated Financial Statement Details
Restricted cash
(dollars in thousands)
Restricted cash due to customers
Real estate escrow balances and other
Total restricted cash
Prepaid expenses and other assets
(dollars in thousands)
Costs of obtaining contracts
(1)(2)
Prepaid so ware maintenance and subscrip ons
(3)
Deriva ve instruments
Implementa on costs for cloud compu ng arrangements, net
(4)(5)
Unbilled accounts receivable
Prepaid insurance
Taxes, prepaid and receivable
Deferred tax assets
Other assets
Total prepaid expenses and other assets
Less: Long-term por on
Prepaid expenses and other current assets
December 31,
2023
December 31,
2022
695,489 $
1,517
697,006 $
700,611
1,629
702,240
December 31,
2023
December 31,
2022
$
$
$
62,377 $
35,169
16,198
9,259
5,615
3,940
3,418
644
13,702
150,322
51,037
$
99,285 $
74,272
34,766
32,117
10,189
5,775
4,902
1,855
1,153
10,929
175,958
94,304
81,654
(1) Amor za on expense from costs of obtaining contracts was $31.9 million, $33.6 million and $35.5 million for the years ended December 31, 2023, 2022 and 2021, respec vely, and is
included in sales, marke ng and customer success expense in our consolidated statements of comprehensive income.
The current por on of costs of obtaining contracts as of December 31, 2023 and 2022 was $25.3 million and $29.1 million, respec vely.
The current por on of prepaid so ware maintenance and subscrip ons as of December 31, 2023 and December 31, 2022 was $32.4 million and $31.7 million, respec vely.
These costs primarily relate to the mul -year implementa ons of our global enterprise resource planning and customer rela onship management systems.
(2)
(3)
(4)
(5) Amor za on expense from capitalized cloud compu ng implementa on costs was $2.5 million, $2.2 million and $1.9 million for the years ended December 31, 2023, 2022 and 2021,
respec vely. Accumulated amor za on for these costs was $7.7 million and $5.2 million as of December 31, 2023 and 2022, respec vely.
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
Accrued expenses and other liabili es
(dollars in thousands)
Taxes payable
Customer credit balances
Opera ng lease liabili es, current por on
Deriva ve instruments
Accrued commissions and salaries
Accrued transac on-based costs related to payments services
Accrued health care costs
Accrued legal costs
Accrued vaca on costs
Con ngent considera on liability
Other liabili es
Total accrued expenses and other liabili es
Less: Long-term por on
Accrued expenses and other current liabili es
Other income, net
(dollars in thousands)
Interest income
Currency revalua on (losses) gains
Other income, net
Other income, net
9. Debt
December 31,
2023
21,282 $
10,238
6,701
5,540
4,413
4,323
3,865
3,659
2,452
1,403
10,704
74,580
10,258
64,322 $
December 31,
2022
16,667
8,257
7,723
323
6,944
5,059
2,467
28,448
2,156
2,710
9,542
90,296
4,294
86,002
$
$
$
$
2023
8,821 $
(36)
4,076
12,861 $
Years ended December 31,
2022
1,746 $
4,635
2,332
8,713 $
2021
392
(1,644)
1,432
180
The following table summarizes our debt balances and the related weighted average effec ve 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: Unamor zed discount and debt issuance costs
Less: Debt, current por on
Debt, net of current por on
December 31,
2023
Debt balance at
December 31,
2022
Weighted average
effec ve interest rate at
December 31,
2023
December 31,
2022
$
114,100 $
607,500
56,745
2,800
781,145
1,481
19,259
$
760,405 $
177,800
623,750
58,189
2,247
861,986
2,943
18,802
840,241
7.52 %
3.51 %
5.22 %
8.42 %
4.24 %
7.02 %
4.17 %
5.18 %
4.26 %
5.22 %
7.38 %
4.52 %
6.45 %
4.48 %
2023 Form 10-K
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Table of Contents
2020 refinancing
Blackbaud, Inc.
Notes to Consolidated Financial Statements
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 our 5-year $700 million credit facility entered into during June 2017 (the "2017 Credit Facility") by amending and
resta ng 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 connec on with the amendment and restatement of the 2017 Credit Facility, the exis ng Pledge Agreement dated June 2, 2017, by us in favor of Bank of
America, N.A., as administra ve agent, was likewise amended and restated.
Summary of the 2020 Credit Facility
The 2020 Revolving Facility includes (i) a $50.0 million sublimit available for the issuance of standby le ers of credit, (ii) a $50.0 million sublimit available for
swingline loans, and (iii) a $100.0 million sublimit available for mul currency borrowings.
Our obliga ons 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 domes c 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 administra ve agent, for the ratable benefit of itself and the secured par es referred to therein.
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 classifica on of our debt as current or non-current based on
the required annual maturi es of the 2020 Credit Facility. We may prepay the 2020 Credit Facility in whole or in part at any me without premium or penalty,
other than customary breakage costs with respect to certain types of loans.
The 2020 Credit Facility contains various representa ons, warran es and affirma ve, nega ve and financial covenants customary for financings of this type.
Financial covenants include a net leverage ra o and an interest coverage ra o. At December 31, 2023, we were in compliance with our debt covenants under
the 2020 Credit Facility.
Under the terms of the 2020 Credit Facility, we are en tled on one or more occasions, subject to the sa sfac on of certain condi ons, to request an increase
in the commitments under the Revolving Credit Facility and/or request addi onal incremental term loans in the aggregate principal amount of up to $250.0
million plus an amount, if any, such that the net leverage ra o shall be no greater than 3.25 to 1.00. At December 31, 2023, our available borrowing capacity
under the 2020 Credit Facility was $384.5 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 defini on of “Applicable Margin”, (ii) modify the net leverage ra o financial covenant to require a net leverage ra o of (A)
4.00:1.00 or less for the fiscal quarter ended December 31, 2021 and for fiscal quarters ending therea er through December 31, 2023 and (B) 3.75:1.00 or
less for the fiscal quarters ending March 31, 2024 and therea er, (iii) reset the $250.0 million fixed dollar basket with respect to the accordion feature and (iv)
modify certain nega ve covenants to provide addi onal opera onal flexibility.
LIBOR Transi on Amendment
On August 26, 2022, we entered into a LIBOR Transi on 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.
A er giving effect to both the First Amendment and the LIBOR Transi on Amendment, dollar denominated loans under the 2020 Revolving Facility and the
2020 Term Loan bear interest based on, at our elec on, 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.,
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
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 sensi ve 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 ra o 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 fi h Business Day preceding such date on the applicable Reuters screen page
plus a credit sensi ve adjustment of 0.0326% per annum. The applicable margin is adjusted quarterly based on our net leverage ra o and ranges from 1.375%
to 2.50% per annum.
We also pay a quarterly commitment fee on the unused por on of the 2020 Revolving Facility from 0.250% to 0.50% per annum, depending on our net
leverage ra o.
At December 31, 2023, the applicable margin for Term SOFR, SONIA and other Eurocurrency Rate loans under the 2020 Credit Facility was 1.625% and the
commitment fee applicable to the 2020 Revolving Facility was 0.250%.
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”).
The 2021 Incremental Term Loan bears interest based on, at our elec on, 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 sensi ve 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 sensi ve 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 ra o 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 exis ng term loan under the 2020 Credit Facility, and is otherwise subject to substan ally the same terms
and condi ons as the exis ng term loan under the 2020 Credit Facility.
Financing costs
In connec on 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 por on of the unamor zed deferred financing costs from the 2017 Credit Facility and prior facili es, are being amor zed into interest
expense over the term of the new facility. We recorded aggregate financing costs of $2.0 million as a direct deduc on 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 connec on with our entry into the 2021 Incremental Term Loan, we paid $3.1 million in financing costs which were recorded as a direct deduc on from the
carrying amount of our debt liability.
As of December 31, 2023, deferred financing costs totaling $0.6 million were included in other assets on our consolidated balance sheets.
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 obliga ons under two
senior secured notes with a then-aggregate outstanding principal amount of $61.1 million (collec vely, the “Real Estate Loans”). The Real Estate Loans require
periodic principal payments and the balance of the Real Estate Loans are due upon maturity in April 2038. At December 31, 2023, we were in compliance with
our debt covenants under the Real Estate Loans.
2023 Form 10-K
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Other debt
Blackbaud, Inc.
Notes to Consolidated Financial Statements
From me to me, we enter into third-party financing agreements for purchases of so ware 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-exis ng credit facility at the incep on of the notes. Our assump on of these loans are noncash financing transac ons and are
reflected in our supplemental disclosure of cash flow informa on.
The following table summarizes our currently effec ve financing agreements as of December 31, 2023:
(dollars in thousands)
(1)
Effec ve dates of agreements :
December 2022
January 2023
Term
in Months
Number of
Annual Payments
First Annual
Payment Due
Original Loan
Value
39
36
3
3
January 2023 $
April 2023
1,710
2,491
(1)
Represent noncash inves ng and financing transac ons during the periods indicated as we purchased so ware and services by assuming directly related liabili es.
The changes in supplier financing obliga ons during the years ended December 31, 2023, consisted of the following:
(dollars in thousands)
Balance at December 31, 2022
Addi ons
Payments
Balance at December 31, 2023
$
$
Total
2,247
2,491
(1,938)
2,800
As of December 31, 2023, the required annual maturi es related to the 2020 Credit Facility, the Real Estate Loans and our other debt were as follows:
Years ending December 31,
(dollars in thousands)
2024
2025
2026
2027
2028
Therea er
Total required maturi es
10. Deriva ve Instruments
Annual
maturi es
19,259
708,534
1,969
2,166
2,374
46,843
781,145
$
$
We generally use deriva ve instruments to manage our interest rate and foreign currency exchange risk. We currently have deriva ves classified as cash flow
hedges and net investment hedges. We do not enter into any deriva ves for trading or specula ve purposes.
All of our deriva ve instruments are governed by Interna onal Swap Dealers Associa on, Inc. master agreements with our counterpar es. As of
December 31, 2023 and December 31, 2022, we have presented the fair value of our deriva ve instruments at the gross amounts in the consolidated balance
sheet as the gross fair values of our deriva ve instruments equaled their net fair values.
Cash flow hedges
We have entered into interest rate swap agreements, which effec vely convert por ons 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 incep on of the contracts. As of
December 31, 2023 and December 31, 2022, the aggregate no onal
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
values of the interest rate swaps were $935.0 million and $435.0 million, respec vely. All of the contracts have maturi es on or before October 2028.
We have entered into foreign currency forward contracts to hedge revenues denominated in the Canadian Dollar ("CAD") against changes in the exchange
rate with the United States Dollar ("USD"). We designated each of these foreign currency forward contracts as cash flow hedges at the incep on of the
contracts. As of December 31, 2023 and December 31, 2022, the aggregate no onal values of the foreign currency forward contracts designated as cash flow
hedges that we held to buy USD in exchange for Canadian Dollars were $29.9 million CAD and $22.6 million CAD, respec vely. All of the contracts have
maturi es of 12 months or less.
Net investment hedges
We have entered into foreign currency forward contracts to hedge a por on of the foreign currency exposure that arises on transla on of our investments
denominated in Bri sh Pounds ("GBP") into USD. We designated each of these foreign currency forward contracts as net investment hedges at the incep on
of the contracts. As of December 31, 2023 and December 31, 2022, the aggregate no onal values of the foreign currency forward contracts designated as net
investment hedges to reduce the vola lity of the U.S. dollar value of a por on of our GBP-denominated investments was £13.2 million and £11.2 million,
respec vely.
The fair values of our deriva ve instruments were as follows as of:
(dollars in thousands)
Balance sheet loca on
Asset deriva ves
December 31,
2023
December 31,
2022
Balance sheet loca on
Liability Deriva ves
December 31,
2023
December 31,
2022
Deriva ve instruments designated as
hedging instruments:
Interest rate swaps, current por on
Prepaid expenses
and other current
Accrued expenses
and other current
assets $
16,198 $
—
liabili es $
— $
—
Foreign currency forward contracts,
current por on
Prepaid expenses
and other current
assets
Interest rate swaps, long-term
Other assets
—
—
247
31,870
Accrued expenses
and other current
liabili es
Other liabili es
536
5,004
Total deriva ve instruments
designated as hedging instruments
$
16,198 $
32,117
$
5,540 $
2023 Form 10-K
323
—
323
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
The effects of deriva ve instruments in cash flow and net investment hedging rela onships were as follows:
(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
Foreign currency forward contracts
Net Investment Hedges
Foreign currency forward contracts
Cash Flow Hedges
Interest rate swaps
Gain recognized
in accumulated other
comprehensive
(loss) income as of
December 31,
2023
Loca on
of gain
reclassified from
accumulated other
comprehensive
(loss) income into
income (loss)
Gain (loss) reclassified from
accumulated other
comprehensive (loss) income
into income (loss)
Year ended
December 31, 2023
$
$
$
$
$
$
$
11,194
(235)
Interest expense $
Revenue $
(301)
December 31,
2022
$
31,870
247
Interest expense $
Revenue $
(323)
December 31,
2021
$
20,418
388
—
Year ended
December 31, 2022
5,520
165
—
Year ended
December 31, 2021
7,160
Interest expense $
(3,714)
Our policy requires that deriva ves used for hedging purposes be designated and effec ve as a hedge of the iden fied risk exposure at the incep on of the
contract. Accumulated other comprehensive income (loss) includes unrealized gains or losses from the change in fair value measurement of our deriva ve
instruments each repor ng period and the related income tax expense or benefit. Excluding net investment hedges, changes in the fair value measurements
of the deriva ve instruments and the related income tax expense or benefit are reflected as adjustments to accumulated other comprehensive income (loss)
un l the actual hedged expense is incurred or un l the hedge is terminated at which point the unrealized gain (loss) and related tax effects are reclassified
from accumulated other comprehensive income (loss) to current earnings. For net investment hedges, changes in the fair value measurements of the
deriva ve instruments and the related income tax expense or benefit are reflected as adjustments to transla on adjustment, a component of accumulated
other comprehensive income (loss), and recognized in earnings only when the hedged GBP investment is liquidated. The es mated accumulated other
comprehensive income as of December 31, 2023 that is expected to be reclassified into earnings within the next twelve months is $16.4 million. There were
no ineffec ve por ons of our interest rate swap or foreign currency forward deriva ves during the years ended December 31, 2023, 2022 and 2021. 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 deriva ve instruments as opera ng ac vi es in the consolidated statements of cash flows.
We did not have any undesignated deriva ve instruments during 2023, 2022 and 2021.
11. Commitments and Con ngencies
Leases
We have opera ng leases for corporate offices, subleased offices and certain equipment and furniture. As of December 31, 2023, we did not have any
opera ng leases that had not yet commenced.
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
The following table summarizes the components of our lease expense:
(dollars in thousands)
Opera ng lease cost
(1)
Variable lease cost
Sublease income
Net lease cost
(1)
Includes short-term lease costs, which were immaterial.
2023
8,812 $
1,431
(3,356)
6,887 $
$
$
Year ended
December 31,
2021
9,636
2,478
(1,516)
10,598
2022
9,501 $
1,670
(2,763)
8,408 $
During the year ended December 31, 2023, we recorded noncash impairment charges of $5.6 million against certain opera ng lease ROU assets. These
impairment charges resulted primarily from our entry into a sublease in July 2023 for a por on of our Washington, DC office loca on, which we previously
closed in February 2023 to align with our remote-first workforce strategy and are reflected in general and administra ve expense on the statements of
comprehensive income.
During the year ended December 31, 2022, we recorded noncash impairment charges of $1.0 million against certain opera ng lease ROU assets resul ng
primarily from our decision to cease using a por on of our leased office space. These charges are reflected in general and administra ve expense on the
statements of comprehensive income.
In October 2021, we made the decision to permanently close our fixed office loca ons (with the excep on of our global headquarters facility in Charleston,
South Carolina), effec ve in December 2021. This change was intended to align our real estate footprint with our transi on 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 es mated useful lives of our opera ng lease ROU assets for certain of our office loca ons we expected to exit. We recorded $5.3 million in incremental
opera ng lease costs during 2021 related to this change in accoun ng es mate. For these same office loca ons, we also reduced the es mated useful lives of
certain facili es-related fixed assets, which resulted in incremental deprecia on 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 opera ng 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 administra ve expense.
Maturi es of our opera ng lease liabili es as of December 31, 2023 were as follows:
Years ending December 31,
(dollars in thousands)
2024
2025
2026
2027
2028
Therea er
Total lease payments
Less: Amount represen ng interest
Present value of future payments
Opera ng leases
8,662
7,703
6,107
6,207
6,101
20,689
55,469
8,683
46,786
$
$
2023 Form 10-K
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Table of Contents
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Our ROU assets and lease liabili es are included in the following line items in our consolidated balance sheet:
(dollars in thousands)
Opera ng leases
Opera ng lease ROU assets
Accrued expenses and other current liabili es
Opera ng lease liabili es, net of current por on
Total opera ng lease liabili es
The weighted average remaining lease terms and discount rates were as follows:
(dollars in thousands)
Opera ng leases
Weighted average remaining lease term (years)
Weighted average discount rate
Supplemental cash flow informa on related to leases was as follows:
December 31,
2023
December 31,
2022
$
$
$
36,927 $
45,899
6,701 $
40,085
46,786 $
7,723
44,918
52,641
December 31,
2023
December 31,
2022
December 31,
2021
7.7
4.70 %
8.5
4.63 %
8.9
4.68 %
Year ended
December 31,
(dollars in thousands)
2023
2022
2021
Cash paid for amounts included in the measurement of lease liabili es:
Opera ng cash flows from opera ng leases
(1)
$
10,983 $
11,439 $
11,338
Right-of-use assets obtained in exchange for lease obliga ons (non-cash):
Opera ng leases
Other commitments
2,765
—
5,358
The term loans under the 2020 Credit Facility require periodic principal payments. The balance of the term loans and any amounts drawn on the revolving
credit loans are due upon maturity of the 2020 Credit Facility in October 2025. The Real Estate Loans also require periodic principal payments and the balance
of the Real Estate Loans are due upon maturity in April 2038.
We have contractual obliga ons for third-party technology used in our solu ons and for other services we purchase as part of our normal opera ons. In
certain cases, these arrangements require a minimum annual purchase commitment by us. As of December 31, 2023, the remaining aggregate minimum
purchase commitment under these arrangements was approximately $257.6 million through 2027.
Solu on and service indemnifica ons
In the ordinary course of business, we provide certain indemnifica ons of varying scope to customers against claims of intellectual property infringement
made by third par es arising from the use of our solu ons or services. We have not iden fied any losses that might be covered by these indemnifica ons
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 inves ga ons, as described below. We record an accrual for a loss con ngency when it is both probable that a material liability has been incurred and the
amount of the loss can be reasonably es mated. If only a range of es mated losses can be determined, we accrue an amount within the range that, in our
judgment, reflects the most likely outcome; if none of the es mates within that range is a be er es mate 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 es mate of
96
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
the loss or range of losses arising from the proceeding can be made, we disclose such an es mate, if material. If such a loss or range of losses is not
reasonably es mable, we disclose that fact. We review any such loss con ngency accruals at least quarterly and adjust them to reflect the impacts of
nego a ons, se lements, rulings, advice of legal counsel and other informa on and events pertaining to a par cular 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 ma ers pending or threatened
against us and intend to defend ourselves vigorously against all claims asserted. It is possible that our consolidated financial posi on, results of opera ons or
cash flows could be materially nega vely affected in any par cular period by an unfavorable resolu on of one or more of such legal proceedings.
Security incident
As previously disclosed, we are subject to risks and uncertain es as a result of a ransomware a ack 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) inves ga on, we do not believe that any data went beyond the cybercriminal, has been misused, or has been disseminated
or otherwise made available publicly. Our inves ga on into the Security Incident remains ongoing.
As a result of the Security Incident, we are currently subject to certain legal proceedings, claims and inves ga ons, as discussed below, and could be the
subject of addi onal legal proceedings, claims, inquiries and inves ga ons in the future that might result in adverse judgments, se lements, fines, penal es
or other resolu on. 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 deduc ble payable by us. As noted below, this coverage reduced our financial exposure related to the Security Incident
in prior years.
We recorded expenses and offse ng probable insurance recoveries related to the Security Incident as follows:
(dollars in thousands)
Gross expense
Offse ng probable insurance recoveries
Net expense
$
$
2023
53,426 $
—
53,426 $
Years ended December 31,
2022
57,614 $
(1,891)
55,723 $
2021
40,561
(38,745)
1,816
The following summarizes our cumula ve expenses, insurance recoveries recognized and insurance recoveries paid as of:
(dollars in thousands)
Cumula ve gross expense
Cumula ve offse ng insurance recoveries recognized
Cumula ve net expense
Cumula ve offse ng insurance recoveries paid
December 31,
2023
December 31,
2022
December 31, 2021
161,431 $
(50,000)
111,431 $
108,005 $
(50,000)
58,005 $
50,391
(48,109)
2,282
(50,000) $
(50,000) $
(29,968)
$
$
$
Recorded expenses have consisted primarily of payments to third-party service providers and consultants, including legal fees, se lement of the previously
disclosed SEC and mul -state A orneys General inves ga ons (discussed below), se lements of customer claims and accruals for certain loss con ngencies.
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 administra ve expense on our consolidated statements of comprehensive (loss) income and as
opera ng ac vi es 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 con nue to experience significant expenses related to our response to the Security Incident, resolu on of legal
proceedings, claims and inves ga ons, including those discussed below, and our efforts to further enhance our cybersecurity measures. For full year 2023, we
incurred net pre-tax
2023 Form 10-K
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
expense of $53.4 million related to the Security Incident, which included $22.4 million for ongoing legal fees. It also includes se lements and addi onal
accruals for loss con ngencies of $31.0 million. Also, for full year 2023, we had net cash outlays of $78.0 million related to the Security Incident, which
included ongoing legal fees, the $3.0 million civil penalty paid during the first quarter of 2023 related to the SEC se lement and the $49.5 million civil penalty
paid during the fourth quarter of 2023 related to the mul -state A orneys General se lement (discussed below). In line with our policy, legal fees are
expensed as incurred. For full year 2024, we currently expect net pre-tax expense of approximately $5.0 million to $10.0 million and net cash outlays of
approximately $8.0 million to $13.0 million for ongoing legal fees related to the Security Incident.
As of December 31, 2023, we have recorded approximately $1.5 million in aggregate liabili es for loss con ngencies based primarily on recent nego a ons
with certain customers related to the Security Incident that we believe we can reasonably es mate in accordance with our loss con ngency procedures
described above. Our liabili es for loss con ngencies are recorded in accrued expenses and other current liabili es on our consolidated balance sheets. It is
reasonably possible that our es mated or actual losses may change in the near term for those ma ers and be materially in excess of the amounts accrued,
but we are unable at this me to reasonably es mate the possible addi onal loss.
There are other Security Incident-related ma ers, including customer claims, customer cons tuent class ac ons and governmental inves ga ons, for which
we have not recorded a liability for a loss con ngency as of December 31, 2023 because we are unable at this me to reasonably es mate the possible loss or
range of loss. Each of these ma ers could, separately or in the aggregate, result in an adverse judgement, se lement, fine, penalty or other resolu on, the
amount, scope and ming of which we are currently unable to predict, but could have a material adverse impact on our results of opera ons, cash flows or
financial condi on.
Customer claims. To date, we have received approximately 260 specific requests for reimbursement of expenses, approximately 214 (or 82%) of which have
been fully resolved and closed and approximately 39 (or 15%) are inac ve and are considered by us to have been abandoned by the customers. We have also
received approximately 400 reserva ons of the right to seek expense recovery in the future from customers or their a orneys in the U.S., U.K. and Canada
related to the Security Incident, none of which resulted in claims submi ed to us and are considered by us to have been abandoned by the customers. We
have also received no ces of proposed claims on behalf of a number of U.K. data subjects, which we are reviewing. In addi on, insurance companies
represen ng various customers’ interests through subroga on claims have contacted us, and certain insurance companies have filed subroga on claims in
court, of which 3 cases remain ac ve and unresolved. Customer and insurer subroga on claims generally seek reimbursement of their costs and expenses
associated with no fying their own customers of the Security Incident and taking steps to assure that personal informa on has not been compromised as a
result of the Security Incident. Our review of customer and subroga on claims includes analyzing individual customer contracts into which we have entered,
the specific claims made and applicable law.
Customer cons tuent class ac ons. Presently, we are a defendant in puta ve consumer class ac on cases in U.S. federal courts (most of which have been
consolidated under mul district li ga on to a single federal court) and in Canadian courts alleging harm from the Security Incident. The plain ffs in these
cases, who purport to represent various classes of individual cons tuents of our customers, generally claim to have been harmed by alleged ac ons and/or
omissions by us in connec on with the Security Incident and assert a variety of common law and statutory claims seeking monetary damages, injunc ve
relief, costs and a orneys’ fees and other related relief.
Lawsuits that are puta ve class ac ons require a plain ff to sa sfy a number of procedural requirements before proceeding to trial. These requirements
include, among others, demonstra on to a court that the law proscribes in some manner our ac vi es, the making of factual allega ons sufficient to suggest
that our ac vi es exceeded the limits of the law and a determina on by the court—known as class cer fica on—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 ac on and the plain ff may lose
the financial incen ve to proceed with the case. We are currently engaged in court proceedings to determine whether this will proceed as a class ac on.
Frequently, a court’s determina on as to these procedural requirements is subject to appeal to a higher court. As a result of these uncertain es, we may be
unable to determine the probability of loss un l, or a er, a court has finally determined that a plain ff has sa sfied the applicable class ac on procedural
requirements.
98
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
Furthermore, for puta ve class ac ons, it is o en not possible to reasonably es mate the possible loss or a range of loss amounts, even where we have
determined that a loss is reasonably possible. Generally, class ac ons involve a large number of people and raise complex legal and factual issues that result
in uncertainty as to their outcome and, ul mately, making it difficult for us to es mate the amount of damages that a plain ff might successfully prove. This
analysis is further complicated by the fact that the plain ffs lack contractual privity with us.
Governmental inves ga ons. We have received a Civil Inves ga ve Demand from the office of the California A orney General rela ng to the Security
Incident and are in discussions with the A orney General about poten al resolu on of issues arising from this inves ga on. Although we are hopeful that we
can resolve this ma er on acceptable terms, there is no assurance that we will be able to do so on terms acceptable to us and the State of California.
We also are subject to the following pending governmental ac ons:
•
•
an inves ga on by the U.S. Federal Trade Commission (the "FTC"), as further described below; and
an inves ga on by the U.S. Department of Health and Human Services.
We also responded to inquiries from the Office of the Australian Informa on Commissioner in September 2020 and the Office of the Privacy Commissioner of
Canada in October 2020.
As previously disclosed, on February 1, 2024, the FTC announced its approval of an Agreement Containing Consent Order (the “Proposed Order”) evidencing
its se lement with the Company in connec on with the Security Incident. Pursuant to its rules, the FTC placed the Proposed Order and related dra
complaint on the public record for a period of 30 days for the receipt of public comments a er which the FTC will consider any comments received from
interested persons prior to determining whether and in what form to finalize the Proposed Order. The 30-day comment period is scheduled to expire on
March 14, 2024. As part of the FTC’s proposed order, the Company has not been fined and is not otherwise required to make any payment. Furthermore, the
Company has agreed to the FTC’s proposed order without admi ng or denying any of the FTC’s allega ons, except as expressly stated otherwise in the
Proposed Order. If finalized, the se lement described in the Proposed Order will fully resolve the FTC inves ga on. Although we believe the Proposed Order
will be finalized in substan ally its current form, there can be no assurances as to whether that will occur or its ming.
Under the terms of the Proposed Order, we have agreed (i) to not misrepresent (a) the extent to which we maintain, use, delete or disclose certain customer
informa on, (b) the extent to which we protect the privacy, security, availability, confiden ality or integrity of such informa on or (c) the extent of any
security incident or unauthorized disclosure, misuse, loss, the , altera on, destruc on or other compromise of such informa on, and (ii) to delete certain
data, adopt and make public certain record reten on limits, establish, implement and maintain a specified informa on security program, obtain regular
independent assessments of the mandated informa on security program, provide to the FTC specified cer fica ons regarding our compliance with the
Proposed Order, provide to the FTC reports of any future security incidents and create and maintain specified recordkeeping.
For more informa on, see the form of Proposed Order that was furnished as Exhibit 99.2 to the Company’s Current Report on Form 8-K filed with the SEC on
February 2, 2024.
As previously disclosed, on October 5, 2023, we entered into separate, substan ally similar Administra ve Orders with each of 49 state A orneys General and
the District of Columbia rela ng to the previously announced 2020 Security Incident in which a cyber-criminal removed a copy of a subset of data from our
self-housed environment. This se lement fully resolves the previously disclosed mul -state Civil Inves ga ve Demand and the separate Civil Inves ga ve
Demand from the Office of the Indiana A orney General rela ng to the Security Incident (the “Mul -state Inves ga on”), which is further described in the
substan ally similar Administra ve Orders filed in each of the 49 states and the District of Columbia.
Under the terms of the Administra ve Orders, we have agreed: (i) to comply with state consumer protec on laws, data breach no fica on laws, and the
Health Insurance Portability and Accountability Act of 1996 (“HIPAA”); (ii) not to make misleading misrepresenta ons to our customers or the individuals
whose data is stored by us concerning (a) the extent to which we protect the privacy, security, confiden ality, or integrity of certain data, (b) the likelihood
that data impacted by a security incident may be subject to unauthorized access, disclosure, or other misuse, or (c) the data breach no fica on requirements;
and (iii) to implement and improve certain cybersecurity programs and tools.
2023 Form 10-K
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
As part of the Administra ve Orders, we also agreed to pay, and have paid, a total of $49.5 million to the 49 states and District of Columbia. We entered into
the Administra ve Orders without admi ng fault or liability in connec on with the ma ers subject to the Mul -state Inves ga on. The form of
Administra ve Order was furnished as Exhibit 99.2 to our Current Report on Form 8-K filed with the SEC on October 5, 2023.
As previously disclosed, on March 9, 2023, we reached a se lement with the SEC in connec on with the Security Incident. This se lement fully resolves the
previously disclosed SEC inves ga on of the Security Incident and is further described in an SEC cease-and-desist order (the “SEC Order”). Under the terms of
the SEC Order, we have agreed to cease-and-desist from commi ng or causing any viola ons or any future viola ons of Sec ons 17(a)(2) and (3) of the
Securi es Act of 1933, as amended (the “Securi es Act”), and Sec on 13(a) of the Securi es Exchange Act of 1934, as amended (the “Exchange Act”), and
Rules 12b-20, 13a-13 and 13a-15(a) thereunder. No other viola ons of the securi es laws are alleged in the SEC Order. As part of the SEC Order, we also
agreed to pay, and have paid, a civil penalty in the amount of $3.0 million. We consented to the entry of the SEC Order without admi ng or denying the
findings of the SEC Order, other than with respect to the SEC’s jurisdic on over the Company and the subject ma er of the SEC Order. The SEC Order
describing the se lement was furnished as Exhibit 99.1 and the SEC’s press release announcing this resolu on was furnished as Exhibit 99.2 to our Current
Report on Form 8-K filed with the SEC on March 9, 2023.
On September 28, 2021, the Informa on Commissioner’s Office in the United Kingdom under the U.K. Data Protec on Act 2018 (the "ICO") no fied us that it
has closed its inves ga on of the Security Incident. Based on its inves ga on and having considered our ac ons before, during and a er the Security
Incident, the ICO issued our European subsidiary a reprimand in accordance with Ar cle 58(2)(b) of the U.K. General Data Protec on Regula on ("U.K. GDPR")
due to our non-compliance, in the ICO's view, with the requirements set out in Ar cle 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 ac on by us.
On September 24, 2021, we received no ce from the Spanish Data Protec on Authority that it has concluded its inves ga on of the Security Incident,
pursuant to which our European subsidiary paid a penalty of €60,000 in rela on to the alleged late no fica on of two Spanish data controllers regarding the
Security Incident.
On January 15, 2021, we were no fied by the Data Protec on Commission of Ireland that it has concluded its inves ga on of the Security Incident without
taking any ac on against us.
We con nue to cooperate with all ongoing inves ga ons, which include various requests for documents, policies, narra ves and communica ons, as well as
requests to interview or depose various Company-related personnel. As noted above, each of these separate governmental inves ga ons could result in
adverse judgments, se lements, fines, penal es or other resolu on, the amount, scope and ming of which we are currently unable to predict, but could
have a material adverse impact on our results of opera ons, cash flows or financial condi on.
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2023 Form 10-K
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12. Income Taxes
Blackbaud, Inc.
Notes to Consolidated Financial Statements
We file income tax returns in the U.S. for federal and various state jurisdic ons as well as in foreign jurisdic ons including Canada, the U.K., Australia, Ireland
and Costa Rica. We are generally subject to U.S. federal income tax examina on for calendar tax years 2020 through 2023 as well as state and foreign income
tax examina ons for various years depending on statutes of limita ons of those jurisdic ons.
The following summarizes the components of income tax expense (benefit):
(dollars in thousands)
Current taxes:
U.S. Federal
U.S. State and local
Interna onal
Total current taxes
Deferred taxes:
U.S. Federal
U.S. State and local
Interna onal
Total deferred taxes
Total income tax provision (benefit)
The following summarizes the components of income (loss) before provision for income taxes:
(dollars in thousands)
U.S.
Interna onal
Income (loss) before provision for income taxes
$
$
$
2023
2022
2021
Years ended December 31,
$
18,879 $
3,485 $
12,331
8,982
40,192
(18,303)
(5,895)
(170)
(24,368)
5,708
7,283
16,476
(16,880)
(9,319)
(445)
(26,644)
15,824 $
(10,168) $
(2,499)
(257)
6,570
3,814
(4,615)
222
1,964
(2,429)
1,385
Years ended December 31,
2023
(22,074) $
39,718
17,644 $
2022
(91,493) $
35,918
(55,575) $
2021
(23,180)
30,263
7,083
2023 Form 10-K
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
A reconcilia on between the effect of applying the federal statutory rate and the effec ve income tax rate used to calculate our income tax provision is as
follows:
Federal statutory rate
Effect of:
State income taxes, net of federal benefit
Change in foreign income tax rate applied to deferred tax balances
Change in state income tax rate applied to deferred tax balances
Nondeduc ble security incident-related fines or penal es
Sec on 162(m) limita on
Stock-based compensa on
Change in valua on reserve (primarily state credit reserves)
GILTI inclusion
Foreign tax rate
Nondeduc ble meals, entertainment and transporta on
Unrecognized tax benefit
Acquisi on costs
Return to accrual adjustment
State credits, net of federal benefit
FDII benefit
Federal credits generated
Other
Income tax provision effec ve rate
Years ended December 31,
2023
21.0 %
2022
21.0 %
2021
21.0 %
20.0
—
7.1
35.7
30.1
13.4
10.8
9.3
6.1
4.4
0.7
—
(8.3)
(9.1)
(10.2)
(42.3)
1.0
89.7 %
1.5
0.1
1.8
(8.7)
(6.4)
(6.3)
(5.4)
(2.6)
1.0
(0.7)
0.5
—
1.4
7.2
2.3
11.5
0.1
18.3 %
4.4
42.6
2.3
—
75.0
(36.2)
26.1
—
(6.0)
1.1
(32.7)
8.7
(4.2)
(32.6)
—
(54.5)
4.6
19.6 %
The increase in our effec ve income tax rate for year ended December 31, 2023, when compared to the same period in 2022, was primarily a ributable to
higher 2023 non-deduc ble accruals for loss con ngencies related to the Security Incident and other non-deduc ble expenses and tax rate changes, par ally
offset by increased tax credits. Furthermore, our 2023 effec ve tax rate was nega vely impacted by higher tax rates in foreign jurisdic ons in which we
operate which were predominantly due to UK tax rate increases. The year-on-year comparison is further impacted by 2023 pre-tax income versus prior year
pre-tax loss.
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2023 Form 10-K
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
The significant components of our deferred tax assets and liabili es were as follows:
(dollars in thousands)
Deferred tax assets rela ng to:
Capitalized R&D and so ware costs
Federal, state and foreign tax credits
Stock-based compensa on
Opera ng leases
Federal and state and foreign net opera ng loss carryforwards
Deferred revenue
Allowance for credit losses
Intangible assets
Accrued bonuses
Other
Total deferred tax assets
Deferred tax liabili es rela ng to:
Intangible assets
Costs of obtaining contracts
Opera ng leases
Fixed assets
Other
Total deferred tax liabili es
Valua on allowance
Net deferred tax liability
2023
December 31,
2022
$
47,351 $
39,260
24,717
12,867
7,061
5,992
1,702
1,050
314
2,982
143,296
(160,172)
(13,870)
(9,865)
(5,833)
(8,342)
(198,082)
(37,862)
$
(92,648) $
12,166
50,194
21,166
14,024
10,369
1,820
1,803
561
455
6,293
118,851
(161,836)
(16,287)
(11,721)
(9,827)
(9,016)
(208,687)
(34,769)
(124,605)
As of December 31, 2023, our federal, foreign and state net opera ng loss carryforwards for income tax purposes were approximately $14.9 million, $3.8
million and $50.8 million, respec vely. Of our federal net opera ng loss carryforwards, $12.4 million are subject to expira on beginning in 2024 while the
remainder have an unlimited carryforward period. The state net opera ng loss carryforwards are subject to various applicable state tax laws. If not u lized,
the state net opera ng loss carryforwards will expire over various periods beginning in 2024. Our foreign net opera ng loss carryforwards have an unlimited
carryforward period. Our state tax credit carryforwards for income tax purposes were approximately $40.9 million, net of federal benefit. If not u lized, the
state tax credit carryforwards will begin to expire in 2024. A por on of the foreign and state net opera ng loss carryforwards and state credit carryforwards
have a valua on reserve due to management's uncertainty regarding the future ability to use such carryforwards.
The following table illustrates the change in our deferred tax asset valua on allowance:
Years ended December 31,
(dollars in thousands)
2023
2022
2021
$
Balance
at beginning
of year
34,769 $
31,974
29,184
Acquisi on-
related
change
— $
—
893
Charges to
expense
3,093 $
2,795
1,897
Balance at
end of
year
37,862
34,769
31,974
2023 Form 10-K
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
The following table sets forth the change to our unrecognized tax benefit for the years ended December 31, 2023, 2022 and 2021:
(dollars in thousands)
Balance at beginning of year
Increases from current period posi ons
Increases from prior period posi ons
Decreases in prior year posi ons
Se lements (payments)
Lapse of statute of limita ons
Balance at end of year
Years ended December 31,
2023
3,083 $
762
101
(118)
(160)
(428)
2022
3,651 $
629
89
(908)
—
(378)
3,240 $
3,083 $
2021
4,625
1,751
6
(57)
(1,192)
(1,482)
3,651
$
$
The total amount of unrecognized tax benefit that, if recognized, would favorably affect the effec ve tax rate was $3.2 million at December 31, 2023. Certain
prior period amounts rela ng to our 2014 acquisi ons were covered under indemnifica on agreements and, therefore, had a corresponding indemnifica on
asset. Due to lapse of statute of limita ons, the indemnified unrecognized tax benefit was released in 2022 resul ng in income tax benefit with offse ng
expense included in pretax income from corresponding release of indemnifica on asset. We recognize accrued interest and penal es, if any, related to
unrecognized tax benefits as a component of income tax expense. The total amount of accrued interest and penal es included in the consolidated balance
sheet as of December 31, 2023 and December 31, 2022 was insignificant. The total amount of interest and penal es included in the consolidated statements
of comprehensive income as an increase or decrease in income tax expense for 2023, 2022 and 2021 was insignificant.
We have taken federal and state tax posi ons 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 expira on of statutes of limita ons. The reasonably possible decrease at December 31,
2023 was insignificant.
For our undistributed earnings of foreign subsidiaries, we concluded that these earnings would be permanently reinvested in the local jurisdic ons and not
repatriated to the United States except to the extent that said earnings are of previously taxed income. Accordingly, we have not provided for U.S. income
taxes and foreign withholding taxes on those undistributed earnings of our foreign subsidiaries.
13. Stock-based Compensa on
Employee stock-based compensa on plans
Under the 2016 Equity and Incen ve Compensa on Plan Amended and Restated as of June 14, 2023 (the "2016 Equity Plan"), we may grant incen ve stock
op ons, nonstatutory stock op ons, stock apprecia on rights, restricted stock, restricted stock units, other stock awards and cash incen ve awards to
employees, directors and consultants. Our Compensa on Commi ee 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 3,363,270 as of December 31, 2023. We issue common stock from our pool
of authorized stock upon exercise of stock op ons and stock apprecia on rights, ves ng of restricted stock units or upon gran ng of restricted stock.
104
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
Recently, we have issued three types of awards under our plans: restricted stock awards, me-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,
2023
1,101,702
607,100
1,209,515
2022
1,345,608
455,708
1,104,260
Awards granted to our execu ve officers and certain members of management are subject to accelerated ves ng upon a change in control as defined in the
employees’ employment agreement or reten on agreement.
Expense recogni on
We recognize compensa on expense associated with stock op ons and awards with performance or market based ves ng condi ons on an accelerated basis
over the requisite service period of the individual grantees, which generally equals the ves ng period. We recognize compensa on 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 ves ng
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 compensa on cost when they occur). Previously recognized compensa on cost for an award is reversed in the period that the award is
forfeited.
Stock-based compensa on expense is allocated to cost of revenue and opera ng expenses on the consolidated statements of comprehensive income based
on where the associated employee’s compensa on is recorded. The following table summarizes stock-based compensa on expense:
(in thousands)
Included in cost of revenue:
Cost of recurring
Cost of one- me services and other
Total included in cost of revenue
Included in opera ng expenses:
Sales, marke ng and customer success
Research and development
General and administra ve
Total included in opera ng expenses
Total stock-based compensa on expense
2023
2022
2021
Years ended December 31,
$
$
14,052 $
2,606
16,658
24,892
30,780
55,432
111,104
127,762 $
11,258 $
3,178
14,436
21,409
24,207
50,242
95,858
110,294 $
12,405
7,547
19,952
20,283
27,080
53,064
100,427
120,379
The total amount of compensa on cost related to unvested awards not recognized was $77.4 million at December 31, 2023. It is expected that this amount
will be recognized over a weighted average period of 1.2 years.
2023 Form 10-K
105
Table of Contents
Restricted stock awards
Blackbaud, Inc.
Notes to Consolidated Financial Statements
We have granted shares of common stock subject to certain restric ons under the 2016 Equity Plan. Restricted stock awards granted to employees vest in
equal annual installments generally over three years from the grant date subject to the recipient’s con nued employment with us. Restricted stock awards
granted to non-employee directors vest a er one year from the date of grant or, if earlier, immediately prior to the next annual elec on of directors, provided
the non-employee director is serving as a director at that me. The fair market value of the stock at the me of the grant is amor zed on a straight-line basis
to expense over the period of ves ng. 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, 2023, and changes during the year then ended:
Unvested at January 1, 2023
Granted
Forfeited
Vested
Unvested at December 31, 2023
Restricted
stock awards
1,345,608 $
473,341
(106,634)
(610,613)
1,101,702
Aggregate
(1)
intrinsic value
(in thousands)
Weighted
average
grant-date
fair value
68.09
62.59
66.37
69.86
64.92 $
95,518
(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, 2023, 2022 and 2021 was $42.7 million, $41.0 million and
$38.5 million, respec vely. The weighted average grant-date fair value of restricted stock awards granted during the years ended December 31, 2022 and
2021 was $60.90 and $77.39, respec vely.
Restricted stock units
We have also granted restricted stock units subject to certain restric ons under the 2016 Equity Plan. Restricted stock units granted to employees vest in
equal annual installments generally over three years from the grant date subject to the recipient’s con nued employment with us. We have also granted
restricted stock units for which ves ng is subject to mee ng certain performance condi ons. The fair market value of the stock at the me of the grant is
amor zed to expense on a straight-line basis over the period of ves ng except for awards with performance condi ons, which are amor zed on an
accelerated basis over the period of ves ng.
The following table summarizes our unvested, me-based restricted stock units as of December 31, 2023, and changes during the year then ended:
Unvested at January 1, 2023
Granted
Forfeited
Vested
Unvested at December 31, 2023
Time-based restricted
stock units
455,708 $
367,913
(24,686)
(191,835)
607,100
Aggregate
(1)
intrinsic value
(in thousands)
Weighted
average
grant-date
fair value
68.81
61.37
64.57
70.53
64.01 $
52,636
(1)
The intrinsic value is calculated as the market value as of the end of the fiscal period.
The total fair value of me-based restricted stock units that vested during the years ended December 31, 2023, 2022 and 2021 was $13.5 million, $9.3 million
and $9.4 million, respec vely. The weighted average grant date fair value of me-based restricted stock units granted for the years ended December 31, 2022
and 2021 was $62.38 and $77.74, respec vely.
106
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Blackbaud, Inc.
Notes to Consolidated Financial Statements
The following table summarizes our unvested, performance-based restricted stock units as of December 31, 2023, and changes during the year then ended:
Unvested at January 1, 2023
Granted
Forfeited
Vested
Unvested at December 31, 2023
Performance-based
restricted
stock units
1,104,260 $
967,252
(72,428)
(789,569)
1,209,515
Aggregate
(1)
intrinsic value
(in thousands)
Weighted
average
grant-date
fair value
64.94
59.62
60.12
64.45
61.29 $
104,849
(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, 2023, 2022 and 2021 was $50.9 million,
$50.5 million, and $44.9 million, respec vely. The weighted average grant date fair value of performance-based restricted stock units granted for the years
ended December 31, 2022 and 2021 was $61.79 and $71.91, respec vely.
14. Stockholders' Equity
Preferred stock
Our Board of Directors may fix the rela ve rights and preferences of each series of preferred stock in a resolu on of the Board of Directors.
Stock repurchase program
Under our stock repurchase program, we are authorized to repurchase shares from me to me in accordance with applicable laws both on the open market,
including under trading plans established pursuant to Rule 10b5-1 under the Securi es Exchange Act of 1934, as amended, and in privately nego ated
transac ons. The ming and amount of repurchases depends on several factors, including market and business condi ons, the trading price of our common
stock and the nature of other investment opportuni es. The repurchase program does not have an expira on date and may be limited, suspended or
discon nued at any me without prior no ce. Under the 2020 Credit Facility, we have restric ons 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, 2023, we repurchased 221,836 shares for $18.8
million. The remaining amount available to purchase stock under the then approved stock repurchase program was $231.2 million as of December 31, 2023.
On January 17, 2024, our Board of Directors reauthorized, expanded and replenished our stock repurchase program by expanding the total capacity under the
program from $250.0 million to $500.0 million available for purchase. Between January 1, 2024 and January 17, 2024, we repurchased $22.3 million under
the prior authoriza on. Between January 18, 2024 and February 16, 2024, we repurchased an addi onal 7,114 shares for $0.6 million under the new
authoriza on. The remaining amount available to purchase stock under the stock repurchase program was $499.4 million as of February 16, 2024.
2023 Form 10-K
107
Table of Contents
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Changes in accumulated other comprehensive income (loss) by component
The changes in accumulated other comprehensive income (loss) by component, consisted of the following:
(in thousands)
Accumulated other comprehensive income (loss), beginning of period
By component:
Gains and losses on cash flow hedges:
Accumulated other comprehensive income (loss) balance, beginning of period
Other comprehensive (loss) income before reclassifica ons, net of tax effects of $201, $(8,068) and
$(1,982)
Amounts reclassified from accumulated other comprehensive (loss) income
Tax expense (benefit) included in provision for income taxes
Total amounts reclassified from accumulated other comprehensive (loss) income
Net current-period other comprehensive (loss) income
Accumulated other comprehensive income balance, end of period
Foreign currency transla on adjustment:
Accumulated other comprehensive (loss) income balance, beginning of period
Transla on adjustment
Accumulated other comprehensive (loss) income balance, end of period
Accumulated other comprehensive (loss) income, end of period
2023
8,938 $
Years ended December 31,
2022
6,522 $
2021
(2,497)
23,833 $
5,257 $
(3,101)
(271)
(20,806)
5,402
(15,404)
(15,675)
22,772
(5,685)
1,489
(4,196)
18,576
8,158 $
23,833 $
(14,895) $
1,265 $
5,049
(9,846)
(16,160)
(14,895)
(1,688) $
8,938 $
5,617
3,714
(973)
2,741
8,358
5,257
604
661
1,265
6,522
$
$
$
$
$
15. Defined Contribu on Plan
We have a defined contribu on 401(k) plan (the "401K Plan") covering substan ally all employees. Employees were able to contribute between 1% and 75%
of their salaries in 2023, 2022 and 2021. We match 50% of qualified employees’ contribu ons up to 6% of their salary. The 401K Plan also provides for
addi onal employer contribu ons to be made at our discre on. Total matching contribu ons to the 401K Plan for the years ended December 31, 2023, 2022
and 2021 were $7.8 million, $9.3 million and $6.5 million, respec vely.
There were no discre onary contribu ons by us to the 401K Plan in 2023, 2022 and 2021.
108
2023 Form 10-K
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16. Segment Informa on
Blackbaud, Inc.
Notes to Consolidated Financial Statements
Our chief opera ng decision maker is our chief execu ve officer ("CEO"). Our CEO uses consolidated financial informa on to make opera ng decisions, assess
financial performance and allocate resources. We have one opera ng segment and one reportable segment.
The following table presents long-lived assets by geographic region based on the loca on of the assets. For purposes of this disclosure, long-lived assets
includes property and equipment, net and opera ng lease ROU assets.
(dollars in thousands)
United States
Other countries
Total long-lived assets
2023
134,316 $
1,300
135,616 $
$
$
Years ended
December 31,
2022
151,656
1,669
153,325
See Note 17 to these consolidated financial statements for informa on about our revenues by geographic region.
17. Revenue Recogni on
Transac on price allocated to the remaining performance obliga ons
As of December 31, 2023, approximately $1.2 billion of revenue is expected to be recognized from remaining performance obliga ons. We expect to
recognize revenue on approximately 50% of these remaining performance obliga ons over the next 12 months, with the remainder recognized therea er.
We applied the prac cal expedient in ASC 606-10-50-14 and have excluded the value of unsa sfied performance obliga ons for (i) contracts with an original
expected length of one year or less (one- me services); and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice
for services performed (transac onal revenue).
We also applied the prac cal expedient in ASC 606-10-65-1-(f)(3), whereby the transac on price allocated to the remaining performance obliga ons, or an
explana on of when we expect to recognize that amount as revenue for all repor ng periods presented before the date of the ini al applica on, is not
disclosed.
Contract balances
Our contract assets as of December 31, 2023 and December 31, 2022 were insignificant. Our closing balances of deferred revenue were as follows:
(in thousands)
Total deferred revenue
December 31,
2023
$
394,927 $
December 31,
2022
385,236
The increase in deferred revenue during 2023 was primarily due to new subscrip on sales of our cloud solu ons and progress in ini a ves to bring our pricing
in line with the market. Historically, due to the ming of customer budget cycles, we have an increase in customer contract renewals at or near the beginning
of our third quarter. Generally, our lowest balance of deferred revenue during the year is at the end of our first quarter. The amount of revenue recognized
during 2023 that was included in the deferred revenue balance at the beginning of the period was approximately $365 million. The amount of revenue
recognized during 2023 from performance obliga ons sa sfied in prior periods was insignificant.
2023 Form 10-K
109
Table of Contents
Disaggrega on of revenue
Blackbaud, Inc.
Notes to Consolidated Financial Statements
We sell our cloud solu ons and related services in three primary geographical markets: to customers in the United States, to customers in the United
Kingdom and to customers located in other countries. The following table presents our revenue by geographic area based on the address of our customers:
(dollars in thousands)
United States
United Kingdom
Other countries
Total revenue
Years ended
December 31,
2023
2022
2021
$
945,580 $
896,116 $
777,333
100,833
59,019
101,026
60,963
89,688
60,719
$
1,105,432 $
1,058,105 $
927,740
The Social Sector and Corporate Sector market groups comprised our go-to-market organiza ons as of December 31, 2023. The following is a descrip on 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, founda ons, educa on
ins tu ons, healthcare organiza ons and other not-for-profit en es globally, and includes JustGiving; and
The Corporate Sector market group focuses on sales to customers and prospects in the corporate sector globally, and includes EVERFI and
YourCause.
The following table presents our revenue by market group:
(dollars in thousands)
Social Sector
Corporate Sector
Total revenue
The following table presents our recurring revenue by type:
(dollars in thousands)
Contractual recurring
Transac onal recurring
Total recurring revenue
110
2023 Form 10-K
Years ended
December 31,
2023
2022
2021
954,845 $
907,197 $
889,755
150,587
150,908
37,985
1,105,432 $
1,058,105 $
927,740
2023
2022
738,351 $
709,097 $
333,169
302,636
1,071,520 $
1,011,733 $
Years ended
December 31,
2021
601,397
279,453
880,850
$
$
$
$
Table of Contents
18. Subsequent Events
Stock Repurchase Program
Blackbaud, Inc.
Notes to Consolidated Financial Statements
On January 17, 2024, our Board of Directors reauthorized, expanded and replenished our exis ng stock repurchase program. The expansion raised the total
capacity under the stock repurchase program from $250.0 million to $500.0 million available for repurchases. The program does not have an expira on date.
During December 2023 and January 2024, prior to the replenishment on January 17, 2024, we repurchased $41.1 million of our common stock under the
stock repurchase program. Between January 18, 2024 and February 16, 2024, we repurchased $0.6 million. As of February 16, 2024, the remaining amount
available to purchase stock under our repurchase program was $499.4 million. All of the Company's stock repurchases during the fourth quarter of 2023 and
the first quarter of 2024 were made pursuant to an SEC Rule 10b5-1(c) trading arrangement.
Repurchases by the Company will be subject to available liquidity, general market and economic condi ons, alternate uses for the capital and other factors.
Stock repurchases may be made from me to me in open market transac ons, in private transac ons or otherwise in accordance with applicable securi es
laws and regula ons and other legal requirements, including compliance with the Company’s finance agreements. There is no minimum number of shares
that the Company is required to repurchase and the repurchase program may be suspended or discon nued at any me without prior no ce. All shares
purchased will be held in the Company’s treasury for possible future use. The Company an cipates funding any stock repurchases from its cash flow from
opera ons.
Addi onal informa on regarding the stock repurchase program reauthoriza on is contained in the Company's Current Report on Form 8-K filed with the SEC
on January 22, 2024.
FTC Se lement
On February 1, 2024, the FTC announced its approval of a Proposed Order evidencing its se lement with the Company, subject to public review and
comment, rela ng to the Security Incident. If finalized, this se lement will fully resolve the previously disclosed FTC inves ga on rela ng to the Security
Incident, which is further described in the FTC’s Proposed Order.
Under the terms of the Proposed Order, the Company has agreed to certain condi ons, which are reflected in their en rety in the Proposed Order. As part of
the Proposed Order, the Company has not been fined and is not otherwise required to make any payment.
The Company has agreed to the Proposed Order without admi ng or denying any of the FTC's allega ons, except as expressly stated otherwise in the
Proposed Order. For more informa on regarding this se lement or the Proposed Order, see Note 11 to these condensed consolidated financial statements.
See also the Proposed Order, which was furnished as Exhibit 99.2 to the Company’s Current Report on Form 8-K filed with the SEC on February 2, 2024.
2023 Form 10-K
111
Table of Contents
Blackbaud, Inc.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evalua on 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 objec ves. As of the end of the period covered by this report, we carried out an evalua on, under the supervision and with the par cipa on
of our management, including our Chief Execu ve Officer (principal execu ve officer) and Chief Financial Officer (principal financial and accoun ng officer), of
the effec veness 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 evalua on, our Chief Execu ve Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effec ve to provide the
reasonable assurance discussed above.
Changes in Internal Control Over Financial Repor ng
No changes in internal control over financial repor ng occurred during the most recent fiscal quarter ended December 31, 2023 with respect to our
opera ons that has materially affected, or is reasonably likely to materially affect, our internal control over financial repor ng.
Management’s Report on Internal Control Over Financial Repor ng
Our management is responsible for establishing and maintaining adequate internal control over financial repor ng (as defined in Rules 13a-15(f) and 15d-
15(f) under the Exchange Act). Internal control over financial repor ng is a process designed to provide reasonable assurance regarding the reliability of
financial repor ng and the prepara on of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial
repor ng includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transac ons and disposi ons of our assets; (ii) provide reasonable assurance that transac ons are recorded as necessary to permit prepara on of financial
statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authoriza ons of our management
and directors; and (iii) provide reasonable assurance regarding preven on or mely detec on of unauthorized acquisi on, use, or disposi on of our assets
that could have a material effect on the financial statements.
Our management conducted an evalua on of the effec veness of our internal control over financial repor ng as of December 31, 2023, based on the
framework in Internal Control - Integrated Framework issued by the Commi ee of Sponsoring Organiza ons of the Treadway Commission (2013 framework).
Based on this evalua on under the Internal Control - Integrated Framework, management concluded that our internal control over financial repor ng was
effec ve as of December 31, 2023.
The effec veness of our internal control over financial repor ng as of December 31, 2023, has been audited by our independent registered public accoun ng
firm, as stated in their a esta on report, which is included in Item 8 of this Annual Report on Form 10-K.
112
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Blackbaud, Inc.
ITEM 9B. OTHER INFORMATION
Trading Plans Adopted or Terminated
The following table provides informa on about trading arrangements adopted or terminated by certain of our officers and directors during the three months
ended December 31, 2023.
Name and Title
Michael P. Gianoni
Chief Execu ve Officer, President and Vice Chairman
of the Board
Anthony W. Boor
Execu ve Vice President and Chief Financial Officer
Kevin P. Gregoire
Execu ve Vice President and Chief Opera ng Officer
Kevin R. McDearis
Execu ve Vice President and Chief Technology Officer
Jon W. Olson
Senior Vice President and General Counsel
Ac on
Date of
Adop on
Plan
effec ve
date
Plan
end
date
Plan
dura on
(months)
Rule
10b5-1
Non-Rule
10b5-1
Trading
arrangement
(1)
Adop on
11/07/23
2/26/24
8/09/24
Adop on
11/07/23
2/26/24
8/09/24
Six
Six
Adop on
11/15/23
2/26/24
11/01/24
Nine
Adop on
11/17/23
3/06/24
6/04/24
Three
Adop on
11/21/23
3/06/24
9/27/24
Seven
X
X
X
X
X
Aggregate
number of
securi es to
be sold
under plan
50,000
30,000
13,000
5,253 (2)
9,200
(1) An SEC "Rule 10b5-1(c) trading arrangement" is a trading arrangement made by a person through entering into a binding contract, verbal instruc on or adop on of a wri en plan prior to
becoming aware of material non-public informa on. The contract, instruc on or wri en plan must specify the amount, price and date of securi es to be sold; include the means for
determining the amount, price and date of the sale or sales; and not permit the person to have subsequent influence over the sale or sales. The compliant plan must be entered into and
operated in good faith, include a specified cooling off period, be cer fied by an authorized officer and is restricted from having mul ple or overlapping plans. A non-compliant trading
arrangement, or a "non-Rule 10b5-1 trading arrangement," is a trading arrangement that has similar requirements to a Rule 10b5-1(c) trading arrangement except that it must be in
wri en form and does not require a cooling off period or cer fica on of an authorized officer and there is no restric on from having mul ple or overlapping plans.
Represents the target quan ty of Performance Share Awards which may be subject to a performance mul plier; therefore, the aggregate number of shares to be sold may be equal to,
greater than or less than the target quan ty.
(2)
None of our officers or directors adopted or terminated a non-Rule 10b5-1 trading arrangement during the three months ended December 31, 2023.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
2023 Form 10-K
113
Table of Contents
Blackbaud, Inc.
PART III.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The informa on required by Item 10 with respect to Directors and Execu ve Officers is incorporated by reference from the informa on under the cap ons
“Elec on of Directors,” “Informa on Regarding Mee ngs of the Board and Commi ees,” “Delinquent Sec on 16(a) Reports,” and “Code of Business Conduct
and Ethics and Code of Ethics,” contained in Blackbaud’s Proxy Statement for the 2024 Annual Mee ng of Stockholders expected to be held on June 12, 2024,
except for "Informa on About Our Execu ve Officers" which is set forth in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
The informa on required by Item 11 is incorporated by reference from the informa on under the cap ons "Director Compensa on," “Execu ve
Compensa on,” “Compensa on Discussion and Analysis,” “2023 Summary Compensa on Table,” "CEO Pay Ra o" and "Pay Versus Performance" contained in
Blackbaud’s Proxy Statement for the 2024 Annual Mee ng of Stockholders expected to be held on June 12, 2024.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The informa on required by Item 12 is incorporated by reference from informa on under the cap ons “Stock Ownership” and "Equity Compensa on Plan
Informa on" contained in Blackbaud’s Proxy Statement for the 2024 Annual Mee ng of Stockholders expected to be held on June 12, 2024.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The informa on required by Item 13 is incorporated by reference from the informa on under the cap ons “Transac ons with Related Persons,” and
“Independence of Directors” contained in Blackbaud’s Proxy Statement for the 2024 Annual Mee ng of Stockholders expected to be held on June 12, 2024.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The informa on required by Item 14 is incorporated by reference from the informa on under the cap on “Audit Commi ee Report,” contained in Blackbaud’s
Proxy Statement for the 2024 Annual Mee ng of Stockholders expected to be held on June 12, 2024.
114
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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 retrospec ve changes to the Consolidated Statement of Opera ons 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 omi ed because the informa on 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
Descrip on of Document
Agreement and Plan of Merger and Reincorpora on 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’ Representa ve
Unit Purchase Agreement, dated as of August 10, 2015, by and
between Smart Tui on Holdings, LLC and Blackbaud, Inc.
Amendment, Consent and Waiver, Agreement dated as of
October 2, 2015, by and between Smart Tui on Holdings, LLC and
Blackbaud, Inc.
Agreement and Plan of Merger, dated as of December 30, 2021,
by and among Blackbaud, Inc., Project Montessori Acquisi on,
Inc., EverFi, Inc. and Eon Stockholder Representa ve, LLC
Amended and Restated Cer ficate of Incorpora on of Blackbaud,
Inc.
Cer ficate of Designa on of Series A Junior Par cipa ng
Preferred Stock of Blackbaud, Inc.
Amended and Restated Bylaws of Blackbaud, Inc. dated
December 7, 2023
Descrip on 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
Registrant’s
Form
S-1/A
8-K
8-K
8-K
8-K
Filed In
Dated
4/6/2004
10/2/2014
10/8/2015
10/8/2015
Exhibit
Number
Filed
Herewith
2.1
10.76
10.78
10.79
1/3/2022
2.1
DEF 14A
4/30/2009
8-K
8-K
8-K
10/11/2022
12/11/2023
10/11/2022
3.1
3.1
4.1
X
2023 Form 10-K
115
Table of Contents
Blackbaud, Inc.
Exhibit
Number
4.3
4.4
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
Descrip on of Document
Amendment to Stockholder Rights Agreement, dated as of
October 2, 2023, between Blackbaud, Inc. and Equini Trust
Company, LLC (f/k/a American Stock Transfer & Trust Company,
LLC), as Rights Agent.
Amendment to Stockholder Rights Agreement, dated as of
January 26, 2024, between Blackbaud, Inc. and Broadridge
Corporate Issuer Solu ons, LLC, as Rights Agent.
Form of Employment Agreement between Blackbaud, Inc. and
each of Anthony W. Boor and Kevin W. Mooney
Form of Employment Agreement between Blackbaud, Inc. and
Jon W. Olson
Lease 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.)
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.)
Offer Le er Agreement between Blackbaud, Inc. and Kevin P.
Gregoire
Form of Employee Agreement between Blackbaud, Inc. and Kevin
P. Gregoire
Fi h 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.)
116
2023 Form 10-K
10-K
10-K
10-Q
10-Q
10-K
10-K
10-Q
10-Q
10-Q
10-Q
10-Q
10-Q
10-Q
10-Q
Registrant’s
Form
8-K
Filed In
Dated
10/2/2023
8-K
1/26/2024
Exhibit
Number
Filed
Herewith
4.2
4.3
10.65
10.65
10.84
10.87
2/27/2013
2/27/2013
8/4/2016
11/4/2016
2/20/2018
10.93
2/20/2018
10.94
5/4/2018
10.95
5/3/2019
5/3/2019
8/4/2020
8/4/2020
8/4/2020
8/4/2020
8/4/2020
10.96
10.97
10.1
10.2
10.3
10.4
10.5
Table of Contents
Blackbaud, Inc.
Exhibit
Number
10.15
10.16
10.17
10.18
10.19 †
10.20
10.21
10.22
10.23
10.24
10.25 †
Descrip on 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 Administra ve Agent, Swingline Lender and
Issuing Lender, PNC Bank, Na onal Associa on, as Syndica on
Agent, and Regions Bank, BBVA USA and Fi h Third Bank,
Na onal Associa on, as Co-Documenta on Agents, with BofA
Securi es, Inc., PNC Bank, Na onal Associa on, Regions Capital
Markets, BBVA USA and Fi h Third Bank, Na onal Associa on 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
Administra ve Agent, for the ratable benefit of itself and the
secured par es referred to therein
Form of Employment Agreement between Blackbaud, Inc. and
Kevin McDearis
LIBOR Transi on 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 administra ve agent
Registra on 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
Representa ve, 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 administra ve agent
LIBOR Transi on Amendment, dated as of August 26, 2022,
between Blackbaud, Inc. and Bank of America, N.A.
Amended and Restated Employment and Noncompe on
Agreement dated September 20, 2022 between Blackbaud, Inc.
and Michael P. Gianoni
Registrant’s
Form
10-Q
Filed In
Dated
8/4/2020
10-Q
11/3/2020
10-Q
11/3/2020
Exhibit
Number
Filed
Herewith
10.7
10.3
10.4
10-Q
11/3/2020
10.5
10-Q
10-Q
8-K
8-K
8-K
10-Q
8-K
5/4/2021
11/4/2021
1/3/2022
1/3/2022
2/3/2022
3/1/2022
9/21/2022
10.1
10.1
10.1
10.2
10.1
10.2
10.1
2023 Form 10-K
117
Table of Contents
Blackbaud, Inc.
Exhibit
Number
10.26
10.27 †
10.28
Descrip on of Document
Consent Agreement, dated as of January 23, 2023, between
Blackbaud, Inc. and Bank of America, N.A.
Amended and Restated Blackbaud, Inc. 2016 Equity and
Incen ve Compensa on Plan
Form of Reten on Agreement dated as of April 24, 2023
between Blackbaud, Inc. and each of Anthony W. Boor, David J.
Benjamin, Kevin P. Gregoire, Kevin R. McDearis, Kevin W. Mooney
and Jon W. Olson
Registrant’s
Form
10-K
Filed In
Dated
2/24/2023
Exhibit
Number
Filed
Herewith
10.30
DEF 14A
4/25/2023
Appendix B
10-Q
5/4/2023
10.1
10.29
Reloca on Agreement dated June 8, 2023 between Blackbaud,
Inc. and David J. Benjamin.
8-K
6/12/2023
10.1
21.1
23.1
23.2
23.3
31.1
31.2
32.1
32.2
97.1
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Subsidiaries of Blackbaud, Inc.
Consent of Independent Registered Public Accoun ng Firm
Consent of Independent Registered Public Accoun ng Firm
Consent of Sidley Aus n LLP
8-K
4/1/2022
23.1
Cer fica on by the Chief Execu ve Officer pursuant to
Sec on 302 of the Sarbanes-Oxley Act of 2002
Cer fica on by the Chief Financial Officer pursuant to
Sec on 302 of the Sarbanes-Oxley Act of 2002
Cer fica on by the Chief Execu ve Officer pursuant to 18 U.S.C.
1350 as adopted pursuant to Sec on 906 of the Sarbanes-Oxley
Act of 2002
Cer fica on by the Chief Financial Officer pursuant to 18 U.S.C.
1350 as adopted pursuant to Sec on 906 of the Sarbanes-Oxley
Act of 2002
Blackbaud, Inc. Execu ve Incen ve Compensa on Clawback
Policy
Inline XBRL Instance Document - the Instance Document does
not appear in the interac ve data file because its XBRL tags are
embedded within the Inline XBRL Document.
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calcula on Linkbase Document
Inline XBRL Taxonomy Extension Defini on Linkbase Document
Inline XBRL Taxonomy Extension Label Linkbase Document
Inline XBRL Taxonomy Extension Presenta on Linkbase
Document
Cover Page Interac ve Data File (forma ed as Inline XBRL and
contained in Exhibit 101).
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
†
Indicates management contract or compensatory plan, contract or arrangement.
118
2023 Form 10-K
Table of Contents
Blackbaud, Inc.
ITEM 16. FORM 10-K SUMMARY
Not applicable.
2023 Form 10-K
119
Table of Contents
Blackbaud, Inc.
SIGNATURES
Pursuant to the requirements of Sec on 13 or 15(d) of the Securi es Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be signed on its
behalf by the undersigned, thereunto duly authorized.
Signed:
February 21, 2024
Blackbaud, Inc.
/S/ MICHAEL P. GIANONI
Chief Execu ve Officer, President and Vice Chairman of the Board
(Principal Execu ve Officer)
Pursuant to the requirements of the Securi es 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
/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
Chief Execu ve Officer, President and Vice
Chairman of the Board (Principal Execu ve
Officer)
Date: February 21, 2024
Execu ve Vice President and Chief Financial
Officer (Principal Financial and Accoun ng Officer)
Date: February 21, 2024
Chairman of the Board of Directors
Date: February 21, 2024
Director
Director
Director
Date: February 21, 2024
Date: February 21, 2024
Date: February 21, 2024
/S/
RUPAL S. HOLLENBECK
Director
Date: February 21, 2024
Rupal S. Hollenbeck
/S/
D. ROGER NANNEY
D. Roger Nanney
/S/
SARAH E. NASH
Sarah E. Nash
/S/
KRISTIAN P. TALVITIE
Kris an P. Talvi e
120
2023 Form 10-K
Director
Director
Director
Date: February 21, 2024
Date: February 21, 2024
Date: February 21, 2024
DESCRIPTION OF THE COMPANY’S
SECURITIES REGISTERED PURSUANT TO
SECTION 12 OF THE SECURITIES
EXCHANGE ACT OF 1934
EXHIBIT 4.1
General
The following is a summary of information concerning the capital stock of Blackbaud, Inc (the "Company"), which consists of (i) up to
180,000,000 shares of common stock, par value $0.001 per share (the “Common Stock”), (ii) up to 20,000,000 shares of preferred stock in
one or more classes or series as may be determined by the Company’s board of directors (the “Board of Directors”) in its discretion, and (iii)
preferred share purchase rights (the “Rights”). The Common Stock and the Rights are registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, and are more fully described below.
The summaries and descriptions below do not purport to be complete statements of the relevant provisions of the Company’s Amended and
Restated Certificate of Incorporation (the “Certificate of Incorporation”), Amended and Restated Bylaws (the “Bylaws”) and Rights Agreement
(as defined below), each of which are incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this Exhibit 4.1 is
a part and are entirely qualified by these documents. We encourage you to read the Certificate of Incorporation, Bylaws, Rights Agreement
and the applicable provisions of the Delaware General Corporation Law (the “DGCL”) for additional information.
Common Stock
Voting rights
The holders of Common Stock are entitled to one vote per share on all matters to be voted on by the stockholders, and there are no
cumulative voting rights. Generally, all matters to be voted on by stockholders must be approved by a majority of the votes entitled to be cast
by all shares of Common Stock present in person or represented by proxy, voting together as a single class, subject to any voting rights
granted to holders of any preferred stock; provided, however, that in all director elections that are contested, the nominees for election as a
director shall be elected by a plurality of the votes cast. For purposes of the foregoing, an election shall be “contested” if, as of the tenth day
preceding the date of the filing of the Company’s definitive proxy statement for such meeting of stockholders, the number of nominees for
director exceeds the number of directors to be elected. The Board of Directors is divided into three classes of directors, as described below.
Dividend rights
The holders of Common Stock are entitled to receive ratable dividends, if any, payable in cash, in stock or otherwise, as and when declared
from time to time by the Board of Directors out of funds legally available for the payment of dividends, subject to any preferential rights that
may be applicable to any outstanding preferred stock.
Other rights and preferences
In the event of a liquidation, dissolution, or winding up of the Company, after payment in full of all outstanding debts and other liabilities, the
holders of Common Stock are entitled to share ratably in all remaining assets, subject to prior distribution rights of preferred stock, if any,
then outstanding. No shares of Common Stock have preemptive rights or other subscription rights to purchase additional shares of Common
Stock. There are no redemption or sinking fund provisions applicable to the Common Stock. All outstanding shares of Common Stock are
fully paid and nonassessable.
The rights, preferences, and privileges of holders of Common Stock will be subject to, and may be adversely affected by, the rights of holders
of any preferred stock that may be issued in the future, as described below. All shares of Common Stock that are acquired by the Company
shall be available for reissuance by the Company, at the sole-discretion of the Board of Directors at any time.
Transfer agent and registrar
The transfer agent and registrar for the Common Stock is Broadridge Corporate Issuer Solutions, LLC, and its telephone number is (877)
830-4936.
EXHIBIT 4.1
Nasdaq listing
The Common Stock is listed for trading on Nasdaq Global Select Market under the ticker symbol “BLKB.”
Anti-takeover Effects of Delaware Law, Provisions of the Certificate of Incorporation, Bylaws and the Rights Agreement
Certain provisions of the DGCL, the Certificate of Incorporation, Bylaws and the Rights Agreement may have the effect of delaying, deferring
or preventing a change in control of the Company or deterring tender offers for Common Stock, proxy contests or other takeover attempts,
including discouraging attempts that might result in the payment of a premium over the market price for the shares of Common Stock.
Delaware anti-takeover law
We are subject to Section 203 of the DGCL, an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation from
engaging in a “business combination” with an “interested stockholder” for a period of three years following the date the person became an
interested stockholder, unless:
•
the board of directors approved the transaction in which the stockholder became an interested stockholder prior to the date the
interested stockholder attained that status;
• when the stockholder became an interested stockholder, he or she or it owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding shares owned by persons who are directors and also officers, as well
as certain shares owned by employee benefits plans; or
•
on or subsequent to the date the business combination is approved by the board of directors, the business combination is authorized
by the affirmative vote of at least 66 2/3% of the voting stock of the corporation at an annual or special meeting of stockholders.
Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the
interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or is an affiliate
or associate of the corporation, and within three years prior to the determination of interested stockholder status did own, 15% or more of a
corporation’s voting stock.
Certificate of Incorporation and Bylaw provisions
Classified Board of Directors. The Board of Directors is divided into three classes of directors, as nearly equal in number as possible, with
each class serving a staggered term of three years. Any vacancy on the Board of Directors, regardless of the reason for the vacancy, may be
filled by vote of the majority of the directors then in office, except in the case of a vacancy caused by action of the stockholders, which
vacancy may only be filled by the stockholders. Directors may be removed from office at any time with or without cause, but only by the
holders of a majority of the shares entitled to vote at an election of directors. The classification of directors will have the effect of making it
more difficult for stockholders to change the composition of the Board of Directors and could also discourage a third-party from making a
tender offer or otherwise attempting to obtain control of the Company, and may maintain the incumbency of the Board of Directors.
Advance notice requirement for stockholder proposals, including director nominations. The Bylaws contain an advance notice procedure for
stockholders proposals to be brought before a meeting of stockholders, including any proposed nominations of persons for election to the
Board of Directors. Stockholders at a meeting may only consider proposals or nominations specified in the notice of meeting, or brought
before the meeting by or at the direction of the Board of Directors or by a stockholder who was a stockholder of record on the record date for
the meeting, who is entitled to vote at the meeting, who has given to the Company’s Secretary timely written notice, in proper form, of the
stockholder’s intention to bring that business before the meeting, and who has otherwise complied with the Bylaws. Although the Bylaws do
not give the Board of Directors the power to approve or disapprove stockholder nominations of candidates for election to the Board of
Directors or proposals regarding other business to be conducted at a special or annual meeting of the stockholders, the Bylaws may have the
effect of precluding the conduct of business at a meeting if the proper procedures are not followed, or may discourage or deter a potential
acquirer from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of the Company.
“Blank” Preferred Stock. The Board of Directors has the authority to issue up to an aggregate of 20,000,000 shares of preferred stock in one
or more classes or series and to determine, with respect to any such class or series, the designations, powers, preferences and rights of
such class or series, and the qualifications, limitations and restrictions thereof, including dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption (including sinking fund provisions), redemption prices, liquidation preferences, and the number of shares
constituting any class
EXHIBIT 4.1
or series or the designation of such class or series, without further vote or action by the stockholders. This preferred stock could have terms
that may discourage a potential acquirer from making, without first negotiating with the Board of Directors, an acquisition attempt through
which such acquirer may be able to change the composition of the Board of Directors, including a tender offer or other takeover attempt. No
shares of preferred stock are currently outstanding.
Emergency Special Meeting of the Board of Directors. The Board of Directors possesses the authority to call and hold emergency special
meetings of the Board of Directors with less than forty-eight hours’ notice. This power to hold an emergency special meeting of the Board of
Directors on short notice could discourage a potential acquirer from launching a bid to acquire majority ownership of the Company, a proxy
solicitation in order to replace the current Board of Directors, or otherwise attempting to obtain control of the Company, as such attempts
could quickly be thwarted or denied by the Board of Directors.
Stockholder Rights Agreement
As more fully described below, on October 7, 2022, the Company declared a dividend of one preferred share purchase right for each of the
Company’s issued and outstanding shares of Common Stock. The description and terms of these Rights are set forth in the Stockholder
Rights Agreement, dated as of October 7, 2022, as amended on October 2, 2023 and January 26, 2024 (the “Rights Agreement”), by and
between the Company and Broadridge Corporate Issuer Solutions, LLC, as successor rights agent to American Stock Transfer & Trust
Company, LLC (the “Rights Agent”). 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 the Series A Junior Participating Preferred Stock, par value $0.001 per share (the “Series A Preferred
Stock”) at a price of $313.00, subject to certain adjustments (as adjusted from time to time, the “Exercise Price”). Under the Rights
Agreement, the Rights will become exercisable if an entity, person or group acquires beneficial ownership of 20% or more of the outstanding
Common Stock in a transaction not approved by the Board of Directors. In the event that the Rights 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, 2024. Additional information
regarding the Rights Agreement is contained in Forms 8-K filed with the SEC on October 11, 2022, October 2, 2023 and January 26, 2024.
Preferred Stock Purchase Rights
Voting and dividend rights
Until a Right is exercised or exchanged, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without
limitation, the right to vote or to receive dividends.
Other rights and preferences
As stated above, on October 7, 2022, the Company declared a dividend of one preferred share purchase right for each of the Company’s
issued and outstanding shares of Common Stock. The dividend will be paid to the stockholders of record at the close of business on October
17, 2022 (the “Record Date”). Each Right entitles the registered holder, subject to the terms of the Rights Agreement, to purchase from the
Company one one-thousandth of a share of the Company’s Series A Preferred Stock at a price of $313.00, subject to certain adjustments.
Subject to certain exceptions, the Rights will not be exercisable until the earlier to occur of (i) the close of business on the tenth business day
after a public announcement or filing that a person has, or group of affiliated or associated persons have, become an “Acquiring Person,”
which is defined as a person or group of affiliated or associated persons who, at any time after the date of the Rights Agreement, have
acquired, or obtained the right to acquire, beneficial ownership of 20% or more of the Company’s outstanding shares of Common Stock,
subject to certain exceptions, or (ii) the close of business on the tenth business day after the date that a tender offer or exchange offer is first
published or sent or given by any person, the consummation of which would result in such person becoming an Acquiring Person (the earlier
of such dates being called the “Distribution Time”).
The Rights Agreement provides that, until the Distribution Time (or earlier expiration or redemption of the Rights), the Rights will be
transferred with and only with the Common Stock. Until the Distribution Time (or earlier expiration or redemption of the Rights), new Common
Stock certificates issued after the Record Date upon transfer or new issuances of Common Stock will contain a legend incorporating the
Rights Agreement by reference, and notice of such legend will be furnished to holders of book entry shares. Until the Distribution Time (or
earlier expiration or redemption of the Rights), the surrender for transfer of any certificates for shares of Common Stock (or book entry shares
of Common Stock) outstanding as of the Record Date will also constitute the transfer of the Rights associated
EXHIBIT 4.1
with the shares of Common Stock represented by such certificate or registered in book entry form. As soon as practicable following the
Distribution Time, separate certificates evidencing the Rights (the “Rights Certificates”) will be mailed to holders of record of the Common
Stock as of the close of business on the Distribution Time, and such separate Rights Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Time. The Rights will expire prior to the earliest of (i) the close of business on October 2,
2024, or such later date as may be established by the Board as long as the extension is submitted to the stockholders of the Company for
ratification at the next annual meeting of stockholders succeeding such extension; (ii) the time at which the Rights are redeemed pursuant to
the Rights Agreement; (iii) the time at which the Rights are exchanged pursuant to the Rights Agreement; and (iv) upon the occurrence of
certain transactions (the earliest of (i), (ii), (iii) and (iv) is referred to as the “Expiration Date”).
Each share of Series A Preferred Stock will be entitled, when, as and if declared, to a minimum preferential per share quarterly dividend
payment equal to the greater of (i) $1.00 per share and (ii) an amount equal to 1,000 times the dividend declared per share of Common
Stock. In the event of liquidation, dissolution or winding up of the Company, the holders of the Series A Preferred Stock will be entitled to a
minimum preferential payment of the greater of (i) $1,000.00 per share (plus any accrued but unpaid dividends), and (ii) an amount equal to
1,000 times the payment made per share of Common Stock. Each share of Series A Preferred Stock will have 1,000 votes, voting together
with the Common Stock. In the event of any merger, consolidation or other transaction in which outstanding shares of Common Stock are
converted or exchanged, each share of Series A Preferred Stock will be entitled to receive 1,000 times the amount received per share of
Common Stock. These Rights are protected by customary anti-dilution provisions as further described in the Certificate of Incorporation and
Bylaws.
The Exercise Price payable, and the number of shares of Series A Preferred Stock or other securities or property issuable, upon exercise of
the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination
or reclassification of, the Series A Preferred Stock, (ii) upon the grant to holders of the Series A Preferred Stock of certain rights or warrants
to subscribe for or purchase Series A Preferred Stock at a price, or securities convertible into Series A Preferred Stock with a conversion
price, less than the then-current market price of the Series A Preferred Stock or (iii) upon the distribution to holders of the Series A Preferred
Stock of evidences of indebtedness or assets (excluding regular periodic cash dividends or dividends payable in Series A Preferred Stock) or
of subscription rights or warrants (other than those referred to above).
In the event that any person or group of persons becomes an Acquiring Person, each holder of a Right, other than the Rights beneficially
owned by the Acquiring Person, affiliates and associates of the Acquiring Person and certain transferees thereof (which will thereupon
become null and void), will, following the Distribution Time, have the right to receive upon exercise of a Right that number of shares of
Common Stock (or at the option of the Company, other securities of the Company) having a market value of two times the Exercise Price,
unless the Rights were earlier redeemed or exchanged.
In the event that, after a person or group of persons has become an Acquiring Person, the Company is acquired in a merger or other
business combination transaction or 50% or more of the Company’s consolidated assets or earning power are sold, proper provisions will be
made so that each holder of a Right (other than Rights beneficially owned by an Acquiring Person, affiliates and associates of the Acquiring
Person and certain transferees thereof which will have become null and void) will thereafter have the right to receive upon the exercise of a
Right that number of shares of Common Stock of the person with whom the Company has engaged in the foregoing transaction (or its
parent) that at the time of such transaction have a market value of two times the Exercise Price of the Right.
With certain exceptions, no adjustment in the Exercise Price will be required until cumulative adjustments require an adjustment of at least
1% in such Exercise Price. No fractional shares of Series A Preferred Stock or Common Stock will be issued (other than fractions of shares
of Series A Preferred Stock which are integral multiples of one one-thousandth of a share of Series A Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), and in lieu thereof an adjustment in cash will be made based on the current
market price of the Series A Preferred Stock or the Common Stock.
At any time after any person or group of persons becomes an Acquiring Person and prior to the acquisition of beneficial ownership by such
Acquiring Person of 50% or more of shares of Common Stock then outstanding, the Board of Directors, at its option, may exchange all or
part of the Rights (other than Rights beneficially owned by such Acquiring Person and certain transferees thereof which will have become null
and void) at an exchange ratio of one share of Common Stock per outstanding Right (subject to adjustment).
At any time before the Distribution Time, the Board of Directors may authorize the redemption of the Rights in whole, but not in part, at a
price of $0.001 per Right (subject to certain adjustments) (the “Redemption Price”). The
EXHIBIT 4.1
redemption of the Rights may be made effective at such time, on such basis and with such conditions as the Board of Directors, in its sole
discretion, may establish. Immediately upon the action of the Board of Directors electing to redeem or exchange the Rights, the Company
shall make announcement thereof, and upon such election, the right to exercise the Rights will terminate and the only right of the holders of
Rights will be to receive the Redemption Price.
In the event the Company receives a Qualifying Offer (as defined in the Rights Agreement) and the Company does not redeem the
outstanding Rights, the Company may exempt such Qualifying Offer from the Rights Agreement, or call a special meeting of stockholders to
vote on whether or not to exempt such Qualifying Offer from the Rights Agreement, in each case within 90 days of the commencement of the
Qualifying Offer (the “Board Evaluation Period”). The holders of record of 20% or more of the outstanding Common Stock (excluding shares
of Common Stock that are beneficially owned by the person making the Qualifying Offer and such person’s related persons) may submit a
written demand directing the Board of Directors to submit a resolution exempting the Qualifying Offer from the Rights Agreement to be voted
upon at a special meeting to be convened within 90 days following the receipt of the written demand (the “Special Meeting Period”). Subject
to the terms of the Rights Agreement, the Board of Directors must take the necessary actions to cause such resolution to be submitted to a
vote of stockholders at a special meeting within the Special Meeting Period; however, the Board of Directors may recommend in favor of or
against or take no position with respect to the adoption of the resolution, as it determines to be appropriate in the exercise of the Board of
Directors’ fiduciary duties.
For so long as the Rights are redeemable, the Company may from time to time in its sole discretion supplement or amend the Rights
Agreement in any respect without the approval of any holders of Rights, and the Rights Agent shall, if the Company so directs, execute such
supplement or amendment. However, from and after the time when the Rights are no longer redeemable, the Rights Agreement may not be
amended or supplemented in any manner that would, among other things, adversely affect the interests of the holders of Rights (other than
holders of Rights that have become null and void).
Transfer agent and registrar
The transfer agent and registrar for the Series A Preferred Stock is Broadridge Corporate Issuer Solutions, LLC, and its telephone number is
(877) 830-4936.
Nasdaq listing
The Series A Preferred Stock is listed for trading on Nasdaq Global Select Market.
SUBSIDIARIES OF BLACKBAUD, INC.
As of February 21, 2024
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
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 La n America, S.R.L.
Blackbaud Pacific Pty. Ltd.
Click 4 Compliance, LLC
Ed Comms Pty Ltd.
Educa onal Communica ons Ltd.
EverFi, Inc.
EverFi Canada, Inc.
EVERFI Interna onal 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 Tui on Management, LLC
YC Blocker 1, LLC
YourCause Holdings, LLC
YourCause, LLC
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorpora on by reference in the following Registra on Statements:
1. Registra on Statement (Form S-8 No. 333-272678 pertaining to the Blackbaud, Inc. 2016 Equity and Incen ve Compensa on Plan Amended and
Restated as of June 14, 2023,
2. Registra on Statement (Form S-8 No. 333-265527) pertaining to the Blackbaud, Inc. 2016 Equity and Incen ve Compensa on Plan Amended and
Restated as of June 9, 2022,
3. Registra on Statement (Form S-3 No. 333-262190) of Blackbaud, Inc.,
4. Registra on Statement (Form S-8 No. 333-257030) pertaining to the Blackbaud, Inc. 2016 Equity and Incen ve Compensa on Plan Amended and
Restated as of June 10, 2021,
5. Registra on Statement (Form S-8 No. 333-232111) pertaining to the Blackbaud, Inc. 2016 Equity and Incen ve Compensa on Plan Amended and
Restated as of June 13, 2019, and
6. Registra on Statement (Form S-8 No. 333-212057) pertaining to the Blackbaud, Inc. 2016 Equity and Incen ve Compensa on Plan;
of our reports dated February 21, 2024, with respect to the consolidated financial statements of Blackbaud, Inc. and the effec veness of internal control over
financial repor ng of Blackbaud, Inc. included in this Annual Report (Form 10-K) of Blackbaud, Inc. for the year ended December 31, 2023.
/S/ Ernst & Young LLP
Raleigh, North Carolina
February 21, 2024
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorpora on by reference in the Registra on Statements on Form S-3 (No. 333-262190) and Form S-8 (No. 333-272678, No. 333-
212057, No. 333-232111, No. 333-257030 and No. 333-265527) of Blackbaud, Inc. of our report dated March 1, 2022 rela ng to the financial statements,
EXHIBIT 23.2
which appears in this Form 10-K.
/S/ PricewaterhouseCoopers LLP
Atlanta, Georgia
February 21, 2024
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Blackbaud, Inc.
EXHIBIT 31.1
I, Michael P. Gianoni, cer fy 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 informa on included in this report, fairly present in all material respects the
financial condi on, results of opera ons and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other cer fying 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 repor ng (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 informa on rela ng to the registrant, including its consolidated subsidiaries, is made known to us by others within those
en es, par cularly during the period in which this report is being prepared;
b. designed such internal control over financial repor ng, or caused such internal control over financial repor ng to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial repor ng and the prepara on of financial statements for
external purposes in accordance with generally accepted accoun ng principles;
c.
evaluated the effec veness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effec veness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evalua on; and
d. disclosed in this report any change in the registrant’s internal control over financial repor ng 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 repor ng; and
5. The registrant’s other cer fying officer and I have disclosed, based on our most recent evalua on of internal control over financial repor ng, to the
registrant’s auditors and the audit commi ee of the registrant’s board of directors (or persons performing the equivalent func ons):
a.
b.
all significant deficiencies and material weaknesses in the design or opera on of internal control over financial repor ng which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial informa on; 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 repor ng.
Date:
February 21, 2024
By:
/s/ Michael P. Gianoni
Michael P. Gianoni
Chief Execu ve Officer, President and Vice Chairman of the Board
(Principal Execu ve Officer)
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Blackbaud, Inc.
EXHIBIT 31.2
I, Anthony W. Boor, cer fy 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 informa on included in this report, fairly present in all material respects the
financial condi on, results of opera ons and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other cer fying 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 repor ng (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 informa on rela ng to the registrant, including its consolidated subsidiaries, is made known to us by others within those
en es, par cularly during the period in which this report is being prepared;
b. designed such internal control over financial repor ng, or caused such internal control over financial repor ng to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial repor ng and the prepara on of financial statements for
external purposes in accordance with generally accepted accoun ng principles;
c.
evaluated the effec veness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the
effec veness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evalua on; and
d. disclosed in this report any change in the registrant’s internal control over financial repor ng 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 repor ng; and
5. The registrant’s other cer fying officer and I have disclosed, based on our most recent evalua on of internal control over financial repor ng, to the
registrant’s auditors and the audit commi ee of the registrant’s board of directors (or persons performing the equivalent func ons):
a.
b.
all significant deficiencies and material weaknesses in the design or opera on of internal control over financial repor ng which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial informa on; 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 repor ng.
Date:
February 21, 2024
By:
/s/ Anthony W. Boor
Anthony W. Boor
Execu ve Vice President and Chief Financial Officer
(Principal Financial and Accoun ng Officer)
Blackbaud, Inc.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.1
In connec on with the Annual Report on Form 10-K of Blackbaud, Inc. (the “Company”) for the period ended December 31, 2023 as filed with the Securi es
and Exchange Commission on or about the date hereof (the “Report”), I, Michael P. Gianoni, Chief Execu ve Officer, President and Vice Chairman of the
Board, hereby cer fy, pursuant to 18 U.S.C. 1350, as adopted pursuant to Sec on 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1. The Report fully complies with the requirements of Sec on 13(a) or 15(d) of the Securi es Exchange Act of 1934; and
2. The informa on contained in the Report fairly presents, in all material respects, the financial condi on and results of opera ons of the Company.
Date:
February 21, 2024
By:
/s/ Michael P. Gianoni
Michael P. Gianoni
Chief Execu ve Officer, President and Vice Chairman of the Board
(Principal Execu ve Officer)
Blackbaud, Inc.
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
EXHIBIT 32.2
In connec on with the Annual Report on Form 10-K of Blackbaud, Inc. (the “Company”) for the period ended December 31, 2023 as filed with the Securi es
and Exchange Commission on or about the date hereof (the “Report”), I, Anthony W. Boor, Execu ve Vice President and Chief Financial Officer, hereby cer fy,
pursuant to 18 U.S.C. 1350, as adopted pursuant to Sec on 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1. The Report fully complies with the requirements of Sec on 13(a) or 15(d) of the Securi es Exchange Act of 1934; and
2. The informa on contained in the Report fairly presents, in all material respects, the financial condi on and results of opera ons of the Company.
Date:
February 21, 2024
By:
/s/ Anthony W. Boor
Anthony W. Boor
Execu ve Vice President and Chief Financial Officer
(Principal Financial and Accoun ng Officer)
EXHIBIT 97.1
BLACKBAUD, INC.
EXECUTIVE INCENTIVE COMPENSATION
CLAWBACK POLICY
Introduc on
Blackbaud is commi ed to upholding the highest standards of governance, ethics and business integrity, which includes our philosophy of pay-for-
performance as it relates to execu ve compensa on. The Blackbaud Board of Directors (the “Board”) has, therefore, adopted this policy, which provides for
the recoupment of certain incen ve-based execu ve compensa on in the event of an accoun ng restatement resul ng from material noncompliance with
financial repor ng requirements under the federal securi es laws (this “Policy”). This Policy is designed to comply with Sec on 10D of the Securi es Exchange
Act of 1934, as amended (the “Exchange Act”), Rule 10D-1 promulgated under the Exchange Act (“Rule 10D-1”) and applicable Nasdaq lis ng standards.
This Policy applies to all of Blackbaud’s current and former execu ve officers, as determined by the Board in accordance with Sec on 10D of the Exchange
Act, Rule 10D-1 and applicable Nasdaq lis ng standards (the “Execu ve Officers”).
This Policy is administered by the Compensa on Commi ee of the Board (the “Commi ee”), which is authorized to interpret and construe this Policy and to
make all determina ons necessary, appropriate or advisable for the administra on of this Policy. It is intended that this Policy be interpreted in a manner
consistent with the requirements of Sec on 10D of the Exchange Act and applicable rules or standards adopted by the Securi es and Exchange Commission
(the “SEC”) or Nasdaq. Any determina ons made by the Commi ee shall be final and binding on all affected individuals.
Required Recoupment of Excess Compensa on
In the event Blackbaud is required to prepare an accoun ng restatement to restate its financial statements due material noncompliance with any financial
repor ng requirement under the federal securi es laws (whether or not fault or misconduct is present), each Execu ve Officer will be required, subject to
certain excep ons specified below, to reimburse or forfeit any excess Incen ve Compensa on (as defined below) received (as described below) by any such
Execu ve Officer during the three completed fiscal years immediately preceding the date on which Blackbaud is required to prepare such accoun ng
restatement.
The date on which Blackbaud is required to prepare an accoun ng restatement is the earlier of:
•
•
The date the Board concludes, or reasonably should have concluded, that Blackbaud’s previously issued financial statements must be restated, or
The date a court, regulator, or other legally authorized body directs Blackbaud to restate its previously issued financial statements .
For purposes of this Policy, “Incen ve Compensa on” means any compensa on that is granted, earned or vested based wholly or in part on the a ainment of
a Financial Repor ng Measure (as defined below), including but not limited to:
• Non-equity incen ve plan awards that are earned solely or in part by sa sfying a Financial Repor ng Measure performance goal, such as bonuses
paid from a bonus pool where the size of the pool is determined solely or in part by sa sfying a Financial Repor ng Measure performance goal or
other annual or special bonuses, short-term or long-term cash incen ves or other cash awards earned by sa sfying a Financial Repor ng Measure
performance goal;
•
•
Restricted stock, restricted stock units, stock op ons, stock apprecia on rights, performance shares and performance units that are granted or vest
solely or in part on sa sfying a Financial Repor ng Measure performance goal; and
Proceeds from the sale of shares acquired through an incen ve plan that were granted or vested solely or in part on sa sfying a Financial Repor ng
Measure performance goal.
Incen ve Compensa on generally does not include salaries that are not based on sa sfying a Financial Repor ng Measure, bonuses paid solely by sa sfying
subjec ve standards unrelated to Financial Repor ng Measures, non-equity incen ve plan awards earned solely by sa sfying strategic or opera onal
measures, wholly me-based equity awards and other compensa on that is paid on a discre onary basis and unrelated to a Financial Repor ng Measure
performance goal.
“Financial Repor ng Measure” means (1) stock price, (2) total stockholder return and (3) any measure that is determined and presented in accordance with
the accoun ng principles used in preparing Blackbaud’s financial statements, and any measure derived wholly or in part from such measures, including
without limita on:
EXHIBIT 97.1
•
Revenues
• Opera ng income
• Net income
•
EBITDA
• Working capital, cash flow funds from opera ons or other liquidity measures
•
•
Return on invested capital or return on assets or other return measures
Earnings per share or other earnings measures
Incen ve Compensa on will be deemed “received” for purposes of this Policy in the fiscal period during which the applicable Financial Repor ng Measure is
a ained, even if the payment or grant occurs a er the end of that period. For example, an award that is granted based on the achievement of a Financial
Repor ng Measure would be received in the fiscal period that the measure was sa sfied. However, if an equity award vests only on the achievement of a
Financial Repor ng Measure, the equity award would be received in the fiscal period that it vests.
Recoupment is required even if the Incen ve Compensa on was awarded pursuant to a pre-exis ng contract or arrangement.
Amount and Method of Recoupment
The amount to be recouped will be the excess of the Incen ve Compensa on paid to an Execu ve Officer based on the erroneous data over the Incen ve
Compensa on that would have been paid to the Execu ve Officer had it been based on the restated results, calculated on a pre-tax basis, as determined by
the Commi ee. For Incen ve Compensa on based on stock price or total stockholder return, if the Commi ee cannot determine the amount of excess
Incen ve Compensa on received by the Execu ve Officer directly from the informa on in the financial restatement, then it will make its determina on based
on a reasonable es mate of the effect of the restatement on the stock price or total stockholder return on which the Incen ve Compensa on was received.
This Policy does not apply to Incen ve Compensa on received by an individual:
•
Before beginning service as an Execu ve Officer;
• Who did not serve as an Execu ve Officer at any me during the three-year recovery period; or
•
Before the effec ve date of the applicable Nasdaq lis ng standard (October 2, 2023).
The Commi ee will determine, in its sole discre on, the method for recouping Incen ve Compensa on pursuant to this Policy. This may include, without
limita on:
•
Execu ve Officer reimbursement of cash Incen ve Compensa on previously paid or any gain realized on the ves ng, exercise, se lement, sale,
transfer or other disposi on of any equity-based awards;
• Offse ng the recouped amount from any compensa on otherwise owed by Blackbaud to the Execu ve Officer;
•
•
Cancelling outstanding vested or unvested equity awards; and/or
Taking any other remedial and recovery ac on permi ed by law, as determined by the Commi ee.
EXHIBIT 97.1
Blackbaud will endeavor to recoup excess Incen ve Compensa on reasonably promptly in compliance with this Policy, Rule 10D-1 and applicable Nasdaq’s
lis ng standards, except to the extent the pursuit of such recoupment would be imprac cable because:
•
•
•
The direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recovered, provided however, before such
conclusion of imprac cability is made, the Commi ee must first (a) make a reasonable a empt to recoup the excess Incen ve Compensa on and (b)
document this a empt and provide such documenta on to Nasdaq;
The recovery would violate home country law, where that law was adopted prior to November 28, 2022, based on an opinion of home country
counsel in compliance with Rule 10D-1 and applicable Nasdaq lis ng standards; or
The recovery would cause an otherwise tax-qualified re rement plan, under which the benefits are broadly available to Blackbaud employees, to fail
to meet qualifica on requirements.
In the event that an Execu ve Officer fails to repay Incen ve Compensa on when due as required by this Policy, the Execu ve Officer will be required to
reimburse Blackbaud for any and all expenses reasonably incurred (including legal fees) by Blackbaud in recovering such Incen ve Compensa on.
Other
Blackbaud will not indemnify any Execu ve Officer against the loss of any incorrectly awarded or received Incen ve Compensa on, including by paying or
reimbursing the Execu ve Officer for premiums for any insurance policy covering any poten al losses.
The Board may amend this Policy from me to me in its discre on as it deems necessary to comply with new or amended rules or standards adopted by the
SEC, Nasdaq or otherwise. The Board may terminate this Policy at any me.
The Board may require that any employment agreement, equity award agreement or similar agreement, as a condi on to the grant of any benefit thereunder,
require an Execu ve Officer to agree to abide by the terms of this Policy.
Any right of recoupment under this Policy is in addi on to, and not in lieu of, any other remedies or rights of recoupment that may be available to Blackbaud
pursuant to the terms of any employment agreement, equity award agreement or similar agreement and any other legal remedies available to Blackbaud,
including but not limited to rights of recoupment provided by Sec on 304 of the Sarbanes Oxley Act of 2002, as amended.
This Policy is binding on, and enforceable against, all Execu ve Officers and their beneficiaries, heirs, executors, administrators or other legal representa ves.
A copy of this Policy and any amendments thereto will be posted on Blackbaud’s website and filed as an exhibit to Blackbaud’s Annual Report on Form 10-K.