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BLACKBAUD INC

BLACKBAUD INCBLKBEarnings & Financial Report

Nasdaq · Information Technology · Services-Prepackaged Software

Blackbaud, Inc. is a cloud computing provider that supports nonprofits, foundations, corporations, education institutions, healthcare organizations, religious organizations, and individual change agents. Its products focus on fundraising, website management, CRM, analytics, financial management, ticketing, and education administration.

What changed in BLACKBAUD INC's 10-K — 2023 vs 2024

Top changes in BLACKBAUD INC's 2024 10-K

445 paragraphs added · 435 removed · 341 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

96 edited+35 added−24 removed60 unchanged
Performance solutions help customers to assess their fundraising performance across donor segments, benchmark themselves against peer organizations and understand industry trends. These solutions provide a holistic view of donor performance that goes beyond standard campaign-based reporting, with key performance indicators related to acquisition, upgrading, retention and reactivation.
Fundraising Performance solutions help customers to assess their fundraising performance across donor segments, benchmark themselves against peer organizations and understand industry trends. These solutions provide a holistic view of donor performance that goes beyond standard campaign-based reporting, with key performance indicators related to acquisition, upgrading, retention and reactivation.
This technology provides a system that is simple to maintain, efficient to operate and is intuitively easy to learn without extensive training. Blackbaud Luminate Online®, delivered in the cloud, helps our customers better understand their online supporters, make the right ask at the right time and raise money online.
This technology provides a system that is simple to maintain, efficient to operate and is intuitively easy to learn without extensive training. Blackbaud Luminate Online®, delivered in the cloud, helps our customers better understand their online supporters, make the right ask at the right time and raise more money online.
Market Overview The social impact market is significant, spanning far beyond philanthropy, and our addressable market is substantial and growing There are millions of organizations globally focused on social impact including nonprofits, foundations, education institutions and healthcare organizations. In the corporate sector, demonstrating positive social impact has become a business imperative.
Market Overview The social impact market is significant, spanning far beyond philanthropy, and our addressable market is substantial There are millions of organizations globally focused on social impact including nonprofits, foundations, education institutions and healthcare organizations. In the corporate sector, demonstrating positive social impact has become a business imperative.
Social Responsibility and ESG YourCause GrantsConnect® and YourCause CSRconnect® are cloud solutions for employee giving, volunteering, and grantmaking used to support corporate philanthropy by building meaningful connections between corporations, employees and nonprofits. After implementing YourCause solutions, customers typically show significant growth in volunteers, donations, engagement and more.
Social Responsibility, Employee Giving and Volunteering YourCause GrantsConnect® and YourCause CSRconnect® are cloud solutions for employee giving, volunteering, and grantmaking used to support corporate philanthropy by building meaningful connections between corporations, employees and nonprofits. After implementing YourCause solutions, customers typically show significant growth in volunteers, donations, engagement and more.
Our compensation framework is designed so that employees are compensated equitably and competitively, including through base salary, variable pay, equity award opportunities and comprehensive benefit offerings. We also seek to support the whole person, through increased benefits and focus on overall well-being.
Our compensation framework is designed so that employees are compensated equitably and competitively, through base salary, variable pay, equity award opportunities and comprehensive benefit offerings. We also seek to support the whole person, through increased benefits and focus on overall well-being.
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 meetings. We enable employees to have opportunities for career development through on-demand and company-led trainings in our Learning Management System platform: DevelopU.
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 meetings. We enable employees to have opportunities for career development through on-demand and company-led trainings via our Learning Management System platform, DevelopU.
The SEC maintains an Internet site that contains these reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov . Information About Our Executive Officers The following table sets forth information concerning our executive officers as of February 15, 2024: Name Age Title Michael P.
The SEC maintains an Internet site that contains these reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov . Information About Our Executive Officers The following table sets forth information concerning our executive officers as of February 15, 2025: Name Age Title Michael P.
Benjamin was Senior Vice President and General Manager at Box, a cloud content management platform for businesses, from October 2016 to March 2022. Prior to that, he was Vice President of Global Services at British Telecom, a multinational telecommunications holding company, from October 2007 to September 2016.
Benjamin was Senior Vice President and General Manager at Box, a cloud content management platform for businesses, from October 2016 to March 2018. Prior to that, he was Vice President of Global Services at British Telecom, a multinational telecommunications holding company, from October 2007 to September 2016.
It includes tools to build online fundraising campaigns as part of an organization's existing website or as a stand-alone fundraising site. Donation forms, gift processing and tools for communicating through web pages and email give our customers the essentials for building sustainable donor relationships. Blackbaud TeamRaiser® is the industry’s most comprehensive cloud solution designed specifically for peer-to-peer event fundraising.
It includes tools to build online fundraising campaigns as part of an organization's existing website or as a stand-alone fundraising site. Donation forms, gift processing and tools for communicating through web pages and email give our customers the essentials for building sustainable donor relationships. Blackbaud TeamRaiser® is the industry’s most comprehensive peer-to-peer fundraising event solution.
Modernized Approach to Pricing and Multi-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 inflationary pressures that all businesses are facing.
Modernized Approach to Pricing and Multi-Year Contracts In the summer of 2022, 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 inflationary pressures that all businesses are facing.
The nonprofit industry faces particular operational challenges Nonprofit organizations — and any other entity that includes fundraising as a revenue source, including education institutions, healthcare organizations and houses of worship — must efficiently: • Solicit funds and build relationships with major and institutional donors; • Garner small cash contributions from numerous contributors; • Manage and develop complex relationships with large numbers of constituents; • Communicate their accomplishments and the importance of their mission online and offline; • Comply with complex accounting, tax and reporting requirements that differ from those for for-profit businesses; • Solicit cash and in-kind contributions from businesses to help raise money or deliver products and services; • Provide a wide array of programs and services to individual constituents and beneficiaries; and • Improve the data collection and information sharing capabilities of their employees, volunteers and donors by creating and providing distributed access to centralized databases. 2023 Form 10-K 3 Table of Contents Blackbaud, Inc.
The nonprofit industry faces particular operational challenges Nonprofit organizations — and any other entity that includes fundraising as a revenue source, including education institutions, healthcare organizations and houses of worship — must efficiently: • Solicit funds and build relationships with major and institutional donors; • Garner small cash contributions from numerous contributors; • Manage and develop complex relationships with large numbers of constituents; • Communicate their accomplishments and the importance of their mission online and offline; • Comply with complex accounting, tax and reporting requirements that differ from those for for-profit businesses; • Solicit cash and in-kind contributions from businesses to help raise money or deliver products and services; • Provide a wide array of programs and services to individual constituents and beneficiaries; and • Improve the data collection and information sharing capabilities of their employees, volunteers and donors by creating and providing distributed access to centralized databases.
Blackbaud Tuition Management™ benefits schools by giving administrators better access to financial data and payment services, and by giving parents more ways to remit tuition payments. The solution helps ease the burden for administrative staff by offering invoicing, payment processing, customer service, enhanced communication with parents and later payer follow-up services.
Blackbaud Tuition Management™ benefits schools by giving administrators better access to financial data and payment services, and by giving parents more ways to remit tuition payments. The solution is fully integrated with Blackbaud Financial Edge NXT and helps ease the burden for administrative staff by offering invoicing, payment processing, customer service, enhanced communication with parents and later payer follow-up services.
The development strategy for all Blackbaud cloud solutions emphasizes: • Flexibility : Customers and partners can extend our component-based architecture to accommodate changing demands without modifying source code. • Adaptability : The architecture of our applications allows us to easily add functionality or integrate with third-party applications to adapt to customer needs and market demands. • Scalability : Scalable architecture and the performance, capacity and load balancing of our customers' industry-standard web servers and databases ensure that applications can scale to meet the needs of large organizations. 12 2023 Form 10-K Table of Contents Blackbaud, Inc.
The development strategy for all Blackbaud cloud solutions emphasizes: • Flexibility : Customers and partners can extend our component-based architecture to accommodate changing demands without modifying source code. • Adaptability : The architecture of our applications allows us to easily add functionality or integrate with third-party applications to adapt to customer needs and market demands. • Scalability : Scalable architecture and the performance, capacity and load balancing of our customers' industry-standard web servers and databases ensure that applications can scale to meet the needs of large organizations.
Blackbaud CRM™ is a comprehensive, configurable fundraising and relationship management solution. It is our lead offering for enterprise-level organizations seeking a powerful, yet adaptable solution for fundraising, marketing and program management across the engagement lifecycle, specializing in supporting sophisticated major giving, membership and high-volume direct marketing programs.
It is our lead offering for enterprise-level organizations seeking a powerful, yet adaptable solution for fundraising, marketing and program management across the engagement lifecycle, specializing in supporting sophisticated major giving, membership and high-volume direct marketing programs.
Prior to joining Alcatel-Lucent, Mr. Olson was employed in legal positions with MCI, Inc., a global business and residential communications company, from September 1996 to July 1997, and Unisys Corporation, a global information technology company, from July 1992 to September 1996. Mr.
Olson was employed in legal positions with MCI, Inc., a global business and residential communications company, from September 1996 to July 1997, and Unisys Corporation, a global information technology company, from July 1992 to September 1996. Mr.
Blackbaud CRM helps organizations build deeper and more personalized relationships with constituents, build their brands through online engagement and multichannel communication tools, and more effectively fundraise, leveraging campaign management, business intelligence and analytics. Blackbaud CRM can be sold as an integrated solution with our enterprise online solutions to enable multi-channel marketing, online engagement and event fundraising.
Blackbaud CRM helps organizations build deeper and more personalized relationships with constituents, build their brands through online engagement and multichannel communication tools, and more effectively fundraise, leveraging campaign management, business intelligence and predictive analytics. Blackbaud CRM can be integrated with enterprise online solutions to enable multi-channel marketing, online engagement and event fundraising.
However, once basic needs are met, programs unique to social impact organizations like the stewardship of relationships and partnerships critical to major gift fundraising, community and employee education; the cultivation and management of gifts, grants and K12 digital education sponsorship; the multi-level networking required for peer-to-peer activism and employee engagement; and the sensitive data and reporting behind critical programs run by and for healthcare and education institutions ensure the ongoing need for highly specialized tools.
However, once basic needs are met, programs unique to social impact organizations like the stewardship of relationships and partnerships critical to major gift fundraising and community education; the cultivation and management of gifts and grants sponsorship; the intricacies of not-for-profit specific fund accounting; the multi-level networking required for peer-to-peer activism and employee engagement; and the sensitive data and reporting behind critical programs run by and for healthcare and education institutions ensure the ongoing need for highly specialized tools.
Execute on our Five Key Operational Initiatives In early 2023, we outlined five key operational initiatives targeted to drive innovation, bookings growth, revenue expansion and lower costs. During 2023, we have executed on these key initiatives. 1.
Execute on our Five Key Operational Initiatives In early 2023, we outlined five key operational initiatives targeted to drive innovation, bookings growth, revenue expansion and lower costs. During 2024, we continued to execute on these key initiatives. 1.
We offer an array of philanthropy programs aimed at engaging our employees as agents of good, including matching gifts, competitive grants that honor noteworthy examples of volunteerism, employee-led grant committees, skills-based volunteerism initiatives, as well as science, technology, engineering and mathematics (STEM) focused community programs.
We offer an array of philanthropy programs aimed at engaging our employees in fueling social impact, including matching gifts, competitive grants that honor noteworthy examples of volunteerism, employee-led grant committees, skills-based volunteerism initiatives, as well as science, technology, engineering and mathematics (STEM) focused community programs.
We maintain many trademarks, including, but not limited to “Blackbaud,” “Raiser's Edge NXT” and “Luminate.” We currently have two active patents on our technology and have one pending patent application. Human Capital Resources As of December 31, 2023, we had approximately 3,000 employees, none of whom are represented by unions or are covered by collective bargaining agreements.
We maintain many trademarks, including, but not limited to “Blackbaud,” “Raiser's Edge NXT” and “Luminate.” We currently have one active patent on our technology and have one pending patent application. Human Capital Resources As of December 31, 2024, we had approximately 2,600 employees, none of whom are represented by unions or are covered by collective bargaining agreements.
We believe we compete against these solutions by offering a set of integrated solutions rather than a single point solution, which we believe improves the overall customer experience.
We believe we compete against these solutions by offering a set of integrated solutions rather than a single point solution, which we believe improves the overall customer experience and reduces organizational risk.
Olson joined us as Senior Vice President and General Counsel in September 2008. Mr. Olson is responsible for Blackbaud's legal activities. Prior to joining us, he was an attorney with Alcatel-Lucent USA, the U.S. subsidiary of Alcatel-Lucent (now owned by Nokia Corporation) that designs, develops, and builds wireline, wireless, and converged communications networks, from July 1997 to September 2008.
Olson is responsible for Blackbaud's legal activities. Prior to joining us, he was an attorney with Alcatel-Lucent USA, the U.S. subsidiary of Alcatel-Lucent (now owned by Nokia Corporation) that designs, develops, and builds wireline, wireless, and converged communications networks, from July 1997 to September 2008. Prior to joining Alcatel-Lucent, Mr.
Blackbaud Award Management™ is a comprehensive, integrated scholarship management platform for higher education and K-12 institutions and foundations, allowing students to apply for all awards using one intuitive and streamlined application process and eliminating many time-consuming administrative tasks. This leads to improved awarding, reporting, compliance, communication and stewardship.
Blackbaud Award Management™ is a comprehensive, integrated scholarship management platform for higher education and K-12 institutions and foundations, allowing students to apply for all awards using one intuitive and streamlined application 8 2024 Form 10-K Table of Contents Blackbaud, Inc. process and eliminating many time-consuming administrative tasks. This leads to improved awarding, reporting, compliance, communication and stewardship.
Examples of constituent insights include: predictive modeling that indicates the likelihood and capacity of a constituent making a gift, wealth screening software that uses publicly available records to build detailed wealth profiles of constituents and persona cluster segmentation that groups constituents based on shared traits with guidance for optimizing messaging to each group. 2023 Form 10-K 9 Table of Contents Blackbaud, Inc.
Examples of constituent insights include: predictive modeling that indicates the likelihood and capacity of a constituent making a gift, wealth screening software that uses publicly available records to build detailed wealth profiles of constituents and persona cluster segmentation that groups constituents based on shared traits with guidance for optimizing messaging to each group.
Both fundraisers and leaders benefit from the tailored consulting to address weaknesses and enhance strengths to comprehensively improve the fundraising team performance. Blackbaud Altru® is a cloud solution that helps arts and cultural organizations consolidate admissions, membership, fundraising, merchandise, marketing and more, giving users a comprehensive view of their supporters.
Both fundraisers and leaders benefit from tailored consulting to address weaknesses and enhance strengths to comprehensively improve fundraising team performance. 2024 Form 10-K 7 Table of Contents Blackbaud, Inc. Blackbaud Altru® is a cloud solution that helps arts and cultural organizations consolidate admissions, membership, fundraising, merchandise, marketing and more, giving users a comprehensive view of their supporters.
Our specific solutions and services include: Fundraising and Engagement Blackbaud Raiser's Edge NXT® is our flagship fundraising and relationship management solution. Raiser's Edge NXT is the first and only cloud fundraising and relationship management solution that is all-inclusive, fully integrated with data health, analytics, email marketing, donation forms, event management, payment processing and process automation to create tailored, user-specific experiences.
Raiser's Edge NXT is the first and only cloud fundraising and relationship management solution that is all-inclusive, fully integrated with data health, predictive analytics, email marketing, donation forms, event management, payment processing and process automation to create tailored, user-specific experiences.
We have a large base of loyal customers and strategic partners that provide references and recommendations often featured in our advertising and promotional activities. Competition The market for software and related services targeting philanthropic-focused for-profit and nonprofit organizations is competitive and highly fragmented.
We have a large base of loyal customers and strategic partners that provide references and recommendations often featured in our advertising and promotional activities. 2024 Form 10-K 11 Table of Contents Blackbaud, Inc. Competition The market for software and related services targeting philanthropic-focused for-profit and nonprofit organizations is competitive and highly fragmented.
Blackbaud School Website System™ is a content management system that gives schools the flexibility to build and edit webpages, with easy access to content types including photos, videos, downloads, text and more. It allows users to share material and contribute content across an entire school community. 8 2023 Form 10-K Table of Contents Blackbaud, Inc.
Blackbaud School Website System™ is a content management system that gives schools the flexibility to build and edit webpages, with easy access to content types including photos, videos, downloads, text and more. It allows users to share material and contribute content across an entire school community.
In addition, our open platform allows integration to specialized applications so the opportunity for disruption from these competitors is minimized. 2023 Form 10-K 11 Table of Contents Blackbaud, Inc. • Vertical-specific solutions are offered by competitors seeking to meet the enterprise-wide needs of a specific sub-segment of the social impact community.
In addition, our open platform allows integration to specialized applications so the opportunity for disruption from these competitors is minimized. • Vertical-specific solutions are offered by competitors seeking to meet the enterprise-wide needs of a specific sub-segment of the social impact community.
We supplement the digital motion with our annual user conference, bbcon ® (which was held in November 2023 in-person for the first time since the pandemic), select participation at virtual and in-person third-party trade shows, technical conferences, and technology seminars. We also target publication of our thought leadership content and position our subject matter experts in industry journals and publications.
We supplement the digital motion with our annual user conference, bbcon ® , select participation at virtual and in-person third-party trade shows, technical conferences, and technology seminars. We also target publication of our thought leadership content and position our subject matter experts in industry journals and publications.
Working Capital For a discussion of our working capital practices, see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations — Liquidity and Capital Resources” in Item 7 in this report. Available Information Our website address is www.blackbaud.com .
Working Capital For a discussion of our working capital practices, see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations — Liquidity and Capital Resources” in Item 7 in this report. 14 2024 Form 10-K Table of Contents Blackbaud, Inc. Available Information Our website address is www.blackbaud.com .
Because of these challenges, we believe nonprofits, education institutions, healthcare organizations and houses of worship can benefit from software applications and services specifically designed to serve their particular needs and workflows to grow revenue, work effectively and accomplish their missions.
Because of these challenges, we believe nonprofits, education institutions, healthcare organizations and houses of worship can benefit from software applications and services specifically designed to serve their particular needs and workflows to grow revenue, work effectively and accomplish their missions. 2024 Form 10-K 3 Table of Contents Blackbaud, Inc.
Blackbaud Guided Fundraising is used by institutions seeking to manage all the details behind the sophisticated, person-to-person solicitation strategies that drive fundraising results. Blackbaud Volunteer Network Fundraising helps institutions manage volunteer fundraising campaigns with tools for project management, communication and reporting. 2023 Form 10-K 7 Table of Contents Blackbaud, Inc.
Blackbaud Guided Fundraising is used by institutions seeking to manage all the details behind the sophisticated, person-to-person solicitation strategies that drive fundraising results. Blackbaud Volunteer Network Fundraising helps institutions manage volunteer fundraising campaigns with tools for project management, communication and reporting.
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.
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. 16 2024 Form 10-K Table of Contents Blackbaud, Inc.
Examples of these solutions include: identifying outdated or invalid constituent addresses in the database and making corrections based on United States Postal Service data and using name and address matching to append additional contact or demographic data points to constituent records to support better segmentation and engagement. Insights inform strategic decision-making and actions that increase efficiency and drive successful outcomes.
Examples of these solutions include: identifying outdated or invalid constituent addresses in the database and making corrections based on United States Postal Service data and using name and address matching to append additional contact or demographic data points to constituent records to support better segmentation and engagement.
Powering thousands of major events each year, TeamRaiser allows nonprofits’ supporters to create personal or team fundraising web pages and send email donation appeals in support of events such as walks, runs and rides. JustGiving® from Blackbaud® is one of the world's leading social platforms for giving.
Powering thousands of major events each year, TeamRaiser allows nonprofits’ supporters to create personal or team fundraising web pages and send email donation appeals in support of events such as walks, runs and rides. JustGiving® from Blackbaud® is a world-class social fundraising platform for online peer-to-peer giving.
Gianoni 63 Chief Executive Officer, President and Vice Chairman of the Board Anthony W. Boor 61 Executive Vice President and Chief Financial Officer David J. Benjamin 52 Executive Vice President and Chief Commercial Officer Kevin P. Gregoire 56 Executive Vice President and Chief Operating Officer Kevin R. McDearis 56 Executive Vice President and Chief Technology Officer Jon W.
Gianoni 64 Chief Executive Officer, President and Vice Chairman of the Board Anthony W. Boor 62 Executive Vice President and Chief Financial Officer David J. Benjamin 53 Executive Vice President and Chief Commercial Officer Kevin P. Gregoire 57 Executive Vice President and Chief Operating Officer Kevin R. McDearis 57 Executive Vice President and Chief Technology Officer Jon W.
We believe we compete well in this market through a combination of positive brand recognition among all three of these groups and the combination of our consumer- and organization-oriented tools relative to those of the competition.
We believe we compete well in this market through a combination of positive brand recognition among all three of these groups and the combination of our consumer- and organization-oriented tools relative to those of the competition. 12 2024 Form 10-K Table of Contents Blackbaud, Inc.
SKY UX allows developers to create applications with the same consistent, cohesive user interface as Blackbaud’s native solutions using an open-source framework that implements Blackbaud design patterns and provides guidelines and tooling for the entire application lifecycle.
SKY UX allows developers to create applications with the same consistent, cohesive user interface as Blackbaud’s native solutions using an open-source framework that implements Blackbaud design patterns and provides guidelines and tooling for the entire application lifecycle. Our Intelligence for Good® strategy affirms our commitment to AI that is convenient, powerful and responsible.
These services include: • System implementation; • Data conversion, business process analysis and application customization; • Database merging and enrichment, and secure credit card transaction processing; • Database production activities; and • Website design services; • Outcome-based and prescriptive services.
These services include: • System implementation; • Data conversion, business process analysis and application customization; • Database merging and enrichment; • Secure credit card transaction processing; • Database production activities; • Website design services; and • Outcome-based and prescriptive services. 10 2024 Form 10-K Table of Contents Blackbaud, Inc.
Customers enrolled in the programs enjoy fast, reliable customer support, receive regular software updates, stay up-to-date with regular communication and can leverage a unified customer portal for quick and easy access to these resources.
Benefits, such as priority routing or additional support channels, are continuously enhanced. Customers enrolled in the programs enjoy fast, reliable customer support, receive regular software updates, stay up-to-date with regular communication and can leverage a unified customer portal for quick and easy access to these resources.
Olson 60 Senior Vice President and General Counsel 14 2023 Form 10-K Table of Contents Blackbaud, Inc. Michael P. Gianoni joined us as Chief Executive Officer and President in January 2014 and was appointed Vice Chairman of the Board in January 2024.
Olson 61 Senior Vice President and General Counsel Michael P. Gianoni joined us as Chief Executive Officer and President in January 2014 and was appointed Vice Chairman of the Board in January 2024.
Transactional Revenue Optimization and Expansion Transactional revenue, which is about one-third of total revenue, is comprised of four primary components: donation processing (~55% of total transactional revenue); consumer giving (~20%); tuition management (~20%); and event-based usage (~5%).
As previously disclosed, there can be volatility quarter-to-quarter on bookings. 3. Transactional Revenue Optimization and Expansion Transactional revenue, which is about one-third of total revenue, is comprised of four primary components: donation processing (~55% of total transactional revenue); consumer giving (~20%); tuition management (~20%); and event-based usage (~5%).
Grant and Award Management Blackbaud Grantmaking™ is a modern cloud solution, built on our Blackbaud SKY Platform, that supports the end-to-end grantmaking process from application through review and resolution. Blackbaud Grantmaking provides core functionality to efficiently disperse funds, maintain compliance with due diligence requirements and measure and demonstrate impact.
Grant and Award Management Blackbaud Grantmaking™ is a modern cloud solution that supports the end-to-end grantmaking process from application through review and resolution. Blackbaud Grantmaking provides core functionality to efficiently disperse funds, maintain compliance with due diligence requirements and measure and demonstrate impact. The system has collaborative tools to help strengthen relationships with grantees and other community partners.
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 attract and develop talent globally.
Blackbaud also attracts and promotes talented employees through effective and targeted recruiting strategies. In 2021, we formally rolled out a remote work strategy which expanded our pool of qualified applicants for roles and internal career progression and enabled Blackbaud's goal to attract and develop talent globally.
As we did in 2021 and 2022, in 2023 we plan to achieve carbon neutrality across our business operations. We are committed to our continued efforts to reduce our emissions footprint and provide transparent annual social responsibility and sustainability reporting.
Blackbaud takes proactive measures to protect the environment, both in our internal sustainable business practices and our external engagements. As we did in 2021, 2022 and 2023, in 2024 we plan to achieve carbon neutrality across our business operations. We are committed to our continued efforts to reduce our emissions footprint and provide transparent annual social responsibility and sustainability reporting.
Prior to that, he was at Guardian Media Group, a mass media company owning various media operations company, where he served as Divisional Chief Operating Officer, among other leadership roles, from June 1995 to September 2007. He holds a BA in European Business from London Metropolitan University and an MBA from The Manchester Metropolitan University. Kevin P.
Prior to that, he was at Guardian Media Group, a mass media company owning various media operations company, where he served as Divisional Chief Operating Officer, among other leadership roles, from June 1995 to September 2007.
Gianoni is a member of the Board of Directors of Teradata Corporation, a publicly traded global big data analytics company, and has been Chairman of the Board since February 2020. Mr. Gianoni has served on several nonprofit boards across several segments, including relief organizations, hospitals and higher education.
Gianoni is a member of the Board of Directors of Teradata Corporation, a publicly traded global big data analytics company, and has been Chairman of the Board since February 2020. Mr.
Insights are extracted by combining customer data with licensed and proprietary data before leveraging advanced AI capabilities and expertise from Blackbaud’s dedicated team of data scientists.
Predictive Insights inform strategic decision-making and actions that increase efficiency and drive successful outcomes. Insights are extracted by combining customer data with licensed and proprietary data before leveraging advanced AI capabilities and expertise from Blackbaud’s dedicated team of data scientists.
We are deeply proud to play a part in our customers’ success in their missions to provide healthcare and cure diseases, advance education, preserve and share arts and culture, protect the environment, support those in need and much more.
During 2024, we had nearly 100,000 customers that paid Blackbaud through transactional fees and approximately 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 education, preserve and share arts and culture, protect the environment, support those in need and much more.
We closed four legacy data centers during 2022 and two in 2023. • Renegotiated key vendor contracts including Microsoft Azure and AWS • Reduced our real estate footprint as part of the shift to a remote first workforce 2023 Form 10-K 5 Table of Contents Blackbaud, Inc.
We closed four legacy data centers during 2022 and two in 2023. • Renegotiated key vendor contracts including Microsoft Azure and AWS • Reduced our real estate footprint as part of the shift to a remote-first workforce During 2024, we continued to run the business at about the same headcount level, while continuing to drive efficiencies in other areas of the business.
He also served on the Board of Directors of the Technology Association of Georgia from 2011 to 2016 and as Vice Chairman of the Board in 2014. He holds a BS in Management from The Georgia Institute of Technology. 2023 Form 10-K 15 Table of Contents Blackbaud, Inc. Jon W.
He also served on the Board of Directors of the Technology Association of Georgia from 2011 to 2016 and as Vice Chairman of the Board in 2014. He holds a BS in Management from The Georgia Institute of Technology. Jon W. Olson joined us as Senior Vice President and General Counsel in September 2008. Mr.
Data Intelligence Our data intelligence offerings provide solutions for data health, insights and performance, enabling nonprofits to define effective campaign strategies and maximize fundraising results. These services either integrate with or are already integrated into our software solutions to give our customers a comprehensive view of their supporters and the market and provide information essential to making well-informed operating decisions.
These services either integrate with or are already integrated into our software solutions to give our customers a comprehensive view of their supporters and the market and provide information essential to making well-informed operating decisions. Blackbaud’s Intelligence for Good® is our comprehensive strategy to deliver AI that is accessible, powerful and responsible.
The significant customization required to transform general business products into nonprofit solutions often requires the use of consultants to guide the implementation, without which, leave the adoption of general business software limited to very basic operations and simple needs. We believe our solutions compete successfully against general business software as a nonprofit’s needs grow more complex.
We believe that the products that remain are not yet fully capable of meeting market needs without significant customization to transform general business products into nonprofit solutions often requiring the use of consultants to guide the implementation, without which, leave the adoption of general business software limited to very basic operations and simple needs.
Strategy Our objective is to maintain and extend our position as the leading provider of cloud software and services for the global social impact community, supporting our customers' missions from securing resources and managing their operations, to delivering their programs and measuring their impact. Our key strategies for achieving this objective are described below.
Strategy Our objective is to maintain and extend our position as the leading provider of cloud software and services essential for the core business operations unique to social impact organizations, teams, and schools. Our key strategies for achieving this objective are described below.
In addition, we, and our delivery partners, apply our industry knowledge and experience, combined with expert knowledge of our solutions, to evaluate an organization's needs and consult on how to improve a business process. Training We provide a variety of onsite, instructor-led online and on-demand training services to our customers on our solutions and application of best practices.
In addition, we, and our delivery partners, apply our industry knowledge and experience, combined with expert knowledge of our solutions, to evaluate an organization's needs and consult on how to improve a business process. Training Blackbaud University helps organizations unlock the full potential of their solutions.
Customer Success Our Customer Success organization is responsible for ensuring our customers achieve their desired outcomes through Blackbaud solutions, starting at onboarding and continuing through the customer lifecycle. Our Customer Success team develops and fosters relationships within all levels of the customer organization to build more demonstrated value in our solutions and services, while helping customers achieve their desired outcomes.
Customer Success Our Customer Success organization is responsible for ensuring our customers achieve their desired outcomes through Blackbaud solutions, starting at onboarding and continuing through the customer lifecycle.
Additionally, the adoption of 3-year renewals as a standard, with more customers opting for this option than we originally expected, are expected to have an added benefit of higher retention 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.
Additionally, the adoption of 3-year renewals as a standard, with more customers opting for this option than we originally expected, is expected to have an added benefit of higher retention which provides greater revenue assurance and predictability. 5. Keen Attention to Cost Management Cost management initiatives already completed drove a significant improvement in profitability during 2023.
McDearis was the Chief Information Officer at Manhattan Associates, Inc., a technology leader in supply chain and omnichannel commerce, from August 2012 to July 2014. He was responsible for leading a global IT organization in strategy development, organization development, portfolio and project management, software and infrastructure engineering, service delivery and operations. Prior to that, Mr.
He was responsible for leading a global IT organization in strategy development, organization development, portfolio and project management, software and infrastructure engineering, service delivery and operations. Prior to that, Mr.
The diversity of the underlying transaction volumes from these four sources has resulted in consistent transactional recurring revenue growth in the mid-to-high single digits over the past several years. Strong momentum in consumer giving and tuition management, rate increases on Blackbaud Merchant Services, and increased donations tied to global events drove continued solid transactional recurring revenue growth in 2023.
The diversity of the underlying transaction volumes from these four sources has resulted in consistent transactional recurring revenue growth in the mid-to-high single digits over the past several years.
Customer Support Customer Support provides assistance to customers using Blackbaud Solutions, helping them understand the capabilities of their subscription, including how to navigate their subscription and answering related questions for core concepts of features and functionality. Benefits, such as priority routing or additional support channels, are continuously enhanced.
Customer success resources bring industry knowledge and expertise to the customer relationship and strive to help our customers achieve positive growth and outcomes. Customer Support Customer Support provides assistance to customers using Blackbaud Solutions, helping them understand the capabilities of their subscription, including how to navigate their subscription and answering related questions for core concepts of features and functionality.
Furthermore, general purpose software applications frequently have limited functionality for the unique needs of our customer base and do not efficiently integrate multiple databases. Some social impact organizations have developed proprietary software, but doing so is expensive, requiring on-site technical personnel for development, implementation and maintenance.
Some social impact organizations have developed proprietary software, but doing so is expensive, requiring on-site technical personnel for development, implementation and maintenance.
Countless individuals also engage in social impact by donating funds, volunteering their time, advocating for a cause, receiving services from or otherwise engaging with social impact organizations.
Countless individuals also engage in social impact by donating funds, volunteering their time, advocating for a cause, receiving services from or otherwise engaging with social impact organizations. Traditional methods of fundraising and organizational management are often costly and inefficient Many social impact organizations use manual methods or software applications not specifically designed for fundraising or nonprofit business operations.
As of December 31, 2023, we had approximately 250 direct sales employees. Our marketing organization, which includes brand, digital, content, product, event and demand generation marketing and corporate communications, develops and launches multi-channel campaigns designed to create brand recognition and market awareness for our solutions and services.
Our marketing organization, which includes brand, digital, content, product, event and demand generation marketing and corporate communications, develops and launches multi-channel campaigns designed to create brand recognition and market awareness for our solutions and services. Our digital demand generation motion focuses on targeted account-based marketing plays, as well as intent-based programs including paid search, retargeting, social and content syndication programs.
With over 70% of employees volunteering with nonprofits annually and one in seven serving on a nonprofit board or committee, our direct experience enables our teams to better serve our customer base. Blackbaud also attracts and promotes talented employees through effective and targeted recruiting strategies.
This differentiator not only builds strong employee engagement but also helps us provide a higher level of service to our customers. With over 76% of employees volunteering with nonprofits annually and one in seven serving on a nonprofit board or committee, our direct experience enables our teams to better serve our customer base.
This alignment continues our focus to amplify and accelerate the significant initiatives already in place at Blackbaud, including: a focus on allyship, mentoring and affinity groups.
This alignment continues our focus to amplify and accelerate the significant initiatives 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, people of color, sustainability and/or those with a disability.
Additional information related to our human capital strategy can be found in our 2022 ESG Report which is available on the Corporate Social Responsibility section of our website.
Our People and Culture Team was recognized by Phenom highlighting our talent experience with the 2024 award for Best Use of Talent Acquisition. Additional information related to our human capital strategy can be found in our 2023 Fueling Impact Report which is available on the Corporate Social Responsibility section of our website.
Built on our Blackbaud SKY Platform, Raiser's Edge NXT is, we believe, the most advanced technology available to nonprofits seeking to operate more efficiently and raise more support for their missions. Raiser’s Edge NXT includes access to Blackbaud Online Express™, a simple, efficient, cloud-based fundraising and marketing tool designed for smaller nonprofit organizations.
We believe Raiser's Edge NXT is the most advanced technology available to nonprofits seeking to operate more efficiently and raise more support for their missions. Blackbaud CRM™ is a comprehensive, configurable fundraising and relationship management solution.
Employee engagement is a focus at Blackbaud, and we continually work to understand what matters and to make our workplace better to attract, develop, and retain talent. Every manager at Blackbaud is required to take a multi-course "Engagement Labs" training designed to equip them with the practical skills to ensure their teams are highly engaged.
Every manager at Blackbaud is required to take a multi-course 2024 Form 10-K 13 Table of Contents Blackbaud, Inc. "Engagement Labs" training designed to equip them with the practical skills to ensure their teams are highly engaged.
Blackbaud's data intelligence solutions 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 portfolio consists of three key outcome areas: Data Health solutions enhance and maintain constituent data so the customer is always working with accurate and up-to-date information.
Blackbaud's data intelligence portfolio consists of three key outcome areas: 2024 Form 10-K 9 Table of Contents Blackbaud, Inc. Data Health solutions enhance and maintain constituent data so the customer is always working with accurate and up-to-date information.
Gregoire was Group President of the Financial Institutions Group at Fiserv, a global technology provider serving the financial services industry, from March 2014 until February 2018. He joined Fiserv in December 2002 and served in other key leadership roles including Division President and Chief Operating Officer, Card Services, and Senior Vice President of Product and Network Strategy. Mr.
Markets since April 2021. He joined us as Executive Vice President and President, Enterprise Markets Group in April 2018. Prior to joining us, Mr. Gregoire was Group President of the Financial Institutions Group at Fiserv, a global technology provider serving the financial services industry, from March 2014 until February 2018.
We strive to hire, develop and retain the best employees and provide a supportive and inclusive environment where their talents and potential are realized. In 2021, we formally adopted a "Remote First" model as a company, which supports Blackbaud's goal to attract top talent globally. For additional information, see “Human Capital Resources” below.
In 2021, we formally rolled out a remote work strategy as a company, which supports Blackbaud's goal to attract top talent globally. For additional information, see “Human Capital Resources” below.
We are not involved in any material disputes with any of our employees, and we believe that relations with our employees are strong. We benefit from an engaged and driven employee base motivated to join the Company by our work to support organizations and individuals driving social impact.
We benefit from an engaged and driven employee base motivated to join the Company by our work to support organizations and individuals driving social impact. Our purpose attracts and retains talented, competitive applicants, with approximately 90% of employees citing the fact that Blackbaud operates in a socially responsible manner is important to them.
The system has collaborative tools to help strengthen relationships with grantees and other community partners. Coupled with Blackbaud Outcomes™, funders and nonprofits are empowered to collaborate around their intended outcomes and work together to achieve impact. Both the funder and the nonprofit can tell an impact story using ROI-focused results and a common outcomes measurement language.
Blackbaud Grantmaking supports collaboration between funders and nonprofits around intended outcomes to drive desired impact. Both the funder and the nonprofit can tell an impact story using ROI-focused results and a common outcomes measurement language.
We augment our software with a range of payment processing, analytic and business intelligence services, consulting, training and professional services, as well as maintenance and technical support.
We augment our software with a range of payment processing, analytic and business intelligence services, consulting, training and professional services, as well as maintenance and technical support. The Blackbaud portfolio is delivered primarily through cloud solutions tailored to the unique needs of nonprofits and foundations, educational institutions, individual change makers and corporate social impact programs.
McDearis has served as our Executive Vice President and Chief Technology Officer since October 2016 and is responsible for the company’s global product and technology portfolio, including cybersecurity. He joined us in August 2014 as our Senior Vice President of Global Product Development. Prior to joining us, Mr.
He joined us in August 2014 as our Senior Vice President of Global Product Development. Prior to joining us, Mr. McDearis was the Chief Information Officer at Manhattan Associates, Inc., a technology leader in supply chain and omnichannel commerce, from August 2012 to July 2014.
Attract and Retain Top Talent and Actively Engage Employee Base Our employees are energized by our opportunity to fuel social impact. Collaboration, innovation, authentic passion for the customers we serve and high standards are core to our culture and help to enable the great work we do.
Collaboration, innovation, authentic passion for the customers we serve and high standards are core to our culture and help to enable the great work we do. We strive to hire, develop and retain the best employees and provide a supportive and inclusive environment where their talents and potential are realized.
During 2023, we had nearly 100,000 customers that paid Blackbaud through transactional fees and more than 40,000 customers with contractual billing arrangements.
This expertly designed product training empowers users to learn fast and work smart! Customers Millions of people across more than 100 countries connect, give, learn and engage through Blackbaud platforms. During 2024, we had nearly 100,000 customers that paid Blackbaud through transactional fees and approximately 40,000 customers with contractual billing arrangements.
Bookings Growth and Acceleration We maintain a keen focus on accelerating bookings growth by signing new logos as well as upselling and cross-selling our existing customer base. Our sales team is split between prospect account executives dedicated to prospecting for new clients and customer account executives who focus on selling additional products to current customers.
We expect these forms to drive higher revenue for our customers and for Blackbaud. We are delivering more innovation, evolving our products and ensuring our customers receive more value from our solutions. 2. Bookings Growth and Acceleration We maintain a keen focus on accelerating bookings growth by signing new logos as well as upselling and cross-selling our existing customer base.
These products generally do not satisfy the needs of nonprofits from end-to-end as they were not designed to support the specific needs of nonprofits during the original architecture, design, and requirements elicitation phases; therefore, we believe that because these products were not originally designed for nonprofits, they are not yet fully capable of meeting market needs without significant customization.
These products generally do not satisfy the needs of nonprofits from end-to-end as they were not designed to support the specific needs of nonprofits during the original architecture, design, and requirements elicitation phases; and several of the products introduced by general business software vendors have been subsequently pulled from market based on lack of adoption and customer satisfaction.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Our customers' collection and use of this data for donor profiling, data analytics or communications outreach might raise privacy and data protection concerns and negatively impact the demand for our solutions and services. For example, our custom modeling and analytical services rely heavily on processing and using of data we gather from customers and various sources.
Our customers' collection and use of this data for donor profiling, data analytics or communications outreach might raise privacy and data protection concerns and negatively impact the demand for our solutions and services. For example, our custom modeling and analytical services rely heavily on processing and using data we gather from customers and various sources.
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 volatility of the trading price of our stock and will diminish our cash reserves.
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 volatility of the trading price of our stock and will diminish our cash reserves and increase our debt.
Along with risks similar to those faced by our U.S. operations, our international operations are also subject to risks related to differing legal, political, social and regulatory requirements and economic conditions, including: • the imposition of additional withholding taxes or other tax on our foreign income, tariffs or restrictions on foreign trade or investment, including currency exchange controls; • greater risk of a failure of our employees and partners to comply with both U.S. and foreign laws, including antitrust regulations, the U.S.
Along with risks similar to those faced by our U.S. operations, our international operations are also subject to risks related to differing legal, political, social and regulatory requirements and economic conditions, including: • the imposition of additional withholding taxes or other tax on our foreign income, tariffs or restrictions on foreign trade or investment, including currency exchange and capital expropriation controls; • greater risk of a failure of our employees and partners to comply with both U.S. and foreign laws, including antitrust regulations, the U.S.
Our 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.
Our 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.
Certain provisions in our organizational documents, the Rights Agreement, compensation arrangements with our officers and Delaware law (as summarized below) may have the effect of delaying, deferring, discouraging or preventing an acquisition 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 attempts.
Certain provisions in our organizational documents, compensation arrangements with our officers and Delaware law (as summarized below) may have the effect of delaying, deferring, discouraging or preventing an acquisition 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 attempts.
The technologies underpinning these features are in the early stages of commercial use and exist in an emerging regulatory environment, which presents regulatory, litigation, ethical, reputational, operational and financial risks. Many U.S. and international governmental bodies and regulators have proposed, or are in the process of developing, new regulations related to the use of AI and machine learning technologies.
The technologies underpinning these features are in the early stages of commercial use and exist in an emerging regulatory environment, which presents regulatory, litigation, ethical, reputational, operational and financial risks. Many U.S. and international governmental bodies and regulators have adopted, or are in the process of developing, new regulations related to the use of AI and machine learning technologies.
The potential risks associated with acquisitions and investment transactions include, but are not limited to: • failure to realize anticipated returns on investment, cost savings and synergies; • difficulty in assimilating the operations, policies and personnel of the acquired company; • unanticipated costs associated with acquisitions; 18 2023 Form 10-K Table of Contents Blackbaud, Inc. • challenges in combining product offerings and entering into new markets in which we may not have experience; • distraction of management’s attention from normal business operations; • potential loss of key employees of the acquired company; • difficulty implementing effective internal controls over financial reporting, disclosure controls and procedures and cybersecurity and data protection procedures; • impairment of relationships with customers or suppliers; and • issues not discovered in due diligence, which may include product quality issues or legal or other contingencies.
The potential risks associated with acquisitions and investment transactions include, but are not limited to: • failure to realize anticipated returns on investment, cost savings and synergies; • difficulty in assimilating the operations, policies and personnel of the acquired company; • unanticipated costs associated with acquisitions; 2024 Form 10-K 19 Table of Contents Blackbaud, Inc. • challenges in combining product offerings and entering into new markets in which we may not have experience; • distraction of management’s attention from normal business operations; • potential loss of key employees of the acquired company; • difficulty implementing effective internal controls over financial reporting, disclosure controls and procedures and cybersecurity and data protection procedures; • impairment of relationships with customers or suppliers; and • issues not discovered in due diligence, which may include product quality issues or legal or other contingencies.
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”).
Each Right entitled 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”).
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 description and terms of these Rights are set forth in the Rights Agreement by and between the Company and American Stock Transfer & Trust Company, LLC.
Stockholder Rights Agreement (the "Rights Agreement"). 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 Rights Agreement by and between the Company and American Stock Transfer & Trust Company, LLC.
In addition, presently, we are a defendant in putative consumer class action cases in U.S. federal courts (most of which have been consolidated under multi district litigation to a single federal court) and in Canadian courts alleging harm from the Security Incident.
In addition, presently, we are a defendant in putative consumer class action cases in U.S. federal courts (most of which have been consolidated under multi district litigation to a single federal court) alleging harm from the Security Incident.
In addition, implementation 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 opportunities and acquisitions and fund liabilities and expenses related to the Security Incident.
In addition, implementation of some or all of this program diminishes our cash reserves and/or increases our debt, which may impact our ability to finance future growth, to pursue possible future strategic opportunities and acquisitions and fund liabilities and expenses related to the Security Incident.
We may be named as a party in additional lawsuits, other claims may be asserted by or on behalf of our customers or their constituents, and we may be subject to additional governmental inquires, requests or investigations.
We may be named as a party in additional lawsuits, other claims may be asserted by or on behalf of our customers or their constituents, and we may be subject to additional governmental inquiries, requests or investigations.
This preferred stock, including the Series A Preferred Stock described below, 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.
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.
(See Note 11 to our consolidated financial statements included in this report.) If any such fines or penalties were great enough that we could not pay them through funds generated from operating activities and/or cause a default under the 2020 Credit Facility, we may be forced to renegotiate or obtain a waiver under the 2020 Credit Facility and/or seek additional debt or equity financing.
(See Note 11 to our consolidated financial statements included in this report.) If any such fines or penalties were great enough that we could not pay them through funds generated from operating activities and/or cause a default under the 2024 Credit Facilities, we may be forced to renegotiate or obtain a waiver under the 2024 Credit Facilities and/or seek additional debt or equity financing.
If our enhanced products and services do not achieve widespread market adoption 2023 Form 10-K 17 Table of Contents Blackbaud, Inc. or there is a reduction in demand due to a lack of customer acceptance, technology challenges, strengthening competition, weakening economic conditions, or security or privacy concerns, our business could be harmed and our financial results could be adversely affected.
If our enhanced products and services do not achieve widespread market adoption or there is a reduction in demand due to a lack of customer acceptance, technology challenges, strengthening competition, weakening economic conditions, or security or privacy concerns, our business could be harmed and our financial results could be adversely affected. 18 2024 Form 10-K Table of Contents Blackbaud, Inc.
(See Note 9 to our consolidated financial statements included in this report for a more detailed description of our 2020 Credit Facility.) There can be no assurance that we will be able to remain in compliance with the covenants to which we are now subject or may be subject in the future and, if we fail to do so, that we will be able to obtain waivers from our lenders or amend the covenants.
(See Note 9 to our consolidated financial statements included in this report for a more detailed description of our 2024 Credit Facilities.) 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.
Although we intend to defend ourselves vigorously against the claims asserted against us, we cannot predict the potential outcomes, cost and expenses associated with current and any future claims, lawsuits, inquiries and investigations, which could require that we incur additional indebtedness to fund.
Although we have defended, and intend to continue to defend, ourselves vigorously against the claims asserted against us, we cannot predict the potential outcomes, cost and expenses associated with current and any future claims, lawsuits, inquiries and investigations, which could require that we incur additional indebtedness to fund.
(See Note 11 to our consolidated financial statements in this report for additional information regarding the Security Incident.) The degree to which we are leveraged could have adverse effects on our business, including the following: • Requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, dividends, stock repurchases and other general corporate purposes; • Increasing the amount of interest we pay, particularly if interest rates increase; • Limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; 24 2023 Form 10-K Table of Contents Blackbaud, Inc. • Restricting us from making additional strategic acquisitions or exploiting business opportunities; • Placing us at a competitive disadvantage compared to our competitors that have less debt; • Reducing our currently available borrowing capacity or limiting our ability to borrow additional funds; and • Decreasing our ability to compete effectively or operate successfully under adverse economic and industry conditions.
(See Note 11 to our consolidated financial statements in this report for additional information regarding the Security Incident.) The degree to which we are leveraged could have adverse effects on our business, including the following: • Requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, dividends, stock repurchases and other general corporate purposes; • Increasing the amount of interest we pay, particularly if interest rates increase; • Limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; • Restricting us from making additional strategic acquisitions or exploiting business opportunities; • Placing us at a competitive disadvantage compared to our competitors that have less debt; • Reducing our currently available borrowing capacity or limiting our ability to borrow additional funds; and • Decreasing our ability to compete effectively or operate successfully under adverse economic and industry conditions.
Responding to and resolving these current and any future lawsuits, claims and/or investigations could result in material remedial and other expenses that will not be covered by insurance. It is reasonably possible that our estimated or actual losses may change in the near term for those matters and be materially more than the amounts accrued.
Responding to and resolving these current and any future lawsuits, claims and/or investigations could result in material remedial and other expenses that will not be covered by insurance. It is reasonably possible that our estimated or actual losses may change in the near term for those matters and be materially in excess of the amounts accrued.
We currently have non-U.S. operations primarily in the U.K., Canada, Australia and Costa Rica, and we intend to expand further into international markets. Expansion of our international operations will require a significant amount of attention from our management and substantial financial resources and might require us to add qualified management in these markets.
We currently have non-U.S. operations primarily in the U.K., Canada, Australia, Costa Rica and India, and we intend to expand further into international markets. Expansion of our international operations has required, and will continue to require, a significant amount of attention from our management and substantial financial resources and might require us to add qualified management in these markets.
In the event of a default under our 2020 Credit Facility, we could be required to immediately repay all outstanding borrowings, which we might not be able to do and which would materially negatively affect our business, operations and financial condition. Our balance sheet includes significant amounts of goodwill and intangible assets.
In the event of a default under our 2024 Credit Facilities, we could be required to immediately repay all outstanding borrowings, which we might not be able to do and which would materially negatively affect our business, operations and financial condition. Our balance sheet includes significant amounts of goodwill and intangible assets.
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.
Under the Rights Agreement, the Rights would have 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.
For example, when providing our solutions to certain customers in the healthcare industry, we must comply with applicable provisions of the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), and might be subject to similar provisions of other legislation, including, without limitation, the Gramm-Leach-Bliley Act and related regulations, and the California Consumer Privacy Act of 2018, which became effective January 1, 2020, and may apply to some of our customers and areas of business.
For example, when providing our solutions to certain customers in the healthcare industry, we must comply with applicable provisions of the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), and might be subject to similar provisions of other legislation, including, without limitation, the Gramm-Leach-Bliley Act and related regulations, and the California Consumer Privacy Act of 2018, and may apply to some of our customers and areas of business.
While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose the source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur and we may be required to release proprietary source code, pay damages for breach of contract, re-engineer our applications, discontinue sales in the event re-engineering cannot be accomplished on a timely basis, or take other remedial action that may divert resources away from our development efforts, any of which could adversely affect our business. 2023 Form 10-K 27 Table of Contents Blackbaud, Inc.
While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose the source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur and we may be required to release proprietary source code, pay damages for breach of contract, re-engineer our applications, discontinue sales in the event re-engineering cannot be accomplished on a timely basis, or take other remedial action that may divert resources away from our development efforts, any of which could adversely affect our business.
Acquisitions, including for example our acquisition of EVERFI, Inc., may also result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, the expenditure of available cash, and amortization expenses or write-downs related to intangible assets such as goodwill, any of which could have a material adverse effect on our operating results or financial condition.
Acquisitions may also result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, the expenditure of available cash, and amortization expenses or write-downs related to intangible assets such as goodwill, any of which could have a material adverse effect on our operating results or financial condition.
As noted above, the terms of the FTC Proposed Order, the Attorneys General Administrative Orders and our settlement with the SEC require that we implement and maintain certain processes and programs and comply with certain legal requirements related to cybersecurity and data protection. Any future regulatory investigation or litigation settlements may also contain such requirements.
The terms of the California Judgment, FTC Order, the Attorneys General Administrative Orders and our settlement with the SEC require that we implement and maintain certain processes and programs and comply with certain legal requirements related to cybersecurity and data protection. Any future regulatory investigation or litigation settlements may also contain such requirements.
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 our common stock having a then-current market value of twice the Exercise Price, which would likely make any takeover or change of control attempt by such entity, person or group prohibitively expensive.
In the event that the Rights became exercisable due to the ownership threshold being crossed, each Right would have entitled its holder (other than the person, entity or group triggering the Rights Plan, whose rights would have become void and not exercisable) to purchase additional shares of Common Stock having a then-current market value of twice the Exercise Price, which would have likely made any takeover or change of control attempt by such entity, person or group prohibitively expensive.
Effectively implementing, monitoring and updating these requirements is expected to be expensive and time-consuming over an extended period.
Effectively implementing, monitoring and updating these requirements has been, and is expected to be over an extended period of time, expensive and time-consuming.
Because our customers use these services for important aspects of their businesses, any defects, delays or disruptions in service or other performance problems with our services could hurt our reputation and damage our customers' businesses.
Because our customers use these services for important aspects of their businesses, any defects, delays or disruptions in service or other performance problems with our services, such as the CrowdStrike Event, could hurt our reputation and damage our customers' businesses.
In addition, from time to time, we encounter fraudulent 2023 Form 10-K 23 Table of Contents Blackbaud, Inc. use of payment methods that could result in substantial additional costs or delay, preclude planned transactions, product launches or improvements, require significant and costly operational changes, impose restrictions, limitations, or additional requirements on our business, products and services, prevent or limit us from providing our products or services in a given market and adversely impact customer retention.
In addition, from time to time, we encounter fraudulent use of payment methods that could result in substantial additional costs or delay, preclude planned transactions, product launches or improvements, require significant and costly operational changes, impose restrictions, limitations, or additional requirements on our business, products and services, prevent or limit us from providing our products or services in a given market and adversely impact customer retention.
Our effective tax rate could be impacted by changes in our earnings and losses in countries with differing statutory tax rates, changes in operations, changes in non-deductible expenses, changes in excess tax benefits of stock-based compensation, changes in the valuation of deferred tax assets and liabilities and our ability to utilize them, the applicability of withholding taxes, effects from acquisitions, and changes in accounting 2023 Form 10-K 29 Table of Contents Blackbaud, Inc. principles and tax laws.
Our effective tax rate could be impacted by changes in our earnings and losses in countries with differing statutory tax rates, changes in operations, changes in non-deductible expenses, changes in excess tax benefits of stock-based compensation, changes in the valuation of deferred tax assets and liabilities and our ability to utilize them, the applicability of withholding taxes, effects from acquisitions, and changes in accounting principles and tax laws.
We have also received approximately 400 reservations of the right to seek expense recovery in the future from customers or their attorneys in the U.S., U.K. and Canada related to the Security Incident, none of which resulted in claims submitted to us and are considered by us to have been abandoned by the customers.
We have also received approximately 400 reservations of the right to seek expense recovery in the future from customers or their attorneys in the U.S., U.K. and Canada related to the Security Incident, 2024 Form 10-K 21 Table of Contents Blackbaud, Inc. none of which resulted in claims submitted to us and are considered by us to have been abandoned by the customers.
Despite the 2023 Form 10-K 19 Table of Contents Blackbaud, Inc. network, application and physical security procedures and internal control measures we employ to safeguard our systems, we have been, and in the future may be, vulnerable to a security breach, intrusion, loss or theft of confidential donor data and transaction data, which has in the past harmed and may in the future harm our business, reputation and future financial results.
Despite the network, application and physical security procedures and internal control measures we employ to safeguard our systems, we have been, and in the future may be, vulnerable to a security breach, intrusion, loss or theft of confidential donor data and transaction data, which has in the past harmed and may in the future harm our business, reputation and future financial results.
Historically, subscription and maintenance renewals have represented a significant portion of our total revenue. Because of this characteristic of our business, if our customers choose not to renew their subscriptions or maintenance arrangements with us on beneficial terms or at all, our business, operating results and financial condition could be harmed.
Historically, subscription and maintenance renewals have represented a significant portion of our total revenue. Because of this characteristic of our 2024 Form 10-K 17 Table of Contents Blackbaud, Inc. business, if our customers choose not to renew their subscriptions or maintenance arrangements with us on beneficial terms or at all, our business, operating results and financial condition could be harmed.
The Security Incident has had, and may continue to have, numerous adverse effects on our business, results of operations, financial condition and cash flows. As previously disclosed, on July 16, 2020, we contacted certain customers to inform them about the Security Incident, including that in May 2020 we discovered and stopped a ransomware attack.
The Security Incident has had, and may continue to have, numerous adverse effects on our business, results of operations, financial condition and cash flows. As previously disclosed, on July 16, 2020, we contacted certain customers to inform them about the Security Incident.
Our use of third-party technologies also exposes us to increased risks including, but not limited to, risks associated with the integration of new technology into our solutions, the diversion of our resources from development of our own proprietary technology and our inability to generate revenue from licensed technology sufficient to offset associated acquisition and maintenance costs.
Our use of third-party technologies also exposes us to increased risks including, but not limited to, risks associated with the integration of new technology into our solutions, the diversion of our resources from development of our own proprietary technology and our inability to generate revenue from licensed technology sufficient to offset associated acquisition and maintenance costs. 20 2024 Form 10-K Table of Contents Blackbaud, Inc.
(See Note 11 to our consolidated financial statements included in this report for a description of the Security Incident and related legal proceedings and regulatory matters.) We are in the information technology business, and our solutions and services store, retrieve, transfer, manipulate and manage our customers’ information and data.
(See Note 11 to our consolidated financial statements included in this report for a description of the Security Incident and related legal proceedings and regulatory matters.) 2024 Form 10-K 27 Table of Contents Blackbaud, Inc. We are in the information technology business, and our solutions and services store, retrieve, transfer, manipulate and manage our customers’ information and data.
The Bylaws may have the effect of precluding the conduct of business at a meeting if the proper procedures are not followed and 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. 28 2023 Form 10-K Table of Contents Blackbaud, Inc.
The Bylaws may have the effect of precluding the conduct of business at a meeting if the proper procedures are not followed and 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.
We are incorporating generative artificial 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 practices, it may result in operational, financial and reputational harm and other adverse consequences to our business. We are implementing AI features in certain of our products and services.
This technology is new and developing, and while we aim to adopt known best practices, it may result in operational, financial and reputational harm and other adverse consequences to our business. We are implementing AI features in certain of our solutions and services.
Provisions in our organizational documents, our Stockholder Rights Agreement (as described below, the "Rights Agreement") , certain officer compensation arrangements and Delaware law may delay or prevent an acquisition or change of control of our Company that could be deemed beneficial to our stockholders.
Provisions in our organizational documents, certain officer compensation arrangements and Delaware law may delay or prevent an acquisition or change of control of our Company that could be deemed beneficial to our stockholders.
If we are unable to grow our international operations in a cost-effective and timely manner, our business and operating results could be harmed. Increases in our international revenues denominated in foreign currencies subject us to fluctuations in foreign currency exchange rates. If we expand our international operations, exposures to gains and losses on foreign currency transactions may increase.
If we are unable to grow our international operations in a cost-effective and timely manner, our business and operating results could be harmed. Increases in our international revenues denominated in foreign currencies subject us to fluctuations in foreign currency exchange rates.
Significant management time and Company resources have been, and are expected to continue to be, devoted to the Security Incident. For example, for full year 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 settlements and recorded liabilities for loss contingencies.
Significant management time and Company resources have been, and are expected to continue to be, devoted to the Security Incident. For example, for full year 2024, we incurred net pre-tax expenses of $13.7 million related to the Security Incident, which included $7.0 million for ongoing legal fees and $6.8 million for settlements and recorded liabilities for loss contingencies.
If we incur additional debt, these risks may intensify. Our ability to meet our debt service obligations will depend upon our future performance, which will be subject to the financial, business and other factors affecting our operations, many of which are beyond our control.
If we incur additional debt, these risks may intensify. Our ability to meet our debt service obligations will depend upon our future performance, which will be subject to the financial, business and other factors affecting our operations, many of which are beyond our control. 2024 Form 10-K 25 Table of Contents Blackbaud, Inc.
Responding to and resolving these current and any future lawsuits, claims and/or investigations could result in material remedial and other expenses.
Responding to and resolving these current and any future lawsuits, claims and/or investigations has resulted, and may continue to result, in material remedial and other expenses.
We also expect that many of our generative AI features will include the processing of personal data and may be subject to laws, policies, legal obligations and codes of conduct related to privacy and data protection.
Many of our generative AI features include the processing of personal data and are, and may be further, subject to laws, policies, legal obligations and codes of conduct related to privacy and data protection.
Foreign Corrupt Practices Act, the U.K. Bribery Act of 2010, and any trade regulations ensuring fair trade practices; • the imposition of, or unexpected adverse changes in, foreign laws or regulatory requirements, including those pertaining to export restrictions, privacy and data protection, trade and employment restrictions and intellectual protections; and • general business disruptions caused by geopolitical situations and developments.
Bribery Act of 2010, and any trade regulations ensuring fair trade practices; • greater risk of failure to comply with foreign country employment or other human resources laws and regulations; • the imposition of, or unexpected adverse changes in, foreign laws or regulatory requirements, including those pertaining to export restrictions, privacy and data protection, trade and employment restrictions and intellectual protections; and • general business disruptions caused by geopolitical situations and developments.
Internet-based services sometimes contain undetected errors when first introduced or when new versions or enhancements are released. We have from time to time found defects in our web-based services and new errors might again be detected in the future.
Internet-based services sometimes contain undetected errors when first 2024 Form 10-K 23 Table of Contents Blackbaud, Inc. introduced or when new versions or enhancements are released. We have from time to time found defects in our web-based services and new errors might again be detected in the future.
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. Stockholder Rights Agreement.
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. 2024 Form 10-K 29 Table of Contents Blackbaud, Inc.
The final form of these may impose obligations related to our development, offering and use of AI technologies and expose us to increased risk of regulatory enforcement and litigation.
These have imposed, and may in the future further impose, obligations related to our development, offering and use of AI technologies and expose us to increased risk of regulatory enforcement and litigation.
In addition, we have been named as a party in various lawsuits in connection with the Security Incident, claims have been asserted by or on behalf of our customers or their constituents, and we are subject to various governmental inquires, requests or investigations.
As a result of this indebtedness and other borrowings, our interest payment obligations have increased. In addition, we have been named as a party in various lawsuits in connection with the Security Incident, claims have been asserted by or on behalf of our customers or their constituents, and we are subject to various governmental inquiries, requests or investigations.
In addition, our customers might use our Internet-based offerings in unanticipated ways that cause a disruption in service for other customers attempting to access their data.
In addition, our customers might use our Internet-based offerings in unanticipated ways that cause a disruption in service for other customers attempting to access their data. For example, on July 19, 2024, CrowdStrike Holdings, Inc.
Our competitors might also establish or strengthen cooperative relationships with resellers and third-party consulting firms or other parties with whom we have had relationships, thereby limiting our ability to promote our solutions. These competitive pressures could cause our revenue and market share to decline. In addition, the introduction of solutions encompassing new technologies can render existing solutions obsolete and unmarketable.
Our competitors might also establish or strengthen cooperative relationships with resellers and third-party consulting firms or other parties with whom we have had relationships, thereby limiting our ability to promote our solutions. These competitive pressures could cause our revenue and market share to decline.
Although we intend to defend ourselves vigorously against the claims asserted against us, we cannot predict the potential outcomes, cost and expenses associated with current and any future claims, lawsuits, inquiries and investigations.
Although we intend to defend ourselves vigorously against the claims asserted against us, we cannot predict the potential outcomes, cost and expenses associated with current and any future claims, lawsuits, inquiries and investigations. 22 2024 Form 10-K Table of Contents Blackbaud, Inc.
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 inactive and are considered by us to have been abandoned by the customers.
To date, we have received approximately 260 specific requests from customers for reimbursement of expenses incurred by them related to the Security Incident, all of which have been fully resolved and closed or are inactive and are considered by us to have been abandoned by the customers.
An impairment of a significant portion of goodwill or intangible assets could materially and negatively affect our results of operations and financial condition. Restrictions in our credit facility limit certain of our activities, including dividend payments, stock repurchases and acquisitions.
An impairment of a significant portion of goodwill or intangible assets, such as the EVERFI impairment charges discussed in Note 4 to our consolidated financial statements in this report, could materially and negatively affect our results of operations and financial condition. Restrictions in our credit facility limit certain of our activities, including dividend payments, stock repurchases and acquisitions.
Any natural disaster or catastrophic event affecting us could have a significant negative impact on our operations. 22 2023 Form 10-K Table of Contents Blackbaud, Inc. Expected new regulations and standards relating to public disclosure, including those related to climate change, could adversely impose significant costs on us to comply with such regulations.
Any natural disaster or catastrophic event affecting us could have a significant negative impact on our operations. New regulations and standards relating to public disclosure, including proposed new rules related to climate change, could adversely impose significant costs on us to comply with such regulations.
Additional information 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 Compensation Arrangements.
Additional information regarding the Rights Agreement and its termination, is contained in the Company’s Current Reports on Form 8-K filed with the SEC on October 2, 2023, January 26, 2024 and March 18, 2024 and in the Company's Form 8-A/A filed with the SEC on March 18, 2024. Officer Compensation Arrangements.
Conforming our solutions and services to PCI DSS or other payment services related regulations or requirements imposed by payment networks or our customers or payment processing partners is expensive and time-consuming.
Conforming 24 2024 Form 10-K Table of Contents Blackbaud, Inc. our solutions and services to PCI DSS or other payment services related regulations or requirements imposed by payment networks or our customers or payment processing partners is expensive and time-consuming.
The program could affect the trading price of our stock and increase volatility, and any announcement of a termination of this program may result in a decrease in the trading price of our 2023 Form 10-K 25 Table of Contents Blackbaud, Inc. stock.
The program could affect the trading price of our stock and increase volatility, and any announcement of a termination of this program may result in a decrease in the trading price of our stock.
In addition, these laws and regulations could impose significant costs on our customers and us and make it more 26 2023 Form 10-K Table of Contents Blackbaud, Inc. difficult for donors to make online donations.
In addition, these laws and regulations could impose significant costs on our customers and us and make it more difficult for donors to make online donations.
We significantly increased our leverage in connection with acquisition of EVERFI and may increase our leverage in the future in connection with additional acquisitions, Security Incident costs or other business purposes, which could adversely impact our business and financial performance. We incurred a substantial amount of indebtedness in connection with acquisitions, including our acquisition of EVERFI, Inc.
We significantly increased our leverage in connection with stock repurchases, and may increase our leverage in the future in connection with acquisitions, Security Incident costs or other business purposes, which could adversely impact our business and financial performance. We incurred a substantial amount of indebtedness to fund the ASR Transaction (as defined on page 105 ) and other stock repurchases.
(See Foreign Currency Exchange Rates on page 59 for more information regarding the impact of foreign currency exchange rates on our operations.) Doing business internationally involves additional risks that could harm our operating results.
The expansion of our international operations has increased, and is expected to continue to increase, our exposures to gains and losses on foreign currency transactions. (See Foreign Currency Exchange Rates on page 59 for more information regarding the impact of foreign currency exchange rates on our operations.) Doing business internationally involves additional risks that could harm our operating results.
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.
See below for a discussion of our previously issued and subsequently cancelled Series A Preferred Stock. 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.
Certain governmental authorities are seeking to impose undertakings, injunctive relief, consent decrees, or other civil or criminal penalties, which could, among other things, materially increase our data security costs or otherwise require us to alter how we operate our business.
Certain governmental authorities have imposed, and others may in the future impose, undertakings, injunctive relief, consent decrees, or other civil or criminal penalties, which have materially increased our data security costs or otherwise required us to alter how we operate our business, and could further do so in the future.
(See Note 14 to our consolidated financial statements in this report for additional information related to our stock repurchase program.) We have recorded significant deferred tax assets, and we might never realize their full value, which would result in a charge against our earnings. As of December 31, 2023, we had deferred tax assets of $143.3 million.
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, 2024, we had deferred tax assets of $162.3 million.
A reduction in the growth or amount of charitable giving due to deteriorating general economic conditions, a recession or otherwise could adversely affect our operating results and financial condition. A large percentage of our customers are nonprofits, foundations, education institutions, healthcare organizations and other members of the social impact community that fully or partially rely on charitable donations.
A large percentage of our customers are nonprofits, foundations, education institutions, healthcare organizations and other members of the social impact community that fully or partially rely on charitable donations.
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 permitted reductions or exceptions to the amount subject to the tax. Any resulting increase in our tax obligation or cash taxes paid could adversely affect our financial position and cash flows.
During 2024, we have been 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 permitted reductions or exceptions to the amount subject to the tax.
We might not be successful in protecting our proprietary technology and our proprietary rights might not provide us with a meaningful competitive advantage. To protect our core proprietary technology, we rely on a combination of patent, trademark, copyright and trade secret laws, as well as nondisclosure agreements, each of which affords only limited protection.
To protect our core proprietary technology, we rely on a combination of patent, 28 2024 Form 10-K Table of Contents Blackbaud, Inc. trademark, copyright and trade secret laws, as well as nondisclosure agreements, each of which affords only limited protection.
In addition, additional leverage could impact our ability to meet certain financial and other covenants contained in our 2020 Credit Facility.
In addition, additional leverage could impact our ability to meet certain financial and other covenants contained in our 2024 Credit Facilities, which increased our total borrowing capacity from $1.1 billion to $1.5 billion.
We have also received notices of proposed claims on behalf of a number of U.K. data subjects, which we are reviewing.
We have also received notices of proposed claims on behalf of a number of U.K. data subjects, which have been fully resolved and closed or are inactive and are considered by us to have been abandoned by the data subjects.
The impairment of a significant portion of these assets could negatively affect our operating results. As of December 31, 2023, we had $1.1 billion and $581.9 million of goodwill and intangible assets, respectively. On at least an annual basis, we assess whether there have been impairments in the carrying value of goodwill and intangible assets.
The impairment of a significant portion of these assets, such as the EVERFI impairment charges, could negatively affect our operating results. As of December 31, 2024, we had $1.1 billion and $132.9 million of goodwill and intangible assets, respectively.
We may need to create new or additional equity incentive programs and/or compensation packages to remain competitive, which could be dilutive to our existing stockholders and/or adversely affect our results of operations. 16 2023 Form 10-K Table of Contents Blackbaud, Inc.
A decline in our stock price could negatively impact the effectiveness of these equity incentive and related compensation programs as retention and recruiting tools. We may need to create new or additional equity incentive programs and/or compensation packages to remain competitive, which could be dilutive to our existing stockholders and/or adversely affect our results of operations.
If the carrying value of an asset is determined to be impaired, then it is written down to fair value by a non-cash charge to operating earnings.
On at least an annual basis, we assess whether there have been impairments in the carrying value of goodwill and intangible assets. If the carrying value of an asset is determined to be impaired, then it is written down to fair value by a noncash charge to operating earnings.
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 settlement and the $49.5 million civil penalty paid during the fourth quarter of 2023 related to the Multistate Investigation (as discussed in Note 11).
During 2024, we had net cash outlays of $15.9 million related to the Security Incident, which included ongoing legal fees, and the $6.8 million paid during the third quarter of 2024 related to our settlement with the Attorney General of the State of California (as discussed in Note 11).
This settlement fully resolves the previously disclosed multi-state Civil Investigative Demand and the separate Civil Investigative Demand from the Office of the Indiana Attorney General relating to the Security Incident, which is further described in the substantially similar Administrative Orders filed in each of the 49 states and the District of Columbia.
In addition, • On March 9, 2023, the Company reached a settlement with the SEC that fully resolved the previously disclosed SEC investigation of the Security Incident; • On October 5, 2023, the Company entered into separate, substantially similar Administrative Orders with each of 49 state Attorneys General and the District of Columbia that fully resolved the previously disclosed multi-state Civil Investigative Demand and the separate Civil Investigative Demand from the Office of the Indiana Attorney General relating to the Security Incident; • On May 20, 2024, the U.S.
For example, following our acquisition of EVERFI, Inc. (as further described in Note 3 to our consolidate financial statements in this report) we experienced the loss of certain employees and unexpected delays in realizing anticipated returns on our investment.
For example, following our acquisition of EVERFI, Inc ("EVERFI") in December 2021, we experienced the loss of certain employees and were unable to realize the anticipated returns on our investment prior to our disposition of the business in December 2024.
We may experience risks relating to the challenges and costs of closing a business combination and the risk that an announced business combination may not close. There can be no assurance that we will be successful in making additional acquisitions in the future or in integrating or executing on our business plan for existing or future acquisitions.
There can be no assurance that we will be successful in making additional acquisitions in the future or in integrating or executing on our business plan for existing or future acquisitions. A reduction in the growth or amount of charitable giving due to deteriorating general economic conditions, a recession or otherwise could adversely affect our operating results and financial condition.
In addition, insurance 20 2023 Form 10-K Table of Contents Blackbaud, Inc. companies representing various customers’ interests through subrogation claims have contacted us, and certain insurance companies have filed subrogation claims in court, of which 3 cases remain active and unresolved.
In addition, insurance companies representing various customers’ interests through subrogation claims have contacted us, and certain insurance companies have filed subrogation claims in court, of which two cases remain active and unresolved. We also were a defendant in putative consumer class action cases in Canadian courts alleging harm from the Security Incident which have now been resolved.
(See Note 11 to our consolidated financial statements included in this report for a more detailed description of the Security Incident and related matters.) On March 9, 2023, the Company reached a settlement with the SEC in connection with the Security Incident.
Department of Health and Human Services, the Office of the Australian Information Commissioner and the Office of the Privacy Commissioner of Canada, each of which we now believe are now longer active actions or investigations. See Note 11 to our consolidated financial statements included in this report for a more detailed description of the Security Incident and related matters.
We have received a Civil Investigative Demand from the office of the California Attorney General relating to the Security Incident. In addition, we are subject to pending governmental actions or investigations by the U.S. Federal Trade Commission, the U.S.
Federal Trade Commission (the "FTC") finalized an Order (the “FTC Order”) evidencing its settlement with us in connection with the Security Incident; • On June 13, 2024, we agreed to a Final Judgment and Permanent Injunction with the Attorney General of the State of California (the "California Judgment") relating to the Security Incident; and • We previously received notices of governmental actions or investigations by the U.S.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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As a result of the Security Incident, we are currently subject to certain legal proceedings, claims and investigations and could be the subject of additional legal proceedings, claims, inquiries and investigations in the future that might result in adverse judgments, settlements, fines, penalties or other resolution.
As a result of the Security Incident, we are currently subject to certain legal proceedings and claims and could be the subject of additional legal proceedings, claims, inquiries and investigations in the future that might result in adverse judgments, settlements, fines, penalties or other resolution.
The ORCAS Committee receives detailed cybersecurity information from key security personnel and reports at least quarterly up through our Risk Steering Committee, which is made up of executives and senior management from various Blackbaud departments: Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Technology Officer, General Counsel, Chief Privacy Officer and Chief Information Security Officer ("CISO"), who has extensive information technology and program management experience.
The ORCAS Committee receives detailed cybersecurity information from key security personnel and reports at least quarterly up through our Risk Steering Committee, which is made up of executives and senior management from various Blackbaud departments: Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Technology Officer, General Counsel, Chief Privacy Officer and CISO, who has extensive information technology and program management experience.
See Note 11 to the consolidated audited financial statements contained in this Annual Report on Form 10-K for additional information regarding the Security Incident and its past and potential impact on the Company. Notwithstanding our strong commitment to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us.
See Note 11 to the consolidated audited financial statements contained in this report for additional information regarding the Security Incident and its past and potential impact on the Company. Notwithstanding our strong commitment to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us. See Item 1A.
Consistent with our prioritization of information and technology protection, cybersecurity risk management has been and remains a key aspect of our overall business strategy, financial planning and capital allocation and a point of ongoing emphasis at all levels of our Company.
Integration into Overall Risk Management System or Processes Consistent with our prioritization of information and technology protection, cybersecurity risk management has been and remains a key aspect of our overall business strategy, financial planning and capital allocation and a point of ongoing emphasis at all levels of our Company.
The Cybersecurity Subcommittee determines cybersecurity materiality and is made up of our General Counsel, Chief Information Security Officer, Chief Accounting Officer and Director of SEC Reporting.
The Cybersecurity Subcommittee determines cybersecurity materiality and is made up of our General Counsel, CISO, Chief Accounting Officer and Director of SEC Reporting.
See Item 1A. "Risk Factors" for a discussion of our cybersecurity risks. Governance Our multi-level cybersecurity governance and risk management structure begins with our Operational Risk Compliance and Security (“ORCAS”) Committee consisting of cross-functional management representatives throughout our Company.
"Risk Factors" for a discussion of our cybersecurity risks. Governance Management's Assessment and Management of Cybersecurity Threats Our multi-level cybersecurity governance and risk management structure begins with our Operational Risk Compliance and Security (“ORCAS”) Committee consisting of cross-functional management representatives throughout our Company.
Our Cybersecurity Incident Subcommittee is part of our Disclosure Committee, which is appointed by Chief Executive Officer and Chief Financial Officer to assist our executives in their responsibility for oversight of the accuracy and timeliness of the disclosures made by Blackbaud. 2023 Form 10-K 31 Table of Contents Blackbaud, Inc.
Our Cybersecurity Incident Subcommittee is part of our Disclosure Committee, which is appointed by Chief Executive Officer and Chief Financial Officer to assist our executives in their responsibility for oversight of the accuracy and timeliness of the disclosures made by Blackbaud.
We also participate in global communities and 30 2023 Form 10-K Table of Contents Blackbaud, Inc. conference platforms to share information and present on best practices to improve the industry’s security awareness posture.
We also participate in global communities and conference platforms to share information and present on best practices to improve the industry’s security awareness posture.
ITEM 1C. CYBERSECURITY Risk Management and Strategy Because technology, data and information security is a top priority at Blackbaud, we maintain and continuously assess and strengthen our cybersecurity program. Comprehensive cybersecurity risk management, including identification, analysis and response to risks affecting our business and its customers, provides the foundation for our program.
ITEM 1C. CYBERSECURITY Risk Management and Strategy Overview of Processes for Assessing, Identifying and Managing Material Cyber Risks Because technology, data and information security is a top priority at Blackbaud, we maintain and continuously assess and strengthen our cybersecurity program.
Cybersecurity leaders reporting to our CISO also have significant information technology and information security experience and industry recognized certifications. The Risk Steering Committee reports to the Risk Oversight Committee of our Board of Directors at the regular quarterly meetings, or more frequently as needed.
Board Oversight The Risk Steering Committee reports to the Risk Oversight Committee of our Board of Directors at the regular quarterly meetings, or more frequently as needed. The Risk Oversight Committee's duties include, among other things, oversight of risks related to information technology security.
In addition, 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.
In addition, 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. 2024 Form 10-K 31 Table of Contents Blackbaud, Inc.
Engagements include an annual NIST Cybersecurity Framework assessment to ensure a reasonable cybersecurity program and retained leading external cybersecurity Incident Response (IR) experts.
Engagements include an annual NIST Cybersecurity Framework assessment to ensure a reasonable cybersecurity program and retained leading external cybersecurity Incident Response (IR) experts. Risks from Third-Party Service Providers and Others Blackbaud also maintains a defined program and dedicated team that provides security oversight of its third-party service providers.
We utilize a four-prong strategy for assessing, identifying and managing material risks from cybersecurity threats: 1.
See Note 11 to the consolidated audited financial statements contained in this report for additional information regarding the Security Incident. We utilize a four-prong strategy for assessing, identifying and managing material risks from cybersecurity threats: 1.
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 relationship. We regularly engage outside consultants and experts to assist us regarding our cybersecurity program.
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 relationship. Risks from Cybersecurity Threats; Actual and Potential Material Impact In addition, we continuously learn from and leverage experience gained from previous cybersecurity incidents that we, like many other companies, have experienced.
The Risk Oversight Committee's duties include, among other things, oversight of risks related to information technology security. The Risk Oversight Committee communicates as appropriate with the full Board of Directors, which is ultimately responsible for cybersecurity risk oversight. Additionally, our cybersecurity Incident Response plan timely informs our Cybersecurity Incident Subcommittee on active cybersecurity incidents that are potentially material.
The Risk Oversight Committee communicates as appropriate with the full Board of Directors, which is ultimately responsible for cybersecurity risk oversight.
Removed
In addition, we continuously learn from and leverage experience gained from previous cybersecurity incidents that we, like many other companies, have experienced.
Added
Comprehensive cybersecurity risk management, including identification, analysis and response to risks affecting our business and its customers, provides the foundation for our program. Our cybersecurity program has been and will continue to be further enhanced by our compliance with the settlement of governmental investigations relating to the Security Incident.
Added
Our enterprise risk management ("ERM") framework integrates our information technology and data management systems and related policies and practices into the larger framework to help guide and prioritize our cybersecurity and information technology-related investments, activities and risk management strategy. At least annually, we review cybersecurity risk as part of our ERM processes and integrate those findings into our overall strategy.
Added
Additionally, our cybersecurity program is further integrated with our overall risk management program through our Chief Information Security Officer's ("CISO") participation in such governance structures as our Risk Steering Committee and our Disclosure Committee, both of which are described in detail below. Engagement of Third Parties We regularly engage outside consultants and experts to assist us regarding our cybersecurity program.
Added
Cybersecurity leaders reporting to our CISO also have significant information technology and information security experience and industry recognized certifications. 32 2024 Form 10-K Table of Contents Blackbaud, Inc. Additionally, our cybersecurity Incident Response plan timely informs our Cybersecurity Incident Subcommittee on active cybersecurity incidents that are potentially material.

Item 2. Properties

Properties — owned and leased real estate

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ITEM 2. PROPERTIES We own our LEED Gold certified global headquarters facility in Charleston, South Carolina, which consists of approximately 172,000 square feet. We believe that it is in good operating condition and adequately serves our current business operations.
ITEM 2. PROPERTIES We own our LEED Gold certified global headquarters facility in Charleston, South Carolina, which consists of approximately 172,000 square feet. We believe that it is in good operating condition and adequately serves our current business operations. As a remote-first workforce company, we have leased a significant portion of the office space in our global headquarters facility.
We continue to pursue strategic alternatives for our Washington, DC office space, including additional 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.
For additional information, see Note 18 to our consolidated financial statements in this report. ITEM 3. LEGAL PROCEEDINGS For a discussion of our legal proceedings, see Note 11 to our consolidated financial statements in this report.
Removed
In December 2021, we acquired EVERFI and assumed a lease for office space in Washington, D.C. and an office in London, U.K. In February 2023, we closed our Washington, DC office location to align with our remote-first workforce strategy and have since that time subleased a portion of the space.
Added
In October 2024, we signed a membership agreement for office space in Hyderabad, India to support our business operations in India. In February 2025, we were released from our lease for office space in Washington, DC (which was acquired as part of our acquisition of EVERFI in December 2021).

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal proceedings 32 Item 4. Mine safety disclosures 32 PART II. 33 Item 5. Market for registrant's common equity, related stockholder matters and issuer purchases of equity securities 33 Item 6. [Reserved] 34 Item 7. Management's discussion and analysis of financial condition and results of operations 35 Item 7A.
Item 3. Legal proceedings 33 Item 4. Mine safety disclosures 33 PART II. 34 Item 5. Market for registrant's common equity, related stockholder matters and issuer purchases of equity securities 34 Item 6. [Reserved] 35 Item 7. Management's discussion and analysis of financial condition and results of operations 36 Item 7A.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Issuer Purchases of Equity Securities The following table provides information about shares of common stock acquired or repurchased during the three months ended December 31, 2023 under our stock repurchase program as then in effect, as well as common stock withheld by us to satisfy the minimum tax obligations of employees due upon vesting of restricted stock awards and units.
Issuer Purchases of Equity Securities The following table provides information about shares of common stock acquired or repurchased during the three months ended December 31, 2024 under our stock repurchase program as then in effect, as well as common stock withheld by us to satisfy the minimum tax obligations of employees due upon vesting of restricted stock awards and units.
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.
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, 2024. The graph assumes that the value of the investment in our common stock and each index was $100.00 at December 31, 2019, and that all dividends are reinvested.
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.
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 18, 2025, there were approximately 101 stockholders of record of our common stock.
Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, this number is not representative of the total number of beneficial owners of our stock. On February 14, 2024, the closing price of our common stock was $71.61.
Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, this number is not representative of the total number of beneficial owners of our stock. On February 18, 2025, the closing price of our common stock was $70.96.
The level of this acquisition activity varies from period to period based upon the timing of award grants and vesting. (2) In December 2021, our Board of Directors reauthorized and replenished our stock repurchase program to authorize us to purchase up to $250.0 million of our outstanding shares of common stock.
The level of this acquisition activity varies from period to period based upon the timing of award grants and vesting. (2) In July 2024, our Board of Directors reauthorized, expanded and replenished our stock repurchase program by raising the total capacity under the program from $500.0 million to $800.0 million available for repurchases.
Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs (2) Approximate dollar value of shares that may yet be purchased under the plans or programs (in thousands) (2) Beginning balance, October 1, 2023 $ 250,000 October 1, 2023 through October 31, 2023 — $ — — 250,000 November 1, 2023 through November 30, 2023 3,194 73.02 — 250,000 December 1, 2023 through December 31, 2023 222,593 84.89 221,836 231,169 Total 225,787 $ 84.72 221,836 $ 231,169 (1) Includes 3,951 shares (3,194 in November and 757 in December) withheld by us to satisfy the minimum tax obligations of employees due upon vesting of restricted stock awards and units.
Period Total number of shares purchased (1) Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under the plans or programs (in thousands) (2) Beginning balance, October 1, 2024 $ 737,188 October 1, 2024 through October 31, 2024 710,974 $ 25.74 (3) 710,974 718,886 November 1, 2024 through November 30, 2024 899,327 83.55 889,480 644,562 December 1, 2024 through December 31, 2024 762 78.13 — 644,562 Total 1,611,063 $ 58.04 1,600,454 $ 644,562 (1) Includes 10,609 shares (9,847 in November and 762 in December) withheld by us to satisfy the minimum tax obligations of employees due upon vesting of restricted stock awards and units.
Removed
December 31, 2018 2019 2020 2021 2022 2023 Blackbaud, Inc. $100.00 $127.30 $92.21 $126.53 $94.30 $138.90 Nasdaq Composite Index 100.00 136.69 198.10 242.03 163.28 236.17 Nasdaq Computer Index 100.00 148.27 233.26 296.23 192.48 315.60 2023 Form 10-K 33 Table of Contents Blackbaud, Inc.
Added
December 31, 2019 2020 2021 2022 2023 2024 Blackbaud, Inc. $100.00 $72.44 $99.39 $74.07 $109.11 $93.03 Nasdaq Composite Index 100.00 144.92 177.06 119.45 172.77 223.87 Nasdaq Computer Index 100.00 157.33 199.80 129.82 212.86 284.38 34 2024 Form 10-K Table of Contents Blackbaud, Inc.
Removed
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 expiration date.
Added
The program does not have an expiration date. (3) Includes the settlement of the ASR in October 2024 in which no cash was exchanged (see discussion on page 56 ).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

136 edited+46 added−41 removed93 unchanged
Income Taxes Income tax provision (benefit) ($M) Percentages indicate effective income tax rates Our effective income tax rate may fluctuate quarterly and annually as a result of factors, including changes in tax law in jurisdictions where we conduct business, transactions entered into, changes in the geographic distribution of our earnings or losses, and our assessment of certain tax contingencies and valuation allowances.
Income Taxes Income tax (benefit) provision ($M) Percentages indicate effective income tax rates Our effective income tax rate may fluctuate quarterly and annually as a result of factors, including changes in tax law in jurisdictions where we conduct business, transactions entered into, changes in the geographic distribution of our earnings or losses, and our assessment of certain tax contingencies and valuation allowances.
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.
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 negatively impacted, and we expect it to continue for the foreseeable future to negatively 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 ).
Accordingly, the Security Incident has negatively impacted, and we expect it to continue for the foreseeable future to negatively 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 ).
We believe the accounting estimates listed below are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. 2023 Form 10-K 59 Table of Contents Blackbaud, Inc.
We believe the accounting estimates listed below are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. 2024 Form 10-K 59 Table of Contents Blackbaud, Inc.
We have not made any material changes in the accounting methodology we use to assess loss contingencies during the year ended December 31, 2023. We review any such loss contingency accruals at least quarterly and adjust them to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case.
We have not made any material changes in the accounting methodology we use to assess loss contingencies during the year ended December 31, 2024. We review any such loss contingency accruals at least quarterly and adjust them to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case.
We adjust the preliminary purchase price allocation, as necessary, up to one year after the acquisition closing date as we obtain new information about facts and circumstances that existed as of the closing date. We have not made any material changes in the accounting methodology we use for business combinations during the year ended December 31, 2023.
We adjust the preliminary purchase price allocation, as necessary, up to one year after the acquisition closing date as we obtain new information about facts and circumstances that existed as of the closing date. We have not made any material changes in the accounting methodology we use for business combinations during the year ended December 31, 2024.
Each of these matters could, separately or in the aggregate, result in an adverse judgement, settlement, fine, penalty or other resolution, the amount, scope and timing of which we are currently unable to predict, but could have a material adverse impact on our results of operations, cash flows or financial condition.
Each of these matters could, separately or in the aggregate, result in an adverse judgment, settlement, fine, penalty or other resolution, the amount, scope and timing of which we are currently unable to predict, but could have a material adverse impact on our results of operations, cash flows or financial condition.
Each of these matters could, separately or in the aggregate, result in an adverse judgement, settlement, fine, penalty or other resolution, the amount, scope and timing of which we are currently unable to predict, but could have a material adverse impact on our results of operations, cash flows or financial condition.
Each of these matters could, separately or in the aggregate, result in an adverse judgment, settlement, fine, penalty or other resolution, the amount, scope and timing of which we are currently unable to predict, but could have a material adverse impact on our results of operations, cash flows or financial condition.
See Note 3 to our consolidated financial statements in this report for information regarding our business acquisitions. 2023 Form 10-K 61 Table of Contents Blackbaud, Inc. Income Taxes Description Judgments and Uncertainties Effect if Actual Results Differ From Assumptions We make estimates and judgments in accounting for income taxes.
See Note 3 to our consolidated financial statements in this report for information regarding our business acquisitions. 2024 Form 10-K 61 Table of Contents Blackbaud, Inc. Income Taxes Description Judgments and Uncertainties Effect if Actual Results Differ From Assumptions We make estimates and judgments in accounting for income taxes.
We have not made any material changes in the accounting methodology we use to recognize revenue during the year ended December 31, 2023. Our revenue recognition accounting methodology may contain uncertainties because it could require us to make significant estimates and assumptions, and to apply judgment for certain customer contracts.
We have not made any material changes in the accounting methodology we use to recognize revenue during the year ended December 31, 2024. Our revenue recognition accounting methodology may contain uncertainties because it could require us to make significant estimates and assumptions, and to apply judgment for certain customer contracts.
Recently Issued Accounting Pronouncements For a discussion of the impact that recently issued accounting pronouncements are expected to have on our financial position and results of operations when adopted in the future, see Note 2 to our consolidated financial statements in this report. 2023 Form 10-K 63 Table of Contents Blackbaud, Inc.
Recently Issued Accounting Pronouncements For a discussion of the impact that recently issued accounting pronouncements are expected to have on our financial position and results of operations when adopted in the future, see Note 2 to our consolidated financial statements in this report. 2024 Form 10-K 63 Table of Contents Blackbaud, Inc.
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 operating cash flow less capital expenditures, including costs required to be capitalized for software and content development, and capital expenditures for property and equipment.
See Non-GAAP organic revenue growth table above. 52 2024 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 operating cash flow less capital expenditures, including costs required to be capitalized for software and content development, and capital expenditures for property and equipment.
To the extent that the carrying value of the asset or asset group exceeds the undiscounted cash flows over the estimated remaining life of the asset, we measure the impairment using discounted cash flows. We have not made any material changes in the accounting methodology we use to assess impairment loss during the year ended December 31, 2023.
To the extent that the carrying value of the asset or asset group exceeds the undiscounted cash flows over the estimated remaining life of the asset, we measure the impairment using discounted cash flows. We have not made any material changes in the accounting methodology we use to assess impairment loss during the year ended December 31, 2024.
One-time services and other Revenue ($M) Cost of revenue ($M) Gross profit ($M) and gross margin (%) YoY Growth (%) YoY Growth (%) One-time services and other revenue is comprised of fees for one-time consulting (including creative services), analytic and onsite training services, and fees for retained and managed services contracts that we do not expect to have a term consistent with our cloud solution contracts.
One-time services and other Revenue ($M) Cost of revenue ($M) Gross profit ($M) and gross margin (%) YoY Growth (%) YoY Growth (%) One-time services and other revenue is comprised of fees for one-time consulting, analytic and onsite training services, and fees for retained and managed services contracts that we do not expect to have a term consistent with our cloud solution contracts.
We believe that these non-GAAP measures are useful to investors, as a supplement to GAAP measures, for evaluating the periodic growth of our business on a consistent basis. Each of these measures of non-GAAP organic revenue growth excludes incremental acquisition-related revenue attributable to companies acquired in the current fiscal year.
We believe that these non-GAAP measures are useful to investors, as a supplement to GAAP measures, for evaluating the periodic growth of our business on a consistent basis. Each of these measures of non-GAAP organic revenue growth excludes incremental acquisition-related revenue attributable to companies, if any, acquired in the current fiscal year.
However, if actual results are not consistent with our estimates or assumptions, we may be exposed to an impairment charge that could materially adversely impact our consolidated financial position and results of operations. 62 2023 Form 10-K Table of Contents Blackbaud, Inc.
However, if actual results are not consistent with our estimates or assumptions, we may be exposed to an impairment charge that could materially adversely impact our consolidated financial position and results of operations. 62 2024 Form 10-K Table of Contents Blackbaud, Inc.
Our cash flow from financing is negatively impacted in our first quarter when most of our equity awards vest, as we pay taxes on behalf of our employees related to the settlement or exercise of equity awards. 2023 Form 10-K 53 Table of Contents Blackbaud, Inc.
Our cash flow from financing is negatively impacted in our first quarter when most of our equity awards vest, as we pay taxes on behalf of our employees related to the settlement or exercise of equity awards. 2024 Form 10-K 53 Table of Contents Blackbaud, Inc.
(3) To determine non-GAAP organic revenue growth and non-GAAP organic recurring revenue growth on a constant currency basis, revenues from entities reporting in foreign currencies were translated to U.S. Dollars using the comparable prior period's quarterly weighted average foreign currency exchange rates.
(4) To determine non-GAAP organic revenue growth and non-GAAP organic recurring revenue growth on a constant currency basis, revenues from entities reporting in foreign currencies were translated to U.S. Dollars using the comparable prior period's quarterly weighted average foreign currency exchange rates.
If we were to change any of these judgments or estimates, it could cause a material increase or decrease in the amount of revenue or deferred revenue that we report in a particular period. 60 2023 Form 10-K Table of Contents Blackbaud, Inc.
If we were to change any of these judgments or estimates, it could cause a material increase or decrease in the amount of revenue or deferred revenue that we report in a particular period. 60 2024 Form 10-K Table of Contents Blackbaud, Inc.
The actual interest expense recognized in our consolidated statements of comprehensive income will depend on the amount of debt, the length of time the debt is outstanding and the interest rate, which could be different from our assumptions on our remaining principal payments described above.
The actual interest expense recognized in our consolidated statements of comprehensive loss will depend on the amount of debt, the length of time the debt is outstanding and the interest rate, which could be different from our assumptions on our remaining principal payments described above.
We record valuation allowances to reduce our deferred tax assets to the amount expected to be realized. We have not made any material changes in the accounting methodology we use to assess income tax during the year ended December 31, 2023.
We record valuation allowances to reduce our deferred tax assets to the amount expected to be realized. We have not made any material changes in the accounting methodology we use to assess income tax during the year ended December 31, 2024.
(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 respective prior period quarterly financial information solely due to the manner in which non-GAAP organic revenue growth and non-GAAP organic recurring revenue growth are calculated.
(3) Non-GAAP organic revenue and non-GAAP organic recurring revenue for the prior year periods presented herein may not agree to non-GAAP organic revenue and non-GAAP organic recurring revenue presented in the respective prior period quarterly financial information solely due to the manner in which non-GAAP organic revenue growth and non-GAAP organic recurring revenue growth are calculated.
These payments represent our estimated future interest payments on debt using our debt balances and the related weighted average effective interest rates as of December 31, 2023, which includes the effect of interest rate swap agreements.
These payments represent our estimated future interest payments on debt using our debt balances and the related weighted average effective interest rates as of December 31, 2024, which includes the effect of interest rate swap agreements.
We currently do not intend nor anticipate a need to repatriate our cash held outside the U.S. 54 2023 Form 10-K Table of Contents Blackbaud, Inc.
We currently do not intend nor anticipate a need to repatriate our cash held outside the U.S. 54 2024 Form 10-K Table of Contents Blackbaud, Inc.
Modernized Approach to Pricing and Multi-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 inflationary pressures that all businesses are facing.
Modernized Approach to Pricing and Multi-Year Contracts In the summer of 2022, 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 inflationary pressures that all businesses are facing.
Each of these matters could, separately or in the aggregate, result in an adverse judgement, settlement, fine, penalty or other resolution, the amount, scope and timing of which we are currently unable to predict, but could have a material adverse impact on our results of operations, cash flows or financial condition. 2023 Form 10-K 55 Table of Contents Blackbaud, Inc.
Each of these matters could, separately or in the aggregate, result in an adverse judgment, settlement, fine, penalty or other resolution, the amount, scope and timing of which we are currently unable to predict, but could have a material adverse impact on our results of operations, cash flows or financial condition. 2024 Form 10-K 55 Table of Contents Blackbaud, Inc.
These payments represent principal payments only, under the following assumptions: (i) that the amounts outstanding under the 2020 Credit Facility, our real estate loans and our other debt at December 31, 2023 will remain outstanding until maturity, with minimum payments occurring as currently scheduled, and (ii) that there are no assumed future borrowings on the 2020 Revolving Facility for the purposes of determining minimum commitment amounts.
These payments represent principal payments only, under the following assumptions: (i) that the amounts outstanding under the 2024 Credit Facilities, our real estate loans and our other debt at December 31, 2024 will remain outstanding until maturity, with minimum payments occurring as currently scheduled, and (ii) that there are no assumed future borrowings on the 2024 Revolving Facility for the purposes of determining minimum commitment amounts.
To that end, we will continue to simplify and rationalize our portfolio through product sunsets and divestitures of non-core businesses and technologies. 38 2023 Form 10-K Table of Contents Blackbaud, Inc. Gross dollar retention Our recurring subscription contracts are typically for a term of three years at contract inception with standard three year renewals thereafter.
To that end, we will continue to simplify and rationalize our portfolio through product sunsets and divestitures of non-core businesses and technologies. 2024 Form 10-K 39 Table of Contents Blackbaud, Inc. Gross dollar retention Our recurring subscription contracts are typically for a term of three years at contract inception with standard three year renewals thereafter.
In order to pay any cash dividends and/or repurchase shares of stock: (i) no default or event of default shall have occurred and be continuing under the 2020 Credit Facility, and (ii) our pro forma net leverage ratio, as set forth in the 2020 Credit Facility, must be 0.25 less than the net leverage ratio requirement at the time of dividend declaration or stock repurchase.
In order to pay any cash dividends and/or repurchase shares of stock: (i) no default or event of default shall have occurred and be continuing under the 2024 Credit Facilities, and (ii) our pro forma net leverage ratio, as set forth in the 2024 Credit Facilities, must be 0.25 less than the net leverage ratio requirement at the time of dividend declaration or stock repurchase.
As a well-known seasoned issuer, we filed an automatic shelf registration statement for an undetermined amount of debt and equity securities with the SEC on January 14, 2022. Under this universal shelf registration statement we may offer and sell, from time to time, debt securities, common stock, preferred stock, depositary shares, warrants, stock purchase contracts and stock purchase units.
As a well-known seasoned issuer, we filed an automatic shelf registration statement for an undetermined amount of debt and equity securities with the SEC on January 10, 2025. Under this universal shelf registration statement we may offer and sell, from time to time, debt securities, common stock, preferred stock, depositary shares, warrants, stock purchase contracts and stock purchase units.
Our purchase obligations are not recorded as liabilities 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 information. The total liability for uncertain tax positions as of December 31, 2023 was $3.2 million.
Our purchase obligations are not recorded as liabilities on our consolidated balance sheets as of December 31, 2024, as we had not received the related services. See Note 11 to our consolidated financial statements in this report for more information. The total liability for uncertain tax positions as of December 31, 2024 was $5.2 million.
See Note 9 to our consolidated financial statements in this report for more information. Interest payments on debt In addition to principal payments, as of December 31, 2023, we expect to pay interest expense over the life of our debt obligations of approximately $96.4 million.
See Note 9 to our consolidated financial statements in this report for more information. Interest payments on debt In addition to principal payments, as of December 31, 2024, we expect to pay interest expense over the life of our debt obligations of approximately $273.4 million.
Other Income Other income ($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.
Other Income Other income ($M) Percentages indicate other income as a percentage of total revenue 2024 vs. 2023 Other income increased in dollars and as a percentage of total revenue during 2024 when compared to 2023, primarily due to an increase in interest income.
We have deferred tax assets for federal, state, and international net operating loss carryforwards and tax credits. The federal and state net operating loss carryforwards are subject to various Internal Revenue Code limitations and applicable state tax laws.
We have deferred tax assets for federal, state, and international net operating loss carryforwards, a federal and state capital loss carryforward and tax credits. The federal and state net operating loss and capital loss carryforwards are subject to various Internal Revenue Code limitations and applicable state tax laws.
Historically, as the U.S. dollar weakened, foreign currency translation resulted in an increase in our revenues and expenses denominated in non-U.S. currencies. Conversely, as the U.S. dollar strengthened, foreign currency translation resulted in a decrease in our revenues and expenses denominated in non-U.S. currencies.
Historically, as the U.S. dollar weakened, foreign currency translation resulted in an increase in our revenues and expenses denominated in non-U.S. currencies. Conversely, as the U.S. dollar strengthened, foreign currency translation resulted in a decrease in our revenues and expenses denominated in non-U.S. currencies. During 2024, foreign translation resulted in increases in our revenues and expenses denominated in non-U.S. currencies.
In accordance with applicable accounting rules, we determined that the Kilter and EVERFI acquisitions were not material to our consolidated financial statements; therefore, revenue and earnings since the acquisition date and pro forma information are not required or presented.
In accordance with applicable accounting rules, we determined that the Kilter acquisition was not material to our consolidated financial statements; therefore, revenue and earnings since the acquisition date and pro forma information are not required or presented.
Results of Operations Reportable segment We report our operating results and financial information in one operating and reportable segment. See Note 16 of our consolidated financial statements in this report for additional information.
See Note 4 to our consolidated financial statements in this report for additional details. Results of Operations Reportable segment We report our operating results and financial information in one operating and reportable segment. See Note 16 to our consolidated financial statements in this report for additional information.
The primary foreign currencies creating the impact are the Australian Dollar, British Pound, Canadian Dollar and Euro. 2023 Form 10-K 51 Table of Contents Blackbaud, Inc. Rule of 40 We previously defined Rule of 40 as non-GAAP organic revenue growth plus non-GAAP adjusted EBITDA margin.
The primary foreign currencies creating the impact are the Australian Dollar, British Pound, Canadian Dollar and Euro. 2024 Form 10-K 51 Table of Contents Blackbaud, Inc. Rule of 40 We define Rule of 40 as non-GAAP organic revenue growth plus non-GAAP adjusted EBITDA margin.
As of December 31, 2023, we have recorded approximately $1.5 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain customers related to the Security Incident that we believe we can reasonably estimate in accordance with our loss contingency procedures described in Note 11.
As of December 31, 2024, we have recorded approximately $0.7 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain customers related to the Security Incident that we believe we can reasonably estimate in accordance with our loss contingency procedures described in Note 11.
As of December 31, 2023, we have recorded approximately $1.5 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain customers related to the Security Incident that we believe we can reasonably estimate in accordance with our loss contingency procedures described in Note 11.
As of December 31, 2024, we have recorded approximately $0.7 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain customers related to the Security Incident that we believe we can reasonably estimate in accordance with our loss contingency procedures described in Note 11.
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 additional information regarding the 2020 Credit Facility.
At December 31, 2024, we were in compliance with our debt covenants under the 2024 Credit Facilities. See Note 9 to our consolidated financial statements included in this report for additional information regarding the 2024 Credit Facilities.
As of December 31, 2023, we have recorded approximately $1.5 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain customers related to the Security Incident that we believe we can reasonably estimate.
As of December 31, 2024, we have recorded approximately $0.7 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain customers related to the Security Incident that we believe we can reasonably estimate.
Our cash flow from operations normally fluctuates quarterly due to the combination of the timing of customer contract renewals including renewals associated with customers of acquired companies, delivery of professional services and occurrence of customer events, as well as merit-based salary increases, among other factors.
Our cash flow from operations normally fluctuates quarterly due to the combination of the timing of customer contract renewals, delivery of professional services and occurrence of customer events, as well as merit-based salary increases, among other factors.
Operating Cash Flow Throughout 2023 and 2022, our cash flows from operations were derived principally from: (i) our earnings from on-going operations prior to non-cash expenses such as depreciation, amortization, stock-based compensation, deferred income taxes, amortization of deferred financing costs and debt discount and adjustments to our provision for credit losses and sales returns; and (ii) changes in our working capital.
Operating Cash Flow Throughout 2024 and 2023, our cash flows from operations were derived principally from: (i) our earnings from on-going operations prior to non-cash expenses such as depreciation, amortization, stock-based compensation, deferred income taxes, amortization of deferred financing costs and debt discount, adjustments to our provision for credit losses and sales returns, the EVERFI impairment charges, loss on disposition of business; and (ii) changes in our working capital.
Operating leases As of December 31, 2023, we had remaining operating lease payments of $55.5 million. These payments have not been reduced by sublease income, incentive payments, reimbursement of leasehold improvements or the amount representing imputed interest of $8.7 million. Our operating leases are generally for corporate offices, subleased offices and certain equipment and furniture.
Operating leases As of December 31, 2024, we had remaining operating lease payments of $45.4 million. These payments have not been reduced by sublease income, incentive payments, reimbursement of leasehold improvements or the amount representing imputed interest of $6.7 million. Our operating leases are generally for corporate offices, subleased offices and certain equipment and furniture.
General and administrative General and administrative expense consists primarily of compensation costs for general corporate functions, including senior management, finance, accounting, legal, human resources and corporate development, Security Incident-related expenses (including legal fees, settlements and loss contingency accruals), third-party professional fees, insurance, allocated depreciation, facilities and IT support costs, acquisition-related expenses and other administrative expenses. 2023 vs. 2022 General and administrative expenses decreased by $10.0 million, or 5.0%.
General and administrative General and administrative expense consists primarily of compensation costs for general corporate functions, including senior management, finance, accounting, legal, human resources and corporate development, Security Incident-related expenses (including legal fees, settlements and loss contingency accruals), third-party professional fees, insurance, allocated depreciation, facilities and IT support costs, acquisition-related expenses and other administrative expenses. 2024 vs. 2023 General and administrative expenses decreased by $47.2 million, or 24.9%.
In connection with the settlement of the multi-state Attorneys General investigation relating 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.
In connection with the settlement of the multi-state Attorneys General investigation, the California Attorney General investigation and the FTC investigation relating 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 May 2044.
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.
Stock repurchase program 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 expiration date.
Under the 2020 Credit Facility, we also have restrictions on our ability to declare and pay dividends and our ability to repurchase shares of our common stock.
Under the 2024 Credit Facilities, we also have restrictions on our ability to declare and pay dividends and our ability to repurchase shares of our common stock.
We currently expect interest expense for the full year 2024 to be approximately $34 million to $38 million although our interest expense in connection with the variable rate portion of our outstanding debt could increase in a rising interest rate environment.
We currently expect interest expense for the full year 2025 to be approximately $65 million to $69 million although our interest expense in connection with the variable rate portion of our outstanding debt could increase in a rising interest rate environment.
Non-GAAP adjusted EBITDA is defined as GAAP net income plus interest, net; income tax provision (benefit); depreciation; amortization of intangible assets from business combinations; amortization of software and content development costs; stock-based compensation; employee severance; acquisition and disposition-related costs; restructuring and other real estate activities; Security Incident-related costs, net of insurance; and impairment of capitalized software development costs.
Non-GAAP adjusted EBITDA is defined as GAAP net income plus interest, net; income tax provision (benefit); depreciation; amortization of intangible assets from business combinations; amortization of software and content development costs; stock-based compensation; employee severance; acquisition and disposition-related costs; Security Incident-related costs; and impairment and disposition charges.
Contractual recurring revenue is primarily comprised of fees for the use of our subscription-based software solutions, which includes providing access to cloud solutions, Impact-as-a-Service™ digital educational content, online training programs and subscription-based analytic services. Contractual recurring revenue also includes fees from maintenance services for our on-premises solutions.
Contractual recurring revenue is primarily comprised of fees for the use of our subscription-based software solutions, which includes providing access to cloud solutions, online training programs and subscription-based analytic services. Contractual recurring revenue also includes fees from maintenance services for our on-premises solutions.
These initiatives included: • A reduction in headcount from approximately 3,600 in the third quarter of 2022 to approximately 3,000 as of December 31, 2023 36 2023 Form 10-K Table of Contents Blackbaud, Inc. • Continued IT consolidation as we migrate customers from legacy private data centers to leading public cloud service providers.
These initiatives included: • A reduction in headcount from approximately 3,600 in the third quarter of 2022 to approximately 3,000 as of December 31, 2023 • Continued IT consolidation as we migrate customers from legacy private data centers to leading public cloud service providers.
The enhancements we are making in our go-to-market approach are expected to reduce our average customer acquisition cost per customer as well as the related payback period while increasing sales velocity. 2023 Form 10-K 43 Table of Contents Blackbaud, Inc. 2023 vs. 2022 Sales, marketing and customer success expenses decreased by $9.3 million, or 4.2%.
The enhancements we are making in our go-to-market approach are expected to reduce our average customer acquisition cost per customer as well as the related payback period while increasing sales velocity. 44 2024 Form 10-K Table of Contents Blackbaud, Inc. 2024 vs. 2023 Sales, marketing and customer success expenses decreased by $14.7 million, or 6.9%.
Deferred Revenue The table below compares the components of deferred revenue from our consolidated balance sheets: (dollars in millions) December 31, 2023 December 31, 2022 Change Total deferred revenue (1) 394.9 385.2 2.5 % Less: Long-term portion 2.4 2.8 (14.9) % Current portion (1) $ 392.5 $ 382.4 2.6 % (1) The individual amounts for each year may not sum to total deferred revenue or current portion of deferred revenue due to rounding.
Deferred Revenue The table below compares the components of deferred revenue from our consolidated balance sheets: (dollars in millions) December 31, 2024 December 31, 2023 Change Total deferred revenue (1) 361.5 394.9 (8.5) % Less: Long-term portion 2.0 2.4 (15.9) % Current portion (1) $ 359.5 $ 392.5 (8.4) % (1) The individual amounts for each year may not sum to total deferred revenue or current portion of deferred revenue due to rounding.
Working capital changes are comprised of changes in accounts receivable, prepaid expenses and other assets, trade accounts payable, accrued expenses and other liabilities and deferred revenue. 2023 vs. 2022 Net cash provided by operating activities 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 operations associated with working capital.
Working capital changes are comprised of changes in accounts receivable, prepaid expenses and other assets, trade accounts payable, accrued expenses and other liabilities and deferred revenue. 2024 vs. 2023 Net cash provided by operating activities increased by $96.3 million during the year ended December 31, 2024, when compared to the same period in 2023, primarily due to a $49.4 million increase in net income adjusted for non-cash expenses and a $46.9 million increase in cash flow from operations associated with working capital.
Years ended December 31, (dollars in millions) 2023 2022 GAAP net cash provided by operating activities $ 199.6 $ 203.9 GAAP operating cash flow margin 18.1 % 19.3 % Non-GAAP adjustments: Less: purchase of property and equipment (4.7) (12.3) Less: capitalized software and content development costs (59.4) (58.8) Non-GAAP free cash flow (1) $ 135.5 $ 132.8 Non-GAAP free cash flow margin 12.3 % 12.6 % Non-GAAP adjustments: Add: Security Incident-related cash flows, net of insurance 78.0 20.9 Non-GAAP adjusted free cash flow (1) $ 213.5 $ 153.7 Non-GAAP adjusted free cash flow margin 19.3 % 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.
Years ended December 31, (dollars in millions) 2024 2023 GAAP net cash provided by operating activities $ 296.0 $ 199.6 GAAP operating cash flow margin 25.6 % 18.1 % Non-GAAP adjustments: Less: purchase of property and equipment (7.4) (4.7) Less: capitalized software and content development costs (59.8) (59.4) Non-GAAP free cash flow (1) $ 228.8 $ 135.5 Non-GAAP free cash flow margin 19.8 % 12.3 % Non-GAAP adjustments: Add: Security Incident-related cash flows, net of insurance 15.9 78.0 Non-GAAP adjusted free cash flow (1) $ 244.7 $ 213.5 Non-GAAP adjusted free cash flow margin 21.2 % 19.3 % (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.
(3) Includes noncash impairment charges incurred during the twelve months ended December 31, 2023 related to the sublease of our Washington, DC office location the lease of which was acquired during the EVERFI acquisition.
(2) Includes noncash impairment charges incurred during the twelve months ended December 31, 2024 and 2023 related to the subleases of our Washington, DC office location the lease of which was acquired during the EVERFI acquisition.
We closed four legacy data centers during 2022 and two in 2023. • Renegotiated key vendor contracts including Microsoft Azure and AWS • Reduced our real estate footprint as part of the shift to a remote first workforce Going forward, our goal is to run the business at about this headcount level for the foreseeable future, while continuing to drive efficiencies in other areas of the business.
We closed four legacy data centers during 2022 and two in 2023. • Renegotiated key vendor contracts including Microsoft Azure and AWS • Reduced our real estate footprint as part of the shift to a remote-first workforce During 2024, we continued to run the business at about the same headcount level, while continuing to drive efficiencies in other areas of the business.
Interest income increased primarily due to higher interest earned on restricted cash held and payable by us to customers for our payment processing solutions. See Note 8 to our consolidated financial statements in this report for more information regarding our other income. 46 2023 Form 10-K Table of Contents Blackbaud, Inc.
Interest income increased primarily due to higher interest earned on restricted cash due to customers for our payment processing solutions. See Note 8 to our consolidated financial statements in this report for more information regarding our other income. 2024 Form 10-K 47 Table of Contents Blackbaud, Inc.
It is reasonably possible that our estimated or actual losses may change in the near term for those matters and be materially in excess of the amounts accrued, but we are unable at this time to reasonably estimate the possible additional loss.
It is reasonably possible that our estimated or actual losses may change in the near term for those matters and be materially in excess of the amounts accrued, but we are unable at this time to reasonably estimate the possible additional loss. 40 2024 Form 10-K Table of Contents Blackbaud, Inc.
The accumulated currency translation 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.
The accumulated currency translation adjustment, recorded within accumulated other comprehensive loss as a component of stockholders’ equity, was a loss of $12.7 million as of December 31, 2024 and a loss of $9.8 million as of December 31, 2023.
Given our remote-first workforce strategy and real estate footprint optimization efforts, as discussed above, we do not anticipate entering any new, material operating leases for offices for the foreseeable future. See Note 11 to our consolidated financial statements in this report for more information. Purchase obligations As of December 31, 2023, we had remaining purchase obligations of $257.6 million.
Given our remote-first workforce strategy and real estate footprint optimization efforts, as discussed above, we do not anticipate entering any new, material operating leases for offices for the foreseeable future. See Note 11 to our consolidated financial statements in this report for more information.
We have taken federal and state tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits may decrease within the next twelve months. The possible decrease could result from the expiration of statutes of limitations. The reasonably possible decrease at December 31, 2023 was insignificant. 2023 Form 10-K 47 Table of Contents Blackbaud, Inc.
We have taken federal and state tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits may decrease within the next twelve months. The possible decrease could result from the expiration of statutes of limitations. The reasonably possible decrease at December 31, 2024 was insignificant.
The following is a summary of the financial covenants under the 2020 Credit Facility: Financial Covenant Requirement Ratio as of December 31, 2023 Net Leverage Ratio (1) ≤ 4.00 to 1.00 1.97 to 1.00 Interest Coverage Ratio ≥ 2.50 to 1.00 9.67 to 1.00 (1) Under the terms of the 2020 Credit Facility, the Net Leverage Ratio requirement may be increased by up to 0.50 provided we satisfy certain requirements, including a permitted business acquisition, and provided that the maximum Net Leverage Ratio shall not exceed 4.25 to 1.00.
The following is a summary of the financial covenants under the 2024 Credit Facilities: Financial Covenant Requirement Ratio as of December 31, 2024 Net Leverage Ratio (1) ≤ 3.75 to 1.00 2.57 to 1.00 Interest Coverage Ratio ≥ 2.50 to 1.00 7.13 to 1.00 (1) Under the terms of the 2024 Credit Facilities, the Net Leverage Ratio requirement may be increased by up to 0.50 provided we satisfy certain requirements, including a permitted business acquisition, and provided that the maximum Net Leverage Ratio shall not exceed 4.25 to 1.00.
A portion of the foreign and state net operating loss carryforwards and a portion of state tax credits have a valuation reserve due to the uncertainty of realizing such carryforwards and credits in the future.
The foreign net operating loss carryforwards have a valuation reserve due to the uncertainty of realizing such carryforwards in the future.
Investing Cash Flow During 2024, we expect our total capital expenditures, including estimated outlays for capitalized software development costs, to be between approximately $65.0 million and $75.0 million. 2023 vs. 2022 Net cash used in investing activities of $64.4 million decreased by $21.2 million during 2023, when compared to 2022.
Investing Cash Flow During 2025, we expect our total capital expenditures, including estimated outlays for capitalized software development costs, to be between approximately $55.0 million and $65.0 million. 2024 vs. 2023 Net cash used in investing activities of $73.4 million increased by $9.0 million during 2024, when compared to 2023.
Update on Five Key Operational Initiatives 1 Product Innovation and Delivery 2 Bookings Growth and Acceleration 3 Transactional Revenue Optimization and Expansion 4 Modernized Approach to Pricing and Multi-Year Customer Contracts 5 Keen Attention to Cost Management 1.
During 2024, we continued to execute on these key initiatives. 1 Product Innovation and Delivery 2 Bookings Growth and Acceleration 3 Transactional Revenue Optimization and Expansion 4 Modernized Approach to Pricing and Multi-Year Customer Contracts 5 Keen Attention to Cost Management 1.
We paid $35.9 million to satisfy tax obligations of employees upon settlement or exercise of equity awards during 2023 compared to $36.4 million during 2022.
We paid $56.8 million to satisfy tax obligations of employees upon settlement or exercise of equity awards during 2024 compared to $35.9 million during 2023.
The exclusion of the prior period revenue is to present the results of the divested business with the results of the combined company for the same period of time in both the prior and current periods.
(2) Non-GAAP revenue from divested businesses excludes revenue associated with divested businesses in the prior period. The exclusion of the prior period revenue is to present the results of the divested business with the results of the combined company for the same period of time in both the prior and current periods.
These patterns may change as a result of the continued shift to online giving, growth in volume of transactions for which we process payments, large dollar customer bookings and contract renewals, or as a result of acquisitions, new market opportunities, new solution introductions or other factors.
These patterns may change as a result of the continued shift to online giving, growth in volume of transactions for which we process payments, large dollar customer bookings and contract renewals, fluctuations in the timing of vendor payments or as a result of acquisitions, dispositions, such as our sale of EVERFI on December 31, 2024, new market opportunities, new solution introductions or other factors.
To determine the impacts on revenue (or income from operations) from fluctuations in currency exchange rates, current period revenues (or income from operations) from entities reporting in foreign currencies were translated into U.S. dollars using the comparable prior year period's weighted average foreign currency exchange rates.
We will continue monitoring such exposure and take action as appropriate. To determine the impacts on revenue (or income from operations) from fluctuations in currency exchange rates, current period revenues (or income from operations) from entities reporting in foreign currencies were translated into U.S. dollars using the comparable prior year period's weighted average foreign currency exchange rates.
See Note 3 to our consolidated financial statements in this report for a summary of these acquisitions. 40 2023 Form 10-K Table of Contents Blackbaud, Inc.
See Note 3 to our consolidated financial statements in this report for a summary of this acquisition. 2024 Form 10-K 41 Table of Contents Blackbaud, Inc.
The term loans under the 2020 Credit Facility and our other debt require periodic principal payments. The balance of the term loans and any amounts drawn on the revolving credit loans are due upon maturity of the 2020 Credit Facility in October 2025.
The term loans under the 2024 Credit Facilities 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 2024 Credit Facilities in April 2029.
There are other Security Incident-related matters, including customer claims, customer constituent class actions and governmental investigations, for which we have not recorded a liability for a loss contingency as of December 31, 2023 because we are unable at this time to reasonably estimate the possible loss or range of loss.
There are other Security Incident-related matters for which we have not recorded a liability for a loss contingency as of December 31, 2024 because we are unable at this time to reasonably estimate the possible loss or range of loss.
We use non-GAAP financial measures internally in analyzing our operational performance. Accordingly, we believe these non-GAAP measures are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance.
Non-GAAP Financial Measures The operating results analyzed below are presented on a non-GAAP basis. We use non-GAAP financial measures internally in analyzing our operational performance. Accordingly, we believe these non-GAAP measures are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance.
There are other Security Incident-related matters, including customer claims, customer constituent class actions and governmental investigations, for which we have not recorded a liability for a loss contingency as of December 31, 2023 because we are unable at this time to reasonably estimate the possible loss or range of loss.
There are other Security Incident-related matters for which we have not recorded a liability for a loss contingency as of December 31, 2024 because we are unable at this time to reasonably estimate the possible loss or range of loss.
The decrease in cash flow from operations associated with working capital during 2023, when compared to 2022, was primarily due to: • fluctuations in the timing of vendor payments; and • a decrease in accrued expenses related to the Security Incident.
The increase in cash flow from operations associated with working capital during 2024, when compared to 2023, was primarily due to: • fluctuations in the timing of vendor payments; • a decrease in accrued expenses related to the Security Incident; partially offset by • an increase in cash taxes paid.
There are other Security Incident-related matters, including customer claims, customer constituent class actions and governmental investigations, for which we have not recorded a liability for a loss contingency as of December 31, 2023 because we are unable at this time to reasonably estimate the possible loss or range of loss.
There are other Security Incident-related matters for which we have not recorded a liability for a loss contingency as of December 31, 2024 because we are unable at this time to reasonably estimate the possible loss or range of loss.
We also continue to invest heavily in the security of our solutions. Research and development expense decreased by $3.6 million, or 2.3%.
We also continue to invest heavily in the security of our solutions. Research and development expense increased by $7.3 million, or 4.8%.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Foreign Currency Risk For a discussion of our exposure to foreign currency exchange rate fluctuations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Foreign Currency Exchange Rates” in Item 7 of this report. 64 2023 Form 10-K Table of Contents Blackbaud, Inc.
Foreign Currency Risk For a discussion of our exposure to foreign currency exchange rate fluctuations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Foreign Currency Exchange Rates” in Item 7 of this report. 64 2024 Form 10-K Table of Contents Blackbaud, Inc.
There were no significant changes in how we manage interest rate risk between December 31, 2022 and December 31, 2023.
There were no significant changes in how we manage interest rate risk between December 31, 2023 and December 31, 2024.
Due to the nature of our debt, the materiality of the fair values of the derivative instruments and the highly liquid, short-term nature and level of our cash and cash equivalents as of December 31, 2023, we believe that the risk of exposure to changing interest rates for those positions is immaterial.
Our interest rate exposure includes SOFR rates. Due to the nature of our debt, the materiality of the fair values of the derivative instruments and the highly liquid, short-term nature and level of our cash and cash equivalents as of December 31, 2024, we believe that the risk of exposure to changing interest rates for those positions is immaterial.
We manage our variable rate interest rate risk through a combination of short-term and long-term borrowings and the use of derivative instruments entered into for hedging purposes.
We manage our variable rate interest rate risk through a combination of short-term and long-term borrowings and the use of derivative instruments entered into for hedging purposes. Additionally, our interest income that we primarily earn on restricted cash due to customers for our payment processing solutions acts as a partial natural hedge against our interest rate risk.
Removed
Additionally, our interest income that we primarily earn on restricted cash held and payable by us to customers for our payment processing solutions acts as a partial natural hedge against our interest rate risk. Our interest rate exposure includes SOFR rates.
Removed
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 modifications did not have a significant financial impact.

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