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What changed in BLACKBAUD INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BLACKBAUD INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+453 added−438 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-24)

Top changes in BLACKBAUD INC's 2023 10-K

453 paragraphs added · 438 removed · 289 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

72 edited+42 added−36 removed66 unchanged
Biggest changeMarkets 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.
Biggest changeGregoire 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.
Powering thousands of events each year, TeamRaiser allows nonprofits’ supporters to create personal or team fundraising web pages and send email donation appeals in support of events such as walks, runs and rides. JustGiving® from Blackbaud® is one of the world's leading social platforms for giving.
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.
Prior to joining us, Mr. McDearis was the Chief Information Officer at Manhattan Associates, Inc., a technology leader in supply chain and omnichannel commerce, from August 2012 to July 2014. He was responsible for leading a global IT organization in strategy development, organization development, portfolio and project management, software and infrastructure engineering, service delivery and operations. Prior to that, Mr.
McDearis 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.
We also participate in and convene a number of industry forums, where we exchange views and engage with industry and government leaders. Our annual user conference, bbcon ® , serves in part as a forum to offer thought leadership to our customers, as do other market-specific user conferences, events and customer gatherings.
We also participate in and convene industry forums, where we exchange views and engage with industry and government leaders. Our annual user conference, bbcon ® , serves in part as a forum to offer thought leadership to our customers, as do other market-specific user conferences, events and customer gatherings.
Our customer success resources work to proactively communicate to drive overall satisfaction and retention of our customer's business. They work to collect and analyze actionable information, whether that is through direct customer relationships or through aggregated analytics that drives future one-to-one or one-to-many interactions.
Our customer success resources work to proactively communicate to drive overall satisfaction and retention of our customers' business. They work to collect and analyze actionable information, whether that is through direct customer relationships or through aggregated analytics that drives future one-to-one or one-to-many interactions.
Drive Strength in Our Sector as an Industry Thought Leader In our over 40 years of operation, we have gained significant insight into the overall market and industry segments in which we operate. We produce a wide range of thought leadership resources, including blogs, monthly indices and white papers, which provide insights and guidance to the social impact community.
Drive Strength in Our Sector as an Industry Thought Leader In our over 40 years of operation, we have gained significant insight into the overall market and industry segments in which we operate. We produce a wide range of thought leadership resources, including blogs, webinars and white papers, which provide insights and guidance to the social impact community.
Performance solutions help customers to assess their fundraising performance across donor segments, benchmark themselves against peer organizations and understand industry trends. These solutions provide a holistic view of donor performance that goes beyond standard campaign-based reporting, with KPIs related to acquisition, upgrading, retention and reactivation.
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.
The nonprofit industry faces particular operational challenges Nonprofit organizations, education institutions, healthcare organizations and houses of worship must efficiently: • Solicit funds and build relationships with major 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 2022 Form 10-K 3 Table of Contents Blackbaud, Inc. • Improve the data collection and information sharing capabilities of their employees, volunteers and donors by creating and providing distributed access to centralized databases.
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.
We maintain many trademarks, including, but not limited to “Blackbaud,” “Raiser's Edge NXT” and “Luminate.” We currently have two active patents on our technology and have one pending patent application. Human Capital Resources As of December 31, 2022, we had over 3,200 employees, none of whom are represented by unions or are covered by collective bargaining agreements.
We 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.
Additional information related to our human capital strategy can be found in our 2021 Social Responsibility Report, which is available on the Corporate Social Responsibility section of our website.
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.
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.
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.
We strive to hire, develop and retain the best employees and provide a supportive and inclusive environment where their talents and potential are realized. In 2021, we formally went Remote First as a company which signals Blackbaud's goal to attract talent globally. For additional information, see “Human Capital Resources” below.
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.
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.
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.
Gianoni is a member of the Board of Directors of Teradata Corporation, a publicly traded global big data analytics company, and has been Chairman of the Board since February 2020. Mr. Gianoni has served on several nonprofit boards across several segments, including relief organizations, hospitals and higher education. He currently is a board member of the International African American Museum.
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.
We have a large base of loyal customers and strategic partners that provide references and recommendations often featured in our advertising and promotional activities. 10 2022 Form 10-K 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.
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.
Ultimately, we believe that Blackbaud is an excellent place to work because we are energized by our opportunity to fuel social impact and committed to running our business in a way that amplifies the difference we make in the world: we govern our business ethically, contribute to causes and communities that matter to our employees through corporate philanthropy, we pursue sustainability, and we work every day to ensure our workplace is supportive, inclusive and engaging.
Ultimately, we believe that Blackbaud is an excellent place to work because we are energized by our opportunity to fuel social impact and committed to running our business in a way that amplifies the difference we make in the world. We govern our business ethically and contribute to causes and communities that matter to our employees through corporate philanthropy.
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.
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.
Mr. Olson is responsible for Blackbaud's legal and real estate activities. Prior to joining us, he was an attorney with Alcatel-Lucent USA, the U.S. subsidiary of France-based Alcatel-Lucent (now owned by Nokia Corporation) that designs, develops, and builds wireline, wireless, and converged communications networks, from July 1997 to September 2008. Prior to joining Alcatel-Lucent, Mr.
Olson 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.
Blackbaud Guided Fundraising is used by institutions seeking to manage all the details behind the sophisticated, person-to-person solicitation strategies that drive fundraising results. Blackbaud Volunteer Network Fundraising helps institutions manage volunteer fundraising campaigns with tools for project management, communication and reporting.
Blackbaud 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.
JustGiving provides world-class technology and innovative tools to connect people with the causes they care about. By making giving more simple, social and rewarding, this platform helps all causes, charities and people in need to reach more people and raise more money. 6 2022 Form 10-K Table of Contents Blackbaud, Inc.
JustGiving provides world-class technology and innovative tools to connect people with the causes they care about. By making giving more simple, social and rewarding, this platform helps all causes, charities and people in need to reach more people and raise more money.
We believe we compete well in this market through a combination of positive brand recognition among all three of these groups and the combination of our consumer- and organization-oriented tools relative to those of the competition. 2022 Form 10-K 11 Table of Contents Blackbaud, Inc.
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.
Olson is a member of the MUSC (Medical University of South Carolina) Hollings Cancer Center Advisory Board and is on the board of the Charleston Symphony and Charleston Jazz. He holds a BS from Georgetown University, a JD from Dickinson School of Law and an MBA from Seton Hall University. 2022 Form 10-K 15 Table of Contents Blackbaud, Inc.
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.
Examples of constituent insights include: predictive modeling that gives numerical scores indicating the likelihood and capacity of a constituent making a gift, wealth screening software that uses publicly available records to build detailed wealth profiles of constituents and persona cluster segmentation that groups constituents based on shared traits with guidance for optimizing messaging to each group.
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.
While there is a growing trend toward social investment that is prompting philanthropic solutions from these general business vendors, most do not have a complete nonprofit specific focus and, therefore, do not offer or intend to offer nonprofit-specific versions. However, there is a subset of general business software competitors who have introduced nonprofit-specific versions of their products.
While there is a growing trend toward social investment that is prompting philanthropic solutions from these general business vendors, most do not have a complete nonprofit specific focus and, therefore, do not offer, or to our knowledge do not intend to offer, nonprofit-specific versions.
Market Overview The social impact market is significant, spanning far beyond philanthropy, and our addressable market is substantial and growing There are millions of organizations globally focused on social impact including nonprofits, foundations, companies involved in corporate social responsibility and ESG, education institutions and healthcare organizations.
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.
We supplement the digital motion with select participation at virtual and in-person third-party trade shows, technical conferences, and technology seminars. We also target publication of our thought leadership content and position our subject matter experts in industry journals and publications.
We 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.
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.
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.
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.
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.
Blackbaud also attracts and promotes talented employees through effective and targeted recruiting strategies. In 2020, Blackbaud announced the launch of a new workforce strategy, allowing for employees to have the option to work from home or other geographic locations within the country to further support the overall well-being during the COVID-19 pandemic.
In 2020, Blackbaud announced the launch of a temporary workforce strategy, allowing employees to work from home or other geographic locations within the country to further support their overall well-being during the COVID-19 pandemic.
We enable employees to have opportunities for career development through on-demand and company-led trainings in our internal DevelopU platform. Our compensation framework is designed so that employees are compensated equitably and competitively, including through base salary, variable pay, equity awards and benefits. We also seek to support the whole person, through increased benefits and focus on well-being.
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.
A new Student Information System that works directly with Blackbaud Learning Management System™, Blackbaud Student Information System simplifies the process of sharing student data and academic records securely. Blackbaud Learning Management System™ is a learning management system that makes it easy to manage, connect, and share information with students, parents, and an entire school community.
Education Solutions Blackbaud Student Information System™ makes it easy for schools to manage schedules, transcripts and GPAs. A new Student Information System that works directly with Blackbaud Learning Management System™, Blackbaud Student Information System simplifies the process of sharing student data and academic records securely.
ENGAGE, our blog and podcast, provides free best practices resources that drive impact across the social impact community, as well. 2022 Form 10-K 5 Table of Contents Blackbaud, Inc. In 2020, we announced Blackbaud Social Good Startup Program, a year-long accelerator designed to support innovative startups with the potential to drive social impact.
ENGAGE, our blog and podcast, provides free best practices resources that drive impact across the social impact community, as well. The Blackbaud Social Good Startup Program is a year-long accelerator designed to support innovative startups with the potential to drive social impact. In alignment with our commitment to diversity in the tech community, we emphasize supporting founders from underrepresented backgrounds.
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 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 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 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.
Developed with direct input from our customers, Blackbaud Learning Management System gives teachers the tools to meet the demands of a modern private school. Blackbaud Enrollment Management System™ is an enrollment management system that simplifies a school’s admissions process.
Blackbaud Learning Management System™ is a learning management system that makes it easy to manage, connect, and share information with students, parents, and an entire school community. Developed with direct input from our customers, Blackbaud Learning Management System gives teachers the tools to meet the demands of a modern private school.
In 2021, we formally went Remote First as a company which expanded our pool of qualified applicants for roles and internal career progression and signals Blackbaud's goal to attract talent globally. Employee engagement is a focus at Blackbaud, and we continually work to understand what matters and to make our workplace better to attract, develop, and retain talent.
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.
We assess and measure progress on engagement and growth opportunities at the individual level through quarterly check-ins, which focus on impact and learnings, and a global career framework that guides employee progression on both management and individual contributor career paths; we also assess engagement on the team and company level through regular employee surveying as well as "Ask Anything" sessions with senior leaders and dedicated Q&A sessions in our company-wide All Hands meetings.
We assess and measure progress on engagement and growth opportunities at the individual level through quarterly check-ins focused on impact and learnings, as well as through a global career framework that guides employee progression on both management and individual contributor career paths.
Both the funder and the nonprofit can tell an impact story using ROI-focused results and a common outcomes measurement language. Blackbaud Award Management™ is a comprehensive, integrated scholarship management platform for higher education and K-12 institutions and foundations, allowing students to apply for all awards using one intuitive and streamlined application process and eliminating many time-consuming administrative tasks.
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.
Our purpose attracts and retains talented, competitive applicants, with approximately 90% of employees saying the fact that Blackbaud operates in a socially responsible manner is important to them.
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. This differentiator not only builds strong employee engagement, but also helps us provide a higher level of service to our customers.
Customers also are empowered with self-help resources such as Knowledgebase articles, user guides, Blackbaud Community, our on-demand library of enablement sessions and have around-the-clock access to support resources for mission-critical needs. 2022 Form 10-K 9 Table of Contents Blackbaud, Inc.
Customers also are empowered with self-help resources such as Knowledgebase articles, user guides, Blackbaud Community, our on-demand library of enablement sessions and have around-the-clock access to support resources for mission-critical needs. Professional and Managed Services Our expert consultants, and those in our partner program, provide implementation, optimization, data conversion and customization services for our software solutions.
These services 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. 8 2022 Form 10-K Table of Contents Blackbaud, Inc.
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.
We now have 14 employee-led affinity groups, including, but not limited to those that represent veterans, LGBTQ+, women in technology, women in sales, Black employees, those interested in sustainability and those with a disability. During 2022, Blackbaud achieved carbon neutrality and committed to new, transparent ESG reporting.
We have 11 employee-led affinity groups, including, but not limited to those that represent veterans, LGBTQ+, women in technology, women in sales, Black employees, those interested in sustainability and those with a disability. 2023 Form 10-K 13 Table of Contents Blackbaud, Inc.
For example, we have increased the number of our cloud solutions sold under a subscription pricing model, which can make it easier for customers to purchase our solutions. In addition, we are continuing to integrate value-adding capabilities such as payment services, analytics and business intelligence into our suite of solutions to better address our customers' needs with comprehensive offerings.
In addition, we are continuing to integrate value-adding capabilities such as payment services, analytics and business intelligence into our suite of solutions to better address our customers' needs to raise more revenue with comprehensive offerings.
The Blackbaud portfolio is delivered primarily through cloud solutions tailored to the unique needs of vertical markets, offering fundraising and relationship management, marketing and engagement, financial management, grant and award management, education management, ticketing, social responsibility, payment services and analytics.
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 built specifically for fundraising and relationship management, marketing and engagement, financial management, grant and award management, education management, ticketing, social responsibility, payment services and analytics. 6 2023 Form 10-K Table of Contents Blackbaud, Inc.
The solution helps ease the burden for administrative staff by offering invoicing, payment processing, customer service, enhanced communication with parents and later payer follow-up services. Blackbaud Financial Aid Management™ offers schools the ability to accept online, customized applications for financial aid and to make better financial aid decisions with a proprietary Hobbies, Interest and Lifestyles ("HIL") profile.
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.
He also served on the Board of Directors of the Technology Association of Georgia ("TAG") from 2011 to 2016 and as Vice Chairman of the Board in 2014. He holds a BS in Management from The Georgia Institute of Technology. Kevin W. Mooney has served as our Executive Vice President, Strategy and Business Development since April 2021.
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.
It allows users to share material and contribute content across an entire school community. Social Responsibility and ESG YourCause GrantsConnect® and YourCause CSRconnect® are cloud solutions for employee giving, volunteering, and grantmaking used to support corporate philanthropy by building meaningful connections between corporations, employees and nonprofits.
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.
Some social impact organizations have developed proprietary software, but doing so is expensive, requiring on-site technical personnel for development, implementation and maintenance.
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.
Blackbaud Financial Edge NXT is advanced technology with powerful reporting tools to help accounting teams drive transparency, stewardship, and compliance while enabling them to seamlessly manage transactions and eliminate manual processes. It seamlessly integrates with Raiser's Edge NXT to simplify gift entry processing and relates information from both systems in an informative manner to eliminate redundant tasks and manual processes.
It seamlessly integrates with Raiser's Edge NXT to simplify gift entry processing and relates information from both systems in an informative manner to eliminate redundant tasks and manual processes. Financial Edge NXT provides nonprofit organizations with the means to help manage fiscal and fiduciary responsibility, enabling them to be more accountable to their constituents.
Blackbaud’s Intelligence for Good® is our unique, comprehensive approach through which we combine artificial intelligence, analytics, big data, and expertise to deliver high-impact data intelligence. This powerful approach enables social impact organizations to transform data into insights and outcomes.
Blackbaud’s Intelligence for Good® is our comprehensive strategy to deliver artificial intelligence that is accessible, powerful and responsible. Our artificial intelligence capabilities enable social impact organizations to transform data into insights and outcomes.
With powerful data intelligence and expertise inside, and an ever-growing network of partners and developers outside, our software is the foundational infrastructure that expands what's possible for anyone dedicated to purpose-driven work. Our solutions can be combined with a range of payment processing, analytic and business intelligence services, consulting, training and professional services, as well as maintenance and technical support.
Solutions and Services We build software for our customers' essential business operations to free them to focus on what matters most: delivering impact. With powerful data intelligence and expertise inside, and an ever-growing network of partners and developers outside, our software is the foundational infrastructure that expands what is possible for anyone dedicated to purpose-driven work.
Both fundraisers and leaders benefit from the tailored consulting to address weaknesses and enhance strengths to comprehensively improve the fundraising team performance. Blackbaud Guided Fundraising™ and Blackbaud Volunteer Network Fundraising™ can work together with Fundraiser Performance Management or independently to help higher education institutions meet their advancement targets and development campaign goals.
It also has sophisticated reporting functionality and tools to manage marketing, communications and fundraising. Blackbaud Guided Fundraising™ and Blackbaud Volunteer Network Fundraising™ can work together with Fundraiser Performance Management or independently to help higher education institutions meet their advancement targets and development campaign goals.
During 2022, we had more than 40,000 customers with contractual billing arrangements and nearly 100,000 customers that paid us through transactional fees. Through our customers and our solutions, we support millions of users and we connect millions of supporters to nearly 150,000 organizations and causes in over 100 countries.
During 2023, we had nearly 100,000 customers that paid Blackbaud through transactional fees and more than 40,000 customers with contractual billing arrangements.
Blackbaud Grantmaking provides core functionality to efficiently disperse funds, maintain compliance with due diligence requirements and measure and demonstrate impact. The system has collaborative tools to help strengthen relationships with grantees and other community partners. Coupled with Blackbaud Outcomes™, funders and nonprofits are empowered to collaborate around their intended outcomes and work together to achieve impact.
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.
The SEC maintains an Internet site that contains these reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov . 2022 Form 10-K 13 Table of Contents Blackbaud, Inc.
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.
It also has sophisticated reporting functionality and tools to manage marketing, communications and fundraising. Financial Management Blackbaud Financial Edge NXT® is the first-of-its-kind cloud accounting solution for nonprofits that is intuitive, fully integrated, and built the way nonprofits need it on our modern Blackbaud SKY Platform.
Financial Management Blackbaud Financial Edge NXT® is the first-of-its-kind cloud accounting solution for nonprofits that is intuitive, fully integrated, and built the way nonprofits need it. Blackbaud Financial Edge NXT is advanced technology with powerful reporting tools to help accounting teams drive transparency, stewardship, and compliance while enabling them to seamlessly manage transactions and eliminate manual processes.
Blackbaud was recognized by Newsweek as one of America's Most Responsible Companies 2023, by Quartz as one of the Best Companies for Remote Workers and was named to Forbes' list of America's Best Employers 2022.
Blackbaud was recognized by Newsweek as one of America's Most Responsible Companies 2024, Built In's Best Places to Work, Forbes' list of America's Best Employers 2023 and won Governance Team of the Year for small to mid-cap companies in Governance Intelligence's annual Corporate Governance Awards.
Billions of individuals also engage by donating funds, volunteering their time, advocating for a cause, receiving services from or otherwise engaging with social impact organizations. Traditional methods of fundraising and organizational management are often costly and inefficient Many social impact organizations use manual methods or software applications not specifically designed for fundraising and organizational management for institutions like theirs.
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.
The Blackbaud Institute for Philanthropic Impact (the "Blackbaud Institute") brings together leading experts in philanthropy to develop and share leading-edge research and insight that accelerates the impact of the social impact community. The research and reports the Blackbaud Institute produces serve to strengthen the social impact community as a whole.
The Blackbaud Institute is a research lab that leverages Blackbaud's unique data resources, along with original research, to drive insight that accelerates the impact of the social impact community. The research and reports the Blackbaud Institute produces serve to strengthen the social impact community as a whole.
Blackbaud Enrollment Management System helps admissions teams and prospective families manage and track their progress, from inquiry and application through acceptance and enrollment. Blackbaud School Website System™ is a content management system that gives schools the flexibility to build and edit webpages, with easy access to content types including photos, videos, downloads, text and more.
Blackbaud Enrollment Management System™ is an enrollment management system that simplifies a school’s admissions process. Blackbaud Enrollment Management System helps admissions teams and prospective families manage and track their progress, from inquiry and application through acceptance and enrollment.
Instructor-led courses are designed to include hands-on lab exercises, as well as course materials with examples and problems to solve.
Instructor-led courses are designed to include hands-on lab exercises, as well as course materials with examples and problems to solve. 10 2023 Form 10-K Table of Contents Blackbaud, Inc. Customers Millions of people across more than 100 countries connect, give, learn and engage through Blackbaud platforms.
He holds a BS from the United States Military Academy at West Point, and an MBA from the F.W. Olin School of Business at Babson College. Kevin R. McDearis has served as our Executive Vice President and Chief Technology Officer since October 2016. He joined us in August 2014 as our Senior Vice President of Global Product Development.
Gregoire is also a veteran of the United States Army, where he served as Lieutenant in the Corps of Engineers and was awarded three Army Commendation Medals. He holds a BS from the United States Military Academy at West Point, and an MBA from the F.W. Olin School of Business at Babson College. Kevin R.
Every manager at Blackbaud is required to take a multi-course 12 2022 Form 10-K Table of Contents Blackbaud, Inc. "Engagement Labs" training designed to equip them with the practical skills to ensure their teams are highly engaged. During 2022, all employees participated in a new, expanded Respect at Work training.
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.
Through the Blackbaud Institute, we also give back to the social impact community by developing in-depth research and thought leadership content to help to drive better outcomes for their organizations with data, technology and expertise. Our digital demand generation motion focuses on targeted account-based marketing plays, as well as intent-based programs including paid search, retargeting, social and content syndication programs.
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.
The HIL profile provides in-depth information on an applicant, delivering to the school a way to make more informed decisions on how they distribute financial aid awards. Grant and Award Management Blackbaud Grantmaking™ is a modern cloud solution, built on our Blackbaud SKY Platform, that supports the end-to-end grantmaking process from application through review and resolution.
Blackbaud Financial Aid Management™ offers schools the ability to accept online, customized applications for financial aid and to make better financial aid decisions with a proprietary Hobbies, Interest and Lifestyles ("HIL") profile. The HIL profile provides in-depth information on an applicant, delivering to the school a way to make more informed decisions on how they distribute financial aid awards.
He holds a BA in European Business from London Metropolitan University and an MBA from The Manchester Metropolitan University. 14 2022 Form 10-K Table of Contents Blackbaud, Inc. Kevin P. Gregoire has served as our Executive Vice President and Chief Operating Officer since July 2022. Prior to that, he was the Executive Vice President and President of U.S.
Gregoire has served as our Executive Vice President and Chief Operating Officer since July 2022. Prior to that, he was the Executive Vice President and President of U.S. Markets since April 2021. He joined us as Executive Vice President and President, Enterprise Markets Group in April 2018. Prior to joining us, Mr.
Such methods are often costly and inefficient because of the difficulties in effectively collecting, sharing and using donation-related information. Furthermore, general purpose software applications frequently have limited functionality for the unique needs of our customer base and do not efficiently integrate multiple databases.
Traditional methods of fundraising and organizational management are often costly and inefficient Many social impact organizations use manual methods or software applications not specifically designed for fundraising and organizational management for institutions like theirs. Such methods are often costly and inefficient because of the difficulties in effectively collecting, sharing and using donation-related information.
Our solutions are designed to meet the needs of virtually all types of organizations in the social impact community, from major global institutions to small charities to individuals. During 2022, we had more than 40,000 customers with contractual billing arrangements and nearly 100,000 customers that paid Blackbaud through transactional fees.
During 2023, we had nearly 100,000 customers that paid Blackbaud through transactional fees and more than 40,000 customers with contractual billing arrangements. Our largest single customer accounted for less than 1% of our 2023 consolidated revenue. Sales and Marketing Most of our solutions and related services are sold through our direct sales force.
Information About Our Executive Officers The following table sets forth information concerning our executive officers as of February 15, 2023: Name Age Title Michael P. Gianoni 62 President and Chief Executive Officer Anthony W. Boor 60 Executive Vice President and Chief Financial Officer David J. Benjamin 51 Executive Vice President and Chief Commercial Officer Kevin P.
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.
Gregoire 55 Executive Vice President and Chief Operating Officer Kevin R. McDearis 55 Executive Vice President and Chief Technology Officer Kevin W. Mooney 64 Executive Vice President, Strategy and Business Development Jon W. Olson 59 Senior Vice President and General Counsel Michael P. Gianoni joined us as President and Chief Executive Officer in January 2014.
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.
Blackbaud brings over four decades of leadership to this sector: since originally incorporating in New York in 1982 and later reincorporating as a South Carolina corporation in 1991 and as a Delaware corporation in 2004, our tailored portfolio of software and services has grown to support the unique needs of vertical markets, with solutions for fundraising and CRM, marketing, advocacy, peer-to-peer fundraising, corporate social responsibility (CSR) and environmental, social and governance (ESG), school management, ticketing, grantmaking, financial management, payment processing and analytics.
Blackbaud brings over four decades of leadership to this sector: since originally incorporating in New York in 1982 and later reincorporating as a South Carolina corporation in 1991 and as a Delaware corporation in 2004. Millions of people across more than 100 countries connect, give, learn and engage through Blackbaud platforms.
After implementing YourCause solutions, customers typically show significant growth in volunteers, donations, engagement and more. These reported successes demonstrate a larger trend: overall ability to attract employees and customers alike by strengthening a company's reputation.
These reported successes demonstrate a larger trend: overall ability to attract employees and customers alike by strengthening a company's reputation. EVERFI® from Blackbaud ® delivers educational content that transforms what is possible for learners while enabling companies to achieve their social impact and business goals.
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ITEM 1. BUSINESS Description of Business We are the world’s leading cloud software company powering social good. Serving the entire social good community—nonprofits, higher education institutions, K–12 schools, healthcare organizations, faith communities, arts and cultural organizations, foundations, companies and individual change agents—we connect and empower organizations and individuals to increase their impact through cloud software, services, data intelligence and expertise.
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ITEM 1. BUSINESS Description of Business We are the leading software provider exclusively dedicated to powering social impact. Serving the nonprofit and education sectors, companies committed to social responsibility and individual change makers, our essential software is built to accelerate impact in fundraising, nonprofit financial management, digital giving, grantmaking, corporate social responsibility and education management.
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Through our customers and our solutions, Blackbaud supports millions of users and we connect millions of supporters to over 150,000 organizations and causes in over 100 countries.
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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.
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Execute on our Four-Point Strategy During 2022, we continued to execute our four-point strategy targeted to drive solution and service innovation, quality enhancement, increased operating efficiency and improved financial performance: 1. Expand Total Addressable Market ("TAM") In December 2021, we doubled our TAM when we acquired EVERFI, Inc. ("EVERFI"), an industry leader in global social impact technology.
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Product Innovation and Delivery Product is core at Blackbaud, and we strive to bring increased value to our customers with improved and innovative capabilities. We have recently announced or released a number of product enhancements as well as new solutions that enable our customers to better deliver on their missions.
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Adding EVERFI advances our position as a leader in the rapidly evolving ESG and CSR spaces and offers cross-selling and upselling opportunities through complementary product offerings with YourCause® solutions. Our TAM now stands at over $20 billion, and we remain active in the evaluation of opportunities to further expand our addressable market through acquisitions and internal product development. 2.
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Some examples include: • Optimized Online Donation Capabilities: New online donation capabilities that fully integrate with Blackbaud’s payment processing and CRM software and enable customers to raise more money while reducing processing costs.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeExpansion of our international operations will require a significant amount of attention from our management and substantial financial resources and might require us to add qualified management in these markets. Our direct sales model requires us to attract, retain and manage qualified sales personnel capable of selling into markets outside the United States.
Biggest changeOur direct sales model requires us to attract, retain and manage qualified sales personnel capable of selling into markets outside the United States. In some cases, our costs of sales might increase if our customers require us to sell through local distributors.
A compromise of our data security, such as the Security Incident, that results in customer or customer constituent personal or payment card data being obtained by unauthorized persons could adversely affect our reputation with our customers and others, as well as our operations, results of operations, financial condition and liquidity has resulted in, and could in the future result in, litigation against us, government investigations or the imposition of fines and penalties.
A compromise of our data security, such as the Security Incident, that results in customer or customer constituent personal or payment card data being obtained by unauthorized persons could adversely affect our reputation with our customers and others, as well as our operations, results of operations, financial condition and liquidity and has resulted in, and could in the future result in, litigation against us, government investigations or the imposition of fines and penalties.
Acquisitions, including for example our recent acquisition of EVERFI, Inc., may also result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, the expenditure of available cash, and amortization expenses or write-downs related to intangible assets such as goodwill, any of which could have a material adverse effect on our operating results or financial condition.
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.
Finally, a failure to meet our climate-related goals, such as our commitment and progress towards reduction of greenhouse gas emissions, could damage our reputation, affect our financial performance and ability to attract and retain talent. Defects, delays or interruptions in our cloud solutions and hosting services could diminish demand for these services and subject us to substantial liability.
Finally, a failure to meet our climate-related goals, such as our commitment and progress towards reduction of greenhouse gas emissions, could damage our reputation, affect our financial performance and impact our ability to attract and retain talent. Defects, delays or interruptions in our cloud solutions and hosting services could diminish demand for these services and subject us to substantial liability.
Unanticipated changes in our effective tax rate and additional tax liabilities and global tax developments may impact our financial results. We are subject to income taxes in the United States and various other jurisdictions. Significant judgment is often required in the determination of our worldwide provision for income taxes.
Changes in our effective tax rate and additional tax liabilities and global tax developments may impact our financial results. We are subject to income taxes in the United States and various other jurisdictions. Significant judgment is often required in the determination of our worldwide provision for income taxes.
We cannot guarantee that our stock repurchase program will be fully consummated or that it will enhance long-term stockholder value. Share repurchases could also increase the volatility of the trading price of our stock and will diminish our cash reserves.
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.
Under the Rights Agreement, the Rights will become exercisable if an entity, person or group acquires beneficial ownership of 20% or more of our outstanding common stock in a transaction not approved by our Board of Directors.
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.
If we are unable to develop or acquire on a timely and cost-effective basis new software solutions or enhancements to existing solutions or if such new solutions or enhancements do not achieve market acceptance, our business, results of operations and financial condition may be materially adversely affected.
If we are unable to develop or acquire on a timely and cost-effective basis new software solutions or enhancements to existing solutions or if such new solutions or enhancements do not achieve market acceptance, we may be unable to compete successfully and our business, results of operations and financial condition may be materially adversely affected.
As part of our business strategy, we will continue from time to time to seek to grow our business through acquisitions of new or complementary businesses, technologies or products that we believe can improve our ability to compete in our existing customer markets or allow us to enter new markets.
As part of our business strategy, we, from time to time, seek to grow our business through acquisitions of new or complementary businesses, technologies or products that we believe can improve our ability to compete in our existing customer markets or allow us to enter new markets.
Each Right entitles the registered holder, subject to the terms of the Rights Agreement, to purchase from us one one-thousandth of a share of our Series A Junior Participating Preferred Stock, par value $0.001 per share (the “Preferred Stock”) at a price of $313.00, subject to certain adjustments (as adjusted from time to time, the “Exercise Price”).
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”).
(See Foreign Currency Exchange Rates on page 58 for more information regarding the impact of foreign currency exchange rates on our operations.) Doing business internationally involves additional risks that could harm our operating results.
(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.
We significantly increased our leverage in connection with acquisition of EVERFI and may increase our leverage in the future in connection with additional acquisitions, Security Incident costs or other business purposes, which could adversely impact our business and financial performance, as described below. We incurred a substantial amount of indebtedness in connection with acquisitions, including our acquisition of EVERFI, Inc.
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.
Our subscription arrangements are generally for a term of three years at contract inception with one to three-year renewals thereafter. Most of our maintenance arrangements are for a one-year term. As a result, much of the revenue we report in each quarter is attributable to arrangements entered into during previous quarters.
Our subscription arrangements are generally for a term of three years at contract inception with three-year renewals thereafter. Our maintenance arrangement renewals are generally for a term of three years. As a result, much of the revenue we report in each quarter is attributable to arrangements entered into during previous quarters.
The impairment of a significant portion of these assets could negatively affect our operating results. As of December 31, 2022, we had $1.1 billion and $635.1 million of goodwill and intangible assets, respectively. On at least an annual basis, we assess whether there have been impairments in the carrying value of goodwill and intangible assets.
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 potential risks associated with acquisitions and investment transactions include, but are not limited to: • failure to realize anticipated returns on investment, cost savings and synergies; • difficulty in assimilating the operations, policies and personnel of the acquired company; • unanticipated costs associated with acquisitions; • challenges in combining product offerings and entering into new markets in which we may not have experience; • distraction of management’s attention from normal business operations; • potential loss of key employees of the acquired company; • difficulty implementing effective internal controls over financial reporting, disclosure controls and procedures and data protection procedures; • impairment of relationships with customers or suppliers; and • issues not discovered in due diligence, which may include product quality issues or legal or other contingencies.
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.
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.
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.
An impairment of a significant portion of goodwill or intangible assets could materially and negatively affect our results of operations and financial condition. Restrictions in our credit facility may limit our activities, including dividend payments, share repurchases and acquisitions.
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.
(See Note 14 to our consolidated financial statements in this report for additional information related to our stock repurchase program.) We have recorded significant deferred tax assets, and we might never realize their full value, which would result in a charge against our earnings. As of December 31, 2022, we had deferred tax assets of $118.9 million.
(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.
(See Note 11 to our consolidated financial statements in this report for additional information regarding the Security Incident.) The degree to which we are leveraged could have adverse effects on our business, including the following: • Requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, dividends, share repurchases and other general corporate purposes; • Limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; • Restricting us from making additional strategic acquisitions or exploiting business opportunities; • Placing us at a competitive disadvantage compared to our competitors that have less debt; • Reducing our currently available borrowing capacity or limiting our ability to borrow additional funds; and • Decreasing our ability to compete effectively or operate successfully under adverse economic and industry conditions. 2022 Form 10-K 23 Table of Contents Blackbaud, Inc.
(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.
If we incur additional debt, these risks may intensify, particularly if interest rates increase in the future. Our ability to meet our debt service obligations will depend upon our future performance, which will be subject to the financial, business and other factors affecting our operations, many of which are beyond our control.
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.
In addition, presently, we are a defendant in 19 putative consumer class action cases [17 in U.S. federal courts (which have been consolidated under multi district litigation to a single federal court) and 2 in Canadian courts] alleging harm from the Security Incident.
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.
Furthermore, actions and investigations by regulatory authorities related to data security incidents and privacy violations continue to increase, which could impact us through increased costs or restrictions on our business, and noncompliance could result in significant regulatory penalties and legal liability.
Furthermore, actions and investigations by regulatory authorities related to data security incidents and privacy violations continue to increase, which have impacted us, and could in the future further impact us, through increased costs or restrictions on our business, and noncompliance could result in significant regulatory penalties and legal liability.
If we are unable, or our customers believe we may be unable, to detect and prevent unauthorized use of payment card or other private financial or personal information, we could be subject to financial liability, our reputation could be harmed and customers may be reluctant to use our solutions and services.
If we are unable, or our customers believe we may be unable, to detect and prevent unauthorized use of payment card or other private financial or personal information, or are otherwise unable to effectively manage our payment processing business, we could be subject to financial liability, our reputation could be harmed and customers may be reluctant to use our solutions and services.
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.
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.
Fundamental to the use of our solutions is the secure collection, storage and transmission of confidential donor and end user data and transaction data, including in our payment services.
Fundamental to the use of our solutions is the secure collection, storage and transmission of confidential donor, customer and end user data, personally identifiable information and transaction data, including in our payment services.
Prior to our successfully preventing the cybercriminal from blocking our system access and fully encrypting files, and ultimately expelling them from our system with no significant disruption to our operations, the cybercriminal removed a copy of a subset of data from our self-hosted environment.
Prior to our successfully preventing the cybercriminal from blocking our system access and fully encrypting files, and ultimately expelling them from our system with no significant disruption to our operations, the cybercriminal removed a copy of a subset of data from our self-hosted environment that affected over 13,000 customers.
ITEM 1A. RISK FACTORS Our business operations face a number of risks. These risks should be read and considered with other information provided in this report. Strategic Risks Our failure to compete successfully could cause our revenue or market share to decline.
ITEM 1A. RISK FACTORS Our business operations face a number of risks. These risks should be read and considered with other information provided in this report. Strategic Risks Our failure to compete successfully, including through technology innovations or new and improved solutions, could cause our revenue or market share to decline.
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.
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.
We currently utilize data center hosting facilities to provide cloud solutions to most of our subscription customers and hosting services to our on-premise license customers.
We currently utilize data center hosting facilities to provide cloud solutions to a significant number of our subscription customers and hosting services to our on-premise license customers.
A reduction in the growth of, or a decline in, charitable giving to these customers, whether due to deteriorating general economic conditions, the impact of past or future changes to applicable tax laws, or otherwise, could negatively impact the volume and size of such payment processing transactions and thereby adversely affect our operating results and financial condition. 18 2022 Form 10-K Table of Contents Blackbaud, Inc.
A reduction in the growth of, or a decline in, charitable giving to these customers, whether due to deteriorating general economic conditions, the impact of past or future changes to applicable tax laws, or otherwise, could negatively impact the volume and size of such payment processing transactions and thereby adversely affect our operating results and financial condition.
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.
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.
Furthermore, we continue to undertake system upgrades designed to 22 2022 Form 10-K Table of Contents Blackbaud, Inc. improve the availability, reliability, resiliency and speed of our payments systems. These efforts are costly and time-consuming, involve significant technical complexity and risk, may divert our resources from new features and products and may ultimately not be effective.
Furthermore, we continue to undertake system upgrades designed to improve the availability, reliability, resiliency and speed of our payments systems. These efforts are costly and time-consuming, involve significant technical complexity and risk, may divert our resources from new features and products and may ultimately not be effective.
(See Note 11 to our consolidated financial statements included in this report for a description of the Security Incident and related legal proceedings and regulatory matters.) 2022 Form 10-K 25 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.
(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.
Operational Risks Breaches of our software, our failure to securely collect, store and transmit customer information, or our failure to safeguard confidential donor data, exposes us to liability, litigation, government investigations, penalties and remedial costs and our reputation and business could suffer.
Operational Risks Breaches of our software, our failure to securely collect, store and transmit customer information, or our failure to safeguard confidential donor data, including, for example, the Security Incident described below, exposes us to liability, litigation, government investigations, penalties and remedial costs and our reputation and business could suffer.
(See Note 11 to our consolidated financial statements in this report for information regarding litigation, government investigations, fines and penalties related to the Security Incident.) We might be required to expend significant additional capital and other resources to rectify problems caused by a security breach, including notification under data privacy laws and regulations, and incur expenses related to remediating our information security systems. 2022 Form 10-K 19 Table of Contents Blackbaud, Inc.
(See Note 11 to our consolidated financial statements in this report for information regarding litigation, government investigations, fines and penalties related to the Security Incident.) We have been, and in the future might be, required to expend significant additional capital and other resources to rectify problems caused by a security breach, including notification under data privacy laws and regulations, and incur expenses related to remediating our information security systems.
Any natural disaster or catastrophic event affecting us could have a significant negative impact on our operations. Expected new regulations and standards relating to public disclosure, including those related to climate change, could adversely could impose significant costs on us to comply with such regulations.
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.
In addition, this program will diminish our cash reserves, which may impact our ability to finance future growth, to pursue possible future strategic opportunities and acquisitions and fund liabilities and expenses related to the Security Incident.
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 the event that the Rights become exercisable due to the ownership threshold being crossed, each Right will entitle its holder (other than the person, entity or group triggering the Rights Plan, whose rights will become void and will not be exercisable) to purchase additional shares of common stock having a then-current market value of twice the Exercise Price.
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.
Internet-based services sometimes contain undetected errors when first introduced or when new versions or enhancements are released. We have from time to time found defects in our web-based services and new errors 2022 Form 10-K 21 Table of Contents Blackbaud, Inc. might again be detected in the future.
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.
Realization of our deferred tax assets is dependent upon our generating sufficient taxable income in future years to realize the tax benefit from those assets. Deferred tax assets 24 2022 Form 10-K Table of Contents Blackbaud, Inc. are reviewed at least annually for realizability.
Realization of our deferred tax assets is dependent upon our generating sufficient taxable income in future years to realize the tax benefit from those assets. Deferred tax assets are reviewed at least annually for realizability.
The market for software and services for the social impact community might not grow and the organizations in that community might not continue to adopt our solutions and services. Many organizations in the social impact community, including nonprofits, foundations, companies, education institutions, and healthcare organizations, have not traditionally used integrated and comprehensive software and services for their specific needs.
Many organizations in the social impact community, including nonprofits, foundations, companies, education institutions, and healthcare organizations, have not traditionally used integrated and comprehensive software and services for their specific needs.
Because of this characteristic of our business, if our customers choose not to renew their subscriptions or maintenance and support arrangements with us on beneficial terms or at all, our business, operating results and financial condition could be harmed.
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.
(See Note 12 to our consolidated financial statements in this report for additional details.) If a deferred tax asset net of our valuation allowance was determined to be not realizable in a future period, the charge to earnings would be recognized as an expense in our results of operations in the period the determination is made.
If a deferred tax asset net of our valuation allowance was determined to be not realizable in a future period, the charge to earnings would be recognized as an expense in our results of operations in the period the determination is made.
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.
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.
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. 20 2022 Form 10-K Table of Contents Blackbaud, Inc.
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.
Even technical violations of these laws may result in penalties that are assessed for each non-compliant transaction. Blackbaud, and some of our customers, are subject to the E.U.
Even technical violations of these laws may result in penalties that are assessed for each non-compliant transaction. We, and some of our customers, are subject to the E.U. General Data Protection Regulation (“GDPR”) and U.K. data protection law, known as the "U.K.
Although our board of directors has authorized a stock repurchase program that does not have an expiration date, the program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares of our common stock. We cannot guarantee that the program will be fully consummated or that it will enhance long-term stockholder value.
Although our board of directors has authorized a stock repurchase program that does not have an expiration date, the program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares of our common stock.
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.
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.
Foreign Corrupt Practices Act, the U.K. Bribery Act of 2010, and any trade regulations ensuring fair trade practices; and • the imposition of, or unexpected adverse changes in, foreign laws or regulatory requirements, including those pertaining to export restrictions, privacy and data protection, trade and employment restrictions and intellectual protections. 2022 Form 10-K 17 Table of Contents Blackbaud, Inc.
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.
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.
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.
Changing domestic and international laws, government regulations and policies, including, without limitation, California AB488 and other similar laws and regulations, could adversely affect our business and operating results by increasing compliance costs, reducing customer demand for our solutions or damaging our reputation.
Changing domestic and international laws, government regulations and policies, laws limiting or restricting our ability to pass card charges on to customers and other similar laws and regulations, could adversely affect our business and operating results by increasing compliance costs, reducing customer demand for our solutions or damaging our reputation.
We are subject to payment processing risk that could negatively impact our results of operation and business if not adequately controlled and managed. Our solutions provide our customers payment processing capabilities that enable their constituents to make donations and purchase services using numerous payment options, including credit card and automated clearing house (“ACH”) checking transactions, through secure online transactions.
Our solutions provide our customers payment processing capabilities that enable their constituents to make donations and purchase services using numerous payment options, including credit card and automated clearing house (“ACH”) checking transactions, through secure online transactions.
To date, we also have received a consolidated, multi-state Civil Investigative Demand issued on behalf of 49 state Attorneys General and the District of Columbia and a separate Civil Investigative Demand from the office of the California Attorney General relating to the Security Incident. In addition, we are subject to pending governmental actions or investigations by the U.S.
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.
To date, we have received approximately 260 customer reimbursement requests and approximately 400 reservations of the right to seek expense recovery in the future from customers or their attorneys in the U.S., U.K. and Canada related to the Security Incident.
We have also received 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.
Federal Trade Commission, the U.S. Department of Health and Human Services, the U.S. Securities and Exchange Commission (the "SEC"), the Office of the Australian Information Commissioner and the Office of the Privacy Commissioner of Canada.
Department of Health and Human Services, the Office of the Australian Information Commissioner and the Office of the Privacy Commissioner of Canada.
(See Note 11 to our consolidated financial statements included in this report for a more detailed description of the Security Incident and related matters.) We may be named as a party in additional lawsuits, other claims may be asserted by or on behalf of our customers or their constituents, and we may be subject to additional governmental inquires, requests or investigations.
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.
Like many major businesses, we are, from time to time, a target of cyberattacks, phishing and social engineering schemes, such as the Security Incident (as described below and in Note 11 to our consolidated financial statements in this report), and we expect these threats to continue, some of which have been, and in the future may be, successful to varying degrees.
Like virtually all major businesses, we are, from time to time, a target of cyberattacks, such as the Security Incident (as described below and in Note 11 to our consolidated financial statements in this report), information systems interruptions, phishing, social engineering schemes and other systems disruptions.
Significant management time and Company resources have been, and are expected to continue to be, devoted to the Security Incident. For example, for full year 2022, we incurred net pre-tax expense of $32.7 million and had net cash outlays of $20.9 million for ongoing legal fees related to the Security Incident.
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.
Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future. 2022 Form 10-K 27 Table of Contents Blackbaud, Inc.
These anti-takeover effects may discourage transactions that might result in the payment of a premium over the market price for shares of our common stock. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future.
To protect our core proprietary technology, we rely on a combination of patent, 26 2022 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.
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.
Anti-takeover provisions in our charter documents, our Stockholder Rights Agreement (as described below, the "Rights Agreement") and Delaware law may delay or prevent an acquisition of our Company.
Provisions 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.
Most of our maintenance arrangements are for a one-year term. As the end of the contract term approaches, we seek the renewal of the agreement with the customer. Historically, subscription and maintenance renewals have represented a significant portion of our total revenue.
Furthermore, our subscription arrangements are generally for a term of three years at contract inception with three-year renewals thereafter. Our maintenance arrangement renewals are generally for a term of three years. As the end of the contract term approaches, we seek the renewal of the agreement with the customer.
GDPR." The law requires companies to meet requirements regarding the handling of personal data, including rights such as the portability of personal data. We completed an extensive program of product and operational changes to address GDPR requirements and all future solutions sold to customers subject to GDPR must include GDPR features.
GDPR." The law requires companies to meet requirements regarding the handling of personal data, including rights such as the portability of personal data. All solutions we sell to customers subject to GDPR must include GDPR features. The implementation of GDPR has affected our ability to offer some features and services to customers in the E.U. and U.K.
A decline in our stock price could negatively impact the value of these equity incentive and related compensation programs as retention and recruiting tools. We may need to create new or additional equity incentive programs and/or compensation packages to remain competitive, which could be dilutive to our existing stockholders and/or adversely affect our results of operations.
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.
We expect that an increasing portion of our international revenues will be denominated in foreign currencies, subjecting us to fluctuations in foreign currency exchange rates. If we expand our international operations, exposures to gains and losses on foreign currency transactions may increase.
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.
On October 7, 2022, we declared a dividend of one preferred share purchase right (a “Right”) for each of our issued and outstanding shares of common stock.
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.
If we do not successfully address the risks inherent in the expansion of our international operations, our business could suffer. We currently have non-U.S. operations primarily in the U.K., Canada, Australia and Costa Rica, and we intend to expand further into international markets.
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.
Any resulting increase in our tax obligation or cash taxes paid could adversely affect our cash flows and financial results. We are also subject to tax examinations or engaged in alternative resolutions in multiple jurisdictions.
We are also subject to tax examinations or engaged in alternative resolutions in multiple jurisdictions.
Our bylaws provide for an advance notice procedure for stockholders to nominate director candidates for election or to bring business before an annual meeting of stockholders, including proposed nominations of persons for election to our board of directors, and limit the persons who may call special meetings of stockholders.
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.
We have also received notices of proposed claims on behalf of a number of UK data subjects, which we are reviewing. In addition, insurance companies representing various customers’ interests through subrogation claims have contacted us, and certain insurance companies have filed subrogation claim in court.
We have also received notices of proposed claims on behalf of a number of U.K. data subjects, which we are reviewing.
Provisions of Delaware law, our certificate of incorporation and bylaws and our Rights Agreement may have the effect of delaying or preventing a change in control of our company or deterring tender offers for our common stock that other stockholders may consider in their best interests.
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.
Subject to the terms of the Rights Agreement, the Rights will expire on October 2, 2023. Additional information regarding the Rights Agreement is contained in a Form 8-K filed with the SEC on October 11, 2022.
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.
Inclusive of accrued liabilities for loss contingencies discussed above, we incurred a total of $55.7 million of net pre-tax expense related to the Security Incident during 2022. Although we carry insurance against certain losses related to the Security Incident, we have exceeded the limit of that insurance coverage.
Although we carry insurance against certain losses related to the Security Incident, we exceeded the limit of that insurance coverage in the first quarter of 2022.
Responding to and resolving these current and any future lawsuits, claims and/or investigations could result in material remedial and other expenses that will not be covered by insurance. For example, we have recorded approximately $23.0 million in aggregate liabilities for loss contingencies related to the Security Incident that we believe we can reasonably estimate as of December 31, 2022.
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.
Removed
More rapid than expected success in implementing our strategic shift from a license-based and one-time services business model to a cloud subscription business model with partners delivering some of our services could negatively impact our total revenue growth and financial performance. We continue to intentionally shift our focus towards selling cloud subscription solutions, which generally require less customization services.
Added
A decline in our stock price could negatively impact the value of these equity incentive and related compensation programs as retention and recruiting tools.
Removed
Also, our cloud solution contracts now frequently include subscription-based professional, analytic and training services or those services can be delivered through our partner program. This strategic shift to migrate our existing customers, sell new customers our cloud subscription solutions and have some services delivered by our partners results in a decrease in our one-time services contracts and revenue.
Added
The market for software and services for the social impact community might not grow and the organizations in that community might not continue to adopt, or renew their subscriptions for, our solutions and services.
Removed
Although our business model seeks to anticipate the rate of migration and resulting negative impact on our total revenue growth, more rapid than expected success in implementing this strategic shift could negatively impact our total revenue growth and financial performance. 16 2022 Form 10-K Table of Contents Blackbaud, Inc.
Added
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.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed1 unchanged
Biggest changeWe are pursuing strategic alternatives for the Washington, DC office space, including sublease, and we have the intent and ability to sublease this office space.
Biggest changeWe 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.
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.
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+4 added−4 removed1 unchanged
Biggest changePeriod 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, 2022 $ 250,000 October 1, 2022 through October 31, 2022 — $ — — 250,000 November 1, 2022 through November 30, 2022 5,486 58.22 — 250,000 December 1, 2022 through December 31, 2022 — — — 250,000 Total 5,486 $ 58.22 — $ 250,000 (1) Includes 5,486 shares in November withheld by us to satisfy the minimum tax obligations of employees due upon vesting of restricted stock awards and units.
Biggest changePeriod 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.
Issuer Purchases of Equity Securities The following table provides information about shares of common stock acquired or repurchased during the three months ended December 31, 2022 under the stock repurchase program then in effect, as well as common stock withheld by us to satisfy the minimum tax obligations of employees due upon vesting of restricted stock awards and units.
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.
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 program does not have an expiration date.
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.
Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, this number is not representative of the total number of beneficial owners of our stock. On February 17, 2023, the closing price of our common stock was $58.61.
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.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is trading on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “BLKB.” As of February 17, 2023, there were approximately 138 stockholders of record of our common stock.
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.
The graph covers the most recent five-year period ended December 31, 2022. The graph assumes that the value of the investment in our common stock and each index was $100.00 at December 31, 2017, and that all dividends are reinvested.
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.
Removed
The performance graph compares the performance of our common stock to the Nasdaq Composite Index, the Nasdaq Computer Index and the Nasdaq Computer and Data Processing Index. The Nasdaq Computer Index has replaced the the Nasdaq Computer and Data Processing Index in this analysis as the Nasdaq Computer and Data Processing Index is no longer considered widely recognized and used.
Added
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.
Removed
December 31, 2017 2018 2019 2020 2021 2022 Blackbaud, Inc. $100.00 $66.92 $85.19 $61.71 $84.67 $63.10 Nasdaq Composite Index 100.00 97.16 132.81 192.47 235.15 158.65 Nasdaq Computer Index 100.00 96.27 142.73 224.55 285.17 185.29 Nasdaq Computer & Data Processing Index 100.00 91.84 125.86 184.56 234.05 144.30 30 2022 Form 10-K Table of Contents Blackbaud, Inc.
Added
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.
Removed
Dividends As a part of a series of measures to better enable us to weather the extraordinary business challenges occasioned by COVID-19 and further effect our long-term strategy to deliver the greatest value to our stockholders, we announced on April 6, 2020 that our Board of Directors had rescinded its previously announced policy to pay an annual dividend at a rate of $0.48 per share of common stock and discontinued the declaration and payment of all cash dividends beginning with the second quarter of 2020 and thereafter until such time, if any, as the Board of Directors may determine in its sole discretion.
Added
Dividends We have not declared or paid any cash dividends on our common stock since the first quarter of 2020, and we do not presently plan to pay cash dividends on our common stock in the foreseeable future.
Removed
As a result, we paid a first quarter dividend of $0.12 per share in 2020 resulting in aggregate dividend payments to stockholders of $6.0 million, but no further dividends were declared or paid in 2020, 2021 or 2022. We currently do not anticipate declaring or paying any cash dividends for the foreseeable future.
Added
Payment of future cash dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, outstanding indebtedness, plans for expansion and restrictions imposed by our debt arrangements, if any.

Item 7. Management's Discussion & Analysis

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

130 edited+63 added−90 removed77 unchanged
Biggest changeYears ended December 31, (dollars in millions, except per share amounts) 2022 Change 2021 Change 2020 GAAP Revenue $ 1,058.1 14.1 % $ 927.7 1.6 % $ 913.2 GAAP gross profit $ 552.7 14.1 % $ 484.5 (0.1) % $ 485.2 GAAP gross margin 52.2 % 52.2 % 53.1 % Non-GAAP adjustments: Add: Stock-based compensation expense 14.4 (27.6) % 20.0 49.2 % 13.4 Add: Amortization of intangibles from business combinations 48.5 39.3 % 34.8 (10.7) % 39.0 Add: Employee severance 2.1 7,262.1 % — (96.8) % 0.9 Subtotal (1) 65.1 18.7 % 54.8 2.9 % 53.2 Non-GAAP gross profit (1) $ 617.8 14.5 % $ 539.3 0.2 % $ 538.4 Non-GAAP gross margin 58.4 % 58.1 % 59.0 % GAAP income from operations $ (28.5) (214.4) % $ 24.9 (33.1) % $ 37.2 GAAP operating margin (2.7) % 2.7 % 4.1 % Non-GAAP adjustments: Add: Stock-based compensation expense 110.3 (8.4) % 120.4 38.0 % 87.3 Add: Amortization of intangibles from business combinations 51.4 38.8 % 37.0 (11.6) % 41.9 Add: Employee severance 5.2 242.0 % 1.5 (69.0) % 4.9 Add: Acquisition and disposition-related costs (2) 6.1 100.9 % 3.1 1,294.5 % 0.2 Add: Restructuring and other real estate activities 0.1 (99.4) % 12.1 (48.0) % 23.3 Add: Security Incident-related costs, net of insurance (3) 55.7 2,968.4 % 1.8 100.0 % — Add: Impairment of capitalized software development costs 2.3 100.0 % — — % — Subtotal (1) 231.1 31.4 % 175.9 11.7 % 157.5 Non-GAAP income from operations (1) $ 202.6 0.9 % $ 200.8 3.1 % $ 194.8 Non-GAAP operating margin 19.1 % 21.6 % 21.3 % GAAP income before provision for income taxes $ (55.6) (884.6) % $ 7.1 (67.2) % $ 21.6 GAAP net income $ (45.4) (896.9) % $ 5.7 (26.2) % $ 7.7 Shares used in computing GAAP diluted earnings per share 51,569,148 6.9 % 48,230,438 (1.0) % 48,696,341 GAAP diluted earnings per share $ (0.88) (833.3) % $ 0.12 (25.0) % $ 0.16 Non-GAAP adjustments: Add: GAAP income tax (benefit) provision (10.2) (834.2) % 1.4 (90.0) % 13.9 Add: Total Non-GAAP adjustments affecting loss from operations 231.1 31.4 % 175.9 11.7 % 157.5 Non-GAAP income before provision for income taxes 175.5 (4.1) % 183.0 2.1 % 179.1 Assumed non-GAAP income tax provision (4) 35.1 (4.1) % 36.6 2.1 % 35.8 Non-GAAP net income (1) $ 140.4 (4.1) % $ 146.4 2.1 % $ 143.3 Shares used in computing Non-GAAP diluted earnings per share 52,207,573 8.2 % 48,230,438 (1.0) % 48,696,341 Non-GAAP diluted earnings per share $ 2.69 (11.5) % $ 3.04 3.4 % $ 2.94 (1) The individual amounts for each year may not sum to subtotal, non-GAAP gross profit, non-GAAP income from operations, non-GAAP income before provision for income taxes or non-GAAP net income due to rounding.
Biggest changeYears ended December 31, (dollars in millions, except per share amounts) 2023 2022 GAAP Revenue $ 1,105.4 $ 1,058.1 GAAP gross profit $ 603.2 $ 552.7 GAAP gross margin 54.6 % 52.2 % Non-GAAP adjustments: Add: Stock-based compensation expense 16.7 14.4 Add: Amortization of intangibles from business combinations 52.5 48.5 Add: Employee severance 0.8 2.1 Subtotal (1) 69.9 65.1 Non-GAAP gross profit (1) $ 673.2 $ 617.8 Non-GAAP gross margin 60.9 % 58.4 % GAAP income (loss) from operations $ 44.7 $ (28.5) GAAP operating margin 4.0 % (2.7) % Non-GAAP adjustments: Add: Stock-based compensation expense 127.8 110.3 Add: Amortization of intangibles from business combinations 55.6 51.4 Add: Employee severance 5.1 5.2 Add: Acquisition and disposition-related costs (2)(3) 7.5 6.1 Add: Restructuring and other real estate activities — 0.1 Add: Security Incident-related costs, net of insurance (4) 53.4 55.7 Add: Impairment of capitalized software development costs — 2.3 Subtotal (1) 249.4 231.1 Non-GAAP income from operations (1) $ 294.1 $ 202.6 Non-GAAP operating margin 26.6 % 19.1 % GAAP income (loss) before provision (benefit) for income taxes $ 17.6 $ (55.6) GAAP net income (loss) $ 1.8 $ (45.4) Shares used in computing GAAP diluted earnings (loss) per share 53,721,342 51,569,148 GAAP diluted earnings (loss) per share $ 0.03 $ (0.88) Non-GAAP adjustments: Add: GAAP income tax provision (benefit) 15.8 (10.2) Add: Total non-GAAP adjustments affecting income from operations 249.4 231.1 Non-GAAP income before provision for income taxes 267.0 175.5 Assumed non-GAAP income tax provision (5) 53.4 35.1 Non-GAAP net income (1) $ 213.6 $ 140.4 Shares used in computing Non-GAAP diluted earnings per share 53,721,342 52,207,573 Non-GAAP diluted earnings per share $ 3.98 $ 2.69 2023 Form 10-K 49 Table of Contents Blackbaud, Inc.
Income Taxes Income tax (benefit) provision ($M) Percentages indicate effective income tax rates Our effective income tax rate may fluctuate quarterly and annually as a result of factors, including changes in tax law in jurisdictions where we conduct business, transactions entered into, changes in the geographic distribution of our earnings or losses, and our assessment of certain tax contingencies and valuation allowances.
Income Taxes Income tax provision (benefit) ($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.
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.
Non-GAAP organic revenue growth In addition, we use non-GAAP organic revenue growth, non-GAAP organic revenue growth on a constant currency basis, non-GAAP organic recurring revenue growth and non-GAAP organic recurring revenue growth in analyzing our operating performance.
Non-GAAP organic revenue growth In addition, we use non-GAAP organic revenue growth, non-GAAP organic revenue growth on a constant currency basis, non-GAAP organic recurring revenue growth and non-GAAP organic recurring revenue growth on a constant currency basis in analyzing our operating performance.
Our operating cash flow depends on continued customer renewal of our subscription and maintenance arrangements and market acceptance of our solutions and services, the volume and size of transactions for which we process payments and our customers' ability to pay.
Our operating cash flow depends on continued customer renewal of our subscription and maintenance arrangements, market acceptance of our solutions and services, the volume and size of transactions for which we process payments and our customers' ability to pay.
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 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.
Cost of recurring revenue is primarily comprised of compensation costs for customer support and production IT personnel, hosting and data center costs, third-party contractor expenses, third-party royalty and data expenses, allocated depreciation, facilities and IT support costs, amortization of intangible assets from business combinations, amortization of software and content development costs, transaction-based costs related to payments services including remittances of amounts due to third-parties and other costs incurred in providing support and recurring services to our customers.
Cost of recurring revenue is primarily comprised of compensation costs for customer support and production IT personnel, hosting and data center costs, third-party contractor expenses, third-party royalty and data expenses, allocated depreciation, facilities and IT support costs, amortization of intangible assets from business combinations, amortization of software development costs, transaction-based costs related to payments services including remittances of amounts due to third-parties and other costs incurred in providing support and recurring services to our customers.
In order to pay any cash dividends and/or repurchase shares of stock: (i) no default or event of default shall have occurred and be continuing under the 2020 Credit Facility, and (ii) our pro forma net leverage ratio, as set forth in the 2020 Credit Facility, must be 0.25 less than the net leverage ratio requirement at the time of dividend declaration or share repurchase.
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.
To the extent that our customers are billed for our solutions and services in advance of delivery, we record such amounts in deferred revenue. Our recurring revenue contracts are generally for a term of three years at contract inception with one to three-year renewals thereafter, billed annually in advance and non-cancelable.
To the extent that our customers are billed for our solutions and services in advance of delivery, we record such amounts in deferred revenue. Our recurring revenue contracts are generally for a term of three years at contract inception with three-year renewals thereafter, billed annually in advance and non-cancelable.
Recorded expenses consisted primarily of payments to third-party service providers and consultants, including legal fees, as well as settlements of customer claims and accruals for certain loss contingencies. Not included in this adjustment were costs associated with enhancements to our cybersecurity program.
Recorded expenses consisted primarily of payments to third-party service providers and consultants, including legal fees, as well as settlements of customer claims, negotiated settlements and accruals for certain loss contingencies. Not included in this adjustment were costs associated with enhancements to our cybersecurity program.
Non-GAAP adjusted free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software development and capital expenditures for property and equipment, plus cash outflows, net of insurance, related to the Security Incident.
Non-GAAP adjusted 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, plus cash outflows, net of insurance, related to the Security Incident.
Stock repurchase program In December 2021, our Board of Directors reauthorized and replenished our stock repurchase program that authorizes us to purchase up to $250.0 million of our outstanding shares of common stock. The program does not have an expiration date.
Stock repurchase program In December 2021, our Board of Directors reauthorized, expanded and replenished our stock repurchase program that authorizes us to purchase up to $250.0 million of our outstanding shares of common stock. The program does not have an expiration date.
These payments represent principal payments only, under the following assumptions: (i) that the amounts outstanding under the 2020 Credit Facility, our real estate loans and our other debt at December 31, 2022 will remain outstanding until maturity, with minimum payments occurring as currently scheduled, and (ii) that there are no assumed future borrowings on the 2020 Revolving Facility for the purposes of determining minimum commitment amounts.
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.
We have not made any material changes in the accounting methodology we use to assess loss contingencies during the year ended December 31, 2022. 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, 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 adjust the preliminary purchase price allocation, as necessary, up to one year after the acquisition closing date as we obtain new information about facts and circumstances that existed as of the closing date. We have not made any material changes in the accounting methodology we use for business combinations during the year ended December 31, 2022.
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.
There are other Security Incident-related matters, including customer claims, customer constituent class actions and governmental investigations, for which we have not recorded a liability for a loss contingency as of December 31, 2022 because we are unable at this time to reasonably estimate the possible loss or range of loss.
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, including customer claims, customer constituent class actions and governmental investigations, for which we have not recorded a liability for a loss contingency as of December 31, 2022 because we are unable at this time to reasonably estimate the possible loss or range of loss.
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, including customer claims, customer constituent class actions and governmental investigations, for which we have not recorded a liability for a loss contingency as of December 31, 2022 because we are unable at this time to reasonably estimate the possible loss or range of loss.
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.
To the extent that the carrying value of the asset or asset group exceeds the undiscounted cash flows over the estimated remaining life of the asset, we measure the impairment using discounted cash flows. We have not made any material changes in the accounting methodology we use to assess impairment loss during the year ended December 31, 2022.
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.
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.
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.
Beginning in the fiscal quarter ended June 30, 2022, we now also include in non-GAAP adjusted EBITDA impairment of capitalized software development costs because we believe it is not directly related to our operating performance in any particular period.
Beginning in the fiscal quarter ended June 30, 2022, we now also include in non-GAAP adjusted EBITDA impairment of capitalized software and content development costs because we believe it is not directly related to our operating performance in any particular period.
(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.
(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.
Operating Cash Flow Throughout 2022, 2021 and 2020, our cash flows from operations were derived principally from: (i) our earnings from on-going operations prior to non-cash expenses such as depreciation, amortization, stock-based compensation, deferred income taxes, amortization of deferred financing costs and debt discount and adjustments to our provision for credit losses and sales returns; and (ii) changes in our working capital.
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.
We record valuation allowances to reduce our deferred tax assets to the amount expected to be realized. We have not made any material changes in the accounting methodology we use to assess income tax during the year ended December 31, 2022.
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.
(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.
(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.
For example, for arrangements that have multiple performance obligations, we must exercise judgment and use estimates in order to (1) determine whether performance obligations are distinct and should be accounted for separately; (2) determine the standalone selling price of each performance obligation; (3) allocate the transaction price among the various performance obligations on a relative standalone selling price basis; and (4) determine whether revenue for each performance obligation should be recognized at a point in time or over time.
For example, for certain arrangements that have multiple performance obligations, we may need to exercise judgment and use estimates in order to (1) determine whether performance obligations are distinct and should be accounted for separately; (2) determine the standalone selling price of each performance obligation; (3) allocate the transaction price among the various performance obligations on a relative standalone selling price basis; and (4) determine whether revenue for each performance obligation should be recognized at a point in time or over time.
Each of these matters could, separately or in the 48 2022 Form 10-K Table of Contents Blackbaud, Inc. aggregate, result in an adverse judgement, settlement, fine, penalty or other resolution, the amount, scope and timing of which we are currently unable to predict, but could have a material adverse impact on our results of operations, cash flows or financial condition.
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.
We have taken federal and state tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits may decrease within the next twelve months. The possible decrease could result from the expiration of statutes of limitations. The reasonably possible decrease at December 31, 2022 was insignificant. 46 2022 Form 10-K 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, 2023 was insignificant. 2023 Form 10-K 47 Table of Contents Blackbaud, Inc.
See Note 3 to our consolidated financial statements in this report for information regarding our business acquisitions. 60 2022 Form 10-K 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. 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.
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. 62 2022 Form 10-K 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. 2023 Form 10-K 63 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. 2022 Form 10-K 61 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 2023 Form 10-K Table of Contents Blackbaud, Inc.
The primary foreign currencies creating the impact are the Australian Dollar, British Pound, Canadian Dollar and EURO. 50 2022 Form 10-K 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. 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.
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. 2022 Form 10-K 59 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 2023 Form 10-K Table of Contents Blackbaud, Inc.
Given our remote-first workforce strategy and real estate footprint optimization efforts, as discussed above, we do not anticipate entering any new, material operating leases for offices for the foreseeable future. See Note 11 to our consolidated financial statements in this report for more information. Purchase obligations As of December 31, 2022, we had remaining purchase obligations of $294.4 million.
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.
Historically, as the U.S. dollar weakened, foreign currency translation resulted in an increase in our revenues and expenses denominated in non-U.S. currencies. Conversely, as the U.S. dollar strengthened, foreign currency translation resulted in a decrease in our revenues and expenses denominated in non-U.S. currencies. During 2022, foreign translation resulted in decreases in our revenues and expenses denominated in non-U.S. currencies.
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.
We are generally subject to U.S. federal income tax examination for calendar tax years ending 2019 through 2022, as well as state and foreign income tax examinations for various years depending on statute of limitations of those jurisdictions.
We are generally subject to U.S. federal income tax examination for calendar tax years ending 2020 through 2023, as well as state and foreign income tax examinations for various years depending on statute of limitations of those jurisdictions.
Following is a summary of the financial covenants under the 2020 Credit Facility: Financial Covenant Requirement Ratio as of December 31, 2022 Net Leverage Ratio (1) ≤ 4.00 to 1.00 3.22 to 1.00 Interest Coverage Ratio ≥ 2.50 to 1.00 7.43 to 1.00 (1) Under the terms of the 2020 Credit Facility, the Net Leverage Ratio requirement may be increased by up to 0.50 provided we satisfy certain requirements, including a permitted business acquisition, and provided that the maximum Net Leverage Ratio shall not exceed 4.25 to 1.00.
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.
See Note 9 to our consolidated financial statements in this report for more information. Interest payments on debt In addition to principal payments, as of December 31, 2022, we expect to pay interest expense over the life of our debt obligations of approximately $148.6 million.
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.
The following are the companies we acquired and their respective acquisition dates: • Kilter, Inc. ("Kilter") on August 19, 2022 • EVERFI, Inc. on December 31, 2021 We have included the results of operations of acquired companies in our consolidated results of operations from the date of their respective acquisitions.
("Kilter") on August 19, 2022 • EVERFI, Inc. on December 31, 2021 We have included the results of operations of acquired companies in our consolidated results of operations from the date of their respective acquisitions.
Operating leases As of December 31, 2022, we had remaining operating lease payments of $63.4 million. These payments have not been reduced by sublease income, incentive payments, reimbursement of leasehold improvements or the amount representing imputed interest of $10.8 million. Our operating leases are generally for corporate offices, subleased offices and certain equipment and furniture.
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.
The accumulated currency translation adjustment, recorded within other comprehensive income (loss) as a component of stockholders’ equity, was a loss of $14.9 million as of December 31, 2022 and income of $1.3 million as of December 31, 2021.
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.
We currently expect interest expense for the full year 2023 to be approximately $40 million to $44 million although our interest expense in connection with the variable rate portion of our outstanding debt could increase in a rising interest rate environment.
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.
The following discussion and analysis presents financial information denominated in millions of dollars which can lead to differences from rounding when compared to similar information contained in the consolidated financial statements and related notes, which are primarily denominated in thousands of dollars. Executive Summary We are the world’s leading cloud software company powering social good.
The following discussion and analysis presents financial information denominated in millions of dollars which can lead to differences from rounding when compared to similar information contained in the consolidated financial statements and related notes, which are primarily denominated in thousands of dollars. Executive Summary We are the leading software provider exclusively dedicated to powering social impact.
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.
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.
The amount of taxes paid by us on behalf of employees related to the settlement or 2022 Form 10-K 55 Table of Contents Blackbaud, Inc. exercise of equity awards varies from period to period based upon the timing of grants and vesting, as well as the market price for shares of our common stock at the time of settlement.
The amount of taxes paid by us on behalf of employees related to the settlement or exercise of equity awards varies from period to period based upon the timing of grants and vesting, as well as the market price for shares of our common stock at the time of settlement.
Deferred Revenue The table below compares the components of deferred revenue from our consolidated balance sheets: (dollars in millions) December 31, 2022 December 31, 2021 Change Total deferred revenue (1) 385.2 378.7 1.7 % Less: Long-term portion 2.8 4.2 (33.7) % Current portion (1) $ 382.4 $ 374.5 2.1 % (1) The individual amounts for each year may not sum to total deferred revenue or current portion of deferred revenue due to rounding.
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.
Investing Cash Flow During 2023, we expect our total capital expenditures, including estimated outlays for capitalized software development costs, to be between approximately $65.0 million and $75.0 million. 2022 vs. 2021 Net cash used in investing activities of $85.5 million decreased by $385.7 million during 2022, when compared to 2021.
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.
Accordingly, we expect that the Security Incident will continue to negatively impact our GAAP profitability and GAAP cash flow for the foreseeable future (see discussion regarding non-GAAP adjusted free cash flow on page 47 ).
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 ).
The timing and amount of repurchases depends on several factors, including market and business conditions, the trading price of our common stock and the nature of other investment opportunities. The repurchase program may be limited, suspended or discontinued at any time without prior notice. During the year ended December 31, 2022, we did not purchase any shares.
The timing and amount of repurchases depends on several factors, including market and business conditions, the trading price of our common stock and the nature of other investment opportunities. The repurchase program may be limited, suspended or discontinued at any time without prior notice. During the year ended December 31, 2023, we repurchased 221,836 shares for $18.8 million.
Balance sheet and cash flow At December 31, 2022, our cash and cash equivalents were $31.7 million and the carrying amount of our debt under the 2020 Credit Facility was $799.1 million. Our net leverage ratio was 3.22 to 1.00.
Balance sheet and cash flow At December 31, 2023, our cash and cash equivalents were $31.3 million. Under the 2020 Credit Facility, the carrying amount of our debt was $720.6 million and our net leverage ratio was 1.97 to 1.00.
As of December 31, 2022, we have recorded approximately $23.0 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain governmental agencies related to the Security Incident that we believe we can reasonably estimate.
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.
Although we believe we have substantial defenses in these matters, we could incur judgments or enter into settlements of claims that could have a material adverse effect on our consolidated financial position, results of operations or cash flows in any particular period.
Although we believe we have substantial defenses in these matters, we could incur judgments or enter into settlements of claims that could have a material adverse effect on our consolidated financial position, results of operations or cash flows in any particular period. For additional information, see Note 11 to our consolidated financial statements in this report.
Critical Accounting Estimates Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP").
These impacts are non-GAAP financial information and are not in accordance with, or an alternative to, information prepared in accordance with GAAP. Critical Accounting Estimates Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP").
The enhancements we are making in our go-to-market approach are expected to reduce our average customer acquisition cost as well as the related payback period while increasing sales velocity. 2022 Form 10-K 41 Table of Contents Blackbaud, Inc. 2022 vs. 2021 Sales, marketing and customer success expenses increased by $35.1 million, or 18.9%.
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%.
(3) Includes Security Incident-related costs incurred during the twelve months ended December 31, 2022 of $57.6 million, which includes approximately $23.0 million in recorded aggregate liabilities for loss contingencies, net of probable insurance recoveries during the same period of $1.9 million and during the twelve months ended December 31, 2021 of $40.6 million, net of probable insurance recoveries during the same period of $38.7 million.
(4) Includes Security Incident-related costs incurred during the twelve months ended December 31, 2023 of $53.4 million, which includes approximately $31.0 million in settlements and recorded aggregate liabilities for loss contingencies, net of insurance recoveries during the same period of $0.0 million and during the twelve months ended December 31, 2022 of $57.6 million, which included approximately $23.0 million in recorded aggregate liabilities for loss contingencies, net of insurance recoveries during the same period of $1.9 million.
We recognize accrued interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. 2022 vs. 2021 The decrease in our effective income tax rate for year ended December 31, 2022, when compared to the same period in 2021, was primarily attributable to current-year non-deductible accruals for loss contingencies related to the Security Incident, stock-based compensation shortfall partially offset by increased tax credits and impact of tax rate decreases.
We recognize accrued interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. 2023 vs. 2022 The increase in our effective income tax rate for year ended December 31, 2023, when compared to the same period in 2022, was primarily attributable to higher 2023 non-deductible accruals for loss contingencies related to the Security Incident and other non-deductible expenses and tax rate changes, partially offset by increased tax credits.
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.
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.
For full year 2023, we currently expect net pre-tax expense of approximately $20 million to $30 million and net cash outlays of approximately $25 million to $35 million for ongoing legal fees related to the Security Incident. In line with our policy, legal fees, are expensed as incurred.
For full year 2024, we currently expect net pre-tax expense of approximately $5 million to $10 million and net cash outlays of approximately $8 million to $13 million for ongoing legal fees related to the Security Incident. In line with our policy, legal fees, are expensed as incurred.
This line in the statement of cash flows represents the change in the amount of restricted cash held and payable by us to customers from one period to the next.
This line in the statement of cash flows represents the change in the amount of restricted cash held and payable by us to customers from one period to the next. This restricted cash due to customers is not available to us for operational purposes.
Comparison of 2022 vs. 2021 and 2021 vs. 2020 Acquisitions During 2022 and 2021, we acquired companies that provided us with strategic opportunities to expand our TAM and share of the philanthropic giving market through the integration of complementary solutions and services to serve the changing needs of our customers.
Acquisitions During 2022 and 2021, we acquired companies that provided us with strategic opportunities to expand our TAM and share of the philanthropic giving market through the integration of complementary solutions and services to serve the changing needs of our customers. The following are the companies we acquired and their respective acquisition dates: • Kilter, Inc.
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.
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.
Our purchase obligations are not recorded as liabilities on our consolidated balance sheets as of December 31, 2022, as we had not received the related services. See Note 11 to our consolidated financial statements in this report for more information.
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.
We also continue to invest heavily in the security of our solutions. Research and development expense increased by $32.3 million, or 26.0%.
We also continue to invest heavily in the security of our solutions. Research and development expense decreased by $3.6 million, or 2.3%.
See Note 10 to our consolidated financial statements in this report for more information regarding our derivative instruments, which we use to manage our variable interest rate risk, and Item 7A.
See Note 10 to our consolidated financial statements in this report for more information regarding our derivative instruments, which we use to manage our variable interest rate risk, and Item 7A. Quantitative and Qualitative Disclosures about Market Risk: Interest Rate Risk on page 64 for more information about our variable interest rate exposure and related risk.
These payments represent our estimated future interest payments on debt using 2022 Form 10-K 57 Table of Contents Blackbaud, Inc. our debt balances and the related weighted average effective interest rates as of December 31, 2022, which includes the effect of interest rate swap agreements.
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.
We believe that these non-GAAP financial measures reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business. 2022 Form 10-K 47 Table of Contents Blackbaud, Inc.
We believe that these non-GAAP financial measures reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business.
Working capital changes are comprised of changes in accounts receivable, prepaid expenses and other assets, trade accounts payable, accrued expenses and other liabilities and deferred revenue. 2022 Form 10-K 53 Table of Contents Blackbaud, Inc. 2022 vs. 2021 Net cash provided by operating activities decreased by $9.8 million during the year ended December 31, 2022, when compared to the same period in 2021, primarily due a $65.1 million increase in cash flow from operations associated with working capital, and a $74.9 million decrease in net income adjusted for non-cash expenses.
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.
We have not made any material changes in the accounting methodology we use to recognize revenue during the year ended December 31, 2022. Our revenue recognition accounting methodology contains uncertainties because it requires us to make significant estimates and assumptions, and to apply judgment.
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.
While these funds may not be needed to fund our U.S. operations for at least the next twelve months, if we need these funds, we may be required to accrue and pay taxes to repatriate a portion of the funds. We currently do not intend or anticipate a need to repatriate our cash held outside the U.S.
While these funds may not be needed to fund our U.S. operations for at least the next twelve months, if we need these funds, we may be required to accrue and pay taxes to repatriate the funds.
(5) Measured by non-GAAP organic revenue growth plus non-GAAP adjusted EBITDA margin. See Non-GAAP organic revenue growth table above. (6) To determine non-GAAP adjusted EBITDA on a constant currency basis, non-GAAP adjusted EBITDA from entities reporting in foreign currencies were translated to U.S. Dollars using the comparable prior period's quarterly weighted average foreign currency exchange rates.
(5) Measured by non-GAAP organic revenue divided by non-GAAP adjusted EBITDA. (6) Measured by non-GAAP organic revenue growth plus non-GAAP adjusted EBITDA margin. See Non-GAAP organic revenue growth table above. (7) To determine non-GAAP adjusted EBITDA on a constant currency basis, non-GAAP adjusted EBITDA from entities reporting in foreign currencies were translated to U.S.
We continuously seek opportunities to optimize our portfolio of solutions to focus time and resources on innovation that will have the greatest impact for our customers and the markets we serve, and drive the highest return on investment. To that end, we will continue to simplify and rationalize our portfolio through product sunsets and divestitures of non-core businesses and technologies.
We continuously seek opportunities to optimize our portfolio of solutions to focus time and resources on innovation that will have the greatest impact for our customers and the markets we serve, and drive the highest return on investment.
We have a number of multi-year pricing initiatives underway, some to bring our pricing in line with the market while others are model changes that are expected to drive greater revenue for both us and our customers.
For information on the impact of foreign currency fluctuations on our financial results, see Foreign Currency Exchange Rates below on page 59 . We have a number of multi-year pricing initiatives underway, some to bring our pricing in line with the market while others are model changes that are expected to drive greater revenue for both us and our customers.
We have entered into foreign currency forward contracts to hedge revenues denominated in the Canadian dollar against changes in the exchange rate with the U.S. dollar. We will continue monitoring such exposure and take action as appropriate.
During 2023, the fluctuation in foreign currency exchange rates impacted our total revenue and our income from operations by insignificant amounts. We have entered into foreign currency forward contracts to hedge revenues denominated in the Canadian dollar against changes in the exchange rate with the U.S. dollar. We will continue monitoring such exposure and take action as appropriate.
Liquidity and Capital Resources The following table presents selected financial information about our financial position: (dollars in millions) December 31, 2022 December 31, 2021 Change Cash and cash equivalents $ 31.7 $ 55.1 (42.5) % Property and equipment, net 107.4 111.4 (3.6) % Software and content development costs, net 141.0 121.4 16.2 % Total carrying value of debt 859.0 956.2 (10.2) % Working capital (312.0) (258.7) (20.6) % The following table presents selected financial information about our cash flows: Years ended December 31, (dollars in millions) 2022 Change 2021 Change 2020 Net cash provided by operating activities $ 203.9 (4.6) % $ 213.7 44.4 % $ 148.0 Net cash used in investing activities (85.5) (81.8) % (471.3) (555.9) % (71.8) Net cash (used in) provided by financing activities (25.7) (109.7) % 264.1 (2,573.2) % (10.7) Our principal sources of liquidity are operating cash flow, funds available under the 2020 Credit Facility and cash on hand.
Liquidity and Capital Resources The following table presents selected financial information about our financial position: (dollars in millions) December 31, 2023 December 31, 2022 Change Cash and cash equivalents $ 31.3 $ 31.7 (1.4) % Property and equipment, net 98.7 107.4 (8.1) % Software and content development costs, net 160.2 141.0 13.6 % Total carrying value of debt 779.7 859.0 (9.2) % Working capital (267.4) (312.0) 14.3 % The following table presents selected financial information about our cash flows: Years ended December 31, (dollars in millions) 2023 2022 Change Net cash provided by operating activities $ 199.6 $ 203.9 (2.1) % Net cash used in investing activities (64.4) (85.5) (24.7) % Net cash used in financing activities (143.0) (25.7) 456.5 % Our principal sources of liquidity are our operating cash flow, funds available under the 2020 Credit Facility and cash on hand.
Most of our equity awards currently vest in our first quarter. During 2022 , cash flow from financing activities associated with changes in restricted cash due to customers increased $111.4 million , compared to a decrease of $13.5 million during 2021 .
Most of our equity awards currently vest in our first quarter. During 2023 , cash flow from financing activities associated with changes in restricted cash due to customers decreased $6.8 million , compared to an increase of $111.4 million during 2022 .
Years ended December 31, (dollars in millions) 2022 Change 2021 Change 2020 GAAP net cash provided by operating activities $ 203.9 (4.6) % $ 213.7 44.4 % $ 148.0 Less: purchase of property and equipment (12.3) 5.4 % (11.7) (60.7) % (29.7) Less: capitalized software and content development costs (58.8) 45.2 % (40.5) (4.0) % (42.2) Non-GAAP free cash flow (1) $ 132.8 (17.8) % $ 161.5 112.2 % $ 76.1 Add: Security Incident-related cash flows, net of insurance 20.9 209.6 % 6.7 226.5 % 2.1 Non-GAAP adjusted free cash flow (1) $ 153.7 (8.6) % $ 168.2 115.2 % $ 78.2 (1) The individual amounts for each year may not sum to non-GAAP free cash flow or non-GAAP adjusted free cash flow due to rounding.
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.
(3) The individual amounts for each year may not sum to subtotal, non-GAAP EBITDA, non-GAAP adjusted EBITDA or non-GAAP adjusted EBITDA on a constant currency basis due to rounding. (4) Includes Security Incident-related costs incurred, net of probable insurance recoveries. See additional details in the reconciliation of GAAP to Non-GAAP operating income above.
(2) The individual amounts for each year may not sum to subtotal, non-GAAP EBITDA, non-GAAP adjusted EBITDA or non-GAAP adjusted EBITDA on a constant currency basis due to rounding. (3) Measured by GAAP revenue divided by non-GAAP EBITDA. (4) See additional details in the reconciliation of GAAP to Non-GAAP operating income above.
Management now uses gross dollar retention in analyzing our success at delighting our customers with innovative and cloud solutions. Gross dollar retention is defined as contracted annual recurring revenue ("CARR") divided by beginning CARR with a measurement period of twelve months. During 2022, our gross dollar retention was approximately 91%.
A key factor to our overall success is the renewal and expansion of our existing subscription agreements with our customers. Management uses gross dollar retention in analyzing our success at delighting our customers with innovative and cloud solutions. Gross dollar retention is defined as contracted annual recurring revenue ("CARR") divided by beginning CARR with a measurement period of twelve months.
As of December 31, 2022, we have recorded approximately $23.0 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain governmental agencies related to the Security Incident that we believe we can reasonably estimate.
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, 2022, we have recorded approximately $23.0 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain governmental agencies related to the Security Incident that we believe we can reasonably estimate.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe manage our variable rate interest rate risk through a combination of short-term and long-term borrowings and the use of derivative instruments entered into for hedging purposes. Our interest rate exposure includes SOFR rates.
Biggest changeWe 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.
Due to the nature of our debt, the materiality of the fair values of the derivative instruments and the highly liquid, short-term nature and level of our cash and cash equivalents as of December 31, 2022, we believe that the risk of exposure to changing interest rates for those positions is immaterial.
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.
There were no significant changes in how we manage interest rate risk between December 31, 2021 and December 31, 2022.
There were no significant changes in how we manage interest rate risk between December 31, 2022 and December 31, 2023.
Foreign Currency Risk For a discussion of our exposure to foreign currency exchange rate fluctuations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Foreign Currency Exchange Rates” in Item 7 of this report. 2022 Form 10-K 63 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 2023 Form 10-K Table of Contents Blackbaud, Inc.
The Financial Conduct Authority in the U.K. has stated that it plans to phase out all tenors of LIBOR by June 2023, therefore, we modified our financial contracts that were indexed to LIBOR to reference SOFR during 2022. These modifications did not have a significant financial impact.
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.
Added
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.

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