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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Item 1A Risk factors and our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. The following discussion and analysis presents financial information denominated in millions of dollars which can lead to differences from rounding when compared to similar information contained in the consolidated financial statements and related notes, which are primarily denominated in thousands of dollars.

Executive Summary

We are the 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. A remote-first company, we have operations in the United States, Australia, Canada, Costa Rica, India and the United Kingdom, supporting users in 100+ countries.

Update on Five Key Operational Initiatives

In early 2023, we outlined five key operational initiatives targeted to drive innovation, bookings growth, revenue expansion and lower costs. During 2024, we continued to execute on these key initiatives.

1 Product Innovation and Delivery

2 Bookings Growth and Acceleration

3 Transactional Revenue Optimization and Expansion

4 Modernized Approach to Pricing and Multi-Year Customer Contracts

5 Keen Attention to Cost Management

1.Product Innovation and Delivery

To maintain our market leadership position, we are accelerating the pace of innovation and new feature delivery to our customers. Our focus has been on two areas, artificial intelligence (AI) and enhancements that continue to improve the connectivity of our suite of solutions. These enhancements are aimed at improving fundraising outcomes while reducing the administrative burden of our end users. Some examples include:

•We have released a number of AI capabilities in our solutions, including generative AI functionality for our JustGiving platform. During 2024, we released generative AI capabilities for Raiser’s Edge NXT®, and we expect that Blackbaud Copilot will be available to our Raiser's Edge NXT customers soon. Using Blackbaud Copilot, users can ask ad hoc questions such as “How can I improve my average donation size?” and the tool will provide intelligent responses as well as recommended actions intended to drive that outcome.

•During 2024, our Online Giving and Prospect Insights capabilities were natively integrated into Raiser's Edge NXT. With these integrations, fundraising administrators can now drive a giving campaign, keep records of each donor interaction, identify new donation opportunities, and provide personalized messaging, all in one integrated experience.

•During 2024, we released our new optimized donation forms for Raiser's Edge NXT, Blackbaud CRM and Blackbaud Altru that fully integrate with our payment processing and CRM software. We expect these forms to drive higher revenue for our customers and for Blackbaud.

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We are delivering more innovation, evolving our products and ensuring our customers receive more value from our solutions.

2.Bookings Growth and Acceleration

We maintain a keen focus on accelerating bookings growth by signing new logos as well as upselling and cross-selling our existing customer base. Our sales team is split between prospect account executives dedicated to prospecting for new clients and customer account executives who focus on selling additional products to current customers. Given the breadth of our product portfolio, this “land and expand” model has proven successful for us over time. As previously disclosed, there can be volatility quarter-to-quarter on bookings.

3.Transactional Revenue Optimization and Expansion

Transactional revenue, which is about one-third of total revenue, is comprised of four primary components: donation processing (~55% of total transactional revenue); consumer giving (~20%); tuition management (~20%); and event-based usage (~5%). The diversity of the underlying transaction volumes from these four sources has resulted in consistent transactional recurring revenue growth in the mid-to-high single digits over the past several years. We continue to see strong momentum in consumer giving and tuition management, we have implemented rate increases across select areas of our payments portfolio, and we continue to implement additional payments solutions optimization to drive enhanced donor experience.

4.Modernized Approach to Pricing and Multi-Year Contracts

In the summer of 2022, we put in place an updated pricing policy primarily for our social sector customers that directly reflects the value we provide to them, is in-line with the broader market and reflects the inflationary pressures that all businesses are facing. This program is designed to deliver sustained revenue growth beyond the initial three-year renewal cycle and will provide us with improved revenue visibility. As previously disclosed, this new approach has three main components: offering 3-year contract renewal terms as our standard, which the vast majority of customers are adopting; embedded annual price increases within the 3-year renewal term, which we have not had previously and are beginning to take effect; and a larger first year price increase to bring our pricing in-line with the broader market.

The first two components, as well as a portion of the third, will continue on beyond the initial renewal cycle, creating what we believe will be a sustainable source of revenue growth.

We have now completed the 2023 and 2024 renewal cohorts, which represented approximately 65% of the total contractual revenue eligible for this program. Approximately another 25% of the renewable base is up for renewal in 2025, and the remaining 10% in the beginning of 2026. The close day-to-day management of renewals, the mix of 3-year and 1-year contracts, and the impact of pricing are progressing well. Additionally, the adoption of 3-year renewals as a standard, with more customers opting for this option than we originally expected, are expected to have an added benefit of higher retention which provides greater revenue assurance and predictability.

5.Keen Attention to Cost Management

Cost management initiatives already completed drove a significant improvement in profitability during 2023. These initiatives included:

•A reduction in headcount from approximately 3,600 in the third quarter of 2022 to approximately 3,000 as of December 31, 2023

•Continued IT consolidation as we migrate customers from legacy private data centers to leading public cloud service providers. We closed four legacy data centers during 2022 and two in 2023.

•Renegotiated key vendor contracts including Microsoft Azure and AWS

•Reduced our real estate footprint as part of the shift to a remote-first workforce

During 2024, we continued to run the business at about the same headcount level, while continuing to drive efficiencies in other areas of the business. After the divestiture of EVERFI on December 31, 2024, we had approximately 2,600 employees.

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As a remote-first workforce company, we can be strategic about selecting the appropriate geographic region for various functions in order to reduce costs without negatively impacting the quality of our products and services. For example, we are currently expanding our operations in India, which we expect will give us greater access to talent, and increase the number of our employees, including management, in India. We have rented office space in India to accommodate those new operations, although we do not currently expect to generate revenue in India in the foreseeable future.

There are two remaining legacy data centers that we are currently working towards closing in the future.

Financial Summary

Total Revenue ($M) Income (loss) from Operations ($M)

YoY Growth (%) YoY Growth (%)

Total revenue increased by $50.1 million during 2024, driven largely by the following:

+ Growth in recurring revenue primarily driven by:

- Decrease in one-time services and other revenue primarily related to:

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.

Our Social Sector revenue (which represents approximately 88% of our total full year revenue) increased $67.4 million, or 7.1%, during 2024, when compared to the same period in 2023, driven primarily by the increases in contractual recurring revenue and transactional recurring revenue discussed above. The Social Sector has proven to be very resilient as demonstrated through the last several economic downturns and the COVID-19 pandemic, and we have great confidence in the long-term trajectory of this portion of our business.

Our Corporate Sector revenue (which represents approximately 12% of our total full year revenue) decreased $17.3 million, or 11.5%, during 2024, when compared to the same period in 2023, driven primarily by the underperformance of EVERFI and our disposition of EVERFI Limited in March 2024 (see Note 3 to our consolidated financial statements in this report for more information).

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As previously disclosed, our EVERFI business faced a number of external challenges and even with the decisive actions we took during 2024, including changes to our Corporate Sector leadership and the disposition of a non-recurring revenue component (EVERFI Limited discussed above), EVERFI continued to be a drag on our overall performance, and we expected that to continue. As a result, we took further actions to right-size EVERFI's business to better align costs to its lower revenues, and we hired a strategic advisor to assist us in considering a range of alternatives for EVERFI, one of which included a potential divestiture of the business. This work resulted in the sale of EVERFI in December 2024 in exchange for nominal cash consideration (see page 40 below and Note 3 to our consolidated financial statements in this report for more information).

Income from operations decreased by $315.2 million during 2024, driven largely by the following:

+ Increase in total revenue, as described above

We are continuing to make investments in the business in areas such as innovation, AI, cybersecurity and our continued shift of cloud infrastructure to leading public cloud service providers. Our profitability during 2024 reflects some of these incremental investments.

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.

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Gross dollar retention

Our recurring subscription contracts are typically for a term of three years at contract inception with standard three year renewals thereafter. 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. During 2024, our gross dollar retention was approximately 90%. This gross dollar retention rate was consistent with our rate for the full year ended December 31, 2023. Excluding EVERFI, our gross dollar retention during the twelve months ended December 31, 2024 was approximately 92%. We are continually investing in innovation, which we believe will increase gross dollar retention over the long-term.

Balance sheet and cash flow

At December 31, 2024, our cash and cash equivalents were $67.6 million. Under the 2024 Credit Facilities, the carrying amount of our debt was $1.0 billion and our net leverage ratio was 2.57 to 1.00.

During 2024, we generated $296.0 million in cash flow from operations, had a net increase in borrowings of $296.7 million, returned $418.0 million to stockholders by way of share repurchases and had aggregate cash outlays of $67.2 million for purchases of property and equipment and capitalized software and content development costs.

Release from Washington, DC lease

In February 2025, we made a one-time cash release payment of $28 million to the lessor in connection with a release from our lease for office space in Washington, DC (which was acquired as part of our acquisition of EVERFI in December 2021). Due to our remote-first workforce strategy, we had not used the office space since February 2023 and had subleased a portion of the space.

Security Incident update

As discussed in Note 11 to our consolidated financial statements included in this report, total costs related to the Security Incident exceeded the limit of our insurance coverage in the first quarter of 2022. Accordingly, the Security Incident has negatively impacted, and we expect it to continue for the foreseeable future to negatively impact, our GAAP profitability and GAAP cash flow (see discussion regarding non-GAAP free cash flow and non-GAAP adjusted free cash flow on page 53). For the year ended December 31, 2024, we incurred net pre-tax expenses of $13.7 million related to the Security Incident, which included $7.0 million for ongoing legal fees. It also includes settlements and recorded liabilities for loss contingencies of $6.8 million. Also, for the year ended December 31, 2024, we had net cash outlays of $15.9 million related to the Security Incident, which included ongoing legal fees and the $6.8 million paid during the third quarter of 2024 related to our settlement with the Attorney General of the State of California (as discussed in Note 11). In line with our policy, legal fees are expensed as incurred. For the year ended December 31, 2025, we currently expect net pre-tax expense of approximately $2.0 million to $3.0 million and net cash outlays of approximately $3.0 million to $4.0 million for ongoing legal fees related to the Security Incident.

As of December 31, 2024, we have recorded approximately $0.7 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain customers related to the Security Incident that we believe we can reasonably estimate in accordance with our loss contingency procedures described in Note 11. 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.

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There are other Security Incident-related matters for which we have not recorded a liability for a loss contingency as of December 31, 2024 because we are unable at this time to reasonably estimate the possible loss or range of loss. Each of these matters could, separately or in the aggregate, result in an adverse judgment, settlement, fine, penalty or other resolution, the amount, scope and timing of which we are currently unable to predict, but could have a material adverse impact on our results of operations, cash flows or financial condition.

EVERFI disposition

On December 9, 2024, the Company concluded that a material impairment charge of up to $415 million was required related to its EVERFI asset group, which primarily included finite-lived intangible assets and capitalized software and content development costs. The total pre-tax noncash charges were subsequently determined to be $390.2 million. On December 31, 2024, we disposed of EVERFI for a nominal amount that resulted in a loss on disposition of $15.2 million, which together with the impairment charges, is recorded within EVERFI disposition on our consolidated statements of comprehensive loss for the year ended December 31, 2024. See Note 4 to our consolidated financial statements in this report for additional details.

Results of Operations

Reportable segment

We report our operating results and financial information in one operating and reportable segment. See Note 16 to our consolidated financial statements in this report for additional information.

Comparison of 2024 vs. 2023

For information regarding the comparison of 2023 to 2022, please refer to Part II Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 21, 2024.

Acquisition

On August 19, 2022, we acquired Kilter, Inc. ("Kilter") in order to provide us with strategic opportunities to expand our total addressable market and share of the philanthropic giving market through the integration of complementary solutions and services to serve the changing needs of our customers.

We have included the results of operations of the acquired company in our consolidated results of operations from the date of acquisition. In accordance with applicable accounting rules, we determined that the Kilter acquisition was not material to our consolidated financial statements; therefore, revenue and earnings since the acquisition date and pro forma information are not required or presented. See Note 3 to our consolidated financial statements in this report for a summary of this acquisition.

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Revenue and Cost of Revenue

Recurring

Revenue ($M) Cost of revenue ($M) Gross profit ($M)and gross margin (%)

YoY Growth (%) YoY Growth (%)

Recurring revenue includes two components: contractual recurring and transactional recurring.

Contractual recurring revenue is primarily comprised of fees for the use of our subscription-based software solutions, which includes providing access to cloud solutions, online training programs and subscription-based analytic services. Contractual recurring revenue also includes fees from maintenance services for our on-premises solutions.

Transactional recurring revenue is comprised of transaction fees associated with the use of our solutions, including donation processing, tuition management, consumer giving and event-based usage.

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.

Our customers continue to prefer cloud subscription offerings with integrated analytics, training and payment services. We intend to continue focusing on innovation, quality and integration of our cloud solutions, which we believe will drive future revenue growth.

Recurring revenue increased by $57.6 million, or 5.4%, driven primarily by the following:

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For additional information on the impact of foreign currency fluctuations on our financial results, see Foreign Currency Exchange Rates below on page 59.

Cost of recurring revenue increased by $24.1 million, or 5.1%, driven primarily by the following:

Recurring gross margin increased by 10 basis points primarily due to the increase in recurring revenue outpacing the increase in cost of recurring revenue.

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.

Cost of one-time services and other is primarily comprised of compensation costs for professional services and onsite training personnel, other costs incurred in providing onsite customer training, third-party contractor expenses, data expense incurred to perform one-time analytic services, third-party software royalties, allocated depreciation, facilities and IT support costs and amortization of intangible assets from business combinations.

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One-time services and other revenue decreased by $7.5 million, or 22.2%, driven primarily by the following:

Cost of one-time services and other decreased $10.0 million or 31.6%, primarily driven by the following:

One-time services and other gross margin increased by 1,130 basis points primarily due to the decrease in cost of one-time services and other revenue outpacing the decrease in one-time services and other revenue.

Operating Expenses

Percentages indicate expenses as a percentage of total revenue

Sales, marketing and customer success

Sales, marketing and customer success expense includes compensation costs, variable sales commissions, travel-related expenses, advertising and marketing materials, public relations costs, variable reseller commissions and allocated depreciation, facilities and IT support costs.

We see a large market opportunity in the long-term and will continue to make investments to drive sales effectiveness. We have also implemented software tools to enhance our digital footprint and drive lead generation. The enhancements we are making in our go-to-market approach are expected to reduce our average customer acquisition cost per customer as well as the related payback period while increasing sales velocity.

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Sales, marketing and customer success expenses decreased by $14.7 million, or 6.9%. The decreases in dollars and as a percentage of total revenue were primarily driven by the following:

Research and development

Research and development expense includes compensation costs for engineering and product management personnel, third-party contractor expenses, software development tools and other expenses related to developing new solutions or upgrading and enhancing existing solutions that do not qualify for capitalization, and allocated depreciation, facilities and IT support costs.

We continue to make investments to delight our customers with innovative cloud solutions. We also continue to invest heavily in the security of our solutions. Research and development expense increased by $7.3 million, or 4.8%. The increases in dollars and as a percentage of total revenue were primarily driven by the following:

Not included in research and development expense for 2024 and 2023 were $60.8 million and $60.7 million, respectively, of qualifying costs associated with software and content development activities that are required to be capitalized under GAAP, such as those for our cloud solutions, as well as development costs associated with acquired companies. Qualifying capitalized software and content development costs associated with our cloud solutions and online educational courses are subsequently amortized to cost of recurring revenue over the related asset's estimated useful life, which generally range from three to seven years. We expect that the amount of software development costs capitalized will modestly decrease in the near-term due to the disposition of EVERFI. We continue to prioritize making investments in innovation, quality, security and the integration of our solutions, which we believe will drive long-term revenue growth.

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General and administrative

General and administrative expense consists primarily of compensation costs for general corporate functions, including senior management, finance, accounting, legal, human resources and corporate development, Security Incident-related expenses (including legal fees, settlements and loss contingency accruals), third-party professional fees, insurance, allocated depreciation, facilities and IT support costs, acquisition-related expenses and other administrative expenses.

General and administrative expenses decreased by $47.2 million, or 24.9%. The decreases in dollars and as a percentage of total revenue were primarily driven by the following:

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Interest Expense

Interest expense ($M)

Percentages indicate expenses as a percentage of total revenue

Interest expense increased in dollars and as a percentage of total revenue during 2024 when compared to 2023, primarily due to our incremental borrowings to fund our ASR Transaction (as defined on page 105) and other stock repurchases. We currently expect interest expense for the full year 2025 to be approximately $65 million to $69 million although our interest expense in connection with the variable rate portion of our outstanding debt could increase in a rising interest rate environment. 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.

Other Income

Other income ($M)

Percentages indicate other income as a percentage of total revenue

Other income increased in dollars and as a percentage of total revenue during 2024 when compared to 2023, primarily due to an increase in interest income. Interest income increased primarily due to higher interest earned on restricted cash due to customers for our payment processing solutions. See Note 8 to our consolidated financial statements in this report for more information regarding our other income.

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Deferred Revenue

The table below compares the components of deferred revenue from our consolidated balance sheets:

(dollars in millions) December 31,2024 December 31,2023 Change

Less: Long-term portion 2.0 2.4 (15.9) %

(1)The individual amounts for each year may not sum to total deferred revenue or current portion of deferred revenue due to rounding.

To the extent that our customers are billed for our solutions and services in advance of delivery, we record such amounts in deferred revenue. Our recurring revenue contracts are generally for a term of three years at contract inception with three-year renewals thereafter, billed annually in advance and non-cancelable. We generally invoice our customers with recurring revenue contracts in annual cycles 30 days prior to the end each one-year period.

The decrease in deferred revenue during the year ended December 31, 2024 was primarily due to our divestiture of EVERFI on December 31, 2024. Historically, due to the timing of customer budget cycles, we have an increase in customer contract renewals at or near the beginning of our third quarter. Generally, our lowest balance of deferred revenue during the year is at the end of our first quarter.

Income Taxes

Income tax (benefit) provision ($M)

Percentages indicate effective income tax rates

Our effective income tax rate may fluctuate quarterly and annually as a result of factors, including changes in tax law in jurisdictions where we conduct business, transactions entered into, changes in the geographic distribution of our earnings or losses, and our assessment of certain tax contingencies and valuation allowances.

We have deferred tax assets for federal, state, and international net operating loss carryforwards, a federal and state capital loss carryforward and tax credits. The federal and state net operating loss and capital loss carryforwards are subject to various Internal Revenue Code limitations and applicable state tax laws. The foreign net operating loss carryforwards have a valuation reserve due to the uncertainty of realizing such carryforwards in the future. Further, as of December 31, 2024, we recorded a valuation allowance against all of our U.S. deferred tax assets in excess of deferred tax liabilities due to combination of our cumulative pretax loss position and net deferred tax asset position resulting from divestiture of EVERFI. We intend to continue maintaining a full valuation allowance on our U.S. net deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.

We file income tax returns in the U.S. for federal and various state jurisdictions as well as in foreign jurisdictions including Canada, the U.K., Australia, Ireland and Costa Rica. We are generally subject to U.S. federal income tax examination for calendar tax years ending 2021 through 2024, as well as state and foreign income tax examinations for various years depending on statute of limitations of those jurisdictions.

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We have taken federal and state tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits may decrease within the next twelve months. The possible decrease could result from the expiration of statutes of limitations. The reasonably possible decrease at December 31, 2024 was insignificant.

We recognize accrued interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense.

The decrease in our effective income tax rate for year ended December 31, 2024, when compared to the same period in 2023, was primarily attributable to the valuation allowance recorded in the current period. As of December 31, 2024, we recorded a valuation allowance against all of our U.S. deferred tax assets in excess of deferred tax liabilities due to the combination of our cumulative pretax loss position and net deferred tax asset position resulting from our divestiture of EVERFI. We intend to continue maintaining a full valuation allowance on our U.S. net deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. Furthermore, the effect of our various rate drivers is reversed by the Company’s 2024 loss position versus income in 2023.

Non-GAAP Financial Measures

The operating results analyzed below are presented on a non-GAAP basis. We use non-GAAP financial measures internally in analyzing our operational performance. Accordingly, we believe these non-GAAP measures are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. While we believe these non-GAAP measures provide useful supplemental information, non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies.

The non-GAAP financial measures discussed below exclude the impact of certain transactions because we believe they are not directly related to our operating performance in any particular period, but are for our long-term benefit over multiple periods. We believe that these non-GAAP financial measures reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business.

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Years ended December 31,

(dollars in millions, except per share amounts) 2024 2023

GAAP gross margin 55.3 % 54.6 %

Non-GAAP adjustments:

Add: Stock-based compensation expense 14.1 16.7

Add: Amortization of intangibles from business combinations 57.0 52.5

Add: Employee severance — 0.8

Non-GAAP gross margin 61.5 % 60.9 %

GAAP (loss) income from operations $ (270.5) $ 44.7

GAAP operating margin (23.4) % 4.0 %

Non-GAAP adjustments:

Add: Stock-based compensation expense 105.0 127.8

Add: Amortization of intangibles from business combinations 60.5 55.6

Add: Employee severance — 5.1

Add: Acquisition and disposition-related costs(2) 6.1 7.5

Add: Security Incident-related costs(3) 13.7 53.4

Add: EVERFI impairment and disposition charges 405.4 —

Non-GAAP income from operations(1) $ 320.1 $ 294.1

Non-GAAP operating margin 27.7 % 26.6 %

GAAP (loss) income before (benefit) provision for income taxes $ (311.6) $ 17.6

GAAP net (loss) income $ (283.2) $ 1.8

GAAP diluted (loss) earnings per share $ (5.60) $ 0.03

Non-GAAP adjustments:

Add: GAAP income tax (benefit) provision (28.4) 15.8

Add: Total non-GAAP adjustments affecting income from operations 590.6 249.4

Non-GAAP income before provision for income taxes 279.0 267.0

Assumed non-GAAP income tax provision(4) 68.4 53.4

Non-GAAP diluted earnings per share $ 4.07 $ 3.98

(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.

(2)Includes noncash impairment charges incurred during the twelve months ended December 31, 2024 and 2023 related to the subleases of our Washington, DC office location the lease of which was acquired during the EVERFI acquisition.

(3)Includes Security Incident-related costs incurred during the twelve months ended December 31, 2024 of $13.7 million, which included approximately $6.8 million in recorded liabilities for loss contingencies, and during the twelve months ended December 31, 2023 of $53.4 million, which included approximately $31.0 million in recorded liabilities for loss contingencies. 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. For full year 2025, we currently expect pre-tax expenses of approximately $2 million to $3 million and cash outlays of approximately $3 million to $4 million for ongoing legal fees related to the Security Incident. In line with our policy, legal fees are expensed as incurred. As of December 31, 2024, we have recorded approximately $0.7 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain customers related to the Security Incident that we believe we can reasonably estimate. There are other Security Incident-related matters for which we have not recorded a liability for a loss contingency as of December 31, 2024 because we are unable at this time to reasonably estimate the possible loss or range of loss. Each of these matters could, separately or in the aggregate, result in an adverse judgment, settlement, fine, penalty or other resolution, the amount, scope and timing of which we are currently unable to predict, but could have a material adverse impact on our results of operations, cash flows or financial condition.

(4)Beginning in 2024, we now apply a non-GAAP effective tax rate of 24.5% when calculating non-GAAP net income and non-GAAP diluted earnings per share. For the twelve months ended December 31, 2023, the tax impact related to non-GAAP adjustments is calculated under our historical non-GAAP effective tax rate of 20.0%.

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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. We believe that these non-GAAP measures are useful to investors, as a supplement to GAAP measures, for evaluating the periodic growth of our business on a consistent basis. Each of these measures of non-GAAP organic revenue growth excludes incremental acquisition-related revenue attributable to companies, if any, acquired in the current fiscal year. For companies, if any, acquired in the immediately preceding fiscal year, each of these non-GAAP organic revenue growth measures reflects presentation of full year incremental non-GAAP revenue derived from such companies as if they were combined throughout the prior period. In addition, each of these non-GAAP organic revenue growth measures excludes prior period revenue associated with divested businesses. The exclusion of the prior period revenue is to present the results of the divested businesses within the results of the combined company for the same period of time in both the prior and current periods. We believe this presentation provides a more comparable representation of our current business’ organic revenue growth and revenue run-rate.

Years ended December 31,

GAAP revenue growth 4.5 %

Less: Non-GAAP revenue from divested businesses(1) — (7.4)

Non-GAAP organic revenue growth 5.2 %

Foreign currency impact on Non-GAAP organic revenue(3) (3.0) —

Non-GAAP organic revenue on constant currency basis(3) $ 1,152.5 $ 1,098.0

Non-GAAP organic revenue growth on constant currency basis 5.0 %

GAAP recurring revenue growth 5.4 %

Less: Non-GAAP recurring revenue from divested businesses(1) — —

Non-GAAP organic recurring revenue $ 1,129.1 $ 1,071.5

Non-GAAP organic recurring revenue growth 5.4 %

Non-GAAP organic recurring revenue(2) $ 1,129.1 $ 1,071.5

Foreign currency impact on non-GAAP organic recurring revenue(3) (2.9) —

Non-GAAP organic recurring revenue growth on constant currency basis 5.1 %

(1)Includes EVERFI revenue of $85.5 million and $106.9 million for the year ended December 31, 2024 and 2023, respectively.

(2)Non-GAAP revenue from divested businesses excludes revenue associated with divested businesses in the prior period. The exclusion of the prior period revenue is to present the results of the divested business with the results of the combined company for the same period of time in both the prior and current periods.

(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.

(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. The primary foreign currencies creating the impact are the Australian Dollar, British Pound, Canadian Dollar and Euro.

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Rule of 40

We define Rule of 40 as non-GAAP organic revenue growth plus non-GAAP adjusted EBITDA margin. Non-GAAP adjusted EBITDA is defined as GAAP net income plus interest, net; income tax provision (benefit); depreciation; amortization of intangible assets from business combinations; amortization of software and content development costs; stock-based compensation; employee severance; acquisition and disposition-related costs; Security Incident-related costs; and impairment and disposition charges.

Years ended December 31,

GAAP net (loss) income $ (283.2) $ 1.8

Non-GAAP adjustments:

Add: GAAP income tax (benefit) provision (28.4) 15.8

Add: Amortization of intangibles from business combinations 60.5 55.6

Add: Amortization of software and content development costs(1) 51.2 45.3

Non-GAAP EBITDA margin(3) (12.2) %

Non-GAAP adjustments:

Add: Stock-based compensation expense 105.0 127.8

Add: Employee severance — 5.1

Add: Acquisition and disposition-related costs(4) 6.1 7.5

Add: Security Incident-related costs(4) 13.7 53.4

Add: EVERFI impairment and disposition charges 405.4 —

Non-GAAP Adjusted EBITDA margin(5) 33.7 %

Foreign currency impact on Non-GAAP adjusted EBITDA (1.6) —

Non-GAAP adjusted EBITDA on constant currency basis(7) 387.3 356.5

Non-GAAP adjusted EBITDA margin on constant currency basis(7) 33.6 %

Rule of 40 on constant currency basis(8) 38.6 %

(1)Includes amortization expense related to software and content development costs and amortization expense from capitalized cloud computing implementation costs.

(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.

(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. Dollars using the comparable prior period's quarterly weighted average foreign currency exchange rates. The primary foreign currencies creating the impact are the Australian Dollar, British Pound, Canadian Dollar and Euro.

(8)Measured by non-GAAP organic revenue growth on constant currency basis plus non-GAAP adjusted EBITDA margin on constant currency basis. See Non-GAAP organic revenue growth table above.

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Non-GAAP free cash flow and non-GAAP adjusted free cash flow

Non-GAAP free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software and content development, and capital expenditures for property and equipment.

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.

We believe non-GAAP free cash flow and non-GAAP adjusted free cash flow provides useful measures of the Company's operating performance. Non-GAAP adjusted free cash flow is not intended to represent and should not be viewed as the amount of residual cash flow available for discretionary expenditures.

Years ended December 31,

GAAP net cash provided by operating activities $ 296.0 $ 199.6

GAAP operating cash flow margin 25.6 % 18.1 %

Non-GAAP adjustments:

Less: purchase of property and equipment (7.4) (4.7)

Less: capitalized software and content development costs (59.8) (59.4)

Non-GAAP free cash flow margin 19.8 % 12.3 %

Non-GAAP adjustments:

Add: Security Incident-related cash flows, net of insurance 15.9 78.0

Non-GAAP adjusted free cash flow(1) $ 244.7 $ 213.5

Non-GAAP adjusted free cash flow margin 21.2 % 19.3 %

(1)The individual amounts for each year may not sum to non-GAAP free cash flow or non-GAAP adjusted free cash flow due to rounding.

Seasonality

Our revenues normally fluctuate as a result of certain seasonal variations in our business. Our first quarter has historically been the seasonal low for bookings, with the second and fourth quarters historically being seasonally higher, and our bookings tend to be back-end loaded within individual quarters given our quarterly quota plans. Transactional revenue is non-contractual and less predictable given the susceptibility to certain drivers such as timing and number of events and marketing campaigns, as well as fluctuations in donation volumes and tuition payments. Our transactional revenue has historically been at its lowest in the first quarter due to the timing of customer fundraising initiatives and events. We have historically experienced seasonal highs during the fourth quarter due to year-end giving campaigns and during the second quarter when a large number of events are held. Our revenue from professional services has historically been lower in the first quarter when many of those services commence and in the fourth quarter due to the holiday season. As a result of these and other factors, our total revenue has historically been lower in the first quarter than in the remainder of our fiscal year, with the fourth quarter historically achieving the highest total revenue. Our expenses, other than transaction-based costs related to our payments services, do not vary significantly as a result of these factors, but do fluctuate on a quarterly basis due to varying timing of expenditures.

Our cash flow from operations normally fluctuates quarterly due to the combination of the timing of customer contract renewals, delivery of professional services and occurrence of customer events, as well as merit-based salary increases, among other factors. Historically, due to lower revenues in our first quarter, combined with the payment of certain annual vendor contracts, our cash flow from operations has been lowest in our first quarter. Due to the timing of customer contract renewals and student enrollments, many of which take place at or near the beginning of our third quarter, our cash flow from operations has generally been lower in our second quarter as compared to our third and fourth quarters. Partially offsetting these favorable drivers of cash flow from operations in our third and fourth quarters are base salary merit increases, which occur in July. In addition, deferred revenues can vary on a seasonal basis due to the timing of customer contract renewals and student enrollments or significant acquisitions. Our cash flow from financing is negatively impacted in our first quarter when most of our equity awards vest, as we pay taxes on behalf of our employees related to the settlement or exercise of equity awards.

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These patterns may change as a result of the continued shift to online giving, growth in volume of transactions for which we process payments, large dollar customer bookings and contract renewals, fluctuations in the timing of vendor payments or as a result of acquisitions, dispositions, such as our sale of EVERFI on December 31, 2024, new market opportunities, new solution introductions or other factors.

Liquidity and Capital Resources

The following table presents selected financial information about our financial position:

(dollars in millions) December 31,2024 December 31,2023 Change

Property and equipment, net 91.9 98.7 (6.9) %

Software and content development costs, net 148.3 160.2 (7.4) %

The following table presents selected financial information about our cash flows:

Years ended December 31,

Net cash provided by operating activities $ 296.0 $ 199.6 48.3 %

Net cash used in investing activities (73.4) (64.4) 14.0 %

Net cash used in financing activities (139.4) (143.0) (2.5) %

Our principal sources of liquidity are our operating cash flow, funds available under the 2024 Credit Facilities and cash on hand. 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. Based on current estimates of revenue and expenses, we believe that the currently available sources of funds and anticipated cash flows from operations will be adequate for at least the next twelve months to finance our operations, fund anticipated capital expenditures and meet our debt obligations. We also believe that we will be able to continue to meet our long-term cash requirements due to our anticipated cash flow from operations, solid financial position and ability to access capital from financial markets. To the extent we undertake future material acquisitions, investments or unanticipated capital or operating expenditures, including in connection with the Security Incident, we may require additional capital. In that context, we regularly evaluate opportunities to enhance our capital structure, including through potential debt or equity issuances.

As a well-known seasoned issuer, we filed an automatic shelf registration statement for an undetermined amount of debt and equity securities with the SEC on January 10, 2025. Under this universal shelf registration statement we may offer and sell, from time to time, debt securities, common stock, preferred stock, depositary shares, warrants, stock purchase contracts and stock purchase units. Subject to certain conditions, this registration statement will be effective through January 9, 2028.

At December 31, 2024, our total cash and cash equivalents balance included approximately $13.9 million of cash that was held by operations 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. We currently do not intend nor anticipate a need to repatriate our cash held outside the U.S.

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Operating Cash Flow

Throughout 2024 and 2023, our cash flows from operations were derived principally from: (i) our earnings from on-going operations prior to non-cash expenses such as depreciation, amortization, stock-based compensation, deferred income taxes, amortization of deferred financing costs and debt discount, adjustments to our provision for credit losses and sales returns, the EVERFI impairment charges, loss on disposition of business; and (ii) changes in our working capital.

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.

Net cash provided by operating activities increased by $96.3 million during the year ended December 31, 2024, when compared to the same period in 2023, primarily due to a $49.4 million increase in net income adjusted for non-cash expenses and a $46.9 million increase in cash flow from operations associated with working capital.

The increase in cash flow from operations associated with working capital during 2024, when compared to 2023, was primarily due to:

•fluctuations in the timing of vendor payments;

•a decrease in accrued expenses related to the Security Incident; partially offset by

•an increase in cash taxes paid.

Security Incident update

As discussed in Note 11 to our consolidated financial statements included in this report, total costs related to the Security Incident exceeded the limit of our insurance coverage in the first quarter of 2022. Accordingly, the Security Incident has negatively impacted, and we expect it to continue for the foreseeable future to negatively impact, our GAAP profitability and GAAP cash flow (see discussion regarding non-GAAP free cash flow and non-GAAP adjusted free cash flow on page 53). For full year 2024, we had net cash outlays of $15.9 million related to the Security Incident, which included ongoing legal fees and the $6.8 million paid during the third quarter of 2024 related to our settlement with the Attorney General of the State of California. For full year 2025, we currently expect net pre-tax expense of approximately $2.0 million to $3.0 million and net cash outlays of approximately $3.0 million to $4.0 million for ongoing legal fees related to the Security Incident.

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Investing Cash Flow

During 2025, we expect our total capital expenditures, including estimated outlays for capitalized software development costs, to be between approximately $55.0 million and $65.0 million.

Net cash used in investing activities of $73.4 million increased by $9.0 million during 2024, when compared to 2023.

During 2024, we used $59.8 million for software and content development costs, which was up $0.3 million from cash spent during 2023. We also spent $7.4 million of cash for purchases of property and equipment during 2024, which was an increase of $2.8 million from cash spent in 2023. In addition, we used net cash of $1.2 million in the disposition of a business and $5.0 million for a minority investment in a business during 2024.

Financing Cash Flow

During 2024, we had a net increase in borrowings of $296.7 million, primarily due to our stock repurchase program, including our ASR Transaction (as defined on page 105) in March 2024. During 2024, we repurchased $418.0 million of our common stock compared to $18.8 million during 2023 (see additional details below regarding our stock repurchase program). We also paid $6.5 million in debt issuance costs in conjunction with our April 2024 refinancing.

We paid $56.8 million to satisfy tax obligations of employees upon settlement or exercise of equity awards during 2024 compared to $35.9 million during 2023. The 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. Most of our equity awards currently vest in our first quarter.

During 2024, cash flow from financing activities associated with changes in restricted cash due to customers increased$47.0 million, compared to a decrease of $6.8 million during 2023. 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.

Stock repurchase program

On January 17, 2024, our Board of Directors reauthorized, expanded and replenished our stock repurchase program by raising the total capacity under the program from $250.0 million to $500.0 million available for repurchases. The program does not have an expiration date. Under the stock repurchase program, we are authorized to repurchase shares from time to time in accordance with applicable laws both on the open market, including under trading plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, and in privately negotiated transactions. The timing and amount of repurchases depends on several factors, including market and business conditions, the trading price of our common stock and the nature of other investment opportunities. The repurchase program may be limited, suspended or discontinued at any time without prior notice.

In March 2024, we announced that we intended to repurchase during 2024 between 7% and 10% of our outstanding common stock as of December 31, 2023 under our repurchase program. Consistent with that commitment, in March 2024, we entered into the ASR Transaction to repurchase an aggregate $200 million of shares of our common stock. Pursuant to the terms of the ASR Transaction, we provided the financial institution with a prepayment of $200 million and received an initial delivery of 2.1 million shares of our common stock, representing approximately 70% of the total shares then-expected to be repurchased under the ASR Transaction. The final number of shares of common stock delivered to us under the ASR Transaction was based on the average of the daily volume-weighted average prices of the common stock during the term of the ASR Transaction, less a discount and subject to customary adjustments upon events affecting the common stock (e.g., dilutive or concentrative events, mergers and acquisitions, and market disruptions). We funded the ASR Transaction prepayment with borrowings pursuant to a revolving credit loan under the then effective 2020 Credit Agreement. On October 29, 2024, in connection with the settlement of the ASR Transaction, we received approximately 490,000 shares of our common stock, in addition to the 2.1 million shares received in March 2024. No cash was exchanged as part of the settlement of the ASR Transaction.

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On July 16, 2024, our Board of Directors reauthorized, expanded and replenished our stock repurchase program by expanding the total capacity under the program from $500.0 million to $800.0 million available for repurchases.

During the year ended December 31, 2024, we repurchased an aggregate of 5,362,439 shares for $418.0 million, including the shares repurchased pursuant to the ASR Transaction and representing approximately 10.0% of the Company's common stock outstanding as of December 31, 2023. When including the net share settlement on employee stock-based compensation, this figure increases to approximately 11%. The remaining amount available to purchase stock under the approved stock repurchase program was $644.6 million as of December 31, 2024. During 2025, we intend to repurchase between 3% and 5% of our outstanding common stock as of December 31, 2024 under our existing stock repurchase program.

2024 Credit Facilities

Historically, we have drawn on our credit facility from time to time to help us meet financial needs primarily due to the seasonality of our cash flows from operations and financing for business acquisitions. At December 31, 2024, our available borrowing capacity under the 2024 Credit Facilities was $468.7 million. The 2024 Credit Facilities mature in April 2029.

At December 31, 2024, the carrying amount of our debt under the 2024 Credit Facilities was $1.0 billion. Our average daily borrowings were $929.5 million during 2024.

The term loans under the 2024 Credit Facilities and our other debt require periodic principal payments. The balance of the term loans and any amounts drawn on the revolving credit loans are due upon maturity of the 2024 Credit Facilities in April 2029. Certain real estate loans (as described in Note 9 to our audited consolidated financial statements included in this report) also require periodic principal payments and the balances of the real estate loans are due upon maturity in April 2038.

The following is a summary of the financial covenants under the 2024 Credit Facilities:

Financial Covenant Requirement Ratio as of December 31, 2024

(1)Under the terms of the 2024 Credit Facilities, the Net Leverage Ratio requirement may be increased by up to 0.50 provided we satisfy certain requirements, including a permitted business acquisition, and provided that the maximum Net Leverage Ratio shall not exceed 4.25 to 1.00.

Under the 2024 Credit Facilities, we also have restrictions on our ability to declare and pay dividends and our ability to repurchase shares of our common stock. In order to pay any cash dividends and/or repurchase shares of stock: (i) no default or event of default shall have occurred and be continuing under the 2024 Credit Facilities, and (ii) our pro forma net leverage ratio, as set forth in the 2024 Credit Facilities, must be 0.25 less than the net leverage ratio requirement at the time of dividend declaration or stock repurchase. At December 31, 2024, we were in compliance with our debt covenants under the 2024 Credit Facilities. See Note 9 to our consolidated financial statements included in this report for additional information regarding the 2024 Credit Facilities.

Commitments and Contingencies

As of December 31, 2024, we had contractual obligations with future minimum commitments as follows:

Payments due by period

(in millions) Less than1 year More than1 year Total(1)

Recorded contractual obligations:

Unrecorded contractual obligations:

(1)The individual amounts may not sum to the total due to rounding.

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Debt

As of December 31, 2024, we had total remaining principal payments of $1.1 billion. These payments represent principal payments only, under the following assumptions: (i) that the amounts outstanding under the 2024 Credit Facilities, our real estate loans and our other debt at December 31, 2024 will remain outstanding until maturity, with minimum payments occurring as currently scheduled, and (ii) that there are no assumed future borrowings on the 2024 Revolving Facility for the purposes of determining minimum commitment amounts. See Note 9 to our consolidated financial statements in this report for more information.

Interest payments on debt

In addition to principal payments, as of December 31, 2024, we expect to pay interest expense over the life of our debt obligations of approximately $273.4 million. These payments represent our estimated future interest payments on debt using our debt balances and the related weighted average effective interest rates as of December 31, 2024, which includes the effect of interest rate swap agreements. The actual interest expense recognized in our consolidated statements of comprehensive loss will depend on the amount of debt, the length of time the debt is outstanding and the interest rate, which could be different from our assumptions on our remaining principal payments described above.

Operating leases

As of December 31, 2024, we had remaining operating lease payments of $45.4 million. These payments have not been reduced by sublease income, incentive payments, reimbursement of leasehold improvements or the amount representing imputed interest of $6.7 million. Our operating leases are generally for corporate offices, subleased offices and certain equipment and furniture. 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, 2024, we had remaining purchase obligations of $184.4 million. These purchase obligations are for third-party technology used in our solutions and for other services we purchase as part of our normal operations. In certain cases, these arrangements require a minimum annual purchase commitment by us. Our purchase obligations are not recorded as liabilities on our consolidated balance sheets as of December 31, 2024, as we had not received the related services. See Note 11 to our consolidated financial statements in this report for more information.

The total liability for uncertain tax positions as of December 31, 2024 was $5.2 million. Our accrued interest and penalties related to tax positions taken on our tax returns was $0.9 million as of December 31, 2024.

In connection with the settlement of the multi-state Attorneys General investigation, the California Attorney General investigation and the FTC investigation relating to the Security Incident, as discussed in Note 11 to our consolidated financial statements in this report, we have agreed to implement and improve certain of our cybersecurity programs and tools through May 2044. The currently anticipated costs in connection with these efforts are expected to be expensed as incurred.

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Foreign Currency Exchange Rates

Approximately 14% of our total revenue for 2024 was generated from operations outside the U.S. We do not have significant operations in countries in which the economy is considered to be highly inflationary. Our consolidated financial statements are denominated in U.S. dollars and, accordingly, changes in the exchange rate between foreign currencies and the U.S. dollar will affect the translation of our subsidiaries’ financial results into U.S. dollars for purposes of reporting our consolidated financial results. The accumulated currency translation adjustment, recorded within accumulated other comprehensive loss as a component of stockholders’ equity, was a loss of $12.7 million as of December 31, 2024 and a loss of $9.8 million as of December 31, 2023. We have entered into foreign currency forward contracts to hedge a portion of the foreign currency exposure that arises on translation of our investments denominated in British Pounds into U.S. dollars.

The vast majority of our contracts are entered into by our U.S. or U.K. entities. The contracts entered into by the U.S. entity are almost always denominated in U.S. dollars or Canadian dollars, and contracts entered into by our U.K., Australian and Irish subsidiaries are generally denominated in British Pounds, Australian dollars and Euros, respectively. Historically, as the U.S. dollar weakened, foreign currency translation resulted in an increase in our revenues and expenses denominated in non-U.S. currencies. Conversely, as the U.S. dollar strengthened, foreign currency translation resulted in a decrease in our revenues and expenses denominated in non-U.S. currencies. During 2024, foreign translation resulted in increases in our revenues and expenses denominated in non-U.S. currencies. Though we have exposure to fluctuations in currency exchange rates, primarily those between the U.S. dollar and both the British Pound and Canadian dollar, the impact has generally not been material to our consolidated results of operations or financial position. During 2024, the fluctuation in foreign currency exchange rates increased our total revenue and our income from operations by $3.0 million and $1.1 million, respectively. We have entered into foreign currency forward contracts to hedge revenues denominated in the Canadian dollar against changes in the exchange rate with the U.S. dollar. We will continue monitoring such exposure and take action as appropriate. To determine the impacts on revenue (or income from operations) from fluctuations in currency exchange rates, current period revenues (or income from operations) from entities reporting in foreign currencies were translated into U.S. dollars using the comparable prior year period's weighted average foreign currency exchange rates. These impacts are non-GAAP financial information and are not in accordance with, or an alternative to, information prepared in accordance with GAAP.

Critical Accounting Estimates

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, we reconsider and evaluate our estimates and assumptions.

We base our estimates on historical experience, current trends and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could materially differ from any of our estimates under different assumptions or conditions. Our significant accounting policies are discussed in Note 2 to our consolidated financial statements in this report. We believe the accounting estimates listed below are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

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Revenue Recognition

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Business Combinations

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Income Taxes

Long-lived Assets and Intangible Assets Other Than Goodwill

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Loss Contingencies

Recently Issued Accounting Pronouncements

For a discussion of the impact that recently issued accounting pronouncements are expected to have on our financial position and results of operations when adopted in the future, see Note 2 to our consolidated financial statements in this report.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have market rate sensitivity for interest rates and foreign currency exchange rates.

Interest Rate Risk

Our variable rate debt is our primary financial instrument with market risk exposure for changing interest rates. We manage our variable rate interest rate risk through a combination of short-term and long-term borrowings and the use of derivative instruments entered into for hedging purposes. Additionally, our interest income that we primarily earn on restricted cash due to customers for our payment processing solutions acts as a partial natural hedge against our interest rate risk. Our interest rate exposure includes SOFR rates. Due to the nature of our debt, the materiality of the fair values of the derivative instruments and the highly liquid, short-term nature and level of our cash and cash equivalents as of December 31, 2024, we believe that the risk of exposure to changing interest rates for those positions is immaterial. There were no significant changes in how we manage interest rate risk between December 31, 2023 and December 31, 2024.

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.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

BLACKBAUD, INC.

Index to Consolidated Financial Statements

Page No.

Reports of Independent Registered Public Accounting Firms (PCAOB ID 42) 66

Consolidated Balance Sheets 69

Consolidated Statements of Comprehensive Loss 70

Consolidated Statements of Cash Flows 71

Consolidated Statements of Stockholders’ Equity 72

Notes to Consolidated Financial Statements 73

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Blackbaud, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Blackbaud, Inc. (the Company) as of December 31, 2024 and 2023, the related consolidated statements of comprehensive loss, cash flows and stockholders’ equity for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 21, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Revenue Recognition - Payment Processing Services

/s/ Ernst & Young LLP

We have served as the Company's auditor since 2021.

Raleigh, North Carolina

February 21, 2025

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Blackbaud, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Blackbaud, Inc.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). In our opinion, Blackbaud, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, and the related consolidated statements of comprehensive loss, cash flows, and stockholders' equity for each of the three years in the period ended December 31, 2024, and the related notes and our report dated February 21, 2025 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Raleigh, North Carolina

February 21, 2025

Blackbaud, Inc.

Consolidated Balance Sheets

Assets

Current assets:

Prepaid expenses and other current assets 81,287 99,285

Liabilities and stockholders’ equity

Current liabilities:

Accrued expenses and other current liabilities 75,543 64,322

Deferred revenue, net of current portion 2,015 2,397

Operating lease liabilities, net of current portion 34,186 40,085

Commitments and contingencies (see Note 11)

Stockholders’ equity:

Preferred stock; 20,000,000 shares authorized; none outstanding — —

Accumulated other comprehensive loss (4,869) (1,688)

(Accumulated deficit) retained earnings (84,303) 198,869

Blackbaud, Inc.

Consolidated Statements of Comprehensive Loss

(dollars in thousands, except per share amounts) Years ended December 31,

Revenue

Cost of revenue

Operating expenses

(Loss) earnings per share

Common shares and equivalents outstanding

Other comprehensive (loss) income

Foreign currency translation adjustment $ (2,822) $ 5,049 $ (16,160)

Blackbaud, Inc.

Consolidated Statements of Cash Flows

Years ended December 31,

Cash flows from operating activities

Provision for credit losses and sales returns 4,932 4,500 6,066

Amortization of deferred financing costs and discount 2,538 1,775 2,364

Loss on disposition of businesses 16,847 — —

EVERFI impairment charges 390,204 — —

Cash flows from investing activities

Capitalized software and content development costs (59,757) (59,443) (58,774)

Cash (used) received in disposition of business (1,179) — 6,426

Other investing activities (5,029) (250) —

Cash flows from financing activities

Debt issuance costs (6,458) — —

Stock issuance costs — — (1,339)

Change in customer funds receivable (1,679) (60) 380

Supplemental disclosure of cash flow information

Non-cash investing and financing activities:

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown above in the consolidated statements of cash flows:

Blackbaud, Inc.

Consolidated Statements of Stockholders' Equity

Shares Amount Shares Amount

Common stock issued in purchase of EVERFI — — — — (1,352) — — (1,352)

Vesting of restricted stock units 1,015,304 — — — — — — —

Restricted stock grants 846,295 2 — — — — — 2

Restricted stock cancellations (179,686) — — — — — — —

Other comprehensive income — — — — — 2,416 — 2,416

Retirements of common stock(1) (143) — — — (14) — — (14)

Vesting of restricted stock units 1,007,921 — — — — — — —

Restricted stock grants 473,341 1 — — — — — 1

Restricted stock cancellations (106,859) — — — — — — —

Other comprehensive loss — — — — — (10,626) — (10,626)

Vesting of restricted stock units 1,410,169 — — — — — — —

Restricted stock grants 422,685 2 — — — — — 2

Restricted stock cancellations (77,785) — — — — — — —

Other comprehensive loss — — — — — (3,181) — (3,181)

(1)Represents shares retired after determining certain EVERFI's selling shareholders would be paid in cash, rather than shares of our common stock.

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Blackbaud, Inc.

Notes to Consolidated Financial Statements

1. Organization

2. Basis of Presentation

Basis of presentation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

Basis of consolidation

The consolidated financial statements include the accounts of Blackbaud, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, we reconsider and evaluate our estimates and assumptions, including those that impact revenue recognition, long-lived and intangible assets, income taxes, business combinations, stock-based compensation, capitalization of software development costs, our allowances for credit losses and sales returns, costs of obtaining contracts, valuation of derivative instruments, loss contingencies and insurance recoveries, among others. Changes in the facts or circumstances underlying these estimates could result in material changes and actual results could materially differ from these estimates.

Recently adopted accounting pronouncements

In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07"). This update requires disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker ("CODM"), a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources. We adopted ASU 2023-07 on December 31, 2024 and the adoption did not have a material impact on our condensed consolidated financial statements.

Recently issued accounting pronouncements

There are no recently issued accounting pronouncements that are expected to have a material impact on our financial position or results of operations when adopted in the future.

Summary of significant accounting policies

Revenue recognition

Our revenue is primarily generated from the following sources: (i) charging for the use of our software solutions in cloud and hosted environments; and (ii) providing payment and transaction services. Revenue is recognized when control of these services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.

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Blackbaud, Inc.

Notes to Consolidated Financial Statements

We determine revenue recognition through the following steps:

•Identification of the contract, or contracts, with a customer;

•Identification of the performance obligations in the contract;

•Determination of the transaction price;

•Allocation of the transaction price to the performance obligations in the contract; and

•Recognition of revenue when, or as, we satisfy a performance obligation.

Our recurring revenue includes two components: contractual recurring and transactional recurring.

Contractual recurring

Contractual recurring revenue represents stand-ready performance obligations in which we are making our solutions or services available to our customers continuously over time or the value of the contract renews. Therefore, contractual recurring revenue is generally recognized over time on a ratable basis over the contract term, beginning on the date that the solution or service is made available to the customer. Our contractual 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.

Transactional recurring

Transactional recurring revenue is comprised of transaction fees associated with the use of our solutions, including donation processing, tuition management, consumer giving and event-based usage.

Our payment services are offered with the assistance of third-party vendors. In general, when we are the principal in a transaction based on the factors identified in ASC 606-10-55-36 through 55-40, we record the revenue and related costs on a gross basis. Otherwise, we net the cost of revenue associated with the service against the gross revenue (amount withheld for the transaction fees) and record the net amount as revenue. For payment and transaction services, we have the right to invoice the customer in an amount that directly corresponds with the value to the customer of our performance to date. Therefore, we recognize revenue for these services over time based on the amount we withhold for the transaction fees in accordance with the 'as invoiced' practical expedient in ASC 606-10-55-18.

One-time services and other

One-time services and other revenue is primarily comprised of fees for one-time consulting, analytic and onsite training services and fees for retained and managed services contracts that we do not expect to have a term consistent with our cloud solution contracts.

We generally bill consulting services based on hourly rates plus reimbursable travel-related expenses. Fixed price consulting engagements are generally billed as milestones towards completion are reached. Revenue for one-time consulting services is generally recognized over time as the services are performed.

Fees for retained and managed services contracts are generally billed in advance and recognized over time on a ratable basis over the contract term, beginning on the date the service is made available to the customer.

Contracts with multiple performance obligations

Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices of our solutions and services are typically estimated based on observable transactions when the solutions or services are sold on a standalone basis.

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Blackbaud, Inc.

Notes to Consolidated Financial Statements

Costs of obtaining contracts, contract assets and deferred revenue

We pay sales commissions at the time contracts with customers are signed or shortly thereafter, depending on the size and duration of the sales contract. Sales commissions and related fringe benefits earned by our sales force are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized in a manner that aligns with the expected period of benefit, which we have determined to be six years. We determined the period of benefit by taking into consideration our customer contracts, including renewals, retention, our technology and other factors. We generally do not pay commissions for contract renewals that are commensurate with the commission paid on the initial contract. The related amortization expense is included in sales, marketing and customer success expense in our consolidated statements of comprehensive loss.

A contract asset is recorded when revenue is recognized in advance of our right to receive consideration (i.e., we must satisfy additional performance obligations in order to receive consideration). Amounts are recorded as receivables when our right to consideration is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Our contract assets are recorded within prepaid expenses and other current assets on our consolidated balance sheets. To the extent that our customers are billed for our solutions and services in advance of us satisfying the related performance obligations, we record such amounts in deferred revenue.

Sales taxes

We present sales taxes and other taxes collected from customers and remitted to governmental authorities on a net basis and, as such, exclude them from revenues.

Fair value measurements

We measure certain financial assets and liabilities at fair value on a recurring basis, including derivative instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. An active market is defined as a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. We use a three-tier fair value hierarchy to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

•Level 1 - Quoted prices for identical assets or liabilities in active markets;

•Level 2 - Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and

•Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable.

Our financial assets and liabilities are classified in their entirety within the hierarchy based on the lowest level of input that is significant to fair value measurement. Changes to a financial asset's or liability's level within the fair value hierarchy are determined as of the end of a reporting period. All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized.

Derivative instruments

We generally use derivative instruments to manage interest rate and foreign currency exchange risk. We view derivative instruments as risk management tools and do not use them for trading or speculative purposes. Our policy requires that derivatives used for hedging purposes be designated and effective as a hedge of the identified risk exposure at the inception of the contract. Accordingly, changes in fair value of the derivative contract must be highly correlated with changes in the fair value of the underlying hedged item at inception of the hedge and over the life of the hedge contract.

We record all derivative instruments on our consolidated balance sheets at fair value as either an asset or liability. If the derivative is designated as a cash flow hedge, the effective portions of the changes in fair value of the derivative are recorded in other comprehensive loss and reclassified to earnings in a manner that matches the timing of the earnings impact of the hedged transactions. If the derivative is designated as a net investment hedge, the effective portions of the changes in fair value of the derivative are recorded to translation adjustment, a component of other comprehensive loss, and recognized in earnings only when the hedged investment is liquidated. Ineffective portions of the changes in the fair value of cash flow hedges are recognized currently in earnings. See Note 10 to these consolidated financial statements for further discussion of our derivative instruments.

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Blackbaud, Inc.

Notes to Consolidated Financial Statements

Cash and cash equivalents

We consider all highly liquid investments purchased with an original maturity of three months or less and cash items in transit to be cash equivalents.

Restricted cash due to customers; Customer funds receivable; Due to customers

Restricted cash due to customers consists of monies collected and held at banks, payment processors, or other financial institutions (or in transit) and payable to our customers, net of the associated transaction fees earned. Monies associated with amounts due to customers are segregated in separate bank accounts and used exclusively for the payment of amounts due to customers. This usage restriction is either legally or internally imposed and reflects our intention with regard to such deposits. Customer funds receivable consists of monies we expect to collect and remit to our customers.

Concentration of credit risk

Financial instruments that potentially subject us to concentrations of credit risk consist of cash and cash equivalents, restricted cash due to customers and accounts receivable. Our cash and cash equivalents and restricted cash due to customers are placed with high credit-quality financial institutions. Our accounts receivable is derived from sales to customers. With respect to accounts receivable, we perform ongoing evaluations of our customers and maintain an allowance for credit losses based on historical experience and our expectations of future credit losses. As of and for the years ended December 31, 2024, 2023 and 2022, there were no significant concentrations with respect to our consolidated revenues or accounts receivable.

Property and equipment

We record property and equipment assets at cost and depreciate them over their estimated useful lives using the straight-line method. Leasehold improvements are depreciated over the lesser of the term of the lease or the estimated useful life of the asset. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is credited or charged to earnings. Repair and maintenance costs are expensed as incurred.

Construction-in-progress primarily related to purchases of information technology assets which had not been placed in service at the respective balance sheet dates. We transfer these assets to the applicable property and equipment category on the date they are placed in service. There was no capitalized interest applicable to construction-in-progress for the years ended December 31, 2024 and 2023.

Business combinations

We include the operating results of acquired companies as well as the net assets acquired and liabilities assumed in our consolidated financial statements from the date of acquisition. We are required to allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed at the acquisition date based upon their estimated fair values. Goodwill as of the acquisition date represents the excess of the purchase consideration of an acquired business over the fair value of the underlying net tangible and intangible assets acquired and liabilities assumed.

We apply significant judgement in estimating the fair value of intangible assets acquired, which involves the use of significant assumptions. Significant assumptions used in the valuation of customer relationships include future revenue and operating expenses, customer attrition rates, contributory asset charges, tax amortization benefit, and discount rates. Significant assumptions used in the valuation of certain developed technology assets include future revenue, proprietary technology obsolescence curve, royalty rate, and discount rate. Significant assumptions used in the valuation of marketing assets include assumptions about the period of time the brand will continue to be valuable, royalty rate, and discount rate. Significant assumptions used in the valuation of content intangible assets include cost-based assumptions. Our estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain and unpredictable, and unanticipated events and changes in circumstances may occur.

Goodwill

Goodwill represents the purchase price in excess of the net amount assigned to assets acquired and liabilities assumed by us in a business combination. Goodwill is not amortized, but tested annually for impairment on the first day of our fourth quarter, or more frequently if indicators of potential impairment arise.

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Blackbaud, Inc.

Notes to Consolidated Financial Statements

Accounting guidance permits entities to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis to determine whether it is necessary to perform the quantitative impairment test. Significant judgment is required in the assessment of qualitative factors, including but not limited to an evaluation of macroeconomic conditions as they relate to our business, industry and market trends, as well as the overall future financial performance of identified reporting units and future opportunities in the markets in which we operate.

The quantitative impairment test compares the fair values of identified reporting units with their respective carrying amounts. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. Based on our current internal reporting structure, we have one operating segment, one reportable segment, and one reporting unit. In each of 2024, 2023 and 2022, we performed the quantitative impairment test, which indicated that the estimated fair values of the identified reporting units significantly exceeded their respective carrying values. There were no impairments of goodwill during 2024, 2023 and 2022.

Intangible assets other than goodwill

We amortize finite-lived intangible assets over their estimated useful lives as follows.

Basis of amortization Amortizationperiod(in years)

Customer relationships Straight-line and Curve of Economic Benefit(1) 10-17

Marketing assets Straight-line and Curve of Economic Benefit(1) 15

Developed technology Straight-line and Curve of Economic Benefit(1) 3-14

(1)Certain of the customer relationships, marketing assets and developed technology assets are amortized on a curve that represents the expected period of economic benefit.

We write off the gross carrying amount and accumulated amortization balances for all fully amortized intangible assets. We evaluate the estimated useful lives and the potential for impairment of finite and indefinite-lived intangible assets on an annual basis or more frequently if events or circumstances indicate revised estimates of useful lives may be appropriate or that the carrying amount may be impaired. If the carrying amount of a finite-lived intangible asset is no longer recoverable based upon the undiscounted cash flows of the asset, the amount of impairment is the difference between the carrying amount and the fair value of the asset. All of our intangible assets were acquired in business combinations. See Note 6 to these consolidated financial statements for a discussion of our impairment of certain intangible assets during 2024 and 2022. There were no impairments of acquired intangible assets during 2023.

Impairment of long-lived assets

We review long-lived assets for impairment when events change or circumstances indicate the carrying amount may not be recoverable. Events or changes in circumstances that indicate the carrying amount may not be recoverable include, but are not limited to, a significant decrease in the market value of the business or asset acquired, a significant adverse change in the extent or manner in which the business or asset acquired is used or significant adverse change in the business climate. If such events or changes in circumstances are present, the undiscounted cash flow method is used to determine whether the asset or asset group is impaired. See Note 6 to these consolidated financial statements for a discussion of our impairment of certain long-lived assets during 2024, 2023 and 2022.

Deferred financing costs and debt discount

Deferred financing costs included in other assets represent the direct third-party costs of entering into the revolving (line-of-credit) portion of our credit facility in April 2024 and portions of the unamortized deferred financing costs from prior facilities. These costs are amortized ratably over the term of the credit facility as interest expense.

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Blackbaud, Inc.

Notes to Consolidated Financial Statements

Other debt issuance costs, as well as the debt discount associated with the 2024 Credit Facilities (as defined below) and portions of the unamortized balances from prior facilities, are recorded as a direct deduction from debt. These costs are amortized over the term of the credit facility as interest expense.

Stock-based compensation

We measure stock-based compensation cost at the grant date based on the fair value of the award and recognize it as expense over the requisite service period, which is the vesting period.

We recognize the effect of awards for which the requisite service period is not rendered when the award is forfeited (that is, we recognize the effect of forfeitures in compensation cost when they occur). Previously recognized compensation cost for an award is reversed in the period that the award is forfeited. Income tax benefits resulting from the vesting and exercise of stock-based compensation awards are recognized in the period the unit or award is vested or option or right is exercised.

Income taxes

We make estimates and judgments in accounting for income taxes. The calculation of the income tax provision requires estimates due to transactions, credits and calculations where the ultimate tax determination is uncertain. Uncertainties arise as a consequence of the actual source of taxable income between domestic and foreign locations, the outcome of tax audits and the ultimate utilization of tax credits. To the extent actual results differ from estimated amounts recorded, such differences will impact the income tax provision in the period in which the determination is made.

We make estimates in determining tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes. We record valuation allowances to reduce our deferred tax assets to the amount expected to be realized. In assessing the adequacy of a recorded valuation allowance significant judgment is required. We consider all positive and negative evidence and a variety of factors including the scheduled reversal of deferred tax liabilities, historical and projected future taxable income, and prudent and feasible tax planning strategies. If we determine there is less than a 50% likelihood that we will be able to use a deferred tax asset in the future in excess of its net carrying value, then an adjustment to the deferred tax asset valuation allowance is made to increase income tax expense, thereby reducing net income in the period such determination was made.

We measure and recognize uncertain tax positions. To recognize such positions, we must first determine if it is more likely than not that the position will be sustained upon audit. We must then measure the benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. Significant judgment is required in the identification and measurement of uncertain tax positions.

Foreign currency

Net assets recorded in a foreign currency are translated at the exchange rate on the balance sheet date. Revenue and expense items are translated using an average of monthly exchange rates. The resulting translation adjustments are recorded in accumulated other comprehensive income.

Gains and losses resulting from foreign currency transactions denominated in currency other than the functional currency are recorded at the approximate rate of exchange at the transaction date in other income, net. For the years ended December 31, 2024 and 2022, we recorded net foreign currency gains that were insignificant and $4.6 million, respectively. During the year ended December 31, 2023, we recorded a net foreign currency loss that was insignificant.

Research and development

Research and development costs are expensed as incurred except as noted below under Software and content development costs. These costs include compensation costs for engineering and product management personnel, third-party contractor expenses, software development tools and other expenses related to researching and developing new solutions or upgrading and enhancing existing solutions that do not qualify for capitalization, and allocated depreciation, facilities and IT support costs.

Software and content development costs

We incur certain costs associated with the development of internal-use software and content, which are primarily related to activities performed to develop our cloud solutions and the development of online education curriculum to be delivered on

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Blackbaud, Inc.

Notes to Consolidated Financial Statements

the Company's cloud platform. Internal and external costs incurred in the preliminary project stage of internal-use software development and content are expensed as incurred. Once the software or content being developed has reached the application development stage, qualifying internal costs including payroll and payroll-related costs of employees who are directly associated with and devote time to the software or content project as well as external direct costs of materials and services are capitalized. Capitalization ceases at the point at which the developed software or content is substantially complete and ready for its intended use, which is typically upon completion of all substantial testing. Qualifying costs capitalized during the application development stage include those related to specific upgrades and enhancements when it is probable that those costs incurred will result in additional functionality. Overhead costs, including general and administrative costs, as well as maintenance, training and all other costs associated with post-implementation stage activities are expensed as incurred. In addition, internal costs that cannot be reasonably separated between maintenance and relatively minor upgrades and enhancements are expensed as incurred. In certain circumstances, content development costs are considered deferred costs, when ownership of developed content belongs to the customer.

Qualifying capitalized software and content development costs are amortized on a straight-line basis over the software asset's estimated useful life, which is generally three to seven years. We evaluate the useful lives of these assets on an annual basis and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. See Note 6 to these consolidated financial statements for a discussion of our impairment of certain capitalized software and content development costs during 2024 and 2022. There were no impairments of capitalized software assets during 2023. We write off the gross carrying amount and accumulated amortization balances for all fully amortized capitalized software and content development cost assets.

Allowance for credit losses

Our accounts receivable consist of a single portfolio segment. Accounts receivable are recorded at original invoice amounts less an allowance for credit losses, an amount we estimate to be sufficient to provide adequate protection against lifetime expected losses resulting from extending credit to our customers. In judging the adequacy of the allowance for credit losses, we consider multiple factors including historical bad debt experience, the current aging of our receivables and current economic conditions that may affect our customers' ability to pay. A considerable amount of judgment is required in assessing these factors and if any receivables were to deteriorate, an additional provision for credit losses could be required. Accounts are written off after all means of collection are exhausted and recovery is considered remote. Provisions for credit losses are recorded in general and administrative expense.

Below is a summary of the changes in our allowance for credit losses.

Allowance for sales returns

We maintain a reserve for returns and credits which is estimated based on several factors including historical experience, known credits yet to be issued, the aging of customer accounts and the nature of service level commitments. A considerable amount of judgment is required in assessing these factors. Provisions for sales returns and credits are charged against the related revenue items.

Below is a summary of the changes in our allowance for sales returns.

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Blackbaud, Inc.

Notes to Consolidated Financial Statements

BLKB US Equity

BLKB · 10-K · period ended 2024-12-31

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

BLKB US Equity☆

BLKB · 10-K · period ended 2024-12-31

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

BLKB US Equity