ITEM 1A. RISK FACTORS
Our business operations face a number of risks. These risks should be read and considered with other information provided in this report.
Strategic Risks
Our failure to compete successfully, including through technology innovations or new and improved solutions, could cause our revenue or market share to decline.
Our market is highly competitive and rapidly evolving, and there are limited barriers to entry for many segments of this market. The companies we compete with and other potential competitors may have greater financial, technical and marketing resources, generate greater revenue and have better name recognition than we do. Also, a large, diversified software enterprise could decide to enter the market directly, including through acquisitions. Competitive pressures can adversely impact our business by limiting the prices we can charge our customers and making the adoption and renewal of our solutions more difficult. Our competitors might also establish or strengthen cooperative relationships with resellers and third-party consulting firms or other parties with whom we have had relationships, thereby limiting our ability to promote our solutions. These competitive pressures could cause our revenue and market share to decline.
In addition, the introduction of solutions encompassing new technologies, such as AI (as discussed below), can render existing solutions obsolete and unmarketable. As a result, our future success will depend, in part, upon our ability to continue to enhance existing solutions and develop and introduce in a timely manner or acquire new solutions that keep pace with technological developments, satisfy increasingly sophisticated customer requirements and achieve market acceptance. If we are unable to develop or acquire on a timely and cost-effective basis new software solutions or enhancements to existing solutions or if such new solutions or enhancements do not achieve market acceptance, we may be unable to compete successfully and our business, results of operations and financial condition may be materially adversely affected.
Because competition for highly qualified personnel is intense, we might not be able to attract and retain key personnel needed to support our planned growth.
To meet our objectives successfully, we must attract and retain highly qualified personnel with specialized skill sets, including with regard to our AI products and our expansion in India, each as discussed in more detail below. If we are unable to attract and retain suitably qualified management, there could be a material adverse impact on our business.
Further, we use equity incentive programs and equity awards in lieu of cash as part of our overall employee compensation agreements to both attract and retain personnel. Declines in our stock price may have in the past negatively impacted, and could again in the future negatively impact, the effectiveness of these equity incentive and related compensation programs as retention and recruiting tools. We may need to create new or additional equity incentive programs and/or compensation packages to remain competitive, which could be dilutive to our existing stockholders and/or adversely affect our results of operations.
The market for software and services for the social impact community might not grow as expected, which would negatively impact the growth of our business.
Many organizations in the social impact community, including nonprofits, foundations, companies, education institutions, and healthcare organizations, have not traditionally used integrated and comprehensive software and services for their specific needs. We cannot be certain that the market for such solutions and services will continue to develop and grow or that these organizations will elect to adopt our solutions and services rather than continue to use traditional, less automated methods, attempt to develop software internally, rely upon legacy software systems, or use software solutions not specifically designed for this market. Organizations that have already invested substantial resources in other fundraising methods or other non-integrated software solutions might be reluctant to adopt our solutions and services to supplement or replace their existing systems or methods. In addition, the implementation of one or more of our software solutions can involve significant capital commitments by our customers, which they may be unwilling or unable to make. If demand for and market acceptance of our solutions and services does not increase, we might not grow our business as we expect.
Table of Contents
Blackbaud, Inc.
Our existing customers may not continue to adopt, or renew their subscriptions for, our solutions and services, which could have a material adverse effect on our business, results of operations and financial liquidity.
Our subscription arrangements are generally for a term of three years at contract inception with three-year renewals thereafter, and our maintenance arrangement renewals are generally for a term of three years. While three‐year terms remain the standard minimum under our renewal program, a portion of our customers elect to renew for longer terms, including four‐year or longer arrangements, which extends the duration over which renewals occur.
As the end of the contract term approaches, we seek the renewal of the agreement with the customer. For example, approximately 40% of our existing customer contracts are due for renewal in 2026, approximately 30% in 2027 and approximately 30% in 2028. To the extent a greater proportion of customers enter into extended‐term arrangements, the timing of renewals may become more concentrated in later periods, and while our extended-term arrangements typically include embedded price increases and other contractual terms designed to support economics over the contract term, we may have fewer opportunities in any given year to comprehensively re‐price or renegotiate customer relationships.
Historically, subscription and maintenance renewals have represented a significant portion of our total revenue. Because of this characteristic of our business, if our customers choose not to renew their subscriptions or maintenance arrangements with us on beneficial terms or at all, our business, operating results and financial condition could be harmed.
Our customers' renewal rates may decline or fluctuate as a result of a number of factors, including their level of satisfaction with our solutions, services and pricing strategies and their ability to continue their operations and spending levels due to general economic conditions, extraordinary business interruptions, client-specific financial issues or otherwise.
Changes in the U.S. federal or state governmental grant, award or other funding programs could negatively impact the operations of our nonprofit customers, which could have a material adverse effect on our business, results of operations, financial condition and liquidity.
Many of our customers depend in significant part on the U.S. federal and state governments for grants, awards and other funding to maintain their operations. Changes in, or uncertainty regarding, the availability, amount or conditions and restrictions related to such funding could negatively impact our customers’ willingness or ability to purchase our various software solutions due to resulting budgetary or investment capital concerns. Our customers and we must identify, assess and respond to new developments and trends in the legislative, regulatory and political environment while federal and state governments and agencies consider and implement potential funding changes that could materially impact various aspects of the nonprofits’ operations and financial health. We cannot predict the specific terms of any such proposals or changes, whether or when they will be implemented, or their effect on our operations. Certain proposals or changes could, if implemented, have an adverse, material impact on our business, results of operations, financial condition or liquidity.
We are increasingly incorporating AI technology into many of our solutions and services, and evolving regulatory requirements, technological complexity, competitive pressures, market perception and investment demands related to AI could result in operational, financial, reputational and stock price volatility risks to our business.
We are implementing AI features, including generative, predictive, interactive and agentic AI technologies, in many of our solutions and services. The technologies underpinning these features are evolving rapidly and exist in an emerging regulatory environment, which presents regulatory, litigation, ethical, reputational, operational and financial risks, some of which are still unknown.
Many U.S. federal, U.S. state and international governmental bodies and regulators have adopted, or are in the process of developing, new laws and regulations related to the use of AI and machine learning technologies. These have imposed, and may in the future further impose, obligations related to our development, offering and use of AI technologies and expose us to increased risk of regulatory enforcement and litigation. Many of our AI features include the processing of personal data and are, and may be further, subject to laws, policies, legal obligations and codes of conduct related to privacy and data protection. There is uncertainty about the extent to which privacy and data protection laws apply to AI technologies, and any delay in addressing privacy or data protection concerns relating to our AI features may result in liability or regulatory investigations and fines, as well as harm to our sales and reputation. In addition, issues relating to intellectual property rights in AI-generated content have not been fully addressed by the courts, laws or regulations. Accordingly, the implementation of AI technologies into our products and services may result in exposure to claims related to copyright infringement or other intellectual property misappropriation.
Table of Contents
Blackbaud, Inc.
Our use of AI technology may also present additional security risks due to embedded security vulnerabilities. Furthermore, many of our AI features may rely on third-party developers and other service providers, and any improper processing of personal data by these service providers could harm our reputation, business or customers, or expose us to legal liability. Also, our sensitive information could be leaked, disclosed or revealed as a result of or in connection with company or vendor use of these technologies generally. Any disruption or failure in our AI systems or infrastructure could result in delays or errors in our operations, which could harm our business and financial results. See also “Item 1A. Risk Factors. Operational Risks” related to breaches of our software and failure to safeguard confidential data in this report.
Blackbaud is actively leveraging agentic AI in the AI features of our solutions and deploying agentic AI for our internal business purposes. Agentic AI differs from traditional AI technologies by making decisions and pursuing business goals autonomously without prompting by humans, sometimes across multiple steps and over time, which may require deployers to give agentic AI access to systems for the purpose of taking such initiative. This presents additional risks, including the possibility of opaque decision making, unique security concerns due to agent permissioning, challenges with monitoring actions and assigning and enforcing accountability.
Our AI technology features may also generate output that is misleading, inaccurate, harmful or otherwise flawed, which may harm our reputation, business or customers, or expose us to legal liability. Also, some AI scenarios present ethical issues. If we enable or offer AI solutions that are controversial because of their purported or actual impact on human rights, privacy, employment or other social issues, we may experience reputational harm and legal liability.
AI technologies require substantial additional investment in the development and maintenance of various models, approaches and processes, as well as development of protections and safeguards for the use of AI technologies, which is expensive and could negatively impact our financial results as we further expand AI technology into our products and services. Likewise, the use of AI technology involves significant technical complexity and requires specialized expertise, which is expected to require increased investment in infrastructure and headcount.
The success of any enhancement or new product depends on many factors, including its relevance to our customers, timely implementation and market acceptance. If our AI-enhanced products and services do not achieve widespread market adoption or there is a reduction in demand due to a lack of customer acceptance, technology challenges, strengthening competition, weakening economic conditions, or security or privacy concerns, our business could be harmed and our financial results could be adversely affected.
We face significant competition from other companies that are developing their own AI-enhanced products and services. Such AI features and technologies may be similar or superior to ours and may be more cost-effective. Furthermore, other parties could have proprietary rights that would interfere with our ability to implement our own AI features. Our AI features also may require access to specific third-party equipment or infrastructure, which availability or pricing we may not be able to control.
Market perception of the role and impact of AI on technology companies may adversely affect our stock price, regardless of our actual operating performance. Investor sentiment regarding artificial intelligence has become a significant driver of valuation for technology companies, and perceptions about whether a company is effectively developing, deploying, or monetizing AI technologies may materially influence market expectations and our stock price. If investors, analysts, customers or other market participants believe that our AI strategy, capabilities, pace of innovation or competitive positioning are insufficient, less differentiated than those of our competitors, or fail to keep pace with rapidly evolving AI technologies, our stock price could decline, even if our business performance and financial results remain strong. Conversely, heightened expectations regarding the benefits of AI could result in increased volatility in our stock price if our actual AI‐related results, timelines, adoption rates, or financial returns differ from market expectations. Shifts in broader market sentiment regarding AI technologies, including changes in investor confidence, regulatory developments, high‐profile failures or controversies involving AI, or a reassessment of the economic value of AI investments across the technology sector, could also negatively impact our valuation and increase stock price volatility independent of our operating results.
It is not possible to predict all of the risks related to the use of AI technology. Although we aim to develop and use AI responsibly and attempt to identify and mitigate ethical and legal issues presented by its use, we may be unsuccessful in identifying or resolving issues before they arise, which may affect our ability to develop and use AI or subject us to legal liability.
Table of Contents
Blackbaud, Inc.
If we do not successfully address the risks inherent in the expansion of our international operations, including in India, our business could suffer.
We currently have non-U.S. operations primarily in the U.K., Canada, Australia, Costa Rica and India, and we intend to expand further into international markets. Expansion of our international operations has required, and will continue to require, a significant amount of attention from our management and substantial financial resources and might require us to add qualified management in these markets. 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. Our direct sales model requires us to attract, retain and manage qualified sales personnel capable of selling into markets outside the United States. In some cases, our costs of sales might increase if our customers require us to sell through local distributors. In addition, there is intense competition in India for skilled technology personnel, and we expect such competition to increase. As a result, we may be unable to retain our current employees in India or to hire additional new employees in India. If we are unable to grow our international operations in a cost-effective and timely manner, our business and operating results could be harmed.
Increases in our international revenues denominated in foreign currencies subject us to fluctuations in foreign currency exchange rates. The expansion of our international operations has increased, and is expected to continue to increase, our exposures to gains and losses on foreign currency transactions. (See Foreign Currency Exchange Rates on page 59 for more information regarding the impact of foreign currency exchange rates on our operations.)
Doing business internationally involves additional risks that could harm our operating results. Along with risks similar to those faced by our U.S. operations, our international operations are also subject to risks related to differing legal, political, social and regulatory requirements and economic conditions, including:
•the imposition of additional withholding taxes or other tax on our foreign income, tariffs or restrictions on foreign trade or investment, including currency exchange and capital expropriation controls;
•greater risk of a failure of our employees and partners to comply with both U.S. and foreign laws, including antitrust regulations, the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act of 2010, and any trade regulations ensuring fair trade practices;
•greater risk of failure to comply with foreign country employment or other human resources laws and regulations;
•the imposition of, or unexpected adverse changes in, foreign laws or regulatory requirements, including those pertaining to export restrictions, privacy and data protection, trade and employment restrictions and intellectual protections; and
•general business disruptions caused by geopolitical situations and developments including, for example, in India, which has experienced in the past, and may again experience, civil unrest and terrorism and has, and may again, been involved in conflicts with other countries, such as the recent conflict with Pakistan.
Unfavorable media coverage related to peer-to-peer fundraising campaigns on our social platforms could negatively impact our business.
Our online social giving platforms receive a high degree of media coverage for particularly news-worthy or controversial fundraising campaigns, as well as for our fee-based business model. Although our terms of service provide express limitations on the platforms' user-initiated fundraising campaigns and reserve our right to remove content that violates our terms of service, it may not always be possible to remove such content prior to it receiving attention in the media. Negative publicity related to our online social giving platforms could have an adverse effect on the size, engagement and loyalty of our user base and could result in decreased revenue, which could adversely affect our business and financial results.
Acquisitions could be difficult to consummate and integrate into our operations, and they could disrupt our business, dilute stockholder value or impair our financial results.
As part of our business strategy, we, from time to time, seek to grow our business through acquisitions of new or complementary businesses, technologies or products that we believe can improve our ability to compete in our existing customer markets or allow us to enter new markets. The potential risks associated with acquisitions and investment transactions include, but are not limited to:
•failure to realize anticipated returns on investment, cost savings and synergies;
Table of Contents
Blackbaud, Inc.
•difficulty in assimilating the operations, policies and personnel of the acquired company;
•unanticipated costs associated with acquisitions;
•challenges in combining product offerings and entering into new markets in which we may not have experience;
•distraction of management’s attention from normal business operations;
•potential loss of key employees of the acquired company;
•difficulty implementing effective internal controls over financial reporting, disclosure controls and procedures and cybersecurity and data protection procedures;
•impairment of relationships with customers or suppliers; and
•issues not discovered in due diligence, which may include product quality issues or legal or other contingencies.
For example, following our acquisition of EVERFI, Inc ("EVERFI") in December 2021, we were unable to realize the anticipated returns on our investment prior to our disposition of the business in December 2024 due to certain of the reasons listed above.
Acquisitions may also result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities, the expenditure of available cash, and amortization expenses or write-downs related to intangible assets such as goodwill, any of which could have a material adverse effect on our operating results or financial condition. For example, in December 2024, we recorded a material noncash impairment charge related to EVERFI (See Note 3 to our consolidated financial statements in this report for more information).
We may experience risks relating to the challenges and costs of closing a business combination and the risk that an announced business combination may not close. There can be no assurance that we will be successful in making additional acquisitions in the future or in integrating or executing on our business plan for existing or future acquisitions.
A reduction in the growth or amount of charitable giving due to deteriorating general economic conditions, a recession or otherwise could adversely affect our operating results and financial condition.
A large percentage of our customers are nonprofits, foundations, education institutions, healthcare organizations and other members of the social impact community that fully or partially rely on charitable donations. If charitable giving, including online giving, does not continue to grow or declines, it could limit our current and potential customers' ability to use and pay for our solutions and services, which could adversely affect our operating results and financial condition.
In addition, we derive a significant portion of our revenue from transaction-based payment processing fees that we collect from our customers through our Blackbaud Integrated Payments solution, which enables our customers' donors to make donations and purchase goods and services using various payment options. A reduction in the growth of, or a decline in, charitable giving to these customers, whether due to deteriorating general economic conditions, the impact of past or future changes to applicable tax laws, or otherwise, could negatively impact the volume and size of such payment processing transactions and thereby adversely affect our operating results and financial condition.
Our failure to obtain licenses for, or our use of, third-party technologies could harm our business.
We expect to continue licensing technologies from third parties, including applications used in our research and development activities, technologies that are integrated into our solutions and solutions that we resell. We believe that the loss of any third-party technologies currently integrated into our solutions could have a material adverse effect on our business. Our inability in the future to obtain any third-party licenses on commercially reasonable terms, or at all, could delay future solution development until equivalent technology can be identified, licensed or developed and integrated. This inability in turn could harm our business and operating results.
Our use of third-party technologies also exposes us to increased risks including, but not limited to, risks associated with the integration of new technology into our solutions, the diversion of our resources from development of our own proprietary technology and our inability to generate revenue from licensed technology sufficient to offset associated acquisition and maintenance costs.
Table of Contents
Blackbaud, Inc.
Operational Risks
Breaches of our software, our failure to securely collect, store and transmit customer information, or our failure to safeguard confidential donor data, including, for example, the Security Incident described below, exposes us to liability, litigation, government investigations, penalties and remedial costs and our reputation and business could suffer.
Fundamental to the use of our solutions is the secure collection, storage and transmission of confidential donor, customer and end user data, personally identifiable information and transaction data, including in our payment services. Despite the network, application and physical security procedures and internal control measures we employ to safeguard our systems, we have been, and in the future may be, vulnerable to a security breach, intrusion, loss or theft of confidential donor data and transaction data, which has in the past harmed and may in the future harm our business, reputation and future financial results. Furthermore, our reliance on remote access to information systems increases our exposure to potential cybersecurity incidents.
Like virtually all major businesses, we are, from time to time, a target of cyberattacks, such as the Security Incident (as described below and in Note 11 to our consolidated financial statements in this report), information systems interruptions, phishing, social engineering schemes and other systems disruptions. We expect these threats to continue, some of which have been, and in the future may be, successful to varying degrees. Because the numerous and evolving cybersecurity threats used to obtain unauthorized access, disable, degrade or sabotage systems have become increasingly more complex and sophisticated, it may be difficult to anticipate these acts or to detect them for periods of time, as with the Security Incident, and we may be unable to respond adequately or timely. As these threats continue to evolve and increase, we have already devoted and expect to continue to devote significant resources in order to modify and enhance our security controls and to identify and remediate any security vulnerabilities.
A compromise of our data security, such as the Security Incident, that results in customer or customer constituent personal or payment card data being obtained by unauthorized persons could adversely affect our reputation with our customers and others, as well as our operations, results of operations, financial condition and liquidity and has resulted in, and could in the future result in, litigation against us, government investigations or the imposition of fines and penalties. (See Note 11 to our consolidated financial statements in this report for information regarding litigation, government investigations, fines and penalties related to the Security Incident.) We have been, and in the future might be, required to expend significant additional capital and other resources to rectify problems caused by a security breach, including notification under data privacy laws and regulations, and incur expenses related to remediating our information security systems.
Even though we carry cyber-technology insurance policies that provide insurance coverage under certain circumstances, we have in the past suffered losses and may in the future suffer losses as a result of a security breach that significantly exceed the coverage available under our insurance policies or for which we do not have coverage. (See Note 11 to our consolidated financial statements in this report for expense and insurance coverage information related to the Security Incident.) Furthermore, in the future such insurance may not be available on commercially reasonable terms, or at all. A security breach and any efforts we make to address such breach could also result in a disruption of our operations, particularly our online sales operations.
The occurrence of actual cyber security events, such as the Security Incident, could magnify the severity of the adverse effects of future incidents on our business. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage information systems can be difficult to detect for long periods of time and can involve difficult or prolonged assessment or remediation periods even once detected. We, therefore, cannot assure you that all potential causes of past significant incidents, including the Security Incident, have been fully identified and remediated. The steps we take may not be sufficient to prevent future significant incidents and, as a result, such incidents may occur again.
A material example of the foregoing risks is the ransomware attack that in May 2020 during which a cybercriminal removed a copy of a subset of data from our self-hosted environment (the “Security Incident”).
As a result of the Security Incident, we received approximately 260 specific requests from customers for reimbursement of expenses incurred by them related to the Security Incident, approximately 400 reservations of the right to seek expense recovery in the future from customers or their attorneys in the U.S., U.K. and Canada related to the Security Incident and notices of proposed claims on behalf of a number of U.K. data subjects, all of which have been fully resolved and closed or are inactive and are considered by us to have been abandoned. In addition, insurance companies representing various customers’ interests through subrogation claims contacted us, and certain insurance companies filed subrogation claims in court, of
Table of Contents
Blackbaud, Inc.
which two cases remain active and unresolved. We also were a defendant in putative consumer class action cases in U.S. and Canadian courts alleging harm from the Security Incident, all of which have now been resolved.
In addition, the Company reached a settlement with the SEC that fully resolved an SEC investigation of the Security Incident; entered into separate, substantially similar Administrative Orders with each of 49 state Attorneys General and the District of Columbia that fully resolved a multi-state Civil Investigative Demand and the separate Civil Investigative Demand from the Office of the Indiana Attorney General relating to the Security Incident; reached a settlement with the U.S. Federal Trade Commission (the "FTC") in connection with the Security Incident; and agreed to a Final Judgment and Permanent Injunction with the Attorney General of the State of California (the "California Judgment") relating to the Security Incident. In addition, we received notices of governmental actions or investigations by the U.S. Department of Health and Human Services, the Office of the Australian Information Commissioner and the Office of the Privacy Commissioner of Canada, each of which we now believe are now longer active actions or investigations.
The terms of the California Judgment, FTC Order, the Attorneys General Administrative Orders and our settlement with the SEC require that we implement and maintain certain processes and programs and comply with certain legal requirements related to cybersecurity and data protection. Effectively implementing, monitoring and updating these requirements has been, and is expected to be over an extended period of time, expensive and time-consuming. Our failure to do so in accordance with the terms of our agreements with FTC, the Attorneys General and with the SEC, and possibly others, could expose us to additional material liability under the terms of the Administrative Orders, the SEC settlement, or otherwise.
Furthermore, significant management time and Company resources have been, and are expected to continue to be, devoted to the Security Incident.
In addition, publicity or developments related to the Security Incident could in the future have a range of other adverse effects on our business or prospects, including causing or contributing to loss of customer confidence, reduced customer demand, reduced customer retention, strategic growth opportunities, and associated retention and recruiting difficulties, some or all of which could be material.
Climate change and other natural disasters, new regulations and standards and climate-related goals have impacted, and may in the future impact, our operations and financial performance.
The long-term effects of climate change on the global economy and our industry may impact our business operations and those of our suppliers, customers and partners. Climate change increases the severity and frequency of extreme weather events such as hurricanes, wildfires, floods, heat waves or power shortages, all of which could lead to business disruptions. The locations of our principal executive offices, our data centers and our operations in India are vulnerable to the effects of climate events and other natural disasters, including hurricanes, heat waves, floods and earthquakes, which we have experienced in the past. In addition, the effects of climate change are harder to mitigate for our Remote-Flexible workforce, which exposes the Company to business disruption. Even though we carry business interruption insurance policies and typically have provisions in our commercial contracts that protect us in certain events, we might suffer losses as a result of business interruptions that exceed the coverage available under our insurance policies or for which we do not have coverage. Any natural disaster or catastrophic event affecting us could have a significant negative impact on our operations.
New regulations and standards relating to public disclosure, including proposed new rules related to climate change, could adversely impose significant costs on us to comply with such regulations.
Finally, a failure to meet our climate-related goals, such as our commitment and progress towards reduction of greenhouse gas emissions, could damage our reputation, affect our financial performance and impact our ability to attract and retain talent.
Defects, delays or interruptions in our cloud solutions and hosting services could diminish demand for these services and subject us to substantial liability.
We currently utilize data center hosting facilities to provide cloud solutions to a significant number of our subscription customers and hosting services to our on-premise license customers. Any damage to, or failure of, these data center systems generally could result in interruptions in service to our customers, notwithstanding any business continuity or disaster recovery agreements that may currently be in place at these facilities. As noted above, our executive offices, some of our data centers and our operations in India are located in areas that are vulnerable to the effects of climate change and could be subject to increased interruptions as a result of the severity and increased frequency of extreme weather events such as
Table of Contents
Blackbaud, Inc.
hurricanes, wildfires, floods, heat waves, or power shortages. Because our cloud solutions and hosting service offerings are complex and we have incorporated a variety of new computer hardware and software systems at our data centers, our services might have errors or defects that users identify after they begin using our services. This could result in unanticipated downtime for our customers and harm to our reputation and business results. Internet-based services sometimes contain undetected errors when first introduced or when new versions or enhancements are released. We have from time to time found defects in our web-based services and new errors might again be detected in the future. In addition, our customers might use our Internet-based offerings in unanticipated ways that cause a disruption in service for other customers attempting to access their data.
For example, on July 19, 2024, CrowdStrike Holdings, Inc. (“CrowdStrike”), which provides cybersecurity services to millions of Microsoft Windows systems worldwide, including to certain Windows systems operated by Blackbaud, implemented a software update to its Falcon sensor software that was flawed and caused Falcon to crash, thereby causing widespread crashes of Windows systems into which it was integrated, including certain Windows systems used by us and certain of our customers (the “CrowdStrike Event”). As a result, some of our customers were unable to access certain of our services and solutions, including our payments processing solutions. We evaluated the actual impact of the CrowdStrike Event on Blackbaud, both directly and indirectly due to the impact on our customers, and deemed it to be immaterial.
Because our customers use these services for important aspects of their businesses, any defects, delays or disruptions in service or other performance problems with our services, such as the CrowdStrike Event, could hurt our reputation and damage our customers' businesses. If that occurs, customers could elect to cancel their service, delay or withhold payment to us, not purchase from us in the future or make claims against us, which could result in an increase in our provision for credit losses, an increase in collection cycles for accounts receivable or the expense and risk of litigation. Any of these could harm our business and reputation.
Material defects or errors in the software we use to deliver our services could harm our reputation, result in significant costs to us and impair our ability to sell our services.
The software applications underlying our services are inherently complex and may contain material defects or errors, particularly when first introduced or when new versions or enhancements are released. We have from time to time found defects in our software, and new errors in our existing software may be detected in the future.
After the release of our software, defects or errors may also be identified from time to time by our internal team and our customers. The costs incurred in correcting any material defects or errors in our software may be substantial and could harm our operating results. Furthermore, our customers may use our software together with solutions from other companies. As a result, when problems occur, it might be difficult to identify the source of the problem. Even when our software does not cause these problems, the existence of these errors might cause us to incur significant costs, divert the attention of our technical personnel from our solution development efforts, impact our reputation and cause significant customer relations problems.
If we are unable, or our customers believe we may be unable, to detect and prevent unauthorized use of payment card or other private financial or personal information, or are otherwise unable to effectively manage our payment processing business, we could be subject to financial liability, our reputation could be harmed and customers may be reluctant to use our solutions and services.
Our solutions provide our customers payment processing capabilities that enable their constituents to make donations and purchase services using numerous payment options, including credit card and automated clearing house (“ACH”) checking transactions, through secure online transactions. The provision of convenient, trusted, fast and effective payment processing services to our customers and potential customers is critical to our business, and revenue from payments processing constitutes a significant percentage of our total revenue. Increases in payment processing fees, material changes in our payment processing systems, changes to rules or regulations concerning payments or disruptions or failures in our payment processing systems or payment products, including products we use to update payment information, could materially adversely impact our customer retention and results of operation. In addition, from time to time, we encounter fraudulent use of payment methods that could result in substantial additional costs or delay, preclude planned transactions, product launches or improvements, require significant and costly operational changes, impose restrictions, limitations, or additional requirements on our business, products and services, prevent or limit us from providing our products or services in a given market and adversely impact customer retention. Furthermore, we continue to undertake system upgrades designed to improve the availability, reliability, resiliency and speed of our payments systems. These efforts are costly and time-
Table of Contents
Blackbaud, Inc.
consuming, involve significant technical complexity and risk, may divert our resources from new features and products and may ultimately not be effective.
The rules of payment card associations in which we participate require that we comply with Payment Card Industry Data Security Standard ("PCI DSS") in order to preserve security of payment card data. Under PCI DSS, we are required to adopt and implement internal controls over the use, storage and security of payment card data to help prevent card fraud. Conforming our solutions and services to PCI DSS or other payment services related regulations or requirements imposed by payment networks or our customers or payment processing partners is expensive and time-consuming. However, failure to comply may subject us to fines, penalties, damages and civil liability, may impair the security of payment card data in our possession, and may harm our reputation and our business prospects, including by limiting our ability to process transactions. All Blackbaud products in scope for PCI DSS compliance meet applicable PCI DSS security requirements.
In addition, we routinely subject our various data protection processes and controls to voluntary third-party review, audit or reporting, including, for example, the American Institute of Certified Public Accountants’ System and Organization Controls reporting. Failure to conduct these voluntary data protection process and control reviews or to obtain and maintain audits or reports covering our data protection processes and controls may harm our reputation or our business prospects and our ability to market our solutions to our customers.
Financial Risks
Because a significant portion of our revenue is recognized over time on a ratable basis over the contract term, downturns in sales may not be immediately reflected in our revenue.
We generally recognize our subscription and maintenance revenue ratably over time over the contract term. Our subscription arrangements are generally for a term of three years at contract inception with three-year renewals thereafter. Our maintenance arrangement renewals are generally for a term of three years. As a result, much of the revenue we report in each quarter is attributable to arrangements entered into during previous quarters. Consequently, a decline in sales to new customers, renewals by existing customers or market acceptance of our solutions in any one quarter will not necessarily be fully reflected in the revenues in that quarter and could negatively affect our revenues and profitability in future quarters.
We have maintained an elevated leverage position, primarily due to stock repurchases, and we may increase our leverage in the future in connection with acquisitions or other business purposes, which could adversely impact our business and financial performance.
As part of our capital allocation strategy and stock repurchase program, we incurred a substantial amount of indebtedness to fund the ASR Transaction in March 2024 and other stock repurchases. As a result of this indebtedness and other borrowings, our interest payment obligations increased and our leverage ratio (as defined in our 2024 Credit Facilities) rose during 2024 and continued to increase into early 2025, reaching a peak of 2.91 to 1.00 as of March 31, 2025. Although our leverage ratio declined modestly during the remainder of 2025, it remained elevated at 2.52 to 1.00 as of December 31, 2025. Absent our ongoing repurchase activity, our leverage ratio would have declined further, as such activity continues to contribute to maintaining a higher level of leverage. In addition, we incurred certain operating expenses associated with our Security Incident, some of which were funded through borrowings.
The degree to which we are leveraged could have adverse effects on our business, including the following:
•Requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, dividends, stock repurchases and other general corporate purposes;
•Increasing the amount of interest we pay, particularly if interest rates increase;
•Limiting our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate;
•Restricting us from making additional strategic acquisitions or exploiting business opportunities;
•Placing us at a competitive disadvantage compared to our competitors that have less debt;
•Reducing our currently available borrowing capacity or limiting our ability to borrow additional funds; and
•Decreasing our ability to compete effectively or operate successfully under adverse economic and industry conditions.
Table of Contents
Blackbaud, Inc.
If we incur additional debt, these risks may intensify. Our ability to meet our debt service obligations will depend upon our future performance, which will be subject to the financial, business and other factors affecting our operations, many of which are beyond our control.
In addition, additional leverage could impact our ability to meet certain financial and other covenants contained in our 2024 Credit Facilities, which increased our total borrowing capacity from $1.1 billion to $1.5 billion. (See Note 9 to our consolidated financial statements in this report for a more detailed description of our 2024 Credit Facilities.) There can be no assurance that we will be able to remain in compliance with the covenants to which we are now subject or may be subject in the future and, if we fail to do so, that we will be able to obtain waivers from our lenders or amend the covenants.
In the event of a default under our 2024 Credit Facilities, we could be required to immediately repay all outstanding borrowings, which we might not be able to do and which would materially negatively affect our business, operations and financial condition.
Our balance sheet includes significant amounts of goodwill and intangible assets. The impairment of a significant portion of these assets, such as the EVERFI impairment charges, could negatively affect our operating results.
As of December 31, 2025, we had $1.1 billion and $106.7 million of goodwill and intangible assets, respectively. On at least an annual basis, we assess whether there have been impairments in the carrying value of goodwill and intangible assets. If the carrying value of an asset is determined to be impaired, then it is written down to fair value by a noncash charge to operating earnings. Changes in circumstances that could indicate that the carrying value of goodwill or intangible assets may not be recoverable include declines in our stock price, market capitalization, cash flows and slower growth rates in our industry. We cannot accurately predict the likelihood or potential amount and timing of any impairment of goodwill or other intangible assets. An impairment of a significant portion of goodwill or intangible assets, such as the EVERFI impairment charges discussed in Note 4 to our consolidated financial statements in this report, have in the past, and could in the future, materially and negatively affect our results of operations and financial condition.
Restrictions in our credit facility limit certain of our activities, including dividend payments, stock repurchases and acquisitions.
Our credit facility contains restrictions, including covenants limiting our ability to incur additional debt, grant liens, make acquisitions and other investments, prepay specified debt, consolidate, merge or acquire other businesses, sell assets, pay dividends and other distributions, repurchase stock and enter into transactions with affiliates. There can be no assurance that we will be able to remain in compliance with the covenants to which we are subject in the future and, if we fail to do so, that we will be able to obtain waivers from our lenders or amend the covenants.
In the event of a default under our credit facility, we could be required to immediately repay all outstanding borrowings, which we might not be able to do. In addition, certain of our material domestic subsidiaries are required to guarantee amounts borrowed under the credit facility, and we have pledged the shares of certain of our subsidiaries as collateral for our obligations under the credit facility. Any such default could have a material adverse effect on our ability to operate, including allowing lenders under the credit facility to enforce guarantees of our subsidiaries, if any, or exercise their rights with respect to the shares pledged as collateral.
We cannot guarantee that our stock repurchase program will be fully consummated or that it will enhance long-term stockholder value. Stock repurchases could also increase the volatility of the trading price of our stock and will diminish our cash reserves and increase our debt.
Although our board of directors has authorized a stock repurchase program that does not have an expiration date, the program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares of our common stock. We have, from time to time, repurchased stock under this program and re-initiated repurchases under the program in the fourth quarter of 2023 after a two-year hiatus. We cannot guarantee that the program will be fully consummated or that it will enhance long-term stockholder value. The program could affect the trading price of our stock and increase volatility, and any announcement of a termination of this program may result in a decrease in the trading price of our stock. In addition, implementation of some or all of this program diminishes our cash reserves and/or increases our debt, which may impact our ability to finance future growth and to pursue possible future strategic opportunities and acquisitions. (See Note 14 to our consolidated financial statements in this report for additional information related to our stock repurchase program, including authorization amount, shares purchased, amounts paid and shares remaining available for purchase.)
Table of Contents
Blackbaud, Inc.
During 2025, we have continued to be subject to 1% U.S. federal excise taxes on share repurchases. This tax liability will vary depending on various factors, including the amount and frequency of any stock repurchases and any permitted reductions or exceptions to the amount subject to the tax. Any resulting increase in our tax obligation or cash taxes paid could adversely affect our financial position and cash flows.
We have recorded significant deferred tax assets, and we might never realize their full value, which would result in a charge against our earnings.
As of December 31, 2025, we had deferred tax assets of $125.6 million. As of December 31, 2025, we have retained a valuation allowance against our U.S. net deferred tax assets. Realization of our deferred tax assets is dependent upon our generating sufficient taxable income in future years to realize the tax benefit from those assets. Deferred tax assets are reviewed at least annually for realizability. A charge against our earnings would result if, based on the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized beyond our existing valuation allowance. This could be caused by, among other things, deterioration in performance, adverse market conditions, adverse changes in applicable laws or regulations, including changes that restrict the activities of or affect the solutions sold by our business and a variety of other factors. If a deferred tax asset net of our valuation allowance was determined to be not realizable in a future period, the charge to earnings would be recognized as an expense in our results of operations in the period the determination is made. Additionally, if we are unable to utilize our deferred tax assets, our cash flow available to fund operations could be adversely affected.
Depending on future circumstances, it is possible that we might never realize the full value of our deferred tax assets. Any future impairment charges related to a significant portion of our deferred tax assets would have an adverse effect on our financial condition and results of operations.
Legal and Compliance Risks
Privacy and data protection concerns, including evolving domestic and international government regulation in the area of consumer data privacy or data protection, could adversely affect our business and operating results.
The effectiveness of our software solutions relies on our customers' storage and use of data concerning their customers, including financial, personally identifying or other sensitive data. Our customers' collection and use of this data for donor profiling, data analytics or communications outreach might raise privacy and data protection concerns and negatively impact the demand for our solutions and services. For example, our custom modeling and analytical services rely heavily on processing and using data we gather from customers and various sources. Privacy and data protection laws could add restrictions or regulatory burdens, which could limit our ability to market and profit from those services.
Governments in some jurisdictions have enacted or are considering enacting consumer data privacy or data protection legislation, including laws and regulations applying to the solicitation, collection, transfer, processing and use of personal data. This legislation could reduce the demand for our software solutions if we fail to design or enhance our solutions to enable our customers to comply with the privacy and data protection measures required by the legislation. Moreover, we may be exposed to liability under existing or new consumer privacy or data protection legislation. For example, when providing our solutions to certain customers in the healthcare industry, we must comply with applicable provisions of the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), and might be subject to similar provisions of other legislation, including, without limitation, the Gramm-Leach-Bliley Act and related regulations, and the California Consumer Privacy Act of 2018 and related regulations, and may apply to some of our customers and areas of business. Even technical violations of these laws may result in penalties that are assessed for each non-compliant transaction.
We, and some of our customers, are subject to the E.U. General Data Protection Regulation (“GDPR”) and U.K. data protection law, known as the "U.K. GDPR." The law requires companies to meet requirements regarding the handling of personal data, including rights such as the portability of personal data. All solutions we sell to customers subject to GDPR must include GDPR features. The implementation of GDPR has affected our ability to offer some features and services to customers in the E.U. and U.K. Furthermore, actions and investigations by regulatory authorities related to data security incidents and privacy violations continue to increase, which have impacted us, and could in the future further impact us, through increased costs or restrictions on our business, and noncompliance could result in significant regulatory penalties and legal liability.
If our customers or we were found to be subject to and in violation of any privacy or data protection laws or regulations, our business may be materially and adversely impacted and we and/or our customers would likely have to change our business
Table of Contents
Blackbaud, Inc.
practices. In addition, these laws and regulations could impose significant costs on our customers and us and make it more difficult for donors to make online donations. (See "Item 1A. Risk Factors. Operational Risks" in this report regarding the Security Incident and related risks.)
We are in the information technology business, and our solutions and services store, retrieve, transfer, manipulate and manage our customers’ information and data. The effectiveness of our software solutions relies on our customers’ storage and use of data concerning their donors, including financial, personally identifying and other sensitive data and our business uses similar systems that require us to store and use data with respect to our customers and personnel. Our collection and our customers’ collection and use of this data might raise privacy and data protection concerns and negatively impact our business or the demand for our solutions and services. If a breach of data security, such as the Security Incident, were to occur, or other violation of privacy or data protection laws and regulations were to be alleged, our business may be materially and adversely impacted and solutions may be perceived as less desirable, which would negatively affect our business and operating results.
Claims that we or our technologies infringe upon the intellectual property or other proprietary rights of a third party may require us to incur significant costs, enter into royalty or licensing agreements or develop or license substitute technology.
We have been, and may in the future be, subject to claims that the technologies in our solutions and services infringe upon the intellectual property or other proprietary rights of a third party. In addition, the vendors providing us with technology that we use in our own solutions could become subject to similar infringement claims. Although we believe that our solutions and services do not infringe any intellectual property or other proprietary rights, we cannot be certain that our solutions and services do not, or that they will not in the future, infringe intellectual property or other proprietary rights held by others. Any claims of infringement could cause us to incur substantial costs to defend against the claim, even if the claim is without merit, and could distract our management from our business. Moreover, any settlement or adverse judgment resulting from the claim could require us to pay substantial amounts, or obtain a license to continue to use the technology and services that are the subject of the claim, and/or otherwise restrict or prohibit our use of the same. There can be no assurance that we would be able to obtain a license on commercially reasonable terms from the third party asserting any particular claim, or that we would be able to successfully develop alternative technology on a timely basis, or that we would be able to obtain a license from another provider of suitable alternative technology to permit us to continue offering, and our customers to continue using, the solutions and services. In addition, we generally provide in our customer arrangements for certain solutions and services that we will indemnify our customers against third-party infringement claims relating to technology we provide to those customers, which could obligate us to pay damages if the solutions and services were found to be infringing. Infringement claims asserted against us, our vendors or our customers may have a material adverse effect on our business, prospects, financial condition and results of operations.
Our solutions utilize open source software, which may subject us to litigation, require us to re-engineer our solutions, or otherwise divert resources away from our development efforts.
We use open source software in connection with certain of our solutions. Such open source software is generally licensed by its authors or other third parties under open source licenses, including, for example, the GNU General Public License, the GNU Lesser General Public License, “Apache-style” licenses, “BSD-style” licenses and other open source licenses. There is little legal precedent governing the interpretation of many of the terms of some of these licenses and, therefore, the potential impact of these terms on our business is currently unable to be determined and may result in unanticipated obligations regarding our solutions and technologies. From time to time, companies that incorporate open source software into their products have faced claims challenging the ownership of open source software and/or compliance with open source license terms. Therefore, we could be subject to litigation by parties claiming ownership of open source software or noncompliance with open source licensing terms. Some open source software licenses require users who distribute open source software as part of their own software to publicly disclose all or part of the source code to such software and/or make available any derivative works of the open source code on unfavorable terms or at no cost. While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose the source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur and we may be required to release proprietary source code, pay damages for breach of contract, re-engineer our applications, discontinue sales in the event re-engineering cannot be accomplished on a timely basis, or take other remedial action that may divert resources away from our development efforts, any of which could adversely affect our business.
Table of Contents
Blackbaud, Inc.
We rely upon trademark, copyright, patent and trade secret laws to protect our proprietary rights, which might not provide us with adequate protection.
Our success and ability to compete depends to a significant degree upon the protection of our proprietary technology rights. We might not be successful in protecting our proprietary technology, particularly in non-U.S. jurisdictions, and our proprietary rights might not provide us with a meaningful competitive advantage. To protect our core proprietary technology, we rely on a combination of patent, trademark, copyright and trade secret laws, as well as nondisclosure agreements, each of which affords only limited protection.
Changing domestic and international laws, government regulations and policies, laws limiting or restricting our ability to pass card charges on to customers and other similar laws and regulations, could adversely affect our business and operating results by increasing compliance costs, reducing customer demand for our solutions or damaging our reputation.
Certain of our solutions, in particular our financial management and payment services solutions, relate to activity heavily regulated by government agencies in the U.S., the U.K., Canada and other countries in which we operate. The laws and regulations enforced by these agencies are proposed or enacted to deter fraud and other illicit financial transactions and to protect consumers and the financial system and are often revised or increased in scope. We have procedures and controls in place to monitor compliance with numerous federal, state and foreign laws and regulations. However, because these laws and regulations are complex, differ between jurisdictions, and are often subject to interpretation, or as a result of unintended errors, we may, from time to time, inadvertently violate these laws and regulations. Compliance with these laws and regulations is expensive and requires the time and attention of management. These costs divert capital and focus away from efforts intended to grow our business. If we do not successfully comply with laws, regulations, or policies, we could incur fines or penalties, be subject to litigation, lose existing or new customer contracts or other business, and suffer damage to our reputation.
Provisions in our organizational documents, certain officer compensation arrangements and Delaware law may delay or prevent an acquisition or change of control of our Company that could be deemed beneficial to our stockholders.
Certain provisions in our organizational documents, compensation arrangements with our officers and Delaware law (as summarized below) may have the effect of delaying, deferring, discouraging or preventing an acquisition or change in control of the Company or a change in our management. This includes tender offers for our common stock, proxy contests or other takeover attempts. These anti-takeover effects may discourage transactions that might result in the payment of a premium over the market price for shares of our common stock. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future.
Certificate of Incorporation and Bylaw provisions. The Board of Directors is divided into three classes of directors, as nearly equal in number as possible, with each class serving a staggered term of three years. The classification of directors will have the effect of making it more difficult and time-consuming for stockholders to change the composition of the Board of Directors, could discourage a third-party from making a tender offer or otherwise attempting to obtain control of the Company and may maintain the incumbency of the Board of Directors.
Our Bylaws contain an advance notice procedure for stockholders proposals to be brought before a meeting of stockholders, including any proposed nominations of persons for election to the Board of Directors. The Bylaws may have the effect of precluding the conduct of business at a meeting if the proper procedures are not followed and may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of the Company.
The Board of Directors has the authority to issue up to an aggregate of 20,000,000 shares of preferred stock in one or more classes or series and to determine, with respect to any such class or series, the designations, powers, preferences and rights of such class or series, and the qualifications, limitations and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption (including sinking fund provisions), redemption prices, liquidation preferences, and the number of shares constituting any class or series or the designation of such class or series, without further vote or action by the stockholders. This preferred stock could have terms that may discourage a potential acquirer from making, without first negotiating with the Board of Directors, an acquisition attempt through which such acquirer may be able to change the composition of the Board of Directors, including a tender offer or other takeover attempt. For example, the Company issued in 2022 to holders of Common Stock, and subsequently cancelled in 2024, rights to acquire shares of its Series A Junior Participating Preferred Stock (the “Series A Preferred Stock”). The Rights would have become exercisable if an
Table of Contents
Blackbaud, Inc.
entity, person or group acquires beneficial ownership of 20% or more of the outstanding Common Stock in a transaction not approved by the Board of Directors at a price, and in a manner, that would have likely made any takeover or change of control attempt by such entity, person or group prohibitively expensive. Additional information regarding the Rights Agreement and its termination is contained in the Company’s Current Reports on Form 8-K filed with the SEC on October 2, 2023, January 26, 2024 and March 18, 2024 and in the Company's Form 8-A/A filed with the SEC on March 18, 2024.
The Board of Directors possesses the authority to call and hold emergency special meetings of the Board of Directors with less than forty-eight hours’ notice. This power to hold an emergency special meeting of the Board of Directors on short notice could discourage a potential acquirer from launching a bid to acquire majority ownership of the Company, a proxy solicitation in order to replace the current Board of Directors, or otherwise attempting to obtain control of the Company.
Officer Compensation Arrangements. We have entered into an employment agreement with our Chief Executive Officer and retention agreements with certain of our officers, which provide that, upon the occurrence of a change in control of us and either the termination of their employment without cause (as defined) or their resignation for good reason (as defined), such persons would be entitled to certain termination or severance payments made by us (which may include a lump sum payment equal to defined percentages of compensation and accelerated vesting of certain equity stock awards paid in accordance with the terms and conditions of the respective agreement). Such provisions could significantly increase the costs to a third-party acquirer and/or deter such third-party from acquiring us.
Delaware anti-takeover law. We are subject to Section 203 of the Delaware General Corporation Law, an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation, such as the Company, from engaging in a “business combination” with an “interested stockholder” for a period of three years following the date the person became an interested stockholder, unless certain criteria are met. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or is an affiliate or associate of the corporation, and within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock.
Changes in our effective tax rate and additional tax liabilities, including those related to our stock repurchases, and global tax developments may impact our financial results.
We are subject to income taxes in the United States and various other jurisdictions. Significant judgment is often required in the determination of our worldwide provision for income taxes. Our effective tax rate could be impacted by changes in our earnings and losses in countries with differing statutory tax rates, changes in operations, changes in non-deductible expenses, changes in excess tax benefits of stock-based compensation, changes in the valuation of deferred tax assets and liabilities and our ability to utilize them, the applicability of withholding taxes, effects from acquisitions, and changes in accounting principles and tax laws. Any changes, ambiguity or uncertainty in taxing jurisdictions’ administrative interpretations, decisions, policies and positions could also materially impact our income tax liabilities.
We may also be subject to additional tax liabilities and penalties due to changes in non-income-based taxes resulting from changes in U.S. federal, state, provincial, local or international tax laws, changes in tax laws in taxing jurisdictions’ administrative interpretations, decisions, policies and positions, results of tax examinations, settlements or judicial decisions, changes in accounting principles, or changes to our business operations, including as a result of acquisitions and dispositions. For example, recent U.S. federal tax legislation continues to create uncertainty in our tax position, cash tax obligations, and financial results. The One Big Beautiful Bill Act (“OBBBA”), enacted on July 4, 2025, represents the most recent example of how rapidly evolving tax laws can materially affect our tax profile. Under Accounting Standards Codification ("ASC") 740, we recognized the impact of the first phase of OBBBA in the third quarter of 2025, including a downward adjustment to our valuation allowance and a reduction in our estimated annual effective tax rate due to the permanent restoration of immediate expensing of U.S. research and development expenditures. OBBBA also affected our deferred tax assets and liabilities, with an immediate net impact and expected material effects in fiscal years 2026 and 2027 as additional phases become effective.
We are also subject to tax examinations or engaged in alternative resolutions in multiple jurisdictions. While we regularly evaluate new information that may change our judgment resulting in recognition, derecognition or changes in measurement of a tax position taken, there can be no assurance that the final determination of any examinations will not have an adverse effect on our operating results or financial position.
Table of Contents
Blackbaud, Inc.
As we utilize our tax credits and net operating loss carryforwards, we may be unable to mitigate our tax obligations to the same extent as in prior years, which could have a material impact to our future cash flows. In addition, changes to our operating structure, including changes related to acquisitions, may result in cash tax obligations.
Global tax developments applicable to multinational businesses may have a material impact to our business, cash flow from operating activities, or financial results. Such developments, for example, may include certain United States’ proposals as well as the Organization for Economic Co-operation and Development’s ("the OECD"), the European Commission’s and certain major jurisdictions’ heightened interest in and taxation of companies participating in the digital economy. The OECD’s Pillar Two global minimum tax framework may materially impact our effective tax rate, cash tax obligations, and financial results. More than 140 jurisdictions have endorsed the OECD/G20 Inclusive Framework’s Pillar Two rules, implementing a 15% global minimum tax through the Income Inclusion Rule, Undertaxed Profits Rule, and Qualified Domestic Minimum Top‐Up Taxes ("QDMTTs"). Several jurisdictions in which we operate have enacted or are in the process of enacting these rules, and others may do so in future years. As these rules continue to evolve, our global tax profile may be subject to significant variability and additional compliance burden.
We currently expect to qualify for at least one of the OECD Transitional Safe Harbors, which include the simplified effective tax rate ("ETR") test, routine profits test, and de minimis test. If we qualify, this would reduce or defer Pillar Two exposure during the transition period. However, qualification depends on jurisdiction‐level financial data, ongoing interpretations, and annual testing requirements. Safe‐harbor eligibility may change from year to year based on operating performance, local statutory developments, or new administrative guidance. Accordingly, there can be no assurance that we will qualify for one or more safe harbors in future periods.
In addition, the United States has entered into “side‐by‐side” agreements with other Inclusive Framework members, under which each jurisdiction may apply its domestic minimum‐tax regime (such as the U.S. corporate alternative minimum tax ["CAMT"] under the Inflation Reduction Act) in parallel with Pillar Two rules. These agreements do not provide an exemption from Pillar Two for U.S.‐headed multinational groups; instead, they increase the likelihood that U.S. rules and foreign QDMTTs will apply concurrently. This new regime goes into effect for years starting in 2026.
Because Pillar Two calculations rely on jurisdiction‐specific adjusted financial statement income, deferred‐tax adjustments, substance‐based exclusions, and intercompany‐transaction rules, the application of these rules may significantly increase the complexity of our global tax computations. Future guidance, data‐requirements, safe‐harbor expirations, or differences in local implementation may result in additional tax expense, increased volatility in our effective tax rate, or new compliance and reporting obligations. Any such developments could materially impact our provision for income taxes, cash flows, and overall financial results.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy
Overview of Processes for Assessing, Identifying and Managing Material Cyber Risks
Because technology, data and information security is a top priority at Blackbaud, we maintain and continuously assess and strengthen our cybersecurity program. Comprehensive cybersecurity risk management, including identification, analysis and response to risks affecting our business and its customers, provides the foundation for our program. Our cybersecurity program has been and will continue to be further enhanced by our compliance with the settlement of governmental investigations relating to the Security Incident. See Note 11 to the consolidated audited financial statements contained in this report for additional information regarding the Security Incident.
Table of Contents
Blackbaud, Inc.
We utilize a four-prong strategy for assessing, identifying and managing material risks from cybersecurity threats:
1.Operational security: We leverage the industry standard CIA Triad Model in conjunction with comprehensive industry control frameworks, compliance regulations, privacy requirements and best practices, including: the National Institute of Standards and Technology ("NIST") Cybersecurity Framework, PCI DSS, System and Organization Controls ("SOC") 1, SOC 2, GDPR, HIPAA, the Trans-Atlantic Data Privacy Framework and Cloud Security Alliance.
2.Product security:Our development teams take part in regular training and use industry best practices to build security into our solutions.
3.Incident response: We monitor the threat landscape 24/7 in coordination with a third-party firm, routinely test our incident response capabilities and preparedness and maintain proactive relationships with law enforcement.
4.Ongoing landscape analysis: We continually evaluate upcoming and changing data privacy regulations and provide thought leadership for our customers on the operational impacts of these regulations and compliance requirements.
We believe that information and technology security is a shared responsibility and, therefore, incorporate data and privacy protection education into the customer experience through ongoing resources such as best practices content, one-on-one consultations with customer success managers and bbcon® sessions. We also participate in global communities and conference platforms to share information and present on best practices to improve the industry’s security awareness posture. In addition, Blackbaud employees are all engaged in on-going security and privacy awareness training campaigns to ensure they are empowered to protect both Blackbaud’s and our customers’ data.
Integration into Overall Risk Management System or Processes
Consistent with our prioritization of information and technology protection, cybersecurity risk management has been and remains a key aspect of our overall business strategy, financial planning and capital allocation and a point of ongoing emphasis at all levels of our Company. Our enterprise risk management ("ERM") framework integrates our information technology and data management systems and related policies and practices into the larger framework to help guide and prioritize our cybersecurity and information technology-related investments, activities and risk management strategy. At least annually, we review cybersecurity risk as part of our ERM processes and integrate those findings into our overall strategy. Additionally, our cybersecurity program is further integrated with our overall risk management program through our Chief Information Security Officer's ("CISO") participation in such governance structures as our Risk Steering Committee and our Disclosure Committee, both of which are described in detail below.
Engagement of Third Parties
We regularly engage outside consultants and experts to assist us regarding our cybersecurity program. Engagements include an annual NIST Cybersecurity Framework assessment to ensure a reasonable cybersecurity program and retained leading external cybersecurity Incident Response (IR) experts.
Risks from Third-Party Service Providers and Others
Blackbaud also maintains a defined program and dedicated team that provides security oversight of its third-party service providers. This program assesses and manages risk at the onboarding phase of engagement with third-party vendors and partners as well as oversight throughout the lifecycle of the vendor relationship.
Risks from Cybersecurity Threats; Actual and Potential Material Impact
In addition, we continuously learn from and leverage experience gained from previous cybersecurity incidents that we, like many other companies, have experienced. As previously disclosed, we were subject to a ransomware attack against us in May 2020 in which a cybercriminal removed a copy of a subset of data from our self-hosted environment. As a result of the Security Incident, we were subject to various legal proceedings, claims, inquiries and investigations, the resolution of which resulted in material adverse judgments, settlements, fines, penalties or other resolutions. See Note 11 to the consolidated audited financial statements contained in this report for additional information regarding the Security Incident and its impact on the Company.
Table of Contents
Blackbaud, Inc.
Notwithstanding our strong commitment to cybersecurity, we may not be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us. See Item 1A. "Risk Factors" for a discussion of our cybersecurity risks.
Governance
Management's Assessment and Management of Cybersecurity Threats
Our multi-level cybersecurity governance and risk management structure begins with our Risk Evaluation & Enterprise Framework ("REEF") Committee consisting of cross-functional management representatives throughout our Company. The REEF Committee receives detailed cybersecurity information from key security personnel and reports at least quarterly up through our Risk Steering Committee, which is made up of executives and senior management from various Blackbaud departments: Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Information Officer, Chief Technology Officer, Chief Legal Officer, Chief Privacy Officer and CISO, who has extensive information technology and program management experience.Our CISO has served in various roles of increasing responsibility in information technology and information security for more than 25 years, including serving in various cybersecurity leadership roles at private companies. He holds two undergraduate degrees—one in business administration and the other in computer information systems—and a graduate degree in information systems, maintains multiple cybersecurity industry recognized certifications and is an alumnus of the FBI CISO Academy. Cybersecurity leaders reporting to our CISO also have significant information technology and information security experience and industry recognized certifications.
Additionally, our cybersecurity Incident Response plan timely informs our Cybersecurity Incident Subcommittee on active cybersecurity incidents that are potentially material. The Cybersecurity Subcommittee determines cybersecurity materiality and is made up of our Chief Legal Officer, CISO and Senior Director of SEC Reporting. Our Cybersecurity Incident Subcommittee is part of our Disclosure Committee, which is appointed by Chief Executive Officer and Chief Financial Officer to assist our executives in their responsibility for oversight of the accuracy and timeliness of the disclosures made by Blackbaud.
Board Oversight
The Risk Steering Committee reports to the Risk Oversight Committee of our Board of Directors at the regular quarterly meetings, or more frequently as needed. The Risk Oversight Committee's duties include, among other things, oversight of risks related to information technology security. The Risk Oversight Committee communicates as appropriate with the full Board of Directors, which is ultimately responsible for cybersecurity risk oversight.
Table of Contents
Blackbaud, Inc.
ITEM 2. PROPERTIES
We own our LEED Gold certified global headquarters facility in Charleston, South Carolina, which consists of approximately 172,000 square feet. We believe that it is in good operating condition and adequately serves our current business operations. As a Remote-Flexible workforce company, we have leased a significant portion of the office space in our global headquarters facility to unrelated third parties. In June 2025 and January 2026, we signed leases as lessee for 69,058 and 45,370 square feet, respectively, of office space in Hyderabad, India to support our business operations in India. In February 2025, we were released from our lease for office space in Washington, DC (which was acquired as part of our acquisition of EVERFI in December 2021). For additional information, see Note 11 to our consolidated financial statements in this report.
ITEM 3. LEGAL PROCEEDINGS
For a discussion of our legal proceedings, see Note 11 to our consolidated financial statements in this report.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
Table of Contents
Blackbaud, Inc.
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is trading on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbol “BLKB.” According to the records of our transfer agent, as of February 9, 2026, there were approximately 95 stockholders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, this number is not representative of the total number of beneficial owners of our stock. On February 9, 2026, the closing price of our common stock was $48.25.
Stock Performance Graph
The following performance graph shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act except as shall be expressly set forth by specific reference in such filing. The performance graph compares the performance of our common stock to the Nasdaq Composite Index and the Nasdaq Computer Index. The graph covers the most recent five-year period ended December 31, 2025. The graph assumes that the value of the investment in our common stock and each index was $100.00 at December 31, 2020, and that all dividends are reinvested.
Table of Contents
Blackbaud, Inc.
Issuer Purchases of Equity Securities
The following table provides information about shares of common stock acquired or repurchased during the three months ended December 31, 2025 under our stock repurchase program as then in effect, as well as common stock withheld by us to satisfy the minimum tax obligations of employees due upon vesting of restricted stock awards and units.
(1)Includes 4,213 shares (1,274 in October, 2,182 in November and 757 in December) withheld by us to satisfy the minimum tax obligations of employees due upon vesting of restricted stock awards and units. The level of this acquisition activity varies from period to period based upon the timing of award grants and vesting.
(2)In December 2025, our Board of Directors reauthorized, expanded and replenished our stock repurchase program by raising the total capacity under the program from $800.0 million to $1.0 billion available for repurchases. The program does not have an expiration date.
Dividends
We have not declared or paid any cash dividends on our common stock since the first quarter of 2020, and we do not presently plan to pay cash dividends on our common stock in the foreseeable future. Payment of future cash dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, outstanding indebtedness, plans for expansion and restrictions imposed by our debt arrangements, if any.
ITEM 6. [RESERVED]
Table of Contents
Blackbaud, Inc.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Item 1A Risk factors and our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. The following discussion and analysis presents financial information denominated in millions of dollars which can lead to differences from rounding when compared to similar information contained in the consolidated financial statements and related notes, which are primarily denominated in thousands of dollars.
Executive Summary
We are the world's leading provider of AI-powered solutions for social impact. Serving nonprofits, educational institutions, companies committed to corporate social responsibility and individual change makers, we propel impact at scale with the sector’s most intelligent solutions for fundraising and engagement, education solutions, financial management and CSR and grantmaking. We have operations in the United States, Australia, Canada, Costa Rica, India and the United Kingdom, supporting users in 100+ countries.
Our revenue is primarily generated from the following sources: (i) charging for the use of our software solutions in cloud and hosted environments; and (ii) providing payment and transaction services.
Operating Initiatives Supporting Long-Term Growth and Margin Improvement
•Product Innovation and Delivery
A central element of our long‐term strategy is the disciplined integration of AI across our products, platform and internal operations, which management views as foundational to driving operating leverage, enhancing customer outcomes and supporting sustainable growth over time.
Our product innovation efforts have focused on two primary areas: (i) advancing AI across the portfolio, and (ii) enhancing product connectivity and interoperability to streamline customer workflows. These enhancements are designed to help customers improve fundraising outcomes while reducing administrative burden.
Through our multi-year Intelligence for Good® initiative, we continue to integrate machine learning and AI-driven capabilities into our products to improve efficiency and support better outcomes for our customers. Our machine learning features for prospect identification have been adopted by more than half of Raiser's Edge NXT® customers. We have also introduced generative AI features across multiple products, primarily supporting the composition of donor and constituent communications.
In late 2025, we released Blackbaud AI Chat, which provides contextual responses within our solutions and assists users in completing tasks more efficiently. At bbcon®, our annual user conference in October 2025, we launched Agents for GoodTM, our agentic AI suite, designed to augment customer teams with virtual AI-driven assistants capable of autonomously executing complex workflows across fundraising, finance and corporate impact functions. These innovations expand the ways customers can use our solutions and are expected to contribute to future bookings, product adoption and customer retention.
•Targeting Mid-Single-Digit Revenue Growth
Contractual Recurring Revenue (~64% of total revenue)
Contractual recurring revenue is driven by new‐customer bookings, cross‐sell and upsell activity within our existing customer base and the retention of existing customer revenue. Our sales organization includes teams focused on both new logo acquisition and expansion within existing customers. In addition to these motions, our new product opportunities (such as Agents for Good discussed above) provide our customer account teams with incremental solutions
Table of Contents
Blackbaud, Inc.
to sell into existing customers. These three motions—new logo, cross-sell/upsell, and new product—support our multi-year “land and expand” strategy.
Most of our software customers now operate on standard three‐year contract terms with mid-to-high single-digit price increases at renewal and embedded annual price increases. These terms provide improved revenue visibility and are expected to contribute to stability in retention rates. Revenue from these arrangements is generally recognized ratably over the contract term.
While our contract renewal program is designed around three‐year terms, more than 20% of renewing customers have elected to enter into four‐year or longer contracts. Accordingly, our customer base is primarily composed of three‐year contracts, with over 20% of customers committed under extended‐term arrangements, which contributes to revenue visibility while extending the duration over which renewals occur.
Because revenue from these contractual arrangements is recognized ratably over the contract term, changes in contract duration affect the period over which revenue is recognized but do not change the pattern of revenue recognition within the contract. To the extent contracts include embedded annual price escalators, the total fees attributable to the subscription-based software solutions are recognized on a straight-line basis over the term of the arrangement, resulting in a more even pattern of revenue recognition over longer periods. Accordingly, period‐over‐period revenue growth continues to be driven primarily by the retention of existing customer revenue, combined with new bookings, expansion activity and contractual renewals with price increases and embedded annual price escalators over the contractual term. Extended‐term arrangements contribute to improved visibility into future revenue and cash flows.
Renewal performance can vary from year to year due to the size and composition of renewal cohorts. Approximately 40% of our existing customer contracts are due for renewal in 2026, compared to approximately 30% in 2027 and approximately 30% in 2028. The contractual annual recurring revenue dollars up for renewal associated with the 2026 renewal cohort are approximately 40% higher than those up for renewal in 2025, reflecting the normal progression of our multi-year contract renewal cycle and the timing of customer renewals. Because the 2026 cohort is meaningfully larger, we may experience higher churn dollars in that year relative to prior years. These cohort dynamics are a normal part of our renewal cycle and can influence year-over-year revenue trends, even when underlying customer retention patterns remain stable.
Transactional Recurring Revenue (~34% of total revenue)
Transactional recurring revenue is diversified across multiple activity types. The primary components of this revenue stream—and their associated products—include:
◦Donation Processing (~55%) - support by Blackbaud Integrated Payments, which powers donation activity across our fundraising and CRM solutions.
◦Consumer Giving (~20%) - driven by JustGiving, which facilitates individual, peer-to-peer and community-driven giving.
◦Tuition Management (~20%) - generated through Blackbaud Tuition Management, which processes tuition, fees and related financial transactions for K-12 private schools.
◦Event‐based Usage (~5%) - derived from usage-based transactions across certain registration, ticketing and event-related workflows within our product suite.
The diversity of these underlying transaction types has contributed to consistent high-single-digit growth in transactional recurring revenue in recent years. In certain periods, transactional recurring revenue may benefit from temporary increases in charitable giving related to isolated events, which can contribute to short‐term variability in transaction volumes. Future growth in this category will depend on volume (e.g., donation activity, giving behavior, tuition payments), same‐store volume trends, the shift toward donor online giving, customer adoption of our payments capabilities and pricing optimization initiatives.
Certain components of transactional revenue—as with the broader social good sector—are influenced by external factors such as giving patterns, macroeconomic conditions and seasonal activity.
We have experienced continued growth in donation processing, consumer giving and tuition management, have implemented targeted rate increases across select areas of our payments portfolio, and are executing additional
Table of Contents
Blackbaud, Inc.
optimization initiatives intended to enhance the donor experience and support long-term transactional revenue expansion.
•Operating Efficiency and Margin Improvement
We are focused on improving operating efficiency and enhancing profitability over time. This includes actions to optimize our workforce, improve productivity, modernize our technology platform and simplify our cost structure. Consistent with this focus, we are applying AI across our internal operations as a tool to support productivity, scalability and operational effectiveness over time.
We have taken several steps to improve efficiency in recent years, including reductions in headcount, optimization of our real estate footprint, renegotiation of key vendor contracts, continued migration of our product infrastructure to public cloud environments and planned closure of our two remaining legacy private data centers. We are also deploying AI-enabled tools across our internal operations, including research and development, customer operations and general and administrative functions, to automate routine activities, accelerate workflows and support internal productivity, while maintaining appropriate controls and governance.
As part of our multi-year global workforce strategy, we are expanding our global footprint through the continued build-out of our Global Capability Center ("GCC") in Hyderabad, India. This expansion enhances our access to talent, enables labor arbitrage while maintaining a high quality of work, and supports a follow-the-sun operating model. Our adoption of AI complements this strategy by informing how we assess roles, skill requirements and productivity opportunities as our operating model evolves.
Beginning in 2024, we have relied on a combination of (i) insourcing certain roles previously performed by third parties into the GCC, (ii) evaluating roles and required skill sets, including opportunities created through our adoption of AI, to determine whether positions that become vacant through attrition should be backfilled within the GCC, and (iii) opportunistically transitioning additional roles to the GCC. We expect to continue this approach as we execute the next phase our global workforce strategy through 2027.
In connection with these efforts, we currently expect to incur pre‐tax GCC workforce transition costs of $6 million to $8 million in 2026, consisting primarily of severance and other employee transition‐related expenses. These costs will be recognized as incurred as impacted employees are notified and related services are received. Because planning for later phases of this multiyear initiative remains ongoing, our current estimates relate only to expected costs in 2026. We expect to provide updates as planning progresses.
We expect the actions taken in 2026, together with later phases of the initiative, to begin generating operating cost efficiencies starting in 2027, although the timing and magnitude of these benefits will depend on the pace of execution, role transitions, technology adoption and other operational factors.
•Stock repurchase program
On December 1, 2025, our Board of Directors reauthorized, expanded and replenished our stock repurchase program by raising the total capacity under the program from $800.0 million to $1.0 billion available for repurchases. The program does not have an expiration date and authorizes the repurchase of shares from time to time in accordance with applicable laws, including through open market transactions, transactions under Rule 10b5-1 trading plans, and privately negotiated transactions. The timing and amount of repurchases are determined based on a variety of factors, including market and business conditions, the trading price of our common stock and alternative uses of capital, and the program may be limited, suspended or discontinued at any time without prior notice.
Table of Contents
Blackbaud, Inc.
On December 2, 2025, we announced an increase in our expected fiscal year 2025 stock repurchase range to between 7.0% and 8.5% of our outstanding common stock as of December 31, 2024. During the year ended December 31, 2025, we repurchased 3,337,844 shares for $214.0 million. Including net share settlement of employee stock compensation, these repurchases represented approximately 7.9% of our outstanding common stock as of December 31, 2024. As of December 31, 2025, $960.6 million remained available for repurchases under the program. During 2026, we intend to repurchase between 5.0% and 10.0% of our outstanding common stock as of December 31, 2025 under our existing stock repurchase program. Over the long term, we expect stock repurchases to remain an important component of our capital allocation strategy, subject to market conditions, business performance, leverage considerations, and other factors. We anticipate utilizing at least 50% of our free cash flow from 2026 to 2030 for stock repurchases. See discussion of our Non‐GAAP Financial Measures below.
Financial Summary
Total revenue ($M) Income (loss) from operations ($M)
YoY Growth (%) YoY Growth (%)
Total revenue decreased by $26.3 million during 2025, driven largely by the following:
For information on the impact of foreign currency fluctuations on our financial results, see Foreign Currency Exchange Rates below on page 59.
Table of Contents
Blackbaud, Inc.
Income from operations increased by $462.1 million during 2025, driven largely by the following:
- Decrease 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.
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.
Gross dollar retention
Table of Contents
Blackbaud, Inc.
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 2025, our gross dollar retention was approximately 92%. This gross dollar retention rate increased over our rate for the full year ended December 31, 2024 primarily due to our sale of EVERFI. Changes in the amount of contractual annual recurring revenue up for renewal in a given period may impact absolute churn dollars even when customer renewal rates remain relatively consistent from year to year. We are continually investing in innovation, which we believe will support gross dollar retention over the long-term.
Balance sheet and cash flow
At December 31, 2025, our cash and cash equivalents were $38.9 million. Under the 2024 Credit Facilities, the carrying amount of our debt was $1.1 billion and our net leverage ratio was 2.52 to 1.00.
During 2025, we generated $265.6 million in cash flow from operations, had a net increase in borrowings of $34.7 million, returned $214.0 million to stockholders by way of share repurchases and had aggregate cash outlays of $62.0 million for purchases of property and equipment and capitalized software development costs.
On July 4, 2025, the United States enacted the OBBBA, which introduced significant changes to U.S. tax law. See Note 12 to our consolidated financial statements in this report for more information. OBBBA impacts meaningfully contributed to reducing U.S. cash taxes in 2025. We expect to continue to see meaningful reductions to cash taxes through 2027. U.S. state OBBBA conformity considerations (which continue to evolve as the states address the new Federal tax legislation) and the phase-in of the OBBBA international tax provisions in 2026 may continue to affect this cash reduction.
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 2025 vs. 2024
For information regarding the comparison of 2024 to 2023, please refer to Part II Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 21, 2025.
Disposition
As previously disclosed, on December 31, 2024, we disposed of our EVERFI business, formerly a wholly owned subsidiary of Blackbaud, Inc, to a private investment firm that is unaffiliated with Blackbaud for nominal cash consideration. The results of operations of EVERFI are not included in our consolidated results of operations subsequent to the date of disposition.
Reclassifications
Our revenue from "recurring" and "one-time services and other" have been combined within "revenue" beginning in 2025 due to the immateriality of our one-time services and other revenue. In order to provide comparability between periods presented, our “recurring“ and “one-time services and other" revenue lines have been combined within “revenue" in the previously reported consolidated statements of comprehensive income to conform to the presentation of the current period. Similarly, "cost of recurring" and "cost of one-time services and other" have been combined within "cost of revenue" in the previously reported consolidated statements of comprehensive income to conform to the presentation of the current period.
Revision of Prior Period Financial Statements
During the third quarter of 2025, we identified a prior period noncash error related to the previously recorded valuation allowance in accounting for income taxes. We have revised previously issued financial statements to correct this error, along with other immaterial prior period errors. None of the revisions were considered material to the prior periods impacted, as disclosed in Note 13 to our unaudited, condensed consolidated financial statements contained in our Quarterly Report on Form 10-Q filed with the SEC on November 3, 2025. All amounts in Item 2 of this filing are provided as revised.
Table of Contents
Blackbaud, Inc.
Revenue and Cost of Revenue
Revenue ($M) Cost of revenue ($M) Gross profit ($M)and gross margin (%)
YoY Growth (%) YoY Growth (%)
Our revenue includes three components: contractual recurring, transactional recurring and one-time services and other.
•Contractual recurring revenue is primarily comprised of fees for the use of our subscription-based software solutions, which includes providing access to cloud solutions, including cloud solutions that incorporate AI-enabled functionality, 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 fees and voluntary donor contributions (to offset processing fees) associated with the use of our solutions, including donation processing, tuition management, consumer giving and event-based usage.
•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 revenue is primarily comprised of compensation costs for customer support, production IT, professional services and onsite training personnel, hosting and data center costs, third-party contractor expenses, third-party royalty and data expenses, allocated depreciation, facilities and IT support (including cybersecurity) 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, data expense incurred to perform one-time analytic services and other costs incurred in providing support, recurring services and onsite customer training 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.
Table of Contents
Blackbaud, Inc.
Revenue decreased by $26.3 million, or 2.3%. For a discussion of our changes in revenue, see "Revenue" above starting on page 41 in this report.
Cost of revenue decreased by $58.1 million, or 11.1%, driven primarily by the following:
Gross margin increased by 410 basis points primarily due to the decrease in cost of revenue outpacing the decrease in 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 (including cybersecurity) costs.
We see a large market opportunity in the long-term and will continue to make investments to drive sales effectiveness. These investments include enhancements to our go‐to‐market approach and the use of software tools, including AI‐enabled sales development capabilities, to enhance our digital footprint, support lead generation and improve sales execution efficiency. For example, we utilize AI to increase sales development representative engagement and customer conversations, supporting pipeline generation. The enhancements we are making in our go-to-market approach are expected to reduce our average customer acquisition cost per customer and related payback period while increasing sales velocity.
Table of Contents
Blackbaud, Inc.
Sales, marketing and customer success expenses decreased by $19.9 million, or 10.1%. 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 (including cybersecurity) costs.
We continue to make investments intended to delight our customers with innovative and secure cloud solutions, including AI technology. Research and development expense decreased by $15.6 million, or 10.1%. The decreases in dollars and as a percentage of total revenue were primarily driven by the following:
Not included in research and development expense for 2025 and 2024 were $52.5 million and $60.8 million, respectively, of qualifying costs associated with software development activities that are required to be capitalized under GAAP, such as those for our cloud solutions. Qualifying capitalized development costs associated with our cloud solutions are subsequently amortized to cost of revenue over the related assets' estimated useful life, which generally range from three to seven years. We expect that the amount of software development costs capitalized will be relatively consistent in the near-term as we continue making investments in innovation, quality, security and the integration of our solutions, which we believe will drive long-term revenue growth.
Table of Contents
Blackbaud, Inc.
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 (including cybersecurity) costs, acquisition-related expenses and other administrative expenses.
General and administrative expenses increased by $11.9 million, or 8.3%. The increases in dollars and as a percentage of total revenue were primarily driven by the following:
Table of Contents
Blackbaud, Inc.
Interest Expense
Interest expense ($M)
Percentages indicate expenses as a percentage of total revenue
Interest expense increased in dollars and as a percentage of total revenue during 2025 when compared to 2024, primarily due to our incremental borrowings to fund stock repurchases during 2024 and 2025 and the expiration of favorable interest rate swaps in October 2024. We currently expect interest expense for the full year 2026 to be approximately $62 million to $66 million although our interest expense in connection with the variable rate portion of our outstanding debt could increase in a rising interest rate environment. See Note 10 to our consolidated financial statements in this report for more information regarding our derivative instruments, which we use to manage our variable interest rate risk, and Item 7A. Quantitative and Qualitative Disclosures about Market Risk: Interest Rate Risk on page 63 for more information about our variable interest rate exposure and related risk.
Other Income, Net
Other income, net ($M)
Percentages indicate other income, net as a percentage of total revenue
The decrease in other income, net in dollars and as a percentage of total revenue during 2025, when compared to 2024, was primarily due to a current year currency revaluation loss compared to a gain in the prior year and, to a lesser extent, by a decrease in interest income largely driven by lower year-over-year U.S. federal interest rates. See Note 8 to our consolidated financial statements in this report for more information regarding our other income.
Table of Contents
Blackbaud, Inc.
Deferred Revenue
The table below compares the components of deferred revenue from our consolidated balance sheets:
(dollars in millions) December 31,2025 December 31,2024 Change
Less: Long-term portion 2.8 2.0 37.9 %
(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. Revenue from these arrangements is generally recognized ratably over the contract term.
The increase in deferred revenue during the year ended December 31, 2025 was primarily due to billings related to contract renewals and new subscription sales of our cloud solutions. Historically, due to the timing of customer budget cycles, we have an increase in billings and customer contract renewals at or near the beginning of our third quarter. Generally, our lowest balance of deferred revenue during the year is at the end of our first quarter.
Income Taxes
Income tax provision (benefit) ($M)
Percentages indicate 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 U.S. federal, U.S. state, and international net operating loss carryforwards, federal and state capital loss carryforwards 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 allowance due to the uncertainty of realizing such carryforwards in the future. 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. Our U.S. consolidated group remains in a three‐year cumulative pretax book loss position. As such, we intend to continue maintaining a 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, Costa Rica and India. We are generally subject to U.S. federal income tax examinations for
Table of Contents
Blackbaud, Inc.
calendar tax years ending 2022 through 2025, as well as state and foreign income tax examinations for various years depending on statutes of limitations and net operating loss and/or tax credit utilization in those jurisdictions.
The increase in our effective income tax rate for year ended December 31, 2025, when compared to the same period in 2024, was primarily attributable to normalization of several non-recurring events in 2024, in which we had recorded the 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.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into U.S. federal income tax law. OBBBA permanently extends immediate expensing of research and development (“R&D”) expenditures under Internal Revenue Code Section 174 and provides transition rules for previously capitalized R&D costs. Under ASC 740, these changes modify the measurement of certain deferred tax assets (“DTAs”), particularly those arising from capitalized Section 174 expenditures.
Additionally, in 2025, the valuation allowance decreased primarily due to the pre-tax income recorded during the current year as well as the enactment of the OBBBA, which resulted in the realizability of certain U.S. deferred tax assets. 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. Management continues to evaluate the impact of future phases of OBBBA that will become effective beginning in 2026, including changes to international tax provisions and interest limitation rules; however, for 2025, no further material impact beyond the valuation allowance‐driven effects is expected.
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.
Table of Contents
Blackbaud, Inc.
Years ended December 31,
(dollars in millions, except per share amounts) 2025 2024
GAAP gross margin 58.8 % 54.7 %
Non-GAAP adjustments:
Add: Stock-based compensation expense 11.5 14.1
Add: Amortization of intangibles from business combinations 27.6 57.0
Add: Employee severance 0.3 —
Non-GAAP gross margin 62.3 % 60.8 %
GAAP income (loss) from operations $ 190.8 $ (271.4)
GAAP operating margin 16.9 % (23.5) %
Non-GAAP adjustments:
Add: Stock-based compensation expense 92.9 105.0
Add: Amortization of intangibles from business combinations 29.9 60.5
Add: Employee severance 1.9 —
Add: Acquisition and disposition-related costs(2) 25.9 6.1
Add: Security Incident-related costs(3) 3.1 13.7
Add: EVERFI impairment and disposition charges — 405.4
Non-GAAP income from operations(1) $ 344.4 $ 319.2
Non-GAAP operating margin 30.5 % 27.6 %
GAAP income (loss) before provision (benefit) for income taxes $ 131.8 $ (312.5)
GAAP diluted earnings (loss) per share $ 2.37 $ (5.92)
Non-GAAP adjustments:
Add: GAAP income tax provision (benefit) 16.8 (12.9)
Add: Total non-GAAP adjustments affecting income from operations 153.7 590.6
Non-GAAP income before provision for income taxes(1) 285.5 278.2
Assumed non-GAAP income tax provision(4) 69.9 68.2
Non-GAAP diluted earnings per share $ 4.45 $ 4.06
(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 charges of $24.3 million incurred during the twelve months ended December 31, 2025 related to the release from our lease for office space in Washington, DC (which was acquired as part of our acquisition of EVERFI in December 2021) and noncash impairment charges incurred during the twelve months ended December 31, 2024 related to the sublease of our Washington, DC office location prior to the EVERFI disposition.
(3)Includes Security Incident-related costs incurred during the twelve months ended December 31, 2025 and 2024 of $3.1 million and $13.7 million, respectively, which included approximately $1.1 million and $6.8 million, respectively, in recorded accruals 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. As of December 31, 2025, we do not have any recorded liabilities for loss contingencies related to the Security Incident.
(4)We use a non-GAAP effective tax rate of 24.5% when calculating non-GAAP net income and non-GAAP diluted earnings per share. We base this rate on our estimated annual GAAP income tax rate, adjusted for items excluded from GAAP income when calculating non-GAAP income and for significant nonrecurring tax adjustments. We review this non-GAAP tax rate annually to determine whether it remains appropriate for evaluating our financial performance. In conducting this review, we consider our GAAP annual effective tax rate, changes in tax legislation, non-GAAP adjustments, and shifts in the geographic mix of revenues and expenses. We also evaluate other factors that we deem significant. Because the tax treatment of non-GAAP adjustments differs from GAAP and because of our methodology for estimating the annual tax rate, the non-GAAP tax rate may differ from the GAAP tax rate and from our actual tax liabilities.
Table of Contents
Blackbaud, Inc.
Non-GAAP organic revenue growth
In addition, we use non-GAAP organic revenue growth, non-GAAP organic revenue growth on a constant currency basis, non-GAAP organic recurring revenue growth and non-GAAP organic recurring revenue growth 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 (2.3) %
Less: Non-GAAP revenue from divested businesses(1) — (85.6)
Non-GAAP organic revenue growth 5.5 %
Foreign currency impact on Non-GAAP organic revenue(3) (3.5) —
Non-GAAP organic revenue on constant currency basis(3) $ 1,124.8 $ 1,069.1
Non-GAAP organic revenue growth on constant currency basis 5.2 %
GAAP recurring revenue growth (2.0) %
Less: Non-GAAP recurring revenue from divested businesses(1) — (82.6)
Non-GAAP organic recurring revenue $ 1,106.2 $ 1,045.7
Non-GAAP organic recurring revenue growth 5.8 %
Non-GAAP organic recurring revenue(2) $ 1,106.2 $ 1,045.7
Foreign currency impact on non-GAAP organic recurring revenue(3) (3.5) —
Non-GAAP organic recurring revenue growth on constant currency basis 5.4 %
(1)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.
(2)Non-GAAP organic revenue and non-GAAP organic recurring revenue for the prior year periods presented herein may not agree to non-GAAP organic revenue and non-GAAP organic recurring revenue presented in the respective prior period quarterly financial information solely due to the manner in which non-GAAP organic revenue growth and non-GAAP organic recurring revenue growth are calculated.
(3)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.
Table of Contents
Blackbaud, Inc.
Rule of 40
We define Rule of 40 as non-GAAP organic revenue growth plus non-GAAP adjusted EBITDA margin. 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 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,
Non-GAAP adjustments:
Add: GAAP income tax provision (benefit) 16.8 (12.9)
Add: Amortization of intangibles from business combinations 29.9 60.5
Add: Amortization of software development costs(1) 49.7 51.2
Non-GAAP EBITDA margin(3) 24.9 %
Non-GAAP adjustments:
Add: Stock-based compensation expense $ 92.9 $ 105.0
Add: Employee severance 1.9 —
Add: Acquisition and disposition-related costs(4) 25.9 6.1
Add: Security Incident-related costs(4) 3.1 13.7
Add: EVERFI impairment and disposition charges — 405.4
Non-GAAP Adjusted EBITDA margin(5) 35.9 %
Foreign currency impact on Non-GAAP adjusted EBITDA (1.8) (1.6)
Non-GAAP adjusted EBITDA on constant currency basis(7) $ 403.5 $ 386.4
Non-GAAP adjusted EBITDA margin on constant currency basis(7) 35.9 %
Rule of 40 on constant currency basis(8) 41.1 %
(1)Includes amortization expense related to software 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.
Table of Contents
Blackbaud, Inc.
Non-GAAP free cash flow and non-GAAP adjusted free cash flow
Non-GAAP free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software development, and capital expenditures for property and equipment.
Non-GAAP adjusted free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software development and capital expenditures for property and equipment, plus cash outflows 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 $ 265.6 $ 296.0
GAAP operating cash flow margin 23.5 % 25.6 %
Non-GAAP adjustments:
Less: purchase of property and equipment (7.8) (7.4)
Less: capitalized software development costs (54.2) (59.8)
Non-GAAP free cash flow margin 18.0 % 19.8 %
Non-GAAP adjustments:
Add: Security Incident-related cash flows, net of insurance 4.6 15.9
Non-GAAP adjusted free cash flow(1) $ 208.2 $ 244.7
Non-GAAP adjusted free cash flow margin 18.5 % 21.2 %
(1)The individual amounts for each year may not sum to non-GAAP free cash flow or non-GAAP adjusted free cash flow due to rounding.
Seasonality
Our revenues normally fluctuate as a result of certain seasonal variations in our business. Our first quarter has historically been the seasonal low for bookings, with the second and fourth quarters historically being seasonally higher, and our bookings tend to be back-end loaded within individual quarters given our quarterly quota plans. Transactional revenue is non-contractual and less predictable given the susceptibility to certain drivers such as timing and number of events and marketing campaigns, as well as fluctuations in donation volumes and tuition payments. Our transactional revenue has historically been at its lowest in the first quarter due to the timing of customer fundraising initiatives and events. We have historically experienced seasonal highs during the fourth quarter due to year-end giving campaigns and during the second quarter when a large number of events are held. Our revenue from professional services has historically been lower in the first quarter when many of those services commence and in the fourth quarter due to the holiday season. As a result of these and other factors, our total revenue has historically been lower in the first quarter than in the remainder of our fiscal year, with the fourth quarter historically achieving the highest total revenue. Our expenses, other than transaction-based costs related to our payments services, do not vary significantly as a result of these factors, but do fluctuate on a quarterly basis due to varying timing of expenditures.
Our cash flow from operations normally fluctuates quarterly due to the combination of the timing of customer contract billings and 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 billings and 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.
Table of Contents
Blackbaud, Inc.
These patterns may change as a result of the continued shift to online giving, growth in volume of transactions for which we process payments, large dollar customer bookings and contract renewals, fluctuations in the timing of vendor payments, or as a result of acquisitions, new market opportunities, new solution introductions or other factors.
Liquidity and Capital Resources
The following table presents selected financial information about our financial position:
(dollars in millions) December 31,2025 December 31,2024 Change
Cash and cash equivalents $ 38.9 $ 67.6 (42.5) %
Property and equipment, net 85.1 91.9 (7.5) %
The following table presents selected financial information about our cash flows:
Years ended December 31,
Net cash provided by operating activities $ 265.6 $ 296.0 (10.3) %
Net cash used in investing activities (74.9) (73.4) 2.1 %
Net cash used in financing activities (247.4) (139.4) 77.5 %
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, 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 and pursuant to applicable SEC regulations, this registration statement is effective for three years from its date of filing with the SEC, or through January 9, 2028.
At December 31, 2025, our total cash and cash equivalents balance included approximately $13.4 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.
Operating Cash Flow
Throughout 2025 and 2024, 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 taxes, amortization of deferred financing costs and debt discount and adjustments to our net 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.
Table of Contents
Blackbaud, Inc.
Net cash provided by operating activities decreased by $30.4 million during the year ended December 31, 2025, when compared to the same period in 2024, primarily due to a $51.5 million decrease in cash flow from operations associated with working capital, partially offset by a $21.0 million increase in net income adjusted for non-cash expenses.
The decrease in cash flow from operations associated with working capital during 2025, when compared to 2024, was primarily due to fluctuations in the timing of vendor payments.
On July 4, 2025, the United States enacted the OBBBA, which introduced significant changes to U.S. tax law. See Note 12 to our consolidated financial statements in this report for more information. OBBBA impacts meaningfully contributed to reducing U.S. cash taxes in 2025. We expect to continue to see meaningful reductions to cash taxes through 2027. U.S. state OBBBA conformity considerations (which continue to evolve as the states address the new Federal tax legislation) and the phase-in of the OBBBA international tax provisions in 2026 may continue to affect this cash reduction.
Investing Cash Flow
During 2026, we expect our total capital expenditures, including estimated outlays for capitalized software development costs, to be between approximately $60.0 million and $70.0 million.
Net cash used in investing activities of $74.9 million increased by $1.5 million during 2025, when compared to 2024.
During 2025, we used $54.2 million for software development costs, which was a decrease of $5.5 million from cash spent during 2024. We spent $7.8 million of cash for purchases of property and equipment during 2025, which was relatively in line with cash spent in 2024. In addition, during 2025, we used net cash of $12.2 million for the disposition of a business compared to $1.2 million for the disposition of a business and $5.0 million for a minority investment in a business during 2024.
Financing Cash Flow
During 2025, we had a net increase in borrowings of $34.7 million, primarily due to our stock repurchase program and to satisfy tax obligations of employees upon settlement of equity awards (see discussion below). During 2025, we repurchased $217.2 million of our common stock (including excise tax) compared to $418.0 million during 2024.
We paid $40.4 million to satisfy tax obligations of employees upon settlement of equity awards during 2025 compared to $56.8 million during 2024. The amount of taxes paid by us on behalf of employees related to the settlement 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 2025, cash flow from financing activities associated with changes in restricted cash due to customers decreased$25.6 million, compared to an increase of $47.0 million during 2024. 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 December 1, 2025, our Board of Directors reauthorized, expanded and replenished our stock repurchase program by raising the total capacity under the program from $800.0 million to $1.0 billion 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.
Table of Contents
Blackbaud, Inc.
On December 2, 2025, we announced an increase in our expected fiscal year 2025 stock repurchase range to between 7.0% and 8.5% of our outstanding common stock as of December 31, 2024. During the year ended December 31, 2025, we repurchased 3,337,844 shares for $214.0 million. Including net share settlement of employee stock compensation, these repurchases represented approximately 7.9% of our outstanding common stock as of December 31, 2024. As of December 31, 2025, $960.6 million remained available for repurchases under the program. During 2026, we intend to repurchase between 5.0% and 10.0% of our outstanding common stock as of December 31, 2025 under our existing stock repurchase program. Over the long term, we expect stock repurchases to remain an important component of our capital allocation strategy, subject to market conditions, business performance, leverage considerations, U.S. excise taxes and other factors. We anticipate utilizing at least 50% of our free cash flow from 2026 to 2030 for stock repurchases. See discussion of our Non‐GAAP Financial Measures above.
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, 2025, our available borrowing capacity under the 2024 Credit Facilities was $413.6 million. The 2024 Credit Facilities mature in April 2029.
At December 31, 2025, the carrying amount of our debt under the 2024 Credit Facilities was $1.1 billion. Our average daily borrowings were $1.1 billion during 2025.
The term loans under the 2024 Credit Facilities and our other debt require periodic principal payments. The balance of the term loans and any amounts drawn on the revolving credit loans are due upon maturity of the 2024 Credit Facilities in April 2029. Certain real estate loans (as described in Note 9 to our audited consolidated financial statements 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, 2025
(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, 2025, we were in compliance with our debt covenants under the 2024 Credit Facilities. See Note 9 to our consolidated financial statements in this report for additional information regarding the 2024 Credit Facilities.
Table of Contents
Blackbaud, Inc.
Commitments and Contingencies
As of December 31, 2025, 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:
Interest payments on debt 1.0 2.3 3.4
Unrecorded contractual obligations:
(1)The individual amounts may not sum to the total due to rounding.
Debt
As of December 31, 2025, we had total remaining principal payments of approximately $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, 2025 will remain outstanding until maturity, with minimum payments occurring as currently scheduled, and (ii) that there are no assumed future borrowings on the revolving credit loans under 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, 2025, we expect to pay interest expense over the life of our debt obligations of approximately $209.5 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, 2025, which includes the effect of interest rate swap agreements. The actual interest expense recognized in our consolidated statements of comprehensive income (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, 2025, we had remaining operating lease payments of $7.0 million. These payments have not been reduced by sublease income, incentive payments, reimbursement of leasehold improvements or the amount representing imputed interest. Our operating leases are generally for corporate offices, subleased offices and certain equipment and furniture. Given our Remote-Flexible workforce strategy and real estate footprint optimization efforts, 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