UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended March 31, 2022

~~For the quarterly period ended March 31, 2021~~


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number:000-50600

Blackbaud, Inc.

(Exact name of registrant as specified in its charter)



Delaware			11-2617163
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

65 Fairchild Street

Charleston, South Carolina 29492

(Address of principal executive offices, including zip code)

(843) 216-6200

(Registrant’s telephone number, including area code)



Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol(s)	Name of Each Exchange on which Registered
Common Stock, $0.001 Par Value	BLKB	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

The number of shares of the registrant’s Common Stock outstanding as of ~~April 28, 2021~~May 2, 2022 was ~~48,818,991.~~52,943,047.

TABLE OF CONTENTS


First Quarter ~~2021~~2022 Form 10-Q						1

Table of Contents

Blackbaud, Inc.


						CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the documents incorporated herein by reference, contains forward-looking statements that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These "forward-looking statements" are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements consist of, among other things, specific and overall impacts of the COVID-19 global pandemic on our financial condition and results of operations and on the markets and communities in which we and our customers and partners operate, trend analyses, statements regarding future events, future financial performance, our anticipated growth, the effect of general economic and market conditions, our business strategy and our plan to build and grow our business, our operating results, our ability to successfully integrate acquired businesses and technologies, the effect of foreign currency exchange rate and interest rate fluctuations on our financial results, the impact of expensing stock-based compensation, the sufficiency of our capital resources, our ability to meet our ongoing debt and obligations as they become due, cybersecurity and data protection risks and related liabilities, and current or potential ~~litigation~~legal proceedings involving us, all of which are based on current expectations, estimates, and forecasts, and the beliefs and assumptions of our management. Words such as “believes,” “seeks,” “expects,” “may,” “might,” “should,” “intends,” “could,” “would,” “likely,” “will,” “targets,” “plans,” “anticipates,” “aims,” “projects,” “estimates” or any variations of such words and similar expressions are also intended to identify such forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions that are difficult to predict. Accordingly, they should not be viewed as assurances of future performance, and actual results may differ materially and adversely from those expressed in any forward-looking statements.

Important factors that could cause actual results to differ materially from our expectations expressed in forward-looking statements include, but are not limited to, those summarized under “Part II, Item 1A. Risk factors” and elsewhere in this report, in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 and in our other ~~SEC filings.~~filings made with the United States Securities & Exchange Commission ("SEC"). Forward-looking statements represent our management's beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statement, whether as a result of new information, future events or otherwise.


2						First Quarter ~~2021~~2022 Form 10-Q


						PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


Blackbaud, Inc. Condensed Consolidated Balance Sheets (Unaudited)	Blackbaud, Inc. Condensed Consolidated Balance Sheets (Unaudited)					Blackbaud, Inc. Condensed Consolidated Balance Sheets (Unaudited)
(dollars in thousands)	(dollars in thousands)	March 31, 2021		December 31, 2020		(dollars in thousands)	March 31, 2022		December 31, 2021
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	27,753	$	35,750	Cash and cash equivalents	$	33,786	$	55,146
Restricted cash	Restricted cash	255,158		609,219		Restricted cash	279,594		596,616
Accounts receivable, net of allowance of $10,361 and $10,292 at March 31, 2021 and December 31, 2020, respectively		83,333		95,404
Accounts receivable, net of allowance of $10,772 and $11,155 at March 31, 2022 and December 31, 2021, respectively						Accounts receivable, net of allowance of $10,772 and $11,155 at March 31, 2022 and December 31, 2021, respectively	91,770		102,726
Customer funds receivable	Customer funds receivable	945		321		Customer funds receivable	2,049		977
Prepaid expenses and other current assets	Prepaid expenses and other current assets	98,095		78,366		Prepaid expenses and other current assets	99,913		95,506
Total current assets	Total current assets	465,284		819,060		Total current assets	507,112		850,971
Property and equipment, net	Property and equipment, net	105,124		105,177		Property and equipment, net	112,675		111,428
Operating lease right-of-use assets	Operating lease right-of-use assets	20,055		22,671		Operating lease right-of-use assets	51,808		53,883
Software development costs, net	Software development costs, net	113,624		111,827		Software development costs, net	126,766		121,377
Goodwill	Goodwill	637,113		635,854		Goodwill	1,056,794		1,058,640
Intangible assets, net	Intangible assets, net	269,118		277,506		Intangible assets, net	683,348		698,052
Other assets	Other assets	74,022		72,639		Other assets	90,194		77,266
Total assets	Total assets	$	1,684,340	$	2,044,734	Total assets	$	2,628,697	$	2,971,617
Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Trade accounts payable	Trade accounts payable	$	35,274	$	27,836	Trade accounts payable	$	39,490	$	22,067
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	53,013		52,228		Accrued expenses and other current liabilities	72,195		100,096
Due to customers	Due to customers	254,947		608,264		Due to customers	278,179		594,273
Debt, current portion	Debt, current portion	12,875		12,840		Debt, current portion	18,116		18,697
Deferred revenue, current portion	Deferred revenue, current portion	290,025		312,236		Deferred revenue, current portion	350,952		374,499
Total current liabilities	Total current liabilities	646,134		1,013,404		Total current liabilities	758,932		1,109,632
Debt, net of current portion	Debt, net of current portion	537,924		518,193		Debt, net of current portion	963,109		937,483
Deferred tax liability	Deferred tax liability	54,444		54,086		Deferred tax liability	144,590		148,465
Deferred revenue, net of current portion	Deferred revenue, net of current portion	4,495		4,678		Deferred revenue, net of current portion	4,725		4,247
Operating lease liabilities, net of current portion	Operating lease liabilities, net of current portion	15,744		17,357		Operating lease liabilities, net of current portion	50,785		53,386
Other liabilities	Other liabilities	9,439		10,866		Other liabilities	1,506		1,344
Total liabilities	Total liabilities	1,268,180		1,618,584		Total liabilities	1,923,647		2,254,557
Commitments and contingencies (see Note 9)		0
Commitments and contingencies (see Note 10)						Commitments and contingencies (see Note 10)	0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock; 20,000,000 shares authorized, 0ne outstanding		0		0
Common stock, $0.001 par value; 180,000,000 shares authorized, 61,595,276 and 60,904,638 shares issued at March 31, 2021 and December 31, 2020, respectively		62		61
Preferred stock; 20,000,000 shares authorized, none outstanding						Preferred stock; 20,000,000 shares authorized, none outstanding	—		—
Common stock, $0.001 par value; 180,000,000 shares authorized, 67,658,172 and 66,165,666 shares issued at March 31, 2022 and December 31, 2021, respectively						Common stock, $0.001 par value; 180,000,000 shares authorized, 67,658,172 and 66,165,666 shares issued at March 31, 2022 and December 31, 2021, respectively	68		66
Additional paid-in capital	Additional paid-in capital	574,958		544,963		Additional paid-in capital	993,223		968,927
Treasury stock, at cost; 12,760,956 and 12,054,268 shares at March 31, 2021 and December 31, 2020, respectively		(399,583)		(353,091)
Accumulated other comprehensive income (loss)		4,163		(2,497)
Treasury stock, at cost; 14,715,944 and 14,182,805 shares at March 31, 2022 and December 31, 2021, respectively						Treasury stock, at cost; 14,715,944 and 14,182,805 shares at March 31, 2022 and December 31, 2021, respectively	(535,585)		(500,911)
Accumulated other comprehensive income						Accumulated other comprehensive income	15,295		6,522
Retained earnings	Retained earnings	236,560		236,714		Retained earnings	232,049		242,456
Total stockholders’ equity	Total stockholders’ equity	416,160		426,150		Total stockholders’ equity	705,050		717,060
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,684,340	$	2,044,734	Total liabilities and stockholders’ equity	$	2,628,697	$	2,971,617

The accompanying notes are an integral part of these condensed consolidated financial statements.	The accompanying notes are an integral part of these condensed consolidated financial statements.					The accompanying notes are an integral part of these condensed consolidated financial statements.


First Quarter ~~2021~~2022 Form 10-Q						3


Blackbaud, Inc. Condensed Consolidated Statements of Comprehensive Income (Unaudited)	Blackbaud, Inc. Condensed Consolidated Statements of Comprehensive Income (Unaudited)	Blackbaud, Inc. Condensed Consolidated Statements of Comprehensive Income (Unaudited)
		Three months ended March 31,						Three months ended March 31,
(dollars in thousands, except per share amounts)	(dollars in thousands, except per share amounts)		2021		2020		(dollars in thousands, except per share amounts)		2022		2021
Revenue	Revenue						Revenue
Recurring	Recurring		$	206,750	$	204,867	Recurring		$	244,666	$	206,750
One-time services and other	One-time services and other		12,441		18,754		One-time services and other		12,458		12,441
Total revenue	Total revenue		219,191		223,621		Total revenue		257,124		219,191
Cost of revenue	Cost of revenue						Cost of revenue
Cost of recurring	Cost of recurring		88,865		89,551		Cost of recurring		112,174		88,865
Cost of one-time services and other	Cost of one-time services and other		14,520		15,314		Cost of one-time services and other		11,188		14,520
Total cost of revenue	Total cost of revenue		103,385		104,865		Total cost of revenue		123,362		103,385
Gross profit	Gross profit		115,806		118,756		Gross profit		133,762		115,806
Operating expenses	Operating expenses						Operating expenses
Sales, marketing and customer success	Sales, marketing and customer success		48,793		58,735		Sales, marketing and customer success		55,216		48,793
Research and development	Research and development		29,179		24,977		Research and development		39,952		29,179
General and administrative	General and administrative		30,587		25,855		General and administrative		43,762		30,587
Amortization	Amortization		549		741		Amortization		811		549
Restructuring	Restructuring		54		24		Restructuring		—		54
Total operating expenses	Total operating expenses		109,162		110,332		Total operating expenses		139,741		109,162
Income from operations			6,644		8,424
(Loss) income from operations							(Loss) income from operations		(5,979)		6,644
Interest expense	Interest expense		(5,114)		(4,159)		Interest expense		(7,599)		(5,114)
Other (expense) income, net			(1,010)		1,070
Income before provision for income taxes			520		5,335
Income tax provision			684		696
Net (loss) income			$	(164)	$	4,639
Earnings (loss) per share
Other income (expense), net							Other income (expense), net		1,121		(1,010)
(Loss) income before provision for income taxes							(Loss) income before provision for income taxes		(12,457)		520
Income tax (benefit) provision							Income tax (benefit) provision		(2,050)		684
Net loss							Net loss		$	(10,407)	$	(164)
Loss per share							Loss per share
Basic	Basic		$	0	$	0.10	Basic		$	(0.20)	$	—
Diluted	Diluted		$	0	$	0.10	Diluted		$	(0.20)	$	—
Common shares and equivalents outstanding	Common shares and equivalents outstanding						Common shares and equivalents outstanding
Basic weighted average shares	Basic weighted average shares		47,363,197		48,036,300		Basic weighted average shares		51,199,717		47,363,197
Diluted weighted average shares	Diluted weighted average shares		47,363,197		48,455,751		Diluted weighted average shares		51,199,717		47,363,197
Other comprehensive income (loss)
Other comprehensive income							Other comprehensive income
Foreign currency translation adjustment	Foreign currency translation adjustment		2,511		(5,728)		Foreign currency translation adjustment		(2,132)		2,511
Unrealized gain (loss) on derivative instruments, net of tax			4,149		(3,122)
Total other comprehensive income (loss)			6,660		(8,850)
Comprehensive income (loss)			$	6,496	$	(4,211)
Unrealized gain on derivative instruments, net of tax							Unrealized gain on derivative instruments, net of tax		10,905		4,149
Total other comprehensive income							Total other comprehensive income		8,773		6,660
Comprehensive (loss) income							Comprehensive (loss) income		$	(1,634)	$	6,496

The accompanying notes are an integral part of these condensed consolidated financial statements.	The accompanying notes are an integral part of these condensed consolidated financial statements.	The accompanying notes are an integral part of these condensed consolidated financial statements.


4						First Quarter ~~2021~~2022 Form 10-Q


Blackbaud, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited)	Blackbaud, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited)					Blackbaud, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited)
		Three months ended March 31,					Three months ended March 31,
(dollars in thousands)	(dollars in thousands)	2021		2020		(dollars in thousands)	2022		2021
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net (loss) income		$	(164)	$	4,639
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Net loss						Net loss	$	(10,407)	$	(164)
Adjustments to reconcile net loss to net cash provided by operating activities:						Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	20,461		21,804		Depreciation and amortization	25,545		20,461
Provision for credit losses and sales returns	Provision for credit losses and sales returns	2,141		2,488		Provision for credit losses and sales returns	1,875		2,141
Stock-based compensation expense	Stock-based compensation expense	30,005		13,580		Stock-based compensation expense	27,860		30,005
Deferred taxes	Deferred taxes	(1,142)		954		Deferred taxes	(7,431)		(1,142)
Amortization of deferred financing costs and discount	Amortization of deferred financing costs and discount	506		188		Amortization of deferred financing costs and discount	645		506
Other non-cash adjustments	Other non-cash adjustments	(32)		102		Other non-cash adjustments	(150)		(32)
Changes in operating assets and liabilities, net of acquisition and disposal of businesses:	Changes in operating assets and liabilities, net of acquisition and disposal of businesses:					Changes in operating assets and liabilities, net of acquisition and disposal of businesses:
Accounts receivable	Accounts receivable	10,407		(3,876)		Accounts receivable	9,010		10,407
Prepaid expenses and other assets	Prepaid expenses and other assets	(17,426)		(5,303)		Prepaid expenses and other assets	(2,067)		(17,426)
Trade accounts payable	Trade accounts payable	7,550		(4,021)		Trade accounts payable	15,919		7,550
Accrued expenses and other liabilities	Accrued expenses and other liabilities	549		(31,694)		Accrued expenses and other liabilities	(13,430)		549
Deferred revenue	Deferred revenue	(22,752)		(23,364)		Deferred revenue	(22,865)		(22,752)
Net cash provided by (used in) operating activities		30,103		(24,503)
Net cash provided by operating activities						Net cash provided by operating activities	24,504		30,103
Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Purchase of property and equipment	Purchase of property and equipment	(3,470)		(2,867)		Purchase of property and equipment	(4,266)		(3,470)
Capitalized software development costs	Capitalized software development costs	(9,302)		(10,937)		Capitalized software development costs	(12,683)		(9,302)

Purchase of net assets of acquired companies, net of cash and restricted cash acquired						Purchase of net assets of acquired companies, net of cash and restricted cash acquired	(19,985)		—

Net cash used in investing activities	Net cash used in investing activities	(12,772)		(13,804)		Net cash used in investing activities	(36,934)		(12,772)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Proceeds from issuance of debt	Proceeds from issuance of debt	80,700		144,700		Proceeds from issuance of debt	59,400		80,700
Payments on debt	Payments on debt	(59,667)		(86,075)		Payments on debt	(33,765)		(59,667)

Employee taxes paid for withheld shares upon equity award settlement	Employee taxes paid for withheld shares upon equity award settlement	(18,426)		(19,782)		Employee taxes paid for withheld shares upon equity award settlement	(34,674)		(18,426)
Proceeds from exercise of stock options		0		1

Change in due to customers	Change in due to customers	(353,597)		(311,095)		Change in due to customers	(315,294)		(353,597)
Change in customer funds receivable	Change in customer funds receivable	(563)		(733)		Change in customer funds receivable	(1,115)		(563)
Purchase of treasury stock	Purchase of treasury stock	(28,066)		0		Purchase of treasury stock	—		(28,066)
Dividend payments to stockholders		0		(5,960)
Net cash used in financing activities	Net cash used in financing activities	(379,619)		(278,944)		Net cash used in financing activities	(325,448)		(379,619)
Effect of exchange rate on cash, cash equivalents and restricted cash	Effect of exchange rate on cash, cash equivalents and restricted cash	230		(2,822)		Effect of exchange rate on cash, cash equivalents and restricted cash	(504)		230
Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	(362,058)		(320,073)		Net decrease in cash, cash equivalents and restricted cash	(338,382)		(362,058)
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	644,969		577,295		Cash, cash equivalents and restricted cash, beginning of period	651,762		644,969
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	282,911	$	257,222	Cash, cash equivalents and restricted cash, end of period	$	313,380	$	282,911

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


(dollars in thousands)	(dollars in thousands)	March 31, 2021		December 31, 2020		(dollars in thousands)	March 31, 2022		December 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	27,753	$	35,750	Cash and cash equivalents	$	33,786	$	55,146
Restricted cash	Restricted cash	255,158		609,219		Restricted cash	279,594		596,616
Total cash, cash equivalents and restricted cash in the statement of cash flows	Total cash, cash equivalents and restricted cash in the statement of cash flows	$	282,911	$	644,969	Total cash, cash equivalents and restricted cash in the statement of cash flows	$	313,380	$	651,762

The accompanying notes are an integral part of these condensed consolidated financial statements.	The accompanying notes are an integral part of these condensed consolidated financial statements.					The accompanying notes are an integral part of these condensed consolidated financial statements.


First Quarter ~~2021~~2022 Form 10-Q						5

Blackbaud, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(Unaudited)


(dollars in thousands)	(dollars in thousands)	Common stock			Additional paid-in capital		Treasury stock		Accumulated other comprehensive income (loss)		Retained earnings		Total stockholders' equity		(dollars in thousands)	Common stock			Additional paid-in capital		Treasury stock		Accumulated other comprehensive income (loss)		Retained earnings		Total stockholders' equity
		Shares	Amount													Shares	Amount
Balance at December 31, 2020		60,904,638	$	61	$	544,963	$	(353,091)	$	(2,497)	$	236,714	$	426,150
Balance at December 31, 2021															Balance at December 31, 2021	66,165,666	$	66	$	968,927	$	(500,911)	$	6,522	$	242,456	$	717,060
Net loss	Net loss	—	—		—		—		—		(164)		(164)		Net loss	—	—		—		—		—		(10,407)		(10,407)
Stock issuance costs related to purchase of EVERFI (see Note 3)															Stock issuance costs related to purchase of EVERFI (see Note 3)	—	—		(983)		—		—		—		(983)

Purchase of 465,821 treasury shares under stock repurchase program		—	—		—		(28,066)		—		—		(28,066)
Retirements of common stock(1)															Retirements of common stock(1)	(33,075)	—		(2,581)		—		—		—		(2,581)
Vesting of restricted stock units	Vesting of restricted stock units	206,418	—		0		—		—		—		0		Vesting of restricted stock units	976,312	—		—		—		—		—		—
Employee taxes paid for 240,867 withheld shares upon equity award settlement		—	—		—		(18,426)		—		—		(18,426)
Employee taxes paid for 533,139 withheld shares upon equity award settlement															Employee taxes paid for 533,139 withheld shares upon equity award settlement	—	—		—		(34,674)		—		—		(34,674)
Stock-based compensation	Stock-based compensation	—	—		29,995		—		—		10		30,005		Stock-based compensation	—	—		27,860		—		—		—		27,860
Restricted stock grants	Restricted stock grants	519,009	1		—		—		—		—		1		Restricted stock grants	580,209	2		—		—		—		—		2
Restricted stock cancellations	Restricted stock cancellations	(34,789)	—		—		—		—		—		—		Restricted stock cancellations	(30,940)	—		—		—		—		—		—
Other comprehensive income	Other comprehensive income	—	—		—		—		6,660		—		6,660		Other comprehensive income	—	—		—		—		8,773		—		8,773
Balance at March 31, 2021		61,595,276	$	62	$	574,958	$	(399,583)	$	4,163	$	236,560	$	416,160
Balance at March 31, 2022															Balance at March 31, 2022	67,658,172	$	68	$	993,223	$	(535,585)	$	15,295	$	232,049	$	705,050

(1)Represents shares retired after determining certain EVERFI's selling shareholders would be paid in cash, rather than shares of our common stock. See Note 3 for additional information regarding our acquisition of EVERFI.

(dollars in thousands) Common stock Additional
paid-in
capital Treasury
stock Accumulated
other
comprehensive
income (loss) Retained
earnings Total
stockholders'
equity
Shares Amount
Balance at December 31, 2019 60,206,091 $ 60 $ 457,804 $ (290,665) $ (5,290) $ 234,855 $ 396,764
Net income — — — — — 4,639 4,639
Payment of dividends ($0.12 per share) — — — — — (5,960) (5,960)
Exercise of stock options and vesting of restricted stock units 210,057 — 1 — — — 1
Employee taxes paid for 245,358 withheld shares upon equity award settlement — — — (19,782) — — (19,782)
Stock-based compensation — — 13,539 — — 41 13,580
Restricted stock grants 563,947 1 — — — — 1
Restricted stock cancellations (47,456) — — — — — —
Other comprehensive loss — — — — (8,850) — (8,850)
Balance at March 31, 2020 60,932,639 $ 61 $ 471,344 $ (310,447) $ (14,140) $ 233,575 $ 380,393
The accompanying notes are an integral part of these condensed consolidated financial statements.


(dollars in thousands)	Common stock			Additional paid-in capital		Treasury stock		Accumulated other comprehensive income (loss)		Retained earnings		Total stockholders' equity
	Shares	Amount
Balance at December 31, 2020	60,904,638	$	61	$	544,963	$	(353,091)	$	(2,497)	$	236,714	$	426,150
Net loss	—	—		—		—		—		(164)		(164)
Purchase of 465,821 treasury shares under stock repurchase program						(28,066)		—		—		(28,066)
Vesting of restricted stock units	206,418	—		—		—		—		—		—
Employee taxes paid for 240,867 withheld shares upon equity award settlement	—	—		—		(18,426)		—		—		(18,426)
Stock-based compensation	—	—		29,995		—		—		10		30,005
Restricted stock grants	519,009	1		—		—		—		—		1
Restricted stock cancellations	(34,789)	—		—		—		—		—		—
Other comprehensive income	—	—		—		—		6,660		—		6,660
Balance at March 31, 2021	61,595,276	$	62	$	574,958	$	(399,583)	$	4,163	$	236,560	$	416,160



















The accompanying notes are an integral part of these condensed consolidated financial statements.


6						First Quarter ~~2021~~2022 Form 10-Q

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)


1. Organization

We are the world’s leading cloud software company powering social good. Serving the entire social good community—nonprofits, higher education institutions, K–12 schools, healthcare organizations, faith communities, arts and cultural organizations, foundations, companies and individual change agents—we connect and empower organizations to increase their impact through cloud software, services, expertise and data intelligence. Our portfolio is tailored to the unique needs of vertical markets, with solutions for fundraising and CRM, marketing, advocacy, peer-to-peer fundraising, corporate social responsibility (CSR) and environmental, social and governance (ESG), school management, ticketing, grantmaking, financial management, payment processing and analytics. Serving the industry for ~~nearly~~more than four decades, we are a remote-first company headquartered in Charleston, South Carolina, ~~and have~~with operations in the United States, Australia, Canada, Costa Rica and the United Kingdom.


2. Basis of Presentation

Unaudited condensed consolidated interim financial statements

The accompanying condensed consolidated interim financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC") for interim financial reporting. These consolidated statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to state fairly the consolidated balance sheets, consolidated statements of comprehensive income, consolidated statements of cash flows and consolidated statements of stockholders’ equity, for the periods presented in accordance with accounting principles generally accepted in the United States ("U.S.") ("GAAP"). The consolidated balance sheet at December 31, ~~2020~~2021 has been derived from the audited consolidated financial statements at that date. Operating results and cash flows for the three months ended March 31, ~~2021~~2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, ~~2021,~~2022, or any other future period. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted in accordance with the rules and regulations for interim reporting of the SEC. These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, and other forms filed with the SEC from time to time.

Basis of consolidation

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

Reportable segment

We report our operating results and financial information in one operating and reportable segment. Our chief operating decision maker uses consolidated financial information to make operating decisions, assess financial performance and allocate resources. Our chief operating decision maker is our chief executive ~~officer~~officer.

As discussed in Note 13 to these condensed consolidated financial statements, beginning in the second quarter of 2021, we combined our General Markets Group ("~~CEO"~~GMG") and Enterprise Markets Group ("EMG") into a single U.S. Markets Group ("UMG") and moved our Corporations vertical under our International Markets Group ("IMG"). This change was made to better align our resources toward customer retention and growth which, are key objectives as we progress toward our long-term aspirational goals. We also acquired EVERFI (as defined below) as of December 31, 2021. As we are working to integrate EVERFI into our business, it has not yet been included in one of our market groups. These changes did not impact our conclusions that we have one operating and reportable segment and one goodwill reporting unit.


First Quarter 2022 Form 10-Q						7

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Risks and uncertainties related to COVID-19

We are subject to risks and uncertainties as a result of the global COVID-19 pandemic. We believe that COVID-19 may continue to significantly impact our vertical markets and geographies, but the ~~significance and duration~~magnitude of the impact on our business cannot be determined at this time due to numerous uncertainties, including the duration of the outbreak, the severity of variants which may develop, travel restrictions and business closures, the effectiveness of vaccination programs and other actions taken to contain the disease and other unforeseeable consequences.


~~First Quarter 2021 Form 10-Q~~						7

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, we reconsider and evaluate our estimates and assumptions, including those that impact revenue recognition, long-lived and intangible assets, income taxes, business combinations, stock-based compensation, capitalization of software development costs, our allowances for credit losses and sales returns, costs of obtaining contracts, valuation of derivative instruments, ~~and~~ loss contingencies and insurance recoveries, among others. Changes in the facts or circumstances underlying these estimates, including due to COVID-19, could result in material changes and actual results could materially differ from these estimates.

Recently issued accounting pronouncements

There are no recently issued accounting pronouncements that we expect to have a material impact on our consolidated financial statements when adopted in the future.

Summary of significant accounting policies

There have been no ~~new or~~ material changes to our significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, filed with the SEC on ~~February 23, 2021.~~March 1, 2022.


3. Business Combinations

2021 Acquisition

EVERFI

On December 31, 2021, we acquired all of the outstanding equity securities, including all voting equity interests, of EVERFI, Inc., a Delaware corporation ("EVERFI"), pursuant to an agreement and plan of merger. The acquisition advanced our position as a leader in the rapidly evolving ESG and CSR spaces. We acquired the equity securities for approximately $442.7 million in cash consideration and 3,811,348 shares of the company's common stock, valued at approximately $301.1 million, for an aggregate purchase price of approximately $743.8 million, subject to closing adjustments. The cash consideration and related expenses were funded primarily through cash on hand and new borrowings under the 2020 Credit Facility (as defined below). As a result of the acquisition, EVERFI has become a wholly owned subsidiary of ours. The operating results of EVERFI have been included in our consolidated financial statements from the date of acquisition. In accordance with applicable accounting rules, we determined that the impact of this acquisition was not material to our consolidated financial statements; therefore, revenue and earnings since the acquisition date and pro forma information are not required to be presented.

The fair values assigned to the assets acquired and liabilities assumed in our acquisition of EVERFI are based on our best estimates and assumptions as of the reporting date and are considered preliminary pending finalization. The estimates and assumptions are subject to change as we obtain additional information during the measurement period, which may be up to one year from the acquisition date. The assets and liabilities, pending finalization, include the valuation of intangible assets as well as the assumed deferred income tax balances. During the three months ended March 31, 2022, we recorded an insignificant measurement period adjustment to the estimated fair value of the EVERFI assets acquired and liabilities assumed following the receipt of new information. The adjustment resulted in an increase to net working capital, excluding deferred revenue, with the corresponding offset to goodwill.


8						First Quarter 2022 Form 10-Q

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)


4. Goodwill and Other Intangible Assets

The change in goodwill during the three months ended March 31, ~~2021,~~2022, consisted of the following:


(dollars in thousands)	Total
Balance at December 31, ~~2020~~2021	$	~~635,854~~1,058,640

Adjustments related to prior year business combinations(1)	(203)
Effect of foreign currency translation	~~1,259~~ (1,643)
Balance at March 31, ~~2021~~2022	$	~~637,113~~1,056,794

(1)See Note 3 to these condensed consolidated financial statements for a discussion of the measurement period adjustment during the three months ended March 31, 2022 to the estimated fair value of the EVERFI assets acquired and liabilities assumed.


~~4. Earnings (Loss)~~5. Loss Per Share

We compute basic earnings (loss) per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income available to common stockholders by the weighted average number of common shares and dilutive potential common shares outstanding during the period. Diluted earnings (loss) per share reflect the assumed exercise, settlement and vesting of all dilutive securities using the “treasury stock method” except when the effect is anti-dilutive. Potentially dilutive securities consist of shares issuable upon the exercise of stock options, settlement of stock appreciation rights and vesting of restricted stock awards and units. Diluted loss per share for the three months ended March 31, ~~2021~~2022 was the same as basic loss per share as there was a net loss in the period and inclusion of potentially dilutive securities was anti-dilutive.

The following table sets forth the computation of basic and diluted earnings (loss) per share:


	Three months ended March 31,
(dollars in thousands, except per share amounts)		2022		2021
Numerator:
Net loss		$	(10,407)	$	(164)
Denominator:
Weighted average common shares		51,199,717		47,363,197
Add effect of dilutive securities:
Stock-based awards		—		—
Weighted average common shares assuming dilution		51,199,717		47,363,197
Earnings per share:
Basic		$	(0.20)	$	—
Diluted		$	(0.20)	$	—

Anti-dilutive shares excluded from calculations of diluted earnings per share		1,558,751		1,360,378


8First Quarter 2022 Form 10-Q						~~First Quarter 2021 Form 10-Q~~9

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements ~~(Continued)~~

(Unaudited)

~~The following table sets forth the computation of basic and diluted earnings (loss) per share:~~

Three months ended
March 31,
(dollars in thousands, except per share amounts) 2021 2020
Numerator:
Net (loss) income $ (164) $ 4,639
Denominator:
Weighted average common shares 47,363,197 48,036,300
Add effect of dilutive securities:
Stock-based awards 0 419,451
Weighted average common shares assuming dilution 47,363,197 48,455,751
Earnings (loss) per share:
Basic $ 0 $ 0.10
Diluted $ 0 $ 0.10
Anti-dilutive shares excluded from calculations of diluted earnings (loss) per share 1,360,378 1,170,289


5.6. Fair Value Measurements

We use a three-tier fair value hierarchy to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

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

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

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


~~First Quarter 2021 Form 10-Q~~						9

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

Recurring fair value measurements

Assets and liabilities that are measured at fair value on a recurring basis consisted of the following, as of the dates indicated below:


		Fair value measurement using									Fair value measurement using
(dollars in thousands)	(dollars in thousands)	Level 1		Level 2		Level 3		Total		(dollars in thousands)	Level 1		Level 2		Level 3		Total
Fair value as of March 31, 2021
Fair value as of March 31, 2022										Fair value as of March 31, 2022
Financial assets:	Financial assets:									Financial assets:
Derivative instruments	Derivative instruments	$	0	$	2,851	$	0	$	2,851	Derivative instruments	$	—	$	21,947	$	—	$	21,947
Total financial assets	Total financial assets	$	0	$	2,851	$	0	$	2,851	Total financial assets	$	—	$	21,947	$	—	$	21,947

Financial liabilities:
Derivative instruments		$	0	$	1,431	$	0	$	1,431
Total financial liabilities		$	0	$	1,431	$	0	$	1,431

Fair value as of December 31, 2020
Financial liabilities:
Fair value as of December 31, 2021										Fair value as of December 31, 2021
Financial assets:										Financial assets:
Derivative instruments	Derivative instruments	$	0	$	4,159	$	0	$	4,159	Derivative instruments	$	—	$	7,160	$	—	$	7,160
Total financial liabilities		$	0	$	4,159	$	0	$	4,159
Total financial assets										Total financial assets	$	—	$	7,160	$	—	$	7,160

Our derivative instruments within the scope of Accounting Standards Codification ("ASC") 815, Derivatives and Hedging, are required to be recorded at fair value. Our derivative instruments that are recorded at fair value include interest rate swaps. See Note 9 to these condensed consolidated financial statements for additional information about our derivative instruments.

The fair value of our interest rate swaps was based on model-driven valuations using LIBOR rates, which are observable at commonly quoted intervals. Accordingly, our interest rate swaps are classified within Level 2 of the fair value hierarchy. The Financial Conduct Authority in the U.K. has stated that it plans to phase out all tenors of LIBOR by ~~the end of calendar year 2021.~~June 2023. We do not currently anticipate a significant impact to our financial position or results of operations as a result of this action as we expect that our financial contracts currently indexed to LIBOR will either expire or be modified without significant financial impact before the phase out occurs.

We believe the carrying amounts of our cash and cash equivalents, restricted cash, accounts receivable, trade accounts payable, accrued expenses and other current liabilities and due to customers approximate their fair values at March 31, ~~2021~~2022 and ~~December��~~December 31, ~~2020,~~2021, due to the immediate or short-term maturity of these instruments.

We believe the carrying amount of our debt approximates its fair value at March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, as the debt bears interest rates that approximate market value. As LIBOR and SOFR rates are observable at commonly quoted intervals, our debt under the 2020 Credit Facility (as defined below) is classified within Level 2 of the fair value hierarchy. Our fixed rate debt is also classified within Level 2 of the fair value hierarchy.


10						First Quarter 2022 Form 10-Q

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

We did not transfer any assets or liabilities among the levels within the fair value hierarchy during the three months ended March 31, ~~2021.~~2022. Additionally, we did not hold any Level 3 assets or liabilities during the three months ended March 31, ~~2021.~~


10						~~First Quarter 2021 Form 10-Q~~

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

2022.

Non-recurring fair value measurements

Assets and liabilities that are measured at fair value on a non-recurring basis include long-lived assets, intangible assets, goodwill and operating lease right-of-use ("ROU") assets. These assets are recognized at fair value during the period in which an acquisition is completed or at lease commencement, from updated estimates and assumptions during the measurement period, or when they are considered to be impaired. These non-recurring fair value measurements, primarily for long-lived assets, intangible assets acquired and operating lease ROU assets, are based on Level 3 unobservable inputs. In the event of an impairment, we determine the fair value of these assets other than goodwill using a discounted cash flow approach, which contains significant unobservable inputs and, therefore, is considered a Level 3 fair value measurement. The unobservable inputs in the analysis generally include future cash flow projections and a discount rate. For goodwill impairment testing, we estimate fair value using market-based methods including the use of market capitalization and consideration of a control premium.

There were no material non-recurring fair value adjustments to our long-lived assets, intangible assets, goodwill and operating lease ROU assets during the three months ended March 31, ~~2021.~~2022.


6.7. Consolidated Financial Statement Details

Restricted cash

(dollars in thousands) March 31,
2021 December 31,
2020
Restricted cash due to customers $ 254,002 $ 607,943
Real estate escrow balances 1,156 1,276
Total restricted cash 255,158 609,219

~~Prepaid expenses and other assets~~

(dollars in thousands) March 31,
2021 December 31,
2020
Costs of obtaining contracts(1)(2)
$ 83,421 $ 84,914
Prepaid software maintenance and subscriptions(3)
33,113 24,471
Receivables for probable insurance recoveries(4)
15,723 6,288
Implementation costs for cloud computing arrangements, net(5)(6)
11,451 11,298
Unbilled accounts receivable 7,660 10,385
Prepaid insurance 6,397 1,426
Derivative instruments 2,851 0
Taxes, prepaid and receivable 1,486 1,891
Other assets 10,015 10,332
Total prepaid expenses and other assets 172,117 151,005
Less: Long-term portion 74,022 72,639
Prepaid expenses and other current assets $ 98,095 $ 78,366


(dollars in thousands)	March 31, 2022		December 31, 2021
Restricted cash due to customers	$	276,130	$	593,296
Letters of credit for operating leases	2,193		2,256
Real estate escrow balances	1,271		1,064
Total restricted cash	$	279,594	$	596,616

~~(1)Amortization expense from costs of obtaining contracts was $9.2 million and $9.5 million for the three months ended March 31, 2021 and 2020, respectively.~~

~~(2)The current portion of costs of obtaining contracts as of March 31, 2021 and December 31, 2020 was $31.6 million and $31.9 million, respectively.~~

~~(3)The current portion of prepaid software maintenance and subscriptions as of March 31, 2021 and December 31, 2020 was $28.0 million and $19.8 million, respectively.~~

~~(4)See discussion of the Security Incident at Note 9.~~

~~(5)These costs primarily relate to the multi-year implementations of our new global enterprise resource planning and customer relationship management systems.~~

~~(6)~~Amortization expense from capitalized cloud computing implementation costs was insignificant for the three months ended March 31, 2021 and 2020, respectively. Accumulated amortization for these costs was $1.6 million as of March 31, 2021 and $1.1 million as of December 31, 2020.


First Quarter ~~2021~~2022 Form 10-Q						11

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements ~~(Continued)~~

(Unaudited)

Prepaid expenses and other assets


(dollars in thousands)	March 31, 2022		December 31, 2021
Costs of obtaining contracts(1)(2)	$	76,482	$	78,465
Prepaid software maintenance and subscriptions(3)	33,950		28,880
Derivative instruments	21,947		7,160
Receivables for probable insurance recoveries(4)(5)	12,715		18,202
Implementation costs for cloud computing arrangements, net(6)(7)	11,354		11,892
Prepaid insurance	11,237		5,363
Unbilled accounts receivable	5,545		5,443
Taxes, prepaid and receivable	4,006		3,986
Deferred tax assets	1,569		1,546
Other assets	11,302		11,835
Total prepaid expenses and other assets	190,107		172,772
Less: Long-term portion	90,194		77,266
Prepaid expenses and other current assets	$	99,913	$	95,506

(1)Amortization expense from costs of obtaining contracts was $8.5 million and $9.2 million for the three months ended March 31, 2022 and 2021, respectively.

(2)The current portion of costs of obtaining contracts as of March 31, 2022 and December 31, 2021 was $29.7 million and $30.2 million, respectively.

(3)The current portion of prepaid software maintenance and subscriptions as of March 31, 2022 and December 31, 2021 was $29.8 million and $24.7 million, respectively.

(4)All receivables for probable insurance recoveries are classified as current.

(5)See discussion of the Security Incident at Note 10 to these condensed consolidated financial statements.

(6)These costs primarily relate to the multi-year implementations of our new global enterprise resource planning and customer relationship management systems.

(7)Amortization expense from capitalized cloud computing implementation costs was insignificant for the three months ended March 31, 2022 and 2021. Accumulated amortization for these costs was $3.5 million and $3.0 million as of March 31, 2022 and December 31, 2021, respectively.

Accrued expenses and other liabilities


(dollars in thousands)	(dollars in thousands)	March 31, 2021		December 31, 2020		(dollars in thousands)	March 31, 2022		December 31, 2021
Taxes payable(1)	Taxes payable(1)	$	16,458	$	19,577	Taxes payable(1)	$	23,305	$	19,777
Accrued legal costs(2)	Accrued legal costs(2)	12,055		4,808		Accrued legal costs(2)	12,208		11,724
Operating lease liabilities, current portion	Operating lease liabilities, current portion	7,191		9,359		Operating lease liabilities, current portion	8,930		9,170
Customer credit balances	Customer credit balances	5,891		5,874		Customer credit balances	7,403		8,403
Accrued commissions and salaries	Accrued commissions and salaries	5,524		5,010		Accrued commissions and salaries	4,656		7,872
Unrecognized tax benefit		3,546		3,351
Accrued health care costs	Accrued health care costs	2,389		2,341		Accrued health care costs	2,601		3,042
Accrued vacation costs	Accrued vacation costs	2,304		2,311		Accrued vacation costs	2,210		2,234
Derivative instruments		1,431		4,159
Accrued bonuses						Accrued bonuses	1,460		5,829
Accrued transaction-based costs related to payments services						Accrued transaction-based costs related to payments services	1,418		5,427
Unrecognized tax benefit						Unrecognized tax benefit	1,409		1,248
Amounts payable to former EVERFI option holders(3)						Amounts payable to former EVERFI option holders(3)	—		17,404
Other liabilities	Other liabilities	5,663		6,304		Other liabilities	8,101		9,310
Total accrued expenses and other liabilities	Total accrued expenses and other liabilities	62,452		63,094		Total accrued expenses and other liabilities	73,701		101,440
Less: Long-term portion	Less: Long-term portion	9,439		10,866		Less: Long-term portion	1,506		1,344
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	$	53,013	$	52,228	Accrued expenses and other current liabilities	$	72,195	$	100,096

(1)We deferred payments of the employer's portion of Social Security taxes during 2020 under the Coronavirus, Aid, Relief and Economic Security Act, ~~("CARES Act"),~~ half of which iswas due by the end of calendar year 2021 with the remainder due by the end of calendar year 2022.

~~Other (expense) income, net~~(2)All accrued legal costs are classified as current.

Three months ended
March 31,
(dollars in thousands) 2021 2020
Interest income $ 152 $ 522
Other (expense) income, net (1,162) 548
Other (expense) income, net $ (1,010) $ 1,070


12						First Quarter 2022 Form 10-Q

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(3)Represents amounts that had not been paid by EVERFI to its former option holders as of December 31, 2021, solely due to the timing of the acquisition on the last day of 2021. See Note 3 to these condensed consolidated financial statements for additional information regarding our acquisition of EVERFI.


7.8. Debt

The following table summarizes our debt balances and the related weighted average effective interest rates, which includes the effect of interest rate swap agreements.

Debt balance at Weighted average
effective interest rate at
(dollars in thousands) March 31,
2021 December 31,
2020 March 31,
2021 December 31,
2020
Credit facility:
Revolving credit loans $ 93,425 $ 69,625 1.80 % 1.83 %
Term loans 397,500 400,000 3.13 % 3.12 %
Real estate loans 60,358 60,626 5.22 % 5.22 %
Other debt 2,232 3,926 5.00 % 5.00 %
Total debt 553,515 534,177 3.14 % 3.21 %
Less: Unamortized discount and debt issuance costs 2,716 3,144
Less: Debt, current portion 12,875 12,840 2.67 % 2.61 %
Debt, net of current portion $ 537,924 $ 518,193 3.15 % 3.22 %


12						~~First Quarter 2021 Form 10-Q~~

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~


	Debt balance at				Weighted average effective interest rate at
(dollars in thousands)	March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021
Credit facility:
Revolving credit loans	$	290,000	$	260,000	3.06	%	3.27	%
Term loans	635,938		640,000		2.93	%	3.02	%
Real estate loans	59,177		59,480		5.22	%	5.22	%
Other debt	537		1,694		5.00	%	5.00	%
Total debt	985,652		961,174		3.11	%	3.23	%
Less: Unamortized discount and debt issuance costs	4,427		4,994
Less: Debt, current portion	18,116		18,697		3.16	%	3.11	%
Debt, net of current portion	$	963,109	$	937,483	3.11	%	3.23	%

2020 credit facility

In October 2020, we entered into a five-year $900.0 million senior credit facility (the "2020 Credit Facility"). At March 31, ~~2021,~~2022, we were in compliance with our debt covenants under the 2020 Credit Facility.

First incremental term loan

In December 2021, we entered into the First Incremental Term Loan Agreement (the "Incremental Amendment"). The Incremental Amendment amended the 2020 Credit Facility and, among other things, provided for a $250.0 million incremental term loan (the “2021 Incremental Term Loan”).

Financing for EVERFI acquisition

On December 31, 2021, we acquired EVERFI for approximately $442.7 million in cash consideration and 3,811,348 shares of the company's common stock, valued at approximately $301.1 million, for an aggregate purchase price of approximately $743.8 million, subject to closing adjustments. We financed the cash consideration and related expenses through cash on hand and new borrowings under the 2020 Credit Facility, including $250.0 million under the 2021 Incremental Term Loan (as defined above).

First amendment to 2020 Credit Facility

On January 31, 2022, we entered into the First Amendment to Credit Agreement (the “Amendment”). The Amendment amended the 2020 Credit Facility to, among other things, (i) modify the definition of “Applicable Margin”, (ii) modify the net leverage ratio financial covenant to require a net leverage ratio of (A) 4.00:1.00 or less for the fiscal quarter ended December 31, 2021 and for fiscal quarters ending thereafter through December 31, 2023 and (B) 3.75:1.00 or less for the fiscal quarters ending March 31, 2024 and thereafter, (iii) reset the $250.0 million fixed dollar basket with respect to the accordion feature and (iv) modify certain negative covenants to provide additional operational flexibility.


First Quarter 2022 Form 10-Q						13

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Real estate loans

In August 2020, we completed the purchase of our global headquarters facility. As part of the purchase price, we assumed the ~~Seller’s~~seller’s obligations under two senior secured notes with ~~an aggregate~~a then-aggregate outstanding principal amount of $61.1 million (collectively, the “Real Estate Loans”). At March 31, ~~2021,~~2022, we were in compliance with our debt covenants under the Real Estate Loans.

Other debt

From time to time, we enter into third-party financing agreements for purchases of software and related services for our internal use. Generally, the agreements are non-interest-bearing notes requiring annual payments. Interest associated with the notes is imputed at the rate we would incur for amounts borrowed under our then-existing credit facility at the inception of the notes.

The following table summarizes our currently effective financing agreements as of March 31, ~~2021:~~2022:

(dollars in thousands) Term
in Months Number of
Annual Payments First Annual Payment Due Original Loan Value
Effective dates of agreements:
December 2019 51 4 January 2020 $ 2,150
January 2020 39 3 March 2020 3,470

~~As of March 31, 2021, the required annual maturities related to the 2020 Credit Facility, the Real Estate Loans and our other debt were as follows:~~

Years ending December 31,
(dollars in thousands) Annual
maturities
2021 - remaining $ 8,378
2022 12,985
2023 11,982
2024 11,609
2025 455,209
Thereafter 53,352
Total required maturities $ 553,515

(dollars in thousands)

Term
in Months

Number of
Annual Payments

First Annual
Payment Due

Original Loan
Value

Effective dates of agreements:

December 2019

January 2020

2,150


8.9. Derivative Instruments

Cash flow hedges

We generally use derivative instruments to manage our variable interest rate risk. We have entered into interest rate swap agreements, which effectively convert portions of our variable rate debt under the 2020 Credit Facility to a fixed rate for the term of the swap agreements. We designated each of the interest rate swap agreements as a cash flow hedge at the inception of the contracts.


~~First Quarter 2021 Form 10-Q~~						13

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

The terms and notional values of our derivative instruments were as follows as of March 31, ~~2021:~~2022:


(dollars in thousands)	Term of derivative instrument	Notional value
Derivative instruments designated as hedging instruments:
Interest rate swap	~~July 2017~~November 2020 - ~~July 2021~~October 2024	$	~~150,000~~
~~Interest rate swap~~	~~February 2018 - June 2021~~	~~50,000~~
~~Interest rate swap~~	~~June 2019 - June 2021~~	~~75,000~~60,000
Interest rate swap	November 2020 - October 2024	60,000
Interest rate swap	~~November 2020 - October 2024~~	~~60,000~~
		$	~~395,000~~

~~Forward-starting interest rate swap~~	June 2021 - October 2024	120,000
~~Forward-starting interest~~Interest rate swap	July 2021 - October 2024	120,000
Interest rate swap	July 2021 - October 2024	75,000
		$	~~240,000~~435,000

The fair values of our derivative instruments were as follows as of:


			Asset derivatives					Liability derivatives						Asset derivatives
(dollars in thousands)	(dollars in thousands)	Balance sheet location	March 31, 2021		December 31, 2020		Balance sheet location	March 31, 2021		December 31, 2020		(dollars in thousands)	Balance sheet location	March 31, 2022		December 31, 2021
Derivative instruments designated as hedging instruments:	Derivative instruments designated as hedging instruments:											Derivative instruments designated as hedging instruments:
Interest rate swaps, current portion		Prepaid expenses and other current assets	$	0	$	0	Accrued expenses and other current liabilities	$	1,431	$	2,698
Interest rate swaps, long-term portion		Other assets	2,851		0		Other liabilities	0		1,461

Interest rate swaps, long-term												Interest rate swaps, long-term	Other assets	21,947		7,160
Total derivative instruments designated as hedging instruments	Total derivative instruments designated as hedging instruments		$	2,851	$	0		$	1,431	$	4,159	Total derivative instruments designated as hedging instruments		$	21,947	$	7,160


14						First Quarter 2022 Form 10-Q

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The effects of derivative instruments in cash flow hedging relationships were as follows:

Gain (loss) recognized
in accumulated other
comprehensive
loss as of

Location
of gain (loss)
reclassified from
accumulated other
comprehensive
loss into income

Gain (loss) reclassified from accumulated
other comprehensive loss into income

Gain (loss) recognized
in accumulated other
comprehensive
loss as of

Location
of gain (loss)
reclassified from
accumulated other
comprehensive
loss into income

Gain (loss) reclassified from accumulated
other comprehensive loss into income

(dollars in thousands)

March 31,
2021

Three months ended

March 31, 2021

(dollars in thousands)

March 31,
2022

Three months ended

March 31, 2022

Interest rate swaps

1,420

Interest expense

(1,373)

Interest rate swaps

21,947

Interest expense

(358)

March 31,
2020

Three months ended

March 31, 2020

March 31,
2021

Three months ended

March 31, 2021

Interest rate swaps

(5,979)

Interest expense

(205)

Interest rate swaps

1,420

Interest expense

(1,376)

Our policy requires that derivatives used for hedging purposes be designated and effective as a hedge of the identified risk exposure at the inception of the contract. Accumulated other comprehensive income (loss) includes unrealized gains or losses from the change in fair value measurement of our derivative instruments each reporting period and the related income tax expense or benefit. Changes in the fair value measurements of the derivative instruments and the related income tax expense or benefit are reflected as adjustments to accumulated other comprehensive income (loss) until the actual hedged expense is incurred or until the hedge is terminated at which point the unrealized gain (loss) is reclassified from accumulated other comprehensive income (loss) to current earnings. The estimated accumulated other comprehensive ~~loss~~income as of March 31, ~~2021~~2022 that is expected to be reclassified into earnings within the next twelve months is ~~$2.2~~$5.7 million. There were 0 ineffective portions of our interest rate swap derivatives during the three months ended


14						~~First Quarter 2021 Form 10-Q~~

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

March 31, ~~2021~~2022 and ~~2020.~~2021. See Note 12 for a summary of the changes in accumulated other comprehensive income (loss) by component.


9.10. Commitments and Contingencies

Leases

We have operating leases for corporate offices, subleased offices and certain equipment and furniture. As of March 31, ~~2021,~~2022, we ~~had~~did not have any operating leases ~~for office space~~ that had not yet ~~commenced with future rent payments of $3.5 million. These operating leases are expected to commence during 2021 with lease terms of 3 years.~~commenced.

The following table summarizes the components of our lease ~~expense were as follows:~~expense:


		Three months ended March 31,						Three months ended March 31,
(dollars in thousands)	(dollars in thousands)		2021		2020		(dollars in thousands)		2022		2021
Operating lease cost(1)	Operating lease cost(1)		$	2,841	$	6,311	Operating lease cost(1)		$	2,532	$	2,841
Variable lease cost	Variable lease cost		699		1,258		Variable lease cost		437		699
Sublease income	Sublease income		(460)		(913)		Sublease income		(431)		(460)
Net lease cost	Net lease cost		$	3,080	$	6,656	Net lease cost		$	2,538	$	3,080

(1)Includes short-term lease costs, which were immaterial.

Other commitments

The term loans under the 2020 Credit Facility require periodic principal payments. The balance of the term loans and any amounts drawn on the revolving credit loans are due upon maturity of the 2020 Credit Facility in October 2025. The Real Estate Loans also require periodic principal payments and the balance of the Real Estate Loans are due upon maturity in April 2038.

We have contractual obligations for third-party technology used in our solutions and for other services we purchase as part of our normal operations. In certain cases, these arrangements require a minimum annual purchase commitment by us. As of March 31, ~~2021,~~2022, the remaining aggregate minimum purchase commitment under these arrangements was approximately ~~$79.0~~$31.7 million through ~~2024.~~2025.


First Quarter 2022 Form 10-Q						15

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Solution and service indemnifications

In the ordinary course of business, we provide certain indemnifications of varying scope to customers against claims of intellectual property infringement made by third parties arising from the use of our solutions or services. If we determine that it is probable that a loss has been incurred related to solution or service indemnifications, any such loss that could be reasonably estimated would be recognized. We have not identified any losses and, accordingly, we have not recorded a liability related to these indemnifications.

Legal proceedings

We are subject to legal proceedings and claims that arise in the ordinary course of business, as well as certain other non-ordinary course proceedings, claims and inquiries, as described below. We make a provision for a loss contingency when it is both probable that a material liability has been incurred and the amount of the loss can be reasonably estimated. If only a range of estimated losses can be determined, we accrue an amount within the range that, in our judgment, reflects the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, we accrue the low end of the range. For proceedings in which an unfavorable outcome is reasonably possible but not probable and an estimate of the loss or range of losses arising from the proceeding can be made, we disclose such an estimate, if material. If such a loss or range of losses is not reasonably estimable, we disclose that fact. We review any such loss contingency provisions at least quarterly and adjust them to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. We


~~First Quarter 2021 Form 10-Q~~						15

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

recognize insurance recoveries, if any, when they are probable of receipt. All associated costs due to third-party service providers and consultants, including legal ~~costs~~fees, are expensed as incurred.

Legal proceedings are inherently unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending or threatened against us and intend to defend ourselves vigorously against all claims asserted. We further believe that the amount or range of reasonably possible losses related to such pending or threatened legal proceedings will not have a material adverse effect on our business, operating results, cash flows, or financial condition should such litigation be resolved unfavorably. It is possible ~~nevertheless,~~ that our consolidated financial position, results of operations or cash flows could be materially negatively affected in any particular period by an unfavorable resolution of one or more of such legal proceedings.

Security incident

As previously disclosed, we are subject to risks and uncertainties as a result of 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 (the "Security Incident"). Based on the nature of the Security Incident, our research and third party (including law enforcement) investigation, we have no reason to believe that any data went beyond the cybercriminal, was or will be misused, or will be disseminated or otherwise made available publicly. Our investigation into the Security Incident by our cybersecurity team and third-party forensic advisors remains ongoing.

As a result of the Security Incident, we are currently subject to certain legal proceedings, claims, inquiries and investigations, as discussed below, and could be the subject of additional legal proceedings, claims, inquires and investigations in the future that might result in adverse judgments, settlements, fines, penalties, or other resolution. To limit our exposure to losses related to claims against us, including data breaches such as the Security Incident, we maintain $50 million of insurance above a $250 thousand deductible payable by us. As noted below, this coverage has reduced our ~~financial~~financial exposure related to the Security Incident, and we will continue to seek recoveries under these insurance policies. ~~Although it is possible that total losses~~

We recorded expenses and offsetting probable insurance recoveries related to the Security Incident ~~will ultimately exceed the limits~~as follows:


	Three months ended March 31,
(dollars in thousands)		2022		2021
Gross expense		$	9,005	$	12,814
Offsetting probable insurance recoveries		(1,804)		(12,813)
Net expense		$	7,201	$	1


16						First Quarter 2022 Form 10-Q

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following summarizes our ~~insurance coverage, we are currently unable to determine if or when that will be the case and, if so, the approximate amount or range of any such excess.~~

~~In the three months ended March 31, 2021, we recorded $12.8 million of~~cumulative expenses, ~~related to the Security Incident and offsetting~~ probable insurance recoveries ~~of $12.8 million. As of March 31, 2021, we have recorded cumulative expenses related to the Security Incident of $22.6 million~~ and ~~cumulative probable~~ insurance recoveries ~~of $22.1 million.~~ paid as of:


(dollars in thousands)	March 31, 2022		December 31, 2021
Cumulative gross expense	$	59,396	$	50,391
Cumulative offsetting insurance recoveries	(49,913)		(48,109)
Cumulative net expense	$	9,483	$	2,282

Cumulative offsetting insurance recoveries paid	$	(37,277)	$	(29,968)

Due to the time required to submit and process such insurance claims, we have not yet received all of the accrued insurance recoveries. ~~Of the insurance recoveries recorded, $6.4 million had been paid as of March 31, 2021.~~ Recorded expenses consisted primarily of payments for legal fees related to ~~third-party service providers~~governmental inquiries and ~~consultants, including legal fees.~~investigations and customer constituent class actions. We present expenses and insurance recoveries related to the Security Incident in general and administrative expense on ~~our condensed~~our consolidated statements of comprehensive ~~income.~~ income and as operating activities on our consolidated statements of cash flows. Total costs related to the Security Incident that we expect will be recoverable exceeded the limit of our insurance coverage during the first quarter of 2022. We expect to continue to experience significant expenses related to our response to the Security Incident, resolution of legal proceedings, claims, inquiries and investigations discussed below, and our efforts to further enhance our security ~~measures, which expenses may be material.~~measures. For full year 2022, we currently expect net cash outlays of approximately $25.0 million to $35.0 million for ongoing legal fees related to the Security Incident. In line with our policy as discussed above, legal fees are expensed as incurred.

Based on our analysis of the factors described above, we have not recorded a liability for a loss contingency related to the Security Incident as of March 31, ~~2021~~2022 because we are unable at this time to reasonably estimate the possible loss or range of loss.

Customer claims.To date, we have received approximately ~~630 claims~~260 specific requests for reimbursement of expenses ("Customer Reimbursement Requests") and approximately 400 reservations of the right to seek expense recovery in the future from customers or their attorneys in the U.S., U.K. and Canada related to the Security Incident (none of which have as yet been filed in ~~court or~~court). Of the Customer Reimbursement Requests received to date, approximately 190 have been fully resolved and closed. In addition, insurance companies representing various customers’ interests through subrogation claims have contacted us. One insurance company has filed a subrogation claim in ~~arbitration). Possible exposure could result from our customers’~~court. Customer and insurer subrogation claims generally seek reimbursement of their costs and expenses associated with notifying their own customers of the Security Incident and taking steps to assure that personal information has not been compromised as a result of the Security Incident. ~~We are in the process~~Our review of customer and subrogation claims includes analyzing individual customer contracts into which we have entered, the specific claims made and applicable law.

Customer constituent class actions. Presently, we are a defendant in 3019 putative consumer class action cases ~~[27~~[17 in U.S. federal courts ~~(some of which~~(which have been consolidated under multi district litigation to a single federal court)~~, 1 in a U.S. state court~~ and 2 in Canadian courts] alleging harm from the Security Incident. The plaintiffs in these cases, who purport to represent various classes of individual constituents of our customers, generally claim to have been harmed by


16						~~First Quarter 2021 Form 10-Q~~

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

alleged actions and/or omissions by us in connection with the Security Incident and assert a variety of common law and statutory claims seeking monetary damages, injunctive relief, costs and attorneys’ fees, and other related relief.

Lawsuits that are putative class actions require a plaintiff to satisfy a number of procedural requirements before proceeding to trial. These requirements include, among others, demonstration to a court that the law proscribes in some manner our activities, the making of factual allegations sufficient to suggest that our activities exceeded the limits of the law and a determination by the court—known as class certification—that the law permits a group of individuals to pursue the case together as a class. If these procedural requirements are not met, the lawsuit cannot proceed as a class action and the plaintiff may lose the financial incentive to proceed with the case. Frequently, a court’s determination as to these procedural requirements is subject to appeal to a higher court. As a result of these uncertainties, we may be unable to determine the probability of loss until, or after, a court has finally determined that a plaintiff has satisfied the applicable class action procedural requirements.


First Quarter 2022 Form 10-Q						17

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Furthermore, for putative class actions, it is often not possible to estimate the possible loss or a range of loss amounts, even where we have determined that a loss is reasonably possible. Generally, class actions involve a large number of people and raise complex legal and factual issues that result in uncertainty as to their outcome and, ultimately, making it difficult for us to estimate the amount of damages that a plaintiff might successfully prove. This analysis is further complicated by the fact that the plaintiffs lack contractual privity with us.

Governmental inquiries and investigations. To date, we have received a consolidated, multi-state Civil Investigative Demand issued on behalf of 4749 state Attorneys General and the District of Columbia and a separate Civil Investigative Demand from the office of the ~~Illinois~~California Attorney ~~General’s Office~~General relating to the Security Incident. ~~In addition, we have received communications, inquires and requests from~~We also are subject to the following pending governmental actions:

•an investigation by the U.S. Federal Trade ~~Commission,~~Commission;

•a formal investigation by the ~~U.S. Securities and Exchange Commission,~~SEC;

•an investigation by the U.S. Department of Health and Human ~~Services, the Information Commissioner’s Office in the United Kingdom (the “ICO”) under the U.K. Data Protection Act 2018,~~Services;

•an investigation by the Office of the Australian Information ~~Commissioner~~Commissioner; and

•an investigation by the Office of the Privacy Commissioner of Canada.

On September 28, 2021, the Information Commissioner's Office in the United Kingdom under the U.K Data Protection Act 2018 (the "ICO") notified us that it has closed its investigation of the Security Incident. Based on its investigation and having considered our actions before, during and after the Security Incident, the ICO issued our European subsidiary a reprimand in accordance with Article 58(2)(b) of the U.K. General Data Protection Regulation ("U.K. GDPR") due to our non-compliance, in the ICO's view, with the requirements set out in Article 32 of the U.K. GDPR regarding the processing of personal data. The ICO did not impose a penalty related to the Security Incident, nor did it impose any requirements for further action by us.

On September 24, 2021, we received notice from the Spanish Data Protection Authority that it has concluded its investigation of the Security Incident, pursuant to which our European subsidiary paid a penalty of €60,000 in relation to the alleged late notification of two Spanish data controllers regarding the Security Incident.

On January 15, 2021, we were notified by the Data Protection Commission of Ireland that it has concluded its investigation of the Security Incident without taking any action against us.

We ~~are cooperating~~continue to cooperate with ~~these offices~~all ongoing inquiries and ~~responding to their inquiries,~~investigations, which include various requests for documents, policies, narratives and communications, as well as requests to interview or depose various Company-related personnel. As noted above, each of these separate governmental inquiries and investigations could result in adverse judgements, settlements, fines, penalties, or other resolution, the amount, scope and timing of which we are currently unable to predict, but could ~~be material.~~


~~10. Income Taxes~~

~~Our income tax provision and effective income tax rates, including the effects of period-specific events, were:~~

Three months ended
March 31,
(dollars in thousands) 2021 2020
Income tax provision $ 684 $ 696
Effective income tax rate 131.5 % 13.0 %

The increase in our effective income tax rate for the three months ended March 31, 2021, when compared to the same period in 2020, was primarily attributable to higher 2021 discrete tax expense against lower pre-tax income. The 2020 effective income tax rate was positively impacted by benefits attributable to stock-based compensation. The 2021 effective income tax rate was negatively impacted by tax expense attributable to stock-based compensation against lower pre-tax income.


~~First Quarter 2021 Form 10-Q~~						17

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~


~~11. Stock-based Compensation~~

Stock-based compensation expense is allocated to cost of revenue and operating expenses on the condensed consolidated statements of comprehensive income based on where the associated employee’s compensation is recorded. The following table summarizes stock-based compensation expense:

Three months ended
March 31,
(dollars in thousands) 2021 2020
Included in cost of revenue:
Cost of recurring $ 2,411 $ 470
Cost of one-time services and other 2,947 395
Total included in cost of revenue 5,358 865
Included in operating expenses:
Sales, marketing and customer success 5,428 2,478
Research and development 6,714 2,799
General and administrative 12,505 7,438
Total included in operating expenses 24,647 12,715
Total stock-based compensation expense $ 30,005 $ 13,580


~~12. Stockholders' Equity~~

~~Stock repurchase program~~

~~In November 2020, our Board of Directors reauthorized and expanded~~have a stock repurchase program that authorizes us to purchase up to $250.0 million of our outstanding shares of common stock. The program does not have an expiration date. 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. Under the 2020 Credit Facility, we have restrictionsmaterial adverse impact on our ~~ability to repurchase shares~~results of ~~our common stock.~~

We account for purchases of treasury stock under the cost method. During the three months ended March 31, 2021, we purchased 465,821 shares for $28.1 million. The remaining amount available to purchase stock under the stock repurchase program was $180.9 million as of March 31, 2021.operations, cash flows, or financial condition.


18						First Quarter ~~2021~~2022 Form 10-Q

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements ~~(Continued)~~

(Unaudited)


11. Income Taxes

Our income tax (benefit) provision and effective income tax rates, including the effects of period-specific events, were:


	Three months ended March 31,
(dollars in thousands)		2022			2021
Income tax (benefit) provision		$	(2,050)		$	684
Effective income tax rate		16.5		%	131.5		%

For the three months ended March 31, 2022, we have utilized the discrete effective tax rate method, as allowed by ASC 740-270-30-18, Income Taxes—Interim Reporting, to calculate our interim income tax provision. The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis. We believe that, at this time, the use of this discrete method is more appropriate than the annual effective tax rate method as our full-year forecasted pre-tax income, relative to our forecasted permanent differences, has the potential to distort our estimated annual effective tax rate.

The decrease in our effective income tax rate for the three months ended March 31, 2022 when compared to the same period in 2021 was primarily attributable to the impact of stock based compensation. The 2022 effective tax rate was negatively impacted by increased tax expense attributable to stock based compensation against pre-tax loss for the period.


12. Stockholders' Equity

Changes in accumulated other comprehensive income (loss) by component

The changes in accumulated other comprehensive income (loss) by component, consisted of the following:

Three months ended
March 31,
(dollars in thousands) 2021 2020
Accumulated other comprehensive loss, beginning of period $ (2,497) $ (5,290)
By component:
Gains and losses on cash flow hedges:
Accumulated other comprehensive loss balance, beginning of period $ (3,101) $ (1,323)
Other comprehensive income (loss) before reclassifications, net of tax effects of $(1,100) and $1,154 3,130 (3,273)
Amounts reclassified from accumulated other comprehensive income (loss) to interest expense 1,376 205
Tax benefit included in provision for income taxes (357) (54)
Total amounts reclassified from accumulated other comprehensive income (loss) 1,019 151
Net current-period other comprehensive income (loss) 4,149 (3,122)
Accumulated other comprehensive income (loss) balance, end of period $ 1,048 $ (4,445)
Foreign currency translation adjustment:
Accumulated other comprehensive income (loss) balance, beginning of period $ 604 $ (3,967)
Translation adjustments 2,511 (5,728)
Accumulated other comprehensive income (loss) balance, end of period 3,115 (9,695)
Accumulated other comprehensive income (loss), end of period $ 4,163 $ (14,140)


	Three months ended March 31,
(dollars in thousands)		2022		2021
Accumulated other comprehensive income (loss), beginning of period		$	6,522	$	(2,497)
By component:
Gains and losses on cash flow hedges:
Accumulated other comprehensive income (loss) balance, beginning of period		$	5,257	$	(3,101)

Other comprehensive income (loss) before reclassifications, net of tax effects of $(3,789) and $(1,100)		10,641		3,130
Amounts reclassified from accumulated other comprehensive income to interest expense		358		1,376
Tax benefit included in provision for income taxes		(94)		(357)
Total amounts reclassified from accumulated other comprehensive income		264		1,019
Net current-period other comprehensive income		10,905		4,149
Accumulated other comprehensive income balance, end of period		$	16,162	$	1,048
Foreign currency translation adjustment:
Accumulated other comprehensive income balance, beginning of period		$	1,265	$	604
Translation adjustments		(2,132)		2,511
Accumulated other comprehensive (loss) income balance, end of period		(867)		3,115
Accumulated other comprehensive income, end of period		$	15,295	$	4,163


First Quarter 2022 Form 10-Q						19

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)


13. Revenue Recognition

Transaction price allocated to the remaining performance obligations

As of March 31, ~~2021,~~2022, approximately ~~$776~~$984 million of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 60% of these remaining performance obligations over the next 12 months, with the remainder recognized thereafter.

We applied the practical expedient in ASC 606-10-50-14 and have excluded the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less (one-time services); and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed (transactional revenue).

Contract balances

Our contract assets as of March 31, ~~2021~~2022 and December 31, ~~2020~~2021 were insignificant. Our opening and closing balances of deferred revenue were as follows:


(in thousands)	(in thousands)	March 31, 2021		December 31, 2020		(in thousands)	March 31, 2022		December 31, 2021

Total deferred revenue	Total deferred revenue	$	294,520	$	316,914	Total deferred revenue	$	355,677	$	378,746

The decrease in deferred revenue during the three months ended March 31, ~~2021~~2022 was primarily due to a seasonal decrease in customer contract ~~renewals~~renewals. . Historically, due to the timing of customer budget cycles, we have an increase in customer contract renewals at or near the beginning of our third ~~quarter generally resulting in~~quarter. Generally, our lowest balance of deferred revenue during the year is at the end of our first quarter. The amount of revenue recognized during the three months ended March 31, ~~2021~~2022 that was included in the deferred revenue balance at the beginning of the period was approximately


~~First Quarter 2021 Form 10-Q~~						19

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

~~$134~~ $152 million. The amount of revenue recognized during the three months ended March 31, ~~2021~~2022 from performance obligations satisfied in prior periods was insignificant.

Disaggregation of revenue

We sell our cloud solutions and related services in three primary geographical markets: to customers in the United States, to customers in the United Kingdom and to customers located in other countries. The following table presents our revenue by geographic area based on the address of our customers:


		Three months ended March 31,						Three months ended March 31,
(dollars in thousands)	(dollars in thousands)		2021		2020		(dollars in thousands)		2022		2021
United States	United States		$	185,327	$	193,959	United States		$	214,394	$	185,327
United Kingdom	United Kingdom		22,305		15,825		United Kingdom		27,660		22,305
Other countries	Other countries		11,559		13,837		Other countries		15,070		11,559
Total revenue	Total revenue		$	219,191	$	223,621	Total revenue		$	257,124	$	219,191

~~The~~Beginning in the second quarter of 2021, we combined our General Markets Group ("GMG")~~, the~~ and Enterprise Markets Group ("EMG"), into a single U.S. Markets Group ("UMG") and ~~the~~moved our Corporations vertical under our International Markets Group ("IMG") ~~comprised~~. This change was made to better align our ~~go-to-market organizations~~resources toward customer retention and growth, which are key objectives as ~~of March 31, 2021. The following is a description of each market group as of that date:~~

•~~The GMG focuses on sales primarily to all K-12 private schools, faith communities and arts and cultural organizations, as well as emerging and mid-sized prospects in the U.S.;~~

•~~The EMG focuses on sales primarily to all healthcare and higher education institutions, corporations and foundations, as well as large and/or strategic prospects in the U.S.; and~~

•~~The IMG focuses on sales primarily to all prospects and customers outside of the U.S.~~

~~The following table presents~~we progress toward our ~~revenue by market group:~~

Three months ended
March 31,
(dollars in thousands) 2021 2020
GMG $ 93,339 $ 95,453
EMG 89,527 98,123
IMG 36,370 30,081
Other (45) (36)
Total revenue $ 219,191 $ 223,621

~~The following table presents our recurring revenue by type:~~

Three months ended
March 31,
(dollars in thousands) 2021 2020
Contractual recurring $ 146,821 $ 147,744
Transactional recurring 59,929 57,123
Total recurring revenue $ 206,750 $ 204,867
long-term aspirational goals.


20						First Quarter ~~2021~~2022 Form 10-Q

Table of Contents

Blackbaud, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The UMG, IMG and EVERFI comprised our go-to-market organizations as of March 31, 2022. The following is a description of each market group as of that date:

•The UMG focuses on sales primarily to all prospects and customers inside of the U.S.; and

•The IMG focuses on sales primarily to all prospects and customers outside of the U.S, as well as corporations.

•We acquired EVERFI as of December 31, 2021 as discussed in Note 3 to these condensed consolidated financial statements. As we are working to integrate EVERFI into our business, it has not yet been included in one of our market groups.

The following table presents our revenue by market group:


	Three months ended March 31,
(dollars in thousands)		2022		2021(1)
UMG		$	182,489	$	173,467
IMG		48,054		45,769
EVERFI		26,975		—
Other		(394)		(45)
Total revenue		$	257,124	$	219,191

(1)Due to the market group change discussed above, we have recast our revenue by market group for the three months ended March 31, 2021 to present them on a consistent basis with the current year.

The following table presents our recurring revenue by type:


	Three months ended March 31,
(dollars in thousands)		2022		2021
Contractual recurring		$	174,531	$	146,821
Transactional recurring		70,135		59,929
Total recurring revenue		$	244,666	$	206,750


First Quarter 2022 Form 10-Q						21

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(Unaudited)

ITEM 2. 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 our unaudited, condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. 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 unaudited, condensed consolidated financial statements and related notes which are primarily denominated in thousands of dollars.


Executive Summary

Our revenue is primarily generated from the following sources: (i) charging for the use of our software solutions in cloud and hosted environments; (ii) providing payment and ~~other transactional-type~~transactional services; (iii) providing software maintenance and support services; providing Impact-as-a-Service™ digital educational content; and (iv) providing professional services, including implementation, consulting, training, analytic and other services.

COVID-19 Impact

The economic impact of COVID-19 on the social good industry remains ~~uncertain.~~somewhat uncertain, although we are seeing signs of recovery in the industry. Our end markets continue to display resilience in the post-pandemic recovery with a digital-first mindset. In February, the Blackbaud Institute released its annual Charitable Giving Report, which reported that overall giving in 2021 grew 9% with the percent of giving done online up significantly from pre-pandemic levels and holding steady in the low-teens. Nearly 30% of those online donations are being made on a mobile device, which we see as a long-term positive as we equip organizations to process mobile donations and optimize mobile user interfaces. If our existing and prospective customers remain cautious in their purchase decisions, our operating environment may continue to be ~~challenging for the remainder of 2021 and potentially beyond.~~challenging. Notwithstanding these conditions, we remain focused on continuing to execute our four-point strategy and strengthening our leadership position.

As expected and previously disclosed, our bookings shortfalls that began at the start of the pandemic in March 2020 are putting pressure on our contractual recurring revenue growth in the near-term. However, we are optimistic this pressure will abate as we progress through 2021. We had a solid bookings performance in the first quarter of 2021, which was favorable to our plan and our first quarter 2020 bookings performance.

Four-Point Strategy


			1						Expand Total Addressable Market

			2						Lead with World Class Teams and Operations

			3						Delight Customers with Innovative Cloud Solutions

			4						Focus on Employees, Culture and ESG Initiatives


22						First Quarter 2022 Form 10-Q

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1.Expand Total Addressable Market ("TAM")

WeIn December 2021, we doubled our TAM when we acquired EVERFI, an industry leader in global social impact technology. Adding EVERFI advances our position as a leader in the rapidly evolving ESG and CSR spaces and offers cross-selling and upselling opportunities through complementary product offerings with YourCause® solutions. Our TAM now stands at over $20 billion, and we remain active in the evaluation of opportunities to further expand our addressable market through acquisitions and internal product development. ~~We have significant opportunities in front of us as we are less than 10% penetrated into a TAM of over $10 billion.~~


~~First Quarter 2021 Form 10-Q~~						21

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2.Lead with World Class Teams and Operations

This strategy expands upon our previous strategies to drive sales effectiveness and improve operating efficiency to include improving overall company performance as measured by the Rule of 40 (see discussion of Non-GAAP Financial Measures below). ~~We have~~We recently welcomed two accomplished leaders to our team as we look to drive future innovation and customer delight, a ~~strong executive team that is delivering on~~Chief Product Officer, to oversee our ~~mission~~global product portfolio and ~~executing on~~a Chief Information Security Officer, to oversee our ~~strategy. We have talent across our company, at every level, who are aligned with these goals as well.~~global trust and security program including all elements of cybersecurity.

3.Delight Customers with Innovative Cloud Solutions

~~2020 required unprecedented speed and scale to support~~We are excited about the role Blackbaud is playing in developing innovative solutions for our customers to diversify the way they receive and process donations. Recently, we ~~were quick~~announced a new product integration in the U.S. between Blackbaud Merchant Services, our end-to-end payment processing solution, and PayPal allowing social good organizations to ~~reprioritize~~offer donors the option to checkout with PayPal or Venmo. Through this integration, Blackbaud customers will have access to a broader audience of donors with PayPal's more than 400 million active consumer accounts enabling a more satisfying giving experience to expand impact. We are also driving a differentiated giving experience through our partnership with Change, to provide Blackbaud's corporate customers an option to run charitable campaigns at point-of-sale like roundups after purchase, match customer donations and ~~expedite~~offer donation options in loyalty programs. Change is a good example of the ecosystem we are building through our Social Good Startup Program. Their platform is already making an impact in the mission-driven commerce space, including enabling a new frontier of giving with cryptocurrency. We also recently held our Product Update Briefings, a semi-annual event designed to share new product features and roadmaps. We provided updates on innovations in the pipeline for Raiser's Edge NXT, Financial Edge NXT, Grantmaking, Data Intelligence, Payment Services, Luminate Online and TeamRaiser, JustGiving, and SKY Developer, to name a few. New this year, we hosted an executive summary session that briefly highlighted our most important product enhancements ~~to support~~and strategies, which can be accessed along with all the sessions by visiting our customers' changing needs as they needed to operate more digitally. We have carried that momentum into 2021. For example, we upgraded virtually all of our Blackbaud Grantmaking customers to a new SKY UX versioncorporate website. Also, in just ~~one month's time. This helps alleviate~~over a month, we are projecting our ~~customers' IT burden, improves data security~~highest turnout ever at our developers' conference designed as a learning event that brings together all levels of developers and technology enthusiasts to share best practices, collaborate with ~~multi-factor authentication~~Blackbaud product experts and provides freedom and flexibility to access advanced grant management technology anywhere via any browser on any device. With more veteran grantmakers using mobile technology and a younger generation of grantmakers emerging in the philanthropic community, providing convenient access to grant data and grant management tools willbuild relationships with peers. We continue to ~~be critical for success. Blackbaud plays a critical role~~drive significant growth in ~~accelerating~~ our customers' move to the cloud. In higher education, with the COVID-19 pandemic accelerating the need for powerful cloud-based systems that allow for easier collaboration, Blackbaud CRM has been the trusted CRM solution for a growing numbernon-Blackbaud developer ecosystem consisting of ~~institutions to support their overall advancement needs.~~customers, consultants, partners and individual change agents.

4.Focus on Employees, Culture and ESG Initiatives

~~During the first quarter of 2021,~~We recently announced that we ~~elevated~~achieved carbon neutrality for 2021. This is a ~~specific~~goal we have been striving towards and our shift to a remote-first workforce enabled us to accelerate our timeline. Since 2019, Blackbaud has reduced its global real estate footprint by 50%, energy emissions to run office space by 63% and employee commute emissions by 75%. With a multi-pronged climate strategy, Blackbaud is focused on ~~employees,~~reducing emissions, using energy efficiently and investing in environmental projects for a more sustainable future. We will share more about our ESG strategy on our Corporate Social Responsibility website, which we expect to launch this quarter. Our mission driven culture ~~and ESG initiatives. This is not new for us. It is something that~~ has been in our DNA ~~for a long time~~since inception and is very attractive in a ~~big advantage as we look~~competitive labor market. We continue to attract and retain top talent. This is evident in our 2020 social responsibility report, which was released in April 2021, and demonstrates how we responded to the unique challenges the pandemic created for our employees, customers, and communities. We also expanded this year's report to include voluntary ESG reporting disclosures that align with the Sustainability Accounting Standards Board and Global Reporting Initiative. One highlight from the report is that the Company is comprised of 46% female employees and 54% male employees, which is an industry-leading ratio. We are fully committed to continuing to createfoster a diverse and inclusive environment ~~at all levels~~focused on employee engagement and connectedness with our remote-first workforce strategy. For example, of our most recent hires, nearly 67% have come from historically under-represented groups. We have a significant role to play in driving advances in the social good space, and we are proud of the ~~organization.~~strong corporate culture we have built and continue to cultivate in today's environment.


First Quarter 2022 Form 10-Q						23

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Financial Summary


Total revenue ($M)						Income from operations ($M)
YoY Growth (%)						YoY Growth (%)


22						~~First Quarter 2021 Form 10-Q~~

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~~(Unaudited)~~

Total revenue ~~decreased~~increased by ~~$4.4~~$37.9 million during the three months ended March 31, ~~2021,~~2022, when compared to the same period in ~~2020,~~2021, driven largely by the following:


			-+						Growth in recurring revenue primarily related to: ~~Decrease~~•an increase in contractual recurring revenue of $27.7 million related to the performance of our cloud solutions, $24.1 million of which was attributable to EVERFI; partially offset by a decrease in maintenance revenue as customers migrate to our cloud solutions; and •an increase in transactional revenue of $10.2 million primarily due to an increase in online charitable giving, the continued shift toward virtual fundraising and, to a lesser extent, increased transactional volume as our customer's constituents have begun to return to in-person events.
			+						Increase in one-time consulting revenue due primarily to our acquisition of EVERFI, largely offset by a decrease in implementation and customization services, in line with our multi-year strategic shift from a license-based and one-time services business model to a cloud subscription business model. Our cloud subscription offerings generally require less implementation and customization services. We changed our commission plans during the first quarter of 2020 to intentionally shift our sales teams' focus towards selling our cloud solutions. Additionally, the bookings shortfalls during 2020 caused by the COVID-19 pandemic contributed to the decrease in one-time consulting revenue.
			-						Decrease in one-time analytics revenue as analytics are generally integrated in our cloud solutions

	+		~~Growth in recurring revenue related to an increase in transactional revenue related to charitable giving~~
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Income from operations decreased by ~~$1.8~~$12.6 million during the three months ended March 31, ~~2021,~~2022, when compared to the same period in ~~2020,~~2021, driven largely by the following:


			-+						Increase ~~in stock-based compensation costs of $16.4 million due to:~~ •~~replacement of our annual cash bonus plans with a short-term performance-based equity award plan;~~ •~~increases in the grant date fair values of our annual equity awards granted to employees;~~ •~~in response to COVID-19, replacement of our 2020 base salary merit increases with one-year time-based equity awards;~~ •~~overall Company performance against 2020 goals; and~~ •~~decrease in the vesting period for our annual long-term incentive time-based equity awards from 4 years (1/4 per year) to 3 years (1/3 per year), beginning in February 2021.~~
			-						~~Decrease~~ in total revenue, as described above

			+						Decrease in stock-based compensation expense of $2.1 million attributable to a change in the timing of our annual short-term incentive ("STI") equity award grants from the second quarter during 2020 to the first quarter beginning in 2021, which resulted in double-expense for STI awards during the first quarter of 2021
			-						Increase in compensation costs other than stock-based compensation of ~~$12.7~~$23.7 million primarily due to ~~a decrease in~~increased employee headcount due to our acquisition of EVERFI
			+-						~~Decrease~~Increases in ~~travel~~third-party contractor and hosting costs of ~~$3.6~~$7.8 million ~~due~~and $2.7 million, respectively, primarily attributable to our ~~restriction on non-essential employee travel~~acquisition of EVERFI and, to a lesser extent, our continued migration of our cloud infrastructure to leading public cloud service providers and investments in ~~response to the COVID-19 pandemic~~security
			+-						~~Decrease~~Increase in Security Incident-related expenses, net of insurance, of $7.2 million. See "Security Incident update" below.
			-						Increase in transaction-based costs of $5.1 million related to payment services integrated in our cloud solutions
			-						Increase in amortization of intangible assets from business combinations of ~~$2.0~~$3.6 million due to our acquisition of EVERFI
			-						Increase in marketing costs of $2.1 million primarily due to our acquisition of EVERFI
			-						Increase in corporate IT costs of $1.2 million primarily related to our acquisition of EVERFI and investments in security tools

We are continuing to make critical investments in the business in areas such as digital marketing, engineering, security, customer success and our continued shift of cloud infrastructure to leading public cloud service providers. Our profitability through the first quarter reflects the addition of EVERFI and some of these incremental investments that were pushed from 2021 into 2022, particularly in areas where we are increasing headcount.


Customer retention

Our recurring revenue contracts are generally for a term of three years at contract inception with one to three-year renewals thereafter. We anticipate a continued decrease in maintenance contract renewals as we transition our solution portfolio and maintenance customers from a perpetual license-based model to a cloud subscription delivery model. In the long term, we also anticipate an increase in recurring subscription contract renewals as we continue focusing on innovation, quality and the integration of our cloud solutions, which we believe will provide value-adding capabilities to better address our customers' needs. Due primarily to these factors, we believe a recurring revenue customer retention measure that combines recurring subscription, maintenance and service customer contracts provides a better representation of our customers' overall behavior. For the twelve months ended March 31, ~~2021,~~2022, approximately ~~93%~~92% of our customers with recurring revenue contracts were retained. This customer retention rate is materially unchanged from our rate for the full year ended December 31, ~~2020.~~

~~Balance sheet~~2021 and ~~cash flow~~

~~At March 31, 2021,~~reflects our ~~cash~~efforts to rationalize our portfolio of solutions and ~~cash equivalents were $27.8 million and the carrying amount of~~migrate customers from legacy solutions towards our ~~debt under the 2020 Credit Facility was $488.8 million. Our net leverage ratio was~~ ~~1.79 to 1.00~~.next generation solutions.


First Quarter ~~2021~~2022 Form 10-Q						2325

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Balance sheet and cash flow

At March 31, 2022, our cash and cash equivalents were $33.8 million and the carrying amount of our debt under the 2020 Credit Facility was $922.0 million. Our net leverage ratio

was 3.57 to 1.00.

During the three months ended March 31, ~~2021,~~2022, we generated ~~$30.1~~$24.5 million in cash from operations, had a net increase in borrowings of ~~$21.0~~$25.6 million ~~returned $28.1 million to stockholders by way of share repurchases~~ and had aggregate cash outlays of ~~$12.8~~$16.9 million for purchases of property and equipment and capitalized software development costs.

Security Incident update

As discussed in Note 10 to our unaudited, condensed consolidated financial statements included in this report, total costs related to the Security Incident that we expect will be recoverable exceeded the limit of our insurance coverage during the first quarter of 2022. Accordingly, we expect that the Security Incident will continue to negatively impact our GAAP profitability and GAAP cash flow for the foreseeable future (see discussion regarding our non-GAAP financial measures beginning on page 32). For full year 2022, we currently expect net cash outlays of approximately $25 million to $35 million for ongoing legal fees related to the Security Incident. In line with our policy, legal fees, are expensed as incurred. We have not recorded a liability for a loss contingency related to the Security Incident as of March 31, 2022 because we are unable at this time to reasonably estimate the possible loss or range of loss.


Results of Operations

Comparison of the three months ended March 31, ~~2021~~2022 and ~~2020~~2021

We have included the results of operations of EVERFI in our consolidated results of operations from the date of acquisition. We determined that the EVERFI acquisition was not material to our consolidated financial statements; therefore, separate presentation of revenue and earnings since the acquisition date is not required.

Revenue and Cost of Revenue

Recurring

Revenue ($M)

Cost of revenue ($M)

Gross profit ($M)
and gross margin (%)

YoY Growth (%)

Recurring revenue is comprised of fees for the use of our subscription-based software solutions, which includes providing access to cloud solutions, hosting services, payment services, online training programs, subscription-based analytic ~~services, such as donor acquisitions and data enrichment, and payment~~ services. Recurring revenue also includes fees from maintenance services for our on-premises solutions, services included in our renewable subscription contracts, retained and managed services contracts that we expect to have a term consistent with our cloud solution contracts, and variable transaction revenue associated with the use of our solutions.


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Cost of recurring revenue is primarily comprised of compensation costs for customer support and production IT personnel, hosting and data center costs, third-party contractor expenses, third-party royalty and data expenses, allocated depreciation, facilities and IT support costs, amortization of intangible assets from business combinations, amortization of software development costs, transaction-based costs related to payments services including remittances of amounts due to third-parties and other costs incurred in providing support and recurring services to our customers.

Our customers continue to prefer cloud subscription offerings with integrated analytics, training and payment services. Recurring subscription contracts are typically for a term of three years at contract inception with one to three-year renewals thereafter. We intend to continue focusing on innovation, quality and integration of our cloud solutions, which we believe will drive future revenue growth.

Recurring revenue increased by ~~$1.9~~$37.9 million, or ~~0.9%~~18.3%, during the three months ended March 31, ~~2021,~~2022, when compared to the same period in ~~2020,~~2021, driven primarily by the following:


			+						Increase in contractual recurring revenue of $27.7 million related to the performance of our cloud solutions, $24.1 million of which was attributable to EVERFI; partially offset by a decrease in maintenance revenue as customers migrate to our cloud solutions
			+						Increase in transactional revenue of ~~$2.8~~$10.2 million primarily due to an increase in online charitable giving, the continued shift toward virtual ~~and online~~ fundraising and, ~~charitable giving~~
			-						~~Decrease in contractual recurring revenue of $0.9 million largely due~~ to a ~~decrease in maintenance revenue related~~lesser extent, increased transactional volume as our customer's constituents have begun to ~~our continuing efforts~~return to ~~migrate customers from legacy on-premises solutions onto our cloud solutions as well as the bookings shortfalls during 2020 resulting from COVID-19~~in-person events.


24						~~First Quarter 2021 Form 10-Q~~

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~~Blackbaud, Inc.~~

~~(Unaudited)~~

Cost of recurring revenue ~~decreased~~increased by ~~$0.7~~$23.3 million, or ~~0.8%~~26.2%, during the three months ended March 31, ~~2021,~~2022, when compared to the same period in ~~2020,~~2021, driven primarily by the following:


			-+						~~Decrease~~Increase in compensation costs of $7.6 million primarily related to an increase in headcount due to our acquisition of EVERFI, and a continued shift in resources historically supporting one-time services and other towards recurring revenue
			+						Increase in transaction-based costs of $5.1 million related to payment services integrated in our cloud solutions
			+						Increase in amortization of intangible assets from business combinations of ~~$1.7~~$3.5 million
			-						~~Decreases in allocated facilities costs related~~ due to ~~efficiencies in~~ our ~~real estate footprint, and third-party contractor costs~~acquisition of EVERFI
			+						Increase in ~~compensation~~third-party contractor and hosting costs of ~~$1.3~~$3.9 million ~~primarily~~as we continue to migrate our cloud infrastructure to leading public cloud service providers and make investments in security
			+						Increase in overhead allocations of $1.6 million related to ~~stock-based compensation due to~~ the ~~factors~~increased headcount discussed above ~~on page 23~~
			+						Increase in amortization of software development costs of ~~$1.0~~$1.1 million ~~due to investments made on innovation, quality and the integration of our cloud solutions~~

Recurring gross margin ~~increased~~decreased by ~~0.7%~~2.9% for the three months ended March 31, ~~2021,~~2022, when compared to the same period in ~~2020,~~2021, primarily due to the increase in cost of recurring revenue ~~slightly~~ outpacing the ~~decrease~~increase in ~~related costs.~~recurring revenue.


First Quarter 2022 Form 10-Q						27

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One-time services and other

Revenue ($M)

Cost of revenue ($M)

Gross profit ($M)
and gross margin (%)

YoY Growth (%)

One-time services and other revenue is comprised of fees for one-time consulting, analytic and onsite training services, fees for retained and managed services contracts that we do not expect to have a term consistent with our cloud solution contracts, revenue from the sale of our software sold under perpetual license arrangements, ~~fees from user conferences~~ and third-party software referral fees.

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

One-time services and other revenue ~~decreased by $6.3 million, or 33.7%,~~ during the three months ended March 31, ~~2021, when compared to~~2022 remained relatively consistent with the same period in ~~2020, driven primarily by~~2021, and included the ~~following:~~following activity:



			-+						~~Decrease~~Increase in one-time consulting revenue of ~~$4.7~~$1.0 million ~~due~~ primarily attributable to EVERFI, largely offset by less revenue from implementation and customization services, in line with our multi-year strategic shift from a license-based and one-time services business model to a cloud subscription business model. Our cloud subscription offerings generally require less implementation and customization services. We changed our commission plans during the first quarter of 2020 to intentionally shift our sales teams' focus towards selling our cloud solutions. Additionally, the bookings shortfalls during 2020 caused by the COVID-19 pandemic contributed to the decrease in one-time consulting revenue.
			-						Decrease in one-time analytics revenue of ~~$1.0~~$0.8 million as analytics are generally integrated in our cloud solutions


~~First Quarter 2021 Form 10-Q~~						25

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~~(Unaudited)~~

Cost of one-time services and other decreased by ~~$0.8~~$3.3 million, or ~~5.2%~~22.9%, during the three months ended March 31, ~~2021,~~2022, when compared to the same ~~periods~~period in ~~2020,~~2021, driven primarily by the following:


			-						Decrease in compensation costs ~~other than stock-based compensation~~ of ~~$1.3~~$2.7 million largely due to a ~~decrease~~continued shift in ~~headcount~~resources historically supporting one-time services and other towards recurring revenue
			-						~~Decrease in third-party contractor costs of $0.7 million primarily due to the timing of our spending~~
			+						~~Increase in stock-based compensation costs of $2.6 million due to the factors discussed above on page 23~~

One-time services and other gross margin ~~decreased~~increased by ~~35.1%~~26.9% during the three months ended March 31, ~~2021, respectively,~~2022, when compared to the same period in ~~2020,~~2021, primarily due to the significant reductions in ~~one-time consulting and analytics revenue~~compensation costs discussed above.


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Operating Expenses

Sales, marketing and
customer success ($M)

Research and
development ($M)

General and
administrative
($M)

Percentages indicate expenses as a percentage of total revenue

Sales, marketing and customer success

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

We see a large market opportunity in the long-term and will continue to make investments to drive sales effectiveness. We have also implemented software tools to enhance our digital footprint and drive lead generation. In response to the COVID-19 pandemic, we implemented a modest and targeted headcount reduction during the second quarter of 2020, including a reduction in our sales headcount with a focus on retaining our most highly productive sales executives. The enhancements we are making in our go-to-market approach are expected to significantly reduce our average customer acquisition cost as well as the related payback period ~~for our customer acquisition costs~~ while increasing sales velocity. ~~As a result, we do not expect our sales, marketing and customer success expense to return to pre-pandemic levels.~~

Sales, marketing and customer success expense ~~decreased~~increased by ~~$9.9~~$6.4 million, or ~~16.9%~~13.2%, during the three months ended March 31, ~~2021, respectively,~~2022, when compared to the same period in ~~2020,~~2021, primarily driven by the following:


			-+						~~Decrease~~Increase in compensation costs ~~other than stock-based compensation~~ of ~~$8.6 million due to the targeted reduction in sales headcount during the second quarter of 2020, discussed above~~
			-						~~Decrease in allocated costs of $2.5~~$3.7 million primarily related to ~~a decrease in rent expense and the impact of the targeted reduction in sales~~increased employee headcount ~~during the second quarter of 2020, as discussed above~~
			-						~~Decrease in travel costs of $2.2 million~~ due to our ~~restriction on non-essential employee travel in response to the COVID-19 pandemic~~
									acquisition of EVERFI
			+						Increase in ~~stock-based compensation~~advertising costs of ~~$2.9~~$2.1 million primarily due to ~~the factors discussed above on page 23~~our acquisition of EVERFI

~~First Quarter 2021 Form 10-Q~~

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Research and development

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

We continue to make investments to delight our customers with innovative cloud ~~solutions, which is a component of our four-point strategy. We increased engineering hiring beginning in the fourth quarter of 2020.~~

solutions. Research and development expenses increased by ~~$4.2~~$10.8 million or ~~16.8%~~36.9%, during the three months ended March 31, ~~2021,~~2022, when compared to the same period in ~~2020,~~2021, primarily driven by the following:


			+						Increase in compensation costs of ~~$3.3~~$8.4 million primarily related to ~~stock-based compensation~~increased employee headcount due to ~~the factors~~our acquisition of EVERFI, and to a lesser extent, our increased hiring of engineers
			+						Increase in third-party contractor costs of $5.5 million, primarily due to our acquisition of EVERFI and, to a lesser extent, an increase in our use of third-party software developers
			+						Increase in overhead allocation costs of $1.0 million primarily related to increased headcount discussed above ~~on page 23~~

			+-						~~Decrease~~Increase in ~~software~~ development costs of ~~$1.7~~$4.7 million that were required to be capitalized under ~~the internal-use~~GAAP, of which $3.5 million was attributable to EVERFI software ~~guidance, primarily due to lower engineering headcount~~and content

Not included in research and development expense for the three months ended March 31, 2022 and 2021 ~~and 2020~~ were ~~$9.1~~$13.8 million and ~~$10.8~~$9.1 million, respectively, of qualifying costs associated with software and content development activities


First Quarter 2022 Form 10-Q						29

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that are required to be capitalized under ~~the internal-use software accounting guidance~~GAAP, such as those for our cloud solutions, as well as development costs associated with acquired companies. Qualifying capitalized ~~software~~ development costs associated with our cloud solutions are subsequently amortized to cost of subscriptions revenue over the related ~~asset's~~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 and the integration of our solutions, which we believe will drive long-term revenue growth.

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, third-party professional fees, insurance, allocated depreciation, facilities and IT support costs, acquisition-related expenses and other administrative expenses.

During the third quarter of 2020, we adjusted our workforce strategy to provide more flexibility to our employees after our offices reopen and we expect to have more employees working remotely either part-time or full-time, even within our hub locations. This change is expected to create efficiencies within our real estate footprint as we shift toward more collaborative workspaces within our offices.

General and administrative expense increased by ~~$4.7~~$13.2 million, or ~~18.3%~~43.1%, during the three months ended March 31, ~~2021,~~2022, when compared to the same period in ~~2020,~~2021, primarily driven by the following:


			+						Increase in ~~stock-based compensation~~Security Incident-related expenses, net of insurance, of $7.2 million, consisting primarily of legal fees, as total costs ~~of $5.1 million due~~related to the ~~factors discussed above on page 23~~Security Incident that we expect will be recoverable exceeded the limit of our insurance coverage during the first quarter of 2022.
			+						Increase in ~~corporate~~compensation costs of ~~$2.2~~$4.6 million primarily related to ~~increases~~increased employee headcount due to our acquisition of EVERFI
			+						Increase in third-party ~~consulting fees~~contractor costs of $1.2 million
			+						Increase in acquisition-related expenses and ~~insurance~~integration costs of $1.0 million due to our acquisition of EVERFI
			-						~~Decrease~~Increase in ~~rent expense~~allocated corporate IT costs of ~~$3.0~~$1.8 million primarily related to ~~the purchase~~investments in security tools. Depreciation, facilities and IT support costs are pooled and recorded to general and administrative expense and allocated to other lines of our ~~global headquarters facility during the third quarter~~statements of ~~2020 and our exit of certain other office leases globally during the second half of 2020 in-line with our new workforce strategy, discussed above~~comprehensive income based on headcount.


~~First Quarter 2021 Form 10-Q~~30						27First Quarter 2022 Form 10-Q

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(Unaudited)

Interest Expense


Interest expense ($M)
Percentages indicate expenses as a percentage of total revenue

The increase in interest expense in dollars and as a percentage of total revenue during the three months ended March 31, ~~2021,~~2022, when compared to the same period in ~~2020,~~2021, was primarily due to the ~~Real Estate Loans assumed~~new borrowings used to finance our acquisition of EVERFI. We currently expect interest expense for the ~~purchase~~full year 2022 to be approximately $30 million to $33 million although our interest expense in connection with the variable rate portion of our ~~global headquarters facility~~outstanding debt could increase in ~~August 2020 and the deferred financing costs and debt discount associated with the 2020 Credit Facility,~~a rising interest rate environment. See Note 9 to our condensed consolidated financial statements in this report for more information regarding our derivative instruments, which ~~was entered into in October 2020.~~we use to manage our variable interest rate risk.

Deferred Revenue

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


(dollars in millions)	(dollars in millions)	Timing of recognition	March 31, 2021		December 31, 2020		Change		(dollars in millions)	March 31, 2022		December 31, 2021		Change
Recurring		Over the period billed in advance, generally one year	$	278.0	$	303.8	(8.5)	%
One-time services and other		As services are delivered	16.5		13.1		26.4	%
Total deferred revenue(1)			294.5		316.9		(7.1)	%
Deferred revenue(1)									Deferred revenue(1)	$	355.7	$	378.7	(6.1)	%
Less: Long-term portion	Less: Long-term portion		4.5		4.7		(3.9)	%	Less: Long-term portion	4.7		4.2		11.3	%
Current portion(1)	Current portion(1)		$	290.0	$	312.2	(7.1)	%	Current portion(1)	$	351.0	$	374.5	(6.3)	%

(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, billed annually in advance, and non-cancelable. We have been for several years successfully shifting our legacy customer base away from annual renewals and moving them onto multi-year renewal contracts. We generally invoice our customers with recurring revenue contracts in annual cycles 30 days prior to the end of each one-year period.

~~Deferred~~The decrease in deferred revenue ~~from recurring revenue contracts decreased~~ during the three months ended March 31, ~~2021,~~2022 was primarily due to a seasonal decrease in customer contract renewals. Historically, due to the timing of customer budget cycles, we have an increase in customer contract renewals at or near the beginning of our third ~~quarter, which generally results in~~quarter. Generally, our lowest balance of deferred revenue during the year is at the end of our first quarter. Deferred revenue from one-time services and other increased during the three months ended March 31, 2021, primarily due to increased bookings during the fourth quarter of 2020 and the first quarter of 2021.


28First Quarter 2022 Form 10-Q						~~First Quarter 2021 Form 10-Q~~31

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(Unaudited)

Income ~~tax provision~~Taxes


Income tax (benefit) provision ($M)
Percentages indicate effective income tax rates

For the three months ended March 31, 2022, we have utilized the discrete effective tax rate method, as allowed by ASC 740-270-30-18, Income Taxes—Interim Reporting, to calculate its interim income tax provision. The discrete method is applied when the application of the estimated annual effective tax rate is impractical because it is not possible to reliably estimate the annual effective tax rate. The discrete method treats the year-to-date period as if it was the annual period and determines the income tax expense or benefit on that basis. We believe that, at this time, the use of this discrete method is more appropriate than the annual effective tax rate method as our as our full-year forecasted pre-tax income, relative to our forecasted permanent differences, has the potential to distort our estimated annual effective tax rate.

The ~~increase~~decrease in our effective income tax rate for the three months ended March 31, ~~2021,~~2022 when compared to the same period in ~~2020,~~2021 was primarily attributable to ~~higher 2021 discrete tax expense against lower pre-tax income. The 2020 effective income tax rate was positively impacted by benefits attributable to stock-based~~the impact of stock based compensation. The ~~2021~~2022 effective ~~income~~ tax rate was negatively impacted by increased tax expense attributable to ~~stock-based~~stock based compensation against ~~lower~~ pre-tax ~~income.~~loss for the period.

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.

Three months ended
March 31,
(dollars in millions) 2021 2020 Change
GAAP gross profit $ 115.8 $ 118.8 (2.5) %
GAAP gross margin 52.8 % 53.1 %
Non-GAAP adjustments:
Add: Stock-based compensation expense 5.4 0.9 519.4 %
Add: Amortization of intangibles from business combinations 9.1 10.9 (16.5) %
Subtotal(1)
14.5 11.8 22.5 %
Non-GAAP gross profit(1)
$ 130.3 $ 130.6 (0.2) %
Non-GAAP gross margin 59.4 % 58.4 %

~~(1)The individual amounts for each year may not sum to non-GAAP revenue, subtotal or non-GAAP gross profit due to rounding.~~


~~First Quarter 2021 Form 10-Q~~32						29First Quarter 2022 Form 10-Q

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(Unaudited)


		Three months ended March 31,										Three months ended March 31,
(dollars in millions, except per share amounts)	(dollars in millions, except per share amounts)		2021			2020			Change		(dollars in millions, except per share amounts)		2022			2021			Change
GAAP income from operations			$	6.6		$	8.4		(21.1)	%
GAAP Revenue											GAAP Revenue		$	257.1		$	219.2		17.3	%

GAAP gross profit											GAAP gross profit		$	133.8		$	115.8		15.5	%
GAAP gross margin											GAAP gross margin		52.0		%	52.8		%
Non-GAAP adjustments:											Non-GAAP adjustments:

Add: Stock-based compensation expense											Add: Stock-based compensation expense		4.1			5.4			(22.6)	%
Add: Amortization of intangibles from business combinations											Add: Amortization of intangibles from business combinations		12.5			9.1			36.8	%

Subtotal(1)											Subtotal(1)		16.6			14.5			14.9	%
Non-GAAP gross profit(1)											Non-GAAP gross profit(1)		$	150.4		$	130.3		15.4	%
Non-GAAP gross margin											Non-GAAP gross margin		58.5		%	59.4		%

GAAP (loss) income from operations											GAAP (loss) income from operations		$	(6.0)		$	6.6		(190.0)	%
GAAP operating margin	GAAP operating margin		3.0		%	3.8		%			GAAP operating margin		(2.3)		%	3.0		%
Non-GAAP adjustments:	Non-GAAP adjustments:										Non-GAAP adjustments:

Add: Stock-based compensation expense	Add: Stock-based compensation expense		30.0			13.6			120.9	%	Add: Stock-based compensation expense		27.9			30.0			(7.1)	%
Add: Amortization of intangibles from business combinations	Add: Amortization of intangibles from business combinations		9.7			11.7			(17.1)	%	Add: Amortization of intangibles from business combinations		13.3			9.7			37.4	%
Add: Employee severance	Add: Employee severance		1.0			0.1			921.6	%	Add: Employee severance		—			1.0			(100.0)	%
Add: Acquisition-related integration costs	Add: Acquisition-related integration costs		(0.1)			—			206.3	%	Add: Acquisition-related integration costs		0.6			(0.1)			(756.1)	%
Add: Acquisition-related expenses	Add: Acquisition-related expenses		0.1			0.1			(53.2)	%	Add: Acquisition-related expenses		0.3			0.1			383.1	%
Add: Restructuring and other real estate activities	Add: Restructuring and other real estate activities		(0.1)			—			(562.5)	%	Add: Restructuring and other real estate activities		0.1			(0.1)			(164.0)	%
Add: Security Incident-related costs, net of insurance(2)											Add: Security Incident-related costs, net of insurance(2)		7.2			—			100.0	%
Subtotal(1)	Subtotal(1)		40.5			25.5			59.1	%	Subtotal(1)		49.4			40.5			21.9	%
Non-GAAP income from operations(1)	Non-GAAP income from operations(1)		$	47.2		$	33.9		39.1	%	Non-GAAP income from operations(1)		$	43.4		$	47.2		(8.0)	%
Non-GAAP operating margin	Non-GAAP operating margin		21.5		%	15.2		%			Non-GAAP operating margin		16.9		%	21.5		%

GAAP income before provision for income taxes			$	0.5		$	5.3		(90.3)	%
GAAP net (loss) income			$	(0.2)		$	4.6		(103.5)	%
Shares used in computing GAAP diluted earnings per share			47,363,197			48,455,751			(2.3)	%
GAAP diluted earnings per share			$	—		$	0.10		(100.0)	%
GAAP (loss) income before provision for income taxes											GAAP (loss) income before provision for income taxes		$	(12.5)		$	0.5		(2,495.6)	%
GAAP net loss											GAAP net loss		$	(10.4)		$	(0.2)		6,245.7	%
Shares used in computing GAAP diluted (loss) earnings per share											Shares used in computing GAAP diluted (loss) earnings per share		51,199,717			47,363,197			8.1	%
GAAP diluted (loss) earnings per share											GAAP diluted (loss) earnings per share		$	(0.20)		$	—		100.0	%
Non-GAAP adjustments:	Non-GAAP adjustments:										Non-GAAP adjustments:
Add: GAAP income tax provision			0.7			0.7			(1.7)	%
Add: GAAP income tax (benefit) provision											Add: GAAP income tax (benefit) provision		(2.1)			0.7			(399.7)	%
Add: Total non-GAAP adjustments affecting income from operations	Add: Total non-GAAP adjustments affecting income from operations		40.5			25.5			59.1	%	Add: Total non-GAAP adjustments affecting income from operations		49.4			40.5			21.9	%

Non-GAAP income before provision for income taxes	Non-GAAP income before provision for income taxes		41.0			30.8			33.2	%	Non-GAAP income before provision for income taxes		36.9			41.0			(10.0)	%
Assumed non-GAAP income tax provision(2)			8.2			6.2			33.2	%
Assumed non-GAAP income tax provision(3)											Assumed non-GAAP income tax provision(3)		7.4			8.2			(10.0)	%
Non-GAAP net income(1)	Non-GAAP net income(1)		$	32.8		$	24.7		33.2	%	Non-GAAP net income(1)		$	29.5		$	32.8		(10.0)	%

Shares used in computing non-GAAP diluted earnings per share	Shares used in computing non-GAAP diluted earnings per share		48,387,042			48,455,751			(0.1)	%	Shares used in computing non-GAAP diluted earnings per share		52,076,858			48,387,042			7.6	%
Non-GAAP diluted earnings per share	Non-GAAP diluted earnings per share		$	0.68		$	0.51		33.3	%	Non-GAAP diluted earnings per share		$	0.57		$	0.68		(16.2)	%

(1)The individual amounts for each year may not sum to non-GAAP gross profit, subtotal, non-GAAP income from operations or non-GAAP net income due to rounding.

(2)Includes Security Incident-related costs incurred during the three months ended March 31, 2022 of $9.0 million, net of probable insurance recoveries during the same period of $1.8 million. Recorded expenses consisted primarily of payments to third-party service providers and consultants, including legal fees, as well as settlements of customer claims. Not included in this adjustment were costs associated with enhancements to our cybersecurity program. For full year 2022, we currently expect net cash outlays of approximately $25 million to $35 million for ongoing legal fees related to the Security Incident. In line with our policy, legal fees, are expensed as incurred. We have not recorded a liability for a loss contingency related to the Security Incident as of March 31, 2022 because we are unable at this time to reasonably estimate the possible loss or range of loss.

(3)We apply a non-GAAP effective tax rate of 20.0% when calculating non-GAAP net income and non-GAAP diluted earnings per share.

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.

Three months ended
March 31,
(dollars in millions) 2021 2020 Change
GAAP net cash provided by (used in) operating activities $ 30.1 $ (24.5) (222.9) %
Less: purchase of property and equipment (3.5) (2.9) 21.0 %
Less: capitalized software development costs (9.3) (10.9) (14.9) %
Non-GAAP free cash flow $ 17.3 $ (38.3) (145.2) %


30First Quarter 2022 Form 10-Q						~~First Quarter 2021 Form 10-Q~~33

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(Unaudited)

Non-GAAP organic revenue growth

In addition, we ~~discuss~~use non-GAAP organic revenue growth, non-GAAP organic revenue growth on a constant currency basis and non-GAAP organic recurring revenue growth, 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 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, and they include the non-GAAP revenue attributable to those companies, as if there were no acquisition-related write-downs of acquired deferred revenue to fair value as required by GAAP.~~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.


(dollars in millions)	(dollars in millions)	Three months ended March 31,				(dollars in millions)				Three months ended March 31,
			2021					2020	(dollars in millions)		2022			2021
GAAP revenue	GAAP revenue		$	219.2		$	223.6				$	257.1		$	219.2
GAAP revenue growth	GAAP revenue growth		(2.0)		%				GAAP revenue growth		17.3		%
Add: Non-GAAP acquisition-related revenue (1)	Add: Non-GAAP acquisition-related revenue (1)		—			—			Add: Non-GAAP acquisition-related revenue(1)		—			25.2
Non-GAAP organic revenue (2)	Non-GAAP organic revenue (2)		$	219.2		$	223.6		Non-GAAP organic revenue(2)		$	257.1		$	244.4
Non-GAAP organic revenue growth	Non-GAAP organic revenue growth		(2.0)		%				Non-GAAP organic revenue growth		5.2		%

Non-GAAP organic revenue (2)	Non-GAAP organic revenue (2)		$	219.2		$	223.6		Non-GAAP organic revenue(2)		$	257.1		$	244.4
Foreign currency impact on Non-GAAP organic revenue (3)	Foreign currency impact on Non-GAAP organic revenue (3)		(2.0)			—			Foreign currency impact on Non-GAAP organic revenue(3)		0.9			—
Non-GAAP organic revenue on constant currency basis (3)	Non-GAAP organic revenue on constant currency basis (3)		$	217.2		$	223.6		Non-GAAP organic revenue on constant currency basis(3)		$	258.0		$	244.4
Non-GAAP organic revenue growth on constant currency basis	Non-GAAP organic revenue growth on constant currency basis		(2.9)		%				Non-GAAP organic revenue growth on constant currency basis		5.6		%

GAAP recurring revenue	GAAP recurring revenue		$	206.8		$	204.9		GAAP recurring revenue		$	244.7		$	206.8
GAAP recurring revenue growth	GAAP recurring revenue growth		0.9		%				GAAP recurring revenue growth		18.3		%
Add: Non-GAAP acquisition-related revenue (1)	Add: Non-GAAP acquisition-related revenue (1)		—			—			Add: Non-GAAP acquisition-related revenue(1)		—			22.8
Non-GAAP organic recurring revenue	Non-GAAP organic recurring revenue		$	206.8		$	204.9		Non-GAAP organic recurring revenue		$	244.7		$	229.5
Non-GAAP organic recurring revenue growth	Non-GAAP organic recurring revenue growth		0.9		%				Non-GAAP organic recurring revenue growth		6.6		%

(1)Non-GAAP acquisition-related revenue excludes incremental acquisition-related revenue calculated in accordance with GAAP that is attributable to companies acquired in the current fiscal year. For companies ~~if any,~~ acquired in the immediately preceding fiscal year, non-GAAP acquisition-related revenue reflects presentation of full-year incremental non-GAAP revenue derived from such companies, as if they were combined throughout the prior ~~period, and it includes the non-GAAP revenue from the acquisition-related deferred revenue write-down attributable to those companies.~~period.

(2)Non-GAAP organic revenue for the prior year periods presented herein will not agree to non-GAAP organic revenue presented in the respective prior period quarterly financial information solely due to the manner in which non-GAAP organic revenue growth is calculated.

(3)To determine non-GAAP organic 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.


~~First Quarter 2021 Form 10-Q~~34						31First Quarter 2022 Form 10-Q

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(Unaudited)

Rule of 40

Rule of 40 is defined 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; ~~acquisition-related deferred revenue write-down;~~ stock-based compensation; acquisition-related integration costs; acquisition-related expenses; employee severance; ~~and~~ restructuring and other real estate ~~activities.~~activities; and Security Incident-related costs, net of insurance.


		Three months ended March 31,										Three months ended March 31,
(dollars in millions)	(dollars in millions)		2021			2020			Change		(dollars in millions)		2022			2021		Change
GAAP net (loss) income			$	(0.2)		$	4.6		(103.5)	%
GAAP net loss											GAAP net loss		$	(10.4)		$	(0.2)	6,245.7	%
Non-GAAP adjustments:	Non-GAAP adjustments:										Non-GAAP adjustments:
Add: Interest, net	Add: Interest, net		5.0			3.6			36.4	%	Add: Interest, net		7.5			5.0		50.7	%
Add: GAAP income tax provision			0.7			0.7			(1.7)	%
Add: GAAP income tax (benefit) provision											Add: GAAP income tax (benefit) provision		(2.1)			0.7		(399.7)	%
Add: Depreciation	Add: Depreciation		3.2			3.5			(9.3)	%	Add: Depreciation		3.5			3.2		10.2	%
Add: Amortization of intangibles from business combinations	Add: Amortization of intangibles from business combinations		9.7			11.7			(17.1)	%	Add: Amortization of intangibles from business combinations		13.3			9.7		37.4	%
Add: Amortization of software development costs(1)	Add: Amortization of software development costs(1)		8.0			6.7			19.3	%	Add: Amortization of software development costs(1)		9.2			8.0		16.1	%
Subtotal			26.5			26.2			1.1	%
Subtotal(2)											Subtotal(2)		31.5			26.5		18.9	%
Non-GAAP EBITDA(2)	Non-GAAP EBITDA(2)		$	26.3		$	30.9		(14.7)	%	Non-GAAP EBITDA(2)		$	21.1		$	26.3	(19.9)	%
Non-GAAP EBITDA margin	Non-GAAP EBITDA margin		12.0		%	13.8		%			Non-GAAP EBITDA margin		8.2		%

Non-GAAP adjustments:	Non-GAAP adjustments:										Non-GAAP adjustments:

Add: Stock-based compensation expense	Add: Stock-based compensation expense		30.0			13.6			120.9	%	Add: Stock-based compensation expense		27.9			30.0		(7.1)	%
Add: Employee severance	Add: Employee severance		1.0			0.1			921.6	%	Add: Employee severance		—			1.0		(100.0)	%
Add: Acquisition-related integration costs	Add: Acquisition-related integration costs		(0.1)			—			206.3	%	Add: Acquisition-related integration costs		0.6			(0.1)		(756.1)	%
Add: Acquisition-related expenses	Add: Acquisition-related expenses		0.1			0.1			(53.2)	%	Add: Acquisition-related expenses		0.3			0.1		383.1	%
Add: Restructuring and other real estate activities	Add: Restructuring and other real estate activities		(0.1)			—			(562.5)	%	Add: Restructuring and other real estate activities		0.1			(0.1)		(164.0)	%
Subtotal			30.9			13.8			123.4	%
Adjusted Non-GAAP EBITDA			$	57.2		$	44.7		28.0	%
Adjusted Non-GAAP EBITDA margin			26.1		%
Add: Security Incident-related costs, net of insurance(3)											Add: Security Incident-related costs, net of insurance(3)		7.2			—		100.0	%
Subtotal(2)											Subtotal(2)		36.1			30.9		17.0	%
Non-GAAP Adjusted EBITDA(2)											Non-GAAP Adjusted EBITDA(2)		$	57.2		$	57.2	—	%
Non-GAAP Adjusted EBITDA margin											Non-GAAP Adjusted EBITDA margin		22.2		%

Rule of 40(2)			24.1		%
Rule of 40(4)											Rule of 40(4)		27.4		%

Non-GAAP adjusted EBITDA											Non-GAAP adjusted EBITDA		57.2			57.2		—	%
Foreign currency impact on Non-GAAP adjusted EBITDA(5)											Foreign currency impact on Non-GAAP adjusted EBITDA(5)		0.5			(0.5)		(199.4)	%
Non-GAAP adjusted EBITDA on constant currency basis(5)											Non-GAAP adjusted EBITDA on constant currency basis(5)		57.7			56.7		1.8	%
Non-GAAP adjusted EBITDA margin on constant currency basis											Non-GAAP adjusted EBITDA margin on constant currency basis		22.4		%

Rule of 40 on constant currency basis(6)											Rule of 40 on constant currency basis(6)		28.0		%

(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 or non-GAAP adjusted EBITDA due to rounding.

(3)Includes Security Incident-related costs incurred, net of probable insurance recoveries. See additional details in the reconciliation of GAAP to Non-GAAP operating income above.

(4)Measured by non-GAAP organic revenue growth plus non-GAAP adjusted EBITDA margin. See Non-GAAP organic revenue growth table above.

(5)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.

(6)Measured by non-GAAP organic revenue growth on constant currency basis plus non-GAAP adjusted EBITDA margin on constant currency basis.


32First Quarter 2022 Form 10-Q						~~First Quarter 2021 Form 10-Q~~35

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(Unaudited)

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

Non-GAAP adjusted free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software development and capital expenditures for property and equipment, plus cash outflows, net of insurance, related to the Security Incident.

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.


	Three months ended March 31,
(dollars in millions)	2022		2021		Change
GAAP net cash provided by operating activities	$	24.5	$	30.1	(18.6)	%
Less: purchase of property and equipment	(4.3)		(3.5)		22.9	%
Less: capitalized software development costs	(12.7)		(9.3)		36.3	%
Non-GAAP free cash flow	$	7.6	$	17.3	(56.4)	%
Add: Security Incident-related cash flows, net of insurance	0.8		1.4		(41.9)	%
Non-GAAP adjusted free cash flow	$	8.4	$	18.7	(55.3)	%

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, ~~however,~~other than transaction-based costs related to our payments services, do not vary significantly as a result of these factors, but do fluctuate on a quarterly basis due to varying timing of expenditures.

Our cash flow from operations normally fluctuates quarterly due to the combination of the timing of customer contract renewals including renewals associated with customers of acquired companies, delivery of professional services and occurrence of customer events, as well as merit-based salary increases, among other factors. Historically, due to lower revenues in our first quarter, combined with the payment of certain annual vendor contracts, our cash flow from 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 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 ~~were replaced~~occur in ~~2020 with performance-based equity awards due to COVID-19, but are expected to return in July 2021.~~July. In addition, deferred revenues can vary on a seasonal basis ~~for~~due to the ~~same reasons.~~timing of customer contract renewals and student enrollments. 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. During the second quarter of 2021, we expect an increase in the amount taxes we pay on behalf of our employees related to the settlement of equity awards when compared to the same period in 2020, as the equity granted in May 2020 in lieu of cash bonus plans and base salary merit increases will vest. These patterns may change as a result of the continued shift to online giving, growth in volume of transactions for which we process payments, or as a result of acquisitions, new market opportunities, new solution introductions, the COVID-19 pandemic or other factors.


36						First Quarter 2022 Form 10-Q

Table of Contents

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(Unaudited)


Liquidity and Capital Resources

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


(dollars in millions)	(dollars in millions)	March 31, 2021		December 31, 2020		Change		(dollars in millions)	March 31, 2022		December 31, 2021		Change
Cash and cash equivalents	Cash and cash equivalents	$	27.8	$	35.8	(22.4)	%	Cash and cash equivalents	$	33.8	$	55.1	(38.7)	%
Property and equipment, net	Property and equipment, net	105.1		105.2		(0.1)	%	Property and equipment, net	112.7		111.4		1.1	%
Software development costs, net	Software development costs, net	113.6		111.8		1.6	%	Software development costs, net	126.8		121.4		4.4	%
Total carrying value of debt	Total carrying value of debt	550.8		531.0		3.7	%	Total carrying value of debt	981.2		956.2		2.6	%
Working capital	Working capital	(180.9)		(194.3)		6.9	%	Working capital	(251.8)		(258.7)		2.6	%

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

Three months ended March 31,
(dollars in millions) 2021 2020 Change
Net cash provided by (used in) operating activities $ 30.1 $ (24.5) (222.9) %
Net cash used in investing activities (12.8) (13.8) (7.5) %
Net cash used in financing activities (379.6) (278.9) 36.1 %


~~First Quarter 2021 Form 10-Q~~						33

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~(Unaudited)~~


	Three months ended March 31,
(dollars in millions)	2022		2021		Change
Net cash provided by operating activities	$	24.5	$	30.1	(18.6)	%
Net cash used in investing activities	(36.9)		(12.8)		189.2	%
Net cash used in financing activities	(325.4)		(379.6)		(14.3)	%

Our principal sources of liquidity are our operating cash flow, funds available under the 2020 Credit Facility 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 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 or, investments or unanticipated capital or operating expenditures, including in connection with the Security Incident, we may require additional capital. In that context, we regularly evaluate opportunities to enhance our capital structure, including through potential debt or equity issuances.

As a well-known seasoned issuer, we filed an automatic shelf registration statement for an undetermined amount of debt and equity securities with the SEC on January 14, 2022. Under this universal shelf registration statement we may offer and sell, from time to time, debt securities, common stock, preferred stock, depositary shares, warrants, stock purchase contracts and stock purchase units. Subject to certain conditions, this registration statement will be effective through January 13, 2024.

At March 31, ~~2021,~~2022, our total cash and cash equivalents balance included approximately ~~$16.6~~$18.4 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

Net cash provided by operating activities increased by $54.6 million during the three months ended March 31, 2021, when compared to the same period in 2020, primarily due to a $46.6 million increase in cash flow from operations associated with working capital and an $8.0 million increase in net income adjusted for non-cash expenses. Throughout both periods, ourOur cash flows from operations ~~were~~are derived principally from: (i) our earnings from on-going operations prior to non-cash expenses such as depreciation, amortization, stock-based compensation, amortization of deferred financing costs and debt discount and adjustments to our provision for credit losses and sales returns; and (ii) changes in our working capital.


First Quarter 2022 Form 10-Q						37

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(Unaudited)

Working capital changes are composed of changes in accounts receivable, prepaid expenses and other assets, trade accounts payable, accrued expenses and other liabilities, and deferred revenue.

Net cash provided by operating activities decreased by $5.6 million during the three months ended March 31, 2022, when compared to the same period in 2021, primarily due to a $13.8 million decrease in net income adjusted for non-cash expenses and a $8.2 million increase in cash flow from operations associated with working capital.

The increase in cash flow from operations associated with working capital during the three months ended March 31, ~~2021,~~2022, when compared to the samesame period in ~~2020,~~2021, was primarily due to:

•~~the payment of our 2019 cash bonus plans in 2020 and the replacement of our 2020 cash bonus plans with performance-based equity awards (which we expect will continue going forward);~~

•~~an increase in the collection of customer receivable balances; and~~

•fluctuations in the timing of vendor ~~payments.~~payments; and

•an increase in taxes payable; partially offset by

•payment of assumed EVERFI accrued bonuses and other payroll-related liabilities during the first quarter of 2022.

Security Incident update

Investing Cash Flow

Net cash used in investing activities of ~~$12.8~~$36.9 million ~~decreased~~increased by ~~$1.0~~$24.2 million during the three months ended March 31, ~~2021,~~2022, when compared to the same period in ~~2020.~~2021.

During the three months ended March 31, ~~2021,~~2022, we used ~~$9.3~~$20.0 million for our acquisition of EVERFI comprised of (i) $17.4 million that had not been paid by EVERFI to its former option holders as of December 31, 2021, solely due to the timing of the acquisition on the last day of 2021; and (ii) $2.6 million that was paid to a number of EVERFI's selling shareholders after determining they would be paid in cash, rather than shares of our common stock.

We used $12.7 million for software development costs, which was ~~down $1.6~~up $3.4 million from cash spent during the same period in ~~2020,~~2021, primarily due to ~~lower engineering headcount. We~~ ~~increased engineering hiring beginning in~~ the ~~fourth quarter~~inclusion of ~~2020~~EVERFI's software and ~~continue to invest in our innovative cloud solutions, as well as~~content development ~~activities for Blackbaud SKY, our modern cloud platform.~~

activities. We also spent ~~$3.5~~$4.3 million of cash for purchases of property and equipment during the three months ended March 31, ~~2021,~~2022, which was ~~an increase~~a decrease of ~~$0.6~~$0.8 million when compared to the same period in ~~2020.~~2021.

Financing Cash Flow

During the three months ended March 31, ~~2021,~~2022, we had a net increase in borrowings of ~~$21.0~~$25.6 million.

We paid ~~$18.4~~$34.7 million to satisfy tax obligations of employees upon settlement of equity awards during the three months ended March 31, ~~2021~~2022 compared to ~~$19.8~~$18.4 million during the same period in ~~2020.~~2021. The increase was primarily attributable to the timing of our annual short-term incentive (bonus) awards vesting during the first quarter of 2022, while similar awards vested during the second quarter of 2021. The amount of taxes paid by us on ~~the~~ 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. ~~While most~~Most of our equity awards currently vest in our first ~~quarter, the equity awards that we granted in May 2020 to replace our 2020 cash bonus plans and base salary merit increases will vest in May 2021.~~ quarter.

During the three months ended March 31, 2022, cash flow from financing activities associated with changes in restricted cash due to customers decreased $315.3 million, compared to a decrease of $353.6 million during the same period in 2021. 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.


3438						First Quarter ~~2021~~2022 Form 10-Q

Table of Contents

Blackbaud, Inc.

(Unaudited)

ended March 31, 2020, we paid dividends of $6.0 million and we did not pay dividends during the same period in 2021, as we discontinued the declaration and payment of all cash dividends, beginning with the second quarter of 2020.

Cash used in financing activities associated with changes in restricted cash due to customers increased $42.5 million during the three months ended March 31, 2021 when compared to the same period in 2020, as the amount of restricted cash held and payable by us to customers as of December 31, 2020 was larger than at the same date in 2019 primarily due to the timing of year-end donations.

Stock repurchase program

In ~~November 2020,~~December 2021, our Board of Directors reauthorized and ~~expanded a~~replenished our stock repurchase program that authorizes us to purchase up to $250.0 million of our outstanding shares of common stock. The program does not have an expiration date. 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. During the three months ended March 31, ~~2021,~~2022, we ~~purchased 465,821 shares for $28.1 million.~~did not purchase any shares. The remaining amount available to purchase stock under the stock repurchase program was $250.0 million as of March 31, 2022.

2020 Credit Facility

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 March 31, ~~2021,~~2022, our available borrowing capacity under the 2020 Credit Facility was ~~$406.0~~$209.7 million. The 2020 Credit Facility matures in October 2025.

At March 31, ~~2021,~~2022, the carrying amount of our debt under the 2020 Credit Facility was ~~$488.8~~$922.0 million. Our average daily borrowings during the three months ended March 31, ~~2021~~2022 were ~~$489.5~~$909.4 million.

The following is a summary of the financial covenants under the 2020 Credit Facility:


Financial covenant	Requirement	Ratio as of March 31, ~~2021~~2022
Net leverage ratio(1)	≤ ~~4.00~~4.25 to 1.00	~~1.79~~3.57 to 1.00
Interest coverage ratio	≥ 2.50 to 1.00	~~16.44~~14.59 to 1.00

(1)Under the terms of the 2020 Credit Facility, the Net Leverage Ratio requirement may be increased by up to 0.50 provided we satisfy certain requirements, including a permitted business acquisition, and provided that the maximum Net Leverage Ratio shall not exceed 4.25 to 1.00.

Under the 2020 Credit Facility, we also have restrictions on our ability to declare and pay dividends and our ability to repurchase shares of our common stock. In order to pay any cash dividends and/or repurchase shares of stock: (i) no default or event of default shall have occurred and be continuing under the 2020 Credit Facility, and (ii) our pro forma net leverage ratio, as set forth in the 2020 Credit Facility, must be 0.25 less than the net leverage ratio requirement at the time of dividend declaration or share repurchase. At March 31, ~~2021,~~2022, we were in compliance with our debt covenants under the 2020 Credit Facility. See Note 8 to our unaudited, condensed consolidated financial statements included in this report for additional information regarding the 2020 Credit Facility.

Commitments and Contingencies


	Payments due by period
(in millions)	Less than 1 year		More than 1 year		Total(1)
Recorded contractual obligations:
Debt	$	18.1	$	967.5	$	985.7
Operating leases	11.4		60.9		72.3
Unrecorded contractual obligations:
Purchase obligations	20.6		11.1		31.7
Interest payments on debt	30.8		101.1		131.9
Total contractual obligations(1)	$	80.9	$	1,140.7	$	1,221.5

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


First Quarter ~~2021~~2022 Form 10-Q						3539

Table of Contents

Blackbaud, Inc.

(Unaudited)

~~Commitments and Contingencies~~Debt

As of March 31, ~~2021,~~2022, we had ~~contractual obligations with future minimum commitments as follows:~~

Payments due by period
(in millions) Total Less than 1
year 1-3 years 3-5 years More than 5
years
Recorded contractual obligations:
Debt(1)
$ 553.5 $ 12.9 $ 23.4 $ 464.4 $ 52.9
Interest payments on debt(2)
2.6 2.2 0.3 — —
Operating leases(3)
25.6 8.1 9.3 4.6 3.5
Unrecorded contractual obligations:
Interest payments on debt(4)
78.9 11.9 24.9 19.2 22.9
Purchase obligations(5)
79.0 56.6 22.4 — —
Total contractual obligations $ 739.6 $ 91.8 $ 80.3 $ 488.2 $ 79.3

~~(1)Represents~~total remaining principal payments of $985.7 million. These payments represent principal payments only, under the following assumptions: (i) that the amounts outstanding under the 2020 Credit Facility, our ~~Real Estate Loans~~real estate loans and our other debt at March 31, ~~2021~~2022 will remain outstanding until maturity, with minimum payments occurring as currently scheduled, and (ii) that there are no assumed future borrowings on the 2020 ~~Credit~~Revolving Facility for the purposes of determining minimum commitment amounts.

~~(2)Represents interest payment obligations related~~ See Note 8 to our unaudited, condensed consolidated financial statements in this report for more information.

Interest payments on debt

In addition to principal payments, as of March 31, 2022, we expect to pay interest expense over the life of our debt obligations of approximately $131.9 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 March 31, 2022, which includes the effect of interest rate swap agreements.

~~(3)Our commitments related to operating leases have not been reduced by sublease income, incentive payments and reimbursement of leasehold improvements.~~

~~(4)~~The actual interest expense recognized in our consolidated statements of comprehensive income will depend on the amount of debt, the length of time the debt is outstanding and the interest rate, which could be different from our assumptions on our remaining principal payments described above.

Operating leases

As of March 31, 2022, we had remaining operating lease payments of $72.3 million. These payments have not been reduced by sublease income, incentive payments, reimbursement of leasehold improvements or the amount representing imputed interest of $12.6 million. Our operating leases are generally for corporate offices, subleased offices and certain equipment and furniture. Given our remote-first workforce strategy and real estate footprint optimization efforts, as discussed above, we do not anticipate entering any new, material operating leases for offices for the foreseeable future. See Note 10 to our unaudited, condensed consolidated financial statements in ~~(1) above.~~this report for more information.

~~(5)We have contractual~~Purchase obligations

As of March 31, 2022, we had remaining purchase obligations of $31.7 million. These purchase obligations are for third-party technology used in our solutions and for other services we purchase as part of our normal operations. In certain cases, these arrangements require a minimum annual purchase commitment by us.

~~The term loan under~~ Our purchase obligations are not recorded as liabilities on our consolidated balance sheets as of March 31, 2022, as we had not received the ~~2020 Credit Facility and~~related services. See Note 10 to our ~~other debt require periodic principal payments. The balance of the term loans and any amounts drawn on the revolving credit loans are due upon maturity of the 2020 Credit Facility~~unaudited, condensed consolidated financial statements in ~~October 2025. The Real Estate Loans also require periodic principal payments and the balance of the Real Estate Loans are due upon maturity in April 2038.~~this report for more information.

The total liability for uncertain tax positions as of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, was $~~4.6~~3.8 million and ~~$4.6~~$3.7 million, respectively. Our accrued interest and penalties related to tax positions taken on our tax returns was ~~$1.1 million~~ ~~and $1.1 million~~insignificant as of March 31, ~~2021~~2022 and December 31, ~~2020, respectively.~~2021.


~~Off-Balance Sheet Arrangements~~40						First Quarter 2022 Form 10-Q

Table of March 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.Contents

Blackbaud, Inc.

(Unaudited)


Foreign Currency Exchange Rates

Approximately ~~15%~~17% of our total revenue for the three months ended March 31, ~~2021~~2022 was generated from operations outside the U.S. We do not have significant operations in countries in which the economy is considered to be highly inflationary. Our consolidated financial statements are denominated in U.S. dollars and, accordingly, changes in the exchange rate between foreign currencies and the U.S. dollar will affect the translation of our subsidiaries’ financial results into U.S. dollars for purposes of reporting our consolidated financial results. The accumulated currency translation adjustment, recorded within accumulated other comprehensive loss as a component of stockholders’ equity, was a ~~gain~~loss of ~~$3.1~~$0.9 million as of March 31, ~~2021~~2022 and a gain of ~~$0.6~~$1.3 million as of December 31, ~~2020.~~


36						~~First Quarter 2021 Form 10-Q~~

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~(Unaudited)~~

2021.

The vast majority of our contracts are entered into by our U.S. or U.K. entities. The contracts entered into by the U.S. entity are almost always denominated in U.S. dollars or Canadian dollars, and contracts entered into by our U.K., Australian and Irish subsidiaries are generally denominated in British Pounds, Australian dollars and Euros, respectively. Historically, as the U.S. dollar weakened, foreign currency translation resulted in an increase in our revenues and expenses denominated in non-U.S. currencies. Conversely, as the U.S. dollar strengthened, foreign currency translation resulted in a decrease in our revenue and expenses denominated in non-U.S. currencies. During the three months ended March 31, ~~2021,~~2022, foreign translation resulted in ~~increases~~decreases in our revenues and expenses denominated in non-U.S. currencies. Though we have exposure to fluctuations in currency exchange rates, primarily those between the U.S. dollar and both the British Pound and Canadian dollar, the impact has generally not been material to our consolidated results of operations or financial position. For the three months ended March 31, ~~2021,~~2022, the fluctuation in foreign currency exchange rates ~~increased~~reduced our total revenue and our income from operations by ~~$2.0~~$0.9 million and ~~$0.7~~$0.2 million, respectively. We will continue monitoring such exposure and take action as appropriate. To determine the impacts on revenue (or income from operations) from fluctuations in currency exchange rates, current period revenues (or income from operations) from entities reporting in foreign currencies were translated into U.S. dollars using the comparable prior year period's weighted average foreign currency exchange rates. These impacts are non-GAAP financial information and are not in accordance with, or an alternative to, information prepared in accordance with GAAP.


Critical Accounting Policies and Estimates

There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, ~~2021~~2022 as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.


Recently Issued Accounting Pronouncements

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


First Quarter 2022 Form 10-Q						41

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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


Interest Rate Risk

Our variable rate debt is our primary financial instrument with market risk exposure for changing interest rates. We manage our variable rate interest rate risk through a combination of short-term and long-term borrowings and the use of derivative instruments entered into for hedging purposes. Our interest rate exposure includes LIBOR and SOFR rates. The Financial Conduct Authority in the U.K. has stated that it plans to phase out all tenors of LIBOR by ~~the end of calendar year 2021.~~June 2023. We do not currently anticipate a significant impact to our financial position or results of operations as a result of this action as we expect that our financial contracts currently indexed to LIBOR will either expire or be modified without significant financial impact before the phase out occurs. Due to the nature of our debt, the materiality of the fair values of the derivative instruments and the highly liquid, short-term nature and level of our cash and cash equivalents as of March 31, ~~2021,~~2022, we believe that the risk of exposure to changing interest rates for those positions is immaterial. There were no significant changes in how we manage interest rate risk between December 31, ~~2020~~2021 and March 31, ~~2021.~~2022.


Foreign Currency Risk

For a discussion of our exposure to foreign currency exchange rate fluctuations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Foreign Currency Exchange Rates” in this report.


~~First Quarter 2021 Form 10-Q~~						37

~~Table of Contents~~

~~Blackbaud, Inc.~~

~~(Unaudited)~~

ITEM 4. CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-15(e) and 15d-15(e)) are designed only to provide reasonable assurance that they will meet their objectives. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial and accounting officer), of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)) pursuant to Securities Exchange Act Rule 13a-15(b). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective to provide the reasonable assurance discussed above.


Changes in Internal Control Over Financial Reporting

Although we do not believe it materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, our evaluation of the effectiveness of internal control over financial reporting as of March 31, 2022 excluded EVERFI as permitted by the guidance issued by the Office of the Chief Accountant of the Securities and Exchange Commission (not to extend more than one year beyond the date of the acquisition or for more than one annual reporting period). The acquisition of EVERFI was completed on December 31, 2021. As of and for the quarter ended March 31, 2022, EVERFI's assets represented approximately 3% of our consolidated total assets and its revenue represented approximately 10% of our consolidated total revenue. We are working to integrate EVERFI into our overall internal control over financial reporting processes.

No changes in internal control over financial reporting occurred during the most recent fiscal quarter ended March 31, ~~2021~~2022 with respect to our operations, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


3842						First Quarter ~~2021~~2022 Form 10-Q

Table of Contents

Blackbaud, Inc.


						PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a discussion of our legal proceedings, see Note 910 to our unaudited, condensed consolidated financial statements in this report.

ITEM 1A. RISK FACTORS

We are supplementing Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, as filed with the Securities and Exchange Commission on ~~February 23, 2021~~March 1, 2022 (the “Annual Report”). The following risk factors should be read in conjunction with the risk factors set forth in that Annual Report.


Operational Risks

The Security Incident ~~could~~has had, and may continue to have numerous adverse effects on our ~~business.~~business, results of operations, financial condition and cash flows.

As previously disclosed, on July 16, 2020, we contacted certain customers to inform them about the Security Incident, including that in May 2020 we discovered and stopped a ransomware attack. Prior to our successfully preventing the cybercriminal from blocking our system access and fully encrypting files, and ultimately expelling them from our system with no significant disruption to our operations, the cybercriminal removed a copy of a subset of data from our self-hosted environment. Although the nature of the incident, our research and third party (including law enforcement) investigation have provided no reason to believe that any data went beyond the cybercriminal, was or will be misused, or will be disseminated or otherwise made available publicly, our investigation into the Security Incident remains ongoing and may provide additional information.

To date, we have received approximately ~~630 claims for reimbursement~~260 Customer Reimbursement Requests and approximately 400 reservations of ~~expenses~~the right to seek expense recovery in the future from customers or their attorneys in the U.S., U.K. and Canada related to the Security Incident (none of which have as yet been filed in ~~court or in arbitration)~~court). In addition, insurance companies representing various customers’ interests through subrogation claims have contacted us. Customer and ~~are in the process~~insurer subrogation claims generally seek reimbursement of ~~assessing what liability may exist pursuant to such claims. Possible exposure could result from our customers’~~their costs and expenses associated with notifying their own ~~constituents~~customers of the Security Incident and taking steps to assure that personal information has not been compromised as a result of the Security Incident. In addition, presently, we are a defendant in 3019 putative consumer class action cases ~~[27~~[17 in U.S. federal courts ~~(some of which~~(which have been consolidated under multi district litigation to a single federal court)~~, 1 in a U.S. state court~~ and 2 in Canadian courts] alleging harm from the Security Incident. The plaintiffs in these cases, who generally purport to represent various classes of individual constituents of our customers, generally claim to have been harmed by alleged actions and/or omissions by us in connection with the Security Incident and assert a variety of common law and statutory claims seeking monetary damages, injunctive relief, costs and attorneys’ fees, and other related relief. To date, we also have received a consolidated, multi-state Civil Investigative Demand issued on behalf of 4749 state Attorneys General and the District of Columbia and a separate Civil Investigative Demand from the office of the ~~Illinois~~California Attorney ~~General’s Office~~General relating to the Security Incident. In addition, we ~~have received communications, inquires and requests from~~are subject to pending governmental actions or investigations by the U.S. Federal Trade Commission, the U.S. Department of Health and Human Services, the ~~U.S. Securities and Exchange Commission, the Information Commissioner’s Office in the United Kingdom (the “ICO”) under the U.K. Data Protection Act 2018,~~SEC, the Office of the Australian Information Commissioner and the Office of the Privacy Commissioner of Canada. (See Note 910 to our unaudited, condensed consolidated financial statements included in this report for a more detailed description of the Security Incident and related ~~matters)~~matters.)


First Quarter 2022 Form 10-Q						43

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Blackbaud, Inc.

We may be named as a party in additional lawsuits, other claims may be asserted by or on behalf of our customers or their constituents, and we may be subject to additional governmental inquires, requests or investigations. Responding to and resolving these current and any future lawsuits, claims and/or investigations could result in material remedial and other expenses that ~~may~~will not be covered by insurance. Governmental authorities also may seek to impose undertakings, injunctive relief, consent decrees, or other civil or criminal penalties, which could, among other things, materially increase our data security costs or otherwise require us to alter how we operate our business. Although we intend to defend ourselves vigorously against the claims asserted against us, we cannot predict the potential outcomes, cost and expenses associated with current and any future claims, lawsuits, inquiries and investigations.


~~First Quarter 2021 Form 10-Q~~						39

~~Table~~In addition, any legislative or regulatory changes adopted in reaction to the Security Incident or other companies’ data breaches could require us to make modifications to the operation of ~~Contents~~

~~Blackbaud, Inc.~~

our business that could have an adverse effect and/or increase or accelerate our compliance costs.

Significant management time and Company resources have been, and are expected to continue to be, devoted to the Security Incident. For example, we currently expect net cash outlays of $25 million to $35 million for ongoing legal fees related to the Security Incident for full year 2022. Although we carry insurance against certain losses related to the Security Incident, we exceeded the limit of that insurance coverage during the first quarter of 2022. As a result, we will be responsible for all expenses or other losses (including penalties, fines or other judgments) or all types of claims that may arise in connection with the Security Incident, which could materially and adversely affect our liquidity and results of operations. (See Note 910 to our unaudited, condensed consolidated financial statements included in this report.) ~~Although~~If any such fines or penalties were great enough that we ~~carry insurance designed~~could not pay them through funds generated from operating activities and/or cause a default under our credit facility, we may be forced to ~~protect us against certain losses related to cybersecurity events, that insurance coverage may not be sufficient to cover all expenses~~renegotiate or ~~other losses (including fines)~~ obtain a waiver under our credit facility and/or ~~all types of claims that may arise in connection with cyberattacks, security compromises and other related incidents. Furthermore, in the future such insurance~~seek additional debt or equity financing. Such renegotiation or financing may not be available on ~~commercially reasonable~~acceptable terms, or at all. In these circumstances, if we were unable to obtain sufficient financing, we may not be able to meet our obligations as they come due.

~~Future~~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.~~difficulties, some or all of which could be material.


44						First Quarter 2022 Form 10-Q

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Blackbaud, Inc.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS


Issuer Purchases of Equity Securities

The following table provides information about shares of common stock acquired or repurchased during the three months ended March 31, ~~2021~~2022 under the stock repurchase program then in effect, as well as common stock withheld by us to satisfy the minimum tax obligations of employees due upon vesting of restricted stock awards and units.

Period
Total
number
of shares
purchased(1)
Average
price
paid
per
share
Total number
of shares
purchased as
part of
publicly
announced
plans or
programs(2)
Approximate
dollar value
of shares
that may yet
be purchased
under the
plans or
programs
(in thousands)
Beginning balance, January 1, 2021 $ 208,999
January 1, 2021 through January 31, 2021 464,149 $ 60.23 464,149 181,042
February 1, 2021 through February 28, 2021 242,539 76.42 1,672 180,933
March 1, 2021 through March 31, 2021 — — — 180,933
Total 706,688 $ 65.79 465,821 $ 180,933


Period	Total number of shares purchased(1)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs(2)	Approximate dollar value of shares that may yet be purchased under the plans or programs (in thousands)
Beginning balance, January 1, 2022					$	250,000
January 1, 2022 through January 31, 2022	—	$	—	—	250,000
February 1, 2022 through February 28, 2022	533,139	65.04		—	250,000
March 1, 2022 through March 31, 2022	—	—		—	250,000
Total	533,139	$	65.04	—	$	250,000

(1)Includes ~~240,867~~533,139 shares in February 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 ~~November 2020,~~December 2021, our Board of Directors reauthorized and ~~expanded~~replenished our stock repurchase program to authorize us to purchase up to $250.0 million of our outstanding shares of common stock. The program does not have an expiration date.


40First Quarter 2022 Form 10-Q						~~First Quarter 2021 Form 10-Q~~45

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Blackbaud, Inc.

ITEM 6. EXHIBITS

The exhibits listed below are filed or incorporated by reference as part of this Quarterly Report on Form 10-Q:

Filed In
Exhibit
Number
Description of Document Filed Herewith Form Exhibit Number Filing Date
10.1
Form of Employment Agreement between Blackbaud, Inc. and Kevin McDearis
X
10.2
Form of Retention Agreement between Blackbaud, Inc. and Kevin McDearis
10-Q 10.92 8/4/2017
31.1
Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
31.2
Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
32.1
Certification by the Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
32.2
Certification by the Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
101.INS Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL Document. X
101.SCH Inline XBRL Taxonomy Extension Schema Document. X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. X
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. X
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. X
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. X
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). X

Filed In

Exhibit
Number

Description of Document

Filed Herewith

Form

Exhibit Number

Filing Date

10.01

First Amendment to Credit Agreement, dated as of January 31, 2022, by and among Blackbaud, Inc., the lenders party thereto and Bank of America N.A., as administrative agent

8-K

10.1

2/3/2022

31.1

Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification by the Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification by the Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL Document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


~~First Quarter 2021 Form 10-Q~~46						41First Quarter 2022 Form 10-Q

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Blackbaud, Inc.


						SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.


		BLACKBAUD, INC.

Date:	May ~~4, 2021~~5, 2022	By:	/s/ Michael P. Gianoni
			Michael P. Gianoni
			President and Chief Executive Officer
			(Principal Executive Officer)

Date:	May ~~4, 2021~~5, 2022	By:	/s/ Anthony W. Boor
			Anthony W. Boor
			Executive Vice President and Chief Financial Officer
			(Principal Financial and Accounting Officer)


42First Quarter 2022 Form 10-Q						~~First Quarter 2021 Form 10-Q~~47


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		2

PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial statements
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows (Unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management's discussion and analysis of financial condition and results of operations	2122
Item 3.	Quantitative and qualitative disclosures about market risk	3742
Item 4.	Controls and procedures	3842

PART II.	OTHER INFORMATION	3943

Item 1.	Legal proceedings	3943
Item 1A.	Risk factors	3943
Item 2.	Unregistered sales of equity securities and use of proceeds	4045

Item 6.	Exhibits	4146

SIGNATURES		4247


Years ending December 31, (dollars in thousands)	Annual maturities
2021 - remaining	$	8,378
2022	12,985
2023	11,982
2024	11,609
2025	455,209

Thereafter	53,352
Total required maturities	$	553,515