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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 June 30, 2022
or
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
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Blackbaud, Inc.
(Exact name of registrant as specified in its charter)
Delaware11-2617163
(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 ClassTrading Symbol(s)Name of Each Exchange on which Registered
Common Stock, $0.001 Par ValueBLKBNasdaq 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 filerAccelerated filer   
Non-accelerated filerSmaller 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 August 1, 2022 was 53,029,940.



TABLE OF CONTENTS
  


Second Quarter 2022 Form 10-Q
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Table of Contents
Blackbaud, Inc.
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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 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, 2021 and in our other 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.
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Second Quarter 2022 Form 10-Q


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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Blackbaud, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)June 30,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents$29,029 $55,146 
Restricted cash449,491 596,616 
Accounts receivable, net of allowance of $9,764 and $11,155 at June 30, 2022 and December 31, 2021, respectively
149,237 102,726 
Customer funds receivable1,194 977 
Prepaid expenses and other current assets98,041 95,506 
Total current assets726,992 850,971 
Property and equipment, net111,865 111,428 
Operating lease right-of-use assets50,036 53,883 
Software and content development costs, net130,329 121,377 
Goodwill1,051,230 1,058,640 
Intangible assets, net664,400 698,052 
Other assets90,670 77,266 
Total assets$2,825,522 $2,971,617 
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable$36,640 $22,067 
Accrued expenses and other current liabilities77,411 100,096 
Due to customers449,402 594,273 
Debt, current portion18,154 18,697 
Deferred revenue, current portion412,712 374,499 
Total current liabilities994,319 1,109,632 
Debt, net of current portion921,619 937,483 
Deferred tax liability135,393 148,465 
Deferred revenue, net of current portion3,547 4,247 
Operating lease liabilities, net of current portion48,542 53,386 
Other liabilities1,628 1,344 
Total liabilities2,105,048 2,254,557 
Commitments and contingencies (see Note 10)
Stockholders’ equity:
Preferred stock; 20,000,000 shares authorized, none outstanding
  
Common stock, $0.001 par value; 180,000,000 shares authorized, 67,755,374 and 66,165,666 shares issued at June 30, 2022 and December 31, 2021, respectively
68 66 
Additional paid-in capital1,020,835 968,927 
Treasury stock, at cost; 14,731,484 and 14,182,805 shares at June 30, 2022 and December 31, 2021, respectively
(536,511)(500,911)
Accumulated other comprehensive income7,455 6,522 
Retained earnings228,627 242,456 
Total stockholders’ equity720,474 717,060 
Total liabilities and stockholders’ equity$2,825,522 $2,971,617 
The accompanying notes are an integral part of these condensed consolidated financial statements.
Second Quarter 2022 Form 10-Q
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Blackbaud, Inc.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(Unaudited)
Three months ended
June 30,
Six months ended
June 30,
(dollars in thousands, except per share amounts)2022202120222021
Revenue
Recurring$252,507 $216,986 $497,173 $423,736 
One-time services and other12,420 12,454 24,878 24,895 
Total revenue264,927 229,440 522,051 448,631 
Cost of revenue
Cost of recurring114,487 94,435 226,661 183,300 
Cost of one-time services and other11,120 13,635 22,308 28,155 
Total cost of revenue125,607 108,070 248,969 211,455 
Gross profit139,320 121,370 273,082 237,176 
Operating expenses
Sales, marketing and customer success52,737 45,452 107,953 94,245 
Research and development38,333 30,222 78,285 59,401 
General and administrative47,391 32,008 91,153 62,595 
Amortization805 567 1,616 1,116 
Restructuring 78  132 
Total operating expenses139,266 108,327 279,007 217,489 
Income (loss) from operations54 13,043 (5,925)19,687 
Interest expense(8,976)(5,054)(16,575)(10,168)
Other income (expense), net3,133 487 4,254 (523)
(Loss) income before provision for income taxes(5,789)8,476 (18,246)8,996 
Income tax (benefit) provision(2,367)1,745 (4,417)2,429 
Net (loss) income$(3,422)$6,731 $(13,829)$6,567 
(Loss) earnings per share
Basic$(0.07)$0.14 $(0.27)$0.14 
Diluted$(0.07)$0.14 $(0.27)$0.14 
Common shares and equivalents outstanding
Basic weighted average shares51,660,739 47,756,326 51,431,501 47,560,847 
Diluted weighted average shares51,660,739 48,444,874 51,431,501 48,444,658 
Other comprehensive (loss) income
Foreign currency translation adjustment$(10,398)$1,783 $(12,530)$4,294 
Unrealized gain on derivative instruments, net of tax2,558 345 13,463 4,494 
Total other comprehensive (loss) income(7,840)2,128 933 8,788 
Comprehensive (loss) income$(11,262)$8,859 $(12,896)$15,355 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Second Quarter 2022 Form 10-Q


Blackbaud, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Six months ended
June 30,
(dollars in thousands)20222021
Cash flows from operating activities
Net (loss) income$(13,829)$6,567 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization51,283 40,742 
Provision for credit losses and sales returns3,653 4,418 
Stock-based compensation expense55,714 60,554 
Deferred taxes(16,656)276 
Amortization of deferred financing costs and discount1,254 879 
Other non-cash adjustments4,225 155 
Changes in operating assets and liabilities, net of acquisition and disposal of businesses:
Accounts receivable(50,818)(27,134)
Prepaid expenses and other assets3,685 (18,162)
Trade accounts payable12,769 2,356 
Accrued expenses and other liabilities(8,739)1,443 
Deferred revenue39,238 27,828 
Net cash provided by operating activities81,779 99,922 
Cash flows from investing activities
Purchase of property and equipment(7,518)(6,128)
Capitalized software and content development costs(27,183)(19,862)
Purchase of net assets of acquired companies, net of cash and restricted cash acquired(19,016) 
Net cash used in investing activities(53,717)(25,990)
Cash flows from financing activities
Proceeds from issuance of debt113,200 128,300 
Payments on debt(129,548)(113,477)
Stock issuance costs(557) 
Employee taxes paid for withheld shares upon equity award settlement(35,600)(38,712)
Change in due to customers(141,001)(170,061)
Change in customer funds receivable(546)(5,014)
Purchase of treasury stock (58,074)
Net cash used in financing activities(194,052)(257,038)
Effect of exchange rate on cash, cash equivalents and restricted cash(7,252)992 
Net decrease in cash, cash equivalents and restricted cash(173,242)(182,114)
Cash, cash equivalents and restricted cash, beginning of period651,762 644,969 
Cash, cash equivalents and restricted cash, end of period$478,520 $462,855 
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)June 30,
2022
December 31,
2021
Cash and cash equivalents$29,029 $55,146 
Restricted cash449,491 596,616 
Total cash, cash equivalents and restricted cash in the statement of cash flows$478,520 $651,762 
The accompanying notes are an integral part of these condensed consolidated financial statements.

Second Quarter 2022 Form 10-Q
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Blackbaud, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)

(dollars in thousands)Common stockAdditional
paid-in
capital
Treasury
stock
Accumulated
other
comprehensive
income
Retained
earnings
Total
stockholders'
equity
SharesAmount
Balance at December 31, 202166,165,666 $66 $968,927 $(500,911)$6,522 $242,456 $717,060 
Net loss— — — — — (10,407)(10,407)
Stock issuance costs related to purchase of EVERFI (see Note 3)
— — (983)— — — (983)
Retirements of common stock(1)
(33,075)— (2,581)— — — (2,581)
Vesting of restricted stock units976,312 —  — — —  
Employee taxes paid for 533,139 withheld shares upon equity award settlement
— — — (34,674)— — (34,674)
Stock-based compensation— — 27,860 — —  27,860 
Restricted stock grants580,209 2 — — — — 2 
Restricted stock cancellations(30,940)— — — — — — 
Other comprehensive income— — — — 8,773 — 8,773 
Balance at March 31, 202267,658,172 $68 $993,223 $(535,585)$15,295 $232,049 $705,050 
Net loss— — — — — (3,422)(3,422)
Stock issuance costs related to purchase of EVERFI (see Note 3)
— — (223)— — — (223)
Retirements of common stock(1)
(395)— (19)— — — (19)
Vesting of restricted stock units23,549 —  — — —  
Employee taxes paid for 15,540 withheld shares upon equity award settlement
— — — (926)— — (926)
Stock-based compensation— — 27,854 — —  27,854 
Restricted stock grants136,598  — — — —  
Restricted stock cancellations(62,550)— — — — — — 
Other comprehensive loss— — — — (7,840)— (7,840)
Balance at June 30, 202267,755,374 $68 $1,020,835 $(536,511)$7,455 $228,627 $720,474 
(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.

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Second Quarter 2022 Form 10-Q

Blackbaud, Inc.
Condensed Consolidated Statements of Stockholders' Equity (continued)
(Unaudited)

(dollars in thousands)Common stockAdditional
paid-in
capital
Treasury
stock
Accumulated
other
comprehensive
income (loss)
Retained
earnings
Total
stockholders'
equity
SharesAmount
Balance at December 31, 202060,904,638 $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 units206,418 —  — — —  
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 grants519,009 1 — — — — 1 
Restricted stock cancellations(34,789)— — — — — — 
Other comprehensive income— — — — 6,660 — 6,660 
Balance at March 31, 202161,595,276 $62 $574,958 $(399,583)$4,163 $236,560 $416,160 
Net income— — — — — 6,731 6,731 
Purchase of 405,047 treasury shares under stock repurchase program
(30,008)— — (30,008)
Vesting of restricted stock units804,323 —  — — —  
Employee taxes paid for 285,521 withheld shares upon equity award settlement
— — — (20,286)— — (20,286)
Stock-based compensation— — 30,528 — — 21 30,549 
Restricted stock grants9,431  — — — —  
Restricted stock cancellations(76,316)— — — — — — 
Other comprehensive income— — — — 2,128 — 2,128 
Balance at June 30, 202162,332,714 $62 $605,486 $(449,877)$6,291 $243,312 $405,274 
The accompanying notes are an integral part of these condensed consolidated financial statements.


Second Quarter 2022 Form 10-Q
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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 more than four decades, we are a remote-first company headquartered in Charleston, South Carolina, 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, 2021 has been derived from the audited consolidated financial statements at that date. Operating results and cash flows for the six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 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, 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.
We acquired EVERFI (as defined below) on December 31, 2021. As we are working to integrate EVERFI into our business, it had not yet been included in one of our market groups as of June 30, 2022. This change did not impact our conclusions that we have one operating and reportable segment and one goodwill reporting unit.
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 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.
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Second Quarter 2022 Form 10-Q

Table of Contents

Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements
(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, 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 material changes to our significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on 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 $441.8 million in cash consideration and 3,810,953 shares of the company's common stock, valued at approximately $301.0 million, for an aggregate purchase price of approximately $742.8 million, net of 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 six months ended June 30, 2022, we recorded insignificant measurement period adjustments to the estimated fair value of the EVERFI assets acquired and liabilities assumed following the receipt of new information. The adjustments resulted in an increase to net working capital, excluding deferred revenue, with the corresponding offset to goodwill.
Second Quarter 2022 Form 10-Q
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Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

4. Goodwill and Other Intangible Assets
The change in goodwill during the six months ended June 30, 2022, consisted of the following:
(dollars in thousands)Total
Balance at December 31, 2021$1,058,640 
Adjustments related to prior year business combination(1)
(1,203)
Effect of foreign currency translation(6,207)
Balance at June 30, 2022$1,051,230 
(1)See Note 3 to these condensed consolidated financial statements for a discussion of the measurement period adjustments during the three and six months ended June 30, 2022 to the estimated fair value of the EVERFI assets acquired and liabilities assumed.
5. (Loss) Earnings Per Share
We compute basic (loss) earnings per share by dividing net (loss) income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted (loss) earnings per share is computed by dividing net (loss) income available to common stockholders by the weighted average number of common shares and dilutive potential common shares outstanding during the period. Diluted (loss) earnings 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 and six months ended June 30, 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 (loss) earnings per share:
  
Three months ended
June 30,
Six months ended
June 30,
(dollars in thousands, except per share amounts)
2022
2021
2022
2021
Numerator:
Net (loss) income$(3,422)$6,731 $(13,829)$6,567 
Denominator:
Weighted average common shares51,660,739 47,756,326 51,431,501 47,560,847 
Add effect of dilutive securities:
Stock-based awards 688,548  883,811 
Weighted average common shares assuming dilution51,660,739 48,444,874 51,431,501 48,444,658 
(Loss) earnings per share:
Basic$(0.07)$0.14 $(0.27)$0.14 
Diluted$(0.07)$0.14 $(0.27)$0.14 
Anti-dilutive shares excluded from calculations of diluted (loss) earnings per share1,167,368 907,210 2,090,267 1,032,655 
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Second Quarter 2022 Form 10-Q

Table of Contents

Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

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.
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
(dollars in thousands)Level 1Level 2Level 3Total
Fair value as of June 30, 2022
Financial assets:
Derivative instruments$ $25,412 $ $25,412 
Total financial assets$ $25,412 $ $25,412 
Fair value as of December 31, 2021
Financial assets:
Derivative instruments$ $7,160 $ $7,160 
Total financial assets$ $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 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 June 30, 2022 and December 31, 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 June 30, 2022 and December 31, 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.
Second Quarter 2022 Form 10-Q
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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 six months ended June 30, 2022. Additionally, we did not hold any Level 3 assets or liabilities during the six months ended June 30, 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.
During the three and six months ended June 30, 2022, we recorded a noncash impairment charge of $2.3 million against certain previously capitalized software development costs that reduced the carrying value of those assets to zero. The impairment charge is reflected in general and administrative expense and resulted primarily from our decision to end customer support for certain solutions.
During the three and six months ended June 30, 2022, we recorded a noncash impairment charge of $2.0 million against certain insignificant customer relationship intangible assets that were held for sale. The impairment charge is reflected in general and administrative expense.
There were no other non-recurring fair value adjustments during the six months ended June 30, 2022 except for certain insignificant business combination accounting adjustments to the initial fair value estimates of assets acquired and liabilities assumed at the acquisition date from updated estimates and assumptions during the measurement period. See Note 3 to these condensed consolidated financial statements for additional details.
7. Consolidated Financial Statement Details
Restricted cash
(dollars in thousands)June 30,
2022
December 31,
2021
Restricted cash due to customers$448,208 $593,296 
Letters of credit for operating leases 2,186 
Real estate escrow balances and other
1,283 1,134 
Total restricted cash$449,491 $596,616 

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Second Quarter 2022 Form 10-Q

Table of Contents

Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Prepaid expenses and other assets
(dollars in thousands)June 30,
2022
December 31,
2021
Costs of obtaining contracts(1)(2)
$74,378 $78,465 
Prepaid software maintenance and subscriptions(3)
31,723 28,880 
Derivative instruments25,412 7,160 
Implementation costs for cloud computing arrangements, net(4)(5)
10,816 11,892 
Receivables for probable insurance recoveries(6)(7)
10,000 18,202 
Prepaid insurance9,499 5,363 
Unbilled accounts receivable8,243 5,443 
Taxes, prepaid and receivable4,009 3,986 
Deferred tax assets1,466 1,546 
Other assets13,165 11,835 
Total prepaid expenses and other assets188,711 172,772 
Less: Long-term portion90,670 77,266 
Prepaid expenses and other current assets$98,041 $95,506 
(1)Amortization expense from costs of obtaining contracts was $8.5 million and $17.0 million for the three and six months ended June 30, 2022, respectively, and $9.0 million and $18.2 million for the three and six months ended June 30, 2021.
(2)The current portion of costs of obtaining contracts as of June 30, 2022 and December 31, 2021 was $29.1 million and $30.2 million, respectively.
(3)The current portion of prepaid software maintenance and subscriptions as of June 30, 2022 and December 31, 2021 was $28.2 million and $24.7 million, respectively.
(4)These costs primarily relate to the multi-year implementations of our new global enterprise resource planning and customer relationship management systems.
(5)Amortization expense from capitalized cloud computing implementation costs was insignificant for the three months ended June 30, 2022 and 2021, respectively, and $1.1 million and $0.9 million for the six months ended June 30, 2022 and 2021, respectively. Accumulated amortization for these costs was $4.1 million and $3.0 million as of June 30, 2022 and December 31, 2021, respectively.
(6)All receivables for probable insurance recoveries are classified as current.
(7)See discussion of the Security Incident at Note 10 to these condensed consolidated financial statements.
Accrued expenses and other liabilities
(dollars in thousands)June 30,
2022
December 31,
2021
Taxes payable(1)
$26,488 $19,777 
Accrued legal costs(2)
15,405 11,724 
Operating lease liabilities, current portion8,560 9,170 
Customer credit balances6,287 8,403 
Accrued commissions and salaries5,457 7,872 
Accrued health care costs2,676 3,042 
Accrued vacation costs2,266 2,234 
Accrued transaction-based costs related to payments services2,236 5,427 
Accrued bonuses1,845 5,829 
Unrecognized tax benefit1,533 1,248 
Amounts payable to former EVERFI option holders(3)
 17,404 
Other liabilities6,286 9,310 
Total accrued expenses and other liabilities79,039 101,440 
Less: Long-term portion1,628 1,344 
Accrued expenses and other current liabilities$77,411 $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, half of which was due by the end of calendar year 2021 with the remainder due by the end of calendar year 2022.
Second Quarter 2022 Form 10-Q
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Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

(2)All accrued legal costs are classified as current.
(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.
Other income (expense), net
Three months ended
June 30,
Six months ended
June 30,
(dollars in thousands)
2022
2021
2022
2021
Interest income$114 $77 $237 $229 
Currency revaluation gains (losses)2,271 220 2,853 (1,167)
Other income, net748 190 1,164 415 
Other income (expense), net$3,133 $487 $4,254 $(523)
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 atWeighted average
effective interest rate at
(dollars in thousands)June 30,
2022
December 31,
2021
June 30,
2022
December 31,
2021
Credit facility:
Revolving credit loans$252,400 $260,000 4.03 %3.27 %
Term loans631,875 640,000 3.45 %3.02 %
Real estate loans58,857 59,480 5.22 %5.22 %
Other debt538 1,694 5.00 %5.00 %
Total debt943,670 961,174 3.72 %3.23 %
Less: Unamortized discount and debt issuance costs3,897 4,994 
Less: Debt, current portion18,154 18,697 4.25 %3.11 %
Debt, net of current portion$921,619 $937,483 3.71 %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 June 30, 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 $441.8 million in cash consideration and 3,810,953 shares of the company's common stock, valued at approximately $301.0 million, for an aggregate purchase price of approximately $742.8 million, net of 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).
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Second Quarter 2022 Form 10-Q

Table of Contents

Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

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.
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 obligations under two senior secured notes with a then-aggregate outstanding principal amount of $61.1 million (collectively, the “Real Estate Loans”). At June 30, 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 June 30, 2022:
(dollars in thousands)Term
 in Months
Number of
Annual Payments
First Annual
Payment Due
Original Loan
Value
Effective dates of agreements:
December 201951January 2020$2,150 
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.
The terms and notional values of our derivative instruments were as follows as of June 30, 2022:
(dollars in thousands)Term of derivative instrumentNotional
value
Derivative instruments designated as hedging instruments:
Interest rate swapNovember 2020 - October 2024$60,000 
Interest rate swapNovember 2020 - October 202460,000 
Interest rate swapJune 2021 - October 2024120,000 
Interest rate swapJuly 2021 - October 2024120,000 
Interest rate swapJuly 2021 - October 202475,000 
$435,000 
Second Quarter 2022 Form 10-Q
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Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

The fair values of our derivative instruments were as follows as of:
Asset derivatives
(dollars in thousands)Balance sheet locationJune 30,
2022
December 31,
2021
Derivative instruments designated as hedging instruments:
Interest rate swaps, long-term
Other assets25,412 7,160