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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 September 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
Preferred Stock Purchase RightsN/ANasdaq 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 October 31, 2022 was 53,097,427.



TABLE OF CONTENTS
  


Third 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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Third 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)September 30,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents$31,413 $55,146 
Restricted cash343,928 596,616 
Accounts receivable, net of allowance of $7,444 and $11,155 at September 30, 2022 and December 31, 2021, respectively
86,704 102,726 
Customer funds receivable1,853 977 
Prepaid expenses and other current assets83,639 95,506 
Total current assets547,537 850,971 
Property and equipment, net109,474 111,428 
Operating lease right-of-use assets47,430 53,883 
Software and content development costs, net135,594 121,377 
Goodwill1,047,178 1,058,640 
Intangible assets, net643,994 698,052 
Other assets95,376 77,266 
Total assets$2,626,583 $2,971,617 
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable$36,374 $22,067 
Accrued expenses and other current liabilities78,471 100,096 
Due to customers344,305 594,273 
Debt, current portion18,193 18,697 
Deferred revenue, current portion393,679 374,499 
Total current liabilities871,022 1,109,632 
Debt, net of current portion835,881 937,483 
Deferred tax liability131,773 148,465 
Deferred revenue, net of current portion2,920 4,247 
Operating lease liabilities, net of current portion46,400 53,386 
Other liabilities5,775 1,344 
Total liabilities1,893,771 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, 67,830,914 and 66,165,666 shares issued at September 30, 2022 and December 31, 2021, respectively
68 66 
Additional paid-in capital1,048,688 968,927 
Treasury stock, at cost; 14,739,744 and 14,182,805 shares at September 30, 2022 and December 31, 2021, respectively
(536,968)(500,911)
Accumulated other comprehensive income2,716 6,522 
Retained earnings218,308 242,456 
Total stockholders’ equity732,812 717,060 
Total liabilities and stockholders’ equity$2,626,583 $2,971,617 
The accompanying notes are an integral part of these condensed consolidated financial statements.
Third Quarter 2022 Form 10-Q
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Blackbaud, Inc.
Condensed Consolidated Statements of Comprehensive (Loss) Income
(Unaudited)
Three months ended
September 30,
Nine months ended
September 30,
(dollars in thousands, except per share amounts)2022202120222021
Revenue
Recurring$249,387 $218,530 $746,560 $642,266 
One-time services and other11,910 12,688 36,788 37,583 
Total revenue261,297 231,218 783,348 679,849 
Cost of revenue
Cost of recurring111,488 95,823 338,149 279,123 
Cost of one-time services and other9,449 11,858 31,757 40,013 
Total cost of revenue120,937 107,681 369,906 319,136 
Gross profit140,360 123,537 413,442 360,713 
Operating expenses
Sales, marketing and customer success56,414 44,703 164,367 138,948 
Research and development40,451 31,566 118,736 90,967 
General and administrative49,860 34,733 141,013 97,328 
Amortization647 558 2,263 1,674 
Restructuring 131  263 
Total operating expenses147,372 111,691 426,379 329,180 
(Loss) income from operations(7,012)11,846 (12,937)31,533 
Interest expense(9,337)(4,003)(25,912)(14,171)
Other income, net4,454 862 8,708 339 
(Loss) income before provision for income taxes(11,895)8,705 (30,141)17,701 
Income tax (benefit) provision(1,576)2,517 (5,993)4,946 
Net (loss) income$(10,319)$6,188 $(24,148)$12,755 
(Loss) earnings per share
Basic$(0.20)$0.13 $(0.47)$0.27 
Diluted$(0.20)$0.13 $(0.47)$0.26 
Common shares and equivalents outstanding
Basic weighted average shares51,692,152 47,542,746 51,519,340 47,554,746 
Diluted weighted average shares51,692,152 48,274,072 51,519,340 48,259,956 
Other comprehensive (loss) income
Foreign currency translation adjustment$(11,536)$(3,234)$(24,066)$1,060 
Unrealized gain on derivative instruments, net of tax6,797 262 20,260 4,756 
Total other comprehensive (loss) income(4,739)(2,972)(3,806)5,816 
Comprehensive (loss) income$(15,058)$3,216 $(27,954)$18,571 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Third Quarter 2022 Form 10-Q


Blackbaud, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Nine months ended
September 30,
(dollars in thousands)20222021
Cash flows from operating activities
Net (loss) income$(24,148)$12,755 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization76,606 60,484 
Provision for credit losses and sales returns4,374 7,992 
Stock-based compensation expense83,659 89,480 
Deferred taxes(21,672)400 
Amortization of deferred financing costs and discount1,827 1,234 
Other non-cash adjustments5,677 (527)
Changes in operating assets and liabilities, net of acquisition and disposal of businesses:
Accounts receivable9,998 (18,779)
Prepaid expenses and other assets22,246 (14,169)
Trade accounts payable14,435 10,728 
Accrued expenses and other liabilities(7,028)2,790 
Deferred revenue23,832 17,400 
Net cash provided by operating activities189,806 169,788 
Cash flows from investing activities
Purchase of property and equipment(10,512)(8,332)
Capitalized software and content development costs(42,757)(29,661)
Purchase of net assets of acquired companies, net of cash and restricted cash acquired(20,945) 
Cash received in sale of business6,426  
Net cash used in investing activities(67,788)(37,993)
Cash flows from financing activities
Proceeds from issuance of debt126,900 128,300 
Payments on debt(229,442)(131,272)
Stock issuance costs(1,205) 
Employee taxes paid for withheld shares upon equity award settlement(36,057)(39,012)
Change in due to customers(243,109)(386,973)
Change in customer funds receivable(1,291)(5,838)
Purchase of treasury stock (98,353)
Net cash used in financing activities(384,204)(533,148)
Effect of exchange rate on cash, cash equivalents and restricted cash(14,235)97 
Net decrease in cash, cash equivalents and restricted cash(276,421)(401,256)
Cash, cash equivalents and restricted cash, beginning of period651,762 644,969 
Cash, cash equivalents and restricted cash, end of period$375,341 $243,713 
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)September 30,
2022
December 31,
2021
Cash and cash equivalents$31,413 $55,146 
Restricted cash343,928 596,616 
Total cash, cash equivalents and restricted cash in the statement of cash flows$375,341 $651,762 
The accompanying notes are an integral part of these condensed consolidated financial statements.

Third 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
loss (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 
Net loss— — — — — (10,319)(10,319)
Stock issuance costs related to purchase of EVERFI (see Note 3)
— — (87)— — — (87)
Retirements of common stock(1)
(65)— (5)— — — (5)
Vesting of restricted stock units12,655 —  — — —  
Employee taxes paid for 8,260 withheld shares upon equity award settlement
— — — (457)— — (457)
Stock-based compensation— — 27,945 — —  27,945 
Restricted stock grants107,906  — — — —  
Restricted stock cancellations(44,956)— — — — — — 
Other comprehensive loss— — — — (4,739)— (4,739)
Balance at September 30, 202267,830,914 $68 $1,048,688 $(536,968)$2,716 $218,308 $732,812 
(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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Third 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 
Net income— — — — — 6,188 6,188 
Purchase of 583,280 treasury shares under stock repurchase program
(40,279)— — (40,279)
Vesting of restricted stock units908 —  — — —  
Employee taxes paid for 4,313 withheld shares upon equity award settlement
— — — (300)— — (300)
Stock-based compensation— — 28,920 — — 6 28,926 
Restricted stock grants54,132  — — — —  
Restricted stock cancellations(34,111)— — — — — — 
Other comprehensive loss— — — — (2,972)— (2,972)
Balance at September 30, 202162,353,643 $62 $634,406 $(490,456)$3,319 $249,506 $396,837 
The accompanying notes are an integral part of these condensed consolidated financial statements.

Third 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 nine months ended September 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. During the third quarter of 2022, we reorganized our market groups and EVERFI is now included in the Corporate Sector market group. See Note 13 to these condensed consolidated financial statements for additional information about our market groups. This change did not impact our conclusions that we have one operating and reportable segment and one goodwill reporting unit.
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Third Quarter 2022 Form 10-Q

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 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.
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 adopted accounting pronouncements
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"). This update provides for optional financial reporting alternatives to reduce cost and complexity associated with accounting for contracts, hedging relationships, and other transactions affected by reference rate reform. This update applies only to contracts, hedging relationships, and other transactions that reference the London Interbank Offer Rate ("LIBOR") or other reference rates expected to be discontinued because of reference rate reform. The accommodations are available for all entities through December 31, 2022, with early adoption permitted. We adopted ASU 2020-04 prospectively as of July 1, 2022, and the adoption did not have a material impact on our consolidated financial statements.
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.
Third Quarter 2022 Form 10-Q
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Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

3. Business Combinations and Dispositions
2022 Disposition
Blackbaud FIMS™ and DonorCentral® NXT
On September 9, 2022, we sold our Foundation Information Management System ("FIMS") and DonorCentral NXT solutions to Fusion Laboratories, LLC for cash proceeds of approximately $6.4 million, subject to closing adjustments. We expect the sale of these solutions to allow us to reduce complexity and focus on innovation within our core products as we execute our strategic growth plans. During the three months ended June 30, 2022, we recognized a noncash impairment charge of $2.0 million against certain insignificant FIMS customer relationship intangible assets that were then held for sale. The impairment charge was recorded in general and administrative expense in our condensed consolidated statements of comprehensive income. During the three and nine months ended September 30, 2022, we recognized an insignificant loss on the disposal of FIMS held for sale assets and liabilities.
2022 Acquisition
Kilter
On August 19, 2022, we acquired all of the outstanding stock of Kilter, Inc. ("Kilter"), a Delaware corporation, pursuant to an agreement and plan of merger, for approximately $2.9 million in cash, subject to closing adjustments. The acquisition of Kilter's mobile application will allow us to expand activity-based peer-to-peer fundraising engagement, to support activity-based health and wellness initiatives for socially responsible companies, and to grow the ways individuals can connect with the causes they care about most through the activities they love. In addition to the consideration paid at closing, we may be required to pay up to a maximum of $3.0 million in additional cash consideration if during the two-year period commencing January 1, 2023 Kilter meets certain application participation targets. A liability for the contingent consideration was recorded at its acquisition-date fair value of $2.7 million in other liabilities in our condensed consolidated balance sheet. Any change in the fair value of the contingent liability, or any change upon final settlement, will be recognized in income from operations. Fair values were also assigned to the other assets acquired and liabilities assumed, primarily consisting of goodwill and a finite-lived developed technology intangible asset, which will be amortized over an estimated useful life of three years. The fair values are based on our best estimates and assumptions as of the reporting date and are considered preliminary pending finalization. Insignificant acquisition-related costs, which primarily consisted of legal services, were recorded as general and administrative expense during the nine months ended September 30, 2022.
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 3,810,888 shares of our 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 nine months ended September 30, 2022, we recorded insignificant measurement period adjustments to the estimated fair value of the EVERFI assets acquired and liabilities
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Third Quarter 2022 Form 10-Q

Table of Contents

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

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.
4. Goodwill and Other Intangible Assets
The change in goodwill during the nine months ended September 30, 2022, consisted of the following:
(dollars in thousands)Total
Balance at December 31, 2021$1,058,640 
Additions related to business combination(1)
3,774 
Adjustments related to prior year business combination(2)
(1,275)
Adjustments related to dispositions(3)
(2,501)
Effect of foreign currency translation(11,460)
Balance at September 30, 2022$1,047,178 
(1)See Note 3 to these condensed consolidated financial statements for a discussion of our acquisition of Kilter.
(2)See Note 3 to these condensed consolidated financial statements for a discussion of the measurement period adjustments during the nine months ended September 30, 2022 to the estimated fair value of the EVERFI assets acquired and liabilities assumed.
(3)See Note 3 to these condensed consolidated financial statements for a summary of our disposition of Blackbaud FIMS and DonorCentral NXT.
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 nine months ended September 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
September 30,
Nine months ended
September 30,
(dollars in thousands, except per share amounts)
2022
2021
2022
2021
Numerator:
Net (loss) income$(10,319)$6,188 $(24,148)$12,755 
Denominator:
Weighted average common shares51,692,152 47,542,746 51,519,340 47,554,746 
Add effect of dilutive securities:
Stock-based awards 731,326  705,210 
Weighted average common shares assuming dilution51,692,152 48,274,072 51,519,340 48,259,956 
(Loss) earnings per share:
Basic$(0.20)$0.13 $(0.47)$0.27 
Diluted$(0.20)$0.13 $(0.47)$0.26 
Anti-dilutive shares excluded from calculations of diluted (loss) earnings per share936,214 904,100 1,195,709 1,034,091 
Third Quarter 2022 Form 10-Q
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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
Financial 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)Quoted Prices in Active Markets for Identical Assets and Liabilities
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total
Fair value as of September 30, 2022
Derivative instruments:
Interest rate swaps$ $33,120 $ $33,120 
Foreign currency forward contracts 1,464  1,464 
Total financial assets$ $34,584 $ $34,584 
Fair value as of September 30, 2022
Contingent consideration obligations$ $ $2,710 $2,710 
Total financial liabilities$ $ $2,710 $2,710 
Fair value as of December 31, 2021
Derivative instruments:
Interest rate swaps$ $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 and foreign currency forward contracts. See Note 9 to these condensed consolidated financial statements for additional information about our derivative instruments.
The fair value of our interest rate swaps and foreign currency forward contracts are based on model-driven valuations using Secured Overnight Financing Rate ("SOFR") rates and foreign currency forward rates, respectively, which are observable at commonly quoted intervals. Accordingly, our interest rate swaps and foreign currency forward contracts are classified within Level 2 of the fair value hierarchy. Our financial contracts that were indexed to LIBOR were modified to reference SOFR during the three months ended September 30, 2022. These modifications did not have a significant financial impact.
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Third Quarter 2022 Form 10-Q

Table of Contents

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

Contingent consideration obligations arise from business acquisitions. The fair values are based on discounted cash flow analyses reflecting a probability-weighted assessment approach derived from the likelihood of possible achievement of specified performance measures or events and captures the contractual nature of the contingencies, commercial risk, and the time value of money. As the fair value measurements for our contingent consideration obligations contain significant unobservable inputs, they are classified within Level 3 of the fair value hierarchy. See Note 3 to these condensed consolidated financial statements for additional information about our contingent consideration obligations.
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 September 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 September 30, 2022 and December 31, 2021, as the debt bears interest rates that approximate market value. As SOFR and LIBOR 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.
We did not transfer any assets or liabilities among the levels within the fair value hierarchy during the nine months ended September 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 nine months ended September 30, 2022, we recorded noncash impairment charges of $1.0 million against certain operating lease ROU assets and $0.3 million against certain property and equipment assets. These impairment charges resulted primarily from our decision to cease using a portion of our leased office space, and the charges are reflected in general and administrative expense on the statements of comprehensive income.
During the nine months ended September 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 nine months ended September 30, 2022, we recorded a noncash impairment charge of $2.0 million against certain insignificant customer relationship intangible assets that were held for sale. Those assets were subsequently sold during the third quarter as part of our disposition of FIMS. See Note 3 to these condensed consolidated financial statements for additional information. The impairment charge is reflected in general and administrative expense.
There were no other non-recurring fair value adjustments during the nine months ended September 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 information.
Third Quarter 2022 Form 10-Q
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Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

7. Consolidated Financial Statement Details
Restricted cash
(dollars in thousands)September 30,
2022
December 31,
2021
Restricted cash due to customers$342,452 $593,296 
Letters of credit for operating leases 2,186 
Real estate escrow balances and other
1,476 1,134 
Total restricted cash$343,928 $596,616 

Prepaid expenses and other assets
(dollars in thousands)September 30,
2022
December 31,
2021
Costs of obtaining contracts(1)(2)
$72,673 $78,465 
Derivative instruments34,584 7,160 
Prepaid software maintenance and subscriptions(3)
27,392 28,880 
Implementation costs for cloud computing arrangements, net(4)(5)
10,461 11,892 
Receivables for probable insurance recoveries(6)(7)
 18,202 
Prepaid insurance7,155 5,363 
Unbilled accounts receivable7,109 5,443 
Taxes, prepaid and receivable4,042 3,986 
Deferred tax assets1,471 1,546 
Other assets14,128 11,835 
Total prepaid expenses and other assets179,015 172,772 
Less: Long-term portion95,376 77,266 
Prepaid expenses and other current assets$83,639 $95,506 
(1)Amortization expense from costs of obtaining contracts was $8.4 million and $25.4 million for the three and nine months ended September 30, 2022, respectively, and $8.8 million and $26.9 million for the three and nine months ended September 30, 2021.
(2)The current portion of costs of obtaining contracts as of September 30, 2022 and December 31, 2021 was $28.6 million and $30.2 million, respectively.
(3)The current portion of prepaid software maintenance and subscriptions as of September 30, 2022 and December 31, 2021 was $24.8 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 September 30, 2022 and 2021, respectively, and $1.6 million and $1.3 million for the nine months ended September 30, 2022 and 2021, respectively. Accumulated amortization for these costs was $4.6 million and $3.0 million as of September 30, 2022 and December 31, 2021, respectively.
(6)All receivables for probable insurance recoveries were classified as current.
(7)See discussion of the Security Incident at Note 10 to these condensed consolidated financial statements.

14
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Third Quarter 2022 Form 10-Q

Table of Contents

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

Accrued expenses and other liabilities
(dollars in thousands)September 30,
2022
December 31,
2021
Taxes payable(1)
$28,133 $19,777 
Accrued legal costs(2)
15,051 11,724 
Operating lease liabilities, current portion8,144 9,170 
Customer credit balances7,488 8,403 
Accrued commissions and salaries4,503 7,872 
Contingent consideration liability(3)
2,710  
Accrued vacation costs2,369 2,234 
Accrued health care costs2,305 3,042 
Accrued transaction-based costs related to payments services2,142 5,427 
Accrued bonuses1,705