0001280058-22-000055 | 10-Q | XBRL Viewer

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Derivative Instruments (Details) £ in Millions, $ in Millions, $ in Millions	9 Months Ended
	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2022 CAD ($)	Sep. 30, 2022 GBP (£)
Derivative [Line Items]
Accumulated other comprehensive loss expected to be reclassified into earnings within next 12 months	$ (17.1)
Ineffective portion of interest rate swap(s)	0.0	$ 0.0
Interest rate swap [Member]
Derivative [Line Items]
Derivative, notional amount	$ 435.0
Foreign exchange contract [Member]
Derivative [Line Items]
Derivative, notional amount			$ 23.6	£ 10.7

Derivative Instruments (Effects of Derivative Instruments in Cash Flow Hedging Relationships) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instrument, Gain (Loss) Reclassified from AOCI into Income, Effective Portion, Statement of Income or Comprehensive Income [Extensible Enumeration]	Interest Expense, Revenue	Interest Expense	Interest Expense, Revenue	Interest Expense
Interest rate swap [Member] \| Cash flow hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) recognized in accumulated other comprehensive loss			$ 33,120	$ 2,283
Gain (loss) reclassified from accumulated other comprehensive loss into income	$ 1,935	$ (505)	1,900	$ (3,289)
Foreign exchange contract [Member] \| Cash flow hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) recognized in accumulated other comprehensive loss			879
Gain (loss) reclassified from accumulated other comprehensive loss into income	22		22
Foreign exchange contract [Member] \| Net investment hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain (loss) recognized in accumulated other comprehensive loss			585
Gain (loss) reclassified from accumulated other comprehensive loss into income	$ 0		$ 0

Income Taxes (Schedule of Effective Income Tax Rates) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Income Tax Disclosure [Abstract]
Income tax (benefit) provision	$ (1,576)	$ 2,517	$ (5,993)	$ 4,946
Effective income tax rate	13.20%	28.90%	19.90%	27.90%

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

Debt (Summary of Other Debt) (Details) $ in Thousands	Dec. 31, 2020 USD ($)
Loans payable [Member]
Debt Instrument [Line Items]
Debt, face amount	$ 2,150

Commitments and Contingencies (Components of Lease Expense) (Details) - USD ($)
$ in Thousands

3 Months Ended

9 Months Ended

Sep. 30, 2022

Sep. 30, 2021

Sep. 30, 2022

Sep. 30, 2021

Commitments and Contingencies Disclosure [Abstract]

Operating lease cost

^[1]

$ 2,301

$ 2,344

$ 7,273

$ 7,557

Variable lease cost

400

625

1,250

2,023

Sublease income

(791)

(313)

(1,988)

(1,139)

Net lease cost

$ 1,910

$ 2,656

$ 6,535

$ 8,441

[1]	Includes short-term lease costs, which were immaterial.

Income Taxes (Tables)

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Schedule of Effective Income Tax Rates

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


	Three months ended September 30,						Nine months ended September 30,
(dollars in thousands)	2022			2021			2022			2021
Income tax (benefit) provision	$	(1,576)		$	2,517		$	(5,993)		$	4,946
Effective income tax rate	13.2		%	28.9		%	19.9		%	27.9		%

Debt (Details)	Dec. 31, 2021 USD ($) shares	Jan. 31, 2022 USD ($)	Oct. 30, 2020 USD ($)	Aug. 31, 2020 USD ($)
Business Acquisition [Line Items]
Credit facility, maximum borrowing capacity			$ 900,000,000
Credit facility, available increase capacity, amount		$ 250,000,000
EVERFI [Member]
Business Acquisition [Line Items]
Total cash consideration paid for the acquisition	$ 441,800,000
Shares of company's common stock, shares \| shares	3,810,888
Shares of company's common stock, value assigned	$ 301,000,000
Aggregate purchase price	742,800,000
Maximum Through December 31, 2023
Business Acquisition [Line Items]
Net leverage ratio		4.00
Maximum After December 31, 2023
Business Acquisition [Line Items]
Net leverage ratio		3.75
Term loans [Member]
Business Acquisition [Line Items]
Debt, face amount	$ 250,000,000
Global HQ [Member]
Business Acquisition [Line Items]
Debt, face amount				$ 61,100,000

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Accounts receivable, allowance	$ 7,444	$ 11,155

Basis of Presentation (Policy)	9 Months Ended
Basis of Presentation (Policy)	Sep. 30, 2022
Accounting Policies [Abstract]
Unaudited interim consolidated financial statements	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	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	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.
Use of estimates	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	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.

Consolidated Financial Statement Details (Components of Accrued Expenses and Other Liabilities) (Details) - USD ($)
$ in Thousands

Sep. 30, 2022

Aug. 19, 2022

Dec. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Taxes payable

^[1]

$ 28,133

$ 19,777

Accrued legal costs

^[2]

15,051

11,724

Operating lease liabilities, current portion

8,144

9,170

Customer credit balances

7,488

8,403

Accrued commissions and salaries

4,503

7,872

Contingent consideration obligations

2,710

^[3]

$ 3,000

^[3]

Accrued vacation costs

2,369

2,234

Accrued health care costs

2,305

3,042

Accrued transaction-based costs related to payments services

2,142

5,427

Accrued bonuses

1,705

5,829

Unrecognized tax benefit

1,671

1,248

Amounts payable to former option holders of an acquired company

17,404

^[4]

Other liabilities

8,025

9,310

Total accrued expenses and other liabilities

84,246

101,440

Less: Long-term portion

5,775

1,344

Accrued expenses and other current liabilities

$ 78,471

$ 100,096

Operating Lease, Liability, Current, Statement of Financial Position [Extensible Enumeration]

Accrued expenses and other current liabilities

[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.
[2]	All accrued legal costs are classified as current.
[3]	See discussion of our acquisition of Kilter at Note 3 to these condensed consolidated financial statements.
[4]	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.

Goodwill and Other Intangible Assets (Change in Goodwill) (Details)
$ in Thousands

9 Months Ended

Sep. 30, 2022

USD ($)

Goodwill [Roll Forward]

Balance at December 31, 2021

$ 1,058,640

Adjustments related to dispositions

(2,501)

^[1]

Effect of foreign currency translation

(11,460)

Balance at September 30, 2022

1,047,178

EVERFI [Member]

Goodwill [Roll Forward]

(1,275)

^[2]

Kilter [Member]

Goodwill [Roll Forward]

$ 3,774

^[3]

[1]	See Note 3 to these condensed consolidated financial statements for a summary of our disposition of Blackbaud FIMS and DonorCentral NXT.
[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 discussion of our acquisition of Kilter.

- Definition

Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

+ References + Details

Subsequent Events (Details) - Subsequent event [Member]	Oct. 07, 2022 $ / shares
Subsequent Event [Line Items]
Class of warrant or right, exercise price	$ 313.00
Rights agreement, ownership limit, percent	20.00%
Series A Junior Participating Preferred Stock
Subsequent Event [Line Items]
Preferred stock, par value per share	$ 0.001

Commitments and Contingencies

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies


10. Commitments and Contingencies

Leases

We have operating leases for corporate offices, subleased offices and certain equipment and furniture. As of September 30, 2022, we had operating leases for equipment that had not yet commenced with future rent payments of $3.0 million. These operating leases are expected to commence during 2022 with lease terms of 3 years.

The following table summarizes the components of our lease expense:


	Three months ended September 30,				Nine months ended September 30,
(dollars in thousands)	2022		2021		2022		2021
Operating lease cost(1)	$	2,301	$	2,344	$	7,273	$	7,557
Variable lease cost	400		625		1,250		2,023
Sublease income	(791)		(313)		(1,988)		(1,139)
Net lease cost	$	1,910	$	2,656	$	6,535	$	8,441

(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 September 30, 2022, the remaining aggregate minimum purchase commitment under these arrangements was approximately $236.0 million through 2027.

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. We have not identified any losses that might be covered by 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 investigations, 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 recognize insurance recoveries, if any, when they are probable of receipt. All associated costs due to third-party service providers and consultants, including legal 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. It is possible 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 do not 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 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 exposure related to the Security Incident.

We recorded expenses and offsetting probable insurance recoveries related to the Security Incident as follows:


	Three months ended September 30,				Nine months ended September 30,
(dollars in thousands)	2022		2021		2022		2021
Gross expense	$	13,658	$	11,448	$	31,098	$	35,916
Offsetting probable insurance recoveries	—		(10,597)		(1,891)		(34,594)
Net expense	$	13,658	$	851	$	29,207	$	1,322

The following summarizes our cumulative expenses, insurance recoveries recognized and insurance recoveries paid as of:


(dollars in thousands)	September 30, 2022		December 31, 2021
Cumulative gross expense	$	81,489	$	50,391
Cumulative offsetting insurance recoveries recognized	(50,000)		(48,109)
Cumulative net expense	$	31,489	$	2,282

Cumulative offsetting insurance recoveries paid	$	(50,000)	$	(29,968)

Recorded expenses have consisted primarily of payments to third-party service providers and consultants, including legal fees, as well as settlements of customer claims and accruals for certain loss contingencies. Not included in the expenses discussed above were costs associated with enhancements to our cybersecurity program. We present expenses and insurance recoveries related to the Security Incident in general and administrative expense on our consolidated statements of comprehensive (loss) income and as operating activities on our consolidated statements of cash flows. Total costs related to the Security Incident have exceeded the limit of our insurance coverage. We expect to continue to experience significant expenses related to our response to the Security Incident, resolution of legal proceedings, claims and investigations, including those discussed below, and our efforts to further enhance our cybersecurity measures. For full year 2022, we currently expect net pre-tax expense of approximately $30.0 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. For full year 2022, we currently expect net cash outlays of approximately $15.0 million to $25.0 million for ongoing legal fees related to the Security Incident.

As of September 30, 2022, we have recorded approximately $5.0 million in aggregate liabilities for loss contingencies related to the Security Incident that we believe we can reasonably estimate. In accordance with our policy described above, certain of these recorded charges reflect the low end of a range of estimated losses based on our determination that no estimate within that range was better than any other amount. It is reasonably possible that actual losses in the future for those matters will be in excess of the amounts accrued, but we are unable at this time to reasonably estimate the possible additional loss. There are other Security Incident-related matters, including customer claims, customer constituent class actions and governmental investigations, for which we have not recorded a liability for a loss contingency as of September 30, 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 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). Of the Customer Reimbursement Requests received to date, approximately 190 have been fully resolved and closed. In June 2022, we also received notice of a proposed claim on behalf of a number of U.K. data subjects, which we are reviewing. In addition, insurance companies representing various customers’ interests through subrogation claims have contacted us. One insurance company has filed a subrogation claim in 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. 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 19 putative consumer class action cases [17 in U.S. federal courts (which have been consolidated under multi district litigation to a single federal 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 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.

Furthermore, for putative class actions, it is often not possible to reasonably 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 investigations. To date, we have received a consolidated, multi-state Civil Investigative Demand issued on behalf of 49 state Attorneys General and the District of Columbia and a separate Civil Investigative Demand from the office of the California Attorney General relating to the Security Incident. We also are subject to the following pending governmental actions:

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

•a formal investigation by the SEC;

•an investigation by the U.S. Department of Health and Human Services;

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

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

We have been having discussions with the SEC Staff about potential resolution of issues arising from their investigation. While we are hopeful that we can resolve the matter on acceptable terms, there is no assurance that we will be able to resolve the matter on terms acceptable to us and the SEC.

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 continue to cooperate with all ongoing 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 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 have a material adverse impact on our results of operations, cash flows, or financial condition.

Organization

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization


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.

Label	Element	Value
Proceeds from Divestiture of Businesses	us-gaap_ProceedsFromDivestitureOfBusinesses	$ 6,400,000
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents	us-gaap_CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents	$ 651,762,000

Derivative Instruments

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives Instruments


9. Derivative Instruments

We generally use derivative instruments to manage our interest rate and foreign currency exchange risk. We currently have derivatives classified as cash flow hedges and net investment hedges. We do not enter into any derivatives for trading or speculative purposes.

All of our derivative instruments are governed by International Swap Dealers Association, Inc. ("ISDA") master agreements with our counterparties. As of September 30, 2022 and December 31, 2021, we have presented the fair value of our derivative instruments at the gross amounts in the condensed consolidated balance sheet as the gross fair values of our derivative instruments equaled their net fair values.

Cash flow hedges

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 swaps as cash flow hedges at the inception of the contracts. As of September 30, 2022 and December 31, 2021, the aggregate notional values of the interest rate swaps were $435.0 million. All of the contracts have maturities on or before October 2024.

During the three months ended September 30, 2022, we entered into foreign currency forward contracts to hedge revenues denominated in the Canadian Dollar ("CAD") against changes in the exchange rate with the United States Dollar ("USD"). We designated each of the forwards as cash flow hedges at the inception of the contracts. As of September 30, 2022, the aggregate notional values of the foreign currency forward contracts designated as cash flow hedges that we held to buy USD in exchange for Canadian Dollars were $23.6 million CAD. All of the contracts have maturities of 12 months or less. We did not have foreign currency forward contracts as of December 31, 2021.

Net investment hedges

We have entered into foreign currency forward contracts to hedge a portion of the foreign currency exposure that arises on translation of our investments denominated in British Pounds ("GBP") into USD. We designated each of these foreign currency forward contracts as net investment hedges at the inception of the contracts. As of September 30, 2022, we had £10.7 million of foreign currency forward contracts designated as net investment hedges to reduce the volatility of the U.S. dollar value of a portion of our GBP-denominated investments.

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


		Asset derivatives
(dollars in thousands)	Balance sheet location	September 30, 2022		December 31, 2021
Derivative instruments designated as hedging instruments:

Foreign currency forward contracts, current portion	Prepaid expenses and other current assets	$	1,464	$	—
Interest rate swaps, long-term	Other assets	33,120		7,160

Total derivative instruments designated as hedging instruments		$	34,584	$	7,160

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


	Gain recognized in accumulated other comprehensive income as of		Location of gain reclassified from accumulated other comprehensive income into (loss) income	Gain (loss) reclassified from accumulated other comprehensive income into (loss) income
(dollars in thousands)	September 30, 2022			Three months ended September 30, 2022		Nine months ended September 30, 2022
Cash Flow Hedges
Interest rate swaps	$	33,120	Interest expense	$	1,935	$	1,900
Foreign currency forward contracts	$	879	Revenue	$	22	$	22
Net Investment Hedges
Foreign currency forward contracts	$	585		$	—	$	—

	September 30, 2021			Three months ended September 30, 2021		Nine months ended September 30, 2021
Cash Flow Hedges
Interest rate swaps	$	2,283	Interest expense	$	(505)	$	(3,289)

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. Excluding net investment hedges, 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. For net investment hedges, changes in the fair value measurements of the derivative instruments and the related income tax expense or benefit are reflected as adjustments to translation adjustment, a component of accumulated other comprehensive income (loss), and recognized in earnings only when the hedged GBP investment is liquidated. The estimated accumulated other comprehensive income as of September 30, 2022 that is expected to be reclassified into earnings within the next twelve months is $17.1 million. There were no ineffective portions of our interest rate swap or foreign currency forward derivatives during the nine months ended September 30, 2022 and 2021. See Note 12 to these condensed consolidated financial statements for a summary of the changes in accumulated other comprehensive income (loss) by component. We classify cash flows related to derivative instruments as operating activities in the condensed consolidated statements of cash flows.

Derivative Instruments (Tables)

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Values of Derivative Instruments

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


		Asset derivatives
(dollars in thousands)	Balance sheet location	September 30, 2022		December 31, 2021
Derivative instruments designated as hedging instruments:

Foreign currency forward contracts, current portion	Prepaid expenses and other current assets	$	1,464	$	—
Interest rate swaps, long-term	Other assets	33,120		7,160

Total derivative instruments designated as hedging instruments		$	34,584	$	7,160

Effects of Derivative Instruments in Cash Flow Hedging Relationships

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


	Gain recognized in accumulated other comprehensive income as of		Location of gain reclassified from accumulated other comprehensive income into (loss) income	Gain (loss) reclassified from accumulated other comprehensive income into (loss) income
(dollars in thousands)	September 30, 2022			Three months ended September 30, 2022		Nine months ended September 30, 2022
Cash Flow Hedges
Interest rate swaps	$	33,120	Interest expense	$	1,935	$	1,900
Foreign currency forward contracts	$	879	Revenue	$	22	$	22
Net Investment Hedges
Foreign currency forward contracts	$	585		$	—	$	—

	September 30, 2021			Three months ended September 30, 2021		Nine months ended September 30, 2021
Cash Flow Hedges
Interest rate swaps	$	2,283	Interest expense	$	(505)	$	(3,289)

Revenue Recognition (Tables)

9 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

Contract Balances

Our closing balances of deferred revenue were as follows:


(in thousands)	September 30, 2022		December 31, 2021
Total deferred revenue	$	396,599	$	378,746

Disaggregation of Revenue

The following table presents our revenue by geographic area based on the address of our customers:


	Three months ended September 30,				Nine months ended September 30,
(dollars in thousands)	2022		2021		2022		2021
United States	$	220,177	$	191,580	$	657,699	$	563,916
United Kingdom	26,858		25,351		81,349		72,142
Other countries	14,262		14,287		44,300		43,791
Total revenue	$	261,297	$	231,218	$	783,348	$	679,849

The following table presents our revenue by market group:


	Three months ended September 30,				Nine months ended September 30,
(dollars in thousands)	2022		2021		2022		2021



Social Sector	$	223,809	$	221,194	$	672,182	$	651,215
Corporate Sector	37,334		8,596		111,634		27,275
Other	154		1,428		(468)		1,359
Total revenue	$	261,297	$	231,218	$	783,348	$	679,849

Disaggregation Of Revenue, Recurring

The following table presents our recurring revenue by type:


	Three months ended September 30,				Nine months ended September 30,
(dollars in thousands)	2022		2021		2022		2021
Contractual recurring	$	178,264	$	150,581	$	530,146	$	448,552
Transactional recurring	71,123		67,949		216,414		193,714
Total recurring revenue	$	249,387	$	218,530	$	746,560	$	642,266

Commitments and Contingencies (Schedule of Security Incident Expense and Probable Insurance Recoveries) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021
Commitments and Contingencies Disclosure [Abstract]
Security Incident, gross expense	$ 13,658	$ 11,448	$ 31,098	$ 35,916
Security Incident, offsetting probable insurance recoveries	0	(10,597)	(1,891)	(34,594)
Security Incident, net expense	13,658	$ 851	29,207	1,322
Security Incident, cumulative gross expense	81,489		81,489		$ 50,391
Security Incident, cumulative offsetting probable insurance recoveries	(50,000)		(50,000)		(48,109)
Security Incident, cumulative net expense	$ 31,489		31,489		$ 2,282
Security Incident, cumulative offsetting insurance recoveries paid			$ (50,000)	$ (29,968)

Revenue Recognition (Details) $ in Millions	9 Months Ended
Revenue Recognition (Details) $ in Millions	Sep. 30, 2022 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue recognized that was included in deferred revenue at beginning of period	$ 303.0
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation	$ 1,000.0
Revenue, remaining performance obligation, percentage to be recognized	60.00%
Revenue, remaining performance obligation, expected timing of satisfaction	12 months

Revenue Recognition (Contract Balances) (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Revenue from Contract with Customer [Abstract]
Total deferred revenue	$ 396,599	$ 378,746

Fair Value Measurements (Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details) - USD ($)
$ in Thousands

Sep. 30, 2022

Aug. 19, 2022

Dec. 31, 2021

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Contingent consideration obligations

$ 2,710

^[1]

$ 3,000

$ 0

^[1]

Fair value measurements, recurring [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Interest rate swaps

33,120

7,160

Foreign currency forward contract

1,464

Total financial assets

34,584

7,160

Contingent consideration obligations

2,710

Total financial liabilities

2,710

Fair value measurements, recurring [Member] | Level 1 [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Interest rate swaps

Foreign currency forward contract

Total financial assets

Contingent consideration obligations

Total financial liabilities

Fair value measurements, recurring [Member] | Level 2 [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Interest rate swaps

33,120

7,160

Foreign currency forward contract

1,464

Total financial assets

34,584

7,160

Contingent consideration obligations

Total financial liabilities

Fair value measurements, recurring [Member] | Level 3 [Member]

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Interest rate swaps

Foreign currency forward contract

Total financial assets

$ 0

Contingent consideration obligations

2,710

Total financial liabilities

$ 2,710

[1]	See discussion of our acquisition of Kilter at Note 3 to these condensed consolidated financial statements.

Derivative Instruments (Fair Value of Derivative Instruments) (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Derivatives, Fair Value [Line Items]
Derivative Asset, Current, Statement of Financial Position [Extensible Enumeration]	Prepaid expenses and other current assets	Prepaid expenses and other current assets
Derivative Asset, Noncurrent, Statement of Financial Position [Extensible Enumeration]	Other assets	Other assets
Designated as hedging instrument [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments designated as hedging instruments	$ 34,584	$ 7,160
Designated as hedging instrument [Member] \| Foreign exchange contract [Member]
Derivatives, Fair Value [Line Items]
Derivative assets, current portion	1,464	0
Designated as hedging instrument [Member] \| Interest rate swap [Member]
Derivatives, Fair Value [Line Items]
Interest rate swaps, long-term	$ 33,120	$ 7,160

Debt (Summary of Debt) (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Line of Credit Facility [Line Items]
Debt, gross	$ 857,476	$ 961,174
Other debt	538	1,694
Less: Unamortized discount and debt issuance costs	3,402	4,994
Less: Debt, current portion	18,193	18,697
Debt, net of current portion	$ 835,881	$ 937,483
Weighted average effective interest rate	3.87%	3.23%
Revolving credit loans [Member]
Line of Credit Facility [Line Items]
Debt, gross	$ 170,600	$ 260,000
Weighted average effective interest rate	4.20%	3.27%
Term loans [Member]
Line of Credit Facility [Line Items]
Debt, gross	$ 627,813	$ 640,000
Weighted average effective interest rate	3.65%	3.02%
Mortgages [Member]
Line of Credit Facility [Line Items]
Debt, gross	$ 58,525	$ 59,480
Weighted average effective interest rate	5.22%	5.22%
Loans payable [Member]
Line of Credit Facility [Line Items]
Weighted average effective interest rate	5.00%	5.00%
Short-term debt [Member]
Line of Credit Facility [Line Items]
Weighted average effective interest rate	5.25%	3.11%
Long-term debt [Member]
Line of Credit Facility [Line Items]
Weighted average effective interest rate	3.84%	3.23%

Consolidated Financial Statement Details (Tables)

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Components of Restricted Cash

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

Components of Prepaid Expenses and Other Assets

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 instruments	34,584		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 insurance	7,155		5,363
Unbilled accounts receivable	7,109		5,443
Taxes, prepaid and receivable	4,042		3,986
Deferred tax assets	1,471		1,546
Other assets	14,128		11,835
Total prepaid expenses and other assets	179,015		172,772
Less: Long-term portion	95,376		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.

Components of Accrued Expenses and Other Liabilities

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 portion	8,144		9,170
Customer credit balances	7,488		8,403
Accrued commissions and salaries	4,503		7,872
Contingent consideration liability(3)	2,710		—
Accrued vacation costs	2,369		2,234
Accrued health care costs	2,305		3,042
Accrued transaction-based costs related to payments services	2,142		5,427
Accrued bonuses	1,705		5,829
Unrecognized tax benefit	1,671		1,248
Amounts payable to former EVERFI option holders(4)	—		17,404
Other liabilities	8,025		9,310
Total accrued expenses and other liabilities	84,246		101,440
Less: Long-term portion	5,775		1,344
Accrued expenses and other current liabilities	$	78,471	$	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.

(2)All accrued legal costs are classified as current.

(3)See discussion of our acquisition of Kilter at Note 3 to these condensed consolidated financial statements.

(4)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.

Components of Other Income and Expense

Other income, net


	Three months ended September 30,				Nine months ended September 30,
(dollars in thousands)	2022		2021		2022		2021
Interest income	$	671	$	82	$	908	$	311
Currency revaluation gains (losses)	2,991		609		5,843		(558)
Other income, net	792		171		1,957		586
Other income, net	$	4,454	$	862	$	8,708	$	339

Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2022

Equity [Abstract]

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 September 30,				Nine months ended September 30,
(dollars in thousands)	2022		2021		2022		2021
Accumulated other comprehensive income (loss), beginning of period	$	7,455	$	6,291	$	6,522	$	(2,497)
By component:
Gains and losses on cash flow hedges:
Accumulated other comprehensive income (loss) balance, beginning of period	$	18,720	$	1,393	$	5,257	$	(3,101)
Other comprehensive income (loss) before reclassifications, net of tax effects of $(2,926), $38, $(7,708) and $(818)	8,241		(109)		21,678		2,329
Amounts reclassified from accumulated other comprehensive income (loss)	(1,957)		505		(1,922)		3,289
Tax expense (benefit) included in provision for income taxes	513		(134)		504		(862)
Total amounts reclassified from accumulated other comprehensive income (loss)	(1,444)		371		(1,418)		2,427
Net current-period other comprehensive income	6,797		262		20,260		4,756
Accumulated other comprehensive income balance, end of period	$	25,517	$	1,655	$	25,517	$	1,655
Foreign currency translation adjustment:
Accumulated other comprehensive (loss) income balance, beginning of period	$	(11,265)	$	4,898	$	1,265	$	604
Translation adjustment	(11,536)		(3,234)		(24,066)		1,060
Accumulated other comprehensive (loss) income balance, end of period	(22,801)		1,664		(22,801)		1,664
Accumulated other comprehensive income, end of period	$	2,716	$	3,319	$	2,716	$	3,319

Subsequent Events

9 Months Ended

Sep. 30, 2022

Subsequent Events [Abstract]

Subsequent Events


14. Subsequent Events

Rights Agreement

On October 7, 2022, our Board of Directors declared a dividend of one preferred share purchase right (a “Right”) for each of our issued and outstanding shares of common stock, which was paid to the stockholders of record at the close of business on October 17, 2022 (the “Record Date”). Each Right entitles the registered holder, subject to the terms of the Rights Agreement (as defined below), to purchase us one one-thousandth of a share of our Series A Junior Participating Preferred Stock, par value $0.001 per share (the “Preferred Stock”) at a price of $313.00, subject to certain adjustments (as adjusted from time to time, the “Exercise Price”). The description and terms of the Rights are set forth in the Stockholder Rights Agreement, dated as of October 7, 2022 (the “Rights Agreement”), by and between us and American Stock Transfer & Trust Company, LLC.

Under the Rights Agreement, the Rights will become exercisable if an entity, person or group acquires beneficial ownership of 20% or more of our outstanding common stock in a transaction not approved by our Board of Directors. In the event that the Rights become exercisable due to the ownership threshold being crossed, each Right will entitle its holder (other than the person, entity or group triggering the Rights Plan, whose rights will become void and will not be exercisable) to purchase additional shares of common stock having a then-current market value of twice the Exercise Price.

Each share of Preferred Stock will be entitled, when, as and if declared, to a minimum preferential per share quarterly dividend payment equal to the greater of (i) $1.00 per share and (ii) an amount equal to 1,000 times the dividend declared per share of common stock. In the event of liquidation, dissolution or winding up of the Company, the holders of the Preferred Stock will be entitled to a minimum preferential payment of the greater of (i) $1,000.00 per share (plus any accrued but unpaid dividends), and (ii) an amount equal to 1,000 times the payment made per share of common stock. Each share of Preferred Stock will have 1,000 votes, voting together with the common stock. In the event of any merger, consolidation or other transaction in which outstanding shares of common stock are converted or exchanged, each share of Preferred Stock will be entitled to receive 1,000 times the amount received per share of common stock. These Rights are protected by customary antidilution provisions.

Subject to the terms of the Rights Agreement, the Rights will expire on October 2, 2023. Additional information regarding the Rights Agreement, including a copy of the Rights Agreement, is contained in a Form 8-K filed with the SEC on October 11, 2022.

Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements


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.

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.

Earnings Per Share (Computation of Basic and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2022	Jun. 30, 2022	Mar. 31, 2022	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2022	Sep. 30, 2021
Earnings Per Share [Abstract]
Net (loss) income	$ (10,319)	$ (3,422)	$ (10,407)	$ 6,188	$ 6,731	$ (164)	$ (24,148)	$ 12,755
Weighted average common shares	51,692,152			47,542,746			51,519,340	47,554,746
Stock-based awards	0			731,326			0	705,210
Weighted average common shares assuming dilution	51,692,152			48,274,072			51,519,340	48,259,956
Basic earnings per share	$ (0.20)			$ 0.13			$ (0.47)	$ 0.27
Diluted earnings per share	$ (0.20)			$ 0.13			$ (0.47)	$ 0.26
Anti-dilutive shares excluded from calculations of diluted (loss) earnings per share	936,214			904,100			1,195,709	1,034,091

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 40
-Section 65
-Paragraph 1
-Subparagraph (e)(4)
-URI https://asc.fasb.org/extlink&oid=126732423&loc=SL123482106-238011

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 3
-URI https://asc.fasb.org/extlink&oid=124431687&loc=d3e22583-107794

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 11
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=124431687&loc=d3e22694-107794

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 45
-Paragraph 10
-URI https://asc.fasb.org/extlink&oid=126958026&loc=d3e1448-109256

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 4
-URI https://asc.fasb.org/extlink&oid=124431687&loc=d3e22595-107794

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 250
-SubTopic 10
-Section 50
-Paragraph 11
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=124431687&loc=d3e22694-107794

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 45
-Paragraph 7
-URI https://asc.fasb.org/extlink&oid=126958026&loc=d3e1337-109256

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 40
-Section 65
-Paragraph 1
-Subparagraph (f)
-URI https://asc.fasb.org/extlink&oid=126732423&loc=SL123482106-238011

Reference 9: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
-SubTopic 10
-Section 55
-Paragraph 52
-URI https://asc.fasb.org/extlink&oid=128363288&loc=d3e4984-109258

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-SubTopic 220
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-04(23))
-URI https://asc.fasb.org/extlink&oid=120400993&loc=SL114874131-224263

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 260
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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

Debt (Tables)

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Summary of 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)	September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021
Credit facility:
Revolving credit loans	$	170,600	$	260,000	4.20	%	3.27	%
Term loans	627,813		640,000		3.65	%	3.02	%
Real estate loans	58,525		59,480		5.22	%	5.22	%
Other debt	538		1,694		5.00	%	5.00	%
Total debt	857,476		961,174		3.87	%	3.23	%
Less: Unamortized discount and debt issuance costs	3,402		4,994
Less: Debt, current portion	18,193		18,697		5.25	%	3.11	%
Debt, net of current portion	$	835,881	$	937,483	3.84	%	3.23	%

Summary of Other Debt

The following table summarizes our currently effective financing agreements as of September 30, 2022:

(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

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

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+ Details

Revenue Recognition (Disaggregation of Recurring Revenue by Type) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Disaggregation of Revenue [Line Items]
Revenue	$ 261,297	$ 231,218	$ 783,348	$ 679,849
Contractual recurring [Member]
Disaggregation of Revenue [Line Items]
Revenue	178,264	150,581	530,146	448,552
Transactional recurring [Member]
Disaggregation of Revenue [Line Items]
Revenue	71,123	67,949	216,414	193,714
Recurring [Member]
Disaggregation of Revenue [Line Items]
Revenue	$ 249,387	$ 218,530	$ 746,560	$ 642,266

- Definition

Amount, excluding tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value added and excise.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

Revenue Recognition (Disaggregation of Revenue by Market Group) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Disaggregation of Revenue [Line Items]
Revenue	$ 261,297	$ 231,218	$ 783,348	$ 679,849
Social Sector
Disaggregation of Revenue [Line Items]
Revenue	223,809	221,194	672,182	651,215
Corporate Sector
Disaggregation of Revenue [Line Items]
Revenue	37,334	8,596	111,634	27,275
Other [Member]
Disaggregation of Revenue [Line Items]
Revenue	$ 154	$ 1,428	$ (468)	$ 1,359

- Definition

+ References

+ Details

Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2022

Earnings Per Share [Abstract]

Computation of Basic and Diluted Earnings Per Share

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 shares	51,692,152		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 dilution	51,692,152		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 share	936,214		904,100		1,195,709		1,034,091

Revenue Recognition

9 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

Revenue Recognition


13. Revenue Recognition

Transaction price allocated to the remaining performance obligations

As of September 30, 2022, approximately $1.0 billion 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 September 30, 2022 and December 31, 2021 were insignificant. Our closing balances of deferred revenue were as follows:


(in thousands)	September 30, 2022		December 31, 2021
Total deferred revenue	$	396,599	$	378,746

The increase in deferred revenue during the nine months ended September 30, 2022 was primarily due to a seasonal increase 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. 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 nine months ended September 30, 2022 that was included in the deferred revenue balance at the beginning of the period was approximately $303 million. The amount of revenue recognized during the nine months ended September 30, 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 September 30,				Nine months ended September 30,
(dollars in thousands)	2022		2021		2022		2021
United States	$	220,177	$	191,580	$	657,699	$	563,916
United Kingdom	26,858		25,351		81,349		72,142
Other countries	14,262		14,287		44,300		43,791
Total revenue	$	261,297	$	231,218	$	783,348	$	679,849

During the third quarter of 2022, we reorganized our market groups. The Social Sector and Corporate Sector market groups comprised our go-to-market organizations as of September 30, 2022. The following is a description of each market group as of that date:

•The Social Sector market group focuses on sales to customers and prospects in the social sector, such as nonprofits, foundations, education institutions, healthcare organizations and other not-for-profit entities globally, and includes JustGiving from Blackbaud; and

•The Corporate Sector market group focuses on sales to customers and prospects in the corporate sector globally, and includes EVERFI from Blackbaud and YourCause from Blackbaud.

The following table presents our revenue by market group:


	Three months ended September 30,				Nine months ended September 30,
(dollars in thousands)	2022		2021		2022		2021



Social Sector	$	223,809	$	221,194	$	672,182	$	651,215
Corporate Sector	37,334		8,596		111,634		27,275
Other	154		1,428		(468)		1,359
Total revenue	$	261,297	$	231,218	$	783,348	$	679,849

The following table presents our recurring revenue by type:


	Three months ended September 30,				Nine months ended September 30,
(dollars in thousands)	2022		2021		2022		2021
Contractual recurring	$	178,264	$	150,581	$	530,146	$	448,552
Transactional recurring	71,123		67,949		216,414		193,714
Total recurring revenue	$	249,387	$	218,530	$	746,560	$	642,266

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI https://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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-Name Accounting Standards Codification
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+ Details

Stockholders' Equity (Changes in Accumulated Other Comprehensive Loss by Component) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Accumulated Other Comprehensive Income [Roll Forward]
Accumulated other comprehensive (loss) income, beginning of period	$ 7,455	$ 6,291	$ 6,522	$ (2,497)
Other comprehensive income (loss) before reclassifications, net of tax effects of $(2,926), $38, $(7,708) and $(818)	(2,926)	38	(7,708)	(818)
Income tax (benefit) provision	(1,576)	2,517	(5,993)	4,946
Net current-period other comprehensive income	4,739	2,972	3,806	(5,816)
Translation adjustment	(11,536)	(3,234)	(24,066)	1,060
Accumulated other comprehensive income (loss), end of period	2,716	3,319	2,716	3,319
Gains and losses on cash flow hedges [Member]
Accumulated Other Comprehensive Income [Roll Forward]
Accumulated other comprehensive (loss) income, beginning of period	18,720	1,393	5,257	(3,101)
Other comprehensive income (loss) before reclassifications, net of tax effects	(8,241)	109	(21,678)	(2,329)
Amounts reclassified from accumulated other comprehensive income (loss)	(1,957)	505	(1,922)	3,289
Income tax (benefit) provision	513	(134)	504	(862)
Total amounts reclassified from accumulated other comprehensive income (loss)	(1,444)	371	(1,418)	2,427
Net current-period other comprehensive income	6,797	262	20,260	4,756
Accumulated other comprehensive income (loss), end of period	25,517	1,655	25,517	1,655
Foreign currency translation adjustment [Member]
Accumulated Other Comprehensive Income [Roll Forward]
Accumulated other comprehensive (loss) income, beginning of period	(11,265)	4,898	1,265	604
Translation adjustment	(11,536)	(3,234)	(24,066)	1,060
Accumulated other comprehensive income (loss), end of period	$ (22,801)	$ 1,664	$ (22,801)	$ 1,664

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 31,413	$ 55,146
Total restricted cash	343,928	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 receivable	1,853	977
Prepaid expenses and other current assets	83,639	95,506
Total current assets	547,537	850,971
Property and equipment, net	109,474	111,428
Operating lease right-of-use assets	47,430	53,883
Software and content development costs, net	135,594	121,377
Goodwill	1,047,178	1,058,640
Intangible assets, net	643,994	698,052
Other assets	95,376	77,266
Total assets	2,626,583	2,971,617
Current liabilities:
Trade accounts payable	36,374	22,067
Accrued expenses and other current liabilities	78,471	100,096
Due to customers	344,305	594,273
Debt, current portion	18,193	18,697
Deferred revenue, current portion	393,679	374,499
Total current liabilities	871,022	1,109,632
Debt, net of current portion	835,881	937,483
Deferred tax liability	131,773	148,465
Deferred revenue, net of current portion	2,920	4,247
Operating lease liabilities, net of current portion	46,400	53,386
Other liabilities	5,775	1,344
Total liabilities	1,893,771	2,254,557
Commitments and contingencies (see Note 10)
Stockholders' equity:
Preferred stock, shares authorized	20,000,000	20,000,000
Preferred stock, shares outstanding	0	0
Preferred stock; 20,000,000 shares authorized, none outstanding	$ 0	$ 0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	180,000,000	180,000,000
Common stock, shares issued	67,830,914	66,165,666
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 capital	$ 1,048,688	$ 968,927
Treasury stock, shares	14,739,744	14,182,805
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 income	2,716	6,522
Retained earnings	218,308	242,456
Total stockholders' equity	732,812	717,060
Total liabilities and stockholders' equity	$ 2,626,583	$ 2,971,617

Debt

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Debt


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)	September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021
Credit facility:
Revolving credit loans	$	170,600	$	260,000	4.20	%	3.27	%
Term loans	627,813		640,000		3.65	%	3.02	%
Real estate loans	58,525		59,480		5.22	%	5.22	%
Other debt	538		1,694		5.00	%	5.00	%
Total debt	857,476		961,174		3.87	%	3.23	%
Less: Unamortized discount and debt issuance costs	3,402		4,994
Less: Debt, current portion	18,193		18,697		5.25	%	3.11	%
Debt, net of current portion	$	835,881	$	937,483	3.84	%	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 September 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 3,810,888 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. 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.

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.

LIBOR transition amendment

On August 26, 2022, we entered into a LIBOR Transition Amendment (the "LIBOR Amendment"). The LIBOR Amendment amended the 2020 Credit Facility, as previously amended, to change the interest rate benchmark from LIBOR to SOFR, as defined in the LIBOR Amendment. The LIBOR Amendment does not change any terms of the 2020 Credit Facility unrelated to reference rate reform.

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 September 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 September 30, 2022:

(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

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
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+ Details

Goodwill and Other Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Change in Goodwill

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.

- Definition

Tabular disclosure of goodwill by reportable segment and in total which includes a rollforward schedule.

+ References

Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
-SubTopic 20
-Section 50
-Paragraph 1
-Subparagraph (h)
-URI https://asc.fasb.org/extlink&oid=121556970&loc=d3e13816-109267

Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
-SubTopic 20
-Section 50
-Paragraph 1
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=121556970&loc=d3e13816-109267

Reference 3: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
-SubTopic 20
-Section 50
-Paragraph 1
-Subparagraph (g)
-URI https://asc.fasb.org/extlink&oid=121556970&loc=d3e13816-109267

Reference 4: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
-SubTopic 20
-Section 50
-Paragraph 1
-URI https://asc.fasb.org/extlink&oid=121556970&loc=d3e13816-109267

Reference 5: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
-SubTopic 20
-Section 50
-Paragraph 1
-Subparagraph (e)
-URI https://asc.fasb.org/extlink&oid=121556970&loc=d3e13816-109267

Reference 6: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
-SubTopic 20
-Section 50
-Paragraph 1
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=121556970&loc=d3e13816-109267

Reference 7: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
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-Paragraph 1A
-URI https://asc.fasb.org/extlink&oid=121556970&loc=SL108378252-109267

Reference 8: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
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-URI https://asc.fasb.org/extlink&oid=121556970&loc=d3e13816-109267

Reference 9: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
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-Section 50
-Paragraph 1
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=121556970&loc=d3e13816-109267

Reference 10: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
-SubTopic 20
-Section 50
-Paragraph 2
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=121556970&loc=d3e13854-109267

Reference 11: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
-SubTopic 20
-Section 55
-Paragraph 24
-URI https://asc.fasb.org/extlink&oid=122137925&loc=d3e14258-109268

Reference 12: http://www.xbrl.org/2009/role/commonPracticeRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
-SubTopic 20
-Section 50
-Paragraph 1
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=121556970&loc=d3e13816-109267

+ Details

Revenue Recognition (Disaggregation of Revenue by Geography) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Disaggregation of Revenue [Line Items]
Revenue	$ 261,297	$ 231,218	$ 783,348	$ 679,849
United States [Member]
Disaggregation of Revenue [Line Items]
Revenue	220,177	191,580	657,699	563,916
United Kingdom [Member]
Disaggregation of Revenue [Line Items]
Revenue	26,858	25,351	81,349	72,142
Other countries [Member]
Disaggregation of Revenue [Line Items]
Revenue	$ 14,262	$ 14,287	$ 44,300	$ 43,791

- Definition

+ References

+ Details

Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Components of Lease Expense

The following table summarizes the components of our lease expense:


	Three months ended September 30,				Nine months ended September 30,
(dollars in thousands)	2022		2021		2022		2021
Operating lease cost(1)	$	2,301	$	2,344	$	7,273	$	7,557
Variable lease cost	400		625		1,250		2,023
Sublease income	(791)		(313)		(1,988)		(1,139)
Net lease cost	$	1,910	$	2,656	$	6,535	$	8,441

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

Schedule of Security Incident Expense and Probable Insurance Recoveries

We recorded expenses and offsetting probable insurance recoveries related to the Security Incident as follows:


	Three months ended September 30,				Nine months ended September 30,
(dollars in thousands)	2022		2021		2022		2021
Gross expense	$	13,658	$	11,448	$	31,098	$	35,916
Offsetting probable insurance recoveries	—		(10,597)		(1,891)		(34,594)
Net expense	$	13,658	$	851	$	29,207	$	1,322

The following summarizes our cumulative expenses, insurance recoveries recognized and insurance recoveries paid as of:


(dollars in thousands)	September 30, 2022		December 31, 2021
Cumulative gross expense	$	81,489	$	50,391
Cumulative offsetting insurance recoveries recognized	(50,000)		(48,109)
Cumulative net expense	$	31,489	$	2,282

Cumulative offsetting insurance recoveries paid	$	(50,000)	$	(29,968)

Consolidated Financial Statement Details (Components of Restricted Cash) (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Restricted cash due to customers	$ 342,452	$ 593,296
Letters of credit for operating leases	0	2,186
Real estate escrow balances and other	1,476	1,134
Total restricted cash	$ 343,928	$ 596,616

Document - shares	9 Months Ended
Document - shares	Sep. 30, 2022	Oct. 31, 2022
Document Information [Line Items]
Document type	10-Q
Document quarterly report	true
Document period end date	Sep. 30, 2022
Document transition report	false
Entity file number	000-50600
Entity registrant name	Blackbaud, Inc.
Entity incorporation, state or country code	DE
Entity tax identification number	11-2617163
Entity address, address line one	65 Fairchild Street
Entity address, city	Charleston
Entity address, state	SC
Entity address, postal zip code	29492
City area code	843
Local phone number	216-6200
Entity current reporting status	Yes
Entity interactive data current	Yes
Entity filer category	Large Accelerated Filer
Entity small business	false
Entity emerging growth company	false
Entity shell company	false
Entity common stock, shares outstanding		53,097,427
Amendment flag	false
Document fiscal year focus	2022
Document fiscal period focus	Q3
Entity central index key	0001280058
Current fiscal year end date	--12-31
Common stock [Member]
Document Information [Line Items]
Title of 12(b) security	Common Stock, $0.001 Par Value
Trading symbol	BLKB
Security exchange name	NASDAQ
Preferred stock purchase rights [Member]
Document Information [Line Items]
Title of 12(b) security	Preferred Stock Purchase Rights
No Trading Symbol Flag	true
Security exchange name	NASDAQ

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Revenue
Revenue	$ 261,297	$ 231,218	$ 783,348	$ 679,849
Cost of revenue
Cost of revenue	120,937	107,681	369,906	319,136
Gross profit	140,360	123,537	413,442	360,713
Operating expenses
Sales, marketing and customer success	56,414	44,703	164,367	138,948
Research and development	40,451	31,566	118,736	90,967
General and administrative	49,860	34,733	141,013	97,328
Amortization	647	558	2,263	1,674
Restructuring	0	131	0	263
Total operating expenses	147,372	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, net	4,454	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 earnings per share	$ (0.20)	$ 0.13	$ (0.47)	$ 0.27
Diluted earnings per share	$ (0.20)	$ 0.13	$ (0.47)	$ 0.26
Common shares and equivalents outstanding
Basic weighted average shares	51,692,152	47,542,746	51,519,340	47,554,746
Diluted weighted average shares outstanding	51,692,152	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 tax	6,797	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
Recurring [Member]
Revenue
Revenue	249,387	218,530	746,560	642,266
Cost of revenue
Cost of revenue	111,488	95,823	338,149	279,123
One-time services and other [Member]
Revenue
Revenue	11,910	12,688	36,788	37,583
Cost of revenue
Cost of revenue	$ 9,449	$ 11,858	$ 31,757	$ 40,013

Consolidated Financial Statement Details (Components of Prepaid Expenses and Other Assets) (Details) - USD ($)
$ in Thousands

3 Months Ended

9 Months Ended

Sep. 30, 2022

Sep. 30, 2021

Sep. 30, 2022

Sep. 30, 2021

Dec. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Costs of obtaining contracts

^[1],[2]

$ 72,673

$ 78,465

Derivative instruments

34,584

7,160

Prepaid software maintenance and subscriptions, current and long-term

^[3]

27,392

28,880

Implementation costs for cloud computing arrangements

^[4],[5]

10,461

11,892

Receivables for probable insurance recoveries

^[6],[7]

18,202

Prepaid insurance

7,155

5,363

Unbilled accounts receivable

7,109

5,443

Taxes, prepaid and receivable

4,042

3,986

Deferred tax assets

1,471

1,546

Other assets

14,128

11,835

Total prepaid expenses and other assets

179,015

172,772

Less: Long-term portion

95,376

77,266

Prepaid expenses and other current assets

83,639

95,506

Amortization expense from costs of obtaining contracts

8,400

$ 8,800

25,400

$ 26,900

Current portion of costs of obtaining contracts

28,600

30,200

Prepaid software maintenance and subscriptions, current

24,800

24,700

Implementation costs for cloud computing arrangements, amortization

1,600

$ 1,300

Implementation costs for cloud computing arrangements, accumulated amortization

$ 4,600

$ 3,000

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

Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets


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.

Business Combinations

9 Months Ended

Sep. 30, 2022

Business Combinations [Abstract]

Business Combinations


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

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.

Commitments and Contingencies (Details) € in Thousands, $ in Thousands	1 Months Ended	9 Months Ended
	Sep. 30, 2021 EUR (€)	Sep. 30, 2022 USD ($) cases
Commitments and Contingencies Disclosure [Abstract]
Operating lease, lease not yet commenced, expense		$ 3,000
Operating lease, lease not yet commenced, term of contract		3 years
Loss Contingencies [Line Items]
Liability insurance, amount, total		$ 50,000
Liability insurance, amount, deductible		250
Loss contingency accrual		$ 5,000
Plaintiffs, number \| cases		260
Pending claims, number \| cases		400
Claims settled, number \| cases		190
Security incident, number of state Attorneys General \| cases		49
Spain [Member]
Loss Contingencies [Line Items]
Security incident, penalty paid \| €	€ 60
Minimum [Member]
Loss Contingencies [Line Items]
Security incident, expected cost		$ 30,000
Expected net cash outlays for ongoing legal fees		15,000
Maximum [Member]
Loss Contingencies [Line Items]
Security incident, expected cost		35,000
Expected net cash outlays for ongoing legal fees		$ 25,000
Putative Consumer Class Action Cases
Loss Contingencies [Line Items]
Plaintiffs, number \| cases		19
Putative Consumer Class Action Cases - Canadian Courts
Loss Contingencies [Line Items]
Plaintiffs, number \| cases		2
Putative Consumer Class Action Cases - US Federal Courts
Loss Contingencies [Line Items]
Plaintiffs, number \| cases		17
Third-party technology [Member]
Long-term Purchase Commitment [Line Items]
Remaining aggregate minimum purchase commitment		$ 236,000

Stockholders' Equity

9 Months Ended

Sep. 30, 2022

Equity [Abstract]

Stockholders' Equity


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 September 30,				Nine months ended September 30,
(dollars in thousands)	2022		2021		2022		2021
Accumulated other comprehensive income (loss), beginning of period	$	7,455	$	6,291	$	6,522	$	(2,497)
By component:
Gains and losses on cash flow hedges:
Accumulated other comprehensive income (loss) balance, beginning of period	$	18,720	$	1,393	$	5,257	$	(3,101)
Other comprehensive income (loss) before reclassifications, net of tax effects of $(2,926), $38, $(7,708) and $(818)	8,241		(109)		21,678		2,329
Amounts reclassified from accumulated other comprehensive income (loss)	(1,957)		505		(1,922)		3,289
Tax expense (benefit) included in provision for income taxes	513		(134)		504		(862)
Total amounts reclassified from accumulated other comprehensive income (loss)	(1,444)		371		(1,418)		2,427
Net current-period other comprehensive income	6,797		262		20,260		4,756
Accumulated other comprehensive income balance, end of period	$	25,517	$	1,655	$	25,517	$	1,655
Foreign currency translation adjustment:
Accumulated other comprehensive (loss) income balance, beginning of period	$	(11,265)	$	4,898	$	1,265	$	604
Translation adjustment	(11,536)		(3,234)		(24,066)		1,060
Accumulated other comprehensive (loss) income balance, end of period	(22,801)		1,664		(22,801)		1,664
Accumulated other comprehensive income, end of period	$	2,716	$	3,319	$	2,716	$	3,319

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-URI https://asc.fasb.org/topic&trid=2208762

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-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(e)(1))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 16: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 40
-Section 50
-Paragraph 6
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126731327&loc=SL126733271-114008

+ Details

Consolidated Financial Statement Details (Components of Other Income and Expense) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Interest income	$ 671	$ 82	$ 908	$ 311
Currency revaluation gains (losses)	2,991	609	5,843	(558)
Other income, net	792	171	1,957	586
Other income, net	$ 4,454	$ 862	$ 8,708	$ 339

Consolidated Financial Statement Details

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Consolidated Financial Statement Details


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 instruments	34,584		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 insurance	7,155		5,363
Unbilled accounts receivable	7,109		5,443
Taxes, prepaid and receivable	4,042		3,986
Deferred tax assets	1,471		1,546
Other assets	14,128		11,835
Total prepaid expenses and other assets	179,015		172,772
Less: Long-term portion	95,376		77,266
Prepaid expenses and other current assets	$	83,639	$	95,506

(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.

(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.

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 portion	8,144		9,170
Customer credit balances	7,488		8,403
Accrued commissions and salaries	4,503		7,872
Contingent consideration liability(3)	2,710		—
Accrued vacation costs	2,369		2,234
Accrued health care costs	2,305		3,042
Accrued transaction-based costs related to payments services	2,142		5,427
Accrued bonuses	1,705		5,829
Unrecognized tax benefit	1,671		1,248
Amounts payable to former EVERFI option holders(4)	—		17,404
Other liabilities	8,025		9,310
Total accrued expenses and other liabilities	84,246		101,440
Less: Long-term portion	5,775		1,344
Accrued expenses and other current liabilities	$	78,471	$	100,096

(2)All accrued legal costs are classified as current.

(3)See discussion of our acquisition of Kilter at Note 3 to these condensed consolidated financial statements.

Other income, net


	Three months ended September 30,				Nine months ended September 30,
(dollars in thousands)	2022		2021		2022		2021
Interest income	$	671	$	82	$	908	$	311
Currency revaluation gains (losses)	2,991		609		5,843		(558)
Other income, net	792		171		1,957		586
Other income, net	$	4,454	$	862	$	8,708	$	339

Basis of Presentation

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation


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.

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.

Condensed Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands

Total

Common stock [Member]

Additional paid-in capital [Member]

Treasury stock [Member]

Accumulated other comprehensive income (loss) [Member]

Retained earnings [Member]

Balance (in shares) at Dec. 31, 2020

60,904,638

Balance at Dec. 31, 2020

$ 426,150

$ 61

$ 544,963

$ (353,091)

$ (2,497)

$ 236,714

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Net (loss) income

(164)

Vesting of restricted stock units (in shares)

206,418

Vesting of restricted stock units

$ 0

Employee taxes paid for withheld shares upon equity award settlement (in shares)

240,867

Employee taxes paid for withheld shares upon equity award settlement

$ (18,426)

(18,426)

Stock-based compensation

30,005

29,995

Restricted stock grants (in shares)

519,009

Restricted stock grants

$ 1

Restricted stock cancellations (in shares)

(34,789)

Other comprehensive income

$ 6,660

6,660

Purchase of treasury shares under stock repurchase program (in shares)

465,821

Purchase of treasury shares under stock repurchase program, cost method

$ (28,066)

(28,066)

Balance (in shares) at Mar. 31, 2021

61,595,276

Balance at Mar. 31, 2021

416,160

$ 62

574,958

(399,583)

4,163

236,560

Balance (in shares) at Dec. 31, 2020

60,904,638

Balance at Dec. 31, 2020

426,150

$ 61

544,963

(353,091)

(2,497)

236,714

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Net (loss) income

12,755

Balance (in shares) at Sep. 30, 2021

62,353,643

Balance at Sep. 30, 2021

396,837

$ 62

634,406

(490,456)

3,319

249,506

Balance (in shares) at Mar. 31, 2021

61,595,276

Balance at Mar. 31, 2021

416,160

$ 62

574,958

(399,583)

4,163

236,560

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Net (loss) income

6,731

Vesting of restricted stock units (in shares)

804,323

Vesting of restricted stock units

$ 0

Employee taxes paid for withheld shares upon equity award settlement (in shares)

285,521

Employee taxes paid for withheld shares upon equity award settlement

$ (20,286)

(20,286)

Stock-based compensation

30,549

30,528

Restricted stock grants (in shares)

9,431

Restricted stock grants

$ 0

Restricted stock cancellations (in shares)

(76,316)

Other comprehensive income

$ 2,128

2,128

Purchase of treasury shares under stock repurchase program (in shares)

405,047

Purchase of treasury shares under stock repurchase program, cost method

$ (30,008)

(30,008)

Balance (in shares) at Jun. 30, 2021

62,332,714

Balance at Jun. 30, 2021

405,274

$ 62

605,486

(449,877)

6,291

243,312

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Net (loss) income

6,188

Vesting of restricted stock units (in shares)

908

Vesting of restricted stock units

$ 0

Employee taxes paid for withheld shares upon equity award settlement (in shares)

4,313

Employee taxes paid for withheld shares upon equity award settlement

$ (300)

(300)

Stock-based compensation

28,926

28,920

Restricted stock grants (in shares)

54,132

Restricted stock grants

$ 0

Restricted stock cancellations (in shares)

(34,111)

Other comprehensive income

$ (2,972)

(2,972)

Purchase of treasury shares under stock repurchase program (in shares)

583,280

Purchase of treasury shares under stock repurchase program, cost method

$ (40,279)

(40,279)

Balance (in shares) at Sep. 30, 2021

62,353,643

Balance at Sep. 30, 2021

396,837

$ 62

634,406

(490,456)

3,319

249,506

Balance (in shares) at Dec. 31, 2021

66,165,666

Balance at Dec. 31, 2021

717,060

$ 66

968,927

(500,911)

6,522

242,456

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Net (loss) income

(10,407)

Stock issuance costs related to purchase of EVERFI

(983)

Retirements of common stock (in shares)

^[1]

(33,075)

Retirements of common stock

^[1]

(2,581)

Vesting of restricted stock units (in shares)

976,312

Vesting of restricted stock units

$ 0

Employee taxes paid for withheld shares upon equity award settlement (in shares)

533,139

Employee taxes paid for withheld shares upon equity award settlement

$ (34,674)

(34,674)

Stock-based compensation

27,860

Restricted stock grants (in shares)

580,209

Restricted stock grants

$ 2

Restricted stock cancellations (in shares)

(30,940)

Other comprehensive income

8,773

Balance (in shares) at Mar. 31, 2022

67,658,172

Balance at Mar. 31, 2022

705,050

$ 68

993,223

(535,585)

15,295

232,049

Balance (in shares) at Dec. 31, 2021

66,165,666

Balance at Dec. 31, 2021

717,060

$ 66

968,927

(500,911)

6,522

242,456

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Net (loss) income

(24,148)

Balance (in shares) at Sep. 30, 2022

67,830,914

Balance at Sep. 30, 2022

732,812

$ 68

1,048,688

(536,968)

2,716

218,308

Balance (in shares) at Mar. 31, 2022

67,658,172

Balance at Mar. 31, 2022

705,050

$ 68

993,223

(535,585)

15,295

232,049

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Net (loss) income

(3,422)

Stock issuance costs related to purchase of EVERFI

(223)

Retirements of common stock (in shares)

^[1]

(395)

Retirements of common stock

^[1]

(19)

Vesting of restricted stock units (in shares)

23,549

Vesting of restricted stock units

$ 0

Employee taxes paid for withheld shares upon equity award settlement (in shares)

15,540

Employee taxes paid for withheld shares upon equity award settlement

$ (926)

(926)

Stock-based compensation

27,854

Restricted stock grants (in shares)

136,598

Restricted stock grants

$ 0

Restricted stock cancellations (in shares)

(62,550)

Other comprehensive income

(7,840)

Balance (in shares) at Jun. 30, 2022

67,755,374

Balance at Jun. 30, 2022

720,474

$ 68

1,020,835

(536,511)

7,455

228,627

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Net (loss) income

(10,319)

Stock issuance costs related to purchase of EVERFI

(87)

Retirements of common stock (in shares)

^[1]

(65)

Retirements of common stock

^[1]

(5)

Vesting of restricted stock units (in shares)

12,655

Vesting of restricted stock units

$ 0

Employee taxes paid for withheld shares upon equity award settlement (in shares)

8,260

Employee taxes paid for withheld shares upon equity award settlement

$ (457)

(457)

Stock-based compensation

27,945

Restricted stock grants (in shares)

107,906

Restricted stock grants

$ 0

Restricted stock cancellations (in shares)

(44,956)

Other comprehensive income

(4,739)

Balance (in shares) at Sep. 30, 2022

67,830,914

Balance at Sep. 30, 2022

$ 732,812

$ 68

$ 1,048,688

$ (536,968)

$ 2,716

$ 218,308

[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.

Earnings Per Share

9 Months Ended

Sep. 30, 2022

Earnings Per Share [Abstract]

Earnings Per Share


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 shares	51,692,152		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 dilution	51,692,152		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 share	936,214		904,100		1,195,709		1,034,091

Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes


11. Income Taxes

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


	Three months ended September 30,						Nine months ended September 30,
(dollars in thousands)	2022			2021			2022			2021
Income tax (benefit) provision	$	(1,576)		$	2,517		$	(5,993)		$	4,946
Effective income tax rate	13.2		%	28.9		%	19.9		%	27.9		%

During the six months ended June 30, 2022, we 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 no longer more appropriate than the annual effective tax rate method.

The decrease in our effective income tax rate for the three and nine months ended September 30, 2022 when compared to the same periods in 2021 was primarily due to the effect of year-to-date losses relative to our forecasted permanent items, including foreign-derived intangible income deduction not generated in the prior year. Furthermore, the 2022 effective income tax rate was negatively impacted by expenses attributable to stock based compensation.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 21
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 17
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
-URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 10
-Section 50
-Paragraph 14
-URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 270
-Section 50
-Paragraph 1
-URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-URI https://asc.fasb.org/topic&trid=2144680

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-SubTopic 30
-Section 50
-Paragraph 2
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details

Business Combinations (Details) - USD ($)
$ in Thousands

Aug. 19, 2022

Dec. 31, 2021

Sep. 30, 2022

^[1]

Business Acquisition [Line Items]

Contingent consideration obligations

$ 3,000

$ 0

^[1]

$ 2,710

Contingent consideration, liability, noncurrent

2,700

Kilter [Member]

Business Acquisition [Line Items]

Total cash consideration paid for the acquisition

$ 2,900

EVERFI [Member]

Business Acquisition [Line Items]

Total cash consideration paid for the acquisition

$ 441,800

Shares of company's common stock, shares

3,810,888

Shares of company's common stock, value assigned

$ 301,000

Aggregate purchase price

$ 742,800

[1]	See discussion of our acquisition of Kilter at Note 3 to these condensed consolidated financial statements.

Condensed Consolidated Statements of Cash Flows $ in Thousands	9 Months Ended
	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)
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 amortization	76,606	60,484
Provision for doubtful accounts and sales returns	4,374	7,992
Stock-based compensation expense	83,659	89,480
Deferred taxes	(21,672)	400
Amortization of deferred financing costs and discount	1,827	1,234
Other non-cash adjustments	5,677	(527)
Changes in operating assets and liabilities, net of acquisition and disposal of businesses:
Accounts receivable	9,998	(18,779)
Prepaid expenses and other assets	22,246	(14,169)
Trade accounts payable	14,435	10,728
Accrued expenses and other liabilities	(7,028)	2,790
Deferred revenue	23,832	17,400
Net cash provided by operating activities	189,806	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)	0
Proceeds from Divestiture of Businesses	6,426	0
Net cash used in investing activities	(67,788)	(37,993)
Cash flows from financing activities
Proceeds from issuance of debt	126,900	128,300
Payments on debt	(229,442)	(131,272)
Stock issuance costs	(1,205)	0
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	0	(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 period	651,762	644,969
Cash, cash equivalents and restricted cash, end of period	375,341	$ 243,713
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents [Abstract]
Cash and cash equivalents	31,413
Total restricted cash	343,928
Total cash, cash equivalents and restricted cash in the statement of cash flows	$ 375,341

Fair Value Measurements Fair Value Measurements (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Jun. 30, 2022	Sep. 30, 2022
Fair Value Disclosures [Abstract]
Operating lease, ROU assets impairment	$ 1.0		$ 1.0
Impairment, long-lived asset, held-for-use	$ 0.3		0.3
Capitalized software development costs, impairments			$ 2.3
Impairment of intangible assets (excluding goodwill)		$ 2.0