blkb-20230213
false000128005800012800582023-02-132023-02-130001280058us-gaap:CommonStockMember2023-02-132023-02-130001280058blkb:PreferredStockPurchaseRightsMember2023-02-132023-02-13

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 13, 2023
https://cdn.kscope.io/5e8c79e9e23196569f54de5aac9df23d-blkb-20230213_g1.jpg
Blackbaud, Inc.
(Exact name of registrant as specified in its charter)
Delaware000-5060011-2617163
(State or other jurisdiction of incorporation)
(Commission File Number)(IRS Employer ID Number)
65 Fairchild Street, Charleston, South Carolina 29492
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (843) 216-6200
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on which Registered
Common Stock, $0.001 Par ValueBLKBNasdaq Global Select Market
Preferred Stock Purchase RightsN/ANasdaq Global Select Market
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.



Item 2.02. Results of Operations and Financial Condition.
On February 13, 2023, Blackbaud, Inc. (the "Company") issued a press release reporting unaudited financial results for the quarter and fiscal year ended December 31, 2022. A copy of this press release is attached hereto as Exhibit 99.1.
The information in this Form 8-K (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No.Description
Press release dated February 13, 2023 reporting unaudited financial results for the quarter and fiscal year ended December 31, 2022.
101.INSInline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
BLACKBAUD, INC.
Date: February 13, 2023/s/ Anthony W. Boor
Anthony W. Boor
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)



Document
 Exhibit 99.1
 
https://cdn.kscope.io/5e8c79e9e23196569f54de5aac9df23d-bblogoa.jpg
PRESS RELEASE 


Blackbaud Announces 2022 Fourth Quarter and Full Year Results
Full Year 2022 Total Revenue Exceeded $1 Billion with 14% Growth; Full Year 2022 Financial Results Met or Exceeded Guidance; Blackbaud Announces Full Year 2023 Financial Guidance with Substantial Margin Expansion
Charleston, S.C. (February 13, 2023) - Blackbaud (NASDAQ: BLKB), the world's leading cloud software company powering social good, today announced financial results for its fourth quarter and full year ended December 31, 2022.

"2022 was a year of substantial progress," said Mike Gianoni, president and CEO, Blackbaud. "We proactively took steps throughout the year to better position the company, manage it efficiently and effectively in a weakened economy, and drive profitability, cash flow and improvement on Rule of 40. Revenue surpassed the $1 billion mark for the first time in our company history, and we achieved 14% revenue growth year over year. Looking ahead, we are building on the strong execution in 2022 and remain focused on driving efficiencies and improvements across the business as we progress along our Rule of 40 journey. At the midpoint of our full year 2023 financial guidance ranges, we anticipate organic revenue growth at constant currency of 4%, adjusted EBITDA margin of 30% and Rule of 40 at constant currency of roughly 34%, up five points versus last year. We are confident in our outlook with plans in place to achieve substantial performance acceleration as the year progresses and deliver significant, enhanced shareholder value."
Fourth Quarter 2022 Results Compared to Fourth Quarter 2021 Results:
GAAP total revenue was $274.8 million, up 10.8%, with $265.2 million in GAAP recurring revenue, up 11.1%.
Non-GAAP organic recurring revenue increased 1.3%.
GAAP loss from operations was $15.5 million, inclusive of security incident-related costs, net of insurance recoveries of $26.5 million, with GAAP operating margin of (5.7)%, a decrease of 300 basis points.
Non-GAAP income from operations was $54.9 million, with non-GAAP operating margin of 20.0%, an increase of 20 basis points.
GAAP net loss was $21.3 million, with GAAP diluted loss per share of $0.41, down $0.26 per share.
Non-GAAP net income was $36.0 million, with non-GAAP diluted earnings per share of $0.68, down $0.07 per share.
Non-GAAP adjusted EBITDA was $67.9 million, up $7.2 million, with non-GAAP adjusted EBITDA margin of 24.7%, an increase of 20 basis points.
GAAP net cash provided by operating activities was $14.1 million, a decrease of $29.8 million.
Non-GAAP adjusted free cash flow was $7.6 million, a decrease of $24.3 million, with non-GAAP adjusted free cash flow margin of 2.8%, a decrease of 1,010 basis points.
"We had a solid end to a strong 2022, meeting or exceeding full year financial guidance across revenue, profitability and adjusted free cash flow," said Tony Boor, executive vice president and CFO, Blackbaud. "For the full year 2022, Rule of 40 at constant currency was 29%, a two-point improvement over 2021. We drove strong cash generation throughout the year and will continue to rapidly deleverage in the near term. In 2023, we expect an acceleration in our financial performance as the year progresses, starting with meaningful improvement in the second quarter. We remain intently focused on managing costs and delivering substantial margin expansion and earnings potential with actions under management control. We will continue to drive operational execution across our business that we believe will accelerate Rule of 40 as the year progresses, giving further confidence in our ability to reach 40% in the next few years."




https://cdn.kscope.io/5e8c79e9e23196569f54de5aac9df23d-bblogoa.jpg
PRESS RELEASE




An explanation of all non-GAAP financial measures referenced in this press release, including the Rule of 40, is included below under the heading "Non-GAAP Financial Measures." A reconciliation of the company's non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release.
Recent Company Highlights
Blackbaud was named to Newsweek’s list of America’s Most Responsible Companies 2023. Blackbaud is one of 500 companies on the list, which highlights leaders in corporate responsibility, spanning 14 industries.
Blackbaud appointed two new directors to its board. Yogesh K. Gupta, president and CEO, Progress Software Corporation, and Rupal S. Hollenbeck, chief commercial officer, Check Point Software Technologies, joined Blackbaud’s board of directors. In addition, Timothy Chou, Ph.D., and Joyce M. Nelson retired from the Blackbaud board.
Blackbaud named Chad Anderson chief accounting officer. Prior to this role, Anderson served Blackbaud as senior vice president and corporate controller.
Blackbaud supported bold technology innovation through its Social Good Startup Program. Startups in the 2022 program recently visited Blackbaud’s world headquarters in December for an annual showcase, sharing their ideas on ways to impact the social good community. Additionally, Blackbaud welcomed its six newest members to the Social Good Startup Program with the January 2023 cohort.
Blackbaud CEO Mike Gianoni was named to Charleston Business Magazine’s 50 Most Influential Hall of Fame, making the list of 50 Most Influential People for the fifth year.
Blackbaud was honored as a Leading Employer by Built In’s 2023 Best Places to Work Awards and RippleMatch’s 2023 Campus Forward Awards.
Blackbaud announced a major gift to support diversity, equity and inclusion globally in partnership with five organizations in each of the regions it operates.
Visit www.blackbaud.com/newsroom for more information about Blackbaud’s recent highlights.
Full-Year 2022 Results Compared to Full-Year 2021 Results:
GAAP total revenue was $1.1 billion, up 14.1%, with $1.0 billion in GAAP recurring revenue, up 14.9%.
Non-GAAP organic recurring revenue increased 4.0%.
GAAP loss from operations was $28.5 million, with GAAP operating margin of (2.7)%, a decrease of 540 basis points.
Non-GAAP income from operations was $202.6 million, with non-GAAP operating margin of 19.1%, a decrease of 250 basis points.
GAAP net loss was $45.4 million, with GAAP diluted loss per share of $0.88, down $1.00 per share.
Non-GAAP net income was $140.4 million, with non-GAAP diluted earnings per share of $2.69, down $0.35 per share.
Non-GAAP adjusted EBITDA was $262.6 million, up $16.5 million, with non-GAAP adjusted EBITDA margin of 24.8%, a decrease of 170 basis points.
GAAP net cash provided by operating activities was $203.9 million, a decrease of $9.8 million.
Non-GAAP adjusted free cash flow was $153.7 million, a decrease of $14.6 million, with non-GAAP free cash flow margin of 14.5%, a decrease of 360 basis points.
2

https://cdn.kscope.io/5e8c79e9e23196569f54de5aac9df23d-bblogoa.jpg
PRESS RELEASE
Financial Outlook
Blackbaud today announced its 2023 full year financial guidance:
Non-GAAP revenue of $1.08 billion to $1.11 billion
Non-GAAP adjusted EBITDA margin of 29.5% to 30.5%
Non-GAAP earnings per share of $3.30 to $3.60
Non-GAAP adjusted free cash flow of $170 million to $190 million
Included in its 2023 full year financial guidance are the following assumptions:
Non-GAAP annualized effective tax rate is expected to be approximately 20%
Interest expense for the year is expected to be approximately $40 million to $44 million
Fully diluted shares for the year are expected to be in the range of approximately 53 million to 54 million
Capital expenditures for the year are expected to be in the range of approximately $65 million to $75 million, including approximately $55 million to $65 million of capitalized software and content development costs
Blackbaud has not reconciled forward-looking full-year non-GAAP financial measures contained in this news release to their most directly comparable GAAP measures, as permitted by Item 10(e)(1)(i)(B) of Regulation S-K. Such reconciliations would require unreasonable efforts at this time to estimate and quantify with a reasonable degree of certainty various necessary GAAP components, including for example those related to compensation, acquisition transactions and integration, tax items or others that may arise during the year. These components and other factors could materially impact the amount of the future directly comparable GAAP measures, which may differ significantly from their non-GAAP counterparts.
In order to provide a meaningful basis for comparison, Blackbaud uses non-GAAP adjusted free cash flow in analyzing its operating performance. Non-GAAP adjusted free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software and content development, capital expenditures for property and equipment, plus cash outflows, net of insurance, related to the previously disclosed Security Incident discovered in May 2020 (the "Security Incident"). Total costs related to the Security Incident exceeded the limit of our insurance coverage during the first quarter of 2022. For full year 2023, Blackbaud currently expects net cash outlays of $25 million to $35 million for ongoing legal fees related to the Security Incident. In line with the company's policy, all associated costs due to third-party service providers and consultants, including legal fees, are expensed as incurred. Please refer to the section below titled "Non-GAAP Financial Measures" for more information on Blackbaud's use of non-GAAP financial measures.
Conference Call Details
What:    Blackbaud's Fourth Quarter and Full Year 2022 Conference Call
When:    February 14, 2023
Time:     8:00 a.m. (Eastern Time)
Live Call:     1-877-407-3088 (US/Canada)
Webcast:    Blackbaud's Investor Relations Webpage
3

https://cdn.kscope.io/5e8c79e9e23196569f54de5aac9df23d-bblogoa.jpg
PRESS RELEASE
About Blackbaud
Blackbaud (NASDAQ: BLKB) is 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—Blackbaud connects and empowers organizations to increase their impact through cloud software, services, expertise and data intelligence. The Blackbaud 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, Blackbaud is a remote-first company headquartered in Charleston, South Carolina, with operations in the United States, Australia, Canada, Costa Rica and the United Kingdom. For more information, visit www.blackbaud.com, or follow us on Twitter, LinkedIn, Instagram, and Facebook.
Investor ContactMedia Contact
IR@blackbaud.commedia@blackbaud.com
Forward-Looking Statements
Except for historical information, all of the statements, expectations, and assumptions contained in this news release are forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding the predictability of our financial condition and results of operations. These statements involve a number of risks and uncertainties. Although Blackbaud attempts to be accurate in making these forward-looking statements, it is possible that future circumstances might differ from the assumptions on which such statements are based. In addition, other important factors that could cause results to differ materially include the following: management of integration of acquired companies; uncertainty regarding increased business and renewals from existing customers; a shifting revenue mix that may impact gross margin; continued success in sales growth; cybersecurity and data protection risks and related liabilities; potential litigation involving us; and the other risk factors set forth from time to time in the SEC filings for Blackbaud, copies of which are available free of charge at the SEC’s website at www.sec.gov or upon request from Blackbaud's investor relations department. Blackbaud assumes no obligation and does not intend to update these forward-looking statements, except as required by law.
Trademarks
All Blackbaud product names appearing herein are trademarks or registered trademarks of Blackbaud, Inc.
Non-GAAP Financial Measures
Blackbaud has provided in this release financial information that has not been prepared in accordance with GAAP. Blackbaud uses non-GAAP financial measures internally in analyzing its operational performance. Accordingly, Blackbaud believes these non-GAAP measures are useful to investors, as a supplement to GAAP measures, in evaluating its ongoing operational performance and trends and in comparing its financial results from period-to-period with other companies in Blackbaud's industry, many of which present similar non-GAAP financial measures to investors. However, these non-GAAP financial measures may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies.
The non-GAAP financial measures discussed above exclude the impact of certain transactions that Blackbaud believes are not directly related to its operating performance in any particular period, but are for its long-term benefit
4

https://cdn.kscope.io/5e8c79e9e23196569f54de5aac9df23d-bblogoa.jpg
PRESS RELEASE
over multiple periods. Blackbaud believes these non-GAAP financial measures reflect its ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in its business.
While Blackbaud believes these non-GAAP measures provide useful supplemental information, non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliations of these non-GAAP measures to their most directly comparable GAAP financial measures.
Non-GAAP free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software and content development, and capital expenditures for property and equipment. In addition, and in order to provide a meaningful basis for comparison, Blackbaud now uses non-GAAP adjusted free cash flow in analyzing its operating performance. Non-GAAP adjusted free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software and content development, and capital expenditures for property and equipment, plus cash outflows, net of insurance, related to the Security Incident. Blackbaud believes non-GAAP free cash flow and non-GAAP adjusted free cash flow provide useful measures of the company's operating performance. Non-GAAP adjusted free cash flow is not intended to represent and should not be viewed as the amount of residual cash flow available for discretionary expenditures.
In addition, Blackbaud uses non-GAAP organic revenue growth, non-GAAP organic revenue growth on a constant currency basis, non-GAAP organic recurring revenue growth and non-GAAP organic recurring revenue growth on a constant currency basis, in analyzing its operating performance. Blackbaud believes that these non-GAAP measures are useful to investors, as a supplement to GAAP measures, for evaluating the periodic growth of its business on a consistent basis. Each of these measures excludes incremental acquisition-related revenue attributable to companies acquired in the current fiscal year. For companies acquired in the immediately preceding fiscal year, each of these measures reflects presentation of full-year incremental non-GAAP revenue derived from such companies as if they were combined throughout the prior period. In addition, each of these measures excludes prior period revenue associated with divested businesses. The exclusion of the prior period revenue is to present the results of the divested businesses within the results of the combined company for the same period of time in both the prior and current periods. Blackbaud believes this presentation provides a more comparable representation of its current business’ organic revenue growth and revenue run-rate.
Rule of 40 is defined as non-GAAP organic revenue growth plus non-GAAP adjusted EBITDA margin. Non-GAAP adjusted EBITDA is defined as GAAP net income plus interest, net; income tax provision (benefit); depreciation; amortization of intangible assets from business combinations; amortization of software and content development costs; stock-based compensation; employee severance; acquisition and disposition-related costs; restructuring and other real estate activities; costs, net of insurance, related to the Security Incident; and impairment of capitalized software development costs.
5

Blackbaud, Inc.
Consolidated Balance Sheets
(Unaudited)
(dollars in thousands, except per share amounts)December 31,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents$31,691 $55,146 
Restricted cash702,240 596,616 
Accounts receivable, net of allowance of $7,318 and $11,155 at December 31, 2022 and December 31, 2021, respectively
102,809 102,726 
Customer funds receivable249 977 
Prepaid expenses and other current assets81,654 95,506 
Total current assets918,643 850,971 
Property and equipment, net107,426 111,428 
Operating lease right-of-use assets45,899 53,883 
Software and content development costs, net141,023 121,377 
Goodwill1,050,272 1,058,640 
Intangible assets, net635,136 698,052 
Other assets94,304 77,266 
Total assets$2,992,703 $2,971,617 
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable$42,559 $22,067 
Accrued expenses and other current liabilities86,002 100,096 
Due to customers700,860 594,273 
Debt, current portion18,802 18,697 
Deferred revenue, current portion382,419 374,499 
Total current liabilities1,230,642 1,109,632 
Debt, net of current portion840,241 937,483 
Deferred tax liability125,759 148,465 
Deferred revenue, net of current portion2,817 4,247 
Operating lease liabilities, net of current portion44,918 53,386 
Other liabilities4,294 1,344 
Total liabilities2,248,671 2,254,557 
Commitments and contingencies
Stockholders’ equity:
Preferred stock; 20,000,000 shares authorized, none outstanding
— — 
Common stock, $0.001 par value; 180,000,000 shares authorized, 67,814,044 and 66,165,666 shares issued at December 31, 2022 and December 31, 2021, respectively
68 66 
Additional paid-in capital1,075,264 968,927 
Treasury stock, at cost; 14,745,230 and 14,182,805 shares at December 31, 2022 and December 31, 2021, respectively
(537,287)(500,911)
Accumulated other comprehensive income8,938 6,522 
Retained earnings197,049 242,456 
Total stockholders’ equity744,032 717,060 
Total liabilities and stockholders’ equity$2,992,703 $2,971,617 

6

Blackbaud, Inc.
Consolidated Statements of Comprehensive (Loss) Income
(Unaudited)
(dollars in thousands, except per share amounts)Three months ended
December 31,
Years ended
December 31,
2022202120222021
Revenue
Recurring$265,173 $238,584 $1,011,733 $880,850 
One-time services and other9,584 9,307 46,372 46,890 
Total revenue274,757 247,891 1,058,105 927,740 
Cost of revenue
Cost of recurring125,300 111,680 463,449 390,803 
Cost of one-time services and other10,183 12,379 41,940 52,392 
Total cost of revenue135,483 124,059 505,389 443,195 
Gross profit139,274 123,832 552,716 484,545 
Operating expenses
Sales, marketing and customer success57,088 47,366 221,455 186,314 
Research and development38,177 33,606 156,913 124,573 
General and administrative58,895 48,934 199,908 146,262 
Amortization662 553 2,925 2,227 
Restructuring— — — 263 
Total operating expenses154,822 130,459 581,201 459,639 
(Loss) income from operations(15,548)(6,627)(28,485)24,906 
Interest expense(9,891)(3,832)(35,803)(18,003)
Other income (expense), net(159)8,713 180 
(Loss) income before (benefit) provision for income taxes(25,434)(10,618)(55,575)7,083 
Income tax (benefit) provision(4,175)(3,561)(10,168)1,385 
Net (loss) income$(21,259)$(7,057)$(45,407)$5,698 
(Loss) earnings per share
Basic$(0.41)$(0.15)$(0.88)$0.12 
Diluted$(0.41)$(0.15)$(0.88)$0.12 
Common shares and equivalents outstanding
Basic weighted average shares51,716,948 46,989,624 51,569,148 47,412,306 
Diluted weighted average shares51,716,948 46,989,624 51,569,148 48,230,438 
Other comprehensive income
Foreign currency translation adjustment7,906 (399)(16,160)661 
Unrealized (loss) gain on derivative instruments, net of tax(1,684)3,602 18,576 8,358 
Total other comprehensive income6,222 3,203 2,416 9,019 
Comprehensive (loss) income$(15,037)$(3,854)$(42,991)$14,717 
7

Blackbaud, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Years ended
December 31,
(dollars in thousands)20222021
Cash flows from operating activities
Net (loss) income$(45,407)$5,698 
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization102,369 82,410 
Provision for credit losses and sales returns6,066 11,450 
Stock-based compensation expense110,294 120,379 
Deferred taxes(26,644)(2,429)
Amortization of deferred financing costs and discount2,364 1,570 
Other non-cash adjustments5,676 10,490 
Changes in operating assets and liabilities, net of acquisition and disposal of businesses:
Accounts receivable(7,340)(6,525)
Prepaid expenses and other assets26,235 (2,048)
Trade accounts payable21,607 (9,670)
Accrued expenses and other liabilities(2,386)(8,190)
Deferred revenue11,059 10,526 
Net cash provided by operating activities203,893 213,661 
Cash flows from investing activities
Purchase of property and equipment(12,289)(11,664)
Capitalized software and content development costs(58,774)(40,489)
Purchase of net assets of acquired companies, net of cash and restricted cash acquired(20,912)(419,120)
Cash received in sale of business6,426 — 
Net cash used in investing activities(85,549)(471,273)
Cash flows from financing activities
Proceeds from issuance of debt211,000 582,200 
Payments on debt(310,740)(152,971)
Debt issuance costs— (3,106)
Stock issuance costs(1,339)— 
Employee taxes paid for withheld shares upon equity award settlement(36,376)(39,404)
Change in due to customers111,386 (13,464)
Change in customer funds receivable380 (731)
Purchase of treasury stock— (108,416)
Net cash (used in) provided by financing activities(25,689)264,108 
Effect of exchange rate on cash, cash equivalents and restricted cash(10,486)297 
Net increase in cash, cash equivalents and restricted cash82,169 6,793 
Cash, cash equivalents and restricted cash, beginning of year651,762 644,969 
Cash, cash equivalents and restricted cash, end of year$733,931 $651,762 
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown above in the consolidated statements of cash flows:
(dollars in thousands)December 31,
2022
December 31,
2021
Cash and cash equivalents$31,691 $55,146 
Restricted cash702,240 596,616 
Total cash, cash equivalents and restricted cash in the statement of cash flows$733,931 $651,762 
8

Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)
(dollars in thousands, except per share amounts)Three months ended
December 31,
Years ended
December 31,
2022202120222021
GAAP Revenue$274,757 $247,891 $1,058,105 $927,740 
GAAP gross profit$139,274 $123,832 $552,716 $484,545 
GAAP gross margin50.7 %50.0 %52.2 %52.2 %
Non-GAAP adjustments:
Add: Stock-based compensation expense3,109 5,094 14,436 19,952 
Add: Amortization of intangibles from business combinations11,686 8,209 48,492 34,812 
Add: Employee severance1,787 — 2,135 29 
Subtotal16,582 13,303 65,063 54,793 
Non-GAAP gross profit$155,856 $137,135 $617,779 $539,338 
Non-GAAP gross margin56.7 %55.3 %58.4 %58.1 %
GAAP (loss) income from operations$(15,548)$(6,627)$(28,485)$24,906 
GAAP operating margin(5.7)%(2.7)%(2.7)%2.7 %
Non-GAAP adjustments:
Add: Stock-based compensation expense
26,635 30,899 110,294 120,379 
Add: Amortization of intangibles from business combinations
12,348 8,762 51,417 37,039 
Add: Employee severance
4,470 — 5,164 1,510 
Add: Acquisition and disposition-related costs(1)
430 2,973 6,135 3,054 
Add: Restructuring and other real estate activities
— 12,515 71 12,102 
Add: Security Incident-related costs, net of insurance(2)
26,516 494 55,723 1,816 
Add: Impairment of capitalized software development costs
— — 2,263 — 
Subtotal70,399 55,643 231,067 175,900 
Non-GAAP income from operations$54,851 $49,016 $202,582 $200,806 
Non-GAAP operating margin20.0 %19.8 %19.1 %21.6 %
GAAP (loss) income before (benefit) provision for income taxes$(25,434)$(10,618)$(55,575)$7,083 
GAAP net (loss) income$(21,259)$(7,057)$(45,407)$5,698 
Shares used in computing GAAP diluted (loss) earnings per share51,716,948 46,989,624 51,569,148 48,230,438 
GAAP diluted (loss) earnings per share$(0.41)$(0.15)$(0.88)$0.12 
Non-GAAP adjustments:
Add: GAAP income tax (benefit) provision(4,175)(3,561)(10,168)1,385 
Add: Total non-GAAP adjustments affecting income from operations70,399 55,643 231,067 175,900 
Non-GAAP income before provision for income taxes44,965 45,025 175,492 182,983 
Assumed non-GAAP income tax provision(3)
8,993 9,005 35,098 36,597 
Non-GAAP net income$35,972 $36,020 $140,394 $146,386 
Shares used in computing non-GAAP diluted earnings per share52,923,158 48,106,044 52,207,573 48,230,438 
Non-GAAP diluted earnings per share$0.68 $0.75 $2.69 $3.04 
(1)Includes a $2.0 million noncash impairment of certain intangible assets held for sale during the twelve months ended December 31, 2022.
(2)Includes Security Incident-related costs incurred during the twelve months ended December 31, 2022 of $57.6 million, which includes approximately $23.0 million in recorded aggregate liabilities for loss contingencies, net of probable insurance recoveries during the same period of $1.9 million and during the twelve months ended December 31, 2021 of $40.6 million, net of probable insurance recoveries during the same period of $38.7 million. Recorded expenses 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 this adjustment were costs associated with enhancements to our cybersecurity program. For full year 2023, we currently expect net pre-tax expense of approximately $20 million to $30 million and net cash outlays of approximately $25 million to $35 million for ongoing legal fees related to the Security Incident. In line with our policy, legal fees, are expensed as incurred. As of December 31, 2022, we have recorded approximately $23.0 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain governmental agencies related to the Security Incident that we believe we can reasonably estimate. It is reasonably possible that our estimated or actual losses may change in the near term for those matters and be materially 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
9

Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures (continued)
(Unaudited)
class actions and governmental investigations, for which we have not recorded a liability for a loss contingency as of December 31, 2022 because we are unable at this time to reasonably estimate the possible loss or range of loss. Each of these matters could, separately or in the aggregate, result in an adverse judgement, settlement, fine, penalty 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.
(3)Blackbaud applies a non-GAAP effective tax rate of 20.0% when calculating non-GAAP net income and non-GAAP diluted earnings per share.

(dollars in thousands)Three months ended
December 31,
Years ended
December 31,
2022202120222021
GAAP revenue$274,757 $247,891 $1,058,105 $927,740 
GAAP revenue growth10.8 %14.1 %
Add: Non-GAAP acquisition-related revenue(1)
— 27,322 — 104,378 
Less: Non-GAAP revenue from divested businesses(2)
— (1,527)— (1,877)
Total Non-GAAP adjustments— 25,795 — 102,501 
Non-GAAP organic revenue(3)
$274,757 $273,686 $1,058,105 $1,030,241 
Non-GAAP organic revenue growth0.4 %2.7 %
Non-GAAP organic revenue(3)
$274,757 $273,686 $1,058,105 $1,030,241 
Foreign currency impact on non-GAAP organic revenue(4)
3,599 — 12,313 — 
Non-GAAP organic revenue on constant currency basis(4)
$278,356 $273,686 $1,070,418 $1,030,241 
Non-GAAP organic revenue growth on constant currency basis1.7 %3.9 %
GAAP recurring revenue$265,173 $238,584 $1,011,733 $880,850 
GAAP recurring revenue growth11.1 %14.9 %
Add: Non-GAAP acquisition-related revenue(1)
— 24,731 — 93,500 
Less: Non-GAAP recurring revenue from divested businesses(2)
— (1,510)— (1,858)
Total Non-GAAP adjustments— 23,221 — 91,642 
Non-GAAP organic recurring revenue(3)
$265,173 $261,805 $1,011,733 $972,492 
Non-GAAP organic recurring revenue growth1.3 %4.0 %
Non-GAAP organic recurring revenue(3)
$265,173 $261,805 $1,011,733 $972,492 
Foreign currency impact on non-GAAP organic recurring revenue(4)
3,093 — 10,914 — 
Non-GAAP organic recurring revenue on constant currency basis(4)
$268,266 $261,805 $1,022,647 $972,492 
Non-GAAP organic recurring revenue growth on constant currency basis2.5 %5.2 %
(1)Non-GAAP acquisition-related revenue excludes incremental acquisition-related revenue calculated in accordance with GAAP that is attributable to companies acquired in the current fiscal year. For companies acquired in the immediately preceding fiscal year, non-GAAP acquisition-related revenue reflects presentation of full-year incremental non-GAAP revenue derived from such companies, as if they were combined throughout the prior period.
(2)Non-GAAP revenue from divested businesses excludes revenue associated with divested businesses. The exclusion of the prior period revenue is to present the results of the divested business with the results of the combined company for the same period of time in both the prior and current periods.
(3)Non-GAAP organic revenue and non-GAAP organic recurring revenue for the prior year periods presented herein may not agree to non-GAAP organic revenue and non-GAAP organic recurring revenue presented in the respective prior period quarterly financial information solely due to the manner in which non-GAAP organic revenue growth and non-GAAP organic recurring revenue growth are calculated.
(4)To determine non-GAAP organic revenue growth and non-GAAP organic recurring revenue growth on a constant currency basis, revenues from entities reporting in foreign currencies were translated to U.S. Dollars using the comparable prior period's quarterly weighted average foreign currency exchange rates. The primary foreign currencies creating the impact are the Australian Dollar, British Pound, Canadian Dollar and EURO.

10

Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures (continued)
(Unaudited)
(dollars in thousands)Three months ended
December 31,
Years ended
December 31,
2022202120222021
GAAP net (loss) income$(21,259)$(7,057)$(45,407)$5,698 
Non-GAAP adjustments:
Add: Interest, net
9,053 3,751 34,057 17,611 
Add: GAAP income tax (benefit) provision(4,175)(3,561)(10,168)1,385 
Add: Depreciation(1)
3,444 3,200 14,086 12,686 
Add: Amortization of intangibles from business combinations
12,348 8,762 51,417 37,039 
Add: Amortization of software and content development costs(2)
10,447 8,743 38,975 32,811 
Subtotal31,117 20,895 128,367 101,532 
Non-GAAP EBITDA$9,858 $13,838 $82,960 $107,230 
Non-GAAP EBITDA margin3.6 %7.8 %
Non-GAAP adjustments:
Add: Stock-based compensation expense
26,635 30,899 110,294 120,379 
Add: Employee severance
4,470 — 5,164 1,510 
Add: Acquisition and disposition-related costs
430 2,973 6,135 3,054 
Add: Restructuring and other real estate activities
— 12,515 71 12,102 
Add: Security Incident-related costs, net of insurance(3)
26,516 494 55,723 1,816 
Add: Impairment of capitalized software development costs
— — 2,263 — 
Subtotal58,051 46,881 179,650 138,861 
Non-GAAP adjusted EBITDA$67,909 $60,719 $262,610 $246,091 
Non-GAAP adjusted EBITDA margin24.7 %24.8 %
Rule of 40(4)
25.1 %27.5 %
Non-GAAP adjusted EBITDA67,909 60,719 262,610 246,091 
Foreign currency impact on Non-GAAP adjusted EBITDA(5)
1,326 (294)6,305 (3,622)
Non-GAAP adjusted EBITDA on constant currency basis(5)
$69,235 $60,425 $268,915 $242,469 
Non-GAAP adjusted EBITDA margin on constant currency basis24.9 %25.1 %
Rule of 40 on constant currency basis(6)
26.6 %29.0 %
(1)During the third quarter of 2020 and the fourth quarter of 2021, we reduced the estimated useful lives of our operating lease right-of-use assets for certain of our office locations we expected to exit. For these same office locations, we also reduced the estimated useful lives of certain facilities-related fixed assets, which resulted in increases in depreciation expense. The accelerated portions of the fixed asset depreciation expense related to these activities of $1.7 million for the three months and twelve months ended December 31, 2021, respectively, were presented in the "Restructuring and other real estate activities" line of the reconciliation of GAAP to non-GAAP financial measures. Total depreciation expense was $4.9 million and $14.4 million for the three and twelve months ended December 31, 2021, respectively.
(2)Includes amortization expense related to software and content development costs, and amortization expense from capitalized cloud computing implementation costs.
(3)See additional details in the reconciliation of GAAP to Non-GAAP operating income above.
(4)Measured by non-GAAP organic revenue growth plus non-GAAP adjusted EBITDA margin. See Non-GAAP organic revenue growth table above.
(5)To determine non-GAAP adjusted EBITDA on a constant currency basis, non-GAAP adjusted EBITDA from entities reporting in foreign currencies were translated to U.S. Dollars using the comparable prior period's quarterly weighted average foreign currency exchange rates. The primary foreign currencies creating the impact are the Australian Dollar, British Pound, Canadian Dollar and EURO.
(6)Measured by non-GAAP organic revenue growth on constant currency basis plus non-GAAP adjusted EBITDA margin on constant currency basis.
11

Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures (continued)
(Unaudited)
(dollars in thousands)Years ended
December 31,
20222021
GAAP net cash provided by operating activities$203,893 $213,661 
Less: purchase of property and equipment(12,289)(11,664)
Less: capitalized software and content development costs(58,774)(40,489)
Non-GAAP free cash flow$132,830 $161,508 
Add: Security Incident-related cash flows, net of insurance20,864 6,739 
Non-GAAP adjusted free cash flow$153,694 $168,247 
12