BLACKBAUD INC

Blackbaud operates in the social impact market, serving nonprofits, educational institutions, companies committed to corporate social responsibility, and individual change makers. The market is significant, spanning far beyond philanthropy, and the company's addressable market is substantial, with millions of organizations globally focused on social impact including nonprofits, foundations, education institutions and healthcare organizations. Traditional methods of fundraising and organizational management are often costly and inefficient, and the nonprofit industry faces particular operational challenges including the need to solicit funds, manage complex relationships with constituents, comply with complex accounting and reporting requirements, and improve data collection and information sharing capabilities. Companies, grantmaking institutions and foundations also face unique challenges in their social impact efforts, including the need to quantify and improve the impact of their grants, cultivate better relationships with grantees, and engage employees in meaningful volunteering and giving activities.

Blackbaud describes itself as the world's leading provider of AI-powered solutions for social impact. The company's competition falls into four primary categories: niche products, vertical-specific solutions, general business software vendors such as Microsoft, Oracle and Salesforce.com, and consumer-oriented fundraising platforms such as GoFundMe and Facebook. The company believes its proprietary data, comprehensive product suite and domain-specific workflows provide a durable competitive moat. Blackbaud's early incorporation of verticalized, embedded AI and agentic automation capabilities, coupled with decades of sector credibility, positions it to lead the market into the next phase of intelligent, mission-driven software.

Blackbaud generates revenue primarily from charging for the use of its software solutions in cloud and hosted environments and providing payment and transaction services. Revenue is composed of contractual recurring revenue, which is approximately 64% of total revenue and is driven by new-customer bookings, cross-sell and upsell activity within the existing customer base and the retention of existing customer revenue, and transactional recurring revenue, which is approximately 34% of total revenue and is diversified across multiple activity types including donation processing, consumer giving, tuition management and event-based usage. Most software customers now operate on standard three-year contract terms with mid-to-high single-digit price increases at renewal and embedded annual price increases. The company's sales organization includes teams focused on both new logo acquisition and expansion within existing customers, supporting a multi-year land and expand strategy.

Blackbaud's solutions and services are delivered primarily through cloud solutions tailored to the unique needs of nonprofits and foundations, educational institutions, individual change makers and corporate social impact programs. The company's AI-powered solutions are built specifically for fundraising and relationship management, marketing and engagement, financial management, grant and award management, education management, ticketing, social responsibility, payment services and analytics. The company's data intelligence portfolio consists of four key outcome areas: Blackbaud Agents for Good, which are a series of AI agents that leverage Blackbaud's proprietary data and sector expertise to act as virtual team members by autonomously executing complex workflows; Predictive Insights, which inform strategic decision-making by combining customer data with licensed and proprietary data; Data Health solutions, which enhance and maintain constituent data; and Fundraising Performance solutions, which help customers assess their fundraising performance. Key fundraising and engagement solutions include Blackbaud Raiser's Edge NXT, described as the first and only cloud fundraising and relationship management solution that is all-inclusive and fully integrated with data health, AI-powered predictive analytics, email marketing, donation forms, event management, payment processing and process automation, and Blackbaud Enterprise Fundraising CRM, which is the lead offering for enterprise-level organizations. Financial management solutions include Blackbaud Financial Edge NXT, described as the market leading solution for fund and sub fund accounting, and Blackbaud Tuition Management, which benefits schools by giving administrators better access to financial data and payment services. Grant and award management solutions include Blackbaud Grantmaking and Blackbaud Award Management. Education solutions include Blackbaud Student Information System, Blackbaud Learning Management System, Blackbaud Enrollment Management System, and Blackbaud School Website System. Social responsibility solutions include YourCause GrantsConnect and YourCause CSRconnect for employee giving, volunteering, and grantmaking, and Blackbaud Impact Edge, an AI-powered solution for social impact reporting and storytelling. Payment services are provided through Blackbaud Integrated Payments, a value-added service integrated with the company's solutions that makes credit card processing simple and secure.

In late 2025, Blackbaud released Blackbaud AI Chat, which provides contextual responses within its solutions and assists users in completing tasks more efficiently. At bbcon, the company's annual user conference in October 2025, it launched Agents for Good, its agentic AI suite designed to augment customer teams with virtual AI-driven assistants capable of autonomously executing complex workflows across fundraising, finance and corporate impact functions. On December 1, 2025, the Board of Directors reauthorized, expanded and replenished the stock repurchase program by raising the total capacity from $800.0 million ¹ to $1.0 billion ² available for repurchases. During the year ended December 31, 2025, the company repurchased 3,337,844 ³ shares for $214.0 million ⁴. Including net share settlement of employee stock compensation, these repurchases represented approximately 7.9% ⁵ of outstanding common stock as of December 31, 2024. As of December 31, 2025, $960.6 million ⁶ remained available for repurchases under the program. In February 2025, the company was released from its lease for office space in Washington, DC, which was acquired as part of the acquisition of EVERFI in December 2021, and made a one-time cash release payment of $28.0 million ⁷ to the lessor. In June 2025 and January 2026, the company signed leases as lessee for 69,058 ⁸ and 45,370 ⁹ square feet, respectively, of office space in Hyderabad, India to support business operations in India.

Total revenue for the year ended December 31, 2025 was $1,128.4 million ¹⁰, a decrease of $26.3 million ¹¹ or 2.3% ¹² compared to $1,154.6 million ¹³ in 2024. The decrease was driven largely by a decrease in contractual recurring revenue of $52.7 million ¹⁴, primarily related to the sale of EVERFI which represented $82.6 million ¹⁵, partially offset by growth of $29.8 million ¹⁶ due to the positive impact of pricing initiatives and new subscription sales of cloud solutions, and a decrease in one-time consulting revenue of $4.2 million ¹⁷, partially offset by an increase in transactional recurring revenue of $30.6 million ¹⁸ primarily due to increases in volume for Blackbaud Integrated Payments and Blackbaud Tuition Management. Income from operations was $190.8 million ¹⁹ compared to a loss from operations of $271.4 million ²⁰ in 2024, an increase of $462.1 million ²¹ driven largely by the pre-tax loss on disposition of EVERFI of $405.4 million ²² in 2024, including noncash impairment charges of $390.2 million ²³, which did not reoccur in 2025. GAAP net income was $115.0 million ²⁴ compared to a net loss of $299.5 million ²⁵ in 2024. GAAP diluted earnings per share was $2.37 ²⁶ compared to a diluted loss per share of $5.92 ²⁷ in 2024. Non-GAAP diluted earnings per share was $4.45 ²⁸ compared to $4.06 ²⁹ in 2024. Cash flow from operations was $265.6 million ³⁰ compared to $296.0 million ³¹ in 2024.

Management's strategy targets mid-single-digit revenue growth. Contractual recurring revenue, approximately 64% of total revenue, is driven by new-customer bookings, cross-sell and upsell activity, and retention. Most software customers now operate on standard three-year contract terms with mid-to-high single-digit price increases at renewal and embedded annual price increases. Approximately 40% of existing customer contracts are due for renewal in 2026, compared to approximately 30% in 2027 and approximately 30% in 2028. The contractual annual recurring revenue dollars up for renewal associated with the 2026 renewal cohort are approximately 40% higher than those up for renewal in 2025. Transactional recurring revenue, approximately 34% of total revenue, has contributed to consistent high-single-digit growth in recent years. Future growth in this category will depend on volume, same-store volume trends, the shift toward donor online giving, customer adoption of payments capabilities and pricing optimization initiatives.

A central element of the long-term strategy is the disciplined integration of AI across products, platform and internal operations, which management views as foundational to driving operating leverage, enhancing customer outcomes and supporting sustainable growth over time. Product innovation efforts have focused on advancing AI across the portfolio and enhancing product connectivity and interoperability. Through the multi-year Intelligence for Good initiative, machine learning features for prospect identification have been adopted by more than half of Raiser's Edge NXT customers. In late 2025, Blackbaud released Blackbaud AI Chat, and at bbcon in October 2025, launched Agents for Good, its agentic AI suite. These innovations are expected to contribute to future bookings, product adoption and customer retention. As part of the multi-year global workforce strategy, the company is expanding its global footprint through the continued build-out of its Global Capability Center in Hyderabad, India, which enhances access to talent, enables labor arbitrage, and supports a follow-the-sun operating model. Beginning in 2024, the company has relied on a combination of insourcing certain roles previously performed by third parties into the GCC, evaluating roles and skill sets and opportunities created through AI adoption to determine whether positions that become vacant through attrition should be backfilled within the GCC, and opportunistically transitioning additional roles to the GCC. This approach is expected to continue through 2027.

The company is focused on improving operating efficiency and enhancing profitability over time, including actions to optimize the workforce, improve productivity, modernize the technology platform and simplify the cost structure. Steps taken include reductions in headcount, optimization of the real estate footprint, renegotiation of key vendor contracts, continued migration of product infrastructure to public cloud environments and planned closure of the two remaining legacy private data centers. AI-enabled tools are being deployed across internal operations, including research and development, customer operations and general and administrative functions, to automate routine activities, accelerate workflows and support internal productivity. In connection with the global workforce strategy, the company currently expects to incur pre-tax GCC workforce transition costs of $6 million to $8 million ³² in 2026, consisting primarily of severance and other employee transition-related expenses. The actions taken in 2026, together with later phases of the initiative, are expected to begin generating operating cost efficiencies starting in 2027.

The company expects total capital expenditures, including estimated outlays for capitalized software development costs, to be between approximately $60.0 million and $70.0 million ³³ in 2026. Interest expense for the full year 2026 is expected to be approximately $62 million to $66 million ³⁴. The company anticipates utilizing at least 50% of its free cash flow from 2026 to 2030 for stock repurchases. During 2026, the company intends to repurchase between 5.0% and 10.0% ³⁵ of its outstanding common stock as of December 31, 2025 under its existing stock repurchase program.

Approximately 40% of existing customer contracts are due for renewal in 2026, compared to approximately 30% in 2027 and approximately 30% in 2028. Because the 2026 cohort is meaningually larger, the company may experience higher churn dollars in that year relative to prior years. These cohort dynamics are a normal part of the renewal cycle and can influence year-over-year revenue trends, even when underlying customer retention patterns remain stable. The company's leverage ratio remained elevated at 2.52 to 1.00 ³⁶ as of December 31, 2025, and absent ongoing repurchase activity, the leverage ratio would have declined further, as such activity continues to contribute to maintaining a higher level of leverage. The company expects to continue to see meaningful reductions to cash taxes through 2027 due to the enactment of the One Big Beautiful Bill Act, though U.S. state OBBBA conformity considerations and the phase-in of OBBBA international tax provisions in 2026 may continue to affect this cash reduction.

The company faces significant risks from its elevated leverage position, with a net leverage ratio of 2.52 to 1.00 ³⁷ as of December 31, 2025, which could require dedicating substantial cash flow to debt payments, increase interest costs, and limit flexibility for strategic actions. The company has significant goodwill and intangible assets of $1.1 billion ³⁸ and $106.7 million ³⁹ respectively as of December 31, 2025, and the impairment of a significant portion of these assets, such as the EVERFI impairment charges of $390.2 million ⁴⁰ in 2024, could negatively affect operating results. The company's balance sheet includes deferred tax assets of $125.6 million ⁴¹ as of December 31, 2025, and a failure to realize their full value could result in a charge against earnings. The company is increasingly incorporating AI technology into its solutions, which presents evolving regulatory requirements, technological complexity, competitive pressures, and potential reputational and legal risks. The company has been subject to a ransomware attack in May 2020 (the Security Incident) which has resulted in cumulative gross expenses of $178.2 million ⁴² as of December 31, 2025, and the company may be unable to prevent future significant incidents.

Management's message emphasizes the company's position as the world's leading provider of AI-powered solutions for social impact and its strategy to maintain and extend that position. Key strategic priorities emphasized for the period ahead include product innovation and delivery through the disciplined integration of AI across products, platform and internal operations, targeting mid-single-digit revenue growth through contractual and transactional recurring revenue streams, and operating efficiency and margin improvement through workforce optimization, technology platform modernization and cost structure simplification. Management also highlights the stock repurchase program as an important component of capital allocation, with an increase in the expected fiscal year 2025 stock repurchase range to between 7.0% and 8.5% of outstanding common stock as of December 31, 2024, and an intention to repurchase between 5.0% and 10.0% of outstanding common stock as of December 31, 2025 during 2026. Management states that over the long term, stock repurchases are expected to remain an important component of capital allocation strategy, with an anticipation of utilizing at least 50% of free cash flow from 2026 to 2030 for stock repurchases.