BLACKBAUD INC

Previous wording

Total revenue increased by $17.5 million during the three months ended March 31, 2024, when compared to the same period in 2023, driven largely by the following:

Current wording

Total revenue increased by $16.2 million and $33.7 million, respectively, during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, driven largely by the following:

Previous wording

As previously disclosed and discussed above, we have a number of multi-year pricing initiatives underway, some to bring our pricing in line with the market while others are model changes that are expected to drive greater revenue for both us and our customers. We expect that the decline in our non-strategic one-time services and other revenue will slow in 2024 compared to the previous two years.

Current wording

As previously disclosed and discussed above, we have a number of multi-year pricing initiatives underway, some to bring our pricing in line with the market while others are model changes that are expected to drive greater revenue for both us and our customers. Excluding the impact from our sale of EVERFI Limited in the first quarter of 2024, we expect that the decline in our non-strategic one-time services and other revenue will slow in 2024 compared to the previous two years.

Previous wording

Our Social Sector revenue (which represents approximately 88% of our total revenue) increased $19.5 million, or 8.7%, during the three months ended March 31, 2024, when compared to the same period in 2023, driven primarily by the increases in contractual recurring revenue and transactional recurring revenue discussed above.

Current wording

Our Social Sector revenue (which represents approximately 88% of our total year-to-date revenue) increased $19.8 million, or 8.5%, and $39.3 million, or 8.6%, respectively, during the three and six months ended June 30, 2024, when compared to the same periods in 2023, driven primarily by the increases in contractual recurring revenue and transactional recurring revenue discussed above. The Social Sector has proven to be very resilient as demonstrated through the last several economic downturns and the COVID-19 pandemic, and we have great confidence in the long-term trajectory of this portion of our business.

Previous wording

Income from operations increased by $20.7 million during the three months ended March 31, 2024, when compared to the same period in 2023, driven largely by the following:

Current wording

Income from operations increased by $41.8 million and $62.5 million, respectively, during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, driven largely by the following:

Previous wording

We are continuing to make critical investments in the business in areas such as innovation, cybersecurity, and our continued shift of cloud infrastructure to leading public cloud service providers. Our profitability during the first quarter of 2024 reflects some of these incremental investments.

Current wording

We are continuing to make critical investments in the business in areas such as innovation, cybersecurity, and our continued shift of cloud infrastructure to leading public cloud service providers. Our profitability during the first half of 2024 reflects some of these incremental investments.

Previous wording

Our recurring subscription contracts are typically for a term of three years at contract inception. A key factor to our overall success is the renewal and expansion of our existing subscription agreements with our customers. Management uses gross dollar retention in analyzing our success at delighting our customers with innovative and cloud solutions. Gross dollar retention is defined as contracted annual recurring revenue ("CARR") divided by beginning CARR with a measurement period of twelve months. For the twelve months ended March 31, 2024, our gross dollar retention was approximately 89%. This gross dollar retention rate was slightly lower than our rate for the full year ended December 31, 2023, primarily due to EVERFI. Excluding EVERFI, our gross dollar retention during the twelve months ended March 31, 2024 was slightly higher than our rate for the full year ended December 31, 2023. We are continually investing in innovation, which we believe will increase gross dollar retention over the long-term.

Current wording

Our recurring subscription contracts are typically for a term of three years at contract inception. A key factor to our overall success is the renewal and expansion of our existing subscription agreements with our customers. Management uses gross dollar retention in analyzing our success at delighting our customers with innovative and cloud solutions. Gross dollar retention is defined as contracted annual recurring revenue ("CARR") divided by beginning CARR with a measurement period of twelve months. For the twelve months ended June 30, 2024, our gross dollar retention was approximately 90%. This gross dollar retention rate was consistent with our rate for the full year ended December 31, 2023. We are continually investing in innovation, which we believe will increase gross dollar retention over the long-term.

Previous wording

At March 31, 2024, our cash and cash equivalents were $26.4 million. Under the 2020 Credit Facility, the carrying amount of our debt was $981.7 million and our net leverage ratiowas 2.72 to 1.00.

Current wording

At June 30, 2024, our cash and cash equivalents were $30.4 million. Under the 2024 Credit Facilities, the carrying amount of our debt was $963.6 million and our net leverage ratiowas 2.51 to 1.00.

Previous wording

During the three months ended March 31, 2024, we generated $64.6 million in cash from operations, had a net increase in borrowings of $260.5 million, returned $262.6 million to stockholders by way of share repurchases and had aggregate cash outlays of $13.3 million for purchases of property and equipment and capitalized software and content development costs.

Current wording

During the six months ended June 30, 2024, we generated $118.4 million in cash from operations, had a net increase in borrowings of $244.9 million, returned $262.6 million to stockholders by way of share repurchases and had aggregate cash outlays of $34.5 million for purchases of property and equipment and capitalized software and content development costs.

Previous wording

As discussed in Note 9 to our unaudited, condensed consolidated financial statements in this report, total costs related to the Security Incident exceeded the limit of our insurance coverage in the first quarter of 2022. Accordingly, the Security Incident has negatively impacted, and we expect it to continue for the foreseeable future to negatively impact, our GAAP profitab ility and GAAP cash flow (see discussion regarding non-GAAP free cash flow and non-GAAP adjusted free cash flow on page 37). For the three months ended March 31, 2024, we incurred net pre-tax expenses of $10.3 million related to the Security Incident, which included $3.3 million for ongoing legal fees and additional accruals for loss contingencies of $7.0 million. During the three months ended March 31, 2024, we had cash outlays of $2.0 million related to the Security Incident for ongoing legal fees. In line with our policy, legal fees are expensed as incurred. For full year 2024, we currently expect pre-tax expenses of approximately $5.0 million to $10.0 million and cash outlays of approximately $8.0 million to $13.0 million for ongoing legal fees related to the Security Incident. Not included in these ranges are our previous settlements or current accruals for loss contingencies related to the matters discussed below.

Current wording

As discussed in Note 9 to our unaudited, condensed consolidated financial statements in this report, total costs related to the Security Incident exceeded the limit of our insurance coverage in the first quarter of 2022. Accordingly, the Security Incident has negatively impacted, and we expect it to continue for the foreseeable future to negatively impact, our GAAP profitab ility and GAAP cash flow (see discussion regarding non-GAAP free cash flow and non-GAAP adjusted free cash flow on page 43). For the three and six months ended June 30, 2024, we incurred net pre-tax expenses of $1.8 million and $12.1 million, respectively, related to the Security Incident, which included $1.8 million and $5.1 million, respectively, for ongoing legal fees and additional accruals for loss contingencies of $0.0 million and $7.0 million, respectively. During the six months ended June 30, 2024, we had cash outlays of $5.8 million related to the Security Incident for ongoing legal fees. In line with our policy, legal fees are expensed as incurred. For full year 2024, we currently expect pre-tax expenses of approximately $5.0 million to $10.0 million and cash outlays of approximately $8.0 million to $13.0 million for ongoing legal fees related to the Security Incident. Not included in these ranges are our previous settlements or current accruals for loss contingencies related to the matters discussed below.

Previous wording

As of March 31, 2024, we have recorded approximately $8.5 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain customers and governmental agencies related to the Security Incident that we believed we could reasonably estimate in accordance with our loss contingency procedures described above and as more fully described in Note 9. It is reasonably possible that our estimated 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.

Current wording

As of June 30, 2024, we have recorded approximately $8.5 million in aggregate liabilities for loss contingencies, which included $6.8 million for our settlement with the Attorney General of the State of California on June 13, 2024 that we paid in the third quarter of 2024, and other accruals based primarily on recent negotiations with certain customers related to the Security Incident that we believed we could reasonably estimate in accordance with our loss contingency procedures described above and as more fully described in Note 9. It is reasonably possible that our estimated 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.

Previous wording

Comparison of the three months ended March 31, 2024 and 2023

Current wording

Comparison of the three and six months ended June 30, 2024 and 2023

Previous wording

Recurring gross margin increased by 140 basis points for the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to the increases in recurring revenue outpacing the increases in cost of recurring revenue.

Current wording

Recurring gross margin increased by 80 basis points and 110 basis points for the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily due to the increases in recurring revenue outpacing the increases in cost of recurring revenue.

Previous wording

One-time services and other revenue decreased by $1.3 million, or 14.1%, during the three months ended March 31, 2024, when compared to the same period in 2023, driven primarily by the following:

Current wording

One-time services and other revenue decreased by $2.7 million, or 31.7%, and $4.0 million, or 22.7%, during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, driven primarily by the following:

Previous wording

Cost of one-time services and other decreased by $1.6 million, or 18.5%, during the three months ended March 31, 2024, when compared to the same period in 2023, driven primarily by the following:

Current wording

Cost of one-time services and other decreased by $2.7 million, or 35.2%, and $4.3 million, or 26.3%, during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, driven primarily by the following:

Previous wording

One-time services and other gross margin increased by 480 basis points during the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to the decrease in compensation costs discussed above outpacing the decrease of one-time services and other revenue.

Current wording

One-time services and other gross margin increased by 450 basis points and 420 basis points during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily due to the decrease in compensation costs discussed above outpacing the decrease of one-time services and other revenue.

Previous wording

Sales, marketing and customer success expense decreased by $3.5 million or 6.5%, during the three months ended March 31, 2024, when compared to the same period in 2023. The decreases in dollars and as a percentage of total revenue were primarily driven by the following:

Current wording

Sales, marketing and customer success expense decreased by $6.1 million, or 11.5%, and $9.6 million or 9.0%, during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023. The decreases in dollars and as a percentage of total revenue were primarily driven by the following:

Previous wording

We continue to make investments to delight our customers with innovative and secure cloud solutions. Research and development expenses increased by $2.2 million or 5.4%, during the three months ended March 31, 2024, when compared to the same period in 2023, primarily driven by the following:

Current wording

We continue to make investments to delight our customers with innovative and secure cloud solutions. Research and development expenses increased by $2.9 million, or 8.1%, and $5.1 million or 6.7%, during the three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023, primarily driven by the following:

Previous wording

Not included in research and development expense for the three months ended March 31, 2024 and 2023 were $13.7 million and $14.2 million, respectively, of qualifying costs associated with software and content development activities that are required to be capitalized under GAAP, such as those for our cloud solutions, as well as development costs associated with acquired companies. Qualifying capitalized development costs associated with our cloud solutions are subsequently amortized to costof recurring revenue over the related assets' estimated useful life, which generally range from three to seven years. We expect that the amount of software and content development costs capitalized will be relatively consistent in the near-term as we continue making investments in innovation, quality, security and the integration of our solutions, which we believe will drive long-term revenue growth.

Current wording

Not included in research and development expense for the three months ended June 30, 2024 and 2023 were $14.8 million and $15.4 million, respectively, and for the six months ended June 30, 2024 and 2023 were $28.5 million and $29.6 million, respectively, of qualifying costs associated with software and content development activities that are required to be capitalized under GAAP, such as those for our cloud solutions, as well as development costs associated with acquired companies. Qualifying capitalized development costs associated with our cloud solutions are subsequently amortized to costof recurring revenue over the related assets' estimated useful life, which generally range from three to seven years. We expect that the amount of software and content development costs capitalized will be relatively consistent in the near-term as we continue making investments in innovation, quality, security and the integration of our solutions, which we believe will drive long-term revenue growth.

Previous wording

General and administrative expense decreased by $5.1 million or 9.6%, during the three months ended March 31, 2024, when compared to the same period in 2023. The decreases in dollars and as a percentage of total revenue were primarily driven by the following:

Current wording

General and administrative expense decreased by $25.7 million, or 43.5%, and $30.8 million, or 27.5%, three and six months ended June 30, 2024, respectively, when compared to the same periods in 2023. The decreases in dollars and as a percentage of total revenue were primarily driven by the following:

Previous wording

Interest expense in dollars and as a percentage of total revenue during the three months ended March 31, 2024, was relatively in line with the same period in 2023. We currently expect interest expense for the full year 2024 to be approximately $48 million to $52 million as we had incremental borrowings to fund our ASR Transaction (as defined on page 40). We also expect interest rates to remain higher throughout 2024 than we originally anticipated. Our interest expense in connection with the variable rate portion of our outstanding debt could increase in a rising interest rate environment. See Note 8 to our unaudited, condensed consolidated financial statements in this report for more information regarding our derivative instruments, which we use to manage our variable interest rate risk, and Item 3. Quantitative and Qualitative Disclosures about Market Risk: Interest Rate Risk (below) for more information about our variable interest rate exposure and related risk.

Current wording

The increases in interest expense in dollars and as a percentage of total revenue during the three and six months ended June 30, 2024, when compared to the same periods in 2023, were primarily due to our incremental borrowings to fund our ASR Transaction. We currently expect interest expense for the full year 2024 to be approximately $52 million to $56 million. Our interest expense in connection with the variable rate portion of our outstanding debt could increase in a rising interest rate environment. See Note 8 to our unaudited, condensed consolidated financial statements in this report for more information regarding our derivative instruments, which we use to manage our variable interest rate risk, and Item 3. Quantitative and Qualitative Disclosures about Market Risk: Interest Rate Risk (below) for more information about our variable interest rate exposure and related risk.

Previous wording

Other income increased in dollars and as a percentage of total revenue during the three months ended March 31, 2024 when compared to the same period in 2023, primarily due to an increase in interest income. Interest income increased primarily due to higher interest earned on restricted cash held and payable by us to customers for our payment processing solutions. See Note 6 to our unaudited, condensed consolidated financial statements in this report for more information regarding our other income.

Current wording

The increases in other income in dollars and as a percentage of total revenue during the three and six months ended June 30, 2024, when compared to the same periods in 2023, were primarily due to an increase in interest income. Interest income increased primarily due to higher interest earned on restricted cash held and payable by us to customers for our payment processing solutions. See Note 6 to our unaudited, condensed consolidated financial statements in this report for more information regarding our other income.

Previous wording

The decrease in deferred revenue during the three months ended March 31, 2024 was primarily due toa seasonal decrease 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.

Current wording

The increase in deferred revenue during the six months ended June 30, 2024 was primarily due toa 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.

Previous wording

The change in our effective income tax rate for the three months ended March 31, 2024 when compared to the same period in 2023 was primarily attributable to favorable impacts of benefits attributable to stock-based compensation and research and development tax credits.

Current wording

The change in our effective income tax rate for the three and six months ended June 30, 2024, when compared to the same periods in 2023 were largely driven by prior year pre-tax losses versus current year pre-tax income. Additionally, the 2024 periods were favorably impacted by benefits attributable to stock-based compensation and research and development tax credits whereas stock-based compensation negatively impacted our effective income tax rates for the 2023 periods. Lastly, the 2023 periods were negatively impacted by non-deductible accruals related to security incident, which have impacted the 2024 periods to a much lesser degree.

Previous wording

(2)Includes Security Incident-related costs incurred during the three months ended March 31, 2024 of $10.3 million which includes approximately $7.0 million in recorded liabilities for loss contingencies and during the three months ended March 31, 2023 of $17.8 million which included approximately $10.2 million in recorded liabilities for loss contingencies. Recorded expenses consisted primarily of payments to third-party service providers and consultants, including legal fees, as well as settlements of customer claims, negotiated settlements and accruals for certain loss contingencies. Not included in this adjustment were costs associated with enhancements to our cybersecurity program. For full year 2024, we currently expect pre-tax expenses of approximately $5 million to $10 million and cash outlays of approximately $8 million to $13 million for ongoing legal fees related to the Security Incident. Not included in these ranges are our previous settlements or current accruals for loss contingencies related to the matters discussed below. In line with our policy, legal fees are expensed as incurred. As of March 31, 2024, we have recorded approximately $8.5 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain customers and 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 class actions and governmental investigations, for which we have not recorded a liability for a loss contingency as of March 31, 2024 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 judgment, 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.

Current wording

(2)Includes Security Incident-related costs incurred during the three and six months ended June 30, 2024 of $1.8 million and $12.1 million, respectively, which includes approximately $0.0 million and $7.0 million, respectively, in recorded liabilities for loss contingencies and during the three and six months ended June 30, 2023 of $26.8 million and $44.6 million, respectively, which included approximately $19.8 million and $30.0 million, respectively, in recorded aggregate liabilities for loss contingencies. Recorded expenses consisted primarily of payments to third-party service providers and consultants, including legal fees, as well as settlements of customer claims, negotiated settlements and accruals for certain loss contingencies. Not included in this adjustment were costs associated with enhancements to our cybersecurity program. For full year 2024, we currently expect pre-tax expenses of approximately $5 million to $10 million and cash outlays of approximately $8 million to $13 million for ongoing legal fees related to the Security Incident. Not included in these ranges are our previous settlements or current accruals for loss contingencies related to the matters discussed below. In line with our policy, legal fees are expensed as incurred. As of June 30, 2024, we have recorded approximately $8.5 million in aggregate liabilities for loss contingencies, which included $6.8 million for our settlement with the Attorney General of the State of California on June 13, 2024 that we paid in the third quarter of 2024, and other accruals based primarily on recent negotiations with certain customers 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 class actions and governmental investigations, for which we have not recorded a liability for a loss contingency as of June 30, 2024 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 judgment, 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.

Previous wording

(3)Beginning in 2024, we now apply a non-GAAP effective tax rate of 24.5% when calculating non-GAAP net income and non-GAAP diluted earnings per share. For the three months ended March 31, 2023, the tax impact related to non-GAAP adjustments is calculated under our historical non-GAAP effective tax rate of 20.0%.

Current wording

(3)Beginning in 2024, we now apply a non-GAAP effective tax rate of 24.5% when calculating non-GAAP net income and non-GAAP diluted earnings per share. For the three and six months ended June 30, 2023, the tax impact related to non-GAAP adjustments is calculated under our historical non-GAAP effective tax rate of 20.0%.

Previous wording

(1)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.

Current wording

(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.

Previous wording

(2)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.

Current wording

(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.

Previous wording

(3)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.

Current wording

(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.

Previous wording

These patterns may change as a result of the continued shift to online giving, growth in volume of transactions for which we process payments, large dollar customer bookings and contract renewals, fluctuations in the timing of vendor payments, or as a result of acquisitions, new market opportunities, new solution introductions or other factors. For example, we currently do not expect that our operating cash flow in the second quarter of 2024 will be higher than that of our first quarter primarily due to fluctuations in the timing of vendor and tax payments.

Current wording

These patterns may change as a result of the continued shift to online giving, growth in volume of transactions for which we process payments, large dollar customer bookings and contract renewals, fluctuations in the timing of vendor payments, or as a result of acquisitions, new market opportunities, new solution introductions or other factors.

Previous wording

Our principal sources of liquidity are our operating cash flow, funds available under the 2024 Credit Facility and cash on hand. Our operating cash flow depends on continued customer renewal of our subscription and maintenance arrangements, market acceptance of our solutions and services, the volume and size of transactions for which we process payments and our customers' ability to pay. Based on current estimates of revenue and expenses, we believe that the currently available sources of funds and anticipated cash flows from operations will be adequate for at least the next twelve months to finance our operations, fund anticipated capital expenditures and meet our debt obligations. We also believe that we will be able to continue to meet our long-term cash requirements due to our anticipated cash flow from operations, solid financial position and ability to access capital from financial markets. To the extent we undertake future material acquisitions or investments or unanticipated capital or operating expenditures, including in connection with the Security Incident, we may require additional capital. In that context, we regularly evaluate opportunities to enhance our capital structure, including through potential debt or equity issuances.

Current wording

Our principal sources of liquidity are our operating cash flow, funds available under the 2024 Credit Facilities and cash on hand. Our operating cash flow depends on continued customer renewal of our subscription and maintenance arrangements, market acceptance of our solutions and services, the volume and size of transactions for which we process payments and our customers' ability to pay. Based on current estimates of revenue and expenses, we believe that the currently available sources of funds and anticipated cash flows from operations will be adequate for at least the next twelve months to finance our operations, fund anticipated capital expenditures and meet our debt obligations. We also believe that we will be able to continue to meet our long-term cash requirements due to our anticipated cash flow from operations, solid financial position and ability to access capital from financial markets. To the extent we undertake future material acquisitions or investments or unanticipated capital or operating expenditures, including in connection with the Security Incident, we may require additional capital. In that context, we regularly evaluate opportunities to enhance our capital structure, including through potential debt or equity issuances.

Previous wording

At March 31, 2024, our total cash and cash equivalents balance included approximately $14.3 million of cash that was held by operations outside the U.S. While these funds may not be needed to fund our U.S. operations for at least the next twelve months, if we need these funds, we may be required to accrue and pay taxes to repatriate the funds. We currently do not intend nor anticipate a need to repatriate our cash held outside the U.S.

Current wording

At June 30, 2024, our total cash and cash equivalents balance included approximately $16.5 million of cash that was held by operations outside the U.S. While these funds may not be needed to fund our U.S. operations for at least the next twelve months, if we need these funds, we may be required to accrue and pay taxes to repatriate the funds. We currently do not intend nor anticipate a need to repatriate our cash held outside the U.S.

Previous wording

Net cash provided by operating activities increased by $42.8 million during the three months ended March 31, 2024, when compared to the same period in 2023, primarily due to a $5.3 million increase in net income adjusted for non-cash expenses and a $37.5 million increase in cash flow from operations associated with working capital.

Current wording

Net cash provided by operating activities increased by $43.4 million during the six months ended June 30, 2024, when compared to the same period in 2023, primarily due to a $57.8 million increase in net income adjusted for non-cash expenses and a $14.3 million decrease in cash flow from operations associated with working capital.

Previous wording

The increase in cash flow from operations associated with working capital during the three months ended March 31, 2024, when compared to the same period in 2023, was primarily due to:

Current wording

The decrease in cash flow from operations associated with working capital during the six months ended June 30, 2024, when compared to the same period in 2023, was primarily due to:

Previous wording

•fluctuations in the timing of vendor payments; and

Current wording

•fluctuations in the timing of vendor payments.

Previous wording

As of March 31, 2024, we have recorded approximately $8.5 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain customers and governmental agencies related to the Security Incident that we believed we could reasonably estimate in accordance with our loss contingency procedures described above and as more fully described in Note 9. It is reasonably possible that our estimated 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.

Current wording

As of June 30, 2024, we have recorded approximately $8.5 million in aggregate liabilities for loss contingencies, which included $6.8 million for our settlement with the Attorney General of the State of California on June 13, 2024 that we paid in the third quarter of 2024, and other accruals based primarily on recent negotiations with certain customers related to the Security Incident that we believed we could reasonably estimate in accordance with our loss contingency procedures described above and as more fully described in Note 9. It is reasonably possible that our estimated 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.

Previous wording

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 March 31, 2024 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 judgment, settlement, fine, penalty or other resolution, the amount, scope and timing of

Current wording

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 June 30, 2024 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 judgment, 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.

Previous wording

Net cash used in investing activities of $14.5 million decreased by $0.8 million during the three months ended March 31, 2024, when compared to the same period in 2023.

Current wording

Net cash used in investing activities of $40.7 million increased by $9.2 million during the six months ended June 30, 2024, when compared to the same period in 2023.

Previous wording

During the three months ended March 31, 2024, we used $13.1 million for software and content development costs, which was down $0.9 million from cash spent during the same period in 2023. We also spent $0.3 million of cash for purchases of property and equipment during the three months ended March 31, 2024, which was a decrease of $1.1 million when compared to the same period in 2023. In addition, we used net cash of $1.2 million in the disposition of a business during the three months ended March 31, 2024.

Current wording

During the six months ended June 30, 2024, we used $28.4 million for software and content development costs, which was down $0.4 million from cash spent during the same period in 2023. We also spent $6.1 million of cash for purchases of property and equipment during the six months ended June 30, 2024, which was an increase of $3.3 million when compared to the same period in 2023. In addition, we used net cash of $1.2 million in the disposition of a business and $5.0 million for a minor investment in a business during the six months ended June 30, 2024.

Previous wording

During the three months ended March 31, 2024, we had a net increase in borrowings of $260.5 million, primarily due to our ASR Transaction (as defined below) in March 2024.

Current wording

During the six months ended June 30, 2024, we had a net increase in borrowings of $244.9 million, primarily due to our ASR Transaction (as defined below) in March 2024. We also paid $6.5 million in debt issuance costs in conjunction with our April 2024 refinancing.

Previous wording

We paid $52.7 million to satisfy tax obligations of employees upon settlement of equity awards during the three months ended March 31, 2024 compared to $31.4 million during the same period in 2023. The amount of taxes paid by us on behalf of employees related to the settlement of equity awards varies from period to period based upon the timing of grants and vesting, as well as the market price for shares of our common stock at the time of settlement. Most of our equity awards currently vest in our first quarter.

Current wording

We paid $54.5 million to satisfy tax obligations of employees upon settlement of equity awards during the six months ended June 30, 2024 compared to $33.7 million during the same period in 2023. The amount of taxes paid by us on behalf of employees related to the settlement of equity awards varies from period to period based upon the timing of grants and vesting, as well as the market price for shares of our common stock at the time of settlement. Most of our equity awards currently vest in our first quarter.