BLACKBAUD INC

Previous wording

Our revenue is primarily generated from the following sources: (i) charging for the use of our software solutions in cloud and hosted environments; (ii) providing payment and transaction services; and (iii) providing Impact-as-a-Service™ digital educational content.

Current wording

Our revenue is primarily generated from the following sources: (i) charging for the use of our software solutions in cloud and hosted environments; and (ii) providing payment and transaction services.

Previous wording

During the nine months of 2024, we generated $222.4 million of operating cash flow, an increase of approximately 9.6% compared to the first three quarters of 2023. Our robust cash flow generation gives us confidence to continue investment in a number of critical areas like product innovation and stock repurchases. In March 2024, we announced that we intend to repurchase during 2024 between 7% and 10% of our outstanding common stock as of December 31, 2023 under our stock repurchase program. During the nine months ended September 30, 2024, we repurchased 3,761,985 shares for $325.4 million, representing approximately 7.0% of the Company's common stock outstanding as of December 31, 2023. These share repurchases do not include the final settlement of the ASR Transaction, as discussed above. The remaining amount available to purchase stock under our stock repurchase program was $737.2 million as of September 30, 2024.

Current wording

In February 2025, we announced that we intend to repurchase during 2025 between 3% and 5% of our outstanding common stock as of December 31, 2024 under our stock repurchase program. During the three months ended March 31, 2025, we repurchased 1,513,022 shares for $100.0 million. Including net share settlement of employee stock compensation, this represents approximately 4.2% of the Company's common stock outstanding as of December 31, 2024. The remaining amount available to purchase stock under our stock repurchase program was $544.5 million as of March 31, 2025.

Previous wording

Total revenue increased by $9.1 million and $42.8 million, respectively, during the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, driven largely by the following:

Current wording

Revenue decreased by $8.6 million during the three months ended March 31, 2025, when compared to the same period in 2024, driven largely by the following:

Previous wording

Income from operations increased by $21.8 million and $84.2 million, respectively, during the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, driven largely by the following:

Current wording

Income from operations increased by $9.7 million during the three months ended March 31, 2025, when compared to the same period in 2024, 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 financial results through the third quarter of 2024 reflect 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.

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 September 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. Excluding EVERFI, our gross dollar retention during the twelve months ended September 30, 2024 was approximately 92%. 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 March 31, 2025, our gross dollar retention was approximately 92%. This gross dollar retention rate increased over our rate for the twelve months ended December 31, 2024 primarily due to our sale of EVERFI. We are continually investing in innovation, which we believe will generate strong gross dollar retention over the long-term.

Previous wording

At September 30, 2024, our cash and cash equivalents were $34.6 million. Under the 2024 Credit Facilities, the carrying amount of our debt was $943.0 million and our net leverage ratiowas 2.42 to 1.00.

Current wording

At March 31, 2025, our cash and cash equivalents were $37.2 million. Under the 2024 Credit Facilities, the carrying amount of our debt was $1.1 billion and our net leverage ratiowas 2.91 to 1.00.

Previous wording

During the nine months ended September 30, 2024, we generated $222.4 million in cash from operations, had a net increase in borrowings of $223.2 million, returned $325.4 million to stockholders by way of share repurchases and had aggregate cash outlays of $50.1 million for purchases of property and equipment and capitalized software and content development costs.

Current wording

During the three months ended March 31, 2025, we generated $1.4 million in cash from operations, had a net increase in borrowings of $130.7 million, returned $100.0 million to stockholders by way of share repurchases and had aggregate cash outlays of $13.7 million for purchases of property and equipment and capitalized software 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 43). 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. In line with our policy, legal fees are expensed as incurred. 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 8 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 34). For the three months ended March 31, 2025, we incurred net pre-tax expenses of $2.2 million related to the Security Incident, which included $1.1 million for ongoing legal fees and additional accruals for loss contingencies of $1.1 million. During the three months ended March 31, 2025, we had cash outlays which were insignificant related to the Security Incident for ongoing legal fees and the settlement of putative consumer class actions cases in Canada. In line with our policy, legal fees are expensed as incurred.

Previous wording

As of September 30, 2024, we have recorded approximately $0.7 million in aggregate liabilities for loss contingencies 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.

Current wording

As of March 31, 2025, we have recorded approximately $1.6 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain plaintiffs and 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 8. It is reasonably possible that our estimated actual losses may change in the near term for those matters, but we believe that they are not reasonably likely, either separately or in the aggregate, to have a material adverse impact on our results of operations, cash flows or financial condition.

Previous wording

Comparison of the three and nine months ended September 30, 2024 and 2023

Current wording

Comparison of the three months ended March 31, 2025 and 2024

Previous wording

Contractual recurring revenue is primarily comprised of fees for the use of our subscription-based software solutions, which includes providing access to cloud solutions, Impact-as-a-Service™ digital educational content, online training programs and subscription-based analytic services. Contractual recurring revenue also includes fees from maintenance services for our on-premises solutions.

Current wording

•Contractual recurring revenue is primarily comprised of fees for the use of our subscription-based software solutions, which includes providing access to cloud solutions, online training programs and subscription-based analytic services. Contractual recurring revenue also includes fees from maintenance services for our on-premises solutions.

Previous wording

Cost of recurring revenue is primarily comprised of compensation costs for customer support and production IT personnel, hosting and data center costs, third-party contractor expenses, third-party royalty and data expenses, allocated depreciation, facilities and IT support costs, amortization of intangible assets from business combinations, amortization of software development costs, transaction-based costs related to payments services including remittances of amounts due to third-parties and other costs incurred in providing support and recurring services to our customers.

Current wording

Cost of revenue is primarily comprised of compensation costs for customer support, production IT, professional services and onsite training personnel, hosting and data center costs, third-party contractor expenses, third-party royalty and data expenses, allocated depreciation, facilities and IT support costs, amortization of intangible assets from business combinations, amortization of software development costs, transaction-based costs related to payments services including remittances of amounts due to third-parties, data expense incurred to perform one-time analytic services and other costs incurred in providing support, recurring services and onsite customer training to our customers.

Previous wording

Recurring gross margin decreased by 140 basis points for the three months ended September 30, 2024, when compared to the same period in 2023, primarily due to the increases in cost of recurring revenue outpacing the increases in recurring revenue.

Current wording

Gross margin increased by 280 basis points for the three months ended March 31, 2025, when compared to the same period in 2024, primarily due to the decreases in cost of revenue outpacing the decreases in revenue.

Previous wording

We see a large market opportunity in the long-term and will continue to make investments to drive sales effectiveness. We have also implemented software tools to enhance our digital footprint and drive lead generation. The enhancements we are making in our go-to-market approach are expected to reduce our average customer acquisition cost per customer as well as the related payback period while increasing sales velocity.

Current wording

We see a large market opportunity in the long-term and will continue to make investments to drive sales effectiveness. We have also implemented software tools to enhance our digital footprint and drive lead generation. The enhancements we are

Previous wording

Sales, marketing and customer success expense decreased by $3.0 million, or 5.7%, and $12.6 million or 7.9%, during the three and nine months ended September 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:

Current wording

Sales, marketing and customer success expense decreased by $6.2 million or 12.2%, during the three months ended March 31, 2025, when compared to the same period in 2024. The decreases in dollars and as a percentage of 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 $1.4 million, or 3.7%, and $6.5 million or 5.7%, during the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023, primarily driven by the following:

Current wording

We continue to make investments to delight our customers with innovative and secure cloud solutions. We also continue to invest heavily in the security of our solutions. Research and development expenses decreased by $9.2 million or 21.6%, during the three months ended March 31, 2025, when compared to the same period in 2024. The decreases in dollars and as a percentage of revenue were primarily driven by the following:

Previous wording

Not included in research and development expense for the three months ended September 30, 2024 and 2023 were $16.0 million and $15.7 million, respectively, and for the nine months ended September 30, 2024 and 2023 were $44.5 million and $45.4 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 March 31, 2025 and 2024 were $12.4 million and $13.7 million, respectively, of qualifying costs associated with software development activities that are required to be capitalized under GAAP, such as those for our cloud solutions. Qualifying capitalized development costs associated with our cloud solutions are subsequently amortized to costof revenue over the related assets' estimated useful life, which generally range from three to seven years. We expect that the amount of software 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

The increases in interest expense in dollars and as a percentage of total revenue during the three and nine months ended September 30, 2024, when compared to the same periods in 2023, were primarily due to our incremental borrowings to fund our ASR Transaction and other stock repurchases. We currently expect interest expense for the full year 2024 to be approximately $53 million to $57 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.

Current wording

The increase in interest expense in dollars and as a percentage of total revenue during the three months ended March 31, 2025, when compared to the same period in 2024, was primarily due to our incremental borrowings to fund stock repurchases during 2024 and 2025 and the expiration of favorable interest rate swaps in October 2024. We currently expect interest expense for the full year 2025 to be approximately $65 million to $69 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 7 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

The decreases in other income in dollars and as a percentage of total revenue during the three and nine months ended September 30, 2024, when compared to the same periods in 2023, were primarily due to current year losses in currency revaluation compared to prior year gains. For the nine months ended September 30, 2024, the decrease was partially offset by 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 decrease in other income in dollars and as a percentage of total revenue during the three months ended March 31, 2025, when compared to the same period in 2024, was primarily due to current year losses in currency revaluation compared to prior year gains. See Note 5 to our unaudited, condensed consolidated financial statements in this report for more information regarding our other income.

Previous wording

To the extent that our customers are billed for our solutions and services in advance of delivery, we record such amounts in deferred revenue. Our recurring revenue contracts are generally for a term of three years at contract inception, billed annually in advance, and non-cancelable. We generally invoice our customers with recurring revenue contracts in annual cycles 30 days prior to the end of each one-year period.

Current wording

To the extent that our customers are billed for our solutions and services in advance of delivery, we record such amounts in deferred revenue. Our recurring revenue contracts are generally for a term of three years at contract inception with three-year renewals thereafter, billed annually in advance and non-cancelable. We generally invoice our customers with recurring revenue contracts in annual cycles 30 days prior to the end of each one-year period.

Previous wording

The increase in deferred revenue during the nine months ended September 30, 2024 was primarily due tothe impact of our contract pricing initiatives within the Social Sector, as well as a seasonal increase in customer contract billings and 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 decrease in deferred revenue during the three months ended March 31, 2025 was primarily due toa seasonal decrease in customer contract billings. Historically, due to the timing of customer budget cycles, we have an increase in billings and 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

(2)Includes Security Incident-related costs incurred during the three months ended September 30, 2024 which were insignificant, during the nine months ended September 30, 2024 of $12.8 million, which included approximately $6.8 million in recorded liabilities for loss contingencies, and during the three and nine months ended September 30, 2023 of $4.1 million and $48.6 million, respectively, which included approximately $0.0 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 September 30, 2024, we have recorded approximately $0.7 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain customers related to the Security Incident that we believe we can reasonably estimate. During the third quarter of 2024, we paid $6.8 million in connection with our settlement with the Attorney General of the State of California (as previously disclosed on June 14, 2024). 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 September 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.

Current wording

(3)Includes Security Incident-related costs incurred during the three months ended March 31, 2025 of $2.2 million, which included approximately $1.1 million in additional accruals of loss contingencies, and during the three months ended March 31, 2024 of $10.3 million which included approximately $7.0 million 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. As of March 31, 2025, we have recorded approximately $1.6 million in aggregate liabilities for loss contingencies based primarily on recent negotiations with certain plaintiffs and 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, but we believe that they are not reasonably likely, either separately or in the aggregate, to have a material adverse impact on our results of operations, cash flows or financial condition. There may be other Security Incident-related matters, which 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.

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 and nine months ended September 30, 2023, the tax impact related to non-GAAP adjustments is calculated under our historical non-GAAP effective tax rate of 20.0%.

Current wording

(4)We apply a non-GAAP effective tax rate of 24.5% when calculating non-GAAP net income and non-GAAP diluted earnings per share.

Previous wording

In addition, we use 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 our operating performance. We believe that these non-GAAP measures are useful to investors, as a supplement to GAAP measures, for evaluating the periodic growth of our business on a consistent basis. Each of these measures of non-GAAP organic revenue growth excludes incremental acquisition-related revenue attributable to companies, if any, acquired in the current fiscal year. For companies, if any, acquired in the immediately preceding fiscal year, each of these non-GAAP organic revenue growth 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 non-GAAP organic revenue growth 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. We believe this presentation provides a more comparable representation of our current business’ organic revenue growth and revenue run-rate.

Current wording

GAAP organic revenue growth excludes incremental acquisition-related revenue attributable to companies, if any, acquired in the current fiscal year. For companies, if any, acquired in the immediately preceding fiscal year, each of these non-GAAP organic revenue growth 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 non-GAAP organic revenue growth 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. We believe this presentation provides a more comparable representation of our current business’ organic revenue growth and revenue run-rate.

Previous 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.

Current 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.

Previous 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.

Current 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.

Previous 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.

Current 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.

Previous wording

We define Rule of 40 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; Security Incident-related costs; and impairment of capitalized software development costs.

Current wording

We define Rule of 40 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 development costs; stock-based compensation; employee severance; acquisition and disposition-related costs; restructuring and other real estate activities; Security Incident-related costs; and impairment of capitalized software development costs.

Previous wording

(1)Includes amortization expense related to software and content development costs and amortization expense from capitalized cloud computing implementation costs.

Current wording

(1)Includes amortization expense related to software development costs and amortization expense from capitalized cloud computing implementation costs.

Previous wording

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.

Current wording

Non-GAAP free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software development, and capital expenditures for property and equipment.

Previous wording

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 related to the Security Incident.

Current wording

Non-GAAP adjusted free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software development and capital expenditures for property and equipment, plus cash outflows related to the Security Incident.

Previous wording

Our cash flow from operations normally fluctuates quarterly due to the combination of the timing of customer contract renewals, delivery of professional services and occurrence of customer events, as well as merit-based salary increases, among other factors. Historically, due to lower revenues in our first quarter, combined with the payment of certain annual vendor contracts, our cash flow from operations has been lowest in our first quarter. Due to the timing of customer contract renewals and student enrollments, many of which take place at or near the beginning of our third quarter, our cash flow from operations has generally been lower in our second quarter as compared to our third and fourth quarters. Partially offsetting these favorable drivers of cash flow from operations in our third and fourth quarters are base salary merit increases, which occur in July. In addition, deferred revenues can vary on a seasonal basis due to the timing of customer contract renewals and student enrollments or significant acquisitions. Our cash flow from financing is negatively impacted in our first quarter when

Current wording

Our cash flow from operations normally fluctuates quarterly due to the combination of the timing of customer contract billings and renewals, delivery of professional services and occurrence of customer events, as well as merit-based salary increases, among other factors. Historically, due to lower revenues in our first quarter, combined with the payment of certain annual vendor contracts, our cash flow from operations has been lowest in our first quarter. Due to the timing of customer contract renewals and student enrollments, many of which take place at or near the beginning of our third quarter, our cash flow from operations has generally been lower in our second quarter as compared to our third and fourth quarters. Partially offsetting these favorable drivers of cash flow from operations in our third and fourth quarters are base salary merit increases, which occur in July. In addition, deferred revenues can vary on a seasonal basis due to the timing of customer contract billings and renewals and student enrollments or significant acquisitions. Our cash flow from financing is negatively

Previous wording

most of our equity awards vest, as we pay taxes on behalf of our employees related to the settlement or exercise of equity awards.

Current wording

impacted in our first quarter when most of our equity awards vest, as we pay taxes on behalf of our employees related to the settlement or exercise of equity awards.

Previous wording

As a well-known seasoned issuer, we filed an automatic shelf registration statement for an undetermined amount of debt and equity securities with the SEC on January 14, 2022. Under this universal shelf registration statement we may offer and sell, from time to time, debt securities, common stock, preferred stock, depositary shares, warrants, stock purchase contracts and stock purchase units. Subject to certain conditions and pursuant to applicable SEC regulations, this registration statement is effective for three years from its date of filing with the SEC, or through January 13, 2025. In order to maintain uninterrupted access to the capital markets, we intend to file a replacement universal shelf registration statement with the SEC before the existing shelf registration statement expires. In that event, the existing shelf registration statement would terminate upon the filing of the replacement shelf registration statement, which would, subject to certain conditions, expire three years from such date of filing.

Current wording

As a well-known seasoned issuer, we filed an automatic shelf registration statement for an undetermined amount of debt and equity securities with the SEC on January 10, 2025. Under this universal shelf registration statement we may offer and sell, from time to time, debt securities, common stock, preferred stock, depositary shares, warrants, stock purchase contracts and stock purchase units. Subject to certain conditions and pursuant to applicable SEC regulations, this registration statement is effective for three years from its date of filing with the SEC, or through January 9, 2028.

Previous wording

At September 30, 2024, our total cash and cash equivalents balance included approximately $15.1 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 March 31, 2025, our total cash and cash equivalents balance included approximately $17.8 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 $19.4 million during the nine months ended September 30, 2024, when compared to the same period in 2023, primarily due to a $47.5 million increase in net income adjusted for non-cash expenses, partially offset by a $28.1 million decrease in cash flow from operations associated with working capital.

Current wording

Net cash provided by operating activities decreased by $63.2 million during the three months ended March 31, 2025, when compared to the same period in 2024, primarily due to a $14.3 million decrease in net income adjusted for non-cash expenses and a $48.9 million decrease in cash flow from operations associated with working capital.

Previous wording

The decrease in cash flow from operations associated with working capital during the nine months ended September 30, 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 three months ended March 31, 2025, when compared to the same period in 2024, was primarily due to:

Previous wording

•a decrease in accrued expenses related to the Security Incident;

Current wording

•a decrease in accrued expenses during the first quarter of 2025 related to disposition-related costs compared to an increase in accrued expenses during the first quarter of 2024 related to the Security Incident.

Previous wording

Net cash used in investing activities of $56.3 million increased by $7.2 million during the nine months ended September 30, 2024, when compared to the same period in 2023.

Current wording

Net cash used in investing activities of $25.9 million increased by $11.4 million during the three months ended March 31, 2025, when compared to the same period in 2024.