BLACKBAUD INC

Previous wording

We delivered another quarter of solid execution against our operating plan, with continued focus on operational efficiency and product innovation. AI initiatives remain an important area of emphasis—both in the capabilities we are delivering to customers and in the way we operate the business. During the first half of 2026, we expanded the availability of AI-enabled capabilities across our product portfolio and launched our first agentic AI solution, the Blackbaud fundraising development agent, into general availability. This solution is designed to assist fundraising teams by automating certain outreach and stewardship activities within existing workflows, using customer-permissioned data and operating under defined governance and user controls.

Current wording

We delivered another quarter of solid execution against our operating plan, with continued focus on operational efficiency and product innovation. AI initiatives remain an important area of emphasis, both in the capabilities we are delivering to customers and in the way we operate the business.

Previous wording

We also continued to apply AI internally to improve efficiency across engineering, sales and marketing, customer success and the back office. During the quarter, our engineering teams increased their use of approved generative AI development tools to accelerate software development and issue remediation, contributing to productivity improvements and faster delivery of enhancements. We are also applying AI to support lead qualification, sales development, customer support and other operational processes.

Current wording

We also continued to apply AI internally to improve efficiency across engineering, sales and marketing, customer success and the back office. Our engineering teams continue to use approved generative AI tools to accelerate software development, reduce time to remediate software issues and increase throughput on new product delivery.

Previous wording

In February 2026, we announced our intention to repurchase between 5% and 10% of our outstanding common stock as of December 31, 2025 during the course of 2026 under our stock repurchase program. During the three months ended June 30, 2026, we repurchased an aggregate of 797,795 shares for $28.0 million. During the six months ended June 30, 2026, we repurchased an aggregate of 2,398,852 shares for $110.1 million. Including net share settlement of employee stock compensation, these repurchases represent approximately 6.2% of our outstanding common stock as of December 31, 2025. As of June 30, 2026, $850.4 million remained available under our stock repurchase program. Over the long term, we expect stock repurchases to remain an important component of our capital allocation strategy, subject to market conditions, business performance, leverage considerations, and other factors. We anticipate utilizing at least 50% of our free cash flow from 2026 to 2030 for stock repurchases. See discussion of our Non‑GAAP Financial Measures below.

Current wording

In February 2026, we announced our intention to repurchase between 5% and 10% of our outstanding common stock as of December 31, 2025 during the course of 2026 under our stock repurchase program. During the three months ended September 30, 2026, we repurchased an aggregate of 448,000 shares for $18.3 million. During the nine months ended September 30, 2026, we repurchased an aggregate of 2,846,852 shares for $128.4 million. Including net share settlement of employee stock compensation, these repurchases represent approximately 7.2% of our outstanding common stock as of December 31, 2025. As of September 30, 2026, $832.1 million remained available under our stock repurchase program. Over the long term, we expect stock repurchases to remain an important component of our capital allocation strategy, subject to market conditions, business performance, leverage considerations, and other factors. We anticipate utilizing at least 50% of our free cash flow from 2026 to 2030 for stock repurchases. See discussion of our Non‑GAAP Financial Measures below.

Previous wording

Revenue increased by $8.6 million and $19.8 million, during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025, driven largely by the following:

Current wording

Revenue increased by $11.5 million and $31.3 million, during the three and nine months ended September 30, 2026, respectively, when compared to the same periods in 2025, driven largely by the following:

Previous wording

Income from operations increased by $4.7 million and $36.4 million, during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025, driven largely by the following:

Current wording

Income from operations increased by $5.4 million and $41.8 million, during the three and nine months ended September 30, 2026, respectively, when compared to the same periods in 2025, driven largely by the following:

Previous wording

Our recurring subscription contracts are typically for a term of three years at contract inception with standard three-year renewals thereafter. In recent periods, we have experienced an increase in longer‑term customer contracts. We now have approximately 90% of our contractual recurring revenue on 3-year or longer contracts and approximately 25% on 4-year or longer contracts. A key factor to our overall success is the renewal and expansion of our existing subscription agreements with our customers.

Current wording

Our recurring subscription contracts are typically for a term of three years at contract inception with standard three-year renewals thereafter. In recent periods, we have experienced an increase in longer‑term customer contracts. We now have approximately 90% of our contractual recurring revenue on 3-year or longer contracts and approximately 25% of our contractual recurring revenue on 4-year or longer contracts. A key factor to our overall success is the renewal and expansion of our existing subscription agreements with our customers.

Previous wording

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, 2026, our gross dollar retention was approximately 91%. This gross dollar retention rate was lower than our rate for the twelve months ended December 31, 2025.

Current wording

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, 2026, our gross dollar retention was approximately 90%. This gross dollar retention rate was lower than our rate for the twelve months ended December 31, 2025 primarily due to the larger 2026 renewal cohort as discussed below.

Previous wording

Renewal performance can vary from year to year due to the size and composition of renewal cohorts. As previously disclosed, 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, reflecting the normal progression of our multi-year contract renewal cycle and the timing of customer renewals. As a result, we expect some temporary pressure on our gross dollar retention as a greater amount of recurring revenue contracts come up for renewal during 2026. We currently expect our gross dollar retention to improve as we move past this larger 2026 renewal cohort and ultimately return to levels more consistent with our recent historical performance by the end of 2027. Finally, we are continually investing in innovation, which we believe will support gross dollar retention over the long-term.

Current wording

Renewal performance can vary from year to year due to the size and composition of renewal cohorts. As previously disclosed, 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, reflecting the normal progression of our multi-year contract renewal cycle and the timing of customer renewals. As a result, we expect some temporary pressure on our gross dollar retention as a greater amount of recurring revenue contracts come up for renewal during 2026. As we move beyond this larger renewal cohort, we expect the contractual recurring revenue up for renewal in 2027 to be nearly 25% lower than in 2026. We currently expect our gross dollar retention to improve as we move past the larger 2026 renewal cohort and ultimately return to levels more consistent with our recent historical performance by the end of 2027. Finally, we are continually investing in innovation, which we believe will support gross dollar retention over the long term.

Previous wording

At June 30, 2026, our cash and cash equivalents were $34.4 million. Under the 2024 Credit Facilities, the carrying amount of our debt was $1.1 billion and our net leverage ratiowas 2.58 to 1.00.

Current wording

At September 30, 2026, our cash and cash equivalents were $35.7 million. Under the 2024 Credit Facilities, the carrying amount of our debt was $1.0 billion and our net leverage ratiowas 2.29 to 1.00.

Previous wording

During the six months ended June 30, 2026, we generated $142.5 million in cash from operations, had a net increase in borrowings of $28.6 million, returned $110.1 million to stockholders by way of share repurchases, and had aggregate cash outlays of $30.2 million for purchases of property and equipment and capitalized software development costs.

Current wording

During the nine months ended September 30, 2026, we generated $284.2 million in cash from operations, had a net decrease in borrowings of $77.1 million, returned $128.4 million to stockholders by way of share repurchases, and had aggregate cash outlays of $46.0 million for purchases of property and equipment and capitalized software development costs.

Previous wording

Comparison of the three and six months ended June 30, 2026 and 2025

Current wording

Comparison of the three and nine months ended September 30, 2026 and 2025

Previous wording

Revenue increased by $8.6 million, or 3.0%, and $19.8 million, or 3.6%, during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025. For a discussion of our changes in revenue, see "Revenue" above starting on page 22 in this report.

Current wording

Revenue increased by $11.5 million, or 4.1%, and $31.3 million, or 3.8%, during the three and nine months ended September 30, 2026, respectively, when compared to the same periods in 2025. For a discussion of our changes in revenue, see "Revenue" above starting on page 22 in this report.

Previous wording

Cost of revenue decreased by $1.2 million, or 1.1%, and $1.4 million, or 0.6%, during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025, driven primarily by the following:

Current wording

Cost of revenue increased by $1.2 million, or 1.1% during the three months ended September 30, 2026, when compared to the same period in 2025, driven primarily by the following:

Previous wording

Gross margin increased by 160 basis points and 170 basis points for the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025, due to the increase in revenue combined with the decrease in cost of revenue.

Current wording

Gross margin increased by 150 basis points for the nine months ended September 30, 2026, when compared to the same period in 2025, due to the increase in revenue combined with the decrease in cost of revenue.

Previous wording

Sales, marketing and customer success expense increased by $2.2 million, or 5.0%, and $4.9 million, or 5.5%, during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025. The increases in dollars and as a percentage of revenue were primarily driven by the following:

Current wording

Sales, marketing and customer success expense increased by $2.1 million, or 4.8%, and $7.0 million, or 5.3%, during the three and nine months ended September 30, 2026, respectively, when compared to the same periods in 2025. The increases in dollars and as a percentage of revenue were primarily driven by the following:

Previous wording

We continue to make investments intended to delight our customers with innovative and secure cloud solutions, including AI technology. Research and development expenses increased by $1.3 million, or 3.8%, and $4.6 million, or 6.9%, during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025. The increases in dollars and as a percentage of revenue were primarily driven by the following:

Current wording

We continue to make investments intended to delight our customers with innovative and secure cloud solutions, including AI technology. Research and development expenses decreased by $1.0 million, or 2.7% during the three months ended September 30, 2026, respectively, when compared to the same period in 2025. 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 June 30, 2026 and 2025 were $13.0 million and $14.4 million, respectively, and for the six months ended June 30, 2026 and 2025 were $25.2 million and $26.8 million, respectively, of qualifying costs associated with software development activities that were capitalized, 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 two 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.

Current wording

Not included in research and development expense for the three months ended September 30, 2026 and 2025 were $11.8 million and $12.1 million, respectively, and for the nine months ended September 30, 2026 and 2025 were $37.0 million and $38.9 million, respectively, of qualifying costs associated with software development activities that were capitalized, 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 two 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

General and administrative expense increased by $1.6 million, or 4.8%, during the three months ended June 30, 2026, when compared to the same period in 2025. The increases in dollars and as a percentage of revenue were primarily driven by the following:

Current wording

General and administrative expense increased by $3.8 million, or 12.2%, during the three months ended September 30, 2026, when compared to the same period in 2025. The increases in dollars and as a percentage of revenue were primarily driven by the following:

Previous wording

General and administrative expense decreased by $24.8 million, or 27.7%, during the six months ended June 30, 2026, when compared to the same period in 2025. The decreases in dollars and as a percentage of revenue were primarily driven by the following:

Current wording

General and administrative expense decreased by $21.0 million, or 17.4%, during the nine months ended September 30, 2026, when compared to the same period in 2025. The decreases in dollars and as a percentage of revenue were primarily driven by the following:

Previous wording

The decreases in interest expense in dollars and as a percentage of total revenue during the three and six months ended June 30, 2026, when compared to the same periods in 2025, were primarily due to a decrease in portfolio effective interest rate on relatively flat average daily borrowing. We currently expect interest expense for the full year 2026 to be approximately $62 million to $66 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

Current wording

The decreases in interest expense in dollars and as a percentage of total revenue during the three and nine months ended September 30, 2026, when compared to the same periods in 2025, were primarily due to lower debt levels. We currently expect interest expense for the full year 2026 to be approximately $62 million to $66 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 increases in other income, net in dollars and as a percentage of total revenue during the three and six months ended June 30, 2026, respectively, when compared to the same periods in 2025, were primarily due to decreases in current year losses in currency revaluation compared to prior year losses. See Note 5 to our unaudited, condensed consolidated financial statements in this report for more information regarding our other income.

Current wording

The increase in other income, net in dollars during the nine months ended September 30, 2026, when compared to the same period in 2025, was primarily due to a decrease in current year loss in currency revaluation compared to prior year loss. See Note 5 to our unaudited, condensed consolidated financial statements in this report for more information regarding our other income.

Previous wording

The increase in deferred revenue during the six months ended June 30, 2026 was primarily due toa seasonal increase 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.

Current wording

The increase in deferred revenue during the nine months ended September 30, 2026 was primarily due toa seasonal increase 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

The decreases in our effective income tax rate for the three and six months ended June 30, 2026 when compared to the same periods in 2025 were primarily due to a decrease in our valuation allowance and increased deductions from OBBBA implementation, partially offset by discrete tax expense recognized in 2026. See Note 9 to our unaudited, condensed consolidated financial statements in this report for more information. We currently expect a material impact from future phases in fiscal years 2026 and 2027, but not beyond, before considering any impacts of any potential future valuation allowance release (described further in Note 9).

Current wording

The increases in our effective income tax rate for the three and nine months ended September 30, 2026 when compared to the same periods in 2025 were primarily due to state income taxes and the limitation on deductible executive compensation under Section 162(m). These increases were partially offset by a reduction in our valuation allowance, increasing the effects of the changes in the realizability of certain deferred tax assets. See Note 9 to our unaudited, condensed consolidated financial statements in this report for more information.

Previous wording

(1)GCC workforce transition costs represent severance and other costs incurred in connection with the transition of certain roles to our Global Capability Center in Hyderabad, India.

Current wording

(1)Global workforce transition costs represent severance and other costs incurred in connection with actions under our global workforce strategy.

Previous wording

(3)Includes charges of $24.3 million incurred during the six months ended June 30, 2025 related to the release from our lease for office space in Washington, DC.

Current wording

(3)Includes charges of $24.3 million incurred during the nine months ended September 30, 2025 related to the release from our lease for office space in Washington, DC.

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 development costs; stock-based compensation; employee severance; GCC workforce transition costs; acquisition and disposition-related costs; Security Incident-related costs; and impairment and disposition charges.

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; global workforce transition costs; acquisition and disposition-related costs; Security Incident-related costs; and impairment and disposition charges.

Previous wording

(3)Measured by GAAP revenue divided by non-GAAP EBITDA.

Current wording

(3)Measured by non-GAAP EBITDA divided by non-GAAP organic revenue.

Previous wording

(5)Measured by non-GAAP organic revenue divided by non-GAAP adjusted EBITDA.

Current wording

(5)Measured by non-GAAP adjusted EBITDA divided by non-GAAP organic revenue.

Previous wording

At June 30, 2026, our total cash and cash equivalents balance included approximately $14.9 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 September 30, 2026, our total cash and cash equivalents balance included approximately $16.3 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.

Previous wording

Net cash provided by operating activities increased by $74.2 million during the six months ended June 30, 2026, when compared to the same period in 2025, primarily due to a $47.5 million increase in net income adjusted for non-cash expenses and a $26.6 million increase in cash flow from operations associated with working capital.

Current wording

Net cash provided by operating activities increased by $76.7 million during the nine months ended September 30, 2026, when compared to the same period in 2025, primarily due to a $58.1 million increase in net income adjusted for non-cash expenses and a $18.6 million increase in cash flow from operations associated with working capital.

Previous wording

The increase in cash flow from operations associated with working capital during the six months ended June 30, 2026, when compared to the same period in 2025, was primarily due to:

Current wording

The increase in cash flow from operations associated with working capital during the nine months ended September 30, 2026, when compared to the same period in 2025, 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

Net cash used in investing activities of $38.9 million decreased by $2.4 million during the six months ended June 30, 2026, when compared to the same period in 2025.

Current wording

Net cash used in investing activities of $54.6 million decreased by $2.7 million during the nine months ended September 30, 2026, when compared to the same period in 2025.

Previous wording

During the six months ended June 30, 2026, we used cash of $26.1 million for software development costs, which was a decrease of $1.7 million when compared to the same period in 2025. We spent $4.1 million for purchases of property and equipment during the six months ended June 30, 2026, which was an increase of $2.8 million when compared to the same period in 2025. Also, we used $8.7 million for a minor investment in a business during the six months ended June 30, 2026.

Current wording

During the nine months ended September 30, 2026, we used cash of $38.6 million for software development costs, which was a decrease of $1.6 million when compared to the same period in 2025. We spent $7.3 million for purchases of property and equipment during the nine months ended September 30, 2026, which was an increase of $2.5 million when compared to the same period in 2025. Also, we used $8.7 million for a minority investment in a business during the nine months ended September 30, 2026.

Previous wording

During the six months ended June 30, 2025, we used net cash of $12.2 million for the disposition of a business.

Current wording

During the nine months ended September 30, 2025, we used net cash of $12.2 million for the disposition of a business.

Previous wording

During the six months ended June 30, 2026, we had a net increase in borrowings of $28.6 million, primarily due to our stock repurchase program and to satisfy tax obligations of employees upon settlement of equity awards (see discussion below).

Current wording

During the nine months ended September 30, 2026, we had a net decrease in borrowings of $77.1 million, primarily due to the use of operating cash flow to pay back debt, offset by our stock repurchase program and satisfying tax obligations of employees upon settlement of equity awards (see discussion below).

Previous wording

We paid $25.3 million to satisfy tax obligations of employees upon settlement of equity awards during the six months ended June 30, 2026 compared to $38.7 million during the same period in 2025. 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 $25.7 million to satisfy tax obligations of employees upon settlement of equity awards during the nine months ended September 30, 2026 compared to $39.7 million during the same period in 2025. 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.

Previous wording

During the six months ended June 30, 2026, cash flow from financing activities associated with changes in restricted cash due to customers increased $132.6 million, compared to an increase of $128.6 million during the same period in 2025. This line in the statement of cash flows represents the change in the amount of restricted cash held and payable by us to customers from one period to the next. This restricted cash due to customers is not available to us for operational purposes.

Current wording

During the nine months ended September 30, 2026, cash flow from financing activities associated with changes in restricted cash due to customers decreased $288.4 million, compared to a decrease of $323.5 million during the same period in 2025. This line in the statement of cash flows represents the change in the amount of restricted cash held and payable by us to customers from one period to the next. This restricted cash due to customers is not available to us for operational purposes.

Previous wording

In February 2026, we announced our intention to repurchase between 5% and 10% of our outstanding common stock as of December 31, 2025 during the course of 2026 under our stock repurchase program. During the three months ended June 30, 2026, we repurchased an aggregate of 797,795 shares for $28.0 million. During the six months ended June 30, 2026, we repurchased an aggregate of 2,398,852 shares for $110.1 million. Including net share settlement of employee stock compensation, these repurchases represent approximately 6.2% of our outstanding common stock as of December 31, 2025. As of June 30, 2026, $850.4 million remained available under our stock repurchase program. Over the long term, we expect stock repurchases to remain an important component of our capital allocation strategy, subject to market conditions, business performance, leverage considerations, U.S. excise taxes and other factors. We anticipate utilizing at least 50% of our free cash flow from 2026 to 2030 for stock repurchases. See discussion of our Non‑GAAP Financial Measures above.

Current wording

In February 2026, we announced our intention to repurchase between 5% and 10% of our outstanding common stock as of December 31, 2025 during the course of 2026 under our stock repurchase program. During the three months ended September 30, 2026, we repurchased an aggregate of 448,000 shares for $18.3 million. During the nine months ended September 30, 2026, we repurchased an aggregate of 2,846,852 shares for $128.4 million. Including net share settlement of employee stock compensation, these repurchases represent approximately 7.2% of our outstanding common stock as of December 31, 2025. As of September 30, 2026, $832.1 million remained available under our stock repurchase program. Over the long term, we expect stock repurchases to remain an important component of our capital allocation strategy, subject to market conditions, business performance, leverage considerations, U.S. excise taxes and other factors. We anticipate utilizing at least 50% of our free cash flow from 2026 to 2030 for stock repurchases. See discussion of our Non‑GAAP Financial Measures above.

Previous wording

Historically, we have drawn on our credit facility from time to time to help us meet financial needs, primarily due to the seasonality of our cash flows from operations and financing for business acquisitions. At June 30, 2026, our available borrowing capacity under the 2024 Credit Facilities was $374.0 million. The 2024 Credit Facilities mature in April 2029.

Current wording

Historically, we have drawn on our credit facility from time to time to help us meet financial needs, primarily due to the seasonality of our cash flows from operations and financing for business acquisitions. At September 30, 2026, our available borrowing capacity under the 2024 Credit Facilities was $474.2 million. The 2024 Credit Facilities mature in April 2029.