BLKB

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How BLKB rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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Executive Summary We are the world's leading provider of AI-powered solutions for social impact.
Serving nonprofits, educational institutions, companies committed to corporate social responsibility and individual change makers, we propel impact at scale with the sector’s most intelligent solutions for fundraising and engagement, education solutions, financial management and CSR and grantmaking.
We have operations in the United States, Australia, Canada, Costa Rica, India and the United Kingdom, supporting users in 100+ countries.
Operating Initiatives Supporting Long-Term Growth and Margin Improvement • Product Innovation and Delivery A central element of our long‑term strategy is the disciplined integration of AI across our products, platform and internal operations, which management views as foundational to driving operating leverage, enhancing customer outcomes and supporting sustainable growth over time.
Our product innovation efforts have focused on two primary areas: (i) advancing AI across the portfolio, and (ii) enhancing product connectivity and interoperability to streamline customer workflows.
These enhancements are designed to help customers improve fundraising outcomes while reducing administrative burden.
Through our multi-year Intelligence for Good® initiative, we continue to integrate machine learning and AI-driven capabilities into our products to improve efficiency and support better outcomes for our customers.
Our machine learning features for prospect identification have been adopted by more than half of Raiser's Edge NXT® customers.
We have also introduced generative AI features across multiple products, primarily supporting the composition of donor and constituent communications.
In late 2025, we released Blackbaud AI Chat, which provides contextual responses within our solutions and assists users in completing tasks more efficiently.
At bbcon®, our annual user conference in October 2025, we launched Agents for Good™, our agentic AI suite, designed to augment customer teams with virtual AI-driven assistants capable of autonomously executing complex workflows across fundraising, finance and corporate impact functions.
These innovations expand the ways customers can use our solutions and are expected to contribute to future bookings, product adoption and customer retention. • Targeting Mid-Single-Digit Revenue Growth Contractual Recurring Revenue (~64% of total revenue) Contractual recurring revenue is driven by new‑customer bookings, cross‑sell and upsell activity within our existing customer base and the retention of existing customer revenue.
Our sales organization includes teams focused on both new logo acquisition and expansion within existing customers.
In addition to these motions, our new product opportunities (such as Agents for Good discussed above) provide our customer account teams with incremental solutions Blackbaud, Inc. to sell into existing customers.
These three motions—new logo, cross-sell/upsell, and new product—support our multi-year “land and expand” strategy.
Most of our software customers now operate on standard three‑year contract terms with mid-to-high single-digit price increases at renewal and embedded annual price increases.
These terms provide improved revenue visibility and are expected to contribute to stability in retention rates.
Revenue from these arrangements is generally recognized ratably over the contract term.
While our contract renewal program is designed around three‑year terms, more than 20% of renewing customers have elected to enter into four‑year or longer contracts.
Accordingly, our customer base is primarily composed of three‑year contracts, with over 20% of customers committed under extended‑term arrangements, which contributes to revenue visibility while extending the duration over which renewals occur.
Because revenue from these contractual arrangements is recognized ratably over the contract term, changes in contract duration affect the period over which revenue is recognized but do not change the pattern of revenue recognition within the contract.
To the extent contracts include embedded annual price escalators, the total fees attributable to the subscription-based software solutions are recognized on a straight-line basis over the term of the arrangement, resulting in a more even pattern of revenue recognition over longer periods.
Accordingly, period‑over‑period revenue growth continues to be driven primarily by the retention of existing customer revenue, combined with new bookings, expansion activity and contractual renewals with price increases and embedded annual price escalators over the contractual term.
Extended‑term arrangements contribute to improved visibility into future revenue and cash flows.
Renewal performance can vary from year to year due to the size and composition of renewal cohorts.
Approximately 40% of our existing customer contracts are due for renewal in 2026, compared to approximately 30% in 2027 and approximately 30% in 2028.
The contractual annual recurring revenue dollars up for renewal associated with the 2026 renewal cohort are approximately 40% higher than those up for renewal in 2025, reflecting the normal progression of our multi-year contract renewal cycle and the timing of customer renewals.
Because the 2026 cohort is meaningfully larger, we may experience higher churn dollars in that year relative to prior years.
These cohort dynamics are a normal part of our renewal cycle and can influence year-over-year revenue trends, even when underlying customer retention patterns remain stable.
Transactional Recurring Revenue (~34% of total revenue) Transactional recurring revenue is diversified across multiple activity types.
The primary components of this revenue stream—and their associated products—include: ◦ Donation Processing (~55%) - support by Blackbaud Integrated Payments , which powers donation activity across our fundraising and CRM solutions. ◦ Consumer Giving (~20%) - driven by JustGiving , which facilitates individual, peer-to-peer and community-driven giving. ◦ Tuition Management (~20%) - generated through Blackbaud Tuition Management , which processes tuition, fees and related financial transactions for K-12 private schools. ◦ Event‑based Usage (~5%) - derived from usage-based transactions across certain registration, ticketing and event-related workflows within our product suite.
The diversity of these underlying transaction types has contributed to consistent high-single-digit growth in transactional recurring revenue in recent years.
In certain periods, transactional recurring revenue may benefit from temporary increases in charitable giving related to isolated events, which can contribute to short‑term variability in transaction volumes.
Future growth in this category will depend on volume (e.g., donation activity, giving behavior, tuition payments), same‑store volume trends, the shift toward donor online giving, customer adoption of our payments capabilities and pricing optimization initiatives.
Certain components of transactional revenue—as with the broader social good sector—are influenced by external factors such as giving patterns, macroeconomic conditions and seasonal activity.
We have experienced continued growth in donation processing, consumer giving and tuition management, have implemented targeted rate increases across select areas of our payments portfolio, and are executing additional Blackbaud, Inc. optimization initiatives intended to enhance the donor experience and support long-term transactional revenue expansion. • Operating Efficiency and Margin Improvement We are focused on improving operating efficiency and enhancing profitability over time.
This includes actions to optimize our workforce, improve productivity, modernize our technology platform and simplify our cost structure.
Consistent with this focus, we are applying AI across our internal operations as a tool to support productivity, scalability and operational effectiveness over time.
We have taken several steps to improve efficiency in recent years, including reductions in headcount, optimization of our real estate footprint, renegotiation of key vendor contracts, continued migration of our product infrastructure to public cloud environments and planned closure of our two remaining legacy private data centers.
We are also deploying AI-enabled tools across our internal operations, including research and development, customer operations and general and administrative functions, to automate routine activities, accelerate workflows and support internal productivity, while maintaining appropriate controls and governance.

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Executive Summary We are the leading software provider exclusively dedicated to powering social impact.
Serving the nonprofit and education sectors, companies committed to social responsibility and individual change makers, our essential software is built to accelerate impact in fundraising, nonprofit financial management, digital giving, grantmaking, corporate social responsibility and education management.
A remote-first company, we have operations in the United States, Australia, Canada, Costa Rica, India and the United Kingdom, supporting users in 100+ countries.
Update on Five Key Operational Initiatives In early 2023, we outlined five key operational initiatives targeted to drive innovation, bookings growth, revenue expansion and lower costs.
During 2024, we continued to execute on these key initiatives. 1 Product Innovation and Delivery 2 Bookings Growth and Acceleration 3 Transactional Revenue Optimization and Expansion 4 Modernized Approach to Pricing and Multi-Year Customer Contracts 5 Keen Attention to Cost Management 1.
Product Innovation and Delivery To maintain our market leadership position, we are accelerating the pace of innovation and new feature delivery to our customers.
Our focus has been on two areas, artificial intelligence (AI) and enhancements that continue to improve the connectivity of our suite of solutions.
These enhancements are aimed at improving fundraising outcomes while reducing the administrative burden of our end users.
Some examples include: • We have released a number of AI capabilities in our solutions, including generative AI functionality for our JustGiving platform.
During 2024, we released generative AI capabilities for Raiser’s Edge NXT®, and we expect that Blackbaud Copilot will be available to our Raiser's Edge NXT customers soon.
Using Blackbaud Copilot, users can ask ad hoc questions such as “How can I improve my average donation size?” and the tool will provide intelligent responses as well as recommended actions intended to drive that outcome. • During 2024, our Online Giving and Prospect Insights capabilities were natively integrated into Raiser's Edge NXT.
With these integrations, fundraising administrators can now drive a giving campaign, keep records of each donor interaction, identify new donation opportunities, and provide personalized messaging, all in one integrated experience. • During 2024, we released our new optimized donation forms for Raiser's Edge NXT, Blackbaud CRM and Blackbaud Altru that fully integrate with our payment processing and CRM software.
We expect these forms to drive higher revenue for our customers and for Blackbaud.
We are delivering more innovation, evolving our products and ensuring our customers receive more value from our solutions. 2.
Bookings Growth and Acceleration We maintain a keen focus on accelerating bookings growth by signing new logos as well as upselling and cross-selling our existing customer base.
Our sales team is split between prospect account executives dedicated to prospecting for new clients and customer account executives who focus on selling additional products to current customers.
Given the breadth of our product portfolio, this “land and expand” model has proven successful for us over time.
As previously disclosed, there can be volatility quarter-to-quarter on bookings. 3.
Transactional Revenue Optimization and Expansion Transactional revenue, which is about one-third of total revenue, is comprised of four primary components: donation processing (~55% of total transactional revenue); consumer giving (~20%); tuition management (~20%); and event-based usage (~5%).
The diversity of the underlying transaction volumes from these four sources has resulted in consistent transactional recurring revenue growth in the mid-to-high single digits over the past several years.
We continue to see strong momentum in consumer giving and tuition management, we have implemented rate increases across select areas of our payments portfolio, and we continue to implement additional payments solutions optimization to drive enhanced donor experience. 4.
Modernized Approach to Pricing and Multi-Year Contracts In the summer of 2022, we put in place an updated pricing policy primarily for our social sector customers that directly reflects the value we provide to them, is in-line with the broader market and reflects the inflationary pressures that all businesses are facing.
This program is designed to deliver sustained revenue growth beyond the initial three-year renewal cycle and will provide us with improved revenue visibility.
As previously disclosed, this new approach has three main components: offering 3-year contract renewal terms as our standard, which the vast majority of customers are adopting; embedded annual price increases within the 3-year renewal term, which we have not had previously and are beginning to take effect; and a larger first year price increase to bring our pricing in-line with the broader market.
The first two components, as well as a portion of the third, will continue on beyond the initial renewal cycle, creating what we believe will be a sustainable source of revenue growth.
We have now completed the 2023 and 2024 renewal cohorts, which represented approximately 65% of the total contractual revenue eligible for this program.
Approximately another 25% of the renewable base is up for renewal in 2025, and the remaining 10% in the beginning of 2026.
The close day-to-day management of renewals, the mix of 3-year and 1-year contracts, and the impact of pricing are progressing well.
Additionally, the adoption of 3-year renewals as a standard, with more customers opting for this option than we originally expected, are expected to have an added benefit of higher retention which provides greater revenue assurance and predictability. 5.
Keen Attention to Cost Management Cost management initiatives already completed drove a significant improvement in profitability during 2023.
These initiatives included: • A reduction in headcount from approximately 3,600 in the third quarter of 2022 to approximately 3,000 as of December 31, 2023 • Continued IT consolidation as we migrate customers from legacy private data centers to leading public cloud service providers.
We closed four legacy data centers during 2022 and two in 2023. • Renegotiated key vendor contracts including Microsoft Azure and AWS • Reduced our real estate footprint as part of the shift to a remote-first workforce During 2024, we continued to run the business at about the same headcount level, while continuing to drive efficiencies in other areas of the business.
After the divestiture of EVERFI on December 31, 2024, we had approximately 2,600 employees.
As a remote-first workforce company, we can be strategic about selecting the appropriate geographic region for various functions in order to reduce costs without negatively impacting the quality of our products and services.
For example, we are currently expanding our operations in India, which we expect will give us greater access to talent, and increase the number of our employees, including management, in India.
We have rented office space in India to accommodate those new operations, although we do not currently expect to generate revenue in India in the foreseeable future.
There are two remaining legacy data centers that we are currently working towards closing in the future.
Financial Summary Total Revenue ($M) Income (loss) from Operations ($M) YoY Growth (%) YoY Growth (%) Total revenue increased by $50.1 million during 2024, driven largely by the following: + Growth in recurring revenue primarily driven by: l an increase in contractual revenue of $36.7 million largely due to the impact of our 3-year contract renewal initiative and pricing within the Social Sector as well as the performance of our cloud solutions, partially offset by decrease in revenue from EVERFI and maintenance revenue; and l an increase in transactional recurring revenue of $20.9 million primarily due to positive results related to pricing initiatives we have implemented in the past twelve months and increases in volume for our Blackbaud Tuition Management and JustGiving solutions; also contributing to the increase in transactional recurring revenue during the year ended December 31, 2024 was an increase related to fluctuations in foreign currency exchange rates of $2.2 million. - Decrease in one-time services and other revenue primarily related to: l decrease in one-time consulting revenue of $7.5 million primarily due to a decrease of $7.4 million resulting from our sale of EVERFI Limited as discussed in Note 3 to our consolidated financial statements in this report For information on the impact of foreign currency fluctuations on our financial results, see Foreign Currency Exchange Rates below on page 59 .
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.
Our Social Sector revenue (which represents approximately 88% of our total full year revenue) increased $67.4 million, or 7.1%, during 2024, when compared to the same period in 2023, driven primarily by the increases in contractual recurring revenue and transactional recurring revenue discussed above.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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