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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     .
Commission file number: 000-50600
Blackbaud, Inc.
(Exact name of registrant as specified in its charter)
Delaware11-2617163
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
65 Fairchild Street
Charleston, South Carolina 29492
(Address of principal executive offices, including zip code)
(843) 216-6200
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on which Registered
Common Stock, $0.001 Par ValueBLKBNasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    
Yes     No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes     No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer   
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    
Yes   No      
The number of shares of the registrant’s Common Stock outstanding as of April 28, 2021 was 48,818,991.



TABLE OF CONTENTS
  

First Quarter 2021 Form 10-Q
1

Table of Contents

Blackbaud, Inc.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including the documents incorporated herein by reference, contains forward-looking statements that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These "forward-looking statements" are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements consist of, among other things, specific and overall impacts of the COVID-19 global pandemic on our financial condition and results of operations and on the markets and communities in which we and our customers and partners operate, trend analyses, statements regarding future events, future financial performance, our anticipated growth, the effect of general economic and market conditions, our business strategy and our plan to build and grow our business, our operating results, our ability to successfully integrate acquired businesses and technologies, the effect of foreign currency exchange rate and interest rate fluctuations on our financial results, the impact of expensing stock-based compensation, the sufficiency of our capital resources, our ability to meet our ongoing debt and obligations as they become due, cybersecurity and data protection risks, and potential litigation involving us, all of which are based on current expectations, estimates, and forecasts, and the beliefs and assumptions of our management. Words such as “believes,” “seeks,” “expects,” “may,” “might,” “should,” “intends,” “could,” “would,” “likely,” “will,” “targets,” “plans,” “anticipates,” “aims,” “projects,” “estimates” or any variations of such words and similar expressions are also intended to identify such forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions that are difficult to predict. Accordingly, they should not be viewed as assurances of future performance, and actual results may differ materially and adversely from those expressed in any forward-looking statements.
Important factors that could cause actual results to differ materially from our expectations expressed in forward-looking statements include, but are not limited to, those summarized under “Part II, Item 1A. Risk factors” and elsewhere in this report, in our Annual Report on Form 10-K for the year ended December 31, 2020 and in our other SEC filings. Forward-looking statements represent our management's beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statement, whether as a result of new information, future events or otherwise.
2
First Quarter 2021 Form 10-Q


PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Blackbaud, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)March 31,
2021
December 31,
2020
Assets
Current assets:
Cash and cash equivalents$27,753 $35,750 
Restricted cash255,158 609,219 
Accounts receivable, net of allowance of $10,361 and $10,292 at March 31, 2021 and December 31, 2020, respectively
83,333 95,404 
Customer funds receivable945 321 
Prepaid expenses and other current assets98,095 78,366 
Total current assets465,284 819,060 
Property and equipment, net105,124 105,177 
Operating lease right-of-use assets20,055 22,671 
Software development costs, net113,624 111,827 
Goodwill637,113 635,854 
Intangible assets, net269,118 277,506 
Other assets74,022 72,639 
Total assets$1,684,340 $2,044,734 
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable$35,274 $27,836 
Accrued expenses and other current liabilities53,013 52,228 
Due to customers254,947 608,264 
Debt, current portion12,875 12,840 
Deferred revenue, current portion290,025 312,236 
Total current liabilities646,134 1,013,404 
Debt, net of current portion537,924 518,193 
Deferred tax liability54,444 54,086 
Deferred revenue, net of current portion4,495 4,678 
Operating lease liabilities, net of current portion15,744 17,357 
Other liabilities9,439 10,866 
Total liabilities1,268,180 1,618,584 
Commitments and contingencies (see Note 9)
Stockholders’ equity:
Preferred stock; 20,000,000 shares authorized, none outstanding
  
Common stock, $0.001 par value; 180,000,000 shares authorized, 61,595,276 and 60,904,638 shares issued at March 31, 2021 and December 31, 2020, respectively
62 61 
Additional paid-in capital574,958 544,963 
Treasury stock, at cost; 12,760,956 and 12,054,268 shares at March 31, 2021 and December 31, 2020, respectively
(399,583)(353,091)
Accumulated other comprehensive income (loss)4,163 (2,497)
Retained earnings236,560 236,714 
Total stockholders’ equity416,160 426,150 
Total liabilities and stockholders’ equity$1,684,340 $2,044,734 
The accompanying notes are an integral part of these condensed consolidated financial statements.
First Quarter 2021 Form 10-Q
3



Blackbaud, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
Three months ended
March 31,
(dollars in thousands, except per share amounts)20212020
Revenue
Recurring$206,750 $204,867 
One-time services and other12,441 18,754 
Total revenue219,191 223,621 
Cost of revenue
Cost of recurring88,865 89,551 
Cost of one-time services and other14,520 15,314 
Total cost of revenue103,385 104,865 
Gross profit115,806 118,756 
Operating expenses
Sales, marketing and customer success48,793 58,735 
Research and development29,179 24,977 
General and administrative30,587 25,855 
Amortization549 741 
Restructuring54 24 
Total operating expenses109,162 110,332 
Income from operations6,644 8,424 
Interest expense(5,114)(4,159)
Other (expense) income, net(1,010)1,070 
Income before provision for income taxes520 5,335 
Income tax provision684 696 
Net (loss) income$(164)$4,639 
Earnings (loss) per share
Basic$ $0.10 
Diluted$ $0.10 
Common shares and equivalents outstanding
Basic weighted average shares47,363,197 48,036,300 
Diluted weighted average shares47,363,197 48,455,751 
Other comprehensive income (loss)
Foreign currency translation adjustment2,511 (5,728)
Unrealized gain (loss) on derivative instruments, net of tax4,149 (3,122)
Total other comprehensive income (loss)6,660 (8,850)
Comprehensive income (loss)$6,496 $(4,211)
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
First Quarter 2021 Form 10-Q


Blackbaud, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Three months ended
March 31,
(dollars in thousands)20212020
Cash flows from operating activities
Net (loss) income$(164)$4,639 
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization20,461 21,804 
Provision for credit losses and sales returns2,141 2,488 
Stock-based compensation expense30,005 13,580 
Deferred taxes(1,142)954 
Amortization of deferred financing costs and discount506 188 
Other non-cash adjustments(32)102 
Changes in operating assets and liabilities, net of acquisition and disposal of businesses:
Accounts receivable10,407 (3,876)
Prepaid expenses and other assets(17,426)(5,303)
Trade accounts payable7,550 (4,021)
Accrued expenses and other liabilities549 (31,694)
Deferred revenue(22,752)(23,364)
Net cash provided by (used in) operating activities30,103 (24,503)
Cash flows from investing activities
Purchase of property and equipment(3,470)(2,867)
Capitalized software development costs(9,302)(10,937)
Net cash used in investing activities(12,772)(13,804)
Cash flows from financing activities
Proceeds from issuance of debt80,700 144,700 
Payments on debt(59,667)(86,075)
Employee taxes paid for withheld shares upon equity award settlement(18,426)(19,782)
Proceeds from exercise of stock options 1 
Change in due to customers(353,597)(311,095)
Change in customer funds receivable(563)(733)
Purchase of treasury stock(28,066) 
Dividend payments to stockholders (5,960)
Net cash used in financing activities(379,619)(278,944)
Effect of exchange rate on cash, cash equivalents and restricted cash230 (2,822)
Net decrease in cash, cash equivalents and restricted cash(362,058)(320,073)
Cash, cash equivalents and restricted cash, beginning of period644,969 577,295 
Cash, cash equivalents and restricted cash, end of period$282,911 $257,222 
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown above in the condensed consolidated statements of cash flows:
(dollars in thousands)March 31,
2021
December 31,
2020
Cash and cash equivalents$27,753 $35,750 
Restricted cash255,158 609,219 
Total cash, cash equivalents and restricted cash in the statement of cash flows$282,911 $644,969 
The accompanying notes are an integral part of these condensed consolidated financial statements.

First Quarter 2021 Form 10-Q
5

Blackbaud, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)

(dollars in thousands)Common stockAdditional
paid-in
capital
Treasury
stock
Accumulated
other
comprehensive
income (loss)
Retained
earnings
Total
stockholders'
equity
SharesAmount
Balance at December 31, 202060,904,638 $61 $544,963 $(353,091)$(2,497)$236,714 $426,150 
Net loss— — — — — (164)(164)
Purchase of 465,821 treasury shares under stock repurchase program
— — — (28,066)— — (28,066)
Vesting of restricted stock units206,418 —  — — —  
Employee taxes paid for 240,867 withheld shares upon equity award settlement
— — — (18,426)— — (18,426)
Stock-based compensation— — 29,995 — — 10 30,005 
Restricted stock grants519,009 1 — — — — 1 
Restricted stock cancellations(34,789)— — — — — — 
Other comprehensive income— — — — 6,660 — 6,660 
Balance at March 31, 202161,595,276 $62 $574,958 $(399,583)$4,163 $236,560 $416,160 

(dollars in thousands)Common stockAdditional
paid-in
capital
Treasury
stock
Accumulated
other
comprehensive
income (loss)
Retained
earnings
Total
stockholders'
equity
SharesAmount
Balance at December 31, 201960,206,091 $60 $457,804 $(290,665)$(5,290)$234,855 $396,764 
Net income— — — — — 4,639 4,639 
Payment of dividends ($0.12 per share)
— — — — — (5,960)(5,960)
Exercise of stock options and vesting of restricted stock units210,057 — 1 — — — 1 
Employee taxes paid for 245,358 withheld shares upon equity award settlement
— — — (19,782)— — (19,782)
Stock-based compensation— — 13,539 — — 41 13,580 
Restricted stock grants563,947 1 — — — — 1 
Restricted stock cancellations(47,456)— — — — — — 
Other comprehensive loss— — — — (8,850)— (8,850)
Balance at March 31, 202060,932,639 $61 $471,344 $(310,447)$(14,140)$233,575 $380,393 
The accompanying notes are an integral part of these condensed consolidated financial statements.


6
First Quarter 2021 Form 10-Q

Table of Contents

Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)


1. Organization
We are the world’s leading cloud software company powering social good. Serving the entire social good community—nonprofits, higher education institutions, K–12 schools, healthcare organizations, faith communities, arts and cultural organizations, foundations, companies and individual change agents—we connect and empower organizations to increase their impact through cloud software, services, expertise and data intelligence. Our portfolio is tailored to the unique needs of vertical markets, with solutions for fundraising and CRM, marketing, advocacy, peer-to-peer fundraising, corporate social responsibility, school management, ticketing, grantmaking, financial management, payment processing and analytics. Serving the industry for nearly four decades, we are headquartered in Charleston, South Carolina, and have operations in the United States, Australia, Canada, Costa Rica and the United Kingdom.
2. Basis of Presentation
Unaudited condensed consolidated interim financial statements
The accompanying condensed consolidated interim financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC") for interim financial reporting. These consolidated statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to state fairly the consolidated balance sheets, consolidated statements of comprehensive income, consolidated statements of cash flows and consolidated statements of stockholders’ equity, for the periods presented in accordance with accounting principles generally accepted in the United States ("U.S.") ("GAAP"). The consolidated balance sheet at December 31, 2020 has been derived from the audited consolidated financial statements at that date. Operating results and cash flows for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021, or any other future period. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted in accordance with the rules and regulations for interim reporting of the SEC. These condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020, and other forms filed with the SEC from time to time.
Basis of consolidation
The condensed consolidated financial statements include the accounts of Blackbaud, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Reportable segment
We report our operating results and financial information in one operating and reportable segment. Our chief operating decision maker uses consolidated financial information to make operating decisions, assess financial performance and allocate resources. Our chief operating decision maker is our chief executive officer ("CEO").
Risks and uncertainties related to COVID-19
We are subject to risks and uncertainties as a result of the global COVID-19 pandemic. We believe that COVID-19 may continue to impact our vertical markets and geographies, but the significance and duration of the impact on our business cannot be determined at this time due to numerous uncertainties, including the duration of the outbreak, travel restrictions and business closures, the effectiveness of vaccination programs and other actions taken to contain the disease and other unforeseeable consequences.
First Quarter 2021 Form 10-Q
7

Table of Contents

Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, we reconsider and evaluate our estimates and assumptions, including those that impact revenue recognition, long-lived and intangible assets, income taxes, business combinations, stock-based compensation, capitalization of software development costs, our allowances for credit losses and sales returns, costs of obtaining contracts, valuation of derivative instruments and loss contingencies, among others. Changes in the facts or circumstances underlying these estimates, including due to COVID-19, could result in material changes and actual results could materially differ from these estimates.
Recently issued accounting pronouncements
There are no recently issued accounting pronouncements that we expect to have a material impact on our consolidated financial statements when adopted in the future.
Summary of significant accounting policies
There have been no new or material changes to our significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 23, 2021.
3. Goodwill and Other Intangible Assets
The change in goodwill during the three months ended March 31, 2021, consisted of the following:
(dollars in thousands)Total
Balance at December 31, 2020$635,854 
Effect of foreign currency translation1,259 
Balance at March 31, 2021$637,113 
4. Earnings (Loss) Per Share
We compute basic earnings (loss) per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income available to common stockholders by the weighted average number of common shares and dilutive potential common shares outstanding during the period. Diluted earnings (loss) per share reflect the assumed exercise, settlement and vesting of all dilutive securities using the “treasury stock method” except when the effect is anti-dilutive. Potentially dilutive securities consist of shares issuable upon the exercise of stock options, settlement of stock appreciation rights and vesting of restricted stock awards and units. Diluted loss per share for the three months ended March 31, 2021 was the same as basic loss per share as there was a net loss in the period and inclusion of potentially dilutive securities was anti-dilutive.
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Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

The following table sets forth the computation of basic and diluted earnings (loss) per share:
  
Three months ended
March 31,
(dollars in thousands, except per share amounts)
2021
2020
Numerator:
Net (loss) income$(164)$4,639 
Denominator:
Weighted average common shares47,363,197 48,036,300 
Add effect of dilutive securities:
Stock-based awards 419,451 
Weighted average common shares assuming dilution47,363,197 48,455,751 
Earnings (loss) per share:
Basic$ $0.10 
Diluted$ $0.10 
Anti-dilutive shares excluded from calculations of diluted earnings (loss) per share1,360,378 1,170,289 
5. Fair Value Measurements
We use a three-tier fair value hierarchy to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:
Level 1 - Quoted prices for identical assets or liabilities in active markets;
Level 2 - Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
First Quarter 2021 Form 10-Q
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Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

Recurring fair value measurements
Assets and liabilities that are measured at fair value on a recurring basis consisted of the following, as of the dates indicated below:
Fair value measurement using
(dollars in thousands)Level 1Level 2Level 3Total
Fair value as of March 31, 2021
Financial assets:
Derivative instruments$ $2,851 $ $2,851 
Total financial assets$ $2,851 $ $2,851 
Financial liabilities:
Derivative instruments$ $1,431 $ $1,431 
Total financial liabilities$ $1,431 $ $1,431 
Fair value as of December 31, 2020
Financial liabilities:
Derivative instruments$ $4,159 $ $4,159 
Total financial liabilities$ $4,159 $ $4,159 
Our derivative instruments within the scope of Accounting Standards Codification ("ASC") 815, Derivatives and Hedging, are required to be recorded at fair value. Our derivative instruments that are recorded at fair value include interest rate swaps.
The fair value of our interest rate swaps was based on model-driven valuations using LIBOR rates, which are observable at commonly quoted intervals. Accordingly, our interest rate swaps are classified within Level 2 of the fair value hierarchy. The Financial Conduct Authority in the U.K. has stated that it plans to phase out LIBOR by the end of calendar year 2021. We do not currently anticipate a significant impact to our financial position or results of operations as a result of this action as we expect that our financial contracts currently indexed to LIBOR will either expire or be modified without significant financial impact before the phase out occurs.
We believe the carrying amounts of our cash and cash equivalents, restricted cash, accounts receivable, trade accounts payable, accrued expenses and other current liabilities and due to customers approximate their fair values at March 31, 2021 and December 31, 2020, due to the immediate or short-term maturity of these instruments.
We believe the carrying amount of our debt approximates its fair value at March 31, 2021 and December 31, 2020, as the debt bears interest rates that approximate market value. As LIBOR rates are observable at commonly quoted intervals, our debt under the 2020 Credit Facility (as defined below) is classified within Level 2 of the fair value hierarchy. Our fixed rate debt is also classified within Level 2 of the fair value hierarchy.
We did not transfer any assets or liabilities among the levels within the fair value hierarchy during the three months ended March 31, 2021. Additionally, we did not hold any Level 3 assets or liabilities during the three months ended March 31, 2021.
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Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

Non-recurring fair value measurements
Assets and liabilities that are measured at fair value on a non-recurring basis include long-lived assets, intangible assets, goodwill and operating lease right-of-use ("ROU") assets. These assets are recognized at fair value during the period in which an acquisition is completed or at lease commencement, from updated estimates and assumptions during the measurement period, or when they are considered to be impaired. These non-recurring fair value measurements, primarily for long-lived assets, intangible assets acquired and operating lease ROU assets, are based on Level 3 unobservable inputs. In the event of an impairment, we determine the fair value of these assets other than goodwill using a discounted cash flow approach, which contains significant unobservable inputs and, therefore, is considered a Level 3 fair value measurement. The unobservable inputs in the analysis generally include future cash flow projections and a discount rate. For goodwill impairment testing, we estimate fair value using market-based methods including the use of market capitalization and consideration of a control premium.
There were no non-recurring fair value adjustments to our long-lived assets, intangible assets, goodwill and operating lease ROU assets during the three months ended March 31, 2021.
6. Consolidated Financial Statement Details
Restricted cash
(dollars in thousands)March 31,
2021
December 31,
2020
Restricted cash due to customers$254,002 $607,943 
Real estate escrow balances1,156 1,276 
Total restricted cash255,158 609,219 
Prepaid expenses and other assets
(dollars in thousands)March 31,
2021
December 31,
2020
Costs of obtaining contracts(1)(2)
$83,421 $84,914 
Prepaid software maintenance and subscriptions(3)
33,113 24,471 
Receivables for probable insurance recoveries(4)
15,723 6,288 
Implementation costs for cloud computing arrangements, net(5)(6)
11,451 11,298 
Unbilled accounts receivable7,660 10,385 
Prepaid insurance6,397 1,426 
Derivative instruments2,851  
Taxes, prepaid and receivable1,486 1,891 
Other assets10,015 10,332 
Total prepaid expenses and other assets172,117 151,005 
Less: Long-term portion74,022 72,639 
Prepaid expenses and other current assets$98,095 $78,366 
(1)Amortization expense from costs of obtaining contracts was $9.2 million and $9.5 million for the three months ended March 31, 2021 and 2020, respectively.
(2)The current portion of costs of obtaining contracts as of March 31, 2021 and December 31, 2020 was $31.6 million and $31.9 million, respectively.
(3)The current portion of prepaid software maintenance and subscriptions as of March 31, 2021 and December 31, 2020 was $28.0 million and $19.8 million, respectively.
(4)See discussion of the Security Incident at Note 9.
(5)These costs primarily relate to the multi-year implementations of our new global enterprise resource planning and customer relationship management systems.
(6)Amortization expense from capitalized cloud computing implementation costs was insignificant for the three months ended March 31, 2021 and 2020, respectively. Accumulated amortization for these costs was $1.6 million as of March 31, 2021 and $1.1 million as of December 31, 2020.
First Quarter 2021 Form 10-Q
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Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

Accrued expenses and other liabilities
(dollars in thousands)March 31,
2021
December 31,
2020
Taxes payable(1)
$16,458 $19,577 
Accrued legal costs12,055 4,808 
Operating lease liabilities, current portion7,191 9,359 
Customer credit balances5,891 5,874 
Accrued commissions and salaries5,524 5,010 
Unrecognized tax benefit3,546 3,351 
Accrued health care costs2,389 2,341 
Accrued vacation costs2,304 2,311 
Derivative instruments1,431 4,159 
Other liabilities5,663 6,304 
Total accrued expenses and other liabilities62,452 63,094 
Less: Long-term portion9,439 10,866 
Accrued expenses and other current liabilities$53,013 $52,228 
(1)We deferred payments of the employer's portion of Social Security taxes during 2020 under the Coronavirus, Aid, Relief and Economic Security Act ("CARES Act"), half of which is due by the end of calendar year 2021 with the remainder due by the end of calendar year 2022.
Other (expense) income, net
  
Three months ended
March 31,
(dollars in thousands)
2021
2020
Interest income$152 $522 
Other (expense) income, net(1,162)548 
Other (expense) income, net$(1,010)$1,070 
7. Debt
The following table summarizes our debt balances and the related weighted average effective interest rates, which includes the effect of interest rate swap agreements.
Debt balance atWeighted average
effective interest rate at
(dollars in thousands)March 31,
2021
December 31,
2020
March 31,
2021
December 31,
2020
Credit facility:
    Revolving credit loans$93,425 $69,625 1.80 %1.83 %
    Term loans397,500 400,000 3.13 %3.12 %
Real estate loans60,358 60,626 5.22 %5.22 %
Other debt2,232 3,926 5.00 %5.00 %
Total debt553,515 534,177 3.14 %3.21 %
Less: Unamortized discount and debt issuance costs2,716 3,144 
Less: Debt, current portion12,875 12,840 2.67 %2.61 %
Debt, net of current portion$537,924 $518,193 3.15 %3.22 %
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Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

2020 credit facility
In October 2020, we entered into a five-year $900.0 million senior credit facility (the "2020 Credit Facility"). At March 31, 2021, we were in compliance with our debt covenants under the 2020 Credit Facility.
Real estate loans
In August 2020, we completed the purchase of our global headquarters facility. As part of the purchase price, we assumed the Seller’s obligations under two senior secured notes with an aggregate outstanding principal amount of $61.1 million (collectively, the “Real Estate Loans”). At March 31, 2021, we were in compliance with our debt covenants under the Real Estate Loans.
Other debt
From time to time, we enter into third-party financing agreements for purchases of software and related services for our internal use. Generally, the agreements are non-interest-bearing notes requiring annual payments. Interest associated with the notes is imputed at the rate we would incur for amounts borrowed under our then-existing credit facility at the inception of the notes.
The following table summarizes our currently effective financing agreements as of March 31, 2021:
(dollars in thousands)Term
 in Months
Number of
Annual Payments
First Annual Payment DueOriginal Loan Value
Effective dates of agreements:
December 201951January 2020$2,150 
January 202039March 20203,470 
As of March 31, 2021, the required annual maturities related to the 2020 Credit Facility, the Real Estate Loans and our other debt were as follows:
Years ending December 31,
(dollars in thousands)
Annual
maturities
2021 - remaining$8,378 
2022 12,985 
2023 11,982 
2024 11,609 
2025 455,209 
Thereafter53,352 
Total required maturities$553,515 
8. Derivative Instruments
Cash flow hedges
We generally use derivative instruments to manage our variable interest rate risk. We have entered into interest rate swap agreements, which effectively convert portions of our variable rate debt under the 2020 Credit Facility to a fixed rate for the term of the swap agreements. We designated each of the interest rate swap agreements as a cash flow hedge at the inception of the contracts.
First Quarter 2021 Form 10-Q
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Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

The terms and notional values of our derivative instruments were as follows as of March 31, 2021:
(dollars in thousands)Term of derivative instrumentNotional
value
Derivative instruments designated as hedging instruments:
Interest rate swapJuly 2017 - July 2021$150,000 
Interest rate swapFebruary 2018 - June 202150,000 
Interest rate swapJune 2019 - June 202175,000 
Interest rate swapNovember 2020 - October 202460,000 
Interest rate swapNovember 2020 - October 202460,000 
$395,000 
Forward-starting interest rate swapJune 2021 - October 2024120,000 
Forward-starting interest rate swapJuly 2021 - October 2024120,000 
$240,000 
The fair values of our derivative instruments were as follows as of:
Asset derivativesLiability derivatives
(dollars in thousands)Balance sheet locationMarch 31,
2021
December 31,
2020
Balance sheet locationMarch 31,
2021
December 31,
2020
Derivative instruments designated as hedging instruments:
Interest rate swaps, current portionPrepaid expenses
and other current assets
$ $ Accrued expenses
and other
current liabilities
$1,431 $2,698 
Interest rate swaps, long-term portionOther assets2,851  Other liabilities 1,461 
Total derivative instruments designated as hedging instruments$2,851 $ $1,431 $4,159 
The effects of derivative instruments in cash flow hedging relationships were as follows:
Gain (loss) recognized
in accumulated other
comprehensive
loss as of
Location
of gain (loss)
reclassified from
accumulated other
comprehensive
loss into income
Gain (loss) reclassified from accumulated
 other comprehensive loss into income
(dollars in thousands)March 31,
2021
Three months ended
March 31, 2021
Interest rate swaps$1,420 Interest expense$(1,373)
March 31,
2020
Three months ended
March 31, 2020
Interest rate swaps$(5,979)Interest expense$(205)
Our policy requires that derivatives used for hedging purposes be designated and effective as a hedge of the identified risk exposure at the inception of the contract. Accumulated other comprehensive income (loss) includes unrealized gains or losses from the change in fair value measurement of our derivative instruments each reporting period and the related income tax expense or benefit. Changes in the fair value measurements of the derivative instruments and the related income tax expense or benefit are reflected as adjustments to accumulated other comprehensive income (loss) until the actual hedged expense is incurred or until the hedge is terminated at which point the unrealized gain (loss) is reclassified from accumulated other comprehensive income (loss) to current earnings. The estimated accumulated other comprehensive loss as of March 31, 2021 that is expected to be reclassified into earnings within the next twelve months is $2.2 million. There were no ineffective portions of our interest rate swap derivatives during the three months ended
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Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

March 31, 2021 and 2020. See Note 12 for a summary of the changes in accumulated other comprehensive income (loss) by component.
9. Commitments and Contingencies
Leases
We have operating leases for corporate offices, subleased offices and certain equipment and furniture. As of March 31, 2021, we had operating leases for office space that had not yet commenced with future rent payments of $3.5 million. These operating leases are expected to commence during 2021 with lease terms of 3 years.
The components of lease expense were as follows:
Three months ended
March 31,
(dollars in thousands)
2021
2020
Operating lease cost(1)
$2,841 $6,311 
Variable lease cost699 1,258 
Sublease income(460)(913)
Net lease cost$3,080 $6,656 
(1)Includes short-term lease costs, which were immaterial.
Other commitments
The term loans under the 2020 Credit Facility require periodic principal payments. The balance of the term loans and any amounts drawn on the revolving credit loans are due upon maturity of the 2020 Credit Facility in October 2025. The Real Estate Loans also require periodic principal payments and the balance of the Real Estate Loans are due upon maturity in April 2038.
We have contractual obligations for third-party technology used in our solutions and for other services we purchase as part of our normal operations. In certain cases, these arrangements require a minimum annual purchase commitment by us. As of March 31, 2021, the remaining aggregate minimum purchase commitment under these arrangements was approximately $79.0 million through 2024.
Solution and service indemnifications
In the ordinary course of business, we provide certain indemnifications of varying scope to customers against claims of intellectual property infringement made by third parties arising from the use of our solutions or services. If we determine that it is probable that a loss has been incurred related to solution or service indemnifications, any such loss that could be reasonably estimated would be recognized. We have not identified any losses and, accordingly, we have not recorded a liability related to these indemnifications.
Legal proceedings
We are subject to legal proceedings and claims that arise in the ordinary course of business, as well as certain other non-ordinary course proceedings, claims and inquiries, as described below. We make a provision for a loss contingency when it is both probable that a material liability has been incurred and the amount of the loss can be reasonably estimated. If only a range of estimated losses can be determined, we accrue an amount within the range that, in our judgment, reflects the most likely outcome; if none of the estimates within that range is a better estimate than any other amount, we accrue the low end of the range. For proceedings in which an unfavorable outcome is reasonably possible but not probable and an estimate of the loss or range of losses arising from the proceeding can be made, we disclose such an estimate, if material. If such a loss or range of losses is not reasonably estimable, we disclose that fact. We review any such loss contingency provisions at least quarterly and adjust them to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. We
First Quarter 2021 Form 10-Q
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Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

recognize insurance recoveries, if any, when they are probable of receipt. All associated legal costs are expensed as incurred.
Legal proceedings are inherently unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending or threatened against us and intend to defend ourselves vigorously against all claims asserted. We further believe that the amount or range of reasonably possible losses related to such pending or threatened legal proceedings will not have a material adverse effect on our business, operating results, cash flows, or financial condition should such litigation be resolved unfavorably. It is possible, nevertheless, that our consolidated financial position, results of operations or cash flows could be materially negatively affected in any particular period by an unfavorable resolution of one or more of such legal proceedings.
Security incident
As previously disclosed, we are subject to risks and uncertainties as a result of a ransomware attack against us in May 2020 in which a cybercriminal removed a copy of a subset of data from our self-hosted environment (the "Security Incident"). Based on the nature of the Security Incident, our research and third party (including law enforcement) investigation, we have no reason to believe that any data went beyond the cybercriminal, was or will be misused, or will be disseminated or otherwise made available publicly. Our investigation into the Security Incident by our cybersecurity team and third-party forensic advisors remains ongoing.
As a result of the Security Incident, we are currently subject to certain legal proceedings, claims, inquiries and investigations, as discussed below, and could be the subject of additional legal proceedings, claims, inquires and investigations in the future that might result in adverse judgments, settlements, fines, penalties, or other resolution. To limit our exposure to losses related to claims against us, including data breaches such as the Security Incident, we maintain $50 million of insurance above a $250 thousand deductible payable by us. As noted below, this coverage has reduced our financial exposure related to the Security Incident, and we will continue to seek recoveries under these insurance policies. Although it is possible that total losses related to the Security Incident will ultimately exceed the limits of our insurance coverage, we are currently unable to determine if or when that will be the case and, if so, the approximate amount or range of any such excess.
In the three months ended March 31, 2021, we recorded $12.8 million of expenses related to the Security Incident and offsetting probable insurance recoveries of $12.8 million. As of March 31, 2021, we have recorded cumulative expenses related to the Security Incident of $22.6 million and cumulative probable insurance recoveries of $22.1 million. Due to the time required to submit and process such insurance claims, we have not yet received all of the accrued insurance recoveries. Of the insurance recoveries recorded, $6.4 million had been paid as of March 31, 2021. Recorded expenses consisted primarily of payments to third-party service providers and consultants, including legal fees. We present expenses and insurance recoveries related to the Security Incident in general and administrative expense on our condensed consolidated statements of comprehensive income. We expect to continue to experience significant expenses related to our response to the Security Incident, resolution of legal proceedings, claims, inquiries and investigations discussed below, and our efforts to further enhance our security measures, which expenses may be material.
Based on our analysis of the factors described above, we have not recorded a liability related to the Security Incident as of March 31, 2021 because we are unable at this time to reasonably estimate the possible loss or range of loss.
Customer claims. To date, we have received approximately 630 claims for reimbursement of expenses from customers or their attorneys in the U.S., U.K. and Canada related to the Security Incident (none of which have as yet been filed in court or in arbitration). Possible exposure could result from our customers’ costs and expenses associated with notifying their own customers of the Security Incident and taking steps to assure that personal information has not been compromised as a result of the Security Incident. We are in the process of analyzing individual customer contracts into which we have entered, the specific claims made and applicable law.
Customer constituent class actions. Presently, we are a defendant in 30 putative consumer class action cases [27 in U.S. federal courts (some of which have been consolidated under multi district litigation to a single federal court), 1 in a U.S. state court and 2 in Canadian courts] alleging harm from the Security Incident. The plaintiffs in these cases, who purport to represent various classes of individual constituents of our customers, generally claim to have been harmed by
16
First Quarter 2021 Form 10-Q

Table of Contents

Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

alleged actions and/or omissions by us in connection with the Security Incident and assert a variety of common law and statutory claims seeking monetary damages, injunctive relief, costs and attorneys’ fees, and other related relief.
Lawsuits that are putative class actions require a plaintiff to satisfy a number of procedural requirements before proceeding to trial. These requirements include, among others, demonstration to a court that the law proscribes in some manner our activities, the making of factual allegations sufficient to suggest that our activities exceeded the limits of the law and a determination by the court—known as class certification—that the law permits a group of individuals to pursue the case together as a class. If these procedural requirements are not met, the lawsuit cannot proceed as a class action and the plaintiff may lose the financial incentive to proceed with the case. Frequently, a court’s determination as to these procedural requirements is subject to appeal to a higher court. As a result of these uncertainties, we may be unable to determine the probability of loss until, or after, a court has finally determined that a plaintiff has satisfied the applicable class action procedural requirements.
Furthermore, for putative class actions, it is often not possible to estimate the possible loss or a range of loss amounts, even where we have determined that a loss is reasonably possible. Generally, class actions involve a large number of people and raise complex legal and factual issues that result in uncertainty as to their outcome and, ultimately, making it difficult for us to estimate the amount of damages that a plaintiff might successfully prove. This analysis is further complicated by the fact that the plaintiffs lack contractual privity with us.
Governmental inquiries and investigations. To date, we have received a consolidated, multi-state Civil Investigative Demand issued on behalf of 47 state Attorneys General and the District of Columbia and a separate Civil Investigative Demand from the office of the Illinois Attorney General’s Office relating to the Security Incident. In addition, we have received communications, inquires and requests from the U.S. Federal Trade Commission, the U.S. Securities and Exchange Commission, the U.S. Department of Health and Human Services, the Information Commissioner’s Office in the United Kingdom (the “ICO”) under the U.K. Data Protection Act 2018, the Office of the Australian Information Commissioner and the Office of the Privacy Commissioner of Canada. We are cooperating with these offices and responding to their inquiries, which include various requests for documents, policies, narratives and communications, as well as requests to interview or depose various Company-related personnel. As noted above, each of these separate governmental inquiries and investigations could result in adverse judgements, settlements, fines, penalties, or other resolution, the amount, scope and timing of which we are currently unable to predict, but could be material.
10. Income Taxes
Our income tax provision and effective income tax rates, including the effects of period-specific events, were:
  
Three months ended
March 31,
(dollars in thousands)
2021
2020
Income tax provision$684 $696 
Effective income tax rate131.5 %13.0 %
The increase in our effective income tax rate for the three months ended March 31, 2021, when compared to the same period in 2020, was primarily attributable to higher 2021 discrete tax expense against lower pre-tax income. The 2020 effective income tax rate was positively impacted by benefits attributable to stock-based compensation. The 2021 effective income tax rate was negatively impacted by tax expense attributable to stock-based compensation against lower pre-tax income.
First Quarter 2021 Form 10-Q
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Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

11. Stock-based Compensation
Stock-based compensation expense is allocated to cost of revenue and operating expenses on the condensed consolidated statements of comprehensive income based on where the associated employee’s compensation is recorded. The following table summarizes stock-based compensation expense:
  
Three months ended
March 31,
(dollars in thousands)
2021
2020
Included in cost of revenue:
Cost of recurring$2,411 $470 
Cost of one-time services and other2,947 395 
Total included in cost of revenue5,358 865 
Included in operating expenses:
Sales, marketing and customer success5,428 2,478 
Research and development6,714 2,799 
General and administrative12,505 7,438 
Total included in operating expenses24,647 12,715 
Total stock-based compensation expense$30,005 $13,580 
12. Stockholders' Equity
Stock repurchase program
In November 2020, our Board of Directors reauthorized and expanded a stock repurchase program that authorizes us to purchase up to $250.0 million of our outstanding shares of common stock. The program does not have an expiration date. Under the stock repurchase program, we are authorized to repurchase shares from time to time in accordance with applicable laws both on the open market, including under trading plans established pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, and in privately negotiated transactions. The timing and amount of repurchases depends on several factors, including market and business conditions, the trading price of our common stock and the nature of other investment opportunities. The repurchase program may be limited, suspended or discontinued at any time without prior notice. Under the 2020 Credit Facility, we have restrictions on our ability to repurchase shares of our common stock.
We account for purchases of treasury stock under the cost method. During the three months ended March 31, 2021, we purchased 465,821 shares for $28.1 million. The remaining amount available to purchase stock under the stock repurchase program was $180.9 million as of March 31, 2021.
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Blackbaud, Inc.
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

Changes in accumulated other comprehensive income (loss) by component
The changes in accumulated other comprehensive income (loss) by component, consisted of the following:
Three months ended
March 31,
(dollars in thousands)
2021
2020
Accumulated other comprehensive loss, beginning of period$(2,497)$(5,290)
By component:
Gains and losses on cash flow hedges:
Accumulated other comprehensive loss balance, beginning of period$(3,101)$(1,323)
Other comprehensive income (loss) before reclassifications, net of tax effects of $(1,100) and $1,154
3,130 (3,273)
Amounts reclassified from accumulated other comprehensive income (loss) to interest expense1,376 205 
Tax benefit included in provision for income taxes(357)(54)
Total amounts reclassified from accumulated other comprehensive income (loss)1,019 151 
Net current-period other comprehensive income (loss)4,149 (3,122)
Accumulated other comprehensive income (loss) balance, end of period$1,048 $(4,445)
Foreign currency translation adjustment:
Accumulated other comprehensive income (loss) balance, beginning of period$604 $(3,967)
Translation adjustments2,511 (5,728)
Accumulated other comprehensive income (loss) balance, end of period3,115 (9,695)
Accumulated other comprehensive income (loss), end of period$4,163 $(14,140)
13. Revenue Recognition
Transaction price allocated to the remaining performance obligations
As of March 31, 2021, approximately $776 million of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 60% of these remaining performance obligations over the next 12 months, with the remainder recognized thereafter.
We applied the practical expedient in ASC 606-10-50-14 and have excluded the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less (one-time services); and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed (transactional revenue).
Contract balances
Our contract assets as of March 31, 2021 and December 31, 2020 were insignificant. Our opening and closing balances of deferred revenue were as follows:
(in thousands)March 31,
2021
December 31,
2020
Total deferred revenue$294,520 $316,914 
The decrease in deferred revenue during the three months ended March 31, 2021 was primarily due to a 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 resulting in our lowest balance of deferred revenue at the end of our first quarter. The amount of revenue recognized during the three months ended March 31, 2021 that was included in the deferred revenue balance at the beginning of the period was approximately
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Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)

$134 million. The amount of revenue recognized during the three months ended March 31, 2021 from performance obligations satisfied in prior periods was insignificant.
Disaggregation of revenue
We sell our cloud solutions and related services in three primary geographical markets: to customers in the United States, to customers in the United Kingdom and to customers located in other countries. The following table presents our revenue by geographic area based on the address of our customers:
Three months ended
March 31,
(dollars in thousands)
2021
2020
United States$185,327 $193,959 
United Kingdom22,305 15,825 
Other countries11,559 13,837 
Total revenue$219,191 $223,621 
The General Markets Group ("GMG"), the Enterprise Markets Group ("EMG"), and the International Markets Group ("IMG") comprised our go-to-market organizations as of March 31, 2021. The following is a description of each market group as of that date:
The GMG focuses on sales primarily to all K-12 private schools, faith communities and arts and cultural organizations, as well as emerging and mid-sized prospects in the U.S.;
The EMG focuses on sales primarily to all healthcare and higher education institutions, corporations and foundations, as well as large and/or strategic prospects in the U.S.; and
The IMG focuses on sales primarily to all prospects and customers outside of the U.S.
The following table presents our revenue by market group:
Three months ended
March 31,
(dollars in thousands)
2021
2020
GMG$93,339 $95,453 
EMG89,527 98,123 
IMG36,370 30,081 
Other(45)(36)
Total revenue$219,191 $223,621 
The following table presents our recurring revenue by type:
Three months ended
March 31,
(dollars in thousands)
2021
2020
Contractual recurring$146,821 $147,744 
Transactional recurring59,929 57,123 
Total recurring revenue$206,750 $204,867 
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. The following discussion and analysis presents financial information denominated in millions of dollars which can lead to differences from rounding when compared to similar information contained in the condensed consolidated financial statements and related notes which are primarily denominated in thousands of dollars.
Executive Summary
We are the world’s leading cloud software company powering social good. Serving the entire social good community—nonprofits, higher education institutions, K–12 schools, healthcare organizations, faith communities, arts and cultural organizations, foundations, companies and individual change agents—we connect and empower organizations to increase their impact through cloud software, services, expertise and data intelligence. Our portfolio is tailored to the unique needs of vertical markets, with solutions for fundraising and CRM, marketing, advocacy, peer-to-peer fundraising, corporate social responsibility, school management, ticketing, grantmaking, financial management, payment processing and analytics. Serving the industry for nearly four decades, we are headquartered in Charleston, South Carolina, and have operations in the United States, Australia, Canada, Costa Rica and the United Kingdom.
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 other transactional-type services; (iii) providing software maintenance and support services; and (iv) providing professional services, including implementation, consulting, training, analytic and other services.
COVID-19 Impact
The economic impact of COVID-19 on the social good industry remains uncertain. If our existing and prospective customers remain cautious in their purchase decisions, our operating environment may continue to be challenging for the remainder of 2021 and potentially beyond. Notwithstanding these conditions, we remain focused on continuing to execute our four-point strategy and strengthening our leadership position.
As expected and previously disclosed, our bookings shortfalls that began at the start of the pandemic in March 2020 are putting pressure on our contractual recurring revenue growth in the near-term. However, we are optimistic this pressure will abate as we progress through 2021. We had a solid bookings performance in the first quarter of 2021, which was favorable to our plan and our first quarter 2020 bookings performance.
Four-Point Strategy
1Expand Total Addressable Market
2Lead with World Class Teams and Operations
3Delight Customers with Innovative Cloud Solutions
4Focus on Employees, Culture and ESG Initiatives
1.Expand Total Addressable Market ("TAM")
We remain active in the evaluation of opportunities to further expand our addressable market through acquisitions and internal product development. We have significant opportunities in front of us as we are less than 10% penetrated into a TAM of over $10 billion.
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2.Lead with World Class Teams and Operations
This strategy expands upon our previous strategies to drive sales effectiveness and improve operating efficiency to include improving overall company performance as measured by the Rule of 40 (see discussion of Non-GAAP Financial Measures below). We have a strong executive team that is delivering on our mission and executing on our strategy. We have talent across our company, at every level, who are aligned with these goals as well.
3.Delight Customers with Innovative Cloud Solutions
2020 required unprecedented speed and scale to support our customers, and we were quick to reprioritize and expedite product enhancements to support our customers' changing needs as they needed to operate more digitally. We have carried that momentum into 2021. For example, we upgraded virtually all of our Blackbaud Grantmaking customers to a new SKY UX version in just one month's time. This helps alleviate our customers' IT burden, improves data security with multi-factor authentication and provides freedom and flexibility to access advanced grant management technology anywhere via any browser on any device. With more veteran grantmakers using mobile technology and a younger generation of grantmakers emerging in the philanthropic community, providing convenient access to grant data and grant management tools will continue to be critical for success. Blackbaud plays a critical role in accelerating our customers' move to the cloud. In higher education, with the COVID-19 pandemic accelerating the need for powerful cloud-based systems that allow for easier collaboration, Blackbaud CRM has been the trusted CRM solution for a growing number of institutions to support their overall advancement needs.
4.Focus on Employees, Culture and ESG Initiatives
During the first quarter of 2021, we elevated a specific strategy focused on employees, culture and ESG initiatives. This is not new for us. It is something that has been in our DNA for a long time and is a big advantage as we look to attract and retain top talent. This is evident in our 2020 social responsibility report, which was released in April 2021, and demonstrates how we responded to the unique challenges the pandemic created for our employees, customers, and communities. We also expanded this year's report to include voluntary ESG reporting disclosures that align with the Sustainability Accounting Standards Board and Global Reporting Initiative. One highlight from the report is that the Company is comprised of 46% female employees and 54% male employees, which is an industry-leading ratio. We are fully committed to continuing to create a diverse and inclusive environment at all levels of the organization.
Financial Summary
Total revenue ($M)Income from operations ($M)
YoY Growth (%)YoY Growth (%)
       
                                   
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Total revenue decreased by $4.4 million during the three months ended March 31, 2021, when compared to the same period in 2020, driven largely by the following:
-Decrease in one-time consulting revenue due primarily to less implementation and customization services. We changed our commission plans during the first quarter of 2020 to intentionally shift our sales teams' focus towards selling our cloud solutions. Additionally, the bookings shortfalls during 2020 caused by the COVID-19 pandemic contributed to the decrease in one-time consulting revenue.
-Decrease in one-time analytics revenue as analytics are generally integrated in our cloud solutions
+Growth in recurring revenue related to an increase in transactional revenue related to charitable giving
Income from operations decreased by $1.8 million during the three months ended March 31, 2021, when compared to the same period in 2020, driven largely by the following:
-
Increase in stock-based compensation costs of $16.4 million due to:
replacement of our annual cash bonus plans with a short-term performance-based equity award plan;
increases in the grant date fair values of our annual equity awards granted to employees;
in response to COVID-19, replacement of our 2020 base salary merit increases with one-year time-based equity awards;
overall Company performance against 2020 goals; and
decrease in the vesting period for our annual long-term incentive time-based equity awards from 4 years (1/4 per year) to 3 years (1/3 per year), beginning in February 2021.
-
Decrease in total revenue, as described above
+
Decrease in compensation costs other than stock-based compensation of $12.7 million primarily due to a decrease in headcount
+
Decrease in travel costs of $3.6 million due to our restriction on non-essential employee travel in response to the COVID-19 pandemic
+
Decrease in amortization of intangible assets from business combinations of $2.0 million
Customer retention
                                   
Our recurring revenue contracts are generally for a term of three years at contract inception with one to three-year renewals thereafter. We anticipate a continued decrease in maintenance contract renewals as we transition our solution portfolio and maintenance customers from a perpetual license-based model to a cloud subscription delivery model. In the long term, we also anticipate an increase in recurring subscription contract renewals as we continue focusing on innovation, quality and the integration of our cloud solutions, which we believe will provide value-adding capabilities to better address our customers' needs. Due primarily to these factors, we believe a recurring revenue customer retention measure that combines recurring subscription, maintenance and service customer contracts provides a better representation of our customers' overall behavior. For the twelve months ended March 31, 2021, approximately 93% of our customers with recurring revenue contracts were retained. This customer retention rate is unchanged from our rate for the full year ended December 31, 2020.
Balance sheet and cash flow
At March 31, 2021, our cash and cash equivalents were $27.8 million and the carrying amount of our debt under the 2020 Credit Facility was $488.8 million. Our net leverage ratio was 1.79 to 1.00.