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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 September 30, 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
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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 filerSmaller 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 October 29, 2021 was 48,176,560.



TABLE OF CONTENTS
  


Third Quarter 2021 Form 10-Q
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1

Blackbaud, Inc.
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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 related liabilities, and current or potential legal proceedings 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 filings made with the United States Securities & Exchange Commission ("SEC"). 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
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Third Quarter 2021 Form 10-Q


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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Blackbaud, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(dollars in thousands)September 30,
2021
December 31,
2020
Assets
Current assets:
Cash and cash equivalents$27,591 $35,750 
Restricted cash216,122 609,219 
Accounts receivable, net of allowance of $10,847 and $10,292 at September 30, 2021 and December 31, 2020, respectively
105,873 95,404 
Customer funds receivable6,076 321 
Prepaid expenses and other current assets102,319 78,366 
Total current assets457,981 819,060 
Property and equipment, net103,346 105,177 
Operating lease right-of-use assets19,652 22,671 
Software development costs, net118,860 111,827 
Goodwill635,912 635,854 
Intangible assets, net249,494 277,506 
Other assets69,699 72,639 
Total assets$1,654,944 $2,044,734 
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable$38,388 $27,836 
Accrued expenses and other current liabilities58,579 52,228 
Due to customers220,785 608,264 
Debt, current portion12,948 12,840 
Deferred revenue, current portion329,426 312,236 
Total current liabilities660,126 1,013,404 
Debt, net of current portion514,418 518,193 
Deferred tax liability56,144 54,086 
Deferred revenue, net of current portion4,528 4,678 
Operating lease liabilities, net of current portion13,470 17,357 
Other liabilities9,421 10,866 
Total liabilities1,258,107 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, 62,353,643 and 60,904,638 shares issued at September 30, 2021 and December 31, 2020, respectively
62 61 
Additional paid-in capital634,406 544,963 
Treasury stock, at cost; 14,039,117 and 12,054,268 shares at September 30, 2021 and December 31, 2020, respectively
(490,456)(353,091)
Accumulated other comprehensive income (loss)3,319 (2,497)
Retained earnings249,506 236,714 
Total stockholders’ equity396,837 426,150 
Total liabilities and stockholders’ equity$1,654,944 $2,044,734 
The accompanying notes are an integral part of these condensed consolidated financial statements.
Third Quarter 2021 Form 10-Q
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3



Blackbaud, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
Three months ended
September 30,
Nine months ended
September 30,
(dollars in thousands, except per share amounts)2021202020212020
Revenue
Recurring$218,530 $200,102 $642,266 $621,229 
One-time services and other12,688 14,899 37,583 49,384 
Total revenue231,218 215,001 679,849 670,613 
Cost of revenue
Cost of recurring95,823 84,251 279,123 265,172 
Cost of one-time services and other11,858 14,434 40,013 43,317 
Total cost of revenue107,681 98,685 319,136 308,489 
Gross profit123,537 116,316 360,713 362,124 
Operating expenses
Sales, marketing and customer success44,703 48,460 138,948 159,149 
Research and development31,566 22,783 90,967 72,655 
General and administrative34,733 34,132 97,328 89,829 
Amortization558 749 1,674 2,219 
Restructuring131 105 263 179 
Total operating expenses111,691 106,229 329,180 324,031 
Income from operations11,846 10,087 31,533 38,093 
Interest expense(4,003)(3,997)(14,171)(12,049)
Other income, net862 542 339 2,242 
Income before provision for income taxes8,705 6,632 17,701 28,286 
Income tax provision2,517 1,756 4,946 6,948 
Net income$6,188 $4,876 $12,755 $21,338 
Earnings per share
Basic$0.13 $0.10 $0.27 $0.44 
Diluted$0.13 $0.10 $0.26 $0.44 
Common shares and equivalents outstanding
Basic weighted average shares47,542,746 48,271,139 47,554,746 48,182,799 
Diluted weighted average shares48,274,072 48,859,707 48,259,956 48,582,068 
Other comprehensive (loss) income
Foreign currency translation adjustment(3,234)4,661 1,060 (1,954)
Unrealized gain (loss) on derivative instruments, net of tax262 943 4,756 (1,628)
Total other comprehensive (loss) income(2,972)5,604 5,816 (3,582)
Comprehensive income$3,216 $10,480 $18,571 $17,756 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
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Third Quarter 2021 Form 10-Q


Blackbaud, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 Nine months ended
September 30,
(dollars in thousands)20212020
Cash flows from operating activities
Net income$12,755 $21,338 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization60,484 68,755 
Provision for credit losses and sales returns7,992 10,156 
Stock-based compensation expense89,480 54,556 
Deferred taxes400 1,879 
Amortization of deferred financing costs and discount1,234 569 
Other non-cash adjustments(527)2,203 
Changes in operating assets and liabilities, net of acquisition and disposal of businesses:
Accounts receivable(18,779)(18,319)
Prepaid expenses and other assets(14,169)4,292 
Trade accounts payable10,728 (17,203)
Accrued expenses and other liabilities2,790 (31,595)
Deferred revenue17,400 12,534 
Net cash provided by operating activities169,788 109,165 
Cash flows from investing activities
Purchase of property and equipment(8,332)(25,836)
Capitalized software development costs(29,661)(32,028)
Net cash used in investing activities(37,993)(57,864)
Cash flows from financing activities
Proceeds from issuance of debt128,300 267,400 
Payments on debt(131,272)(290,999)
Debt issuance costs (593)
Employee taxes paid for withheld shares upon equity award settlement(39,012)(21,286)
Proceeds from exercise of stock options 4 
Change in due to customers(386,973)(337,821)
Change in customer funds receivable(5,838)(4,495)
Purchase of treasury stock(98,353) 
Dividend payments to stockholders (5,960)
Net cash used in financing activities(533,148)(393,750)
Effect of exchange rate on cash, cash equivalents and restricted cash97 (623)
Net decrease in cash, cash equivalents and restricted cash(401,256)(343,072)
Cash, cash equivalents and restricted cash, beginning of period644,969 577,295 
Cash, cash equivalents and restricted cash, end of period$243,713 $234,223 
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)September 30,
2021
December 31,
2020
Cash and cash equivalents$27,591 $35,750 
Restricted cash216,122 609,219 
Total cash, cash equivalents and restricted cash in the statement of cash flows$243,713 $644,969 
The accompanying notes are an integral part of these condensed consolidated financial statements.

Third Quarter 2021 Form 10-Q
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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 
Net income— — — — — 6,731 6,731 
Purchase of 405,047 treasury shares under stock repurchase program
— — — (30,008)— — (30,008)
Vesting of restricted stock units804,323 —  — — —  
Employee taxes paid for 285,521 withheld shares upon equity award settlement
— — — (20,286)— — (20,286)
Stock-based compensation— — 30,528 — — 21 30,549 
Restricted stock grants9,431  — — — —  
Restricted stock cancellations(76,316)— — — — — — 
Other comprehensive income— — — — 2,128 — 2,128 
Balance at June 30, 202162,332,714 $62 $605,486 $(449,877)$6,291 $243,312 $405,274 
Net income— — — — — 6,188 6,188 
Purchase of 583,280 treasury shares under stock repurchase program
— — — (40,279)— — (40,279)
Vesting of restricted stock units908 —  — — —  
Employee taxes paid for 4,313 withheld shares upon equity award settlement
— — — (300)— — (300)
Stock-based compensation— — 28,920 — — 6 28,926 
Restricted stock grants54,132  — — — —  
Restricted stock cancellations(34,111)— — — — — — 
Other comprehensive loss— — — — (2,972)— (2,972)
Balance at September 30, 202162,353,643 $62 $634,406 $(490,456)$3,319 $249,506 $396,837 

6
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Third Quarter 2021 Form 10-Q

Blackbaud, Inc.
Condensed Consolidated Statements of Stockholders' Equity (continued)
(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, 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 
Net income— — — — — 11,823 11,823 
Exercise of stock options and vesting of restricted stock units7,111 — 3 — — — 3 
Employee taxes paid for 21,200 withheld shares upon equity award settlement
— — — (1,214)— — (1,214)
Stock-based compensation— — 20,103 — — 30 20,133 
Restricted stock grants20,776  — — — —  
Restricted stock cancellations(59,426)— — — — — — 
Other comprehensive loss— — — — (336)— (336)
Balance at June 30, 202060,901,100 $61 $491,450 $(311,661)$(14,476)$245,428 $410,802 
Net income— — — — — 4,876 4,876 
Vesting of restricted stock units906 —  — — —  
Employee taxes paid for 4,574 withheld shares upon equity award settlement
— — — (290)— — (290)
Stock-based compensation— — 20,819 — — 24 20,843 
Restricted stock grants48,783  — — — —  
Restricted stock cancellations(46,864)— — — — — — 
Other comprehensive income— — — — 5,604 — 5,604 
Balance at September 30, 202060,903,925 $61 $512,269 $(311,951)$(8,872)$250,328 $441,835 
The accompanying notes are an integral part of these condensed consolidated financial statements.


Third Quarter 2021 Form 10-Q
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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 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 nine months ended September 30, 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").
As discussed in Note 13, beginning in the second quarter of 2021, we combined our General Markets Group ("GMG") and Enterprise Markets Group ("EMG") into a single U.S. Markets Group ("UMG") and moved our Corporations vertical under our International Markets Group ("IMG"). This change was made to better align our resources toward customer retention and growth which, are key objectives as we progress toward our long-term aspirational goals. The change did not impact our conclusions that we have one operating and reportable segment and one goodwill reporting unit.
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Third Quarter 2021 Form 10-Q


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

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 significantly impact our vertical markets and geographies, but the magnitude of the impact on our business cannot be determined at this time due to numerous uncertainties, including the duration of the outbreak, the severity of variants which may develop, travel restrictions and business closures, the effectiveness of vaccination programs and other actions taken to contain the disease and other unforeseeable consequences.
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, loss contingencies and insurance recoveries, 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 nine months ended September 30, 2021, consisted of the following:
(dollars in thousands)Total
Balance at December 31, 2020$635,854 
Effect of foreign currency translation58 
Balance at September 30, 2021$635,912 
4. Earnings Per Share
We compute basic earnings per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings 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 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.
Third Quarter 2021 Form 10-Q
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9


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

The following table sets forth the computation of basic and diluted earnings per share:
  
Three months ended
September 30,
Nine months ended
September 30,
(dollars in thousands, except per share amounts)
2021
2020
2021
2020
Numerator:
Net income$6,188 $4,876 $12,755 $21,338 
Denominator:
Weighted average common shares47,542,746 48,271,139 47,554,746 48,182,799 
Add effect of dilutive securities:
Stock-based awards731,326 588,568 705,210 399,269 
Weighted average common shares assuming dilution48,274,072 48,859,707 48,259,956 48,582,068 
Earnings per share:
Basic$0.13 $0.10 $0.27 $0.44 
Diluted$0.13 $0.10 $0.26 $0.44 
Anti-dilutive shares excluded from calculations of diluted earnings per share904,100 915,226 1,034,091 1,036,445 
5. Fair Value Measurements
We use a three-tier fair value hierarchy to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:
Level 1 - Quoted prices for identical assets or liabilities in active markets;
Level 2 - Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
Recurring fair value measurements
Assets and liabilities that are measured at fair value on a recurring basis consisted of the following, as of the dates indicated below:
Fair value measurement using
(dollars in thousands)Level 1Level 2Level 3Total
Fair value as of September 30, 2021
Financial assets:
Derivative instruments$ $2,283 $ $2,283 
Total financial assets$ $2,283 $ $2,283 
Fair value as of December 31, 2020
Financial liabilities:
Derivative instruments$ $4,159 $ $4,159 
Total financial liabilities$ $4,159 $ $4,159 
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Third Quarter 2021 Form 10-Q


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

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. See Note 8 for additional information about our derivative instruments.
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 all tenors of LIBOR by June 2023. 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 September 30, 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 September 30, 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 nine months ended September 30, 2021. Additionally, we did not hold any Level 3 assets or liabilities during the nine months ended September 30, 2021.
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 material non-recurring fair value adjustments to our long-lived assets, intangible assets, goodwill and operating lease ROU assets during the nine months ended September 30, 2021.
6. Consolidated Financial Statement Details
Restricted cash
(dollars in thousands)September 30,
2021
December 31,
2020
Restricted cash due to customers$214,709 $607,943 
Real estate escrow balances1,413 1,276 
Total restricted cash$216,122 $609,219 
Third Quarter 2021 Form 10-Q
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11


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

Prepaid expenses and other assets
(dollars in thousands)September 30,
2021
December 31,
2020
Costs of obtaining contracts(1)(2)
$78,656 $84,914 
Prepaid software maintenance and subscriptions(3)
28,904 24,471 
Receivables for probable insurance recoveries(4)(5)
25,936 6,288 
Implementation costs for cloud computing arrangements, net(6)(7)
12,430 11,298 
Unbilled accounts receivable6,302 10,385 
Prepaid insurance3,331 1,426 
Derivative instruments2,283  
Taxes, prepaid and receivable1,473 1,891 
Other assets12,703 10,332 
Total prepaid expenses and other assets172,018 151,005 
Less: Long-term portion69,699 72,639 
Prepaid expenses and other current assets$102,319 $78,366 
(1)Amortization expense from costs of obtaining contracts was $8.8 million and $26.9 million for the three and nine months ended September 30, 2021, respectively, and $9.4 million and $28.2 million for the three and nine months ended September 30, 2020, respectively.
(2)The current portion of costs of obtaining contracts as of September 30, 2021 and December 31, 2020 was $30.3 million and $31.9 million, respectively.
(3)The current portion of prepaid software maintenance and subscriptions as of September 30, 2021 and December 31, 2020 was $25.4 million and $19.8 million, respectively.
(4)All receivables for probable insurance recoveries are classified as current.
(5)See discussion of the Security Incident at Note 9.
(6)These costs primarily relate to the multi-year implementations of our new global enterprise resource planning and customer relationship management systems.
(7)Amortization expense from capitalized cloud computing implementation costs was insignificant and $1.3 million for the three and nine months ended September 30, 2021, respectively, and insignificant for the three and nine months ended September 30, 2020. Accumulated amortization for these costs was $2.5 million as of September 30, 2021 and $1.1 million as of December 31, 2020.
Accrued expenses and other liabilities
(dollars in thousands)September 30,
2021
December 31,
2020
Accrued legal costs(1)
$21,341 $4,808 
Taxes payable(2)
14,430 19,577 
Operating lease liabilities, current portion7,160 9,359 
Customer credit balances6,539 5,874 
Accrued commissions and salaries4,084 5,010 
Unrecognized tax benefit3,656 3,351 
Accrued health care costs2,440 2,341 
Accrued vacation costs2,207 2,311 
Derivative instruments 4,159 
Other liabilities6,143 6,304 
Total accrued expenses and other liabilities68,000 63,094 
Less: Long-term portion9,421 10,866 
Accrued expenses and other current liabilities$58,579 $52,228 
(1)All accrued legal costs are classified as current. The increase in accrued legal costs from December 31, 2020 was primarily due to the Security Incident. See Note 9.
(2)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 was due by the end of calendar year 2021 with the remainder due by the end of calendar year 2022.
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Third Quarter 2021 Form 10-Q


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

Other income, net
  
Three months ended
September 30,
Nine months ended
September 30,
(dollars in thousands)
2021
2020
2021
2020
Interest income$82 $767 $311 $1,399 
Other income (expense), net780 (225)28 843 
Other income, net$862 $542 $339 $2,242 
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)September 30,
2021
December 31,
2020
September 30,
2021
December 31,
2020
Credit facility:
Revolving credit loans$75,000 $69,625 2.23 %1.83 %
Term loans392,500 400,000 2.04 %3.12 %
Real estate loans59,779 60,626 5.22 %5.22 %
Other debt2,232 3,926 5.00 %5.00 %
Total debt529,511 534,177 2.44 %3.21 %
Less: Unamortized discount and debt issuance costs2,145 3,144 
Less: Debt, current portion12,948 12,840 2.47 %2.61 %
Debt, net of current portion$514,418 $518,193 2.44 %3.22 %
2020 credit facility
In October 2020, we entered into a five-year $900.0 million senior credit facility (the "2020 Credit Facility"). At September 30, 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 September 30, 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 September 30, 2021:
(dollars in thousands)Term
 in Months
Number of
Annual Payments
First Annual
Payment Due
Original Loan
Value
Effective dates of agreements:
December 201951January 2020$2,150 
January 202039March 20203,470 
Third Quarter 2021 Form 10-Q
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13