# Blackbaud (BLKB) — Financial Analysis

**Exchange:**   
**Coverage as of:** 2026-Q2  
**Updated:** 2026-06-10  
**Tier:** Free primer (step 2 of 19)  
**Sibling pages:** /stocks/blkb/thesis · /memo/blkb

## Financial Snapshot

---
step: 04
title: Financial Quality & Adversarial Sweep
source: coverage-next-full
ticker: BLKB
company: Blackbaud Inc
created: 2026-06-10
---

### Step 04 — Financial Quality: Blackbaud Inc (BLKB)

> *Transcript analysis not performed (coverage-next-full path). Analysis based on SEC filings, investor presentations, and web research.*

#### 1. Income Statement Quality Assessment

##### Revenue Recognition

Blackbaud recognizes subscription revenue ratably over the contract term (ASC 606), which is conservative and appropriate for a SaaS model. Transactional revenue is recognized at point of transaction. One-time services recognized as delivered. No aggressive upfront recognition patterns observed in filings. [S2]

**Remaining Performance Obligations (RPO) as of Dec 31, 2025:** ~$1.3B — equivalent to ~1.15x annual revenue, indicating good forward visibility. Approximately 60% expected to be recognized within 12 months. [S2]

##### Earnings Quality Adjustments

| Item | GAAP FY2025 | Non-GAAP Adjustment | Commentary |
|------|-------------|---------------------|------------|
| Revenue | $1,128.4M | — | No adjustment |
| Gross Profit | $663.7M (58.8%) | ~$686M (~60.8%) | Add back SBC in COGS |
| Operating Income | $190.8M (16.9%) | $344.4M (30.5%) | Add SBC + restructuring + security costs |
| Net Income | $115.0M | ~$200M | Approximate; tax-adjusted |
| EPS (diluted) | $2.54 | $4.45 | SBC, restructuring, amortization removed |

**Key adjustments scrutinized:** [S2]
- **SBC ($92.9M):** Real economic cost but non-cash. $92.9M / $1,128M revenue = 8.2% of revenue. Declined from $128M peak (FY2023) — positive trend. At 8.2%, this is high for a mature vertical SaaS company (typical range 5-10%) and must be monitored.
- **Security incident costs ($18.0M):** Ongoing tail from the 2020 ransomware breach. FTC consent order finalized May 2024 — no monetary penalty. These costs should taper materially in FY2026.
- **Restructuring/acquisitions ($28.7M):** Post-EVERFI reorganization. Should be non-recurring.
- **Amortization of acquired intangibles ($14.0M):** Legitimate non-cash but creates a GAAP/non-GAAP delta.

**Assessment:** Non-GAAP adjustments are reasonable but cumulative SBC at 8%+ of revenue is a real dilution risk. The company bought back ~$635M in shares over FY2024-FY2025 partially to offset SBC dilution — this is an important dynamic to track.

##### Profitability Trends [S1, S2, S4]

| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|--------|--------|--------|--------|--------|--------|
| Revenue ($M) | 928 | 1,070 | 1,097 | 1,135 | 1,128 |
| Gross Margin | 52.2% | 53.1% | 54.4% | 54.7% | 58.8% |
| GAAP Operating Margin | -6.0% | 3.0% | 4.3% | -21.5%* | 16.9% |
| Non-GAAP Operating Margin | ~22% | ~24% | ~26.8% | ~27.7% | 30.5% |
| FCF Margin | ~18% | ~22% | ~24% | ~24% | ~26% |

*FY2024 distorted by $390.2M EVERFI goodwill impairment.

**Trend assessment:** Consistent margin expansion on a non-GAAP basis (22% → 30.5% over 5 years) driven by cloud migration completion and operating leverage. Gross margin inflection in FY2025 (+410bps) is meaningful and structurally durable — the EVERFI exit removed a lower-margin business unit.

#### 2. Balance Sheet Quality

| Item | Dec 2023 | Dec 2024 | Dec 2025 |
|------|----------|----------|----------|
| Cash & Equivalents | ~$95M | ~$130M | ~$73M |
| Total Assets | ~$2.8B | ~$2.4B | ~$2.1B |
| Total Debt | ~$960M | ~$1,040M | ~$1,148M |
| Net Debt | ~$865M | ~$910M | ~$1,075M |
| Total Equity | ~$630M | ~$255M | ~$85M |
| Net Debt / EBITDA | ~2.2x | ~2.4x | ~2.52x |

**Balance sheet quality: MODERATE CONCERN**

The balance sheet has been meaningfully weakened by:
1. **Aggressive share buybacks:** ~$635M in FY2024-FY2025 funded by debt/operating cash, compressing equity to near-zero ($85M)
2. **EVERFI goodwill impairment:** $390M write-down in FY2024 eliminated goodwill and reduced total assets
3. **Rising leverage:** Net Debt/EBITDA at 2.52x is elevated but not crisis-level for a high-FCF business. Covenant headroom exists.

**FCF perspective:** At $280-290M guided FCF (FY2026), the company could theoretically delever to 2.0x within 18-24 months without buybacks. Management has instead committed to returning 5-10% of shares annually via buybacks. This is a capital allocation choice — prioritizing per-share value over balance sheet conservatism.

#### 3. Cash Flow Quality

##### FCF Bridge (FY2025 Estimated) [S4, S2]

```
Non-GAAP Operating Income:   $344.4M
 + Depreciation/Amortization: ~$55M
 - CapEx:                      ~$8M
 - Cash Taxes:                 ~$60M
 - Cash Interest:              ~$62M
 - Security Incident Costs:    ~$18M
 - Working Capital Change:     ~$0M
                              ──────
FCF (estimated):             ~$251–$260M
Company-guided FCF (FY2026): $280–$290M
```

**CapEx intensity is exceptionally low (~0.7% of revenue)** — typical for a cloud SaaS model where product investment is capitalized as R&D. FCF conversion from non-GAAP operating income is high (~75%+), reflecting the capital-light model.

#### 4. Adversarial Research Sweep

##### Short Reports and Investigations

**No active short reports found** as of research date (Jun 2026). Historical context: [S7]

- **2020 Ransomware Breach:** Most significant adverse event. In May 2020, Blackbaud disclosed a ransomware attack where attackers accessed donor data for ~$10K ransom payment. Resulted in:
  - Multi-state AG settlements (~$50M aggregate over 2022-2023)
  - FTC consent order (finalized May 2024, no monetary penalty)
  - Class action settlements
  - Ongoing security improvement costs ($18M in FY2025 P&L)
  - Permanent increase in cybersecurity oversight (dedicated board committee)
  
  **Resolution status:** Largely behind the company as of FY2025-FY2026. FTC consent order is the final major formal proceeding.

##### Activist / Governance Risks

- **Clearlake Capital (~20.5% stake):** Private equity firm with significant influence. In April 2024, Clearlake submitted an **unsolicited $80/share bid** (vs. $27.86 current price) — summarily rejected by the board as "undervaluing the company." [S6]
  - The board terminated its poison pill in March 2024 — signal of shareholder-friendly posture OR setup for rejected bid narrative
  - Current $27.86 stock price is 65% below Clearlake's bid price, raising the question of whether the board's rejection was a mistake or Clearlake's bid was opportunistic
  - Clearlake remains largest non-institutional shareholder; their ownership creates both a floor (prevents hostile takeover by others) and a ceiling (overhang on open-market purchases)

##### Accounting Irregularities

- **No material accounting restatements** in the 10-K filing history [S2]
- Non-GAAP adjustments are substantial but disclosed and consistent year-over-year
- Revenue recognition practices conservative (ratable subscription recognition)
- **Watch:** SBC as % of revenue — any reversal of the declining trend would be a quality concern

##### Legal and Regulatory Exposure

| Matter | Status | Financial Exposure |
|--------|--------|-------------------|
| 2020 Ransomware (multi-state AGs) | Substantially settled | Mostly resolved; tail risk minimal |
| FTC Consent Order | Finalized May 2024 | No monetary penalty; compliance costs ongoing |
| Ongoing class actions | Wind-down phase | Immaterial reserves |
| UK GDPR exposure | Ongoing monitoring | Low; limited UK personal data in breach |

#### 5. Financial Quality Summary

| Dimension | Assessment | Notes |
|-----------|------------|-------|
| Revenue recognition | HIGH quality | Ratable; conservative |
| Earnings quality | MODERATE | SBC high; adjustments legitimate but large |
| FCF conversion | HIGH quality | Capital-light; ~75%+ conversion |
| Balance sheet | MODERATE concern | High leverage; near-zero equity |
| Cash generation | HIGH quality | Consistent, growing FCF |
| Governance/legal | MODERATE concern | Security breach largely resolved; Clearlake overhang |

#### 6. Thesis Tracker Update

**Thesis refinement after Step 04:** Financial quality is mixed but not alarming. The core concern is the deliberate balance sheet levering via buybacks — a management team that has borrowed to buy back stock at prices ranging from $50-$80 while the stock now trades at $27.86. Either management's FY2026-FY2030 targets are realistic (in which case buybacks were smart) or they were too aggressive (in which case the debt remains while the equity has underperformed). The security breach overhang is nearly resolved. SBC at 8%+ of revenue is elevated but declining.

#### 7. Source Index

| ID | Source |
|----|--------|
| S1 | SEC EDGAR XBRL (CIK 0001280058) |
| S2 | SEC 10-K FY2025 (filed 2026-02-18) |
| S4 | StockAnalysis.com (BLKB) |
| S6 | Proxy / governance research (Jun 2026) |
| S7 | Industry research / competitive analysis (Jun 2026) |
| S8 | Investor presentations / IR materials (Jun 2026) |

## Deeper Financial Analysis

The fundamental tier ($1.00) adds 8 dimensions not included here:

- Revenue Breakdown — segment revenue, geographic mix, product-line margins
- Financial Trends — QoQ momentum, leading indicators, inflection points
- Balance Sheet — debt structure, dilution risk, working capital dynamics
- Capital Allocation — ROIC, buyback cadence, reinvestment efficiency
- Earnings Analysis — beats/misses, guidance vs actuals, transcript highlights
- Competitive Positioning — market share, pricing power, peer benchmarks
- Industry Context — TAM, sector tailwinds/headwinds, regulatory backdrop

**API endpoint:** GET /api/v1/research/BLKB/fundamental

## Navigation

- Overview: /stocks/blkb
- Financials (this page): /stocks/blkb/financials
- Thesis: /stocks/blkb/thesis
- Investment Memo: /memo/blkb
- Coverage universe: /stocks