Blackbaud(BLKB) - 2024 Q4 - Annual Report

Technology and Innovation Risks - The company is incorporating generative AI technology into certain solutions and services, which may present operational, financial, and reputational risks due to the emerging regulatory environment [124] - The introduction of new technologies, such as AI, could render existing solutions obsolete, impacting the company's market competitiveness [116] - The company’s reliance on third-party service providers for AI features may expose it to legal liabilities and reputational harm if personal data is improperly processed [125] - The company’s generative AI features may produce misleading or harmful outputs, which could lead to reputational damage and legal liabilities [126] - The company faces risks associated with the use of third-party technologies, which could delay solution development and harm business operations [139] Competition and Market Dynamics - The company faces intense competition for highly qualified personnel, which could impact its ability to support planned growth if key personnel cannot be attracted or retained [117] - The company has experienced significant competition, which may limit pricing power and affect customer adoption and renewal of solutions [115] - The market for software and services in the social impact community may not grow as expected, potentially limiting the adoption of the company's solutions [119] - Negative media coverage related to peer-to-peer fundraising campaigns could adversely affect user engagement and revenue [131] Financial Performance and Revenue - GAAP revenue for 2024 was $1,155.5 million, representing a 4.5$1,105.4 million in 2023 [321] - Non-GAAP organic revenue for 2024 was $1,155.5 million, with a growth rate of 5.2$1,098.0 million in 2023 [321] - Non-GAAP adjusted EBITDA for 2024 was $388.9 million, with a margin of 33.7$283.2 million, compared to a net income of $1.8 million in 2023 [327] - Non-GAAP diluted earnings per share for 2024 was$4.07, up from $3.98 in 2023 [327] - A significant portion of revenue is derived from transaction-based payment processing fees, and a decline in charitable giving could negatively impact these revenues [138] Security and Compliance Issues - The company has received approximately 260 specific requests for reimbursement related to a security incident, with ongoing litigation in U.S. federal courts [150][152] - Compliance with cybersecurity and data protection requirements is expected to be expensive and time-consuming, with potential material liability for non-compliance [154] - The company is subject to various lawsuits and governmental inquiries related to the Security Incident, which may result in additional expenses and liabilities [157][174] - Compliance with Payment Card Industry Data Security Standards (PCI DSS) is critical for the company, as failure to comply may result in fines and harm its reputation [171] - Privacy and data protection concerns may adversely affect demand for the company's software solutions, particularly in light of evolving regulations [185] International Operations and Currency Risks - The company is expanding its international operations, particularly in India, to access talent and increase employee numbers, although it does not expect to generate revenue in India in the foreseeable future [129] - The expansion of international operations has increased exposure to foreign currency exchange rate fluctuations, which could impact financial results [130] - Approximately 14$3.0 million and income from operations by $1.1 million [376][377] Acquisitions and Impairment - The company has faced challenges in integrating acquisitions, such as the acquisition of EVERFI, Inc., which resulted in a material noncash impairment charge in December 2024 [135] - The company recorded$405.4 million in impairment and disposition charges related to the EVERFI acquisition in 2024 [327] - The divestiture of EVERFI on December 31, 2024, contributed to the decrease in deferred revenue [306] Tax and Regulatory Considerations - The effective income tax rate decreased in 2024 compared to 2023, primarily due to a valuation allowance against U.S. deferred tax assets [313] - The company recorded a valuation allowance against all U.S. deferred tax assets in excess of deferred tax liabilities as of December 31, 2024, due to cumulative pretax losses [310] - The company is subject to periodic audits by domestic and foreign tax authorities, which can impact tax positions [387] Financial Obligations and Capital Management - The company’s total borrowing capacity increased from $1.1 billion to$1.5 billion under the 2024 Credit Facilities [176] - The stock repurchase program was re-initiated in Q4 2023 after a two-year hiatus, but there is no guarantee it will enhance long-term shareholder value [181] - The company repurchased $418.0 million of its common stock in 2024, a significant increase from$18.8 million in 2023 [353] - Total contractual obligations as of December 31, 2024, amounted to $1.581 billion, with$168.7 million due within one year [366] Operational Risks - The company is subject to various operational risks, including cybersecurity threats that could adversely affect its reputation and financial results [145] - The company continues to face risks related to defects or errors in its software, which could lead to significant costs and damage to its reputation [166] - The company’s operations and financial performance may be impacted by climate change and natural disasters, affecting its data centers and business continuity [159]