Blackbaud : Q2 2020 Blackbaud Investor Presentation

Blackbaud

Investor Presentation

TICKER: BLKB

July 29, 2020

Forward-Looking Statements

This presentation contains forward-looking statements within the meaning of 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 in this presentation consist of, among other things, statements regarding future operating results, all of which are based on current expectations, estimates, and forecasts, and the beliefs and assumptions of the Company's management. Words such as "expects," "anticipates," "aims," "projects," "intends," "plans," "likely," "will," "should," "believes," "estimates," "seeks," variations of such words, and similar expressions are intended to identify such forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Factors that could cause actual results to differ materially from the Company's expectations expressed in this presentation include: expectations for continuing to successfully execute the Company's growth and operational improvement strategies; expectations of future growth in the social good software solutions market, segments within that market and the Company's total addressable market; expectations that achieving the Company's goals will extend its competitive advantage and provide improved product quality and innovative solutions for its customers; expectations that centers of excellence and use of best-of-breed platforms will drive increasing operating efficiency and contribute to margin improvement; expectations that the Company's financial position provides flexibility to fuel future growth through acquisitions or other opportunities; expectations that past acquisitions have expanded the Company's customer and market opportunities; risks associated with unfavorable media coverage; risks associated with acquisitions; risks inherent in the expansion of our international operations; risks related to the United Kingdom's departure from the European Union; the possibility of reduced growth or amount of charitable giving; uncertainty regarding increased business and renewals from existing customers; risks associated with implementation of software products; the ability to attract and retain key personnel; risks related to the Company's leverage, credit facility, dividend policy and share repurchase program; lengthy sales and implementation cycles; technological changes that make the Company's products and services less competitive; risk related to the adequacy of our data security procedures; the implementation of our new global enterprise resource planning system; uncertainty regarding the COVID-19 disruption and the other risk factors set forth from time to time in the Company's SEC filings. Factors that could cause or contribute to such differences include, but are not limited to, those summarized under Risk Factors in the Company's most recent annual report on Form 10-K, and any quarterly reports on Forms 10-Q thereafter, copies of which are available free of charge at the SEC's website at www.sec.govor upon request from the Company's investor relations department. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent the Company's beliefs and assumptions only as of the date of this presentation. Except as required by law, the Company does not intend, and undertakes no obligation, to revise or update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Trademark Usage

All Blackbaud product names appearing herein are trademarks or registered trademarks of Blackbaud, Inc. This presentation contains trade names, trademarks and service marks of other companies. The Company does not intend its use or display of other parties' trade names, trademarks and service marks to imply a relationship with, or endorsement or sponsorship of, these other parties.

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Historical Financials and Non-GAAP Financial Measures

Use of Non-GAAPFinancial Measures: The Company has provided in this presentation financial information that has not been prepared in accordance with GAAP. The Company uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating the Company's ongoing operational performance. The Company believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial results from period to period with other companies in the Company's industry, many of which present similar non-GAAP financial measures to investors. These non-GAAP financial measures may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies. The Company believes that these non-GAAP financial measures reflect the Company's ongoing business in a manner that allows for meaningful period-to-period comparison and analysis of trends in the Company's business. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures.

Blackbaud discusses non-GAAP organic revenue growth measures, including non-GAAP organic revenue growth, non-GAAP organic revenue growth on a constant currency basis and non-GAAP organic recurring revenue growth, which Blackbaud believes provide useful information for evaluating the periodic growth of its business as well as growth on a consistent basis. Each measure of non-GAAP organic revenue growth excludes incremental acquisition-related revenue attributable to companies acquired in the current fiscal year. For companies acquired in the immediately preceding fiscal year, if any, each measure of non-GAAP organic revenue growth reflects presentation of full year incremental non-GAAP revenue derived from such companies as if they were combined throughout the prior period, and it includes the current period non-GAAP revenue attributable to those companies, as if there were no acquisition- related write-downs of acquired deferred revenue to fair value as required by GAAP. In addition, each measure of non-GAAP organic revenue growth excludes prior period revenue associated with divested businesses. The exclusion of the prior period revenue is intended to present the results of the divested businesses within the results of the combined company for the same period of time in both the prior and current periods. Blackbaud believes this presentation provides a more comparable representation of our current business' organic revenue growth and revenue run-rate. In these materials, Blackbaud is presenting the following unaudited information: historical recurring and total revenue for the three and six month periods ended June 30, 2020, for the fiscal year ended December 31, 2019 and the interim periods therein; calculations for recurring revenue growth and total revenue growth for the six month period ended June 30, 2020 and the interim periods therein; and calculations of non-GAAP organic recurring revenue growth, non-GAAP organic revenue growth and non-GAAP organic revenue growth on a constant currency basis for the same periods.

Non-GAAP free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software development, and capital expenditures for property and equipment.

Historical Financial Statements Being Presented: In these materials, Blackbaud is presenting the following unaudited historical financial information: historical consolidated balance sheets as of the fiscal year ended December 31, 2019 and interim consolidated balance sheets for each of the quarters within fiscal 2020 and 2019; historical consolidated statements of comprehensive income for the fiscal year ended December 31, 2019 and interim consolidated statements of comprehensive income for each of the quarters within fiscal 2020 and 2019; historical consolidated statements of cash flows for the fiscal year ended December 31, 2019 and interim consolidated statements of cash flows for each of the interim year-to-date periods within fiscal 2020 and 2019; and historical non-GAAP financial information for the fiscal year ended December 31, 2019 and for each of the quarters within fiscal 2020 and 2019 as well as reconciliations of the non-GAAP measures to their most directly comparable GAAP measures and related non-GAAP adjustments. Blackbaud is providing this unaudited financial information to allow investors and analysts to more easily access and review the Company's historical consolidated financial data by including such information in one document. In order to provide comparability between periods presented, certain previously reported historical financial information has been reclassified to conform to the presentation of the most recent reporting period, which is discussed in more detail with that information. In addition, certain of the unaudited historical financial statements have been adjusted for the effects of recently adopted accounting pronouncements, which are discussed in more detail with that information.

Reconciliation of GAAP to Non-GAAPFinancial Measures: Reconciliations of the most directly comparable GAAP measures to non-GAAP financial measures and related adjustments, as well as details of Blackbaud's methodology for calculating non-GAAP organic revenue growth, non-GAAP organic revenue growth on a constant currency basis and non-GAAP organic recurring revenue growth can be found in the Appendix to these materials and on the "Investor Relations" page of the Company's website.

Blackbaud has not reconciled forward-lookingnon-GAAP financial measures contained in this investor material to their most directly comparable GAAP measures. Such reconciliations would require unreasonable efforts at this time to estimate and quantify with a reasonable degree of certainty various necessary GAAP components, including for example those related to compensation, acquisition transactions and integration, tax items or others that may arise. These components and other factors could materially impact the amount of the future directly comparable GAAP measures, which may differ significantly from their non-GAAP counterparts.

3

Key Messages

The leader in	Highly	Executing a
a large and	differentiated from	clear four-point
growing market	the competition	growth strategy

4

01

Our Markets

5

Social good is a significant global sector

ARTS AND CULTURAL	HIGHER EDUCATION
ORGANIZATIONS	INSTITUTIONS
COMPANIES	INDIVIDUAL
FAITH	CHANGE AGENTS
COMMUNITIES	K-12 SCHOOLS
FOUNDATIONS	NONPROFITS
HEALTHCARE
ORGANIZATIONS

6

Blackbaud is the world's leading cloud

software company powering social good

$100B+	Millions	80%	1 out of 3
raised, granted, and	of users across	of the most	Fortune 500
invested in their	100+ countries1	influential	companies3
programming by our		nonprofits2
customers each year1

30 of 32	93%	25	150+
largest nonprofit	of higher education	of the largest	experts dedicated
hospitals4	institutions with	Catholic Dioceses	to arts and cultural
	billion-dollar	in the US1	organizations1
	campaigns5

1. PROVEN LEADER

Among the Top 30
Largest Cloud Software	Nonprofit CRM	Nonprofit Financial
Providers Worldwide,
Solution	Accounting Solution
2019

Source: (1) Internal Statistics, (2) Top 50 listed by The Street.com featured by MSN, (3) Fortune 500, (4) Becker's Hospital Review, (5) Council for Advancement and Support of Education

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Driving significant value for our customers

$10M	+335%
in contribution revenue	Marshfield Clinic Health System
in first 30 days post-implementation	exceeded their fundraising goal for
for Fellowship of Christian Athletes	their ALS Steps for Hope event

$3.5M	100%	2 weeks	+513%
raised by Brown University	participation in employee	saved off month-end	growth in
in 24 hours, a 63% increase	volunteering program	close process for	sustaining donor
in year over year fundraising	achieved by Berkshire Bank	Acero Schools in Chicago	program for San Diego
on #GivingTuesday			Humane Society

Sourced from Blackbaud customer stories

8

Substantial TAM with significant penetration opportunity

$10B+	<10%
2020 TAM	Revenue Penetration

Fundraising, Relationship	Payment Services	Financial Management, Grant	Organizational and Program	Social Responsibility
Management and Engagement		and Award Management	Management

$3B+	$3B+	$1.5B+	$1.5B+	$1.0B
<20% Penetrated	<10% Penetrated	<10% Penetrated	<10% Penetrated	<5% Penetrated

Sources: FY 2019 Blackbaud Revenue. TAM based on IRS data, Canadian Revenue Agency, Private School Universe, IPEDS, Dun & Bradstreet, HIMSS, Guidestar, Blackbaud internal data

9

Opportunity for growth extends across vertical markets

$10B+	<10%
2020 TAM	Revenue Penetration

Revenue Penetration by Vertical

$3.5B+ TAM

Each vertical represents $1.5B+ TAM

Each vertical represents $0.5B - $1B TAM

Faith-	K-12	Higher
based	Schools	Education
<5%	<15%	<20%

Nonprofits	Companies &	Healthcare	Arts &
Cultural
<10%	Foundations	<15%
<10%
	<5%

Sources: FY 2019 Blackbaud Revenue. TAM based on IRS data, Canadian Revenue Agency, Private School Universe, IPEDS, Dun & Bradstreet, HIMSS, Guidestar, Blackbaud internal data

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02

Key Differentiators

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The market's most comprehensive solutions for social good

Blackbaud is the largest cloud software vendor focused exclusively on the social good community1

Only Blackbaud offers a full portfolio of purpose-built,integrated solutions

Highly fragmented competition offers single-pointsolutions

Large customer base

with 92% customer retention

Strong balance sheet and cash flows to support strategic

acquisitions and internal product development

Fundraising &	Marketing &	Financial	Organizational	Payment
Relationship	& Program	Analytics
Engagement	Management	Services
Management	Management

OUR COMPETITORS

(and partners)

1 IDC #29th largest cloud software provider worldwide

12

Built on industry leading cloud technology

Power of the Platform

Common shared components

Continuous innovation and feature deployment

Accelerated time to market

Integrated capabilities

Enables a network effect

13

We make it simple with one accountable partner

Cloud Software

We build, integrate, and

implement vertical-specific solutions purpose-built for the unique needs of our customers.

Expertise	Services
With nearly four decades	We drive impact through
of experience, we are	dedicated customer support and
undisputed industry	training, along with strategic
experts on technology	and managed services tailored
for social good.	to our customers.

Data Intelligence

Using exclusive data, analytics, and expertise, we deliver unparalleled insight and intelligence to the customers we serve.

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A culture built on unmatched commitment to social good

4 out of 5

employees volunteer regularly logging over 100,000 hours annually

500+

employees worked previously for social good organizations

Note: Internal Statistics

1 out of 4

employees serve on nonprofit boards

9 out of 10

employees say Blackbaud's

mission was important to their decision to join the company

600+

engineers; largest R&D investment in the sector

1 out of 3

employees belong to an employee-led affinity group

A

MSCI ESG Rating

Over 2x

employees participating in matching gift program compared to U.S. national median

15

03

Strategy for

Growth

16

Executing a clear four-point growth strategy

01 Delight customers with innovative cloud solutions

Comprehensive, purpose-built

cloud solutions - backed by service to deliver differentiated value

02 Drive sales effectiveness

Improving go -to-market efficiency to drive recurring revenue growth

	Expand total		Improve operating
03	04
	addressable market		efficiency
	Acquiring, building, and partnering into		Executing a world-class operating
	near adjacent markets		model

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Delight customers with innovative cloud solutions

STRATEGY 1

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Drive sales effectiveness

Scalable	Prescriptive
Model	Selling
Global sales operations	Vertical go-to-market focus
Customer success organization	Integrated clouds
Best-in-breed back	Bifurcate hunters vs. farmers
office systems	Customer advisory councils

STRATEGY 2

Go-to-Market

Efficiency

Quality lead generation

Optimize market coverage

Productivity focus

Expand partner channel

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Expand total addressable market

Acquiring, building, and partnering into near adjacent markets

STRATEGY 3

$4B+	in TAM added through acquisitions and
new solution builds

				Blackbaud Education Management Portfolio
				Blackbaud Church Management™
2014	2015	2016	2017	2018	2019

Expand TAM into	Accelerate shift	Accelerate revenue	Accretive to operating
near adjacencies	to the cloud	growth	margins

Note: Criteria calls for investments to be accretive to operating margins over time.

20

Efficient, scalable operating model

Vertical Go-to-market

focus on customer needs and solution selling

Centers of Excellence

support functions with common systems, metrics, and measurement

Vertical

Go-to-Market

ARTS &

CULTURALNONPROFITS ORGANIZATIONS

	Global Centers
	of Excellence
SALES	(COEs)	GLOBAL
MARKETING
OPERATIONS
COMPANIES
	Centralized
CUSTOMER	Back Office	CUSTOMER
OPERATIONS
SUCCESS

STRATEGY 4

K-12

SCHOOLS

Productivity Improvement

continuous improvement across all functions of the organization

FAITH	RESEARCH,		HIGHER
DATA	EDUCATION
COMMUNITIES	DELIVERY &
INTELLIGENCE	INSTITUTIONS
	OPERATIONS

HEALTHCARE

FOUNDATIONSORGANIZATIONS

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04

Financial Strategy

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COVID-19

Early actions taken in response to COVID-19

In line with our strategy, made a pivot to place a greater emphasis on increased profitability and cash flow

Our Board of Directors eliminated the payment of future quarterly cash dividends beginning with the second quarter of 2020

Implemented several cost reduction measures:

Suspended the company funded 401(k) match until the end of the year

Put a temporary freeze on company hiring efforts

CEO announced he will temporarily forgo his paycheck

Restricted non-essential employee travel and put in place other operating cost reductions

Converted certain cash compensation to equity-based awards:

Replaced employee's 2020 cash merit increases with a one-time restricted stock grant

Replaced cash bonus plans for 2020 with a one-time performance stock grant

Employee relief measure providing all worldwide employees with a base salary less than $75,000 with additional support in the form of a one-time bonus of $1,000 USD

Continuously evaluate further possible actions in order to respond quickly to rapidly changing conditions, if needed

Q2 Earnings Highlights

Operating Margin

23.5%

19.2%

+430 bps

Q2 2019

Q2 2020

Free Cash Flow Margin

20.8%

16.8%

+400 bps

Q2 2019

Q2 2020

Non-GAAP Operating Margin and Free Cash Flow Margin

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Business model drives recurring revenue

Continued shift in mix to over 90% recurring revenue greatly improves durability

13%	$902M

Revenue CAGR

since IPO

$166M

2005	2006	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
								Recurring			One-time Services & Other

Non-GAAP Revenue. 2016, 2017, 2018 and 2019 reflect adoption of ASC 606. Blackbaud's initial public offering was mid-year 2004; comparisons began with next full year of revenue

2019 Recurring

Revenue

92%	18%
of total	CAGR
revenue	2005-2019

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Balancing growth and profitability to support future growth

Operating Margin

	18.8%	20.5%	21.1%	20.0%
17.8%				16.8%
2014	2015	2016	2017	2018	2019

Investments in go-to-market and cloud innovation

Operating Margin

Future expansion depends on the level of investments in:

Go-to-Market Model

Focusing on lead generation, market coverage and sales effectiveness

Engineering and Innovation

Invest in innovative cloud solutions

Migration to Public Cloud Infrastructure

Enhanced scalability and security

Non-GAAP operating margin. 2016, 2017, 2018 and 2019 reflect adoption of ASC 606

25

Generating healthy free cash flow margins inclusive of investments

Free Cash Flow Margin

			17.5%	17.5%
	14.9%	15.0%			13.8%
	2015	2016	2017	2018	2019
Investments	$34M	$44M	$39M	$52M	$58M

Investments in go-to-market and cloud innovation

Free Cash Flow Highlights

Strong free cash flow margins inclusive of investments:

• Focused on go-to-market model
• Innovation and new solution builds
• Cloud infrastructure
• Global workplace strategy

Non-GAAP free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software development, and capital expenditures for property and equipment.

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Maintaining a disciplined capital strategy

GROWTH AND OPERATING

INITIATIVES

• Capital investments consistent with solution roadmap and strategy
• Invest in operational efficiencies
• Strategic acquisitions

MAINTAIN STRONG

BALANCE SHEET

• Cash balances
• Debt maintenance
• Debt to EBITDA < 3.5X

RETURN OF CAPITAL

TO SHAREHOLDERS*

• Option for share repurchase- $50M authorized and available

*Our Board of Directors may decide, in its sole discretion, at any time and for any reason, whether to repurchase our common stock.

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Proven history of deleveraging

Ratio

3.50x

Targeted Max Leverage 3.5x

3.00x

2.50x
	~2.2x
2.00x	Q2'20

Leverage

1.50x

1.00x

Optimal Leverage 1.8x

0.50x

0.00x

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

2012

2013

2014

2015

2016

2017

2018

2019

2020

Note: Current covenant for leverage ratio is less than or equal to 3.5x. Calculation of debt over TTM EBITDA is based on credit agreement in place at the end of the respective reporting quarter.

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Strong returns on a substantially larger investment base

Strong Returns

2019 WACC: 9.1%	1.9x	14%	$1.7B
2019 ROIC*: 17.3%
	CAGR
	$0.7B
	2013	Invested Capital	2019

*See appendix for detailed ROIC calculation; Decrease in invested capital from 2018 to 2019 driven by write-offs on the book value of fully amortized assets and facilities-related fixed assets as a part of our facilities optimization strategy

29

Improving shareholder value

Industry leading cloud software company with an unmatched commitment to the social good sector

Rapid innovation and M&A focused on expanding a large, stable, and growing addressable market

Executing a disciplined strategy focused on accelerating financial performance

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Appendix

31

Return on Invested Capital (ROIC) Calculation

(dollarsinmillions)

	2019
Total Assets	$1,993
Less: Restricted cash and customer funds receivable	(546)
Less: Non-interest bearing current liabilities	(435)
Add: Accumulated depreciation	104
Add: Accumulated amortization of software development	38
Add: Accumulated amortization of ROU assets1	20
Add: Accumulated amortization of intangibles	239
Less: Purchase price of 2019 acquisition2	0
Add: Research & development (excluding stock-based compensation) 3Y Expense3	267
Invested Capital	$1,679
Income from Operations	27
Add: Rent/Lease expense	28
Add: Depreciation	15
Add: Amortization of software development	21
Add: Amortization of intangibles	50
EBITDA4	142
Add: Stock-based compensation	59
Add: R&D Exp (excl SBC)	95
Adjusted EBITDA4	295
Less: Implied taxes (assumes 20% tax rate)	(5)
Adjusted NOPAT4	$290
Return on invested capital (ROIC)	17.3%

1. With adoption of ASC842 and subsequent addition of right-of-use assets on the balance sheet, value of leased assets is replaced
2. 2019 acquisition excluded as it closed on first business day of the year
3. Sum of previous three years R&D expense excluding any stock-based compensation
4. Non-GAAPEBITDA, Adjusted EBITDA, Adjusted NOPAT

32

Historical Reconciliations of GAAP and Non-GAAP Organic Revenue Growth (Unaudited)

33

Supplemental Schedule for Change in Revenue Classification

Revenue from retained and managed service contracts that we do not expect to have a term consistent with our cloud solution contracts is included in onetime services and other revenue beginning January 1, 2020. As shown below, this change in presentation resulted in decreases in recurring revenue and offsetting increases to one-time services and other revenue of $4.2 million and $8.5 million, respectively, during the three and six months ended June 30, 2020.

In order to provide comparability between the 2020 and 2019 periods, we are providing below the amounts by which reported recurring revenue and onetime services and other revenue would have changed had the change in presentation discussed above been effective January 1, 2019.

This information is not intended as a substitute for the Company's previously reported results.

34

Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations (Unaudited)

35

Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations (Unaudited)

36

Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations (Unaudited)

37

Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations (Unaudited)

38

Historical Consolidated Balance Sheets (Unaudited)

39

Historical Consolidated Statements of Comprehensive Income (Unaudited)

Note 1: The individual amounts for each quarter may not sum to full year totals due to rounding.

40

Historical Consolidated Statements of Cash Flows (Unaudited)

Note 1: The individual amounts for each quarter may not sum to full year totals due to rounding.

41

Historical Reconciliations of GAAP to Non-GAAP Financial Measures (Unaudited)

Note 1: The individual amounts for each quarter may not sum to full year totals due to rounding.

Note 2: We apply a non-GAAP effective tax rate of 20.0% when calculating non-GAAP net income and non-GAAP diluted earnings per share.

42

Historical Reconciliations of GAAP to Non-GAAP Financial Measures (Unaudited)

43