Summary
Blackbaud opened fiscal 2026 with first quarter revenue of $281.1 million, up 4.2% from the prior year quarter. Recurring revenue carried the top line. Management credited pricing initiatives and demand for cloud solutions in contractual recurring revenue, and pricing plus higher Blackbaud Integrated Payments volume in transactional recurring revenue. One-time consulting revenue declined on fewer sales of implementation and customization services. Non-GAAP organic revenue grew 4.2% in the quarter, and 3.3% on a constant currency basis, while non-GAAP organic recurring revenue grew 5.0%. The company also launched the Development Agent, its first agentic AI solution, on top of more than 70 new AI capabilities embedded across its products.
Profit grew much faster than the top line. Gross profit was $166.6 million, up 7.4%, and gross margin reached 59.2%, up 180 basis points, as cost of revenue edged lower. Operating income was $51.4 million, up 161.1%, and operating margin was 18.3%, up 1,100 basis points. A large part of the gain came from costs that did not repeat. Acquisition and disposition-related costs fell $25.0 million after the prior year release from the Washington, DC office lease. Security Incident-related expenses dropped $2.2 million. General and administrative expense fell $26.4 million, or 46.6%. Research and development expense rose $3.4 million, or 10.0%, on higher engineering compensation and headcount. Net income was $31.1 million, and diluted earnings per share was $0.67, up $0.58 per share.
The non-GAAP view shows the same direction with less amplitude. Non-GAAP income from operations was $83.4 million at a 29.6% margin, up 120 basis points. Non-GAAP adjusted EBITDA was $98.7 million, up $6.6 million, at a 35.1% margin. Non-GAAP diluted earnings per share was $1.14, up $0.19 per share, and the Rule of 40 score was 39.3%. Cash generation was the standout. GAAP net cash provided by operating activities was $51.5 million, up $50.1 million. Non-GAAP free cash flow, which subtracts capital spending, was $37.0 million, up $49.3 million, at a 13.2% margin. Purchases of property and equipment were $1.7 million, up 142.4%.
Capital allocation stayed aggressive. Blackbaud repurchased 1,601,057 shares for $82.1 million in the quarter, and including net share settlement of employee stock compensation those repurchases equal about 4.5% of shares outstanding as of December 31, 2025. Roughly $878.5 million remained available under the authorization at March 31, 2026, and management plans to buy back between 5.0% and 10.0% of those shares during 2026. The net leverage ratio was 2.67 to 1.00. Deferred revenue was $340.05 million at March 31, 2026, up 2.4% from a year earlier, reflecting the seasonal dip in first quarter billings. Gross dollar retention was approximately 92% for the twelve months ended March 31, 2026.
Guidance for the full fiscal year 2026 was reaffirmed at non-GAAP adjusted EBITDA of $430 million to $438 million, non-GAAP diluted earnings per share of $5.15 to $5.25, and non-GAAP free cash flow of $280 million to $290 million. Full year assumptions include a non-GAAP annualized effective tax rate of approximately 24.5%, interest expense of about $62 million to $66 million, and diluted weighted average shares of about 45.0 million to 46.0 million. Capital expenditures for the full year are expected to be approximately $60 million to $70 million, including approximately $52 million to $62 million of capitalized software development costs.
The risk list is familiar and mostly external. The company flags cybersecurity and data protection liabilities, uncertainty around the development, deployment, regulation, security and adoption of artificial intelligence, potential litigation, and a shifting revenue mix that could pressure gross margin. Variable rate debt is another exposure, since interest expense could rise in a higher rate environment. About 17% of revenue came from operations outside the U.S., and foreign currency translation lifted both revenue and income from operations in the quarter. Billings and cash flow will keep swinging with the seasonal pattern, since deferred revenue is highest near the third quarter and lowest at the end of the first quarter.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2026 | Q4 FY2025 | QoQ | Q1 FY2025 | YoY |
|---|---|---|---|---|---|
| Revenue | $281.1M | $295.3M | -4.8% | $270.7M | +3.9% |
| Gross profit | $166.6M | $172.3M | -3.3% | $155.8M | +6.9% |
| Gross margin | 59.2% | 58.4% | +0.9 pp | 57.6% | +1.7 pp |
| Research & development | $36.9M | $33.8M | +9.3% | $33.6M | +10.0% |
| Sales & marketing | $47.3M | $44.8M | +5.8% | $44.6M | +6.1% |
| General & administrative | $30.3M | $34.0M | -11.1% | $56.7M | -46.6% |
| Total operating expenses | $115.1M | $113.1M | +1.7% | $135.4M | -15.0% |
| Operating income (loss) | $51.4M | $59.1M | -13.0% | $20.4M | +151.8% |
| Operating margin | 18.3% | 20.0% | -1.7 pp | 7.5% | +10.8 pp |
| Net income (loss) | $31.1M | $36.7M | -15.1% | $4.9M | +539.8% |
| Net margin | 11.1% | 12.4% | -1.3 pp | 1.8% | +9.3 pp |
| Diluted EPS | $0.67 | $0.76 | -$0.09 | $0.10 | +$0.57 |
Risks
Blackbaud launched its first agentic AI solution, the fundraising development agent, into general availability and expects subscription pricing generally in the tens of thousands of dollars, but commercialization remains early and the company continues to evaluate customer adoption, operational impacts, and potential financial contributions. If adoption or pricing falls short, the AI investment may not deliver expected returns.
The OBBBA enacted on July 4, 2025 meaningfully reduced U.S. cash taxes in 2025 and is expected to continue reducing cash taxes through 2027, but U.S. state OBBBA conformity considerations and the phase-in of OBBBA international tax provisions in 2026 may affect this cash reduction.
The company intends to repurchase between 5% and 10% of its outstanding common stock as of December 31, 2025 during 2026, and repurchased 1,601,057 shares in Q1 2026, about 4.5% including net share settlement. Debt covenants restrict dividends and share repurchases unless the pro forma net leverage ratio is 0.25 less than the covenant requirement.
Settlements related to the Security Incident require implementing and improving cybersecurity programs and tools through May 2044, with costs primarily expensed as incurred. Security Incident-related expenses that occurred in 2025 did not reoccur in 2026, but the long-term compliance obligations remain.
MD&A states the first quarter is historically the seasonal low for bookings and transactional revenue, and transactional revenue is non-contractual and less predictable due to timing of events, donation volumes, and tuition payments. This can cause quarterly revenue and cash flow variability.
More than 20% of renewing customers have elected four-year or longer contracts, and an increasing number are requesting five-year contracts. Longer contract terms may affect the timing of billings, deferred revenue, and renewal cycles.
Approximately 17% of total revenue for Q1 2026 was generated outside the U.S., and foreign currency fluctuations increased total revenue and income from operations in Q1 2026. The company uses forward contracts to hedge only a portion of its foreign currency exposure.
MD&A attributes an increase in stock-based compensation expense in Q1 2026 primarily to certain executive retirements, highlighting key personnel transition risk.
SaaS KPIs
All quarters →Non-GAAP Adjusted EBITDA Margin
Non-GAAP Operating Margin
Non-GAAP Organic Recurring Revenue Growth
Rule of 40
Non-GAAP Organic Revenue Growth
Non-GAAP Free Cash Flow Margin
Non-GAAP Free Cash Flow
Non-GAAP organic revenue growth on constant currency basis
GAAP Recurring Revenue
Non-GAAP organic recurring revenue growth on constant currency basis
Rule of 40 on constant currency basis
Summary, forecast, risks and KPIs are extracted from BLACKBAUD INC's SEC filings for Q1 FY2026 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.