Summary
Blackbaud's fiscal 2025 second quarter showed a familiar pattern: reported revenue shrank while margins and profit expanded. GAAP revenue was $281.4 million for the quarter, down 2.1% from the prior-year quarter. The decline was tied to the divestiture of EVERFI; on a non-GAAP organic basis, revenue rose 6.8%, and organic recurring revenue rose 6.9%. Gross profit was $167.7 million, up 3.2%, and gross margin reached 59.6%, up 3.0 percentage points. Operating income was $56.7 million, up 34.7%, with an operating margin of 20.1%, up 5.5 percentage points. Net income was $26.0 million, up 19.2%, and diluted EPS was $0.54, up $0.12. Management said the quarter produced the highest Rule of 40 score in company history at 45.3%.
The non-GAAP picture was stronger still. Non-GAAP income from operations was $94.3 million, with a non-GAAP operating margin of 33.5%, an increase of 350 basis points. Non-GAAP net income was $58.2 million, and non-GAAP diluted EPS was $1.21, up $0.13. Non-GAAP adjusted EBITDA was $108.5 million, up $5.9 million, with a 38.5% margin, an increase of 280 basis points. GAAP operating cash flow was $66.9 million for the quarter, up $13.1 million. Non-GAAP free cash flow was $51.5 million, up $18.9 million, and non-GAAP adjusted free cash flow was $53.1 million, up $16.7 million. Capital expenditures were $0.6 million for the quarter, down 89.4%. For the six months ended June 30, 2025, GAAP revenue was $552.0 million, down 2.6%, and gross profit was $323.6 million, up 2.5%. Operating income for the six months was $77.1 million, up 46.0%, net income was $30.8 million, up 14.0%, and diluted EPS was $0.63, up $0.11. GAAP operating cash flow for the six months was $68.3 million, down 42.3%, while capital expenditures were $1.3 million, down 78.6%. The MD&A pointed to working capital swings, vendor payment timing, and disposition-related cash costs as drivers of the year-to-date operating cash flow decline. The quarter's operating cash flow increase contrasts with the year-to-date decline.
Operational metrics and capital returns offered more context. Gross dollar retention was approximately 92% for the twelve months ended June 30, 2025. Deferred revenue was $401.4 million at June 30, 2025, down 6.5% from the prior-year quarter. During the six months ended June 30, 2025, Blackbaud repurchased 1,513,022 shares for $100.0 million, and the remaining authorization under the stock repurchase program was $544.5 million as of June 30, 2025. The company did not repurchase any shares during the second quarter. Management continued to highlight its shift to three-year contracts, cloud migration, AI product integration, and the expansion of operations in India. Recent announcements included an integration with Constant Contact, a new senior vice president of North America sales, and the upcoming bbcon 2025 conference. The company also agreed to implement and improve certain cybersecurity programs through May 2044 as part of prior settlements.
Guidance moved higher. Management raised full-year 2025 guidance for non-GAAP diluted EPS to $4.30 to $4.50, non-GAAP adjusted EBITDA margin to 35.4% to 36.2%, and non-GAAP adjusted free cash flow to $190 million to $200 million. The updated assumptions include a non-GAAP annualized effective tax rate of approximately 24.5% and fully diluted shares of approximately 48.5 million to 49.5 million. The guidance does not contemplate future impact of the One Big Beautiful Bill Act, though the company said the OBBBA is expected to meaningfully reduce cash taxes in the near term. Management also intends to repurchase between 3% and 5% of its outstanding common stock as of December 31, 2024 during 2025. Risks include uncertainty around federal grant funding, cybersecurity and data protection risks and related liabilities, potential litigation, integration of acquired companies, a shifting revenue mix, foreign currency exposure, and interest rate risk. The company also remains exposed to the loss of EVERFI revenue in reported results, even as organic growth and margin expansion continue.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2025 | Q1 FY2025 | QoQ | Q2 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $281.4M | $270.7M | +4.0% | $287.3M | -2.1% |
| Gross profit | $167.7M | $155.8M | +7.6% | $162.6M | +3.2% |
| Gross margin | 59.6% | 57.6% | +2.0 pp | 56.6% | +3.0 pp |
| Research & development | $33.6M | $33.6M | +0.1% | $39.1M | -14.0% |
| Sales & marketing | $44.0M | $44.6M | -1.3% | $47.1M | -6.4% |
| General & administrative | $32.9M | $56.7M | -42.0% | $33.4M | -1.8% |
| Total operating expenses | $111.1M | $135.4M | -18.0% | $120.5M | -7.8% |
| Operating income (loss) | $56.7M | $20.4M | +177.5% | $42.1M | +34.7% |
| Operating margin | 20.1% | 7.5% | +12.6 pp | 14.7% | +5.5 pp |
| Net income (loss) | $26.0M | $4.9M | +433.8% | $21.8M | +19.2% |
| Net margin | 9.2% | 1.8% | +7.4 pp | 7.6% | +1.6 pp |
| Diluted EPS | $0.54 | $0.10 | +$0.44 | $0.42 | +$0.12 |
Risks
Blackbaud is implementing generative, predictive, interactive and agentic AI features while U.S. federal, state and international AI and privacy laws remain unsettled. This creates increased risk of regulatory enforcement, litigation, fines and liability, including uncertainty over how privacy and data protection laws apply to AI and unresolved intellectual property rights in AI-generated content.
The company faces significant competition from other companies developing their own AI-enhanced products and services, which may be similar or superior and more cost-effective. Other parties could hold proprietary rights that interfere with Blackbaud's AI features, and access to specific third-party equipment or infrastructure may be outside its control.
Blackbaud is in the early stages of leveraging agentic AI, which can make decisions and pursue goals autonomously without human prompting. This presents additional risks including opaque decision making, unique security concerns from agent permissioning, and challenges with monitoring actions and assigning accountability.
New and emerging AI technologies require substantial additional investment in models, processes, protections and safeguards, as well as specialized expertise and increased infrastructure and headcount. These costs are expensive and could negatively impact financial results as AI technology expands into more products and services.
MD&A notes concerns about federal grant funding in the U.S. and how it potentially impacts Blackbaud's customers, even though the company states its solutions are not in the funds flow from federal agencies. The uncertainty could affect customer operations and demand for fundraising software.
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 Adjusted Free Cash Flow Margin
Non-GAAP Free Cash Flow Margin
Non-GAAP Free Cash Flow
Non-GAAP organic revenue growth on constant currency basis
Non-GAAP Adjusted EBITDA
Non-GAAP Adjusted Free Cash Flow
Non-GAAP organic recurring revenue growth on constant currency basis
Rule of 40 on constant currency basis
Non-GAAP Adjusted EBITDA Margin on Constant Currency Basis
Non-GAAP Income from Operations
Summary, forecast, risks and KPIs are extracted from BLACKBAUD INC's SEC filings for Q2 FY2025 (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.