Summary
Blackbaud's third quarter revenue was $281.1 million, down 1.9% from the prior-year quarter. The decline is mostly about portfolio shape. The December 2024 sale of EVERFI pulled the reported top line lower. On an organic basis, non-GAAP organic revenue grew 5.2%, and non-GAAP organic recurring revenue grew 5.5%. Transactional revenue moved up on higher payment volumes and pricing, while contractual recurring revenue slipped with EVERFI. Gross dollar retention was approximately 92% for the twelve months ended September 30, 2025, an increase over the rate for the twelve months ended December 31, 2024, again largely because of the divestiture.
Profitability moved in the opposite direction of revenue. Gross profit was $167.5 million, up 6.5%, and gross margin expanded 4.7 percentage points to 59.6%. Operating income rose 32.6% to $54.6 million, pushing operating margin up 5.1 percentage points to 19.4%. Net income was $47.5 million, up 159.7%, and diluted EPS was $0.98, up $0.63. Lower amortization of intangibles from business combinations, lower compensation costs tied to the EVERFI sale and a drop in Security Incident-related expenses all fed the operating improvement, partly offset by acquisition and disposition-related costs.
The year-to-date shape is different. Revenue of $833.1 million was down 2.3%, but operating income of $131.6 million was up 37.3% and net income of $78.3 million was up 67.1%. Cash has been lumpier. Operating cash flow of $207.5 million was down 6.7% for the nine months, with the company pointing to the timing of vendor payments and a smaller working capital contribution. The quarter itself was much stronger, with operating cash flow of $139.2 million, up 33.9%.
On a non-GAAP basis, income from operations was $84.0 million at a 29.9% margin, up 240 basis points, and adjusted EBITDA was $99.7 million, up $4.6 million, at a 35.4% margin. The Rule of 40 score landed at 40.6%. Free cash flow and adjusted free cash flow are separate measures. Non-GAAP free cash flow was $123.2 million, up $34.9 million, while non-GAAP adjusted free cash flow, which adds back Security Incident cash outflows, was $125.1 million, up $27.5 million.
Guidance for the full year 2025 was reiterated for revenue, adjusted EBITDA margin and earnings per share, and the company raised full-year 2025 guidance for non-GAAP adjusted free cash flow to $195 million to $205 million. Full-year assumptions include interest expense of approximately $66 million to $70 million, a non-GAAP annualized effective tax rate of approximately 24.5% and fully diluted shares of approximately 48.5 million to 49.5 million. Capital expenditures for the year are expected to include a large share of capitalized software development costs.
Capital allocation remains aggressive. Blackbaud repurchased 459,528 shares for $30.1 million in the quarter and 1,972,550 shares for $130.2 million in the first nine months of 2025, and about $514 million remained available under the program at September 30, 2025. Management expects total 2025 repurchases to represent between 5.2% and 7.0% of shares outstanding as of December 31, 2024. Net leverage was 2.45 to 1.00 against a covenant maximum of 3.75 to 1.00. Deferred revenue was $384.9 million, down 6.9% from the prior-year quarter, although the company describes the sequential build as a normal seasonal lift from third-quarter billings and renewals.
The risk list is familiar. Management calls out federal grant funding uncertainty as a customer concern but argues the software sits outside the flow of federal funds and supports individual donor fundraising. The company also lists cybersecurity and data protection liabilities, a shifting revenue mix that could pressure gross margin, integration of acquired companies, and interest rate exposure on variable-rate debt. Interest expense rose on borrowings used for buybacks and the expiration of favorable swaps in October 2024. Blackbaud separately revised prior period financial statements to correct a noncash income tax valuation allowance error, which it judged immaterial to prior reporting periods but material to 2025 figures had it been fixed in the current period.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2025 | Q2 FY2025 | QoQ | Q3 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $281.1M | $281.4M | -0.1% | $286.7M | -1.9% |
| Gross profit | $167.5M | $167.7M | -0.2% | $159.2M | +5.2% |
| Gross margin | 59.6% | 59.6% | -0.0 pp | 55.5% | +4.0 pp |
| Research & development | $37.2M | $33.6M | +10.7% | $39.4M | -5.5% |
| Sales & marketing | $44.1M | $44.0M | +0.1% | $49.5M | -10.8% |
| General & administrative | $31.0M | $32.9M | -5.5% | $25.6M | +21.1% |
| Total operating expenses | $112.9M | $111.1M | +1.7% | $115.4M | -2.1% |
| Operating income (loss) | $54.6M | $56.7M | -3.7% | $43.8M | +24.5% |
| Operating margin | 19.4% | 20.1% | -0.7 pp | 15.3% | +4.1 pp |
| Net income (loss) | $47.5M | $26.0M | +82.8% | $20.5M | +131.2% |
| Net margin | 16.9% | 9.2% | +7.7 pp | 7.2% | +9.7 pp |
| Diluted EPS | $0.98 | $0.54 | +$0.44 | $0.40 | +$0.58 |
Risks
Interest expense increased in FY2025 Q3 and year to date, and MD&A expects full-year 2025 interest expense of approximately $66M to $70M. With debt carrying amount of $1.0B and a net leverage ratio of 2.45 to 1.00 at Sep 30, 2025, variable-rate borrowings expose Blackbaud to rising interest rates.
MD&A highlights concerns about U.S. federal grant funding and its potential impact on nonprofit and education customers, even though Blackbaud says its solutions are not in the funds flow from federal agencies. Weaker customer budgets could pressure demand.
Revenue was down 1.9% in FY2025 Q3 to $281.1M and down 2.3% year to date to $833.1M, partly due to contractual recurring revenue declines following the sale of EVERFI and lower one-time consulting revenue. Transactional recurring revenue growth only partially offset these declines.
MD&A notes obligations from Security Incident settlements to implement and improve cybersecurity programs through May 2044. Although Security Incident-related expenses decreased $10.0M for the nine months ended Sep 30, 2025, the long-term compliance commitment and potential future costs remain.
During FY2025 Q3, Blackbaud identified a prior period noncash error related to the valuation allowance in accounting for income taxes and revised previously issued financial statements. The revision, while not material, raises financial reporting and internal control scrutiny.
Operating cash flow was down 6.7% to $207.5M for the nine months ended Sep 30, 2025, compared with $222.4M in the prior-year period, driven by working capital and lower net income adjusted for non-cash items. Continued weakness could constrain liquidity.
MD&A says Blackbaud is expanding operations in India to gain greater access to talent and lower costs, and it continuously evaluates shifting roles to lower-cost jurisdictions. Execution, quality and remote-workforce risks may arise from this international expansion.
Gross dollar retention was approximately 92% for the twelve months ended Sep 30, 2025, and it increased over the rate for the twelve months ended Dec 31, 2024 primarily due to the EVERFI sale. Continued reliance on renewals and expansion means any retention decline could pressure recurring revenue.
Blackbaud repurchased 1,972,550 shares for $130.2M during the nine months ended Sep 30, 2025 and expects total 2025 repurchases to represent between 5.2% and 7.0% of shares outstanding as of Dec 31, 2024. Funding buybacks with borrowings could increase leverage and reduce liquidity.
About 16% of revenue for the nine months ended Sep 30, 2025 was generated outside the U.S. Foreign currency fluctuations increased total revenue and income from operations by $2.6M and $1.8M, respectively, year to date, but future rate movements could reverse that benefit.
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
GAAP Recurring Revenue
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
Recurring Revenue as % of Total Revenue
Summary, forecast, risks and KPIs are extracted from BLACKBAUD INC's SEC filings for Q3 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.