Blackbaud now expects to spend more than it planned this year on severance and other costs of reshaping its workforce, as the Daniel Island software company keeps moving work to a center it is building in Hyderabad, India.
In its quarterly report, filed Oct. 28, Blackbaud said it expects pretax global workforce transition costs of about $8 million to $10 million in 2026, mostly severance and other employee transition expenses. It had previously disclosed $6 million to $8 million. The company said the increase reflects “additional workforce transition actions undertaken during 2026.”
Spending has already passed the old range. Blackbaud recorded $5.4 million of those costs in the third quarter, bringing the total for the first nine months to $8.4 million, according to its earnings release.
“Because planning for later phases of our multi-year global workforce strategy remains ongoing, our current estimate relates only to expected costs in 2026,” the company said in the filing.
What is moving to India
Blackbaud’s annual report, filed in February, describes the Hyderabad operation, which it calls a Global Capability Center, as part of a multi-year workforce strategy. Since 2024, the company said, it has brought in-house roles that outside firms had handled, weighed whether jobs left open by attrition should be refilled in India, and been “opportunistically transitioning additional roles” there. It said its adoption of artificial intelligence informs how it assesses roles and skill requirements, and that it expects to keep the approach through 2027.
The company signed leases for 69,058 square feet of office space in Hyderabad in June 2025 and 45,370 square feet in January 2026, according to the annual report.
The way Blackbaud labels the costs has also shifted. Its second-quarter report tied them to “the transition of certain roles to our Global Capability Center in Hyderabad, India.” The third-quarter report calls them global workforce transition costs and ties them more broadly to “actions under our global workforce strategy.”
The savings show up elsewhere in the results. Third-party contractor costs fell $8.2 million from a year earlier in the third quarter. Blackbaud attributed that mainly to moving work to employees at the Hyderabad center, using fewer outside contractors and finishing earlier projects. Compensation costs other than stock-based pay fell $2.4 million, which the company attributed primarily to the shift of work to India.
In September, Blackbaud entered into currency contracts to hedge operating expenses it pays in Indian rupees. At Sept. 30 those contracts had a combined notional value of $19.8 million, the filing shows.
Blackbaud employed about 2,800 people worldwide at the end of 2025, according to its annual report. Its filings do not say how many work in South Carolina. The company owns its 172,000-square-foot headquarters at 65 Fairchild St. and has leased a significant portion of it to other companies, the annual report says.
The quarter
Revenue rose 4.1% to $292.6 million in the three months ended Sept. 30, from $281.1 million a year earlier.
Net income slipped to $46.1 million from $47.5 million. The year-earlier quarter included a $6.4 million income tax benefit; pretax income this year rose to $46.4 million from $41.0 million. Diluted earnings per share rose to $1.02 from 98 cents, helped by about 7% fewer shares.
Excluding stock-based pay, the workforce transition costs and other items, Blackbaud earned $1.36 a share, up from $1.10.
“Innovation continues to drive our clear market leadership and a widening competitive moat,” said Mike Gianoni, Blackbaud’s president, CEO and vice chairman, in the earnings release.
The company reaffirmed its 2026 guidance, including revenue of $1.173 billion to $1.179 billion and adjusted earnings of $5.15 to $5.25 a share, and said it expects to finish in the upper half of its ranges.
Through Sept. 30, Blackbaud spent $128.4 million this year buying back 2,846,852 shares, the filing shows.
“Year-to-date we have repurchased more than 7% of our common stock outstanding since the end of 2025 while also reducing our leverage ratio from 2.7x in Q1 to 2.3x in Q3,” Chad Anderson, Blackbaud’s executive vice president and chief financial officer, said in the release.
Renewals and the stock
One customer measure slipped. Blackbaud’s gross dollar retention, which compares contracted annual recurring revenue at the end of a 12-month period with the amount at its start, was about 90% for the 12 months ended Sept. 30, down from about 91% for the period ended June 30.
The company has said the measure is under pressure because the contracts up for renewal in 2026 are worth about 40% more than those that came up in 2025. It expects the contracts up for renewal in 2027 to be nearly 25% smaller by value, and its investor presentation says it expects retention to climb back to 91% to 92% by the end of 2027.
Blackbaud’s shares opened Oct. 28 at $46.48, about 13% below the previous close of $53.70, then recovered most of the drop to close at $52.51, down 2.2%, according to Nasdaq trading data.
