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Blackbaud Announces 2019 First Quarter Results
First Quarter Recurring Revenue Grows 10% Representing 92% of Total Revenue; Reaffirms 2019 Financial Guidance

CHARLESTON, S.C., April 30, 2019 /PRNewswire/ -- Blackbaud (NASDAQ: BLKB), the world's leading cloud software company powering social good, today announced financial results for its first quarter ended March 31, 2019.

"We continued to rapidly advance our existing applications, brought new solutions to market, and closed on the acquisition of YourCause which creates lasting value for our customers and shareholders, and grows our addressable markets," said Mike Gianoni, Blackbaud's president and CEO. "And, I'm incredibly proud of the recognition that Blackbaud has received on a few of our internal program initiatives, including being named to Forbes Best Mid-sized Employers for the fourth consecutive year."

First Quarter 2019 Results Compared to First Quarter 2018 Results:

  • Total GAAP revenue was $215.8 million, up 5.7%, with $198.1 million in GAAP recurring revenue, representing 91.8% of total GAAP revenue. GAAP recurring revenue was up 9.5%.
  • Total non-GAAP revenue was $216.5 million, up 5.9%, with $198.8 million in non-GAAP recurring revenue, representing 91.8% of total non-GAAP revenue. Non-GAAP recurring revenue was up 9.7%.
  • Non-GAAP organic recurring revenue increased 5.7%.
  • GAAP income from operations was $2.2 million, with GAAP operating margin of 1.0%, a decrease of 760 basis points.
  • Non-GAAP income from operations was $36.0 million, with non-GAAP operating margin of 16.6%, a decrease of 450 basis points.
  • GAAP net loss was $1.1 million, with GAAP diluted loss per share of $0.02, down $0.39.
  • Non-GAAP net income was $24.7 million, with non-GAAP diluted earnings per share of $0.51, down $0.15.
  • Non-GAAP free cash flow was $(22.5) million, a decrease of $21.4 million.

"I'm pleased with the execution against our strategic objectives through the first quarter, and our full year financial outlook is unchanged," said Tony Boor, Blackbaud's executive vice president and CFO. "We are in an investment year to better position the business for accelerated growth and long-term success, and we are tracking well to expectations.  The sales account executives hired in the second-half of 2018 are currently underway ramping to targeted productivity, we are executing our workplace strategy, and we continue to rapidly innovate for our customers."

An explanation of all non-GAAP financial measures referenced in this press release is included below under the heading "Non-GAAP Financial Measures." A reconciliation of the company's non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release.

Recent Company Highlights:

Visit www.blackbaud.com/newsroom for more information about Blackbaud's recent highlights.

Dividend
Blackbaud announced today that its Board of Directors has declared a second quarter 2019 dividend of $0.12 per share payable on June 14, 2019 to stockholders of record on May 28, 2019.

Financial Outlook
Blackbaud today reaffirmed its 2019 full year financial guidance, which includes the acquisition of YourCause:

  • Non-GAAP revenue of $880 million to $910 million
  • Non-GAAP operating margin of 16.7% to 17.2%
  • Non-GAAP diluted earnings per share of $2.11 to $2.28
  • Non-GAAP free cash flow of $124 million to $134 million

Blackbaud has not reconciled forward-looking full-year non-GAAP financial measures contained in this news release to their most directly comparable GAAP measures, as permitted by Item 10(e)(1)(i)(B) of Regulation S-K. 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 during the year. 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.

Adoption of New Lease Accounting Standard
On January 1, 2019, we adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) ("ASU 2016-02"), using the transition method that allowed us to initially apply the guidance at the adoption date of January 1, 2019 without adjusting comparative periods presented. ASU 2016-02 requires lessees to record most leases on their balance sheet but recognize expenses in the income statement in a manner similar to previous guidance. The impacts of adoption are reflected in Blackbaud's guidance and the other financial information herein. We will provide more detailed information regarding the impact of our adoption of ASU 2016-02 in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.

Conference Call Details – Please Note Updated Live Call Dial-in and Passcode

What:

Blackbaud's 2019 First Quarter Conference Call

When:

May 1, 2019

Time:

8:00 a.m. (Eastern Time)

Live Call:

888-394-8218 (US/Canada); passcode 1637268

Webcast:

Blackbaud's Investor Relations Webpage

About Blackbaud
Blackbaud (NASDAQ: BLKB) is the world's leading cloud software company powering social good. Serving the entire social good community—nonprofits, foundations, companies, education institutions, healthcare organizations and individual change agents—Blackbaud connects and empowers organizations to increase their impact through cloud software, services, expertise and data intelligence. The Blackbaud portfolio is tailored to the unique needs of vertical markets, with solutions for fundraising and CRM, marketing, advocacy, peer-to-peer fundraising, corporate social responsibility, school management, ticketing, grantmaking, financial management, payment processing and analytics. Serving the industry for more than three decades, Blackbaud is headquartered in Charleston, South Carolina and has operations in the United States, Australia, Canada and the United Kingdom. For more information, visit www.blackbaud.com, or follow us on Twitter, LinkedIn, and Facebook.

Investor Contact:

Media Contact:

Steve Hufford

media@blackbaud.com

Director of Investor Relations

 

843-654-2655

 

steve.hufford@blackbaud.com

 

Forward-Looking Statements
Except for historical information, all of the statements, expectations, and assumptions contained in this news release are forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding: the predictability of our financial results, expectations that our revenue will continue to grow, and expectations that we will achieve our projected 2019 full-year financial guidance. These statements involve a number of risks and uncertainties. Although Blackbaud attempts to be accurate in making these forward-looking statements, it is possible that future circumstances might differ from the assumptions on which such statements are based. In addition, other important factors that could cause results to differ materially include the following: management of integration of acquired companies; uncertainty regarding increased business and renewals from existing customers; a shifting revenue mix that may impact gross margin; continued success in sales growth; risks related to our dividend policy and stock repurchase program, including the possibility that we might discontinue payment of dividends; and the other risk factors set forth from time to time in the SEC filings for Blackbaud, copies of which are available free of charge at the SEC's website at www.sec.gov or upon request from Blackbaud's investor relations department. Blackbaud assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

Trademarks
All Blackbaud product names appearing herein are trademarks or registered trademarks of Blackbaud, Inc.

Non-GAAP Financial Measures
Blackbaud has provided in this release financial information that has not been prepared in accordance with GAAP. This information includes non-GAAP revenue, non-GAAP recurring revenue, non-GAAP gross profit, non-GAAP gross margin, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income and non-GAAP diluted earnings per share. Blackbaud has acquired businesses whose net tangible assets include deferred revenue. In accordance with GAAP reporting requirements, Blackbaud recorded write-downs of deferred revenue to fair value, which resulted in lower recognized revenue. Both on a quarterly and year-to-date basis, the revenue for the acquired businesses is deferred and typically recognized over a one-year period, so Blackbaud's GAAP revenues for the one-year period after the acquisitions will not reflect the full amount of revenues that would have been reported if the acquired deferred revenue was not written down to fair value. The non-GAAP measures described above reverse the acquisition-related deferred revenue write-downs so that the full amount of revenue booked by the acquired companies is included, which Blackbaud believes provides a more accurate representation of a revenue run-rate in a given period. In addition to reversing write-downs of acquisition-related deferred revenue, non-GAAP financial measures discussed above exclude the impact of certain items that Blackbaud believes are not directly related to its performance in any particular period, but are for its long-term benefit over multiple periods.

In addition, Blackbaud uses non-GAAP organic revenue growth, non-GAAP organic revenue growth on a constant currency basis and non-GAAP organic recurring revenue growth, in analyzing its operating performance. Blackbaud believes that these non-GAAP measures are useful to investors, as a supplement to GAAP measures, for evaluating the periodic growth of its business on a consistent basis. Each of these measures excludes incremental acquisition-related revenue attributable to companies acquired in the current fiscal year. For companies acquired in the immediately preceding fiscal year, each of these measures 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 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 of these measures excludes prior period revenue associated with divested businesses. The exclusion of the prior period revenue is 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 its current business' organic revenue growth and revenue run-rate.

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.

Blackbaud 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 Blackbaud's ongoing operational performance. Blackbaud believes that these non-GAAP financial measures reflect Blackbaud's ongoing business in a manner that allows for meaningful period-to-period comparison and analysis of trends in its business. In addition, Blackbaud believes that the use of these non-GAAP financial measures provides additional information 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 Blackbaud's industry, many of which present similar non-GAAP financial measures to investors. However, these non-GAAP financial measures may not be completely comparable to similarly titled measures of other companies due to differences in the exact method of calculation between companies. 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, Inc.

Consolidated balance sheets

(Unaudited)

 

(dollars in thousands)

March 31,
 2019

December 31,
 2018

Assets

   

Current assets:

   

Cash and cash equivalents

$

25,187

 

$

30,866

 

Restricted cash due to customers

219,396

 

418,980

 

Accounts receivable, net of allowance of $5,128 and $4,722 at March 31, 2019
and December 31, 2018, respectively

90,727

 

86,595

 

Customer funds receivable

5,474

 

1,753

 

Prepaid expenses and other current assets

73,099

 

59,788

 

  Total current assets

413,883

 

597,982

 

Property and equipment, net

38,757

 

40,031

 

Operating lease right-of-use assets

110,485

 

 

Software development costs, net

81,231

 

75,099

 

Goodwill

634,845

 

545,213

 

Intangible assets, net

355,751

 

291,617

 

Other assets

67,461

 

65,363

 

Total assets

$

1,702,413

 

$

1,615,305

 

Liabilities and stockholders' equity

   

Current liabilities:

   

Trade accounts payable

$

32,640

 

$

34,538

 

Accrued expenses and other current liabilities

54,983

 

46,893

 

Due to customers

224,870

 

420,733

 

Debt, current portion

7,500

 

7,500

 

Deferred revenue, current portion

281,082

 

295,991

 

  Total current liabilities

601,075

 

805,655

 

Debt, net of current portion

576,068

 

379,624

 

Deferred tax liability

48,050

 

44,291

 

Deferred revenue, net of current portion

4,290

 

2,564

 

Operating lease liabilities, net of current portion

102,880

 

 

Other liabilities

4,302

 

9,388

 

Total liabilities

1,336,665

 

1,241,522

 

Commitments and contingencies

   

Stockholders' equity:

   

Preferred stock; 20,000,000 shares authorized, none outstanding

 

 

Common stock, $0.001 par value; 180,000,000 shares authorized, 60,182,678
and 59,327,633 shares issued at March 31, 2019 and December 31, 2018,
respectively

60

 

59

 

Additional paid-in capital

412,937

 

399,241

 

Treasury stock, at cost; 10,999,885 and 10,760,574 shares at March 31, 2019
and December 31, 2018, respectively

(285,284)

 

(266,884)

 

Accumulated other comprehensive loss

(1,452)

 

(5,110)

 

Retained earnings

239,487

 

246,477

 

Total stockholders' equity

365,748

 

373,783

 

Total liabilities and stockholders' equity

$

1,702,413

 

$

1,615,305

 

 

 

Blackbaud, Inc.

Consolidated statements of comprehensive income

(Unaudited)

 

(dollars in thousands, except per share amounts)

Three months ended
 March 31,

2019

2018

Revenue

   

Recurring

$

198,094

 

$

180,846

 

One-time services and other

17,736

 

23,338

 

Total revenue

215,830

 

204,184

 

Cost of revenue

   

Cost of recurring

84,711

 

69,079

 

Cost of one-time services and other

14,572

 

18,958

 

Total cost of revenue

99,283

 

88,037

 

Gross profit

116,547

 

116,147

 

Operating expenses

   

Sales, marketing and customer success

55,455

 

45,477

 

Research and development

28,461

 

25,958

 

General and administrative

27,117

 

25,051

 

Amortization

1,376

 

1,269

 

Restructuring

1,953

 

811

 

Total operating expenses

114,362

 

98,566

 

Income from operations

2,185

 

17,581

 

Interest expense

(5,323)

 

(3,517)

 

Other income, net

182

 

160

 

(Loss) income before provision for income taxes

(2,956)

 

14,224

 

Income tax benefit

(1,834)

 

(3,527)

 

Net (loss) income

$

(1,122)

 

$

17,751

 

(Loss) earnings per share

   

Basic

$

(0.02)

 

$

0.38

 

Diluted

$

(0.02)

 

$

0.37

 

Common shares and equivalents outstanding

   

Basic weighted average shares

47,516,912

 

47,019,603

 

Diluted weighted average shares

48,051,289

 

48,009,395

 

Other comprehensive income (loss)

   

Foreign currency translation adjustment

4,590

 

6,437

 

Unrealized (loss) gain on derivative instruments, net of tax

(932)

 

1,079

 

Total other comprehensive income

3,658

 

7,516

 

Comprehensive income

$

2,536

 

$

25,267

 

 

Blackbaud, Inc.

Consolidated statements of cash flows

(Unaudited)

 
 

Three months ended
 March 31,

(dollars in thousands)

2019

2018

Cash flows from operating activities

   

Net (loss) income

$

(1,122)

 

$

17,751

 

Adjustments to reconcile net (loss) income to net cash (used in) provided by
operating activities:

   

Depreciation and amortization

21,724

 

19,820

 

Provision for doubtful accounts and sales returns

2,032

 

1,774

 

Stock-based compensation expense

13,726

 

11,092

 

Deferred taxes

(1,155)

 

902

 

Amortization of deferred financing costs and discount

188

 

188

 

Other non-cash adjustments

1,820

 

(197)

 

Changes in operating assets and liabilities, net of acquisition and disposal of
businesses:

   

  Accounts receivable

(1,797)

 

5,088

 

  Prepaid expenses and other assets

(12,107)

 

(10,052)

 

  Trade accounts payable

(3,624)

 

(1,655)

 

  Accrued expenses and other liabilities

(11,690)

 

(14,092)

 

  Deferred revenue

(18,006)

 

(18,866)

 

  Net cash (used in) provided by operating activities

(10,011)

 

11,753

 

Cash flows from investing activities

   

Purchase of property and equipment

(1,152)

 

(5,771)

 

Capitalized software development costs

(11,319)

 

(7,103)

 

Purchase of net assets of acquired companies, net of cash and restricted cash
acquired

(109,386)

 

(5,036)

 

  Net cash used in investing activities

(121,857)

 

(17,910)

 

Cash flows from financing activities

   

Proceeds from issuance of debt

271,500

 

81,700

 

Payments on debt

(75,175)

 

(52,875)

 

Employee taxes paid for withheld shares upon equity award settlement

(18,400)

 

(22,511)

 

Proceeds from exercise of stock options

3

 

9

 

Change in due to customers

(242,885)

 

(434,640)

 

Change in customer funds receivable

(3,573)

 

(4,783)

 

Dividend payments to stockholders

(5,901)

 

(5,825)

 

  Net cash used in financing activities

(74,431)

 

(438,925)

 

Effect of exchange rate on cash, cash equivalents, and restricted cash

1,036

 

713

 

Net decrease in cash, cash equivalents, and restricted cash

(205,263)

 

(444,369)

 

Cash, cash equivalents, and restricted cash, beginning of period

449,846

 

640,174

 

Cash, cash equivalents, and restricted cash, end of period

$

244,583

 

$

195,805

 
 

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown above in the consolidated statements of cash flows:

 

(dollars in thousands)

March 31,
 2019

December 31,
 2018

Cash and cash equivalents

$

25,187

 

$

30,866

 

Restricted cash due to customers

219,396

 

418,980

 

Total cash, cash equivalents and restricted cash in the statement of cash flows

$

244,583

 

$

449,846

 

 

 

Blackbaud, Inc.

Reconciliation of GAAP to non-GAAP financial measures

(Unaudited)

 

(dollars in thousands, except per share amounts)

Three months ended
 March 31,

2019

2018

GAAP Revenue

$

215,830

 

$

204,184

 

Non-GAAP adjustments:

   

Add: Acquisition-related deferred revenue write-down

716

 

348

 

Non-GAAP revenue

$

216,546

 

$

204,532

 
     

GAAP gross profit

$

116,547

 

$

116,147

 

GAAP gross margin

54.0

%

56.9

%

Non-GAAP adjustments:

   

Add: Acquisition-related deferred revenue write-down

716

 

348

 

Add: Stock-based compensation expense

974

 

1,095

 

Add: Amortization of intangibles from business combinations

11,416

 

10,386

 

Add: Employee severance

1,119

 

575

 

Subtotal

14,225

 

12,404

 

Non-GAAP gross profit

$

130,772

 

$

128,551

 

Non-GAAP gross margin

60.4

%

62.9

%

     

GAAP income from operations

$

2,185

 

$

17,581

 

GAAP operating margin

1.0

%

8.6

%

Non-GAAP adjustments:

   

Add: Acquisition-related deferred revenue write-down

716

 

348

 

Add: Stock-based compensation expense

13,726

 

11,092

 

Add: Amortization of intangibles from business combinations

12,792

 

11,655

 

Add: Employee severance

3,421

 

931

 

Add: Acquisition-related integration costs

718

 

433

 

Add: Acquisition-related expenses

445

 

394

 

Add: Restructuring costs

1,953

 

811

 

Subtotal

33,771

 

25,664

 

Non-GAAP income from operations

$

35,956

 

$

43,245

 

Non-GAAP operating margin

16.6

%

21.1

%

     

GAAP (loss) income before provision for income taxes

$

(2,956)

 

$

14,224

 

GAAP net (loss) income

$

(1,122)

 

$

17,751

 
     

Shares used in computing GAAP diluted (loss) earnings per share

48,051,289

 

48,009,395

 

GAAP diluted (loss) earnings per share

$

(0.02)

 

$

0.37

 
     

Non-GAAP adjustments:

   

Less: GAAP income tax benefit

(1,834)

 

(3,527)

 

Add: Total non-GAAP adjustments affecting income from operations

33,771

 

25,664

 

Non-GAAP income before provision for income taxes

30,815

 

39,888

 

Assumed non-GAAP income tax provision(1)

$

6,163

 

$

7,978

 

Non-GAAP net income

$

24,652

 

$

31,910

 
     

Shares used in computing non-GAAP diluted earnings per share

48,051,289

 

48,009,395

 

Non-GAAP diluted earnings per share

$

0.51

 

$

0.66

 

(1)     Blackbaud applies a non-GAAP effective tax rate of 20.0% when calculating non-GAAP net income and non-GAAP diluted earnings per share.

 

 

Blackbaud, Inc.

Reconciliation of GAAP to non-GAAP financial measures (continued)

(Unaudited)

 

(dollars in thousands)

Three months ended
 March 31,

2019

2018

GAAP revenue

$

215,830

 

$

204,184

 

GAAP revenue growth

5.7

%

 

(Less) Add: Non-GAAP acquisition-related revenue (1)

(4,386)

 

2,714

 

Non-GAAP organic revenue (2)

$

211,444

 

$

206,898

 

Non-GAAP organic revenue growth

2.2

%

 
     

Non-GAAP organic revenue (2)

$

211,444

 

$

206,898

 

Foreign currency impact on non-GAAP organic revenue (3)

1,779

 

 

Non-GAAP organic revenue on constant currency basis (3)

$

213,223

 

$

206,898

 

Non-GAAP organic revenue growth on constant currency basis

3.1

%

 
     

GAAP recurring revenue

$

198,094

 

$

180,846

 

GAAP recurring revenue growth

9.5

%

 

(Less) Add: Non-GAAP acquisition-related revenue (1)

(4,175)

 

2,599

 

Non-GAAP organic recurring revenue

$

193,919

 

$

183,445

 

Non-GAAP organic recurring revenue growth

5.7

%

 

(1)

Non-GAAP acquisition-related revenue excludes incremental acquisition-related revenue calculated in accordance with GAAP that is attributable to companies acquired in the current fiscal year. For companies acquired in the immediately preceding fiscal year, non-GAAP acquisition-related revenue 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 non-GAAP revenue from the acquisition-related deferred revenue write-down attributable to those companies.

(2)

Non-GAAP organic revenue for the prior year periods presented herein may not agree to non-GAAP organic revenue presented in the respective prior period quarterly financial information solely due to the manner in which non-GAAP organic revenue growth is calculated.

(3)

To determine non-GAAP organic revenue growth on a constant currency basis, revenues from entities reporting in foreign currencies were translated to U.S. Dollars using the comparable prior period's quarterly weighted average foreign currency exchange rates. The primary foreign currencies creating the impact are the Canadian Dollar, EURO, British Pound and Australian Dollar.

 

 

(dollars in thousands)

Three months ended
 March 31,

2019

2018

GAAP net cash provided by operating activities

$

(10,011)

 

$

11,753

 

Less: purchase of property and equipment

(1,152)

 

(5,771)

 

Less: capitalized software development costs

(11,319)

 

(7,103)

 

Non-GAAP free cash flow

$

(22,482)

 

$

(1,121)

 

 

Power your passion (PRNewsfoto/Blackbaud)

 

 

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SOURCE Blackbaud