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Blackbaud Announces 2020 First Quarter Results
Steps Up in Support of Social Economy; Strengthens Balance Sheet and Liquidity Position

CHARLESTON, S.C., May 5, 2020 /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, 2020.

"Blackbaud remains highly committed to the success of our customers, our company and the entire social economy during these challenging times," said Mike Gianoni, Blackbaud's president and CEO. "Our teams launched new innovative solutions in response to pandemic-specific needs that arose. We've given back to the social good community through hundreds of free resources, philanthropic gifts, service on boards and more. And we've maintained our commitments to customers, including our very high standard of service and support. Blackbaud has served the social good community as a leader in software for nearly four decades. We have been decisive in our actions, and our immediate priority continues to be the safety and welfare of our people and being a strong global partner for social good organizations around the world during this unprecedented time."

First Quarter 2020 Results Compared to First Quarter 2019 Results:

  • Total GAAP revenue was $223.6 million, up 3.6%, with $204.9 million in GAAP recurring revenue, representing 91.6% of total GAAP revenue. GAAP recurring revenue was up 3.4%.
  • Total non-GAAP revenue was $223.6 million, up 3.3%, with $204.9 million in non-GAAP recurring revenue, representing 91.6% of total non-GAAP revenue. Non-GAAP recurring revenue was up 3.0%.
  • Non-GAAP organic recurring revenue increased 3.0%.
  • GAAP income from operations was $8.4 million, with GAAP operating margin of 3.8%, an increase of 280 basis points.
  • Non-GAAP income from operations was $33.9 million, with non-GAAP operating margin of 15.2%, a decrease of 140 basis points.
  • GAAP net income was $4.6 million, with GAAP diluted earnings per share of $0.10, up $0.12.
  • Non-GAAP net income was $24.7 million, with non-GAAP diluted earnings per share of $0.51, unchanged from first quarter 2019.
  • Non-GAAP free cash flow was $(38.3) million, a decrease of $15.8 million.

"Following a solid start to the year, we acted quickly to ensure the financial strength and flexibility needed in response to the uncertainty of COVID-19 and current global market conditions while remaining critically focused on the success of our customers and the health and economic stability of our employees," said Tony Boor, executive vice president and CFO, Blackbaud. "Our recurring revenue model and strong balance sheet remain stabilizing factors as we navigate the wide array of potential outcomes that could result from COVID-19, and we will continue to implement the necessary near-term measures to make certain Blackbaud remains in a strong position longer-term on behalf of all of our stakeholders."

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.

COVID-19 Actions

Blackbaud announced several immediate steps to provide additional near-term liquidity and financial flexibility while implementing employee relief measures in light of the COVID-19 pandemic. These actions included:

  • Blackbaud's Board of Directors eliminated the payment of quarterly cash dividends on Blackbaud's common stock
  • Blackbaud's 401(k) match program is temporarily suspended for US-based employees
  • Temporary freeze on company hiring efforts
  • Mike Gianoni, Blackbaud's president and CEO, is forgoing his paycheck for the foreseeable future
  • Restriction of non-essential employee travel and other operating cost reductions
  • Employee cash merit increases for 2020 replaced with a one-time restricted stock grant
  • Employee cash bonus programs for 2020 replaced with a one-time performance stock grant
  • All worldwide employees that have a base salary equal to or less than $75,000 USD received additional financial support in the form of a one-time bonus of $1,000 USD

Recent Company Highlights

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

Revenue Classifications

Revenue from retained and managed service contracts that we do not expect to have a term consistent with our cloud solution contracts is included in one-time services and other revenue beginning January 1, 2020. This change in presentation resulted in a $4.3 million decrease in recurring revenue and an offsetting increase to one-time services and other revenue during the three months ended March 31, 2020.

Conference Call Details

What:   

Blackbaud's 2020 First Quarter Conference Call

When:    

May 6, 2020

Time:       

8:00 a.m. (Eastern Time)

Live Call: 

877-407-3088 (US/Canada)

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, higher education institutions, K–12 schools, healthcare organizations, faith communities, arts and cultural organizations, foundations, companies 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, Costa Rica and the United Kingdom. For more information, visit www.blackbaud.com, or follow us on Twitter, LinkedIn, Instagram 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 and expectations that our revenue will continue to grow. 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; uncertainty regarding the COVID-19 disruption; 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,
 2020

 

December 31,
 2019

 

Assets

   

Current assets:

   

Cash and cash equivalents

$

24,972

 

$

31,810

 

Restricted cash due to customers

232,250

 

545,485

 

Accounts receivable, net of allowance of $5,928 and $5,529 at March 31,
2020 and December 31, 2019, respectively

89,191

 

88,868

 

Customer funds receivable

1,205

 

524

 

Prepaid expenses and other current assets

81,004

 

67,852

 

  Total current assets

428,622

 

734,539

 

Property and equipment, net

35,661

 

35,546

 

Operating lease right-of-use assets

100,568

 

104,400

 

Software development costs, net

105,594

 

101,302

 

Goodwill

631,033

 

634,088

 

Intangible assets, net

303,097

 

317,895

 

Other assets

66,346

 

65,193

 

Total assets

$

1,670,921

 

$

1,992,963

 

Liabilities and stockholders' equity

   

Current liabilities:

   

Trade accounts payable

$

44,510

 

$

47,676

 

Accrued expenses and other current liabilities

45,781

 

73,317

 

Due to customers

233,455

 

546,009

 

Debt, current portion

10,351

 

7,500

 

Deferred revenue, current portion

288,682

 

314,335

 

  Total current liabilities

622,779

 

988,837

 

Debt, net of current portion

520,576

 

459,600

 

Deferred tax liability

43,286

 

44,594

 

Deferred revenue, net of current portion

1,715

 

1,802

 

Operating lease liabilities, net of current portion

91,235

 

95,624

 

Other liabilities

10,937

 

5,742

 

Total liabilities

1,290,528

 

1,596,199

 

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,
60,932,639 and 60,206,091 shares issued at March 31, 2020 and
December 31, 2019, respectively

61

 

60

 

Additional paid-in capital

471,344

 

457,804

 

Treasury stock, at cost; 11,311,712 and 11,066,354 shares at March 31,
2020 and December 31, 2019, respectively

(310,447)

 

(290,665)

 

Accumulated other comprehensive loss

(14,140)

 

(5,290)

 

Retained earnings

233,575

 

234,855

 

Total stockholders' equity

380,393

 

396,764

 

Total liabilities and stockholders' equity

$

1,670,921

 

$

1,992,963

 

 

 

Blackbaud, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)

 

(dollars in thousands, except per share amounts)  

Three months ended
 March 31,

   

2020

2019

 

Revenue

     

Recurring

$

204,867

 

$

198,094

   

One-time services and other

18,754

 

17,736

   

Total revenue

223,621

 

215,830

   

Cost of revenue

     

Cost of recurring

89,551

 

84,711

   

Cost of one-time services and other

15,314

 

14,572

   

Total cost of revenue

104,865

 

99,283

   

Gross profit

118,756

 

116,547

   

Operating expenses

     

Sales, marketing and customer success

58,735

 

55,455

   

Research and development

24,977

 

28,461

   

General and administrative

25,855

 

27,117

   

Amortization

741

 

1,376

   

Restructuring

24

 

1,953

   

Total operating expenses

110,332

 

114,362

   

Income from operations

8,424

 

2,185

   

Interest expense

(4,159)

 

(5,323)

   

Other income, net

1,070

 

182

   

Income (loss) before provision (benefit) for income taxes

5,335

 

(2,956)

   

Income tax provision (benefit)

696

 

(1,834)

   

Net income (loss)

$

4,639

 

$

(1,122)

   

Earnings (loss) per share

     

Basic

$

0.10

 

$

(0.02)

   

Diluted

$

0.10

 

$

(0.02)

   

Common shares and equivalents outstanding

     

Basic weighted average shares

48,036,300

 

47,516,912

   

Diluted weighted average shares

48,455,751

 

47,516,912

   

Other comprehensive (loss) income

     

Foreign currency translation adjustment

(5,728)

 

4,590

   

Unrealized loss on derivative instruments, net of tax

(3,122)

 

(932)

   

Total other comprehensive (loss) income

(8,850)

 

3,658

   

Comprehensive (loss) income

$

(4,211)

 

$

2,536

   

 

 

Blackbaud, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 
 

Three months ended
 March 31,

 

(dollars in thousands)

2020

2019

 

Cash flows from operating activities

   

Net income (loss)

$

4,639

 

$

(1,122)

 

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

   

Depreciation and amortization

21,804

 

21,724

 

Provision for credit losses and sales returns

2,488

 

2,032

 

Stock-based compensation expense

13,580

 

13,726

 

Deferred taxes

954

 

(1,155)

 

Amortization of deferred financing costs and discount

188

 

188

 

Other non-cash adjustments

102

 

1,820

 

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

   

 Accounts receivable

(3,876)

 

(1,797)

 

 Prepaid expenses and other assets

(5,303)

 

(12,107)

 

 Trade accounts payable

(4,021)

 

(3,624)

 

 Accrued expenses and other liabilities

(31,694)

 

(11,690)

 

 Deferred revenue

(23,364)

 

(18,006)

 

Net cash used in operating activities

(24,503)

 

(10,011)

 

Cash flows from investing activities

   

Purchase of property and equipment

(2,867)

 

(1,152)

 

Capitalized software development costs

(10,937)

 

(11,319)

 

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

 

(109,386)

 

Net cash used in investing activities

(13,804)

 

(121,857)

 

Cash flows from financing activities

   

Proceeds from issuance of debt

144,700

 

271,500

 

Payments on debt

(86,075)

 

(75,175)

 

Employee taxes paid for withheld shares upon equity award settlement

(19,782)

 

(18,400)

 

Proceeds from exercise of stock options

1

 

3

 

Change in due to customers

(311,095)

 

(242,885)

 

Change in customer funds receivable

(733)

 

(3,573)

 

Dividend payments to stockholders

(5,960)

 

(5,901)

 

Net cash used in financing activities

(278,944)

 

(74,431)

 

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

(2,822)

 

1,036

 

Net decrease in cash, cash equivalents and restricted cash

(320,073)

 

(205,263)

 

Cash, cash equivalents and restricted cash, beginning of period

577,295

 

449,846

 

Cash, cash equivalents and restricted cash, end of period

$

257,222

 

$

244,583

 

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,
 2020

December 31,
 2019

 

Cash and cash equivalents

$

24,972

 

$

31,810

 

Restricted cash due to customers

232,250

 

545,485

 

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

$

257,222

 

$

577,295

 

 

 

Blackbaud, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures

(Unaudited)

 

(dollars in thousands, except per share amounts)

Three months ended
 March 31,

 

2020

2019

 

GAAP Revenue

$

223,621

 

$

215,830

 

Non-GAAP adjustments:

   

Add: Acquisition-related deferred revenue write-down

 

716

 

Non-GAAP revenue

$

223,621

 

$

216,546

 
     

GAAP gross profit

$

118,756

 

$

116,547

 

GAAP gross margin

53.1

%

54.0

%

Non-GAAP adjustments:

   

Add: Acquisition-related deferred revenue write-down

 

716

 

Add: Stock-based compensation expense

865

 

974

 

Add: Amortization of intangibles from business combinations

10,930

 

11,416

 

Add: Employee severance

32

 

1,119

 

Subtotal

11,827

 

14,225

 

Non-GAAP gross profit

$

130,583

 

$

130,772

 

Non-GAAP gross margin

58.4

%

60.4

%

     

GAAP income from operations

$

8,424

 

$

2,185

 

GAAP operating margin

3.8

%

1.0

%

Non-GAAP adjustments:

   

Add: Acquisition-related deferred revenue write-down

 

716

 

Add: Stock-based compensation expense

13,580

 

13,726

 

Add: Amortization of intangibles from business combinations

11,671

 

12,792

 

Add: Employee severance

97

 

3,421

 

Add: Acquisition-related integration costs

(32)

 

718

 

Add: Acquisition-related expenses

139

 

445

 

Add: Restructuring costs

24

 

1,953

 

Subtotal

25,479

 

33,771

 

Non-GAAP income from operations

$

33,903

 

$

35,956

 

Non-GAAP operating margin

15.2

%

16.6

%

     

GAAP income (loss) before provision (benefit) for income taxes

$

5,335

 

$

(2,956)

 

GAAP net income (loss)

$

4,639

 

$

(1,122)

 
     

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

48,455,751

 

47,516,912

 

GAAP diluted earnings (loss) per share

$

0.10

 

$

(0.02)

 
     

Non-GAAP adjustments:

   

Add: GAAP income tax provision (benefit)

696

 

(1,834)

 

Add: Total non-GAAP adjustments affecting income from operations

25,479

 

33,771

 

Non-GAAP income before provision for income taxes

30,814

 

30,815

 

Assumed non-GAAP income tax provision(1)

$

6,163

 

$

6,163

 

Non-GAAP net income

$

24,651

 

$

24,652

 
     

Shares used in computing non-GAAP diluted earnings per share

48,455,751

 

48,051,289

 

Non-GAAP diluted earnings per share

$

0.51

 

$

0.51

 

(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

(Unaudited)

 

(dollars in thousands)

Three months ended
 March 31,

2020

 

2019

GAAP revenue

$

223,621

 

$

215,830

GAAP revenue growth

3.6

%

 

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

 

716

Non-GAAP organic revenue(2)

$

223,621

 

$

216,546

Non-GAAP organic revenue growth

3.3

%

 
     

Non-GAAP organic revenue(2)

$

223,621

 

$

216,546

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

310

 

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

$

223,931

 

$

216,546

Non-GAAP organic revenue growth on constant currency basis

3.4

%

 
     

GAAP recurring revenue

$

204,867

 

$

198,094

GAAP recurring revenue growth

3.4

%

 

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

 

716

Non-GAAP organic recurring revenue

$

204,867

 

$

198,810

Non-GAAP organic recurring revenue growth

3.0

%

 

(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 Australian Dollar, British Pound, Canadian Dollar and EURO.

 

 

(dollars in thousands)

Three months ended
 March 31,

2020

2019

GAAP net cash provided by operating activities

$

(24,503)

$

(10,011)

Less: purchase of property and equipment

(2,867)

(1,152)

Less: capitalized software development costs

(10,937)

(11,319)

Non-GAAP free cash flow

$

(38,307)

$

(22,482)

 

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SOURCE Blackbaud