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Blackbaud Announces 2020 Second Quarter Results
Recurring Revenue Grows 4%; Diluted Earnings Per Share Increases 60% Reflecting Pivot to Emphasize Profitability and Cash Flow

CHARLESTON, S.C., July 29, 2020 /PRNewswire/ -- Blackbaud (NASDAQ: BLKB), the world's leading cloud software company powering social good, today announced financial results for its second quarter ended June 30, 2020.

"We continue to prioritize the well-being of our employees as we think about the future of work at Blackbaud and building on our strong, customer-centric culture," said Mike Gianoni, Blackbaud's president and CEO. "Our customers are once more proving the often under-appreciated resilience of our market and finding creative ways to ensure they deliver on their missions despite the challenges presented by the current environment. This pandemic will be a catalyst for the industry to move even faster towards modern, purpose-built cloud solutions, and we remain very well positioned as a leader in this market and the best long-term partner for social good organizations. While we continue to be optimistic over the long-term opportunity, the uncertainty of today's environment is likely to put pressure on near-term revenue growth."

Second Quarter 2020 Results Compared to Second Quarter 2019 Results:

  • Total GAAP revenue was $232.0 million, up 2.8%, with $216.3 million in GAAP recurring revenue, representing 93.2% of total GAAP revenue. GAAP recurring revenue was up 3.7%.
  • Total non-GAAP revenue was $232.0 million, up 2.5%, with $216.3 million in non-GAAP recurring revenue, representing 93.2% of total non-GAAP revenue. Non-GAAP recurring revenue was up 3.4%.
  • Non-GAAP organic recurring revenue increased 3.4%.
  • GAAP income from operations was $19.6 million, with GAAP operating margin of 8.4%, an increase of 240 basis points.
  • Non-GAAP income from operations was $54.5 million, with non-GAAP operating margin of 23.5%, an increase of 430 basis points.
  • GAAP net income was $11.8 million, with GAAP diluted earnings per share of $0.24, up $0.09 per share.
  • Non-GAAP net income was $41.0 million, with non-GAAP diluted earnings per share of $0.85, up $0.19 per share.
  • Non-GAAP free cash flow was $48.2 million, an increase of $10.2 million.

"We executed very well in the second quarter 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. "The second quarter results clearly show the stability in our customer base, durability of the market we serve, as well as our ability to drive increased profitability and cash flow. The early actions taken to bolster our liquidity and increase related borrowing capacity generated a significant cost reduction for the quarter and are planned through the remainder of the year, with some of these temporary actions expected to reverse heading into 2021."

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.

Conference Call Details
What:        Blackbaud's 2020 Second Quarter Conference Call
When:       July 30, 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 condition and results of operations. 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; the security of our data and that of our customers; 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)

June 30,
 2020

 

December 31,
 2019

 

Assets

   

Current assets:

   

Cash and cash equivalents

$

30,531

 

$

31,810

 

Restricted cash due to customers

421,915

 

545,485

 

Accounts receivable, net of allowance of $9,025 and $5,529 at June 30, 2020 and December 31, 2019, respectively

129,675

 

88,868

 

Customer funds receivable

1,284

 

524

 

Prepaid expenses and other current assets

83,699

 

67,852

 

Total current assets

667,104

 

734,539

 

Property and equipment, net

36,539

 

35,546

 

Operating lease right-of-use assets

95,575

 

104,400

 

Software development costs, net

106,044

 

101,302

 

Goodwill

630,687

 

634,088

 

Intangible assets, net

292,187

 

317,895

 

Other assets

68,673

 

65,193

 

Total assets

$

1,896,809

 

$

1,992,963

 

Liabilities and stockholders' equity

   

Current liabilities:

   

Trade accounts payable

$

41,029

 

$

47,676

 

Accrued expenses and other current liabilities

52,893

 

73,317

 

Due to customers

423,199

 

546,009

 

Debt, current portion

9,194

 

7,500

 

Deferred revenue, current portion

332,570

 

314,335

 

Total current liabilities

858,885

 

988,837

 

Debt, net of current portion

478,919

 

459,600

 

Deferred tax liability

45,108

 

44,594

 

Deferred revenue, net of current portion

4,626

 

1,802

 

Operating lease liabilities, net of current portion

86,586

 

95,624

 

Other liabilities

11,883

 

5,742

 

Total liabilities

1,486,007

 

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, 60,901,100 and 60,206,091 shares issued at June 30, 2020 and December 31, 2019, respectively

61

 

60

 

Additional paid-in capital

491,450

 

457,804

 

Treasury stock, at cost; 11,332,912 and 11,066,354 shares at June 30, 2020 and December 31, 2019, respectively

(311,661)

 

(290,665)

 

Accumulated other comprehensive loss

(14,476)

 

(5,290)

 

Retained earnings

245,428

 

234,855

 

Total stockholders' equity

410,802

 

396,764

 

Total liabilities and stockholders' equity

$

1,896,809

 

$

1,992,963

 

 

 

Blackbaud, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)

 
 

(dollars in thousands, except per share amounts)

Three months ended
 June 30,

   

Six months ended
 June 30,

 

2020

2019

   

2020

 

2019

 

Revenue

         

Recurring

$

216,260

 

$

208,468

   

$

421,127

 

$

406,562

 

One-time services and other

15,731

 

17,166

   

34,485

 

34,902

 

Total revenue

231,991

 

225,634

   

455,612

 

441,464

 

Cost of revenue

         

Cost of recurring

91,370

 

86,657

   

180,921

 

171,368

 

Cost of one-time services and other

13,569

 

14,150

   

28,883

 

28,722

 

Total cost of revenue

104,939

 

100,807

   

209,804

 

200,090

 

Gross profit

127,052

 

124,827

   

245,808

 

241,374

 

Operating expenses

         

Sales, marketing and customer success

51,954

 

55,009

   

110,689

 

110,464

 

Research and development

24,895

 

25,902

   

49,872

 

54,363

 

General and administrative

29,842

 

28,543

   

55,697

 

55,660

 

Amortization

729

 

1,152

   

1,470

 

2,528

 

Restructuring

50

 

730

   

74

 

2,683

 

Total operating expenses

107,470

 

111,336

   

217,802

 

225,698

 

Income from operations

19,582

 

13,491

   

28,006

 

15,676

 

Interest expense

(3,893)

 

(5,799)

   

(8,052)

 

(11,122)

 

Other income, net

630

 

2,181

   

1,700

 

2,363

 

Income before provision for income taxes

16,319

 

9,873

   

21,654

 

6,917

 

Income tax provision

4,496

 

2,733

   

5,192

 

899

 

Net income

$

11,823

 

$

7,140

   

$

16,462

 

$

6,018

 

Earnings per share

         

Basic

$

0.25

 

$

0.15

   

$

0.34

 

$

0.13

 

Diluted

$

0.24

 

$

0.15

   

$

0.34

 

$

0.13

 

Common shares and equivalents outstanding

         

Basic weighted average shares

48,239,928

 

47,714,621

   

48,138,125

 

47,622,740

 

Diluted weighted average shares

48,418,378

 

48,160,684

   

48,465,077

 

48,101,212

 

Other comprehensive loss

         

Foreign currency translation adjustment

(887)

 

(6,018)

   

(6,615)

 

(1,428)

 

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

551

 

(1,939)

   

(2,571)

 

(2,871)

 

Total other comprehensive loss

(336)

 

(7,957)

   

(9,186)

 

(4,299)

 

Comprehensive income (loss)

$

11,487

 

$

(817)

   

$

7,276

 

$

1,719

 

 

Blackbaud, Inc.
Consolidated Statements of Cash Flows
(Unaudited)

 
 
 

Six months ended
 June 30,

 

(dollars in thousands)

2020

 

2019

 

Cash flows from operating activities

   

Net income

$

16,462

 

$

6,018

 

Adjustments to reconcile net income to net cash provided by operating activities:

   

Depreciation and amortization

46,088

 

43,113

 

Provision for credit losses and sales returns

6,677

 

4,646

 

Stock-based compensation expense

33,713

 

28,755

 

Deferred taxes

1,945

 

465

 

Amortization of deferred financing costs and discount

376

 

376

 

Other non-cash adjustments

477

 

1,982

 

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

   

Accounts receivable

(48,167)

 

(45,071)

 

Prepaid expenses and other assets

(7,068)

 

(12,725)

 

Trade accounts payable

(8,984)

 

216

 

Accrued expenses and other liabilities

(26,520)

 

(9,014)

 

Deferred revenue

22,489

 

26,328

 

Net cash provided by operating activities

37,488

 

45,089

 

Cash flows from investing activities

   

Purchase of property and equipment

(5,887)

 

(6,375)

 

Capitalized software development costs

(21,679)

 

(23,206)

 

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

 

(109,386)

 

Other investing activities

 

500

 

Net cash used in investing activities

(27,566)

 

(138,467)

 

Cash flows from financing activities

   

Proceeds from issuance of debt

202,100

 

329,100

 

Payments on debt

(185,250)

 

(155,150)

 

Employee taxes paid for withheld shares upon equity award settlement

(20,996)

 

(19,760)

 

Proceeds from exercise of stock options

4

 

6

 

Change in due to customers

(121,612)

 

(107,808)

 

Change in customer funds receivable

(828)

 

(3,741)

 

Dividend payments to stockholders

(5,960)

 

(11,802)

 

Net cash (used in) provided by financing activities

(132,542)

 

30,845

 

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

(2,229)

 

(526)

 

Net decrease in cash, cash equivalents and restricted cash

(124,849)

 

(63,059)

 

Cash, cash equivalents and restricted cash, beginning of period

577,295

 

449,846

 

Cash, cash equivalents and restricted cash, end of period

$

452,446

 

$

386,787

 

 

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)

June 30,
 2020

 

December 31,
 2019

 

Cash and cash equivalents

$

30,531

 

$

31,810

 

Restricted cash due to customers

421,915

 

545,485

 

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

$

452,446

 

$

577,295

 

 

Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)

 
 

(dollars in thousands, except per share amounts)

Three months ended
 June 30,

   

Six months ended
 June 30,

 

2020

 

2019

   

2020

 

2019

 

GAAP Revenue

$

231,991

 

$

225,634

   

$

455,612

 

$

441,464

 

Non-GAAP adjustments:

         

Add: Acquisition-related deferred revenue write-down

 

716

   

 

1,432

 

Non-GAAP revenue

$

231,991

 

$

226,350

   

$

455,612

 

$

442,896

 
           

GAAP gross profit

$

127,052

 

$

124,827

   

$

245,808

 

$

241,374

 

GAAP gross margin

54.8

%

55.3

%

 

54.0

%

54.7

%

Non-GAAP adjustments:

         

Add: Acquisition-related deferred revenue write-down

 

716

   

 

1,432

 

Add: Stock-based compensation expense

2,570

 

791

   

3,435

 

1,765

 

Add: Amortization of intangibles from business combinations

9,686

 

11,329

   

20,616

 

22,745

 

Add: Employee severance

781

 

(4)

   

813

 

1,115

 

Subtotal

13,037

 

12,832

   

24,864

 

27,057

 

Non-GAAP gross profit

$

140,089

 

$

137,659

   

$

270,672

 

$

268,431

 

Non-GAAP gross margin

60.4

%

60.8

%

 

59.4

%

60.6

%

           

GAAP income from operations

$

19,582

 

$

13,491

   

$

28,006

 

$

15,676

 

GAAP operating margin

8.4

%

6.0

%

 

6.1

%

3.6

%

Non-GAAP adjustments:

         

Add: Acquisition-related deferred revenue write-down

 

716

   

 

1,432

 

Add: Stock-based compensation expense

20,133

 

15,029

   

33,713

 

28,755

 

Add: Amortization of intangibles from business combinations

10,415

 

12,481

   

22,086

 

25,273

 

Add: Employee severance

4,264

 

191

   

4,361

 

3,612

 

Add: Acquisition-related integration costs

(71)

 

464

   

(103)

 

1,182

 

Add: Acquisition-related expenses

85

 

365

   

224

 

810

 

Add: Restructuring costs

50

 

730

   

74

 

2,683

 

Subtotal

34,876

 

29,976

   

60,355

 

63,747

 

Non-GAAP income from operations

$

54,458

 

$

43,467

   

$

88,361

 

$

79,423

 

Non-GAAP operating margin

23.5

%

19.2

%

 

19.4

%

17.9

%

           

GAAP income before provision for income taxes

$

16,319

 

$

9,873

   

$

21,654

 

$

6,917

 

GAAP net income

$

11,823

 

$

7,140

   

$

16,462

 

$

6,018

 
           

Shares used in computing GAAP diluted earnings per share

48,418,378

 

48,160,684

   

48,465,077

 

48,101,212

 

GAAP diluted earnings per share

$

0.24

 

$

0.15

   

$

0.34

 

$

0.13

 
           

Non-GAAP adjustments:

         

Add: GAAP income tax provision

4,496

 

2,733

   

5,192

 

899

 

Add: Total non-GAAP adjustments affecting income from operations

34,876

 

29,976

   

60,355

 

63,747

 

Non-GAAP income before provision for income taxes

51,195

 

39,849

   

82,009

 

70,664

 

Assumed non-GAAP income tax provision(1)

10,239

 

7,970

   

$

16,402

 

$

14,133

 

Non-GAAP net income

$

40,956

 

$

31,879

   

$

65,607

 

$

56,531

 
           

Shares used in computing non-GAAP diluted earnings per share

48,418,378

 

48,160,684

   

48,465,077

 

48,101,212

 

Non-GAAP diluted earnings per share

$

0.85

 

$

0.66

   

$

1.35

 

$

1.18

 

(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
 June 30,

   

Six months ended
 June 30,

 

2020

 

2019

   

2020

 

2019

 

GAAP revenue

$

231,991

 

$

225,634

   

$

455,612

 

$

441,464

 

GAAP revenue growth

2.8

%

   

3.2

%

 

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

 

716

   

 

1,432

 

Non-GAAP organic revenue(2)

$

231,991

 

$

226,350

   

$

455,612

 

$

442,896

 

Non-GAAP organic revenue growth

2.5

%

   

2.9

%

 
           

Non-GAAP organic revenue(2)

$

231,991

 

$

226,350

   

$

455,612

 

$

442,896

 

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

2,008

 

   

2,318

 

 

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

$

233,999

 

$

226,350

   

$

457,930

 

$

442,896

 

Non-GAAP organic revenue growth on constant currency basis

3.4

%

   

3.4

%

 
           

GAAP recurring revenue

$

216,260

 

$

208,468

   

$

421,127

 

$

406,562

 

GAAP recurring revenue growth

3.7

%

   

3.6

%

 

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

 

716

   

 

1,432

 

Non-GAAP organic recurring revenue

$

216,260

 

$

209,184

   

$

421,127

 

$

407,994

 

Non-GAAP organic recurring revenue growth

3.4

%

   

3.2

%

 

(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)

Six months ended
 June 30,

 

2020

 

2019

 

GAAP net cash provided by operating activities

$

37,488

 

$

45,089

 

Less: purchase of property and equipment

(5,887)

 

(6,375)

 

Less: capitalized software development costs

(21,679)

 

(23,206)

 

Non-GAAP free cash flow

$

9,922

 

$

15,508

 

 

Power your passion (PRNewsfoto/Blackbaud)

 

 

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SOURCE Blackbaud