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Blackbaud Announces 2020 Third Quarter Results
Delivers on Increased Profitability Driving 11% Year over Year Increase in Diluted Earnings Per Share

CHARLESTON, S.C., Oct. 28, 2020 /PRNewswire/ -- Blackbaud (NASDAQ: BLKB), the world's leading cloud software company powering social good, today announced financial results for its third quarter ended September 30, 2020.

"Our customers continue to navigate the challenges caused by the pandemic which will put pressure on our ability to drive near-term revenue growth in 2020 and 2021, thus we're executing our balanced strategy with a sharper focus on profitability," said Mike Gianoni, Blackbaud's president and CEO. "Digital transformation has shifted from a long-term strategy to a daily reality, as organizations across the market have adapted to new and distributed ways of working. We've had a singular focus on the social good sector for nearly 40 years, and we remain very well positioned as a leader in this market and the best long-term partner for social good organizations. I'm excited about the progress we're making to deliver unmatched innovation for our customers and enhance the future of work at Blackbaud for our employees."

Third Quarter 2020 Results Compared to Third Quarter 2019 Results:

  • Total GAAP revenue was $215.0 million, down 2.8%, with $200.1 million in GAAP recurring revenue, representing 93.1% of total GAAP revenue. GAAP recurring revenue was down 2.5%.
  • Total non-GAAP revenue was $215.0 million, down 2.9%, with $200.1 million in non-GAAP recurring revenue, representing 93.1% of total non-GAAP revenue. Non-GAAP recurring revenue was down 2.6%.
  • Non-GAAP organic recurring revenue decreased 2.6%.
  • GAAP income from operations was $10.1 million, with GAAP operating margin of 4.7%, an increase of 110 basis points.
  • Non-GAAP income from operations was $48.1 million, with non-GAAP operating margin of 22.4%, an increase of 590 basis points.
  • GAAP net income was $4.9 million, with GAAP diluted earnings per share of $0.10, up $0.01 per share.
  • Non-GAAP net income was $35.7 million, with non-GAAP diluted earnings per share of $0.73, up $0.17 per share.
  • Non-GAAP free cash flow was $41.4 million, a decrease of $21.1 million.

"Our third quarter results are indicative of our ability to drive a strong margin profile inclusive of near-term pressure on revenues and necessary investments in areas like engineering and security," said Tony Boor, executive vice president and CFO. "During the quarter we also completed the purchase of our Charleston headquarters, and we will continue to optimize our overall real estate footprint in the fourth quarter to align with our workforce strategy and the future of work at Blackbaud. There are significant opportunities in front of us and we are well positioned to continue making the critical investments necessary to ensure the long-term success of the business while remaining committed to driving increased shareholder value through profitability and earnings growth."

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 Third Quarter Conference Call
When:         October 29, 2020
Time:          8:00 a.m. (Eastern Time)
Live Call:    1-877-407-3088 (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)

September 30,
2020

December 31,
2019

Assets

   

Current assets:

   

Cash and cash equivalents

$

30,563

 

$

31,810

 

Restricted cash

203,660

 

545,485

 

Accounts receivable, net of allowance of $10,727 and $5,529 at September 30, 2020 and December 31, 2019, respectively

96,830

 

88,868

 

Customer funds receivable

4,901

 

524

 

Prepaid expenses and other current assets

76,761

 

67,852

 

Total current assets

412,715

 

734,539

 

Property and equipment, net

109,469

 

35,546

 

Operating lease right-of-use assets

30,218

 

104,400

 

Software development costs, net

108,891

 

101,302

 

Goodwill

632,840

 

634,088

 

Intangible assets, net

284,414

 

317,895

 

Other assets

72,617

 

65,193

 

Total assets

$

1,651,164

 

$

1,992,963

 

Liabilities and stockholders' equity

   

Current liabilities:

   

Trade accounts payable

$

31,775

 

$

47,676

 

Accrued expenses and other current liabilities

48,380

 

73,317

 

Due to customers

207,356

 

546,009

 

Debt, current portion

10,305

 

7,500

 

Deferred revenue, current portion

322,452

 

314,335

 

Total current liabilities

620,268

 

988,837

 

Debt, net of current portion

497,953

 

459,600

 

Deferred tax liability

46,989

 

44,594

 

Deferred revenue, net of current portion

5,803

 

1,802

 

Operating lease liabilities, net of current portion

25,706

 

95,624

 

Other liabilities

12,610

 

5,742

 

Total liabilities

1,209,329

 

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, 60,903,925 and 60,206,091 shares issued at September 30, 2020 and December 31, 2019, respectively

61

 

60

 

Additional paid-in capital

512,269

 

457,804

 

Treasury stock, at cost; 11,337,486 and 11,066,354 shares at September 30, 2020 and December 31, 2019, respectively

(311,951)

 

(290,665)

 

Accumulated other comprehensive loss

(8,872)

 

(5,290)

 

Retained earnings

250,328

 

234,855

 

Total stockholders' equity

441,835

 

396,764

 

Total liabilities and stockholders' equity

$

1,651,164

 

$

1,992,963

 

 

Blackbaud, Inc.
Consolidated statements of comprehensive income
(Unaudited)
 

 

(dollars in thousands, except per share amounts)

Three months ended
September 30,

 

Nine months ended
September 30,

2020

2019

 

2020

2019

Revenue

         

Recurring

$

200,102

 

$

205,227

   

$

621,229

 

$

611,789

 

One-time services and other

14,899

 

15,893

   

49,384

 

50,795

 

Total revenue

215,001

 

221,120

   

670,613

 

662,584

 

Cost of revenue

         

Cost of recurring

84,251

 

87,645

   

265,172

 

259,013

 

Cost of one-time services and other

14,434

 

14,152

   

43,317

 

42,874

 

Total cost of revenue

98,685

 

101,797

   

308,489

 

301,887

 

Gross profit

116,316

 

119,323

   

362,124

 

360,697

 

Operating expenses

         

Sales, marketing and customer success

48,460

 

55,499

   

159,149

 

165,963

 

Research and development

22,783

 

25,941

   

72,655

 

80,304

 

General and administrative

34,132

 

28,897

   

89,829

 

84,557

 

Amortization

749

 

703

   

2,219

 

3,231

 

Restructuring

105

 

400

   

179

 

3,083

 

Total operating expenses

106,229

 

111,440

   

324,031

 

337,138

 

Income from operations

10,087

 

7,883

   

38,093

 

23,559

 

Interest expense

(3,997)

 

(5,111)

   

(12,049)

 

(16,233)

 

Other income, net

542

 

2,158

   

2,242

 

4,521

 

Income before provision for income taxes

6,632

 

4,930

   

28,286

 

11,847

 

Income tax provision

1,756

 

364

   

6,948

 

1,263

 

Net income

$

4,876

 

$

4,566

   

$

21,338

 

$

10,584

 

Earnings per share

         

Basic

$

0.10

 

$

0.10

   

$

0.44

 

$

0.22

 

Diluted

$

0.10

 

$

0.09

   

$

0.44

 

$

0.22

 

Common shares and equivalents outstanding

         

Basic weighted average shares

48,271,139

 

47,757,769

   

48,182,799

 

47,668,235

 

Diluted weighted average shares

48,859,707

 

48,464,529

   

48,582,068

 

48,223,712

 

Other comprehensive income (loss)

         

Foreign currency translation adjustment

4,661

 

(3,893)

   

(1,954)

 

(5,321)

 

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

943

 

(363)

   

(1,628)

 

(3,234)

 

Total other comprehensive income (loss)

5,604

 

(4,256)

   

(3,582)

 

(8,555)

 

Comprehensive income

$

10,480

 

$

310

   

$

17,756

 

$

2,029

 

 

 Blackbaud, Inc.
Consolidated statements of cash flows
(Unaudited)

 
 

Nine months ended
September 30,

(dollars in thousands)

2020

2019

Cash flows from operating activities

   

Net income

$

21,338

 

$

10,584

 

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

   

Depreciation and amortization

68,755

 

63,998

 

Provision for credit losses and sales returns

10,156

 

6,192

 

Stock-based compensation expense

54,556

 

43,621

 

Deferred taxes

1,879

 

(75)

 

Amortization of deferred financing costs and discount

569

 

564

 

Other non-cash adjustments

2,203

 

2,047

 

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

   

Accounts receivable

(18,319)

 

(6,375)

 

Prepaid expenses and other assets

4,292

 

(5,129)

 

Trade accounts payable

(17,203)

 

(74)

 

Accrued expenses and other liabilities

(31,595)

 

(13,592)

 

Deferred revenue

12,534

 

20,363

 

Net cash provided by operating activities

109,165

 

122,124

 

Cash flows from investing activities

   

Purchase of property and equipment

(25,836)

 

(9,597)

 

Capitalized software development costs

(32,028)

 

(34,513)

 

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

 

(109,353)

 

Other investing activities

 

500

 

Net cash used in investing activities

(57,864)

 

(152,963)

 

Cash flows from financing activities

   

Proceeds from issuance of debt

267,400

 

371,200

 

Payments on debt

(290,999)

 

(255,625)

 

Debt issuance costs

(593)

 

 

Employee taxes paid for withheld shares upon equity award settlement

(21,286)

 

(20,279)

 

Proceeds from exercise of stock options

4

 

7

 

Change in due to customers

(337,821)

 

(215,942)

 

Change in customer funds receivable

(4,495)

 

(6,283)

 

Dividend payments to stockholders

(5,960)

 

(17,705)

 

Net cash used in financing activities

(393,750)

 

(144,627)

 

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

(623)

 

(2,240)

 

Net decrease in cash, cash equivalents and restricted cash

(343,072)

 

(177,706)

 

Cash, cash equivalents and restricted cash, beginning of period

577,295

 

449,846

 

Cash, cash equivalents and restricted cash, end of period

$

234,223

 

$

272,140

 

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)

September 30,
2020

December 31,
2019

Cash and cash equivalents

$

30,563

 

$

31,810

 

Restricted cash

203,660

 

545,485

 

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

$

234,223

 

$

577,295

 

 

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

 

(dollars in thousands, except per share amounts)

Three months ended
September 30,

 

Nine months ended
September 30,

2020

2019

 

2020

2019

GAAP Revenue

$

215,001

 

$

221,120

   

$

670,613

 

$

662,584

 

Non-GAAP adjustments:

         

Add: Acquisition-related deferred revenue write-down

 

259

   

 

1,691

 

Non-GAAP revenue

$

215,001

 

$

221,379

   

$

670,613

 

$

664,275

 
           

GAAP gross profit

$

116,316

 

$

119,323

   

$

362,124

 

$

360,697

 

GAAP gross margin

54.1

%

54.0

%

 

54.0

%

54.4

%

Non-GAAP adjustments:

         

Add: Acquisition-related deferred revenue write-down

 

259

   

 

1,691

 

Add: Stock-based compensation expense

3,688

 

784

   

7,123

 

2,549

 

Add: Amortization of intangibles from business combinations

9,219

 

11,225

   

29,835

 

33,970

 

Add: Employee severance

 

19

   

813

 

1,134

 

Subtotal

12,907

 

12,287

   

37,771

 

39,344

 

Non-GAAP gross profit

$

129,223

 

$

131,610

   

$

399,895

 

$

400,041

 

Non-GAAP gross margin

60.1

%

59.5

%

 

59.6

%

60.2

%

           

GAAP income from operations

$

10,087

 

$

7,883

   

$

38,093

 

$

23,559

 

GAAP operating margin

4.7

%

3.6

%

 

5.7

%

3.6

%

Non-GAAP adjustments:

         

Add: Acquisition-related deferred revenue write-down

 

259

   

 

1,691

 

Add: Stock-based compensation expense

20,843

 

14,866

   

54,556

 

43,621

 

Add: Amortization of intangibles from business combinations

9,968

 

11,928

   

32,054

 

37,201

 

Add: Employee severance

232

 

48

   

4,593

 

3,660

 

Add: Acquisition-related integration costs

(15)

 

1,024

   

(118)

 

2,206

 

Add: Acquisition-related expenses

64

 

220

   

288

 

1,030

 

Add: Restructuring and other real estate activities

6,943

 

400

   

7,017

 

3,083

 

Subtotal

38,035

 

28,745

   

98,390

 

92,492

 

Non-GAAP income from operations

$

48,122

 

$

36,628

   

$

136,483

 

$

116,051

 

Non-GAAP operating margin

22.4

%

16.5

%

 

20.4

%

17.5

%

           

GAAP income before provision for income taxes

$

6,632

 

$

4,930

   

$

28,286

 

$

11,847

 

GAAP net income

$

4,876

 

$

4,566

   

$

21,338

 

$

10,584

 
           

Shares used in computing GAAP diluted earnings per share

48,859,707

 

48,464,529

   

48,582,068

 

48,223,712

 

GAAP diluted earnings per share

$

0.10

 

$

0.09

   

$

0.44

 

$

0.22

 
           

Non-GAAP adjustments:

         

Add: GAAP income tax provision

1,756

 

364

   

6,948

 

1,263

 

Add: Total non-GAAP adjustments affecting income from operations

38,035

 

28,745

   

98,390

 

92,492

 

Non-GAAP income before provision for income taxes

44,667

 

33,675

   

126,676

 

104,339

 

Assumed non-GAAP income tax provision(1)

8,933

 

6,735

   

$

25,335

 

$

20,868

 

Non-GAAP net income

$

35,734

 

$

26,940

   

$

101,341

 

$

83,471

 
           

Shares used in computing non-GAAP diluted earnings per share

48,859,707

 

48,464,529

   

48,582,068

 

48,223,712

 

Non-GAAP diluted earnings per share

$

0.73

 

$

0.56

   

$

2.09

 

$

1.73

 
   

(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
September 30,

 

Nine months ended
September 30,

2020

2019

 

2020

2019

GAAP revenue

$

215,001

 

$

221,120

   

$

670,613

 

$

662,584

 

GAAP revenue growth

(2.8)

%

   

1.2

%

 

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

 

259

   

 

1,691

 

Non-GAAP organic revenue(2)

$

215,001

 

$

221,379

   

$

670,613

 

$

664,275

 

Non-GAAP organic revenue growth

(2.9)

%

   

1.0

%

 
           

Non-GAAP organic revenue(2)

$

215,001

 

$

221,379

   

$

670,613

 

$

664,275

 

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

(796)

 

   

1,522

 

 

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

$

214,205

 

$

221,379

   

$

672,135

 

$

664,275

 

Non-GAAP organic revenue growth on constant currency basis

(3.2)

%

   

1.2

%

 
           

GAAP recurring revenue

$

200,102

 

$

205,227

   

$

621,229

 

$

611,789

 

GAAP recurring revenue growth

(2.5)

%

   

1.5

%

 

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

 

259

   

 

1,691

 

Non-GAAP organic recurring revenue

$

200,102

 

$

205,486

   

$

621,229

 

$

613,480

 

Non-GAAP organic recurring revenue growth

(2.6)

%

   

1.3

%

 
   

(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)

Nine months ended
September 30,

2020

2019

GAAP net cash provided by operating activities

$

109,165

 

$

122,124

 

Less: purchase of property and equipment

(25,836)

 

(9,597)

 

Less: capitalized software development costs

(32,028)

 

(34,513)

 

Non-GAAP free cash flow

$

51,301

 

$

78,014

 

 

Power your passion (PRNewsfoto/Blackbaud)

 

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/blackbaud-announces-2020-third-quarter-results-301162147.html

SOURCE Blackbaud, Inc.