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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 25, 2017

 
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Blackbaud, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
(State or other jurisdiction of incorporation)
000-50600
 
11-2617163
(Commission File Number)
 
(IRS Employer ID Number)
 
 
 
2000 Daniel Island Drive, Charleston, South Carolina
 
29492
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (843) 216-6200
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨




Item 2.02. Results of Operations and Financial Condition.
On October 25, 2017, Blackbaud, Inc. issued a press release reporting unaudited financial results for the quarter ended September 30, 2017. A copy of this press release is attached hereto as Exhibit 99.1.
The information in this Form 8-K (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No.
 
Description
 
 
 
 
Press release dated October 25, 2017 reporting unaudited financial results for the quarter ended September 30, 2017.





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
BLACKBAUD, INC.
 
 
 
 
 
 
 
Date:
October 25, 2017
 
 
/s/ Anthony W. Boor
 
 
 
 
 
Anthony W. Boor
 
 
 
 
 
Executive Vice President and Chief Financial Officer
 
 
 
 
 
(Principal Financial and Accounting Officer)
 




Exhibit
 
 
Exhibit 99.1
 
 
 
 
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PRESS RELEASE
 
 



Blackbaud Announces 2017 Third Quarter Results
Subscriptions Represent Roughly Two-Thirds of Total Revenue and Grew 21%; Profitability Hits a 2017 High;
Management Updates 2017 Full-Year Financial Guidance for JustGiving Acquisition
 

Charleston, S.C. (October 25, 2017) - Blackbaud (NASDAQ: BLKB), the world's leading cloud software company powering social good, today announced financial results for its third quarter ended September 30, 2017.

"Our unique ability to maximize customer outcomes through innovative new technology and industry expertise is a powerful combination, and it is driving our strong financial performance,” said Mike Gianoni, Blackbaud's president and CEO. "We just concluded our annual user conference bbcon, and it's quite clear to customers that our social good-optimized cloud Blackbaud SKYTM provides the industry's best cloud capabilities, and that we are rapidly evolving it with new innovation. Blackbaud SKY is fueling our strong revenue growth, which is becoming increasingly stable and predictable, as we shift our mix of revenue towards recurring subscriptions. Subscriptions revenue now represents 65 percent of our total revenue and non-GAAP organic subscriptions revenue was strong, growing 19 percent during the third quarter."

Third Quarter 2017 Results Compared to Third Quarter 2016 Results:
•
Total GAAP revenue was $195.5 million, up 6.8%, with $159.0 million in GAAP recurring revenue, representing 81.3% of total revenue, and $127.5 million in subscription revenue, representing 65.2% of total revenue.
•
Total non-GAAP revenue was $195.9 million, up 7.0%, with $159.3 million in non-GAAP recurring revenue, representing 81.3% of total non-GAAP revenue, and $127.8 million in subscription revenue, representing 65.2% of total revenue.
•
Non-GAAP organic revenue increased 5.6%, non-GAAP organic recurring revenue increased 10.7%, and non-GAAP organic subscription revenue increased 19.0%.
•
GAAP income from operations increased 32.7% to $18.0 million, with GAAP operating margin increasing 180 basis points to 9.2%.
•
Non-GAAP income from operations increased 23.3% to $42.0 million, with non-GAAP operating margin increasing 280 basis points to 21.4%.
•
GAAP net income increased 40.5% to $12.5 million, with GAAP diluted earnings per share of $0.26, up $0.07.
•
Non-GAAP net income increased 25.8% to $26.9 million, with non-GAAP diluted earnings per share of $0.56, up $0.11.
•
Non-GAAP free cash flow was $59.1 million, an increase of $17.5 million.

"We posted a very solid third quarter balancing accelerated growth in revenue with improved profitability" said Tony Boor, Blackbaud's executive vice president and CFO. "The company's strong financial performance continues to position us well toward achieving our financial guidance and long-term aspirational goals. We've updated our financial expectation for 2017 to include the acquisition of peer-to-peer giving leader JustGivingTM, which closed on October 2nd, and we look forward to keeping this steady momentum by finishing the year strong."
An explanation of all non-GAAP financial measures referenced in this press release, including Blackbaud's definition of non-GAAP free cash flow, is included below under the heading "Non-GAAP Financial Measures." A reconciliation of the

 
 
 
 
 
 
 
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PRESS RELEASE
 
 

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:
•
Blackbaud shared a series of announcements that deliver high impact for the social good community during bbcon 2017. A bbcon 2017 virtual pass is now available providing access to main stage, keynote presentations and premier content.
•
Blackbaud and Microsoft announced plans to strengthen their strategic partnership to digitally transform the nonprofit sector.The companies made a three-point commitment to collaboration, which includes going deeper on integrations, joint innovation and sector leadership to scale global good.
•
Blackbaud was named to the Fortune 2017 Change the World List, which recognizes companies that have positive impact through activities that are part of their core business strategy.
•
Blackbaud announced the results of a commissioned Total Economic Impact™ (TEI) study conducted by Forrester Consulting on behalf of Blackbaud, examining the return on investment that University of North Texas experienced by deploying Blackbaud Raiser’s Edge NXT™.
•
Blackbaud completed the acquisition of U.K.-based JustGiving™, whose online social giving platform has played a powerful role in the growth of peer-to-peer fundraising.
•
IDC released its July 2017 Worldwide SaaS and Cloud Software Market Shares Report and since 2014 Blackbaud’s rank moved up from 30 to 24.
•
Blackbaud’s President and CEO Mike Gianoni was named to the list of Top 50 SaaS CEOs by The SaaS Report.

Visit www.blackbaud.com/press-room for more information about Blackbaud’s recent highlights.

Dividend
Blackbaud announced today that its Board of Directors has declared a fourth quarter 2017 dividend of $0.12 per share payable on December 15, 2017 to stockholders of record on November 28, 2017.

Financial Outlook
Blackbaud today updated its 2017 full-year financial guidance to reflect the acquisition of JustGiving, which closed on October 2, 2017:

•
Non-GAAP revenue of $785 million to $795 million
•
Non-GAAP income from operations of $159 million to $165 million
•
Non-GAAP operating margin of 20.3% to 20.8%
•
Non-GAAP diluted earnings per share of $2.12 to $2.20
•
Non-GAAP free cash flow of $125 million to $135 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.


2
 
 
 
 
 
 
 
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PRESS RELEASE
 
 

Conference Call Details
What:    Blackbaud's 2017 Third Quarter Conference Call
When:    October 26, 2017
Time:     8:00 a.m. (Eastern Time)
Live Call:     877-616-0061 (domestic) or 719-325-2171 (international); passcode 976294.
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, corporations, education institutions, healthcare institutions and individual change agents—Blackbaud connects and empowers organizations to increase their impact through 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.

Investor Contact:
 
Media Contact:
 
Mark Furlong
 
Nicole McGougan
 
Director of Investor Relations
 
Public Relations Manager
 
843-654-2097
 
843-654-3307
 
mark.furlong@blackbaud.com
 
nicole.mcgougan@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: expectations that certain aspects of our operations, financial results and financial condition will continue to improve, and expectations that we will achieve our projected 2017 full-year financial guidance and long-term aspirational goals. 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

3
 
 
 
 
 
 
 
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PRESS RELEASE
 
 

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 discusses non-GAAP organic revenue growth, non-GAAP organic revenue growth on a constant currency basis, non-GAAP organic subscriptions revenue growth and non-GAAP organic recurring revenue growth, which it believes provides useful information 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 the 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.

4
Blackbaud, Inc.
Consolidated balance sheets
(Unaudited)


(dollars in thousands)
September 30,
2017

December 31,
2016

Assets
 
 
Current assets:
 
 
Cash and cash equivalents
$
17,050

$
16,902

Restricted cash due to customers
139,095

353,771

Accounts receivable, net of allowance of $4,540 and $3,291 at September 30, 2017 and December 31, 2016, respectively
100,868

88,932

Prepaid expenses and other current assets
50,082

48,314

Total current assets
307,095

507,919

Property and equipment, net
43,903

50,269

Software development costs, net
48,618

37,582

Goodwill
472,776

438,240

Intangible assets, net
252,713

253,676

Other assets
21,889

22,524

Total assets
$
1,146,994

$
1,310,210

Liabilities and stockholders’ equity
 
 
Current liabilities:
 
 
Trade accounts payable
$
17,830

$
23,274

Accrued expenses and other current liabilities
45,650

54,196

Due to customers
139,095

353,771

Debt, current portion
8,576

4,375

Deferred revenue, current portion
277,008

244,500

Total current liabilities
488,159

680,116

Debt, net of current portion
329,380

338,018

Deferred tax liability
39,352

29,558

Deferred revenue, net of current portion
5,412

6,440

Other liabilities
7,799

8,533

Total liabilities
870,102

1,062,665

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, 58,503,687 and 57,672,401 shares issued at September 30, 2017 and December 31, 2016, respectively
59

58

Additional paid-in capital
341,476

310,452

Treasury stock, at cost; 10,426,122 and 10,166,801 shares at September 30, 2017 and December 31, 2016, respectively
(234,329
)
(215,237
)
Accumulated other comprehensive loss
(1,013
)
(457
)
Retained earnings
170,699

152,729

Total stockholders’ equity
276,892

247,545

Total liabilities and stockholders’ equity
$
1,146,994

$
1,310,210




5
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,
 
2017

2016

 
2017

2016

Revenue
 
 
 
 
 
Subscriptions
$
127,492

$
105,440

 
$
370,923

$
306,330

Maintenance
31,486

36,410

 
98,184

111,019

Services and other
36,535

41,213

 
102,222

115,161

Total revenue
195,513

183,063

 
571,329

532,510

Cost of revenue
 
 
 
 
 
Cost of subscriptions
58,045

51,943

 
170,336

153,772

Cost of maintenance
5,698

5,531

 
17,551

16,547

Cost of services and other
23,262

25,843

 
71,595

76,499

Total cost of revenue
87,005

83,317

 
259,482

246,818

Gross profit
108,508

99,746

 
311,847

285,692

Operating expenses
 
 
 
 
 
Sales, marketing and customer success
44,193

40,690

 
129,394

115,707

Research and development
22,071

22,510

 
67,647

67,973

General and administrative
23,545

22,319

 
67,350

62,089

Amortization
734

687

 
2,164

2,147

Total operating expenses
90,543

86,206

 
266,555

247,916

Income from operations
17,965

13,540

 
45,292

37,776

Interest expense
(3,092
)
(2,641
)
 
(8,685
)
(8,037
)
Other income (expense), net
468

(15
)
 
1,581

(185
)
Income before provision for income taxes
15,341

10,884

 
38,188

29,554

Income tax provision
2,793

1,950

 
2,964

5,323

Net income
$
12,548

$
8,934

 
$
35,224

$
24,231

Earnings per share
 
 
 
 
 
Basic
$
0.27

$
0.19

 
$
0.76

$
0.53

Diluted
$
0.26

$
0.19

 
$
0.74

$
0.51

Common shares and equivalents outstanding
 
 
 
 
 
Basic weighted average shares
46,711,709

46,159,956

 
46,627,213

46,078,306

Diluted weighted average shares
47,846,997

47,394,106

 
47,679,103

47,268,469

Dividends per share
$
0.12

$
0.12

 
$
0.36

$
0.36

Other comprehensive (loss) income
 
 
 
 
 
Foreign currency translation adjustment
(188
)
289

 
(467
)
261

Unrealized (loss) gain on derivative instruments, net of tax
(267
)
409

 
(89
)
(378
)
Total other comprehensive (loss) income
(455
)
698

 
(556
)
(117
)
Comprehensive income
$
12,093

$
9,632

 
$
34,668

$
24,114


6
Blackbaud, Inc.
Consolidated statements of cash flows
(Unaudited)


 
Nine months ended 
 September 30,
 
(dollars in thousands)
2017

2016

Cash flows from operating activities
 
 
Net income
$
35,224

$
24,231

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
54,765

53,109

Provision for doubtful accounts and sales returns
7,246

3,139

Stock-based compensation expense
31,055

25,005

Deferred taxes
(2,511
)
(225
)
Amortization of deferred financing costs and discount
650

718

Other non-cash adjustments
572

(634
)
Changes in operating assets and liabilities, net of acquisition and disposal of businesses:
 
 
Accounts receivable
(17,169
)
(9,288
)
Prepaid expenses and other assets
596

(934
)
Trade accounts payable
(2,891
)
267

Accrued expenses and other liabilities
(9,522
)
(12,837
)
Restricted cash due to customers
214,244

119,291

Due to customers
(214,244
)
(119,291
)
Deferred revenue
25,370

17,593

Net cash provided by operating activities
123,385

100,144

Cash flows from investing activities
 
 
Purchase of property and equipment
(8,417
)
(15,459
)
Capitalized software development costs
(20,605
)
(19,078
)
Purchase of net assets of acquired companies, net of cash acquired
(49,729
)
(3,377
)
Purchase of derivative instruments
(516
)
—

Proceeds from settlement of derivative instruments
1,030

—

Net cash used in investing activities
(78,237
)
(37,914
)
Cash flows from financing activities
 
 
Proceeds from issuance of debt
588,300

179,000

Payments on debt
(594,144
)
(212,581
)
Debt issuance costs
(3,085
)
—

Employee taxes paid for withheld shares upon equity award settlement
(19,092
)
(10,497
)
Proceeds from exercise of stock options
14

10

Dividend payments to stockholders
(17,299
)
(17,108
)
Net cash used in financing activities
(45,306
)
(61,176
)
Effect of exchange rate on cash and cash equivalents
306

46

Net increase in cash and cash equivalents
148

1,100

Cash and cash equivalents, beginning of period
16,902

15,362

Cash and cash equivalents, end of period
$
17,050

$
16,462



7
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,
 
2017

2016

 
2017

2016

GAAP Revenue
$
195,513

$
183,063

 
$
571,329

$
532,510

Non-GAAP adjustments:
 
 
 
 
 
Add: Acquisition-related deferred revenue write-down
349

—

 
697

3,639

Non-GAAP revenue
$
195,862

$
183,063

 
$
572,026

$
536,149

 
 
 
 
 
 
GAAP gross profit
$
108,508

$
99,746

 
$
311,847

$
285,692

GAAP gross margin
55.5
%
54.5
%
 
54.6
%
53.7
%
Non-GAAP adjustments:
 
 
 
 
 
Add: Acquisition-related deferred revenue write-down
349

—

 
697

3,639

Add: Stock-based compensation expense
934

916

 
2,675

2,603

Add: Amortization of intangibles from business combinations
9,976

9,862

 
29,903

29,670

Add: Employee severance
—

18

 
973

160

Add: Acquisition-related integration costs
—

—

 
86

—

Subtotal
11,259

10,796

 
34,334

36,072

Non-GAAP gross profit
$
119,767

$
110,542

 
$
346,181

$
321,764

Non-GAAP gross margin
61.1
%
60.4
%
 
60.5
%
60.0
%
 
 
 
 
 
 
GAAP income from operations
$
17,965

$
13,540

 
$
45,292

$
37,776

GAAP operating margin
9.2
%
7.4
%
 
7.9
%
7.1
%
Non-GAAP adjustments:
 
 
 
 
 
Add: Acquisition-related deferred revenue write-down
349

—

 
697

3,639

Add: Stock-based compensation expense
10,926

8,818

 
31,055

25,005

Add: Amortization of intangibles from business combinations
10,710

10,549

 
32,067

31,817

Add: Employee severance
128

72

 
2,994

473

Add: Acquisition-related integration costs
383

917

 
613

1,419

Add: Acquisition-related expenses
1,519

152

 
3,851

265

Subtotal
24,015

20,508

 
71,277

62,618

Non-GAAP income from operations
$
41,980

$
34,048

 
$
116,569

$
100,394

Non-GAAP operating margin
21.4
%
18.6
%
 
20.4
%
18.7
%
 
 
 
 
 
 
GAAP net income
$
12,548

$
8,934

 
$
35,224

$
24,231

 
 
 
 
 
 
Shares used in computing GAAP diluted earnings per share
47,846,997

47,394,106

 
47,679,103

47,268,469

GAAP diluted earnings per share
$
0.26

$
0.19

 
$
0.74

$
0.51

 
 
 
 
 
 
Non-GAAP adjustments:
 
 
 
 
 
Add: Total Non-GAAP adjustments affecting income from operations
24,015

20,508

 
71,277

62,618

Add (less): Loss (gain) on derivative instrument
3

—

 
(472
)
—

Add: Loss on debt extinguishment
137

—

 
299

—

Less: Tax impact related to Non-GAAP adjustments
(9,846
)
(8,096
)
 
(32,010
)
(24,172
)
Non-GAAP net income
$
26,857

$
21,346

 
$
74,318

$
62,677

 
 
 
 
 
 
Shares used in computing Non-GAAP diluted earnings per share
47,846,997

47,394,106

 
47,679,103

47,268,469

Non-GAAP diluted earnings per share
$
0.56

$
0.45

 
$
1.56

$
1.33


8
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,
 
2017

2016

 
2017

2016

Detail of certain Non-GAAP adjustments:
 
 
 
 
 
Stock-based compensation expense:
 
 
 
 
 
Included in cost of revenue:
 
 
 
 
 
Cost of subscriptions
$
331

$
318

 
$
963

$
904

Cost of maintenance
103

137

 
294

391

Cost of services and other
500

461

 
1,418

1,308

Total included in cost of revenue
934

916

 
2,675

2,603

Included in operating expenses:
 
 
 
 
 
Sales, marketing and customer success
1,686

1,055

 
4,906

2,972

Research and development
2,093

1,674

 
5,877

4,874

General and administrative
6,213

5,173

 
17,597

14,556

Total included in operating expenses
9,992

7,902

 
28,380

22,402

Total stock-based compensation expense
$
10,926

$
8,818

 
$
31,055

$
25,005

 
 
 
 
 
 
Amortization of intangibles from business combinations:
 
 
 
 
 
Included in cost of revenue:
 
 
 
 
 
Cost of subscriptions
$
8,061

$
7,790

 
$
24,099

$
23,454

Cost of maintenance
1,289

1,332

 
3,871

3,996

Cost of services and other
626

740

 
1,933

2,220

Total included in cost of revenue
9,976

9,862

 
29,903

29,670

Included in operating expenses
734

687

 
2,164

2,147

Total amortization of intangibles from business combinations
$
10,710

$
10,549

 
$
32,067

$
31,817




9
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,
 
2017

2016

 
2017

2016

GAAP revenue
$
195,513

$
183,063

 
$
571,329

$
532,510

GAAP revenue growth
6.8
%
 
 
7.3
%
 
(Less) Add: Non-GAAP acquisition-related revenue (1)
(2,134
)
—

 
(4,048
)
3,639

Total Non-GAAP adjustments
(2,134
)
—

 
(4,048
)
3,639

Non-GAAP revenue (2)
$
193,379

$
183,063

 
$
567,281

$
536,149

Non-GAAP organic revenue growth
5.6
%
 
 
5.8
%
 
 
 
 
 
 
 
Non-GAAP revenue (2)
$
193,379

$
183,063

 
$
567,281

$
536,149

Foreign currency impact on Non-GAAP revenue (3)
(480
)
—

 
785

—

Non-GAAP revenue on constant currency basis (3)
$
192,899

$
183,063

 
$
568,066

$
536,149

Non-GAAP organic revenue growth on constant currency basis
5.4
%
 
 
6.0
%
 
 
 
 
 
 
 
GAAP subscriptions revenue
$
127,492

$
105,440

 
$
370,923

$
306,330

GAAP subscriptions revenue growth
20.9
%
 
 
21.1
%
 
(Less) Add: Non-GAAP acquisition-related revenue (1)
(1,986
)
—

 
(3,749
)
3,534

Total Non-GAAP adjustments
(1,986
)
—

 
(3,749
)
3,534

Non-GAAP organic subscriptions revenue
$
125,506

$
105,440

 
$
367,174

$
309,864

Non-GAAP organic subscriptions revenue growth
19.0
%
 
 
18.5
%
 
 
 
 
 
 
 
GAAP subscriptions revenue
$
127,492

$
105,440

 
$
370,923

$
306,330

GAAP maintenance revenue
$
31,486

$
36,410

 
98,184

111,019

GAAP recurring revenue
$
158,978

$
141,850

 
$
469,107

$
417,349

GAAP recurring revenue growth
12.1
%
 
 
12.4
%
 
(Less) Add: Non-GAAP acquisition-related revenue (1)
(1,986
)
—

 
(3,749
)
3,625

Total Non-GAAP adjustments
(1,986
)
—

 
(3,749
)
3,625

Non-GAAP recurring revenue
$
156,992

$
141,850

 
$
465,358

$
420,974

Non-GAAP organic recurring revenue growth
10.7
%
 
 
10.5
%
 
(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 revenue for the prior year periods presented herein may not agree to non-GAAP 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)
Nine months ended 
 September 30,
 
2017

2016

GAAP net cash provided by operating activities
$
123,385

$
100,144

Less: purchase of property and equipment
(8,417
)
(15,459
)
Less: capitalized software development costs
(20,605
)
(19,078
)
Non-GAAP free cash flow
$
94,363

$
65,607



10