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): April 30, 2018
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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 April 30, 2018, Blackbaud, Inc. (the "Company") issued a press release reporting unaudited financial results for the quarter ended March 31, 2018. A copy of this press release is attached hereto as Exhibit 99.1.
Item 7.01. Regulation FD Disclosure.
On January 1, 2018, the Company adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), using the full retrospective method of transition, which requires that the standard be applied to all periods presented. Adoption of ASU 2016-09 did not materially impact our total revenues for 2017 and 2016 and it had no impact on net cash provided by or used in operating, investing or financing activities. The primary impacts of adopting ASU 2014-09 relate to the deferral of incremental commission and other costs of obtaining contracts with customers and the increase to the amortization period for those costs. Previously, the Company deferred only direct and incremental commission costs to obtain a contract and amortized those costs over the contract term, generally three years, as the revenue was recognized. Under the new standard, the Company defers all incremental commission and related fringe benefit costs to obtain a contract and amortizes these costs in a manner that aligns with the expected period of benefit, which was determined to be five years.
On April 30, 2018, the Company made an investor presentation accessible via the Investor Relations section of its website that includes the following unaudited historical financial information, which has been adjusted to reflect the adoption of ASU 2014-09:
• | historical consolidated balance sheets as of the fiscal years ended December 31, 2017 and 2016 and interim consolidated balance sheets for each of the quarters within fiscal 2018 and 2017; |
• | historical consolidated statements of comprehensive income for the fiscal years ended December 31, 2017 and 2016 and interim consolidated statements of comprehensive income for each of the quarters within fiscal 2018 and 2017; |
• | historical consolidated statements of cash flows for the fiscal years ended December 31, 2017 and 2016 and interim consolidated statements of cash flows for each of the interim year-to-date periods within fiscal 2018 and 2017; and |
• | historical non-GAAP financial measures for the fiscal years ended December 31, 2017 and 2016 and for each of the quarters within fiscal 2018 and 2017 as well as reconciliations of the non-GAAP measures to their most directly comparable GAAP measures and related non-GAAP adjustments. |
A copy of the adjusted unaudited historical financial information and non-GAAP financial measures is attached hereto as Exhibit 99.2.
The information in this Form 8-K (including Exhibits 99.1 and 99.2) 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
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: | April 30, 2018 | /s/ Anthony W. Boor | |||
Anthony W. Boor | |||||
Executive Vice President and Chief Financial Officer | |||||
(Principal Financial and Accounting Officer) | |||||
Exhibit 99.1 | ||
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PRESS RELEASE | ||
Blackbaud Announces 2018 First Quarter Results
First Quarter Recurring Revenue Grows 13% representing 89% of total revenue;
Reaffirms 2018 Full Year Financial Guidance
Charleston, S.C. (April 30, 2018) - Blackbaud (NASDAQ: BLKB), the world's leading cloud software company powering social good, today announced financial results for its first quarter ended March 31, 2018.
"We've continued moving the business towards a subscriptions-based revenue model with our mix of recurring revenue now standing at 89% of total, a new all-time high for us," said Mike Gianoni, Blackbaud's president and CEO. "The market remains strong and we continue to integrate our solution portfolio at a rapid pace and deliver innovative new software capabilities to our growing base of over 40,000 customers and to the millions of individual change makers using our platforms."
First Quarter 2018 Results Compared to First Quarter 2017 Results:
• | Total GAAP revenue was $204.2 million, up 10.3%, with $180.8 million in GAAP recurring revenue, representing 88.6% of total GAAP revenue. GAAP recurring revenue was up 13.0%. |
• | Total non-GAAP revenue was $204.5 million, up 10.5%, with $181.1 million in non-GAAP recurring revenue, representing 88.6% of total non-GAAP revenue. Non-GAAP recurring revenue was up 13.2%. |
• | Non-GAAP organic revenue increased 5.3% and non-GAAP organic recurring revenue increased 7.2%. |
• | GAAP income from operations increased 32.5% to $17.6 million, with GAAP operating margin increasing 140 basis points to 8.6%. |
• | Non-GAAP income from operations increased 18.0% to $43.2 million, with non-GAAP operating margin increasing 130 basis points to 21.1%. |
• | GAAP net income increased 35.1% to $17.8 million, with GAAP diluted earnings per share of $0.37, up $0.09. |
• | Non-GAAP net income increased 35.8% to $31.9 million, with non-GAAP diluted earnings per share of $0.66, up $0.16. |
• | Non-GAAP free cash flow was $(1.1) million, a decrease of $4.6 million. |
"Execution against our strategic plan allowed us to post solid results for the quarter," said Tony Boor, Blackbaud's executive vice president and CFO. "We've adopted ASC 606 using the full retrospective method and we're now reporting maintenance and subscriptions combined as recurring revenue given the tremendous progress we've made in shifting our revenue model towards cloud-based subscriptions."
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.
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PRESS RELEASE | ||
Recent Company Highlights:
• | David Benjamin joined Blackbaud as Group President leading its International Markets Group (IMG), which includes the company's United Kingdom, Australia and New Zealand operations. |
• | Kevin Gregoire joined Blackbaud as Group President leading its Enterprise Market Group (EMG) for North America while Brian Boruff transitioned to a new role as Executive Vice President of Partner Ecosystem and Global Alliances. |
• | The company introduced Blackbaud Grantmaking™, its newest and most comprehensive grants management solution, which evolves the experience previously available with its original grantmaking solution, GIFTS Online™. |
• | Blackbaud reported strong momentum in adoption rates among higher education institutions seeking an integrated, smart cloud solution set. |
• | The Blackbaud Institute for Philanthropic Impact™ released one of its most highly anticipated annual reports, the 2017 Charitable Giving Report. |
• | Blackbaud has been named to the Forbes America’s Best Employers for Diversity 2018 list. |
• | Blackbaud granted a one-time stock award to eligible employees, equivalent to approximately $2,000 (USD). |
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 second quarter 2018 dividend of $0.12 per share payable on June 15, 2018 to stockholders of record on May 25, 2018.
Financial Outlook
Blackbaud today reaffirmed its 2018 full year financial guidance:
• | Non-GAAP revenue of $870 million to $890 million |
• | Non-GAAP operating margin of 20.6% to 21.0% |
• | Non-GAAP diluted earnings per share of $2.75 to $2.88 |
• | Non-GAAP free cash flow of $165 million to $175 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.
Reclassifications
Our revenue from "subscriptions" and "maintenance" and a portion of our "services and other" revenue have been combined within "recurring" revenue beginning in 2018. In order to provide comparability between periods presented, those amounts of revenue have been combined within "recurring" revenue in the previously reported consolidated statements of comprehensive income to conform to presentation of the current period. Similarly, "cost of subscriptions" and "cost of maintenance" and a portion of "cost of services and other" have been combined within "cost of recurring" in the previously reported consolidated statements of comprehensive income to conform to presentation of the current period. "Services and other" revenue has been renamed as "one-time services and other" and consists of revenue that did not meet the description of "recurring" revenue in the consolidated statements of comprehensive income.
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PRESS RELEASE | ||
Adoption of New Revenue Accounting Standard
On January 1, 2018, we adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), using the full retrospective method of transition, which requires that the standard be applied to all periods presented. The impacts of adoption are reflected in the financial information herein. We have provided more detailed information regarding the impact of our adoption of ASU 2014-09 in a Form 8-K filed with the SEC today. We have also made that information accessible via the Investor Relations section of our website.
Conference Call Details
What: Blackbaud's 2018 First Quarter Conference Call
When: May 1, 2018
Time: 8:00 a.m. (Eastern Time)
Live Call: 800-289-0462 (US/Canada); passcode 788816.
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: the predictability of our financial results, expectations that our revenue will continue to grow, and expectations that we will achieve our projected 2018 full-year financial guidance. These statements involve a number of risks and uncertainties. Although Blackbaud attempts to be accurate in making these forward-looking statements, it is possible that future circumstances might differ from the assumptions on which such statements are based. In addition, other important factors that could cause results to differ materially include the following: management of integration of acquired companies; uncertainty regarding increased business and renewals from existing customers; a shifting revenue mix that may impact gross margin; continued success in sales growth; risks related to our dividend policy and stock repurchase program, including the possibility that we might discontinue payment of dividends; and the other risk factors set forth from time to time in the SEC filings for Blackbaud, copies of which are available free of charge at the SEC’s website at www.sec.gov or upon request from Blackbaud's investor relations department. Blackbaud assumes no obligation and does not intend to update these forward-looking statements, except as required by law.
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PRESS RELEASE | ||
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.
As previously disclosed, beginning in 2018, Blackbaud applies a non-GAAP effective tax rate of 20.0% when calculating non-GAAP net income and non-GAAP diluted earnings per share. The non-GAAP tax rate will be reviewed annually to determine whether it remains appropriate in consideration of Blackbaud's financial results including its periodic effective tax rate calculated in accordance with GAAP, its operating environment and related tax legislation in effect and other factors deemed necessary. All first quarter 2017 measures of non-GAAP net income and non-GAAP diluted earnings per share included in this news release are calculated under Blackbaud's historical non-GAAP effective tax rate of 32.0%.
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
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PRESS RELEASE | ||
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.
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Blackbaud, Inc.
Consolidated balance sheets
(Unaudited)
(dollars in thousands) | March 31, 2018 | December 31, 2017 | ||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 25,013 | $ | 29,830 | ||
Restricted cash due to customers | 170,792 | 610,344 | ||||
Accounts receivable, net of allowance of $5,480 and $5,141 at March 31, 2018 and December 31, 2017, respectively | 88,911 | 95,679 | ||||
Customer funds receivable | 6,373 | 1,536 | ||||
Prepaid expenses and other current assets | 68,474 | 61,978 | ||||
Total current assets | 359,563 | 799,367 | ||||
Property and equipment, net | 44,647 | 42,243 | ||||
Software development costs, net | 57,062 | 54,098 | ||||
Goodwill | 537,433 | 530,249 | ||||
Intangible assets, net | 306,776 | 314,651 | ||||
Other assets | 62,453 | 57,238 | ||||
Total assets | $ | 1,367,934 | $ | 1,797,846 | ||
Liabilities and stockholders’ equity | ||||||
Current liabilities: | ||||||
Trade accounts payable | $ | 23,619 | $ | 24,693 | ||
Accrued expenses and other current liabilities | 40,113 | 54,399 | ||||
Due to customers | 177,165 | 611,880 | ||||
Debt, current portion | 8,576 | 8,576 | ||||
Deferred revenue, current portion | 254,877 | 275,063 | ||||
Total current liabilities | 504,350 | 974,611 | ||||
Debt, net of current portion | 458,592 | 429,648 | ||||
Deferred tax liability | 48,080 | 48,023 | ||||
Deferred revenue, net of current portion | 5,075 | 3,643 | ||||
Other liabilities | 7,516 | 5,632 | ||||
Total liabilities | 1,023,613 | 1,461,557 | ||||
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, 59,233,843 and 58,551,761 shares issued at March 31, 2018 and December 31, 2017, respectively | 59 | 59 | ||||
Additional paid-in capital | 362,113 | 351,042 | ||||
Treasury stock, at cost; 10,710,248 and 10,475,794 shares at March 31, 2018 and December 31, 2017, respectively | (261,710 | ) | (239,199 | ) | ||
Accumulated other comprehensive income (loss) | 7,041 | (642 | ) | |||
Retained earnings | 236,818 | 225,029 | ||||
Total stockholders’ equity | 344,321 | 336,289 | ||||
Total liabilities and stockholders’ equity | $ | 1,367,934 | $ | 1,797,846 | ||
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Blackbaud, Inc.
Consolidated statements of comprehensive income
(Unaudited)
(dollars in thousands, except per share amounts) | Three months ended March 31, | |||||
2018 | 2017 | |||||
Revenue | ||||||
Recurring | $ | 180,846 | $ | 160,047 | ||
One-time services and other | 23,338 | 25,025 | ||||
Total revenue | 204,184 | 185,072 | ||||
Cost of revenue | ||||||
Cost of recurring | 69,079 | 63,875 | ||||
Cost of one-time services and other | 18,958 | 21,607 | ||||
Total cost of revenue | 88,037 | 85,482 | ||||
Gross profit | 116,147 | 99,590 | ||||
Operating expenses | ||||||
Sales, marketing and customer success | 45,477 | 40,997 | ||||
Research and development | 25,958 | 22,706 | ||||
General and administrative | 25,051 | 21,923 | ||||
Amortization | 1,269 | 691 | ||||
Restructuring | 811 | — | ||||
Total operating expenses | 98,566 | 86,317 | ||||
Income from operations | 17,581 | 13,273 | ||||
Interest expense | (3,517 | ) | (2,377 | ) | ||
Other income, net | 160 | 286 | ||||
Income before provision for income taxes | 14,224 | 11,182 | ||||
Income tax benefit | (3,527 | ) | (1,960 | ) | ||
Net income | $ | 17,751 | $ | 13,142 | ||
Earnings per share | ||||||
Basic | $ | 0.38 | $ | 0.28 | ||
Diluted | $ | 0.37 | $ | 0.28 | ||
Common shares and equivalents outstanding | ||||||
Basic weighted average shares | 47,019,603 | 46,501,761 | ||||
Diluted weighted average shares | 48,009,395 | 47,482,840 | ||||
Dividends per share | $ | 0.12 | $ | 0.12 | ||
Other comprehensive income | ||||||
Foreign currency translation adjustment | 6,437 | 152 | ||||
Unrealized gain on derivative instruments, net of tax | 1,079 | 182 | ||||
Total other comprehensive income | 7,516 | 334 | ||||
Comprehensive income | $ | 25,267 | $ | 13,476 | ||
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Blackbaud, Inc.
Consolidated statements of cash flows
(Unaudited)
Three months ended March 31, | ||||||
(dollars in thousands) | 2018 | 2017 | ||||
Cash flows from operating activities | ||||||
Net income | $ | 17,751 | $ | 13,142 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
Depreciation and amortization | 19,820 | 18,091 | ||||
Provision for doubtful accounts and sales returns | 1,774 | 2,738 | ||||
Stock-based compensation expense | 11,092 | 9,294 | ||||
Deferred taxes | 902 | 592 | ||||
Amortization of deferred financing costs and discount | 188 | 239 | ||||
Other non-cash adjustments | (197 | ) | (243 | ) | ||
Changes in operating assets and liabilities, net of acquisition and disposal of businesses: | ||||||
Accounts receivable | 5,088 | (4,027 | ) | |||
Prepaid expenses and other assets | (10,052 | ) | (3,195 | ) | ||
Trade accounts payable | (1,655 | ) | (1,267 | ) | ||
Accrued expenses and other liabilities | (14,092 | ) | (15,536 | ) | ||
Deferred revenue | (18,866 | ) | (7,064 | ) | ||
Net cash provided by operating activities | 11,753 | 12,764 | ||||
Cash flows from investing activities | ||||||
Purchase of property and equipment | (5,771 | ) | (2,719 | ) | ||
Capitalized software development costs | (7,103 | ) | (6,583 | ) | ||
Purchase of net assets of acquired companies, net of cash and restricted cash acquired | (5,036 | ) | 59 | |||
Net cash used in investing activities | (17,910 | ) | (9,243 | ) | ||
Cash flows from financing activities | ||||||
Proceeds from issuance of debt | 81,700 | 67,600 | ||||
Payments on debt | (52,875 | ) | (53,794 | ) | ||
Employee taxes paid for withheld shares upon equity award settlement | (22,511 | ) | (14,828 | ) | ||
Proceeds from exercise of stock options | 9 | 11 | ||||
Change in due to customers | (434,640 | ) | (195,999 | ) | ||
Change in customer funds receivable | (4,783 | ) | — | |||
Dividend payments to stockholders | (5,825 | ) | (5,765 | ) | ||
Net cash used in financing activities | (438,925 | ) | (202,775 | ) | ||
Effect of exchange rate on cash, cash equivalents, and restricted cash | 713 | 26 | ||||
Net decrease in cash, cash equivalents, and restricted cash | (444,369 | ) | (199,228 | ) | ||
Cash, cash equivalents, and restricted cash, beginning of period | 640,174 | 370,673 | ||||
Cash, cash equivalents, and restricted cash, end of period | $ | 195,805 | $ | 171,445 | ||
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed 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, 2018 | December 31, 2017 | ||||
Cash and cash equivalents | $ | 25,013 | $ | 29,830 | ||
Restricted cash due to customers | 170,792 | 610,344 | ||||
Total cash, cash equivalents and restricted cash in the statement of cash flows | 195,805 | 640,174 | ||||
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Blackbaud, Inc.
Reconciliation of GAAP to non-GAAP financial measures
(Unaudited)
(dollars in thousands, except per share amounts) | Three months ended March 31, | |||||
2018 | 2017 | |||||
GAAP Revenue | $ | 204,184 | $ | 185,072 | ||
Non-GAAP adjustments: | ||||||
Add: Acquisition-related deferred revenue write-down | 348 | — | ||||
Non-GAAP revenue | $ | 204,532 | $ | 185,072 | ||
GAAP gross profit | $ | 116,147 | $ | 99,590 | ||
GAAP gross margin | 56.9 | % | 53.8 | % | ||
Non-GAAP adjustments: | ||||||
Add: Acquisition-related deferred revenue write-down | 348 | — | ||||
Add: Stock-based compensation expense | 1,095 | 791 | ||||
Add: Amortization of intangibles from business combinations | 10,386 | 9,855 | ||||
Add: Employee severance | 575 | 952 | ||||
Add: Acquisition-related integration costs | — | 86 | ||||
Subtotal | 12,404 | 11,684 | ||||
Non-GAAP gross profit | $ | 128,551 | $ | 111,274 | ||
Non-GAAP gross margin | 62.9 | % | 60.1 | % | ||
GAAP income from operations | $ | 17,581 | $ | 13,273 | ||
GAAP operating margin | 8.6 | % | 7.2 | % | ||
Non-GAAP adjustments: | ||||||
Add: Acquisition-related deferred revenue write-down | 348 | — | ||||
Add: Stock-based compensation expense | 11,092 | 9,294 | ||||
Add: Amortization of intangibles from business combinations | 11,655 | 10,546 | ||||
Add: Employee severance | 931 | 2,746 | ||||
Add: Acquisition-related integration costs | 433 | 230 | ||||
Add: Acquisition-related expenses | 394 | 570 | ||||
Add: Restructuring costs | 811 | — | ||||
Subtotal | 25,664 | 23,386 | ||||
Non-GAAP income from operations | $ | 43,245 | $ | 36,659 | ||
Non-GAAP operating margin | 21.1 | % | 19.8 | % | ||
GAAP income before provision for income taxes | $ | 14,224 | $ | 11,182 | ||
GAAP net income | $ | 17,751 | $ | 13,142 | ||
Shares used in computing GAAP diluted earnings per share | 48,009,395 | 47,482,840 | ||||
GAAP diluted earnings per share | $ | 0.37 | $ | 0.28 | ||
Non-GAAP adjustments: | ||||||
Add: GAAP income tax benefit | (3,527 | ) | (1,960 | ) | ||
Add: Total non-GAAP adjustments affecting income from operations | 25,664 | 23,386 | ||||
Non-GAAP income before provision for income taxes | 39,888 | 34,568 | ||||
Assumed non-GAAP income tax provision(1) | $ | 7,978 | $ | 11,062 | ||
Non-GAAP net income | $ | 31,910 | $ | 23,506 | ||
Shares used in computing non-GAAP diluted earnings per share | 48,009,395 | 47,482,840 | ||||
Non-GAAP diluted earnings per share | $ | 0.66 | $ | 0.50 | ||
(1) | Beginning in 2018, Blackbaud applies a non-GAAP effective tax rate of 20.0% when calculating non-GAAP net income and non-GAAP diluted earnings per share. The 2017 measures of non-GAAP net income and non-GAAP diluted earnings per share are calculated under Blackbaud's historical non-GAAP effective tax rate of 32.0%. |
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Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP financial measures (continued)
(Unaudited)
(dollars in thousands) | Three months ended March 31, | |||||
2018 | 2017 | |||||
GAAP revenue | $ | 204,184 | $ | 185,072 | ||
GAAP revenue growth | 10.3 | % | ||||
(Less) Add: Non-GAAP acquisition-related revenue (1) | 348 | 9,202 | ||||
Total Non-GAAP adjustments | 348 | 9,202 | ||||
Non-GAAP revenue (2) | $ | 204,532 | $ | 194,274 | ||
Non-GAAP organic revenue growth | 5.3 | % | ||||
Non-GAAP revenue (2) | $ | 204,532 | $ | 194,274 | ||
Foreign currency impact on non-GAAP revenue (3) | (2,093 | ) | — | |||
Non-GAAP revenue on constant currency basis (3) | $ | 202,439 | $ | 194,274 | ||
Non-GAAP organic revenue growth on constant currency basis | 4.2 | % | ||||
GAAP recurring revenue | $ | 180,846 | $ | 160,047 | ||
GAAP recurring revenue growth | 13.0 | % | ||||
(Less) Add: Non-GAAP acquisition-related revenue (1) | 303 | 9,009 | ||||
Total Non-GAAP adjustments | 303 | 9,009 | ||||
Non-GAAP recurring revenue | $ | 181,149 | $ | 169,056 | ||
Non-GAAP organic recurring revenue growth | 7.2 | % | ||||
(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 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) | Three months ended March 31, | |||||
2018 | 2017 | |||||
GAAP net cash provided by operating activities | $ | 11,753 | $ | 12,764 | ||
Less: purchase of property and equipment | (5,771 | ) | (2,719 | ) | ||
Less: capitalized software development costs | (7,103 | ) | (6,583 | ) | ||
Non-GAAP free cash flow | $ | (1,121 | ) | $ | 3,462 | |
10
1
1
Blackbaud, Inc. Adjusted Unaudited Historical Financial Information and Non-GAAP
Financial Measures
Reclassifications to the unaudited historical financial information
In order to provide comparability between periods presented, certain previously reported historical financial information has been reclassified to conform
to the presentation of the most recent reporting period. A summary of those prior period reclassifications is as follows:
• "Our revenue from "subscriptions" and "maintenance" and a portion of our "services and other" have been combined within "recurring" revenue in the consolidated
statements of comprehensive income. Similarly, "cost of subscriptions" and "cost of maintenance" and a portion of "cost of services and other" have been combined
within "cost of recurring" in the consolidated statements of comprehensive income.
• "Services and other" revenue has been renamed as "one-time services and other" and consists of revenue that did not meet the description of "recurring" revenue in
the consolidated statements of comprehensive income.
Exhibit 99.2
2
2
Historical Consolidated Balance Sheets (Unaudited)
Restated for ASU 2014-09 Previously Reported Change
(in thousands) Q4 2016 Q4 2017 Q4 2016 Q4 2017 Q4 2016 Q4 2017
Assets
Current assets:
Cash and cash equivalents $ 16,902 $ 29,830 $ 16,902 $ 29,830 $ — $ —
Restricted cash due to customers 353,771 610,344 353,771 610,344 — —
Accounts receivable, net of allowance 88,261 95,679 88,932 96,293 (671) (614)
Customer funds receivable — 1,536 — 1,536 — —
Prepaid expenses and other current assets 54,211 61,978 48,314 56,099 5,897 5,879
Deferred tax asset, current portion — — — — — —
Total current assets 513,145 799,367 507,919 794,102 5,226 5,265
Property and equipment, net 50,269 42,243 50,269 42,243 — —
Software development costs, net 37,582 54,098 37,582 54,098 — —
Goodwill 438,240 530,249 438,240 530,249 — —
Intangible assets, net 253,676 314,651 253,676 314,651 — —
Other assets 52,097 57,238 22,524 24,083 29,573 33,155
Total assets $ 1,345,009 $ 1,797,846 $ 1,310,210 $ 1,759,426 $ 34,799 $ 38,420
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable $ 23,274 $ 24,693 $ 23,274 $ 24,693 $ — $ —
Accrued expenses and other current liabilities 54,196 54,399 54,196 54,399 — —
Due to customers 353,771 611,880 353,771 611,880 — —
Debt, current portion 4,375 8,576 4,375 8,576 — —
Deferred revenue, current portion 243,849 275,063 244,500 276,456 (651) (1,393)
Total current liabilities 679,465 974,611 680,116 976,004 (651) (1,393)
Debt, net of current portion 338,018 429,648 338,018 429,648 — —
Deferred tax liability 43,475 48,023 29,558 37,597 13,917 10,426
Deferred revenue, net of current portion 6,440 3,643 6,440 3,643 — —
Other liabilities 8,533 5,632 8,533 5,632 — —
Total liabilities 1,075,931 1,461,557 1,062,665 1,452,524 13,266 9,033
Commitments and contingencies
Stockholders’ equity:
Preferred stock — — — — — —
Common stock, $0.001 par value 58 59 58 59 — —
Additional paid-in capital 310,452 351,042 310,452 351,042 — —
Treasury stock, at cost (215,237) (239,199) (215,237) (239,199) — —
Accumulated other comprehensive loss (604) (642) (457) (649) (147) 7
Retained earnings 174,409 225,029 152,729 195,649 21,680 29,380
Total stockholders’ equity 269,078 336,289 247,545 306,902 21,533 29,387
Total liabilities and stockholders’ equity $ 1,345,009 $ 1,797,846 $ 1,310,210 $ 1,759,426 $ 34,799 $ 38,420
3
3
Historical Consolidated Statements of Comprehensive Income (Unaudited)
Restated for ASU 2014-09 Previously Reported(2) Change
(in thousands, except share and per share amounts) FY 2016 FY 2017 FY 2016 FY 2017 FY 2016 FY 2017
Revenue
Recurring $ 609,063 $ 684,583 $ 575,933 $ 651,031 $ 33,130 $ 33,552
One-time services and other 122,579 103,904 154,882 137,275 (32,303) (33,371)
Total revenue 731,642 788,487 730,815 788,306 827 181
Cost of revenue
Cost of recurring 246,669 277,639 235,977 265,713 10,692 11,926
Cost of one-time services and other 92,551 84,265 103,243 96,191 (10,692) (11,926)
Total cost of revenue 339,220 361,904 339,220 361,904 — —
Gross profit 392,422 426,583 391,595 426,402 827 181
Operating expenses
Sales, marketing and customer success 150,157 169,559 155,754 173,525 (5,597) (3,966)
Research and development 89,870 89,911 89,870 89,911 — —
General and administrative 81,331 94,870 81,331 94,870 — —
Amortization 2,840 3,271 2,840 3,271 — —
Restructuring — 794 — 794 — —
Total operating expenses 324,198 358,405 329,795 362,371 (5,597) (3,966)
Income from operations 68,224 68,178 61,800 64,031 6,424 4,147
Interest expense (10,583) (12,097) (10,583) (12,097) — —
Other income (expense), net (291) 2,260 (291) 2,260 — —
Income before provision (benefit) for income taxes 57,350 58,341 50,926 54,194 6,424 4,147
Income tax provision (benefit) 11,946 (15,292) 9,411 (11,739) 2,535 (3,553)
Net income $ 45,404 $ 73,633 $ 41,515 $ 65,933 $ 3,889 $ 7,700
Earnings per share
Basic $ 0.98 $ 1.58 $ 0.90 $ 1.41 $ 0.08 $ 0.17
Diluted $ 0.96 $ 1.54 $ 0.88 $ 1.38 $ 0.08 $ 0.16
Common shares and equivalents outstanding
Basic weighted average shares 46,132,389 46,669,440 46,132,389 46,669,440 — —
Diluted weighted average shares 47,316,538 47,775,702 47,316,538 47,775,702 — —
Dividends per share $ 0.48 $ 0.48 $ 0.48 $ 0.48 $ — $ —
Other comprehensive income (loss) — —
Foreign currency translation adjustment 204 (788) 324 (943) (120) 155
Unrealized gain (loss) on derivative instruments, net of tax 45 751 44 751 1 —
Total other comprehensive income (loss) 249 (37) 368 (192) (119) 155
Comprehensive income $ 45,653 $ 73,596 $ 41,883 $ 65,741 $ 3,770 $ 7,855
Note: The individual amounts for each quarter may not sum to full year totals due to rounding.
Note 1: The individual amounts for each quarter may not sum to full year totals due to rounding.
Note 2: See the discussion of our reclassifications of previously reported revenue and costs of revenue above.
4
4
Historical Reconciliations of GAAP to Non-GAAP Financial Measures (Unaudited)
Restated for ASU 2014-09 Previously Reported Change
(in thousands, except share and per share amounts) FY 2016 FY 2017 FY 2016 FY 2017 FY 2016 FY 2017
GAAP Revenue $ 731,642 $ 788,487 $ 730,815 $ 788,306 $ 827 $ 181
Non-GAAP adjustments:
Add: Acquisition-related deferred revenue write-down 3,639 2,496 3,639 2,496 — —
Non-GAAP revenue $ 735,281 $ 790,983 $ 734,454 $ 790,802 $ 827 $ 181
GAAP gross profit $ 392,422 $ 426,583 $ 391,595 $ 426,402 $ 827 $ 181
GAAP gross margin 53.6% 54.1% 53.6% 54.1% —% —%
Non-GAAP adjustments: — —
Add: Acquisition-related deferred revenue write-down 3,639 2,496 3,639 2,496 — —
Add: Stock-based compensation expense 3,297 3,470 3,297 3,470 — —
Add: Amortization of intangibles from business combinations 39,558 40,099 39,558 40,099 — —
Add: Employee severance 382 994 382 994 — —
Add: Acquisition-related integration costs — 86 — 86 — —
Subtotal 46,876 47,145 46,876 47,145 — —
Non-GAAP gross profit $ 439,298 $ 473,728 $ 438,471 $ 473,547 $ 827 $ 181
Non-GAAP gross margin 59.7% 59.9% 59.7% 59.9% —% —%
GAAP income from operations $ 68,224 $ 68,178 $ 61,800 $ 64,031 $ 6,424 $ 4,147
GAAP operating margin 9.3% 8.6% 8.5% 8.1% 0.8% 0.5%
Non-GAAP adjustments:
Add: Acquisition-related deferred revenue write-down 3,639 2,496 3,639 2,496 — —
Add: Stock-based compensation expense 32,638 40,631 32,638 40,631 — —
Add: Amortization of intangibles from business combinations 42,398 43,370 42,398 43,370 — —
Add: Employee severance 1,995 4,345 1,995 4,345 — —
Add: Acquisition-related integration costs 1,419 966 1,419 966 — —
Add: Acquisition-related expenses 301 5,914 301 5,914 — —
Add: Restructuring costs — 794 — 794 — —
Subtotal 82,390 98,516 82,390 98,516 — —
Non-GAAP income from operations $ 150,614 $ 166,694 $ 144,190 $ 162,547 $ 6,424 $ 4,147
Non-GAAP operating margin 20.5% 21.1% 19.6% 20.6% 0.9% 0.5%
GAAP income before provision for income taxes $ 57,350 $ 58,341 $ 50,926 $ 54,194 $ 6,424 $ 4,147
GAAP net income $ 45,405 $ 73,633 $ 41,515 $ 65,933 $ 3,890 $ 7,700
Shares used in computing GAAP diluted earnings per share 47,316,538 47,775,702 47,316,538 47,775,702 — —
GAAP diluted earnings per share $ 0.96 $ 1.54 $ 0.88 $ 1.38 $ 0.08 $ 0.16
Non-GAAP adjustments:
Add: GAAP income tax provision (benefit) 11,946 (15,292) 9,411 (11,739) 2,535 (3,553)
Add: Total Non-GAAP adjustments affecting income from operations 82,390 98,516 82,390 98,516 — —
(Less) add: (Gain) loss on derivative instruments — (462) — (462) — —
Add: Loss on debt extinguishment — 299 — 299 — —
Non-GAAP income before provision for income taxes 139,740 156,694 133,316 152,547 6,424 4,147
Assumed non-GAAP income tax provision (2) 44,717 50,142 42,661 48,815 2,056 1,327
Non-GAAP net income $ 95,023 $ 106,552 $ 90,655 $ 103,732 $ 4,368 $ 2,820
Shares used in computing Non-GAAP diluted earnings per share 47,316,538 47,775,702 47,316,538 47,775,702 — —
Non-GAAP diluted earnings per share $ 2.01 $ 2.23 $ 1.92 $ 2.17 $ 0.09 $ 0.06
Note 1: The individual amounts for each quarter may not sum to full year totals due to rounding.
Note 2: Beginning in 2018, we now apply a non-GAAP effective tax rate of 20.0% in our determination of non-GAAP net income. All 2016 and 2017 measures of the tax impact related to non-GAAP adjustments, non-GAAP net
income and non-GAAP diluted earnings per share included in these materials are calculated under Blackbaud's historical non-GAAP effective tax rate of 32.0%.
5
5
Historical Consolidated Balance Sheets Reflecting the Adoption of ASU 2014-09
(Unaudited)
(in thousands) Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018
Assets
Current assets:
Cash and cash equivalents $ 16,902 $ 13,872 $ 17,268 $ 17,050 $ 29,830 $ 25,013
Restricted cash due to customers 353,771 157,574 267,940 139,095 610,344 170,792
Accounts receivable, net of allowance 88,261 89,823 129,129 100,097 95,679 88,911
Customer funds receivable — — — — 1,536 6,373
Prepaid expenses and other current assets 54,211 59,012 59,780 56,638 61,978 68,474
Total current assets 513,145 320,281 474,117 312,880 799,367 359,563
Property and equipment, net 50,269 47,200 45,679 43,903 42,243 44,647
Software development costs, net 37,582 41,139 44,962 48,618 54,098 57,062
Goodwill 438,240 438,307 472,643 472,776 530,249 537,433
Intangible assets, net 253,676 243,263 263,347 252,713 314,651 306,776
Other assets 52,097 50,577 51,902 54,095 57,238 62,453
Total assets $ 1,345,009 $ 1,140,767 $ 1,352,650 $ 1,184,985 $ 1,797,846 $ 1,367,934
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable $ 23,274 $ 20,666 $ 17,660 $ 17,830 $ 24,693 $ 23,619
Accrued expenses and other current liabilities 54,196 39,072 46,508 45,650 54,399 40,113
Due to customers 353,771 157,574 267,940 139,095 611,880 177,165
Debt, current portion 4,375 4,375 7,500 8,576 8,576 8,576
Deferred revenue, current portion 243,849 236,143 279,637 275,687 275,063 254,877
Total current liabilities 679,465 457,830 619,245 486,838 974,611 504,350
Debt, net of current portion 338,018 351,995 380,162 329,380 429,648 458,592
Deferred tax liability 43,475 44,195 54,405 55,196 48,023 48,080
Deferred revenue, net of current portion 6,440 7,681 6,067 5,412 3,643 5,075
Other liabilities 8,533 7,802 7,572 7,800 5,632 7,516
Total liabilities 1,075,931 869,503 1,067,451 884,626 1,461,557 1,023,613
Commitments and contingencies
Stockholders’ equity:
Preferred stock — — — — — —
Common stock, $0.001 par value 58 58 58 59 59 59
Additional paid-in capital 310,452 319,731 330,559 341,476 351,042 362,113
Treasury stock, at cost (215,237) (230,065) (231,881) (234,329) (239,199) (261,710)
Accumulated other comprehensive loss (604) (270) (623) (998) (642) 7,041
Retained earnings 174,409 181,810 187,086 194,151 225,029 236,818
Total stockholders’ equity 269,078 271,264 285,199 300,359 336,289 344,321
Total liabilities and stockholders’ equity $ 1,345,009 $ 1,140,767 $ 1,352,650 $ 1,184,985 $ 1,797,846 $ 1,367,934
6
6
Historical Consolidated Statements of Comprehensive Income Reflecting the
Adoption of ASU 2014-09 (Unaudited)
(in thousands, except share and per share amounts) FY 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 Q1 2018
Revenue
Recurring $ 609,063 $ 160,047 $ 166,389 $ 167,506 $ 190,641 $ 684,583 $ 180,846
One-time services and other 122,579 25,025 25,200 26,918 26,761 103,904 23,338
Total revenue 731,642 185,072 191,589 194,424 217,402 788,487 204,184
Cost of revenue
Cost of recurring 246,669 63,875 66,178 66,747 80,839 277,639 69,079
Cost of one-time services and other 92,551 21,607 20,817 20,258 21,583 84,265 18,958
Total cost of revenue 339,220 85,482 86,995 87,005 102,422 361,904 88,037
Gross profit 392,422 99,590 104,594 107,419 114,980 426,583 116,147
Operating expenses
Sales, marketing and customer success 150,157 40,997 42,580 42,646 43,336 169,559 45,477
Research and development 89,870 22,706 22,870 22,071 22,264 89,911 25,958
General and administrative 81,331 21,923 21,882 23,545 27,520 94,870 25,051
Amortization 2,840 691 739 734 1,107 3,271 1,269
Restructuring — — — — 794 794 811
Total operating expenses 324,198 86,317 88,071 88,996 95,021 358,405 98,566
Income from operations 68,224 13,273 16,523 18,423 19,959 68,178 17,581
Interest expense (10,583) (2,377) (3,216) (3,092) (3,412) (12,097) (3,517)
Other (expense) income, net (291) 286 827 468 679 2,260 160
Income before provision (benefit) for income taxes 57,350 11,182 14,134 15,799 17,226 58,341 14,224
Income tax provision (benefit) 11,946 (1,960) 3,105 2,975 (19,412) (15,292) (3,527)
Net income $ 45,404 $ 13,142 $ 11,029 $ 12,824 $ 36,638 $ 73,633 $ 17,751
Earnings per share
Basic $ 0.98 $ 0.28 $ 0.24 $ 0.27 $ 0.78 $ 1.58 $ 0.38
Diluted $ 0.96 $ 0.28 $ 0.23 $ 0.27 $ 0.76 $ 1.54 $ 0.37
Common shares and equivalents outstanding
Basic weighted average shares 46,132,389 46,501,761 46,662,481 46,711,709 46,794,744 46,669,440 47,019,603
Diluted weighted average shares 47,316,538 47,482,840 47,691,340 47,846,997 48,014,250 47,775,702 48,009,395
Dividends per share $ 0.48 $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.48 $ 0.12
Other comprehensive income (loss)
Foreign currency translation adjustment 204 152 (348) (108) (484) (788) 6,437
Unrealized gain (loss) on derivative instruments, net of tax 45 182 (4) (267) 840 751 1,079
Total other comprehensive income (loss) 249 334 (352) (375) 356 (37) 7,516
Comprehensive income $ 45,653 $ 13,476 $ 10,677 $ 12,449 $ 36,994 $ 73,596 $ 25,267
Note: The individual amounts for each quarter may not sum to full year totals due to rounding.
Note 1: The individual amounts for each quarter may not sum to full year totals due to rounding.
7
7
Historical Consolidated Statements of Cash Flows Reflecting the Adoption of
ASU 2014-09 (Unaudited)
(in thousands)
12 months ending
12/31/2016
3 months ending
3/31/2017
6 months ending
6/30/2017
9 months ending
9/30/2017
12 months ending
12/31/2017
3 months ending
3/31/2018
Cash flows from operating activities
Net income $ 45,404 $ 13,142 $ 24,171 $ 36,995 $ 73,633 $ 17,751
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 70,491 18,091 36,481 54,765 73,948 19,820
Provision for doubtful accounts and sales returns 3,730 2,738 5,469 7,246 11,686 1,774
Stock-based compensation expense 32,638 9,294 20,129 31,055 40,631 11,092
Deferred taxes 5,415 592 (1,524) (568) (17,814) 902
Amortization of deferred financing costs and discount 958 239 468 650 838 188
Other non-cash adjustments (864) (243) (540) 572 504 (197)
Changes in operating assets and liabilities, net of acquisition of businesses:
Accounts receivable (13,007) (4,027) (44,809) (17,097) (15,821) 5,088
Prepaid expenses and other assets (8,495) (3,195) (3,262) (2,524) (9,550) (10,052)
Trade accounts payable 3,689 (1,267) (3,951) (2,891) 1,024 (1,655)
Accrued expenses and other liabilities (751) (15,536) (8,467) (9,522) (4,973) (14,092)
Deferred revenue 14,420 (7,064) 30,386 24,704 22,184 (18,866)
Net cash provided by operating activities 153,628 12,764 54,551 123,385 176,290 11,753
Cash flows from investing activities
Purchase of property and equipment (17,694) (2,719) (5,666) (8,417) (10,208) (5,771)
Capitalized software development costs (26,359) (6,583) (13,614) (20,605) (28,345) (7,103)
Purchase of net assets of acquired companies, net of cash and restricted cash acquired (3,377) 59 (49,729) (49,729) (146,789) (5,036)
Purchase of derivative instruments — — (516) (516) (568) —
Proceeds from settlement of derivative instruments — — — 1,030 1,030 —
Net cash used in investing activities (47,430) (9,243) (69,525) (78,237) (184,880) (17,910)
Cash flows from financing activities
Proceeds from issuance of debt 227,200 67,600 575,700 588,300 774,500 81,700
Payments on debt (293,575) (53,794) (529,169) (594,144) (679,119) (52,875)
Debt issuance costs — — (3,085) (3,085) (3,085) —
Employee taxes paid for withheld shares upon equity award settlement (15,376) (14,828) (16,644) (19,092) (23,962) (22,511)
Proceeds from exercise of stock options 16 11 14 14 15 9
Change in due to customers 96,000 (195,999) (85,581) (214,244) 226,717 (434,640)
Customer funds receivable — — — — 6,644 (4,783)
Dividend payments to stockholders (22,811) (5,765) (11,530) (17,299) (23,069) (5,825)
Net cash (used in) provided by financing activities (8,546) (202,775) (70,295) (259,550) 278,641 (438,925)
Effect of exchange rate on cash, cash equivalents, and restricted cash 2,622 26 (196) (126) (550) 713
Net increase (decrease) in cash, cash equivalents, and restricted cash 100,274 (199,228) (85,465) (214,528) 269,501 (444,369)
Cash, cash equivalents, and restricted cash, beginning of period 270,399 370,673 370,673 370,673 370,673 640,174
Cash, cash equivalents, and restricted cash, end of period $ 370,673 $ 171,445 $ 285,208 $ 156,145 $ 640,174 $ 195,805
Note: The year-to-date amounts may not sum to full year totals due to rounding.
8
8
Historical Reconciliations of GAAP to Non-GAAP Financial Measures Reflecting the
Adoption of ASU 2014-09 (Unaudited)
(in thousands, except share and per share amounts) FY 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 FY 2017 Q1 2018
GAAP Revenue $ 731,642 $ 185,072 $ 191,589 $ 194,424 $ 217,402 $ 788,487 $ 204,184
Non-GAAP adjustments:
Add: Acquisition-related deferred revenue write-down 3,639 — 348 349 1,799 2,496 348
Non-GAAP revenue $ 735,281 $ 185,072 $ 191,937 $ 194,773 $ 219,201 $ 790,983 $ 204,532
GAAP gross profit $ 392,422 $ 99,590 $ 104,594 $ 107,419 $ 114,980 $ 426,583 $ 116,147
GAAP gross margin 53.6% 53.8% 54.6% 55.2% 52.9% 54.1% 56.9%
Non-GAAP adjustments:
Add: Acquisition-related deferred revenue write-down 3,639 — 348 349 1,799 2,496 348
Add: Stock-based compensation expense 3,297 791 950 934 795 3,470 1,095
Add: Amortization of intangibles from business combinations 39,558 9,855 10,072 9,976 10,196 40,099 10,386
Add: Employee severance 382 952 21 — 21 994 575
Add: Acquisition-related integration costs — 86 — — — 86 —
Subtotal 46,876 11,684 11,391 11,259 12,811 47,145 12,404
Non-GAAP gross profit $ 439,298 $ 111,274 $ 115,985 $ 118,678 $ 127,791 $ 473,728 $ 128,551
Non-GAAP gross margin 59.7% 60.1% 60.4% 60.9% 58.3% 59.9% 62.9%
GAAP income from operations $ 68,224 $ 13,273 $ 16,523 $ 18,423 $ 19,959 $ 68,178 $ 17,581
GAAP operating margin 9.3% 7.2% 8.6% 9.5% 9.2% 8.6% 8.6%
Non-GAAP adjustments:
Add: Acquisition-related deferred revenue write-down 3,639 — 348 349 1,799 2,496 348
Add: Stock-based compensation expense 32,638 9,294 10,835 10,926 9,576 40,631 11,092
Add: Amortization of intangibles from business combinations 42,398 10,546 10,811 10,710 11,303 43,370 11,655
Add: Employee severance 1,995 2,746 120 128 1,351 4,345 931
Add: Acquisition-related integration costs 1,419 230 — 383 353 966 433
Add: Acquisition-related expenses 301 570 1,762 1,519 2,063 5,914 394
Add: Restructuring costs — — — — 794 794 811
Subtotal 82,390 23,386 23,876 24,015 27,239 98,516 25,664
Non-GAAP income from operations $ 150,614 $ 36,659 $ 40,399 $ 42,438 $ 47,198 $ 166,694 $ 43,245
Non-GAAP operating margin 20.5% 19.8% 21.0% 21.8% 21.5% 21.1% 21.1%
GAAP income before provision for income taxes $ 57,350 $ 11,182 $ 14,134 $ 15,799 $ 17,226 $ 58,341 $ 14,224
GAAP net income $ 45,405 $ 13,142 $ 11,029 $ 12,824 $ 36,638 $ 73,633 $ 17,751
Shares used in computing GAAP diluted earnings per share 47,316,538 47,482,840 47,691,340 47,846,997 48,014,250 47,775,702 48,009,395
GAAP diluted earnings per share $ 0.96 $ 0.28 $ 0.23 $ 0.27 $ 0.76 $ 1.54 $ 0.37
Non-GAAP adjustments:
Add: GAAP income tax provision (benefit) 11,946 (1,960) 3,105 2,975 (19,412) (15,292) (3,527)
Add: Total Non-GAAP adjustments affecting income from operations 82,390 23,386 23,876 24,015 27,239 98,516 25,664
(Less) add: (Gain) loss on derivative instruments — — (475) 3 10 (462) —
Add: Loss on debt extinguishment — — 162 137 — 299 —
Non-GAAP income before provision for income taxes 139,740 34,568 37,697 39,954 44,475 156,694 39,888
Assumed non-GAAP income tax provision (2) 44,717 11,062 12,063 12,785 14,232 50,142 7,978
Non-GAAP net income $ 95,023 $ 23,506 $ 25,634 $ 27,169 $ 30,243 $ 106,552 $ 31,910
Shares used in computing Non-GAAP diluted earnings per share 47,316,538 47,482,840 47,691,340 47,846,997 48,014,250 47,775,702 48,009,395
Non-GAAP diluted earnings per share $ 2.01 $ 0.50 $ 0.54 $ 0.57 $ 0.63 $ 2.23 $ 0.66
Note 1: The individual amounts for each quarter may not sum to full year totals due to rounding.
Note 2: Beginning in 2018, we now apply a non-GAAP effective tax rate of 20.0% in our determination of non-GAAP net income. All 2016 and 2017 measures of the tax impact related to non-GAAP adjustments, non-GAAP net
income and non-GAAP diluted earnings per share included in these materials are calculated under Blackbaud's historical non-GAAP effective tax rate of 32.0%.
9
9
(in thousands)
12 months ending
12/31/2016
3 months ending
3/31/2017
6 months ending
6/30/2017
9 months ending
9/30/2017
12 months ending
12/31/2017
3 months ending
3/31/2018
GAAP net cash provided by operating activities 153,628 12,764 54,551 123,385 176,290 11,753
Less: purchase of property and equipment (17,694) (2,719) (5,666) (8,417) (10,208) (5,771)
Less: capitalized software development costs (26,359) (6,583) (13,614) (20,605) (28,345) (7,103)
Non-GAAP free cash flow $ 109,575 $ 3,462 $ 35,271 $ 94,363 $ 137,737 $ (1,121)
Note: The year-to-date amounts may not sum to full year totals due to rounding.
Historical Reconciliations of GAAP to Non-GAAP Financial Measures Reflecting the
Adoption of ASU 2014-09 (Unaudited)