Blackbaud Announces 2018 Third Quarter Results
"We are driving digital transformation in each of the industry segments we serve through the delivery of innovative new cloud software technology, which has expanded the addressable markets for
Third Quarter 2018 Results Compared to Third Quarter 2017 Results:
- Total GAAP revenue was
$209.5 million , up 7.8%, with$188.7 million in GAAP recurring revenue, representing 90.0% of total GAAP revenue. GAAP recurring revenue was up 12.6%. - Total non-GAAP revenue was
$210.1 million , up 7.9%, with$189.2 million in non-GAAP recurring revenue, representing 90.1% of total non-GAAP revenue. Non-GAAP recurring revenue was up 12.8%. - Non-GAAP organic revenue increased 1.2% and non-GAAP organic recurring revenue increased 4.9%.
- GAAP income from operations decreased 14.3% to
$15.8 million , with GAAP operating margin decreasing 200 basis points to 7.5%. - Non-GAAP income from operations decreased 6.4% to
$39.7 million , with non-GAAP operating margin decreasing 290 basis points to 18.9%. - GAAP net income decreased 12.9% to
$11.2 million , with GAAP diluted earnings per share of$0.23 , down$0.04 . - Non-GAAP net income increased 4.4% to
$28.4 million , with non-GAAP diluted earnings per share of$0.59 , up$0.02 . - Non-GAAP free cash flow was
$57.8 million , a decrease of$1.3 million .
"We've been executing a new and more aggressive program to ramp hiring for sales and sales support roles in the third quarter," said
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:
Blackbaud released its inaugural Social Responsibility Report, providing an overview of the company's global social responsibility, governance and ethical practices.Blackbaud andMicrosoft expanded their partnership with an Integrated Cloud Initiative for Nonprofits™ and the introduction of jointly-developed Nonprofit Resource Management.- The company announced the Cloud Solution for Higher Education with the introduction of a new
Education Management portfolio and the addition of stewardship management and guided fundraising tailored for higher education. - The company wrapped a successful bbcon 2018, the premier tech gathering for social good, and announced a new partnership with Points of Light.
- AnitaB.org recognized
Blackbaud as one of the 2018 Top Companies for Women Technologists. Blackbaud was included in IDC's "Worldwide Software as a Service and Cloud Software Market Shares, 2017: A Year of Expanding Platforms" report, ranking No. 24 for the second straight year on IDC's list of "Top 100 Cloud Software Vendors by Revenue" and climbing two spots to No. 18 on IDC's list of "Top 20 Worldwide SaaS Applications Revenue by Vendor."Blackbaud reported that a Nucleus Research ROI Case Study ofStarCare Specialty Health System found that by deploying Financial Edge NXT®, organizations can improve financial transparency, save time and effectively manage their programs.Blackbaud announced the results of a commissioned Total Economic Impact™ study conducted byForrester Consulting , which examines the return on investment that a healthcare organization (Inova Health Foundation ) may experience by deploying currently using Blackbaud Raiser's Edge NXT™ and Grateful Patient Solution.
Visit www.blackbaud.com/newsroom for more information about
Dividend
Financial Outlook
- Non-GAAP revenue of
$844 million to $854 million - Non-GAAP operating margin of 19.3% to 19.6%
- Non-GAAP diluted earnings per share of
$2.46 to $2.52 - Non-GAAP free cash flow of
$143 million to $147 million
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. "Cost of services and other" has been renamed as "cost of one-time services and other" and consists of costs that did not meet the description of those related to "recurring" revenue in the consolidated statements of comprehensive income.
Adoption of New Revenue Accounting Standard
On
Conference Call Details |
|
What: |
Blackbaud's 2018 Third Quarter Conference Call |
When: |
October 30, 2018 |
Time: |
8:00 a.m. (Eastern Time) |
Live Call: |
800-289-0462 (US/Canada); passcode 013759. |
Webcast: |
About
Investor Contact:
Director, Investor Relations
843.654.2097
mark.furlong@blackbaud.com
Media Contact:
Director, External Affairs
843.654.3004
brian.kosoy@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
Trademarks
All
Non-GAAP Financial Measures
In addition,
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, Inc. |
||||||
(dollars in thousands) |
September 30, |
December 31, |
||||
Assets |
||||||
Current assets: |
||||||
Cash and cash equivalents |
$ |
25,352 |
$ |
29,830 |
||
Restricted cash due to customers |
179,729 |
610,344 |
||||
Accounts receivable, net of allowance of $4,518 and $5,141 at September 30, |
95,858 |
95,679 |
||||
Customer funds receivable |
5,501 |
1,536 |
||||
Prepaid expenses and other current assets |
68,842 |
61,978 |
||||
Total current assets |
375,282 |
799,367 |
||||
Property and equipment, net |
42,901 |
42,243 |
||||
Software development costs, net |
68,289 |
54,098 |
||||
Goodwill |
547,338 |
530,249 |
||||
Intangible assets, net |
305,394 |
314,651 |
||||
Other assets |
65,512 |
57,238 |
||||
Total assets |
$ |
1,404,716 |
$ |
1,797,846 |
||
Liabilities and stockholders' equity |
||||||
Current liabilities: |
||||||
Trade accounts payable |
$ |
25,453 |
$ |
24,693 |
||
Accrued expenses and other current liabilities |
44,391 |
54,399 |
||||
Due to customers |
185,230 |
611,880 |
||||
Debt, current portion |
8,576 |
8,576 |
||||
Deferred revenue, current portion |
302,840 |
275,063 |
||||
Total current liabilities |
566,490 |
974,611 |
||||
Debt, net of current portion |
416,680 |
429,648 |
||||
Deferred tax liability |
47,405 |
48,023 |
||||
Deferred revenue, net of current portion |
3,429 |
3,643 |
||||
Other liabilities |
7,027 |
5,632 |
||||
Total liabilities |
1,041,031 |
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, 59,323,548 |
59 |
59 |
||||
Additional paid-in capital |
386,657 |
351,042 |
||||
Treasury stock, at cost; 10,756,662 and 10,475,794 shares at September 30, |
(266,597) |
(239,199) |
||||
Accumulated other comprehensive income (loss) |
602 |
(642) |
||||
Retained earnings |
242,964 |
225,029 |
||||
Total stockholders' equity |
363,685 |
336,289 |
||||
Total liabilities and stockholders' equity |
$ |
1,404,716 |
$ |
1,797,846 |
Blackbaud, Inc. |
|||||||||||||
(dollars in thousands, except per share amounts) |
Three months ended |
Nine months ended |
|||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||
Revenue |
|||||||||||||
Recurring |
$ |
188,656 |
$ |
167,506 |
$ |
562,251 |
$ |
493,942 |
|||||
One-time services and other |
20,876 |
26,918 |
65,137 |
77,143 |
|||||||||
Total revenue |
209,532 |
194,424 |
627,388 |
571,085 |
|||||||||
Cost of revenue |
|||||||||||||
Cost of recurring |
76,535 |
66,747 |
221,964 |
196,800 |
|||||||||
Cost of one-time services and other |
18,702 |
20,258 |
56,482 |
62,682 |
|||||||||
Total cost of revenue |
95,237 |
87,005 |
278,446 |
259,482 |
|||||||||
Gross profit |
114,295 |
107,419 |
348,942 |
311,603 |
|||||||||
Operating expenses |
|||||||||||||
Sales, marketing and customer success |
49,077 |
42,646 |
143,047 |
126,223 |
|||||||||
Research and development |
24,218 |
22,071 |
75,473 |
67,647 |
|||||||||
General and administrative |
24,894 |
23,545 |
78,392 |
67,350 |
|||||||||
Amortization |
1,237 |
734 |
3,707 |
2,164 |
|||||||||
Restructuring |
(914) |
— |
3,585 |
— |
|||||||||
Total operating expenses |
98,512 |
88,996 |
304,204 |
263,384 |
|||||||||
Income from operations |
15,783 |
18,423 |
44,738 |
48,219 |
|||||||||
Interest expense |
(4,140) |
(3,092) |
(11,960) |
(8,685) |
|||||||||
Other (expense) income, net |
(147) |
468 |
359 |
1,581 |
|||||||||
Income before provision for income taxes |
11,496 |
15,799 |
33,137 |
41,115 |
|||||||||
Income tax provision (benefit) |
332 |
2,975 |
(2,370) |
4,120 |
|||||||||
Net income |
$ |
11,164 |
$ |
12,824 |
$ |
35,507 |
$ |
36,995 |
|||||
Earnings per share |
|||||||||||||
Basic |
$ |
0.24 |
$ |
0.27 |
$ |
0.75 |
$ |
0.79 |
|||||
Diluted |
$ |
0.23 |
$ |
0.27 |
$ |
0.74 |
$ |
0.78 |
|||||
Common shares and equivalents outstanding |
|||||||||||||
Basic weighted average shares |
47,279,591 |
46,711,709 |
47,174,903 |
46,627,213 |
|||||||||
Diluted weighted average shares |
48,160,146 |
47,846,997 |
48,074,698 |
47,679,103 |
|||||||||
Dividends per share |
$ |
0.12 |
$ |
0.12 |
$ |
0.36 |
$ |
0.36 |
|||||
Other comprehensive income (loss) |
|||||||||||||
Foreign currency translation adjustment |
1,047 |
(108) |
(1,333) |
(305) |
|||||||||
Unrealized gain (loss) on derivative instruments, net of tax |
566 |
(267) |
2,410 |
(89) |
|||||||||
Total other comprehensive income (loss) |
1,613 |
(375) |
1,077 |
(394) |
|||||||||
Comprehensive income |
$ |
12,777 |
$ |
12,449 |
$ |
36,584 |
$ |
36,601 |
Blackbaud, Inc. |
||||||
Nine months ended |
||||||
(dollars in thousands) |
2018 |
2017 |
||||
Cash flows from operating activities |
||||||
Net income |
$ |
35,507 |
$ |
36,995 |
||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||
Depreciation and amortization |
59,993 |
54,765 |
||||
Provision for doubtful accounts and sales returns |
4,760 |
7,246 |
||||
Stock-based compensation expense |
35,683 |
31,055 |
||||
Deferred taxes |
1,430 |
(568) |
||||
Amortization of deferred financing costs and discount |
564 |
650 |
||||
Other non-cash adjustments |
(2,085) |
572 |
||||
Changes in operating assets and liabilities, net of acquisition and disposal of businesses: |
||||||
Accounts receivable |
(4,480) |
(17,097) |
||||
Prepaid expenses and other assets |
(12,372) |
(2,524) |
||||
Trade accounts payable |
(134) |
(2,891) |
||||
Accrued expenses and other liabilities |
(6,923) |
(9,522) |
||||
Deferred revenue |
25,888 |
24,704 |
||||
Net cash provided by operating activities |
137,831 |
123,385 |
||||
Cash flows from investing activities |
||||||
Purchase of property and equipment |
(12,910) |
(8,417) |
||||
Capitalized software development costs |
(26,629) |
(20,605) |
||||
Purchase of net assets of acquired companies, net of cash and restricted cash acquired |
(45,315) |
(49,729) |
||||
Purchase of derivative instruments |
— |
(516) |
||||
Proceeds from settlement of derivative instruments |
— |
1,030 |
||||
Net cash used in investing activities |
(84,854) |
(78,237) |
||||
Cash flows from financing activities |
||||||
Proceeds from issuance of debt |
219,900 |
588,300 |
||||
Payments on debt |
(233,225) |
(594,144) |
||||
Debt issuance costs |
— |
(3,085) |
||||
Employee taxes paid for withheld shares upon equity award settlement |
(27,398) |
(19,092) |
||||
Proceeds from exercise of stock options |
11 |
14 |
||||
Change in due to customers |
(425,218) |
(214,244) |
||||
Change in customer funds receivable |
(4,371) |
— |
||||
Dividend payments to stockholders |
(17,484) |
(17,299) |
||||
Net cash used in financing activities |
(487,785) |
(259,550) |
||||
Effect of exchange rate on cash, cash equivalents, and restricted cash |
(285) |
(126) |
||||
Net decrease in cash, cash equivalents, and restricted cash |
(435,093) |
(214,528) |
||||
Cash, cash equivalents, and restricted cash, beginning of period |
640,174 |
370,673 |
||||
Cash, cash equivalents, and restricted cash, end of period |
$ |
205,081 |
$ |
156,145 |
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) |
September 30, |
December 31, |
||||
Cash and cash equivalents |
$ |
25,352 |
$ |
29,830 |
||
Restricted cash due to customers |
179,729 |
610,344 |
||||
Total cash, cash equivalents and restricted cash in the statement of cash flows |
$ |
205,081 |
$ |
640,174 |
Blackbaud, Inc. |
|||||||||||||
(dollars in thousands, except per share amounts) |
Three months ended |
Nine months ended |
|||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||
GAAP Revenue |
$ |
209,532 |
$ |
194,424 |
$ |
627,388 |
$ |
571,085 |
|||||
Non-GAAP adjustments: |
|||||||||||||
Add: Acquisition-related deferred revenue write-down |
571 |
349 |
1,838 |
697 |
|||||||||
Non-GAAP revenue |
$ |
210,103 |
$ |
194,773 |
$ |
629,226 |
$ |
571,782 |
|||||
GAAP gross profit |
$ |
114,295 |
$ |
107,419 |
$ |
348,942 |
$ |
311,603 |
|||||
GAAP gross margin |
54.5 |
% |
55.2 |
% |
55.6 |
% |
54.6 |
% |
|||||
Non-GAAP adjustments: |
|||||||||||||
Add: Acquisition-related deferred revenue write-down |
571 |
349 |
1,838 |
697 |
|||||||||
Add: Stock-based compensation expense |
1,270 |
934 |
4,010 |
2,675 |
|||||||||
Add: Amortization of intangibles from business combinations |
10,625 |
9,976 |
31,688 |
29,903 |
|||||||||
Add: Employee severance |
279 |
— |
866 |
973 |
|||||||||
Add: Acquisition-related integration costs |
— |
— |
25 |
86 |
|||||||||
Subtotal |
12,745 |
11,259 |
38,427 |
34,334 |
|||||||||
Non-GAAP gross profit |
$ |
127,040 |
$ |
118,678 |
$ |
387,369 |
$ |
345,937 |
|||||
Non-GAAP gross margin |
60.5 |
% |
60.9 |
% |
61.6 |
% |
60.5 |
% |
|||||
GAAP income from operations |
$ |
15,783 |
$ |
18,423 |
$ |
44,738 |
$ |
48,219 |
|||||
GAAP operating margin |
7.5 |
% |
9.5 |
% |
7.1 |
% |
8.4 |
% |
|||||
Non-GAAP adjustments: |
|||||||||||||
Add: Acquisition-related deferred revenue write-down |
571 |
349 |
1,838 |
697 |
|||||||||
Add: Stock-based compensation expense |
10,730 |
10,926 |
35,683 |
31,055 |
|||||||||
Add: Amortization of intangibles from business combinations |
11,862 |
10,710 |
35,395 |
32,067 |
|||||||||
Add: Employee severance |
682 |
128 |
1,713 |
2,994 |
|||||||||
Add: Acquisition-related integration costs |
756 |
383 |
3,383 |
613 |
|||||||||
Add: Acquisition-related expenses |
269 |
1,519 |
1,874 |
3,851 |
|||||||||
Add: Restructuring costs |
(914) |
— |
3,585 |
— |
|||||||||
Subtotal |
23,956 |
24,015 |
83,471 |
71,277 |
|||||||||
Non-GAAP income from operations |
$ |
39,739 |
$ |
42,438 |
$ |
128,209 |
$ |
119,496 |
|||||
Non-GAAP operating margin |
18.9 |
% |
21.8 |
% |
20.4 |
% |
20.9 |
% |
|||||
GAAP income before provision for income taxes |
$ |
11,496 |
$ |
15,799 |
$ |
33,137 |
$ |
41,115 |
|||||
GAAP net income |
$ |
11,164 |
$ |
12,824 |
$ |
35,507 |
$ |
36,995 |
|||||
Shares used in computing GAAP diluted earnings per share |
48,160,146 |
47,846,997 |
48,074,698 |
47,679,103 |
|||||||||
GAAP diluted earnings per share |
$ |
0.23 |
$ |
0.27 |
$ |
0.74 |
$ |
0.78 |
|||||
Non-GAAP adjustments: |
|||||||||||||
Add: GAAP income tax provision (benefit) |
332 |
2,975 |
(2,370) |
4,120 |
|||||||||
Add: Total non-GAAP adjustments affecting income from operations |
23,956 |
24,015 |
83,471 |
71,277 |
|||||||||
Add (less): Loss (gain) on derivative instrument |
— |
3 |
— |
(472) |
|||||||||
Add: Loss on debt extinguishment |
— |
137 |
— |
299 |
|||||||||
Non-GAAP income before provision for income taxes |
35,452 |
39,954 |
116,608 |
112,219 |
|||||||||
Assumed non-GAAP income tax provision(1) |
7,090 |
12,785 |
$ |
23,322 |
$ |
35,910 |
|||||||
Non-GAAP net income |
$ |
28,362 |
$ |
27,169 |
$ |
93,286 |
$ |
76,309 |
|||||
Shares used in computing non-GAAP diluted earnings per share |
48,160,146 |
47,846,997 |
48,074,698 |
47,679,103 |
|||||||||
Non-GAAP diluted earnings per share |
$ |
0.59 |
$ |
0.57 |
$ |
1.94 |
$ |
1.60 |
(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%. |
Blackbaud, Inc. |
|||||||||||||
(dollars in thousands) |
Three months ended |
Nine months ended |
|||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||
GAAP revenue |
$ |
209,532 |
$ |
194,424 |
$ |
627,388 |
$ |
571,085 |
|||||
GAAP revenue growth |
7.8 |
% |
9.9 |
% |
|||||||||
(Less) Add: Non-GAAP acquisition-related revenue (1) |
(2,373) |
10,228 |
(2,794) |
31,033 |
|||||||||
Total Non-GAAP adjustments |
(2,373) |
10,228 |
(2,794) |
31,033 |
|||||||||
Non-GAAP revenue (2) |
$ |
207,159 |
$ |
204,652 |
$ |
624,594 |
$ |
602,118 |
|||||
Non-GAAP organic revenue growth |
1.2 |
% |
3.7 |
% |
|||||||||
Non-GAAP revenue (2) |
$ |
207,159 |
$ |
204,652 |
$ |
624,594 |
$ |
602,118 |
|||||
Foreign currency impact on non-GAAP revenue (3) |
524 |
— |
(3,459) |
— |
|||||||||
Non-GAAP revenue on constant currency basis (3) |
$ |
207,683 |
$ |
204,652 |
$ |
621,135 |
$ |
602,118 |
|||||
Non-GAAP organic revenue growth on constant currency basis |
1.5 |
% |
3.2 |
% |
|||||||||
GAAP recurring revenue |
$ |
188,656 |
$ |
167,506 |
$ |
562,251 |
$ |
493,942 |
|||||
GAAP recurring revenue growth |
12.6 |
% |
13.8 |
% |
|||||||||
(Less) Add: Non-GAAP acquisition-related revenue (1) |
(2,319) |
10,182 |
(2,666) |
30,749 |
|||||||||
Total Non-GAAP adjustments |
(2,319) |
10,182 |
(2,666) |
30,749 |
|||||||||
Non-GAAP recurring revenue |
$ |
186,337 |
$ |
177,688 |
$ |
559,585 |
$ |
524,691 |
|||||
Non-GAAP organic recurring revenue growth |
4.9 |
% |
6.7 |
% |
(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 |
|||||
2018 |
2017 |
|||||
GAAP net cash provided by operating activities |
$ |
137,831 |
$ |
123,385 |
||
Less: purchase of property and equipment |
(12,910) |
(8,417) |
||||
Less: capitalized software development costs |
(26,629) |
(20,605) |
||||
Non-GAAP free cash flow |
$ |
98,292 |
$ |
94,363 |
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