Document
false0001280058 0001280058 2019-10-28 2019-10-28


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 28, 2019

 
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Blackbaud, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
000-50600
11-2617163
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer ID Number)
65 Fairchild Street, 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))
 
 
 
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on which Registered
Common Stock, $0.001 Par Value
BLKB
Nasdaq Global Select Market
 
 
 
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 28, 2019, Blackbaud, Inc. (the "Company") issued a press release reporting unaudited financial results for the quarter ended September 30, 2019. 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 28, 2019 reporting unaudited financial results for the quarter ended September 30, 2019.
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).






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 28, 2019
 
 
/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 2019 Third Quarter Results
Third Quarter Recurring Revenue Grows 9%; Reaffirms 2019 Financial Guidance

 
Charleston, S.C. (October 28, 2019) - Blackbaud (NASDAQ: BLKB), the world's leading cloud software company powering social good, today announced financial results for its third quarter ended September 30, 2019.
    
"We continue to gain momentum in our aim to delight customers through innovative cloud solutions, and it is clear that the progress we've made is resonating with the individuals that use our solutions every day. Earlier this month, we hosted a record number of attendees at the 20th annual bbcon, the premier tech gathering for organizations focused on the latest trends and innovations driving the social good community forward," said Mike Gianoni, Blackbaud's president and CEO. "Among the many product and innovation updates across all of our vertical markets, we announced the general availability of Blackbaud Church Management™, which is already transforming the church technology landscape. Within just one year of announcing plans for Blackbaud Church Management, we now serve churches in more than half of the 50 U.S. states, representing congregations of all different sizes and spanning more than 10 denominations. This pace of innovation is extraordinary in our industry."

Third Quarter 2019 Results Compared to Third Quarter 2018 Results:
Total GAAP revenue was $221.1 million, up 5.5%, with $205.2 million in GAAP recurring revenue, representing 92.8% of total GAAP revenue. GAAP recurring revenue was up 8.8%.
Total non-GAAP revenue was $221.4 million, up 5.4%, with $205.5 million in non-GAAP recurring revenue, representing 92.8% of total non-GAAP revenue. Non-GAAP recurring revenue was up 8.6%.
Non-GAAP organic recurring revenue increased 5.6%.
GAAP income from operations was $7.9 million, with GAAP operating margin of 3.6%, a decrease of 390 basis points.
Non-GAAP income from operations was $36.6 million, with non-GAAP operating margin of 16.5%, a decrease of 240 basis points.
GAAP net income was $4.6 million, with GAAP diluted earnings per share of $0.09, down $0.14.
Non-GAAP net income was $26.9 million, with non-GAAP diluted earnings per share of $0.56, down $0.03.
Non-GAAP free cash flow was $62.5 million, an increase of $4.7 million.

"We've posted solid recurring revenue growth through the first three quarters of the year, and anticipate carrying that performance through the end of 2019," said Tony Boor, Blackbaud's executive vice president and CFO. "The investments we're making in innovation are delivering tremendous value for our existing customers and we've created entirely new product opportunities in our Higher Education and Faith verticals. The investments into sales and marketing are improving our ability to scale, increase our selling footprint, and position us to drive future growth. We're planning to continue these heightened investments though the end of the year."

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:

Blackbaud sees record attendance at milestone bbcon, the premier tech gathering for social good
Blackbaud announces general availability of breakthrough Church Management software
YourCause, a part of Blackbaud, expands global footprint
CEO Mike Gianoni named one of America's most innovative leaders by Forbes
With the release of its second annual social responsibility report, Blackbaud provides an in-depth look at the company’s purpose, people, governance and impact on the world
For the second consecutive year, AnitaB.org recognizes Blackbaud as one of the Top Companies for Women Technologists

Visit www.blackbaud.com/newsroom for more information about Blackbaud’s recent highlights.

Dividend
Blackbaud announced today that its Board of Directors has declared a fourth quarter 2019 dividend of $0.12 per share payable on December 13, 2019 to stockholders of record on November 27, 2019.

Financial Outlook
Blackbaud today reaffirmed its 2019 full year financial guidance:

Non-GAAP revenue of $880 million to $910 million
Non-GAAP operating margin of 16.7% to 17.2%
Non-GAAP diluted earnings per share of $2.11 to $2.28
Non-GAAP free cash flow of $124 million to $134 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.

Adoption of New Lease Accounting Standard
On January 1, 2019, we adopted Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842) ("ASU 2016-02"), using the transition method that allowed us to initially apply the guidance at the adoption date of January 1, 2019 without adjusting comparative periods presented. ASU 2016-02 requires lessees to record most leases on their balance sheet but recognize expenses in the income statement in a manner similar to previous guidance. The impacts of adoption are reflected in Blackbaud's guidance and other financial information herein. We have provided more detailed information regarding the impact of our adoption of ASU 2016-02 in our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 3, 2019.

Conference Call Details
What:    Blackbaud's 2019 Third Quarter Conference Call
When:    October 29, 2019
Time:     8:00 a.m. (Eastern Time)
Live Call:     800-289-0459 (US/Canada); passcode 357233
Webcast:    Blackbaud's Investor Relations Webpage


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About Blackbaud
Blackbaud (NASDAQ: BLKB) is the world’s leading cloud software company powering social good. Serving the entire social good community—nonprofits, foundations, companies, education institutions, healthcare organizations and individual change agents—Blackbaud connects and empowers organizations to increase their impact through cloud software, services, expertise and data intelligence. The Blackbaud portfolio is tailored to the unique needs of vertical markets, with solutions for fundraising and CRM, marketing, advocacy, peer-to-peer fundraising, corporate social responsibility, school management, ticketing, grantmaking, financial management, payment processing and analytics. Serving the industry for more than three decades, Blackbaud is headquartered in Charleston, South Carolina and has operations in the United States, Australia, Canada, Costa Rica and the United Kingdom. For more information, visit www.blackbaud.com, or follow us on Twitter, LinkedIn, and Facebook.
Investor Contact:
 
Media Contact:
 
Steve Hufford
 
media@blackbaud.com
 
Director of Investor Relations
 
 
 
843-654-2655
 
 
 
steve.hufford@blackbaud.com
 
 
 

Forward-Looking Statements
Except for historical information, all of the statements, expectations, and assumptions contained in this news release are forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding: the predictability of our financial results, expectations that our revenue will continue to grow, and expectations that we will achieve our projected 2019 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.

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-

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related deferred revenue, non-GAAP financial measures discussed above exclude the impact of certain items that Blackbaud believes are not directly related to its performance in any particular period, but are for its long-term benefit over multiple periods.

In addition, Blackbaud uses non-GAAP organic revenue growth, non-GAAP organic revenue growth on a constant currency basis and non-GAAP organic recurring revenue growth, in analyzing its operating performance. Blackbaud believes that these non-GAAP measures are useful to investors, as a supplement to GAAP measures, for evaluating the periodic growth of its business on a consistent basis. Each of these measures excludes incremental acquisition-related revenue attributable to companies acquired in the current fiscal year. For companies acquired in the immediately preceding fiscal year, each of these measures reflects presentation of full-year incremental non-GAAP revenue derived from such companies as if they were combined throughout the prior period, and it includes the non-GAAP revenue attributable to those companies, as if there were no acquisition-related write-downs of acquired deferred revenue to fair value as required by GAAP. In addition, each of these measures excludes prior period revenue associated with divested businesses. The exclusion of the prior period revenue is to present the results of the divested businesses within the results of the combined company for the same period of time in both the prior and current periods. Blackbaud believes this presentation provides a more comparable representation of its current business’ organic revenue growth and revenue run-rate.

Non-GAAP free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software development, and capital expenditures for property and equipment.

Blackbaud uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating Blackbaud's ongoing operational performance. Blackbaud believes that these non-GAAP financial measures reflect Blackbaud's ongoing business in a manner that allows for meaningful period-to-period comparison and analysis of trends in its business. In addition, Blackbaud believes that the use of these non-GAAP financial measures provides additional information for investors to use in evaluating ongoing operating results and trends and in comparing its financial results from period-to-period with other companies in Blackbaud's industry, many of which present similar non-GAAP financial measures to investors. However, these non-GAAP financial measures may not be completely comparable to similarly titled measures of other companies due to differences in the exact method of calculation between companies. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures.

4

Blackbaud, Inc.
Consolidated balance sheets
(Unaudited)


(dollars in thousands)
September 30,
2019

December 31,
2018

Assets
 
 
Current assets:
 
 
Cash and cash equivalents
$
29,084

$
30,866

Restricted cash due to customers
243,056

418,980

Accounts receivable, net of allowance of $4,791 and $4,722 at September 30, 2019 and December 31, 2018, respectively
90,700

86,595

Customer funds receivable
7,784

1,753

Prepaid expenses and other current assets
75,321

59,788

Total current assets
445,945

597,982

Property and equipment, net
37,285

40,031

Operating lease right-of-use assets
110,840


Software development costs, net
94,055

75,099

Goodwill
630,644

545,213

Intangible assets, net
327,089

291,617

Other assets
64,154

65,363

Total assets
$
1,710,012

$
1,615,305

Liabilities and stockholders’ equity
 
 
Current liabilities:
 
 
Trade accounts payable
$
34,169

$
34,538

Accrued expenses and other current liabilities
63,947

46,893

Due to customers
250,840

420,733

Debt, current portion
7,500

7,500

Deferred revenue, current portion
320,982

295,991

Total current liabilities
677,438

805,655

Debt, net of current portion
495,556

379,624

Deferred tax liability
47,237

44,291

Deferred revenue, net of current portion
2,014

2,564

Operating lease liabilities, net of current portion
100,133


Other liabilities
6,177

9,388

Total liabilities
1,328,555

1,241,522

Commitments and contingencies
 
 
Stockholders’ equity:
 
 
Preferred stock; 20,000,000 shares authorized, none outstanding


Common stock, $0.001 par value; 180,000,000 shares authorized, 60,207,091 and 59,327,633 shares issued at September 30, 2019 and December 31, 2018, respectively
60

59

Additional paid-in capital
442,803

399,241

Treasury stock, at cost; 11,022,799 and 10,760,574 shares at September 30, 2019 and December 31, 2018, respectively
(287,163
)
(266,884
)
Accumulated other comprehensive loss
(13,665
)
(5,110
)
Retained earnings
239,422

246,477

Total stockholders’ equity
381,457

373,783

Total liabilities and stockholders’ equity
$
1,710,012

$
1,615,305




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,
 
2019

2018

 
2019

2018

Revenue
 
 
 
 
 
Recurring
$
205,227

$
188,656

 
$
611,789

$
562,251

One-time services and other
15,893

20,876

 
50,795

65,137

Total revenue
221,120

209,532

 
662,584

627,388

Cost of revenue
 
 
 
 
 
Cost of recurring
87,645

76,535

 
259,013

221,964

Cost of one-time services and other
14,152

18,702

 
42,874

56,482

Total cost of revenue
101,797

95,237

 
301,887

278,446

Gross profit
119,323

114,295

 
360,697

348,942

Operating expenses
 
 
 
 
 
Sales, marketing and customer success
55,499

49,077

 
165,963

143,047

Research and development
25,941

24,218

 
80,304

75,473

General and administrative
28,897

24,894

 
84,557

78,392

Amortization
703

1,237

 
3,231

3,707

Restructuring
400

(914
)
 
3,083

3,585

Total operating expenses
111,440

98,512

 
337,138

304,204

Income from operations
7,883

15,783

 
23,559

44,738

Interest expense
(5,111
)
(4,140
)
 
(16,233
)
(11,960
)
Other income (expense), net
2,158

(147
)
 
4,521

359

Income before provision for income taxes
4,930

11,496

 
11,847

33,137

Income tax provision (benefit)
364

332

 
1,263

(2,370
)
Net income
$
4,566

$
11,164

 
$
10,584

$
35,507

Earnings per share
 
 
 
 
 
Basic
$
0.10

$
0.24

 
$
0.22

$
0.75

Diluted
$
0.09

$
0.23

 
$
0.22

$
0.74

Common shares and equivalents outstanding
 
 
 
 
 
Basic weighted average shares
47,757,769

47,279,591

 
47,668,235

47,174,903

Diluted weighted average shares
48,464,529

48,160,146

 
48,223,712

48,074,698

Other comprehensive (loss) income
 
 
 
 
 
Foreign currency translation adjustment
(3,893
)
1,047

 
(5,321
)
(1,333
)
Unrealized (loss) gain on derivative instruments, net of tax
(363
)
566

 
(3,234
)
2,410

Total other comprehensive (loss) income
(4,256
)
1,613

 
(8,555
)
1,077

Comprehensive income
$
310

$
12,777

 
$
2,029

$
36,584


6

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


 
Nine months ended 
 September 30,
 
(dollars in thousands)
2019

2018

Cash flows from operating activities
 
 
Net income
$
10,584

$
35,507

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation and amortization
63,998

59,993

Provision for doubtful accounts and sales returns
6,192

4,760

Stock-based compensation expense
43,621

35,683

Deferred taxes
(75
)
1,430

Amortization of deferred financing costs and discount
564

564

Other non-cash adjustments
2,047

(2,085
)
Changes in operating assets and liabilities, net of acquisition and disposal of businesses:
 
 
Accounts receivable
(6,375
)
(4,480
)
Prepaid expenses and other assets
(5,129
)
(12,372
)
Trade accounts payable
(74
)
(134
)
Accrued expenses and other liabilities
(13,592
)
(6,923
)
Deferred revenue
20,363

25,888

Net cash provided by operating activities
122,124

137,831

Cash flows from investing activities
 
 
Purchase of property and equipment
(9,597
)
(12,910
)
Capitalized software development costs
(34,513
)
(26,629
)
Purchase of net assets of acquired companies, net of cash and restricted cash acquired
(109,353
)
(45,315
)
Other investing activities
500


Net cash used in investing activities
(152,963
)
(84,854
)
Cash flows from financing activities
 
 
Proceeds from issuance of debt
371,200

219,900

Payments on debt
(255,625
)
(233,225
)
Employee taxes paid for withheld shares upon equity award settlement
(20,279
)
(27,398
)
Proceeds from exercise of stock options
7

11

Change in due to customers
(215,942
)
(425,218
)
Change in customer funds receivable
(6,283
)
(4,371
)
Dividend payments to stockholders
(17,705
)
(17,484
)
Net cash used in financing activities
(144,627
)
(487,785
)
Effect of exchange rate on cash, cash equivalents and restricted cash
(2,240
)
(285
)
Net decrease in cash, cash equivalents and restricted cash
(177,706
)
(435,093
)
Cash, cash equivalents and restricted cash, beginning of period
449,846

640,174

Cash, cash equivalents and restricted cash, end of period
$
272,140

$
205,081

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown above in the consolidated statements of cash flows:
(dollars in thousands)
September 30,
2019

December 31,
2018

Cash and cash equivalents
$
29,084

$
30,866

Restricted cash due to customers
243,056

418,980

Total cash, cash equivalents and restricted cash in the statement of cash flows
$
272,140

$
449,846


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,
 
2019

2018

 
2019

2018

GAAP Revenue
$
221,120

$
209,532

 
$
662,584

$
627,388

Non-GAAP adjustments:
 
 
 
 
 
Add: Acquisition-related deferred revenue write-down
259

571

 
1,691

1,838

Non-GAAP revenue
$
221,379

$
210,103

 
$
664,275

$
629,226

 
 
 
 
 
 
GAAP gross profit
$
119,323

$
114,295

 
$
360,697

$
348,942

GAAP gross margin
54.0
%
54.5
%
 
54.4
%
55.6
%
Non-GAAP adjustments:
 
 
 
 
 
Add: Acquisition-related deferred revenue write-down
259

571

 
1,691

1,838

Add: Stock-based compensation expense
784

1,270

 
2,549

4,010

Add: Amortization of intangibles from business combinations
11,225

10,625

 
33,970

31,688

Add: Employee severance
19

279

 
1,134

866

Add: Acquisition-related integration costs


 

25

Subtotal
12,287

12,745

 
39,344

38,427

Non-GAAP gross profit
$
131,610

$
127,040

 
$
400,041

$
387,369

Non-GAAP gross margin
59.5
%
60.5
%
 
60.2
%
61.6
%
 
 
 
 
 
 
GAAP income from operations
$
7,883

$
15,783

 
$
23,559

$
44,738

GAAP operating margin
3.6
%
7.5
%
 
3.6
%
7.1
%
Non-GAAP adjustments:
 
 
 
 
 
Add: Acquisition-related deferred revenue write-down
259

571

 
1,691

1,838

Add: Stock-based compensation expense
14,866

10,730

 
43,621

35,683

Add: Amortization of intangibles from business combinations
11,928

11,862

 
37,201

35,395

Add: Employee severance
48

682

 
3,660

1,713

Add: Acquisition-related integration costs
1,024

756

 
2,206

3,383

Add: Acquisition-related expenses
220

269

 
1,030

1,874

Add: Restructuring costs
400

(914
)
 
3,083

3,585

Subtotal
28,745

23,956

 
92,492

83,471

Non-GAAP income from operations
$
36,628

$
39,739

 
$
116,051

$
128,209

Non-GAAP operating margin
16.5
%
18.9
%
 
17.5
%
20.4
%
 
 
 
 
 
 
GAAP income before provision for income taxes
$
4,930

$
11,496

 
$
11,847

$
33,137

GAAP net income
$
4,566

$
11,164

 
$
10,584

$
35,507

 
 
 
 
 
 
Shares used in computing GAAP diluted earnings per share
48,464,529

48,160,146

 
48,223,712

48,074,698

GAAP diluted earnings per share
$
0.09

$
0.23

 
$
0.22

$
0.74

 
 
 
 
 
 
Non-GAAP adjustments:
 
 
 
 
 
Add: GAAP income tax provision (benefit)
364

332

 
1,263

(2,370
)
Add: Total non-GAAP adjustments affecting income from operations
28,745

23,956

 
92,492

83,471

Non-GAAP income before provision for income taxes
33,675

35,452

 
104,339

116,608

Assumed non-GAAP income tax provision(1)
6,735

7,090

 
$
20,868

$
23,322

Non-GAAP net income
$
26,940

$
28,362

 
$
83,471

$
93,286

 
 
 
 
 
 
Shares used in computing non-GAAP diluted earnings per share
48,464,529

48,160,146

 
48,223,712

48,074,698

Non-GAAP diluted earnings per share
$
0.56

$
0.59

 
$
1.73

$
1.94

(1)
Blackbaud applies a non-GAAP effective tax rate of 20.0% when calculating non-GAAP net income and non-GAAP diluted earnings per share.

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,
 
2019

2018

 
2019

2018

GAAP revenue
$
221,120

$
209,532

 
$
662,584

$
627,388

GAAP revenue growth
5.5
%
 
 
5.6
%
 
(Less) Add: Non-GAAP acquisition-related revenue (1)
(5,250
)
571

 
(14,194
)
5,056

Non-GAAP organic revenue (2)
$
215,870

$
210,103

 
$
648,390

$
632,444

Non-GAAP organic revenue growth
2.7
%
 
 
2.5
%
 
 
 
 
 
 
 
Non-GAAP organic revenue (2)
$
215,870

$
210,103

 
$
648,390

$
632,444

Foreign currency impact on non-GAAP organic revenue (3)
1,457


 
5,413


Non-GAAP organic revenue on constant currency basis (3)
$
217,327

$
210,103

 
$
653,803

$
632,444

Non-GAAP organic revenue growth on constant currency basis
3.4
%
 
 
3.4
%
 
 
 
 
 
 
 
GAAP recurring revenue
$
205,227

$
188,656

 
$
611,789

$
562,251

GAAP recurring revenue growth
8.8
%
 
 
8.8
%
 
(Less) Add: Non-GAAP acquisition-related revenue (1)
(5,490
)
571

 
(13,963
)
4,887

Non-GAAP organic recurring revenue
$
199,737

$
189,227

 
$
597,826

$
567,138

Non-GAAP organic recurring revenue growth
5.6
%
 
 
5.4
%
 
(1)
Non-GAAP acquisition-related revenue excludes incremental acquisition-related revenue calculated in accordance with GAAP that is attributable to companies acquired in the current fiscal year. For companies acquired in the immediately preceding fiscal year, non-GAAP acquisition-related revenue reflects presentation of full-year incremental non-GAAP revenue derived from such companies, as if they were combined throughout the prior period, and it includes the non-GAAP revenue from the acquisition-related deferred revenue write-down attributable to those companies.
(2)
Non-GAAP organic revenue for the prior year periods presented herein may not agree to non-GAAP organic revenue presented in the respective prior period quarterly financial information solely due to the manner in which non-GAAP organic revenue growth is calculated.
(3)
To determine non-GAAP organic revenue growth on a constant currency basis, revenues from entities reporting in foreign currencies were translated to U.S. Dollars using the comparable prior period's quarterly weighted average foreign currency exchange rates. The primary foreign currencies creating the impact are the Canadian Dollar, EURO, British Pound and Australian Dollar.

(dollars in thousands)
Nine months ended 
 September 30,
 
2019

2018

GAAP net cash provided by operating activities
$
122,124

$
137,831

Less: purchase of property and equipment
(9,597
)
(12,910
)
Less: capitalized software development costs
(34,513
)
(26,629
)
Non-GAAP free cash flow
$
78,014

$
98,292



9