Blackbaud, Inc.
 

 
 
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 30, 2006
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:
o      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o      Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 


 

Item 2.02. Results of Operations and Financial Condition.
On October 30, 2006, Blackbaud, Inc. issued a press release reporting unaudited financial results for the quarter ended September 30, 2006. A copy of the press release is attached.
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.
     (c) Exhibits
         
Exhibit No.   Description
       
 
  99.1    
Press release dated October 30, 2006.

2


 

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 30, 2006  /s/ Timothy V. Williams    
  Timothy V. Williams,   
  Vice President and Chief Financial Officer   

3

Ex-99.1
 

Exhibit 99.1
Blackbaud, Inc. Announces Third Quarter 2006 Results and Fourth Quarter 2006 Dividend
CHARLESTON, S.C., October 30, 2006 — Blackbaud, Inc. (Nasdaq: BLKB), the leading provider of software and related services designed specifically for nonprofit organizations, today announced financial results for its third quarter, ended September 30, 2006.
For the quarter ended September 30, 2006, Blackbaud reported total revenue of $49.9 million, an increase of 16% compared with the third quarter of 2005. License revenue increased 7% to $7.8 million, services revenue increased 17% to $17.0 million, and maintenance and subscriptions revenue increased 18% to $23.7 million over the comparable period.
Marc Chardon, Chief Executive Officer of Blackbaud, stated, “We are pleased with the Company’s performance in the third quarter, highlighted by better-than-expected revenue and profitability. The Raiser’s Edge® drove sales of our core solutions to their highest quarterly growth rate in the past two years, while continued interest in our newer offerings helped us achieve growth of over 50% in sales of those new solutions.” Chardon continued, “We were pleased to sign our first early adopter for an exciting new offering that we plan to deliver in the first half of 2007. Early customer response to our strategic direction has been positive, and we are investing in several initiatives that we believe will expand our market opportunity and enable Blackbaud to sustain its solid growth track record.”
Blackbaud’s income from operations and net income, determined in accordance with generally accepted accounting principles (“GAAP”), were $13.7 million and $8.5 million, respectively, for the third quarter of 2006 compared with income from operations of $10.7 million and net income of $7.7 million in the same period last year. GAAP fully diluted earnings per share were $0.19 for the quarter ended September 30, 2006, compared with $0.17 in the same period last year.
For the quarter ended September 30, 2006, non-GAAP income from operations, which excludes stock-based compensation expense, amortization of intangibles arising from business combinations and certain state tax credits, was $15.8 million, an increase of 28% compared with the same period last year. Non-GAAP net income was $9.9 million for the quarter ended September 30, 2006, an increase of 30% compared to the same period last year. Non-GAAP fully diluted earnings per share were $0.22 for the quarter ended September 30, 2006, an increase of 29% compared with $0.17 in the same period last year. A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”
Blackbaud had cash and cash equivalents of $54.3 million at September 30, 2006, an increase of $23.3 million compared to the end of the prior quarter. The increase in cash was primarily the result of strong cash flow from operations.
Timothy V. Williams, Chief Financial Officer of Blackbaud, stated, “A strong revenue performance, the highest quarterly gross margin since Blackbaud went public over two years ago and a continued focus on operational excellence drove a record quarterly non-GAAP operating margin of 32% in the third quarter. Our business momentum remains strong and we are optimistic about our outlook as we approach the new year.”
Fourth Quarter Dividend
Blackbaud announced today that its Board of Directors has declared a fourth quarter dividend of $0.07 per share payable on December 15, 2006 to stockholders of record on November 28, 2006.
Conference Call Details
Blackbaud will host a conference call today, October 30, 2006, at 5:00 p.m. (EST) to discuss the Company’s financial results, operations and related matters. To access this call, dial 800-811-8824 (domestic) or 913-981-4903 (international). A replay of this conference call will be available through November 6, 2006, at 888-203-1112 (domestic) or 719-457-0820 (international). The replay passcode is 9233324. A live webcast of this conference call will be available on the “Investor Relations” page of the Company’s Web site, and a replay will be archived on the Web site as well.

 


 

About Blackbaud
Blackbaud is the leading global provider of software and related services designed specifically for nonprofit organizations. More than 15,000 organizations — including the American Red Cross, Bowdoin College, the Chesapeake Bay Foundation, the Crohn’s & Colitis Foundation of America, the Detroit Zoological Society, Episcopal High School, Help the Aged, the Lincoln Center, and United Way of America — use Blackbaud products and consulting services for fundraising, financial management, business intelligence, Web site management, school administration, and ticketing. Blackbaud’s solutions include The Raiser’s Edge®, The Financial Edge, The Education Edge, The Patron Edge®, Blackbaud® NetCommunity, The Information Edge, The Researcher’s Edge, WealthPoint, and ProspectPoint, as well as a wide range of consulting and educational services. Founded in 1981, Blackbaud is headquartered in Charleston, South Carolina, and has operations in Toronto, Ontario; Glasgow, Scotland; London, England; and Sydney, Australia. For more information, visit www.blackbaud.com.
Blackbaud, the Blackbaud logo, The Raiser’s Edge, The Financial Edge, The Education Edge, The Patron Edge, Blackbaud NetCommunity, The Information Edge, The Researcher’s Edge, WealthPoint, and ProspectPoint are trademarks or registered trademarks of Blackbaud, Inc.
Forward-looking Statements
Except for historical information, all of the statements, expectations, and assumptions contained in this news release are forward-looking statements that 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: uncertainty regarding increased business and renewals from existing customers; continued success in sales growth; adoption of our products and services by nonprofits; risk associated with management of growth; risk associated with the ability to attract and retain key personnel; successful implementation of multiple integrated software products; lengthy sales and implementation cycles, particularly in larger organizations; risks related to our dividend policy and stock repurchase program, including potential limitations on our ability to grow and the possibility that we might discontinue payment of dividends and stock repurchases; risk associated with product concentration; economic conditions and seasonality; competition; risks associated with management of growth; risks associated with acquisitions; technological changes that make our products and services less competitive; 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 upon request from Blackbaud’s investor relations department.
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 gross profit, non-GAAP operating income and margin, non-GAAP net income and non-GAAP fully diluted earnings per share. 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 the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial results with other companies in Blackbaud’s industry, many of which present similar non-GAAP financial measures to investors. As noted, the non-GAAP financial results discussed above exclude the impact of costs associated with amortization of intangibles arising from business combinations, stock-based compensation expense and certain adjustments to our deferred tax asset.
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 measure below. As previously mentioned, a reconciliation of our 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.
INVESTOR CONTACT:
Tim Dolan
Integrated Corporate Relations
203-682-8200
MEDIA CONTACT:
Melanie Milonas
Blackbaud, Inc.
melanie.milonas@blackbaud.com
843.216.6200 x3307
SOURCE: Blackbaud, Inc.

 


 

Blackbaud, Inc.
Consolidated balance sheets
(Unaudited)
                 
    September 30,     December 31,  
(in thousands, except share amounts)   2006     2005  
 
Assets
               
Current assets:
               
Cash and cash equivalents
  $ 54,261     $ 22,683  
Cash, restricted
    513        
Accounts receivable, net of allowance of $1,291 and $1,100, respectively
    29,816       25,577  
Prepaid expenses and other current assets
    8,608       8,741  
Deferred tax asset, current portion
    4,127       7,600  
     
Total current assets
    97,325       64,601  
Property and equipment, net
    8,964       8,700  
Deferred tax asset
    66,070       71,487  
Goodwill
    2,408       2,208  
Intangible assets, net
    8,102       396  
Other assets
    56       106  
     
 
               
Total assets
  $ 182,925     $ 147,498  
     
Liabilities and stockholders’ equity
               
Current liabilities:
               
Trade accounts payable
  $ 4,105     $ 4,683  
Accrued expenses and other current liabilities
    16,135       15,806  
Deferred acquisition costs, current portion
    513        
Deferred revenue
    71,573       59,459  
     
Total current liabilities
    92,326       79,948  
Deferred acquisition costs, long-term portion
    270        
Long-term deferred revenue
    1,564       1,279  
     
 
               
Total liabilities
    94,160       81,227  
     
 
               
Commitments and contingencies
               
Stockholders’ equity:
               
Preferred stock; 20,000,000 shares authorized, none outstanding
           
Common stock, $.001 par value; 180,000,000 shares authorized, 48,687,310 and 47,529,836 shares issued at September 30, 2006 and December 31, 2005, respectively
    49       48  
Additional paid-in capital
    84,597       73,583  
Deferred compensation
          (6,497 )
Treasury stock, at cost; 4,711,144 and 4,267,313 shares at September 30, 2006 and December 31, 2005, respectively
    (68,738 )     (60,902 )
Accumulated other comprehensive income
    181       92  
Retained earnings
    72,676       59,947  
     
 
               
Total stockholders’ equity
    88,765       66,271  
     
 
               
Total liabilities and stockholders’ equity
  $ 182,925     $ 147,498  
     

 


 

Blackbaud, Inc.
Consolidated statements of operations
(Unaudited)
                                 
    Three months ended September 30,     Nine months ended September 30,  
(in thousands, except share and per share amounts)   2006     2005     2006     2005  
     
Revenue
                               
License fees
  $ 7,826     $ 7,291     $ 24,281     $ 22,063  
Services
    17,014       14,486       46,423       40,070  
Maintenance
    20,838       18,110       60,079       52,752  
Subscriptions
    2,839       1,895       7,625       5,028  
Other revenue
    1,373       1,362       3,991       3,442  
         
Total revenue
    49,890       43,144       142,399       123,355  
         
Cost of revenue
                               
Cost of license fees
    514       1,080       1,694       3,166  
Cost of services (of which $122, $55, $402 and $229 in the three months ended September 30, 2006 and 2005 and in the nine months ended September 30, 2006 and 2005, respectively, was stock-based compensation expense)
    8,641       7,375       24,899       20,988  
Cost of maintenance (of which $26, $6, $84 and $28 in the three months ended September 30, 2006 and 2005 and in the nine months ended September 30, 2006 and 2005, respectively, was stock-based compensation expense)
    3,272       2,643       9,930       7,947  
Cost of subscriptions (of which $4, $0, $13 and $0 in the three months ended September 30, 2006 and 2005 and in the nine months ended September 30, 2006 and 2005, respectively, was stock-based compensation expense)
    658       292       1,775       1,126  
Cost of other revenue
    1,246       1,171       3,751       3,106  
         
Total cost of revenue
    14,331       12,561       42,049       36,333  
         
Gross profit
    35,559       30,583       100,350       87,022  
         
Operating expenses
                               
Sales and marketing (of which $193, $38, $633 and $182 in the three months ended September 30, 2006 and 2005 and in the nine months ended September 30, 2006 and 2005, respectively, was stock-based compensation expense)
    10,251       8,634       30,072       25,272  
Research and development (of which $183, $22, $562 and $119 in the three months ended September 30, 2006 and 2005 and in the nine months ended September 30, 2006 and 2005, respectively, was stock-based compensation expense)
    5,742       5,331       17,652       15,758  
General and administrative (of which $1,396, $1,486, $4,206 and $(3,271) in the three months ended September 30, 2006 and 2005 and in the nine months ended September 30, 2006 and 2005, respectively, was stock-based compensation expense (benefit))
    5,716       5,891       16,804       8,975  
Amortization
    190       10       509       10  
         
Total operating expenses
    21,899       19,866       65,037       50,015  
         
Income from operations
    13,660       10,717       35,313       37,007  
Interest income
    492       190       865       770  
Interest expense
    (12 )     (12 )     (36 )     (37 )
Other (expense) income, net
    (64 )     (32 )     (196 )     (34 )
         
Income before provision for income taxes
    14,076       10,863       35,946       37,706  
Income tax provision
    5,573       3,143       14,043       10,592  
         
Net income
  $ 8,503     $ 7,720     $ 21,903     $ 27,114  
         
 
                               
Earnings per share
                               
Basic
  $ 0.20     $ 0.18     $ 0.51     $ 0.64  
Diluted
  $ 0.19     $ 0.17     $ 0.49     $ 0.58  
 
                               
Common shares and equivalents outstanding
                               
Basic weighted average shares
    43,438,730       41,961,726       43,182,585       42,628,278  
Diluted weighted average shares
    44,679,274       45,017,221       44,589,575       46,676,356  
Dividends per share
  $ 0.07     $ 0.05     $ 0.21     $ 0.15  

 


 

Blackbaud, Inc.
Consolidated statements of cash flows
(Unaudited)
                 
    Nine months ended  
    September 30,  
(in thousands)   2006     2005  
 
Cash flows from operating activities
               
Net income
  $ 21,903     $ 27,114  
Adjustments to reconcile net income to net provided by cash provided by operating activities
               
Depreciation and amortization
    2,693       2,026  
Provision for doubtful accounts and sales returns
    1,080       711  
Stock-based compensation expense (benefit)
    5,900       (2,404 )
Amortization of deferred financing fees
    36       36  
Deferred taxes
    8,445       11,613  
Excess tax benefit on exercise of stock options
          6,033  
Changes in assets and liabilities, net of acquisition
               
Accounts receivable
    (4,871 )     (3,427 )
Prepaid expenses and other assets
    161       (9,963 )
Trade accounts payable
    (593 )     96  
Accrued expenses and other current liabilities
    178       (1,203 )
Deferred revenue
    10,428       8,452  
     
Total adjustments
    23,457       11,970  
     
Net cash provided by operating activities
    45,360       39,084  
     
 
               
Cash flows from investing activities
               
Purchase of property and equipment
    (2,294 )     (2,223 )
Purchase of net assets of acquired companies
    (6,095 )     (938 )
     
Net cash used in investing activities
    (8,389 )     (3,161 )
     
 
               
Cash flows from financing activities
               
Payments on capital lease obligations
          (44 )
Proceeds from exercise of stock options
    6,044       5,475  
Excess tax benefit on exercise of stock options
    5,568        
Purchase of treasury stock
    (7,836 )     (56,229 )
Dividend payments to stockholders
    (9,174 )     (6,380 )
     
Net cash used in financing activities
    (5,398 )     (57,178 )
     
Effect of exchange rate on cash and cash equivalents
    5       (186 )
     
Net increase in cash and cash equivalents
    31,578       (21,441 )
Cash and cash equivalents, beginning of period
    22,683       42,144  
     
Cash and cash equivalents, end of period
  $ 54,261     $ 20,703  
     

 


 

Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP financial measures
(Unaudited)
(In thousands, except per share amounts)
                                 
    Three months ended September 30,     Nine months ended September 30,  
    2006     2005     2006     2005  
         
 
GAAP revenue
  $ 49,890     $ 43,144     $ 142,399     $ 123,355  
         
 
                               
GAAP gross profit
  $ 35,559     $ 30,583     $ 100,350     $ 87,022  
 
                               
Non-GAAP adjustments:
                               
Add back: Stock-based compensation expense — options
    45       61       177       257  
Add back: Stock-based compensation expense — restricted stock
    107             322        
         
 
                               
Non-GAAP gross profit
  $ 35,711     $ 30,644     $ 100,849     $ 87,279  
         
 
                               
Non-GAAP gross profit
    72 %     71 %     71 %     71 %
         
 
                               
GAAP income from operations
  $ 13,660     $ 10,717     $ 35,313     $ 37,007  
Non-GAAP adjustments:
                               
Add back: Stock-based compensation expense (benefit) — options
    1,462       1,569       4,504       (2,751 )
Add back: Stock-based compensation expense — restricted stock
    462       38       1,396       38  
Add back: Amortization of intangibles from business combinations
    190       10       509       10  
         
 
                               
Total Non-GAAP adjustments
    2,114       1,617       6,409       (2,703 )
         
 
                               
Non-GAAP income from operations
  $ 15,774     $ 12,334     $ 41,722     $ 34,304  
         
 
                               
Non-GAAP operating margin
    32 %     29 %     29 %     28 %
         
 
                               
GAAP net income
  $ 8,503     $ 7,720     $ 21,903     $ 27,114  
Non-GAAP adjustments:
                               
Add back: Total Non-GAAP adjustments affecting income from operations
    2,114       1,617       6,409       (2,703 )
Add back: Tax impact related to Non-GAAP adjustments
    (741 )     (1,725 )     (2,476 )     (3,060 )
         
 
                               
Non-GAAP net income
  $ 9,876     $ 7,612     $ 25,836     $ 21,351  
         
 
                               
GAAP shares used in computing diluted earnings per share
    44,679       45,017       44,590       46,676  
Non-GAAP adjustments:
                               
Add back: Incremental shares related to dilutive securities
    300       (433 )     300       (694 )
         
 
                               
Shares used in computing Non-GAAP diluted earnings per share
    44,979       44,584       44,890       45,982  
         
 
                               
Non-GAAP diluted earnings per share
  $ 0.22     $ 0.17     $ 0.58     $ 0.46