Form 8-K

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): November 1, 2007

 


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))

 



Item 2.02. Results of Operations and Financial Condition.

On November 1, 2007, Blackbaud, Inc. issued a press release reporting unaudited financial results for the quarter ended September 30, 2007. A copy of this 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 November 1, 2007.

 

 


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: November 1, 2007     /s/ Timothy V. Williams
    Timothy V. Williams,
    Senior Vice President and Chief Financial Officer
Press Release

Exhibit 99.1

Blackbaud, Inc. Announces Third Quarter 2007 Results and Fourth Quarter 2007 Dividend

CHARLESTON, S.C. – November 1, 2007 – 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, 2007.

Marc Chardon, Chief Executive Officer of Blackbaud, stated, “We were pleased with the Company’s overall performance in the third quarter, which was highlighted by revenue and profitability that was above the high-end of our expectations. Demand for our solutions continues to be solid, and we believe our overall market opportunity remains largely under penetrated, as evidenced by the continuing addition of new customers across all segments of our market. At the same time we are also seeing success, as we have historically, in selling additional solutions to our large base of almost 19,000 customers.”

Chardon added, “During the third quarter, the contribution to our results from our most recent acquisitions, the Target Companies and eTapestry, continued to be very strong, with each generating better than expected revenue performance. Equally as important from a long-term perspective, we continue to be encouraged by the growing interest levels we are seeing for our new Enterprise CRM and Direct Marketing solutions.”

For the quarter ended September 30, 2007, Blackbaud reported total revenue of $67.8 million, an increase of 36% compared with the third quarter of 2006. License revenue increased 9% to $8.5 million, subscriptions increased 154% to $7.1 million, services revenue increased 55% to $26.3 million, and maintenance revenue increased 16% to $24.0 million, compared with the same period in 2006.

Blackbaud’s income from operations and net income, determined in accordance with generally accepted accounting principles (“GAAP”), were $15.3 million and $8.8 million, respectively, for the third quarter of 2007 compared with income from operations of $13.6 million and net income of $8.4 million in the same period last year. GAAP diluted earnings per share were $0.20 for the quarter ended September 30, 2007, compared with GAAP diluted earnings per share of $0.19 in the same period last year.

For the quarter ended September 30, 2007, non-GAAP income from operations, which excludes stock-based compensation expense and amortization of intangibles arising from business combinations, was $17.7 million, an increase from $15.7 million in the prior year period and above the high-end of the Company’s previously issued guidance range and represented a non-GAAP operating margin of 26%. Non-GAAP net income was $10.5 million for the quarter ended September 30, 2007, an increase from $9.8 million in the same period last year. Non-GAAP diluted earnings per share were $0.23 for the quarter ended September 30, 2007, an increase from $0.22 in the prior year period and at the high-end of Blackbaud’s previously issued guidance.

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.”

Cash from operations for the quarter ended September 30, 2007 was $30.5 million, an increase of 18% over the $25.7 million generated in the same period last year.

Timothy V. Williams, Chief Financial Officer of Blackbaud, stated, “We were pleased with the progress of integrating the Target Companies and eTapestry acquisitions during the quarter, which were key factors driving the better-than-expected operating profitability results. In addition, subscription-based services continue to be the highest growth portion of Blackbaud’s business, enhancing the Company’s long-term business model and revenue visibility.”


Fourth Quarter Dividend

Blackbaud announced today that its Board of Directors has declared a fourth quarter dividend of $0.085 per share payable on December 14, 2007 to stockholders of record on November 28, 2007.

Conference Call Details

Blackbaud will host a conference call today, November 1, 2007, at 5:00 p.m. (Eastern Time) to discuss Blackbaud’s financial results, operations and related matters. To access this call, dial 888-263-2905 (domestic) or 913-312-0697(international). A replay of this conference call will be available through November 8, 2007, at 888-203-1112 (domestic) or 719-457-0820 (international). The replay passcode is 8344025. 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 services designed specifically for nonprofit organizations, enabling them to improve operational efficiency, build strong relationships, and raise more money to support their missions. Approximately 19,000 organizations — including the American Red Cross, Dartmouth College, the WGBH Educational Foundation, Episcopal High School, Lincoln Center, Cancer Research UK, Special Olympics, and Arthritis Foundation — use one or more of Blackbaud products and services for fundraising, constituent relationship management, financial management, direct marketing, school administration, ticketing, business intelligence, website management, prospect research, consulting, and analytics. Since 1981, Blackbaud’s sole focus and expertise has been partnering with nonprofits and providing them the solutions they need to make a difference in their local communities and worldwide. Headquartered in the United States, Blackbaud also has operations in Canada, the United Kingdom, and Australia. For more information, visit www.blackbaud.com.

All Blackbaud product names appearing herein 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: management of integration of recently acquired companies and other risks associated with acquisitions; risk associated with successful implementation of multiple integrated software products; lengthy sales and implementation cycles, particularly in larger organizations; uncertainty regarding increased business and renewals from existing customers; continued success in sales growth; the ability to attract and retain key personnel; risks related to our dividend policy and share repurchase program, including potential limitations on our ability to grow and the possibility that we might discontinue payment of dividends; risks relating to restrictions imposed by the credit facility; risks associated with management of growth; 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 at the SEC’s website at http:www.sec.gov or 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 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 tax-related adjustments.

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

ICR

timothy.dolan@icrinc.com

617-956-6727

Media Contact:

Melanie Milonas

Blackbaud, Inc.

melanie.milonas@blackbaud.com

843-216-6200 x3307

SOURCE: Blackbaud, Inc.


Blackbaud, Inc.

Consolidated balance sheets

(Unaudited)

 

(in thousands, except share amounts)

   September 30,
2007
    December 31,
2006
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 16,182     $ 67,783  

Cash, restricted

     —         518  

Accounts receivable, net of allowance of $1,965 and $1,268 at September 30, 2007 and December 31, 2006, respectively

     41,639       29,505  

Prepaid expenses and other current assets

     9,854       8,507  

Deferred tax asset, current portion

     4,042       5,318  
                

Total current assets

     71,717       111,631  

Property and equipment, net

     14,894       10,524  

Deferred tax asset

     53,568       62,302  

Goodwill

     58,530       2,518  

Intangible assets, net

     38,764       7,986  

Other assets

     489       48  
                

Total assets

   $ 237,962     $ 195,009  
                

Liabilities and stockholders’ equity

    

Current liabilities:

    

Trade accounts payable

   $ 5,611     $ 5,863  

Accrued expenses and other current liabilities

     20,137       16,047  

Deferred acquisition costs, current portion

     —         518  

Capital lease obligations, current portion

     551       —    

Short-term debt

     11,515       —    

Deferred revenue

     93,975       75,078  
                

Total current liabilities

     131,789       97,506  

Deferred acquisition costs, noncurrent

     —         271  

Capital lease obligations, noncurrent

     693       —    

Deferred revenue, noncurrent

     2,718       1,874  

Other noncurrent liabilities

     1,015       —    
                

Total liabilities

     136,215       99,651  
                

Commitments and contingencies

    

Stockholders’ equity:

    

Preferred stock; 20,000,000 shares authorized, none outstanding

     —         —    

Common stock, $.001 par value; 180,000,000 shares authorized, 49,627,834 and 49,205,522 shares issued at September 30, 2007 and December 31, 2006, respectively

     50       49  

Additional paid-in capital

     97,949       88,409  

Deferred compensation

    

Treasury stock, at cost; 5,380,923 and 4,743,895 shares at September 30, 2007 and December 31, 2006, respectively

     (84,084 )     (69,630 )

Accumulated other comprehensive income

     262       232  

Retained earnings

     87,570       76,298  
                

Total stockholders’ equity

     101,747       95,358  
                

Total liabilities and stockholders’ equity

   $ 237,962     $ 195,009  
                


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)

   2007     2006     2007     2006  

Revenue

        

License fees

   $ 8,549     $ 7,826     $ 27,646     $ 24,281  

Services

     26,341       17,014       66,873       46,423  

Maintenance

     24,015       20,790       69,615       59,748  

Subscriptions

     7,063       2,783       17,395       7,534  

Other revenue

     1,867       1,373       5,496       3,991  
                                

Total revenue

     67,835       49,786       187,025       141,977  
                                

Cost of revenue

        

Cost of license fees

     699       514       1,979       1,694  

Cost of services

     14,583       8,641       40,305       24,899  

Cost of maintenance

     4,298       3,272       12,537       9,930  

Cost of subscriptions

     2,727       658       6,841       1,775  

Cost of other revenue

     1,736       1,246       4,872       3,751  
                                

Total cost of revenue

     24,043       14,331       66,534       42,049  
                                

Gross profit

     43,792       35,455       120,491       99,928  
                                

Operating expenses

        

Sales and marketing

     14,616       10,251       41,756       30,072  

Research and development

     7,253       5,742       21,006       17,652  

General and administrative

     6,436       5,716       19,172       16,804  

Amortization

     143       190       325       509  
                                

Total operating expenses

     28,448       21,899       82,259       65,037  
                                

Income from operations

     15,344       13,556       38,232       34,891  

Interest income

     155       492       682       865  

Interest expense

     (320 )     (12 )     (1,066 )     (36 )

Other (expense), net

     (343 )     (64 )     (420 )     (196 )
                                

Income before provision for income taxes

     14,836       13,972       37,428       35,524  

Income tax provision

     6,028       5,536       14,661       13,880  
                                

Net income

   $ 8,808     $ 8,436     $ 22,767     $ 21,644  
                                

Earnings per share

        

Basic

   $ 0.20     $ 0.19     $ 0.52     $ 0.50  

Diluted

   $ 0.20     $ 0.19     $ 0.51     $ 0.49  

Common shares and equivalents outstanding

        

Basic weighted average shares

     43,557,370       43,438,730       43,524,815       43,182,585  

Diluted weighted average shares

     44,526,524       44,679,274       44,510,155       44,589,575  

Dividends per share

   $ 0.085     $ 0.070     $ 0.255     $ 0.210  


Blackbaud, Inc.

Consolidated statements of cash flows

(Unaudited)

 

     Nine months ended September 30,  

(in thousands)

   2007     2006  

Cash flows from operating activities

    

Net income

   $ 22,767     $ 21,644  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     5,771       2,693  

Provision for doubtful accounts and sales returns

     2,275       1,080  

Stock-based compensation expense

     4,868       5,900  

Amortization of deferred financing fees

     50       36  

Deferred taxes

     7,961       8,282  

Changes in assets and liabilities, net of acquisition:

    

Accounts receivable

     (6,592 )     (4,871 )

Prepaid expenses and other assets

     (562 )     161  

Trade accounts payable

     (1,035 )     (593 )

Accrued expenses and other current liabilities

     997       178  

Deferred revenue

     13,342       10,850  
                

Net cash provided by operating activities

     49,842       45,360  
                

Cash flows from investing activities

    

Purchase of property and equipment

     (4,731 )     (2,294 )

Purchase of net assets of acquired companies

     (84,434 )     (6,095 )
                

Net cash used in investing activities

     (89,165 )     (8,389 )
                

Cash flows from financing activities

    

Proceeds from issuance of debt

     48,000       —    

Proceeds from exercise of stock options

     2,402       6,044  

Excess tax benefit on exercise of stock options

     2,304       5,568  

Payments on debt

     (38,422 )     —    

Payments of deferred financing fees

     (418 )     —    

Payments on capital lease obligations

     (335 )     —    

Purchase of treasury stock

     (14,454 )     (7,836 )

Dividend payments to stockholders

     (11,259 )     (9,174 )
                

Net cash used in financing activities

     (12,182 )     (5,398 )
                

Effect of exchange rate on cash and cash equivalents

     (96 )     5  
                

Net (decrease) increase in cash and cash equivalents

     (51,601 )     31,578  

Cash and cash equivalents, beginning of period

     67,783       22,683  
                

Cash and cash equivalents, end of period

   $ 16,182     $ 54,261  
                


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,  
     2007     2006     2007     2006  

GAAP revenue

   $ 67,835     $ 49,786     $ 187,025     $ 141,977  
                                

GAAP gross profit

   $ 43,792     $ 35,455     $ 120,491     $ 99,928  

Non-GAAP adjustments:

        

Add back: Stock-based compensation expense (see table below)

     274       152       733       499  

Add back: Amortization of intangibles from business combinations (see table below)

     826       —         2,047       —    
                                

Non-GAAP gross profit

   $ 44,892     $ 35,607     $ 123,271     $ 100,427  
                                

Non-GAAP gross margin

     66 %     72 %     66 %     71 %
                                

GAAP income from operations

   $ 15,344     $ 13,556     $ 38,232     $ 34,891  

Non-GAAP adjustments:

        

Add back: Stock-based compensation expense (see table below)

     1,357       1,924       4,868       5,900  

Add back: Amortization of intangibles from business combinations (see table below)

     969       190       2,372       509  
                                

Total Non-GAAP adjustments

     2,326       2,114       7,240       6,409  
                                

Non-GAAP income from operations

   $ 17,670     $ 15,670     $ 45,472     $ 41,300  
                                

Non-GAAP operating margin

     26 %     31 %     24 %     29 %
                                

GAAP net income

   $ 8,808     $ 8,436     $ 22,767     $ 21,644  

Non-GAAP adjustments:

        

Add back: Total Non-GAAP adjustments affecting income from operations

     2,326       2,114       7,240       6,409  

Add back: Tax impact related to Non-GAAP adjustments

     (665 )     (738 )     (2,759 )     (2,474 )
                                

Non-GAAP net income

   $ 10,469     $ 9,812     $ 27,248     $ 25,579  
                                

GAAP shares used in computing diluted earnings per share

     44,527       44,679       44,510       44,590  

Non-GAAP adjustments:

        

Add back: Incremental shares related to dilutive securities

     319       300       379       300  
                                

Shares used in computing Non-GAAP diluted earnings per share

     44,846       44,979       44,889       44,890  
                                

Non-GAAP diluted earnings per share

   $ 0.23     $ 0.22     $ 0.61     $ 0.57  
                                

Detail of Non-GAAP adjustments:

        

Stock-based compensation expense:

        

Cost of revenue

        

Cost of services

   $ 187     $ 122     $ 526     $ 402  

Cost of maintenance

     52       26       151       84  

Cost of subscriptions

     35       4       56       13  
                                

Subtotal

     274       152       733       499  

Operating expenses

        

Sales and marketing

     23       193       544       633  

Research and development

     260       183       795       562  

General and administrative

     800       1,396       2,796       4,206  
                                

Subtotal

     1,083       1,772       4,135       5,401  
                                

Total stock-based compensation expense

     1,357       1,924       4,868       5,900  
                                

Amortization of intangibles from business combinations:

        

Cost of revenue

        

Cost of license fees

   $ 43     $ —       $ 110     $ —    

Cost of services

     318       —         851       —    

Cost of maintenance

     110       —         291       —    

Cost of subscriptions

     327       —         730       —    

Cost of other revenue

     28       —         65       —    
                                

Subtotal

     826       —         2,047       —    
                                

Operating expenses

     143       190       325       509  
                                

Total amortization of intangibles from business combinations

     969       190       2,372       509