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Blackbaud Announces 2017 First Quarter Results
First Quarter GAAP Revenue Growth of 8.5%; Non-GAAP Organic Revenue Growth of 7.4%; Reaffirms 2017 Full Year Financial Guidance

CHARLESTON, S.C., May 1, 2017 /PRNewswire/ -- Blackbaud (NASDAQ: BLKB), the world's leading cloud software company powering social good, today announced financial results for its first quarter ended March 31, 2017.

"The market remains strong, the pace of innovation we're delivering is unmatched in our industry and we're seeing very positive traction with our next generation cloud solutions, which are powering impressive results for our customers," said Mike Gianoni, Blackbaud's president and CEO. "Solid growth in subscriptions revenue continues to fuel recurring revenue growth, adding stability and predictability to our already strong business. Our non-GAAP organic subscriptions revenue grew 20 percent this quarter, and represented 64 percent of total revenue. And, our non-GAAP organic recurring revenue grew 12 percent, representing 83 percent of total revenue, a new all-time high for Blackbaud."

First Quarter 2017 Results Compared to First Quarter 2016 Results:

  • Total GAAP revenue was $183.6 million, up 8.5%, with $152.0 million in GAAP recurring revenue, representing 82.8% of total revenue, and $118.2 million in subscription revenue, representing 64.4% of total revenue.
  • Total non-GAAP revenue was $183.6 million, up 7.4%, with $152.0 million in non-GAAP recurring revenue, representing 82.8% of total non-GAAP revenue, and $118.2 million in subscription revenue, representing 64.4% of total revenue.
  • Non-GAAP organic revenue increased 7.4%, non-GAAP organic recurring revenue increased 11.9%, and non-GAAP organic subscription revenue increased 19.9%.
  • GAAP income from operations decreased 0.3% to $10.6 million, with GAAP operating margin decreasing 50 basis points to 5.8%.
  • Non-GAAP income from operations increased 7.6% to $34.0 million, with non-GAAP operating margin of 18.5% equal to prior year.
  • GAAP net income increased 84.6% to $11.5 million, with GAAP diluted earnings per share of $0.24, up $0.11.
  • Non-GAAP net income increased 10.8% to $21.7 million, with non-GAAP diluted earnings per share of $0.46, up $0.04.
  • Non-GAAP free cash flow was $3.5 million, an increase of $10.3 million.

"We had a very solid start to the year," said Tony Boor, Blackbaud's executive vice president and CFO. "Execution against our strategic plan allowed us to post solid results for the quarter, and positions us well to achieve our full year financial guidance and long term aspirational goals."

An explanation of all non-GAAP financial measures referenced in this press release, including Blackbaud's definition of free cash flow, 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:

Visit www.blackbaud.com/press-room/ for more information about Blackbaud's recent highlights.

Dividend
Blackbaud announced today that its Board of Directors has declared a second quarter 2017 dividend of $0.12 per share payable on June 15, 2017 to stockholders of record on May 26, 2017.

Financial Outlook
Blackbaud today reaffirmed its 2017 full year financial guidance.

  • Non-GAAP revenue of $775 million to $795 million
  • Non-GAAP income from operations of $155 million to $163 million
  • Non-GAAP operating margin of 20.0% to 20.5%
  • Non-GAAP diluted earnings per share of $2.06 to $2.18
  • Non-GAAP free cash flow of $120 million to $130 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.

Conference Call Details

What:

Blackbaud's 2017 First Quarter Conference Call

When:

May 2, 2017

Time:

8:00 a.m. (Eastern Time)

Live Call:

800-967-7149 (domestic) or 719-386-0002 (international); passcode 732627.

Webcast:

Blackbaud's Investor Relations Webpage

About Blackbaud
Blackbaud (NASDAQ: BLKB) is the world's leading cloud software company powering social good. Serving the entire social good community—nonprofits, foundations, corporations, education institutions, and individual change agents—Blackbaud connects and empowers organizations to increase their impact through software, services, expertise, and data intelligence. The Blackbaud portfolio is tailored to the unique needs of vertical markets, with solutions for fundraising and relationship managementdigital marketingadvocacyaccountingpaymentsanalyticsschool management, grant managementcorporate social responsibility, and volunteerism. Serving the industry for more than three decades, Blackbaud is headquartered in Charleston, South Carolina and has operations in the United States, Australia, Canada, and the United Kingdom. For more information, visit www.blackbaud.com.

Investor Contact:


Media Contact:


Mark Furlong


Nicole McGougan


Director of Investor Relations


Blackbaud Public Relations


843-654-2097


843-654-3307


mark.furlong@blackbaud.com


nicole.mcgougan@blackbaud.com


Forward-Looking Statements
Except for historical information, all of the statements, expectations, and assumptions contained in this news release are forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding: expectations that our revenue and operating cash flow will continue to grow and that our operating margins will continue to improve, and expectations that we will achieve our projected 2017 full year financial guidance and long-term aspirational goals. 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-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 discusses non-GAAP organic revenue growth, non-GAAP organic revenue growth on a constant currency basis, non-GAAP subscriptions revenue growth and non-GAAP organic recurring revenue growth, which it believes provides useful information for evaluating the periodic growth of its business on a consistent basis. Each of these measures of non-GAAP organic revenue growth 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 non-GAAP organic revenue growth 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 non-GAAP organic revenue growth 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 the 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.

 


Blackbaud, Inc.
Consolidated balance sheets
(Unaudited)




(dollars in thousands)

March 31,
 2017

December 31,
 2016

Assets



Current assets:



Cash and cash equivalents

$

13,872

$

16,902

Restricted cash due to customers

164,748

353,771

Accounts receivable, net of allowance of $3,328 and $3,291 at March 31, 2017
and December 31, 2016, respectively

90,510

88,932

Prepaid expenses and other current assets

49,172

48,314

Total current assets

318,302

507,919

Property and equipment, net

47,200

50,269

Software development costs, net

41,139

37,582

Goodwill

438,307

438,240

Intangible assets, net

243,263

253,676

Other assets

22,914

22,524

Total assets

$

1,111,125

$

1,310,210

Liabilities and stockholders' equity



Current liabilities:



Trade accounts payable

$

20,666

$

23,274

Accrued expenses and other current liabilities

39,072

54,196

Due to customers

164,748

353,771

Debt, current portion

4,375

4,375

Deferred revenue, current portion

237,101

244,500

Total current liabilities

465,962

680,116

Debt, net of current portion

351,995

338,018

Deferred tax liability

29,636

29,558

Deferred revenue, net of current portion

7,681

6,440

Other liabilities

7,801

8,533

Total liabilities

863,075

1,062,665

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, 58,410,419 and
57,672,401 shares issued at March 31, 2017 and December 31, 2016, respectively

58

58

Additional paid-in capital

319,731

310,452

Treasury stock, at cost; 10,375,257 and 10,166,801 shares at March 31, 2017 and
December 31, 2016, respectively

(230,065)

(215,237)

Accumulated other comprehensive loss

(175)

(457)

Retained earnings

158,501

152,729

Total stockholders' equity

248,050

247,545

Total liabilities and stockholders' equity

$

1,111,125

$

1,310,210

 

 

Blackbaud, Inc.
Consolidated statements of comprehensive income
(Unaudited)



(dollars in thousands, except per share amounts)

Three months ended
 March 31,

2017

2016

Revenue



Subscriptions

$

118,179

$

96,851

Maintenance

33,781

37,160

Services and other

31,661

35,245

Total revenue

183,621

169,256

Cost of revenue



Cost of subscriptions

54,926

49,666

Cost of maintenance

5,982

5,318

Cost of services and other

24,574

24,905

Total cost of revenue

85,482

79,889

Gross profit

98,139

89,367

Operating expenses



Sales, marketing and customer success

42,240

35,609

Research and development

22,706

22,715

General and administrative

21,923

19,679

Amortization

691

752

Total operating expenses

87,560

78,755

Income from operations

10,579

10,612

Interest expense

(2,377)

(2,675)

Other income (expense), net

286

(105)

Income before provision for income taxes

8,488

7,832

Income tax (benefit) provision

(3,023)

1,595

Net income

$

11,511

$

6,237

Earnings per share



Basic

$

0.25

$

0.14

Diluted

$

0.24

$

0.13

Common shares and equivalents outstanding



Basic weighted average shares

46,501,761

45,967,863

Diluted weighted average shares

47,482,840

47,064,164

Dividends per share

$

0.12

$

0.12

Other comprehensive income (loss)



Foreign currency translation adjustment

100

403

Unrealized gain (loss) on derivative instruments, net of tax

182

(669)

Total other comprehensive income (loss)

282

(266)

Comprehensive income

$

11,793

$

5,971

 

 

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




Three months ended
 March 31,

(dollars in thousands)

2017

2016

Cash flows from operating activities



Net income

$

11,511

$

6,237

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



Depreciation and amortization

18,091

17,609

Provision for doubtful accounts and sales returns

2,738

1,017

Stock-based compensation expense

9,294

7,743

Deferred taxes

(50)

626

Amortization of deferred financing costs and discount

239

239

Other non-cash adjustments

(243)

(217)

Changes in operating assets and liabilities, net of acquisition and disposal of
businesses:



Accounts receivable

(4,041)

817

Prepaid expenses and other assets

(1,214)

1,846

Trade accounts payable

(1,267)

139

Accrued expenses and other liabilities

(15,536)

(20,416)

Restricted cash due to customers

188,824

141,055

Due to customers

(188,824)

(141,055)

Deferred revenue

(6,758)

(8,883)

Net cash provided by operating activities

12,764

6,757

Cash flows from investing activities



Purchase of property and equipment

(2,719)

(7,837)

Capitalized software development costs

(6,583)

(5,798)

Purchase of net assets of acquired companies, net of cash

59

Net cash used in investing activities

(9,243)

(13,635)

Cash flows from financing activities



Proceeds from issuance of debt

67,600

74,600

Payments on debt

(53,794)

(60,494)

Employee taxes paid for withheld shares upon equity award settlement

(14,828)

(5,516)

Proceeds from exercise of stock options

11

3

Dividend payments to stockholders

(5,765)

(5,700)

Net cash (used in) provided by financing activities

(6,776)

2,893

Effect of exchange rate on cash and cash equivalents

225

707

Net decrease in cash and cash equivalents

(3,030)

(3,278)

Cash and cash equivalents, beginning of period

16,902

15,362

Cash and cash equivalents, end of period

$

13,872

$

12,084

 


 

Blackbaud, Inc.
Reconciliation of GAAP to non-GAAP financial measures
(Unaudited)



(dollars in thousands, except per share amounts)

Three months ended
 March 31,

2017

2016

GAAP Revenue

$

183,621


$

169,256


Non-GAAP adjustments:



Add: Acquisition-related deferred revenue write-down


1,786


Non-GAAP revenue

$

183,621


$

171,042





GAAP gross profit

$

98,139


$

89,367


GAAP gross margin

53.4

%

52.8

%

Non-GAAP adjustments:



Add: Acquisition-related deferred revenue write-down


1,786


Add: Stock-based compensation expense

791


845


Add: Amortization of intangibles from business combinations

9,855


9,881


Add: Employee severance

952


64


Add: Acquisition-related integration costs

86



Subtotal

11,684


12,576


Non-GAAP gross profit

$

109,823


$

101,943


Non-GAAP gross margin

59.8

%

59.6

%




GAAP income from operations

$

10,579


$

10,612


GAAP operating margin

5.8

%

6.3

%

Non-GAAP adjustments:



Add: Acquisition-related deferred revenue write-down


1,786


Add: Stock-based compensation expense

9,294


7,743


Add: Amortization of intangibles from business combinations

10,546


10,633


Add: Employee severance

2,746


288


Add: Acquisition-related integration costs

230


383


Add: Acquisition-related expenses

570


113


Subtotal

23,386


20,946


Non-GAAP income from operations

$

33,965


$

31,558


Non-GAAP operating margin

18.5

%

18.5

%




GAAP net income

$

11,511


$

6,237





Shares used in computing GAAP diluted earnings per share

47,482,840


47,064,164


GAAP diluted earnings per share

$

0.24


$

0.13





Non-GAAP adjustments:



Add: Total Non-GAAP adjustments affecting income from operations

23,386


20,946


Less: Tax impact related to Non-GAAP adjustments

(13,223)


(7,613)


Non-GAAP net income

$

21,674


$

19,570





Shares used in computing Non-GAAP diluted earnings per share

47,482,840


47,064,164


Non-GAAP diluted earnings per share

$

0.46


$

0.42


 

 

Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP financial measures (continued)
(Unaudited)



(dollars in thousands)

Three months ended
 March 31,

2017

2016

Detail of certain Non-GAAP adjustments:



Stock-based compensation expense:



Included in cost of revenue:



Cost of subscriptions

$

294

$

275

Cost of maintenance

86

118

Cost of services and other

411

452

Total included in cost of revenue

791

845

Included in operating expenses:



Sales, marketing and customer success

1,439

896

Research and development

1,717

1,471

General and administrative

5,347

4,531

Total included in operating expenses

8,503

6,898

Total stock-based compensation expense

$

9,294

$

7,743




Amortization of intangibles from business combinations:



Included in cost of revenue:



Cost of subscriptions

$

7,911

$

7,811

Cost of maintenance

1,293

1,332

Cost of services and other

651

738

Total included in cost of revenue

9,855

9,881

Included in operating expenses

691

752

Total amortization of intangibles from business combinations

$

10,546

$

10,633

 

 

Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP financial Measures (continued)
(Unaudited)



(dollars in thousands)

Three months ended
 March 31,

2017

2016

GAAP revenue

$

183,621


$

169,256


GAAP revenue growth

8.5

%


Add: Non-GAAP acquisition-related revenue (1)


1,786


Total Non-GAAP adjustments


1,786


Non-GAAP revenue (2)

$

183,621


$

171,042


Non-GAAP organic revenue growth

7.4

%





Non-GAAP revenue (2)

$

183,621


$

171,042


Foreign currency impact on Non-GAAP revenue (3)

140



Non-GAAP revenue on constant currency basis (3)

$

183,761


$

171,042


Non-GAAP organic revenue growth on constant currency basis

7.4

%





GAAP subscriptions revenue

$

118,179


$

96,851


GAAP subscriptions revenue growth

22.0

%


Add: Non-GAAP acquisition-related revenue (1)


1,754


Total Non-GAAP adjustments


1,754


Non-GAAP organic subscriptions revenue

$

118,179


$

98,605


Non-GAAP organic subscriptions revenue growth

19.9

%





GAAP subscriptions revenue

$

118,179


$

96,851


GAAP maintenance revenue

33,781


37,160


GAAP recurring revenue

$

151,960


$

134,011


GAAP recurring revenue growth

13.4

%


Add: Non-GAAP acquisition-related revenue (1)


1,781


Total Non-GAAP adjustments


1,781


Non-GAAP recurring revenue

$

151,960


$

135,792


Non-GAAP organic recurring revenue growth

11.9

%






(1)     Non-GAAP acquisition-related revenue excludes incremental acquisition-related revenue calculated in accordance with GAAP that is attributable to companies
          acquired in the current fiscal year. For companies acquired in the immediately preceding fiscal year, non-GAAP acquisition-related revenue reflects presentation
          of full-year incremental non-GAAP revenue derived from such companies, as if they were combined throughout the prior period, and it includes the non-GAAP
          revenue from the acquisition-related deferred revenue write-down attributable to those companies.

(2)     Non-GAAP revenue for the prior year periods presented herein may not agree to non-GAAP revenue presented in the respective prior period quarterly financial
          information solely due to the manner in which non-GAAP organic revenue growth is calculated.

(3)     To determine non-GAAP organic revenue growth on a constant currency basis, revenues from entities reporting in foreign currencies were translated to U.S.
          Dollars using the comparable prior period's quarterly weighted average foreign currency exchange rates. The primary foreign currencies creating the impact are
          the Canadian Dollar, EURO, British Pound and Australian Dollar.

 

(dollars in thousands)

Three months ended
 March 31,

2017

2016

GAAP net cash provided by operating activities

$

12,764

$

6,757

Less: purchase of property and equipment

(2,719)

(7,837)

Less: capitalized software development costs

(6,583)

(5,798)

Non-GAAP free cash flow

$

3,462

$

(6,878)

 

 

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SOURCE Blackbaud