Blackbaud Announces 2018 Second Quarter Results
Second Quarter Recurring Revenue Grows 16% Representing 90% of Total Revenue; Reaffirms 2018 Full Year Financial Guidance
"We've continued moving the business toward a subscriptions-based revenue model with our mix of recurring revenue now standing at 90 percent of total, a new all-time high for us," said
Second Quarter 2018 Results Compared to Second Quarter 2017 Results:
- Total GAAP revenue was
$213.7 million , up 11.5%, with$192.7 million in GAAP recurring revenue, representing 90.2% of total GAAP revenue. GAAP recurring revenue was up 15.8%.
- Total non-GAAP revenue was
$214.6 million , up 11.8%, with$193.6 million in non-GAAP recurring revenue, representing 90.2% of total non-GAAP revenue. Non-GAAP recurring revenue was up 16.2%.
- Non-GAAP organic revenue increased 4.8% and non-GAAP organic recurring revenue increased 8.0%.
- GAAP income from operations decreased 31.2% to
$11.4 million , with GAAP operating margin decreasing 330 basis points to 5.3%.
- Non-GAAP income from operations increased 11.9% to
$45.2 million , with non-GAAP operating margin increasing 10 basis points to 21.1%.
- GAAP net income decreased 40.2% to
$6.6 million , with GAAP diluted earnings per share of$0.14 , down$0.09 .
- Non-GAAP net income increased 28.8% to
$33.0 million , with non-GAAP diluted earnings per share of$0.69 , up$0.15 .
- Non-GAAP free cash flow was
$41.6 million , an increase of$9.8 million .
"We've been diligently executing a workplace strategy to better align our organizational objectives with our geographically diverse workforce in the second quarter," said
An explanation of all non-GAAP financial measures referenced in this press release is included below under the heading "Non-GAAP Financial Measures." A reconciliation of the company's non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release.
Recent Company Highlights:
Blackbaud announced the general availability of the Blackbaud TeamRaiser® integration with Facebook Fundraisers.Blackbaud launched the Cloud Solution for Faith Communities with the introduction of Blackbaud Church Management™.Blackbaud was named to theForbes America's Best Employers for Women 2018 list.- The company released new innovative benchmarking capabilities in Raiser's Edge NXT™, its flagship cloud fundraising and relationship management solution.
- The company reported strong satisfaction rates of Blackbaud CRM™ among higher education institutions seeking to power their advancement needs, expand campus-wide collaboration and develop the infrastructure needed to support future growth.
Blackbaud unveiled its new world headquarters during a ribbon-cutting ceremony, just over two years since the company announced plans for its construction in 2016.Blackbaud released results of a commissioned Total Economic Impact™ study conducted byForrester Consulting , examining the return on investment that schools may experience by deploying The Cloud Solution for K-12 Schools.Susan Connors was named president and general manager ofBlackbaud's Managed Services business, which provides expertise through a range of operational services to help customers scale their impact with measurable outcomes and increased efficiency.Blackbaud announced the acquisition of Reeher, the industry leader in fundraising performance management for higher education.Blackbaud announced that the company will open an office in San José,Costa Rica , its latest international expansion and first presence inLatin America .
Visit www.blackbaud.com/press-room for more information about
Dividend
Financial Outlook
- Non-GAAP revenue of
$870 million to $890 million - Non-GAAP operating margin of 20.6% to 21.0%
- Non-GAAP diluted earnings per share of
$2.75 to $2.88 - Non-GAAP free cash flow of
$165 million to $175 million
Reclassifications
Our revenue from "subscriptions" and "maintenance" and a portion of our "services and other" revenue have been combined within "recurring" revenue beginning in 2018. In order to provide comparability between periods presented, those amounts of revenue have been combined within "recurring" revenue in the previously reported consolidated statements of comprehensive income to conform to presentation of the current period. Similarly, "cost of subscriptions" and "cost of maintenance" and a portion of "cost of services and other" have been combined within "cost of recurring" in the previously reported consolidated statements of comprehensive income to conform to presentation of the current period. "Services and other" revenue has been renamed as "one-time services and other" and consists of revenue that did not meet the description of "recurring" revenue in the consolidated statements of comprehensive income. "Cost of services and other" has been renamed as "cost of one-time services and other" and consists of costs that did not meet the description of those related to "recurring" revenue in the consolidated statements of comprehensive income.
Adoption of New Revenue Accounting Standard
On
Conference Call Details
What: |
Blackbaud's 2018 Second Quarter Conference Call |
When: |
July 31, 2018 |
Time: |
8:00 a.m. (Eastern Time) |
Live Call: |
800-289-0462 (US/Canada); passcode 367579. |
Webcast: |
About
Investor Contact: |
Media Contact: |
||
Mark Furlong |
Nicole McGougan |
||
Director of Investor Relations |
Public Relations Manager |
||
843-654-2097 |
843-654-3307 |
||
Forward-Looking Statements
Except for historical information, all of the statements, expectations, and assumptions contained in this news release are forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding: the predictability of our financial results, expectations that our revenue will continue to grow, and expectations that we will achieve our projected 2018 full-year financial guidance. These statements involve a number of risks and uncertainties. Although
Trademarks
All
Non-GAAP Financial Measures
In addition,
Non-GAAP free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software development, and capital expenditures for property and equipment.
As previously disclosed, beginning in 2018,
Blackbaud, Inc. |
||||||
Consolidated balance sheets |
||||||
(Unaudited) |
||||||
(dollars in thousands) |
June 30,
2018 |
December 31,
2017 |
||||
Assets |
||||||
Current assets: |
||||||
Cash and cash equivalents |
$ |
29,194 |
$ |
29,830 |
||
Restricted cash due to customers |
295,463 |
610,344 |
||||
Accounts receivable, net of allowance of $5,501 and $5,141 at June 30, 2018 and |
130,509 |
95,679 |
||||
Customer funds receivable |
5,528 |
1,536 |
||||
Prepaid expenses and other current assets |
75,816 |
61,978 |
||||
Total current assets |
536,510 |
799,367 |
||||
Property and equipment, net |
44,531 |
42,243 |
||||
Software development costs, net |
62,023 |
54,098 |
||||
Goodwill |
547,312 |
530,249 |
||||
Intangible assets, net |
317,220 |
314,651 |
||||
Other assets |
64,089 |
57,238 |
||||
Total assets |
$ |
1,571,685 |
$ |
1,797,846 |
||
Liabilities and stockholders' equity |
||||||
Current liabilities: |
||||||
Trade accounts payable |
$ |
31,141 |
$ |
24,693 |
||
Accrued expenses and other current liabilities |
46,182 |
54,399 |
||||
Due to customers |
300,991 |
611,880 |
||||
Debt, current portion |
8,576 |
8,576 |
||||
Deferred revenue, current portion |
306,365 |
275,063 |
||||
Total current liabilities |
693,255 |
974,611 |
||||
Debt, net of current portion |
471,236 |
429,648 |
||||
Deferred tax liability |
48,055 |
48,023 |
||||
Deferred revenue, net of current portion |
3,442 |
3,643 |
||||
Other liabilities |
7,474 |
5,632 |
||||
Total liabilities |
1,223,462 |
1,461,557 |
||||
Commitments and contingencies |
||||||
Stockholders' equity: |
||||||
Preferred stock; 20,000,000 shares authorized, none outstanding |
— |
— |
||||
Common stock, $0.001 par value; 180,000,000 shares authorized, 59,301,209 |
59 |
59 |
||||
Additional paid-in capital |
375,949 |
351,042 |
||||
Treasury stock, at cost; 10,735,926 and 10,475,794 shares at June 30, 2018 and |
(264,383) |
(239,199) |
||||
Accumulated other comprehensive loss |
(1,011) |
(642) |
||||
Retained earnings |
237,609 |
225,029 |
||||
Total stockholders' equity |
348,223 |
336,289 |
||||
Total liabilities and stockholders' equity |
$ |
1,571,685 |
$ |
1,797,846 |
Blackbaud, Inc. |
|||||||||||||
Consolidated statements of comprehensive income |
|||||||||||||
(Unaudited) |
|||||||||||||
(dollars in thousands, except per share amounts) |
Three months ended
June 30, |
Six months ended
June 30, |
|||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||
Revenue |
|||||||||||||
Recurring |
$ |
192,749 |
$ |
166,389 |
$ |
373,595 |
$ |
326,436 |
|||||
One-time services and other |
20,923 |
25,200 |
44,261 |
50,225 |
|||||||||
Total revenue |
213,672 |
191,589 |
417,856 |
376,661 |
|||||||||
Cost of revenue |
|||||||||||||
Cost of recurring |
76,350 |
66,178 |
145,429 |
130,053 |
|||||||||
Cost of one-time services and other |
18,822 |
20,817 |
37,780 |
42,424 |
|||||||||
Total cost of revenue |
95,172 |
86,995 |
183,209 |
172,477 |
|||||||||
Gross profit |
118,500 |
104,594 |
234,647 |
204,184 |
|||||||||
Operating expenses |
|||||||||||||
Sales, marketing and customer success |
48,493 |
42,580 |
93,970 |
83,577 |
|||||||||
Research and development |
25,297 |
22,870 |
51,255 |
45,576 |
|||||||||
General and administrative |
28,447 |
21,882 |
53,498 |
43,805 |
|||||||||
Amortization |
1,201 |
739 |
2,470 |
1,430 |
|||||||||
Restructuring |
3,688 |
— |
4,499 |
— |
|||||||||
Total operating expenses |
107,126 |
88,071 |
205,692 |
174,388 |
|||||||||
Income from operations |
11,374 |
16,523 |
28,955 |
29,796 |
|||||||||
Interest expense |
(4,303) |
(3,216) |
(7,820) |
(5,593) |
|||||||||
Other income, net |
346 |
827 |
506 |
1,113 |
|||||||||
Income before provision for income taxes |
7,417 |
14,134 |
21,641 |
25,316 |
|||||||||
Income tax provision (benefit) |
825 |
3,105 |
(2,702) |
1,145 |
|||||||||
Net income |
$ |
6,592 |
$ |
11,029 |
$ |
24,343 |
$ |
24,171 |
|||||
Earnings per share |
|||||||||||||
Basic |
$ |
0.14 |
$ |
0.24 |
$ |
0.52 |
$ |
0.52 |
|||||
Diluted |
$ |
0.14 |
$ |
0.23 |
$ |
0.51 |
$ |
0.51 |
|||||
Common shares and equivalents outstanding |
|||||||||||||
Basic weighted average shares |
47,222,657 |
46,662,481 |
47,121,692 |
46,584,263 |
|||||||||
Diluted weighted average shares |
48,053,094 |
47,691,340 |
48,030,547 |
47,586,893 |
|||||||||
Dividends per share |
$ |
0.12 |
$ |
0.12 |
$ |
0.24 |
$ |
0.24 |
|||||
Other comprehensive (loss) income |
|||||||||||||
Foreign currency translation adjustment |
(8,817) |
(349) |
(2,380) |
(197) |
|||||||||
Unrealized gain (loss) on derivative instruments, net of tax |
765 |
(4) |
1,844 |
178 |
|||||||||
Total other comprehensive loss |
(8,052) |
(353) |
(536) |
(19) |
|||||||||
Comprehensive (loss) income |
$ |
(1,460) |
$ |
10,676 |
$ |
23,807 |
$ |
24,152 |
Blackbaud, Inc. |
||||||
Consolidated statements of cash flows |
||||||
(Unaudited) |
||||||
Six months ended |
||||||
(dollars in thousands) |
2018 |
2017 |
||||
Cash flows from operating activities |
||||||
Net income |
$ |
24,343 |
$ |
24,171 |
||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||
Depreciation and amortization |
39,847 |
36,481 |
||||
Provision for doubtful accounts and sales returns |
3,697 |
5,469 |
||||
Stock-based compensation expense |
24,953 |
20,129 |
||||
Deferred taxes |
1,121 |
(1,524) |
||||
Amortization of deferred financing costs and discount |
376 |
468 |
||||
Other non-cash adjustments |
(419) |
(540) |
||||
Changes in operating assets and liabilities, net of acquisition and disposal of |
||||||
Accounts receivable |
(38,092) |
(44,809) |
||||
Prepaid expenses and other assets |
(18,629) |
(3,262) |
||||
Trade accounts payable |
6,327 |
(3,951) |
||||
Accrued expenses and other liabilities |
(6,675) |
(8,467) |
||||
Deferred revenue |
29,545 |
30,386 |
||||
Net cash provided by operating activities |
66,394 |
54,551 |
||||
Cash flows from investing activities |
||||||
Purchase of property and equipment |
(9,575) |
(5,666) |
||||
Capitalized software development costs |
(16,359) |
(13,614) |
||||
Purchase of net assets of acquired companies, net of cash and restricted cash acquired |
(45,315) |
(49,729) |
||||
Purchase of derivative instruments |
— |
(516) |
||||
Net cash used in investing activities |
(71,249) |
(69,525) |
||||
Cash flows from financing activities |
||||||
Proceeds from issuance of debt |
173,500 |
575,700 |
||||
Payments on debt |
(132,150) |
(529,169) |
||||
Debt issuance costs |
— |
(3,085) |
||||
Employee taxes paid for withheld shares upon equity award settlement |
(25,184) |
(16,644) |
||||
Proceeds from exercise of stock options |
11 |
14 |
||||
Change in due to customers |
(309,189) |
(85,581) |
||||
Change in customer funds receivable |
(4,391) |
— |
||||
Dividend payments to stockholders |
(11,653) |
(11,530) |
||||
Net cash used in financing activities |
(309,056) |
(70,295) |
||||
Effect of exchange rate on cash, cash equivalents, and restricted cash |
(1,606) |
(196) |
||||
Net decrease in cash, cash equivalents, and restricted cash |
(315,517) |
(85,465) |
||||
Cash, cash equivalents, and restricted cash, beginning of period |
640,174 |
370,673 |
||||
Cash, cash equivalents, and restricted cash, end of period |
$ |
324,657 |
$ |
285,208 |
||
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown above in the consolidated statements of cash flows: |
||||||
(dollars in thousands) |
June 30, |
December 31, |
||||
Cash and cash equivalents |
$ |
29,194 |
$ |
29,830 |
||
Restricted cash due to customers |
295,463 |
610,344 |
||||
Total cash, cash equivalents and restricted cash in the statement of cash flows |
324,657 |
640,174 |
Blackbaud, Inc. |
|||||||||||||
Reconciliation of GAAP to non-GAAP financial measures |
|||||||||||||
(Unaudited) |
|||||||||||||
(dollars in thousands, except per share amounts) |
Three months ended
June 30, |
Six months ended
June 30, |
|||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||
GAAP Revenue |
$ |
213,672 |
$ |
191,589 |
$ |
417,856 |
$ |
376,661 |
|||||
Non-GAAP adjustments: |
|||||||||||||
Add: Acquisition-related deferred revenue write-down |
919 |
348 |
1,267 |
348 |
|||||||||
Non-GAAP revenue |
$ |
214,591 |
$ |
191,937 |
$ |
419,123 |
$ |
377,009 |
|||||
GAAP gross profit |
$ |
118,500 |
$ |
104,594 |
$ |
234,647 |
$ |
204,184 |
|||||
GAAP gross margin |
55.5 |
% |
54.6 |
% |
56.2 |
% |
54.2 |
% |
|||||
Non-GAAP adjustments: |
|||||||||||||
Add: Acquisition-related deferred revenue write-down |
919 |
348 |
1,267 |
348 |
|||||||||
Add: Stock-based compensation expense |
1,645 |
950 |
2,740 |
1,741 |
|||||||||
Add: Amortization of intangibles from business combinations |
10,677 |
10,072 |
21,063 |
19,927 |
|||||||||
Add: Employee severance |
12 |
21 |
587 |
973 |
|||||||||
Add: Acquisition-related integration costs |
25 |
— |
25 |
86 |
|||||||||
Subtotal |
13,278 |
11,391 |
25,682 |
23,075 |
|||||||||
Non-GAAP gross profit |
$ |
131,778 |
$ |
115,985 |
$ |
260,329 |
$ |
227,259 |
|||||
Non-GAAP gross margin |
61.4 |
% |
60.4 |
% |
62.1 |
% |
60.3 |
% |
|||||
GAAP income from operations |
$ |
11,374 |
$ |
16,523 |
$ |
28,955 |
$ |
29,796 |
|||||
GAAP operating margin |
5.3 |
% |
8.6 |
% |
6.9 |
% |
7.9 |
% |
|||||
Non-GAAP adjustments: |
|||||||||||||
Add: Acquisition-related deferred revenue write-down |
919 |
348 |
1,267 |
348 |
|||||||||
Add: Stock-based compensation expense |
13,861 |
10,835 |
24,953 |
20,129 |
|||||||||
Add: Amortization of intangibles from business combinations |
11,878 |
10,811 |
23,533 |
21,357 |
|||||||||
Add: Employee severance |
100 |
120 |
1,031 |
2,866 |
|||||||||
Add: Acquisition-related integration costs |
2,194 |
— |
2,627 |
230 |
|||||||||
Add: Acquisition-related expenses |
1,211 |
1,762 |
1,605 |
2,332 |
|||||||||
Add: Restructuring costs |
3,688 |
— |
4,499 |
— |
|||||||||
Subtotal |
33,851 |
23,876 |
59,515 |
47,262 |
|||||||||
Non-GAAP income from operations |
$ |
45,225 |
$ |
40,399 |
$ |
88,470 |
$ |
77,058 |
|||||
Non-GAAP operating margin |
21.1 |
% |
21.0 |
% |
21.1 |
% |
20.4 |
% |
|||||
GAAP income before provision for income taxes |
$ |
7,417 |
$ |
14,134 |
$ |
21,641 |
$ |
25,316 |
|||||
GAAP net income |
$ |
6,592 |
$ |
11,029 |
$ |
24,343 |
$ |
24,171 |
|||||
Shares used in computing GAAP diluted earnings per share |
48,053,094 |
47,691,340 |
48,030,547 |
47,586,893 |
|||||||||
GAAP diluted earnings per share |
$ |
0.14 |
$ |
0.23 |
$ |
0.51 |
$ |
0.51 |
|||||
Non-GAAP adjustments: |
|||||||||||||
Add: GAAP income tax provision (benefit) |
825 |
3,105 |
(2,702) |
1,145 |
|||||||||
Add: Total non-GAAP adjustments affecting income from |
33,851 |
23,876 |
59,515 |
47,262 |
|||||||||
Add (less): Loss (gain) on derivative instrument |
— |
(475) |
— |
(475) |
|||||||||
Add: Loss on debt extinguishment |
— |
162 |
— |
162 |
|||||||||
Non-GAAP income before provision for income taxes |
41,268 |
37,697 |
81,156 |
72,265 |
|||||||||
Assumed non-GAAP income tax provision(1) |
8,254 |
12,063 |
$ |
16,232 |
$ |
23,125 |
|||||||
Non-GAAP net income |
$ |
33,014 |
$ |
25,634 |
$ |
64,924 |
$ |
49,140 |
|||||
Shares used in computing non-GAAP diluted earnings per share |
48,053,094 |
47,691,340 |
48,030,547 |
47,586,893 |
|||||||||
Non-GAAP diluted earnings per share |
$ |
0.69 |
$ |
0.54 |
$ |
1.35 |
$ |
1.03 |
(1) |
Beginning in 2018, Blackbaud applies a non-GAAP effective tax rate of 20.0% when calculating non-GAAP net income and non-GAAP diluted earnings per share. The 2017 measures of non-GAAP net income and non-GAAP diluted earnings per share are calculated under Blackbaud's historical non-GAAP effective tax rate of 32.0%. |
Blackbaud, Inc. |
|||||||||||||
Reconciliation of GAAP to Non-GAAP financial measures (continued) |
|||||||||||||
(Unaudited) |
|||||||||||||
(dollars in thousands) |
Three months ended
June 30, |
Six months ended
June 30, |
|||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||
GAAP revenue |
$ |
213,672 |
$ |
191,589 |
$ |
417,856 |
$ |
376,661 |
|||||
GAAP revenue growth |
11.5 |
% |
10.9 |
% |
|||||||||
(Less) Add: Non-GAAP acquisition-related revenue (1) |
(769) |
11,603 |
(421) |
20,805 |
|||||||||
Total Non-GAAP adjustments |
(769) |
11,603 |
(421) |
20,805 |
|||||||||
Non-GAAP revenue (2) |
$ |
212,903 |
$ |
203,192 |
$ |
417,435 |
$ |
397,466 |
|||||
Non-GAAP organic revenue growth |
4.8 |
% |
5.0 |
% |
|||||||||
Non-GAAP revenue (2) |
$ |
212,903 |
$ |
203,192 |
$ |
417,435 |
$ |
397,466 |
|||||
Foreign currency impact on non-GAAP revenue (3) |
(1,890) |
— |
(3,983) |
— |
|||||||||
Non-GAAP revenue on constant currency basis (3) |
$ |
211,013 |
$ |
203,192 |
$ |
413,452 |
$ |
397,466 |
|||||
Non-GAAP organic revenue growth on constant |
3.8 |
% |
4.0 |
% |
|||||||||
GAAP recurring revenue |
$ |
192,749 |
$ |
166,389 |
$ |
373,595 |
$ |
326,436 |
|||||
GAAP recurring revenue growth |
15.8 |
% |
14.4 |
% |
|||||||||
(Less) Add: Non-GAAP acquisition-related revenue (1) |
(650) |
11,558 |
(347) |
20,567 |
|||||||||
Total Non-GAAP adjustments |
(650) |
11,558 |
(347) |
20,567 |
|||||||||
Non-GAAP recurring revenue |
$ |
192,099 |
$ |
177,947 |
$ |
373,248 |
$ |
347,003 |
|||||
Non-GAAP organic recurring revenue growth |
8.0 |
% |
7.6 |
% |
(1) |
Non-GAAP acquisition-related revenue excludes incremental acquisition-related revenue calculated in accordance with GAAP that is attributable to |
(2) |
Non-GAAP revenue for the prior year periods presented herein may not agree to non-GAAP revenue presented in the respective prior period |
(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 in thousands) |
Six months ended
June 30, |
|||||
2018 |
2017 |
|||||
GAAP net cash provided by operating activities |
$ |
66,394 |
$ |
54,551 |
||
Less: purchase of property and equipment |
(9,575) |
(5,666) |
||||
Less: capitalized software development costs |
(16,359) |
(13,614) |
||||
Non-GAAP free cash flow |
$ |
40,460 |
$ |
35,271 |
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