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Blackbaud Announces 2020 Second Quarter Results


CHARLESTON, S.C., July 29, 2020 /PRNewswire/ — Blackbaud (NASDAQ: BLKB), the world’s leading cloud software company powering social good, today announced financial results for its second quarter ended June 30, 2020.

“We continue to prioritize the well-being of our employees as we think about the future of work at Blackbaud and building on our strong, customer-centric culture,” said Mike Gianoni, Blackbaud’s president and CEO. “Our customers are once more proving the often under-appreciated resilience of our market and finding creative ways to ensure they deliver on their missions despite the challenges presented by the current environment. This pandemic will be a catalyst for the industry to move even faster towards modern, purpose-built cloud solutions, and we remain very well positioned as a leader in this market and the best long-term partner for social good organizations. While we continue to be optimistic over the long-term opportunity, the uncertainty of today’s environment is likely to put pressure on near-term revenue growth.”

Second Quarter 2020 Results Compared to Second Quarter 2019 Results:

  • Total GAAP revenue was $232.0 million, up 2.8%, with $216.3 million in GAAP recurring revenue, representing 93.2% of total GAAP revenue. GAAP recurring revenue was up 3.7%.
  • Total non-GAAP revenue was $232.0 million, up 2.5%, with $216.3 million in non-GAAP recurring revenue, representing 93.2% of total non-GAAP revenue. Non-GAAP recurring revenue was up 3.4%.
  • Non-GAAP organic recurring revenue increased 3.4%.
  • GAAP income from operations was $19.6 million, with GAAP operating margin of 8.4%, an increase of 240 basis points.
  • Non-GAAP income from operations was $54.5 million, with non-GAAP operating margin of 23.5%, an increase of 430 basis points.
  • GAAP net income was $11.8 million, with GAAP diluted earnings per share of $0.24, up $0.09 per share.
  • Non-GAAP net income was $41.0 million, with non-GAAP diluted earnings per share of $0.85, up $0.19 per share.
  • Non-GAAP free cash flow was $48.2 million, an increase of $10.2 million.

“We executed very well in the second quarter while remaining critically focused on the success of our customers and the health and economic stability of our employees,” said Tony Boor, executive vice president and CFO. “The second quarter results clearly show the stability in our customer base, durability of the market we serve, as well as our ability to drive increased profitability and cash flow. The early actions taken to bolster our liquidity and increase related borrowing capacity generated a significant cost reduction for the quarter and are planned through the remainder of the year, with some of these temporary actions expected to reverse heading into 2021.”

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 

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

Conference Call Details
What:        Blackbaud’s 2020 Second Quarter Conference Call
When:       July 30, 2020
Time:         8:00 a.m. (Eastern Time)
Live Call:   877-407-3088 (US/Canada)
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, higher education institutions, K–12 schools, healthcare organizations, faith communities, arts and cultural organizations, foundations, companies 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, Instagram and Facebook.

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 condition and results of operations. 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; the security of our data and that of our customers; uncertainty regarding the COVID-19 disruption; 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 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.

Blackbaud, Inc.
Consolidated Balance Sheets
(Unaudited)



(dollars in thousands)

June 30,
 2020


December 31,
 2019


Assets



Current assets:



Cash and cash equivalents

$

30,531


$

31,810


Restricted cash due to customers

421,915


545,485


Accounts receivable, net of allowance of $9,025 and $5,529 at June 30, 2020 and December 31, 2019, respectively

129,675


88,868


Customer funds receivable

1,284


524


Prepaid expenses and other current assets

83,699


67,852


Total current assets

667,104


734,539


Property and equipment, net

36,539


35,546


Operating lease right-of-use assets

95,575


104,400


Software development costs, net

106,044


101,302


Goodwill

630,687


634,088


Intangible assets, net

292,187


317,895


Other assets

68,673


65,193


Total assets

$

1,896,809


$

1,992,963


Liabilities and stockholders’ equity



Current liabilities:



Trade accounts payable

$

41,029


$

47,676


Accrued expenses and other current liabilities

52,893


73,317


Due to customers

423,199


546,009


Debt, current portion

9,194


7,500


Deferred revenue, current portion

332,570


314,335


Total current liabilities

858,885


988,837


Debt, net of current portion

478,919


459,600


Deferred tax liability

45,108


44,594


Deferred revenue, net of current portion

4,626


1,802


Operating lease liabilities, net of current portion

86,586


95,624


Other liabilities

11,883


5,742


Total liabilities

1,486,007


1,596,199


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, 60,901,100 and 60,206,091 shares issued at June 30, 2020 and December 31, 2019, respectively

61


60


Additional paid-in capital

491,450


457,804


Treasury stock, at cost; 11,332,912 and 11,066,354 shares at June 30, 2020 and December 31, 2019, respectively

(311,661)


(290,665)


Accumulated other comprehensive loss

(14,476)


(5,290)


Retained earnings

245,428


234,855


Total stockholders’ equity

410,802


396,764


Total liabilities and stockholders’ equity

$

1,896,809


$

1,992,963


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,


2020

2019



2020


2019


Revenue






Recurring

$

216,260


$

208,468



$

421,127


$

406,562


One-time services and other

15,731


17,166



34,485


34,902


Total revenue

231,991


225,634



455,612


441,464


Cost of revenue






Cost of recurring

91,370


86,657



180,921


171,368


Cost of one-time services and other

13,569


14,150



28,883


28,722


Total cost of revenue

104,939


100,807



209,804


200,090


Gross profit

127,052


124,827



245,808


241,374


Operating expenses






Sales, marketing and customer success

51,954


55,009



110,689


110,464


Research and development

24,895


25,902



49,872


54,363


General and administrative

29,842


28,543



55,697


55,660


Amortization

729


1,152



1,470


2,528


Restructuring

50


730



74


2,683


Total operating expenses

107,470


111,336



217,802


225,698


Income from operations

19,582


13,491



28,006


15,676


Interest expense

(3,893)


(5,799)



(8,052)


(11,122)


Other income, net

630


2,181



1,700


2,363


Income before provision for income taxes

16,319


9,873



21,654


6,917


Income tax provision

4,496


2,733



5,192


899


Net income

$

11,823


$

7,140



$

16,462


$

6,018


Earnings per share






Basic

$

0.25


$

0.15



$

0.34


$

0.13


Diluted

$

0.24


$

0.15



$

0.34


$

0.13


Common shares and equivalents outstanding






Basic weighted average shares

48,239,928


47,714,621



48,138,125


47,622,740


Diluted weighted average shares

48,418,378


48,160,684



48,465,077


48,101,212


Other comprehensive loss






Foreign currency translation adjustment

(887)


(6,018)



(6,615)


(1,428)


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

551


(1,939)



(2,571)


(2,871)


Total other comprehensive loss

(336)


(7,957)



(9,186)


(4,299)


Comprehensive income (loss)

$

11,487


$

(817)



$

7,276


$

1,719


Blackbaud, Inc.
Consolidated Statements of Cash Flows
(Unaudited)




Six months ended
 June 30,


(dollars in thousands)

2020


2019


Cash flows from operating activities



Net income

$

16,462


$

6,018


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



Depreciation and amortization

46,088


43,113


Provision for credit losses and sales returns

6,677


4,646


Stock-based compensation expense

33,713


28,755


Deferred taxes

1,945


465


Amortization of deferred financing costs and discount

376


376


Other non-cash adjustments

477


1,982


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



Accounts receivable

(48,167)


(45,071)


Prepaid expenses and other assets

(7,068)


(12,725)


Trade accounts payable

(8,984)


216


Accrued expenses and other liabilities

(26,520)


(9,014)


Deferred revenue

22,489


26,328


Net cash provided by operating activities

37,488


45,089


Cash flows from investing activities



Purchase of property and equipment

(5,887)


(6,375)


Capitalized software development costs

(21,679)


(23,206)


Purchase of net assets of acquired companies, net of cash and restricted cash acquired


(109,386)


Other investing activities


500


Net cash used in investing activities

(27,566)


(138,467)


Cash flows from financing activities



Proceeds from issuance of debt

202,100


329,100


Payments on debt

(185,250)


(155,150)


Employee taxes paid for withheld shares upon equity award settlement

(20,996)


(19,760)


Proceeds from exercise of stock options

4


6


Change in due to customers

(121,612)


(107,808)


Change in customer funds receivable

(828)


(3,741)


Dividend payments to stockholders

(5,960)


(11,802)


Net cash (used in) provided by financing activities

(132,542)


30,845


Effect of exchange rate on cash, cash equivalents and restricted cash

(2,229)


(526)


Net decrease in cash, cash equivalents and restricted cash

(124,849)


(63,059)


Cash, cash equivalents and restricted cash, beginning of period

577,295


449,846


Cash, cash equivalents and restricted cash, end of period

$

452,446


$

386,787


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)

June 30,
 2020


December 31,
 2019


Cash and cash equivalents

$

30,531


$

31,810


Restricted cash due to customers

421,915


545,485


Total cash, cash equivalents and restricted cash in the statement of cash flows

$

452,446


$

577,295


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,


2020


2019



2020


2019


GAAP Revenue

$

231,991


$

225,634



$

455,612


$

441,464


Non-GAAP adjustments:






Add: Acquisition-related deferred revenue write-down


716




1,432


Non-GAAP revenue

$

231,991


$

226,350



$

455,612


$

442,896








GAAP gross profit

$

127,052


$

124,827



$

245,808


$

241,374


GAAP gross margin

54.8

%

55.3

%


54.0

%

54.7

%

Non-GAAP adjustments:






Add: Acquisition-related deferred revenue write-down


716




1,432


Add: Stock-based compensation expense

2,570


791



3,435


1,765


Add: Amortization of intangibles from business combinations

9,686


11,329



20,616


22,745


Add: Employee severance

781


(4)



813


1,115


Subtotal

13,037


12,832



24,864


27,057


Non-GAAP gross profit

$

140,089


$

137,659



$

270,672


$

268,431


Non-GAAP gross margin

60.4

%

60.8

%


59.4

%

60.6

%







GAAP income from operations

$

19,582


$

13,491



$

28,006


$

15,676


GAAP operating margin

8.4

%

6.0

%


6.1

%

3.6

%

Non-GAAP adjustments:






Add: Acquisition-related deferred revenue write-down


716




1,432


Add: Stock-based compensation expense

20,133


15,029



33,713


28,755


Add: Amortization of intangibles from business combinations

10,415


12,481



22,086


25,273


Add: Employee severance

4,264


191



4,361


3,612


Add: Acquisition-related integration costs

(71)


464



(103)


1,182


Add: Acquisition-related expenses

85


365



224


810


Add: Restructuring costs

50


730



74


2,683


Subtotal

34,876


29,976



60,355


63,747


Non-GAAP income from operations

$

54,458


$

43,467



$

88,361


$

79,423


Non-GAAP operating margin

23.5

%

19.2

%


19.4

%

17.9

%







GAAP income before provision for income taxes

$

16,319


$

9,873



$

21,654


$

6,917


GAAP net income

$

11,823


$

7,140



$

16,462


$

6,018








Shares used in computing GAAP diluted earnings per share

48,418,378


48,160,684



48,465,077


48,101,212


GAAP diluted earnings per share

$

0.24


$

0.15



$

0.34


$

0.13








Non-GAAP adjustments:






Add: GAAP income tax provision

4,496


2,733



5,192


899


Add: Total non-GAAP adjustments affecting income from operations

34,876


29,976



60,355


63,747


Non-GAAP income before provision for income taxes

51,195


39,849



82,009


70,664


Assumed non-GAAP income tax provision(1)

10,239


7,970



$

16,402


$

14,133


Non-GAAP net income

$

40,956


$

31,879



$

65,607


$

56,531








Shares used in computing non-GAAP diluted earnings per share

48,418,378


48,160,684



48,465,077


48,101,212


Non-GAAP diluted earnings per share

$

0.85


$

0.66



$

1.35


$

1.18


(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.


 

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,


2020


2019



2020


2019


GAAP revenue

$

231,991


$

225,634



$

455,612


$

441,464


GAAP revenue growth

2.8

%



3.2

%


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


716




1,432


Non-GAAP organic revenue(2)

$

231,991


$

226,350



$

455,612


$

442,896


Non-GAAP organic revenue growth

2.5

%



2.9

%








Non-GAAP organic revenue(2)

$

231,991


$

226,350



$

455,612


$

442,896


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

2,008




2,318



Non-GAAP organic revenue on constant currency basis(3)

$

233,999


$

226,350



$

457,930


$

442,896


Non-GAAP organic revenue growth on constant currency basis

3.4

%



3.4

%








GAAP recurring revenue

$

216,260


$

208,468



$

421,127


$

406,562


GAAP recurring revenue growth

3.7

%



3.6

%


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


716




1,432


Non-GAAP organic recurring revenue

$

216,260


$

209,184



$

421,127


$

407,994


Non-GAAP organic recurring revenue growth

3.4

%



3.2

%


(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 Australian Dollar, British Pound, Canadian Dollar and EURO.

(dollars in thousands)

Six months ended
 June 30,


2020


2019


GAAP net cash provided by operating activities

$

37,488


$

45,089


Less: purchase of property and equipment

(5,887)


(6,375)


Less: capitalized software development costs

(21,679)


(23,206)


Non-GAAP free cash flow

$

9,922


$

15,508


SOURCE Blackbaud

Related Links

http://www.blackbaud.com





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