Blackbaud, Inc. Announces Fourth Quarter And Full Year 2012 Results

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. 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.

Blackbaud, Inc.
Consolidated balance sheets
(Unaudited)
				December 31,					December 31,
(in thousands, except share amounts)				2012					2011
Assets
Current assets:
Cash and cash equivalents				$	13,491				$	52,520
Donor restricted cash					68,177					40,205
Accounts receivable, net of allowance of $8,546 and $3,913 at December 31, 2012 and 2011, respectively					75,692					62,656
Prepaid expenses and other current assets					40,589					31,016
Deferred tax asset, current portion					15,799					1,551
Total current assets					213,748					187,948
Property and equipment, net					49,063					34,397
Deferred tax asset					-					29,376
Goodwill					265,055					90,122
Intangible assets, net					168,037					44,660
Other assets					9,844					6,087
Total assets				$	705,747				$	392,590
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable				$	13,623				$	13,464
Accrued expenses and other current liabilities					45,996					32,707
Donations payable					68,177					40,205
Debt, current portion					10,000					-
Deferred revenue, current portion					173,899					153,665
Total current liabilities					311,695					240,041
Debt, net of current portion					205,500					-
Deferred tax liability					24,468					-
Deferred revenue, net of current portion					11,119					9,772
Other liabilities					5,281					2,775
Total liabilities					558,063					252,588
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, 54,859,604 and 53,959,532 shares issued at December 31, 2012 and 2011, respectively					55					54
Additional paid-in capital					203,638					175,401
Treasury stock, at cost; 9,209,371 and 9,019,824 shares at December 31, 2012 and 2011, respectively					(170,898	)				(166,226	)
Accumulated other comprehensive loss					(1,973	)				(1,148	)
Retained earnings					116,862					131,921
Total stockholders' equity					147,684					140,002
Total liabilities and stockholders' equity				$	705,747				$	392,590

Blackbaud, Inc.
Consolidated statements of comprehensive income
(Unaudited)
				Three months ended December 31,										Years ended December 31,
(in thousands, except share and per share amounts)				2012					2011					2012					2011
Revenue
License fees				$	4,397				$	4,875				$	20,551				$	19,475
Subscriptions					48,703					27,651					162,102					103,544
Services					29,415					25,865					119,626					108,781
Maintenance					34,156					33,263					136,101					130,604
Other revenue					3,380					3,391					9,039					8,464
Total revenue					120,051					95,045					447,419					370,868
Cost of revenue
Cost of license fees					831					735					2,993					3,345
Cost of subscriptions					19,622					12,276					68,773					42,536
Cost of services					25,429					19,896					97,208					79,086
Cost of maintenance					7,057					6,371					26,001					25,178
Cost of other revenue					2,813					2,796					7,485					7,049
Total cost of revenue					55,752					42,074					202,460					157,194
Gross profit					64,299					52,971					244,959					213,674
Operating expenses
Sales and marketing					24,339					18,280					95,218					75,361
Research and development					17,327					12,460					64,692					47,672
General and administrative					12,069					9,580					63,308					36,933
Impairment of cost method investment					-					1,800					200					1,800
Amortization					689					252					2,106					980
Total operating expenses					54,424					42,372					225,524					162,746
Income from operations					9,875					10,599					19,435					50,928
Interest income					28					50					146					183
Interest expense					(2,235	)				(57	)				(5,864	)				(200	)
Other income (expense), net					(326	)				168					(392	)				346
Income before provision for income taxes					7,342					10,760					13,325					51,257
Income tax provision					4,072					4,409					6,742					18,037
Net income				$	3,270				$	6,351				$	6,583				$	33,220
Earnings per share
Basic				$	0.07				$	0.15				$	0.15				$	0.76
Diluted				$	0.07				$	0.14				$	0.15				$	0.75
Common shares and equivalents outstanding
Basic weighted average shares					44,345,887					43,738,007					44,145,535					43,522,563
Diluted weighted average shares					44,757,841					44,337,711					44,691,845					44,149,054
Dividends per share				$	0.12				$	0.12				$	0.48				$	0.48
Other comprehensive income (loss)
Foreign currency translation adjustment					(22	)				(232	)				(34	)				(336	)
Unrealized gain (loss) on derivative instruments, net of tax					92					-					(791	)				-
Total other comprehensive income (loss)					70					(232	)				(825	)				(336	)
Comprehensive income				$	3,340				$	6,119				$	5,758				$	32,884

Blackbaud, Inc.
Consolidated statements of cash flows
(Unaudited)
				Years ended December 31,
(in thousands)				2012					2011
Cash flows from operating activities
Net income				$	6,583				$	33,220
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization					31,879					16,995
Provision for doubtful accounts and sales returns					9,591					5,646
Stock-based compensation expense					19,240					14,884
Excess tax benefits from stock-based compensation					(81	)				(932	)
Deferred taxes					7,585					13,533
Impairment of cost method investment					200					1,800
Gain on sale of assets					-					(549	)
Other non-cash adjustments					747					(878	)
Changes in operating assets and liabilities, net of acquisition of businesses:
Accounts receivable					(9,397	)				(8,692	)
Prepaid expenses and other assets					(8,817	)				(2,915	)
Trade accounts payable					(1,363	)				1,714
Accrued expenses and other liabilities					(388	)				(1,056	)
Donor restricted cash					(27,990	)				(22,862	)
Donations payable					27,990					22,862
Deferred revenue					12,912					12,757
Net cash provided by operating activities					68,691					85,527
Cash flows from investing activities
Purchase of property and equipment					(20,557	)				(18,215	)
Purchase of net assets of acquired companies, net of cash acquired					(280,687	)				(23,385	)
Capitalized software development costs					(1,245	)				(1,012	)
Proceeds from sale of assets					-					874
Net cash used in investing activities					(302,489	)				(41,738	)
Cash flows from financing activities
Proceeds from issuance of debt					315,000					-
Payments on debt					(99,500	)				-
Payments of deferred financing costs					(2,440	)				(767	)
Proceeds from exercise of stock options					3,146					2,041
Excess tax benefits from stock-based compensation					81					932
Dividend payments to stockholders					(21,731	)				(21,429	)
Payments on capital lease obligations					-					(40	)
Net cash provided by (used in) financing activities					194,556					(19,263	)
Effect of exchange rate on cash and cash equivalents					213					(10	)
Net increase (decrease) in cash and cash equivalents					(39,029	)				24,516
Cash and cash equivalents, beginning of year					52,520					28,004
Cash and cash equivalents, end of year				$	13,491				$	52,520

Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP financial measures
(Unaudited)
				Three months ended December 31,									Years ended December 31,
(in thousands, except per share amounts)				2012				2011					2012				2011
GAAP revenue				$	120,051			$	95,045				$	447,419			$	370,868
Non-GAAP adjustments:
Add back: Convio deferred revenue writedown					771				-					5,592				-
Total Non-GAAP adjustments					771				-					5,592				-
Non-GAAP revenue				$	120,822			$	95,045				$	453,011			$	370,868
GAAP gross profit				$	64,299			$	52,971				$	244,959			$	213,674
Non-GAAP adjustments:
Add: Convio deferred revenue writedown					771				-					5,592				-
Add: Stock-based compensation expense					1,238				903					4,184				3,278
Add: Amortization of intangibles from business combinations					5,032				1,725					15,243				6,598
Add: Acquisition integration costs					(8	)			-					589				-
Add: Write-off of prepaid proprietary software licenses					-				-					350				-
Total Non-GAAP adjustments					7,033				2,628					25,958				9,876
Non-GAAP gross profit				$	71,332			$	55,599				$	270,917			$	223,550
Non-GAAP gross margin					59	%			58	%				60	%			60	%
GAAP income from operations				$	9,875			$	10,599				$	19,435			$	50,928
Non-GAAP adjustments:
Add: Convio deferred revenue writedown					771				-					5,592				-
Add: Stock-based compensation expense					4,786				3,971					19,240				14,884
Add: Amortization of intangibles from business combinations					5,721				1,977					17,349				7,578
Add: Acquisition integration and restructuring costs					1,127				-					6,923				-
Add: Acquisition-related expenses					-				786					6,428				1,840
Add: Write-off of prepaid proprietary software licenses					-				-					350				-
Add: Impairment of cost method investment					-				1,800					200				1,800
Less: Gain on sale of assets					-				-					-				(549	)
Total Non-GAAP adjustments					12,405				8,534					56,082				25,553
Non-GAAP income from operations				$	22,280			$	19,133				$	75,517			$	76,481
Non-GAAP operating margin					18	%			20	%				17	%			21	%
GAAP net income				$	3,270			$	6,351				$	6,583			$	33,220
Non-GAAP adjustments:
Add: Total Non-GAAP adjustments affecting income from operations					12,405				8,534					56,082				25,553
Less: Tax impact related to Non-GAAP adjustments					(3,631	)			(3,117	)				(20,327	)			(11,919	)
Non-GAAP net income				$	12,044			$	11,768				$	42,338			$	46,854
Shares used in computing Non-GAAP diluted earnings per share					44,758				44,338					44,692				44,149
Non-GAAP diluted earnings per share				$	0.27			$	0.27				$	0.95			$	1.06
Detail of Non-GAAP adjustments:
Stock-based compensation expense:
Cost of revenue
Cost of subscriptions				$	126			$	164				$	860			$	571
Cost of services					875				571					2,786				1,966
Cost of maintenance					237				168					538				741
Subtotal					1,238				903					4,184				3,278
Operating expenses
Sales and marketing					794				391					2,527				1,325
Research and development					1,078				766					3,556				3,039
General and administrative					1,676				1,911					8,973				7,242
Subtotal					3,548				3,068					15,056				11,606
Total stock-based compensation expense				$	4,786			$	3,971				$	19,240			$	14,884
Amortization of intangibles from business combinations
Cost of revenue
Cost of license fees				$	120			$	156				$	485			$	635
Cost of subscriptions					4,237				901					11,969				3,341
Cost of services					542				400					1,992				1,572
Cost of maintenance					114				249					722				975
Cost of other revenue					19				19					75				75
Subtotal					5,032				1,725					15,243				6,598
Operating expenses					689				252					2,106				980
Total amortization of intangibles from business combinations				$	5,721			$	1,977				$	17,349			$	7,578

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