Blackbaud, Inc. Announces Third Quarter 2013 Results

Blackbaud, Inc. (NASDAQ: BLKB), a leading global provider of software and services for nonprofits, today announced financial results for its third quarter ended September 30, 2013.

“Blackbaud’s third quarter results were highlighted by profitability that exceeded the high end of our guidance,” stated Tony Boor, Interim Chief Executive Officer and Chief Financial Officer of Blackbaud. “Each of our business units delivered a solid performance in the third quarter, and we continue to see nonprofit organizations turning to Blackbaud and our broad suite of leading product offerings to help drive their fundraising initiatives.”

Boor added, “We continue to make progress improving the operational efficiency of the company, and we believe there are still many gains to be captured as we look ahead. At the same time, we are beginning to increase investments in our product portfolio and go-to-market organization to ensure we are properly positioned to benefit from exciting shifts in the market, including SaaS, online fundraising and mobile. We believe this is the right strategy to generate increased revenue growth and optimize shareholder value from a long-term perspective.”

Third Quarter 2013 GAAP Financial Results

Blackbaud reported total revenue of $127.9 million for the third quarter of 2013, an increase of 4% compared to $122.5 million for the third quarter of 2012. GAAP income from operations and net income were $18.0 million and $9.4 million, respectively, compared to $6.2 million and $2.8 million, respectively, for the third quarter of 2012. Diluted earnings per share were $0.21 for the third quarter of 2013, compared to $0.06 in the same period last year.

Third Quarter 2013 Non-GAAP Financial Results

Total non-GAAP revenue was $128.0 million for the third quarter of 2013. Non-GAAP revenue excludes the impact of a $0.1 million write-down of deferred revenue associated with the acquisition of Convio. Non-GAAP income from operations, which also excludes stock-based compensation expense, amortization of intangibles arising from business combinations, integration and restructuring costs, CEO severance costs and employee severance costs, was $28.9 million for the third quarter of 2013, up from $20.7 million in the same period last year and above the high-end of the company’s guidance. Non-GAAP net income was $16.7 million for the third quarter of 2013, up from $11.7 million in the same period last year. Non-GAAP diluted earnings per share were $0.37 for the third quarter of 2013, up from $0.26 in the same period last year and also above the high-end of the company’s guidance.

A reconciliation between GAAP and 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.”

Balance Sheet and Cash Flow

The company ended the third quarter with $16.7 million in cash, compared to $7.3 million on June 30, 2013. The company generated $40.5 million in cash flow from operations during the third quarter, returned $5.5 million to stockholders by way of dividend, invested $4.1 million in capital expenditures and capitalized software and reduced its debt balance by $21.8 million.

Dividend

Blackbaud announced today that its Board of Directors has approved a fourth quarter 2013 dividend of $0.12 per share payable on December 13, 2013 to stockholders of record on November 27, 2013.

Conference Call Details

Blackbaud will host a conference call today, October 30, 2013, at 8:00 a.m. (Eastern Time) to discuss the company's financial results, operations and related matters. To access this call, dial 877-407-3982 (domestic) or 201-493-6780 (international). A replay of this conference call will be available through November 6, 2013, at 877-870-5176 (domestic) or 858-384-5517 (international). The replay passcode is 10000322. A live webcast of this conference call will be available on the "Investor Relations" page of the company's website at www.blackbaud.com/investorrelations and a replay will be archived on the website as well.

About Blackbaud

Serving the nonprofit and education sectors for 30 years, Blackbaud (NASDAQ: BLKB) combines technology and expertise to help organizations achieve their missions. Blackbaud works with more than 29,000 customers in over 60 countries that support higher education, healthcare, human services, arts and culture, faith, the environment, independent K-12 education, animal welfare and other charitable causes. The company offers a full spectrum of cloud-based and on-premise software solutions and related services for organizations of all sizes including: fundraising, eMarketing, advocacy, constituent relationship management (CRM), financial management, payment services, analytics and vertical-specific solutions. Using Blackbaud technology, these organizations raise more than $100 billion each year. Recognized as a top company by Forbes, InformationWeek, and Software Magazine and honored by Best Places to Work, Blackbaud is headquartered in Charleston, South Carolina and has operations in the United States, Australia, Canada, the Netherlands and the United Kingdom. For more information, visit  www.blackbaud.com.

Forward-looking Statements

This news release contains forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding: increasing adoption of our solutions by nonprofit organizations, reflecting benefits from our integrated product strategy; improvements in operational efficiency and the pace of such improvements; our plans to invest in products and go-to-market organizations to drive growth and shareholder value; and our fourth quarter dividend payment. 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 and other risks associated with acquisitions; the ability to attract and retain key personnel; general economic risks; uncertainty regarding increased business and renewals from existing customers; continued success in sales growth; risks associated with successful implementation of multiple integrated software products; risks related to our dividend policy and stock 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; lengthy sales and implementation cycles, particularly in larger organizations; 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 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. 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 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 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 from period to period with other companies in Blackbaud's industry, many of which present similar non-GAAP financial measures to investors. Non-GAAP financial results discussed above exclude items such as a write-down of Convio deferred revenue, stock-based compensation expense, costs associated with amortization of intangibles arising from business combinations, integration and restructuring costs, CEO severance costs and employee severance costs, because they are not directly related to our performance in any particular period, but are for our long-term benefit over multiple periods.

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)
         
September 30, December 31,
(in thousands, except share amounts)         2013   2012
 
Assets
Current assets:
Cash and cash equivalents $ 16,679 $ 13,491
Donor restricted cash 41,758 68,177
Accounts receivable, net of allowance of $6,809 and $8,546
at September 30, 2013 and December 31, 2012, respectively 71,309 75,692
Prepaid expenses and other current assets 30,286 40,589
Deferred tax asset, current portion   8,732       15,799  
Total current assets 168,764 213,748
Property and equipment, net 48,413 49,063
Goodwill 264,639 265,055
Intangible assets, net 149,698 168,037
Other assets   18,435       9,844  
 
Total assets $ 649,949     $ 705,747  
 
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 8,449 $ 13,623
Accrued expenses and other current liabilities 39,551 45,996
Donations payable 41,758 68,177
Debt, current portion 12,500 10,000
Deferred revenue, current portion   185,406       173,899  
Total current liabilities 287,664 311,695
Debt, net of current portion 161,200 205,500
Deferred tax liability 29,944 24,468
Deferred revenue, net of current portion 8,619 11,119
Other liabilities   5,850       5,281  
 
Total liabilities   493,277       558,063  
 
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, 55,222,085 and 54,859,604 shares issued
at September 30, 2013 and December 31, 2012, respectively 55 55
Additional paid-in capital 216,827 203,638
Treasury stock, at cost; 9,425,277 and 9,209,371 shares
at September 30, 2013 and December 31, 2012, respectively (178,001 ) (170,898 )
Accumulated other comprehensive loss (1,409 ) (1,973 )
Retained earnings   119,200       116,862  
 
Total stockholders' equity   156,672       147,684  
 
Total liabilities and stockholders' equity $ 649,949     $ 705,747  
 
 
Blackbaud, Inc.
Consolidated statements of comprehensive income
(Unaudited)
             
Three months ended September 30, Nine months ended September 30,
(in thousands, except share and per share amounts)         2013   2012   2013   2012
Revenue
License fees $ 3,831 $ 4,465 $ 12,801 $ 16,154
Subscriptions 52,034 47,414 151,754 113,399
Services 35,411 34,463 95,617 90,211
Maintenance 34,722 34,499 102,992 101,945
Other revenue   1,856       1,631     5,781       5,659  
Total revenue   127,854       122,472     368,945       327,368  
Cost of revenue
Cost of license fees 492 728 1,860 2,162
Cost of subscriptions 21,482 19,616 63,470 49,151
Cost of services 26,121 26,438 78,023 71,779
Cost of maintenance 6,653 6,789 19,088 18,944
Cost of other revenue   1,366       1,557     3,864       4,672  
Total cost of revenue   56,114       55,128     166,305       146,708  
Gross profit   71,740       67,344     202,640       180,660  
Operating expenses
Sales and marketing 23,833 26,279 72,648 70,879
Research and development 16,547 19,205 49,459 47,365
General and administrative 12,628 14,985 38,219 51,239
Restructuring 110 - 3,466 -
Amortization 614 690 1,928 1,417
Impairment of cost method investment   -       -     -       200  
Total operating expenses   53,732       61,159     165,720       171,100  
Income from operations 18,008 6,185 36,920 9,560
Interest income 16 38 53 118
Interest expense (1,394 ) (1,976 ) (4,585 ) (3,629 )
Other (expense) income, net   (140 )     382     (346 )     (66 )
Income before provision for income taxes 16,490 4,629 32,042 5,983
Income tax provision   7,097       1,804     13,360       2,670  
Net income $ 9,393     $ 2,825   $ 18,682     $ 3,313  
 
Earnings per share
Basic $ 0.21     $ 0.06   $ 0.42     $ 0.08  
Diluted $ 0.21     $ 0.06   $ 0.41     $ 0.07  
 
Common shares and equivalents outstanding
Basic weighted average shares   44,735,425       44,172,836     44,583,623       44,077,911  
Diluted weighted average shares   45,569,275       44,718,101     45,332,617       44,650,028  
 
Dividends per share $ 0.12     $ 0.12   $ 0.36     $ 0.36  
 
 
Other comprehensive (loss) income
Foreign currency translation adjustment 94 (123 ) 113 (12 )
Unrealized (loss) gain on derivative instruments, net of tax   (97 )     (319 )   451       (883 )
Total other comprehensive (loss) income   (3 )     (442 )   564       (895 )
Comprehensive income $ 9,390     $ 2,383   $ 19,246     $ 2,418  
 
 
Blackbaud, Inc.
Consolidated statements of cash flows
(Unaudited)
         
Nine months ended September 30,
(in thousands)         2013   2012
 
Cash flows from operating activities
Net income $ 18,682 $ 3,313
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 31,625 21,433
Provision for doubtful accounts and sales returns 1,072 4,212
Stock-based compensation expense 12,968 14,455
Excess tax benefits from stock-based compensation - (81 )
Deferred taxes 9,192 2,670
Impairment of cost method investment - 200
Other non-cash adjustments 1,390 444
Changes in operating assets and liabilities, net of acquisition of businesses:
Accounts receivable 3,203 (11,965 )
Prepaid expenses and other assets 10,092 (5,609 )
Trade accounts payable (1,466 ) (1,313 )
Accrued expenses and other liabilities (18,643 ) (3,618 )
Donor restricted cash 26,626 14,273
Donations payable (26,626 ) (14,273 )
Deferred revenue   9,855       15,528  
Net cash provided by operating activities   77,970       39,669  
Cash flows from investing activities
Purchase of property and equipment (13,407 ) (15,427 )
Purchase of net assets of acquired companies, net of cash acquired (876 ) (280,687 )
Capitalized software development costs   (2,371 )     (572 )
Net cash used in investing activities   (16,654 )     (296,686 )
Cash flows from financing activities
Proceeds from issuance of debt 63,100 315,000
Payments on debt (104,900 ) (70,000 )
Payments of deferred financing costs - (2,440 )
Proceeds from exercise of stock options 335 3,105
Excess tax benefits from stock-based compensation - 81
Dividend payments to stockholders   (16,458 )     (16,248 )
Net cash (used in) provided by financing activities   (57,923 )     229,498  
Effect of exchange rate on cash and cash equivalents   (205 )     581  
Net increase (decrease) in cash and cash equivalents 3,188 (26,938 )
Cash and cash equivalents, beginning of period   13,491       52,520  
Cash and cash equivalents, end of period $ 16,679     $ 25,582  
 
 
Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP financial measures
(Unaudited)
         
Three months ended September 30, Nine months ended September 30,
(in thousands, except per share amounts)         2013 2012   2013 2012
 
GAAP revenue $ 127,854 $ 122,472 $ 368,945 $ 327,368
Non-GAAP adjustments:
Add: Convio deferred revenue write-down   119     1,352     985     4,819  
Total Non-GAAP adjustments 119 1,352 985 4,819
Non-GAAP revenue $ 127,973   $ 123,824   $ 369,930   $ 332,187  
 
GAAP gross profit $ 71,740   $ 67,344   $ 202,640   $ 180,660  
GAAP gross margin   56 %   55 %   55 %   55 %
Non-GAAP adjustments:
Add: Convio deferred revenue write-down 119 1,352 985 4,819
Add: Stock-based compensation expense 908 1,263 3,016 2,946
Add: Amortization of intangibles from business combinations 5,508 4,866 16,598 10,212
Add: Acquisition integration costs 79 595 678 595
Add: Write-off of prepaid proprietary software licenses   -     -     -     350  
Total Non-GAAP adjustments 6,614 8,076 21,277 18,922
Non-GAAP gross profit $ 78,354   $ 75,420   $ 223,917   $ 199,582  
Non-GAAP gross margin   61 %   61 %   61 %   60 %
 
GAAP income from operations $ 18,008   $ 6,185   $ 36,920   $ 9,560  
GAAP operating margin   14 %   5 %   10 %   3 %
Non-GAAP adjustments:
Add: Convio deferred revenue write-down 119 1,352 985 4,819
Add: Stock-based compensation expense 3,072 4,831 12,968 14,455
Add: Amortization of intangibles from business combinations 6,122 5,556 18,526 11,629
Add: Acquisition integration costs 170 2,766 1,416 5,795
Add: Restructuring costs 109 - 3,466 -
Add: CEO severance 636 - 1,275 -
Add: Employee severance 625 - 625 -
Add: Acquisition-related expenses - - - 6,427
Add: Write-off of prepaid proprietary software licenses - - - 350
Add: Impairment of cost method investment   -     -     -     200  
Total Non-GAAP adjustments 10,853 14,505 39,261 43,675
Non-GAAP income from operations $ 28,861   $ 20,690   $ 76,181   $ 53,235  
Non-GAAP operating margin   23 %   17 %   21 %   16 %
 
GAAP net income $ 9,393   $ 2,825   $ 18,682   $ 3,313  
Non-GAAP adjustments:
Add: Total Non-GAAP adjustments affecting income from operations 10,853 14,505 39,261 43,675
Less: Tax impact related to Non-GAAP adjustments   (3,567 )   (5,659 )   (14,449 )   (16,697 )
Non-GAAP net income $ 16,679   $ 11,671   $ 43,494   $ 30,291  
 
Shares used in computing Non-GAAP diluted earnings per share   45,569     44,718     45,333     44,650  
Non-GAAP diluted earnings per share $ 0.37   $ 0.26   $ 0.96   $ 0.68  
 
Detail of Non-GAAP adjustments:
Stock-based compensation expense:
Cost of revenue
Cost of subscriptions $ 340 $ 308 $ 755 $ 734
Cost of services 468 854 1,905 1,911
Cost of maintenance   100     101     356     301  
Subtotal 908 1,263 3,016 2,946
Operating expenses
Sales and marketing 512 714 1,755 1,734
Research and development 762 980 2,977 2,478
General and administrative   890     1,874     5,220     7,297  
Subtotal   2,164     3,568     9,952     11,509  
Total stock-based compensation expense $ 3,072   $ 4,831   $ 12,968   $ 14,455  
 
Amortization of intangibles from business combinations
Cost of revenue
Cost of license fees $ 87 $ 119 $ 334 $ 366
Cost of subscriptions 4,657 4,044 13,968 7,732
Cost of services 631 571 1,897 1,450
Cost of maintenance 114 114 342 608
Cost of other revenue   19     18     57     56  
Subtotal 5,508 4,866 16,598 10,212
Operating expenses   614     690     1,928     1,417  
Total amortization of intangibles from business combinations $ 6,122   $ 5,556   $ 18,526   $ 11,629  

Copyright Business Wire 2010

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