CHARLESTON, S.C., Aug. 01, 2016 (GLOBE NEWSWIRE) -- Blackbaud (NASDAQ:BLKB), the world's leading cloud software company powering social good, today announced financial results for its second quarter ended June 30, 2016.

"Execution against our strategic plan is driving strong and balanced revenue growth across our portfolio," said Mike Gianoni, Blackbaud's president and CEO. "Our next generation solutions are widening the gap between Blackbaud and the competition, positioning us well for future growth, and ultimately delivering greater value for our customers."

Second Quarter 2016 Results:
  • Total GAAP revenue was $180.2 million, up 15.3% from one year ago, with $141.5 million in GAAP recurring revenue, representing 78.5% of total revenue.
  • Total non-GAAP revenue was $182.0 million, up 14.7% from one year ago, with $143.3 million in non-GAAP recurring revenue, representing 78.7% of total non-GAAP revenue.
  • Non-GAAP organic revenue increased 9.4% and non-GAAP organic recurring revenue increased 11.5%.
  • GAAP income from operations decreased 1.8% to $14.2 million, with GAAP operating margin decreasing 140 basis points to 7.9%.
  • Non-GAAP income from operations increased 6.4% to $34.8 million, with non-GAAP operating margin decreasing 150 basis points to 19.1%.
  • GAAP net income increased 10.9% to $7.8 million, with GAAP diluted earnings per share up $0.02 to $0.17.
  • Non-GAAP net income increased 13.2% to $21.8 million, with non-GAAP diluted earnings per share up $0.05 to $0.46.
  • Cash flow from operations was $37.9 million, down from $43.3 million one year ago.

"We posted another strong quarter, and we're confident in our ability to achieve full year guidance which we've modified slightly for operating cash flow," said Tony Boor, Blackbaud's executive vice president and CFO. "Our current non-GAAP financial guidance accelerates organic revenue growth, improves profitability, and increases cash flow for the full year when compared to 2015."

Company Highlights:
  • Released SKY Reporting™ for Raisers Edge NXT™ customers by leveraging Blackbaud SKY™ capabilities
  • The acquisition of Attentive.ly accelerated Blackbaud's ability to integrate critical social media capabilities into its portfolio of solutions
  • Blackbaud opened a new Canadian office and training center in Toronto, Ontario
  • Released Blackbaud Success Assurance™ for Higher Education to bring a modern, end-to-end solution approach to higher education institutions
  • Named in Forbes' Annual Fast Tech 25 list as one of this year's fastest growing public tech companies, as well as Forbes' 2016 Most Innovative Growth Companies ranking

DividendBlackbaud announced today that its Board of Directors has declared a third quarter 2016 dividend of $0.12 per share payable on September 15, 2016 to stockholders of record on August 26, 2016.

Financial OutlookUpdated full year financial guidance.
  • Non-GAAP revenue of $725.0 million to $740.0 million
  • Non-GAAP income from operations of $141.0 million to $147.0 million
  • Non-GAAP operating margin of 19.4% to 19.9%
  • Non-GAAP diluted earnings per share of $1.90 to $1.98
  • Cash flow from operations of $135.0 million to $145.0 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 Fiscal 2016 Second Quarter Conference Call
When:   August 2, 2016
Time:   8:00 a.m. (Eastern Time)
Live Call:   1-888-461-2018 (domestic) or 1-719-457-2712 (international); passcode 132904.
Webcast:   Blackbaud's Investor Relations Webpage
     

About BlackbaudBlackbaud (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 management, digital marketing, advocacy, accounting, payments, analytics, school management, grant management, corporate 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, Ireland, and the United Kingdom. For more information, visit  www.blackbaud.com.

Forward-Looking StatementsExcept 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 2016 full year financial guidance. 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. All Blackbaud product names appearing herein are trademarks or registered trademarks of Blackbaud, Inc.

Non-GAAP Financial MeasuresBlackbaud 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 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.

Unaudited calculations of non-GAAP organic revenue growth, non-GAAP organic revenue growth on a constant currency basis and non-GAAP organic recurring revenue growth for the three and six months ended June 30, 2016, as well as unaudited reconciliations of those non-GAAP measures to their most directly comparable GAAP measures, are as follows:

       
(dollars in thousands) Three months ended  June 30,     Six months ended  June 30,  
2016   2015     2016   2015  
GAAP revenue $ 180,191   $ 156,259     $ 349,447   $ 303,252  
GAAP revenue growth 15.3 %     15.2 %  
Add: Non-GAAP acquisition-related revenue (1) 1,853   10,395     3,639   22,736  
Less: Revenue from divested businesses (2)   (191 )     (586 )
Total Non-GAAP adjustments 1,853   10,204     3,639   22,150  
Non-GAAP revenue (3) $ 182,044   $ 166,463     $ 353,086   $ 325,402  
Non-GAAP organic revenue growth 9.4 %     8.5 %  
           
Non-GAAP revenue (3) $ 182,044   $ 166,463     $ 353,086   $ 325,402  
Foreign currency impact on Non-GAAP revenue (4) 887       2,414    
Non-GAAP revenue on constant currency basis (4) $ 182,931   $ 166,463     $ 355,500   $ 325,402  
Non-GAAP organic revenue growth on constant currency basis 9.9 %     9.2 %  
           
GAAP subscriptions revenue $ 104,039   $ 80,009     $ 200,890   $ 152,522  
GAAP maintenance revenue $ 37,449   $ 38,627     74,609   77,523  
GAAP recurring revenue $ 141,488   $ 118,636     $ 275,499   $ 230,045  
GAAP recurring revenue growth 19.3 %     19.8 %  
Add: Non-GAAP acquisition-related revenue (1) 1,844   10,046     3,625   21,948  
Less: Revenue from divested businesses (2)   (133 )     (378 )
Total Non-GAAP adjustments 1,844   9,913     3,625   21,570  
Non-GAAP recurring revenue $ 143,332   $ 128,549     $ 279,124   $ 251,615  
Non-GAAP organic recurring revenue growth 11.5 %     10.9 %  

(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) For businesses divested in the prior fiscal year, non-GAAP organic revenue growth excludes the prior period revenue associated with divested businesses. The exclusion of the prior period revenue is to present the results of the divested business within the results of the combined company for the same period of time in both the prior and current periods.(3) Non-GAAP revenue for the prior year periods presented herein will 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.(4) 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.

Additional details of Blackbaud's methodology for calculating non-GAAP organic revenue growth and non-GAAP organic revenue growth on a constant currency basis can be found on Blackbaud's investor relations page.

As previously disclosed, beginning in 2016, Blackbaud now applies a non-GAAP effective tax rate of 32.0% in its calculation of the tax impact on non-GAAP adjustments, which impacts the tax impact related to non-GAAP adjustments, non-GAAP net income and non-GAAP diluted earnings per share measures. The non-GAAP effective tax rate utilized will be reviewed annually to determine whether it remains appropriate in consideration of Blackbaud's financial results including its periodic effective tax rate calculated in accordance with GAAP, its operating environment and related tax legislation in effect and other factors deemed necessary. All 2015 measures of the tax impact related to non-GAAP adjustments, non-GAAP net income and non-GAAP diluted earnings per share included in this news release are calculated under Blackbaud's historical non-GAAP effective tax rate of 39.0%.

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) June 30,  2016   December 31,  2015  
Assets    
Current assets:    
Cash and cash equivalents $ 15,263   $ 15,362  
Restricted cash due to customers 195,034   255,038  
Accounts receivable, net of allowance of $4,386 and $4,943 at June 30, 2016 and December 31, 2015, respectively 107,749   80,046  
Prepaid expenses and other current assets 53,797   48,666  
Total current assets 371,843   399,112  
Property and equipment, net 54,144   52,651  
Software development costs, net 27,793   19,551  
Goodwill 436,012   436,449  
Intangible assets, net 273,445   294,672  
Other assets 21,847   20,901  
Total assets $ 1,185,084   $ 1,223,336  
Liabilities and stockholders' equity    
Current liabilities:    
Trade accounts payable $ 27,817   $ 19,208  
Accrued expenses and other current liabilities 44,739   57,461  
Due to customers 195,034   255,038  
Debt, current portion 4,375   4,375  
Deferred revenue, current portion 250,449   230,216  
Total current liabilities 522,414   566,298  
Debt, net of current portion 398,865   403,712  
Deferred tax liability 27,823   27,996  
Deferred revenue, net of current portion 6,212   7,119  
Other liabilities 8,102   7,623  
Total liabilities 963,416   1,012,748  
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, 57,543,656 and 56,873,817 shares issued at June 30, 2016 and December 31, 2015, respectively 58   57  
Additional paid-in capital 294,810   276,340  
Treasury stock, at cost; 10,048,472 and 9,903,071 shares at June 30, 2016 and December 31, 2015, respectively (207,898 ) (199,861 )
Accumulated other comprehensive loss (1,640 ) (825 )
Retained earnings 136,338   134,877  
Total stockholders' equity 221,668   210,588  
Total liabilities and stockholders' equity $ 1,185,084   $ 1,223,336  
             

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,  
2016   2015     2016   2015  
Revenue          
Subscriptions $ 104,039   $ 80,009     $ 200,890   $ 152,522  
Maintenance 37,449   38,627     74,609   77,523  
Services 35,419   33,667     67,833   64,973  
License fees and other 3,284   3,956     6,115   8,234  
Total revenue 180,191   156,259     349,447   303,252  
Cost of revenue          
Cost of subscriptions 52,142   39,400     101,814   75,578  
Cost of maintenance 5,685   6,969     11,008   14,471  
Cost of services 24,696   25,915     49,015   52,886  
Cost of license fees and other 1,020   1,146     1,622   2,307  
Total cost of revenue 83,543   73,430     163,459   145,242  
Gross profit 96,648   82,829     185,988   158,010  
Operating expenses          
Sales, marketing and customer success 39,308   29,723     74,922   58,285  
Research and development 22,578   20,166     45,357   41,442  
General and administrative 19,857   17,955     39,613   34,798  
Amortization 708   524     1,460   1,012  
Total operating expenses 82,451   68,368     161,352   135,537  
Income from operations 14,197   14,461     24,636   22,473  
Interest expense (2,721 ) (1,873 )   (5,396 ) (3,559 )
Other expense, net (65 ) (1,274 )   (170 ) (1,561 )
Income before provision for income taxes 11,411   11,314     19,070   17,353  
Income tax provision 3,598   4,272     6,262   6,026  
Net income $ 7,813   $ 7,042     $ 12,808   $ 11,327  
Earnings per share          
Basic $ 0.17   $ 0.15     $ 0.28   $ 0.25  
Diluted $ 0.17   $ 0.15     $ 0.27   $ 0.24  
Common shares and equivalents outstanding          
Basic weighted average shares   46,083,055     45,579,345       46,047,788     45,554,645  
Diluted weighted average shares   46,927,626     46,402,707       46,865,218     46,289,440  
Dividends per share $ 0.12   $ 0.12     $ 0.24   $ 0.24  
Other comprehensive (loss) income          
Foreign currency translation adjustment (431 ) (196 )   (28 ) (522 )
Unrealized (loss) gain on derivative instruments, net of tax (118 ) 97     (787 ) (372 )
Total other comprehensive loss (549 ) (99 )   (815 ) (894 )
Comprehensive income $ 7,264   $ 6,943     $ 11,993   $ 10,433  
                           

Blackbaud, Inc.
Consolidated statements of cash flows
(Unaudited)
   
  Six months ended  June 30,  
(dollars in thousands) 2016   2015  
Cash flows from operating activities    
Net income $ 12,808   $ 11,327  
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization 35,549   27,272  
Provision for doubtful accounts and sales returns 2,264   2,934  
Stock-based compensation expense 15,787   11,413  
Excess tax benefits from exercise and vesting of stock-based compensation (2,729 ) (954 )
Deferred taxes (129 ) (801 )
Loss on sale of business   1,976  
Amortization of deferred financing costs and discount 478   420  
Other non-cash adjustments (429 ) 289  
Changes in operating assets and liabilities, net of acquisition and disposal of businesses:    
Accounts receivable (30,097 ) (13,355 )
Prepaid expenses and other assets (6,011 ) (2,102 )
Trade accounts payable 8,857   5,235  
Accrued expenses and other liabilities (18,019 ) (9,882 )
Restricted cash due to customers 62,038   78,718  
Due to customers (62,038 ) (78,718 )
Deferred revenue 19,658   13,792  
Net cash provided by operating activities 37,987   47,564  
Cash flows from investing activities    
Purchase of property and equipment (12,569 ) (7,014 )
Capitalized software development costs (12,168 ) (6,982 )
Purchase of net assets of acquired companies, net of cash 530    
Net cash used in sale of business   (521 )
Net cash used in investing activities (24,207 ) (14,517 )
Cash flows from financing activities    
Proceeds from issuance of debt 120,900   70,100  
Payments on debt (126,088 ) (93,388 )
Proceeds from exercise of stock options 5   18  
Excess tax benefits from exercise and vesting of stock-based compensation 2,729   954  
Dividend payments to stockholders (11,398 ) (11,255 )
Net cash used in financing activities (13,852 ) (33,571 )
Effect of exchange rate on cash and cash equivalents (27 ) (984 )
Net decrease in cash and cash equivalents (99 ) (1,508 )
Cash and cash equivalents, beginning of period 15,362   14,735  
Cash and cash equivalents, end of period $ 15,263   $ 13,227  
             

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,  
2016   2015     2016   2015  
GAAP Revenue $ 180,191   $ 156,259     $ 349,447   $ 303,252  
Non-GAAP adjustments:          
Add: Acquisition-related deferred revenue write-down 1,853   2,484     3,639   6,006  
Non-GAAP revenue $ 182,044   $ 158,743     $ 353,086   $ 309,258  
           
GAAP gross profit $ 96,648   $ 82,829     $ 185,988   $ 158,010  
GAAP gross margin 53.6 % 53.0 %   53.2 % 52.1 %
Non-GAAP adjustments:          
Add: Acquisition-related deferred revenue write-down 1,853   2,484     3,639   6,006  
Add: Stock-based compensation expense 773   1,049     1,645   1,950  
Add: Amortization of intangibles from business combinations 9,927   7,567     19,808   15,206  
Add: Employee severance 78   343     142   939  
Subtotal 12,631   11,443     25,234   24,101  
Non-GAAP gross profit $ 109,279   $ 94,272     $ 211,222   $ 182,111  
Non-GAAP gross margin 60.0 % 59.4 %   59.8 % 58.9 %
           
GAAP income from operations $ 14,197   $ 14,461     $ 24,636   $ 22,473  
GAAP operating margin 7.9 % 9.3 %   7.0 % 7.4 %
Non-GAAP adjustments:          
Add: Acquisition-related deferred revenue write-down 1,853   2,484     3,639   6,006  
Add: Stock-based compensation expense 7,871   6,311     15,787   11,413  
Add: Amortization of intangibles from business combinations 10,635   8,091     21,268   16,218  
Add: Employee severance 113   443     401   1,582  
Add: Acquisition-related integration costs 119   187     502   671  
Add: Acquisition-related expenses   715     113   788  
Subtotal 20,591   18,231     41,710   36,678  
Non-GAAP income from operations $ 34,788   $ 32,692     $ 66,346   $ 59,151  
Non-GAAP operating margin 19.1 % 20.6 %   18.8 % 19.1 %
           
GAAP net income $ 7,813   $ 7,042     $ 12,808   $ 11,327  
           
Shares used in computing GAAP diluted earnings per share   46,927,626     46,402,707       46,865,218     46,289,440  
GAAP diluted earnings per share $ 0.17   $ 0.15     $ 0.27   $ 0.24  
           
Non-GAAP adjustments:          
Add: Total Non-GAAP adjustments affecting loss from operations 20,591   18,231     41,710   36,678  
Add: Loss on sale of business   1,976       1,976  
Less: Tax impact related to Non-GAAP adjustments (6,643 ) (8,019 )   (13,187 ) (15,816 )
Non-GAAP net income $ 21,761   $ 19,230     $ 41,331   $ 34,165  
           
Shares used in computing Non-GAAP diluted earnings per share   46,927,626     46,402,707       46,865,218     46,289,440  
Non-GAAP diluted earnings per share $ 0.46   $ 0.41     $ 0.88   $ 0.74  
                           

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,  
2016   2015     2016   2015  
Detail of certain Non-GAAP adjustments:          
Stock-based compensation expense:          
Included in cost of revenue:          
Cost of subscriptions $ 290   $ 325     $ 571   $ 468  
Cost of maintenance 123   85     246   246  
Cost of services 360   639     828   1,236  
Total included in cost of revenue 773   1,049     1,645   1,950  
Included in operating expenses:          
Sales, marketing and customer success 921   804     1,822   1,506  
Research and development 1,559   1,186     3,094   2,164  
General and administrative 4,618   3,272     9,226   5,793  
Total included in operating expenses 7,098   5,262     14,142   9,463  
Total stock-based compensation expense $ 7,871   $ 6,311     $ 15,787   $ 11,413  
           
Amortization of intangibles from business combinations:          
Included in cost of revenue:          
Cost of subscriptions $ 7,853   $ 5,767     $ 15,664   $ 11,539  
Cost of maintenance 1,332   1,006     2,664   2,159  
Cost of services 657   702     1,310   1,309  
Cost of license fees and other 85   92     170   199  
Total included in cost of revenue 9,927   7,567     19,808   15,206  
Included in operating expenses 708   524     1,460   1,012  
Total amortization of intangibles from business combinations $ 10,635   $ 8,091     $ 21,268   $ 16,218  
                           

 
Investor Contact:Mark FurlongDirector of Investor Relations843-654-2097mark.furlong@blackbaud.comMedia Contact:Nicole McGouganBlackbaud Public Relations843-654-3307nicole.mcgougan@blackbaud.com

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