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Blackbaud, Inc. Announces Second Quarter 2015 Results

CHARLESTON, S.C., July 29, 2015 (GLOBE NEWSWIRE) -- Blackbaud, Inc. (NASDAQ:BLKB), a leading global provider of software and services for the nonprofit, charitable giving and education communities, today announced financial results for its second quarter ended June 30, 2015.

Second Quarter 2015 Highlights

  • Total revenue growth of 12.1% to $156.3 million
  • Non-GAAP organic revenue growth of 5.6%; 7.2% in constant currency
  • Recurring revenue increased to 75.9% of total revenue
  • Total subscriptions revenue growth of 23.1% to $80.0 million

President and CEO, Mike Gianoni, commented, "We are very pleased with our revenue and profitability results for the quarter and year to date. Our subscription revenue is now more than half of company revenues and reflects our strategic transition to the cloud. Our recent announcement of the general availability of our newest cloud-based offering, Raiser's Edge NXT, illustrates our commitment to this strategy."

"We continued to focus on executing the key programs within our five growth strategies. Our organic revenue growth and improved operating margin reflects the results of our investments and actions," concluded Mr. Gianoni.

Second Quarter 2015 GAAP Financial Results

Blackbaud generated total revenue of $156.3 million in the second quarter of 2015, an increase of 12.1% compared to $139.4 million in the second quarter of 2014. Income from operations and net income were $14.5 million and $7.0 million, respectively, compared to $16.0 million and $9.3 million, respectively, in the second quarter of 2014. Diluted earnings per share was $0.15 in the second quarter of 2015, compared to $0.20 in the same period last year.

Total revenue, income from operations and net income were positively impacted in the second quarter from growth in subscriptions revenue and contributions from acquisitions completed in June and October of 2014. The positive impacts to income from operations and net income were offset by increased amortization of intangible assets arising from those acquisitions as well as increased stock-based compensation. The loss from the sale of a business during the second quarter of 2015 also negatively impacted net income.

Second Quarter 2015 Non-GAAP Financial Results

Blackbaud achieved non-GAAP revenue of $158.7 million and non-GAAP organic revenue growth of 5.6% in the second quarter of 2015. On a constant currency basis, non-GAAP organic revenue growth was 7.2% in the second quarter of 2015. Non-GAAP organic revenue growth includes $11.2 million of incremental non-GAAP revenue in the second quarter of 2014 associated with acquired companies, as if the companies were combined throughout the prior period. Non-GAAP organic revenue growth excludes $0.2 million of revenue in the second quarter of 2014 associated with a business divested of in the current fiscal year, in order 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.

Non-GAAP income from operations increased 21.1% to $32.7 million in the second quarter of 2015, compared to $27.0 million in the same period last year. Non-GAAP net income increased 21.6% to $19.2 million for the second quarter of 2015 compared to $15.8 million in the same period last year. Non-GAAP diluted earnings per share was $0.41 for the second quarter of 2015, up from $0.35 per diluted share in the same period last year. An explanation of these measures is included below under the heading "Non-GAAP Financial Measures."

Non-GAAP income from operations and non-GAAP net income were positively impacted in the second quarter by growth in subscriptions revenue and contributions from acquisitions completed in 2014.

Executive Vice President and CFO Tony Boor, commented, "We are continuing to see the real benefits of our investments, our product integration and our operational improvement initiatives. Our non-GAAP operating margin of 20.6% is a 120 basis point improvement over the same quarter last year. We continue to maintain a strong balance sheet and cash flow, which we believe positions the company well for continued investments to drive increased growth over the long-term."

Full-Year Financial Guidance Update

Blackbaud announced today that it is updating its 2015 full-year financial guidance:

  • Non-GAAP revenue of $635.0 million to $645.0 million;
  • Non-GAAP income from operations of $118.0 million to $122.0 million;
  • Non-GAAP operating margin of 18.6% to 18.9%;
  • Non-GAAP diluted earnings per share of $1.47 to $1.53; and
  • Cash flow from operations of $115.0 million to $125.0 million.

The updates were a result of the company's better than originally expected second quarter and year to date financial performance.

Balance Sheet and Cash Flow

The company ended the second quarter with $13.2 million of cash and cash equivalents, compared to $13.3 million on March 31, 2015. The company generated $43.3 million in cash flow from operations during the second quarter, reduced net borrowings by $28.2 million, returned $5.6 million to stockholders by way of dividend and had cash outlays of $8.3 million for capital expenditures and capitalized software.

Dividend

Blackbaud announced today that its Board of Directors has approved a third quarter 2015 dividend of $0.12 per share payable on September 15, 2015 to stockholders of record on August 28, 2015.

Conference Call Details

Blackbaud will host a conference call tomorrow, July 30, 2015, at 8:00 a.m. (Eastern Time) to discuss the company's financial results, operations and related matters. To access this call, dial 1-888-505-4389 (domestic) or 1-719-457-2663 (international) and enter passcode 191851. To access a replay of this conference call, which will be available through August 12, 2015, dial 1-888-203-1112 (domestic) or 1-719-457-0820 (international), and enter passcode 9095162. 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.

Investors and others should note that we announce material financial information to our investors using our website, www.blackbaud.com, SEC filings, press releases, public conference calls and webcasts. We use these channels as well as social media to communicate with our customers and the public about our company, our services and other issues. It is possible that the information we post on social media could be deemed material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the social media channels listed on the "Investor Relations" page of the company's website at www.blackbaud.com/investorrelations.

About Blackbaud

Serving the nonprofit, charitable giving and education communities for more than 30 years, Blackbaud (NASDAQ:BLKB) combines technology solutions and expertise to help organizations achieve their missions. Blackbaud works in over 60 countries to support more than 30,000 customers, including nonprofits, K12 private and higher education institutions, healthcare organizations, foundations and other charitable giving entities, and corporations. The company offers a full spectrum of cloud and on-premise solutions, and related services for organizations of all sizes, including nonprofit fundraising and relationship management, eMarketing, advocacy, accounting, payment and analytics, as well as grant management, corporate social responsibility, education and other solutions. Using Blackbaud technology, these organizations raise, invest, manage and award more than $100 billion each year. Recognized as a top company, 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 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: our projected 2015 full year financial results, expectations that our strategic product transitions will result in continued growth in subscriptions revenue; expectations for continuing to execute and benefit from our five growth and operational improvement strategies; and expectations that past investments will continue to yield revenue growth, operational efficiencies and improved operating margins. 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 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, non-GAAP diluted earnings per share, EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin. The company has acquired businesses whose net tangible assets include deferred revenue. In accordance with GAAP reporting requirements, the company 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 our 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 we believe 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 we believe are not directly related to our performance in any particular period, but are for our long-term benefit over multiple periods.

In addition, we discuss non-GAAP organic revenue growth and non-GAAP organic revenue growth on a constant currency basis, which we believe provide useful information for evaluating the periodic growth of our business on a consistent basis. 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, non-GAAP organic revenue growth reflects presentation of full year or stub period incremental non-GAAP revenue derived from such companies as if they were combined throughout the prior period, and it includes the current period 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, non-GAAP organic revenue growth excludes prior period revenue associated with divested businesses in the current fiscal year. 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. We believe this presentation provides a more comparable representation of our current business' organic revenue growth and revenue run-rate. To determine non-GAAP organic revenue growth on a constant currency basis for second quarter of 2015, revenues from entities reporting in foreign currencies were translated into U.S. dollars using the comparable prior year period's quarterly weighted average foreign currency exchange rates which resulted in $2.4 million of incremental non-GAAP revenue for the second quarter of 2015. Details of our methodology for calculating non-GAAP organic revenue growth and non-GAAP organic revenue growth on a constant currency basis can be found on the "Investor Relations" page of the company's website at www.blackbaud.com/investorrelations.

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 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. These non-GAAP financial measures are not completely comparable to similarly titled measures of other companies due to differences in the exact method of calculation between companies. In addition, 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. 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)
(in thousands, except share amounts) June 30,
2015
December 31,
2014
Assets
Current assets:
Cash and cash equivalents $13,227 $ 14,735
Donor restricted cash 61,055 140,709
Accounts receivable, net of allowance of $4,433 and $4,539 at June 30, 2015 and December 31, 2014, respectively 87,462 77,523
Prepaid expenses and other current assets 41,628 40,392
Deferred tax asset, current portion 11,967 14,423
Total current assets 215,339 287,782
Property and equipment, net 48,960 50,402
Goodwill 345,873 349,008
Intangible assets, net 212,596 229,307
Other assets 32,592 26,684
Total assets $ 855,360 $ 943,183
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 18,100 $ 11,436
Accrued expenses and other current liabilities 45,357 52,201
Donations payable 61,055 140,709
Debt, current portion 4,375 4,375
Deferred revenue, current portion 225,076 212,283
Total current liabilities 353,963 421,004
Debt, net of current portion 253,130 276,196
Deferred tax liability 37,469 43,639
Deferred revenue, net of current portion 8,796 8,991
Other liabilities 6,747 7,437
Total liabilities 660,105 757,267
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, 56,658,529 and 56,048,135 shares issued at June 30, 2015 and December 31, 2014, respectively 57 56
Additional paid-in capital 257,996 245,674
Treasury stock, at cost; 9,790,192 and 9,740,054 shares at June 30, 2015 and December 31, 2014, respectively (192,665) (190,440)
Accumulated other comprehensive loss (1,926) (1,032)
Retained earnings 131,793 131,658
Total stockholders' equity 195,255 185,916
Total liabilities and stockholders' equity $ 855,360 $ 943,183
Blackbaud, Inc.
Consolidated statements of comprehensive income
(Unaudited)
Three months ended
June 30,
Six months ended
June 30,
(in thousands, except share and per share amounts) 2015 2014 2015 2014
Revenue
Subscriptions $ 80,009 $ 64,985 $ 152,522 $ 123,253
Maintenance 38,627 36,527 77,523 72,179
Services 33,667 31,795 64,973 59,925
License fees and other 3,956 6,081 8,234 11,653
Total revenue 156,259 139,388 303,252 267,010
Cost of revenue
Cost of subscriptions 39,400 31,749 75,578 61,873
Cost of maintenance 6,969 5,983 14,471 11,397
Cost of services 25,915 25,540 52,886 51,803
Cost of license fees and other 1,146 1,424 2,307 2,953
Total cost of revenue 73,430 64,696 145,242 128,026
Gross profit 82,829 74,692 158,010 138,984
Operating expenses
Sales and marketing 29,723 26,433 58,285 51,549
Research and development 20,166 18,064 41,442 34,558
General and administrative 17,955 13,781 34,798 26,599
Amortization 524 418 1,012 1,005
Total operating expenses 68,368 58,696 135,537 113,711
Income from operations 14,461 15,996 22,473 25,273
Interest income 7 13 15 29
Interest expense (1,873) (1,328) (3,559) (2,787)
Loss on sale of business (1,976) (1,976)
Loss on debt extinguishment and termination of derivative instruments (996)
Other income (expense), net 695 225 400 (11)
Income before provision for income taxes 11,314 14,906 17,353 21,508
Income tax provision 4,272 5,626 6,026 8,414
Net income $ 7,042 $ 9,280 $ 11,327 $ 13,094
Earnings per share
Basic $ 0.15 $ 0.21 $ 0.25 $ 0.29
Diluted $ 0.15 $ 0.20 $ 0.24 $ 0.29
Common shares and equivalents outstanding
Basic weighted average shares 45,579,345 45,155,955 45,554,645 45,141,878
Diluted weighted average shares 46,402,707 45,660,910 46,289,440 45,607,106
Dividends per share $ 0.12 $ 0.12 $ 0.24 $ 0.24
Other comprehensive (loss) income
Foreign currency translation adjustment (196) (385) (522) 170
Unrealized gain (loss) on derivative instruments, net of tax 97 (394) (372) (82)
Total other comprehensive (loss) income (99) (779) (894) 88
Comprehensive income $ 6,943 $ 8,501 $ 10,433 $ 13,182
Blackbaud, Inc.
Consolidated statements of cash flows
(Unaudited)
Six months ended
June 30,
(in thousands) 2015 2014
Cash flows from operating activities
Net income $ 11,327 $ 13,094
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 27,272 21,194
Provision for doubtful accounts and sales returns 2,934 2,966
Stock-based compensation expense 11,413 8,044
Excess tax benefits from exercise and vesting of stock-based compensation (954) (2,067)
Deferred taxes (801) 1,757
Loss on sale of business 1,976
Impairment of capitalized software development costs 770
Loss on debt extinguishment and termination of derivative instruments 996
Amortization of deferred financing costs and discount 420 343
Other non-cash adjustments 289 1,488
Changes in operating assets and liabilities, net of acquisition of businesses:
Accounts receivable (13,355) (15,096)
Prepaid expenses and other assets (2,102) 2,941
Trade accounts payable 5,235 (1,333)
Accrued expenses and other liabilities (9,882) 4,419
Donor restricted cash 78,718 62,609
Donations payable (78,718) (62,609)
Deferred revenue 13,792 5,588
Net cash provided by operating activities 47,564 45,104
Cash flows from investing activities
Purchase of property and equipment (7,014) (5,423)
Capitalized software development costs (6,982) (3,831)
Purchase of net assets of acquired companies, net of cash acquired (32,762)
Net cash used in sale of business (521)
Net cash used in investing activities (14,517) (42,016)
Cash flows from financing activities
Proceeds from issuance of debt 70,100 201,000
Payments on debt (93,388) (180,002)
Debt issuance costs (2,484)
Proceeds from exercise of stock options 18 107
Excess tax benefits from from exercise and vesting of stock-based compensation 954 2,067
Dividend payments to stockholders (11,255) (11,081)
Net cash (used in) provided by financing activities (33,571) 9,607
Effect of exchange rate on cash and cash equivalents (984) 263
Net (decrease) increase in cash and cash equivalents (1,508) 12,958
Cash and cash equivalents, beginning of period 14,735 11,889
Cash and cash equivalents, end of period $ 13,227 $ 24,847
Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP financial measures
(Unaudited)
Three months ended
June 30,
Six months ended
June 30,
(in thousands, except per share amounts and percentages) 2015 2014 2015 2014
GAAP Revenue $ 156,259 $ 139,388 $ 303,252 $ 267,010
Non-GAAP adjustments:
Add: Acquisition-related deferred revenue write-down 2,484 6,006
Non-GAAP revenue $ 158,743 $ 139,388 $ 309,258 $ 267,010
GAAP gross profit $ 82,829 $ 74,692 $ 158,010 $ 138,984
GAAP gross margin 53.0% 53.6% 52.1% 52.1%
Non-GAAP adjustments:
Add: Acquisition-related deferred revenue write-down 2,484 6,006
Add: Stock-based compensation expense 1,049 953 1,950 1,829
Add: Amortization of intangibles from business combinations 7,567 5,330 15,206 10,767
Add: Employee severance 343 939
Subtotal 11,443 6,283 24,101 12,596
Non-GAAP gross profit $ 94,272 $ 80,975 $ 182,111 $ 151,580
Non-GAAP gross margin 59.4% 58.1% 58.9% 56.8%
GAAP income from operations $ 14,461 $ 15,996 $ 22,473 $ 25,273
GAAP operating margin 9.3% 11.5% 7.4% 9.5%
Non-GAAP adjustments:
Add: Acquisition-related deferred revenue write-down 2,484 6,006
Add: Stock-based compensation expense 6,311 4,330 11,413 8,044
Add: Amortization of intangibles from business combinations 8,091 5,748 16,218 11,772
Add: Employee severance 443 1,582
Add: Impairment of capitalized software development costs 770 770
Add: Acquisition-related integration costs 187 97 671 97
Add: Acquisition-related expenses 715 65 788 65
Add: CEO transition costs 870
Subtotal 18,231 11,010 36,678 21,618
Non-GAAP income from operations $ 32,692 $ 27,006 $ 59,151 $ 46,891
Non-GAAP operating margin 20.6% 19.4% 19.1% 17.6%
GAAP net income $ 7,042 $ 9,280 $ 11,327 $ 13,094
Shares used in computing GAAP diluted earnings per share 46,403 45,661 46,289 45,607
GAAP diluted earnings per share $ 0.15 $ 0.20 $ 0.24 $ 0.29
Non-GAAP adjustments:
Add: Total Non-GAAP adjustments affecting income from operations 18,231 11,010 36,678 21,618
Add: Loss on sale of business 1,976 1,976
Add: Loss on debt extinguishment and termination of derivative instruments 996
Less: Tax impact related to Non-GAAP adjustments (8,019) (4,480) (15,816) (8,793)
Non-GAAP net income $ 19,230 $ 15,810 $ 34,165 $ 26,915
Shares used in computing Non-GAAP diluted earnings per share 46,403 45,661 46,289 45,607
Non-GAAP diluted earnings per share $ 0.41 $ 0.35 $ 0.74 $ 0.59
Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP financial measures (continued)
(Unaudited)
Three months ended
June 30,
Six months ended
June 30,
(in thousands, except percentages) 2015 2014 2015 2014
GAAP net income $ 7,042 $ 9,280 $ 11,327 $ 13,094
Non-GAAP adjustments:
Add: Interest, net 1,866 1,315 3,544 2,758
Add: Income tax provision 4,272 5,626 6,026 8,414
Add: Depreciation 4,517 4,345 9,293 8,648
Add: Amortization of intangibles from business combinations 8,091 5,748 16,218 11,772
Add: Amortization of software development costs 986 427 1,761 774
Subtotal 19,732 17,461 36,842 32,366
EBITDA $ 26,774 $ 26,741 $ 48,169 $ 45,460
EBITDA Margin 16.9% 19.2% 15.6% 17.0%
Non-GAAP adjustments:
Add: Other (income) expense, net (695) (225) (400) 11
Add: Loss on sale of business 1,976 1,976
Add: Loss on debt extinguishment and termination of derivative instruments 996
Add: Acquisition-related deferred revenue write-down 2,484 6,006
Add: Stock-based compensation expense 6,311 4,330 11,413 8,044
Add: Employee severance 443 1,582
Add: Impairment of capitalized software development costs 770 770
Add: Acquisition-related integration costs 187 97 671 97
Add: Acquisition-related expenses 715 65 788 65
Add: CEO transition costs 870
Subtotal 11,421 5,037 22,036 10,853
Adjusted EBITDA $ 38,195 $ 31,778 $ 70,205 $ 56,313
Adjusted EBITDA Margin 24.1% 22.8% 22.7% 21.1%
Detail of certain Non-GAAP adjustments:
Stock-based compensation expense:
Included in cost of revenue:
Cost of subscriptions $ 325 $ 175 $ 468 $ 364
Cost of maintenance 85 196 246 341
Cost of services 639 582 1,236 1,124
Total included in cost of revenue 1,049 953 1,950 1,829
Included in operating expenses:
Sales and marketing 804 588 1,506 1,059
Research and development 1,186 762 2,164 1,424
General and administrative 3,272 2,027 5,793 3,732
Total included in operating expenses 5,262 3,377 9,463 6,215
Total stock-based compensation expense $ 6,311 $ 4,330 $ 11,413 $ 8,044
Amortization of intangibles from business combinations:
Included in cost of revenue:
Cost of subscriptions $ 5,767 $ 4,434 $ 11,539 $ 8,994
Cost of maintenance 1,006 115 2,159 230
Cost of services 702 676 1,309 1,332
Cost of license fees and other 92 105 199 211
Total included in cost of revenue 7,567 5,330 15,206 10,767
Included in operating expenses 524 418 1,012 1,005
Total amortization of intangibles from business combinations $ 8,091 $ 5,748 $ 16,218 $ 11,772

CONTACT: Investor Contact: Jagtar Narula Blackbaud, Inc. 843-654-2164 jagtar.narula@blackbaud.com Media Contact: Nicole McGougan Blackbaud, Inc. 843-654-3307 nicole.mcgougan@blackbaud.com

Source:Blackbaud