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Blackbaud Announces 2019 Fourth Quarter and Full Year Results

Fourth Quarter Recurring Revenue Grows 10%; Delivers on 2019 Financial Guidance; Announces 2020 Financial Guidance


CHARLESTON, S.C., Feb. 10, 2020 /PRNewswire/ -- Blackbaud (NASDAQ: BLKB), the world's leading cloud software company powering social good, today announced financial results for its fourth quarter and full year ended December 31, 2019.

"We had a strong finish to 2019 as we furthered our strategic initiatives and drove valuable outcomes for our over 45,000 customers. Looking ahead, we have a positive outlook as the market remains solid, and we continue to be uniquely positioned to digitally transform the markets we serve," said Mike Gianoni, Blackbaud's president and CEO. "We've made truly transformational changes across the company over the last several years as we built a scalable operating model, created a culture of innovation and better positioned ourselves to capture the large market opportunities in front of us. The structural changes are now largely behind us, and we're well positioned to further differentiate ourselves as the leading cloud software company powering social good and deliver increased value to our customers, employees and our shareholders."

Fourth Quarter 2019 Results Compared to Fourth Quarter 2018 Results:

  • Total GAAP revenue was $237.8 million, up 7.5%, with $219.8 million in GAAP recurring revenue, representing 92.4% of total GAAP revenue. GAAP recurring revenue was up 9.9%.
  • Total non-GAAP revenue was $238.1 million, up 7.3%, with $220.1 million in non-GAAP recurring revenue, representing 92.4% of total non-GAAP revenue. Non-GAAP recurring revenue was up 9.8%.
  • Non-GAAP organic recurring revenue increased 6.7%.
  • GAAP income from operations was $3.6 million, with GAAP operating margin of 1.5%, a decrease of 510 basis points.
  • Non-GAAP income from operations was $35.5 million, with non-GAAP operating margin of 14.9%, a decrease of 420 basis points.
  • GAAP net income was $1.3 million, with GAAP diluted earnings per share of $0.03, down $0.16.
  • Non-GAAP net income was $24.5 million, with non-GAAP diluted earnings per share of $0.51, down $0.14.
  • Non-GAAP free cash flow was $46.1 million, a decrease of $4.6 million.

"Our strong performance in the fourth-quarter allowed us to achieve our full year financial guidance and exceed the mid-point of our ranges for revenue and earnings per share. Over the course of 2019, we made strategic investments to further expand our go-to-market model, drive cloud innovation for our customers and ensure scalability in our business," said Tony Boor, Blackbaud's executive vice president and CFO. "We're optimistic about the year ahead as we continue the positive shift in revenue mix towards recurring revenue. From a profitability and cash flow perspective, we're underway in a multi-year effort to migrate our cloud infrastructure to leading public cloud service providers, and we expect to continue a heightened pace of investment in our go-to-market model and cloud innovation to better position the business for accelerated growth and long term success."

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.

Full-Year 2019 Results Compared to Full-Year 2018 Results:

  • Total GAAP revenue was $900.4 million, up 6.1%, with $831.6 million in GAAP recurring revenue, representing 92.4% of total GAAP revenue. GAAP recurring revenue was up 9.1%.
  • Total non-GAAP revenue was $902.4 million, up 6.0%, with $833.5 million in non-GAAP recurring revenue, representing 92.4% of total non-GAAP revenue. Non-GAAP recurring revenue was up 9.0%.
  • Non-GAAP organic recurring revenue increased 5.8%.
  • GAAP income from operations was $27.1 million, with GAAP operating margin of 3.0%, a decrease of 400 basis points.
  • Non-GAAP income from operations was $151.6 million, with non-GAAP operating margin of 16.8%, a decrease of 320 basis points.
  • GAAP net income was $11.9 million, with GAAP diluted earnings per share of $0.25, down $0.68.
  • Non-GAAP net income was $108.0 million, with non-GAAP diluted earnings per share of $2.24, down $0.35.
  • Non-GAAP free cash flow was $124.1 million, a decrease of $24.9 million.

Dividend
Blackbaud announced today that its Board of Directors has declared a first quarter 2020 dividend of $0.12 per share payable on March 13, 2020 to stockholders of record on February 28, 2020.

Financial Outlook
Blackbaud today announced its 2020 full year financial guidance:

  • Non-GAAP revenue of $930 million to $955 million
  • Non-GAAP operating margin of 16.0% to 16.5%
  • Non-GAAP diluted earnings per share of $2.20 to $2.35
  • Non-GAAP free cash flow of $100 million to $115 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 Fourth Quarter and Full Year 2019 Conference Call

When:      

February 11, 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, foundations, companies, education institutions, healthcare organizations 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.

Investor Contact:


Media Contact:


Steve Hufford


media@blackbaud.com


Director of Investor Relations




843-654-2655




steve.hufford@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: the predictability of our financial results, expectations that our revenue will continue to grow, and expectations that we will achieve our projected 2020 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.

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)

December 31,
 2019

December 31,
 2018

Assets



Current assets:



Cash and cash equivalents

$

31,810


$

30,866


Restricted cash due to customers

545,485


418,980


Accounts receivable, net of allowance of $5,529 and $4,722 at December 31, 2019 and December 31, 2018, respectively

88,868


86,595


Customer funds receivable

524


1,753


Prepaid expenses and other current assets

67,852


59,788


Total current assets

734,539


597,982


Property and equipment, net

35,546


40,031


Operating lease right-of-use assets

104,400



Software development costs, net

101,302


75,099


Goodwill

634,088


545,213


Intangible assets, net

317,895


291,617


Other assets

65,193


65,363


Total assets

$

1,992,963


$

1,615,305


Liabilities and stockholders' equity



Current liabilities:



Trade accounts payable

$

47,676


$

34,538


Accrued expenses and other current liabilities

73,317


46,893


Due to customers

546,009


420,733


Debt, current portion

7,500


7,500


Deferred revenue, current portion

314,335


295,991


Total current liabilities

988,837


805,655


Debt, net of current portion

459,600


379,624


Deferred tax liability

44,594


44,291


Deferred revenue, net of current portion

1,802


2,564


Operating lease liabilities, net of current portion

95,624



Other liabilities

5,742


9,388


Total liabilities

1,596,199


1,241,522


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, 60,206,091 and 59,327,633 shares issued at December 31, 2019 and December 31, 2018, respectively

60


59


Additional paid-in capital

457,804


399,241


Treasury stock, at cost; 11,066,354 and 10,760,574 shares at December 31, 2019 and December 31, 2018, respectively

(290,665)


(266,884)


Accumulated other comprehensive loss

(5,290)


(5,110)


Retained earnings

234,855


246,477


Total stockholders' equity

396,764


373,783


Total liabilities and stockholders' equity

$

1,992,963


$

1,615,305


 

 


Blackbaud, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)


(dollars in thousands, except per share amounts)

Three months ended
 December 31,



Years ended
 December 31,


2019


2018



2019


2018


Revenue






Recurring

$

219,820


$

199,930



$

831,609


$

762,181


One-time services and other

18,019


21,288



68,814


86,425


Total revenue

237,839


221,218



900,423


848,606


Cost of revenue






Cost of recurring

98,975


83,517



357,988


305,481


Cost of one-time services and other

17,562


19,779



60,436


76,261


Total cost of revenue

116,537


103,296



418,424


381,742


Gross profit

121,302


117,922



481,999


466,864


Operating expenses






Sales, marketing and customer success

58,189


49,801



224,152


192,848


Research and development

25,860


23,338



106,164


98,811


General and administrative

28,857


27,962



113,414


106,354


Amortization

2,085


1,137



5,316


4,844


Restructuring

2,725


1,005



5,808


4,590


Total operating expenses

117,716


103,243



454,854


407,447


Income from operations

3,586


14,679



27,145


59,417


Interest expense

(4,385)


(3,938)



(20,618)


(15,898)


Other (expense) income, net

(463)


744



4,058


1,103


(Loss) income before (benefit) provision for income taxes

(1,262)


11,485



10,585


44,622


Income tax (benefit) provision

(2,586)


2,151



(1,323)


(219)


Net income

$

1,324


$

9,334



$

11,908


$

44,841


Earnings per share






Basic

$

0.03


$

0.20



$

0.25


$

0.95


Diluted

$

0.03


$

0.19



$

0.25


$

0.93


Common shares and equivalents outstanding






Basic weighted average shares

47,777,635


47,300,931



47,695,383


47,206,669


Diluted weighted average shares

48,572,575


48,025,617



48,312,271


48,045,084


Other comprehensive income (loss)






Foreign currency translation adjustment

7,962


(3,885)



2,641


(5,218)


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

413


(1,827)



(2,821)


583


Total other comprehensive income (loss)

8,375


(5,712)



(180)


(4,635)


Comprehensive income

$

9,699


$

3,622



$

11,728


$

40,206


 

 

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



Years ended
 December 31,


(dollars in thousands)

2019


2018


Cash flows from operating activities



Net income

$

11,908


$

44,841


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



Depreciation and amortization

85,693


79,566


Provision for doubtful accounts and sales returns

8,725


6,890


Stock-based compensation expense

58,633


48,274


Deferred taxes

(3,600)


(619)


Amortization of deferred financing costs and discount

752


752


Other non-cash adjustments

4,906


(1,912)


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



Accounts receivable

(6,569)


2,166


Prepaid expenses and other assets

6,383


(5,217)


Trade accounts payable

12,900


9,487


Accrued expenses and other liabilities

(9,718)


(2,027)


Deferred revenue

12,464


19,184


Net cash provided by operating activities

182,477


201,385


Cash flows from investing activities



Purchase of property and equipment

(11,492)


(14,719)


Capitalized software development costs

(46,874)


(37,629)


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

(109,353)


(44,943)


Other investing activities

500


(500)


Net cash used in investing activities

(167,219)


(97,791)


Cash flows from financing activities



Proceeds from issuance of debt

424,000


270,900


Payments on debt

(344,500)


(322,476)


Employee taxes paid for withheld shares upon equity award settlement

(23,781)


(27,685)


Proceeds from exercise of stock options

7


11


Change in due to customers

77,793


(188,502)


Change in customer funds receivable

1,301


(844)


Dividend payments to stockholders

(23,607)


(23,312)


Net cash provided by (used in) financing activities

111,213


(291,908)


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

978


(2,014)


Net increase (decrease) in cash, cash equivalents and restricted cash

127,449


(190,328)


Cash, cash equivalents and restricted cash, beginning of year

449,846


640,174


Cash, cash equivalents and restricted cash, end of year

$

577,295


$

449,846


 

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)

December 31,
 2019

December 31,
 2018

Cash and cash equivalents

$

31,810


$

30,866


Restricted cash due to customers

545,485


418,980


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

$

577,295


$

449,846


 


 

Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(Unaudited)


(dollars in thousands, except per share amounts)

Three months ended
 December 31,


Years ended
 December 31,

2019

2018


2019

2018

GAAP Revenue

$

237,839


$

221,218



$

900,423


$

848,606


Non-GAAP adjustments:






Add: Acquisition-related deferred revenue write-down

241


571



1,932


2,409


Non-GAAP revenue

$

238,080


$

221,789



$

902,355


$

851,015








GAAP gross profit

$

121,302


$

117,922



$

481,999


$

466,864


GAAP gross margin

51.0

%

53.3

%


53.5

%

55.0

%

Non-GAAP adjustments:






Add: Acquisition-related deferred revenue write-down

241


571



1,932


2,409


Add: Stock-based compensation expense

817


1,232



3,366


5,242


Add: Amortization of intangibles from business combinations

10,799


10,545



44,769


42,233


Add: Employee severance

87


52



1,221


918


Add: Acquisition-related integration costs





25


Subtotal

11,944


12,400



51,288


50,827


Non-GAAP gross profit

$

133,246


$

130,322



$

533,287


$

517,691


Non-GAAP gross margin

56.0

%

58.8

%


59.1

%

60.8

%







GAAP income from operations

$

3,586


$

14,679



$

27,145


$

59,417


GAAP operating margin

1.5

%

6.6

%


3.0

%

7.0

%

Non-GAAP adjustments:






Add: Acquisition-related deferred revenue write-down

241


571



1,932


2,409


Add: Stock-based compensation expense

15,012


12,591



58,633


48,274


Add: Amortization of intangibles from business
combinations

12,884


11,682



50,085


47,077


Add: Employee severance

765


533



4,425


2,246


Add: Acquisition-related integration costs

189


300



2,395


3,683


Add: Acquisition-related expenses

132


972



1,162


2,846


Add: Restructuring costs

2,725


1,005



5,808


4,590


Subtotal

31,948


27,654



124,440


111,125


Non-GAAP income from operations

$

35,534


$

42,333



$

151,585


$

170,542


Non-GAAP operating margin

14.9

%

19.1

%


16.8

%

20.0

%







GAAP (loss) income before (benefit) provision for
income taxes

$

(1,262)


$

11,485



$

10,585


$

44,622


GAAP net income

$

1,324


$

9,334



$

11,908


$

44,841








Shares used in computing GAAP diluted earnings per share

48,572,575


48,025,617



48,312,271


48,045,084


GAAP diluted earnings per share

$

0.03


$

0.19



$

0.25


$

0.93








Non-GAAP adjustments:






Add: GAAP income tax (benefit) provision

(2,586)


2,151



(1,323)


(219)


Add: Total non-GAAP adjustments affecting income from
operations

31,948


27,654



124,440


111,125


Non-GAAP income before provision for income taxes

30,686


39,139



135,025


155,747


Assumed non-GAAP income tax provision(1)

6,137


7,828



$

27,005


$

31,149


Non-GAAP net income

$

24,549


$

31,311



$

108,020


$

124,598








Shares used in computing non-GAAP diluted earnings per
share

48,572,575


48,025,617



48,312,271


48,045,084


Non-GAAP diluted earnings per share

$

0.51


$

0.65



$

2.24


$

2.59


(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
 December 31,


Years ended
 December 31,

2019

2018


2019

2018

GAAP revenue

$

237,839


$

221,218



$

900,423


$

848,606


GAAP revenue growth

7.5

%



6.1

%


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

(5,903)


571



(20,097)


5,627


Non-GAAP organic revenue(2)

$

231,936


$

221,789



$

880,326


$

854,233


Non-GAAP organic revenue growth

4.6

%



3.1

%








Non-GAAP organic revenue(2)

$

231,936


$

221,789



$

880,326


$

854,233


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

607




6,020



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

$

232,543


$

221,789



$

886,346


$

854,233


Non-GAAP organic revenue growth on constant currency basis

4.8

%



3.8

%








GAAP recurring revenue

$

219,820


$

199,930



$

831,609


$

762,181


GAAP recurring revenue growth

9.9

%



9.1

%


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

(5,841)


571



(19,804)


5,458


Non-GAAP organic recurring revenue

$

213,979


$

200,501



$

811,805


$

767,639


Non-GAAP organic recurring revenue growth

6.7

%



5.8

%




(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)








Years ended
 December 31,









2019


2018


GAAP net cash provided by operating activities








$

182,477


$

201,385


Less: purchase of property and equipment








(11,492)


(14,719)


Less: capitalized software development costs








(46,874)


(37,629)


Non-GAAP free cash flow








$

124,111


$

149,037


 

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