Blackbaud (BLKB) Gains 41% YTD: Will the Uptrend Continue?
Blackbaud BLKB witnessed strong momentum this year. Its shares have rallied 41% year to date compared with the S&P 500 Composite’s 19.6% growth.
BLKB is a well-known cloud software company. It offers a full spectrum of cloud-based and on-premise software solutions and related services for organizations of all sizes, especially the ones engaged in driving social good. It continues to invest heavily in cloud-based applications and software that is expected to bolster its long-term growth.
The company's performance is being driven by robust organic growth and extensive cost-cutting measures. In the last reported quarter, non-GAAP organic revenues grew 6.6% on a reported basis and 5.9% at constant currency, year over year. Non-GAAP organic recurring revenues rose 8.3% year over year. Total revenues jumped 6.2% year over year to $277.6 million.
Non-GAAP operating margin increased 960 basis points from the year-ago level to 28.7%, owing to extensive cost discipline. Non-GAAP adjusted EBITDA margin was 35%, up 940 bps year over year.
Momentum in both contractual and transactional recurring revenue streams, coupled with rising volumes across its other payment solutions, bodes well. Frequent product launches along with rising customer renewal rates and bookings are likely to be beneficial.
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The company is investing in generative AI to further expand its footprint. In October 2023, it announced that it was working on a new AI-powered, social impact reporting and storytelling solution — Impact Edge. Impact Edge will be integrating YourCause from Blackbaud and EVERFI from Blackbaud solutions within a single tool to consolidate data gathered from all reliable sources into one centralized location.
BLKB has a five-point growth strategy with an objective to deliver innovative products, drive booking growth, transactional revenue expansion, modernize pricing and multi-year customer contracts, and improve cost management.
Strategic buyouts have played a pivotal role in driving the top line. The acquisition of EVERFI has helped the company to expand its total addressable market (TAM) by about two times. It added more than $14 billion in TAM through acquisitions and new product launches from 2014 to 2021.
Driven by steady business momentum, Blackbaud reiterated its guidance for 2023. Management continues to expect non-GAAP revenues to be between $1.095 billion and $1.125 billion. It projects non-GAAP adjusted EBITDA margin in the range of 30.5-31.5%.
Non-GAAP earnings per share (EPS) are anticipated to be between $3.63 and $3.94. Non-GAAP adjusted free cash flow for the year is forecasted in the $190-$210 million range.
A Look at Estimates
BLKB’s 2023 and 2024 revenues are anticipated to rise 4.8% and 8%, respectively, year over year. The company’s earnings are expected to increase 40.9% and 17.3% in 2023 and 2024, respectively, on a year-over-year basis.
Over the past 60 days, EPS estimates for 2023 have remained unchanged at $3.79, while the same for 2024 improved 2 cents to $4.45.
A Few Headwinds Persist
Weakness prevailing over global macroeconomic conditions, forex volatility, a leveraged balance sheet and stiff competition continue to be concerns for this Zacks Rank #3 (Hold) stock.
Stocks to Consider
Some better-ranked stocks for investors interested in the broader technology space are Cadence Design Systems CDNS, Adobe ADBE and Watts Water Technologies WTS, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Cadence’s 2023 EPS has remained unchanged in the past seven days at $5.11. CDNS’ long-term earnings growth rate is 19.5%.
Cadence’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, delivering an average surprise of 4.1%. Shares of CDNS have risen 63.3% in the past year.
The Zacks Consensus Estimate for Adobe’s fiscal 2024 EPS has remained unchanged in the past 30 days at $17.86. ADBE’s long-term earnings growth rate is 13.5%. Shares of ADBE have rallied 84.3% in the past year.
The Zacks Consensus Estimate for Watts Water Technologies' 2023 EPS has improved 2.8% in the past 60 days to $8.00.
WTS’ earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 11.8%. Shares of WTS have rallied 29.7% in the past year.
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