Blackbaud, Inc. Announces Third Quarter 2015 Results

CHARLESTON, S.C., Oct. 28, 2015 (GLOBE NEWSWIRE) -- Blackbaud, Inc. (NASDAQ:BLKB), the leading provider of software and services for the worldwide philanthropic community, today announced financial results for its third quarter ended September 30, 2015.

Third Quarter 2015 Highlights

• Total revenue growth of 9.8% to $158.8 million
• Non-GAAP organic revenue growth of 3.5%; 5.5% in constant currency
• Recurring revenue represented 75.0% of total revenue
• Total subscriptions revenue growth of 20.7% to $80.9 million
• Non-GAAP income from operations increased 12.5% to $30.6 million
• Cash flow from operations of $37.7 million

President and CEO, Mike Gianoni, commented, “We continue to make solid progress as a company and are pleased with our revenue and profitability results for the quarter and year to date. We have just completed our annual user conference with record attendance from the philanthropic community. Our leading solutions, our transition to the cloud and our strategy of open and integrated products are resonating with the market.”

Third Quarter 2015 GAAP Financial Results

Blackbaud generated total revenue of $158.8 million in the third quarter of 2015, an increase of 9.8% compared to $144.6 million in the third quarter of 2014. Income from operations and net income were $14.0 million and $7.9 million, respectively, compared to $13.5 million and $10.4 million, respectively, in the third quarter of 2014. Diluted earnings per share was $0.17 in the third quarter of 2015, compared to $0.23 in the same period last year.

Total revenue, income from operations and net income were positively impacted in the third quarter from growth in subscriptions revenue and contributions from Blackbaud's acquisition of MicroEdge in October 2014. The positive impacts to income from operations and net income were offset by increased amortization of intangible assets arising from acquisitions completed in 2014 as well as increased stock-based compensation.

Third Quarter 2015 Non-GAAP Financial Results

Blackbaud achieved non-GAAP revenue of $159.9 million and non-GAAP organic revenue growth of 3.5% in the third quarter of 2015. On a constant currency basis, non-GAAP organic revenue growth was 5.5% in the third quarter of 2015. Non-GAAP organic revenue growth includes $10.5 million of incremental non-GAAP revenue in the third quarter of 2014 associated with acquired companies, as if the companies were combined throughout the prior period. Non-GAAP organic revenue growth excludes $0.6 million of revenue in the third 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 12.5% to $30.6 million in the third quarter of 2015, compared to $27.2 million in the same period last year. Non-GAAP net income increased 11.5% to $17.7 million in the third quarter of 2015 compared to $15.8 million in the same period last year. Non-GAAP diluted earnings per share was $0.38 in the third 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." 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.

Non-GAAP income from operations and non-GAAP net income were positively impacted in the third quarter by growth in subscriptions revenue and contributions from Blackbaud's acquisition of MicroEdge in October 2014.

Executive Vice President and CFO, Tony Boor, commented, "We continue to see the benefits of our investments in the business and our strong operational improvement. Our subscription revenue continues to grow at double-digit rates while non-GAAP operating margin has improved year-over-year. In the latest quarter, our non-GAAP operating margin of 19.1% is a 50 basis point improvement over the same quarter last year. The actions we have taken to improve operational efficiency are yielding positive results which allows us to continue to invest in our business."

Full-Year Financial Guidance Update
 
Blackbaud announced today that it is updating its 2015 full-year financial guidance to include the impact of its acquisition of Smart, LLC ("Smart Tuition"), which closed on October 2, 2015:

• Non-GAAP revenue of $645.0 million to $653.0 million
• Non-GAAP income from operations of $120.0 million to $124.0 million
• Non-GAAP operating margin of 18.6% to 19.0%
• Non-GAAP diluted earnings per share of $1.48 to $1.52
• Cash flow from operations of $115.0 million to $119.0 million

Balance Sheet and Cash Flow

The company ended the third quarter with $17.6 million of cash and cash equivalents, compared to $13.2 million on June 30, 2015. The company generated $37.7 million in cash flow from operations during the third quarter, reduced net debt by $20.2 million, returned $5.6 million to stockholders by way of dividend and had cash outlays of $11.4 million for capital expenditures and capitalized software.

To fund the company's acquisition of Smart Tuition on October 2, 2015 for a net purchase price of $187.8 million in cash, the company drew down $186.0 million of cash from its $350.0 million available revolving credit commitments under its senior secured credit facility and paid the remainder with cash on hand. Following the draw down, the total amount outstanding on the letters of credit, revolving credit loans and term loan was $429.0 million. Additional details related to the acquisition of Smart Tuition can be found in the company's filings with the SEC at www.sec.gov and on the company’s website at www.blackbaud.com/investorrelations.

Dividend

Blackbaud announced today that its Board of Directors has approved a fourth quarter 2015 dividend of $0.12 per share payable on December 15, 2015 to stockholders of record on November 25, 2015.

Conference Call Details

Blackbaud will host a conference call tomorrow, October 29, 2015, at 8:00 a.m. (Eastern Time) to discuss the company's financial results, operations and related matters. To access this call, dial 1-888-461-2018 (domestic) or 1-719-457-2650 (international) and enter passcode 740468. To access a replay of this conference call, which will be available through November 11, 2015, dial 1-888-203-1112 (domestic) or 1-719-457-0820 (international), and enter passcode 5826172. 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 the company announces material financial information to our investors using its website, www.blackbaud.com, SEC filings, press releases, public conference calls and webcasts. The company uses these channels as well as social media to communicate with its clients and the public about the company, its services and other issues. It is possible that the information the company posts on social media could be deemed material information. Therefore, Blackbaud encourages investors, the media, and others interested in the company to review the information posted on its social media channels listed on the company's Investor Relations page at, www.blackbaud.com/investorrelations.

About Blackbaud

Serving the worldwide philanthropic community for more than 30 years, Blackbaud (NASDAQ:BLKB) combines innovative software and services, and expertise to help organizations achieve their missions. Blackbaud works in over 60 countries to power the passions of more than 30,000 clients, including nonprofits, K-12 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, as well as a resource network that empowers and connects organizations of all sizes. Blackbaud's portfolio of software and services support nonprofit fundraising and relationship management, eMarketing, advocacy, accounting, payments and analytics, as well as grant management, corporate social responsibility, and education. 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 revenue and profitability; continued execution of and benefit from our five growth and operational improvement strategies; and expectations that past investments will continue to yield subscriptions 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 clients; 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 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 the company 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 our long-term benefit over multiple periods.

In addition, Blackbaud discusses non-GAAP organic revenue growth and non-GAAP organic revenue growth on a constant currency basis, which it believes provides useful information for evaluating the periodic growth of its 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 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. Blackbaud believes 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 the third 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 $3.1 million of incremental non-GAAP revenue for the third quarter of 2015. 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 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.