Blackbaud Announces 2019 Fourth Quarter and Full Year Results
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:
-- A year after acquiring market-leading corporate social responsibility
provider, YourCause, Blackbaud reports record growth and expansion of
its solutions for companies committed to social good.
-- Blackbaud K-12 Solutions(TM) closes out a marquee 2019 marked by
increasing revenue and efficiencies for private schools through its
total school solution.
-- Blackbaud appoints Margaret "Maggie" Driscoll as its Chief People
Officer, leading all human resources functions for the company.
-- Blackbaud, which powers 24 of the top 25 private U.S. colleges as ranked
by Forbes with its solutions, continues to transform the higher
education technology landscape and demonstrate growth just a year after
introducing its comprehensive Cloud Solution for Higher Education.
-- To celebrate the eighth annual global giving holiday, GivingTuesday,
Blackbaud unveils a new digital resource to support comprehensive giving
strategies.
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, December 31,
2019 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 Years ended
December 31, 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, December 31,
2019 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
Years ended
December 31, 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 12,884 11,682 50,085 47,077
combinations
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 $
(1,262) $
11,485 $
10,585 $
44,622
income taxes
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 31,948 27,654 124,440 111,125
operations
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 48,572,575 48,025,617 48,312,271 48,045,084
share
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
Years ended
December 31, 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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SOURCE Blackbaud
