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Blackbaud, Inc. Announces Third Quarter 2012 Results

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CHARLESTON, S.C.--(BUSINESS WIRE)--

Blackbaud, Inc. (Nasdaq: BLKB), the leading provider of software and related services designed specifically for nonprofit organizations, today announced financial results for its third quarter ended September 30, 2012.

“Blackbaud delivered third quarter non-GAAP profitability that exceeded the high-end of our guidance, despite facing continued macroeconomic headwinds and transition-related factors in our enterprise business unit,” stated Marc Chardon, Chief Executive Officer of Blackbaud.

“Our integration of Convio progressed well during the third quarter. We finalized the integrated product roadmap and communicated our “go forward” online fundraising and CRM offerings to our global sales organization and customer base. We are moving forward as a single organization with the best-of-both-worlds online and offline solutions for nonprofit organizations of all sizes and across verticals,” added Marc Chardon.

Tony Boor, Chief Financial Officer of Blackbaud, said “We made excellent progress identifying and executing against synergies while bringing together Blackbaud and Convio during the third quarter. As a result we are tracking ahead of our original target of realizing $9-10 million in annualized cost savings by the end of 2012. As we navigate through the present economic uncertainty, we will continue to focus on protecting our bottom line and cash flow.”

Third Quarter 2012 GAAP Financial Results

Blackbaud reported total revenue of $122.5 million for the third quarter of 2012, an increase of 28% compared to $95.4 million for the third quarter of 2011. Income from operations and net income were $6.2 million and $2.8 million, respectively, compared with $16.0 million and $10.2 million, respectively, for the third quarter of 2011. Diluted earnings per share were $0.06 for the third quarter of 2012, compared with $0.23 in the same period last year.

Third Quarter 2012 Non-GAAP Financial Results

Blackbaud reported total non-GAAP revenue of $123.8 million, which includes $1.3 million of the deferred revenue write down associated with the Convio acquisition. Non-GAAP income from operations, which also excludes stock-based compensation expense, amortization of intangibles arising from business combinations, and acquisition and integration related expenses, was $20.7 million for the third quarter of 2012, compared to $21.5 million in the same period last year. Non-GAAP net income was $11.7 million, or $0.26 per diluted share for the third quarter of 2012, compared to $13.0 million, or $0.30 per diluted share in the same period last year.

A reconciliation between GAAP and non-GAAP results has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Non-GAAP Financial Measures.”

Balance Sheet and Cash Flow

The Company ended the third quarter with $25.6 million in cash, compared to $21.2 million at the end of the second quarter.

The Company generated $28.7 million in cash flow from operations during the third quarter, returned $5.4 million to stockholders by way of dividend, reduced debt by $14.6 million and invested $3.9 million in capital expenditures. The Company ended the third quarter with $245.0 million of debt.

Dividend and Share Repurchase Program

Blackbaud announced today that its Board of Directors has approved a third quarter 2012 dividend of $0.12 per share payable on December 14, 2012, to stockholders of record on November 28, 2012. Additionally, as of September 30, 2012, $50.0 million remained available under the Company's share repurchase program.

Conference Call Details

Blackbaud will host a conference call today, November 1, 2012, at 8:00 a.m. (Eastern Time) to discuss the Company's financial results, operations and related matters. To access this call, dial 877-941-2321 (domestic) or 480-629-9666 (international). A replay of this conference call will be available through November 8, 2012, at 877-870-5176 (domestic) or 858-384-5517 (international). The replay passcode is 4573758. 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.

About Blackbaud

Serving the nonprofit and education sectors for 30 years, Blackbaud (NASDAQ: BLKB) combines technology and expertise to help organizations achieve their missions. Blackbaud works with more than 27,000 nonprofit customers in over 60 countries that support higher education, healthcare, human services, arts and culture, faith, the environment, independent K-12 education, animal welfare and other charitable causes. The company offers a full spectrum of cloud-based and on-premise software solutions and related services for organizations of all sizes including: fundraising software, online fundraising software, event fundraising software, eMarketing, social media, advocacy, constituent relationship management (CRM), analytics, financial management and vertical-specific solutions for ticketing, school management, and more. Using Blackbaud software, nonprofits raise more than $100 billion each year. Recognized as a top company by Forbes, InformationWeek and Software Magazine, and honored by Best Places to Work, Blackbaud is headquartered in Charleston, South Carolina and has operations in the United States, Australia, Canada, Mexico, the Netherlands 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: market acceptance of Blackbaud's acquisition of Convio and the resulting unparalleled product offering position; and Blackbaud ability to achieve its synergy and non-GAAP operating margin targets and the timing of the benefits. These statements involve a number of risks and uncertainties, including; Blackbaud's ability to leverage product offerings to improve operational performance; Blackbaud's cost savings targets and progress towards achieving such targets; and, Blackbaud's commitment to improve profitability and related profitability targets. 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 and other risks associated with acquisitions; general economic risks; uncertainty regarding increased business and renewals from existing customers; continued success in sales growth; risks associated with successful implementation of multiple integrated software products; the ability to attract and retain key personnel; risks related to our leverage, dividend policy and share repurchase program, including potential limitations on our ability to grow and the possibility that we might discontinue payment of dividends; risks relating to restrictions imposed by the credit facility; risks associated with management of growth; lengthy sales and implementation cycles, particularly in larger organizations; technological changes that make our products and services less competitive; 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 income from operations, non-GAAP net income, non-GAAP diluted earnings per share and non-GAAP operating margin. 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 an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial results with other companies in Blackbaud's industry, many of which present similar non-GAAP financial measures to investors. Non-GAAP financial results discussed above exclude: a write-down of Convio deferred revenue; stock-based compensation expense; costs associated with amortization of intangibles arising from business combinations; acquisition and integration related expense; a write-off of prepaid proprietary software licenses; a charge associated with impairment of cost method investment; and, a gain in connection with the sale of assets. We use these measures and believe them useful to investors because they provide additional insight in comparing results from period to period.

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. As previously mentioned, 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)
 
September 30, December 31,
(in thousands, except share amounts)     2012       2011  
 
Assets
Current assets:
Cash and cash equivalents $ 25,582 $ 52,520
Donor restricted cash 25,993 40,205

Accounts receivable, net of allowance of $4,663 and $3,913 at September 30, 2012 and December 31, 2011, respectively

83,351 62,656
Prepaid expenses and other current assets 37,549 31,016
Deferred tax asset, current portion   3,673       1,551  
Total current assets 176,148 187,948
Property and equipment, net 42,858 34,397
Deferred tax asset 521 29,376
Goodwill 263,172 90,122
Intangible assets, net 173,736 44,660
Other assets   9,213       6,087  
 
Total assets $ 665,648     $ 392,590  
 
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 10,115 $ 13,464
Accrued expenses and other current liabilities 39,668 32,707
Donations payable 25,993 40,205
Debt, current portion 10,000 -
Deferred revenue, current portion   177,218       153,665  
Total current liabilities 262,994 240,041
Long-term debt, net of current portion 235,000 -
Deferred tax liability 5,052 -
Deferred revenue, net of current portion 10,425 9,772
Other liabilities   4,518       2,775  
 
Total liabilities   517,989       252,588  
 
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, 54,243,438 and 53,959,532 shares issued at September 30, 2012 and December 31, 2011, respectively

54 54
Additional paid-in capital 198,825 175,401

Treasury stock, at cost; 9,089,110 and 9,019,824 shares at September 30, 2012 and December 31, 2011, respectively

(168,239 ) (166,226 )
Accumulated other comprehensive loss (2,043 ) (1,148 )
Retained earnings   119,062       131,921  
 
Total stockholders' equity   147,659       140,002  
 
Total liabilities and stockholders' equity $ 665,648     $ 392,590  
 
 
Blackbaud, Inc.
Consolidated statements of comprehensive income
(Unaudited)
       
 
Three months ended September 30, Nine months ended September 30,
(in thousands, except share and per share amounts)     2012       2011     2012       2011  
Revenue
License fees $ 4,465 $ 4,952 $ 16,154 $ 14,600
Subscriptions 47,414 26,091 113,399 75,893
Services 34,463 29,605 90,211 82,916
Maintenance 34,499 32,898 101,945 97,341
Other revenue   1,631       1,867     5,659       5,073  
 
Total revenue   122,472       95,413     327,368       275,823  
 
Cost of revenue
Cost of license fees 728 828 2,162 2,610
Cost of subscriptions 19,616 10,625 49,151 30,260
Cost of services 26,438 20,009 71,779 59,190
Cost of maintenance 6,789 6,521 18,944 18,807
Cost of other revenue   1,557       1,708     4,672       4,253  
 
Total cost of revenue   55,128       39,691     146,708       115,120  
 
Gross profit   67,344       55,722     180,660       160,703  
 
Operating expenses
Sales and marketing 26,279 18,745 70,879 57,081
Research and development 19,205 11,719 47,365 35,212
General and administrative 14,985 8,975 51,239 27,353
Impairment of cost method investment - - 200 -
Amortization   690       249     1,417       728  
 
Total operating expenses   61,159       39,688     171,100       120,374  
 
Income from operations 6,185 16,034 9,560 40,329
Interest income 38 55 118 133
Interest expense (1,976 ) (59 ) (3,629 ) (143 )
Other income (expense), net   382       (107 )   (66 )     178  
 
Income before provision for income taxes 4,629 15,923 5,983 40,497
Income tax provision   1,804       5,709     2,670       13,628  
 
Net income $ 2,825     $ 10,214   $ 3,313     $ 26,869  
 
Earnings per share
Basic $ 0.06 $ 0.23 $ 0.08 $ 0.62
Diluted $ 0.06 $ 0.23 $ 0.07 $ 0.61
 
Common shares and equivalents outstanding
Basic weighted average shares 44,172,836 43,548,494 44,077,911 43,449,958
Diluted weighted average shares 44,718,101 44,147,911 44,650,028 44,045,438
 
Dividends per share $ 0.12 $ 0.12 $ 0.36 $ 0.36
 
 
Other comprehensive loss
Foreign currency translation adjustment (123 ) (273 ) (12 ) (104 )
Unrealized loss on derivative instruments, net of tax   (319 )     -     (883 )     -  
Comprehensive income $ 2,383     $ 9,941   $ 2,418     $ 26,765  
 
 
Blackbaud, Inc.
Consolidated statements of cash flows
(Unaudited)
   
 
 
Nine months ended September 30,
(in thousands)     2012       2011  
 
Cash flows from operating activities
Net income $ 3,313 $ 26,869

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

Depreciation and amortization 21,433 12,376
Provision for doubtful accounts and sales returns 4,212 3,708
Stock-based compensation expense 14,455 10,913
Excess tax benefits from stock-based compensation (81 ) (532 )
Deferred taxes 2,670 6,511
Impairment of cost method investment 200 -
Gain on sale of assets - (549 )
Other non-cash adjustments 444 (156 )
Changes in operating assets and liabilities, net of acquisition of businesses:
Accounts receivable (11,965 ) (5,818 )
Prepaid expenses and other assets (5,609 ) (992 )
Trade accounts payable (1,313 ) 901
Accrued expenses and other liabilities (3,618 ) 799
Donor restricted cash 14,273 (7,598 )
Donations payable (14,273 ) 7,598
Deferred revenue   15,528       14,593  
Net cash provided by operating activities   39,669       68,623  
Cash flows from investing activities
Purchase of property and equipment (15,427 ) (12,997 )
Purchase of net assets of acquired companies, net of cash acquired (280,687 ) (16,475 )
Capitalized software development costs (572 ) (1,012 )
Proceeds from sale of assets   -       874  
Net cash used in investing activities   (296,686 )     (29,610 )
Cash flows from financing activities
Proceeds from issuance of debt 315,000 -
Payments on debt (70,000 ) -
Payments of deferred financing costs (2,440 ) (767 )
Proceeds from exercise of stock options 3,105 1,973
Excess tax benefits from stock-based compensation 81 532
Dividend payments to stockholders (16,248 ) (16,035 )
Payments on capital lease obligations   -       (35 )
Net cash provided by (used in) financing activities   229,498       (14,332 )
Effect of exchange rate on cash and cash equivalents   581       (656 )
Net increase (decrease) in cash and cash equivalents (26,938 ) 24,025
Cash and cash equivalents, beginning of period   52,520       28,004  
Cash and cash equivalents, end of period $ 25,582     $ 52,029  
 
 
Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP financial measures
(Unaudited)
 
  Three months ended September 30,   Nine months ended September 30,
(in thousands, except per share amounts)     2012       2011     2012       2011  
   
GAAP revenue $ 122,472 $ 95,413 $ 327,368 $ 275,823
 
Non-GAAP adjustments:
Add back: Convio deferred revenue writedown   1,352       -     4,819       -  
Total Non-GAAP adjustments 1,352 - 4,819 -
 
Non-GAAP revenue $ 123,824     $ 95,413   $ 332,187     $ 275,823  
 
 
GAAP gross profit $ 67,344 $ 55,722 $ 180,660 $ 160,703
 
Non-GAAP adjustments:
Add: Convio deferred revenue writedown 1,352 - 4,819 -
Add: Stock-based compensation expense 1,263 764 2,946 2,375
Add: Amortization of intangibles from business combinations 4,866 1,614 10,212 4,873
Add: Acquisition integration costs 595 - 595 -
Add: Write-off of prepaid proprietary software licenses   -       -     350       -  
Total Non-GAAP adjustments 8,076 2,378 18,922 7,248
 
Non-GAAP gross profit $ 75,420     $ 58,100   $ 199,582     $ 167,951  
 
Non-GAAP gross margin   61 %     61 %   60 %     61 %
 
GAAP income from operations $ 6,185 $ 16,034 $ 9,560 $ 40,329
 
Non-GAAP adjustments:
Add: Convio deferred revenue writedown 1,352 - 4,819 -
Add: Stock-based compensation expense 4,831 3,587 14,455 10,913
Add: Amortization of intangibles from business combinations 5,556 1,863 11,629 5,601
Add: Acquisition integration and restructuring costs 2,766 - 5,795 -
Add: Acquisition-related expenses - - 6,427 1,054
Add: Write-off of prepaid proprietary software licenses - - 350 -
Add: Impairment of cost method investment - - 200 -
Less: Gain on sale of assets   -       -     -       (549 )
Total Non-GAAP adjustments 14,505 5,450 43,675 17,019
 
Non-GAAP income from operations $ 20,690     $ 21,484   $ 53,235     $ 57,348  
 
Non-GAAP operating margin   17 %     23 %   16 %     21 %
 
GAAP net income $ 2,825 $ 10,214 $ 3,313 $ 26,869
 
Non-GAAP adjustments:
Add: Total Non-GAAP adjustments affecting income from operations 14,505 5,450 43,675 17,019
Less: Tax impact related to Non-GAAP adjustments   (5,659 )     (2,625 )   (16,697 )     (8,803 )
 
Non-GAAP net income $ 11,671     $ 13,039   $ 30,291     $ 35,085  
 
 
 
 
Shares used in computing Non-GAAP diluted earnings per share   44,718       44,148     44,650       44,045  
 
Non-GAAP diluted earnings per share $ 0.26     $ 0.30   $ 0.68     $ 0.80  
 
Detail of Non-GAAP adjustments:
Stock-based compensation expense:
Cost of revenue
Cost of subscriptions $ 308 $ 80 $ 734 $ 407
Cost of services 854 491 1,911 1,395
Cost of maintenance   101       193     301       573  
Subtotal 1,263 764 2,946 2,375
Operating expenses
Sales and marketing 714 305 1,734 934
Research and development 980 759 2,478 2,273
General and administrative   1,874       1,759     7,297       5,331  
Subtotal   3,568       2,823     11,509       8,538  
Total stock-based compensation expense $ 4,831     $ 3,587   $ 14,455     $ 10,913  
 
Amortization of intangibles from business combinations
Cost of revenue
Cost of license fees $ 119 $ 158 $ 366 $ 479
Cost of subscriptions 4,044 823 7,732 2,440
Cost of services 571 394 1,450 1,172
Cost of maintenance 114 221 608 726
Cost of other revenue   18       18     56       56  
Subtotal 4,866 1,614 10,212 4,873
Operating expenses   690       249     1,417       728  
Total amortization of intangibles from business combinations $ 5,556     $ 1,863   $ 11,629     $ 5,601  

Investor Contact:
ICR
Brian Denyeau, 646-277-1251
brian.denyeau@icrinc.com
or
Tim Dolan, 617-956-6727
timothy.dolan@icrinc.com
or
Media Contact:
Blackbaud, Inc.
Melanie Mathos, 843-216-6200 x3307
melanie.mathos@Blackbaud.com










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