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Blackbaud’s Revenue Sags, But Margins Up Double Digits

Paul Clolery

Editor’s Note: This article originally appeared in The Non-Profit Times.  It is reprinted with permission.  To subscribe to the free newsletter of The Non-Profit Times, click here.

The breach at software giant Blackbaud has not had a material impact on the company’s revenue. While the firm will be investing in cybersecurity, between $36 million and $41 million will be spent on real estate consolidation this year.

Blackbaud officials said that COVID had the largest impact on revenue, for the third quarter ended Sept. 30 during a call with stock analysts. Total non-GAAP (Generally Accepted Accounting Principles) revenue was $215 million, down 2.9 percent, with $200.1 million in non-GAAP recurring revenue, representing 93.1 percent of total non-GAAP revenue. Non-GAAP recurring revenue was down 2.6 percent.

Non-GAAP income from operations was $48.1 million, with non-GAAP operating margin of 22.4 percent, according to the data released by Blackbaud.

Blackbaud President and CEO Mike Gianoni and Tony Boor, executive vice president and financial officer, talked about financial performance and changes in the company’s workforce and operations caused by the pandemic. The largest issue was the cancellation of events by Blackbaud users due to COVID-19. Blackbaud receives a transaction fee when a donor makes a gift or registers for an event.

“Our customers continue to navigate the challenges caused by the pandemic which will put pressure on our ability to drive near-term revenue growth in 2020 and 2021, thus we’re executing our balanced strategy with a sharper focus on profitability,” said Gianoni. “Digital transformation has shifted from a long-term strategy to a daily reality, as organizations across the market have adapted to new and distributed ways of working.”

Gianoni said that the sales pipeline for the remainder of the year and for 2021 is soft due to the decision-making timeline of charities stretching out due to the pandemic.

With Blackbaud also transitioning to a heavy digital emphasis, which includes staff working in non-office settings, the firm is spending between $20 million and $25 million to exit office leases around the world. Blackbaud also spent $16 million to purchase its new headquarters campus in Charleston, S.C., which it had been leasing.

Blackbaud made headlines in July when it was announced a ransom had been paid to hackers who entered the system in February but were not discovered until May. Some donor data was accessed during the breach, which impacted what Blackbaud officials referred to as a small number of users but required notification to clients worldwide. Blackbaud officials have declined to say how many nonprofits had information stolen or how much ransom was paid.

Gianoni said that costs related to the hack were not material to the company’s financial statement, although it was reported to the Securities and Exchange Commission (SEC). As a public company, Blackbaud must file with the SEC when there is a potential for impact to the bottom line.

Among the data points released during the analyst call are:

  • Total GAAP revenue was $215.0 million, down 2.8 percent, with $200.1 million in GAAP recurring revenue, representing 93.1 percent of total GAAP revenue. GAAP recurring revenue was down 2.5 percent.
  • Total non-GAAP revenue was $215.0 million, down 2.9 percent, with $200.1 million in non-GAAP recurring revenue, representing 93.1 percent of total non-GAAP revenue. Non-GAAP recurring revenue was down 2.6 percent.
  • Non-GAAP organic recurring revenue decreased 2.6 percent.
  • GAAP income from operations was $10.1 million, with GAAP operating margin of 4.7 percent, an increase of 110 basis points.
  • Non-GAAP income from operations was $48.1 million, with non-GAAP operating margin of 22.4 percent, an increase of 590 basis points.
  • GAAP net income was $4.9 million, with GAAP diluted earnings per share of $0.10, up $0.01 per share.
  • Non-GAAP net income was $35.7 million, with non-GAAP diluted earnings per share of $0.73, up $0.17 per share.
  • Non-GAAP free cash flow was $41.4 million, a decrease of $21.1 million.

Boor said that while nothing is imminent, they are looking at smaller firms that might be under pressure due to the pandemic and that its debt facility and debt ratios would allow for acquisitions if appropriate. Blackbaud’s debt to equity ratio is 115 percent.

Blackbaud is a public company and shares are traded on NASDAQ. Shares closed at $49.34 on Friday, down 38 percent year to date and a one-year change down 43.5 percent. The firm’s net margins are just shy of 2.5 percent.

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Paul Clolery
Paul Clolery

Paul Clolery is vice president and editorial director of NPT Publishing Group and The NonProfit Times, the leading business publication for the charitable, tax-exempt sector.

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