PR Newswire | Aug 3, 2021 04:10PM EDT

08/03 15:10 CDT

Blackbaud Announces 2021 Second Quarter ResultsSecond Quarter Cash Flow from Operations Increases $8 Million Year-Over-Year with Non-GAAP Free Cash Flow Margin of 25% CHARLESTON, S.C., Aug. 3, 2021

CHARLESTON, S.C., Aug. 3, 2021 /PRNewswire/ -- Blackbaud (NASDAQ: BLKB), the world's leading cloud software company powering social good, today announced financial results for its second quarter ended June 30, 2021.

"Blackbaud had another strong quarter as our market's progress toward a post-pandemic recovery and the shift to a digital-first world continues to accelerate," said Mike Gianoni, president and CEO, Blackbaud. "We have so much to be excited about as a company. This year marks Blackbaud's 40th anniversary; and since day one, our focus has been on building a better world. Given our strong performance through the first half of 2021, we are well positioned for further success as we look ahead to the second half of this year and the next several years. We're making excellent progress executing against our strategic plan that will move us further toward our long-term aspirational goal of achieving the Rule of 40 through a balance of organic revenue growth and improved profitability."

Second Quarter 2021 Results Compared to Second Quarter 2020 Results:

* Total GAAP revenue was $229.4 million, down 1.1%, with $217.0 million in GAAP recurring revenue, up 0.3%. * Non-GAAP organic recurring revenue increased 0.3%. * GAAP income from operations was $13.0 million, with GAAP operating margin of 5.7%, a decrease of 270 basis points. * Non-GAAP income from operations was $54.1 million, with non-GAAP operating margin of 23.6%, an increase of 10 basis points. * GAAP net income was $6.7 million, with GAAP diluted earnings per share of $0.14, down $0.10 per share. * Non-GAAP net income was $39.7 million, with non-GAAP diluted earnings per share of $0.82, down $0.03 per share. * Non-GAAP adjusted EBITDA was $65.8 million, down $3.1 million, with non-GAAP adjusted EBITDA margin of 28.7%. * GAAP net cash provided by operating activities was $69.8 million, an increase of $7.8 million. * Non-GAAP free cash flow was $56.6 million, an increase of $8.4 million.

"We had another solid quarter of execution, and our first half performance combined with our latest modeling suggests our upside revenue scenarios for the full year are looking more likely," said Tony Boor, executive vice president and CFO, Blackbaud. "Second quarter recurring revenue growth was roughly flat year-over-year inclusive of the tough compare in our payments revenue, which was expected given the elevated volumes we saw at the onset of the pandemic. Our contractual recurring revenue, which is the core of our business, grew during the quarter, and the trends we're seeing in bookings and renewals bode well for continued growth in the second half. We are continuing to make critical investments in the business, and our plans call for the level of investment to increase in the second half. Year-to-date we've generated roughly $74 million of free cash flow, and thus we feel very confident we will exceed the $100 million floor we set for 2021, with our latest models suggesting we could generate at least $120 million to $130 million of free cash flow this year. We will also continue executing against our capital deployment strategy focused on maximizing value for our shareholders. This includes opportunistic share repurchases and a renewed focus on M&A."

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

* During the second quarter, Blackbaud repurchased 405,047 shares of its common stock at a total cost of $30 million, leaving approximately $151 million remaining under existing share repurchase authorization of $250 million. * The company released its ninth-annual Industry Review providing key learnings and trends related to companies' corporate social responsibility (CSR) programs and employees' philanthropic behavior. * Blackbaud launched a Payment Terminal solution that allows Arts and Cultural organizations to receive secure, contactless chip and tap payments for tickets and donations. * General availability of Blackbaud Peer-to-Peer Fundraising was announced in Canada, and in Australia and New Zealand, enabling organizations around the world to connect their supporters to the power of JustGiving, the world's largest giving platform, without subscription or set-up costs. * Blackbaud celebrated 40 years in business, marking four decades of the company's commitment to powering social good and helping good take over. * For the second consecutive year, Blackbaud's annual conference, bbcon, will be virtual and free for all to attend. * Blackbaud appointed Chris Singh as senior vice president of Customer Success.

Visit www.blackbaud.com/newsroom for more information about Blackbaud's recent highlights.

Conference Call Details

What: Blackbaud's 2021 Second Quarter Conference Call

When: August 4, 2021

Time: 8:00 a.m. (Eastern Time)

Live Call: 1-877-407-3088 (US/Canada)

Webcast: Blackbaud's Investor Relations Webpage

About BlackbaudBlackbaud (NASDAQ: BLKB) is the world's leading cloud software company powering social good. Serving the entire social good community-nonprofits, higher education institutions, K-12 schools, healthcare organizations, faith communities, arts and cultural organizations, foundations, companies 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 four 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 onTwitter, LinkedIn, Instagram, and Facebook.

Investor Contact: Media Contact:

Steve Hufford media@blackbaud.com

Director, Investor Relations

IR@blackbaud.com

Forward-Looking StatementsExcept 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 condition and results of operations. 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; cybersecurity and data protection risks and related liabilities; uncertainty regarding the COVID-19 disruption; potential litigation involving us; 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.

TrademarksAll Blackbaud product names appearing herein are trademarks or registered trademarks of Blackbaud, Inc.

Non-GAAP Financial MeasuresBlackbaud has provided in this release financial information that has not been prepared in accordance with GAAP. Blackbaud uses non-GAAP financial measures internally in analyzing its operational performance. Accordingly, Blackbaud believes these non-GAAP measures are useful to investors, as a supplement to GAAP measures, in evaluating its ongoing operational performance 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 potential differences in the exact method of calculation between companies.

The non-GAAP financial measures discussed above exclude the impact of certain transactions that Blackbaud believes are not directly related to its operating performance in any particular period, but are for its long-term benefit over multiple periods. Blackbaud believes these non-GAAP financial measures reflect its ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in its business.

While Blackbaud believes these non-GAAP measures provide useful supplemental information, 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 reconciliations of these non-GAAP measures to their most directly comparable GAAP financial measures.

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.

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.

Rule of 40 is defined as non-GAAP organic revenue growth plus non-GAAP adjusted EBITDA margin. Non-GAAP adjusted EBITDA is defined as GAAP net income plus interest, net; income tax provision; depreciation; amortization of intangible assets from business combinations; amortization of software development costs; acquisition-related deferred revenue write-down; stock-based compensation; acquisition-related integration costs; acquisition-related expenses; employee severance; restructuring and other real estate activities; and security Incident-related costs, net of insurance.

Blackbaud, Inc.

Consolidated Balance Sheets

(Unaudited)



(dollars in thousands) June 30, December 31, 2021 2020

Assets

Current assets:

Cash and cash equivalents $28,288 $35,750

Restricted cash 434,567 609,219

Accounts receivable, net of allowance of $9,911 and $10,292 at 119,270 95,404 June 30, 2021 and December 31, 2020, respectively

Customer funds receivable 5,390 321

Prepaid expenses and other current assets 103,493 78,366

Total current assets 691,008 819,060

Property and equipment, net 104,914 105,177

Operating lease right-of-use assets 22,630 22,671

Software development costs, net 116,562 111,827

Goodwill 637,510 635,854

Intangible assets, net 260,072 277,506

Other assets 70,666 72,639

Total assets $1,903,362$2,044,734

Liabilities and stockholders' equity

Current liabilities:

Trade accounts payable $30,605 $27,836

Accrued expenses and other current liabilities 55,808 52,228

Due to customers 438,633 608,264

Debt, current portion 12,911 12,840

Deferred revenue, current portion 339,670 312,236

Total current liabilities 877,627 1,013,404

Debt, net of current portion 531,973 518,193

Deferred tax liability 56,227 54,086

Deferred revenue, net of current portion 5,749 4,678

Operating lease liabilities, net of current portion 17,173 17,357

Other liabilities 9,339 10,866

Total liabilities 1,498,088 1,618,584

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, 62,332,714 and 60,904,638 shares issued at June 30, 2021 and 62 61 December 31, 2020, respectively

Additional paid-in capital 605,486 544,963

Treasury stock, at cost; 13,451,524 and 12,054,268 shares at (449,877) (353,091) June 30, 2021 and December 31, 2020, respectively

Accumulated other comprehensive income (loss) 6,291 (2,497)

Retained earnings 243,312 236,714

Total stockholders' equity 405,274 426,150

Total liabilities and stockholders' equity $1,903,362$2,044,734

Blackbaud, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)



Three months ended Six months ended (dollars in thousands, except per share amounts)June 30, June 30, 2021 2020 2021 2020

Revenue

Recurring $216,986 $216,260 $423,736 $421,127

One-time services and other 12,454 15,731 24,895 34,485

Total revenue 229,440 231,991 448,631 455,612

Cost of revenue

Cost of recurring 94,435 91,370 183,300 180,921

Cost of one-time services and other 13,635 13,569 28,155 28,883

Total cost of revenue 108,070 104,939 211,455 209,804

Gross profit 121,370 127,052 237,176 245,808

Operating expenses

Sales, marketing and customer success 45,452 51,954 94,245 110,689

Research and development 30,222 24,895 59,401 49,872

General and administrative 32,008 29,842 62,595 55,697

Amortization 567 729 1,116 1,470

Restructuring 78 50 132 74

Total operating expenses 108,327 107,470 217,489 217,802

Income from operations 13,043 19,582 19,687 28,006

Interest expense (5,054) (3,893) (10,168) (8,052)

Other income (expense), net 487 630 (523) 1,700

Income before provision for income taxes 8,476 16,319 8,996 21,654

Income tax provision 1,745 4,496 2,429 5,192

Net income $6,731 $11,823 $6,567 $16,462

Earnings per share

Basic $0.14 $0.25 $0.14 $0.34

Diluted $0.14 $0.24 $0.14 $0.34

Common shares and equivalents outstanding

Basic weighted average shares 47,756,32648,239,92847,560,84748,138,125

Diluted weighted average shares 48,444,87448,418,37848,444,65848,465,077

Other comprehensive income (loss)

Foreign currency translation adjustment 1,783 (887) 4,294 (6,615)

Unrealized gain (loss) on derivative 345 551 4,494 (2,571) instruments, net of tax

Total other comprehensive income (loss) 2,128 (336) 8,788 (9,186)

Comprehensive income $8,859 $11,487 $15,355 $7,276

Blackbaud, Inc.

Consolidated Statements of Cash Flows

(Unaudited)



Six months ended June 30,

(dollars in thousands) 2021 2020

Cash flows from operating activities

Net income $6,567 $16,462

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

Depreciation and amortization 40,742 46,088

Provision for credit losses and sales returns 4,418 6,677

Stock-based compensation expense 60,554 33,713

Deferred taxes 276 1,945

Amortization of deferred financing costs and discount 879 376

Other non-cash adjustments 155 477

Changes in operating assets and liabilities, net of acquisition and disposal of businesses:

Accounts receivable (27,134) (48,167)

Prepaid expenses and other assets (18,162) (7,068)

Trade accounts payable 2,356 (8,984)

Accrued expenses and other liabilities 1,443 (26,520)

Deferred revenue 27,828 22,489

Net cash provided by operating activities 99,922 37,488

Cash flows from investing activities

Purchase of property and equipment (6,128) (5,887)

Capitalized software development costs (19,862) (21,679)

Net cash used in investing activities (25,990) (27,566)

Cash flows from financing activities

Proceeds from issuance of debt 128,300 202,100

Payments on debt (113,477)(185,250)

Employee taxes paid for withheld shares upon equity award settlement (38,712) (20,996)

Proceeds from exercise of stock options - 4

Change in due to customers (170,061)(121,612)

Change in customer funds receivable (5,014) (828)

Purchase of treasury stock (58,074) -

Dividend payments to stockholders - (5,960)

Net cash used in financing activities (257,038)(132,542)

Effect of exchange rate on cash, cash equivalents and restricted cash 992 (2,229)

Net decrease in cash, cash equivalents and restricted cash (182,114)(124,849)

Cash, cash equivalents and restricted cash, beginning of period 644,969 577,295

Cash, cash equivalents and restricted cash, end of period $462,855$452,446

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) June 30, December 31, 2021 2020

Cash and cash equivalents $28,288 $35,750

Restricted cash 434,567 609,219

Total cash, cash equivalents and restricted cash in the statement of cash flows$462,855$644,969

Blackbaud, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)



Three months ended Six months ended (dollars in thousands, except per share amounts) June 30, June 30, 2021 2020 2021 2020

GAAP Revenue $229,440 $231,991 $448,631 $455,612



GAAP gross profit $121,370 $127,052 $237,176 $245,808

GAAP gross margin 52.9 %54.8 %52.9 %54.0 %

Non-GAAP adjustments:

Add: Stock-based compensation expense 5,237 2,570 10,595 3,435

Add: Amortization of intangibles from business 8,880 9,686 18,008 20,616 combinations

Add: Employee severance 15 781 15 813

Subtotal 14,132 13,037 28,618 24,864

Non-GAAP gross profit $135,502 $140,089 $265,794 $270,672

Non-GAAP gross margin 59.1 %60.4 %59.2 %59.4 %



GAAP income from operations $13,043 $19,582 $19,687 $28,006

GAAP operating margin 5.7 %8.4 %4.4 %6.1 %

Non-GAAP adjustments:

Add: Stock-based compensation expense 30,549 20,133 60,554 33,713

Add: Amortization of intangibles from business 9,447 10,415 19,124 22,086 combinations

Add: Employee severance 451 4,264 1,442 4,361

Add: Acquisition-related integration costs - (71) (98) (103)

Add: Acquisition-related expenses 64 85 129 224

Add: Restructuring and other real estate activities 118 50 7 74

Add: Security Incident-related costs, net of insurance^(1)470 - 470 -

Subtotal 41,099 34,876 81,628 60,355

Non-GAAP income from operations $54,142 $54,458 $101,315 $88,361

Non-GAAP operating margin 23.6 %23.5 %22.6 %19.4 %



GAAP income before provision for income taxes $8,476 $16,319 $8,996 $21,654

GAAP net income $6,731 $11,823 $6,567 $16,462



Shares used in computing GAAP diluted earnings per share 48,444,874 48,418,378 48,444,658 48,465,077

GAAP diluted earnings per share $0.14 $0.24 $0.14 $0.34



Non-GAAP adjustments:

Add: GAAP income tax provision 1,745 4,496 2,429 5,192

Add: Total non-GAAP adjustments affecting income from 41,099 34,876 81,628 60,355 operations

Non-GAAP income before provision for income taxes 49,575 51,195 90,624 82,009

Assumed non-GAAP income tax provision^(2) 9,915 10,239 $18,125 $16,402

Non-GAAP net income $39,660 $40,956 $72,499 $65,607



Shares used in computing non-GAAP diluted earnings per 48,444,874 48,418,378 48,444,658 48,465,077 share

Non-GAAP diluted earnings per share $0.82 $0.85 $1.50 $1.35

Includes Security Incident-related costs incurred during the three and six months ended June 30, 2021 of $11.7 million and $24.4 million, respectively, net of probable insurance recoveries during the same periods of $11.2 million(1) and $23.9 million, respectively. Recorded expenses consisted primarily of payments to third-party service providers and consultants, including legal fees, as well as settlements of customer claims. Not included in this adjustment were costs associated with enhancements to our cybersecurity program.

(2) 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)



Three months ended Six months ended (dollars in thousands) June 30, June 30, 2021 2020 2021 2020

GAAP revenue $229,440 $231,991$448,631 $455,612

GAAP revenue growth (1.1) % (1.5) %

Add: Non-GAAP acquisition-related revenue^(1) - - - -

Non-GAAP organic revenue^(2) $229,440 $231,991$448,631 $455,612

Non-GAAP organic revenue growth (1.1) % (1.5) %



Non-GAAP organic revenue^(2) $229,440 $231,991$448,631 $455,612

Foreign currency impact on non-GAAP organic revenue^(3) (4,390) - (6,343) -

Non-GAAP organic revenue on constant currency basis^(3) $225,050 $231,991$442,288 $455,612

Non-GAAP organic revenue growth on constant currency (3.0) % (2.9) % basis



GAAP recurring revenue $216,986 $216,260$423,736 $421,127

GAAP recurring revenue growth 0.3 % 0.6 %

Add: Non-GAAP acquisition-related revenue^(1) - - - -

Non-GAAP organic recurring revenue $216,986 $216,260$423,736 $421,127

Non-GAAP organic recurring revenue growth 0.3 % 0.6 %

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(1) 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.

Non-GAAP organic revenue for the prior year periods presented herein may not(2) 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.

To determine non-GAAP organic revenue growth on a constant currency basis, revenues from entities reporting in foreign currencies were translated to U.S.(3) 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.

Blackbaud, Inc.

Reconciliation of GAAP to Non-GAAP Financial Measures (continued)

(Unaudited)



Three months ended Six months ended (dollars in thousands) June 30, June 30, 2021 2020 2021 2020

GAAP net income $6,731 $11,823$6,567 $16,462

Non-GAAP adjustments:

Add: Interest, net 4,977 3,783 9,939 7,420

Add: GAAP income tax provision 1,745 4,496 2,429 5,192

Add: Depreciation 3,140 3,595 6,351 7,136

Add: Amortization of intangibles from business 9,447 10,415 19,124 22,086 combinations

Add: Amortization of software development costs^(1) 8,119 10,367 16,082 17,039

Subtotal 27,428 32,656 53,925 58,873

Non-GAAP EBITDA $34,159 $44,479$60,492 $75,335

Non-GAAP EBITDA margin 14.9 % 13.5 %



Non-GAAP adjustments:

Add: Stock-based compensation expense 30,549 20,133 60,554 33,713

Add: Employee severance 451 4,264 1,442 4,361

Add: Acquisition-related integration costs - (71) (98) (103)

Add: Acquisition-related expenses 64 85 129 224

Add: Restructuring and other real estate activities 118 50 7 74

Add: Security Incident-related costs, net of insurance^(2)470 - 470 -

Subtotal 31,652 24,461 62,504 38,269

Adjusted Non-GAAP EBITDA $65,811 $68,940$122,996 $113,604

Adjusted Non-GAAP EBITDA margin 28.7 % 27.4 %



Rule of 40^(3) 27.6 % 25.9 %

(1) Includes amortization expense related to software development costs and amortization expense from capitalized cloud computing implementation costs.

Includes Security Incident-related costs incurred, net of probable insurance(2) recoveries. See additional details in the reconciliation of GAAP to Non-GAAP operating income above.

(3) Measured by non-GAAP organic revenue growth plus non-GAAP adjusted EBITDA margin. See Non-GAAP organic revenue growth table above.

Six months ended (dollars in thousands) June 30, 2021 2020

GAAP net cash provided by operating activities $99,922$37,488

Less: purchase of property and equipment (6,128) (5,887)

Less: capitalized software development costs (19,862)(21,679)

Non-GAAP free cash flow $73,932$9,922

View original content to download multimedia: https://www.prnewswire.com/news-releases/blackbaud-announces-2021-second-quarter-results-301347390.html

SOURCE Blackbaud, Inc.