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Blackbaud, Inc. Announces Second Quarter 2011 Results
[August 04, 2011]

Blackbaud, Inc. Announces Second Quarter 2011 Results


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 second quarter ended June 30, 2011.

Marc Chardon, Chief Executive Officer of Blackbaud, stated, "We are very pleased with the company's financial performance for the second quarter, which was highlighted by revenue and profitability that were above the high-end of our guidance. Market demand remains stable and our general markets and enterprise business units are executing at a high level."

"Blackbaud continues to reinforce its leadership position at the high-end of the market. In the second quarter, we matched our record first quarter performance, closing five Enterprise CRM deals, and are well on our way to having a record year in this important growth segment of our market. We are increasingly leveraging our product investments and experience in developing best practices for large and complex implementations, as well as what we have learned in working with the hundreds of enterprise customers using our Target Analytics, Target Software and PIDI solutions," Chardon added. "The strong adoption of our online fundraising solutions, including a record quarter of unit sales from our Sphere and Net Community offerings, particularly in our general markets business unit, continues to drive strong growth in our subscription revenue."

Blackbaud reported total revenue of $93.4 million for the quarter ended June 30, 2011, an increase of 16% compared to $80.7 million for the second quarter of 2010. Income from operations and net income, determined in accordance with GAAP, were $13.8 million and $8.9 million, respectively, compared with $11.2 million and $6.8 million, respectively, for the second quarter of 2010. Diluted earnings per share were $0.20 for the quarter ended June 30, 2011, compared with $0.15 in the same period last year.

Non-GAAP income from operations, which excludes stock-based compensation expense and amortization of intangibles arising from business combinations, was $19.2 million, an increase of 21% compared to $15.8 million in the same period last year. Non-GAAP net income was $11.8 million for the quarter ended June 30, 2011, an increase of 24% compared to $9.5 million in the same period last year. Non-GAAP diluted earnings per share were $0.27 for the quarter ended June 30, 2011, an increase of 23% compared with $0.22 in the same period last year.

A reconciliation of GAAP to 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."

The Company ended the second quarter with $33.4 million in cash, an increase from $24.1 million at the end of the previous quarter. The company generated $37.8 million in cash from operations for the six months ended June 30, 2011, an increase of 53% compared to the same period last year.

"Blackbaud delivered mid-teens revenue growth for the second consecutive quarter, and we believe the company is well positioned to do the same for the full year 2011," said Timothy V. Williams, Chief Financial Officer of Blackbaud. "The return to solid services revenue growth is encouraging considering it was particularly hard hit during the economic downturn. In addition, we are very pleased with the growth of our recurring revenue, which has an annualized run rate that is approaching $250 million, including subscription revenue that is now at over $100 million annualized."

Third Quarter 2011 Dividend and Share Repurchase Program

Blackbaud announced today that its Board of Directors has approved a third quarter dividend of $0.12 per share payable on September 15, 2011, to stockholders of record on August 26, 2011. Additionally, as of June 30, 2011, $50.0 million remained available under the Company's share repurchase program, which became effective on August 1, 2010.

Conference Call Details

Blackbaud will host a conference call today, August 4, 2011, at 5:00 p.m. (Eastern Time) to discuss the Company's financial results, operations and related matters. To access this call, dial 888-542-1139 (domestic) or 719-325-2474 (international). A replay of this conference call will be available through August 11, 2011, at 877-870-5176 (domestic) or 858-384-5517 (international). The replay passcode is 6644079. 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

Blackbaud is the leading global provider of software and services designed specifically for nonprofit organizations, enabling them to improve operational efficiency, build strong relationships, and raise more money to support their missions. Approximately 24,000 organizations - including The American Red Cross, Cancer Research UK, Earthjustice, International Fund for Animal Welfare, Lincoln Center, The Salvation Army, The Taft School, Tulsa Community Foundation, Ursinus College, the WGBH Educational Foundation, and Yale University - use one or more Blackbaud products and services for fundraising, constituent relationship management, financial management, website management, direct marketing, education administration, ticketing, business intelligence, prospect research, consulting, and analytics. Since 1981, Blackbaud's sole focus and expertise has been partnering with nonprofits and providing them the solutions they need to make a difference in their local communities and worldwide. Headquartered in the United States, Blackbaud also has operations in Australia, Canada, Hong Kong, 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 that 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: general economic risks; uncertainty regarding increased business and renewals from existing customers; continued success in sales growth; management of integration of acquired companies and other risks associated with acquisitions; risks associated with successful implementation of multiple integrated software products; the ability to attract and retain key personnel; risks related to our 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. 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 income from operations and margin, non-GAAP net income and non-GAAP diluted earnings per share. 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. As noted, the non-GAAP financial results discussed above exclude stock-based compensation expense, costs associated with amortization of intangibles arising from business combinations, one-time write-offs or expenses incurred in connection with acquisitions and a gain in connection with the sale of a business.

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)
         
June 30, December 31,
(in thousands, except share amounts)     2011       2010
 
Assets
Current assets:
Cash and cash equivalents $ 33,397 $ 27,974
Donor restricted cash 10,836 16,359

Accounts receivable, net of allowance of $2,826 and $2,687
 at June 30, 2011 and December 31, 2010, respectively

68,610 59,804
Prepaid expenses and other current assets 29,770 33,847
Deferred tax asset, current portion   5,173           5,164  
Total current assets 147,786 143,148
Property and equipment, net 25,558 22,963
Deferred tax asset 39,082 44,639
Goodwill 89,450 76,247
Intangible assets, net 42,229 38,515
Other assets   5,494           2,579  
 
Total assets $ 349,599         $ 328,091  
 
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 13,344 $ 9,883
Accrued expenses and other current liabilities 27,831 28,322
Donations payable 10,835 16,359
Deferred revenue   146,895           141,149  
Total current liabilities 198,905 195,713
Deferred revenue, noncurrent 10,593 6,900
Other noncurrent liabilities   2,605           2,419  
 
Total liabilities   212,103           205,032  
 
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, 53,469,136 and 53,316,280 shares issued
 at June 30, 2011 and December 31, 2010, respectively

54 53
Additional paid-in capital 167,402 158,419

Treasury stock, at cost; 8,857,378 and 8,842,882 shares at
 June 30, 2011 and December 31, 2010, respectively

(161,596 ) (161,186 )
Accumulated other comprehensive loss (516 ) (512 )
Retained earnings   132,152           126,285  
 
Total stockholders' equity   137,496           123,059  
 
Total liabilities and stockholders' equity $ 349,599         $ 328,091  
 
 

Blackbaud, Inc.
Consolidated statements of operations
(Unaudited)
        Three months ended June 30,         Six months ended June 30,
(in thousands, except share and per share amounts)         2011     2010 2011     2010
Revenue        
License fees $ 5,097 $ 6,972 $ 9,648 $ 12,139
Subscriptions 25,870 20,386 51,380 39,562
Services 27,976 20,886 52,008 40,975
Maintenance 32,601 30,957 64,434 61,554
Other revenue   1,858           1,470     3,206           2,680  
 
Total revenue   93,402           80,671     180,676           156,910  
 
Cost of revenue
Cost of license fees 1,031 975 1,719 1,592
Cost of subscriptions 10,473 7,616 19,635 14,842
Cost of services 20,176 15,837 39,181 31,753
Cost of maintenance 6,035 5,925 12,286 11,695
Cost of other revenue   1,411           1,333     2,545           2,450  
 
Total cost of revenue   39,126           31,686     75,366           62,332  
 
Gross profit   54,276           48,985     105,310           94,578  
 
Operating expenses
Sales and marketing 19,048 19,023 38,393 35,446
Research and development 12,033 11,710 23,999 22,619
General and administrative 9,176 6,901 18,377 15,298
Amortization   245           196     479           392  
- - - -
Total operating expenses   40,502           37,830     81,248           73,755  
 
Income from operations 13,774 11,155 24,062 20,823
Interest income 45 23 78 43
Interest expense (60 ) (79 ) (84 ) (125 )
Other income (expense), net   216           (185 )   285           (182 )
 
Income before provision for income taxes 13,975 10,914 24,341 20,559
Income tax provision   5,047           4,124     7,829           7,817  
 
Net income $ 8,928         $ 6,790   $ 16,512         $ 12,742  
 
Earnings per share
Basic $ 0.21 $ 0.16 $ 0.38 $ 0.29
Diluted $ 0.20 $ 0.15 $ 0.38 $ 0.29
 
Common shares and equivalents outstanding
Basic weighted average shares 43,447,007 43,260,625 43,399,874 43,347,630
Diluted weighted average shares 44,098,046 44,027,307 44,004,712 44,126,259
Dividends per share $ 0.12 $ 0.11 $ 0.24 $ 0.22
 
 
Blackbaud, Inc.
Consolidated statements of cash flows
(Unaudited)
         
Six months ended June 30,
(in thousands)       2011     2010
 
Cash flows from operating activities
Net income $ 16,512 $ 12,742

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

Depreciation and amortization 8,107 7,844
Provision for doubtful accounts and sales returns 2,366 702
Stock-based compensation expense 7,326 6,060
Excess tax benefits from stock based compensation (226 ) (1,040 )
Deferred taxes 2,453 1,737
Other non-cash adjustments (617 ) (140 )
Changes in operating assets and liabilities, net of acquisition of businesses:
Accounts receivable (10,621 ) (12,540 )
Prepaid expenses and other assets 5,233 1,318
Trade accounts payable 1,355 1,411
Accrued expenses and other liabilities (3,045 ) (3,517 )
Donor restricted cash 5,540 5,929
Donations payable (5,540 ) (5,929 )
Deferred revenue   9,003           10,109  
Net cash provided by operating activities   37,846           24,686  
Cash flows from investing activities
Purchase of property and equipment (7,703 ) (6,761 )
Purchase of net assets of acquired companies, net of cash acquired (16,475 ) (390 )
Purchase of investment - (2,000 )
Purchase of intangible assets - (130 )
Proceeds from sale of assets   719           -  
Net cash used in investing activities   (23,459 )         (9,281 )
Cash flows from financing activities
Dividend payments to stockholders (10,686 ) (9,839 )
Proceeds from exercise of stock options 1,925 2,980
Excess tax benefits from stock based compensation 226 1,040
Purchase of treasury stock - (21,542 )
Proceeds from issuance of debt - 4,000
Payments on debt - (1,071 )
Payments of deferred financing fees (767 ) -
Payments on capital lease obligations   (25 )         (112 )
Net cash used in financing activities   (9,327 )         (24,544 )
Effect of exchange rate on cash and cash equivalents   363           (366 )
Net increase (decrease) in cash and cash equivalents 5,423 (9,505 )
Cash and cash equivalents, beginning of period   27,974           22,769  
Cash and cash equivalents, end of period $ 33,397         $ 13,264  
 
 
Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP financial measures
(Unaudited)
                   
 
 
 
Three months ended June 30, Six months ended June 30,
(in thousands, except per share amounts)       2011     2010 2011     2010
 
GAAP revenue $ 93,402       $ 80,671   $ 180,676       $ 156,910  
 
 
GAAP gross profit $ 54,276 $ 48,985 $ 105,310 $ 94,578
 
Non-GAAP adjustments:
Add: Stock-based compensation expense 810 667 1,611 1,372
Add: Amortization of intangibles from business combinations   1,605         1,540     3,196         3,046  
Total Non-GAAP adjustments 2,415 2,207 4,807 4,418
 
Non-GAAP gross profit $ 56,691       $ 51,192   $ 110,117       $ 98,996  
 
Non-GAAP gross margin   61 %       63 %   61 %       63 %
 
 
 
GAAP income from operations $ 13,774 $ 11,155 $ 24,062 $ 20,823
 
Non-GAAP adjustments:
Add: Stock-based compensation expense 3,530 2,908 7,326 6,060
Add: Amortization of intangibles from business combinations 1,850 1,736 3,675 3,438
Add: Acquisition-related expenses - - 1,054 -
Less: Gain on sale of assets   -         -     (549 )       -  
Total Non-GAAP adjustments 5,380 4,644 11,506 9,498
 
Non-GAAP income from operations $ 19,154       $ 15,799   $ 35,568       $ 30,321  
 
Non-GAAP operating margin   21 %       20 %   20 %       19 %
 
 
 
GAAP net income $ 8,928 $ 6,790 $ 16,512 $ 12,742
 
Non-GAAP adjustments:
Add: Total Non-GAAP adjustments affecting income from operations 5,380 4,644 11,506 9,498
Add: Tax impact related to Non-GAAP adjustments   (2,501 )       (1,943 )   (6,152 )       (3,905 )
 
Non-GAAP net income $ 11,807       $ 9,491   $ 21,866       $ 18,335  
 
 
 
 
Shares used in computing Non-GAAP diluted earnings per share   44,098         44,027     44,005         44,126  
 
Non-GAAP diluted earnings per share $ 0.27       $ 0.22   $ 0.50       $ 0.42  
 
Detail of Non-GAAP adjustments:
Stock-based compensation expense:
Cost of revenue
Cost of subscriptions $ 225 $ 75 $ 327 $ 167
Cost of services 447 414 904 850
Cost of maintenance   138         178     380         355  
Subtotal 810 667 1,611 1,372
Operating expenses
Sales and marketing 272 344 629 705
Research and development 671 704 1,514 1,415
General and administrative   1,777         1,193     3,572         2,568  
Subtotal   2,720         2,241     5,715         4,688  
Total stock-based compensation expense $ 3,530       $ 2,908   $ 7,326       $ 6,060  
 
Amortization of intangibles from business combinations:
Cost of revenue
Cost of license fees $ 126 $ 115 $ 258 $ 209
Cost of subscriptions 816 760 1,617 1,520
Cost of services 391 341 778 677
Cost of maintenance 253 306 505 603
Cost of other revenue   19         18     38         37  
Subtotal 1,605 1,540 3,196 3,046
Operating expenses   245         196     479         392  
Total amortization of intangibles from business combinations $ 1,850       $ 1,736   $ 3,675       $ 3,438  


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