Blackbaud, Inc. Announces First Quarter 2013 Results

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Blackbaud, Inc. Announces First Quarter 2013 Results

Announces Second Quarter 2013 Dividend

CHARLESTON, S.C.--(BUSINESS WIRE)-- Blackbaud, Inc. (NAS: BLKB) , the leading provider of software and services to the nonprofit sector, today announced financial results for its first quarter ended March 31, 2013.


"Our first quarter results were a solid start to 2013, as our revenue and profitability were above the high end of our guidance ranges," stated Marc Chardon, Chief Executive Officer of Blackbaud. "There is growing awareness among non-profit organizations that they need to invest in new or upgraded fundraising software and related solutions in order to achieve their missions. We are still in the early stages of benefitting from our integrated product strategy following the acquisition of Convio, and we are encouraged by customer feedback that continues to be very positive on the direction of our company and solutions."

First Quarter 2013 GAAP Financial Results

Blackbaud reported total revenue of $115.6 million for the first quarter of 2013, an increase of 22% compared to $94.7 million for the first quarter of 2012. GAAP income from operations and net income were $4.6 million and $2.7 million, respectively, compared with $5.3 million and $2.8 million, respectively, for the first quarter of 2012. Diluted earnings per share were $0.06 for the first quarter of 2013, consistent with $0.06 in the same period last year.

First Quarter 2013 Non-GAAP Financial Results

Total non-GAAP revenue, including $0.6 million of deferred revenue write down associated with the Convio acquisition, was $116.2 million for the first quarter of 2013, which exceeded the high-end of the company's guidance. Non-GAAP income from operations, which excludes the write-down of Convio deferred revenue, stock-based compensation expense, amortization of intangibles arising from business combinations, integration and restructuring costs, and CEO severance costs, was $20.9 million for the first quarter of 2013, up from $13.2 million in the same period last year and above the high-end of the company's guidance. Non-GAAP net income was $11.8 million for the first quarter of 2013, up from $7.8 million in the same period last year. Non-GAAP diluted earnings per share were $0.26 for the first quarter of 2013, up from $0.17 in the same period last year and above the high-end of the company's guidance.

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."

"The first quarter was a strong performance from a profitability perspective as we benefitted from the realization of the merger integration and cost synergy efforts that we've undertaken in recent quarters," said Tony Boor, Chief Financial Officer of Blackbaud. "With customer demand trends remaining stable and our operational efficiency improving at a faster than expected pace, we have the opportunity to move forward more quickly with investments in core back office systems that will help our integrated organization scale from a long-term perspective. We continue to believe that executing against our operational efficiency plans can drive meaningful shareholder value with improved revenue growth over time, providing additional opportunity for value creation."

Balance Sheet and Cash Flow

The company ended the first quarter with $8.4 million in cash, compared to $13.5 million at the end of 2012. The company generated $12.9 million in cash flow from operations during the first quarter, returned $5.5 million to stockholders by way of dividend, invested $7.1 million in capital expenditures and capitalized software and reduced its debt balance by $4.5 million.

Dividend

Blackbaud announced today that its Board of Directors has approved a second quarter 2013 dividend of $0.12 per share payable on June 14, 2013, to stockholders of record on May 28, 2013.

Conference Call Details

Blackbaud will host a conference call today, May 1, 2013, at 8:00 a.m. (Eastern Time) to discuss the company's financial results, operations and related matters. To access this call, dial 877-407-3982 (domestic) or 201-493-6780 (international). A replay of this conference call will be available through May 8, 2013, at 877-870-5176 (domestic) or 858-384-5517 (international). The replay passcode is 411126. 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 (NAS: BLKB) combines technology and expertise to help organizations achieve their missions. Blackbaud works with more than 28,000 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, eMarketing, advocacy, constituent relationship management (CRM), payment services, analytics and vertical-specific solutions. Using Blackbaud technology, these organizations 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, 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: the growing need for non-profit organizations to invest in new technology; benefits from our integrated product strategy; the positive direction of our company and solutions; customer demand trends; improvements in operational efficiency and the pace of such improvements; our ability to invest more quickly in back office systems; the ability of system investments to help our integrated organizational scale; the ability of our operational efficiency plans to drive meaningful shareholder value; improved revenue growth over time; and, such revenue growth providing value creation. 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; the ability to attract and retain key personnel; 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; 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-related and integration costs; restructuring costs; and CEO severance. 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)
 
(in thousands, except share amounts)  March 31,
2013
  December 31,
2012
 
Assets
Current assets:
Cash and cash equivalents$8,449$13,491
Donor restricted cash26,28068,177

Accounts receivable, net of allowance of $7,560 and $8,546
  at March 31, 2013 and December 31, 2012, respectively

69,40275,692
Prepaid expenses and other current assets27,52840,589
Deferred tax asset, current portion 17,745    15,799 
Total current assets149,404213,748
Property and equipment, net48,04549,063
Goodwill265,667265,055
Intangible assets, net162,525168,037
Other assets 16,752    9,844 
 
Total assets$642,393   $705,747 
 
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable$9,746$13,623
Accrued expenses and other current liabilities37,51245,996
Donations payable26,28068,177
Debt, current portion10,00010,000
Deferred revenue, current portion 166,986    173,899 
Total current liabilities250,524311,695
Long-term debt, net of current portion201,000205,500
Deferred tax liability26,75824,468
Deferred revenue, net of current portion10,06011,119
Other liabilities 4,366    5,281 
 
Total liabilities 492,708    

558,063

 
 
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, 54,883,954 and 54,859,604 shares issued
at March 31, 2013 and December 31, 2012, respectively5555
Additional paid-in capital208,853203,638

Treasury stock, at cost; 9,239,829 and 9,209,371 shares
  at March 31, 2013 and December 31, 2012, respectively

(171,733)(170,898)
Accumulated other comprehensive loss(1,569)(1,973)
Retained earnings 114,079    116,862 
 
Total stockholders' equity 149,685    147,684 
 
Total liabilities and stockholders' equity$642,393   $705,747 
    
Blackbaud, Inc.
Consolidated statements of comprehensive income
(Unaudited)
 
 
Three months ended March 31,
(in thousands, except share and per share amounts)   2013    2012 
Revenue
License fees$2,980$7,168
Subscriptions47,75628,062
Services28,83823,958
Maintenance34,14833,566
Other revenue 1,901    1,952 
Total revenue 115,623    94,706 
Cost of revenue
Cost of license fees725613
Cost of subscriptions20,38312,974
Cost of services25,39920,042
Cost of maintenance5,8745,977
Cost of other revenue 1,197    1,469 
Total cost of revenue 53,578    41,075 
Gross profit 62,045    53,631 
Operating expenses
Sales and marketing24,39220,377
Research and development16,42913,304
General and administrative12,74214,501
Restructuring3,210-
Amortization 678    197 
Total operating expenses 57,451    48,379 
Income from operations4,5945,252
Interest income1747
Interest expense(1,694)(191)
Other income (expense), net 103    (308)
Income before provision for income taxes3,0204,800
Income tax provision 354    2,041 
Net income$2,666   $2,759 
 
Earnings per share
Basic$0.06$0.06
Diluted$0.06$0.06
 
Common shares and equivalents outstanding
Basic weighted average shares44,473,51943,944,459
Diluted weighted average shares45,009,21344,613,256
 
Dividends per share$0.12$0.12
 
 
Other comprehensive income
Foreign currency translation adjustment285279
Unrealized gain on derivative instruments, net of tax 119    - 
Total other comprehensive income 404    279 
Comprehensive income$3,070   $3,038 
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Blackbaud, Inc.
Consolidated statements of cash flows
(Unaudited)
 
Three months ended March 31,
(in thousands)   2013    2012 
 
Cash flows from operating activities
Net income$2,666$2,759
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization10,4084,816
Provision for doubtful accounts and sales returns6701,117
Stock-based compensation expense5,1783,836
Excess tax benefits from stock-based compensation-(310)
Deferred taxes(188)967
Other non-cash adjustments353(555)
Changes in operating assets and liabilities, net of acquisition of businesses:
Accounts receivable5,404(1,686)
Prepaid expenses and other assets6,416(1,754)