Blackbaud, Inc. Announces Third Quarter 2012 Results

Blackbaud, Inc. Announces Third Quarter 2012 Results

Announces Fourth Quarter 2012 Dividend

CHARLESTON, S.C.--(BUSINESS WIRE)-- Blackbaud, Inc. (NAS: 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 (NAS: 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

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