Blackbaud, Inc. Earnings Rise on Strong Organic Growth

By Markets Fool.com

Image source: Getty Images.

Continue Reading Below

Blackbaud's (NASDAQ: BLKB) software offerings powering social good continue to sell at a brisk pace as new customers sign up for its cloud-based services. That rapid adoption led to double-digit revenue and profit growth in the third quarter. Those results kept the company on the path to hit its full-year guidance.

Blackbaud results: The raw numbers

Metric

Q3 2016 Actuals

Q3 2015 Actuals

Growth (YOY)

Non-GAAP revenue

$183.1 million

$141.9 million

14.5%

Non-GAAP net income

$21.3 million

$17.7 million

20.8%

Adjusted earnings per share (EPS)

$0.45

$0.38

18.4%

YOY = year over year. Data source: Blackbaud.

What happened with Blackbaud this quarter?

Continue Reading Below

Blackbaud continues to add new customers to its cloud-based services.

  • Blackbaud's revenue rose double digits this quarter mainly due to organic growth, with non-GAAP organic revenue up 8.1% year over year. Subscriptions revenue led the way, up 30.3% to $105.4 million. Revenue from services and license fees also increased from the year-ago quarter, up 2% and 21.3%, respectively, to $36.6 million and $4.6 million. This growth more than offsets weaker maintenance revenue, which slipped 4.7% to $36.4 million.
  • Recurring revenue now represents 77.5% of the total, which is up from 75% in the year-ago quarter. That said, the percentage is off from 78.7% of total revenue last quarter and 79.4% to start the year.
  • Margins contracted by 50 basis points to 18.6% due in part to higher costs.
  • Cash flow from operations was a robust $51.4 million, up 32.5% year over year.

What management had to say

About the quarter, CEO Mike Gianoni said:

We posted another very solid quarter, with 77.5% of our total revenue now recurring, and non-GAAP organic revenue growth of 8.1%. Our ability to accelerate customer value through innovative new technology is driving our strong financial performance, and will enable us to fuel future growth. We just concluded our annual conference and it's clear that Blackbaud is setting a new technology standard for the social good community.

One of the drivers of Blackbaud's growth is its cloud-based accounting solution, Financial Edge NXT, which offers users an all-in-one solution for transparency, stewardship, and compliance. Nonprofit customers are rapidly adopting the product because it not only serves a need but does it in an innovative way that is increasing productivity and accessibility.

Looking forward

Because Blackbaud's results were as expected, CFO Tony Boor did not have many changes to the company's guidance:

We are maintaining our non-GAAP financial guidance, while increasing cash flow from operations to account for the early adoption of ASU 2016-09 (the new share-based compensation expense accounting standard).

Those new standards will increase the guidance for cash flow to a range of $147 million to $157 million, which is up from the prior range of $135 million to $145 million. Otherwise, the company continues to expect non-GAAP revenue to be between $725 million to $740 million and non-GAAP earnings per share of $1.90 to $1.98.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Matt DiLallo owns shares of Blackbaud. The Motley Fool recommends Blackbaud. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.