Blackbaud Announces 2019 Fourth Quarter and Full Year Results

Fourth Quarter Recurring Revenue Grows 10%; Delivers on 2019 Financial Guidance;
Announces 2020 Financial Guidance

Charleston, S.C. (February 10, 2020) — Blackbaud (NASDAQ: BLKB), the world’s leading cloud software company powering social good, today announced financial results for its fourth quarter and full year ended December 31, 2019.

“We had a strong finish to 2019 as we furthered our strategic initiatives and drove valuable outcomes for our over 45,000 customers. Looking ahead, we have a positive outlook as the market remains solid, and we continue to be uniquely positioned to digitally transform the markets we serve,” said Mike Gianoni, Blackbaud’s president and CEO. “We’ve made truly transformational changes across the company over the last several years as we built a scalable operating model, created a culture of innovation and better positioned ourselves to capture the large market opportunities in front of us. The structural changes are now largely behind us, and we’re well positioned to further differentiate ourselves as the leading cloud software company powering social good and deliver increased value to our customers, employees and our shareholders.”

Fourth Quarter 2019 Results Compared to Fourth Quarter 2018 Results:

• Total GAAP revenue was $237.8 million, up 7.5%, with $219.8 million in GAAP recurring revenue, representing 92.4% of total GAAP revenue. GAAP recurring revenue was up 9.9%.
• Total non-GAAP revenue was $238.1 million, up 7.3%, with $220.1 million in non-GAAP recurring revenue, representing 92.4% of total non-GAAP revenue. Non-GAAP recurring revenue was up 9.8%.
• Non-GAAP organic recurring revenue increased 6.7%.
• GAAP income from operations was $3.6 million, with GAAP operating margin of 1.5%, a decrease of 510 basis points.
• Non-GAAP income from operations was $35.5 million, with non-GAAP operating margin of 14.9%, a decrease of 420 basis points.
• GAAP net income was $1.3 million, with GAAP diluted earnings per share of $0.03, down $0.16.
• Non-GAAP net income was $24.5 million, with non-GAAP diluted earnings per share of $0.51, down $0.14.
• Non-GAAP free cash flow was $46.1 million, a decrease of $4.6 million.

“Our strong performance in the fourth-quarter allowed us to achieve our full year financial guidance and exceed the mid-point of our ranges for revenue and earnings per share. Over the course of 2019, we made strategic investments to further expand our go-to-market model, drive cloud innovation for our customers and ensure scalability in our business,” said Tony Boor, Blackbaud’s executive vice president and CFO. “We’re optimistic about the year ahead as we continue the positive shift in revenue mix towards recurring revenue. From a profitability and cash flow perspective, we’re underway in a multi-year effort to migrate our cloud infrastructure to leading public cloud service providers, and we expect to continue a heightened pace of investment in our go-to-market model and cloud innovation to better position the business for accelerated growth and long term success.”

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:

• A year after acquiring market-leading corporate social responsibility provider, YourCause, Blackbaud reports record growth and expansion of its solutions for companies committed to social good.
• Blackbaud K–12 Solutions^TM closes out a marquee 2019 marked by increasing revenue and efficiencies for private schools through its total school solution.
• Blackbaud appoints Margaret “Maggie” Driscoll as its Chief People Officer, leading all human resources functions for the company.
• Blackbaud, which powers 24 of the top 25 private U.S. colleges as ranked by Forbes with its solutions, continues to transform the higher education technology landscape and demonstrate growth just a year after introducing its comprehensive Cloud Solution for Higher Education.
• To celebrate the eighth annual global giving holiday, GivingTuesday, Blackbaud unveils a new digital resource to support comprehensive giving strategies.

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

Full-Year 2019 Results Compared to Full-Year 2018 Results:

• Total GAAP revenue was $900.4 million, up 6.1%, with $831.6 million in GAAP recurring revenue, representing 92.4% of total GAAP revenue. GAAP recurring revenue was up 9.1%.
• Total non-GAAP revenue was $902.4 million, up 6.0%, with $833.5 million in non-GAAP recurring revenue, representing 92.4% of total non-GAAP revenue. Non-GAAP recurring revenue was up 9.0%.
• Non-GAAP organic recurring revenue increased 5.8%.
• GAAP income from operations was $27.1 million, with GAAP operating margin of 3.0%, a decrease of 400 basis points.
• Non-GAAP income from operations was $151.6 million, with non-GAAP operating margin of 16.8%, a decrease of 320 basis points.
• GAAP net income was $11.9 million, with GAAP diluted earnings per share of $0.25, down $0.68.
• Non-GAAP net income was $108.0 million, with non-GAAP diluted earnings per share of $2.24, down $0.35.
• Non-GAAP free cash flow was $124.1 million, a decrease of $24.9 million.

Dividend

Blackbaud announced today that its Board of Directors has declared a first quarter 2020 dividend of $0.12 per share payable on March 13, 2020 to stockholders of record on February 28, 2020.

Financial Outlook

Blackbaud today announced its 2020 full year financial guidance:

• Non-GAAP revenue of $930 million to $955 million
• Non-GAAP operating margin of 16.0% to 16.5%
• Non-GAAP diluted earnings per share of $2.20 to $2.35
• Non-GAAP free cash flow of $100 million to $115 million

Blackbaud has not reconciled forward-looking full-year non-GAAP financial measures contained in this news release to their most directly comparable GAAP measures, as permitted by Item 10(e)(1)(i)(B) of Regulation S-K. Such reconciliations would require unreasonable efforts at this time to estimate and quantify with a reasonable degree of certainty various necessary GAAP components, including for example those related to compensation, acquisition transactions and integration, tax items or others that may arise during the year. These components and other factors could materially impact the amount of the future directly comparable GAAP measures, which may differ significantly from their non-GAAP counterparts.

Conference Call Details

What: Blackbaud’s Fourth Quarter and Full Year 2019 Conference Call
When: February 11, 2020
Time: 8:00 a.m. (Eastern Time)
Live Call: 877-407-3088 (US/Canada)
Webcast: Blackbaud’s Investor Relations Webpage

About Blackbaud

Blackbaud (NASDAQ: BLKB) is the world’s leading cloud software company powering social good. Serving the entire social good community—nonprofits, foundations, companies, education institutions, healthcare organizations 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 more than three 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 on Twitter, LinkedIn, Instagram and Facebook.

Investor Contact:

Steve Hufford
Director of Investor Relations
843-654-2655
steve.hufford@blackbaud.com

Media Contact:
media@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 predictability of our financial results, expectations that our revenue will continue to grow, and expectations that we will achieve our projected 2020 full-year financial guidance. 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; risks related to our dividend policy and stock repurchase program, including the possibility that we might discontinue payment of dividends; 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.

Trademarks

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 recurring revenue, non-GAAP gross profit, non-GAAP gross margin, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income and non-GAAP diluted earnings per share. Blackbaud has acquired businesses whose net tangible assets include deferred revenue. In accordance with GAAP reporting requirements, Blackbaud recorded write-downs of deferred revenue to fair value, which resulted in lower recognized revenue. Both on a quarterly and year-to-date basis, the revenue for the acquired businesses is deferred and typically recognized over a one-year period, so Blackbaud’s GAAP revenues for the one-year period after the acquisitions will not reflect the full amount of revenues that would have been reported if the acquired deferred revenue was not written down to fair value. The non-GAAP measures described above reverse the acquisition-related deferred revenue write-downs so that the full amount of revenue booked by the acquired companies is included, which Blackbaud believes provides a more accurate representation of a revenue run-rate in a given period. In addition to reversing write-downs of acquisition-related deferred revenue, non-GAAP financial measures discussed above exclude the impact of certain items that Blackbaud believes are not directly related to its performance in any particular period, but are for its long-term benefit over multiple periods.

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.

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.

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 these non-GAAP financial measures reflect Blackbaud’s ongoing business in a manner that allows for meaningful period-to-period comparison and analysis of trends in its business. In addition, Blackbaud believes that the use of these non-GAAP financial measures provides additional information for investors to use in evaluating ongoing operating results 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 differences in the exact method of calculation between companies. 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.