Blackbaud Announces 2024 Third Quarter Results

At bbcon® 2024, Blackbaud Launched Its Most Aggressive Innovation Plans Yet

Charleston, S.C. (October 30, 2024) - Blackbaud (NASDAQ: BLKB), the leading provider of software for powering social impact, today announced financial results for its third quarter ended September 30, 2024.

"Blackbaud is a clear market leader with a path to penetrate even further into a rich market opportunity while empowering our existing customers through continued innovation. In September at our annual tech conference, bbcon, we introduced six waves of innovation that were met with overwhelming enthusiasm from our customers," said Mike Gianoni, president, CEO and vice chairman of the board of directors, Blackbaud. "Blackbaud remains focused on our operating plan and delivering an attractive multi-year financial profile of balanced mid single-digit plus organic revenue growth and improving profitability and cash flows. We plan to put our strong cash flow to work in a purposeful capital allocation strategy that benefits our stockholders. I continue to be excited about the company's mid- and long-term future."

Third Quarter 2024 Results Compared to Third Quarter 2023 Results:

• GAAP total revenue was $286.7 million, up 3.3% and non-GAAP organic revenue increased 4.3%.
• GAAP recurring revenue was $280.0 million, up 4.1% and represented 98% of total revenue. Non-GAAP organic recurring revenue increased 4.1%.
• GAAP income from operations was $43.8 million, with GAAP operating margin of 15.3%, an increase of 740 basis points.
• Non-GAAP income from operations was $78.9 million, with non-GAAP operating margin of 27.5%, a decrease of 120 basis points.
• GAAP net income was $20.5 million, with GAAP diluted earnings per share of $0.40, up $0.23 per share.
• Non-GAAP net income was $51.1 million, with non-GAAP diluted earnings per share of $0.99, down $0.13 per share.
• Non-GAAP adjusted EBITDA was $95.2 million, down $1.9 million, with non-GAAP adjusted EBITDA margin of 33.2%, a decrease of 180 basis points.
• GAAP net cash provided by operating activities was $104.0 million, a decrease of $24.0 million, with GAAP operating cash flow margin of 36.3%, a decrease of 980 basis points.
• Non-GAAP free cash flow was $88.3 million, a decrease of $22.3 million, with non-GAAP free cash flow margin of 30.8%, a decrease of 900 basis points.
• Non-GAAP adjusted free cash flow was $97.6 million, a decrease of $20.3 million, with non-GAAP adjusted free cash flow margin of 34.0%, a decrease of 850 basis points.

"The revision of our FY24 guide is a direct result of continued underperformance of EVERFI," said Tony Boor, executive vice president and CFO, Blackbaud. "We've spoken in the past about improving EVERFI's performance and evaluating strategic options. We've hired a strategic advisor to assist us in evaluating options and have recently rightsized the business to better align costs to revenues. We plan to continue to update you as appropriate in this area."

"However, we remain confident that our underlying business and our future opportunities remain strong. In the third quarter, our Social Sector, representing 89% of total revenue, grew at 6.6%. Non-GAAP adjusted EBITDA margin was 33.2% and the business generated $97.6 million in adjusted free cash flow for the quarter. We remain committed to our stock repurchase program and as of today have repurchased approximately 8% of the common stock outstanding as of year-end 2023. We plan to continue to be purposeful about buying back our stock as well as investing in product innovation to deliver a compelling investment thesis to new and existing shareholders. We remain committed to delivering an attractive financial investment balanced between top-line growth, profitability and cash flow, all of which are supported by our proven operating plan."

An explanation of all non-GAAP financial measures referenced in this press release, including the Rule of 40, 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

• At bbcon 2024, Blackbaud showcased the future of AI-powered fundraising and financial management for social impact organizations, rolling out six waves of innovation to build connection between solutions and teams while delivering contextual intelligence.
• Blackbaud and Microsoft announced upcoming product innovations that will enable Blackbaud customers to soon benefit from deeper integration of Microsoft AI and analytics into Blackbaud software, enabling them to achieve greater impact, gain in-depth insights and increase efficiency.
• The company released Blackbaud Donation Forms to U.S. Blackbaud CRM™ and Blackbaud Altru® customers to help social impact organizations raise more, streamline the donor experience, simplify administrative tasks, and reduce processing costs, enabling them to sustain and grow their missions.
• G2 recognized Blackbaud Raiser's Edge NXT® in its Summer 2024 Reports across 11 different categories and as an overall leader in the Donor Management, Nonprofit CRM, and Donor Prospect Research categories, based on user ratings.
• Blackbaud also celebrated the achievements of its community during the quarter, recognizing Blackbaud Partner Network Awards winners helping bring more flexibility and value to customers, celebrating customers achieving the most with their technology through the Blackbaud Impact Awards, and honoring standout fundraisers in the JustGiving Awards.

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

Financial Outlook

Blackbaud today revised its 2024 full year financial guidance:

• GAAP revenue of $1.150 billion to $1.160 billion
• Non-GAAP adjusted EBITDA margin of 33.0% to 34.0%
• Non-GAAP earnings per share of $3.98 to $4.16
• Non-GAAP adjusted free cash flow of $235 million to $245 million

Included in its 2024 full year financial guidance are the following updated assumptions:

• Non-GAAP annualized effective tax rate is expected to be approximately 24.5%
• Interest expense for the year is expected to be approximately $53 million to $57 million
• Fully diluted shares for the year are expected to be approximately 51.0 million to 52.0 million
• Capital expenditures for the year are expected to be approximately $65 million to $75 million, including approximately $60 million to $70 million of capitalized software and content development costs

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.

In order to provide a meaningful basis for comparison, Blackbaud uses non-GAAP adjusted free cash flow in analyzing its operating performance. Non-GAAP adjusted free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software and content development, capital expenditures for property and equipment, plus cash outflows related to the previously disclosed Security Incident discovered in May 2020 (the "Security Incident"). Total costs related to the Security Incident exceeded the limit of our insurance coverage during the first quarter of 2022. For full year 2024, Blackbaud currently expects net cash outlays of $8 million to $13 million for ongoing legal fees related to the Security Incident. In line with the company's policy, all associated costs due to third-party service providers and consultants, including legal fees, are expensed as incurred. Please refer to the section below titled "Non-GAAP Financial Measures" for more information on Blackbaud's use of non-GAAP financial measures.

Stock Repurchase Program

As of September 30, 2024, Blackbaud had approximately $737 million remaining under its common stock repurchase program that was expanded, replenished and reauthorized in July 2024.

Conference Call Details

What: Blackbaud's 2024 Third Quarter Conference Call

When: October 30, 2024

Time: 8:00 a.m. (Eastern Time)

Live Call: 1-877-407-3088 (US/Canada)

Webcast: Blackbaud's Investor Relations Webpage

About Blackbaud

Blackbaud (NASDAQ: BLKB) is the leading software provider exclusively dedicated to powering social impact. Serving the nonprofit and education sectors, companies committed to social responsibility and individual change makers, Blackbaud's essential software is built to accelerate impact in fundraising, nonprofit financial management, digital giving, grantmaking, corporate social responsibility and education management. With millions of users and over $100 billion raised, granted or managed through Blackbaud platforms every year, Blackbaud's solutions are unleashing the potential of the people and organizations who change the world. Blackbaud has been named to Newsweek's list of America's Most Responsible Companies, Quartz's list of Best Companies for Remote Workers and Forbes' list of America's Best Employers. A remote-first company, Blackbaud has operations in the United States, Australia, Canada, Costa Rica, India and the United Kingdom, supporting users in 100+ countries. Learn more at www.blackbaud.com, or follow us on X/Twitter, LinkedIn, Instagram, and Facebook.

Investor Contact

[email protected]

Media Contact

[email protected]

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 condition and results of operations. 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; cybersecurity and data protection risks and related liabilities; potential litigation involving us; 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. Blackbaud uses non-GAAP financial measures internally in analyzing its operational performance. Accordingly, Blackbaud believes these non-GAAP measures are useful to investors, as a supplement to GAAP measures, in evaluating its ongoing operational performance 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 potential differences in the exact method of calculation between companies.

The non-GAAP financial measures discussed above exclude the impact of certain transactions that Blackbaud believes are not directly related to its operating performance in any particular period, but are for its long-term benefit over multiple periods. Blackbaud believes these non-GAAP financial measures reflect its ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in its business.

While Blackbaud believes these non-GAAP measures provide useful supplemental information, 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 reconciliations of these non-GAAP measures to their most directly comparable GAAP financial measures.

As previously disclosed, beginning in 2024, we apply a non-GAAP effective tax rate of 24.5% when calculating non-GAAP net income and non-GAAP diluted earnings per share. The non-GAAP tax rate utilized in future periods will be reviewed annually to determine whether it remains appropriate in consideration of our financial results including our periodic effective tax rate calculated in accordance with GAAP, our operating environment and related tax legislation in effect and other factors deemed necessary. All 2023 measures of non-GAAP net income and non-GAAP diluted earnings per share included in this news release are calculated under Blackbaud's historical non-GAAP effective tax rate of 20.0%.

Non-GAAP free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software and content development, and capital expenditures for property and equipment. In addition, and in order to provide a meaningful basis for comparison, Blackbaud also uses non-GAAP adjusted free cash flow in analyzing its operating performance. Non-GAAP adjusted free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software and content development, and capital expenditures for property and equipment, plus cash outflows related to the Security Incident. Blackbaud believes non-GAAP free cash flow and non-GAAP adjusted free cash flow provide useful measures of the company's operating performance. Non-GAAP free cash flow and Non-GAAP adjusted free cash flow are not intended to represent and should not be viewed as the amount of residual cash flow available for discretionary expenditures.

In addition, Blackbaud uses non-GAAP organic revenue growth, non-GAAP organic revenue growth on a constant currency basis, non-GAAP organic recurring revenue growth and non-GAAP organic recurring revenue growth on a constant currency basis, 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, if any, 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. 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.

Rule of 40 is defined as non-GAAP organic revenue growth plus non-GAAP adjusted EBITDA margin. Non-GAAP adjusted EBITDA is defined as GAAP net income plus interest, net; income tax provision (benefit); depreciation; amortization of intangible assets from business combinations; amortization of software and content development costs; stock-based compensation; employee severance; acquisition and disposition-related costs; restructuring and other real estate activities; Security Incident-related costs; and impairment of capitalized software development costs.

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