Blackbaud Announces 2017 Third Quarter Results

Subscriptions Represent Roughly Two-Thirds of Total Revenue and Grew 21%; Profitability Hits a 2017 High;

Management Updates 2017 Full-Year Financial Guidance for JustGiving Acquisition

CHARLESTON, S.C., Oct. 25, 2017 /PRNewswire/ -- Blackbaud (NASDAQ: BLKB), the world's leading cloud software company powering social good, today announced financial results for its third quarter ended September 30, 2017.

"Our unique ability to maximize customer outcomes through innovative new technology and industry expertise is a powerful combination, and it is driving our strong financial performance," said Mike Gianoni, Blackbaud's president and CEO. "We just concluded our annual user conference bbcon, and it's quite clear to customers that our social good-optimized cloud Blackbaud SKYtm provides the industry's best cloud capabilities, and that we are rapidly evolving it with new innovation. Blackbaud SKY is fueling our strong revenue growth, which is becoming increasingly stable and predictable, as we shift our mix of revenue towards recurring subscriptions. Subscriptions revenue now represents 65 percent of our total revenue and non-GAAP organic subscriptions revenue was strong, growing 19 percent during the third quarter."

Third Quarter 2017 Results Compared to Third Quarter 2016 Results:

• Total GAAP revenue was $195.5 million, up 6.8%, with $159.0 million in GAAP recurring revenue, representing 81.3% of total revenue, and $127.5 million in subscription revenue, representing 65.2% of total revenue.
• Total non-GAAP revenue was $195.9 million, up 7.0%, with $159.3 million in non-GAAP recurring revenue, representing 81.3% of total non-GAAP revenue, and $127.8 million in subscription revenue, representing 65.2% of total revenue.
• Non-GAAP organic revenue increased 5.6%, non-GAAP organic recurring revenue increased 10.7%, and non-GAAP organic subscription revenue increased 19.0%.
• GAAP income from operations increased 32.7% to $18.0 million, with GAAP operating margin increasing 180 basis points to 9.2%.
• Non-GAAP income from operations increased 23.3% to $42.0 million, with non-GAAP operating margin increasing 280 basis points to 21.4%.
• GAAP net income increased 40.5% to $12.5 million, with GAAP diluted earnings per share of $0.26, up $0.07.
• Non-GAAP net income increased 25.8% to $26.9 million, with non-GAAP diluted earnings per share of $0.56, up $0.11.
• Non-GAAP free cash flow was $59.1 million, an increase of $17.5 million.

"We posted a very solid third quarter balancing accelerated growth in revenue with improved profitability," said Tony Boor, Blackbaud's executive vice president and CFO. "The company's strong financial performance continues to position us well toward achieving our financial guidance and long-term aspirational goals. We've updated our financial expectation for 2017 to include the acquisition of peer-to-peer giving leader JustGivingtm, which closed on October 2^nd, and we look forward to keeping this steady momentum by finishing the year strong. "   

An explanation of all non-GAAP financial measures referenced in this press release, including Blackbaud's definition of non-GAAP free cash flow, 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:

• Blackbaud shared a series of announcements that deliver high impact for the social good community during bbcon 2017. A bbcon 2017 virtual pass is now available providing access to main stage, keynote presentations and premier content.
• Blackbaud and Microsoft announced plans to strengthen their strategic partnership to digitally transform the nonprofit sector. The companies announced a three-point commitment to collaboration, which includes going deeper on integrations, joint innovation and sector leadership to scale global good.
• Blackbaud was named to the Fortune 2017 Change the World List, which recognizes companies that have positive impact through activities that are part of their core business strategy.
• Blackbaud announced the results of a commissioned Total Economic Impacttm (TEI) study conducted by Forrester Consulting on behalf of Blackbaud, examining the return on investment that University of North Texas experienced by deploying Blackbaud Raiser's Edge NXTtm.
• Blackbaud completed the acquisition of U.K.-based JustGivingtm, whose online social giving platform has played a powerful role in the growth of peer-to-peer fundraising.
• IDC released its July 2017 Worldwide SaaS and Cloud Software Market Shares Report and since 2014 Blackbaud's rank has moved up from 30 to 24.
• Blackbaud's President and CEO Mike Gianoni was named to the list of Top 50 SaaS CEOs by The SaaS Report.

Visit www.blackbaud.com/press-room for more information about Blackbaud's recent highlights.

Dividend

Blackbaud announced today that its Board of Directors has declared a fourth quarter 2017 dividend of $0.12 per share payable on December 15, 2017 to stockholders of record on November 28, 2017.

Financial Outlook

Blackbaud today updated its 2017 full-year financial guidance to reflect the acquisition of JustGiving, which closed on October 2, 2017:

• Non-GAAP revenue of $785 million to $795 million
• Non-GAAP income from operations of $159 million to $165 million
• Non-GAAP operating margin of 20.3% to 20.8%
• Non-GAAP diluted earnings per share of $2.12 to $2.20
• Non-GAAP free cash flow of $125 million to $135 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.

About Blackbaud

Blackbaud (NASDAQ: BLKB) is the world's leading cloud software company powering social good. Serving the entire social good community?nonprofits, foundations, corporations, education institutions, healthcare institutions and individual change agents?Blackbaud connects and empowers organizations to increase their impact through 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 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: expectations that certain aspects of our operations, financial results and financial condition will continue to improve, and expectations that we will achieve our projected 2017 full-year financial guidance and long-term aspirational goals. 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 discusses non-GAAP organic revenue growth, non-GAAP organic revenue growth on a constant currency basis, non-GAAP organic subscriptions revenue growth and non-GAAP organic recurring revenue growth, which it believes provides useful information 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 the 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.

SOURCE Blackbaud, Inc.