Blackbaud Announces 2023 Second Quarter Results
Blackbaud, a provider of software for powering social impact, announced financial results for its second quarter ended June 30, 2023.
"We had a solid second quarter, and I'm very pleased with the progress we are making on our five-point operating plan," said Mike Gianoni, president and CEO, Blackbaud. "We released new product capabilities, launched our Intelligence for Good vision for AI, brought on important new clients, continued to shift to modern contractual pricing and terms, and are delivering more value to our customers—all of which was enabled by our dedicated and passionate employees. Our business momentum is driving strong returns, and I'm optimistic about the future."
Second Quarter 2023 Results Compared to Second Quarter 2022 Results:
- GAAP total revenue was $271.0 million, up 2.3%, with $262.4 million in GAAP recurring revenue, up 3.9%.
- Non-GAAP organic recurring revenue increased 4.4%.
- GAAP income from operations was $0.3 million, inclusive of security incident-related costs of $26.8 million, with GAAP operating margin of 0.1%, an increase of 10 basis points.
- Non-GAAP income from operations was $74.1 million, with non-GAAP operating margin of 27.4%, an increase of 680 basis points.
- GAAP net income was $2.1 million, with GAAP diluted earnings per share of $0.04, up $0.11 per share.
- Non-GAAP net income was $52.6 million, with non-GAAP diluted earnings per share of $0.98, up $0.23 per share.
- Non-GAAP adjusted EBITDA was $88.8 million, up $18.2 million, with non-GAAP adjusted EBITDA margin of 32.8%, an increase of 620 basis points.
- GAAP net cash provided by operating activities was $53.2 million, a decrease of $4.1 million.
- Non-GAAP adjusted free cash flow was $43.6 million, a decrease of $0.3 million, with non-GAAP adjusted free cash flow margin of 16.1%, a decrease of 50 basis points.
"Second quarter financial results were solid and in line with the increased guidance we announced in Q1," said Tony Boor, executive vice president and CFO, Blackbaud. "Total revenue of $271 million represented organic growth at constant currency of 3.2%. Organic recurring revenue at constant currency grew faster at 4.8%. Transactional revenue grew in the high single digits year over year, and the operational progress we made in the quarter on modernized pricing has positioned us well for accelerating revenue growth over the remainder of the year. The actions we have taken to reduce costs are driving meaningful benefits, including a significant improvement in adjusted EBITDA, both sequentially and over last year's second quarter. Adjusted EBITDA margin of 32.9% at constant currency was a roughly six-point improvement year over year. By the fourth quarter of this year, we expect to achieve organic revenue growth in the high-single digits as well as Rule of 40 well ahead of our prior target of 2025."
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.
Blackbaud reiterated its 2023 full year financial guidance:
- Non-GAAP revenue of $1.095 billion to $1.125 billion
- Non-GAAP adjusted EBITDA margin of 30.5% to 31.5%
- Non-GAAP earnings per share of $3.63 to $3.94
- Non-GAAP adjusted free cash flow of $190 million to $210 million
- Included in its 2023 full year financial guidance are the following assumptions:
- Non-GAAP annualized effective tax rate is expected to be approximately 20%
- Interest expense for the year is expected to be approximately $37 million to $41 million
- Fully diluted shares for the year are expected to be in the range of approximately 53 million to 54 million
- Capital expenditures for the year are expected to be in the range of approximately $65 million to $75 million, including approximately $55 million to $65 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, net of insurance, 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 2023, Blackbaud currently expects net cash outlays of $25 million to $35 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.
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