Blackbaud Announces 2022 Fourth Quarter and Full Year Results
Full Year 2022 Total Revenue Exceeded $1 Billion with 14% Growth; Full Year 2022 Financial Results Met or Exceeded Guidance; Blackbaud Announces Full Year 2023 Financial Guidance with Substantial Margin Expansion
Charleston, S.C. (February 13, 2023) — 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, 2022.
“2022 was a year of substantial progress,” said Mike Gianoni, president and CEO, Blackbaud. “We proactively took steps throughout the year to better position the company, manage it efficiently and effectively in a weakened economy, and drive profitability, cash flow and improvement on Rule of 40. Revenue surpassed the $1 billion mark for the first time in our company history, and we achieved 14% revenue growth year over year. Looking ahead, we are building on the strong execution in 2022 and remain focused on driving efficiencies and improvements across the business as we progress along our Rule of 40 journey. At the midpoint of our full year 2023 financial guidance ranges, we anticipate organic revenue growth at constant currency of 4%, adjusted EBITDA margin of 30% and Rule of 40 at constant currency of roughly 34%, up five points versus last year. We are confident in our outlook with plans in place to achieve substantial performance acceleration as the year progresses and deliver significant, enhanced shareholder value.”
Fourth Quarter 2022 Results Compared to Fourth Quarter 2021 Results:
- GAAP total revenue was $274.8 million, up 10.8%, with $265.2 million in GAAP recurring revenue, up 11.1%.
- Non-GAAP organic recurring revenue increased 1.3%.
- GAAP loss from operations was $15.5 million, inclusive of security incident-related costs, net of insurance recoveries of $26.5 million, with GAAP operating margin of (5.7)%, a decrease of 300 basis points.
- Non-GAAP income from operations was $54.9 million, with non-GAAP operating margin of 20.0%, an increase of 20 basis points.
- GAAP net loss was $21.3 million, with GAAP diluted loss per share of $0.41, down $0.26 per share.
- Non-GAAP net income was $36.0 million, with non-GAAP diluted earnings per share of $0.68, down $0.07 per share.
- Non-GAAP adjusted EBITDA was $67.9 million, up $7.2 million, with non-GAAP adjusted EBITDA margin of 24.7%, an increase of 20 basis points.
- GAAP net cash provided by operating activities was $14.1 million, a decrease of $29.8 million.
- Non-GAAP adjusted free cash flow was $7.6 million, a decrease of $24.3 million, with non-GAAP adjusted free cash flow margin of 2.8%, a decrease of 1,010 basis points.
“We had a solid end to a strong 2022, meeting or exceeding full year financial guidance across revenue, profitability and adjusted free cash flow,” said Tony Boor, executive vice president and CFO, Blackbaud. “For the full year 2022, Rule of 40 at constant currency was 29%, a two-point improvement over 2021. We drove strong cash generation throughout the year and will continue to rapidly deleverage in the near term. In 2023, we expect an acceleration in our financial performance as the year progresses, starting with meaningful improvement in the second quarter. We remain intently focused on managing costs and delivering substantial margin expansion and earnings potential with actions under management control. We will continue to drive operational execution across our business that we believe will accelerate Rule of 40 as the year progresses, giving further confidence in our ability to reach 40% in the next few years.”
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
- Blackbaud was named
to Newsweek’s list of America’s Most Responsible Companies 2023. Blackbaud is one of 500 companies on the list, which highlights leaders in corporate responsibility, spanning 14 industries.
- Blackbaud appointed
two new directors to its board. Yogesh K. Gupta, president and CEO, Progress Software Corporation, and Rupal S. Hollenbeck, chief commercial officer, Check Point Software Technologies, joined Blackbaud’s board of directors. In addition, Timothy Chou, Ph.D., and Joyce M. Nelson retired from the Blackbaud board.
- Blackbaud named
Chad Anderson chief accounting officer. Prior to this role, Anderson served Blackbaud as senior vice president and corporate controller.
- Blackbaud supported
bold technology innovation through its Social Good Startup Program. Startups in the 2022 program recently visited Blackbaud’s world headquarters in December for an annual showcase, sharing their ideas on ways to impact the social good community. Additionally, Blackbaud welcomed
its six newest members to the Social Good Startup Program with the January 2023 cohort.
- Blackbaud CEO Mike Gianoni was named
to Charleston Business Magazine’s 50 Most Influential Hall of Fame, making the list of 50 Most Influential People for the fifth year.
- Blackbaud was honored
as a Leading Employer by Built In’s 2023 Best Places to Work Awards and RippleMatch’s 2023 Campus Forward Awards.
- Blackbaud announced
a major gift to support diversity, equity and inclusion globally in partnership with five organizations in each of the regions it operates.
Visit www.blackbaud.com/newsroom for more information about Blackbaud’s recent highlights.
Full-Year 2022 Results Compared to Full-Year 2021 Results:
- GAAP total revenue was $1.1 billion, up 14.1%, with $1.0 billion in GAAP recurring revenue, up 14.9%.
- Non-GAAP organic recurring revenue increased 4.0%.
- GAAP loss from operations was $28.5 million, with GAAP operating margin of (2.7)%, a decrease of 540 basis points.
- Non-GAAP income from operations was $202.6 million, with non-GAAP operating margin of 19.1%, a decrease of 250 basis points.
- GAAP net loss was $45.4 million, with GAAP diluted loss per share of $0.88, down $1.00 per share.
- Non-GAAP net income was $140.4 million, with non-GAAP diluted earnings per share of $2.69, down $0.35 per share.
- Non-GAAP adjusted EBITDA was $262.6 million, up $16.5 million, with non-GAAP adjusted EBITDA margin of 24.8%, a decrease of 170 basis points.
- GAAP net cash provided by operating activities was $203.9 million, a decrease of $9.8 million.
- Non-GAAP adjusted free cash flow was $153.7 million, a decrease of $14.6 million, with non-GAAP free cash flow margin of 14.5%, a decrease of 360 basis points.
Blackbaud today announced its 2023 full year financial guidance:
- Non-GAAP revenue of $1.08 billion to $1.11 billion
- Non-GAAP adjusted EBITDA margin of 29.5% to 30.5%
- Non-GAAP earnings per share of $3.30 to $3.60
- Non-GAAP adjusted free cash flow of $170 million to $190 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 $40 million to $44 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.
Conference Call Details
What: Blackbaud’s Fourth Quarter and Full Year 2022 Conference Call
When: February 14, 2023
Time: 8:00 a.m. (Eastern Time)
Live Call: 1-877-407-3088 (US/Canada)
Blackbaud (NASDAQ: BLKB) is the world’s leading cloud software company powering social good. Serving the entire social good community—nonprofits, higher education institutions, K–12 schools, healthcare organizations, faith communities, arts and cultural organizations, foundations, companies 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 (CSR) and environmental, social and governance (ESG), school management, ticketing, grantmaking, financial management, payment processing and analytics. Serving the industry for more than four decades, Blackbaud is a remote-first company headquartered in Charleston, South Carolina, with 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.
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.
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.
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 now 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, net of insurance, 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 adjusted free cash flow is 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 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; costs, net of insurance, related to the Security Incident; and impairment of capitalized software development costs.