Blackbaud Inc 10-Q for FY2022 Q1

Blackbaud Inc (BLKB)

10-Q 2022-05-05 For: 2022-03-31

Added on April 09, 2026

About this 10-Q

Blackbaud Inc filed this 10-Q on May 5, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).

Headline figures

Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $257.12M; up 17.3% from $219.19M a year earlier
Net loss: $10.41M; compared with a net loss of $164K a year earlier
Diluted EPS: -$0.20; compared with $0.00 a year earlier

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Delaware			11-2617163
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)



Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class	Trading Symbol(s)	Name of Each Exchange on which Registered
Common Stock, $0.001 Par Value	BLKB	Nasdaq Global Select Market


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		2

PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial statements
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows (Unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management's discussion and analysis of financial condition and results of operations	22
Item 3.	Quantitative and qualitative disclosures about market risk	42
Item 4.	Controls and procedures	42

PART II.	OTHER INFORMATION	43

Item 1.	Legal proceedings	43
Item 1A.	Risk factors	43
Item 2.	Unregistered sales of equity securities and use of proceeds	45

Item 6.	Exhibits	46

SIGNATURES		47


Blackbaud, Inc. Condensed Consolidated Balance Sheets (Unaudited)
(dollars in thousands)	March 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	33,786	$	55,146
Restricted cash	279,594		596,616
Accounts receivable, net of allowance of $10,772 and $11,155 at March 31, 2022 and December 31, 2021, respectively	91,770		102,726
Customer funds receivable	2,049		977
Prepaid expenses and other current assets	99,913		95,506
Total current assets	507,112		850,971
Property and equipment, net	112,675		111,428
Operating lease right-of-use assets	51,808		53,883
Software development costs, net	126,766		121,377
Goodwill	1,056,794		1,058,640
Intangible assets, net	683,348		698,052
Other assets	90,194		77,266
Total assets	$	2,628,697	$	2,971,617
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable	$	39,490	$	22,067
Accrued expenses and other current liabilities	72,195		100,096
Due to customers	278,179		594,273
Debt, current portion	18,116		18,697
Deferred revenue, current portion	350,952		374,499
Total current liabilities	758,932		1,109,632
Debt, net of current portion	963,109		937,483
Deferred tax liability	144,590		148,465
Deferred revenue, net of current portion	4,725		4,247
Operating lease liabilities, net of current portion	50,785		53,386
Other liabilities	1,506		1,344
Total liabilities	1,923,647		2,254,557
Commitments and contingencies (see Note 10)
Stockholders’ equity:
Preferred stock; 20,000,000 shares authorized, none outstanding	—		—
Common stock, $0.001 par value; 180,000,000 shares authorized, 67,658,172 and 66,165,666 shares issued at March 31, 2022 and December 31, 2021, respectively	68		66
Additional paid-in capital	993,223		968,927
Treasury stock, at cost; 14,715,944 and 14,182,805 shares at March 31, 2022 and December 31, 2021, respectively	(535,585)		(500,911)
Accumulated other comprehensive income	15,295		6,522
Retained earnings	232,049		242,456
Total stockholders’ equity	705,050		717,060
Total liabilities and stockholders’ equity	$	2,628,697	$	2,971,617

The accompanying notes are an integral part of these condensed consolidated financial statements.


Blackbaud, Inc. Condensed Consolidated Statements of Comprehensive Income (Unaudited)
	Three months ended March 31,
(dollars in thousands, except per share amounts)		2022		2021
Revenue
Recurring		$	244,666	$	206,750
One-time services and other		12,458		12,441
Total revenue		257,124		219,191
Cost of revenue
Cost of recurring		112,174		88,865
Cost of one-time services and other		11,188		14,520
Total cost of revenue		123,362		103,385
Gross profit		133,762		115,806
Operating expenses
Sales, marketing and customer success		55,216		48,793
Research and development		39,952		29,179
General and administrative		43,762		30,587
Amortization		811		549
Restructuring		—		54
Total operating expenses		139,741		109,162
(Loss) income from operations		(5,979)		6,644
Interest expense		(7,599)		(5,114)
Other income (expense), net		1,121		(1,010)
(Loss) income before provision for income taxes		(12,457)		520
Income tax (benefit) provision		(2,050)		684
Net loss		$	(10,407)	$	(164)
Loss per share
Basic		$	(0.20)	$	—
Diluted		$	(0.20)	$	—
Common shares and equivalents outstanding
Basic weighted average shares		51,199,717		47,363,197
Diluted weighted average shares		51,199,717		47,363,197
Other comprehensive income
Foreign currency translation adjustment		(2,132)		2,511
Unrealized gain on derivative instruments, net of tax		10,905		4,149
Total other comprehensive income		8,773		6,660
Comprehensive (loss) income		$	(1,634)	$	6,496

The accompanying notes are an integral part of these condensed consolidated financial statements.


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the quarterly period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from to .


(dollars in thousands)	Common stock			Additional paid-in capital		Treasury stock		Accumulated other comprehensive income (loss)		Retained earnings		Total stockholders' equity
	Shares	Amount
Balance at December 31, 2021	66,165,666	$	66	$	968,927	$	(500,911)	$	6,522	$	242,456	$	717,060
Net loss	—	—		—		—		—		(10,407)		(10,407)
Stock issuance costs related to purchase of EVERFI (see Note 3)	—	—		(983)		—		—		—		(983)

Retirements of common stock(1)	(33,075)	—		(2,581)		—		—		—		(2,581)
Vesting of restricted stock units	976,312	—		—		—		—		—		—
Employee taxes paid for 533,139 withheld shares upon equity award settlement	—	—		—		(34,674)		—		—		(34,674)
Stock-based compensation	—	—		27,860		—		—		—		27,860
Restricted stock grants	580,209	2		—		—		—		—		2
Restricted stock cancellations	(30,940)	—		—		—		—		—		—
Other comprehensive income	—	—		—		—		8,773		—		8,773
Balance at March 31, 2022	67,658,172	$	68	$	993,223	$	(535,585)	$	15,295	$	232,049	$	705,050


(dollars in thousands)	Total
Balance at December 31, 2021	$	1,058,640

Adjustments related to prior year business combinations(1)	(203)
Effect of foreign currency translation	(1,643)
Balance at March 31, 2022	$	1,056,794


	Fair value measurement using
(dollars in thousands)	Level 1		Level 2		Level 3		Total
Fair value as of March 31, 2022
Financial assets:
Derivative instruments	$	—	$	21,947	$	—	$	21,947
Total financial assets	$	—	$	21,947	$	—	$	21,947






Fair value as of December 31, 2021
Financial assets:
Derivative instruments	$	—	$	7,160	$	—	$	7,160
Total financial assets	$	—	$	7,160	$	—	$	7,160


	Debt balance at				Weighted average effective interest rate at
(dollars in thousands)	March 31, 2022		December 31, 2021		March 31, 2022		December 31, 2021
Credit facility:
Revolving credit loans	$	290,000	$	260,000	3.06	%	3.27	%
Term loans	635,938		640,000		2.93	%	3.02	%
Real estate loans	59,177		59,480		5.22	%	5.22	%
Other debt	537		1,694		5.00	%	5.00	%
Total debt	985,652		961,174		3.11	%	3.23	%
Less: Unamortized discount and debt issuance costs	4,427		4,994
Less: Debt, current portion	18,116		18,697		3.16	%	3.11	%
Debt, net of current portion	$	963,109	$	937,483	3.11	%	3.23	%


(dollars in thousands)	Term of derivative instrument	Notional value
Derivative instruments designated as hedging instruments:
Interest rate swap	November 2020 - October 2024	$	60,000
Interest rate swap	November 2020 - October 2024	60,000
Interest rate swap	June 2021 - October 2024	120,000
Interest rate swap	July 2021 - October 2024	120,000
Interest rate swap	July 2021 - October 2024	75,000
		$	435,000


		Asset derivatives
(dollars in thousands)	Balance sheet location	March 31, 2022		December 31, 2021
Derivative instruments designated as hedging instruments:

Interest rate swaps, long-term	Other assets	21,947		7,160
Total derivative instruments designated as hedging instruments		$	21,947	$	7,160


	Gain (loss) recognized in accumulated other comprehensive loss as of		Location of gain (loss) reclassified from accumulated other comprehensive loss into income	Gain (loss) reclassified from accumulated other comprehensive loss into income
(dollars in thousands)	March 31, 2022			Three months ended March 31, 2022
Interest rate swaps	$	21,947	Interest expense	$	(358)

	March 31, 2021			Three months ended March 31, 2021
Interest rate swaps	$	1,420	Interest expense	$	(1,376)


(in thousands)	March 31, 2022		December 31, 2021
Total deferred revenue	$	355,677	$	378,746


1. Organization


2. Basis of Presentation


3. Business Combinations


5. Loss Per Share


			1						Expand Total Addressable Market

			2						Lead with World Class Teams and Operations

			3						Delight Customers with Innovative Cloud Solutions

			4						Focus on Employees, Culture and ESG Initiatives


Total revenue ($M)						Income from operations ($M)
YoY Growth (%)						YoY Growth (%)


			+						Growth in recurring revenue primarily related to: •an increase in contractual recurring revenue of $27.7 million related to the performance of our cloud solutions, $24.1 million of which was attributable to EVERFI; partially offset by a decrease in maintenance revenue as customers migrate to our cloud solutions; and •an increase in transactional revenue of $10.2 million primarily due to an increase in online charitable giving, the continued shift toward virtual fundraising and, to a lesser extent, increased transactional volume as our customer's constituents have begun to return to in-person events.
			+						Increase in one-time consulting revenue due primarily to our acquisition of EVERFI, largely offset by a decrease in implementation and customization services, in line with our multi-year strategic shift from a license-based and one-time services business model to a cloud subscription business model. Our cloud subscription offerings generally require less implementation and customization services.
			-						Decrease in one-time analytics revenue as analytics are generally integrated in our cloud solutions


			+						Increase in total revenue, as described above
			+						Decrease in stock-based compensation expense of $2.1 million attributable to a change in the timing of our annual short-term incentive ("STI") equity award grants from the second quarter during 2020 to the first quarter beginning in 2021, which resulted in double-expense for STI awards during the first quarter of 2021
			-						Increase in compensation costs other than stock-based compensation of $23.7 million primarily due to increased employee headcount due to our acquisition of EVERFI
			-						Increases in third-party contractor and hosting costs of $7.8 million and $2.7 million, respectively, primarily attributable to our acquisition of EVERFI and, to a lesser extent, our continued migration of our cloud infrastructure to leading public cloud service providers and investments in security
			-						Increase in Security Incident-related expenses, net of insurance, of $7.2 million. See "Security Incident update" below.
			-						Increase in transaction-based costs of $5.1 million related to payment services integrated in our cloud solutions
			-						Increase in amortization of intangible assets from business combinations of $3.6 million due to our acquisition of EVERFI
			-						Increase in marketing costs of $2.1 million primarily due to our acquisition of EVERFI
			-						Increase in corporate IT costs of $1.2 million primarily related to our acquisition of EVERFI and investments in security tools


			+						Increase in contractual recurring revenue of $27.7 million related to the performance of our cloud solutions, $24.1 million of which was attributable to EVERFI; partially offset by a decrease in maintenance revenue as customers migrate to our cloud solutions
			+						Increase in transactional revenue of $10.2 million primarily due to an increase in online charitable giving, the continued shift toward virtual fundraising and, to a lesser extent, increased transactional volume as our customer's constituents have begun to return to in-person events.


			+						Increase in compensation costs of $7.6 million primarily related to an increase in headcount due to our acquisition of EVERFI, and a continued shift in resources historically supporting one-time services and other towards recurring revenue
			+						Increase in transaction-based costs of $5.1 million related to payment services integrated in our cloud solutions
			+						Increase in amortization of intangible assets from business combinations of $3.5 million due to our acquisition of EVERFI
			+						Increase in third-party contractor and hosting costs of $3.9 million as we continue to migrate our cloud infrastructure to leading public cloud service providers and make investments in security
			+						Increase in overhead allocations of $1.6 million related to the increased headcount discussed above
			+						Increase in amortization of software development costs of $1.1 million


			+						Increase in one-time consulting revenue of $1.0 million primarily attributable to EVERFI, largely offset by less revenue from implementation and customization services, in line with our multi-year strategic shift from a license-based and one-time services business model to a cloud subscription business model. Our cloud subscription offerings generally require less implementation and customization services.
			-						Decrease in one-time analytics revenue of $0.8 million as analytics are generally integrated in our cloud solutions


			-						Decrease in compensation costs of $2.7 million largely due to a continued shift in resources historically supporting one-time services and other towards recurring revenue


			+						Increase in compensation costs of $3.7 million primarily related to increased employee headcount due to our acquisition of EVERFI
			+						Increase in advertising costs of $2.1 million primarily due to our acquisition of EVERFI


			+						Increase in compensation costs of $8.4 million primarily related to increased employee headcount due to our acquisition of EVERFI, and to a lesser extent, our increased hiring of engineers
			+						Increase in third-party contractor costs of $5.5 million, primarily due to our acquisition of EVERFI and, to a lesser extent, an increase in our use of third-party software developers
			+						Increase in overhead allocation costs of $1.0 million primarily related to increased headcount discussed above

			-						Increase in development costs of $4.7 million that were required to be capitalized under GAAP, of which $3.5 million was attributable to EVERFI software and content


			+						Increase in Security Incident-related expenses, net of insurance, of $7.2 million, consisting primarily of legal fees, as total costs related to the Security Incident that we expect will be recoverable exceeded the limit of our insurance coverage during the first quarter of 2022.
			+						Increase in compensation costs of $4.6 million primarily related to increased employee headcount due to our acquisition of EVERFI
			+						Increase in third-party contractor costs of $1.2 million
			+						Increase in acquisition-related expenses and integration costs of $1.0 million due to our acquisition of EVERFI
			-						Increase in allocated corporate IT costs of $1.8 million primarily related to investments in security tools. Depreciation, facilities and IT support costs are pooled and recorded to general and administrative expense and allocated to other lines of our statements of comprehensive income based on headcount.


Interest expense ($M)
Percentages indicate expenses as a percentage of total revenue


(dollars in millions)	March 31, 2022		December 31, 2021		Change
Deferred revenue(1)	$	355.7	$	378.7	(6.1)	%
Less: Long-term portion	4.7		4.2		11.3	%
Current portion(1)	$	351.0	$	374.5	(6.3)	%


Income tax (benefit) provision ($M)
Percentages indicate effective income tax rates


	Three months ended March 31,
(dollars in millions, except per share amounts)		2022			2021			Change
GAAP Revenue		$	257.1		$	219.2		17.3	%




GAAP gross profit		$	133.8		$	115.8		15.5	%
GAAP gross margin		52.0		%	52.8		%
Non-GAAP adjustments:

Add: Stock-based compensation expense		4.1			5.4			(22.6)	%
Add: Amortization of intangibles from business combinations		12.5			9.1			36.8	%


Subtotal(1)		16.6			14.5			14.9	%
Non-GAAP gross profit(1)		$	150.4		$	130.3		15.4	%
Non-GAAP gross margin		58.5		%	59.4		%

GAAP (loss) income from operations		$	(6.0)		$	6.6		(190.0)	%
GAAP operating margin		(2.3)		%	3.0		%
Non-GAAP adjustments:

Add: Stock-based compensation expense		27.9			30.0			(7.1)	%
Add: Amortization of intangibles from business combinations		13.3			9.7			37.4	%
Add: Employee severance		—			1.0			(100.0)	%
Add: Acquisition-related integration costs		0.6			(0.1)			(756.1)	%
Add: Acquisition-related expenses		0.3			0.1			383.1	%
Add: Restructuring and other real estate activities		0.1			(0.1)			(164.0)	%
Add: Security Incident-related costs, net of insurance(2)		7.2			—			100.0	%
Subtotal(1)		49.4			40.5			21.9	%
Non-GAAP income from operations(1)		$	43.4		$	47.2		(8.0)	%
Non-GAAP operating margin		16.9		%	21.5		%

GAAP (loss) income before provision for income taxes		$	(12.5)		$	0.5		(2,495.6)	%
GAAP net loss		$	(10.4)		$	(0.2)		6,245.7	%
Shares used in computing GAAP diluted (loss) earnings per share		51,199,717			47,363,197			8.1	%
GAAP diluted (loss) earnings per share		$	(0.20)		$	—		100.0	%
Non-GAAP adjustments:
Add: GAAP income tax (benefit) provision		(2.1)			0.7			(399.7)	%
Add: Total non-GAAP adjustments affecting income from operations		49.4			40.5			21.9	%


Non-GAAP income before provision for income taxes		36.9			41.0			(10.0)	%
Assumed non-GAAP income tax provision(3)		7.4			8.2			(10.0)	%
Non-GAAP net income(1)		$	29.5		$	32.8		(10.0)	%

Shares used in computing non-GAAP diluted earnings per share		52,076,858			48,387,042			7.6	%
Non-GAAP diluted earnings per share		$	0.57		$	0.68		(16.2)	%


	Three months ended March 31,
(dollars in millions)	2022		2021		Change
Net cash provided by operating activities	$	24.5	$	30.1	(18.6)	%
Net cash used in investing activities	(36.9)		(12.8)		189.2	%
Net cash used in financing activities	(325.4)		(379.6)		(14.3)	%


Financial covenant	Requirement	Ratio as of March 31, 2022
Net leverage ratio(1)	≤ 4.25 to 1.00	3.57 to 1.00
Interest coverage ratio	≥ 2.50 to 1.00	14.59 to 1.00


	Payments due by period
(in millions)	Less than 1 year		More than 1 year		Total(1)
Recorded contractual obligations:
Debt	$	18.1	$	967.5	$	985.7
Operating leases	11.4		60.9		72.3
Unrecorded contractual obligations:
Purchase obligations	20.6		11.1		31.7
Interest payments on debt	30.8		101.1		131.9
Total contractual obligations(1)	$	80.9	$	1,140.7	$	1,221.5


Period	Total number of shares purchased(1)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs(2)	Approximate dollar value of shares that may yet be purchased under the plans or programs (in thousands)
Beginning balance, January 1, 2022					$	250,000
January 1, 2022 through January 31, 2022	—	$	—	—	250,000
February 1, 2022 through February 28, 2022	533,139	65.04		—	250,000
March 1, 2022 through March 31, 2022	—	—		—	250,000
Total	533,139	$	65.04	—	$	250,000


		BLACKBAUD, INC.

Date:	May 5, 2022	By:	/s/ Michael P. Gianoni
			Michael P. Gianoni
			President and Chief Executive Officer
			(Principal Executive Officer)

Date:	May 5, 2022	By:	/s/ Anthony W. Boor
			Anthony W. Boor
			Executive Vice President and Chief Financial Officer
			(Principal Financial and Accounting Officer)