It has been about a month since the last earnings report for Blackbaud (BLKB Quick QuoteBLKB - Free Report) . Shares have added about 6.9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Blackbaud due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Blackbaud Q3 Earnings Beat Estimates, Revenues Up Y/Y

Blackbaud delivered non-GAAP earnings of 69 cents per share in third-quarter 2022, which surpassed the Zacks Consensus Estimate by 11.3%. The bottom line declined 11.5% year over year.

Total revenues increased 13% year over year to $261.3 million but missed the consensus mark by 0.03%. The top line was driven by strength in recurring revenues.

Total recurring revenues in the reported quarter amounted to $249.4 million, up 14% and contributed 95.4% to total revenues. One-time services and other revenues (4.6% of total revenues) amounted to $11.9 million, decreasing 6.1% year over year.

Non-GAAP organic revenues were up 1.7% year over year. Non-GAAP organic revenues on a constant-currency (CC) basis amounted to $266.2 million, up 3.6% year over year. Non-GAAP organic recurring revenues rose 3.5% year over year. The company’s organic recurring revenues were driven by higher transactional volume and increasing customer renewal rates

Margin Details

Non-GAAP gross margin came in at 59.6%, up 60 basis points (bps) from the prior-year quarter’s levels.

Total operating expenses were up 32% on a year-over-year basis to $147.4 million. As a percentage of revenues, the figure expanded 810 bps to 56.4%.

Non-GAAP operating margin contracted 270 bps from the year-ago quarter’s figure to 19.1%.

Non-GAAP adjusted EBITDA margin came in at 25.6%, down 140 bps year over year.

Balance Sheet & Cash Flow

As of Sep 30, 2022, Blackbaud had total cash, cash equivalents and restricted cash of $375.4 million compared with $478.5 million as of Jun 30, 2022.

Total debt (including the current portion) as of Sep 30, 2022, amounted to $854.1 million compared with $939.8 million as of Jun 30, 2022.

Cash provided by operating activities in the three months ended Sep 30, 2022, was $108 million compared with $69.8 million in the prior-year period.

Non-GAAP adjusted free cash flow in the third quarter was $93.8 million compared with $58.6 million of non-GAAP adjusted free cash flow in the previous-year quarter

2022 Guidance

Blackbaud expects non-GAAP revenues between $1.05 billion and $1.07 billion.

The company projects a non-GAAP adjusted EBITDA margin in the range of 23.7-24.2%.

Non-GAAP earnings are expected to be between $2.43 and $2.63 per share.

Non-GAAP adjusted free cash flow for the year is forecast in the range of $140-$150 million

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -14.82% due to these changes.

VGM Scores

Currently, Blackbaud has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Blackbaud has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Blackbaud is part of the Zacks Computer - Software industry. Over the past month, Cadence Design Systems (CDNS Quick QuoteCDNS - Free Report) , a stock from the same industry, has gained 18.6%. The company reported its results for the quarter ended September 2022 more than a month ago.

Cadence reported revenues of $902.55 million in the last reported quarter, representing a year-over-year change of +20.2%. EPS of $1.06 for the same period compares with $0.80 a year ago.

For the current quarter, Cadence is expected to post earnings of $0.91 per share, indicating a change of +11% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Cadence. Also, the stock has a VGM Score of C.