A month has gone by since the last earnings report for Blackbaud (BLKB Quick QuoteBLKB - Free Report) . Shares have added about 11.6% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

Blackbaud Q3 Earnings Miss Estimates

Blackbaud reported third-quarter 2024 non-GAAP earnings per share (EPS) of 99 cents, which missed the Zacks Consensus Estimate by 5.7%. The bottom line decreased 11.6% year over year.

Total revenues jumped 3.3% year over year to $286.7 million. Revenues missed the Zacks Consensus Estimate by 2.4%.

Total recurring revenues (contributed 98% to total revenues) in the reported quarter amounted to $280 million, up 4.1% year over year. This growth was driven by contract renewal initiatives, strategic pricing adjustments in the Social Sector and robust performance of cloud solutions. One-time services and other revenues (2% of total revenues) were $6.7 million, down 22.2%.

Blackbaud unveiled advancements in AI-driven fundraising and financial management for social impact organizations, at bbcon 2024. It launched six innovative initiatives focused on fostering stronger links between its solutions and teams.

Non-GAAP organic revenues were up 4.3% on a reported basis and 3.9% on a constant-currency basis, year over year. Non-GAAP organic recurring revenues rose 4.1%.

Margin Details

Non-GAAP gross margin was 61.7% compared with 62.4% a year ago. Total operating expenses declined 13.8% on a year-over-year basis to $115.4 million.

Non-GAAP operating margin fell 120 basis points (bps) to 27.5%. Non-GAAP adjusted EBITDA margin was 33.2%, down 180 bps year over year.

Balance Sheet & Cash Flow

As of Sept. 30, 2024, Blackbaud had total cash, cash equivalents and restricted cash of $462.7 million compared with $831.1 million as of June 30, 2024. Total debt (including the current portion) as of Sept. 30, 2024, was $1000.9 million compared with $1021.9 million as of June 30, 2024.

For the third quarter, cash provided by operating activities was $104 million compared with $128 million in the prior-year quarter.Non-GAAP adjusted free cash flow was $97.6 million compared with $117.9 million in the year-ago quarter.

As of Sept. 30, 2024, Blackbaud had nearly $737 million available under its stock repurchase program, which was expanded and renewed in July 2024. The company has repurchased about 8% of the common stock that was outstanding at the end of 2023 through October.

In July 2024, Blackbaud’s board of directors approved a replenished and expanded $800 million stock repurchase authorization. The company expects to buy back up to 10% of the common stock outstanding in 2024 to offset dilution from annual stock-based compensation.

Outlook Revised

Blackbaud has lowered its annual revenue forecast due to the ongoing adverse financial effects from the EVERFI business, despite the continued growth of its core Social Sector. The company has streamlined the EVERFI business to more closely match expenses with revenues and engaged Goldman Sachs as a strategic advisor to explore additional options. It has also lowered EVERFI's expense run rate to reflect a reduced revenue forecast.

Blackbaud now expects non-GAAP revenues between $1.150 billion and $1.160 billion, down from earlier guidance of $1.164 billion to $1.194 billion. The company projects non-GAAP adjusted EBITDA margin in the range of 33-34%.Non-GAAP EPS is anticipated to be between $3.98 and $4.16, down from earlier guidance of $4.12 to $4.38.

Non-GAAP adjusted free cash flow for 2024 is forecasted to be in the range of $235-$245 million compared with earlier guidance of $254-$274 million.

Non-GAAP annualized effective tax rate is the same as the prior estimation of approximately 24.5%. Interest expense is expected in the band of $53 million to $57 million, changed from earlier guidance of $52 million to $56 million.

Fully diluted shares are now anticipated to be 51.0 million to 52.0 million, unchanged from the earlier guidance. Capital expenditures are expected to be in the range of $65 million to $75 million, which includes $60-$70 million of capitalized software and content development costs. This remains the same as the earlier outlook.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

The consensus estimate has shifted 10.94% due to these changes.

VGM Scores

Currently, Blackbaud has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, 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

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 belongs to the Zacks Computer - Software industry. Another stock from the same industry, Cadence Design Systems (CDNS Quick QuoteCDNS - Free Report) , has gained 10.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.

Cadence reported revenues of $1.22 billion in the last reported quarter, representing a year-over-year change of +18.8%. EPS of $1.64 for the same period compares with $1.26 a year ago.

For the current quarter, Cadence is expected to post earnings of $1.82 per share, indicating a change of +31.9% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.7% 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 F.