A month has gone by since the last earnings report for Blackbaud (BLKB - Free Report) . Shares have lost about 3.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Blackbaud due for a breakout? 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 catalysts.
Blackbaud Tops Q3 Earnings & Revenues Estimates
Blackbaud delivered third-quarter 2018 non-GAAP earnings of 59 cents per share, outpacing the Zacks Consensus Estimate by 4 cents. Moreover, the figure improved by a couple of cents from the year-ago quarter.
The company adopted a new Accounting Standards Codification ("ASC") 606 using full retrospective method from the first quarter. Per the new accounting standards, Blackbaud now reports maintenance and subscriptions combined under recurring revenues as it is shifting toward a cloud-based subscription model from the traditional revenue-base model.
Total non-GAAP revenues increased 7.9% year over year to $210.1 million, surpassing the Zacks Consensus Estimate of $206 million.
Total recurring revenues for the reported quarter came in at $188.7 million, accounting for 90% of total revenues. The figure was also up 12.6% year over year. Non-GAAP recurring revenues came in at $189.2 million, up 12.8% year over year.
One-time services and other revenues were pegged at $20.9 million (almost 10% of total revenue), declining 22.4% year over year.
Non-GAAP organic revenue increased 1.2% year over year (1.5% on a constant currency basis), while non-GAAP organic recurring revenues improved 4.9%.
Non-GAAP gross profit advanced 7% from the year-ago quarter to $127 million. However, non-GAAP gross margin contracted 40 basis points ("bps") to 60.5%.
Blackbaud’s non-GAAP operating income for the quarter under review declined 6.4% from the year-ago quarter to reach $39.7 million. Non-GAAP operating margin contracted 290 bps from the year-ago figure to reach 18.9%. The decrease may be primarily attributed to an increase of 10.7% in total operating expenses of $98.5 million from the year-ago quarter.
Non-GAAP net income improved 4.4% from the prior-year quarter to $28.4 million.
As on Sep 30, 2018, Blackbaud had cash and cash equivalents of $25.4million compared with $29.2 million, at the end of previous quarter. Total debt (including current portion) amounted to $425.3 million, compared with $479.8 million reported at the end of previous quarter.
Non-GAAP free cash flow came in at $57.8 million, marking a decrease of $1.3 million from the year-ago figure.
The company generated $137.8 million as cash from operatingactivities for the nine months ended Sep 30, 2018.
The company recently approved a quarterly dividend payment of 12 cents per share to be paid on Dec 14, 2018 to shareholders as on Nov 28, 2018.
Blackbaud announced that by deploying its cloud fund accounting software, Financial Edge NXT, an organization canexperience an annual return on investment of 102% and average annual benefit of $446,680 within one year. This announcement was made as per the Nucleus Research ROI Case Study of StarCare Specialty Health System.
The company announced "Cloud Solution for Higher Education" in the newly introduced Education Management portfolio. Custom capabilities pertaining to higher education including guided fundraising and stewardship management were also added.
Further, Blackbaud expanded alliance with Microsoft with Integrated Cloud Initiative for Nonprofits. The company also launched the Nonprofit Resource Management, which is jointly-developed with Microsoft.
At bbcon 2018 event, the company entered into a new partnership with Points of Light.
We believe growing clout of company’s Financial Edge NXT offering, expansion of product portfolio and collaborations bode well for Blackbaud in the longer haul.
Owing to the impact of shift toward a cloud-based subscription model from the traditional revenue-based model, Blackbaud had lowered 2018 outlook on Oct 8, 2018. The company maintained the revised fiscal 2018 guidance in the third quarter earnings announcement.
The company anticipates revenues for 2018 to be in the band of $844-$854 million, down from its earlier guided range of $870-$890 million.
Non-GAAP earnings per share have been forecast in the range of $2.46-$2.52 per share, down from the previous guidance of $2.75-$2.88 per share.
Non-GAAP operating margins are projected be in the range of 19.3-19.6%, down from the previous range of 20.6-21%.
Blackbaud anticipates non-GAAP free cash flow expectations for 2018 to $143 million to $147 million from its earlier view of $165-$175 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Blackbaud has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Blackbaud has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.