A month has gone by since the last earnings report for Blackbaud (BLKB - Free Report) . Shares have added about 3.3% 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 catalysts.
Blackbaud Beats on Q1 Earnings & Revenues
Blackbaud, Inc. delivered first-quarter 2019 non-GAAP earnings of 51 cents per share, outpacing the Zacks Consensus Estimate by a penny. However, the figure declined 22.7% from the year-ago quarter.
Total non-GAAP revenues improved 5.9% year over year to $216.5 million, surpassing the Zacks Consensus Estimate of $211 million.
Blackbaud 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 recurring revenues for the reported quarter came in at $198.1 million, accounting for 91.8% of total revenues of $215.8 million. The figure was also up 9.5% year over year. Non-GAAP recurring revenues came in at $198.8 million, up 9.7% year over year.
One-time services and other revenues were pegged at $17.7 million (almost 8.2% of total revenues), declining 24% year over year.
Non-GAAP organic revenues improved 2.2% flat year over year (up 3.1% on a constant currency basis) to $211.4 million. Meanwhile, non-GAAP organic recurring revenues increased 5.7% to $193.9 million.
Non-GAAP gross profit advanced 1.7% from the year-ago quarter to $130.8 million. However, non-GAAP gross margin contracted 250 bps to 60.4%.
Blackbaud’s non-GAAP operating income for the quarter under review declined 16.9% from the year-ago quarter to reach almost $36 million.
Non-GAAP operating margin contracted 450 bps from the year-ago figure to 16.6%. The decrease can primarily be attributed to an increase of 16% in total operating expenses of $114.4 million from the year-ago quarter.
Balance Sheet & Cash Flow
As on Mar 31, 2019, Blackbaud had cash and cash equivalents of $25.2 million compared with $30.9 million, at the end of previous quarter. Total debt (including current portion) amounted to $583.6 million, compared with $387.1 million reported at the end of previous quarter.
Free cash flow came in at ($22.5 million) compared with $50.7 million reported in the prior-quarter.
The company used $10 million cash from operating activities for 3 months ended Mar 31, 2019.
The company recently approved a quarterly dividend payment of 12 cents per share to be paid on Jun 14, 2019 to shareholders as on May 28, 2019.
Latest Initiatives Hold Promise
In a bid to expand international presence, Blackbaud recently announced the appointment of Allan Hoffmann as president and general manager to lead the company’s operations based in Canada.
Synergies from JustGiving acquisition helped Blackbaud to introduce Blackbaud Peer-to-Peer Fundraising solution, at no subscription fee, in the reported quarter.
The company also unveiled Blackbaud Purchase Cards and Expense Management in its Financial Edge NXT; consequently aiding social organizations streamline financial processes and enhance mission delivery.
Blackbaud also announced the conclusion of YourCause buyout. YourCause's product vision and capabilities will complement Blackbaud's technical expertise, in turn offering enhanced offerings to non-profit organizations and institutions working for social causes.
We believe growing clout of company’s Raiser's Edge NXT and Financial Edge NXT offerings, expansion of product portfolio and collaborations with the likes of Microsoft, among others, will aid financial performance in subsequent quarters.
Blackbaud reiterated 2019 outlook. The company continues to anticipate revenues for 2019 to be in the band of $880-$910 million (mid-point $895 million).
Non-GAAP earnings per share have been forecast in the range of $2.11-$2.28 per share (mid-point of $2.20).
Non-GAAP operating margins are projected be in the range of 16.7-17.2%.
Blackbaud continues to anticipate non-GAAP free cash flow expectations for 2019 to be in the range of $124 million to $134 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6% due to these changes.
Currently, Blackbaud has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. 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 F. 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. Notably, Blackbaud has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.