Blackbaud (BLKB) Up 1.9% Since Last Earnings Report: Can This Continue?

It’s been about a month since Blackbaud’s (BLKB) last earnings report. Shares rose about 1.9% in that time, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Blackbaud headed for a decline? Before we dive into the recent reaction from investors and analysts, let’s take a quick look at the company’s most recent earnings report in order to get a better handle on the important factors influencing the situation.

Blackbaud’s best first-quarter earnings estimates

Blackbaud reported first-quarter 2024 non-GAAP earnings per share (EPS) of 93 cents, topping the Zacks Consensus Estimate by 9.4%. The financial result increased by 29.2% year on year.

Total revenue increased 6.7% year-over-year to $279.3 million, driven by growth in recurring revenue. The successful implementation of the five-point operating plan played a key role in increasing revenues and profitability. Nevertheless, revenues missed the Zacks Consensus Estimate by 1.1%.

Total recurring revenue (representing 97.2% of total revenue) for the reported quarter was $271.5 million, up 7.4% year-over-year. One-time and other services revenue (2.8%) was $7.7 million, down 14.1% year-over-year.

Non-GAAP organic revenues increased 6.9% on a reported basis and 6.6% on a constant currency basis year over year. Non-GAAP organic recurring revenue increased 7.4%.

Margin details

Non-GAAP gross margin was 61.4% compared to 59.8% a year earlier.

Total operating expenses decreased 4.2% year-over-year to $142.3 million.

Non-GAAP operating margin increased 430 basis points (bps) to 25.9%.

Non-GAAP adjusted EBITDA margin was 31.8%, up 460 basis points year over year.

Balance sheet and cash flow

As of March 31, 2024, Blackbaud had total cash, cash equivalents and restricted cash of $382.9 million compared to $728.3 million as of December 31, 2023.

Total debt (including current portion) as of March 31, 2024 was $1,039.8 million compared to $779.7 million as of December 31, 2023.

Cash from operations was $64.6 million in the first quarter, compared to $21.8 million in the prior-year period.

Non-GAAP adjusted free cash flow was $53.3 million, compared to $15.7 million in the prior-year quarter.

In the quarter in question, it bought back 3 million shares. As part of the previously announced buyout authorization, the company plans to buy back 7-10% of the issued shares in 2024, of which 5.5% was already bought back in the first quarter.

Perspectives

With two specific transactions in the first quarter – the divestiture of EVERFI’s one-time creative services business and its recent share repurchase activity, Blackbaud updated its full-year financial guidance.

Management now expects non-GAAP revenue to be in the range of $1.164 billion to $1.194 billion, compared to the previously expected range of $1.17 billion to $1.2 billion.

The company continues to forecast non-GAAP adjusted EBITDA margin in the range of 32.5-33.5%.

Non-GAAP EPS is expected to be in the range of $4.12 to $4.38, unchanged from prior guidance.

Non-GAAP adjusted free cash flow is forecast to be between $254 million and $274 million, unchanged from prior guidance.

The effective annual non-GAAP tax rate is the same as the previous estimate and is approximately 24.5%.

Interest costs are now expected to be between $48 million and $52 million, compared to earlier expectations of $34 million to $38 million.

Shares are now expected in the range of 52-53 million compared to the previously expected range of 53.5-54.5 million.

Capital expenditures are expected to be $65-75 million, which includes $60-70 million of capitalized software and content development costs. This remains the same as the previous perspective.

How have estimates changed since then?

Last month, investors saw a downward trend in new estimates.

As a result of these changes, the consensus estimate moved by -9.44%.

VGM results

Blackbaud currently has a Strong Growth Score of A, although it lags well behind its Momentum Score of F. Plotting a somewhat similar path, the stock is rated D on the value side, placing it in the bottom 40% for this investment strategy.

Overall, the stock has a Total VGM Score of C. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. Notably, Blackbaud carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Industry player performance

Blackbaud is part of the Zacks Computer – Software industry. Shares of Microsoft (MSFT) in the same industry have gained 8.7% over the past month. More than a month ago, the company published its results for the quarter ended March 2024.

Microsoft reported revenue of $61.86 billion in the most recent quarter, representing a +17% year-over-year change. EPS of $2.94 in the same period compared to $2.45 a year ago.

Microsoft is expected to report earnings per share of $2.90 for the current quarter, representing a year-over-year change of +7.8%. Over the past 30 days, the Zacks Consensus Estimate has moved +0.2%.

Microsoft earns a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Rating of D.

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