Blackbaud(BLKB) - 2025 Q2 - Quarterly Results

Press Release Overview Announcement and Executive Commentary Blackbaud announced its Q2 2025 earnings, raising full-year guidance, with the CEO highlighting significant growth and profitability improvements since 2020 and a record Rule of 40 score, while the CFO attributed outperformance to operational execution and a robust financial model - Blackbaud announced its Q2 2025 earnings and raised its full-year financial guidance[1][4] - CEO Mike Gianoni stated the company significantly exceeded the Rule of 40 in Q2, reaching a record 45.3%, with plans to advance towards the Rule of 45[2][5] - CFO Chad Anderson noted revenue and profitability exceeded expectations, driven by rigorous operational execution, continuous productivity improvements, and a strong financial model[4] Second Quarter 2025 Financial Performance Key Financial Metrics (GAAP & Non-GAAP) Blackbaud achieved robust financial performance in Q2 2025, with significant growth in non-GAAP organic and recurring revenue despite a slight GAAP total revenue decrease due to the EVERFI divestiture, demonstrating enhanced operational efficiency and profitability across key GAAP and non-GAAP metrics Q2 2025 Key Financial Data (Compared to Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | Change Rate | Notes | | :-------------------------------- | :------------- | :------------- | :--- | :----- | :--- | | GAAP Total Revenue | $281.4 million | $287.2 million | -$5.8 million | -2.1% | Impacted by EVERFI divestiture | | Non-GAAP Organic Revenue | $281.4 million | $263.5 million | +$17.9 million | +6.8% | | | GAAP Recurring Revenue | $275.6 million | $281.4 million | -$5.8 million | -2.0% | 98.0% of total revenue, impacted by EVERFI divestiture | | Non-GAAP Organic Recurring Revenue | $275.6 million | $258.0 million | +$17.6 million | +6.9% | | | GAAP Operating Income | $56.7 million | $42.1 million | +$14.6 million | +34.7% | Operating Margin 20.1% (+540 bps) | | Non-GAAP Operating Income | $94.3 million | $86.1 million | +$8.2 million | +9.5% | Operating Margin 33.5% (+350 bps) | | GAAP Net Income | $26.0 million | $21.8 million | +$4.2 million | +19.3% | | | GAAP Diluted EPS | $0.54 | $0.42 | +$0.12 | +28.6% | | | Non-GAAP Net Income | $58.2 million | $55.7 million | +$2.5 million | +4.5% | | | Non-GAAP Diluted EPS | $1.21 | $1.08 | +$0.13 | +12.0% | | | Non-GAAP Adjusted EBITDA | $108.5 million | $102.5 million | +$6.0 million | +5.9% | Adjusted EBITDA Margin 38.5% (+280 bps) | | Rule of 40 Score | 45.3% | - | - | - | | | GAAP Net Cash from Operating Activities | $66.9 million | $53.8 million | +$13.1 million | +24.3% | Operating Cash Flow Margin 23.8% (+510 bps) | | Non-GAAP Free Cash Flow | $51.5 million | $32.6 million | +$18.9 million | +58.0% | Free Cash Flow Margin 18.3% (+690 bps) | | Non-GAAP Adjusted Free Cash Flow | $53.1 million | $36.4 million | +$16.7 million | +45.9% | Adjusted Free Cash Flow Margin 18.9% (+620 bps) | Company Updates and Future Outlook Recent Company Highlights Blackbaud achieved several key milestones in Q2 2025, including executive appointments, deepened AI strategy and product integration, a strategic partnership with Constant Contact, industry report publication, and ESG recognition - Appointed Salesforce veteran Bill Fort as Senior Vice President of North America Sales[11] - Unveiled the Agentic AI vision at the annual developer conference, aiming to enhance client efficiency in donor cultivation and fundraising operations through AI[11] - Showcased the Intelligence for Good® AI strategy in the May product update brief, emphasizing direct integration of powerful, responsible AI into products[11] - Partnered with Constant Contact to integrate leading digital marketing capabilities through Blackbaud Raiser's Edge NXT®, enabling social impact clients to more effectively reach and engage supporters[11] - Blackbaud Institute released the 2025 Status of Fundraising Report, indicating growing recognition of technology (including AI) in the social impact sector and its positive effect on fundraising revenue growth[11] - Published the 2024 Impact Report and was named one of Newsweek's World's Most Environmental Companies for 2025, highlighting the company's ESG commitment[11] Full Year 2025 Financial Guidance Blackbaud raised its full-year 2025 financial guidance, covering key metrics such as GAAP revenue, non-GAAP adjusted EBITDA margin, non-GAAP EPS, and non-GAAP adjusted free cash flow, based on strong first-half performance - Blackbaud raised its full-year 2025 financial guidance, excluding the potential impact of a future "One Big Beautiful Bill Act"[10] Full Year 2025 Financial Guidance | Metric | Full Year 2025 Guidance | | :-------------------------------- | :------------- | | GAAP Revenue | $1.120 billion - $1.130 billion | | Non-GAAP Adjusted EBITDA Margin | 35.4% - 36.2% | | Non-GAAP EPS | $4.30 - $4.50 | | Non-GAAP Adjusted Free Cash Flow | $190 million - $200 million | | Non-GAAP Annualized Effective Tax Rate | Approximately 24.5% | | Full-Year Interest Expense | Approximately $65 million - $69 million | | Full-Year Fully Diluted Shares | Approximately 48.5 million - 49.5 million shares | | Full-Year Capital Expenditures | Approximately $55 million - $65 million (including $50-$60 million capitalized software development costs) | Stock Repurchase Program As of June 30, 2025, Blackbaud's common stock repurchase program had approximately $545 million remaining authorization - As of June 30, 2025, Blackbaud's common stock repurchase program (expanded, supplemented, and reauthorized in July 2024) had approximately $545 million remaining authorization[15] Reclassifications Effective 2025, Blackbaud combined "recurring revenue" and "one-time services and other revenue" into "revenue," and "recurring costs" and "one-time services and other costs" into "cost of revenue" to ensure comparability of financial statements - Effective 2025, due to the immateriality of one-time services and other revenue, the company combined "recurring revenue" and "one-time services and other revenue" into "revenue"[16] - To ensure comparability across periods, previously reported "recurring revenue" and "one-time services and other revenue" in the consolidated statements of comprehensive income have been combined to align with current period presentation[16] - Similarly, "recurring costs" and "one-time services and other costs" have been combined into "cost of revenue"[16] Corporate Information and Disclosures Conference Call Details Blackbaud will host its Q2 2025 conference call on July 30, 2025, to discuss financial results - Blackbaud's Q2 2025 conference call will be held on July 30, 2025, at 8:00 AM ET[17] - Live access is available by dialing 1-877-407-3088 (US/Canada) or via webcast on the Blackbaud Investor Relations webpage[17] About Blackbaud Blackbaud is a leading social impact software provider, serving nonprofits, educational institutions, corporate social responsibility departments, and individual changemakers globally, accelerating impact in fundraising, financial management, and digital giving, with multiple industry recognitions - Blackbaud (NASDAQ: BLKB) is a leading software provider focused on powering social impact[17] - Serves nonprofit and education sectors, companies committed to corporate social responsibility, and individual changemakers[17] - Its software is designed to accelerate impact in fundraising, nonprofit financial management, digital giving, grantmaking, corporate social responsibility, and education management[17] - Over $100 billion is raised, granted, or managed annually through the Blackbaud platform, serving millions of users[17] - Recognized by Newsweek as one of America's Most Responsible Companies, by Quartz as a Best Company for Remote Workers, and by Forbes as one of America's Best Employers[17] - As a remote-first company, Blackbaud has operations in the US, Australia, Canada, Costa Rica, India, and the UK, supporting users in over 100 countries[17] Investor & Media Contacts Provides contact email addresses for investor relations and media relations - Investor contact email: IR@blackbaud.com[18] - Media contact email: media@blackbaud.com[18] Forward-Looking Statements This press release contains forward-looking statements protected by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, involving projections of the company's financial condition and operating results, which are subject to risks and uncertainties, and the company undertakes no obligation to update these statements - All statements, expectations, and assumptions in this press release (other than historical information) are forward-looking statements, protected by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995[20] - These statements involve numerous risks and uncertainties, including managing acquired company integration, uncertainties in existing customer business and renewals, impact of revenue mix changes on gross margins, continued success of sales growth, cybersecurity and data protection risks and related liabilities, and potential litigation[20] - Blackbaud undertakes no obligation to update these forward-looking statements, except as required by law[20] Non-GAAP Financial Measures Explanation Blackbaud provides non-GAAP financial information, explaining its rationale and definitions for using these metrics, including non-GAAP free cash flow, adjusted free cash flow, organic revenue growth, and Rule of 40, emphasizing their usefulness as supplements to GAAP - Blackbaud uses non-GAAP financial measures to analyze its operating performance, believing they supplement GAAP measures and aid investors in evaluating ongoing operational performance and trends[22][23][24] - Non-GAAP free cash flow is defined as cash flow from operations less capital expenditures (including capitalized software development costs and property and equipment capital expenditures)[25] - Non-GAAP adjusted free cash flow adds cash outflows related to the May 2020 security incident to non-GAAP free cash flow[25] - Non-GAAP organic revenue growth and non-GAAP organic recurring revenue growth exclude incremental revenue from current period acquisitions and adjust for divested business revenue to provide a more comparable view of business growth performance[27] - The Rule of 40 is defined as non-GAAP organic revenue growth plus non-GAAP adjusted EBITDA margin[28] - Non-GAAP adjusted EBITDA is defined as GAAP net income plus net interest, provision for income taxes, depreciation, amortization of intangible assets from business combinations, amortization of capitalized software development costs, share-based compensation, employee severance costs, acquisition and disposition related costs, security incident related costs, and impairment and disposition charges[28] Consolidated Financial Statements Consolidated Balance Sheets As of June 30, 2025, Blackbaud's consolidated balance sheet shows increases in total assets and liabilities, with significant rises in restricted cash and accounts receivable, while stockholders' equity decreased Consolidated Balance Sheet Key Data (As of June 30, 2025, and December 31, 2024) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | Change Rate | | :-------------------------------- | :------------- | :------------- | :--- | :----- | | Assets | | | | | | Cash and Cash Equivalents | $41,566 | $67,628 | -$26,062 | -38.5% | | Restricted Cash | $870,248 | $741,884 | +$128,364 | +17.3% | | Accounts Receivable, Net | $145,237 | $83,539 | +$61,698 | +73.9% | | Total Assets | $2,629,393 | $2,495,715 | +$133,678 | +5.4% | | Liabilities | | | | | | Accounts Payable | $42,664 | $50,810 | -$8,146 | -16.0% | | Customer Funds Payable | $874,757 | $742,340 | +$132,417 | +17.8% | | Debt, Non-Current Portion | $1,136,112 | $1,051,110 | +$85,002 | +8.1% | | Total Liabilities | $2,541,443 | $2,353,722 | +$187,721 | +8.0% | | Stockholders' Equity | | | | | | Total Stockholders' Equity | $87,950 | $141,993 | -$54,043 | -38.1% | Consolidated Statements of Comprehensive Income Blackbaud achieved year-over-year growth in net income and operating income for Q2 and H1 2025, despite a slight decrease in total revenue, with improved gross profit and operating margins reflecting effective cost control and efficiency gains Consolidated Statements of Comprehensive Income Key Data (For the Periods Ended June 30, 2025) | Metric (in thousands) | Q2 2025 | Q2 2024 | Change Rate (QoQ) | H1 2025 | H1 2024 | Change Rate (YoY) | | :-------------------------------- | :------------- | :------------- | :----------- | :----------- | :----------- | :----------- | | Revenue | $281,382 | $287,286 | -2.1% | $552,043 | $566,536 | -2.6% | | Cost of Revenue | $113,633 | $124,700 | -8.9% | $228,448 | $250,906 | -8.9% | | Gross Profit | $167,749 | $162,586 | +3.2% | $323,595 | $315,630 | +2.5% | | Operating Expenses | $111,063 | $120,494 | -7.8% | $246,479 | $262,819 | -6.3% | | Operating Income | $56,686 | $42,092 | +34.7% | $77,116 | $52,811 | +46.0% | | Interest Expense | ($18,411) | ($15,715) | +17.1% | ($35,356) | ($25,991) | +36.0% | | Income Tax Expense | $13,413 | $7,883 | +70.1% | $14,136 | $6,427 | +119.9% | | Net Income | $25,980 | $21,804 | +19.2% | $30,847 | $27,050 | +14.0% | | Diluted EPS | $0.54 | $0.42 | +28.6% | $0.63 | $0.52 | +21.2% | Consolidated Statements of Cash Flows In H1 2025, Blackbaud's cash flow from operating activities decreased, but cash flow from financing activities significantly increased, primarily due to debt issuance, while investing activities cash outflow remained relatively stable Consolidated Statements of Cash Flows Key Data (For the Periods Ended June 30, 2025) | Metric (in thousands) | H1 2025 | H1 2024 | Change | Change Rate | | :-------------------------------- | :------------- | :------------- | :--- | :----- | | Net Cash Provided by Operating Activities | $68,329 | $118,435 | -$50,106 | -42.3% | | Net Cash Used in Investing Activities | ($41,333) | ($40,718) | -$615 | +1.5% | | Net Cash Provided by Financing Activities | $68,094 | $25,657 | +$42,437 | +165.4% | | Cash, Cash Equivalents, and Restricted Cash at End of Period | $911,814 | $831,108 | +$80,706 | +9.7% | Reconciliation of GAAP to Non-GAAP Financial Measures Non-GAAP Gross Profit and Operating Income Reconciliation Blackbaud provides a reconciliation of GAAP gross profit and operating income to their non-GAAP counterparts, with key adjustments including share-based compensation, amortization of business combination intangibles, severance, acquisition/disposition costs, and security incident costs, significantly improving non-GAAP margins Non-GAAP Gross Profit and Operating Income Reconciliation (For the Periods Ended June 30, 2025) | Metric (in thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------------- | :------------- | :------------- | :----------- | :----------- | | GAAP Gross Profit | $167,749 | $162,586 | $323,595 | $315,630 | | Non-GAAP Gross Profit | $178,321 | $180,602 | $343,917 | $352,083 | | Non-GAAP Gross Margin | 63.4% | 62.9% | 62.3% | 62.1% | | GAAP Operating Income | $56,686 | $42,092 | $77,116 | $52,811 | | Non-GAAP Operating Income | $94,330 | $86,139 | $171,828 | $158,573 | | Non-GAAP Operating Margin | 33.5% | 30.0% | 31.1% | 28.0% | | Key Adjustments (Q2 2025): | | | | | | Share-Based Compensation Expense | $27,252 | $24,286 | $49,422 | $57,856 | | Amortization of Intangible Assets from Business Combinations | $7,586 | $15,541 | $15,172 | $31,108 | | Employee Severance Costs | $2,147 | — | $2,147 | — | | Acquisition and Disposition Related Costs | $264 | $2,398 | $25,396 | $4,653 | | Security Incident Related Costs | $395 | $1,822 | $2,575 | $12,145 | - Acquisition and disposition related costs for H1 2025 included $24.3 million for the termination of a Washington D.C. office space lease, acquired through the EVERFI acquisition[38] - Security incident related costs primarily include third-party service provider and consultant fees (including legal fees), as well as customer claims and negotiated settlements; as of June 30, 2025, approximately $1.6 million in loss contingencies have been recorded[39] Non-GAAP Revenue and Recurring Revenue Reconciliation Blackbaud reconciles GAAP revenue and recurring revenue to non-GAAP organic and organic recurring revenue, providing a clearer view of core business growth by excluding divested business revenue and accounting for foreign exchange impacts Non-GAAP Revenue and Recurring Revenue Reconciliation (For the Periods Ended June 30, 2025) | Metric (in thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------------- | :------------- | :------------- | :----------- | :----------- | | GAAP Revenue | $281,382 | $287,286 | $552,043 | $566,536 | | GAAP Revenue Growth | -2.1% | - | -2.6% | - | | Non-GAAP Organic Revenue | $281,382 | $263,530 | $552,043 | $519,371 | | Non-GAAP Organic Revenue Growth | 6.8% | - | 6.3% | - | | Non-GAAP Organic Revenue (Constant Currency) | $279,472 | $263,530 | $550,431 | $519,371 | | Non-GAAP Organic Revenue Growth (Constant Currency) | 6.0% | - | 6.0% | - | | GAAP Recurring Revenue | $275,631 | $281,376 | $539,681 | $552,894 | | GAAP Recurring Revenue Growth | -2.0% | - | -2.4% | - | | Non-GAAP Organic Recurring Revenue | $275,631 | $257,958 | $539,681 | $507,422 | | Non-GAAP Organic Recurring Revenue Growth | 6.9% | - | 6.4% | - | | Non-GAAP Organic Recurring Revenue (Constant Currency) | $273,737 | $257,958 | $538,064 | $507,422 | | Non-GAAP Organic Recurring Revenue Growth (Constant Currency) | 6.1% | - | 6.0% | - | - Non-GAAP organic revenue and recurring revenue exclude revenue generated by divested businesses in prior periods to provide a more comparable view of business performance[42] - Non-GAAP organic revenue growth at constant currency is determined by converting foreign currency reporting entity revenues to U.S. dollars using comparable prior period weighted average foreign currency exchange rates, primarily impacted by AUD, GBP, CAD, and EUR[44] Non-GAAP EBITDA, Adjusted EBITDA, and Free Cash Flow Reconciliation Blackbaud provides reconciliations from GAAP net income to non-GAAP EBITDA and adjusted EBITDA, and from GAAP operating cash flow to non-GAAP free cash flow and adjusted free cash flow, illustrating the company's true operating profitability and cash generation capabilities after excluding specific non-cash and non-recurring items Non-GAAP EBITDA and Adjusted EBITDA Reconciliation (For the Periods Ended June 30, 2025) | Metric (in thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------------- | :------------- | :------------- | :----------- | :----------- | | GAAP Net Income | $25,980 | $21,804 | $30,847 | $27,050 | | Non-GAAP EBITDA | $78,393 | $74,020 | $121,706 | $116,770 | | Non-GAAP EBITDA Margin | 27.9% | - | 22.0% | - | | Non-GAAP Adjusted EBITDA | $108,451 | $102,526 | $201,246 | $191,424 | | Non-GAAP Adjusted EBITDA Margin | 38.5% | - | 36.5% | - | | Rule of 40 | 45.3% | - | 42.8% | - | | Rule of 40 (Constant Currency) | 44.4% | - | 42.4% | - | | Key Adjustments (Q2 2025): | | | | | | Net Interest | $16,443 | $12,900 | $31,733 | $21,128 | | GAAP Provision for Income Taxes | $13,413 | $7,883 | $14,136 | $6,427 | | Depreciation | $2,667 | $3,253 | $5,642 | $6,328 | | Amortization of Intangible Assets from Business Combinations | $7,586 | $15,541 | $15,172 | $31,108 | | Amortization of Capitalized Software Development Costs | $12,304 | $12,639 | $24,176 | $24,729 | | Share-Based Compensation Expense | $27,252 | $24,286 | $49,422 | $57,856 | | Employee Severance Costs | $2,147 | — | $2,147 | — | | Acquisition and Disposition Related Costs | $264 | $2,398 | $25,396 | $4,653 | | Security Incident Related Costs | $395 | $1,822 | $2,575 | $12,145 | Non-GAAP Free Cash Flow Reconciliation (For the Periods Ended June 30, 2025) | Metric (in thousands) | H1 2025 | H1 2024 | | :-------------------------------- | :------------- | :------------- | | GAAP Net Cash Provided by Operating Activities | $68,329 | $118,435 | | GAAP Operating Cash Flow Margin | 12.4% | 20.9% | | Non-GAAP Free Cash Flow | $39,231 | $83,925 | | Non-GAAP Free Cash Flow Margin | 7.1% | 14.8% | | Non-GAAP Adjusted Free Cash Flow | $41,704 | $89,747 | | Non-GAAP Adjusted Free Cash Flow Margin | 7.6% | 15.8% | | Key Adjustments (H1 2025): | | | | Less: Purchases of Property and Equipment | ($1,311) | ($6,118) | | Less: Capitalized Software Development Costs | ($27,787) | ($28,392) | | Add: Security Incident Related Cash Outflows | $2,473 | $5,822 |