Blackbaud(US:BLKB)2025-11-03 21:09Revenue Performance - Total revenue decreased by $5.5 million (1.9%) and $19.4 million (2.3%) for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024[166]. - GAAP revenue for Q3 2025 was $281.1 million, a decrease of 1.9% compared to Q3 2024's $286.6 million[205]. - Non-GAAP organic revenue for Q3 2025 was $281.1 million, reflecting a growth of 5.2% from Q3 2024's $267.3 million[212]. - Non-GAAP organic recurring revenue growth for Q3 2025 was 5.5%, with non-GAAP organic recurring revenue at $275.8 million compared to $261.5 million in Q3 2024[212]. - Approximately 16% of total revenue for the nine months ended September 30, 2025, was generated from operations outside the U.S.[265]. Profitability Metrics - Income from operations increased by $13.4 million and $35.7 million for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024[144]. - GAAP gross profit for Q3 2025 increased to $167.5 million, resulting in a gross margin of 59.6%, up from 54.9% in Q3 2024[212]. - Non-GAAP income from operations for Q3 2025 was $84.0 million, with a non-GAAP operating margin of 29.9%, compared to 27.5% in Q3 2024[212]. - GAAP net income for the nine months ended September 30, 2025, was $78.3 million, an increase from $46.8 million in the same period of 2024[212]. - GAAP net income for Q3 2025 was $47.5 million, compared to $18.3 million in Q3 2024, representing a 159.6% increase[218]. Expenses and Cost Management - Cost of revenue decreased by $15.6 million (12.1%) and $41.5 million (10.8%) for the three and nine months ended September 30, 2025, respectively, compared to the same periods in 2024[167]. - Sales, marketing and customer success expenses decreased by $5.7 million, or 11.4%, and $14.6 million, or 9.9%, for the three and nine months ended September 30, 2025, compared to the same periods in 2024[174]. - Research and development expenses decreased by $0.7 million, or 1.9%, and $11.7 million, or 10.1%, for the three and nine months ended September 30, 2025, compared to the same periods in 2024[175]. - General and administrative expenses increased by $3.5 million, or 12.8%, and $13.7 million, or 12.9%, for the three and nine months ended September 30, 2025, compared to the same periods in 2024[181]. Cash Flow and Liquidity - Cash and cash equivalents were $38.3 million as of September 30, 2025, with a net leverage ratio of 2.45 to 1.00[150]. - Cash and cash equivalents decreased by 43.4% to $38.3 million as of September 30, 2025, down from $67.6 million at the end of 2024[233]. - Net cash provided by operating activities for the nine months ended September 30, 2025, was $207.5 million, a decrease of 6.7% from $222.4 million in 2024[233]. - Non-GAAP free cash flow for the nine months ended September 30, 2025, was $162.5 million, a decrease of 5.2% from $172.3 million in 2024[227]. - The company incurred $24.3 million in charges related to the release from a lease for office space during the nine months ended September 30, 2025[206]. Share Repurchase and Debt Management - The company repurchased 459,528 shares for $30.1 million during the three months ended September 30, 2025, and a total of 1,972,550 shares for $130.2 million during the nine months ended September 30, 2025[141]. - The company expects total share repurchases during 2025 to represent between 5.2% and 7.0% of its outstanding common stock as of December 31, 2024[141]. - Total carrying value of debt as of September 30, 2025, was $1,064.6 million, a slight decrease of 1.0% from $1,075.0 million at the end of 2024[233]. - The net leverage ratio as of September 30, 2025, was 2.45 to 1.00, well below the maximum requirement of 3.75 to 1.00 under the 2024 Credit Facilities[253]. - Total remaining principal payments due as of September 30, 2025, were approximately $1.1 billion, with expected future interest payments of about $230.0 million[258][259]. Tax and Regulatory Impacts - The effective income tax rate decreased due to a favorable impact of a valuation allowance reduction against net U.S. deferred tax assets[197]. - The company expects the OBBBA to significantly reduce cash taxes through 2027[198]. - The company applies a non-GAAP effective tax rate of 24.5% for calculating non-GAAP net income and diluted earnings per share[208]. Strategic Initiatives - The company is transitioning its contractual revenue contracts from primarily 1-year to primarily 3-year renewal terms, enhancing revenue predictability for customers[136]. - The company is expanding operations in India to access talent and reduce costs, with hiring beginning in 2024[136]. - The new agentic AI suite, "Agents for Good™," was launched to help social impact organizations enhance their operations[139]. - The company continues to invest in innovative and secure cloud solutions, including AI technology, to enhance customer satisfaction[175]. - The company implemented software tools to enhance its digital footprint and drive lead generation, aiming to reduce customer acquisition costs[173].