Summary
Blackbaud's fiscal 2021 second quarter carried a difficult comparison in payments. GAAP revenue for the quarter ended June 30, 2021 was $229.4 million, down 1.1% from the prior-year quarter. GAAP recurring revenue was $217.0 million, up 0.3%, and non-GAAP organic recurring revenue grew 0.3%. The pressure came from transactional revenue tied to payment processing, which fell against the elevated online giving volumes of the second quarter of 2020. Contractual recurring revenue grew. One-time services and other revenue declined, and management tied that to fewer implementation and customization projects after commission plans changed in the first quarter of 2020 to steer sales toward cloud solutions, along with booking shortfalls during 2020. Foreign currency exchange rate movements increased total revenue by $6.3 million and income from operations by $2.3 million for the six months ended June 30, 2021.
Profitability moved the wrong way. Gross profit was $121.4 million, down 4.5%, and gross margin was 52.9%, down 1.9 percentage points. Recurring gross margin narrowed on the mix shift away from higher margin transactional revenue. GAAP operating income was $13.0 million, down 33.4%, and the operating margin of 5.7% was down 2.8 percentage points. The largest drag came from stock-based compensation, which rose after the company replaced annual cash bonus plans with a short-term performance equity plan, shortened the vesting period on annual long-term awards from four years to three, and granted equity in place of 2020 base salary merit increases. Research and development expense rose on engineering hiring, while sales and marketing costs fell with lower headcount and travel. GAAP net income was $6.7 million, down 43.1%, and diluted earnings per share was $0.14, down $0.10. For the six months ended June 30, 2021, net income was $6.6 million, down 60.1%.
Non-GAAP figures tell a steadier story. Non-GAAP income from operations was $54.1 million at a 23.6% margin, up 10 basis points. Non-GAAP adjusted EBITDA was $65.8 million, down $3.1 million, at a 28.7% margin. Non-GAAP diluted earnings per share was $0.82, down $0.03.
Cash generation was the bright spot. GAAP net cash provided by operating activities was $69.8 million in the quarter, up 12.6%. For the six months ended June 30, 2021, operating cash flow was $99.9 million, up 166.5%, helped by working capital swings, better collections and the shift from cash bonuses to equity awards. Non-GAAP free cash flow was $56.6 million in the quarter, up $8.4 million, and $73.9 million year to date. Capital expenditures were $2.7 million in the quarter, down 12.0%. Deferred revenue was $345.4 million at June 30, 2021, up 2.4%, helped by a seasonal renewal lift and early pricing actions. The company held $28.3 million of cash and cash equivalents and $483.1 million of debt under its 2020 credit facility, with a net leverage ratio of 1.78 to 1.00. It repurchased 405,047 shares for $30 million during the quarter and had $150.9 million left under its authorization.
Guidance centers on full-year 2021 cash flow. The CFO said free cash flow of roughly $74 million in the first half gives confidence the company will exceed the $100 million floor it set for 2021, and that its latest models suggest at least $120 million to $130 million of free cash flow for the fiscal year. Management also said upside revenue scenarios for the full year look more likely, while warning that investment will rise in the second half. The long-term aspirational goal remains the Rule of 40, and the measure was 27.6% in the quarter against 25.9% in the prior-year quarter. Risks deserve attention. The Security Incident could produce losses above insurance limits, and the company cannot estimate the size or the effect on operations, liquidity or financial condition. Recovery from COVID-19 remains uncertain, so customers could stay cautious about purchase decisions. Other risks include cybersecurity and data protection exposure, a revenue mix that pressures gross margin, the migration of maintenance customers to cloud subscriptions, litigation, debt covenant restrictions, and the seasonal timing of renewals and cash flow.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2021 | Q1 FY2021 | QoQ | Q2 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $229.4M | $219.2M | +4.7% | $232.0M | -1.1% |
| Gross profit | $121.4M | $115.8M | +4.8% | $127.1M | -4.5% |
| Gross margin | 52.9% | 52.8% | +0.1 pp | 54.8% | -1.9 pp |
| Research & development | $30.2M | $29.2M | +3.6% | $24.9M | +21.4% |
| Sales & marketing | $45.5M | $48.8M | -6.8% | $52.0M | -12.5% |
| General & administrative | $32.0M | $30.6M | +4.6% | $29.8M | +7.3% |
| Total operating expenses | $108.3M | $109.2M | -0.8% | $107.5M | +0.8% |
| Operating income (loss) | $13.0M | $6.6M | +96.3% | $19.6M | -33.4% |
| Operating margin | 5.7% | 3.0% | +2.6 pp | 8.4% | -2.8 pp |
| Net income (loss) | $6.7M | -$164.0K | +4204.3% | $11.8M | -43.1% |
| Net margin | 2.9% | -0.1% | +3.0 pp | 5.1% | -2.2 pp |
| Diluted EPS | $0.14 | $0.00 | +$0.14 | $0.24 | -$0.10 |
Risks
Ongoing fallout from the May 2020 ransomware attack where a cybercriminal removed a subset of data from Blackbaud's self-hosted environment. In the three and six months ended June 30, 2021, Blackbaud recorded $11.7 million and $24.4 million of Security Incident-related expenses, respectively, with offsetting probable insurance recoveries of $11.2 million and $23.9 million.
As of the filing, Blackbaud faces 29 putative consumer class actions, approximately 260 customer reimbursement requests and approximately 400 reservations of recovery rights, plus a multi-state Civil Investigative Demand from 47 state Attorneys General and the District of Columbia and separate Civil Investigative Demands from the Illinois and California Attorneys General. It has also received inquiries from the FTC, HHS, SEC, U.K. ICO, Australian OAIC, Canadian OPC and Spanish DPA.
Blackbaud believes it is probable that total losses related to the Security Incident will ultimately exceed the limits of its insurance coverage, and it cannot yet determine the amount or range of any excess. Future cybersecurity insurance may not be available on commercially reasonable terms, or at all.
Future publicity or developments related to the Security Incident could cause loss of customer confidence, reduced customer demand, reduced customer retention, strategic growth opportunities, and associated retention and recruiting difficulties. The company's trailing-twelve-month recurring revenue customer retention rate was approximately 92% for the period ended June 30, 2021, materially unchanged from full year 2020.
COVID-19 economic impact on the social good industry remains uncertain, though management sees signs of recovery. If existing and prospective customers remain cautious in their purchase decisions, the operating environment may continue to be challenging for the remainder of 2021 and potentially beyond. Total revenue decreased 1.1% in FY2021 Q2 and 1.5% year to date versus comparable prior-year periods.
SaaS KPIs
All quarters →Non-GAAP Adjusted EBITDA Margin
Non-GAAP Operating Margin
Non-GAAP Organic Recurring Revenue Growth
Rule of 40
Non-GAAP Organic Revenue Growth
Non-GAAP Free Cash Flow Margin
Non-GAAP Free Cash Flow
Non-GAAP organic revenue growth on constant currency basis
Summary, forecast, risks and KPIs are extracted from BLACKBAUD INC's SEC filings for Q2 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.