Summary
Blackbaud's third quarter of fiscal 2021 showed top-line improvement and better GAAP profitability than the prior-year quarter. Revenue was $231.2 million, up 7.5%. Gross profit was $123.5 million, up 6.2%, while gross margin was 53.4%, down 0.7 percentage points. Operating income was $11.8 million, up 17.4%, and operating margin was 5.1%, up 0.4 percentage points. Net income was $6.2 million, up 26.9%, and diluted EPS was $0.13, up $0.03. The nine-month picture was weaker on profitability. Revenue for the nine months was $679.8 million, up 1.4%. Gross profit was $360.7 million and roughly flat. Operating income was $31.5 million, down 17.2%. Net income was $12.8 million, down 40.2%, and diluted EPS was $0.26, down $0.18.
Non-GAAP results and cash flow were stronger. Non-GAAP income from operations was $50.5 million, with a non-GAAP operating margin of 21.8%, down 60 basis points. Non-GAAP net income was $37.9 million, and non-GAAP diluted EPS was $0.78, up $0.05. Adjusted EBITDA was $62.4 million, up $3.0 million, with a 27.0% margin. Operating cash flow was $69.9 million, down $1.8 million. Free cash flow was $57.9 million, up $16.5 million. For the nine months, operating cash flow was $169.8 million, up $60.6 million, and free cash flow was $131.8 million. Capital expenditures were $2.2 million in the quarter, down $17.7 million, and $8.3 million for the nine months, down $17.5 million. Deferred revenue was $334.0 million, up 1.7%.
Management raised its full-year 2021 outlook for revenue, profitability and free cash flow. The company expects to exceed the $920 million high end of its upside revenue scenario for 2021, achieve an adjusted EBITDA margin of at least 26% for the full year, and generate at least $150 million in free cash flow. It also expects further acceleration in its full-year recurring revenue growth rate into 2022. In the fourth quarter of 2021, Blackbaud plans to incur $13.0 million to $14.0 million of pre-tax costs from permanently closing fixed office locations, with expected future annual before-tax expense savings of $3.0 million to $5.0 million beginning in 2022. The company repurchased 583,280 shares for $40.3 million in the quarter, leaving approximately $111 million under its authorization. Customer retention remained solid: approximately 93% of customers with recurring revenue contracts were retained for the twelve months ended September 30, 2021, materially unchanged from the full year ended December 31, 2020.
Risks remain concentrated around the Security Incident and the company's investment cycle. Management said total costs related to the Security Incident will exceed insurance coverage during the fourth quarter of 2021. That could negatively impact GAAP profitability and cash flow in the fourth quarter and will negatively impact GAAP profitability and cash flow for the foreseeable future. Blackbaud cannot estimate the amount or range of any excess. Other risk factors include COVID-19 disruption, cybersecurity and data protection risks, management of acquired companies, a shifting revenue mix that may impact gross margin, uncertainty around increased business and renewals, and potential litigation. The company is also making critical investments in digital marketing, engineering, security, customer success, and cloud infrastructure, and some of those investments are likely to push into early 2022.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2021 | Q2 FY2021 | QoQ | Q3 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $231.2M | $229.4M | +0.8% | $215.0M | +7.5% |
| Gross profit | $123.5M | $121.4M | +1.8% | $116.3M | +6.2% |
| Gross margin | 53.4% | 52.9% | +0.5 pp | 54.1% | -0.7 pp |
| Research & development | $31.6M | $30.2M | +4.4% | $22.8M | +38.6% |
| Sales & marketing | $44.7M | $45.5M | -1.6% | $48.5M | -7.8% |
| General & administrative | $34.7M | $32.0M | +8.5% | $34.1M | +1.8% |
| Total operating expenses | $111.7M | $108.3M | +3.1% | $106.2M | +5.1% |
| Operating income (loss) | $11.8M | $13.0M | -9.2% | $10.1M | +17.4% |
| Operating margin | 5.1% | 5.7% | -0.6 pp | 4.7% | +0.4 pp |
| Net income (loss) | $6.2M | $6.7M | -8.1% | $4.9M | +26.9% |
| Net margin | 2.7% | 2.9% | -0.3 pp | 2.3% | +0.4 pp |
| Diluted EPS | $0.13 | $0.14 | -$0.01 | $0.10 | +$0.03 |
Risks
The 2020 Security Incident continues to drive litigation and claims, including approximately 260 Customer Reimbursement Requests, approximately 400 reservations of recovery rights, and 19 putative consumer class action cases as of the filing. The investigation remains ongoing and additional lawsuits, claims, or investigations may arise.
MD&A states the company believes total costs related to the Security Incident will exceed insurance limits during Q4 2021 and will negatively impact GAAP profitability and cash flow for the foreseeable future. As of September 30, 2021, cumulative Security Incident expenses were $45.7 million and cumulative probable insurance recoveries were $43.9 million.
The company has received a consolidated multi-state Civil Investigative Demand on behalf of 48 state Attorneys General and the District of Columbia, separate CIDs from Illinois and California, and inquiries from the FTC, HHS, SEC, UK ICO, Australian, Canadian, Spanish, and Irish privacy authorities. Authorities may seek undertakings, injunctive relief, consent decrees, or civil or criminal penalties that could increase data security costs or require operational changes.
The risk factor states future publicity or developments related to the Security Incident could cause loss of customer confidence, reduced customer demand, reduced customer retention, and fewer strategic growth opportunities.
The risk factor states future publicity or developments related to the Security Incident could contribute to retention and recruiting difficulties. Significant management time and Company resources have been and are expected to continue to be devoted to the Security Incident.
MD&A says the economic impact of COVID-19 on the social good industry remains somewhat uncertain, and 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.
MD&A attributes the decrease in income from operations for the nine months ended September 30, 2021 to an increase in stock-based compensation expense of $34.9 million, driven by compensation program changes expected to cause stock-based compensation expense to remain higher than historical levels.
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
Non-GAAP Adjusted EBITDA
Summary, forecast, risks and KPIs are extracted from BLACKBAUD INC's SEC filings for Q3 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.