Summary
Blackbaud reported third quarter revenue of $261.3 million, up 13.0% from the prior-year quarter. Year-to-date revenue was $783.3 million, up 15.2%. Gross profit in the quarter was $140.4 million, up 13.6%, and gross margin was 53.7%, up 0.3 percentage points from the prior-year quarter. The top line benefited from growth in recurring revenue and EVERFI, but GAAP profitability moved sharply lower. The quarter produced an operating loss of $7.0 million and an operating margin of -2.7%, down 7.8 percentage points from the prior-year quarter. Net loss was $10.3 million, down from net income a year earlier, and diluted loss per share was -$0.20, down $0.33 per share. Security Incident-related costs, net of insurance, were $13.7 million in the quarter and weighed on GAAP results.
On a non-GAAP basis, the picture was steadier. Non-GAAP income from operations was $49.8 million, with a non-GAAP operating margin of 19.1%, down 270 basis points. Non-GAAP net income was $36.0 million, and non-GAAP diluted earnings per share was $0.69, down $0.09 per share. Non-GAAP adjusted EBITDA was $66.9 million, up $4.6 million, though margin slipped 140 basis points to 25.6%. Cash generation was a clear bright spot. GAAP operating cash flow was $108.0 million in the quarter, up $38.2 million, and year-to-date GAAP operating cash flow was $189.8 million, up 11.8%. Deferred revenue was $396.6 million, up 18.8% from the prior-year quarter. Non-GAAP adjusted free cash flow was $93.8 million in the quarter, up $35.2 million, with a margin of 35.9%, up 1,050 basis points. Management said the company generated $94 million of adjusted free cash flow in the quarter and $146 million year-to-date, which exceeds the midpoint of its full-year guidance range.
Operationally, Blackbaud kept reshaping the portfolio. It acquired Kilter, an activity-based engagement app, and divested Blackbaud FIMS and DonorCentral NXT to NPact. The company hosted its 23rd annual bbcon conference, announced general availability of two fee-cover models for Raiser's Edge NXT and eTapestry, and was named to Quartz's ranking of the Best Companies for Remote Workers. Management also extended CEO Mike Gianoni's employment contract for an additional three years. Customer retention was approximately 91% for the twelve months ended September 30, 2022, down from the full year ended December 31, 2021. The company said its total addressable market stands at over $20 billion.
Costs and risks remain in focus. Blackbaud announced a workforce reduction and further elimination of open positions, expecting $6 million to $8 million in pre-tax employee severance costs primarily in the fourth quarter of 2022. It expects those actions to reduce the planned future pre-tax cost run rate by $40 million to $50 million beginning in 2023, partly offset by continued cybersecurity and innovation investments. Foreign currency reduced total revenue by $8.7 million and income from operations by $2.2 million in the first nine months of 2022. The company said year-to-date bookings for EVERFI were lighter than expected, though it has filled account executive vacancies. The Security Incident continues to cast a shadow. Total costs have exceeded insurance coverage, and management expects the incident to negatively affect GAAP profitability and GAAP cash flow for the foreseeable future. For full year 2022, Blackbaud expects net pre-tax expense of about $30 million to $35 million for ongoing legal fees and net cash outlays of $15 million to $25 million. It has recorded about $5.0 million in aggregate liabilities for loss contingencies related to the incident, and some matters remain unaccrued because losses cannot be reasonably estimated. Net leverage was 3.10 to 1.00 at September 30, 2022.
For full year 2022, Blackbaud reiterated non-GAAP revenue guidance of $1.05 billion to $1.07 billion, non-GAAP adjusted EBITDA margin of 23.7% to 24.2%, non-GAAP earnings per share of $2.43 to $2.63, and non-GAAP adjusted free cash flow of $140 million to $150 million. The full-year assumptions include a 20% non-GAAP annualized effective tax rate, interest expense of $34 million to $37 million, fully diluted shares of 52 million to 53.5 million, and capital expenditures of $60 million to $70 million. For 2023, management targets mid-single digit organic revenue growth and an adjusted EBITDA margin approaching 29%, with the goal of reaching the mid-30s on Rule of 40 at constant currency. The company said it expects 2022 Rule of 40 performance of roughly 29% on a constant currency basis and sees high visibility into the step-level improvement in 2023, based on actions already taken and initiatives in place.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $261.3M | $264.9M | -1.4% | $231.2M | +13.0% |
| Gross profit | $140.4M | $139.3M | +0.7% | $123.5M | +13.6% |
| Gross margin | 53.7% | 52.6% | +1.1 pp | 53.4% | +0.3 pp |
| Research & development | $40.5M | $38.3M | +5.5% | $31.6M | +28.1% |
| Sales & marketing | $56.4M | $52.7M | +7.0% | $44.7M | +26.2% |
| General & administrative | $49.9M | $47.4M | +5.2% | $34.7M | +43.6% |
| Total operating expenses | $147.4M | $139.3M | +5.8% | $111.7M | +31.9% |
| Operating income (loss) | -$7.0M | $54.0K | -13085.2% | $11.8M | -159.2% |
| Operating margin | -2.7% | 0.0% | -2.7 pp | 5.1% | -7.8 pp |
| Net income (loss) | -$10.3M | -$3.4M | -201.5% | $6.2M | -266.8% |
| Net margin | -4.0% | -1.3% | -2.7 pp | 2.7% | -6.6 pp |
| Diluted EPS | -$0.20 | -$0.07 | -$0.13 | $0.13 | -$0.33 |
Risks
The 2020 Security Incident has led to approximately 260 customer reimbursement requests, approximately 400 reservations of recovery rights, 19 putative consumer class actions (17 U.S. federal consolidated in an MDL and 2 Canadian), subrogation claims, and Civil Investigative Demands plus pending governmental actions or investigations by the FTC, HHS, SEC, Australian Information Commissioner and Privacy Commissioner of Canada. Total costs have exceeded insurance coverage, with FY2022 expected net pre-tax expense of approximately $30 million to $35 million for ongoing legal fees and net cash outlays of approximately $15 million to $25 million; approximately $5.0 million in aggregate loss contingencies was recorded as of September 30, 2022, and unpaid fines or penalties could force renegotiation or a waiver under the 2020 Credit Facility or additional debt or equity financing.
Publicity or developments related to the Security Incident could cause loss of customer confidence, reduced customer demand, reduced customer retention, and retention and recruiting difficulties. For the twelve months ended September 30, 2022, approximately 91% of customers with recurring revenue contracts were retained, which decreased from the full year ended December 31, 2021, reflecting portfolio rationalization and migration from legacy solutions.
The current uncertain macroeconomic environment led management to eliminate open positions and reduce workforce; expected $6 million to $8 million pre-tax severance costs primarily in Q4 2022 and planned $40 million to $50 million reduction in future pre-tax cost run rate beginning in 2023, partially offset by continued cybersecurity and innovation investments.
Management expects fluctuations in foreign currency exchange rates to have a significant negative impact on total revenue for full year 2022; for the nine months ended September 30, 2022, FX reduced total revenue by $8.7 million and income from operations by $2.2 million.
Year-to-date bookings for EVERFI continue to be lighter than expected, though management has filled account executive vacancies and they are now fully staffed and ramping to drive future bookings.
Interest expense increased due to new borrowings to finance the EVERFI acquisition, and management expects FY2022 interest expense of approximately $34 million to $37 million while variable-rate debt could increase in a rising interest rate environment.
The October 7, 2022 Rights Agreement, together with charter, bylaw, and Delaware law provisions, may delay or prevent an acquisition or deter tender offers, potentially preventing stockholders from receiving a takeover premium; the Rights expire on October 2, 2023.
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 Adjusted Free Cash Flow Margin
Non-GAAP organic revenue growth on constant currency basis
GAAP Recurring Revenue
Non-GAAP Adjusted EBITDA
Non-GAAP Adjusted Free Cash Flow
Non-GAAP organic recurring revenue growth on constant currency basis
Rule of 40 on constant currency basis
Non-GAAP Adjusted EBITDA Margin on Constant Currency Basis
Non-GAAP Organic Recurring Revenue
GAAP recurring revenue growth
Summary, forecast, risks and KPIs are extracted from BLACKBAUD INC's SEC filings for Q3 FY2022 (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.