Summary
Blackbaud closed the third quarter of 2023 with revenue of $277.6 million, up 6.2% from the prior-year quarter. Gross profit rose 11.0% to $155.9 million, and gross margin reached 56.1%, up 2.4 percentage points. Operating income was $22.0 million, a swing to a profit from the prior-year quarter, and operating margin was 7.9%, up 10.6 percentage points. Net income was $9.0 million, also a swing to a profit, and diluted earnings per share were $0.17, up $0.37. The quarter included security incident-related costs, net of insurance, of $4.1 million.
Non-GAAP results showed similar momentum. Non-GAAP income from operations was $79.6 million with a 28.7% operating margin, an increase of 960 basis points. Non-GAAP adjusted EBITDA was $97.1 million, up $30.2 million, at a 35.0% margin, an increase of 940 basis points. The Rule of 40 reached 41.6%, which management said was achieved a quarter earlier than expected. GAAP net cash provided by operating activities was $128.0 million, an increase of $20.0 million, or 18.5%. Non-GAAP free cash flow was $110.6 million, and non-GAAP adjusted free cash flow was $117.9 million, up $24.1 million, at a 42.5% margin. Capital expenditures were $1.5 million, down 51.1%.
For the nine months ended September 30, 2023, revenue was $810.4 million, up 3.5% from the prior-year period. Operating income was $12.4 million, a swing to a profit, and the net loss was $3.6 million. Operating cash flow for the nine months was $203.0 million, up 6.9%.
The company pointed to its five-point operating plan: product innovation, bookings growth, transactional revenue optimization, modernized pricing and multi-year contracts, and cost management. New product work includes a next-generation donation form in Raiser's Edge NXT, Prospect Insights for major gifts, and Impact Edge for corporate social impact reporting. Generative AI capabilities were added to JustGiving. The company also reported non-GAAP organic revenue growth of 6.6% and non-GAAP organic recurring revenue growth of 8.3%. On pricing, Blackbaud has moved to three-year renewal terms as its standard. Through October 2023, nearly 90% of 2023 contracts eligible for renewal rate increases had renewed. Gross dollar retention was approximately 90% for the twelve months ended September 30, 2023. Deferred revenue was $418.8 million, up 5.6% from the prior-year quarter. The company also appointed Todd Lant as Chief Customer Officer.
Guidance for the full year 2023 was reiterated. Blackbaud expects non-GAAP revenue of $1.095 billion to $1.125 billion, a non-GAAP adjusted EBITDA margin of 30.5% to 31.5%, non-GAAP earnings per share of $3.63 to $3.94, and non-GAAP adjusted free cash flow of $190 million to $210 million. Assumptions include an approximately 20% non-GAAP annualized effective tax rate, interest expense of approximately $37 million to $41 million, fully diluted shares of approximately 53 million to 54 million, and capital expenditures of approximately $65 million to $75 million, including $55 million to $65 million of capitalized software and content development costs.
The main risk remains the Security Incident. Net pre-tax expenses that were security incident-related, net of insurance, were $4.1 million in the quarter and $48.6 million for the nine months ended September 30, 2023. Blackbaud has recorded approximately $50.0 million in aggregate liabilities for loss contingencies and expects to pay $49.5 million in the fourth quarter of 2023 related to the multi-state Attorneys General settlement. For the full year 2023, net cash outlays for ongoing legal fees are expected to be $25 million to $35 million. Other Security Incident-related matters have not been accrued, and the company says they could have a material adverse impact on results of operations, cash flows or financial condition. Beyond litigation, the company cites cybersecurity and data protection risks, a shifting revenue mix that may impact gross margin, and integration of acquired companies. Net leverage was 2.11 to 1.00 at September 30, 2023, above the company's target of 2 to 1 or less. Blackbaud had $250 million remaining under its stock repurchase program and expects to resume repurchases in the fourth quarter of 2023.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2023 | Q2 FY2023 | QoQ | Q3 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $277.6M | $271.0M | +2.4% | $261.3M | +6.2% |
| Gross profit | $155.9M | $149.6M | +4.2% | $140.4M | +11.0% |
| Gross margin | 56.1% | 55.2% | +1.0 pp | 53.7% | +2.4 pp |
| Research & development | $38.0M | $36.1M | +5.0% | $40.5M | -6.1% |
| Sales & marketing | $52.5M | $53.2M | -1.4% | $56.4M | -7.0% |
| General & administrative | $42.6M | $59.1M | -28.0% | $49.9M | -14.6% |
| Total operating expenses | $133.8M | $149.3M | -10.4% | $147.4M | -9.2% |
| Operating income (loss) | $22.0M | $294.0K | +7398.0% | -$7.0M | +414.4% |
| Operating margin | 7.9% | 0.1% | +7.8 pp | -2.7% | +10.6 pp |
| Net income (loss) | $9.0M | $2.1M | +328.4% | -$10.3M | +187.4% |
| Net margin | 3.3% | 0.8% | +2.5 pp | -4.0% | +7.2 pp |
| Diluted EPS | $0.17 | $0.04 | +$0.13 | -$0.20 | +$0.37 |
| Customers | 13,000 | — | — | — | — |
Risks
Blackbaud is adding generative AI to products such as JustGiving's Story Enhancer and Prospect Insights, but the technology is early stage and subject to emerging AI regulations, privacy and IP litigation, third-party provider failures, and flawed output that could harm reputation or create liability.
The 2020 Security Incident continues to drive legal and regulatory exposure: on October 5, 2023 Blackbaud settled with 49 state Attorneys General and the District of Columbia for $49.5 million payable in Q4 2023, had approximately $50.0 million in aggregate loss contingency liabilities as of September 30, 2023, and incurred $48.6 million net pre-tax expenses in the first nine months of 2023; other customer claims and investigations could exceed accruals.
One-time services and other revenue decreased by $3.3 million, or 27.6%, in Q3 2023 and by $10.5 million, or 28.6%, in the first nine months of 2023, and management expects it to continue to significantly decrease in 2023, so recurring revenue growth must offset this decline.
Management noted there can be volatility quarter-to-quarter on bookings, despite strong first quarter bookings and notable large contracts in the second and third quarters, which could make revenue timing less predictable.
The company is shifting customers to 3-year standard renewals and implementing rate increases; while nearly 90% of 2023 contracts eligible for renewal rate increases had renewed through October 2023, failure to sustain renewals or unexpected attrition could impair the expected acceleration in revenue growth.
At September 30, 2023, the carrying amount of debt under the 2020 Credit Facility was $683.2 million and full year 2023 interest expense is expected to be approximately $37 million to $41 million; the variable rate portion of debt could increase interest expense in a rising rate environment.
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 Free Cash Flow Margin
Non-GAAP organic revenue growth on constant currency basis
Non-GAAP organic recurring revenue growth on constant currency basis
Non-GAAP Gross Margin
Recurring Revenue as % of Total Revenue
Rule of 40 (constant currency)
Summary, forecast, risks and KPIs are extracted from BLACKBAUD INC's SEC filings for Q3 FY2023 (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.