Summary
Blackbaud reported third quarter revenue of $286.7 million, up 3.3% from the prior-year quarter, with recurring revenue at 98% of the total and growing 4.1%. Non-GAAP organic revenue rose 4.3%. Gross profit was $159.2 million, up 2.1%, but gross margin slipped to 55.5%, down 0.6 percentage points, because cost of recurring revenue grew faster than recurring revenue. One-time services and other revenue fell 22.2%, hurt by the sale of EVERFI Limited.
GAAP profitability improved sharply. Income from operations was $43.8 million and operating margin was 15.3%, up 7.3 percentage points. Net income was $20.5 million, up 127.8% from the prior-year quarter. Diluted earnings per share were $0.40, up 135.3%. Two forces lifted the GAAP lines. Stock-based compensation fell on weaker performance against targets for performance-based awards and a lower grant date fair value. Acquisition and disposition-related costs also dropped after the prior year's Washington, DC office impairment did not repeat.
The non-GAAP view moved the other way. Non-GAAP income from operations was $78.9 million at a 27.5% margin, down 120 basis points. Non-GAAP adjusted EBITDA was $95.2 million, down $1.9 million, at a 33.2% margin, down 180 basis points. Non-GAAP diluted earnings per share were $0.99, down $0.13. The Rule of 40 measure was 37.5% against 39.6%.
Cash generation was uneven. Operating cash flow in the quarter was $104.0 million, down 18.8% from the prior-year quarter. Operating cash flow for the nine months was $222.4 million, up 9.6%. Non-GAAP free cash flow was $88.3 million, down $22.3 million, and non-GAAP adjusted free cash flow was $97.6 million, down $20.3 million. Capital expenditures for the nine months were $7.2 million, up 70.5%. Deferred revenue of $413.3 million at September 30, 2024 was down 1.3% from a year earlier. Debt carried at $943.0 million and the net leverage ratio was 2.42 to 1.00.
The Social Sector did the heavy lifting. Revenue there rose 6.6%, or $15.7 million, and the segment made up 89% of total revenue. The Corporate Sector fell 17.3%, or $6.6 million, on EVERFI's underperformance and the March 2024 sale of EVERFI Limited. EVERFI is roughly 8% of total revenue, and the company has hired a strategic advisor to weigh options, including a possible divestiture. Gross dollar retention was approximately 90% for the twelve months ended September 30, 2024, consistent with the full year 2023 rate, and approximately 92% excluding EVERFI.
Management revised its full year 2024 guidance to a non-GAAP adjusted EBITDA margin of 33.0% to 34.0%, non-GAAP earnings per share of $3.98 to $4.16, and non-GAAP adjusted free cash flow of $235 million to $245 million. The company tied the revision to EVERFI's continued underperformance and did not reconcile the forward-looking non-GAAP measures to their closest GAAP measures. Assumptions include interest expense of approximately $53 million to $57 million, a non-GAAP annualized effective tax rate of approximately 24.5%, and fully diluted shares of approximately 51.0 million to 52.0 million.
Security Incident costs still weigh on GAAP results. The company expects full year 2024 pre-tax expenses of approximately $5 million to $10 million and cash outlays of approximately $8 million to $13 million for ongoing legal fees. It paid $6.8 million in the quarter to settle with the California Attorney General, and other matters could have a material adverse impact. On capital return, $737.2 million remained available under the repurchase program at September 30, 2024. Blackbaud repurchased 3,761,985 shares for $325.4 million in the nine months, about 7.0% of shares outstanding as of December 31, 2023, settled its accelerated share repurchase in October 2024 with approximately 490,000 more shares, and aims to buy back up to 10% for the year.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2024 | Q2 FY2024 | QoQ | Q3 FY2023 | YoY |
|---|---|---|---|---|---|
| Revenue | $286.7M | $287.3M | -0.2% | $277.6M | +3.3% |
| Gross profit | $159.2M | $162.6M | -2.1% | $155.9M | +2.1% |
| Gross margin | 55.5% | 56.6% | -1.1 pp | 56.1% | -0.6 pp |
| Research & development | $39.4M | $39.1M | +0.8% | $38.0M | +3.7% |
| Sales & marketing | $49.5M | $47.1M | +5.0% | $52.5M | -5.7% |
| General & administrative | $25.6M | $33.4M | -23.3% | $42.6M | -39.8% |
| Total operating expenses | $115.4M | $120.5M | -4.2% | $133.8M | -13.8% |
| Operating income (loss) | $43.8M | $42.1M | +4.1% | $22.0M | +98.8% |
| Operating margin | 15.3% | 14.7% | +0.6 pp | 7.9% | +7.3 pp |
| Net income (loss) | $20.5M | $21.8M | -5.8% | $9.0M | +127.8% |
| Net margin | 7.2% | 7.6% | -0.4 pp | 3.3% | +3.9 pp |
| Diluted EPS | $0.40 | $0.42 | -$0.02 | $0.17 | +$0.23 |
| Customers | 13,000 | 13,000 | ±0.0% | 13,000 | ±0.0% |
Risks
The 2020 Security Incident continues to generate litigation and investigations, including active subrogation cases, U.S. and Canadian consumer class actions, and pending governmental investigations by HHS, the Office of the Australian Information Commissioner and the Office of the Privacy Commissioner of Canada. For the nine months ended September 30, 2024, Blackbaud incurred net pre-tax expenses of $12.8 million and cash outlays of $15.1 million related to the Security Incident.
Settlements with the FTC, 49 state Attorneys General and the District of Columbia, the SEC, and California require Blackbaud to implement and maintain cybersecurity programs and tools through May 2044. Failure to comply could expose the company to additional material liability under the administrative orders and settlements.
Blackbaud exceeded its Security Incident insurance coverage limit in the first quarter of 2022 and is responsible for all remaining expenses, penalties, fines or judgments. The company recorded only $0.7 million in aggregate loss contingency liabilities as of September 30, 2024 and cannot reasonably estimate possible additional losses, which may be materially in excess of accrued amounts.
EVERFI continues to be a drag on overall performance, with Corporate Sector revenue decreased 17.3% for the quarter and 10.7% year to date when compared to the same periods in 2023, driven primarily by EVERFI underperformance and the March 2024 disposition of EVERFI Limited. Blackbaud hired a strategic advisor to consider alternatives, including a potential divestiture, and expects the drag to continue.
Blackbaud is increasing operating costs to enhance cybersecurity and migrate cloud infrastructure, including increases in compensation costs other than stock-based compensation of $3.6 million and third-party contractor costs of $3.2 million during the three months ended September 30, 2024, and it expects these investments to continue for the foreseeable future.
Interest expense increased during the three and nine months ended September 30, 2024, compared to the same periods in 2023, primarily due to incremental borrowings to fund the ASR Transaction and other stock repurchases. Blackbaud expects full year 2024 interest expense of approximately $53 million to $57 million, and its variable rate debt could increase costs in a rising interest rate environment.
Publicity or developments related to the Security Incident could cause loss of customer confidence, reduced customer demand and reduced customer retention. Gross dollar retention was approximately 90% for the twelve months ended September 30, 2024, consistent with the full year ended December 31, 2023, and approximately 92% excluding EVERFI.
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
Summary, forecast, risks and KPIs are extracted from BLACKBAUD INC's SEC filings for Q3 FY2024 (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.