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Blackbaud Inc. Reports Operating Results (10-Q)

November 06, 2012 | About:
10qk

10qk

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Blackbaud Inc. (BLKB) filed Quarterly Report for the period ended 2012-09-30.

Blackbaud, Inc. has a market cap of $1.07 billion; its shares were traded at around $22.35 with a P/E ratio of 35.2 and P/S ratio of 2.9. The dividend yield of Blackbaud, Inc. stocks is 2%. Blackbaud, Inc. had an annual average earning growth of 6.8% over the past 10 years.

Highlight of Business Operations:

In May 2012, we completed our acquisition of Convio, Inc. (Convio), for approximately $329.8 million in cash consideration and the assumption of unvested equity awards valued at approximately $5.9 million, for a total of $335.7 million. Convio was a leading provider of on-demand constituent engagement solutions that enabled nonprofit organizations to more effectively raise funds, advocate for change and cultivate relationships. The acquisition of Convio expands our subscription and online offerings and accelerates our evolution to a subscription-based revenue model. As a result of the acquisition, Convio has become a wholly-owned subsidiary of ours. The results of operations of Convio are included in our consolidated financial statements from the date of acquisition. Since the date of acquisition through September 30, 2012, total revenue from Convio was $31.3 million. Because we have integrated a substantial amount of the Convio operations, it is impracticable to determine the operating costs attributable solely to the acquired business. During the nine months ended September 30, 2012, we incurred $6.4 million of acquisition-related costs associated with the acquisition of Convio, which were recorded in general and administrative expense.

Overall, revenue in the third quarter of 2012 and the first nine months of 2012 increased 28% and 19% compared to the same periods in 2011, respectively. When removing the impact of revenue from acquired companies, revenue increased by 5% and 6% during the third quarter of 2012 and the first nine months of 2012, respectively. These increases were principally the result of continued growth in our subscriptions revenue as a result of the continued increase in demand for our subscription-based offerings as our business shifts towards hosted solutions. Maintenance revenue also contributed to the increase in revenue from maintaining high renewal rates, new maintenance contracts associated with new license arrangements and existing client increases.

Income from operations for the third quarter of 2012 and the first nine months of 2012 decreased by $9.8 million and $30.8 million when compared to the same periods in 2011, respectively. The decrease in income from operations during the third quarter of 2012 and the first nine months of 2012 was attributable to: (i) an increase in incremental costs associated with our acquisition of Convio of $6.6 million and $18.7 million related to transaction costs, integration costs, amortization of acquired intangibles from business combinations and stock-based compensation expense; (ii) a $0.8 million and $5.3 million increase in professional fees associated with consulting and other service providers engaged in our business optimization and re-engineering efforts; and (iii) an increase of $2.4 million and $5.6 million in hosting costs due to incremental investments to improve our hosting services. Also contributing to the decrease in income from operations in both periods was our continued shift from a license-based model with upfront revenue recognition to a subscription-based model, which recognizes revenue ratably over the agreement term.

Included in services revenue in the third quarter of 2012 is $3.9 million of revenue attributable to acquired companies. Excluding the revenue from acquired companies, the increase in services revenue of $1.0 million, or 3%, is principally attributable to increases in education services revenue of $0.5 million and analytic services revenue of $0.7 million, offset by a decrease in consulting services revenue of $0.2 million. The rates we charge for our education and analytic services have remained relatively constant year over year, as such, the increase in revenue is the result of an increase in volume. The volume of education services revenue increased due to higher demand for subscription-based training. The increase in volume of analytics services is due to an increase in demand for donor lists. The decrease in consulting services revenue during the third quarter of 2012 compared to the same period in 2011 was primarily the result of a greater portion of our service engagements being with large enterprise customers as our mid-market moves to subscription-based offerings. These larger enterprise engagements can experience volatility in utilization due to the complex nature of these engagements.

Included in services revenue in the first nine months of 2012 is $6.5 million of revenue attributable to acquired companies. Excluding the revenue from acquired companies, the increase in services revenue of $0.8 million, or 1%, is principally due to an increase in education services revenue of $1.2 million, offset by a decrease in consulting services revenue of $0.4 million. The rates we charge for our education service offerings have remained relatively constant year over year and, as such, the increase in revenue is the result of a change in volume. The increase in revenue from education services is the result of higher demand for subscription-based training. The decrease in consulting services revenue in the first nine months of 2012 compared to the same period in 2011 was primarily the result of a greater portion of our service engagements being with larger enterprise customers as our mid-market moves to subscription-based offerings. These larger enterprise engagements can experience volatility in utilization due to the complex nature of these engagements.

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