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BLACKBAUD INC 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

Blackbaud, Inc.

Filing date:

02/21/2025

TLDR:

Blackbaud Inc.’s 10-K filing for fiscal year 2024 shows revenue growth driven by recurring revenue, but a significant loss from operations due to the EVERFI disposition. The company is executing five key operational initiatives, but faces challenges from the EVERFI divestiture and cybersecurity investments.

ELI5:

Blackbaud, a software company for nonprofits, made more money this year, but lost a lot of money because they sold a part of their business and had to spend money on security. They’re trying to improve by focusing on new products, getting more customers, and managing costs.

Accession #:

0001280058-25-000010

Published on

Analyst Summary

  • Total revenue increased by 4.5% to $1,155.5 million, driven by a 5.4% increase in recurring revenue.
  • The company experienced a significant loss from operations due to the EVERFI disposition.
  • Ongoing expenses related to the 2020 security incident continue to impact profitability.
  • Gross Profit Margin: 55.3% (2024) vs. 54.6% (2023).
  • Operating Profit Margin: -23.4% (2024) vs. 4.0% (2023).
  • Net Profit Margin: -24.5% (2024) vs. 0.2% (2023).
  • Current Ratio: 0.78 (2024) vs. 0.78 (2023).
  • Debt-to-Equity Ratio: 16.6
  • Revenue Growth: 4.5%
  • Net Income Growth: -15833%
  • EPS Growth: -18766%

Opportunities and Risks

  • Opportunities: Product Innovation and Delivery, Bookings Growth and Acceleration, Transactional Revenue Optimization and Expansion, Modernized Approach to Pricing and Multi-Year Contracts, Keen Attention to Cost Management.
  • Risks: EVERFI disposition impacting overall performance, ongoing security incident-related costs, high debt-to-equity ratio, negative operating and profit margins.

Potential Implications

Company Performance

  • Continued focus on product innovation and cost management may improve future performance.
  • The impact of the EVERFI disposition needs to be mitigated.
  • Addressing security vulnerabilities and reducing related expenses is crucial.

Stock Price

  • Negative profitability metrics may negatively impact the stock price.
  • Successful execution of operational initiatives could improve investor confidence.
  • Resolution of security incident-related issues could positively influence the stock price.

SEC Filing Report: Blackbaud Inc. (10-K) – Fiscal Year Ended December 31, 2024

Executive Summary

This report analyzes Blackbaud Inc.’s 10-K filing for the fiscal year ended December 31, 2024. Key findings include revenue growth driven by recurring revenue streams, a significant loss from operations due to the EVERFI disposition, and ongoing expenses related to the 2020 security incident. Blackbaud is executing on its five key operational initiatives, including product innovation, bookings growth, transactional revenue optimization, modernized pricing, and cost management. The overall assessment is a hold, pending further clarity on the long-term impact of the EVERFI divestiture and the effectiveness of ongoing cybersecurity investments.

Company Overview

Blackbaud, Inc. is a leading software provider exclusively dedicated to powering social impact. The company serves nonprofit and education sectors, companies committed to social responsibility, and individual change-makers. Blackbaud’s software accelerates impact in fundraising, nonprofit financial management, digital giving, grantmaking, corporate social responsibility, and education management. The company operates in the United States, Australia, Canada, Costa Rica, India, and the United Kingdom.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management highlights the execution of five key operational initiatives:

  • Product Innovation and Delivery: Focus on AI and connectivity enhancements.
  • Bookings Growth and Acceleration: Emphasis on new logos and upselling.
  • Transactional Revenue Optimization and Expansion: Growth in donation processing, consumer giving, and tuition management.
  • Modernized Approach to Pricing and Multi-Year Contracts: Transition to 3-year contracts with embedded price increases.
  • Keen Attention to Cost Management: Continued IT consolidation and remote-first workforce strategy.

Management’s tone is optimistic regarding the social sector’s resilience and the long-term trajectory of the business. However, the EVERFI disposition is acknowledged as a drag on overall performance.

Financial Statement Analysis

Revenue

Total revenue increased by $50.1 million (4.5%) to $1,155.5 million. Recurring revenue increased by $57.6 million (5.4%), driven by contractual and transactional recurring revenue. One-time services and other revenue decreased by $7.5 million (22.2%).

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Blackbaud, Inc. Financial Analysis – 2024

This report analyzes the financial performance of Blackbaud, Inc. based on its 2024 10-K filing. The analysis includes key financial ratios, trend analysis where possible, and industry comparisons. The stock price at the time of reporting (BLKB – 2025-02-21) was $68.24.

1. Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin:

    • Calculation: Gross Profit / Total Revenue = $639.203M / $1,155.495M = 55.3%
    • Trend: 55.3% (2024) vs. 54.6% (2023). Percentage Change: (55.3 – 54.6) / 54.6 = 1.3% increase.
    • Industry: The software industry generally has high gross profit margins, often ranging from 60% to 80%. Blackbaud’s gross profit margin is lower than the industry average, suggesting higher cost of goods sold relative to revenue.
  • Operating Profit Margin:

    • Calculation: Income (Loss) from Operations / Total Revenue = -$270.506M / $1,155.495M = -23.4%
    • Trend: -23.4% (2024) vs. 4.0% (2023). Percentage Change: ((-23.4) – 4.0) / 4.0 = -685% decrease.
    • Industry: A negative operating margin indicates the company is not profitable from its core operations. The industry average for software companies is typically positive, ranging from 10% to 25%. Blackbaud’s negative operating margin is a significant concern.
  • Net Profit Margin:

    • Calculation: Net (Loss) Income / Total Revenue = -$283.172M / $1,155.495M = -24.5%
    • Trend: -24.5% (2024) vs. 0.2% (2023). Percentage Change: ((-24.5) – 0.2) / 0.2 = -12350% decrease.
    • Industry: Similar to the operating margin, a negative net profit margin is unfavorable. Software companies typically aim for a net profit margin of 10% or higher.
  • Return on Assets (ROA):

    • Calculation: Net (Loss) Income / Total Assets = -$283.172M / $2,495.715M = -11.3%
    • Trend: Not enough information to calculate
    • Industry: A negative ROA indicates the company is not efficiently using its assets to generate profit. The software industry generally sees ROA values between 5% and 15%.
  • Return on Equity (ROE):

    • Calculation: Net (Loss) Income / Total Stockholders’ Equity = -$283.172M / $141.993M = -199.4%
    • Trend: Not enough information to calculate
    • Industry: A negative ROE suggests the company is not effectively using equity investments to generate profits. Typical ROE for software companies ranges from 10% to 25%.
  • Earnings Per Share (EPS) – Basic and Diluted:

    • Calculation: Basic and Diluted EPS = Net (Loss) Income / Weighted Average Common Shares = -$283.172M / 50,560,538 = -$5.60
    • Trend: -$5.60 (2024) vs. $0.03 (2023). Percentage Change: ((-5.60) – 0.03) / 0.03 = -18766% decrease.
    • Industry: Negative EPS is a sign of poor profitability. Software companies generally aim for positive and growing EPS.

Liquidity

  • Current Ratio:

    • Calculation: Total Current Assets / Total Current Liabilities = $976.308M / $1,252.097M = 0.78
    • Trend: 0.78 (2024) vs. 0.78 (2023). Percentage Change: (0.78 – 0.78) / 0.78 = 0%
    • Industry: A current ratio below 1 suggests the company may have difficulty meeting its short-term obligations. A healthy current ratio is generally between 1.5 and 2.0.
  • Quick Ratio (Acid-Test Ratio):

    • Calculation: (Total Current Assets – Inventory) / Total Current Liabilities. Since inventory is not explicitly listed, and Blackbaud is primarily a software company, we will exclude prepaid expenses and other current assets instead: ($976.308M – $81.287M) / $1,252.097M = 0.71
    • Trend: Not enough information to calculate
    • Industry: Similar to the current ratio, a quick ratio below 1 indicates potential short-term liquidity issues.
  • Cash Ratio:

    • Calculation: (Cash and Cash Equivalents + Restricted Cash) / Total Current Liabilities = $809.512M / $1,252.097M = 0.65
    • Trend: Not enough information to calculate
    • Industry: A low cash ratio suggests the company relies heavily on other current assets to meet its obligations.

Solvency/Leverage

  • Debt-to-Equity Ratio:

    • Calculation: Total Liabilities / Total Stockholders’ Equity = $2,353.722M / $141.993M = 16.6
    • Trend: Not enough information to calculate
    • Industry: A high debt-to-equity ratio indicates the company relies heavily on debt financing. The software industry typically has lower debt-to-equity ratios, often below 1.0.
  • Debt-to-Assets Ratio:

    • Calculation: Total Liabilities / Total Assets = $2,353.722M / $2,495.715M = 0.94
    • Trend: Not enough information to calculate
    • Industry: A high debt-to-assets ratio suggests a significant portion of the company’s assets are financed by debt.
  • Interest Coverage Ratio (Times Interest Earned):

    • Calculation: Earnings Before Interest and Taxes (EBIT) / Interest Expense = -$270.506M + $55.634M / $55.634M = -3.86
    • Trend: Not enough information to calculate
    • Industry: A negative interest coverage ratio indicates the company is not generating enough operating income to cover its interest expenses. A healthy ratio is typically above 2.0.

Activity/Efficiency

  • Inventory Turnover:

    • Calculation: Not applicable (software company)
    • Trend: Not applicable
    • Industry: Not applicable
  • Days Sales Outstanding (DSO):

    • Calculation: (Accounts Receivable / Total Revenue) * 365 = ($83.539M / $1,155.495M) * 365 = 26.4 days
    • Trend: Not enough information to calculate
    • Industry: A lower DSO is generally better, indicating efficient collection of receivables.
  • Days Payable Outstanding (DPO):

    • Calculation: (Trade Accounts Payable / Total Revenue) * 365 = ($50.810M / $1,155.495M) * 365 = 16.0 days
    • Trend: Not enough information to calculate
    • Industry: DPO indicates how long a company takes to pay its suppliers.
  • Asset Turnover:

    • Calculation: Total Revenue / Total Assets = $1,155.495M / $2,495.715M = 0.46
    • Trend: Not enough information to calculate
    • Industry: A low asset turnover ratio suggests the company is not efficiently utilizing its assets to generate revenue.

Valuation

  • Price-to-Earnings Ratio (P/E):

    • Calculation: Stock Price / EPS = $68.24 / (-$5.60) = -12.2
    • Trend: Not enough information to calculate
    • Industry: A negative P/E ratio is not meaningful and indicates negative earnings.
  • Price-to-Book Ratio (P/B):

    • Calculation: Market Cap / Book Value of Equity. Market Cap = $68.24 * 49,245,588 shares outstanding = $3,360.4M. Book Value of Equity = $141.993M. P/B = $3,360.4M / $141.993M = 23.7
    • Trend: Not enough information to calculate
    • Industry: A high P/B ratio suggests the market values the company’s assets significantly higher than their book value.
  • Price-to-Sales Ratio (P/S):

    • Calculation: Market Cap / Total Revenue = $3,360.4M / $1,155.495M = 2.91
    • Trend: Not enough information to calculate
    • Industry: The P/S ratio varies across the software industry.
  • Enterprise Value to EBITDA (EV/EBITDA):

    • Calculation: EV = Market Cap + Total Debt – Cash and Cash Equivalents = $3,360.4M + $1,077.818M – $67.628M = $4,370.59M. EBITDA = -$141.2M. EV/EBITDA = $4,370.59M / (-$141.2M) = -30.95
    • Trend: Not enough information to calculate
    • Industry: A negative EV/EBITDA is not meaningful due to the negative EBITDA.

Growth Rates

  • Revenue Growth:

    • Calculation: (Current Revenue – Previous Revenue) / Previous Revenue = ($1,155.5M – $1,105.4M) / $1,105.4M = 4.5%
    • Trend: 4.5%
    • Industry: The software industry generally experiences higher growth rates, often in the double digits.
  • Net Income Growth:

    • Calculation: (Current Net Income – Previous Net Income) / Previous Net Income = (-$283.2M – $1.8M) / $1.8M = -15833%
    • Trend: -15833%
    • Industry: The software industry generally experiences higher growth rates, often in the double digits.
  • EPS Growth:

    • Calculation: (Current EPS – Previous EPS) / Previous EPS = (-$5.60 – $0.03) / $0.03 = -18766%
    • Trend: -18766%
    • Industry: The software industry generally experiences higher growth rates, often in the double digits.

Other Relevant Metrics

  • Non-GAAP Metrics: Blackbaud presents several non-GAAP metrics, including Non-GAAP Gross Profit, Non-GAAP Income from Operations, Non-GAAP Net Income, EBITDA, and Adjusted EBITDA. These metrics generally exclude stock-based compensation, amortization of intangibles, severance costs, acquisition-related costs, security incident-related costs, and impairment charges. While these adjustments can provide insights into the company’s underlying performance, it’s crucial to assess their reasonableness. For example, excluding stock-based compensation, a recurring expense, can distort the true profitability picture. The company also presents Non-GAAP organic revenue growth, which excludes revenue from divested businesses. This metric provides a clearer view of the company’s core revenue growth.
  • Rule of 40: Blackbaud highlights its “Rule of 40” metric, which combines revenue growth and adjusted EBITDA margin. In 2024, the Rule of 40 was 38.9%. This metric is used to assess the balance between growth and profitability.
  • Gross Dollar Retention: The filing mentions gross dollar retention, a key metric for SaaS companies, but does not provide the actual value. This metric measures the percentage of recurring revenue retained from existing customers.
  • EVERFI Disposition: The pre-tax loss on the disposition of EVERFI was $405.4 million, including noncash impairment charges of $390.2 million. This significantly impacted the company’s operating and net income.
  • Security Incident: The company incurred $13.7 million in Security Incident-related costs in 2024, a decrease from $53.4 million in 2023. This remains a significant expense.

2. Commentary

Blackbaud’s 2024 financial performance was weak, marked by a significant net loss and negative operating and profit margins. While revenue grew modestly, profitability metrics deteriorated substantially due to the EVERFI disposition and ongoing security-related expenses. The company’s liquidity position is concerning, with a current ratio below 1. The high debt-to-equity ratio also raises solvency concerns. While non-GAAP metrics paint a slightly better picture, the underlying GAAP results indicate significant challenges.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️