Blackbaud (BLKB) Up 1.9% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Blackbaud (BLKB). Shares have added about 1.9% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Blackbaud due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Blackbaud Q1 Earnings Top Estimates
Blackbaud reported first-quarter 2024 non-GAAP earnings per share (EPS) of 93 cents, which surpassed the Zacks Consensus Estimate by 9.4%. The bottom line increased 29.2% year over year.
Total revenues jumped 6.7% year over year to $279.3 million, driven by growth in recurring revenues. Successful execution of its five-point operating plan has been instrumental in driving revenue growth and increasing profitability. Nonetheless, revenues missed the Zacks Consensus Estimate by 1.1%.
Total recurring revenues (contributed 97.2% to total revenues) in the reported quarter amounted to $271.5 million, up 7.4% year over year. One-time services and other revenues (2.8%) amounted to $7.7 million, down 14.1% year over year.
Non-GAAP organic revenues were up 6.9% on a reported basis and 6.6% at constant currency year over year. Non-GAAP organic recurring revenues rose 7.4%.
Margin Details
Non-GAAP gross margin was 61.4% compared with 59.8% a year ago.
Total operating expenses declined 4.2% on a year-over-year basis to $142.3 million.
Non-GAAP operating margin jumped 430 basis points (bps) to 25.9%.
Non-GAAP adjusted EBITDA margin was 31.8%, up 460 bps year over year.
Balance Sheet & Cash Flow
As of Mar 31, 2024, Blackbaud had total cash, cash equivalents and restricted cash of $382.9 million compared with $728.3 million as of Dec 31, 2023.
Total debt (including the current portion) as of Mar 31, 2024, was $1039.8 million compared with $779.7 million as of Dec 31, 2023.
For the first quarter, cash provided by operating activities was $64.6 million compared with $21.8 million in the prior-year period.
Non-GAAP adjusted free cash flow was $53.3 million compared with $15.7 million in the year-ago quarter.
In the quarter under review, it repurchased 3 million shares. As a part of its previously announced buyback authorization, the company expects to repurchase 7-10% of the outstanding shares in 2024 with 5.5% already repurchased in the first quarter.
Outlook
With two specific transactions in the first quarter — the divestiture of EVERFI's nonrecurring creative services business and recent stock repurchase activity, Blackbaud updated its full-year financial guidance.
Management now expects non-GAAP revenues to be between $1.164 billion and $1.194 billion compared with the earlier guided range of $1.17-$1.2 billion.
The company continues to project non-GAAP adjusted EBITDA margin in the range of 32.5-33.5%.
Non-GAAP EPS is anticipated to be between $4.12 and $4.38, unaltered from the earlier guidance.
Non-GAAP adjusted free cash flow is forecast in the range of $254-$274 million, unchanged from the prior outlook.
Non-GAAP annualized effective tax rate is the same as the prior estimation of approximately 24.5%.
Interest expense is now expected in the band of $48 million to $52 million, up from earlier guidance of $34-$38 million.
Shares are now anticipated in the 52-53 million band compared with the earlier guided range of 53.5-54.5 million.
Capital expenditures are envisioned in the range of $65-$75 million, which includes $60-$70 million of capitalized software and content development costs. This remains the same as the earlier outlook.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -9.44% due to these changes.
VGM Scores
Currently, Blackbaud has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Blackbaud has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Blackbaud is part of the Zacks Computer - Software industry. Over the past month, Microsoft (MSFT), a stock from the same industry, has gained 8.7%. The company reported its results for the quarter ended March 2024 more than a month ago.
Microsoft reported revenues of $61.86 billion in the last reported quarter, representing a year-over-year change of +17%. EPS of $2.94 for the same period compares with $2.45 a year ago.
Microsoft is expected to post earnings of $2.90 per share for the current quarter, representing a year-over-year change of +7.8%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.2%.
Microsoft has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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