Morningstar | Blackbaud Experiences Headwinds in SaaS Transition
Blackbaud has established itself over the past 30 years as the premier vendor of relationship-management software that aids nonprofit organizations and higher education institutions in managing donor relationships, marketing, and allocating funds and in-kind product donations. The company is rapidly migrating many of its legacy on-premises customers to cloud-based solutions, a shift that we believe will ensure its leadership position for the long term.In our view, Blackbaud is the only end-to-end vendor in the nonprofit organization and higher education space for managing donor relationships and payments, marketing activities, payment processing, event management, analytics, and the rest of the activities that are involved in running these organizations. Many point vendors operate in this space but none of them can offer this complete suite of products, giving Blackbaud a significant competitive edge when approaching large customers. Further, Blackbaud offers tailored solutions that serve customers of all sizes in a variety of subverticals, including healthcare, environmental foundations, and corporate giving organizations. The firm has also begun layering in applications for critical processes such as analytics and payments, creating strong customer switching costs, evidenced by its mid-90s renewal rates. As a result, Blackbaud has racked up more than 40,000 customers and a massive revenue lead in an underpenetrated and expanding addressable market.Blackbaud’s premier products are the cloud-based Raiser’s Edge NXT and Financial Edge NXT and will drive the majority of their long-term growth. However, the company has been able to push into new markets with several tuck-in acquisitions lately, including Whipple Hill and Smart Tuition, which gives the firm a presence in the K-12 and tuition-management markets. While the business model will see fits and starts as the cloud migration continues, the salesforce expands, and acquisitions are rolled up, we think Blackbaud is extremely well positioned to deliver strong returns on invested capital in the long run.Blackbaud is a cloud software company. The company is engaged in providing software solutions in cloud and hosted environments, providing payment and transaction services, providing software maintenance and support services, and providing services, including implementation, consulting, training, analytic and other services. The company's portfolio provides fundraising and relationship management, marketing and engagement, financial management, grant and award management, organizational and program management (such as education management, church management and ticketing), social responsibility, payment services and analytics.
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