Morningstar | BLKB Updated Forecasts and Estimates from 01 Aug 2018
Blackbaud announced second-quarter results that were in line with our expectations for sales growth and earnings. The firm’s transition to recurring revenue streams is on track, with 90% as a percentage of total sales versus 87% in the prior-year quarter. Blackbaud has made a series of strategic acquisitions in adjacent nonprofit markets, but this quarter it announced an internally developed platform for faith-based communities. Blackbaud’s Cloud Solution for Faith Communities is estimated to address a market of over 300,000 congregations that donated in excess of $135 billion in 2017. We will maintain our wide moat rating and $107 fair value estimate. The shares have traded solidly in 3-star territory, and we think investors should wait for a margin of safety before investing in the software company.Second-quarter adjusted revenue increased 12% (5% organically) versus the prior-year period to $215 million. We note that declines in maintenance revenue are likely to accelerate as more customers move to the firm’s cloud-based solutions with subscription contracts, which will certainly help long-term growth and top-line predictability but does cause some near-term growing pains as service-related sales decline. Blackbaud delivered adjusted operating margins slightly ahead of our expectations as a result of recurring revenue and cost savings in services margins, as that part of the business is slowly wound down. Adjusted operating margin expanded roughly 10 basis points year over year to 21.1%, flat with the sequential quarter. Management reiterated its forecast for full-year operating margins between 20.6% and 21%. The full-year guidance for adjusted revenue of $870 million-$890 million remains in effect, though management indicated that it will probably end the year at the low end of that range because of quicker-than-anticipated declines in services sales and variability in sales from its payment platform, JustGiving.
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.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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