Blackbaud, Inc. (NASDAQ:BLKB)
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The Company is a global provider of software and related services designed specifically for nonprofit organizations.
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The Company is a global provider of software and related services designed specifically for nonprofit organizations.
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Blackbaud, Inc. founded in 1981 in South Carolina, is a market leaders in providing software and related services to non-profit organizations. The company has three core software applications: The Raiser's Edge, The Financial Edge and The Education Edge. The Raiser’s Edge is its best performing application, contributing over 60% to the revenue tally. Blackbaud segregates its operational revenues into five key segments: License fees; Services; Maintenance; Subscriptions; and Other revenue. The Maintenance segment that includes annual fees derived from maintenance contracts associated with new software licenses and annual renewals of existing maintenance contracts provides the major chunk of over 40% of the total inflows.
Non-profit organizations are seeing continued growth, with over 1.5 million registered U.S non profit organizations. The donations that are supposedly the lifeblood of such entities have also seen a robust growth, rising at over 7.5% in the past ten years and crossing the $250 billion mark. However, the cost associated with acquiring donations is quite high; where the organizations spend about 24 cents of every dollar on the procurement process. Companies like Blackbaud aid in reducing the cost as well as generating additional donations.
Blackbaud is currently witnessing mixed results, though its revenue have seen a strong double-digit growth in last quarter; net income also rising to a similar feet led by high performance of licenses and services segments. However, its stock observed a significant dip guided by fall in subscription segment and company’s acquisition of Target Software and Analytics for $62 million, leading to speculations about Blackbaud’s margins.
Looking ahead, Blackbaud could see continued growth as it only caters to just about 5% of the total addressable market. Moreover company’s strong cash flow, its new Galileo product range and high switching cost associated with the existing users, makes it a healthy investment. Further, the Target acquisition will aid in enhancing its product line, while possible synergies could improve the margins, making Blackbaud’s a strong stock at current level.
Blackbaud’s latest results continue to give mixed indications with 1Q’07 revenues surging 27% to $55.3 million. If the growth in the top-line emanates from higher license revenue, maintenance, services and subscriptions also observed a positive trend. However it is the bottom-line that again leaves much to desire, with net income rising by mere three and half percent to $5.8 million. The modest jump in the bottom line can primarily be attributed to reduced margins and upsurge in operating expenses.
The company recently launched its technology platform named Infinity, along with two new products for nonprofits information management. The new product suite consists of Blackbaud Enterprise CRM, a centralized system of record and Blackbaud Direct Marketing, a direct marketing campaigns from list segmentations to reporting, which enhances Blackbaud’s Raiser's Edge product range. These new products can be cited as an important revenue driver for the future and will observe a rising contribution in the coming quarters.
Blackbaud’s fundamentals still appears strong in its growing niche market. Looking ahead, the company appears to be moving in right direction with enhanced product portfolio and its increasing foray in the international markets, which includes number of international schools and non profit organizations like the recent partnership with YMCA de Mexico for using company’s Raiser's Edge to support new major fundraising initiatives in Mexico City. Moreover, Blackbaud’s improved guidance for the rest of the year and consistent growth in high-end clients continue to make Blackbaud a good investment, especially when its quality product range and market potential is considered.