UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2017March 31, 2019
or
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¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission file number: 000-50600
Blackbaud, Inc.
(Exact name of registrant as specified in its charter)
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Delaware | 11-2617163 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
2000 Daniel Island Drive65 Fairchild Street
Charleston, South Carolina 29492
(Address of principal executive offices, including zip code)
(843) 216-6200
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES þ NO ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES þ NO ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer þ | Accelerated filer | ¨ |
Non-accelerated filer ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
| Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES ¨ NO þ
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Securities Registered Pursuant to Section 12(b) of the Act: |
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on which Registered |
Common Stock, $0.001 Par Value | BLKB | The Nasdaq Stock Market LLC (Nasdaq Global Select Market) |
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The number of shares of the registrant’s Common Stock outstanding as of October 23, 2017April 24, 2019 was 48,089,595.49,186,460.
TABLE OF CONTENTS
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ThirdFirst Quarter 20172019 Form 10-Q | | 1 |
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| | CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS |
This Quarterly Report on Form 10-Q, including the documents incorporated herein by reference, contains forward-looking statements that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty. These "forward-looking statements" are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements consist of, among other things, trend analyses, statements regarding future events, future financial performance, our anticipated growth, the effect of general economic and market conditions, our business strategy and our plan to build and grow our business, our operating results, our ability to successfully integrate acquired businesses and technologies, the effect of foreign currency exchange rate and interest rate fluctuations on our financial results, the impact of expensing stock-based compensation, the sufficiency of our capital resources, our ability to meet our ongoing debt and obligations as they become due, and potential litigation involving us, all of which are based on current expectations, estimates, and forecasts, and the beliefs and assumptions of our management. Words such as “believes,” “seeks,” “expects,” “may,” “might,” “should,” “intends,” “could,” “would,” “likely,” “will,” “targets,” “plans,” “anticipates,” “aims,” “projects,” “estimates” or any variations of such words and similar expressions are also intended to identify such forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions that are difficult to predict. Accordingly, they should not be viewed as assurances of future performance, and actual results may differ materially and adversely from those expressed in any forward-looking statements.
Important factors that could cause actual results to differ materially from our expectations expressed in forward-looking statements include, but are not limited to, those summarized under “Item 1A. Risk factors” and elsewhere in this report, in our Annual Report on Form 10-K for the year ended December 31, 20162018 and in our other SEC filings. Forward-looking statements represent our management's beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update or revise any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statement, whether as a result of new information, future events or otherwise.
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2 | | ThirdFirst Quarter 20172019 Form 10-Q |
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| | PART I. FINANCIAL INFORMATION |
ITEM 1. FINANCIAL STATEMENTS
| | Blackbaud, Inc. Consolidated balance sheets (Unaudited) | Blackbaud, Inc. Consolidated balance sheets (Unaudited) | Blackbaud, Inc. Consolidated balance sheets (Unaudited) |
(dollars in thousands) | September 30, 2017 |
| December 31, 2016 |
| March 31, 2019 |
| December 31, 2018 |
|
Assets | | |
Current assets: | | |
Cash and cash equivalents | $ | 17,050 |
| $ | 16,902 |
| $ | 25,187 |
| $ | 30,866 |
|
Restricted cash due to customers | 139,095 |
| 353,771 |
| 219,396 |
| 418,980 |
|
Accounts receivable, net of allowance of $4,540 and $3,291 at September 30, 2017 and December 31, 2016, respectively | 100,868 |
| 88,932 |
| |
Accounts receivable, net of allowance of $5,128 and $4,722 at March 31, 2019 and December 31, 2018, respectively | | 90,727 |
| 86,595 |
|
Customer funds receivable | | 5,474 |
| 1,753 |
|
Prepaid expenses and other current assets | 50,082 |
| 48,314 |
| 73,099 |
| 59,788 |
|
Total current assets | 307,095 |
| 507,919 |
| 413,883 |
| 597,982 |
|
Property and equipment, net | 43,903 |
| 50,269 |
| 38,757 |
| 40,031 |
|
Operating lease right-of-use assets | | 110,485 |
| — |
|
Software development costs, net | 48,618 |
| 37,582 |
| 81,231 |
| 75,099 |
|
Goodwill | 472,776 |
| 438,240 |
| 634,845 |
| 545,213 |
|
Intangible assets, net | 252,713 |
| 253,676 |
| 355,751 |
| 291,617 |
|
Other assets | 21,889 |
| 22,524 |
| 67,461 |
| 65,363 |
|
Total assets | $ | 1,146,994 |
| $ | 1,310,210 |
| $ | 1,702,413 |
| $ | 1,615,305 |
|
Liabilities and stockholders’ equity | | |
Current liabilities: | | |
Trade accounts payable | $ | 17,830 |
| $ | 23,274 |
| $ | 32,640 |
| $ | 34,538 |
|
Accrued expenses and other current liabilities | 45,650 |
| 54,196 |
| 54,983 |
| 46,893 |
|
Due to customers | 139,095 |
| 353,771 |
| 224,870 |
| 420,733 |
|
Debt, current portion | 8,576 |
| 4,375 |
| 7,500 |
| 7,500 |
|
Deferred revenue, current portion | 277,008 |
| 244,500 |
| 281,082 |
| 295,991 |
|
Total current liabilities | 488,159 |
| 680,116 |
| 601,075 |
| 805,655 |
|
Debt, net of current portion | 329,380 |
| 338,018 |
| 576,068 |
| 379,624 |
|
Deferred tax liability | 39,352 |
| 29,558 |
| 48,050 |
| 44,291 |
|
Deferred revenue, net of current portion | 5,412 |
| 6,440 |
| 4,290 |
| 2,564 |
|
Operating lease liabilities, net of current portion | | 102,880 |
| — |
|
Other liabilities | 7,799 |
| 8,533 |
| 4,302 |
| 9,388 |
|
Total liabilities | 870,102 |
| 1,062,665 |
| 1,336,665 |
| 1,241,522 |
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Commitments and contingencies (see Note 10) |
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Stockholders’ equity: | | |
Preferred stock; 20,000,000 shares authorized, none outstanding | — |
| — |
| — |
| — |
|
Common stock, $0.001 par value; 180,000,000 shares authorized, 58,503,687 and 57,672,401 shares issued at September 30, 2017 and December 31, 2016, respectively | 59 |
| 58 |
| |
Common stock, $0.001 par value; 180,000,000 shares authorized, 60,182,678 and 59,327,633 shares issued at March 31, 2019 and December 31, 2018, respectively | | 60 |
| 59 |
|
Additional paid-in capital | 341,476 |
| 310,452 |
| 412,937 |
| 399,241 |
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Treasury stock, at cost; 10,426,122 and 10,166,801 shares at September 30, 2017 and December 31, 2016, respectively | (234,329 | ) | (215,237 | ) | |
Treasury stock, at cost; 10,999,885 and 10,760,574 shares at March 31, 2019 and December 31, 2018, respectively | | (285,284 | ) | (266,884 | ) |
Accumulated other comprehensive loss | (1,013 | ) | (457 | ) | (1,452 | ) | (5,110 | ) |
Retained earnings | 170,699 |
| 152,729 |
| 239,487 |
| 246,477 |
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Total stockholders’ equity | 276,892 |
| 247,545 |
| 365,748 |
| 373,783 |
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Total liabilities and stockholders’ equity | $ | 1,146,994 |
| $ | 1,310,210 |
| $ | 1,702,413 |
| $ | 1,615,305 |
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The accompanying notes are an integral part of these consolidated financial statements. |
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ThirdFirst Quarter 20172019 Form 10-Q | | 3 |
| | Blackbaud, Inc. Consolidated statements of comprehensive income (Unaudited) | Blackbaud, Inc. Consolidated statements of comprehensive income (Unaudited) | Blackbaud, Inc. Consolidated statements of comprehensive income (Unaudited) |
(dollars in thousands, except per share amounts) | Three months ended September 30, | | | Nine months ended September 30, | | Three months ended March 31, | |
2017 |
| 2016 |
| | 2017 |
| 2016 |
| 2019 |
| 2018 |
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Revenue | | | | |
Subscriptions | $ | 127,492 |
| $ | 105,440 |
| | $ | 370,923 |
| $ | 306,330 |
| |
Maintenance | 31,486 |
| 36,410 |
| | 98,184 |
| 111,019 |
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Services and other | 36,535 |
| 41,213 |
| | 102,222 |
| 115,161 |
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Recurring | | $ | 198,094 |
| $ | 180,846 |
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One-time services and other | | 17,736 |
| 23,338 |
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Total revenue | 195,513 |
| 183,063 |
| | 571,329 |
| 532,510 |
| 215,830 |
| 204,184 |
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Cost of revenue | | | | |
Cost of subscriptions | 58,045 |
| 51,943 |
| | 170,336 |
| 153,772 |
| |
Cost of maintenance | 5,698 |
| 5,531 |
| | 17,551 |
| 16,547 |
| |
Cost of services and other | 23,262 |
| 25,843 |
| | 71,595 |
| 76,499 |
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Cost of recurring | | 84,711 |
| 69,079 |
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Cost of one-time services and other | | 14,572 |
| 18,958 |
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Total cost of revenue | 87,005 |
| 83,317 |
| | 259,482 |
| 246,818 |
| 99,283 |
| 88,037 |
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Gross profit | 108,508 |
| 99,746 |
| | 311,847 |
| 285,692 |
| 116,547 |
| 116,147 |
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Operating expenses | | | | |
Sales, marketing and customer success | 44,193 |
| 40,690 |
| | 129,394 |
| 115,707 |
| 55,455 |
| 45,477 |
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Research and development | 22,071 |
| 22,510 |
| | 67,647 |
| 67,973 |
| 28,461 |
| 25,958 |
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General and administrative | 23,545 |
| 22,319 |
| | 67,350 |
| 62,089 |
| 27,117 |
| 25,051 |
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Amortization | 734 |
| 687 |
| | 2,164 |
| 2,147 |
| 1,376 |
| 1,269 |
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Restructuring | | 1,953 |
| 811 |
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Total operating expenses | 90,543 |
| 86,206 |
| | 266,555 |
| 247,916 |
| 114,362 |
| 98,566 |
|
Income from operations | 17,965 |
| 13,540 |
| | 45,292 |
| 37,776 |
| 2,185 |
| 17,581 |
|
Interest expense | (3,092 | ) | (2,641 | ) | | (8,685 | ) | (8,037 | ) | (5,323 | ) | (3,517 | ) |
Other income (expense), net | 468 |
| (15 | ) | | 1,581 |
| (185 | ) | |
Income before provision for income taxes | 15,341 |
| 10,884 |
| | 38,188 |
| 29,554 |
| |
Income tax provision | 2,793 |
| 1,950 |
| | 2,964 |
| 5,323 |
| |
Net income | $ | 12,548 |
| $ | 8,934 |
| | $ | 35,224 |
| $ | 24,231 |
| |
Earnings per share | | | | |
Other income, net | | 182 |
| 160 |
|
(Loss) income before provision for income taxes | | (2,956 | ) | 14,224 |
|
Income tax benefit | | (1,834 | ) | (3,527 | ) |
Net (loss) income | | $ | (1,122 | ) | $ | 17,751 |
|
(Loss) earnings per share | | |
Basic | $ | 0.27 |
| $ | 0.19 |
| | $ | 0.76 |
| $ | 0.53 |
| $ | (0.02 | ) | $ | 0.38 |
|
Diluted | $ | 0.26 |
| $ | 0.19 |
| | $ | 0.74 |
| $ | 0.51 |
| $ | (0.02 | ) | $ | 0.37 |
|
Common shares and equivalents outstanding | | | | |
Basic weighted average shares | 46,711,709 |
| 46,159,956 |
| | 46,627,213 |
| 46,078,306 |
| 47,516,912 |
| 47,019,603 |
|
Diluted weighted average shares | 47,846,997 |
| 47,394,106 |
| | 47,679,103 |
| 47,268,469 |
| 47,516,912 |
| 48,009,395 |
|
Dividends per share | $ | 0.12 |
| $ | 0.12 |
| | $ | 0.36 |
| $ | 0.36 |
| |
Other comprehensive (loss) income | | | | |
Other comprehensive income (loss) | | |
Foreign currency translation adjustment | (188 | ) | 289 |
| | (467 | ) | 261 |
| 4,590 |
| 6,437 |
|
Unrealized (loss) gain on derivative instruments, net of tax | (267 | ) | 409 |
| | (89 | ) | (378 | ) | (932 | ) | 1,079 |
|
Total other comprehensive (loss) income | (455 | ) | 698 |
| | (556 | ) | (117 | ) | |
Total other comprehensive income | | 3,658 |
| 7,516 |
|
Comprehensive income | $ | 12,093 |
| $ | 9,632 |
| | $ | 34,668 |
| $ | 24,114 |
| $ | 2,536 |
| $ | 25,267 |
|
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The accompanying notes are an integral part of these consolidated financial statements. |
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4 | | ThirdFirst Quarter 20172019 Form 10-Q |
| | Blackbaud, Inc. Consolidated statements of cash flows (Unaudited) | Blackbaud, Inc. Consolidated statements of cash flows (Unaudited) | Blackbaud, Inc. Consolidated statements of cash flows (Unaudited) |
| Nine months ended September 30, | | Three months ended March 31, | |
(dollars in thousands) | 2017 |
| 2016 |
| 2019 |
| 2018 |
|
Cash flows from operating activities | | |
Net income | $ | 35,224 |
| $ | 24,231 |
| |
Adjustments to reconcile net income to net cash provided by operating activities: | | |
Net (loss) income | | $ | (1,122 | ) | $ | 17,751 |
|
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | | |
Depreciation and amortization | 54,765 |
| 53,109 |
| 21,724 |
| 19,820 |
|
Provision for doubtful accounts and sales returns | 7,246 |
| 3,139 |
| 2,032 |
| 1,774 |
|
Stock-based compensation expense | 31,055 |
| 25,005 |
| 13,726 |
| 11,092 |
|
Deferred taxes | (2,511 | ) | (225 | ) | (1,155 | ) | 902 |
|
Amortization of deferred financing costs and discount | 650 |
| 718 |
| 188 |
| 188 |
|
Other non-cash adjustments | 572 |
| (634 | ) | 1,820 |
| (197 | ) |
Changes in operating assets and liabilities, net of acquisition and disposal of businesses: | | |
Accounts receivable | (17,169 | ) | (9,288 | ) | (1,797 | ) | 5,088 |
|
Prepaid expenses and other assets | 596 |
| (934 | ) | (12,107 | ) | (10,052 | ) |
Trade accounts payable | (2,891 | ) | 267 |
| (3,624 | ) | (1,655 | ) |
Accrued expenses and other liabilities | (9,522 | ) | (12,837 | ) | (11,690 | ) | (14,092 | ) |
Restricted cash due to customers | 214,244 |
| 119,291 |
| |
Due to customers | (214,244 | ) | (119,291 | ) | |
Deferred revenue | 25,370 |
| 17,593 |
| (18,006 | ) | (18,866 | ) |
Net cash provided by operating activities | 123,385 |
| 100,144 |
| |
Net cash (used in) provided by operating activities | | (10,011 | ) | 11,753 |
|
Cash flows from investing activities | | |
Purchase of property and equipment | (8,417 | ) | (15,459 | ) | (1,152 | ) | (5,771 | ) |
Capitalized software development costs | (20,605 | ) | (19,078 | ) | (11,319 | ) | (7,103 | ) |
Purchase of net assets of acquired companies, net of cash acquired | (49,729 | ) | (3,377 | ) | |
Purchase of derivative instruments | (516 | ) | — |
| |
Proceeds from settlement of derivative instruments | 1,030 |
| — |
| |
Purchase of net assets of acquired companies, net of cash and restricted cash acquired | | (109,386 | ) | (5,036 | ) |
Net cash used in investing activities | (78,237 | ) | (37,914 | ) | (121,857 | ) | (17,910 | ) |
Cash flows from financing activities | | |
Proceeds from issuance of debt | 588,300 |
| 179,000 |
| 271,500 |
| 81,700 |
|
Payments on debt | (594,144 | ) | (212,581 | ) | (75,175 | ) | (52,875 | ) |
Debt issuance costs | (3,085 | ) | — |
| |
Employee taxes paid for withheld shares upon equity award settlement | (19,092 | ) | (10,497 | ) | (18,400 | ) | (22,511 | ) |
Proceeds from exercise of stock options | 14 |
| 10 |
| 3 |
| 9 |
|
Change in due to customers | | (242,885 | ) | (434,640 | ) |
Change in customer funds receivable | | (3,573 | ) | (4,783 | ) |
Dividend payments to stockholders | (17,299 | ) | (17,108 | ) | (5,901 | ) | (5,825 | ) |
Net cash used in financing activities | (45,306 | ) | (61,176 | ) | (74,431 | ) | (438,925 | ) |
Effect of exchange rate on cash and cash equivalents | 306 |
| 46 |
| |
Net increase in cash and cash equivalents | 148 |
| 1,100 |
| |
Cash and cash equivalents, beginning of period | 16,902 |
| 15,362 |
| |
Cash and cash equivalents, end of period | $ | 17,050 |
| $ | 16,462 |
| |
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The accompanying notes are an integral part of these consolidated financial statements. | |
Effect of exchange rate on cash, cash equivalents, and restricted cash | | 1,036 |
| 713 |
|
Net decrease in cash, cash equivalents, and restricted cash | | (205,263 | ) | (444,369 | ) |
Cash, cash equivalents, and restricted cash, beginning of period | | 449,846 |
| 640,174 |
|
Cash, cash equivalents, and restricted cash, end of period | | $ | 244,583 |
| $ | 195,805 |
|
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown above in the consolidated statements of cash flows:
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(dollars in thousands) | March 31, 2019 |
| December 31, 2018 |
|
Cash and cash equivalents | $ | 25,187 |
| $ | 30,866 |
|
Restricted cash due to customers | 219,396 |
| 418,980 |
|
Total cash, cash equivalents and restricted cash in the statement of cash flows | $ | 244,583 |
| $ | 449,846 |
|
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The accompanying notes are an integral part of these consolidated financial statements. |
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ThirdFirst Quarter 20172019 Form 10-Q | | 5 |
Blackbaud, Inc.
Consolidated statements of stockholders' equity
(Unaudited)
|
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Blackbaud, Inc. Consolidated statement of stockholders' equity (Unaudited) |
(dollars in thousands) | Common stock | | Additional paid-in capital |
| Treasury stock |
| Accumulated other comprehensive loss |
| Retained earnings |
| Total stockholders' equity |
|
Shares |
| Amount |
|
Balance at December 31, 2016 | 57,672,401 |
| $ | 58 |
| $ | 310,452 |
| $ | (215,237 | ) | $ | (457 | ) | $ | 152,729 |
| $ | 247,545 |
|
Net income | — |
| — |
| — |
| — |
| — |
| 35,224 |
| 35,224 |
|
Payment of dividends | — |
| — |
| — |
| — |
| — |
| (17,299 | ) | (17,299 | ) |
Exercise of stock options and stock appreciation rights and vesting of restricted stock units | 349,713 |
| — |
| 14 |
| — |
| — |
| — |
| 14 |
|
Employee taxes paid for 259,321 withheld shares upon equity award settlement | — |
| — |
| — |
| (19,092 | ) | — |
| — |
| (19,092 | ) |
Stock-based compensation | — |
| — |
| 31,010 |
| — |
| — |
| 45 |
| 31,055 |
|
Restricted stock grants | 549,589 |
| 1 |
| — |
| — |
| — |
| — |
| 1 |
|
Restricted stock cancellations | (68,016 | ) | — |
| — |
| — |
| — |
| — |
| — |
|
Other comprehensive loss | — |
| — |
| — |
| — |
| (556 | ) | — |
| (556 | ) |
Balance at September 30, 2017 | 58,503,687 |
| $ | 59 |
| $ | 341,476 |
| $ | (234,329 | ) | $ | (1,013 | ) | $ | 170,699 |
| $ | 276,892 |
|
| | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. |
|
| | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | Common stock | | Additional paid-in capital |
| Treasury stock |
| Accumulated other comprehensive Income (loss) |
| Retained earnings |
| Total stockholders' equity |
|
Shares |
| Amount |
|
Balance at December 31, 2018 | 59,327,633 |
| $ | 59 |
| $ | 399,241 |
| $ | (266,884 | ) | $ | (5,110 | ) | $ | 246,477 |
| $ | 373,783 |
|
Net loss | — |
| — |
| — |
| — |
| — |
| (1,122 | ) | (1,122 | ) |
Payment of dividends ($0.12 per share) | — |
| — |
| — |
| — |
| — |
| (5,901 | ) | (5,901 | ) |
Exercise of stock options and stock appreciation rights and vesting of restricted stock units | 234,453 |
| — |
| 3 |
| — |
| — |
| — |
| 3 |
|
Employee taxes paid for 239,311 withheld shares upon equity award settlement | — |
| — |
| — |
| (18,400 | ) | — |
| — |
| (18,400 | ) |
Stock-based compensation | — |
| — |
| 13,693 |
| — |
| — |
| 33 |
| 13,726 |
|
Restricted stock grants | 663,906 |
| 1 |
| — |
| — |
| — |
| — |
| 1 |
|
Restricted stock cancellations | (43,314 | ) | — |
| — |
| — |
| — |
| — |
| — |
|
Other comprehensive income | — |
| — |
| — |
| — |
| 3,658 |
| — |
| 3,658 |
|
Balance at March 31, 2019 | 60,182,678 |
| $ | 60 |
| $ | 412,937 |
| $ | (285,284 | ) | $ | (1,452 | ) | $ | 239,487 |
| $ | 365,748 |
|
| | | | | | | |
|
|
| | | | | | | | | | | | | | | | | | | | |
(dollars in thousands) | Common stock | | Additional paid-in capital |
| Treasury stock |
| Accumulated other comprehensive Income (loss) |
| Retained earnings |
| Total stockholders' equity |
|
Shares |
| Amount |
|
Balance at December 31, 2017 | 58,551,761 |
| $ | 59 |
| $ | 351,042 |
| $ | (239,199 | ) | $ | (642 | ) | $ | 225,029 |
| $ | 336,289 |
|
Net income | — |
| — |
| — |
| — |
| — |
| 17,751 |
| 17,751 |
|
Payment of dividends ($0.12 per share) | — |
| — |
| — |
| — |
| — |
| (5,825 | ) | (5,825 | ) |
Exercise of stock options and stock appreciation rights and vesting of restricted stock units | 279,422 |
| — |
| 9 |
| — |
| — |
| — |
| 9 |
|
Employee taxes paid for 234,454 withheld shares upon equity award settlement | — |
| — |
| — |
| (22,511 | ) | — |
| — |
| (22,511 | ) |
Stock-based compensation | — |
| — |
| 11,062 |
| — |
| — |
| 30 |
| 11,092 |
|
Restricted stock grants | 437,878 |
| — |
| — |
| — |
| — |
| — |
| — |
|
Restricted stock cancellations | (35,218 | ) | — |
| — |
| — |
| — |
| — |
| — |
|
Other comprehensive income | — |
| — |
| — |
| — |
| 7,516 |
| — |
| 7,516 |
|
Reclassification upon early adoption of ASU 2018-02 |
|
|
|
| 167 |
| (167 | ) | — |
|
Balance at March 31, 2018 | 59,233,843 |
| $ | 59 |
| $ | 362,113 |
| $ | (261,710 | ) | $ | 7,041 |
| $ | 236,818 |
| $ | 344,321 |
|
| | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements. |
|
| | |
6 | | ThirdFirst Quarter 20172019 Form 10-Q |
Blackbaud, Inc.
Notes to consolidated financial statements
(Unaudited)
We are the world’s leading cloud software company powering social good. Serving the entire social good community—nonprofits, foundations, corporations,companies, education institutions, healthcare institutionsorganizations and individual change agents—we connect and empower organizations to increase their impact through cloud software, services, expertise and data intelligence. Our portfolio is tailored to the unique needs of vertical markets, with solutions for fundraising and CRM, marketing, advocacy, peer-to-peer fundraising, corporate social responsibility, school management, ticketing, grantmaking, financial management, payment processing and analytics. Serving the industry for more than three decades, we are headquartered in Charleston, South Carolina and have operations in the United States, Australia, Canada, Costa Rica and the United Kingdom. As of September 30, 2017, we had approximately 35,000 customers.
Unaudited interim consolidated financial statements
The accompanying interim consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission ("SEC") for interim financial reporting. These consolidated statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to state fairly the consolidated balance sheets, consolidated statements of comprehensive income, consolidated statements of cash flows and consolidated statementsstatement of stockholders’ equity, for the periods presented in accordance with accounting principles generally accepted in the United States ("U.S.") ("GAAP"). The consolidated balance sheet at December 31, 2016,2018, has been derived from the audited consolidated financial statements at that date. Operating results and cash flows for the ninethree months ended September 30, 2017March 31, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2017,2019, or any other future period. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted in accordance with the rules and regulations for interim reporting of the SEC. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016,2018, and other forms filed with the SEC from time to time.
Reclassifications
Due to the insignificance of our revenue from "license fees and other," we have combined that revenue with our "services" revenue beginning in 2017. In order to provide comparability between periods presented, "services" and "license fees and other" have been combined within "services and other" in the previously reported consolidated statements of comprehensive income to conform to presentation of the current period. Similarly, "cost of services" and "cost of license fees and other" have been combined within "cost of services and other" in the previously reported consolidated statements of comprehensive income to conform to presentation of the current period.
Basis of consolidation
The consolidated financial statements include the accounts of Blackbaud, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Reportable segment
We report our operating results and financial information in one operating and reportable segment. Our chief operating decision maker uses consolidated financial information to make operating decisions, assess financial performance and allocate resources. Our chief operating decision maker is our chief executive officer ("CEO").
Recently adopted accounting pronouncements
In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718) - Scope of Modification Accounting ("ASU 2017-09"), which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. Under ASU 2017-09, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. ASU 2017-09 is effective for all companies for annual and interim periods beginning after December 15, 2017, with early adoption permitted in any interim period for reporting periods for
|
| | |
Third Quarter 2017 Form 10-Q | | 7 |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
which financial statements have not been issued. ASU 2017-09 should be applied prospectively to an award modified on or after the adoption date. We early adopted ASU 2017-09 as of April 1, 2017. As this standard is prospective in nature, the impact to our financial statements will depend on the nature of our future award modifications.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business ("ASU 2017-01"), which provides a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. ASU 2017-01 is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted, and applied prospectively. We early adopted ASU 2017-01 as of July 1, 2017 and do not expect the standard to have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment("ASU 2017-04"), which removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted, and applied prospectively. We early adopted ASU 2017-04 as of July 1, 2017 for use in our fourth quarter annual goodwill impairment testing and do not expect the standard to have a material impact on our consolidated financial statements.
Recently issued accounting pronouncements
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) - Restricted Cash ("ASU 2016-18"), which requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is permitted, including adoption in an interim period, but any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. The new standard must be adopted retrospectively. We are currently evaluating the impact of this standard on our consolidated statements of cash flows.
In February 2016, the FASBFinancial Accounting Standards Board ("FASB") issued ASUAccounting Standards Update ("ASU") 2016-02, Leases (Topic 842) (ASU 2016-02)("ASU 2016-02"). ASU 2016-02 will requirerequires lessees to record most leases on their balance sheetssheet but recognize expenses in the income statement in a manner similar to currentprevious guidance. The updated guidance also eliminates certain real estate-specific provisions and changes the guidance on sale-leaseback transactions, initial direct costs and lease executory costs for all entities. For lessors, the standard modifies the classification criteria and the accounting for sales-type and direct financing leases. Allway in which entities will classify leases to determinedetermines how to recognize lease-related revenue and expense. Classification will continue to affect amounts that lessors record on the balance sheet.
We adopted ASU 2016-02 is effective for annualas of January 1, 2019 using the transition method that allowed us to initially apply the guidance at the adoption date of January 1, 2019 without adjusting comparative periods beginning after December 15, 2018, and interim periods within those years. Early adoption is permitted. Upon adoption, entities will be requiredpresented. We elected to use a modified retrospective approach for leases that exist or are entered into after the beginningpackage of the earliest comparative period in the financial statements. The modified retrospective approach includes a number of optional practical expedients that allowed us to not reassess: (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any existing leases. We did not elect
|
| | |
First Quarter 2019 Form 10-Q | | 7 |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
to use the hindsight practical expedient, which permits entities may elect to apply. We expectuse hindsight in determining the lease term and assessing impairment. Additionally, we elected not to apply the recognition requirements of the new lease accounting standard to short-term leases. Adopting ASU 2016-02 had a material impact on our consolidated balance sheet as of January 1, 2019, as we recognized $121.6 million of lease liabilities and $113.4 million of right-of-use ("ROU") assets for those leases classified as operating leases.
Summary of significant accounting policies
Except for the accounting policy added for leases below as a result of adopting ASU 2016-02, there have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 20, 2019, that have had a material impact on our consolidated financial statement.
Leases
We determine if an arrangement is a lease at inception. Operating leases are included in operating lease ROU assets, accrued expense and other current liabilities, and operating lease liabilities, net of current portion in our consolidated balance sheet as of March 31, 2019.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The operating lease ROU asset also includes any initial direct costs and lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will impactexercise that option. Lease expense for lease payments related to our operating leases is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which are generally accounted for separately. We do not recognize short-term leases (those that, at the commencement date, have a lease term of 12 months or less) on our consolidated balance sheets.
YourCause acquisition
On January 2, 2019, we acquired all of the outstanding equity securities, including all voting equity interests, of YourCause Holdings, LLC, a Delaware limited liability company ("YourCause"), pursuant to a purchase agreement and plan of merger. The acquisition expands our footprint in corporate social responsibility and employee engagement and enhances our position as a leader in providing solutions to both nonprofit organizations and for-profit companies committed to addressing social issues. We acquired the equity securities for an aggregate purchase price of $157.7 million in cash, subject to certain adjustments set forth in the agreement and plan of merger. The purchase price and related expenses were funded primarily through borrowings under the 2017 Credit Facility (as defined below). As a result of the acquisition, YourCause has become a wholly-owned subsidiary of ours. The operating results of YourCause have been included in our consolidated financial statements from the date of acquisition. During the three months ended March 31, 2019, we incurred insignificant acquisition-related expenses associated with the acquisition, which were recorded in general and are currently evaluating the extent of the impact that implementation of this standard will have on adoption.administrative expense.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The standard also provides guidance on the recognition of costs related to obtaining customer contracts. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. ASU 2014-09 will be effective for us beginning in the first quarter of 2018 and we anticipate using the full retrospective transition method. We are currently evaluating the impact that the adoption of ASU 2014-09 will have on our consolidated financial statements and related disclosures. As a result of our evaluation to date, we expect that ASU 2014-09 will generally result in the deferral of more costs to obtain a contract over a longer period using the expected period of benefit as compared with our current practice of using our average initial contract term. We also anticipate incremental disclosures, including, but not limited to, the opening and closing balances of contract assets and liabilities, revenue recognized in the reporting period that was included in the contract liability balance at the beginning of the period, and the aggregate amount of the transaction price allocated to remaining performance obligations at the end of each reporting period including when we expect to recognize that amount.
|
| | |
8 | | ThirdFirst Quarter 20172019 Form 10-Q |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
AcademicWorks acquisition
On April 3, 2017, we acquired all of the outstanding shares of capital stock, including all voting equity interests, of AcademicWorks, Inc., a Texas corporation ("AcademicWorks"), pursuant to a stock purchase agreement. AcademicWorks is the market leader in scholarship management for higher education and K-12 institutions, foundations, and grant-making institutions. The acquisition extends our offerings for our higher education, K-12, and corporate and foundation customers. We acquired AcademicWorks for $52.1 million in cash, net of closing adjustments. We financed the acquisition through a draw down of a revolving credit loan under our then-existing credit facility. As a result of the acquisition, AcademicWorks has become a wholly-owned subsidiary of ours. The operating results of AcademicWorks have been included in our consolidated financial statements within our EMG and GMG reportable segments (as defined in Note 14 below) from the date of acquisition. During the three and nine months ended September 30, 2017, we incurred insignificant acquisition-related expenses associated with the acquisition of AcademicWorks, which were recorded in general and administrative expense.
The fair values assigned to the assets acquired and liabilities assumed in the table below are based on our best estimates and assumptions as of the reporting date and are considered preliminary pending finalization. The estimates and assumptions are subject to change as we obtain additional information during the measurement period, which may be up to one year from the acquisition date. The assets and liabilities, pending finalization, include the valuation of acquired finite-lived intangible assets as well as the assumed deferred revenue and deferred income tax balances.
|
| | | |
(in thousands) | Purchase price allocation |
|
Net working capital, excluding deferred revenue | $ | 3,332 |
|
Other long-term assets | 2,574 |
|
Identifiable intangible assets | 74,690 |
|
Deferred tax liability | (4,615 | ) |
Deferred revenue | (4,300 | ) |
Other long-term liabilities | (1,650 | ) |
Goodwill | 87,717 |
|
Total purchase price | $ | 157,748 |
|
|
| | | |
(in thousands) | Purchase price allocation |
|
Net working capital, excluding deferred revenue | $ | 2,949 |
|
Property and equipment | 290 |
|
Finite-lived intangible assets | 30,900 |
|
Deferred revenue | (3,950 | ) |
Deferred tax liability | (12,350 | ) |
Goodwill | 34,305 |
|
Total purchase price | $ | 52,144 |
|
The estimated fair value of accounts receivable acquired approximates the contractual value of $1.0 million.$4.1 million and $54.7 million of the goodwill arising in the acquisition is deductible for income tax purposes. The estimated goodwill recognized is attributable primarily to the opportunities for expected synergies from combining the operations and the assembled workforce of AcademicWorks, with $20.6 million and $13.7 million assigned to our EMG and GMG reportable segments, respectively. None of the goodwill arising in the acquisition is deductible for income tax purposes.YourCause.
The AcademicWorksYourCause acquisition resulted in the identification of the following identifiable finite-lived intangible assets: |
| | | | |
| Intangible assets acquired |
| Weighted average amortization period |
YourCause | (in thousands) |
| (in years) |
Acquired technology | $ | 47,800 |
| 12 |
Customer relationships | 25,900 |
| 15 |
Marketing assets | 830 |
| 2 |
Non-compete agreements | 160 |
| 0 |
Total intangible assets | $ | 74,690 |
| 13 |
|
| | | | |
| Intangible assets acquired |
| Weighted average amortization period |
AcademicWorks | (in thousands) |
| (in years) |
Acquired technology | $ | 22,500 |
| 9 |
Customer relationships | 8,000 |
| 15 |
Marketing assets | 320 |
| 2 |
Non-compete agreements | 80 |
| 3 |
Total intangible assets | $ | 30,900 |
| 10 |
The estimated fair values of the finite-lived intangible assets were based on variations of the income approach, which estimates fair value based upon the present value of cash flows that the assets are expected to generate, and which included the relief-from-royalty method, incremental cash flow method, including the comparative (with and without) method and multi-period excess earnings method, depending on the intangible asset being valued. The method of amortization of
|
| | |
Third Quarter 2017 Form 10-Q | | 9 |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
identifiable finite-lived intangible assets is based on the expected pattern in which the estimated economic benefits of the respective assets are consumed or otherwise used up. Customer relationships and acquired technology assets are being amortized on an accelerated basis. Marketing assets and non-compete agreements are being amortized on a straight-line basis. The non-compete agreements were fully amortized as of March 31, 2019, based on the insignificance of the acquired assets.
We determined that the impact of this acquisition was not material to our consolidated financial statements; therefore, separate presentation of revenue and earnings since the acquisition date and pro forma information are not required or presented.nor included herein.
|
| | |
First Quarter 2019 Form 10-Q | | 9 |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
|
|
4. Goodwill and Other Intangible Assets |
The change in goodwill for each reportable segment (as defined in Note 14 below) during the ninethree months ended September 30, 2017,March 31, 2019, consisted of the following:
|
| | | |
(dollars in thousands) | Total |
Balance at December 31, 2018 | $ | 545,213 |
|
Additions related to current year business combinations | 87,717 |
|
Effect of foreign currency translation | 1,915 |
|
Balance at March 31, 2019 | $ | 634,845 |
|
|
| | | | | | | | | | | | |
(dollars in thousands) | EMG | GMG | IMG | Total |
Balance at December 31, 2016 | $ | 241,334 |
| $ | 192,238 |
| $ | 4,668 |
| $ | 438,240 |
|
Additions related to current year business combination(1) | 20,583 |
| 13,722 |
| — |
| 34,305 |
|
Adjustments related to prior year business combination(2) | (29 | ) | (58 | ) | (1 | ) | (88 | ) |
Effect of foreign currency translation | — |
| — |
| 319 |
| 319 |
|
Balance at September 30, 2017 | $ | 261,888 |
| $ | 205,902 |
| $ | 4,986 |
| $ | 472,776 |
|
| |
(1) | See Note 3 to these consolidated financial statements for details regarding our acquisition of AcademicWorks.
|
| |
(2) | The change in goodwill was related to a post-closing working capital adjustment associated with the prior year acquisition of Good+Geek, Inc. ("Attentive.ly"), as well as an immaterial measurement period adjustment. |
|
|
5. (Loss) Earnings Per Share |
We compute basic earnings (loss) per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income available to common stockholders by the weighted average number of common shares and dilutive potential common shares outstanding during the period. Diluted earnings (loss) per share reflect the assumed exercise, settlement and vesting of all dilutive securities using the “treasury stock method” except when the effect is anti-dilutive. Potentially dilutive securities consist of shares issuable upon the exercise of stock options, settlement of stock appreciation rights and vesting of restricted stock awards and units. Diluted loss per share for the three months ended March 31, 2019 is the same as basic loss per share as there is a net loss in the period and inclusion of potentially dilutive securities is anti-dilutive.
The following table sets forth the computation of basic and diluted earnings (loss) per share:
|
| | | | | | |
| Three months ended March 31, | |
(dollars in thousands, except per share amounts) | 2019 |
| 2018 |
|
Numerator: | | |
Net (loss) income | $ | (1,122 | ) | $ | 17,751 |
|
Denominator: | | |
Weighted average common shares | 47,516,912 |
| 47,019,603 |
|
Add effect of dilutive securities: | | |
Stock-based awards | — |
| 989,792 |
|
Weighted average common shares assuming dilution | 47,516,912 |
| 48,009,395 |
|
(Loss) earnings per share: | | |
Basic | $ | (0.02 | ) | $ | 0.38 |
|
Diluted | $ | (0.02 | ) | $ | 0.37 |
|
| | |
Anti-dilutive shares excluded from calculations of diluted (loss) earnings per share | 740,119 |
| 24 |
|
|
| | |
10 | | ThirdFirst Quarter 20172019 Form 10-Q |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
The following table sets forth the computation of basic and diluted earnings per share:
|
| | | | | | | | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | |
(dollars in thousands, except per share amounts) | 2017 |
| 2016 |
| | 2017 |
| 2016 |
|
Numerator: | | | | | |
Net income | $ | 12,548 |
| $ | 8,934 |
| | $ | 35,224 |
| $ | 24,231 |
|
Denominator: | | | | | |
Weighted average common shares | 46,711,709 |
| 46,159,956 |
| | 46,627,213 |
| 46,078,306 |
|
Add effect of dilutive securities: | | | | | |
Stock-based awards | 1,135,288 |
| 1,234,150 |
| | 1,051,890 |
| 1,190,163 |
|
Weighted average common shares assuming dilution | 47,846,997 |
| 47,394,106 |
| | 47,679,103 |
| 47,268,469 |
|
Earnings per share: | | | | | |
Basic | $ | 0.27 |
| $ | 0.19 |
| | $ | 0.76 |
| $ | 0.53 |
|
Diluted | $ | 0.26 |
| $ | 0.19 |
| | $ | 0.74 |
| $ | 0.51 |
|
| | | | | |
Anti-dilutive shares excluded from calculations of diluted earnings per share | 1,719 |
| 1,723 |
| | 4,938 |
| 3,766 |
|
|
|
6. Fair Value Measurements |
We use a three-tier fair value hierarchy to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:
Level 1 - Quoted prices for identical assets or liabilities in active markets;
Level 2 - Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
|
| | |
Third Quarter 2017 Form 10-Q | | 11 |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
Recurring fair value measurements
Financial assetsAssets and liabilities that are measured at fair value on a recurring basis consisted of the following, as of the dates indicated below: |
| | | | | | | | | | | | | | | |
| Fair value measurement using | | |
(dollars in thousands) | Level 1 |
| | Level 2 |
| | Level 3 |
| | Total |
|
Fair value as of March 31, 2019 | | | | | | | |
Financial assets: | | | | | | | |
Derivative instruments | $ | — |
| | $ | 1,239 |
| | $ | — |
| | $ | 1,239 |
|
Total financial assets | $ | — |
| | $ | 1,239 |
| | $ | — |
| | $ | 1,239 |
|
| | | | | | | |
Fair value as of March 31, 2019 | | | | | | | |
Financial liabilities: | | | | | | | |
Derivative instruments | $ | — |
| | $ | 433 |
| | $ | — |
| | $ | 433 |
|
Total financial liabilities | $ | — |
| | $ | 433 |
| | $ | — |
| | $ | 433 |
|
| | | | | | | �� |
Fair value as of December 31, 2018 | | | | | | | |
Financial assets: | | | | | | | |
Derivative instruments | $ | — |
| | $ | 2,260 |
| | $ | — |
| | $ | 2,260 |
|
Total financial assets | $ | — |
| | $ | 2,260 |
| | $ | — |
| | $ | 2,260 |
|
| | | | | | | |
Fair value as of December 31, 2018 | | | | | | | |
Financial liabilities: | | | | | | | |
Derivative instruments | $ | — |
| | $ | 186 |
| | $ | — |
| | $ | 186 |
|
Total financial liabilities | $ | — |
| | $ | 186 |
| | $ | — |
| | $ | 186 |
|
|
| | | | | | | | | | | | | | | |
| Fair value measurement using | | |
(dollars in thousands) | Level 1 |
| | Level 2 |
| | Level 3 |
| | Total |
|
Fair value as of September 30, 2017 | | | | | | | |
Financial assets: | | | | | | | |
Derivative instruments | $ | — |
| | $ | 223 |
| | $ | — |
| | $ | 223 |
|
Total financial assets | $ | — |
| | $ | 223 |
| | $ | — |
| | $ | 223 |
|
| | | | | | | |
Fair value as of September 30, 2017 | | | | | | | |
Financial liabilities: | | | | | | | |
Derivative instruments | $ | — |
| | $ | 369 |
| | $ | — |
| | $ | 369 |
|
Total financial liabilities | $ | — |
| | $ | 369 |
| | $ | — |
| | $ | 369 |
|
| | | | | | | |
Fair value as of December 31, 2016 | | | | | | | |
Financial assets: | | | | | | | |
Derivative instruments | $ | — |
| | $ | 206 |
| | $ | — |
| | $ | 206 |
|
Total financial assets | $ | — |
| | $ | 206 |
| | $ | — |
| | $ | 206 |
|
| | | | | | | |
Fair value as of December 31, 2016 | | | | | | | |
Financial liabilities: | | | | | | | |
Derivative instruments | $ | — |
| | $ | 163 |
| | $ | — |
| | $ | 163 |
|
Total financial liabilities | $ | — |
| | $ | 163 |
| | $ | — |
| | $ | 163 |
|
Our derivative instruments within the scope of ASCAccounting Standards Codification ("ASC") 815, Derivatives and Hedging, are required to be recorded at fair value. Our derivative instruments that are recorded at fair value include interest rate swaps, as well as foreign currency forward and option contracts.swaps.
The fair value of our interest rate swaps was based on model-driven valuations using LIBOR rates, which are observable at commonly quoted intervals. Accordingly, our interest rate swaps are classified within Level 2 of the fair value hierarchy.
Our foreign currency forward and option contracts are valued using standard calculations/models that use as their basis readily observable market parameters including, foreign currency exchange rates, volatilities, and interest rates. Therefore, our foreign currency forward and option contracts are classified within Level 2 of the fair value hierarchy.
We believe the carrying amounts of our cash and cash equivalents, restricted cash due to customers, accounts receivable, trade accounts payable, accrued expenses and other current liabilities and due to customers approximate their fair values at September 30, 2017March 31, 2019 and December 31, 2016,2018, due to the immediate or short-term maturity of these instruments.
|
| | |
First Quarter 2019 Form 10-Q | | 11 |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
We believe the carrying amount of our debt approximates its fair value at September 30, 2017March 31, 2019 and December 31, 2016,2018, as the debt bears interest rates that approximate market value. As LIBOR rates are observable at commonly quoted intervals, our debt is classified within Level 2 of the fair value hierarchy.
We did not transfer any assets or liabilities among the levels within the fair value hierarchy during the ninethree months ended September 30, 2017.March 31, 2019. Additionally, we did not hold any Level 3 assets or liabilities during the ninethree months ended September 30, 2017.
|
| | |
12 | | Third Quarter 2017 Form 10-Q |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
March 31, 2019.
Non-recurring fair value measurements
Assets and liabilities that are measured at fair value on a non-recurring basis include intangible assets, goodwill and goodwill,operating lease ROU assets, which are recognized at fair value during the period in which an acquisition is completed or at lease commencement, from updated estimates and assumptions during the measurement period, or when they are considered to be impaired. These non-recurring fair value measurements, primarily for intangible assets acquired and operating lease ROU assets, are based on Level 3 unobservable inputs. In the event of an impairment, we determine the fair value of the goodwill and intangible assets other than goodwill using a discounted cash flow approach, which contains significant unobservable inputs and, therefore, is considered a Level 3 fair value measurement. The unobservable inputs in the analysis generally include future cash flow projections and a discount rate. For goodwill impairment testing, we estimate fair value using market-based methods including the use of market capitalization and consideration of a control premium.
During the three months ended March 31, 2019, we recorded $1.3 million in impairments of operating lease ROU assets associated with certain leased office spaces we ceased using as part of our facilities optimization restructuring. These impairments were recorded as restructuring expense on our consolidated statements of comprehensive income. See Note 15 to these consolidated financial statements for additional details regarding our facilities optimization restructuring.
There were no non-recurring fair value adjustments to intangible assets and goodwill during the ninethree months ended September 30, 2017, except for an insignificant business combination accounting adjustment to the initial fair value estimates of the Attentive.ly assets acquired and liabilities assumed at the acquisition date from updated information obtained during the measurement period. See Note 4 to these consolidated financial statements for additional details. The measurement period of a business combination may be up to one year from the acquisition date. We record any measurement period adjustments to the fair value of assets acquired and liabilities assumed, with the corresponding offset to goodwill.March 31, 2019.
|
|
7. Consolidated Financial Statement Details |
AccruedPrepaid expenses and other liabilitiesassets
|
| | | | | | |
(dollars in thousands) | March 31, 2019 |
| December 31, 2018 |
|
Costs of obtaining contracts(1)(2) | $ | 88,812 |
| $ | 85,590 |
|
Prepaid software maintenance and subscriptions | 27,598 |
| 21,134 |
|
Unbilled accounts receivable | 6,043 |
| 4,161 |
|
Taxes, prepaid and receivable | 3,954 |
| 2,055 |
|
Derivative instruments | 1,239 |
| 2,260 |
|
Security deposits | 1,228 |
| 1,020 |
|
Other assets | 11,686 |
| 8,931 |
|
Total prepaid expenses and other assets | 140,560 |
| 125,151 |
|
Less: Long-term portion | 67,461 |
| 65,363 |
|
Prepaid expenses and other current assets | $ | 73,099 |
| $ | 59,788 |
|
| |
(1) | Amortization expense from costs of obtaining contracts was $9.6 million for the three months endedMarch 31, 2019. |
| |
(2) | The current portion of costs of obtaining contracts as of March 31, 2019 and December 31, 2018 was $32.1 million and $31.7 million, respectively. |
|
| | | | | | |
(dollars in thousands) | September 30, 2017 |
| December 31, 2016 |
|
Accrued bonuses | $ | 14,581 |
| $ | 19,217 |
|
Accrued commissions and salaries | 5,429 |
| 9,352 |
|
Lease incentive obligations | 4,780 |
| 5,604 |
|
Customer credit balances | 5,246 |
| 5,148 |
|
Deferred rent liabilities | 4,400 |
| 4,110 |
|
Taxes payable | 2,584 |
| 3,452 |
|
Unrecognized tax benefit | 3,609 |
| 3,295 |
|
Accrued subscriptions | 2,638 |
| 2,840 |
|
Accrued vacation costs | 2,626 |
| 2,214 |
|
Accrued health care costs | 2,479 |
| 1,495 |
|
Other liabilities | 5,077 |
| 6,002 |
|
Total accrued expenses and other liabilities | 53,449 |
| 62,729 |
|
Less: Long-term portion | 7,799 |
| 8,533 |
|
Accrued expenses and other current liabilities | $ | 45,650 |
| $ | 54,196 |
|
Other income (expense), net
|
| | | | | | | | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | |
(dollars in thousands) | 2017 |
| 2016 |
| | 2017 |
| 2016 |
|
Components of Other Income (Expense), Net | | | | | |
Interest income | $ | 393 |
| $ | 224 |
| | $ | 771 |
| $ | 463 |
|
(Loss) gain on derivative instrument | (3 | ) | — |
| | 472 |
| — |
|
Loss on debt extinguishment | (137 | ) | — |
| | (299 | ) | — |
|
Other income (expense), net | 215 |
| (239 | ) | | 637 |
| (648 | ) |
Other income (expense), net | $ | 468 |
| $ | (15 | ) | | $ | 1,581 |
| $ | (185 | ) |
|
| | |
Third Quarter 2017 Form 10-Q12 | | 13First Quarter 2019 Form 10-Q |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
Accrued expenses and other liabilities
|
| | | | | | |
(dollars in thousands) | March 31, 2019 |
| December 31, 2018 |
|
Operating lease liabilities, current portion | $ | 16,755 |
| $ | — |
|
Accrued bonuses | 8,586 |
| 14,868 |
|
Accrued commissions and salaries | 8,546 |
| 9,934 |
|
Taxes payable | 4,843 |
| 6,204 |
|
Customer credit balances | 4,027 |
| 4,076 |
|
Unrecognized tax benefit | 3,609 |
| 2,719 |
|
Accrued vacation costs | 2,101 |
| 2,352 |
|
Accrued health care costs | 1,841 |
| 1,497 |
|
Other liabilities | 8,977 |
| 14,631 |
|
Total accrued expenses and other liabilities | 59,285 |
| 56,281 |
|
Less: Long-term portion | 4,302 |
| 9,388 |
|
Accrued expenses and other current liabilities | $ | 54,983 |
| $ | 46,893 |
|
The following table summarizes our debt balances and the related weighted average effective interest rates, which includes the effect of interest rate swap agreements.
|
| | | | | | | | | | | |
| Debt balance at | | | Weighted average effective interest rate at | |
(dollars in thousands) | March 31, 2019 |
| December 31, 2018 |
| | March 31, 2019 |
| December 31, 2018 |
|
Credit facility: | | | | | |
Revolving credit loans | $ | 298,200 |
| $ | 100,000 |
| | 3.90 | % | 4.13 | % |
Term loans | 286,875 |
| 288,750 |
| | 3.43 | % | 3.44 | % |
Total debt | 585,075 |
| 388,750 |
| | 3.67 | % | 3.61 | % |
Less: Unamortized discount and debt issuance costs | 1,507 |
| 1,626 |
| | | |
Less: Debt, current portion | 7,500 |
| 7,500 |
| | 3.75 | % | 3.77 | % |
Debt, net of current portion | $ | 576,068 |
| $ | 379,624 |
| | 3.67 | % | 3.61 | % |
|
| | | | | | | | | | | |
| Debt balance at | | | Weighted average effective interest rate at | |
(dollars in thousands) | September 30, 2017 |
| December 31, 2016 |
| | September 30, 2017 |
| December 31, 2016 |
|
Credit facility: | | | | | |
Revolving credit loans | $ | 39,900 |
| $ | 180,900 |
| | 3.38 | % | 2.36 | % |
Term loans | 298,125 |
| 162,969 |
| | 2.64 | % | 2.62 | % |
Other debt | 2,151 |
| — |
| | 4.50 | % | — | % |
Total debt | 340,176 |
| 343,869 |
| | 2.74 | % | 2.48 | % |
Less: Unamortized discount and debt issuance costs | 2,220 |
| 1,476 |
| | | |
Less: Debt, current portion | 8,576 |
| 4,375 |
| | 2.74 | % | 2.50 | % |
Debt, net of current portion | $ | 329,380 |
| $ | 338,018 |
| | 2.74 | % | 2.48 | % |
Financing for AcademicWorks acquisition
As discussed in Note 3 to these consolidated financial statements, on April 3, 2017 we acquired AcademicWorks for $52.1 million in cash, net of closing adjustments. We financed the acquisition through a draw down of a revolving credit loan under the 2014 Credit Facility (defined below).
2017 refinancing
We were previously party to a $325.0 million five-year credit facility entered into during February 2014. The credit facility included: a dollar and a designated currency revolving credit facility with sublimits for letters of credit and swingline loans (the “2014 Revolving Facility”) and a term loan facility (the “2014 Term Loan”), together, (the “2014 Credit Facility”).
In June 2017, we entered into a five-year $700.0 million senior credit facility (the “2017"2017 Credit Facility”Facility"). The 2017 Credit Facility includes a $400.0 million revolving credit facility (the “2017 Revolving Facility”) and a $300.0 million term loan facility (the “2017 Term Loan”). Upon closing we drew $300.0 million on a term loan and $110.0 million in revolving credit loans, which was usedAs of March 31, 2019, the required annual maturities related to repay all amounts outstanding under the 2014 Credit Facility, fees and expenses incurred in connection with the 2017 Credit Facility and for other general corporate purposes.were as follows: |
| | | |
Years ending December 31, (dollars in thousands) | Annual maturities |
|
2019 - remaining | $ | 5,625 |
|
2020 | 7,500 |
|
2021 | 7,500 |
|
2022 | 564,450 |
|
2023 | — |
|
Thereafter | — |
|
Total required maturities | $ | 585,075 |
|
Certain lenders of the 2014 Term Loan participated in the 2017 Term Loan and the change in the present value of our future cash flows to these lenders under the 2014 Term Loan and under the 2017 Term Loan was less than 10%. Accordingly, we accounted for the refinancing event for these lenders as a debt modification. Certain lenders of the 2014 Term Loan did not participate in the 2017 Term Loan. Accordingly, we accounted for the refinancing event for these lenders as a debt extinguishment. Certain lenders of the 2014 Revolving Facility participated in the 2017 Revolving Facility and provided increased borrowing capacities. Accordingly, we accounted for the refinancing event for these lenders as a debt modification. Certain lenders of the 2014 Revolving Facility did not participate in the 2017 Revolving Facility. Accordingly, we accounted for the refinancing event for these lenders as a debt extinguishment.
We recorded an insignificant loss on debt extinguishment related to the write-off of debt discount and deferred financing costs for the portions of the 2014 Credit Facility considered to be extinguished. This loss was recognized in the consolidated statements of comprehensive income within other income (expense), net.
In connection with our entry into the 2017 Credit Facility, we paid $3.1 million in financing costs, of which $1.0 million was capitalized in other assets and, together with a portion of the unamortized deferred financing costs from the 2014 Credit Facility and prior facilities, are being amortized into interest expense ratably over the term of the new facility. As of September 30, 2017, deferred financing costs totaling $1.3 million were included in other assets on our consolidated balance sheets. As of December 31, 2016, deferred financing costs included in other assets on our consolidated balance sheets were insignificant. We recorded aggregate financing costs of $1.8 million as a direct deduction from the carrying
|
| | |
14First Quarter 2019 Form 10-Q | | Third Quarter 2017 Form 10-Q13 |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
amountFinancing for 2019 acquisition
On January 2, 2019, we acquired YourCause for $157.7 million in cash, subject to certain adjustments set forth in the agreement and plan of our debt liability, which related to debt discount (fees paid to lenders) and debt issuance costs formerger. We financed the 2017 Term Loan.
Summary of the 2017 Credit Facility
The 2017 Revolving Facility includes (i)acquisition with a $50.0 million sublimit available for the issuance of standby letters of credit, (ii) a $50.0 million sublimit available for swingline loans, and (iii) a $100.0 million sublimit available for multicurrency borrowings.
The 2017 Credit Facility is secured by the stock and limited liability company interests of certain of our subsidiaries and any of our material domestic subsidiaries.
Amounts borrowed under the dollar tranche revolving credit loans and term loan under the 2017 Credit Facility bear interest at a rate per annum equal to, at our option, (a) a base rate equal to the highest of (i) the prime rate announced by Bank of America, N.A., (ii) the Federal Funds Rate plus 0.50% and (iii) the Eurocurrency Rate (which varies depending on the currency in which the loan is denominated) plus 1.00% (the “Base Rate”), in addition to a margin of 0.00% to 0.75%, or (b) Eurocurrency Rate plus a margin of 1.00% to 1.75%.
We also pay a quarterly commitment fee on the unused portion of the 2017 Revolving Facility from 0.15% to 0.25% per annum, depending on our net leverage ratio. At September 30, 2017, the commitment fee was 0.20%.
The term loan under the 2017 Credit Facility requires periodic principal payments. The balance of the term loan and any amounts drawn on the revolving credit loans are due upon maturity of the 2017 Credit Facility in June 2022. We evaluate the classification of our debt as current or non-current based on the required annual maturities of the 2017 Credit Facility.
The 2017 Credit Facility includes financial covenants related to the net leverage ratio and interest coverage ratio, as well as restrictions on our ability to declare and pay dividends and our ability to repurchase shares of our common stock. At September 30, 2017, we were in compliance with our debt covenants under the 2017 Credit Facility.
The 2017 Credit Facility also includes an option to request increases in the revolving commitments and/or request additional term loans in an aggregate principal amount of up to $200.0 million plus an amount, if any, such that the Net Leverage Ratio shall be no greater than 3.00 to 1.00.
Other debt
In September 2017, we entered into a two-year $2.2 million agreement to finance our purchase of software licenses and related services. The agreement is a non-interest bearing note requiring annual payments, with the first payment due in November 2017. Interest associated with the note is imputed at the rate we would incur for amounts borrowed under the 2017 Credit Facility.
As of September 30, 2017, the required annual maturities related to the 2017 Credit Facility and other debt were as follows: |
| | | |
Years ending December 31, (dollars in thousands) | Annual maturities |
|
2017 - remaining | $ | 2,950 |
|
2018 | 8,576 |
|
2019 | 7,500 |
|
2020 | 7,500 |
|
2021 | 7,500 |
|
Thereafter | 306,150 |
|
Total required maturities | $ | 340,176 |
|
|
| | |
Third Quarter 2017 Form 10-Q | | 15 |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
|
|
9. Derivative Instruments |
Cash flow hedges
We generally use derivative instruments to manage our variable interest rate risk. In March 2014, we entered into an interest rate swap agreement (the "March 2014 Swap Agreement"), which effectively converts portions of our variable rate debt under our credit facility to a fixed rate for the term of the swap agreement. The initial notional value of the March 2014 Swap Agreement was $125.0 million with an effective date beginning in March 2014. In March 2017, the notional value of the March 2014 Swap Agreement decreased to $75.0 million for the remaining term through February 2018. We designated the March 2014 Swap Agreement as a cash flow hedge at the inception of the contract.
In October 2015, we entered into an additional interest rate swap agreement (the "October 2015 Swap Agreement"), which effectively converts portions of our variable rate debt under our credit facility to a fixed rate for the term of the October 2015 Swap Agreement. The notional value of the October 2015 Swap Agreement was $75.0 million with an effective date beginning in October 2015 and maturing in February 2018. We designated the October 2015 Swap Agreement as a cash flow hedge at the inception of the contract.
In July 2017, we entered into an additional interest rate swap agreement (the "July 2017 Swap Agreement"), which effectively converts portions of our variable rate debt under our credit facility to a fixed rate for the term of the swap agreement.July 2017 Swap Agreement. The notional value of the July 2017 Swap Agreement was $150.0 million with an effective date beginning in July 2017 through July 2021. We designated the July 2017 Swap Agreement as a cash flow hedge at the inception of the contract.
Undesignated contracts
In June 2017,February 2018, we entered into an additional interest rate swap agreement (the "February 2018 Swap Agreement"), which effectively converts portions of our variable rate debt under our credit facility to a foreign currency option contract to hedge our exposure to currency fluctuations in connection with our acquisitionfixed rate for the term of JustGiving because the purchase price was denominated in British Pounds.February 2018 Swap Agreement. The notional value of the instrumentFebruary 2018 Swap Agreement was £100.0$50.0 million with an effective date beginning in February 2018 through June 2017 and maturing in September 2017.2021. We settleddesignated the foreign currency option contract in September 2017. We did not designate the foreign currency option contractFebruary 2018 Swap Agreement as a cash flow hedge for accounting purposes since it involved a business combination. As such, changes inat the fair value of this derivative are recognized currently in earnings. The insignificant premium paid for this option and the $1.0 million in proceeds from the settlement are shown within cash flows from investing activities in our consolidated statements of cash flows.
As the closing date of our acquisition of JustGiving extended beyond the settlement dateinception of the foreign currency option contract, we entered into a foreign currency forward contract in September 2017 with settlement in October 2017. The notional value of the instrument was £103.5 million. We did not designate the foreign currency forward contract as a cash flow hedge for accounting purposes since it involved a business combination. As such, changes in the fair value of this derivative are recognized currently in earnings.contract.
|
| | |
16 | | Third Quarter 2017 Form 10-Q |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
The fair values of our derivative instruments were as follows as of: |
| | | | | | | | | | | | | | | |
| | Asset Derivatives | | | Liability Derivatives |
(dollars in thousands) | Balance sheet location | March 31, 2019 |
| December 31, 2018 |
| | Balance sheet location | March 31, 2019 |
| December 31, 2018 |
|
Derivative instruments designated as hedging instruments: | | | | | | | |
Interest rate swaps, long-term portion | Other assets | 1,239 |
| 2,260 |
| | Other liabilities | 433 |
| 186 |
|
Total derivative instruments designated as hedging instruments | | $ | 1,239 |
| $ | 2,260 |
| | | $ | 433 |
| $ | 186 |
|
|
| | | | | | | | | | | | | | | |
| | Asset Derivatives | | | Liability Derivatives |
(dollars in thousands) | Balance sheet location | September 30, 2017 |
| December 31, 2016 |
| | Balance sheet location | September 30, 2017 |
| December 31, 2016 |
|
Derivative instruments designated as hedging instruments: | | | | | | | |
Interest rate swaps, current portion | Prepaid expenses and other current assets | $ | 223 |
| $ | — |
| | Accrued expenses and other current liabilities | $ | — |
| $ | — |
|
Interest rate swaps, long-term portion | Other assets | — |
| 206 |
| | Other liabilities | 328 |
| 163 |
|
Total derivative instruments designated as hedging instruments | | $ | 223 |
| $ | 206 |
| | | $ | 328 |
| $ | 163 |
|
| | | | | | | |
Derivative instruments not designated as hedging instruments: | |
| | | | | |
Foreign currency forward contracts | Prepaid expenses and other current assets | $ | — |
| $ | — |
| | Accrued expenses and other current liabilities | $ | 41 |
| $ | — |
|
Total derivative instruments not designated as hedging instruments | | $ | — |
| $ | — |
| | | $ | 41 |
| $ | — |
|
|
| | | | | | |
Total derivative instruments | | $ | 223 |
| $ | 206 |
| | | $ | 369 |
| $ | 163 |
|
The effects of derivative instruments in cash flow hedging relationships were as follows: |
| | | | | | | |
| Gain (loss) recognized in accumulated other comprehensive loss as of |
| Location of gain (loss) reclassified from accumulated other comprehensive loss into income | Gain (loss) reclassified from accumulated other comprehensive loss into income |
|
(dollars in thousands) | March 31, 2019 |
| Three months ended March 31, 2019 |
|
Interest rate swaps | $ | 806 |
| Interest expense | $ | 229 |
|
| | | |
| March 31, 2018 |
| | Three months ended March 31, 2018 |
|
Interest rate swaps | $ | 2,748 |
| Interest expense | $ | 20 |
|
|
| | | | | | | | | | | |
| Gain (loss) recognized in accumulated other comprehensive loss as of |
| Location of gain (loss) reclassified from accumulated other comprehensive loss into income | Gain (loss) reclassified from accumulated other comprehensive loss into income | |
(dollars in thousands) | September 30, 2017 |
| Three months ended September 30, 2017 |
| | Nine months ended September 30, 2017 |
|
Interest rate swaps | $ | (105 | ) | Interest expense | $ | (88 | ) | | $ | (192 | ) |
| | | | | |
| September 30, 2016 |
| | Three months ended September 30, 2016 |
| | Nine months ended September 30, 2016 |
|
Interest rate swaps | $ | (654 | ) | Interest expense | $ | (265 | ) | | $ | (875 | ) |
Our policy requires that derivatives used for hedging purposes be designated and effective as a hedge of the identified risk exposure at the inception of the contract. Accumulated other comprehensive income (loss) includes unrealized gains or losses from the change in fair value measurement of our derivative instruments each reporting period and the related income tax expense or benefit. Changes in the fair value measurements of the derivative instruments and the related income tax expense or benefit are reflected as adjustments to accumulated other comprehensive income (loss) until the actual hedged expense is incurred or until the hedge is terminated at which point the unrealized gain (loss) is reclassified from accumulated other comprehensive income (loss) to current earnings. The estimated accumulated other comprehensive income as of September 30, 2017March 31, 2019 that is expected to be reclassified into earnings within the next twelve months is insignificant.$0.7 million. There were no ineffective portions of our interest rate swap derivatives during the ninethree months ended September 30, 2017 March 31, 2019
|
| | |
14 | | First Quarter 2019 Form 10-Q |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
and 2016.2018. See Note 13 to these consolidated financial statements for a summary of the changes in accumulated other comprehensive income (loss) by component.
|
| | |
Third Quarter 2017 Form 10-Q | | 17 |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
We did not have any undesignated derivative instruments during 2016. The effects of undesignated derivative instruments during the three and nine months ended September 30, 2017 were as follows: |
| | | | | | | | |
| Location of gain (loss) recognized in income on derivative | Gain (loss) recognized in income | |
(dollars in thousands) | Three months ended September 30, 2017 |
| | Nine months ended September 30, 2017 |
|
Foreign currency option contracts | Other income (expense), net | $ | 38 |
| | $ | 513 |
|
Foreign currency forward contracts | Other income (expense), net | $ | (41 | ) | | $ | (41 | ) |
Total (loss) gain(1) | | $ | (3 | ) | | $ | 472 |
|
| |
(1) | The individual amounts for each year may not sum to total gain (loss) due to rounding. |
|
|
10. Commitments and Contingencies |
Leases
TotalWe have operating leases for corporate offices, subleased offices and certain equipment and furniture. Our leases have remaining lease terms of less than 1 year to 20 years, some of which include options to extend the leases for up to 5 years. We do not have lease agreements with residual value guarantees, sale leaseback terms or material restrictive covenants.
In May 2016, we entered into a lease agreement for our New Headquarters Facility in Charleston, South Carolina. There are two phases for construction of the New Headquarters Facility. Phase One included a building with approximately 172,000 rentable square feet, which we began using in April 2018. The lease agreement also grants us a Phase Two option to request that the landlord construct and lease to us a second office building and related improvements. The lease agreement expires in April 2038 and provides for four renewal periods of five years each at a base rent expense was $3.8 millionequal to the then prevailing market rate for comparable buildings.
We continue to lease our former headquarters facility, now called our Customer Operations Center, in Charleston, South Carolina. The lease expires in October 2023 and $3.1 millionhas two five-year renewal options. We also have a lease for office space in Austin, Texas which expires in September 2023 and has two five-year renewal options.
For each of the leases discussed above, we have not included the renewal options in the lease terms for calculating the lease liability as the renewal options allow us to maintain operational flexibility and we are not reasonably certain we will exercise these options at this time.
As of March 31, 2019, we had additional operating leases, primarily for office space, that have not yet commenced with future rent payments of $9.3 million. These operating leases will commence during fiscal year 2019 with lease terms of two to four years.
The components of lease expense for the three months ended September 30, 2017 and 2016, respectively, and $11.9 million and $8.6 millionMarch 31, 2019, were as follows:
|
| | | |
| Three months ended March 31, |
|
(dollars in thousands) | 2019 |
|
Operating lease cost(1) | $ | 6,001 |
|
Variable lease cost(2) | 991 |
|
Sublease income | (705 | ) |
Net lease cost | $ | 6,287 |
|
| |
(1) | Includes short-term lease costs, which are immaterial. |
| |
(2) | Includes costs for operating lease ROU assets that vary due to changes in facts or circumstances occurring after the commencement date, other than the passage of time. For example, the base rent of our Customer Operations Center (discussed above) escalates annually at a rate equal to the change in the consumer price index, as defined in the agreement, but not to exceed 5.5% in any year. Accordingly, variable lease costs for this lease are determined as the difference between the actual rent payment for a period and the rent payment expected for that period as of our adoption of ASU 2016-02 on January 1, 2019. |
During the ninethree months ended September 30, 2017 and 2016, respectively. The quarterly South Carolina state incentive paymentsMarch 31, 2019, we receivedrecorded $1.3 million in impairments of operating lease ROU assets associated with certain leased office spaces we ceased using as a resultpart of locating our headquarters facility in Berkeley County, South Carolina, ended in the fourth quarter of 2016.facilities optimization restructuring. These amountsimpairments were recorded as a reductionrestructuring expense on our consolidated statements of comprehensive income. See Note 15 to these consolidated financial statements for additional details regarding our facilities optimization restructuring.
Total rent expense upon receiptas determined under ASC 840 for the three months ended March 31, 2018 was $4.5 million.
|
| | |
First Quarter 2019 Form 10-Q | | 15 |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
Maturities of our operating lease liabilities as of March 31, 2019 were as follows:
|
| | | |
Years ending December 31, (dollars in thousands) | Operating leases(1) |
|
2019 – remaining | $ | 17,590 |
|
2020 | 21,616 |
|
2021 | 18,155 |
|
2022 | 16,405 |
|
2023 | 14,613 |
|
Thereafter | 81,958 |
|
Total lease payments | 170,337 |
|
Less: Amount representing interest | 50,702 |
|
Present value of future payments | $ | 119,635 |
|
| |
(1) | Our maturities of our operating lease liabilities do not include payments related to Phase Two of our New Headquarters Facility, as that option had not been exercised as of March 31, 2019. |
As determined under ASC 840, the future minimum lease payments related to lease agreements with a remaining noncancelable term in excess of one year, net of related sublease commitments and lease incentives, as of December 31, 2018 were insignificantas follows:
|
| | | |
Years ending December 31, (dollars in thousands) | Operating leases |
|
2019 | $ | 20,808 |
|
2020 | 20,274 |
|
2021 | 16,924 |
|
2022 | 14,391 |
|
2023 | 12,923 |
|
Thereafter | 81,755 |
|
Total minimum lease payments | $ | 167,075 |
|
Our ROU assets and lease liabilities are included in the following line items in our consolidated balance sheet:
|
| | | |
(dollars in thousands) | March 31, 2019 |
|
Operating leases | |
Operating lease right-of-use assets | $ | 110,485 |
|
| |
Accrued expenses and other current liabilities | $ | 16,755 |
|
Operating lease liabilities, net of current portion | 102,880 |
|
Total operating lease liabilities | $ | 119,635 |
|
As of March 31, 2019, the weighted average remaining lease terms and discount rates were as follows:
|
| | |
(dollars in thousands) | March 31, 2019 |
|
Operating leases | |
Weighted average remaining lease term (years) | 13.0 |
|
Weighted average discount rate | 5.96 | % |
|
| | |
16 | | First Quarter 2019 Form 10-Q |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
Supplemental cash flow information related to leases during the three months ended September 30, 2016 and $2.2 million during the nine months ended September 30, 2016.March 31, 2019, was as follows:
|
| | | |
| Three months ended March 31, |
|
(dollars in thousands) | 2019 |
|
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows from operating leases | $ | 5,914 |
|
Right-of-use assets obtained in exchange for lease obligations (non-cash): | |
Operating leases | 108,330 |
|
Other commitments
The term loans under the 2017 Credit Facility require periodic principal payments. The balance of the term loans and any amounts drawn on the revolving credit loans are due upon maturity of the 2017 Credit Facility in June 2022.
We have contractual obligations for third-party technology used in our solutions and for other services we purchase as part of our normal operations. In certain cases, these arrangements require a minimum annual purchase commitment by us. As of September 30, 2017,March 31, 2019, the remaining aggregate minimum purchase commitment under these arrangements was approximately $51.9$111.4 million through 2021.2023.
Solution and service indemnifications
In the ordinary course of business, we provide certain indemnifications of varying scope to customers against claims of intellectual property infringement made by third parties arising from the use of our solutions or services. If we determine that it is probable that a loss has been incurred related to solution or service indemnifications, any such loss that could be reasonably estimated would be recognized. We have not identified any losses and, accordingly, we have not recorded a liability related to these indemnifications.
Legal proceedings
We are subject to legal proceedings and claims that arise in the ordinary course of business. We make a provision for a loss contingency when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Unless otherwise specifically disclosed in this note, we have determined as of September 30, 2017,March 31, 2019, that no provision for liability nor disclosure is required related to any claim against us because (a) there is not a reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim; (b) a reasonably possible loss or range of loss cannot be estimated; or (c) such estimate is immaterial.
All legal costs associated with litigation are expensed as incurred. Litigation is inherently unpredictable. However, we believe that we have valid defenses with respect to the legal matters pending against us. It is possible, nevertheless, that our consolidated financial position, results of operations or cash flows could be negatively affected in any particular period by an unfavorable resolution of one or more of such proceedings, claims or investigations.
|
| | |
18First Quarter 2019 Form 10-Q | | Third Quarter 2017 Form 10-Q17 |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
Our income tax provisionbenefit and effective income tax rates, including the effects of period-specific events, were:
|
| | | | | | |
| Three months ended March 31, | |
(dollars in thousands) | 2019 |
| 2018 |
|
Income tax benefit | $ | (1,834 | ) | $ | (3,527 | ) |
Effective income tax rate | 62.0 | % | (24.8 | )% |
|
| | | | | | | | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | |
(dollars in thousands) | 2017 |
| 2016 |
| | 2017 |
| 2016 |
|
Income tax provision | $ | 2,793 |
| $ | 1,950 |
| | $ | 2,964 |
| $ | 5,323 |
|
Effective income tax rate | 18.2 | % | 17.9 | % | | 7.8 | % | 18.0 | % |
We compute the year-to-date income tax provision by applying the estimated annual effective tax rate to the year-to-date pre-tax income or loss and adjusting for discrete tax items in the period. Our effective income tax rate can be more or less volatile based on the amount of pre-tax income or loss. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower. The increase in our effective income tax rate during the three months ended September 30, 2017 remained relatively unchangedMarch 31, 2019, when compared to the same period in 2016. 2018, was partially attributable to the impact of discrete tax benefits on a pre-tax loss for the quarter as compared to pre-tax income for the same period in 2018.
The decreaseincrease in our effective income tax rate during the ninethree months ended September 30, 2017,March 31, 2019, when compared to the same period in 2016,2018, was primarilyalso due to a $9.0 milliondecrease in the discrete tax benefit to income tax expense relating to stock-based compensation items, as compared to a $4.3 million discrete tax benefit for the same period in 2016.compensation. The increase in the discrete tax benefit for the nine months ended September 30, 2017, as compared to the same period in 2016,impact was attributable to an increasea decrease in the market price for shares of our common stock, when compared to the same period in 2018, as reported by the NASDAQNasdaq Stock Market LLC ("NASDAQ"Nasdaq"), as well as an increase in the number of stock awards that vested and were exercised.. Most of our equity awards are granted during our first quarter and vest in subsequent years during the same quarter.
|
|
12. Stock-based Compensation |
Stock-based compensation expense is allocated to cost of revenue and operating expenses on the consolidated statements of comprehensive income based on where the associated employee’s compensation is recorded. The following table summarizes stock-based compensation expense:
|
| | | | | | |
| Three months ended March 31, | |
(dollars in thousands) | 2019 |
| 2018 |
|
Included in cost of revenue: | | |
Cost of recurring | $ | 512 |
| $ | 452 |
|
Cost of one-time services and other | 462 |
| 643 |
|
Total included in cost of revenue | 974 |
| 1,095 |
|
Included in operating expenses: | | |
Sales, marketing and customer success | 2,911 |
| 1,825 |
|
Research and development | 2,674 |
| 2,136 |
|
General and administrative | 7,167 |
| 6,036 |
|
Total included in operating expenses | 12,752 |
| 9,997 |
|
Total stock-based compensation expense | $ | 13,726 |
| $ | 11,092 |
|
|
| | | | | | | | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | |
(dollars in thousands) | 2017 |
| 2016 |
| | 2017 |
| 2016 |
|
Included in cost of revenue: | | | | | |
Cost of subscriptions | $ | 331 |
| $ | 318 |
| | $ | 963 |
| $ | 904 |
|
Cost of maintenance | 103 |
| 137 |
| | 294 |
| 391 |
|
Cost of services and other | 500 |
| 461 |
| | 1,418 |
| 1,308 |
|
Total included in cost of revenue | 934 |
| 916 |
| | 2,675 |
| 2,603 |
|
Included in operating expenses: | | | | | |
Sales, marketing and customer success | 1,686 |
| 1,055 |
| | 4,906 |
| 2,972 |
|
Research and development | 2,093 |
| 1,674 |
| | 5,877 |
| 4,874 |
|
General and administrative | 6,213 |
| 5,173 |
| | 17,597 |
| 14,556 |
|
Total included in operating expenses | 9,992 |
| 7,902 |
| | 28,380 |
| 22,402 |
|
Total stock-based compensation expense | $ | 10,926 |
| $ | 8,818 |
| | $ | 31,055 |
| $ | 25,005 |
|
|
| | |
Third Quarter 2017 Form 10-Q18 | | 19First Quarter 2019 Form 10-Q |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
Dividends
Our Board of Directors has adopted a dividend policy, which provides for the distribution to stockholders of a portion of cash generated by us that is in excess of operational needs and capital expenditures. The 2017 Credit Facility limits the amount of dividends payable and certain state laws restrict the amount of dividends distributed.
In February 2017,2019, our Board of Directors approved an annual dividend rate of $0.48 per share to be made in quarterly payments. Dividend payments are not guaranteed and our Board of Directors may decide, in its absolute discretion, at any time and for any reason, not to declare and pay further dividends. The following table provides information with respect to quarterly dividends of $0.12 per share paid on common stock during the ninethree months ended September 30, 2017.March 31, 2019. |
| | | | | | |
Declaration Date | Dividend per Share |
| Record Date | | Payable Date |
February 8, 2017 | $ | 0.12 |
| February 28 | | March 15 |
May 1, 2017 | $ | 0.12 |
| May 26 | | June 15 |
July 31, 2017 | $ | 0.12 |
| August 28 | | September 15 |
|
| | | | | | |
Declaration Date | Dividend per Share |
| Record Date | | Payable Date |
February 6, 2019 | $ | 0.12 |
| February 27 | | March 15 |
On October 25, 2017,April 30, 2019, our Board of Directors declared a fourthsecond quarter dividend of $0.12 per share payable on December 15, 2017June 14, 2019 to stockholders of record on NovemberMay 28, 2017.2019.
Changes in accumulated other comprehensive lossincome (loss) by component
The changes in accumulated other comprehensive lossincome (loss) by component, consisted of the following: |
| | | | | | |
| Three months ended March 31, | |
(dollars in thousands) | 2019 |
| 2018 |
|
Accumulated other comprehensive loss, beginning of period | $ | (5,110 | ) | $ | (642 | ) |
By component: | | |
Gains and losses on cash flow hedges: | | |
Accumulated other comprehensive income balance, beginning of period | $ | 1,498 |
| $ | 748 |
|
Other comprehensive (loss) income before reclassifications, net of tax effects of $276 and $(392) | (763 | ) | 1,094 |
|
Amounts reclassified from accumulated other comprehensive loss to interest expense | (229 | ) | (20 | ) |
Tax benefit included in provision for income taxes | 60 |
| 5 |
|
Total amounts reclassified from accumulated other comprehensive loss | (169 | ) | (15 | ) |
Net current-period other comprehensive (loss) income | (932 | ) | 1,079 |
|
Reclassification upon early adoption of ASU 2018-02 | — |
| 167 |
|
Accumulated other comprehensive income balance, end of period | $ | 566 |
| $ | 1,994 |
|
Foreign currency translation adjustment: | | |
Accumulated other comprehensive loss balance, beginning of period | $ | (6,608 | ) | $ | (1,390 | ) |
Translation adjustments | 4,590 |
| 6,437 |
|
Accumulated other comprehensive (loss) income balance, end of period | (2,018 | ) | 5,047 |
|
Accumulated other comprehensive (loss) income, end of period | $ | (1,452 | ) | $ | 7,041 |
|
|
| | |
First Quarter 2019 Form 10-Q | | 19 |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
|
| | | | | | | | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | |
(dollars in thousands) | 2017 |
| 2016 |
| | 2017 |
| 2016 |
|
Accumulated other comprehensive loss, beginning of period | $ | (558 | ) | $ | (1,640 | ) | | $ | (457 | ) | $ | (825 | ) |
By component: | | | | | |
Gains and losses on cash flow hedges: | | | | | |
Accumulated other comprehensive income (loss) balance, beginning of period | $ | 203 |
| $ | (806 | ) | | $ | 25 |
| $ | (19 | ) |
Other comprehensive (loss) income before reclassifications, net of tax effects of $209, $(161), $135 and $589 | (320 | ) | 248 |
| | (205 | ) | (909 | ) |
Amounts reclassified from accumulated other comprehensive loss to interest expense | 88 |
| 265 |
| | 192 |
| 875 |
|
Tax benefit included in provision for income taxes | (35 | ) | (104 | ) | | (76 | ) | (344 | ) |
Total amounts reclassified from accumulated other comprehensive loss | 53 |
| 161 |
| | 116 |
| 531 |
|
Net current-period other comprehensive (loss) income | (267 | ) | 409 |
| | (89 | ) | (378 | ) |
Accumulated other comprehensive loss balance, end of period | $ | (64 | ) | $ | (397 | ) | | $ | (64 | ) | $ | (397 | ) |
Foreign currency translation adjustment: | | | | | |
Accumulated other comprehensive loss balance, beginning of period | $ | (761 | ) | $ | (834 | ) | | $ | (482 | ) | $ | (806 | ) |
Translation adjustments | (188 | ) | 289 |
| | (467 | ) | 261 |
|
Accumulated other comprehensive loss balance, end of period | (949 | ) | (545 | ) | | (949 | ) | (545 | ) |
Accumulated other comprehensive loss, end of period | $ | (1,013 | ) | $ | (942 | ) | | $ | (1,013 | ) | $ | (942 | ) |
Transaction price allocated to the remaining performance obligations
As of March 31, 2019, approximately $739 million of revenue is expected to be recognized from remaining performance obligations. We expect to recognize revenue on approximately 60% of these remaining performance obligations over the next 12 months, with the remainder recognized thereafter.
We applied the practical expedient in ASC 606-10-50-14 and have excluded the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less (one-time services); and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed (payment services and usage).
Contract balances
Our contract assets as of March 31, 2019 and December 31, 2018 were insignificant. Our opening and closing balances of deferred revenue were as follows:
|
| | | | |
(in thousands) | March 31, 2019 |
| December 31, 2018 |
|
Total deferred revenue | 285,372 |
| 298,555 |
|
The modest decrease in deferred revenue during the three months ended March 31, 2019 was primarily due to less customer contract renewals in our first quarter due to the timing of customer budget cycles. Historically, we have an increase in customer contract renewals near the beginning of our third quarter resulting in lower deferred revenue at the end of our first quarter. The amount of revenue recognized during the three months ended March 31, 2019 that was included in the deferred revenue balance at the beginning of the period was approximately $131 million. The amount of revenue recognized during the three months ended March 31, 2019 from performance obligations satisfied in prior periods was insignificant.
Disaggregation of revenue
We sell our cloud-based solutions and related services in two primary geographical markets: to customers in the United States, and to customers located outside of the United States. The following table presents our revenue by geographic area based on the address of our customers:
|
| | | | | | |
| Three months ended March 31, | |
(dollars in thousands) | 2019 |
| 2018 |
|
United States | $ | 188,126 |
| $ | 175,923 |
|
Other countries | 27,704 |
| 28,261 |
|
Total revenue | $ | 215,830 |
| $ | 204,184 |
|
The General Markets Group ("GMG"), the Enterprise Markets Group ("EMG"), and the International Markets Group ("IMG") comprise our go-to-market organizations. The following is a description of each market group:
The GMG focuses on sales primarily to all K-12 private schools, faith-based and arts and cultural organizations, as well as emerging and mid-sized prospects in the U.S.;
The EMG focuses on sales primarily to all healthcare and higher education institutions, corporations and foundations, as well as large and/or strategic prospects in the U.S.; and
The IMG focuses on sales primarily to all prospects and customers outside of the U.S.
|
| | |
20 | | ThirdFirst Quarter 20172019 Form 10-Q |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
The following table presents our revenue by market group:
|
| | | | | | |
| Three months ended March 31, | |
(dollars in thousands) | 2019 |
| 2018(1) |
|
GMG | $ | 92,515 |
| $ | 88,268 |
|
EMG | 95,165 |
| 86,851 |
|
IMG | 28,122 |
| 28,999 |
|
Other | 28 |
| 66 |
|
Total revenue | $ | 215,830 |
| $ | 204,184 |
|
| |
(1) | Beginning in the first quarter of 2019, all of our Canadian operations are included in IMG. We have recast our revenue by market group for the three months endedMarch 31, 2018, to present them on a consistent basis with the current year. |
|
|
14. Segment Information15. Restructuring |
During the first quarter of 2017, in an effort to further our organizational objectives, including improved operating efficiency, customer outcomes and employee satisfaction, we changed the namesinitiated a multi-year plan to consolidate and relocate some of our reportable segments. However, there wasexisting offices to highly modern and more collaborative workspaces with short-term financial commitments. These workspaces are also more centrally located for our employees and closer to our customers and prospects. Restructuring costs incurred prior to our adoption of ASU 2016-02 on January 1, 2019 consisted primarily of costs to terminate lease agreements, contractual lease payments, net of estimated sublease income, upon vacating space as part of the plan, as well as insignificant costs to relocate affected employees and write-off facilities-related fixed assets that we would no change inlonger use.
Upon adoption of ASU 2016-02 at January 1, 2019, we reduced our operating lease ROU assets recognized at transition by the determinationcarrying amounts of our reportable segments or our reporting units atthe restructuring liabilities for certain leased office spaces that time. Aswe ceased using prior to December 31, 2018. See additional details below.
Restructuring costs incurred during the three months ended March 31, 2019 consisted primarily of September 30, 2017, our reportable segments wereoperating lease ROU asset impairment costs and, to a lesser extent, write-offs of facilities-related fixed assets that we will no longer use.
We currently expect to incur before-tax restructuring costs associated with these activities of between $8.5 million and $9.5 million, of which $7.3 million has been incurred as of March 31, 2019, with substantially all of the General Markets Group ("GMG"),remaining costs expected to be incurred by the Emerging Markets Group ("EMG"), and the International Markets Group ("IMG"). end of 2019.
The following is a descriptiontable summarizes our facilities optimization restructuring costs as of each reportable segment:March 31, 2019: |
| | | | | | | | | | | |
| Cumulative costs incurred as of |
| | Costs incurred during the three months ended(1) |
| | Cumulative costs incurred as of |
|
(in thousands) | December 31, 2018 |
| | March 31, 2019 | |
By component: | | | | | |
Contract termination costs | $ | 4,176 |
| | $ | 1,392 |
| | $ | 5,568 |
|
Other costs | 1,208 |
| | 561 |
| | 1,769 |
|
Total | $ | 5,384 |
| | $ | 1,953 |
| | $ | 7,337 |
|
The GMG is generally focused on sales to all emerging and mid-sized prospects and customers in North America;
The EMG is generally focused on sales to all large and/or strategic prospects and customers in North America; and
The IMG is focused on marketing, sales, delivery and support to all prospects and customers outside of North America.
Our chief operating decision maker is our chief executive officer ("CEO"). Currently, our CEO reviews financial information presented on an operating segment basis for the purposes of making certain operating decisions and assessing financial performance. The CEO uses internal financial reports that provide segment revenues and operating income, as adjusted, which excludes stock-based compensation expense, amortization expense, depreciation expense, research and development expense and certain corporate sales, marketing, general and administrative expenses. Segment operating income, as adjusted, includes direct, controllable costs related to the sale of our solutions and services, and our customer success program.
The CEO does not review any segment balance sheet information. Summarized reportable segment financial results, were as follows:
|
| | | | | | | | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | |
(dollars in thousands) | 2017 |
| 2016 |
| | 2017 |
| 2016 |
|
Revenue by segment: | | | | | |
GMG | $ | 102,838 |
| $ | 97,621 |
| | $ | 296,954 |
| $ | 279,543 |
|
EMG | 81,836 |
| 74,351 |
| | 243,713 |
| 220,887 |
|
IMG | 10,846 |
| 11,030 |
| | 30,632 |
| 31,926 |
|
Other(1) | (7 | ) | 61 |
| | 30 |
| 154 |
|
Total revenue | $ | 195,513 |
| $ | 183,063 |
| | $ | 571,329 |
| $ | 532,510 |
|
Segment operating income, as adjusted(2): | | | | | |
GMG | $ | 49,971 |
| $ | 46,540 |
| | $ | 143,658 |
| $ | 134,408 |
|
EMG | 44,375 |
| 38,696 |
| | 130,887 |
| 113,186 |
|
IMG | 2,888 |
| 1,064 |
| | 7,084 |
| 3,126 |
|
Other(1) | (58 | ) | (157 | ) | | (113 | ) | (109 | ) |
| 97,176 |
| 86,143 |
| | 281,516 |
| 250,611 |
|
Less: | | | | | |
Corporate unallocated costs(3) | (57,575 | ) | (53,236 | ) | | (173,102 | ) | (156,013 | ) |
Stock-based compensation costs | (10,926 | ) | (8,818 | ) | | (31,055 | ) | (25,005 | ) |
Amortization expense | (10,710 | ) | (10,549 | ) | | (32,067 | ) | (31,817 | ) |
Interest expense | (3,092 | ) | (2,641 | ) | | (8,685 | ) | (8,037 | ) |
Other income (expense), net | 468 |
| (15 | ) | | 1,581 |
| (185 | ) |
Income before provision for income taxes | $ | 15,341 |
| $ | 10,884 |
| | $ | 38,188 |
| $ | 29,554 |
|
| |
(1) | Other includes revenue and the related costs from the saleIncludes $1.3 million of solutions and services not directly attributable to a reportable segment. |
| |
(2) | Segment operating income, as adjusted, includes direct, controllable costs related to the sale of our solutions and service, and our customer success program. |
| |
(3) | Corporate unallocated costs include research and development, depreciation expense, and certain corporate sales, marketing, general and administrative expenses.lease ROU asset impairment costs. |
|
| | |
ThirdFirst Quarter 20172019 Form 10-Q | | 21 |
Blackbaud, Inc.
Notes to consolidated financial statements (continued)
(Unaudited)
In lightThe change in our liability related to our facilities optimization restructuring during the three months ended March 31, 2019, consisted of the ongoing and anticipated increasing centralization of our operations, including without limitation marketing, customer support, customer success and professional services, we are evaluating whether changes may need to be made to our internal reporting structure to better support and assess the operations of our business going forward. If changes are made, we will assess the resulting effect on our reportable segments, operating segments and reporting units, if any.following: |
| | | | | | | | | | | | | | | | | | | |
| Accrued at |
| | Increases for incurred costs(1) |
| | Written off upon adoption of ASU 2016-02(2) |
| | Costs paid |
| | Accrued at |
|
(in thousands) | December 31, 2018 |
| | | | | March 31, 2019 |
|
By component: | | | | | | | | | |
Contract termination costs | $ | 1,865 |
| | $ | 1,392 |
| | $ | (1,656 | ) | | $ | (1,536 | ) | | $ | 65 |
|
Other costs | 50 |
| | 561 |
| | — |
| | (611 | ) | | — |
|
Total | $ | 1,915 |
| | $ | 1,953 |
| | $ | (1,656 | ) | | $ | (2,147 | ) | | $ | 65 |
|
| |
(1) | Includes $1.3 million of operating lease ROU asset impairment costs. |
| |
15. Subsequent Events(2) | Upon adoption of ASU 2016-02 at January 1, 2019, we reduced our operating lease ROU assets recognized at transition by the carrying amounts of the restructuring liabilities for certain leased office spaces that we ceased using prior to December 31, 2018. |
JustGiving acquisition
On October 2, 2017, Blackbaud Global Limited (“Blackbaud Global”), a United Kingdom limited liability company and wholly-owned subsidiary of ours, acquired the entire issued share capital, including all voting equity interests, of Giving Limited, a United Kingdom private limited company doing business as “JustGiving” for an aggregate purchase price of £95.0 million, or approximately $127.4 million, in cash, subject to certain adjustments set forth in the stock purchase agreement. JustGiving is a market leading social platform for giving, and the acquisition is expected to enhance our capabilities to serve both individual donors and nonprofits, expanding the peer-to-peer fundraising capabilities we offer today. As a result of the acquisition, JustGiving has become a wholly-owned subsidiary of ours. We will include the operating results of JustGiving as well as the net assets acquired and liabilities assumed in our consolidated financial statements from the date of acquisition. During the three and nine months ended September 30, 2017, we incurred acquisition-related expenses associated with the acquisition of JustGiving of $0.7 million and $2.2 million, respectively, which are recorded in general and administrative expense. Due to the timing of the transaction, the initial accounting for this acquisition, including the measurement of assets acquired, liabilities assumed and goodwill, is not complete and is pending detailed analyses of the facts and circumstances that existed as of the October 2, 2017 acquisition date.
On October 2, 2017, we borrowed $138.7 million pursuant to a revolving credit loan under the 2017 Credit Facility to finance the acquisition of JustGiving. Following the borrowing, approximately $178.6 million was outstanding under the revolving credit loans with approximately $169.8 million of available borrowing capacity under the 2017 Credit Facility.
|
| | |
22 | | ThirdFirst Quarter 20172019 Form 10-Q |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. The following discussion and analysis presents financial information denominated in millions of dollars which can lead to differences from rounding when compared to similar information contained in the consolidated financial statements and related notes which are primarily denominated in thousands of dollars.
We are the world’s leading cloud software company powering social good. Serving the entire social good community—nonprofits, foundations, corporations,companies, education institutions, healthcare institutionsorganizations and individual change agents—we connect and empower organizations to increase their impact through cloud software, services, expertise and data intelligence. Our portfolio is tailored to the unique needs of vertical markets, with solutions for fundraising and CRM, marketing, advocacy, peer-to-peer fundraising, corporate social responsibility, school management, ticketing, grantmaking, financial management, payment processing and analytics. Serving the industry for more than three decades, we are headquartered in Charleston, South Carolina and have operations in the United States, Australia, Canada, Costa Rica and the United Kingdom. As of September 30, 2017, we had approximately 35,000 customers.
Our revenue is primarily generated from the following sources: (i) charging for the use of our software solutions in cloud-based and hosted environments; (ii) providing transactionpayment and payment processingtransaction services; (iii) providing software maintenance and support services; and (iv) providing professional services, including implementation, consulting, training, consulting, analytic and other services; and (iv) providing software maintenance and support services.
During the thirdfirst quarter of 2017,2019, we continued to execute on our four-point growth strategy targeted to drive an extended period of quality enhancement, solution and service innovation, andquality enhancement, increasing operating efficiency and financial performance:
Four-Point Growth Strategy
| |
1. | Deliver Integrated and Open Solutions in the Cloud |
During the first quarter of 2019, we announced the U.S. launch of Blackbaud Peer-to-Peer Fundraising, powered by JustGiving. This new solution enables all social good organizations to empower supporters to fundraise on their behalf. The launch elevates our peer-to-peer portfolio by providing our best-in-class cloud solution at no subscription cost.
We also introduced Blackbaud Purchase Cards integrated with Expense Management in Financial Edge NXT providing social good organizations with an efficient and convenient alternative to traditional procurement methods and paper-based payables processes such as checks, purchase orders, and invoices. The result for our customers is decentralized daily purchasing while implementing and monitoring the right controls in a scalable way, enabling them to realize benefits such as reductions in procurement cycle time, increased savings through supplier discounts, and working capital and cash flow improvements.
We continue to transitionprogress in our businessearly adopter program for our new Cloud Solution for Faith Communities with our first wave of early adopter customers now live on our Church Management Solution using it to predominantly serve customers through a subscription-based cloud delivery model, enabling lower cost of entry, greater scalability and lower total cost of ownershiprun their day-to-day operations in close collaboration with our product teams.
The market response to our customers. expanded Education Management portfolio for Higher Education has been positive, with Blackbaud SKY enabling us to extend our proven K-12 Private School solutions up-market. Our Education Management portfolio consists of Student Information, Learning Management, Tuition Management as well as Financial Edge NXT and Raiser's Edge NXT.
We continue to optimizebuild on our portfolio of solutions and integrate powerful capabilities — such as built in data, analytics, artificial intelligence, payment processing and tailored user-specific experiences — to bring even greater value and performance to our customers.
The Blackbaud SKY™ cloud platform is allowing us to innovate at a more rapid pace, including delivering enhanced integrated analytics capabilities that surface directly in our customers’ software through SKY AI and SKY Analytics—components of our broader Intelligence for Good approach that combines AI, analytics, one of the industry’s most robust data sets and expertise to drive powerful insights for our customers. These embedded, cloud-delivered insights provide high impact, workflow-integrated intelligence that drives fundraising, advocacy, event participation and other purpose driven constituent interactions.
At our annual user conference, bbcon, we announced a joint-partnershippartnership with Microsoft to couple together Microsoft's horizontal solutions with our industry-leading vertical solutions. We now intend to fully power Blackbaud SKYjointly-develop, co-market and co-sell innovative software technology that will advance the industry. Our first jointly-developed solution, Nonprofit Resource Management, is currently in the Microsoft Azure environment,development, and we will become a Cloud Solution Provider Partner for the Microsoft platform.are working in close collaboration with early adopters.
|
| | |
ThirdFirst Quarter 20172019 Form 10-Q | | 23 |
| |
2. | Drive Sales Effectiveness |
Selling modern, integrated cloud-solutions that are purpose-built for our customers' needs is a key competitive differentiator for our sales teams. We continuespent much of 2018 working to investsimplify our program and refine our methodology and approach in a world-classuniform way to better enable our salespeople with process and practice. In the second half of 2018, we ramped our direct sales organizationhiring more significantly than in the past and those new hires are progressing well towards targeted productivity. We expect to accelerate revenue growthcontinue making investments during the remainder of 2019 and penetrate our large and expanding total addressable market ("TAM"), which is currently estimated to be over $7.0 billion.beyond. During the first three quartersquarter of 2017,2019, we createdimplemented a new Senior Vice President of Global Sales position to lead this effortcommon sales leadership framework across the organization and we have focused on enabling our expanding sales teams with training, processes, and tools to improve effectiveness and drive revenue growth. The further development of our customer success program is allowingCompany, providing our sales teams to focus on closing sales rather than account management. The move to selling pre-integrated solution suites instead of individual point-solutions continuesmanagers with best practice tools and training necessary to be successful,successful. With the sales structure transformation now largely done, the focus going forward will be adding additional sales headcount and we have furthered our go-to-market shift with a concentrated sales focus by sub-vertical, including K-12 private schools, foundations, corporations, arts & cultural, higher education and healthcare.improving productivity.
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3. | Expand TAM into Near Adjacencies through Acquisitions and Product Investments |
We continueare continuing to evaluate compelling opportunities to acquire companies, technologies and/or services. We are guided by our acquisition criteria for considering attractive assets that expand our TAM, provide entrytotal addressable market ("TAM") into new and near adjacencies accelerate our shift to the cloud, accelerate revenue growth, are accretive to marginswith acquisitions and present synergistic opportunities.
During the third quarter,product investments. In January 2019, we launched Blackbaud Labs as a means to incubate new ideas and foster our strong culture of innovation and creativity within Blackbaud, with the sole focus of bringing new capabilities to market organically. We previously announced the promotion of our new Senior Vice President of Corporate Strategy and Business Development, who led the effort for many of our acquisitions, including AcademicWorksadded another half-billion dollars in April 2017 and, most recently, JustGiving.
AcademicWorks is the market leader in scholarship management for higher education and K-12 institutions, foundations, and grant-making institutions. Their cloud platform enables students to apply for all awards at an institution using one intuitive and streamlined process, while offering schools and awarding institutions a common platform for improved awarding, reporting, compliance, communication and stewardship of those awards. Additional details regardingTAM when we completed our acquisition of AcademicWorks are providedYourCause, an industry leader in Note 3enterprise corporate social responsibility and employee engagement technology. Adding YourCause’s capabilities in workplace giving and volunteering to our consolidated financial statementsBlackbaud’s cloud software platform, data intelligence, services and expertise in this report. Duringphilanthropy and engagement is expected to drive effectiveness for companies and the third quarter,broader social good community. Our TAM now stands at over $10 billion, and we focused on integrating AcademicWorks' solutions and operations as well as cross-selling.
In October 2017, we closed our acquisition of the United Kingdom-based online fundraising services provider JustGiving, whose online social giving platform has played a powerful role in the growth of peer-to-peer fundraising. The acquisition enhances our capability to serve both individual donors and nonprofits, expanding the peer-to-peer fundraising capabilities we currently offer today through TeamRaiser and everydayhero, which are used by leading nonprofit organizations to connect their causes to the individuals who support them. JustGiving also adds personal crowdfunding to our portfolio, which is an offering we did not previously provide and a fast growing segment of charitable giving. Additional details regarding our acquisition of JustGiving are provided below and in Note 15 to our consolidated financial statements in this report.
Both AcademicWorks and JustGiving meet the acquisition criteria discussed above. We remain active in the evaluation of acquisition opportunities to broadenfurther expand our portfolio, provide better integrated solutions for our customers, differentiate ourselves from the competitionaddressable market through acquisitions and improve our financial performance.internal product development.
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4. | Improve Operating Efficiency |
We are also focused on operational efficiency to deliver improved profitability. Our organizationalstrengthen the business and position us for long-term success. We continue to execute a comprehensive workplace and workforce strategy, driving towards a more scalable operating model has evolved in recent years allowing us to gainthat creates efficiency and consistency in how we execute.execute through infrastructure investments, productivity initiatives, and organizational re-alignments. We have centralizedcontinued executing against our operations, including marketing, product management, finance,workplace strategy, working to replace and upgrade some of our existing offices and expand our footprint into new locations for customer support, customer successfacing roles. This has been a multi-year program for us, and professional services. In 2014, we set a long-term aspirational goalexpect to improve operating margins annually, and increase our non-GAAP operating margins by at least 300 basis points on a constant currency basis from our 2014 baseline of 17.5%,be largely complete by the end of 2017. Since setting that goal, we have improved margins annually, inclusive of heightened investments to drive future growth and2019.
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| | | | | | | | |
Total revenue | | | |
| Three months ended March 31, | |
(dollars in millions) | 2019 |
| 2018 |
| Change |
|
Total revenue | $ | 215.8 |
| $ | 204.2 |
| 5.7 | % |
The increase in total revenue during the midst of migrating our customer basethree months ended March 31, 2019, when compared to the cloud.same period in 2018, was primarily driven by growth in recurring revenue as we continue to see positive demand from customers across our portfolio of cloud-based solutions. The acquisitions of Reeher and YourCause, which occurred after March 31, 2018, also contributed to the increases in recurring and total revenue. As expected, one-time services and other revenue declined $5.6 million during the three months ended March 31, 2019 due to our continued shift in focus towards selling cloud-based subscription solutions. In general, our cloud-based solutions include integrated analytics, training and payments services, and require less implementation services and little to no customization services. We expect to deliver on our goal,are also selling more subscription-based contracts for professional services and we see future opportunity ahead to further improve profitability through the infrastructure investments we have madeservices embedded in our back office for scale, focus on operational excellence,renewable cloud-based solution contracts. As a result, we continue to expect one-time services and achieving our productivity initiatives.other revenue to decline.
We have included the results of operations of AcademicWorks in our consolidated results of operations from the date of acquisition. We determined that the AcademicWorks acquisition was not a material business combination; therefore, revenue and earnings since the acquisition date are not required or presented.
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| | |
24 | | ThirdFirst Quarter 20172019 Form 10-Q |
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| | | | | | | | | | | | | | | | | |
Total revenue | | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | |
(dollars in millions) | 2017 |
| 2016 |
| Change |
| | 2017 |
| 2016 |
| Change |
|
Total revenue | $ | 195.5 |
| $ | 183.1 |
| 6.8 | % | | $ | 571.3 |
| $ | 532.5 |
| 7.3 | % |
|
| | | | | | | | |
Income from operations | | | |
| Three months ended March 31, | |
(dollars in millions) | 2019 |
| 2018 |
| Change |
|
Income from operations | $ | 2.2 |
| $ | 17.6 |
| (87.6 | )% |
The increases in total revenueIncome from operations decreased during the three and nine months ended September 30, 2017,March 31, 2019, when compared to the same periodsperiod in 2016, were primarily driven by growth in subscriptions revenue as our business model continues to shift towards providing predominantly cloud-based subscription solutions. Subscriptions revenue also grew as a result of increases in the number of customers and the volume of transactions for which we process payments. Services and other revenue as well as maintenance revenue declined during the three and nine months ended September 30, 2017 from our continued shift in focus towards selling cloud-based subscription solutions. In general, our NXT and other cloud-based solutions require less implementation services, which we expect to continue to negatively impact services and other revenue over time. In addition, we have also used promotions and discounts for our consulting services as incentives to accelerate the migration of our existing customer base from on-premises solutions toward our cloud-based subscriptions. In the near-term, the transition to subscription-based solutions also negatively impacts total revenue growth, as time-based revenue from subscription arrangements is deferred and recognized ratably over the subscription period, typically three years at contract inception, whereas on-premises license revenue from arrangements that include perpetual licenses is recognized up-front.
|
| | | | | | | | | | | | | | | | | |
Income from operations | | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | |
(dollars in millions) | 2017 |
| 2016 |
| Change |
| | 2017 |
| 2016 |
| Change |
|
Income from operations | $ | 18.0 |
| $ | 13.5 |
| 32.7 | % | | $ | 45.3 |
| $ | 37.8 |
| 19.9 | % |
Income from operations increased during the three and nine months ended September 30, 2017, when compared to the same periods in 2016.2018. The positive impact of growth in total revenue driven by recurring subscriptions as discussed above was partially offset primarily by investments we are making in our sales organization and customer success programinnovation, which we expect to continue in 2019 and to a lesser extent, increasesbeyond. Increases in stock basedstock-based compensation expense of $2.1$2.6 million, and $6.1employee severance of $2.5 million, respectively, rent expense of $0.7$1.6 million, restructuring costs of $1.1 million and $3.3amortization of intangible assets from business combinations of $1.1 million respectively, and net increases in acquisition-related expenses and integration costs of $0.8 million and $2.8 million, respectively. An increase of $2.5 million in employee severance costs during the nine months ended September 30, 2017 also negatively impacted income from operations.operations during the three months ended March 31, 2019. The increase in stock-based compensation expense was primarily driven by an increase in the grant date fair value of our annual equity awards granted to employees during the first quarter of 2019, when compared to the grant date fair value of the awards granted during the same period in 2018. The increase in rent expense was primarily driven byassociated with the endlease for our New Headquarters Facility in the fourth quarter of 2016 of theCharleston, South Carolina, state incentive payments we received as a result of locating our headquarters facilitywhich commenced in Berkeley County, South Carolina. These amounts were recorded as a reduction of rent expense upon receipt. Also contributing to the increase in rent expense were new operating leases for equipment that we have historically purchased.April 2018.
Customer retention
SubscriptionOur recurring revenue contracts are typicallygenerally for a term of three years at contract inception with one to three yearthree-year renewals thereafter. Over time, weWe anticipate a continued decrease in maintenance contract renewals as we transition our solution portfolio and maintenance customers from a perpetual license-based model to a cloud-based subscription delivery model. WeIn the long term, we also anticipate an increase in recurring subscription contract renewals as we continue focusing on innovation, quality and the integration of our subscriptioncloud-based solutions, which we believe will provide value-adding capabilities to better address our customers' needs. Due primarily to these factors, we believe a recurring revenue customer retention measure that combines recurring subscription, maintenance and maintenanceservice customer contracts provides an accuratea better representation of our customers' overall behavior. For the yeartwelve months ended September 30, 2017,March 31, 2019, approximately 93%92% of our customers with recurring subscription or maintenancerevenue contracts were retained. This customer retention rate is relatively unchanged from our rate for the full year 2016.
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| | |
Third Quarter 2017 Form 10-Q | | 25 |
solutions and migrate customers from legacy solutions towards our next generation cloud-based solutions. We are investing in innovation and our customer success program, which we believe will increase customer retention over the long-term.
Balance sheet and cash flow
At September 30, 2017,March 31, 2019, our cash and cash equivalents were $17.1$25.2 million and outstanding borrowingsthe carrying amount of our debt under the 2017 Credit Facility were $340.2was $583.6 million. Our net leverage ratio was 2.98 to 1.00.
During the ninethree months ended September 30, 2017,March 31, 2019, we generated $123.4used $10.0 million in cash flow fromfor operations, reducedhad a net increase in our net borrowings by $5.8of $196.3 million, inclusive of the incremental borrowings neededwhich was primarily used to finance the acquisition of AcademicWorks,YourCause, returned $17.3$5.9 million to stockholders by way of dividends and had aggregate cash outlays of $29.0$12.5 million for purchases of property and equipment and capitalized software development costs.
Recent development - JustGiving acquisitionAdoption of new lease accounting standard
On October 2, 2017,January 1, 2019, we acquiredadopted ASU 2016-02, using the entire issued share capitaltransition method that allowed us to initially apply the guidance at the adoption date of JustGivingJanuary 1, 2019 without adjusting comparative periods presented. Adopting ASU 2016-02 had a material impact on our consolidated balance sheet as as we recognized lease liabilities and ROU assets for an aggregate purchase pricethose leases classified as operating leases. The impacts of £95.0 million, or approximately $127.4 million, in cash, subject to certain adjustments set forthadoption are reflected in the stock purchase agreement. We financedfinancial information herein. For additional information regarding the acquisition through borrowings under the 2017 Credit Facility. As a resultimpact of the acquisition, JustGiving has become a wholly-owned subsidiaryour adoption of ours. We will include the operating resultsASU 2016-02, see See Notes 2 and 10 of JustGiving as well as the net assets acquired and liabilities assumed in our consolidated financial statements from the datein this report.
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| | |
First Quarter 2019 Form 10-Q | | 25 |
Comparison of the three and nine months ended September 30, 2017March 31, 2019 and 20162018
We have included the results of operations of YourCause in our consolidated results of operations from the date of acquisition. We determined that the YourCause acquisition was not a material business combination; therefore, separate presentation of revenue and earnings since the acquisition date are not required nor included herein.
Operating results
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| | | | | | | | | | | | | | | | | |
Revenue by segment | | | | | | |
| Three months ended September 30, | |
| Nine months ended September 30, | |
(dollars in millions) | 2017 |
| 2016 |
| Change |
| | 2017 |
| 2016 |
| Change |
|
GMG | $ | 102.8 |
| $ | 97.6 |
| 5.3 | % | | $ | 297.0 |
| $ | 279.5 |
| 6.2 | % |
EMG | 81.8 |
| 74.4 |
| 10.1 | % | | 243.7 |
| 220.9 |
| 10.3 | % |
IMG | 10.8 |
| 11.0 |
| (1.7 | )% | | 30.6 |
| 31.9 |
| (4.1 | )% |
Total revenue(1) | $ | 195.5 |
| $ | 183.1 |
| 6.8 | % | | $ | 571.3 |
| $ | 532.5 |
| 7.3 | % |
|
| | | | | | | | |
Recurring | | | |
| Three months ended March 31, | |
(dollars in millions) | 2019 |
| 2018 |
| Change |
|
Recurring revenue | $ | 198.1 |
| $ | 180.8 |
| 9.5 | % |
Cost of recurring | 84.7 |
| 69.1 |
| 22.6 | % |
Recurring gross profit(1) | $ | 113.4 |
| $ | 111.8 |
| 1.4 | % |
Recurring gross margin | 57.2 | % | 61.8 | % | |
| |
(1) | The individual amounts for each year may not sum to total revenue due to rounding. |
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| | | | | | | | | | | | | | | | | |
GMG | | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | |
(dollars in millions) | 2017 |
| 2016 |
| Change |
| | 2017 |
| 2016 |
| Change |
|
GMG revenue | $ | 102.8 |
| $ | 97.6 |
| 5.3 | % | | $ | 297.0 |
| $ | 279.5 |
| 6.2 | % |
% of total revenue | 52.6 | % | 53.3 | % | | | 52.0 | % | 52.5 | % | |
The increases in GMG revenue during the three and nine months ended September 30, 2017 when compared to the same periods in 2016 were attributable to growth in subscriptions revenue, partially offset by declines in maintenance revenue and, to a lesser extent, services and other revenue. The growth in GMG subscriptions revenue was primarily due to increases in demand across our portfolio of cloud-based solutions. To a much lesser extent, GMG subscriptions revenue growth was also driven by increases in the number of customers and the volume of transactions for which we process payments. We expect that the ongoing shift in our go-to-market strategy towards cloud-based subscription offerings, which, in general, require less implementation services will continue to negatively impact both services and other revenue and maintenance revenue over time.
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| | |
26 | | Third Quarter 2017 Form 10-Q |
|
| | | | | | | | | | | | | | | | | |
EMG | | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | |
(dollars in millions) | 2017 |
| 2016 |
| Change |
| | 2017 |
| 2016 |
| Change |
|
EMG revenue | $ | 81.8 |
| $ | 74.4 |
| 10.1 | % | | $ | 243.7 |
| $ | 220.9 |
| 10.3 | % |
% of total revenue | 41.9 | % | 40.6 | % | | | 42.7 | % | 41.5 | % | |
The increases in EMG revenue during the three and nine months ended September 30, 2017, when compared to the same periods in 2016, were primarily attributable to growth in subscriptions revenue, partially offset by decreases in services and other revenue and, to a lesser extent, maintenance revenue. The growth in EMG subscriptions was driven primarily by increases in demand for our cloud-based solutions, as well as an increase in the number of customers and the volume of transactions for which we process payments. We are increasingly selling our Blackbaud CRM solution as a subscription offering, which has resulted in less license fees revenue during the three and nine months ended, September 30, 2017, when compared to the same periods in 2016. We expect that the ongoing shift in our go-to-market strategy towards cloud-based subscription offerings, which, in general, require less implementation services will continue to negatively impact both services and other revenue and maintenance revenue over time.
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| | | | | | | | | | | | | | | | | |
IMG | | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | |
(dollars in millions) | 2017 |
| 2016 |
| Change |
| | 2017 |
| 2016 |
| Change |
|
IMG revenue | $ | 10.8 |
| $ | 11.0 |
| (1.7 | )% | | $ | 30.6 |
| $ | 31.9 |
| (4.1 | )% |
% of total revenue | 5.5 | % | 6.0 | % | | | 5.4 | % | 6.0 | % | |
The decreases in IMG revenue during the three and nine months ended September 30, 2017, when compared to the same periods in 2016, were primarily related to reductions in services and other revenue and maintenance revenue, partially offset by increases in subscriptions revenue. The increases in IMG subscriptions revenue during the three and nine months ended September 30, 2017 were primarily due to increased demand for our cloud-based solutions and, to a much lesser extent, increases in the volume of transactions for which we process payments. The fluctuation in foreign currency exchange rates had an insignificant impact on IMG revenue during the three months ended September 30, 2017 and negatively impacted IMG revenue during the nine months ended September 30, 2017 by approximately $0.8 million. Further explanation of this impact is included below under the caption "Foreign Currency Exchange Rates". We expect that the ongoing shift in our go-to-market strategy towards cloud-based subscription offerings, which, in general, require less implementation services will continue to negatively impact both services and other revenue and maintenance revenue over time.
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| | |
Third Quarter 2017 Form 10-Q | | 27 |
Operating results
|
| | | | | | | | | | | | | | | | | |
Subscriptions | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | |
(dollars in millions) | 2017 |
| 2016 |
| Change |
| | 2017 |
| 2016 |
| Change |
|
Subscriptions revenue | $ | 127.5 |
| $ | 105.4 |
| 20.9 | % | | $ | 370.9 |
| $ | 306.3 |
| 21.1 | % |
Cost of subscriptions | 58.0 |
| 51.9 |
| 11.7 | % | | 170.3 |
| 153.8 |
| 10.8 | % |
Subscriptions gross profit(1) | $ | 69.4 |
| $ | 53.5 |
| 29.8 | % | | $ | 200.6 |
| $ | 152.6 |
| 31.5 | % |
Subscriptions gross margin | 54.5 | % | 50.7 | % | | | 54.1 | % | 49.8 | % | |
| |
(1) | The individual amounts for each year may not sum to subscriptionsrecurring gross profit due to rounding. |
SubscriptionsRecurring revenue is comprised of revenue from chargingfees for the use of our subscription-based software solutions, which includes providing access to cloud-based solutions, and hosting services, access to certainonline training programs, subscription-based analytic services, such as donor acquisitions and data enrichment, and payment services. Recurring revenue also includes fees from maintenance services for our on-premises solutions, services included in our renewable subscription contracts, subscription-based contracts for professional services and our online subscription training offerings, revenue from payment processing services, as well as variable transaction revenue associated with the use of our solutions.
We continue to experience growth in sales of our cloud-based solutions and hosting services as we meet the demand of our customers that increasingly prefer cloud-based subscription offerings, including existing customers that are migrating from on-premises solutions to our cloud-based solutions. In addition, we have experienced growth in our payment processing services from the continued shift to online giving, further integration of these services to our existing solution portfolio and the sale of these services to new and existing customers. Recurring subscriptions contracts are typically for a term of three years at contract inception with one to three year renewals thereafter. We intend to continue focusing on innovation, quality and integration of our subscription solutions, which we believe will drive subscriptions revenue growth.
Cost of subscriptionsrecurring revenue is primarily comprised of compensation costs for customer support and production IT personnel, third-party contractor expenses, third-party royalty and data expenses, hosting expenses, allocated depreciation, facilities and IT support costs, amortization of intangible assets from business combinations, amortization of software development costs, transaction-based costs related to payments services including remittances of amounts due to third-parties and other costs incurred in providing support and recurring services to our customers.
We continue to experience growth in sales of our cloud-based solutions as we meet the demand of our customers that increasingly prefer cloud-based subscription offerings with integrated analytics, training and payment services. Recurring subscription contracts are typically for a term of three years at contract inception with one to three-year renewals thereafter. We intend to continue focusing on innovation, quality and integration of our cloud-based solutions, which we believe will drive future revenue growth.
The increasesincrease in subscriptionsrecurring revenue during the three and nine months ended September 30, 2017,March 31, 2019, when compared to the same periodsperiod in 2016, were2018, was primarily due to strongpositive demand across our portfolio of cloud-based solutions as revenue from subscriptions increased $21.8 million. The inclusion of Reeher and YourCause contributed to the increase in recurring revenue as both acquisitions were completed after March 31, 2018. We also saw increases in revenue from subscription-based professional services as well as services embedded in our renewable cloud-based solution portfolio, and, tocontracts. These favorable impacts from subscriptions were partially offset by a much lesser extent, increasesdecrease in the numbermaintenance revenue of customers and the volume of transactions for which we process payments.
The increases in cost of subscriptions$4.5 million during the three and nine months ended September 30, 2017,March 31, 2019, when compared to the same periodsperiod in 2016, were2018. The decrease in maintenance revenue was primarily related to our efforts to migrate customers from legacy on-premises solutions onto our solutions powered by Blackbaud SKY, our modern cloud platform.
The increase in cost of recurring revenue during the three months ended March 31, 2019, when compared to the same period in 2018, was primarily due to increases in transaction-based costs of $4.3 million, related to payment services integrated in our payments servicescloud-based solutions, allocations of $4.7depreciation, facilities and IT support costs of $2.5 million, compensation costs of $2.4 million, data center costs of $2.0 million and $12.4 million, respectively and increasesamortization of software development costs of $1.0 million. The growth in the cost of third-party technology embedded in certaincompensation costs was primarily attributable to an increasing portion of our subscription solutionsresources now providing subscription-based professional services as opposed to one-time. The inclusion of $1.5 millionReeher and $4.8 million. Partially offsettingYourCause also contributed to the increase in cost of subscriptionsrecurring revenue during the ninethree months ended September 30, 2017 was a decrease in third-party contractor expenses of $1.5 million.
The increases in subscriptions gross margin for the three and nine months ended September 30, 2017,March 31, 2019 when compared to the same periods in 2016, were primarily the result of the positive economics of shifting customers to our next generation cloud-based solutions as growth in subscriptions revenue outpaced the growth in related costs. The results of AcademicWorks did not significantly impact our subscriptions gross margins for the three and nine months ended September 30, 2017.
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| | |
2826 | | ThirdFirst Quarter 20172019 Form 10-Q |
to the same period in 2018. The increase in amortization of software development costs was primarily due to investments made on innovation, quality and the integration of our cloud-based solutions.
The decrease in recurring gross margin for the three months ended March 31, 2019, when compared to the same period in 2018, was primarily the result of incremental costs associated with our continued shift toward cloud-based solutions, including compensation costs, hosting and data center costs, and amortization of software development costs, as well as a one-time third-party refund related to our integrated payment services during the three months ended March 31, 2018 that did not recur in 2019.
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| | | | | | | | | | | | | | | | | |
Maintenance | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | |
(dollars in millions) | 2017 |
| 2016 |
| Change |
| | 2017 |
| 2016 |
| Change |
|
Maintenance revenue | $ | 31.5 |
| $ | 36.4 |
| (13.5 | )% | | $ | 98.2 |
| $ | 111.0 |
| (11.6 | )% |
Cost of maintenance | 5.7 |
| 5.5 |
| 3.0 | % | | 17.6 |
| 16.5 |
| 6.1 | % |
Maintenance gross profit(1) | $ | 25.8 |
| $ | 30.9 |
| (16.5 | )% | | $ | 80.6 |
| $ | 94.5 |
| (14.6 | )% |
Maintenance gross margin | 81.9 | % | 84.8 | % | | | 82.1 | % | 85.1 | % | |
|
| | | | | | | | |
One-time services and other | | | |
| Three months ended March 31, | |
(dollars in millions) | 2019 |
| 2018 |
| Change |
|
One-time services and other revenue | $ | 17.7 |
| $ | 23.3 |
| (24.0 | )% |
Cost of one-time services and other | 14.6 |
| 19.0 |
| (23.1 | )% |
One-time services and other gross profit(1) | $ | 3.2 |
| $ | 4.4 |
| (27.8 | )% |
One-time services and other gross margin | 17.8 | % | 18.8 | % | |
| |
(1) | The individual amounts for each year may not sum to maintenance gross profit due to rounding. |
Maintenance revenue is comprised of annual fees derived from maintenance contracts associated with new software licenses and annual renewals of existing maintenance contracts. These contracts provide customers with updates, enhancements and certain upgrades to our software solutions and online, telephone and email support. Maintenance contracts are typically renewed on an annual basis.
Cost of maintenance is primarily comprised of compensation costs for customer support personnel, third-party contractor expenses, third-party royalty costs, allocated depreciation, facilities and IT support costs, amortization of intangible assets from business combinations, amortization of software development costs and other costs incurred in providing support and services to our customers.
The decreases in maintenance revenue during the three and nine months ended September 30, 2017, when compared to the same periods in 2016, were primarily comprised of (i) reductions in maintenance from contracts that were migrated to a cloud-based subscription or not renewed and reductions in contracts with existing customers of $9.2 million and $25.7 million, respectively; partially offset by (ii) incremental maintenance from new customers associated with new license contracts and increases in contracts with existing customers of $4.3 million and $12.1 million, respectively; and (iii) insignificant amounts of incremental maintenance from contractual inflationary rate adjustments.
Cost of maintenance during the three months ended September 30, 2017 remained relatively unchanged when compared to the same period in 2016. Cost of maintenance increased during the nine months ended September 30, 2017, when compared to the same period in 2016, primarily as a result of an increase in compensation costs of $1.0 million, driven by a refinement in the method in which we allocate customer support costs between cost of maintenance and cost of subscriptions.
Maintenance gross margin decreased during the three and nine months ended September 30, 2017, when compared to the same periods in 2016, primarily due to the increase in maintenance customer support costs combined with the decline in maintenance revenue as discussed above.
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| | |
Third Quarter 2017 Form 10-Q | | 29 |
|
| | | | | | | | | | | | | | | | | |
Services and other | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | |
(dollars in millions) | 2017 |
| 2016 |
| Change |
| | 2017 |
| 2016 |
| Change |
|
Services and other revenue | $ | 36.5 |
| $ | 41.2 |
| (11.4 | )% | | $ | 102.2 |
| $ | 115.2 |
| (11.2 | )% |
Cost of services and other | 23.3 |
| 25.8 |
| (10.0 | )% | | 71.6 |
| 76.5 |
| (6.4 | )% |
Services and other gross profit(1) | $ | 13.3 |
| $ | 15.4 |
| (13.6 | )% | | $ | 30.6 |
| $ | 38.7 |
| (20.8 | )% |
Services and other gross margin | 36.3 | % | 37.3 | % | | | 30.0 | % | 33.6 | % | |
| |
(1) | The individual amounts for each year may not sum toone-time services and other gross profit due to rounding. |
ServicesOne-time services and other revenue includesis comprised of fees for one-time consulting, implementation, training, analytic and installationonsite training services, as well as revenue from the sale of our software sold under perpetual license arrangements, fees from user conferences and third-party software referral fees. Consulting, implementation and installation services involve converting data from a customer’s existing system, system configuration, process re-engineering and assistance in file set up. Analytic services are comprised of donor prospect research, sales of lists of potential donors, benchmarking studies and data modeling services. These analytic services involve the assessment of current and prospective donor information of the customer and are performed using our proprietary analytical tools. The end product is intended to enable organizations to more effectively target their fundraising activities.
Cost of one-time services and other is primarily comprised of compensation costs for professional services and onsite training personnel, third-party contractor expenses,other costs incurred in providing onsite customer training, third-party contractor expenses, data expense incurred to perform one-time analytic services, third-party software royalties, variable reseller commissions, costs of user conferences, allocated depreciation, facilities and IT support costs and amortization of intangible assets from business combinations.
ServicesOne-time services and other revenue decreased during the three and nine months ended September 30, 2017,March 31, 2019, when compared to the same periodsperiod in 2016,2018, primarily due to decreases in one-time consulting revenue of $3.8 million and to a lesser extent, declines in analytics revenue and license fees revenue.of $1.0 million. We expect that the ongoing shift in our go-to-market strategy towards cloud-based subscription offerings, which in general,generally include integrated analytics and require less implementation and customization services, will continue to negatively impact one-time services and other revenue over time.revenue. We have also used promotionscontinue to sell more subscription-based contracts for professional services and discounts forservices embedded in our consulting servicesrenewable cloud-based solution contracts, both of which are recorded as incentives to accelerate the migration of our existing customer base from on-premises solutions toward our cloud-based subscriptions. The maturation of our Blackbaud Enterprise CRM solution is lessening the extent of implementation services required for that solution. In addition, we are increasingly selling our Blackbaud CRM solution as a subscription offering, which has resulted in less license feesrecurring revenue.
Cost of one-time services and other decreased during the three and nine months ended September 30, 2017,March 31, 2019, when compared to the same periodsperiod in 2016,2018, primarily due to decreasesa decrease in compensation costs of $1.4$3.0 million, and $2.5 million, respectively, which is in line with the ongoing shift in our go-to-market strategy as discussed above.above as an increasing portion of our resources are now providing subscription-based professional services as opposed to one-time.
ServicesOne-time services and other gross margin decreased during the three and nine months ended September 30, 2017,March 31, 2019, when compared to the same periodsperiod in 2016, primarily due to2018, as the declines in one-time consulting revenue and higher margin analytics and license fees revenue coupledassociated with the slightly more modestshift in our go-to-market strategy outpaced the reductions in costs of one-time services and other.other discussed above. This is a trend we expect to continue in the near term as we complete the transition of our solution portfolio to a cloud-based subscription delivery model.
|
| | |
30First Quarter 2019 Form 10-Q | | Third Quarter 2017 Form 10-Q27 |
Operating expenses
| | Sales, marketing and customer success | Sales, marketing and customer success | | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | | Three months ended March 31, | |
(dollars in millions) | 2017 |
| 2016 |
| Change |
| | 2017 |
| 2016 |
| Change |
| 2019 |
| 2018 |
| Change |
|
Sales, marketing and customer success expense | $ | 44.2 |
| $ | 40.7 |
| 8.6 | % | | $ | 129.4 |
| $ | 115.7 |
| 11.8 | % | $ | 55.5 |
| $ | 45.5 |
| 21.9 | % |
% of total revenue | 22.6 | % | 22.2 | % | | | 22.6 | % | 21.7 | % | | 25.7 | % | 22.3 | % | |
Sales, marketing, and customer success expense includes compensation costs, variable-sales commissions, travel-related expenses, sales commissions, advertising and marketing materials, public relations costs, variable reseller commissions and allocated depreciation, facilities and IT support costs.
We continue to make investments to drive sales effectiveness, which is a component of our four-point growth strategy to accelerate revenue growth. We are also investing in our customer success organization to drive customer loyalty, retention, and referrals.strategy. The increase in sales, marketing and customer success expense in dollars and as a percentage of total revenue during the three and nine months ended September 30, 2017,March 31, 2019, when compared to the same periodsperiod in 2016, were2018, was primarily due to increases in compensation costs of $3.3$6.5 million and $10.5 million, respectively. Also contributing to the increase in sales, marketing and customer success expense for the nine months ended September 30, 2017 was an increase in commissioncommissions expense of $1.8$1.3 million. Compensation costs increased primarilyas a result of our efforts during the second half of 2018 to increase our direct sales force and we expect to continue making investments during the remainder of 2019 and beyond. These incremental investments are intended to address the large market opportunity that we see for ourselves and fuel future revenue growth. In addition, compensation costs increased due to incremental headcount associated with the increase in direct sales, marketing,inclusion of Reeher and customer success efforts of our growing operations.YourCause. The increase in commission expense was primarily driven by a refinementan increase in the period over which we recognize deferred commission to expense.commissionable sales.
| | Research and development | Research and development | | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | | Three months ended March 31, | |
(dollars in millions) | 2017(1) |
| 2016(1) |
| Change |
| | 2017(2) |
| 2016(2) |
| Change |
| 2019(1) |
| 2018(1) |
| Change |
|
Research and development expense | $ | 22.1 |
| $ | 22.5 |
| (2.0 | )% | | $ | 67.6 |
| $ | 68.0 |
| (0.5 | )% | $ | 28.5 |
| $ | 26.0 |
| 9.6 | % |
% of total revenue | 11.3 | % | 12.3 | % | | | 11.8 | % | 12.8 | % | | 13.2 | % | 12.7 | % | |
| |
(1) | Not included in research and development expense for the three months ended September 30, 2017March 31, 2019 and 20162018 were $7.0$11.1 million and $6.9$6.9 million, respectively, of qualifying costs associated with development activities that are required to be capitalized under the internal-use software accounting guidance such as those related to development of our next generation cloud-based solutions. Qualifying capitalized software development costs associated with our cloud-based solutions are subsequently amortized to cost of subscriptions revenue over the related asset's estimated useful life, which generally range from three to seven years. |
| |
(2) | Not included in research and development expense for the nine months endedSeptember 30, 2017 and 2016 were $20.6 million and $18.9 million, respectively, of qualifying costs associated with development activities that are required to be capitalized under the internal-use software accounting guidance.
|
Research and development expense includes compensation costs for engineering and product management personnel, third-party contractor expenses, software development tools and other expenses related to developing new solutions, upgrading and enhancing existing solutions, and allocated depreciation, facilities and IT support costs.
We continue to make investments to deliver integrated and open solutions in the cloud, which is a component of our four-point growth strategy to accelerate revenue growth. Researchstrategy. The increase in research and development expense remained relatively unchangedin dollars and as a percentage of total revenue during the three and nine months ended September 30, 2017,March 31, 2019, when compared to the same periodsperiod in 2016. During the nine months ended September 30, 2017, an increase2018, was primarily due to increases in compensation costs of $1.4$3.3 million and third-party contractor expenses of $1.1 million. The increases in compensation costs were primarily associated with our additionthe inclusion of specializedReeher's and YourCause's engineering resourcesresources. The incremental third-party contractor expenses were intended to help drive our solution development efforts, including our new Cloud Solutions for Faith Communities and Higher Education and the Integrated Cloud Initiative for Nonprofits. The increase in research and development expense dollars was partially offset primarily by an increase in the amount of software development costs that were capitalized of $1.7 million. As discussed above, the increases in the amounts capitalized were a result of incurring more qualifying costs associated with development activities that are required to be capitalized under the internal-use software guidance. We expect that the amount of software development costs capitalized will continue to increase modestly in the near-term as we make investments in innovation, quality and the integration of our solutions, which we believe will drive long-term revenue growth.
Research and development expense decreased as a percentage of total revenue during the three and nine months ended September 30, 2017, when compared to the same periods in 2016, primarily due to productivity gains, which have allowed us to scale our business. The increases in the amounts of software development costs capitalized as discussed above also contributed to the decreases in research and development expense as a percentage of total revenue.
|
| | |
Third Quarter 2017 Form 10-Q28 | | 31First Quarter 2019 Form 10-Q |
| | General and administrative | General and administrative | | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | | Three months ended March 31, | |
(dollars in millions) | 2017 |
| 2016 |
| Change |
| | 2017 |
| 2016 |
| Change |
| 2019 |
| 2018 |
| Change |
|
General and administrative expense | $ | 23.5 |
| $ | 22.3 |
| 5.5 | % | | $ | 67.4 |
| $ | 62.1 |
| 8.5 | % | $ | 27.1 |
| $ | 25.1 |
| 8.2 | % |
% of total revenue | 12.0 | % | 12.2 | % | | | 11.8 | % | 11.7 | % | | 12.6 | % | 12.3 | % | |
General and administrative expense consists primarily of compensation costs for general corporate functions, including senior management, finance, accounting, legal, human resources and corporate development, third-party professional fees, insurance, allocated depreciation, facilities and IT support costs, acquisition-related expenses and other administrative expenses.
The increasesincrease in general and administrative expense in dollars and as a percentage of total revenue during the three and nine months ended September 30, 2017,March 31, 2019, when compared to the same periodsperiod in 2016, were2018, was primarily due to increases in rent expense of $0.7$1.5 million, associated with the lease for our New Headquarters Facility in Charleston, South Carolina, which commenced in April 2018, and $3.3 million, respectively, and net increases in acquisition-related expenses and integrationcompensation costs of $0.8 million. The increase in compensation costs was primarily related to stock-based compensation and our acquisition of YourCause.
Restructuring
During 2017, in an effort to further our organizational objectives including, improved operating efficiency, customer outcomes and employee satisfaction, we initiated a multi-year plan to consolidate and relocate some of our existing offices to highly modern and more collaborative workspaces with short-term financial commitments. These workspaces are also more centrally located for our employees and closer to our customers and prospects. Restructuring costs incurred prior to our adoption of ASU 2016-02 on January 1, 2019 consisted primarily of costs to terminate lease agreements, contractual lease payments, net of estimated sublease income, upon vacating space as part of the plan, as well as insignificant costs to relocate affected employees and write-off facilities-related fixed assets that we would no longer use.
Upon adoption of ASU 2016-02 at January 1, 2019, we reduced our operating lease ROU assets recognized at transition by the carrying amounts of the restructuring liabilities for certain leased office spaces that we ceased using prior to December 31, 2018. See additional details below.
Restructuring costs incurred during the three months ended March 31, 2019 consisted primarily of operating lease ROU asset impairment costs and, to a lesser extent, write-offs of facilities-related fixed assets that we will no longer use.
We currently expect to incur before-tax restructuring costs associated with these activities of between $8.5 million and $2.8$9.5 million, respectively. An increase of $2.5which $7.3 million in employee severancehas been incurred as of March 31, 2019, with substantially all of the remaining costs during the nine months ended September 30, 2017 also drove up general and administrative expense. The increases in rent expense were primarily drivenexpected to be incurred by the end of 2019. These restructuring activities are currently expected to result in the fourth quarterimproved operating efficiencies and future annual before-tax savings of 2016between $5.0 million and $6.0 million beginning in 2020.
The following table summarizes our facilities optimization restructuring costs as of the South Carolina state incentive payments we received as a result of locating our headquarters facility in Berkeley County, South Carolina. These amounts were recorded as a reduction of rent expense upon receipt. Also contributing to the increases in rent expense were new operating leases for equipment that we have historically purchased.
General and administrative expense as a percentage of total revenue remained relatively unchanged during the three and nine months ended September 30, 2017, when compared to the same periods in 2016.
|
| | | | | | | | | | | | | | | | | |
Interest expense | | | | | | |
| Three months ended September 30, | | | Nine months ended September 30, | |
(dollars in millions) | 2017 |
| 2016 |
| Change |
| | 2017 |
| 2016 |
| Change |
|
Interest expense | $ | 3.1 |
| $ | 2.6 |
| 17.1 | % | | $ | 8.7 |
| $ | 8.0 |
| 8.1 | % |
% of total revenue | 1.6 | % | 1.4 | % | | | 1.5 | % | 1.5 | % | |
|
| | | | | | | | | | | |
| Cumulative costs incurred as of |
| | Costs incurred during the three months ended(1) |
| | Cumulative costs incurred as of |
|
(in thousands) | December 31, 2018 |
| | March 31, 2019 | |
By component: | | | | | |
Contract termination costs | $ | 4,176 |
| | $ | 1,392 |
| | $ | 5,568 |
|
Other costs | 1,208 |
| | 561 |
| | 1,769 |
|
Total | $ | 5,384 |
| | $ | 1,953 |
| | $ | 7,337 |
|
| |
(1) | Includes $1.3 million of operating lease ROU asset impairment costs. |
Interest expense increased during the three and nine months ended September 30, 2017, when compared to the same periods in 2016, primarily due to modest increases in our weighted average effective interest rates. Also contributing to the increase in interest expense during the nine months ended September 30, 2017 was the required immediate expense recognition for certain debt issuance costs when we refinanced our credit facility in June 2017. In the near term, we expect interest expense as well as interest expense as a percentage of revenue to increase as a result of our acquisition of JustGiving.
|
| | |
32First Quarter 2019 Form 10-Q | | Third Quarter 2017 Form 10-Q29 |
The change in our liability related to our facilities optimization restructuring during the three months ended March 31, 2019, consisted of the following:
|
| | | | | | | | | | | | | | | | | | | |
| Accrued at |
| | Increases for incurred costs(1) |
| | Written off upon adoption of ASU 2016-02(2) |
| | Costs paid |
| | Accrued at |
|
(in thousands) | December 31, 2018 |
| | | | | March 31, 2019 |
|
By component: | | | | | | | | | |
Contract termination costs | $ | 1,865 |
| | $ | 1,392 |
| | $ | (1,656 | ) | | $ | (1,536 | ) | | $ | 65 |
|
Other costs | 50 |
| | 561 |
| | — |
| | (611 | ) | | — |
|
Total | $ | 1,915 |
| | $ | 1,953 |
| | $ | (1,656 | ) | | $ | (2,147 | ) | | $ | 65 |
|
| |
(1) | Includes $1.3 million of operating lease ROU asset impairment costs. |
| |
(2) | Upon adoption of ASU 2016-02 at January 1, 2019, we reduced our operating lease ROU assets recognized at transition by the carrying amounts of the restructuring liabilities for certain leased office spaces that we ceased using prior to December 31, 2018. |
|
| | | | | | | | |
Interest expense | | | |
| Three months ended March 31, | |
(dollars in millions) | 2019 |
| 2018 |
| Change |
|
Interest expense | $ | 5.3 |
| $ | 3.5 |
| 51.4 | % |
% of total revenue | 2.5 | % | 1.7 | % | |
Interest expense increased during the three months ended March 31, 2019, when compared to the same period in 2018, primarily due to increases in our average daily borrowings related to our acquisitions of Reeher in April 2018 and YourCause in January 2019. Also contributing to the increases in interest expense during the three months ended March 31, 2019 were modest increases in our weighted average effective interest rates.
Deferred revenue
The table below compares the components of deferred revenue from our consolidated balance sheets:
| | (dollars in millions) | Timing of recognition | September 30, 2017 |
| Change |
| | December 31, 2016 |
| Timing of recognition | March 31, 2019 |
| Change |
| | December 31, 2018 |
|
Subscriptions | Over the period billed in advance, generally one year | $ | 179.9 |
| 24.4 | % | | $ | 144.6 |
| |
Maintenance | Over the period billed in advance, generally one year | 68.5 |
| (10.8 | )% | | 76.8 |
| |
Services and other | As services are delivered | 34.0 |
| 15.2 | % | | 29.5 |
| |
Recurring | | Over the period billed in advance, generally one year | $ | 272.7 |
| (5.0 | )% | | $ | 287.0 |
|
One-time services and other | | As services are delivered | 12.7 |
| 9.2 | % | | 11.6 |
|
Total deferred revenue(1) | | 282.4 |
| 12.5 | % | | 250.9 |
| | 285.4 |
| (4.4 | )% | | 298.6 |
|
Less: Long-term portion | | 5.4 |
| (16.0 | )% | | 6.4 |
| | 4.3 |
| 67.3 | % | | 2.6 |
|
Current portion(1) | | $ | 277.0 |
| 13.3 | % | | $ | 244.5 |
| | $ | 281.1 |
| (5.0 | )% | | $ | 296.0 |
|
| |
(1) | The individual amounts for each year may not sum to total deferred revenue or current portion of deferred revenue due to rounding. |
To the extent that our customers are billed for our solutions and services in advance of delivery, we record such amounts in deferred revenue. Our recurring revenue contracts are generally for a term of three years at contract inception with one to three-year renewals thereafter, billed annually in advance and non-cancelable. We generally invoice our subscription and maintenance customers with recurring revenue contracts in annual cycles 30 days prior to the end of the contract term.
Deferred revenue from subscriptions increasedrecurring revenue contracts decreased modestly during the ninethree months ended September 30, 2017,March 31, 2019, primarily due to an increase in subscription sales, as well as a seasonal increase in subscriptionless customer contract renewals. Historically,renewals due to the timing of customer budget cycles,cycles. Historically, we have an increase in customer contract renewals near the beginning of our third quarter resulting in our second quarter as compared to our fourth quarter. The increase inlower deferred revenue at the end of our first quarter. Deferred revenue from one-time services and other increased during the ninethree months ended September 30, 2017 was primarily the result of an increase in training sales and related billings. A seasonal increase in advance registration billings associated with our bbcon user conference, which occurs each year in October, also contributed to the increase in deferred revenue from services and other. The decrease in deferred revenue attributable to maintenance during the nine months ended September 30, 2017 wasMarch 31, 2019, primarily due to the continuing shifta modest increase in our go-to-market strategy towards cloud-based subscription offerings, which do not require maintenance contracts.onsite training sales.
We have acquired businesses whose net tangible assets include deferred revenue. In accordance with GAAP reporting requirements, we recorded write-downs of deferred revenue from customer arrangements predating the acquisition to fair value, which resulted in lower recorded deferred revenue as of the acquisition date than the actual amounts paid in advance for solutions and services under those customer arrangements. Therefore, our deferred revenue after an acquisition will not reflect the full amount of deferred revenue that would have been reported if the acquired deferred revenue was
|
| | |
30 | | First Quarter 2019 Form 10-Q |
not written down to fair value. Further explanation of this impact is included below under the caption "Non-GAAP financial measures".
| | Income tax provision | | | | | | |
Income tax benefit | | | |
| Three months ended September 30, | | | Nine months ended September 30, | | Three months ended March 31, | |
(dollars in millions) | 2017 |
| 2016 |
| Change |
| | 2017 |
| 2016 |
| Change |
| 2019 |
| 2018 |
| Change |
|
Income tax provision | $ | 2.8 |
| $ | 2.0 |
| 43.2 | % | | $ | 3.0 |
| $ | 5.3 |
| (44.3 | )% | |
Income tax benefit | | $ | (1.8 | ) | $ | (3.5 | ) | (48.0 | )% |
Effective income tax rate | 18.2 | % | 17.9 | % | | | 7.8 | % | 18.0 | % | | 62.0 | % | (24.8 | )% | |
We compute the year-to-date income tax provision by applying the estimated annual effective tax rate to the year-to-date pre-tax income or loss and adjusting for discrete tax items in the period. Our effective income tax rate can be more or less volatile based on the amount of pre-tax income or loss. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower. The increase in our effective income tax rate during the three months ended September 30, 2017 remained relatively unchangedMarch 31, 2019, when compared to the same period in 2016. 2018, was partially attributable to the impact of discrete tax benefits on a pre-tax loss for the quarter as compared to pre-tax income for the same period in 2018.
The decreaseincrease in our effective income tax rate during the ninethree months ended September 30, 2017,March 31, 2019, when compared to the same period in 2016,2018, was primarilyalso due to a $9.0 milliondecrease in the discrete tax benefit to income tax expense relating to stock-based compensation items, as compared to a $4.3 million discrete tax benefit for the same period in 2016.compensation. The increase in the discrete tax benefit for the nine months ended September 30, 2017, as compared to the same period in 2016,impact was attributable to an increasea decrease in the market price for shares of our common stock, when compared to the same period in 2018, as reported by NASDAQ, as well as an increase in the number of stock awards that vested and were exercised.Nasdaq. Most of our equity awards are granted during our first quarter and vest in subsequent years during the same quarter.
|
| | |
ThirdFirst Quarter 20172019 Form 10-Q | | 3331 |
Non-GAAP financial measures
The operating results analyzed below are presented on a non-GAAP basis. We use non-GAAP revenue, non-GAAP gross profit, non-GAAP gross margin, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income and non-GAAP diluted earnings per share internally in analyzing our operational performance. Accordingly, we believe these non-GAAP measures are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. While we believe these non-GAAP measures provide useful supplemental information, non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be completely comparable to similarly titled measures of other companies due to potential differences in the exact method of calculation between companies.
We have acquired businesses whose net tangible assets include deferred revenue. In accordance with GAAP reporting requirements, we recorded write-downs of deferred revenue under arrangements predating the acquisition to fair value, which resulted in lower recognized revenue than the contributed purchase price until the related obligations to provide services under such arrangements are fulfilled. Therefore, our GAAP revenues after the acquisitions will not reflect the full amount of revenue that would have been reported if the acquired deferred revenue was not written down to fair value. The non-GAAP measures described below reverse the acquisition-related deferred revenue write-downs so that the full amount of revenue booked by the acquired companies is included, which we believe provides a more accurate representation of a revenue run-rate in a given period and, therefore, will provide more meaningful comparative results in future periods.
The non-GAAP financial measures discussed below exclude the impact of certain transactions because we believe they are not directly related to our operating performance in any particular period, but are for our long-term benefit over multiple periods. We believe that these non-GAAP financial measures reflect our ongoing business in a manner that allows for meaningful period-to-period comparisons and analysis of trends in our business.
| | | Three months ended September 30, | | | Nine months ended September 30, | | Three months ended March 31, | |
(dollars in millions) | 2017 |
| 2016 |
| Change |
| | 2017 |
| 2016 |
| Change |
| 2019 |
| 2018 |
| Change |
|
GAAP Revenue | $ | 195.5 |
| $ | 183.1 |
| 6.8 | % | | $ | 571.3 |
| $ | 532.5 |
| 7.3 | % | $ | 215.8 |
| $ | 204.2 |
| 5.7 | % |
Non-GAAP adjustments: | | | | | | | |
Add: Acquisition-related deferred revenue write-down | 0.3 |
| — |
| 100.0 | % | | 0.7 |
| 3.6 |
| (80.8 | )% | 0.7 |
| 0.3 |
| 105.7 | % |
Non-GAAP revenue(1) | $ | 195.9 |
| $ | 183.1 |
| 7.0 | % | | $ | 572.0 |
| $ | 536.1 |
| 6.7 | % | $ | 216.5 |
| $ | 204.5 |
| 5.9 | % |
| | | | | | | |
GAAP gross profit | $ | 108.5 |
| $ | 99.7 |
| 8.8 | % | | $ | 311.8 |
| $ | 285.7 |
| 9.2 | % | $ | 116.5 |
| $ | 116.1 |
| 0.3 | % |
GAAP gross margin | 55.5 | % | 54.5 | % | | | 54.6 | % | 53.7 | % | | 54.0 | % | 56.9 | % | |
Non-GAAP adjustments: | | | | | | | |
Add: Acquisition-related deferred revenue write-down | 0.3 |
| — |
| 100.0 | % | | 0.7 |
| 3.6 |
| (80.8 | )% | 0.7 |
| 0.3 |
| 105.7 | % |
Add: Stock-based compensation expense | 0.9 |
| 0.9 |
| 2.0 | % | | 2.7 |
| 2.6 |
| 2.8 | % | 1.0 |
| 1.1 |
| (11.1 | )% |
Add: Amortization of intangibles from business combinations | 10.0 |
| 9.9 |
| 1.2 | % | | 29.9 |
| 29.7 |
| 0.8 | % | 11.4 |
| 10.4 |
| 9.9 | % |
Add: Employee severance | — |
| — |
| (100.0 | )% | | 1.0 |
| 0.2 |
| 508.1 | % | 1.1 |
| 0.6 |
| 94.6 | % |
Add: Acquisition-related integration costs | — |
| — |
| — | % | | 0.1 |
| — |
| 100.0 | % | |
Subtotal(1) | 11.3 |
| 10.8 |
| 4.3 | % | | 34.3 |
| 36.1 |
| (4.8 | )% | 14.2 |
| 12.4 |
| 14.7 | % |
Non-GAAP gross profit(1) | $ | 119.8 |
| $ | 110.5 |
| 8.3 | % | | $ | 346.2 |
| $ | 321.8 |
| 7.6 | % | $ | 130.8 |
| $ | 128.6 |
| 1.7 | % |
Non-GAAP gross margin | 61.1 | % | 60.4 | % | | | 60.5 | % | 60.0 | % | | 60.4 | % | 62.9 | % | |
| |
(1) | The individual amounts for each year may not sum to non-GAAP revenue, subtotal or non-GAAP gross profit due to rounding. |
|
| | |
3432 | | ThirdFirst Quarter 20172019 Form 10-Q |
| | | Three months ended September 30, | | | Nine months ended September 30, | | Three months ended March 31, | |
(dollars in millions, except per share amounts) | 2017 |
| 2016 |
| Change |
| | 2017 |
| 2016 |
| Change |
| 2019 |
| 2018 |
| Change |
|
GAAP income from operations | $ | 18.0 |
| $ | 13.5 |
| 32.7 | % | | $ | 45.3 |
| $ | 37.8 |
| 19.9 | % | $ | 2.2 |
| $ | 17.6 |
| (87.6 | )% |
GAAP operating margin | 9.2 | % | 7.4 | % | | | 7.9 | % | 7.1 | % | | 1.0 | % | 8.6 | % | |
Non-GAAP adjustments: | | | | | | | |
Add: Acquisition-related deferred revenue write-down | 0.3 |
| — |
| 100.0 | % | | 0.7 |
| 3.6 |
| (80.8 | )% | 0.7 |
| 0.3 |
| 105.7 | % |
Add: Stock-based compensation expense | 10.9 |
| 8.8 |
| 23.9 | % | | 31.1 |
| 25.0 |
| 24.2 | % | 13.7 |
| 11.1 |
| 23.7 | % |
Add: Amortization of intangibles from business combinations | 10.7 |
| 10.5 |
| 1.5 | % | | 32.1 |
| 31.8 |
| 0.8 | % | 12.8 |
| 11.7 |
| 9.8 | % |
Add: Employee severance | 0.1 |
| 0.1 |
| 77.8 | % | | 3.0 |
| 0.5 |
| 533.0 | % | 3.4 |
| 0.9 |
| 267.5 | % |
Add: Acquisition-related integration costs | 0.4 |
| 0.9 |
| (58.2 | )% | | 0.6 |
| 1.4 |
| (56.8 | )% | 0.7 |
| 0.4 |
| 65.8 | % |
Add: Acquisition-related expenses | 1.5 |
| 0.2 |
| 899.3 | % | | 3.9 |
| 0.3 |
| 1,353.2 | % | 0.4 |
| 0.4 |
| 12.9 | % |
Add: Restructuring costs | | 2.0 |
| 0.8 |
| 140.8 | % |
Subtotal(1) | 24.0 |
| 20.5 |
| 17.1 | % | | 71.3 |
| 62.6 |
| 13.8 | % | 33.8 |
| 25.7 |
| 31.6 | % |
Non-GAAP income from operations(1) | $ | 42.0 |
| $ | 34.0 |
| 23.3 | % | | $ | 116.6 |
| $ | 100.4 |
| 16.1 | % | $ | 36.0 |
| $ | 43.2 |
| (16.9 | )% |
Non-GAAP operating margin | 21.4 | % | 18.6 | % | | | 20.4 | % | 18.7 | % | | 16.6 | % | 21.1 | % | |
| | | | | | | |
GAAP net income | $ | 12.5 |
| $ | 8.9 |
| 40.5 | % | | $ | 35.2 |
| $ | 24.2 |
| 45.4 | % | |
Shares used in computing GAAP diluted earnings per share | 47,846,997 |
| 47,394,106 |
| 1.0 | % | | 47,679,103 |
| 47,268,469 |
| 0.9 | % | |
GAAP diluted earnings per share | $ | 0.26 |
| $ | 0.19 |
| 36.8 | % | | $ | 0.74 |
| $ | 0.51 |
| 45.1 | % | |
GAAP (loss) income before provision for income taxes | | $ | (3.0 | ) | $ | 14.2 |
| (120.8 | )% |
GAAP net (loss) income | | $ | (1.1 | ) | $ | 17.8 |
| (106.3 | )% |
Shares used in computing GAAP diluted (loss) earnings per share | | 47,516,912 |
| 48,009,395 |
| (1.0 | )% |
GAAP diluted (loss) earnings per share | | $ | (0.02 | ) | $ | 0.37 |
| (105.4 | )% |
Non-GAAP adjustments: | | | | | | | |
Add: Total Non-GAAP adjustments affecting income from operations | 24.0 |
| 20.5 |
| 17.1 | % | | 71.3 |
| 62.6 |
| 13.8 | % | |
Add (less): Loss (gain) on derivative instrument | — |
| — |
| 100.0 | % | | (0.5 | ) | — |
| 100.0 | % | |
Add: Loss on debt extinguishment | 0.1 |
| — |
| 100.0 | % | | 0.3 |
| — |
| 100.0 | % | |
Less: Tax impact related to Non-GAAP adjustments(2) | (9.8 | ) | (8.1 | ) | 21.6 | % | | (32.0 | ) | (24.2 | ) | 32.4 | % | |
Less: GAAP income tax benefit | | (1.8 | ) | (3.5 | ) | (48.0 | )% |
Add: Total non-GAAP adjustments affecting income from operations | | 33.8 |
| 25.7 |
| 31.6 | % |
Non-GAAP income before provision for income taxes | | 30.8 |
| 39.9 |
| (22.7 | )% |
Assumed non-GAAP income tax provision(2) | | 6.2 |
| 8.0 |
| (22.8 | )% |
Non-GAAP net income(1) | $ | 26.9 |
| $ | 21.3 |
| 25.8 | % | | $ | 74.3 |
| $ | 62.7 |
| 18.6 | % | $ | 24.7 |
| $ | 31.9 |
| (22.7 | )% |
| | | | | | | |
Shares used in computing Non-GAAP diluted earnings per share | 47,846,997 |
| 47,394,106 |
| 1.0 | % | | 47,679,103 |
| 47,268,469 |
| 0.9 | % | |
Shares used in computing non-GAAP diluted earnings per share | | 48,051,289 |
| 48,009,395 |
| 0.1 | % |
Non-GAAP diluted earnings per share | $ | 0.56 |
| $ | 0.45 |
| 24.4 | % | | $ | 1.56 |
| $ | 1.33 |
| 17.3 | % | $ | 0.51 |
| $ | 0.66 |
| (22.7 | )% |
| |
(1) | The individual amounts for each year may not sum to subtotal, non-GAAP income from operations or non-GAAP net income due to rounding. |
| |
(2) | We apply a non-GAAP effective tax rate of 32.0%20.0% in our determination of non-GAAP net income, which represents the GAAP effective tax rate, excluding the discrete tax effect of stock-based compensation. |
The increases in non-GAAP income from operations during the threeNon-GAAP free cash flow is defined as operating cash flow less capital expenditures, including costs required to be capitalized for software development, and nine months ended September 30, 2017, when compared to the same periods in 2016, were primarily due to growth in subscriptions revenue, partially offset by investments we are making in our sales organizationcapital expenditures for property and customer success program and, to a lesser extent, increases in rent expense, which are discussed above.equipment. |
| | | | | | | | | |
| Three months ended March 31, | |
(dollars in millions) | 2019 |
| Change |
| | 2018 |
|
GAAP net cash provided by operating activities | $ | (10.0 | ) | (185.2 | )% | | $ | 11.8 |
|
Less: purchase of property and equipment | (1.2 | ) | (80.0 | )% | | (5.8 | ) |
Less: capitalized software development costs | (11.3 | ) | 59.4 | % | | (7.1 | ) |
Non-GAAP free cash flow | (22.5 | ) | 1,905.5 | % | | (1.1 | ) |
|
| | |
First Quarter 2019 Form 10-Q | | 33 |
Non-GAAP organic revenue growth
In addition, we discuss non-GAAP organic revenue growth, non-GAAP organic revenue growth on a constant currency basis non-GAAP organic subscriptions revenue growth and non-GAAP organic recurring revenue growth, which wein analyzing our performance. We believe providesthat these non-GAAP measures are useful informationto investors, as a supplement to GAAP measures, for evaluating the periodic growth of our business on a consistent basis. Each of these measures of non-GAAP organic revenue growth excludes incremental acquisition-related revenue attributable to companies acquired in the current fiscal year. For companies, if any, acquired in the immediately preceding fiscal year, each of these non-GAAP organic revenue growth measures reflects presentation of full year incremental non-GAAP revenue derived from such companies as if they were combined throughout the prior period, and it includesthey include the non-GAAP revenue attributable to those companies, as if there were no acquisition-related write-downs of acquired deferred revenue to fair value as required by GAAP. In addition, each of these non-GAAP organic revenue growth measures excludes prior period revenue associated with divested businesses. The exclusion of the prior period revenue is to present the results of the divested businesses within the results of the combined company for the same period of time in both the prior and current periods. We believe this presentation provides a more comparable representation of our current business’ organic revenue growth and revenue run-rate.
|
| | |
Third Quarter 2017 Form 10-Q | | 35 |
|
| | | | | | | | | | | | | |
(dollars in millions) | Three months ended September 30, | | | Nine months ended September 30, | |
2017 |
| 2016 |
| | 2017 |
| 2016 |
|
GAAP revenue | $ | 195.5 |
| $ | 183.1 |
| | $ | 571.3 |
| $ | 532.5 |
|
GAAP revenue growth | 6.8 | % | | | 7.3 | % | |
(Less) Add: Non-GAAP acquisition-related revenue (1) | (2.1 | ) | — |
| | (4.0 | ) | 3.6 |
|
Total Non-GAAP adjustments | (2.1 | ) | — |
| | (4.0 | ) | 3.6 |
|
Non-GAAP revenue | $ | 193.4 |
| $ | 183.1 |
| | $ | 567.3 |
| $ | 536.1 |
|
Non-GAAP organic revenue growth | 5.6 | % | | | 5.8 | % | |
| | | | | |
Non-GAAP revenue (2) | $ | 193.4 |
| $ | 183.1 |
| | $ | 567.3 |
| $ | 536.1 |
|
Foreign currency impact on Non-GAAP organic revenue (3) | (0.5 | ) | — |
| | 0.8 |
| — |
|
Non-GAAP revenue on constant currency basis (3) | $ | 192.9 |
| $ | 183.1 |
| | $ | 568.1 |
| $ | 536.1 |
|
Non-GAAP organic revenue growth on constant currency basis | 5.4 | % | | | 6.0 | % | |
| | | | | |
GAAP subscriptions revenue | $ | 127.5 |
| $ | 105.4 |
| | $ | 370.9 |
| $ | 306.3 |
|
GAAP subscriptions revenue growth | 20.9 | % | | | 21.1 | % | |
(Less) Add: Non-GAAP acquisition-related revenue (1) | (2.0 | ) | — |
| | (3.7 | ) | 3.5 |
|
Total Non-GAAP adjustments | (2.0 | ) | — |
| | (3.7 | ) | 3.5 |
|
Non-GAAP organic subscriptions revenue | $ | 125.5 |
| $ | 105.4 |
| | $ | 367.2 |
| $ | 309.9 |
|
Non-GAAP organic subscriptions revenue growth | 19.0 | % | | | 18.5 | % | |
| | | | | |
GAAP subscriptions revenue | $ | 127.5 |
| $ | 105.4 |
| | $ | 370.9 |
| $ | 306.3 |
|
GAAP maintenance revenue | $ | 31.5 |
| $ | 36.4 |
| | 98.2 |
| 111.0 |
|
GAAP recurring revenue | $ | 159.0 |
| $ | 141.9 |
| | 469.1 |
| 417.3 |
|
GAAP recurring revenue growth | 12.1 | % | | | 12.4 | % | |
(Less) Add: Non-GAAP acquisition-related revenue (1) | (2.0 | ) | — |
| | (3.7 | ) | 3.6 |
|
Total Non-GAAP adjustments | (2.0 | ) | — |
| | (3.7 | ) | 3.6 |
|
Non-GAAP recurring revenue | $ | 157.0 |
| $ | 141.9 |
| | $ | 465.4 |
| $ | 421.0 |
|
Non-GAAP organic recurring revenue growth | 10.7 | % | | | 10.5 | % | |
|
| | | | | | |
(dollars in millions) | Three months ended March 31, | |
2019 |
| 2018 |
|
GAAP revenue | $ | 215.8 |
| $ | 204.2 |
|
GAAP revenue growth | 5.7 | % | |
(Less) Add: Non-GAAP acquisition-related revenue (1) | (4.4 | ) | 2.7 |
|
Non-GAAP organic revenue | $ | 211.4 |
| $ | 206.9 |
|
Non-GAAP organic revenue growth | 2.2 | % | |
| | |
Non-GAAP organic revenue (2) | $ | 211.4 |
| $ | 206.9 |
|
Foreign currency impact on Non-GAAP organic revenue (3) | 1.8 |
| — |
|
Non-GAAP organic revenue on constant currency basis (3) | $ | 213.2 |
| $ | 206.9 |
|
Non-GAAP organic revenue growth on constant currency basis | 3.1 | % | |
| | |
GAAP recurring revenue | 198.1 |
| 180.8 |
|
GAAP recurring revenue growth | 9.5 | % | |
(Less) Add: Non-GAAP acquisition-related revenue (1) | (4.2 | ) | 2.6 |
|
Non-GAAP organic recurring revenue | $ | 193.9 |
| $ | 183.4 |
|
Non-GAAP organic recurring revenue growth | 5.7 | % | |
| |
(1) | Non-GAAP acquisition-related revenue excludes incremental acquisition-related revenue calculated in accordance with GAAP that is attributable to companies acquired in the current fiscal year. For companies, if any, acquired in the immediately preceding fiscal year, non-GAAP acquisition-related revenue reflects presentation of full-year incremental non-GAAP revenue derived from such companies, as if they were combined throughout the prior period, and it includes the non-GAAP revenue from the acquisition-related deferred revenue write-down attributable to those companies. |
| |
(2) | Non-GAAP organic revenue for the prior year periods presented herein maywill not agree to non-GAAP organic revenue presented in the respective prior period quarterly financial information solely due to the manner in which non-GAAP organic revenue growth is calculated. |
| |
(3) | To determine non-GAAP organic revenue growth on a constant currency basis, revenues from entities reporting in foreign currencies were translated to U.S. Dollars using the comparable prior period's quarterly weighted average foreign currency exchange rates. The primary foreign currencies creating the impact are the Canadian Dollar, EURO, British Pound and Australian Dollar. |
|
| | |
34 | | First Quarter 2019 Form 10-Q |
Seasonality
Our revenues normally fluctuate as a result of certain seasonal variations in our business. Our transaction revenue has historically been at its lowest in the first quarter due to the timing of customer fundraising initiatives and events. Our revenue from payment processing services has historically increased during the fourth quarter due to year-end giving. Our revenue from professional services has historically been lower in the first quarter when many of those services commence and in the fourth quarter due to the holiday season. As a result of these and other factors, our total revenue has historically been lower in the first quarter than in the remainder of our fiscal year, with the third and fourth quartersquarter historically achieving the highest total revenues.revenue. Our expenses, however, do not vary significantly as a result of these factors, but do fluctuate on a quarterly basis due to varying timing of expenditures. Our cash flow from operations normally fluctuates quarterly due to the combination of the timing of customer contract renewals including renewals associated with customers of acquired companies, delivery of professional services and occurrence of customer events, the payment of bonuses, as well as merit-based salary increases, among other factors. Historically, due to lower revenues in our first quarter, combined with the payment of bonuses from the prior year in our first quarter, our cash flow from operations has been lowest in
|
| | |
36 | | Third Quarter 2017 Form 10-Q |
our first quarter, and due to the timing of customer contract renewals, many of which take place at or near the beginning of our third quarter, our cash flow from operations has been lower in our second quarter as compared to our third and fourth quarters. Partially offsetting these favorable drivers of cash flow from operations in our third and fourth quarters are merit-based salary increases, which are generally effective in April each year. In addition, deferred revenues can vary on a seasonal basis for the same reasons. These patterns may change as a result of the continued shift to online giving, growth in volume of transactions for which we process payments, or as a result of acquisitions, new market opportunities, new solution introductions or other factors. Our cash flow from financing is negatively impacted in our first quarter when most of our equity awards vest, as we pay taxes on behalf of our employees related to the settlement or exercise of equity awards.
|
|
Liquidity and Capital Resources |
The following table presents selected financial information about our financial position:
| | (dollars in millions) | September 30, 2017 |
| Change |
| | December 31, 2016 |
| March 31, 2019 |
| Change |
| | December 31, 2018 |
|
Cash and cash equivalents | $ | 17.1 |
| 0.9 | % | | $ | 16.9 |
| $ | 25.2 |
| (18.4 | )% | | $ | 30.9 |
|
Property and equipment, net | 43.9 |
| (12.7 | )% | | 50.3 |
| 38.8 |
| (3.2 | )% | | 40.0 |
|
Software development costs, net | 48.6 |
| 29.4 | % | | 37.6 |
| 81.2 |
| 8.2 | % | | 75.1 |
|
Total carrying value of debt | 338.0 |
| (1.3 | )% | | 342.4 |
| 583.6 |
| 50.7 | % | | 387.1 |
|
Working capital | (181.1 | ) | (5.1 | )% | | (172.2 | ) | (187.2 | ) | 9.9 | % | | (207.7 | ) |
Working capital excluding deferred revenue | 95.9 |
| 32.7 | % | | 72.3 |
| |
The following table presents selected financial information about our cash flows:
| | | Nine months ended September 30, | | Three months ended March 31, | |
(dollars in millions) | 2017 |
| Change |
| | 2016 |
| 2019 |
| Change |
| | 2018 |
|
Net cash provided by operating activities | $ | 123.4 |
| 23.2 | % | | $ | 100.1 |
| |
Net cash (used in) provided by operating activities | | $ | (10.0 | ) | (185.2 | )% | | $ | 11.8 |
|
Net cash used in investing activities | (78.2 | ) | 106.4 | % | | (37.9 | ) | (121.9 | ) | 580.4 | % | | (17.9 | ) |
Net cash used in financing activities | (45.3 | ) | (25.9 | )% | | (61.2 | ) | (74.4 | ) | (83.0 | )% | | (438.9 | ) |
Our principal sources of liquidity are operating cash flow, funds available under the 2017 Credit Facility and cash on hand. Our operating cash flow depends on continued customer renewal of our subscription maintenance and supportmaintenance arrangements and market acceptance of our solutions and services. Based on current estimates of revenue and expenses, we believe that the currently available sources of funds and anticipated cash flows from operations will be adequate for at least the next twelve months to finance our operations, fund anticipated capital expenditures, meet our debt obligations and pay dividends. Dividend payments are not guaranteed and our Board of Directors may decide, in its absolute discretion, at any time and for any reason, not to declare and pay further dividends and/or repurchase our common stock. To the extent we undertake future material acquisitions, investments or unanticipated capital expenditures, we may require additional capital. In that context, we regularly evaluate opportunities to enhance our capital structure including through potential debt or equity issuances.
|
| | |
First Quarter 2019 Form 10-Q | | 35 |
At September 30, 2017,March 31, 2019, our total cash and cash equivalents balance included approximately $7.5$13.4 million of cash that was held by operations outside the U.S. While these funds may not be needed to fund our U.S. operations for at least the next twelve months, if we need these funds, we may be required to accrue and pay taxes to repatriate the funds. We currently do not intend nor anticipate a need to repatriate our cash held outside the U.S.
Operating cash flow
Net cash provided by operating activities of $123.4 million increaseddecreased by $23.2$21.8 million during the ninethree months ended September 30, 2017,March 31, 2019, when compared to the same period in 2016,2018, primarily due to an increasea $14.1 million decrease in net income adjusted for non-cash expenses, and an increasea decrease in cash flow from operations associated with working capital. Throughout both periods, our cash flows from operations were derived principally from: (i) our earnings from on-going operations prior to non-cash
|
| | |
Third Quarter 2017 Form 10-Q | | 37 |
expenses such as depreciation, amortization, stock-based compensation, amortization of deferred financing costs and debt discount and adjustments to our provision for sales returns and allowances; and (ii) changes in our working capital.
Working capital changes are composed of changes in accounts receivable, prepaid expenses and other assets, trade accounts payable, accrued expenses and other liabilities, and deferred revenue. Cash flow from operations associated with working capital increased $1.6decreased $7.6 million during the ninethree months ended September 30, 2017,March 31, 2019, when compared to the same period in 2016,2018, primarily due to a decrease in bonus payments partially offset by an increase in the collection of customer account balances in 2018. Fluctuations in the timing of vendor payments also contributed to the decrease in cash taxes paid.flow from operations associated with working capital.
Investing cash flow
Net cash used in investing activities of $78.2$121.9 million increased by $40.3$103.9 million during the ninethree months ended September 30, 2017,March 31, 2019, when compared to the same period in 2016.2018.
During the ninethree months ended September 30, 2017,March 31, 2019, we used net cash of $49.7$109.4 million, for theour acquisition of AcademicWorksYourCause, compared to $3.4$5.0 million spent on similar investments in acquired companies during the same period in 2016.2018. We used $20.6$11.3 million for software development costs, which was up $1.5$4.2 million from cash spent induring the same period in 2016.2018. The increase in cash outlays for software development costs was primarily driven by development activities related to our next generation cloud-based solutions, andincluding our Church Management Solution, as well as development activities for Blackbaud SKY, our new modern cloud platform.
We also spent $8.4$1.2 million of cash for purchases of property and equipment during the ninethree months ended September 30, 2017,March 31, 2019, which was down $7.0$4.6 million from cash spent during the same period in 2016.2018. The decrease inhigher cash outlays for property and equipment during the same period in 2018 was primarily driven by a shift toward leasing certain equipment that we have historically purchased. Cash outlaysleasehold improvements for operating leases are presentedour New Headquarters Facility in operating cash flows.Charleston, South Carolina.
Financing cash flow
During the ninethree months ended September 30, 2017,March 31, 2019, we had a net decreaseincrease in borrowings of $5.8$196.3 million, even with the incremental borrowings neededwhich was primarily used to finance our acquisition of AcademicWorks. We also paid $3.1 millionYourCause. Historically, due to lower revenues in financing costs as a resultour first quarter, combined with the payment of refinancingbonuses from the prior year in our credit facility.first quarter, our cash flow from operations has been lowest in our first quarter.
We paid $19.1$18.4 million to satisfy tax obligations of employees upon settlement or exercise of equity awards during the ninethree months ended September 30, 2017March 31, 2019 compared to $10.5$22.5 million during the same period in 2016.2018. The amount of taxes paid by us on the behalf of employees related to the settlement or exercise of equity awards varies from period to period based upon the timing of grants and vesting, employee exercise decisions, as well as the market price for shares of our common stock at the time of settlement. Due to a change in the timing of our annual equity award grants, mostMost of our equity awards nowcurrently vest in our first quarter. In addition, during the ninethree months ended September 30, 2017,March 31, 2019, we paid dividends of $17.3$5.9 million, which was relatively consistent with the comparable period of 2016.2018.
Cash used in financing activities associated with changes in restricted cash due to customers increased $191.8 million during the three months ended March 31, 2019 when compared to the same period in 2018, as the amount of restricted cash held and payable by us to customers as of December 31, 2017 was significantly larger than at the same date in 2018.
|
| | |
36 | | First Quarter 2019 Form 10-Q |
2017 Credit Facility
As discussed above, in June 2017, we entered into the 2017 Credit Facility. Upon closing, we drew $300.0 million on a term loan and $110.0 million in revolving credit loans, which was used to repay all amounts outstanding under our previous credit facility and for other general corporate purposes.
We have drawn on our credit facility from time to time to help us meet financial needs, such as financing for business acquisitions. At September 30, 2017,March 31, 2019, our available borrowing capacity under the 2017 Credit Facility was $356.2$98.4 million. The 2017 Credit Facility matures in June 2022.
At September 30, 2017,March 31, 2019, the carrying amount of our debt under the 2017 Credit Facility was $335.8$583.6 million. Our average daily borrowings during the three and nine months ended September 30, 2017March 31, 2019 were $355.4 million and $368.5 million, respectively.$557.5 million.
The following is a summary of the financial covenants under our credit facility:
|
| | |
Financial Covenant | Requirement | Ratio as of September 30, 2017March 31, 2019 |
Net Leverage Ratio | ≤ 3.50 to 1.00 | 1.792.98 to 1.00 |
Interest Coverage Ratio | ≥ 2.50 to 1.00 | 16.3110.53 to 1.00 |
|
| | |
38 | | Third Quarter 2017 Form 10-Q |
Under the 2017 Credit Facility, we also have restrictions on our ability to declare and pay dividends and our ability to repurchase shares of our common stock. In order to pay any cash dividends and/or repurchase shares of stock: (i) no default or event of default shall have occurred and be continuing under the 2017 Credit Facility, and (ii) our pro forma net leverage ratio, as set forth in the 2017 Credit Facility, must be 0.25 less than the net leverage ratio requirement at the time of dividend declaration or share repurchase. At September 30, 2017,March 31, 2019, we were in compliance with our debt covenants under the 2017 Credit Facility.
Commitments and contingencies
As of September 30, 2017,March 31, 2019, we had contractual obligations with future minimum commitments as follows: | | | Payments due by period | Payments due by period |
(in millions) | Total |
| Less than 1 year |
| 1-3 years |
| 3-5 years |
| More than 5 years |
| Total |
| Less than 1 year |
| 1-3 years |
| 3-5 years |
| More than 5 years |
|
Recorded contractual obligations: | | |
Debt(1) | $ | 340.2 |
| $ | 8.6 |
| $ | 16.1 |
| $ | 315.5 |
| $ | — |
| $ | 585.1 |
| $ | 7.5 |
| $ | 15.0 |
| $ | 562.6 |
| $ | — |
|
Operating leases(2) | | 170.3 |
| 23.3 |
| 38.2 |
| 29.1 |
| 79.8 |
|
| | |
Unrecorded contractual obligations: | | |
Operating leases(2) | 190.4 |
| 20.2 |
| 40.0 |
| 33.1 |
| 97.1 |
| |
Interest payments on debt(3) | 41.9 |
| 8.9 |
| 18.7 |
| 14.3 |
| — |
| 68.1 |
| 21.6 |
| 42.8 |
| 3.8 |
| — |
|
Purchase obligations(4) | 51.9 |
| 21.3 |
| 30.6 |
| — |
| — |
| 111.4 |
| 41.8 |
| 67.9 |
| 1.7 |
| — |
|
Total contractual obligations | $ | 624.4 |
| $ | 59.0 |
| $ | 105.4 |
| $ | 362.9 |
| $ | 97.1 |
| $ | 935.0 |
| $ | 94.2 |
| $ | 163.8 |
| $ | 597.2 |
| $ | 79.8 |
|
| |
(1) | Represents principal payments only, under the following assumptions: (i) that the amounts outstanding under the 2017 Credit Facility and our other debt at September 30, 2017March 31, 2019 will remain outstanding until maturity, with minimum payments occurring as currently scheduled, and (ii) that there are no assumed future borrowings on the 2017 RevolvingCredit Facility for the purposes of determining minimum commitment amounts. |
| |
(2) | Our commitments related to operating leases have not been reduced by sublease income, incentive payments and reimbursement of leasehold improvements. |
| |
(3) | The actual interest expense recognized in our consolidated statements of comprehensive income will depend on the amount of debt, the length of time the debt is outstanding and the interest rate, which could be different from our assumptions described in (1) above. |
| |
(4) | We have contractual obligations for third-party technology used in our solutions and for other services we purchase as part of our normal operations. In certain cases, these arrangements require a minimum annual purchase commitment by us. |
The term loan under the 2017 Credit Facility and our other debt require periodic principal payments. The balance of the term loans and any amounts drawn on the revolving credit loans are due upon maturity of the 2017 Credit Facility in June 2022.
The total liability for uncertain tax positions as of September 30, 2017March 31, 2019 and December 31, 2016,2018, was $3.4$4.7 million and $3.1$3.7 million, respectively. Our accrued interest and penalties related to tax positions taken on our tax returns was insignificant$1.0 million and $0.7 million as of September 30, 2017March 31, 2019 and December 31, 2016.2018, respectively.
In February 2017,2019, our Board of Directors approved our annual dividend rate of $0.48 per share to be made in quarterly payments. Dividends at this annual rate would aggregate to $23.0$23.5 million assuming 48.049.0 million shares of common stock
|
| | |
First Quarter 2019 Form 10-Q | | 37 |
are outstanding, although dividends are not guaranteed and our Board of Directors may decide, in its absolute discretion, to change or suspend dividend payments at any time for any reason. Our ability to continue to declare and pay dividends quarterly this year and beyond might be restricted by, among other things, the terms of the 2017 Credit Facility, general economic conditions and our ability to generate adequate operating cash flow.
On October 25, 2017,April 30, 2019, our Board of Directors declared a fourthsecond quarter dividend of $0.12 per share payable on December 15, 2017June 14, 2019 to stockholders of record on NovemberMay 28, 2017.2019.
|
|
Off-Balance Sheet Arrangements |
As of September 30, 2017,March 31, 2019, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K promulgated by the SEC that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
|
| | |
Third Quarter 2017 Form 10-Q | | 39 |
|
|
Foreign Currency Exchange Rates |
Approximately 10%13% of our total revenue for the ninethree months ended September 30, 2017March 31, 2019 was generated from operations outside the United States.U.S. We do not have significant operations in countries in which the economy is considered to be highly inflationary. Our consolidated financial statements are denominated in U.S. dollars and, accordingly, changes in the exchange rate between foreign currencies and the U.S. dollar will affect the translation of our subsidiaries’ financial results into U.S. dollars for purposes of reporting our consolidated financial results. The accumulated currency translation adjustment, recorded within accumulated other comprehensive loss as a component of stockholders’ equity, was a loss of $0.9 million and $0.5$2.0 million as of September 30, 2017March 31, 2019 and a loss of $6.6 million as of December 31, 2016, respectively.2018.
The vast majority of our contracts are entered into by our U.S. or U.K. entities. The contracts entered into by the U.S. entity are almost always denominated in U.S. dollars or Canadian dollars, and contracts entered into by our U.K., Australian and Irish subsidiaries are generally denominated in British Pounds, Australian dollars and Euros, respectively. Historically, as the U.S. dollar weakened, foreign currency translation resulted in an increase in our revenues and expenses denominated in non-U.S. currencies. Conversely, as the U.S. dollar strengthened, foreign currency translation resulted in a decrease in our revenue and expenses denominated in non-U.S. currencies. During the ninethree months ended September 30, 2017,March 31, 2019, foreign translation resulted in ana decrease in our revenues and expenses denominated in non-U.S. currencies. Though we have exposure to fluctuations in currency exchange rates, primarily those between the U.S. dollar and both the British Pound and Canadian dollar, the impact has generally not been material to our consolidated results of operations or financial position. For the ninethree months ended September 30, 2017,March 31, 2019, the fluctuation in foreign currency exchange rates had insignificant impacts onreduced our total revenue by $1.7 million and our income from operations. For the nine months ended September 30, 2017, the fluctuation in foreign currency exchange rates decreased IMG revenueoperations by approximately $0.8 million.an insignificant amount. We will continue monitoring such exposure and take action as appropriate. To determine the impacts on revenue (or income from operations) from fluctuations in currency exchange rates, current period revenues (or income from operations) from entities reporting in foreign currencies were translated into U.S. dollars using the comparable prior year period's weighted average foreign currency exchange rates. These impacts are non-GAAP financial information and are not in accordance with, or an alternative to, information prepared in accordance with GAAP.
In June and September 2017, we entered into a foreign currency option contract and a foreign currency forward contract, respectively, to hedge our exposure to currency fluctuations in connection with our acquisition of JustGiving, because the purchase price was denominated in British Pounds. See Note 9 of our consolidated financial statements in this report for additional information about these derivative instruments.
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations. In addition, if inflationary pressures impact the rate of giving to our customers, there could be adverse impacts to our business, financial condition and results of operations.
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Critical Accounting Policies and Estimates |
There have been no significant changes in our critical accounting policies and estimates during the ninethree months ended September 30, 2017March 31, 2019 as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.2018.
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38 | | First Quarter 2019 Form 10-Q |
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Recently Issued Accounting Pronouncements |
For a discussion of the impact that recently issued accounting pronouncements are expected to have on our financial position and results of operations when adopted in the future, see Note 2 of our consolidated financial statements in this report.
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40 | | Third Quarter 2017 Form 10-Q |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have market rate sensitivity for interest rates and foreign currency exchange rates.
Our variable rate debt is our primary financial instrument with market risk exposure for changing interest rates. We manage our variable rate interest rate risk through a combination of short-term and long-term borrowings and the use of derivative instruments entered into for hedging purposes. Due to the nature of our debt, the materiality of the fair values of the derivative instruments and the highly liquid, short-term nature and level of our cash and cash equivalents as of September 30, 2017,March 31, 2019, we believe there is no materialthat the risk of exposure to changing interest rates for those positions.positions is immaterial. There were no significant changes in how we manage interest rate risk between December 31, 20162018 and September 30, 2017.March 31, 2019.
For a discussion of our exposure to foreign currency exchange rate fluctuations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Foreign Currency Exchange Rates” in this report.
ITEM 4. CONTROLS AND PROCEDURES
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Evaluation of Disclosure Controls and Procedures |
Disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-15(e) and 15d-15(e)) are designed only to provide reasonable assurance that they will meet their objectives. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial and accounting officer), of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)) pursuant to Securities Exchange Act Rule 13a-15(b). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective to provide the reasonable assurance discussed above.
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Changes in Internal Control Over Financial Reporting |
No changechanges in internal control over financial reporting occurred during the most recent fiscal quarter ended September 30, 2017March 31, 2019 with respect to our operations, which hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting. As discussed in Note 2 to our consolidated financial statements in this report, we adopted ASU 2016-02 effective January 1, 2019. We implemented internal controls to ensure we adequately evaluated our contracts and properly assessed the impact of the new standard on our financial statements. There were no significant changes to our internal control over financial reporting due to the adoption of ASU 2016-02.
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ThirdFirst Quarter 20172019 Form 10-Q | | 4139 |
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| | PART II. OTHER INFORMATION |
ITEM 1A. RISK FACTORS
Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item IA, "Risk factors" in our Annual Report on Form 10-K for the year ended December 31, 2016,2018, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our stock. There have been no material changes to our risk factors since our Annual Report on Form 10-K for the year ended December 31, 2016.2018.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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Issuer Purchases of Equity Securities |
The following table provides information about shares of common stock acquired or repurchased during the three months ended September 30, 2017.March 31, 2019. All of these acquisitions were of common stock withheld by us to satisfy tax obligations of employees due upon exercise of stock appreciation rights and vesting of restricted stock awards and units. The level of acquisition activity varies from period to period based upon the timing of grants and vesting as well as employee exercise decisions.
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Period | Total number of shares purchased |
| | Average price paid per share |
| | Total number of shares purchased as part of publicly announced plans or programs(1) |
| | Approximate dollar value of shares that may yet be purchased under the plans or programs (in thousands) |
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Beginning balance, July 1, 2017 | | | | | | | $ | 50,000 |
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July 1, 2017 through July 31, 2017 | — |
| | $ | — |
| | — |
| | 50,000 |
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August 1, 2017 through August 31, 2017 | 24,710 |
| | 86.24 |
| | — |
| | 50,000 |
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September 1, 2017 through September 30, 2017 | 3,644 |
| | 87.00 |
| | — |
| | 50,000 |
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Total | 28,354 |
| | $ | 86.34 |
| | — |
| | $ | 50,000 |
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Period | Total number of shares purchased |
| | Average price paid per share |
| | Total number of shares purchased as part of publicly announced plans or programs(1) |
| | Approximate dollar value of shares that may yet be purchased under the plans or programs (in thousands) |
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Beginning balance, January 1, 2019 | | | | | | | $ | 50,000 |
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January 1, 2019 through January 31, 2019 | 5,404 |
| | $ | 65.88 |
| | — |
| | 50,000 |
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February 1, 2019 through February 28, 2019 | 233,407 |
| | 77.14 |
| | — |
| | 50,000 |
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March 1, 2019 through March 31, 2019 | 500 |
| | 80.00 |
| | — |
| | 50,000 |
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Total | 239,311 |
| | $ | 76.89 |
| | — |
| | $ | 50,000 |
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(1) | In August 2010, our Board of Directors approved a stock repurchase program that authorized us to purchase up to $50.0 million of our outstanding shares of common stock. We have not made any repurchases under the program to date, and the program does not have an expiration date. |
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4240 | | ThirdFirst Quarter 20172019 Form 10-Q |
ITEM 6. EXHIBITS
The exhibits listed below are filed or incorporated by reference as part of this Quarterly Report on Form 10-Q: |
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| | | | Filed In |
Exhibit Number | | Description of Document | | Filed Herewith | | Form | | Exhibit Number | | Filing Date |
| | | | X | | | | | | |
| | | | X | | | | | | |
| | | | X | | | | | | |
| | | | X | | | | | | |
101.INS* | | XBRL Instance Document. | | X | | | | | | |
101.SCH* | | XBRL Taxonomy Extension Schema Document. | | X | | | | | | |
101.CAL* | | XBRL Taxonomy Extension Calculation Linkbase Document. | | X | | | | | | |
101.DEF* | | XBRL Taxonomy Extension Definition Linkbase Document. | | X | | | | | | |
101.LAB* | | XBRL Taxonomy Extension Label Linkbase Document. | | X | | | | | | |
101.PRE* | | XBRL Taxonomy Extension Presentation Linkbase Document. | | X | | | | | | |
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| | | | Filed In |
Exhibit Number | | Description of Document | | Filed Herewith | | Form | | Exhibit Number | | Filing Date |
| | | | X | | | | | | |
| | | | X | | | | | | |
| | | | | | 10-Q | | 10.92 | | 8/4/2017 |
| | | | X | | | | | | |
| | | | X | | | | | | |
| | | | X | | | | | | |
| | | | X | | | | | | |
101.INS* | | XBRL Instance Document. | | X | | | | | | |
101.SCH* | | XBRL Taxonomy Extension Schema Document. | | X | | | | | | |
101.CAL* | | XBRL Taxonomy Extension Calculation Linkbase Document. | | X | | | | | | |
101.DEF* | | XBRL Taxonomy Extension Definition Linkbase Document. | | X | | | | | | |
101.LAB* | | XBRL Taxonomy Extension Label Linkbase Document. | | X | | | | | | |
101.PRE* | | XBRL Taxonomy Extension Presentation Linkbase Document. | | X | | | | | | |
* Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended or otherwise subject to liability of that Section, and shall not be part of any registration statement or other document filed under the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such filing.
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ThirdFirst Quarter 20172019 Form 10-Q | | 4341 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | BLACKBAUD, INC. |
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Date: | November 2, 2017May 3, 2019 | By: | /s/ Michael P. Gianoni |
| | | Michael P. Gianoni |
| | | President and Chief Executive Officer |
| | | (Principal Executive Officer) |
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Date: | November 2, 2017May 3, 2019 | By: | /s/ Anthony W. Boor |
| | | Anthony W. Boor |
| | | Executive Vice President and Chief Financial Officer |
| | | (Principal Financial and Accounting Officer) |
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4442 | | ThirdFirst Quarter 20172019 Form 10-Q |