Business Overview and History
Blackbaud, Inc. (NASDAQ:BLKB) is the leading software provider exclusively dedicated to powering social impact. With over four decades of experience, the company has solidified its position as the go-to partner for nonprofits, educational institutions, healthcare organizations, and corporations committed to social responsibility.
Blackbaud was originally incorporated in New York in 1982 and later reincorporated as a South Carolina corporation in 1991 and a Delaware corporation in 2004. The company's mission is to serve the unique needs of the social impact community, providing essential software and services that enable its customers to focus on their vital work.
Blackbaud's product portfolio spans a wide range of solutions, including fundraising and engagement, financial management, grant and award management, education management, social responsibility, and data intelligence. The company's flagship offerings, such as Raiser's Edge NXT, Blackbaud CRM, and Blackbaud Altru, are purpose-built to address the complex operational and financial requirements of its customers.
Over the years, Blackbaud has strategically expanded its capabilities through targeted acquisitions, including the 2015 acquisition of Smart Tuition, a leading tuition management solution for private and charter K-12 schools, and the 2021 acquisition of EVERFI, a leading provider of digital education and workforce development solutions. However, the EVERFI acquisition, while initially seen as a strategic move, ultimately proved to be a challenge, and the company divested the business in December 2024 for a nominal amount, recording a significant loss.
Blackbaud's essential software is built to accelerate impact in fundraising, nonprofit financial management, digital giving, grantmaking, corporate social responsibility, and education management. Millions of people across more than 100 countries connect, give, learn, and engage through Blackbaud platforms. During 2024, the company had nearly 100,000 customers that paid Blackbaud through transactional fees and approximately 40,000 customers with contractual billing arrangements.
In May 2020, Blackbaud faced a significant challenge when it became the victim of a ransomware attack, known as the "Security Incident." A cybercriminal removed a copy of a subset of data from Blackbaud's self-hosted environment, resulting in various legal proceedings, claims, inquiries, and investigations. The company incurred significant expenses related to the Security Incident, which negatively impacted its GAAP profitability and cash flow for several years.
Financial Performance and Metrics
Blackbaud's financial performance has shown significant improvement over the past five years. In 2024, the company reported total revenue of $1.16 billion, representing an organic growth rate of 5.2% compared to the prior year. This growth was driven by a strong performance in the company's social sector, which accounts for approximately 88% of total revenue and grew 7% year-over-year.
The company's recurring revenue, which includes both contractual recurring and transactional recurring components, reached $1.13 billion in 2024, up 5.4% from the previous year. Contractual recurring revenue, the largest portion of Blackbaud's top line, grew 8% in 2024, while transactional recurring revenue increased by 6%.
Blackbaud's profitability has also improved markedly in recent years. In 2024, the company reported an adjusted EBITDA margin of 33.7%, up from 26.5% in 2020. This margin expansion has been driven by a combination of revenue growth, cost optimization initiatives, and increased operational efficiency.
The company's strong cash flow generation has been another highlight, with adjusted free cash flow reaching $245 million in 2024, representing a margin of 21.2% of revenue. This robust cash flow has enabled Blackbaud to fund its growth initiatives, including product innovation and strategic acquisitions, while also returning capital to shareholders through a share repurchase program.
In 2024, Blackbaud bought back 10% of its outstanding common stock, and when including the net share settlement on employee stock compensation, the figure rises to 11%. The company has indicated that it plans to continue aggressively repurchasing between 3% to 5% of its outstanding shares in 2025.
Financials
Blackbaud's financial performance has been strong, with total revenue reaching $1.16 billion in 2024, representing an organic growth rate of 5.2%. The company's recurring revenue, which includes both contractual and transactional components, reached $1.13 billion in 2024, up 5.4% from the previous year.
For the full year 2024, Blackbaud reported a net loss of $283.17 million, primarily due to a $405.36 million loss on the disposition of the EVERFI business. Annual operating cash flow was $296 million, and annual free cash flow was $228.8 million.
In the fourth quarter of 2024, Blackbaud reported revenue of $302.23 million, representing a 2.5% year-over-year growth. However, the company recorded a net loss of $334.54 million for the quarter, again primarily due to the EVERFI disposition.
Blackbaud operates globally, with approximately 14% of total revenue in 2024 generated from operations outside the U.S. The company has operations in the United States, Australia, Canada, Costa Rica, India, and the United Kingdom, supporting users in over 100 countries.
Liquidity
The company's strong cash flow generation has been a highlight, with adjusted free cash flow reaching $245 million in 2024, representing a margin of 21.2% of revenue. This robust cash flow has enabled Blackbaud to fund its growth initiatives and return capital to shareholders through share repurchases.
As of December 31, 2024, Blackbaud had $67.63 million in cash and cash equivalents, with $468.70 million available under its 2024 Credit Facilities. The company's debt-to-equity ratio stood at 7.81, while its current ratio and quick ratio were both 0.78.
The 2024 Credit Facilities provide for a $700 million revolving credit facility and an $800 million term loan facility, maturing in April 2029. This financial flexibility supports Blackbaud's ongoing operations and strategic initiatives.
Innovation and Product Roadmap
Blackbaud's commitment to innovation is a key competitive advantage. The company's Intelligence for Good program integrates various machine learning and artificial intelligence (AI) capabilities that help customers streamline workflows, enhance efficiency, and achieve better outcomes. For example, the company has released generative AI features across multiple products, primarily for composing outreach communications.
In the current quarter, Blackbaud plans to release Blackbaud Copilot, an industry-leading innovation that provides contextual responses to questions and drives actions. Copilot leverages Blackbaud's extensive data resources and expertise in the social impact sector to deliver powerful AI-powered insights and recommendations to customers.
The company is also leveraging AI to transform the way it operates, identifying and scaling solutions across marketing, customer success, and engineering to drive internal efficiencies. Blackbaud's focus on innovation and the integration of cutting-edge technologies positions it well to continue delivering value to its customers and staying ahead of the competition.
Market Position and Competitive Landscape
Blackbaud operates in three primary market groups: the Social Sector, the Corporate Sector, and the Education Sector. The Social Sector, which accounts for approximately 88% of Blackbaud's total revenue, focuses on sales to customers and prospects in the social sector, such as nonprofits, foundations, healthcare organizations, and other not-for-profit entities globally. This includes the company's JustGiving platform.
The Corporate Sector, which makes up around 12% of total revenue, focuses on sales to corporate customers and prospects engaged in social responsibility initiatives and includes the YourCause solutions. The Education Sector provides solutions for K-12 and higher education institutions.
The market for software and services targeting philanthropic-focused for-profit and nonprofit organizations is highly competitive and fragmented, with low barriers to entry for many segments. However, Blackbaud believes its industry expertise, comprehensive suite of integrated solutions, and reputation as a market leader provide a competitive advantage. The overall social impact software market is expected to see mid-single-digit annual growth over the next several years.
Risks and Challenges
While Blackbaud's financial and operational performance has been impressive, the company faces several risks and challenges that investors should be aware of.
The social impact sector, while resilient, can be susceptible to changes in government funding and economic conditions. Reductions in grants, awards, or other funding sources for Blackbaud's nonprofit, educational, and healthcare customers could impact their ability to invest in the company's solutions.
Additionally, Blackbaud operates in a highly competitive market, with both niche providers and larger technology companies vying for a share of the social impact software and services market. The company's ability to maintain its market-leading position and continue to innovate its product offerings is crucial to its long-term success.
The company's transition to cloud-based solutions and the integration of emerging technologies, such as AI, also present operational and execution risks that Blackbaud must navigate effectively. Any delays or challenges in delivering these innovations could impact customer adoption and the company's growth trajectory.
Furthermore, Blackbaud has faced several cybersecurity incidents in the past, including a ransomware attack in 2020 that resulted in significant legal, operational, and reputational costs. The company's ability to maintain robust cybersecurity measures and protect its customers' sensitive data is paramount to preserving trust and mitigating future risks.
Outlook and Conclusion
Despite the risks and challenges, Blackbaud's long-term outlook remains positive. The company's proven track record, market-leading position, and commitment to innovation position it well to continue capitalizing on the growing demand for purpose-built software and services in the social impact sector.
For the full year 2025, Blackbaud has provided guidance for revenue in the range of $1.115 billion to $1.125 billion, representing organic growth of 4.2% to 5.1% as reported, or 4.5% to 5.4% on a constant currency basis. The company expects to maintain its adjusted EBITDA margin in the range of 34.9% to 35.9%, while generating adjusted free cash flow of $185 million to $195 million.
Blackbaud is guiding for 2025 non-GAAP EPS in the range of $4.16 to $4.35, up 2% to 7% year-over-year. The company expects its Rule of 40 at constant currency to be 40.4% at the midpoint of its 2025 guidance, a 170 basis point improvement year-over-year.
Blackbaud's focus on delivering value to its customers, investing in product development, and prudently managing its capital structure have been the key drivers of its success. As the company continues to execute on its strategic initiatives and navigate the evolving technology landscape, it is poised to remain a leading provider of essential software and services to the social impact community.