January 18, 2004

Blackbaud predicts growth for rest of '04

John P. McDermott  /  The Post and Courier

After going public last month, the local software firm expects sales of $135 million by year's end

In its first unscripted remarks to investors since its initial public offering, Blackbaud Inc. presented a bullish forecast for the rest of 2004 Tuesday while its top executives gave investors a primer about how its business model differs from most traditional software makers.

"Our outlook for the rest of the year remains positive," said Robert J. Sywolski, chief executive of the Charleston-based software company. Timothy V. Williams, chief financial officer, said Blackbaud turned in a "solid" July and "at this point in time August is proceeding well." As a result, Williams said, the company has decided to issue growth forecasts for the third and fourth quarters.

Specifically, Williams said Blackbaud is "comfortable" in projecting revenue of $33.5 million to $34.5 million for each of the next two reporting periods, representing year-to-year gains of 12 percent and 11 percent, respectively. For all of 2004, the company is calling for sales to climb 14 percent to $135 million.

On a per-share basis, Blackbaud's earnings are forecast to total 50 to 51 cents for 2004, or about $21 million, compared to a penny a share loss last year. Tuesday's conference call marked Wall Street's version of a coming out party for Blackbaud, which as a brand new stock issuer had been prohibited from making public comments about most aspects of its business until after its $65 million IPO was completed. The federally mandated "quiet period" has now lapsed.

Besides fielding questions from investors, one of the company's goals Tuesday was to ensure that analysts who can influence the stock price in their reports understand its financial model. For instance, Williams stressed several times that certain Blackbaud revenue streams are highly seasonal because roughly half of the company's customers – mainly nonprofit organizations – end their fiscal years in June while the rest close out their books in December. That affects the timing of their spending decisions, he said.

Also, Blackbaud said its sales figures are based on an unusually high number of transactions – some 1,200 a month – as opposed to relying on one or two "colossal" deals each quarter. "Therefore, revenue tends to be more predictable than for other software companies," Williams said.

Industry analysts who participated in the call were from J.P. Morgan, Thomas Weisel Partners and Wachovia. All three firms were part of the underwriting team that helped sell the Blackbaud IPO to investors. Most of the questions that Sywolski and Williams fielded were about revenue trends, especially software sales to larger nonprofit groups. Shares of Blackbaud went public at $8 a share last month. The stock rose 3.3 percent Tuesday to close at $9.34, up 30 cents. The conference call was held after markets closed.