February 14, 2013

Blackbaud Issues First Earnings Report Since Layoffs

Brendan Kearney  /  Post and Courier

Blackbaud had a tough 2012 thanks to the still-struggling economy and the delayed acquisition of a rival software company, but the past few months have given the leadership of the Daniel Island company reason for optimism.

That was the message Wednesday as Blackbaud reported its earnings for the first time since announcing a raft of layoffs and the pending departure of its chief executive officer last month.

The company, which sells fundraising software to nonprofits, reported net income of $6.58 million on revenues of $447.4 million for 2012. Net income for the last three months of the year was $3.27 million on revenues of $120 million.

Those revenue figures are higher than the corresponding time periods in 2011, but this year they include Convio, the Austin, Texas-based firm that Blackbaud bought, after months of regulatory review, in May for $275 million.

The delay hurt Convio's business in the first part of 2012, then integrating the two companies, with customers essentially on hold, hurt Blackbaud, especially in the third quarter.

But the fourth quarter offered hope. CEO Marc Chardon said there were "early signs of acceleration in the opportunity pipeline" for one of Convio's main products, Luminate.

Blackbaud also managed to exceed its $9 million to 10 million cost-savings goal for the year.

Chardon, who will step down by the end of this year, estimated that the 150 layoffs the company announced a month ago would save another $10 million in 2013.

"We remain optimistic about the market opportunity ahead of the company, and I'm still absolutely confident that the enhanced position from the acquisition of Convio will lead to improved growth and profitability as we go through 2013 and beyond," Chardon said during a conference call with investors.

The company's board of directors approved a first-quarter dividend of 12 cents per share payable March 15 to stockholders of record on Feb. 28.

Chardon said Blackbaud's services revenues, which were disappointing in the third quarter and led to a portion of the layoffs, were "relatively weak" again in the fourth quarter. The company is in the midst of a transition from selling a perpetual license to its software to a subscription model.

"If you take a look at the opportunity space and you were to say we were selling sort of half the units that we would be selling in Q3 in our initial thinking, you wouldn't be far off," Chardon said.

But international business was up, Chardon said, and the company's product investments will eventually pay off.

"We expect to be a major beneficiary when the economic and charitable giving environment eventually improves," he said.

Analysts on the call thanked and praised Chardon for his more than seven years at the helm of the company, which has tripled in size over his tenure and now has about 2,600 employees.

Asked about his successor, Chardon said he and the board have yet to select the executive search firm that will facilitate that process.

"So you can infer that there are plenty of people interested in the job because it's a really cool job," Chardon said. "But the sorting through of it will happen after the firm is selected."

"I'm pretty sure I'll see you next quarter," he said, referring to the May earnings report, "because these things take time."