Blackbaud (BLKB) Q2 2024 earnings summary

Executive summary

• Q2 2024 delivered strong revenue growth of 6.0% year-over-year to $287.3M, driven by recurring revenue, pricing initiatives, and robust Social Sector performance, which grew 8.5% and represented 88% of revenue.

• Profitability improved significantly, with GAAP operating margin rising to 14.7%, non-GAAP adjusted EBITDA margin reaching 35.7% (up 290 basis points), and net income increasing to $21.8M.

• The Corporate Sector declined 9.2% due to EverFi underperformance and macro headwinds; strategic alternatives, including divestiture, are being considered for EverFi.

• The board expanded the stock repurchase program to $800 million, with up to 10% of outstanding shares targeted for repurchase in 2024; 2.95M shares repurchased for $262.6M in H1 2024.

• Focus remains on innovation, cost management, and capital allocation, including product investments and prudent debt management.

Financial highlights

• Q2 2024 total revenue was $287.3M, up 6.0% year-over-year; recurring revenue rose 7.2% to $281.4M, while one-time services revenue declined 31.7% to $5.9M.

• Non-GAAP adjusted EBITDA margin reached 35.7% (up 290 bps YoY); non-GAAP net income was $55.7M, and non-GAAP diluted EPS was $1.08 (up $0.10 YoY).

• Operating cash flow for H1 2024 was $118.4M, with free cash flow at $83.9M; adjusted free cash flow for Q2 was $36M.

• Rule of 40 for Q2 2024 was 42.4%.

• Gross margin improved to 56.6% in Q2 2024 from 55.2% in Q2 2023.

Outlook and guidance

• 2024 GAAP revenue guidance is $1.164B–$1.194B, with 7.4% organic revenue growth expected; non-GAAP adjusted EBITDA margin guidance is 32.5%–33.5%.

• Non-GAAP EPS guidance is $4.12–$4.38; adjusted free cash flow guidance is $254M–$274M.

• Social Sector projected to grow high single to low double digits, offset by Corporate Sector decline; revenue growth to benefit from multi-year contracts with annual price escalators.

• 2024 guidance includes a one-time step up in cybersecurity investment, impacting margin by ~200bps; not expected to repeat in 2025.

• Full-year guidance reiterated across all metrics, with expectations to be at the low end of revenue guidance due to EverFi.