Blackbaud (BLKB) has reported impressive third-quarter 2023 earnings, surpassing the Zacks Consensus Estimate by 15.5%. The company’s non-GAAP earnings per share stood at $1.12, marking a significant 62.3% year-over-year increase. Total revenues for the quarter reached $277.6 million, beating the Zacks Consensus Estimate by 0.2% and reflecting a 6.2% year-over-year growth, primarily driven by strong recurring revenue growth.

Recurring Revenues Drive Growth

In the reported quarter, recurring revenues contributed 96.9% to Blackbaud’s total revenues, amounting to $269 million. This represents a year-over-year increase of 7.9%. On the other hand, one-time services and other revenues accounted for 3.1% of the top line, totaling $8.6 million, which is a decrease of 27.8% year over year. Non-GAAP organic revenues, on a reported basis, improved by 6.6% while increasing by 5.9% at constant currency compared to the previous year. Non-GAAP organic recurring revenues, in particular, experienced substantial growth, rising 8.3% year over year.

Margins Show Improvement

Blackbaud’s non-GAAP gross margin expanded by 280 basis points (bps) from the previous year, reaching 62.4%. This improvement in gross margin contributed to the company’s strong performance. Additionally, total operating expenses decreased by 9.2% year over year to $133.8 million, and as a percentage of revenues, this figure contracted by 820 bps to 48.2%. The company’s non-GAAP operating margin extended by 960 bps, reaching 28.7%, while its non-GAAP adjusted EBITDA margin saw significant growth, increasing by 940 bps year over year to reach 35%.

Strong Cash Flow and Balance Sheet Position

As of September 30, Blackbaud reported total cash, cash equivalents, and restricted cash of $390.7 million, compared to $790.3 million as of June 30, 2023. The company’s total debt (including the current portion) as of September 30, 2023, stood at $723.4 million, a decrease from $846.6 million as of June 30, 2023. In terms of cash flow, Blackbaud reported $128 million in cash provided by operating activities for the third quarter, compared to $108 million in the prior-year period. The company’s non-GAAP adjusted free cash flow for the quarter reached $117.6 million, reflecting growth from the previous year.

Guidance for 2023 Reiterated

Blackbaud has reiterated its guidance for 2023, with non-GAAP revenues expected to be between $1.095 billion and $1.125 billion. The Zacks Consensus Estimate for non-GAAP revenues is $1.11 billion. The company projects a non-GAAP adjusted EBITDA margin in the range of 30.5% to 31.5%. Non-GAAP earnings per share are anticipated to be between $3.63 and $3.94, with the Zacks Consensus Estimate at $3.79 per share. Furthermore, Blackbaud forecasts non-GAAP adjusted free cash flow for the year to be in the $190 million to $210 million range.

Stocks to Consider for Investment

In the broader technology space, there are several stocks worth considering for investment. Asure Software (ASUR), Synopsys (SNPS), and VMware (VMW) are among the top choices. While Asure Software sports a Zacks Rank #1 (Strong Buy), Synopsys and VMware carry a Zacks Rank #2 (Buy) each. Asure Software has shown consistent growth and an average surprise of 676.4% in its earnings. Synopsys has a long-term earnings growth rate of 16.7%, and VMware has displayed a 1.2% average earnings surprise. These stocks present attractive investment opportunities and have performed well in the past year.

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Conclusion

Blackbaud has delivered strong financial results in the third quarter of 2023, exceeding earnings expectations and achieving positive revenue growth. The company’s focus on recurring revenues and its improvement in margins and cash flow position contribute to its overall success. With a positive outlook and guidance reiterated for 2023, Blackbaud remains well-positioned for continued growth and offers potential investment opportunities in the technology sector.

Disclaimer: The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.