Slide 1: Blackbaud Q3 Investor Presentation
Blackbaud Q3 Investor Presentation Ticker: BLKB October 2017 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements Forward-Looking Statements:This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements in this presentation
Slide 3: Historical Financials and Non-GAAP Financial Measures
Historical Financials and Non-GAAP Financial Measures Use of Non-GAAP Financial Measures: The Company has provided in this presentation financial information that has not been prepared in accordance with GAAP. The Company uses these non-GAAP financial measures internally in analyzing its financial r
Slide 4: Key Messages
Key Messages 1 The leader in a large and growing market 2 Highly differentiated from the competition 3 Executing a clear growth strategy 4
Slide 5: Our Markets, Key Differentiators, Strategy for Growth, Financial Performance
Our Markets Key Differentiators Strategy for Growth Financial Performance 5
Slide 6: Philanthropy is Large, Stable and Growing—US Statistics
Philanthropy is Large, Stable and Growing—US Statistics (3)Charitable Giving Sizeable & 1.6M Growing(1) Nonprofits $ Billions Meaningful to 3rd Economy(2) Largest Employer Significant $2T+ Annual Industry(1) Revenue & Expense Giving is Tracks GDP Inflation-adjusted dollars Current dollars Stable(3)
Slide 7: Charitable Giving is Significant and Diverse
Charitable Giving is Significant and Diverse Sources Recipients Recipients 32% 80% 15% Religion Education $123B $60B Individuals 12% Human Services $47B 10% Foundations $41B $390 15% Billion 8% Health $33B Foundations 8% Public Society Benefit $30B 5% Arts, Culture, Humanities $18B 6% International
Slide 8: Substantial TAM with Significant Penetration Opportunity
Substantial TAM with Significant Penetration Opportunity 2017 TAM > $7B Penetration < 15% 2016 TAM CAGR > 7% TAM Total market opportunity $15B TAM represents total estimated annual spend. FY 2016 TAM $6.9B. FY 2017 TAM $7.6B Sources: Based on 2013 data derived from primary research – Boston Analytic
Slide 9: Clear Market Leader
Clear Market Leader Program Payment Fundraising Engagement Financials Analytics Management Processing Wide Economic Moat Blackbaud is the largest software vendor focused on the social good community Only Blackbaud offers the full portfolio of purpose-built, integrated solutions (and partners) Highly
Slide 10: Our Markets, Key Differentiators, Strategy for Growth, Financial Performance
Our Markets Key Differentiators Strategy for Growth Financial Performance 10
Slide 11: The Market's Only Complete Solution Offering
The Market’s Only Complete Solution Offering… Differentiator 1 Constituent Digital Peer-to-Peer Program Relationship Financials Marketing Fundraising Management Enterprise Management Enterprise CRM Education • ON Suite • SmartTuition • AcademicWorks Luminate Luminate Online TeamRaiser CRM Mid Salesf
Slide 12: Industry Leading Cloud Technology
…Industry Leading Cloud Technology… Differentiator 2 – consistent user experience Application Services – micro-services architecture Cloud Infrastructure – strategic partners Cloud Operations – industry-leading standards – open source technology 12
Slide 13: Unmatched Domain Expertise and Capability
…Unmatched Domain Expertise and Capability Differentiator 3 Market Leadership Big Data and Analytics Thought Leadership Sales Industry’s largest dataset Blackbaud Institute Services Prospect research Employ industry experts Solutions Database maintenance Educate our customers Customer Success Campai
Slide 14: Our Markets, Key Differentiators, Strategy for Growth, Financial Performance
Our Markets Key Differentiators Strategy for Growth Financial Performance 14
Slide 15: Executing a Clear Four-Point Growth Strategy
Executing a Clear Four-Point Growth Strategy 1. Deliver integrated and open solutions in the cloud 2. Drive sales effectiveness 3. Expand total addressable market 4. Improve operating efficiency 15
Slide 16: Deliver Integrated and Open Solutions in the Cloud
Deliver Integrated and Open Solutions in the Cloud STRATEGY 1 Integration delivers total solutions +45% Subscription CAGR Open architecture extends functionality Modern micro-services architecture Rapid feature & functionality delivery Common user experience Accessible anytime, anywhere 6% 28% 59% S
Slide 17: Drive Sales Effectiveness
Drive Sales Effectiveness STRATEGY 2 Strategy Result Organizational framework—common playbook Best practices consistently applied Increase efficiency—systems, tools, automation Equip for success Market coverage—deploy headcount Increase number of deal opportunities Add: Direct sales—new logo focus T
Slide 18: Expand TAM with Acquisitions
Expand TAM with Acquisitions STRATEGY 3 Expand Accelerate Accelerate rev Accretive to Acquisitions Vertical TAM shift to cloud growth margins Peer-to-Peer +$0.2B Education & Foundations +$0.1B Education +$0.7B Foundations & Corporations +$0.6B Education +$0.3B JustGivin
Slide 19: Improve Operating Efficiency Delivered
Improve Operating Efficiency STRATEGY 4 Strategy Results Infrastructure investments Enhanced speed Best-of-breed platforms >75% systems reduction Better accuracy Delivered +260bps Operational excellence Enriched quality Exiting 2016 @ CC Simplify, standardize, optimize, automate Highly scalable Prod
Slide 20: Our Markets, Key Differentiators, Strategy for Growth, Financial Performance
Our Markets Key Differentiators Strategy for Growth Financial Performance 20
Slide 21: Business Model Drives Recurring Revenue
Business Model Drives Recurring Revenue $790M $735M Subscriptions Revenue 14% CAGR Revenue CAGR 11x 59% 45% Recurring Revenue $191M 1.6x CAGR 79% 20% 2006 2016 2017 Guidance* Subscriptions Maintenance Services License & Other Non-GAAP Revenue *Guidance issued 10/25/17. $790M is the mid-point of the
Slide 22: Balancing Investments with Margin Expansions
Balancing Investments with Margin Expansions 25% 24% Executing Strategy • Future expansion depends 23% Infrastructure Investments 23.5% on level of investments in: 22% Operational Excellence • Sales and marketing Productivity Gains • Customer success 21% 20.5% ~ 20.9% • Engineering 20% 20.1% •
Slide 23: Delivering Revenue Growth and Improved Profitability
Delivering Revenue Growth and Improved Profitability Total Operating Diluted Free Cash Revenue Margin EPS Flow $130 $2.16 $790 ~ 20.5% $94 $571 +38% 17.8% +15% +70% +38% $1.27 2014 2017 EST 2014 2017 EST 2014 2017 EST 2014 2017 EST Non-GAAP revenues, operating margin, diluted EPS and free cash flow.
Slide 24: Maintaining a Disciplined Capital Strategy
Maintaining a Disciplined Capital Strategy Growth and operating initiatives • Capital investments consistent ~55% with solution roadmap and strategy • Invest in operational efficiencies • Strategic acquisitions Annual Free Maintain strong balance sheet • Cash balances Cash Flow ~30% • Debt maintenan
Slide 25: Proven History of Deleveraging
Proven History of Deleveraging 3.5x Targeted Max Leverage 3.5x 3.0x 2.5x Leverage Ratio 2.0x Optimal Leverage 1.8x 1.5x 1.0x 0.5x 0.0x Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2012 2013 2014 2015 2016 2017 Note: Current covenant for leverage ratio is less than or equal to
Slide 26: Generating Healthy Cash Flows Inclusive of Investments
Generating Healthy Cash Flows Inclusive of Investments Free Cash Flow $180 Uses and Investments $160 $140 $120 Cash Flow ($ millions) Investing in Innovation $100 (capitalized software) $80 $60 Back office and cloud $40 infrastructure investments (capitalized expenditures) $20 $- 2014 2015 2016 2017
Slide 27: Strong Returns on Increasing Investment Base
Strong Returns on Increasing Investment Base Strong Returns 2016 WACC: 7.9% 2.5x 2016 ROIC*: 19.8% 27.4% CAGR Invested Capital *See appendix for detailed ROIC calculation 27
Slide 28: Tracking to Long-Term Aspirational Goals
Tracking to Long-Term Aspirational Goals Goals assume 2014 constant currency Guidance Mid-Point Goals 2014 2015 2016 2017 2014-2017 Non-GAAP organic 6%–10% 7.1% 7.7% 9.8% 5%+ revenue growth Annually Non-GAAP operating 20.5%–23.5% 17.8% 19.1% 20.1% ~20.9% margin Exiting 2017 Cash flow from $500M–$550
Slide 29: Guidance (October 2017)
Guidance (October 2017) Strong Double-Digit Growth Across Categories Mid-Point YoY Growth Est. FX Impact Non-GAAP Revenue $785 million–$795 million $790M 8% <$1M Non-GAAP Operating Income $159 million–$165 million $162M 12% <$1M Non-GAAP Operating Margin 20.3%–20.8% 20.5% 90 bps <10 bps Non-GAAP Dil
Slide 30: Improving Shareholder Value
SUMMARY Improving Shareholder Value Performance Strategy execution is accelerating financial performance Goals Delivering on long-term aspirational goals Technology Early days of integrated cloud solution strategy Capital Strategy Significant cash flow and strong balance sheet 30
Slide 31: Appendix
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Slide 32: Early Adoption of ASU 2016-09
Early Adoption of ASU 2016-09(1) Summary of Changes Impact on Operating Cash Flow(4) Excess Tax Employee Tax Benefits(2) Withholding(3) (in $ millions) FY FY 1H 2014 2015 2016 APIC Cash from Ops (as reported) $102.3 $114.3 $38.0 Net Income Excess Tax Benefits $7.5 $5.5 $2.7 Operating Cash Flow Emplo
Slide 33: Return on Invested Capital (ROIC) Calculation
Return on Invested Capital (ROIC) Calculation 2016 Total Assets $1,310,210 Less restricted cash (353,771) Less non-interest bearing current liabilities (321,970) Add: Accumulated depreciation 95,901 Add: Accumulated amortization of software development 17,544 Add: Accumulated amortization of intangi
Slide 34: Historical Reconciliations of GAAP and Non-GAAP Organic Revenue Growth
Historical Reconciliations of GAAP and Non-GAAP Organic Revenue Growth (Unaudited) (dollars in thousands) Nine months ended Three months ended Year ended Three months ended 09/30/2017 09/30/2016 09/30/2017 06/30/2017 03/31/2017 12/31/2016 12/31/2016 09/30/2016 06/30/2016 03/31/2016 GAAP revenue $ 57
Slide 35: Historical Reconciliations of GAAP and Non-GAAP Organic Revenue Growth
Historical Reconciliations of GAAP and Non-GAAP Organic Revenue Growth (Unaudited) (dollars in thousands) Nine months ended Three months ended Year ended Three months ended 09/30/2017 09/30/2016 09/30/2017 06/30/2017 03/31/2017 12/31/2016 12/31/2016 09/30/2016 06/30/2016 03/31/2016 GAAP subscription
Slide 36: Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations
Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations (Unaudited) Three Months Ended September 30, 2017 Acquisition-related Stock-based Amortization of Deferred Revenue Compensation Intangibles from Employee Acquisition-related Acquisition-related Non-GAAP (dollars in thousands, e
Slide 37: Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations
Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations (Unaudited) Nine Months Ended September 30, 2017 Acquisition-related Stock-based Amortization of Deferred Revenue Compensation Intangibles from Employee Acquisition-related Acquisition-related Non-GAAP (dollars in thousands, ex
Slide 38: Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations
Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations (Unaudited) Three Months Ended September 30, 2016 Acquisition-related Stock-based Amortization of Deferred Revenue Compensation Intangibles from Employee Acquisition-related Acquisition-related Non-GAAP (dollars in thousands, e
Slide 39: Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations
Reconciliation of GAAP to Non-GAAP Consolidated Statements of Operations (Unaudited) Nine Months Ended September 30, 2016 Acquisition-related Stock-based Amortization of Deferred Revenue Compensation Intangibles from Employee Acquisition-related Acquisition-related Non-GAAP (dollars in thousands, ex
Slide 40: Reclassifications to the historical unaudited financial information
Historical Financial Statements and Non-GAAP Financial Information Being Presented Reclassifications to the historical unaudited financial information In order to provide comparability between periods presented, certain previously reported historical financial information has been reclassified to co
Slide 41: Recently adopted accounting pronouncements
Historical Financial Statements and Non-GAAP Financial Information Being Presented Recently adopted accounting pronouncements In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2015-03, Interest - Imputation of Interest - Simplifying the Presen
Slide 42: Historical Consolidated Balance Sheets (Unaudited)
Historical Consolidated Balance Sheets (Unaudited) (in thousands) Q1 2015 Q2 2015 Q3 2015 Q4 2015 (1) Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Assets Current assets: Cash and cash equivalents $ 13,286 $ 13,227 $ 17,555 $ 15,362 $ 12,084 $ 15,263 $ 16,462 $ 16,902 $ 13,872 $ 17,268 $ 1
Slide 43: Historical Consolidated Statements of Comprehensive Income (Unaudited)
Historical Consolidated Statements of Comprehensive Income (Unaudited) (in thousands, except share and per share amounts) Q1 2015 Q2 2015 Q3 2015 Q4 2015 FY 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 FY 2016 Q1 2017 Q2 2017 Q3 2017 Revenue Subscriptions $ 72,513 $ 80,009 $ 80,901 $ 98,336 $ 331,759 $ 96,8
Slide 44: Historical Consolidated Statements of Cash Flows (Unaudited)
Historical Consolidated Statements of Cash Flows (Unaudited) 3 months ending 6 months ending 9 months ending 12 months ending 3 months ending 6 months ending 9 months ending 12 months ending 3 months ending 6 months ending 9 months ending (in thousands) 3/31/2015 6/30/2015 9/30/2015 12/31/2015 3/31/
Slide 45: Historical Reconciliations of GAAP to Non-GAAP Financial Measures (Unaudited)
Historical Reconciliations of GAAP to Non-GAAP Financial Measures (Unaudited) (in thousands, except share and per share amounts) Q1 2015 Q2 2015 Q3 2015 Q4 2015 FY 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 FY 2016 Q1 2017 Q2 2017 Q3 2017 GAAP Revenue $ 146,993 $ 156,259 $ 158,811 $ 175,877 $ 637,940 $ 16
Slide 46: Historical Reconciliations of GAAP to Non-GAAP Financial Measures (Unaudited)
Historical Reconciliations of GAAP to Non-GAAP Financial Measures (Unaudited) 3 months ending 6 months ending 9 months ending 12 months ending 3 months ending 6 months ending 9 months ending 12 months ending 3 months ending 6 months ending 9 months ending (in thousands) 3/31/2015 6/30/2015 9/30/2015