Blackbaud Earnings: Good Recurring Revenue Growth Uplifts Results

We are maintaining our $77 fair value estimate for narrow-moat Blackbaud, after the firm reported first-quarter results that came in ahead of our revenue expectations but below our bottom-line estimates. Given Blackbaud’s service into the nonprofit niche, we note the firm is more susceptible to macro swings compared with software peers, and its first quarter is seasonally the weakest. Nevertheless, we are encouraged by Blackbaud’s execution of its operating plan thus far, which we expect will enable the firm to attain its Rule of 40 objective (the sum of organic revenue growth and adjusted EBITDA margin) for the year. The firm lowered its 2024 revenue guidance to reflect the divestiture of a nonstrategic business, while bottom-line targets are unchanged. We see shares as fairly valued.