Solid Quarter as Blackbaud Progresses Toward Rule of 40 Goals; FVE Down to $74

Wide-moat Blackbaud reported solid overall first-quarter results that were mixed compared with our expectations. Given the firm provides only annual guidance, we think the quarter was generally in line with investor expectations, with growth a bit better and profitability a bit light, and we see the company as progressing toward its full-year outlook, which was reiterated. Based on results and the outlook, we are modestly lowering our profitability outlook through the medium term, thus we are lowering our fair value estimate to $74 per share, from $77. We still see shares as attractive. We continue to believe in the roadmap for margin expansion and organic revenue growth over the next five years based on a combination of price increases, revenue and cost synergies from the EVERFI acquisition, improved salesforce productivity as a result of an increased focus on digital, and the elimination of duplicative costs as Blackbaud moves its solutions to the public cloud.