Good Margins Drive Solid Q3 Results for Blackbaud; 2023 Previewed With More of the Same; FVE $70

Wide-moat Blackbaud reported solid overall third-quarter results that were in line on revenue and better in terms of profitability relative to our expectations. Guidance was redirected toward the middle of the range for the previously issued outlook for revenue and the top of the range for adjusted EBITDA margin. The company also previewed 2023 guidance, which was loosely in line with our revenue estimate and a little better on profitability. In short, pricing actions are helping on both revenue and margins, data center closures, sales productivity, targeted headcount reductions, and slowed hiring are all contributing to margins. Management is pleased with improved renewals even in the face of pricing recent pricing actions. Lastly, we note EVERFI issues from last quarter seem to have stabilized. Based on positive results, we are maintaining our fair value estimate of $70 per share. We continue to see shares as attractive for long-term investors, but we view shares as more sensitive to a recession than most of our enterprise software stocks. We also see the involvement of Clearlake partners as putting a floor under the stock, although the recently adopted one-year shareholder rights action muddies the water somewhat.