Blackbaud Earnings: Pricing Initiatives Help With Solid Results, but Guidance Likely Disappoints

Narrow-moat Blackbaud reported fourth-quarter results that included impressive profitability, with adjusted EBITDA margin ahead of our estimates. Management laid out 2024 targets that were below FactSet consensus estimates. We anticipated that a weaker macro environment would weigh on 2024 results, so our model skewed conservative. We are therefore raising our estimates for revenue and profitability in 2024 to account for more-normal demand and company guidance. As a result, we are raising our fair value estimate to $77 per share from $70. We are encouraged by Blackbaud’s improved productivity and booking momentum, which we expect will continue to support the firm in achieving its Rule of 40 objective (the sum of organic revenue growth and adjusted EBITDA margin). We view the shares, which were down sharply following the announcement, as fairly valued.