Blackbaud Earnings: Weaker Performance Driven by EVERFI, Which Is Now Officially for Sale

Narrow-moat Blackbaud reported results that were in line with our revenue expectations and slightly better than we anticipated from a profitability standpoint. We were below FactSet consensus estimates from both perspectives given our belief that EVERFI issues would continue to worsen and because the company provides only annual guidance. Ultimately, that belief played out during the third quarter, with the company disclosing that as it relates to EVERFI, it had taken cost-cutting actions and retained Goldman Sachs to explore alternatives. Because of persistent issues, Blackbaud lowered its annual guidance for both revenue and non-GAAP EPS, while raising its adjusted EBITDA margin. Because we were already anticipating more prolonged EVERFI weakness, we are maintaining our fair value estimate of $77 per share. We see shares as fairly valued after the large selloff on Oct. 30.