Blackbaud Earnings: Strong Margins Drive Early 'Rule of 40' Attainment
Narrow-moat Blackbaud reported third-quarter results that were ahead of our expectations. We were most impressed by the firm surpassing its "Rule of 40" goal ahead of schedule. Management reiterated its full-year 2023 targets, which we are confident the firm can achieve as its pricing actions, improved productivity, and booking momentum from the EVERFI acquisition continue to take effect. Although Blackbaud is exposed to macroeconomic risk and seasonality, we expect margin expansion to continue throughout 2024. Balancing near-term expectations with our long-term outlook, we maintain our $70 fair value estimate and view the shares as fairly valued. We believe Blackbaud is well positioned as a leader in the not-for-profit niche and see no changes to that arising from third-quarter results.