BLKB - Blackbaud: Improving Trends Wrong Price

2024-01-29 20:08:35 ET

Summary

• Blackbaud has experienced significant events since 2020, including a security breach, an acquisition, and a business change.
• Management lacks alignment with minority shareholders.
• Blackbaud implemented pricing initiatives and multi-year contracts, leading to improved margins and revenue growth, but its valuation is currently too high for a buy recommendation.

Background

Several events since 2020 altered Blackbaud's ( BLKB ) future, including a security breach , a significant acquisition of EVERFI in 2021, and a monumental business change in 2023, all discussed in detail below. The security breach's temporary costs are winding down while the business is inflecting positively due to pricing initiatives. These factors culminated in an impressive 46% stock price appreciation in 2023. While Blackbaud is improving, its valuation is marginally too high for a buy recommendation. However, I would be interested if it pulled back into the high $60s; until then, I recommend a neutral stance.

Business Description

Blackbaud is a cloud software company in the social good space, serving nonprofits, higher education, K-12 schools, and other foundations. The portfolio of software and services has grown to support fundraising and CRM (customer relationship management), marketing, advocacy, peer-to-peer fundraising, CSR (corporate social responsibility), payment processing, analytics, and much more. They have over 40,000 customers with contractual billing arrangements and nearly 100,000 who paid Blackbaud through transactional fees....

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