Blackbaud: Profits from Non-Profits

10/26/2015 8:00 am EST

Focus: STOCKS

Peter Staas

Managing Editor, Capitalist Times and Energy & Income Advisor

Founded three decades ago, this new recommendation of ours has emerged as the leading provider of integrated software solutions for the nonprofit sector, explains Peter Staas, editor of Capitalist Times.

Blackbaud (BLKB) boasts more than 30,000 customers in over 60 countries. Its customers run the gamut from K-12 schools and universities to arts, cultural, environmental, faith-based organizations, and beyond.

Many nonprofits still rely on manual methods or standalone software applications for fundraising that aren’t seamlessly integrated with their accounting or payment-processing systems.

These inefficiencies mean that roughly one-quarter of every donation to a nonprofit organization goes toward fundraising expenses; any cost reductions translate into more money available for pursuing their missions.

Given the tight budgets at many nonprofits, developing and maintaining the internal infrastructure to support enterprise software doesn’t make sense. SaaS solutions, on the other hand, are a perfect fit.

Blackbaud has developed an industry-leading suite of software solutions tailored to the nonprofit industry’s needs. These products focus on maintaining customer relationships, online fundraising, and financial management and reporting.

Blackbaud stands to benefit as more nonprofit organizations look to improve their operational efficiency and upgrade to modern software solutions.

And after announcing the transition of its popular Raiser’s Edge and Financial Edge applications to the Software-as-a-Service model in the fourth quarter of 2014, the company has grown subscription revenue to 50% of its total sales.

Recurring revenue from subscriptions and maintenance packages accounts for 75% of the software company’s top line.

The growing appeal of mobile donations and engagement with donors through social media also represent huge upside drivers for adoption of Blackbaud’s products.

Over the past year, the company has made a series of acquisitions adjacent markets, expanding the customer universe for its legacy solutions.

These deals include the acquisitions of companies that provide applications for K-12 schools, including tuition management. This enabled Blackbaud to offer a complete suite of solutions to the 20,000 private schools in the US.

Blackbaud rates a buy up to $57 per share. The stock trades at a reasonable valuation today, though investors may want to wait for a correction in the broader market before deploying a big lump of capital.

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