Analyst Note| Dan Romanoff, CPA |
Wide-moat Blackbaud reported solid second-quarter results, exceeding FactSet consensus expectations for revenue and adjusted EPS. Management’s outlook for the second half of 2021 focused on the high end of its prior guidance of $910 million-$920 million in revenue, though expectations still reflect a gradual recovery. Trends toward digital transformation of the business, including adoption of cloud solutions and reliance on online giving, have been accelerated by the pandemic in the last year. The resurgence of in-person events and visits to arts and cultural centers advances the opportunity in the payment space, with Payment Terminal Solution, which allows for secure, contactless payment processing through Blackbaud Merchant Services, launched in the quarter. With the international expansion efforts made in JustGiving and YourCause, the renewed interest in M&A with a continued focus on the Rule of 40, and improving sales and marketing efficiency, we view management’s positive 2021 outlook as appropriate. Still, we are lowering our fair value estimate to $77 per share from $81 based mainly on a higher tax rate assumption. We view the shares, currently trading around $70, as modestly undervalued for patient, value-oriented investors.