Blackbaud: Big Fish In The Small Non-Profit Software Pond

Baird's Steven Ashley reiterated Blackbaud, Inc. BLKB's Outperform rating and $70.00 price target after meeting with Blackbaud's management team last week.

Blackbaud's lone wolf position in the non-profit software space gives the company an advantage executing M&A deals, positioning itself as a "strategic bidder" according to Ashley. The analyst expects future M&A to add 2.00 percent to management's goal of 6–10 percent organic growth.

Key Progression Explained

With the exception of Blackbaud's CFO, the entire management team was new within the past two years. Management's notable improvements to the company included:

• Making significant progress launching cloud-based NXT product line.
• Improving computerization of products, aiding the sales team.
• Successfully created "complete end-to-end offerings in the K-12 space through acquisitions of WhippleHill and Smart Tuition."
• Consolidating back-end from several unique legacy systems to a few "best-of-breed, providing a back-end platform that makes M&A integration easier."
• Stepping up hiring to improve sales effectiveness.
• Segmenting sales force "into hunters and farmers."
• Deploying a more active sales force into the field "rather than sitting in Charleston."
• Expanding indirect sales through the use of Value-Added Resellers.

Related Link: Evercore Initiates Blackbaud At Hold With $70.00 PT

Industry Driver

The industry's shift toward online donations among non-profits will provide another driver of change within the company said Ashley. "Management estimates that nearly 90 percent of donations still occurred via paper check, but [the] mix is beginning to quickly shift online, which creates new product opportunities for Blackbaud," according to Ashley.

Brexit Neutrality

Additionally, Ashley praised the company's relative neutrality to European markets in the face of Brexit. "Blackbaud is well positioned in light of the current macro environment deriving just 4 percent of sales from Europe, relatively unique among software companies of Blackbaud's size," stated the Baird analyst. As a result of the industry change, Blackbaud saw mobile payments grow about 50 percent last year.

At time of writing, Blackbaud traded at $63.52, down 0.01 percent in Tuesday's pre-market session.