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SWITCH TO SUBS HITTING BLACKBAUD NET

Marc Chardon, BlackbaudThe switch to subscription revenue from traditional sources is hitting Blackbaud’s P&L. And combined with a slower giving and a protracted period for government approval of its Convio acquisition, things piled up a bit on the Charleston, S.C.-based nonprofit specialist. The company lost $2.3 million in the quarter ended June 30, compared to net income of $9.4 million a year earlier.

Second quarter revenue was $110.2 million, up 18 percent from $93.8 million, including Convio’s results from May 4. But CEO Marc Chardon noted in this week’s earnings webcast that as subscription revenue becomes a bigger part of the mix, it is having an impact on services revenue. “We expect our services revenue to be low, stretched out or longer implementations or bundled with subscriptions,” he said. Subscription revenue was the largest component of revenue for the first time at 34.4 percent of the total. The extended Department of Justice review of the Convio deal clipped revenue from the top line as buyers waited to see the outcome, and to figure out the impact on product lines. The impact of the combined events showed up in a drop of gross margin to 54.2 percent, down from 58.1 percent in last year’s second quarter. And the bottom line was pummeled by G&A spending, which rose to $21.8 million from $9.2 million. The company forecasts that services revenue will be $10 million to $13 million less than its prior guidance. Although services are growing along with average deal size, the revenue is being stretched out over larger engagements. That will impact profitability. The company expects $9 million to $10 million in savings annually from its post acquisition plans.
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