Investment Thesis
Blackbaud operates a profitable software business with healthy margins (59.2% gross, 18.3% operating) and positive free cash flow generation ($49.8M). However, the company is burdened by an unsustainable capital structure with a debt-to-equity ratio of 33.66x, critically low liquidity (0.74x current ratio), and declining revenues (-2.3% YoY), creating significant financial distress risk that outweighs operational strengths.
Strengths
- High gross margins (59.2%) and operating margins (18.3%) indicate strong pricing power and unit economics typical of quality software businesses
- Positive free cash flow generation ($49.8M, 17.7% FCF margin) demonstrates ability to generate cash despite revenue headwinds
- EPS growth of 140% YoY shows operational leverage and discipline in capital allocation
Risks
- Critically high leverage with debt-to-equity ratio of 33.66x creates severe financial distress risk and limits strategic flexibility
- Deteriorating liquidity position with current ratio of 0.74x below 1.0, indicating potential short-term funding challenges
- Declining revenue (-2.3% YoY) combined with low interest coverage ratio (3.2x) leaves company vulnerable to operational or market stress
- Stockholders' equity of only $34.6M relative to $2.1B in total assets indicates equity base has been severely eroded
Key Metrics to Watch
- Debt reduction progress and refinancing ability given low interest coverage
- Revenue stabilization or return to growth to support debt servicing capacity
- Operating cash flow sustainability under declining revenue trajectory
- Current ratio improvement to above 1.0 for liquidity restoration
Financial Metrics
Revenue
281.1M
Net Income
31.1M
EPS (Diluted)
$0.67
Free Cash Flow
49.8M
Total Assets
2.1B
Cash
34.1M
Profitability Ratios
Gross Margin
59.2%
Operating Margin
18.3%
Net Margin
11.1%
ROE
90.1%
ROA
1.5%
FCF Margin
17.7%
Balance Sheet & Liquidity
Current Ratio
0.74x
Quick Ratio
0.74x
Debt/Equity
33.66x
Debt/Assets
98.4%
Interest Coverage
3.21x
Long-term Debt
1.2B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-06T14:33:10.395085 |
Data as of: 2026-03-31 |
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