ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 11-2617163 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer ý | Accelerated filer | ¨ |
Non-accelerated filer ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Page No. | |||
PART I. | |||
Item 1. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
PART II. | |||
Item 2. | |||
Item 6. | |||
Exhibit – 10.67 | |||
Exhibit – 10.68 | |||
Exhibit – 10.69 | |||
Exhibit – 31.1 | |||
Exhibit – 31.2 | |||
Exhibit – 32.1 | |||
Exhibit – 32.2 | |||
Exhibit – 101 |
(in thousands, except share amounts) | March 31, 2013 | December 31, 2012 | |||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 8,449 | $ | 13,491 | |||
Donor restricted cash | 26,280 | 68,177 | |||||
Accounts receivable, net of allowance of $7,560 and $8,546 at March 31, 2013 and December 31, 2012, respectively | 69,402 | 75,692 | |||||
Prepaid expenses and other current assets | 27,528 | 40,589 | |||||
Deferred tax asset, current portion | 17,745 | 15,799 | |||||
Total current assets | 149,404 | 213,748 | |||||
Property and equipment, net | 48,045 | 49,063 | |||||
Goodwill | 265,667 | 265,055 | |||||
Intangible assets, net | 162,525 | 168,037 | |||||
Other assets | 16,752 | 9,844 | |||||
Total assets | $ | 642,393 | $ | 705,747 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities: | |||||||
Trade accounts payable | $ | 9,746 | $ | 13,623 | |||
Accrued expenses and other current liabilities | 37,512 | 45,996 | |||||
Donations payable | 26,280 | 68,177 | |||||
Debt, current portion | 10,000 | 10,000 | |||||
Deferred revenue, current portion | 166,986 | 173,899 | |||||
Total current liabilities | 250,524 | 311,695 | |||||
Debt, net of current portion | 201,000 | 205,500 | |||||
Deferred tax liability | 26,758 | 24,468 | |||||
Deferred revenue, net of current portion | 10,060 | 11,119 | |||||
Other liabilities | 4,366 | 5,281 | |||||
Total liabilities | 492,708 | 558,063 | |||||
Commitments and contingencies (see Note 9) | |||||||
Stockholders’ equity: | |||||||
Preferred stock; 20,000,000 shares authorized, none outstanding | — | — | |||||
Common stock, $0.001 par value; 180,000,000 shares authorized, 54,883,954 and 54,859,604 shares issued at March 31, 2013 and December 31, 2012, respectively | 55 | 55 | |||||
Additional paid-in capital | 208,853 | 203,638 | |||||
Treasury stock, at cost; 9,239,829 and 9,209,371 shares at March 31, 2013 and December 31, 2012, respectively | (171,733 | ) | (170,898 | ) | |||
Accumulated other comprehensive loss | (1,569 | ) | (1,973 | ) | |||
Retained earnings | 114,079 | 116,862 | |||||
Total stockholders’ equity | 149,685 | 147,684 | |||||
Total liabilities and stockholders’ equity | $ | 642,393 | $ | 705,747 |
(in thousands, except share and per share amounts) | Three months ended March 31, | ||||||
2013 | 2012 | ||||||
Revenue | |||||||
License fees | $ | 2,980 | $ | 7,168 | |||
Subscriptions | 47,756 | 28,062 | |||||
Services | 28,838 | 23,958 | |||||
Maintenance | 34,148 | 33,566 | |||||
Other revenue | 1,901 | 1,952 | |||||
Total revenue | 115,623 | 94,706 | |||||
Cost of revenue | |||||||
Cost of license fees | 725 | 613 | |||||
Cost of subscriptions | 20,383 | 12,974 | |||||
Cost of services | 25,399 | 20,042 | |||||
Cost of maintenance | 5,874 | 5,977 | |||||
Cost of other revenue | 1,197 | 1,469 | |||||
Total cost of revenue | 53,578 | 41,075 | |||||
Gross profit | 62,045 | 53,631 | |||||
Operating expenses | |||||||
Sales and marketing | 24,392 | 20,377 | |||||
Research and development | 16,429 | 13,304 | |||||
General and administrative | 12,742 | 14,501 | |||||
Restructuring | 3,210 | — | |||||
Amortization | 678 | 197 | |||||
Total operating expenses | 57,451 | 48,379 | |||||
Income from operations | 4,594 | 5,252 | |||||
Interest income | 17 | 47 | |||||
Interest expense | (1,694 | ) | (191 | ) | |||
Other income (expense), net | 103 | (308 | ) | ||||
Income before provision for income taxes | 3,020 | 4,800 | |||||
Income tax provision | 354 | 2,041 | |||||
Net income | $ | 2,666 | $ | 2,759 | |||
Earnings per share | |||||||
Basic | $ | 0.06 | $ | 0.06 | |||
Diluted | $ | 0.06 | $ | 0.06 | |||
Common shares and equivalents outstanding | |||||||
Basic weighted average shares | 44,473,519 | 43,944,459 | |||||
Diluted weighted average shares | 45,009,213 | 44,613,256 | |||||
Dividends per share | $ | 0.12 | $ | 0.12 | |||
Other comprehensive income | |||||||
Foreign currency translation adjustment | 285 | 279 | |||||
Unrealized gain on derivative instruments, net of tax | 119 | — | |||||
Total other comprehensive income | 404 | 279 | |||||
Comprehensive income | $ | 3,070 | $ | 3,038 |
Three months ended March 31, | |||||||
(in thousands) | 2013 | 2012 | |||||
Cash flows from operating activities | |||||||
Net income | $ | 2,666 | $ | 2,759 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 10,408 | 4,816 | |||||
Provision for doubtful accounts and sales returns | 670 | 1,117 | |||||
Stock-based compensation expense | 5,178 | 3,836 | |||||
Excess tax benefits from stock-based compensation | — | (310 | ) | ||||
Deferred taxes | (188 | ) | 967 | ||||
Other non-cash adjustments | 353 | (555 | ) | ||||
Changes in operating assets and liabilities, net of acquisition of businesses: | |||||||
Accounts receivable | 5,404 | (1,686 | ) | ||||
Prepaid expenses and other assets | 6,416 | (1,754 | ) | ||||
Trade accounts payable | (754 | ) | 1,739 | ||||
Accrued expenses and other liabilities | (10,074 | ) | (5,253 | ) | |||
Donor restricted cash | 42,588 | 19,361 | |||||
Donations payable | (42,588 | ) | (19,361 | ) | |||
Deferred revenue | (7,139 | ) | (1,691 | ) | |||
Net cash provided by operating activities | 12,940 | 3,985 | |||||
Cash flows from investing activities | |||||||
Purchase of property and equipment | (6,292 | ) | (6,297 | ) | |||
Purchase of net assets of acquired companies, net of cash acquired | (876 | ) | — | ||||
Capitalized software development costs | (764 | ) | — | ||||
Net cash used in investing activities | (7,932 | ) | (6,297 | ) | |||
Cash flows from financing activities | |||||||
Proceeds from issuance of debt | 16,700 | — | |||||
Payments on debt | (21,200 | ) | — | ||||
Payments of deferred financing costs | — | (2,440 | ) | ||||
Proceeds from exercise of stock options | 67 | 2,959 | |||||
Excess tax benefits from stock-based compensation | — | 310 | |||||
Dividend payments to stockholders | (5,479 | ) | (5,409 | ) | |||
Net cash used in financing activities | (9,912 | ) | (4,580 | ) | |||
Effect of exchange rate on cash and cash equivalents | (138 | ) | 339 | ||||
Net decrease in cash and cash equivalents | (5,042 | ) | (6,553 | ) | |||
Cash and cash equivalents, beginning of period | 13,491 | 52,520 | |||||
Cash and cash equivalents, end of period | $ | 8,449 | $ | 45,967 |
(in thousands, except share amounts) | Common stock | Additional paid-in capital | Treasury stock | Accumulated other comprehensive loss | Retained earnings | Total stockholders' equity | ||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||
Balance at December 31, 2011 | 53,959,532 | $ | 54 | $ | 175,401 | $ | (166,226 | ) | $ | (1,148 | ) | $ | 131,921 | $ | 140,002 | |||||||||||
Net income | — | — | — | — | — | 6,583 | 6,583 | |||||||||||||||||||
Payment of dividends | — | — | — | — | — | (21,731 | ) | (21,731 | ) | |||||||||||||||||
Exercise of stock options, stock appreciation rights and restricted stock units | 355,180 | — | 3,146 | — | — | — | 3,146 | |||||||||||||||||||
Surrender of 189,547 shares upon restricted stock and restricted stock unit vesting and exercise of stock options and stock appreciation rights | — | — | — | (4,672 | ) | — | — | (4,672 | ) | |||||||||||||||||
Tax impact of exercise of equity-based compensation | — | — | 81 | — | — | — | 81 | |||||||||||||||||||
Stock-based compensation | — | — | 19,151 | — | — | 89 | 19,240 | |||||||||||||||||||
Equity-based awards assumed in business combination | — | — | 5,859 | — | — | — | 5,859 | |||||||||||||||||||
Restricted stock grants | 687,652 | 1 | — | — | — | — | 1 | |||||||||||||||||||
Restricted stock cancellations | (142,760 | ) | — | — | — | — | — | — | ||||||||||||||||||
Other comprehensive loss | — | — | — | — | (825 | ) | — | (825 | ) | |||||||||||||||||
Balance at December 31, 2012 | 54,859,604 | $ | 55 | $ | 203,638 | $ | (170,898 | ) | $ | (1,973 | ) | $ | 116,862 | $ | 147,684 | |||||||||||
Net income | — | — | — | — | — | 2,666 | 2,666 | |||||||||||||||||||
Payment of dividends | — | — | — | — | — | (5,479 | ) | (5,479 | ) | |||||||||||||||||
Exercise of stock options, stock appreciation rights and restricted stock units | 73,341 | — | 67 | — | — | — | 67 | |||||||||||||||||||
Surrender of 30,458 shares upon restricted stock and restricted stock unit vesting and exercise of stock options and stock appreciation rights | — | — | — | (835 | ) | — | — | (835 | ) | |||||||||||||||||
Stock-based compensation | — | — | 5,148 | — | — | 30 | 5,178 | |||||||||||||||||||
Restricted stock grants | 11,618 | — | — | — | — | — | — | |||||||||||||||||||
Restricted stock cancellations | (60,609 | ) | — | — | — | — | — | — | ||||||||||||||||||
Other comprehensive income | — | — | — | — | 404 | — | 404 | |||||||||||||||||||
Balance at March 31, 2013 | 54,883,954 | $ | 55 | $ | 208,853 | $ | (171,733 | ) | $ | (1,569 | ) | $ | 114,079 | $ | 149,685 |
(in thousands) | ECBU | GMBU | IBU | Target Analytics | Other | Total | |||||||||||||||||
Balance at December 31, 2012 | $ | 148,322 | $ | 75,149 | $ | 6,311 | $ | 33,177 | $ | 2,096 | $ | 265,055 | |||||||||||
Additions related to business combinations | — | — | 397 | — | — | 397 | |||||||||||||||||
Adjustments related to prior year business combinations | 289 | 112 | — | — | — | 401 | |||||||||||||||||
Effect of foreign currency translation | — | — | (186 | ) | — | — | (186 | ) | |||||||||||||||
Balance at March 31, 2013 | $ | 148,611 | $ | 75,261 | $ | 6,522 | $ | 33,177 | $ | 2,096 | $ | 265,667 |
Three months ended March 31, | |||||||
(in thousands) | 2013 | 2012 | |||||
Included in cost of revenue: | |||||||
Cost of license fees | $ | 121 | $ | 123 | |||
Cost of subscriptions | 4,633 | 982 | |||||
Cost of services | 633 | 411 | |||||
Cost of maintenance | 114 | 244 | |||||
Cost of other revenue | 19 | 19 | |||||
Total included in cost of revenue | 5,520 | 1,779 | |||||
Included in operating expenses | 678 | 197 | |||||
Total | $ | 6,198 | $ | 1,976 |
Year ending December 31, | Amortization | ||
(in thousands) | expense | ||
2013 - remaining | $ | 18,452 | |
2014 | 22,667 | ||
2015 | 22,284 | ||
2016 | 21,869 | ||
2017 | 19,543 | ||
Total | $ | 104,815 |
(in thousands) | |||
Net working capital, excluding deferred revenue | $ | 54,912 | |
Property and equipment | 6,591 | ||
Other long term assets | 75 | ||
Deferred revenue | (7,917 | ) | |
Deferred tax liability | (32,049 | ) | |
Intangible assets and liabilities | 139,650 | ||
Goodwill | 174,412 | ||
$ | 335,674 |
Intangible assets acquired | Weighted average amortization period | ||||
(in thousands) | (in years) | ||||
Customer relationships | $ | 53,000 | 15 | ||
Marketing assets | 7,800 | 7 | |||
Acquired technology | 69,000 | 8 | |||
In-process research and development | 9,100 | 7 | |||
Non-compete agreements | 1,440 | 2 | |||
Unfavorable leasehold interests | (690 | ) | 7 | ||
$ | 139,650 |
Three months ended March 31, | |||||||
(in thousands, except per share amounts) | 2013 | 2012 | |||||
Revenue | $ | 115,623 | $ | 115,575 | |||
Net income (loss) | $ | 2,666 | $ | (4,065 | ) | ||
Basic earnings (loss) per share | $ | 0.06 | $ | (0.09 | ) | ||
Diluted earnings (loss) per share | $ | 0.06 | $ | (0.09 | ) |
Three months ended March 31, | |||||||
(in thousands, except share and per share amounts) | 2013 | 2012 | |||||
Numerator: | |||||||
Net income, as reported | $ | 2,666 | $ | 2,759 | |||
Denominator: | |||||||
Weighted average common shares | 44,473,519 | 43,944,459 | |||||
Add effect of dilutive securities: | |||||||
Employee equity-based compensation | 535,694 | 668,797 | |||||
Weighted average common shares assuming dilution | 45,009,213 | 44,613,256 | |||||
Earnings per share: | |||||||
Basic | $ | 0.06 | $ | 0.06 | |||
Diluted | $ | 0.06 | $ | 0.06 |
Three months ended March 31, | |||||
2013 | 2012 | ||||
Shares excluded from calculations of diluted earnings per share | 473,299 | 114,563 |
(in thousands) | March 31, 2013 | December 31, 2012 | |||||
Deferred sales commissions | $ | 17,685 | $ | 18,142 | |||
Prepaid software maintenance | 5,504 | 5,530 | |||||
Taxes, prepaid and receivable | 1,760 | 7,398 | |||||
Deferred professional services costs | 8,112 | 8,057 | |||||
Other assets | 11,219 | 11,306 | |||||
Total prepaid expenses and other assets | 44,280 | 50,433 | |||||
Less: Long-term portion | 16,752 | 9,844 | |||||
Total prepaid expenses and other current assets | $ | 27,528 | $ | 40,589 |
(in thousands) | March 31, 2013 | December 31, 2012 | |||||
Taxes payable | $ | 6,486 | $ | 7,607 | |||
Accrued commissions and salaries | 4,954 | 5,905 | |||||
Accrued bonuses | 5,466 | 11,966 | |||||
Customer credit balances | 3,439 | 4,577 | |||||
Accrued software and maintenance | 3,427 | 3,875 | |||||
Unrecognized tax benefit | 3,184 | 3,846 | |||||
Other liabilities | 14,922 | 13,501 | |||||
Total accrued expenses and other liabilities | 41,878 | 51,277 | |||||
Less: Long-term portion | 4,366 | 5,281 | |||||
Total accrued expenses and other current liabilities | $ | 37,512 | $ | 45,996 |
Debt balance at | Effective interest rate at | ||||||||||||
(in thousands, except percentages) | March 31, 2013 | December 31, 2012 | March 31, 2013 | December 31, 2012 | |||||||||
Credit facility: | |||||||||||||
Revolving credit loans | $ | 121,000 | $ | 123,000 | 2.48 | % | 2.68 | % | |||||
Term loans | 90,000 | 92,500 | 2.89 | % | 3.14 | % | |||||||
Total debt | 211,000 | 215,500 | 2.65 | % | 2.88 | % | |||||||
Less: Debt, current portion | 10,000 | 10,000 | 2.89 | % | 3.14 | % | |||||||
Debt, net of current portion | $ | 201,000 | $ | 205,500 | 2.64 | % | 2.86 | % |
Year ending December 31, (in thousands) | Annual maturities | ||
2013 - remaining | $ | 7,500 | |
2014 | 13,750 | ||
2015 | 15,000 | ||
2016 | 15,000 | ||
2017 | 159,750 | ||
Total required maturities | $ | 211,000 |
Liability fair value at | |||||||||
(in thousands) | Balance sheet location | March 31, 2013 | December 31, 2012 | ||||||
Derivative instruments designated as hedging instruments: | |||||||||
Interest rate swaps | Other liabilities | $ | 1,101 | $ | 1,296 | ||||
Total derivative instruments designated as hedging instruments | $ | 1,101 | $ | 1,296 |
Loss recognized in accumulated other comprehensive loss | Location of loss reclassified from accumulated other comprehensive loss into income | Loss reclassified from accumulated other comprehensive loss into income | |||||||
March 31, 2013 | Three months ended March 31, | ||||||||
(in thousands) | 2013 | ||||||||
Interest rate swaps | $ | (1,101 | ) | Interest expense | $ | (190 | ) |
Year ending December 31, | Operating | ||
(in thousands) | leases | ||
2013 – remaining | $ | 7,784 | |
2014 | 10,219 | ||
2015 | 9,167 | ||
2016 | 8,408 | ||
2017 | 8,436 | ||
Thereafter | 47,884 | ||
Total minimum lease payments | $ | 91,898 |
Three months ended March 31, | |||||
2013 | 2012 | ||||
Effective tax rate | 11.7 | % | 42.5 | % |
Three months ended March 31, | |||||||
(in thousands) | 2013 | 2012 | |||||
Included in cost of revenue: | |||||||
Cost of subscriptions | $ | 226 | $ | 181 | |||
Cost of services | 844 | 492 | |||||
Cost of maintenance | 62 | 111 | |||||
Total included in cost of revenue | 1,132 | 784 | |||||
Included in operating expenses: | |||||||
Sales and marketing | 698 | 417 | |||||
Research and development | 1,152 | 651 | |||||
General and administrative | 2,196 | 1,984 | |||||
Total included in operating expenses | 4,046 | 3,052 | |||||
Total | $ | 5,178 | $ | 3,836 |
(in thousands) | Gains and losses on cash flow hedges | Foreign currency translation adjustment | Total | ||||||||
Balance at December 31, 2012 | $ | (791 | ) | $ | (1,182 | ) | $ | (1,973 | ) | ||
Other comprehensive (loss) income before reclassifications | (71 | ) | 285 | 214 | |||||||
Amounts reclassified from accumulated other comprehensive loss to interest expense | 190 | — | 190 | ||||||||
Net current-period other comprehensive income | 119 | 285 | 404 | ||||||||
Balance at March 31, 2013 | $ | (672 | ) | $ | (897 | ) | $ | (1,569 | ) |
• | The ECBU is focused on marketing, sales, delivery and support to large and/or strategic, specifically identified named prospects and customers in North America; |
• | The GMBU is focused on marketing, sales, delivery and support to all emerging and mid-sized prospects and customers in North America; |
• | The IBU is focused on marketing, sales, delivery and support to all prospects and customers outside of North America; and |
• | Target Analytics is primarily focused on marketing, sales and delivery of analytics services to all prospects and customers in North America. |
Three months ended March 31, | |||||||
(in thousands) | 2013 | 2012 | |||||
Revenue by segment: | |||||||
ECBU | $ | 44,679 | $ | 33,841 | |||
GMBU | 53,018 | 43,831 | |||||
IBU | 9,238 | 8,670 | |||||
Target Analytics | 8,668 | 8,364 | |||||
Other(1) | 20 | — | |||||
Total revenue | $ | 115,623 | $ | 94,706 | |||
Segment operating income(2): | |||||||
ECBU | $ | 23,642 | $ | 15,187 | |||
GMBU | 32,176 | 26,059 | |||||
IBU | 624 | 361 | |||||
Target Analytics | 3,176 | 3,444 | |||||
Other(1) | 209 | 253 | |||||
59,827 | 45,304 | ||||||
Less: | |||||||
Corporate unallocated costs(3) | 43,857 | 34,240 | |||||
Stock-based compensation costs | 5,178 | 3,836 | |||||
Amortization expense | 6,198 | 1,976 | |||||
Interest expense (income), net | 1,677 | 144 | |||||
Other expense (income), net | (103 | ) | 308 | ||||
Income before provision for income taxes | $ | 3,020 | $ | 4,800 |
(1) | Other includes revenue and the related costs from the sale of products and services not directly attributable to an operating segment. |
(2) | Segment operating income includes direct, controllable costs related to the sale of products and services by the reportable segment, except for IBU, which includes operating costs from our foreign locations such as sales, marketing, general, administrative, depreciation and facilities costs. |
(3) | Corporate unallocated costs include research and development, depreciation expense, and certain corporate sales, marketing, general and administrative expenses. |
Total costs expected to be incurred | Costs incurred during the three months ended | Cumulative costs incurred as of | |||||||||
(in thousands) | March 31, 2013 | ||||||||||
By component: | |||||||||||
Employee severance and retention costs | $ | 465 | $ | 41 | $ | 216 | |||||
Employee relocation costs | 265 | 34 | 34 | ||||||||
730 | 75 | 250 | |||||||||
By reportable segment: | |||||||||||
Other | $ | 730 | $ | 75 | $ | 250 |
Accrued at | Increases for incurred costs | Costs paid | Accrued at | ||||||||||||
(in thousands) | December 31, 2012 | March 31, 2013 | |||||||||||||
Employee severance and retention costs | $ | 175 | $ | 41 | $ | — | $ | 216 | |||||||
Employee relocation costs | — | 34 | (34 | ) | — | ||||||||||
$ | 175 | $ | 75 | $ | (34 | ) | $ | 216 |
Total costs expected to be incurred | Costs incurred during the three months ended | Cumulative costs incurred as of | |||||||||
(in thousands) | March 31, 2013 | ||||||||||
By component: | |||||||||||
Employee severance costs | $ | 3,300 | $ | 3,135 | $ | 3,135 | |||||
By reportable segment: | |||||||||||
ECBU | $ | 828 | $ | 828 | $ | 828 | |||||
GMBU | 290 | 290 | 290 | ||||||||
Target Analytics | 136 | 136 | 136 | ||||||||
Other | 2,046 | 1,881 | 1,881 | ||||||||
$ | 3,300 | $ | 3,135 | $ | 3,135 |
Accrued at | Increases for incurred costs | Costs paid | Accrued at | ||||||||||||
(in thousands) | December 31, 2012 | March 31, 2013 | |||||||||||||
Employee severance costs | $ | — | $ | 3,135 | $ | (2,822 | ) | $ | 313 |
• | executing on operational efficiencies and initiating investments in core back-office systems for future growth; |
• | restructuring activities that included a realignment of our workforce, as well as the transition of our San Diego, California operations to our Austin, Texas location; and |
• | continuing the shift in our offerings towards subscription-based pricing to meet the needs and preferences of our customers. |
Three months ended March 31, | ||||||||||||||
(in millions) | 2013 | 2012 | Change | % Change | ||||||||||
License fees | $ | 3.0 | $ | 7.2 | $ | (4.2 | ) | (58 | )% | |||||
Subscriptions | 47.8 | 28.1 | 19.7 | 70 | % | |||||||||
Services | 28.8 | 24.0 | 4.8 | 20 | % | |||||||||
Maintenance | 34.1 | 33.5 | 0.6 | 2 | % | |||||||||
Other | 1.9 | 1.9 | — | — | % | |||||||||
Total revenue | $ | 115.6 | $ | 94.7 | $ | 20.9 | 22 | % |
Three months ended March 31, | ||||||||||||||
(in millions) | 2013 | 2012 | Change | % Change | ||||||||||
License fees revenue | $ | 3.0 | $ | 7.2 | $ | (4.2 | ) | (58 | )% | |||||
Cost of license fees | 0.7 | 0.6 | 0.1 | 17 | % | |||||||||
License fees gross profit | $ | 2.3 | $ | 6.6 | $ | (4.3 | ) | (65 | )% | |||||
License fees gross margin | 77 | % | 92 | % |
Three months ended March 31, | ||||||||||||||
(in millions) | 2013 | 2012 | Change | % Change | ||||||||||
Subscriptions revenue | $ | 47.8 | $ | 28.1 | $ | 19.7 | 70 | % | ||||||
Cost of subscriptions | 20.4 | 13.0 | 7.4 | 57 | % | |||||||||
Subscriptions gross profit | $ | 27.4 | $ | 15.1 | $ | 12.3 | 81 | % | ||||||
Subscriptions gross margin | 57 | % | 54 | % |
Three months ended March 31, | ||||||||||||||
(in millions) | 2013 | 2012 | Change | % Change | ||||||||||
Services revenue | $ | 28.8 | $ | 24.0 | $ | 4.8 | 20 | % | ||||||
Cost of services | 25.4 | 20.0 | 5.4 | 27 | % | |||||||||
Services gross profit | $ | 3.4 | $ | 4.0 | $ | (0.6 | ) | (15 | )% | |||||
Services gross margin | 12 | % | 17 | % |
Three months ended March 31, | ||||||||||||||
(in millions) | 2013 | 2012 | Change | % Change | ||||||||||
Maintenance revenue | $ | 34.1 | $ | 33.5 | $ | 0.6 | 2 | % | ||||||
Cost of maintenance | 5.9 | 6.0 | (0.1 | ) | (2 | )% | ||||||||
Maintenance gross profit | $ | 28.2 | $ | 27.5 | $ | 0.7 | 3 | % | ||||||
Maintenance gross margin | 83 | % | 82 | % |
Three months ended March 31, | ||||||||||||||
(in millions) | 2013 | 2012 | Change | % Change | ||||||||||
Other revenue | $ | 1.9 | $ | 1.9 | $ | — | — | % | ||||||
Cost of other revenue | 1.2 | 1.5 | (0.3 | ) | (20 | )% | ||||||||
Other gross profit | $ | 0.7 | $ | 0.4 | $ | 0.3 | 75 | % | ||||||
Other gross margin | 37 | % | 21 | % |
Three months ended March 31, | ||||||||||||||
(in millions) | 2013 | 2012 | Change | % Change | ||||||||||
Sales and marketing expense | $ | 24.4 | $ | 20.4 | $ | 4.0 | 20 | % | ||||||
% of revenue | 21 | % | 22 | % |
Three months ended March 31, | ||||||||||||||
(in millions) | 2013 | 2012 | Change | % Change | ||||||||||
Research and development expense | $ | 16.4 | $ | 13.3 | $ | 3.1 | 23 | % | ||||||
% of revenue | 14 | % | 14 | % |
Three months ended March 31, | ||||||||||||||
(in millions) | 2013 | 2012 | Change | % Change | ||||||||||
General and administrative expense | $ | 12.7 | $ | 14.5 | $ | (1.8 | ) | (12 | )% | |||||
% of revenue | 11 | % | 15 | % |
Three months ended March 31, | ||||||||||||||
(in millions) | 2013 | 2012 | Change | % Change | ||||||||||
GAAP income from operations | $ | 4.6 | $ | 5.3 | $ | (0.7 | ) | (13 | )% | |||||
Non-GAAP adjustments: | ||||||||||||||
Add: Convio deferred revenue writedown | 0.6 | — | 0.6 | 100 | % | |||||||||
Add: Stock-based compensation expense | 5.2 | 3.8 | 1.4 | 37 | % | |||||||||
Add: Amortization of intangibles from business combinations | 6.2 | 2.0 | 4.2 | 210 | % | |||||||||
Add: Acquisition integration costs | 0.8 | — | 0.8 | 100 | % | |||||||||
Add: Restructuring costs | 3.2 | — | 3.2 | 100 | % | |||||||||
Add: CEO severance | 0.3 | — | 0.3 | 100 | % | |||||||||
Add: Acquisition-related expenses | — | 2.2 | (2.2 | ) | (100 | )% | ||||||||
Total Non-GAAP adjustments | 16.3 | 8.0 | 8.3 | 104 | % | |||||||||
Non-GAAP income from operations | $ | 20.9 | $ | 13.3 | $ | 7.6 | 57 | % | ||||||
Non-GAAP operating margin | 18 | % | 14 | % |
Three months ended March 31, | |||||
2013 | 2012 | ||||
Effective tax rate | 11.7 | % | 42.5 | % |
Financial Covenant | Requirement | Ratio as of March 31, 2013 |
Leverage Ratio | < 3.00 to 1.0 | 2.07 to 1.00 |
Interest Coverage Ratio | > 3.50 to 1.0 | 14.38 to 1.00 |
Payments due by period | |||||||||||||||||||
(in millions) | Total | Less than 1 year | 1-2 years | 3-5 years | More than 5 years | ||||||||||||||
Operating leases | $ | 94.6 | $ | 10.6 | $ | 19.5 | $ | 17.4 | $ | 47.1 | |||||||||
Debt and interest(1) | 230.4 | 15.6 | 40.0 | 174.8 | — | ||||||||||||||
Total | $ | 325.0 | $ | 26.2 | $ | 59.5 | $ | 192.2 | $ | 47.1 |
(1) | Included in the table above is $19.4 million of interest. The actual interest expense recognized in our consolidated statements of comprehensive income will depend on the amount of debt, the length of time the debt is outstanding and the interest rate, which could be different from our assumptions used in the above table. |
Period | Total number of shares purchased | Average price paid per share | Approximate dollar value of shares that may yet be purchased under the plan or programs (in thousands) | |||||||
Beginning balance, January 1, 2013 | $ | 50,000 | ||||||||
January 1, 2013 through January 31, 2013 | 5,085 | $ | 25.02 | $ | 50,000 | |||||
February 1, 2013 through February 28, 2013 | 21,047 | $ | 27.44 | $ | 50,000 | |||||
March 1, 2013 through March 31, 2013 | 4,326 | $ | 30.23 | $ | 50,000 | |||||
Total | 30,458 | $ | 27.43 | $ | 50,000 |
Exhibits: | |
10.67 | Letter Agreement entered into as of January 24, 2013, by and between Blackbaud, Inc. and Marc. Chardon. |
10.68 | Form of Management Transition Retention Agreement between Blackbaud, Inc. and each of Anthony W. Boor, Charles T. Cumbaa, Jana B. Eggers, Kevin W. Mooney and Joseph D. Moye. |
10.69 | Management Transition Retention Agreement between Blackbaud, Inc. and Bradley J. Holman. |
31.1 | Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1 | Certification by the Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2 | Certification by the Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS* | XBRL Instance Document. |
101.SCH* | XBRL Taxonomy Extension Schema Document. |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document. |
BLACKBAUD, INC. | |||
Date: | May 7, 2013 | By: | /s/ Marc E. Chardon |
Marc E. Chardon | |||
President and Chief Executive Officer | |||
Date: | May 7, 2013 | By: | /s/ Anthony W. Boor |
Anthony W. Boor | |||
Senior Vice President and Chief Financial Officer |
/s/ Jon W. Olson | |
Jon W. Olson | |
Vice President & General Counsel | |
Agreed. | |
/s/ Marc E. Chardon | |
Marc E. Chardon |
BLACKBAUD, INC. | |
/s/ Marc Chardon | |
By: Marc Chardon | |
Title: President and Chief Executive Officer | |
EMPLOYEE: | |
/s/ Brad Holman | |
Brad Holman, | |
President of International Business Unit |
1. | I have reviewed this report on Form 10-Q of Blackbaud, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | May 7, 2013 | By: | /s/ Marc E. Chardon | |
Marc E. Chardon | ||||
President and Chief Executive Officer |
1. | I have reviewed this report on Form 10-Q of Blackbaud, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | May 7, 2013 | By: | /s/ Anthony W. Boor | |
Anthony W. Boor | ||||
Senior Vice President and Chief Financial Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report. |
Date: | May 7, 2013 | By: | /s/ Marc E. Chardon | |
Marc E. Chardon | ||||
President and Chief Executive Officer |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for, the periods presented in the Report. |
Date: | May 7, 2013 | By: | /s/ Anthony W. Boor | |
Anthony W. Boor | ||||
Senior Vice President and Chief Financial Officer |
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Derivative Instruments (Effects of Derivative Instruments in Cash Flow Hedging Relationships) (Details) (Interest Rate Swap [Member], Cash Flow Hedging [Member], USD $)
In Thousands, unless otherwise specified |
3 Months Ended |
---|---|
Mar. 31, 2013
|
|
Derivative Instruments, Gain (Loss) [Line Items] | |
Loss recognized in accumulated other comprehensive loss | $ (1,101) |
Interest expense [Member]
|
|
Derivative Instruments, Gain (Loss) [Line Items] | |
Loss reclassified from accumulated other comprehensive loss into income | $ (190) |
Accrued Expenses And Other Liabilities (Components Of Accrued Expenses And Other Liabilities) (Details) (USD $)
In Thousands, unless otherwise specified |
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Accrued Expenses and Other Liabilities [Abstract] | ||
Taxes Payable | $ 6,486 | $ 7,607 |
Accrued commissions and salaries | 4,954 | 5,905 |
Accrued bonuses | 5,466 | 11,966 |
Customer credit balances | 3,439 | 4,577 |
Accrued software and maintenance | 3,427 | 3,875 |
Unrecognized tax benefit | 3,184 | 3,846 |
Other Liabilities | 14,922 | 13,501 |
Total accrued expenses and other liabilities | 41,878 | 51,277 |
Less: Long-term portion | 4,366 | 5,281 |
Total accrued expenses and other current liabilities | $ 37,512 | $ 45,996 |
Earnings Per Share (Anti-Dilutive Securities) (Details)
|
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
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Earnings Per Share [Abstract] | ||
Shares excluded from calculations of diluted earnings per share | 473,299 | 114,563 |
Stockholders' Equity (Tables)
|
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | Changes in accumulated other comprehensive loss by component The changes in accumulated other comprehensive loss by component, consisted of the following:
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Income Taxes (Narrative) (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
Dec. 31, 2012
|
|
Income Tax Disclosure [Abstract] | |||
Projected annual effective tax rate | 11.70% | 42.50% | |
Unrecognized tax benefit that, if recognized, would favorably affect the effective tax rate | $ 3.2 | $ 3.8 |
Earnings Per Share (Tables)
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation Of Basic And Diluted Earnings Per Share | The following table sets forth the computation of basic and diluted earnings per share:
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Anti-Dilutive Securities | The following shares and potential shares underlying stock-based awards were not included in diluted earnings per share because their inclusion would have been anti-dilutive:
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Debt (Summary of Debt) (Details) (USD $)
In Thousands, unless otherwise specified |
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Line of Credit Facility [Line Items] | ||
Total debt | $ 211,000 | $ 215,500 |
Less: Debt, current portion | 10,000 | 10,000 |
Debt, net of current portion | 201,000 | 205,500 |
Effective interest rate | 2.65% | 2.88% |
Revolving Credit Loans [Member]
|
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Line of Credit Facility [Line Items] | ||
Total debt | 121,000 | 123,000 |
Effective interest rate | 2.48% | 2.68% |
Term Loans [Member]
|
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Line of Credit Facility [Line Items] | ||
Total debt | $ 90,000 | $ 92,500 |
Effective interest rate | 2.89% | 3.14% |
Short-term Debt [Member]
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Line of Credit Facility [Line Items] | ||
Effective interest rate | 2.89% | 3.14% |
Long-term Debt [Member]
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Line of Credit Facility [Line Items] | ||
Effective interest rate | 2.64% | 2.86% |
Business Combinations (Purchase Price Allocation) (Details) (Convio, Inc [Member], USD $)
In Thousands, unless otherwise specified |
May 04, 2012
|
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Convio, Inc [Member]
|
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Business Acquisition [Line Items] | |
Net working capital, excluding deferred revenue | $ 54,912 |
Property and equipment | 6,591 |
Other long term assets | 75 |
Deferred revenue | (7,917) |
Deferred tax liability | (32,049) |
Intangible assets and liabilities | 139,650 |
Goodwill | 174,412 |
Total paid for acquisition | $ 335,674 |
Summary Of Significant Accounting Policies (Narrative) (Details)
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3 Months Ended |
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Mar. 31, 2013
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Significant Accounting Policies [Line Items] | |
Contract term (in year) of the maintenance services | 1 year |
Minimum [Member]
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Significant Accounting Policies [Line Items] | |
Recognition period (in years) of revenue from hosted services | 1 year |
Recognition period (in years) of revenue from hosted applications | 1 year |
Maximum [Member]
|
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Significant Accounting Policies [Line Items] | |
Number of days to exceed for customary payment terms | 90 days |
Recognition period (in years) of revenue from hosted services | 3 years |
Recognition period (in years) of revenue from hosted applications | 3 years |
Derivative Instruments (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2013
|
May 31, 2012
Interest Rate Swap [Member]
Swap_Agreements
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Derivative [Line Items] | ||
Number of interest rate swap agreements | 2 | |
Notional value of the swap agreements | $ 150.0 | |
Tax benefit allocated to the loss recognized in accumulated other comprehensive loss | $ 0.1 |
Restructuring (Schedule of Changes in Restructuring Liability for Realignment of Workforce Plan) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2013
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Mar. 31, 2012
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Restructuring Reserve [Roll Forward] | ||
Increases for incurred costs | $ 3,210 | $ 0 |
Plan to Realign Company's Workforce [Member]
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Restructuring Reserve [Roll Forward] | ||
Increases for incurred costs | 3,135 | |
Plan to Realign Company's Workforce [Member] | Employee Severance [Member]
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Restructuring Reserve [Roll Forward] | ||
Accrued at December 31, 2012 | 0 | |
Increases for incurred costs | 3,135 | |
Costs paid | (2,822) | |
Accrued at March 31, 2013 | $ 313 |
Prepaid Expenses And Other Assets (Components Of Prepaid Expenses And Other Assets) (Details) (USD $)
In Thousands, unless otherwise specified |
Mar. 31, 2013
|
Dec. 31, 2012
|
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Deferred sales commissions | $ 17,685 | $ 18,142 |
Prepaid software maintenance | 5,504 | 5,530 |
Taxes, prepaid and receivable | 1,760 | 7,398 |
Deferred professional services costs | 8,112 | 8,057 |
Other assets | 11,219 | 11,306 |
Total prepaid expenses and other assets | 44,280 | 50,433 |
Less: Long-term portion | 16,752 | 9,844 |
Total prepaid expenses and other current assets | $ 27,528 | $ 40,589 |
Summary Of Significant Accounting Policies
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Mar. 31, 2013
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of Significant Accounting Policies | Summary of significant accounting policies Unaudited interim consolidated financial statements The interim consolidated financial statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC) for interim financial reporting. These consolidated statements are unaudited and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to state fairly the consolidated balance sheets, consolidated statements of comprehensive income, consolidated statements of cash flows and consolidated statements of stockholders’ equity, for the periods presented in accordance with accounting principles generally accepted in the United States (U.S. GAAP). The consolidated balance sheet at December 31, 2012, has been derived from the audited consolidated financial statements at that date. Operating results and cash flows for the three months ended March 31, 2013, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2013, or any other future period. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been omitted in accordance with the rules and regulations for interim reporting of the SEC. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012, and other forms filed with the SEC from time to time. Basis of consolidation The consolidated financial statements include the accounts of the Blackbaud, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Use of estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, we reconsider and evaluate our estimates and assumptions, including those that impact revenue recognition, long-lived and intangible assets and goodwill, stock-based compensation, the provision for income taxes, capitalization of software development costs, our allowance for sales returns and doubtful accounts, deferred sales commissions, accounting for business combinations and loss contingencies. Changes in the facts or circumstances underlying these estimates could result in material changes and actual results could materially differ from these estimates. Revenue recognition Our revenue is primarily generated from the following sources: (i) charging for the use of our software products in a hosted environment; (ii) selling perpetual licenses of our software products; (iii) providing professional services including implementation, training, consulting, analytic, hosting and other services; and (iv) providing software maintenance and support services. We recognize revenue when all of the following conditions are met: •Persuasive evidence of an arrangement exists; •The product or services has been delivered; •The fee is fixed or determinable; and •Collection of the resulting receivable is probable. Determining whether and when these criteria have been met can require significant judgment and estimates. We deem acceptance of an agreement to be evidence of an arrangement. Delivery for our products occurs when the product is shipped or transmitted, and title and risk of loss have transferred to the customers. Our typical agreements do not include customer acceptance provisions; however, if acceptance provisions are provided, delivery is deemed to occur upon acceptance. We consider the fee to be fixed or determinable unless the fee is subject to refund or adjustment or is not payable within our standard payment terms. Payment terms greater than 90 days are considered to be beyond our customary payment terms. Collection is deemed probable if we expect that the customer will be able to pay amounts under the arrangement as they become due. If we determine that collection is not probable, we defer revenue recognition until collection. Revenue is recognized net of sales returns and allowances. Subscriptions We provide hosting services to customers who have purchased perpetual rights to certain of our software products (hosting services). Revenue from hosting services, as well as data enrichment services, data management services and online training programs, is recognized ratably beginning on the activation date over the term of the agreement, which generally ranges from one to three years. Any related set-up fees are recognized ratably over the estimated period that the customer benefits from the related hosting service. We make certain of our software products available for use in hosted application arrangements without licensing perpetual rights to the software (hosted applications). Revenue from hosted applications is recognized ratably beginning on the activation date over the term of the agreement, which generally ranges from one to three years. Any revenue related to upfront activation, set-up or implementation fees is recognized ratably over the estimated period that the customer benefits from the related hosted application. Direct and incremental costs relating to activation, set-up and implementation for hosted applications are capitalized until the hosted application is deployed and in use, and then expensed over the estimated period that the customer benefits from the related hosted application. For arrangements that have multiple elements and do not include software licenses, we allocate arrangement consideration at the inception of the arrangement to those elements that qualify as separate units of accounting. The arrangement consideration is allocated to the separate units of accounting based on relative selling price method in accordance with the selling price hierarchy, which includes: (i) vendor specific objective evidence (VSOE) if available; (ii) third-party evidence (TPE) if VSOE is not available; and (iii) best estimate of selling price if neither VSOE nor TPE is available. In general, we use VSOE to allocate the selling price to subscription and service deliverables. Revenue from transaction processing fees is recognized when the service is provided and the amounts are determinable. Credit card fees directly associated with processing donations for customers are included in subscriptions revenue, net of related transaction costs. License fees We sell software licenses with maintenance, varying levels of professional services and, in certain instances, with hosting services. We allocate revenue to each of the elements in these arrangements using the residual method under which we first allocate revenue to the undelivered elements, typically the non-software license components, based on objective evidence of the fair value of the various elements. We determine the fair value of the various elements using different methods. Fair value for maintenance services associated with software licenses is based upon renewal rates stated in the agreements with customers, which vary according to the level of support service provided under the maintenance program. Fair value of professional services and other products and services is based on sales of these products and services to other customers when sold on a stand-alone basis. Any remaining revenue is allocated to the delivered elements which is normally the software license in the arrangement. When a software license is sold with software customization services, generally the services are to provide customer support for assistance in creating special reports and other enhancements that will assist with efforts to improve operational efficiency and/or to support business process improvements. These services are not essential to the functionality of the software. However, when software customization services are considered essential to the functionality of the software, we recognize revenue for both the software license and the services using the percentage-of-completion method. Services We generally bill consulting, installation and implementation services based on hourly rates plus reimbursable travel-related expenses. Revenue is recognized for these services over the period the services are performed. We recognize analytic services revenue from donor prospect research engagements, the sale of lists of potential donors, benchmarking studies and data modeling service engagements upon delivery. In arrangements where we provide customers the right to updates to the lists during the contract period, revenue is recognized ratably over the contract period. We sell training at a fixed rate for each specific class at a per attendee price or at a packaged price for several attendees, and recognize the related revenue upon the customer attending and completing training. Additionally, we sell fixed-rate programs, which permit customers to attend unlimited training over a specified contract period, typically one year, subject to certain restrictions, and revenue is recognized ratably over the contract period. Maintenance We recognize revenue from maintenance services ratably over the contract term, typically one year. Maintenance contracts are at rates that vary according to the level of the maintenance program and are generally renewable annually. Maintenance contracts also include the right to unspecified product upgrades on an if-and-when available basis. Certain support services are sold in prepaid units of time and recognized as revenue upon their usage. Deferred revenue To the extent that our customers are billed for the above described services in advance of delivery, we record such amounts in deferred revenue. Goodwill The change in goodwill for each reportable segment during the three months ended March 31, 2013, consisted of the following:
Amortization expense Amortization expense related to finite-lived intangible assets acquired in business combinations is allocated to cost of revenue and operating expenses on the consolidated statements of comprehensive income based on the revenue stream to which the asset contributes and the nature of the intangible asset. The following table summarizes amortization expense for:
The following table outlines the estimated future amortization expense for each of the next five years for our finite-lived intangible assets as of March 31, 2013:
Recently adopted accounting pronouncements Effective January 1, 2013, we adopted ASU 2013-02, Comprehensive Income (Topic 220) Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires that entities provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, entities are required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, entities are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. The adoption of ASU 2013-02 did not have a material impact on our consolidated financial statements. We have presented the amounts reclassified out of accumulated other comprehensive income by component in Note 12 to our consolidated financial statements. Effective January 1, 2013, we adopted ASU 2012-02, Intangibles - Goodwill and Other (Topic 350) Testing Indefinite-Lived Intangible Assets for Impairment, which simplifies how entities test indefinite-lived intangible assets for impairment. ASU 2012-02 permits an entity to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test currently required by ASC Topic 350-30 on general intangibles other than goodwill. The adoption of ASU 2012-02 did not have a material impact on our consolidated financial statements. |
Segment Information (Reportable Segment Financial Results) (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
Mar. 31, 2012
|
|||||||||
Segment Reporting Information [Line Items] | ||||||||||
Total revenue | $ 115,623 | $ 94,706 | ||||||||
Total segment operating income | 59,827 | [1] | 45,304 | [1] | ||||||
Corporate unallocated costs | 43,857 | [2] | 34,240 | [2] | ||||||
Stock based compensation costs | 5,178 | 3,836 | ||||||||
Amortization expense | 6,198 | 1,976 | ||||||||
Interest expense (income), net | 1,677 | 144 | ||||||||
Other expense (income), net | (103) | 308 | ||||||||
Income before provision for income taxes | 3,020 | 4,800 | ||||||||
ECBU [Member]
|
||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Total revenue | 44,679 | 33,841 | ||||||||
Total segment operating income | 23,642 | [1] | 15,187 | [1] | ||||||
GMBU [Member]
|
||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Total revenue | 53,018 | 43,831 | ||||||||
Total segment operating income | 32,176 | [1] | 26,059 | [1] | ||||||
IBU [Member]
|
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Segment Reporting Information [Line Items] | ||||||||||
Total revenue | 9,238 | 8,670 | ||||||||
Total segment operating income | 624 | [1] | 361 | [1] | ||||||
Target Analytics [Member]
|
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Segment Reporting Information [Line Items] | ||||||||||
Total revenue | 8,668 | 8,364 | ||||||||
Total segment operating income | 3,176 | [1] | 3,444 | [1] | ||||||
Other Business Unit [Member]
|
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Segment Reporting Information [Line Items] | ||||||||||
Total revenue | 20 | [3] | 0 | [3] | ||||||
Total segment operating income | $ 209 | [1],[3] | $ 253 | [1],[3] | ||||||
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