Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Blackbaud (BLKB 2.81%) fell more than 15% after the company reported mixed quarterly results and forward guidance.
So what: Total adjusted revenue rose roughly 4% to $128 million, which translated to adjusted net income of $16.7 million, or $0.37 per share. Though earnings beat expectations for $0.35 per share on the same basis, revenue fell short of average estimates of $129.33 million.
In addition, Blackbaud provided fourth-quarter guidance for sales in the range of $131.5 million to $133.5 million and non-GAAP earnings per share of $0.31 to $0.32. For reference, analysts were modeling lower Q4 sales of $130.4 million, but higher adjusted earnings of $0.34 per share.
Now what: Interim CEO Anthony Boor elaborated on the guidance miss during the subsequent earnings conference call, saying included in the Q4 guidance were "additional costs associated with the next phase of the infrastructure investments [the company is] deploying to further improve [its] efficiency and productivity, as well as increased investments" in the company's sales force, marketing, and new products aimed at renewing Blackbaud's revenue growth.
To be sure, Blackbaud will need to eventually pick up its sales growth going forward if it wants to continue growing earnings and justify its lofty valuation. Remember, shares pulled back from an all-time high this morning and are currently trading at nearly 102 times last year's earnings and 24 times next year's estimates. As it stands, until Blackbaud can prove its initiatives will work, I can't blame investors for taking some money off the table.
