What happened

Shares of Blackbaud (NASDAQ:BLKB) surged on Thursday, up 12% by 10:30 a.m. EST when the company reported excellent fourth-quarter results after markets closed yesterday.

So what

Blackbaud reported revenue of $198.3 million, which was 11.3% higher than the fourth quarter of last year and $3.4 million more than analysts expected. Earnings, meanwhile, jumped 57% to $28 million, or $0.59 per share, which was $0.03 per share ahead of expectations. Driving earnings growth was an increase in cloud-based software subscriptions, which rose 25% to $122.7 million. That pushed revenue from recurring sources up to 80% for the first time in the company's history. The rise in high-margin subscription revenue also drove up margins, which increased 400 basis points to 22.5%.

An investor celebrating in front of a computer screen.

Image source: Getty Images.

The strong finish to 2016 enabled Blackbaud to achieve its full-year guidance across the board. Furthermore, it set the company up to keep growing in 2017. The company sees sales rising to a range of $775 million to $795 million this year, up 6.9% at the midpoint from last year. Meanwhile, it expects earnings growth of 10.4% at the midpoint. That outlook puts the company on pace to achieve all the aspirational goals it set in 2014.

Now what

Blackbaud's transition into the cloud has paid big dividends, enabling the company to increase sales and margins and driving robust earnings growth. That tailwind should continue to propel its financial results higher this year.