Margins matter. The more Blackbaud (Nasdaq: BLKB) keeps of each buck it earns in revenue, the more money it has to invest in growth, fund new strategic plans, or (gasp!) distribute to shareholders. That's why I check on my holdings' margins at least once a quarter. I'm looking for the absolute numbers, comparisons to sector peers and competitors, and any trend that may tell me how strong Blackbaud’s competitive position could be.

Here's the current margin snapshot for Blackbaud and some of its sector and industry peers and direct competitors.


TTM Gross Margin

TTM Operating Margin

TTM Net Margin





Microsoft (Nasdaq: MSFT)




Oracle (Nasdaq: ORCL)




SS&C Technologies Holdings (Nasdaq: SSNC)



8.3% (NYSE: CRM)




Source: Capital IQ, a division of Standard & Poor's.

Unfortunately, that chart doesn't tell us much about where Blackbaud has been, or where it's going. A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it can't make up for this problem by cutting costs -- and most companies can't -- then both the business and its shares face a decidedly bleak outlook.

Of course, over the short term, the kind of economic shocks we recently experienced can drastically affect a company's profitability. That's why I like to look at five fiscal years' worth of margins, along with the results for the trailing 12 months, the last fiscal year, and last fiscal quarter. You can't always reach a hard conclusion about your company's health, but you can better understand what to expect, and what to watch.

Here's the margin picture for Blackbaud over the past few years.

(Because of seasonality in some businesses, the numbers for the last period on the right -- the TTM figures -- aren't always comparable to the FY results preceding them.)

Here's how the stats break down:

  • Over the past five years, gross margin peaked at 70.1% and averaged 65.3%. Operating margin peaked at 27.3% and averaged 20.6%. Net margin peaked at 19.9% and averaged 13.4%.
  • Fiscal 2009 gross margin was 60.9%, 440 basis points worse than the five-year average. Fiscal 2009 operating margin was 14.8%, 580 basis points worse than the five-year average. Fiscal 2009 net margin was 9.2%, 420 basis points worse than the five-year average.
  • TTM gross margin is 61.1%, 420 basis points worse than the five-year average. TTM operating margin is 15.2%, 540 basis points worse than the five-year average. TTM net margin is 9.7%, 370 basis points worse than the five-year average.
  • LFQ gross margin is 60.7%, 60 basis points better than the prior-year quarter. LFQ operating margin is 13.8%, 40 basis points worse than the prior-year quarter. LFQ net margin is 8.4%, 20 basis points worse than the prior-year quarter.

With recent 12-month-period operating margins below historical averages, Blackbaud has some work to do.

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