Initiated 2026-09-28 (re-initiation; prior report `initiation-2026-09-26.md`) · Price $42.16 (as of 2026-09-28 intraday, stockanalysis) · Mkt cap $1.91bn (45.39mm cover shares) · Technology / vertical software for nonprofits · Model: verified

Rating: Buy — Conviction: High

Blackbaud is the incumbent fundraising and fund-accounting system for mid-to-large US nonprofits, with 98% recurring revenue and GAAP margins rising as stock compensation falls. At ~11x GAAP EBITDA and under 8x forward non-GAAP earnings, the price assumes years of share loss, while filings show revenue growth of 3–4% and GAAP operating margin up 100bp year over year. Both valuation methods sit well above the price on the base case, and the call holds at a 1pp higher discount rate.

Conviction tests (3a-v-c): T1 pass (base +39.1% at +1pp, +92.6% at −1pp) · T2 pass (Gordon +77.9%, exit +45.3%) · T3 pass · T4 pass (8-Ks since Q2 results: a board appointment only; no deal, ruling or contract event)

The rule gives High; I would call it Medium. The tests don't stress the share-loss driver, and 4x leverage turns a modest revenue break into a −64% bear case and a −89% tail.

Model value range vs price
Bear $15.07Base $68.14Bull $115.48Price $42.16

Business overview

Blackbaud sells cloud software to nonprofits, foundations, private schools and healthcare foundations. Products: Raiser's Edge NXT (donor CRM), Financial Edge (fund accounting), K-12 school management, corporate-giving tools and Blackbaud Merchant Services (donation payments). Q2 2026 revenue was $290.6mm (+3.0%), of which $285.3mm was recurring, and organic recurring growth was 3.3%. FY2025 revenue fell 2.3% to $1,128.4mm after the EVERFI exit. Earnings turn on three things: renewal pricing and retention in the installed base, payment volumes (which track giving), and cost discipline. GAAP operating margin rose from 16.9% in FY2025 to 21.3% in Q2 2026, and SBC fell from $127.8mm (FY2023) to $92.9mm (FY2025).

Competition

Salesforce is the main threat for large nonprofits: its Nonprofit Cloud serves ~55,000 organizations. Bonterra (private) is consolidating the mid-market; per 2026 vendor guides it added OneCause (14,000 clients) in October 2025 on top of EveryAction and Network for Good. Lighter platforms (Bloomerang, Neon One, Virtuous) serve smaller charities. A 2026 vendor guide puts Blackbaud at ~40–50% of mid-to-large nonprofit CRM deployments and says 48% of nonprofits are considering a switch. These are survey estimates. Pressure would show up first in renewal pricing and large-customer losses to Salesforce. On one definition (stockanalysis, 2026-09-28), Salesforce trades at 17.0x EV/EBITDA and 16.0x forward P/E, against Blackbaud's 11.2x and 7.7x.

Bull case

  1. Margin expansion keeps compounding. GAAP EBITDA margin was 24.5% in FY2025 and 27.4% in H1 2026, with SBC falling each year. Plays out if cost discipline takes GAAP EBITDA margin to the low 30s by FY2030. Model: ebitda_margin
  2. AI and payments lift growth to mid-single digits. AI features and embedded payments raise revenue per customer. Plays out if growth moves from ~3.5% to ~6% without share loss. Model: rev_growth
  3. The multiple recovers from a trough. EV is 10.9x FY2025 GAAP EBITDA on the model's basis. Plays out if two or three quarters of steady retention ease the disruption fear. Model: exit_ev_ebitda, wacc

Bear case

  1. Share loss to Salesforce and consolidators. A large switching intent, an AI-native Salesforce product and a larger Bonterra could turn price increases into concessions. Plays out if growth stalls in FY2027 and turns negative from FY2028. Model: rev_growth, exit_ev_ebitda, wacc, terminal_growth
  2. Leverage magnifies any stumble. Debt is $1,152mm against $34mm of cash, 4.0x FY2025 GAAP EBITDA (covenant basis 2.58x). Buybacks exceeded FCF in FY2024 and FY2025. Plays out if EBITDA falls while the April 2029 facility ($1,086mm) nears. Model: FY0 net debt (credit.debt), wacc
  3. Margins fall back. Holding share could require price concessions and more AI R&D. Plays out if GAAP EBITDA margin slips back toward 23%. Model: ebitda_margin

Valuation & balance sheet

Metric (definition) Current Own history (range or 5y avg) Peers Source, as-of
EV/EBITDA, aggregator (TTM, stockanalysis EBITDA) 11.2x n/a (not retrieved this run) Salesforce 17.0x · Tyler 30.1x · AppFolio 35.6x stockanalysis.com, 2026-09-28
EV/EBITDA, model basis (EV $3.03bn, no leases / FY2025 GAAP EBITDA $277.0mm after SBC) 10.9x n/a (not restated) n/a (peers not restated) 10-K, 10-Q; model-inputs.json
FCF yield: company definition (FY2026 guide $280–290mm, SBC added back) / after SBC (model Base Y1 levered FCF $171mm) 14.9% / 8.9% FY2025 company FCF $203.5mm = 10.6% of today's cap Salesforce 8.0% · Tyler 5.4% · AppFolio 3.8% (aggregator definition) Q2 2026 release; 10-K cash flow; stockanalysis, 2026-09-28
Forward P/E (non-GAAP EPS) 7.7x n/a (not retrieved this run) Salesforce 16.0x · Tyler 22.6x · AppFolio 26.5x stockanalysis.com, 2026-09-28

Model-implied value range (from model-summary.json; generic module, Gordon-growth DCF and exit-EV/EBITDA DCF, midpoints): Bear $15.07 · Base $68.14 · Bull $115.48 per share, i.e. implied returns of −64.2% / +61.6% / +173.9% vs $42.16. These ranges show how the bull and bear drivers translate into value; they are not price targets. The price sits about midway between bear and base: the market is paying for growth that stalls, not for the reaffirmed guidance. Leverage explains the width: equity is ~63% of EV.

Re-rating. The exit method uses 10.5x, a 4% de-rating from today's 10.9x, and gives $61.27 (+45%). That return comes from EBITDA growth and debt paydown, not re-rating. The Gordon method gives $75.00, 22% higher, because 8.0% WACC with 2.5% terminal growth implies a higher terminal multiple. Part of the Gordon upside is therefore a re-rating.

FCF framing. The ~15% "FCF yield" people quote uses company FCF, which adds back ~$93mm of SBC. The model treats SBC as a real cost, so its Base Y1 levered FCF is $171mm, or 8.9%.

Tail, quantified. A harsher bear was run outside the committed model: revenue +3%, then −4% a year; GAAP EBITDA margin 26% falling to 22%; NWC −20% of revenue (shorter billing terms); 6x exit; 10% WACC; 0% terminal growth. That gives $4.80 (−89%).

Balance sheet:

Model note:

Relative value vs peers
MetricBLKBCRMTYLAPPFPeer medianvs median
P/E (TTM)13.9x21.1x43.7x45.5x43.7x−68%
P/E (forward)7.9x15.5x23.2x25.8x23.2x−66%
PEGn/a0.9x1.5x1.1x1.1x
EV/EBITDA (TTM)11.7x17.0x30.6x35.0x30.6x−62%
EV/Sales (TTM)2.7x5.0x5.8x6.5x5.8x−53%
P/B30.0x4.9x4.5x13.3x4.9x+513%
FCF yield16.4%8.0%5.3%3.9%5.3%+11.2pp
EV/FCF (TTM)9.5x14.5x19.7x25.2x19.7x−52%
P/E (TTM)APPF45.5xTYL43.7xCRM21.1xBLKB13.9x
P/E (forward)APPF25.8xTYL23.2xCRM15.5xBLKB7.9x
PEGTYL1.5xAPPF1.1xCRM0.9x
EV/EBITDA (TTM)APPF35.0xTYL30.6xCRM17.0xBLKB11.7x
EV/Sales (TTM)APPF6.5xTYL5.8xCRM5.0xBLKB2.7x
P/BBLKB30.0xAPPF13.3xCRM4.9xTYL4.5x
FCF yieldBLKB16.4%CRM8.0%TYL5.3%APPF3.9%
EV/FCF (TTM)APPF25.2xTYL19.7xCRM14.5xBLKB9.5x

As of 2026-10-09. One source and one definition for every company: aggregator TTM and consensus-forward multiples, lease-inclusive EV. Not the model's own EV basis (see the report's valuation table). Quotes taken 11:40-11:58 ET on 2026-10-09 with the market open, so multiples reflect intraday prices. Dashed line = peer median. Source: stockanalysis.com /stocks/<ticker>/statistics/, fetched 2026-10-09.

Notes. No PEG on the source for Blackbaud; blank, not computed. Blackbaud's P/B (30x) is inflated by a small equity base after buybacks and debt.

Scenario stress test

Reasoned from the bull/bear drivers above. The model column comes from the scenario overlays (Base case + shock).

Scenario Effect Mechanism Magnitude Model Δ value vs Base ($/sh)
S1 Fast equity crash − Levered small-cap de-rates; donor wealth falls, trimming payment volumes Med −$7.53
S2 Slow bear / recession − Giving falls; nonprofits delay upgrades and cut seats; payment volumes drop. Much smaller than Base − Bear ($53.07) on purpose: a recession is transitory, while the bear case is permanent share loss High −$14.02
S3 Rapid rate shock − Discount rate rises; ~$350mm of unswapped floating debt reprices High −$12.48
S4 Slow rate grind − Same channel, grinding Med −$7.73
S5 Soft-landing cuts + Lower discount rate and cheaper floating debt; giving holds up High +$15.18
S6 Recession-driven cuts − Lower giving outweighs the lower discount rate Low −$2.18
S7a Credit liquidity shock − Levered equity sells off; no maturity until 2029 Med −$7.09
S7b Slow default cycle − Leveraged-loan repricing raises the cost of refinancing the 2029 facility and the equity risk premium Med −$9.05
S8 Stagflation − Higher discount rate; real giving falls; wage inflation High −$12.17
S9a Dollar spike − Small UK, Canada and Australia revenue translates lower Low −$0.47
S9b Dollar slide + Mirror of S9a Low +$0.47
S10 Melt-up + Momentum lifts de-rated small-cap software Med +$7.09
S11 Energy supply shock 0 No material effect, not modeled Low $0.00
S12 Mega-cap/AI derating − Software multiples compress in sympathy with an AI unwind Low −$4.25

Currently active/on watch per the playbook: state.md lists S3 as partially active, and the macro log records all three S3 legs crossed from 2026-09-24 (10Y 5.17% on 09-25). S8, S10 and S11 are on watch. S3 and S8 are High rows here.

Model value change vs Base, by scenario
S2 Slow bear / recession−$14.02S3 Rapid rate shock−$12.48S8 Stagflation−$12.17S7b Slow default cycle−$9.05S4 Slow rate grind−$7.73S1 Fast equity crash−$7.53S7a Credit liquidity shock−$7.09S12 Mega-cap/AI derating−$4.25S6 Recession-driven cuts−$2.18S9a Dollar spike−$0.47S11 Energy supply shock$0.00S9b Dollar slide+$0.47S10 Melt-up+$7.09S5 Soft-landing cuts+$15.18

What would change the call

Upgrades (conviction) if:

Downgrades if:

Watch items

Sources