Non-Profit Tech Blog

Those of you looking for more information regarding the purchase of Kintera by Blackbaud may want to check out the recent EDGAR filing by Blackbaud. It contains FAQs that were sent out to Blackbaud and Kintera employees. Many of these questions are pertinent to nonprofits such as:

A customer is raising issues that are specific to them that are not covered by the generic messaging. Who do I contact for more information?

Should any of your customers raise Kintera-Blackbaud issues that are specific to them, contact a member of the Integration Leadership Team so they can be involved. You should contact the person from your company below based on the product the customer has questions about:

• Sphere – Shaw Drummond (Blackbaud); Rich LaBarbera (Kintera)
• P!N – Chris South (Blackbaud); Ian Gruber (Kintera)
• Fundware – Scott Butler (Blackbaud); Scott Bechler (Kintera)
• Other issues – Bob Hughes (Blackbaud); Rich LaBarbera (Kintera)

UPDATE (6/2/2008): Thanks to EDGAR, we now have access to e-mails sent from Blackbaud and Kintera management to their employees. Check it out!

There’s also a webcast available that was hosted by Marc Chardon and Timothy Williams. The questions were inevitably financially-related but I’ve distilled some of the more technically relevant pieces for those of you looking for more information.

The webcast starts out with a prepared statement from Marc and Timothy. They went on to state that they believed that Kintera Sphere is the most advanced and the best Internet fundraising software in the sector. They went on to say that 2300 nonproifts use Sphere.

They said that the acquisition is intended to accelerate Blackbaud’s move into online fundraising. They will continue to use Blackbaud NetCommunity for solutions requiring tight integration with Raiser’s Edge but KNTA will be for those customers who aren’t looking for Raiser’s Edge integration.

What was interesting to me is that it looks like they bought Kintera primarily for Sphere. Per seat licensing fees are what makes up Kintera Sphere revenue whereas Fundware is associated with renewable maintenance contracts. Fundware has 1700 customers whereas Financial Edge has 4300 customers. Apparently, KNTA made $45 million in 2007 with the majority of it from Sphere. The purchase for Kintera was at 1x annual revenue which makes the purchase pretty close to a fire sale. Apparently, Kintera was still operating at a net operating loss this year and that will drop the purchase price even lower to around $36 million.

Blackbaud wants to improve profitability of Kintera by sharing the costs of building online fundraising and CRM. Also, people were concerned about KNTA’s sustainability and it weighed on decisions to purchase KNTA. BLKB is guessing that with its backing KNTA will have a better reputation in regards to sales.

There was a question and answer period as well. Here are some snippets from the Q&A period with the timelines inserted so that you can follow along in the Web cast.

25:00
eTapestry is donor management more similar to RE than to Sphere or BBNC. They don’t expect to see any integration between eTapestry and Kintera Sphere.

Sphere had very strong online fundraising characteristics and was on .NET platform. Blackbaud believes that makes for much easier integration. I forgot that Kintera was .NET but now that I hear it again I think this acquisition makes a lot more sense for Blackbaud.

Blackbaud will have a roadmap out in next three months and they think that Blackbaud NetCommunity and Sphere will integrate in the years ahead.

28:30
Are KNTA transaction processing fees continuing?
Yes.

You’ve got to listen to this question being asked of Blackbaud management as the analyst asking the question mentions that Blackbaud once thought of Kintera’s transaction fees as “mercenary” which is something that Blackbaud immediately backed away from. I don’t think I’ve ever heard that criticism of Kintera by Blackbaud but it was funny to hear.

30:05
Blackbaud was asked about the previous integrations with Target Analytics and eTapestry. Blackbaud is claiming that the integration between Target and Blackbaud’s Analytics groups has gone well and that they think eTapestry and Kintera integrations will proceed similarly.

41:45
The question is asked as to why did BB stop with Scorpio and think of purchasing Kintera.
They say that 18 months ago stock prices were different. Blackbaud NetCommunity is still not really finished and not yet connected to infinity. As a result, Scorpio (the recent improvements to NetCommunity) wasn’t really wasted if Blackbaud bought Kintera. There would be very little duplication of engineering.

44:45
An analyst asks about Kintera’s restricted cash line item?
Blackbaud responds that restricted cash and donations payable are offsets to one another.

Here’s an interesting item I didn’t know about. I believe this restricted cash line item on Kintera’s quarterly statement is the float that Kintera carries in order to insure that donations are paid. It was $7 million in Kintera’s last quarterly statement. This means that Kintera is earning interest on that $7 million before it gets disbursed to nonprofits on their system. It’s a nice job when you can get it

UPDATE (6/2/2008): Don’t Tell the Donor has posted Gene Austin’s response to the acquisition. It’s a bit strange in that there’s a call from Convio to have Blackbaud open up its API despite the fact that Convio’s own API is problematic at best in its inability to provide multiple records in one call. In fact, if Kintera’s API gets adopted into the Blackbaud codebase there’s a good chance that Blackbaud itself will have the more open API vs. Convio’s. Sometimes, I have to wonder if Convio’s strategists ever bother to check themselves before they wreck themselves. I concur with Don’t Tell the Donor in that it’s highly unlikely that people will believe Convio’s new stance as an advocate for open APIs since they themselves were late to the game in this respect.