Active First Half For Share Prices Of Nonprofits’ Vendors

March 6, 2012       Mark Hrywna      

Last year’s resurgence of stock portfolios since the nadir of the economy in 2008 has slowed somewhat into 2011, but there are still more winners than losers among companies that have a hand in the nonprofit sector.

Among a dozen stocks of companies that serve nonprofits — including software, direct marketing and online fundraising – roughly one-third are down this year. In the aggregate, the 12 firms are up almost 8.5 percent for the first half of 2011, more than the Down Jones Industrial Average (7.23 percent), S&P 500 (5 percent) and NASDAQ (4.55 percent).

The 12-stock index was up about 28 percent in 2010, considerably better than even the broader markets, such as the Dow Jones’ 11-percent spike, the S&P 500, which was up 13 percent, and NASDAQ, gaining 17 percent last year.

Most stocks that are up in 2011 opened the year strong and pulled back some in the second quarter, along with the Dow Jones, which briefly dipped below 12,000 amid concerns regarding the European debt crisis, among other things.

For the first half of 2011, eight of the 12 stocks were up, led by Alliance Data Systems (ADS), which was up more than 32 percent despite a data breach at Epsilon, its online email marketing division. Companies such as Best Buy, Kroger and JP Morgan Chase alerted their customers of a breach in April. Epsilon’s nonprofit clients include The Smithsonian Institution, San Diego Zoo and Save the Children. ADS stock price dipped some 5 percent a day after the breach was announced but the Dallas-based firm closed the second quarter trading at $94.07 per share, after soaring almost 21 percent during the first quarter.

Another firm that’s been up almost one-third this year is Austin, Texas-based online fundraiser Convio (CNVO). Like Alliance Data, Convio’s stock price had its surge during the first quarter, up almost 40 percent. It dipped to $10.81 per share in the second quarter, but is still up more than 30 percent for 2011.

Salesforce.com (CRM) was up almost 13 percent, which would be a good first half for any firm, but is especially sweet after the huge year it had in 2010. The San Francisco-based firm was up 79 percent last year, twice as a much as any of the other stocks examined by Exempt.

Among the losers in 2011 so far is Harte-Hanks (HHS), down 36 percent, more than erasing its 22-percent gain during 2010. Acxiom (ACXM) is another stock that enjoyed a rebound last year only to give back most of it in 2011. The Little Rock, Ark.-based marketing firm enjoyed a 28-percent bump in 2010 — second only to Salesforce.com Oracle in the “Nonprofit Index” — but has dropped off by 23 percent by the first half of this year. Microsoft (MSFT) continues to scuffle, down 7 percent so far this year, after a 7-percent drop last year.

Among the other companies in the study were eBay (+16 percent), Blackbaud (+7 percent), Omnicom Group (+5 percent), Oracle (+5 percent), Serenic (+13 percent) and Sage Software (-25 percent).

It has been another busy year in the nonprofit space for technology and software firms, which have gobbled up smaller companies.

Convio has started using some of the $56 million it raised in a 2010 Initial Public Offering (IPO) to make acquisitions. It has made the jump outside of the United States, with its July announcement that it had purchased Baigent Digital, one of the United Kingdom’s leading digital strategy, design and technology implementation firms. The company paid $2.9 million, a slight premium over the $2 million in revenue Baigent reported for 2010. Based on performance incentives, Convio could pay up to an additional $400,000. Another purchase, announced in January, was StrategicOne for $5 million, possibly $6 million in all if the Overland Park, Kan., database marking firm reaches certain targets over the next three years.

In February, Blackbaud announced an acquisition of its own: $17.5 million cash for Alexandria, Va.-based Public Interest Data (PIDI), a database management, acquisition list and analytics services firm. The Charleston, S.C.-based software provider, could pay an additional $2.5 million based on performance of the company over the first two years. It was Blackbaud’s second acquisition in three months, after picking up Santa Barbara, Calif.-based NOZA, Inc., creator of the world’s largest searchable database of charitable donations.

The deal included cash and the assumption of debt but the amount and other terms were not disclosed. NOZA generated $1 million in revenue in 2009 and was approximately breakeven. The firm also sold the Blackbaud Donor-Advised Fund program, which was previously known as Giving Capital and later Kintera Donor Advised Fund before being acquired by Blackbaud in 2008, to Renaissance Administration, LLC, in Indianapolis.

Blackbaud was up 7 percent in 2011 — closing the first half at $27.72 per share — keeping pace with the overall index, which was up 8.5 percent.