Blackbaud (BLKB) 6 Nov 212021 Q3 Earnings call transcript

Good day, and welcome to Blackbaud's Third Quarter 2021 Earnings Call. Today's conference is being recorded. I'll now turn the conference over to Steve Hufford, Director of Investor Relations at Blackbaud. Please go ahead, sir.

Good morning everyone. on quarter us earnings joining for Blackbaud's XXXX third call. Thanks

and or more are otherwise on internally our refer financial Boor, recent differ Blackbaud's our President will Tony open could the your then cause be measures me that representative line that Please of comments, for XX-K Mike a risks from measures release a make we substitution is both specified, night, on and note not our materially issued in in those Investor the Blackbaud's presentation combination SEC to more Mike prepared will comments call supplemental Vice is of from up Tony Joining how uncertainties business. we and our A filings non-GAAP and Relations this available measure are note today GAAP non-GAAP and GAAP most results Unless last schedule non-GAAP that today Gianoni, contain as risks. reconciliation information that forward-looking and we refer statements to projected. and should CEO more other and President Executive for press GAAP measures and the only on will Please financial CFO. on Please questions. detailed results Form We available subject in to isolation our call. of we a website. to considered measures. for non-GAAP actual and believe those

for the I'll our call Mike, engagement briefly activities turn the I Before cover over to quarter. investor

Conference, Barclays James Suisse will Media be Telecommunications Global Technology Conference. XXth quarter, Investors our Annual in participating During and team the the and Technology, Conference, Credit Raymond Technology fourth

Mike. Baird be holding you, With December XXth. call and I'll on virtual by We XXth over will turn investor to the on that, hosted November Stifel meetings also

Thank everyone. our call you, joining Thank morning for today. Steve. Good you

of the which our faith-based even culture revenue. Blackbaud, building double-digit improved shift represents roughly located. a first quarter transitioned Topline We've as have regardless our a own reflected achieved shift a engaged much year seen successfully roughly year, of as name company's a seen remote growth, to best flow applications, for customers as this the inflection exceeding cloud-based a quarter on XX firmly exceeding history. where and just time a walls over virtual to accelerate. and execution market XX-point to our fantastic results connected an of walks, people to of our pace entry backdrop. even are revenue in the are we market we're free expectations where admissions world XX% we a and digital-first we've are virtual grant online prayer expectations new I Third few. near runs, with for drove on We continues rides, on this tools, potentially for growth to recurring for fundraising we're in company total meeting cash capabilities have to And they organizations, point our and at improvement and Rule our company the believe

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we year again our the XXXX. are outlook raising Turning for full to the of remainder year,

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on across and capabilities, accounts and Another to and as vendors, example artificial This unmatched streamlined creation, payments, Financial management relationship drive recent invoice data well receiving sponsors. of in to a billing, success Edge the experience Blackbaud's flexibility And as major bringing insights we intelligence release such where provides we're XXXX, philanthropic our a in is of entire new customers as customers. customers, robust for just area plan experience. release holistic areas wave workflows NXT, controls as benefit a and extending walls modern transforming our receivable the to committed our together outside most by happening from industry's well. but innovation, intelligence giving this giving We're the to the new also database of innovation a not with in

more extend X,XXX than registered is developer solutions. in seen that to to growing create capabilities our over Our new with non-Blackbaud community tools And now Blackbaud We have we've ecosystem. rapidly ever developers over use in cases found about them such the I'm as the we're no-code in APIs have smarter. where enabling excited that growth the to market, with or Edge a Platform, to help employee such seeing our or marketplace, the Blackbaud X,XXX organizations substantial an Microsoft curated Connector, with seasoned with work integrates engagement. Urcos app We're Shopify Urcos our customers non-developers for our more platform NXT integrating also as to automated without data new having API tools enabling Power effective connect easily build workflows app low-code be into with a Raiser's employee Workday, a developer.

as available US in with markets strong is a bbcon, the the giving our gifts the UK. innovate At total in to our announced continue checkout become with now of also follow success team to additional that share donations. greater cover after We online complete customers' model seeing

they the JustGiving at reiterating extensively I easy-to-add organization. market an UK if with full be customers. by Instead, and giving inflection XXXX platform and donation You we we are fees. company simple-to-use significant with there button for choose board growth year that non-profit that others raising full estimates XXXX. want any of are a our cover the opportunities the and in checkout Blackbaud real recurring our from cover win-win differentiates with ahead. donors checkout point our for an can used to and this checkout a summarize I'll our believe with it's We're for expect revenue can year by growth model, is accelerate that in for our no organization. tested success processing Giving complete processing fees where think itself the great We've to across

Our infrastructure to a velocity We're growth go-to-market SKY on future investments customer in motion. platform focused innovation, deliver continued and investments through additional higher success, cloud and in the results. fueling security

and carry open quarter, into Q&A. acceleration a us, strong Overall, through to this of it that, the positioned to we once call growth innovative challenging year be before Tony? and over of we for strengthen while end resilient to to we're very driving long-term pandemic the financial turn continue our customers. market capture proven well-positioned partner opportunities for and our a in environment, leadership of is again Blackbaud and best front Tony I'll the XXXX. well the inorganic face meaningful in to With and the performance. organic we Our up has had as position the in momentum

before results everyone. line Today, Thanks QX open latest for for and full our Good our Mike. year up outlook for we questions. morning the cover I'll the

You and details refer press our to XXXX the materials our can posted yesterday's full to of investor for performance. the financial website release QX

events revenue a expected half was an growth we You've our Recurring XXXX. growth earlier of revenue of benefited revenue the levels, previous in X.X% and historical for this driver staying should as year. the what's expectations. larger trend has investor believe a we organic grew calls higher proof heard revenue to this of in-person exceeded Strong delivered basis, that in only session online point of returning we and drivers an percentage as acceleration on giving a us performance against laid out on overall transactional from not execute and say second performance QX but XX key serve compared power. a those achievable

best ever. an seeing success As of months we're one JustGiving their example the had here, of revenue

We've a XX%. XXXX, contractual on Also, and in expect increasing revenue as million to should business, result strong lift $X point take continue improvement we pricing seen of services see ARR approximately our per with customer to grew rep trends to revenue, growth. Onetime bookings million, initiatives on in overall with core in retention QX. declined as which rate starting hold. soon our the is the other revenue which some Our a growth. was $X drag quarter which year-over-year renewals of in basis our bottom drag and Again, in total sales this productivity to early XXX we total recurring revenue

us of the our trends to business estimates scenario which the our the leading For beginning upside the the top out year raise exceed best of second was we're expect now million. at for to in the full year, and end in laid are the we quarter seeing row, a $XXX

of We to representing foundation the laid our earnings for inclusive going investments an we had earnings, and adjusted our XX.X%, of forward. adjusted generated success, margin was per adjusted expansion a XX%. margin $X.XX. quarters and and EBITDA customer velocity And like considerable margin of EBITDA third We XXXX, gross of infrastructure EBITDA Moving diluted security XX% motion. three cloud a through margin in $XX areas higher of quarter an sales million, share of innovation,

year full loaded. for estimate certain adjusted EBITDA best roughly margin back-half Our being XX% of investments included

likely particularly in we're XXXX, these While progress push areas some headcount. where making of early investments to good here, increasing into are we're

do than we had in We at competitive a market, continue rate attracting great headcount which top we're planned. the a talent less job but adding to labor is

the Our we've in to prior increased are look a experience to our we people and create capacity paying recruiting tools accelerate and best-in-class hiring. needed investments as off candidate

year anticipated overperformance full adjusted XXXX. margin EBITDA sheet. to expect achieve the QX of brings and flow and timing at me our an we revenue statement to in of That least for balance XX% investments, now the cash Given

Our for Through flow flow, and on of of of three quarters, our third free million, the million ever terms cash margin for of flow representing of free $XXX us quarter, a we've free current years has $XX $XX year-on-year plan one was generated increase flow in cash cash million XX%. the free best cash a generation. pace approximately

not suggests modeling to we're of I'll feel million company. the We fully flow, investments likely $XXX during the also completed today planned million share where valuation still we're heightened at the opportunistic for generate a of inclusive reflect least note free latest Our we that as does quarter. heading repurchases QX. $XX cash of that

net had XXth, available repurchase million debt. $XXX September authorization. We we approximately and of the our in ended quarter current As under million with share remaining $XXX

stood million Our $XXX X.X QX, end debt calls EBITDA a had of we the we less and capital X.X capacity. times. borrowing at to ratio for And of of strategy at times, than

opportunistically high that the on and perspective continue exceed XXXX. the to As repurchases be may acquisition will full transactional revenue look To the behind outlook actively quarters prove we that prove And that, our forward, executing and to that the $XXX we conservative million estimates internal for of evaluating confidence a end we company's high previous are opportunities, three have we quarter with us, may we're determine -- shares plan undervalued when share XXXX of revenue on for by year summarize From modeling fourth we performance. our our revenue. market. depending

some Our earlier, on our XXXX, profitability, full accelerate year-over-year. some revenue revenue here of transactional pace least as for quarter free our the in suggests at ramped our million adjusted year variability flow. payments further I should call inclusive combined remind we XXXX year with an performance expect seasonal And acceleration Shifting plans on see strong tends full to EBITDA our of quarter at cash achieve recurring revenue. carry to the for XXXX. for our we be to fourth And for growth which XX% fourth ahead into QX is $XXX to year-to-date, depending to revenue investments will rate. I'll looking to performance spoke margin could growth generate of you, least recurring outlook of we high

our the on XX to to improvement We potentially the shareholders roughly during also representing calls investments oversight and summary, including which sheet a come. the we we're and the have of free XX-point business ability and ensuring of growth, balance Rule efficiently total outlook our in and and a capital flow achieved the the identifying third revenue through the against raised of adequate returning In confidence increased to the management, capital continue grow accelerate saw capital years pace financial history. year best acquisitions, year-over-year, of for recurring will executing quarter, We've revenue. access share rigorous in company's the full additional XXXX for have in cash XX% business, deployment strategy to for levels to option in We a roughly double-digit excess nearly XXXX to performance year repurchases. on including our

resilience near-term M&A margin shareholders allocate capital our why nobody way to growth, us knows Rule increasingly provides performance. financial over and With truly the we well line goal. visibility greater with optionality our the expansion our aiming achieve for And value last how business, as our of pandemic share proven to accomplish our a repurchase program of are initiatives inclusive accelerating have positioned We maximizes like the our long with our combined that us performance that, the We're and questions. to ability a our in company and has to that strategy our XX will ample market accelerate long-term. to to confident capital of the for in I'd open up and your

Stifel. our with Thank you. take will now question Instructions] We first [Operator Parker Lane from

relative areas the could your improve quarter. Hey to Or seeing about it in particular that performance board? you'd Thanks talk for the is positive you'd bit question. say any guys. to productivity balanced a hoping last incrementally have across I you're little my you a Mike, point the taking productivity was pickup been mostly across are sales that there business, commentary

we're markets and good really we Thanks seeing at Yes. well and the SMB out prescribed at and the of We're seeing seen marketplace. there. doing well the performance I across improved of it verticals, your across quarter our the question. board. kind cruising metal Pacific that sort the better closed productivity deals year-to-date, Parker of is more Canada look different And in We've products our and we're in all in in for for internationally. UK. and gotten We've

year-over-year productivity seen a the basis. board across improvements we've So, on

should Or R&D the again, here is you're to maybe the behind investments? you're mentioned those of that or looking a think investments, accelerate your then that employees an hiring area hiring, there it. And and that XXXX? bring sales Got How capacity where to you as looking well? mix enter in are Where terms you're seeing increasing bit about as of mostly focus? we we you plan. marketing little Is recruiting in on

of Yes, couple it's a areas.

more success. and focus sales can the investing in we're infrastructure, line, and more customer you see in in We're there. innovation. there adding So, security R&D on Big

So, this XX those kind the areas three are and months. year headcount been last of adding big the we've that the

Thanks.

see quarter. Got back great you it. Thanks. Very good and to

Your Baird. the with Oliver comes next Rob question of from line

return that's question is guys. exciting. just the bit up we pretty potential and some into Hi, cover to of that's what I post to it Mike market, terms fundraising quick think to budgets the customers? terms in out in morning calling coming I and for pre-COVID back back a you the kind a your good had driving we on that inflection, capital wanted that, you, little in to And in-person Thanks. follow-up. seeing, events of dive for events? just then a normalization inflection just levels in or do particular, more you're are that saw then that fundraising following of And

Yes. Sure Yes. Rob.

for we've the we see the proves to a So, long been back quarter half this of growth and we'd return third time thought saying our that. that year,

events. So and return of our to an digital. yes, we're seeing markets sort seeing got basically all NBA We're of

actually so We're XX% a only year. to digital closed digital digital and year-over-year before. of that's a stay. And year. significant or year, mixing Online We're that grew markets and they're so standpoint, just open seeing events also last digital from opposed in-person fundraising first grew, lot shift to and last last were a to seeing some our now as here what, fundraising

So, them in the cloud folks not. that or they pandemic need help they're mix. partner we're facility showed a all the when solid seeing And to

growth and of general, So, seeing We're productivity. a bookings, It's mix in a year-over-year of back. coming things. transactions. it's great lot It's

we're the So, board. seeing across that

I'll Tony. add. is this Rob, just And

I'm capacity events gone some is yet. I've the way capacity-wise, seen with involved back of least not from I've and what think to just all the non-profits at I the

So, pandemic year or many high other the seasonal And from for pandemic. that there's events where a how in a things. still then this folks some zoos a is still to all and tighter and lot are folks piece the constraints things in of of earlier able those the from museums of secondary gala the we participate missed were bit the

And quarters participation first event in we upside come better see spring year of have summer this kind and that in next year. of and think this I two as saw we we should schedule, what we of so than out some the

Yes.

our Another Day add outlined and we're there, And the several of too, those fruition. that little is we presentation. had we've bit, in around year, kind earlier implementing a we this Investor a about quite talked initiatives in pricing take while come to to that

some are implemented, some So, are coming.

there forward there's upside as going So, good well.

helpful the you ended. Tony, follow-up the talked spending I out products talked of Mike, of open of guys. pace really AI. Thanks. last search, giving That's brief, month or an user you coming My it. conference but R&D list But about color, is potentially guess about impressive Definitely

kind briefly, bit would bond you're when excited what up you of which of innovation, here, most Mike pace most dialed hear curious to you be kind the I guys. Just you're a about. guys look and kind clearly little of be about at of have ones that Thanks curious excited which I'll

another. engineering across built, products, to and we lot of it all of of awesome an And we're way Yes, your touching a or a which leverage our there's we've really we're getting using it's verticals multi-use engineering in quite some one SKY. few, point, call platform that's system that out

and go-forward innovation. platform management our completely moved and we in say it's customers of platform the this that new thing I'd well. have been it's great transformed literally engineering grants driving this last system, our in a modern And XXX% Blackbaud the now to that was as we has grants just accelerated completed platform biggest quarter, so

highlight one that's So, the is completed the I'd of latest innovation. sort things of

it. Thanks Appreciate again guys.

Yes sure.

with The next Peterson the line from question Raymond comes Brian of James.

Thanks for taking gentlemen. my question. Hi

Just better. how commentary of terms customer Mike, and So, curious is net and parse pretty looking. any just you new get little base? that curious, to is I that in opportunities could that the versus the mean environment in I'm getting with it's bit your the clear what's out split a on backdrop execution happening color the

signing non-profits colleges logos world. lot We're a the Yes. community in of new and around

corporate YourCause global more becoming Our its platform footprint. really is in much growing well,

kind board, and between strong. the team that deals productivity the seeing farmers. closing got recently. of we've And healthcare across separated we're new year-over-year like in in logos said, bookings hunters sales growth quite our And So, our I sales in and big is

the example So, we're good was as where but far at about with well. QX bookings just growth in pleased this Again, we've year. talked year, that, we're throughout so not and of performance revenue increasing a

on the to workforce. see a those Or was XXXX? And hiring. of about to the be to how guys feel bleeds expect a think And mean, transitioning release Great. maybe just I press remote you you that I Thanks fourth fully or XXXX Tony, that help hiring follow-up Would you in did are where here? efforts? that guys. quarter the you do do getting into your kind

we Blackbaud kept pandemic to is we're been Hey now for that on I'll a when we recruiting took started, recruiting position while, actually not have it start. sort that in demonstrates I'll office. just fact This the over question. close really of hunkered the folks year the a and Thanks. Appreciate Yes, ago And Mike. press sent first. a Brian. sort remote but start. of down we a the release

our a for around ago, some fantastic we well year. the world. been for recall real of going transition and got of over us, a year estate It's just a You out been it's

combination is jobs. perfect cloud company lot the applicants a excited a folks because of of set in been. but over XXX,XXX diversity customers a that talent for software and at people a big about it's like about. public a and to access hire year, market those a that And from serves now looking are are not we we never care We're career hundred sort standpoint of people the Our company, few we get Blackbaud

a talent year for doing And and from diversity so a been standpoint we've now. well really over well hiring

just And follow-up. Yes. I'll Brian,

business just side the the personnel seen crazy company right actually we now. dynamic has. every up attrition We've attrition on this piece market difficult in the I of have tick as is think think I

has it's all on hiring so and well some we're the the is inflation been to that deal not a seen. then there's certainly And what personnel bit having than attrition been with. us, a higher but And hitting the we've problem, historically that's as cost been of obviously, inflation

Got it. on Congrats Thanks guys. quarter. great the

Thank you.

Our proceed next line from with question is question. the Materne ISI. Evercore of with your Please Kirk

on guys. This for here Kirk asking Hey taking Two is of Thanks question. questions. [indiscernible] my behalf Materne.

kind talked adding on productivity I you sales productivity balance of of year to business. improve XXXX? about First, how better about when ahead know capacity guys of for productivity calendar you adding this the there? before, versus but getting there improvements further recurring looking think you room contractual to the Is side more mentioned the further do And

doing both. We are

nice of there's capacity a productivity. adding we improved a in doubt to sales. about are plenty areas secondly, We've room room And there's for year-over-year growth, that. in of yes, really well. There's couple So, sales productivity but seen for more as no

So continues. that

spending additional we we're area on will is as productivity. well, of marketing people lead more take sales work other of sales that so the think velocity that increase up increase their to some dollars drive side some can kind their I which gen and the digital

velocity to Yes, model. sales couple that us centralized sales takes which really really executives, hiring high onboard it weeks new we've or of higher also efficient is built great. It's and a a literally a hire model

a And that. follow-up. just then appreciate quick I

in growth a onetime how payment into standpoint around side, we unusual anything about heading events? And season? should the holiday the seasonality was like the On XQ there payments think from

That mentioned XX% last sub-XX% We stay. to Mike run we've last at we a here We year. increase, in seen never online. sharp donation historically like was have to of think I donation total year earlier, up volume. somewhere that's saw donated jumped think online

compare So, the et perspective. easier that's lack last one events, of because benefit. QX in XXXX year-over-year the And impact pandemic from an and then year, donation of was cetera, of online frankly, just the an

increase normal. And I back so as I we to think year starting as fully. in this overall this of levels out come -- capacity year. hopefully, versus part really think answering of this we'll expect to some one earlier expect questions, our impact get to said upside revenue somewhere continued as Rob's acceleration pandemic, we back year's QX there's increased volumes. what closer And normal of growth think see back were prepared coming just that's continues then of to in to is still in And up And comments, I more events we we part more XXXX next see

guys. Thanks Awesome.

You bet.

Our question with line BTIG. Rachel with your next from coming of is the Freeman Please question. proceed

Rachel is for for taking my this Hi, VanVliet. question. Matt Thanks on

on coming see touched expect to off constraints XXXX. you capacity the that You in

you next are more main see more customers? events customer for hybrid and the for in-person through approach year? being So, do the incremental of year, events hybrid Or some foresee seeing revenues per you with expecting more of a plus return digital events to events a in-person

thanks. Rachel, that I'll Yes, take start,

events an well higher events We're seeing seeing happening of per in also increase that performance. customer our ARR didn't back revenue in coming sales as because are happen. We and bookings

drives again, is us seeing the industry shifting that. we're which of both well. as transaction Also, So, growth online for more

XX% total took of that's X%. It's in decade not a it year, If half to get X% went a recall, and last one and year, big or raising going you to from a fund to jump online backwards. and more

there's So, higher bookings. online and then shift that ARR dynamics customer more in revenue in per also and of then mobile and the

jump in this don't a typically that variable Rachel, transactional that And nature, all run I'll systems customers' to monetize dollars pricing have Mike's point, are necessarily is in the Tony. Yes. things, of model. through one our We there.

will And online get increased some so from transaction we benefit volumes, certainly.

of yet started and I well. for not next implementing some we've have think just begun the We some other as thing of keep in year, initiatives pricing have the still mind these. in to some

well. I by with U.S. just will U.K. success to increase per the revenue customer complete cover the as think a model giving bringing

several session help volume that hopeful this earlier investor going through that got drive year We're we pricing the will also opportunities in we've So forward. went increased per customer.

you just performing the how that fall, That's transaction speak the then in is revenues the can to just impact return to K-XX And in-person the market how during did overall? And great. schooling on quarter?

Yes.

So, Bookings are the well. market is good. pretty K-XX performing

the were or last our so of in in because class Our were XX able regardless to all students systems months if operate the of were not. vital customers

So, in of an to administrators seen positive. in return six a locations, schools platform. to our management super haven't our the We've the run not. the tuition of schools class their platform had access schools or so last having months, In had advantage our in student issue regardless the mobile

lot there. a start So, A of to quarter. the all our good innovation platforms on had they've good happening

here user got at feedback very and doing close these schools. fact, we're schools that group a relationship with groups and like a innovative in their headquarters the lot. good that get that to a talk about we this see In K-XX we've have that run things those user things We we week they'd

the yes, us. is for K-XX So, solid market

Thanks. I'll queue. hop in back

Okay.

will remarks. time, for closing management this At you. Thank I to the turn floor back

was year XX-point recurring All Thank excellent roughly everyone. pace best you, by near we're have an driving just on We're right. improvement I'll that example the Great. company. quarter saying on a third our in of close achieved We growth, year-over-year. potentially company's flow as free history. Rule cash a double-digit what revenue of XX after to

starting multiple the course have to levers to over hold. we As we which year, revenue are of margin accelerate growth said and with take this

we're for and financial against you, and to the at the the and XX shareholder of our pandemic disciplined We've our M&A Rule substantial revenue pricing will few execution transactional the event-driven steady First, model outlook framework deployment capital Thank recovery and price We second, business. value. third, commitment looking a believe opportunities. returning; generate catch-up actively continued with opportunities; everyone. bookings

concludes today's This you. conference. Thank

disconnect you for your time. may lines You this participation. at your Thank