Blackbaud (BLKB) 31 Jul 242024 Q2 Earnings call transcript

Good day, and welcome to the Blackbaud, Inc.

Second Quarter 2024 Earnings Conference Call. Today's conference is being recorded.

I'll now turn the conference over to Tom Barth, Head of Investor Relations. Please go ahead, sir.

everyone. morning, Good joining Call. for Blackbaud's Quarter Second Thank us Earnings XXXX you on I'm Investor Head Blackbaud. new Tom the Barth, of Relations at here I'm recently have very Blackbaud excited team. joined the to a you. look know I but of with of working I likely all forward lot to you,

the CFO. is Mike for on and will prepared Mike and and CEO, Gianoni, Executive Blackbaud's then today Tony open questions. remarks, line and Tony your Chairman; Boor, call up we Vice me Blackbaud's President Joining Vice President the will and make

our note those subject and from XX-K our Please risks. to cause contain to to risks comments Form on materially that today actual other forward-looking SEC and those differ could refer recent statements projected. forms Please uncertainties for that most information results more

results. performance, our the website as GAAP the and to on today press our focus both of financial and for well to that full The guidance. discussion GAAP our investor including will posted on We Please refer believe materials year a results combination as details non-GAAP full release measures non-GAAP be from how as this measure Please otherwise a that for business. Unless measures should measures refer we we isolation non-GAAP call. more of will non-GAAP our specified, on only measures. GAAP note internally considered to representative in not financial are financial substitute or

I'll And over Mike. the with you, turn that, to call

everyone. morning, good and Tom, you, Thank

nonprofit of key initiatives serve our company all to to power maintaining our extended world's to key X-point management these flow. the talk to second the enhance our our social customers, of to impact come needs Before better innovation how quarter, has predictability cash our provider of software revenue and product growth, cost as about attention while the very implemented far successfully several like leading through position specific I We've executing years I'd past plan. operating on by highlight

double-digit our million. material fuel a driven adjusted flow accelerated we that $XXX result to and program generated significant improved free repurchase significantly and expanded cash revenue our sustained recently EBITDA a non-GAAP we've As stock EPS work, margin, which growth, used was to replenished of growth have this

Our approximately negative the accelerating our X.X% second of in significantly revenue quarter from growth impact was growth growing evident Total the quarter is strong, strong quarter results. Organic growth X%, for in revenue the revenue XXXX. progress also X%, growth was of EVERFI. excluding the second

the piece Our XX% adjusted this $X.XX, non-GAAP nearly will XX%, reflect was EBITDA margin but $XXX was does benefit ASR, full the million rate. final tax our a reflect higher does the basis up per year-over-year, points up And settle share XXX of which yet year, later year-over-year. not which earnings of

quarters, and results strength detailed a focus and model. they previous are direct our our of we against result and continued execution of in leverage plan have operating and These franchise the highlight technology, strategy our financial and

record is our performance The is just inflection exciting, we're of started. While approaching another point. getting company

few closed and years, long the many on operations In and tremendous and challenges in near, the past to of primarily over faced book focus creation capabilities, improving company have the the opportunities ahead the allowing and our successfully addressed addition mid to term. on the value we us now go-to-market growth

strong We with shareholder compelling believe opportunities investment multiple Blackbaud is for a returns.

an First, rich into software inherent mission-critical most opportunity. as further services, a to purpose-built the and an industry and even leader of set market penetrate comprehensive with ability have we

and for allows our aggressively to customers provides financial the leverage enhances great value in to to Second, invest of attract new innovation, ability our our which customers. us model continue

returns. Third, disciplined, we generate committed are strong and to flows capital cash value-maximizing

speak first two aggressive to and to I'd the current improve on of in as Tony comment shareholder we to plan like at undervalued repurchase that value. guidance. as and will dive believe to results into the our We third the our be valuations, Blackbaud's drivers, well stock and

charitable innovation. granted rich our and market our XXXX in Blackbaud strengthened platforms invested giving through us, $XXX which donated, a have globally. of by front opportunity We was in $XXX is of over roughly U.S. billion billion,

sector, and to leader, continue see primarily a our In to as our great to focus we enterprise customers. social And nonprofits. our midsize offerings new logos to opportunities existing on land continue we expand as market well

our And too. choices, we appreciate have customers that

product brand capabilities. For and decades, market with depth of leader being and the enjoyed breadth recognition strong we have unmatched our

success But of the we're our past. not relying on

invest continue developer capabilities, to money our them our enable including network AI to operational spend throughout their continuous to which on customers and efficiency, through administrative ultimately more enhancements time to generative in innovation turn charitable more executing time with aggressively increasing partner tasks. less We portfolio, our allowing product on while and missions APIs in produce raise

that depth is point of disparate smaller natural We're for customers our include address alike. horizontal meet prospects The customers These disjointed a believe comprehensive complex, technology additional larger a and require depth nonprofit-specific landscape breadth vendors needs. no customer and capabilities. solutions of companies for combined lack a functionality choice and competitive or of new nonprofit; complex only company alternative aspects offers needs the of we often customization expensive to single our that potentially where the software and

business our to results. Moving

XX% revenue The extremely total social social segment in Our largest quarter. well. of revenue sector performing sector our is is the representing

acceleration the confidence in grew sector very social have be to in demonstrated several COVID-XX dramatic revenue proven has business. downturns quarter, of quarter last trajectory the and compared through XXXX. this second second a the And the X.X% The resilient as in sector long-term we growth to Social great the X% of to the year-over-year pandemic. rate

of valuable content, impacted despite pool. growth. and great revenues, talent on EVERFI, comprehensive In total company a corporate been and a catalog relationships, a by drag which been has being has deep of customer has performance including only EVERFI unique sector, our X% assets,

EVERFI nonrecurring corporate to including be leadership a However, Blackbaud's overall know. faced a on And sector to challenges, performance. strong decisive drag divestiture have business, while number changes of of everything taken has external the you of as continues and we actions, components

Accordingly, a for alternatives actively range considering we of EVERFI. are strategic

This divestiture and One of is which early EVERFI customers. includes support work in business. to remains a stages positioned the its well of potential

to progress We update will you this as on initiative. is continue made

Tony, bolster these to several reinforce meaningful turning foundation Before for success. over our to I years to past made we've want the progress

Our shares as operating outstanding plan continues cash to top drive XXXX. bottom well to We strong committed of as line as XX% as and remain much growth our flows. in repurchasing

bright. is Our and future mid- near, long-term

few after closing and come Tony back in your we'll I'll take with thoughts, minutes then questions. Tony? some a

our plan our is The our excited results. positive and remain continued bottom Thanks, visible and and Mike. line the front execution road strategy top with operating in on very about in progress I'm of pleased financial us.

almost Total those quarter X% to up Looking results. on second was an X% basis. organic year-over-year $XXX and million, revenue

Our of share of which the at X.X%. sector, well represents Blackbaud's XX%, revenue revenue growth perform social continues lion's to with particularly

contractual Within in our up grew year-over-year X.X% recurring the while social recurring sector, the was sector social transactional revenue revenue X.X%.

The year. results corporate the in revenue only by EVERFI our X.X% sector, be weighed in of underperformance and to of this XX% total which X% the was represents quarter, at continues completed total the down of approximately that of revenues and reflect EVERFI. U.K. divestiture company's represented March declined Recall, EVERFI

expect at We headwinds to EVERFI continue.

for Mike pursuing this alternatives strategic said As we're business. earlier,

our Rule drove line. way EBITDA on 'XX. overachieved of of year We the are result well XX the full on goal with XX.X% XX.X%. the our our Rule XX a for for of our initiatives and quarter year-over-year also the a improvement our to basis of in quarter pleased below margin point second cost We're to revenue XXX of with outcome Moving adjusted that continued management goal

We generated $XX in of million quarter. free cash flow adjusted the second

free cash XXXX. adjusted our is half quarter XX% generation with of Taken adjusted flow the to approximately the compared first cash flow strong of together first $XX half the million, first in free up

cash confidence of gives stock like in a to free product flow innovation robust us Our investment repurchases. critical areas, and continue number

be we aggressive valuations. our the previously stock repurchasing addition in at ASR, In current announced our to to plan

is and use these As of the million better announced, than company's Board million business $XXX levels. there believe into Directors no back capacity capital shareholders around replenished innovation returning from through capital the has stock. recently repurchases existing $XXX program, the for to valuation product reauthorized available We expanded to of repurchase common and the company's total the raising stock investing of

highlight your like Before which into the items I XXXX. may guidance, for developing I'd year talk think for views about help to in several you to about remainder and annual of the

revenue. Regarding

continued events And more aren't, to giving this the second ones benefited will there we a In headwinds in XXXX half at charitable there anticipated in 'XX. cannot from whether creates addition the for 'XX. predict of if any the compare difficult viral EVERFI, we like be

for new new price reminder, standard industry also and customers a for those growth for we are renewals norms as escalators X-year revenue generate expected to sustained within contracts, our implementing is contract approach annual summary, business. a are to we is In which which by multiyear the us. contract, to is moving modernized Second, following our us;

can deck this You to for refer our additional information investor program. on

here bottom items. are Additionally, line some

on company may plan with We to each continue and quarter, to margins tight business. continue During employee-wide invest dip timing slightly. headcount, the increase which to attrition merit and as hiring cash there of its annual fluctuations and third we but costs implements causes to the maintain be the in controls quarter-to-quarter

business second and the Next, and third has outperforming our quarters with degree some quarter first our of fourth typically seasonality quarter quarter.

XXXX to be mentioned I the to compare a quarterly last increased due of charitable is As QX earlier, far difficult viral quarter pacing, giving over as of year. as events third expected levels our

could Of reoccur. these some see events of course, we

program of delivery shares shares repurchase, incremental Lastly, later and accelerated this regarding or year. stock settlement our March, delivery more than an in X.X expect initial ASR, XXX,XXX million additional we an currently at of had this

guidance. to Turning

our tracking continues across full to sector ranges well metrics. all perform social and plan. The We reiterating is are guidance core to year

to range year-to-date currently at revenue anticipate being being range. high cost anticipate end However, strong performance margin our guidance end the EVERFI, management. same towards adjusted EBITDA time, due and the our due low continued to of of underperformance on the our profitability guidance we at focus At we

in to We the be of of a lot have half 'XX. first proud

and execute to especially our the ability in line performance pleased strong to its of produce plan continue profitable our with on flows. have We forward. We're social and confidence drive core sector bottom operating top results going growth and cash to

providing shareholders. our on our to We customers value and remain enhanced focused

the which accrue We benefit to also, are removing Mike believe impact we of EVERFI, shareholders. to will value our discussed, as of the committed negative

back then Let to it and line for me we'll for a quick the Mike open up turn questions. comment,

and undervalued years, to we success, by will feel improved cash this and the in continue seems including flow, We our the our social expanding single-digit of over dramatically last core of growth growth repurchase sector, quarter. free this to revenue couple Therefore, have in the be aggressively strong community. revenue that of high much Blackbaud's margins shares. investment EBITDA margin including invest

and we and long-term Blackbaud's results, tremendous Our proven driving believe near, operating bright. plan is future is mid-

Thank you, your look Operator? we to questions. forward and

[Operator Instructions] question from first coming James. Our is Raymond Peterson of Brian

environment of with love the I'd on solely an the How to of get side. social the the the how the lower update look? thinking business the related Mike, that to health is EVERFI? And side for on to going growth business. Just bookings as looks what's the about an So of we're want end outlook social of does that on health year, the update get on

Sure, on business, side doing minus much the the Yes. Bookings pretty Brian. is company are which fine EVERFI. the of whole social

Sales fully EVERFI. drag New revenue is is productivity the logos good, And up. are to related up.

grew the out, company. improve potential But business, QX, plans we've I sector Massive year, social prepared as X.X%. X% improvement the remarks. I'll got Last just at And a sale. said this the in including of business. for EVERFI, QX about just is in the year's to point XX% the mentioned, this

a follow-up Maybe good that. on

in relative can margin at segment even corporate Tony? or about that Just there, think to the EVERFI the side? to of share Anything could looking business general, social understand we the how profile you

I -- on Brian, business to outlook. want clarify first The revenue the EVERFI Yes. one thing,

events. The the back for for some other see charitable upside is us we if half viral

last year. As you compare a a We events. QX we this recall, very good tough prepared we'll had guys and -- There had year. viral charitable and were have the large several a comments, really we talked in QX about

not now of that right of if any would some provide those. some incorporate but forecast would upside we our see As those,

very From the dilutive the contribution, an growth EVERFI both it front and front. is overall profitability EBITDA on on and

We've us a place. on got So of do that. for work quite there's plans different a lot in few to

those we've efforts. stated, we'll keep we And made changes on make as Mike already. updated guys As progress you management

The next Oliver of question is coming from Baird. Rob

my noise. apologize first I for any background question for is Mike, you.

the Why your in Just still general could wondering whether view the the the should of as business. it corporate to then regarding follow-up be considerations, your question, you need a all? of part just to and remain sector, light on for that I important of alternative potential corporate talk in do a philosophy about Blackbaud? about announcement part And I EVERFI if And at the talk strategic had Is just for you business an there. Tony, well. the was you

The and EVERFI Rob. corporate Sure, YourCause. sector Yes. several predominantly includes platforms,

YourCause The actually it business well. the It's is really is to EVERFI. growth. accretive doing of part drag company's

YourCause connects nonprofits to that really nicely and donate that's ecosystem. and to internationally. has a connected growing global that And expanding of a very large so footprint well, part is corporations to global doing again, our nonprofits, it platform is us

company X% nonprofit the the connected doing And do It YourCause again, sector. I think is sector few said EVERFI of companies a is So side. to we is rest this well. the company, through the it's of on an really important times,

Great.

And just business. talked that's contracts social side appreciate -- you well. been the towards then, migrating going X-year like I it does X-year about of the that. Tony, renewals, customers on Okay. seem your And

You it rate. see can in certainly the growth

call cohort I'd customers that you know be you X. If some curious, renewals an that you year we for that that there concern give took was was before. need now? through can and a and of update, get potential And great. I've cohort us this that not Where in asked out -- a question we There are did X be to would cohort cohort. I

late for thanks started question. program year. Rob, last We, know, of Yes, as the you this QX

what those on good up a year initial on. chunk eye That's were have versus come where contracts may customers of a agreement. X have keeping chosen we we an multiyear So

which overall, very gross retention down good disclose we considering now at XX% It's fared positive the dollar little for is you the front. renewal which dollar the constant The news rates at EVERFI, a year-over-year, efforts by on very our that is, is see, but all we company. pulled our bit held have held publicly, number, renewal gross well. can contractual XX% Overall, steady

I'll Rob, clarification. just for something, add just too,

while part question. program has includes annual which for a this price of now. to So initial will continues. doesn't It's contracts, had per we've been customers before. X-year these will The years, price it continue. When and moving end after your It it, annual call Also have never these escalators, we on And going the X, includes business. X-year contracts years if escalators renew, program X also will. X, in, the X just you

is from VanVliet question BTIG. Matt coming next The of

was as beginning could here areas guess how the in the any is portfolio on of a be through a K-XX you've I bit next color seem to gotten of us lot year. just the that particular, of summer and if outperforming? you headed doing. I business that And the give school of wondering little into

that We K-XX and a that company portfolio got K-XX set is in of platform. Matt. market that's really marketing some and capabilities back, additive with Great is well. equity Thanks, just engineering. leaders very help website, We've to admissions a little a presence. which in Yes. there while sales doing good announced partner made to in our and product investment an we

platform we're really the management, the So having to lots tuition a of runs schools, doing great growth well year opportunities. financials fundraising, that and there, the and

you're at lower Okay. to end where curious least And customers underperformance the brunt the Just an forward to on today. at up following the at is of how or of the it try quantify headwind outlook just least on being here. churn at Could ongoing feeling new EVERFI then much versus sort maybe of on bookings? you due down-sell

in The It's of the rest revenue company just X.X%. bookings. of or the thing. XX% grew the to QX drag the so, in And EVERFI. X% be Sure Yes. is clear. business, predominantly on company, Again, it's

question next of coming is Lane from The Parker Stifel.

sort forward? result what most I you And challenges -- a taking rearview were? the recent challenges growth appreciate another of notable just you for you mentioned in the inflection challenges reaching of those the it a how questions. company you the Mike, Can going company sustainable as the rehash up putting the of years lot point sets mirror. some of of

bet. Yes, you

in which queued operating up. X-point put go, showed So we up then COVID to plan this was

a So lot closed a executed We've We've driving a program. renewal prices. it that lot contract tabled new implemented And of of for innovation. data list while. a we've plan. on centers. We've we parts We're new implemented of

So all base that's to why coming to the fruition. from X.X% That's quarter. company this X% past grew

concluded years that. announced legal The those action over now other ago, we issues with in things that We are as now. predominantly behind is which some well. incident California, matter fact, us security now. behind many We with for we yesterday, had pretty And are much settlement the example. all a And had class us

also behind that's us. So

things behind are distraction have we a us. those and So for management those

So free the lots up like happening free just EBITDA of things of we're year. to cash mentioned Year-to-date, couple times. I you in is -- The cash quarter. look things revenue flow this at if year-over-year growth XX% about good a related XX% flow.

together key really margin standpoint well So metrics all expansion. coming a growth from the are and

specific And Yes. of I very giving, know have then, Can just the you viral campaigns? Very kind unforeseeable. they typically a I comp. helpful. visibility into have those understand that charitable to you Tony, events you are related talk about tough on the

the your you that for So of balance in guidance the consider year? how do

in our Yes. not We forecast. any viral include currently, Parker, would charitable events

half, And from on in we earlier be the in second currently towards the end EVERFI. that may to on if provide we low upside the I would where due those so was that's comment made the questions, guide revenue see of some do some of think earlier we one the

up be of -- kind but visibility lot like of a just just you were and or viral we tough, as And all. a races events, into. a to of and didn't that what is walks are again a types in that other we'll there's surprises, ones drive lot and anything and visibility charitable because things year really things and have the could see may come of at bit. they things the little have half We unfortunate those that The last the meaningful brings. weather-related have imagine, more half second Typically, unforeseen first wars like can wait

think not revenue, I the upside year, in this EVERFI. upside. Yes, but was made is though we represent the that for is some the second The of half There those again, downside. drag some point

next The Materne Evercore ISI. question coming is from Kirk of

you new contract Mike about think that Appreciate of years. you next for I Are of just the to and year cycle Tony, shifting I supposed us give sort contract how coming on going? couple the Can any sort you time. was earlier? the XX% different of or be then of there you just to this talk in talk and the to can balance is all? earlier, mean, roughly sort terms I about is clients that? an guess renew wanting update over to

deck going of a done the the is got with Kirk. It's core slides to those program be going about part this it's changes. just of now. no well. Yes, XX% been planned. well, company explain going try in some available There's it. this on of the We'll We've to And It's the as end IR year. by

X-year the contracts. up customers Pretty are bulk much for of signing

only every they're pretty XX% is much be X-year significantly less that contracts X-year a have As mandated we them of X-year less we main, a But get some contract, small this, we'll which amount contracts. because on a about contract to fine. the of have We'll X-year year. remaining customers XX% through renews company in to and have

start months we'll to X-year for XX those so, contracts cycle annual in we'll So again, renew or with escalators. price and

it's going all, in really all well. So

touched of a the of on Okay. upon the a sorry bit I that's But small I And nonrecurring this, late. Tony, U.K., then, on little divestiture EVERFI's assume jumped in the you business very Great. if drag. part

softer to think bigger Is bookings the the corporate just way part it? that retention. I of drag think the is in about and

organic dollar divested we a that numbers that adjust that. the our would millions was Yes, single business U.K., of and of Correct. for in

Boor Mr. At back like you. I'd closing over to the time, turn comments. floor for this Thank to

a us today. events, In be forward a will Thank you, which We you, of attending Investor several September, site. now and Relations thank you and for conferences, our on August Donna, to soon, investor everyone, listed speaking investor nice day. we and with have look include number joining are

Ladies and This participation. for today's gentlemen, your thank concludes you event.

log webcast rest your the disconnect this off day. and enjoy may at the You or your lines of time,