Blackbaud (BLKB) 30 Oct 242024 Q3 Earnings call transcript

Greetings, and welcome to the Blackbaud Third Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tom Barth, Head of Investor Relations. Thank you, sir.

You may begin.

everyone. morning, Good joining Call. for Blackbaud's Quarter Third Thank us Earnings XXXX you on

those Joining Mike we Boor, today Executive call prepared Officer. me the on will Tony are uncertainties to today filings note up President forward-looking those statements Chief and and from and that differ make the risks results Chairman; Mike for actual and comments Vice and Officer, XX-K contain Vice Gianoni, open Please and risks. our Executive that questions. Please for Tony to cause then your to could Blackbaud's remarks, Form and Financial will on President refer Chief most projected. Blackbaud's line materially subject more recent information SEC other

results. and for press full to well non-GAAP The financial year Please on refer the as materials website our discussion including release today full to details performance, as guidance. posted our our focus results investor will GAAP on

are and substitute be a that GAAP otherwise will believe We non-GAAP not measures. our refer that business. this Please isolation non-GAAP to should internally or financial specified, from note measures combination of measures financial Unless we call. only in both a GAAP how we on measure measures considered non-GAAP as more of representative for

call that, to And me Mike. the with over turn let

for Thank you, ranges addressing XXXX. Tom. guidance Good morning, revised everyone. I by want to our begin

very well, feel sector, the shareholders. revenue, we is to majority and which social perform remain our Our investment a of we for strong continues

the impact EVERFI. our lowering continued due annual negative are revenue financial to We guidance of

remain of guidance unchanged. year performance the our would EVERFI, negative the Without for

our and underlying We are that our future opportunities confident remain strong. business

strategic and EVERFI's business in spoken about the We've evaluating options. performance past improving

the business X% portion possible in remains best of our achieving outcome. management is our While revenue small focused a at on roughly overall the quarter, of EVERFI

to Goldman continue other we've to We better plan rightsized cost as you appropriate options. in assist to area. us evaluating have our hired to revenues, business adviser the as We in Sachs this align recently and to update strategic

business, we look of As you a across our by driven shareholder our the focus for compelling execution plan, investment, opportunities Blackbaud, continued believe operating returns. is X-point of our parts with multiple strong other on

market extend social into to solutions software our impact pace of position continue through offerings We providing our purpose-built software and penetrate as exciting comprehensive the innovative set the to rich new continue and the leader we our in of list even to accelerate power and mission-critical opportunity. further on an services, of to market most

our both with held impact bbcon, was thousands virtually. our exciting. professionals Seattle, and customers and The reception social annual conference, In user in by September, clear of attending we in-person and enthusiasm

powerful new waves richer payment We announced and AI with analytics, new companies to connectivity, expanded such Contact, performance capabilities, partnerships Constant of encryption as navigation innovation, including menus, a deeper assist, name X new few.

and less We'll improving in continue executing our allowing charitable to ] to and administrative time their more raise time operational network money partner to spend their missions them customers on innovation enable ultimately, efficiency, developer further while more invest our with [ aggressively on tasks. to

and which numbers, natural X.X% third our social the sector, include in revenue Their success our ours choice grew new is FY customers visible drive remain difficult a We helps for quarter comparison. 'XX prospects in and alike. despite

X.X%. up the reoccurring revenue, social, within company's revenue contractual largest And line, was

excluding XX%. EVERFI, grew transactional Gross the X.X%. approximately Our by retention, largest ] our and [ solutions, revenue driven see our customers line reoccurring of was XX% revenue dollar second social value using

workflow, institutions education wins These enhancements of the College These Dallas and the and prominent competition over in We beat will efforts. Davidson out to University fundraising the higher our vertical of logos Nevada, deepened customers. included end-to-end enviable our our power and new existing with Baptist list add Reno. recent to relationships their competitive University, XX,XXX valued

strong gives confidence Our quarter. remains nearly million in adjusted stock the strong This repurchase $XXX great third program. very to us at fuel cash free performance flow our aggressive

approximately the current has plan common Through as of multiyear end will of stock as bought remain and as October, financial its buy with as outstanding about our that capital prospects. allocation at by trajectory XXXX X% year-end back of is much Blackbaud's as more I the as but balance cover well XXXX. the pleased Tony company XX% to results well strategy,

have plan results. margin, hearts operating to years year-to-date. are driving over social significantly EBITDA last strong flow by customers mission our adjusted free very empower of a success, Blackbaud's We impact driven the and couple revenue, of and that this improved our of the and adjusted feel proven cash much in employees

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

between pleased the growth and flows; continued We about us. purposeful in capital cash committed of opportunities I'm earnings, Mike. allocation with Thanks, and balanced remain model, remain revenues, prudent our financial strategy. providing excited front progress in our shareholders attractive the and an to

Looking to revenue X.X% results, $XXX an basis. year-over-year up X.X% organic on quarter and was our third total million,

the of the perform with revenue well to at Our very growth of which revenue represents continues Social Blackbaud's quarter, majority sector, X.X%. in approximately XX%

Mike Corporate Our decline, negatively influenced was by sector as EVERFI. again mentioned,

the company in XX% total declined Although it only year-over-year quarter, in represents X% revenue quarter. the of EVERFI

earlier, rate Goldman this our in reflected revised of in We EVERFI's at Mike And reduced the outlook. hiring strategic run expense lower to through pursuing term, better Sachs with business align expect said and have near as continue the recently alternatives which we're to revenue headwinds is the guide. EVERFI for

same was the cash $XX in $XXX million quarter quarter Moving from and repurchase our third adjusted generated the the program. adjusted flow despite year-to-date, up margin below impact expense is which time associated share million $XXX we from XX.X%, interest free line, revenue of million of in XXXX additional with third the our frame EBITDA negative

bought recently completed flow stock other ASR when company of repurchases, our We in with our repurchasing aggressive the continue back our common to We repurchases. of goal investment of critical outstanding previously stock stock. quarter, continue up million confidence And free of outstanding with combined of has areas a approximately announced as and robust cash plan the 'XX. to innovation $XXX Our back buying product to our gives the fourth stock common our be stock in X% like end of XX% us to program. our number

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

anticipated have not XXXX. in like addition we in revenue, to unusually we viral the large did at Regarding events softness continued the any of EVERFI, experienced

nicely normalized transactional rates. business growing at more So if you extract those events, our is

renewal have continues sector XXXX, well. contract we XXXX. the perform to in last modernize the through approach shift to modernized in the pricing, contracts in approximately -- XX% will XXXX By and approximately our of social the terms and have the gone cohort, Second, XX% XX% eligible to of end leaving

third past The is of the in 'XX in social in in approximately contractual first in recurring revenue which our the renewal XX% of quarters. quarter meaningful rate the quarter way, growth represents to we which compared lapped X uplift reflected approximately the a pricing quarter X%

X a contracts And finally, and modernized renewal recognized straight-line have while on the escalators X, is years in price revenue our basis.

by and value the is for evenly term. contract So divided over in recognized a example, total XX X-year full the contract,

Turning takes to continued the core which year social perform into consideration to sector that guidance, we ranges, are revising guidance well. our-full

at to However, we underperformance continue EVERFI. expect

XXXX time, full our At $X.XXX guidance per guidance our year. revised share margin be EBITDA XX.X% range billion. growth we adjusted our XX% $X.XX, X.X%, follows: last XX%, year. slightly range revenue increasing $X.XX $X.XXX from Therefore, expected At are is $X.XX last X.X% to to of from up we midpoint, Non-GAAP slightly as same year. the between earnings rate and billion to the is from year in up the to organic up last

does in will XXXX. with well approximately the EVERFI outstanding into of negative reflected until diluted impact take share our be in guidance is in and share Also yet program. underperformance not associated of note, sometime count fully incremental the This repurchase shares repurchase million interest fully our account $XX full as not reflected as expense

be million our $XXX $XXX between expected flow XXXX million, and free a Lastly, at midpoint. cash increase XX% adjusted to over the is

We strong. have work of a to lot close we be proud as to the year

consistent execute with social produce and sector the to cash plan, continue and pleased We're driving growth, core our its on confidence have to and of highly continue forward. especially growth performance enviable going our flow. operating earnings We which ability is to profitable revenue in

impact numbers as also, our negative We Mike discussed, committed removing of to the aid EVERFI, will significantly. are which financial

customers enhanced As remain and our on focused always, our shareholders. to value we providing

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

is a February of Thank why We XXXX investment. the us. I'd year like remain Blackbaud highlight in specific fiscal about guidance future We'll you, front to our excited call, but Tony. in sound provide

driven organic option by and growth to revenue, base a innovation. Below our with expect reoccurring the you expansion empowered can focus logos expect installed a more, new strong visible improve can employee full revenue and EBITDA. on streams productivity by revenue call Regarding of you mid-single-digit line, targeting both cost, for

accelerate cash free tuck-ins a as annual purposeful flow strategy. a R&D. drive buyback as will to strong significant M&A very allocation on our effective our prudent focused includes well Additionally, capital program This and

line the can we questions. that, for With Operator? open

from [Operator our will with Instructions] We Rob first Oliver question now take Baird.

that's growth what's in but does it least a social on Tony, Totally sector relative pricing a I little going just full I 'XX social of lapping down explanation at that stuff. your of bit, the rate, But expectations your with on QX. sector, bit. a growth appear on dive year terms ticked EVERFI the rate to on some get that, weighing the the for to in appreciate wanted little

QX, a you ones if call a for eye anything you So doing or those there, whether to perhaps exiting I of to from expectations of were well know want be would your there had I that's up price helpful. relative changed increases, that get you a on, willingness anything, contracts renewal, any were out what, just guys else but accept which to flagged you year are which to X-year ago, about keen sense

Thanks, Rob.

from the contract the mid- We've very plan. are contract discounting contract to running side, front folks XX% with in has is seeing taking in on with Kind the we're what especially X-year contracts well, multiyear X-year those is Overall, that contracts. everything seen choosing that on of the percentage versus line is The right the heightened On of typically folks initiative. high pricing mix, renewals. the social performing the stuck. not still

regulatory governing rules, We're contracts. of customers seeing other number or multiyear do who, a small for can't purposes

how forward. we'll working and we're those that contracts going So deal through with

contract. we're And in then that it's mid-XXs plan close about, the a a spoke year, something on mind, the [ as churn line a keeping much in eye rate X ] smaller piece as is the on; to pool Keep with multiyear right shifting holding churn of actually, we well. with

contracts. X-year fewer lot a have We

at slightly right as totality, is those EVERFI, side. sector of churn the But gross dollar to where XX% totality, exclude dollar at look in is There company. we actually gross higher If rate is we would a from the front. years our metric ago on at for is retention on the expect. total on probably we In best up about XX% social retention a couple which were we're that

So on a good pricing to sector related. on how slightly I causes the on feel It's business. also growth if have we're really getting social know retention on the doing expect front rate that really really to the contractual don't on transactional those anything and side on contracts. there's lower what us we're

in we QX really because Last events viral you if recall, year, high had and QX. growth of

up ended rate. on at social the transactional I we almost think growth year the XX%

historical We're right I running kind now believe. at to X.X%, X% year-to-date, X% Our right of X%. is

along had And year seen so we're and haven't last just this viral We coming -- haven't year on no well aren't for remainder pretty the I planning of year, that Rob. meaningful any for think the yet viral we the really saw transactional. and

with Peterson Our question Brian from next comes Raymond James.

thinking on that, kind we the as I of would the transactional mid-single-digit But about growth look think how of about to these we how maybe predict? outlook? Mike of understand, I the about up we know absent trajectory that versus following of kind business viral transactional do maybe which love recurring you're growth. contractual talked any can't Tony, at long-term events,

we the have That's having about side and some think growth viral upside, events period, of good call if Yes, several models saw would said, to like kind that's in for norm options longer X%. Brian, for drive rate term. When big talk that up, a QX. expect us given last to where kind like your we for thanks. for that's business, grown of I I year The some of we would is QX the years. transactional in assumption make the I a for it's X%

rates and with have out across future transactional modeling But start some X% in right some platform that also make is that to the traction. those we some newer rolling to the programs a we're X% higher the to think somewhere growth for I think I of portfolio, the get good could innovation in rate as assumption transactions. now,

digit Hence, X.X% mid-single seeing the we've the rate we're kind once overall the to saying lapped X% initiative, the initiative, we're think more on in contract rates new because of I pricing contractual social. growth

So that ballpark for assumption I that a good models. think in probably is somewhere your really

the never brand-new Brian, bbcon [ a want in and before. product we customers for payables that brand-new build, things to product new I going is the accounts and space at space but solution ], It's and for of our it called for innovation eliminating done Payment in transaction in transaction while a add section to we're checks, us. is which announced for is we've one which a monetizing the a essentially take Assistant to us, product was our

Absolutely.

Yes.

there, dilutive No, would guys. the great the some there. color you we love in know costs versus with And to how Accretive, maybe of a just the perspective about guys detail on would that but Blackbaud? love line, profile should of EVERFI, there, a margin you've rightsizing of the I think core follow-up just given business ton understand there,

shortness, as bottom shortfall rightsizing, even in going a from cost to know. because great of business, Yes, even the We've cash Brian, still getting margins it our of is, That the the and with be the still up, done revenue, perspective. rightsizing job dilutive. with such on dilutive structure, the a you line flow

starting very signs new some know we've think some completely recently you business seen that I like we're on saw would can over do a market I maybe but nice to we've bottom but couple don't of there that out. the that of of And couple last about maybe, I in Mike, on appetite the Mike, seen some very couple we wins a we've significant does positive talk feel yet, here EVERFI. that that say the because new decline those? you wins. we're mentioned some seen years, in new

Yes, a took out Brian, just make And some pretty X% sure substantial just cost yes, we of it our everyone to of EVERFI's business, reminder, recently. understands that.

Tony's some lot run really go the So better a logo the rate over last is renewals, got nice quarter, new to forward. EVERFI we've And point, wins.

Check. Initiative I'll quarter. in A are then Those more, couple or mention, expansions last logos Truth Foundation, NASCAR, Guardian there's the new Sterling And Life, too. many

So I gloom doom with think don't all EVERFI. want folks and it's to

pretty looking I remarks, are with alternatives aggressive prepared at there. in Sachs. mentioned We Goldman we're my

of marketplace that We there related but are addressing some upsides the performance, are EVERFI the to on some there reception in these drag logos.

comes question next with Lane Our from Stifel. Parker

Or about this resonating of individual you know how most that could And in innovation, we mentioned payments? Blackbaud? the at the the spoke you Is going Mike, benefit the benefit of across be better your conference just but I upside ] is waves to earlier, financial about most? think you the retention what should you if business? How with the think with? growth and innovation? shoots Payments focus subscription this customers expect to should Do we in resonated what of the [ Assistant on the X

well. lot are bbcon, of a website announced details We sure. on Yes, things our as in

some them, like Constant Assistant to existing So with Financial better and just future one us which embedded partnership Edge with integration; to more Raiser's sell NXT, from Edge and areas Payment cross-sell like to Contact. is of NXT modules capabilities allows solutions integration interoperability, better AI and customers,

marketing . We as for be partner great at announced us. a to customers, already partner of a So platform conference have marketing -- lot so they're well. we shared going that the

of all these are getting earn kind ] focus continuing of innovations So these to renewals our -- really right new the on [ logos. contract just and

in recorded, it's to -- at that outstanding. just information in more bbcon folks attended so all thousands reception And at and the looking thousands the And customers was conference actually have Seattle. that the at because in of addition we'll

doing product and team engineering innovation. are teams great our in job So just a driving

retention to XX% XX%, the you And gross Good sitting now Tony, improvement hear. mentioned around ex-EVERFI.

and the to look like that the pricing Is even way Just the structure, line? new of Or to think be at clearly the years? wondering, but look over could right as next perhaps business? the tailwind few forward benefiting what contracting you going that top there, that continue to about a could more

contract really uplift. seeing of you retention don't nicely we're any I new Parker, give Well, uplift tell any but publicly, prior retention. our you where bumped and where the up not we're looking the on of new, the at were has net customers to net of recall, initiative. were benefit giving credence the I The the we can the because growth, with gross they retention pricing we're retention those of if then the kind year in And think, net dollar numbers is

good. I feel So do

done over just work I support, the area we're that think the something customer that doing; done our we'll of years Mike about customer gross speaks would I'm the in gross we've on the be speaking last several retention. dollar. success, initiatives with in kind the the was to all we've of intention dollar company as north our hopeful of think a I that stay XX%, And really innovation

next Our BTIG. from comes with question Matt VanVliet

side? a true of on you there to for amount on of on the going of renewal first, just decisions there customer kind lack is own there? number downsizes EVERFI upon deals meaningful a a the are seeing churn guess, new trying side, their logo just just understand, I and of Or

couple The a pause, this bit. little I the space in little of a years. both market of last pressed guess, bit it's Matt, Yes. in

in of pulled financial some an Bank and you example. I'll We regional a have was specifically a footprint. the Valley services, for big banking, back. Silicon In example. give banks customer,

some pullback So spend. bit a there's little in some financial services and program in shifts

a the got has bit a the new renewal bookings I've been and in of a on side. remember, of But product years, expansion is the customers. And customers hundreds and been it's enamored little of EVERFI everyone and thousands has So solution. with myself, EVERFI and on side Blackbaud. met X part

backwards it's called logos. been of on in bunch a space, have business work I a is to Goldman case pullback to and a mentioned a bit. gloom. just growth. from it's But a We've the caused got which And the some doom There's macro going here in -- just struggle not the with us. all fact, Sachs

resolve problem. We cost just we'll So some out. took this

We total, are announce the company. the to I focused think it, it's next the on period drag making hopefully sure but not on time. of Again, have it's a we're some working in of X% outcomes on and we'll

YourCause has foundation how impacted been and then, And far? that of side progressing that How business? has the so the

Yes.

EVERFI has well. is YourCause not doing impacted YourCause. actually really

well sector. And to we're It's so A doing there. on new social great organically really lot the growing, of logos of rest the YourCause. accretive frankly,

part impact. it's corporate a of the So

X% is EVERFI of the Again, company.

a the XX on over really got platform. million YourCause employees well. doing very is We've sticky platform. It's

lots of So Fortune well. pipeline, doing XXX customers, is good YourCause

question Our Kirk next Evercore. with comes Materne from

I relative just sort sort new of pricing if going on of just It color side? little add was on just along new was I on to more plan? you bookings area, I the curious to they the are looking, things maybe in that business, like the wondering renewal guess, are seems just bit how well. Mike, recurring relative contractual net there could a

really XX we've Yes. in actually the doing bookings, micro to We year-over-year, are they're new in nicely or XX shifted the logos the logo new of the months. don't more And new out really side. but last logos net up teams well. break

of cloud license-type but behind to in Edge and had shift older the that's been That Financial solutions largely some Edge products we've the like Raiser's years, older now. and what's customers us left. solutions of really only a selling cloud We've is tiny the for part on products,

we and bunch I in expect well that a my I remarks, to logos, mentioned to shift The new wins bookings are is and mentioned pretty going is YourCause, going higher a productivity prepared logo that's So ed EVERFI. well. softness new continue. big also. predominant of Sales up. bookings in

EVERFI, in factored Tony, last -- you how drag might corporate sorry, the Great. mentioned can have And divested the is that that but on this down sort then, remind this divested year? quarter, you of Or this side for was nonrecurring a how the big business just into was XX% it services quarter? the of us growth --

QX When it for that year. we the revised and our was that for revenue $X we about guidance, Kirk, at took the of divestiture, out of million end

Okay, everyone.

that's the want today. thank the for of end to I everyone think questions. joining us I

be which will Investor include number attending November We on our are a conferences in site. to investor December, listed and investor of events now several Relations

look day. to forward with Of speak always course, nice speaking and a and to I'm happy to directly, you you have we soon,

This concludes teleconference. today's

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