Core Insights - The Q3 earnings season is expected to be challenging, with many companies experiencing slowing growth and weaker macroeconomic fundamentals [1] - Elevated stock valuations will require companies to demonstrate strong performance in their earnings releases [1] Industry Summary - The technology sector is facing significant scrutiny as analysts with extensive experience in both Wall Street and Silicon Valley highlight the current trends impacting the industry [1] - The involvement of seasoned analysts in advising startups indicates a focus on emerging themes within the technology landscape [1]

Core Insights - The Q3 earnings season is expected to be challenging, with many companies experiencing slowing growth and weaker macroeconomic fundamentals [1] - Elevated stock valuations will require companies to demonstrate strong performance in their earnings releases [1] Industry Analysis - The technology sector is particularly highlighted, with insights from an analyst who has extensive experience in both Wall Street and Silicon Valley [1] - The analyst has been actively contributing to discussions on industry trends since 2017, indicating a long-term engagement with the sector [1]

Core Insights - Blackbaud, Inc. (BLKB) reported third-quarter 2025 non-GAAP EPS of $1.10, exceeding the Zacks Consensus Estimate by 2.8%, with an 11.1% year-over-year increase in earnings [1][8] - Total revenues decreased by 1.9% year over year to $281.1 million, primarily due to the divestiture of EVERFI, but still surpassed the Zacks Consensus Estimate by 0.5% [1][2] Financial Performance - Non-GAAP organic revenues increased by 5.2% on a reported basis and 4.8% on a constant-currency basis year over year [3] - Non-GAAP organic recurring revenues rose by 5.5% on a reported basis and 5.1% on a constant-currency basis [3] - Non-GAAP gross margin improved to 63% from 61% a year ago, while total operating expenses fell by 2.8% year over year to $112.9 million [4] - GAAP operating margin increased by 500 basis points to 19.4%, and non-GAAP operating margin rose by 240 basis points to 29.9% [4] Balance Sheet & Cash Flow - As of September 30, 2025, Blackbaud had total cash and equivalents of $457.4 million, down from $911.8 million as of June 30, 2025 [5] - Total debt decreased to $1 billion from $1.1 billion over the same period [5] - Cash provided by operating activities was $207.5 million, compared to $222.4 million in the prior-year quarter [6] Share Repurchase Program - Blackbaud has nearly $514 million available under its stock buyback program, which was expanded and renewed in July 2024 [9] - The company expects total share repurchases in 2025 to represent between 5.2% and 7.0% of its outstanding common stock as of December 31, 2024 [9] 2025 Outlook - Blackbaud reiterated its guidance for full-year 2025, projecting GAAP revenues between $1.120 billion and $1.130 billion, reflecting approximately 5% organic growth at the midpoint on a constant currency basis [10] - Non-GAAP adjusted EBITDA margin is expected to be in the range of 35.4-36.2%, with non-GAAP EPS anticipated between $4.30 and $4.50 [11] - Non-GAAP adjusted free cash flow for 2025 is forecasted to be in the range of $195-$205 million [11] Recent Developments - Blackbaud introduced new embedded AI capabilities across its product portfolio, marking a significant advancement towards its vision for intelligent action [13] - The company launched the 2025 Ultimate End-of-Year Fundraising Toolkit to assist organizations in maximizing fundraising success [14]

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Core Insights - Blackbaud (BLKB) reported quarterly earnings of $1.1 per share, exceeding the Zacks Consensus Estimate of $1.07 per share, and up from $0.99 per share a year ago [1] - The company achieved an earnings surprise of +2.80% for the quarter, and has surpassed consensus EPS estimates three times in the last four quarters [2] - Blackbaud's revenues for the quarter were $281.14 million, slightly above the Zacks Consensus Estimate by 0.53%, but down from $286.73 million year-over-year [3] Financial Performance - The earnings surprise of +2.80% indicates strong performance relative to expectations [2] - The company has consistently exceeded revenue estimates, achieving this three times in the last four quarters [3] - Year-to-date, Blackbaud shares have declined by approximately 13.2%, contrasting with a 17.2% gain in the S&P 500 [4] Future Outlook - The future performance of Blackbaud's stock will largely depend on management's commentary during the earnings call and the subsequent earnings outlook [4][5] - Current consensus EPS estimate for the upcoming quarter is $1.17, with expected revenues of $293.91 million, and for the current fiscal year, the EPS estimate is $4.40 on revenues of $1.13 billion [8] - The Zacks Rank for Blackbaud is currently 3 (Hold), suggesting the stock is expected to perform in line with the market in the near future [7] Industry Context - The Computer - Software industry, to which Blackbaud belongs, is currently ranked in the top 37% of over 250 Zacks industries, indicating a favorable outlook compared to lower-ranked industries [9] - The performance of Blackbaud may also be influenced by the overall industry outlook, as top-ranked industries tend to outperform lower-ranked ones significantly [9]

Financial Data and Key Metrics Changes - Blackbaud generated revenue of $281 million, representing a 5.2% organic growth year-over-year [4] - Adjusted EBITDA margin improved to 35.4%, up more than 200 basis points year-over-year [4] - Non-GAAP diluted earnings per share increased to $1.10, an 11% rise year-over-year [4] - Free cash flow was particularly strong at $125 million, up from $98 million last year, indicating a 28% growth year-over-year [16] Business Line Data and Key Metrics Changes - The company continues to focus on acquiring new logos, driving innovation, and strengthening customer relationships through additional solutions and renewals [5] - Significant new logo wins include St. Mary's College and Concordia College, with multi-year agreements signed for their fundraising goals [7][8] - The average annual recurring revenue (ARR) from new logo deals is increasing, with a minimum contract length of three years [30] Market Data and Key Metrics Changes - Annual charitable giving in the U.S. is nearing $600 billion, up more than 6% year-over-year, indicating a resilient market for Blackbaud's offerings [5] - Corporate giving has reached an all-time high, becoming the fastest-growing nonprofit revenue source over the last five years [5] Company Strategy and Development Direction - Blackbaud is focused on mid-single-digit organic revenue growth, EBITDA growth exceeding revenue growth, and double-digit diluted EPS growth [12] - The company is increasing its stock repurchase target from 5% to a range of 5.2% to 7% for 2025, reflecting confidence in its value [12] - Investments in product innovation, particularly in AI capabilities, are a priority to enhance customer engagement and operational efficiency [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to create substantial shareholder value, supported by strong year-to-date performance [12] - The anticipated cash tax benefits from recent tax law changes are expected to positively impact free cash flow through 2027 [18] - The company is committed to maintaining a balance between growth and profitability while focusing on capital allocation strategies [15] Other Important Information - The company identified a prior period non-cash error related to income tax calculations, which resulted in immaterial impacts on previously filed financial statements [19][34] - Blackbaud's operational discipline and efficiencies are yielding positive results, contributing to higher profitability [6] Q&A Session Summary Question: Customer feedback on AI and agentic functionality - Management noted excitement around AI capabilities, with 40% of customers adopting new features quickly, and plans to monetize these solutions in the near future [24][25] Question: New logo wins and contract sizes - New logo wins are showing larger average ARR deals, with contracts typically being a minimum of three years [30][31] Question: Revenue reclassification rationale - The revenue reclassification was due to an immaterial non-cash error related to income tax calculations, corrected as a best practice [32][34] Question: Monetization timeline for agentic AI - Monetization of agentic AI solutions is expected to start modestly next year, with clear ROI anticipated for customers [39][40] Question: Structural drivers for transactional revenue growth - Transactional revenue is performing well across all platforms, with no viral events impacting growth, indicating strong fundamentals [47]

Financial Data and Key Metrics Changes - Blackbaud generated revenue of $281 million, representing a 5.2% organic growth year-over-year [4] - Adjusted EBITDA margin improved to 35.4%, up more than 200 basis points year-over-year [4] - Non-GAAP diluted earnings per share increased to $1.10, an 11% rise year-over-year [4] - Free cash flow was particularly strong at $125 million, up from $98 million last year, indicating a 28% growth year-over-year [16] Business Line Data and Key Metrics Changes - The company continues to focus on acquiring new logos, driving innovation, and strengthening customer relationships through additional solutions and renewals [5] - Significant new logo wins include St. Mary's College and Concordia College, with multi-year agreements signed for their fundraising goals [7][8] - The average annual recurring revenue (ARR) from new logo deals is increasing, with a minimum contract length of three years [30] Market Data and Key Metrics Changes - Annual charitable giving in the U.S. is nearing $600 billion, up more than 6% year-over-year, indicating a resilient market for Blackbaud's offerings [5] - Corporate giving has reached an all-time high, becoming the fastest-growing nonprofit revenue source over the last five years [5] Company Strategy and Development Direction - Blackbaud is focusing on mid-single-digit organic revenue growth, EBITDA growth exceeding revenue growth, and double-digit diluted EPS growth [12] - The company is increasing its stock repurchase target from 5% to a range of 5.2% to 7% for 2025, demonstrating confidence in its value [12] - Investments in product innovation, particularly in AI capabilities, are a priority for future growth [18][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to create substantial shareholder value, supported by strong year-to-date performance [12] - The company anticipates continued strong performance in Q4, with a focus on driving adjusted free cash flow and returning capital to shareholders [21] - Management noted that the operational discipline and efficiencies are yielding positive results, contributing to higher profitability [6] Other Important Information - The company identified a prior period non-cash error related to income tax calculations, which resulted in immaterial impacts to previously filed financial statements [19][34] - Blackbaud's guidance for 2025 includes projected revenue in the range of $1,120 million to $1,130 million, with an anticipated EBITDA margin of approximately 35.4% to 36.2% [20] Q&A Session Summary Question: Customer feedback on AI and agentic functionality - Management noted excitement around AI capabilities, with about 40% of customers quickly adopting new features [23][24] Question: New logo wins and contract sizes - New logo wins are showing larger average ARR deals, with contracts typically being a minimum of three years [30] Question: Revenue reclassification and tax restatement - The revenue reclassification was due to an immaterial non-cash error related to income tax calculations, which was corrected as a best practice [32][34] Question: Monetization of agentic AI - Monetization of agentic AI solutions is expected to start modestly next year, with clear ROI anticipated for customers [38][40] Question: Structural drivers for higher growth in transactional revenue - Management indicated strong performance across all transaction platforms, with no viral events impacting growth [47]

Financial Data and Key Metrics Changes - Blackbaud generated revenue of $281 million, representing a 5.2% organic growth year-over-year [4] - Adjusted EBITDA margin improved to 35.4%, up more than 200 basis points year-over-year [4] - Non-GAAP diluted earnings per share increased to $1.10, an 11% rise year-over-year [4] - Free cash flow was particularly strong at $125 million, up from $98 million last year, indicating a 28% growth year-over-year [15][16] Business Line Data and Key Metrics Changes - The company reported solid contractual recurring revenue growth and continued strength in transactional recurring revenue lines [14] - New logo wins included significant contracts with St. Mary's College and Concordia College, showcasing the effectiveness of their product offerings [6][7] - The average annual recurring revenue (ARR) from new logo deals has been increasing, with a focus on mid-tier and enterprise customers [28] Market Data and Key Metrics Changes - Annual charitable giving in the U.S. is nearing $600 billion, up more than 6% year-over-year, indicating a resilient market for Blackbaud's services [5] - Corporate giving has reached an all-time high, becoming the fastest-growing nonprofit revenue source over the last five years [5] Company Strategy and Development Direction - Blackbaud is focusing on acquiring new logos, driving innovation, and strengthening customer relationships through additional solutions and renewals [5] - The company is investing in AI capabilities, with over 70 planned or available AI enhancements aimed at improving fundraising efforts [9] - The capital allocation strategy prioritizes stock repurchase, with an increase in the repurchase target from 5% to 5.2% to 7% for 2025 [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to create substantial shareholder value, supported by strong year-to-date performance [12] - The guidance for 2025 includes revenue projections of $1,120 million to $1,130 million, with organic growth at approximately 5% [19] - The anticipated EBITDA margins are projected to be between 35.4% and 36.2%, with a focus on margin expansion opportunities [20] Other Important Information - The company identified a prior period non-cash error related to income tax calculations, which resulted in immaterial impacts on previously filed financial statements [18][31] - Incremental investments of approximately $7 million in product innovation and AI development are planned for the third and fourth quarters [18] Q&A Session Summary Question: Customer feedback on AI and agentic functionality - Management noted excitement around AI capabilities, with about 40% of customers adopting new features quickly, and plans to monetize these solutions in the future [24][25] Question: New logo wins and contract sizes - Management confirmed a focus on larger ARR deals, with multi-year contracts being standard, and noted an increase in average contract sizes [28][29] Question: Revenue reclassification rationale - The revision was related to an immaterial non-cash error in tax calculations, which was corrected as part of best practices [31][32] Question: Monetization timeline for agentic AI - Management expects modest revenue from agentic AI solutions to start in 2026, with a clear ROI for customers using these agents [34][36] Question: Structural drivers for higher growth in transactional revenue - Management highlighted strong performance across all transaction platforms, with no viral events impacting growth in the quarter [41]

Company Overview - Blackbaud is a market leader in providing software for social impact, serving over 40,000 customers with approximately 2,600 employees across 100+ countries[16] - The company facilitates over $100 billion annually in donations, grants, and investments through its platforms[16] - Blackbaud's annual recurring revenue is approximately $1.1 billion (Non-GAAP, at the midpoint of 2025 financial guidance)[16] Market Opportunity and Product Innovation - Blackbaud operates in a large and underpenetrated total addressable market (TAM) exceeding $10 billion[31] - Revenue penetration in key segments like Fundraising, Relationship Management and Engagement is less than 20%, and Financial Management, Grant and Award Management is less than 10%[31] - The company is focused on product innovation, including AI-driven solutions like Blackbaud Development Agent and integrations with platforms like Constant Contact[39, 42] Financial Performance and Outlook - Blackbaud is targeting a Rule of 45 by FY2030, combining organic revenue growth and adjusted EBITDA margin[73] - The company's Q3 2025 non-GAAP organic revenue grew by 5.2% year-over-year[65] - Q3 2025 non-GAAP adjusted EBITDA margin was 35.4%, a 220 basis point improvement from Q3 2024[66] - Q3 2025 non-GAAP diluted EPS grew by 11% year-over-year[66] - Blackbaud increased its 2025 total revenue guidance to a midpoint of $1.125 billion, with an adjusted EBITDA margin of 35.8% and diluted EPS of $4.40[70] - The company expects to repurchase 5.2% to 7.0% of its common stock outstanding in 2025 and has reduced common stock outstanding by 10% since Q4 2023[82]

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