Summary of Blackbaud FY Conference Call (March 02, 2026) Company Overview - **Company**: Blackbaud (NasdaqGS:BLKB) - **Industry**: Cloud software focused on K12 education, nonprofits, and foundations - **Revenue**: Approximately $1.2 billion, with 85% from North America - **Business Model**: 98% recurring revenue, with a mix of transaction processing (one-third) and subscription services [2][7][12] Core Business Insights - **Growth Profile**: Achieved Rule of 40 in 2025, with organic growth of 5.5% and mid-30s EBITDA margin [2][7] - **Long-term Goals**: Aspiring to become a Rule of 45 company [7][9] - **Total Addressable Market (TAM)**: Estimated at $10 billion across various sectors [13] AI Innovations - **Product Launch**: Introduction of "Agents for Good," including a Development Agent that automates fundraising [18][19] - **Early Adoption**: Initial rollout with early adopter customers, generating contracts and interest across K12 schools, universities, and nonprofits [19][21] - **Monetization Potential**: Expected annual fees for the Development Agent between $25,000 and $35,000, with thousands of potential customers [22][25] Customer Base and Market Dynamics - **Customer Segmentation**: Diverse customer base including K12 schools, universities, healthcare systems, and nonprofits [21] - **Fundraising Capabilities**: AI agents can target untapped donor bases, enhancing fundraising efficiency [30][33] - **Retention Strategy**: Transitioned to multi-year contracts with annual price increases, resulting in over 20% of customers on four-year or longer contracts [42][44] Competitive Landscape - **K12 Market**: Limited competition with no vendor offering a complete suite of services; Blackbaud integrates fundraising, tuition management, and financials [94][96] - **Nonprofit Sector**: Few small competitors, but none of significant size directly competing with Blackbaud [105] Transactional Business Growth - **Revenue Composition**: Transaction business accounts for over one-third of total revenue, with growth opportunities in donation processing and tuition management [110] - **Online Giving Trends**: Online giving is in the mid-teens percentage of total giving, which exceeds $600 billion annually in the U.S. [117][123] Financial Performance and Capital Allocation - **Cash Flow**: Strong cash flow generation, with $208 million last year and a projected $285 million this year [156] - **Stock Buyback**: Significant stock buyback program with approximately $500 million remaining under authorization [153][151] - **EPS Growth**: Mid-teens EPS growth expected this year, with long-term aspirational goals set for the next five years [158] Margin Improvement Strategies - **EBITDA Growth**: Increased from low 20s to above 35% over the past four years, with further opportunities for improvement [135] - **Operational Efficiency**: Closing legacy data centers and transitioning to direct employees in India to enhance gross margins [137][139] Conclusion - **Overall Health**: The customer base remains strong, with resilience demonstrated during economic downturns like COVID-19 [130][133] - **Future Outlook**: Continued focus on innovation, AI integration, and expanding product offerings to drive growth and enhance customer retention [64][70]

Core Insights - Blackbaud, Inc. (BLKB) is experiencing growth due to a strong product portfolio, AI-driven innovation, and margin expansion, aiming for Rule of 45 status by 2030 [1][10] - The company's shares increased approximately 12.5% in the past month, outperforming the Zacks Computer – Software industry's growth of 2.8% [1] Product Portfolio and Innovation - Blackbaud is focusing on cloud software solutions and data-driven decisions, utilizing AI, machine learning, and predictive analytics [3] - The introduction of Agents for Good, an AI suite, aims to assist social impact organizations by automating complex tasks [4] - The launch of the 2025 Ultimate End-of-Year Fundraising Toolkit is designed to enhance fundraising success for organizations [5] - A partnership with Constant Contact allows for better engagement across various digital channels within Blackbaud Raiser's Edge NXT [6] Financial Performance and Projections - For full-year 2025, Blackbaud anticipates non-GAAP EPS between $4.30 and $4.50, with an adjusted EBITDA margin projected at 35.4-36.2% [7][9] - The company expects adjusted free cash flow of $195–$205 million for 2025, supporting investments in innovation and shareholder returns [10] - Projected GAAP revenues are between $1.120 billion and $1.130 billion, indicating approximately 5% organic growth [11] Competitive Landscape and Challenges - Blackbaud faces competition from nonprofit-focused peers and large enterprises, which pressures pricing and margins [12] - Ongoing acquisitions increase integration risk and have inflated goodwill and intangibles to 55.6% of total assets as of September 30, 2025 [12] Valuation and Investment Appeal - The stock trades at a forward 12-month P/E ratio of 18.46, below the industry's average of 28.81, indicating potential undervaluation [13] - With strong cash flow, a robust product portfolio, and consistent share repurchase programs, BLKB presents an attractive investment opportunity [14]

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]