Blackbaud(BLKB) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 2025, the company generated revenue of $271 million, reflecting a 5.8$0.96, achieving a Rule of 40 score of 40.1% [6][19][20] - Non-GAAP adjusted EBITDA increased by approximately $4 million compared to the previous year, with a 250 basis point improvement in margin [19][20] - Adjusted free cash flow was negative$11 million in Q1, primarily due to a one-time $28 million cash release payment related to the Washington DC office lease and increased interest expenses [20][24] Business Line Data and Key Metrics Changes - The transactional business was a significant driver of overperformance in Q1, with approximately 9$2 million in incremental revenue for the quarter [34][35] - The company has transitioned the majority of its products and customers to third-party cloud solutions, enhancing operational efficiency [8] Market Data and Key Metrics Changes - The company reported strong performance in international markets, particularly in Asia Pacific and Europe, with good sales bookings and customer retention [53] - JustGiving, a platform in the UK, continues to perform well, benefiting from brand recognition and participation in major events [54] Company Strategy and Development Direction - The company aims to achieve a Rule of 45 by 2030, focusing on organic revenue growth driven by innovation and a strong capital allocation strategy [6][15][26] - The company is investing in AI capabilities to enhance customer engagement and improve internal productivity, with plans to integrate these innovations into existing products [9][10][76] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the social impact market, noting that the company has not seen any negative impact on sales bookings or customer retention despite macroeconomic challenges [6][32][46] - The guidance for 2025 remains unchanged, projecting revenue in the range of $1.5 billion to$1.125 billion, with organic growth of 4.2% to 5.1% [22][23] Other Important Information - The company repurchased approximately 4% of its outstanding shares in Q1 2025, continuing its commitment to return capital to shareholders [12][21] - The transition of CFO duties from Tony Bohr to Chad Anderson was highlighted, with both executives expressing confidence in the company's future [13][14] Q&A Session Summary Question: Impact of federal grant funding on customers - Management clarified that their solutions are not reliant on federal grants, and while some customers may be affected, there has been no impact on sales bookings or customer retention [31][32][46] Question: Performance of the transactional business - The transactional business was a key driver of overperformance in Q1, with strong growth and good performance across the board [34][35] Question: Guidance and macroeconomic considerations - Management maintained that the guidance for the year does not anticipate material changes in the macro environment, expressing optimism for continued growth [41][46] Question: Net new bookings and international market performance - New bookings have increased significantly in Q1, with a positive outlook for international markets, particularly for the JustGiving platform [51][53] Question: Contract renewals and customer retention - Customer retention remains high, with a standard practice of notifying customers well in advance of contract renewals, ensuring smooth transitions [63][66] Question: Share buyback program - The company is on track to meet its share buyback target for 2025 and will continue to evaluate its capital allocation strategy [70][73] Question: Monetization of AI technologies - The company is exploring monetization models for its AI solutions but has not charged separately for these capabilities to date, focusing on delivering value to customers [76][81]