Blackbaud(BLKB) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics - Adjusted free cash flow margin improved to 22% at the midpoint of guidance, up from 14% in 2022 and 19% in 2023 [6] - Full-year revenues for 2023 were $1,105 million, up 4.8$356 million, a 36% increase year-over-year [20] - Earnings per share increased to $3.98 in 2023, compared to$2.69 in 2022 [21] - Adjusted free cash flow for 2023 was $214 million, up from$154 million in 2022, representing a 19.3% margin [21] - For 2024, revenue is expected to be between $1,170 million and$1,200 million, with organic growth projected at 7.2% [22] - Adjusted free cash flow for 2024 is guided at $254 million to$274 million, with a midpoint margin of 22.3% [38] Business Line Data and Key Metrics - Contractual recurring revenues grew 6.4%, transactional recurring revenues grew 12.5%, and total recurring revenue grew 8.4% in Q4 2023 [19] - Non-strategic one-time revenues declined by $2 million in Q4 2023, representing a 1-point drag on total revenue growth [19] - The company is accelerating investments in AI and cybersecurity, with incremental costs expected to ramp up throughout 2024 [26][27] Market Data and Key Metrics - The UK statutory tax rate increased from 19$41 million in December 2023 and January 2024, with a new $500 million repurchase authorization [16][17] - The company is focused on returning capital to shareholders through stock repurchases and maintaining a strong balance sheet, with a debt-to-adjusted EBITDA ratio of approximately 2x [39][40] Summary of Q&A Session Question: Impact of data center shutdowns on cost reduction and gross margins - The company expects substantial CapEx reductions as data centers are shut down and migrated to the cloud, with some duplicative costs remaining during the transition [6] - Long-term efficiency gains are expected from cloud environments, with additional cost savings from automation and AI investments [6] Question: Sales capacity and productivity improvements - The company has the right team in place, with no substantial headcount increases planned, but significant opportunities for productivity improvements and quota attainment [13] Question: Timing and impact of AI investments on EBITDA margins - AI investments began ramping up in Q4 2023 and are expected to continue throughout 2024, with some costs falling off towards the end of the year [26] Question: Pricing strategy and contribution to revenue growth - The pricing optimization program is going well, with 35% of the base renewed on multiyear contracts in 2023 and an additional 30% expected in 2024 [46][52] - The company is focused on driving innovation to justify price increases and multiyear contracts [46][52] Question: Corporate impact market dynamics - The corporate impact market is large, with potential for multi-million-dollar contracts, but it is subject to discretionary spending [63] - The company has a strong presence in this market, with significant opportunities for cross-selling and growth [63]