Blackbaud, Inc.

Good day and welcome to Blackbaud's first quarter 2020 earnings conference call. Today's conference is being recorded. I will now turn the call over to Mark Furlong. Please go ahead, sir.

Good morning, everyone. Thanks for joining us on Blackbaud's first quarter 2020 earnings call. Joining me on the call today are Mike Gianoni, Blackbaud's president and CEO, and Tony Boor, Blackbaud's executive vice president and CFO. Mike and Tony will make prepared comments, and then we will open the line for your questions. Please note that our comments today contain forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from those projected. Please refer to our most recent Form 10-K and other SEC filings for more information on those risks. We believe that a combination of both GAAP and non-GAAP measures are more representative of how we internally measure our business. Unless otherwise specified, we will refer only to non-GAAP financial measures on this call. Please note that non-GAAP financial measures should not be considered in isolation from or as a substitution for GAAP measures. A reconciliation of GAAP and non-GAAP results is available in the press release we issued last night and a more detailed supplemental schedule is available in our presentation on our investor relations website. Before I turn the call over to Mike, I'll briefly cover our upcoming investor engagement activity, which is available on our investor relations website. During the second quarter, our team will be virtually attending the Needham Technology and Media Conference, Baird's 2020 Global Consumer Technology and Services Conference and Stiefel Crop Sector Conference. With that, I'll turn the call over to Mike. Thanks, Mark.

Good morning, everyone. Thanks for joining our call today. Before turning to our results, I know many of us have spouses, partners, family members or friends who are on the front lines of the COVID-19 response. So I want to take a minute to say thank you. BlackBaud has been serving the socially good community for nearly four decades. and the leadership role we serve in this market is especially critical in the current environment. We continue to be inspired by the resilience, innovation and determination demonstrated by social good organizations around the world during these challenging times. We've taken measures to ensure our own business continuity by remaining critically focused on customers, employees and shareholders. This morning, I will share our actions taken related to COVID-19 and outline our priorities as we continue to execute against our strategic initiatives and ensure the long-term success of the company. I'll then turn it over to Tony to cover the financials in more detail. We had a strong start in 2020 against our financial plan. As the COVID-19 pandemic began to evolve, we moved quickly to enact plans with our immediate priority being the welfare of our employees and continuing to be a strong partner for our customers. In March, we closed our offices worldwide and made the shift to a global remote workforce with no extra effort. You've heard me talk a lot about the transformational changes we've made in the business and that has created a scalable operating model that has been tested with this global crisis and we haven't missed a beat operationally. Our internal IT and organization structure changes over the last several years allowed us to immediately go virtual and have all of our global employees working from home as if they continued to come into the office every day. Customers didn't notice a difference as our high level of support just continued to perform. Our support teams immediately became an efficient mobile call center. It's been impressive to achieve an uptick in our customer satisfaction with scores reaching into the high 90s. Our implementation services teams had already largely shifted to a remote implementation model and are fully equipped to continue customer engagements uninterrupted. In fact, less than 10% of scheduled project hours have been delayed thus far. And just last month, we completed a successful virtual implementation of our Black Lives CRM enterprise offering with University of South Carolina, which is the most complex and labor-intensive in the portfolio. We spent the last several years reorganizing our business to focus on vertical go-to-market teams with a centralized back office consisting of global centers of excellence, and it's clear those changes are now paying off. Many of our customers have had to cancel and postpone their planned in-person fundraising events, and our agile engineering teams have moved quickly to respond to these customers. We've been reprioritizing and expediting product enhancements to support their changing needs. Examples range from pivoting to virtual fitness events to putting new live stream fundraising tools in the hands of both organizations and individuals. In terms of our go-to-market efforts, we've been investing in sales and marketing to better address our large market opportunity. As part of this effort, we've implemented software tools to enhance our digital footprint and drive efficiency. The investments we've made enable us to quickly adapt to changing market conditions, including competitive opportunities. Our ability to ensure business continuity for our customers, performance scale, and pivot to offer solutions to the changing needs of our customers has become a new differentiator for Blackbaud, and we've moved quickly to capitalize on these early opportunities by leveraging our enhanced go-to-market capabilities. While the disruption caused by this virus has caused some deal pipeline to push out to Q2 in the second half of 2020, We've been able to showcase ourselves as the best long-term partner for social good organizations, and we remain very well positioned as a leader in this market. As part of our cost control measures, we've put a freeze on hiring across the company, including sales. Blackbaud employees are committed to social good professionally and personally, and I'm incredibly proud of how our teams have risen to the challenge to help our customers and our company to remain strong in the short term as we plan for long-term success. Turning to our customers, the need for funding, support, and resources is significant as social good organizations work to pivot their models, activate supporters, and minimize disruptions to their services and operations. I encourage you to look at our recent press releases, for example, of how COVID-19 is impacting some of our customers and the role Blackbaud plays in combating the challenges posed by the virus. Many socially good organizations have been thrown into crisis mode. We've seen they are pivoting to rely even more on technology and cloud solutions to run their operations. I believe this crisis will be a catalyst for the industry to move even faster to purpose-built cloud solutions. While near-term disruption occurred starting in the back half of March, in the weeks since the crisis came to the forefront, Several Blackbaud customers creatively switched in-person events to virtual fundraisers, established virtual volunteering options for employees in increased matching gift programs, galvanized lobbying efforts for legislation, and created an array of COVID-19 funds and grant opportunities. K-12 schools swiftly moved classes online as they've been forced to shut their doors. Religious organizations have provided online resources while coordinating support, given the increased need for offerings. Zoos, aquariums, and other cultural organizations, which have lost revenue from in-person attendance and events, have provided content for all to enjoy online, while pivoting to drive more online fundraising. We've seen over a thousand percent increase in online donations processed for some food banks, as they look to narrow the funding gap required to meet surges in demand. As financial staff are forced to work from home, there continues to be demand for our cloud financial solution, Financial Edge NXT. This industry has been undergoing a digital transformation in which we have been the global leader, and that has accelerated in recent weeks. Our move over the last several years to cloud solutions, purpose-built for vertical markets, has proved to be the right strategy as this crisis has highlighted how important modern, scalable, and secure cloud systems are not a required standard. In many cases, black cloud technology is a critical component to helping our customers quickly mobilize and adapt to a more digital and virtual environment. For example, private K-12 schools like Louisville High School, Open Window School, and River Oaks Baptist School have been able to quickly move to becoming a virtual school, keeping students, parents, and teachers productive using our solutions. After making the decision to transition their school online, the head of school for River Oaks Baptist School said, and I quote, as we were preparing for the transition to distance learning, we relied on the recommendation of our technology team to use our Blackbaud solutions to institute an asynchronous-only classroom experience. It's the best decision we've ever made. and many more. The business impact of the virus continues to manifest itself in different ways across the vertical markets that we serve, and we continue to closely follow market trends, including charitable giving, which can be crucial for many of our customers as they look to close funding gaps. I'll remind you that growth in giving in the U.S. has been closely correlated to U.S. GDP for decades, and the mix of giving continues to shift toward online donations. For historical reference, total charitable giving was approximately $300 billion in 2008 and declined 8% in 2009 before growing again in 2010. Since then, it has grown to over $400 billion annually. Also, the number of registered nonprofits grew during the same time period. Moving back to this year, early trends showed a decline in donations processed by our customers as events had to be postponed or canceled. However, in the weeks since the crisis began, many have creatively pivoted to virtual fundraising and events, and we see this in the data. For example, our JustGiving platform has seen a sharp increase in COVID-19-related campaigns with appeals raising tens of millions of dollars to support causes focused on combating this crisis. Among them is a campaign in the UK to raise support for the National Health Service staff and volunteers caring for COVID-19 patients. With an original goal of 1,000 pounds, the campaign has raised over 30 million pounds from well over a million supporters across more than 80% of the countries in the world. Our scalable platforms allow events like this to happen. This is just one of the many examples that make this market so resilient as communities, philanthropists, celebrities, corporations, and others step up to support social good organizations in this time of need. Another example is Direct Relief, who relied on Blackbaud Luminate Online and Blackbaud Razor's Edge NXT during its historic peak in donations and included high-volume celebrity fundraisers. Direct Relief's VP of Partnerships and Philanthropy told us, we're deeply grateful to Blackbaud for ensuring that our technology backbone for philanthropic efforts is robust and scalable. Blackbaud's commitment ensures that the extraordinary generosity from individuals and institutions to help keep healthcare workers safe is immediately put to use to help those who help others. Long-term, we believe The impact of COVID-19 will significantly accelerate the existing secular trends toward adoption of modern cloud solutions in our market. Overall, Blackbaud remains highly committed to the success of our customers, our company, and the entire social economy during these challenging times. We quickly transitioned our global workforce to a remote operation with zero business disruption and we've supported our employees as they continue to enable thousands of customers to quickly pivot their own operations and strategic efforts. We've had webinars with thousands of customers, helping them more aggressively move to digital capabilities. Our teams launched new innovation in response to pandemic-specific needs that arose. We've given back to the entire social good community through hundreds of free resources, philanthropic gifts, service on boards and more. and we've maintained our commitments to customers, including our very high standard of service and support. This crisis has put a spotlight on the critical need to move to the cloud and to partner with a software provider like Blackbaud. We're hearing this in the market. Lastly, we've acted quickly to take measures to ensure that we have the necessary liquidity and financial flexibility to continue supporting our customers, protect the welfare of employees, and deliver increased value to our shareholders. With that, I'll turn the call over to Tony before we open it up for Q&A. Tony?