Blackbaud, Inc.

Greetings and welcome to the Blackbaud Second Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Mr. Mark Furlan, Senior Director, Corporate Finance and Investor Relations for Blackbaud. Thank you. You may begin.

Good morning, everyone. Thanks for joining us on Blackbaud's second 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'll open up the line for your questions. Please note that our comments today contain forward-looking statements subject to risk Thank you. Thank you. should not be considered an 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 now available on our investor 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 third quarter, our team will be virtually attending the Oppenheimer 23rd Annual Technology Internet Communications Conference and Canaccord Genuity 40th Annual Growth Conference. We will also be participating in virtual meetings hosted by DA Davidson and Raymond James. With that, I'll turn the call over to Mike.

Thanks, Mark. Good morning, everyone, and thanks for joining our call today. When the COVID-19 pandemic began, we moved quickly to respond and enacted plans to ensure business health while prioritizing the welfare of our employees and continuing to be a strong partner for our customers. I'm incredibly proud of our employees and their dedication to serving our customers at a very high standard during these uncertain times. Our second quarter results reflect strong execution against these plans with a heightened focus on driving profitability and cash flow given the duration and magnitude of the pandemic remains uncertain. Revenue for the quarter fell short of our original plan, although it exceeded our initial scenario planning from the start of the pandemic as our customers globally continue to demonstrate the often underappreciated resilience of this market during these challenging times. We are proud to support their efforts through reliable and highly effective technology and we believe having cloud software in place to support the missions of social good organizations has never been more critical. This morning, I will share a few updates related to our business and our market before turning it over to Tony to cover the financials in more detail. The transformational changes we've made in the business over the last several years allow us to immediately switch to a virtual work environment in March and supported our global employees' ability to effectively work from home. With our physical offices across the world closed, we've experienced a new way of working, and I've been quite impressed by our ability to operate so effectively as a remote workforce. As we think ahead in anticipation of our offices reopening, were reevaluating elements of our workforce strategy based on the lessons learned over the past few months. We are firmly committed to building on our strong culture by creating employee experiences and programs that further develop and attract the best talent and promote a diverse and inclusive environment. In fact, Blackbaud's workplace culture just received two national recognitions, being named to Forbes' list of best employers for women and Fast Company's Best Workplaces for Innovators list. We continue to make progress in creating more inclusive diversity programs that are focused on education, awareness, recruitment, empowerment, community involvement and financial support. We also recognize that now more than ever, the topic of equality needs a strong, unified voice at Blackfriar. This is one of the reasons I'm excited we're in the process of hiring a head of diversity and inclusion reporting directly to our Chief People Officer, Maggie Driscoll, who you'll remember joined us earlier this year. This is the next step on our journey. Turning to our customers, the impact of the virus continues to manifest itself in different ways across the broken markets that we serve. During this difficult time, our solutions are supporting key nonprofits, higher education, and healthcare institutions around the world with software technology needed to effectively fundraise and manage other core functions within their operations. We're proud to power fundraisers that directly fund critical research in essential equipment, including potential vaccine breakthroughs, low-cost ventilator production and methods to treat the virus and slow its spread. As the current environment continues to shape the landscape of education, we've been on the front line supporting private K-12 schools throughout the pandemic, from quickly moving day-to-day activities online to planning for the future of the classroom. This was evident earlier this month at our annual tech conference for K-12 private school leaders, which took place in a completely remote environment this year and was made free for all to attend. We welcomed over 5,000 registrants, with thousands being first-time attendees. That's a new record for us in both categories as we typically have around 600 in attendance. The timeliness of our competency-based education release was on display during the conference as the most attended sessions focused on Blackboard learning management system and competency-based education best practices as schools plan for distance learning and hybrid education models for the fall. I'll note registration is now open for our largest event, VBcon 2020, which will also be virtual with no admission fee and will be held October 6th through the 8th with a reimagined global format. In an effort to learn how the current environment has impacted churches, we partnered with an independent research group to conduct a survey of over 500 churches ranging in size from under 100 to more than 5,000 in pre-pandemic attendance. Of the churches survey, two-thirds of churches indicated that giving has increased or stayed the same during the pandemic, and more than 80% reported having adequate cash reserves set aside in preparation for a crisis. Zoos, museums, and other cultural organizations continue to be challenged with lost revenue from in-person attendance and events. Although some of these organizations are beginning to open their doors, having made investments in updated policies and procedures, to promote the health and safety of their visitors. Black Thought plays a critical role in solving these challenges, often serving as a core system of record as these organizations rely even more on technology and cloud solutions to run their operations. The need for our systems to run core operations is a key driver of our 92% customer retention rate and renewal rates which continue to trend above our original plan for the year. During the quarter, many in-person events shifted online, had to be postponed or even canceled, and social good organizations are being forced to employ new strategies to maintain momentum with current supporters while capturing the attention of potential new donors. We've been there to help them make this shift. Our solutions are already equipped with features that are lending themselves to this current environment. and we have quickly acted upon customer feedback to add enhancements and new functionality to serve our customers so they can continue to focus on their missions during this time. For example, we built new integration between peer-to-peer fundraising and donor management solutions, simplifying the process of raising donations and acquiring new supporters through pandemic-friendly virtual events and peer-to-peer campaigns. We simplified donation forms to expedite fundraising We also added new financial management capabilities, further easing the transition to working from home with solutions that support collaboration and efficient cash flow management and financial operations from the cloud. This ties back to our continued execution against our four-point growth strategy and our focus on delighting our customers through innovative cloud solutions. We are also increasing our focus on driving sales effectiveness in the current environment. The investments we've made to enhance our digital footprint are enabling us to be more prescriptive and cost-effective in our marketing efforts and to quickly adapt to changing market conditions. And over the longer term, we believe the impact of COVID-19 will accelerate the existing trends driving adoption of modern cloud solutions in our market. We also introduced new pricing and financing offers based on the changing needs of our customers. Despite our optimism over the long term, the uncertainty of today's environment has created short-term challenge in our ability to build a pipeline and bookings are falling short of budget expectations, which we expect to put pressure on near-term revenues. As a result, we've begun shifting investments toward digital marketing aimed at lead generation and put a greater emphasis on selling solutions with the highest lifetime value. We've enabled our sales managers to back sales positions with a focus on 2021 bookings. Overall, I'm pleased with our execution through the second quarter as we all adapt to the current environment. We continue to prioritize the well-being of our employees as we think about the future of work at Blackbaud, continuing to build on our strong customer-centric culture. Our customers are once more proving the resilience of our markets. and finding creative ways to ensure they can continue to deliver on their missions. This crisis will be a catalyst for the industry to move even faster towards modern, purpose-built cloud solutions and we remain very well positioned as a leader in this market and the best long-term partner for socially good organizations. Our strategy, since I came to BlackLive, has relied on a balanced approach to growth and profitability. The pandemic has created short-term uncertainty in our revenue outlook and early impacts on pipeline and bookings will likely limit our ability to drive near-term revenue growth at our originally planned levels. Therefore, in line with our strategy, we made a pivot to greater emphasis on delivering shareholder value through increased profitability and cash flow, which are more controllable. The results of the quarter are a clear indicator of our ability to do this. We see long-term opportunities to drive similar results as in Q2. and drive up the underlying economics of the business. With that, I'll turn the call over to Tony before we open it up for Q&A. Tony?