Blackbaud, Inc.

Good day, and welcome to Blackboard's third quarter 2021 earnings call. Today's conference is being recorded. I'll now turn the conference over to Steve Hufford, Director of Investor Relations at Blackboard. Please go ahead, sir.

Good morning, everyone. Thanks for joining us on Blackboard's third quarter 2021 earnings call. Joining me on the call today are Mike Giannone, Blackboard's President and CEO, and Tony Bohr, Blackboard's Executive Vice President and CFO. Hello. Mike and Tony will make prepared comments, and then we will open up 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 investor engagement activities for the quarter. During the fourth quarter, our team will be participating in the Credit Suisse 25th Annual Technology Conference, Raymond James Technology Investors Conference, and Barclays Global Technology, Media, and Telecommunications Conference. We will also be holding virtual investor meetings hosted by Stifel on November 10th and Baird on December 14th. With that, I'll turn the call over to you, Mike.

Thank you, Steve. Morning, everyone. Thank you for joining our call today. Third quarter results reflected a fantastic quarter of execution for Blackbaud, exceeding even our own expectations on a much improved market backdrop. We achieved near double digit recurring revenue growth, which represents a roughly 95% of our total revenue. Top line growth drove a roughly 10 point improvement on the rule of 40 over the year. and we're on pace to potentially have our best free cash flow year in the company's history. I firmly believe we're at an inflection point for our market and our company as the shift to a digital first world continues to accelerate. We've seen this shift as we have successfully transitioned to a remote first company where we are building a connected, engaged culture regardless of where people are located. And we've seen this in our customers as they are meeting and exceeding new expectations with online grant applications, cloud-based fundraising tools, virtual walks, runs, and rides, timed entry capabilities for admissions, and even virtual prayer walls for faith-based organizations, just to name a few. As I've mentioned before, the percentage of giving done online grew by 40% in 2020, with roughly a quarter of that giving taking place on mobile devices. We believe these trends are here to stay, and we are transforming and accelerating how people and organizations connect by combining our end-to-end commitment to driving outcomes for our customers with a technology platform and services that increase velocity, performance, and scale. And we're just getting started, as the vision we set for the Sky Platform is becoming a reality. Also, last month, tens of thousands of customers and prospects joined us virtually at our annual conference, BBCon, to witness how the latest innovations from BlackBud can help them drive more impact while maximizing their time and resources. Turning to the remainder of the year, we are again raising our outlook for full year 2021. We have high confidence we will exceed the $920 million high end of our upside revenue scenario for 2021 laid out on our Q4 2020 call earlier this year. And we expect to see further acceleration in our full-year reoccurring revenue growth rate in 2022. We're also raising our best estimate for profitability and free cash flow, and we continue to believe BlackBot is undervalued. Thus, we executed on our share buyback program again in the third quarter. We continue to execute on our four-point strategy, and each are progressing well. Today, I'm going to provide an update primarily on our recent innovation efforts. As usual, Following my comments, I'll turn the call over to Tony to cover the financials in more detail. A big part of our strategy is to delight customers with innovative cloud solutions to drive more impact. Over the past year, I've seen the innovation and determination of both our experienced experts and incredible new leaders who have joined our engineering, product, and customer success teams. I'm especially excited that over 50% of our newest team members come from backgrounds that are historically underrepresented in tech. We believe that by building a diverse team that reflects our customers and communities, we'll have deeper and more representative insight that drives impact throughout everything we do. We're not just helping our customers digitally transform the old ways of working. We're creating tools that offer breakthrough improvements and reinvent the way they accomplish outcomes and track results. For instance, We recently released an entirely new experience for BlackBuck grant making, and we've since converted every existing grants customer to the new platform, a great example of the vision we have for our entire portfolio. Another example is a major recent release on Financial Edge NXT, where we're transforming the entire accounts receivable experience. This provides a modern experience and a new streamlined workflows and controls in areas such as invoice creation, billing, and receiving payments, as well as holistic relationship management across vendors, customers, and sponsors. And in 2022, we plan to release a new wave of data intelligence capabilities, extending our success in this area by bringing together the industry's most robust database of philanthropic giving with artificial intelligence to drive unmatched insights for our customers. We're also committed to giving customers the flexibility to benefit not just from Blackbaud's innovation, but the innovation happening outside of our walls as well. Our developer community is growing rapidly with more tools than ever to create new capabilities that extend Blackbaud solutions. We now have over 5,500 non-Blackbaud developers registered in our ecosystem, and we've seen substantial growth in the Blackbaud marketplace. where over 6,400 organizations have found a curated app to help them work smarter. And I'm excited about the use cases we're seeing in the market, such as an app that integrates Shopify with Razor's Edge NXT or a new API integrating YourCost with Workday, enabling our customers to easily connect employee data into the YourCost platform for more effective employee engagement. We're also enabling non-developers with low-code or no-code tools, such as our Microsoft Power Platform, Connector, to build automated workflows with our APIs without having to be a seasoned developer. We also continue to innovate as online gifts become a greater share of our customers' total donations. At BBCon, the team announced that Giving Checkout with our complete cover model is now available in the U.S. with additional markets to follow after seeing strong success in the UK. You can think of giving checkout as an easy-to-add, simple-to-use donation button that can be used by any nonprofit organization. Giving checkout differentiates itself from others with a complete cover model where there are no processing fees for the organization. Instead, donors choose that checkout if they want to cover the processing fees. We've tested this extensively with great success in the UK without just giving platform, and it's a real win-win for Blackbaud and our customers. I'll summarize by reiterating that I believe we are at an inflection point for our market and our company with significant growth opportunities ahead. We're raising our estimates across the board for full year 2021, and we expect reoccurring revenue growth to accelerate in full year 2022. Our investments in the Sky platform continue to deliver results. We're focused on fueling future growth through additional investments in innovation, customer success, security, and cloud infrastructure, and a higher velocity go-to-market motion. Our market has once again proven to be resilient and innovative in the face of a challenging pandemic environment, and we continue to strengthen our leadership position as the best long-term partner for our customers. Blackbaud is well-positioned to capture the organic and inorganic growth opportunities in front of us while driving meaningful acceleration in financial performance. Overall, we have a very strong quarter and we're well-positioned to carry this momentum through the end of the year and into 2022. With that, I'll turn the call over to Tony before we open it up for Q&A. Tony?