Blackbaud, Inc.

Good day and welcome to Blackbaud's Q1 2022 earnings call. Today's conference is being recorded. I'll now turn the conference over to Steve Hufford. Please go ahead, sir.

Good morning, everyone. Thanks for joining us on Blackbaud's first quarter 2022 earnings call. Joining me on the call today are Mike Giannone, Blackbaud's president and CEO, and Tony Boer, Blackbaud's executive vice president and CFO. 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 mention that notice of our 2022 annual meeting of stockholders and proxy statement were filed on April 19th, and our annual meeting materials were posted to our investor relations website the same day. And during the second quarter, our team will be attending the Needham 17th Annual Technology and Media Conference, May 16th and 19th, virtually, the J.P. Morgan 50th Annual Global Technology, Media, and Communications Conference on May 24th, the Baird Global Consumer Technology and Services Conference on June 6th, and the Stiefel Cross-Sector Insight Conference on June 7th. We will also be participating in virtual investor meetings hosted by Raymond James on May 10th and 11th. As a reminder, we're also available at ir.blackbaud.com if you'd like to connect during the quarter. With that, I'll turn the call over to you, Mike.

Thanks, Steve. Welcome, everyone. and thank you for joining us on the call today. The first quarter was a strong start to the year. Two months ago, we provided our 2022 financial guidance that called for total revenue growth of approximately 17% at the midpoint of our guidance range, a significant acceleration in organic revenue growth to approximately 5%, and nearly 30% on Rule 40 at constant currency. We are tracking well to this guidance, and remain confident in our full-year outlook. In the first quarter, we had total revenue growth of 17.3%, and our organic reoccurring revenue grew 6.6%, which was largely driven by the strength in our transactional volumes and continued growth in our contractual reoccurring revenues. It's really great to see this return to growth in Q1. Our adjusted EBITDA margin was 22.2% inclusive of anticipated spend that carried over from last year, and we achieved 28% on Rule of 40 and constant currency. A key point here, we outperformed our internal plans on each of these key metrics during the quarter. In just a few months since our acquisition of EverFi, we've made significant progress on our integration efforts, focusing initially on systems and team integration, as well as synergy execution. Cross-selling plans with your cause are underway, and we recently began marketing the products together. This acquisition advances our position as a leader in a rapidly evolving ESG and corporate social responsibility spaces with over half of our adjustable opportunity now in the corporate sector. Last month, we recognized Financial Literacy Month, which raises awareness and promotes financial understanding and preparedness. As young people move toward financial independence, it's critically important they understand the most basic and foundational financial lessons, and EverFi helps fulfill this need. As companies continue to invest more in these types of programs to give back to their communities and employees, we will be a leading partner to help them drive meaningful social impact across a large span of technology-enabled program areas, from community education to volunteering to grant making in philanthropy. Looking to the remainder of the year, our recent company performance, combined with the EverFi acquisition, allowed us to significantly pull forward our timeline for achieving our long-term goal of mid to high single-digit organic revenue growth into 2022. We are pacing well against our full-year expectations as we continue to execute on our key growth and margin drivers with solid visibility into the remainder of 2022. Like everyone else, we're also closely monitoring the global macro environment. Blackbaud has a unique role to play in times of crisis as the need for many of our customer services increases and our focus is always on supporting our customers to help them achieve their missions. It has been inspiring to see how our customers have come together and respond to the conflict in Ukraine to raise millions in funds for humanitarian relief. While Blackbaud does not have operations or employees based in the area of conflict, we're proud to be powering critical work that is making a real difference in the lives that have been upended by this crisis. Since the start of the conflict on February 24th, organizations have leveraged Blackbaud technology to engage supporters and raise funds for humanitarian relief. For example, CARE is providing basic supplies and services for families fleeing Ukraine with a goal of reaching 4 million people in need. Direct Relief is partnering with Ukraine's Ministry of Health and others to provide critical shipments of 164 tons of medical aid, and Tikva Children's Home has successfully evacuated over 3,000 people and continues to care for refugees in-country. On our JustGiving platform, more than $55 million has been raised for Ukraine-related causes through individual giving. And with our complete cover model and the hard work of our teams to proactively accelerate our vetting process, we're ensuring more donated funds get to those in need even faster. Additionally, with one in three Fortune 500 companies relying on BlackBaud's Your Cause CSR solution, we were able to quickly launch resources to help customers build response programs for the crisis and provide a list of verified overarching relief funds helping those affected in Ukraine. A great example of this is Wells Fargo employees who have donated more than $330,000 to the Ukraine relief effort through the Your Cars portal, and those donations are making even more of an impact through their grant program. We are honored to be a key technology partner for our customers as they pursue their missions. And we will continue to delight our customers through our industry-leading innovation. Our end markets continue to display resilience in the post-pandemic recovery with a digital-first mindset. In February, Blackbaud Institute released its annual charitable giving report. Overall, giving in 2021 grew 9% year over year with a percent of giving done online up significantly from pre-pandemic levels and holding steady in the low teens. Nearly 30% of those online donations are being made on a mobile device, which we see as a long-term tailwind as we equip organizations to process mobile donations and optimize mobile user interfaces. I'm really excited by the role BlackBaud is playing in developing innovative solutions for our customers to diversify the way they receive and process donations. Recently, we announced a new product integration in the US between Blackbaud Merchant Services, our end-to-end payment processing solution, and PayPal, allowing social good organizations to offer donors the option to check out with PayPal or Venmo. Through this integration, Blackbaud customers will have access to a broader audience of donors with PayPal's more than 400 million active consumer accounts, enabling a more satisfying giving experience to expand impact. We are also driving a differentiated giving experience through our partnership with Change to provide Blackbaud's corporate customers an option to run charitable campaigns at point of sale, like roundups after purchase. The ability to match customer donations and offer donation options in loyalty programs. Change is a good example of the ecosystem we're building through our social good startup program. Their platform is already making an impact in the mission-driven commerce space, including enabling a new frontier of giving with cryptocurrency. And just last week, we held our product update briefings, a semi-annual event designed to share new product features and roadmaps. We provided updates on innovations in the pipeline for Razor's Edge NXT, Financial Edge NXT, grant-making, data intelligence, payment services, Illuminate Online, and Team Razor, JustGiving, and Sky Developer, to name a few. And new this year, we hosted an executive summary session that briefly highlighted our most important product enhancements and strategies which can be accessed along with all the sessions by visiting our corporate website. Also, in just over a month, we are projecting our highest turnout ever at our developers conference, designed as a learning event that brings together all levels of developers and technology enthusiasts to share best practices, collaborate with BlackLive product experts, and build relationships with peers. We continue to drive significant growth in our developer ecosystem consisting of customers, consultants, partners, and individual change agents. Additionally, we recently issued press releases welcoming two accomplished leaders to our team as we look to drive future innovation and customer delight. We recently hired Sudip Dutta as Chief Product Officer to oversee our global product portfolio. Sudip is an accomplished, growth-minded, and outcome-driven technology executive with a stellar track record in managing large business portfolios while creating and delivering value for customers. Sadiq has held executive leadership roles leading product and engineering teams at companies such as Oracle and IBM, and most recently, Broadcom. We also recently hired Chuck Miller as Chief Information Security Officer to oversee our global trust and security program, including all elements of cybersecurity. Chuck has deep domain expertise in security and technology services gained in organizations like Truist, SunTrust, Capital One, and Verizon. Both Sudeep and Chuck bring over 25 years of experience in proven leadership in their respective areas. Next, I'd like to cover some recent headway we've made on our strategy focusing on employees, culture, and ESG initiatives. We recently announced that we achieved carbon neutrality for 2021. This is a goal we have been striving towards for a while now, and our shift to a remote-first workforce enabled us to accelerate our timeline. Since 2019, BlackBody has reduced its global real estate footprint by 50%, energy emissions to run office space by 63%, and employee commute emissions by 75%. With a multi-pronged climate strategy, BlackBot is focused on reducing emissions, using energy efficiently, and investing in our environmental projects for a more sustainable future. And we look forward to sharing more about our ESG strategy on our corporate social responsibility website, launching later this month. As I've mentioned before, our mission-driven culture has been in our DNA since inception and is very attractive in a competitive labor market. We continue to foster a diverse and inclusive environment focused on employee engagement and connectedness with our remote-first workforce strategy. As just one proof point of our more recent hires, 67% have come from historically underrepresented groups. That number jumps to 74% for our incoming summer intern class where we just received recognition from collegegrad.com for being a top intern and entry-level employer. We have a significant role to play in driving advances in the social good space, and I'm proud of the strong corporate culture we've built, continue to cultivate in today's environment. In summary, we're executing well against our plan, moving quickly to integrate EverFi and have solid visibility into the remainder of 2022 and beyond. The midpoint of our financial guidance ranges for this year calls for a total revenue of approximately 17 percent, inclusive of our recent acquisition of EverFi. A significant acceleration in organic revenue growth to approximately 5 percent and nearly 30 percent on a rule of 40, which is roughly 250 basis point improvement year-over-year at constant currency. We expect a similar improvement on the rule of 40 in 2023 as we target our midterm goal of roughly 35 and a rule of 40 in the next few years. By balancing sustainable mid to high single-digit organic revenue growth and meaningful margin expansion over the next few years, we believe we can drive significant value for our customers, employees, and shareholders. With that, I'll turn the call over to Tony before we open it up for Q&A. Tony?