Blackbaud, Inc.

Good day and welcome to Blackbaud's Q4 full-year 2023 earnings call. Today's conference is being recorded. I will now turn the conference over to Kevin Moon. Please go ahead, sir.

Good morning, everyone. Thank you for joining us on Blackbaud's fourth quarter and full-year 2023 earnings call. Joining me on the call today are Mike Giannone, Blackbaud's CEO, President, and Vice Chairman, and Tony Boer, Blackwad'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 certain 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. The discussion today will focus on non-GAAP results. Please refer to our press release and the investor materials posted to our website for the full details on our financial performance, including GAAP results, as well as full year guidance. 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 substitute for GAAP measures. With that, I'll turn the call over to you, Mike.

Thank you, Kevin. Thank you, everyone, for joining our call today. I'd like to start today's comments by offering a few perspectives on 2023. Then I'll comment on our product evolution, share a few customer wins, and then conclude with an update on our capital allocation and stock repurchase plans before turning the call over to Tony. The fourth quarter concluded a year of substantial transformation for Blackbaud. Approximately a year and a half ago, we implemented our five-point operating plan, which began producing results in the second quarter of last year, continued through year end, and has put our company on a clear trajectory of improving financial performance. In the second quarter, our cost management initiatives drove significant adjusted EBITDA margin expansion as expenses declined year over year. Then in the third quarter, our revenue growth rate accelerated as our modernized pricing program gained traction, and we achieved the rule of 40 ahead of plan. And today, I'm pleased to report that our company's adjusted free cash flow grew substantially and enabled the company to begin returning cash to shareholders in the form of an active stock for purchase program. So, 2023 has been a transformational year for the company. To put that transformation into perspective, we entered the year in our social sector with only about a third of opportunities renewing on multi-year contracts, and we exited the year with three-quarters of opportunities renewing on multi-year contracts. We entered the year with none of our customers on our modernized contract pricing, and we exited the year with approximately 35% of our eligible customers on modernized contract pricing. We entered the year with organic revenue growth of less than 1%, and we exited the year with fourth quarter organic revenue growth of over 7%. We entered the year with EBITDA margins of under 25%, And we exited the year with fourth quarter adjusted EBITDA margins of over 33%. And we entered the year with a rule of 40 score of 25. And we exited the year with a fourth quarter rule of 40 score of 41. That's transformational performance. I'm pleased with the results the team has produced. I'm excited about the continued momentum we expect in 2024, as you'll hear today. For the full year of 2023, Blackbaud produced revenue of $1,105 billion, adjusted EBITDA of $356 million, non-GAAP diluted earnings per share of $3.98, adjusted free cash flow of $214 million, and a Rule of 40 score of 37 percent. All of these measures are substantially better than 2022's performance and meet or exceed the increased guidance ranges we released in Q1 of 2023. Tony will share greater detail on our financial results in his comments. Now turning to product. During the fourth quarter, we continue to focus on delivering more value to our customers through product innovation. For example, we increased the power of social impact-based fundraising with the announcement of an early adopter program for new optimized online giving capabilities. These new capabilities enable native integration with products across BlackBot's portfolio and in early testing are raising considerably more funds for our customers. It will be generally available for U.S. Razor's Edge NXT users this week with availability coming soon for BlackBot CRM and Altru customers. Also in the fourth quarter, we announced the availability of our GoodMove mobile application for all Team Razor peer-to-peer events. This enables a streamlined experience for participants, while expanding participation to virtual as well as in-person events. And as part of Blackbaud's Intelligence for Good strategy, our investment in artificial intelligence continued with the launch of Prospect Insights Pro, an intuitive, guided experience to deliver AI-driven insights in support of planned and major gift fundraising. So plenty of progress on a product innovation front. Customers are utilizing this technology to further their mission and improve their operations. And this is shown by our wins from this last quarter. For example, the American Parkinson's Disease Association selected Blackbaud to consolidate its direct marketing and CRM functions from multiple vendor solutions. A Blackbaud unified solution, which includes partner capabilities, will help APDA continue to surpass their fundraising goals and support their mission to help everyone living with Parkinson's disease to live life to the fullest. Also during the fourth quarter, the Salvation Army Western Territory sought to modernize and improve Hunt Managers' constituent data to increase fundraising and enhance engagement. The organization chose Blackbaud's BBCRM over two very large competitors, owing to our singular focus on nonprofits. And the Rockford Christian School in Illinois purchased our total school solution. The school was driven by a strong desire to better inform business decisions as well as optimize the parent, student, and teacher experience as it plans for growth over the next five years. This competitive win replaced several disparate legacy systems and includes a comprehensive suite of student enrollment, student information, tuition management, and financial management. On the corporate impact side of the business, News Corp selected Your Cause to power their corporate giving and volunteering programs in the communities they serve across the globe. And Fidelity Investments expanded its collaboration with Everfi by sponsoring a new high school financial education program featuring a first-of-its-kind investing simulation. aligned to Fidelity's commitment to financial literacy and providing the next generation with access to meaningful financial education. So in summation, we're bringing mission-critical solutions to our customers that we're continually involving to have greater impact and value. Our customers recognize the value of our solutions as shown by the increase in multi-year contract renewals and the adoption of our modernized contract pricing. Now I'd like to provide an update on our expanded stock repurchase program. This is an important development in our transformation, and it's predicated on our strong and growing cash generation. On January 22nd, we disclosed that in December and January of this year, we were actively buying shares in the open market, investing approximately $41 million to acquire almost 500,000 shares. Given the upside we see in the business, and continued strong performance expected in 2024, We believe these repurchases are a good investment for our shareholders. We also announced that our board increased our go-forward repurchase authorization to $500 million, doubling the previous $250 million authorization. That gives us a lot of headroom for future stock repurchases. At a minimum, we plan to buy back the dilution from an annual stock-based compensation. Historically, we have taken the opportunistic approach to capital allocation and we expect that to continue. Value creating M&A will also remain a capital allocation priority. To the extent that investments and acquisitions are available that strengthen our business, enable growth, and create shareholder value, we will deploy cash to do so. Of course, such opportunities are hard to predict. We remain focused on making prudent investments to grow the business, both organically and inorganically, while returning excess capital to shareholders. So with the books closed on what was an outstanding year for Blackbaud, let me turn the call over to Tony, who will share more details on the financials and why we're enthusiastic about 2024. Tony?