Blackbaud, Inc.

Ladies and Chairman, good morning and welcome to the Blackboard's first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kevin Mooney, EVP Corporate Strategy and Business Development. Please go ahead, sir.

Good morning, everyone. Thank you for joining us on Blackboard's first quarter 2024 earnings call. Joining me on the call today are Mike Giannone, Blackboard's CEO, President, and Vice Chairman, and Tony Boer, Blackboard'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 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. Before I turn the call over to Mike, I'd like to mention that notice of our 2024 annual meeting of stockholders and proxy statement were filed on April 23rd, and our annual meeting materials were posted to our investor relations website that same day. With that, I'll turn the call over to you, Mike.

Thank you, Kevin. Thank you for joining our call today. I would just like to quickly start with a comment on the Clear Lake proposal. To be clear, the Blackbaud board and management team are 100 percent committed to maximizing shareholder value. Execution on our five-point operating plan has redefined the trajectory of the company and is fueling positive operating and financial performance and substantial free cash flow. We are confident in BlackBot's strategy and ability to deliver significant value. The Board is continuing to review Clear Lake's proposal with this in mind. we'll provide an update to the market in due course. Now, turning to the operations of the business, I'd like to cover three primary topics today. One, our continued execution on the company's five-point operating plan and the strong performance we're delivering as a result. Two, our current thinking with respect to select elements of our portfolio. And three, an update on our progress with respect to the company's capital return program. As we've discussed the past few quarters, we're very focused on our five-point operating plan to improve product innovation, accelerate bookings growth, optimize transactional revenue, modernize contract renewals, and improve cost management. The team has been executing against this program, and it has transformed the financial performance of the company. Over the past year alone, we have delivered adjusted EBITDA growth of 25%, non-GAAP EPS growth of 28%, and adjusted free cash flow growth of 240% year-over-year in the first quarter. Strong performance across the business in the first quarter reinforces our confidence. We grew the top line, expanded adjusted EBITDA margins, and generated significant free cash flow which is enabling both substantial capital returns to shareholders and investments that drive product delivery and innovation for customers and fortify our industry leadership. Blackbaud is a much stronger company than it was just one year ago and remains the clear market leader in the social impact software market. We believe that we are well positioned for the future and our goal of achieving the rule of 40 for the full year As you'll recall, we achieved Rule of 40 one quarter ahead of expectations. We expect to deliver Rule of 40 for the full year in 2024, a more than 300 basis point improvement over 2023. Now I'd like to turn our attention to the team's fantastic product innovation and feature delivery that was rolled out this quarter. The team has been busy. The pace of innovation is accelerating and customers are enthusiastic about what we're offering. Our focus has been on two areas, specifically generative AI and enhancements that continue to improve the connectivity of our suite of solutions. These enhancements are aimed at improving fundraising outcomes while reducing the administrative burden of our end users. As discussed previously, we've released a number of AI capabilities over the past few quarters, including new gen AI functionality for our JustGiving platform. This quarter, we rolled out GenAI capabilities for Razor's Edge NXT, and before long, Blackbaud Copilot will be available to our Razor's Edge NXT customers. Using Blackbaud Copilot, users can ask ad hoc questions such as, how can I improve my average donation size? And the tool will provide intelligent responses as well as recommended actions to drive that outcome. This past quarter, our online giving and prospect insights capabilities were natively integrated into Razor's Edge NXT. With these integrations, fundraising administrators can now drive a viral giving campaign, keep records of each donor interaction, identify new donation opportunities, and provide personalized messaging all in one integrated experience. And finally, last quarter I mentioned our new optimized BlackBot donation forms, we're coming to Razor's Edge NXT. As of this quarter, we have a few hundred customers signed up and running with nearly a thousand more experimenting. It's early days, but we expect these forms to drive higher revenue for our customers and for BlackBot. We include these exciting new features in our products at no additional cost to increase the value our customers receive from their existing subscriptions. We are delivering more innovation, evolving our products, and ensuring our customers receive more value from our solutions. Now onto another element of our five-point operating plan, bookings, growth, and acceleration. I'd like to highlight several interesting customer wins from the quarter that illustrate not only what customers want, but our unique ability to serve this demand as the market leader with the most comprehensive and purpose-built solution set in the industry. Five Cities Homeless Coalition, based in Grover Beach, California, helps families and individuals by providing the housing, resources, and support they need to become self-sufficient, productive community members. What started out as a simple replacement of its financial management tool became a multi-solution sale that also included fundraising and payment processing. By signing on with BlackBud, Five Cities can now streamline their financial operations and reporting and focus on expanding their fundraising to meet the needs of the community they serve. Another win in the quarter and a new logo was Carl Sandburg College, which serves the educational needs of Western and Central Illinois. They were looking for a system that could run fundraising, accounting, and scholarship management with a long-term goal of increasing student enrollment. Blackbaud was uniquely positioned to provide this suite of offerings in one simple platform. And also during the quarter, we upgraded the National Coast Guard Museum to a new solution. The organization is in the groundbreaking phase of their brand new museum, slated to open in 2026 on the waterfront of New London, Connecticut. In preparation for their opening, the museum selected Blackbaud's purpose-built solution for general admission organizations, Altru. This was an upgrade on their current Blackbaud solutions. which was instrumental in the initial campaign phase, and illustrates our commitment to helping organizations through the full life cycle of their operational and fundraising needs. Now I'll discuss how we're thinking about our portfolio. After careful evaluation, we decided to divest EverFi's creative agency services business in the UK. This business was not a strategic fit for the company, and the revenue was one time in nature. we continuously evaluate our product portfolio to ensure we're driving profitable growth and shareholder value. Turning to an update on our stock repurchase program, the significant adjusted free cash flow growth we delivered in 2023 is continuing in 2024. Even though the first quarter tends to be a seasonal low for adjusted EBITDA, our adjusted free cash flow was up 38 million year over year. which demonstrates the leverage of our business model. Our strong cash production, together with capacity on our credit facility, allowed us to make a healthy start on our share repurchase program. As you will recall, we have committed to repurchasing between 7% to 10% of outstanding stock in 2024, and we are well on our way to doing just that. During the quarter, we executed and funded a $200 million accelerated share repurchase agreement. Together with open market purchases, the company bought back nearly 3 million shares this quarter, which represents approximately 5.5 percent of our outstanding common stock as of year end 2023. We believe stock repurchases at current prices represent a good return to our shareholders. So, it's been an active and successful quarter on many fronts. I'm excited about the progress we've made in the first quarter. The team is hard at work across the business, innovating in our product offerings, increasing operational efficiency, and taking our message to the market that Blackbaud offers intelligent, impactful, and flexible tools to help customers thrive. With that, I'd like to turn the call over to Tony.