Blackbaud, Inc.

Greetings and welcome to the Blackheart Third 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 zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tom Barth, Head of Investor Relations. Thank you, sir. You may begin.

Good morning, everyone. Thank you for joining us on Blackbaud's third quarter 2024 earnings call. Joining me on the call today are Mike Giannone, Blackbaud's Chief Executive Officer, President and Vice Chairman, and Tony Bohr, Blackbaud's Executive Vice President and Chief Financial Officer. Mike and Tony will make prepared remarks, and then we will open up the line for your questions. Please note that comments today contain forward-looking statements subject to risk 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 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 to only 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. And with that, let me turn the call over to Mike.

Thank you, Tom. Good morning, everyone. I want to begin by addressing our revised guidance ranges for 2024. Our social sector, which is the majority of our revenue, continues to perform very well, and we feel we remain a strong investment for shareholders. We are lowering our annual revenue guidance due to the continued negative financial impact of EverFi. Without the negative performance of EverFi, our guidance for the year would remain unchanged. We are confident that our underlying business and our future opportunities remain strong. We've spoken in the past about improving Everfi's business performance and evaluating strategic options. While Everfi remains a small portion of our overall business, at roughly 7 percent of our revenue in the quarter, management is focused on achieving the best possible outcome. We have recently right-sized the business to better align cost to revenues, and we've hired Goldman Sachs as our strategic advisor to assist us in evaluating other options. We plan to continue to update you as appropriate in this area. As you look across the other parts of our business, we believe Blackbaud, driven by our continued focus on execution of our five-point operating plan, is a compelling investment with multiple opportunities for strong shareholder returns. We continue to extend our position as the market leader in providing software to power social impact, through our offerings of the most comprehensive set of purpose-built and mission-critical software and services. And we continue to accelerate the pace on an exciting list of innovative new solutions to penetrate even further into our rich market opportunity. In September, we held our annual user conference, BBCon, in Seattle, with thousands of social impact professionals attending, both in person and virtually. The enthusiasm and reception by our customers was clear and exciting. We announced six waves of innovation, including AI capabilities, new powerful partnerships with companies such as Constant Contact, new expanded navigation menus, new performance analytics, payment assist, deeper encryption, and richer connectivity, to name a few. We'll continue to invest aggressively in innovation and partner with our developer network to further enable our customers to raise more money while improving their operational efficiency, ultimately allowing them to spend more time executing on their charitable missions and less time on administrative tasks. We remain a natural choice for customers and new prospects alike. Their success helps drive ours and is visible in our third quarter numbers, which include revenue in our social sector grew 6.6% despite a difficult FY23 comparison. And within social, contractual reoccurring revenue, the company's largest revenue line was up 6.8%. Our second largest revenue line of social transactional reoccurring revenue grew 6.6%. Gross dollar retention, driven by the value our customers see using our solutions, was 90%. and excluding EverFi approximately 92%. We beat out the competition to add prominent new logos and deepened our existing relationships with our list of over 40,000 customers. These included competitive wins in the higher education vertical to Dallas Baptist University, Davidson College, and the University of Nevada, Reno. These institutions valued our enviable end-to-end workflow and recent enhancements will power their fundraising efforts. Our adjusted free cash flow remains very strong at nearly 100 million in the third quarter. This strong performance gives us great confidence to fuel our aggressive stock repurchase program. Through October, the company has bought back approximately 8% of the common stock outstanding at the end of 2023, and our current plan is to buy as much as 10% of that balance by year end 2024. Tony will cover more about financial results as well as capital allocation strategy, but I remain pleased with Blackbaud's multi-year trajectory as well as its prospects. Blackbaud's revenue, adjusted EBITDA margin, adjusted free cash flow have improved significantly over the last couple of years and year to date. We feel that much of this success driven by a proven operating plan and our mission to empower social impact in the hearts of our customers and employees are driving very strong results. I'll come back after Tony in a few minutes with some closing thoughts, and then we'll take your questions. Tony?