Blackbaud, Inc.

Greetings and welcome to the Blackbaud's first quarter 2025 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 first quarter 2025 earnings call. Joining me on the call today will be Mike Giannone, Blackbaud's CEO, President, and Vice Chairman, Tony Bohr, Blackbaud's Executive Vice President and CFO, and Chad Anderson, Blackbaud's Chief Accounting Officer. Mike, Tony, and Chad 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 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 on 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 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 GAAP measures. And with that, I'll turn the call over to you, Mike.

Thank you, Tom, and good morning, everyone. Last quarter, I spent some time discussing the strong financial progress Blackbaud has made over the past five years across both our top and bottom lines. We continue to extend our position as the market leader and provide the most comprehensive suite of purpose-built and mission-critical software and services to the social impact sector. Our solutions allow customers to spend more time focusing on what matters to them. their vital social impact work at hospitals, private schools, universities, nonprofits, companies, and through individual acts of generosity. We remain the premier software partner across the social impact space. Our solid first quarter and Rule of 40 attainment give me confidence that Blackbaud is well positioned on our journey to the Rule of 45 by 2030. In the first quarter, Black Lab generated revenue of $271 million, which is 5.8% organic growth, a non-GAAP-adjusted EBITDA margin of 34.3%, non-GAAP-diluted earnings per share of 96 cents, and a Rule of 40 score of 40.1%. These results are a testament to the resilience of our business in challenging times. The social impact market has been a consistent grower for many decades through recessions, business upturns and downturns, and even through the COVID-19 global pandemic. I know there are concerns about federal grant funding and how it impacts our customers, but much like in COVID, this uncertainty only makes our software more critical to our customers' operations, enabling them to improve fundraising outcomes and to undertake or sharpen their own cost management initiatives. To be clear, our solutions are not in the funds flow from federal agencies, but are used for fundraising from individual donors, which is even more critical now. We are proud to play a vital role in supporting our customers' operations as they navigate change. BlackBot has also undertaken a number of operational initiatives that set us up to perform well even in a challenging market. In 2023, we began transitioning our contractual revenue contracts from primarily one-year to primarily three-year renewal terms. This modernized approach to contract terms provides increased visibility and consistency for nearly two-thirds of our revenue base and provides better predictability for our customers. Over the past several years, we have transitioned the majority of our products and customers to the third-party cloud while shutting down many of our private data colos with only two of our own data centers remaining. We continue to innovate through the use of AI to not only empower our customers, but also improve our own internal productivity. And lastly, we have right-sized our operations by further rationalizing office leases, and renegotiating significant vendor contracts. And despite a strong focus on reducing expenses, we continue to invest aggressively in innovation in our extensive developer network to help our customers raise more money while enhancing and streamlining their operations. Our innovation and end-to-end workflows continue to be a competitive differentiator and drive sales. We are supporting this innovation through enhancements in sales and marketing programs, and we continue to identify, experiment, and scale a range of successful solutions across marketing, customer success, and engineering to be an active innovator through applied AI. We saw the positive market reaction to our focus here earlier this month at our Corporate Social Impact Summit in Dallas. The summit brought together hundreds of executives from leading companies across the US to share insights and drive meaningful change. Attendees received an exclusive preview of product innovations, including how we are integrating our Your Cause portfolio with our payments and fundraising solutions, expanding the use of AI to transform the grant-making process, helping companies unleash generosity globally, and revolutionizing corporate social impact reporting through our partnership with True Impact. Your cause has made significant strides in innovation, particularly with our announcement of expedited giving. Expedited giving will transform the way employee donations and eligible match funding are processed, ensuring that nonprofits receive corporate donations directly and faster than ever before. which is especially critical during disaster response efforts. This initiative will soon begin testing with a select group of pilot corporations and nonprofits, expediting employee donations to charities that have Blackbaud integrated payments customers. The key value proposition here for customers is to reduce the time lag of an employee donation to a nonprofit to just a day or two. In addition to investing in our innovation, We plan to use our cash flow to repurchase BlackBud shares. As you recall, in 2024, the company bought back 10% of the common stock outstanding. And when you include the net share settlement on employees.com, the figure rises to 11%. In the first quarter of 2025, we repurchased approximately 4%, well within our plans of buying between 3% to 5% of our outstanding shares in 2025. Before I close, I also want to take this opportunity to say a special thank you to Tony Bohr. Tony is transitioning his CFO duties to Chad Anderson later today. Tony has been a great CFO, and I'm very grateful to him for his many contributions to Blackbaud's growth and success. Over the last 14 years, Tony has developed an outstanding finance organization, and he's instilled a strong operational and financial discipline across the company. I look forward to continuing to work with Tony in his new role as EVP of Corporate Development and Strategy to help ensure a smooth transition and continue to drive our success and operational excellence. One of his key focus areas will be to help lead our charge to be a Rule of 45 company. I'm delighted about Chad's promotion to CFO. Chad's a highly accomplished global finance executive and 12-year veteran of Blackbaud with a deep knowledge of our business, our customers, and the industry. Chad has successfully led many key and impactful projects to mature, modernize, and improve the efficiency and accuracy of the company's financial systems, processes, and organization. Having worked closely with Chad for over a decade, I'm looking forward to benefiting from his experience and knowledge in the role of CFO as we work to deliver profitable growth for our shareholders in 2025 and beyond. There will be a formal press release in 8K at the end of the day today. Let me conclude with my blackboard continues to be a sound investment choice that we believe should create substantial shareholder value, and our performance in Q1 reinforces that belief. Regarding organic revenue, you can expect mid-single digit plus organic revenue growth driven by visible and full reoccurring revenue streams targeting both new logos and expansion of our install base empowered by innovation. You can continue to expect a strong focus on cost and employee productivity to improve EBITDA. Additionally, our strong free cash flow will drive a purposeful capital allocation strategy in 2025 and beyond with a plan to buy back of up to 5% of common stock outstanding in 2025. We look forward to our continued journey in offering our shareholders increasing value in the coming years as we make progress against our Rule of 45 ambition by 2030. With that, let me turn the call over to Tony.