Blackbaud, Inc.

Good day, and welcome to Blackbaud's second quarter 2025 earnings conference call. Today's conference is being recorded. I'll now turn the conference over to Tom Barth, Head of Investor Relations. Please go ahead, sir.

Good morning, everyone. Thank you for joining us on Blackbaud's second quarter 2025 earnings call. Joining me on the call today are Mike Giannone, Blackbaud's CEO, President, and Vice Chairman, and Chad Anderson, Blackbaud's Executive Vice President and CFO. Mike and Chad will make prepared remarks, 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 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 how we internally measure our business. Unless otherwise specified, we will refer only to non-GAAP financial measures on this call. Please note that the non-GAAP financial measures should not be considered in isolation from or as substitute for GAAP measures. And with that, I'll turn the call over to you, Mike.

Thank you, Tom. Good morning, everyone. Over the last several quarters, I've emphasized BlackBaud's significant improvement in growth and profitability since 2020. I'm pleased to say that BlackBaud continues to perform very well through the first half of 2025 with a very strong second quarter across revenue, EBITDA, EPS, and cash flow. In fact, in the second quarter, we delivered a rule of 45, our highest quarterly rule of performance in the company's history. In the second quarter, BlackBot generated revenue of $281 million, which is 6.8% organic growth year over year, and adjusted EBITDA margin of 38.5%, up nearly 300 basis points year-over-year, and non-GAAP diluted earnings per share of $1.21, up 12% year-over-year. This improvement would have been even higher had we adjusted for EverFi. These results are a testament to the power of our people, our product offerings, and our position as the market leader providing the most comprehensive suite of purpose-built and mission critical software for the social impact sector. Our solutions allow customers to spend more time focusing on what matters to them, making concrete improvements in the world through their vital social impact work. We remain the premier software partner across the social impact space. I'd like to highlight three specific areas that our management team is focused on and that contributed to this quarter's results. Acquiring new logos, driving innovation, and as such, strengthening our customer relationships through additional solutions and renewals, and driving higher profitability through operational discipline and efficiencies. We continue to have a strong focus on signing new logos. Here are a couple of our latest wins and why Blackbaud was the right choice for these organizations. a large youth development organization sought to replace an antiquated tech stack as it prepared to power its primary engagement campaign. The campaign's core purpose is to reach 10 million youths in the next six years. This organization needed a better holistic technology infrastructure to achieve its lofty fundraising and alumni engagement goals and provide change management support. After a detailed review of the market, the organization purchased Razor's Edge NXT and Data Intelligence. This is a strong enterprise deal in our nonprofit space. This new customer was also very excited by the new network effect we are creating by connecting our nonprofit fundraising solutions, in this case, Razor's Edge NXT, to our corporate employee engagement solution called YourCause. This connects Blackbud nonprofit customers to corporations. Nonprofits need volunteers and donors, and companies have volunteers and potential donors. We are the premier provider in both of those spaces, and for the first time ever, we have connected those platforms to create a network. Only Blackbaud has the solutions to do this. Another new customer is Sunnybrook Foundation. They're a world-renowned leader in research education and patient care based out of Toronto. and are undertaking a significant digital transformation. The foundation selected Blackbaud CRM from among both US and Canadian competitors because of our leadership in the fundraising market and our ability to modernize donor experience and California Polytechnic State University, a leading public education institution, selected Blackbaud's Razor's Edge NXT as its modern cloud-based solution to replace a legacy system and drive its digital transformation. This win highlights our growing momentum in the higher education vertical, where our professional services team brings deep implementation expertise. Our success with Cal Poly was driven by a combination of our proven change management methodology, our integrated payment solution, which ensures PCI compliance and operational efficiency, and our ability to align with the university's long-term strategic goals. This partnership underscores the value of our modern scalable platform in meeting the evolving needs of higher education institutions. Specific to our Your Cause solution, We had a very strong quarter of adding and expanding large customers like NASDAQ, Tyson Foods, Chevron, Quest Diagnostics, Cummings, and several other global brand names. We are winning with your cause because of our investments and innovation like Impact Edge, Expedited Payments, and the expanded global markets we serve. Also during the second quarter, we're pleased to add Bill Fort as our new head of North American sales. Bill reports to our chief commercial officer, David Benjamin, and leads our U.S. and Canadian sales teams, serving our customers across all verticals. Bill brings with him deep knowledge in the social impact sector, having led software teams most recently at Salesforce, with experience from Oracle and SAP as well. He set the ground running and we look forward to his continued focus on driving more growth. Our second primary focus is continuing to invest aggressively in innovation. We have made notable progress on this front during Q2. Our Razor's Edge NXT transformation is in full swing with continuous updates. Literally hundreds were delivered just this past quarter. We have recently modernized pledge giving, releasing a new integration with Constant Contact, a best-of-breed digital marketing solution for mid-market organizations. The constant contact integration is a connected experience within Razor's Edge NXT and a hallmark of our connected and open strategy. We are transforming Financial Edge NXT from a system of record to a system of intelligence and connected finance. This includes seamless integration with Razor's Edge NXT and new advanced methods of journal entry and invoicing that can make our customers significantly more efficient. In K-12 education, we've started a limited rollout of our common records engine with marquee customers. Common records engine is a significant and differentiated feature that connects advancement offices with school administrations. Schools spend significant time on transferring data between offices. Delays, inaccuracies, and incomplete information have a direct impact on relationships they build with their community. A key component of the powerful network effect solution for our corporate Your Cause customers that I mentioned earlier is a new level of efficiency within this new network. In the corporate employee giving world, donations typically take months to reach the intended charity. By integrating our Your Cause payments and fundraising solutions, this can be accomplished in a day or two. This provides BlackBot a unique position in this market with this integrated solutions capability. AI continues to be front and center in our innovation with our AI Everywhere strategy. This includes innovation already underway, like predictive AI that's helping customers identify billions of dollars in untapped giving potential, generative AI-powered acknowledgements that are speeding and enhancing communication with supporters, and an upcoming technical preview of BlackBot Copilot, an AI-powered coach and assistant that allows users to interact with their data in natural language, ask questions, and gain insights. We also have underway a full agentic offering, which we expect to launch at our upcoming BBCon conference in October. We're working with selected customers to partner on these new solutions. We believe there's great potential for agentic AI in the social impact sector to help customers unlock new levels of effectiveness and deeper connections across critical fundraising operations like donor cultivation, stewardship, and sustainer management, and driving accelerated revenue for our customers and the sector. Our agentic offerings features include capabilities such as reviewing donors at risk of lapsing and suggesting additional activities or reviewing gifts and creating segments of likely upgrade prospects and generating offers specific to each donor. We also have a full agentic fundraiser solution in development that will be available this fall to address the needs of our customers to reach more donors and drive their messages in revenue. I recently hosted our virtual developer conference we call BV Dev Days with over 2,600 developers worldwide. Participants explored innovative ways to automate and extend our Blackboard solutions alongside our employees, partners, and peers. We're starting to see a fundamental shift in how customers are using AI for their custom development, leveraging AI to write code, broadening the definition of what a developer is and lowering the barrier to creating time-saving customizations and automations on top of their Blackboard solutions. We look forward to highlighting these points as well as many of our other unique and exciting innovations at our annual customer event, BBCon, in October in Philadelphia. Customers and prospects will have the opportunity to enhance their skills, make valuable connections across Blackbaud's customer community, and hear from Blackbaud leaders on what's coming next in innovation. In addition to over 100 powerhouse sessions led by industry experts and Blackbaud leaders, as well as pre-conference workshops, product training and developers of all levels will be available. We continue to be very focused on our operational rigor to drive increased profitability and strong cash flows. And our Q2 and first half is a strong testament to that discipline. Over the past several quarters, I've spent a lot of time discussing our significantly improved financial results from the last five years in a financial model you can expect from us in the future. We believe BlackBaud is a sound investment choice that has the potential to create substantial shareholder value. This belief is supported by our performance in the first half of 2025 and raising our guidance for the remainder of this year. As a framework going forward, we are targeting mid-single-digit plus organic revenue growth, EBITDA growth in excess of revenue growth, double-digit diluted EPS growth, and we will continue to drive very strong free cash flow, which includes purposeful capital allocation. Chad will provide a bit more of the specifics on our plans across these metrics in his guidance section, but we look forward to continuing the journey and offering our shareholders increasing value in the coming years. With that, let me turn the call over to Chad.