BLACKBAUD INC Q4 FY2024 earnings call

Key Points - Divested Everfi on December 31, 2024, which was dilutive to revenue growth and profitability in 2024. - In 2024, extended market leadership in the social impact sector, with significant improvement in new logo wins and deepening relationships with ~40,000 customers. Notable K-12 wins include Notre Dame High School, American Heritage Schools, and San Diego Jewish Academy. - AI initiatives: Blackbaud’s Intelligence for Good integrates machine learning and AI capabilities, with over 5,000 Raiser’s Edge NXT customers adopting machine learning features. Blackbaud Copilot, an industry-leading innovation, will provide contextual responses and drive actions. - Financial improvements over the past five years: Organic growth rate increased from 1.2% in 2020 to 5.2% in 2024; EBITDA margin increased from 26.5% in 2020 to 33.7% in 2024; adjusted free cash flow margin increased from 8.3% in 2020 to 21.2% in 2024; Rule of 40 increased from 27.7% in 2020 to 38.9% in 2024.

In 2024, the social sector revenue was $1,155,000,000. Contractual recurring revenue, the largest revenue line, grew 8%, and social transactional recurring revenue, the second largest, grew 6%. The Everfi business was divested on December 31, 2024, and will not be included in future financial results.

2025 Guidance - Revenue expected to be in the range of $1.115 billion to $1.125 billion, representing organic growth of 4.2% to 5.1% (or 4.5% to 5.4% on constant currency). - EBITDA margins anticipated to be approximately 34.9% to 35.9%. - Non-GAAP EPS expected in the range of $4.16 to $4.35, up 2% to 7% year-over-year. - Adjusted free cash flow guided to $185 million to $195 million. - Excludes Everfi from financial results; Everfi divestiture had impacts like a one-time $28 million cash release payment and $390 million impairment charge. - Factors affecting guidance include lapping prior renewal cohorts, focus on net new logos, and currency impact of $2 million to $3 million.

Risks - Volatility in viral giving, which can significantly impact transactions; in 2023, viral events caused a tough compare in 2024. - Potential impact of federal dollar allocation changes on customers, though not seen to affect Blackbaud yet. - Costs related to Everfi divestiture, including a $28 million cash release payment for a lease and $390 million impairment charge.

Q: Brian Peterson asked about pivoting go-to-market resources from migrations to net new and end markets for progress in 2025.

A: Mike Gianoni responded that migrations from old platforms to new cloud solutions are largely behind, with new logo growth strong in 2024, focusing on K-12, arts, cultural, non-profit, and YourCause businesses.

Q: Brian Peterson asked about viral giving in 2025 guidance.

A: Tony Boor replied that viral giving is volatile, with 2023 having high viral events making 2024 a tough compare, ranging from near zero to $10-$15 million annually, and wildfire impact in 2025 was south of $1 million.

Q: Rob Oliver asked about customer views on federal dollar allocation impact.

A: Mike Gianoni stated Blackbaud isn't involved in federal funding systems, and customers focus on using Blackbaud's platforms to drive donations.

Q: Parker Lane asked about achieving Rule of 45 by 2030.

A: Mike Gianoni said it's a mix of mid single-digit revenue growth, scale from reduced employees, labor arbitrage in India, and AI driving productivity. Tony Boor added it's not linear, with steps like getting out of data centers and cloud migration.

Q: Kirk Materne asked about AI development and its impact on customers.

A: Mike Gianoni said Blackbaud has embedded AI in Raiser’s Edge NXT with over 5,000 customers, and Blackbaud Copilot is coming, allowing natural language interaction with data for improved business outcomes.