Blackbaud, Inc. Q2 FY2025 earnings call

Key Points

• Strong Q2 results with 6.8% organic revenue growth, 38.5% adjusted EBITDA margin, and $1.21 non-GAAP diluted EPS.
• Focus on acquiring new logos, including wins with a large youth development organization, SunnyBrook Foundation, and California Polytechnic State University.
• Investment in innovation, such as progress on Raiser's Edge NXT, Financial Edge NXT, Common Records Engine, and AI initiatives like Agentic AI and Blackbaud copilot.
• Introduction of Bill Fort as Head of North American sales, bringing deep social impact sector knowledge.
• Operational rigor driving profitability and cash flows, with a focus on capital allocation and stock repurchases.

In the second quarter of 2025, Blackbaud generated revenue of $281 million, achieving 6.8% organic growth year-over-year. Adjusted EBITDA was $108 million with a margin of 38.5%, up nearly 300 basis points year-over-year. Non-GAAP diluted earnings per share were $1.21, up 12% year-over-year. The company emphasized strong performance across revenue, EBITDA, EPS, and cash flow, with a focus on its purpose-built software for the social impact sector.

Revenue

• Projected revenue for 2025 in the range of $1.120 billion to $1.130 billion, midpoint of ~5% organic growth on constant currency basis.

Profitability

• Anticipates EBITDA margins of 35.4% to 36.2%, midpoint implies ~7% growth in adjusted EBITDA dollars year-over-year.
• 2025 non-GAAP EPS expected in the range of $4.30 to $4.50, midpoint implies ~11% year-over-year growth.

Cash Flow

• Increased adjusted free cash flow guidance for 2025 to $190 million to $200 million.
• Tax law changes expected to reduce cash taxes, but impact not reflected in current guidance.

• Macroeconomic landscape could materially impact results.
• Volatility in transactional revenue, with Q4 typically the highest revenue quarter.
• Annual merit increases in Q3 and Q4 leading to higher compensation costs.
• Tax law changes implications still being analyzed, potential impact not yet included in guidance.

Q: About AI in customer conversations and budget for AI tools.

A: AI is topical, with ongoing investments, some embedded in solutions, others new products, and productivity lifts from AI use within the company.

Q: On mid-single-digit growth relative to software vs payments.

A: Transactional overperformance in first half, not expected to recur, viral giving not included in guidance.

Q: On Bill Fort's addition as Head of North America.

A: Excited about Bill's experience from Salesforce, Oracle, SAP, expecting new ideas and upgraded competition.

Q: On stock buyback.

A: Focus on stock repurchases and debt repayment, pacing well with 4% repurchased in first half, aiming for 5% year-end.

Q: On renewals and customer contracts.

A: Renewals are ongoing, not just at contract end, with cross-selling and upselling as ongoing activities.

Q: On cash tax benefits from tax law changes.

A: Analyzing, expects favorable impact, but not sized yet, will update next call.

Q: On upsell around 3-year contract customers.

A: Ongoing cross-selling and upselling, not waiting for renewal, with most customers having multiple software providers.

Q: On Agentic AI strategy.

A: Agentic AI products coming, separately monetized, with various pricing models under consideration, including a virtual fundraiser.

Q: On tax changes impact on R&D.

A: Section 174 related to R&D, repeal of amortization for domestic R&D, offshore R&D still capitalized.