Blackbaud, Inc. Q2 FY2026 earnings call

Core Business Performance and Customer Momentum

• The company delivered solid Q2 execution meeting planned financial targets, with healthy new customer logo wins, competitive displacements, and increasing numbers of returning win-back customers across the nonprofit, higher education, and K-12 verticals.
• Contract duration has improved: 25% of customers now hold 4-year or longer contracts, up from 20% previously, supporting long-term revenue stability.
• Overall sales bookings are running ahead of internal plans, driven by new sales leadership and improved win rates across the business.

AI Product Innovation and Strategy

• The first agentic AI offering, Fundraising Development Agent, launched into general availability ahead of schedule, with early customer results showing reply rates, open rates, and average attributable gift size all exceeding industry averages, allowing customers to engage broader donor bases without adding headcount.
• Four additional Agents for Good AI solutions are planned for launch in the coming months: Data Health Agent (autonomous data cleaning for fundraising), Admissions Agent (personalized admissions for K-12), Digital Marketing Agent (intelligent campaign planning and optimization), and Accounts Payable Agent (invoice automation for Financial Edge NXT).
• Blackbaud is building a reimagined cloud-native, AI-first connected platform (a single operating system for the social impact sector), with full details to be unveiled at BBCon 2026 in late September. AI-powered workflow usage is expanding rapidly, with over half of Razor's Edge NXT customers already using machine learning-enabled donor prospecting that generates tens of billions of predictions annually.
• The company differentiates its AI offerings via embedded integration with existing customer systems, robust proprietary social impact sector data, purpose-built AI governance, and a strong existing foundation of customer trust and security.
• Blackbaud launched the AI Coalition for Social Impact, which now offers a free product-agnostic AI certification program to help social impact professionals adopt AI responsibly and effectively.

Internal AI Adoption and Operational Efficiency

• Blackbaud is using AI internally across engineering, sales, marketing, customer success, and back-office functions to speed development, reduce issue resolution time, improve lead qualification, and streamline customer support.

Capital Allocation Strategy

• From 2026 through 2030, Blackbaud targets double-digit annual EPS growth, with 4% to 6% annual organic revenue growth (upside available from viral giving events and new AI product launches), 6% to 8% annual adjusted EBITDA growth, and expansion of adjusted EBITDA margin to 40% or higher.
• The company plans to allocate 50% or more of cumulative 2026-2030 free cash flow to stock repurchases, and has already reduced outstanding common stock by approximately 15% since Q4 2023, fully offsetting dilution from stock-based compensation.
• In H1 2026 alone, the company repurchased just over 6% of outstanding common stock relative to the end of 2025.

New Pricing Initiative

• Blackbaud introduced a new platform fee for certain online giving form transactions to support continued investment in secure modern online giving infrastructure. Most customers can pass this fee to donors via an existing donor cover option, and the revenue from this fee will be weighted to the second half of 2026, with the largest contribution in Q4.

Blackbaud does not break out financial performance for individual product segments in this call. Aggregate Q2 2026 results are: organic revenue grew 3% year-over-year to $291 million; non-GAAP adjusted EBITDA was $110 million, with an adjusted EBITDA margin of 38%; non-GAAP EPS increased 9% year-over-year to $1.33; free cash flow increased 46% year-over-year to $75 million. Overall, the business is subscription-led with recurring contractual revenue as the core, plus variable transactional revenue that fluctuates quarter to quarter.

• Management reaffirms the original full-year 2026 guidance ranges for all key metrics (revenue, adjusted EBITDA, EPS, free cash flow), and now expects full-year results to land in the upper half of all ranges.
• EPS and free cash flow are specifically expected to come in at or above the high end of their 2026 guidance ranges, with full-year 2026 non-GAAP EPS on track to hit the high end of the high teens target range.
• Full-year 2026 financial results are still expected to be heavily weighted to the back half of the year, particularly the fourth quarter, driven by larger renewal volumes and the new platform fee contribution, all of which was already incorporated into the original guidance.
• A planned near-term temporary dip in gross dollar retention is expected in 2026 due to the 2026 recurring renewal cohort being 40% larger than 2025's cohort. Gross dollar retention is expected to rebound to the historical norm of 91% to 92% by the end of 2027, and this dynamic was already factored into 2026 guidance.
• Long-term targets from 2026 through 2030 are maintained: 4% to 6% annual organic revenue growth, 6% to 8% annual adjusted EBITDA growth, adjusted EBITDA margin expansion to 40%+, double-digit annual EPS growth, and allocation of at least 50% of cumulative free cash flow to share repurchases.

• Forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from projected results; the company references risk factor disclosures in recent SEC filings for full details.
• AI adoption across the social impact sector is still in early days, and most customer organizations face a gap between general AI adoption and effective, revenue-driving use of AI, which could slow monetization of new AI products.
• Transactional revenue is variable quarter to quarter and can be impacted by unpredictable viral giving events, which are not included in guidance assumptions.
• The larger 2026 renewal cohort creates a near-term headwind for reported gross dollar retention in 2026, even though the impact is expected to be temporary.

Q: Why are you seeing more customer win-backs recently, and how have overall win rates developed in 2026? What is driving guidance moving to the upper end of the range, specifically across contractual/recurring and transactional lines?

A: Customers are returning to Blackbaud primarily because of the company's heavy investment in core product innovation and embedded AI capabilities. Customers see significant uplifts in donations raised when using Blackbaud's fundraising solutions, which drives these win-backs. Overall sales bookings are running well ahead of internal plans, driven by new sales leadership and strong win rates across most business areas. Almost all new customers sign multi-year contracts, which benefits near-term and long-term results, and 25% of all customers now hold 4-year or longer contracts, up from 20% previously, supporting long-term stability.

Q: How is the new customer logo acquisition program tracking, and can you explain why Q2 organic growth was 3% while full-year guidance is 4% to 4.5%? What is the expected Q4 impact of the new online giving platform fee?

A: The new logo program is performing very well, with strong new logo gains across K-12, nonprofit, higher education, and the Your Cause corporate social responsibility business. New logo sales teams are fully dedicated to this line of business, and overall results are nicely ahead of plan. The lower Q2 growth is expected: Q2 2025 transactional revenue was above trend due to viral giving, creating a tough year-over-year comparison. The larger 2026 renewal cohort and back-half weighting of results were all planned and included in guidance. The new platform fee was launched in Q3, is already included in guidance, is a common industry pricing model, and contributes to the back-half weighting, with the largest impact falling in Q4 2026.

Q: What is the sales strategy for the new Agents for Good AI products, and what are the expected margin expansion levers through 2030?

A: New AI products launch with a dedicated small selling team embedded in product and engineering to maintain a close customer feedback loop for rapid iteration. As products mature after GA launch, they are transitioned to the general global sales team. The first agent launched in GA just a few months ago, and the company has already announced five new AI products with more to come at BBCon. Margin expansion remains on track, driven by workforce strategy optimization (including expansion of the Hyderabad center), tech stack and platform modernization, and natural operating leverage from the SaaS subscription model. AI-driven efficiency gains have not been meaningfully incorporated into guidance yet, but early internal adoption of AI to streamline operations across all departments is already showing early signs of improved operating performance.

Q: What is the current state of customer AI maturity, and when will Agents for Good start meaningfully contributing to revenue?

A: Customer AI maturity varies widely across the broad customer base (from small local nonprofits to large Fortune 100 companies), but almost all customers are interested in AI and it remains very early days for widespread impactful AI adoption outside of the solutions Blackbaud already delivers. No meaningful revenue contribution from new AI agents is expected in 2026, with growing revenue contribution starting in 2027 and scaling over time. Blackbaud's trusted embedded model, which keeps customer data proprietary and secure (not shared with third-party large language models), positions the company well to capture growing AI adoption as the market matures.