Release Date: October 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Blackbaud Inc (BLKB, Financial) reported strong performance in its social sector, which accounts for approximately 89% of its revenue, with a growth of 6.6% year-over-year.
- The company announced six waves of innovation, including AI capabilities and new partnerships, which were well-received at their annual user conference, bbcon.
- Gross dollar retention rate improved to 90%, and excluding EVERFI, it was approximately 92%, indicating strong customer satisfaction and retention.
- Blackbaud Inc (BLKB) generated $98 million of adjusted free cash flow in the third quarter, supporting its aggressive stock repurchase program.
- The company has successfully repurchased approximately 8% of its common stock outstanding at the end of 2023, with plans to buy back up to 10% by year-end 2024.
Negative Points
- Blackbaud Inc (BLKB) lowered its annual revenue guidance due to the continued negative financial impact of EVERFI, which declined 26% year-over-year in the quarter.
- EVERFI, representing 7% of total company revenue, continues to be a drag on overall performance, prompting the company to explore strategic alternatives with Goldman Sachs.
- The company has not experienced any unusually large viral events this year, impacting the growth rate of its transactional business.
- Despite right-sizing efforts, EVERFI remains dilutive to Blackbaud Inc (BLKB)'s bottom line and cash flow.
- The revised full-year guidance reflects underperformance at EVERFI, with anticipated headwinds continuing in the near term.
Q & A Highlights
Q: Can you explain the impact of EVERFI on Blackbaud's growth rate and any changes in expectations for the social sector?
A: Anthony Boor, CFO, explained that the social sector is performing well, with pricing holding steady and a high percentage of customers opting for multi-year contracts. The slight decrease in growth expectations is due to the absence of viral events that boosted last year's growth, not due to issues with the social sector itself. EVERFI's underperformance continues to weigh on overall growth.
Q: What is the long-term growth trajectory for Blackbaud's transactional business, excluding viral events?
A: Anthony Boor, CFO, stated that the transactional business typically grows at a rate of 6% to 7%. This is expected to continue, with potential upside from viral events and new transactional innovations. The overall expectation is mid-single-digit growth for the company.
Q: How is Blackbaud addressing the challenges with EVERFI, and what is its impact on margins?
A: Anthony Boor, CFO, noted that even after cost reductions, EVERFI remains dilutive to margins. However, recent positive signs include new wins and a potential bottoming out of its decline. Michael Gianoni, CEO, added that they are exploring strategic alternatives with Goldman Sachs and have seen some new logo wins, indicating potential improvements.
Q: What innovations were highlighted at Blackbaud's user conference, and how do they impact the business?
A: Michael Gianoni, CEO, highlighted innovations such as embedded AI, better integration, and a partnership with Constant Contact. These innovations aim to enhance customer retention and attract new logos, ultimately supporting growth in both subscription and payment areas.
Q: How is the YourCause platform performing, and is it affected by EVERFI's challenges?
A: Michael Gianoni, CEO, stated that YourCause is performing well, with strong growth and a robust pipeline. It is not impacted by EVERFI's challenges and remains a positive contributor to Blackbaud's corporate impact sector.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
