Blackbaud (BLKB) CFO On Fundraising & Engagement Solutions

Great to be here. Good to see you.

Yeah, I think Mike was on it in Q2 and gave you a little insight. We've been in the nonprofit social impact space for 40 plus years. We have 40,000 plus nonprofit and corporate customers under contract, about 1.1 billion this year in revenue. We make critical software solutions and analytic services for the nonprofit space, ESG, social impact corporations from a CSR perspective. And we found that even through the pandemic, when times have been tough, these nonprofit orgs have needed our solutions even more. So we've got a really sticky customer base. We believe the value we add has created tremendous value with our nonprofits and helped them survive what's been turbulent economic times over the last few years.

Well, you know, we implemented a new pricing strategy just recently. It actually went into effect late last year, but really at heart in March of this year. And we've actually been moving our customer base away from what has historically been annual contracts to multi-year contracts, which align more with where the overall software industry has gone. Most of the vendor agreements I'm signing now as CFO for Blackbaud are three to five to seven year agreements. We've started shifting from those single year agreements to three year agreements, and it's been very successful. We've had to increase our prices this year. Inflation, all of us are paying more for things, and so we've seen a fairly significant price increase. It's actually held really well. We've seen renewal rates actually improve; they're running ahead of plan. The mix of contracts that we're shifting our customers from these one year to multi year contracts is actually running ahead of plan as well. And so the vast majority of customers are shifting to these three year multiyear agreements, which is really positive for us, for our outlook for predictability and certainty of that revenue in the future.

Absolutely. Giving was down slightly last year. You know, during the pandemic, interestingly, had companies, profit orgs really struggle because they were shut down wholly. You couldn't have people in museums and zoos, etcetera. So you had certain nonprofit orgs that were really struggling. Surprisingly, they found ways to survive. Their supporters and donors came out in droves and continued to donate money to help those orgs stay open. So we had fewer than we thought might go out of business during the pandemic. Then you had surges in giving to food banks and other type orgs that were helping those folks in need during those difficult times. And that actually caused a surge in overall giving in the US. And so we saw overall giving exceed 500 billion for the first time ever. We were down just a little bit overall in the US last year. Still tremendous opportunity for us and our customers. I think the key on our side, what we see is we have good diversity. We sell into such a broad set of customers. We've been doing this for 40 plus years, as I said, and we have a broad portfolio. We're selling into higher ed institutions, private K-12 schools, the normal charities and nonprofits, plus corporations, for profit businesses, Fortune 500 for corporate social responsibility. That diversification really helps. And then our systems are systems of record. And so they need these solutions to be successful, to raise money, to do their financials, grantmaking, et cetera. And so because they are core critical systems, we didn't see a real negative impact. They couldn't afford, in other words, to be without our solutions. I think we fared really well through the tough economic cycles.

Yeah, you hit that one right on the head. We're 97% recurring revenue now. We've had a little bit of drag against our growth for the last several years as we've kind of strategically focused on getting out of the one time services businesses as we move more to SaaS offering. Obviously you need less customization services. That's been a big focus over the 12 years I've been here. We've seen that services line shrink. It's been about a point and a half to two point drag on our overall growth for the last several years. We see that bottoming out sometime here in the next year. So that'll be a growth driver for us. We've been historically running in kind of low single digit growth rate. We've done a lot of things from a strategic perspective on the growth front, a lot of initiatives that's helped that accelerate. You saw this year with when you spoke to Mike and then our Q3 earnings, we saw a nice improvement in growth in the low single digits, kind of mid-single digits is where we're guiding for the year. For 24, we're guiding 24 and beyond. We're guiding to a high single digit. I do think we have the opportunity in the future to potentially crack into that low double digit if things line up well and our efforts on the strategic front continue to perform well. One of the key drivers that will be an indicator of how well we do this year and the nonprofits is kind of how giving goes for the end of the year. About 36% of all giving in the US happens in the fourth quarter with 20% of all the giving landing in the month of December. We just had Giving Tuesday this week. We rang the bell at Nasdaq closing bell on Monday to kind of kick off Giving Tuesday, which we were a co-founder of. So that's a big one. We're keeping our eye on that transactional revenue and how that trends out here through the rest of the year, which is a big piece of the total year of giving.

Appreciate it. Great talking to you.