Efficiency Metrics, Management, and Consolidation - Tony Boor’s CFO Playbook for Scaling Blackbaud

Well, I'm glad to be here. This is going to be exciting for the next hour.

I did, yeah. It's kind of crazy how that all happened. I grew up in a family that raced, so ever since I was two years old, I remember going to the dirt track stock car races because my parents had stock cars and my older brothers had stock cars. So we had mini bikes and go-karts and that kind of stuff. But when I was 13 or 14, I went to buy my first motorcycle, and they ended up hiring me to start hauling trash and sweeping floors. And 10 years later, I was the general manager.

Yeah, yeah. It was kind of cool. By the time I got to the GM spot, I'd worked every position, I think. So I started sweeping floors like I said out in the shop and cleaning up and hauling trash, and then moved into the service department. So I actually worked on bikes for a while, and then moved into the parts department and became the parts manager, and then moved into the sales department and became sales manager, did some of the accounting and payroll and stuff. I think that's where I got my first kind of taste for business and that I liked that. And then ultimately was the general manager for the final couple of years.

Yeah, I'm not any good at that one because my wife made me get rid of them. I sold the last ones I had when I moved to Indiana to get married originally. Oh man, I raced for about eight years, motocross and supercross and short track and all that. So she wasn't very fond of that. Since we were going to have kids, decided I need to quit all that fun stuff.

Exactly. Maybe when you retire, right? Yeah, someday. But I've got to think like you probably learned a lot about customer service at a young age.

It was a great experience, and I still draw on that. When I talk to staff or when I'm doing these group lunches and people can just ask whatever questions, a lot of it gets to be career discussion and how I got here and those kind of things. Like some of what we'll talk about today, I always share that I learned a great deal. It was a small business, a couple million dollars a year, but I learned a ton about business and accounting and working with people and some of the sales skills. I still remember one of the lessons learned is not to judge people by how they dress or what they drive. There was this buddy of mine's dad that were big pecan farmers down there in New Mexico, and he came in in his old beat-up Jeep truck, and he's dusty, and he's got a dirty old cowboy hat. I'm the sales manager at the time. The sales guys wouldn't even wait on him. He walks in looking around, I walk out of my office, walk over and say, 'Hey Poncho, how you doing?' He writes me a check for six three-wheelers that they're using for irrigation at the farm. But they just automatically critiqued him when he walked in and said this is some old guy in a beat-up truck, he doesn't have any money. And he was one of the richest guys in town. And the other side is to take good care of those folks and build those relationships because then they tell you and their other friends to come to the Honda and Yamaha shop to buy a motorcycle, not the Suzuki or Kawasaki, and to talk to Tony. So it's where I first learned how important relationships were, because so many of my future sales came from taking good care of people instead of trying to hit a home run on somebody. You took care of them and got them in the right bike at the right price, and they referred a bunch of other people to you.

Yeah, exactly.

Yeah, I had a lot of folks that were significantly older. I think what really helped back then was knowing the job because I'd worked in all the areas before I became manager, as you would expect. So like in the parts department or in the service department when I was working there, I had a lot of older folks that were significantly older than me. But if you know your job and you're good at it, and hence why I got the promotion into those, I think there was really never any conflict or issues that I can recall having. It felt pretty natural, to tell you the truth. And there was still a lot to learn from those folks, so it was kind of a two-way street. You didn't try and belittle anybody or act like you were superior because you're younger or any of those things. We just were a good team and worked together. You're all running a business together, and yeah, you were the GM.

Yeah, or some slice or subset thereof, but certainly more than just the numbers guy, for sure. I've had HR departments, I've had CIOs reporting to me numerous times, I've had operations. As the interim president of Europe, Middle East, and Africa, we'll talk about that a little more later. Interim CEO even. When I came here to Blackbaud, I had our Law Department, our General Counsel and his team, corporate real estate reporting into me, our IR, our CIO and cyber teams, and a few others I'm forgetting. But typically, once I got out of public accounting into my first kind of on the other side of the desk CFO/controller roles, it always seemed to have had more than just the finance team.

I think in most places it is, and especially now. When I talk to recruiters, and I'm always open to trying to help them find candidates, I'm where I am until I retire, but always happy to help them. When I'm talking to a lot of these roles, they're looking for somebody who's going to be hooked at the hip with the CEO, helping drive strategy. In many cases, I just talked to one last week and gave him a couple of referrals, and he was talking about a big private equity company and they needed somebody who's going to really handle the operations of the business, not just the finance. So they were looking for a broader experience. That's why they saw my resume and were reaching out to me originally. But there's somebody with that much broader experience because the CEO is kind of a founder and sales guy and doesn't want to do any other stuff, and a lot of times then you'll leave that right to the CFO or COO if they've got one.

And I think it's the relationship you build then with your team members within the company are so different as well. Not just that bean counter or the finance person. You get a lot more credibility when you've been in the business helping them in the day-to-day versus just closing the books or doing the budgets and the forecast. It also better positions you to help them solve problems and allocate resources because if you understand the business, you can probably see around corners that you otherwise wouldn't have exposure to.

It was just an awesome opportunity. I've been here 13 years in October/November time frame. When I left BrightPoint, I took some time off. It was like my first time to kind of take a true sabbatical. I was going to take a year off, and then like all of us, I think we start getting anxious and updating the resume and start sending out some feelers just because I'm worried what if in a year I don't have a gig. And I started getting bombarded with opportunities. I really wanted to take this chance. I was hoping this would be my last opportunity and I would be more coaching, mentoring, I was later in my career and I would ride into the sunset and retire from here. And this one just came across a desk and I was so excited. It was crazy because it was in the tech space, so I got to get into software, which I was very interested in doing. And we had 40,000 nonprofit customers, so it was like what a win-win. I've been very active, I still am, being on boards of nonprofits, and I love giving back to community. My wife and I do a lot of that. So it was just like a huge opportunity when this one came through. And I love the company, the people. A lot of the folks that come here come here because of what we do, but it's also a big successful software company that's been around 40, almost 44 years. So it was kind of a best of both worlds. And to get to work with the Cancer Societies and American Heart and the Memorial Sloan Ketterings, and we were just out in Napa for a big fundraiser with the Jimmy V Foundation. It is pretty cool. It's neat. You get to marry all the stuff in tech and software, but you're doing it with all these nonprofits, and it makes you feel good that you're having an impact in the world.

No, it's software where we started. Our founder, if you can imagine because we're so old, was a consultant at the time and wrote some DOS-based code for a private girl school in New York. They're still a customer today, if you can believe it. And that code he wrote led to the original creation of what we call Financial Edge, which is our nonprofit-specific financial solution, accounting solution. So if you think of NetSuite or something, we have one that's built for nonprofits specifically. And then expanded into fundraising, and that became what is our core legacy product, The Raiser's Edge. So those two products have been around since the inception of the company. And then over the years, through acquisition and building and innovation, we built up a portfolio of 60 to 70 different software solutions, which is crazy. Now we've since our new CEO came on board about 11 years ago, we've been working on diversifying and shrinking that and getting rid of a lot of overlapping. We've done a great job. We've sunset or gotten rid of probably 35 or 40 solutions. Now we've got about 18 core solutions today. Transactions didn't exist in the early days. It largely didn't exist till Mike came on board. He came from FIServ and was at Checkfree before that with Pete Kight, and Pete was the guy who wrote the first electronic check effectively, which became the company Checkfree that Fiserv bought. And so Mike brought this payments capability. We had a little of payments where we did some processing of donations for our customers, but we really built what is now a third of our revenue after Mike came on board 11 years ago. So we moved to the cloud, we moved to SaaS from a maintenance kind of approach, the old school sell license software and maintenance. We're now on the cloud, all subscription, and about a third of our revenue is transactions, which was largely zero 11 years ago.

Right. And we do that. The transactions would include things like donor management. So if you're making a donation online at one of the websites, in most cases that'll be through our platform, through our payments platform. If you're participating in one of the big runs, walks, or rides for a charity, that'll be through our platform. And the money you raise and people donate to you on JustGiving or those peer-to-peer fundraising sites, most likely we're handling those. If your company was using our YourCause platform and you're making employee gifts and then a company match on it, that would be using our payments platform. If your kids were going to a private K-12 school and you're paying tuition to that school, most likely you're on our tuition management platform for making those payments. So we've got all these different sources, all different types of transactions, but we handle nearly $20 billion worth of donations of one type or another through our platforms. Now we only record a small portion of that as revenue, so we're on net accounting, but we're a pretty damn good-sized bank when you think about the $20 billion of transactions we process at $50 and $75 and $100 a piece. There's a lot of volume there.

Yeah, yeah. A lot of the biggest. I don't know what the specific number is today, but we probably have 75 to 85% of the biggest runs and walks and rides, so American Heart and Cancer and all of those. And then we help them use our solutions to run all their galas. So if you're going to the, I've been on the executive committee for the Charleston Heart Ball for six or seven years now, and they'll use our tools for a lot of that stuff too, and auctions and the event management. There's quite a bit in our solutions. It's really a lot of our tools are called CRMs, but it's misleading. They're not CRMs, they're donor management and event management and volunteer management. But it's kind of a CRM-based system, but it's purpose-built to manage those specific things nonprofits need versus what you'd think. We use Salesforce to manage our sales team, but I wouldn't sell Salesforce to a nonprofit. Some try to use it to do the stuff, but then they have to bolt a lot of other solutions onto it, kind of best-of-breed solutions to mimic what a Raiser's Edge or our big enterprise CRM would do.

Yeah. When you think of ours, like a couple we talked about, those legacy products Financial Edge and Raiser's Edge, those products are very purpose-built. So when you think about the financials, it's the same as every other package. You got procure-to-pay and order-to-cash and GL and all of that related stuff. But the general ledger, the way it's set up, manages fund accounting and it manages encumbrances. So you make a donation to your university and you say it can only go to an account major that's on the baseball team and they have a GPA requirement. Well, the school has to track that and report back to you that that's how they used your money. How do you do that in a typical accounting package? Ours is purposely built to do that. And then nonprofits have to do 990s, which requires a bunch of allocation of expenses to all these different buckets. What's fundraising costs versus operational costs versus mission delivery costs? You could do that with a regular accounting package, but it's a lot of work. You're setting up a bunch of sub-accounts and doing allocations, where ours has that allocation and portion stuff built right into it. So once you set up the chart of accounts, it points to where it's supposed to go and automates the journal entries and does all that for you so that you've got the data in the right place to be able to then spit it out and do your 990, for instance. And then on the fundraising side, we call it a CRM, but it's not CRM, it's fundraising management. And it's purposely built. It's not for making a sale, it's for managing a donor or a constituent, a grateful patient if you're a hospital foundation, or an alumni if you're from the university. So we sell to most of the big universities. They all use our tool to reach out to you and ask us for more money and to nurture that relationship over the years so that hopefully down the road you'll bequest a bunch of money out of your estate to the school.

Yeah, exactly. It's interesting. New Mexico State, I had not heard from them in forever until I got here. So I was at Blackbaud, so you can think of how long my career's been. Had not ever heard boo from them. And out of the blue, I get a call from the Alumni Association and the ex-governor of New Mexico who's the chancellor now at the university. They want to come out and meet with me and my wife. And I'm like, how'd you find me? And they said, well, we bought your software with your analytics. And by the way, you know all my personal data is in the proxy. They don't have much money I make, but they never reached out to me. They got our software and our analytics said, oh well, this Tony Boor guy is now CFO of a public company, makes a bunch of money, here's where he lives, what we think his net worth is, his propensity to give. You should probably reach out to him and ask for a donation.

If you can get your hands on that transaction volume, I think it adds real value. Because it adds value, especially in our case, it adds a lot of value to the customer because they ultimately want to know who all those donors are and get those people into their database. Even if they're giving small dollars, they want to get them in the database and be able to use that data going forward. When they're using third parties, it's not automated through APIs, it's not automatically loaded, it doesn't automatically load into their GL. That's where our purpose-built solutions really save them a lot of time. Because if I'm doing the payments processing, even if it's not the payments, if I'm just doing the donation processing through the website for them, all that data is getting loaded right into their donation solution. And if they have the Financial Edge solution, it's going right into their accounting system as well in real time, versus getting feeds and download and reloading and uploading and creating duplicates and all the other stuff that goes with it. It's just a lot of downstream work. So there's a lot of efficiency, certainly in our business, but I think that's the case in most. So just a lot of efficiency, and it's great revenue. The margins can look a little funky. For us on the credit card process in the US, you talked about this new tip model, complete cover or tip jar model. We're just bringing that to the US. We've been doing that in the UK for a long time. That really improves your margins because typically people will give a higher percentage than what we would have for a take rate on that transaction. So normally a take rate will be two and a half to three points. And then I got to pay the processors to process that transaction, so I pass through a couple of points, so my margins are 30-35%. But if you give a 5% tip, well that 300 basis points or 275 is now 500, but my cost of goods don't change. I'm still passing through the same 200. So think of what that does to my margin on that business. Instead of 35%, it's 50 or 60%. And it's great cash flow. It's awesome cash flow. Sometimes depending on the model you're set up, you can make money on the deposits in transit while they're sitting in the bank until they get dispersed to the customers. So it's a good additive piece of business to have. It's a nice kind of royalty stream to add to any business that can get in it. Now it comes with a lot of risks. When you think about transactions like what we're doing, you got KYC, you got to know your customer, you got to do all the OFAC screening, you got to act like you're a bank. You got a lot of stuff that you have to do to keep everybody compliant and deal with anti-money laundering and the drug cartels trying to test stuff. So there's a lot of other headaches that comes with that. But if you can figure out how to make that work and do it properly, it's really good business.

Yeah, yeah. You got to have the right skill set, the right people on the team. Like I said, we've got a whole team as if we were a decent-sized bank, frankly, that does all the compliance stuff. And the rules keep changing. The UK passed a bunch of new rules a couple years ago that you're dealing with, and Canada's changing the rules. The payment processors are always changing the rules about what data you have to get for know your customer. And a lot of times you have to get owners of the business and/or board members. There's a lot of data that you have to gather and then manage properly so you don't get turned off. It can very quickly get yourself sideways if you don't understand it. So making sure you bring the right partners to the table is what I would recommend folks do. I'm always happy to talk to them, our team is as well. But we're looking at a lot of other options, like how do we put our strong cash flow and balance sheet to work in other ways? So we're rolling out some payables kind of solutions now through Financial Edge that our customers can use to get out of cutting checks and doing electronic payments. And it's just part of the solution, they just have to turn it on, and there are rebates that they get and we get that come as part of that. We're partnering with a third party to do that. We're looking at, could we roll out something like on all the supplies that the nonprofits have to buy, their airline and travel? Can we be an aggregator for the purchasing and they get a rebate, we get a rebate, and they get their supplies at 20% below what they would have to pay on their own because they're a small business versus aggregating it across all of our customers? So there's a lot of interesting dynamics that we're looking at of other services where we could use our cash flow and balance sheet to improve their business model and for us to make some other incremental kind of royalty streams.

Right, right. Exactly. And some interesting business models that allow you to spread your risk around and diversify the business. During the pandemic, we thought we were just going to get killed. We thought the nonprofit industry was going to get hammered because they couldn't even be open. You think about museums and zoos and a lot of those things, churches. But a lot of it went online. So a lot of churches that weren't online tithing went online because they didn't have a choice because people couldn't come to mass physically. And so a lot of old-school folks went electronic, and we saw a surge in giving online. So giving went from being about 9% of total giving in the US, it had been that 9 to 10% for years and years, decades, went to about 13-14% during the pandemic just because you had to give online because you couldn't hand people money or checks anymore. And so there's still this huge opportunity because we still have a lot of cash and checks getting handled in the US compared to the rest of the world. So there's still a tremendous opportunity for expansion from that share of wallet of what's electronic and online. But it's interesting, the nonprofit space that folks like you and I supported, those businesses even while they were shut down, we had less businesses go out of business during the pandemic than prior, which is just amazing to me. I was expecting, we were doing those what-if scenarios and all the sensitivity analysis and stuff when we walked into the pandemic. I assume we're going to have a huge bad debt and a bunch of customer turn because they were going to go bankrupt. And we actually had less than we had years before, which was just dumbfounding to me. Great news, but very surprising. It was a positive inflection point from that standpoint. You brought people online that wouldn't have been there before, so that's amazing.

Yeah, ARR to OT. So the OT is the total earnings for a sales rep. So when you think about it, with their commission, with their benefits, all the stuff, depending what all you want to put in, their base salary, whatever they may get. So you're looking at, if I'm paying a sales rep $200,000, depends on the type of rep. If they're on the lower end of the market going more the small business versus enterprise, and there's a lot of nuances in the software space. Even in our business, because we sell to so many different size orgs, we've got lots of different types of reps and they have different plans. But just say a rep, a good peer benchmark, if a rep makes $200 OT, you would like them to do about $800,000 in ARR. So their annual recurring revenue, their bookings that they deliver per year, you'd like it to be about a 4 to 1. Now that then leads into CAC. So if you're doing that, your CAC is kind of the opposite direction. Your customer acquisition cost will have marketing expense, lead gen, and a bunch of other stuff in there. But you're looking at what's that cost to acquire that booking number. And then you're looking a lot of times, CAC will be a CAC and a CAC payback. CAC doesn't really tell you anything other than you'd like to see the CAC go down for the amount of dollars you're raising. But that's really looking at your CAC payback. How long does it take me to pay back that customer acquisition cost? If you follow the Bessemer metrics and those kind of things, they would say something less than 24 months is a good CAC payback. But if you look at Tyler Technologies, Brian and team don't care about a two-year payback because their customers stay with them forever. They have like 98-99% retention, so their lifetime value is crazy. So they don't care about the CAC. They care about every new customer they get because they know that customer's going to be with them for 98 or 99 years. So it's really interesting as you get into all those CAC and CAC payback and LTV and LTV to CAC. We were just having this discussion at our ELT, our leadership team offsite last week. There's not one of those metrics that's perfect. I would say LTV to CAC is probably the best because it's most encompassing, but you want to look at all of those: ARR per OT, the CAC, the CAC payback, LTV, LTV to CAC. Because dependent on your business model, what's good for one might not be the right answer for you.

Correct, correct. Yeah. And if you ever looked at when people talk about retention rates, it's really interesting. I've done this with my team because a lot of times people don't understand it. If you have a 99% retention rate, that means your average customer life is 99 years. But a 98% retention means your customer life is 50. It's half. It's only a one point difference in retention, but it's half the life. And then 97 is a 33-year life, and 96 is a 25-year life, 95 is 20, 90 is 10. So you go down, the difference between 100% retention and 90 is huge. You're losing 10% of your customer base every year, so at 90 they're a 10-year life.

Yeah, that's a really important one. We look at unit retention, so kind of customer overall. Are we keeping the customer? Because they may get rid of this product and buy another. We got 18 solutions plus a bunch of services. It's kind of like your Comcast, you're turning stuff on and off all the time and they've got different options. So we look at kind of customers, are we keeping our customer? And that's our unit metric. And then we look at gross dollar retention and net dollar retention. Both are very important. Gross dollar retention is a good indicator of are you holding your own from an overall retention perspective, because you're not giving yourself credit for the upsells and cross-sells and price increases. So that's a good one to watch out for. But net is really about growth because net's looking at all the inbound new revenue from that customer less all the turn. And that really tells you if you're growing. Because if you get above 100% on net, you're growing. If you're below 100, you're shrinking. It's that simple. And the higher you are above 100, the faster you're growing.

Right. And so we look at it kind of with and without because the payments business is so unique and they could go to a third-party provider tomorrow but not turn the software. And so we kind of have to look at it in both directions.

Exactly. We do it with and without almost all the product P&Ls. Everything we do, you do an activity-based costing, we're doing return on invested capital. All those are with and without typically because it's such an odd nuance, especially with the margin structure being so different.

Well, it's interesting. It's a lot less of a focus for us in this software business where we're billing a year in advance in most cases and have negative cash conversion cycles and negative working capital than what I would have had at BrightPoint where I have inventory all over the world and it's going obsolete overnight and I've got huge accounts receivable for all the phones and accessories I sold to everybody. And so then return on invested capital and EVA was critical because you had to make sure you were getting, our margins were paper thin, so you had to really watch your balance sheet and you're taking on a lot of inventory exposure and a lot of credit exposure. So managing EVA and ROIC was critical. I think it was also critical to our stock price because of the nature of the business being a distribution business. So a lot more important back then than it is today. But we still use it to make our resource allocation decisions, like the engineering and where we're going to put our money, where we're going to put our sales efforts. And we've kicked the tires and done quite a bit of work on residual cash earnings with those guys, with George and those guys. And it's just we haven't gotten to the point that we think it's necessarily the right thing to roll out across the entirety of the business, but something we're still looking at. It's certainly really helpful in allocating resources and reallocating resources to the best use and the strongest use. We historically look at it also because we do so many acquisitions. I think we've done 14 in the 13 years I've been here. So we use it a lot there too to make sure we're getting a return on those acquisitions. And we'll usually use a modified ROIC, a Holt methodology like from Credit Suisse, that kind of normalizes for some things to give you a better, more consistent across industry kind of view. So that's usually what we've used at the higher level looking at the company and return for the total company, which historically we've been 18 to 20 plus percent ROIC. And our WACC is 7 to 8, so we're getting two to three times our WACC, which is pretty damn strong.

Economic value add is just the opposite of ROIC. So it's the opposite side of the equation. So you're doing the charge and netting to get to a dollar value of what value did you create, versus ROIC as the percentage. So it's exactly really the same metric, it's just the other side of it in a hard dollar versus percentage. And they're both important because you could have this tremendously high return on investment but it'd only be a dollar, or you could have a lower return on investment rate but it could be a billion dollars. So my treasurer and I often argue with folks, would you rather have a 20% return on a $100,000 base of invested capital or a 10% on $20 billion? Hence I think EVA and ROIC kind of come into play depending which way you're looking at and what kind of decisions you're making. But it's effectively the same thing, just a little different math. One's got the charge in it already and gets to a raw dollar, one's a percentage. Interesting reading if you ever want to read his book.

No, I think residual cash earnings is a really neat concept. I like it. And it's just a slight tweak out of the same concepts of EVA, ROIC. It's like the Holt methodology but they've done some other things. I like the approach. I think it's a good approach private or public. It's really helpful in allocating resources. So when you're going through the budgeting process, long-range modeling, strategy, AOPs, and people are asking for dollars, it can be really helpful in deciding where you should put your dollars to maximize returns. Because even if you have a negative return, looking at residual cash earnings you can improve upon that. So it's really about how do I every period, whatever that reporting period is, get better? How do I improve my performance? It really helps, I think, if you install it across the business to make resource allocation decisions.

Correct, especially the effect phase, right? Yeah, totally.

Yeah, that was one of the many changes we made. And we did a lot of it, took a lot of years to get through this because we were kind of a conglomerate. We had bought a bunch of companies and developed a bunch of products, but they were all kind of standing on their own all over the damn place. We had offices all over the world, a ton of them in the US and different places from all those acquisitions. And when Mike came on board, we made a big push to consolidate. We started putting in centers of excellence, shared service centers, redid our whole go-to-market on the sales and marketing side, went to hunter-farmer models and enterprise and consumer-based and all of those things. It took us eight or nine years to get through all that. We were just getting done with all that heavy lifting right before the pandemic hit us. So it was quite a journey to get there. We consolidated a lot of the back-office systems. As a result, because you had three or four different financial systems that different people had at different companies we bought, never consolidated, and used Hyperion to consolidate all these. And then one of the areas that we recently made changes, this is one of the last ones we did, is we went to this pillar model. And so because we have such a diverse portfolio now, we look at kind of fundraising as a pillar, financials as a pillar. And so we have these pillars, and then with pillar leads underneath them, then they have a subset of our product portfolio. And they're getting activity-based costing built models, P&Ls that then they look at and try and, again goes back to how do we allocate resources next year? If we have 900 or 1,000 engineers on staff plus a bunch of third-party ones, how do you decide where to point all those folks when you're going to work on innovation? So they have their P&Ls, we do their ROIC and residual cash earnings calcs, and that's kind of how we decide where we're going to move dollars. It's one of the ways we look at how we allocate the dollars.

And as we start rolling out new services like financial services we've talked about, that may change. And so we may need another pillar that becomes our fin services business potentially or something. But we're working through how do you compensate those people to make sure they're really focused on improving that performance of their portfolio and their pillar, and how are they working together with the others? So it's an interesting, we've been kind of in that model I think for about two years now, this newest pillar model, and it seems to be working really well.

Yeah, so we've got business partners is what we call them. Finance business partners within the FP&A team that will work with them. And we currently have one lead finance business partner, so kind of like their CFO per se, that is working with all the pillars. And then that person, Nikki happens to have the necessary staff underneath her to support them. So finance kind of does it all centrally, gives them their P&Ls and their EVA and all that stuff, and then they'll work with them on business cases and strategy and allocation decisions.

Yeah, a big one. So like I said, our CIO reported into me until about two years ago when we made some other organization changes and kind of created our first COO position, and so we moved IT and cyber under that new CIO under Kevin Gregoire. Prior to that though, Todd and team reported to me, and we were on a journey. And this started before our new CEO, so this started when I first came on board. We were on a journey for probably 11 years to get the back office consolidated. We had so many disparate CRMs and financial stacks, and we had stuff all over the place. And so we had to build a strategy, and you weren't going to get it done overnight, and it's expensive. So super expensive. One of the first things we did was we picked Workday for HR. We thought we might have to bolt another revenue kind of solution onto Workday, but luckily we were able to build using things within their construct. But we largely reduced probably over a hundred different point solutions down to 10 or 12. Well think about it, recruiting used a different solution than they did for onboarding, and a different solution for your check-ins or your performance reviews, you had another solution. And we had different procurement and accounts payable solutions, and we had different solutions for collections, and we had multiple ERPs still out there and financial packages. And it's funny when you start looking through, they add up in a hurry.

Scary, it's scary, isn't it?

Right, right. I'm one VLOOKUP away from chaos. Yeah, yeah, exactly. A big accounting restatement if you're not careful. Let alone how do you audit that?

Yeah. Now we're using Workday actually to build out this new kind of subledger on steroids for the transaction business. So we're trying to build out our own kind of back office as one common platform because most of the current code that we use to manage all the transaction stuff is built into those related products. So if it's the online donations versus the tuition management versus your YourCause platform, etc. And so we're trying to build up this back office solution. We're actually using Workday and Prism to build this big subledger that automates the journal entries and the revenue and then all the reconciliations and roll-forwards of all those millions and millions and millions of transactions so that we can have a better handle on that. And then we can use AI tools to do the roll-forwards and reconciliations, make sure the numbers tie and reconcile back to the Stripes and Mastercards and Visas of the world. Phase one is almost done as we speak, and then we'll have four more phases for the other transaction pieces of the business we spoke about earlier. But then we'll build out this kind of back office team. It'll be no longer in the engineering team's hands, it'll be in the kind of back office. I'm not sure if that'll live in finance or somewhere else, but we'll have a dedicated team that's handling everything transaction, which would be neat.

Right, yeah. And our approach as we move to the cloud, our CEO and our head of all the engineering teams and product really had a vision years ago and we've been working towards it, which is to build it once, not 10 times. So you need email capability within their product, but let's build email capability, or frankly, because our customer sends so many emails, let's go to somebody who does that on steroids, that's all they do for their day job, and use them to do all the email sending and just connect via an API. Let's not try and build that ourselves in each product. But what we've moved to now is a platform with a microservices kind of approach. And that's why we're rewriting all these legacy products so that if I need events management, I don't need to build events management in the five products that might need to manage events. I build events management once and you consume it as a microservice through the platform. So in the past, I'd have engineers write code in five different potential code bases in different languages because I have products I bought all these years and they all need event management. Each engineering team had to write their own scripts and new code for that. Where now what we're trying to do is build it once, build it really well, and let everybody consume it instead of building it in each monolithic code stack. So that's part of moving to the cloud journey as well, huge efficiencies on the engineering side, especially if you have multiple products in the portfolio that have a lot of similar needs.

Well, and it's part of how our EBITDA three years ago was in the low to mid 20s, and we're in the mid-30s now. That's a game changer. We're a Rule of 40 company this year for the year. We were in the 20s something two years ago. So there's huge efficiencies to be had with all of this stuff we're talking about.

I've had a lot of them. We all make mistakes, that's for sure. There's no shortage of those. You just got to learn from them. I would say the one that bothered me the most and still bothers me is a large acquisition when I was at my old company. Very significant acquisition, our biggest competitor. And I just, it was one of those I didn't feel good about it and I wasn't vocal enough. And we pulled the trigger on it, and then the economy fell apart in '07-'08. We took on a bunch of debt with that acquisition, and it was a not-run business. And hence, I was CFO of the company and president of Europe, Middle East, and Africa for the next two and a half years because I had to go do a major restructuring. So I flew back and forth to Europe damn near every other week for two and a half years as we completely restructured that business. And that's the one I still kick myself because, had I, and it's one of those you second guess, had I pushed a little harder, had I worked a little harder on due diligence, might we have uncovered some of the things we uncovered after it was too late? You know what I mean? And it was a very painful two and a half years, I can tell you, for the company and for me and for a lot of my team.

It is, it's hard to stop. Especially if the board's excited about it, it looks good on paper. It's tough to stop a moving train. And that happens a lot. And that's one where I knew and I had this feeling in my gut, and I just didn't push hard enough.

I've been very lucky. When I talk about my career with team members and doing career counseling with them, I'd tell you what I learned over the years and it's paid huge dividends. Make sure you do your current job well before you start asking for the next one. Make sure you build the right team under you before you start asking for the next one. There are so many people that get so ahead of themselves. And I don't want to say it's not just younger kids. My daughter's doing really well in public accounting at EY, but they're just so excited to go get that next job. It's really important to figure out how to sweep the floors and haul trash well before you start working in the service department, before you start working in parts, and do a really good job being a parts guy before you become the parts manager, or a salesman before you become the sales manager. And I've seen people derail themselves because they get ahead of themselves. They don't do their current job well, so much so that they may have a lot of upside but they end up losing their job because they're so focused on that next job and not doing the current one. And then if you build the right team underneath you, if you're a leader in a business and you were doing a great job, CJ, how do I get comfortable giving you a promotion if you haven't built the right team underneath you and have the right succession planning? Because if I move you out, your area is going to crumble. And now what am I going to do? But if you haven't built the right team underneath you, it can make promotions hard to get as well. So not doing the job well and second, not being prepared with your team for that promotion, you can get hamstrung from either side, is what I've found over the years.

Absolutely, yeah. I'm very proud. I've got, I don't know how many now, six or seven just from Blackbaud that are sitting CFOs today. We're a great training ground. It's awesome. The Belichick coaching tree.

It's a great business for people to learn because you've seen, we've got a big portfolio, we got a lot of different solutions, we sell in a lot of different markets all over the world, we got payments, transactions. There's a lot versus most software companies are doing one or two things, not 18 separate products and then a bunch of services, that's down from 70 something products. So a lot for folks to learn. And there's only one CFO, and so people hit those glass ceilings. We've hired really good people. Speaking of like the NFL, I use that acronym a lot for my managers. We're not beholden by the rules the NFL teams are. You don't get just one first-round pick. They can all be first-round picks. And so I really push my people to hire really high-caliber folks with better experience, maybe from bigger jobs. And then that just makes their transition to ours easier, and they bring skills and experiences that help make us a better company. And it just raises the level for everybody. And it's been phenomenal to see that success. And folks, many folks have hit their glass ceiling and they've left to go get these CFO gigs elsewhere, and they're very happy where they are.

Yeah, yeah. That's one of the things I'm most proud of, to see people go out and be successful like that.

Absolutely.

Oh, too many to even think about it. I would say not expense so much. We actually had a person that ran our, and this was at another job years ago, had a person that was our travel coordinator for the company. Had entered into a deal with all our vendors, set up their own separate company, own separate bank account, and we're getting kickbacks on all our travel expenditures.

Yes. And it was one of my accounts payable person that just something didn't make sense. Lived in the same street as this person, knew enough because in the accounting you know what everybody makes even though you're not supposed to, but they knew what this person made and said how can this person afford the house they're in, the car they're driving, all the stuff they're doing? And one thing led to another, dug into it, and yeah, they'd been embezzling money from the company for years. That doesn't end well. No. But it tells you, you got to watch everything. I mean, you wouldn't normally think about it because they're just taking a slice off the side. We're still getting our travel booked. And you see that a lot of times with buyers, right? Purchasing people. I don't throw everybody in the bucket that they're bad because they're in purchasing, but I've seen that as well where purchasing folks negotiate their own side deals and get kickbacks for giving business to a specific manufacturer versus another one. I'm going to buy these MacBooks, not these Microsoft Surfaces, but I get a kickback through a side channel for that.

You know, people get in trouble, right? And especially younger folks, they don't have as much to make ends meet, and maybe they've got a lot of debt. Things put pressure on you. It's unfortunate, but it does happen, and I've seen it a lot in my career, too many times.

Absolutely. Thanks for having me on. I appreciate it. It's been a blast.