BLKB — Blackbaud, Inc.

Summary of Blackbaud's Q2 2026 Earnings Call

1. Key Financial Results and Metrics

• Revenue: Q2 organic revenue grew 3% year-over-year to $291 million.
• Adjusted EBITDA: $110 million, with a margin of approximately 38%.
• Non-GAAP EPS: Increased by 9% to $1.33, with expectations for high teens EPS for the full year.
• Free Cash Flow: Rose 46% year-over-year to $75 million.
• Contractual Revenue: Approximately 90% of recurring revenue is from contracts of 3 years or longer, with 25% on 4-year or longer contracts.

2. Strategic Updates and Business Highlights

• AI Integration: Blackbaud launched five new AI products, enhancing customer engagement and operational efficiency. The first product, the development agent, is already generating positive results for customers.
• Customer Wins: Notable new customer acquisitions included Nelson University and the East Hampton Historical Society, with several competitive displacements noted.
• K-12 Vertical Focus: Significant innovations were introduced in the K-12 sector, including predictive insights and enhanced enrollment capabilities.
• Cybersecurity and Data Governance: Continued investments in these areas to address customer concerns and enhance trust.

3. Forward Guidance and Outlook

• Full Year Guidance: Blackbaud is pointing to the high end of its original guidance for FY 2026 across revenue, adjusted EBITDA, EPS, and free cash flow.
• Long-term Goals: Targeting double-digit annual EPS growth from 2026 to 2030, with organic revenue growth of 4% to 6% annually.
• Capital Allocation: Plans to deploy at least 50% of cumulative free cash flow from 2026 to 2030 towards stock repurchases.

4. Challenges and Points of Concern

• Gross Dollar Retention: Expected near-term dip due to a larger renewal cohort, with recovery anticipated by the end of 2027.
• Transactional Revenue Variability: Fluctuations in transactional revenue were noted, with the current quarter seeing a decline compared to previous years.
• Market Competition: The company faces competitive pressures, particularly in retaining and winning back customers from other providers.

5. Notable Q&A Insights

• Customer Win-Backs: The return of former customers is attributed to innovation and improved product offerings.
• Sales Performance: Strong performance in bookings and win rates, with new sales leadership contributing positively.
• AI Maturity: Customers are at varying stages of AI adoption, with significant interest but still early in effective utilization.
• Platform Fee Introduction: A new platform fee for online transactions is expected to contribute positively to Q4 results, aligning with industry practices.

Overall, Blackbaud demonstrated solid financial performance in Q2 2026, with strategic investments in AI and customer engagement driving growth. However, the company faces challenges related to customer retention and transactional revenue variability. The outlook remains positive, with expectations for strong performance in the latter half of the year.