Good day and welcome to Blackbaud's Fourth Quarter and Full Year 2020 Earnings Call. Today's conference is being recorded. Now, I’ll turn the conference over to Mark Furlong. Please go ahead, sir.

Good morning everyone. Thanks for joining us on Blackbaud's fourth quarter and full year 2020 earnings call. Joining me on the call today are Mike Gianoni, Blackbaud's President and CEO, and Tony Boor, Blackbaud's Executive Vice President and CFO. Mike and Tony will make prepared comments and then we will open up the line for your questions. Please note that our comments today contain forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from those projected. Please refer to our most recent Form 10-K and other SEC filings for more information on those risks. We believe that a combination of both GAAP and non-GAAP measures are more representative of how we internally measure our business. Unless otherwise specified, we will refer only to non-GAAP financial measures on this call. Please note that non-GAAP financial measures should not be considered, in isolation from or as a substitution for GAAP measures. A reconciliation of GAAP and non-GAAP results is available in the press release we issued last night, and a more detailed supplemental schedule is available in our presentation on our Investor Relations Website. Before I turn the call over to Mike, please note Blackbaud will host a virtual investor session on March 25, and we invite members of the investment community to register for the event by visiting our investor relations website. I’ll also mention that during the first quarter of 2021 our team will be virtually attending Raymond James’s 42nd Annual Institutional Investor Conference. With that, I'll turn the call over to Mike.

Thanks Mark. Good morning everyone. Thanks for joining our call today. Q4 was a very solid quarter and strong finish for what has been a unique year to say the least. As we discussed during our December event where we outlined our long-term goals and strategic outlook are pivot to place a greater emphasis on profitability positions us for significant improvement on the Rule of 40 as we exit the pandemic including a return to sustainable revenue growth rate in the mid-single digits or greater. Our results are solid early indicator that overtime the Rule of 40 is within our reach. We achieved 30 on Rule of 40 for the fourth quarter and we were within 10 basis point of the Rule of 40 in the month of December as our organic revenue growth rate strengthened towards the end of the quarter. Without doubt this past year has tested the industry and underscored the resiliency of our customers and our market as they serve such a critical role in solving the challenges we face as a society. 2020 put a spotlight on the need for digital capabilities associated organizations were forced to quickly pivot Corona operations to ensure they continue to deliver on their missions in this environment. For example, while we shift online in virtual fundraising as with reshaping the landscape in this market for many years, that shift has rapidly accelerated. In 2020, we saw over 20% year-over-year growth in online giving with more than a quarter of donations made on our mobile device and ended the year giving grew nearly 30% year-over-year. For more than two decades, less than 10% of giving has been done online for this group to 13% last year and now mirrors the digital adoption experienced in online retail sales. This is a…

Thanks Mike. Good morning, everyone. Today I'll cover our results for Q4, the full year and our outlook for 2021 before opening up the line for your questions. You can refer to today's press release and the investor materials posted to our website for the full detail of our Q4 and full year 2020 financial performance. Turning to our results, fourth quarter revenue increased 1.9% versus Q4 of 2019 with recurring revenue growth of 4.3% on organic basis, inclusive of a very strong finish to the quarter. I'll reiterate Mike's comment that our customer base is healthy overall with our customer retention improving to 93% for the year. Our renewal rates exceeded our pre pandemic expectations for the year, we had a greater mix of our customers opt in for longer renewal term periods, and we ended the year with better than expected accounts receivable agents, all of which are positive indications of the health and resiliency of our industry and customer base. Payments transaction volumes exceeded our expectations and were the primary driver of revenue growth for the quarter. Transactional revenue grew $14 million year-over-year in the fourth quarter. This strong performance also highlights the often underappreciated resiliency of our market. As expected, the shortfalls in bookings that began at the start of the pandemic put pressure on our contractual recurring revenue growth in the fourth quarter, though on a full year basis, contractual revenue grew year-over-year. There's no question that the current environment has put a greater emphasis on investing in digital and cloud based solutions. And we're optimistic that this will materialize in improving pipeline bookings as we progress through 2021. We were pleased to see a solid start with January bookings coming in ahead of plan, though it's early and January is a seasonally low month…

Thank you [Operator Instructions] Our first question comes from line of Tom Roderick with Stifel. Please proceed with your question.

Happy New Year. Thanks for taking my questions. Tony, let me start with you. I appreciate all the case 123 framework here for some scenario analysis. And that's really helpful. I guess the question if I just think about the base case versus, cases two and three, tell me a little bit more about how you plan to manage the expense structure? And when you would sort of adjust that expense structure, particularly from a go-to-market and headcount standpoint should be should the environment start to diverge from the base case scenario? At what point would you look to pair back on expenses or to the contrary, what are the signs you're looking for that say, we can green lights and more go-to-market expenses and start thinking about more of a growth mode?

Yes. Thanks, Tom. Good to talk to you. I think one big thing that to remind everyone of is that we're going to see From 34:23 onwards From 60 to end Topline growth versus potentially weighing on margins, is there more focus on making sure, it’s kind of a an accretive – to margins before you invest on the topline as you have a little more focus on that holistic Rule 40, just kind of curious how the mindset has changed a little bit in what looks to be still a slower end market growth for the short term.

Yes, I think Matt, it’s certainly this year when we’re still in the midst of the pandemic, there’s certainly more focus on the profitability and frankly because we have more control over that. And so there is certainly I’m keeping a keener eye on driving that, because I can’t – I don’t have as much assurance that investments for growth will drive the right kind of returns, because a bit of that is still out of our control due to the pandemic and related impacts. Going forward, I think our strategy still holds. We’ve always talked about balanced approach. If we see that we can get adequate returns, I don’t think our hurdle rate has changed from that perspective, but we can see we can get adequate returns from investments for growth. We will certainly pursue those. As you know, growth drives typically a higher valuation in the market for our shareholders. And so as always we are planning to keep a balanced focus there between both growth and profitability. That’s why I like the Rule of 40, right. Both sides of that are impactful on the Rule of 40 itself. So if I can drive a point of growth than a point of margin on that growth, that’s double positive impact to the Rule of 40 itself. So, I think in the pandemic to answer your question a little more focus on profit, because we have more control. I think post pandemic we go back a bit more to where we were which is kind of both growth and profitability. But I think we have the ability to do both.

Our next question comes from the line of Ryan MacDonald with Needham & Company. Please proceed with your question.

Yes, good morning gentlemen. Thanks for squeezing me in here. On online payments momentum, I’m curious as we looked at the shift to e-commerce this year, we saw that acceleration results in a number of retailers and brands really accelerate their adoption of additional channels to sell in online. Are you seeing at all in some of the conversations you are having with existing customers a similar dynamic building momentum of sort of adopting online payments – they have lagged in the past at all?

Yes, this is Mike here. Absolutely Ryan. That’s why the market went – all I’m getting from under 10% to 13% of the market level in one year. So yes, we are definitely seeing that. And I would equate that to the retail space.

Yes, Ryan I’d add when you think about like the churches because they couldn’t have, folks weren’t able to go to mass or to church. They had to shift so many churches, spacious lawns were still kind of passing the baskets, cheques and cash. They had to go to online tithing so there was a significant increase in the faith based space, move online for tithing and other giving. A lot of the big non-profit that would have a typical gave us in advance because they couldn’t have those live that had to move to virtual. And so that by definition moved to online versus cheques and cash at the events. A lot of folks have gone to virtual auctions, so as part of their events or fund raising efforts as well which moved those online. So there’s certainly been a shift as Mike said, and I think that’s going to continue atleast from some of the work I’m doing with non-profits. I’d expect that to be a continued thing going forward.

Excellent. And just one quick follow up. On the in-person events, you expect that to come back around mid-year. Are you actually starting to see your customers putting those big events or plan those big events in the calendar, obviously they will take a few months to sort of market and brand, are you actually being arrive in the calendar now that you have been more confidence that those in-person events are atleast on schedule to return mid-year? Thanks.

Yes, right. It’s Mike. They are all planning for that back half of this year. So that’s a good time.

I think some in the first half may still be having events on their fiscal year, but doing them virtually. I know though even one personally as the Marathon, like the Atlanta Marathon has actually been scheduled I think it’s late this month or early next. And all they are doing is they are changing their set up of that and you have to register for a time slot instead of starting people on big patches, they are going to start I mean more contained groups. Then you are going to have a mask up until you start the race, and so people can creative [ph] and we are seeing all of those come back to London Marathon schedule late this year. So, yes, very positive on that front.

Thank you. Our next question comes from the line of Rishi Jaluria with D.A. Davidson. Please proceed with your question.

Hey Mike and Tony thanks for taking my questions. Nice to see some resilience in this business. Wanted to start by following up on the ESG steering committee that was announced last week. Can you give us a sense for ultimately what sort of calls that you want to get out of this and you know outside of obviously making the stock more attractive which [indiscernible] has given the record inflows we are seeing in the ESG funds. Are there other areas you see this going, is there something that maybe could help your efforts on the CSR side of the equation for example. And then I’ve got a follow up.

Yes, sure it’s Mike. Yes, this announcement we made is just a natural fit for Blackbaud. We’ve had such a big CSR focus over the years. So announcing something with ESG and having to be a formal program was a working group which is underway. It’s just been a natural extension to kind of who we are and what we do. We are working at following these standards that are out there and doing some other things that are going to be right in line with ESG. So it’s a really good fit for us, it’s not just for shareholders. It’s for our employees and kind of who we are with the company, very easy natural extension for us to go in this way. And it’s a great way to aggregate a lot of things that are already underway at the company.

All right, great. And then Mike, I wanted to go back to your comment that you made during the prepared remarks, which is that it seems like you saw a decent acceleration in the business in December. And I know that’s obviously a seasonally strong month. But can you give us a little bit of color on what you saw in December, was it payment saw an acceleration or other things that would be helpful? Thanks.

Yes, sure. It was predominantly payments. We’ve always said that the business is very scalable because we have a situation with payments and frankly with events too we are because our customer retention is even up. We just need things like payments and events to happen. The customer has already sold and implemented. So they are kind of sitting there and activity holds right, organic revenue growth. We saw that in Q4 and in December and it was predominantly payments. And the other thing that happened was we also I think performed well. From a margin standpoint I mentioned in my prepared remarks. We pretty much had a Rule 40 in the month of December, which is very strong for us. And it was really driven a lot by organic growth and some pretty good margin results. So it really I think proves the scalability of the company in that regard.

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I’ll turn the floor back to Mr. Gianoni for any final comments.

Great, thank you. Thanks Operator. I’ll just close by saying we have a lot to be excited about heading into this year. Our market is once again proving it’s resiliency. I believe we are uniquely positioned to elevate our status as a leader in this market. We believe that steady execution against the Rule 40, financial framework and our continued commitment to disciplined capital deployment will generate substantial shareholder value. Thank you everyone. We look forward to providing a more comprehensive update and our initiatives to accelerate long-term performance at our investors session in March. Thanks.

Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.