Blackbaud, Inc. (BLKB) Q3 2026 Earnings Report, Transcript and Summary

Good day, and welcome to Blackbaud's Q3 26 Earnings Call. Today's conference is being recorded. I will now turn the conference over to Tom Barth, Head of Investor Relations. Please go ahead, sir.

Good morning, everyone. Thank you for joining us on Blackbaud's third quarter 26 earnings call. Joining me on the call today are Mike Gianoni, Blackbaud's Chief Executive Officer, President and Vice Chairman and Chad Anderson, Blackbaud's executive vice president and chief financial officer. 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. Today's discussion will focus on non GAAP results. Please refer to our press release and investor materials posted to our website for full details on our financial performance. Including GAAP results, full year guidance, and long term aspirational goals. We believe that a combination of GAAP and non GAAP measures provides a more representative view on how we 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 substitute for GAAP measures. We have also provided a slide presentation with supplemental data additional highlights and financial metrics. The earnings release, supplemental tables and presentation are available in the Investor Relations section of our website on blackbaud.com. And with that, let me turn the call over to you, Mike.

Thank you, Tom. Good morning, everyone. Appreciate you joining us today. We delivered another quarter of solid execution against our operating plan with earnings per share and cash flow coming in better than expected as we continue to focus on a balanced financial profile driven by productivity efficiencies and a rapidly accelerating pace of product innovation. These results reflect the leadership position Blackbaud holds. At the intersection of innovation and community. We understand the organizations we serve the people who do the work, and the communities that depend on them. We are equally committed to the technology and the transformation they need and proud of how we lead in both. We convene the sector We share what we learn. And we build the products it runs on. This foundation took 4 decades to build. And as AI changes how social impact organizations operate, for the years to come, here and abroad this intersection of innovation and community is becoming more urgent and more indispensable. Our customers want human ingenuity combined with the best of innovation. From a partner they trust, And as such, what we do and what we offer has never been more important This has never been more evident in our pace of innovation over the past year. Last year, we talked about moving our products from systems of record to systems of intelligent action. And we continue to improve on that vision. In fact, at BBCON 26, we announced Platform for Good, our unified operating system for social impact. And introduce Lantern, the first domain specific language model purpose built for fundraising. I want to spend most of my time on those announcements. On how we are continuing to invest in the core products our customers rely on every day and on what we are hearing from customers. Platform for Good is the next step. A single connected operating system in which our products, data, AI, and expertise work together learning from every interaction and getting smarter with every product that runs on it. It is built on 3 layers, The data core brings together our differentiated data assets, including the Blackbaud philanthropic data set research and industry data, from the Blackbaud Institute, and Blackbaud Giving Search. The intelligence layer is powered by our social impact signal graph, which connects signals across the social impact ecosystem to surface patterns, relationships, and context. And the action layer is where our AI moves from intelligence to execution. Through assistance agents, workflows with appropriate human oversight and control. Importantly, platform for good requires no action from existing customers. It unites our products under the surface. And customers adopt new capabilities as they become available while continuing to work in the Blackbaud solutions and workflows they use today. That matters in a sector where many organizations have limited IT resources and face turnover and staffing shortages. We also introduced Lantern, Lantern is the newest part of our intelligence layer. Our research shows that 85% of social impact professionals use AI in their daily work yet only about 10% of organizations are seeing returns. General purpose models learn from the Internet Lantern learns from philanthropy. Developed through a strategic collaboration with Databricks, Lantern combines leading open weight models on the Databricks data and AI platform with more than 40 years of Blackbaud's fundraising experience. It is post trained on synthetic scenarios modeled on our social impact signal graph. It understands giving behavior rather than buying behavior. Including retention, upgrade paths, and lifetime relationships. Which are central to fundraising but not native to general purpose AI, Just as importantly, it is developed under our responsible AI principles, with privacy, transparency, and sector appropriate governance at its core and with input from customers. Including Boston University, Heifer House, and YMCA of the North. On timing, Lantern will begin powering featured Raiser's Edge NXT and Agents for Good capabilities in 2027. With broader availability across platform for good to follow. Our Agents for Good family continues to grow. The development agent our first agentic product, which became available earlier this year is helping fundraising teams identify and engage donors who are not in a major gift officer's portfolio under human supervision. At BBCON, we announced new advancements to development agent and introduced the Data Health Agent a continuous data steward that detects and addresses data issues through review and approve workflows. We also previewed Agentic experiences for finance and education, including our vision for an accounts payable agent in Financial Edge NXT that reviews invoice details prepares cash aware payment runs, and stages recommendations for human approval. I want to be clear about something. Our AI investment is in addition to, not instead of, our investments in the core products our customers depend on every day. Our use of AI in engineering has expanded our capacity and increased our velocity such that we are announcing more new solutions than we ever have. At the same time, significantly advancing our core solutions. Those core products are the systems of record the workflows, and the trust that make our AI valuable. And we continue to invest in them aggressively. The clearest example of enhancement was improvements within Razor's Edge NXT At BBCON, we unveiled its next chapter, Rebuilt from the ground up as a native cloud AI powered platform with embedded intelligence automation, and connected data. The new, more powerful Razor's Edge NXT, enhancements were planned for customer use in 2027. But were accelerated and pulled forward by more than a year and include purpose built AI that surfaces high potential prospects and giving signals. These enhancements also include strategy assistant, which delivers benchmarks, and recommendations directly in the flow of work drawing on more than $1 trillion in giving history tracked through Raiser's Edge NXT. We also introduced Blackbaud Marketing embedded within Raiser's Edge NXT to help teams plan campaigns, identify audiences, and coordinate engagement across channels. In financial management and payments, we announced our next generation Payment Assist through a strategic partnership with Bill and Deposit Connect which brings gift fee, and disbursement data together across Raiser's NXT Blackbaud integrated payments, and Financial Edge NXT. In education, we unveiled the higher education connected campus solution. Built with our partner Student First, which brings the student life cycle together with advancement finance, awarding, and payments and we continue to invest in our total school solution for K-12. Together, these investments reflect our strategy. Modernize the products customers already trust then add embedded intelligence and new AI solutions so customers get value from AI without replatforming or adding bolt on tools. That approach is reflected in contract terms and customer satisfaction. With approximately 90% of our contractual recurring revenue on contracts of 3 years or longer and approximately 25% on 4 years or longer up from 20% earlier in the year. Our approach to the established parts of the portfolio is deliberate. We continue to fund modernization performance, security, and compliance work across our fundraising, financial management, education, and corporate social responsibility and grant making solutions. Because customers judge us first on whether the products they use every day are reliable intuitive and getting better. We also see the 2 new efforts reinforcing each other Every improvement to a core product such as cleaner data, tighter integrations, and faster workflows, makes the intelligence layer more accurate and more useful. And every agent and model we ship is embedded in a solution customers already trust. Which reduces the data gaps and security risks created by bolt on tools. That is a large part of why we believe our differentiation is clear and widening. Turning to customers, this quarter, we again saw a healthy mix of new customer logo wins and cross sales of additional solutions to our existing customers across all verticals. Within a higher education vertical, we replaced a well known global CRM at Cal State University Chico with Raiser's Edge NXT Like many of our new logos, they want to modernize their advancement operations streamline fundraising, and reporting processes and provide their team with a scalable cloud platform to support future growth and donor engagement. Also in the third quarter, we had a new logo win that signed up for Raiser's Edge NXT and our AI development agent solution for the first time. Additionally, we closed a 7-figure multiyear enterprise agreement with International Schools Partnership. A global organization operating over 100 schools worldwide. This win expanded Blackbaud's presence in the multischool enterprise segment through a portfolio wide technology standardization initiative across The US and Canada. They chose us as they seek to leverage Blackbaud's integrated platform data strategy, and implementation expertise. These wins reflect the strength of purpose built connected solutions over fragmented generic alternatives. And the value of our solutions in meeting our customers' ambitious goals. Trust is critical to new existing organizations allowing intelligent systems to act on their behalf. Our customers trust in us as their partner. In the solutions they are used to in the data, and in our security are 2 advantages for both our customers and for Blackbaud. The gap between AI adoption and effective use is exactly what we are working to close by delivering trusted AI inside the tools our customers already use and through the AI Coalition for Social Impact, which we convened in 2025. The coalition's free product agnostic AI for social impact certification program opened in July and its second course on responsible AI principles and regulations is planned for later this year. And now turning to how we use AI internally. We continue to identify, experiment, and scale solutions across engineering, sales and marketing, customer success, and the back office to improve speed, and operational efficiency. Our engineering teams continue to use leading generative AI tools such as Microsoft GitHub Copilot and Anthropic Claude and other approved solutions to accelerate development reduce time to remediate software issues, and increase throughput on new product delivery. Looking ahead, our priorities are straightforward. First, deliver the capabilities we announced at BBCON on the timelines we have described. Including the Raiser's Edge NXT enhancements. The Agents for Good roadmap and the first Lantern powered capabilities in 2027 Second, keep investing in the reliability, security, and usability of the products our customers run their organizations on. And third, keep translating advances in AI into practical outcomes customers can trust. Our 26 full year guidance does not include any meaningful revenue contribution from our new AI products. We view commercialization for Agents for Good and Lantern as potential upside over time and we will continue to make guidance and investment decisions accordingly. As a reminder, from 2026 through 2030, we are targeting double digit annual EPS growth driven by total organic revenue growth of 4% to 6% annually with potential upside from viral events and new product launches such as our Agents for Good catalog, adjusted EBITDA growth of 6% to 8% annually while expanding our adjusted EBITDA margin to 40%+. We expect to translate that into strong free cash flow growth and plan to deploy 50% or more of a cumulative free cash flow generated between 2026 and 2030 towards stock repurchases leaving us with optionality for potential tuck in acquisitions. Since the fourth quarter of 23, we have reduced common stock outstanding by approximately 16%. Regarding our expectations for the remainder of this year, we are again pointing investors to the upper half of our 2026 guide across revenue, and adjusted EBITDA and for EPS and free cash flow we expect results to be at or above the high end of the guidance ranges. Chad will provide more detail and color in a minute. To conclude, we believe Blackbaud is a compelling investment with multiple opportunities for strong shareholder returns. From an operating financial, and strategic perspective, we are pleased to be carrying real momentum into the fourth quarter and the years ahead. With Platform for Good, Lantern, and Agents for Good, embedded within the core products our customers trust. We look forward to our continued journey And I would also like to thank the entire Blackbaud team for their continued strong efforts and job well done. I would now like to turn it over to Chad to walk through our third quarter results.

Thanks, Mike and good morning, everyone. In the third quarter, we continued to balance cost management with growth opportunities, AI capabilities and investments in innovation. We are focused on durable subscription led performance prudent expectations around transactional revenue and steady improvements in profitability and cash flow. Our Q3 performance reflected continued demand for our mission critical solutions along with growth in transaction revenue. As always, transactional revenue can vary from quarter to quarter and our guidance philosophy assumes performance consistent with historical patterns and does not include any assumption for viral giving events. Q3 revenue grew 4.1% to $293 million. Non-GAAP adjusted EBITDA was $111 million representing an adjusted EBITDA margin of 38% and non GAAP EPS continues to be strong and increased 24% to $1.36 in the quarter and we had a very strong free cash flow quarter of $126 million During the first 9 months of 2026, including the net share settlement of employee stock compensation, we repurchased just over 7% of our outstanding common stock as of 12/31/2025. Since the fourth quarter of 23, we have fully offset dilution from stock based compensation and also reduced common shares outstanding by approximately 16%. Additionally, we used our strong free cash flow and existing cash position to reduce our debt leverage levels from 2.7x at the end of Q1 to just under 2.3x in Q3. Before discussing our outlook, I would like to highlight several housekeeping items that are already contemplated in our financial guidance and may be helpful as you think about modeling the business through the balance of 2026 and into 2027. First, as we have discussed previously, Our 2026 contractual recurring revenue renewal cohort is approximately 40% larger than last year. As expected, this is affecting reported gross dollar retention and will continue to moderate contractual recurring revenue growth in the fourth quarter and through the first half of 2027. As we move beyond this larger renewal cohort, we are planning for a material reduction in churn to revenue as our recurring revenue renewal cohort in 2027 will be nearly 25% smaller than 2026. We expect this smaller renewal cohort to provide a tailwind to contractual recurring revenue growth which should begin to normalize in the second half of 27 with gross dollar retention returning to its historical norm of 91% to 92% by the end of 2027. Second, as discussed last quarter, we introduced a platform fee within our transactional revenue that began in the third quarter. The expected contribution is included in our 2026 guide and we expect the rollout to support transactional revenue growth through the first half of 2027. Turning to margins. We are on track to close our last 2 company operated colo data centers by year end. This is the culmination of a multiyear infrastructure modernization effort and example of the productivity initiatives embedded in our operating model. Because the final closures occur late in 2026, we expect the related financial benefits to be realized starting in 2027. Finally, regarding free cash flow, we continue to make steady progress on our workforce strategy including the build out of our global capability center in India, which expands our access to talent, and supports greater cost efficiency over time. During the third quarter, we announced and executed a voluntary separation. We expect the cash impact of that program to occur primarily in the fourth quarter. We now expect full year global workforce transition costs of approximately $8 million to $10 million modestly above our prior estimate of $6 million to $8 million and expect global workforce transition activity to continue through 2027. These actions support our longer term operating model while resulting in near term cash outflows. Despite this, we expect our free cash flow will be at the upper end or above our 2026 guidance range. Based on our year to date performance, and our current view of the operating environment, we are reaffirming our full year guidance ranges and expect to finish in the upper half of the range across revenue and adjusted EBITDA and for EPS and free cash flow, we expect results to be at or above the high end of the guidance ranges. Looking ahead, we anticipate deploying at least 50% of cumulative free cash flow through 2030 towards share repurchases. Beyond that, commitment, the company has tremendous optionality for dynamically allocating capital to its highest and best use based on market conditions, including additional share repurchases, debt reduction, and also plan to continue to look opportunistically at strategic tuck in acquisitions. We have a lot to be proud of. Executing well over the last several years and throughout 2026. And continuing our commitment to providing meaningful solutions to our customers and strong execution of our operating plan. We remain committed to providing investors with an attractive financial model balanced between growth of revenues, earnings, and cash flows along with a prudent and purposeful capital allocation strategy And as always, we remain focused on providing enhanced value to our customers, and our shareholders. Thank you all. Mike and I would be happy to take your questions. Operator.

Thank you, ladies and gentlemen. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, as a reminder, please press star 1 to ask a question, and please limit yourself to 1 question plus a follow-up. To allow us to facilitate as many questions as possible. We will now take our first question from Brian Peterson at Raymond James. Go ahead caller. Your line is now open.

Hi, gentlemen. Thanks for taking the questions. So maybe just starting on AI, We were at a BBCON, and I think it was very clear that the pace of innovation is accelerating. Mike, I know you referenced that in your prepared comments. But as we are looking at this as an investment opportunity, I think we are kind of thinking about what is that AI monetization path. So Mike, is there anything that you can kind of point us towards? I know we are early days, but in terms of thinking about that revenue opportunity for Blackbaud, like, what would you point us to there?

Yeah, Brian. Thanks. Yeah. Pace of innovation has picked up a lot. We have announced more products this year than we ever have. We have 1 in the market As you know, the development agent in the market about 7 months. Getting very well received. We are closing deals all the time. We have announced several other products where signing up customers for what we call our early adopter program for the new AI marketing platform, for the data health agent So those customers are being signed every day, every week right now to build the EAP platform. Those will go into general availability. You know, sometime early next year. And so we have got new revenue lines being built by these new solutions. what is also interesting is we are we are getting a lot of interest on these new solutions which then pulls in our core products as well. You know, I mentioned that we closed not more than 1, but a Raiser's Edge NXT deal because the was interested in the development agent and you have to get Raiser's Edge NXT to get the dev agent. And so we are selling bundles with the new solutions now as well. So, yeah, it is early days, you know, Brian. there is a lot of receptivity. We do webinars with customers and get hundreds and hundreds of customers on those webinars post BBCON. Because they wanna learn about these new solutions. So I would say it is early days, but building a ton of interest. that is good to hear.

Maybe just a follow-up on the transactional revenue. I know you guys mentioned the platform fee coming in this quarter. Was there any viral giving in the third quarter that kind of helped that number? And maybe as we are thinking about longer term, how should we be thinking about that transactional growth rate relative to some of the longer term target to the corporate average? Thanks, guys.

Yeah. That new platform fee came in Q3. A little bit. And then, obviously, it is go forward. Right? So we will have it this quarter. And then the first half of next year. We will have that platform fee and we. It really was a catch up because pretty much everyone else has a platform fee. So we feel good about that. that is fully in place. And we feel good about our transaction businesses. You know, they are a little different. Right? 1 of them is based on donations and volume. Another 1 is tuitions and schools. And then there is just giving, which is predominantly over in The UK. So they are all a little bit a little bit different. Think the key thing for us is the fact that we have got our core system of record platforms integrated with transaction solutions which makes the core platforms stickier And then we are integrating all those together in our Platform for Good announcement, which is basically an integration of our financial platform, fundraising, transactions, and the new AI solutions all in a common platform getting access to that data within the systems of record So it is kind of a long winded answer to say, you know, the transaction systems we feel good about them. And the fact that they are embedded with everything else is a really good position for us. And you could see in the fact that our customers they are either on a 3-year contract, but 25% of them are now on 4-year or longer contracts. And that 25% number has really ticked up a lot in the last 18 months. Appreciate the color. Thanks, Mike. Yeah. You bet.

We will now take our next question from Parker Lane at Stifel. Go ahead caller, your line is now open.

Hey guys, good morning. Thanks for taking the question. Mike, you talked about Lantern in the introduction of more domain specific models over time. Can you talk about why that is so important to the industry you play in? And what the timeline do you expect those to come out by? I know you mentioned 27. Is that an event that we should expect in the first half of the year or the second half of the year?

Yeah. You bet. So it is important for a lot of reasons. Number 1, Lantern is embedded within our platforms. And it has access to you know, things like our signal graph, which is sort of the workflows within our systems, the history of workflows, you know, what makes our systems you know, from a data and a workflow perspective important for our customers. And so our customers can use Lantern to learn how to improve their business So that is important. And Lantern is trained only on philanthropy and fundraising. So it is very specific to that attuned to that. And we have developed that in a collaboration with Databricks as well. Which we announced at BBCON. So it is not a general purpose tool. it is embedded within our solutions. it is only for philanthropy and fundraising. It uses data from our Blackbaud search, our Blackbaud Giving Institute, It understands what we call a signal graph which is sort of patterns of success that our customers can learn from. It does not use any customer specific data. It uses synthetically created data that mimics customer data. So that is important. it is also inside of our cyber stack, it is inside of our trusted and governed solutions. And we have a lot of conversations with our customers around AI and AI trust. So that is really important as well. Thanks, Mike.

And Chad, 1 for you. Good to see the colo data center is closing by year end. How should we think about the timing and magnitude of the financial impact there? I know you mentioned the benefit to be realized in 2027. Is this going to be a situation where you see an immediate benefit pop from the switch to public cloud? Or will this flow into the model over time?

Hey. Good morning, Parker. Thanks for the call, and it is it is a good question. I would expect that it is going to moderate over time. We are pleased. You know, this is just another example of Blackbaud executing. So we will be closing the. You know, both of the remaining colos by end of the year. And, you know, feel really good about it from a modeling perspective. I would assume that, it kind of blends in over time. Starting in 2027. And then, you know, from a margin perspective, I would also, you know, just remind you, we are continuing to execute very well relative to the build out of the global capability center in India. As well. So in the prepared remarks, you would have heard me talk about the kind of transition related cost. Those will step up a little bit. In Q4, and we will see the benefit related to that from a cost efficiency perspective next year. Really pleased with the progress. And then we do have a number of other levers that we are continuing to execute. We have got an overview of those that we provide in the investor materials as well.

Yeah. I will just add. it is nice to get that project behind us too. You know, we started to consolidate and close these colo data centers years ago. Takes a while because it is complex. there is a lot of communication technology. it is not just our solutions. Right? it is all the data center infrastructure But the company now is pretty much running on Azure and AWS. So we do not have or we will not have any colo data centers you know, starting in January, which is a big deal from an operational standpoint. it is just really simplifies our operations, and we do not have to manage colo data centers anymore. So it is a big accomplishment for us operationally.

Understood. Thanks, Mike. Yep. You bet.

Once again, if you would like to ask a question, please press 1 on your telephone keypad. We will now take our next question from Peter Burkly at Evercore ISI. Go ahead caller, your line is now open.

Yeah. Hey, guys. Thanks so much for taking the question. Maybe just first 1, organic growth stepped up a little above 4% this quarter. Up about a point. Versus last quarter. And I think the updated guide of towards the upper half of the range implies another point and a half or so step up. So just curious if you could help us bridge that step up across different elements, whether that is the platform fee, normal holiday giving and seasonality, renewal timing, or anything else that might be coming into play there? And then I guess how much of the, you know, the Q4 exit rate would you treat as a durable starting point for 2027? As opposed to just, you know, a quarterly timing element?

Yeah. So a couple things in there, Peter. First, we did not have much from a holiday giving, right? That usually happens in the back half of Q4. And we see that typically in the transaction systems that we have. So that is 1 point. We do not have much of that in Q3. Did not really have any viral events on transactions in Q3 either. In fact, the growth in Q3. We are happy with the growth but it is a bit moderated because of a large cohort of renewals we have this year, right? We have got 40% more renewals this year And we have talked about this a bunch in the past. You know, than we have had last year. And so you know, that moderates it a little bit, frankly. But we are pretty much by all of those. We would start to talk to customers on their renewals about 5 months ahead. So we are working renewals in Q1. Right now. So that big cohort is you know, the work of that is kind of behind us. And so we had a really solid quarter It met our expectations. We are happy with where we are looking at for the year. Chad mentioned, looking at revenue to be in the upper half of our guide. And adjusted EBITDA in the upper half of our guide. As you know, we guide annually right, not quarterly. And then EPS and free cash flow you know, right at the top or maybe above the guide for the year. So you know, good strong finish for the year. We are happy with Q3. And, you know, we are. I think we are in good shape to finish the year and have a good setup for 2027.

Great. Thanks. And maybe if I could just double click actually on renewal cohort and what you are seeing there. So just curious, sort of against your plan initially, how have renewal rates price increases at renewal, you know, some new product attached? How's that sort of track versus what your initial plan was? You know? And then and then what are you seeing that supports that path back to that 91-92% gross retention in the next year.

Yeah. You bet. I mean, a couple things there. You know? So the fact that we are saying we are going to be toward the upper half of the revenue guide is a clue to how that is going. it is going as planned. it is just a high volume this year. that is all. So it is kind of a mathematical thing. Right? So it is going as planned. We are starting to attach some of the new solutions. So we talk to our customers now about things like the development agent at renewal We will be talking to customers about the data health agent at renewal. But we are just going into EAP right now. So we will have a lot more opportunities for more attached because of all the new solutions that we announced a ton of interest in the data health product that we announced. You know, all of our customers either have you know, a full time person doing data health or they have a percentage of a team's time doing data health. So I think that product's gonna resonate really well. And we have seen a huge response to that at our BBCON conference. And then our brand new marketing platform you know, big response to that. We have already signed up a bunch of customers for EAP there. So the attachment opportunities are just gonna go up because of all the new solutions that we announced. But you know, back to the renewal question you had, it is going as planned and you know, we are looking at the upper half of our guide for revenue this year.

So Great. Thanks, Mike. Yep. Okay.

Thank you.

Thank you, Peter, and everyone for joining us today. We will be attending a number of investor events in the fourth quarter including several investor conferences, which are listed on our IR website. We hope to see you and or speak with you very soon, and we wish you continued success have a wonderful day.

Ladies and gentlemen, thank you for your participation. This concludes today's teleconference. Please disconnect your lines and have a wonderful day. Good day, and welcome to Blackbaud's Q3 26 Earnings Call. Today's conference is being recorded. I will now turn the conference over to Tom Barth, Head of Investor Relations. Please go ahead, sir. Good morning, everyone. Thank you for joining us on Blackbaud's Third Quarter 26 Earnings Call. Joining me on the call today are Mike Gianoni, Blackbaud's Chief Executive Officer, President and Vice Chairman and Chad Anderson, Blackbaud's executive vice president and chief financial officer. 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. Today's discussion will focus on non GAAP results. Please refer to our press release and investor materials posted to our website for full details on our financial performance. Including GAAP results, full year guidance, and long term aspirational goals. We believe that a combination of GAAP and non GAAP measures provides a more representative view on how we 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 substitute for gap. Measures. We have also provided a slide presentation with supplemental data and additional highlights and financial metrics. The earnings release, supplemental tables and presentation are available in the Investor Relations section of our website on blackbaud.com. And with that, let me turn the call over to you, Mike. Thank you, Tom. Good morning, everyone. Appreciate you joining us today. We delivered another quarter of solid execution against our operating plan with earnings per share and cash flow coming in better than expected as we continue to focus on a balanced financial profile driven by productivity efficiencies and a rapidly accelerating pace of product innovation. These results reflect the leadership position Blackbaud holds. At the intersection of innovation and community. We understand the organizations we serve the people who do the work, and the communities that depend on them. We are equally committed to the technology and the transformation they need and proud of how we lead in both. We convene the sector We share what we learn. And we build the products it runs on. This foundation took 4 decades to build. And as AI changes how social impact organizations operate, for the years to come, here and abroad this intersection of innovation and community is becoming more urgent and more indispensable. Our customers bought human ingenuity combined with the best of innovation. From a partner they trust And as such, what we do and what we offer has never been more important This has never been more evident in our pace of innovation over the past year. Last year, we talked about moving our products from systems of record to systems of intelligent action. And we continue to improve on that vision. In fact, at BBCON 26, we announced Platform for Good, our unified operating system for social impact. And introduce Lantern, the first domain specific language model purpose built for fundraising. I want to spend most of my time on those announcements. On how we are continuing to invest in the core products our customers rely on every day and on what we are hearing from customers. Platform for Good is the next step. A single connected operating system in which our products, data, AI, and expertise work together learning from every interaction and getting smarter with every product that runs on it. It is built on 3 layers, The data core brings together our differentiated data assets, including the Blackbaud philanthropic data set research and industry data, from the Blackbaud Institute, and Blackbaud Giving Search. The intelligence layer is powered by our social impact signal graph, which connects signals across the social impact ecosystem to surface patterns, relationships, and context. And the action layer is where our AI moves from intelligence to execution. Through assistance agents, workflows with appropriate human oversight and control. Importantly, Platform for Good requires no action from existing customers. It unites our products under the surface and customers adopt new capabilities as they become available while continuing to work in the Blackbaud solutions and workflows they use today. That matters in a sector where many organizations have limited IT resources and face turnover and staffing shortages. We also introduced Lantern, Lantern is the newest part of our intelligence layer. Our research shows that 85% of social impact professionals use AI in their daily work Yet only about 10% of organizations are seeing returns. General purpose models learn from the Internet Lantern learns from philanthropy. Developed through a strategic collaboration with Databricks, Lantern combines leading open weight models on the Databricks data and AI platform with more than 40 years of Blackbaud's fundraising experience. It is post trained on synthetic scenarios modeled on our social impact signal graph. It understands giving behavior rather than buying behavior. Including retention, upgrade paths, and lifetime relationships. Which are central to fundraising but not native to general purpose AI, Just as importantly, it is developed under our responsible AI principles, with privacy, transparency, and sector appropriate governance at its core and with input from customers. Including Boston University, Heifer House, and YMCA of the North. On timing, Lantern will begin powering featured Razor's Edge NXT and Agents for Good capabilities in 2027 with broader availability across platform for good to follow. Our Agents for Good family continues to grow. The development agent our first agentic product, which became available earlier this year, helping fundraising teams identify and engage donors who are not in a major gift officer's portfolio under human supervision. At BBCON, we announced new advancements to development agent and introduced the Data Health Agent a continuous data steward that detects and addresses data issues through review and approve workflows. We also previewed Agentic experiences for finance and education. Including our vision for an accounts payable agent in Financial Edge NXT that reviews invoice details prepares cash aware payment runs, and stages recommendations for human approval. I want to be clear about something. Our AI investment is in addition to, not instead of, our investments in the core products our customers depend on every day. Our use of AI in engineering has expanded our capacity and increased our velocity such that we are announcing more new solutions than we ever have At the same time, significantly advancing our core solutions. Those core products are the systems of record the workflows, and the trust that make our AI valuable. And we continue to invest in them aggressively. The clearest example of enhancement was improvements within Razor's Edge NXT at BBCON we unveil its next chapter. Rebuilt from the ground up as a native cloud AI powered platform with embedded intelligence automation, and connected data. The new, more powerful Raiser's Edge NXT, enhancements were planned for customer use in 2027. But were accelerated and pulled forward by more than a year and include purpose built AI that surfaces high potential prospects and giving signals. These enhancements also include strategy assistant, which delivers benchmarks and recommendations directly in the flow of work drawing on more than $1 trillion in giving history tracked through Raiser's Edge NXT. We also introduced Blackbaud Marketing embedded within Raiser's Edge NXT to help teams plan campaigns, identify audiences, and coordinate engagement across channels. In financial management and payments, we announced our next generation Payment Assist through a strategic partnership with Bill and Deposit Connect which brings gift fee, and disbursement data together across Raiser's Edge NXT Blackbaud integrated payments, and Financial Edge NXT. In education, we unveiled the higher education connected campus solution. Built with our partner Student First, which brings the student life cycle together with advancement finance, awarding, and payments and we continue to invest in our total school solution for K-12. Together, these investments reflect our strategy. Modernize the products customers already trust then add embedded intelligence and new AI solutions so customers get value from AI without replatforming or adding bolt on tools. That approach is reflected in contract terms and customer satisfaction. With approximately 90% of our contractual recurring revenue on contracts of 3 years or longer and approximately 25% on 4 years or longer up from 20% earlier in the year. Our approach to the established parts of the portfolio is deliberate. We continue to fund modernization performance, security, and compliance work across our fundraising, financial management, education, and corporate social responsibility and grant making solutions. Because customers judge us first on whether the products they use every day are reliable intuitive and getting better. We also see the 2 new efforts reinforcing each other, Every improvement to a core product such as cleaner data, tighter integrations, and faster workflows, makes the intelligence layer more accurate and more useful. And every agent and model we ship is embedded in a solution customers already trust. Which reduces the data gaps and security risks created by bolt on tools. That is a large part of why we believe our differentiation is clear and widening. Turning to customers this quarter, we again saw a healthy mix of new customer logo wins and cross sales of additional solutions to our existing customers across all verticals. Within a higher education vertical, we replaced a well known global CRM at Cal State University Chico with Raiser's Edge NXT Like many of our new logos, they want to modernize their advancement operations streamline fundraising, and reporting processes and provide their team with a scalable cloud platform to support future growth and donor engagement. Also in the third quarter, we had a new logo win that signed up for Raiser's Edge NXT and our AI development agent solution for the first time. Additionally, we closed a 7-figure multiyear enterprise agreement with International Schools Partnership. A global organization operating over 100 schools worldwide. This win expanded Blackbaud's presence in the multischool enterprise segment through a portfolio wide technology standardization initiative across The US and Canada. They chose us as they seek to leverage Blackbaud's integrated platform data strategy, and implementation expertise. These wins reflect the strength of purpose built connected solutions over fragmented generic alternatives. And the value of our solutions in meeting our customers' ambitious goals. Trust is critical to new existing organizations allowing intelligent systems to act on their behalf. Our customers trust in us as their partner. In the solutions they are used to in the data, and in our security are 2 advantages for both our customers and for Blackbaud. The gap between AI adoption and effective use is exactly what we are working to close by delivering trusted AI inside the tools our customers already use and through the AI coalition for social impact. Which we convened in 2025. The coalition's free product agnostic AI for social impact certification program opened in July and its second course on responsible AI principles and regulations is planned for later this year. And now turning to how we use AI internally. We continue to identify, experiment, and scale solutions across engineering, sales and marketing, customer success, and the back office to improve speed, and operational efficiency. Our engineering teams continue to use leading generative AI tools such as Microsoft GitHub Copilot and Anthropic Claude and other approved solutions to accelerate development reduce time to remediate software issues, and increase throughput on new product delivery. Looking ahead, our priorities are straightforward. First, deliver the capabilities we announced at BBCON on the timelines we have described. Including the Raiser's Edge NXT enhancements. The Agents for Good roadmap and the first Lantern powered capabilities in 2027 Second, keep investing in the reliability, security, and usability of the products our customers run their organizations on. And third, keep translating advances in AI into practical outcomes customers can trust. Our 26 full year guidance does not include any meaningful revenue contribution from our new AI products. We view commercialization for Agents for Good and Lantern as potential upside over time and we will continue to make guidance and investment decisions accordingly. As a reminder, from 2026 through 2030, we are targeting double digit annual EPS growth driven by total organic revenue growth of 4% to 6% annually with potential upside from viral events and new product launches such as our Agents for Good catalog, and adjusted EBITDA growth of 6% to 8% annually while expanding our adjusted EBITDA margin to 40%+. We expect to translate that into strong free cash flow growth and plan to deploy 50% or more of a cumulative free cash flow generated between 2026 and 2030 towards stock repurchases leaving us with optionality for potential tuck in acquisitions. Since the fourth quarter of 23, we have reduced common stock outstanding by approximately 16%. Regarding our expectations for the remainder of this year, we are again pointing investors to the upper half of our 2026 guide across revenue, and adjusted EBITDA and for EPS and free cash flow we expect results to be at or above the high end of the guidance ranges. Chad will provide more detail and color in a minute. To conclude, we believe Blackbaud is a compelling investment with multiple opportunities for strong shareholder returns. From an operating financial, and strategic perspective, we are pleased to be carrying real momentum into the fourth quarter and the years ahead. With Platform for Good, Lantern, and Agents for Good, embedded within the core products our customers trust. We look forward to our continued journey And I would also like to thank the entire Blackbaud team for their continued strong efforts and job well done. I would now like to turn it over to Chad to walk through our third quarter results. Thanks, Mike and good morning, everyone. In the third quarter, we continued to balance cost management with growth opportunities, AI capabilities and investments in innovation. We are focused on durable subscription led performance prudent expectations around transactional revenue and steady improvements in profitability and cash flow. Our Q3 performance reflected continued demand for our mission critical solutions along with growth in transaction revenue. As always, transactional revenue can vary from quarter to quarter and our guidance philosophy assumes performance consistent with historical patterns and does not include any assumption for viral giving events. Q3 revenue grew 4.1% to $293 million. Non-GAAP adjusted EBITDA was $111 million representing an adjusted EBITDA margin of 38% and non GAAP EPS continues to be strong and increased 24% to $1.36 in the quarter and we had a very strong free cash flow quarter of $126 million During the first 9 months of 2026, including the net share settlement of employee stock compensation, we repurchased just over 7% of our outstanding common stock as of 12/31/2025. Since the fourth quarter of 23, we have fully offset dilution from stock based compensation and also reduced common shares outstanding by approximately 16%. Additionally, we used our strong free cash flow and existing cash position to reduce our debt leverage levels from 2.7x at the end of Q1 to just under 2.3x in Q3. Before discussing our outlook, I would like to highlight several housekeeping items that are already contemplated in our financial guidance, and may be helpful as you think about modeling the business through the balance of 2026 and into 2027. First, as we have discussed previously, Our 2026 contractual recurring revenue renewal cohort is approximately 40% larger than last year. As expected, this is affecting reported gross dollar retention and will continue to moderate contractual recurring revenue growth in the fourth quarter and through the first half of 2027. As we move beyond this larger renewal cohort, we are planning for a material reduction in churn to revenue as our recurring revenue renewal cohort in 2027 will be nearly 25% smaller than 2026. We expect this smaller renewal cohort to provide a tailwind to contractual recurring revenue growth which should begin to normalize in the second half of 27 with gross dollar retention returning to its historical norm of 91% to 92% by the end of 2027. Second, as discussed last quarter, we introduced a platform fee within our transactional revenue that began in the third quarter. The expected contribution is included in our 2026 guide and we expect the rollout to support transactional revenue growth through the first half of 2027. Turning to margins. We are on track to close our last 2 company operated colo data centers by year end. This is the culmination of a multiyear infrastructure modernization effort and example of the productivity initiatives embedded in our operating model. Because the final closures occur late in 2026, we expect the related financial benefits to be realized starting in 2027. Finally, regarding free cash flow, we continue to make steady progress on our workforce strategy including the build out of our global capability center in India, which expands our access to talent, and supports greater cost efficiency over time During the third quarter, we announced and executed a voluntary separation program We expect the cash impact of that program to occur primarily in the fourth quarter. We now expect full year global workforce transition costs of approximately $8 million to $10 million modestly above our prior estimate of $6 million to $8 million and expect global workforce transition activity to continue through 2027. These actions support our longer term operating model while resulting in near term cash outflows. Despite this, we expect our free cash flow will be at the upper end or above our 2026 guidance range. Based on our year to date performance, and our current view of the operating environment, we are reaffirming our full year guidance ranges and expect to finish in the upper half of the range across revenue and adjusted EBITDA and for EPS and free cash flow, we expect results to be at or above the high end of the guidance ranges. Looking ahead, we anticipate deploying at least 50% of cumulative free cash flow through 2030 towards share repurchases. Beyond that, commitment, the company has tremendous optionality for dynamically allocating capital to a highest and best use based on market conditions, including additional share repurchase debt reduction and also plan to continue to look opportunistically at strategic tuck in acquisitions. We have a lot to be proud of. Executing well over the last several years and throughout 2026. And continuing our commitment to providing meaningful solutions to our customers and strong execution of our operating plan. We remain committed to providing investors with an attractive financial model balanced between growth of revenues, earnings, and cash flows along with a prudent and purposeful capital allocation strategy And as always, we remain focused on providing enhanced value to our customers, and our shareholders. Thank you all. Mike and I would be happy to take your questions. Operator. Thank you, ladies and gentlemen. If you are using your speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, as a reminder, please press 1 to ask a question, and please limit yourself to 1 question plus a follow-up. To allow us to facilitate as many questions as possible. We will now take our first question from Brian Peterson at Raymond James. Go ahead caller. Your line is now open. Hi, gentlemen. Thanks for taking the questions. So maybe just starting on AI, we were at a BBCON, and I think it very clear that the pace of innovation is accelerating. Mike, I know you referenced that in your prepared comments. But as we are looking at this as an investment opportunity, I think we are kind of thinking about what is that AI monetization path. So, Mike, is there anything that you can kind of point us towards? I know we are early days, but in terms of thinking about that revenue opportunity for Blackbaud, like, what would you point us to there? Yeah, Brian. Thanks. Yeah. Pace of innovation has picked up a lot. We have announced more products this year than we ever have. We have 1 in the market As you know, the development agent in the market about 7 months. Getting very well received. We are closing deals all the time. We have announced several other products where signing up customers for what we call our early adopter program for the new AI marketing platform, for the data health agent So those customers are being signed you know, every day, every week right now to build the EAP platform. Those will go into general availability. You know, sometime early next year. And so we have got new revenue lines being built by these new solutions. what is also interesting is we are we are getting a lot of interest on these new solutions, which then pulls in our core products as well. You know, I mentioned that we closed not more than 1, but a Raiser's Edge NXT deal because the customer was interested in the development agent and you have to get Raiser's Edge NXT to get the dev agent. And so we are selling bundles with the new solutions now as well. So, yeah, it is early days, you know, Brian. there is a lot of receptivity. We do webinars with customers and get hundreds and hundreds of customers on those webinars post BBCON. Because they wanna learn about these new solutions. So I would say it is early days, but building a ton of interest. that is good to hear. Maybe just a follow-up on the transactional revenue. I know you guys mentioned the platform fee coming in this quarter. Was there any viral giving in the third quarter that kind of helped that number? And maybe as we are thinking about longer term, how should we be thinking about that transactional growth rate relative to some of the longer term targets to the corporate average? Thanks, guys. Yeah. That new platform fee came in Q3. A little bit. And then, obviously, it is go forward. Right? So we will have it this quarter. And then the first half of next year. We will have that platform fee and we. It really was a catch up because pretty much everyone else has a platform fee. So we feel good about that. that is fully in place. And we feel good about our transaction businesses. You know, they are a little different. Right? 1 of them is based on donations and volume. Another 1 is tuitions and schools. And then there is just getting, which is predominantly over in The UK. So they are all a little bit a little bit different. Think the key thing for us is the fact that we have got our core system of record platforms integrated with transaction solutions which makes the core platforms stickier And then we are integrating all those together in our Platform for Good announcement, which is basically integration of our financial platform, fundraising, transactions, and the new AI solutions all in a common platform getting access to that data within the systems of record So it is kind of a long winded answer to say, you know, the transaction systems we feel good about them. And the fact that they are embedded with everything else is a really good position for us. And you could see in the fact that our customers they are either on a 3-year contract, but 25% of them are now on 4-year or longer contracts. And that 25% number has really ticked up a lot in the last 18 months. Appreciate the color. Thanks, Mike. Yeah. You bet. We will now take our next question from Parker Lane at Stifel. Go ahead caller, your line is now open. Hey guys, good morning. Thanks for taking the question. Mike, you talked about Lantern in the introduction of more domain specific models over time. Can you talk about why that is so important to the industry you play in? And what the timeline do you expect those to come out by? I know you mentioned 27. Is that an event that we should expect in the first half of the year or the second half of the year? Yeah. You bet. So it is important for a lot of reasons. Number 1, Lantern is embedded within our platforms. And it has access to you know, things like our signal graph, which is sort of the workflows within our systems, the history of workflows, you know, what makes our systems you know, from a data and a workflow perspective important for our customers so our customers can use Lantern to learn how to improve their business, So that is important. And Lantern is trained only on philanthropy and fundraising. So it is very specific to that in tuned to that. And we have developed that in a collaboration with Databricks as well. Which we announced at BBCON. So it is not a general purpose tool. it is embedded within our solutions. it is only for philanthropy and fundraising. It uses data from our Blackbaud search, our Blackbaud Giving Institute, It understands what we call a signal graph which is sort of patterns of success that our customers can learn from. It uses synthetically created It does not use any customer specific data. data that mimics customer data. So that is important. it is also inside of our cyber stack, it is inside of our trusted and governed solutions. And we have a lot of conversations with our customers around AI and AI trust. So that is really important as well. Thanks, Mike. And Chad, 1 for you. Good to see the colo data center is closing by year end. How should we think about the timing and magnitude of the financial impact there? I know you mentioned the benefit to be realized in 2027. Is this going to be a situation Or will this flow into the model over time? where you see an immediate benefit pop from the switch to public cloud? Hey. Good morning, Parker. Thanks for the call, and it is it is a good question. I would expect that it is going to moderate over time. We are pleased. You know, this is just another example of Blackbaud executing. So we will be closing the, you know, both of the remaining colos by end of the year. And, you know, feel really good about it from a modeling perspective. I would assume that, it kind of blends in over time. Starting in 2027. And then, you know, from a margin perspective, I would also, you know, just remind you, we are continuing to execute very well relative to the build out of the global capability center in India. As well. So in the prepared remarks, you would have heard me talk about the kind of transition related cost. Those will step up a little bit in Q4, and we will see the benefit related to that from a cost efficiency perspective next year. Really pleased with the progress. And then we do have a number of other levers that we are continuing to execute. We have got an overview of those that we provide in the investor materials as well. Yeah. I will just add. it is nice to get that project behind us too. You know, we started to consolidate and close these colo data centers years ago. Takes a while because it is complex. there is a lot of communication technology. it is not just our solutions. Right? it is all the data center infrastructure But the company now is pretty much running on Azure and AWS. So we do not have or we will not have any colo data centers you know, starting in January, which is a big deal from an operational standpoint. it is really simplifies our operations, and we do not have to manage colo data centers anymore. So it is a big accomplishment for us operationally. Understood. Thanks, Mike. Yep. You bet. Once again, if you would like to ask a question, please press 1 on your telephone keypad. We will now take our next question from Peter Burkly at ISI. Go ahead caller. Your line is now open.

Yes, hey guys, thanks so much for taking the question. Maybe just first 1, organic growth stepped up a little above 4% this quarter, up about a point versus last quarter. And I think the updated guide towards the upper half of the range implies another point and a half or so step up. So just curious if you could help us bridge that step up across different elements, that be the platform fee, normal holiday giving and seasonality, renewal timing, sort or anything else that might be coming into play there? And then I guess how much of the you know, the Q4 exit rate would you treat as a durable starting point for 2027? As opposed to just, you know, a quarterly timing element?

Yeah. So a couple things in there, Peter. First, we did not have much from a holiday giving, right? That usually happens in the back half of Q4. And we see that typically in the transaction systems that we have. So that is 1 point. We do not have much of that in Q3. Did not really have any viral events on transactions in Q3 either. In fact, the growth in Q3. We are happy with the growth but it is a bit moderated because of a large cohort of renewals we have this year, right? We have got 40% more renewals this year And we have talked about this a bunch in the past. You know, than we have had last year. And so you know, that moderates it a little bit, frankly. But we are pretty much by all of those. We would start to talk to customers on their renewals about 5 months ahead. So we are working renewals in Q1. Right now. So that big cohort is you know, the work of that is kind of behind us. And so we had a really solid quarter It met our expectations. We are happy with where we are looking at for the year. Chad mentioned, looking at revenue to be in the upper half of our guide. And adjusted EBITDA in the upper half of our guide. As you know, we guide annually right, not quarterly. And then EPS and free cash flow you know, right at the top or maybe above the guide for the year. So you know, good strong finish for the year. We are happy with Q3. And, you know, we are. I think we are in good shape to finish the year and have a good setup for 2027.

Great. Thanks. And maybe if I could just double click actually on renewal cohort and what you are seeing there. So I am just curious, sort of against your plan initially, how have renewal rates, price increases at renewal, you know, some new product attached? How's that sort of track versus what your initial plan was? You know? And then and then what are you seeing that Yeah. You bet. I mean, a couple things there. You know? So of supports that path back, that 91-92% gross retention in the next year.

the fact that we are saying we are going to be toward the upper half of the revenue guide is a clue to how that is going. it is going as planned. it is just a high volume this year. that is all. So it is kind of a mathematical thing. Right? So it is going as planned. We are starting to attach some of the new solutions. So we talk to our customers now about things like the development agent at renewal We will be talking to customers about the data health agent at renewal. But we are just going into EAP right now. So we will have a lot more opportunities for more attachments because of all the new solutions that we announced, a ton of interest in the data health product that we announced. You know, all of our customers either have you know, a full time person doing data health or they have a percentage of a team's time doing data health. So I think that product's gonna resonate really well. And we have seen a huge response to that at our BBCON conference. And then our brand new marketing platform you know, big response to that. We have already signed up a bunch of customers for EAP there. So the attachment opportunities are just gonna go up because of all the new solutions that we announced. But you know, back to the renewal question you had, it is going as planned and you know, we are looking at the upper half of our guide for revenue this year.

So Great. Thanks, Mike. Yep. Okay.

Thank you.

Thank you, Peter, and everyone for joining us today. We will be attending a number of investor events in the fourth quarter including several investor conferences, which are listed on our IR website.