Blackbaud - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 delivered modest top-line growth with GAAP total revenue of $302.2M (+2.4% YoY) and recurring revenue of $296.2M (+3.1% YoY; 98% of total), while non-GAAP adjusted EBITDA was $102.2M (33.8% margin, +20 bps YoY).
• A significant non-cash impairment and disposition related to EVERFI drove a GAAP diluted loss per share of $6.74 and GAAP operating margin of (121.5)%; EVERFI sale closed on Dec 31, 2024 and is excluded from go-forward guidance.
• 2025 guidance targets mid-single-digit organic growth (constant currency 4.5–5.4%), adjusted EBITDA margin of 34.9–35.9%, non-GAAP EPS of $4.16–$4.35, and adjusted free cash flow of $185–$195M; management plans to repurchase 3–5% of shares in 2025.
• Management highlighted AI product momentum (Blackbaud Copilot), a pivot to net new logos, and operational cost workstreams (data center exits, India-based tech talent), underpinning a path to “Rule of 45” by 2030.

What Went Well and What Went Wrong

What Went Well

• Non-GAAP profitability remained robust: adjusted EBITDA of $102.2M (33.8% margin, +20 bps YoY) and non-GAAP income from operations of $82.7M (27.4% margin).
• Cash generation strengthened: GAAP operating cash flow margin expanded to 24.3% in Q4 (+2,540 bps YoY), with non-GAAP free cash flow of $56.5M (+$75.1M YoY) and adjusted FCF of $57.3M (+$21.0M YoY).
• Strategic focus sharpened: EVERFI divestiture closed, removing a dilutive asset; CEO: “We see a path to becoming a Rule of 45 company by 2030.”.

What Went Wrong

• GAAP results were severely impacted by EVERFI: aggregate pre-tax impairment and disposition charges of $405.4M led to GAAP net loss of $330.8M and diluted loss per share of $6.74.
• Non-GAAP EPS declined YoY to $1.08 (from $1.14), reflecting lapping of prior renewal pricing uplift and modest near-term bookings softness as sales refocus on net new and cross-sell.
• Transactional “viral giving” tailwinds were absent in 2024 vs strong 2023, creating tough comps in payments/transactional revenue; management excluded viral giving from 2025 guidance.

Transcript

Operator (participant)

Good day, and welcome to Blackbaud's fourth quarter and fiscal year 2024 earnings conference call. Today's conference is being recorded. I'll now turn the conference over to Tom Barth, Investor Relations. Please go ahead, sir.

Tom Barth (Head of Investor Relations)

Good morning, everyone. Thank you for joining us on Blackbaud's fourth quarter and full year 2024 earnings call. Joining me on the call today are Mike Gianoni, Blackbaud's CEO, President, and Vice Chairman, and Tony Boor, Blackbaud's Executive Vice President and Chief Financial Officer. Mike and Tony will make prepared remarks, and then we will open up your 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. The discussion today will focus on non-GAAP results. Please refer to our press release and the investor materials posted to our website for the full details on our financial performance, including GAAP results, as well as full year guidance.

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 substitute for GAAP measures, and with that, let me turn the call over to you, Mike.

Mike Gianoni (CEO, President, and Vice Chairman)

Thank you, Tom. Good morning, everyone. Before I dive into our results, I wanted to quickly touch on EVERFI. We closed the divestiture of EVERFI business on December 31st. As you know, EVERFI was dilutive to both our revenue growth and profitability in 2024. We're pleased to advance into the new year with this deal closed and are looking forward to focusing on what we do best. Heading into 2025, we are concentrating on our core Blackbaud business, and our financial guidance and go-forward results will not include EVERFI. Turning to the rest of the business, I wanted to express how pleased I am with the progress Blackbaud has made over the past five years and highlight some key achievements from the past year.

In 2024, we extended our position as the market leader, providing the most comprehensive suite of purpose-built and mission-critical software and services to the social impact sector. We continue to invest aggressively in innovation and partner with our extensive developer network to help our customers raise more money while enhancing and streamlining their operations. Our solutions allow customers to spend more time focusing on what matters to them, making a concrete difference through their vital social impact work. We remain the premier software partner across the social impact space. Our market-leading innovation is a competitive differentiator and continues to drive sales. In 2024, we saw significant improvement in new logo wins while also deepening our existing relationships with our list of approximately 40,000 customers. Last quarter, I highlighted several wins in the higher ed vertical.

In this quarter, I'll give you more in the K-12 education vertical, including Notre Dame High School, American Heritage Schools, and San Diego Jewish Academy. These institutions, like those in higher ed and other verticals, valued our end-to-end workflow and innovation. We continue to be very focused on new logo growth across all of our industry verticals and are supporting this initiative through enhancements in sales and marketing programs. Let me spend a minute on some of our key AI initiatives. Blackbaud's Intelligence for Good program integrates several machine learning and AI capabilities that help our customers streamline workflows, enhance efficiency, and achieve better outcomes. The machine learning features that focus on better prospecting have been adopted by over 5,000 Raiser's Edge NXT customers. We've introduced generative AI features across multiple products, mainly for composing outreach communication.

But in the current quarter, we'll be releasing Blackbaud Copilot, which provides contextual responses to questions and drives actions. Copilot is an industry-leading innovation that only we could deliver, thanks to our access to years of social good-centric benchmark data. And like the rest of the software industry, we have started experimentation with agentic AI, and the prospects across social, corporate, and education sectors are encouraging. We're also leveraging AI to transform the way we work, cultivating opportunities that allow us to prove efficiencies. We continue to identify, experiment, and scale a range of successful solutions across marketing, customer success, and engineering to be an active innovator through applied AI. So when our customers or our own employees ask me if AI can help them, it's not a question of can. It does. Now turning to our 2024 financial results.

For the full year 2024, Blackbaud produced revenue of $1,155,000,000 and adjusted EBITDA margin of nearly 34%, non-GAAP diluted earnings per share of $4.07, and a Rule of 40 score of approximately 39%. Revenues in our social sector grew 7% despite a strong FY 2023 comparison, and within social, contractual recurring revenue, the company's largest revenue line was up 8%. Our second largest revenue line of social transactional recurring revenue grew 6%. Gross dollar retention, driven by the value our customers see using our solutions, was approximately 92%, excluding EVERFI. Our adjusted free cash flow remained extremely strong at approximately $245 million, or 21% of revenue, up from 19% in 2023. Our strong adjusted free cash flow gives us great confidence in continuing to invest in innovation as well as fuel our ongoing stock repurchase program. For 2024, the company bought back 10% of the common stock outstanding.

And if you include the net share settlement on employee stock comp, the figure rises to 11%. In 2025, we intend to continue to aggressively repurchase between 3%-5% of our outstanding shares. Our 2024 results are a reflection of our successful work in solidifying Blackbaud's attractive financial model over the past five years. Our revenue, margins, cash flows, and Rule of 40 have improved significantly since 2020. I'd like to spend a minute outlining that success for you. Our organic growth rate in 2020 was 1.2%. In 2024, it was 5.2%. Our EBITDA margin in 2020 was 26.5%. In 2024, it was 33.7%. Our adjusted free cash flow margin in 2020 was 8.3%. In 2024, it was 21.2%. And Rule of 40 in 2020 was 27.7%. In 2024, it was 38.9%.

This success is a result of a proven operating plan, continuous product innovation, refinement of our go-to-market programs, a focus on efficiencies and effectiveness, and a steadfast dedication to not only powering social impact, but centering it in all we do with both our customers and employees. Blackbaud's multi-year trajectory will also be built on these tenets, and when combined with our future opportunities, we see a clear path to becoming a Rule of 45 company by 2030. Let me conclude with why Blackbaud continues to be a sound investment choice that we believe should create substantial shareholder value. Regarding organic revenue, you can expect mid-single-digit organic revenue growth plus, driven by visible and full recurring revenue streams targeting both new logos and the expansion of our installed base empowered by innovation. You can continue to expect a strong focus on cost and employee productivity to improve EBITDA.

Additionally, our very strong free cash flow will drive a purposeful capital allocation strategy in 2025 and beyond, with a plan to buy back between 3% and 5% of common stock outstanding in 2025. We look forward to our continued journey and offering our shareholders increasing value in the coming years as we make progress against our Rule of 45 ambition by 2030. And as always, we thank our employees around the world for their commitment and dedication to make Blackbaud such a great company. With that, let me turn the call over to Tony.

Tony Boor (EVP and CFO)

Thanks, Mike. I'm also pleased with our 2024 results and our financial progression over these last five years. I'm excited about the opportunities in front of us. We remain committed to providing investors an attractive financial model balanced between growth in revenues, earnings, and cash flows, along with a prudent and purposeful capital allocation strategy. Mike walked through our 2024 full-year results, which tells a strong story of improving top-line growth and dramatically improved profitability and cash flow since 2020. To reiterate, full-year 2024 organic revenues were up 5.2% to $1,155,000,000. Adjusted EBITDA of $389 million was up 32 million, with approximately a point-and-a-half improvement to margin. EVERFI was approximately a 2 percentage point drag on total revenue growth for the year.

Our ability to grow revenue and EBITDA margin speaks to the power of our five-point operating plan, which positively impacted earnings per share and adjusted free cash flows. Non-GAAP EPS increased to $4.07 compared to $3.98 last year. Adjusted free cash flow was $245 million, up from $214 million last year, representing an adjusted free cash flow margin of 21.2% compared to 19.3% in 2023. This increase is despite the negative impact of approximately $20 million in additional interest expense associated with our share repurchase program in 2024 and approximately $25 million increase in cash taxes due to improved profitability and a correspondingly higher cash tax rate. Our robust free cash flow gives us confidence to continue investment in a number of critical areas like product innovation and stock repurchases. We bought back 10% of the common stock outstanding as of end of 2024.

If you include the net share settlement on employee stock comp, the figure rises to 11%. Before I provide 2025 guidance, I want to set the table on several factors that will influence our numbers and help you set your models for both the year and the quarters appropriately. In 2025, we expect to continue to invest in our products and deliver innovative capabilities that our customers value. And we plan to refine our go-to-market capabilities to ensure we maximize new logo acquisition and expansion within our vast customer base. As Mike mentioned, we completed the sale of EVERFI on December 31st of 2024. EVERFI contributed $85.5 million to 2024 revenues, but will be excluded from our go-forward financial results and our 2025 financial guidance. With EVERFI divested, we will no longer report corporate sector revenue separately in 2025 and beyond.

YourCause revenue will be included with the rest of our products in a single revenue line. Regarding costs associated with EVERFI divestiture, in February of 2025, we made a one-time cash release payment of $28 million in connection with the release of our lease for office space in Washington, D.C., which was acquired as part of the acquisition of EVERFI in December of 2021. The remaining cost of the lease would have been $42 million, and we expect it to provide a $3 million-$3.5 million improvement to adjusted EBITDA on an annualized basis going forward. There was approximately $14 million of GAAP-only transaction costs related to the EVERFI divestiture incurred in 2024. And lastly, the company finalized the non-cash impairment charge related to the EVERFI asset group. The pre-tax charge was $390 million, and within the range we previously announced.

Additionally, the EVERFI sale and impairment resulted in a tax benefit of approximately $110 million, partially offset by a tax valuation allowance charge of $47 million. Additional details will be included in our 10-K. Thinking about revenue seasonality, recall that the fourth quarter is typically our highest revenue quarter, while the first quarter is our lowest due to timing and charitable giving and events throughout the year. Turning to profitability, Q1 tends to be our lowest quarter from a profitability standpoint due to the timing of expenses related to employee benefits and employee stock award vesting. Our annual merit increases for employee compensation go in effect on July 1st every year, so Q3 tends to have higher compensation-related costs compared to Q2. Additionally, we anticipate $2 million-$3 million of negative impact to revenue and adjusted EBITDA for the year due to currency. Moving now to guidance.

Our 2025 financial guidance assumes no material changes, good or bad, in the current macroeconomic landscape. So for the year, we are projecting revenue in the range of $1,115,000,000-$1,125,000,000 representing organic growth of 4.2%-5.1% as reported, or 4.5%-5.4% on a constant currency basis. The midpoint of this range is approximately 2 percentage points less than our 2024 growth rate, excluding EVERFI, and can primarily be explained by two factors. First, we discussed on last quarter's call, the third quarter of 2024 represented the first period in which we lapped the renewal pricing uplift in a meaningful way, which drove lower growth rates in the third and fourth quarters of 2024. This trend will continue on a full-year basis in 2025 as we continue to lap prior renewal cohorts.

Remember, while the renewal contracts have price escalators in years two and three, the revenue is recognized on a straight-line basis. So, for example, in a three-year contract, the total contract value is divided by 36 and recognized evenly over the full term. And to a lesser extent, we expect some modest softness in bookings near term as we have transitioned our sales efforts from migrations, which are now largely complete, to focus on net new logos as well as cross-sales. As Mike mentioned, we saw some early success with this initiative as new logo growth was up significantly in 2024. And lastly, we are not currently incorporating any anticipated viral giving in our guide, which is a change from past years.

Shifting to profitability, we will continue to focus on margin expansion opportunities while at the same time making investments in the business and areas of innovation, artificial intelligence, product roadmaps, cybersecurity, and India-based tech talent. Therefore, we anticipate EBITDA margins of approximately 34.9%-35.9%. And with the overall revenue and spend configuration I just outlined, we expect 2025 non-GAAP EPS in the range of $4.16-$4.35, or up 2%-7% as reported year-over-year. The combination of higher growth and better margin is expected to result in a Rule of 40 at constant currency of 40.4% at the midpoint of guidance for the full year, which is a 170 basis point improvement year-over-year. We continue to have a sharp focus on driving adjusted free cash flow and returning capital to our shareholders.

For the year, we're guiding to adjusted free cash flow of $185 million-$195 million. The guidance range is inclusive of several one-time investments that will provide long-term benefits to the company and shareholders, including the $28 million cash release payment associated with the Washington, D.C. office lease that I mentioned earlier, and a one-time investment for a new office location in India that will provide access to high-quality and cost-effective tech talent. Additionally, we expect to incur approximately $11 million of incremental interest expense year-over-year, comprised of roughly $30 million in interest for our 2024 and planned 2025 stock repurchases offset by the paydown of debt using discretionary cash. Finally, we expect an approximately $15 million decline year-over-year due to other factors, including the timing of certain working capital items and divestiture-related costs.

You can find more details on slide 24 of our investor deck. Underlying these guidance ranges, we have made the following assumptions. Non-GAAP annualized effective tax rate is expected to be approximately 24.5% unchanged from last year. Interest expense for the year is expected to be approximately $65 million-$69 million compared to $56 million in 2024. Fully diluted shares for the year are expected to be approximately $48.5 million-$49.5 million. Capital expenditures for the year are expected to be approximately $55 million-$65 million, including $50 million-$60 million of capitalized software development costs. Looking to 2026 and beyond, we believe adjusted free cash flow will continue to grow and anticipate, at a minimum, repurchasing shares to offset dilution from share-based compensation.

Beyond that, the company has tremendous optionality to dynamically allocate capital to its highest use based on market conditions, including additional stock repurchases, synergistic M&A, or repayment of debt. The performance of our stock, the interest rate environment, and availability of acquisitions will help inform our capital allocation decisions going forward. We have a lot to be proud of and a lot more to look forward to as Blackbaud moves into 2025 and beyond with a goal of becoming a Rule of 45 company by 2030. As such, we remain focused on providing enhanced value to our customers and our shareholders. Operator, let's open up the line for questions.

Operator (participant)

Thank you. Ladies and gentlemen, if you would like to ask a question, please signal by pressing Star 1 on your telephone keypad. If you are using your speakerphone, please make sure your mute function is off to allow your signal to reach our equipment. We ask that analysts limit themselves to one question and a follow-up so that others may also ask questions. Again, as a reminder, please press Star 1 to ask a question, and please limit yourself to one question and a follow-up. We will now take our first question from Brian Peterson with Raymond James. Please go ahead, sir.

Brian Peterson (Managing Director)

Hi, gentlemen. Thanks for taking the question. So I appreciate all the commentary here. I know you guys mentioned maybe pivoting some of the go-to-market resources away from the migrations and towards net new. So if we think about where you guys have the biggest opportunity, or maybe in markets where you think you can make the most progress in 2025, what does that look like, and what does that TAM or opportunity look like beyond the 40,000 customers that you have today?

Mike Gianoni (CEO, President, and Vice Chairman)

Hey, Brian. It's Mike. Thanks for the question. Yeah, we started this a while ago last year. It really ramped up to have a bigger focus on net new logos because the migrations from a few of our platforms to the new cloud solutions are largely behind us now, which is good news. And our new logo production last year grew quite nice in the back half of the year. Just to be clear, we expect bookings to go up this year in total over last year. It's just that we're more focused on new logos. And of course, we're still focused on back-to-base cross-selling as well. We do a lot of land and expand. I mentioned in my prepared remarks a couple of K-12 large wins. We're doing well across the board in K-12, arts and cultural, nonprofit, YourCause business.

Great opportunities in pipeline and new logos there as well. So again, we started this shift a while ago because we've been working on migrations for several years, and we saw the tail of that, if you will. It's gone well. We're pleased with the new logo results last year and look forward to it this year.

Brian Peterson (Managing Director)

Great. Appreciate the commentary, Mike. And Tony, I know you mentioned that you weren't assuming any kind of viral giving in the 2025 guide. If we look back historically, what is the mix of kind of viral giving versus what you'd say is more, I guess, recurring? And have you seen any giving that's, I'd say, viral associated with some of the events in California this year? Thanks, guys.

Tony Boor (EVP and CFO)

Yeah, Brian, good question. Thank you. The viral, as you've seen in the numbers, can be very volatile. In 2023, we had an extremely high year from a viral perspective. Q3 and Q4, especially that year, made for a really tough compare for the 2024 year. I think we were up 13.2% in Q4 of 2023, largely on the payments and transaction side of the business, largely because of viral events. Last year, we really saw next to no viral events come through our channels and systems. And so we just had a big whipsaw year-over-year, and hence the really tough compare that we saw for transactions in Q4 of 2024. They can run from, as we saw last year, next to nothing.

I could say you could be as low as zero to as high as something that's in the $10 million-$15 million a year kind of range is what we've seen in my tenure here. A lot of volatility. Then for the wildfires, we did see a little bit that's incorporated into our guide, but it was south of $1 million of impact.

Brian Peterson (Managing Director)

Thanks, Tony.

Tony Boor (EVP and CFO)

Absolutely.

Operator (participant)

Our next question comes from Rob Oliver with Baird. Please proceed with your question.

Rob Oliver (Senior Research Analyst)

Great. Thank you. Good morning to my first one was Mike and Tony. As you guys contemplated the guidance for 2025, I'd be curious just to hear your view on what you're hearing from your customer base relative to some of the potential impact around changes in federal dollar allocation. I know many of your customers, whether they be foundations, hospitals, universities, are recipients of federal grants. I would just be curious to know how they're thinking about that and how you guys are thinking about that potential impact in your guidance for this year. And then I had one follow-up.

Mike Gianoni (CEO, President, and Vice Chairman)

Yeah, sure, Rob. Yeah, we're hearing about that a little bit. We don't see any impact yet for us. Just to be clear, we're not involved in that funding system at all. Our platforms are for driving donations through individual donors, if you will. We're not involved in federal funding workflow of cash, if you will. So for us, our customers will likely need what we focus on best, which is to drive more of their revenue through donations using our platforms. But it's early days there, but we haven't seen much of that yet in the marketplace. Now, we've got such a wide variety of customers too that some are not involved in those fundings and some are more so than others, like K-12 schools versus some of the foundations, for example.

Rob Oliver (Senior Research Analyst)

Got it. Okay. Helpful. And then, Tony, if you can just walk through, I know, and you guys then kind of slide on this as well, but on that free cash flow guide, definitely weaker than we expected. And I understand that there are a lot of moving parts with EVERFI. And I think you walked through some of the cost initiatives. But if you could just help maybe rank order some of those impacts on the free cash flow for us and some of the decisions around the spending, that would be helpful. Thanks.

Tony Boor (EVP and CFO)

Yeah, happy to, Rob. Like I said, there's a new slide in the deck that you can look at that'll provide this same information for everybody. We're going from a year of 245 at midpoint of the guide on free cash flows, $190 million for 2025. We had $28 million hit this year for one time for the buyout of that Washington, D.C. lease that we acquired as part of EVERFI going on four years ago now. So we paid $28 million for a lease release on that facility. The remaining lease, as I said in my prepared comments, would have cost us $42 million. So a nice pickup from that perspective over the next few years. The annualized savings on that, we believe, is about $3 million-$3.5 million a year that'll come out of the P&L and cash flow going forward.

Then we have a new India location. We've had hundreds of engineers in India for several years, but those have typically been through third-party contractors. And we're just going to bring those folks in-house as actual employees. India is a great opportunity for talent. It's getting really tough to find good, trained, educated talent around the world. India is one of the few countries that has an excess. And so we're going to be investing more fully in India over the next couple of years because of the scarcity of talent. That's about a $5 million usage. Interest expense is the other big one, Rob. As you know, we bought back about 11% of our stock last year. That was an incremental $20 million of interest. Obviously, that carries over into this year or that amount of debt and that related interest expense.

And then we expect about another incremental $11 million this year because we are planning on buying back 3%-5%, as we said in the prepared comments, of our stock again this year. So the gross amount of interest impact is $30 million-$31 million overall. Now, we have had some, obviously, some good free cash flow generation and paid down debt to offset that. So the net impact, I think, year on year is about $11 million. And then we have some working capital changes because of big vendor payments and timing. There was some of the EVERFI divestiture costs that will wash through the free cash flow this year. And then a few other ancillary puts and takes.

But those are the big nuts: the $28 million for the lease buyout, the India investment, and then largely the interest expense and a little bit of working capital.

Rob Oliver (Senior Research Analyst)

Great. Thanks very much.

Operator (participant)

Our next question comes from Parker Lane with Stifel. Please proceed with your question.

Parker Lane (Director)

Hey, guys. Thanks for taking the question. Looking at the Rule of 45 sort of target here for 2030, can you just talk about how you intend to achieve that, particularly on the bottom line? Is that going to be a relatively balanced mix of cost savings across a number of different initiatives, or is there some low-hanging fruit that can help you get there a little faster?

Mike Gianoni (CEO, President, and Vice Chairman)

Yeah, I'll start with that, Parker. It's Mike. It's sort of a mix there too. We still have a couple of data centers to get behind us. We've closed most of them over the years, so that'll help. We believe that with the mid-single-digit revenue growth, more of that will convert. We're getting more scale out of the business by far than we ever have. A quick example, in my decade here, when I started, we were $500 million in revenue with 3,000 employees, and now we're $1.1 billion with 2,600 employees. So we're getting a lot more scale out of the business, and we expect that to continue in the future. Also, there will be some labor arbitrage with the India effort that Tony mentioned as well, which is going to take a little time to really come online.

So we've got a lot of opportunities in driving the top line at mid-single digits and just really focused on the operations of the business. And as I mentioned in my prepared remarks, we've got a lot of really interesting things going on internally with AI, driving productivity across sales and engineering and other areas. So we've got several initiatives underway, Parker, that's going to drive that. So we feel pretty confident around all of those because we've gotten some pretty good results. When we started the big push on Rule of 40, we did a huge jump in EBITDA, I think, in 18 months. We went up like 10 points, roughly. So I think there's great opportunity here to keep driving that forward and get to the Rule of 45.

Tony Boor (EVP and CFO)

And Parker, I'd just add a couple of things. One, we don't expect this to be linear in getting to that Rule of 45. Some of the things Mike talked about, like the getting out of the data centers, the cloud migration, we'll get out of Citrix costs and a bunch of other things as we turn off those old versions of RE and FE, etc. Some of those things will be a little later staged, and we'll have some kind of stair-step impacts throughout that march towards that Rule of 45 over the next few years.

Parker Lane (Director)

Got it. Appreciate the feedback, guys. Thanks.

Mike Gianoni (CEO, President, and Vice Chairman)

Sure.

Operator (participant)

As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from Kirk Materne with Evercore. Please proceed with your question.

Kirk Materne (Senior Managing Director)

Yeah, hi, guys. Mike, maybe just to start with you, obviously, you guys have a great sort of treasure trove of data within this industry. I was just kind of wondering how that's sort of impacting your development opportunities around AI, what you think you could bring to bear with AI for some of your customers. Can you just jump into that a little bit and maybe how that factors into your growth opportunity or your incremental cross-sell expansion opportunity with your existing customers? Thanks.

Mike Gianoni (CEO, President, and Vice Chairman)

Yeah, great question. We have a ton going on there, lots of exciting things with machine learning and AI. We've got embedded AI now, and I said this in my prepared remarks, in our Raiser's Edge NXT product, and over 5,000 customers have adopted that. And it's still early days with that, and it's driving some step-level changes that we measure that our customers are achieving related to conversion rates, increased donations by donor, revenue insights. We also are moving to more advanced stages with what we're calling Blackbaud Copilot, which is sort of the next generation, if you will. It's in one of our products now called Blackbaud Impact Edge, and it's coming out in Raiser's Edge NXT and Financial Edge NXT soon.

It allows customers to interact with their data with natural language questions, which I think is going to be a game changer for them to be able to really improve their business and drive revenue. And it's also going to do things like simplify fund accounting by combining automation and personalization. So these things are coming out as we speak. Many others have been introduced over the last year or so. Today, the current AI capabilities are in the base products, and we have these advanced capabilities coming out. So we are looking at new opportunities to monetize advanced AI in our solutions. Those are not out yet, pricing, but working on those. So that's something that will come in the future.

Kirk Materne (Senior Managing Director)

Great. Thanks, Mike.

Mike Gianoni (CEO, President, and Vice Chairman)

Sure.

Operator (participant)

There are no further questions at this time. So I'd now like to turn the floor back over to Tom Barth for closing comments.

Tom Barth (Head of Investor Relations)

All right. Thank you, Maria. Thank you, everyone, for joining us today. We will be attending a number of investor events in February and March to include several conferences, which are listed on our investor relations site. We hope to see you then and to speaking with you very soon. Thank you, and have a nice day.

Operator (participant)

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