BLACKBAUD INC (BLKB)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 was strong: revenue $281.4M (+6.8% non-GAAP organic), non-GAAP diluted EPS $1.21, adjusted EBITDA margin 38.5%, and Rule of 40 of 45.3%, a Company record .
• Blackbaud raised FY25 guidance across all key metrics: GAAP revenue to $1.120–$1.130B, non-GAAP adjusted EBITDA margin to 35.4%–36.2%, non-GAAP EPS to $4.30–$4.50, and adjusted free cash flow to $190–$200M .
• Results vs consensus: Revenue and EPS both beat; EBITDA (SPGI’s “EBITDA” measure) came in below consensus, reflecting differences versus Blackbaud’s focus on adjusted EBITDA (which increased) — see Estimates Context for details .
• Catalysts: Guidance raise, strength in transaction solutions, FX tailwind, and accelerating AI roadmap including Copilot and Agentic AI to be showcased at bbcon; new Constant Contact integration strengthens product moat in fundraising marketing workflows .

What Went Well and What Went Wrong

What Went Well

• Surpassed Rule of 40 with the highest quarterly performance in Company history; management reiterated trajectory toward “Rule of 45” over time .
• Profitability expansion: non-GAAP operating margin 33.5% (+350bps YoY), adjusted EBITDA margin 38.5% (+280bps YoY), cash from operations $66.9M (+$13.1M YoY) .
• Strategic product momentum: announced Constant Contact integration embedded in Raiser's Edge NXT, improving AI-powered digital marketing for nonprofits; management highlighted Copilot and upcoming Agentic AI monetization path .
  • “We delivered a rule of 45, our highest quarterly rule of performance in the company's history.” — CEO Mike Gianoni .
  • “We are raising our full-year 2025 financial guidance across all key metrics.” — CFO Chad Anderson .

What Went Wrong

• GAAP revenue declined 2.1% YoY due to the EVERFI divestiture; recurring revenue similarly down 2.0% YoY on the same driver .
• Consensus EBITDA (SPGI’s definition) missed despite strong adjusted EBITDA, highlighting metric alignment issues; transactional outperformance is volatile and not assumed for H2 .
• Interest expense increased and will remain elevated ($65–$69M FY25) given prior buybacks; Q3/Q4 OpEx will rise due to annual merit increases effective July 1 .

Financial Results

Segment/Revenue Composition

Cash Flow KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “In the second quarter, we delivered a rule of 45, our highest quarterly rule of performance in the company's history.” — Mike Gianoni .
• “Our guidance… assumes no material changes… We are raising our guidance across all metrics… revenue $1,120M–$1,130M; EBITDA margins ~35.4%–36.2%; EPS $4.30–$4.50; adjusted free cash flow $190M–$200M.” — Chad Anderson .
• “AI continues to be front and center… predictive AI… generative AI acknowledgements… technical preview of Blackbaud Copilot… full Agentic offering… separately monetized.” — Mike Gianoni .
• “Our revised guidance doesn't assume the same level of transactional revenue overperformance as the first half… any viral giving events would represent upside.” — Chad Anderson .
• “We delevered to 2.7x… we'll get to low twos by year-end… prioritizing stock repurchases and debt repayment.” — Chad Anderson .

Q&A Highlights

• AI monetization and roadmap: Copilot near-term; Agentic AI products to be sold as separate SKUs; pricing models under evaluation; competitive advantage from system-of-record data .
• Transaction revenue volatility: Strong H1 but not assumed in H2; viral giving could be upside .
• Renewals cadence/retention: Slight seasonal concentration in Q2/Q4; most customers on 3-year contracts; retention stable .
• Capital allocation: ~4% repurchased H1; deleveraging to 2.7x; optionality to repurchases vs debt repayment depending on rates/stock .
• Tax law impact: Section 174 repeal expected to meaningfully reduce cash taxes; update expected next quarter; not in guidance .

Estimates Context

Results vs Wall Street consensus (S&P Global):

Values retrieved from S&P Global.
Notes:

• Revenue: beat in Q1 and Q2; slight miss in Q4.
• EPS: beat in Q1 and Q2; in-line/slight beat in Q4.
• EBITDA: below SPGI consensus in all three quarters; Blackbaud emphasizes non-GAAP adjusted EBITDA, which increased YoY and beat company’s internal profitability targets .

Key Takeaways for Investors

• Guidance raise across all key metrics is a clear positive; H2 setup is conservative on transactions, providing potential upside from viral events and FX .
• Profitability trends are strong: adjusted EBITDA margin expanded to 38.5%; Rule of 40 reached 45.3%, with management reiterating a path toward Rule of 45 .
• AI productization is nearing monetization (Copilot and Agentic AI), creating a new revenue lever and reinforcing product differentiation via system-of-record data .
• Renewals/retention remain steady under the 3-year contracting model, supporting revenue visibility; Q2/Q4 seasonality is manageable .
• Capital allocation remains shareholder-friendly (buybacks) while deleveraging; expect interest expense to stay elevated but decline with debt paydown .
• Watch for tax law developments (Section 174 repeal) potentially improving cash taxes and FY25/26 FCF trajectories; management will update next quarter .
• Narrative moving the stock: sustained margin expansion plus upcoming AI monetization and integration wins (Constant Contact) are likely to be key sentiment drivers near-term .

Earnings Call Themes & Trends (Supporting details)

• Product/AI: “AI Everywhere… predictive AI identifies billions in untapped giving… Copilot… full Agentic offering this fall.” .
• Transactions: “Strong H1 transactions; difficult to predict; no viral events in Q2; upside if they occur.” .
• FX tailwind acknowledged in H1 performance and revised revenue guidance .
• Operational discipline: five-point plan driving margin/eps/free cash flow; buybacks ~4% H1; leverage down to 2.7x .

Additional Relevant Press Releases (Q2 Context)

• Constant Contact integration embedded within RE NXT to enhance AI-driven digital marketing for nonprofits; phased rollout starting July, general availability in early August .