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BLACKBAUD INC (BLKB)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered mid-single-digit organic growth and stronger profitability: non-GAAP organic revenue +5.2%, adjusted EBITDA margin 35.4% (+220 bps YoY), and non-GAAP diluted EPS $1.10 (+$0.11 YoY) .
  • Revenue and EPS were modest beats versus S&P Global consensus: revenue $281.1M vs $279.2M*, EPS $1.10 vs $1.07*; EBITDA (non-adjusted) trailed consensus (actual ~$77.6M vs ~$98.6M*) .
  • Guidance reiterated for FY25 revenue, EBITDA margin and EPS; adjusted free cash flow guidance raised to $195–$205M from $190–$200M .
  • Catalysts: bbcon unveiled 70+ embedded AI features and “Agents for Good” with monetization beginning in Q4, plus continued buybacks (YTD >5% of shares) and leverage reduction to 2.4x .

What Went Well and What Went Wrong

What Went Well

  • Non-GAAP adjusted EBITDA margin expanded to 35.4% (+220 bps YoY), reflecting operational discipline; non-GAAP income from operations rose to $84.0M .
  • Strong cash generation: GAAP operating cash flow $139.2M (49.5% margin); non-GAAP free cash flow $123.2M and adjusted FCF $125.1M (44.5% margin) .
  • AI innovation momentum and early monetization path: “Agents for Good” launched, with development agent enabling proactive donor management; monetization begins this quarter with expected bookings and modest revenue next year .

Quote: “Innovation continues to drive our clear market leadership and a widening competitive moat… we continue to make significant investments in AI” — CEO Mike Gianoni .

What Went Wrong

  • GAAP revenue declined 1.9% YoY to $281.1M due to EVERFI divestiture (organic growth +5.2%) .
  • EBITDA (non-adjusted) below consensus: actual ~$77.6M vs ~$98.6M*, despite strong adjusted EBITDA; highlights analyst focus differences on adjusted vs unadjusted metrics .
  • Interest expense headwind persists; full-year interest expected $66–$70M; G&A rose to $31.0M in Q3 from $27.5M YoY, reflecting investment and cost mix .

Financial Results

Revenue and EPS (chronological: oldest → newest)

MetricQ3 2024Q1 2025 (as revised)Q2 2025 (as revised)Q3 2025
Revenue ($USD Billions)$0.287 $0.270 $0.282 $0.281
Non-GAAP Diluted EPS ($)$0.99 $0.96 $1.21 $1.10

Margins and Operating Metrics

MetricQ3 2024Q3 2025
GAAP Gross Margin (%)54.9% 59.6%
GAAP Operating Margin (%)14.4% 19.4%
Non-GAAP Adjusted EBITDA Margin (%)n/a35.4%

Recurring Revenue

MetricQ3 2024Q3 2025
Recurring Revenue ($USD Millions)$279.9 $275.8
Recurring as % of Totaln/a98.1%

Cash Flow (trend)

MetricQ2 2025Q3 2025
GAAP Operating Cash Flow ($USD Millions)n/a$139.2
GAAP OCF Margin (%)n/a49.5%
Non-GAAP Free Cash Flow ($USD Millions)$53 $123.2
Non-GAAP Adjusted Free Cash Flow ($USD Millions)$53 $125.1

Actual vs S&P Global Consensus (Q3 2025)

MetricConsensusActual
Revenue ($USD Millions)279.2*281.1
Primary EPS ($)1.07*1.10
EBITDA ($USD Millions, non-adjusted)98.6*77.6

Values marked with an asterisk were retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance (Q2’25)Current Guidance (Q3’25)Change
GAAP RevenueFY 2025$1.120B–$1.130B $1.120B–$1.130B Maintained
Non-GAAP Adjusted EBITDA MarginFY 202535.4%–36.2% 35.4%–36.2% Maintained
Non-GAAP Diluted EPSFY 2025$4.30–$4.50 $4.30–$4.50 Maintained
Non-GAAP Adjusted Free Cash FlowFY 2025$190M–$200M $195M–$205M Raised

Assumptions reiterated: non-GAAP effective tax rate ~24.5%; interest expense ~$66–$70M; diluted shares ~48.5–49.5M; capex ~$55–$65M (incl. $50–$60M capitalized software) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/Agentic monetizationEmbedded AI widely deployed; Agentic AI products to launch at bbcon; monetization models under evaluation “Agents for Good” launched; monetization starts this quarter with bookings; modest revenue next year; clear ROI cases (development agent) Accelerating
Transaction revenueQ1 overperformance incl. viral giving; Q2 strong transactional lines, Q4 seasonal peak Q3 strong across all 3 platforms; no viral events; expansion/cross-sell footprint growing Stable-to-strong
Renewals & pricingStandardized 3+ year terms; ~90% renewal program completion by YE25; high retention Minimum 3-year contracts; ~20% 4+ year; pricing increases continue; 90% program completion by YE Stable
Capital allocationBuybacks ~4% in Q1; deleveraging to 2.7x in Q2 Repurchased ~460k shares in Q3; YTD ~5.2% of common stock; leverage down to 2.4x Shareholder-friendly
Tax law impact (Section 174)Expected meaningful cash tax benefit; sizing forthcoming Updated FY25 FCF guidance includes benefit from “One Big Beautiful Bill Act”; more detail for 2026 forthcoming Positive
Security incident costs2024: ~$12.8M; Q3’25 insignificant; no recorded liabilities at 9/30/25 Continued minimal ongoing impact; adjusted in non-GAAP results Diminishing

Management Commentary

  • CEO: “We believe Blackbaud is a sound investment choice… supported by our strong 2025 year to date financial results.”
  • CEO on AI: “We unveiled… sector-specific AI… and our new agentic AI suite, Agents for Good, to help social impact organizations expand their teams with virtual team members and achieve more at scale.”
  • CFO: “Adjusted free cash flow was $125 million, up from $98 million last year… we repurchased approximately 460,000 shares… leverage decreased to 2.4x… we are reiterating guidance and raising adjusted free cash flow.”

Q&A Highlights

  • AI monetization: Monetization begins in Q4 for the development agent; pricing as multi-year SaaS subscription; quick ROI expected as agents unlock untapped donor segments .
  • New logos and contract terms: Larger ARR deals, multi-module sales; minimum 3-year contracts; ~20% 4+ year; renewal program ~90% completion by YE .
  • Transactional revenue drivers: Strong across fundraising embedded processing, JustGiving, and K-12 tuition; no viral events in Q3; fundamentals/cross-sell driving growth .
  • Tax law and FCF: FY25 adjusted FCF raised due to cash tax savings, net of ~$7M incremental innovation investments in Q3–Q4 .
  • Margin outlook: AI-related investments expected to be favorable to gross margin and EBITDA over time; internal initiatives (closing data centers, India build-out) support margin expansion .

Estimates Context

  • Q3 2025 revenue: $281.1M actual vs $279.2M consensus*; Primary EPS: $1.10 actual vs $1.07 consensus*; EBITDA (non-adjusted): ~$77.6M actual vs ~$98.6M consensus* .
  • Implication: Modest top-line and EPS beats may support near-term estimate stability to slight upward revisions; however, analysts focused on EBITDA (non-adjusted) may need to reconcile methodology vs company’s emphasis on adjusted EBITDA and FCF. Values marked with an asterisk were retrieved from S&P Global.

Key Takeaways for Investors

  • The quarter was clean with organic growth, margin expansion YoY, and strong FCF; EPS and revenue beat consensus modestly, while EBITDA (non-adjusted) missed — framing matters for investor narratives .
  • Raised FY25 adjusted FCF guidance ($195–$205M) and leverage down to 2.4x reinforce capital return capacity (active buybacks; preliminary 2026 diluted shares 46.5–47.5M) .
  • AI is moving from showcase to monetization: “Agents for Good” monetizes in Q4, providing incremental bookings and revenue in 2026; watch attach rates in Raiser's Edge NXT and enterprise CRM .
  • Transaction platforms and cross-sell momentum are sustaining growth without viral tailwinds; Q4 seasonality likely helps transactional lines .
  • GAAP revenue down YoY due to EVERFI divestiture; investors should anchor on organic growth and adjusted profitability, while monitoring interest expense trajectory ($66–$70M FY) .
  • Near-term trading setup: modest beat + raised FCF and AI monetization could be supportive; medium-term thesis hinges on sustained mid-single-digit organic growth, adjusted EBITDA expansion, and consistent buybacks .
  • Watch execution on internal efficiency initiatives (data center closures, India talent) for margin tailwinds and on responsible AI coalition for ecosystem credibility .