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Good morning. Thank you for joining us. Our call will begin in 1 minute. Thank you. Good day, and welcome to Blackbaud's first quarter 2026 earnings call. Today's conference is being recorded. I'll 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 first quarter 2026 earnings call. Joining me today on the call is Mike Gianoni, Blackbaud's CEO, 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 of 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've 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. With that, let me turn the call over to you, Mike.

Thank you, Tom. Good morning, everyone. We appreciate you joining today. We delivered solid execution against our operating plan to start 2026 with a continued focus on efficiency and a strong pace of product innovation. AI enablement remains key to our success, both in terms of the capabilities we're delivering to customers and in the way Blackbaud is operating. We continue to invest aggressively in innovation to produce meaningful product enhancements throughout our portfolio, including generative and agentic AI capabilities. Our products enable our customers to dramatically improve engagement levels, raise more money, and lead their organizations while increasing operational efficiency, ultimately allowing them to spend more time executing on their missions and less time on administrative tasks. No company can better help our customers deliver on their meaningful missions than Blackbaud.

Blackbaud brings nearly 45 years of specialized domain expertise, serving as a system of record for our customers with deeply embedded workflows purpose-built for the social impact sector. Further, we have invested and continue to invest heavily in cybersecurity and AI governance to help ensure that our customers' data remains secure and that our AI solutions use data responsibly. Many organizations in our vertical markets have limited IT resources and face turnover and staffing shortages. We win because our solutions are intuitive, require fewer complex customizations and integrations, and translate advances like AI into practical outcomes customers can trust, building confidence that is supporting longer contract terms at renewal. As I mentioned last quarter, over 20% of our customers are on 4-year or longer contract terms. This quarter, we continue to see a nice mix of new customer logo wins and selling additional solutions to our existing customers.

Some examples of new logos were competitive displacements across many of our verticals. This includes several private K-12 schools that purchased our total school solution. A performing arts center who moved to Financial Edge NXT and Blackbaud Advisory+ to unlock potential donors and meet their expansive goals. A well-known veterans organization which replaced a fragmented, siloed fundraising environment with our end-to-end solution, allowing a better view of their donors and improving their collaboration across their fundraising team. A U.K.-based nonprofit buying Raiser's Edge NXT as part of a wider digital transformation project and now can benefit from our AI innovation and solutions. To be clear, we are all in on AI and are confident that AI strengthens our ability to deliver differentiated solutions and drive future growth, as well as also improving how we run Blackbaud.

While in the first quarter, our first agentic AI offering, the Fundraising Development Agent, launched into general availability ahead of schedule, we're still early stages of broader commercialization, which we view as potential upside over time as we make guidance and investment decisions. Our engineering teams are using leading generative AI tools such as Microsoft, GitHub Copilot, Anthropic Claude, and other approved solutions to accelerate development, reduce time to remediate software issues, and increase throughput on new product delivery. We're also expanding generative AI features across our portfolio, including Blackbaud AI Chat, which provides contextual answers and can initiate actions within workflows. Chat for Blackbaud AI is differentiated because it's embedded within our systems of record, leveraging customer permissioned data, Blackbaud-specific data, and years of social good benchmarks within a governed environment. Our competitive differentiation is clear.

We have a data moat, one of the most robust sets of philanthropic and social impact data processed and secured in real time, combined with decades of domain expertise. Native integrations across systems of record, engagement, financial accounting, and intelligence further strengthen that advantage. These AI capabilities are seeing strong adoption momentum. Usage of AI-powered workflows has expanded meaningfully over the past several quarters. More than half of our Raiser's Edge NXT customers use machine learning-enabled donor prospecting, generating nearly 30 billion predictions annually and creating a feedback loop and improves outcomes across our customer base. These capabilities are powered by an extensive and diverse set of data sources, including Blackbaud Institute survey and benchmarking data, licensed data sets from leading providers, identity resolution capabilities, and specialized philanthropic data sets such as Blackbaud Giving Search.

Our applied intelligence layer aggregates behavioral signals across the ecosystem to feed predictive analytics and advanced AI models, supported by strong governance, cybersecurity, and a focus on data integrity. We have embedded new agentic AI solutions in our products that can operate with appropriate access to customer permissioned data and workflows. Agents for Good is a new product category for Blackbaud. As I mentioned earlier, in Q1, we launched our first Agent for Good solution, the Blackbaud Fundraising Development Agent, which is an agentic virtual team member that can proactively take on complex tasks, workflows, and initiatives while operating within strong governance and oversight by power users. This agent, natively embedded within the trusted Blackbaud environment, enables teams to identify and steward donors that they do not have the capacity to reach today, unlocking new revenue streams at a fraction of the cost possible in the past.

This fundraising Development Agent is a new revenue line and a significant accomplishment for Blackbaud. To frame this a bit, the pricing model is an annual subscription fee similar to the majority of our products. It's still early, but we expect the price will be in the tens of thousands per year, and we expect to cross-sell subscriptions to thousands of existing customers in addition to new logo sales. Applicable donations raised by the Development Agent would be processed through Blackbaud integrated payments platform, driving additional transactional revenue. This new Development Agent is already producing results for our early adopter customers and is now commercially available with several new customers in Q1. Additionally, we have run a number of webinars and sales events for our existing customers where attendance was oversubscribed and the reception was enthusiastic. We couldn't be more pleased.

This Development Agent is the first of many agents we plan to introduce across our product portfolio as part of our Agents for Good initiative. To reiterate, we believe this agentic AI solution embedded within our system of record provides a competitive advantage to Blackbaud. Our agents leverage our proprietary and customer-specific data within existing workflows underpinned by strong AI governance and cybersecurity framework. Additionally, we offer our solutions through multiyear subscription model and do not utilize seat-based pricing. 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. For example, we're using AI to write code, better qualify inbound interest, support sales development, and improve customer support workflows, helping teams focus more time on high-value interactions.

While our record of past performance is compelling, we're just getting started. In addition to improving our operations, go-to-market capabilities, and increased pace of innovation, we have successfully addressed many of the challenges the company faced over the past few years, allowing us to focus on the value creation opportunities ahead in the near, mid, and long term. Last quarter, I walked through our longer-term aspirations. As a reminder, from 2026 through 2030, we are targeting double-digit annual EPS growth driven by the following: Organic total revenue growth of 4%-6% annually with potential upside based on viral events-new product launches such as our Agents for Good catalog. Adjusted EBITDA growth of 6%-8% annually while expanding our adjusted EBITDA margin to 40%+.

Slide 24 in our investor deck provides more detail on the planned initiatives to drive continued margin expansion, most of which are already underway. We expect this improvement in EBITDA to translate to strong free cash flow growth. The $285 million midpoint of our 2026 cash flow guidance range represents a 25% CAGR since 2020. These strong cash flows drive a purposeful capital allocation strategy with consistent stock repurchases as a core tenet. We expect to deploy 50%+ of our cumulative free cash flow generated between 2026 and 2030 towards stock repurchases and continue to reduce our common stock outstanding. This is a continuation of our significant stock repurchase program over the last couple of years, in which we reduced common stock outstanding by approximately 14% since Q4 2023.

Based upon the planned growth across revenue, EBITDA, and cash flow, as well as our aggressive repurchase of our shares, our goal is non-GAAP EPS CAGR of 13%+ between 2026 and 2030. We're off to a good start in 2026 in that regard, with expected non-GAAP EPS growth of 17% at the midpoint of our 2026 guide. We're confident in our ability to deliver double-digit EPS growth in 2027 and beyond. 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 momentum into the years ahead. We look forward to our continued journey. I would like to congratulate the entire Blackbaud team for a good start here in 2026, and as always, thank them for the job well done. Thank you.

I'd now like to turn it over to Chad to walk through Q1 results and our guide for the remainder of 2026. Chad?

Thanks, Mike. Good morning, everyone. I'll walk through our first quarter 2026 financial performance and then discuss our full year 2026 outlook. In Q1, we continued to balance cost management with growth opportunities, and innovation. As we do each quarter, we were focused on durable subscription-led performance, prudent expectations around transactional revenue, and steady progress on profitability and cash flow. Our Q1 performance reflected continued demand for our mission-critical solutions and growth in transactional revenue volumes. As always, transactional revenue can be variable quarter-to-quarter, and our guidance philosophy assumes performance that is consistent with historical patterns and does not include any assumption for viral giving events. Q1 organic revenues grew 4.2% to $281 million. Non-GAAP adjusted EBITDA of $99 million was up $7 million, with an approximately 1 percentage point improvement to adjusted EBITDA margin.

The mid-single-digit organic revenue growth and improved EBITDA margin speaks to the power of our operating focus, which positively impacted earnings per share. Non-GAAP EPS increased to $1.14, up 20% compared to $0.95 last year, and our free cash flow was up nearly $50 million year-over-year to $37 million in the quarter. Our strong expected free cash flow for the year gives us confidence to continue investment in a number of critical areas like go-to-market initiatives, product innovation, and share repurchases. In Q1, including the net share settlement of employee stock compensation, we bought back approximately 4.5% of our shares outstanding at the end of 2025 and continue to demonstrate a strong commitment to our belief in the value of Blackbaud. It was a solid start to the year. Moving on to our 2026 outlook.

Based on our first quarter performance and our current view of the operating environment, we are reaffirming the full-year guidance ranges and assumptions we provided in February, including significant earnings and cash flow improvements. The detail on these ranges can be found in our earnings release and investor presentation on the website. As a reminder, we expect 2026 quarterly financial performance, including revenue growth and profitability, to be heavily weighted to the back half of the year, and particularly the fourth quarter. Looking to 2026 and beyond, we believe free cash flow will grow significantly, and we anticipate utilizing at least 50% of our cumulative free cash flow from 2026 to 2030 for share repurchases.

Beyond that, the company has tremendous optionality for dynamically allocating capital to its highest and best use based on market conditions, including additional stock repurchases, repayment of debt, or synergistic tuck-in M&A. We have a lot to be proud of, executing well through recessions, financial crises, COVID, and the shift to the cloud through a commitment to providing meaningful solutions to our customers and strong execution of our operating plan. On our journey to becoming a Rule of 45 company, we remain committed to providing investors with an attractive financial model balanced between growth of revenues, earnings, and cash flows, along with prudent and purposeful capital allocation strategy. 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'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're 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 one to ask a question, and please limit yourself to one question plus a follow-up so that as many as possible to ask questions. We will now take our first question from Brian Peterson with Raymond James. Please proceed with your question.

Hey, guys. Congrats on the strong quarter. Mike, maybe starting with you, I know you made the comment on AI in thousands of customers on Agents for Good. You know, was that comment specifically about 2026 adoption, or is that a little bit longer term? And as you've had these webinars and kinda early adopter customers, are there any cohorts, whether that's by end market or maybe by products that they use, that you think would be the first to kinda lean into the agentic functionality?

Yeah, Brian, thanks for the questions. As I mentioned, we announced in general availability our first fully agentic product, the Development Agent. Importantly too, we announced that we have a new category of products that will be announced throughout this year and go forward. That's the first one. There'll be more coming. That was in early adopter mode, you know, back half of last year, first part of this year. Went to general availability in March. That is targeted to thousands of existing Blackbaud customers. That's the target. We're ramping up sales. It just went to availability about a month ago, 6 weeks ago or so. It's a great opportunity. We've had hundreds and hundreds of customers on webinars, super interested and excited about this new product. It provides them scale that they can't get to today.

It's a new category for us and for our customers. Really great start, achieving our planned numbers, and it's product 1 in a category of many coming.

Hey, Mike, since we're on the topic of AI, I just wanna take a moment on how we're continuing to invest in AI. As I mentioned during the call, we're reaffirming our guidance for the year. However, just to ensure you model quarterly spreads correctly, we expect adjusted EBITDA dollars to decline slightly year-over-year in the second quarter due to planned AI investments for customer-facing products as well as for internal operations.

Yeah, just to hit on that a little bit. You know, our quarters are never linear anyway. They haven't historically been linear. We're always weighted to the tail end of the year with giving, holiday giving, you know, things like that. Full year guidance is great. We're investing in AI. You know, we're partnered with Anthropic, investing in their tools. Really happy for our first quarter results and the guide for the year.

Our next question comes from the line of Rob Oliver with Baird. Please proceed with your questions.

Great. Thanks, guys. Good morning. My question, Mike and Chad, one for me, is, you know, you guys called out some nice new logo wins in the quarter, and I know you guys have talked in the last year or two about that being a really important part of your go-to-market motion now. I was wondering if you could help us, you know, try to put some precision on that, quantify in any way, sort of perhaps as you look at, you know, say, new bookings, what % of that is perhaps new logos, and how does that change relative to kind of before you guys started to really focus on the new logo motion? Anything there you can provide for us about some of the context around the new logo wins would be, and the progress there would be helpful. Thank you.

Yeah, Rob, thanks. You know, our sales teams are divided into vertical market teams, so they're focused on specific markets. For example, you know, K-12 teams only sell to K-12, nonprofits, higher ed, et cetera. Then they're further separated into back-to-base sales and new logo sales in each of those markets. We've got really good motion in back to base and new logos. Back to base, just quickly mention, this new Development Agent is predominantly early targeted to back to base because it's embedded inside of our system of record products like RE NXT. However, we think these new capabilities will drive new logos also because new customers will wanna buy the system of record to get access to the agentic AI solution that's embedded inside of it. That's kinda one part.

We're seeing a nice set of wins across the verticals in new logos, and even on enterprise deals. You know, one of the deals we closed in the first quarter is one of the largest deals in our history, and I think that deal was a 5-year contract. It's an enterprise deal with a large nonprofit. They bought pretty much the product portfolio. It's a very large, veterans, not-focused nonprofit, which I think is outstanding. They bought several products from us. Across the portfolio, a really great competitive enterprise win in a long-term contract. You know, K-12 nonprofits, YourCause, I've named a bunch of customers, you know, in last quarters on YourCause, a lot of Fortune 500 customers signing up for YourCause.

We've got a kind of a flywheel effect on new logos and stickiness for our existing customers. The other thing I'll mention is we've got some really unique Blackbaud-only things going on that we don't talk a ton about. We do with customers, but not in these calls. We got something called a Blackbaud Verified Network. That is a network effect where we've connected our YourCause customers to our nonprofit customers. For example, a new logo customer buying, let's say, Raiser's Edge NXT will buy that platform to do fundraising, of course, but they're in the Blackbaud Verified Network, which means they're connected to hundreds of YourCause customers and millions and millions of employees, and they can promote themselves in the network.

It's a connected network between nonprofits or fundraisers and kinda global Fortune 500 companies using those platforms, using our payments rails, and it's only available at Blackbaud. It's a connected network effect, which is interesting, and that's getting attention from new logos as well.

The next questions are from the line of Parker Lane with Stifel. Please proceed with your questions.

Hey, guys. Thanks for taking the question. When you look at the investments that you plan to make around the AI opportunity, I think you said adjusted EBITDA dollars might be a little bit lower year-over-year as a result of that investment. How much of that is coming in the form of-

Now we said, Parker, we said in Q2.

In Q2. Yeah. Okay.

It's a smoothing comment around the quarters, not the year. To be clear, we only go, like, guide to the year, as you know. Go ahead. Thanks.

Yeah.

Yep.

As we look at that investment, though, how much of that is gonna come in the form of R&D and sales and marketing, other OpEx items versus potential impacts to gross margins as customers take on more consumption elements as part of these agents?

Yeah. We see an opportunity to improve our gross margins year-over-year. We have in the first quarter, you could see with our results. We've got some great gross margin improvement opportunities. Some of that is continued closure of two outstanding legacy data centers. Some of it is to get away from some legacy software infrastructure we use from vendors that we're not going to need in the future. Those will end. We see gross margin improvement opportunities. Our investments, you know, a lot of the AI investments are for new product builds, like these Agents for Good category. We'll be announcing new products as we go throughout this year, either in early adopter or general availability. Again, Development Agents is sort of the first one out in the gate from a general availability standpoint.

We also have a lot of investments in, you know, tools we use and in engineering. There's just a tremendous opportunity for AI enhancements in engineering. We have agents now that we've built in engineering that obviously, we use things like Anthropic Claude for code generation, but things we've built for user stories, acceptance criteria, code scaffolding, and it's been reducing workloads from days to hours. We're building agents in engineering to run engineering to get more engineering scale. That's a big flywheel effect, and we're seeing that happen already. You know, AI assistant, you know, anomaly detections for governance, integration, just a lot of AI innovation in productivity in engineering. That's sort of the inside picture. The outside picture is these new products we're bringing to market.

Our next question is from the line of Kirk Materne with Evercore ISI. Please proceed with your questions.

Yeah. Thanks very much. Mike, I was wondering, can you talk through some of the thought process on the pricing structure around sort of the agents and sort of the subscription model? Obviously, you know, a lot of folks are talking about sort of, you know, outcome-based pricing and things like that. I know ultimately it's all about the value delivered to your customers. How did you guys land on that, and how are you making sure, you know, they start seeing the value kinda out of the box to, you know, get them excited about, you know, and really creating a reference flywheel as well? Thanks.

Yeah. You bet. We're, you know, we're looking at all the pricing models available to us with these new AI products. This first product, the Development Agent, you know, is a pricing model which is like our other products. It's an annual subscription fee in a multi-year contract. It's not usage-based yet. That's a great model. We don't have any seat-based pricing. I think you know that. We've got annual fees for our subscription products, and then we've got, you know, more than a third of our company is transaction-based pricing now, which is arguably outcomes based because it's a percentage of a transaction, a little over a third of our total revenue. For the AI products, the first one is an annual subscription fee, and we're looking at other models.

We've got more products coming out, so we're looking at usage models and other models of pricing. There'll be various pricing models based on the product and where the product fits. The thing that's really exciting, though, Kirk, is the availability of the addressable market changes because, you know, our solutions are purchased from our customers' IT budgets, right? There are other budgets that our customers have. They have budgets for, you know, hiring more people for fundraising, which is an available different budget, not an IT budget, right? There's budgets in, you know, other, you know, hires of different vendors, you know, that we can reach into outside of the traditional IT budgets where they purchase Blackbaud products.

You know, we're looking at total spend of our customers outside of IT budgets as a growing addressable market for us.

Thank you. At this time, I'll hand the floor back to management for any further remarks.

Okay. Well, thank you everyone for joining us today. We'll be attending a number of investor events in May and June to include several investor conferences, which are listed on our IR website. We hope to see you then or speak with you very soon and wish you continued success. Have a great day.

This will conclude today's conference. You may disconnect your lines at this time. We thank you for your participation. Have a wonderful day.