Blackbaud Touts AI Agents, Payments Growth and Buybacks at Baird Conference

Key Points

• Blackbaud executives said the company is leaning into AI with a three-wave strategy that includes analytics, generative AI, and new agentic tools under its “Agents for Good” initiative. The first fundraising development agent has already launched to early adopters and is seeing good traction.
• Management highlighted steady business fundamentals, saying revenue is growing in the mid-single digits and that client attrition has not materially changed despite pressure on some nonprofits. Payments and cross-sell are also key growth drivers, with transactional revenue running a little over one-third of total revenue.
• Blackbaud reiterated a strong capital return focus, with plans to devote at least 50% of free cash flow to buybacks and continue reducing share count. The company also reaffirmed its longer-term targets for revenue, EBITDA and EPS growth, while saying AI could provide an additional tailwind not yet reflected in guidance.

Blackbaud NASDAQ: BLKB executives emphasized the company’s nonprofit software focus, artificial intelligence initiatives, payments opportunity and capital return strategy during a discussion hosted by Baird Senior Research Analyst Rob Oliver.

Oliver described Blackbaud as a vertical software leader in the nonprofit market and said Baird had recently upgraded the stock, calling it “incredibly inexpensive” from the firm’s view. The discussion featured Chad Anderson, Blackbaud’s chief financial officer, and Jeff Klein, director of corporate strategy and development.

Executives Highlight Nonprofit Software Footprint

Anderson described Blackbaud as a cloud software company serving a range of nonprofit-related markets, including foundations, community foundations, and foundations tied to universities and hospital systems. He said the company has operated in the sector for 45 years, building domain expertise around nonprofit operations and workflows.

At its core, Anderson said Blackbaud provides fundraising software and a financial solution designed for fund-related nonprofit accounting. He also pointed to embedded analytics, payments and deep workflow capabilities.

Anderson said Blackbaud grows revenue “roughly in mid-single digits” and that its revenue base is about two-thirds subscription, typically tied to fundraising and financial management solutions. The remaining roughly one-third comes from payments and other usage or consumption models.

AI Strategy Centers on Analytics, Generative AI and Agents

Klein said many of Blackbaud’s products function as mission-critical systems of record for donor management, customer relationship management, financial management, general ledger accounting and payment processing. He said the company’s tools are “critical to running the operations of the business” for many customers.

Klein described three waves of AI within Blackbaud’s platform. The first was the company’s analytics business, which he said has long included capabilities such as donor prospecting and intelligent gift recommendations. The second wave involved generative AI embedded into existing solutions at no additional cost, including Blackbaud AI Chat, which allows users to ask natural-language questions and generate donor outreach content.

The third wave is the company’s “Agents for Good” strategy, which Klein said is designed as a catalog of agentic AI solutions. The first product, a fundraising development agent, is intended to serve as an autonomous virtual teammate that fundraises for an organization. Klein said it entered an early adopter program in the fourth quarter of last year and the first quarter of this year and became generally available in late March. He said early traction has been good.

Asked whether the nonprofit sector’s historically slower technology adoption gives Blackbaud time to embed AI into its platform, Klein said many customers do not have large technology teams and look to vendors such as Blackbaud to bring new technologies and use cases to them.

Management Says Funding Pressure Has Not Changed Attrition Trends

Oliver asked about the buying environment in light of cuts affecting charities and nonprofits, including changes tied to USAID and local funding. Anderson said the nonprofit sector is large, significant and resilient, noting that it is roughly the third-largest employer in the U.S. and that annual U.S. donations to nonprofits are around $600 billion and growing.

Anderson said some organizations are affected by changes in government funding, but large nonprofits often have multiple revenue streams. If some government-related funding disappears, he said, those organizations can become more reliant on Blackbaud’s fundraising solutions. He added that not all nonprofit verticals are affected in the same way.

“While some of our clients have been under pressure, we haven’t seen a notable change in client attrition to speak of,” Anderson said.

Contracts, Cross-Sell and Payments Remain Key Growth Levers

Anderson said Blackbaud began planning a move toward standard three-year contracts five or six years ago, paused during COVID and rolled out the program in 2023. The contracts include embedded price escalators. He said gross dollar retention has remained stable at around 92%, and the company is now entering the next renewal wave after completing the initial three-year cycle.

Klein said cross-selling remains an important part of Blackbaud’s land-and-expand model. About half of the company’s sales force is focused on new logos, while the other half is focused on cross-selling portfolio products. He said Blackbaud has roughly 18 products and is adding separately priced AI products, including the agentic AI offering.

Payments also remain a major part of the business. Klein said transactional revenue is a little over one-third of total revenue and has historically grown slightly faster than core software, in the mid- to high-single-digit range. He cited new logos, payment enablement within the existing base, pricing levers such as take-rate optimization, donor-cover models and donation or tuition volume growth as drivers.

Capital Allocation Focuses on Buybacks

On competition, Klein said Blackbaud operates in a fragmented market and is the only provider in its space with a broad suite spanning financial management, fundraising, digital marketing, school operations and ticketing for arts and cultural customers. He said larger horizontal providers such as Salesforce and Microsoft Dynamics appear in some deals, but their products are not purpose-built for nonprofits and often require outside customization.

Klein also said Blackbaud sees a data advantage based on the volume, variety, velocity and governance of its data, particularly as AI becomes more important.

Anderson said capital allocation has prioritized share repurchases over the past few years. He said Blackbaud has reduced its overall share count by 14% over a couple of years and has publicly stated an intent to dedicate at least 50% of free cash flow to repurchases annually, with a goal of reducing shares by 5% to 10%.

Anderson said the company also aims to manage leverage in the “low twos” and views tuck-in acquisitions as a third capital allocation priority. He said free cash flow has increased at roughly a 25% compound annual growth rate since 2020 and reiterated targets for mid-single-digit revenue growth, 6% to 8% EBITDA growth and 13%-plus EPS growth, with AI described as a potential tailwind not factored into current guidance.

About Blackbaud NASDAQ: BLKB

Blackbaud, Inc is a leading provider of cloud software, services and data intelligence solutions designed specifically for the social good community. The company's main offerings include fundraising and relationship management platforms, financial management systems, grant and award management tools, and advanced analytics. Its flagship products—such as Raiser's Edge NXT, Blackbaud Financial Edge NXT and Blackbaud NetCommunity—help nonprofit organizations, educational institutions, healthcare providers and foundations streamline donor engagement, optimize financial operations and measure program impact.

Founded in 1981 and headquartered in Charleston, South Carolina, Blackbaud has grown from a small technology startup into a global specialist in nonprofit software.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.