Blackbaud: 3 Key Takeaways for Long-Term Investors
Key Points
Third-quarter revenue reached $293 million, up 4.1% year over year.
Blackbaud repurchased over 7% of its common stock during the first nine months of 2026.
The 2027 contract renewal cohort will be 25% smaller than 2026.
On its third-quarter 2026 earnings call, held on Oct. 28, 2026, Blackbaud (NASDAQ:BLKB) announced that full-year adjusted earnings per share and free cash flow, the net cash generated after operational costs, will reach or exceed the high end of previous guidance. Long-term investors benefit when a software provider expands its operating margins while building domain-specific artificial intelligence features into established products.
Three key takeaways from the call highlight how management plans to capture future growth.
1. Artificial Intelligence Expands Platform Capabilities and Sales Opportunities
Management launched Lantern, an artificial intelligence language model tailored specifically for philanthropic organizations. This innovation helps drive sales for Raiser's Edge NXT, the company's core cloud platform for fundraising.
Developed through a strategic collaboration with Databricks, Lantern combines leading open weight models on the Databricks data and AI platform with more than 40 years of Blackbaud's fundraising experience.
-- Michael Gianoni, Chief Executive Officer, President and Vice Chairman
2. Smaller Renewal Cohort Will Reduce Customer Churn in 2027
A large wave of contract renewals created temporary headwinds for gross dollar retention, a metric showing the share of revenue kept from existing clients. Management expects retention to normalize between 91% and 92% as contract renewal volume drops next year.
As we move beyond this larger renewal cohort, we are planning for a material reduction in churn to revenue as our recurring revenue renewal cohort in 2027 will be nearly 25% smaller than 2026.
-- Chad Anderson, executive vice president and chief financial officer
3. Data Center Closures Drive Multiyear Operating Efficiency Gains
Efficiency moves continue as management migrates computing tasks to major public cloud providers. Closing company-operated colocation data centers, which are third-party physical facilities housing servers, reduces operational overhead and boosts profit margins.
We are on track to close our last 2 company operated colo data centers by year end. This is the culmination of a multiyear infrastructure modernization effort and example of the productivity initiatives embedded in our operating model.
-- Chad Anderson, executive vice president and chief financial officer
Looking Ahead
Third-quarter revenue grew 4.1% year over year to $293 million, and operational efficiency gains continue to push earnings higher. Long-term software contract terms and global workforce expansion protect profitability while executives focus on contract retention and product cross-selling.
We remain committed to providing investors with an attractive financial model balanced between growth of revenues, earnings, and cash flows along with a prudent and purposeful capital allocation strategy.
-- Chad Anderson, executive vice president and chief financial officer
Capital allocation plans center on returning cash directly to shareholders while maintaining financial flexibility for smaller software acquisitions.
Looking ahead, we anticipate deploying at least 50% of cumulative free cash flow through 2030 toward share repurchases.
-- Chad Anderson, executive vice president and chief financial officer
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