Q2 2022 Blackbaud Inc Earnings Call

Good day and welcome to Black was Q2 2022 earnings call. Today's conference is being recorded I'll now turn the conference over to Steve Herbert.

Please go ahead Sir.

Good morning, everyone. Thank you for joining us on Blackhawk's second quarter 2022 earnings call. Joining me on the call today are Mike G&A like was president and CEO and Tony Boor, <unk> Executive Vice President and CFO Mike.

Mike and Tony will make prepared comments and then we will open up the line for your questions.

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, we believe that a combination of both GAAP and non-GAAP measures are more representative of how we internally measure our business unless otherwise specified we will refer only to non-GAAP measures on this call.

Please note that non-GAAP financial measures should not be considered in isolation from or as a substitution for GAAP measures. A reconciliation of GAAP and non-GAAP results is available in the press release, we issued last night and a more detailed supplemental schedule is available in our presentation on our Investor Relations website.

Before I turn the call over to Mike I'll briefly mention that during the third quarter. Our team will be attending the Oppenheimer technology Internet and Communications conference on August 10th in the Midwest ideas Conference on August 25th.

In addition, we will be participating in virtual investor meetings hosted by Baird on August 16.

As a reminder, we are also available.

Blackboard dot com, if you'd like to connect during the quarter with that I'll turn the call over to you Mike.

Thank you Steve Good morning, everyone. Thank you for joining us on the call today.

Before I turn to the business and operational highlights for the quarter I'd like to briefly address the current economic landscape in our view on black box positioning.

<unk> five macro factors and how this impacts our outlook for the second half of the year.

First we remain focused on attracting hiring and retaining top talent, we've enhanced our capabilities to attract and hire in a competitive environment.

And we clearly remain a sort of destination, we consistently have over 100000 applicants for a few hundred job openings.

Given the macro environment, we have cut back our hiring plans and have reduced staff and our onetime services revenue area.

Second.

Blackboard has no downside exposure to the conflict in Ukraine Humana.

Humanitarian organizations are leveraging our digital technology to engage supporters and raise funds for those affected by the conflict.

Third in terms of the rising interest rate environment I'll remind you that we took the prudent step to refinance our debt in 2020.

We took advantage of the low interest rate environment to hedge some of our exposure to rising interest rates.

Fourth on the topic of inflation and entering a technical recession, we look back at the impact on our markets and company in past recessions and the impact has been minimal for example, Black Lodge revenue continued to grow through the 2008 to 2010 timeframe.

At a time when our reoccurring revenue was a much smaller percentage of total revenue.

Today, we stand at roughly 95% reoccurring revenue on a much larger base.

Looking at the broader market there has been a little long term impact of philanthropy during past recessions.

The big test of resiliency for our company and our end markets once the pandemic and belt fared pretty well.

We remain consistent in our approach to running the business with a long term mindset and thoughtful execution of our strategy.

The track record of balancing sustainable growth and strong profitability.

And fifth from a currency perspective, our exposure is limited given the size of our international footprint.

However, we are revising our forward outlook and guidance slightly to account for the impact we expect in the second half of the year, which Tony will cover in more detail.

Now onto our business results, we had a strong second quarter to close out the first half of the year, which paced ahead of our internal plan.

Q2, we achieved 32% on a rule of 40 at constant currency, which paced above the midpoint of our original full year guidance expectation of roughly 30% for the full year.

We had total revenue growth of 15% inclusive of <unk>.

And our organic reoccurring revenue grew 5%, which was largely driven by the continued growth in our transaction revenues and contractual reoccurring revenues to the firm.

First half of the year, our organic reoccurring revenue growth stands at 6%.

Our adjusted EBIT margin was 24, 5% year to date.

With shifts at the high end of our original full year guidance range of 24% and 24, 5% in short the business performed extremely well in the first half of the year.

Now shifting to our operating performance.

We're executing a strategy focused on driving significant improvements as we progress on our journey to achieving a rule of 40.

To start the recently announced a series of strategic organizational updates to streamline our business operations and become even more customer centric.

I appointed Kevin Gregg water into the new role of EVP and Chief operating officer.

Overseas functions spanning from products and technology to customer success and retention.

Bringing these functions under one leader will ensure consistency in our approach and the customer experience.

In support of this we also named Chris saying is the company's first chief customer officer.

Serving our central position focused on delivering a best in class experience for our customers.

Next David Benjamin who was appointed to the new role of EVP and Chief commercial officer overseeing the company's global sales efforts. In addition to his responsibilities for the international markets group and just giving.

This change will further streamline and simplify our go to market efforts.

Maximize our outcomes as a global company.

Also Tom Davidson, who is a reminder is the fee.

<unk> CEO of <unk> will now have executive responsibility for our Euro cost business. In addition to ever Fi to align our your cause in every Fi offerings. We continue our investment in being the partner of choice for corporations focused on social responsibility and impact.

Finally, I'd like to take a moment to highlight our recent appointment of Dan.

And if you are to Blackhawks board of directors.

Do you need was currently vice President and global Chief Information Security Officer for United Airlines brings over 20 years of experience in Tech and cyber security and will be a great addition to our board.

All really great leadership changes for the company.

Also in the second quarter, we exited our first co Lo data center with more scheduled to close in the coming quarters. This shift to third party cloud infrastructure enables us to deliver secure stable modernized and affordable solutions to our customers while.

<unk> our operating cost.

We still have a lot of work to do but we continue to make significant progress as we accelerate our move to third party cloud datacenter environments.

Lastly, I'm inspired by the innovations our teams are driving as we've seen the sky platform become a reality.

We are transforming accelerating our customers connect with their users and donors offering breakthrough improvements to accomplish outcomes and track results.

In June we announced the launch of prospect insights, a new software tool within raisers edge NXT and automate in App intelligence related to major giving likelihood and capacity and then prescribes actions related to portfolio management and solicitation.

For growing organizations that need you prioritize major giving prospects.

<unk> insight offers multi dimensional fund raising insights and actions within their existing software.

Also in June we held our annual developer conference highlighting the low code movement and accessible technology.

Nearly 90% of attendees left the conference ceiling that blackboard empowers customers to improve usage and experience with Blackrock solutions.

With more than 70, 203rd party Sky developers now registered in our program in.

An increase of over 40% year over year.

We are enabling even more customers partners and consultants to take advantage of efficiencies and low code or no kind of technologies.

Another way, we are expanding our ecosystem of good.

Through our social good startup program, which supports early stage software companies focused on solving problems that matter to the social good community since launching in 2019, we have supported 33 startups and just last month, we welcomed an additional six companies to our July 2000.

22 cohort.

We are excited to start working with these founders to design a unique plant it addresses their goals for growth and provides a curated access the blackrock resources to.

To continue their innovation efforts.

And within the last two weeks.

At both Black large K 12 conference, which brought together thousands of experts and peers in the private school sector for engaging sessions with outcomes based content as well as ever five learn on continents, which brought together more than 7000 gene 12 educators largely from the public.

Sector to collaborate on innovative education strategies grounded in a whole child learning.

And lastly, as we continue to advance our position as a leader in the rapidly evolving ESG and corporate social responsibility spaces.

<unk> continues to be at the forefront.

For example, <unk>.

I guess the founding partner of the Fortune impact initiative, which will be held in Atlanta later this year, bringing together senior ESG leaders on the Fortune 1000.

Look to advance their ESG and CSR efforts.

In summary, we've had an outstanding first half of the year.

Taking a prudent approach to our outlook for the second half of 2022.

We are uniquely positioned as a market leader in our space.

To monitor the macro environment and remain confident in our core business as well as our ability to execute incremental program initiatives already underway as we look to balance operating disciplines with strategic investments to drive sustainable growth looking to the rest of the year.

So the unfavorable movement in foreign exchange rates, our revenue and profitability outlook would fall within our original guidance ranges are.

Our operational execution is sound and we're confident black box positioning to drive accelerated growth and meaningful margin expansion over the next several years.

I'll turn the call over to Tony before we open it up for Q&A.

Arnie.

Thanks, Mike Good morning, everyone.

Today I'll cover our results for the second quarter and review our outlook for full year 2022 before opening up the line for questions.

Please refer to yesterday's press release, and the Investor materials posted to our website for the full details of our Q2 2022 financial performance.

We had another strong quarter that positions us well as we head into the back half of 'twenty two.

Second quarter total revenue was $265 million, representing total revenue growth of 15% versus the prior year quarter.

Organic revenue growth in the quarter was 5% when adjusted for foreign currency impacts of $2 9 million driven by continued strength in recurring revenues.

Healthy improvements in renewal rates and sales productivity per rep continues to be bright spots with more opportunity ahead as we execute on our multiyear initiatives are.

Our payments business once again delivered strong growth on increasing volumes and some of the pricing initiatives underway along with the continued mixed shift towards online donations should provide a multiyear tailwind for payments revenue.

Onetime services and other revenue was roughly a 90 basis point drag on our total revenue growth in the quarter.

Based on our latest projections, we no longer expect the drag from onetime services and other revenue to bottom in 2022, and it's possible. It could decline further as we introduce the optionality to shift more significant mix of professional services work to partners.

So everybody contributed total revenue of roughly $27 million in the quarter and 54 million for the first half.

Moving to earnings our second quarter gross margin was 59% we generated adjusted EBITDA of $71 million, representing an adjusted EBITDA margin of 26, 6% and diluted earnings per share of <unk> 75.

Our first half adjusted EBITDA margin was 24, 5%.

Alright, I'm, sorry, EBIT margin of 24, 5% is at the high end of our original expectation of 24 to 24, 5% and this reflects our continued progress on key growth and margin drivers like pricing initiatives shift to third party cloud infrastructure go to market efficiencies and <unk> integration.

Cost synergies that will drive significant margin expansion going forward.

While we have adjusted our full year outlook, we have high confidence in our proven track record of being able to manage cost and drive operational scale in the business.

That brings me to the cash flow statement of balance sheet, our adjusted free cash flow was $44 million in the second quarter and represented an adjusted free cash flow margin of approximately 17%.

We ended the quarter with $911 million and net debt with an additional 245 million of borrowing capacity.

For Q2, we have reduced our debt to EBITDA ratio to three four times and we remain focused on rapidly deleveraging through the remainder of 'twenty two.

Given the current global market environment, it's important to reiterate that the steps we took to refinance our debt and take advantage of the low interest rate environment at the beginning of the pandemic in 2020 leave us in a strong balance sheet management position with financial flexibility.

Our exposure to rising interest rates is somewhat insulated with roughly 50% of our debt hedged at very low fixed rates through the end of 2024.

With the first half behind US we've updated our full year financial guidance, primarily to account for the evolving macroeconomic conditions, such as unfavorable foreign exchange rate movement as well as other unforeseen items like the continued drag on total revenue from our mix shift away from onetime services revenue and also updated.

Sales projections for everybody.

Starting with revenue, we slightly reduced our revenue guidance range by approximately 2% to $1 billion and $50 million to $1 billion 70 billion.

Roughly half of this is attributed to unfavorable movement in FX rates with a vast majority associated with the decline in British pound, which represents nearly two thirds of our international revenue.

The remainder of the reduced range can largely tied to the continued drag in onetime services revenue, which is a positive mix shift for us over the long term.

We now expect our overall onetime services and other revenue to be roughly flat for the full year, which represents a continued decline in our core onetime services revenue when normalizing for roughly $15 million of incremental one time revenue expected from our acquisition of Evercore.

Lastly to a much lesser extent or later, our latest projections suggest some softness in our bookings plan forever Fi, which has minimal impact on our full year 2022 revenues given ratable revenue recognition and offsetting strength in the rest of the business. We are intensely focused on closing they have or five bookings gap as we.

Look ahead to 2023.

Given the typical seasonality of just giving in our services business, we expect a slight sequential quarterly decline in total revenue in the third quarter before picking up again in the fourth quarter importantly.

Importantly, the midpoint of our guidance continues to call for mid single digit organic revenue growth at constant currency, which is well aligned with our long term goal framework.

Turning to profitability our original full year adjusted EBITDA margin guidance was in the range of 24% to 24, 5% and excluding currency impacts our targeted range is unchanged, we anticipate FX to reduce profitability by roughly 30 basis points, bringing our revised full year.

And for adjusted EBITDA margin to 23, 7% to 24, 2%.

We continue to make progress on our efforts to drive efficiencies in our go to market and to create additional scalability in our products and infrastructure looking at the rule of 40, we now anticipate roughly 28% for the full year at constant currency and we're targeting significant improvement in 2023.

Moving to cash flow, our original guidance anticipated adjusted free cash flow in the range of $165 million to $175 million. We now expect adjusted free cash flow in a range of $140 million to $150 million for the full year.

And the difference is largely attributable to two buckets, the first which represents over half. The revision is unforeseen changes to assumptions that are mostly outside of our control such as unfavorable FX and slightly higher expectations for cash tax and interest payments. The second bucket is the lesser of the two and is attributed to the softness in <unk>.

Bookings, which are typically billed annually upfront as a reminder, our guidance for adjusted free cash flow excludes cash to be spent net of insurance reimbursements related to the ongoing litigation of our previously disclosed securities in our most recent expectation for net cash outlays of 15 million to 25 million.

For ongoing legal fees related to the security incident.

In summary, we had a strong second quarter posting double digit total revenue growth mid single digit organic recurring revenue growth and achieved 32% on a rule of 40 at constant currency.

We remain confident in our core operating performance of the business and our ability to execute on incremental program initiatives that position us well from both a growth and margin perspective overall, we remain confident that continued execution against our plan for 'twenty two has us well positioned to continue progressing towards our long term goals.

Achieving the rule of 40, and we remain committed to allocating capital in a way that maximizes value for our shareholders.

With that I'd like to open up the line for your questions.

Alright, Thank you and.

Ladies and gentlemen, if you would like.

To ask a question please signal.

Star one on your telephone keypad.

If you are using your speaker phone. Please make sure. Your mute function is turned off that now your signal to reach our equipment again as a reminder, please press star one to ask the question and please limit yourself to one question plus a follow up to allow us this facility as many questions as possible.

One moment, please as we pool for questions.

Yeah.

My first question.

Elaine with Stifel. Please proceed with your question.

Yeah, Hi, Thanks, guys for taking the question I'm curious if you could pinpoint exactly when some of the softness in bookings started to occur forever Phi in.

What the causes there was that primarily from a.

Integration and execution situation or is it macro related with customers sort of evaluating their budgets for the remainder of the year. Thanks.

Sure Hey, it's Mike I'll start with.

The fact that our guidance change.

This is mostly due to FX and one time not ever fine.

And if we didn't have this FX impact we'd still be within our original guidance range.

Every Fi acquisition is going really well.

The growth opportunity in a big market quick.

Quick reminder, every fae is about 10% of our revenue.

Also.

<unk> is within $1 million of their first half revenue plan.

There is some booking softness for two reasons to your specific question.

First we had some very large opportunities in the digital currency space that pushed we.

We still have opportunities in this area and second we had higher than we would like in sales turnover, but we're now staffed.

I'll also remind you we over performed in other areas in the company and like transactions in subscriptions and whatever five we did have some great deals with companies like Guardian life J P. Morgan Truest fifth third bank and Google for example.

So this ESG space is still really a big opportunity for us.

Got it good to hear and then I know you said you reduced some staff in onetime services what are some of the other areas, where you maybe reduce your hiring plans for the years and for the year and is that just in response to the uncertain macro or is there anything else at play there.

Yeah. So the one time service is pretty straightforward, we've been managing cost and staff there for years <unk>, just because it's simply just less hours.

Requiring for our solutions and so that's been ongoing for a while and we just continued that to just reduce our cost as the one time revenue.

Has gone backwards, which is has been planned and.

In general we've cut back on hiring kind of across the board no specific area. This is really to be a bit conservative.

But no really one specific area, we continue to hire in some places in the business, but in general we're going to hire at lower rate.

Got it thanks, Mike.

Yep you're welcome.

Next question comes from the line of Rob Oliver with Baird. Please proceed with your question.

Hi, guys. Good morning, Thank you for taking my questions.

Mike one for you.

To start I'm. Just curious you guys have talked about some of the pricing initiatives that you saw get traction over in Europe , and some of those learnings and bringing them over here.

So the U S and I know you referenced them again in your prepared remarks.

It does seem that the majority of the organic growth is coming up on the transactional side. So just wondering where you.

Is it a point or are we at a point, yet where we would start to see those price initiatives start to contribute to organic growth.

The software side, and maybe help us understand when that might happen in a little bit more about what's happening.

Yeah, you bet. So we do have multiple initiatives as we've talked about in the past related to pricing.

On the software side.

On the transactional side as well, Rob and some have already been put into place most of the growth. There is still in the future. They are on the calendar to implement.

And some takes contractual changes some take some software changes and process change.

But we have many initiatives underway related to that on the calendar in the future. So we will start to see some more growth there.

Back half of this year all through next year as well.

Okay, Great. That's helpful. Thanks, Mike and then Tony just one for you.

Great milestone getting one of the Colo data centers.

Does that feel like.

That question has become has got so many times over the past year and a half so congrats on that and I just was wondering.

No.

Can you just remind us how many you have left to close and I know because of the acquisitions.

Different products at different Colo data centers, but can you just to the extent that you can maybe give us a sense for.

That timeline and pathway as we would start to see some cost benefits from that thanks Tony.

Yes, Rob it's good and you know this we've been doubled up on expense for several years, if not triple in some areas as we.

Get the cloud environments up and running and then spending money to migrate customers out of the colo to that and still paying for their own Colo plus making some added security investments on both fronts at the same time. So we do believe we will have a very positive impact on gross margins as we migrate out of those.

We closed that first one we have several smaller colo data centers, so those will be.

In the nearer term, we will be able to close those so think of those over the next probably two to three years and we have a couple of very large data centers those will take longer to actually shut down fully but we will be able to consolidate within those data centers and shutdown equipment in rigs in network.

Your et cetera.

See I don't know that we will see a big stair step kind of improvement, but over the next between two to five years, we should see some fairly significant improvement in gross margin come back as we get those data center shutdown and get customers moved over to the cloud environments, and we are spending a bit more.

Actively today as well trying to accelerate some of the move to those cloud environments because they do also enhance our security footprint at the same time.

So theres a little bit of offset unfortunately, right now to some of the savings because we're trying to accelerate those moves more quickly.

Hey, Rob I'll. Just this is Mike I'll, just add some of the smaller data centers will close fairly soon.

And secondly, we primarily are in like a lot of companies AWS and Azure I think we talked more about azure, but we have a pretty big footprint in AWS.

And ever fight is AWS. So there was no colo.

Drag with <unk>, they're already in a destination environment on AWS for us.

Okay. That's helpful color. Thanks, Mike Thanks, Tony Good progress I appreciate it.

Yep.

Our next question comes from the line of Kirk.

With Evercore ISI. Please proceed with your question.

Hi, Thanks, Thanks Brent.

Yes, Mike obviously transactional gotten off to a really good start in the first half of the year as we go back to a little bit more normal hopefully way of life in terms of people, taking vacations and sort of maybe a little bit slower August how should we thinking just about the shape of the back half of the year is it going to be you know could it be a little bit more fourth quarter weighted.

On the transactional side, just any thoughts you have on that would be helpful. Yes.

Yes sure.

It has been seasonal.

In the back half of the year, you have things like giving Tuesdays and holidays in the fourth quarter.

And so it's natural for us to have growth in the back half of the year on the transaction side.

Okay, and just on ever Fi and maybe I'm not doing the math right, but it seems like a lot of the growth in the first half of the year for it has been on the services side or the nonrecurring side.

Can you just talk about that I guess in context of the full year Guide you guys gave is that sort of a precursor of revenue that's related to then ramp on a recurring basis in the back half of the year. So that ends up being a little bit more seasonal. This year. Just I was wondering just talk about that in the context of the original guide for this year I never thought because it sounds like Theyre on plan. So that's one.

Make sure I understand how they're kind of true.

Lending on that front. Thanks.

Yes, Curt this is Tony I'll take that one ever probably hasnt as a.

Large chunk of what we call one time services and a lot of it is developing.

Specific curated content for customers.

So it's a little different than what you'd think of implementation services. It services will be used by customer, but not necessarily general across the customer base and that is a fairly large number it's actually it looks like now we're going to see a decline we didn't expect to see in our core kind of one time services somewhere in the $15 million range and we think that's going to be largely.

Offset by <unk>, one time services, we expect that to be about $15 million on the year, that's kind of what panned out in the quarter as well we were short encore Evercore I came in and kind of offset that between three and $4 million.

<unk> plan as the prepared comments spoke to is was definitely backend loaded that was the deal model as was the budget we did expect.

Slightly improved revenue number and significantly improve profitability in the budget versus the deal model.

But definitely back end loaded that's kind of the nature of the Beast as well with them. There is a lot of if you recall we spoke about before.

Upsell renewal services with existing customers as they expand their offerings into other school systems or geographies or at other pieces of training and educational materials.

The plan is that we would have a more back half loaded and hence you see this lower growth with them being right on plan for the first half that we've been right in line with what our expectations were coming into the year. The softness in bookings won't hit revenue a lot. This year it will be more of an impact on that 23 expectations, but we've got some things offsetting that like improvement.

And our overall renewal rates et cetera, and then really the one impact is cash flow because they've been all year and advanced typically so it hits cash flow a little bit Fisher.

That's super helpful. Tony Thanks, very much.

You bet.

Our next question comes from the line of Brian Peterson with Raymond James. Please proceed with your question.

Thanks, Joe and good morning, Tony I wanted to follow up on the ever five questions. So if we think about how it typically works for them.

If you're booking new business when does that revenue is there a lag between when that perfectly typically starts in thinking about the growth algorithm is it more up sell or expansion base versus net new idea I know, it's a small part of the reduction I think we're just trying to understand some of the moving parts here.

Yes, Brian .

It depends on the deal.

It's interesting I like the renewal.

<unk> renewal upsells with existing customers that can turn on very very quickly because it already in many cases are already exists and youre just taking it to other geographies or other school systems right Youre expanding to other states potentially and so that can be immediate recognition. So its a little iffy as to when it turns on if it's a <unk>.

Brand new deal when you have to develop content and get it rolled out I think that runs in the 5% to six months kind of turn on just looking at the team here.

So there's a big mix there between how quickly depending on the type of transaction and then the training will be kind of in between the curriculum build can be a little in between so that can take weeks if not months to build out if it's specific.

Onetime services kind of revenue that we're creating a curated for a customer.

The mix is interesting you know Mike spoke in his prepared comments and then in the first answer we had some relatively large deals again, because this is kind of enterprise level deals that pushed.

Those can be very material, we had some that were certainly multi multimillion dollar.

<unk> kind of transactions that pushed renewals and expansions can be very large also we have some in the works now that look very promising that our expansion. So it's kind of all over the board and going to create a little bit of.

Watching this as to when they hit both in the size of the transactions and then the timing to turn on the revenue. So it's really difficult for me to give you a good read as to how to model that and.

No understood I appreciate the color.

Tony.

Go ahead Mike.

I'm just going to say just a quick add a quick reminder of <unk> business is 10% of our revenue. So the bookings lumpiness on their enterprise deals is it really material lots of total blackboard level, but there is some big enterprise opportunities there.

So there are a little lumpy because they are big enterprise type opportunities.

And are there I mentioned some deals with some of the customers I mentioned earlier. So this whole ESG space is just an awesome opportunity for growth.

And they've got a really unique footprint there.

We just put the <unk> product line together with them because there is a nice cross sell opportunity not a lot of overlap with the customer base and a nice cross sell opportunity.

Both ways with those platforms.

No understood I appreciate all the color there guys I mean, maybe kind of what kind of a segue on that Mike you.

You gave me a lot of our gave a lot of color on the macro and a lot of moving parts here. If you looked at net new deals coming to Blackwater I know, it's different by product and they're not all of it is predicated on the macro right. So I'd be curious what have you seen in terms of kind of the pace of net new customers that are coming to blackboard and any commonality that's what it's about.

Over the last 90 days thanks, guys.

Yes, we still see new logos coming in.

<unk>.

The really interesting thing about what we've learned in the last two years.

The resiliency of our end markets.

And I've mentioned this in my prepared remarks, and I will just kind of repeat it.

The RF markets. The pandemic was the ultimate test you know you think about.

Past recessions and the size of the markets that we serve.

The pandemic didn't put any of our end market customers on business really we didn't see that in some of them I take I'll take out sector like.

Performing arts centers in museums were completely closed.

A big chunk of the pandemic and they're open.

And so things like a recession or a slowdown in the economies of different countries and the U S.

It's much less of an impact.

So we're pretty excited about new logo opportunities the big deals that we're working with ever Fi our cross sell with your cards.

So we're pretty excited about the growth opportunities in our end markets and that corporation space.

Got it thanks, Mike.

Youre welcome.

Our next question comes from Matt Vanvliet with BTG people see with your question.

Hey, good morning, guys. Thanks for taking the question, maybe a little bit more of an extension on.

The last answer Mike as you look at.

Some of your end markets that are more reliant on.

Sort of in person events, and giving on kind of an individual basis.

What have you seen in past times, where the stock market. In particular has declined pretty substantially do you feel like that tends to have more of a correlation to reduce giving or reduced average size of gifts.

That you've seen in the past, maybe even more than a broader economic recession.

Or how have you guys looked at maybe the sensitivity around potential one time, giving through.

Through the end of the year given some of those other macro issues.

Yes, Matt So we as I mentioned in my prepared remarks, we actually did go back and look at giving.

<unk> of giving the getting behavior.

In past recessions and black box performance.

And your question is on the giving side first of all I'll remind you that in the U S, giving us over $470 billion a year, it's massive and <unk>.

Think about the fact that we actually monetize a very small percentage of it.

So regardless of even how the macro works, there's still such a huge tam for us to go after.

Significant.

Back in the <unk> timeframe, giving.

<unk> went a little bit backwards, and then accelerated from there.

And it's gone up a lot. Since then so it doesn't really concern us most of that 470 billion.

Almost 70% is individuals.

And the averages are pretty small as far as donation size. So we do not see a.

Impact on giving with the economy slowing down in recessions or potential recessions. It just hasnt happened in the past number one.

Number two.

We monetize a small percentage of it so in other words, even if it did go backwards, we only monetize a small percentage of it which is a huge tam for us so it's a very resilient.

Part of that.

The economy really yeah.

The nonprofit sector is the third largest employer in the U S.

And so we don't see that as a.

As a big issue.

And your question on one time gifts you know a large one time gifts are not run through payment systems anyway. So we do not monetize that we monetize the 70% are small part of the 70%.

Of the $4 70.

And a smaller part of that which is online that makes sense. So we went back looked at past recessions looked at black box performance.

And back in early <unk>.

Nine timeframe, we were a much smaller company and a lot less.

On the reoccurring revenue side, so we're a much bigger base.

You know over $1 billion and 95% recurring revenue. So we're actually in a much better position than we were in the past.

Okay very helpful and then as you look.

At some of the newer initiatives, maybe could you provide any kind of update in terms of what the traction has been looking like or penetration rates on the church management side.

Thank you.

Sure.

Yes, we have a couple of them church higher Ed ever Pi R. R.

I guess the big three.

We're cross selling a lot in the faith based space.

K 12 platform the faith based space, there's a lot of K 12 schools.

More cross selling.

Sure.

New logos and cross sell with raisers edge, NXT and financial edge NXT.

The higher Ed space, We've got our Blackboard education management platform that we're selling to smaller colleges.

And that roadmap is progressing well.

And I think I talked a lot about ever Fi lots of cross sell upsell.

While we renew in the <unk> space, and then new logos and new content that we're developing as well.

We just had some recent press releases on some new content that we've built and deployed at ever Fi.

Alright, great. Thank you.

Yep.

And our next question comes from the line of Koji Ikeda with Bank of America. Please proceed with your question.

Hi, Good morning, guys. Thanks for taking my question is with Birmingham.

For Gucci.

So you called out some changes in management.

This is a great question.

Gotcha Okay.

Any changes to call out in challenging times is becoming more customer centric.

Is there any specific feedback.

Got from customers are you focusing more on you Dan Shannon.

Just wanted some more color I am.

Sure.

Yeah sure. So yeah there is.

It's a big opportunity for us we've made a lot of progress in the last year.

On things like retention and renewals are numbers are up nicely.

Yes.

Over a 1 billion dollar business with 95% reoccurring revenue that is a great growth opportunity for us.

So we're recently named crossing.

As the chief customer officer, he's been with us a little over a year.

And Catherine Greg Guar as Chief operating officer, we've really put together, our customer success, and our engineering and our organizations to drive automation and scale and customer retention.

Because it's a big focus of ours, and it's a big growth opportunity for us given where 95% reoccurring revenue. So nothing that has really come from customers. It's just the next step of maturity in our organization to go after this big growth opportunity in driving up retention and renewals.

Got it thank you.

Yeah.

And we have reached the end of the question and answer session and I will now turn the call back over to CEO , Mike <unk> for.

For closing remarks.

Thank you operator ill just close by reiterating we had an outstanding first half of the year and looking to the rest of the year aside from unfavorable movement in foreign exchange rates.

Our revenue and profitability outlook would fall within our original guidance ranges.

We continue to monitor the macro environment and remain confident in our core business.

As well as our ability to execute on incremental program initiatives already underway as we look to balance operating discipline with strategic investments to drive sustainable growth overall, our plan for 2022 has us well positioned to continue progressing toward our long term goal of achieving rule.

40.

We look forward to providing further updates on our next call. Thanks, everyone.

And we have.

This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

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