Q2 2023 Blackbaud Inc Earnings Call

[music].

Good day, and welcome to Blackboard second quarter 2023 earnings call.

Today's conference is being recorded.

Now I'll turn the conference over to Kevin Riley.

Please go ahead Sir.

Good morning, everyone. Thank you for joining us on Blackboard second quarter 2023 earnings call.

Joining me on the call today are Mike Gene Oni, Blackboard, President and CEO , and Tony Boor Blackhawks Executive Vice President and CFO .

Mike and Tony will make prepared comments and then we'll open the lines for your questions.

Please note that our comments today contain certain 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.

The discussion today will focus on non-GAAP results.

Please refer to our press release and the Investor materials posted to our website for the full details of our financial performance, including GAAP results as well as full year guidance.

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 financial financial 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.

Before I turn the call over to Mike I'll briefly mention that our Investor relations team will be participating in investor meetings with Stifel In New York City on August 14th and attending the three part advisors Midwest ideas conference in Chicago on August 23rd.

With that I'll turn the call over to you Mike.

Yeah.

Thank you for joining our call I'm pleased to share that we're making measurable progress on our five point operating plan we introduced in May.

With this plan, we essentially have a one two punch. The first is the margin expansion that we began to realize in the second quarter.

And the second tranche is a new layer of revenue driven by our modernized approach to renewal pricing that will accelerate revenue growth in the second half and we'll have good margin flow through.

Accordingly, we're confident in the delivery of our increased financial guidance for the year.

That strong operational execution produced solid financial results for the quarter as expected the cost actions completed in previous quarters drove a substantial increase in adjusted EBITDA.

Additionally, our modernized approach to renewal pricing and multi year customer contracts continues to perform very well.

Recall that our heaviest months for renewals are June July and December .

June and July are now completed and we will begin to see revenue build in the second half and subsequently in future years.

From a numbers perspective, we reported total revenue of $271 million, which was up three 2% year over year on an organic constant currency basis reoccur.

Reoccurring revenue is now 97% total revenue and grew faster at four 8% on a constant currency basis.

Adjusted EBITDA at constant currency with $89 million, which was up a very meaningful 17 million or 24% over the second quarter of last year.

That represented an adjusted EBITDA margin of 32.9% at constant currency, which was an increase of 5.9 percentage points above the second quarter of 2022.

Taken together rule of 40 at constant currency was just over 36% for the quarter just over a four percentage point increase year over year and five points higher sequentially.

And we had another good quarter for cash flow production with adjusted free cash flow of $44 million.

Now turning to our operating plan, which focuses on five key drivers one product innovation and delivery.

It's more value to our customers with continuous improvement sourced from internal development and a vibrant ecosystem to bookings growth and acceleration that results on improving sales channel efficiency.

<unk> transactional revenue optimization and expansion for a modernized approach to pricing and multi year customer contracts that reflect the value of the services, we provide with 97% of our revenue recurring this is sure and predictable revenue.

And five keen attention on cost management I'm excited about the significant progress we're making in each of these areas.

I'll provide an update on product delivery and innovation.

As well as our modernized pricing initiatives.

I'll also share examples.

The enthusiasm, we're seeing from our customers, which is driving numerous new wins and cross selling success and Tony will cover the upside being realized from bookings transactional revenues and cost management as well as a deeper review of our second quarter financial results.

Product is core at Black box, and we strive to bring increased value to our customers to their software subscriptions with improved and innovative capabilities.

For example, we recently released a new next generation donation form and raisers edge NXT with a goal of increasing the conversion rate and donations our customers' race.

We match the new donation for this prospect insights, which utilizes AI to identify and qualified candidates for major gifts.

Well early days. However, the results are promising many customers are raising more money and that fuels the delivery of their missions and revenue growth for us.

I'd like to drill into this example, a bit more illustrates the power of our suite.

We think it's unmatched in our space and has a strong competitive differentiator after using our next generation donation form and prospect insights donations can be processed via our credit card processing service Black card merchant services. Those donations then get recorded in our fund accounting system.

Financial edge NXT.

Logged into raisers edge NXT, our donor management system of record.

All of this has enabled seamlessly and automatically.

This is great value for our customers as it not only maximizes their fundraising, but also minimizes their back office and administrative workloads are.

A great example of this is Marc Litz, our U K based hospice provider.

With their previous technology solution donation processing required five to six distinct steps now donation batches are processed with a single click.

That includes sending each donor and automatically generated thank you message in their own words quote blackboard frees up time for our team to love our support is more.

And that enables their scarce human resources to spend more time on their mission and with donors.

Another example of the power of this week is a win this past quarter with Great School in Houston, Texas.

After our recent strategic planning meeting this private faith based case, you eight school realize their data was disconnected and had limited decision making.

They wanted a connected system not just for convenience because they see the power and the outcomes that connected data can drive our solution included five major components for managing the lifecycle of the student enrollment So learning management student information fundraising and financial management.

We also have a number of new product innovations that are underway in early June we announced additions to our intelligence for good product suite that.

Announcement outlined initiatives and investments that we plan to implement over the next several quarters to make artificial intelligence more accessible powerful and responsible across our social impact sector.

Much has been said AI lately, but AI is not new to loss for years Blackboard has been using AI enabled capabilities and our analytics offerings.

That said, we're expanding our strategy into next generation and generative AI technology that addresses specific challenges related to fundraising stewardship corporate impact in education needs.

We'll be rolling out an extensive new set of capabilities across our product portfolio for example, AI for peer to peer fundraisers.

I for donor stewardship, and AI for corporate impact.

And these are only a few of the capabilities we have planned.

In July we announced our newest cohort our participants and our social good startup program.

This program, which was launched in 2020 is designed to help new companies with creative solutions launched successfully.

This year's cohort is focused on using generative AI to increase impact for nonprofits and companies. This cohort includes 10 startups that provide AI solutions for grant writing purpose built marketing prospect outreach and strategy major gift administration and content creation to name just.

Phew.

Also at the beginning of June we hosted our annual developers conference with nearly 10003rd party developers registered and almost 4000 customers using a third party app. Our developer community is an important component of our ecosystem.

And looking more broadly at our ecosystem beyond software development and AI.

Also focusing more energy on our partner network to the blackboard marketplace.

This is a great way to extend our joint capabilities leverage our extensive customer base and distribution and enter into your revenue share agreements.

Last but not least we recently announced that we made a small but strategic investment in momentum.

Leading AI focused blackboard partner and graduate of our social good startup program our investment in momentum allows us to accelerate product delivery and embed AI capabilities and solutions like <unk> optimized fundraising and stewardship processes.

So as you can see there's plenty underway on the products side of our business. We look forward to sharing more about these exciting developments during a product update briefings in October at.

At our BD can user conference during future quarterly earnings calls.

And now I'd like to spend a bit of time updating you on the progress we've made.

And our initiative to modernize our pricing and contract terms.

The effort is maturing nicely and is well on its way.

We have already renewed customer contracts David through mid September .

Notify customers with December 2023 contract renewals and in some cases are already working larger strategic accounts with renewal dates into the first half of 2024.

The vast majority of customers are opting for the three year contract option. It is higher than we expected when we launched the program late last year, and obviously it improves future revenue security and predictability.

The pricing aspect of the program is performing equally well.

For software subscriptions, we renewed in the second quarter. The first year subscription price increase is up from what we experienced in the first quarter.

These multi year contracts include annual price Escalations. Please.

Please keep in mind as we reported on our last call.

But our heaviest months for renewals are June July and December .

So while the June and July renewals are now completed and the December renewals are largely notified the revenue impact is yet to be recognized in a meaningful way.

Before I turn the call over to Tony I'd like to spend some time talking about the commitment we make every day for our employees and our customers we're committed to strengthening the impact we make to the way we operate our business starting in the very highest standards.

We continue to need a leader in helping individual change makers University schools nonprofits charities and companies around the world drive impact for their causes.

To give you a sense of the impact our business has.

Over $100 billion are donated granted are invested through our systems every year.

60000 teachers reached $3 4 million students with critical skills learning through <unk> learning modules.

900000 individual change makers were enabled on just giving that benefited 23000 charities.

And employees on our your college platform volunteer remarkable 12 million hours last year alone.

It's that kind of impact that drives our employees and our company and.

And most importantly, none of this could be achievable without our exceptional team members, who deliver impact every day for our customers.

I personally want to thank them for their hard work their dedication and passion they bring to the job every day, it's their efforts that enable our strong execution on the operating plan that we reviewed with you today.

With that I'll turn the call over to Tony.

Thanks, Mike Good morning, everyone.

Second quarter financial results were solid and in line with the increased guidance, we announced on last quarter's call.

The benefit of cost actions, we've been taking began to be realized this quarter, which drove a significant improvement in adjusted EBITDA, both sequentially and over last year's second quarter and.

And the operational progress, we are making including our modernized pricing is leading to impressive bookings and cross sells and has positioned us well for accelerating revenue growth through the remainder of the year and into the next.

For the second quarter backlog reported revenue of $271 million, representing organic revenue growth of three 2% at constant currency.

Organic recurring revenue grew four 8% at constant currency and non strategic one time services revenue declined by $4 million compared to the second quarter of last year.

From a bookings standpoint, we signed several notable enterprise level contracts during the quarter. Recent examples include <unk> previously announced contract with the medical University of South Carolina to provide preventative behavioral health to K 12 students as well as its expansion with J P. Morgan U K for stem training.

And we secured a multiyear renewal and cross sells by adding blackboard merchant services to the AOS Association's peer to peer solution.

Transactional revenue optimization and expansion is another key business driver in our five point operating plan.

<unk> performed well this quarter growing in the high single digits year over year. As a reminder, transactional revenues are included in our recurring revenue line.

Each of the three revenue streams of transactional revenue performed well and grew in the quarter driven by tuition management as enrollment continues to trend upward.

We saw continued strong performance in the Justgiving business.

We began to see positive impacts from the rate change we implemented in January I'm Blackboard merchant services.

As I mentioned earlier, our cost management program began producing sustainable results for this quarter based upon the actions we've previously taken.

As expected cost items are more immediately impactful to the P&L that our pricing actions pricing action as build each month as renewals occur.

For the second quarter total costs were down 14 million year on year on higher revenue.

That's good performance and represents a six percentage, 6% cost reduction from a year ago and it shows the leverage that's inherent in our business.

It's our intention to keep a tight hold on costs going forward.

While we may have some expense growth owing to inflationary pressures, we are managing head count our largest expense tightly and we will continue to scrutinize all other costs on an ongoing basis.

Adjusted EBITDA in constant currency was $89 million for the quarter, which was $17 million higher than the second quarter of 'twenty, two and represents a 24% growth rate the.

The adjusted EBIT margin at constant currency of 32, 9% was an improvement of five nine percentage points over the 27% recorded last year.

Taken together rule of 40 at constant currency was 36% for the quarter up over four points from last year and over five points sequentially. So we're tracking well against our commitment to be at a rule of 40 run rate by year end.

During the quarter, we recorded an additional noncash expense of $19 8 million to raise our aggregate liability for certain probable loss contingencies related to the security incidents to $50 million.

We're in active discussions with the attorney general to settle that matter at a harmful for resolution in the near future.

We had another solid quarter of adjusted free cash flow production and are on track to attain our increased guidance range of $190 million to $210 million for the year for the second quarter adjusted free cash flow was $44 million higher profitability and good cash collections self.

And higher cash taxes, which were up from last year due to increased tax rates in the U K changes in deductibility of software development costs here in the U S for federal tax purposes, and conclusion of tax attributes that were utilized in prior periods.

All of which were already considered in our guidance range. We ended the quarter with $818 million of net debt and a debt to EBITDA ratio of two seven times.

Turning to the remainder of 2023, we are reiterating the full year financial guidance, which we increased in Q1 we.

We anticipate annual 2023 revenues of $1.095 billion to $1 billion $125 million.

Adjusted EBITDA margin of 35% to 31, 5% rule.

Rule of 40 at constant currency or 34, 8% to 38, 6%, a nearly seven and a half point improvement year over year at the midpoint.

And adjusted free cash flow.

$190 million to $210 million.

The midpoint of our free cash flow guidance is substantially higher than last year and represents approximately $3 75 per share which at current share price is a free cash flow yield of approximately 5%.

We intend to use this year's free cash flow to retire debt and drive two or 2.0 debt to EBITDA target as.

As free cash flow per share grows into 2024, we believe it will present, a great value creation opportunity for our shareholders as we head into next year, we'll provide more guidance on our go forward capital allocation and capital return strategy.

So to conclude our prepared comments were pleased by the progress we made during the second quarter. Our five point plan is driving strong results. We've started realizing cost benefits and margin improvements and set up well for increasing revenue gains and have strong cash flows.

With that operator, please open the lines for questions.

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 speaker phone. Please make sure your mute function is turned off to lay your signal to reach our equipment.

Again as a reminder, please press star one to ask a question. Please limit yourself to one question plus a follow up to allow us to facilitate as many questions as possible.

We will now take our first question from Brian Peterson with Raymond James.

Thanks, gentlemen, congrats on the quarter. So I wanted to hit on the pricing success that you guys have had I know, it's a key topic I'd love to understand what the feedback has been from customers anything on retention and how that's trended versus your expectations any color you can provide there.

Yes sure. Good morning. This is Mike program is going really well.

We launched this last year and it started to go and in fact in March.

Customer retention and renewals are right, where we thought they would be most customers are opting for a three year contract.

We've started March so we are pretty deep into the into the program.

Well early renewing I'll remind you only renewing about 35% of the total this year and of that about 70% of that is already done.

So the new pricing essentially eventually takes effect in the second half of this year. So we didn't get really much revenue in Q2 builds in Q3 and Q4, just go forward, but it's going well.

No that's great to hear Mike and maybe just a higher level one on AI I'd.

I'd be curious.

When you talk to your customers how are they thinking about leveraging Jeremy.

What do you think the early use cases will be kind of across the nonprofit landscape. Thanks guys.

The early use cases for customers on our platforms around marketing messaging.

Which we have a lot.

Our folks that use our platforms outreach to donors as an example, I mean, there's a lot of efficiency and opportunity using generative AI for that part of that investment we made in that company I mentioned in my prepared remarks. So those are the that really is the first early use case is.

Market and donor messaging outreach.

Thanks, Mike.

Youre welcome.

Our next question comes from Rob Oliver with Baird. Please proceed with your question.

Great Hi, Thanks, guys. Good morning, Mike one other price increases.

Follow up.

For you.

So I appreciate that color with 35% of the total I think you set up this year and 70% of that done. So can you just talk a little bit I know, we didn't see much of an impact at least in the numbers in Q2 from that is that because deals were backend loaded in June as they tend to be in software.

And then can you also talk a little bit about the pricing uplift that you're getting relative to expectations. Obviously, we've got a ramp in revenue growth in the back half of the year. So just wanted to get comfortable would you feeling relative to that and then I had a quick follow up for Tony.

Sure so yes.

The program again started last year, but that contract renewals started March so.

With the fact that we're a reoccurring ratable Rev Rec business.

It ramps up so and it takes a while so you're right we didn't get much of an impact at all in Q2 and it'll start to ramp in Q3 and Q4, we added a slide to our investor deck at slide number 21, and it does a good job.

In showing just.

The 2023% to 35% of the total just how that ramps this year quarter by quarter and then obviously you know we get a full year effect of <unk>.

Future years, as well and again, we're getting we're getting the pricing, we anticipated and programs going just really well.

Great. Thanks, I appreciate that and then.

21 for you and it sounds like we're gonna get more color on their sudden in late summer fall, but when you look at you know you guys, bringing your your debt ratio down nicely. Here. You also have some some unknowns in terms of cash on the liability side from the breach, but when you look at the capital allocation strategy like looking out at someone.

The you know take privates out there, we're starting to see a break in the in the M&A market a little bit here.

Devaluations look more reasonable to you and and.

It's been a little while since you guys made an acquisition. So we're kind of getting into the this one here with her that might happen again, so any color there would be appreciated. Thank you.

Yeah like you said the cash was looking really good collections had been strong.

Overall looks very positive obviously with the guy and we'd get that increased guide that we gave last quarter on track on that front the debt pay down assuming we don't have any material settlement, we'd expect to be close to two times leveraged by the end of the year, which is kinda you know our optimal level, so that opens us back up.

To start looking at more acquisition opportunities.

Reinstated potentially stock buyback really between they ever find acquisition now it's been about paying down the debt and getting that leverage profile down. So we'll be in good shape I do think the market is opening up I think valuations have improved a bit from the highs that they were at so I'm sure Mister ammonium team will be active and engaged look at it.

The market for a new opportunities as well.

Great. Thanks again.

Bankrupt.

Our next question comes from the lineup Parker Lane with Stifel. Please proceed with your questions.

Yeah, Hi, guys. Thanks for taking the question first one for you Tony when we looked at been recurring gross margin improvement here very solid year over year corner and record. It I'm. Just wondering if you could unpack that a little bit and help us understand how much of that as a result of pricing versus the I T consolidation versus you.

You know any other initiatives you put in place to improve that and then as we look forward do you think this is the sustainable level that we should build off of or should there be some you know variation along the way.

Yeah part of it it's a good question, we haven't seen a significant impact from.

From the pricing, yet and and when you refer to that New chart, an investor deck, then I'll help you out.

Get to those numbers that we've seen a you know a small impact in Q2, that's gonna grow substantially in Q3 Q for as you'll see in that New chart and then by Q1, we're getting a full quarter impact that prices. So that we'll have some ongoing improvement.

To the gross margin and overall margins because a lot of that will fall through the.

The bigger drivers of the gross margin improvements seen thus far as closing for KOLO data centers last year accelerating or move to the cloud we've renegotiated because I'm moving to the cloud renegotiated those key contract with Microsoft and and AWS and got some more favorable pricing on those cloud environments and then obviously the <unk>.

Cost actions, we took place last year in Q1 this year.

Largely related to head count and other costs items are having a positive impact the one wildcard so you're kind of follow up on the sustainability. One wildcard is you know that that we always have to look at it as what happens on the transaction side, So should transaction volumes grow.

Or shrink significantly in the future that would have an impact on the gross margins, obviously because of the the Bvm's business. Obviously has a much different margin profile, then does our subscription business that would be the one wildcard is the sustainability, but within the true contractual recurring revenue I would expect this is a point that we.

We'll see improvement upon not go backwards from as the margin expansion from pricing comes in play and we got a couple more colo data centers to closing some other things that will help the cost structure as well.

And the second one's for Mike Mike When you look at the corporate ER vertical you know, you're obviously got deeper in their last year with the ever Fi acquisition just curious.

That's that's the the health of the demand environment around corporate right now what you're seeing out there and you know if you feel like some of those challenges that you face from Ah Ah Ah still standpoint, and others somewhat of a reorganisation there last year. If that's all in the rearview mirror and it's it's all systems go now just what do you see it on the corporate side of things.

Yeah, I'm here to get bookings are pretty good still a lot of interest out there we've got a good pipeline.

No I'm just a couple of deals in the last two quarters.

And these calls medical University of South Carolina, Senator Arctic quality, Microsoft So a lot of good deals that we are closed a year to date there's the.

<unk> changes to your point, we're complete last year.

And overall at the company level, you know year to date bookings are are pretty good we're seeing the growth near the date.

Across the whole product portfolio pretty well and so.

The exciting part of that what we're doing is this sort of new layer of organic revenue with his contract and pricing, which those slides slide 20 in the deck.

That shows that in 21, just an.

Example, for this year, it's sort of a whole new layer of revenue now we have not yet experience and we will start to see it.

The Chinese point mine earlier, you know Q3 and Q4 this year.

Given our increased guide, but remember that's only a small part of it too because again, 35% of the contracts or renewing this year and in Q3, and Q4 willing and get a partial impact of those and so you know we'll get a full year effectiveness next year, but the next year, we're going to renew on top of that another.

30% of the contract. So this multi year program than just restarts again.

Six so that on top of his good year to date bookings as just a new layer.

Organic revenue growth, that's pretty exciting drive more margin improvement as well.

Yeah understood.

The questions Gus sure Yep. Thanks.

The next question is from the line of cars.

With Evercore ISI.

You with your question.

Yeah. Thanks, very much congrats on the results guys. Mike I was wondering if you could just talk about the opportunity for cross cells as the renewal portfolio comes up obviously, just getting the pricing on the renewals is obviously job one but just thoughts on the opportunities across selling upsell you know other solutions as part of that process, if that's sort of the order.

The day or or is that something you think of it as more of like a 24 25 opportunity.

Yeah, Yeah, we we constantly do that we've got sales folks focused on cross L. A new logo folks.

And so that's a part of renewals and it's a part of just sort of base.

Face assignments job assignments around cross selling.

Into the existing base and we've got a lot of opportunity. The other thing that's driving that is innovation.

We continue to drive the integration of our our platforms and making better use your experiences.

Key products like razors edge, <unk> financial Ingenix T and.

And our payments processing.

That drives cross-sell opportunity so cross selling is still a big opportunity for us across the board in the corporate sector as well.

Okay, and then Tony just on this sort of leverage in the business I was just kind of curious kids talk a little bit that there are any incremental costs around you know Jenny is every company has to sort of you know sort of evolved their platform to incorporate that you're just any thoughts in terms of if there are any incremental offsets against the sound of the base.

Since you're getting from you know some of the cost actions you guys who've taken already thanks.

Thanks for not.

Not significantly overall, so we certainly.

Re allocate I would say and revisit our allocation of our investment in R&D quite often on a regular basis and so I think it's more of a reallocation of that the total investment because as you know we spend a good chunk of our overall dollars on R&D and innovation. So any place that we've had an increase.

And the last couple of years over the last few years frankly, it's been to move to the clouds. So we've had a lot of redundant costs as we still pay for the cold data centers and pay to move to the cloud and then also we're paying for the new cloud environments and then the other places we've made a lot of investments in cyber as every company is doing and we continue to.

That that's probably one of the few places in the business that we're seeing an increasing expert overall.

Thank you.

Our next question is from the line of George begin with Bank of America. Please proceed with your questions.

Hi, Thanks for taking my question.

You know it seemed to kind of comment.

On you know the recently announced changes to the partner program and you know kind of what your longterm expectations are.

The contribution from that channel.

Yeah sure. This is Mike. So we've we have a new leader that's running that program as a kind of mid year last year.

And we're really driving a couple of components. There you know we've got their social what we call a soldier startup program.

Which basically create new partners and then we have new partners coming in of all types there either.

<unk> then companies software companies services businesses.

And we've got a much higher focus on this partner ecosystem and then we combine that with the developer network you know I talked about the fact that we've got over 10000 registered developers.

In that program. If you go back just four or five years or maybe 500 now those over 10000.

And so we're focused on.

The black color black ecosystem, where.

Its partners and these are again software companies systems integrators professional services firms developer network, that's important for us and so we're building the Zika system, because frankly, it helps our customers and it helps us or our solutions are stickier if you will.

They were expanded through the through.

Through the partner network and we're looking to drive you know shared revenue and some more organic drove through through these partnerships.

Thank you.

If you'd like to ask a question today, you May press star one from your telephone keypad.

The next question to the line of Matinees with B T. B T. I T. Please proceed with your questions.

Good morning, and thanks for taking my question I guess first on.

The education space, just curious maybe if you could dive in a little bit there and seeing this being kind of the the key selling season, and especially on the up sell cross sell side of it what what you are seeing their how much appetite is there from.

Your schools to continue to use more of the platform as you've made some additions from a product standpoint.

Yes, I mentioned one school in my prepared remarks.

This is actually pretty heavy implementation season, because the schools need to get ready for the fall. So we see a higher selling season.

Sort of earlier in the year in the spring summer is like implementation time.

To get the schools ready.

Good cross-sell opportunities there.

K 12 space that we're in it's Rylee R Y this product portfolio.

So there's quite a few products.

That we sell their from tuition management financials.

Fund raising to running the school Saf's student enrollment systems, and we typically will go in a new logo in <unk>.

Provide a platform it might start with the school admins.

Operating system.

S I as in school admissions and things or it might start with fund raising but then we have a lot of opportunity to keep going back and adding to that which.

Which happens quite often so yeah that business is doing well, we got a really good footprint there good partner network there as well.

And so yeah. It's a it's been a really good environment for us the payment side of that wishes. The tuition management platform, it's been really strong for us.

You have to do this year.

Matt we're seeing good continued increase in enrollment as well and the school space, which is really helping on the tuition side.

Okay, great. Thank you and then.

Like you talked about even starting to discuss with a larger enterprise level customers on the renewals for early next year curious and what their their feedback is in terms of the level of price increases are you seeing or hearing much pushback because they look at that three year option versus versus one year.

Just curious what the feedback is on some of those very large customers.

You know, we're not I mean, you have to remember too that you know we're not we're not alone there what I mean by that is these enterprise customers have.

You know.

Lots of software providers, it could be S&P, Oracle, Microsoft and others or day and others. So we're not necessarily alone there.

In.

Basically requiring multiyear contracts and price increases so that's kind of one point you know the point is.

We our system of record.

The solutions, we provide for.

The mid year and enterprise is a system of record their revenue where the revenue generator.

For those foundations. If you will so we are a you know it's not a discretionary choice for them. So where of course system of record we have great long term relationships and those contract renewals of customers of all sizes are going to plan and going.

Quite well and the way the process works.

As I mentioned in my prepared remarks, yeah, we've already notified the customers through the end of this year and we've already completed.

Pretty much the end of July and most of August and a big part of September and October is already complete so our visibility to these renewals in our visibility to organic revenue growth has never been the strong because we've got this future view of renewed contracts and price increase.

<unk> and organic growth, which is awesome and so the enterprise customers.

Dealing with some of those discussions right now because they're into next year, because we notify.

Quite far in advance and it's all going really well.

Alright, great. Thank you Yep you're welcome.

Thank you at this time when we have reached the end in a question and answer session I'll turn the call back to 19 only for closing remarks.

Thank you operator, thanks, everyone, who joined the call today in summary, we had a solid second quarter and we are successfully executing our five point plan.

Innovating products driving bookings optimizing transactional revenue modernizing contractual pricing and tightening cost management.

Our operating plan has in effect a one two punch that cost initiatives are the first and it started to produce improved margins in the second quarter and the second punch is the progress we're making on a renewal side of the business that will accelerate revenue growth in the third and fourth quarters.

Fourth quarter of this year, we expect to achieve organic revenue growth in the high single digits as well as rule of 40, well ahead of our prior target of 2025 and looking ahead to 2024, we expect to continue growing revenue in expanding margin to achieve rule 40 for the full year.

I'm incredibly proud of the progress our team members have made and I'm confident that we will continue to build on our momentum and drive strong sustainable growth and value creation for shareholders. Thank you.

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