Blackbaud (BLKB) Q3 2025 Earnings Transcript

The key signal here is not just a clean beat; it is that BLCO is exiting the “launch burn” phase and entering a margin-reset phase while still posting mid-single-digit top-line growth. That combination matters because the market has typically valued this name as a levered, execution-fragile turnaround; a sustained step-down in SG&A with R&D still rising implies operating leverage can expand even without heroic revenue assumptions. The second-order effect is that the company’s internal capital intensity is falling at the same time its cash conversion is improving, which should compress the equity risk premium if management proves the new framework is durable through year-end.

The most important competitive read-through is that the dry-eye franchise appears to be turning a new entrant into a category-expansion catalyst rather than a share-loss event. If combined therapy becomes the default behavior, the winner is the company with the broadest field force, payer access, and complementary mechanisms — not necessarily the best single product — which favors BLCO’s portfolio architecture. The surgical rebound is equally important because a recall-driven rebound typically has more air left than consensus expects; once consignment normalizes and surgeon trust is restored, the follow-through can extend for several quarters rather than one.

The main risk is that the current margin inflection is partly mix- and recovery-driven, so investors may be over-extrapolating Q3 into 2026 before the Investor Day details. Tariff mitigation is being treated as solved, but the company is still exposed to policy volatility and China consumer softness; either could pressure gross margin or growth if macro weakens. The contrarian setup is that the stock may be under-owned because investors focus on leverage and legacy execution issues, while missing that the business is becoming more self-funding exactly as management starts to re-rate the portfolio toward higher-ROIC growth.