Blackbaud (BLKB) Q4 2025 Earnings Transcript

BLKB is transitioning from a “stabilization” story to a self-funding compounding story: the important signal is not the headline growth rate, but the widening gap between organic revenue and cash generation. The company is effectively using AI and India-based labor arbitrage to turn a mid-single-digit growth profile into double-digit EPS growth, which matters because the market typically pays a much higher multiple for durable margin expansion plus buybacks than for top-line acceleration alone. The step-up in free cash flow also creates an unusually powerful mechanical bid for the stock over the next 12-24 months, since repurchases are now a formal capital allocation pillar rather than opportunistic usage.

The underappreciated second-order effect is that longer contracts and stronger retention reduce near-term volatility while also lowering the perceived risk of monetizing new AI modules. That gives management room to layer on a premium “workflow automation” price point without needing a broad base of new customers to prove the model first. If the first agentic product gains traction, the real upside is not the standalone subscription fee; it is the attachment rate into payments and transactional revenue, which could create a higher-quality recurring mix and justify a multiple re-rating.

The main risk is that the market may initially over-earn the AI upside and underweight the quarterly sequencing drag: tougher compares in the first half and heavier expense in the back half could create a few noisy prints even if the full-year thesis remains intact. The bigger contrarian point is that the stock may still be underowned relative to the quality of the cash-return story because investors may screen BLKB as a slow-growth vertical SaaS name rather than a buyback compounder with explicit EPS accretion. That said, the valuation will likely hinge on whether management can convert “AI optionality” into measurable net revenue retention and incremental payments volume by late 2026.