BLKB - NASDAQ

Good day, and welcome to Blackbaud's Second Quarter 2025 Earnings Conference Call. Today's conference is being recorded. I'll now turn the conference over to Tom Barth, Head of Investor Relations. Please go ahead, sir.

Good morning, everyone. Thank you for joining us on Blackbaud's Second Quarter 2025 Earnings Call. Joining me on the call today are Mike Gianoni, Blackbaud's CEO, President and Vice Chairman; and Chad Anderson, Blackbaud's Executive Vice President and CFO. Mike and Chad will make prepared remarks, 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. The discussion today will focus on non-GAAP results. Please refer to our press release and the investor materials posted to our website for full details on 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 how we internally measure our business. Unless otherwise specified, we will refer only to non-GAAP financial measures on this call. Please note that the non-GAAP financial measures should not be considered in isolation from or as a substitute for GAAP measures. And with that, I'll turn the call over to you, Mike.

Thank you, Tom. Good morning, everyone. Over the last several quarters, I've emphasized Blackbaud's significant improvement in growth and profitability, since 2020. I'm pleased to say that Blackbaud continues to perform very well through the first half of 2025 with a very strong second quarter across revenue, EBITDA, EPS and cash flow. In fact, in the second quarter, we delivered a Rule of 45, our highest quarterly rule of performance in the company's history. In the second quarter, Blackbaud generated revenue of $281 million, which is 6.8% organic growth year-over-year and adjusted EBITDA margin of 38.5%, up nearly 300 basis points year-over-year and non-GAAP diluted earnings per share of $1.21 up 12% year-over-year. This improvement would have been even higher had we adjusted for EVERFI. These results are a testament to the power of our people, our product offerings and our position as the market leader providing the most comprehensive suite of purpose-built and mission-critical software for the social impact sector. Our solutions allow customers to spend more time focusing on what matters to them, making concrete improvements in the world through their vital social impact work. We remain the premier software partner across the social impact space. I'd like to highlight 3 specific areas that our management team is focused on and that contributed to this quarter's results, acquiring new logos, driving innovation and as such, strengthening our customer relationships through additional solutions and renewals and driving higher profitability through operational discipline and efficiencies. We continue to have a strong focus on signing new logos. Here are a couple of our latest wins and why Blackbaud was the right choice for these organizations. A large youth development organization sought to replace an antiquated tech stack as it prepared to power its primary engagement campaign. The campaign's core purpose is to reach 10 million youths in the next 6 years. This organization needed a better holistic technology infrastructure to achieve its lofty fundraising and alumni engagement goals and provide change management support. After a detailed review of the market, the organization purchased Raiser's Edge NXT and Data Intelligence. This is a strong enterprise deal in our nonprofit space. This new customer was also very excited by the new network effect we are creating by connecting our nonprofit fundraising solutions. In this case, Raiser's Edge NXT to our corporate employee engagement solution called YourCause. This connects Blackbaud nonprofit customers to corporations. Nonprofits need volunteers and donors and companies have volunteers and potential donors. We are the premier provider in both of those spaces. And for the first time ever, we have connected those platforms to create a network. Only Blackbaud has a solution to do this. Another new customer is SunnyBrook Foundation. They're a world-renowned leader in research education and patient care based out of Toronto and are undertaking a significant digital transformation the Foundation selected Blackbaud CRM from among both U.S. and Canadian competitors because of our leadership in the fundraising market and our ability to modernize donor experience and California Polytechnic State University, a leading public education institution, selected Blackbaud's Raiser's Edge NXT as its modern cloud-based solution to replace a legacy system and drive its digital transformation. This win highlights our growing momentum in the higher education vertical, where our professional services team brings deep implementation expertise. Our success with Cal Poly was driven by a combination of our proven change management methodology, our integrated payment solution, which ensures PCI compliance and operational efficiency and our ability to align with the university's long-term strategic goals. This partnership underscores the value of our modern scalable platform in meeting the evolving needs of higher education institutions. Specific to our YourCause solution, we had a very strong quarter of adding and expanding large customers like NASDAQ, Tyson Foods, Chevron, Quest Diagnostics, Cummins and several other global brand names. We are winning with YourCause because of our investments in innovation like Impact Edge, expedited payments and the expanded global markets we serve. Also during the second quarter, we were pleased to add Bill Fort as our new Head of North American sales. Bill reports to our Chief Commercial Officer, David Benjamin, and leads our U.S. and Canadian sales teams serving our customers across all verticals. Bill brings with him deep knowledge in the social impact sector, having led software teams most recently at Salesforce with experience from Oracle and SAP as well. He's hit the ground running, and we look forward to his continued focus on driving more growth. Our second primary focus is continuing to invest aggressively in innovation. We have made notable progress on this front during Q2. Our Raiser's Edge NXT transformation is in full swing with continuous updates. Literally hundreds were delivered just this past quarter. We have recently modernized pledge giving releasing a new integration with Constant Contact, a best-of-breed digital marketing solution for mid- market organizations. The Constant Contact integration is a connected experience within Raiser's Edge NXT and a hallmark of our connected and open strategy. We are transforming Financial Edge NXT from a system of record to a system of intelligence and connected finance. This includes seamless integration with Raiser's Edge NXT and new advanced methods of journal entry and invoicing that can make our customers significantly more efficient. In K-12 education, we've started a limited rollout of our common records engine with marquee customers. Common records engine is a significant and differentiated feature that connects advancement offices with school administrations. School spend significant time on transferring data between offices, delays, inaccuracies and incomplete information have a direct impact on the relationships they build with their community. A key component of the powerful network effect solution for our corporate YourCause customers that I mentioned earlier is a new level of efficiency within this new network. In the corporate employee giving world, donations typically take months to reach the intended charity. By integrating our YourCause, payments and fundraising solutions, this could be accomplished in a day or 2. This provides Blackbaud a unique position in this market with this integrated solutions capability. AI continues to be front and center in our innovation with our AI Everywhere strategy. This includes innovation already underway like predictive AI that's helping customers identify billions of dollars in untapped giving potential generative AI-powered acknowledgments they're speedy and enhancing communication with supporters and an upcoming technical preview of Blackbaud copilot an AI-powered coach and assistant that allows users to interact with their data in natural language ask questions and gain insights. We also have underway a full Agentic offering, which we expect to launch at our upcoming bbcon conference in October. We're working with selected customers to partner on these new solutions. We believe there's great potential for Agentic AI in the social impact sector to help customers unlock new levels of effectiveness and deeper connections across critical fundraising operations like donor cultivation, stewardship and sustainer management and driving accelerated revenue for our customers in the sector. Our Agentic offerings features include capabilities such as reviewing donors at risk of lapsing and suggesting additional activities or reviewing gifts and creating segments of likely upgrade prospects and generating offers specific to each donor. We also have a full Agentic fundraiser solution in development that will be available this fall to address the needs of our customers to reach more donors and drive their messages in revenue. I recently hosted our virtual developer conference, we call bbdevdays with over 2,600 developers worldwide participants explored innovative ways to automate and extend our Blackbaud solutions alongside our employees, partners and peers. We're starting to see a fundamental shift in how customers are using AI for their custom development, leveraging AI to write code, broadening the definition of what a developer is and lowering the barrier to creating time-saving customizations and automations on top of their Blackbaud solutions. We look forward to highlighting these points as well as many of our other unique and exciting innovations at our annual customer event, bbcon in October in Philadelphia. Customers and prospects will have the opportunity to enhance their skills make valuable connections across Blackbaud's customer community and hear from Blackbaud leaders on what's coming next in innovation. In addition to over 100 powerhouse sessions led by industry experts and Blackbaud leaders as well as preconference workshops for product training and developers of all levels will be available. We continue to be very focused on our operational rigor to drive increased profitability and strong cash flows. In our Q2 and first half is a strong testament to that discipline. Over the past several quarters, I've spent a lot of time discussing our significantly improved financial results from the last 5 years and financial model you can expect from us in the future. We believe Blackbaud is a sound investment choice, but has the potential to create substantial shareholder value. This belief is supported by our performance in the first half of 2025 and raising our guidance for the remainder of this year as a framework going forward, we are targeting mid-single-digit plus organic revenue growth. EBITDA growth in excess of revenue growth, double-digit diluted EPS growth, and we will continue to drive very strong free cash flow, which includes purposeful capital allocation. Chad will provide a bit more of the specifics on our plans across these metrics in his guidance section, but we look forward to continuing the journey and offering our shareholders increasing value in the coming years. With that, let me turn the call over to Chad.

Thank you, Mike, and good morning, everyone. Blackbaud continues to be well positioned for long-term success, delivering consistent growth and enviable profitability. As Mike outlined, Blackbaud performed well in the second quarter, capping a strong first half of the year. We remain committed to providing investors an attractive financial model, balance between growth in revenues, earnings and cash flows, along with a prudent and purposeful capital allocation strategy. Mike walked through the high-level Q2 results, which tell a story of consistent mid-single-digit top-line growth and improved profitability. But to reiterate, Q2 organic revenues were up 6.8% to $281 million with the revenue over performance powered by our transaction solutions and some additional support from foreign currency rates. Adjusted EBITDA of $108 million was up approximately $6 million with a nearly 300 basis point improvement to margin. Improved revenue and EBITDA margin speaks to the power of the company's 5-point operating plan, which positively impacted earnings per share. Non-GAAP EPS increased to $1.21 compared to $1.08 last year. Adjusted free cash flow was $53 million, up from $36 million last year representing an adjusted free cash flow margin of 18.9% compared to 12.7% in Q2, 2024. Our expected free cash flow for the year gives us confidence to continue investment in a number of critical areas like product innovation, which can also include stock repurchases and debt repayment. In the first half of 2025, we bought back approximately 4% of our outstanding shares and continue to demonstrate our strong belief in the value of Blackbaud. Additionally, leverage decreased to 2.7x in the second quarter compared to 2.9x last quarter. It was a strong first half of the year. Before I move to guidance for the remainder of 2025, there are several housekeeping items that I wanted to highlight that may influence our numbers and help you set your models for both the year and upcoming quarters appropriately. Thinking about revenue seasonality, our transactional revenue can create fluctuations from quarter-to-quarter with Q4 typically being our highest revenue quarter. Our annual merit increases for employee compensation go into effect on July 1. So Q3 and Q4 tend to have higher compensation-related costs compared to Q1 and Q2. Finally, we're analyzing the tax implications of the July tax law changes and believe it will meaningfully reduce cash taxes for the company in the near term. Any potential impact to the second half of 2025 is not yet reflected in our improved 2025 guidance range. We will provide more clarity on this topic during next quarter's call. Moving now to guidance for the remainder of 2025. Our guidance for the year assumes no material changes, positive or negative in the current macroeconomic landscape. We are raising our guidance across all metrics for the year by the following: Regarding revenue, we are projecting revenue in the range of $1.120 billion to $1.130 billion representing organic growth at the midpoint of approximately 5% on a constant currency basis. This is an increase of $5 million driven by strong first half transactional revenue performance as well as some foreign exchange upside relative to expectations at the beginning of the year. Our modernized approach to contract renewals continues to go as expected and as originally planned, we are lapping another renewal pricing cohort, which is reflected in our increased guidance. Additionally, our revised guidance doesn't assume the same level of transactional revenue over performance as the first half and any viral giving events would represent upside to the current guidance range. Shifting to profitability. We continue to focus on margin expansion opportunities, while at the same time, making investments in the business in key areas like innovation, artificial intelligence and cybersecurity. Therefore, we anticipate EBITDA margins of approximately 35.4% to 36.2% as a reminder, EVERFI's contribution to our 2024 EBITDA was approximately $10 million to $15 million. After adjusting for the estimated impact of the EVERFI divestiture the midpoint of our new EBITDA margin range implies approximately 7% growth in adjusted EBITDA dollars year-over-year. With the overall revenue and spend configuration I just outlined, we expect 2025 non-GAAP EPS in the range of $4.30 to $4.50. After adjusting for the estimated impact of the EVERFI divestiture, the midpoint of our revised 2025 non-GAAP EPS range implies an approximately 11% rate year-over-year. The combination of higher growth and better margins is expected to result in a Rule of 40 at constant currency of 40.5% and the midpoint of revised guidance for the full year and approximately 190 basis point improvement year-over-year. We continue to focus sharply on driving adjusted free cash flow and returning capital to our shareholders. For the year, we're increasing our adjusted free cash flow guidance of $190 million to $200 million. As we discussed earlier this year, there are approximately $60 million of onetime items in working capital fluctuations negatively impacting our 2025 free cash flow outlook that we do not expect to repeat in 2026. You can find more details on Slide 24 of our investor deck. The company has tremendous optionality to dynamically allocate capital to its highest use based on market conditions, including additional stock repurchases, repayment of debt or synergistic M&A. The performance of our stock, the interest rate environment and the availability of acquisitions will help inform our capital allocation decisions going forward. We have a lot to be proud of and a lot more to look forward to through the back half of 2025 and beyond. As such, we remain focused on providing enhanced value to our customers and shareholders. At this time, I'll ask the operator, let's open up the line for questions. Operator?

[Operator Instructions] We will now take our first question from Brian Peterson from Raymond James.

So Mike, obviously, AI is very topical. It sounds like you'll have more to share there out of bbcon. I'm just curious at a high level, like how much is that coming up in your customer conversations? And how are you thinking about budget and spend for some of these AI tools over the next several years?

Yes. So thanks, Brian. I appreciate it. Yes, we'll have a lot of news at bbcon. We've had several announcements throughout the last year as well with a lot of embedded AI and machine learning capabilities. We've been building predictive analytics and machine learning capabilities for the last decade. So it's not a new topic area for us per se. It's coming up with customers. They're trying to figure out how to use AI, how does it impact them, how they get more productivity? Can they drive revenue, all the things that you would normally think that they would be curious about. And I feel like we're going to be an industry leader in the space. We've got a really good team. We've added a lot of talent. We've got new engineers in our India location that are AI experts. We've got some outside partners we use in the space. We've announced quite a bit already embedded in our solutions. I mentioned this morning in my prepared remarks, some new Agentic AI capabilities. Those will be new products and solutions from us that will be monetized. Some of the things we've already announced are embedded in our solutions and included in the base cost of our solutions. Some of the new ones will be new products and new revenue lines from us. So we continue to invest in AI in the space from an innovation standpoint. I'll also add, we have a ton of AI work going on inside the company. As a software company, we're a consumer and a creator of AI, if you will. So we have a lot of solutions across the business in marketing and sales and customer success and software engineering and product development across the board. So we're using a lot of capabilities there. We aren't really achieved sort of economic benefits from those. We're getting some productivity lifts. They're making impacts on the business and how we run the company. But I think they're going to provide some pretty interesting opportunities as we continue to march down the Rule of 45 from a margin improvement and productivity improvement standpoint.

And maybe a follow-up for Chad. I know you guys kind of mentioned the kind of mid-single-digit plus growth rate over the long term. Looking at the first half of the year, transactional, it was growing in the high-single-digits. I know there's been -- give some comments on viral giving and there's some structural tailwinds to that growth rate. I just -- I would like to understand how we should be thinking about transactional relative to that mid-single-digit plus growth rate over the long term.

Absolutely. And we had a strong first half of the year. The transactional overperformance was just that. It transactional volumes were strong. It's difficult to predict the transaction volumes are more volatile. With that said, we had a great first half and a strong second quarter. I'd also mention that the contractual revenue performed well as to plan. So as you think about the transaction over performance, we're being measured. We don't expect that to recur. In the second half at the moment, we're going to continue to monitor. And I'd also remind you that we saw a little bit of viral giving in the first quarter. We haven't seen any in the second quarter. And as such, we haven't included any in the guidance. So we just keep that in mind. If there are viral events that happen, those will be upside.

Our next question comes from Rob Oliver with Baird.

So Mike, first 1 for you would be on the addition of Bill Fort as Head of North America. I know you guys have called out prior to Bill's arrival, focus on new logos and you've been calling them out in the slide deck and you referenced a few here. I guess, in echo of Brian's question trying to understand that single-digit that mid-single-plus target or guidance or forecast relative to software versus payments. Maybe talk about some of what Bill was doing -- or I know, I realize he's only been on the job now for 1.5 months. But maybe talk about what his priorities are, what some learnings are that he's been bringing to a Blackbaud and what you expect sort of his benefit will be? And then I had a quick follow-up for Chad.

Yes, Rob, thanks. Yes, we're excited to have Bill here. We've known Bill for a little bit. Like you said, he's been here just several weeks. Like any time you bring in an executive, I expect new ideas. I expect probably some different bench practices. I definitely expect our ability to compete will be upgraded. He was on the other side of the table at Salesforce.org from us for years. And then so he brings knowledge of our customers in the marketplace understands our competition, all of our competition not just Salesforce and their partners. He brings a lot of executive sales structure experience, having been at bigger companies like Salesforce and Oracle and SAP. So he's got a long background in sales and sales leadership and he have a specific background in our exact space. So there's a lot of benefit from his knowledge, and I expect we're going to be making some changes to driving new logos and cross- sales in the company.

Great. I appreciate that. And then, Chad, just 1 on the buyback. You guys have been fairly consistent with that. I think you did not buy back stock this quarter. So just was curious as to what the thought process there. I know you guys described it as programmatic, but just wanted to -- any color you could provide there on your thoughts would be helpful.

We've made good progress on that front. Our current focus is from a capital allocation perspective are on stock repurchases and debt repayment in the first half. Now we've repurchased approximately 4%. We stated up to 5% for the year. So we're pacing really well. We bought back 11% last year. At the same time, we did borrow quite a bit. So we've seen an increase in interest expense. So we're mindful of that. In Q2, we paid down quite a bit of debt. We've delevered. And so you would have heard -- we deleverage at 2.7x down from 2.9x in the first quarter. So good progress there, and we expect to continue to delever and we'll get down to somewhere in the low-2s by end of the year. So the way I think about it, like we're going to continue to evaluate interest rates. We'll see what the Fed does. And then we'll prioritize stock repurchases as well as debt repayment. And the good news is we have optionality to do both.

Our next question comes from Parker Lane with Stifel.

I know you have about 25% of contracts that are in the renewal cohort this year. I was wondering if you could talk about the linearity and renewal periods you're seeing from a seasonal perspective. Is that more front half weighted, back half weighted? Or is it something that's smoothed out over the course of the year?

Yes, Mark, it's Mike. Typically, renewals are higher in Q2 and at the end of the year, kind of matches people's fiscal years, but it's really paced out. The bump-ups in volume aren't really significant, such fairly smooth that we see some increases in Q2 and Q4. The program is going well. It's just a normal course of business now. It's 3 years old. We'll be 90% done with all of them by the end of this year. No major changes to what we anticipated and what we rolled out. And pretty much all customers are signing 3 years, sometimes longer, contracts.

Thanks, Mike. And it's been a year filled with a lot of headlines around the macro and tariffs and [indiscernible] clearly, some solid results here through the first half of the year. Have you seen any pockets of weakness in customer -- in the customer base or some anxiety around renewals perhaps as these businesses and organizations think about where their future funding is going to come from?

Yes. Good question. So for us, we don't see any impact to Blackbaud. Our customers, ones that we're getting federal funding. Obviously, they need to look for revenue in other places. Typically, that's our platform. So if you're losing a grant revenue line, by the way, we're not involved in the funds flow from the government at all as a note. But if you get government grants as 1 of your revenue lines and you use a Blackbaud fundraising solution for your other revenue lines, you're going to depend more on us. So there's a higher dependency for our kind of solutions to drive revenue, which we see as potential upside for us. We've seen some customers have to cut back a little and restructure because of a loss of a grant -- federal grant revenue line, but haven't seen anybody go out of business or any changes like that. So there's been no impact to sales pipeline or renewals. And again, it makes our fundraising solutions stickier.

Our next question comes from Kirk Materne with Evercore ISI.

Mike, I realize it's early, but starting in the beginning of next year, you're going to start coming back up on cycling through that first tranche of customers that did those 3-year deals with you. How are you just thinking about sort of upsell around those customers that have already gone through the process. Customers tend to renew early at times. Just any thoughts on sort of that is an opportunity. Obviously, it's a much more structured contracting process. But obviously, you guys have a broad suite of products. Just wondering how you're thinking about upsell and cross-sell as some of those customers come back and start reengaging with you?

Yes, Kirk. So we don't wait for the contract renewal. About half our sales team are focused on cross-selling anyway. We have expansion opportunities for most of our customer types, if you will. And so that's an ongoing activity. It's not just at renewal. Sometimes it happens at renewal. So the back-to-base sales folks are coordinated with our contract folks together on renewals. But again, that's an ongoing activity for us. So we just see this continuing on forward. As a reminder, most of our customers have multiple software providers, not Blackbaud competitors, but just others they buy software from. So our move to the pricing and standardizing on 3-year contracts wasn't necessarily new for our customers to see. It was just new for Blackbaud and so we don't see any changes to the program. It's just -- again, it's part of the base business, and we'll just continue on.

And then, Chad, for you, I realize it's super early. Any just thoughts on the magnitude of benefits from a cash tax perspective because of the 1 big beautiful bill? Any just thoughts on that for you all. Obviously, it impacts your R&D in particular, but just kind of trying to get a sense on sizing, if at all possible?

Yes. Thanks, Kirk. It's still early days. So we're analyzing the implications of the new legislation. We expect that it's going to have a very favorable impact from a cash tax perspective. We have not sized it yet to the point that we're ready to share, but we think it will be meaningful and our intent will be to provide an update at the next call. But I would remind everyone that we've not included the potential impact into the revised guidance.

Yes. Kirk, I'll just add -- this is Mike. I'll add to that, too, that in Chad's prepared remarks, he mentioned that we have $60 million we took in the first quarter for some moves that really improved the business. About half of that was a lease write-off was $28 million. That would have cost us $42 million if we kept the lease. That $60 million is coming back next year, #1. #2, we've got the benefit of the tax bill Chad just mentioned. And thirdly, we'll just have organic improvement as the business continues to grow from a cash production standpoint. So really outstanding outlook with those 3 components related to cash.

Our next question comes from Koji Ikeda with Bank of America.

I wanted to ask a question on the Agentic AI strategy. I know you're going to talk about it more at bbcon, but I did want to ask how you're thinking about it really from a high level of the AI product and how you're thinking about including the features within existing tiers maybe using AI as a carrot to up-tier to more premium tiers. And then just AI products that are stand-alone SKUs and how to think about monetization of those standard SKUs? Are they going to be fee based? Are they going to be consumption-based? Any sort of color there would be helpful.

Yes, Koji, thanks. I can spend an hour on that one. So we've got some really impactful AI in production across many of our products today, we have not monetized those, as you know. And they're driving a lot of improved capabilities. And because they're embedded in our products, we have -- the key thing about AI is access to appropriate data, clean data and good data makes AI an impactful additive solution for folks. And so we have things that are going across our fundraising solutions today that are very important and impactful, not yet Agentic. We are coming out with Agentic, I mentioned that. We are working with customers now -- we'll have products by the fall at bbcon, these will be separately monetized. We're looking at all the models of pricing that are in the industry. We've got some outside folks helping us with pricing models. It will be pricing. There's a couple of choices you can make. I'm not going to preannounce that. But it would definitely be additive for us and drive good ROI for customers as well. We are coming out with a Blackbaud AI chat or a copilot. That will be here very, very soon. And that will allow customers to just ask English questions within their solutions as opposed to kind of going from screen to screen like a typical cloud solution, they could just ask questions and get answers, inside their solution. The key thing is our products are systems of record. So we have all the data. And we also procure outside data as well. So we have first, second and third-party data that gets ingested in our systems. So our own data that gets in the core system of record, outside data that we purchased and add to it and then apply AI capabilities on top of that for unique solutions for customers. And you have to be sort of inside the system of record to be able to do that and we're the system of record, which is a pretty significant competitive advantage for us. From an Agentic standpoint, we will be coming out with a virtual fundraiser, again, embedded within our solutions, separate products separately monetized. I'll give you an example. Think of a university that might have 200,000 alumni that might have 30 gift officers. Those 30 gift officers were probably focused on the top 5,000 or 10,000 prospects, if you will, or alumni. And there might be 190,000 of them that really don't get a lot of attention, recent grads, other reasons. A virtual fundraiser can focus on those 24 hours a day and raise money, which will be an additive fundraiser going after potential revenue lines and donors, they're not access today are focused on today. So that's an example of an Agentic solution that we're building that will be out here in the fall, a virtual fundraiser. Hopefully, that was helpful.

Very helpful. And maybe a follow-up for Chad. I know the previous question was around tax changes or your answer is around the tax changes. I did want to dig into that just a little bit. We were taking a look at those July tax changes and super interesting. So maybe from a high level, what particular topics within tax changes are you looking at? Was it maybe something around the R&D expense amortization or something else that was behind your prepared remarks about tax?

Sure, Koji. And you're right. The most material section of the code change that we expect to drive change for Blackbaud is going to come from that Section 174 that's directly related to R&D expenditures. The repeal of the Section 174 will kind of remove the requirement to capitalize and then amortize the tax benefit over time for domestic R&D. So that's where the bulk of the -- kind of the thought and commentary come through there's details you're right to be aware of. R&D work that occurs offshore will continue to be capitalized and amortized. So there's devil in the detail that we're getting into, but that's the primary driver.

Okay. I think that's it for our questions today. Yes. Operator, I'll take it from here. Thank you, and thank everyone for joining us today. We will be attending a number of investor events in August and September to include several investor conferences, which are listed on our Events page on our Investor Relations site. We hope to see you and/or speaking with you soon, and we wish you good health, and have a great day. Thank you.