Blackbaud Targets AI Agents and Payments to Fuel Nonprofit Software Growth
Blackbaud executives outlined plans to expand revenue through generative AI and LLM products, payments processing, and share buybacks during a conference discussion. The company serves nonprofits, foundations, and educational institutions with fundraising and financial management software.
Chad Anderson, Blackbaud's chief financial officer, said the company operates in a large market. U.S. nonprofits receive roughly $600 billion in annual donations, and the nonprofit sector ranks as the third-largest employer in the country.
Three Waves of AI Strategy
Jeff Klein, director of corporate strategy and development, described Blackbaud's AI approach in three phases. The first involves analytics capabilities such as donor prospecting and gift recommendations. The second adds generative AI features to existing products at no extra cost, including a chat tool that generates donor outreach content.
The third phase centers on what Blackbaud calls "Agents for Good"-AI agents and automation designed as autonomous virtual teammates. The first product, a fundraising development agent, entered early adoption in late 2024 and became generally available in March. Klein said early customer response has been positive.
Klein noted that many nonprofit organizations lack large technology teams and rely on vendors to introduce new tools. This positions Blackbaud to embed AI capabilities faster than the sector's historical adoption pace would suggest.
Payments and Cross-Selling Drive Revenue
Transactional payments revenue accounts for just over one-third of total revenue and grows in the mid- to high-single-digit range annually, outpacing core software growth. Klein cited new customer acquisition, payment enablement within the existing customer base, and pricing optimization as key drivers.
Cross-selling also remains central to Blackbaud's expansion strategy. About half the sales force focuses on new customers, while the other half pursues additional product sales to existing clients. Blackbaud has roughly 18 products and is adding separately priced AI offerings.
Attrition Stable Despite Funding Pressure
Some nonprofits face reduced government funding, but Anderson said customer attrition has not shifted noticeably. Large nonprofits typically maintain multiple revenue streams, and those losing government support often increase reliance on Blackbaud's fundraising tools.
Blackbaud began moving toward standard three-year contracts in 2023 after pausing during the pandemic. Gross dollar retention has remained stable at around 92%, and the company is entering the next renewal cycle after completing the initial three-year period.
Capital Returns and Competitive Position
Blackbaud has reduced its share count by 14% over the past two years and committed to dedicating at least 50% of free cash flow to buybacks annually, with a target of 5% to 10% annual share reduction. The company aims to maintain leverage in the low twos and views smaller acquisitions as a secondary priority.
Klein said Blackbaud operates in a fragmented market and is the only provider offering a broad suite spanning financial management, fundraising, digital marketing, school operations, and ticketing. Larger horizontal providers like Salesforce and Microsoft Dynamics compete in some deals but lack nonprofit-specific features and often require customization.
The company projects mid-single-digit revenue growth, 6% to 8% EBITDA growth, and 13%-plus EPS growth. Management described AI as a potential tailwind not yet factored into current guidance.
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