Blackbaud Inc Q3 FY2023 Earnings Call

Good day, and welcome to Blackbaud's Third Quarter 2023 Earnings Call. Today's conference is being recorded. I'll now turn the conference over to Kevin Mooney, Executive Vice President, Investor Relations. Please go ahead, sir.

Good morning, everyone. Thank you for joining us on Blackbaud's third quarter 2023 earnings call. Joining me on the call today are Mike Gianoni, Blackbaud's President and CEO; and Tony Boor, Blackbaud's Executive Vice President and CFO. Mike and Tony will make prepared comments, and then we will open the lineup 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 measures on this call. Please note that non-GAAP financial measures should not be considered in isolation from as a substitution for GAAP measures. With that I will turn the call over to you Mike.

Thank you for joining the call today. I'm pleased to share that Blackbaud produced very strong results in the third quarter. Our performance accelerated as we continued to execute on our five-point operating plan to improve product innovation, accelerate bookings growth, optimize transactional revenue, modernize contract pricing, and improve cost management. You may recall that on last quarter's call I suggested that our plan would deliver a one-two punch. First an improvement in profitability and second improved organic revenue growth. In the second quarter, the business delivered the first punch, much improved margins. This strong margin expansion continued in the third quarter with total cost, again, being below last year's level. We're continuing to aggressively manage our cost and margin going forward. This quarter, we also delivered the second punch with improved organic revenue growth. For the quarter total organic revenue grew 6.6%. That's more than twice the rate of growth in the second quarter and up almost 5 percentage points from a year ago. And our organic recurring revenue, which is our most strategic revenue line, comprising 97% of our total revenue grew even faster at 8.3%. The combination of accelerating revenues and lower costs drove improved margins and excellent cash flow for the third quarter. As a result of our execution on both the top and bottom line, we delivered on our commitment to become a Rule of 40 company with a result of 41.6%. We attained this North Star goal a few years before our initial expectation in a full quarter ahead of recent expectations, and that score is up a remarkable 14 points from the third quarter of last year. Results like these take a coordinated effort across the entire company. I'd like to thank Blackbaud's employees for their strong execution and commitment to delivering for our customers. In the quarter our team made continued progress across all five points of our plan. One aspect I'd like to discuss in greater detail on today's call are the many new capabilities we're driving through innovation. During the quarter, we continued to invest in new innovations that increase the value of our products and solve customer pain points. We're investing for the intermediate and longer term in several exciting opportunities. For example, during the quarter, we placed a new optimized donation form into an early adopter program with customers across charity, education, and arts and cultural organizations. Customers appreciated our investment in a system of engagement that's designed to attain higher conversion rates with fewer clicks and therefore drive customer revenue. So it's both more impactful and more efficient. We expect to make this generally available in the first half of next year. Also, we're hoping to solve a large customer pain point with early introduction of a new product called Impact Edge starting in the corporate sector. This newly developed solution aggregates EVERFi’s educational impact data with employee volunteering and giving data from our YourCause platform. It provides a single view of a corporation's social impact program and replaces labor-intensive, manually produced reports into a standardized structure. With Impact Edge human resources and DE&I leaders are able to track and analyze performance of their programs in real-time. Current plans are to put this new solution into an early adopter program this year with a full rollout in the second half of 2024. And lastly, we continue to build on our intelligence for good strategy that we introduced last quarter that leverages the power of machine learning and artificial intelligence. For example, recently we introduced a new capability we call the story enhancer in JustGiving our consumer giving platform. This generative AI capability resulted in more engagement among early adopters and is expected to have a positive downstream impact on our payments revenue. We're enthusiastic about what these new features and products can do to make our customers more effective and efficient, increase the value of our offerings, and add to our growth going forward. To illustrate how our products impact our customers, I'd like to share a few examples of recent customer wins. The Sarcoma Foundation of America was a new logo win for Blackbaud in the third quarter. They came to us with the goal of increasing awareness around the disease and raising funds for researchers and their advocacy efforts. They chose to replace two competitive products with Blackbaud's Raiser's Edge NXT donor management system, and Team Raiser for their peer-to-peer fundraising. Delaware County Christian School is a K-12 independent school in Pennsylvania. They were running several disparate systems, one for academics, a second for advancement, and a third for the business office. This was a real pain point. There was no 360-degree view of students. Revenue management was challenging and communication was fragmented across departments. As part of their strategic plan, the school was looking for an innovative education technology partner while enhancing school communication and fellowship. Blackbaud is providing a total school solution to enable their strategic vision. On the corporate impact side of the business EVERFi welcomed Cisco as a new partner. Cisco Systems is partnering with EVERFi to offer mental wellness and financial literacy education for K-12 students and adults across Selma, Alabama as a part of their broader CSR program efforts in the region. Additionally, EVERFi renewed and expanded their nine-year partnership with the National Hockey League and National Hockey League Players Association who sponsored the Future Goals Hockey Scholar Education course that leverages the game of hockey to teach STEM skills to students in grades four to seven. The third quarter was also a period of very active customer outreach with several high touch events, for example, the Annual JustGiving Awards were held in London and received over 20,000 votes to celebrate 24 individuals that fundraised for causes on our peer-to-peer platform. In Charleston, several top non-profit CIOs convened at our digital innovation summit that covered topics ranging from AI to cybersecurity and our corporate impact team assembled some of its largest customers to its annual impact summit in Miami. Their leaders discussed why social impact is a business imperative and how to best drive impact to employee volunteering and giving. Finally, last week we held bbcon in Denver with smaller popups slated for Toronto, Sydney, and London. This is our largest customer conference and this year we held the conference in hybrid format with virtual and in-person attendees. This had the dual benefit of expanding the tens of attendees while also enabling the personal camaraderie and interaction that our customers enjoy. Through these events, we reached the full spectrum of our customers from individuals to non-profits to corporations. In addition to strengthening our robust brand, this program of outreach affirms our position as the leading software company singularly focused on a social impact movement. With that, I'll turn the call over to Tony for coverage of our financial results.

Thanks, Mike. As Mike mentioned, we had outstanding execution in the third quarter resulting in strong third quarter results in line with the increased guidance we communicated in May. We accelerated top line growth as envisioned, continued the tight focus on cost management, produced strong EBITDA and growing cash flow, and achieved our goal of becoming a Rule of 40 company one quarter ahead of plan. Let's dive into the details. Total revenue for the quarter reached $278 million representing an organic growth rate of 6.6% over the third quarter of 2022. The third quarter marks the third consecutive quarter of increasing revenue growth rates. Notably, this growth is more than double the growth rate of the previous quarter. During the quarter foreign exchange had a slight dampening effect as the British pound strengthened against the dollar such that the business grew 5.9% at constant currency. Non-Strategic one-time revenues have leveled out over the past three quarters and declined by $3 million year-over-year. As we've talked about in the past, this line item is mostly comprised of professional services that carry modest margins and are not a strategic focus of the company going forward. Recurring revenues grew faster at an organic rate of 8.3% or 7.5% at constant currency. As Mike noted earlier, recurring revenues constitute 97% of total company revenues. The excellent growth in recurring revenues is driven by both our contractual and transactional recurring revenue streams. Contractual recurring revenue is generated from our software subscriptions and is at the core of what we do, accounting for about two-thirds of total revenue. For the quarter we continued to see excellent results from modernizing our pricing model in the social sector. We also continued to extend contract terms. Last year the majority of contract renewals were for a one-year term, this year the vast majority have been for a three-year term and recall that there are embedded mid to high single-digit price escalations in years two and three of multi-year contracts. The power of this transformation is remarkable and is just now being felt in the business. There are three additional benefits of this modernization program. First, it provides a higher degree of revenue security. Second, it dramatically increases revenue visibility and predictability, which aids planning. And third, it reduces the volume of internal work effort involved in the renewal process. Given that our retention metrics have held up or are slightly improved, we're quite happy with the impact this program is generating. The remaining third of our revenues are transactional in nature and are composed of donation processing, consumer giving, and tuition processing for our K-12 school clients. These revenue streams are connected to and result from our software subscriptions. They have good value for our customers, eliminate their busy work, and create greater customer stickiness. All three saw good volume growth this quarter and like contractual recurring, we've had good success implementing price increases in this area of the business as well, although at more modest rates. In summary, our revenue initiatives are progressing very well, and we are pleased by the top-line performance during the quarter, which reflects progress against our 5-point plan. We're keeping a very close eye on the macro environment but so far, we've not witnessed any additional impact on giving as we head into the fourth quarter, the largest giving season of the year. Therefore, we're reiterating our full-year 2023 revenue guidance of $1.095 billion to $1.125 billion. Now let's turn to the bottom line, cost management has been a strength of ours this year, and the third quarter was no exception. During the quarter, we reduced total costs by $13 million or approximately 6% from a year ago. When you factor in accelerating revenue growth, which was $16 million during the quarter, you see the strength of the P&L management. This performance demonstrates the scalability of our business. Our intention is to keep a tight hold on costs going forward, however, we will be adding a few positions throughout the company and will also be increasing our investment in the area of security. Our cost management should continue to produce results with some minor quarter-on-quarter fluctuations owing to modest cost increases and a likely revenue mix shift to payments processing in the heavy giving season of the fourth quarter. Our adjusted EBITDA for the period came in at $97 million. That's a $30 million improvement over last year's third quarter and a 45% increase. The adjusted EBITDA margin was 35% compared to 25.6% last year. At constant currency, the EBITDA margin was 34.8%. We remain on track to attain our full year EBITDA margin guidance of 30.5% to 31.5%. There's a lot to be satisfied with in this report; however, I'm most pleased with surpassing the Rule-40. This has been a North Star for us. Just one year ago, we set our sights on this goal as we launched our 5-point plan. We were then at 27.3% and suggested that we'd cross 40 in 2025. Obviously, we made progress against this goal more quickly than anticipated. This quarter, Blackbaud became a Rule of 40 company, with a result of 41.6% or 40.7% at constant currency. That's a more than 14-point improvement from the third quarter of last year, and it's even a quarter earlier than we had expected as of last quarter's earnings call. There could be some volatility on this number from quarter-to-quarter as certain costs are lumpy and as the fourth quarter's heavy payment volume naturally comes at lower margins. That said, we will not stop here and are working to make further improvements. Looking ahead to 2024, we expect to continue growing revenue and expanding margins to achieve Rule of 40 for the full year. We also had a very good quarter of adjusted free cash flow. The third quarter is typically our seasonally strongest quarter for cash flow production, and that held true this year. We generated adjusted free cash flow of $118 million in Q3, and that puts us on track to meet or exceed the high end of our increased guidance of $190 million to $210 million for the full year. We ended the quarter with $712 million of net debt and as we previously announced, we will be making aggregate payments of $49.5 million to 49 State Attorneys General and the District of Colombia during the fourth quarter in settlement of the security matter. Even with these payments, we still expect to end this year at our previously announced goal of approximately two times debt to adjusted EBITDA. Additionally, given our strong cash flow, we expect to resume share repurchases this year under our existing $250 million board authorization. We'll be giving longer-term guidance on our capital allocation and share repurchase plans when we announce our fourth quarter results in early 2024. Before we open the call for questions, let me summarize: Q3 was a very strong quarter for Blackbaud and represented an inflection point for revenue growth as we continue to deliver on our 5-point operating plan. Coupled with continued progress on cost management, we drove a dramatic improvement in adjusted EBITDA, which was up $30 million or 45%, and the adjusted EBITDA margin expanded to 35% from 25.6%. We delivered on our vision to become a Rule of 40 company sooner than planned, and we generated a sizable amount of adjusted free cash flow, positioning us to maintain a strong balance sheet and return capital to our shareholders in the form of share repurchases. With that, operator, please open the lines for any questions the audience may have.

Thank you. We will now take our first question from Brian Peterson from Raymond James. Go ahead, your line is now open.

Thanks so much and congrats on the quarter. So Mike, just wanted to start off with the macro. I would love to understand what your customer conversations have been like over the course of the year? And you also have laid out some growth targets for 2024, I'd love to understand the visibility that you have into that figure and what kind of gives you that confidence in the high single-digit growth rate?

Sure, Brian. As I mentioned in my prepared remarks, this time of year brings a lot of customer interactions, especially with bbcon and other events we’ve had in the past couple of months. There has been significant engagement overall, which has been very positive. The excitement around bbcon was notable due to the product announcements, and we set up a large marketplace with demonstrations of new products and capabilities. Recently, we issued a few press releases regarding product initiatives involving generative AI and the launch of a new product called Impact Edge. The customer feedback has been overwhelmingly positive, both for myself and the rest of the company. Regarding your second question about growth, we are very pleased with the recent quarter’s results. The most exciting aspect for me is the organic recurring revenue, which comprises 97% of the total and grew by 8.3% this quarter, which is fantastic. We have implemented several initiatives focused on top-line growth moving forward, and we feel optimistic about this quarter, Q4, and next year. We conduct long-range forecasts internally because the business is mainly recurring, giving us a high level of confidence in our growth and margin outlook. I’m also thrilled that we achieved the Rule of 40 this past quarter and plan to maintain that perspective going forward.

Well, it's great to see the Rule of 40. And being out of bbcon too, you rolled out a lot of the innovation out there. I'd love to understand, as you think about the pickup in innovation here, is that something that we'll be able to drive pricing further than you guys have kind of already announced, or is that something that's going to be more embedded in what you guys are doing today? We'd just love to understand how we think about the innovation driving pricing over the long term? Thanks, guys.

Yes, of course. The pricing we have initiated involves converting our customers to three-year contracts with updated pricing. These contracts are based on the continued innovation in our cloud platforms. This new innovation is already factored into those contracts. While some innovations won't have new pricing, products like Impact Edge will generate new revenue. Additionally, other innovations, such as the new donation forms, will enable our customers to increase their revenue and donations, ultimately contributing to organic revenue growth on our payments platform. Therefore, there is built-in organic revenue growth from new products driving transactions, rather than just through changes in pricing along with our existing pricing model from the three-year contract conversions.

Appreciate the color. Thanks, Mike.

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

Great, hey, good morning. Thanks, guys. I had two, Mike, one for you and then Tony, a follow-up for you. So Mike, just on these, obviously, a nice job you guys are executing well on these price increases and on the contract discussions. I imagine these can always be easy discussions in this economy. I'm just curious how you guys are thinking about it, I mean switching people from one to three years. Is this an opportunity to get more product into people's hands as well to really showcase some of the other capabilities for Blackbaud as we sometimes see when price increases happen with software companies? Just help us understand how you're thinking about that?

Yes, sure. So the good thing on this move to three-year contracts and new pricing is our retention numbers have helped, which is great. And we just had thousands of customers in Denver for bbcon, and I spoke to many customers. No one's excited about getting higher pricing, but customers are excited about all the innovation coming. And so I feel like the stream of innovation is us just earning the right to have higher pricing and maintaining our retention rates. Customers are seeing that. Our platforms are very sticky. They are systems of record. They're nondiscretionary and customers are loyal and excited about what's coming from an innovation standpoint. So it's been positive. Yes, some of the conversations aren't great, but customers are not leaving because of pricing. They're staying because of the impact our products have on their business and they see a stream of innovation coming. So it's been a really positive program for us, Rob. It's gone extremely well and the customers are super excited with what they've seen at bbcon and the other events we had.

Great. Okay. That's really helpful. Thanks for all that Mike. And then, Tony, just as a follow-up question, Mike mentioned we have some visibility here given the notice, the five-month notice. How should we think about, I think about half of the contracts, a very high mix of contracts up for renewal next year? So how should we think about that linearity, is it going to be more back-end loaded, is it going to be more even throughout the year? Any help there would be great.

Yes, Rob. So we had the biggest cohort this year from a renewals perspective. We've got a slide in the investor materials that you can look at. I think next year about 30% of the contractual recurring base will be up for renewal, and we'll be working on the new pricing and the shift to three-year contracts. We've got the seasonality to keep in mind as typical on those contracts. A lot of those in the quarters, certainly in Q2 and early part of Q3 with the school years and just typically in the years when we sold those and then some also late in the year as well. So we'll have some lumpiness around end of Q2, start of Q3. That's not unusual. That's typical for us. So you'd expect that. And then the pricing in that uplift turns on very quickly on most of those contracts, and that's a straight line method over the three-year contract term. So I think as long as you get that seasonality right on when the renewals come up, you can spread that revenue pretty cleanly in your model.

Okay, great. And thanks for that Tony. I misread it, it is 30. Thanks for the correction there and thanks for the interest, guys. Appreciate it.

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

Yeah, hi guys. Thanks for taking the questions here. Maybe, Tony, just to pick up on the last response you had. I know you guys were pretty proactive last year in getting in front of these 2023 cohort customers and communicating the pricing change and perhaps doing early renewals. Is there any potential for early renewals for that 2024 cohort of people starting to think about that or is that going to come at the time that the contract ends?

Yes, Parker, as Mike mentioned in his prepared comments, we are already well into December at this point due to our advance planning. We are initiating conversations with customers whose contracts we will be renewing in the early part of 2024. We are also engaging with some of our larger customers well ahead of time to discuss upsells and other opportunities. Currently, our visibility is quite strong. We have almost a full year of renewals completed through December, and we have a solid understanding of our renewal rates, which are performing even better than anticipated. This is especially impressive given the price increases and the shift to three-year contracts. Additionally, some customers opted for one-year contracts and will begin their renewals in the next couple of months, even before the end of this year. We are already working with these customers for their second-year renewals as well, and our renewal rates remain robust. Overall, we are feeling very optimistic.

Yes, Parker, I'll add. So we're going to get about 35% of the total this year. We're pretty much done with this year, close to it. We noticed five months ahead, so we're already notifying customers in March next year. And when customers get notified, that's when the conversation starts. They don't wait till that month. So think about the February and March customers; we've already been talking to because if everyone has already got noticed, the March ones are getting noticed now, and we'll start those conversations. So this whole thing is sort of five months ahead of us all the time, which is really great. So we're able to manage it with very good future visibility.

Got it. Appreciate the color on that. And then, Mike, maybe to stick with you. I thought the Impact Edge is very interesting. Can you help us understand, is that primarily going to be an expansion vehicle in that corporate vertical that you're playing in today or does that have the potential to actually drive incremental interest in net new business through that release?

Yes. That product was extremely popular at bbcon, with many people waiting to see the demo. It is introduced into our corporate impact business, targeting companies like Fortune 1000 firms to measure and visually display their global impact. Eventually, we plan to extend it to large nonprofits and foundations in other markets, starting with our corporate impact group.

Understood. Appreciate it guys. Thanks.

Our next question comes from Kirk Materne with Evercore ISI. Please proceed with your question.

Thanks and congrats on the nice quarter. Mike, I was wondering if you could just talk a little bit about sort of your thought process on sort of organic innovation versus acquisition at this point in time. We're at sort of a different period in terms of where interest rates are. And I was just kind of curious, when you think out three to five years, do you feel good about the ability to perhaps be a little bit more focused on organic? I know you have it, it's not like you weren't, but less dependent on M&A as you go forward. I realize that's always a balance, but just kind of curious how you're thinking about it given where rates are? And I just have a quick follow-up for Tony.

Yes, absolutely. We have been quite inquisitive as a company. Last year, we made a small acquisition that has effectively expanded our technology. Recently, we also acquired a small equity stake in one of our startup partner businesses, contributing to our technology investments aimed at enhancing our innovation pipeline. This year, we have focused on several initiatives we have previously discussed, such as resolving litigation with the Attorney Generals and paying off debt, which aligns with our goal of being leveraged at about two by year-end. As mentioned, we plan to resume our buyback program with $250 million authorized by the Board, which we had not yet implemented while we prioritized debt reduction and legal matters. This gives some insight into our capital strategy. Additionally, when we share our Q4 results and next year's guidance, we will outline our long-term capital allocation strategy. Regarding mergers and acquisitions, we remain active in the market. We have a strong outlook for robust organic growth but also see solid acquisition opportunities to increase our total addressable market and enhance the product offerings per customer. For example, Impact Edge represents a new organic initiative aimed at diversifying our product range per customer, while promising M&A opportunities persist as well.

That's helpful. And then Tony, I have a quick question for you. You mentioned some one-time benefits in transactions this quarter related to the Hawaii wildfire relief and the BBMS rate change. Were those significant? It seems like the performance was primarily driven by improved activity levels, but I'm curious about how we should consider that on a seasonal basis.

Yes, Kirk, I don't think that the viral stuff was that significant in the quarter, it obviously contributes. We end up, as you are aware, you've been following us a long time, we have a lot of different drivers on the transaction side of the business that at times will cause a little bit of volatility but not meaningful material to the overall revenue numbers. We had continued to see good traction in BBMS and good growth on that front. Overall, Tuition Management also has done well. The number of families at the private schools that we support is up year-on-year. We have had some price increases on both BBMS and BBTM. And then the YourCause business has some transaction components that have done well. And then JustGiving has also done well in the UK. And that model and the take rates on the donor cover complete cover things have done really well in the UK business also. So we kind of see across the board steady growth in transactions, very similar to what we saw in the last couple of years. So that growth rate continues to be kind of in that high single to low double, depending on the quarter.

Okay, great. Thanks very much, Tony.

Our next question comes from Matt Van with BTIG. Please proceed with your question.

Yeah, good morning guys. Thanks for taking the question. I guess on the EVERFi side, it seems like it continues to gain momentum and have some strong traction there. Anything you'd point to that you've either done internally from a strategic or staffing perspective or maybe more from a macro headwind dissipation perspective. But just what's really driving the success on the EVERFi side and how should we think about that heading into 2024?

Bookings have increased compared to last year, and the pipeline looks positive. We combined our business with YourCause last year because our target customers and markets are similar, and there's minimal overlap between EVERFi and YourCause clients, so we see a strong cross-sell opportunity. We now have a Corporate Impact group led by Tom Davidson, offering five products, with EVERFi and YourCause being the primary ones that we're selling to companies. This structure is relatively new, and we created the name Corporate Impact to emphasize our focus on corporations. We also have a suite of products, including Impact Edge, which we just announced and will launch next year. Overall, there's been a new organizational structure in the past year, with new sales leadership and a promising pipeline for this segment. That's a brief overview.

Alright, very helpful. And then, Tony, following up on Kirk's question before, rather than looking at the one-time potential impacts on transactions. Curious as you look towards the fourth quarter and sort of the busier year-end giving season and even into the early part of next year, what have you seen of late in terms of whether it's frequency or size of transactions that gives you confidence that you're not going to have any kind of seasonal headwinds or any macro impact there? How have you looked at it on maybe a like-for-like customer base or things of that nature to ensure that the fourth quarter will continue to be strong?

Okay, Matt that's a really good question coming into the end of the quarter and year-end giving and Giving Tuesday and all those related pieces. Last year, we saw a bit of decline in the average donation size in Q4 that created a little bit of softness. I think that's the impact of the economy and disposable income for individuals. Giving with corporations and foundations and DAFs has actually been up. So that volume has done well. Overall transactions even last year when things turned south a little bit with the economy, the transaction volume was up but the average donation size was down slightly. We've not seen any further deterioration in that. So we keep a close eye on it. So at this point, we're assuming that that's going to hold for us. Hard to say until we get to that and see what volume is there at the end of the year. But thus far through the year, those transaction sizes have held up pretty well. And we've seen good transaction volume as we spoke through the first three quarters and some good giving with some of the viral events that we spoke about with Hawaii. So overall, we feel pretty good. We've not seen any further deterioration, really hard to project. But right now, we're expecting that to hold with that. What is slightly softer than what we saw in the prior couple of years, but a continuation of last year's kind of giving.

Yes. And the other part of that, Matt, is in that mix of transactions, we've seen really nice growth in the tuition platform with more families, more students, and more use of the tuition platform as well, and really strong. And that's kind of locked in as we're in the school year.

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

Hey, good morning. Hey Mike, hey Tony. Thanks for taking the questions. I just have one, so when I was looking through the deck this morning and I'm on the outlook slide for 2023 and 2024, I noticed there was a slight change, and I was hoping we could walk through it a little bit. So on the 2024 plus outlook, the contractual recurring revenue and total revenue now says high single-digit growth and looking at some of the past decks used to say high single-digit growth to low double-digit growth. So I was wondering maybe what's changed in the outlook this quarter versus earlier this year and that is resulting in this moderation in the 2024 plus growth outlook? Thanks, guys.

Yes, I can address that. There isn't a significant change because this quarter and maintaining our guidance provide insight into our expectations for Q4. We are keeping our guidance for the year, which remains around the midpoint of about 5 to 5.5. The growth we anticipate for next year, which we haven't discussed in detail yet, is expected to be substantial, particularly given this year’s slower start in the first two quarters and the increase in revenue in Q3 and Q4. Our guidance is focused on the year as a whole rather than just individual quarters, so it really reflects what the overall year could look like compared to this year.

Got it. Mike, thanks for taking the questions.

There are no further questions at this time. I would now like to turn the floor back over to Mike Gianoni for closing comments.

Great, thank you. Thanks for joining us this morning. Just to summarize, we delivered really strong results during the third quarter. We continued to successfully execute our 5-point plan with solid expense management and accelerating organic growth, and Rule of 40 attainment. We're very pleased with the quarter and excited for the future and the significant value we're confident we will create for shareholders. I'm really proud of the progress we've made and grateful for the hard work and positive spirit of our team members who continue to drive our success. We look forward to sharing more with you on our fourth quarter earnings call. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.