Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Blackbaud First 2012 Quarter Earnings Call. Today's conference is being recorded. [Operator Instructions] I would now like to turn the call over to Mr. Tony Boor, Chief Financial Officer of Blackbaud. Please go ahead, sir.

Thank you, Jill. Good afternoon, everyone. Thank you for joining us today to review our first quarter 2012 results. With me on the call is Marc Chardon, our President and Chief Executive Officer. We both have prepared remarks, and then we'll open up the call for your questions. Please note that our remarks today contain forward-looking statements. These statements are based solely on present information and are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Please refer to our SEC filings, including our most recent annual report on Form 10-K and the risk factors contained therein, as well as our periodic reports under the Securities Act of 1934 for more information on these risks and uncertainties and on the limitations that apply to our forward-looking statements. Also please note that a webcast of today's call will be available on our Investor Relations section of our website. With that, let me turn it over to Marc to review our high-level financial performance and business highlights, then I'll come back at the end to provide greater details on our first quarter results, as well as guidance for the second quarter. Marc?

Thank you, Tony. Thanks to all of you for joining us this afternoon to review our first quarter results, which represented a solid start to 2012. Revenue is at the high end of our guidance. We continue to make progress evolving toward a subscription-based business model, and our Enterprise business unit delivered very strong performance. We enjoyed a particularly strong quarter for our Blackbaud CRM offering. Holding a record performance during 2011, we're off to a great start in '12, with Blackbaud CRM representing the largest contributor to our first quarter sales. Of course, the biggest news came last week when we received regulatory approval to move forward with our acquisition of Convio, which we expect to close tomorrow. Blackbaud is now well positioned to deliver a best-of-both-worlds offering to non-profit organizations, including the most comprehensive CRM and online fund raising solutions. We believe our combined organization is much better positioned to meet the multichannel supporter engagement needs of nonprofitable organizations and both teams are eager to move forward. In addition to being great news for our employees, customers and prospects, we're very excited to have the opportunity to become one of the largest subscription-based software as a service vendors in the world. Let me provide a brief overview of our first quarter financial performance. We do lever at revenue of $94.7 million, which was at the high end of our guidance of $93 million to $95 million, and represented a 9% growth on a year-over-year basis. The fastest-growing component of our revenue continues to be subscriptions, which at $28.1 million grew 17% year-over-year. The continuing evolution of our business towards subscription-based offerings means that subscription units outnumbered perpetual license sales units by a ratio of over 5:1 during the quarter. We continue to see strong demand for our subscription…

Thanks, Marc. The company delivered a solid performance in the quarter. Revenue was toward the high end of our guidance and reflects the solid overall momentum of our business. At the same time, significant investments in our business brought margins down on a year-over-year basis for the first quarter, which was consistent with the commentary that we shared last quarter. As I will review in detail, we view some of the investments as nonrecurring and are confident that we will show improving bottom-line leverage over the course of 2012 and beyond. Let me begin with the review of our first quarter non-GAAP results starting with the P&L. Total revenue for the first quarter was $94.7 million, an increase of 9% on a year-over-year basis and at the high end of our guidance of $93 million to $95 million. Subscription revenue was $28.1 million or a 17% increase from the first quarter of 2011. Subscription revenue continues to grow as a percentage of our total revenue, and while we had a relatively strong license revenue performance for the quarter, subscription revenue was still approximately 4x the size of our license revenue. The relative size of our subscription business will become even more substantial following the close of the Convio acquisition. To put this in further perspective, Convio subscription and usage revenue was over $15 million for the fourth quarter of 2011, which is more than half the size of Blackbaud's subscription revenue in the first quarter of 2012. Blackbaud's maintenance revenue of $33.6 million for the first quarter was up 5% on a year-over-year basis, and we continue to benefit in this area from our best-in-class renewal rates. When combined with our subscription revenue, our total recurring revenue was $61.6 million for the first quarter or an annualized run rate of…

[Operator Instructions] And our first question today comes from Tom Roderick with Stifel, Nicolaus.

This is Chris Koh for Tom. So just -- Tony, just a quick question, if I may, on the sales and marketing commentary that you made. So it sounds like maybe because you weren't entirely sure when or if the Convio acquisition would close, can you give us a sense of how much of that cost either nominal dollars or in percentage terms in terms of sales and marketing spend over which we had originally planned for?

Chris, we're actually not breaking that out at this point. I would tell you that what I can say is we had the biggest quarter from a net higher perspective that we've had as a company in Q1, with the large amount of those heads focused towards sales and marketing.

Okay. And was the kind of strategic decision behind that worry that it wouldn't actually close or was it something where you just felt, even if it did close, that was the prudent thing to do anyway?

Yes, the longer it took and the more steps there are, you have to consider the possibility it might not. We were confident to do the whole process, Chris. I felt pretty -- but on the other hand, as we were going forward, both organizations, I'm quite sure, felt some pressure in terms of the ability to keep the bookings momentum and the pipeline full. So I think we're in a good position and I feel very good about the people we have in the sales and marketing we've brought on board. It just means we did it a little earlier than we might otherwise have done.

Great. And then on the other issue about direct marketing investment in that product, just trying to get a sense in terms of what the margins wound at coming in that versus the implications on the previous guidance. Is that requiring a little bit more dollars than you had expected? Or is a timing issue or is it pretty much unplanned in terms of the direct marketing product investment?

The DM expense, we said, is about $1 million and it's on plan and it was spread over the first 2 quarters and it's still spread over the first 2 quarters as originally intended. So no seasonality impacts.

Got it, great. And then Marc, on your commentary about maybe the overall nonprofit buying environment modestly improving, are you seeing any change in terms of the number of no decisions, I remember that was kind of a gauge that you guys used to look at in terms of trying to gauge how good the macro is doing. Are you seeing a tick up there or is it roughly similar to the past couple quarters?

I don't actually know the answer to that. So I'm assuming that since I wasn’t told that there was a difference, that there's not a difference. But that's an assumption, not a fact.

Great. In terms of the CRM, you mentioned it was the largest contributor to the quarter in terms of sales. Is that actual sales on a revenue perspective or is that a bookings statement?

Bookings.

[Operator Instructions] We'll go next to Ross MacMillan with Jefferies.

Tony or Marc, that was obviously a strong perpetual license quarter. You mentioned some of that was driven by prior period deal recognition. Anyway to parse that out so that we can get a sense what the kind of run rate assumption on the license should look like?

Not that we're disclosing at this point, so we don't typically disclose that level of granularity. I would tell you, we certainly had a positive quarter -- impact on the quarter from sales within the quarter, as well as impact from those that were made in prior quarter.

So let me just, one question I had around that was, there was a potential for you to be able to recognize license revenues faster as you move to a point that CRM got more templated, in other words, you could meet your BSOE obligations and so forth, faster. Is that the a point that we're at now, so is it possible we could actually license growth this year?

So I would say that in the higher education space, it's very likely that any higher education deal will be sold with a software license as opposed to a ratable recognition of any kind. So you're really more likely to see a variation, depending on what -- how many licenses were sold by -- in that style, in the higher education or in the space where we've done that. So it's not about packaging it. It is just about the experience and the number of implementations and how far the product has gotten. And in terms of talking about license growth, we've always told you, I think subscription is going to keep growing faster than licenses. And in any given quarter, it can be up or it can be down, depending on the number of units that are in a recognition or a nonrecognition sector.

Okay, that's helpful. I noticed that DSO was higher than we expected. Tony, any comments on the DSO?

No. I think we have some good opportunity. I think from an overall working capital management perspective, it's something that I haven't had a lot of time to focus on yet with all of our other priorities. But I would say that there's nothing alarming to me in that perspective. I do think it's something that we could spend a little more time focusing on and have begun looking at that more recently and have some actions in place to help turn that around a bit by next quarter.

Great. And the last one for me just on CapEx. Is there any implications to the sort of run rate CapEx you've got going on right now as you add Convio into the mix?

So, Convio is not obviously contemplated yet. So we'll close on that deal tomorrow and we will jump right in and get to work on the planning, so we can get some numbers out to you guys in the market, hopefully early June. We currently are on a run rate of $5 million to $6 million per quarter. Based upon what we know today about Convio's model, I would not expect to have a significant impact to our CapEx as a result of combining the companies.

The other thing I'd mention is, I don't see, as a first 100- or a first 250-day priority, any kind of data center rationalization across the 2 organizations. So you're pretty safe in assuming that the IT data center side of the equation is pretty much a B+C, Blackbaud plus Convio equals the number, as opposed to lots of synergies or dysynergies [ph] in that sector.

Okay, great. And very one last one for me. Did you have an updated number on the total live eCRM customers?

I don't remember. But I think we only had 1 live go live in the quarter, and that would be Michigan. So whatever I said last quarter plus 1. I think it was high 20s. So my guess is that it's 29. It, certainly, is not more than 1 or 2 off of that. I do expect us to have several go-lives -- a couple of go-lives a quarter, sort of couple plus a quarter for the rest of the year.

[Operator Instructions] And that concludes our Q&A session. I would like to turn the call back to Mr. Tony Boor.

Well, that was a record short one. I was expecting a long one gentlemen and ladies. Anyway, thank you very much for joining us on the call today. We will look forward to talking with several of you individually. And then we'll talk again in early June when we have an opportunity to have digested some of the Convio numbers. Good day.

This concludes today's call, have a wonderful day.