Please stand by. We're about to begin. Good day, and welcome to the Blackbaud 2015 Third Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jagtar Narula, Vice President of Investor Relations. Please go ahead, sir.

Good morning, everyone. Thanks for joining us today for Blackbaud's 2015 third quarter conference call. Today, we will review our financial and operational results for the third quarter of 2015, and provide commentary on our progress towards achieving our goals for the full year. 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 up the call for your questions. Please note that our comments today contain forward-looking statements. These statements are based solely on present information, and are subject to risks and uncertainties that could cause our 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. During this call, we discuss non-GAAP organic revenue growth, which we believe provides useful information for evaluating the periodic growth of our business on a consistent basis. Details of our methodology in calculating non-GAAP organic revenue growth can be found on the Investor Relations section of our website at www.blackbaud.com. Also, please note that a webcast and transcript of today's call will be available on the Investor Relations section of our website, as well as our quarterly investor presentation. Before I turn the call over to Mike, I would like to highlight some of our upcoming investor events. Our team will be participating at the following upcoming conferences: The Wells Fargo 2015 Technology, Media & Telecom Conference on November 11 in New York City, and…

And we will take our first question from Tom Roderick of Stifel. Tom M. Roderick - Stifel, Nicolaus & Co., Inc.: Hey, gentlemen. Good morning. I wanted to start my first question here just talking a little bit about the Smart Tuition acquisition and make sure we are all on the same page. Can you just sort of break down what's – how we ought to think about the revenue impact to the guidance that you've issued for the full year? So what should we expect to get out of this for the fourth quarter, and what might that look like on an annual operating basis? And then, I guess, the second part of that question is, and thinking of Smart now as part of the broader K-12 picture, what does that K-12 operating unit sort of look like these days? I don't know if you can share scale or anything else you can talk about K-12 now that you are wrapping WhippleHill together with Smart. Thanks. Anthony W. Boor - CFO, CAO, Executive VP-Finance & Administration: Yeah. Thanks, Tom. Real quick, if I could. I wanted to make one correction to our prepared comments. We erroneously referenced our prior guidance on non-GAAP diluted EPS. I want to make sure everybody was clear on that. Our updated guidance is diluted EPS on non-GAAP basis of $1.48 to $1.52, which is reflected correctly in the press release. We just referenced our old guidance in the prepared comments. So, Tom, on the revenue impact, we didn't give anything specific on the Q4 impact. I would say for 2016, we would estimate that revenue to be somewhere in the $40 million to $50 million range, so we are still doing some preliminary work on integration and planning and synergies. But we expect kind…

We go next to John Rizzuto of SunTrust Robinson Humphrey.

Hi. Good morning, everyone. Mike, I wanted to ask you a little bit about the architecture as now, it seems you're ready to go. It looks like everything's on a new architecture, you've got it set up, you're going to Azure, and really, a new phase in that, if you will. As we look at it now, away from what we are calling cloud or hosting, if you could characterize people on the old architecture moving to this new architecture, what the benefits of that might bring for the customers, as well as for Blackbaud from a business standpoint, as well as how long that transition may take. Michael P. Gianoni - President, Chief Executive Officer & Director: Sure. Yes, happy to do that, John. So I'll use NXT as an example, a representative example of which – what's going to happen across the company. So the NXT platform, we did – you could think of what we did in sort of two pieces, one was focused on that mid-market Raiser's Edge transition to the cloud. And at the same time, we have developed and now used across R&D and announced with Blackbaud SKY, a whole new set of tools and capabilities that are product-agnostic, but will be used across the whole portfolio. So some quick benefits. We're live with about a thousand NXT clients roughly since July. The architecture allows us to develop and deploy in a very high velocity. I mean, I'll give you a quick example. Two weeks ago, I was with a customer on a Wednesday, and we were talking about the new capabilities that they would like to see as far as complex list building in their business, and two days before, we'd released the capability in the platform that they had seen and not yet used. And so we're releasing things that just show up in the platform on a weekly, monthly basis now because we can, where in the past, that RE environment was on a version release that took 18 months to 24 months. It's happening constantly now; I mean, so small to large releases to show up in the cloud. So the benefit for us is high velocity innovation, and the benefit for clients is the lack of requirement to adopt the new version because capabilities just show up. So that's sort of – that's significant benefits for us and the customer. We're also able to deploy in a much higher quality environment as well, which has happened with NXT. So that's moving across – that ability is moving across the whole portfolio.

Got it. And you talked about the new APIs, and obviously, it gives Blackbaud a first time opportunity to create a ecosystem around the platform. What – toward getting partners involved, getting third parties on the ecosystem or helping them building those – and extending the Blackbaud platform, how do you think that will progress over, let's say, the next 12 months? Michael P. Gianoni - President, Chief Executive Officer & Director: Yeah, I think that – so that's a great question. And the Blackbaud SKY announcement to me, I said this in the prepared remarks, and for the company is a major strategic change for us in a very positive way. So the Blackbaud Partner Marketplace has actually come a long way in the last 18 months, and this will, I believe, accelerate that. So the API – SKY API, as we announced, for the first time are available with industry – open industry standards, which is the REST architecture. That's a big deal because you can hire people that know those tools, and partners have REST API developers. And this will be open source so they can use that. We're also providing the SKY UX. So the products they build will have the same look and feel as our products, which is much better for customers. So in the long run, the Blackbaud SKY capabilities will accelerate the ecosystem for partners and for our clients as well.

Okay. And with the – just finally on – and I guess, this will have the – thank you for giving us, by the way, the characterization of what Smart can be for next year, it's very helpful. But with the Smart Tuition, as you reached out and you start looking at their customer base, what you have been able to do thus far, what have you learned about the Smart Tuition customer base and what you have seen that is – may have maintained your confidence level, increased your confidence level, and just characterize – again, only a month, but just characterize now that you have been able to get involved as the owner of the company, if you will. Michael P. Gianoni - President, Chief Executive Officer & Director: Sure. Yeah, John, as I mentioned, I believe this is a fantastic fit in the K-12 space for us, which is a very large addressable market in which we do not have a large share of. There is not a lot of overlap between our current K-12 customers and the Smart base, yet the requirement is there for both our existing K-12 solutions when you combine WhippleHill and the NXT line to the Smart Tuition clients, and then the Smart Tuition capabilities for our existing customers. So I think there is a lot of interesting upside here. And also, again, we will be integrating the Smart platform with our K-12 existing cloud solutions, which makes the usage for the client base much more seamless. I think there is really interesting upside for us with this, and it's been solidified with the ownership in the last month and as we dig in more.

All right, great. Well, thank you, guys. I'll let somebody else ask some questions. Anthony W. Boor - CFO, CAO, Executive VP-Finance & Administration: Thanks, John. Michael P. Gianoni - President, Chief Executive Officer & Director: Thank you.

And we go next to Stan Berenshteyn of Sidoti & Company. Stan Berenshteyn - Sidoti & Co. LLC: Great. Thank you for taking my questions. Just to start off, we saw some tepid expansion in deferred revenue in the third quarter on a sequential basis. Is that primarily a function of seasonality or are there some other drivers happening there? Anthony W. Boor - CFO, CAO, Executive VP-Finance & Administration: Yeah, Stan, this is Tony. Our deferred revenue, and I think we have spoken about this before, it's a difficult proposition, we do not provide a lot of clarity on it. Q2 is typically, from a renewal and billing perspective, our highest quarter from a seasonality perspective, and so you'll see some ramp in Q2. As we transition also to the cloud with the NXT products, we are offering today, some discounts to migration customers trying to accelerate. Those folks moved to the cloud. And when they sign an NXT contract, there is going to be some movement in deferreds because we are going to give them a credit for their prior maintenance deferreds that would have been on the balance sheet, and then re-record this new NXT deferral for the billing. And then the third piece, it has caused some volatility the last couple of years as that we've done several acquisitions and, of course, the write-off of the deferreds related to acquisitions and the rebuild. But there is – so there is quite a bit of, say, bit noise in our deferred at this point. We feel really good when you look at the underlying business and the growth in NXT sales. That's why we gave those units. But it is a little tough for you to model, I think, because of all of those three things. Stan…

And from B. Riley & Company, we go next to Kevin Liu. Kevin Liu - B. Riley & Co. LLC: Hi, good morning. First question, just on the NXT bookings that you've already secured, can you talk a little bit about to what extent those are already contributing to your subscription revenue line, and then whether all of the customers booked are fully reflected in your deferreds? Anthony W. Boor - CFO, CAO, Executive VP-Finance & Administration: Kev, this is Tony. So the NXT bookings, anything that would have been billed, we typically would sign a three-year agreement with an NXT customer. During the transition period, if they were a migration customer, you would obviously have, as I said earlier in the commentary, have a reversal of the prior bookings, and then you would bill them typically a year in advance. And so you would reflect that in deferred, assuming they have been – they've signed a contract and then billed, which would happen in most cases. If they were a new customer, there would be no reversal and you would have a booking of typically that one year in advance with annual billings from that point forward. The revenue side gets a little more complex, so if they are a new customer, they would have gotten – prior to general release, they would have gotten access to the old version in a hosted environment. So they would have gotten 7.93 or 7.94 version of Raiser's Edge or Financial Edge in a hosted environment with the rights to NXT when they are ready to convert in general market availability. So today, though, in today's market, now that both are released, they would move straight to that new NXT, and we'd spread that revenue over the 36-month contract ratably. Kevin Liu…

Our next question comes from Peter Wahlstrom of Morningstar Investment Research.

Good morning, guys. Thanks for taking my question. Anthony W. Boor - CFO, CAO, Executive VP-Finance & Administration: Good morning, Peter.

So, just as a follow-up, can you maybe give us a sense as to what is the level of CapEx or maybe there is additional OpEx following either Smart Tuition or the Microsoft cloud partnership kind of Blackbaud SKY? Does that essentially reset the level of spending or introduce another variable, which impacts the trajectory of your mid range margin or cash flow goals? Anthony W. Boor - CFO, CAO, Executive VP-Finance & Administration: Sure. It's an intersecting dynamic with the move to the cloud onto the – so I would expect that you will see – because we still keep a fairly good amount in-house from an infrastructure perspective. But I would expect CapEx kind of on a run rate to decline a bit on that front. What we are seeing for CapEx that's also increased that rate is that as we move to more and more innovation on these new products and platforms, there is a larger percentage of that R&D that is capitalizable. And so we have seen growth in CapEx related to capitalized software R&D costs as well, Peter. So I would expect with the fact that we are moving more of our R&D spend towards true innovation of new solutions, that at least for the foreseeable future, we'll see some increase in CapEx there that I'll expect to see some offset because we're moving to the cloud for some of our back – hosting infrastructure.

Okay. And then shifting really quickly to NXT and some of the new clients that have signed on, whether they had existing Blackbaud relationships or are new to the firm, can you provide maybe a little bit more detail or sense of how many of these customers are opting for the good kind of package versus the better and best? And how quickly then they are able to kind of migrate up the functionality level, even though I understand that even the good level has more functionality today? Michael P. Gianoni - President, Chief Executive Officer & Director: Yeah, the good – there's a good, better, best. And RE, sort of the classic or the – let's call it the vintage RE to the – even the good, there's a very significant difference in functionality in the entry level RE NXT. Many clients are opting up higher than the entry level given the value-add that they see with things like analytics. So we are pleased with where they are opting to because they see the value-add for their business. And there is a pretty significant uptick in capability, again, at the entry level.

Okay. And just to confirm, there's really no incremental cost to Blackbaud for the customers switching on those additional modules or adding that functionality, is that correct? Anthony W. Boor - CFO, CAO, Executive VP-Finance & Administration: There will be some hosting infrastructure costs associated with those, right, because if they are turning on multiple products versus a typical Raiser's Edge, we would, say, have some hosting expense. And then on the analytics side, because there is embedded analytics depending on which package they choose, there could be some variable analytics-related costs as well.

Okay. Thank you very much. Anthony W. Boor - CFO, CAO, Executive VP-Finance & Administration: You bet.

We'll take a follow-up question now from Tom Roderick of Stifel. Tom M. Roderick - Stifel, Nicolaus & Co., Inc.: Hey, Mike, I wanted to follow up just on a couple of topics you discussed early, but particularly the Nonprofit Intelligence product. I guess from my perspective, that looked like a meaningful step forward in what you guys are offering for the analytics package here. And I think I understand properly that NXT customers automatically get payments in analytics included in that, but given that NPI is sort of a premium offering for the analytics side, I am curious if that is something that you can charge for right out of the gates when that's – when that becomes generally available. And maybe that sort of fit into the context of your good, better, best discussion, but we'd love to hear how you think that can possibly impact the ability of your customers to buy more products. Michael P. Gianoni - President, Chief Executive Officer & Director: Sure. Yeah. The NP Intelligence is a significant announcement for the RE and FE customer base. It is not a additional fee, but it's basically a replacement of reporting capabilities that where relatively inferior from a go forward standpoint. So it is a modern cloud capability around reporting. It's not analytics, but it's a reporting capability that aggregates the results of analytics and other data. Excuse me. The other key thing, Tom, that I'll mention, which we also announced at bbcon, is that the Intelligence is a capability given our new architecture. We're going to deploy the same NP Intelligence capability in our Luminate platform as well. So we're able to now share capabilities across platforms. And if you recall, Luminate was a key online product, which came with the Convio acquisition years…

And we'll take a follow-up from John Rizzuto of SunTrust Robinson Humphrey.

Hi, thanks for the follow-up. Tony, a little bit about the model. So when you gave guidance for Q4, you held out a GPS – or EPS guidance, rather, pretty much where you've had it, just what to think about there. And then as we look forward for as much as you can characterize in all due respect, because you've just gotten Smart Tuition, where there might be synergy points as far as from operating – the operating model that we may or may not be able to get from Smart Tuition as it start to absorb the company more fully? Anthony W. Boor - CFO, CAO, Executive VP-Finance & Administration: Sure, John. So, yeah, the dilutive EPS because we were still wrestling a bit with where interest was going to – and rates were going to go. We narrowed that range. We did take up operating income, as you know, and operating margin. So we feel really good on the year. If you go back and look at our original guidance that we gave kind of end of the year, yeah, we were in the range of non-GAAP operating margin of 17.9% to 18.3%, with the midpoint 18.1%. And with this revised guidance inclusive of Smart, we are saying $120 million to $124 million, or 18.6% to 19%. And that's before constant currency. So I think on a constant currency basis, full year operating margins are somewhere in that 19% to 19.1%, at the midpoint, which is great when you think we set the baseline at Investor Day last year at 17.5%. So with inclusive of Smart, we're looking at a 150 basis point to 160 basis point improvement already just a year in to our strategic initiative. So we feel really good about that. Synergies on Smart, that's something we're working through now. Obviously, we did a lot of due diligence, we had some ideas about what we think we can deliver. Back office-wise, there will be some synergies rolled over or right into that, the infrastructure that we discussed that we've invested in over the last couple of years. So they'll get that parental advantage, as Mike likes to call it, that moving on to all of our CRM and financial platforms, et cetera. So we're – the team is actually working on that integration as we speak. So we get some cost synergies there from a back office perspective. I think the biggest synergies are probably more so there on the revenue side with this acquisition. To Mike's point, not a lot of overlap with our existing base and theirs. And so we see really good cross sell opportunities on back to our base and then to their existing base. So I think this one, because it is a smaller operation, will probably see more revenue synergies than cost synergies.

Great. And so as much as you can, can you just give us a little breakdown on the Smart Tuition revenue line? I mean, what are they charging, I'm not sure. What is subscription fees, what are all license – I don't know if it's 100% license, 100% subscription, based to that nature, services and such? Anthony W. Boor - CFO, CAO, Executive VP-Finance & Administration: Yes, you will see all of that, I think, coming through subscription revenue. There are no license there. And then I'd suggest maybe, because there's a whole slew of different fees, probably the best thing would be to look at Smart's website to get a sense of how that's offered, because there is quite a dynamic of different services that are offered. Michael P. Gianoni - President, Chief Executive Officer & Director: Right. It's based – it's a cloud model. Anthony W. Boor - CFO, CAO, Executive VP-Finance & Administration: Okay.

Okay, perfect. All right. Thanks, guys. Anthony W. Boor - CFO, CAO, Executive VP-Finance & Administration: Thanks, guys.

And this concludes today's question-and-answer session. At this time, I'd like to turn the conference back over to management for any additional or closing remarks. Michael P. Gianoni - President, Chief Executive Officer & Director: Thanks, operator. I'd like to just close by saying, everyone, our most recent quarter and year-to-date performance, we feel, has been very strong. The business is gaining momentum. Excuse me. We are well positioned to achieve our guidance this year and longer-term aspirational goals. Also, I'll mention, I hope everyone takes the opportunity to join the executive team and me in December 3 for Investor Day. We will be webcasting the live event held at the NASDAQ building in New York City. And please contact Investor Relations if you are interested in attending. Thanks, everyone. Have a good day.

And this does conclude today's presentation. Thank you, all, for your participation.