Good day and welcome to the Blackbaud First Quarter 2017 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mark Furlong. Please go ahead.

Good morning, everyone. Thanks for joining us on Blackbaud's first quarter 2017 earnings call. Today, we will review our financial and operational results, provide commentary on our performance and the context of our four-point growth strategy. 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'll 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. 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 you only to non-GAAP financial measures on this call. Please note that non-GAAP financial measures should not be considered an isolation from or as a substitute for GAAP measures. A reconciliation of GAAP and non-GAAP results is available in the press release we issued last night, and a more detailed supplemental schedule is available on our Investor Relations website. Before I turn the call over to Mike, I'll briefly cover our upcoming investor marketing activity, which is available on our Investor Relations website. During the second quarter, our team will be in the following cities attending conferences and meetings with investors in Miami, New York, Boston, Chicago, Milwaukee, Sta. Monica, Toronto, Montreal, San Francisco, Baltimore, Atlanta, and Tampa. Please reach out to Investor Relations if you're interested in connecting at one of these events. With that, I'll hand the call over to Mike.

Thanks, Mark. Good morning, everyone, and thanks for joining our call today. I'm pleased to report that we had a solid start to 2017. The market remains very strong, the pace of innovation we're delivering is unmatched in our industry, and we're seeing very positive traction with our next-generation cloud solutions. We've carried the positive momentum from last year into 2017 with full year financial guidance that improves upon last year's performance and implies achievement of our long-terms aspirational goals. As usual, Tony will provide more detail on our financial results, and I'll provide an update in the context of our four-point growth strategy. So, let's get started. The first of our four growth strategies is integrated and open solutions in the cloud. Blackbaud SKY, our new modern cloud platform, continuous to rapidly evolve with thousands of updates since becoming generally available in 2015. Blackbaud SKY combines infrastructure, processes, and pre-integrated services like payments, analytics, reporting, and our artificial intelligence to deliver total solutions allowing our customers to achieve their highest potential. We just publicly introduced SKY AI, or artificial intelligence, recently, but we've been embedding artificial intelligence and advanced analytical capabilities into our cloud software for several years now. SKY AI is the artificial intelligence engine behind the growing number of insights integrated into BlackBaud cloud software solutions powered by machine learning, positive technology, natural language processing, predictive analytics and other advanced technologies. We're enabling data-driven decisions by pairing the industry's largest dataset with the industry's most advanced set of AI capabilities, ultimately having greater impact on our customers and their missions. So why is Blackbaud different in this area of analytics and artificial intelligence? We don't simply provide our customers a set of tools. We design and deliver complete solutions specific to customer needs. For example, we just…

Thanks, Mike, and good morning, everyone. I'm pleased to report that we had a very solid start to the year, positioning us well to achieve our full-year financial guidance. I'll direct you to yesterday's press release and the investor materials posted in our website for the full detail of our Q1 financial performance. Today, I'll focus on the key highlights so we can get to your questions. Our first quarter revenue was $183.6 million, an increase of 7.4% on an organic basis over 2016. Recurring revenue continues to climb representing 83% of our total revenue, which is 340 basis points higher than Q1 of 2016 and 11.9% growth on an organic basis. Recurring organic revenue growth is a key metric for us as it represents the core of the business and will continue to grow as a percentage of total revenue as we further our shift towards subscription-based recurring revenue. Subscriptions accounted for roughly 64% of total revenue in Q1, which is a 670 basis point improvement over Q1 of 2016, representing revenue growth of roughly 20% on an organic basis. Subscriptions continue to exhibit strong performance as we move to integrated and open solutions in the cloud and shift our mid-market customers to NXT. We remain pleased with the market traction to-date and the economics of shifting customers to next-generation cloud solutions in a subscription model. We've combined services revenue with licenses and other, which declined 10.2% versus Q1 of 2016 and represented 17% of our total revenue. Consulting services drove the year-over-year decline, which is in accordance with our strategy given we're shifting our offerings toward innovative and modern cloud solutions requiring less implementation and customization services. Our services revenue is declining faster than we originally anticipated for 2017. We're expecting to be down year-over-year both as a…

Thank you. We'll pause for just a moment to allow everyone an opportunity to signal for questions. And we'll go first to Tom Roderick with Stifel. Tom Roderick - Stifel, Nicolaus & Co., Inc.: Gentlemen, good morning.

Good morning. Tom Roderick - Stifel, Nicolaus & Co., Inc.: Thanks for taking my question. Hey, Mike, can I ask you the first question just about the sales structure these days? You have some interesting comments there, talking about how you see a bigger opportunity from new customers at this point. And I think, a lot of us have been thinking more about the opportunity on the installed base and what you can do to upsell them and cross-sell them and that certainly sounds like it still exists. But talk to us a little if you don't mind, just about what that means from a profitability perspective, thinking about new customers, sometimes taking longer and become less profitable as your installed base, is long to kind of come up the speed with the ASPs that your existing installed customers are used to. I love to hear a little bit more about how that progression plays out both from a growth and margin perspective.

Sure, Tom. We announced that Patrick Hodges is now reporting to me and heading the sales effort globally and his project that is part of our four-point strategy that we introduced awhile back and this is just a continuation of the program. We still have a tremendous opportunity for back-to-base to the installed base. And for cross-selling, there's a big opportunity, a lot of run way there. There's also a big opportunity for net new customers and we've been making that change incrementally over the last 18 to 24 months where if you go back a couple of years and we had very mixed territories where the old sales executives and whole teams might have both back-to-base and responsibility for net new logos. And we've separated those out largely in either geographic territories or go-to market. So, we have teams that are hunters only, if you will, going after net new logos, and then teams that are cross-selling into the base which remains a tremendous opportunity. So, it's not a shift in strategy. It's just a continuing investment and maturation of the sales function in the company at a bit of a faster pace because of the opportunity that we see ahead of us. It doesn't diminish the cross-sell opportunity at all. It's still significantly there. Tom Roderick - Stifel, Nicolaus & Co., Inc.: Perfect. Thank you. Tony, quick follow-up just on the AcademicWorks acquisition there. I think some people are going to ask you about why not update guidance for it. I understand it's early in the year, but perhaps you could just add some more parameters around what $50 million bought you there, how we ought to think about what ends up in the preferred write-down scenario versus actually getting the GAAP revenue. And then, can you get to why you didn't choose to update your guidance relative to something that probably has – or at least a little bit of contribution to the top line? Thanks.

Sure, Tom. As you say, it was a $50 million acquisition that happened in the first part of Q2. We paid a reasonable multiple like we've done, I think, with most of our recent transactions, but not the anticipated revenue and margin impact rest of the year compared to the size of the rest of the business is not material and would fit within our previously provided guidance range, and so we just chose not to update at this point in time. I think the other thing we'd say is that we'd expect it to be accretive from an earnings perspective as well.

And we'll take our next question from Justin Furby with William Blair. Justin A. Furby - William Blair & Co. LLC: Hey, guys. Good morning. Thanks. I want to start, Mike, with you on the sales investments that you've done layering in over the last several quarters. I just wonder if you could share anything in terms of if you're seeing anything in terms of pipeline growth or bookings growth or any type of forward metric that maybe we can't see. And then, Tony, you posted, I think, 12% recurring growth in Q1 organic. Is that sort of the right way to think about the full year organically? Thanks.

Sure. I'll take the first part. We used what I would describe as all the right modern metrics for understanding productivity and ramp up and cost ratios and time to quota that we put in awhile back. And so, these head count ramp ups, and you in the K that we went up by about 10% in head count last year, these are done with an eye towards high productivity and the building of future opportunities related to bookings and revenue growth and what have you. So yeah, I mean, we better get better performance, right, because we're adding head count, and it's quite measured as well. So, we're excited about the fact that we spent the last couple of years, and we're not quite done, but really modernizing the product portfolio through a lot of integration, the whole SKY architecture, big focus on AI and analytics, it's been going on for years, and the impact of our solutions in the market are significant. And it's just a build on of, again, the maturing and the growth of the sales function in a very large addressable market. So, we're excited about what that holds for the future and that's really all about the announcements around Patrick.

Then, Justin, on organic recurring revenue growth, you've hit on a very positive trend. In 2015, we were about just over 90% growth, that ramped to about 11.5% last year and we've seen continued acceleration through Q1 of this year, up to almost 12% at 11.9%. We don't guide to that, so I can't give you any future color as to what we'd expect on the year. We held our full year guidance. The one thing we did see in the quarter as you can see by looking at the numbers and in our prepared comments is that our services and other revenue, the non-recurring side of the business actually fell off a little more than we anticipated. When we originally gave guidance at the end of the year, we had suggested that services in dollars was going to be relatively flat year-over-year. We actually saw a bit of decline there and anticipate that that would continue through the rest of the year, which means we've seen a little better than expected performance overall with the recurring revenue because we're still running right in line with our expectation. So, I think that's a positive move from a mix perspective and right in line with our strategy that services continues to decline because we're moving more quickly to the cloud. I mean, less customization, less implementation service, more out of the box configuration, et cetera. So, that's a very positive mix for us. Justin A. Furby - William Blair & Co. LLC: Got it. Thank you very much.

And I'll just add that you could see the strategy of the company sort of manifest itself in the revenue shift that's happening with services and maintenance going backwards, which is basically unite toward the success of selling the subscription model and the organic growth in the subscription line is really just a manifestation of the strategy coming to bear. So, it's positive. Justin A. Furby - William Blair & Co. LLC: Thank you very much.

You're welcome.

Thanks, buddy.

And we'll go next to Ben McFadden with Pacific Crest Securities.

Hey, guys. Thanks for taking my question. Mike, I want to start with K-12 market, especially in light of this AcademicWorks acquisition. I was curious as far as kind of what traction you're seeing there, and any metrics you can provide as far as sort of the amount of solution – average solutions to customer base as now versus what they would have had, say, maybe two years ago or any other way that we can kind of think about your traction in that K-12 market would be great.

Yeah. Sure. So AcademicWorks for us is just a perfect fit. I can't tell you how many times we're out in the market and customers are asking us why don't we do scholarship management. And these guys have built a really solid cloud, modern tech cloud platform that addresses a very big problem in the industry. And it covers, actually, three of our markets. It covers higher ed, it covers foundations, and it covers the higher end of the K-12 school market to your question. So, it's a nice natural fit for us from an adjacency standpoint in multiple markets that are currently addressed by our teams. Specifically, the K-12, yeah, we're covering quite a bit of that market today from an application standpoint. If you go back a couple of years, we might have provided fundraising for a K-12 school. And you look today and we're covering much of the total IT spend in a school from student enrollment to learning management, to mobile apps for parents, to tuition management, analytics, payments, financial management, and now, on the high end scholarship management. So we really cover a lot in that school. And so, it's pretty significant from a coverage standpoint and an opportunity standpoint. So there's a cross sell opportunity here that is significant for us across all of those solutions that I just named. There's also a significant value proposition here because a typical case of a school that is not a Blackbaud full customer has either 10 or 15 standalone point solutions that are unintegrated. And so moving to our cloud solution with common reporting and common user experiences and common data is a big impact to the operations of the school. So, it's really early days in our opportunity to address that marketplace as well.

Thanks. And, Tony, I just wanted to ask a question here on the maintenance decline in the quarter which showed, I guess, an accelerated decline. And Mike mentioned the fact that that shows some success on as far as getting people ramped to subscription. But I wonder if you could provide just a little bit more color as far as helping us dissect this maintenance line between how much of this is just an accelerated success on NXT migrations versus maybe some of the other factors that could be impacting that line such as end-of-life products or the Blackbaud CRM going to a ratable recognition model?

Yeah. Absolutely. Ben, the overall metric that I'd suggest you look at from a potential churn is that our retention rate has held relatively flat year-over-year at 93%. So we're not seeing any kind of increase in churn in the overall business from the migration sunsetting plans of all the products. Those are largely cloud-based or subscription model products. Not a lot in there are going to be maintenance. The BBCRM would not be of maintenance decline unless you were to lose one of those customers, and that would be reflected within the churn. So the vast majority of that deceleration in maintenance would be moved over to the cloud-based next-gen products.

And we'll go next to Rishi Jaluria with JMP Securities.

Hey, guys. Thank you for taking my questions. One thing on AcademicWorks that I kind of wanted to follow up on, Mike, you talked about how it hits the opportunity in higher ed. And I know your major educational opportunity so far has been in K-12. Do you see a longer term opportunity to expand your products specifically into higher ed maybe either by retooling your existing academic solutions or maybe creating new ones? And then, I have one follow-up after that.

Sure, yeah. We actually have a pretty good presence in higher ed and do extremely well in the market. We don't have as much application coverage in higher ed as we do in K-12. As I just described, all the things that we do in K-12, we don't have that amount of coverage, but we are looking for more. AcademicWorks is one example. Yes, there's a lot more to do in higher ed from an application standpoint and from a cross-selling standpoint as well. So we think AcademicWorks is a great fit in all three of those markets, higher ed foundations and K-12. They're all scholarship – the granting and receiving institutions that are really unautomated. So our opportunity in higher ed, I think, is growing with our existing portfolio pre-AcademicWorks. And now, with AcademicWorks, just represents a bigger opportunity. We also, I think you know, we stood up higher ed as a more formal vertical, brought in an executive a little over six months ago with significant higher ed experience, that heads up that vertical for us. He's been here seven or eight months now and has brought a whole new dimension to that leadership and focus on the higher ed vertical for us.

Okay. Got it, got it. And, Tony, on the services side, I know you mentioned that part of the reason that you expect to see a decline now versus flat services dollars year-over-year has been that there's less customization involved and more out-of-the-box solutions. Have you also been able to, I guess, see some offloading of services, workloads to partners that's also contributed to that or can you help us kind of understand how partners have played a factor in this role here?

Not yet. We haven't seen and we haven't done much on the front from a partner's perspective. It's something we continue to evaluate and look at for the future, but today that had very little impact on the numbers you saw. We do also have mix and promotional issues that'll affect services and then just seasonality. So I think when you look at those across the board, nothing highly unusual. I think the biggest impact again is just our rapid move to the cloud is overall reducing the need for services, I think, is the point to take home.

And I'll just add something, too. We talked about a lot when we announced NXT, but we haven't really talked about this that much is we've got a pretty significant focus on our cloud solutions, not just on the features that the customers see, but on full automation as well. So we've effectively automated, for the most part, the implementation of solutions like Raiser's Edge NXT, where if you go back and look at Raiser's Edge, it took a person to either show up on site or to have a pretty substantial project plan with a customer even to move from an older version of Raiser's Edge to the Raiser's Edge 7. But to move to NXT, it's largely an automated process where, for example, an existing Raiser's Edge customer would get an e-mail with links. You click on the links and the transition begins. So we, in fact, have some customers that go from Raiser's Edge to NXT over a weekend. It used to be a multi-month database transition process. So we've largely automated that, which is great to accelerate adoption in the market and reduce our operating cost and drive cloud sales, but it also puts some pressure on the fact that there is a need for services revenue in those scenarios.

And we'll take our next question from Rob Oliver with Robert W. Baird. Jason Velkavrh - Robert W. Baird & Co., Inc. (Broker): Good morning. This is Jason Velkavrh on for Rob. Thanks for taking our questions. The first question, so one of the benefits you've mentioned with having more sales reps in local markets is – I know you mentioned a situation last quarter where a customer was looking to move to a competitor and you kind of were able to preempt that. I'm just curious, with having reps in the field for kind of a longer period of time now, is there any other competitive learnings you would call out. And just even more broadly, just anything else in the competitive environment that you'd call out right now?

Yeah. I mean, the competitive environment hasn't changed all that much for us as far as who we compete with. Our win rates are very high. And it's really all about being in market and driving higher productivity with local sales executives, and it's been a pretty substantial change for us. If you go back a couple of years, when I started a little over three years ago, we didn't have a physical office in New York, Silicon Valley and Toronto. And we do now, and it makes a big difference as far as the frequency of customer interaction. And we've made a lot of changes in the company, right? We're a new company and it's best to deliver that message face to face, and customers actually seeing the product, and demos, and what have you. And lastly, I'll just add, the market opportunity is significant. This is a very large market with several hundred thousand addressable customers. And so, we're investing in sales in a way that hasn't happened before. Historically, before I came here, most of our North American sales folks were here in South Carolina, and it's a field-based model and it should be a field-based model. So it's productivity, it's size of addressable market, and it's just the opportunity to present itself to having folks in the field. And we think about this in terms of also having the support infrastructure as well. So, we need more sales engineers in the field and we've been investing, as you know, in customer success as well. So, it's a combination of customer-facing individuals based on the opportunity that we see in front of us. Jason Velkavrh - Robert W. Baird & Co., Inc. (Broker): Great. Thanks a lot. And then one more from me. You mentioned in the prepared remarks some of the developments with SKY AI. I'm just curious if you can elaborate a little more. Are these features that are baked in the current products. And (37:27) are there any future SKUs that you could offer separately And then again more broadly just anything on how you'd monetize the AI features in the SKY platform.

Sure. It's all of those. So yes, they're baked into existing solutions. What's really interesting about what we're doing, and I think it's quite unique is that it's a combination of products, not just tool kits, but products that are built, and in many cases, specific to your vertical industry. So, predictive analytics products built for, example, on arts and culture institution that hides the data and the predictive analytics together from transactions or the things like ticket purchasing and donations and ability to drive revenue based on the data that our customers have and the data that we also add. So we're covering this in a pretty comprehensive way, not just providing a tool kit, it includes big data. And that's data we purchase is proprietary data that we have added to specific analytics and artificial intelligence capabilities embedded in solutions specific to grow the markets. I talked in my prepared remarks about a healthcare application. Also combined with expertise, we have data scientists that are focused on these solutions as well in addition to engineers. And so it's a combination of embedded intelligence in core solutions that just make the core platform a stronger platform that actually have predictive next steps that do things like predictive social listening in connections to social media, predictive next steps for gifts, for driving operational operation improvement. And it's embedded solutions and new SKUs as well. So, it's been a big focus for us for a while. We've just repackaged this together now in a more digestible market-facing sort of branded way, but it's not a new capability. This is something that is a significant industry differentiator. No one in the industry is doing this. When you combine the analytics, the AI and the data, and the expertise, and no one is doing this at a sub-vertical level, arts and cultural, higher ed, healthcare, et cetera. So, it's quite unique. And the other thing that happens here is it differentiates our core solutions in the subscription line when these are embedded and integrated in the way that we're doing this. We're really excited about the expertise that we brought in over the years here and the opportunity to help our customers be a lot more successful, and differentiate us in the marketplace in our core solutions.

And we'll go next to Kirk Materne with Evercore ISI.

Yeah. Thanks very much, guys. I guess, Mike, first one for me would just be on the incremental hiring around sales reps. What's the right way to think about the ramps in productivity for those folks as we think out and the potential for you guys to see some re-acceleration? Is it six to nine months to get someone up and productive? I assume it depends on whether their going after some new logos or going after the base. But could you just give us some – I guess, some incremental comments on that, just help us – just thinking about that.

Sure. I say that on the average, six to nine months is a good number. But when you get into the specific job types, it's pretty wide, right? So, we're ramping up with entry-level folks that are cross-selling, things like subscription-based learning in education into the existing base, they ramped up very, very quickly. And then we're also bringing in enterprise folks that are competing for multimillion dollar deals and it takes a while and then it's the mix between hunters and back to base. But if you put a macro on it, I'd say six to nine months is a pretty good macro when you average it out across the different types. And what's really interesting about what we're doing is we see the need for all those types, not just one type. So, we are ramping up phone. We're ramping up midmarket. We're ramping up into some particular verticals and on the enterprise side as well. And it's also requiring us obviously to bring in either promote from within or bring in some outside sort of first and second line sales leadership as well which has been really great as far as the level of interest that we have and folks coming to Blackbaud.

Great. And then just one for Tony. Tony, obviously, your comments on the maintenance sort of shifting over to the subscription bucket as you make this transition. Can you just talk about, I guess, qualitatively because I assume you're not going to want to discuss it specifically, but qualitatively what that means from a margin perspective, meaning are you getting a multiplier on that dollar of revenue over subscription that more than offsets for the difference in gross margins in general? I'm just trying to get a sense on, obviously that's the way you want things to go but does that have a near term sort of negative impact on operating margins as you go through that transition? Thanks.

Sure. Thanks, Kirk. Maintenance margins for us have historically been very strong in 80% to 90% range. So, the shift to subscriptions today – we talked about last year Investor Day we're seeing a 1.5 to 2 times uplift from what a average customer was paying an actual maintenance to what they would pay in the subscription for NXT, Raiser's Edge NXT or Financial Edge NXT was kind of average. We've not updated that number, but not a lot of change in the market, so presumably that's still holding. The downside on the margin on the subscription is that we've done a lot of work and made substantial investments from an R&D perspective over the last few years and innovation and building out those new next-gen products. You've seen the result of that in the financials with GAAP requires us to capitalize those software costs, qualify. And as a result, we've seen a large ramp in cap software over the last few years. And that in turn is resulting in an acceleration in growth and amortization. But cap software in amortization largely hits within the subscription COGS, so it drags down the subscription margins. Mix is another big piece, Kirk, that comes into play. So overall, I would suggest the costs of infrastructure, support costs, cap software, all of those things taken to consideration, subscription margins probably a bit less than what we'd see in maintenance, so a little bit of dilution there overall. And then mix is the bigger piece really for us in your modeling going forward. Usage and recurring subscriptions are accretive to our overall company gross margins, but payments inclusive of Smart's related payments business would be dilutive to our gross margins. So, that will be the key factor really to watch as your modeling in the future years where that mix comes up.

So just to add to that too, right, just to think about the top of the P&L. As we've mentioned before in the maintenance line, predominantly made up of RE and FE, and customer retention rates are 93%. So, the shift to subscription has been started and underway. And we're also obviously – and if you look at the guidance for the year, and last couple of years, you can see that margin is moving up at the whole company level. So, we have some of these shifts from maintenance to subscription happening margin-wise as well inside the business. But operating margin at the company level based on our guidance is actually moving up, and we think there's a long runway in that opportunity as well.

Yeah. And I think maintenance is, what, about 25% of the size of subscription now. So, much smaller base.

Yeah.

And we'll go next to Brian Peterson with Raymond James. Brian Peterson - Raymond James & Associates, Inc.: Good morning, gentlemen. Thanks for taking the question. So, clearly, there's an increased focus on adding new logos. Just curious, if you think about the potential customers in that $7 billion TAM, how much of that would you characterize as white space versus potentially displacing a competitive solution?

Well, I don't know that there's any pure white space, but sometimes the competitive solution at low end is Excel or Access, right? There's always something there. So, it's a mix, and I could tell you some product lines it's just it is, at the micro, it's white space. So, adding advanced analytics tools or moving a customer who is in a model, from fundraising standpoint, collecting checks and cash to automated integrated payments, I guess that's white space. So, it's a pretty wide mix, and, I mean, you'd be probably surprised that some of the legacy systems that we're out there upgrading. I know a customer that had a 25-year-old system from a legacy hardware manufacturer that we recently replaced. So, it's a pretty wide mix out there of what the industry is using. And the move toward our new cloud solutions is a substantial upgrade for them as far as durability to drive revenue and reduced operating cost. So, the opportunity for financial improvement in the customer base is significant on our new platforms. Brian Peterson - Raymond James & Associates, Inc.: Got it. And maybe one follow up for you, Tony. I'm sorry if I missed this, but any help on what you're expecting for sales head count growth in 2017 and progress year-to-date on those efforts? Thanks, guys.

Yeah. I don't think we've historically given any guidance on that. I'd look back, Brian, probably at just what we've done historically. It's obviously a key focus and kind of the last piece of our strategy to continue to invest in sales. And, obviously, we speak a lot about improving productivity as well. Last year, I think we added – it was a full organic year because we didn't have an acquisition – I think we added roughly 40 direct sales heads. So that's kind of 10% increase, which was a bit higher than where we've been historically because typically a good chunk of the adds have come through acquisition. So it was a fairly strong year from just an overall organic increase in sales head count. And then we're also – as Mike said, we've made a lot of investments and focus on improving the productivity with the entire existing sales head count base. So that's effectively adding sales head count in and of itself also.

And we'll go next question to Kevin Liu with B. Riley. Kevin Liu - B. Riley & Co. LLC: Hey. Good morning. Just in terms of the current conversion yields that you're seeing, does that increase kind of the competitiveness as clients potentially evaluate other providers? And then, could you also talk about any sort of differences in your win rates and conversions versus just going after new account?

Sure. So if you're specifically referring to Raiser's Edge and Financial Edge conversions, because that's the arguably the largest conversions that we're working on, just go back to thinking about retention rates historically. So retention rates historically for those products prior to our new cloud solutions were in the low-90s. At the whole company level, we're still at 93%. So those are highly retained customers. Those solutions are very deep from a functionality standpoint and pretty widely installed. There has not historically, previous to the last couple of years, been a lot of innovation at Blackbaud. So if you combine the fact that these were highly retained customers with a lack of innovation over the last decade with the fact that in the last two-and-a-half, three years, there's significant innovation and significant uplift in customer success when they moved to the new platform, it just bodes for really interesting model that these customers are highly retained when there wasn't a good answer in the future version. And now that there is, it's just a big opportunity for us in the customer base. So I would just point to all of those factors and sort of what's happening in the marketplace. The other thing, as I mentioned a couple of minutes ago, because we've taken a lot of the pain out of conversion from, let's say, Raiser's Edge to NXT through automating the back office, when you go from Raiser's Edge 7 to NXT for the bulk of the customer base, that's a significant competitive advantage. So as the customer is looking to go from Raiser's Edge 7 to some competitive platform, we're signing up for a very long and arduous conversion process, which doesn't exist, moving to our cloud solutions which are frankly better than the competition in the marketplace. So pretty good story for our customers that had been with us for a long time looking to modernize to a new cloud solution. Kevin Liu - B. Riley & Co. LLC: Got it. And as you're starting to see more conversions and presumably having that maintenance stream continue to come down, what sort of opportunity do you see there either this year or perhaps in the future to try to get those margins back up to where they were historically?

Well, I think my first year, when I started at the company level, our margin was 17.5%, right? We're guiding to 20% to 20.5%. So you can think about the fact that, yes, we have some product transitions going on. And at the face of the P&L, we have maintenance reducing by design and subscriptions with a healthy organic growth. Those are happening and those will continue to happen for a while. At the top of the house though, we're improving margin of the whole company while that's going on, right? So the transition we're talking about now is two products out of a very strong cloud product portfolio, right? So I think we have to remember specifically what we're talking about. These are product results that are resulting in a really nice uptick on the future subscription opportunity line from RE and FE to Raiser's Edge NXT and Financial Edge NXT. But the top of the house for company results were improving margins of the whole company, right? So Raiser's Edge and Financial Edge are a subset of the company. We do not have a product line that dominates the revenue line of the business.

And we'll go next to Mark Schappel with Benchmark.

Hi. Thank you for taking my question. Most of my questions have been answered. I do have one though. And, Tony, this is for you, building on an earlier question. I was wondering if you could address the retention rates in the quarter? I think earlier you touched on this. If I recall correctly, the 2016 churn was around 93% to do the sunsetting of several products. I was wondering if that retention rate is still holding around 93% and when we might start moving forward?

Yeah. It's holding well at 93%. We've, historically, if you're going to look back several years, have been in kind of a 93% to 94% range. So considering all of the portfolio rationalization that we're going through currently, I feel very positive that those rates have held. We have talked a couple of years ago about some analysis we had done and we just recently updated that, which is important to note, thinking about just Mike's last answer to Kevin's question. Our retention rate on Raiser's Edge, Financial Edge has typically been in the low-90% to mid-90% range over the years without the innovation. And we have done some analysis that when a customer also utilized or owned one of our analytic services and utilize our payments platform, then our retention rates actually were up in the very high-90s, i.e., in the 98%, 99% range. The interesting thing is with RE NXT, for instance, that has embedded payments, embedded analytics as well as online solutions and several other pieces all integrated into one suite. So we'd anticipate to see some very positive improvements in retention, assuming we get good quality adoption of all of the NXT feature functionality capability over the years as well. So that should prove to be a very positive on retention rate as we migrate that base of RE and FE over to the NXT models.

Great. Thank you very much.

And we'll go next to Ryan MacDonald with Wunderlich Securities.

Hi. Good morning, guys. Focusing on sort of the focus on adding new customer adoption and ramping the sales force of that, can you talk about, as you've gone through this process and sort of getting more sales head count in the field and sort of selling the solution to new customers, can you talk about how you're seeing sort of the conversation evolve when you bring in to the fact that you are seeing more substantial competitors or more aggressive, say, pricing from your competitors in the marketplace and how that affects the sales process for your sales reps?

Yeah. It's actually been really positive for us because of our new solutions. The ability to bring that K-12 solutions to market as I described what we have there earlier or what we're doing in higher ed in a lot of verticals and on new platforms, we've embedded artificial intelligence, and analytics, and integrated mobile, and online payments in a modern intuitive cloud experience has been a massive upgrade for Blackbaud. All those things didn't exist three years ago. And so, it makes it a heck of a lot easier to sign up new customers when that experience and that level of purposely built solutions for this industry are demonstrating come to bear. One thing that's unique about us is the solutions we build are not generic for all industries. It's specific to our markets and our customers. And in a modern cloud environment, it really resonates with net new customers. And so, from a sales standpoint, when I got here, we were still selling a lot – you'd be shocked at how many new Raiser's Edge customers we're selling every year on the old version, pre RE NXT because of the depth of functionality in that product to serve this marketplace, right. We put all that forward into a modern cloud solution so that really resonates well with net new customers.

Got it. And then just a quick follow-up on the AcademicWorks acquisition, can you talk about if any customer overlap that you have with that solution within your existing base, within the K-12 market?

Yeah. Mostly in the higher ed market, there was some customer overlap. There's also a lot of cross sell opportunity in the higher ed market. There's also some overlap to a lesser extent in the foundation marketplace. And K-12 market, lots of cross sell opportunity there. And there's also, again, the combination of cross selling that platform back into the higher ed foundation of K-12 space and then just net new customers.

And it appears that there are no further questions at this time. I would like to turn the call back to Mike Gianoni for any additional or closing remarks.

Thanks, operator. I'll just close everyone by saying Q1 was a really solid start to the year for us. We're really pleased with our progress that we've made against our strategic plan and our four strategic objectives. We plan to further these initiatives in 2017 and achieve our financial guidance and long-term aspirational goals. Tony and I look forward to updating all of you in our progress on the next call and thanks, everyone, for your participation.

This does conclude today's conference. We thank you for your participation. You may now disconnect.