ブラックボッド（BLKB）2026年第3四半期決算説明会：売上高成長、AIロードマップ、業績見通し

主要ポイント

• 2026年第3四半期の売上高は、Blackbaudのミッションクリティカルなソリューションに対する継続的な需要とトランザクション売上高の成長に支えられ、4.1%増の2億9,300万ドルとなりました。
• 調整後EBITDAは1億1,100万ドルに達し、マージンは38%となりました。Non-GAAP EPSは24%増の1.36ドルとなり、フリーキャッシュフローは合計1億2,600万ドルとなりました。
• 経営陣は通期ガイダンスを再確認し、売上高および調整後EBITDAがそれぞれの予想レンジの上位半分に収まると予想しています。EPSおよびフリーキャッシュフローはガイダンスの上限と同等またはそれを上回る見込みです。
• Blackbaudは、Platform for GoodおよびDatabricksと共同開発した資金調達特化型言語モデル「Lantern」を発表しました。Lanternを搭載した最初の機能は2027年に提供開始予定です。
• 同社は2026年最初の9ヶ月間に、2025年末時点の発行済株式数の7%強を自社株買いしました。発行済株式数は2023年第4四半期以降、約16%減少しています。
• 2026年の更新コホート規模が大きいことが契約ベースの継続収益の成長を抑制していますが、経営陣は2027年のコホート規模が縮小することで、来年後半には正常化に向かうと予想しています。

主要財務データ

事業および業績の動向

Blackbaudの製品戦略は、既存のファンドレイジング、財務管理、教育、決済ソリューションへのデータおよびAI機能の組み込みを中心に据えています。

Platform for Goodは、データコア、Social Impact Signal Graphを搭載したインテリジェンス層、アシスタント・エージェント・ワークフローで構成されるアクション層の3つのレイヤーを通じて、同社の製品、データ、AI、セクターの専門知識を連携させます。既存顧客は、新機能が利用可能になってもプラットフォームを再構築する必要はありません。

Databricksとの戦略的提携により開発されたLanternは、慈善活動およびファンドレイジングに特化して設計されています。顧客固有のデータではなく、BlackbaudのSocial Impact Signal Graphをモデルにした合成シナリオを用いて学習されています。経営陣は、Lanternが2027年に一部のRaiser’s Edge NXTおよびAgents for Good機能への導入を開始すると見込んでいます。

Development Agentは提供開始から約7ヶ月が経過しており、顧客の関心を集め新たな案件を獲得しています。また、BlackbaudはData Health Agentおよび新しいAIマーケティングプラットフォームの初期導入企業を募集しており、一般提供は2027年初頭を予定しています。

BlackbaudはAI以外の製品投資についても強調しました。Raiser’s Edge NXTは、インテリジェンスと自動化を組み込んだネイティブクラウドプラットフォームとして再構築されています。その他の発表には、Blackbaud Marketing、BILLと共同開発した次世代Payment Assist、Deposit Connect、および高等教育向けのConnected Campusソリューションが含まれます。

契約ベースの継続収益の約90%が、少なくとも3年間の契約に紐づいています。4年以上の契約の割合は、2026年序盤の20%から上昇し、現在は約25%となっています。

顧客獲得の実績としては、グローバルCRMの刷新としてRaiser’s Edge NXTを採用したカリフォルニア州立大学チコ校や、米国およびカナダ全域の事業をカバーするInternational Schools Partnershipとの7桁ドル規模の複数年エンタープライズ契約などが挙げられます。

業績見通し（ガイダンス）

Blackbaudは2026年通期のガイダンスレンジを再確認しました。経営陣は、売上高および調整後EBITDAがそれぞれのレンジの上位半分で着地し、EPSおよびフリーキャッシュフローはレンジの上限と同等またはそれを上回ると見込んでいます。

2026年の見通しには、新しいAI製品からの実質的な売上やバイラルな寄付イベントによる影響は織り込まれていません。経営陣は、Agents for GoodおよびLanternの将来的な商業化を、現在のガイダンスに織り込まれた貢献要因ではなく、潜在的な上振れ要因と捉えています。

2026年から2030年にかけて、Blackbaudは以下の目標を掲げています：

• オーガニック売上高の年率4%〜6%の成長。
• 調整後EBITDAの年率6%〜8%の成長。
• 40%を超える調整後EBITDAマージン。
• 2桁の年率EPS成長。
• 累積フリーキャッシュフローの50%以上を自社株買いに充当。

同社は自社運用する最後の2つのコロケーションデータセンターを2026年末までに閉鎖する予定です。経営陣は、関連するコスト削減効果が2027年から表れ始め、時間の経過とともに拡大すると予想しています。

リスクおよび注視すべき点

Blackbaudの2026年における契約ベースの継続収益の更新コホートは、2025年比で約40%拡大しています。経営陣によると、これにより2026年第4四半期および2027年前半を通じて、契約ベースの継続収益の成長は引き続き抑制される見通しです。

2027年の更新コホートは2026年より約25%縮小する見込みです。経営陣は、これにより解約圧力が緩和され、総ドル保持率が2027年末までに過去のレンジである91%〜92%に戻ると見込んでいます。

トランザクション売上高は四半期ごとに変動する可能性があり、寄付額、授業料や学校関連の支払額、JustGivingの稼働状況に依存します。同社のガイダンスは過去の取引パターンを前提としており、バイラルな寄付イベントは除外しています。

通期の組織再編・人員移行コストは、前回の予想である600万〜800万ドルから、現在は合計で約800万〜1,000万ドルになると見込まれています。希望退職プログラムによるキャッシュへの影響の大部分は2026年第4四半期に発生する見込みであり、移行活動は2027年まで続く予定です。

アナリスト質疑応答のハイライト

AIのマネタイズ：経営陣は、Development Agentが案件を創出しており、利用にRaiser’s Edge NXTを必要とするためコア製品の販売支援にもつながっていると説明しました。Data Health Agentおよび新たなAIマーケティングプラットフォームの初期導入手続きが進められているものの、AIは依然として商業化の初期段階にあります。

トランザクション売上高：第3四半期に導入されたプラットフォーム手数料は、同四半期中にわずかに寄与しました。経営陣は、これが2027年前半までトランザクション売上高の成長を支えると見込んでいます。Blackbaudは第3四半期に重要なバイラル寄付イベントはなかったと報告しました。

契約更新と維持率：経営陣によると、規模が大きい2026年の更新コホートは計画通りに進展しています。新しいAI製品がクロスセルの機会を生み出し始めており、一方、規模がより小さい2027年のコホートは、来年後半に継続収益のトレンドを改善させると予想されています。

インフラの効率化：残りのコロケーションデータセンターを閉鎖することにより、Blackbaudは2027年1月から主にMicrosoft AzureとAWS上で運用を行うことになります。経営陣は、財務上のメリットが即座に現れるのではなく、時間の経過とともに段階的に業績に寄与すると予想しています。

決算説明会トランスクリプト全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good day, and welcome to Blackbaud's Q3 2026 Earnings Call. Today's conference is being recorded. I will now turn the conference over to Tom Barth, Head of Investor Relations. Please go ahead, sir.

Tom Barth

Good morning, everyone. Thank you for joining us on Blackbaud's Third Quarter 2026 Earnings Call. Joining me on the call today are Mike Gianoni, Blackbaud's Chief Executive Officer, President and Vice Chairman; and Chad Anderson, Blackbaud's Executive Vice President and Chief Financial Officer.

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.

Today's discussion will focus on non-GAAP results. Please refer to our press release and investor materials posted to our website for full details on our financial performance, including GAAP results, full year guidance and long-term aspirational goals. We believe that a combination of GAAP and non-GAAP measures provides a more representative view on how we 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, or as a substitute for GAAP measures.

We've also provided a slide presentation with supplemental data and additional highlights and financial metrics. The earnings release, supplemental tables and presentation are available in the Investor Relations section of our website on blackbaud.com.

And with that, let me turn the call over to you, Mike.

Michael Gianoni

Thank you, Tom. Good morning, everyone. We appreciate you joining us today. We delivered another quarter of solid execution against our operating plan with earnings per share and cash flow coming in better than expected as we continue to focus on a balanced financial profile driven by productivity efficiencies and a rapidly accelerating pace of product innovation. These results reflect the leadership position Blackbaud holds at the intersection of innovation and community.

We understand the organizations we serve, the people who do the work and the communities that depend on them. We are equally committed to the technology and the transformation they need and proud of how we lead in both. We convene the sector, we share what we learn and we build the products it runs on. This foundation took 4 decades to build. And as AI changes how social impact organizations operate for the years to come here and abroad, this intersection of innovation and community is becoming more urgent and more indispensable.

Our customers want human ingenuity combined with the best of innovation from a partner they trust. And as such, what we do and what we offer has never been more important. This has never been more evident in our pace of innovation over the past year.

Last year, we talked about moving our products from systems of record to systems of intelligent action, and we continue to improve on that vision. In fact, at bbcon 2026, we announced Platform for Good, our unified operating system for social impact and introduced Lantern, the first domain-specific language model purpose-built for fundraising. I want to spend most of my time on those announcements on how we are continuing to invest in the core products our customers rely on every day and on what we are hearing from customers. Platform for Good is the next step, a single connected operating system in which our products, data, AI and expertise work together, learning from every interaction and getting smarter with every product that runs on it.

It is built on 3 layers. The data core brings together our differentiated data assets, including the Blackbaud Philanthropic dataset, research and industry data from the Blackbaud Institute and Blackbaud Giving Search. The intelligence layer is powered by our Social Impact Signal Graph, which connects signals across the social impact ecosystem to surface patterns, relationships and context. And the action layer is where our AI moves from intelligence to execution through assistants, agents and workflows with appropriate human oversight and control.

Importantly, Platform for Good requires no action from existing customers. It unites our products under the surface and customers adopt new capabilities as they become available while continuing to work in the Blackbaud solutions and workflows they use today. That matters in a sector where many organizations have limited IT resources and face turnover and staffing shortages.

We also introduced Lantern. Lantern is the newest part of our intelligence layer. Our research shows that 85% of social impact professionals use AI in their daily work, yet only about 10% of organizations are seeing returns. General purpose models learn from the Internet. Lantern learns from philanthropy. Developed through a strategic collaboration with Databricks, Lantern combines leading open-weight models on the Databricks data and AI platform with more than 40 years of Blackbaud's fundraising experience. It is posttrained on synthetic scenarios modeled on our Social Impact Signal Graph, so it understands giving behavior rather than buying behavior, including retention, upgrade paths and lifetime relationships, which are central to fundraising, but not native to general purpose AI.

Just as importantly, it is developed under our responsible AI principles with privacy, transparency and sector-appropriate governance at its core and with input from customers, including Boston University, Hess House and YMCA of the North. On timing, Lantern will begin powering featured Raiser's Edge NXT and Agents for Good capabilities in 2027 with broader availability across Platform for Good to follow.

Our Agents for Good family continues to grow. The Development Agent, our first agentic product, which became available earlier this year, is helping fundraising teams identify and engage donors who are not in a major gift officers portfolio under human supervision. At bbcon, we announced new advancements to Development Agent and introduced the Data Health Agent, a continuous data steward that detects and addresses data issues through review and approved workflows. We also previewed agentic experiences for finance and education, including our vision for an accounts payable agent in Financial Edge NXT that reviews invoice details, prepares cash-aware payment runs and stages recommendations for human approval.

I want to be clear about something. Our AI investment is in addition to, not instead of our investments in the core products our customers depend on every day. Our use of AI in engineering has expanded our capacity and increased our velocity such that we are announcing more new solutions than we ever have and at the same time, significantly advancing our core solutions. Those core products are the systems of record, the workflows and the trust that make our AI valuable, and we continue to invest in them aggressively.

The clearest example of enhancement was improvements within Raiser's Edge NXT. At bbcon, we unveiled its next chapter, rebuilt from the ground up as a native cloud AI-powered platform with embedded intelligence, automation and connected data. The new more powerful Raiser's Edge NXT enhancements were planned for customer use in 2027, but were accelerated and pulled forward by more than a year and include purpose-built AI that services high potential prospects and giving signals. These enhancements also include Strategy Assistant, which delivers benchmarks and recommendations directly in the flow of work, drawing on more than $1 trillion in giving history tracked through Raiser's Edge NXT.

We also introduced Blackbaud Marketing embedded within Raiser's Edge NXT to help teams plan campaigns, identify audiences and coordinate engagement across channels.

In financial management and payments, we announced our next-generation Payment Assist through a strategic partnership with BILL in Deposit Connect, which brings gift, fee and disbursement data together across Raiser's Edge NXT, Blackbaud Integrated Payments and Financial Edge NXT.

In education, we unveiled the higher education Connected Campus solution built with our partner, Student First, which brings the student life cycle together with advancement, finance, awarding and payments, and we continue to invest in our total school solution for K-12.

Together, these investments reflect our strategy, modernize the products customers already trust, then add embedded intelligence and new AI solutions so customers get value from AI without replatforming or adding bolt-on tools. That approach is reflected in contract terms and customer satisfaction with approximately 90% of our contractual reoccurring revenue on contracts of 3 years or longer and approximately 25% on 4 years or longer, up from 20% earlier in the year.

Our approach to the established parts of the portfolio is deliberate. We continue to fund modernization, performance, security and compliance work across our fundraising, financial management, education and corporate social responsibility and grant-making solutions because customers judge us first on whether the products they use every day are reliable, intuitive and getting better. We also see the 2 new efforts reinforcing each other. Every improvement to a core product such as cleaner data, tighter integrations and faster workflows makes the intelligence layer more accurate and more useful. And every agent and model we ship is embedded in a solution customers already trust, which reduces the data gaps and security risks created by bolt-on tools. That is a large part of why we believe our differentiation is clear and widening.

Turning to customers. This quarter, we again saw a healthy mix of new customer logo wins and cross-sales of additional solutions to our existing customers across all verticals. Within our Higher Education vertical, we replaced a well-known global CRM at Cal State University, Chico, with Raiser's Edge NXT. Like many of our new logos, they want to modernize their advancement operations, streamline fundraising and reporting processes and provide their team with a scalable cloud platform to support future growth and donor engagement.

Also in the third quarter, we had a new logo win that signed up for Raiser's Edge NXT and our AI development agent solution for the first time. Additionally, we closed a 7-figure multiyear enterprise agreement with International Schools Partnership, a global organization operating over 100 schools worldwide. This win expanded Blackbaud's presence in the multi-school enterprise segment through a portfolio-wide technology standardization initiative across the U.S. and Canada. They chose us as they seek to leverage Blackbaud's integrated platform, data strategy and implementation expertise.

These wins reflect the strength of purpose-built connected solutions over fragmented generic alternatives and the value of our solutions in meeting our customers' ambitious goals. Trust is critical to new and existing organizations, allowing intelligent systems to act on their behalf. Our customers trust in us as their partner, in the solutions they are used to, in the data and in our security, which are advantages for both our customers and for Blackbaud. The gap between AI adoption and effective use is exactly what we are working to close by delivering trusted AI inside the tools our customers already use and through the AI Coalition for Social Impact, which we convened in 2025. The Coalition's free product-agnostic AI for social impact certification program opened in July, and its second course on responsible AI principles and regulations is planned for later this year.

And now turning to how we use AI internally. We continue to identify, experiment and scale solutions across engineering, sales and marketing, customer success and the back office to improve speed and operational efficiency. Our engineering teams continue to use leading generative AI tools such as Microsoft GitHub Copilot, Anthropic Claude and other approved solutions to accelerate development, reduce time to remediate software issues and increase throughput on new product delivery.

Looking ahead, our priorities are straightforward; first, deliver the capabilities we announced at bbcon on the time lines we have described, including the Raiser's Edge NXT enhancements, the Agents for Good road map and the first Lantern-powered capabilities in 2027; second, keep investing in the reliability, security and usability of the products our customers run their organizations on; and third, keep translating advances in AI into practical outcomes customers can trust.

Our 2026 full year guidance does not include any meaningful revenue contribution from our new AI products. We view commercialization for Agents for Good and Lantern as potential upside over time, and we will continue to make guidance and investment decisions accordingly. As a reminder, from 2026 through 2030, we are targeting double-digit annual EPS growth driven by total organic revenue growth of 4% to 6% annually with potential upside from viral events and new product launches such as our Agents for Good catalog, and adjusted EBITDA growth of 6% to 8% annually while expanding our adjusted EBITDA margin to 40% plus.

We expect to translate that into strong free cash flow growth and plan to deploy 50% or more of our cumulative free cash flow generated between 2026 and 2030 towards stock repurchases, leaving us with optionality for potential tuck-in acquisitions.

Since the fourth quarter of 2023, we have reduced common stock outstanding by approximately 16%.

Regarding our expectations for the remainder of this year, we are again pointing investors to the upper half of our 2026 guide across revenue and adjusted EBITDA. And for EPS and free cash flow, we expect results to be at or above the high end of the guidance ranges. Chad will provide more detail and color in a minute.

To conclude, we believe Blackbaud is a compelling investment with multiple opportunities for strong shareholder returns. From an operating, financial and strategic perspective, we are pleased to be carrying real momentum into the fourth quarter and the years ahead with Platform for Good, Lantern and Agents for Good embedded within the core products our customers trust. We look forward to our continued journey. And I would also like to thank the entire Blackbaud team for their continued strong efforts and job well done.

I'd now like to turn it over to Chad to walk through our third quarter results.

Chad Anderson

Thanks, Mike, and good morning, everyone. In the third quarter, we continued to balance cost management with growth opportunities, AI capabilities and investments in innovation. We're focused on durable subscription-led performance, prudent expectations around transactional revenue and steady improvements in profitability and cash flow.

Our Q3 performance reflected continued demand for our mission-critical solutions, along with growth in transaction revenue. As always, transactional revenue can vary from quarter-to-quarter, and our guidance philosophy assumes performance consistent with historical patterns and does not include any assumption for viral giving events.

Q3 revenue grew 4.1% to $293 million. Non-GAAP adjusted EBITDA was $111 million, representing an adjusted EBITDA margin of 38%, and non-GAAP EPS continues to be strong and increased 24% to $1.36 in the quarter, and we had a very strong free cash flow quarter of $126 million.

During the first 9 months of 2026, including the net share settlement of employee stock compensation, we repurchased just over 7% of our outstanding common stock as of December 31, 2025. Since the fourth quarter of 2023, we have fully offset dilution from stock-based compensation and also reduced common shares outstanding by approximately 16%.

Additionally, we used our strong free cash flow and existing cash position to reduce our debt leverage levels from 2.7x at the end of Q1 to just under 2.3x in Q3.

Before discussing our outlook, I'd like to highlight several housekeeping items that are already contemplated in our financial guidance and may be helpful as you think about modeling the business through the balance of 2026 and into 2027.

First, as we've discussed previously, our 2026 contractual recurring revenue renewal cohort is approximately 40% larger than last year. As expected, this is affecting reported gross dollar retention and will continue to moderate contractual recurring revenue growth in the fourth quarter and through the first half of 2027.

As we move beyond this larger renewal cohort, we're planning for a material reduction in churn revenue as our recurring revenue renewal cohort in 2027 will be nearly 25% smaller than 2026. We expect this smaller renewal cohort to provide a tailwind to contractual recurring revenue growth, which should begin to normalize in the second half of 2027 with gross dollar retention returning to its historical norm of 91% to 92% by the end of 2027.

Second, as discussed last quarter, we introduced a platform fee within our transactional revenue that began in the third quarter. The expected contribution is included in our 2026 guide, and we expect the rollout to support transactional revenue growth through the first half of 2027.

Turning to margins. We're on track to close our last 2 company-operated colo data centers by year-end. This is the culmination of a multiyear infrastructure modernization effort and example of the productivity initiatives embedded in our operating model. Because the final closures occur late in 2026, we expect the related financial benefits to be realized starting in 2027.

Finally, regarding free cash flow, we continue to make steady progress on our workforce strategy, including the build-out of our global capability center in India, which expands our access to talent and supports greater cost efficiency over time.

During the third quarter, we announced and executed a voluntary separation program. We expect the cash impact of that program to occur primarily in the fourth quarter. We now expect full year global workforce transition costs of approximately $8 million to $10 million, modestly above our prior estimate of $6 million to $8 million, and expect global workforce transition activity to continue through 2027. These actions support our longer-term operating model while resulting in near-term cash outflows. Despite this, we expect our free cash flow will be at the upper end or above our 2026 guidance range.

Based on our year-to-date performance and our current view of the operating environment, we are reaffirming our full year guidance ranges and expect to finish in the upper half of the range across revenue and adjusted EBITDA. And for EPS and free cash flow, we expect results to be at or above the high end of the guidance ranges.

Looking ahead, we anticipate deploying at least 50% of cumulative free cash flow through 2030 towards share repurchases. Beyond that commitment, the company has tremendous optionality for dynamically allocating capital to its highest and best use based on market conditions, including additional share repurchases, debt reduction and also plan to continue to look opportunistically at strategic tuck-in acquisitions.

We have a lot to be proud of, executing well over the last several years and throughout 2026 and continuing our commitment to providing meaningful solutions to our customers and strong execution of our operating plan. We remain committed to providing investors with an attractive financial model, balanced between growth of revenues, earnings and cash flows, along with a prudent and purposeful capital allocation strategy. And as always, we remain focused on providing enhanced value to our customers and our shareholders.

Thank you all. Mike and I would be happy to take your questions. Operator?

Operator

[Operator Instructions] We will now take our first question from Brian Peterson at Raymond James.

質疑応答

Brian Peterson

So maybe just starting on AI. We were at a bbcon, and I think it was very clear that the pace of innovation is accelerating. Mike, I know you referenced that in your prepared comments. But as we're looking at this as an investment opportunity, I think we're kind of thinking about what is that AI monetization path. So Mike, is there anything that you can kind of point us towards? I know we're early days, but in terms of thinking about that revenue opportunity for Blackbaud, like what would you point us to there?

Michael Gianoni

Yes, Brian, thanks. Yes, pace of innovation has picked up a lot. We've announced more products this year than we ever have. We have one in the market. As you know, the Development Agent is in the market about 7 months, getting very well received. We're closing deals all the time. We've announced several other products. We're signing up customers for what we call our early adopter program for the new AI marketing platform, for the data health agent. So those customers are being signed every day, every week right now to build the EAP platform. Those will go into general availability sometime early next year.

And so we've got new revenue lines being built by these new solutions. What's also interesting is we're getting a lot of interest on these new solutions, which then pulls in our core products as well. I mentioned that we closed not more than one, but a Raiser's Edge NXT deal because the customer was interested in the Development Agent, and you have to get Raiser's Edge NXT to get the Dev Agent. And so we're selling bundles with the new solutions now as well.

So yes, it's early days, Brian. There's a lot of receptivity. We do webinars with customers and get hundreds and hundreds of customers on those webinars post bbcon because they want to learn about these new solutions. So I'd say it's early days, but building a ton of interest.

Brian Peterson

That's good to hear. Maybe just a follow-up on the transactional revenue. I know you guys mentioned kind of the platform fee coming in this quarter. Was there any viral giving in the third quarter that kind of helped that number? And maybe as we're thinking about longer term, how should we be thinking about that transactional growth rate relative to some of the longer-term targets for the corporate average?

Michael Gianoni

Yes. That new platform fee came in, in Q3 a little bit, and then obviously, it's go forward, right? So we'll have it this quarter and then the first half of next year we'll have that platform fee. And it really was a catch-up because pretty much everyone else has a platform fee. So we feel good about that. That's fully in place. And we feel good about our transaction businesses. They're a little different, right? One of them is based on donations and volume, another one is tuitions and schools. And then there's JustGiving, which is predominantly over in the U.K. So they're all a little bit different.

I think the key thing for us is the fact that we've got our core system of record platforms integrated with transaction solutions, which makes the core platforms stickier. And then we're integrating all those together in our platform for a good announcement, which is basically the integration of our financial platform, fundraising, transactions and the new AI solutions all in a common platform, getting access to that data within the systems of record. So that's kind of a long-winded answer to say the transaction systems, we feel good about them and the fact that they're embedded with everything else is a really good position for us. And you could see in the fact that our customers, they're either on a 3-year contract, but 25% of them are now on 4-year or longer contracts. And that 25% number has really ticked up a lot in the last 18 months.

Operator

We will now take our next question from Parker Lane at Stifel.

J. Lane

Mike, you talked about Lantern and the introduction of more domain-specific models over time. Can you talk about why that's so important to the industry you play in? And what the time line do you expect those to come out by? I know you mentioned '27. Is that an event that we should expect in the first half of the year or in the second half of the year?

Michael Gianoni

Yes, you bet. So it's important for a lot of reasons. Number one, Lantern is embedded within our platforms, and it has access to things like our Signal Graph, which is sort of the workflows within our systems, the history of workflows, what makes our systems from a data and a workflow perspective important for our customers. And so our customers can use Lantern to learn how to improve their business. So that's important. And Lantern is trained only on philanthropy and fundraising. So it's very specific to that and tuned to that. And we have developed that in a collaboration with Databricks as well, which we announced at bbcon.

So it's not a general purpose tool. It's embedded within our solutions. It's only for philanthropy and fundraising. It uses data from our Blackbaud Search, our Blackbaud Giving Institute. It understands what we call the Signal Graph, which is sort of patterns of success that our customers can learn from. It doesn't use any customer-specific data. It uses synthetically created data that mimics customer data. So that's important. It's also inside of our cyber stack. It's inside of our trusted and governed solutions. And we have a lot of conversations with our customers around AI and AI trust. So that's really important as well.

J. Lane

Thanks, Mike. And Chad, one for you. Good to see the colo data centers closing by year-end. How should we think about the timing and magnitude of the financial impact there? I know you mentioned the benefits to be realized in '27. Is this going to be a situation where you see an immediate benefit from the switch to public cloud? Or will this flow into the model over time?

Chad Anderson

Thanks for the call-in. It's a good question. I would expect that it's going to moderate over time. We're pleased. This is just another example of Blackbaud executing. So we'll be closing both of the remaining colos by end of the year and feel really good about it from a modeling perspective. I would assume that, that kind of blends in kind of over time starting in '27. And then from a margin perspective, I'd also just remind you, we're continuing to execute very well relative to the build-out of the global capability center in India as well. So in the prepared remarks, you would have heard me talk about the -- kind of the transition-related costs. Those will step up a little bit in Q4, and we'll see the benefit related to that from an efficiency -- cost efficiency perspective next year, but really pleased with the progress. And then we do have a number of other levers that we're continuing to execute. We've got an overview of those that we provide in the investor materials as well.

Michael Gianoni

I'll also add, it's nice to get that project behind us, too. We started to consolidate and close these colo data centers years ago. It takes a while because it's complex. There's a lot of communication technology. It's not just our solutions, right? It's all the data center infrastructure. But the company now is pretty much running on Azure and AWS. So we don't have -- or we won't have any colo data centers starting in January, which is a big deal from an operational standpoint. It just really simplifies our operations, and we don't have to manage colo data centers anymore. So it's a big accomplishment for us operationally.

Operator

[Operator Instructions] We will now take our next question from Peter Burkly at Evercore ISI.

Peter Burkly

Maybe just first one, organic growth stepped up a little above 4% this quarter, up about 1 point versus last quarter. And I think the updated guide towards the upper half of the range implies another 1.5 points or so step-up. So just curious if you could help us bridge that step-up across different elements, whether that be the platform fee, normal holiday giving seasonality, renewal timing, sort of anything else that might be coming into play there? And then I guess, how much of the 4Q exit rate would you treat as a durable starting point for 2027 as opposed to just a quarterly timing element?

Michael Gianoni

Yes. So a couple of things in there, Peter. First, we didn't have much from a holiday giving, right? That usually happens in the back half of Q4. And we see that typically in the transaction systems that we have. So that's one point. We don't have much of that in Q3. It didn't really have any viral events on transactions in Q3 either. In fact, the growth in Q3, we're happy with the growth, but it's a bit moderated because of a large cohort of renewals we have this year, right? We've got 40% more renewals this year, and we talked about this a bunch in the past than we've had last year. And so that moderates it a little bit, frankly. But we're pretty much by all those.

We start to talk to customers on their renewals about 5 months ahead. So we're working renewals in Q1 right now. So that big cohort is -- the work of that is kind of behind us. And so we had a really solid quarter. It met our expectations. We're happy with where we're looking at for the year. Chad mentioned looking at revenue to be in the upper half of our guide and adjusted EBITDA in the upper half of our guide. As you know, we guide annually, right, not quarterly. And then EPS and free cash flow right at the top or maybe above the guide for the year. So good strong finish for the year. We're happy with Q3. And I think we're in good shape to finish the year and have a good setup for '27.

Peter Burkly

Great. And maybe if I can just double-click actually on that renewal cohort and what you're seeing there. So I'm just curious sort of against your plan initially, how have renewal rates, price increases at renewal, some new product attach, how has that sort of tracked versus maybe what your initial plan was? And then what are you seeing that sort of supports that path back to that 91%, 92% gross retention next year?

Michael Gianoni

Yes, you bet. I mean a couple of things there. So the fact that we're saying we're going to be toward the upper half of the revenue guide is a clue to how that's going. It's going as planned. It's just a high volume this year, that's all. So it's kind of a mathematical thing, right? So it's going as planned. We are starting to attach some of the new solutions. So we talk to our customers now about things like the Development Agent at renewal. We will be talking to customers about the Data Health Agent at renewal, but we're just going into EAP, right now.

So we'll have a lot more opportunities for more attachments because of all the new solutions that we announced. A ton of interest in the Data Health product that we announced. All of our customers either have a full-time person doing data health or they have a percentage of a team's time doing data health. So I think that product is going to resonate really well, and we've seen a huge response to that at our bbcon conference. And then our brand-new marketing platform, a big response to that, and we've already signed up a bunch of customers for EAP there.

So the attachment opportunities are just going to go up because of all the new solutions that we announced. But back to the renewal question you had, it's going as planned. And we're looking at the upper half of our guide for revenue this year. So...

Tom Barth

Thank you, Peter, and everyone, for joining us today. We will be attending a number of investor events in the fourth quarter, including several investor conferences, which are listed on our IR website. We hope to see you and/or speak with you very soon, and we wish you continued success and have a wonderful day.

Operator

Ladies and gentlemen, thank you for your participation. This concludes today's teleconference. Please disconnect your lines, and have a wonderful day.