Blackbaud, Inc. Announces Third Quarter 2009 Results.

Announces Fourth Quarter 2009 Dividend

CHARLESTON, S.C. -- Blackbaud, Inc. (Nasdaq: BLKB), the leading provider of software and related services designed specifically for nonprofit organizations, today announced financial results for its third quarter ended September 30, 2009.

Marc Chardon, Chief Executive Officer of Blackbaud, stated, "We are very pleased with the company's better-than-expected financial results in the third quarter. We continue to see the largest nonprofit organizations moving forward with technology investments in order to optimize their fundraising activities in the current economic environment, while also driving operational enhancements that will benefit their organizations long-term. As a result, Blackbaud's enterprise sales efforts and the Blackbaud Enterprise CRM[TM] product offering continue to represent important drivers of our solid financial performance."

"While the market environment remains challenging, Blackbaud is making steady progress in strengthening its market position. We continue to expand our existing relationships and add to our customer base in the online fundraising segment of the market, and the company's already solid overall win rates continue to increase. These reasons, along with others, cause us to believe Blackbaud is well positioned for enhanced growth when the economy eventually improves."

On a GAAP basis, Blackbaud reported total revenue of $79.2 million for the quarter ended September 30, 2009, a decrease of 1.1% compared with the third quarter of 2008. Income from operations and net income were $13.9 million and $9.8 million, respectively, compared with $11.5 million and $7.3 million, respectively, in the third quarter of 2008. Diluted earnings per share were $0.22 for the quarter ended September 30, 2009, compared with $0.17 in the same period last year.

For the quarter ended September 30, 2009, non-GAAP revenue, including a $0.5 million revenue adjustment related to Kintera purchase accounting, was $79.7 million, a decrease of 3.6% compared with non-GAAP revenues in the third quarter of 2008. Non-GAAP income from operations, which excludes stock-based compensation expense and amortization of intangibles arising from business combinations, was $18.9 million, above the Company's guidance of $15.5 to $16.5 million and representing a non-GAAP operating margin of 23.8%. Non-GAAP operating income was $19.2 million in the third quarter of 2008.

Non-GAAP net income was $11.6 million for the quarter ended September 30, 2009, compared with $11.4 million in the same period last year. Non-GAAP diluted earnings per share were $0.26 for the quarter ended September 30, 2009, above the Company's guidance of $0.22 to $0.23 and compared to $0.26 in the same period last year.

A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading "Non-GAAP Financial Measures."

The Company ended the quarter with $22.2 million in cash, up from $18.5 million at the end of the previous quarter. The company generated $25.8 million in cash from operations during the third quarter, approximately $23 million of which was used to reduce debt. The Company also used $4.4 million for the quarterly payment of dividends to stockholders.

Timothy V. Williams, Chief Financial Officer of Blackbaud, stated, "The company's strong third quarter financial results were enhanced by a couple of large Blackbaud Enterprise CRM[TM] deals that closed and were recognized during the quarter. Revenue and profitability would have been above the high-end of our guidance even without these larger transactions, and the company's evolution to subscription-based offerings and recurring revenue continues to progress." Williams added, "We are pleased with the company's ability to execute at the highest level with respect to expense management. During the third quarter, our worldwide organization continued to identify incremental expense savings and to focus on how to improve the efficiency of our operations."

Fourth Quarter 2009 Dividend and Share Repurchase Program

Blackbaud announced today that its Board of Directors has declared a fourth quarter dividend of $0.10 per share payable on December 15, 2009 to stockholders of record on November 27, 2009. Additionally, as of September 30, the Company had approximately $30 million remaining under its common stock share repurchase program that was authorized over a year ago.

Conference Call Details

Blackbaud will host a conference call today, October 28, 2009, at 5:00 p.m. (Eastern Time) to discuss the Company's financial results, operations and related matters. To access this call, dial 800-575-5790 (domestic) or 719-325-2392 (international). A replay of this conference call will be available through November 4, 2009, at 888-203-1112 (domestic) or 719-457-0820 (international). The replay passcode is 4454356. A live webcast of this conference call will be available on the "Investor Relations" page of the Company's website at www.blackbaud.com/investorrelations, and a replay will be archived on the website as well.

About Blackbaud

Blackbaud is the leading global provider of software and services designed specifically for nonprofit organizations, enabling them to improve operational efficiency, build strong relationships, and raise more money to support their missions. Approximately 22,000 organizations -- including University of Arizona Foundation, American Red Cross, Cancer Research UK, The Taft School, Lincoln Center, In Touch Ministries, Tulsa Community Foundation, Ursinus College, Earthjustice, International Fund for Animal Welfare, and the WGBH Educational Foundation -- use one or more Blackbaud products and services for fundraising, constituent relationship management, financial management, website management, direct marketing, education administration, ticketing, business intelligence, prospect research, consulting, and analytics. Since 1981, Blackbaud's sole focus and expertise has been partnering with nonprofits and providing them the solutions they need to make a difference in their local communities and worldwide. Headquartered in the United States, Blackbaud also has operations in Australia, Canada, the Netherlands, and the United Kingdom. For more information, visit www.blackbaud.com .

All Blackbaud product names appearing herein are trademarks or registered trademarks of Blackbaud, Inc.

Forward-looking Statements

Except for historical information, all of the statements, expectations, and assumptions contained in this news release are forward-looking statements that involve a number of risks and uncertainties. Although Blackbaud attempts to be accurate in making these forward-looking statements, it is possible that future circumstances might differ from the assumptions on which such statements are based. In addition, other important factors that could cause results to differ materially include the following: general economic risks; uncertainty regarding increased business and renewals from existing customers; continued success in sales growth; management of integration of acquired companies and other risks associated with acquisitions; risks associated with successful implementation of multiple integrated software products; the ability to attract and retain key personnel; risks related to our dividend policy and share repurchase program, including potential limitations on our ability to grow and the possibility that we might discontinue payment of dividends; risks relating to restrictions imposed by the credit facility; risks associated with management of growth; lengthy sales and implementation cycles, particularly in larger organizations; technological changes that make our products and services less competitive; and the other risk factors set forth from time to time in the SEC filings for Blackbaud, copies of which are available free of charge at the SEC's website at www.sec.gov or upon request from Blackbaud's investor relations department.

Non-GAAP Financial Measures

Blackbaud has provided in this release financial information that has not been prepared in accordance with GAAP. This information includes non-GAAP revenue, non-GAAP income from operations and margin, non-GAAP net income and non-GAAP diluted earnings per share. Blackbaud uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating Blackbaud's ongoing operational performance. Blackbaud believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial results with other companies in Blackbaud's industry, many of which present similar non-GAAP financial measures to investors. As noted, the non-GAAP financial results discussed above exclude stock-based compensation expense and costs associated with amortization of intangibles arising from business combinations and include revenue associated with the Kintera acquisition that is not recognizable under GAAP purchase accounting.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measure below. As previously mentioned, a reconciliation of our non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release.

Blackbaud, Inc.
Consolidated balance sheets
(Unaudited)
		September 30,		December 31,
(in thousands, except share amounts)		2009		2008
Assets
Current assets:
Cash and cash equivalents		$	22,238			$	16,361
Donor restricted cash			16,493				12,363
Accounts receivable, net of allowance of $2,911 and $2,777 at September 30, 2009 and December 31, 2008, respectively			51,266				52,554
Prepaid expenses and other current assets			21,978				17,281
Deferred tax asset, current portion			6,745				6,858
Total current assets			118,720				105,417
Property and equipment, net			19,287				21,384
Deferred tax asset			61,096				64,762
Goodwill			74,208				73,615
Intangible assets, net			43,815				48,171
Other assets			530				537
Total assets		$	317,656			$	313,886
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable		$	7,085			$	7,023
Accrued expenses and other current liabilities			26,371				21,758
Donations payable			16,493				12,363
Capital lease obligations, current portion			230				384
Debt, current portion			18,642				60,049
Deferred revenue			128,168				113,802
Total current liabilities			196,989				215,379
Capital lease obligations, noncurrent			57				203
Long-term debt, net of current portion			420				1,288
Deferred revenue, noncurrent			5,449				5,838
Other noncurrent liabilities			1,386				670
Total liabilities			204,301				223,378
Commitments and contingencies
Stockholders' equity:
Preferred stock; 20,000,000 shares authorized, none outstanding			-				-
Common stock, $0.001 par value; 180,000,000 shares authorized, 51,683,679 and 51,269,081 shares issued at September 30, 2009 and December 31, 2008, respectively			52				51
Additional paid-in capital			132,324				116,846
Treasury stock, at cost; 7,536,337 and 7,494,466 shares at September 30, 2009 and December 31, 2008, respectively			(131,265	)			(130,594	)
Accumulated other comprehensive loss			(164	)			(899	)
Retained earnings			112,408				105,104
Total stockholders' equity			113,355				90,508
Total liabilities and stockholders' equity		$	317,656			$	313,886

Blackbaud, Inc.
Consolidated statements of operations
(Unaudited)
		Three months ended September 30,		Nine months ended September 30,
(in thousands, except share and per share amounts)		2009		2008		2009		2008
Revenue
License fees		$	5,919			$	8,099			$	19,123			$	27,337
Services			22,818				27,076				66,412				75,988
Maintenance			29,742				27,411				86,574				79,212
Subscriptions			19,190				15,547				53,686				33,342
Other revenue			1,536				1,965				4,566				6,157
Total revenue			79,205				80,098				230,361				222,036
Cost of revenue
Cost of license fees			987				1,011				2,871				2,660
Cost of services			15,269				16,703				46,990				47,301
Cost of maintenance			5,498				5,363				16,078				14,662
Cost of subscriptions			7,462				6,259				21,240				13,739
Cost of other revenue			1,325				1,970				4,136				5,841
Total cost of revenue			30,541				31,306				91,315				84,203
Gross profit			48,664				48,792				139,046				137,833
Operating expenses
Sales and marketing			15,778				16,686				46,965				47,597
Research and development			11,389				10,568				34,151				27,977
General and administrative			7,420				9,848				24,872				24,387
Amortization			194				190				572				524
Total operating expenses			34,781				37,292				106,560				100,485
Income from operations			13,883				11,500				32,486				37,348
Interest income			32				219				131				418
Interest expense			(181	)			(603	)			(876	)			(821	)
Other income (expense), net			226				(152	)			96				(192	)
Income before provision for income taxes			13,960				10,964				31,837				36,753
Income tax provision			4,132				3,648				11,349				13,407
Net income		$	9,828			$	7,316			$	20,488			$	23,346
Earnings per share
Basic		$	0.23			$	0.17			$	0.48			$	0.54
Diluted		$	0.22			$	0.17			$	0.47			$	0.53
Common shares and equivalents outstanding
Basic weighted average shares			42,781,072				42,668,276				42,805,498				43,112,209
Diluted weighted average shares			43,826,550				43,409,941				43,493,362				43,889,859
Dividends per share		$	0.10			$	0.10			$	0.30			$	0.30

Blackbaud, Inc.
Consolidated statements of cash flows
(Unaudited)
		Nine months ended September 30,
(in thousands)		2009		2008
Cash flows from operating activities
Net income		$	20,488			$	23,346
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			11,563				9,099
Provision for doubtful accounts and sales returns			2,082				4,018
Stock-based compensation expense			9,062				7,912
Excess tax benefit on exercise of stock options			(4,806	)			(168	)
Deferred taxes			5,896				1,837
Other non-cash adjustments			94				80
Changes in assets and liabilities, net of acquisition of businesses:
Accounts receivable			1,389				(12,516	)
Prepaid expenses and other assets			447				(1,020	)
Trade accounts payable			(198	)			904
Accrued expenses and other current liabilities			2,625				(5,459	)
Donor restricted cash			(4,129	)			(6,343	)
Donations payable			4,129				6,343
Deferred revenue			11,713				19,963
Net cash provided by operating activities			60,355				47,996
Cash flows from investing activities
Purchase of property and equipment			(3,865	)			(5,577	)
Purchase of net assets of acquired companies, net of cash acquired			(2,258	)			(49,927	)
Net cash used in investing activities			(6,123	)			(55,504	)
Cash flows from financing activities
Proceeds from issuance of debt			-				86,000
Proceeds from exercise of stock options			2,127				696
Excess tax benefit on exercise of stock options			4,806				168
Payments on debt			(42,275	)			(27,283	)
Payments of deferred financing fees			-				(47	)
Payments on capital lease obligations			(300	)			(427	)
Purchase of treasury stock			-				(40,338	)
Dividend payments to stockholders			(13,206	)			(13,196	)
Net cash (used in) provided by financing activities			(48,848	)			5,573
Effect of exchange rate on cash and cash equivalents			493				(537	)
Net increase (decrease) in cash and cash equivalents			5,877				(2,472	)
Cash and cash equivalents, beginning of period			16,361				14,775
Cash and cash equivalents, end of period		$	22,238			$	12,303

Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP financial measures
(Unaudited)
		Three months ended September 30,			Nine months ended September 30,
(in thousands, except per share amounts)		2009	2008			2009	2008
GAAP revenue		$	79,205		$	80,098				$	230,361		$	222,036
Non-GAAP adjustments:
Add back: Kintera deferred revenue writedown			452			2,555					2,493			2,555
Total Non-GAAP adjustments			452			2,555					2,493			2,555
Non-GAAP revenue		$	79,657		$	82,653				$	232,854		$	224,591
GAAP gross profit		$	48,664		$	48,792				$	139,046		$	137,833
Non-GAAP adjustments:
Add back: Kintera deferred revenue writedown			452			2,555					2,493			2,555
Add back: Stock-based compensation expense (see table below)			685			566					1,969			1,534
Add back: Amortization of intangibles from business combinations (see table below)			1,583			1,735					4,736			3,541
Total Non-GAAP adjustments			2,720			4,856					9,198			7,630
Non-GAAP gross profit		$	51,384		$	53,648				$	148,244		$	145,463
Non-GAAP gross margin			65	%		65	%				64	%		65	%
GAAP income from operations		$	13,883		$	11,500				$	32,486		$	37,348
Non-GAAP adjustments:
Add back: Kintera deferred revenue writedown			452			2,555					2,493			2,555
Add back: Stock-based compensation expense (see table below)			2,817			3,234					9,062			7,912
Add back: Amortization of intangibles from business combinations (see table below)			1,777			1,925					5,308			4,065
Total Non-GAAP adjustments			5,046			7,714					16,863			14,532
Non-GAAP income from operations		$	18,929		$	19,214				$	49,349		$	51,880
Non-GAAP operating margin			24	%		23	%				21	%		23	%
GAAP net income		$	9,828		$	7,316				$	20,488		$	23,346
Non-GAAP adjustments:
Add back: Total Non-GAAP adjustments affecting income from operations			5,046			7,714					16,863			14,532
Add back: Tax impact related to Non-GAAP adjustments			(3,280	)		(3,636	)				(7,644	)		(6,594	)
Non-GAAP net income		$	11,594		$	11,394				$	29,707		$	31,284
Shares used in computing Non-GAAP diluted earnings per share			43,827			43,918					43,493			44,388
Non-GAAP diluted earnings per share		$	0.26		$	0.26				$	0.68		$	0.70
Detail of Non-GAAP adjustments:
Stock-based compensation expense:
Cost of revenue
Cost of services		$	335		$	360				$	1,072		$	1,012
Cost of maintenance			230			138					544			369
Cost of subscriptions			120			68					353			153
Subtotal			685			566					1,969			1,534
Operating expenses
Sales and marketing			422			424					1,093			1,005
Research and development			718			581					2,115			1,609
General and administrative			992			1,663					3,885			3,764
Subtotal			2,132			2,668					7,093			6,378
Total stock-based compensation expense		$	2,817		$	3,234				$	9,062		$	7,912
Amortization of intangibles from business combinations:
Cost of revenue
Cost of license fees		$	95		$	80				$	266		$	166
Cost of services			336			336					1,006			1,004
Cost of maintenance			326			370					976			566
Cost of subscriptions			807			931					2,432			1,749
Cost of other revenue			19			18					56			56
Subtotal			1,583			1,735					4,736			3,541
Operating expenses			194			190					572			524
Total amortization of intangibles from business combinations		$	1,777		$	1,925				$	5,308		$	4,065