Blackbaud (BLKB) 8-K Blackbaud, Inc. Announces Third Quarter 2006 Results and Fourth Quarter 2006 Dividend

Exhibit 99.1

Blackbaud, Inc. Announces Third Quarter 2006 Results and Fourth Quarter 2006 Dividend

CHARLESTON, S.C., October 30, 2006 — 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, 2006.

For the quarter ended September 30, 2006, Blackbaud reported total revenue of $49.9 million, an increase of 16% compared with the third quarter of 2005. License revenue increased 7% to $7.8 million, services revenue increased 17% to $17.0 million, and maintenance and subscriptions revenue increased 18% to $23.7 million over the comparable period.

Marc Chardon, Chief Executive Officer of Blackbaud, stated, “We are pleased with the Company’s performance in the third quarter, highlighted by better-than-expected revenue and profitability. The Raiser’s Edge^® drove sales of our core solutions to their highest quarterly growth rate in the past two years, while continued interest in our newer offerings helped us achieve growth of over 50% in sales of those new solutions.” Chardon continued, “We were pleased to sign our first early adopter for an exciting new offering that we plan to deliver in the first half of 2007. Early customer response to our strategic direction has been positive, and we are investing in several initiatives that we believe will expand our market opportunity and enable Blackbaud to sustain its solid growth track record.”

Blackbaud’s income from operations and net income, determined in accordance with generally accepted accounting principles (“GAAP”), were $13.7 million and $8.5 million, respectively, for the third quarter of 2006 compared with income from operations of $10.7 million and net income of $7.7 million in the same period last year. GAAP fully diluted earnings per share were $0.19 for the quarter ended September 30, 2006, compared with $0.17 in the same period last year.

For the quarter ended September 30, 2006, non-GAAP income from operations, which excludes stock-based compensation expense, amortization of intangibles arising from business combinations and certain state tax credits, was $15.8 million, an increase of 28% compared with the same period last year. Non-GAAP net income was $9.9 million for the quarter ended September 30, 2006, an increase of 30% compared to the same period last year. Non-GAAP fully diluted earnings per share were $0.22 for the quarter ended September 30, 2006, an increase of 29% compared with $0.17 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.”

Blackbaud had cash and cash equivalents of $54.3 million at September 30, 2006, an increase of $23.3 million compared to the end of the prior quarter. The increase in cash was primarily the result of strong cash flow from operations.

Timothy V. Williams, Chief Financial Officer of Blackbaud, stated, “A strong revenue performance, the highest quarterly gross margin since Blackbaud went public over two years ago and a continued focus on operational excellence drove a record quarterly non-GAAP operating margin of 32% in the third quarter. Our business momentum remains strong and we are optimistic about our outlook as we approach the new year.”

Fourth Quarter Dividend

Blackbaud announced today that its Board of Directors has declared a fourth quarter dividend of $0.07 per share payable on December 15, 2006 to stockholders of record on November 28, 2006.

Conference Call Details

Blackbaud will host a conference call today, October 30, 2006, at 5:00 p.m. (EST) to discuss the Company’s financial results, operations and related matters. To access this call, dial 800-811-8824 (domestic) or 913-981-4903 (international). A replay of this conference call will be available through November 6, 2006, at 888-203-1112 (domestic) or 719-457-0820 (international). The replay passcode is 9233324. A live webcast of this conference call will be available on the “Investor Relations” page of the Company’s Web site, and a replay will be archived on the Web site as well.

About Blackbaud

Blackbaud is the leading global provider of software and related services designed specifically for nonprofit organizations. More than 15,000 organizations — including the American Red Cross, Bowdoin College, the Chesapeake Bay Foundation, the Crohn’s & Colitis Foundation of America, the Detroit Zoological Society, Episcopal High School, Help the Aged, the Lincoln Center, and United Way of America — use Blackbaud products and consulting services for fundraising, financial management, business intelligence, Web site management, school administration, and ticketing. Blackbaud’s solutions includeThe Raiser’s Edge^®,The Financial Edge^™,The Education Edge^™,The Patron Edge^®,Blackbaud^® NetCommunity^™,The Information Edge^™,The Researcher’s Edge^™,WealthPoint^™, andProspectPoint^™, as well as a wide range of consulting and educational services. Founded in 1981, Blackbaud is headquartered in Charleston, South Carolina, and has operations in Toronto, Ontario; Glasgow, Scotland; London, England; and Sydney, Australia. For more information, visit www.blackbaud.com.

Blackbaud, the Blackbaud logo,The Raiser’s Edge,The Financial Edge,The Education Edge,The Patron Edge,Blackbaud NetCommunity,The Information Edge,The Researcher’s Edge,WealthPoint,andProspectPointare 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: uncertainty regarding increased business and renewals from existing customers; continued success in sales growth; adoption of our products and services by nonprofits; risk associated with management of growth; risk associated with the ability to attract and retain key personnel; successful implementation of multiple integrated software products; lengthy sales and implementation cycles, particularly in larger organizations; risks related to our dividend policy and stock repurchase program, including potential limitations on our ability to grow and the possibility that we might discontinue payment of dividends and stock repurchases; risk associated with product concentration; economic conditions and seasonality; competition; risks associated with management of growth; risks associated with acquisitions; 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 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 gross profit, non-GAAP operating income and margin, non-GAAP net income and non-GAAP fully 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 the impact of costs associated with amortization of intangibles arising from business combinations, stock-based compensation expense and certain adjustments to our deferred tax asset.

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.

INVESTOR CONTACT:
Tim Dolan
Integrated Corporate Relations
203-682-8200

MEDIA CONTACT:
Melanie Milonas
Blackbaud, Inc.
melanie.milonas@blackbaud.com
843.216.6200 x3307

SOURCE:Blackbaud, Inc.

Blackbaud, Inc.
Consolidated balance sheets
(Unaudited)

	September 30,			December 31,
(in thousands, except share amounts)	2006			2005
Assets
Current assets:
Cash and cash equivalents	$	54,261		$	22,683
Cash, restricted		513			—
Accounts receivable, net of allowance of $1,291 and $1,100, respectively		29,816			25,577
Prepaid expenses and other current assets		8,608			8,741
Deferred tax asset, current portion		4,127			7,600
Total current assets		97,325			64,601
Property and equipment, net		8,964			8,700
Deferred tax asset		66,070			71,487
Goodwill		2,408			2,208
Intangible assets, net		8,102			396
Other assets		56			106
Total assets	$	182,925		$	147,498
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable	$	4,105		$	4,683
Accrued expenses and other current liabilities		16,135			15,806
Deferred acquisition costs, current portion		513			—
Deferred revenue		71,573			59,459
Total current liabilities		92,326			79,948
Deferred acquisition costs, long-term portion		270			—
Long-term deferred revenue		1,564			1,279
Total liabilities		94,160			81,227
Commitments and contingencies
Stockholders’ equity:
Preferred stock; 20,000,000 shares authorized, none outstanding		—			—
Common stock, $.001 par value; 180,000,000 shares authorized, 48,687,310 and 47,529,836 shares issued at September 30, 2006 and December 31, 2005, respectively		49			48
Additional paid-in capital		84,597			73,583
Deferred compensation		—			(6,497	)
Treasury stock, at cost; 4,711,144 and 4,267,313 shares at September 30, 2006 and December 31, 2005, respectively		(68,738	)		(60,902	)
Accumulated other comprehensive income		181			92
Retained earnings		72,676			59,947
Total stockholders’ equity		88,765			66,271
Total liabilities and stockholders’ equity	$	182,925		$	147,498

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)	2006			2005			2006			2005
Revenue
License fees	$	7,826		$	7,291		$	24,281		$	22,063
Services		17,014			14,486			46,423			40,070
Maintenance		20,838			18,110			60,079			52,752
Subscriptions		2,839			1,895			7,625			5,028
Other revenue		1,373			1,362			3,991			3,442
Total revenue		49,890			43,144			142,399			123,355
Cost of revenue
Cost of license fees		514			1,080			1,694			3,166
Cost of services (of which $122, $55, $402 and $229 in the three months ended September 30, 2006 and 2005 and in the nine months ended September 30, 2006 and 2005, respectively, was stock-based compensation expense)		8,641			7,375			24,899			20,988
Cost of maintenance (of which $26, $6, $84 and $28 in the three months ended September 30, 2006 and 2005 and in the nine months ended September 30, 2006 and 2005, respectively, was stock-based compensation expense)		3,272			2,643			9,930			7,947
Cost of subscriptions (of which $4, $0, $13 and $0 in the three months ended September 30, 2006 and 2005 and in the nine months ended September 30, 2006 and 2005, respectively, was stock-based compensation expense)		658			292			1,775			1,126
Cost of other revenue		1,246			1,171			3,751			3,106
Total cost of revenue		14,331			12,561			42,049			36,333
Gross profit		35,559			30,583			100,350			87,022
Operating expenses
Sales and marketing (of which $193, $38, $633 and $182 in the three months ended September 30, 2006 and 2005 and in the nine months ended September 30, 2006 and 2005, respectively, was stock-based compensation expense)		10,251			8,634			30,072			25,272
Research and development (of which $183, $22, $562 and $119 in the three months ended September 30, 2006 and 2005 and in the nine months ended September 30, 2006 and 2005, respectively, was stock-based compensation expense)		5,742			5,331			17,652			15,758
General and administrative (of which $1,396, $1,486, $4,206 and $(3,271) in the three months ended September 30, 2006 and 2005 and in the nine months ended September 30, 2006 and 2005, respectively, was stock-based compensation expense (benefit))		5,716			5,891			16,804			8,975
Amortization		190			10			509			10
Total operating expenses		21,899			19,866			65,037			50,015
Income from operations		13,660			10,717			35,313			37,007
Interest income		492			190			865			770
Interest expense		(12	)		(12	)		(36	)		(37	)
Other (expense) income, net		(64	)		(32	)		(196	)		(34	)
Income before provision for income taxes		14,076			10,863			35,946			37,706
Income tax provision		5,573			3,143			14,043			10,592
Net income	$	8,503		$	7,720		$	21,903		$	27,114
Earnings per share
Basic	$	0.20		$	0.18		$	0.51		$	0.64
Diluted	$	0.19		$	0.17		$	0.49		$	0.58
Common shares and equivalents outstanding
Basic weighted average shares		43,438,730			41,961,726			43,182,585			42,628,278
Diluted weighted average shares		44,679,274			45,017,221			44,589,575			46,676,356
Dividends per share	$	0.07		$	0.05		$	0.21		$	0.15

Blackbaud, Inc.
Consolidated statements of cash flows
(Unaudited)

	Nine months ended
	September 30,
(in thousands)	2006			2005
Cash flows from operating activities
Net income	$	21,903		$	27,114
Adjustments to reconcile net income to net provided by cash provided by operating activities
Depreciation and amortization		2,693			2,026
Provision for doubtful accounts and sales returns		1,080			711
Stock-based compensation expense (benefit)		5,900			(2,404	)
Amortization of deferred financing fees		36			36
Deferred taxes		8,445			11,613
Excess tax benefit on exercise of stock options		—			6,033
Changes in assets and liabilities, net of acquisition
Accounts receivable		(4,871	)		(3,427	)
Prepaid expenses and other assets		161			(9,963	)
Trade accounts payable		(593	)		96
Accrued expenses and other current liabilities		178			(1,203	)
Deferred revenue		10,428			8,452
Total adjustments		23,457			11,970
Net cash provided by operating activities		45,360			39,084
Cash flows from investing activities
Purchase of property and equipment		(2,294	)		(2,223	)
Purchase of net assets of acquired companies		(6,095	)		(938	)
Net cash used in investing activities		(8,389	)		(3,161	)
Cash flows from financing activities
Payments on capital lease obligations		—			(44	)
Proceeds from exercise of stock options		6,044			5,475
Excess tax benefit on exercise of stock options		5,568			—
Purchase of treasury stock		(7,836	)		(56,229	)
Dividend payments to stockholders		(9,174	)		(6,380	)
Net cash used in financing activities		(5,398	)		(57,178	)
Effect of exchange rate on cash and cash equivalents		5			(186	)
Net increase in cash and cash equivalents		31,578			(21,441	)
Cash and cash equivalents, beginning of period		22,683			42,144
Cash and cash equivalents, end of period	$	54,261		$	20,703

Blackbaud, Inc.
Reconciliation of GAAP to Non-GAAP financial measures
(Unaudited)
(In thousands, except per share amounts)

	Three months ended September 30,						Nine months ended September 30,
	2006			2005			2006			2005
GAAP revenue	$	49,890		$	43,144		$	142,399		$	123,355
GAAP gross profit	$	35,559		$	30,583		$	100,350		$	87,022
Non-GAAP adjustments:
Add back: Stock-based compensation expense — options		45			61			177			257
Add back: Stock-based compensation expense — restricted stock		107			—			322			—
Non-GAAP gross profit	$	35,711		$	30,644		$	100,849		$	87,279
Non-GAAP gross profit		72	%		71	%		71	%		71	%
GAAP income from operations	$	13,660		$	10,717		$	35,313		$	37,007
Non-GAAP adjustments:
Add back: Stock-based compensation expense (benefit) — options		1,462			1,569			4,504			(2,751	)
Add back: Stock-based compensation expense — restricted stock		462			38			1,396			38
Add back: Amortization of intangibles from business combinations		190			10			509			10
Total Non-GAAP adjustments		2,114			1,617			6,409			(2,703	)
Non-GAAP income from operations	$	15,774		$	12,334		$	41,722		$	34,304
Non-GAAP operating margin		32	%		29	%		29	%		28	%
GAAP net income	$	8,503		$	7,720		$	21,903		$	27,114
Non-GAAP adjustments:
Add back: Total Non-GAAP adjustments affecting income from operations		2,114			1,617			6,409			(2,703	)
Add back: Tax impact related to Non-GAAP adjustments		(741	)		(1,725	)		(2,476	)		(3,060	)
Non-GAAP net income	$	9,876		$	7,612		$	25,836		$	21,351
GAAP shares used in computing diluted earnings per share		44,679			45,017			44,590			46,676
Non-GAAP adjustments:
Add back: Incremental shares related to dilutive securities		300			(433	)		300			(694	)
Shares used in computing Non-GAAP diluted earnings per share		44,979			44,584			44,890			45,982
Non-GAAP diluted earnings per share	$	0.22		$	0.17		$	0.58		$	0.46