8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):      October 27, 2004

BLACKBAUD, INC.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation)

000-50600	11-2617163
(Commission File Number)	(IRS Employer ID Number)

2000 Daniel Island Drive, Charleston, South Carolina 29492

(Address of principal executive offices)                     (Zip Code)

Registrant’s telephone number, including area code           (843) 216-6200          

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

     o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

     o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

     o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

     o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

     On October 27, 2004, Blackbaud, Inc. issued a press release reporting unaudited financial results for the third quarter ended September 30, 2004. A copy of this press release is attached.

     The information in this Form 8-K (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

     (c) Exhibits

Exhibit No.	Description
99.1	Press release dated October 27, 2004.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	BLACKBAUD, INC.
Date: October 27, 2004	/s/ Timothy V. Williams
	Timothy V. Williams,
	Vice President and Chief Financial Officer

EX-99.1

Blackbaud, Inc. Announces Record Third Quarter 2004 Results

Charleston, S.C. (October 27, 2004) – Blackbaud (Nasdaq: BLKB), the leading provider of software and related services designed specifically for nonprofit organizations, today announced record financial results for its third quarter 2004.

For the quarter ended September 30, 2004, Blackbaud reported total revenue of $36.2 million, an increase of 19% compared with the third quarter of 2003. License revenue increased 19% to $6.2 million, services revenue increased 27% to $12.1 million, and maintenance and subscriptions revenue increased 15% to $17.0 million, over the comparable period.

Blackbaud’s income from operations and net income, determined in accordance with generally accepted accounting principles (GAAP), were $12.7 million and $7.6 million, respectively, for the third quarter 2004 compared with $1.1 million and a loss of $0.1 million in the same period last year. Pro forma income from operations and net income, which exclude stock-based compensation expense, amortization of intangibles arising from business combinations, and costs associated with the Company’s recently completed IPO, were $11.0 million and $6.7 million, respectively, compared with $8.9 million and $4.7 million in the same period last year.

GAAP diluted earnings per share were $0.16 for the quarter ended September 30, 2004, compared with ($0.00) in the same period last year. Pro forma earnings per share were $0.15 for the quarter ended September 30, 2004, compared with $0.10 in the same period last year.

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

Cash from operations for the third quarter of 2004 was $17.0 million, and for the first nine months of 2004, cash from operations was $33.3 million, up 23% on a year-over-year basis. Blackbaud had cash and cash equivalents of $33.4 million at September 30, 2004.

“We are very pleased with our third quarter results. Our ‘new revenue,’ which we define as the combination of our software and services revenue, grew at 24% on a year-over-year basis. We believe this growth reflects the strength of Blackbaud’s competitive position and product portfolio, as well as the attractiveness of our market opportunity. We have the broadest and deepest solutions focused on solving the business challenges nonprofit organizations face, and we continue to execute well against our strategy to become the nonprofit industry’s one-stop-shop for software and services,” said Robert J. Sywolski, Chief Executive Officer of Blackbaud.

Timothy V. Williams, Chief Financial Officer of Blackbaud, added, “The September quarter was again better than our expectations from a software and services perspective. Our core solutions continue to grow and do very well, while we are excited about the growing acceptance of new solutions such as The Patron Edge™ and Blackbaud Analytics™. We feel good about the tone of our business.”

Conference Call Details
Blackbaud will host a conference call today, October 27, 2004, at 5:00 p.m. (EDT) to discuss the quarterly results and related matters. To access this call, dial 877-715-5321 (domestic) or 973-582-2785 (international). A replay of this conference call will be available through November 3, 2004, at 877-519-4471 (domestic) or 973-341-3080 (international). The replay password is 5259662. 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 our Web site as well.

About Blackbaud, Inc.
Blackbaud is the leading global provider of software and related services designed specifically for nonprofit organizations. More than 12,500 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 Mayo Foundation, the New York Philharmonic and United Way of America – use Blackbaud products and consulting services for fundraising, financial management, business intelligence and school administration. Blackbaud’s solutions include The Raiser’s Edge®, The Financial Edge™, The Education Edge™, The Patron Edge™, The Information Edge™, WealthPoint™ and ProspectPoint™, 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, 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, The Information Edge, WealthPoint and ProspectPoint 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: continued success in sales growth; adoption of our products and services by nonprofits; uncertainty regarding increased business and renewals from existing customers; risk associated with product concentration; lengthy sales and implementation cycles; 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; the ability to attract and retain key personnel; 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 certain financial information that has not been prepared in accordance with GAAP. This information includes pro forma gross margin, pro forma operating income and margin, pro forma net income and pro forma 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 the Company’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 the Company’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 the Company’s IPO (completed on July 22, 2004) and the expensing of stock option compensation.

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 as detailed above. As previously mentioned, a reconciliation of GAAP to pro forma results has been provided in the financial statement tables included in this press release.

BLACKBAUD, INC.
BALANCE SHEETS
(Unaudited)
(In thousands, except share data)

	September 30,			December 31,
	2004			2003
Assets
Current assets:
Cash and cash equivalents	$	33,382		$	6,708
Accounts receivable, net of allowance of $1,531 and $1,222, respectively		16,921			14,518
Prepaid expenses and other current assets		3,049			2,713
Deferred tax asset, current portion		1,035			1,799
Total current assets		54,387			25,738
Property and equipment, net		6,354			6,621
Deferred tax asset		80,175			86,966
Goodwill		1,471			1,386
Deferred financing fees, net		161			156
Other assets		37			99
Total assets	$	142,585		$	120,966
Liabilities and Stockholders’ Equity
Current liabilities:
Trade accounts payable	$	2,362		$	2,590
Current portion of long-term debt and capital lease obligations		81			142
Accrued expenses and other current liabilities		11,983			9,659
Deferred revenue		51,727			43,673
Total current liabilities		66,153			56,064
Long-term debt and capital lease obligations		—			5,044
Total liabilities		66,153			61,108
Commitments and contingencies
Stockholders’ equity:
Preferred stock; 20,000,000 shares authorized, none outstanding		—			—
Common stock, $.001 par value; 180,000,000 shares authorized, 42,542,700 and 42,408,872 shares issued and outstanding in 2004 and 2003, respectively		43			41,613
Additional paid-in capital		38,056			—
Deferred compensation		(1,405	)		(4,795	)
Accumulated other comprehensive income		289			518
Retained earnings		39,449			22,522
Total stockholders’ equity		76,432			59,858
Total liabilities and stockholders’ equity	$	142,585		$	120,966

BLACKBAUD, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)

	Three months ended September 30,						Nine months ended September 30,
	2004			2003			2004			2003
Revenue
License fees	$	6,244		$	5,252		$	18,614		$	15,427
Services		12,062			9,515			32,678			25,888
Maintenance and subscriptions		16,956			14,782			48,886			43,271
Other revenue		921			795			2,849			2,906
Total revenue		36,183			30,344			103,027			87,492
Cost of revenue
Cost of license fees		1,053			653			2,733			2,110
Cost of services (of which ($1,211), $892, ($644) and $2,291 in the three months ended September 30, 2004 and 2003 and the nine months ended September 30, 2004 and 2003 respectively, was stock option compensation (benefit) expense)		4,795			5,255			15,988			15,347
Cost of maintenance and subscriptions (of which ($167), $135, ($105) and $344 in the three months ended September 30, 2004 and 2003 and the nine months ended September 30, 2004 and 2003, respectively, was stock option compensation (benefit) expense)		2,466			3,225			7,864			9,031
Cost of other revenue		802			843			2,577			2,556
Total cost of revenue		9,116			9,976			29,162			29,044
Gross profit		27,067			20,368			73,865			58,448
Sales and marketing		6,993			5,454			20,646			15,991
Research and development		4,541			4,302			13,245			11,506
General and administrative		3,181			2,690			9,093			8,042
Amortization		—			667			32			800
Costs of initial public offering		805			—			2,455			—
Stock option compensation		(1,138	)		6,112			55			17,326
Total operating expenses		14,382			19,225			45,526			53,665
Income from operations		12,685			1,143			28,339			4,783
Interest income		79			22			133			70
Interest expense		(18	)		(594	)		(268	)		(2,216	)
Other (expense) income, net		(4	)		(198	)		342			(100	)
Income before provision for income taxes		12,742			373			28,546			2,537
Income tax provision		5,155			425			11,619			2,886
Net income (loss)	$	7,587		$	(52	)	$	16,927		$	(349	)
Earnings (loss) per share
Basic	$	0.18		$	(0.00	)	$	0.40		$	(0.01	)
Diluted	$	0.16		$	(0.00	)	$	0.36		$	(0.01	)
Common shares and equivalents outstanding
Basic weighted average shares		42,536,961			42,408,873			42,480,059			42,391,299
Diluted weighted average shares		46,515,156			42,408,873			46,466,986			42,391,299
Summary of stock option compensation (benefit) expense
Cost of services	$	(1,211	)	$	892		$	(644	)	$	2,291
Cost of maintenance and subscription revenue		(168	)		135			(106	)		344
Total cost of revenue		(1,379	)		1,027			(750	)		2,635
Sales and marketing		(670	)		490			(194	)		1,201
Research and development		(833	)		623			(517	)		1,639
General and administrative		365			4,999			766			14,486
Total operating expense		(1,138	)		6,112			55			17,326
Total stock option compensation (benefit) expense	$	(2,517	)	$	7,139		$	(695	)	$	19,961

BLACKBAUD, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

	Nine Months ended September 30,
	2004			2003
Cash flows from operating activities
Net income (loss)	$	16,927		$	(349	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation		1,889			2,197
Amortization of intangibles		32			800
Stock option compensation		(695	)		19,961
Amortization of deferred financing fees		156			702
Deferred taxes		7,555			283
Changes in assets and liabilities, net of acquisition Accounts receivable		(2,365	)		(166	)
Prepaid expenses and other assets		(267	)		(1,165	)
Accrued expenses and other current liabilities		2,240			1,493
Deferred revenue		8,040			4,302
Total adjustments		16,355			27,395
Net cash provided by operating activities		33,282			27,046
Cash flows from investing activities
Purchase of property and equipment		(1,616	)		(1,837	)
Purchase of net assets of acquired company		(97	)		(894	)
Net cash used in investing activities		(1,713	)		(2,731	)
Cash flows from financing activities
Repayments on long-term debt and capital lease obligations		(5,105	)		(34,280	)
Proceeds from exercise of stock options		642			233
Payment of deferred financing fees		(161	)		—
Net cash used in financing activities		(4,624	)		(34,047	)
Effect of exchange rate on cash and cash equivalents		(271	)		495
Net increase (decrease) in cash and cash equivalents		26,674			(9,237	)
Cash and cash equivalents, beginning of year		6,708			18,703
Cash and cash equivalents, end of year	$	33,382		$	9,466
Noncash activities
Change in fair value of derivative instruments	$	—		$	332

BLACKBAUD, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
(In thousands, except per share amounts)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2004			2003			2004			2003
GAAP revenue	$	36,183		$	30,344		$	103,027		$	87,492
GAAP gross margin	$	27,067		$	20,368		$	73,865		$	58,448
Pro forma adjustments:
Amortization of deferred stock compensation		(1,379	)		1,027			(750	)		2,635
Pro forma gross profit	$	25,688		$	21,395		$	73,115		$	61,083
Pro forma gross margin		71	%		71	%		71	%		70	%
GAAP income from operations	$	12,685		$	1,143		$	28,339		$	4,783
Pro forma adjustments:
Amortization of deferred stock compensation		(2,517	)		7,139			(695	)		19,961
Costs of initial public offering		805			—			2,455			—
Amortization of intangibles from business combinations		—			667			32			800
Total pro forma adjustments		(1,712	)		7,806			1,792			20,761
Pro forma income from operations	$	10,973		$	8,949		$	30,131		$	25,544
Pro forma operating margin		30	%		29	%		29	%		29	%
GAAP net income (loss)	$	7,587		$	(52	)	$	16,927		$	(349	)
Pro forma adjustments:
Total pro forma adjustments affecting income from operations		(1,712	)		7,806			1,792			20,761
Tax impact related to pro forma adjustments		855			(3,044	)		(211	)		(8,097	)
Pro forma net income	$	6,730		$	4,710		$	18,508		$	12,315
GAAP shares used in computing diluted income (loss) per share		46,515			42,409			46,467			42,391
Pro forma adjustments:
Incremental shares related to stock options		(612	)		2,909			(655	)		2,192
Shares used in computing pro forma earnings per diluted share		45,903			45,318			45,812			44,583
Pro forma earnings per diluted share	$	0.15		$	0.10		$	0.40		$	0.28

INVESTOR CONTACT:

Tim Dolan
Integrated Corporate Relations
203-682-8200

MEDIA CONTACT:
Megan McDonnell
Integrated Corporate Relations
203-682-8200

SOURCE: Blackbaud, Inc.