Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Blackbaud Fourth Quarter 2007 Earnings Conference Call. Today’s conference call is being recorded. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for your questions. Now at this time, it is my pleasure to turn the conference over to Tim Williams, Chief Financial Officer of Blackbaud.

Thank you very much. Good afternoon, everyone. Thank you for joining us today to review our fourth quarter and full year 2007 results. With me on the call today is Marc Chardon, President and Chief Executive Officer. Marc and I will make a few prepared remarks and then we will open up the call for questions. Please note that our remarks today contain forward-looking statements. These statements are based solely on present information and are subject to risks and uncertainties that can cause actual results to differ materially from those projected in our forward-looking statements. Please refer to our SEC filings, including our most recent annual report on Form 10-K and the risk factors contained therein, as well as our periodic reports under the Securities Act of 1934 for more information on these risks and uncertainties and on the limitations that apply to our forward-looking statements. Also please note that a webcast of today’s call will be available in the Investor Relations section of our website. With that, let me turn the call over to Marc and I will be back a little bit later to give you some further details regarding our financials.

Thank you, Tim, and my thanks to all of you on the phones for joining us today. We were quite pleased with the company’s financial results in the fourth quarter and the full year 2007, both of which were above the high end of our expectations. Even more important, we achieved what we said we would accomplish in the execution of our growth initiatives, including our Enterprise CRM; direct marketing and Internet offerings; the integration of the Target companies and eTapestry acquisitions; and the continued growth of our international business. Each of these areas remains a key component of our growth strategy in 2008 and beyond. Interest in our overall solutions remains high, and we believe non-profit organizations are continuing to look to technology as a means to improve their operational efficiency and their ability to raise funds. We believe our overall market opportunity remains largely under-penetrated as evidenced by the majority of our larger transactions going to brand new customers, combined with the fact that we have just begun to serve the low end of the market with our eTapestry office. Now let me return to the details of our fourth quarter performance. Total revenue of $70 million grew 42% on a year-over-year basis and exceeded the high end of our guidance. License revenue came in at $9.9 million, up 21% year-over-year. This is the highest rate year-over-year growth in nearly three years. It was better than we anticipated. Keep in mind, the impact of a small number of large deals can influence the percentage growth in license revenue on any given quarter given the size of the number. But this variability typically has little impact on the overall revenue and profitability of Blackbaud. Our fourth quarter subscription revenue grew 160% year-over-year to $8 million, and it remained the…

Thanks, Marc. I will provide some details on the fourth quarter operating results then update our guidance and finish with a very quick review of our capital management program. First, let’s start with some highlights from the income statement. As you heard earlier, total revenue came in at $70 million, which was up 42% on a year-over-year basis and that also represent a 23% organic growth. The $70 million was above the high end of our $66.5 to $68.5 million guidance range for the quarter. License revenue was $9.9 million, an increase of 21% year-over-year and $300,000 above the high end of our guidance range for the quarter. As a reminder, the growth in this revenue component is all organic as both eTapestry and Target contribute virtually nothing in our software licensing revenue. In addition, it’s also worth noting that license revenue growth was not solely influenced by the four large deals that Marc alluded to earlier. In fact, one of the deals involves multi-period payment terms which will result in the license revenue recognition being spread over 12 quarters, and for another deal because of the terms of the agreement, no revenue including services revenue will be recognized until the second half of 2008. We were pleased with the strong growth in licensing revenue during the quarter in addition to the continued growth in our subscription based revenue. Subscription revenue was $8 million in the fourth quarter, an increase of 160% on a year-over-year basis. Subscription revenue continues to represent the fastest growing portion of our business and it increased to 11% of our total revenue in the fourth quarter up from 6% in the year-ago period. Even without the contribution from Target and eTapestry, subscription revenue would have increased by approximately 38% on a year-over-year basis in the…

Our first question will come from Phil Rueppel - Wachovia Securities.

It sounds like you are making progress on the eCRM front. Could you outline what the milestones or some of the initiatives that you need to do to scale that business in terms of building out the support infrastructure? How you are going to organize sales? And what kind of sales training needs to happen to really start to ramp that business? And along those lines, as you enter ’08, have you made any major restructuring in the sales organization in terms of territories, quotas, product specialization, et cetera? Thanks.

We have not changed the sales structure at all. The majority of the training for the Enterprise part of sales force, which I will remind you is less than 25% of the sales reps, was already done last year. So, essentially any rep who would be selling the eCRM product set of the Direct Marketing product set knows the product and knows how to qualify. We are not expecting to expand the sales organization significantly in terms of head count next year. It will be more growth through productivity. And the key change really that you need in order to continue to grow and scale the business is to increase the size and throughput of the professional services organization, and their ability to continue to implement. So, we have a plan for continuing to shift resources and grow resources in the professional services space to cover that.

And our next question will come from John Neff - William Blair.

Congratulations on a great year. I was wondering, if you could give us a little color on the economic sensitivity of your end market, just some things I’ve been reading lately, talking about some of the number of non-profit organizations and particularly in certain sectors, talking about more difficulty fund raising, particularly small ticket fund raising. I was wondering if that has an impact on Target and your Direct Marketing efforts. Also even on the large gift side, reports about delayed gifts, spread out gifts, things of that nature. And I was just wondering if you could give us a sense of anticipated sensitivity to these kinds of things as we move forward into 2008.

Our customer base tends to have fiscal years that end in June and December. About half of them are December. We had a very strong December quarter, and people have been talking about the economic factors and social factors at a macroeconomic level in the press, but we don’t hear it from our customer base at this point. What typically has happened over the past 40-plus years is that the amount of donations that happen rise every year, personal donations, and that’s relatively insulated from both economic upturn and downturn. Times are tough. The need is higher. People do put more effort into fund raising when times are tough, because both the need is higher, and people may have a little less in their pocketbooks. But it turns out that most people don’t actually like to give less in a year than they gave the year before. And so, there have been 40-plus years of monotonic increases in personal donations. We have seen essentially no impact in terms of people making their decisions in the very largest accounts, because typically they are very predicated on the cycle and their capital fund raising cycles. So, if they are between capital campaigns and they are planning on putting a new system in, they seem to be still quite intent on doing it at the schedule that they have chosen, because they have to start their next capital campaign. And the smaller organizations are continuing to see a sustained effort. So, our guidance takes into consideration the factors that are available to us, and of course, I suppose if things really went bad, things might look different at some point in time but to me, today, we don’t see any impact of the macroeconomic factors on the sector we serve.

Okay. Thank you. The dedicated Internet business unit, I was wondering if you could discuss some of the initiatives you are thinking about there. Also is there any interest in Blackbaud creating some sort of a branded giving portal, à la Network for Good or JustGive, GuideStar or Google?

You never say never in this business. But our first business is to serve customers who are raising funds through portals like that, as well as directly to their direct marketed, Internet marketed and cultivated fund raising sources. So, we would typically think about that starting to how do we help other organizations use tools like JustGive or Facebook or MySpace or others. So, from that perspective, that’s the answer to that half of the question. In terms of what the Internet business unit will be doing differently, the first thing is they are going to have the team that focuses on selling the Net Community offerings to the non-Raiser’s Edge installed base. The second thing they will be doing is putting together a higher level service bureau offering that will provide people who use the Internet as a primary channel or as a significant channel for fund raising to be able to outsource some of that to us, and not fund raising per se, but the management of the infrastructure, very similar to what the DMS part of Target does when they do service bureau support for segmentation and fund raising activities in the large direct marketing organizations. So, those are the two primary differences.

Our next question is from Trey Coupan - Banc of America Securities.

Back to the eCRM business, I was wondering if you could give us your thoughts on what do you expect the deal volume to be heading into ‘08. Are you expecting to see three or four customers a quarter? It just seems like it might be difficult to gauge timing? I just wanted to hear your thoughts on that.

The number of eCRM deals we could have in a quarter can vary from one to three or four as you’ve surmised. It is quite a variable decision process because typically the sales cycle can be literally up to a year and the budgeting parameters are all often also associated with customers’ buying cycle. Every one of these customers has professional IT organization or professional purchasing organization, and the pressure of trying to sell versus the pressure of what the buying cycle looks like, is what really mandates that. You are not going to see double-digits in a quarter and it’s really a handful is what we are targeting and if we come out of the year having done two to three per quarter on average, I’ll be feeling like we’ve had the year of 2008 that I’m looking for.

Okay, great. Thank you. Finally just in terms of your acquisition strategy; ‘07 has been a busy year. What should we expect for ‘08? Are you still looking to be acquisitive? Or are you going to take some time before you start going out and looking again?

We’ve acquired companies for three reasons in the past. One was smaller organizations that we are moving out of the business and wanted their customers moved over to a sustainable platform. And if one of those comes up, that’s the kind of thing we know how to do pretty well and we’d do it. There are not a lot of them out there. We have occasionally bought pieces of technology and if that is required, we’ll do it. In terms of major acquisitions like in the past year, we have made I think pretty much our make versus buy decisions. Never say never, but we pretty much made our make versus buy decisions for the sectors we will serve for the next couple of years. The one area where I don’t really know the answer to your question, yet, sitting here is what the International Business Development VP will come back with as he continues to look at some of the other countries around the world. I do think at some point in time, there is a reasonable chance that we do some M&A activity to increase our international footprint.

Our next question will come from Adam Holt - JP Morgan. Nitin Doke – JP Morgan: This is Nitin Doke for Adam. Congratulations on the quarter. O:

I think that probably I should start by saying as it has been the case in the past, we don’t comment on or try to give guidance on specific margin levels by line items, Nitin, as you know. So, I’m not going to get very specific here. What I would say is that, all that said, is that what we would expect some improvement in our services margin this year relative to last. We talked a good bit over the last year about the significant amount of hiring that we did; the improvement in our retention rates and the need to ramp those resources up as we move through the year. And I think that we feel very good about where we are with our staff levels right now. We feel like we are virtually at a fully staffed level as we moved into the new year, and we would expect to see some improvement in those services margins but I would not suggest to you that we would get back to the pre-2007 levels. That said, again, as I have already indicated, we would expect to see some improvement. Nitin Doke – JP Morgan: Great. And one quick follow up. You talked about the Enterprise CRM deals being spread over multiple quarters. You talked about one deal having a 12 quarter term. I was wondering if that is typical and if any license revenue shows up in the deferred revenue line.

What I would say to you is that to-date in eCRM, we have done five deals. Three of which have revenue spread out over beyond an upfront license. It’s difficult to say what’s typical yet. Our goal is for the larger transactions to try to spread out that license revenue as appropriate when we can, but it’s difficult to say what’s typical at this point. With respect to this fourth quarter, we had one deal, which involved multi-period payment terms. In another deal, we actually are being required as part of the terms of the agreement to deliver a future version of the eCRM product. So, not only is the license revenue there deferred, the services revenue will be as well. We wouldn’t expect that to be typical of what we see in the future. Although, we could have another one of those that could pop-up before we finish the first half of 2008. That’s about all I can tell you at this stage.

Our next question is from Tom Roderick - Thomas Weisel Partners.

Tim, I was hoping you could just walk us through the margin impact of the eCRM deals. You are doing more now than you had anticipated you might do at this point in the game. And so, you have got some pretty big sales efforts driving through some bigger deals. Did these deals put a little pressure on the margins in the near term, and then at what point longer term did they come back to the corporate average or even become accretive to the margin structure?

Tom, I would say that since these are early adopters, as you would expect, there is some margin impact, but I wouldn’t take that too far. I think the bigger impact for us as an organization is not isolated to eCRM deals versus some other particular offering we’ve had. Across the board, last year, we made a significant effort to hire additional resources. That had an impact on our services business. We have discussed that. I think in response to an earlier question, I indicated we are going to be looking for modest improvement as we move through this year. And the eCRM deals are baked into our thinking around that. So, I don’t really think about eCRM in that context, absent to the extent to which some of these might be recognized over several quarters.

Remember that the eCRM deals are going to have a very high service content and whether it is a Raiser’s Edge deal or eCRM deal, the service profile on how that service content is delivered and built for will over time look quite similar. So, you are really talking about the deferral of somewhere between a couple of $100,000 and maybe $0.5 million of software per deal, not the deferral of full contract value. So, most of the contract value happens in a similar way, once we get into an operating rhythm here.

Good point. One brief follow up from me here, just want to touch on Scorpio. I guess it will be out soon. You have already signed your first customer. Can you just give a little flavor for what the pent-up demand is out there for a Net Community platform that is not tied to the Raiser’s Edge? How big is that market opportunity for you?

It is at least as large as our current market opportunity for Net Community; there are many more non-profits that do not have the Raiser’s Edge than do. And so, you take a look at that market and it is literally in the tens of thousands of customers. And as we consider taking that same platform and taking it down market there are hundreds of thousands of small customers who want and desire web presence, too. It’s a similar profile to the overall universe of customers that we serve. Some of them have been served by some existing Internet providers today, and many of them are not really thinking of them yet as fundraising but really have calling card web presences or informational web presences but not building community with that.

Our next question is from Ross Macmillan - Jefferies.

Thanks and congrats on the quarter from me as well. I just wanted to be clear on these eCRM deals as you do them, it sounds like that the contract structures are kind of flexible. But from the standpoint you can talk to it, are you actually billing for software that’s going to get delivered in future quarters? Are we seeing that hit the balance sheet on the deferred line yet, or is the billing coming depending on when the customer wants to actually deploy, so some of that is actually not even on the balance sheet yet? Thanks.

Ross, the only deal in which we’ve actually promised a delivery a future version was the one contract I mentioned that has a specific requirement under the terms that we deliver a future version. In that particular case, obviously no revenues have been recognized. We will be billing that customer for services as they are performed, and we actually will be billing for the software. And that will show-up in deferred revenue, but I don’t think there is a sizable impact, at the end of the year in deferred revenue, but it will show up as we move through 2008. In the case of the other deal that’s going to be recognized over 12 quarters, that is going to show up in deferred revenue as those payments actually get billed. But my sense is, it’s not going to sit in deferred revenue for very long because we will be billing it on a quarterly basis, so, virtually moving into revenue at that time.

So, it’s fair to say that these are still somewhat flexible; there is no hard and fast rule as to how these deals are getting structured?

I think that the very first ones were a little bit like that. But the terms for what we are calling the smart license, which is that 12 quarter deferred or ratable payment set of terms, that is a license that we have defined, other companies in the industry use a very similar license. I would see us doing really three things in general, once we get a little bit further into this, and by little bit, I don’t mean very far; either a 12 quarter deferred ratable license model like that or an upfront fully paid-up license or a subscription. I expect to sell our first subscription eCRM deal some time in the year where subscription means they don’t actually own the license. And so, those are the three things I expect to see, and I don’t think that we need to have a lot of flexibility around that over time. The one case that is out of that, is that there is a specific need for some functionality to be in a future version before the customer believes that they have fully accepted what we sold them, and that’s the reason for revenue recognition, why that one turned out that way, that’s the exception not the rule, by far the exception.

Makes sense. And then, just on the license as a percentage of the ‘08 guidance, it looks like if I took either 13 or 14% of total revenues, the growth rate would be a little bit lower than what we saw in ‘07. Is that just reflective of this change in terms of the expectation eCRM will become a bigger part of the mix and therefore more of the deferral of the license, is that fair?

There is a small amount of deferral in license because of the ratable license, when you shift from paid up to ratable payments. But there is also remember that subscription revenue is growing and so we are delivering more software added value through subscription and you really should be looking at the total of the sales of the two of them together to think about the value of the software intellectual property that we deliver.

Makes sense. And then very last one, just on services. You obviously hired aggressively last year ahead of the start of the eCRM rollout. You also said, I think, you got one customer live. I presume that just now is going to be growing at a more steady state as you basically bring on new implementation staff to build the new deals and new implementations is that fair?

We actually are pretty much in a good situation right now to mostly run the deals that we have in hand, with the team that we have starting at the beginning of the year. Actually the hiring went the way we thought, the problem really was that − it was a good problem to have − attrition went way down in the professional services organization last year. So, we started this year, however, with about the right team of people, plus or minus a handful of specialized people to do the business that we’ve lined up and sold at this point. And here is where you will some growth during the year but you won’t see very much; they will be shifting their resources, and these are long-term projects; they are very, very predictable in terms of when the work gets done.

We will next go to Bob Stimson - WR Hambrecht.

Going back to 2002 forward, you have been putting up some pretty good growth numbers, and I am just curious, what is the overall growth rate of the industry in your mind? Or do you believe, maybe you are gaining share vis-à-vis BSR or maybe you could talk about some of the wins and where the new Greenfield opportunities are, or were they displacements?

As you know there is no separate consulting industry body or whatever that tells us about the industry growth are. Our best estimate is that the growth is mid- or upper single digits in terms of how fast the IT solutions portion of this business is growing. So, yes, we do believe we are taking share. We clearly have been successful against BSR in the higher education space. We clearly continue to get new customers in the mid and low market from people who use Excel or Access databases, as well as some generic products or nothing, and customers who have been using some other competitors’ product in the fund raising space and Student Information Systems. So, there is a fair amount for us Greenfield, because we are offering things that we didn’t offer before, Student Information System, the higher end, the eCRM is a very high end. Some of the customers of Target and eCRM together can allow us to cover. So, those are Greenfield for us, but they are typically people who were doing something in the past.

Thanks Mark. Tim, real quick, I am just trying to reconcile a little bit on your Q1 guidance, $68 to $70 million maybe my numbers are wrong, but what’s your operating margin assumption on the $68 to $70 million. And then, when you are making that “lower assumption” is the bulk of it just sales and marketing?

I think what we said, which would be factored into our guidance...

You can just give me how you feel right now.

When we were talking about the quarter, what we said was that we expected non-GAAP operating income of $14.2 to $14.8. And so, that’s 22% to 28%. I think it’s a margin roughly comparable with what you saw in the first quarter, last year. And that is our margin assumption. That said, as you also heard me say, we are anticipating margin improvement throughout the year and our guidance for the full year anticipates somewhere in the range of around 50 basis points of margin improvement, year-over-year. That’s in line with what we talked about last year, when we talked to you about the third quarter results. We told you we are expecting to see some margin improvement in that range. And so, all I can tell you is that we are looking for more of that in the second half of the year and maybe even some in the second quarter, but it won’t be in first quarter.

Okay. And this is just a weird question but do you believe that the accounting model shifting to more of a deferred revenue, if you were comparing apples-to-apples, would your margins be closer to historical levels or is it still just the function of the acquisitions flowing through and building up your product ramp? Or is accounting really underestimating your operating margin potential?

First of all, I would say that with respect to the accounting model, I don’t think the accounting model has a huge impact in what’s happening to our margin. I think that what’s happening to our margin is more a function of the mix of our revenue; more revenue is coming from our services. We are going to improve our service margin, but it’s still a heavier mix. I think what you are seeing in maintenance, you are seeing a modest decline in our maintenance margin, this is driven by the fact that more of our maintenance, more of our support activities are being driven by our newer solutions which are more complex, require more people to support them. And so, that’s offset by other factors where we think we can get some efficiency. And we have talked about the need to spend more from an R&D perspective, that’s baked into our thinking here too. So, it’s a variety of factors, the point is as we move through the year, we think we can enhance and improve our margins modestly. As I said around 50 basis points, and I would add, finally as I’ve said before, where our margins are today, they are still world-class margins for what it is we do. And so, we are not apologizing for that in any way.

Thanks, a lot. And that was very helpful.

And we have time for one final question. That is from Alan Cooke - Merrill Lynch.

You said long-term you expect to get to 27% to 28%. How do you define long-term, is that a couple of years, three years, five years; what are your expectations there?

It’s certainly not 2008, as we’ve already said. It’s probably beyond 2009 too, Alan. But I am just not going to put a specific time table on it. Our goal consistently has been, we are going to make incremental modest improvement as we see fit, while we continue to invest in our business.

And with that, I will turn the call to Tim Williams for closing comments.

All I can say is thank you for your continued support and interest in the company. And we look forward to talking with you in the weeks ahead. Thank you very much.