Welcome to the Blackbaud's first quarter 2009 Earnings Call. Today's call is being recorded. (Operator Instructions). I would like to turn the conference over to Mr. Tim Williams, Senior Vice President and Chief Financial Officer of Blackbaud. Please go ahead, sir.

Thank you very much. Good afternoon, everyone. Thank you for joining us today to review our first quarter 2009 results. With me on the call is Marc Chardon, President and Chief Executive Officer. Marc and I have some prepared remarks, and then we will open up the call later for questions. Please note our remarks today contain forward-looking statements. These statements are based solely on present information and are subject to risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Please refer to our SEC filings, including our most recent 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 come back a little bit later to give some further details regarding our financials. Marc?

Thank you, Tim, and my thanks to all of you on the call for joining us today to review our first quarter 2009 financial results. A strong final month of the quarter enabled Blackbaud to deliver revenue that was at the higher end of our guidance. When combined with tight cost controls from the start of the quarter, this led to profitability that was well ahead of our expectations. Areas of our business that were particularly strong included our Enterprise CRM solutions, where we experienced record sales activity, and online fundraising, led by the strong performance of our Sphere offering. Looking back, we are truly fortunate that we have made investments in our key growth initiatives and that we made them when we did, because it is the success of these initiatives that are a very large reason Blackbaud is delivering solid financial results and weathering the challenging economic environment. Tim will cover the financials in detail in a moment, but let's take a look at the highlights. Our total non-GAAP revenue of approximately $76 million was at the top quartile of our targeted range for the quarter. This represented approximately 9% growth against a relatively challenging year ago comparison quarter. Our focus on cost containment enabled the company to deliver first quarter non-GAAP operating income and earnings per share that were both well above our guidance ranges. Looking at the makeup of our revenue, subscriptions remained the highest growth component of revenue in the first quarter, both on a year-over-year and on a sequential basis, and it was more than twice the level of our license revenue, which remains the smallest contributor to our revenue. Total recurring revenue, which is made up of both subscriptions and maintenance, represented approximately 60% of our total non-GAAP revenue for the quarter, which…

Thanks, Marc. Let me begin by providing some details on our first quarter operating results, and then I will follow that with guidance for the second quarter and then wrap up with a quick review of our capital management program. First, let's start with the income statement. GAAP revenue came in at $74.7 million and after adding back the $1.2 million purchase accounting write-down associated with Kintera's deferred revenue, you get to non-GAAP revenue of $75.9 million. This represented an increase of 9% compared with the first quarter of 2008. We estimate that Blackbaud's first quarter total revenue, excluding the contribution from Kintera, would have decreased approximately 3% on a year-over-year basis and would have been flat on a constant currency basis that is factoring out foreign exchange impacts. This compares to a growth of 4% last quarter and is certainly well below our long-term target of low to mid-teens growth what we believe this as a consequence of the difficult economic environment that is impacting our end market. Looking at the details of our total revenue, non-GAAP subscription revenue was $16.9 million, an increase of 92% on a year-over-year basis. It increased to 22% of our total revenue in the first quarter, up from 13% in the year-ago period. Even without the sizeable contribution from Kintera, subscription revenue would still have increased by approximately 27% on a year-over-year basis. License revenue was $7.4 million in the first quarter, a decrease of 23% year-over-year. As Marc pointed out, the first quarter of 2008 was a difficult comparison quarter as license revenue grew by 19% year-over-year in that quarter. The market environment, as you will recall, became increasingly challenging for us beginning in the second quarter of 2008. Our non-GAAP services revenue came in at $22.1 million during the first quarter,…

(Operator Instructions) We will go first to Horacio Zambrano, Jefferies & Company. Horacio Zambrano - Jefferies & Co: Hi, guys. In here for Ross MacMillan. Just a question here on the revenue recognition of the eCRM deals. How do you expect these new deals to kind of flow through the P&L and did you recognize much revenue from prior eCRM deals in the current quarter?

Horacio, as I think we have mentioned before with respect to the eCRM deals, mostly, we anticipate that the revenue, and in particular the software revenue, is in most cases going to likely be spread over several quarters for these transactions, along with related services revenue. In this quarter, one of the deals that Marc alluded to, we did recognize the software revenue. The deal was structured to allow us to do that and it did have an impact on the quarter and of course we are continuing to do services engagements for many of the other deals that we have done in prior quarters. I don't have the exact amount on that, but it did make a contribution certainly in the quarter as well. Horacio Zambrano - Jefferies & Co: Okay, just one follow-up. On the cost containment, have you guys done any layoffs or was it all around just prudent sort of attrition and how do you expect to hit the new $10 million that you might be able to squeeze out going forward for the rest of the year?

We have basically the same number of people at the beginning and the end of the quarter, so we did not have layoffs and we have actually added some people in specific areas as we watched also some attrition in those areas where the revenue was low, so on balance, pretty much flat headcount. I expect that we will be able to do the $10 million without layoffs in the second half of the year or the end of this year. So those are not in our plan. We will, however, be a little bit more attuned to replacement attrition probably in the second half.

We will go next to John Neff, William Blair.

A quick just a piggyback on the cost control on the $10 million, Marc; how much if any of that is from streamlining some of the Kintera operations?

No significant amount of the incremental part is from that. Kintera and the rest of the organization, the ISD team and the rest of the organization have sort of all contributed pretty much equally to things like travel containment and any number of other things. So, the engineering cost savings that I have talked about in the past were already included in the $265 million number that I gave you last time.

Then you mentioned how December 31 is a big renewal date for customers. The maintenance rates were still in the mid 90s, but how firm at this point are those renewal commitments at this time? In other words, do you have good handle on who is really onboard?

Yes, I think we do, John. I mean, certainly, to some degree we are seeing some customers who are taking a little bit longer to pay and therefore in some cases, we do see that, but I would say we feel quite good about our renewal rates, certainly from a unit standpoint. There is a little bit of difference on the dollar renewal rate. So, in some cases, we are adding customers who are electing to eliminate a seat or eliminate a small module here or there, but we feel quite good about where we are with respect to those rates.

Two specific additional comments; one, we have seen no increase in our customers seeking business. It is a very small percentage, and so from an economic perspective, while customers may be feeling the pinch, they are continuing to go forward, and I will point out that the Kintera renewals have actually had dollar renewal rates that are significantly above unit renewal rates, in part because of our added ability to sell more when we do a renewal for the Kintera Sphere customer base.

Since you brought up that distinction, I guess I should ask what is the way you define the renewal rate in the mid 90s? Is that on a unit basis or a dollar renewal basis?

Well, it is actually both, John. There is a little bit of disparity between the two but they are both in the mid 90s.

Okay. Then Marc, I was wondering if you could just maybe give us a brief tutorial on some of the nuances of philanthropy in the Netherlands and the role that RLC is playing and maybe some of the idiosyncrasies of that market.

Well, first, I wouldn't call it idiosyncrasy, but the first difference is they speak Dutch and so having a local language product is a significant asset. It turns out that the Netherlands is probably the single most philanthropic country in the world in terms of activity per member of population and also giving. So, while they are a relatively small market with maybe 100,000 non-profits compared to the sort of 1.5 million that you might find in the United States, there is a target market of 750 to 1,000 organizations that have €250,000 for larger sort of budget, revenue budget and that would be the primary target customer base for the two RLC pieces of software. The first is very similar to The Raiser's Edge, although probably less functional, but in Dutch, which is helpful and that would cover probably a third of the market opportunity. The other two-thirds are actually membership based organizations and they have a second offering that is a membership based fundraising and membership management product, which is quite unique and is quite valuable in that particular market.

I am sorry, just wanted to make sure you said 7,500 sort of targetable large…

No, no. I would say about 1,000, between 750 and 1,000. So, with about one-third of those being sort of typical Raiser's Edge type customers and about two-thirds being sort of more membership type organizations. With 80 customers, that would mean that we are something like 10% of the market at this point.

We will go next to Tom Roderick, Thomas Weisel Partners.

Marc, I wanted to touch on your comment there regarding a strong final month of the quarter and it certainly seemed to generate some upside. Can you talk about what your customers are telling you regarding their budgets, why you think you saw better close rates at the end of the March quarter, and what do you think that means going forward into Q2 as we get into kind of the end of the fiscal year for many non-profits? Thanks.

Well, I think that it is more our ability to manage through and sell through the environment than any fundamental underlying change in the economics of our customers. So, I am pleased with that sales activity, but I am sure not counting on it to continue into Q2. I haven't seen any really significant difference, and when I talk to customers, it just seems like they have gotten tired of waiting. I mean you saw a little bit of that when we looked at the Q1 macroeconomic results and we saw for the first time that individual consumption has started to go back up just slightly and the primary reason that people give is, "well, we keep waiting for this to end. We have got to do something. We decided to do it now," and of course there is always sales pressure at the end of the quarter. So, I think that may have been fortuitous and I am not counting on it to reoccur.

Great. So, you had four new eCRM deals, and I guess given the size of those and the nature of those deals, maybe this wouldn't be when we would expect four to close in a quarter. So, were those sort of a function of pipeline having been pretty full and finally materializing from the deals? Just maybe you can comment on why you think you saw an uptick in eCRM? Then what is going on with the competitive dynamics in that marketplace if you look at competitors like SunGard, Oracle perhaps? Are they showing up more in these competitive bakeoff situations or less than you have historically seen there?

I think it is absolutely what you said. The pipeline takes a little bit longer these days to work, deals take a little bit longer to work their way through. Frankly, it has somewhat less of an impact on any given quarter's revenue, because most of the software and most of the business is spread out over several quarters thereafter. So, the time came, and it also means that there is a little bit less leverage for customers to say at the end of the quarter, therefore "you are going to have to give us that extra 10% or whatever." Given that it has no current impact, the temptation to do that is actually very small, right? So, we have just basically waited for deals to happen at their right time, obviously trying to keep pushing them through the process and more steps show up now in this economic environment than would otherwise have done. So, I think some of it slipped out from Q4 last year and some of it was just Q1 business that was planned.

We will go next to Phil Rueppel, Wachovia.

This is actually Priya Parasuraman for Phil. I was wondering on the licenses again, did you see any specific segment contributing to the upside or was it just overall?

The only surprising sector, I mean other than the fact that I was very pleased to see four eCRM deals close, but that is not going to produce a ton of revenues. The only significant factor was one eCRM deal being a softer deal as opposed to a contractor kind of deal and the arts and cultural sector actually was so much stronger than I expected that sector to be given that it had a fair amount of its challenges as well, and that is a perfect example of. It has been hurting for a while. People kept quitting off and then some people decided, in fact, that they had to make an investment. They did not see the great turnaround on the horizon, so they buckled down and made the investment. Otherwise, no significant changes in sector-by-sector basis.

Okay. Then on the subscription revenue line item, did that come in line with your plan, and I know you are not giving full year guidance, but how do you think that will trend in terms of seasonality or through the rest of the year?

Well, we are not giving specific guidance, but I would say that as a recurring revenue item, we have somewhat better visibility with respect to subscription than we do certain other lines. We would expect as part of our, and what we see in our business right now, that we will experience sequential growth through the rest of the year, but we are not prepared to put any specifics around that.

We will go next to John Neff, William Blair.

A follow-up; in terms of any new legislation or regulation concerning the non-profit sector, is there anything out there on the horizon that could affect the budgets of your customers either positively or negatively?

Concerning legislation, John, I don't see anything that I believe is going to have a material or significant impact. I think the economic environment has obviously had an impact, and I think that government grant making and funding has gone down at all levels of government, from state and local all the way up to the federal government, and so that has changed that sort of the level of need sector by sector, but that is not legislative.

(Operator Instructions). It appears we have no further questions. At this time I would like to turn nit back over to management for any additional or closing remarks.

Well, we want to thank everybody for joining us on the call today and look forward to chatting with some of you over the next several weeks. Marc and I will be on the road a bit during the month of May, and hopefully we will see some of you then. We thank you again for participating and for your support.

Thank you very much and bye now. Thank you for being on the call.

This concludes today's conference. Thank you for your participation.