1280058--3/13/2006--BLACKBAUD

related topics

{system, service, information}

{acquisition, growth, future}

{product, market, service}

{customer, product, revenue}

{property, intellectual, protect}

{regulation, government, change}

{personnel, key, retain}

{operation, natural, condition}

{tax, income, asset}

{stock, price, operating}

{product, liability, claim}

A substantial majority of our revenue is derived from The Raiser s Edge and a decline in sales or renewals of this product and related services could harm our business. Our quarterly financial results fluctuate and might be difficult to forecast and, if our future results are below either any guidance we might issue or the expectations of public market analysts and investors, the price of our common stock might decline. We encounter long sales and implementation cycles, particularly for our largest customers, which could have an adverse effect on the size, timing and predictability of our revenue and sales. We have recorded a significant deferred tax asset, and we might never realize the full value of our deferred tax asset, which would result in a charge against our earnings. Nonprofit organizations might not use the Internet to facilitate their fundraising and organizational efforts in a manner sufficient to allow us to make a profit or even recapture our investment in this area. In addition, even if they increasingly use the Internet for these purposes, if we fail to capitalize on this opportunity, we could lose market share. Our failure to compete successfully could cause our revenue or market share to decline. We might not be able to manage our future growth efficiently or profitably. Because competition for highly qualified personnel is intense, we might not be able to attract and retain the employees we need to support our planned growth. Our services revenue produces substantially lower gross margins than our license revenue, and an increase in services revenue relative to license revenue would harm our overall gross margins. Failure to adapt to technological change and to achieve broad adoption and acceptance of our new products and services could adversely affect our earnings. If our products fail to perform properly due to undetected errors or similar problems, our business could suffer. Our failure to integrate third-party technologies could harm our business. If the security of our software, in particular our hosted Internet solutions products, is breached, our business and reputation could suffer. If we are unable to detect and prevent unauthorized use of credit cards and bank account numbers and safeguard confidential donor data, we could be subject to financial liability, our reputation could be harmed and customers may be reluctant to use our products and services. We currently do not have any issued patents, but we rely upon trademark, copyright, patent and trade secret laws to protect our proprietary rights, which might not provide us with adequate protection. If we do not successfully address the risks inherent in the expansion of our international operations, our business could suffer. Future acquisitions could prove difficult to integrate, disrupt our business, dilute stockholder value and strain our resources. Claims that we infringe upon third parties intellectual property rights could be costly to defend or settle. If we become subject to product or general liability or errors and omissions claims, they could be time-consuming and costly. If we were found subject to or in violation of any laws or regulations governing privacy or electronic fund transfers, we could be subject to liability or forced to change our business practices. Increasing government regulation could affect our business. Our operations might be affected by the occurrence of a natural disaster or other catastrophic event in Charleston, South Carolina.

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1280058--3/13/2006--BLACKBAUD_INC