BLACKBOARD INC.

ABOUT Blackboard Inc.Blackboard Inc. (NASDAQ: BBBB) is a leading provider of enterprise software and services to the education industry. The Company’s product line consists of

five software applications bundled in two suites, the Blackboard Academic Suite™ and the Blackboard Commerce Suite™. Blackboard’s clients include colleges,

universities, schools and other education providers, as well as textbook publishers and student-focused merchants that serve education providers and their students.

Blackboard is headquartered in Washington, DC, with offices and staff in North America, Europe and Asia.

FINANCIAL Highlights

TOTAL REVENUES($ in millions)

’02 $69.9

’03 $92.5

’04 $111.4

CASH FLOW FROM OPERATIONS($ in millions)

’02 $1.4

’03 $19.7

’04 $32.7

$32.7 million

2004 cash flow from operations

$111.4million

2004 total revenues

($ in millions)

Year Ended December 31, 2002 2003 2004

Revenues Product $ 62.4 $ 83.3 $ 98.6 Professional Services 7.5 9.2 12.8

Total Revenues $ 69.9 $ 92.5 $ 111.4Operating Expenses Cost of Product Revenues $ 21.5 $ 23.1 $ 25.9 Cost of Professional Services Revenues 5.7 6.6 8.0 Research and Development 10.3 11.4 13.7 Sales and Marketing 24.2 30.9 35.2 General and Administrative 16.5 14.7 14.9 Amortization of Intangibles Resulting from Acquisitions 5.5 5.8 3.5 Stock-Based Compensation 0.5 0.3 0.2

Total Operating Expenses $ 84.2 $ 92.8 $ 101.4(Loss) Income from Operations $ (14.2) $ (0.3) $ 10.0Net (Loss) Income(1) $ (41.7) $ (1.4) $ 10.0Net Cash Provided by Operating Activities $ 1.4 $ 19.7 $ 32.7

(1) Includes $26.6 million for the cumulative effect of change in accounting principle in 2002.

2004 was a milestone year for Blackboard. We are pleased to share a few words to highlight our accomplishments, thank those responsible and, most importantly, outline the critical elements of our growth strategy that will drive Blackboard to new heights in 2005. We founded Blackboard with the vision of transforming the Internet into a powerful environment for teaching and learning. And while we still have a long way to go, 2004 brought great progress towards that important goal.

Driving Shareholder Value Through Client Success…When we speak of a milestone year in 2004, we do so across a number of the strategic objectives that drive Blackboard’s growth strategy. Our strategy can be thought of most simply as continuing to establish Blackboard as a leading technology platform for the global education industry, and the consequent weaving of our applications into the fabric of our clients’ teaching, learning and commerce activities.

Our progress in 2004 towards this end has been noteworthy:

1. Our core U.S. higher education license count grew by 15% over 2003.

2. We demonstrated the opportunities that lie beyond the U.S. higher education market, by having stronger than expected growth in the U.S. K–12 and international markets.

3. We grew the average number of licenses a client runs and our average contract value per client, confirming the value of our broader suites of solutions and the strength of our client relationships.

4. We achieved 92% renewal rates, exceeding our own expectations and validating the value of Blackboard solutions to our clients.

5. We made significant progress expanding the client base of our two newest applications—Blackboard Content System™ and BbOne®.

6. We saw our first joint venture, the Chinese eLearning company Cerbibo, build a strong foothold in a fast-growing market.

What do these strategic milestones mean for increasing shareholder value? Our financial performance for 2004 provides the answer. For the full year 2004, we generated revenues of $111.4 million, a 20% increase over 2003, and earnings per diluted share of $0.21, a 110% increase over 2003. We expanded our gross margins to a Company record of 70% while investing $13.7 million in product development. Blackboard again generated significant cash, ending the year with cash flow from operations of $32.7 million, a 66% increase compared to 2003 cash flow from operations of $19.7 million. We are proud of these accomplishments and expect to build on our success in 2005.

The Blackboard Community of Practice…There is no question as to who deserves our sincere appreciation for accomplishing the milestones listed above. The concept of a “Community of Practice” is an important one for Blackboard. Our combination of over 2,200 clients, millions of end users, 420 independent software vendors (ISVs), leading education- publishing partners, 600 merchants, and 481 employees at the end of 2004, positions Blackboard uniquely in the global education market. Our network—of people, ideas and technology—is both our platform for growth and the object of our fiduciary responsibility. We thank our clients, partners, and you, our investors, for helping make possible our record positive financial and strategic performance. We especially thank our hard-working and talented employees.

The Year Ahead…As we proceed into 2005, our goals include continued revenue growth, diligent operational cost control, and ongoing strategic investments to increase market share in the global higher education and U.S. K–12 markets. Again, we are focused on the following major strategic objectives:

1. Increasing the breadth of our U.S. higher education leadership position;

2. Growing the depth of our existing client relationships;

3. Expanding our leadership position in the fast-growing emerging markets of U.S. K–12 and global higher education;

4. Retaining our clients through great products and high-quality service and support;

5. Continuing our pace of innovation through new product introductions; and

6. Selectively considering the acquisition or license of businesses, products or technologies that are complementary to our business and the objectives set forth.

Our future depends on making the client experience with Blackboard the best in the industry. The Blackboard Academic Suite™ and Blackboard Commerce Suite™ software product lines support a broad spectrum of mission-critical activities, including course creation and management, content management, performance evaluation, online community development, campus transaction processing and off-campus merchant relations, to name a few. Students, faculty and administrators in 64 countries depend on our success.

Again, we express our thanks to you, our shareholders, for your continued support—support that will help Blackboard to succeed and grow in 2005 and beyond. We remain steadfastly committed to enhancing shareholder value and ensuring the long-term success of our business through the accomplishments of our global client base. It is our pleasure to serve you and our clients everywhere.

Matthew Pittinsky Michael ChasenChairman of the Board Chief Executive Officer

TO OUR FELLOW Shareholders

© 2005 Blackboard Inc. All rights reserved. Blackboard, the Blackboard logo, Blackboard Learning System, Blackboard Content System, Blackboard Community System, Blackboard Transaction System, Blackboard Academic Suite, Blackboard Commerce Suite, Blackboard Building Blocks, and/or other Blackboard products referenced herein are trademarks of Blackboard Inc. and may be registered in certain jurisdictions. All other trademarks and registered trademarks are the property of their respective owners.

Board of Directors

Matthew L. PittinskyChairman Blackboard Inc.

Michael L. ChasenChief Executive Officer and President Blackboard Inc.

Frank R. GattiChief Financial Officer Educational Testing Service

Steven B. GruberManaging Partner Oak Hill Capital Management, Inc.

Arthur E. LevinePresident and Professor of Education Teachers College, Columbia University

E. Rogers Novak, Jr.Managing Member Novak Biddle Venture Partners

William RaduchelChairman and Chief Executive Officer Ruckus Network Inc.

Corporate Officers

Matthew L. PittinskyChairman

Michael L. ChasenChief Executive Officer and President

Peter Q. RepettiChief Financial Officer

George D. CalvertSenior Vice President, Product Development

Todd E. GibbySenior Vice President, Sales

Mary E. GoodSenior Vice President, Human Resources and Facilities

James HermensSenior Vice President, Global Services and Support

Tim HillSenior Vice President, Marketing

Matthew H. SmallSenior Vice President, Legal, General Counsel and Secretary

Michael J. BeachVice President, Finance and Treasurer

Corporate Headquarters

Blackboard Inc. 1899 L Street, NW, 5th Floor Washington, DC 20036

Investor Materials

For further information about Blackboard, additional copies of this report, Form 10-K or other financial literature contact:

Michael Stanton Senior Director, Investor Relations Blackboard Inc. 1899 L Street, NW, 5th Floor Washington, DC 20036 202.463.4860

You may also learn more about Blackboard by visiting the Investor Center on our website at investor.blackboard.com

Legal Counsel

Wilmer Cutler Pickering Hale and Dorr LLP Washington, DC

Independent Registered Public Accounting Firm

Ernst & Young LLPMcLean, VA

Transfer Agent and Registrar

American Stock Transfer & Trust Company 59 Maiden Lane New York, NY 10038 800.937.5449 www.amstock.com

Stock Listing

Blackboard’s common stock is traded on the NASDAQ Stock Market under the symbol “BBBB.”

Notice of Annual Meeting

Sheraton Four Points Hotel 1201 K Street, NW Washington, DC 20005 May 19, 2005, 11 a.m.

CORPORATE Directory

Please visit us at www.blackboard.com for more shareholder information.

BLACKBOARD INC. HEADQUARTERS

1899 L Street, NW, 5th Floor Washington, DC 20036 T: 202.463.4860 F: 202.463.4863www.blackboard.com