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Blackboard Inc. Reports Second Quarter 2007 Results

  • Second Quarter Revenue Increases 36 Percent to $59.4 Million -
  • Company Raises Financial Guidance for 2007
  • WASHINGTON, July 31 /PRNewswire-FirstCall/ -- Blackboard Inc. (Nasdaq: BBBB) today announced financial results for the second quarter ended June 30, 2007 and updated guidance for the third quarter and the full year of 2007.

    Total revenue for the quarter ended June 30, 2007 was $59.4 million, an increase of 36 percent over the second quarter of 2006. Product revenues for the quarter were $52.3 million, an increase of 41 percent over the second quarter of 2006, while professional services revenues for the quarter were $7.1 million, an increase of 8 percent over the second quarter of 2006. The increase in revenue was driven by strong growth in Blackboard's annual licensing of enterprise level products and ASP hosting service to global academic institutions including clients resulting from the acquisition of WebCT, Inc.

    Net income was $3.4 million, resulting in net income per basic and diluted share of $0.12 for the second quarter of 2007 compared to a net loss of $6.3 million and net loss per basic and diluted share of ($0.23) for the second quarter of 2006. Non-GAAP adjusted net income for the second quarter of 2007, which excludes the amortization of acquisition-related intangible assets, net of taxes, was $6.8 million, resulting in non-GAAP adjusted net income per share of $0.23 compared to non-GAAP adjusted net loss of $2.2 million and non- GAAP adjusted net loss per share of ($0.08) for the second quarter of 2006.

    "I am pleased with our results in the second quarter, where we experienced strong revenue growth and expanded operating margins and earnings per share," said Michael Chasen, CEO and President of Blackboard Inc. "I am particularly encouraged by the interest we see for our Blackboard Academic Suite, particularly our newly launched offering, the Blackboard Outcomes System."

        Highlights from the Second Quarter of 2007
    
        * A few of Blackboard's new and expanded client relationships in the
          quarter included:
    
            - U.S. Higher Education: Arkansas State University, Bethune Cookman
              College, Bowie State University, Clark College, Delgado Community
              College, Fairleigh Dickinson University, John Carroll University,
              Mercer University, Mott Community College, Northampton Community
              College, Radford University, Stetson University College of Law,
              University of Northern Iowa, Webster University, York College of
              Pennsylvania and others.
    
            - International: Auckland University of Technology, Caribbean
              University, Hiroshima Kokusai Gakuin University, London South Bank
              University, Macquarie University, Motherwell College, St Martin's
              College, Tamagawa University, Universidad de la Rioja, University
              College Cork, University of Leeds, University of Notre Dame
              Australia, University of the Virgin Islands, University of Trinidad
              and Tobago, Utrecht University and others.
    
            - K-12: Arlington Public Schools (VA), Chaminade College
              Prepatory (NY), Clear Creek Independent School District (TX),
              Fairfax County Public Schools (VA), Jefferson County Public
              Schools (CO), Mead School District (WA), North Carolina Virtual
              Public School (NC), Richland School District Two (SC), St. George's
              School (RI), The Lawrenceville School (NJ), The Madeira School (VA),
              The Roeper School (MI), The York School (Ontario, Canada), Virtual
              High School (MA), Walnut Valley Unified School District (CA) and
              others.
    
        * Blackboard's enterprise licenses (Blackboard Learning
          System(TM) - Enterprise, Blackboard Community System(TM), Blackboard
          Transaction System(TM), Blackboard Content System(TM), Blackboard
          Portfolio System(TM) and Blackboard Outcomes System(TM)), totaled 3,756.
    
        * The Mississippi Community College System licensed a fully-hosted
          implementation of the Blackboard Academic Suite(TM), including the
          Blackboard Outcomes System for its 65,000 students across the 15-college
          system.
    
        * Blackboard completed the sale of $165.0 million aggregate principal
          amount of 3.25 percent Convertible Senior Notes due 2027, pursuant to a
          registration statement filed with the Securities and Exchange Commission
          on June 13, 2007.
    
        * Blackboard expanded the number of directors permitted to serve on the
          board to nine people and appointed Joseph L. Cowan, Thomas Kalinske and
          Beth Kaplan, to the company's Board of Directors.
    
    
        Outlook for the Third Quarter and Full Year of 2007
    
        Third Quarter of 2007:
    
        * Revenue of $60.0 to $61.0 million;
    
        * Amortization of acquired intangibles of approximately $5.5 million;
    
        * Net income of $2.7 to $3.2 million, resulting in net income per diluted
          share of $0.09 to $0.11, which is based on an estimated 30.2 million
          diluted shares and an effective tax rate of 41.5 percent; and
    
        * Non-GAAP adjusted net income, excluding the amortization of acquired
          intangibles and the associated tax impact, of $6.0 to $6.5 million,
          resulting in non-GAAP adjusted net income per diluted share of $0.20 to
          $0.22 based on an estimated 30.2 million diluted shares and an effective
          tax rate of 40.5 percent.
    
        Full Year 2007:
    
        * Revenue of $235.0 to $237.0 million;
    
        * Amortization of acquired intangibles of approximately $22.0 million;
    
        * Net income of $11.8 to $12.8 million, resulting in net income per
          diluted share of  $0.39 to $0.43, which is based on an estimated
          30.0 million diluted shares and an effective tax rate of 41.5 percent;
          and
    
        * Non-GAAP adjusted net income excluding the amortization of acquired
          intangibles and the associated tax impact, of $25.0 to $26.0 million,
          resulting in non-GAAP adjusted net income per diluted share of $0.83 to
          $0.87 based on an estimated 30.0 million diluted shares and an effective
          tax rate of 40.5 percent.
    
        Conference Call

    Blackboard will broadcast its second quarter conference call live over the Internet today beginning at 4:30 p.m. (Eastern). Interested parties can access the webcast through the Investor Relations section of the Company's Web site at http://investor.blackboard.com. Please access the Web site at least 15 minutes prior to the start of the call to register, download and install any necessary software.

    A replay of the call will be available via telephone from approximately 7:00 p.m. Eastern (4:00 p.m. Pacific) on July 31, 2007 until 11:00 p.m. Eastern (8:00 p.m. Pacific) on August 7, 2007. To listen to the replay, participants in the U.S. and Canada should dial 888-286-8010, and international participants should dial +1 (617) 801-6888. The conference ID for the replay is 85156969.

    Use of Non-GAAP Financial Measures

    This release includes information about the Company's non-GAAP adjusted net (loss) income and non-GAAP adjusted net (loss) income per share which are non-GAAP financial measures. Management believes that both measures, which exclude amortization of acquired intangibles and the associated tax impact, provide additional useful information to investors regarding the Company's ongoing financial condition and results of operations and aspects of current operating performance which can be effectively managed. Since the Company has historically reported these non-GAAP results to the investment community, management also believes the inclusion of these non-GAAP financial measures provides consistency in its financial reporting and facilitates investors' understanding of the Company's historic operating trends by providing an additional basis for comparisons to prior periods. In addition, the Company's internal reporting, including information provided to the Company's Audit Committee and Board of Directors, contains non-GAAP measures. The Company has also adopted internal compensation metrics that are determined on a basis that excludes amortization of acquired intangibles and the associated tax impact.

    A material limitation associated with the use of the above non-GAAP financial measures is that they have no standardized measurement prescribed by GAAP and may not be comparable with similar non-GAAP financial measures used by other companies. The Company compensates for these limitations by providing full disclosure of each non-GAAP financial measure and reconciliation to the most directly comparable GAAP financial measure which investors can use to appropriately consider each financial measure determined under GAAP as well as on the adjusted non-GAAP basis. However, the non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. In addition to the information contained in this release, investors should also review information contained in the Company's Form 10-Q dated May 4, 2007, as well as other filings with the Securities and Exchange Commission when assessing the Company's financial condition and results of operations.

    About Blackboard Inc.

    Blackboard Inc. (Nasdaq: BBBB) is a leading provider of enterprise software applications and related services to the education industry. Founded in 1997, Blackboard enables educational innovations everywhere by connecting people and technology. Millions of people use Blackboard everyday at academic institutions around the globe, including colleges, universities, K-12 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, D.C., with offices in North America, Europe, Australia and Asia.

        http://www.blackboard.com
    
        Blackboard
        Educate. Innovate. Everywhere.(TM)
    

    Any statements in this press release about future expectations, plans and prospects for Blackboard and other statements containing the words "believes," "anticipates," "plans," "expects," "will," and similar expressions, constitute forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including the factors discussed in the "Risk Factors" section of our Form 10-Q filed on May 4, 2007 with the SEC. In addition, the forward-looking statements included in this press release represent the Company's views as of July 31, 2007. The Company anticipates that subsequent events and developments will cause the Company's views to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to July 31, 2007.

    
                                   BLACKBOARD INC.
    
                        CONSOLIDATED STATEMENTS OF OPERATIONS
    
                  (in thousands, except share and per share amounts)
    
                                   Three Months Ended       Six Months Ended
                                         June 30                 June 30
                                     2006        2007        2006        2007
                                 ----------- ----------- ----------- -----------
                                 (unaudited) (unaudited) (unaudited) (unaudited)
        Revenues:
         Product                     $36,987     $52,299     $70,161    $102,280
         Professional services         6,593       7,105      11,127      12,404
                                 ----------- ----------- ----------- -----------
        Total revenues                43,580      59,404      81,288     114,684
        Operating expenses:
         Cost of product
          revenues, excludes
          $2,800 and $2,928 for
          the three months ended
          June 30, 2006 and 2007,
          respectively, and
          $3,733 and $5,749 for
          the six months ended
          June 30, 2006 and 2007,
          respectively, in
          amortization of
          acquired technology
          included in
          amortization of
          intangibles resulting
          from acquisitions shown
          below (1)                  10,027      11,922      17,993      23,619
         Cost of professional
          services revenues (1)       4,285       4,138       7,676       7,902
         Research and development
          (1)                         7,273       6,999      12,157      13,952
         Sales and marketing (1)     15,093      16,370      27,242      31,203
         General and
          administrative (1)          9,801       8,829      17,401      17,859
         Amortization of
          intangibles resulting
          from acquisitions           5,377       5,493       7,214      10,892
                                 ----------- ----------- ----------- -----------
        Total operating expenses     51,856      53,751      89,683     105,427
                                 ----------- ----------- ----------- -----------
        (Loss) income from
         operations                  (8,276)      5,653      (8,395)      9,257
        Other income (expense):
         Interest expense            (1,318)     (1,157)     (1,896)     (1,915)
         Interest income                392         507       1,633         912
         Other income (expense)         179         876        (147)        949
                                 ----------- ----------- ----------- -----------
        (Loss) income before
         benefit (provision) for
         income taxes                (9,023)      5,879      (8,805)      9,203
                                 ----------- ----------- ----------- -----------
        Benefit (provision) for
         income taxes                 2,712      (2,440)      2,642      (3,820)
        Net (loss) income           $(6,311)     $3,439     $(6,163)     $5,383
                                 =========== =========== =========== ===========
        Net (loss) income per
         common share:
         Basic                       $(0.23)       $0.12     $(0.22)       $0.19
                                 =========== =========== =========== ===========
         Diluted                     $(0.23)       $0.12     $(0.22)       $0.18
                                 =========== =========== =========== ===========
        Weighted average number
         of common shares:
         Basic                    27,776,658  28,706,575  27,678,634  28,525,603
                                 =========== =========== =========== ===========
         Diluted                  27,776,658  29,860,118  27,678,634  29,774,861
                                 =========== =========== =========== ===========
    
        (1) Includes the
         following amounts
         related to stock-based
         compensation:
         Cost of product revenues      $129        $120        $164        $249
         Cost of professional
          services revenues             251         175         369         291
         Research and development       154         170         276         287
         Sales and marketing            933       1,152       1,340       1,930
         General and
          administrative                811       1,401       1,628       2,473
    
        Reconciliation of (loss) income before benefit (provision) for income
         taxes to non-GAAP adjusted net (loss) income (2):
    
        (Loss) income before
         benefit (provision) for
         income taxes               $(9,023)     $5,879     $(8,805)     $9,203
        Add: Amortization of
         intangibles resulting
         from acquisitions            5,377       5,493       7,214      10,892
        Adjusted benefit
         (provision) for income
         taxes (3)                    1,440      (4,610)        628      (8,122)
                                 ----------- ----------- ----------- -----------
    
        Non-GAAP adjusted net
         (loss) income              $(2,206)     $6,762       $(963)     $11,973
                                 =========== =========== =========== ===========
        Non-GAAP adjusted net
         (loss) income per common
         share - diluted             $(0.08)      $0.23      $(0.03)       $0.40
                                 =========== =========== =========== ===========
    
        (2) Non-GAAP adjusted net (loss) income and non-GAAP adjusted net (loss)
        income per share are non-GAAP financial measures and have no standardized
        measurement prescribed by GAAP.  Management believes that both measures
        provide additional useful information to investors regarding the
        Company's ongoing financial condition and results of operations and since
        the Company has historically reported these non-GAAP results they provide
        an additional basis for comparisons to prior periods.  The non-GAAP
        financial measures may not be comparable with similar non-GAAP financial
        measures used by other companies and should not be considered in
        isolation from, or as a substitute for, financial information prepared in
        accordance with GAAP.  The Company provides the above reconciliation to
        the most directly comparable GAAP financial measure to allow investors to
        appropriately consider each non-GAAP financial measure.
    
        (3) Adjusted benefit (provision) for income taxes is applied at an
        effective rate of approximately 39.5% and 40.5% for the three months
        ended June 30, 2006 and 2007, respectively, and approximately 39.5% and
        40.4% for the six months ended June 30, 2006 and 2007, respectively.
    
    
    
                                   BLACKBOARD INC.
    
                        CONDENSED CONSOLIDATED BALANCE SHEETS
    
                                                   December 31,         June 30,
                                                        2006              2007
                                                    -----------       -----------
                                                                      (unaudited)
                                                         (in thousands,
                                                   except per share amounts)
                                         ASSETS
        Current assets:
           Cash and cash equivalents                   $30,776          $169,453
           Accounts receivable, net                     52,394            64,656
           Inventories                                   2,377             1,852
           Prepaid expenses and
            other current assets                         3,514             6,369
           Deferred tax asset,
            current portion                              7,326             8,480
           Deferred cost of revenues,
            current portion                              7,983             7,966
                                                   -----------       -----------
              Total current assets                     104,370           258,776
    
        Deferred tax asset, noncurrent portion          25,431            20,805
        Deferred cost of revenues,
         noncurrent portion                              4,253             3,783
        Restricted cash                                  1,999             2,337
        Property and equipment, net                     12,761            14,751
        Goodwill                                       101,644           105,730
        Intangible assets, net                          56,841            49,135
                                                   -----------       -----------
        Total assets                                  $307,299          $455,317
                                                   ===========       ===========
    
                        LIABILITIES AND STOCKHOLDERS' EQUITY
        Current liabilities:
           Accounts payable                            $2,238            $3,146
           Accrued expenses                            20,519            19,917
           Term loan, current portion                     246               -
           Deferred rent, current portion                 371               209
           Deferred revenues, current portion         117,972           105,291
                                                   -----------       -----------
              Total current liabilities               141,346           128,563
    
        Term loan, noncurrent portion, net of
         debt discount                                 23,377               -
        Notes payable, net of debt discount               -             160,485
        Deferred rent, noncurrent portion                 157               358
        Deferred revenues, noncurrent portion           2,298             3,457
        Stockholders' equity:
           Common stock, $0.01 par value                  282               289
           Additional paid-in capital                 231,331           248,847
           Accumulated deficit                        (91,492)          (86,682)
                                                   -----------       -----------
        Total stockholders' equity                    140,121           162,454
                                                   -----------       -----------
        Total liabilities and stockholders'
         equity                                      $307,299          $455,317
                                                   ===========       ===========
    
    
    
                                   BLACKBOARD INC.
    
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
    
                                                          Six Months Ended
                                                               June 30
                                                   -----------------------------
                                                       2006              2007
                                                   -----------       -----------
                                                   (unaudited)       (unaudited)
                                                         (in thousands)
        Cash flows from operating activities
        Net (loss) income                             $(6,163)           $5,383
        Adjustments to reconcile net (loss)
         income to net cash (used in)
         provided by operating activities:
         Deferred income tax benefit                   (3,493)           (1,464)
         Excess tax benefits from stock-based
          compensation                                   (173)           (4,444)
         Amortization of debt discount                    246               806
         Depreciation and amortization                  4,175             5,164
         Amortization of intangibles
          resulting from acquisitions                   7,214            10,892
         Change in allowance for doubtful accounts       (107)               70
         Noncash stock-based compensation               3,777             5,230
         Changes in operating assets and liabilities:
           Accounts receivable                        (26,448)          (12,332)
           Inventories                                 (1,045)              525
           Prepaid expenses and other current assets     (442)           (2,855)
           Deferred cost of revenues                   (1,187)              487
           Accounts payable                              (128)              908
           Accrued expenses                            (6,352)            4,488
           Deferred rent                                  (41)               39
           Deferred revenues                           16,296           (11,522)
                                                   -----------       -----------
        Net cash (used in) provided by
         operating activities                         (13,871)            1,375
    
        Cash flows from investing activities
         Acquisition of WebCT, Inc., net of
          cash acquired                              (154,628)              -
         Purchase of property and equipment            (5,741)           (7,089)
         Payments for patent enforcement costs            -              (2,090)
         Purchase of intangible assets                    -              (1,530)
         Sale of held-to-maturity securities           23,546               -
         Sale of available-for-sale securities         39,056               -
                                                   -----------       -----------
        Net cash used in investing activities         (97,767)          (10,709)
    
        Cash flows from financing activities
         Proceeds from notes payable                      -             160,456
         Proceeds from revolving credit facility       10,000               -
         Payments on revolving credit facility        (10,000)              -
         Proceeds from term loan                       57,522               -
         Payments on term loan                           (300)          (24,400)
         Release of letters of credit                   1,517               -
         Payments on letters of credit                    -                (338)
         Excess tax benefits from stock-based
          compensation                                    173             4,444
         Proceeds from exercise of stock options        4,451             7,849
                                                   -----------       -----------
        Net cash provided by financing activities      63,363           148,011
                                                   -----------       -----------
        Net (decrease) increase in cash and
         cash equivalents                             (48,275)          138,677
        Cash and cash equivalents
         at beginning of period                        75,895            30,776
                                                   -----------       -----------
        Cash and cash equivalents
         at end of period                             $27,620          $169,453
                                                   ===========       ===========
    

    SOURCE Blackboard Inc.

    CONTACT: Michael J. Stanton, Vice President, Investor Relations of Blackboard Inc., +1-202-463-4860, ext. 2305/