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Blackboard Inc. Reports Fourth Quarter and Year End 2007 Results

- Fourth Quarter Revenue Increases 23 Percent to $63.2 million -

WASHINGTON, Feb. 5 /PRNewswire-FirstCall/ -- Blackboard Inc. (Nasdaq: BBBB) today announced financial results for the fourth quarter and year ended December 31, 2007 and updated guidance for the first quarter and full year 2008.

Blackboard's fourth quarter revenue was $63.2 million, an increase of 23 percent over the same period in 2006. The increase in revenue was driven by growth in Blackboard's annual licensing of enterprise level products to global academic institutions as well as continued strong growth in our global ASP hosting business. Product revenue in the fourth quarter was $57.4 million, an increase of 23 percent over the $46.8 million of product revenue last year. Professional services revenue for the quarter was $5.8 million, which represents an increase of 26 percent over the same period in 2006.

Net income was $4.2 million for the fourth quarter of 2007 compared to net income of $201,000 in the same period last year. Net income per basic and diluted share was $0.14 compared to a net income per basic and diluted share of $0.01 in the same period last year. Non-GAAP adjusted net income for the fourth quarter of 2007, which excludes the amortization of acquisition-related intangible assets, net of taxes, was $7.7 million, resulting in non-GAAP adjusted net income per diluted share of $0.25 compared to non-GAAP adjusted net income of $3.4 million and non-GAAP adjusted net income per diluted share of $0.12 for the fourth quarter of 2006.

Total revenue for the year ended December 31, 2007 was $239.4 million, an increase of 31 percent over 2006. Net income was $12.9 million for the full year 2007 compared to a net loss of $10.7 million in the same period last year. For the full year 2007, net income per basic share was $0.45 and net income per diluted share was $0.43 compared to a net loss per basic and diluted share of ($0.39) for the full year 2006. Non-GAAP adjusted net income for the full year 2007, which excludes the amortization of acquisition-related intangible assets, net of taxes, was $26.2 million, resulting in non-GAAP adjusted net income per diluted share of $0.87 compared to non-GAAP adjusted net income of $1.6 million and non-GAAP adjusted net income per diluted share of $0.06 for the full year 2006.

"This was a tremendous year for Blackboard," said Michael Chasen, chief executive officer and president for Blackboard. "We are pleased with our financial results, made possible by our global client base adopting Blackboard products and services to manage their most mission-critical technologies. During the year, we realized strong revenue and earnings performance and generated operating cash-flows of more than $69 million."

Highlights from the Fourth Quarter of 2007

-- Blackboard's new and expanding client relationships in the quarter included:

       -- U.S. Higher Education: CSU-Colorado, Dominican College, Framingham
          State College, Grinnell College, Harford Community College, Holy
          Family University, Indiana Wesleyan University, Kendall College,
          Kentucky Community and Technical College System, Kishwaukee College,
          Labette Community College, Northeastern University, Ohio University,
          Rio Hondo College, Rivier College, SUNY - Jefferson Community
          College, Tallahassee Community College, Texas State Technical
          College System, University of Arkansas at Monticello, University of
          Dallas, Vassar College, Washington State University-Vancouver,
          Waynesburg College and others.

       -- International: Amersham & Wycombe College, Caribbean University,
          Central University of Technology, Charles Darwin University,
          Croatian Academic and Research Network CARNET, Deakin University,
          Ferris University, Lewisham College, Newcastle College, Niels Brock
          College Copenhagen, Spiru Haret University, Universidade Anhembi
          Morumbi, University of Kent at Canterbury and others.

       -- K-12: Alaska Student Instructional Services (AK), Albuquerque Public
          Schools (NM), Archdiocese of New Orleans Office of Catholic Schools
          (LA), Briarcliff Manor Union Free School District (NY), Connecticut
          Distance Learning Consortium (CT), Galena Park Independent School
          District (TX), Henry County Public Schools (GA), Jefferson County
          Public Schools (CO), Lafayette Parish School Board (LA), Lake
          Stevens School District (WA), Mississippi Department of Education -
          Center for Professional Development (MS), South East Cornerstone
          School Division #209 (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 3,935.
       Blackboard also ended 2007 with 3,536 total clients.

    Financial Guidance for 2008

Blackboard's financial guidance for the first quarter and full year 2008 reflects the inclusion of the NTI Group, Inc. starting January 31, 2008, the effective date of the acquisition. Blackboard's 2008 revenue related to NTI deferred revenue will be approximately $12 million lower than what NTI would have recognized as an independent company. When former NTI clients pay annually on their license agreements, Blackboard will recognize revenue for the fair value of these agreements over the term of the renewal, which is generally one year. Blackboard's 2008 results will also be negatively impacted by approximately $5 million in merger and integration related expenses from the NTI acquisition.

    Guidance for the First Quarter of 2008:

    -- Revenue of $64.0 to $66.0 million;
    -- Stock-based compensation expense of approximately $3.9 million;
    -- Amortization of acquired intangibles of approximately $8.7 million;
    -- GAAP net loss of ($5.7) to ($4.9) million, resulting in a GAAP net loss
       per diluted share of ($0.18) to ($0.16), which is based on an estimated
       31.5 million diluted shares and an estimated effective tax rate of 39.5
       percent; and
    -- Non-GAAP adjusted net income (loss) excluding the amortization of
       acquired intangibles and the associated tax impact, of a net loss of
       ($500,000) to net income of $300,000, resulting in a non-GAAP adjusted
       net loss per diluted share of ($0.02) to non-GAAP adjusted net income
       per share of $0.01 based on an estimated 31.5 million diluted shares
       and an estimated effective tax rate of 39.5 percent.

    Guidance for the Full Year 2008:

    -- Revenue of $306 to $314 million;
    -- Stock-based compensation expense of approximately $17 million;
    -- Amortization of acquired intangibles of approximately $37.6 million;
    -- Net interest expense of approximately $2.6 million;
    -- GAAP net loss of ($4.0) million to ($800,000), resulting in a GAAP net
       loss per diluted share of  ($0.12) to ($0.02), which is based on an
       estimated 32.4 million diluted shares and an estimated effective tax
       rate of 39.5 percent; and
    -- Non-GAAP adjusted net income excluding the amortization of acquired
       intangibles and the associated tax impact, of $18.8 to $22.0 million,
       resulting in non-GAAP adjusted net income per diluted share of $0.58 to
       $0.68 based on an estimated 32.4 million diluted shares and an
       estimated effective tax rate of 39.5 percent.

    Conference Call

Blackboard will broadcast its fourth 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 February 5, 2008 until 11:00 p.m. Eastern (8:00 p.m. Pacific) on February 12, 2008. 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 49202597.



                               BLACKBOARD INC.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
              (in thousands, except share and per share amounts)

                                   Three Months Ended          Year Ended
                                       December 31             December 31
                               -----------------------------------------------
                                   2006       2007         2006        2007
                               -----------  ---------    --------  -----------
                               (unaudited) (unaudited)             (unaudited)
    Revenues:
      Product                     $46,795     $57,358    $160,392    $213,631
      Professional services         4,625       5,844      22,671      25,817
                                ---------   ---------   ---------   ---------
    Total revenues                 51,420      63,202     183,063     239,448
    Operating expenses:
      Cost of product
       revenues, excludes
       $2,800 and $2,977 for
       the three months ended
       December 31, 2006 and
       2007, respectively, and
       $9,333 and $11,654 for
       the year ended December
       31, 2006 and 2007,
       respectively, in
       amortization of
       acquired technology
       included in
       amortization of
       intangibles resulting
       from acquisitions shown
       below (1)                   10,246      11,833      39,594      47,444
      Cost of professional
       services revenues (1)        3,940       4,602      16,001      16,941
      Research and development (1)  7,005       7,436      27,162      28,278
      Sales and marketing (1)      14,420      16,615      58,340      66,033
      General and
       administrative (1)           8,760      10,425      35,823      38,667
      Amortization of
       intangibles resulting
       from acquisitions            5,378       5,734      17,969      22,122
                                ---------   ---------   ---------   ---------
    Total operating expenses       49,749      56,645     194,889     219,485
                                ---------   ---------   ---------   ---------
    Income (loss) from
     operations                     1,671       6,557     (11,826)     19,963
    Other income (expense):
      Interest expense             (1,598)     (1,931)     (5,354)     (5,766)
      Interest income                 406       2,341       2,380       5,673
      Other income (expense)         (218)     (1,395)       (519)        575
                                ---------   ---------   ---------   ---------
    Income (loss) before
     (provision) benefit for
     income taxes                     261       5,572     (15,319)     20,445
    (Provision) benefit for
     income taxes                     (60)     (1,369)      4,582      (7,580)
                                ---------   ---------   ---------   ---------
    Net income (loss)                $201      $4,203    $(10,737)    $12,865
                                =========   =========   =========   =========
    Net income (loss) per
     common share:
      Basic                         $0.01       $0.14      $(0.39)      $0.45
                                =========   =========   =========   =========
      Diluted                       $0.01       $0.14      $(0.39)      $0.43
                                =========   =========   =========   =========
    Weighted average number
     of common shares:
      Basic                    28,144,314  29,154,396  27,857,576  28,789,083
                               ==========  ==========  ==========  ==========
      Diluted                  29,113,413  30,256,902  27,857,576  30,113,621
                               ==========  ==========  ==========  ==========


    (1) Includes the
     following amounts
     related to stock-based
     compensation:
      Cost of product revenues       $109        $203        $386        $672
      Cost of professional
       services revenues                5         160         524         631
      Research and development        289         116         733         467
      Sales and marketing             712       1,181       2,951       4,359
      General and administrative      903       1,622       3,462       5,914

    Reconciliation of income
     (loss) before (provision)
     benefit for income taxes
     to non-GAAP adjusted net
     income (2):

    Income (loss) before
     benefit (provision) for
     income taxes                    $261      $5,572    $(15,319)    $20,445
    Add: Amortization of
     intangibles resulting
     from acquisitions              5,378       5,734      17,969      22,122
    Adjusted provision for
     income taxes (3)              (2,227)     (3,634)     (1,047)    (16,318)
                                ---------   ---------   ---------   ----------
    Non-GAAP adjusted net
     income                        $3,412      $7,672      $1,603     $26,249
                                =========   =========   =========   =========
    Non-GAAP adjusted net
     income per common share
     - diluted                      $0.12       $0.25       $0.06       $0.87
                                =========   =========   =========   =========


    (2) Non-GAAP adjusted net income (loss) and non-GAAP adjusted net income
        (loss) 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 provision for income taxes is applied at an effective rate
        of approximately 39.5% and 32.1% for the three months ended December
        31, 2006 and 2007, respectively, and approximately 39.5% and 38.3% for
        the year ended December 31, 2006 and 2007, respectively.



                               BLACKBOARD INC.

                    CONDENSED CONSOLIDATED BALANCE SHEETS

                                                December 31,     December 31,
                                                    2006             2007
                                               -------------    -------------
                                                                 (unaudited)
                                                         (in thousands,
                                                    except per share amounts)

                                    ASSETS
    Current assets:
      Cash and cash equivalents                   $30,776          $206,558
      Accounts receivable, net                     52,394            52,846
      Inventories                                   2,377             2,089
      Prepaid expenses and other current
       assets                                       3,514             5,255
      Deferred tax asset, current
       portion                                      7,326             6,549
      Deferred cost of revenues, current
       portion                                      7,983             6,793
                                               -------------    -------------
        Total current assets                      104,370           280,090

    Deferred tax asset, noncurrent
     portion                                       25,431            34,154
    Deferred cost of revenues, noncurrent
     portion                                        4,253                84
    Restricted cash                                 1,999             4,015
    Property and equipment, net                    12,761            18,584
    Goodwill and intangible assets, net           158,485           168,349
                                               -------------    -------------
    Total assets                                 $307,299          $505,276
                                               =============    =============


                     LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                             $2,238            $3,747
      Accrued expenses                             20,519            24,182
      Term loan, current portion                      246               -
      Deferred rent, current portion                  371               160
      Deferred revenues, current portion          117,972           126,600
                                               -------------    -------------
        Total current liabilities                 141,346           154,689

    Term loan, noncurrent portion, net of
     debt discount                                 23,377               -
    Notes payable, net of debt discount               -             161,519
    Deferred rent, noncurrent portion                 157             1,469
    Deferred revenues, noncurrent portion           2,298             2,925
    Stockholders' equity:
      Common stock, $0.01 par value                   282               292
      Additional paid-in capital                  231,331           263,582
      Accumulated deficit                         (91,492)          (79,200)
                                               -------------    -------------
    Total stockholders' equity                    140,121           184,674
                                               -------------    -------------
    Total liabilities and stockholders'
     equity                                      $307,299          $505,276
                                               =============    =============



                               BLACKBOARD INC.

               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                          Year Ended
                                                          December 31
                                                  ---------------------------
                                                     2006              2007
                                                  ---------         ---------
                                                                   (unaudited)
                                                         (in thousands)
    Cash flows from operating activities
    Net (loss) income                             $(10,737)          $12,865
    Adjustments to reconcile net (loss)
     income to net cash provided by
     operating activities:
      Deferred income tax benefit                   (5,075)           (2,830)
      Excess tax benefits from stock-based
       compensation                                 (3,317)           (6,845)
      Amortization of debt discount                  1,701             1,840
      Depreciation and amortization                  8,980            10,681
      Amortization of intangibles
       resulting from acquisitions                  17,969            22,122
      Change in allowance for doubtful
       accounts                                       (109)               (2)
      Noncash stock-based compensation               8,056            12,043
      Changes in operating assets and
       liabilities:
        Accounts receivable                        (21,780)             (225)
        Inventories                                   (571)              288
        Prepaid expenses and other current
         assets                                        (42)           (1,233)
        Deferred cost of revenues                   (5,129)              372
        Accounts payable                               133               952
        Accrued expenses                            (5,588)            9,394
        Deferred rent                                 (245)            1,101
        Deferred revenues                           38,640             8,834
                                                  ---------         ---------
    Net cash provided by operating
     activities                                     22,886            69,357

    Cash flows from investing activities
     Purchases of property and equipment           (10,081)          (16,023)
     Payments for patent enforcement
      costs                                           (276)           (4,186)
     Acquisitions, net of cash acquired           (154,628)          (27,664)
     Sales and purchases of securities,
      net                                           62,602               -
                                                  ---------         ---------
    Net cash used in investing activities         (102,383)          (47,873)

    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                        (35,600)          (24,400)
      Release of letters of credit                   1,777               -
      Payments on letters of credit                 (1,798)           (1,976)
      Excess tax benefits from stock-based
       compensation                                  3,317             6,845
      Proceeds from exercise of stock
       options                                       9,160            13,373
                                                  ---------         ---------
    Net cash provided by financing
     activities                                     34,378           154,298
                                                  ---------         ---------
    Net (decrease) increase in cash and
     cash equivalents                              (45,119)          175,782
    Cash and cash equivalents at
     beginning of year                              75,895            30,776
                                                  ---------         ---------
    Cash and cash equivalents at end of
     year                                          $30,776          $206,558
                                                  =========         =========


    About Blackboard Inc.

Blackboard 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(TM) and the Blackboard Commerce Suite(TM). 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, D.C., with offices and staff in North America, Europe, Australia and Asia.

Forward Looking Statements

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, including statements about future financial performance and the expected benefits of the acquisition and its impact on Blackboard's financial results in future periods, 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 timing and extent of regulatory review, the timing of the closing, the ability of Blackboard to integrate the business, operations and personnel of NTI following the acquisition, and the ability of both companies to retain their existing customers and gain new customers before and after the closing of the acquisition. Other factors that could affect the results discussed in our forward-looking statements include those set forth in the "Risk Factors" section of our most recent 10-Q filed with the SEC. In addition, the forward-looking statements included in this press release represent the Company's views as of February 5, 2008. 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 February 5, 2008.

Use of Non-GAAP Financial Measures

This release includes information about the Company's non-GAAP adjusted net income and non-GAAP adjusted net 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 that can be effectively managed. Because 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 November 8, 2007, as well as other filings with the Securities and Exchange Commission when assessing the Company's financial condition and results of operations.

SOURCE Blackboard Inc.

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