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Blackboard Inc. Reports Second Quarter 2008 Results

- Company Raises Cash Flow from Operations Guidance - - Revenue Increases 27 Percent to $75.5 Million -
WASHINGTON, Aug 06, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Blackboard Inc. (Nasdaq: BBBB) today announced financial results for the second quarter ended June 30, 2008 and updated guidance for the third quarter and the full year of 2008.

Total revenue for the quarter ended June 30, 2008 was $75.5 million, an increase of 27 percent over the second quarter of 2007. Product revenues for the quarter were $68.4 million, an increase of 31 percent over the second quarter of 2007, while professional services revenues for the quarter were $7.2 million, an increase of 1 percent over the second quarter of 2007. The increase in product revenue was driven by continued strong growth in Blackboard's annual licensing of enterprise level products and managed hosting service to global academic clients. Our revenue and earnings would have been stronger in the quarter but the Company's financials were impacted by the delay in the release of the Blackboard Transaction System(TM) 3.0.

Net income was $1.0 million, resulting in net income per basic and diluted share of $0.03 for the second quarter of 2008 compared to net income of $3.4 million and net income per basic and diluted share of $0.12 for the second quarter of 2007. Non-GAAP adjusted net income for the second quarter of 2008, which excludes the amortization of acquisition-related intangible assets, net of taxes, was $6.9 million, resulting in non-GAAP adjusted net income per diluted share of $0.22 compared to non-GAAP adjusted net income of $6.8 million and non-GAAP adjusted net income per diluted share of $0.23 for the second quarter of 2007. Included in the results for the second quarter of 2008 is a $3.3 million benefit to operating income from the patent judgment against Desire2Learn, Inc. as well as a $4.0 million benefit to other income from a gain on investment.

"We had strong product sales in the second quarter driven by an increasing number of large deals including our initial statewide wins," said Michael Chasen, CEO and President of Blackboard Inc. "Sales during the quarter were particularly strong in the U.S. higher education market and once again, we experienced increased demand for our managed hosting services."

    Highlights from the Second Quarter of 2008

    -- A few of Blackboard's new and expanded client relationships in the
       quarter included:
       -- U.S. Higher Education: Charleston Blackhawk Technical College,
          Brookdale Community College, Calhoun Community College, Centennial
          College, Christopher Newport University, Embry-Riddle Aeronautical
          University, Frederick Community College, Maricopa Community College,
          Northwest Arkansas Community College, Palm Beach Community College,
          Santa Barbara City College, Shawnee Community College, Temple
          University, University of North Carolina - General Administration,
          University of Great Falls, University of Saint Francis and others.

       -- International: Aston University, Imperial College London, Leiden
          University, Northumberland College, SENA, Sheffield Hallam
          University, South Wales Higher Education Partnership, Spiru Haret
          University, University of Manchester and others.

       -- K-12: Baltimore City Public Schools (MD), Broward County Public
          Schools (FL), Clear Creek Independent School District (TX), Fairfax
          County Public Schools (VA), Indian Oasis-Baboquivari Unified School
          District (AZ), Naperville CUSD 203 (IL), Poway Unified School
          District (CA), Tulsa Technology Center (OK), Volusia County Public
          Schools (FL), Walnut Valley Unified School District (CA), Westport
          Public Schools (CT) and others.


    -- Blackboard won several key statewide deals in the quarter including:
       -- Blackboard was selected by the State of New Mexico to partner in a
          landmark initiative to deploy a single, statewide e-learning
          platform that will be the first of its kind to connect teaching,
          learning, and training for the state's K-20, adult education, and
          government communities.
       -- The State of Mississippi has implemented the Blackboard's Connect
          service to provide the Executive Director of Mississippi Emergency
          Management Agency (MEMA) and the Governor of Mississippi the ability
          to communicate with residents and staff regarding time-sensitive
          incidents.
       -- The State of Florida selected Blackboard for a pilot program
          allowing the Florida Division of Emergency Management and four
          Florida counties, including Brevard County, Orange County, Pasco
          County, and Polk County, to use the Blackboard Connect service for
          time-sensitive alerts and notifications.

    -- Other key highlights of the quarter include:
       -- Nearly 200 new Blackboard Connect deals closed in the second quarter
          with 35 Blackboard Connect cross-sell deals to existing Blackboard
          U.S. higher education clients.
       -- Blackboard announced the formation of the Blackboard K-12 Advisory
          Board and appointed five initial members including, Thomas G.
          Carroll, PhD, Therese "Terry" Crane, Ed.D., Joe A. Hairston, Ed.D.,
          Linda Pittenger and Paul E. Resta, PhD.  Members of the K-12
          Advisory Board will help Blackboard identify and respond to critical
          issues confronting today's educators, track and discuss developing
          trends, and advise on future partnerships and alliances.


    Outlook for the Third Quarter and Full Year of 2008

    Third Quarter of 2008:
    -- Revenue of $82.0 to $84.0 million;
    -- Amortization of acquired intangibles of approximately $9.9 million;

-- Net loss of ($600,000) to net income of $700,000, resulting in net loss per basic share of ($0.02) to net income per diluted share of $0.02, which is based on an estimated 31.3 million basic shares and 32.3 million diluted shares, respectively, and an estimated effective tax rate of approximately zero percent;

-- Non-GAAP adjusted net income, excluding the amortization of acquired intangibles and the associated tax impact, of $5.8 to $6.6 million, resulting in non-GAAP adjusted net income per diluted share of $0.18 to $0.20 based on an estimated 32.3 million diluted shares and an estimated effective tax rate of 37 percent.

    Full Year 2008:
    -- Revenue of $312.0 to $316.0 million;
    -- Amortization of acquired intangibles of approximately $38.3 million;
    -- Stock-based compensation expense of approximately $15.5 million;

-- Net loss of $(300,000) to net income of $2.3 million, resulting in net loss per basic share of ($0.01) to net income per diluted share of $0.07, which is based on an estimated 31.8 million basic shares and 32.0 million diluted shares, respectively, and an estimated effective tax rate of approximately zero percent;

-- Non-GAAP adjusted net income excluding the amortization of acquired intangibles and the associated tax impact, of $23.5 to $25.1 million, resulting in non-GAAP adjusted net income per diluted share of $0.73 to $0.78 based on an estimated 32.0 million diluted shares and an estimated effective tax rate of 37 percent (which reflects an effective rate of 28 percent for the fourth quarter of 2008);

    -- Cash flow from operations of $75.0 to $80.0 million.


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.

A replay of the call will be available via telephone at approximately 7:00 p.m. (ET) on August 6, 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 83748927.



                               BLACKBOARD INC.

                    CONSOLIDATED STATEMENTS OF OPERATIONS

              (in thousands, except share and per share amounts)

                                  Three Months Ended       Six Months Ended
                                        June 30                 June 30
                               ----------------------- ----------------------
                                    2007        2008        2007        2008
                               ----------- ----------- ----------- ----------
                               (unaudited) (unaudited) (unaudited) (unaudited)
    Revenues:
      Product                     $52,299     $68,377    $102,280    $131,486
      Professional services         7,105       7,170      12,404      12,537
                               ----------- ----------- ----------- ----------
    Total revenues                 59,404      75,547     114,684     144,023
    Operating expenses:
      Cost of product revenues,
       excludes $2,928 and
       $4,572 for the three
       months ended June 30,
       2007 and 2008,
       respectively, and $5,749
       and $8,660 for the six
       months ended June 30, 2007
       and 2008, respectively,
       in amortization of
       acquired technology
       included in
       amortization of
       intangibles resulting
       from acquisitions shown
       below (1)                   11,922      18,000      23,619      33,971
      Cost of professional
       services revenues (1)        4,138       5,134       7,902      10,084
      Research and
       development (1)              6,999       9,944      13,952      19,677
      Sales and marketing (1)      16,370      22,763      31,203      43,620
      General and
       administrative (1)           8,829      12,461      17,859      25,215
      Proceeds from patent
       judgment                       -        (3,313)        -        (3,313)
      Amortization of
       intangibles resulting
       from acquisitions            5,493       9,729      10,892      18,408
                               ----------- ----------- ----------- ----------
    Total operating expenses       53,751      74,718     105,427     147,662
                               ----------- ----------- ----------- ----------
    Income (loss) from
     operations                     5,653         829       9,257      (3,639)
    Other income (expense):
      Interest expense             (1,157)     (1,917)     (1,915)     (3,747)
      Interest income                 507         258         912       1,148
      Other income                    876       3,780         949       4,090
                               ----------- ----------- ----------- ----------
    Income (loss) before
     provision for income
     taxes                          5,879       2,950       9,203      (2,148)
    Provision for income taxes     (2,440)     (1,913)     (3,820)       (108)
                               ----------- ----------- ----------- ----------
    Net income (loss)              $3,439      $1,037      $5,383     $(2,256)
                               =========== =========== =========== ==========
    Net income (loss) per
     common share:
      Basic                         $0.12       $0.03       $0.19      $(0.07)
                               =========== =========== =========== ==========
      Diluted                       $0.12       $0.03       $0.18      $(0.07)
                               =========== =========== =========== ==========
    Weighted average number
     of common shares:
      Basic                    28,706,575  30,981,113  28,525,603  30,574,931
                               =========== =========== =========== ==========
      Diluted                  29,860,118  31,939,435  29,774,861  30,574,931
                               =========== =========== =========== ==========

    (1) Includes the
     following amounts
     related to stock-based
     compensation:
      Cost of product revenues       $120        $258        $249        $435
      Cost of professional
       services revenues              175          69         291         232
      Research and development        170         190         286         352
      Sales and marketing           1,152       1,665       1,930       3,081
      General and
       administrative               1,401       1,615       2,474       3,378

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

    Income (loss) before
     provision for income
     taxes                         $5,879      $2,950      $9,203     $(2,148)
    Add: Amortization of
     intangibles resulting
     from acquisitions              5,493       9,729      10,892      18,408
    Adjusted provision for
     income taxes (3)              (4,610)     (5,756)     (8,122)     (7,379)
                               ----------- ----------- ----------- ----------
    Non-GAAP adjusted net
     income                        $6,762      $6,923     $11,973      $8,881
                               =========== =========== =========== ==========
    Non-GAAP adjusted net
     income per common
     share - diluted                $0.23       $0.22       $0.40       $0.28
                               =========== =========== =========== ==========


    (2) Non-GAAP adjusted net income and non-GAAP adjusted net 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 provision for income taxes is applied at an effective rate of
        approximately 40.5% and 45.4% for the three months ended June 30, 2007
        and 2008, respectively, and approximately 40.4% and 45.4% for the six
        months ended June 30, 2007 and 2008, respectively.



                               BLACKBOARD INC.

                    CONDENSED CONSOLIDATED BALANCE SHEETS

                                                December 31,         June 30,
                                                    2007              2008
                                                ------------      -----------
                                                                  (unaudited)
                                                        (in thousands,
                                                   except per share amounts)
                                     ASSETS
    Current assets:
      Cash and cash equivalents                  $206,558           $55,295
      Accounts receivable, net                     52,846            94,116
      Inventories                                   2,089             1,781
      Prepaid expenses and other current
       assets                                       5,255             9,845
      Deferred tax asset, current
       portion                                      6,549             7,213
      Deferred cost of revenues                     6,877             5,854
                                                ------------      -----------
        Total current assets                      280,174           174,104

    Deferred tax asset, noncurrent portion         34,154            15,662
    Common stock warrant                              -               3,980
    Restricted cash                                 4,015             4,930
    Property and equipment, net                    18,584            33,310
    Goodwill and intangible assets, net           168,349           359,393
                                                ------------      -----------
    Total assets                                 $505,276          $591,379
                                                ============      ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                             $3,747            $4,053
      Accrued expenses                             24,182            25,423
      Deferred rent, current portion                  160               336
      Deferred revenues, current portion          126,600           137,135
                                                ------------      -----------
        Total current liabilities                 154,689           166,947

    Notes payable, net of debt discount           161,519           162,406
    Deferred rent, noncurrent portion               1,469             7,479
    Deferred revenues, noncurrent portion           2,925             5,582
    Stockholders' equity:
      Common stock, $0.01 par value                   292               311
      Additional paid-in capital                  263,582           330,110
      Accumulated deficit                         (79,200)          (81,456)
                                                ------------      -----------
    Total stockholders' equity                    184,674           248,965
                                                ------------      -----------
    Total liabilities and stockholders'
     equity                                      $505,276          $591,379
                                                ============      ===========



                               BLACKBOARD INC.

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        Six Months Ended
                                                            June 30
                                                  ---------------------------
                                                      2007              2008
                                                  ----------       ----------
                                                  (unaudited)      (unaudited)
                                                         (in thousands)
    Cash flows from operating activities
    Net income (loss)                                $5,383           $(2,256)
    Adjustments to reconcile net income
     (loss) to net cash provided by (used
     in) operating activities:
      Deferred income tax benefit                    (1,464)           (2,914)
      Excess tax benefits from stock-based
       compensation                                  (4,444)           (1,021)
      Amortization of debt discount                     806               887
      Depreciation and amortization                   5,164             7,389
      Amortization of intangibles
       resulting from acquisitions                   10,892            18,408
      Change in allowance for doubtful
       accounts                                          70               335
      Noncash stock-based compensation                5,230             7,478
      Gain on common stock warrant                      -              (3,980)
      Changes in operating assets and
       liabilities:
        Accounts receivable                         (12,332)          (33,482)
        Inventories                                     525               308
        Prepaid expenses and other current assets    (2,855)           (3,516)
        Deferred cost of revenues                       487             1,023
        Accounts payable                                908            (2,544)
        Accrued expenses                              4,488              (295)
        Deferred rent                                    39             6,186
        Deferred revenues                           (11,522)            3,148
                                                  ----------       ----------
    Net cash provided by (used in)
     operating activities                             1,375            (4,846)

    Cash flows from investing activities
      Purchases of property and equipment            (7,089)          (17,358)
      Payments for patent enforcement
       costs                                         (2,090)           (2,448)
      Purchase of intangible assets                  (1,530)              -
      Acquisitions, net of cash acquired                -            (132,902)
                                                  ----------       ----------
    Net cash used in investing activities           (10,709)         (152,708)

    Cash flows from financing activities
      Proceeds from notes payable                   160,456               -
      Payments on term loan                         (24,400)              -
      Payments on letters of credit                    (338)              (27)
      Excess tax benefits from stock-based
       compensation                                   4,444             1,021
      Proceeds from exercise of stock options         7,849             5,297
                                                  ----------       ----------
    Net cash provided by financing activities       148,011             6,291
                                                  ----------       ----------
    Net increase (decrease) in cash and
     cash equivalents                               138,677          (151,263)
    Cash and cash equivalents at
     beginning of period                             30,776           206,558
                                                  ----------       ----------
    Cash and cash equivalents at end of period     $169,453           $55,295
                                                  ==========       ==========



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 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 9, 2008, 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 global leader in enterprise technology and innovative solutions that improve the experience of millions of students and learners around the world every day. Blackboard's solutions allow thousands of higher education, K-12, professional, corporate, and government organizations to extend teaching and learning online, facilitate campus commerce and security, and communicate more effectively with their communities. Founded in 1997, Blackboard is headquartered in Washington, D.C., with offices in North America, Europe, Asia and Australia.

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 9, 2008 with the SEC. In addition, the forward-looking statements included in this press release represent the Company's views as of August 6, 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 August 6, 2008.

SOURCE Blackboard Inc.

http://www.blackboard.com