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Blackboard Inc. Reports Third Quarter 2008 Results

 - Company Reports Record Cash Flow from Operations and Raises Full Year Cash
                       Flow from Operations Guidance -

        - Third Quarter Revenue Increases 35 Percent to $83.1 Million -

WASHINGTON, Oct. 29 /PRNewswire-FirstCall/ -- Blackboard Inc. (Nasdaq: BBBB) today announced financial results for the third quarter ended September 30, 2008 and updated guidance for the fourth quarter and the full year of 2008.

Total revenue for the quarter ended September 30, 2008 was $83.1 million, an increase of 35 percent over the third quarter of 2007. Product revenues for the quarter were $74.3 million, an increase of 38 percent over the third quarter of 2007, while professional services revenues for the quarter were $8.8 million, an increase of 16 percent over the third quarter of 2007. For the third quarter of 2008, net income was $2.1 million, or $0.07 per basic share and $0.06 per diluted share, compared to net income of $3.3 million, or $0.11 per basic and diluted share for the third quarter of 2007. In the quarter, the company had a $2.4 million benefit for income taxes.

"We are pleased with our third quarter financial results which were inline with our prior guidance when you adjust for the income tax benefit. In addition, we were able to generate record cash flows from operations of $60.3 million during the quarter," said Michael Chasen, CEO and President of Blackboard Inc. "We experienced high client retention rates in our peak renewal quarter and we continue to believe that long-term demand for our solutions is strong due to the value we bring to our clients."

Commenting on the Company's sales and outlook, Chasen continued, "Following very strong sales in the second quarter, our new sales in the third quarter were impacted by the challenging macroeconomic environment, particularly to K-12 clients, where budgets are more economically sensitive. Therefore, we are taking a cautious approach to our outlook for the fourth quarter. However, despite our caution, we believe that we will continue to benefit from the strength of our annual subscription business model coupled with the relative resiliency of the education sector. We are well positioned for continued revenue growth and margin expansion in 2009 and beyond."

    Financial Highlights from the Third Quarter of 2008

    -- Total revenue for the quarter ended September 30, 2008 was $83.1
       million, an increase of 35 percent over the third quarter of 2007.
    -- Net income was $2.1 million, or $0.07 per basic share and $0.06 per
       diluted share, for the third quarter of 2008, compared to net income of
       $3.3 million, or $0.11 per basic and diluted share for the third
       quarter of 2007.
    -- Non-GAAP adjusted net income was $8.0 million, or $0.25 per diluted
       share, for the third quarter of 2008, compared to $6.6 million or $0.22
       per diluted share for the third quarter of 2007. Please refer to
       Blackboard's "Use of Non-GAAP Financial Measures" below.
    -- Cash flows from operations were $60.3 million for the third quarter of
       2008, up 57 percent from the third quarter of 2007.
    -- Capital expenditures were $4.9 million for the third quarter of 2008.
    -- Cash and cash equivalents were $118.7 million at September 30, 2008.


    Business Highlights from the Third Quarter of 2008

    -- A few of Blackboard's new and expanded client relationships in the
       quarter included:
       - U.S. Higher Education: Bellevue University, Central Oregon Community
         College, Dowling College, Duke University, Fayetteville Technical
         Community College, George Washington University, Northeastern State
         University, Oakland Community College, Portland Community College,
         Sinclair Community College, Tulane University, University of Arizona,
         University of Maryland -- College Park, Yuba College and others.
       - International: Chartered Institute of Professional Development,
         Istanbul Bilgi University, King Khalid University, TU Twente,
         Universidad de Los Andes, Universiteit Maastricht, University of
         Birmingham, University of Creative Arts, University of Luiss,
         University of New South Wales and others.
       - K-12: Archdiocese of New Orleans Office of Catholic Schools (LA),
         Jefferson Parish Public Schools (LA), Kentucky Department of
         Education KY), Macomb Intermediate School District (GA), Pennsylvania
         Cyber Charter School (PA) and others.
    -- Blackboard was selected by the State of New Mexico 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.
    -- Blackboard announced the availability of Blackboard School Central, a
       powerful, cost-effective online learning platform that empowers K-12
       school districts of any size to securely and reliably expand learning
       opportunities and teacher professional development.


    Outlook for the Fourth Quarter and Full Year of 2008

    Fourth Quarter of 2008:

    -- Revenue of $82.9 to $84.9 million;
    -- Amortization of acquired intangibles of approximately $9.8 million;
    -- Stock-based compensation expense of approximately $3.9 million;
    -- Net income of $900,000 to $2.2 million, resulting in net income per
       diluted share of $0.03 to $0.07, which is based on an estimated 32.2
       million diluted shares, and an estimated income tax benefit of
       approximately $600,000; and
    -- Non-GAAP adjusted net income of $7.2 to $8.0 million, resulting in
       non-GAAP adjusted net income per diluted share of $0.22 to $0.25 based
       on an estimated 32.2 million diluted shares and an estimated effective
       tax rate of 29 percent.


    Full Year 2008:

    -- Revenue of $310.0 to $312.0 million;
    -- Amortization of acquired intangibles of approximately $38.3 million;
    -- Stock-based compensation expense of approximately $15.1 million;
    -- Net income of $800,000 to $2.1 million, resulting in net income per
       diluted share of $0.02 to $0.06, which is based on an estimated 31.8
       million diluted shares, and an estimated income tax benefit of
       approximately $2.8 million;
    -- Non-GAAP adjusted net income of $24.4 to $25.2 million, resulting in
       non-GAAP adjusted net income per diluted share of $0.76 to $0.79 based
       on an estimated 31.8 million diluted shares and an estimated effective
       tax rate of 33 percent; and
    -- Cash flow from operations of $80.0 to $85.0 million.

Conference Call

Blackboard will broadcast its third 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 from approximately 7:00 p.m. (ET) on October 29, 2008 until 11:00 p.m. (ET) on November 5, 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 85636788.

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 August 7, 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 August 7, 2008 with the SEC. In addition, the forward-looking statements included in this press release represent the Company's views as of October 29, 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 October 29, 2008.



                                 BLACKBOARD INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

               (in thousands, except share and per share amounts)

                                 Three Months Ended       Nine Months Ended
                                     September 30            September 30
                                ---------------------  -----------------------
                                   2007        2008        2007        2008
                               ----------- ----------- ----------- -----------
                               (unaudited) (unaudited) (unaudited) (unaudited)
    Revenues:
     Product                     $53,993     $74,332    $156,273    $205,818
     Professional services         7,569       8,758      19,973      21,295
                               ----------- ----------- ----------- -----------
    Total revenues                61,562      83,090     176,246     227,113
    Operating expenses:
     Cost of product revenues,
      excludes $2,928 and
      $4,572 for the three
      months ended September 30,
      2007 and 2008, respectively,
      and $8,676 and $13,232 for
      the nine months ended
      September 30, 2007 and 2008,
      respectively, in amortization
      of acquired technology
      included in amortization
      of intangibles resulting
      from acquisitions shown
      below (1)                   11,955      19,626      35,611      53,597
     Cost of professional
      services revenues (1)        4,437       4,994      12,339      15,078
     Research and development
      (1)                          6,927      10,514      20,842      30,191
     Sales and marketing (1)      18,215      24,079      49,418      67,699
     General and
      administrative (1)          10,383      12,716      28,242      37,931
     Proceeds from patent
      judgment                       -           -           -        (3,313)
     Amortization of
      intangibles resulting
      from acquisitions            5,496       9,729      16,388      28,137
                               ----------- ----------- ----------- -----------
    Total operating expenses      57,413      81,658     162,840     229,320
                               ----------- ----------- ----------- -----------
    Income (loss) from
     operations                    4,149       1,432      13,406      (2,207)
    Other income (expense):
     Interest expense             (1,920)     (1,798)     (3,835)     (5,545)
     Interest income               2,420         339       3,332       1,487
     Other income (expense)        1,021        (233)      1,970       3,857
                               ----------- ----------- ----------- -----------
    Income (loss) before
     (provision) benefit for
     income taxes                  5,670        (260)     14,873      (2,408)
    (Provision) benefit for
     income taxes                 (2,391)      2,351      (6,211)      2,243
                               ----------- ----------- ----------- -----------
    Net income (loss)             $3,279      $2,091      $8,662       $(165)
                               =========== =========== =========== ===========
    Net income (loss) per
     common share:
     Basic                         $0.11       $0.07       $0.30      $(0.01)
                               =========== =========== =========== ===========
     Diluted                       $0.11       $0.06       $0.29      $(0.01)
                               =========== =========== =========== ===========
    Weighted average number
     of common shares:
     Basic                    28,956,253  31,184,215  28,668,076  30,754,997
                              =========== =========== =========== ============
     Diluted                  30,116,974  32,203,249  29,981,276  30,754,997
                              =========== =========== =========== ============

    (1) Includes the
        following amounts
        related to stock-based
        compensation:
        Cost of product revenues    $183        $244        $469        $679
        Cost of professional
         services revenues           181           8         471         240
        Research and development     102         195         351         547
        Sales and marketing        1,248       1,549       3,178       4,630
        General and
         administrative            1,817       1,636       4,292       5,015

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

    Income (loss) before
     (provision) benefit for
     income taxes                 $5,670       $(260)    $14,873     $(2,408)
    Add: Amortization of
     intangibles resulting
     from acquisitions             5,496       9,729      16,388      28,137
    Adjusted provision for
     income taxes (3)             (4,524)     (1,492)    (12,646)     (8,871)
                               ----------- ----------- ----------- -----------
    Non-GAAP adjusted net
     income                       $6,642      $7,977     $18,615     $16,858
                               =========== =========== =========== ===========
    Non-GAAP adjusted net
     income per common share
     - diluted                     $0.22       $0.25       $0.62       $0.53
                               =========== =========== =========== ===========

    (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 15.8% for the three months ended
        September 30, 2007 and 2008, respectively, and approximately 40.5% and
        34.5% for the nine months ended September 30, 2007 and 2008,
        respectively.



                                    BLACKBOARD INC.

                         CONDENSED CONSOLIDATED BALANCE SHEETS


                                               December 31,      September 30,
                                                    2007              2008
                                               ------------      -------------
                                                                  (unaudited)
                                                    (in thousands,
                                              except per share amounts)
                               ASSETS
    Current assets:
       Cash and cash equivalents                  $206,558          $118,746
       Accounts receivable, net                     52,846           102,542
       Inventories                                   2,089             2,030
       Prepaid expenses and other current
        assets                                       5,255             8,911
       Deferred tax asset, current portion           6,549             7,849
       Deferred cost of revenues                     6,877             6,883
                                               ------------      -------------
          Total current assets                     280,174           246,961

    Deferred tax asset, noncurrent portion          34,154            18,206
    Common stock warrant                               -               1,990
    Restricted cash                                  4,015             4,253
    Property and equipment, net                     18,584            34,147
    Goodwill and intangible assets, net            168,349           349,316
                                               ------------      -------------
    Total assets                                  $505,276          $654,873
                                               ============      =============

           LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
       Accounts payable                             $3,747            $4,570
       Accrued expenses                             24,182            24,862
       Deferred rent, current portion                  160               289
       Deferred revenues, current portion          126,600           186,307
                                               ------------      -------------
          Total current liabilities                154,689           216,028

    Notes payable, net of debt discount            161,519           162,805
    Deferred rent, noncurrent portion                1,469             9,915
    Deferred revenues, noncurrent portion            2,925             5,194
    Stockholders' equity:
       Common stock, $0.01 par value                   292               313
       Additional paid-in capital                  263,582           339,983
       Accumulated deficit                         (79,200)          (79,365)
                                               ============      =============
    Total stockholders' equity                     184,674           260,931
                                               ------------      -------------
    Total liabilities and stockholders'
     equity                                       $505,276          $654,873
                                               ============      =============



                                 BLACKBOARD INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                      Nine Months Ended
                                                         September 30
                                                  --------------------------
                                                     2007            2008
                                                  -----------    -----------
                                                  (unaudited)    (unaudited)
                                                        (in thousands)
    Cash flows from operating activities
    Net income (loss)                               $8,662           $(165)
    Adjustments to reconcile net income
     (loss) to net cash provided by
     operating activities:
     Deferred income tax benefit                    (2,278)         (6,094)
     Excess tax benefits from stock-based
      compensation                                  (6,233)         (1,903)
     Amortization of debt discount                   1,352           1,286
     Depreciation and amortization                   7,858          11,642
     Amortization of intangibles
      resulting from acquisitions                   16,388          28,137
     Change in allowance for doubtful
      accounts                                          54             245
     Noncash stock-based compensation                8,761          11,111
     Gain on common stock warrant                      -            (3,980)
     Changes in operating assets and liabilities:
       Accounts receivable                         (13,478)        (41,818)
       Inventories                                     221              59
       Prepaid expenses and other current
        assets                                      (2,176)         (2,582)
       Deferred cost of revenues                       (78)             (6)
       Accounts payable                             (1,122)         (2,027)
       Accrued expenses                              8,038           1,006
       Deferred rent                                   355           8,575
       Deferred revenues                            13,466          51,932
                                                  ===========    ===========
    Net cash provided by operating activities       39,790          55,418

    Cash flows from investing activities
     Purchases of property and equipment           (11,154)        (22,297)
     Proceeds from common stock warrant                -             1,990
     Payments for patent enforcement costs          (2,978)         (3,141)
     Purchase of intangible assets                  (1,530)            -
     Purchases of available-for-sale
      securities                                   (24,850)            -
     Sales of available-for-sale securities         24,850             -
     Acquisitions, net of cash acquired                -          (132,992)
                                                  -----------    -----------
    Net cash used in investing activities          (15,662)       (156,440)

    Cash flows from financing activities
     Proceeds from notes payable                   160,456             -
     Payments on term loan                         (24,400)            -
     Payments on letters of credit                    (338)            (54)
     Releases of letters of credit                     -               704
     Excess tax benefits from stock-based
      compensation                                   6,233           1,903
     Proceeds from exercise of stock options        11,177          10,657
                                                  -----------    -----------
    Net cash provided by financing
     activities                                    153,128          13,210
                                                  -----------    -----------
    Net increase (decrease) in cash and
     cash equivalents                              177,256         (87,812)
    Cash and cash equivalents at
     beginning of period                            30,776         206,558
                                                  -----------    -----------
    Cash and cash equivalents at end of
     period                                       $208,032        $118,746
                                                  ===========    ===========

SOURCE Blackboard Inc. 10/29/2008
CONTACT: Michael J. Stanton, Senior Vice President, Corporate Affairs &
Treasury of Blackboard Inc., 1-202-463-4860, ext. 2305
Web site: http://www.blackboard.com
http://investor.blackboard.com (BBBB)