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)