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Blackboard Inc. Reports Fourth Quarter and Year End 2008 Results

    - Fourth Quarter Revenue Increases 35 Percent to $85.0 Million -

    - Full Year 2008 Revenue Increases 30 Percent to $312.1 Million -

WASHINGTON, Feb. 4 /PRNewswire-FirstCall/ -- Blackboard Inc. (Nasdaq: BBBB) today announced financial results for the fourth quarter and year ended December 31, 2008 and guidance for the first quarter and full year 2009.

Blackboard's fourth quarter revenue was $85.0 million, an increase of 35 percent over the same period in 2007. Product revenue in the fourth quarter was $77.4 million, an increase of 35 percent over the $57.4 million of product revenue in the fourth quarter of last year. Professional services revenue for the quarter was $7.6 million, which represents an increase of 30 percent over the same period in 2007.

Blackboard's fourth quarter revenue was $85.0 million, an increase of 35 percent over the same period in 2007. Product revenue in the fourth quarter was $77.4 million, an increase of 35 percent over the $57.4 million of product revenue last year. Professional services revenue for the quarter was $7.6 million, which represents an increase of 30 percent over the same period in 2007.

GAAP net income was $3.0 million for the fourth quarter of 2008 compared to GAAP net income of $4.2 million in the same period last year. GAAP net income per basic share was $0.10 and GAAP net income per diluted share was $0.09 compared to GAAP net income per basic and diluted share of $0.14 in the same period last year. Non-GAAP adjusted net income for the fourth quarter of 2008, which excludes the amortization of acquisition-related intangible assets, net of taxes, was $8.9 million, resulting in non-GAAP adjusted net income per diluted share of $0.28 compared to non-GAAP adjusted net income of $7.7 million and non-GAAP adjusted net income per diluted share of $0.25 for the fourth quarter of 2007.

Total revenue for the year ended December 31, 2008 was $312.1 million, an increase of 30 percent over 2007. GAAP net income was $2.8 million for the year ended December 31, 2008 compared to GAAP net income of $12.9 million in the same period last year. For the year ended December 31, 2008, GAAP net income per basic share and diluted share was $0.09 compared to GAAP net income per basic share of $0.45 and GAAP net income per diluted share of $0.43 for 2007. Non-GAAP adjusted net income for the full year 2008, which excludes the amortization of acquisition-related intangible assets, net of taxes, was $25.7 million, resulting in non-GAAP adjusted net income per diluted share of $0.81 compared to non-GAAP adjusted net income of $26.2 million and non-GAAP adjusted net income per diluted share of $0.87 for 2007.

"This was a good year for Blackboard resulting in strong revenue and earnings performance and $80 million in operating cash flows," said Michael Chasen, chief executive officer and president of Blackboard. "Our strong financial results were driven by the value our products and services provide to our global client base for the management of their most mission-critical technologies. In addition, with the introduction of Blackboard Connect we further expanded our solutions offering to meet the growing needs of our clients."

Chasen continued, "Even with the challenging economy, our business is well positioned and we believe in 2009 we can continue to deliver strong revenue growth with expanding operating margins."

    Highlights from the Fourth Quarter of 2008

    --  Blackboard's new and expanding client relationships in the quarter
        included:
        --  U.S. Higher Education: Buffalo State University, Central Michigan
            University, City Colleges of Chicago, Des Moines Area Community
            College, Florida State University, Georgetown University, Georgia
            Gwinnet College, Loyola Marymount University, Marshall University,
            Michigan State University, Ohio State University, Santa Clara
            University, South Carolina State, University of Alabama,
            University of Central Missouri, University of Memphis, University
            of South Carolina, University of Texas at Tyler, Vassar College
            and others.
        --  International: Charles Darwin University, King Abdullah University
            of Science and Technology, Korea University, Policia Nacional de
            Colombia, Suffolk New College, Universidad Camilo Jose Cela,
            Universidad de Los Andes, University of Birmingham, Utrecht
            University and others.
        --  K-12: Cherry Creek School District (CO), Cincinnati Public Schools
            (OH), Corvallis School District (OR), Delaware Department of
            Education, Florida Virtual School, Jersey City Schools (NJ), New
            Orleans Public Schools (LA), Riverside Unified School District
            (CA), West Bend School District (IN) and others.
    --  Blackboard's enterprise licenses (Blackboard Learning System(TM) --
        Enterprise, Blackboard Community System(TM), Blackboard Transaction
        System(TM), Blackboard Content System(TM), Blackboard Connect(TM) and
        Blackboard Outcomes System(TM)), totaled 6,817.
    --  Blackboard ended 2008 with 5,547 total clients.


    Change in Definition of Non-GAAP Adjusted Net Income

Beginning in the first quarter of 2009, Blackboard will define "Non-GAAP Adjusted Net Income" and "Non-GAAP Adjusted Net Income per Diluted Share," to exclude the amortization of acquisition-related intangible assets, stock-based compensation expense and certain defined non-cash items, net of taxes. Under Blackboard's non-GAAP definition utilized in 2008, these measures did not exclude stock-based compensation expense. The Non-GAAP results presented in this press release are calculated using the old definition, except for our future guidance and the table below.


    For comparability with past periods, Blackboard is providing Non-GAAP
Adjusted Net Income and Non-GAAP Adjusted Net Income per Diluted Share for
each quarter of 2008 under the new definition in the table below.  This table
shows a quantitative historical reconciliation of GAAP (Loss) Income before
Benefit (Provision) For Income Taxes to Non-GAAP Adjusted Net Income and
Non-GAAP Adjusted Net Income per Diluted Share under both the old and new
definition.




                                                    2008
                                                    ----
                                    Q1      Q2       Q3       Q4       FY
                                    --      --       --       --       --
                                  (unaudited and in thousands except per
                                               share amounts)
    GAAP (Loss) income
     before benefit
     (provision)
     for income taxes            $(5,098) $2,950    $(260)  $1,496    $(912)
    Add: Amortization of
     intangibles resulting
     from acquisitions             8,679   9,729    9,729    9,729   37,866
    Adjusted provision for
     income taxes                 (1,623) (5,756)  (1,492)  (2,354) (11,225)
                                  ------  ------   ------   ------  -------
    Non-GAAP adjusted net
     income (old definition)      $1,958  $6,923   $7,977   $8,871  $25,729
                                  ======  ======   ======   ======  =======
    Non-GAAP adjusted net
     Income per diluted
     share (old definition)        $0.06   $0.22    $0.25    $0.28    $0.81
                                   =====   =====    =====    =====    =====
    Non-GAAP effective tax
     rate (old definition)         45.3%   45.4%    15.8%    21.0%    30.4%

    Add: Stock-based
     compensation                  3,682   3,797    3,632    4,016   15,127
    Adjustment to provision
     for income taxes             (1,454) (1,500)  (1,435)  (1,586)  (5,975)
                                  ------  ------   ------   ------   ------
    Non-GAAP adjusted net
     income (new definition)      $4,186  $9,220  $10,174  $11,301  $34,881
                                  ======  ======  =======  =======  =======
    Non-GAAP adjusted net
     income per diluted share
     (new definition)              $0.13   $0.29    $0.32    $0.35    $1.10
                                   =====   =====    =====    =====    =====
    Non-GAAP effective tax
     rate (new definition)         42.4%   44.0%    22.3%    25.9%    33.0%

    Guidance for the First Quarter of 2009

    --  Revenue of $83.5 to $86.5 million;
    --  Stock-based compensation expense of approximately $4.3 million;
    --  Amortization of acquired intangibles of approximately $8.8 million;
    --  GAAP net loss of ($1,200,000) to GAAP net income of $600,000,
        resulting in GAAP net loss per basic share of ($0.04) to GAAP net
        income per diluted share of $0.02, which is based on an estimated 31.4
        million basic shares and 32.2 million diluted shares, respectively,
        and an estimated effective tax rate of approximately 38 percent;
    --  Non-GAAP adjusted net income (calculated on the new basis) of $6.7 to
        $8.6 million, which excludes stock-based compensation expense and
        amortization of acquisition-related intangible assets, net of taxes;
        and
    --  Non-GAAP adjusted net income per diluted share (calculated on the new
        basis) of $0.21 to $0.27 based on an estimated 32.2 million diluted
        shares and an estimated effective tax rate of approximately 38.5
        percent.


    Guidance for the Full Year 2009

    --  Revenue of $361.0 to $373.0 million;
    --  Stock-based compensation expense of approximately $16.5 million;
    --  Amortization of acquired intangibles of approximately $28 million;
    --  GAAP net income of $16.1 to $23.5 million, resulting in GAAP net
        income per diluted share of $0.49 to $0.72, which is based on an
        estimated 32.5 million diluted shares; and an estimated effective tax
        rate of approximately 38 percent;
    --  Non-GAAP adjusted net income (calculated on the new basis) of $43.7 to
        $51.1 million, which excludes stock-based compensation expense and
        amortization of acquisition-related intangible assets, net of taxes;
    --  Non-GAAP adjusted net income per diluted share (calculated on the new
        basis) of $1.34 to $1.57 based on an estimated 32.5 million diluted
        shares and an estimated effective tax rate of approximately 38.5
        percent;
    --  Cash flow from operations of $80.0 to $95.0 million; and
    --  Capital expenditures of approximately 6 percent of total revenue.

During the first quarter of 2009, we expect to adopt FASB Staff Position APB 14-1, "Accounting for Convertible Debt Instruments That May be Settled in Cash Upon Conversion (Including Partial Cash Settlement)" (APB 14-1) which would increase the interest expense on our outstanding convertible debt. We estimate that the adoption of APB 14-1 to result in increased interest expense of approximately $1.5 million for the first quarter of 2009 and approximately $6.0 million for the full year 2009. The increased interest expense resulting from APB-14-A is a non-cash expense. The current first quarter and full year 2009 guidance for GAAP net income does not include the adoption of APB-14 and the adoption of APB 14-1 would have no impact on our Non-GAAP Adjusted Net Income which will exclude any non-cash interest expense on our convertible debt.

The first quarter and full year 2009 guidance for GAAP net income does not include the effect of the adoption of FASB Staff Position APB 14-1, "Accounting for Convertible Debt Instruments That May be Settled in Cash Upon Conversion (Including Partial Cash Settlement)" (APB 14-1) which would increase the interest expense on our outstanding convertible debt. We estimate that the adoption of APB 14-1 to result in increased interest expense of approximately $1.5 million for the first quarter of 2009 and approximately $6.0 million for the full year 2009. The increased interest expense resulting from APB-14-A is a non-cash expense. The adoption of APB 14-1 would have no impact on our Non-GAAP Adjusted Net Income which will exclude any non-cash interest expense on our convertible debt.

    Blackboard Conference Call Information:

    Domestic: +1 (866) 831-6243
    International: +1 (617) 213-8855
    Confirmation Code: 43311920

Blackboard will also broadcast its conference call live over the Internet beginning at 4:30 p.m. on February 4, 2009, and 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. Eastern (4:00 p.m. Pacific) on February 4, 2009 until 11:00 p.m. Eastern (8:00 p.m. Pacific) on February 11, 2009. 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 96236089.



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

                               Three Months Ended            Year Ended
                                    December 31              December 31
                                    -----------              -----------
                                 2007         2008        2007         2008
                                 ----         ----        ----         ----
                            (unaudited)  (unaudited)             (unaudited)
    Revenues:
      Product                  $57,358      $77,440    $213,631    $283,258
      Professional services      5,844        7,581      25,817       28,876
                                 -----        -----      ------       ------
    Total revenues              63,202       85,021     239,448      312,134
    Operating expenses:
      Cost of product
       revenues, excludes
       $2,977 and $4,572 for
       the three months ended
       December 31, 2007 and
       2008, respectively,
       and $11,654 and $17,803
       for the years ended
       December 31, 2007 and
       2008, respectively,
       in amortization of
       acquired technology
       included in
       amortization of
       intangibles resulting
       from acquisitions
       shown below (1)          11,833       21,640      47,444       75,237
      Cost of professional
       services revenues (1)     4,602        4,477      16,941       19,555
      Research and
       development (1)           7,436       10,389      28,278       40,580
      Sales and marketing (1)   16,615       23,377      66,033       91,076
      General and
       administrative (1)       10,425       12,826      38,667       50,757
      Proceeds from
       patent judgment               -            -           -       (3,313)
      Amortization of
       intangibles resulting
       from acquisitions         5,734        9,729      22,122       37,866
                                 -----        -----      ------       ------
    Total operating expenses    56,645       82,438     219,485      311,758
                                ------       ------     -------      -------
    Income from operations       6,557        2,583      19,963          376
    Other (expense) income:
      Interest expense          (1,931)      (1,760)     (5,766)      (7,305)
      Interest income            2,341          406       5,673        1,893
      Other (expense) income    (1,395)         267         575        4,124
                                ------          ---         ---        -----
    Income (loss) before
     (provision) benefit
     for income taxes            5,572        1,496      20,445         (912)
    (Provision) benefit
     for income taxes           (1,369)       1,489      (7,580)       3,732
                                ------        -----      ------        -----
    Net income                  $4,203       $2,985     $12,865       $2,820
                                ======       ======     =======       ======
    Net income per
     common share:
      Basic                      $0.14        $0.10       $0.45        $0.09
                                 =====        =====       =====        =====
      Diluted                    $0.14        $0.09       $0.43        $0.09
                                 =====        =====       =====        =====
    Weighted average number
     of common shares:
      Basic                 29,154,396   31,352,994  28,789,083   30,885,908
                            ==========   ==========  ==========   ==========
      Diluted               30,256,902   31,839,631  30,113,621   31,809,544
                            ==========   ==========  ==========   ==========


    (1) Includes the following amounts related to stock-based compensation:

      Cost of product
       revenues                   $203         $270        $672         $949
      Cost of professional
       services revenues           160           81         631          321
      Research and
       development                 116          230         467          777
      Sales and marketing        1,181        1,354       4,359        5,984
      General and
       administrative            1,622        2,081       5,914        7,096



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

    GAAP Income (loss) before
     (provision) benefit for
     income taxes               $5,572       $1,496     $20,445        $(912)
    Add: Amortization
     of intangibles
     resulting from
     acquisitions                5,734        9,729      22,122       37,866
    Adjusted provision
     for income taxes (3)       (3,634)      (2,354)    (16,318)     (11,225)
                                ------       ------     -------      -------
    Non-GAAP adjusted net
     income (4)                 $7,672       $8,871     $26,249      $25,729
                                ======       ======     =======      =======
    Non-GAAP adjusted net
     income per common
     share - diluted (4)         $0.25        $0.28       $0.87        $0.81
                                 =====        =====       =====        =====


    (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 32.1% and 21.0% for the three months ended December
        31, 2007 and 2008, respectively, and approximately 38.3% and 30.4%
        for the years ended December 31, 2007 and 2008, respectively.

    (4) Beginning in fiscal 2009, the Company changed the definition it
        utilizes for non-GAAP adjusted net income.  However, for the 2007 and
        2008 periods presented in the reconciliation of income (loss) before
        (provision) benefit for income taxes to non-GAAP adjusted net income,
        the old definition for non-GAAP adjusted net income is being used
        which excludes the amortization of intangibles resulting from
        acquisitions, net of taxes.



                                    BLACKBOARD INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                 December 31,   December 31,
                                                       2007          2008
                                                       ----          ----
                                                                 (unaudited)
                                                        (in thousands,
                                                    except per share amounts)
            ASSETS
    Current assets:
      Cash and cash equivalents                     $206,558      $141,746
      Accounts receivable, net                        52,846        92,529
      Inventories                                      2,089         1,783
      Prepaid expenses and other current assets        5,255         8,922
      Deferred tax asset, current portion              6,549         1,796
      Deferred cost of revenues                        6,877         7,271
                                                       -----         -----
        Total current assets                         280,174       254,047

    Deferred tax asset, noncurrent portion            34,154        27,146
    Investment in common stock warrant                     -         1,990
    Restricted cash                                    4,015         4,249
    Property and equipment, net                       18,584        31,950
    Goodwill and intangible assets, net              168,349       338,976
                                                     -------       -------
    Total assets                                    $505,276      $658,358
                                                    ========      ========

            LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                                $3,747        $2,579
      Accrued expenses                                24,182        27,879
      Deferred rent, current portion                     160           345
      Deferred revenues, current portion             126,600       179,238
                                                     -------       -------
        Total current liabilities                    154,689       210,041

    Notes payable, net of debt discount              161,519       163,172
    Deferred rent, noncurrent portion                  1,469        10,959
    Deferred revenues, noncurrent portion              2,925         5,554
    Stockholders' equity:
      Common stock, $0.01 par value                      292           314
      Additional paid-in capital                     263,582       344,698
      Accumulated deficit                            (79,200)      (76,380)
                                                     -------       -------
    Total stockholders' equity                       184,674       268,632
                                                     -------       -------
    Total liabilities and stockholders' equity      $505,276      $658,358
                                                    ========      ========



                                BLACKBOARD INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                             Year Ended
                                                             December 31
                                                             -----------
                                                          2007         2008
                                                          ----         ----
                                                                  (unaudited)
                                                           (in thousands)
    Cash flows from operating activities
    Net income                                          $12,865       $2,820
    Adjustments to reconcile net income to net
     cash provided by operating activities:
      Deferred income tax benefit                        (2,830)      (8,113)
      Excess tax benefits from stock-based
       compensation                                      (6,845)      (2,107)
      Amortization of debt discount                       1,840        1,653
      Depreciation and amortization                      10,681       15,703
      Amortization of intangibles resulting
       from acquisitions                                 22,122       37,866
      Change in allowance for doubtful accounts              (2)         161
      Noncash stock-based compensation                   12,043       15,127
      Gain on investment in common stock warrant              -       (3,980)
      Changes in operating assets and liabilities:
        Accounts receivable                                (225)     (31,721)
        Inventories                                         288          306
        Prepaid expenses and other current assets        (1,233)      (2,594)
        Deferred cost of revenues                           372         (394)
        Accounts payable                                    952       (4,018)
        Accrued expenses                                  9,394        4,227
        Deferred rent                                     1,101        9,675
        Deferred revenues                                 8,834       45,224
                                                          -----       ------
    Net cash provided by operating activities            69,357       79,835

    Cash flows from investing activities
      Purchases of property and equipment               (16,023)     (24,007)
      Proceeds from sale of investment in common
       stock warrant                                          -        1,990
      Payments for patent enforcement costs              (4,186)      (3,552)
      Purchases of available-for-sale securities        (94,250)           -
      Sales of available-for-sale securities             94,250            -
      Acquisitions, net of cash acquired                (27,664)    (132,992)
                                                        -------     --------
    Net cash used in investing activities               (47,873)    (158,561)

    Cash flows from financing activities
      Proceeds from notes payable                       160,456            -
      Payments on term loan                             (24,400)           -
      Payments on letters of credit                      (1,976)        (530)
      Releases of letters of credit                           -        1,184
      Excess tax benefits from stock-based
       compensation                                       6,845        2,107
      Proceeds from exercise of stock options            13,373       11,153
                                                         ------       ------
    Net cash provided by financing activities           154,298       13,914
                                                        -------       ------
    Net increase (decrease) in cash and cash
     equivalents                                        175,782      (64,812)
    Cash and cash equivalents at beginning of year       30,776      206,558
                                                         ------      -------
    Cash and cash equivalents at end of year           $206,558     $141,746
                                                       ========     ========

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. These forward looking statements include statements about our expected financial results for the first quarter of 2009 and the full year 2009 and other statements about our future financial performance. 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 November 6, 2008 with the SEC. In addition, the forward-looking statements included in this press release represent the Company's views as of February 4, 2009. 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 4, 2009.

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, and beginning in 2009 will also exclude stock-based compensation expense, 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 enhanced comparability 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, and beginning in 2009 will also exclude stock-based compensation expense.

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 6, 2008, 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. 02/04/2009
CONTACT: Michael J. Stanton, Senior Vice President, Investor Relations
of Blackboard Inc., +1-202-463-4860, ext. 2305
/Web Site: http://www.blackboard.com
(BBBB)