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Blackboard Inc. Reports Third Quarter Revenue of $98.4 Million

- Revenue Increases 18 Percent Year-Over-Year -

WASHINGTON, Nov. 3 /PRNewswire-FirstCall/ -- Blackboard Inc. (Nasdaq: BBBB) today announced financial results for the third quarter ended September 30, 2009 and updated guidance for the fourth quarter and the full year of 2009.

Total revenue for the quarter ended September 30, 2009 was $98.4 million, an increase of 18 percent over the third quarter of 2008. Product revenues for the quarter were $87.9 million, an increase of 18 percent over the third quarter of 2008, while professional services revenues for the quarter were $10.5 million, an increase of 20 percent over the third quarter of 2008. The increase in revenue was driven by strong growth in Blackboard's professional services and managed hosting offerings.

GAAP net income was $4.3 million, resulting in net income per diluted share of $0.13 for the third quarter of 2009 compared to net income of $885,000 and net income per diluted share of $0.03 for the third quarter of 2008. Non-GAAP adjusted net income for the third quarter of 2009, which excludes the amortization of acquisition-related intangible assets, stock-based compensation, and non-cash interest expense, all net of taxes, was $13.3 million, resulting in non-GAAP adjusted net income per diluted share of $0.40 compared to non-GAAP adjusted net income of $10.2 million and non-GAAP adjusted net income per diluted share of $0.32 for the third quarter of 2008.

Additional Financial Highlights from the Third Quarter of 2009

    --  Total cash flow from operations was $76.0 million for the third quarter
        of 2009, representing a 26% increase compared to the third quarter last
        year.

    --  Cash and cash equivalents were $132.0 million as of September 30, 2009.

"We are pleased with our financial results in the third quarter which exceeded our prior guidance. Cash flow from operations during the quarter was a record for the Company, driven by our strong renewal rates during our peak renewal quarter," said Michael Chasen, CEO and President of Blackboard Inc. "We experienced solid demand for our products and services and continued to experience a growing sales pipeline. We were particularly pleased with the adoption of some of our newer products like Blackboard Mobile(TM), which strengthens our overall positioning in the market and fills a vital need for our clients seeking better ways to serve constituents."

Highlights from the Third Quarter of 2009

    --  A few of Blackboard's new and expanded client relationships in the
        quarter included:
        --  U.S. Higher Education: Alamance Community College, Arizona State
            University, Baylor University, Binghamton University, Carlow
            University, Des Moines Area Community College, Florida A&M
            University, Grambling State University, Hinds Community College,
            Louisiana Community and Technical College System, Louisiana State
            University, North Carolina Central University, South Orange County
            Community College, Texas A&M University-San Antonio, University of
            Southern Mississippi, University of Washington and others.
        --  International: Delft University of Technology, Emirates College,
            Hong Kong Institute of Education, King Faisal University, King Saud
            University, Manchester University, Radboud University, Regent's
            College in London, University of Bristol, University of Central
            Lancashire and others.
        --  K-12: Irving ISD, KC Distance Learning, Mead School District, Newark
            Public Schools, Omaha Public Schools, Pomona Unified School
            District, Queen Anne's County Public Schools, Santa Monica-Malibu
            Unified School District, Spokane Public Schools, Tangipahoa Parish
            School Board and others.

        --  Professional Education (ProEd): Air University, Capella University,
            Central Intelligence Agency, Defense Information School, Defense
            Language Institute, Grand Canyon University, Joint Special
            Operations University, National Academy of Medical Coding
            Specialists, National Intelligence University and others.

    --  Blackboard announced the launch of the Blackboard Mobile platform.
        Blackboard Mobile allows education institutions to deliver a rich set of
        campus life services and content to mobile devices, uniquely branded for
        each institution, to better connect current students, parents, faculty,
        prospective students and alumni to the campus experience.

Outlook for the Fourth Quarter and Full Year of 2009

Fourth Quarter of 2009:

    --  Revenue of $96.7 to $99.7 million;
    --  Stock-based compensation expense of approximately $4.0 million;
    --  Amortization of acquired intangibles of approximately $9.3 million;
    --  GAAP net income of $4.2 million to $6.4 million;
    --  GAAP net income per diluted share of $0.12 to $0.19, which is based on
        an estimated 33.7 million diluted shares, and an estimated effective tax
        rate of approximately 28 percent;
    --  Non-GAAP adjusted net income of $13.3 to $15.5 million, which excludes
        the amortization of acquisition-related intangible assets, stock-based
        compensation, and non-cash interest expense, all net of taxes; and

    --  Non-GAAP adjusted net income per diluted share of $0.40 to $0.46 based
        on an estimated 33.7 million diluted shares and an estimated effective
        tax rate of approximately 35 percent.

Full Year 2009:

    --  Revenue of $373.6 to $376.6 million;
    --  Stock-based compensation expense of approximately $16.0 million;
    --  Amortization of acquired intangibles of approximately $35.0 million;
    --  GAAP net income of $4.4 to $6.5 million;
    --  GAAP net income per diluted share of $0.13 to $0.20, which is based on
        an estimated 32.5 million diluted shares and an estimated effective tax
        rate of approximately 28 percent;
    --  Non-GAAP adjusted net income of $44.1 to $46.3 million, which excludes
        the amortization of acquisition-related intangible assets, stock-based
        compensation, non-cash interest expense, and non-cash patent related
        impairment charge, all net of taxes;
    --  Non-GAAP adjusted net income per diluted share of $1.34 to $1.41 based
        on an estimated 32.8 million diluted shares and an estimated effective
        tax rate of approximately 38 percent; and

    --  Cash flow from operations of $95.0 to $105.0 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 at approximately 7:00 p.m. (ET) on November 3, 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 37009592.


                                 BLACKBOARD INC.

                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

                (in thousands, except share and per share amounts)

                                Three Months Ended        Nine Months Ended
                                   September 30             September 30
                                   ------------             ------------
                                    2008        2009        2008        2009
                                    ----        ----        ----        ----
    Revenues:
      Product                    $74,332     $87,862    $205,818    $251,369
      Professional services        8,758      10,546      21,295      25,597
                                   -----      ------      ------      ------
    Total revenues                83,090      98,408     227,113     276,966
    Operating expenses:
      Cost of product revenues,
       excludes $4,572 and $2,480
       for the three months ended
       September 30, 2008 and 2009,
       respectively, and $13,232 and
       $8,152 for the nine months
       ended September 30, 2008 and
       2009, respectively, in
       amortization of acquired
       technology included in
       amortization of intangibles
       resulting from acquisitions
       shown below (1)            19,626      23,849      53,597      67,055
      Cost of professional
       services revenues (1)       4,994       5,550      15,078      15,020
      Research and
       development (1)            10,514      11,428      30,191      33,848
      Sales and marketing (1)     24,079      24,670      67,699      74,008
      General and
       administrative (1)         12,716      14,636      37,931      42,476
      Patent related (proceeds)
       impairment and other costs      -           -      (3,313)     10,984
      Amortization of intangibles
       resulting from acquisitions 9,729       9,282      28,137      25,728
                                   -----       -----      ------      ------
    Total operating expenses      81,658      89,415     229,320     269,119
                                  ------      ------     -------     -------
    Income (Loss) from operations  1,432       8,993      (2,207)      7,847
    Other (expense) income:
      Interest expense (2)        (3,004)     (3,015)     (9,073)     (8,877)
      Interest income                339          36       1,487         202
      Other income                  (233)        300       3,857       1,103
                                    ----         ---       -----       -----
    (Loss) Income before
     benefit (provision) for
     income taxes (2)             (1,466)      6,314      (5,936)        275
    Benefit (Provision) for
     income taxes                  2,351      (2,007)      2,243         (77)
                                   -----      ------       -----         ---
    Net income (loss) (2)           $885      $4,307     $(3,693)       $198
                                    ====      ======     =======        ====
    Net income (loss) per common
     share: (2)
      Basic                        $0.03       $0.13      $(0.12)      $0.01
                                   =====       =====      ======       =====
      Diluted                      $0.03       $0.13      $(0.12)      $0.01
                                   =====       =====      ======       =====
    Weighted average number of
     common shares:
      Basic                   31,184,215  32,073,491  30,754,997  31,682,212
                              ==========  ==========  ==========  ==========
      Diluted                 32,203,249  33,045,337  30,754,997  32,466,179
                              ==========  ==========  ==========  ==========

    (1) Includes the following
     amounts related to stock-
     based compensation:
      Cost of product
       revenues                     $244        $347        $679        $923
      Cost of professional
       services revenues               8         138         240         398
      Research and
       development                   195         284         547         768
      Sales and marketing          1,549       1,501       4,630       4,625
      General and
       administrative              1,636       1,775       5,015       5,270


    (2) Blackboard adopted ASC 470-20 (Prior authoritative literature: FASB
    Staff Position No. APB 14-1, "Accounting for Convertible Debt Instruments
    that May be Settled in Cash Upon Conversion") effective January 1, 2009,
    which required restatement of prior periods, as applicable.  The three and
    nine months ended September 30, 2008 have been adjusted to reflect
    additional amortization of debt discount of $1,206 and $3,529,
    respectively.  Interest expense, Income (Loss) before benefit (provision)
    for income taxes, Net income (loss), and Net income (loss) per common
    share - Basic and Diluted have been adjusted accordingly and were
    previously reported as $(1,798), $(260), $2,091, $0.07 and $0.06,
    respectively, for the three months ended September 30, 2008.  Interest
    expense, Income (Loss) before benefit (provision) for income taxes, Net
    income (loss), and Net income (loss) per common share - Basic and Diluted
    have been adjusted accordingly and were previously reported as $(5,545),
    $(2,408), $(165), $(0.01) and $(0.01), respectively, for the nine months
    ended September 30, 2008.


    Reconciliation of GAAP Net (loss) income before benefit
    (provision) for income taxes to Non-GAAP adjusted net
    income (3):

    GAAP Net (loss)
     income before
     benefit (provision)
     for income taxes            $(1,466)     $6,314     $(5,936)       $275
    Add: Non-cash
     patent related
     impairment                        -           -           -       7,447
    Add: Amortization
     of intangibles
     resulting from
     acquisitions                  9,729       9,282      28,137      25,728
    Add: Stock-based
     compensation                  3,632       4,045      11,111      11,984
    Add: Non-cash
     interest expense              1,595       1,571       4,777       4,689
    Adjusted provision
     for income taxes
     (4)                          (3,316)     (7,892)    (14,509)    (19,463)
                                  ------      ------     -------     -------
    Non-GAAP adjusted
     net income (5)              $10,174     $13,320     $23,580     $30,660
                                 =======     =======     =======     =======
    Non-GAAP adjusted
     net income per
     common share -
     diluted (5)                   $0.32       $0.40       $0.74       $0.94
                                   =====       =====       =====       =====
    Weighted average
     number of diluted
     common shares            32,203,249  33,045,337  31,778,833  32,466,179
                              ==========  ==========  ==========  ==========

    (3) 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 generally accepted accounting principles in the US (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.

    (4) Adjusted provision for income taxes is applied at an effective rate of
    approximately 24.6% and 37.2% for the three months ended September 30,
    2008 and 2009, respectively, and approximately 38.1% and 38.8% for the
    nine months ended September 30, 2008 and 2009, respectively.

    (5) Beginning in fiscal 2009, the Company changed the definition it
    utilizes for non-GAAP adjusted net income.  For the 2008 period presented
    in the reconciliation of GAAP Net (loss) income before benefit (provision)
    for income taxes to non-GAAP adjusted net income, the new definition for
    non-GAAP adjusted net income is being used which excludes the amortization
    of intangibles resulting from acquisitions, stock-based compensation,
    patent related impairment charges, and non-cash interest expense, all net
    of taxes.


                                 BLACKBOARD INC.

                 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS


                                               December 31,    September 30,
                                                       2008             2009
                                                       ----             ----
                                                       (in thousands,
                                                 except per share amounts)
                                      ASSETS
    Current assets:
      Cash and cash equivalents                    $141,746         $132,049
      Accounts receivable, net                       92,529           93,018
      Inventories                                     1,783            2,140
      Prepaid expenses and other current assets (6)   8,361           12,235
      Deferred tax asset, current portion             1,796            5,255
      Deferred cost of revenues                       7,126            7,609
                                                      -----            -----
        Total current assets                        253,341          252,306

    Deferred tax asset, noncurrent portion (6)       18,897            9,067
    Investment in common stock warrant                1,990            3,124
    Restricted cash                                   4,249            4,139
    Property and equipment, net                      31,950           36,286
    Other assets                                        549              936
    Goodwill and intangible assets, net             338,976          409,873
                                                    -------          -------
    Total assets                                   $649,952         $715,731
                                                   ========         ========

                       LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                               $2,579           $5,524
      Accrued expenses                               27,879           35,880
      Deferred rent, current portion                    345              975
      Deferred revenues, current portion            179,238          200,472
                                                    -------          -------
        Total current liabilities                   210,041          242,851

    Notes payable, net of debt discount (6)         149,923          154,612
    Deferred rent, noncurrent portion                10,959           11,674
    Deferred revenues, noncurrent portion             5,554            6,536
    Stockholders' equity:
      Common stock, $0.01 par value                     314              322
      Additional paid-in capital (6)                356,683          383,060
      Accumulated deficit (6)                       (83,522)         (83,324)
                                                    -------          -------
    Total stockholders' equity                      273,475          300,058
                                                    -------          -------
    Total liabilities and stockholders'
     equity                                        $649,952         $715,731
                                                   ========         ========

    (6)  As noted in footnote (2) above, ASC 470-20 required restatement of
    prior periods.  Prepaid expenses and other current assets, Deferred tax
    assets - noncurrent portion, Notes payable, Additional paid-in capital,
    and Accumulated deficit have been adjusted accordingly and were
    previously reported as $8,518, $27,146, $163,172, $344,698, and
    $(76,380), respectively, as of December 31, 2008.


                                BLACKBOARD INC.

                UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                         Nine Months Ended
                                                           September 30
                                                           ------------
                                                            2008      2009
                                                            ----      ----
                                                          (in thousands)
    Cash flows from operating activities
    Net (loss) income (7)                                $(3,693)     $198
    Adjustments to reconcile net loss to net cash
     (used in) provided by operating activities:
      Deferred income tax benefit                         (6,094)   (2,455)
      Excess tax benefits from stock-based compensation   (1,903)     (763)
      Amortization of debt discount (7)                    4,777     4,689
      Depreciation and amortization                       11,642    14,045
      Amortization of intangibles resulting from
       acquisitions                                       28,137    25,728
      Patent related impairment charge                         -     7,447
      Change in allowance for doubtful accounts              245     1,233
      Stock-based compensation                            11,111    11,984
      Gain on investment in common stock warrant          (3,980)   (1,136)
      Changes in operating assets and liabilities:
        Accounts receivable                              (41,818)      987
        Inventories                                           59      (357)
        Prepaid expenses and other current assets (7)     (2,545)   (3,319)
        Deferred cost of revenues                             (6)     (483)
        Accounts payable                                  (2,027)    2,885
        Accrued expenses                                   1,006     8,780
        Deferred rent                                      8,575     1,345
        Deferred revenues                                 51,932    19,002
                                                          ------    ------
    Net cash provided by operating activities             55,418    89,810

    Cash flows from investing activities
      Purchases of property and equipment                (22,297)  (15,919)
      Payments for patent enforcement costs               (3,141)     (414)
      Purchase of available-for-sale investments               -    (6,586)
      Redemptions of available-for-sale investments            -     6,586
      Proceeds from common stock warrant                   1,990         -
      Acquisitions, net of cash acquired                (132,992)  (91,784)
                                                        --------   -------
    Net cash used in investing activities               (156,440) (108,117)

    Cash flows from financing activities
      Payments on letters of credit                         (127)        -
      Release of letters of credit                           777       110
      Excess tax benefits from stock-based compensation    1,903       763
      Proceeds from exercise of stock options             10,657     7,737
                                                          ------     -----
    Net cash provided by financing activities             13,210     8,610
                                                          ------     -----
    Net decrease in cash and cash equivalents            (87,812)   (9,697)
    Cash and cash equivalents at beginning of period     206,558   141,746
                                                         -------   -------
    Cash and cash equivalents at end of period          $118,746  $132,049
                                                        ========  ========

    (7)  As noted in footnote (2) above, ASC 470-20 required restatement
    of prior periods.  Net loss, Amortization of debt discount, and
    Prepaid expenses and other current assets have been adjusted
    accordingly and were previously reported as $(165), $1,286, and
    $(2,582), respectively, for the nine months ended September 30, 2008.

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.

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 6, 2009 with the SEC. In addition, the forward-looking statements included in this press release represent the Company's views as of November 3, 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 November 3, 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 the amortization or impairment of intangible assets, stock-based compensation, and non-cash interest 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 in 2009 also excludes stock-based compensation expense, non-cash patent related impairment charges, non-cash interest expense and other items as determined by the Board of Directors.

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 6, 2009, 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.

For Financial Media and Investors: Michael J. Stanton, Senior Vice President, Investor Relations, Blackboard Inc., +1-202-463-4860 ext. 2305, Staci Strauss Mortenson, Senior Vice President, ICR, +1-203-682-8273; For Education & General Media: Matthew Maurer, Director, Public Relations, Blackboard Inc., +1-202-463-4860 ext. 2637, matthew.maurer@blackboard.com