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Blackboard Inc. Reports Fourth Quarter and Year End 2005 Results

      - Fourth Quarter Revenue Increases 19 Percent to $35.7 Million and
             Net Income Increases 388 Percent to $23.1 Million  -

 - Cash Flow From Operations for 2005 Increases 22 Percent to $39.8 Million -

WASHINGTON, Feb. 13 /PRNewswire-FirstCall/ -- Blackboard Inc. (Nasdaq: BBBB) today announced financial results for the fourth quarter and year ended December 31, 2005 and guidance for the full year 2006.

Total revenue for the quarter ended December 31, 2005 was $35.7 million, an increase of 19 percent over the fourth quarter of 2004. Product revenues for the quarter were $32.0 million, an increase of 18 percent over the fourth quarter of 2004, while professional services revenues for the quarter were $3.7 million, an increase of 30 percent over the fourth quarter of 2004. GAAP net income was $23.1 million for the fourth quarter of 2005, an increase of 388 percent over net income of $4.7 million for the fourth quarter of 2004. Cash net income for the fourth quarter of 2005, which excludes the amortization of acquisition-related intangible assets, net of taxes, was $23.2 million. GAAP Net income per diluted share and cash net income per diluted share were $0.79 in the fourth quarter of 2005.

During the fourth quarter, Blackboard realized a $14.8 million earnings benefit from the reduction of its deferred tax valuation allowance. Excluding the earnings benefit from the reduction of its deferred tax valuation allowance, Blackboard would have had net income per diluted share of $0.28 and cash net income per diluted share of $0.29 for the fourth quarter.

"Our business momentum continues to be strong with both revenue and earnings, which are once again exceeding expectations," said Michael Chasen, chief executive officer for Blackboard. "Our objectives in 2006 and beyond are to successfully integrate WebCT and to continue executing against our stated long-term targets as we did in 2005. We will achieve this by taking the best of both companies and continuing to lead the education industry in product innovation as well as superior client service and support."

Total revenue for the year ended December 31, 2005 was $135.7 million, an increase of 22 percent over 2004. GAAP net income was $41.9 million in 2005, an increase of 316 percent over net income of $10.0 million in 2004. Cash net income in 2005, which excludes the amortization of acquisition-related intangible assets, net of taxes, was $42.1 million. For the full year 2005, Blackboard realized a $14.8 million earnings benefit from the reduction of its deferred tax valuation allowance. GAAP Net income per diluted share and cash net income per diluted share were $1.47 and $1.48, respectively, for the full year 2005. Excluding the earnings benefit from the reduction of its deferred tax valuation allowance, Blackboard would have had net income per diluted share of $0.95 and cash net income per diluted share of $0.96 for the full year 2005.

    Highlights from the Fourth Quarter of 2005

    * Blackboard's new and expanding client relationships in the quarter
      included:

    -- U.S. Higher Education Market: Clark University, Columbia Southern
       University, East Carolina University, Georgian College, Herzing
       College, Loyola Marymount University, North Dakota State University,
       Northwood University, United States Naval Academy, University of New
       Orleans and Wichita State University.

    -- International Markets: Bournemouth University, City of Sunderland
       College, Edith Cowan University, Feng Chia University, Gifu Shotuku
       Gakuen University, Griffith University, Kingston College, Macclesfield
       College, ROC Friesland College, University of Bradford and University
       of Reading.

    -- K-12 Market: Brooklyn Technical High School, Lake County Public
       Schools, Lakewood School District, City of Reykjavik K-12 (Iceland),
       Poway Unified School District, Sarasota County Public Schools, South
       Carolina Department of Education and The Hotchkiss School.

    Highlights from the Year End 2005

    * Blackboard's enterprise-class licenses [Blackboard Learning System -
      Enterprise Edition, Blackboard Community System, Blackboard Transaction
      System and the Blackboard Content System], totaled 2,087 at the end of
      2005, which represents a 25 percent year over year increase.

    * Blackboard announced its acquisition of WebCT, Inc. marking a major
      milestone in the education industry.  Closing of the WebCT transaction
      is expected in March or April of 2006.

    * Release 7.0 of the Blackboard Academic Suite was released providing
      clients around the globe powerful multi-language and mobile
      capabilities. Release 7.0 of the Blackboard Academic Suite comes with
      standard language packs providing support for English, simplified
      Chinese, Dutch, French, German, Italian, Japanese and Spanish.

    * Blackboard launched a new European data center in June of 2005, which
      allows Blackboard to host products for its clients in Europe.

    * The Company ended 2005 with more than 4,891 digital content titles
      available in Blackboard format, an increase of 25 percent from 2004.
      Currently Blackboard is working with 24 higher education publishers
      representing 40 different imprints.

    * Blackboard's BbOne offering is now in use at 55 U.S. higher education
      institutions.  As of December 31, 2005, 820 off-campus merchants are now
      accepting BbOne as a form of payment.

Outlook for the First Quarter and Full Year 2006 Excluding the WebCT Transaction

The following forward-looking statements regarding future financial performance are based on current expectations and actual results may differ materially. These statements do not reflect the potential impact of the pending acquisition of WebCT, Inc. Blackboard will provide updated guidance to reflect the WebCT transaction following the closing of the acquisition.

Effective January 1, 2006, Blackboard adopted the fair value recognition provisions of SFAS 123(R), "Share-Based Payment," using the modified- prospective method. Under this method, compensation cost recognized during the first quarter of 2006 will include (a) compensation cost for all stock options granted to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of FASB Statement No. 123, and (b) compensation cost for all stock options granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R). No restatement of prior periods is made for the fair value recognition of compensation costs under the modified-prospective method, which will have a significant impact on the comparability of the results of operations for the Company in 2006. A portion of the stock-based compensation expense relating to incentive stock options is not deductible for income tax provision purposes and will result in an increase in the Company's effective tax rate from 39.5 percent to approximately 43.5 percent. In any quarter, the Company may realize a tax benefit associated with the disqualifying disposition of a portion of the incentive stock options exercised which may cause the effective tax rate to be below 43.5 percent. The Company will continue to utilize its net operating loss carry-forwards to reduce its cash tax liabilities in 2006 and 2007.

    The Company's guidance for the first quarter of 2006 is as follows:

    * Revenue to be $35.7 to $36.7 million;

    * Stock-based compensation expense of approximately $2.0 million:

    * GAAP net income of approximately $3.5 to $3.8 million, resulting in GAAP
      net income per diluted share of approximately $0.12 to $0.13 per share,
      which is based on an estimated 29.7 million diluted shares and an
      effective tax rate of 43.5 percent; and

    * Cash net income of approximately $5.1 to $5.4 million, which excludes
      amortization of intangibles, stock-based compensation expense, and the
      associated tax impact, resulting in cash net income per diluted share of
      approximately $0.17 to $0.18 per share based on an estimated 29.7
      million diluted shares and an effective tax rate of 39.5 percent.

    Guidance for the full year of 2006 is as follows:

    * Revenue of approximately $155.0 to $159.0 million;

    * Stock-based compensation expense of approximately $9.5 million;

    * Operating margins, excluding the amortization of intangibles and stock-
      based compensation expenses, of approximately 20 percent:

    * GAAP net income of approximately $14.6 to $15.8 million, resulting in
      GAAP net income per diluted share of approximately $0.49 to $0.53 per
      share, which is based on an estimated 30.1 million diluted shares and an
      effective tax rate of 43.5 percent; and

    * Cash net income of approximately $21.6 to $22.9 million, which excludes
      amortization of intangibles, stock-based compensation expense, and the
      associated tax impact, resulting in cash net income per diluted share of
      approximately $0.72 to $0.76 per share based on an estimated 30.1
      million diluted shares and an effective tax rate of 39.5 percent.

    Conference Call

Blackboard will broadcast its fourth quarter conference call live over the Internet today beginning at 5 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. Please access the Web site at least 15 minutes prior to the start of the call to register, download and install any necessary software.

A telephone replay of the call will be available from approximately 7:00 p.m. Eastern (4:00 p.m. Pacific) on February 13, 2006 until 11:00 p.m. Eastern (8:00 p.m. Pacific) on February 20, 2006. To listen to the replay, participants in the U.S. and Canada should dial 888-286-8010, and international participants should dial 617-801-6888. The conference ID for the replay is 38134372.




                               BLACKBOARD INC.

                    CONSOLIDATED STATEMENTS OF OPERATIONS

                                Three Months Ended          Year Ended
                                    December 31,            December 31,
                               ----------------------  ----------------------
                                  2004        2005        2004        2005
                               ----------  ----------  ----------  ----------
                               (unaudited) (unaudited)             (unaudited)
                                      (in thousands, except share and
                                             per share amounts)
    Revenues:
      Product                     $27,216     $32,048     $98,632    $120,389
      Professional services         2,837       3,698      12,771      15,275
                                ---------  ----------  ----------  ----------
    Total revenues                 30,053      35,746     111,403     135,664

    Operating expenses:
      Cost of product
       revenues, excludes
       amortization of
       acquired technology
       included in
       amortization of
       intangibles resulting
       from acquisitions shown
       below                        7,067       7,789      25,897      29,607
      Cost of professional
       services revenues            1,958       2,721       7,962      10,220
      Research and development      3,322       3,783      13,749      13,945
      Sales and marketing           8,244       9,604      35,176      37,873
      General and
       administrative               4,153       4,822      14,895      19,231
      Amortization of
       intangibles resulting
       from acquisitions              879          66       3,517         266
      Stock-based compensation         19          20         174          75
                                ---------  ----------  ----------  ----------
    Total operating expenses       25,642      28,805     101,370     111,217
                                ---------  ----------  ----------  ----------
    Income from operations          4,411       6,941      10,033      24,447
    Other income (expense):
      Interest expense                (24)        (10)       (179)        (49)
      Interest income                 282       1,207         494       3,146
                                ---------  ----------  ----------  ----------
    Income before (benefit)
     provision for income
     taxes                          4,669       8,138      10,348      27,544
    (Benefit) provision for
     income taxes                     (63)    (14,973)        299     (14,309)
                                ---------  ----------  ----------  ----------
    Net income                      4,732      23,111      10,049      41,853
    Dividends on and accretion
     of convertible
     preferred stock                  -           -        (6,344)        -
                                ---------  ----------  ----------  ----------
    Net income attributable to
     common stockholders           $4,732     $23,111      $3,705     $41,853
                                =========  ==========  ==========  ==========
    Net income attributable to
     common stockholders
     per common share:
      Basic                         $0.18       $0.85       $0.23       $1.57
                                =========  ==========  ==========  ==========
      Diluted                       $0.17       $0.79       $0.21       $1.47
                                =========  ==========  ==========  ==========
    Weighted average number of
     common shares:
      Basic                    25,804,457  27,273,665  16,071,598  26,714,748
                               ==========  ==========  ==========  ==========
      Diluted                  27,629,066  29,214,963  17,864,137  28,509,777
                               ==========  ==========  ==========  ==========

    Reconciliation of net
     income to cash net
     income (1):
    Net income attributable to
     common stockholders           $4,732     $23,111      $3,705     $41,853
    Add: Dividends on and
     accretion of convertible
     preferred stock                  -           -         6,344         -
                               ----------  ----------  ----------  ----------
    Net income                      4,732      23,111      10,049      41,853
    Add: Amortization of
     intangibles resulting
     from acquisitions,
     net of taxes (2)                 879          66       3,415         266
                               ----------  ----------  ----------  ----------
    Cash net income                $5,611     $23,177     $13,464     $42,119
                               ==========  ==========  ==========  ==========
    Cash net income per common
     share - diluted                $0.20       $0.79       $0.53       $1.48
                               ==========  ==========  ==========  ==========
    Proforma weighted average
     number of common
     shares - diluted (3)      27,629,066  29,214,963  25,174,969  28,509,777
                               ==========  ==========  ==========  ==========

    Reconciliation of net
     income to proforma net
     income, which excludes
     $14.8 million tax
     benefit (4):
    Net income                                $23,111                 $41,853
    Subtract: $14.8 million
     tax benefit                              (14,799)                (14,799)
                                           ----------              ----------
    Proforma net income                         8,312                  27,054
                                           ==========              ==========
    Proforma net income per
     common share - diluted                     $0.28                   $0.95
                                           ==========              ==========
    Weighted average number of
     common shares - diluted               29,214,963              28,509,777
                                           ==========              ==========

    Reconciliation of cash net
     income to proforma cash
     net income, which
     excludes $14.8 million
     tax benefit (4):
    Cash net income                           $23,177                 $42,119
    Subtract: $14.8 million
     tax benefit                              (14,799)                (14,799)
                                           ----------              ----------
    Proforma cash net income                    8,378                  27,320
                                           ==========              ==========
    Proforma cash net income
     per common share -
     diluted                                    $0.29                   $0.96
                                           ==========              ==========
    Weighted average number of
     common shares - diluted               29,214,963              28,509,777
                                           ==========              ==========

    (1) Cash net income is not a generally accepted accounting principle or
    GAAP measure.  However, management believes based on feedback from
    investors, analysts and other users of the Company's financial information
    that cash net income is an appropriate measure of the operating
    performance of the Company.  Further, management believes, based on
    feedback from analysts, that cash net income is an important measure used
    by analysts in their earnings estimates of the Company, which is used by
    investors and potential investors.  This measure should be considered in
    addition to, not as a substitute for or superior to, net income, net
    income (loss) attributable to common stockholders, cash flows and other
    measures of financial performance prepared in accordance with generally
    accepted accounting principles.  Because cash net income is used by some
    investors, analysts and other users of the Company's financial information
    as performance measures, they are reconciled herein to net income.

    (2) The amortization of intangibles is net of taxes, applied at an
    effective rate of 0.0% for the three months ended December 31, 2004 and
    2005, and 2.9% and 0.0% for the years ended December 31, 2004 and 2005,
    respectively.

    (3) Proforma weighted average number of common shares assumes i) the
    conversion of all redeemable preferred stock and Series E warrants as of
    January 1 for the respective periods in 2004 and ii) the conversion of
    accrued dividend accretion on the preferred shares based on a conversion
    price of $14.00 per share for 2004 and the average accrued dividend
    accretion balance for the 2004 periods presented.

    (4) Proforma net income and proforma cash net income and related proforma
    earnings per shares have been provided and reconciled to present
    comparative information to investors, analysts and other users of the
    Company's financial information excluding the earnings benefit of $14.8
    million related to the reduction of our deferred tax vaulation allowance
    in the fourth quarter of 2005.



                               BLACKBOARD INC.

                    CONDENSED CONSOLIDATED BALANCE SHEETS

                                              December 31,      December 31,
                                                  2004              2005
                                             ------------      -------------
                                                                (unaudited)
                                                     (in thousands,
                                               except per share amounts)
                                     ASSETS
    Current assets:
       Cash and cash equivalents                   $78,149           $75,895
       Short-term investments                       20,000            62,602
       Accounts receivable, net                     21,686            26,136
       Inventories                                   1,994             1,806
       Prepaid expenses and other current
        assets                                       1,727             2,637
       Deferred tax asset, current
        portion                                                       10,274
       Deferred cost of revenues, current
        portion                                      4,547             5,797
                                               -----------      ------------
          Total current assets                     128,103           185,147

    Deferred tax asset, noncurrent
     portion                                           -              12,023
    Deferred cost of revenues, noncurrent
     portion                                           369             1,310
    Deferred merger costs (WebCT, Inc.)                -               4,956
    Property and equipment, net                      8,848             9,940
    Goodwill                                        10,252            10,252
    Intangible assets, net                             826               560
                                               -----------        ----------
     Total assets                                 $148,398          $224,188
                                               ===========        ==========


                      LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
       Accounts payable                             $1,114            $1,833
       Accrued expenses                              9,290            14,083
       Equipment note, current portion                 525               -
       Deferred rent current portion                   247               347
       Deferred revenues, current portion           63,901            74,975
                                               -----------        ----------
          Total current liabilities                 75,077            91,238

    Equipment note, noncurrent portion                 237               -
    Deferred rent, noncurrent portion                  820               426
    Deferred revenues, noncurrent portion            3,157             2,199
    Stockholders' equity:
       Common stock, $0.01 par value                   260               275
       Additional paid-in capital                  191,664           210,919
       Deferred stock compensation                    (209)             (114)
       Accumulated deficit                        (122,608)          (80,755)
                                               -----------        ----------
    Total stockholders' equity                      69,107           130,325
                                               -----------        ----------
    Total liabilities and stockholders'
     equity                                       $148,398          $224,188
                                               -----------        ----------


                               BLACKBOARD INC.

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                          Year Ended
                                                          December 31,
                                                 ----------        ----------
                                                    2004              2005
                                                 ----------        ----------
                                                                   (unaudited)
                                                         (in thousands)
    Cash flows from operating activities
    Net income                                      $10,049           $41,853
    Adjustments to reconcile net income to
     net cash provided by operating
     activities:
      Deferred tax benefit                              -             (14,799)
      Depreciation and amortization                   6,275             6,867
      Amortization of intangibles
       resulting from acquisitions                    3,517               266
      Change in allowance for doubtful
       accounts                                         (64)             (253)
      Noncash deferred stock compensation               174                75
      Changes in operating assets and
       liabilities:
        Accounts receivable                           1,248            (4,197)
        Inventories                                      56               188
        Prepaid expenses and other current
         assets                                        (173)             (910)
        Deferred cost of revenues                    (1,070)           (2,191)
        Accounts payable                               (719)              719
        Accrued expenses                               (610)            2,373
        Deferred rent                                   (68)             (294)
        Deferred revenues                            14,116            10,116
                                                 ----------        ----------
    Net cash provided by operating
     activities                                      32,731            39,813

    Cash flows from investing activities
      Purchase of property and equipment             (7,440)           (7,959)
      Purchase of held-to-maturity
       securities                                       -             (33,296)
      Sale of held-to-maturity securities               -               9,750
      Purchase of available-for-sale
       securities                                   (20,000)          (55,306)
      Sale of available-for-sale
       securities                                       -              36,250
      Payments for merger costs (WebCT,
       Inc.)                                            -              (2,536)
                                                 ----------         ---------
    Net cash used in investing activities           (27,440)          (53,097)

    Cash flows from financing activities
      Payments on equipment notes                      (922)             (762)
      Proceeds from line of credit                    7,880               -
      Payments on line of credit                    (15,760)              -
      Payments on note payable                       (2,000)              -
      Proceeds from issuance of common
       stock, net of issuance costs                  50,986               -
      Proceeds from exercise of Series D
       Warrants                                         248               -
      Proceeds from exercise of stock
       options                                        1,970            11,792
                                                 ----------         ---------
    Net cash provided by financing
     activities                                      42,402            11,030
                                                 ----------         ---------
    Net increase (decrease) in cash and
     cash equivalents                                47,693            (2,254)
    Cash and cash equivalents at beginning
     of period                                       30,456            78,149
                                                 ----------         ---------
    Cash and cash equivalents at end of
     period                                         $78,149           $75,895
                                                 ==========         =========


    Use of Non-GAAP Financial Measures

Blackboard provides cash net income and cash net income per share in this press release as additional information regarding Blackboard's operating results. These measures are not in accordance with, nor are they an alternative for, Generally Accepted Accounting Principles (GAAP) and may be different from cash net income and other non-GAAP measures used by other companies. Blackboard believes that this presentation of cash net income and cash net income per share provides useful information to investors regarding additional financial and business trends relating to Blackboard's financial condition and results of operations.

About Blackboard Inc.

Blackboard Inc. (Nasdaq: BBBB) is a leading provider of enterprise software applications and related services to the education industry. Founded in 1997, Blackboard enables educational innovations everywhere by connecting people and technology. With two product suites, the Blackboard Academic Suite (TM) and the Blackboard Commerce Suite (TM), Blackboard is used by millions of people at academic institutions around the globe, including colleges, universities, K-12 schools and other education providers, as well as textbook publishers and student-focused merchants that serve education providers and their students. Blackboard is headquartered in Washington, D.C., with offices in North America, Europe and Asia.

Forward-Looking Statements

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 most recent 10-Q filed with the SEC. In addition, the forward-looking statements included in this press release represent the Company's views as of February 13, 2006. 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 13, 2006.

SOURCE Blackboard Inc.

CONTACT:
Michael J. Stanton
Vice President, Investor Relations
Blackboard Inc.
+1-202-463-4860 ext. 2305
Web site: http://www.blackboard.com
(BBBB)