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)