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Blackboard Inc. Reports Second Quarter Results

Revenue Increases 32 Percent to $43.6 Million

Company Raises Financial Guidance for the Third Quarter and Full Year 2006

Michael Beach Named CFO Effective September 1, 2006

WASHINGTON, Aug. 8 /PRNewswire-FirstCall/ -- Blackboard Inc. (Nasdaq: BBBB) today announced financial results for the second quarter ended June 30, 2006 and raised guidance for the third quarter and the full year of 2006.

Blackboard's second quarter revenue was $43.6 million, an increase of 32 percent over the same period in 2005. Product revenue was $37.0 million, an increase of 26 percent over the $29.4 million of product revenue last year. Professional services revenue for the quarter was $6.6 million, which represents an increase of 78 percent over the second quarter of 2005. Net loss in the second quarter was $6.3 million, resulting in a net loss per basic and diluted share of ($0.23). Non-GAAP cash net loss, which excludes the amortization of acquired intangibles, stock-based compensation expense and the associated tax impact, was $828,000 resulting in a non-GAAP cash net loss per diluted share of ($0.03).

"We are very pleased with our second quarter and first half results for 2006. In the quarter, we continued to see strong adoption levels for enterprise products and professional services across all education markets," said Michael Chasen, President and CEO of Blackboard Inc.

Total revenue for the first six months ended June 30, 2006 was $81.3 million, an increase of 27 percent over the first six months of 2005. Net loss was $6.2 million for the first six months of 2006 compared to net income of $11.5 million for the first six months of 2005. Non-GAAP cash net income for the first six months of 2006, which excludes the amortization of acquired intangibles, stock-based compensation expense and the associated tax impact, was $1.3 million resulting in non-GAAP cash net income per diluted share of $0.05.

Investors should note that the Company's net loss and non-GAAP cash net loss continue to reflect the impact of the deferred revenue reductions related to purchase accounting adjustments and non-recurring integration costs, both relating to the WebCT, Inc. acquisition.

Integration Success Continues

Commenting on the ongoing integration of WebCT, Chasen stated, "We are now nearly six months into operating as a combined organization and integration is going very well. Demand for our products and services remains high and our non-recurring integration costs continue to be lower than expected. The entire Blackboard team continues to do a superb job."

Industry Adoption Continues Across the U.S. and Internationally

A few of Blackboard's new and expanded client relationships in the quarter included:

    * U.S. Higher Education: Antelope Valley College, Bentley College, Bryant
      University, Clarkson University, Eastern University, Hampden-Sydney
      College, Lawson State Community College, McNeese State University,
      Missouri Baptist University, Post University, Saint Xavier University,
      Southern University at New Orleans, Tacoma Community College, Virginia
      State University and others.

    * International: Bishop Grosseteste College, ESSEC Business School,
      Glasgow College of Nautical Studies, North Glasgow College, Novabase
      eLearning, Otago Polytechnic, SIM University, York College, and others.

    * K-12: Fauquier County Public Schools, Glenbrook High School District,
      Higley Unified School District, Hutchinson Public Schools, Kentucky
      Department of Education, Lee's Summit School District, North Carolina
      Teacher Academy, Rochester Community Schools, Saddleback Valley Unified
      School District and others.

    Michael Beach Named CFO Effective September 1, 2006

Blackboard also announced today that Mike Beach will succeed Peter Repetti as the Company's chief financial officer effective September 1, 2006. As part of the planned transition process, Mr. Repetti will keep the title of CFO until September 1 while direct responsibilities are gradually assumed by Mr. Beach, and then will serve in an advisory capacity to ensure a seamless transition.

"While I will miss working with Pete on a daily basis, I am very pleased that Mike will be succeeding him as Blackboard's new CFO," commented Chasen. "Mike has worked closely with Pete and me over the past five years and has been instrumental in driving Blackboard's strategy and overall success as a public company."

Mr. Beach, currently vice president of finance and treasurer, has been with Blackboard since 2001 with responsibilities for accounting, corporate treasury, tax, and financial reporting functions. Mr. Beach has been an integral member of the Blackboard management team and played a lead role in Blackboard's initial public offering and the Company's recent acquisition of WebCT, Inc. Prior to joining the Company, Mr. Beach was a Senior Manager at Ernst & Young LLP where he provided accounting, audit, tax, acquisition due diligence and other services to several public and private clients. Mr. Beach has also served as Controller for GreenStone Industries, Inc. where he managed that company's accounting, tax and reporting functions.

Commenting on his planned departure, Mr. Repetti stated, "My five years at Blackboard have been very rewarding and my decision to leave has been a difficult one to make. I am pleased with all the things that we have accomplished including a successful public offering and the acquisition of WebCT, Inc. As our recent results reflect, Blackboard is performing well and on track for another excellent year."

    Company Raises Financial Guidance

    Third Quarter of 2006:

    * Revenue of $48.3 to $49.3 million;

    * Stock-based compensation expense of $2.6 million;

    * Amortization of acquired intangibles of $5.4 million;

    * Net loss of ($5.4) to ($5.0) million, resulting in net loss per basic
      share of ($0.19) to ($0.18), which is based on an estimated 28.1 million
      basic shares and an effective tax rate of 31 percent; and

    * Non-GAAP cash net income, which excludes amortization of acquired
      intangibles, stock-based compensation expense, and the associated tax
      impact, of $200,000 to $500,000, resulting in non-GAAP cash net income
      per diluted share of $0.01 to $0.02 based on an estimated 29.1 million
      diluted shares and an effective tax rate of 39.5 percent.

    Full Year 2006:

    * Revenue of $178.3 to $180.3 million;

    * Stock-based compensation expense of $9.1 million;

    * Amortization of acquired intangibles of $18.1 million;

    * Net loss of ($12.5) to ($11.7) million, resulting in net loss per basic
      share of ($0.44) to ($0.41), which is based on an estimated 28.3 million
      basic shares and an effective tax rate of 31 percent; and

    * Non-GAAP cash net income, which excludes amortization of acquired
      intangibles, stock-based compensation expense, and the associated tax
      impact, of $5.7 to $6.4 million, resulting in non-GAAP cash net income
      per diluted share of $0.20 to $0.22 based on an estimated 29.3 million
      diluted shares and an effective tax rate of 39.5 percent.

    Conference Call

Blackboard will broadcast its second quarter conference call live over the Internet today beginning at 5:00 p.m. Eastern time. 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 replay of the call will be available via telephone from 7:00 p.m. Eastern (4:00 p.m. Pacific) on August 8, 2006 until 8:00 p.m. Eastern time (5:00 p.m. Pacific time) on August 15, 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 43918020.

Use of Non-GAAP Financial Measures

This release includes information about the Company's non-GAAP cash net income and non-GAAP cash net income per share which are non-GAAP financial measures. Management believes that both measures, which exclude amortization of acquired intangibles, stock-based compensation expense, and the associated tax impact, provide additional useful information to investors regarding the Company's ongoing financial condition and results of operations and aspects of current operating performance which can be effectively managed. Since the Company has historically reported these non-GAAP results to the investment community, management also believes the inclusion of these non-GAAP financial measures provides consistency in its financial reporting and facilitates investors' understanding of the Company's historic operating trends by providing an additional basis for comparisons to prior periods. In addition, the Company's internal reporting, including information provided to the Company's Audit Committee and Board of Directors, contains non-GAAP cash net income and non-GAAP cash net income per share. The Company has also adopted internal compensation metrics that are determined on a basis that excludes amortization of acquired intangibles, stock-based compensation expense, and the associated tax impact.

A material limitation associated with the use of the above non-GAAP financial measures is that they have no standardized measurement prescribed by GAAP and may not be comparable with similar non-GAAP financial measures used by other companies. The Company compensates for these limitations by providing full disclosure of each non-GAAP financial measure and a 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 May 10, 2006, as well as other filings with the Securities and Exchange Commission when assessing the Company's financial condition and results of operations.



                               BLACKBOARD INC.

               UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

              (in thousands, except share and per share amounts)

                                  Three Months Ended       Six Months Ended
                                       June 30,                June 30,
                               -----------------------------------------------
                                   2005        2006        2005        2006
                               ----------- ----------- ----------- -----------
    Revenues:
      Product                  $   29,353  $   36,987  $   57,040  $   70,161
      Professional services         3,696       6,593       6,951      11,127
                               ----------- ----------- ----------- -----------
    Total revenues                 33,049      43,580      63,991      81,288
    Operating expenses:
      Cost of product revenues,
       excludes $2,800 and
       $3,733 in amortization
       of acquired technology
       included in amortization
       of intangibles resulting
       from acquisitions shown
       below for the three and
       six months ended June
       30, 2006, respectively
       (1)                          7,095      10,027      14,311      17,993
      Cost of professional
       services revenues (1)        2,552       4,285       4,766       7,676
      Research and development
       (1)                          3,307       7,273       6,505      12,157
      Sales and marketing (1)       9,462      15,093      17,946      27,242
      General and
       administrative (1)           4,809       9,801       9,432      17,401
      Amortization of
       intangibles resulting
       from acquisitions               66       5,377         134       7,214
                               ----------- ----------- ----------- -----------
    Total operating expenses       27,291      51,856      53,094      89,683
                               ----------- ----------- ----------- -----------
    Income (loss) from
     operations                     5,758      (8,276)     10,897      (8,395)
    Other income (expense):
      Interest expense                (12)     (1,318)        (30)     (1,896)
      Interest income                 524         392       1,007       1,633
      Other income (expense)           -          179          -         (147)
                               ----------- ----------- ----------- -----------
    Income (loss) before
     (provision) benefit for
     income taxes                   6,270      (9,023)     11,874      (8,805)
    (Provision) benefit for
     income taxes                    (207)      2,712        (401)      2,642
                               ----------- ----------- ----------- -----------
    Net income (loss)               6,063      (6,311)     11,473      (6,163)
                               =========== =========== =========== ===========
    Net income (loss) per
     common share:
      Basic                    $     0.23  $    (0.23) $     0.44  $    (0.22)
                               =========== =========== =========== ===========
      Diluted                  $     0.21  $    (0.23) $     0.41  $    (0.22)
                               =========== =========== =========== ===========
    Weighted average number
     of common shares:
      Basic                    26,516,106  27,776,658  26,303,114  27,678,634
                               =========== =========== =========== ===========
      Diluted                  28,201,336  27,776,658  27,930,823  27,678,634
                               =========== =========== =========== ===========

    (1) Includes the following
     amounts related to stock-
     based compensation:
      Cost of product revenues $       -   $      129  $       -   $      164
      Cost of professional
       services revenues               -          251          -          369
      Research and development         -          154          -          276
      Sales and marketing              -          933          -        1,340
      General and administrative       18         811          36       1,628

Reconciliation of income (loss) before (provision) benefit for income taxes to non-GAAP cash net income (loss) (2):

    Income (loss) before
     (provision) benefit for
     income taxes              $    6,270  $   (9,023) $   11,874  $   (8,805)
    Add: Amortization of
     intangibles resulting
     from acquisitions                 66       5,377         134       7,214
    Add: Stock-based
     compensation                      18       2,278          36       3,777
    Adjusted (provision)
     benefit for income taxes
     (3)                             (210)        540        (409)       (863)
                               ----------- ----------- ----------- -----------
    Non-GAAP cash net income
     (loss)                         6,144        (828)     11,635       1,323
                               =========== =========== =========== ===========
    Non-GAAP cash net income
     (loss) per common share
     - diluted                 $     0.22  $    (0.03) $     0.42  $     0.05
                               =========== =========== =========== ===========
    Adjusted weighted average
     number of common
     shares - diluted          28,201,336  28,873,764  27,930,823  28,836,779
                               =========== =========== =========== ===========

    (2) Non-GAAP cash net income (loss) and non-GAAP cash net income (loss)
        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) benefit for income taxes is applied at an
        effective rate of approximately 3.3% and 39.5% for the three months
        ended June 30, 2005 and 2006, respectively, and approximately 3.4% and
        39.5% for the six months ended June 30, 2005 and 2006, respectively.



                               BLACKBOARD INC.

                    CONDENSED CONSOLIDATED BALANCE SHEETS

                                                    December 31,    June 30,
                                                        2005         2006
                                                    -----------   -----------
                                                                   (unaudited)
                                                          (in thousands,
                                                     except per share amounts)
                           ASSETS
    Current assets:
       Cash and cash equivalents                    $   75,895    $   27,620
       Short-term investments                           62,602           -
       Restricted cash                                     521           461
       Accounts receivable, net                         26,136        57,060
       Inventories                                       1,806         2,851
       Prepaid expenses and other current assets         2,116         3,914
       Deferred tax asset, current portion              10,274        14,918
       Deferred cost of revenues, current portion        5,797         6,959
                                                    -----------   -----------
          Total current assets                         185,147       113,783

    Deferred tax asset, noncurrent portion              12,023        11,701
    Deferred cost of revenues, noncurrent portion        1,310         1,335
    Deferred merger costs (WebCT, Inc.)                  4,956           -
    Property and equipment, net                          9,940        13,226
    Goodwill                                            10,252       102,725
    Intangible assets, net                                 560        66,652
                                                    -----------   -----------
    Total assets                                    $  224,188    $  309,422
                                                    ===========   ===========

                LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
       Accounts payable                                 $1,833        $1,977
       Accrued expenses                                 14,083        18,432
       Term loan, current portion                          -             600
       Deferred rent, current portion                      347           417
       Deferred revenues, current portion               74,975        94,082
                                                    -----------   -----------
          Total current liabilities                     91,238       115,508

    Term loan, noncurrent portion, net of debt
     discount                                              -          56,867
    Deferred rent, noncurrent portion                      426           315
    Deferred revenues, noncurrent portion                2,199         4,171
    Stockholders' equity:
       Common stock, $0.01 par value                       275           278
       Additional paid-in capital                      210,805       219,201
       Accumulated deficit                             (80,755)      (86,918)
                                                    -----------   -----------
    Total stockholders' equity                         130,325       132,561
                                                    -----------   -----------
    Total liabilities and stockholders' equity      $  224,188    $  309,422
                                                    ===========   ===========



                               BLACKBOARD INC.

               UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                         Six Months Ended
                                                             June 30,
                                                      -----------------------
                                                        2005          2006
                                                      ---------     ---------
                                                          (in thousands)
    Cash flows from operating activities
    Net income (loss)                                 $ 11,473      $ (6,163)
    Adjustments to reconcile net income (loss)
     to net cash provided by (used in) operating
     activities:
      Deferred income tax benefit                          -          (3,493)
      Excess tax benefits from stock-based
       compensation                                        -            (173)
      Amortization of debt discount                        -             246
      Depreciation and amortization                      3,274         4,175
      Amortization of intangibles resulting from
       acquisitions                                        134         7,214
      Change in allowance for doubtful accounts            225          (107)
      Noncash stock-based compensation                      36         3,777
      Changes in operating assets and liabilities:
        Accounts receivable                            (17,258)      (26,448)
        Inventories                                       (513)       (1,045)
        Prepaid expenses and other current assets         (640)         (442)
        Deferred cost of revenues                       (1,252)       (1,187)
        Accounts payable                                   697          (128)
        Accrued expenses                                   (34)       (6,679)
        Deferred rent                                     (152)          (41)
        Deferred revenues                                5,095        16,623
                                                      ---------     ---------
    Net cash provided by (used in) operating
     activities                                          1,085       (13,871)

    Cash flows from investing activities
      Acquisition of WebCT, Inc., net of cash
       acquired                                            -        (154,628)
      Purchase of property and equipment                (4,774)       (5,741)
      Purchase of held-to-maturity securities          (21,159)          -
      Sale of held-to-maturity securities                  -          23,546
      Purchase of available-for-sale securities         (9,600)          -
      Sale of available-for-sale securities              9,950        39,056
                                                      ---------     ---------
    Net cash used in investing activities              (25,583)      (97,767)

    Cash flows from financing activities
      Payments on equipment notes                         (323)          -
      Proceeds from revolving credit facility              -          10,000
      Payments on revolving credit facility                -         (10,000)
      Proceeds from term loan                              -          57,522
      Payments on term loan                                -            (300)
      Release of letter of credit                          -           1,517
      Excess tax benefits from stock-based
       compensation                                        -             173
      Proceeds from exercise of stock options            5,559         4,451
                                                      ---------     ---------
    Net cash provided by financing activities            5,236        63,363
                                                      ---------     ---------
    Net decrease in cash and cash equivalents          (19,262)      (48,275)
    Cash and cash equivalents at beginning of period    78,149        75,895
                                                      ---------     ---------
    Cash and cash equivalents at end of period        $ 58,887      $ 27,620
                                                      =========     =========



    About Blackboard

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. Blackboard solutions are 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, Australia and Asia. WebCT is a wholly owned subsidiary of Blackboard Inc.

Blackboard

Educate. Innovate. Everywhere. (TM)

Any statements in this press release about future expectations, plans and prospects for Blackboard and other statements containing the words "believes," "anticipates," "plans," "expects," "will," and similar expressions, constitute forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by such forward-looking statements as a result of various important factors, including the factors discussed in the "Risk Factors" section of our Annual Report on Form 10-Q filed on May 10, 2006 with the SEC. In addition, the forward-looking statements included in this press release represent the Company's views as of August 8, 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 August 8, 2006.

SOURCE: Blackboard Inc.

CONTACT: Michael J. Stanton, Vice President, Investor Relations of Blackboard Inc., +1-202-463-4860 ext. 2305