Blackboard Inc. Reports Third Quarter Results
Revenue Increases 40 Percent to $50.4 Million
Company Raises Guidance for Fourth Quarter and Full Year 2006
WASHINGTON, Nov. 7 /PRNewswire-FirstCall/ -- Blackboard Inc.
(Nasdaq: BBBB) today announced financial results for the third quarter ended
September 30, 2006 and provided guidance for the fourth quarter and the full
year of 2006.
Blackboard's third quarter revenue was $50.4 million, an increase of 40
percent over the same period in 2005. The increase in revenue was driven by,
continued growth in Blackboard's annual licensing of enterprise level products
to clients including clients resulting from the acquisition of WebCT, Inc.,
which closed on February 28, 2006.
Product revenue was $43.4 million, an increase of 39 percent over the
$31.3 million of product revenue last year. Professional services revenue for
the quarter was $6.9 million, which represents an increase of 50 percent over
the same period in 2005. Net loss in the third quarter was $4.8 million,
resulting in a net loss per basic and diluted share of $0.17. Non-GAAP cash
net income, which excludes the amortization of acquired intangibles, stock-
based compensation expense and the associated tax impact, was $522,000
resulting in a non-GAAP cash net income per diluted share of $0.02.
"We are pleased with our financial results, made possible by clients
around the world selecting Blackboard products and services to manage their
most mission-critical online education activities," said Michael Chasen, Chief
Executive Officer for Blackboard. "During the quarter, we realized strong
revenue and earnings performance and generated operating cash-flow in excess
of $24 million."
Total revenue for the nine months ended September 30, 2006 was $131.6
million, an increase of 32 percent over the same period in 2005. Net loss was
$10.9 million for the first nine months of 2006 compared to net income of
$18.7 million over the same period in 2005. Non-GAAP cash net income for the
first nine months of 2006, which excludes the amortization of acquired
intangibles, stock-based compensation expense and the associated tax impact,
was $1.8 million resulting in non-GAAP cash net income per diluted share of
$0.06.
Investors should note that the Company's 2006 net loss and non-GAAP cash
net income reflect the negative impact of the deferred revenue reductions
related to purchase accounting adjustments and non-recurring integration
costs, both relating to the WebCT, Inc. acquisition.
Strong Client Adoption and Retention Continues
Commenting on client adoption, Chasen added "During the third quarter we
continued to experience steady adoption of products by existing and new
clients. Additionally, our client retention rate remained strong during our
busiest renewal quarter of the year."
A few of Blackboard's new and expanded client relationships in the quarter
included:
* U.S. Higher Education: Claflin University, College of DuPage, College of
Westchester, Dallas County Community College District, Dominican
University of California, Montcalm Community College, Ohio Wesleyan
University, Ozarks Technical Community College, Pearl River Community
College, Southern Methodist University, University of North Carolina at
Chapel Hill and others.
* International: Freie Universitaet Berlin, International School of
Brussels, King Khalid University, Liverpool John Moores University,
Metropolitan Institute of TAFE, Prince Mohammed University, Universitaet
Potsdam, University of Bedfordshire, University of East Anglia,
University of Strathclyde, Westminster Kingsway College and others.
* K-12: Albuquerque Public Schools, Atlanta Public Schools, Bishop O'Dowd
High School, Chesterfield County School District, Deer Valley Unified
School District, Henry County Public Schools, Littleton Public Schools,
Pennsylvania Virtual Charter School, Pope John XXIII Regional High
School, Spokane Public Schools, The Bishop Strachan School and others.
Highlights from the Third Quarter
* Blackboard launched the latest version of its client support site,
Behind the Blackboard(TM). The new site features a variety of tools so
that members of the academic community can better manage their e-
Learning infrastructure and access up-to-the-minute resources and
information about Blackboard products and services.
* Blackboard held the Fourth Annual Blackboard Building Blocks Developers
Conference. The annual event highlights academic and commercial
developers working to extend Blackboard's e-Learning platform by using
the Blackboard Building Blocks(R) technology.
* Blackboard released a new customized e-Learning product for K-12
institutions, the Blackboard K-12 Starter Edition(TM). This new
solution is a hosted package featuring a variety of resources for K-12
districts in the early stages of establishing an e-Learning strategy.
Financial Guidance for the Fourth Quarter of 2006:
* Revenue of $49.4 to $50.4 million;
* Stock-based compensation expense of $2.7 million;
* Amortization of acquired intangibles of $5.4 million;
* Net loss of ($800,000) to ($400,000), resulting in net loss per basic
share of ($0.03) to ($0.02), which is based on an estimated 28.3 million
basic shares and an effective tax rate of 30 percent; and
* Non-GAAP cash net income, which excludes amortization of acquired
intangibles, stock-based compensation expense, and the associated tax
impact, of $4.3 to $4.7 million, resulting in non-GAAP cash net income
per diluted share of $0.15 to $0.16 based on an estimated 29.1 million
diluted shares and an effective tax rate of 39.5 percent.
Financial Guidance for the Full Year 2006:
* Revenue of $181.1 to $182.1 million;
* Stock-based compensation expense of $8.8 million;
* Amortization of acquired intangibles of $18.1 million;
* Net loss of ($11.8) to ($11.4) million, resulting in net loss per basic
share of ($0.42) to ($0.41), which is based on an estimated 28 million
basic shares and an effective tax rate of 30 percent; and
* Non-GAAP cash net income, which excludes amortization of acquired
intangibles, stock-based compensation expense, and the associated tax
impact, of $6.2 to $6.6 million, resulting in non-GAAP cash net income
per diluted share of $0.21 to $0.23 based on an estimated 28.9 million
diluted shares and an effective tax rate of 39.5 percent.
Conference Call
Blackboard will broadcast its third quarter call live over the Internet
beginning at 5:00 p.m. on November 7, 2006 and 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 approximately
7:00 p.m. Eastern (4:00 p.m. Pacific) on November 7, 2006 until 11:00 p.m.
Eastern (8:00 p.m. Pacific) on November 14, 2006. 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 54744437.
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 August 9, 2006,
as well as other filings with the Securities and Exchange Commission when
assessing the Company's financial condition and results of operations.
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.
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 August 9, 2006 with the SEC. In addition,
the forward-looking statements included in this press release represent the
Company's views as of November 7, 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 November
7, 2006.
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,
----------------------------------------------
2005 2006 2005 2006
---------- ---------- ---------- ----------
Revenues:
Product $31,301 $43,435 $88,341 $113,597
Professional services 4,626 6,919 11,577 18,046
---------- ---------- ---------- ----------
Total revenues 35,927 50,354 99,918 131,643
Operating expenses:
Cost of product
revenues, excludes
$2,800 and $6,533 in
amortization of
acquired technology
included in
amortization of
intangibles resulting
from acquisitions shown
below for the three and
nine months ended
September 30, 2006,
respectively (1) 7,507 11,354 21,818 29,348
Cost of professional
services revenues (1) 2,733 4,385 7,499 12,061
Research and development (1) 3,657 8,000 10,162 20,157
Sales and marketing (1) 10,323 16,678 28,269 43,920
General and
administrative (1) 5,032 9,661 14,464 27,063
Amortization of
intangibles resulting
from acquisitions 66 5,377 200 12,591
---------- ---------- ---------- ----------
Total operating expenses 29,318 55,455 82,412 145,140
---------- ---------- ---------- ----------
Income (loss) from
operations 6,609 (5,101) 17,506 (13,497)
Other income (expense):
Interest expense (9) (1,860) (39) (3,756)
Interest income 932 341 1,939 1,974
Other income (expense) - (155) - (301)
---------- ---------- ---------- ----------
Income (loss) before
(provision) benefit for
income taxes 7,532 (6,775) 19,406 (15,580)
(Provision) benefit for
income taxes (263) 2,000 (664) 4,642
---------- ---------- ---------- ----------
Net income (loss) 7,269 (4,775) 18,742 (10,938)
========== ========== ========== ==========
Net income (loss) per
common share:
Basic $0.27 $(0.17) $0.71 $(0.39)
========== ========== ========== ==========
Diluted $0.25 $(0.17) $0.66 $(0.39)
========== ========== ========== ==========
Weighted average number of
common shares:
Basic 26,986,242 27,922,879 26,529,922 27,760,438
========== ========== ========== ==========
Diluted 28,829,768 27,922,879 28,240,576 27,760,438
========== ========== ========== ==========
(1) Includes the following
amounts related to stock-
based compensation:
Cost of product revenues $- $113 $- $277
Cost of professional
services revenues - 150 - 519
Research and development - 168 - 444
Sales and marketing - 899 - 2,239
General and
administrative 19 931 55 2,559
Reconciliation of income
(loss) before (provision)
benefit for income taxes
to non-GAAP cash net
income (2):
Income (loss) before
(provision) benefit for
income taxes $7,532 $(6,775) $19,406 $(15,580)
Add: Amortization of
intangibles resulting
from acquisitions 66 5,377 200 12,591
Add: Stock-based
compensation 19 2,261 55 6,038
Adjusted provision for
income taxes (3) (267) (341) (668) (1,204)
---------- ---------- ---------- ----------
Non-GAAP cash net income 7,350 522 18,993 1,845
========== ========== ========== ==========
Non-GAAP cash net income
per common share -
diluted $0.25 $0.02 $0.67 $0.06
========== ========== ========== ==========
Adjusted weighted average
number of common
shares - diluted 28,829,768 29,036,375 28,240,576 28,930,136
========== ========== ========== ==========
(2) Non-GAAP cash net income and non-GAAP cash net income per share are
non-GAAP financial measures and have no standardized measurement
prescribed by GAAP. Management believes that both measures provide
additional useful information to investors regarding the Company's
ongoing financial condition and results of operations and since the
Company has historically reported these non-GAAP results they provide
an additional basis for comparisons to prior periods. The non-GAAP
financial measures may not be comparable with similar non-GAAP
financial measures used by other companies and should not be
considered in isolation from, or as a substitute for, financial
information prepared in accordance with GAAP. The Company provides
the above reconciliation to the most directly comparable GAAP
financial measure to allow investors to appropriately consider each
non-GAAP financial measure.
(3) Adjusted provision for income taxes is applied at an effective rate of
approximately 3.5% and 39.5% for the three months ended September 30,
2005 and 2006, respectively, and approximately 3.4% and 39.5% for the
nine months ended September 30, 2005 and 2006, respectively.
BLACKBOARD INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30,
2005 2006
--------- ---------
(unaudited)
(in thousands,
except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents $75,895 $37,045
Short-term investments 62,602 -
Restricted cash 521 461
Accounts receivable, net 26,136 61,360
Inventories 1,806 2,443
Prepaid expenses and other current
assets 2,116 2,976
Deferred tax asset, current portion 10,274 16,818
Deferred cost of revenues, current
portion 5,797 8,080
--------- ---------
Total current assets 185,147 129,183
Deferred tax asset, noncurrent portion 12,023 12,386
Deferred cost of revenues, noncurrent
portion 1,310 772
Deferred merger costs (WebCT, Inc.) 4,956 -
Property and equipment, net 9,940 13,276
Goodwill 10,252 102,725
Intangible assets, net 560 61,275
--------- ---------
Total assets $224,188 $319,617
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,833 $1,530
Accrued expenses 14,083 20,153
Term loan, current portion - 600
Deferred rent, current portion 347 398
Deferred revenues, current portion 74,975 118,388
--------- ---------
Total current liabilities 91,238 141,069
Term loan, noncurrent portion, net of
debt discount - 42,411
Deferred rent, noncurrent portion 426 233
Deferred revenues, noncurrent portion 2,199 3,290
Stockholders' equity:
Common stock, $0.01 par value 275 280
Additional paid-in capital 210,805 224,027
Accumulated deficit (80,755) (91,693)
--------- ---------
Total stockholders' equity 130,325 132,614
--------- ---------
Total liabilities and stockholders'
equity $224,188 $319,617
========= =========
BLACKBOARD INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
---------------------------
2005 2006
--------- ---------
(in thousands)
Cash flows from operating activities
Net income (loss) $18,742 $(10,938)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Deferred income tax benefit - (6,078)
Excess tax benefits from stock-based
compensation - (248)
Amortization of debt discount - 940
Depreciation and amortization 5,003 6,572
Amortization of intangibles
resulting from acquisitions 200 12,591
Change in allowance for doubtful accounts (24) (143)
Noncash stock-based compensation 55 6,038
Changes in operating assets and
liabilities:
Accounts receivable (11,490) (30,712)
Inventories (59) (637)
Prepaid expenses and other current
assets (586) 496
Deferred cost of revenues (1,959) (1,745)
Accounts payable 111 (575)
Accrued expenses 797 (4,883)
Deferred rent (221) (142)
Deferred revenues 12,797 40,048
--------- ---------
Net cash provided by operating activities 23,366 10,584
Cash flows from investing activities
Acquisition of WebCT, Inc., net of
cash acquired - (154,628)
Purchase of property and equipment (6,696) (8,188)
Purchase of held-to-maturity
securities (27,230) -
Sale of held-to-maturity securities 5,750 23,546
Purchase of available-for-sale
securities (21,900) -
Sale of available-for-sale
securities 25,600 39,056
--------- ---------
Net cash used in investing activities (24,476) (100,214)
Cash flows from financing activities
Payments on equipment notes (424) -
Proceeds from revolving credit facility - 10,000
Payments on revolving credit facility - (10,000)
Proceeds from term loan - 57,522
Payments on term loan - (15,450)
Release of letter of credit - 1,517
Excess tax benefits from stock-based
compensation - 248
Proceeds from exercise of stock options 8,222 6,943
--------- ---------
Net cash provided by financing
activities 7,798 50,780
--------- ---------
Net increase (decrease) in cash and
cash equivalents 6,688 (38,850)
Cash and cash equivalents at beginning
of period 78,149 75,895
--------- ---------
Cash and cash equivalents at end of
period $84,837 $37,045
========= =========
SOURCE: Blackboard Inc.
CONTACT: Michael J. Stanton, Vice President, Investor Relations of
Blackboard Inc., +1-202-463-4860, ext. 2305