Blackboard Inc. Reports Fourth Quarter and Year End 2006 Results
- Fourth Quarter Revenue Increases 44 Percent to $51.4 million -
- Company Raises FY 2007 Guidance -
WASHINGTON, Feb. 6 /PRNewswire-FirstCall/ -- Blackboard Inc.
(Nasdaq: BBBB) today announced financial results for the fourth quarter and
year ended December 31, 2006 and updated guidance for the first quarter and
full year 2007.
Blackboard's fourth quarter revenue was $51.4 million, an increase of 44
percent over the same period in 2005. The increase in revenue was driven by
strong growth in Blackboard's annual licensing of enterprise level products to
global academic institutions including clients resulting from the acquisition
of WebCT, Inc., which closed on February 28, 2006. Product revenue in the
fourth quarter was $46.8 million, an increase of 46 percent over the $32.0
million of product revenue last year. Professional services revenue for the
quarter was $4.6 million, which represents an increase of 25 percent over the
same period in 2005.
Net income in the fourth quarter was $201,000, resulting in net income per
basic and diluted share of $0.01. Non-GAAP cash net income, which excludes
the amortization of acquired intangibles, stock-based compensation expense and
the associated tax impact, was $4.6 million in the fourth quarter resulting in
a non-GAAP cash net income per diluted share of $0.16.
"This was a tremendous year for Blackboard and our industry," said Michael
Chasen, chief executive officer and president for Blackboard. "In 2006, we
were able to significantly expand our client relationships through the
acquisition and successful integration of WebCT while continuing to deliver
innovative technologies and leading client support and services."
Total revenue for the year ended December 31, 2006 was $183.1 million, an
increase of 35 percent over 2005. Net loss was $10.7 million in 2006,
resulting in a net loss per basic and diluted share of $0.39. Non-GAAP cash
net income in 2006, which excludes the amortization of acquired intangibles,
stock-based compensation expense and the associated tax impact, was $6.5
million, resulting in a non-GAAP cash net income per diluted share of $0.22.
Additionally, Blackboard prepaid $35.0 million in principal on acquisition
debt in 2006.
Highlights from the Fourth Quarter of 2006
* Blackboard's new and expanding client relationships in the quarter
included:
-- U.S. Higher Education: Iowa State University, North Carolina Community
College System, Pima Community College, Portland Community College,
Salt Lake Community College, San Diego Community College District,
Seton Hall University, Texas A&M University - College Station, The
Board of Trustees of the University of Alabama, The College of New
Jersey, University of Alabama at Huntsville, University of Florida
Board of Trustees, University of Houston, University of Massachusetts
Amherst, University of North Alabama and Weber State University.
-- International: Flinders University of South Australia, Keele
University, La Trobe University, Leeds Metropolitan University, London
Metropolitan University, Middlesex University, Napier University,
Queensland University of Technology, Sheffield Hallam University,
Universidad de Sevilla, University of Canterbury, University of East
London, University of Melbourne, University of Portsmouth, University
of Sheffield, University of Stellenbosch and University of Tasmania.
-- K-12: Amarillo Independent School District (TX), Broward County Public
Schools (FL), Clear Creek Independent School District (TX), Cuyahoga
Heights Schools (OH), Illinois State University Lab School (IL), Monroe
County Public Schools (FL), Naperville CUSD 203 (IL), North East
Florida Educational Consortium (FL), PAIS/BOA (PA), Pasadena
Independent School District (CA), Pittsylvania County Schools (VA),
Polk County Public Schools (FL), Rocky Hill School (RI), St. James
Parish School Board (LA) and The School District of Palm Beach County
(FL).
Highlights from the Year End 2006
* Blackboard completed its acquisition of WebCT, Inc. on February 28,
2006 marking a major milestone in the education industry.
* Blackboard ended 2006 with 3,462 clients representing an increase of 53
percent over 2005.
* Blackboard's enterprise-class licenses (Blackboard Learning System(TM)
- Enterprise, Blackboard Community System(TM), Blackboard Transaction
System(TM) and the Blackboard Content System(TM)), totaled 3,492 at the
end of 2006, which represents an increase of 67 percent over 2005.
* Blackboard launched the Blackboard Beyond Initiative(TM), which is
focused on developing a series of Web properties that connect the
institutions, faculty, and students who use Blackboard applications
worldwide across education segments and disciplines.
* Blackboard's BbOne(SM) offering is now in use at 65 U.S. higher
education institutions. As of December 31, 2006, more than 1,000 off-
campus merchants are now accepting BbOne as a form of payment.
Notice of Change to Financial Guidance
Beginning in the first quarter of 2007 Blackboard management will begin
providing financial guidance and reporting on two new non-GAAP financial
measures: "Non-GAAP Adjusted Net Income" and "Non-GAAP Adjusted Net Income per
Share," which exclude the amortization of acquired intangibles and the
associated tax impact. These new measures will replace "Non-GAAP Cash Net
Income" and "Non-GAAP Cash Net Income per Share," which the Company had
previously provided.
For the purpose of future comparisons, Blackboard is providing Non-GAAP
Adjusted Net Income (Loss) and Non-GAAP Adjusted Net Income (Loss) per Share
for 2006. Below is historical reconciliation of income (loss) before benefit
(provision) for income taxes to Non-GAAP Adjusted Net Income (Loss) (1):
Q1 2006 Q2 2006 Q3 2006 Q4 2006 FY 2006
------- ------- ------- ------- -------
(unaudited and denoted in thousands except
per share amounts)
Income (loss) before benefit
(provision) for income taxes $218 $(9,023) $(6,775) $261 $(15,319)
Add: Amortization of
intangibles resulting from
acquisitions 1,837 5,377 5,377 5,378 17,969
Adjusted (provision) benefit
for income taxes (2) (812) 1,440 552 (2,227) (1,047)
------- ------- ------- ------- -------
Non-GAAP adjusted net income
(loss) $1,243 $(2,206) $(846) $3,412 $1,603
======= ======= ======= ======= =======
Non-GAAP adjusted net income
(loss) per common share -
diluted $0.04 $(0.08) $(0.03) $0.12 $0.06
======= ======= ======= ======= =======
(1) Non-GAAP adjusted net income and non-GAAP adjusted net income per
share are non-GAAP financial measures and have no standardized measurement
prescribed by 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.
(2) Adjusted (provision) benefit for income taxes is applied at an
effective rate of 39.5%.
Financial Guidance for 2007
First Quarter of 2007:
* Revenue of $53.0 to $54.2 million;
* Amortization of acquired intangibles of approximately $5.4 million;
* Net income of $1.3 to $1.8 million, resulting in net income per diluted
share of $0.04 to $0.06, which is based on an estimated 29.5 million
diluted shares and an effective tax rate of 41.5 percent; and
* Non-GAAP adjusted net income excluding the amortization of acquired
intangibles and the associated tax impact, of $4.4 to $4.9 million,
resulting in non-GAAP adjusted net income per diluted share of $0.15 to
$0.17 based on an estimated 29.5 million diluted shares and an
effective tax rate of 41.5 percent.
Full Year 2007:
* Revenue of $230 to $235 million;
* Amortization of acquired intangibles of approximately $22 million;
* Net income of $10 to $12 million, resulting in net income per diluted
share of $0.33 to $0.40, which is based on an estimated 30 million
diluted shares and an effective tax rate of 41.5 percent; and
* Non-GAAP adjusted net income excluding the amortization of acquired
intangibles and the associated tax impact, of $22.5 to $24.5 million,
resulting in non-GAAP adjusted net income per diluted share of $0.75 to
$0.82 based on an estimated 30 million diluted shares and an effective
tax rate of 41.5 percent.
Conference Call
Blackboard will broadcast its fourth quarter conference call live over the
Internet today beginning at 4:30 p.m. (Eastern). Interested parties can access
the webcast through the Investor Relations section of the Company's Web site
at http://investor.blackboard.com. 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 February 6, 2007 until 11:00 p.m.
Eastern (8:00 p.m. Pacific) on February 13, 2007. 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 86268897.
BLACKBOARD INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Three Months Ended Year Ended
December 31, December 31,
------------------------------------------------
2005 2006 2005 2006
----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited)
Revenues:
Product $32,048 $46,795 $120,389 $160,392
Professional services 3,698 4,625 15,275 22,671
----------- ----------- ----------- -----------
Total revenues 35,746 51,420 135,664 183,063
Operating expenses:
Cost of product
revenues, excludes
$2,800 and $9,333 in
amortization of
acquired technology
included in
amortization of
intangibles resulting
from acquisitions shown
below for the three and
twelve months ended
December 31, 2006,
respectively (1) 7,789 10,246 29,607 39,594
Cost of professional
services revenues (1) 2,721 3,940 10,220 16,001
Research and
development (1) 3,783 7,005 13,945 27,162
Sales and marketing (1) 9,604 14,420 37,873 58,340
General and
administrative (1) 4,842 8,760 19,306 35,823
Amortization of
intangibles resulting
from acquisitions 66 5,378 266 17,969
----------- ----------- ----------- -----------
Total operating expenses 28,805 49,749 111,217 194,889
----------- ----------- ----------- -----------
Income (loss) from
operations 6,941 1,671 24,447 (11,826)
Other income (expense):
Interest expense (10) (1,598) (49) (5,354)
Interest income 1,207 406 3,146 2,380
Other expense - (218) - (519)
----------- ----------- ----------- -----------
Income (loss) before
benefit (provision) for
income taxes 8,138 261 27,544 (15,319)
Benefit (provision) for
income taxes 14,973 (60) 14,309 4,582
----------- ----------- ----------- -----------
Net income (loss) $23,111 $201 $41,853 $(10,737)
=========== =========== =========== ===========
Net income (loss) per
common share:
Basic $0.85 $0.01 $1.57 $(0.39)
=========== =========== =========== ===========
Diluted $0.79 $0.01 $1.47 $(0.39)
=========== =========== =========== ===========
Weighted average number of
common shares:
Basic 27,273,665 28,144,314 26,714,748 27,857,576
=========== =========== =========== ===========
Diluted 29,214,963 29,113,413 28,509,777 27,857,576
=========== =========== =========== ===========
(1) Includes the following
amounts related to stock-
based compensation:
Cost of product revenues $- $109 $- $386
Cost of professional
services revenues - 5 - 524
Research and development - 289 - 733
Sales and marketing - 712 - 2,951
General and
administrative 20 903 75 3,462
Reconciliation of income
(loss) before benefit
(provision) for income
taxes to non-GAAP cash
net income (2):
Income (loss) before
benefit (provision) for
income taxes $8,138 $261 $27,544 $(15,319)
Add: Amortization of
intangibles resulting
from acquisitions 66 5,378 266 17,969
Add: Stock-based
compensation 20 2,018 75 8,056
Adjusted provision for
income taxes (3) (3,248) (3,025) (11,015) (4,229)
----------- ----------- ----------- -----------
Non-GAAP cash net income $4,976 $4,632 $16,870 $6,477
=========== =========== =========== ===========
Non-GAAP cash net income
per common share -
diluted $0.17 $0.16 $0.59 $0.22
=========== =========== =========== ===========
Adjusted weighted average
number of common
shares - diluted 29,214,963 29,113,413 28,509,777 28,988,839
=========== =========== =========== ===========
(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
39.5% for the three months ended December 31, 2005 and 2006, respectively,
and 39.5% for the year ended December 31, 2005 and 2006, respectively.
BLACKBOARD INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2005 2006
--------------- ---------------
(unaudited)
(in thousands,
except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents $75,895 $30,776
Short-term investments 62,602 -
Accounts receivable, net 26,136 52,394
Inventories 1,806 2,377
Prepaid expenses and other current
assets 2,116 3,514
Deferred tax asset, current
portion 10,274 8,883
Deferred cost of revenues, current
portion 5,797 7,983
--------------- ---------------
Total current assets 184,626 105,927
Deferred tax asset, noncurrent portion 12,023 23,874
Deferred cost of revenues, noncurrent
portion 1,310 4,253
Deferred merger costs (WebCT, Inc.) 4,956 -
Restricted cash 521 1,999
Property and equipment, net 9,940 12,761
Goodwill 10,252 101,644
Intangible assets, net 560 56,841
--------------- ---------------
Total assets $224,188 $307,299
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,833 $2,238
Accrued expenses 14,083 20,519
Term loan, current portion - 246
Deferred rent, current portion 347 371
Deferred revenues, current portion 74,975 117,972
--------------- ---------------
Total current liabilities 91,238 141,346
Term loan, noncurrent portion, net of
debt discount - 23,377
Deferred rent, noncurrent portion 426 157
Deferred revenues, noncurrent portion 2,199 2,298
Stockholders' equity:
Common stock, $0.01 par value 275 282
Additional paid-in capital 210,805 231,331
Accumulated deficit (80,755) (91,492)
--------------- ---------------
Total stockholders' equity 130,325 140,121
--------------- ---------------
Total liabilities and stockholders'
equity $224,188 $307,299
=============== ===============
BLACKBOARD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended
December 31,
------------------------------
2005 2006
------------ ------------
(unaudited)
(in thousands)
Cash flows from operating activities
Net income (loss) $41,853 $(10,737)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Deferred income tax benefit (14,799) (6,657)
Excess tax benefits from stock-based
compensation - (3,317)
Amortization of debt discount - 1,701
Depreciation and amortization 6,867 8,980
Amortization of intangibles
resulting from acquisitions 266 17,969
Change in allowance for doubtful
accounts (253) (109)
Noncash stock-based compensation 75 8,056
Changes in operating assets and
liabilities:
Accounts receivable (4,197) (21,780)
Inventories 188 (571)
Prepaid expenses and other current
assets (910) (42)
Deferred cost of revenues (2,191) (5,129)
Accounts payable 719 133
Accrued expenses 2,373 (5,087)
Deferred rent (294) (245)
Deferred revenues 10,116 38,640
------------ ------------
Net cash provided by operating activities 39,813 21,805
Cash flows from investing activities
Acquisition of WebCT, Inc., net of
cash acquired - (153,547)
Payments for merger costs (WebCT, Inc.) (2,536) -
Purchase of property and equipment (7,959) (10,081)
Payments for patent enforcement costs - (276)
Purchase of held-to-maturity securities (33,296) -
Sale of held-to-maturity securities 9,750 23,546
Purchase of available-for-sale
securities (55,306) -
Sale of available-for-sale securities 36,250 39,056
------------ ------------
Net cash used in investing activities (53,097) (101,302)
Cash flows from financing activities
Proceeds from revolving credit facility (762) 10,000
Payments on revolving credit facility - (10,000)
Proceeds from term loan - 57,522
Payments on term loan - (35,600)
Release of letter of credit - 1,777
Payments on letters of credit (1,798)
Excess tax benefits from stock-based
compensation - 3,317
Proceeds from exercise of stock options 11,792 9,160
------------ ------------
Net cash provided by financing activities 11,030 34,378
------------ ------------
Net decrease in cash and cash equivalents (2,254) (45,119)
Cash and cash equivalents at beginning
of period 78,149 75,895
------------ ------------
Cash and cash equivalents at end of
period $75,895 $30,776
============ ============
Use of Non-GAAP Financial Measures
This release includes information about the Company's non-GAAP cash net
income, non-GAAP cash net income per share, non-GAAP adjusted net income and
non-GAAP adjusted net income per share which are non-GAAP financial measures.
Management believes that both measures, which exclude 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 measures. 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
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 November 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 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. Millions of people use Blackboard everyday 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.
http://www.blackboard.com
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
Form 10-Q filed on November 9, 2006 with the SEC. In addition, the forward-
looking statements included in this press release represent the Company's
views as of February 6, 2007. 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 6, 2007.
SOURCE Blackboard Inc.
CONTACT: Michael J. Stanton, Vice President, Investor Relations of
Blackboard Inc., +1-202-463-4860 ext. 2305