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Blackboard Inc. Reports Third Quarter 2007 Results

  • Third Quarter Revenue Increases 22 Percent to $61.6 Million
  • Company Raises Financial Guidance for Fourth Quarter and FY 2007

WASHINGTON, Nov. 1 /PRNewswire-FirstCall/ -- Blackboard Inc. (Nasdaq: BBBB) today announced financial results for the third quarter ended September 30, 2007, and updated guidance for the fourth quarter and the full year of 2007.

Total revenue for the quarter ended September 30, 2007, was $61.6 million, an increase of 22 percent over the third quarter of 2006. Product revenues for the quarter were $54 million, an increase of 24 percent over the third quarter of 2006, while professional services revenues for the quarter were $7.6 million, an increase of 9 percent over the third quarter of 2006.

Net income was $3.3 million, resulting in net income per basic and diluted share of $0.11 for the third quarter of 2007 compared to a net loss of $4.8 million and net loss per basic and diluted share of ($0.17) for the third quarter of 2006. Non-GAAP adjusted net income for the third quarter of 2007, which excludes the amortization of acquisition-related intangible assets, net of taxes, was $6.6 million, resulting in non-GAAP adjusted net income per share of $0.22 compared to non-GAAP adjusted net loss of $846,000 and non-GAAP adjusted net loss per share of ($0.03) for the third quarter of 2006.

"During the quarter, we realized strong revenue and earnings performance and generated operating cash flow in excess of $38 million," said Michael Chasen, CEO and President of Blackboard Inc. "These results combined with our outlook for the fourth quarter put us on track to have another record year with revenue expected to exceed $237 million and cash flow of approximately $60 million. Our continued financial success is giving us the opportunity to invest more meaningfully in our business, particularly in ongoing product development and client support."

    Highlights from the Third Quarter of 2007
    -- A few of Blackboard's new and expanded client relationships in the
       quarter included:

       -- U.S. Higher Education: Brigham Young University, Butte College,
          Campbell University, Central Carolina Community College, CSU - Long
          Beach, Dominican University of California, Iona College,
          Massachusetts Bay Community College, Meredith College, Southeastern
          Baptist Theological Seminary, SUNY - University at Buffalo,
          University of Georgia, University of Pittsburgh, University of
          Southern Mississippi, University of Vermont and others.

       -- International: City of Wolverhampton College, Holmes Colleges
          Australia, Kings College London, Northbrook College Sussex, Richmond
          International University in London, Taylors College, Universidad
          Nacional de Colombia, Universitaria Los Libertadores, University of
          Newcastle, University of Northampton, University of Wales, Swansea
          and others.

       -- K-12: Anderson County Schools (TN), Birdville ISD (TX), Colorado
          State Department of Education (CO), Hurst Euless Bedford Independent
          School District (TX), Institute for Educational Development (AZ),
          Madison Public Schools (CT), Montgomery County Public Schools (MD),
          New Orleans Public Schools (LA), Riverside Unified School District
          (CA), Roseville Joint Union High School District (CA), South
          Carolina Department of Education (SC) and others.

    -- Blackboard's enterprise licenses (Blackboard Learning System(TM) -
       Enterprise, Blackboard Community System(TM), Blackboard Transaction
       System(TM), Blackboard Content System(TM), Blackboard Portfolio
       System(TM) and Blackboard Outcomes System(TM)), totaled 3,797.

    -- Blackboard unveiled a new plagiarism prevention service,
       SafeAssign(TM). This new service helps prevent plagiarism by detecting
       unoriginal content in student papers and delivering reports within the
       Blackboard Learning System(TM).

    -- Blackboard partnered with Wimba to distribute the Wimba Collaboration
       Suite Express(TM) to Blackboard K-12 schools and districts in the
       United States, Canada and Mexico.

    Outlook for the Fourth Quarter and Full Year of 2007
    Fourth Quarter of 2007:
    -- Revenue of $61.0 to $62.0 million;
    -- Amortization of acquired intangibles of approximately $5.5 million;
    -- Net income of $4.0 to $4.5 million, resulting in net income per diluted
       share of $0.13 to $0.15, which is based on an estimated 30.4 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 $7.3 to $7.8 million,
       resulting in non-GAAP adjusted net income per diluted share of $0.24 to
       $0.26 based on an estimated 30.4 million diluted shares and an
       effective tax rate of 40.5 percent.

    Full Year 2007:
    -- Revenue of $237.3 to $238.3 million;
    -- Amortization of acquired intangibles of approximately $22.0 million;
    -- Net income of $12.6 to $13.1 million, resulting in net income per
       diluted share of  $0.42 to $0.44, which is based on an estimated 29.9
       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 $25.9 to $26.4 million,
       resulting in non-GAAP adjusted net income per diluted share of $0.86 to
       $0.88 based on an estimated 29.9 million diluted shares and an
       effective tax rate of 40.5 percent.

    Conference Call

Blackboard will broadcast its third-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. (ET) on November 1, 2007, until 11:00 p.m. (ET) on November 8, 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 42516653.



                                 BLACKBOARD INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

               (in thousands, except share and per share amounts)

                                 Three Months Ended       Nine Months Ended
                                     September 30            September 30
                               ----------------------- -----------------------
                                   2006        2007        2006        2007
                               ----------- ----------- ----------- -----------
                               (unaudited) (unaudited) (unaudited) (unaudited)
    Revenues:
      Product                     $43,435     $53,993    $113,597    $156,273
      Professional services         6,919       7,569      18,046      19,973
                               ----------- ----------- ----------- -----------
    Total revenues                 50,354      61,562     131,643     176,246
    Operating expenses:
      Cost of product
       revenues, excludes
       $2,800 and $2,928 for
       the three months ended
       September 30, 2006 and
       2007, respectively, and
       $6,533 and $8,676 for
       the nine months ended
       September 30, 2006 and
       2007, respectively, in
       amortization of
       acquired technology
       included in
       amortization of
       intangibles resulting
       from acquisitions shown
       below (1)                   11,354      11,955      29,348      35,611
      Cost of professional
       services revenues (1)        4,385       4,437      12,061      12,339
      Research and development (1)  8,000       6,927      20,157      20,842
      Sales and marketing (1)      16,678      18,215      43,920      49,418
      General and
       administrative (1)           9,661      10,383      27,063      28,242
      Amortization of
       intangibles resulting
       from acquisitions            5,377       5,496      12,591      16,388
                               ----------- ----------- ----------- -----------
    Total operating expenses       55,455      57,413     145,140     162,840
                               ----------- ----------- ----------- -----------
    (Loss) income from
     operations                    (5,101)      4,149     (13,497)     13,406
    Other income (expense):
      Interest expense             (1,860)     (1,920)     (3,756)     (3,835)
      Interest income                 341       2,420       1,974       3,332
      Other income (expense)         (155)      1,021        (301)      1,970
                               ----------- ----------- ----------- -----------
    (Loss) income before
      benefit (provision) for
      income taxes                 (6,775)      5,670     (15,580)     14,873
    Benefit (provision) for
     income taxes                   2,000      (2,391)      4,642      (6,211)
                               ----------- ----------- ----------- -----------
    Net (loss) income             $(4,775)     $3,279    $(10,938)     $8,662
                               =========== =========== =========== ===========
    Net (loss) income per
     common share:
      Basic                        $(0.17)      $0.11      $(0.39)      $0.30
                               =========== =========== =========== ===========
      Diluted                      $(0.17)      $0.11      $(0.39)      $0.29
                               =========== =========== =========== ===========
    Weighted average number
     of common shares:
      Basic                    27,922,879  28,956,253  27,760,438  28,668,076
                               =========== =========== =========== ===========
      Diluted                  27,922,879  30,116,974  27,760,438  29,981,276
                               =========== =========== =========== ===========

    (1) Includes the
     following amounts
     related to stock-based
     compensation:
      Cost of product revenues       $113        $183        $277        $469
      Cost of professional
       services revenues              150         181         519         471
      Research and development        168         102         444         351
      Sales and marketing             899       1,248       2,239       3,178
      General and
       administrative                 931       1,817       2,559       4,292

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

    (Loss) income before
     benefit (provision) for
     income taxes                 $(6,775)     $5,670    $(15,580)    $14,873
    Add: Amortization of
     intangibles resulting
     from acquisitions              5,377       5,496      12,591      16,388
    Adjusted benefit
     (provision) for income
     taxes (3)                        552      (4,524)      1,181     (12,646)
                               ----------- ----------- ----------- -----------
    Non-GAAP adjusted net
     (loss) income                  $(846)     $6,642     $(1,808)    $18,615
                               =========== =========== =========== ===========
    Non-GAAP adjusted net
     (loss) income per common
     share - diluted               $(0.03)      $0.22      $(0.07)      $0.62
                               =========== =========== =========== ===========

    (2) Non-GAAP adjusted net (loss) income and non-GAAP adjusted net (loss)
    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 benefit (provision) for income taxes is applied at an
    effective rate of approximately 39.5% and 40.5% for the three months
    ended September 30, 2006 and 2007, respectively, and approximately 39.5%
    and 40.5% for the nine months ended September 30, 2006 and 2007,
    respectively.



                                    BLACKBOARD INC.

                         CONDENSED CONSOLIDATED BALANCE SHEETS

                                               December 31,      September 30,
                                                   2006              2007
                                              --------------    --------------
                                                                  (unaudited)
                                                       (in thousands,
                                                  except per share amounts)
                                     ASSETS
    Current assets:
       Cash and cash equivalents                   $30,776          $208,032
       Accounts receivable, net                     52,394            65,818
       Inventories                                   2,377             2,156
       Prepaid expenses and other current
        assets                                       3,514             5,690
       Deferred tax asset,
        current portion                              7,326             8,480
       Deferred cost of revenues,
        current portion                              7,983             8,656
                                              --------------    --------------
          Total current assets                     104,370           298,832

    Deferred tax asset,
     noncurrent portion                             25,431            21,619
    Deferred cost of revenues,
     noncurrent portion                              4,253             3,658
    Restricted cash                                  1,999             2,337
    Property and equipment, net                     12,761            16,179
    Goodwill                                       101,644           105,730
    Intangible assets, net                          56,841            44,986
                                              --------------    --------------
    Total assets                                  $307,299          $493,341
                                              ==============    ==============


                      LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
       Accounts payable                             $2,238            $1,116
       Accrued expenses                             20,519            22,194
       Term loan, current portion                      246               -
       Deferred rent, current portion                  371               144
       Deferred revenues, current portion          117,972           130,507
                                              --------------    --------------
          Total current liabilities                141,346           153,961

    Term loan, noncurrent portion, net of
     debt discount                                  23,377               -
    Notes payable, net of debt discount                -             161,031
    Deferred rent, noncurrent portion                  157               739
    Deferred revenues, noncurrent portion            2,298             3,229
    Stockholders' equity:
       Common stock, $0.01 par value                   282               291
       Additional paid-in capital                  231,331           257,493
       Accumulated deficit                         (91,492)          (83,403)
                                              --------------    --------------
    Total stockholders' equity                     140,121           174,381
                                              --------------    --------------
    Total liabilities and
     stockholders' equity                         $307,299          $493,341
                                              ==============    ==============



                                 BLACKBOARD INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                       Nine Months Ended
                                                          September 30
                                                 -----------------------------
                                                     2006              2007
                                                 ------------      -----------
                                                 (unaudited)       (unaudited)
                                                          (in thousands)
    Cash flows from operating activities
    Net (loss) income                              $(10,938)           $8,662
    Adjustments to reconcile net (loss)
     income to net cash provided by
     operating activities:
      Deferred income tax benefit                    (6,078)           (2,278)
      Excess tax benefits from stock-based
       compensation                                    (248)           (6,233)
      Amortization of debt discount                     940             1,352
      Depreciation and amortization                   6,572             7,858
      Amortization of intangibles resulting
       from acquisitions                             12,591            16,388
      Change in allowance for doubtful accounts        (143)               54
      Noncash stock-based compensation                6,038             8,761
      Changes in operating assets and liabilities:
        Accounts receivable                         (30,712)          (13,478)
        Inventories                                    (637)              221
        Prepaid expenses and other current assets       496            (2,176)
        Deferred cost of revenues                    (1,745)              (78)
        Accounts payable                               (575)           (1,122)
        Accrued expenses                             (4,883)            8,038
        Deferred rent                                  (142)              355
        Deferred revenues                            40,048            13,466
                                                 ------------      -----------
    Net cash provided by operating activities        10,584            39,790

    Cash flows from investing activities
      Acquisition of WebCT, Inc., net of
       cash acquired                               (154,628)              -
      Purchase of property and equipment             (8,188)          (11,154)
      Payments for patent enforcement costs             -              (2,978)
      Purchase of intangible assets                     -              (1,530)
      Sale of held-to-maturity securities            23,546               -
      Sale of available-for-sale securities          39,056               -
                                                 ------------      -----------
    Net cash used in investing activities          (100,214)          (15,662)

    Cash flows from financing activities
      Proceeds from notes payable                       -             160,456
      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)          (24,400)
      Release of letters of credit                    1,517               -
      Payments on letters of credit                     -                (338)
      Excess tax benefits from stock-based
       compensation                                     248             6,233
      Proceeds from exercise of stock options         6,943            11,177
                                                 ------------      -----------
    Net cash provided by financing activities        50,780           153,128
                                                 ------------      -----------
    Net (decrease) increase in cash and
     cash equivalents                               (38,850)          177,256
    Cash and cash equivalents at
     beginning of period                             75,895            30,776
                                                 ------------      -----------
    Cash and cash equivalents at
     end of period                                  $37,045          $208,032
                                                 ============      ===========



    Use of Non-GAAP Financial Measures

This release includes information about the Company's non-GAAP adjusted net (loss) income and non-GAAP adjusted net (loss) income per share, which are non-GAAP financial measures. Management believes that both measures, which exclude amortization of acquired intangibles 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 that can be effectively managed. Because 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 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 August 10, 2007, 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 August 7, 2007 with the SEC. In addition, the forward-looking statements included in this press release represent the Company's views as of November 1, 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 November 1, 2007.

SOURCE Blackboard Inc.

CONTACT: Michael Stanton of Blackboard Inc., +1-202-463-4860 ext. 2305