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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