Blackboard Inc. Reports Second Quarter 2008 Results
- Company Raises Cash Flow from Operations Guidance -
- Revenue Increases 27 Percent to $75.5 Million -
WASHINGTON, Aug. 6 -- Blackboard Inc. (NASDAQ:BBBB)
today announced financial results for the second quarter ended June 30, 2008 and updated guidance for the third quarter and the full year of 2008.
Total revenue for the quarter ended June 30, 2008 was $75.5 million, an increase of 27 percent over the second quarter of 2007. Product revenues for the quarter were $68.4 million, an increase of 31 percent over the second quarter of 2007, while professional services revenues for the quarter were $7.2 million, an increase of 1 percent over the second quarter of 2007. The increase in product revenue was driven by continued strong growth in Blackboard's annual licensing of enterprise level products and managed hosting service to global academic clients. Our revenue and earnings would have been stronger in the quarter but the Company's financials were impacted by the delay in the release of the Blackboard Transaction System(TM) 3.0.
Net income was $1.0 million, resulting in net income per basic and diluted share of $0.03 for the second quarter of 2008 compared to net income of $3.4 million and net income per basic and diluted share of $0.12 for the second quarter of 2007. Non-GAAP adjusted net income for the second quarter of 2008, which excludes the amortization of acquisition-related intangible assets, net of taxes, was $6.9 million, resulting in non-GAAP adjusted net income per diluted share of $0.22 compared to non-GAAP adjusted net income of $6.8 million and non-GAAP adjusted net income per diluted share of $0.23 for the second quarter of 2007. Included in the results for the second quarter of 2008 is a $3.3 million benefit to operating income from the patent judgment against Desire2Learn, Inc. as well as a $4.0 million benefit to other income from a gain on investment.
"We had strong product sales in the second quarter driven by an increasing number of large deals including our initial statewide wins," said Michael Chasen, CEO and President of Blackboard Inc. "Sales during the quarter were particularly strong in the U.S. higher education market and once again, we experienced increased demand for our managed hosting services."
Highlights from the Second Quarter of 2008
-- A few of Blackboard's new and expanded client relationships in the
quarter included:
-- U.S. Higher Education: Charleston Blackhawk Technical College,
Brookdale Community College, Calhoun Community College, Centennial
College, Christopher Newport University, Embry-Riddle Aeronautical
University, Frederick Community College, Maricopa Community College,
Northwest Arkansas Community College, Palm Beach Community College,
Santa Barbara City College, Shawnee Community College, Temple
University, University of North Carolina - General Administration,
University of Great Falls, University of Saint Francis and others.
-- International: Aston University, Imperial College London, Leiden
University, Northumberland College, SENA, Sheffield Hallam
University, South Wales Higher Education Partnership, Spiru Haret
University, University of Manchester and others.
-- K-12: Baltimore City Public Schools (MD), Broward County Public
Schools (FL), Clear Creek Independent School District (TX), Fairfax
County Public Schools (VA), Indian Oasis-Baboquivari Unified School
District (AZ), Naperville CUSD 203 (IL), Poway Unified School
District (CA), Tulsa Technology Center (OK), Volusia County Public
Schools (FL), Walnut Valley Unified School District (CA), Westport
Public Schools (CT) and others.
-- Blackboard won several key statewide deals in the quarter including:
-- Blackboard was selected by the State of New Mexico to partner in a
landmark initiative to deploy a single, statewide e-learning
platform that will be the first of its kind to connect teaching,
learning, and training for the state's K-20, adult education, and
government communities.
-- The State of Mississippi has implemented the Blackboard's Connect
service to provide the Executive Director of Mississippi Emergency
Management Agency (MEMA) and the Governor of Mississippi the ability
to communicate with residents and staff regarding time-sensitive
incidents.
-- The State of Florida selected Blackboard for a pilot program
allowing the Florida Division of Emergency Management and four
Florida counties, including Brevard County, Orange County, Pasco
County, and Polk County, to use the Blackboard Connect service for
time-sensitive alerts and notifications.
-- Other key highlights of the quarter include:
-- Nearly 200 new Blackboard Connect deals closed in the second quarter
with 35 Blackboard Connect cross-sell deals to existing Blackboard
U.S. higher education clients.
-- Blackboard announced the formation of the Blackboard K-12 Advisory
Board and appointed five initial members including, Thomas G.
Carroll, PhD, Therese "Terry" Crane, Ed.D., Joe A. Hairston, Ed.D.,
Linda Pittenger and Paul E. Resta, PhD. Members of the K-12
Advisory Board will help Blackboard identify and respond to critical
issues confronting today's educators, track and discuss developing
trends, and advise on future partnerships and alliances.
Outlook for the Third Quarter and Full Year of 2008
Third Quarter of 2008:
-- Revenue of $82.0 to $84.0 million;
-- Amortization of acquired intangibles of approximately $9.9 million;
-- Net loss of ($600,000) to net income of $700,000, resulting in net loss per basic share of ($0.02) to net income per diluted share of $0.02, which is based on an estimated 31.3 million basic shares and 32.3 million diluted shares, respectively, and an estimated effective tax rate of approximately zero percent;
-- Non-GAAP adjusted net income, excluding the amortization of acquired intangibles and the associated tax impact, of $5.8 to $6.6 million, resulting in non-GAAP adjusted net income per diluted share of $0.18 to $0.20 based on an estimated 32.3 million diluted shares and an estimated effective tax rate of 37 percent.
Full Year 2008:
-- Revenue of $312.0 to $316.0 million;
-- Amortization of acquired intangibles of approximately $38.3 million;
-- Stock-based compensation expense of approximately $15.5 million;
-- Net loss of $(300,000) to net income of $2.3 million, resulting in net loss per basic share of ($0.01) to net income per diluted share of $0.07, which is based on an estimated 31.8 million basic shares and 32.0 million diluted shares, respectively, and an estimated effective tax rate of approximately zero percent;
-- Non-GAAP adjusted net income excluding the amortization of acquired intangibles and the associated tax impact, of $23.5 to $25.1 million, resulting in non-GAAP adjusted net income per diluted share of $0.73 to $0.78 based on an estimated 32.0 million diluted shares and an estimated effective tax rate of 37 percent (which reflects an effective rate of 28 percent for the fourth quarter of 2008);
-- Cash flow from operations of $75.0 to $80.0 million.
Conference Call
Blackboard will broadcast its second 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/.
A replay of the call will be available via telephone at approximately 7:00 p.m. (ET) on August 6, 2008. 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 83748927.
BLACKBOARD INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Three Months Ended Six Months Ended
June 30 June 30
----------------------- ----------------------
2007 2008 2007 2008
----------- ----------- ----------- ----------
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues:
Product $52,299 $68,377 $102,280 $131,486
Professional services 7,105 7,170 12,404 12,537
----------- ----------- ----------- ----------
Total revenues 59,404 75,547 114,684 144,023
Operating expenses:
Cost of product revenues,
excludes $2,928 and
$4,572 for the three
months ended June 30,
2007 and 2008,
respectively, and $5,749
and $8,660 for the six
months ended June 30, 2007
and 2008, respectively,
in amortization of
acquired technology
included in
amortization of
intangibles resulting
from acquisitions shown
below (1) 11,922 18,000 23,619 33,971
Cost of professional
services revenues (1) 4,138 5,134 7,902 10,084
Research and
development (1) 6,999 9,944 13,952 19,677
Sales and marketing (1) 16,370 22,763 31,203 43,620
General and
administrative (1) 8,829 12,461 17,859 25,215
Proceeds from patent
judgment - (3,313) - (3,313)
Amortization of
intangibles resulting
from acquisitions 5,493 9,729 10,892 18,408
----------- ----------- ----------- ----------
Total operating expenses 53,751 74,718 105,427 147,662
----------- ----------- ----------- ----------
Income (loss) from
operations 5,653 829 9,257 (3,639)
Other income (expense):
Interest expense (1,157) (1,917) (1,915) (3,747)
Interest income 507 258 912 1,148
Other income 876 3,780 949 4,090
----------- ----------- ----------- ----------
Income (loss) before
provision for income
taxes 5,879 2,950 9,203 (2,148)
Provision for income taxes (2,440) (1,913) (3,820) (108)
----------- ----------- ----------- ----------
Net income (loss) $3,439 $1,037 $5,383 $(2,256)
=========== =========== =========== ==========
Net income (loss) per
common share:
Basic $0.12 $0.03 $0.19 $(0.07)
=========== =========== =========== ==========
Diluted $0.12 $0.03 $0.18 $(0.07)
=========== =========== =========== ==========
Weighted average number
of common shares:
Basic 28,706,575 30,981,113 28,525,603 30,574,931
=========== =========== =========== ==========
Diluted 29,860,118 31,939,435 29,774,861 30,574,931
=========== =========== =========== ==========
(1) Includes the
following amounts
related to stock-based
compensation:
Cost of product revenues $120 $258 $249 $435
Cost of professional
services revenues 175 69 291 232
Research and development 170 190 286 352
Sales and marketing 1,152 1,665 1,930 3,081
General and
administrative 1,401 1,615 2,474 3,378
Reconciliation of income
(loss) before provision
for income taxes to
non-GAAP adjusted net
income (2):
Income (loss) before
provision for income
taxes $5,879 $2,950 $9,203 $(2,148)
Add: Amortization of
intangibles resulting
from acquisitions 5,493 9,729 10,892 18,408
Adjusted provision for
income taxes (3) (4,610) (5,756) (8,122) (7,379)
----------- ----------- ----------- ----------
Non-GAAP adjusted net
income $6,762 $6,923 $11,973 $8,881
=========== =========== =========== ==========
Non-GAAP adjusted net
income per common
share - diluted $0.23 $0.22 $0.40 $0.28
=========== =========== =========== ==========
(2) 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.
(3) Adjusted provision for income taxes is applied at an effective rate of
approximately 40.5% and 45.4% for the three months ended June 30, 2007
and 2008, respectively, and approximately 40.4% and 45.4% for the six
months ended June 30, 2007 and 2008, respectively.
BLACKBOARD INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30,
2007 2008
------------ -----------
(unaudited)
(in thousands,
except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents $206,558 $55,295
Accounts receivable, net 52,846 94,116
Inventories 2,089 1,781
Prepaid expenses and other current
assets 5,255 9,845
Deferred tax asset, current
portion 6,549 7,213
Deferred cost of revenues 6,877 5,854
------------ -----------
Total current assets 280,174 174,104
Deferred tax asset, noncurrent portion 34,154 15,662
Common stock warrant - 3,980
Restricted cash 4,015 4,930
Property and equipment, net 18,584 33,310
Goodwill and intangible assets, net 168,349 359,393
------------ -----------
Total assets $505,276 $591,379
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $3,747 $4,053
Accrued expenses 24,182 25,423
Deferred rent, current portion 160 336
Deferred revenues, current portion 126,600 137,135
------------ -----------
Total current liabilities 154,689 166,947
Notes payable, net of debt discount 161,519 162,406
Deferred rent, noncurrent portion 1,469 7,479
Deferred revenues, noncurrent portion 2,925 5,582
Stockholders' equity:
Common stock, $0.01 par value 292 311
Additional paid-in capital 263,582 330,110
Accumulated deficit (79,200) (81,456)
------------ -----------
Total stockholders' equity 184,674 248,965
------------ -----------
Total liabilities and stockholders'
equity $505,276 $591,379
============ ===========
BLACKBOARD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30
---------------------------
2007 2008
---------- ----------
(unaudited) (unaudited)
(in thousands)
Cash flows from operating activities
Net income (loss) $5,383 $(2,256)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Deferred income tax benefit (1,464) (2,914)
Excess tax benefits from stock-based
compensation (4,444) (1,021)
Amortization of debt discount 806 887
Depreciation and amortization 5,164 7,389
Amortization of intangibles
resulting from acquisitions 10,892 18,408
Change in allowance for doubtful
accounts 70 335
Noncash stock-based compensation 5,230 7,478
Gain on common stock warrant - (3,980)
Changes in operating assets and
liabilities:
Accounts receivable (12,332) (33,482)
Inventories 525 308
Prepaid expenses and other current assets (2,855) (3,516)
Deferred cost of revenues 487 1,023
Accounts payable 908 (2,544)
Accrued expenses 4,488 (295)
Deferred rent 39 6,186
Deferred revenues (11,522) 3,148
---------- ----------
Net cash provided by (used in)
operating activities 1,375 (4,846)
Cash flows from investing activities
Purchases of property and equipment (7,089) (17,358)
Payments for patent enforcement
costs (2,090) (2,448)
Purchase of intangible assets (1,530) -
Acquisitions, net of cash acquired - (132,902)
---------- ----------
Net cash used in investing activities (10,709) (152,708)
Cash flows from financing activities
Proceeds from notes payable 160,456 -
Payments on term loan (24,400) -
Payments on letters of credit (338) (27)
Excess tax benefits from stock-based
compensation 4,444 1,021
Proceeds from exercise of stock options 7,849 5,297
---------- ----------
Net cash provided by financing activities 148,011 6,291
---------- ----------
Net increase (decrease) in cash and
cash equivalents 138,677 (151,263)
Cash and cash equivalents at
beginning of period 30,776 206,558
---------- ----------
Cash and cash equivalents at end of period $169,453 $55,295
========== ==========
Use of Non-GAAP Financial Measures
This release includes information about the Company's 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 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 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 May 9, 2008, 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 global leader in enterprise technology and innovative solutions that improve the experience of millions of students and learners around the world every day. Blackboard's solutions allow thousands of higher education, K-12, professional, corporate, and government organizations to extend teaching and learning online, facilitate campus commerce and security, and communicate more effectively with their communities. Founded in 1997, Blackboard is headquartered in Washington, D.C., with offices in North America, Europe, Asia and Australia.
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 May 9, 2008 with the SEC. In addition, the forward-looking statements included in this press release represent the Company's views as of August 6, 2008. The Company anticipates that subsequent events and developments will cause the Company's views to change. However, while the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. These forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to August 6, 2008.
