BBBB Blackboard (MM)

- Second Quarter Revenue Increases 36 Percent to $59.4 Million - WASHINGTON, July 31 /PRNewswire-FirstCall/ -- Blackboard Inc. (NASDAQ:BBBB) today announced financial results for the second quarter ended June 30, 2007 and updated guidance for the third quarter and the full year of 2007. Total revenue for the quarter ended June 30, 2007 was $59.4 million, an increase of 36 percent over the second quarter of 2006. Product revenues for the quarter were $52.3 million, an increase of 41 percent over the second quarter of 2006, while professional services revenues for the quarter were $7.1 million, an increase of 8 percent over the second quarter of 2006. The increase in revenue was driven by strong growth in Blackboard's annual licensing of enterprise level products and ASP hosting service to global academic institutions including clients resulting from the acquisition of WebCT, Inc. Net income was $3.4 million, resulting in net income per basic and diluted share of $0.12 for the second quarter of 2007 compared to a net loss of $6.3 million and net loss per basic and diluted share of ($0.23) for the second quarter of 2006. Non-GAAP adjusted net income for the second quarter of 2007, which excludes the amortization of acquisition-related intangible assets, net of taxes, was $6.8 million, resulting in non-GAAP adjusted net income per share of $0.23 compared to non-GAAP adjusted net loss of $2.2 million and non- GAAP adjusted net loss per share of ($0.08) for the second quarter of 2006. "I am pleased with our results in the second quarter, where we experienced strong revenue growth and expanded operating margins and earnings per share," said Michael Chasen, CEO and President of Blackboard Inc. "I am particularly encouraged by the interest we see for our Blackboard Academic Suite, particularly our newly launched offering, the Blackboard Outcomes System." Highlights from the Second Quarter of 2007 * A few of Blackboard's new and expanded client relationships in the quarter included: - U.S. Higher Education: Arkansas State University, Bethune Cookman College, Bowie State University, Clark College, Delgado Community College, Fairleigh Dickinson University, John Carroll University, Mercer University, Mott Community College, Northampton Community College, Radford University, Stetson University College of Law, University of Northern Iowa, Webster University, York College of Pennsylvania and others. - International: Auckland University of Technology, Caribbean University, Hiroshima Kokusai Gakuin University, London South Bank University, Macquarie University, Motherwell College, St Martin's College, Tamagawa University, Universidad de la Rioja, University College Cork, University of Leeds, University of Notre Dame Australia, University of the Virgin Islands, University of Trinidad and Tobago, Utrecht University and others. - K-12: Arlington Public Schools (VA), Chaminade College Prepatory (NY), Clear Creek Independent School District (TX), Fairfax County Public Schools (VA), Jefferson County Public Schools (KY), Mead School District (WA), North Carolina Virtual Public School (NC), Richland School District Two (SC), St. George's School (RI), The Lawrenceville School (NJ), The Madeira School (VA), The Roeper School (MI), The York School (Ontario, Canada), Virtual High School (MA), Walnut Valley Unified School District (CA) 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 3,756. * The Mississippi Community College System licensed a fully-hosted implementation of the Blackboard Academic Suite(TM), including the Blackboard Outcomes System for its 65,000 students across the 15-college system. * Blackboard completed the sale of $165.0 million aggregate principal amount of 3.25 percent Convertible Senior Notes due 2027, pursuant to a registration statement filed with the Securities and Exchange Commission on June 13, 2007. * Blackboard expanded the number of directors permitted to serve on the board to nine people and appointed Joseph L. Cowan, Thomas Kalinske and Beth Kaplan, to the company's Board of Directors. Outlook for the Third Quarter and Full Year of 2007 Third Quarter of 2007: * Revenue of $60.0 to $61.0 million; * Amortization of acquired intangibles of approximately $5.5 million; * Net income of $2.7 to $3.2 million, resulting in net income per diluted share of $0.09 to $0.11, which is based on an estimated 30.2 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 $6.0 to $6.5 million, resulting in non-GAAP adjusted net income per diluted share of $0.20 to $0.22 based on an estimated 30.2 million diluted shares and an effective tax rate of 40.5 percent. Full Year 2007: * Revenue of $235.0 to $237.0 million; * Amortization of acquired intangibles of approximately $22.0 million; * Net income of $11.8 to $12.8 million, resulting in net income per diluted share of $0.39 to $0.43, which is based on an estimated 30.0 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 $25.0 to $26.0 million, resulting in non-GAAP adjusted net income per diluted share of $0.83 to $0.87 based on an estimated 30.0 million diluted shares and an effective tax rate of 40.5 percent. 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/. 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 July 31, 2007 until 11:00 p.m. Eastern (8:00 p.m. Pacific) on August 7, 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 85156969. 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 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 4, 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 May 4, 2007 with the SEC. In addition, the forward-looking statements included in this press release represent the Company's views as of July 31, 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 July 31, 2007. BLACKBOARD INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share amounts) Three Months Ended Six Months Ended June 30 June 30 2006 2007 2006 2007 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) Revenues: Product $36,987 $52,299 $70,161 $102,280 Professional services 6,593 7,105 11,127 12,404 ----------- ----------- ----------- ----------- Total revenues 43,580 59,404 81,288 114,684 Operating expenses: Cost of product revenues, excludes $2,800 and $2,928 for the three months ended June 30, 2006 and 2007, respectively, and $3,733 and $5,749 for the six months ended June 30, 2006 and 2007, respectively, in amortization of acquired technology included in amortization of intangibles resulting from acquisitions shown below (1) 10,027 11,922 17,993 23,619 Cost of professional services revenues (1) 4,285 4,138 7,676 7,902 Research and development (1) 7,273 6,999 12,157 13,952 Sales and marketing (1) 15,093 16,370 27,242 31,203 General and administrative (1) 9,801 8,829 17,401 17,859 Amortization of intangibles resulting from acquisitions 5,377 5,493 7,214 10,892 ----------- ----------- ----------- ----------- Total operating expenses 51,856 53,751 89,683 105,427 ----------- ----------- ----------- ----------- (Loss) income from operations (8,276) 5,653 (8,395) 9,257 Other income (expense): Interest expense (1,318) (1,157) (1,896) (1,915) Interest income 392 507 1,633 912 Other income (expense) 179 876 (147) 949 ----------- ----------- ----------- ----------- (Loss) income before benefit (provision) for income taxes (9,023) 5,879 (8,805) 9,203 ----------- ----------- ----------- ----------- Benefit (provision) for income taxes 2,712 (2,440) 2,642 (3,820) Net (loss) income $(6,311) $3,439 $(6,163) $5,383 =========== =========== =========== =========== Net (loss) income per common share: Basic $(0.23) $0.12 $(0.22) $0.19 =========== =========== =========== =========== Diluted $(0.23) $0.12 $(0.22) $0.18 =========== =========== =========== =========== Weighted average number of common shares: Basic 27,776,658 28,706,575 27,678,634 28,525,603 =========== =========== =========== =========== Diluted 27,776,658 29,860,118 27,678,634 29,774,861 =========== =========== =========== =========== (1) Includes the following amounts related to stock-based compensation: Cost of product revenues $129 $120 $164 $249 Cost of professional services revenues 251 175 369 291 Research and development 154 170 276 287 Sales and marketing 933 1,152 1,340 1,930 General and administrative 811 1,401 1,628 2,473 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 $(9,023) $5,879 $(8,805) $9,203 Add: Amortization of intangibles resulting from acquisitions 5,377 5,493 7,214 10,892 Adjusted benefit (provision) for income taxes (3) 1,440 (4,610) 628 (8,122) ----------- ----------- ----------- ----------- Non-GAAP adjusted net (loss) income $(2,206) $6,762 $(963) $11,973 =========== =========== =========== =========== Non-GAAP adjusted net (loss) income per common share - diluted $(0.08) $0.23 $(0.03) $0.40 =========== =========== =========== =========== (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 June 30, 2006 and 2007, respectively, and approximately 39.5% and 40.4% for the six months ended June 30, 2006 and 2007, respectively. BLACKBOARD INC. CONDENSED CONSOLIDATED BALANCE SHEETS December 31, June 30, 2006 2007 ----------- ----------- (unaudited) (in thousands, except per share amounts) ASSETS Current assets: Cash and cash equivalents $30,776 $169,453 Accounts receivable, net 52,394 64,656 Inventories 2,377 1,852 Prepaid expenses and other current assets 3,514 6,369 Deferred tax asset, current portion 7,326 8,480 Deferred cost of revenues, current portion 7,983 7,966 ----------- ----------- Total current assets 104,370 258,776 Deferred tax asset, noncurrent portion 25,431 20,805 Deferred cost of revenues, noncurrent portion 4,253 3,783 Restricted cash 1,999 2,337 Property and equipment, net 12,761 14,751 Goodwill 101,644 105,730 Intangible assets, net 56,841 49,135 ----------- ----------- Total assets $307,299 $455,317 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $2,238 $3,146 Accrued expenses 20,519 19,917 Term loan, current portion 246 - Deferred rent, current portion 371 209 Deferred revenues, current portion 117,972 105,291 ----------- ----------- Total current liabilities 141,346 128,563 Term loan, noncurrent portion, net of debt discount 23,377 - Notes payable, net of debt discount - 160,485 Deferred rent, noncurrent portion 157 358 Deferred revenues, noncurrent portion 2,298 3,457 Stockholders' equity: Common stock, $0.01 par value 282 289 Additional paid-in capital 231,331 248,847 Accumulated deficit (91,492) (86,682) ----------- ----------- Total stockholders' equity 140,121 162,454 ----------- ----------- Total liabilities and stockholders' equity $307,299 $455,317 =========== =========== BLACKBOARD INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30 ----------------------------- 2006 2007 ----------- ----------- (unaudited) (unaudited) (in thousands) Cash flows from operating activities Net (loss) income $(6,163) $5,383 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Deferred income tax benefit (3,493) (1,464) Excess tax benefits from stock-based compensation (173) (4,444) Amortization of debt discount 246 806 Depreciation and amortization 4,175 5,164 Amortization of intangibles resulting from acquisitions 7,214 10,892 Change in allowance for doubtful accounts (107) 70 Noncash stock-based compensation 3,777 5,230 Changes in operating assets and liabilities: Accounts receivable (26,448) (12,332) Inventories (1,045) 525 Prepaid expenses and other current assets (442) (2,855) Deferred cost of revenues (1,187) 487 Accounts payable (128) 908 Accrued expenses (6,352) 4,488 Deferred rent (41) 39 Deferred revenues 16,296 (11,522) ----------- ----------- Net cash (used in) provided by operating activities (13,871) 1,375 Cash flows from investing activities Acquisition of WebCT, Inc., net of cash acquired (154,628) - Purchase of property and equipment (5,741) (7,089) Payments for patent enforcement costs - (2,090) 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 (97,767) (10,709) 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 (300) (24,400) Release of letters of credit 1,517 - Payments on letters of credit - (338) Excess tax benefits from stock-based compensation 173 4,444 Proceeds from exercise of stock options 4,451 7,849 ----------- ----------- Net cash provided by financing activities 63,363 148,011 ----------- ----------- Net (decrease) increase in cash and cash equivalents (48,275) 138,677 Cash and cash equivalents at beginning of period 75,895 30,776 ----------- ----------- Cash and cash equivalents at end of period $27,620 $169,453 =========== =========== DATASOURCE: Blackboard Inc. CONTACT: Michael J. Stanton, Vice President, Investor Relations of Blackboard Inc., +1-202-463-4860, ext. 2305 Web site: http://www.blackboard.com/ http://investor.blackboard.com/

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