- Third Quarter Revenue Increases 21% to $35.9 Million -
- Net Income Increases 109% to $7.3 Million -
- Company Raises Guidance for Fourth Quarter and Full Year 2005 -
WASHINGTON, Nov. 1 - Blackboard Inc. (Nasdaq: BBBB) today announced financial results for the third quarter ended September 30, 2005.
Total revenue for the quarter ended September 30, 2005 was $35.9 million, an increase of 21% over the third quarter of 2004. Product revenue for the quarter was $31.3 million, an increase of 23% over the third quarter of 2004, while professional services revenue for the quarter was $4.6 million, an increase of 7% over the third quarter of 2004. Operating income was $6.6 million for the third quarter of 2005 compared to operating income of $3.1 million for the third quarter of 2004. Net income was $7.3 million for the third quarter of 2005 compared to net income of $3.5 million for the third quarter of 2004. Cash net income for the third quarter of 2005, which excludes the amortization of acquisition-related intangible assets, net of taxes, was $7.3 million. Net income per diluted share and cash net income per diluted share were $0.25 in the third quarter of 2005.
"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 strong cash-flow of more than $22 million."
Total revenue for the first nine months ended September 30, 2005 was $99.9 million, an increase of 23% over the first nine months of 2004. Operating income was $17.5 million for the first nine months of 2005 compared to operating income of $5.6 million for the first nine months of 2004. Net income was $18.7 million for the first nine months of 2005 compared to net income of $5.3 million for the first nine months of 2004. Cash net income for the first nine months of 2005, which excludes the amortization of acquisition-related intangible assets, net of taxes, was $18.9 million. Net income per diluted share was $0.66 and cash net income per diluted share was $0.67 for the first nine months of 2005.
Blackboard provides cash net income in this press release as additional information regarding Blackboard's operating results. These measures are not in accordance with, nor are they an alternative for, generally accepted accounting principles (GAAP) and may be different from cash net income and other non-GAAP measures used by other companies. Blackboard believes that this presentation of cash net income and cash net income per share provides useful information to investors regarding additional financial and business trends relating to Blackboard's financial condition and results of operations.
Highlights from the Third Quarter 2005
* Blackboard's new and expanding client relationships in the quarter
included:
* U.S. Higher Education Market: Bellevue University, Boise State
University, Columbus State Community College, Cornell University,
CSU-Fullerton, Minnesota School of Business, Morehead State
University, Oklahoma Christian University, Troy University,
University of Alabama of Tuscaloosa, Valley Forge Christian College,
Wayne County Community College District and Wayne State University.
* International Markets: City College Norwich, City of Bristol
College, College of the Bahamas, Grenoble Ecole de Management,
Hertie School of Governance, Kyoto College of Economics, Newcastle
College, Shujitsu University, Singapore Polytechnic, Southern Cross
University, The Peoples College, Nottingham, Universitaet Potsdam
and University of the Arts, London.
* K-12 Market: Acalanes Union High School District, Brophy College
Preparatory, Broward County Public Schools, Fairfax County Public
Schools, Greater Egg Harbor Regional High School District, Ozark
City Schools, Palo Alto Unified School District, Park Hill School
District, Sarasota County Public Schools, School District of the
City of Erie, Tabor Academy and Western Pennsylvania Cyber Charter
School
* As of the third quarter, more than 1,000 academic institutions were
running the enterprise version of the Blackboard Learning System(TM).
* Blackboard held the Third 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.
Outlook for the Fourth Quarter and Full Year of 2005
The following forward-looking statements regarding future financial performance are based on current expectations and actual results may differ materially. These statements do not reflect the potential impact of mergers, acquisitions or other business combinations that may be completed after the date of this release, including the pending acquisition of WebCT, Inc.
Blackboard expects that its effective tax rate will continue to be in the range of 4 to 7 percent through the end of 2005. Additionally, the Company's guidance does not incorporate the impact of expensing stock-based compensation under FAS 123(R), which the Company will adopt beginning January 1, 2006.
For the fourth quarter of 2005, we expect:
* Revenue to be approximately $34.9 to $35.4 million;
* Net income to be approximately $7.3 to $7.6 million, resulting in
diluted EPS of approximately $0.25 to $0.26 per share. This is based on
an estimated 29.2 million diluted shares and a 4% effective tax rate for
the quarter; and
* Cash net income to be approximately $7.4 to $7.7 million after adding
back the tax adjusted amortization of intangibles of approximately
$70,000, which would result in cash EPS of approximately $0.25 to $0.26
per share. This is based on an estimated 29.2 million diluted shares
and an estimated 4% effective tax rate for the quarter.
For the full year of 2005, we expect:
* Revenue to be approximately $134.8 to $135.3 million;
* Net income to be approximately $25.9 to $26.3 million, resulting in
diluted EPS of approximately $0.91 to $0.92 per share, which is based on
an estimated 28.5 million diluted shares and a 4% effective tax rate for
the full year; and
* Cash net income to be approximately $26.3 to $26.6 million after adding
back the tax adjusted amortization of intangibles of approximately
$300,000, which would result in cash EPS of approximately $0.92 to $0.93
per share based on an estimated 28.5 million diluted shares and an
estimated 4% effective tax rate for the full year.
The Company's fourth quarter and full year guidance does not currently reflect any benefits from the potential reversal of valuation allowances on our deferred tax assets.
Conference Call
Blackboard will broadcast its third quarter conference call live over the Internet today beginning at 5 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 telephone replay of the call will be available from approximately 7:00 p.m. Eastern (4 p.m. Pacific) on November 1, 2005 until 11:00 p.m. Eastern (8:00 p.m. Pacific) on November 8, 2005. To listen to the replay, participants in the U.S. and Canada should dial 888-286-8010, and international participants should dial 617-801-6888. The conference ID for the replay is 14609542.
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. With two product suites, the Blackboard Academic Suite (TM) and the Blackboard Commerce Suite (TM), Blackboard is 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 and Asia.
Blackboard
Educate. Innovate. Everywhere.
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 most recent 10-Q filed with the SEC. In addition, the forward-looking statements included in this press release represent the Company's views as of November 1, 2005. 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, 2005.
BLACKBOARD INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2004 2005 2004 2005
----------- ----------- ----------- -----------
(in thousands, (in thousands,
except share and except share and
per share amounts) per share amounts)
Revenues:
Product $ 25,468 $ 31,301 $ 71,416 $ 88,341
Professional services 4,308 4,626 9,934 11,577
----------- ----------- ----------- -----------
Total revenues 29,776 35,927 81,350 99,918
Operating expenses:
Cost of product revenues,
excludes amortization of
acquired technology
included in amortization
of intangibles resulting
from acquisitions shown
below 6,813 7,507 18,830 21,818
Cost of professional
services revenues 2,378 2,733 6,004 7,499
Research and development 3,537 3,657 10,427 10,162
Sales and marketing 9,074 10,323 26,932 28,269
General and administrative 3,957 5,013 10,742 14,409
Amortization of
intangibles resulting
from acquisitions 879 66 2,638 200
Stock-based compensation 44 19 155 55
----------- ----------- ----------- -----------
Total operating expenses 26,682 29,318 75,728 82,412
----------- ----------- ----------- -----------
Income from operations 3,094 6,609 5,622 17,506
Other income (expense):
Interest expense (27) (9) (155) (39)
Interest income 163 932 212 1,939
----------- ----------- ----------- -----------
Income before benefit
(provision) for income
taxes 3,230 7,532 5,679 19,406
Benefit (Provision) for
income taxes 250 (263) (362) (664)
----------- ----------- ----------- -----------
Net income 3,480 7,269 5,317 18,742
Dividends on and accretion
of convertible
preferred stock - - (6,344) -
----------- ----------- ----------- -----------
Net income (loss)
attributable to common
stockholders $ 3,480 $ 7,269 $ (1,027) $ 18,742
=========== =========== =========== ===========
Net income (loss)
attributable to common
stockholders
per common share:
Basic $ 0.14 $ 0.27 $ (0.08) $ 0.71
=========== =========== =========== ===========
Diluted $ 0.12 $ 0.25 $ (0.08) $ 0.66
=========== =========== =========== ===========
Weighted average number
of common shares:
Basic 25,683,200 26,986,242 12,868,696 26,529,922
=========== =========== =========== ===========
Diluted 27,906,730 28,829,768 12,868,696 28,240,576
=========== =========== =========== ===========
Reconciliation of cash net
income to net income (1):
Net income (loss)
attributable to common
stockholders $ 3,480 $ 7,269 $ (1,027) $ 18,742
Add: Dividends on and
accretion of convertible
preferred stock - - 6,344 -
---------- ---------- ---------- ----------
Net income 3,480 7,269 5,317 18,742
Add: Amortization of
intangibles resulting
from acquisitions, net of
taxes (2) 879 64 2,470 193
---------- ---------- ---------- ----------
Cash net income $ 4,359 $ 7,333 $ 7,787 $ 18,935
=========== =========== =========== ===========
Cash net income per
common share - diluted $ 0.16 $ 0.25 $ 0.32 $ 0.67
=========== =========== =========== ===========
Proforma weighted average
number of common
shares - diluted (3) 27,906,730 28,829,768 24,514,850 28,240,576
=========== =========== =========== ===========
(1) Cash net income is not a generally accepted accounting principle or
GAAP measure. However, management believes based on feedback from
investors, analysts and other users of the Company's financial
information that cash net income is an appropriate measure of the
operating performance of the Company. Further, management believes,
based on feedback from analysts, that cash net income is an important
measure used by analysts in their earnings estimates of the Company,
which is used by investors and potential investors. This measure
should be considered in addition to, not as a substitute for or
superior to, net income, net income (loss) attributable to common
stockholders, cash flows and other measures of financial performance
prepared in accordance with generally accepted accounting principles.
Because cash net income is used by some investors, analysts and other
users of the Company's financial information as performance measures,
they are reconciled herein to net income.
(2) The amortization of intangibles is net of taxes, applied at an
effective rate of 0.0% and 3.5% for the three months ended September
30, 2004 and 2005, respectively, and 6.4% and 3.4% for the nine months
ended September 30, 2004 and 2005, respectively.
(3) Proforma weighted average number of common shares assumes i) the
conversion of all redeemable preferred stock and Series E warrants as
of January 1 for the respective periods in 2004 and ii) the conversion
of accrued dividend accretion on the preferred shares based on a
conversion price of $14.00 per share for 2004 and the average accrued
dividend accretion balance for the 2004 periods presented.
BLACKBOARD INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30,
2004 2005
-------------- --------------
(unaudited)
(in thousands,
except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents $ 78,149 $ 84,837
Short-term investments 20,000 37,780
Accounts receivable, net 21,686 33,200
Inventories 1,994 2,053
Prepaid expenses and other current
assets 1,727 2,313
Deferred cost of revenues, current
portion 4,547 5,288
-------------- --------------
Total current assets 128,103 165,471
Deferred cost of revenues, noncurrent
portion 369 1,587
Property and equipment, net 8,848 10,541
Goodwill 10,252 10,252
Intangible assets, net 826 626
-------------- --------------
Total assets $ 148,398 $ 188,477
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,114 $ 1,225
Accrued expenses 9,290 10,087
Equipment note, current portion 525 338
Deferred revenues, current portion 63,901 77,536
-------------- --------------
Total current liabilities 74,830 89,186
Equipment note, noncurrent portion 237 -
Deferred rent 1,067 846
Deferred revenues, noncurrent portion 3,157 2,319
Stockholders' equity:
Common stock, $0.01 par value 260 270
Additional paid-in capital 191,664 199,876
Deferred stock compensation (209) (154)
Accumulated deficit (122,608) (103,866)
-------------- --------------
Total stockholders' equity 69,107 96,126
-------------- --------------
Total liabilities and stockholders'
equity $ 148,398 $ 188,477
============== ==============
BLACKBOARD INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
----------------------------
2004 2005
---------- ----------
(in thousands)
Cash flows from operating activities
Net income $ 5,317 $ 18,742
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 4,669 5,003
Amortization of intangibles resulting from
acquisitions 2,638 200
Change in allowance for doubtful accounts 186 (24)
Noncash stock compensation related to
options issued to nonemployees 69 -
Noncash deferred stock amortization 86 55
Changes in operating assets and liabilities:
Accounts receivable (2,805) (11,490)
Inventories (72) (59)
Prepaid expenses and other current assets (469) (586)
Deferred cost of revenues (1,659) (1,959)
Accounts payable (419) 111
Accrued expenses (950) 797
Deferred rent (19) (221)
Deferred revenues 14,057 12,797
---------- ----------
Net cash provided by operating activities 20,629 23,366
Cash flows from investing activities
Purchase of property and equipment (6,356) (6,696)
Purchase of held-to-maturity securities - (27,230)
Sale of held-to-maturity securities - 5,750
Purchase of available-for-sale securities - (21,900)
Sale of available-for-sale securities - 25,600
---------- ----------
Net cash used in investing activities (6,356) (24,476)
Cash flows from financing activities
Payments on equipment notes (710) (424)
Payments on line of credit (7,880) -
Payments on note payable (2,000) -
Proceeds from issuance of common stock,
net of issuance costs 50,896 -
Proceeds from exercise of Series D Warrants 248 -
Proceeds from exercise of stock options 1,063 8,222
---------- ----------
Net cash provided by financing activities 41,617 7,798
---------- ----------
Net increase in cash and cash equivalents 55,890 6,688
Cash and cash equivalents at beginning
of period 30,456 78,149
---------- ----------
Cash and cash equivalents at end of period $ 86,346 $ 84,837
========== ==========
