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Blackboard Inc. Reports First Quarter Results

Revenue of $37.7 Million; Company Raises Financial Guidance for 2006

WASHINGTON, May 8 /PRNewswire-FirstCall/ -- Blackboard Inc. (Nasdaq: BBBB) today announced financial results for the first quarter ended March 31, 2006 and updated guidance for the second quarter and the full year of 2006.

Blackboard's first quarter revenue was $37.7 million. Product revenue was $33.2 million, an increase of 20 percent over the $27.7 million of product revenue last year. Professional services revenue for the quarter was $4.5 million, which represents an increase of 39 percent over the first quarter of 2005. Net income in the first quarter was $148,000, resulting in net income of $0.01 per diluted share. Cash net income, a non-GAAP financial measure, which excludes the amortization of intangibles, stock-based compensation expense and the associated tax impact, was $2.2 million resulting in cash net income per diluted share of $0.07.

The financial results for the first quarter reflect the inclusion of WebCT since February 28, 2006. Due to purchase accounting adjustments, Blackboard's 2006 revenue related to WebCT deferred revenue at the date of the merger will be lower than what WebCT would have recognized as an independent company. When former WebCT clients renew their license agreements, Blackboard will recognize revenue for the full value of these agreements over the term of the renewal, which is generally one year. Blackboard's 2006 results will also be negatively impacted by merger and integration related expenses from the WebCT acquisition.

"I am very pleased with the continuing strength of our business performance and financial results in the first quarter of 2006," said Michael Chasen CEO of Blackboard Inc. "Demand for Blackboard products and professional services were driven by a combination of existing and new client subscribers."

Merger with WebCT Complete, Outlook Positive

Commenting on the integration of WebCT, Inc., Peter Repetti, Blackboard's CFO, stated, "Our most significant accomplishment in the quarter was the successful completion of our merger with WebCT. The integration to date is proceeding smoothly, and we believe that we are effectively building on the unique strengths of the combined organization. Based on our positive momentum, we have raised our quarterly and full-year financial guidance for 2006."

    Quarterly Highlights

    * A few of Blackboard's new and expanded client relationships in the
      quarter included:
      - U.S. Higher Education: Albany College of Pharmacy, Campbell
        University, College of the Canyons, Florida Atlantic University, Fox
        Valley Technical College, Loyola University New Orleans, Mills
        College, Oberlin College, Oklahoma Christian University, Rowan-
        Cabarrus Community College, University of Michigan - Flint, Waukesha
        County Technical College and others.
      - International: Canterbury Christ Church University, College of the
        Bahamas, Heriot-Watt University, Kings College, New College Durham,
        Niigata University, Shizuoka University, Spiru Haret University, and
        others.
      - K-12: Branson School Online, Hudson County Schools of Technology, Kane
        County Regional Office of Education, Lubbock Independent School
        District, and others.
    * On February 28, 2006, Blackboard completed its merger with WebCT, Inc.
    * The Company hosted BbWorld(TM) 2006, Blackboard's 8th Annual Users
      Conference, which attracted more than 1,800 client and partner
      attendees.
    * In March, the Company announced the launch of the Blackboard Beyond
      Initiative.  The Blackboard Beyond Initiative calls for the creation of
      a series of Web properties that connect the institutions, faculty and
      students who use Blackboard worldwide across education segments and
      disciplines.

    Financial Guidance for the Second Quarter and Full Year 2006

    Second Quarter of 2006:

    * Revenue of $40.5 to $41.5 million;
    * Stock-based compensation expense of $2.5 million;
    * Amortization of acquired intangibles of $5.4 million;
    * Net loss of ($8.7) to ($8.3) million, resulting in net loss per diluted
      share of ($0.30) to ($0.28), which is based on an estimated 29.3 million
      diluted shares and an effective tax rate of 32 percent; and
    * Cash net loss, which is a non-GAAP financial measure, of ($3.0) to
      ($2.6) million, which excludes amortization of intangibles, stock-based
      compensation expense, and the associated tax impact, resulting in cash
      net loss per diluted share of ($0.10) to ($0.09) based on an estimated
      29.3 million diluted shares and an effective tax rate of 39.5 percent.

    Full year 2006:

    * Revenue of $169.7 to $172.7 million;
    * Stock-based compensation expense of $9.6 million;
    * Amortization of acquired intangibles of $18 million;
    * Net loss of ($15.9) to ($14.7) million, resulting in net loss per
      diluted share of ($0.54) to ($0.50), which is based on an estimated
      29.6 million diluted shares and an effective tax rate of 33.0 percent;
      and
    * Cash net income, which is a non-GAAP financial measure, of $2.5 to $3.7
      million, which excludes amortization of intangibles, stock-based
      compensation expense, and the associated tax impact, resulting in cash
      net income per diluted share of $0.08 to $0.13 based on an estimated
      29.6 million diluted shares and an effective tax rate of 39.5 percent.




                               BLACKBOARD INC.

               UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                     Three Months Ended
                                                          March 31,
                                                -----------------------------
                                                    2005              2006
                                                -----------       -----------
                                               (in thousands, except share and
                                                      per share amounts)
    Revenues:
      Product                                      $27,687           $33,174
      Professional services                          3,255             4,534
                                                -----------       -----------
    Total revenues                                  30,942            37,708
    Operating expenses:
      Cost of product revenues, excludes
       amortization of acquired technology
       included in amortization of intangibles
       resulting from acquisitions shown below
       and includes $35 in stock based
       compensation for 2006                         7,216             7,966
      Cost of professional services revenues,
       includes $118 in stock based compensation
       for 2006                                      2,214             3,391

      Research and development, includes $122 in
       stock based compensation for 2006             3,198             4,884

      Sales and marketing, includes $407 in stock
       based compensation for 2006                   8,484            12,149
      General and administrative, includes $18
       and $817 in stock based compensation for
       2005 and 2006, respectively                   4,623             7,600
      Amortization of intangibles resulting from
       acquisitions                                     68             1,837
                                                -----------       -----------
    Total operating expenses                        25,803            37,827
                                                -----------       -----------
    Income from operations                           5,139              (119)
    Other income (expense):
      Interest expense                                 (18)             (578)
      Interest income                                  483             1,241
      Other expense                                      -              (326)
                                                -----------       -----------
    Income before provision for income taxes         5,604               218
    Provision for income taxes                        (194)              (70)
                                                -----------       -----------
    Net income                                      $5,410              $148
    Net income per common share
      Basic                                          $0.21             $0.01
                                                ===========       ===========
      Diluted                                        $0.20             $0.01
                                                ===========       ===========
    Weighted average number of common shares:
      Basic                                     26,076,137        27,577,200
                                                ===========       ===========
      Diluted                                   27,657,202        28,757,423
                                                ===========       ===========

    Reconciliation of income before provision
     for income taxes to cash net income (1):

    Income before provision for income taxes        $5,604              $218
    Add: Amortization of intangibles resulting
     from acquisitions                                  68             1,837
    Add: Stock-based compensation                       18             1,499
    Proforma provision for income taxes (2)           (214)           (1,404)
                                                -----------       -----------
    Cash net income                                 $5,476            $2,150
                                                ===========       ===========
    Cash net income per common share - diluted       $0.20             $0.07
                                                ===========       ===========
    Proforma weighted average number of common
     shares - diluted                           27,657,202        28,757,423
                                                ===========       ===========

    (1) Cash net income is not a generally accepted accounting principle or
        GAAP measure.  However, management believes that, based on feedback
        from investors, analysts and other users of the Company's financial
        information, cash net income is an appropriate measure of the
        operating performance of the Company.  Further, management believes,
        based on feedback from analysts, 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, cash flows and other measures of financial
        performance prepared in accordance with GAAP.  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) Proforma provision for income taxes is applied at an effective rate
        of approximately 3.8% and 39.5% for the three months ended March 31,
        2005 and 2006, respectively.




                               BLACKBOARD INC.

                    CONDENSED CONSOLIDATED BALANCE SHEETS


                                                December 31,        March 31,
                                                    2005              2006
                                                ------------       -----------
                                                                   (unaudited)
                                                        (in thousands,
                                                    except per share amounts)
                                     ASSETS
    Current assets:
       Cash and cash equivalents                   $75,895           $32,546
       Short-term investments                       62,602               -
       Restricted cash                                 521             1,978
       Accounts receivable, net                     26,136            26,283
       Inventories                                   1,806             2,347
       Prepaid expenses and other current assets     2,116             3,046
       Deferred tax asset, current portion          10,274            11,314
       Deferred cost of revenues, current
        portion                                      5,797             5,422
                                                ------------       -----------
          Total current assets                     185,147            82,936

    Deferred tax asset, noncurrent portion          12,023            11,701
    Deferred cost of revenues, noncurrent
     portion                                         1,310               951
    Deferred merger costs (WebCT, Inc.)              4,956                 -
    Property and equipment, net                      9,940            11,327
    Goodwill                                        10,252           102,725
    Intangible assets, net                             560            72,029
                                                ------------       -----------
    Total assets                                  $224,188          $281,669
                                                ============       ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
       Accounts payable                             $1,833            $2,440
       Accrued expenses                             14,083            15,877
       Term loan, current portion                        -               600
       Deferred rent, current portion                  347               476
       Deferred revenues, current portion           74,975            67,710
                                                ------------       -----------
          Total current liabilities                 91,238            87,103

    Term loan, noncurrent portion, net of
     debt discount                                       -            56,806
    Deferred rent, noncurrent portion                  426               421
    Deferred revenues, noncurrent portion            2,199             2,441
    Stockholders' equity:
       Common stock, $0.01 par value                   275               277
       Additional paid-in capital                  210,805           215,228
       Accumulated deficit                         (80,755)          (80,607)
                                                ------------       -----------
    Total stockholders' equity                     130,325           134,898
                                                ------------       -----------
    Total liabilities and stockholders' equity    $224,188          $281,669
                                                ============       ===========



                               BLACKBOARD INC.

               UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                      Three Months Ended
                                                           March 31,
                                                   ---------------------------
                                                    2005              2006
                                                   --------          ---------
                                                         (in thousands)
    Cash flows from operating activities
    Net income                                      $5,410               $148
    Adjustments to reconcile net income
     (loss) to net cash used in operating
     activities:
      Deferred tax provision                             -                (28)
      Amortization of debt discount                      -                 34
      Depreciation and amortization                  1,664              1,727
      Amortization of intangibles resulting
       from acquisitions                                68              1,837
      Change in allowance for doubtful accounts       (301)                (9)
      Noncash stock-based compensation                  18              1,499
      Changes in operating assets and liabilities,
       net of effect of acquisitions:
        Accounts receivable                          4,810              4,231
        Inventories                                    (15)              (541)
        Prepaid expenses and other current assets     (742)               426
        Deferred cost of revenues                   (1,597)               734
        Accounts payable                               900                335
        Accrued expenses                            (1,825)            (9,061)
        Deferred rent                                  (81)               124
        Deferred revenues                           (9,730)           (11,479)
                                                   --------          ---------
    Net cash used in operating activities           (1,421)           (10,023)

    Cash flows from investing activities
      Acquisition of WebCT, Inc., net of cash
       acquired                                          -           (154,628)
      Purchase of property and equipment            (2,428)            (1,569)
      Purchase of held-to-maturity securities       (9,207)                 -
      Sale of held-to-maturity securities                -             23,546
      Purchase of available-for-sale securities     (4,500)                 -
      Sale of available-for-sale securities          5,400             39,056
                                                   --------          ---------
    Net cash used in investing activities          (10,735)           (93,595)

    Cash flows from financing activities
      Payments on equipment notes                     (180)                 -
      Proceeds from revolving credit facility            -             10,000
      Payments on revolving credit facility              -            (10,000)
      Proceeds from term loan                                          57,522
      Payments on term loan                              -               (150)
      Proceeds from exercise of stock options        1,286              2,897
                                                   --------          ---------
    Net cash provided by financing activities        1,106             60,269
                                                   --------          ---------
    Net decrease in cash and cash equivalents      (11,050)           (43,349)
    Cash and cash equivalents at beginning of
     period                                         78,149             75,895
                                                   --------          ---------
    Cash and cash equivalents at end of period     $67,099            $32,546
                                                   ========          =========



    Conference Call

Blackboard will broadcast its first quarter conference call live over the Internet today beginning at 5:00 p.m. Eastern time. 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 7:00 p.m. Eastern (4:00 p.m. Pacific) on May 8, 2006 until 8:00 p.m. Eastern time (5:00 p.m. Pacific time) on May 15, 2006. 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 67341564.

Use of Non-GAAP Financial Measures

This release includes forecasts of the Company's cash net income which is a non-GAAP financial measure. Management believes that cash net income, which excludes amortization of intangibles, stock-based compensation expense, and the associated tax impact, provides useful information to investors regarding the Company's ongoing financial condition and results of operations. In addition, management believes that cash net income is useful to investors because it provides an additional basis for measuring the Company's financial condition against other periods. Since the Company has historically reported non-GAAP results to the investment community, management also believes the inclusion of non-GAAP measure provides consistency in its financial reporting. However, 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-K dated February 15, 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 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.

Forward-Looking Statements

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-K filed with the SEC. In addition, the forward-looking statements included in this press release represent the Company's views as of May 8, 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 May 8, 2006.

SOURCE: Blackboard Inc.

CONTACT: Michael J. Stanton, Vice President, Investor Relations of Blackboard Inc., +1-202-463-4860 ext. 2305