- Published: 05 February 2009
- Written by Editor
Blackboard Inc. Reports Fourth Quarter and Year End 2008 Results
- Fourth Quarter Revenue Increases 35 Percent to $85.0 Million -
- Full Year 2008 Revenue Increases 30 Percent to $312.1 Million -
Blackboard Inc. (Nasdaq: BBBB) today announced financial results for the fourth quarter and year ended December 31, 2008 and guidance for the first quarter and full year 2009.
Blackboard's fourth quarter revenue was $85.0 million, an increase of 35 percent over the same period in 2007. Product revenue in the fourth quarter was $77.4 million, an increase of 35 percent over the $57.4 million of product revenue in the fourth quarter of last year. Professional services revenue for the quarter was $7.6 million, which represents an increase of 30 percent over the same period in 2007.
Blackboard's fourth quarter revenue was $85.0 million, an increase of 35 percent over the same period in 2007. Product revenue in the fourth quarter was $77.4 million, an increase of 35 percent over the $57.4 million of product revenue last year. Professional services revenue for the quarter was $7.6 million, which represents an increase of 30 percent over the same period in 2007.
GAAP net income was $3.0 million for the fourth quarter of 2008 compared to GAAP net income of $4.2 million in the same period last year. GAAP net income per basic share was $0.10 and GAAP net income per diluted share was $0.09 compared to GAAP net income per basic and diluted share of $0.14 in the same period last year. Non-GAAP adjusted net income for the fourth quarter of 2008, which excludes the amortization of acquisition-related intangible assets, net of taxes, was $8.9 million, resulting in non-GAAP adjusted net income per diluted share of $0.28 compared to non-GAAP adjusted net income of $7.7 million and non-GAAP adjusted net income per diluted share of $0.25 for the fourth quarter of 2007.
Total revenue for the year ended December 31, 2008 was $312.1 million, an increase of 30 percent over 2007. GAAP net income was $2.8 million for the year ended December 31, 2008 compared to GAAP net income of $12.9 million in the same period last year. For the year ended December 31, 2008, GAAP net income per basic share and diluted share was $0.09 compared to GAAP net income per basic share of $0.45 and GAAP net income per diluted share of $0.43 for 2007. Non-GAAP adjusted net income for the full year 2008, which excludes the amortization of acquisition-related intangible assets, net of taxes, was $25.7 million, resulting in non-GAAP adjusted net income per diluted share of $0.81 compared to non-GAAP adjusted net income of $26.2 million and non-GAAP adjusted net income per diluted share of $0.87 for 2007.
"This was a good year for Blackboard resulting in strong revenue and earnings performance and $80 million in operating cash flows," said Michael Chasen, chief executive officer and president of Blackboard. "Our strong financial results were driven by the value our products and services provide to our global client base for the management of their most mission-critical technologies. In addition, with the introduction of Blackboard Connect we further expanded our solutions offering to meet the growing needs of our clients."
Chasen continued, "Even with the challenging economy, our business is well positioned and we believe in 2009 we can continue to deliver strong revenue growth with expanding operating margins."
Highlights from the Fourth Quarter of 2008
-- Blackboard's new and expanding client relationships in the quarter
included:
-- U.S. Higher Education: Buffalo State University, Central Michigan
University, City Colleges of Chicago, Des Moines Area Community
College, Florida State University, Georgetown University, Georgia
Gwinnet College, Loyola Marymount University, Marshall University,
Michigan State University, Ohio State University, Santa Clara
University, South Carolina State, University of Alabama, University
of Central Missouri, University of Memphis, University of South
Carolina, University of Texas at Tyler, Vassar College and others.
-- International: Charles Darwin University, King Abdullah University
of Science and Technology, Korea University, Policia Nacional de
Colombia, Suffolk New College, Universidad Camilo Jose Cela,
Universidad de Los Andes, University of Birmingham, Utrecht
University and others.
-- K-12: Cherry Creek School District (CO), Cincinnati Public Schools
(OH), Corvallis School District (OR), Delaware Department of
Education, Florida Virtual School, Jersey City Schools (NJ), New
Orleans Public Schools (LA), Riverside Unified School District (CA),
West Bend School District (IN) and others.
-- Blackboard's enterprise licenses (Blackboard Learning System(TM) --
Enterprise, Blackboard Community System(TM), Blackboard Transaction
System(TM), Blackboard Content System(TM), Blackboard Connect(TM) and
Blackboard Outcomes System(TM)), totaled 6,817.
-- Blackboard ended 2008 with 5,547 total clients.
Change in Definition of Non-GAAP Adjusted Net Income
Beginning in the first quarter of 2009, Blackboard will define "Non-GAAP Adjusted Net Income" and "Non-GAAP Adjusted Net Income per Diluted Share," to exclude the amortization of acquisition-related intangible assets, stock-based compensation expense and certain defined non-cash items, net of taxes. Under Blackboard's non-GAAP definition utilized in 2008, these measures did not exclude stock-based compensation expense. The Non-GAAP results presented in this press release are calculated using the old definition, except for our future guidance and the table below.
For comparability with past periods, Blackboard is providing Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Net Income per Diluted Share for each quarter of 2008 under the new definition in the table below. This table shows a quantitative historical reconciliation of GAAP (Loss) Income before Benefit (Provision) For Income Taxes to Non-GAAP Adjusted Net Income and Non-GAAP Adjusted Net Income per Diluted Share under both the old and new definition.
2008
----
Q1 Q2 Q3 Q4 FY
-- -- -- -- --
(unaudited and in thousands except per
share amounts)
GAAP (Loss) income
before benefit
(provision)
for income taxes $(5,098) $2,950 $(260) $1,496 $(912)
Add: Amortization of
intangibles resulting
from acquisitions 8,679 9,729 9,729 9,729 37,866
Adjusted provision for
income taxes (1,623) (5,756) (1,492) (2,354) (11,225)
------ ------ ------ ------ -------
Non-GAAP adjusted net
income (old definition) $1,958 $6,923 $7,977 $8,871 $25,729
====== ====== ====== ====== =======
Non-GAAP adjusted net
Income per diluted
share (old definition) $0.06 $0.22 $0.25 $0.28 $0.81
===== ===== ===== ===== =====
Non-GAAP effective tax
rate (old definition) 45.3% 45.4% 15.8% 21.0% 30.4%
Add: Stock-based
compensation 3,682 3,797 3,632 4,016 15,127
Adjustment to provision
for income taxes (1,454) (1,500) (1,435) (1,586) (5,975)
------ ------ ------ ------ ------
Non-GAAP adjusted net
income (new definition) $4,186 $9,220 $10,174 $11,301 $34,881
====== ====== ======= ======= =======
Non-GAAP adjusted net
income per diluted share
(new definition) $0.13 $0.29 $0.32 $0.35 $1.10
===== ===== ===== ===== =====
Non-GAAP effective tax
rate (new definition) 42.4% 44.0% 22.3% 25.9% 33.0%
Guidance for the First Quarter of 2009
-- Revenue of $83.5 to $86.5 million;
-- Stock-based compensation expense of approximately $4.3 million;
-- Amortization of acquired intangibles of approximately $8.8 million;
-- GAAP net loss of ($1,200,000) to GAAP net income of $600,000, resulting
in GAAP net loss per basic share of ($0.04) to GAAP net income per
diluted share of $0.02, which is based on an estimated 31.4 million
basic shares and 32.2 million diluted shares, respectively, and an
estimated effective tax rate of approximately 38 percent;
-- Non-GAAP adjusted net income (calculated on the new basis) of $6.7 to
$8.6 million, which excludes stock-based compensation expense and
amortization of acquisition-related intangible assets, net of taxes; and
-- Non-GAAP adjusted net income per diluted share (calculated on the new
basis) of $0.21 to $0.27 based on an estimated 32.2 million diluted
shares and an estimated effective tax rate of approximately 38.5
percent.
Guidance for the Full Year 2009
-- Revenue of $361.0 to $373.0 million;
-- Stock-based compensation expense of approximately $16.5 million;
-- Amortization of acquired intangibles of approximately $28 million;
-- GAAP net income of $16.1 to $23.5 million, resulting in GAAP net income
per diluted share of $0.49 to $0.72, which is based on an estimated 32.5
million diluted shares; and an estimated effective tax rate of
approximately 38 percent;
-- Non-GAAP adjusted net income (calculated on the new basis) of $43.7 to
$51.1 million, which excludes stock-based compensation expense and
amortization of acquisition-related intangible assets, net of taxes;
-- Non-GAAP adjusted net income per diluted share (calculated on the new
basis) of $1.34 to $1.57 based on an estimated 32.5 million diluted
shares and an estimated effective tax rate of approximately 38.5
percent;
-- Cash flow from operations of $80.0 to $95.0 million; and
-- Capital expenditures of approximately 6 percent of total revenue.
During the first quarter of 2009, we expect to adopt FASB Staff Position APB 14-1, "Accounting for Convertible Debt Instruments That May be Settled in Cash Upon Conversion (Including Partial Cash Settlement)" (APB 14-1) which would increase the interest expense on our outstanding convertible debt. We estimate that the adoption of APB 14-1 to result in increased interest expense of approximately $1.5 million for the first quarter of 2009 and approximately $6.0 million for the full year 2009. The increased interest expense resulting from APB-14-A is a non-cash expense. The current first quarter and full year 2009 guidance for GAAP net income does not include the adoption of APB-14 and the adoption of APB 14-1 would have no impact on our Non-GAAP Adjusted Net Income which will exclude any non-cash interest expense on our convertible debt.
The first quarter and full year 2009 guidance for GAAP net income does not include the effect of the adoption of FASB Staff Position APB 14-1, "Accounting for Convertible Debt Instruments That May be Settled in Cash Upon Conversion (Including Partial Cash Settlement)" (APB 14-1) which would increase the interest expense on our outstanding convertible debt. We estimate that the adoption of APB 14-1 to result in increased interest expense of approximately $1.5 million for the first quarter of 2009 and approximately $6.0 million for the full year 2009. The increased interest expense resulting from APB-14-A is a non-cash expense. The adoption of APB 14-1 would have no impact on our Non-GAAP Adjusted Net Income which will exclude any non-cash interest expense on our convertible debt.
Blackboard Conference Call Information:
Domestic: +1 (866) 831-6243
International: +1 (617) 213-8855
Confirmation Code: 43311920
Blackboard will also broadcast its conference call live over the Internet beginning at 4:30 p.m. on February 4, 2009, and 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 from approximately 7:00 p.m. Eastern (4:00 p.m. Pacific) on February 4, 2009 until 11:00 p.m. Eastern (8:00 p.m. Pacific) on February 11, 2009. 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 96236089.
BLACKBOARD INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Three Months Ended Year Ended
December 31 December 31
----------- -----------
2007 2008 2007 2008
---- ---- ---- ----
(unaudited) (unaudited) (unaudited)
Revenues:
Product $57,358 $77,440 $213,631 $283,258
Professional services 5,844 7,581 25,817 28,876
----- ----- ------ ------
Total revenues 63,202 85,021 239,448 312,134
Operating expenses:
Cost of product
revenues, excludes
$2,977 and $4,572 for
the three months ended
December 31, 2007 and
2008, respectively,
and $11,654 and $17,803
for the years ended
December 31, 2007 and
2008, respectively,
in amortization of
acquired technology
included in
amortization of
intangibles resulting
from acquisitions
shown below (1) 11,833 21,640 47,444 75,237
Cost of professional
services revenues (1) 4,602 4,477 16,941 19,555
Research and
development (1) 7,436 10,389 28,278 40,580
Sales and marketing (1) 16,615 23,377 66,033 91,076
General and
administrative (1) 10,425 12,826 38,667 50,757
Proceeds from
patent judgment - - - (3,313)
Amortization of
intangibles resulting
from acquisitions 5,734 9,729 22,122 37,866
----- ----- ------ ------
Total operating expenses 56,645 82,438 219,485 311,758
------ ------ ------- -------
Income from operations 6,557 2,583 19,963 376
Other (expense) income:
Interest expense (1,931) (1,760) (5,766) (7,305)
Interest income 2,341 406 5,673 1,893
Other (expense) income (1,395) 267 575 4,124
------ --- --- -----
Income (loss) before
(provision) benefit
for income taxes 5,572 1,496 20,445 (912)
(Provision) benefit
for income taxes (1,369) 1,489 (7,580) 3,732
------ ----- ------ -----
Net income $4,203 $2,985 $12,865 $2,820
====== ====== ======= ======
Net income per
common share:
Basic $0.14 $0.10 $0.45 $0.09
===== ===== ===== =====
Diluted $0.14 $0.09 $0.43 $0.09
===== ===== ===== =====
Weighted average number
of common shares:
Basic 29,154,396 31,352,994 28,789,083 30,885,908
========== ========== ========== ==========
Diluted 30,256,902 31,839,631 30,113,621 31,809,544
========== ========== ========== ==========
(1) Includes the following amounts related to stock-based compensation:
Cost of product
revenues $203 $270 $672 $949
Cost of professional
services revenues 160 81 631 321
Research and
development 116 230 467 777
Sales and marketing 1,181 1,354 4,359 5,984
General and
administrative 1,622 2,081 5,914 7,096
Reconciliation of GAAP Income (loss) before (provision) benefit for
Income taxes to Non-GAAP adjusted net income (2):
GAAP Income (loss) before
(provision) benefit for
income taxes $5,572 $1,496 $20,445 $(912)
Add: Amortization
of intangibles
resulting from
acquisitions 5,734 9,729 22,122 37,866
Adjusted provision
for income taxes (3) (3,634) (2,354) (16,318) (11,225)
------ ------ ------- -------
Non-GAAP adjusted net
income (4) $7,672 $8,871 $26,249 $25,729
====== ====== ======= =======
Non-GAAP adjusted net
income per common
share - diluted (4) $0.25 $0.28 $0.87 $0.81
===== ===== ===== =====
(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 32.1% and 21.0% for the three months ended December
31, 2007 and 2008, respectively, and approximately 38.3% and 30.4%
for the years ended December 31, 2007 and 2008, respectively.
(4) Beginning in fiscal 2009, the Company changed the definition it
utilizes for non-GAAP adjusted net income. However, for the 2007 and
2008 periods presented in the reconciliation of income (loss) before
(provision) benefit for income taxes to non-GAAP adjusted net income,
the old definition for non-GAAP adjusted net income is being used
which excludes the amortization of intangibles resulting from
acquisitions, net of taxes.
BLACKBOARD INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2007 2008
---- ----
(unaudited)
(in thousands,
except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents $206,558 $141,746
Accounts receivable, net 52,846 92,529
Inventories 2,089 1,783
Prepaid expenses and other current assets 5,255 8,922
Deferred tax asset, current portion 6,549 1,796
Deferred cost of revenues 6,877 7,271
----- -----
Total current assets 280,174 254,047
Deferred tax asset, noncurrent portion 34,154 27,146
Investment in common stock warrant - 1,990
Restricted cash 4,015 4,249
Property and equipment, net 18,584 31,950
Goodwill and intangible assets, net 168,349 338,976
------- -------
Total assets $505,276 $658,358
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $3,747 $2,579
Accrued expenses 24,182 27,879
Deferred rent, current portion 160 345
Deferred revenues, current portion 126,600 179,238
------- -------
Total current liabilities 154,689 210,041
Notes payable, net of debt discount 161,519 163,172
Deferred rent, noncurrent portion 1,469 10,959
Deferred revenues, noncurrent portion 2,925 5,554
Stockholders' equity:
Common stock, $0.01 par value 292 314
Additional paid-in capital 263,582 344,698
Accumulated deficit (79,200) (76,380)
------- -------
Total stockholders' equity 184,674 268,632
------- -------
Total liabilities and stockholders' equity $505,276 $658,358
======== ========
BLACKBOARD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended
December 31
-----------
2007 2008
---- ----
(unaudited)
(in thousands)
Cash flows from operating activities
Net income $12,865 $2,820
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred income tax benefit (2,830) (8,113)
Excess tax benefits from stock-based
compensation (6,845) (2,107)
Amortization of debt discount 1,840 1,653
Depreciation and amortization 10,681 15,703
Amortization of intangibles resulting
from acquisitions 22,122 37,866
Change in allowance for doubtful accounts (2) 161
Noncash stock-based compensation 12,043 15,127
Gain on investment in common stock warrant - (3,980)
Changes in operating assets and liabilities:
Accounts receivable (225) (31,721)
Inventories 288 306
Prepaid expenses and other current assets (1,233) (2,594)
Deferred cost of revenues 372 (394)
Accounts payable 952 (4,018)
Accrued expenses 9,394 4,227
Deferred rent 1,101 9,675
Deferred revenues 8,834 45,224
----- ------
Net cash provided by operating activities 69,357 79,835
Cash flows from investing activities
Purchases of property and equipment (16,023) (24,007)
Proceeds from sale of investment in common
stock warrant - 1,990
Payments for patent enforcement costs (4,186) (3,552)
Purchases of available-for-sale securities (94,250) -
Sales of available-for-sale securities 94,250 -
Acquisitions, net of cash acquired (27,664) (132,992)
------- --------
Net cash used in investing activities (47,873) (158,561)
Cash flows from financing activities
Proceeds from notes payable 160,456 -
Payments on term loan (24,400) -
Payments on letters of credit (1,976) (530)
Releases of letters of credit - 1,184
Excess tax benefits from stock-based
compensation 6,845 2,107
Proceeds from exercise of stock options 13,373 11,153
------ ------
Net cash provided by financing activities 154,298 13,914
------- ------
Net increase (decrease) in cash and cash
equivalents 175,782 (64,812)
Cash and cash equivalents at beginning of year 30,776 206,558
------ -------
Cash and cash equivalents at end of year $206,558 $141,746
======== ========
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. These forward looking statements include statements about our expected financial results for the first quarter of 2009 and the full year 2009 and other statements about our future financial performance. 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 November 6, 2008 with the SEC. In addition, the forward-looking statements included in this press release represent the Company's views as of February 4, 2009. 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 February 4, 2009.
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, and beginning in 2009 will also exclude stock-based compensation expense, provide additional useful information to investors regarding the Company's ongoing financial condition and results of operations and aspects of current operating performance that can be effectively managed. Because 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 enhanced comparability 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, and beginning in 2009 will also exclude stock-based compensation expense.
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 November 6, 2008, as well as other filings with the Securities and Exchange Commission when assessing the Company's financial condition and results of operations.
