Blackboard Inc. Reports Third Quarter Revenue of $120.8 Million
WASHINGTON, Nov. 3, 2010 /PRNewswire-FirstCall/ — Blackboard Inc. (Nasdaq: BBBB) today announced financial results for the third quarter ended September 30, 2010 and updated guidance for the fourth quarter and the full year of 2010.
Total revenue for the quarter ended September 30, 2010 was $120.8 million, an increase of 23 percent over the third quarter of 2009. Product revenues for the quarter were $112.3 million, an increase of 28 percent over the third quarter of 2009, while professional services revenues for the quarter were $8.5 million, a decrease of 19 percent over the third quarter of 2009.
GAAP net income was $5.7 million, resulting in net income per diluted share of $0.16 for the third quarter of 2010 compared to net income of $4.3 million and net income per diluted share of $0.13 for the third quarter of 2009. Non-GAAP adjusted net income for the third quarter of 2010, which excludes the amortization of acquisition-related intangible assets, stock-based compensation expense, and non-cash interest expense, all net of taxes, was $15.6 million, resulting in non-GAAP adjusted net income per diluted share of $0.45 compared to non-GAAP adjusted net income of $13.3 million and non-GAAP adjusted net income per diluted share of $0.40 for the third quarter of 2009.
“We are pleased with our results in the third quarter. Our renewal rates were once again strong during our peak renewal quarter, emphasizing the unmatched value we provide to our clients, and that we remain a core part of their learning infrastructure,” said Michael Chasen, CEO and President of Blackboard Inc. “During the quarter, we experienced solid demand across our solutions with particular interest in our new Blackboard Mobile(TM) Learn offering, as well as continued success with Blackboard Managed Hosting. Additionally, the integration of both Elluminate and Wimba continues to track along very well under our new Blackboard Collaborate banner. We have successfully rolled out our initial product roadmap to the client community and received a very positive reception from the client community.”
Additional Financial Highlights from the Third Quarter of 2010
- Deferred revenue was $236.7 million as of September 30, 2010, an increase of 14 percent compared to September 30, 2009.
- Total cash flow from operations was $68.0 million for the third quarter of 2010.
- Total free cash flow (cash flow from operations less purchases of property and equipment) was $64.5 million for the third quarter of 2010.
- Cash and cash equivalents were $86.4 million as of September 30, 2010.
“Financial results were solid across the business in the third quarter,” said John Kinzer, CFO of Blackboard Inc. “Based on the ongoing strength of our business and improvements in invoicing and cash collections, we are raising our expectations for free cash flow for the full year.”
Highlights from the Third Quarter of 2010
- A few of Blackboard’s new and expanded client relationships in the quarter included:
- U.S. Higher Education: Albany State University, Bowie State University, The Citadel, Florida State University, Georgia Institute of Technology, Georgia Virtual and Technical College, Greenville Technical College, Hillsborough Community College, Merrimack College, San Jacinto Community College District, South Texas College, Tufts University, University of Tennessee-Knoxville, University of Texas at Tyler and others.
- International: Instituto Profesional DUOC, Rijks Universiteit Groningen, Royal Melbourne Institute of Technology, Southern Denmark University, TU Delft, Universdad de Los Andes, Universidade Cruzeiro do Sul and others.
- K-12: Ascension Parish Public Schools (LA), Bridges Canada (Ontario, Canada), Clay County Public Schools (FL), Delaware Department of Education (DE), Fairmont Schools (CA), Hawaii Department of Education (HI), Metro Nashville Public Schools (TN), Muscogee County School District (GA), Orange County Superintendent of Schools (CA), Randolph Township School District (NJ), Rutherford County School District (NC), Union Public Schools (OK) and others.
- Professional Education (ProEd): Alta – Westwood College, Astoria University, Defense Institute of Security Assistance Management, FBI Academy, Marine Corps Institute, Naval War College, School of Visual Arts and others.
- Blackboard acquired both Elluminate, Inc. and Wimba, Inc., two of the leading providers of synchronous learning and collaboration technology to the education markets. The newly combined businesses have been integrated under the Blackboard Collaborate(TM) brand.
- Blackboard and McGraw-Hill Higher Education, a unit of The McGraw-Hill Companies (NYSE: MHP), formed a business partnership to introduce a new, best of class learning management offering that joins McGraw-Hill’s media-rich content, assessment engines, and industry leading adaptive learning tools with the latest capabilities of Blackboard’s Web-based teaching and learning platform, Blackboard Learn(TM).
- Blackboard and Barnes & Noble Inc. (NYSE: BKS), the world’s largest bookseller and leading operator of college bookstores, introduced a partnership that aims to make it easier for millions of higher education students to access and use interactive e-textbooks as part of their online course experience.
- Blackboard and Follett Higher Education Group launched a partnership to give students the ability to purchase and use digital textbooks directly in the Blackboard Learn platform with a free integration that brings interactive texts into the course experience.
Outlook for the Fourth Quarter and Full Year of 2010
Fourth Quarter of 2010:
- Revenue of $114.8 million to $118.8 million;
- Amortization of acquired intangibles of approximately $10.2 million;
- Stock-based compensation expense of approximately $5.5 million;
- GAAP net income of $200,000 to $1.7 million;
- GAAP net income per diluted share of $0.01 to $0.05, which is based on an estimated 35.2 million diluted shares and an estimated effective tax rate of approximately 30.0 percent;
- Non-GAAP adjusted net income of $10.7 to $12.3 million, which excludes the amortization of acquisition-related intangible assets, stock-based compensation expense, and non-cash interest expense, all net of taxes; and
- Non-GAAP adjusted net income per diluted share of $0.31 to $0.35 based on an estimated 35.2 million diluted shares and an estimated effective tax rate of approximately 37.0 percent.
Full Year 2010:
- Revenue of $444.4 to $448.4 million;
- Amortization of acquired intangibles of approximately $38.3 million;
- Stock-based compensation expense of approximately $20.4 million;
- GAAP net income of $15.3 to $16.9 million,
- GAAP net income per diluted share of $0.44 to $0.48, which is based on an estimated 34.8 million diluted shares and an estimated effective tax rate of approximately 30.0 percent;
- Non-GAAP adjusted net income of $54.7 to $56.2 million, which excludes the amortization of acquisition-related intangible assets, stock-based compensation expense, and non-cash interest expense, all net of taxes;
- Non-GAAP adjusted net income per diluted share of $1.57 to $1.61 based on an estimated 34.8 million diluted shares and an estimated effective tax rate of approximately 37.0 percent; and
- Free cash flow from operations (cash flow from operations less purchases of property and equipment) of $80.0 to $90.0 million.
Conference Call
Blackboard will broadcast its third 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 November 3, 2010. 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 46865053.
BLACKBOARD INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Three Months Ended
September 30
------------
2009 2010
---- ----
Revenues:
Product $87,862 $112,307
Professional services 10,546 8,515
------ -----
Total revenues 98,408 120,822
Operating expenses:
Cost of product revenues,
excludes $2,480 and $2,348
for the three months ended
September 30, 2009 and
2010, respectively, and
$8,153 and $7,672 for the
nine months ended
September 30, 2009 and
2010, respectively, in
amortization of acquired
technology included in
amortization of
intangibles resulting from
acquisitions shown below
(1) 23,849 28,425
Cost of professional
services revenues (1) 5,550 5,989
Research and development
(1) 11,428 15,081
Sales and marketing (1) 24,670 32,563
General and administrative
(1) 14,636 18,077
Patent related impairment
and other costs - -
Amortization of intangibles
resulting from
acquisitions 9,282 9,677
----- -----
Total operating expenses 89,415 109,812
------ -------
Income from operations 8,993 11,010
Other expense, net:
Interest expense (3,015) (3,182)
Interest income 36 34
Other income (expense), net 300 361
--- ---
Income before provision for
income taxes 6,314 8,223
Provision for income taxes (2,007) (2,490)
------ ------
Net income $4,307 $5,733
====== ======
Net income per common
share:
Basic $0.13 $0.17
===== =====
Diluted $0.13 $0.16
===== =====
Weighted average number of
common shares:
Basic 32,073,491 34,295,259
========== ==========
Diluted 33,045,337 34,790,856
========== ==========
(1) Includes the following
amounts related to stock-
based compensation:
Cost of product revenues $347 $316
Cost of professional
services revenues 138 179
Research and development 284 335
Sales and marketing 1,501 2,122
General and administrative 1,775 1,957
Reconciliation of GAAP net
income before provision
for income taxes to non-
GAAP adjusted net income
(2):
GAAP Net income before
provision for income taxes $6,314 $8,223
Add: Non-cash patent
related impairment - -
Add: Amortization of
intangibles resulting from
acquisitions 9,282 9,677
Add: Stock-based
compensation 4,045 4,909
Add: Non-cash interest
expense 1,571 1,646
Adjusted provision for
income taxes (3) (7,892) (8,902)
------ ------
Non-GAAP adjusted net
income $13,320 $15,553
======= =======
Non-GAAP adjusted net
income per common share -
diluted $0.40 $0.45
===== =====
Weighted average number of
diluted common shares 33,045,337 34,790,856
========== ==========
Nine Months Ended
September 30
------------
2009 2010
---- ----
Revenues:
Product $251,369 $303,511
Professional services 25,597 26,105
------ ------
Total revenues 276,966 329,616
Operating expenses:
Cost of product revenues,
excludes $2,480 and $2,348
for the three months ended
September 30, 2009 and
2010, respectively, and
$8,153 and $7,672 for the
nine months ended
September 30, 2009 and
2010, respectively, in
amortization of acquired
technology included in
amortization of
intangibles resulting from
acquisitions shown below
(1) 67,055 80,368
Cost of professional
services revenues (1) 15,020 15,854
Research and development
(1) 33,848 39,333
Sales and marketing (1) 74,008 85,808
General and administrative
(1) 42,476 49,633
Patent related impairment
and other costs 10,984 -
Amortization of intangibles
resulting from
acquisitions 25,728 28,014
------ ------
Total operating expenses 269,119 299,010
------- -------
Income from operations 7,847 30,606
Other expense, net:
Interest expense (8,877) (8,978)
Interest income 202 105
Other income (expense), net 1,103 (545)
----- ----
Income before provision for
income taxes 275 21,188
Provision for income taxes (77) (6,059)
--- ------
Net income $198 $15,129
==== =======
Net income per common
share:
Basic $0.01 $0.45
===== =====
Diluted $0.01 $0.44
===== =====
Weighted average number of
common shares:
Basic 31,682,212 33,929,754
========== ==========
Diluted 32,466,179 34,660,010
========== ==========
(1) Includes the following
amounts related to stock-
based compensation:
Cost of product revenues $923 $923
Cost of professional
services revenues 398 476
Research and development 768 898
Sales and marketing 4,625 5,843
General and administrative 5,270 6,792
Reconciliation of GAAP net
income before provision
for income taxes to non-
GAAP adjusted net income
(2):
GAAP Net income before
provision for income taxes $275 $21,188
Add: Non-cash patent
related impairment 7,447 -
Add: Amortization of
intangibles resulting from
acquisitions 25,728 28,014
Add: Stock-based
compensation 11,984 14,932
Add: Non-cash interest
expense 4,689 4,711
Adjusted provision for
income taxes (3) (19,463) (24,884)
------- -------
Non-GAAP adjusted net
income $30,660 $43,961
======= =======
Non-GAAP adjusted net
income per common share -
diluted $0.94 $1.27
===== =====
Weighted average number of
diluted common shares 32,466,179 34,660,010
========== ==========
(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 37.2% and 36.4% for the three months ended
September 30, 2009 and 2010, respectively, and approximately 38.8%
and 36.1% for the nine months ended September 30, 2009 and 2010,
respectively.
BLACKBOARD INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
December 31, September 30,
2009 2010
---- ----
ASSETS
Current assets:
Cash and cash equivalents $167,353 $86,425
Accounts receivable, net 69,098 137,069
Inventories 1,557 181
Prepaid expenses and other
current assets 15,232 18,225
Deferred tax asset, current
portion 2,692 1,090
Deferred cost of revenues 7,664 6,026
----- -----
Total current assets 263,596 249,016
Deferred tax asset, noncurrent
portion 18,188 17,999
Investment in common stock
warrant 3,124 3,124
Restricted cash 3,923 4,801
Property and equipment, net 34,483 38,857
Other assets 1,453 2,178
Goodwill 328,858 429,798
Intangible assets, net 71,309 103,966
------ -------
Total assets $724,934 $849,739
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,360 $1,322
Accrued expenses 28,264 41,877
Deferred rent, current portion 1,021 462
Deferred tax liability, current
portion - 1,326
Deferred revenues, current
portion 186,702 229,673
Convertible senior notes, net
of debt discount - 160,787
--- -------
Total current liabilities 218,347 435,447
Convertible senior notes, net
of debt discount 156,177 -
Deferred rent, noncurrent
portion 11,507 12,487
Deferred tax liability,
noncurrent portion 1,474 5,586
Deferred revenues, noncurrent
portion 5,957 7,007
Stockholders' equity:
Common stock, $0.01 par value 331 343
Additional paid-in capital 406,751 449,509
Accumulated other comprehensive
loss - (159)
Accumulated deficit (75,610) (60,481)
------- -------
Total stockholders' equity 331,472 389,212
------- -------
Total liabilities and
stockholders' equity $724,934 $849,739
======== ========
BLACKBOARD INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended
September 30
------------
2009 2010
---- ----
Cash flows from operating activities
Net income $198 $15,129
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred income tax benefit (2,455) 3,355
Excess tax benefits from stock-based
compensation (763) (2,751)
Amortization of debt discount and issuance
costs 4,689 4,711
Depreciation and amortization 14,045 14,808
Amortization of intangibles resulting from
acquisitions 25,728 28,014
Patent related impairment charge 7,447 -
Change in allowance for doubtful accounts 1,233 (712)
Stock-based compensation 11,984 14,932
Gain on investment in common stock warrant (1,136) -
Changes in operating assets and
liabilities:
Accounts receivable 987 (57,036)
Inventories (357) 1,375
Prepaid expenses and other current assets (3,319) (605)
Deferred cost of revenues (483) 1,639
Accounts payable 2,885 (3,315)
Accrued expenses 8,780 9,591
Deferred rent 1,345 421
Deferred revenues 19,002 34,926
------ ------
Net cash provided by operating activities 89,810 64,482
Cash flows from investing activities
Acquisitions, net of cash acquired (91,784) (155,069)
Purchases of property and equipment (15,919) (16,327)
Purchase of available-for-sale
securities (6,586) -
Redemptions of available-for-sale
securities 6,586 -
Payments for patent enforcement costs (414) -
---- ---
Net cash used in investing activities (108,117) (171,396)
Cash flows from financing activities
Releases of letters of credit 110 61
Payments on letters of credit - (184)
Payment for debt issuance costs - (1,727)
Excess tax benefits from stock-based
compensation 763 2,751
Proceeds from exercise of stock options 7,737 25,085
----- ------
Net cash provided by financing activities 8,610 25,986
----- ------
Net decrease in cash and cash equivalents (9,697) (80,928)
Cash and cash equivalents at beginning of
period 141,746 167,353
------- -------
Cash and cash equivalents at end of period $132,049 $86,425
======== =======
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.
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 August 9, 2010 with the SEC. In addition, the forward-looking statements included in this press release represent the Company’s views as of November 3, 2010. 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 3, 2010.
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 the amortization or impairment of intangible assets, stock-based compensation, and non-cash interest 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 in 2010 also excludes stock-based compensation expense, non-cash patent related impairment charges, non-cash interest expense and other items as determined by the Board of Directors.
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 August 9, 2010, as well as other filings with the Securities and Exchange Commission when assessing the Company’s financial condition and results of operations.
SOURCE Blackboard Inc.