Company Delivers EPS of $0.12 per Share
WASHINGTON, Nov. 9 /PRNewswire-FirstCall/ -- Blackboard Inc. (Nasdaq: BBBB) today announced financial results for the third quarter ended September 30, 2004.
Total revenue for the quarter ended September 30, 2004 was $29.8 million, an increase of 16% over the third quarter of 2003. Product revenue for the quarter was $25.5 million, an increase of 15% over the third quarter of 2003, while professional services revenue for the quarter was $4.3 million, an increase of 28% over the third quarter of 2003. Operating income was $3.1 million for the third quarter of 2004 compared to operating income of $1.0 million for the third quarter of 2003. Net income was $3.5 million for the third quarter of 2004 compared to net income of $591,000 for the third quarter of 2003. Cash net income for the third quarter of 2004, which excludes the amortization of acquisition-related intangible assets, net of taxes, was $4.4 million. Earnings per diluted share were $0.12, while cash earnings per diluted share were $0.16 in the third quarter of 2004.
"I am pleased with our financial results this quarter, during which we realized strong revenue and earnings performance and had excellent cash-flow," said Michael Chasen, Chief Executive Officer for Blackboard. "We are on track to meet our full year financial guidance."
Total revenue for the first nine months ended September 30, 2004 was $81.4 million, an increase of 19% over the first nine months of 2003. Operating income was $5.6 million for the first nine months of 2004 compared to an operating loss of $1.9 million for the first nine months of 2003. Net income was $5.3 million for the first nine months of 2004 compared to a net loss of $2.8 million for the first nine months of 2003. Cash net income for the first nine months of 2004, which excludes the amortization of acquisition-related intangible assets, net of taxes, was $7.8 million.
Blackboard provides cash net income and cash net income per share 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, 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 2004
Blackboard's new and expanding client relationships in the quarter included:
U.S. Higher Education Market: Alabama State University, Lakeland College, National Defense Medical College, The College of St. Mark and St. John and University of Texas at Brownsville.
International Markets: Aylesbury College, Brooklands College, City University of Hong Kong, North Trafford College, South Tyneside College and Southwark College.
K-12 Market: Ashtabula Area City Schools, Durango School District, Jefferson Davis Parish School District, Roanoke County Schools and the School District of Palm Beach County.
During the quarter, Blackboard announced the availability of the newest version of the Blackboard Content System(TM) (Release 2.0). The Blackboard Content System is a key product in the Blackboard Academic Suite(TM), a comprehensive family of integrated applications for teaching, learning, community-building and knowledge-sharing.
Outlook for the Fourth Quarter and Full Year 2004
The following statements regarding future financial performance are based on current expectations. These statements are forward looking. Actual results may differ materially, especially in the current uncertain economic environment. 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.
During the third quarter, Blackboard completed an analysis of its potential 2004 and 2005 tax liabilities as a result of a new Federal Tax ruling (RevProc 2004-34), which more closely aligns the Company's tax and GAAP income. These changes result in a lower effective tax rate in our Provision for Income Taxes. At this time, the Company believes that its effective tax rate will be in the range of between 4 to 7 percent through the end of 2005. Previously, the Company had anticipated an effective tax rate of approximately 20 percent.
For the fourth quarter of 2004, we expect:
Revenue to be $28.3 to $28.8 million;
Net income to be $2.4 to $2.7 million, resulting in EPS of $0.09 to $0.10 per share. This is based on an estimated 28.1 million diluted shares; and
Cash net income to be $3.3 to $3.6 million after adding back the tax adjusted amortization of intangibles of approximately $0.9 million, which results in cash EPS of $0.12 to $0.13 per share. Again, this is based on an estimated 28.1 million diluted shares.
For the full year 2004, we expect:
Revenue to be $109.7 to $110.2 million;
Net income, excluding preferred dividend accretion, to be $7.8 to $8.0 million, resulting in EPS of $0.30 to $0.32 per share, which is based on an estimated 25.6 million diluted shares and a 5% effective tax rate for the full year; and
Cash net income to be $11.0 million to $11.2 million after adding back the tax adjusted amortization of intangibles of approximately $3.2 million, which results in cash EPS of $0.43 to $0.44 per share based on an estimated 25.6 million diluted shares and a 5% effective tax rate for the full year.
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 replay of the call will be available via telephone from approximately 8:00 p.m. Eastern (5:00 p.m. Pacific) on November 9, 2004 until 8:00 p.m. Eastern (5:00 p.m. Pacific) on November 16, 2004. 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 33422188.
BLACKBOARD INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
--------------------------
2003 2004
-------- --------
(in thousands)
Cash flows from operating activities
Net (loss) income $(2,848) $5,317
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation and amortization 2,997 4,669
Amortization of intangibles 4,313 2,638
Change in allowance for doubtful accounts 155 186
Change in obsolescence reserve 85 17
Noncash stock compensation related to
options issued to nonemployees - 69
Noncash stock compensation for modification
of options 21 -
Noncash deferred stock amortization 56 86
Changes in operating assets and liabilities,
net of effect of acquisitions:
Accounts receivable (10,204) (2,805)
Inventories (205) (89)
Prepaid expenses and other current assets 2,661 (659)
Deferred cost of revenues (238) (1,659)
Accounts payable 1,404 (419)
Accrued expenses 863 (950)
Deferred rent (117) (19)
Deferred revenues 10,341 14,057
-------- --------
Net cash provided by operating activities 9,284 20,439
Cash flows from investing activities
Purchase of property and equipment (3,472) (6,356)
Acquisition of business, net of cash acquired (4,500) -
-------- --------
Net cash used in investing activities (7,972) (6,356)
Cash flows from financing activities
Proceeds from equipment notes 1,540 -
Payments on equipment notes (1,062) (710)
Proceeds from line of credit 5,380 -
Payments on line of credit (4,750) (7,880)
Payments on note payable (1,000) (2,000)
Proceeds from issuance of common stock,
net of issuance costs - 50,896
Proceeds from exercise of warrants - 248
Release of letters of credit 210 190
Proceeds from exercise of stock options 140 1,063
-------- --------
Net cash provided by financing activities 458 41,807
-------- --------
Net increase in cash and cash equivalents 1,770 55,890
Cash and cash equivalents at beginning of
period 20,372 30,456
-------- --------
Cash and cash equivalents at end of period $22,142 $86,346
======== ========
BLACKBOARD INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2003 2004 2003 2004
----------------------- -----------------------
(in thousands, except share and
per share amounts)
Revenues:
Product $22,206 $25,468 $61,199 $71,416
Professional services 3,364 4,308 7,296 9,934
----------------------- -----------------------
Total revenues 25,570 29,776 68,495 81,350
Operating expenses:
Cost of product revenues,
excludes amortization of
acquired technology
included in amortization
of intangibles resulting
from acquisitions shown
below 6,528 6,813 17,436 18,830
Cost of professional
services revenues 2,186 2,378 5,085 6,004
Research and development 2,980 3,537 8,433 10,427
Sales and marketing 7,633 9,074 22,382 26,932
General and administrative 3,677 3,957 12,415 10,742
Amortization of
intangibles resulting
from acquisitions 1,445 879 4,313 2,638
Stock-based compensation 105 44 306 155
----------------------- -----------------------
Total operating expenses 24,554 26,682 70,370 75,728
----------------------- -----------------------
Income (loss) from
operations 1,016 3,094 (1,875) 5,622
Other income (expense), net:
Interest expense (146) (27) (439) (155)
Interest income 21 163 80 212
----------------------- -----------------------
Income (loss) before
(provision) benefit for
income taxes 891 3,230 (2,234) 5,679
(Provision) benefit for
income taxes (300) 250 (614) (362)
----------------------- -----------------------
Net income (loss) 591 3,480 (2,848) 5,317
Dividends on and
accretion of convertible
preferred stock (2,531) - (7,521) (6,344)
----------------------- -----------------------
Net (loss) income
attributable to common
stockholders $(1,940) $3,480 $(10,369) $(1,027)
======================= =======================
Net (loss) income
attributable to common
stockholders
per common share:
Basic $(0.35) $0.14 $(1.88) $(0.08)
======================= =======================
Diluted $(0.35) $0.12 $(1.88) $(0.08)
======================= =======================
Weighted average number of
common shares:
Basic 5,519,638 25,683,200 5,511,009 12,868,696
======================= =======================
Diluted 5,519,638 27,906,730 5,511,009 12,868,696
======================= =======================
Reconciliation of cash net
income to net income
(loss) (1):
Net (loss) income
attributable to common
stockholders $(1,940) $3,480 $(10,369) $(1,027)
Add: Dividends on and
accretion of convertible
preferred stock 2,531 - 7,521 6,344
----------------------- -----------------------
Net income (loss) 591 3,480 (2,848) 5,317
Add: Amortization of
intangibles resulting
from acquisitions, net of
taxes (2) 958 879 3,128 2,470
----------------------- -----------------------
Cash net income 1,549 4,359 280 7,787
======================= =======================
Cash net income per common
share - diluted $0.07 $0.16 $0.01 $0.32
======================= =======================
Proforma weighted average
number of common shares
- diluted (3) 22,399,368 27,906,730 22,136,908 24,514,850
======================= =======================
(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 (loss), net (loss) income 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 (loss).
(2) The amortization of intangibles is net of taxes, applied at an
effective rate of 33.7% and 0.0% for the three months ended September
30, 2003 and 2004, respectively, and 27.5% and 6.4% for the nine
months ended September 30, 2003 and 2004, 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 and ii) the conversion of
accrued dividend accretion on the preferred shares based on a
conversion price of $9.66 per share for 2003 and $14.00 per share for
2004 and the average accrued dividend accretion balance for the period
presented.
BLACKBOARD INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, September 30,
2003 2004
--------- ----------
(unaudited)
(in thousands,
except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents $30,456 $86,346
Accounts receivable, net 22,870 25,489
Inventories, net 2,050 2,122
Prepaid expenses and other current assets 711 1,370
Deferred cost of revenues 3,846 5,505
--------- ----------
Total current assets 59,933 120,832
Property and equipment, net 7,683 9,542
Restricted cash 843 653
Goodwill 10,252 10,252
Intangible assets, net 4,343 1,704
--------- ----------
Total assets $83,054 $142,983
========= ==========
LIABILITIES AND STOCKHOLDERS'
(DEFICIT) EQUITY
Current liabilities:
Accounts payable $1,833 $1,414
Accrued expenses 9,900 9,122
Line of credit 7,880 -
Equipment note, current portion 949 662
Note payable 2,000 -
Deferred revenues, current portion 51,215 63,447
--------- ----------
Total current liabilities 73,777 74,645
Equipment note, noncurrent portion 735 312
Deferred rent 1,135 1,116
Deferred revenues, noncurrent portion 1,727 3,552
Preferred Stock, $0.01 par value 125,963 -
Warrants to purchase Series E Preferred Stock 4,334 -
Stockholders' (deficit) equity:
Common stock, $0.01 par value 55 258
Additional paid-in capital 8,020 190,665
Deferred stock compensation (35) (226)
Accumulated deficit (132,657) (127,339)
--------- ----------
Total stockholders' (deficit) equity (124,617) 63,358
--------- ----------
Total liabilities and stockholders'
(deficit) equity $83,054 $142,983
========= ==========
SOURCE Blackboard Inc.
CONTACT:
Corporate and Investor Contact:
Michael J. Stanton of Blackboard Inc.
+1-202-463-4860 ext. 2305
or
Media Relations Contact:
Stacey Finkel of DBC Public Relations Experts
+1-202-549-6087
for Blackboard Inc.
Web site: http://www.blackboard.com
(BBBB)
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Blackboard Inc.
Ph: 202.463.4860 x.305
FX: 202.463.4863
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