BBBB Blackboard (MM)

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. DATASOURCE: Blackboard Inc. CONTACT: Michael J. Stanton, Vice President, Investor Relations of Blackboard Inc., +1-202-463-4860 ext. 2305 Web site: http://www.blackboard.com/

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