The company closed the quarter with $55.3 million in cash and cash equivalents.
- Accounts receivable increased to $94.1 million at the end of the quarter up from $64.7 million for the same quarter last year.
- Total deferred revenues increased to $142.7 million at the end of the second quarter up 31% from the $108.7 million at the end of the second quarter last year.
- Current deferred revenues related to the recurring products totaled $124.9 million compared to $89.3 million last year, representing an increase of approximately 40%.
- Cash flow provided by operations totaled $1.2 million for the second quarter, and capital expenditures were $9.4 million in the second quarter 2008.
For the third quarter of 2008, the company expects revenue of $82 million to $84 million.
- Amortization of acquired intangibles is expected to be approximately $9.9 million.
- The company expects net loss of $600,000 to net income of $700,000 resulting in net loss per share of $0.02, to net income per diluted share of $0.02, which is based on an estimated 31.3 million basic shares and 32.3 million diluted shares respectively and an estimated effective tax rate of 0%.
Non-GAAP adjusted net income excluding the amortization of acquired intangibles and associated tax impact of $5.8 to $6.6 million resulting in non-GAAP adjusted net income per diluted share of $0.18 to $0.20 based on an estimated 32.3 million diluted shares and an estimated effective tax rate of 37%.
For the full year 2008, the company expects:
- revenue of $312 million to $316 million,
- amortization of acquired intangibles of approximately $38.3 million,
- stock-based compensation expense of approximately $15.5 million,
- net loss of $300,000 to net income of $2.3 million resulting in net loss per basic share of $0.01 to net income per diluted share of $0.07 which is based on an estimated 31.8 million basic shares and 32 million diluted shares respectively, and an estimated effective tax rate of 0%.
Non-GAAP adjusted net income excluding the amortization of acquired intangibles and the associated tax impact of $23.5 million to $25.1 million resulting in non-GAAP adjusted net income per diluted share of $0.73 to $0.78 based on estimated 32 million diluted shares, and an estimated effective tax rate of 37%. The effective tax rate is based on the expected annual earnings and this implies an estimated effective tax rate of 28% in the fourth quarter.
The company is raising its guidance for cash flow from operations to be $75 million to $80 million for the full year.
- Cash flow year-to-date has been slightly better than expectations, and this is expected to continue in the second half of 2008.
- During the quarter GAAP effective tax rate was approximately 65%. Depending on the amount of GAAP earnings and the mix of domestic and international income, the company may experience material variations in the GAAP effective rate.
Key questions and answers from the second quarter fiscal 2008 earnings call conducted by Blackboard, Inc. (BBBB) on August 6, 2008.
Michael Nemeroff (Wedbush):
I''m just trying to work through the guidance, especially on the bottom line. So the way I have calculated, there was the $0.04 increase on the higher end of the guidance range from Desire2Learn, $0.04 from tax. So essentially you are raising the high end of the guidance on the EPS by about a $0.01 or $0.02. Did I calculate that correctly?
Mike Beach: I think the impact of the Desire2Learn is going to be more than $0.04 on the full year. I think it is probably closer to six. However, yes, the tax on Desire2Learn numbers are generally in line with what we would calculate.
Michael Nemeroff (Wedbush):
Then on the revenue that you did not get, the million in revenue from the delay in shipping the transaction, the new version of transaction. Is that revenue that is going to be able to be made up in future quarters? Or is that just roll off because it is ratable?
Mike Beach: We would expect to make that up in future periods. Unfortunately we have got a window of installations that occurs in the summer months. A big portion of that will push in to next year. So we will get that revenue. It is just that some of it will occur in the third and fourth quarter, large amount of that we will actually push into 2009.
Michael Nemeroff (Wedbush):
You mentioned that the spending environment for academic institutions, you do not feel it as much as the normal enterprise software company. Can you compare what the pipeline looks like or looked like coming out of the User Conference this year than it did coming out of last year''s conference? Could you give us some qualitative comments around that? Then also, in your conversation with customers, are any of them delaying purchases of any new modules in anticipation of Version 9?
Mike Chasen: We were extremely pleased with Blackboard World Conference this year. I think it was our strongest conference to date and we have the strongest pipeline coming from that conference. Generally the client comments to us on the improvements that we made in support, the enhancements to our managed hosting as well as the vision that we laid out there really was exciting.
We expect to have strong results for the rest of this year. I do think that what is reflective of the industry as is our high contract value number, and our larger revenue where we are continuing to see strong demand particularly for our products, and whether that is our e-Learning product or our new Blackboard Connect and Blackboard Transaction product, as well and we are continuing to increase our sales focus to make sure that we are getting this product out in the hands of the clients; and we are seeing a lot of success there with the cross selling.
Just a technical note to your comment about the next release of our software. All of our clients are on annual subscriptions, so they continue to upgrade and get all future releases of our software just as they are released to the public, so there is not any delayed reaction to purchase because of that, if anything it really gets people excited about the future direction that we are headed in as a company.
Michael Nemeroff (Wedbush):
At the User Conference and analyst sessions, you talked about the dilemma of how you account for some of these statewide contracts and the number of absolute enterprise licenses that you will book. Can you tell us how you accounted for the State of New Mexico this quarter and how you plan on accounting for those statewide deals in the absolute enterprise count going forward?
Mike Beach: As it relates to the enterprise counts, currently New Mexico is included in the counts, just that the amount of clients that were previously using the product in New Mexico. When the system goes live which will be the end of this year, early next year, then we would be able to better determine the number of actual users of the system and that relates as well to the revenue recognition impact that we also will not be able to recognize revenue on this deal until the end of the year.
