This is a summary of the third quarter fiscal 2008 earnings call conducted by Blackboard, Inc. (BBBB) on October 29, 2008.
Management:
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SVP, IR: Michael Stanton
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President and CEO: Michael Chason
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CFO: Mike Beach
Key Investor Issues:
- Revenue was $83.1 million, an increase of 35% over the third quarter of 2007.
- Net income was $2.1 million or $0.07 per basic share and $0.06 per diluted share.
- A non-GAAP adjusted net income was $8 million or $0.25 per diluted share.
- Cash flow from operations was just over $60 million for the quarter.
Third Quarter Highlights:
A difficult economy presents both challenges and opportunities to the education industry.
On the one hand, a slowing economy does have negative impacts on education spending as it does in other industries. These economic concerns were most pronounced in the US K-12 market, which is the most economically sensitive end market for the business. The reason for this is that a significant portion of K-12 funding comes directly from state and local taxes which have been negatively impacted this year.
Revenue for the third quarter of 2008 was $83.1 million, up 35% from last year and in line with the expectations.
Product revenue for the quarter was $74.3 million, representing an increase of 38% over the same quarter last year. Professional service revenue for the quarter was $8.8 million, which represents an increase of 16% over the prior year.
- For the quarter, ratable recurring revenues increased 42% to $65.5 million as compared to $46 million in the same quarter last year.
- Ratable non-recurring revenues increased 18% to $6.5 million as compared to $5.5 million in the same quarter last year.
- Other revenues increased 11% to $11.1 million as compared to $10.1 million in the same quarter last year.
Gross profit, excluding stock-based compensation and the amortization of acquired technologies, was $58.7 million vs. $45.5 million in the same quarter a year ago, representing an increase of 29%.
- For the quarter, the gross margin was 71% excluding stock-based compensation and amortization of acquired technologies.
- Total operating expenses, excluding the cost of revenues, stock-based compensation and amortization of acquired intangibles, were $43.9 million, representing an increase of 36% as compared to $32.4 million in the same quarter last year.
- For the quarter, the company incurred stock-based compensation expense of $3.6 million and intangible amortization expense of $9.7 million.
The net income was $2.1 million compared to net income of $3.3 million in the same quarter last year.
- Net income per diluted share or per basic and diluted share was $0.07 and $0.06 respectively for the quarter.
- Net income for the third quarter also benefited from a $2.4 million income tax benefit.
- Non-GAAP adjusted net income was $8 million or $0.25 per diluted share. It was in line with the guidance when you apply the effective rate provided last quarter.
In terms of the balance sheet, the company is pleased with the ending cash and cash equivalents of $118.7 million.
Accounts receivable increased to $102.5 million at the end of the quarter from $65.8 million in the same quarter last year. This increase is due to the growth in receivables from acquired companies and overall growth in our business.
Total deferred revenues increased to $191.5 million at the end of the third quarter, up 43% from the $133.7 million at the end of the third quarter last year. And current deferred revenues related to the recurring products totaled $167.4 million compared to $114.7 million in the same quarter last year, representing an increase of 46%.
Cash flow provided by operations totaled $60.3 million for the quarter which was a record and represents a 57% increase compared to the third quarter last year.
Capital expenditures were $4.9 million in the third quarter.
For the fourth quarter of 2008, the company expects:
- revenue of $82.9 million to $84.9 million,
- amortization of acquired intangibles of approximately $9.8 million,
- stock-based compensation expense of approximately $3.9 million,
- net income of $900,000 to $2.2 million resulting in net income per diluted share of $0.03 to $0.07 which is based on estimated 32.2 million diluted shares
- an estimated income tax benefit of approximately $600,000.
