Non-GAAP adjusted net income of $7.2 million to $8 million, resulting in non-GAAP adjusted net income per diluted share of $0.22 to $0.25 based on an estimated 32.2 million diluted shares and an estimated effective tax rate of approximately 29%.
For the full year 2008, the company expects:
- revenue of $310 million to $312 million,
- amortization of acquired intangibles of approximately $38.3 million,
- stock-based compensation expense of approximately $15.1 million,
- net income of $800,000 to $2.1 million resulting in net income per diluted share of $0.02 to $0.06, which is based on estimated 31.8 million diluted shares
- an estimated income tax benefit of $2.8 million.
Non-GAAP adjusted net income of $24.4 million to $25.2 million resulting in non-GAAP adjusted net income per diluted share of $0.76 to $0.79 based on an estimated 31.8 million diluted shares and an estimated effective tax rate of approximately 33%.
The company is raising its cash flow from operations guidance for the year.
The company now expects cash flow from operations of $80 million to $85 million. Blackboard realized an income tax benefit of $2.4 million in the third quarter. Depending on the amount of GAAP earnings and the mix of domestic and international income, the company may experience some material variations in the GAAP effective tax rate.
In terms of the Blackboard Connect progress, there were more than 200 new Blackboard Connect deals closed in the third quarter. Importantly, 40 of these deals were cross-sell to existing Blackboard US higher education clients.
The company ended the quarter with a total of 6,599 enterprise category licenses.
Breaking out these licenses, Blackboard had:
- 2,340 licenses of the Enterprise Blackboard Learning System,
- 839 licenses of the Blackboard Community System,
- 485 licenses of the Blackboard Content System,
- 30 licenses of the Blackboard Outcome System,
- 455 licenses of the Blackboard Transaction System,
- 2,450 licenses of the Blackboard Connect offering.
In terms of the Blackboard Learning System basic product, Blackboard had 793 licenses.
The total number of licenses including the basic licenses at the end of the quarter was 7,392.
In terms of the Managed Hosting business, Blackboard finished the quarter with 583 hosted clients, which is a 16% increase over last year.
The client renewal rate continues to trend in line with where Blackboard ended last year, at approximately 92%. The company finished the quarter with an annualized contract value of approximately $272 million which represents an annual increase of 25% measured on a pro forma basis including Blackboard Connect, formally known as the NTI Group in both areas.
The total headcount at the end of third quarter was flat sequentially at 1,080 people.
Blackboard had:
- 253 people in sales;
- 91 in marketing and business development;
- 231 in product development;
- 196 in support, managed hosting, and production;
- 135 in professional services;
- 174 in operations.
Key questions and answers from the third quarter fiscal 2008 earnings call conducted by Blackboard, Inc. (BBBB) on October 29, 2008.
Michael Nemeroff (Wedbush):
Could you reconcile the guidance to the tax benefit? By my calculations, I get to about $0.19 on the EPS for the quarter. Then also if you could tell us whether the core contract value for Blackboard was at or above that 20% figure that it’s been for the last couple quarters and whether you have any concerns about cash flow and collections going forward as the credit crunch and schools may be possibly hoarding cash?
Mike Beach: We have got significant variability in the effective tax rate. You could see that in the third quarter benefit. If you apply the estimated effective rate from our prior guidance which was 37% to the non-GAAP earnings in the quarter, the earnings per share would have been $0.19.
The only other kind of one-time item or unusual item in the quarter was the foreign currency. So if you look at foreign currency, we had a $200,000 negative impact to earnings which is worth about $0.01.
Michael Nemeroff (Wedbush):
So excluding the tax benefit but adding back the FX, you get to about $0.20 which was in line with consensus, is that correct?
Mike Beach: Yes. On the contract value for Blackboard would have been approximately 19% growth for the quarter year-over-year.
