Blackboard BBBB reported an 18% year-over-year increase in third-quarter revenue, but the acquisition of Angel Learning earlier this year was probably responsible for most of the growth. The firm's performance was in line with our expectations, and we are maintaining our fair value estimate. Tight IT budgets at educational institutions hurt sales of Blackboard's Enterprise Learning System and margins of the firm's Connect service. Total Enterprise Learning System licenses for Blackboard and Angel grew by just 2 to 2,843, reflecting a combination of weak new sales and some customer attrition. The third quarter is a heavy renewal quarter for Blackboard's customers, and we suspect renewals were probably weaker than in years past. Tight budgets can act as a catalyst for change, and open-source alternatives like Moodle could appear particularly attractive to cash-strapped educational institutions. However, high switching costs should keep a lid on overall customer attrition, and license and revenue growth should return as the economy improves, in our opinion.
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Analyst Notes
08-07-09 | 2:24PM Blackboard Sees Bookings Growth
05-15-09 | 9:02AM Blackboard's 1Q Bookings Weak
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