Blackboard Reveals SaaS Financial Trends

Evidence is mounting that the software as a service (SaaS) industry is doing well — but not quite as well as financial analysts had expected. The latest anecdote comes from Blackboard Inc., a company that offers hosted applications to colleges and universities.

I’ve tracked Blackboard for numerous years while working at a college and also contributing to University Business magazine. Blackboard was among the first niche, vertical market software companies to truly master the SaaS business model. So, how are things at Blackboard, and what does the data mean to managed service providers (MSPs)? Here’s a look.

The good news: Blackboard has raised its earnings and revenue estimates for the year, indicating that annual revenue will likely range between $310.5 million and $316.5 million, up from a previous predicted range of $306 million to $314 million in revenue for the year, notes the Associated Press (AP).

Still, the shorter-term news shows caught my attention. The company expects 2Q earnings to be 10 to 13 cents per share, while analysts had been expecting 14 cents per share, according to AP. My read on the situation: The economy is impacting SaaS, ever so slightly.

Now, here’s where the danger enters the picture. Earlier this week, The Wall Street Journal mentioned the following troubling trend: A lot of companies, particularly high-tech companies, had Q1 weakness but nevertheless proclaim overall annual sales and profits will be strong this year.

In other words, numerous companies will need to have particularly strong results in Q2 through Q4 to compensate for softness in Q1. Think of it this way: Imagine if you wanted to lose 20 pounds this year. But you didn’t drop any weight in Q1. The net result is you’d have to work extra hard Q2 through Q4 to meet your original goals. I think that’s the situation facing high-tech.

Cautious Optimism

Overall, I hope readers remain cautiously optimistic but extra attentive to market trends. A few of my recent posts have attempted to “tone down” the noise and financial hype we’re hearing in the MSP and SaaS markets. My goal isn’t to rain on the MSP parade. Rather, I just want to make sure MSPs don’t consider themselves fully immune to the economic trends around them.

Savvy companies like Blackboard remain upbeat… but the short-term results may be slightly below Wall Street’s expectations. That’s worth noting.