Blackline Safety Corp. ("Blackline" or the "Company"), a global leader in connected safety technology, reported its fiscal first quarter financial results for the period ended January 31, 2024.
Management Commentary
“In Q1, we delivered our 28th consecutive quarter of year-over-year total revenue growth with a 25% increase compared to the same quarter last year. Gross profit grew by 40% year-over-year to $14.6 million, and we maintained our gross margin of 55% from the particularly strong fourth quarter of fiscal 2023. Net dollar retention was 130% in Q1, a record for the Company and a signal of the powerful value proposition customers see in our connected safety solutions. We also saw our ARR(1) grow 37% to $54.2 million and we reduced our adjusted EBITDA loss by 48%,” said Cody Slater, CEO and Chair, Blackline Safety Corp.
Blackline saw year-over-year revenue growth across all operating regions, with Europe leading the way at 39% driven by new deals across a range of verticals. The United States and Canada also grew 29% and 11% respectively, demonstrating that the investments the Company has made in its Sales and Marketing engine are delivering results.
The Company remains on track to achieve positive quarterly Adjusted EBITDA in the seasonally stronger second half of the fiscal year by leveraging the strength of its product and service segments, margin enhancements, and expansion across the utilities, energy and industrial sectors. A continued focus on disciplined cost management will further contribute to Blackline’s path to sustained profitability.
Mr. Slater continued: “We are particularly pleased we ended what is traditionally our softest quarter with total cash and short-term investments on hand of $15.9 million, the same as that on hand at our October 31, 2023 year-end. We saw a significant improvement in our cash flows from operating activities where we used $0.4 million of cash compared to $7.6 million in the prior year’s quarter. We also have total liquidity available through our cash, short-term investments and availability on our credit facility of $26.2 million, all in addition to the availability on our lease securitization facility of $52.9 million. Our cost optimization, margin expansion and revenue growth will continue to improve our cash burn, keeping us on the path to a sustainable free cash flow generating business.”
Fiscal First Quarter 2024 and Recent Financial and Operational Highlights
- Total revenue of $26.3 million, a 25% increase over the prior year’s Q1
- Recurring software services revenue of $13.9 million, a 31% increase over the prior year’s Q1
- ARR(1) growth of 37% year-over-year to $54.2 million
- Product revenue of $11.4 million, a 21% increase over the prior year’s Q1
- European market growth of 39% over the prior year’s Q1
- United States growth continues to be strong with a 29% increase over the prior year’s Q1
- Total Q1 expenses were $19.9 million, which increased 10% year-over-year, however Q1 expenses as a percentage of revenue(1) decreased 10% year-over year and were flat with Q4
- Significant improvement in net cash used in operating activities to $0.4 million, a 94% decrease over the prior year’s Q1
- Secured a $2.7 million contract with a major U.S. upstream energy company to protect over 800 workers
- Joined the Amazon Web Services (AWS) Partner Network as an AWS Public Sector Partner
(1) This news release presents certain non-GAAP and supplementary financial measures, including key performance indicators used by management and typically used by companies in the software-as-a-service industry, as well as non-GAAP ratios to assist readers in understanding the Company’s performance. Further details on these measures and ratios are included in the “Key Performance Indicators,” and “Non-GAAP and Supplementary Financial Measures” sections of this news release.
Key Financial Information
Total revenue for the fiscal first quarter was $26.3 million, an increase of 25% compared to $21.0 million in the prior year’s quarter. Total revenue for each geographical market increased, with the European markets leading the growth up 39% while other regions also demonstrated strong growth with the United States up 29%, Canada up 11% and Rest of World up 7%.
Service revenue during the fiscal first quarter was $14.9 million, an increase of 28% compared to $11.6 million in the prior year’s quarter. Software services revenue increased 31% to $13.9 million. The increase in software services revenue was attributable to new activations of devices sold over the past 12 months, as well as net growth within our existing customer base of $2.8 million which resulted in NDR of 130%.
Product revenue during the fiscal first quarter was $11.4 million, a 21% increase compared to $9.4 million in the prior year’s quarter. The increase in the current year period reflects the Company’s expanded sales network and past investments in our global sales team through targeted demand generation and sales development activities.
Overall, gross margin percentage(1) for the fiscal first quarter was 55%, a 6% increase compared to the prior year’s quarter. The increase in total gross margin percentage(1) was due to a combination of higher sales volume, our enhanced pricing strategy, continued cost optimization across our business and a shift in revenue mix towards higher margin service revenue. Product revenue comprised 43% of total revenue in the first quarter, compared to 45% in the prior year’s quarter, while service revenue made up 57% of total revenue for the quarter, compared to 55% in the prior year’s quarter.
Service gross margin percentage(1) increased to 76% compared to the prior year’s quarter of 73%. This was primarily due to our continued service revenue growth through additional value-added features, enhanced pricing and our scale absorbing more fixed costs.
Product gross margin percentage(1) for the fiscal first quarter increased to 29% from 21% in the prior year’s quarter. The improvement reflects the increased volume of product sales in the current quarter compared to the prior year, as well as the Company’s focus on manufacturing line efficiency and the impact of our enhanced pricing strategy. The fiscal first quarter product gross margin decreased by 3% compared to the seasonally stronger fourth quarter of fiscal 2023 mainly due to the decrease in product sales volume.
Total expenses for the fiscal first quarter were $19.9 million, an increase of $1.8 million compared to the prior year’s quarter of $18.2 million, due to increases in sales and marketing expenses and general and administrative expenses, slightly offset by a decrease in product research and development costs. However, Q1 expenses as a percentage of revenue(1) decreased 10% year-over-year compared to the prior year’s Q1.
Net loss for the fiscal first quarter was $5.8 million, or $0.08 per share, compared to $7.7 million or $0.11 per share in the prior year’s quarter. Net loss decreased due to an increase in total gross profit as well as decreases in product research and development costs.
EBITDA(1) for the fiscal first quarter was $(3.4) million or $(0.05) per share compared to $(6.0) million or $(0.08) in the prior year’s quarter. The $2.7 million improvement in EBITDA(1) is primarily due to the increase in total gross profit.
Adjusted EBITDA(1) for the fiscal first quarter was $(3.2) million or $(0.04) per share compared to $(6.2) million or $(0.09) per share in the prior year’s quarter. The $3.0 million improvement in Adjusted EBITDA(1) is primarily due to the increase in total gross profit.
At the end of the fiscal first quarter, Blackline had total cash and short-term investments on hand of $15.9 million, $10.3 million available on its senior secured operating facility and $52.9 million available on its lease securitization facility. Blackline was able to maintain a similar cash position as at October 31, 2023 year end mainly due to reduced operating losses and cash inflows from changes in non-cash working capital, which were offset by a net cash inflow of $1.3 million during the quarter from the Company’s operating credit facility and securitization facility.
Blackline’s Interim Condensed Consolidated Financial Statements and Management’s Discussion and Analysis on Financial Condition and Results of Operations for the three-month period ended January 31, 2024, are available on SEDAR+ under the Company’s profile at www.sedarplus.ca. All results are reported in Canadian dollars.
Conference Call
A conference call and live webcast have been scheduled for 11:00 am ET on Thursday, March 14, 2024. Participants should dial 1-800-319-4610 or +1-416-915-3239 at least 10 minutes prior to the conference time. A live webcast will also be available at https://www.gowebcasting.com/13181. Participants should join the webcast at least 10 minutes prior to the start time to register and install any necessary software. If you cannot make the live call, a replay will be available within 24 hours by dialing 1-800-319-6413 and entering access code 0742.
