Blackline Safety Corp. (“Blackline”, the “Company”, “we” or “our”), a global leader in connected safety technology, reported its fiscal second quarter financial results for the period ended April 30, 2024.
Management Commentary
“We achieved our highest quarterly revenue ever at $31.6 million, a 31% increase over the prior year’s second quarter. This result, coupled with our highest gross profit at $18.0 million and highest gross margin at 57% demonstrate the strength of our hardware-enabled software as a service business model as the company scales,” said Cody Slater, Blackline Safety Corp. CEO and Chair.
“Our record ARR of $56.5 million, up 33% year-over-year, and NDR at 130%, up from 118% twelve months ago, signals the value that our loyal customers see in the Blackline Platform, our unique hardware and software connected safety solution. Our ARR growth is driven by new customer acquisition and our NDR performance is fueled by our existing enterprise customers expanding their current contracts, as both see the value in adopting our products and services to protect their people,” Slater added.
This record-breaking quarter was driven by rising demand from customers in over 70 countries around the world for Blackline’s industry leading connected safety products and services, with Europe leading the year-over-year growth at 69%, Canada up 34% and the U.S. up 20%. The Company significantly grew its presence in a variety of verticals, including the utility and water and wastewater industries, fire and hazmat, and upstream and midstream energy sectors. This growth was a result of the contribution from the past investments in the Company’s sales teams and supporting functions to enable Blackline to serve more customers across broader markets.
“An emerging driver of our robust financial performance is that we are now seeing customers standardize on our solutions to protect all their frontline workers. This is evidenced by our announcement earlier this week of our largest deal to date—$8.5 million—with a major North American midstream energy company, an expansion to their previously announced $3.5 million contract, whereby Blackline now protects their entire workforce,” Slater continued.
Post quarter-end, the Company announced the successful closing of a bought deal financing and concurrent private placement, raising $34.6 million in gross proceeds strengthening its ability to finance its lease program into the future. Blackline ended the second quarter with total cash and cash equivalents of $13.2 million. The Company also has available capacity on its credit facility of $9.4 million and have renewed its lease securitization facility with CWB Maxium.
“Our additional capital, along with our cost optimization, margin expansion and revenue growth reinforces our trajectory towards exiting fiscal 2024 with positive quarterly Adjusted EBITDA and becoming a sustainable, free cash flow company as we lead the industrial connected safety market into the future,” concluded Slater.
Fiscal Second Quarter 2024 and Recent Financial and Operational Highlights
- Total revenue of $31.6 million, a 31% increase over the prior year’s Q2
- Service revenue of $16.8 million, a 30% increase over the prior year’s Q2
- Product revenue of $14.8 million, a 32% increase over the prior year’s Q2
- ARR(1) growth continues to be strong with 33% growth year-over-year to $56.5 million
- European market growth of 69% over the prior year’s Q2
- Canadian market achieved 34% growth over the prior year’s Q2
- United States growth continues to be strong with a 20% increase over the prior year’s Q2
- Achieved product gross margin of 34%, up from 26% from the prior year’s Q2
- Achieved service gross margin of 77%, up from 75% from the prior year’s Q2
- Total Q2 expenses of $21.8 million, up $2.6 million year-over-year, an 11% decrease as a percentage of revenue
- Significant improvement in net cash used in operating activities to $1.5 million from $7.1 million over the prior year’s Q2, a 78% decrease
- Generated gross proceeds of $34.6 million through a bought deal financing and concurrent private placement which closed June 12, 2024
- Renewed lease securitization facility with CWB Maxium for $15.0 million and USD $30.0 million
- Several large contract wins, including a $1.5 million contract with major U.S. utility provider in California, $1.7 million service upgrade with a U.S. upstream energy company in Texas and a $1.4 million deal with a water utility provider in Australia
(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 second quarter was $31.6 million, an increase of 31% compared to $24.1 million in the prior year’s quarter. Total revenue for each geographical market increased with the European markets leading the year-over-year growth at 69% while other regions also demonstrated strong growth with Canada up 34%, United States up 20% and Rest of World up 3%.
Service revenue during the fiscal second quarter was $16.8 million, an increase of 30% compared to $12.9 million in the prior year’s quarter. Software services revenue increased 28% to $14.5 million. The increase in software services revenue is attributable to new activations of devices sold over the past 12 months as well as net growth within the existing customer base of $3.2 million which resulted in NDR of 130%. Rental revenue increased 42% to $2.2 million compared to $1.6 million in the prior year’s quarter.
Product revenue during the fiscal second quarter was $14.8 million, a 32% increase compared to $11.2 million in the prior year’s quarter. The increase in the current year period reflects the results of the Company’s past investments in the global sales team and its targeted demand generation and sales development activities.
Overall, gross margin percentage(1) for the fiscal second quarter was 57%, a 5% 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 and continued cost optimization across the business. Product revenue comprised 47% of total revenue in the second quarter, compared to 46% in the prior year’s quarter, while service revenue made up 53% of total revenue for the quarter, compared to 54% in the prior year’s quarter.
Service gross margin percentage(1) increased to 77% compared to the prior year’s quarter of 75%. This was primarily due to continued service revenue growth, through additional value-added features and scale absorbing more fixed cost of sales.
Product gross margin percentage(1) for the fiscal second quarter increased to 34% from 26% in the prior year’s quarter. The improvement reflects the increased volume of product sales year-over-year, wherein more fixed product costs of sales were absorbed, as well as the Company’s focus on manufacturing line efficiency.
Total expenses for the second fiscal quarter were $21.8 million, an increase of $2.6 million compared to the prior year’s quarter of $19.2 million, due to increases in sales and marketing expenses. General and administrative expenses and product research and development costs remained largely consistent in the current quarter compared to the prior year’s quarter. However, Q2 total expenses as a percentage of revenue(1) decreased 11% year-over-year compared to prior year’s Q2.
Net loss for the fiscal second quarter was $4.3 million, or $0.06 per share, compared to $6.6 million or $0.09 per share in the prior year’s quarter. Net loss decreased due to an increase in total revenue and overall gross profit.
EBITDA(1)forthe fiscal second quarter was $(1.9) million or $(0.03) per share compared to $(4.6) million or $(0.06) per share 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 second quarter was $(2.0) million or $(0.03) per share compared to $(4.5) million or $(0.06) per share in the prior year’s quarter. The $2.5 million improvement in Adjusted EBITDA(1) is primarily due to the increase in total gross profit.
At the end of the fiscal second quarter, Blackline had total cash and cash equivalents on hand of $13.2 million and $9.4 million available on its senior secured operating facility and $54.4 million available on its lease securitization facility. There was a net increase in cash and cash equivalents in the fiscal second quarter of $1.8 million as compared to a net decrease in cash and cash equivalents in the prior year’s quarter of $6.1 million. There was significant improvement in net cash used in operating activities which used $1.5 million of net cash compared to $7.1 million year-over-year. Investing activities provided net cash of $2.1 million for the fiscal second quarter compared to the prior year’s quarter wherein investing activities used net cash of $7.3 million. This was slightly offset by a decrease in net cash provided by financing activities which is primarily due to net repayments from the lease securitization facility of $1.5 million during the quarter. Subsequent to the end of the period, the Company closed a bought deal financing and concurrent private placement, raising gross proceeds of $34.6 million.
Blackline’s Interim Condensed Consolidated Financial Statements and Management’s Discussion and Analysis on Financial Condition and Results of Operations for the three and six-months ended April 30, 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, June 13, 2024. Participants should dial 1-844-763-8274 or +1-647-484-8814 at least 10 minutes prior to the conference time. A live webcast will also be available at https://www.gowebcasting.com/13182. 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 1-855-669-9658 or +1-604-674-8052 and entering access code 0724.
