Blackline Safety Corp. (“Blackline”, the “Company”, “we” or “our”), a global leader in connected safety technology, reported its fiscal third quarter financial results for the period ended July 31, 2024.
Management Commentary
Blackline Safety achieved another record quarter for revenue at $33.7 million, an increase of 36% from last year. This is the 30th consecutive quarter of year-over-year growth dating back 7.5 years. “We have achieved topline growth in every quarter since we launched the G7. The $33.7 million reported this quarter is actually more revenue than we generated in the entire fiscal 2019, demonstrating the strong market acceptance of our connected worker solutions,” said Cody Slater, Blackline Safety Corp. CEO and Chair.
“Topline growth has been the story all along for Blackline but achieving positive EBITDA demonstrates that the Company is now truly reaching scale, and we have barely scratched the surface of what we can accomplish,” Slater continued.
Gross profit increased 48% to $19.9 million and gross margins improved to 59% from 54% last year. “Gross profit for the year to date is nearly equal to that of the entire 2023 year with our single strongest quarter still to come,” Slater added.
“ARR is at a record level of $62.1 million, up 32% year-over-year, demonstrating the power of our recurring revenue model. NDR for the quarter was 128%, up from 125% twelve months ago, which reflects our existing customers continuing to expand their current contracts,” noted Slater.
Third quarter total expenses as a percentage of revenue(1) declined to 65% compared to 81% from the prior year’s quarter and 132% from the third quarter of 2022. “This dramatic improvement demonstrates the cost discipline the whole Company has shown with every expense category reduced as a percentage of revenue,” commented Slater.
Demand for Blackline’s industry-leading connected safety products and services led to strong revenue growth in every geography, with the U.S. up 34% year-over-year, Europe up 29%, Canada up 11% and the Rest of World (“ROW”) region growing an impressive 212%. Blackline continues to expand its presence globally with customers in over 75 countries around the world. The continued success of this expansion is evidenced by the recent announcement of a new energy client in South Africa, marking the Company’s first significant contract in Africa.
“The Blackline platform has become an invaluable tool for all our customers to protect their workers. An example of this is our recently announced $3.9 million contract renewal with one of the largest utility companies in the United States, adding two more years of monitoring by Blackline’s Safety Operations Center (SOC) as well as push-to-talk services for the utility company’s 2,200 G7 devices,” noted Slater.
During the quarter, the Company closed a bought deal financing and concurrent private placement for gross proceeds of $34.6 million. Blackline ended the third quarter with total cash and cash equivalents including short term investments of $40.8 million. The Company also has $14.8 million available on its senior secured operating facility with a $5.0 million accordion.
“The Company continues on its path towards cash flow positivity – we have seen net cash used in operations decrease from $20.1M during the first nine months of 2023 to just $2.9M in the same period in 2024. As this trend continues, we expect to see the Company reach another milestone and achieve cash flow positivity in the near future,” stated Slater.
“In Q3 2024, Blackline demonstrated strength in all aspects of the business, reaching the milestone of positive EBITDA and advancing us on our path to a Rule of 40(3) company, the gold standard for SaaS businesses. Only two years ago, we were at negative 16 according to this metric—this quarter we reached 38 with our seasonally strongest quarter still ahead of us,” concluded Slater.
Fiscal Third Quarter 2024 and Recent Financial and Operational Highlights
- Total revenue of $33.7 million, a 36% increase over the prior year’s Q3
- Service revenue of $18.2 million, a 34% increase over the prior year’s Q3
- Product revenue of $15.5 million, a 38% increase over the prior year’s Q3
- ARR(1) of $62.1 million, a 32% increase over the prior year’s Q3
- United States revenue growth of 34% over the prior year’s Q3
- European revenue growth of 29% over the prior year’s Q3
- Canadian revenue growth of 11% over the prior year’s Q3
- ROW revenue growth of 212% over the prior year’s Q3
- Achieved product gross margin of 38%, up from 29% from the prior year’s Q3
- Achieved service gross margin of 77%, up from 75% from the prior year’s Q3
- Total Q3 expenses of $21.9 million, up $1.8 million from the prior year’s Q3
- Total expenses as a percentage of revenue(1) declined in Q3 2024 to 65% compared to 81% from the prior year’s Q3
- Generated gross proceeds of $34.6 million through a bought deal financing and concurrent private placement
- $3.9 million contract renewal with one of the largest utility companies in the U.S.
- $1.5 million deal with a California utility provider
- $1.9 million deal with a South African energy company
- $8.5 million contract expansion for a major North American midstream company to protect an additional 1,025 workers
(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.
(2) Hardware margins were the highest in the Company’s history after Q4 2020 is adjusted to exclude COVID relief programs.
(3) Rule of 40 is calculated as the sum of revenue growth and Adjusted EBITDA margin.
Key Financial Information
Total revenue increased 36% to $33.7 million in fiscal third quarter. Geographically, revenue was up in each region with the U.S. representing the largest contributor with $15.8 million, up 34% year over year. The European region increased revenue by 29% to $7.9 million, Canada grew by 11% to $6.4 million and the ROW region grew by 212% to $3.7 million. Revenue from ROW in Q3 2024 was greater than its contribution in the entire fiscal 2021.
Product revenue grew by 38% in the third quarter to $15.5 million. This strong growth was made possible by the Company’s expanded sales network and past investments in our global sales team, especially within Europe and the ROW markets.
Software service revenue during the fiscal third quarter was up 34% to $18.2 million compared to the prior year’s Q3 and was up 9% relative to last quarter. This quarter-over-quarter growth represents an acceleration compared to the 5% growth from Q4 2023 to Q1 2024 and the 5% growth from Q1 2024 to Q2 2024. This quarter’s growth was the result of new activations from devices sold to end users as well as the strong rental revenue which grew 101% to $2.3 million from Q3 last year.
Gross margin percentage(1) for the third quarter was a record 59% compared to 54% in the prior year’s quarter. The improvement in gross margin percentage was aided by our highest ever product gross margin percentage(1) of 38% this quarter, up from 34% in Q3 2023 and more than double the product gross margin percentage(1) achieved two years ago. Service gross margin percentage(1) improved to 77% from 75% last year in Q3.
Total expenses were $21.9 million, up 9% from last year. Total expenses as a percentage of revenue(1) were 65% - a significant improvement from last year which was 81% of revenue.
Net loss for the quarter was $2.5 million, down from a loss of $6.8 million in the prior year’s third quarter. On a per share basis, net loss was $0.03 compared with a loss of $0.09 last year. The net loss was one-third of where it was a year ago due to higher revenue and stronger gross margins.
EBITDA(1) for the third quarter was $53 thousand compared to a loss of $4.9 million in the prior year’s third quarter. On an adjusted basis, EBITDA was $0.8 million, an improvement of $4.6 million relative to the Adjusted EBITDA(1) loss of $3.8 million last year.
As of July 31, 2024, Blackline had $13.8 million in cash and cash equivalents along with $27.0 million in short-term investments. The Company has $14.8 million available on its senior secured operating facility and $47.5 million available on its lease securitization facility. Cash and cash equivalents increased $0.6 million during the third quarter through a combination of $30.2 million increase from financing activities, a decline of $29.9 million in investing (primarily from $27.0 million invested in short-term investments) and a decline of $0.9 million from operating activities.
Blackline’s Interim Condensed Consolidated Financial Statements and Management’s Discussion and Analysis on Financial Condition and Results of Operations for the three and nine-months ended July 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 Wednesday, September 11, 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/13632. Participants should join the webcast at least 10 minutes prior to the start time to register and install any necessary software. A replay will be available after 2:00 PM ET on September 11, 2024 through October 11, 2024 by dialing +1-855-669-9658 (Canada Toll Free), +1-877-344-7529 (USA Toll Free) or +1-412-317-0088 (International Toll) and entering access code 9016403.
