- Service revenue up 39% year-over-year to $11.6 million,
generating highest service margin in company history of 73%
- Annual recurring revenue(1) growth of 34% year-over-year to
$39.7 million
- Net Dollar Retention(1) of 113% improves year-over-year from
103%
- Total operating expenses of $18.2 million, declining
sequentially from $20.3 million
- Q1 Adjusted EBITDA(1) loss of $6.2 improves sequentially from a
loss of $7.7 million
- Growth outlook and cost containment efforts support target of
exiting fiscal 2023 generating Adjusted EBITDA profitability
Blackline Safety Corp. ("Blackline" or the
"Company") (TSX: BLN), a global leader in connected
safety technology, today reported record fiscal first quarter
financial results for the period ended January 31, 2023.
Management Commentary
“Our strong Q1 growth of 34% represented our 24th consecutive
quarter of strong year-over-year revenue growth, which was driven
by increases in both our service and product segments increasing
39% and 29%, respectively. Our results in Q1 also displayed
impressive progress and advancement of our cost reduction goals,”
said Cody Slater, CEO and Chair of Blackline Safety. “Through our
revenue growth and sales mix, we were able to deliver improved
gross margins of 49% during the quarter, which marks our highest
level since the second quarter of 2021. Looking forward, we see
continued strong customer demand driving revenue growth coupled
with our disciplined cost management approach enabling Blackline to
achieve and sustain positive Adjusted EBITDA as we exit fiscal
2023.”
“In addition, our annual recurring revenue(1) advanced 34%
year-over-year to $39.7 million. Regionally, we experienced
year-over-year growth across the board highlighted by the United
States increasing 36% benefiting from a robust pipeline, while
Canada generated 69% growth.”
“On the margin front, we experienced the strongest service
margins in Company history of 73%. Our product margins also
improved significantly year-over-year from 10% to 21%, but declined
when compared to Q4 FY 2022 due to lower volume, decreased
percentage of sales generated through our leasing program, and
foreign exchange impact. Looking forward, we anticipate margin
improvements through the remainder of the fiscal year through the
recent price increases and component costs reductions and
efficiencies.”
“We made initial deliveries of our latest transformative product
during Q1, the G6, and we anticipate demand and adoption to grow
throughout the balance of this fiscal year while revenue is
expected to be back-half weighted in fiscal 2023. We continue to
see significant potential for G6 to disrupt and capture share in
the $220 million annual zero-maintenance gas detection market.”
“We ended the first quarter in a solid financial position with
total cash and short-term investments on hand of $23.5 million,
while our cash burn rate improved for the third consecutive
quarter. Furthermore, we continue to work towards finalizing a
financial structure for the hardware equivalent element of our
finance lease portfolio, which had a total undiscounted value of
$35.5 million at the end of the quarter for the right to use the
hardware and associated services. Importantly, this will supplement
our liquidity position as we execute on our path to sustained
profitability as we exit fiscal 2023.”
Fiscal First Quarter 2023 and Recent Financial and
Operational Highlights
- Total revenue of $21.0 million, a 34% increase over the prior
year’s Q1
- Service revenue of $11.6 million, a 39% increase over the prior
year’s Q1
- Product revenue of $9.4 million, a 29% increase over the prior
year’s Q1
- Canadian market momentum remains strong with 69% growth over
prior year’s Q1
- United States regaining momentum with 36% growth over prior
year’s Q1
- Annual recurring revenue(1) growth of 34% year-over-year to
$39.7 million
- Rental revenue growth of 305% year-over-year
- Total operating expenses of $18.2 million, declining $2.1
million sequentially
- Released third annual Environment, Social & Governance
(“ESG”) Report continuing our commitment to diversity, inclusion,
environmental sustainability and community engagement
- Launched our first European Union (“EU") based service centre
in France to serve the growing number of customers in Europe and
provide an operational base to expand the Company’s rental offering
in the region
- Announced a multi-year contract with a $1 million lifetime
value in the Middle East, Blackline’s largest ever order in its
Rest of World region
Financial highlights
Three-months ended January
31,
(CAD thousands, except per share and
percentage amounts)
2023
2022
% Change
Product revenue
9,424
7,325
29
Service revenue
11,622
8,345
39
Total Revenue
21,046
15,670
34
Gross margin
10,383
6,387
63
Gross margin percentage(1)
49
41
8
Total Expenses
18,164
19,324
(6)
Total Expenses as a percentage of
revenue(1)
86
123
(37)
Net loss
(7,692)
(12,873)
(40)
Loss per common share - Basic and
diluted
(0.11)
(0.21)
(48)
Adjusted EBITDA(1 & 2)
(6,231)
(11,124)
44
Adjusted EBITDA per common share(1 &2)
- Basic and diluted
(0.09)
(0.18)
50
(1)
This news release presents certain
non-GAAP and supplementary financial measures, 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 “Non-GAAP and Supplementary Financial Measures”
section of this press release.
(2)
Adjusted EBITDA is adjusted for all
periods presented as Management updated the non-GAAP composition to
remove the adjustment of product research and development costs and
included the adjustment for foreign exchange gains or losses as
noted in the Non-GAAP Financial Measures section. The amounts
presented in the table above reflected the restated figures to
align with the updated composition.
Key Financial Information
Fiscal first quarter revenue was $21.0 million, an increase of
34% from $15.7 million in the prior year quarter. Total revenue for
each geographical market increased with Europe up 10%, Rest of
World up 16%, United States up 36% and Canada up 69% representing
the largest geographic growth region year-over-year.
Service revenue during the fiscal first quarter was $11.6
million, an increase of 39% compared to $8.3 million in the prior
year quarter. Software services revenue increased 31% to $10.6
million and rental revenue increased 305% to $1.0 million. Software
services growth was attributable to new activations of devices sold
over the past 12 months as well as net growth within our existing
customer base of $1.2 million. Rental revenue growth continues to
be strong, up over 305% year-over-year, as our dedicated rental
team continues to meet heightened demand for its connected
solutions in the industrial construction, turnaround and
maintenance markets.
Product revenue during the fiscal first quarter was $9.4
million, a 29% increase compared to the prior year quarter of $7.3
million. The increase in the current year period reflects the
Company’s expanded sales network and investment in our global sales
team over the past twelve months with continued strong demand
generation and sales development activities.
Overall gross margin percentage for the fiscal first quarter was
49%, an 8% increase compared to the prior year quarter. The
increase in total gross margin percentage is due to a combination
of a higher sales volume and an enhanced pricing strategy. Product
revenue comprised 45% of total revenue in the first quarter, a
decrease of 2% from the prior year quarter, while service revenue
made up 55% of total revenue for the quarter, representing a 2%
increase. Service gross margin percentage increased to 73% compared
to the prior year quarter at 68% as service revenue continued to
grow, absorbing more fixed cost of sales.
Product gross margin percentage increased to 21% from 10% in the
prior year quarter as the Company has been able to mitigate some of
the global supply chain challenges that it has experienced since
the third quarter of 2021. During the quarter the Company began
completing some sales under our newly introduced pricing structure.
The Company has been able to automate more of its manufacturing
line, improving the efficiency and throughput of its
operations.
Net loss was $7.7 million, in the fiscal first quarter, compared
to $12.9 million in the prior year quarter. Net loss decreased
primarily due to decreases in sales and marketing expenses and an
increase in gross margin, offset by increases in general and
administrative expenses and product research and development
costs.
Adjusted EBITDA(1) was ($6.2) million for the fiscal first
quarter compared to ($11.1) million in the prior year quarter. The
increase in Adjusted EBITDA is primarily due to the decrease in net
loss.
At quarter end, Blackline had total cash and short-term
investments on hand of $23.5 million and $7.0 million of
availability on its senior secured operating facility. The decrease
in cash and short-term investments is mainly due to operating
losses. At quarter end, the Company had $8.0 million of borrowings
on its senior secured operating facility, repaying $0.6 million
during the quarter from operating cash flow.
Blackline’s Interim Condensed Consolidated Financial Statements
and Management’s Discussion and Analysis on Financial Condition and
Results of Operations for the three months ended January 31, 2023
are available on SEDAR under the Company’s profile at
www.sedar.com. 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 16, 2023. 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/12481. Participants should join the
webcast at least 10 minutes prior to the conference time to
register and install any necessary software. If you cannot make the
call live, a replay will be available within 24 hours by dialing in
to dialing 1-800-319-6413 and entering access code 9921.
About Blackline Safety
Blackline Safety is a technology leader driving innovation in
the industrial workforce through IoT (Internet of Things). With
connected safety devices and predictive analytics, Blackline
enables companies to drive towards zero safety incidents and
improved operational performance. Blackline provides wearable
devices, personal and area gas monitoring, cloud-connected software
and data analytics to meet demanding safety challenges and enhance
overall productivity for organizations with coverage in more than
100 countries. Armed with cellular and satellite connectivity,
Blackline provides a lifeline to tens of thousands of people,
having reported over 200 billion data-points and initiated over
seven million emergency responses. For more information, visit
BlacklineSafety.com and connect with us on Facebook, Twitter,
LinkedIn and Instagram.
Non-GAAP and Supplementary Financial Measures
This press release presents certain non-GAAP and supplementary
financial measures, including key performance indicators used by
management typically used by our competitors in the
software-as-a-service industry, as well as non-GAAP ratios to
assist readers in understanding the Company’s performance. These
measures do not have any standardized meaning and therefore are
unlikely to be comparable to similar measures presented by other
issuers and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
GAAP.
Management uses these non-GAAP and supplementary financial
measures, as well as non-GAAP ratios and key performance indicators
to analyze and evaluate operating performance. Blackline also
believes the non-GAAP and supplementary financial measures defined
below are commonly used by the investment community for valuation
purposes, and are useful complementary measures of profitability,
and provide metrics useful in Blackline’s industry.
Throughout this news release, the following terms are used,
which do not have a standardized meaning under GAAP.
Key Performance Indicators
The Company recognizes service revenues ratably over the term of
the service period under the provisions of agreements with
customers. The terms of agreements, combined with high customer
retention rates, provides the Company with a significant degree of
visibility into near-term revenues. Management uses a number of
metrics, including the ones identified below, to measure the
Company’s performance and customer trends, which are used to
prepare financial plans and shape future strategy. Key performance
indicators may be calculated in a manner different than similar key
performance indicators used by other companies.
- “Annual recurring revenue” (“ARR”) is the total
annualized value of recurring service amounts (ultimately
recognized as software services revenue) of all service contracts
at a point in time. Annualized service amounts are determined
solely by reference to the underlying contracts, normalizing for
the varying revenue recognition treatments under IFRS 15 Revenue
from Contracts with Customers. It excludes one-time fees, such as
for non-recurring professional services, and assumes that customers
will renew the contractual commitments on a periodic basis as those
commitments come up for renewal, unless such renewal is known to be
unlikely.
- “Net Dollar Retention” (”NDR”) compares
the aggregate service revenue contractually committed for a full
period under all customer agreements of our total customer base as
of the beginning of each period to the total service revenue of the
same group at the end of the period. It includes the effect of our
service revenue that expands, renews, contracts or is declined, but
excludes the total service revenue from new activations during the
period. We believe that NDR provides a fair measure of the strength
of our recurring revenue streams and growth within our existing
customer base.
Non-GAAP Financial Measures
A non-GAAP financial measure: (a) depicts the historical or
expected future financial performance, financial position or cash
of the Company; (b) with respect to its composition, excludes an
amount that is included in, or includes an amount that is excluded
from, the composition of the most comparable financial measure
presented in the primary consolidated financial statements; (c) is
not presented in the primary financial statements of the Company;
and (d) is not a ratio.
Non-GAAP financial measures presented and discussed in this news
release are as follows:
“Adjusted EBITDA” is useful to securities analysts,
investors and other interested parties in evaluating operating
performance by presenting the results of the Company which excludes
the impact of certain non-operational items and certain non-cash
and non-recurring items, such as stock compensation expense.
Adjusted EBITDA is calculated as earnings before interest expense,
interest income, income taxes, depreciation and amortization,
stock-based compensation expense, foreign exchange loss (gain), and
non-recurring impact transactions, if any. The Company considers an
item to be non-recurring when a similar revenue, expense, loss or
gain is not reasonably likely to occur within the next two years or
has not occurred during the prior two years.
Reconciliation of non-GAAP financial measures
Reconciliation of non-GAAP financial
measures
Three-months ended January
31,
(CAD thousands)
2023
2022
% Change
Net loss
(7,692)
(12,873)
(40)
Depreciation and amortization
1,737
1,515
15
Finance income, net
(279)
(64)
336
Income taxes
190
-
-
Stock-based compensation expense(1)
539
56
863
Foreign exchange loss (gain)(2)
(726)
242
400
Adjusted EBITDA(3)
(6,231)
(11,124)
44
(1)
Stock-based compensation expense relates
to the Company’s stock compensation plan and stock option expense
is extracted from cost of sales, general and administrative
expenses, sales and marketing expenses and product research and
development costs on the consolidated statements of loss and
comprehensive loss.
(2)
During the fourth fiscal quarter of 2022,
Management updated the non-GAAP composition to include an
adjustment for foreign exchange loss (gain). Comparative periods
have been restated to reflect this change
(3)
Adjusted EBITDA is adjusted for all
periods presented as Management updated the non-GAAP composition to
remove the adjustment of product research and development costs as
noted in the Non-GAAP Financial Measures section. The amounts
presented in the table above reflect the restated figures to align
with the updated composition.
Non-GAAP Ratios
A non-GAAP ratio is a financial measure presented in the form of
a ratio, fraction, percentage or similar representation and that
has a non-GAAP financial measure as one or more of its
components.
Non-GAAP ratios presented and discussed in this news release is
follows:
“Adjusted EBITDA per common share” is useful to
securities analysts, investors and other interested parties in
evaluating operating and financial performance. Adjusted EBITDA per
common share is calculated on the same basis as net income (loss)
per common share, utilizing the basic and diluted weighted average
number of common shares outstanding during the periods
presented.
Supplementary Financial Measures
A supplementary financial measure: (a) is, or is intended to be,
disclosed on a periodic basis to depict the historical or expected
future financial performance, financial position or cash flow of
the Company; (b) is not presented in the financial statements of
the Company; (c) is not a non-GAAP financial measure; and (d) is
not a non-GAAP ratio.
Supplementary financial measures presented and discussed in this
news release is as follows:
- “Gross margin percentage” represents gross margin as a
percentage of revenue
- “Annual recurring revenue” represents total annualized
value of recurring service amounts of all service contracts
- “Net dollar retention” represents the aggregate service
revenue contractually committed
- “Product gross margin percentage” represents product
gross margin as a percentage of product revenue
- “Service gross margin percentage” represents service
gross margin as a percentage of service revenue
Note Regarding Forward-Looking Statements
This news release contains forward-looking statements and
forward-looking information (collectively "forward-looking
information") within the meaning of applicable securities laws
relating to, among other things, Blackline’s expectation to deliver
continued revenue growth, coupled with disciplined cost management,
which is expected to allow Blackline to exit fiscal 2023 in a
position of sustained positive Adjusted EBITDA, that the Company
expects to realize continued improvement in product margins in
fiscal 2023 driven by these pricing increases and enhancements
through product redesigns and its view that product and service
margins can approach 40% and 75%, respectively at the end of fiscal
2023, the Company's expectation that it will have liquidity to
execute on its fiscal 2023 path to profitability and its ability to
generate free cash flow, the anticipated effects an approximate 15%
global pricing increase on products and services during Q4 will
have on revenue and margins in fiscal 2023 and beyond . Blackline
provided such forward-looking statements in reliance on certain
expectations and assumptions that it believes are reasonable at the
time. The material assumptions on which the forward-looking
information in this news release are based, and the material risks
and uncertainties underlying such forward-looking information,
include: expectations and assumptions concerning business prospects
and opportunities, customer demands, the availability and cost of
financing, labor and services, that Blackline will pursue growth
strategies and opportunities in the manner described herein, and
that it will have sufficient resources and opportunities for the
same, that other strategies or opportunities may be pursued in the
future, and the impact of increasing competition, business and
market conditions; the accuracy of outlooks and projections
contained herein; that future business, regulatory, and industry
conditions will be within the parameters expected by Blackline,
including with respect to prices, margins, demand, supply, product
availability, supplier agreements, availability, and cost of labour
and interest, exchange, and effective tax rates; projected capital
investment levels, the flexibility of capital spending plans, and
associated sources of funding; cash flows, cash balances on hand,
and access to the Company's credit facility being sufficient to
fund capital investments; foreign exchange rates; near-term pricing
and continued volatility of the market; accounting estimates and
judgments; the ability to generate sufficient cash flow to meet
current and future obligations; the Company's ability to obtain and
retain qualified staff and equipment in a timely and cost-efficient
manner; the Company's ability to carry out transactions on the
desired terms and within the expected timelines; forecast
inflation, including on the Company's components for its products,
the impact of a potential pandemic and the war in Ukraine on the
global economy; and other assumptions, risks, and uncertainties
described from time to time in the filings made by Blackline with
securities regulatory authorities. Although Blackline believes that
the expectations and assumptions on which such forward-looking
information is based are reasonable, undue reliance should not be
placed on the forward-looking information because Blackline can
give no assurance that they will prove to be correct.
Forward-looking information addresses future events and conditions,
which by their very nature involve inherent risks and
uncertainties, including the risks set forth above and as discussed
in Blackline's Management's Discussion and Analysis and Annual
Information Form for the year ended October 31, 2022 and available
on SEDAR at www.sedar.com. Blackline's actual results, performance
or achievement could differ materially from those expressed in, or
implied by, the forward-looking information and, accordingly, no
assurance can be given that any of the events anticipated by the
forward-looking information will transpire or occur, or if any of
them do so, what benefits Blackline will derive therefrom.
Management has included the above summary of assumptions and risks
related to forward-looking information provided in this press
release in order to provide readers with a more complete
perspective on Blackline's future operations and such information
may not be appropriate for other purposes. Readers are cautioned
that the foregoing lists of factors are not exhaustive. These
forward-looking statements are made as of the date of this press
release and Blackline disclaims any intent or obligation to update
publicly any forward-looking information, whether as a result of
new information, future events or results or otherwise, other than
as required by applicable securities laws.
(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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230316005341/en/
INVESTOR AND ANALYST: Matt Glover or Georg Venturatos
Gateway Group, Inc. BLN@GatewayIR.com Telephone: +1 949 574
3860
MEDIA: Christine Gillies, CPMO
cgillies@blacklinesafety.com Telephone: +1 403 629 9434
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