25th consecutive quarter of year-over-year revenue growth
- Service revenue increased 46% year-over-year to $12.9
million
- Record gross margins of $12.5 million, up 77%
year-over-year
- Annual Recurring Revenue(1) increased 38% year-over-year to
$42.4 million
- Record Net Dollar Retention(1) of 118% improves year-over-year
from 102%
- Total expenses of $19.2 million, declining 11% from $21.5
million year-over-year
- Q2 Adjusted EBITDA(1) loss of $4.5 million compared to $12.3
million loss in Q2 2023, an improvement of $7.8 million
- Company on track to exit fiscal 2023 generating positive
quarterly Adjusted EBITDA
Blackline Safety Corp. ("Blackline" or the
"Company") (TSX: BLN), a global leader in connected
safety technology, today reported its fiscal second quarter
financial results for the period ended April 30, 2023.
Management Commentary
“In Q2 our year-over-year revenue growth accelerated to 45%
compared to Q1 which saw 34% growth and represented our 25th
consecutive quarter of year-over-year revenue growth. The increase
was driven by strength in both our service and product segments
which grew 46% and 43%, respectively. We were able to achieve this
while maintaining our reduced cost structure as we continue on our
path to achieving positive Adjusted EBITDA by the end of this
fiscal year,” said Cody Slater, CEO and Chair of Blackline.
“Through our revenue growth and sales mix, we were able to deliver
52% gross margins; a quarterly record of $12.5 million driven by
record service margins of 75% all of which validates the
opportunity for our business model to generate free cash flow in
the near term.”
“In addition, our Annual Recurring Revenue (“ARR”)(1) also
accelerated from Q1 advancing 38% year-over-year to $42.4 million.
Exceeding $40 million in ARR is an important milestone in our
journey as Blackline scales its connected worker solution globally
and continues to earn greater market share through customer
adoption of its world-class products and services across a variety
of industrial verticals.
Regionally, we experienced year-over-year growth across the
board highlighted by 65% growth in the United States 24% growth in
Canada and the Rest of World market set a new high-water mark with
nearly $2.0 million in quarterly revenue growing by 123%
year-over-year as our robust pipeline continues to positively
impact our business.”
“On the margin front, we experienced the strongest service
margins in Company history of 75%. Our product margins also
improved significantly year-over-year from 13% to 26% and increased
sequentially from 21% in Q1 2023. Looking forward, we anticipate
continued margin improvements through the remainder of the fiscal
year through our enhanced pricing strategy, increased manufacturing
automation and continued cost optimization.”
“We ended the second quarter in a solid financial position with
total cash and short-term investments on hand of $21.9 million. We
also completed our lease securitization facility during the
quarter, with $8.3 million of funding received from the sale of the
initial tranche of lease contracts. Additional funding will be
received for lease agreements from Q2 as well as new agreements
signed with our customers. This facility provides Blackline with
the financial flexibility to accelerate the adoption of our lease
program, driving stronger margins and even better customer
retention while lowering the Company’s overall cost of capital. In
addition, it provides Blackline with the opportunity to
aggressively market our lease program which will enable easier
customer adoption through an all-in monthly fee, including the new
G6 product line.”
Fiscal Second Quarter 2023 and Recent Financial and
Operational Highlights
- Total revenue of $24.1 million, a 45% increase over the prior
year’s Q2
- Service revenue of $12.9 million, a 46% increase over the prior
year’s Q2
- Product revenue of $11.2 million, a 43% increase over the prior
year’s Q2
- United States (“U.S.”) market momentum continues with 65%
growth over the prior year’s Q2
- Rest of World markets continues rapid expansion with 123%
growth over prior year's Q2
- Canadian market remains strong with 24% growth over the prior
year’s Q2
- ARR (1) growth of 38% year-over-year to $42.4 million
- Rental revenue of $1.6 million a 247% increase over the prior
year’s Q2
- Total expenses, excluding non-recurring transaction costs, were
$18.1 million, declining $3.3 million year-over-year
- Closed a $50+ million lease purchase facility with CWB Maxium
with initial funding of $8.3 million, enhancing the flexible buying
options offered to customers by Blackline while improving the
Company’s liquidity and overall cost of capital
- Announced a $3.2 million deal with a leading U.S. energy
company to protect 1,000 workers, replacing a non-connected
competitor with our wearables and Blackline Analytics cloud-based
solution
- Released our third annual Environment, Social & Governance
(“ESG”) Report continuing our commitment to diversity, inclusion,
environmental sustainability and community engagement
- Expanded production capacity by 30%-50% by
repurposing space at the Company’s existing headquarters in
Calgary
Financial highlights
Three-months ended April
30,
(CAD thousands, except per share and
percentage amounts)
2023
2022
% Change
Product revenue
11,202
7,858
43
Service revenue
12,893
8,807
46
Total Revenue
24,095
16,665
45
Gross margin
12,524
7,062
77
Gross margin percentage(1)
52%
42%
Total Expenses
19,200
21,514
(11)
Total Expenses as a percentage of
revenue(1)
80%
129%
Net loss
(6,557)
(14,543)
(55)
Loss per common share - Basic and
diluted
(0.09)
(0.24)
(63)
Adjusted EBITDA(1 & 2)
(4,500)
(12,330)
64
Adjusted EBITDA per common share(1 &
2) - Basic and diluted
(0.06)
(0.20)
70
(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 second quarter revenue was $24.1 million, an increase of
45% from $16.7 million in the prior year quarter. Total revenue for
each geographical market increased with the United States leading
the growth, up 65% while the other regions also demonstrated strong
growth with Rest of World up 123%, Canada up 24% and Europe up 17%,
year-over-year.
Service revenue during the fiscal second quarter was $12.9
million, an increase of 46% compared to $8.8 million in the prior
year quarter. Recurring software services revenue increased 36% to
$11.3 million and rental revenue increased 247% to $1.6 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 $1.6 million which represented Net
Dollar Retention of 118%.
Rental revenue continues to be strong, with year-over-year
growth of 247% with the comparative period representing the first
quarter of the Company’s strategic focus to provide this short-term
project-based offering across North America for the industrial
construction, turnaround, and maintenance markets.
Product revenue during the fiscal second quarter was $11.2
million, a 43% increase compared to the prior year quarter of $7.9
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.
Overall gross margin percentage for the fiscal second quarter
was 52%, a 10% increase compared to the prior year quarter. The
increase in total gross margin percentage is due to a combination
of a 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
46% of total revenue in the second quarter, a decrease of 1% from
the prior year quarter, while service revenue made up 54% of total
revenue for the quarter, representing a 1% increase. Service gross
margin percentage increased to 75% compared to the prior year
quarter at 69% as service revenue continued to grow, through
additional value-added features and the scale absorbing more fixed
cost of sales.
Product gross margin percentage increased to 26% from 13% in the
prior year quarter and 21% in the fiscal first quarter as the
Company has been mitigated most global supply chain challenges that
it has experienced since the third quarter of 2021. During the
quarter the Company completed most sales orders under our newly
introduced pricing structure. The Company has automated more of its
manufacturing line, improving the efficiency and throughput of its
operations.
Net loss was $6.6 million, or $0.09 per share in the fiscal
second quarter, compared to $14.5 million or $0.24 per share in the
prior year quarter. Net loss decreased due to an increase in total
gross margin as well as decreases in sales and marketing expenses
and product research and development costs, partially offset by
increases in general and administrative expenses which were higher
due to transaction costs related to the closing of the Company’s
lease securitization facility.
Adjusted EBITDA(1) was ($4.5) million or ($0.06) per share for
the fiscal second quarter compared to ($12.3) million or ($0.20)
per share in the prior year quarter and ($6.2) million or ($0.09)
per share in the fiscal first quarter of 2023. The $7.8 million
improvement in Adjusted EBITDA is primarily due to the increase in
total gross margin, as well as the decrease in total expenses.
At quarter end, Blackline had total cash and short-term
investments on hand of $21.9 million and $8.0 million of
availability on its senior secured operating facility after paying
down $1.0 million during the quarter. The decrease in cash and
short-term investments is mainly due to operating losses which were
offset by funding from the initial tranche of leases that were sold
under the Company’s $15 million CAD plus $35 million USD
securitization facility. The lease securitization facility will
create a step change in our cash burn which combined with our
improving gross margins and cost discipline, ensures the Company
has the cash it requires to execute on our path to quarterly
positive Adjusted EBITDA.
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,
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 Wednesday, June 14, 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/12594. 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 0243.
About Blackline Safety Corp
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 alerts. 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 several
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-based 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 April
30,
(CAD thousands)
2023
2022
% Change
Net loss
(6,557)
(14,543)
55
Depreciation and amortization
2,058
1,619
27
Finance income, net
(222)
(57)
(289)
Income taxes
103
148
(30)
Stock-based compensation expense(1)
202
310
(35)
Foreign exchange loss (gain)(2)
(1,226)
(1)
NM
Other non-recurring impact
transactions(3)
1,142
194
489
Adjusted EBITDA(4)
(4,500)
(12,330)
64
(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)
Other non-recurring impact transactions in
the current period include consulting and legal fees related to the
completion of the lease securitization facility and separation
related costs comprising severance, stock forfeitures and
accelerated vesting of stock options related to the departure of an
officer of the Company.
(4)
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, including growth in the adoption of lease
agreements with its customers, 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 gross margins
in fiscal 2023 driven by enhancements to pricing strategy, cost
optimization and greater business scale, 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. 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/20230614807460/en/
INVESTOR AND ANALYST CONTACT Shane Grennan, CFO
sgrennan@blacklinesafety.com Telephone: +1 403 630 8400 MEDIA
CONTACT Christine Gillies, CPMO cgillies@blacklinesafety.com
Telephone: +1 403 629 9434
Blackline Safety (TSX:BLN)
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