26th consecutive quarter of year-over-year revenue growth
- Service revenue increased 41% year-over-year to $13.6
million
- Record gross margins of $13.4 million, up 62%
year-over-year
- Annual Recurring Revenue(1) increased 43% year-over-year to
$47.0 million
- Record Net Dollar Retention(1) of 125% improves year-over-year
from 105%
- Total expenses of $20.1 million, declining 18% from $24.6
million year-over-year
- Adjusted EBITDA(1) loss of $3.8 million in Q3 2023 compared to
$11.5 million loss in Q3 2022, a $7.7 million improvement
- Company remains 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 third quarter
financial results for the period ended July 31, 2023.
Management Commentary
“In Q3 we recorded our second consecutive quarter of
year-over-year service revenue growth topping 40% and our 26th
consecutive quarter of year-over-year total revenue growth. We set
another record in gross margin of $13.4 million, which was driven
by strength in both our product and service segments that saw
increases of 119% and 50%, respectively. This consistent margin
expansion, coupled with our disciplined cost reduction initiatives
fuels our path to achieving positive Adjusted EBITDA by the end of
this fiscal year,” said Cody Slater, CEO and Chair of Blackline.
“Our year-over-year total revenue growth of 34% illustrates our
strong momentum and ever expanding market share in the connected
worker market while our competitors report largely flat sales in
this space.”
“We surpassed our Net Dollar Retention (“NDR”)(1) target one
quarter ahead of schedule, reaching 125% for Q3 2023, demonstrating
the powerful value proposition that our connected safety solutions
bring to our customers. The increase in NDR was key to the growth
in our Annual Recurring Revenue (“ARR”)(1) up 43% year-over-year to
$47.0 million. The addition of several large enterprise customers
over the past year has contributed to this growth, as Blackline now
has over 25 customers that each generate more than $1.0 million in
recurring service revenue. We see opportunity to expand within
these organizations and other global enterprise customers across
utilities, energy and manufacturing sectors.”
“Regionally, we experienced year-over-year growth across the
board with 55% growth in Europe, while the United States and Canada
grew 36% and 19% respectively. Our Rest of World segment grew 5%
building on its strong outlook for next year, with several large
deals secured in the last six months.”
“Our efforts in pricing and lean manufacturing generated product
margin of 29% in the quarter compared to 17% in the same quarter
last year. Combined with our healthy service margins at 75%,
Blackline Safety achieved its highest overall margin percentage in
nearly three years. This continues our trend of margin improvements
which is key to our goal of achieving positive Adjusted EBITDA and
strengthening our sustainable financial model.”
“We remain in a strong financial position with total cash,
short-term investments, and availability on our credit facility of
$26.6 million as well as our lease securitization facility, which
has over $50 million available. As we continue to reduce our cash
burn through cost optimization, margin expansion and revenue
growth, it is clear that we have the capital resources available to
continue on our path to a sustainable free cash flow generating
business.”
Fiscal Third Quarter 2023 and Recent Financial and
Operational Highlights
- Total revenue of $24.8 million, a 34% increase over the prior
year’s Q3
- Service revenue of $13.6 million, a 41% increase over the prior
year’s Q3
- Product revenue of $11.3 million, a 26% increase over the prior
year’s Q3
- European market growth of 55% over the prior year’s Q3
- United States (“U.S.”) growth continues to be strong with a 36%
increase over the prior year’s Q3
- Canadian market contributed 19% growth over the prior year’s
Q3
- ARR (1) growth of 43% year-over-year to $47.0 million
- Total expenses were $20.1 million, declining $4.5 million
year-over-year
- Announced over $2.0 million in total contract value for
hundreds of fire and hazmat organizations globally
- Secured $1.3 million worth of contracts with leading Middle
East energy companies
- Expanded production capacity by 30%-50% by repurposing space at
the Company’s headquarters in Calgary
- Announced a $3.2 million deal with a leading U.S. energy
company to protect 1,000 workers, displacing a non-connected
competitor with our wearables and Blackline Analytics cloud-based
solution
Financial highlights
Three-months ended July
31,
(CAD thousands, except per share and
percentage amounts)
2023
2022
% Change
Product revenue
11,255
8,910
26
Service revenue
13,575
9,657
41
Total Revenue
24,830
18,567
34
Gross margin
13,422
8,274
62
Gross margin percentage(1)
54%
45%
Total Expenses
20,092
24,605
(18)
Total Expenses as a percentage of
revenue(1)
81%
133%
Net loss
(6,842)
(16,291)
(58)
Loss per common share - Basic and
diluted
(0.09)
(0.27)
(65)
Adjusted EBITDA(1 & 2)
(3,760)
(11,517)
(67)
Adjusted EBITDA per common share(1 &
2) - Basic and diluted
(0.04)
(0.19)
(73)
(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
Total revenue for fiscal third quarter was $24.8 million, an
increase of 34% compared to $18.6 million in the prior year’s
quarter. Total revenue for each geographical market increased with
Europe leading the growth up 55% while the other regions also
demonstrated strong growth with the United States up 36%, Canada up
19% and Rest of World up 5%.
Service revenue during the fiscal third quarter was $13.6
million, an increase of 41% compared to $9.7 million in the prior
year’s quarter. Software services revenue increased 41% to $12.4
million and rental revenue increased 35% to $1.1 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 $2.4 million which
resulted in Net Dollar Retention of 125%.
Rental revenue continues to be strong, with year-over-year
growth of 35% with the comparative period representing the first
quarter that the Company established its global rental team to
implement our strategic focus of providing short-term,
project-based offerings across North America for the industrial
construction, turnaround, and maintenance markets.
Product revenue during the fiscal third quarter was $11.3
million, a 26% increase compared to $8.9 million in the prior
year’s quarter. 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 third quarter was
54%, a 9% increase compared to the prior year’s quarter. The
increase in total gross margin percentage 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
45% of total revenue in the third quarter, compared to 48% in the
prior year’s quarter, while service revenue made up 55% of total
revenue for the quarter, compared to 52% in the prior year’s
quarter. Service gross margin percentage increased to 75% compared
to the prior year’s quarter of 70%. This was primarily due to our
continued service revenue growth, through additional value-added
features and the scale absorbing more fixed cost of sales.
Product gross margin percentage for the fiscal third quarter
increased to 29% from 17% in the prior year’s quarter and 26% in
the fiscal second quarter. The Company has been able to mitigate
most global supply chain challenges that it has experienced since
the third quarter of 2021, while implementing other lean
manufacturing initiatives and cost optimizations. During the
quarter the Company continued to process sales under our updated
pricing structure. The Company has been able to automate more of
its manufacturing line, improving the efficiency and throughput of
its operations.
Net loss for the fiscal third quarter was $6.8 million, or $0.09
per share, compared to $16.3 million or $0.27 per share in the
prior year’s quarter. Net loss decreased due to an increase in
total gross margin as well as decreases in general and
administrative expenses, sales and marketing expenses, and product
research and development costs.
Adjusted EBITDA(1) for the fiscal third quarter was ($3.8)
million or ($0.05) per share compared to ($11.5) million or ($0.19)
per share in the prior year’s quarter. The $7.7 million improvement
in Adjusted EBITDA is primarily due to the increase in total gross
margin, as well as the decrease in total expenses.
At the end of the fiscal third quarter, Blackline had total cash
and short-term investments on hand of $17.6 million and $8.0
million available on its senior secured operating facility. The
decrease in cash and short-term investments is mainly due to
operating losses which were offset by net funding from the lease
securitization facility of $1.8 million during the quarter.
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,
2023, 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, September 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/12668. 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 0356.
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 215 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 July
31,
(CAD thousands)
2023
2022
% Change
Net loss
(6,842)
(16,291)
58
Depreciation and amortization
1,821
1,755
4
Finance income, net
(16)
(38)
58
Income taxes
188
(2)
NM
Stock-based compensation expense(1)
287
416
(31)
Foreign exchange loss (gain)(2)
802
1,264
(37)
Other non-recurring impact
transactions(3)
-
1,379
(100)
Adjusted EBITDA(4)
(3,760)
(11,517)
67
(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 prior year period include restructuring costs.
(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.sedarplus.ca. 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/20230914920889/en/
INVESTOR AND ANALYST Shane Grennan, CFO
sgrennan@blacklinesafety.com Telephone: +1 403 630 8400
MEDIA Christine Gillies, CPMO
cgillies@blacklinesafety.com Telephone: +1 403 629 9434
Blackline Safety (TSX:BLN)
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Blackline Safety (TSX:BLN)
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