- 22nd consecutive quarter of year-over-year revenue growth
- Product revenue of $8.9 million, up 69% year-over-year
- Service revenue of $9.7 million, up 30% year-over-year
- Robust outlook supported by pricing increase, forthcoming cost
reductions and recent equity raise
Blackline Safety Corp. ("Blackline" or the
"Company") (TSX: BLN), a global leader in connected
safety technology, today reported record fiscal third quarter
financial results for the period ended July 31, 2022.
Management Commentary
“Our Q3 results reflect our continued success in driving strong
revenue growth of 46% to $18.6 million amidst a still challenging
operating environment that includes inflationary cost increases and
longer cycle times as global supply chain challenges remain,” said
Cody Slater, CEO and Chair of Blackline Safety. “Revenue growth was
primarily driven by another robust quarter of product growth at 69%
and service growth accelerated to 30%, our highest quarterly growth
of the last two years, as we delivered on numerous deployments
during the quarter and our rental business continues to ramp. This
service growth demonstrates the attractiveness of our
hardware-enabled software-as-a-service business model as our
growing customer base deploys more of our devices that utilize our
high-margin services. This led to Blackline exiting the quarter
with annual recurring revenue of $32.9 million(1).”
“We are also encouraged with our margin performance in Q3 as
service margins maintained their strong levels at 70% and hardware
margins improved sequentially from 13% to 17% as we continue to
proactively seek ways to mitigate elevated component costs and
shipping charges. It is important to note that these margins do not
reflect any benefit from the approximate 15% pricing increase being
implemented in Q4 on both hardware and services. We expect to
realize a step-change improvement in our hardware margins in the
near-term with the pricing increase, while our service margins
should see a steady uplift over the coming quarters as we add new
customers and renew existing customers on the new pricing model.
Our differentiated product and service offerings along with our net
dollar retention (1) of 103% in Q3 give us confidence that the
pricing increase will not impact our competitive positioning.”
“In terms of our operating costs, we remain confident in our
ability to achieve our goal of Q4 operating costs at or below Q2
levels of $21.5 million. Operating costs in Q3 remained elevated,
as we incurred total one-time restructuring costs of $1.4 million,
including severance and redundancy costs of $0.5 million,
associated with our previously announced cost reduction
initiatives. While a portion of our operating costs are correlated
to revenue and may increase on an absolute basis, we expect Q3
operating costs to be the high-water mark for Blackline as a
percentage of sales as we expect to generate improved operating
leverage going forward.”
“We remain on track to release our G6 product in October to
capture the $240 million annual zero-maintenance gas detection
market. Early feedback remains positive with high levels of
interest, and we look forward to building on this momentum with the
launch of the G6 at the NSC Safety Congress & Expo, North
America’s largest event for workplace safety, next week.”
“Lastly, to help bolster our liquidity position amidst an
uncertain macro environment, we successfully raised nearly $25
million in gross proceeds through a bought deal financing and
concurrent private placement and signed a non-binding term sheet
for a new $15 million senior secured operating facility in August.
This influx of capital, along with our pricing increases and cost
reductions, put us in a strong position to execute on our plans to
couple continued robust top-line growth with improved line-of-sight
to sustained profitability.”
Fiscal Third Quarter 2022 and Recent Financial and
Operational Highlights
- Total revenue of $18.6 million, a 46% increase over the prior
year’s Q3
- Service revenue of $9.7 million, a 30% increase over the prior
year’s Q3
- Product revenue of $8.9 million, a 69% increase from the prior
year’s Q3
- Continued strong growth of 75% in the U.S. market compared to
the prior year’s Q3
- Momentum remains in Canada with 68% growth compared to prior
year’s Q3
- 64% revenue growth in Rest of World market compared to the
prior year’s Q3
- Europe’s revenue had a decline of 6% compared to the prior
year’s Q3 as the region underwent its realignment and leadership
transition
- Annual recurring revenue(1) growth of 21% year-over-year to
$32.9 million
- Implementing approximate 15% pricing increase in hardware and
services in Q4
- Generated total gross proceeds of $24.9 million in a bought
deal financing and concurrent private placement, closed on August
31, 2022
- Signed non-binding term sheet with ATB Financial for new $15
million senior secured operating facility with a $5 million
accordion feature
- Signed three North American energy deals with combined lifetime
value of over $10 million, including an almost $7 million deal with
a Texas-based oil and gas company
- Selected by Severn Trent, the UK’s second biggest water
company, for a $2 million connected safety program with potential
total value up to $4.2 million
Financial highlights
Three-months ended July
31
Nine-months ended July
31
CAD millions, except for percentage and per share data
2022
2021
Change
2022
2021
Change
$
$
%
$
$
%
Revenue
18.6
12.7
46
50.9
35.0
45
Gross Margin
8.3
5.9
41
21.7
17.4
25
Gross Margin Percentage
45%
46%
(1)
43%
50%
(7)
Net Loss
(16.3)
(10.3)
59
(43.7)
(23.7)
84
Loss per common share
(0.27)
(0.19)
42
(0.72)
(0.44)
64
EBITDA(1)
(14.6)
(8.9)
(63)
(38.8)
(20.0)
(94)
EBITDA per common share(1)
(0.24)
(0.16)
(50)
(0.64)
(0.37)
(73)
Adjusted EBITDA(1)
(5.7)
(4.5)
(26)
(18.4)
(6.4)
(190)
Adjusted EBITDA per common share(1)
(0.09)
(0.08)
(13)
(0.30)
(0.12)
(150)
(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.
Key Financial Information
Fiscal third quarter revenue was $18.6 million, an increase of
46% from $12.7 million in the prior year quarter, with Canada up
68%, Rest of World up 64% and U.S. revenues up 75% being the
largest geographic growth regions quarter-over-quarter. The
increases in each region were assisted by the recovery of the
energy sector.
Service revenue during the fiscal third quarter was $9.7
million, an increase of 30% compared to $7.4 million in the prior
year quarter. Software services revenue increased 26% to $8.3
million, operating lease revenue decreased 27% to $0.6 million and
rental revenue increased 730% to $0.8 million. Retention rates of
our existing customers across geographic regions and industry
sectors remained robust with net dollar retention of 103% for the
quarter. Rental revenue growth continues to be strong as a result
of the demand for the Company’s complete suite of connected
solutions in the industrial turnaround and maintenance market.
Product revenue during the fiscal third quarter was $8.9
million, an increase of 69% compared to $5.3 million in the prior
year quarter, which reflects the prior investment in the Company’s
expanded sales network and global sales team with continued strong
demand generation and sales development activities.
Overall gross margin percentage for the fiscal third quarter was
45%, a 1% decrease compared to the prior year quarter driven by a
heavier product versus service mix. The decrease in total gross
margin percentage is due to the sales mix with product revenue
comprising 48% of total revenue in the third quarter of 2022
compared to 42% in the third quarter of 2021. Service gross margin
percentage remained consistent at 70% compared to the prior year
quarter as service revenue continued to grow, offsetting an
increased cost base.
Product gross margin percentage increased to 17% from 13% in the
prior year quarter and the fiscal second quarter of 2022 as the
Company has been able to mitigate some of the global supply chain
challenges that it is has experienced since the third quarter of
2021. Higher sales volumes also contributed to lower unabsorbed
overhead costs during the current period. The increase was offset
by write-offs of $0.7 million which reduced Product gross margin by
8%.
Net loss and EBITDA were $16.3 million and ($14.6) million,
respectively, in the fiscal third quarter, compared to net loss and
EBITDA of $10.3 million and ($8.9) million in the prior year
quarter. The increased net loss in the periods is due primarily to
increases in general and administrative expenses, sales and
marketing expenses and product research and development costs,
offset by an increase in gross margin. The decrease in EBITDA is
primarily due to increases in total expenses and other
non-recurring transactions in the third quarter, offset by
increased gross margin compared to the prior year comparable
period.
Adjusted EBITDA was ($5.7) million for the fiscal third quarter
compared to ($4.5) million in the prior year quarter. The decrease
in Adjusted EBITDA is a result of increases in general and
administrative expenses and sales and marketing expenses, offset by
increased gross margin compared to the prior year comparable
periods.
At quarter end, Blackline had total cash on hand of $10.5
million and no debt. The decrease in cash and short-term
investments is mainly due to increased operating expenses and the
Company’s investment in the G6 product line launching during the
fourth quarter of the year. Blackline has invested $1.6 million in
this fiscal year to grow the rental fleet as we have expanded our
share of the industrial turnaround market. Subsequent to the end of
the period, the company closed a bought deal financing and
concurrent private placement, raising gross proceeds of $24.9
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 nine-months ended July 31,
2022 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, September 14, 2022. 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/12014. 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 9294.
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 187 billion data-points and initiated over
five 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.
- “Net dollar retention” 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 expand, renew, contract or attrit, but excludes the
total service revenue from new activations during the period.
- “Annual recurring revenue” 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.
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:
“EBITDA” is useful to securities analysts, investors and
other interested parties in evaluating operating performance by
presenting the results of the Company on a basis which excludes the
impact of certain non-operational items. EBITDA refers to earnings
before interest expense, interest income, income taxes,
depreciation and amortization.
“Adjusted EBITDA” is useful to securities analysts,
investors and other interested parties in evaluating operating
performance by presenting the results of the Company on a basis
which excludes the impact of certain non-operational items, product
research and development costs related to new and existing
products, which enables the primary readers of the news release to
evaluate the results of the Company such that it was operating
without any expenditures in product research and development, and
certain non-cash and non-recurring items, such as stock
compensation expense, that the Company considers appropriate to
adjust given the irregular nature and relevance to comparable
companies. Adjusted EBITDA is calculated as earnings before
interest expense, interest income, income taxes, depreciation and
amortization, stock-based compensation expense, product development
costs 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
Three-months ended July
31
Nine-months ended July
31
CAD millions
2022
2021
Change
2022
2021
Change
$
$
%
$
$
%
Net Loss
(16.3)
(10.3)
59
(43.7)
(23.7)
84
Depreciation and amortization
1.7
1.4
30
4.9
3.7
32
Finance income, net
-
-
-
(0.1)
(0.1)
12
Income taxes
-
-
-
0.1
0.1
8
EBITDA
(14.6)
(8.9)
(63)
(38.8)
(20.0)
(94)
Product research and development costs,
net of depreciation, amortization and stock-based compensation
expense(1)
7.1
4.0
76
18.0
10.8
67
Stock-based compensation expense(2)
0.4
0.4
18
0.8
2.1
(63)
Other non-recurring impact
transactions
1.4
-
NM
1.6
0.7
(137)
Adjusted EBITDA
(5.7)
(4.5)
(26)
(18.4)
(6.4)
(190)
(1)
Product research and development costs
exclude depreciation and amortization, with stock-based
compensation relating to product research and development excluded
and adjusted in the subsequent line as defined below.
(2)
Stock-based compensation expense relates
to the Company’s stock compensation plan and stock option expense
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.
(3)
Other non-recurring transactions includes
restructuring costs and acquisition expenses.
NM – Not meaningful
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:
“EBITDA per common share” is useful to securities
analysts, investors and other interested parties in evaluating
operating and financial performance. EBITDA per common share is
calculated on the same basis as net loss per common share,
utilizing the basic and diluted weighted average number of common
shares outstanding during the periods presented.
“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
- “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 Safety's expectation of
deployments being completed in the second half of the year, that
the appointment of our Chief Growth Officer will help drive
improved operating performance across our regions, including
Europe; the evaluation of additional focused measures to optimize
operating performance and accelerate timeline to profitability; the
forthcoming G6 launch to disrupt the zero maintenance gas detection
industrial market, the timeline of launch, and confidence in the
potential for the product and service to take share in their
respective market. Blackline provided such forward-looking
statements in reliance on certain expectations and assumptions that
it believes are reasonable at the time, including 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, or that other
strategies or opportunities may be pursued in the future, and the
impact of increasing competition. 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 discussed in Blackline's
Management's Discussion and Analysis and Annual Information Form
for the year ended October 31, 2021 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/20220914005326/en/
INVESTOR AND ANALYST CONTACTS:
Matt Glover or Jeff Grampp, CFA Gateway Group, Inc.
BLN@GatewayIR.com Telephone: +1 949 574 3860
MEDIA CONTACT Christine Gillies, CMO
cgillies@blacklinesafety.com Telephone: +1 403 629 9434
Blackline Safety (TSX:BLN)
Historical Stock Chart
From Aug 2024 to Sep 2024
Blackline Safety (TSX:BLN)
Historical Stock Chart
From Sep 2023 to Sep 2024