BlackLine (NASDAQ:BL) Reports Q1 In Line With Expectations, Stock Soars

Radek Strnad /
2023/05/04 4:33 pm EDT
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Accounting automation software maker Blackline (NASDAQ:BL) reported results in line with analyst expectations in Q1 FY2023 quarter, with revenue up 15.6% year on year to $139 million. The company expects that next quarter's revenue would be around $144 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. BlackLine made a GAAP loss of $12 million, improving on its loss of $13.4 million, in the same quarter last year.

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BlackLine (BL) Q1 FY2023 Highlights:

  • Revenue: $139 million vs analyst estimates of $138.2 million (small beat)
  • EPS (non-GAAP): $0.34 vs analyst estimates of $0.16 ($0.18 beat)
  • Revenue guidance for Q2 2023 is $144 million at the midpoint, roughly in line with what analysts were expecting
  • The company reconfirmed revenue guidance for the full year, at $591 million at the midpoint
  • Free cash flow of $14.3 million, down 29.4% from previous quarter
  • Net Revenue Retention Rate: 106%, in line with previous quarter
  • Customers: 4,236, up from 4,188 in previous quarter
  • Gross Margin (GAAP): 74.6%, in line with same quarter last year

"BlackLine's longstanding commitment to customer-driven success and market-leading innovation continue to support our differentiated market position and long-term opportunity," said Owen Ryan, co-CEO of BlackLine.

Started in 2001 by software engineer Therese Tucker, one of the very few women founders who took their companies public, BlackLine (NASDAQ:BL) provides software for organizations to automate accounting and finance tasks.

The demand for easy to use, integrated cloud based finance software that integrates tax and accounting operations continues to rise in tandem with the difficulty workers find trying to use existing accounting tools like spreadsheets given the growing volume of finance data littered across a multitude of enterprise applications. A related demand driver is the secular increase of e-commerce and rising adoption of modern point of sales and payments platforms which easily integrate with backend financial software.

Sales Growth

As you can see below, BlackLine's revenue growth has been strong over the last two years, growing from quarterly revenue of $98.9 million in Q1 FY2021, to $139 million.

BlackLine Total Revenue

This quarter, BlackLine's quarterly revenue was once again up 15.6% year on year. But the revenue actually decreased by $973 thousand in Q1, compared to $5.69 million increase in Q4 2022. We'd like to see revenue increase each quarter, but a one-off fluctuation is usually not concerning and the management is guiding for growth to rebound in the next quarter.

Guidance for the next quarter indicates BlackLine is expecting revenue to grow 12.1% year on year to $144 million, slowing down from the 25.8% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 13% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Product Success

One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.

BlackLine Net Revenue Retention Rate

BlackLine's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 106% in Q1. That means even if they didn't win any new customers, BlackLine would have grown its revenue 6% year on year. Despite it going down over the last year this is still a decent retention rate and it shows us that not only BlackLine's customers stick around but at least some of them get increasing value from its software over time.

Key Takeaways from BlackLine's Q1 Results

With a market capitalization of $3.12 billion BlackLine is among smaller companies, but its more than $1.09 billion in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We were glad to see free cash flow turn positive year on year. On the other hand, it was unfortunate to see the slowdown in customer growth and revenue decreased quarter on quarter. Overall, it seems to us that this was an ok quarter for BlackLine. The company is up 8.14% on the results and currently trades at $55.19 per share.

BlackLine may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.