BlackLine (NASDAQ:BL) Surprises With Q2 Sales, Stock Soars

Adam Hejl /
2022/08/04 4:30 pm EDT
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Accounting automation software maker Blackline (NASDAQ:BL) reported Q2 FY2022 results beating Wall St's expectations, with revenue up 25.8% year on year to $128.4 million. However, guidance for the next quarter was less impressive, coming in at $134 million at the midpoint, being 1% below analyst estimates. BlackLine made a GAAP loss of $11.9 million, improving on its loss of $25.5 million, in the same quarter last year.

Is now the time to buy BlackLine? Access our full analysis of the earnings results here, it's free.

BlackLine (BL) Q2 FY2022 Highlights:

  • Revenue: $128.4 million vs analyst estimates of $126.5 million (1.52% beat)
  • EPS (non-GAAP): $0.07 vs analyst estimates of $0.01 ($0.06 beat)
  • Revenue guidance for Q3 2022 is $134 million at the midpoint, below analyst estimates of $135.3 million
  • The company reconfirmed revenue guidance for the full year, at $526 million at the midpoint
  • Free cash flow was negative $5.06 million, compared to negative free cash flow of $4.68 million in previous quarter
  • Net Revenue Retention Rate: 110%, in line with previous quarter
  • Customers: 4,003, up from 3,897 in previous quarter
  • Gross Margin (GAAP): 74.3%, down from 76.9% same quarter last year

"This was a solid quarter for BlackLine, as we delivered strong revenue growth combined with overall operating efficiency and profitability," said Marc Huffman, 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 year, growing from quarterly revenue of $102.1 million, to $128.4 million.

BlackLine Total Revenue

This quarter, BlackLine's quarterly revenue was once again up a very solid 25.8% year on year. On top of that, revenue increased $8.24 million quarter on quarter, a very strong improvement on the $4.91 million increase in Q1 2022, which shows acceleration of growth, and is great to see.

Guidance for the next quarter indicates BlackLine is expecting revenue to grow 22.4% year on year to $134 million, in line with the 20.8% 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 22.5% 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 110% in Q2. That means even if they didn't win any new customers, BlackLine would have grown its revenue 10% year on year. Trending up over the last year, this is 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 Q2 Results

With a market capitalization of $3.96 billion BlackLine is among smaller companies, but its more than $1.02 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 very impressed by BlackLine’s very strong acceleration in customer growth this quarter. And we were also glad to see good revenue growth. On the other hand, it was unfortunate to see that the revenue guidance for the next quarter missed analysts' expectations. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is up 5.57% on the results and currently trades at $71.39 per share.

Should you invest in BlackLine 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.