BlackLine's (NASDAQ:BL) Posts Q1 Sales In Line With Estimates, Next Quarter Growth Looks Optimistic

Radek Strnad /
2022/05/05 4:32 pm EDT
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Accounting automation software maker Blackline (NASDAQ:BL) reported results in line with analyst expectations in Q1 FY2022 quarter, with revenue up 21.6% year on year to $120.2 million. The company expects that next quarter's revenue would be around $126.5 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. BlackLine made a GAAP loss of $13.4 million, improving on its loss of $33.2 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) Q1 FY2022 Highlights:

  • Revenue: $120.2 million vs analyst estimates of $119.5 million (small beat)
  • EPS (non-GAAP): $0.01 vs analyst estimates of -$0.08 ($0.09 beat)
  • Revenue guidance for Q2 2022 is $126.5 million at the midpoint, above analyst estimates of $125.2 million
  • The company reconfirmed revenue guidance for the full year, at $526 million at the midpoint
  • Free cash flow was negative $4.68 million, down from positive free cash flow of $15.2 million in previous quarter
  • Net Revenue Retention Rate: 110%, in line with previous quarter
  • Customers: 3,897, up from 3,825 in previous quarter
  • Gross Margin (GAAP): 74.4%, down from 77.8% same quarter last year

"BlackLine delivered an outstanding first quarter with strong performance that beat our revenue and income expectations," 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 $98.8 million, to $120.2 million.

BlackLine Total Revenue

This quarter, BlackLine's quarterly revenue was once again up a very solid 21.6% year on year. But the growth did slow down a little compared to last quarter, as BlackLine increased revenue by $4.91 million in Q1, compared to $5.92 million revenue add in Q4 2021. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates BlackLine is expecting revenue to grow 23.8% year on year to $126.5 million, in line with the 22.6% 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 22.7% over the next twelve months.

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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 Q1. 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 Q1 Results

With a market capitalization of $4.02 billion BlackLine is among smaller companies, but its more than $1.03 billion in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see BlackLine provide next quarter revenue outlook exceeding analysts’ expectations. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see the slowdown in customer growth and gross margin deteriorated a little. The company is flat on the results and currently trades at $61.99 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.