BlackLine's (NASDAQ:BL) Posts Q4 Sales In Line With Estimates But Full Year Guidance Underwhelms

Adam Hejl /
2023/02/14 4:11 pm EST
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Accounting automation software maker Blackline (NASDAQ:BL) reported results in line with analyst expectations in Q4 FY2022 quarter, with revenue up 21.4% year on year to $140 million. However, guidance for the next quarter was less impressive, coming in at $138 million at the midpoint, being 2.95% below analyst estimates. BlackLine made a GAAP profit of $11.3 million, improving on its loss of $32.5 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) Q4 FY2022 Highlights:

  • Revenue: $140 million vs analyst estimates of $139.7 million (small beat)
  • EPS (non-GAAP): $0.35 vs analyst estimates of $0.17 ($0.18 beat)
  • Revenue guidance for Q1 2023 is $138 million at the midpoint, below analyst estimates of $142.2 million
  • Management's revenue guidance for upcoming financial year 2023 is $591 million at the midpoint, missing analyst estimates by 2.67% and predicting 13% growth (vs 22.9% in FY2022)
  • Free cash flow of $20.3 million, up 22.4% from previous quarter
  • Net Revenue Retention Rate: 107%, in line with previous quarter
  • Customers: 4,188, up from 4,060 in previous quarter
  • Gross Margin (GAAP): 76.2%, in line with same quarter last year

"BlackLine reported solid financial results this quarter, as we continued to deliver against our goal of driving profitable growth," 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 two years, growing from quarterly revenue of $95.7 million in Q4 FY2020, to $140 million.

BlackLine Total Revenue

This quarter, BlackLine's quarterly revenue was once again up a very solid 21.4% year on year. Quarter on quarter the revenue increased by $5.69 million in Q4, which was in line with Q3 2022. This steady quarter-on-quarter growth shows the company is able to maintain its steady growth trajectory.

Guidance for the next quarter indicates BlackLine is expecting revenue to grow 14.8% year on year to $138 million, slowing down from the 21.6% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $591 million at the midpoint, growing 13% compared to 22.8% increase in FY2022.

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 107% in Q4. That means even if they didn't win any new customers, BlackLine would have grown its revenue 7% year on year. Despite the recent drop this is still a decent retention rate and it shows us that BlackLine's customers stick around and at least some of them get increasing value from its software over time.

Key Takeaways from BlackLine's Q4 Results

With a market capitalization of $4.37 billion BlackLine is among smaller companies, but its more than $1.08 billion in cash and positive free cash flow over the last twelve months give us confidence that BlackLine has the resources it needs to pursue a high growth business strategy.

We were very impressed by BlackLine’s very strong acceleration in customer growth this quarter. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see that BlackLine's revenue guidance for the full year missed analysts' expectations and it indicates quite a significant slowdown in growth. Overall, this quarter's results were not the best we've seen from BlackLine. The company is flat on the results and currently trades at $72.57 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.