Posted on Wednesday, May 9th 2018
According to a report by TechNavio published last year, the global business accounting software market is estimated to grow at CAGR of 6% to reach $4.1 billion by the year 2021. Blackline (Nasdaq: BL) is a SaaS-based finance and accounting firm that is trying to chip away at this market opportunity.
BlackLine’s first quarter revenues grew 34% to $51.3 million. It ended the quarter with a GAAP net loss of $7.2 million, or $0.13 per share. Non GAAP net income was $0.3 million or $0.01 per share. The market was looking for revenues of $51.3 million and a non GAAP net loss of $0.03 per share.
By segment, subscription and support revenues grew 33% to $48.6 million and professional services revenues grew 64% to $2.66 million.
Among other metrics, the company added 89 net new customers in the quarter, thus ending with a total of more than 2,290 customers for the quarter. It grew its user base to more than 202,000 users and recorded a dollar-based net revenue retention rate of 110% during the quarter.
For the current quarter, BlackLine forecast revenues of $53-$54 million with a non GAAP net loss of $0.02-$0.00. It expects to end the year with revenues of $222-$225 million and a Non-GAAP net income of $5 million, or $0.10 per share.
While the company did manage to outpace market expectations, analysts aren’t too pleased. Not only did the growth slow down for the quarter, but it is expected to continue to decelerate for the year. Last year, BlackLine had reported an impressive 43% growth. For the current year, it has forecast a comparatively modest 26% growth. New customer additions have also slowed down. Last quarter, it had reported a net addition of 117 customers, compared with the 89 added this quarter.
BlackLine’s Product Tie-ups
To combat the deceleration, BlackLine has been increasing its tie-ups in the market. Earlier this month, it announced a strategic tie-up with KPMG in Canada. As part of the agreement, the two firms will work together to provide technology and advisory services to help customers adopt a Continuous Accounting model. The Continuous Accounting model allows finance and accounting teams to deliver real-time financial intelligence to executives. As part of the new services, KPMG’s finance process enablement and automation vision will be integrated with BlackLine’s cloud platform for automation and analytics so that clients will have access to financial solutions that can be implemented into their business processes to help improve efficiencies and align finance strategies with business strategies.
Earlier this year, BlackLine had also expanded its tie-up with EY. EY and BlackLine will work together to get companies across various industries to drive finance transformation through implementation of BlackLine products. Their customers will be able to do away with manual and spreadsheet-driven processes while leveraging EY’s expertise in audit, framework-as-a-service, tax, and finance advisory services.
Questions for BlackLine’s Board
BlackLine has been an interesting growth story so far. The new partnerships looks very promising but will take a few quarters to be fully generative. Meanwhile, there are smaller players like FloQast that is offering a similar product, but focused on the mid-market – companies with 200-3,000 employees. FloQast does not disclose financial details, but it is surely doing good business as was evident in my discussion with its CEO Mike Whitmire. Does an acquisition make sense to expand into the mid-market decisively? It would vastly increase the TAM.
Blackline’s stock is trading at $40.74 with a market capitalization of $2.2 billion. It touched a 52-week high of $45.19 in February this year. It has recovered from the 52-week low of $28.79 that it had fallen to in August last year. It has definitely come a long way from the October 2016 list price of $17.
More investigation and analysis of Unicorn companies can be found in my Entrepreneur Journeys book, Billion Dollar Unicorns.
This segment is a part in the series : Billion Dollar Unicorns
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