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Partnerships are the Mantra for BlackLine

Posted on Friday, Aug 9th 2019

According to a Market Study Report published earlier this year, the global cloud accounting software market is expected to grow 9% annually to $4.3 billion by the year 2024. The researcher pegs the industry’s revenues at $2.63 billion for the current year. Cloud-based financial software provider, BlackLine (Nasaq: BL) is a leading SaaS-based financial software solution that recently announced another stellar performance.

BlackLine’s Financials

Revenues for the second quarter grew 26% over the year to $69.66 million, compared with the Street’s estimate of $68 million. Net loss for the quarter came in at $5.2 million. On an adjusted basis, the company reported a net income of $6.1 million or $0.10 per share, compared with the earnings of a penny a share that the market had forecast.

By segment, subscription and support revenues grew 25% to $66.07 million and professional services revenues grew 49% to $3.6 million.

Among other metrics, it added 106 net new customers in the quarter to end with over 2,810 customers. Net user base for BlackLine grew to 236,802 and it achieved a dollar-based net revenue retention rate of 108% at the end of the quarter.

For the third quarter, BlackLine forecast revenues of $71.7-$72.7 million with a Non GAAP net income of $0.02-$0.04 per share. The market was looking for revenues of $71.3 million with an EPS of $0.04 per share for the quarter. BlackLine expects revenues of $281-$284 million for the year with an EPS of $0.22-$0.25. The market was looking for revenues of $279 million with an EPS of $0.17 for the year.

BlackLine’s Partnerships

BlackLine remains focused on growing its partner network. Earlier this week, it released a new tiered program for its strategic consulting partners. The new program integrates BlackLine’s existing Affiliate and Enterprise Consulting Partner Programs into a single BlackLine Alliance Partner Program that is catered to provide higher expertise and service to enterprise and mid-market customers looking for digital financial transformations. The five new partner tiers named Select, Bronze, Silver, Gold and Platinum will provide growing degrees of go-to-market enablement, incentives, funding, training, recognition and marketing support. A partner will be able to achieve a specific tier based on the volume of business that it generates to help customers with their finance transformation using BlackLine’s solutions.

Last month, BlackLine had also expanded its technology partner ecosystem to help simplify the integration of multiple financial software solutions with the cloud. As part of the expansion, BlackLine improved connectivity and integration with key ERP partners, RPA providers and integration and connectivity platforms including Dell Boomi, OneCloud and Workato. The move will enable seamless end-to-end financial processes by allowing organizations to connect BlackLine with critical business applications. BlackLine’s OneCloud can now connect with key planning and consolidation technologies including Oracle HFM & Essbase, Oracle EPM Cloud, Workiva, Anaplan, Host Analytics and IBM Planning Analytics. It also recently launched a new Technology Partner Program to simplify the integration of close, consolidation and reporting processes.

The market is pleased with BlackLine’s growth. Its stock is trading at $54.75 with a market capitalization of $3.2 billion. It touched a year high of $58.11 in September last year. It has recovered from the low of $34.01 it had fallen to in November last year.

I still believe that BlackLine is a very lucrative target for companies like SAP and Oracle. The addition of a company like BlackLine will add significantly to the cloud capabilities of these tech giants. BlackLine already has integrations with the ERP solutions of these vendors, making an acquisition even more lucrative.

I think that BlackLine should also focus on a PaaS strategy. Currently, BlackLine operates on an API model where connectors help extract relevant data from ERP solutions. APIs are a great solution to integrate with third party systems. A platform open to developers will also attract innovation and addition of other complementary products on BlackLine, giving BlackLine access to a pool of potential acquisitions.

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