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Cloud Stocks: Blackline Needs a PaaS Strategy

Posted on Tuesday, Aug 18th 2020

According to a recent survey, more than half of US-based Finance & Accounting professionals are continuing to prioritize their organization’s finance transformation goals even amid the current pandemic. The survey conducted by financial software provider Blackline (NASDAQ: BL) found that 53% of those surveyed saw little or no impact of the global pandemic.

Blackline’s Financials

Blackline’s second quarter revenues grew 20% to $83.3 million, ahead of the market’s estimate of $80.91 million. Net loss was $8.3 million, compared with a net loss of $5.4 million a year ago. Non GAAP net income was $11.9 million, or $0.20 per share, compared with the market’s estimates of $0.10 per share.

Among key metrics, it added 82 net new customers to end with 3,138 customers at the end of the June quarter. It expanded its user base to 277,426 and reported a dollar-based net revenue retention rate of 108%.

For the third quarter, Blackline expects revenues of $84.5-$85.5 million with an EPS of $0.11-$0.12. It expects to end the year with revenues of $335.5-$338.5 million and an EPS of $0.45-$0.49. The market was looking for revenues of $84.4 million for the quarter with an EPS of $0.10 and revenues of $337.9 million for the year with an EPS of $0.43.

Blackline’s COVID Response

The pandemic has resulted in the workforce globally moving to virtual and remote working conditions. Blackline has helped organizations manage their financial tasks in these conditions. For many organizations, having their finance teams work remotely was a new experience. It did not help that governments were making several changes to tax and other regulatory matters that impacted these organizations. Additionally, statutory audits moved to a remote working condition as well. Blackline has been helping the organizations manage these transitions with relative ease by adding new features and services.

At the start of the quarter, Blackline granted free access to its entire training library. Its content library includes CPE eligible courses to allow CPAs to retain their current accreditations at no cost. It also added a new curriculum with live virtual training that is focused on a remote workforce environment. It also offered the task management and reporting capabilities complimentary for 6 months to existing customers to enable a more effective remote close.

Recognizing the need of coaching in the current conditions, Blackline announced complimentary one-on-one coaching sessions with its subject matter experts, so that customers can optimize their existing Blackline instance in this environment. It launched its modern accounting playbook (MAP) to help mid-market companies get up and running quickly on its platform. MAP includes best practices that Blackline has curated from over fourteen hundred mid-market companies. It also offered complimentary implementations for a limited time to help these smaller organizations manage transition to the platform without hurting their already scarce capital resources.

Earlier this quarter, BlackLine released its resource hub for closing virtually. It is aimed at helping finance and accounting teams globally to close their books of accounts while working remotely. The resource hub is available to all professionals regardless of whether they are an existing customer or not. It provides insight, guidance, and leading practices to the professionals.

Blackline is using the current crisis to attract more professionals across its offerings. But, like I pointed out earlier, Blackline needs to follow a long term PaaS strategy. It currently relies on an API model, building connectors to extract relevant data from various ERP solutions. But a platform that is open to developers will help drive innovation and the creation of an ecosystem that supports building of complementary solutions. Blackline will need to follow through on a long-term PaaS strategy that will help it differentiate from other cloud players out there.

Blackline’s stock is trading at $74.93 with a market capitalization of $4.15 billion. It had touched a 52-week high of $94.06 last month. The stock has recovered from the 52-week low of $38.32 that it had fallen to in March this year.

This segment is a part in the series : Cloud Stocks


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