Blackline (NASDAQ:BL), maker of accounting automation software, reported third-quarter 2024 results that exceeded market revenue expectations, with revenue up 10.1% year over year to $165.9 million. The company expects revenue next quarter to be around $168 million, close to analyst estimates. Non-GAAP earnings of $0.60 per share were also 16.2% above analyst consensus estimates.
Is Now the Time to Buy BlackLine? Find out in our full research report.
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Gain: $165.9 million vs. analyst estimates of $163.1 million (1.7% better)
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Custom EPS: $0.60 vs. analyst estimates of $0.52 (16.2% better)
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Adjusted operating result: $37.62 million vs. analyst estimates of $32.02 million (17.5% better)
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Revenue guidance for Q4 CY2024 is $168 million in the middle, about in line with what analysts expected
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Gross margin (GAAP): 75.2%, in line with the same quarter last year
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Operating margin: 5%, compared to -0.7% in the same quarter last year
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Free cash flow margin: 29.8%, compared to 21.4% in the previous quarter
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Net Revenue Retention Rate: 105%, compared to 104% in the previous quarter
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Customers: 4,433, compared to 4,435 in the previous quarter
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Invoices: $154.9 million at quarter end, up 4.3% year over year
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Market capitalization: $3.65 billion
“BlackLine delivered another quarter of solid financial results, exceeding our financial expectations while generating record free cash flow,” said Owen Ryan, co-CEO of BlackLine.
Founded in 2001 by software engineer Therese Tucker, one of the few female founders to take their company public, BlackLine (NASDAQ:BL) provides software for organizations to automate accounting and financial tasks.
The demand for easy-to-use, integrated cloud-based financial software that integrates tax and accounting operations continues to rise, along with the challenges employees face when using existing accounting tools such as spreadsheets, given the growing amount of financial data spread across a large number of business applications. . A related demand driver is the continued rise in e-commerce and the increasing adoption of modern point-of-sale and payment platforms that easily integrate with backend financial software.
Examining a company’s long-term performance can provide clues about business quality. Any company can perform well for a quarter or two, but the best ones grow consistently over the long term. Over the past three years, BlackLine’s revenue grew at a tepid annual rate of 16.3%.
This quarter, BlackLine reported 10.1% year-over-year revenue growth, and revenue of $165.9 million exceeded Wall Street estimates by 1.7%. Management currently expects a 7.9% year-over-year increase next quarter.
Looking further ahead, sell-side analysts expect revenue to grow by 8.4% over the next twelve months, a slowdown from the past three years. This projection does not make us enthusiastic and illustrates that the market believes its products and services will experience some headwinds in demand.
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In addition to revenue, billings are a non-GAAP metric that sheds additional light on BlackLine’s business quality. Billings is often called “cash revenue” because it shows how much money the company has collected from customers in a given period. This differs from revenue, which must be recognized in parts over the term of a contract.
Over the past year, BlackLine’s billings growth has been poor, up an average of 9% year-over-year and up $154.9 million in the last quarter. This alternative revenue measure has been growing slower than revenue, meaning the company is recognizing revenue at a faster rate than it is raising cash – a liquidity headwind that could also indicate a slowdown in future revenue growth.
One of the best parts of the software-as-a-service business model (and one reason they trade at high valuations) is that customers typically spend more on a company’s products and services over time.
BlackLine’s net revenue retention, a key performance metric that measures how much money existing customers from a year ago are spending today, was 105% in the third quarter. This means that even if BlackLine had not acquired any new customers in the last twelve months, revenue would have increased by 5%.
BlackLine has an adequate net retention rate, which shows us that it is holding up overall but lagging behind the top SaaS companies, which routinely post net retention rates of over 120%.
It was encouraging to see that BlackLine narrowly exceeded analyst revenue expectations this quarter. On the other hand, customer base growth slowed and Wall Street billings fell short of expectations. Overall, this was a weaker quarter. The stock was flat at $59.45 immediately after the results.
BlackLine’s last quarter wasn’t that good. However, one earnings report doesn’t define the quality of a company, so let’s examine whether the stock is a buy at its current price. The last quarter does matter, but not nearly as much as the fundamentals and longer-term valuation when deciding whether the stock is a buy. We cover that in our useful full research report which you can read here. It’s free.
