Accounting automation software maker Blackline (NASDAQ:BL) reported Q4 CY2024 results exceeding the market’s revenue expectations, with sales up 8.8% year on year to $169.5 million. On the other hand, next quarter’s revenue guidance of $167 million was less impressive, coming in 2.1% below analysts’ estimates. Its non-GAAP profit of $0.47 per share was 6.4% below analysts’ consensus estimates.
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BlackLine (BL) Q4 CY2024 Highlights:
- Revenue: $169.5 million vs analyst estimates of $168.4 million (8.8% year-on-year growth, 0.6% beat)
- Adjusted EPS: $0.47 vs analyst expectations of $0.50 (6.4% miss)
- Adjusted Operating Income: $30.65 million vs analyst estimates of $31.26 million (18.1% margin, 1.9% miss)
- Management’s revenue guidance for the upcoming financial year 2025 is $702 million at the midpoint, missing analyst estimates by 1.4% and implying 7.4% growth (vs 10.8% in FY2024)
- Adjusted EPS guidance for the upcoming financial year 2025 is $2.04 at the midpoint, missing analyst estimates by 10.6%
- Operating Margin: 3.7%, down from 8.2% in the same quarter last year
- Free Cash Flow Margin: 21.6%, down from 29.8% in the previous quarter
- Customers: 4,443, up from 4,433 in the previous quarter
- Net Revenue Retention Rate: 102%, down from 105% in the previous quarter
- Market Capitalization: $4.02 billion
“We believe our recent user conference and accelerating innovation are creating momentum for BlackLine,” said Owen Ryan, Co-CEO of BlackLine.
Company Overview
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.
Tax Software
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
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Over the last three years, BlackLine grew its sales at a 15.3% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell slightly short of our benchmark for the software sector, which enjoys a number of secular tailwinds.
This quarter, BlackLine reported year-on-year revenue growth of 8.8%, and its $169.5 million of revenue exceeded Wall Street’s estimates by 0.6%. Company management is currently guiding for a 6.1% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 9% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and indicates its products and services will see some demand headwinds.
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Customer Retention
One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.
BlackLine’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 104% in Q4. This means BlackLine would’ve grown its revenue by 4% even if it didn’t win any new customers over the last 12 months.
Despite falling over the last year, BlackLine still has an adequate net retention rate, showing us that it generally keeps customers but lags behind the best SaaS businesses, which routinely post net retention rates of 120%+.
Key Takeaways from BlackLine’s Q4 Results
We were impressed by BlackLine’s strong growth in customers this quarter. On the other hand, its full-year revenue guidance slightly missed and its full-year EPS guidance fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 13.6% to $54.79 immediately after reporting.
BlackLine didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
