Blackline Safety Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
September 14, 2023

There are 9 speakers on the call.

Operator

Welcome to BlackLine Safety's Fiscal Third Quarter Results Conference Call. This conference is being recorded. I would now like to turn the conference over to Scott Boston, Vice President of Finance. Please go ahead.

Speaker 1

Welcome, and thank you for joining us. Today, we will be discussing our fiscal results for the Q3 ended July 31, 2023, which were issued before market opened this morning. With me today is Cody Slater, CEO and Chair of BlackLine Safety Corp as well as our CFO, Shane Brennan. I will turn the call over to Cody in just a moment for an overview of our Q3. Following that, Shane will discuss the financial highlights of the quarter in greater detail.

Speaker 1

Cody will then close with our outlook and some additional commentary before we take questions. I'd like to remind everyone that an archive of this webcast will be made available on the Investor I would like to note that some of the information discussed in this call is based on information as of today and contains forward looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, please review the forward looking statements disclosure in the earnings news release as well as in the company's SEDAR filings. During this call, there will be a discussion of IFRS results, Non GAAP financial measures, non GAAP ratios and supplementary financial measures.

Speaker 1

A reconciliation between IFRS results and non GAAP financial measures is available on the company's earnings news release and MD and A, both of which can be found on our website, blacklinesafety.com And on SEDAR, all dollar amounts are reported in Canadian dollars unless otherwise noted. With that, I will now hand the call over to Mr. Slater.

Speaker 2

Thank you, Scott. Good morning, everyone, and welcome to BlackLine Safety's Q3 2023 conference call. I'm pleased to share today BlackLine's 3rd fiscal quarter results, our 26th consecutive quarter of year over year revenue growth. These results demonstrate the successful execution of our plan to deliver positive adjusted EBITDA through revenue growth, margin expansion and cost discipline. We saw revenue growth 34% over the prior year, while incurring 18% lower operating costs.

Speaker 2

BlackLine also achieved the highest ever gross margin for the company at $13,400,000 which was driven by product margins of 29%, their highest in over 2 years And continued strong service margins of 75%. We also exceeded our target for the key metric Net dollar attention reaching 125 percent 1 quarter ahead of schedule. This drove our annual recurring revenue or ARR to $47,000,000 up 43% year over year. Our growth combined with our continued cost discipline led to an improvement of $7,700,000 in adjusted EBITDA compared with the prior year quarter. The past year has seen BlackLine improve every single financial metric as we continue to deliver value to our growing list of customers To our unique and innovative product, data and communication services.

Speaker 2

With our improving margins, growing ARR and decreasing cash We exited the quarter in the strongest financial position ever with total liquidity of $25,600,000 in our cash, short term investments and operating facility And $50,000,000 available on our lease securitization facility. As we continue to win market share, we saw 26 Hardware revenue growth year over year, taking business from our competitors and expanding the connected safety market through our industry leading products and services. In Europe, we saw growth in the water, wastewater and utility sectors, which led to a 55% revenue increase for that region. Other significant global wins include several orders across the Middle East totaling $1,300,000 in total contract value And a deal was $3,200,000 to protect 1,000 workers for a large energy company in the U. S.

Speaker 2

Permian Basin. We continue to see strong customer interest in the G6, especially with our soon to be released enhanced feature levels, launching as Protect and Protect Plus. These feature sets are driving customer adoption as well as higher service revenue. As expected, we have recently started to see the first large opportunities emerge We demonstrate these enhanced functionalities illustrating again how data and communication are central to the way that BlackLine differentiates its fully connected solution. I will now turn the call over to our CFO, Shane Grennan to discuss our fiscal Q3 results and financial position in more detail.

Speaker 3

Thank you, Cody, and good morning all. As Cody mentioned, we achieved our 26th consecutive quarter of year over year revenue growth up 34%, generating total revenue of $24,800,000 This includes $11,300,000 in product revenue, Which increased 26% year over year. The increase in the current year reflects the past investments in the company's expanded sales network and global sales team We continued strong demand generation and sales development activities. Product gross margin of $3,300,000 more than doubled in the 3rd quarter, Thanks to the growth in revenue and an increase in gross margin percentage to 29% from 17% in the prior year period. Margin increased sequentially for the 3rd consecutive quarter as we began the rollout of a secondary pricing increase And saw benefits from increased throughput from our expanded production facility, where we have enhanced capacity and process automation.

Speaker 3

Service revenue during the quarter increased 41 percent to $13,600,000 our 2nd consecutive quarter with greater than 40% growth in this segment. Software services were a major contributor to this growth, up 41% year over year, Which also drove ARR growth of 43 percent to $47,000,000 Newly activated devices contributed to year over year growth of 1 point $4,000,000 in the quarter and net service increases within our existing customer base contributed 2,400,000 This resulted in net dollar retention of 125%, achieving our Q4 FY 2023 target 1 quarter ahead of schedule. Our pricing increase, combined with customer device count expansions and the efforts of our client success team To increase the penetration of higher value services, including BlackLine Safety Operations Center, personnel monitoring, 2 way voice and Push to Talk, All contributed to this remarkable number. Our rental business also continues to generate a robust growth with revenue increasing 35% from the prior year to $1,100,000,000 Rental revenue was slightly down from the Q2 of 2020 3, With Q3 being a slower season for rental projects, we expect to continue our strong year on year growth in the rental business in the 4th quarter As well as fiscal 2024, with the rental team having expanded to cover Europe and the Middle East regions, where there is huge demand for our connected area And wearable monitors for 3 to NiteMuck projects.

Speaker 3

Our service gross margin percentage continued to be strong at 75%, Generating over $10,000,000 of gross margin for the quarter. We expect to see incremental margin improvements in Q4 and fiscal 2024 Our total gross margin percentage came in at 54%, yielding $13,400,000 setting another quarterly record for total gross margin. The growth in total gross margin is due to revenue mix, cost optimization efforts across our business and the rollout of our pricing increase. In terms of our geographic growth mix, we are pleased with our performance as each one of our key geographic markets improved from the year ago comparable period. Our European market represented our largest growth region, improving 55% from last year's Q3 as our sales team secured several major wins in The U.

Speaker 3

S. Continues to be our largest market and demonstrated strong growth at 35% from the year ago comparable period As we leveraged our established sales network in the region. Additionally, our Canadian and rest of world markets were able to see year over year increases of 19% and 5%, respectively, as we continue to have excellent product wins and strong renewals across these regions. Shifting now to operating expenses. Our core expenses for the quarter were $20,100,000 which was down $4,500,000 or 18% Compared to our expenses of $24,600,000 in the prior year quarter.

Speaker 3

Excluding impacts of foreign exchange, This was the 6th consecutive quarter where BlackLine has reduced its total expenses as a percentage of revenue. General and administrative expenses decreased 8% from the prior year quarter to $5,700,000 which represented 23% of revenue compared to 33% in the prior year. This increase was primarily due to reduced legal and consulting costs As we continue to focus on our fixed cost base, sales and marketing expenses decreased 3% from the prior year quarter to CAD 9,300,000 Which represented 38% of revenue compared to 52% in the prior year period. The decrease was a result of lower headcount, contractor expenses compared to the prior year. I would like to underscore that even with this decrease, These go to market teams drove revenue growth of 34% for the quarter.

Speaker 3

Product research and development costs Decreased 43% from the prior year quarter to $4,300,000 and decreased as a percentage of revenue to 17% from 40% in the prior year period. Salaries, recruitment expenses and consulting and contractor costs associated with Achieve 6 We're all down with the core development work for that product having been completed. Our development teams are now focused on the next generations of our core products and services, and we look forward to the impact these innovations will make as these products begin to launch in late 2024. Moving on to capital expenditures. These totaled $1,400,000 for the quarter, primarily for additions of revenue generating sensor cartridges Inventory totaled $16,600,000 at quarter end compared to $18,700,000 at the end of the 4th quarter As we work to improve our inventory turnover, while our sales continue to grow, we see inventory continuing to be a source of cash for us over the next several quarters.

Speaker 3

Our G7 lease program has total of $38,200,000 in future contracted cash flows at July 31, 2023, Up from $36,000,000 on October 31, 2022. During the quarter, we received proceeds from our lease securitization facility With CWB Maxim of $2,600,000 and made scheduled repayments of $8,800,000 We expect to see similar advances in repayments in the 4th quarter based on 3rd quarter lease contracts. We continue to have over CAD50 1,000,000 equivalent of availability on the facility as of the end of this quarter As we continue to use the facility to optimize our working capital. At quarter end, we have total cash and short term investments on hand of CAD 17,600,000 with CAD 8,000,000 of availability on our senior secured operating facility with ATB Financial And CAD50 1,000,000 equivalent of availability under the lease securitization facility with CWB Maxim. We remain confident that we have the resources required to execute our business strategy of achieving sustainable growth, innovation and disciplined cost management so that BlackLine can generate positive free cash flow in fiscal 2024.

Speaker 3

I will hand it back to Cody to discuss our outlook And to provide closing remarks. Koli? Thank you, Shane.

Speaker 2

We want to reiterate our goal to achieve positive Quarterly adjusted EBITDA in Q4 of this year and for the full year of fiscal 2024. I would also underscore that we have the liquidity and resources Stronger company than it was a year ago. We've grown to be one of the most significant players in our industry and proven that our business model can Everything we have done to date has positioned us to become the dominant player in the multibillion dollar gas detection and connected safety markets. It is now time to focus on the true opportunity this presents to both our top and bottom line, driving value for our shareholders over the coming years. I want to thank the BlackLine team across the globe for their commitment to our purpose and for the incredible results they have collectively delivered to date.

Speaker 2

I speak for all BlackLine employees when I say that we are grateful to our customers for their continued trust in BlackLine to protect their people around the world. Thank you for your attention this morning, and I'll now turn it over to the operator for questions.

Operator

Thank you. We will now begin the analyst question and answer session. The first question comes from John Hao with National Bank. Please go ahead.

Speaker 4

Hey, good morning, guys, and thanks for taking my questions. So Cody, could you give An update on the G6 and whether it is still on track for delivery in Q4?

Speaker 2

Sure, John. As we mentioned in the call, I think that last number of couple of quarters, we've been working on both an updated version of The capabilities for the 6 that we call Protect and Protect Plus, so the Protect, both of these are really designed to give enhanced Feature sets that customers were looking for, really getting more value out of the data, both who are completed through their development and beginning their launch right now in The field along with the accessories that are also necessary for that, such as the large scale multi chargers that The Protect Plus, since it uses a lot more data, we'll have a weeks long battery life rather than a year long battery life. So you need to have easier methods of charging. All that's coming to is all that's completed and coming into market right now. We're seeing the pipeline start to build on that as part of this

Speaker 4

Okay, thanks. A related question on hardware is, could you comment on Your overall hardware sales pipeline, how is this going to impact your Q4 product revenue?

Speaker 2

Sure. I think one thing most people probably where Q4 is always our strongest hard work quarter is the seasonality in some aspects. And it's just the fact that the company is growing at the rates we are here last quarter, but Q4 is always going to be the strongest quarter. We're seeing a pipeline right now that supports us continuing that, supports us seeing strength really across the whole product range. I'd point to a couple The markets, the what we call our best of the world market, which was a little soft in its growth last quarter is going to be very strong in Q4.

Speaker 2

We saw the beginning of the return to real strong growth in Europe in Q3 that's continuing into Q4. Strong pipeline across the And across the area monitors, really throughout all of our regions right now.

Speaker 4

Okay, got it. Last question is on modeling. In terms of your total operating expense for Q4, should we expect the total cost to be relatively flat compared to Q3?

Speaker 3

John, that's correct. Yes, that would be a fair assessment.

Speaker 4

Thank you. I'll pop the line.

Operator

And the next question comes from Ronan Anantarajah with ATB Capital Markets. Please go ahead.

Speaker 5

Thanks. Just had a question on customer behavior. Have you guys noticed The customer behavior has changed over time and our customers being a little bit more cautious, which could lead to longer lead times.

Speaker 2

We're going to actually say it's a little bit the opposite that the penetration, the The depth of experience we have in the different vertical markets now just add strength. So the customer What we see is less desire for customers to treat us as a bit of an unknown. We're In the markets, we're being used by their competitors or people in their same industry or a lot of our expansion is inside our current customer base itself. So Really, I think the shift we're seeing a shift in the market, certainly we've seen a shift in last year and strengthening in the Oil and Gas space with the strengthening of WTI pricing, which maintains its strength right now and penetration into Some new verticals are starting well. We mentioned that a little bit in one of our press releases recently about the fire and hazmat world.

Speaker 2

So I think as we become More of the industry standard for connected worker, which we really are in the context of the world of gas detection, I think the it's a bit of the opposite. We see a little we see shorter development times To bring a lead to what we call a net level, and we see that continuing in the future.

Speaker 5

Perfect. That's great color. And just had another question on just your net dollar attention. Last quarter, You revised your target up to 120 and then now you guys are at 125. So do you guys have a new target or do you see where NDR could potentially go?

Speaker 2

And we're really pleased because I think that's a huge number to look at, $125,000,000 that those are Industry leading kind of numbers in any world. I think internally what we really like about that is just how much it reflects on the customers And how much customers value the services we provide for and that's what that is really driving that. And that strong customer retention that Growth in net dollar customers adopt new units and as they adopt new services, the core real growth And reaching 125, we did that faster than we thought. I think you'll see similar numbers going forward, but not a similar level of growth going forward.

Operator

The next question comes from Jason Zandberg with PI Financial. Please go ahead.

Speaker 5

Hey, thanks for taking my questions. First of all, just wanted to get your comment on You had a very strong sales quarter for in Europe. Just wanted to get some color if I could on those strong sales during the Q3?

Speaker 2

Sure. I think what you're seeing really is just the Work has been done over the last year in Europe with some shifting in our sales structure and our approach to markets there, and We see that as really the tip of the iceberg there for Europe. They've done a good job of getting themselves into the position where We're now seeing visibility in our European pipeline that shows that kind of you can see that kind of growth going forward. Still a lot in water. Wastewater is definitely good strength in addition from current customer base.

Speaker 2

And yes, it's just a pretty broad The European market is a little different to us and there's less oil and gas penetration within the market in Europe, but Broader industrial base and we are seeing a real strength there across the board on the product space. And we're going to start seeing that in the rentals in Europe as well too and the rentals in the rest of the world and Middle Eastern market As we put some investments in today. So, well, I'm showing that all up, what you're seeing is the results of the work the team over there has done and The alignment here will continue here globally to the previous into the track we've been long ago.

Speaker 5

Okay. No, that's great. And my second question just relates to your ARR. It was a nice jump this quarter to $47,000,000 Quite impressive given Where you've been trending, this is definitely a step up, step change. Just wondered sort of what's your outlook on your annual recurring revenue Thanks.

Speaker 3

Hey, Jason. It's Shane here. So yes, we did have a very good move in this quarter. We were 11% sequentially

Speaker 2

From our Q2 through our

Speaker 3

Q3, reasons for that were expansion within the existing customer base That we have moving on to more high level service plans that were within there as well as new device sales Probably be something that may be more modest from a modeling perspective on a go forward basis. But yes, it's

Speaker 5

That's great. Thanks

Speaker 6

very much.

Operator

The next question comes from David Kwan with TD Securities. Please go ahead.

Speaker 6

Hey, guys. Just wanted to get back on to the G6 here. Obviously, you had a bunch of customers that were looking for more G7 like features in the G6 that you guys have been working on and accelerate the product roadmap. So could you give us a better sense on how we should think about the ramp in the G6, Understanding that you're kind of launching it right now and to what extent there might be some pent up demand or whether we're still going to need This is going to be somewhat similar to the G7 launch. Customers are going to want to go through POCs and stuff like that and then maybe see More of a wrap in a couple of quarters.

Speaker 2

Yes, I think it would be a little bit of a mix between the 2. It's a bit more of the latter, but We have customers who've been waiting for some of those enhanced feature sets, particularly the higher level of data and visibility of workforce that we can provide. So we're going to start to see a ramp in shipments in Q4. And but I think the The real pipeline build is as we get those new Protect and Protect Plus features really into the market will be in 3 major Trade shows at the end of this quarter. Our biggest really is the work in the year In both Germany, Middle East and North America, that will be a core focus of that.

Speaker 2

And I think that will really start to Bill and Graff, we're really looking forward into next year for Q1 and Q2 going forward.

Speaker 6

That's helpful. Thanks, Cody. And maybe a couple of questions for Shane. Just on the receivables, that's Continue to trend upwards. I think it's up almost over double year over year versus roughly a onethree increase in the revenue.

Speaker 6

Can you provide some color as to what's kind of going on there? Like it clearly seems like customers are taking longer to pay. So How much of a concern is that? And I also noticed, I guess, the loss allowance, it's still relatively small, but that jumped Significantly since the end of last year. So one looking for some color on that.

Speaker 3

Sure, David. Yes, we were at Overall, dollars 35,000,000 at the end of July, that was $30,000,000 compared to April. Obviously, you referenced the greatly increasing revenue numbers over the periods that we've had. From a day sales outstanding perspective, we are higher at our July quarter end as compared to, say, our April quarter end. A lot of that is to do with the timing of sales and whether it happened within that particular fiscal quarter.

Speaker 3

In our July quarter, we had a Larger proponents of our sales taking place within the last month of the period, which means that those will be recovered through cash receipts in the Q4 as opposed to being received in the quarter, we're not from a provision for potential bad debt perspective. We calculate that in accordance and there's no unusual items within there that's from an outstanding or concerning point of view from my perspective. So overall, it is a larger number at the end of July, but it has been actively managed in terms of our cash receipts on a continuous basis.

Speaker 6

I appreciate that. Yes, I didn't know whether you just had a lot of sales late in the quarter. So, but it has increased over the last Couple of quarters and I think it's roughly about $5,000,000 a quarter. So I don't know if you just the last few quarters you've been getting a bunch of sales towards the end of the quarter or if there's something else going on?

Speaker 2

It does happen, David, that through our sales at the

Speaker 3

end of the quarter, again, our revenues have continued to increase each Through the year, Q2 and Q3, they will start it, but that is the status more appropriate after that.

Speaker 6

How should we look at that going forward? Like, do you should we expect a reversal and the DSOs Chris, finally to come down and hopefully as early as Q4, if not early next year?

Speaker 3

Yes, certainly, David. I would like that to come down to turn that more often and have the cash proceeds come in a little bit faster, and that's something where We actually obviously work on, but I would say it is dependent on when sales fall within a particular period and when they can be brought in Within our general credit terms or not.

Speaker 6

Yes. I just was wondering because typically, obviously, with the Q4 being a seasonally stronger quarter that your Seagulls have Usually jumps, not surprisingly. I was just wondering whether given the increases that we've seen in the receivables so far this year, like Should we expect Q4 receivables to be increased, maybe not to the same extent as we've seen in prior years, but whether it increases a little bit or maybe stays flattish, so we can Work on the receivables that are already outstanding.

Speaker 3

I would think and Cody made a reference earlier, Pipeline for Q4, that's there. So it wouldn't be unexpected that it would be a Q4 larger receivables number than, say, Qs 1, Q3.

Speaker 6

Okay. Okay. Last question, just on the inventory side, it was down a bit, so helping offset that improvement or increase in the receivables. And I know you guys have made some changes there in terms of kind of delivery times and whatnot. Is this kind of a level that you feel comfortable Based on the sales trajectory where based on the inventory levels that you'd like to hold or Could we see that number start to trend up again?

Speaker 3

Sure. Yes. So we ended our July quarter end of $16,600,000 in terms of inventory that was down from $18,700,000 at the end of the fiscal year. To answer your question, yes, we would like See, PAMA approved our turns again on that as we go into the Q4. So we would like to see can we Be that be a source of cash again in our 4th quarter.

Speaker 6

Okay, perfect. Thank you.

Operator

The next question comes from Gabriel Leung with Beacon Securities. Please go ahead.

Speaker 7

Hi, Good morning and thanks

Speaker 5

for taking my questions and congrats on the progress.

Speaker 7

Just got a couple of questions. First, just going back to With operating expenses being relatively flat expected over quarter over quarter and I guess services revenue is relatively predictable, it would imply a relatively Big jump in hardware revenues to get to that EBITDA positive milestone next quarter. So I'm curious, What sort of visibility do you have into hitting those hardware revenue milestones this quarter? And is any of that predicated on some maybe I'm chunking orders that might have to wait until sort of the last week of the quarter or 2 to close out.

Speaker 2

Sure, Diego. I'd like to point things out of that first before talking about the pipeline. The other things you'd want to see in Q4, we Expect to see in Q4 is a continued expansion of our gross margins. You've seen that as the hardware has moved from 17% year ago to 29%. The service margins moved up into that 75% range.

Speaker 2

The season increase in the service in the gross margins, particularly on the hardware in Q4 is our anticipation based on volumes and product mix. You'll see a strengthening in the rental program as well too. We've Shannon, we've noted that Rental was actually down Q3 from Q2. That's a bit of a seasonality. The Q4 is a strong quarter.

Speaker 2

We have good visibility of that returning to Very strong growth, continued strength in the whole service channel. And then when you look at the product side, We have good visibility within our pipeline of reaching the targets that we need to hit that EBITDA number. Yes, there's some decent sized orders in there. Now there's no one order that makes up a third of the number or some massive portion of the number, but there are large scale orders, obviously, There is risk within those whether they slide or don't or slide out, But there's also one that we're actively looking at going into the quarter. So it's here we're we have a Strong view of the pipeline going forward that gives us confidence that we can reach those numbers.

Speaker 2

I think the other chat question that becomes supply chain and The ability to ship everything that we have incoming in the orders, that's another challenge that we're actively managing as we look What is always our largest quarter. Without getting into details, there's always supply chain challenges, but we believe those are well managed for the quarter as well.

Speaker 7

Got you. Thanks for that. And secondly, just on G6, Cody, you mentioned you've obviously got a much clearer line of sight to some More material purchase orders on G6 side now that the features functionality are completed. And I'm curious whether you've seen any change in behavior from your traditional competitors in the space Now that you are getting closer to potentially signing a large PO on the G6 side, whether you've seen any changes in specifically around pricing and whether You might have gotten a bit more predatory in terms of the pricing with the imminent release of the or launch of your product.

Speaker 2

It's an interesting question. I think there's been a couple of situations you can say where we're seeing competitors Actually marketing their low cost products, frankly, below cost pricing, But we're not targeting the kinds of customers that we're looking at, Diego, the ones that are looking to buy the 6 are the ones that are looking for that higher value Most are trending towards looking at our enhanced service level being on Protect Plus, which actually has a Significant price increase over the original core launch of the G6. So we don't see that Kind of predatory pricing, doing anything but damaging our competitors' margins and really doesn't hurt our market, some of our customers.

Speaker 7

Got you. Thanks for that. Thanks for the feedback. Congrats on the progress. Thanks.

Operator

The next question comes from Raj Sharma with B. Riley. Please go ahead.

Speaker 8

Yes. Thank you for taking my questions. Solid quarter, solid results. Congratulations. I just wanted to understand a couple of things.

Speaker 8

Just the cadence of the securitization facility And the levels that you see up, down during the quarter and also Relative to that, the percentage of the leased versus outright purchases, If you can give more color on that. And what level of the securitization facility do you see foresee the balance On it in the quarters and the year ahead.

Speaker 3

Raj, it's Shane here. So yes, our lease securitization has been utilized now. It's been extremely successful for us The usage that we had during our Q2 from a Q3 perspective, the The lease was probably a little lighter than some of the previous quarters that we've had compared to our Q2 and other quarters of the prior fiscal year. The uptake of lease is, again, it's customer dependent in the period as to what Capital allocation decision a customer wants to make in terms of them buying the devices

Speaker 2

and through a bundle Plans or whether

Speaker 3

they wish to do it through a finance slate. From a look forward perspective, The numbers that we have for Q3 would be good indicators for what Q4 and forward maybe, but I will Caution that it is dependent on the extent to which customers enter into finance leases through the period as to what we could finance. And we've Canadian dollar equivalent of $50,000,000 available for that facility with C. V. B.

Speaker 3

Vaccines at the end of July. We'll continue to actively utilize that facility on a go forward basis for those customers that we will put through that securitization program, And we look forward to continuing to manage our working capital effectively through using that 2 wheeling program.

Speaker 8

Yes. Thank you. I wanted to kind of understand the securitization facility. So the percentage of the lease is what of the total In products? And you also have Advances

Speaker 3

Sorry, Raj, I think you broke up the last piece of your question.

Speaker 8

I'm trying to understand The leased revenues versus total and how that plays in the use of the securitization facility and how that would play in with the And how should we kind of look at that modeling when you look at also the accounts receivable balances And when and what level of AR could we expect sort of in terms of DSOs Over the years, how that plays with the securitization facility?

Speaker 3

Yes, sure, Raj. So By way of indicator that the percentage that could go through lease could be low teens up to sometimes 30%, 30% plus within a quarter depending on what the customer decision is. From your modeling perspective, you can take an average of somewhere in there, look at what the set the product sales within the period is and then factor off In terms of what would be financed through that program, our preference is to fully utilize, where possible, customers within North America, Which is where the lease program is securitization is centered for those North American customers and to put as many as possible through that program to aid us. So

Speaker 8

And then just moving on to the product gross margins, you are Expecting the expense levels to stay constant here, the overall operating expense levels. And then the gross margins on the product side, Did I hear from Cody that you expect significantly higher product gross margins in Q4

Speaker 2

Yes. If you looked at it throughout the year, we've gone up every quarter, quarter on quarter in those margins. Q4 is our highest volume quarter. There's also a price increase that took place in June that will impact this as well too. So we've talked a lot about In June of this year, so that's going to also help impact those margins.

Speaker 2

So yes, you should look to see the Strengthening of the hardware margin and a slight strengthening on the service margin, I'd say, as well Because of that price increase and just

Speaker 3

the volumes at the end of the day.

Speaker 8

Great. Thank you. That's it for me. I'll take it offline.

Operator

This concludes the question and answer session. I would like to turn the conference back over to Cody Slater for any closing remarks.

Speaker 2

Thank you, operator. I'd just like to thank everybody for

Operator

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Powered by Quartr

Key Takeaways

  • BlackLine delivered its 26th consecutive quarter of year-over-year revenue growth, growing total sales by 34% and boosting annual recurring revenue (ARR) by 43% to CA$47 million.
  • The company achieved its highest-ever gross margin at 54% (29% product margin, 75% service margin) and cut operating costs by 18%, driving a CA$7.7 million improvement in adjusted EBITDA versus last year.
  • Net dollar retention reached 125%—one quarter ahead of schedule—supported by pricing increases and higher-value service adoption, while rental revenue jumped 35% and hardware sales grew 26%.
  • Operating expenses fell for the sixth straight quarter as a percentage of revenue, with G&A down to 23%, sales & marketing to 38%, and R&D to 17%, reflecting disciplined cost management.
  • Management reaffirmed targets for positive adjusted EBITDA in Q4 and full-year fiscal 2024, underpinned by strong liquidity (CA$17.6 million cash and CA$50 million securitization facility) and a robust pipeline for the upcoming G6 product launch.
AI Generated. May Contain Errors.
Earnings Conference Call
Blackline Safety Q3 2023
00:00 / 00:00