BlackLine (BL 46.54, +1.00, +2.20%) is trading modestly higher today after reporting
Q2 results last night. The company sells cloud-based software that helps
companies automate and control their financial close process. In simple terms,
BlackLine's goal is to transform and modernize accounting and finance
operations for mid-and large-size companies. Specifically, its platform
supports accounting processes such as the financial close, account
reconciliation, inter-company accounting, and controls assurance.
Traditional enterprise resource planning (ERP) systems are typically
not effective for processes handled outside of a company's general ledger, such
as balance sheet account reconciliation, intercompany transaction accounting,
and the broader financial close process. Many companies also use multiple ERPs
and other financial systems without a platform to efficiently integrate them.
BL believes that it has created a new category of software
that is capable of automating and streamlining accounting and finance
operations in a manner that complements traditional ERP systems. Its approach
modernizes what has historically been accomplished through batch processing and
manual controls that are typically applied only during the month-, quarter-, or
year-end financial close. BL’s platform supports distributing these tasks in
the broader day-to-day real-time of a business, improving the accessibility of
results and analysis derived from them; the company refers to its updated
process as "continuous accounting." The company has more than 2,400
customers and more than 209,000 users across more than 150 countries.
Turning to the Q2 results, BL reported a surprise profit, as
non-GAAP EPS came in at $0.01 when a small loss was expected. Prior guidance
was for non-GAAP EPS of $(0.02)-0.00, so they beat that slightly. Revenue rose
32.1% year/year to $55.45 mln, above prior guidance of $53-54 mln. The Q3
guidance of non-GAAP EPS at breakeven and revenue at $57-58 mln were both
in-line with market expectations.
On the call, BL talked about how it saw a strong demand
environment in Q2, which helped it add 105 net new customers, bringing its
total to approximately 2,400. These customers are from broad and diverse
industries and range from big market companies, financial institutions, and
universities to the largest global companies in the world.
Of note, over the last several months, BL has been scaling
up its sales leadership for the next phase of growth, beginning with its hire
of Marc Huffman as COO. Mr. Huffman joins BlackLine from NetSuite, where he was
responsible for their sales and operations in EMEA. He has a deep level of
experience scaling cloud accounting software sales organizations. BlackLine
also recently made two new key senior sales hires.
From a broader perspective, BL says its business remains
strong. Given that the company has only been public since late 2016, it's still
in its early days, but the pace of digital transformation is accelerating
within the industry, and BL believes that its product platform and its partner
ecosystem leave the company well-positioned to help guide customers through
this process.
In sum, this was another good quarter for BL. The stock
began made its IPO debut in October 2016 and spent the first year in a steady
ascent. The stock slumped after a disappointing report in mid-2017 and
struggled for the remainder of 2017, but 2018 has seen a nice uptrend in the
stock. The stock traded little in the pre-market but spiked as much as approximately
8% higher shortly after the open, suggesting that investors agree that BlackLine’s
latest results were worth cheering.