BlackLine, Inc (BL, $126.23): "BlackLine’s Bottom-Line Surprise"
By: Graham
Pedersen, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
- BlackLine,
Inc. (NASDAQ:BL) operates a cloud-based software platform designed
to transform accounting and finance operations for organizations of all types
and sizes.
- For Q2 2021, BL reported an EPS of $0.15, beating a consensus of $0.08, resulting in an earnings surprise of 87.5%.
- The implementation of the recently introduced ‘BlackLine Optimization Academy’ aims to scale the business and broaden customers’ depth of its offerings.
- BL expanded its customer base by 3.3% in Q2 2021, a net gain of 116 new customers.
- The firm’s SAP offering, SolEx, delivered its strongest quarter since its inception.
Key
points: BL reported Q2 2021 earnings of $0.15 per share, beating the consensus
estimate of $0.08 per share, representing an earnings surprise of 87.5%. BL posted
$102.12 million in revenues for the quarter ending June 2021, surpassing the consensus
estimate of $101.1 million. BL showed revenue growth of 22.6% year-over-year,
and its price-to-earnings ratio is currently 193.5. The company has
outperformed consensus EPS forecasts four times over the last four quarters.
The BlackLine Optimization
Academy consists of training sessions that focus on nine foundational
accounting processes to improve efficiency in automation with BL. In addition,
the initiative seeks to help customers get the most value out of BlackLine by
proactively engaging them earlier in the transformation process. As a result, BL
can expect to experience increased adoption and platform expansion as clients
realize the full benefits of the service.
While the effects of the pandemic
are subsiding, BL has seen an increasing trend in large companies prioritizing
digital transformation. As a result, executives are being asked to perform more
with the same or even fewer resources in today's organizations, which are
experiencing a severe skills crisis. BL can capitalize on this by automating
time-consuming and laborious activities, thus freeing critical finance and
accounting resources.
BlackLine’s SolEx deals were vast
and strategic in scope, covering APAC, EMEA, and North America. SolEx was
especially strong in the APAC region, creating significant orders and
building its small growing business in Japan. BL expects to continue
capturing new SolEx accounts through partnerships.
What has the stock done lately?
BL’s share price has consolidated
within the $110s/$120s over the past month and hasn’t shown any signs of a break-out.
From year to date, BL shares have fallen 7.5%, compared to a gain of 20.8% for
the S&P 500. The stock's 50-day moving average is $116, and its 200-day
moving average is $117. The Q1 2021 consensus EPS forecast is $0.13 on revenues
of $107.5 million and $0.48 for the current fiscal year on revenues of $420
million.
Past
Year Performance:
Shares of BlackLine, Inc. have
been trading within a range of $154.61 and $88.62 over the last 52-week period.
BL has experienced a YTD loss of -7.52%, with a 52-week beta of 1.25. BL was
closely shadowing the Russell 2000 (Figure 1), although BL fell sharply in
March and continued to lag while the Russell 2000 continued sideways. BL has underperformed
the benchmark from year-to-date, producing a 52-week gain of 22.13%, compared
to the benchmark at 39.52%.
My
Takeaway
BL was added to the small-cap
portfolio in March 2017 at around $27.50 per share, with a price target of
$32.99. Since being added to the fund, the stock has gained over 348%. BL was
pitched under the notion that expanding through international- and
middle-market penetration would drive top and bottom-line growth. Management
has demonstrated strong performance, quadrupling the firm’s size over four
years, reducing the WACC by 44%, and generating positive ROIC, ROA, and ROE
since added. Because the investment thesis continues to support long-term
growth and profitability, I believe that BL represents a hold in the AIM
small-cap equity fund.
