BlackLine, Inc. — FY 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. This is an annual report, not a standalone Q4 filing; selected Q4 results are included below. BlackLine provides cloud-based accounting and financial-close software. At year-end it reported 3,024 customers and 267,621 users, excluding on-premise software.
Financial performance and liquidity
| Metric | FY 2019 | FY 2018 | Change |
|---|---|---|---|
| Revenue | $289.0 million | $227.8 million | +27% |
| Subscription and support revenue | $272.4 million | $217.4 million | +25% |
| Gross profit / GAAP gross margin | $230.0 million / 79.6% | $176.9 million / 77.7% | Margin +1.9 percentage points |
| Operating loss | $27.9 million | $29.8 million | Loss narrowed |
| Net loss attributable to BlackLine | $32.5 million | $28.7 million | Loss widened |
| Operating cash flow | $29.7 million | $16.1 million | Increased |
- Revenue growth reflected customer and user additions, customer expansion into more products, and increased sales of strategic products. Dollar-based net revenue retention was 110%, versus 108% in 2018; customers grew 15% and users 20%.
- Non-GAAP net income was $22.0 million, compared with $5.5 million in 2018; non-GAAP gross margin was 82.9%, compared with 82.1%. These company-defined non-GAAP measures exclude specified items, including stock compensation and acquired-intangible amortization.
- Q4 revenue was $80.3 million, versus $62.3 million in Q4 2018. Q4 net loss attributable to BlackLine was $9.2 million, versus $8.1 million.
- Cash and cash equivalents plus marketable securities totaled $607.7 million at year-end, up from $132.6 million. Current assets were $723.4 million and current liabilities $207.0 million; deferred revenue was $162.6 million.
- Operating cash flow was $29.7 million. Investing cash outflow was $408.5 million, primarily reflecting net purchases of marketable securities; financing cash inflow was $452.5 million, principally from the convertible-note issuance.
- The company issued $500 million principal of 0.125% convertible senior notes due 2024. Net carrying amount was $384.3 million after accounting discounts and issuance costs. The company bought capped calls for $46.2 million; its stated current intent was to settle conversions with principal in cash and any excess conversion value in shares.
Material changes, outlook, and risks
- Subscription revenue remained the dominant source, representing approximately 94% of 2019 revenue. Management expects sales and marketing, research and development, and general and administrative costs to increase as it invests in growth and international expansion.
- BlackLine reported continuing GAAP losses and an accumulated deficit of $163.6 million. Management said existing cash, investments, and operating cash flow should fund working capital, capital expenditures, and financing needs for at least 12 months.
- No specific 2020 revenue or earnings guidance is provided in the supplied filing text. Management cautions that sales cycles may lengthen and become less predictable, particularly for larger contracts and strategic products.
- Key risks include customer renewal and expansion, competition and pricing pressure, reliance on a limited range of solutions and partners (including SAP), cybersecurity and service outages, and execution of the planned migration of some data centers to Google Cloud Platform. International operations expose the company to currency, regulatory, privacy, and economic risks; the filing also identifies potential coronavirus-related disruption.
- The company revised previously issued 2017 and 2018 financial statements for an immaterial tax error that had understated tax expense and deferred tax liabilities. It also stated that 2019 interim quarterly amounts would be revised in subsequent 2020 filings. The auditor gave unqualified opinions on the financial statements and internal controls; management and the auditor found internal control over financial reporting effective at year-end.
- The filing reports no litigation expected to have a material adverse effect. It discloses $16.8 million of purchase obligations and up to $8.0 million of contingent consideration tied to realizing specified tax benefits; timing and amount of that contingent payment are uncertain.
Important facts for investors to verify
- Whether customer growth, retention, and product expansion can sustain revenue growth as the business scales.
- How GAAP losses and operating expenses trend relative to revenue, and how much reported non-GAAP profitability depends on exclusions, especially stock-based compensation.
- The terms, conversion conditions, cash repayment exposure, and potential dilution associated with the 2024 notes and capped calls.
- The composition, maturity, and liquidity of the investment portfolio and the use of proceeds from the notes.
- The effects of the tax-error revisions, including the planned revisions to 2019 quarterly filings and the realizability of tax assets and loss carryforwards.