BlackLine, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing, not a standalone fourth-quarter report. BlackLine sells cloud-based accounting and finance automation software, primarily through subscriptions; subscriptions and support represented approximately 94% of FY2022 revenue.
Financial performance and position
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $522.9 million | $425.7 million |
| Subscription and support revenue | $491.2 million | $398.6 million |
| Gross profit / GAAP gross margin | $393.6 million / 75.3% | $327.8 million / 77.0% |
| Operating loss | $56.2 million | $38.6 million |
| Net loss attributable to BlackLine | $29.4 million | $115.2 million |
| Net cash from operating activities | $56.0 million | $80.1 million |
- Revenue grew 23%, primarily from customer and user additions and sales of strategic products. Customers rose 9% to 4,188; users rose 12% to 366,522. Dollar-based net revenue retention declined to 107% from 109%, reflecting foreign-exchange headwinds and slower net expansion in existing accounts.
- GAAP gross margin declined 1.7 percentage points, as subscription and support costs grew faster than revenue. Non-GAAP gross margin was 79.3%, versus 79.6%; non-GAAP net income was $46.2 million, versus $36.5 million. These company-defined non-GAAP measures exclude specified expenses and are not GAAP results.
- Cash and cash equivalents were $201.0 million and marketable securities were $874.1 million at year-end, totaling approximately $1.075 billion. Management said liquidity and operating cash flow should cover working capital, capital expenditures and financing obligations for at least 12 months.
- Convertible notes had $1.4 billion aggregate principal outstanding: $250 million due in 2024 and $1.15 billion due in 2026. Notes are generally intended to be settled with principal in cash and any conversion value above principal in shares, subject to the indentures.
Material changes and unusual items
- BlackLine acquired FourQ in January 2022 for $160.2 million cash, with up to $73.2 million of contingent consideration. Year-end contingent consideration fair value was $33.5 million; the remeasurement produced a $22.4 million benefit to general and administrative expense. FourQ valuation assumptions were identified as a critical audit matter.
- In December, the company announced a workforce reduction of approximately 5% (about 95 positions). It recorded $3.8 million in restructuring charges; the plan was substantially completed in the fourth quarter.
- A $5.3 million impairment charge related to cloud-computing implementation costs followed a decision to change direction on a quote-to-cash implementation.
- Net loss improved year over year, but comparisons were affected by lower convertible-note discount amortization and the nonrecurrence of a 2021 debt-extinguishment loss, as well as the 2022 contingent-consideration benefit and tax benefit. Adoption of ASU 2020-06 also changed convertible-note accounting and reduced opening equity by $262.1 million, net of tax, through the adoption adjustment.
- Backlog was $772.9 million, up from $596.3 million. The company cautions that backlog is not a key internal management metric and is not necessarily indicative of future revenue.
Outlook, commentary and risks
The filing provides no formal numeric revenue or earnings guidance. Management reported that economic uncertainty had led customers to delay purchasing decisions and increased price sensitivity, and noted that longer, less predictable sales cycles are expected as the company pursues larger contracts and strategic products.
- Key risks include customer renewals and expansion, macroeconomic conditions, competition and reliance on a limited number of solutions; cybersecurity, service availability and third-party cloud providers; and execution of the Google Cloud Platform migration.
- International operations accounted for approximately 29% of revenue. Foreign-exchange movements, evolving privacy and data-transfer regulations, and geopolitical developments may affect results and operations.
- Convertible-note conversion, repurchase or maturity obligations could require substantial cash; conversion settled in shares could dilute stockholders. The conditional conversion features were not triggered at year-end.
- No litigation was disclosed that management expected to have a material adverse effect. Management and the auditor concluded that internal control over financial reporting was effective at December 31, 2022.
Important facts for investors to verify
- Whether customer expansion and retention stabilize, including the drivers of the 107% net revenue retention rate.
- Whether gross margin recovers as cloud-hosting, acquisition-related amortization and infrastructure costs develop.
- FourQ integration and performance against earnout milestones, which could result in up to $73.2 million of additional cash consideration.
- Cash generation and liquidity relative to the $1.4 billion note principal, especially the 2024 maturity and potential conversion or repurchase events.
- Execution and customer impact of the cloud migration, and whether the impaired quote-to-cash implementation signals further implementation costs or write-downs.
- The assumptions underlying non-GAAP results, contingent-consideration valuations, and the reported backlog; consult the full financial statements and reconciliation disclosures.