BlackLine, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone Q4 filing. BlackLine sells cloud-based accounting and finance automation software, primarily through subscriptions; subscription and support accounted for about 93% of 2020 revenue.
Financial performance
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Revenue | $351.7 million | $289.0 million | +22% |
| Subscription and support revenue | $328.6 million | $272.4 million | +21% |
| Professional services revenue | $23.2 million | $16.5 million | +40% |
| GAAP gross profit / margin | $282.8 million / 80.4% | $230.0 million / 79.6% | Margin +0.8 percentage points |
| Operating loss | $(19.9) million | $(27.9) million | Loss narrowed |
| Net loss attributable to BlackLine | $(46.9) million | $(32.5) million | Loss widened |
| Basic and diluted loss per share | $(0.83) | $(0.59) | Loss per share widened |
| Cash provided by operating activities | $54.7 million | $29.7 million | Increased |
Non-GAAP net income was $46.1 million, compared with $22.0 million in 2019; the company’s definition excludes specified items, including stock-based compensation, debt discount amortization, acquisition-related items and non-controlling-interest adjustments. Stock-based compensation was $49.7 million in 2020.
At December 31, 2020, cash and cash equivalents were $367.4 million and marketable securities were $175.2 million, totaling $542.6 million. Current assets were $674.1 million and current liabilities were $242.3 million. Cash flow from investing was positive $173.6 million, mainly reflecting maturities and sales of marketable securities, partly offset by the Rimilia acquisition. Financing cash flow was positive $18.9 million.
BlackLine had $500.0 million principal amount of 0.125% convertible senior notes due 2024; their net carrying amount was $407.0 million. Management said available liquidity and operating cash flow should cover working capital, capital expenditures and financing needs for at least 12 months. The filing reports no cash dividends and no material off-balance-sheet financing arrangements.
Changes and material developments
- Revenue grew 22%; customers increased 14% to 3,433 and users increased 9% to 291,873. Dollar-based net revenue retention declined to 106% from 110%, which management attributed primarily to lower expansion within existing accounts, including COVID-related spending constraints.
- Gross margin improved, and the operating loss narrowed, but the attributable net loss widened. Higher interest expense—principally amortization of the notes’ debt discount—and an $8.9 million adjustment related to redeemable non-controlling interest contributed to the difference.
- On October 2, 2020, BlackLine acquired Rimilia, extending its offering into accounts-receivable automation. Cash paid was approximately $121.4 million, with up to $30 million of additional earnout consideration. The preliminary purchase-price allocation included $104.6 million of goodwill; Rimilia’s contribution to 2020 consolidated results was not material.
- At year-end, the notes’ stock-price conversion condition had been met, allowing holders to convert during Q1 2021. The company said it intended to use combination settlement—principal in cash and any excess conversion value in shares—and had received no conversion requests through the filing date.
- CEO Marc Huffman succeeded founder Therese Tucker effective January 1, 2021. The company reported a correction of prior-period calculations of redeemable non-controlling interest in Q3 2020; it recorded a cumulative $1.5 million correction in that quarter, affecting reported attributable losses and EPS in the affected quarters.
Outlook, commentary and risks
The filing provides no numerical FY2021 revenue, earnings or cash-flow guidance. Management said COVID-19 had delayed purchasing decisions, reduced pipeline and large deals, extended payment terms and slowed activity in EMEA, North American mid-market and SAP-related opportunities. It expected these effects to continue to affect fiscal 2021 results, while noting that the broader impact remained uncertain. Management expected travel and in-person customer events to remain restricted during the first half of 2021.
Key risks include customer renewals and expansion, the reduced retention rate, persistent GAAP losses, competition and pricing pressure, cybersecurity and service availability, dependence on third-party cloud providers and strategic partners, and acquisition integration. The notes’ conversion or fundamental-change provisions could require substantial cash payments or result in dilution. Other financial considerations include $23.5 million of contingent-consideration liabilities, a full valuation allowance on U.S. federal and state net deferred tax assets, and goodwill and intangible assets subject to impairment risk.
The auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective. Rimilia was excluded from the internal-control assessment for 2020 because it was acquired during the year. No pending legal matter was identified as reasonably expected to have a material adverse effect.
Important facts for investors to verify
- Whether retention and customer expansion stabilize after the decline in dollar-based net revenue retention to 106%.
- Whether COVID-related sales delays, concessions and longer payment terms persist, and how they affect renewals, revenue growth and operating cash flow.
- The cash, share and dilution consequences of any convertible-note conversions, including the role and limits of the capped calls.
- Rimilia’s integration progress, ARR performance against earnout thresholds, and final purchase-price allocation.
- The sustainability of cash generation relative to GAAP losses, stock-based compensation and investment needs.
- The impact of the Q3 2020 non-controlling-interest correction when comparing quarterly attributable losses and EPS.