BlackLine, Inc. — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; includes unaudited fourth-quarter results. BlackLine provides cloud software to automate accounting and finance processes. At year-end, it reported 3,825 customers and 328,389 users. Subscription and support made up approximately 94% of FY 2021 revenue.
Financial performance and liquidity
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Revenue | $425.7 million | $351.7 million |
| Subscription and support revenue | $398.6 million | $328.6 million |
| Professional services revenue | $27.1 million | $23.2 million |
| GAAP gross profit / margin | $327.8 million / 77.0% | $282.8 million / 80.4% |
| Operating loss | $38.6 million | $19.9 million |
| Net loss attributable to BlackLine, Inc. | $115.2 million; $1.97 per share | $46.9 million; $0.83 per share |
| Cash from operating activities | $80.1 million | $54.7 million |
| Cash, cash equivalents and marketable securities | $1.20 billion | $542.6 million |
Fourth-quarter 2021 revenue was $115.3 million, gross profit was $87.4 million, and net loss attributable to BlackLine, Inc. was $37.0 million. Non-GAAP net income attributable to BlackLine was $36.5 million for FY 2021, versus $46.1 million in FY 2020; the company’s non-GAAP measure excludes specified items, including stock-based compensation and convertible-note accounting costs.
Revenue increased 21% year over year, driven by customer and user growth and increased sales of strategic products. Dollar-based net revenue retention improved to 109% from 106%; customers grew 11% and users 13%. Gross margin declined 3.4 percentage points as cost of revenue grew 42%, including higher cloud-hosting and personnel costs. Operating expenses rose 21% overall, contributing to a larger operating loss.
Operating cash flow rose to $80.1 million, supported in part by a $51.6 million increase in deferred revenue and substantial non-cash charges. Investing activities used $506.9 million, mainly reflecting net purchases of marketable securities. Financing activities provided $599.2 million, primarily from the 2026 convertible notes issuance.
At December 31, 2021, BlackLine had $1.4 billion aggregate principal amount of convertible notes outstanding: $250 million of 2024 Notes and $1.15 billion of 2026 Notes. Their combined balance-sheet carrying amount, net of unamortized discounts and issuance costs, was approximately $1.11 billion. The 2024 Notes’ conversion condition was met; holders could convert during the quarter ending March 31, 2022. Management said it intended to settle conversions with principal in cash and any excess value in shares. The company stated its existing liquidity and operating cash flow should cover needs and obligations for at least 12 months.
Material changes, outlook and risks
- Acquisitions and partnerships: The 2020 Rimilia acquisition expanded accounts-receivable automation; its remaining contingent consideration had a $14.4 million estimated fair value at year-end. After year-end, BlackLine acquired FourQ on January 26, 2022, for $165 million cash, with up to $75 million additional contingent consideration. In early 2022, it also announced a Google Cloud collaboration. FourQ’s purchase-price allocation was still under evaluation at the filing date.
- Management outlook: The filing provides no specific FY 2022 revenue or earnings guidance. Management expected COVID-related purchasing delays, a reduced pipeline and delays in large deals, including through the SAP partnership, to affect FY 2022 results. It expected travel restrictions and virtual customer events to continue during the first half of 2022.
- Principal risks: The company cited customer retention and expansion, competition, continued losses, hiring and growth execution, longer and less predictable sales cycles, cybersecurity and service availability, reliance on cloud providers and strategic partners, foreign-exchange exposure, and evolving privacy and data-protection rules. Management noted remote work increased cybersecurity exposure. BlackLine also flagged potential dilution or cash demands from convertible notes and acquisition payments.
- Contingencies and controls: The company reported no litigation expected to have a material adverse effect and no material off-balance-sheet arrangements. It had $58.2 million of purchase obligations, including $9.8 million payable within 12 months, and up to $75 million of FourQ contingent consideration. Management and the auditor concluded internal control over financial reporting was effective at year-end.
Most important facts for investors to verify
- Whether revenue growth and 109% net retention persist, particularly through renewal and expansion of existing customer contracts.
- Whether cloud-hosting and staffing costs stabilize, given the decline in GAAP gross margin and the higher operating loss.
- How cash generation and liquidity evolve after the FourQ cash payment, contingent consideration, and any 2024 Notes conversions.
- Whether FourQ integration and expected strategic benefits are achieved, and how its contingent payments and purchase accounting are ultimately measured.
- Whether COVID-related delays, SAP channel performance, cybersecurity risks, and dependence on third-party cloud providers materially affect sales or service delivery.
- How reported GAAP losses compare with non-GAAP results, including the impact of stock-based compensation and convertible-note discount amortization.