Blackline Safety has 66 per cent upside, Beacon Securities says

Blackline Safety Corp. (Blackline Safety Stock Quote, Chart: TSXV:BLN) reported its fiscal third quarter earnings last week, with revenue that came in better than expected, says analyst Gabriel Leung of Beacon
Securities.

Calgary-based Blackline saw its overall revenue hit $4.7 million, a 103 per cent year-over-year increase, while its EBITDA was negative $1.5 million. CEO and Chairman Cody Slater said the company’s G7 gas detection and analytics tool is now “revolutionizing the safety industry.”

“Expanding customer adoption of Blackline’s connected safety products and services drove strong revenue growth through our third quarter,” said Cody Slater, Blackline Safety CEO and Chairman. “Overall revenue more than doubled with service revenue up 58 per cent and a 260 per cent jump in product revenue.”

Blackline’s revenue beat Leung’s $3.2 million estimate while EBITDA was a hair off of his negative $1.3 million. In a Monday note to clients, the analyst points out that BLN’s recurring services revenues in Q3 were $2.9 million versus his estimate of $2.8 million.

The company’s free cash flow was negative at $2.5 million while it ended the quarter with working capital of $15.5 million.

“We continue to view an acceleration in deal flow and competitive displacements as the key catalyst for this stock,” says Leung. “Recall that we do view the portable gas detection market, as being comprised of ~$5.3 million end users representing ~$3.5 billion in potential annual recurring revenues (based on BLN’s ~$55 monthly lease plan for single-gas detection).”

The analyst is maintaining his “Speculative Buy” rating and $8.25 price target for Blackline, representing a 12-month return on investment of 66 per cent at the time of publication.