Gabriel Leung of Beacon Securities has slightly budged in his assessment of Blackline Safety (Blackline Safety Stock Quote, Chart, News, Analysts, Financials TSXV:BLN), lowering his target price from $11.50/share to $11/share while maintaining a “Buy” rating in an update to clients on Friday.
Founded in 2004 and headquartered in Calgary, Blackline Safety is a hardware-enabled SaaS company that develops, manufactures and markets worker safety monitoring products and services in Canada, the United States and internationally. The company’s product offerings include the G7C and G7X wearable safety devices, the G7 EXO cloud-connected monitor and the G7 Dock, which is used to calibrate the G7C and G7X devices.
Leung’s updated analysis comes ahead of its fourth quarter financial results call which is scheduled for January 20, with the target drop coming as a result of dilution from recent financing.
“We believe there could be upside to our estimates based on stronger-than-expected hardware sales in the quarter,” Leung said.
Ahead of the official results being released, Leung is modelling revenue of $14.4 million for Blackline in the quarter, paired with a $7.5 million EBITDA loss.
Blackline has been active from a corporate standpoint in the quarter, securing $40 million in additional financing after it issued nearly 5.5 million shares at $7.30/share. The company also expanded its global presence by opening new offices in Houston and Dubai.
The company then secured its biggest contract to date, a two-year, $7.8 million pact with a multi-state US natural gas and electric utility company, which will purchase G7 wearables and accessories for approximately 3,000 front line workers.
The company’s December dealings began with further details on its partnership with Northern Ireland Water, secured through Blackline’s Irish distributor OBW Technologies, in which the water authority will replace its current gas detection units with upwards of 500 Blackline Safety G7c devices to improve protection and communication with at-risk workers.
Blackline then reeled in another big client, announcing a three-year global framework agreement with Royal Dutch Shell in which Blackline secures its status as a preferred supplier of portable gas detection equipment to support the technology safety programs at Shell’s offshore and onshore facilities and installations around the world.
The company then opened 2022 by announcing it brought on additional Surface Mount Technology (SMT) to its in-house production line in anticipation of strong customer demand for the company’s products in the upcoming year, with the aim of doubling its hardware production in the year.
The production upgrade comes with a particular emphasis on high volume production of G6, its entry-level single-gas wearable safety device, which is expected to launch later this year.
Most recently, Blackline announced a $4.3 million deal on Thursday with a US-based energy company with extensive onshore natural gas and unconventional oil operations across the middle and eastern United States, where Blackline will provide its 24/7 live monitoring services, while its new partner has purchased 500 G7x cloud-connected wearable safety devices with an accompanying G7 Bridge.
“This four-year commitment shows not only the growing importance of cloud-connected devices and real-time visibility to protect workers, but also reflects Blackline Safety’s position as a leader in the industry,” said Cody Slater, CEO, Blackline Safety. “We’re uniquely equipped to provide not only the hardware but also data analytics and emergency response to ensure every worker gets the job done and returns home safe every day.”
Leung forecasted Blackline to end its 2021 fiscal year with $49.4 million in revenue, implying a 28.6 per cent year-over-year increase from the reported $38.4 million in 2020, and $74.8 million for 2022, implying a year-over-year increase of 51.4 per cent.
On Blackline’s revenue valuation Leung is projecting the EV/Revenue multiple to drop from the reported 8.2x in 2020 to 6.4x in 2021 before falling to 4.2x in 2022.
Meanwhile, Leung forecasts further EBITDA losses of $24.7 million and $26.4 million for 2021 and 2022, respectively.
“Looking into FY22, we believe that BLN’s investments in sales and marketing and R&D could pay off in the form of continued strength within both its hardware and services revenue lines,” Leung said. “We believe the expected launch of the G6 single gas wearable safety device, which we expect in the July timeframe, could also be a key revenue catalyst for the latter half of the calendar year.”
Blackline’s stock price dropped by 21.4 per cent over the course of the last year, though its trajectory has been relatively consistent outside of a pair of summer spikes, culminating in a 52-week high of $30.80/share on June 23. At press time, Leung’s $11.00 target represented a projected one-year return of 73 per cent.