Blackline Safety is a Buy, says PI Financial

Look for continued topline growth in the upcoming quarterly release from Blackline Safety (Blackline Safety Stock Quote, Charts, News, Analysts, Financials TSX:BLN), according to analyst Jason Zandberg of PI Financial. Zandberg provided an update to clients on Blackline on Wednesday where he reiterated a “Buy” rating and $6.00 target, saying new contract announcements will be catalysts for the company and stock.

Calgary-based Blackline Safety makes connected safety wearables with predictive analytics for field workers, including personal and area gas monitoring equipment, software and data analytics. The company has business in over 100 countries worldwide and over 200 billion data points and over seven million emergency alerts.

The company is reporting its second quarter 2023 financials on June 14, with Zandberg calling for revenue of $23.5 million and EBITDA of negative $5.4 million, while the consensus call from analysts is $23.3 million and negative $4.8 million, respectively.

Zandberg said he expects BLN to stay on its revenue growth path where the previous quarter saw a 34 per cent year-over-year raise, with Canadian sales up 69 per cent. Zandberg noted that while Blackline’s Products revenue can be lumpy, its Services sales are more indicative of the company’s overall growth momentum.

The analyst said the overall impact of the Q2 release should be positive.

“The last three quarters reported year-over-year Service revenue growth of +30 per cent, +33 per cent, and +39 per cent while product revenue growth was +69 per cent, +0 per cent, and +29 per cent. We expect service revenue will be +35 per cent in Q2 while we expect product revenue growth to be +27 per cent,” Zandberg wrote.

On the operations side, Zandberg noted the new securitization program with CWB Maxium Financial to purchase receivables from their leasing program, which the analyst said should help improve Blackline’s financial liquidity as cash will come upfront and at favourable pricing and terms, thus improving cash flow flexibility.

Blackline also announced last month a four-year lease with energy company Permian Basin with a contract value of $3.2 million.

“This contract will not hit the Q2 financials, but it is indicative of BLN’s continued strength in the Energy sector as well as the growing strength of its leasing program,” Zandberg wrote.

On Blackline’s upcoming catalysts, Zandberg said investors should look out for continuing revenue growth, contract announcements, a ramp in its G6 product sales and the plan for hitting profitability in the fourth quarter 2023.

BLN shares remain down over the past two years, but the stock is up 49 per cent year-to-date. At press time, Zandberg’s $6.00 target represented a 12-month projected return of 121 per cent.