BLN wins price target raise at ATB Capital

Following the company’s second quarter results, ATB Capital analyst Martin Toner has maintained his “Buy” rating on Blackline Safety (Blackline Safety Stock Quote, Chart, News, Analysts, Financials TSX:BLN).

On June 13, BLN posted its second quarter results. “The company reported an Adjusted EBITDA loss of $2.04-million on revenue of $14.8-million, a topline that was up 32%, year-over-year.

“We achieved our highest quarterly revenue ever at $31.6-million, a 31-per-cent increase over the prior year’s second quarter. This result, coupled with our highest gross profit at $18-million and highest gross margin at 57 per cent, demonstrate the strength of our hardware-enabled software as a service business model as the company scales,” CEO Cody Slater said. “Our record ARR [annual recurring revenue] of $56.5-million, up 33 per cent year-over-year, and NDR [net dollar retention] at 130 per cent, up from 118 per cent 12 months ago, signals the value that our loyal customers see in the Blackline platform, our unique hardware and software connected safety solution. Our ARR growth is driven by new customer acquisition and our NDR performance is fuelled by our existing enterprise customers expanding their current contracts, as both see the value in adopting our products and services to protect their people.”

Toner summarized the quarter.

“Before market open on June 13, Blackline Safety reported Q2/24 revenue of $31.6mm (+31.1% y/y), ahead of consensus of $30.0mm and setting a Company quarterly revenue record. Gross margin of 57% also represented a Company record. Adjusted EBITDA loss of $2.0mm slightly missed consensus of a $1.6mm loss, and net loss of $4.3mm also slightly missed consensus of a $3.8mm loss. BLN reported record annual recurring revenue (ARR) of $56.5mm, representing a 33% y/y increase and a 400bp q/q deceleration, while net dollar retention (NDR) of 130% (+1,700bp y/y) matched Q1’s result, a Company record. The Company’s strong top line on Product revenue is a positive, and reflects BLN’s growing brand awareness in the portable gas detection market. The re-acceleration of revenue growth, regardless of margin expansion, should be viewed positively, in our opinion. We believe the Company has significant gross margin re-investment opportunities that can contribute to sustaining gross profit growth at current levels. We believe investors should view the inflection positively and should be willing to be patient on further EBITDA margin improvement.”

In a research update to clients June 14, Toner maintained his “Outperform” rating and raised his price target on the stock from $5.50 to $6.00, implying a return of 43.2% at the time of publication.

Toner thinks BLN will post an Adjusted EBITDA loss of $2.6-million on revenue of $128.8-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $13.9-million on a topline of $165.7-million the following year.