ATB Capital Markets analyst Martin Toner maintained an “Outperform” rating and $10.00 price target on Blackline Safety (Blackline Safety Stock Quote, Chart, News, Analysts, Financials TSXV:BLN) ahead of its June 11 Q2 earnings, citing continued momentum in revenue and profitability despite near-term macro headwinds.
Toner noted in his June 2 report that Blackline posted positive adjusted EBITDA for the third straight quarter in Q1, beating expectations, and recorded a company-high $70.9-million in annual recurring revenue. While he expects a temporary dip in Q2 adjusted EBITDA due to higher operating expenses, he sees growth resuming in the second half. He believes the company remains well-positioned to gain long-term market share in gas detection.
“The company continues to post strong top-line growth while expanding profitability,” Toner said. “For Q2/25, we expect revenues to grow 17% y/y while expecting a 140bp q/q expansion in gross margin (and a ~280bp y/y improvement), driven by expansion in product gross margins. We also expect Q2 adj. EBITDA to decline q/q to $0.4mm (from $1.5mm) due to a temporary uptick in opex.”
He said he expects adjusted EBITDA to begin growing again sequentially starting in Q3.
“We believe BLN will be a long-term share gainer player in the gas detection market and with plenty of operating leverage inherent in the business model, which we believe will drive EBITDA margin expansion,” he said. “We reduce our Q2 Product revenue by $1.5mm given potential macro headwinds, though all other estimates remain largely unchanged. At ~4x NTM P/S, we think the valuation underappreciates BLN’s growth runway and profitability potential.”
Toner expects Blackline to generate $5.2-million in Adjusted EBITDA on $158.6-million in revenue for fiscal 2025. He projects that those figures will improve to $16.5-million in EBITDA on $193.0-million in revenue in fiscal 2026.
He said ATB’s price target implies a potential return of 31.5%.
“Our price target is based on our discounted cash flow (DCF) model, using a weighted average cost of capital (WACC) of 12.0% and a terminal growth rate of 3% (both unchanged),” he said. “Our DCF model implies a terminal Enterprise Value (EV)/Sales multiple of 2.5x in 2033, and our discounted terminal value of $584.4mm represents 73.5% of our total estimated EV of $794.9mm.”
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About The Author /
Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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