Is Blackline Safety, with 33 straight quarters of revenue growth, still undervalued?

Blackline Safety (Blackline Safety Stock Quote, Chart, News, Analysts, Financials TSXV:BLN) posted its 33rd straight quarter of year-over-year revenue growth, reporting $35.9-million in Q2 fiscal 2025 revenue, below expectations, but beat on gross margin and Adjusted EBITDA, which came in at $1.0-million.

In a June 11 note, ATB Capital Markets analyst Martin Toner maintained his $10 target and “Outperform” rating, highlighting strong service revenue, record annual recurring revenue of $75.2-million, and continued margin expansion.

Before markets opened on June 10, Blackline reported Q2 2025 revenue of $35.9-million, up 14% year over year but below the $37.9-million consensus. Gross margin rose to 62.4%, beating expectations of 58.6% and improving from 57.1% a year earlier, driven by stronger service revenue. Adjusted EBITDA came in at $1.0-million, ahead of the $0.1-million consensus, marking a fourth straight quarter in the black.

Blackline also reported record annual recurring revenue of $75.2-million, up 33% year over year, with net dollar retention rising to 128%, a 100-basis-point gain.

“The company continues to grow profitability at a faster-than-expected pace,” Toner said. “Notably, management emphasized that the company remains ‘well-positioned’ in the face of tariffs (given most products are exempt). At the same time, BLN cited ‘potential’ negative impacts on revenue and earnings from slowing global investment and additional costs on the business.”

A $3.6-million quarter-over-quarter drop in U.S. revenue to $15.8-million likely drove the product revenue miss. While product sales came in about $3-million below expectations, a $1-million beat on service revenue led to a slight gross profit beat. However, since product sales drive future service revenue, the shortfall could affect growth in later quarters.

“We believe investors should look at any weakness in the shares as an opportunity to accumulate a high-quality growth story at a reasonable and discounted price,” Toner said.

Blackline reported Q2 service revenue of $21.9-million, up 31% year over year, and product revenue of $14.1-million, down 5% as growth slowed from 56% last quarter due to geopolitical delays. Regionally, revenue rose 23% in Canada, 1% in the U.S., and 14% in Europe compared to Q1 2024. The company said service growth was driven by a 32% increase in software revenue to $19.2-million, while rental revenue rose 20% to $2.7-million.

Gross profit was $22.4-million, up from $18.0-million last year, with an overall gross margin of 62%, a 530-basis-point improvement. Product gross margin rose about 500 bps to 39%, and service gross margin improved by roughly 200 bps to 79%.

As of April 30, 2025, Blackline had $52.6-million in cash and short-term investments. Including a $17.5-million senior secured credit facility, total liquidity stood at $70.1-million.

In a press release on June 11 discussing its second quarter, Blackline said most of its products are compliant with the United States–Mexico–Canada Agreement and exempt from tariffs currently in place on goods shipped to the United States from Canada.

“As a result, Blackline Safety remains well-positioned to expand its business with its comprehensive suite of connected safety wearables and area monitors,” the company said. “The Company’s technology supports diverse industries worldwide, delivering real-time safety insights, emergency response management, and improved productivity.”

Blackline said tariff uncertainty could slow global investment and add costs to the business, potentially impacting revenue and earnings.

“Blackline remains committed to leveraging its innovative product portfolio to meet the needs of customers worldwide. With strategic investments in manufacturing, sales, and marketing, we will continue to drive strong growth, particularly in our high-margin service revenue, as we help transform the industrial workplace into a connected one.”

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