Blackline Flatlined

Wow 15 percent sell off and I have been in the stock one week.
Is this a buying opportunity or have I missed something?
Have not had a chance to hear the call, but earnings looked ok.
Has anyone picked up any thing from the conference call?
Thoughts?
Mike

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https://www.fool.com/investing/2017/08/04/why-blackline-shar…
some possible reasons for the price collapse

Second Quarter 2017 Financial Highlights
• Total GAAP revenues of $42.3 million for the second quarter of 2017, an increase of 46% compared to the second quarter of 2016.

• Non-GAAP net loss of $1.4 million, or $0.03 per share, on 51.8 million weighted average shares outstanding.

third Quarter 2017
• Total GAAP revenue is expected to be in the range of $43.5 million to $44.5 million.
• Non-GAAP net loss is expected to be in the range of $2.5 million to $3.5 million, or $0.05 to $0.07 per share, on 52.7 million weighted average shares outstanding.

no significant revenue increase , non GAAP loss increase expected this quarter

from GlassDoor
BlackLine is the leader in Enhanced Finance Controls and Automation software and the only provider today offering a completely unified cloud platform - built from a single code base - that supports the entire close-to-disclose process, as well as a host of other key accounting and financial processes. BlackLine’s Finance Controls and Automation Platform increases business efficiency and visibility, while ensuring the highest degree of balance sheet integrity.
is that a broken process, one that needs fixing? Got me. 92% approve of the CEO a seemingly high number

This quarter expected results seem to be in conflict with the CEO comments about future of the company.
• Total GAAP revenue is expected to be in the range of $170.0 million to $173.0 million.
• Non-GAAP net loss is expected to be in the range of $14.0 million to $16.0 million, or $0.27 to $0.30 per share, on 52.8 million weighted average shares outstanding.

http://investors.blackline.com/phoenix.zhtml?c=254441&p=…

that does not seem exciting to me. revenue
$42.3 million last quarter X 4 =$ 169 million possibly indicating little growth in this and next quarter

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YoY revenue for 2017 guidance will come in at 40% increase over 2016.


	Q1	Q2	Q3	Q4		% change
						
Revenue (millions)						
2013					38	
2014					57	50%
2015	18	19	22	24	83	46%
2016	27	29	32.2	35.3	123.5	49%
2017	38.6	42.3			173	40%

Total customers increased to almost 2000.

Negatives: 1)No deals closed for their Intercompany Hub (ICH) this quarter. The CEO views this product as integral to their future. But they’ve essentially created a product that noone has used before. As a result, the sales cycle is unfortunately long. She mentioned that the sales pipeline remains strong.

  1. Customer service. As they’ve grown and hired new sales people, the CEO has said customer service has lagged. She’s refocused the company to ensure everyone knows that customer service is the #1 thing they should focus on, and is not lip-service after a sales been made. I like this. Word of mouth and reputation is essential if they’re going to continue growing.

The big 4 accounting firms:
Pricewaterhouse Coopers (PwC), Ernst & Young (EY), Deloitte, and KPMG.
They bring in business from all 4, which is great. Only a formal ‘alliance’ has been signed with Deloitte. The deal with Deloitte is to promote the Intercompany Hub. CEO expects this to materialise in driving new sales sometime next year. They are big deals and take time!

I took the opportunity to buy more at 30.5 just before close yesterday. Not an exciting quarter results but not disastrous by all means. Accelerating growth was just not there and they maintained their guidance. This may be low-balling. CEO said it was prudent to maintain guidance rather than raise. I think because of the long sales cycles.

Chris’ observations comparing companies like BL, New Relic vs shop/wix…etc is spot on. With these long sales cycles you will not get the massive growth we’ve found with SHOP. I’m willing to wait and hold on this one though because I believe it will be less volatile as SHOP. The big customers they have are sticky and are more likely to survive a downturn compared with many of SHOP’s customers. As companies switch to the crowd and the big accounting firms start backing cloud solutions, we’ll see whether BL increasing recurring revenue can bring in profits.

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BlackLine is the leader in Enhanced Finance Controls and Automation software and the only provider today offering a completely unified cloud platform - built from a single code base - that supports the entire close-to-disclose process, as well as a host of other key accounting and financial processes.

Don’t underestimate how difficult it is to turn a central business process like finance inside out. It’s not the code, it’s all the bureaucracy that has to be redesigned, people have to be sold on something that will most likely result in a bunch of layoffs or at a minimum job dislocations. Then the training on new processes and information flows, etc, etc. The bigger the customer, the more they need it, but the bigger the bureaucracy and the harder it is to implement. And in addition, this s/w is supposed to close the books, so it’s almost impossible to incrementally deploy, there are few options short of “big bang.” And timing becomes a crucial issue as well, probably most companies would want to implement after closing fourth quarter which means for 4 - 8 weeks the company will be closing the books with the former process while trying to turn all new processes for first quarter of the coming year. Buying this s/w is an enormous, expensive risky deal.

OTH, once implemented, there’s a big ongoing benefit with respect to accounting costs and improved business visibility.

I’m sure a lot of CFOs desire what BL has to offer, but pause when looking at the risk of a failed implementation or even the cost of success . . .

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There’s no doubt that the cost of an accounting system conversion will be high, both in terms of dollar costs and overall manpower and hassle. However, I don’t believe that companies are going to have the option to go to real time accounting. I think investors are going to come to require it. Taking a step back, in a digital age, it really doesn’t make a great deal of sense that it takes 4 months to issue an audit report (and I say this as an audit partner of a national accounting firm.)

One of the topics that the AICPA is currently planning for is the concept of continuous auditing, recognizing that investors are going to want their financial statements sooner and sooner in this digital era. Continuous accounting dovetails with this.

In my mind, I don’t believe the question is whether or not the accounting world is going to continuous accounting. I believe that is a foregone conclusion. The question is who wins and/or how many slices of the pie their will be.

I have no idea how Blackline will fair against its competition, but I like the concept.

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(and I say this as an audit partner of a national accounting firm.)

Thanks so much Stoney Terp for that terrifically valuable insiders view!

Saul

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One of the topics that the AICPA is currently planning for is the concept of continuous auditing, recognizing that investors are going to want their financial statements sooner and sooner in this digital era. Continuous accounting dovetails with this.

I’ve been out of public auditing for a very long time. So I could certainly be well out of date. My hazy recollection is that the Big 8 accounting firms (you now have an idea of how long I’ve been away from auditing!) had some staff at their clients performing bits and pieces of audit work on a monthly or quarterly basis. They’d test transactions and internal controls during the year so that when the year end rolled around those labor intensive parts of the audit were mostly done. That would basically take care of the income statement accounts. All that would need to be worked on after year end would be the balance sheet.

Is that the general idea of continuous auditing today?

On the continuous accounting side, that’s been around for decades for very small businesses. QuickBooks is a continuous accounting approach to bookkeeping. There are no monthly closings or periodic summaries that need to be dealt with. QuickBooks itself has huge drawbacks and holes in internal control systems, which render it completely unsuitable to a public company. But it does have the basic framework for a continuous accounting system. I am surprised to hear that we are just getting someone writing software appropriate for a public company that uses continuous accounting.

–Peter

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I have posted some on this before, but let me expand a bit. In my own ERP system, whose origin dates back to the 80s, everything posted in real time except one thing and that was the GL implications of transactions in AR, AP, and the like. Those posted to a journal and were only posted to the GL when the journal was posted on a company-based cycle. Small companies would only post once a month, but larger ones would post as often as once a day. The latter seem as close to real time as most people would like. I did consider posting directly to the GL and skipping the journal, a change that would only have taken me a few days to implement, but people seemed to like having the report of the journal posting. For a customer who posted every day, we used a reporting product that printed the report to disk and made it viewable in a browser, to avoid a huge mound of paper reports, so that the journal for any given day was readily available, but didn’t need filing.

So, I am unimpressed by the real time posting …

Oh, and as for the auditors, the controller in my largest customer and I had a great working relationship such that every time the auditors showed up and asked for some new complex set of data, he and I would promptly figure out a new report that provided that data at the push of a button, so the next time they visited they had to figure out some new demand to justify their time.

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