New Idea - BlackLine

Came across this company on a screen. BlackLine (BL). It is a $1.9 billion cloud-based accounting software company that IPO’d last October. The top line grew 48% in 2016 and 62% in 2015. Gross margins have improved every year and net margins, though still negative, are improving as well.

The company knows it is in a crowded space but Gartner labeled it a leader and BlackLine is taking market share. TAM is expected to be nearly 20 billion by next year and BlackLine’s revenues are only around 130 million.

BlackLine specializes in “continuous accounting”, a real-time reconciliation process rather than a batch process at the end of a quarter or year. This allows companies to better handle ERP (enterprise resource planning). The company has many big-name clients including Under Armour who recently started using the platform.

Insider ownership is very high and one of the biggest holders, ICONIQ, is backed by Mark Zuckerburg. BlackLine is an interesting company, just found it today, so let me know what you think!

Very best,

Ryan

19 Likes

thanks for mention

it it matters, there was another 7m shares not included in that latest count (anti-dilutive as they report neg GAAP EPS) as listed in Note 9 of the 10Q - so the cap is ~300m higher. I think there was a follow-on offering too - didn’t look closely at that to see if they sold existing shares or floated new ones.

Course, you can argue it doesn’t matter w/this sort of stock…

Looks interesting thanks Ryan.

Just had a chance to have a brief look only but:
1)Cloud-based - great trend to be involved in
and
2) 116% customer retention rate.

I love that. Similarly to VEEVO’s amazing retention rate.

BL
only 3 earnings reports but beat analyst consensus each time. Still losing money .
Selling what they do at less than it costs them.
I do like companies on the verge of profitability but can not tell if that is the case here.

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I looked at this a month or two ago and passed mostly because of the price tag. With a PS ratio at almost exactly the same level as Mulesoft’s (which needless to say is very high), Blackline isn’t growing nearly as fast.

Bear

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Still working to get good growth rankings compared to other stocks (99 is highest you can get)

ChecklistRating
Composite Rating 77 Fail
EPS Rating 44 Fail
RS Rating 93 Pass
Group RS Rating B+ Pass
SMR Rating D Fail
Acc/Dis Rating B Pass

Last 3 Qtrs Avg EPS Growth 33% (poor)

Qtrs of EPS Acceleration 0 (bad)

Atlassian (TEAM) is in is same stock group and looks stronger:
ChecklistRating
Composite Rating 95 Pass
EPS Rating 87 Pass
RS Rating 85 Pass
Group RS Rating B+ Pass
SMR Rating A Pass
Acc/Dis Rating B- Pass