Blackline Announces Third Quarter Financial Results

Irene L. Joffman

LOS ANGELES, Oct. 29, 2020 (GLOBE NEWSWIRE) — BlackLine, Inc. (Nasdaq: BL), today announced financial results for the third quarter ended September 30, 2020.

Therese Tucker, Founder and CEO, commented, “BlackLine delivered strong third quarter results as the demand environment continued to steadily improve. The momentum we are experiencing is validation that finance transformation is mission critical and climbing to the top of the CFO’s priority list.  With our recent acquisition of Rimilia, a leader in accounts receivable automation solutions, BlackLine has expanded its core customer capabilities and total addressable market. We believe there is a very large, untapped opportunity to help companies struggling with manual and unsustainable accounting processes. We remain confident these market dynamics will continue to favor our value proposition.”

Third Quarter 2020 Financial Highlights

  • Total GAAP revenues of $90.5 million for the third quarter of 2020, an increase of 21% compared to the third quarter of 2019. 

  • GAAP net loss attributable to BlackLine of $8.6 million, or $0.15 per share, on 57.1 million weighted average shares outstanding, which compares to a GAAP net loss attributable to BlackLine of $9.2 million in the third quarter of 2019.

  • Non-GAAP net income attributable to BlackLine of $15.1 million, or $0.25 per share, on 61.2 million diluted weighted average shares outstanding. This compares with non-GAAP net income attributable to BlackLine of $7.1 million in the third quarter of 2019.

  • Operating cash flow of $21.8 million, compared to $9.9 million in the third quarter of 2019.

  • Free cash flow of $18.5 million, compared to $7.1 million in the third quarter of 2019.

Key Metrics and Recent Business Highlights

  • Added 88 net new customers in the third quarter for a total of 3,226 customers at September 30, 2020. 

  • Expanded the company’s user base to 282,579 at September 30, 2020.

  • Achieved a dollar-based net revenue retention rate of 107% at September 30, 2020.

  • Acquired Rimilia to add AI-powered accounts receivable automation to our modern accounting platform.

  • Named a ‘Best Place to Work in Los Angeles’ by the Los Angeles Business Journal.

  • Recognized as a 2020 Tech Cares Award Winner from TrustRadius for giving back to the finance & accounting community during the COVID-19 pandemic.

  • Announced that customer Red Wing Shoe Company, Inc. was named a winner in the 2020 Nucleus Research ROI Award for achieving nearly 400% ROI from BlackLine deployment. 

  • Added Mel Zeledon, cloud enterprise software veteran, as senior vice president of channels and alliances.

The financial results included in this press release are preliminary and pending final review. Financial results will not be final until BlackLine files its quarterly report on Form 10-Q for the period. Information about the BlackLine’s use of non-GAAP financial measures is provided below under “Use of Non-GAAP Financial Measures.”

Financial Outlook

Fourth Quarter 2020

  • Total GAAP revenue is expected to be in the range of $91 million to $92 million.

  • Non-GAAP net income attributable to BlackLine is expected to be in the range of $4 million to $5 million, or $0.06 to $0.08 per share on 61.6 million diluted weighted average shares outstanding.

Full Year 2020

  • Total GAAP revenue is expected to be in the range of $347.4 million to $348.4 million.

  • Non-GAAP net income attributable to BlackLine is expected to be in the range of $37 million to $38 million, or $0.61 to $0.63 per share on 60.7 million diluted weighted average shares outstanding.

Guidance for non-GAAP net income attributable to BlackLine and net income attributable to BlackLine per share does not include the impact of the provision for (benefit from) income taxes that we were able to recognize as a result of the deferred tax liabilities associated with the intangible assets established upon the acquisition in the fourth quarter of 2016 of Runbook B.V. (the “Runbook Acquisition”), amortization of acquired intangible assets primarily resulting from the acquisition of the company by its principal stockholders in 2013 (the “2013 Acquisition”) and the Runbook Acquisition, stock-based compensation, the amortization of debt discount and issuance costs, the change in fair value of contingent consideration, acquisition-related costs, legal settlement gains, costs incurred with our shelf offering, and the adjustment to the value of the redeemable non-controlling interest to the redemption amount.  Reconciliations of non-GAAP net income attributable to BlackLine and net income attributable to BlackLine per share guidance to the most directly comparable U.S. GAAP measures, or net income (loss) attributable to BlackLine and net income (loss) attributable to BlackLine per share, are not available on a forward-looking basis without unreasonable efforts due to the unpredictability and complexity of the charges excluded from non-GAAP net income attributable to BlackLine and net income attributable to BlackLine per share. The company expects the variability of the above changes could have a significant, and potentially unpredictable, impact on its future GAAP net income (loss) attributable to BlackLine and net income (loss) attributable to BlackLine per share.

Quarterly Conference Call

BlackLine, Inc. will hold a conference call to discuss its third quarter results at 2:00 p.m. Pacific time on Thursday, October 29, 2020. A live audio webcast will be accessible on BlackLine’s investor relations website at https://investors.blackline.com. The call can also be accessed domestically at (844) 229-7595 and internationally at (314) 888-4260, passcode 1478236. A telephonic replay will be available through Thursday, November 5, 2020 at (855) 859-2056 or (404) 537-3406, passcode 1478236. A replay of the webcast will be available at https://investors.blackline.com/ for 12 months. BlackLine has used, and intends to continue to use, its Investor Relations website as a means of disclosing material non-public information and for complying with its disclosure obligations under Regulation FD.

About BlackLine
Companies come to BlackLine, Inc. (Nasdaq: BL) because their traditional manual accounting processes are not sustainable. BlackLine’s cloud-based solutions and market-leading customer service help companies move to modern accounting by unifying their data and processes, automating repetitive work, and driving accountability through visibility. BlackLine provides solutions to manage and automate financial close, accounts receivable and intercompany accounting processes, helping large enterprises and midsize companies across all industries do accounting work better, faster, and with more control.

More than 3,200 customers trust BlackLine to help them close faster with complete and accurate results. The company is the pioneer and recognized Leader in Gartner’s 2019 Magic Quadrant for Cloud Financial Close Solutions. Based in Los Angeles, BlackLine also has regional headquarters in London, Singapore, and Sydney. For more information, please visit blackline.com.

Forward-looking Statements

This release and the conference call referenced above contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “would,” “continue,” “ongoing” or the negative of these terms or other comparable terminology.  Forward-looking statements in this release and quarterly conference call include, but are not limited to, statements regarding BlackLine’s future financial and operational performance, including, without limitation, GAAP and non-GAAP guidance for the fourth quarter and full year of 2020, our expectations for our business, including the demand environment, BlackLine’s addressable market, market position and pipeline, the impact of the COVID-19 pandemic on our business, our market and our industry, and our expectations regarding our acquisition of Rimilia, including the market opportunity and Rimilia’s contribution to our business and financial results. 

Any forward-looking statements contained in this press release or the quarterly conference call are based upon BlackLine’s historical performance and its current plans, estimates and expectations and are not a representation that such plans, estimates, or expectations will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith beliefs and assumptions as of that time with respect to future events, and are subject to risks and uncertainties.  If any of these risks or uncertainties materialize or if any assumptions prove incorrect, actual performance or results may differ materially from those expressed in or suggested by the forward looking statements. These risks and uncertainties include, but are not limited to risks related to the company’s ability to attract new customers and expand sales to existing customers; the extent to which customers renew their subscription agreements or increase the number of users; the company’s ability to manage growth and scale effectively, including additional headcount and entry into new geographies; the company’s ability to provide successful enhancements, new features and modifications to its software solutions; the company’s ability to develop new products and software solutions and the success of any new product and service introductions; the success of the company’s strategic relationships with technology vendors and business process outsourcers, channel partners and alliance partners; any breaches of the company’s security measures; a disruption in the company’s hosting network infrastructure; costs and reputational harm that could result from defects in the company’s solution; the loss of any key employees; the impact of the COVID-19 pandemic and related measures taken by governments and private industry; continued strong demand for the company’s software in the United States, Europe, Asia Pacific and Latin America; the company’s ability to compete as the financial close management provider for organizations of all sizes; the timing and success of solutions offered by competitors; changes in the proportion of the company’s customer base that is comprised of enterprise or mid-sized organizations; the company’s ability to expand its enterprise and mid-market sales teams and effectively manage its sales forces and their performance and productivity; fluctuations in our financial results due to long and increasingly variable sales cycles, failure to protect the company’s intellectual property; the company’s ability to integrate acquired businesses and technologies successfully or achieve the expected benefits of such transactions; unpredictable and uncertain macro and regional economic conditions; seasonality; changes in current tax or accounting rules; cyber attacks and the risk that the company’s security measures may not be sufficient to secure its customer or confidential data adequately; acts of terrorism or other vandalism, war or natural disasters; the impact of any determination of deficiencies or weaknesses in our internal controls and processes; and other risks and uncertainties described in the other filings we make with the Securities and Exchange Commission from time to time, including the risks described under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission on February 27, 2020 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. Forward-looking statements should not be read as a guarantee of future performance or results, and you should not place undue reliance on such statements.  Except as required by law, we do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.  All of the information in this press release is subject to completion of our quarterly review process.

Use of Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles, or GAAP, BlackLine has provided in this release and the quarterly conference call held on October 29, 2020 certain financial measures that have not been prepared in accordance with GAAP defined as “non-GAAP financial measures,” which include (i) non-GAAP gross profit and non-GAAP gross margin, (ii) non-GAAP operating expenses, (iii) non-GAAP income (loss) from operations, (iv) non-GAAP net income (loss) and non-GAAP net income (loss) per share, (v) and free cash flow.

BlackLine’s management uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to the corresponding GAAP measures, in evaluating BlackLine’s ongoing operational performance and trends and in comparing its financial measures with other companies in the same industry, many of which present similar non-GAAP financial measures to help investors understand the operational performance of their businesses.  However, it is important to note that the particular items BlackLine excludes from, or includes in, its non-GAAP financial measures may differ from the items excluded from, or included in, similar non-GAAP financial measures used by other companies in the same industry. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. A reconciliation of the non-GAAP financial measures to such GAAP measures has been provided in the tables included as part of this press release.

Non-GAAP Gross Profit and Non-GAAP Gross Margin.  Non-GAAP gross profit is defined as GAAP revenues less GAAP cost of revenue adjusted for the amortization of acquired developed technology resulting from the 2013 Acquisition and the Runbook Acquisition and stock-based compensation. Non-GAAP gross margin is defined as non-GAAP gross profit divided by GAAP revenues. BlackLine believes that presenting non-GAAP gross margin is useful to investors as it eliminates the impact of certain non-cash expenses and allows a direct comparison of gross margin between periods.

Non-GAAP Operating Expenses.  Non-GAAP operating expenses include (a) non-GAAP sales and marketing expense, (b) non-GAAP research and development expense and (c) non-GAAP general and administrative expense.  Non-GAAP sales and marketing expense is defined as GAAP sales and marketing expense adjusted for the amortization of acquired intangibles primarily resulting from the 2013 Acquisition and the Runbook Acquisition and stock-based compensation.  Non-GAAP research and development expense is defined as GAAP research and development expense adjusted for stock-based compensation.  Non-GAAP general and administrative expense is defined as GAAP general and administrative expense as adjusted for the amortization of acquired intangibles resulting from the 2013 Acquisition and Runbook Acquisition, stock-based compensation, the change in fair value of contingent consideration, acquisition-related costs, legal settlement gains, and costs incurred in connection with our shelf offering in the first quarter of 2019.  BlackLine believes that presenting each of the non-GAAP operating expenses is useful to investors as it eliminates the impact of certain cash and non-cash expenses and allows a direct comparison of operating expenses between periods.

Non-GAAP Income (Loss) from Operations. Non-GAAP income (loss) from operations is defined as GAAP income (loss) from operations adjusted for the amortization of acquired intangible assets primarily resulting from the 2013 Acquisition and the Runbook Acquisition, stock-based compensation, the change in fair value of contingent consideration, acquisition-related costs, legal settlement gains, and costs incurred in connection with our shelf offering in the first quarter of 2019. The company believes that presenting non-GAAP income (loss) from operations is useful to investors as it eliminates the impact of items that have been impacted by the 2013 Acquisition and the Runbook Acquisition and other related costs in order to allow a direct comparison of loss from operations between all periods presented.

Non-GAAP Net Income (Loss) attributable to BlackLine. Non-GAAP net income (loss) is defined as GAAP net income (loss) adjusted for the impact of the provision for (benefit from) income taxes that we were able to recognize as a result of the deferred tax liabilities associated with the intangible assets established upon the 2013 Acquisition and the Runbook Acquisition, amortization of acquired intangible assets resulting primarily from the 2013 Acquisition and the Runbook Acquisition, stock-based compensation, the amortization of debt discount and issuance costs from our convertibles notes, the change in the fair value of contingent consideration, acquisition-related costs, legal settlement gains, costs incurred in connection with our shelf offering, and the adjustment to the value of the redeemable non-controlling interest to the redemption amount.  Non-GAAP diluted net income (loss) per common share includes the adjustment for shares resulting from the elimination of stock-based compensation.  The company believes that presenting non-GAAP net income (loss) is useful to investors as it eliminates the impact of items that have been impacted by the 2013 Acquisition and the Runbook Acquisition and other related costs in order to allow a direct comparison of net loss between all periods presented.

Free Cash Flow. Free cash flow is defined as cash flows provided by operating activities less cash flows used to purchase property and equipment, capitalized software development, and intangible assets. BlackLine believes that presenting free cash flow is useful to investors as it provides a measure of the company’s liquidity used by management to evaluate the amount of cash generated by the company’s business including the impact of purchases of property and equipment and cost of capitalized software development.

Use of Operating Metrics

BlackLine has provided in this release and the quarterly conference call held on October 29, 2020 certain operating metrics, including (i) number of customers, (ii) number of users and (iii) dollar-based net revenue retention rate, which BlackLine uses to evaluate its business, measure its performance, identify trends affecting its business, formulate financial projections and make strategic decisions.  These operating metrics exclude the impact of Runbook licensed customers and users as these customers did not have an active subscription agreement with BlackLine as of September 30, 2020.

Dollar-based Net Revenue Retention Rate.  Dollar-based net revenue retention rate is calculated as the implied monthly subscription and support revenue at the end of a period for the base set of customers from which the company generated subscription revenue in the year prior to the calculation, divided by the implied monthly subscription and support revenue one year prior to the date of calculation for that same customer base. This calculation does not reflect implied monthly subscription and support revenue for new customers added during the one-year period but does include the effect of customers who terminated during the period.  Implied monthly subscription and support revenue is defined as the total amount of minimum subscription and support revenue contractually committed to, under each of BlackLine’s customer agreements over the entire term of the agreement, divided by the number of months in the term of the agreement.  BlackLine believes that dollar-based net revenue retention rate is an important metric to measure the long-term value of customer agreements and the company’s ability to retain and grow its relationships with existing customers over time. 

Number of Customers. A customer is defined as an entity with an active subscription agreement as of the measurement date. In situations where an organization has multiple subsidiaries or divisions, each entity that is invoiced as a separate entity is treated as a separate customer. In an instance where an existing customer requests its invoice be divided for the sole purpose of restructuring its internal billing arrangement without any incremental increase in revenue, such customer continues to be treated as a single customer.  BlackLine believes that its ability to expand its customer base is an indicator of the company’s market penetration and the growth of its business.

Number of Users. Historically, BlackLine’s products were priced based on the number of users of its platform. Over time, the company has begun to sell an increasing number of non-user based products with fixed or transaction-based pricing.  For this reason, we believe the growth in the number of total users is less correlated to the growth of the business overall.

Media Contact:
BlackLine
Kimberly Uberti
[email protected]

Investor Relations Contact:
BlackLine
Alexandra Geller
[email protected]

BlackLine, Inc.

Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

 

 

September 30, 2020

 

December 31, 2019

ASSETS

 

 

 

 

Cash and cash equivalents

 

$

408,070

 

 

$

120,232

 

Marketable securities

 

 

117,433

 

 

 

487,515

 

Accounts receivable, net of allowance

 

 

91,137

 

 

 

102,829

 

Prepaid expenses and other current assets

 

 

137,474

 

 

 

12,830

 

Total current assets

 

 

754,114

 

 

 

723,406

 

Capitalized software development costs, net

 

 

13,925

 

 

 

10,032

 

Property and equipment, net

 

 

10,787

 

 

 

13,024

 

Intangible assets, net

 

 

15,066

 

 

 

17,520

 

Goodwill

 

 

185,138

 

 

 

185,138

 

Operating lease right-of-use assets

 

 

9,274

 

 

 

12,549

 

Other assets

 

 

58,436

 

 

 

52,883

 

Total assets

 

$

1,046,740

 

 

$

1,014,552

 

 

 

 

 

 

LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, AND STOCKHOLDERS’ EQUITY

 

 

Accounts payable

 

$

2,088

 

 

$

7,401

 

Accrued expenses and other current liabilities

 

 

29,403

 

 

 

30,098

 

Deferred revenue

 

 

165,681

 

 

 

162,552

 

Short-term portion of operating lease liabilities

 

 

4,289

 

 

 

4,938

 

Short-term portion of contingent consideration

 

 

2,008

 

 

 

2,008

 

Total current liabilities

 

 

203,469

 

 

 

206,997

 

Operating lease liabilities

 

 

7,828

 

 

 

10,606

 

Convertible senior notes, net

 

 

401,217

 

 

 

384,343

 

Contingent consideration

 

 

4,206

 

 

 

4,354

 

Deferred tax liabilities

 

 

4,750

 

 

 

4,571

 

Deferred revenue, noncurrent

 

 

72

 

 

 

163

 

Total liabilities

 

 

621,542

 

 

 

611,034

 

 

 

 

 

 

Redeemable non-controlling interest (a)

 

 

8,128

 

 

 

4,905

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

Common stock

 

 

573

 

 

 

559

 

Additional paid-in capital

 

 

605,078

 

 

 

561,275

 

Accumulated other comprehensive income

 

 

568

 

 

 

377

 

Accumulated deficit

 

 

(189,149

)

 

 

(163,598

)

Total stockholders’ equity

 

 

417,070

 

 

 

398,613

 

 

 

 

 

 

Total liabilities, redeemable non-controlling interest, and stockholders’ equity

 

$

1,046,740

 

 

$

1,014,552

 

 

 

 

 

 

(a) During the third quarter of 2020, the Company identified prior period errors in the calculation of its adjustment to redeemable non-controlling interest of $0.9 million at December 31, 2019. The Company corrected the $1.5 million cumulative prior period error at September 30, 2020, which reduced the carrying value of the redeemable non-controlling interest.

 

BlackLine, Inc.

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

Revenues

 

 

 

 

 

 

 

 

Subscription and support

 

$

84,247

 

 

$

70,311

 

 

$

239,149

 

 

$

197,651

 

Professional services

 

 

6,282

 

 

 

4,614

 

 

 

17,250

 

 

 

11,067

 

Total revenues

 

 

90,529

 

 

 

74,925

 

 

 

256,399

 

 

 

208,718

 

Cost of revenues

 

 

 

 

 

 

 

 

Subscription and support

 

 

11,700

 

 

 

11,689

 

 

 

34,708

 

 

 

34,109

 

Professional services

 

 

5,282

 

 

 

3,603

 

 

 

15,082

 

 

 

9,745

 

Total cost of revenues

 

 

16,982

 

 

 

15,292

 

 

 

49,790

 

 

 

43,854

 

Gross profit

 

 

73,547

 

 

 

59,633

 

 

 

206,609

 

 

 

164,864

 

Operating expenses

 

 

 

 

 

 

 

 

Sales and marketing

 

 

42,588

 

 

 

41,848

 

 

 

129,199

 

 

 

114,888

 

Research and development

 

 

14,829

 

 

 

11,558

 

 

 

38,423

 

 

 

32,694

 

General and administrative

 

 

18,147

 

 

 

14,088

 

 

 

51,667

 

 

 

40,444

 

Total operating expenses

 

 

75,564

 

 

 

67,494

 

 

 

219,289

 

 

 

188,026

 

Loss from operations

 

 

(2,017

)

 

 

(7,861

)

 

 

(12,680

)

 

 

(23,162

)

Other income (expense)

 

 

 

 

 

 

 

 

Interest income

 

 

648

 

 

 

2,161

 

 

 

4,142

 

 

 

3,590

 

Interest expense

 

 

(5,914

)

 

 

(3,006

)

 

 

(17,340

)

 

 

(3,006

)

Other income (expense), net

 

 

(5,266

)

 

 

(845

)

 

 

(13,198

)

 

 

584

 

Loss before income taxes

 

 

(7,283

)

 

 

(8,706

)

 

 

(25,878

)

 

 

(22,578

)

Provision for income taxes (a)

 

 

438

 

 

 

170

 

 

 

754

 

 

 

856

 

Net loss

 

 

(7,721

)

 

 

(8,876

)

 

 

(26,632

)

 

 

(23,434

)

Net loss attributable to non-controlling interest

 

 

(425

)

 

 

(509

)

 

 

(1,081

)

 

 

(978

)

Adjustment attributable to non-controlling interest (b)

 

 

1,319

 

 

 

839

 

 

 

4,239

 

 

 

893

 

Net loss attributable to BlackLine, Inc. (b)

 

$

(8,615

)

 

$

(9,206

)

 

$

(29,790

)

 

$

(23,349

)

 

 

 

 

 

 

 

 

 

Basic net loss attributable to BlackLine, Inc. per share:

 

 

 

 

 

 

 

 

Basic net loss attributable to BlackLine, Inc. per share (b)

 

$

(0.15

)

 

$

(0.17

)

 

$

(0.53

)

 

$

(0.42

)

Shares used to calculate basic net loss per share

 

 

57,063

 

 

 

55,480

 

 

 

56,619

 

 

 

55,164

 

Diluted net loss attributable to BlackLine, Inc. per share:

 

 

 

 

 

 

 

 

Diluted net loss attributable to BlackLine, Inc. per share (b)

 

$

(0.15

)

 

$

(0.17

)

 

$

(0.53

)

 

$

(0.42

)

Shares used to calculate diluted net loss per share

 

 

57,063

 

 

 

55,480

 

 

 

56,619

 

 

 

55,164

 

 

 

 

 

 

 

 

 

 

(a) During the fourth quarter of 2019 the Company identified prior period errors related to its provision for income taxes that were calculated in connection with the adoption of ASC 606, Revenue from Contracts and Customers. Although management has concluded that such errors were immaterial to the previously issued financial statements, the Company is revising its 2019 unaudited quarterly financial statements. The quarter ended September 30, 2019 condensed consolidated financial information included herein has also been revised to reflect a decrease in tax expense and a corresponding increase in net income of $36,000. The nine months ended September 30, 2019 condensed consolidated financial information included herein has also been revised to reflect an increase in tax expense and a corresponding decrease in net income of $0.3 million.

 

(b) During the third quarter of 2020, the Company identified that commencing in 2019 it had incorrectly calculated its quarterly adjustment to the carrying value of its redeemable non-controlling interest with a corresponding impact to net loss attributable to BlackLine, Inc., adjustment attributable to non-controlling interest, and basic and diluted net loss per share attributable to BlackLine, Inc.  Such errors resulted in the $0.4 million ($0.01 per diluted share) overstatement of net loss attributable to BlackLine, Inc. for the quarter and nine months ended September 30, 2019, respectively. The Company corrected the cumulative impact of such prior period errors as an out-of-period adjustment in the quarter and nine months ended September 30, 2020, which resulted in the understatement of net loss attributable to BlackLine, Inc. of $1.5 million ($0.03 per diluted share) and $0.9 million ($0.02 per diluted share) in the quarter and nine months ended September 30, 2020, respectively.

 

BlackLine, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss attributable to BlackLine, Inc.

 

$

(8,615

)

 

$

(9,206

)

 

$

(29,790

)

 

$

(23,349

)

Net loss and adjustment attributable to redeemable non-controlling interest

 

 

894

 

 

 

330

 

 

 

3,158

 

 

 

(85

)

Net loss

 

 

(7,721

)

 

 

(8,876

)

 

 

(26,632

)

 

 

(23,434

)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

5,178

 

 

 

5,327

 

 

 

14,615

 

 

 

16,803

 

Change in fair value of contingent consideration

 

 

(72

)

 

 

129

 

 

 

(148

)

 

 

313

 

Amortization of debt discount and issuance costs

 

 

5,758

 

 

 

2,923

 

 

 

16,874

 

 

 

2,923

 

Stock-based compensation

 

 

13,326

 

 

 

10,141

 

 

 

35,398

 

 

 

24,605

 

Noncash lease expense

 

 

1,186

 

 

 

1,217

 

 

 

3,557

 

 

 

3,677

 

(Accretion) amortization of purchase discounts/premiums on marketable securities, net

 

 

301

 

 

 

(100

)

 

 

(333

)

 

 

(873

)

Net foreign currency (gains) losses

 

 

(237

)

 

 

137

 

 

 

(275

)

 

 

138

 

Deferred income taxes

 

 

17

 

 

 

154

 

 

 

179

 

 

 

737

 

Provision for doubtful accounts receivable

 

 

588

 

 

 

84

 

 

 

728

 

 

 

157

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

6,797

 

 

 

(3,184

)

 

 

11,202

 

 

 

(7,455

)

Prepaid expenses and other current assets

 

 

(744

)

 

 

528

 

 

 

(3,260

)

 

 

3,129

 

Other assets

 

 

(2,136

)

 

 

(2,011

)

 

 

(5,542

)

 

 

(9,647

)

Accounts payable

 

 

(3,891

)

 

 

(525

)

 

 

(4,569

)

 

 

(1,591

)

Accrued expenses and other current liabilities

 

 

6,525

 

 

 

5,361

 

 

 

(1,175

)

 

 

1,044

 

Deferred revenue

 

 

(1,743

)

 

 

(152

)

 

 

3,038

 

 

 

14,971

 

Operating lease liabilities

 

 

(1,343

)

 

 

(1,299

)

 

 

(3,734

)

 

 

(3,997

)

Net cash provided by operating activities

 

 

21,789

 

 

 

9,854

 

 

 

39,923

 

 

 

21,500

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

 

 

 

 

(23,737

)

 

 

(116,400

)

 

 

(93,259

)

Proceeds from maturities of marketable securities

 

 

36,723

 

 

 

20,150

 

 

 

460,982

 

 

 

95,138

 

Proceeds from sales of marketable securities

 

 

 

 

 

17,279

 

 

 

25,959

 

 

 

17,279

 

Capitalized software development costs

 

 

(2,844

)

 

 

(1,152

)

 

 

(7,838

)

 

 

(3,751

)

Purchases of property and equipment

 

 

(291

)

 

 

(1,472

)

 

 

(2,515

)

 

 

(3,461

)

Purchases of intangible assets

 

 

 

 

 

 

 

 

(2,333

)

 

 

 

Cash paid for pending acquisition

 

 

(121,433

)

 

 

 

 

 

(121,433

)

 

 

 

Net cash provided by (used in) investing activities

 

 

(87,845

)

 

 

11,068

 

 

 

236,422

 

 

 

11,946

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from issuance of convertible senior notes, net of issuance costs

 

 

 

 

 

487,163

 

 

 

 

 

 

487,163

 

Purchase of capped calls related to convertible senior notes

 

 

 

 

 

(46,150

)

 

 

 

 

 

(46,150

)

Proceeds from employee stock purchase plan

 

 

 

 

 

 

 

 

3,608

 

 

 

2,552

 

Proceeds from exercises of stock options

 

 

3,871

 

 

 

3,806

 

 

 

14,287

 

 

 

8,371

 

Acquisition of common stock for tax withholding obligations

 

 

(1,272

)

 

 

(784

)

 

 

(6,128

)

 

 

(3,372

)

Financed purchases of property and equipment

 

 

(169

)

 

 

(169

)

 

 

(394

)

 

 

(314

)

Net cash provided by financing activities

 

 

2,430

 

 

 

443,866

 

 

 

11,373

 

 

 

448,250

 

 

 

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash

 

 

88

 

 

 

144

 

 

 

130

 

 

 

308

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

(63,538

)

 

 

464,932

 

 

 

287,848

 

 

 

482,004

 

Cash, cash equivalents, and restricted cash, beginning of period

 

 

471,888

 

 

 

63,527

 

 

 

120,502

 

 

 

46,455

 

Cash, cash equivalents, and restricted cash, end of period

 

$

408,350

 

 

$

528,459

 

 

$

408,350

 

 

$

528,459

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

408,070

 

 

$

528,197

 

 

$

408,070

 

 

$

528,197

 

Restricted cash included within prepaid expenses and other current assets at end of period

 

 

19

 

 

 

19

 

 

 

19

 

 

 

19

 

Restricted cash included within other assets at end of period

 

 

261

 

 

 

243

 

 

 

261

 

 

 

243

 

Total cash, cash equivalents, and restricted cash at end of period shown in the consolidated statements of cash flows

 

$

408,350

 

 

$

528,459

 

 

$

408,350

 

 

$

528,459

 

 

 

 

 

 

 

 

 

 

 

BlackLine, Inc.

Reconciliations of Non-GAAP Financial Measures

(in thousands, except percentages and per share data)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

Non-GAAP Gross Profit

 

 

 

 

 

 

 

 

Gross profit

 

$

73,547

 

 

$

59,633

 

 

$

206,609

 

 

$

164,864

 

Amortization of developed technology

 

 

176

 

 

 

1,199

 

 

 

527

 

 

 

4,622

 

Stock-based compensation

 

 

1,871

 

 

 

1,431

 

 

 

4,900

 

 

 

3,478

 

Total Non-GAAP Gross Profit

 

$

75,594

 

 

$

62,263

 

 

$

212,036

 

 

$

172,964

 

Gross margin

 

 

81.2

%

 

 

79.6

%

 

 

80.6

%

 

 

79.0

%

Non-GAAP gross margin

 

 

83.5

%

 

 

83.1

%

 

 

82.7

%

 

 

82.9

%

 

 

 

 

 

 

 

 

 

Non-GAAP Operating Income:

 

 

 

 

 

 

 

 

Loss from operations

 

$

(2,017

)

 

$

(7,861

)

 

$

(12,680

)

 

$

(23,162

)

Amortization of intangible assets

 

 

1,622

 

 

 

2,566

 

 

 

4,787

 

 

 

8,722

 

Stock-based compensation

 

 

13,326

 

 

 

10,141

 

 

 

35,398

 

 

 

24,605

 

Change in fair value of contingent consideration

 

 

(72

)

 

 

129

 

 

 

(148

)

 

 

313

 

Acquisition-related costs

 

 

1,790

 

 

 

 

 

 

1,790

 

 

 

 

Legal settlement gains

 

 

 

 

 

(380

)

 

 

 

 

 

(380

)

Shelf offering costs

 

 

 

 

 

 

 

 

 

 

 

212

 

Total non-GAAP operating income

 

$

14,649

 

 

$

4,595

 

 

$

29,147

 

 

$

10,310

 

 

 

 

 

 

 

 

 

 

Non-GAAP Net Income Attributable to BlackLine, Inc.

 

 

 

 

 

 

 

 

Net loss attributable to BlackLine, Inc. (a)

 

$

(8,615

)

 

$

(9,206

)

 

$

(29,790

)

 

$

(23,349

)

Provision for (benefit from) income taxes

 

 

(61

)

 

 

53

 

 

 

(149

)

 

 

35

 

Amortization of intangible assets

 

 

1,622

 

 

 

2,566

 

 

 

4,787

 

 

 

8,722

 

Stock-based compensation

 

 

13,326

 

 

 

10,141

 

 

 

35,398

 

 

 

24,605

 

Amortization of debt discount and issuance costs

 

 

5,758

 

 

 

2,923

 

 

 

16,874

 

 

 

2,923

 

Change in fair value of contingent consideration

 

 

(72

)

 

 

129

 

 

 

(148

)

 

 

313

 

Acquisition-related costs

 

 

1,790

 

 

 

 

 

 

1,790

 

 

 

 

Legal settlement gains

 

 

 

 

 

(380

)

 

 

 

 

 

(380

)

Shelf offering costs

 

 

 

 

 

 

 

 

 

 

 

212

 

Adjustment to redeemable non-controlling interest (a)

 

 

1,319

 

 

 

839

 

 

 

4,239

 

 

 

893

 

Total non-GAAP net income attributable to BlackLine, Inc.

 

$

15,067

 

 

$

7,065

 

 

$

33,001

 

 

$

13,974

 

Basic non-GAAP net income attributable to BlackLine, Inc. per share:

 

 

 

 

 

 

 

 

Basic non-GAAP net income attributable to BlackLine, Inc. per share

 

$

0.26

 

 

$

0.13

 

 

$

0.58

 

 

$

0.25

 

Shares used to calculate basic non-GAAP net income per share

 

 

57,063

 

 

 

55,480

 

 

 

56,619

 

 

 

55,164

 

Diluted non-GAAP net income attributable to BlackLine, Inc. per share:

 

 

 

 

 

 

 

 

Diluted non-GAAP net income attributable to BlackLine, Inc. per share

 

$

0.25

 

 

$

0.12

 

 

$

0.55

 

 

$

0.24

 

Shares used to calculate diluted non-GAAP net income per share

 

 

61,213

 

 

 

59,048

 

 

 

60,445

 

 

 

58,599

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

 

2020

 

 

 

2019

 

 

 

2020

 

 

 

2019

 

Non-GAAP Sales and Marketing Expense:

 

 

 

 

 

 

 

 

Sales and marketing expense

 

$

42,588

 

 

$

41,848

 

 

$

129,199

 

 

$

114,888

 

Amortization of intangible assets

 

 

(968

)

 

 

(968

)

 

 

(2,905

)

 

 

(2,904

)

Stock-based compensation

 

 

(5,675

)

 

 

(4,522

)

 

 

(15,645

)

 

 

(11,074

)

Total non-GAAP sales and marketing expense

 

$

35,945

 

 

$

36,358

 

 

$

110,649

 

 

$

100,910

 

 

 

 

 

 

 

 

 

 

Non-GAAP Research and Development Expense:

 

 

 

 

 

 

 

 

Research and development expense

 

$

14,829

 

 

$

11,558

 

 

$

38,423

 

 

$

32,694

 

Stock-based compensation

 

 

(1,954

)

 

 

(1,452

)

 

 

(4,918

)

 

 

(3,631

)

Total non-GAAP research and development expense

 

$

12,875

 

 

$

10,106

 

 

$

33,505

 

 

$

29,063

 

 

 

 

 

 

 

 

 

 

Non-GAAP General and Administrative Expense:

 

 

 

 

 

 

 

 

General and administrative expense

 

$

18,147

 

 

$

14,088

 

 

$

51,667

 

 

$

40,444

 

Amortization of intangible assets

 

 

(478

)

 

 

(399

)

 

 

(1,355

)

 

 

(1,196

)

Stock-based compensation

 

 

(3,826

)

 

 

(2,736

)

 

 

(9,935

)

 

 

(6,422

)

Change in fair value of contingent consideration

 

 

72

 

 

 

(129

)

 

 

148

 

 

 

(313

)

Acquisition-related costs

 

 

(1,790

)

 

 

 

 

 

(1,790

)

 

 

 

Legal settlement gains

 

 

 

 

 

380

 

 

 

 

 

 

380

 

Shelf offering costs

 

 

 

 

 

 

 

 

 

 

 

(212

)

Total non-GAAP general and administrative expense

 

$

12,125

 

 

$

11,204

 

 

$

38,735

 

 

$

32,681

 

 

 

 

 

 

 

 

 

 

Total Non-GAAP Operating Expenses

 

$

60,945

 

 

$

57,668

 

 

$

182,889

 

 

$

162,654

 

 

 

 

 

 

 

 

 

 

Free Cash Flow

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

21,789

 

 

$

9,854

 

 

$

39,923

 

 

$

21,500

 

Capitalized software development costs

 

 

(2,844

)

 

 

(1,152

)

 

 

(7,838

)

 

 

(3,751

)

Purchases of property and equipment

 

 

(291

)

 

 

(1,472

)

 

 

(2,515

)

 

 

(3,461

)

Financed purchases of property and equipment

 

 

(169

)

 

 

(169

)

 

 

(394

)

 

 

(314

)

Purchases of intangible assets

 

 

 

 

 

 

 

 

(2,333

)

 

 

 

Free cash flow

 

$

18,485

 

 

$

7,061

 

 

$

26,843

 

 

$

13,974

 

 

 

 

 

 

 

 

 

 

(a) During the third quarter of 2020, the Company identified that commencing in 2019 it had incorrectly calculated its quarterly adjustment to the carrying value of its redeemable non-controlling interest with a corresponding impact to net loss attributable to BlackLine, Inc., adjustment attributable to non-controlling interest, and basic and diluted net loss per share attributable to BlackLine, Inc.  Such errors resulted in the $0.4 million ($0.01 per diluted share) overstatement of net loss attributable to BlackLine, Inc. for the quarter and nine months ended September 30, 2019, respectively. The Company corrected the cumulative impact of such prior period errors as an out-of-period adjustment in the quarter and nine months ended September 30, 2020, which resulted in the understatement of net loss attributable to BlackLine, Inc. of $1.5 million ($0.03 per diluted share) and $0.9 million ($0.02 per diluted share) in the quarter and nine months ended September 30, 2020, respectively.

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