Mr. Cody Slater reports

BLACKLINE SAFETY REPORTS FISCAL THIRD QUARTER 2023 RESULTS - RECORD REVENUE OF $24.8 MILLION UP 34% YEAR-OVER-YEAR

Blackline Safety Corp. has released its fiscal third quarter financial results for the period ended July 31, 2023.

Management commentary

"In Q3 we recorded our second consecutive quarter of year-over-year service revenue growth topping 40 per cent and our 26th consecutive quarter of year-over-year total revenue growth. We set another record in gross margin of $13.4-million, which was driven by strength in both our product and service segments that saw increases of 119 per cent and 50 per cent, respectively. This consistent margin expansion, coupled with our disciplined cost reduction initiatives, fuels our path to achieving positive adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] by the end of this fiscal year," said Cody Slater, chief executive officer and chair of Blackline. "Our year-over-year total revenue growth of 34 per cent illustrates our strong momentum and ever-expanding market share in the connected worker market while our competitors report largely flat sales in this space.

"We surpassed our net dollar retention (NDR) target one quarter ahead of schedule, reaching 125 per cent for Q3 2023, demonstrating the powerful value proposition that our connected safety solutions bring to our customers. The increase in NDR was key to the growth in our annual recurring revenue (ARR) up 43 per cent year-over-year to $47-million. The addition of several large enterprise customers over the past year has contributed to this growth, as Blackline now has over 25 customers that each generate more than $1-million in recurring service revenue. We see opportunity to expand within these organizations and other global enterprise customers across utilities, energy and manufacturing sectors.

"Regionally, we experienced year-over-year growth across the board with 55-per-cent growth in Europe, while the United States and Canada grew 36 per cent and 19 per cent, respectively. Our rest of world segment grew 5 per cent, building on its strong outlook for next year, with several large deals secured in the last six months.

"Our efforts in pricing and lean manufacturing generated product margin of 29 per cent in the quarter compared to 17 per cent in the same quarter last year. Combined with our healthy service margins at 75 per cent, Blackline Safety achieved its highest overall margin percentage in nearly three years. This continues our trend of margin improvements which is key to our goal of achieving positive adjusted EBITDA and strengthening our sustainable financial model.

"We remain in a strong financial position with total cash, short-term investments and availability on our credit facility of $26.6-million as well as our lease securitization facility, which has over $50-million available. As we continue to reduce our cash burn through cost optimization, margin expansion and revenue growth, it is clear that we have the capital resources available to continue on our path to a sustainable free-cash-flow-generating business."

Fiscal third quarter 2023 and recent financial and operational highlights:

• Total revenue of $24.8-million, a 34-per-cent increase over the prior year's Q3;
• Service revenue of $13.6-million, a 41-per-cent increase over the prior year's Q3;
• Product revenue of $11.3-million, a 26-per-cent increase over the prior year's Q3;
• European market growth of 55 per cent over the prior year's Q3;
• United States growth continues to be strong with a 36-per-cent increase over the prior year's Q3;
• Canadian market contributed 19-per-cent growth over the prior year's Q3;
• ARR growth of 43 per cent year-over-year to $47-million;
• Total expenses were $20.1-million, declining $4.5-million year-over-year;
• Announced over $2-million in total contract value for hundreds of fire and hazmat organizations globally;
• Secured $1.3-million worth of contracts with leading Middle Eastern energy companies;
• Expanded production capacity by 30 per cent to 50 per cent by repurposing space at the company's headquarters in Calgary;
• Announced a $3.2-million deal with a leading U.S. energy company to protect 1,000 workers, displacing a non-connected competitor with the company's wearables and Blackline Analytics cloud-based solution.

Key financial information

Total revenue for fiscal third quarter was $24.8-million, an increase of 34 per cent compared with $18.6-million in the prior year's quarter. Total revenue for each geographical market increased with Europe leading the growth up 55 per cent while the other regions also demonstrated strong growth with the United States up 36 per cent, Canada up 19 per cent and rest of world up 5 per cent.

Service revenue during the fiscal third quarter was $13.6-million, an increase of 41 per cent compared with $9.7-million in the prior year's quarter. Software services revenue increased 41 per cent to $12.4-million and rental revenue increased 35 per cent to $1.1-million. The increase in software services revenue was attributable to new activations of devices sold over the past 12 months as well as net growth within the company's existing customer base of $2.4-million which resulted in net dollar retention of 125 per cent.

Rental revenue continues to be strong, with year-over-year growth of 35 per cent with the comparative period representing the first quarter that the company established its global rental team to implement its strategic focus of providing short-term, project-based offerings across North America for the industrial construction, turnaround and maintenance markets.

Product revenue during the fiscal third quarter was $11.3-million, a 26-per-cent increase compared with $8.9-million in the prior year's quarter. The increase in the current-year period reflects the company's expanded sales network and investment in its global sales team over the past 12 months.

Overall gross margin percentage for the fiscal third quarter was 54 per cent, a 9-per-cent increase compared with the prior year's quarter. The increase in total gross margin percentage was due to a combination of higher sales volume, the company's enhanced pricing strategy, continued cost optimization across its business and a shift in revenue mix toward higher-margin service revenue. Product revenue comprised 45 per cent of total revenue in the third quarter, compared with 48 per cent in the prior year's quarter, while service revenue made up 55 per cent of total revenue for the quarter, compared with 52 per cent in the prior year's quarter. Service gross margin percentage increased to 75 per cent compared with the prior year's quarter of 70 per cent. This was primarily due to Blackline's continued service revenue growth, through additional value-added features and the scale absorbing more fixed cost of sales.

Product gross margin percentage for the fiscal third quarter increased to 29 per cent from 17 per cent in the prior year's quarter and 26 per cent in the fiscal second quarter. The company has been able to mitigate most global supply chain challenges that it has experienced since the third quarter of 2021, while implementing other lean manufacturing initiatives and cost optimizations. During the quarter the company continued to process sales under its updated pricing structure. The company has been able to automate more of its manufacturing line, improving the efficiency and throughput of its operations.

Net loss for the fiscal third quarter was $6.8-million, or nine cents per share, compared with $16.3-million or 27 cents per share in the prior year's quarter. Net loss decreased due to an increase in total gross margin as well as decreases in general and administrative expenses, sales and marketing expenses, and product research and development costs.

Adjusted EBITDA for the fiscal third quarter was ($3.8-million) or (five cents) per share compared with ($11.5-million) or (19 cents) per share in the prior year's quarter. The $7.7-million improvement in adjusted EBITDA is primarily due to the increase in total gross margin, as well as the decrease in total expenses.

At the end of the fiscal third quarter, Blackline had total cash and short-term investments on hand of $17.6-million and $8-million available on its senior secured operating facility. The decrease in cash and short-term investments is mainly due to operating losses which were offset by net financing from the lease securitization facility of $1.8-million during the quarter.

Blackline's interim condensed consolidated financial statements and management's discussion and analysis on financial condition and results of operations for the three and nine months ended July 31, 2023, are available on SEDAR+ under the company's profile. All results are reported in Canadian dollars.

Conference call

A conference call and live webcast have been scheduled for 11 a.m. ET on Thursday, Sept. 14, 2023. Participants should dial 1-800-319-4610 or 1-416-915-3239 at least 10 minutes prior to the conference time. A live webcast will also be available. Participants should join the webcast at least 10 minutes prior to the start time to register and install any necessary software. If you cannot make the live call, a replay will be available within 24 hours by dialling 1-800-319-6413 and entering access code 0356.

About Blackline Safety Corp.

Blackline Safety is a technology leader driving innovation in the industrial work force through IoT (Internet of Things). With connected safety devices and predictive analytics, Blackline enables companies to drive toward zero safety incidents and improved operational performance. Blackline provides wearable devices, personal and area gas monitoring, cloud-connected software, and data analytics to meet demanding safety challenges and enhance overall productivity for organizations with coverage in more than 100 countries. Armed with cellular and satellite connectivity, Blackline provides a lifeline to tens of thousands of people, having reported over 215 billion data points and initiated over seven million emergency alerts.

We seek Safe Harbor.