Mr. Cody Slater reports

BLACKLINE SAFETY HITS $100M MILESTONE IN ANNUAL REVENUE

Blackline Safety Corp. has released its fiscal fourth quarter and annual financial results for the period ended Oct. 31, 2023.

Management commentary

"We are delighted to achieve a significant milestone, reaching $100-million in total annual revenue as we recorded our 27th consecutive quarter of year-over-year total revenue growth. This includes our fourth quarter, where we reached $30-million in total revenue, a 36-per-cent increase over the prior year's quarter. We are proud of our execution during the year: increasing ARR 40 per cent to $51.1-million, achieving 33 per cent more in hardware revenue, while decreasing total annual expenses 10 per cent, leading to a dramatic reduction in EBITDA loss," said Cody Slater, chief executive officer and chair, Blackline Safety.

"In Q3 of last year, we embarked on a path to profitability. In that quarter, our EBITDA loss represented 79 per cent of our revenue and our cash used in operating activities was 105 per cent. In Q4 2023, our EBITDA loss was reduced to less than 5 per cent, our cash used in operating activities as a percentage of revenue was improved to 7 per cent, all while achieving top-line growth of 36 per cent. Even though we did not hit our ambitious goal of reaching EBITDA positive results I am confident the company has transformed itself into an engine that can continue to deliver top-line growth in the future and generate significant profitability in the long run," continued Mr. Slater.

Blackline set a new record in quarterly gross profit of $16.5-million which was driven by strength in both its product and service segments that delivered increases of 66 per cent and 53 per cent, respectively. The company's strong fiscal fourth quarter gross margin percentages of 32 per cent for hardware and 77 per cent for service are an excellent benchmark for fiscal 2024 and will contribute to Blackline's path sustained profitability. Q4 2023 marked the fourth consecutive quarter of 33-per-cent year-over-year revenue growth or better. It expects to continue its revenue and market share growth while maintaining cost discipline to target consistent positive adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) in the seasonally stronger second half of fiscal 2024.

Blackline delivered industry-leading NDR (net dollar retention), reaching a new high of 129 per cent in Q4 2023. Its solutions are core to the health, safety and compliance practices of its customers across industrial markets who continue to value the work force visibility and safety that the company's integrated technology solution provides.

Geographically, the company experienced year-over-year growth across the board with the United States growing 89 per cent while its rest of world and Canada markets grew 14 per cent and 12 per cent, respectively. Europe grew 1 per cent compared with a strong fourth quarter in the prior year and it remains a key driver of growth for Blackline in fiscal 2024.

Mr. Slater continued: "Blackline achieved its highest quarterly gross profit ever at $16.5-million, overall margin percentage was the highest in three years at 55 per cent, driven by service margin of 77 per cent and product margin of 32 per cent. The improvements in these metrics continue to be driven by our lean manufacturing, increasing scale, value-added software services and enhanced pricing model. The trend of margin improvements is a key contributor to a sustainable profitable financial model.

"With the close of our expanded two-year credit facility in October, with a total capacity of $25-million, we remain in a strong financial position with total cash, short-term investments and availability on our credit facility of $29.2-million, all in addition to our lease securitization facility, which has $53.2-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 fourth quarter 2023 and recent financial and operational highlights:

• Total revenue of $30-million, a 36-per-cent increase over the prior year's Q4;
• Service revenue of $15-million, a 38-per-cent increase over the prior year's Q4;
• Product revenue of $15-million, a 35-per-cent increase over the prior year's Q4;
• United States growth continues to be strong with an 89-per-cent revenue increase over the prior year's Q4;
• Canadian market contributed 12-per-cent revenue growth over the prior year's Q4;
• Rest of world revenue grew 14 per cent compared with the prior year's Q4;
• Annual recurring revenue growth of 40 per cent year-over-year to $51.1-million;
• Total Q4 expenses were $19.8-million, declining $500,000 compared with the prior year's Q4;
• Expanded credit facility with ATB Financial to $25-million;
• Introduced new features for award-winning G7 EXO area gas monitor;
• Unveiled Protect and Protect Plus service plans for G6 and new features, including an emergency SOS button, real-time connectivity and an expanded suite of data analytics;
• Named to The Globe & Mail's Report on Business Top Growing Companies for fifth consecutive year;
• Awarded $3.5-million contract by leading North American energy company to protect over 850 workers;
• Secured $1.3-million worth of contracts with leading Middle East energy companies;
• Announced over $2-million in total contract value for hundreds of fire and hazmat organizations globally.

Key financial information

Total revenue for fiscal fourth quarter was $30-million, an increase of 36 per cent compared with $22-million in the prior year's quarter. Total revenue for each geographical market increased with the United States leading the growth, up 89 per cent, while other regions also demonstrated strong growth with Canada up 12 per cent and rest of world up 14 per cent. Europe also improved over a strong quarter in the prior year, growing 1 per cent.

Service revenue during the fiscal fourth quarter was $15-million, an increase of 38 per cent compared with $10.9-million in the prior year's quarter. Software services revenue increased 34 per cent to $13.2-million and rental revenue increased 69 per cent to $1.8-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 our existing customer base of $2.5-million which resulted in NDR of 129 per cent.

Rental revenue continues to be strong, with year-over-year growth of 69 per cent as Blackline's rental team expanded its offering globally during the year for short-term, project-based offerings across North America for the industrial construction, turnaround and maintenance markets.

Product revenue during the fiscal fourth quarter was $15-million, a 35-per-cent increase compared with $11.1-million in the prior year's quarter. The increase in the current-year period reflects the company's expanded sales network and past investments in its global sales team through its targeted demand generation and sales development activities.

Over all, gross margin percentage for the fiscal fourth quarter was 55 per cent, a 7-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 50 per cent of total revenue in the fourth quarter, compared with 51 per cent in the prior year's quarter, while service revenue made up 50 per cent of total revenue for the quarter, compared with 49 per cent in the prior year's quarter. Service gross margin percentage increased to 77 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 its scale absorbing more fixed cost of sales.

Product gross margin percentage for the fiscal fourth quarter increased to 32 per cent from 26 per cent in the prior year's quarter and 29 per cent in the fiscal third 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 using its updated pricing structure. The company has been able to automate more of its manufacturing line, improving the efficiency and throughput of its operations.

Finance expense, net, was $295 for the fiscal fourth quarter compared with finance income, net, of $107 in the prior year's quarter. Finance expenses were higher in the quarter due to increases in prime lending rates, interest expense on the company's securitization facility and interest expense on the amount drawn on the company's senior secured operating facility over the last year. This increase was partially offset by higher interest revenue from finance leases and financial assets held for cash management purposes.

Net loss for the fiscal fourth quarter was $4.5-million, or (six cents) per share, compared with $9.9-million or (14 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 product research and development costs.

EBITDA for the fiscal fourth quarter was $(1.5-million) or (two cents) per share compared with $(8.1-million) or (12 cents) in the prior year's quarter. The $6.6-million improvement in EBITDA is primarily due to the increase in total gross margin, as well as the decrease in total expenses.

Adjusted EBITDA for the fiscal fourth quarter was $(1.8-million) or (three cents) per share compared with $(7.7-million) or (11 cents) per share in the prior year's quarter. The $5.9-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 fourth quarter, Blackline had total cash and short-term investments on hand of $16-million and $13.2-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 advances from the company's operating credit facility of $1.6-million during the quarter.

Blackline's annual consolidated financial statements and management's discussion and analysis on financial condition and results of operations for the year ended Oct. 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, Jan. 18, 2024. 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 on-line. 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 226 billion data points and initiated over seven million emergency alerts.

We seek Safe Harbor.