Mr. Cody Slater reports

BLACKLINE SAFETY REPORTS FISCAL FIRST QUARTER 2024 RESULTS - REVENUE UP 25% YEAR-OVER-YEAR

Blackline Safety Corp. has released its fiscal first quarter financial results for the period ended Jan. 31, 2024.

Management commentary

"In Q1, we delivered our 28th consecutive quarter of year-over-year total revenue growth with a 25-per-cent increase compared to the same quarter last year. Gross profit grew by 40 per cent year-over-year to $14.6-million, and we maintained our gross margin of 55 per cent from the particularly strong fourth quarter of fiscal 2023. Net dollar retention was 130 per cent in Q1, a record for the company and a signal of the powerful value proposition customers see in our connected safety solutions. We also saw our ARR [annual recurring revenue] grow 37 per cent to $54.2-million and we reduced our adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] loss by 48 per cent," said Cody Slater, chief executive officer and chair, Blackline Safety.

Blackline saw year-over-year revenue growth across all operating regions, with Europe leading the way at 39 per cent, driven by new deals across a range of verticals. The United States and Canada also grew 29 per cent and 11 per cent, respectively, demonstrating that the investments the company has made in its sales and marketing engine are delivering results.

The company remains on target to achieve positive quarterly adjusted EBITDA in the seasonally stronger second half of the fiscal year, by leveraging the strength of its product and service segments, margin enhancements, and expansion across the utilities, energy and industrial sectors. A continued focus on disciplined cost management will further contribute to Blackline's path to sustained profitability.

Mr. Slater continued: "We are particularly pleased we ended what is traditionally our softest quarter with total cash and short-term investments on hand of $15.9-million, the same as that on hand at our Oct. 31, 2023, year-end. We saw a significant improvement in our cash flows from operating activities, where we used $400,000 of cash compared to $7.6-million in the prior year's quarter. We also have total liquidity available through our cash, short-term investments and availability on our credit facility of $26.2-million, all in addition to the availability on our lease securitization facility of $52.9-million. Our cost optimization, margin expansion and revenue growth will continue to improve our cash burn, keeping us on the path to a sustainable free-cash-flow-generating business."

Fiscal first quarter 2024 and recent financial and operational highlights:

• Total revenue of $26.3-million, a 25-per-cent increase over the prior year's Q1;
• Recurring software services revenue of $13.9-million, a 31-per-cent increase over the prior year's Q1;
• ARR growth of 37 per cent year-over-year to $54.2-million;
• Product revenue of $11.4-million, a 21-per-cent increase over the prior year's Q1;
• European market growth of 39 per cent over the prior year's Q1;
• United States growth continues to be strong, with a 29-per-cent increase over the prior year's Q1;
• Total Q1 expenses were $19.9-million, which increased 10 per cent year-over-year, however, Q1 expenses as a percentage of revenue decreased 10 per cent year-over year and were flat with Q4;
• Significant improvement in net cash used in operating activities to $400,000, a 94-per-cent decrease over the prior year's Q1;
• Secured a $2.7-million contract with a major United States upstream energy company to protect over 800 workers;
• Joined the Amazon Web Services (AWS) partner network as an AWS public sector partner.

Key financial information

Total revenue for the fiscal first quarter was $26.3-million, an increase of 25 per cent compared with $21-million in the prior year's quarter. Total revenue for each geographical market increased, with the European markets leading the growth up 39 per cent, while other regions also demonstrated strong growth with the United States up 29 per cent, Canada up 11 per cent and rest of world up 7 per cent.

Service revenue during the fiscal first quarter was $14.9-million, an increase of 28 per cent compared with $11.6-million in the prior year's quarter. Software services revenue increased 31 per cent to $13.9-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 $2.8-million, which resulted an NDR (net dollar retention) of 130 per cent.

Product revenue during the fiscal first quarter was $11.4-million, a 21-per-cent increase compared with $9.4-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 targeted demand generation and sales development activities.

Over all, gross margin percentage for the fiscal first quarter was 55 per cent, a 6-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, Blackline Safety's enhanced pricing strategy, continued cost optimization across its business and a shift in revenue mix toward higher-margin service revenue. Product revenue comprised 43 per cent of total revenue in the first quarter, compared with 45 per cent in the prior year's quarter, while service revenue made up 57 per cent of total revenue for the quarter, compared with 55 per cent in the prior year's quarter.

Service gross margin percentage increased to 76 per cent compared with the prior year's quarter of 73 per cent. This was primarily due to Blackline Safety's continued service revenue growth through additional value-added features, enhanced pricing and its scale absorbing more fixed costs.

Product gross margin percentage for the fiscal first quarter increased to 29 per cent from 21 per cent in the prior year's quarter. The improvement reflects the increased volume of product sales in the current quarter compared with the prior year, as well as the company's focus on manufacturing line efficiency and the impact of the company's enhanced pricing strategy. The fiscal first quarter product gross margin decreased by 3 per cent compared with the seasonally stronger fourth quarter of fiscal 2023, mainly due to the decrease in product sales volume.

Total expenses for the fiscal first quarter were $19.9-million, an increase of $1.8-million compared with the prior year's quarter of $18.2-million, due to increases in sales and marketing expenses, and general and administrative expenses, slightly offset by a decrease in product research and development costs. However, Q1 expenses as a percentage of revenue decreased 10 per cent year-over-year compared with the prior year's Q1.

Net loss for the fiscal first quarter was $5.8-million, or eight cents per share, compared with $7.7-million, or 11 cents per share, in the prior year's quarter. Net loss decreased due to an increase in total gross profit as well as decreases in product research and development costs.

EBITDA for the fiscal first quarter was negative $3.4-million, or negative five cents per share, compared with negative $6-million, or negative eight cents, in the prior year's quarter. The $2.7-million improvement in EBITDA is primarily due to the increase in total gross profit.

Adjusted EBITDA for the fiscal first quarter was negative $3.2-million, or negative four cents per share, compared with negative $6.2-million, or negative nine cents per share, in the prior year's quarter. The $3-million improvement in adjusted EBITDA is primarily due to the increase in total gross profit.

At the end of the fiscal first quarter, Blackline had total cash and short-term investments on hand of $15.9-million, $10.3-million available on its senior secured operating facility and $52.9-million available on its lease securitization facility. Blackline was able to maintain a similar cash position as at Oct. 31, 2023, year-end, mainly due to reduced operating losses and cash inflows from changes in non-cash working capital, which were offset by a net cash inflow of $1.3-million during the quarter from the company's operating credit facility and securitization facility.

Blackline's interim condensed consolidated financial statements, and management's discussion and analysis on financial condition and results of operations for the three-month period ended Jan. 31, 2024, are available on SEDAR+ under the company's profile.

Conference call

A conference call and live webcast have been scheduled for 11 a.m. Eastern Time on Thursday, March 14, 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 0742.

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 225 billion data points and initiated over seven million emergency alerts.

We seek Safe Harbor.