BlackLine's Edge

Updated: Apr 26, 2021

Therese Tucker:

Demand environment improved through the quarter, demand for back-end financial automation is critical and will benefit. Legacy accounting processes were not sustainable in the pre-COVID world, the pandemic has made is even less sustainable! (I find this to be a very interesting COVID play, coming from the finance area, not really accounting, but I have accountants for friends. Some have heard and some have not heard of this company). A lot of accountants and financial professionals went through their first remote closing! Companies are shifting, and budgeting, and technology initiatives are at the forefront of it all. Marc will be the new CEO, as Therese moves to an Executive Chair. https://seekingalpha.com/article/4366222-blacklines-bl-ceo-therese-tucker-on-q2-2020-results-earnings-call-transcript

My view from reading about BlackLine the past week. I think this company has a strong moat, I think they have developed strong partnerships to really lock down their edge. Under the "Independence" section of their most recent 10-K, the company highlights how their platform is not dependent on any single operating system, and works with most MAJOR ERP systems customers might use. This is bigly. Essentially allowing them to have access to a greater amount of customers. This is the EDGE the company has. Just a few, NetSuite, Oracle, SAP, and Workday.

With the product being designed by accountants, for accountants, I think this sort of goes back to the "invest in what you know" sort of deal. I know finance, I know some accounting… ;). These engineers perfected a user-friendly interface! I feel like the last step I would have to do is test the product. I think this stock is being completely overlooked because its not growing at 40%, but a steady 25-30%, with 2019 non-GAAP Gross margins coming in at 82.9%! (79.6% GAAP).

(Source: 2019 10-K)

I would like to think that 25% revenue growth in Subscriptions and support, and then 59% revenue growth in Pro Services is very solid. Overall 27% Growth YoY. Their DBNE (Dollar-based net revenue retention rate) is a solid 110% for 2019, 108% in 2018, and 112% in 2017. Acceleration from 2018 to 2019. I am looking forward to what the next quarter has in store due to the automation switch in this meticulous field..

I absolutley love to see a software company spending over 50% on Sales and Marketing…young companies need to GROW. 2018 56.5% of revenue was spent on S&M, and 2019 55% was spent on S&M.

Overall, I feel like this company is in a league of its own, creating a new area for software. Automation is important, and essentially the future of how we are getting things done. I would like to invest my hard earned capital into a company doing just that, especially coming from the finance background.

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