Mr. Cody Slater reports

BLACKLINE SAFETY REPORTS HIGHEST QUARTERLY REVENUE EVER - Q2 HITS $31.6M, UP 31% YEAR-OVER-YEAR

Blackline Safety Corp. has released its fiscal second quarter financial results for the period ended April 30, 2024.

Management commentary

"We achieved our highest quarterly revenue ever at $31.6-million, a 31-per-cent increase over the prior year's second quarter. This result, coupled with our highest gross profit at $18-million and highest gross margin at 57 per cent, demonstrate the strength of our hardware-enabled software as a service business model as the company scales," said Cody Slater, Blackline Safety's chief executive officer and chair.

"Our record ARR [annual recurring revenue] of $56.5-million, up 33 per cent year-over-year, and NDR [net dollar retention] at 130 per cent, up from 118 per cent 12 months ago, signals the value that our loyal customers see in the Blackline platform, our unique hardware and software connected safety solution. Our ARR growth is driven by new customer acquisition and our NDR performance is fuelled by our existing enterprise customers expanding their current contracts, as both see the value in adopting our products and services to protect their people," Mr. Slater added.

This record-breaking quarter was driven by rising demand from customers in over 70 countries around the world for Blackline's industry-leading connected safety products and services, with Europe leading the year-over-year growth at 69 per cent, Canada up 34 per cent and the United States up 20 per cent. The company significantly grew its presence in a variety of verticals, including the utility, and water and waste water, industries, fire and hazmat, and upstream and mid-stream energy sectors. This growth was a result of the contribution from the past investments in the company's sales teams and supporting functions to enable Blackline to serve more customers across broader markets.

"An emerging driver of our robust financial performance is that we are now seeing customers standardize on our solutions to protect all their frontline workers. This is evidenced by our announcement earlier this week of our largest deal to date -- $8.5-million -- with a major North American mid-stream energy company, an expansion to their previously announced $3.5-million contract, whereby Blackline now protects their entire work force," Mr. Slater continued.

Postquarter-end, the company announced the successful closing of a bought-deal financing and concurrent private placement, raising $34.6-million in gross proceeds, strengthening its ability to finance its lease program into the future. Blackline ended the second quarter with total cash and cash equivalents of $13.2-million. The company also has available capacity on its credit facility of $9.4-million and has renewed its lease securitization facility with CWB Maxium.

"Our additional capital, along with our cost optimization, margin expansion and revenue growth, reinforces our trajectory towards exiting fiscal 2024 with positive quarterly adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] and becoming a sustainable, free cash flow company as we lead the industrial connected safety market into the future," concluded Mr. Slater.

Fiscal second quarter 2024 and recent financial and operational highlights:

• Total revenue of $31.6-million, a 31-per-cent increase over the prior-year Q2;
• Service revenue of $16.8-million, a 30-per-cent increase over the prior-year Q2;
• Product revenue of $14.8-million, a 32-per-cent increase over the prior-year Q2;
• ARR growth continues to be strong with 33 per cent growth year-over-year to $56.5-million;
• European market growth of 69 per cent over the prior-year Q2;
• Canadian market achieved 34 per cent growth over the prior-year Q2;
• United States growth continues to be strong with a 20-per-cent increase over the prior-year Q2;
• Achieved product gross margin of 34 per cent, up from 26 per cent from the prior-year Q2;
• Achieved service gross margin of 77 per cent, up from 75 per cent from the prior-year Q2;
• Total Q2 expenses of $21.8-million, up $2.6-million year-over-year, an 11-per-cent decrease as a percentage of revenue;
• Significant improvement in net cash used in operating activities to $1.5-million from $7.1-million over the prior-year Q2, a 78-per-cent decrease;
• Generated gross proceeds of $34.6-million through a bought-deal financing and concurrent private placement which closed June 12, 2024;
• Renewed lease securitization facility with CWB Maxium for $15-million and $30.0-million (U.S.);
• Several large contract wins, including a $1.5-million contract with major United States utility provider in California, $1.7-million service upgrade with a U.S. upstream energy company in Texas and a $1.4-million deal with a water utility provider in Australia.

Key financial information

Total revenue for the fiscal second quarter was $31.6-million, an increase of 31 per cent compared with $24.1-million in the prior-year quarter. Total revenue for each geographical market increased with the European markets leading the year-over-year growth at 69 per cent, while other regions also demonstrated strong growth with Canada up 34 per cent, United States up 20 per cent and rest of world up 3 per cent.

Service revenue during the fiscal second quarter was $16.8-million, an increase of 30 per cent compared with $12.9-million in the prior-year quarter. Software services revenue increased 28 per cent to $14.5-million. The increase in software services revenue is attributable to new activations of devices sold over the past 12 months as well as net growth within the existing customer base of $3.2-million which resulted in NDR of 130 per cent. Rental revenue increased 42 per cent to $2.2-million compared with $1.6-million in the prior-year quarter.

Product revenue during the fiscal second quarter was $14.8-million, a 32-per-cent increase compared with $11.2-million in the prior-year quarter. The increase in the current-year period reflects the results of the company's past investments in the global sales team, and its targeted demand generation and sales development activities.

Over all, gross margin percentage for the fiscal second quarter was 57 per cent, a 5-per-cent increase compared with the prior-year quarter. The increase in total gross margin percentage was due to a combination of higher sales volume and continued cost optimization across the business. Product revenue comprised 47 per cent of total revenue in the second quarter, compared with 46 per cent in the prior-year quarter, while service revenue made up 53 per cent of total revenue for the quarter, compared with 54 per cent in the prior-year quarter.

Service gross margin percentage increased to 77 per cent compared with the prior-year quarter of 75 per cent. This was primarily due to continued service revenue growth, through additional value-added features and scale absorbing more fixed cost of sales.

Product gross margin percentage for the fiscal second quarter increased to 34 per cent from 26 per cent in the prior-year quarter. The improvement reflects the increased volume of product sales year-over-year, wherein more fixed product costs of sales were absorbed, as well as the company's focus on manufacturing line efficiency.

Total expenses for the second fiscal quarter were $21.8-million, an increase of $2.6-million compared with the prior-year quarter of $19.2-million, due to increases in sales and marketing expenses. General and administrative expenses, and product research and development costs, remained largely consistent in the current quarter compared with the prior-year quarter. However, Q2 total expenses as a percentage of revenue decreased 11 per cent year-over-year compared with prior-year Q2.

Net loss for the fiscal second quarter was $4.3-million, or six cents per share, compared with $6.6-million, or nine cents per share, in the prior-year quarter. Net loss decreased due to an increase in total revenue and overall gross profit.

EBITDA for the fiscal second quarter was negative $1.9-million, or negative three cents per share, compared with negative $4.6-million, or negative six cents per share, in the prior-year quarter. The $2.7-million improvement in EBITDA is primarily due to the increase in total gross profit.

Adjusted EBITDA for the fiscal second quarter was negative $2-million, or negative three cents per share, compared with negative $4.5-million, or negative six cents per share, in the prior-year quarter. The $2.5-million improvement in adjusted EBITDA is primarily due to the increase in total gross profit.

At the end of the fiscal second quarter, Blackline had total cash and cash equivalents on hand of $13.2-million, $9.4-million available on its senior secured operating facility, and $54.4-million available on its lease securitization facility. There was a net increase in cash and cash equivalents in the fiscal second quarter of $1.8-million as compared with a net decrease in cash and cash equivalents in the prior-year quarter of $6.1-million. There was significant improvement in net cash used in operating activities, which used $1.5-million of net cash compared with $7.1-million year-over-year. Investing activities provided net cash of $2.1-million for the fiscal second quarter compared with the prior-year quarter, wherein investing activities used net cash of $7.3-million. This was slightly offset by a decrease in net cash provided by financing activities which is primarily due to net repayments from the lease securitization facility of $1.5-million during the quarter. Subsequent to the end of the period, the company closed a bought-deal financing and concurrent private placement, raising gross proceeds of $34.6-million.

Blackline's interim condensed consolidated financial statements, and management's discussion and analysis on financial condition and results of operations, for the three and six months ended April 30, 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, June 13, 2024. Participants should dial 1-844-763-8274 or 1-647-484-8814 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 1-855-669-9658 or 1-604-674-8052 and entering access code 0724.

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 232 billion data-points and initiated over seven million emergency alerts.

We seek Safe Harbor.