Blackline Safety Corp. (TSX: BLN) Q2 2025 Earnings Call | 06/11/2025

Here's a summary of Blackline Safety's Second Quarter Fiscal 2025 Earnings Call:

Blackline Safety Q2 FY25 Earnings Call Summary

Blackline Safety reported record second-quarter results, extending its streak to 33 consecutive quarters of year-over-year growth despite a dynamic macroeconomic environment and geopolitical instability. While product revenue saw a slight decline due to customer caution, service revenue remained a strong growth driver, and the company achieved positive adjusted EBITDA for the fourth consecutive quarter.

Key Financial Highlights (Q2 FY25 vs. Q2 FY24):

• Total Revenue: $35.9 million, up 14%.
  • Service Revenue: $21.9 million, up 31% (driven by device activations and rental demand). Software services grew 32% to $19.2 million; Rental revenue grew 20%.
  • Product Revenue: $14.1 million, down 5% (attributed to geopolitical instability, trade policy shifts, and cautious investment environment).
• Annual Recurring Revenue (ARR): Record $75.2 million, up 33% year-over-year.
• Net Dollar Retention: 128% (eighth consecutive quarter above 125%).
• Gross Margin: Record 63% (trailing 12-month gross margin exceeded 60% for the first time).
  • Product margins: 39% (negatively impacted by U.S. tariffs).
  • Service gross margins: Record 79%.
• Gross Profit: Record $22.7 million, up 26% year-over-year.
• Adjusted EBITDA: Positive $1 million (compared to a $2 million loss a year ago). This marks the fourth consecutive quarter of positive adjusted EBITDA.
• Net Loss: Narrowed to $3.7 million (a 13% improvement).
• Cash and Short-term Investments: $52.6 million, up 22% from year-end FY24.
• Liquidity: Total available liquidity of $70.1 million.

First Half (H1 FY25) Performance:

• Revenue: $73.6 million, up 27% year-over-year.
• Product Revenue (H1 FY25): Rose by 21% compared to H1 FY24.

Operational & Strategic Highlights:

• X08 Area Monitor: Introduced a version with gamma radiation detection, generating strong initial demand (21 new orders on launch day). This strengthens offerings in fire, hazmat, and emergency response, serving as an entry point into these niche markets.
• U.S. Tariffs: Incurred $351,000 in tariff expense on U.S.-bound inventory in Q2. However, devices are now USMCA compliant and exempt from current U.S. tariffs from Canada.
• Manufacturing Strategy: Adapted plans to continue manufacturing and assembling out of the Calgary location, leveraging USMCA compliance, instead of assembling in Houston. Planning to expand Calgary capacity by adding material storage off-site.
• Operational Discipline: Since Q2 FY22, revenue has more than doubled, gross profit has more than tripled, while operating expenses increased by only 17%, demonstrating disciplined business management.
• Regional Performance: Strong gains in "Rest of World" (up 78%), particularly the Middle East. Canada and Europe grew by 23% and 14% respectively, while the U.S. saw a modest 1% increase due to investment slowdown.
• Rental Demand: Strong demand across industrial, construction, and maintenance markets.

Outlook:

• Remains steadfast in the goal of achieving positive adjusted EBITDA for the full fiscal year 2025.
• Expects product volatility for some time but maintains confidence in product acceptance and strong pipelines.
• Anticipates consistent growth in the "Rest of World" segment, with the Middle East being a key growth market.
• Service gross margins are expected to show steady strength.
• The company is confident in driving growth and expanding the connected safety market.
• The balance of the year will see investments to continue manufacturing and additional investments in cartridges and rental equipment.
• Q3 is expected to have seasonal pickup in rental revenue.

Blackline Safety aims to redefine industrial safety with its connected solutions, leveraging a strong financial position, dedicated team, and award-winning products to capture growing demand and protect more workers globally.