BlackLine Inc (NASDAQ:BL) offers cloud-based accounting software-as-a-service (SaaS) to companies, giving its customers the ability to perform continuous accounting, which, as opposed to batch processing, allows companies to automate cumbersome accounting tasks, saving them time and resources. It also gives them important data in real time, rather than having to wait until the end of a month or quarter when accounts have traditionally been reconciled.

In the company's fourth quarter, there was ample evidence clients appreciated the value of streamlining their back-office accounting needs.

In Q4, BlackLine's revenue grew to $62.3 million, a 25% increase year over year, with adjusted gross margin staying incredibly high at 81.9%. The company is not having a hard time finding customers for its services, adding 137 net new customers during the quarter, growing its customer base to 2,631 -- good for a 19% increase over 2017's fourth quarter.

While the top line and customer growth is more than robust, BlackLine's dedication to keeping its existing customers will make it a market-beating investment for years to come. Let's take a closer look at what's becoming BlackLine's biggest advantage.

BlackLine Metrics 2018 Q4 2017 Q4 Change (Decrease)
Revenue 62.3 million 50.0 million 24.6%
Adjusted gross margin 81.9 82.1 (0.2) percentage points
Revenue retention rate 108 112 (4) percentage points
Customers 2,631 2,208 19.2%

Data source: BlackLine Inc.

Investing in customer success

The most impressive figure from BlackLine's fourth quarter was its 98% customer-retention rate. The second most impressive number was the company's 108% revenue-retention rate, meaning that its existing customers from the year before spent 8% more this year than last.

These numbers show that not only are BlackLine's customers staying with the company, they're spending more for its services each year. In the quarterly conference call, CEO Therese Tucker credited this success with BlackLine being recognized as a trustworthy guide on businesses' journeys to digital transformation:

[O]ur thought leadership in Continuous Accounting, and disruptive new technologies continues to resonate with our customers. Customers ready for digital transformation want a solution and ecosystem that incorporates process automation and machine learning and scales with their needs, as their businesses grow and evolve. And most importantly, BlackLine is increasingly being recognized as their strategic trusted partner on this journey.

To keep pace in a digital world, companies have to unlock efficiencies and automate processes. BlackLine's customer renewal rates are evidence that it more than satisfactorily meets these types of needs and delivers on its promises. But BlackLine is also finding new ways to delight its customers.

Check out the latest BlackLine earnings call transcript.

Man in business suit punches numbers into calculator while holding spreadsheet.

BlackLine's accounting software services gives businesses real-time access to important data and streamlines cumbersome reconciliation processes. Image source: Getty Images.

New strategic products

BlackLine is also devoting resources to introducing new strategic products that deepen its relationships with its customers and boost the top and bottom lines. Tucker says, "We put a lot of effort into product innovation and bringing the market new products that drive real accounting and finance transformation and help expand our strategic value." This includes products and services such as:

  • Intercompany Hub: This service manages and automates the workflow, processing, and settlement of transactions occurring between two subsidiaries under the same corporate umbrella, some of the most headache-inducing transactions finance departments deal with.
  • Smart Close: This feature standardizes and simplifies the financial close process, ensuring critical steps and approvals are not skipped over or neglected.  
  • Transaction Matching: This product streamlines and automates transaction matching for things such as bank statement reconciliations and credit card matching, a task that is traditionally tedious and labor-intensive. 

Strategic products accounted for 19% of BlackLine's total sales in the full fiscal year. But even more important than becoming their own significant revenue stream, these products broaden BlackLine's ecosystem, making it harder for customers to leave as they become dependent on BlackLine to accomplish more of their most important accounting tasks.

A neutral third party

In the company's third quarter, management announced a new partnership with SAP SE (NYSE:SAP), allowing SAP sales reps to directly sell BlackLine's products to its customers. While stressing that it was still very early in the relationship, Tucker announced that SAP had landed BlackLine several new customers across the globe. She said, "SAP demonstrated in a very short time that their partnership can help us efficiently expand our reach, accelerate our sales cycle and obtain larger deals through expanded product offerings and digital transformation budgets."

Tucker acknowledged, however, the importance of treating all such enterprise resource-planning providers the same, and that its products be compatible with all major software providers so that its services feature universal appeal. In Q4, BlackLine also released a connector for Oracle Corporation (NYSE:ORCL), allowing BlackLine's products to be seamlessly introduced into the Oracle E-Business Suite. This allows enterprise customers with business software built on top of Oracle's products to quickly integrate and use BlackLine's accounting software.

Why BlackLine's headed in the right direction

BlackLine's focus has been to introduce innovative solutions for its clients, automating laborious accounting tasks and standardizing error-prone financial tasks. By introducing new products, it is deepening its ecosystem, giving it a more holistic, sticky platform and making it harder for existing customers to explore different options. By working with a wide range of software giants, it ensures its products can be used by any company for its accounting needs.

If BlackLine maintains this strategic focus, I believe it will continue to deliver market-beating returns for its shareholders well into the future, which is why BlackLine occupies a place in my own personal portfolio.