What happened
Shares of BlackLine (BL 2.24%) crashed in Friday morning trading after the maker of cloud-based accounting software released its fourth-quarter report following the close of Thursday's session. Analysts had forecast it would earn $0.10 per share on $113.6 million in revenue in the fourth quarter, and while the company beat the revenue estimate, it missed on earnings, reporting a profit of $0.08 per share.
As of 10:20 a.m. ET, BlackLine stock was down 12.2%.
Image source: Getty Images.
So what
BlackLine grew its sales 20% year over year in Q4 to $115.3 million, which beat analysts' consensus target. On earnings, however, the news was bleaker. Not only did the company underperform analysts' expectations, even that weak $0.08 per share figure was a non-GAAP calculation. When calculated according to generally accepted accounting principles, BlackLine's booked a loss of $0.63 per share for the quarter -- more than twice its GAAP loss from the prior-year period.
The story for the full year was similar. BlackLine racked up $1.97 per share in GAAP losses in 2021 (but reported a profit of $0.58 per share, non-GAAP) on sales that grew by 21% to $425.7 million. On the plus side, free cash flow grew by 62% to $56.3 million.
Now what
Despite the respectable FCF performance, investors are selling off BlackLine based on the earnings miss -- and on weak guidance as well.
Giving its guidance pro forma, management predicted that BlackLine will lose between $0.07 per share and $0.10 per share in the first quarter of 2022 -- versus Wall Street's consensus projection of a $0.10 per share profit. Similarly for the year, BlackLine says it will earn only $0.08 per share to $0.11 per share -- where the analysts are looking for 2022 earnings of $0.71 per share.
Granted, BlackLine does think it will exceed analysts' consensus targets for sales (as it did in Q4), bringing in between $119 million and $120 million in Q1, and between $520 million and $525 million for the full year. Given the size of the losses BlackLine is promising, however, it seems investors simply aren't ready to get excited about sales growth today.
