2016 IPO Prospects: From Bootstrapping to IPO, BlackLine Shows the Way

According to a recent research, the global SaaS market is projected to grow 8% annually over the next three years to be worth $67 billion in 2018. In another report, Gartner projects that the global spending on enterprise application software will grow from $149.9 billion in 2015 to $201 billion in 2019 due to the accelerating cloud adoption of software. It expects enterprise software spending to account for more than half of new software implementations in organizations. Cloud-based enterprise financial software provider BlackLine has seen strong growth due to these market trends and is expected to list later this week.

BlackLine’s Offerings

Founded in 2001, Los Angeles-based BlackLine was set up by programming enthusiast and entrepreneur Therese Tucker. BlackLine was initially set up as a wealth management software company before it pivoted to its current avatar. While aspiring to becoming a wealth management firm, BlackLine had realized that it was difficult to break the dominance of the big players in the industry. But during a meeting with a client, namely First National Bank of Nebraska, Therese noted their frustration over the manual process of reconciling books. It was then that the first BlackLine module was developed to track and complete balance sheet account reconciliations.

Today, BlackLine has become much more than a reconciliation software. It helps bridge gaps where traditional financial ERP solutions fail. ERP systems do not have comprehensive solutions for processes handled outside of an organization’s general ledger, such as balance sheet account reconciliation, intercompany transaction accounting and other broader financial close process requirements. As a result, many companies have to use spreadsheets and other labor-intensive processes. To support them, BlackLine offers a comprehensive cloud-based software platform that supports critical accounting processes such as the financial close, account reconciliation, intercompany accounting, and controls assurance. It helps empower organizations to improve the integrity of financial reporting, achieve efficiencies, and enhance real-time visibility into operations. It boasts of a client list of over 1,500 global enterprises with names like Coca Cola, Under Armour, and Dow Chemical Co. as part of the portfolio.

Recently, BlackLine announced the acquisition of Netherlands-based financial software company Runbook for an estimated $34 million. The acquisition will help BlackLine improve the integration of its products with SAP along with giving it a stronger market presence in Europe.

BlackLine’s Financials

Once BlackLine identified its core business, it witnessed strong revenue growth. Revenues increased from $51.7 million in 2014 to $83.6 million in 2015. Losses have grown as well as the company continues to invest in product and market development. Losses for 2015 grew from m$16.8 million a year ago to $24.7 million. For the six months ended June this year, revenues have improved 48% to $55.6 million. During the same period, net losses grew 56% to $16.9 million. Back in 2010, when I had first spoken with Therese for an interview, BlackLine was operating at a run rate of $10 million. It has come a long way since then.

BlackLine earns a bulk of its revenue from the subscription-based model. For the six months ended June this year, subscription revenues came in at $52.98 million compared with $35.89 million a year ago. During the period, it earned a modest $2.6 million from professional services rendered to clients.

BlackLine was bootstrapped by Therese till 2013 when it took private equity investment from Iconiq Capital and Silver Lake Partners. At the time of the investment, BlackLine was valued at above $200 million. Last month, BlackLine filed to go public. Its IPO is expected later this week under the ticker BL. It expects to price its 8.6 million shares in the range of $13 to $15 per share to bring in up to $148.35 million. Analysts estimate that the listing would value BlackLine at over $1 billion. BlackLine has had a very interesting ride to its current Unicorn status. You can read more about its journey in my earlier interview with Therese along with a more recent 1M/1M Roundtable that you can listen to here.

Photo Credit:Roger Ahlbrand/Flickr.com 

This segment is a part in the series : 2016 IPO Prospects