BlackLine: A Visible Path to Earnings Growth Acceleration

BlackLine is a financial software company with potential for revenue growth acceleration to mid-teens. If this occurs, valuation multiples are expected to rise. The company's previous growth has been steady, but recent acquisitions and new product offerings could drive future growth. BlackLine's financials are solid, with a strong balance sheet and increasing profitability. Overall, BlackLine is a promising investment opportunity with the potential for significant growth.

BlackLine, Inc. (NASDAQ: BL), a financial software company, has shown potential for revenue growth acceleration to mid-teens. This growth is expected to drive valuation multiples higher. The company's previous growth has been steady, but recent acquisitions and new product offerings could propel future growth. BlackLine's financials are robust, with a strong balance sheet and increasing profitability.

Key Drivers of Growth

1. Go-to-Market Motion and SAP Partnership: BlackLine's pivot towards larger enterprise customers and its SAP partnership have been pivotal. The company's new go-to-market motion has shown meaningful progress, with total pipeline generation growing ~50% year-over-year in the first half of 2025. The SAP partnership has also seen significant growth, with opportunities skyrocketing from 20 to ~170 within a few months.

2. Studio360 and Verity AI: The launch of Studio360 has seen early adoption data supporting its potential. Over 110 customers are already live on the platform, with adoption heavily concentrated among large enterprises. Verity AI, a digital workforce for finance, is expected to drive strong adoption and monetization, as it allows for the automation of complex accounting tasks.

Financial Outlook

BlackLine's current consensus estimates expect adjusted EPS of ~$2.8 in FY27, representing ~28% growth vs. FY24. However, this estimate may be conservative given the several growth catalysts mentioned above. The company's revenue growth is expected to return to the low-to-mid-teens percentage, driven by improving SAP relationships, increasing Studio360 adoption, Verity gaining traction, and the new GTM model capturing more pipeline growth.

Valuation

The valuation of BlackLine could see a reversion to its past 2-year mean of ~26x forward PE. Assuming an adjusted EPS of $3.3 (15% CAGR vs. FY24), this implies a share price target of ~$86.

Risks

The adoption of Verity AI may be slower than expected due to the risk-averse nature of finance departments. Additionally, there is a concentration risk with the SAP partnership, as the reseller agreement can be terminated with just six months' notice.

Conclusion

BlackLine is executing well on all fronts, with its GTM efficiency improvements translating into sales momentum, SAP evolving into an even better growth channel, and the combination of Studio360 and Verity AI further driving growth. These factors de-risk the growth outlook and support an acceleration in both revenue and margin trajectory through FY27.

References

BlackLine: Visible Path To Earnings Growth Acceleration^[1] https://seekingalpha.com/article/4828784-blackline-visible-path-to-earnings-growth-acceleration