Blackline Safety Earnings Call Highlights Profitable Growth

Blackline Safety ((TSE:BLN)) has held its Q4 earnings call. Read on for the main highlights of the call.

Blackline Safety’s Earnings Call Signals Profitable Growth Despite Near-Term Headwinds

Blackline Safety’s latest earnings call struck an upbeat tone, emphasizing record revenue, strong recurring revenue growth, and a decisive shift into profitability. Management acknowledged some short-term pressure on hardware sales and margins, driven by macro uncertainty, delayed government funding, and the upcoming G8 product transition, but repeatedly framed these issues as timing-related rather than structural. The overarching message: a high-margin, recurring SaaS model is gaining scale, profitability is improving, and major strategic wins are laying the groundwork for the next leg of growth.

Record Annual Revenue and Persistent Top-Line Momentum

Blackline delivered record fiscal 2025 revenue of $150.5 million, an 18% year-over-year increase, with fourth-quarter revenue rising 10% to $39.3 million. The company has now posted 35 consecutive quarters of year-over-year top-line growth, underscoring the durability of demand for its connected safety solutions even against a choppy macro backdrop. Management highlighted this streak as evidence that the business can grow through cycles, powered by a combination of new customer wins and expanding deployments within existing accounts.

ARR Strength Underpins Visibility and Future Growth

Annual recurring revenue (ARR) reached a record $84.5 million at year-end, up nearly 30% from the prior year, giving investors greater confidence in future revenue streams. This expanding ARR base reflects the company’s shift toward a SaaS-centric model, where subscription and service contracts are increasingly driving the top line. Management framed ARR growth as the core metric for long-term value creation, pointing to the pipeline of expansions and renewals that continue to layer additional high-margin revenue onto the installed base.

Service Revenue Acceleration and Favorable Mix Shift

Service revenue surged 30% to $90.5 million for the year and hit $25.5 million in the fourth quarter, also up 30% year over year. Within services, software services rose 26% to $21.5 million, while rental revenue jumped 55% to $4.0 million, reflecting growing appetite for flexible, subscription-style offerings. This mix shift toward recurring SaaS and rental income is strategically important, as it not only increases revenue visibility but also supports higher margins and a more resilient business model than one reliant on lumpy hardware sales.

Turn to Profitability with Positive Adjusted EBITDA

A key milestone in the quarter was the move to full-year profitability on an adjusted basis. Adjusted EBITDA came in at $6.1 million for fiscal 2025, reversing a $2.4 million loss in the prior year. In the fourth quarter, adjusted EBITDA was $2.2 million (EBITDA $1.4 million), marking the sixth consecutive quarter of positive adjusted EBITDA. Management framed this as evidence that scale is now dropping to the bottom line, demonstrating operating leverage even as the company continues to invest in growth, R&D, and the upcoming G8 platform.

Margin Expansion and Exceptional Service Profitability

Gross margin improved significantly to 63% for the full year, up from 58% a year earlier, and climbed to 67% in the fourth quarter compared with 61% in the same period last year. Service gross margin was a standout, reaching a record 82% in Q4, driven by scale benefits and efficiencies in connectivity and infrastructure costs. These improving margins emphasize the economic strength of Blackline’s recurring revenue engine and give management more flexibility to invest in product development and sales while still supporting profit growth over time.

Industry-Leading Customer Retention and Expansion

Net dollar retention came in at 128% in the fourth quarter and has been above 125% for 10 consecutive quarters, signaling strong expansion within the existing customer base. This metric means customers, on average, are spending significantly more year over year, adding devices, services, and additional functionality. For investors, such robust retention and expansion rates highlight both the stickiness of Blackline’s offerings and the considerable runway for upselling and cross-selling into the installed base.

Strategic ADNOC Win Boosts International Profile

A major highlight was the multiyear purchase agreement with ADNOC, which could ultimately involve up to 28,000 devices. Blackline shipped nearly 2,500 devices in the fourth quarter alone, surpassing the initial disclosure of 1,000 devices, with further deployments expected over roughly the next two years. Management emphasized that this flagship deal is not only a sizable revenue opportunity but is also stimulating broader interest across the Middle East, positioning Blackline as a preferred connected safety partner for large-scale industrial customers in the region.

G8 Launch: A Platform for Higher Value Per Device

The company unveiled its next-generation connected wearable, the G8, which it describes as a platform rather than a single product. Orders are being taken now, with the first commercial shipments expected in February 2026. G8 is designed to support apps, improved push-to-talk (PTT) functionality, and a broader ecosystem of accessories, positioning it to drive higher per-device service revenue and deeper customer stickiness. Management expects a roughly two- to three-quarter transition from the current G7 to the G8, indicating a measured, managed upgrade cycle that could unlock new monetization avenues as customers adopt more features and services.

Solid Balance Sheet and Liquidity to Fund Expansion

Blackline ended the year with $46.6 million in cash and short-term investments, and total available liquidity of $76.4 million when including $29.8 million of available capacity on its senior secured operating facility. This compares favorably to $60.4 million of total liquidity at the end of the prior fiscal year, strengthening the company’s financial flexibility. With positive adjusted EBITDA and ample liquidity, management argued the company is well-positioned to fund the G8 ramp, capacity additions, and ongoing international expansion without compromising balance sheet strength.

Product Revenue Drop Highlights Cyclical Hardware Exposure

Despite the strong service and ARR performance, fourth-quarter product revenue declined 14% year over year to $13.8 million. Management attributed the weakness to macroeconomic uncertainty, global trade concerns, and a more cautious stance by customers on capital purchases. While this underscores that hardware demand remains cyclical and sensitive to macro conditions, the company stressed that the underlying installed base and service growth remain intact, supporting its longer-term growth narrative.

Extended Hardware Refresh Cycles Pressure Near-Term Sales

Another drag on product revenue has been customers lengthening device refresh cycles, effectively reducing refresh rates and delaying new hardware orders. Even as Blackline continues to win new customers and expand ARR, these slower refresh decisions weighed on quarterly product sales. Management portrayed this as a timing issue, not a loss of customers, but acknowledged it is a key headwind in the near term as enterprises stretch their capital budgets.

U.S. Government Funding Disruption Delays Orders

Blackline also cited the impact of U.S. government funding disruptions on its fire and hazmat customer base. Purchase activity slowed, and management indicated that some orders amounting to low single-digit millions were delayed rather than lost. The expectation is that, once funding normalizes, these orders will come back into the pipeline in subsequent quarters. This highlights some exposure to public-sector budget timing, but management remained confident in the underlying demand from these customers.

G8 Ramp to Temporarily Weigh on Hardware Margins

Management flagged short-term risks to product gross margins during the G8 manufacturing ramp, anticipating a modest decline of a few points for a couple of quarters as production scales and a new surface-mount technology (SMT) line is brought online. Prebuilding inventory and onboarding the second SMT line will add some complexity and cost in the short run. However, the company sees significant upside in hardware margins longer term, once manufacturing efficiencies are realized and the G8 platform is fully ramped, reinforcing the strategic nature of the investment.

Macro and Energy Market Weakness Extends Sales Cycles

Broader macro softness and lower energy prices are contributing to longer sales cycles, particularly in upstream energy, where deals that historically closed in about six months are now taking eight to nine months. Similar dynamics are being observed in Canada and the U.S., with customers moving more cautiously on large capital commitments. In response, Blackline is expanding its pipeline to offset the slower close rates, signaling a proactive approach to sustaining growth in a less predictable macro environment.

Operating Expense Intensity Reflects Ongoing Investment

In the fourth quarter, operating expenses were 68% of revenue (excluding a one-time G&A charge and foreign-exchange effects), with sales and marketing accounting for 32% and R&D 16%. This level of spending underscores that Blackline is still in an investment phase, funding sales capacity, R&D, and platform development such as G8. While it leaves the company somewhat sensitive to revenue shortfalls in the near term, management pointed to improving EBITDA trends as evidence that operating leverage is emerging even as it continues to invest for growth.

Guidance and Outlook: G8 Transition, Margin Path, and Growth Drivers

Looking ahead, management’s guidance centers on the G8 launch, the timing of deferred orders, and the trajectory of margins and growth. Commercial shipments of G8 are expected to begin in late February 2026, with a two- to three-quarter transition from G7 to G8 and modestly higher hardware pricing. A key expectation is a materially higher PTT attach rate compared to the G7’s ~11%, supporting richer per-device economics. Some first-quarter product revenue is anticipated to shift into the second quarter, particularly delayed U.S. fire and hazmat orders that are projected to flow through in the second and third quarters. Product gross margin may dip a few points during the G8 ramp, but management targets hardware margins above roughly 40% into late 2026 and 2027 as the new platform scales. The company is investing in a second SMT line later this fiscal year, with single-digit-million capital expenditure and inventory build to support the ramp. Underpinning this outlook are strong current fundamentals: record ARR of $84.5 million, full-year revenue of $150.5 million, positive full-year adjusted EBITDA of $6.1 million, consistent net dollar retention of 128% over 10 quarters, solid liquidity of $76.4 million, and a scaling ADNOC deployment that could reach about 28,000 devices over roughly two years.

Blackline Safety’s earnings call painted the picture of a company transitioning from high-growth challenger to a more mature, profitable platform business. While investors must navigate near-term noise from macro uncertainty, extended sales cycles, suppressed hardware demand, and the G8 production ramp, the underlying story is one of expanding high-margin recurring revenue, strong customer expansion, and growing international traction. With a strengthened balance sheet, a major new product platform on the way, and a marquee ADNOC deployment ramping, Blackline appears positioned to sustain profitable growth, making the name one to watch for investors focused on connected industrial safety and SaaS-driven business models.