Looming CEO Change Doesn’t Slow BlackLine

 The big news about BlackLine Inc. during the second quarter was that founder and Chief Executive Therese Tucker announced she would step down from the head position effective at the start of next year.

The day before Tucker made the announcement on Aug. 6, the Woodland Hills accounting software developer’s share price hit a 52-week high of $94.06, a price that has since been eclipsed early this month.

Rob Oliver, an analyst with Robert W. Baird & Co. Inc. who follows BlackLine, said in an interview with the Business Journal the rise in stock price speaks well to the job that Tucker has done.

A typical problem with small to medium sized business led by their founder is that they don’t want to share responsibility and delegate authority, Oliver said, adding that a chief executive needs to be confident in bringing on talented executives.

“Therese has brought in a tremendous amount of talent into the company over the past two years … from a chief technology officer to a chief marketing officer to a chief customer success officer,” Oliver said.

Also brought on was Tucker’s designated successor, former NetSuite executive Marc Huffman, who currently serves as president and chief operating officer. After the switchover, Tucker will remain as executive chair of the BlackLine board.Recruiting on so many talented executives speaks to Tucker’s legacy as chief executive, the company’s position going forward and the attractiveness of working for BlackLine, Oliver said.

In looking at a chart of BlackLine’s stock price, one could rightly ask what has changed, he continued.

“Some of the manifestations of those initiatives that Therese has implemented are part of the reason,” Oliver added.

The new chief executive announcement came on the same day as the company revealed its second quarter earnings.

The company reported on Aug. 6 an adjusted net income of $11.9 million (20 cents a share) for the quarter ending June 30, compared with adjusted net income of $6 million (10 cents) in the same period a year earlier. Revenue grew 20 percent to $83.3 million.BlackLine’s share price has skyrocketed since the start of the year with an 87 percent increase through Oct. 15 and flirting with the $100 range. On Oct. 21 the share price closed at $97.72.

In a conference call with analysts to discuss the second quarter earnings, Tucker said the change in top executives was part of a succession plan the company has been working toward for some time.“I’m so pleased with all the work that Marc has done to help scale and grow our company since he joined BlackLine in 2018. He’s fantastic,” Tucker said in the call. “This change will allow me in the executive chair role to focus on my passion, product and customers. I’m excited about BlackLine’s future and look forward to this next phase.”Nice numbersOliver and other analysts who follow the company were pleased with the quarterly results, although some showed some hesitation.

Koji Ikeda, an analyst in the San Francisco office of Oppenheimer & Co. Inc., said in a research note that while it was positive that second quarter results beat Wall Street estimates, the reinitiated 2020 guidance came in below what the analysts expected.

“(It) implies a meaningful (second half) step-down in growth, which may be an indication that some of the disruption in BlackLine’s end-market could last longer than other software categories,” Ikeda wrote in the note.He added that there was some suggestion of conservatism built into the 2020 guidance. For the full 2020 year, the company expects revenue in the range of $336 million to $339 million, net income in the range of $27.5 million to $29.5 million or 45 to 40 cents on a per share basis.

According to Ikeda, the consensus estimate for revenue was $338 million while the earnings estimate was 42 cents a share or just below the guidance amount.For the third quarter, Oliver said expectations will be modest.With a quarter of the company’s sales coming from partner SAP SE, a German multinational software company that resells BlackLine software around the world, it is prudent for BlackLine to be cautious about its partner closing any big deals going forward, he added.  “BlackLine has been clear that they do not expect a lot from SAP in the fourth quarter, which would typically be a quarter when they would get a lot from SAP,” Oliver said.