MuleSoft And BlackLine 2 SaaS Plays 'Making It Look Easy' Since Their IPOs

Q1 Analysis

Analysts Bhavan Suri and David Griffin said BlackLine has made it look easy by turning in another solid beat-and-raise performance. The analysts noted that revenues of $1.7 million exceeded their estimates as well as the Street, helped by subscription and support revenues, which were $1.7 million above their estimates.

The earnings per share were $0.03 ahead of estimates and margins increased on the back of the revenue beat, the analysts noted.

The sales beat was attributed to strong global demand for EFCA solutions, execution against the company's 2017 operational initiatives, and a healthy mix of transactions from both new and existing customers.

Reflecting healthy demand from new and existing customers, including both enterprise and midmarket organizations, the analysts noted BlackLine's total customer accounts grew 31 percent to 1,850, total users grew 24.8 percent to 171,423 and dollar-based net revenue retention rate came in at 117 percent.

"We believe BlackLine's ability to displace competing EFCA products is strongly supportive of our view that the company is successfully establishing itself as the clear market leader," the analysts said.

Meanwhile, Suri and Griffin termed MuleSoft's first quarterly results as a public company as solid. The analysts attributed the revenue upside to $3.5 million upside on subscription and support revenues, partly offset by a $0.6 million shortfall on the services line.

The analysts said the outperformance came about due to strong demand across both new and existing customers. The earnings per share beat the Street estimate by $0.05, the analysts noted.

On other metrics, the analysts noted that MuleSoft's customer base increased 26.8 percent to 1,131. The analysts believe increasing deal sizes with net new customers and healthy expansion activity within existing customers was evidenced by TTM subscription revenue per customer growing 32 percent.

Additionally, the analysts said strong expansion within existing customers was also supported by MuleSoft's 116 percent dollar-based net revenue retention rate during the quarter, in line with the range seen over the last several quarters.

The Outlook

William Blair noted BlackLine raised the mid-point of its full-year earnings and revenue estimates, and the second-quarter guidance was above estimates.

"Given the momentum of the business demonstrated this quarter and management's favorable pipeline commentary, we remain constructive on the company's prospects for walking numbers up throughout the remainder of the year," the firm said.

On MuleSoft's guidance, William Blair said the above-consensus guidance for the second quarter and the full year are very achievable, given the business momentum reflected in the first quarter results and the favorable commentary the firm heard at the company's recent conference.

Potential Growth Avenues

William Blair noted BlackLine suggested accelerating interest in its newer Intercompany Hub product. The firm said the company signed one of the largest deals in its history in the first quarter, with Intercompany Hub representing about half of the transaction value.

The firm singled out MuleSoft's partner channel, which contributes somewhere in the mid- to high-20 percent range of new and add-on bookings. The company expects the contribution to grow over time.

William Blair maintains its Outperform rating on Blackline, as it expects the company to maintain its strong momentum in the second quarter, likely allowing for another impressive performance.

"Over the longer term, we are incrementally constructive on BlackLine's positioning, as all signs suggest the company's platform strategy is resonating with the market," the firm said.

On MuleSoft, the firm maintains its Outperform rating, expecting the company to maintain its strong momentum in the second quarter, likely allowing for another beat-and-raise performance.

Longer term, the firm believes the company has all the necessary criteria to become a multi-billion-dollar revenue generator at 20 percent-plus operating margins.

At the time of writing, BlackLine's shares were up 1.89 percent at $32.82 and MuleSoft's shares were edging up 0.41 percent at $22.07.