Blackline Safety Corp.

Thank you for standing by. This is the conference operator. Welcome to the Blackline Safety Corp First Quarter 2023 Results Conference Call. As a reminder, all participants are in lesson-only mode and the conference being recorded. After the presentation, there will be an opportunity for analysts to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, You may signal an operator by pressing start and zero. I would now like to turn the conference over to Scott Boston, Vice President of Finance. Please go ahead.

Welcome, and thank you for joining us. I'd like to remind everyone that this call is being recorded today, Thursday, March 16, 2023. With me today is Cody Slater, CEO and Chair of Blackline Safety Corp., as well as our CFO, Shane Greenick. Before turning the call over to Cody, I would like to note that some of the information discussed in this call is based on information as of today and contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in such statements. For discussion of these risks and uncertainties, please review the forward-looking statements disclosure in the earnings news release as well as in the company's CDAR filings. During this call, there will be a discussion of IFRS results non-GAAP financial measures, non-GAAP ratios, and supplementary financial measures. Reconciliation between IFRS results and non-GAAP financial measures is available on the company's earnings news release and MD&A, both of which can be found on our website, blacklinesafety.com and CDAR. All dollar amounts are reported in Canadian dollars unless otherwise noted. Participants are advised this webcast is live and is also being recorded for playback purposes. An archive of the webcast will be made available on the Investors section of our website. Neither this call nor the webcast archive may be re-recorded or otherwise reproduced or distributed without prior written permission from Blackline Safety Corps. With that, I will now hand the call over to Mr. Slater.

Thank you, Scott. Good morning, everyone, and welcome to Blackline Safety's first quarter 2023 conference call. Today we will be discussing our fiscal results for the first quarter ended January 31st, 2023, which were issued before market opening this morning. To set the agenda for today's call, I will start by providing some high level remarks. Shane will then discuss key financial highlights of the quarter in greater detail, and I'll conclude by providing our outlook and some closing comments before we take questions. After a strong end to our fiscal 2022 year, we continued our momentum into Q1 of fiscal 2023 with total revenue of $21 million, representing our 24th consecutive quarter of year-over-year revenue growth and operating expenses of $18.2 million, which declined over $2 million sequentially. This top-line growth, combined with our execution on achieving meaningful cost reductions in our operations, has continued to lay the groundwork for our path towards positive adjusted EBITDA generation for the company as we exit the fiscal year. As a result, we were able to post our strongest overall gross margins since the second quarter of 2021, coming in at 49%, which benefited from continued momentum in our higher margin services segments. Our total revenue grew 34% year-over-year and generated gains during the quarter across all of our geographical regions. Canada represented our largest year-over-year growth, increasing 69% during the quarter, which is a testament to our dedicated sales team in the region being able to take advantage of a strong energy sector as well as several other markets across a variety of industries. The US region returned to growth this quarter after a slight decline in Q4, improving 36% from the year-ago comparable period. The US region represented 45% of our total revenue in the quarter and has benefited from a robust pipeline and our established sales network in the region. Our rest of the world market saw a 16% improvement year over year as a result of an increased presence in the region and strategic targeting of customers in specific industries, including fire emergency and hazardous materials response, energy, water treatment, and food processing. I would also note that for our rest of the world market in the quarter, the company completed its largest ever order in the Middle East region with a $1 million lifetime value, for one of the world's largest energy and petrochemical companies, marking another blue-chip customer for Blackline that values our world-class connected safety solutions. Lastly, in our European market, we saw an uptick year over year in revenue of 10%, which we expect to continue to improve in the coming quarters, given our efforts to increase our presence in the region. We continue to view our European region as a key market for our future revenue growth. Shifting to our business segments, product revenue of $9.4 million increased 29% compared to the prior year quarter. This increase was driven by our expanded sales network and investment in our global sales team in the prior year, along with continued strong demand generation. Product margins came in at 21%, improving significantly from 10% in the prior year quarter, declining sequentially. driven by lower volume, a significantly lower percentage of sales generated through our leasing program and foreign exchange impact. Looking forward, we continue to see tailwinds for our margins through the remainder of the fiscal year. Specifically, we anticipate the recent price increases coupled with product design improvements and a normalized adoption of our leasing program will drive considerable margin improvement by the end of fiscal 2023. On the service side, we experienced continued momentum and strong growth, with a 39% increase to $11.6 million. This exceeded the 33% growth we reported last quarter, which marked the strongest service growth we had achieved over the past two years at the time. In addition, we generated 34% year-over-year growth in ARR to $39.6 million and recorded net dollar retention of 113%, increasing year-over-year from 103%. The service revenue increase was driven by our software services, which increased 31% to $10.6 million as we continue to activate new devices and experience net growth within our existing customer base. On the rental side, we continued to see impressive growth, resulting in 305% expansion compared to the prior year's quarter to $1 million. We see our strong rental results as a leading indicator of future sales, which bodes well for the back half of fiscal 2023. Our rental team continues to meet heightened demand for our connected solutions in the industrial construction, turnaround, and maintenance markets. Service margins expanded sequentially and year over year, coming in at 73%, the highest service margins achieved by the company to date. Looking ahead, we continue to anticipate that the 15% pricing increase, similar to the hardware business, coupled with greater adoption of our higher value service offerings across our installed base, positions us well to continue to expand our service margins toward the end of fiscal 2023. Lastly, I'd like to highlight our continuous cost reduction efforts and the progress we've made over the past three quarters as we continue our path towards profitability. We recorded total operating expenses for Q1 of $18.2 million, representing a sequential decline of over $2 million. The company's success in reducing costs has been the result of better leveraging past investments in sales and marketing teams and rationalizing research and development costs as we move past the launch of the G6. The step-change improvements in operating costs, along with our continued top-line growth, leveraging our expanded presence in key geographic markets, puts us in a strong position to deliver on our goal of achieving adjusted EBITDA profitability as we exit the fiscal year. I will now turn the call over to our CFO, Shane Grennan, to discuss our fiscal quarter results and financial position in more detail.