COVID-19 Tailwinds Are Boosting This 'SaaS' Problem-Solver

Teleworking stocks have been red-hot in recent months...

The COVID-19 outbreak has closed offices around the world. As a result, businesses have invested heavily in technology and services to make sure that employees can transition seamlessly to working away from the office.

This spurred an increase in demand for products from video-conferencing company Zoom Video Communications (ZM), e-signature giant DocuSign (DOCU), and for things like laptops and cloud storage. And stocks in such businesses have soared...

But there are still more tailwinds ahead. British Prime Minister Boris Johnson recently told Britons to work from home (if they can) for at least the next six months.

And even though some states and countries have reopened their economies, this telework trend is still in place. Real estate services giant CBRE Group (CBRE) recently said that only 20% to 25% of workers are back in the office. And in New York City, only 10% have returned.

Today's stock is another that benefits from this trend...

BlackLine (Nasdaq: BL) is a $5 billion Software as a Service ("SaaS") company. The company's goal is to transform accounting and finance departments by automating the accounting-close process.

Every company has to close its books each month. "Closing the books" means recording all transactions, making sure the numbers are correct, and producing a set of financial statements. It's a painstaking, never-ending process.

Even before the pandemic, BlackLine had a strong business...

Closing the books is still one area of finance and accounting that hasn't been automated. For most companies, it's still a time-consuming affair using lots of manual Excel spreadsheets.

BlackLine's software eliminates the need for spreadsheets and automates all parts of the close process. It shaves days off the time it takes to close the books every month.

Because it's a SaaS company, customers subscribe to the software over time instead of paying huge, upfront license and hardware fees. So companies both large and small can afford it.

Customers access BlackLine's software in "the cloud" from anywhere with an Internet connection. This gives BlackLine a boost as most businesses' accounting employees continue to work from home through the pandemic. Companies still have to close their books whether they're operating out of a physical office or not.

BlackLine's software is a brand-new solution in the accounting industry... Market research firm Gartner had to create a whole new category for it (which it calls "Financial Close Solutions").

It is a massive potential "greenfield" market, meaning one that's still undeveloped and is wide open for the taking. Market research firm Frost & Sullivan estimates the market size to be $18.5 billion, with 165,000 potential customers worldwide. That's a huge tailwind for BlackLine shares.

BlackLine has around 3,000 customers today, including some of the best-known companies in the world... like Nike (NKE), Hershey (HSY), Costco Wholesale (COST), Coca-Cola (KO), Dow (DOW), and Hyatt Hotels (H). But no single customer accounts for more than 10% of its sales.

What's more, customers love BlackLine's products, and they stick with them...

BlackLine boasts an impressive 110% "dollar-based net retention rate" on its contracts. That means that customers paid BlackLine 10% more this year than last year, even after factoring in all customers that didn't renew their contracts.

This is like the same-store sales metric that retailers report, but better... Unlike retailers' same-store sales metrics, the retention rate doesn't include any new customers added during the year. BlackLine's retention rate has historically ranged from 108% to 120%.

The financial-close market is poised to grow, recession or no recession... global pandemic or not. Every company wants to close its books faster and more cheaply. And they are turning to BlackLine, the leading company in the market, to do it.

Sometimes investing is simple.