Q4 2020 Blackline Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter 2020 Black line earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to participate on that portion of the call simply press star one on your telephone if you.
The required any further assistance. Please press star then share.
I'll now hand, the conference over to your speaker today on it.
Scully Vice President of Investor Relations.
Good afternoon, and thank you for your participation today.
On the call is Marc Hoffman, Chief Executive Officer of Backline Mark.
Chief Financial Officer, and Theresa founder and executive Chair.
Before we get started I would like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans objectives and expected performance.
In particular, our guidance of Q1 and the full year.
We're looking statements within the meaning of the private securities.
So the litigation Reform Act of 1990 day. These forward looking statements represent our outlook only as of the date of this call. While we believe any forward looking statements. We may make a reasonable actual results could differ materially because of the statements are based on our current expectation as of today and are subject to.
Risks and uncertainties.
Putting the stated in our periodic reports filed with the Securities and Exchange Commission income.
The killer, our form 10-K, and form 10-Q, we do not undertake and expressly disclaim any obligation to update or alter our forward looking statements whether as the result of new information future events or otherwise, except as required by applicable law.
Also unless otherwise stated all financial measures disclosed on this call will be non-GAAP, a discussion of why we use non-GAAP financial measures and information regarding reconciliation of our GAAP versus non-GAAP results is currently available in our press release, which may be.
Round on our Investor Relations website at investors day, Lifeline Dotcom and.
Our form 8-K filed with the SEC today.
Now I will turn the call over to Mark to begin.
Good afternoon, everyone and thank you for joining us today.
As I look back on 2020, what began as of year of such promise quickly shifted to a year the tested our resilience and our ability to adapt.
Credibly proud of what Black line was able to accomplish in 2020 as we continued to drive growth scale of the business and maintain a strong leadership position, all while leading with compassion towards our colleagues our partners and of course our customers.
I'd now like to take an opportunity to highlight the initiatives that enabled our success throughout the pandemic.
And that we believe will continue to drive future growth.
First.
Our commitment to serve our customers has grown stronger than ever.
Throughout the year, we showcase just how much we can for our customers with outreach efforts supported by nearly every department and Black line and spanning a variety of programs from education training and development to coaching sessions relief programs and some complementary products and services.
We have received multiple accolades for these efforts, but the greatest reward comes from our customer testimonials.
Hearing how black line enabled a seamless month end close in the face of an unprecedented pandemic.
In these difficult times, we remained true to our founding principles to serve our customers, which has strengthened our relationships and driven expansion of existing accounts.
Very proud of our efforts to serve our customers and our commitment to their success and I believe this compassion will continue to differentiate black one.
Second we invested in key areas, such as talent product customer success, and M&A to make our organization stronger and.
In 2020, we increased our pace of hiring adding senior leaders across the organization and strategy alliances product technology and R&D.
We accelerated our investment in R&D and product innovation, resulting in new products, new functionality and an aggressive product roadmap to maintain our leadership position.
We retained our capacity and services and sales and added head count to our customer success teams driving strong results in customer account growth.
And last but certainly not least we made a strategic investment in our long term vision to best serve the controller with our largest acquisition ever the.
The acquisition of Roumelia marked our entry into the adjacent market of accounts receivables automation and grew our total addressable market to more than $28 billion.
History has shown the company to invest in the downturn are often better equipped to respond to demand when the economy recovers.
We believe these investments have made black on stronger and well positioned to capitalize on an improving macro economy in 2021.
Third we continue to use our expertise to bring value to the market.
When you engage with the customer or prospect around their corporate goals. The conversation changes to a strategic discussion of proven used cases processes that scale and real value creation.
Our modern accounting playbook or Mac offering is one example of how black line users its expertise and leadership to sell value and has been a strong growth lever for us in the mid market.
At or beyond the black event in November we extended this initiative with the introduction of our collaborative accounting experience as a framework to guide customers and prospects of lung every step of their modern accounting journey.
We have turned the insights and learnings from nearly 300000 accountants across more than 3400 customers into leading practices could accelerate time to value and create great customer experiences.
Our ability to lead our customers has continued to generate returns as we land new accounts expand our footprint with existing customers generate goodwill and further strengthen our competitive position.
And fourth we came up with new and innovative ways to virtually engage with and connect to the finance and accounting community.
From Webinars to finance transformation series to best practice summits and strategic client forums, we continue to host educational and world class events that focused on urgent topics such as the remote close in cash optimization.
Our beyond the Black event was our largest virtual of that yet and it was a huge success.
On the Black attracted 12 times as many attendees compared to the in person event, we held last year.
With the nearly 18000 registrants, we had representatives from more than 70% of our existing customers and more than 700 new prospects.
This event is about bringing our community of accounting and finance leaders together to educate them on how modern accounting can support their organizational goals.
Nearly 4000 attendees participated in the SAP P track to learn how to enable financial close excellence within their SAP instance, we.
We had more than 2000 attendees tuned into our newly introduced Black line cash of application breakout session, formerly known as Roumelia cash.
We received hundreds of positive reviews from customers in G tube trust radius, and Gartner peer insights as well as a best in class virtual event net promoter score of 62 for the event.
And of course, the event generated new opportunities and interest from both new and existing customers.
These touch points of enabled us to reach a broader audience in 2020 than we could have in prior years we.
We believe this degree of engagement and awareness will continue to enhance our brand recognition and drive future opportunities.
These initiatives combined with the continued improvement in the demand environment drove another quarter of strong results, we saw momentum across all facets of the business, resulting in better than expected performance for the quarter.
For instance, we continue to see an increasing trend of large deals both new and expansion.
Suggesting companies are committing to large digital transformation projects.
Our existing customers continued to progress on their finance transformation journeys with Upsells Cross sells and the addition of strategic products.
Following three consecutive quarters of large deal momentum we feel good about the pipeline for large transformational deals in 2021.
Our map offering continues to gain strong traction in the mid market map generated a record number of new logos in Q4 the.
Eclipsing the early of record and commanding a higher average sales price.
From a sheer volume perspective, nearly half of our new logo volume in 2020 came from map logos alone.
As mentioned earlier, our map of offering is aligned with our value approach to selling which is making it easier for customers to buy and creating greater consistency for our mid market sales engine.
So <unk> was another strong performer, resulting in its largest quarter to date.
As our sole ex partnership has matured the continues to drive more revenue and a greater volume of new logo adds in.
In 2020 select the added nearly twice as many new logos when compared to 2019.
Whats more now that this partnership is two years in we also started to see account expansion with the sole ex add on business throughout the year.
We have the very strong land and expand model and although the primary goal of the sole ex partnership is to generate new logo adds we expect so lex customers will experience.
Account growth similar to that of our direct customers.
Given the continued progress with this relationship we believe we are of good setup for growth in 2021.
Our new cash application product has generated a significant amount of interest among existing customers.
We signed our first depue joint deals in the quarter as extensions to existing contracts, which allowed for accelerated sales cycles. We also captured a small number of new cash application logos due to the urgent need surrounding cash optimization.
Cash application is the only been available for a short time, but early indicators are strong and we like what we're seeing in the market.
And of course, our partner ecosystem continues to drive new logos and account expansion and we saw that trend continue in the fourth quarter.
Our partners tell us that their customers urgently need help with the remote close in cash optimization.
We believe our partner ecosystem will continue to validate our value proposition and influence key decision makers in 2021.
Throughout 2020, we've seen continual improvement in Q4 marks yet another quarter of increasing activity and momentum, albeit not at the same level, we experienced pre COVID-19.
With that said, we exceeded expectations in the current macro environment and delivered strong Q4 2020 results that we're really pleased with.
Looking to 2021 and.
In January we held on our company wide kickoff of that where I shared with our employees around the globe. How committed we are two of them too.
To our customers.
And to their future success, just as importantly, we laid out our strategy for the upcoming year.
Let me share with you know what I shared with them.
Our strategy for 2021 is the continuing to invest and to build on our long term initiatives to fuel accelerated growth.
From a product perspective, our vision is to improve and automate financing accounting processes to be the most indispensable platform for the controller ship.
In 2020, we introduced new functionality new products, such as cash App and account analysis, and we discussed our vision for the touch was close.
In 2021, we will sustain and extend investments in our existing products and assess the market for adjacent opportunities to deepen our product offering and drive adoption of our platform.
As the pioneer and leader in our space, we take that role very seriously.
As such we will continue to focus on strengthening our competitive advantages we believe our.
Our ability to serve our customers and our commitment to customer success is a huge differentiator for black line.
In 2021, we will continue to leverage our partner ecosystem invest in our customer success teams and use our expertise through offerings, such as map and the customer journey framework to help more companies make the move to modern accounting accelerate their time to value and ensure a great customer.
Experiences.
And of course, we will continue to drive our organization and build the more inclusive equitable and diverse workplace.
We enter 2021 stronger than we were a year ago, and we believe we are well positioned to capitalize on the huge market opportunity ahead of us.
The key to success in this upcoming year is continued improvement in the demand environment true.
Our 2020, we saw this increase and as we move into 2021, we are confident that cfos and controllers of wrestling with the same challenges.
More than ever before.
However, timing of this macro environment will affect everything on.
Our expectation is to continually come up the curve throughout the year.
We look forward to sharing more about our 2021 and long term strategy at our analyst day.
On March nine.
Before we discuss financial performance I wanted to thank and congratulate to reach on building such a strong and unique company.
<unk> started this journey that became black climbed nearly 20 years ago.
The position, we have in our space, our brand reputation market, leading products and customer loyalty are all of reflection.
Of the past 20 years of her life's work.
When I woke up on January 1st.
On a real day as CEO of Black line.
<unk> was the first person to reach out with an encouraging and supported message.
I'm grateful to be in a position to grow this company and incredibly excited to have the front row seat for the opportunity.
And now I'll turn it over to Teresa.
Thank you, Mike and good afternoon, everyone.
I'd like to remind everyone that this transition has been long in the works and has been very deliberate Mr. Hoffman and I are now going on nearly three years of working together so the skills more like a natural next step versus the big change on.
Over these past several years I have seen mark demonstrate great leadership and drive effective change of Black line.
And I have every confidence on his ability to scale Black line as we enter the group's next phase of growth now.
Now that I am in my new role as executive Chair My primary responsibility is to facilitate board discussions and support Mark and of course when called upon by the team.
Always happy to assist with serving our customers and deepening our product offering to areas that will continue to the time and differentiate black line in the years to come.
Finally, I wanted to thank all of the investors and analysts.
Black line on this journey you have all been a major part of our success I have really enjoyed my time as the public company CEO and I have enjoyed meeting with you working with you and I am truly learned so much.
With that I'll turn the call over to Mark Parkey.
Yeah.
Thank you curious mark and good afternoon, everyone.
I'd like to start off by reiterating Mark's praise for our employees and what they have been able to accomplish over this past year.
I am so proud of how black line has been able to adapt lead and show strength and resilience in the year of such unprecedented challenges.
This is a testament to our culture, our foundation to serve and our role as the market leader.
Now onto the numbers.
For the full year 2020, total revenue grew 22% to 351 $7 million.
Given the difficult and challenging environment. This was the good results, we saw on improving demand environment throughout the year and that recovery continued into Q4 to close out the solid end to the year.
Our gross margins remained high at 83% and with the help of work from home mandates for our employees on virtual marketing events, we achieved record profitability and cash flow with $46 million of net income and $55 million on cash from operations.
For the fourth quarter total revenue grew 19%.
This growth represents a decline from the prior year, resulting from the macro environment in 2020.
We continue to see increasing demand with strong elements of growth returning to the business such as on an improving demand environment for large deals.
Continued progress with sole ex and the success of our map initiative.
We remain optimistic about long term growth given the progress that we are seeing across our initiatives and the continued strength and stability in the underlying fundamentals of our business model in the fourth quarter for instance, our international business was 26% of total revenue up from 24% in the prior year.
Revenue from our SAP partnership totaled 24% of total revenue up from 23% in Q3 and as Mark mentioned, we saw revenue from our sole ex partnership accelerate in Q4.
70% of large deals in the quarter involved the partner, which is in line with the prior year and consistent with our go to market model expectations.
Strategic products represented 19% of sales for the quarter coming at debt coming in at the high end of our anticipated range of 15% to 20%.
With solid performances from all of strategic products.
Moving on to our key performance metrics for the quarter. We added 207 net new customers in the quarter for a total of 3433 customers, including the addition of approximately of 100 net new customers from the <unk> acquisition.
As we anticipated our dollar based net revenue retention rate ticked down slightly in Q4 two of 106%.
The macro environment through the year has impacted demand, especially at the high end of the enterprise and limited our near term expansion efforts within our existing customers.
Do you expect demand to return upon market recovery.
In Q4, we generated net income attributable to black line of $13 million.
We generated $15 million in operating cash flow on $8 million and free cash flow for the quarter.
We finished the year with approximately $543 million in cash equivalents and marketable securities.
Over the past several years, we've seen consistent improvement in net income driven predominantly by operating leverage.
In 2020, we accelerated well above trend to a 13% net income margin.
Even with increased investment in customer success, and our technology and product roadmap, primarily due to cost savings associated with the mandatory work from home regulations and virtual events.
In 2021, we anticipate margin compression as we intend to make targeted investments in our public cloud infrastructure to support the integration of Vermillion and capture the large and growing our automation opportunity.
And to build out our services and support team for evolving customer and product mix.
These expenses will ramp through the year and we expect the impact on overall gross margin will be two to three points in the near term.
Additionally, operating expenses vary on a quarterly basis with the step up in the first quarter driven by annual salary increases payroll tax reset on annual kickoff events, we expect.
To generate operating leverage on additional margin throughout the year as we execute on the topline and the demand environment improves.
Finally, we are modeling returned to travel cost in the back half of 2021 from many areas of our business.
This remains uncertain and our business, but modeling the cost gives us appropriate flexibility as the year develops we remain on track to achieve our long term target model.
Turning now to guidance.
We feel good about where we ended the year on our setup going into 2021.
At this point in time, though there is still uncertainty regarding when the broader economy will return to a normal cadence.
As such our approach to our 'twenty 'twenty one guidance remains pragmatic.
For the first quarter of 2021 total GAAP revenue is expected to be in the range of 95.5 to $96 $5 million.
On the bottom line, we expect to report net income attributable to Black line in the range of two 5% of $3 5 million or four to six on a per share basis.
Our share count will be approximately $62 3 million diluted weighted average shares.
For the full year 2021.
Total GAAP revenue is expected to be in the range of 400 of $10 million to $415 million.
On the bottom line, we expect to report net income attributable to Black line in the range of $24 million to $26 million or <unk> 38 to 41 on a per share basis.
Our share count will be approximately $62 7 million diluted weighted average shares.
In summary, we are very pleased to see an improving demand environment and continued execution from the company to closeout of solid end to the year.
We remain focused on capitalizing on the long term opportunities for accounting transformation and driving further momentum in our business.
And now we will take your questions.
Thank you and ladies and gentlemen, as a reminder to ask the question simply press Star one on your telephone.
Let me try a question press the pound or hash key.
One moment, while we compile the Q&A roster.
Yeah.
Our first question is from not them booked with the P. I G. Your question. Please.
Yeah, Hi, everyone. Thanks for taking the question in the great job on the closing.
On a strong year, there I guess looking at the overall partner community.
The tremendous involvement on the overall deal flow.
Maybe as you think about the the sole ex agreement.
Are you hearing most from from customers driving demand and in what areas from a functionality standpoint are you of landing most frequently with and then what's what's maybe more comment on kind of a follow up land and expand.
Thank you.
With regard to sole ex.
We saw continued progress in Q4.
The strong logo adds and so to answer one of your questions. There now what are we landing with where landon sort of with our traditional base to use case.
Helping customers organize of digitize their clothes provide more visibility.
As well as.
Core balance sheet substantiation type of activities, that's the typical land.
Occasionally there are some other unique attributes to it that will land there but.
Our base the use cases of what we land most frequently with select and Thats driven some nice logo volume.
The additional.
A question that you had in there was what are we seeing because we're seeing sort of return an improvement over time, which seems to the month by month reveal itself, a little more and more to us the companies who may have gone to the sidelines during the early time of the pandemic.
<unk> assessed their priorities.
And it seems that investing in digital transformation and some of our customers is just too important to pause and so we're seeing that trend broadly throughout our customers and new customer lands.
And then following up on on some of the investments you talked about the the pace of hiring really picked up and we've seen the number of releases about the the go to market team.
On some parts of kind of back filling from from what you had a.
Responsibility for Mark just curious in terms of the rate on the the quota carrying rep side, and then where do you feel like your capacity adds given the <unk>.
Central for an increase further increase in end market demand in 'twenty. One do you feel like you have to add even more head count there or is it some more kind of support services around customer success.
The sales engineers, the things of that nature. Thanks.
Yeah. Thanks for the question. So one of the benefits we had going into the pandemic is that we had made a very large pattern of hiring into the go to market. We had gotten people, where we needed them and really hired up and started the year with a good cohort of sales leaders and salespeople around the world.
Our focus during the year was really to keep them deployed in the areas, where they could help our customers where they could build their markets and work with partners of demand return and so we're really proud of the retention.
Of that group of people and they remain at the end of the year pretty consistent with where we started the year and so as we put the hiring also in the sales and marketing team came in the customer support organization for serving the customers and success.
Particularly around the account management area as well so as we move into 2021. Our goal was to have the capacity on the strength to meet the demand. So we'll move through the first part of this year with enough capacity and then we'll be hiring sales and marketing teams as we move through the year.
Year at pace with the demand returning I'll also add debt or hiring success in other parts of the business like in our tech leadership and in parts of the business that drove our.
Sort of leadership in products and tech was off of very strong for the year, which were equally proud of.
Alright, well, thanks for taking my questions and congrats again.
Thank you.
Thank you. Our next question comes from Rob Oliver with Baird.
Your question please.
Great Good evening and thank you very much.
And just Theresa thanks to you as well and of.
George working with you as well so just wanted to echo your comments on <unk>.
Okay. Thank you.
And also congrats to Mark Williams on his promotion Marc Hoffman I'll start with you and then I had one follow up.
The the commentary around the partner channel.
Okay. It sounds like it's continuing to evolve really nicely you know Theresa put in a lot of groundwork and building out that part of your channel early on in some of our checks have shown that partners are clearly getting more engaged in the financial suite, particularly Iran. Remote close. So just curious if I know you guys have a pretty loyal cadre of.
Parker's around new ecosystem, but have some of the circumstances of remote close on the pain.
Cause some of maybe the the partners that have been a little less active with you guys to start to get more active and how do you think about the you know.
Of that partner channel of bobbing and contributing in 'twenty, one and then I had a follow up thanks.
Yes. Thank you.
The consistent performance in our partner community in 2020 in Q4, specifically they are involved in a pretty consistent percentage of our largest deals in the quarter.
I think to your point regarding.
Areas of expertise I think largely customers and companies in general even prospects.
In such a unique time sought out expertise and experience and a lot of the people who possess the expertise and experience our either our employees or employees of our partners.
And so with the with the.
The concept of the remote close or having to endure something for the first time I think of drove a lot of.
Hand, raisers and eyeballs towards some of our partners.
Who possess the expertise.
Performed admirably on behalf of us in the.
Of those customers.
I think that it will continue to be a phenomenon that will drive us we tried to take.
And serve our customers broadly with our own talent as well as does that talent from the partner community.
I don't I don't think that will diminish over time, I think it'll be a consistent strategy that will have to offer expertise either through us or third parties to help customers who are engaging in digital finance transformation. The expertise of this year was just unique because it was the first time I think anyone's in the pandemic and the effect on the accounting.
Great. Thanks, Mark I appreciate that and Mark part and I had a follow up.
For you appreciate the a lot of the detail that you gave around the numbers and the thought process on 'twenty, one just regarding the customer count, which again really nice growth for you guys on the customer count, it's really becoming a nice trend here.
That include any.
Organic element relative to Vermillion, and if so just wondering if you could provide any color there. Thanks.
Yes of course, thanks, Rob so out of the little over 200 customers added about 100, where are from the acquisition of familiar.
We had some complementary customers as well as you know.
Those were already included in the numbers. So these were net new from the acquisition and in Q4.
The growth in customer logos was something we were very pleased with.
Great. Thanks again guys.
Thank you Rob.
Thank you. Our next question comes from Matt Stotler with William Blair. Your question. Please.
Everybody. Thank you for taking my questions I guess first.
I'd like to touch on.
Maybe the bigger picture here of a bigger picture question. So Vermilion is obviously, a really solid edition really really interesting expansion opportunity there.
But when you think about the process cycles of your ultimately looking to consolidate and automate.
Whether that's the record report procure to pay quote to cash and Theres a lot. There. So how do you think about optimizing the value proposition for your customers and whats most important to own versus where you can partner to provide that value.
Yes, so we.
I have set of strategy that really revolves around serving the needs of the controller.
And so.
That's an area obviously.
Our original category, creating and leading space that we do quite well, we have great brand permission in that space.
We.
We look at.
Both of the product that we build organically ourselves.
The lens and dimension as well as any further activity. We may perform we provide that same strategic lens to it.
You mentioned a number of areas in there there are of interest to us.
But primarily we're looking to make sure we stay close to the controller.
There's just a great number of areas processes that require additional modernization optimization of automation that we.
We have our eyes on.
We're excited about the future of building a company that can really serve that controller.
Got it that's helpful.
And then maybe one on the competitive landscape, we'd love to just get an update on if you're seeing any significant changes in behavior in this environment, especially given it's a pretty unique environment that you're operating on at this point they've obviously been you know a couple of interesting partnership announcements from the competitive landscape over the past few months I would look to.
Again, any update or color on what you're seeing there. Thank you.
No real.
The meaningful change in the competitive environment.
I would I believe that the demand environment is improving over time.
It spills over to every bucket out there and so I'm sure that the other organizations, who are beneficial to that improving demand environment. We believe that as the market creator of the category leader and a lot of that value accrues to us.
And so the only thing I can.
Tell you realistically in the competitive landscape.
Inertia status quo continues to be the number one matter of that.
We deal with from a competitive standpoint, we win our fair share.
Based on our experience our modern accounting playbook.
As really boosted win rates for us.
Just on.
Sort of proven value.
Our expertise measured across thousands of companies that use our software and Thats really resonating in this current environment and so.
We're pleased with where we stand from a competitive standpoint.
Great. Thanks again.
Thank you.
Thank you. Our next question comes from Alex Sklar with Raymond James Your question. Please.
I also want to follow up here on the on the map program and some of the announcements that you made up beyond the black which seem to kind of build on that and by taking some of those learnings in bundles and moving them up market I'm curious what you can tell us about the early feedback around accelerators and any additional details around catalysts that you teased that though the conference.
Thanks.
Yeah. So thank you for that question and I appreciate your tuning in to beyond the black.
The modern accounting playbook is still in its early innings itself as of.
As a concept for us we've added and the market for four quarters, reflecting us as it is the leader in the space leveraging our experience has driven great customer logo expansion for us when rates are up versus initial inertia of the days to close metric all of these things really.
Really perform it for us so we're excited to begin the journey.
Towards that same expertise leverage into the enterprise and then what you referred to is our.
Our collaborative accounting experience, where we're taking and now packaging.
Of that experience in a way that takes customers where they are on the journey of digital finance transformation and applying our expertise for having the right solution at the right time with the right deliberate well for them.
It's just kicking off.
Realistically in Q1.
The way too early for us to give you any sense of market reception metal.
It'd be something that hopefully will check back with us on in the future.
Okay. Thanks, and then I guess, given kind of where we're four quarters into the map.
Are you seeing any of those early adopters kind of graduated from the initial bundle and taking the additional products is that kind of part of of your confidence behind the the reacceleration of the.
The net retention revenue metric thanks.
The simple answer is yes from.
Coming back to us and looking for expansion in terms of its impact on yes, we see we see really positive influence on the the impact is larger deal sizes uptake of.
The strategic products down in the in the mid market like of transaction matching. So those are positive trends that we think that comes from that leadership to that program.
Those are happening.
Great. Thank you.
Our next question comes from pad, well valence with J M. P. Your question. Please.
Oh, great. Thank you.
So mark I have sort of a big picture question for you which is.
So when I covered you at net suite you guys were.
Really good in the S M D.
And you had to make your way up market right and you had that whole capturing the subsidiaries' first approach.
But of Black line sort of really good at enterprise and you'd make it your way down market. So I'd just love to hear your.
Thoughts on how those are different and what you've.
And what you're applying.
Yes.
Yes, Thanks Pat.
Yes.
I would say that black line is in.
It is a premier product a premier solution.
And we serve some of the largest organizations in the world at scale.
Okay.
And so what we build is that sort of class what we strategically done is taken in fine finding ways to drive a very efficient delivery.
Deliverable based on that same technology set and then our experience to apply it to.
Our mid market company of mid market organization.
Wouldn't necessarily say the SMB companies in that now.
That said.
That is a really inefficient way to bill.
The company and so.
We operate in the traditional mid market segment, we try to win company's debt.
Yes.
The revenue size and complexity that we have great value for and we try to make sure. We win the right logos customers that are well backed high growth companies and get them on their way up and then we can serve them.
For in essence of their lifespan.
And how do you I'm sure there are exceptions, but just sort of generally speaking how do you draw that line.
Well the.
Yeah.
I think we're good at understanding what we do really really well and what we've done and we have a good discipline in our go to market organization.
We're really aware of how we spend our money and spending.
The SaaS organization spend a decent amount of money on sales and marketing you know that very very well, Pat and spending that to chase after somebody who's not going to stick with you on love you for a long time is probably not the most efficient spend and so I think we're really disciplined at it.
Usually it's based on the complexity of the customers organization measured and the accountants.
The type and complexity of the ERP environment in the type of work that they do.
Great. Okay. Thank you.
Thank you. Our next question comes from Josh Beck with Keybanc. Your question. Please.
Thanks for taking the question team.
Go back to some of your earlier comments around digital transformation, certainly I think.
Early in the pandemic it certainly got put on the backburner and more front office collaboration types of of.
Of project, probably took priority, but it feels like maybe as we went through the year. There was a change there. So just curious if that's what you saw and then as you enter <unk>.
The one would you describe the because you did say that certainly you felt like you were to area of strength.
That more or less it's at.
The similar or higher priority to where it was pre COVID-19, but just would like to hear some of the antidotes the feedbacks that you're having with your customers on that topic.
Sure. Thanks, Josh.
I think it's a little premature to try to identify where it is versus pre COVID-19.
But what I can tell you that from the experience in talking to our customers and prospects and talking to our sales team and leaders.
Is a gradual improvement over time and customers returning to the marketplace and per Reprioritising, where they spend their money there was a number of people who.
I went to the sidelines, if you will post pandemic that existed throughout the quarter, we saw some of them start to return.
On.
Two the having these priorities in Q4, we were the beneficiary of that from the demand environment, improving and we see that continue on a forward looking basis, and our pipeline and our opportunities our sales teams.
Excited about heading into 2021, having people come back having people prioritize digital finance transformation.
And I made the statement earlier, because we heard it in a couple of times from our customers.
In virtually the same words the digital.
Ransford nation of finance.
Was too important and too big to pause and so they took a pause a re.
Prioritize what they were going to invest and spend money on and then have returned.
Okay. That's very helpful. And then I'm just curious with Roumelia on now that you've had it under.
On the umbrella of a little bit longer.
What has been maybe some of the the synergies.
Go to market right now.
It's very early but just would be curious there and then just anything you can share on the maybe revenue how we should be thinking about that from the 1 billion of as we go through the year.
Great Yes.
Still early as you mentioned and I have to say first off that.
You know when you buy an organization you by obviously the intellectual property in their brand and all of these things, but you also.
You acquire a team of people, who really loved the team that we got as a part of it.
We started out really purposely focused and concentrated on.
On their cash application business that they.
They had in the market and we put that in the hands of our sales team.
Early and we drove collaboration with our sales team.
Around that with their existing sales team and sort of an overlay of fashion. So we view that as a product to put in to the distribution organization Thats more of AST and.
Global in nature, the Black line.
Beyond that we also wanted to make sure. We took advantage of our largest conference of the year beyond the black where we really highlighted cash application.
Accounts receivable by Black line.
And we had 2000 attendees at the B on the Black session that we have we mentioned that were already transacting, there and we feel.
Cautiously optimistic I would say that the trends that we're seeing in that business with the collaboration of our sales team with their expertise is going to really pay off for us the <unk>.
Most of the acquisition was effective the first day of the fourth quarter, we didn't expect it to be material in the quarter and it wasn't to our overall revenue growth.
However, it did beat our expectations, we were out of the gate pretty quick we've been Super pleased with the performance in the market and.
We did get better than expectation, but.
Given the purchase accounting rules, it's not material to our growth rate.
In this in that period.
Really helpful. Thank you.
Thank you.
Our next question comes from Mike Mark Murphy with J P. Morgan the question. Please.
Hey, Good afternoon. This is Matt Coss on behalf of Mark Murphy. Thank you for taking my questions.
Maybe just to follow up on.
Yeah, Josh this question about Roumelia it.
You said it is not.
No meaningful or material to your growth rate, where you're talking about in Q4, only or was that also for for 2021.
Yes, Thanks, Matt.
We said this before too as debt.
It's not material in Q4, nor do we expect it to be a meaningful contributor in 2021, given the purchase accounting rules, we think that as we move into 2022, we will see the contribution from that acquisition at the top end, we are investing in that business that is a part of the.
The.
The margin expectation in our guide.
As we move forward.
Got it got it Okay, and then given the acquisition of Emilia should we expect any difference in the mix.
Of the services component of your revenue for 2021 or should it be kind of similar to what we've seen historically.
It's going to be similar youre not going to see the same acceleration in our services revenue that we've seen in the last couple of years. It will moderate in this upcoming year, we mentioned that as a percentage of our revenue and customer mix, we like it in this range and some of which would expect to see that again this year.
Roumelia as a.
The business model is very similar to black line, whereas high subscription high renewable high retention rate and <unk>.
Small services.
Got it Okay and then.
Last one are there any changes.
You described a lot of the hiring that you've done and put in place last year, but are there any changes you expect mark Williams to make as your new Chief revenue Officer.
The short answer to that is no.
Mark is of a very experienced and disciplined sales leader.
He is going to continue to execute our multi year growth initiatives. He added to his team with by hiring a new leader for <unk>.
On large partnerships and select we announced that.
In terms of staffing changes go to market changes I would say nothing substantial there.
More of the same that the things that we're working for us before the pandemic the things at work to help us get us through the pandemic the the things you'll see in 2021.
Okay. Thank you very much thank.
Thank you.
Thank you. Our next question comes from Terry Tillman with true. It your question. Please.
Hey, folks at the David under holding on for its already comment on.
So just going back to spend I know, we've talked about on a bunch of share in the Q&A session.
Definitely the investing smart I believe of election out of the mid point of your sales and marketing long term target and I know you're being prudent with your forecast and also focusing on growth, but just thinking longer term about G&A efficiency opportunities maybe as you look out 12 to 24 months. So I'm just trying to get a handle on the sports side in terms of.
Synergy opportunities in striking that delicate balance thanks.
<unk>.
Yeah. Thanks. Good question, our look we think that economies of scale and as we continue to build.
On our global infrastructure and support which we think is world class today to support our growth of around around the globe that will get <unk>.
Synergy and economies of scale over time, and the G&A and that's why when you look at where it is today versus where our target is that's a big area of incremental operating leverage as we move forward.
Okay understood. Thanks for that and then so I know you just did the big acquisitions, obviously, we're talking about insurance rate.
Youre very selective on you do have the healthy balance sheet. So just wondering broadly your view on the product opportunity set of the marketplace. The complementary offerings and just generally how you're seeing valuations out there in the marketplace at this point of the recovery. Thank you.
Yes, I'll start.
We continue to believe that we have of complete product set operate really well in financial close with a very large opportunity that remains new and unpen of traded so theres, an incredible amount of headroom for us to invest and what makes us great in those products that are today ready and.
The market.
The a or automation was an example of Mark's strategy. He described earlier about being able to serve as the place for the controller.
Within the financial close as they go through this macro trend of digital transformation.
Earlier someone asked about the cycle management processes. That's exactly the process you would go through if you were of controller you are working from a place of the financial controls looking at these different cycles and trying to automate them similar to the ones that we do our view is that we're investing in our platform today.
A lot of that is to drive innovation, we are innovating now more than ever and.
And we are willing to do acquisitions, where it makes sense to serve our customers on to drive that strategy of serving the controller.
Excellent. Thank you very much.
Thank you.
Our next question comes from Chris Merwin with Goldman Sachs. Your question. Please.
Hi, Thanks, very much for taking my question.
So I wanted to ask about the the partner ecosystems involvement.
With Roumelia net and that opportunity for you obviously, you have long standing relationships.
With the core financial close how much of the partners, helping right now and educating companies about the automation.
Automation opportunity and is that an area, where you can invest more to.
The push them as you think about selling this product into some of your larger customers. Thank you.
Yes. Thank you so it's interesting.
The answer to your question is yes, they are integral to the strategy of roumelia in educating the market and providing services and expertise.
The reveal yes.
As you May remember from our announcement was the UK based company and they had great of awareness and traction in Europe, and so there was a slight nuance to the partnerships not being just directly overlap. The hours. There was a couple of Oregon organizations really successful organizations that they were better aligned with which we believe will start to <unk>.
Draw some synergies with our.
Category, leading close process automation space Alternatively.
What we really liked about it was black Knight's strength in brand awareness and customer.
The portfolio here in North America, and the fact that we have some of these low.
And productive.
Advisory firms that we work with and the ability to now have them assist in providing more reach more expertise per client is something we're really really excited about.
Great. Thanks, a lot mark.
Thank you.
Thank you.
And our last question comes from Bank of Beijing with the Piper Sandler. Please go ahead.
Hi, guys. This is Hannah Rudolph on for Brent today. Thank you for taking my questions first I wanted to ask about what pipeline build was like coming out of beyond the black relative to prior years and thus far how on.
The pipeline close rates trending.
Relative to historical rates with in person conferences.
Yes.
It's a great question, we spend a lot of time and the analytics around that its still early were.
We've built a pipeline.
Beginning of the at the very front of the Covid, but look what we saw in Q3 and Q4 was improving.
On close rates and pipeline behavior, better consistency and the virtual.
We started to see things that are very promising on a great potential we've been efficient in the marketing and sales organization through throughout the year.
We are actually confident and feel good about the level of interaction and dialogue on demand that we've put into the pipeline.
Alright, that's super helpful. And then clearly there's a tremendous opportunity here to modernize the back office and it seems like 2021 could really be at the beginning of this major upgrade cycle. So I was wondering what are you. Most excited for in 2021 and do you feel that there are any underappreciated levers of growth going into the year.
And on I think you said that very well thank you.
Equally excited about there's a tremendous opportunity I don't know if its the.
The first step or not I can just tell you on behalf of all of the employees I have talked about I think 2021 is kind of be a year of change.
Yeah.
Perhaps.
This will be the year, where we see progress made against this pandemic.
So people I think are really excited about more traditional means of working together, even though they are prepared to continue to operate in this unique model that were in the.
The return of the normal economic cycle, the return of our the continuation of I guess of the improving demand environment.
Everybody has really rallied around the initiatives that we have as the company.
We took a lot of effort in 2020, making sure that our employees and our customers were cared for I think we built the great bit of loyalty around that.
They're ready for an improving demand environment and to execute the plans that we have in place.
Great. Thank you.
Thank you.
Thank you and this concludes our Q&A session for today I would like to turn the call back to our CEO Marc Hoffman on for his final remarks.
Thank you and thank you for joining us today.
We appreciate your ongoing support of Black line.
And to continue with the tradition that was established by the founder of <unk> I'd like to remind you all of you and ask that as you run into them refer your portfolio of companies to Black line, and we will take really good care of them.
We're excited about the opportunities for accounting transformation and driving further momentum in our business. We look forward to continuing this discussion at our analyst day and other of Investor events during the year with you. Thank you.
And thank you ladies and gentlemen, that's all of your participation in today's conference you may now disconnect.
Hello.
The.
Thank you.
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Okay.
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