Q2 2022 Blackline Inc Earnings Call
Good day and thank you for standing by welcome to the second quarter 2022 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 ask a question. During the session you will need to press star one one on your telephone please be advised that today's conference is being recorded.
I'd now like to hand, the conference over to Matt Humphries, Vice President of Investor Relations. Please go ahead.
Good afternoon, and thank you for joining us today with me on the call with Marc Huffman, Chief Executive Officer of Black White, and Mark Partin, Chief Financial Officer.
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 for Q3 and full year 2022, our forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Yeah.
These forward looking statements represent our outlook only as of the date of this call.
While we believe any forward looking statements, we make are reasonable actual results could differ materially.
Because these statements are based on our current expectations as of today and are subject to risks and uncertainties, including those seeded in our periodic reports filed with the Securities Exchange Commission in particular, 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 a result of new information future events or otherwise, except as required by applicable law.
Also unless otherwise stated.
Our financial measures disclosed on this call will be non-GAAP .
A discussion of these non-GAAP financial measures and information regarding reconciliations of our GAAP versus non-GAAP results is currently available in our earnings release.
Which may be found on our Investor relations website at investors that black line Dot com.
In our form 8-K filed with the SEC today.
Now I'll turn the call over to <unk>, Chief Executive Officer, Marc Hoffman.
Mark.
Thank you, Matt and good afternoon, everyone. Thank you for joining us today.
We saw solid performance across the business this quarter, even in the face of rising global economic volatility.
Teams executed well and delivered revenue of $129 million.
Representing a year over year growth of 26% an acceleration from last quarter.
Additionally, we ended the quarter at $500 million.
Annual recurring revenue.
This strong quarterly performance was driven by the strategic investments we've made across the business centered around our top three priorities customer engagement and success platform innovation and expansion and growing our international presence.
All three continue to play a critical role in driving long term growth.
Taking a step back from our Q2 performance, we recognize that businesses around the world.
Again are experiencing a challenging operating environment due to a variety of macroeconomic and geopolitical circumstances. These challenges manifest themselves are acutely within the back office, where manual legacy processes still dominate.
Over the past few quarters.
We've seen an acceleration in digital transformation initiatives.
There are still far too many businesses running manual processes, which create unnecessary friction limit strategic decision, making and expose companies to unnecessary risk and missed opportunities.
Taking all of this together the cost of doing nothing is rapidly rising.
For black clients, specifically the demand environment for back office automation software remains resilient.
With pockets of noise.
Through ongoing customer interactions prospect conversations and partner insight, we can receive real time insight into where the market is where it's going and the challenges our customers are facing.
As a result of these conversations we expect that near term growth may be influenced by broader market conditions, including the possibility of lengthened sales cycles. Despite these potential conditions, our confidence in the longer term opportunity remains strong.
Our go to market and customer success teams are fully engaged with our customers prospects and partners focusing on the value that our solutions provide and how they can be leveraged quickly during volatile periods like today.
In one such case this quarter and middle market, North American reinsurance customer was having serious challenges with their financial close audit and statutory reporting processes. These challenges were exacerbated by staffing shortfall and a heavy reliance on manual work.
We were able to demonstrate the value of our core financial close products and how they could leverage these quickly through our map program, improving close efficiency and accuracy, while enhancing their control environment through automation saving countless person hours and freeing up staff to focus on strategic work.
Our expansive customer footprint across industries, and geographies provides a level of natural resiliency and diversity to our business, which is especially important when faced with a more uncertain operating environment.
This in turn gives us confidence in our pipeline as we consider a range of macro environments that could occur in the second half of this year.
No we haven't seen any material changes to our business or the demand environment. Thus far we're taking a pragmatic approach to how we are positioning the business for late 2022.
Our updated guidance is an output of our approach and Mark will walk through this with you shortly.
To that end, we are placing additional rigor on the scope of investments we are making we.
We do not plan to slow down or reduce investments into our strategic initiatives, particularly those that drive long term growth and extend our competitive positioning like our <unk> migration, which remains very much on track.
Innovation of our platform.
We are however, enhancing the rigor and discipline around other planned investments.
Our ability to toggle these investment choices without impacting our long term strategy is vital to our success. It gives us a level of financial flexibility that many others may not have.
Our proven ability to invest through various market cycles and delivered continue innovation in the market as a key differentiator and further strengthen the trust customers and partners housing Black line.
Looking ahead, we remain focused on hiring talented individuals that can accelerate our growth globally.
We've seen time and time again companies that lack of discipline and reducing investment in capacity during periods of uncertainty only to come out on the other side unprepared to capture growth in an economic recovery.
Our goal is to balance this approach with targeted hiring across the business and in geographies that we feel will accelerate our long term growth profile.
To sum it up we expect to maintain a responsible level of investment into our business and our people we expect to generate further operational efficiencies from these investments as we move through the back half of this year and into next.
And we will position ourselves such that when the global macroeconomic environment becomes a bit clearer, we will be executing from a position of strength.
With these considerations in mind lets review, our Q2 highlights and dive deeper into our results.
Total revenue in the second quarter was $129 million.
Up 26% versus the prior year with net revenue retention at 110% up four points versus last year and steady versus Q1 of 2022.
Customer expansion growth and further up sell of our strategic products drove higher average deal sizes for.
For reference our average deal size increased to 125000 this quarter up from 112000 in Q2 of 2021.
Additionally, we now have 43 customers that generate $1 million or more in <unk> up 48% year over year.
Revenue performance from our enterprise business was in line with our expectations and delivered solid year over year growth across geographies.
However, bookings were slightly lower than expected as a few larger deals that we expected to close at the end of the quarter were delayed.
We're actively pursuing these deals remain engaged with the customers and partners involved to close them in a timely manner.
Our middle market business showed strength once again, reflecting the key investments that we've made across our go to market teams and into our strategic partner network, especially in EMEA and Asia Pacific.
New logo growth in the middle market was healthy, bringing our middle market customer count to over 2000.
We're seeing a higher average deal sizes and very healthy competitive win rates globally.
Strategic products had another strong quarter led by the demand for innovative solutions solving some of the most complex customer problems.
We saw some great wins, this quarter and intercompany, including a large global consumer company, who chose to deepen their relationship with Black line.
As part of their multi year financial transformation project. This customer realized that there were significant risks with there.
Our existing intercompany processes and had no clear solution our road map to resolve this.
Leaning on our go to market and solutions team, while leveraging our existing partner network, we were able to deliver an accretive solution that adds strategic value to the company, while minimizing the risk that they face every day.
<unk> ability to expand within our existing customer base and cross sell at market, leading strategic products is a key tenant of our long term growth agenda.
Evident in our recent NRI results.
You should expect us to focus resources here to drive customer penetration higher.
We also saw some notable wins in competitive takeaways and our automation and one example of new customer who is a leading logistics and transportation operator focused on global supply chains was looking to replace their existing solution.
Over the past few years, they had recurring challenges across basic collection tasks to laying internal processing timelines, which lead to missed deadlines and as a result poor customer experiences.
Our go to market teams were able to drive home the value that black line modern AI solution provide while offering additional solution that the customer could leverage as they grow and expand their own business.
Being a strategic partner to customers is critical especially in today's environment.
Also important are the partners, we leveraged globally to help us expand our reach and win new business and this quarter. We saw some great wins, where we leveraged our extensive partner network to solve complex requirement for customers around the world.
In one such instance, we leveraged our SAP select partnership to land one of Europe's largest telecommunication providers that was running multiple legacy systems as a part of their reconciliation processes.
They wanted to simplify their existing technology footprint.
Proving efficiency visibility automation and control across their business.
They also wanted to operate more strategically proactively managing our business and enhancing their and control environment.
With our partners, we are able to provide a comprehensive set of solutions that are aligned to their objectives and their technology road map, while delivering an attractive ROI and much lower PTO than their previous experience.
All in a great example of how we leverage our partners to expand our reach into new customers and markets.
And another example, working with our partners again, we were able to land one of Europe's largest automobile manufacturers.
The customer was embarking on a multi year digital transformation process and had a very clear strategy for their back office of the future.
Not only were they looking for more advanced reconciliation capabilities, but we're intent on driving further efficiency through process automation.
We had a very consultative RFP, we were able to build trust and a relationship and exceed their complex requirements. We also offered additional solutions.
Outdated and poorly designed processes that were above and beyond the current scope paving the way for a much deeper relationship over time.
To close I'm proud of what our teams accomplished this quarter in the face of elevated market uncertainty.
Our results were solid and we believe the investments, we're making will continue to drive favorable results in the business.
The near term may be punctuated by further uncertainty across our customers and markets. We recognize this and are taking a pragmatic approach to position our business appropriately while laying the foundation for our long term growth.
We expect to update you on our long term growth views at our planned Investor day in November which will run concurrently with our beyond the black customer conference.
As part of this will provide an update on our product and solutions positioning and how that positioning drives our long term growth.
We also plan to discuss our go to market strategy and take a deeper dive into our strategic product portfolio, especially inter company.
With that I'll turn it over to Mark to discuss the details of our financial performance and our outlook.
Thank you Mark and good afternoon, everyone.
Our second quarter financial results were solid led by the continued execution against our growth initiatives further customer expansion upsell of strategic products continues to reinforce our long term opportunity that we see.
Additionally, we saw incremental improvements in operating efficiency across key parts of the business and remained disciplined on managing costs in the quarter.
As Mark mentioned, we did see a few slip deals in very late Q2.
While the number was small the deal sizes were larger given the nature and scope of these deals we expect them to close in the near future.
Now, let's review some key results and highlights for Q2.
Total revenue grew to $129 million, representing 26% growth compared to the second quarter of 2021.
With subscription revenue growing to $121 million up 27% compared to last year.
Notably we ended Q2 with $500 million in annual recurring revenue.
In the quarter non-GAAP overall gross margin was 79% and non-GAAP subscription gross margin was 82%.
We added 106 net new customers in the quarter, bringing our total customer count to 4003.
We have 43 customers that generate $1 million or more.
Sure.
Up 48% year over year.
Strategic product performance was strong, especially on the intercompany and transaction matching.
And came in above our expected range of 26% of sales.
Performance here was driven by further upselling activity and execution from our go to market teams combined with solid market demand.
Partners were involved in 65% of large deals up slightly versus last year and consistent with the first quarter.
Our partner ecosystem continues to be a powerful growth lever providing opportunities to win new logos and expand further into our customer base.
Revenue from our SAP partnership remain steady representing 24% of revenue in Q2.
non-GAAP operating expenses increased by 37% versus the prior year as we continued to invest in strategic initiatives and product innovation that fuels, our long term growth.
Combined with continued hiring within our go to market and customer success teams.
Our hiring plan coming into the year was designed to be front end loaded with lower levels of hiring activity in the second half.
Given that we've achieved our hiring targets and have an appropriate level of capacity to sustain our growth.
We expect to see a lower velocity of hiring in the back half of the year.
Further we have been able to leverage our cost base to drive sustainable efficiencies that improve our margin profile.
In services for example, we're leveraging our partner network to take on more Onboarding and implementation opportunities.
Despite lower services revenue contributions in the near term, we see multiple benefits from that first we're able to push out lower margin services work driving higher margin for the company overall.
And second these opportunities provide incentives for our partners to expand and grow their black line practices.
US further opportunities to capture.
Additionally, we're seeing incremental improvements in our sales efficiency metrics.
Focused much of our recent hiring these past three to four quarters and our sales teams.
And as they ramp and mature within the organization, we're able to drive leverage off this cost base.
We expect to see continued improvements in these going forward and as a consideration in our updated financial guidance.
Given the operational improvement mentioned, along with cost discipline, we delivered non-GAAP net income attributable to black line of $5 million above our prior guidance range.
We generated $5 9 million in operating cash flow and a minus $5 1 million and free cash flow.
Free cash flow in the period was influenced by higher capex related to infrastructure build out as well as product and technology spend.
We expect that going forward this outlay with normalized lower in line with historical trends and drive continued improvement in our free cash flow profile.
We finished the quarter with approximately $1 billion in cash equivalents and marketable securities.
Given us the financial flexibility to continue to invest through the cycle and with the long term in mind.
Now before we walk through our updated financial guidance I'd like to provide some thoughts on how we are approaching the back half of the year and the considerations we've incorporated.
As you know we have a highly predictable subscription model with very strong renewal rate, which gives us great visibility.
High confidence into how our revenue growth trends over time.
However, broader market conditions, such as today's macro environment requires us to consider additional factors that could influence our full year revenue expectation.
Pacifically.
The rapid appreciation of the US dollar is expected to be a one point headwind to revenue growth for the full year.
Also we feel it prudent to assume that we will see some elongated sales cycles in the back half of this year and as such our underwriting another point headwind to full year revenue growth.
Finally.
We discussed earlier the continued shift of certain services related work to our partners leading to higher margins for that business.
The impact to full year revenue growth due to the continued shift is also expected to be one point.
We expect that the operational efficiencies, we are generating will continue to drive further margin improvement in the back half of the year.
Reflected in our updated full year non-GAAP net income guidance.
Putting this altogether for the third quarter of 2022.
Total GAAP revenue is expected to be in the range of $133 million to $135 million.
Presenting approximately 22% to 23% growth compared to the third quarter of 2021.
We expect to report non-GAAP net income attributable to black line in the range of $6 million to $7 million.
Or 8% to 10 on a per share basis.
Our share count will be approximately $73 2 million diluted weighted average shares.
And for the full year 2022, we continue to expect total GAAP revenue in the range of $524 million to $528 million.
Representing 23% to 24% growth compared to full year 2021.
On the bottom line, we expect to report non-GAAP net income attributable to Black line in the range of $18 million to $20 million.
Or 25% to 27 on a per share basis.
Our share count will be approximately 73 million diluted weighted average shares.
To close I want to emphasize that we remain focused on our long term growth ambition.
Demand for back office automation software remains resilient and our market leadership diverse customer base and financial position will serve us well as we navigate this volatile period.
And of course, the disciplined effort and execution from our employees globally underpinned our success and is a key asset that we will continue to leverage as we grow.
Now I'll ask the operator to open the discussion to take your questions.
Thank you and as a reminder to ask a question simply press Star one one on your telephone please standby, while we compile the Q&A roster.
Great Good afternoon, and thanks for taking my question here.
I totally understand large deals are taking longer to close we're seeing that largely across most of the software space.
You did see a pretty healthy uptick in million dollar deals.
Deals up 48% year over year relative to the number of customers now crossing that threshold. So maybe could you just take a step back and maybe walk us through what's what's driving larger deal sizes. It looks like you.
User expands we're also very strong in the quarter is the bundle kind of our customers taking larger bundles is it larger initial lands that expands larger just walk us through the momentum youre seeing.
And those million dollar <unk> customers given they are growing about two X faster than overall revenue.
Yes, Thanks, Brian .
If you look back in time, when we IPO the.
The company had one 1 million clients in 2018, when I joined we had seven and since then we've had this is part of our growth initiatives.
The theory being what we do is so mission critical for these customers who have so much complexity that we should be investing in how we grow this space and so this has been part of our growth initiatives all the way back to 2018.
Causing us to invest in things like proper account management customer success investments that we referenced consistently.
As our top growth initiatives the process expertise that we have focused on how we create a journey equally as impressive in my mind is the growth in the $250000 or greater at year spend we have from our customer portfolio and the way I think about it as we land them in our average sales price per ton.
<unk> has increased over the last several years that $250000 or greater population or so.
Those that are beginning a journey with us and going through a journey in at $1 million.
Thinking big transformation and customers, who are really strategic for us. So it's been purposeful speaks to the nature of the criticality of what we do for customers and our extreme focus on it.
Helpful. And then I guess, just one quick follow up for Mark P. As you think about the current environment.
Clearly still facing kind of labor shortages out there, it's still a tight labor market.
Is the narrative of automation resonating with some of these customers are they leading in on on either our automation accounting automation as it means to address some of the short as they are having is.
As cost one of the narratives cost savings a narrative that his resume any sort of shift maybe you've seen there.
And the last couple of quarters it would be helpful to hear thanks.
Look I would I would turn to Mike.
CFO peers.
And so a number of our customers some of many of which we've been talking to recently.
About high ROI products, and the Cfos office, continuing to get priority and I think we see that in a couple of ways. One is we've had a cup.
Couple of Rex.
A record strategic product quarters, and strategic products are the real.
ROI payback high automation things like intercompany and and <unk> and smart close and transaction matching these are ways that companies can really thrive.
Greater.
Capability at a reduced capacity talent management retention of accounts continues to be one of the largest problems in the accounting office and Thats not going to go away anytime soon so they have to make a fundamental shift.
Over the last 24 months it went from hybrid working environment to talent management as part of being able to automate within the account as office and I think we are better positioned today with our overall product portfolio and the team that can help lead accountants through the decisions.
On how to implement automation is.
I think it's as good as it's ever been.
Very helpful color there. Thank you.
Thank you gentlemen for our next question.
Okay.
Our next question comes from Matt Van Vliet with BTG. Please go ahead.
Yes, good afternoon, and thanks for taking the question.
I guess first on sort of the broader partner community.
And then maybe more specifically on <unk> as well.
Anything that youre seeing there thats, gaining more traction as the strategic products section really bringing a lot more of those partners and having them invest in the practice knowing that not only are you, bringing more of the services work to them, but these projects can be very substantial and the ability to push into.
Million dollar plus deals is very tangible now so.
So maybe just talk about kind of which of the strategic products maybe are attracting the most attention from those partners.
Sure.
Answer when you land, a new customer and we continue to observe people who are living in a very manual world.
And so that initial land and then setup of the base use case.
In itself is really critical for us but is not as.
Basically monetize as a consulting practice and so as we get into that journey in the higher automation higher value more strategic products. It clearly is a motivator for partner organizations to build on their practices.
The matching.
Volume in engine that we have the journal entry engine Inter company are three great examples where we see a lot of traction within the partner communities, which.
We have spent a great deal of time training and educating on the value of those products.
Products over the course of the last year or so.
I think the more strategic products, which have the most traction and the last one I would really highlight inter company is.
An area that.
The most significant most complex organizations in the world, who already had these really big embedded relationships with these large consulting organizations. There is a lot of momentum around intercompany in the marketplace from an interest standpoint that we expect we believe we will transfer to demand in the future.
And then when you look at a few of the large deals that you talked about slipping out of the quarter. Here is there anything that you can point to that's maybe a correlation across those.
Great.
And maybe maybe digging in one layer deeper or do you feel like you've already been selected potentially as a vendor and it's a matter of timing getting sort of everything and wind up on the signatures and budget.
Or is there a risk that some of those deals maybe end up going to a competitor given that the sales cycles elongated.
Yes.
I'll remind you it's a great question I'll remind people that the largest statistical competitor is the status quo and so.
In most every case on the top of our list of watch list.
Opportunities that.
Have elongated if you will from a decision process that we've already been selected.
Location of approval process and the complexity around that which.
<unk> tends to change.
Yes.
Happened to be a handful of the larger I think Marc referenced that in his script a couple of those were tied up in select.
So lex relationship is productive.
It's Steve.
Seasonal in nature, it's got some variability to it and we just experienced a little of that.
Alright, great. Thank you.
Our momentum.
<unk>.
Our next question is from Rob Oliver with RW Baird. Your line is open.
Great Hey, guys. Good afternoon. Thanks for taking my question so.
A lot of focus here so far in the call it strategic products and I think rightfully. So it seems like a really big success story for you guys.
And with nice attach rates, which you called out in both familiar and <unk>.
Actually you call that ICA Tonight for Q and that was my question was.
Are you, particularly with that large global consumer company, where you guys already were embedded in where the decision.
Mark Kaufmann was to go with you guys right because <unk> already impacting those decisions and if so how is it relative to your expectations for the year and then I had a follow up for Mark partner.
Sure so with regard to that I start to refer to this now is just our intercompany will start.
Talking about it.
Our user conference in.
Investor Day, as ISN intercompany financial management, and it's the combined organizations, which were looking at is a business unit just to.
As a data point for you we had more bookings through the halfway point in the year of 2022, thus far than all of 2021 and both of the <unk>.
Assets that were in there.
The capabilities have been contributing to that success. So very pleased with it very pleased with where we are on progress on the integration the product road map and planning the distribution strategy, thus far with our intercompany business.
Great. Okay. Thanks, and then Mark for you.
Obviously.
You talked about some of the levers that you can pull on the cost side, depending on different scenarios and certainly profitability outlook.
Is markedly higher but can you just you guys have laid.
Played out some of the untouchables, such as the Google cloud transition and others.
Can you just remind us what are some of the things what are some of the things you can't touch where you do have control over which are more variable costs that you can play with depending upon which of the outcome scenarios that we're seeing in the economy.
Yes, yes, great. Thanks.
Thanks for the question.
We did expect to be more profitable. This year, if we could execute and we are in so our revenue will drop to the bottom line and that helps.
On the profitability with respect to our levers of growth. There's a few that really make a difference I called out one of them earlier and in the sales and marketing where over the last three or four quarters, we have been hiring and investing in.
Our sales capacity and Thats been one of our stated goals and then we ramp up typically at the beginning of the year and then we have today one of the greatest sort of investments in <unk> potential that we've had in our business in many years and so that production will come online over the next several quarters and we will start.
See the sales efficiency coming from that so that's a large one in the second half another one is around this.
Gross margin impact that we mentioned from services, where we're able to drive in Q2, we had a 20% gross margin and we're seeing a high efficiency good pricing power and also a.
Effective and efficient use of the partner ecosystem.
Our belt tightening in G&A, which we are doing.
It also includes.
NRG CP migration the cost optimization and work that that team is doing to maintain a stable and consistent margin, while maintaining that that customer experience and migration is really great. We're on schedule and we're finding ways to de lever on the cost side. There. So those are the big contributors to the SEC.
Half of the year.
Yes.
Really helpful. Okay. Thanks, a lot guys I appreciate it have a good evening.
Thank you Rob.
One moment for our next question please.
Sean <unk> with Jpmorgan. Please go ahead.
Hey, Thank you for taking the questions.
To ask you about the macro seems like you said you are not seeing material changes with you.
It seems like you do expect kind of a potential elongation of sales cycles.
What are.
Those conversations manifesting at this point in time and some of the discussions.
Are you seeing any discussions or people are reassessing their 2023 budgets at this point.
Thinking of cutting them that are maintaining it how should people think about that.
Yes.
I agree with your assertion about our commentary on.
The impact thus far from the macro environment.
I do believe that.
Yes.
And so much of this comes through customer conversation.
We reiterate.
<unk>.
Our prospects and customers as to their priorities.
And the recent interactions that I've had with customers we remain a priority and then multiyear strategic priority and their rollout of Black line again. These are some of the largest most complex organizations in the world going through.
Global Rollouts and modernizing their financial system, so their commitment stays high to that I do.
Do see that people are taking a moment to evaluate what the forward looking priorities are and making sure that they're investing and allocating capital properly I think thats, an ordinary course, it effects our sector as well as the broader economy in terms of what businesses are prioritizing their spend on.
Understood.
The other question I think you kind of answered it but I'll come on to ask one more time.
Inorganic contribution in the 10-Q, it seems like it was a little bit higher for Q1 than we had expected.
And.
And is that it's a single unit, maybe maybe you don't want to break it out at this point they are both doing well, but I think investors are trying to understand kind of the organic.
Growth of the business, how should how should we go about thinking about the organic growth at this point.
Yes. Thanks.
When we set out our annual guidance for the year with respect to <unk> or <unk>.
Our guidance was that the impact of the inorganic for the full year would be 2% to 3% on revenue in our guide and after Q2, we are executing to the high end of that range.
As of.
As of Q2 and sort of year to date. So when you think about the numbers, that's probably the right way to disaggregate it.
Just just to be sure you said, 2%.
Just into the guidance as of Q4.
That's right and we're executing to the high end of that range.
Okay understood. Thank you.
Yes.
Our next question please.
Comes from Alex Sklar with Raymond James Please proceed.
Okay.
Great. Thanks, Mark.
Marc Hoffman after you bought <unk>.
Two years now, but we saw you really expands the functionality into a broader suite. It sounds like more of the same to come within our company now after <unk> can you talk about if either of those kind of business units are becoming a tip of the spear offering for you or are those still more cross sell.
I think our experience.
So the latter question there Alex Thank you.
We've landed new customers to the <unk> suite and cash App specifically.
Been pleased with the progress in our mid market sector.
Specifically on some of that new customer motion, we've got I think some momentum there in terms of our strategy with four Q intercompany and ISN.
Yes, we are.
Helping bring those assets together.
For a complete set of functionality, we're executing well on our product road map such that we have complete trade non trade netting it settlement the real important portions of intercompany.
Management, we're starting to work on.
Interoperability with the important systems of the world like materials management systems that that trade business really depends upon so we can fit into a really complex global architecture, and we remain on track for getting our products through the PQ process for select all of those.
To say that we continue to invest we're staying on track for the broadening of intercompany capabilities and that will be our strategy there.
Got it okay. That's really helpful. So more to come and in the black but.
An S&P they talked about a nice quarter the rise initiative.
You talked about some traction this quarter, but noted some seasonality I'm curious kind of if you could just kind of parse out how that SAP be solar partnership going year to date versus plan.
Yes, I'd say that we're pleased with the partnership that rise initiative continues to be one of the elements that is driving progress both from an actual standpoint and an interest in demand Gen conversation standpoint, So I would say is the benefit.
The sum of the slipped deals that I referred to were specifically larger in nature and things that were partnered with SAP, who selects that have yet to complete in and become part of the Q2 actuals such that that put us.
I would say, it's just slightly behind where I would want us to be at the halfway point in <unk>.
Okay. Thanks for the color.
One moment for our next question please.
Comes from Matt Stotler with William Blair. Please proceed.
Thanks for taking the questions maybe first one just another one on on strategic products service, and we've talked about especially with IC H.
For a while right in that products been around for many years.
But clearly this year there is a lot of strong momentum behind <unk> and kind of portfolio in general I would love to just kind of dig down into what's driving that right. I mean is it more.
Customer readiness to adopt these types of solutions or is it more hey.
They'll have.
More of the pieces in place driving required for <unk> on the intercompany side and are adding capabilities and so now that these products are are more ready.
To really fit the breath of customer needs.
<unk> fees.
More on the internal go to market front in terms of you guys kind of getting that motion really kind of.
Banging away on all cylinders this year or is this more partner buy in and kind of any.
Any elevation of our partner participation in the last several quarters or is it a combination of all of those are I mean, it seems like things are kind of converging on the strategic products, we'll look to kind of get some thoughts there.
Yes, so great question I think it's the latter it's a maturity.
Scenario, where you've got.
Market receptivity, there hasnt been a large focus.
Oftentimes vendors bring education to potential solutions to these challenges and their <unk>.
<unk> was leading the way on that <unk> was an emerging company focused on that and so I think there's a maturity model and the.
The interest and demand in readiness.
Clearly there is a need for it out there if you talk to any of these large companies every single one of the meetings I mean, we talk about their intercompany challenges and there are vast.
It's a more completeness and our capabilities upstream in planning and executing transactions downstream.
Sort of more completeness around the trade and non trade.
So there is a maturity that's going on there.
And then.
Through the acquisition, we bring in roughly 100 heads.
Really capable people great team, who are some of the best intercompany experts in the world.
So I think all of those things combined.
Two.
Get us where we are today and really the excitement that we have and the potential future.
Alright, that's helpful. And then maybe just one on kind of the <unk>.
International business, Alright, obviously, S&P is doing well, but outside of kind of that that portion of international.
<unk>.
But love to get any sort of updates or if youre seeing any different trends or behaviors internationally versus domestic markets any color on the progress with your initiatives there would be helpful.
Yes.
If we look at the halfway point of the year the international.
Performance was good.
We hadn't yet.
There's all of this obviously discussion in volatility in the market and it wasn't.
<unk> to us or material that it was going to be a drag on the international now that said we have some of those slipped deals we referred to that of course are international in nature, but we.
We had good performance internationally, we're happy with our progress and the investments that we've made internationally we continue to.
Grow.
Our presence we could we've talked about taking the modern accounting playbook.
Globally, and we continue to drive growth and mid market, we continue to drive some growth through select internationally as well as our own direct efforts into the non SAP world.
That's helpful. Thanks again.
Thank you one moment for our next question.
It comes from Andrew de Gasperi with Bahrenburg. Please proceed.
Thanks.
Just one on the full year guide thanks for quantifying the impacts, but you've laid out just the one follow up I have is on the.
One percentage point, you laid out with deals getting pushed out I was just wondering clearly you quantified it.
I'm just trying to understand if this is due to the Q2 deals getting pushed out or you're assuming some other potential weakness in the back half as well.
And then I have a follow up.
Yes. Thank you it's both so its Q2 and the timing delay that creates revenue recognition delay and then it's an assumption around Q3 and Q4 as well that there will be some similar impact, albeit.
To a lesser extent.
That's helpful and then.
Terms of the margin guide.
Thanks for laying out.
Assumption there as well I was just wondering when you mentioned that belt tightening on G&A.
And did I misunderstand, but you Didnt mentioned in sales and marketing is that continuing to be invested as originally planned earlier in the year.
Yes. Thank you so sales and marketing has been accelerating its hiring as well as customers team for the last three to four quarters. We began in earnest of Q3 last year, we started to see the accelerating demand in the market, we talked about the need to hire and bill.
<unk> capacity to meet that demand in key areas of the business, including International account management and mid markets and so we did that over that three or four quarters.
Salespeople in our business take a while to ramp to get to a full time production and so the.
The original plan was higher early and then taper in the second half of the year, that's sort of the rhythm of hiring in that group. So we will get the efficiency out of that in the second half.
Alright, thank you.
Yes.
Thank you and I will turn the call back to Mr. Marc Hoffman for final remarks.
I just want to thank everybody for tuning in today.
And on behalf of the management team just thank our employees, who are working very very hard to serve our customers serve each other.
Our customers and our partner for their continued belief and faith in black lines ability to modernize and changed the work that accountants too.
We'll see you next time, thank you very much everyone.
Thank you and with that ladies and gentlemen, we conclude our conference call. Thank you for participating and you may now disconnect.
The conference will begin shortly to raise Johan during Q&A, you can dial star one one.
[music].
Okay.
Yes.
[music].
Yeah.
Okay.
[music].
Okay.
[music].
Okay.
Okay.
Yes.
Yes.
[music].
Yes.
Okay.
[music].
Sure.
[music].
Yes.
So.
Dan.
[music].
Yes.
Yes.