Q4 2024 BlackLine Inc Earnings Call
Good day and thank you for standing by. Welcome to the Black Line Q4 2024 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.
Comparisons we make on the call today relate to the corresponding period of last year unless otherwise noted.
Finally, unless otherwise stated our financial measures disclosed in this call.
All will be non-GAAP, a discussion of these non-GAAP financial measures and information regarding reconciliations of our historical GAAP versus non-GAAP results is available in the earnings release, which may be found on our Investor Relations website at investors Aflac Com dotcom.
Form 8-K filed with the SEC today.
Now I'll turn the call over to Black line co Chief Executive Officer Owen.
Owen: Thank you, Matt and good afternoon, everyone. Thank you for joining us on today's call.
Speaker Change: Like you we have seen the devastating impacts the wildfires have had across Los Angeles.
Speaker Change: Our thoughts are with our employees their families and all those affected in the L. A community, including our industry peers partners and stakeholders, who all call this region home.
Speaker Change: While several of our team members have been impacted by the fires and evacuations our operations remain unaffected and we are delivering for our customers without disruption.
Speaker Change: We are providing direct support to our affected employees and are working with local relief organizations to assist the broader community.
Speaker Change: Now turning to our fourth quarter performance Black line met or exceeded our revenue and non-GAAP guidance. Despite notable currency headwinds due to a strong U S dollar.
Speaker Change: We delivered 9% revenue growth in the fourth quarter with a non-GAAP operating margin of 18%.
Speaker Change: Patrick will provide a detailed breakdown of our performance and the specific impact of FX movements shortly.
Speaker Change: As we entered the year, our strategic evolution and momentum remains right on track following our successful beyond the black events.
Speaker Change: Our pipeline has seen healthy growth across multiple dimensions.
Speaker Change: We are seeing an increase in both volume and critically in opportunity size driven in part through platform, our multi pillar opportunities.
Speaker Change: The quality of these opportunities has also improved driven in part by our strategic channel partnerships.
Speaker Change: A combination of higher volume larger deals and enhanced opportunity quality reflects the growing market recognition of our platform's comprehensive value proposition.
Speaker Change: That being said, we did see instances in the fourth quarter were deal velocity, especially in larger late stage opportunity slowed.
Speaker Change: This caused some opportunities to extend into 2025.
Speaker Change: Most of these deals have closed in January and most we expect to close in the coming months.
Speaker Change: We remain optimistic that the momentum that has been building will continue.
Speaker Change: Our new Chief commercial officer, Stuart Bad how it started today and is expected to drive relentless execution across the business.
Speaker Change: His experience with enterprise customers and with our largest go to market partner will.
Speaker Change: We will only enhance and accelerate our strategy and ultimately our results.
Speaker Change: At Investor Day, we shared key strategic initiatives and I am pleased to report substantial progress across these priorities.
Speaker Change: Our journey toward fed ramp certification continues equate to plan positioning us to serve public sector organizations at a crucial time.
Speaker Change: Government agencies increasingly recognize the critical need for modern technology to fulfill their missions effectively and we're seeing promising opportunities emerging in this space.
Speaker Change: One word of caution is the changing environment in Washington D C.
Speaker Change: We are gaining momentum with state and local governments, who are eager to not just adopt our technology, but to partner deeply with black line through their digital finance transformation.
Speaker Change: While our public sector initiative is early I am very pleased with the early momentum we have seen in the large greenfield opportunity ahead.
Speaker Change: Our new packaging and pricing model recently launched are seeing positive early traction.
Speaker Change: Interest began building during the beyond the Black conference even before the formal launch.
Speaker Change: In Q4, we secured an unlimited pricing agreement with an existing customer enabling them to expand our solutions beyond the typical accounting teams and into other areas in the office of the CFO as they move forward on their digital finance transformation, while we're a little over one month in we are tracking to our initial targets and expect that this.
Speaker Change: Multi year initiative will be accretive to our growth.
Speaker Change: On retention, we saw further improvement in our revenue renewal rate, which has been a priority at black line in.
Speaker Change: In the fourth quarter, our revenue renewal rate was 96% and what was a heavy renewals quarter.
Speaker Change: Our enterprise performance was strong at 97% coupled with a notable improvement in our mid market business, which came in at 92%.
Speaker Change: These levels are much more in line with our expectations.
Speaker Change: At beyond the Black we formally launched our repositioned brand and market message solidifying our position as the intelligent financial data platform that powers. The modern office of the CFO.
Speaker Change: Two years ago, we set out to elevate our brand to the CFO.
Speaker Change: The launch of our studio 360 platform enables us to reach that goal.
Speaker Change: This enhanced positioning has also catalyze deeper engagement with our key system integrators and SAP.
Speaker Change: We'll see expanded potential and our go to market strategy.
Speaker Change: So still in its early stages, we anticipate studio a 360 will be a critical growth driver.
Speaker Change: This strategic transformation extends beyond just messaging it represents a comprehensive evolution encompassing our industry focus platform capabilities embedded artificial intelligence and modernized pricing and packaging.
Speaker Change: By delivering enhanced customer value and demonstrable ROI, we have strengthened our value proposition to both CFO and CIO.
Speaker Change: Positioning us to pursue larger more strategic opportunities.
Speaker Change: As mentioned our evolution has driven deeper engagement with partners and we continue to see major global systems integrators, increasing their investments in black line practices and aligning with our platform vision for the office of the CFO.
Speaker Change: We also are focused on increasing our reach to select new go to market partners, while enhancing existing partner relationships.
Speaker Change: For example, we recently entered workdays partner program to continue to elevate our message and reach to CFO and CIO globally.
Speaker Change: In my discussions with their senior leaders, we believe Theyre global positioning and success in strategic industries and markets aligns well with our competitive strengths and strategy.
Speaker Change: We are also focused on deepening and enhancing our strategic relationship with SAP, Our primary go to market partner.
Speaker Change: Given sappy significance to our future growth strategy and accelerating digital finance transformation trends allow me to provide additional context about this partnership.
Speaker Change: Since November we have had numerous meetings to discuss how we can enhance this partnership going forward.
Speaker Change: The focus was on driving even more value to customers as they move to the cloud and stronger results for our companies.
Speaker Change: Let me outline just a few of the items, we have committed to going forward.
Speaker Change: First we have begun the premium qualification process for studio 360, as part of the select program with a formal launch scheduled in the second quarter.
Speaker Change: Coupling our powerful studio 360 platform together with SAP solutions to offer comprehensive orchestration and automation capabilities for Sap's customers globally will resonate in the market.
Speaker Change: Second we have been included in the S. T E. P M package as part of their rise initiative.
Speaker Change: Which is a recommended SAP package for customers planning to migrate from ECC to S. Four Hana.
Speaker Change: As part of this package Black line studio $3 60, and financial reporting analytic solutions will be included and offered to SAP customers.
Speaker Change: Next we launched our SAP catalysts group, which is a dedicated team of black liners, whose sole focus will be on making all aspects of the relationship work.
Speaker Change: We are more tightly aligning our compensation structure to support our solar efforts, especially for those moving to the public cloud.
Speaker Change: Finally, we are jointly positioning finance first is the strategic entry point for ERP modernization.
Speaker Change: This allows for black line deployments before ERP migration, delivering early ROI and customers' digital transformation journeys.
Speaker Change: Early implementation show promise and we expect the sequencing to drive growth in our SAP partnership over the next several years.
Speaker Change: This was not intended to be an exhaustive update of our efforts, but the alignment is quite strong, particularly as we work through a year of significant transition in 2024.
Speaker Change: Turning to broader deal activity this quarter.
Speaker Change: In Europe, we expanded with D E systems, a large global aerospace and defense company.
Speaker Change: Historically, we serve smaller subsidiaries scattered around the globe, but given our performance and platform vision, we along with our partners were able to demonstrate how we could enable their digital finance transformation journey in advance of their upcoming <unk> transformation.
Speaker Change: In North America, we were able to replace a mid market competitor at Snowflake, a new customer.
Speaker Change: This multi pillar deals, including both financial close and financial reporting analytics.
Speaker Change: It was driven by their desire to have a partner that could support them as they grow and scale something our competitors could not match.
Speaker Change: As they shared they knew they had significant limitations with their existing vendor with a great deal of wasted time and lack of capabilities in advanced automation and consolidation.
Speaker Change: Black lines capability to a natural evolution for the customer as they continue to grow a story, we see regularly.
Speaker Change: We also saw further examples of success with both our platform and industry strategy, particularly in financial services at Zilpah, a fast growing European Fintech company, we want a competitive deal and replace legacy solutions as they sought to remove many of the pain points and inefficiencies that had built over the years.
Speaker Change: With a view on scaling their business, even further into the future. They recognize they need to reengineer their financial and operational processes to enhance end to end orchestration controls and visibility.
Speaker Change: This multi pillar and platform deal includes financial close financial reporting analytics and studio $3 60.
Speaker Change: On the solar side, we saw solid performance in our international markets, a key focus area for Black line.
Speaker Change: Specifically, we signed a net new deal with Sandvik Carmack, a leading multinational engineering and manufacturing company based in the Nordics searching for enhanced insights and visibility as well as control across their global divisions Sandvik recognize the complex challenges Black line can help solve especially went online with their SAP landscape.
Speaker Change: Chip.
Also in Europe, we expanded with a leading consumer goods customer in the UK.
Speaker Change: The customer is looking for a modern alternative to an existing homegrown intercompany solution to solve the growing challenges by their finance tax and treasury teams.
Speaker Change: Given our track record of delivering ROI previously this company was keen to adopt <unk> to streamline automate and integrate their intercompany processes.
Speaker Change: In Japan, we signed Tanaka holdings to a net new deal supporting their transformation automation mandates as.
Speaker Change: As part of this deal which included core financial close functionality alongside more advanced capabilities like automated journals, we were able to demonstrate the power of a joint black line and SAP offering to enable future success. We also expanded our Japanese market presence by signing a major automotive manufacturer Bill.
Speaker Change: Building on our successful track record with their North American operations, we developed a comprehensive financial blueprint that addresses their end to end requirements through our partnership with SAP.
Speaker Change: This deal represents a notable breakthrough in the Japanese market. We have historically served subsidiaries, but faced challenges penetrating parent companies. These two wins demonstrate that our strategic efforts in Japan are gaining meaningful traction.
Speaker Change: With that I would like to turn the call over to <unk> <unk>.
Ellen: Thank you Ellen.
Ellen: Ovation remains the cornerstone of our strategy and the primary catalyst for unlocking further market opportunities.
Ellen: Our commitment to technological advancement extends beyond individual product improvements it represents our vision for digital finance transformation across the enterprise.
Ellen: Through our platform evolution, AI integration and enhanced automation capabilities were not just meeting current market demands, we're anticipating and shaping the future of financial operations in order to deliver value to our customers to.
Ellen: To bring this to life our studio 360 launch in November has generated significant market enthusiasm for its ability to orchestrate connect and automate financial systems at scale.
Ellen: Both customers and partners recognize its transformative potential for the office of the CFO and we are accelerating innovation to establish our leadership in this modernization journey.
Ellen: Large fortune 100 companies are already implementing studio 360, and providing additional valuable feedback.
Ellen: The initial response has been compelling customers report saving material time and process administration to the studio 360 is powerful automation and orchestration capabilities.
Beyond the established benefits of our closed solutions, they're achieving further acceleration of close timelines and creating additional team capacity through more efficient workflow automation.
Ellen: These low code orchestration capabilities are specifically designed to get finance and accounting departments, greater autonomy and reducing their dependence on internal resources.
Ellen: A recent example, with an early adopter illustrates this empowerment. After we demonstrated how to set up a single orchestrate workflow their finance and accounting teams independently created additional templates within days to enhance their accounting processes. This exemplifies one.
Ellen: Our goals, allowing customers to control their own transformation journey, and ultimately driving faster time to value and enhanced ROI.
Ellen: Similarly, we have received great customer feedback on how studio 360 is visualized capabilities are able to greatly enhance and improve both visibility into and control their financial operations in a more timely manner.
Ellen: For example through power bi and other visualization tools that are needed just studio 360.
Ellen: Eliminating the need for customers to export their data out of Black line.
Ellen: They cannot only save time and their processes, but also reduced our reliance on third party tools and generate the real time insights that they demand.
Ellen: Our strategic partnership with Snowflake has become a key differentiator, particularly through the integration of their data share capabilities into studio 360.
Ellen: This resonates deeply within our customer base, many of whom are existing snowflake users.
Ellen: The ability to extract insights and analytics from customers existing data infrastructure strengthens our position within the office of the CFO, while enabling expanded reporting and analytics capabilities in the coming months, we will deploy these foundational platform features and as <unk>.
Ellen: Part of the Snowflake partner program expand our market reach.
Ellen: Turning to our pillars financial closed continues to be the primary entry point for digital finance transformation with studio 360 poised to amplify its impact Brian.
Hansen: Hansen this core pillar with advanced capabilities, particularly for our industry focused initiatives by introducing big data matching and high frequency. Reconciliations. Additionally, we're expanding platform connectivity through new Oracle fusion and workday integrations expanding.
Hansen: Studios, <unk> ecosystem, and providing customers more ways to leverage our platform and comprehensive suite of solutions in our financial reporting analytics pillar, we've launched new AI based executive insights featuring real time internal reporting capabilities.
Hansen: And comprehensive generative AI functionality.
Hansen: We've also developed enterprise consolidation capabilities to strengthen our record to report offering positioning us to capitalize on opportunities arising from legacy consolidations solution end of life transitions and broader ERP migration initiatives.
Hansen: Financial reporting and analytics has seen great success in North America consistently ranking as one of our fastest growing solutions, but the compelling value of an end to end close and consolidation package has also resonated well beyond the north American markets our recently.
Hansen: Wave of successful implementations across Japan, and Europe underscores the universal demand for end to end close and consolidation capabilities validating our solutions value proposition across diverse markets.
Hansen: We are seeing increasing demand for our intercompany solutions as organizations face increasingly complex cross border transactions and regulatory requirements at beyond the black customer discussions emphasize the pressing need for solutions that can adapt to evolving global.
Hansen: <unk> and manage their business in response, we're significantly enhancing our end to end intercompany solution with advanced capabilities and deeper integration across our platform.
Hansen: Enabling customers to navigate these complex regulatory challenges effectively.
Hansen: Our strategic partnership amplifies this opportunity, providing a pathway to accelerate <unk> adoption across our shared customer base.
Hansen: Our invoice to cash solutions market leadership was recently validated.
Speaker Change: CS recognition of Black line as a leader.
Speaker Change: We're strategically focused on deepening its integration with studio <unk> hundred 60, which will both streamline implementation.
Speaker Change: And deliver a comprehensive solution that addresses cfo's end to end requirements. The strength of our solution and strategic roadmap is attracting premier talent from competitors further validating our market position and division.
Speaker Change: Moreover, our partners are making significant investments in their practices demonstrating their confidence in our solution and creating additional momentum to accelerate our growth in this strategic market.
Speaker Change: As we look ahead, our innovation roadmap becomes even more ambitious we're not simply participating in digital finance transformation, we have a vision of what the future of finance and accounting should be while we are proud of our achievements thus far they represent just the beginning.
Speaker Change: Of our journey.
Speaker Change: Our commitment to innovation is expected to drive our growth, enabling us to expand our market leadership and deliver real value to customers as they transform.
Speaker Change: With that I'll turn it over to Patrick to cover our financials Patrick.
Patrick: Thank you Terese as discussed previously we are making meaningful progress with our core strategic initiatives building on what we shared at our November Investor Day, while early we expect that as we move ahead this year and into the next the financial benefits from these initiatives will become more notable and begin to accelerate growth towards our updated financial.
Speaker Change: <unk> targets.
Speaker Change: Also our financial Foundation remains very strong characterized by healthy operating margin expansion and a robust balance sheet.
Speaker Change: This foundation enables us to maintain our commitment to innovation, while delivering incremental value to our customers.
Speaker Change: Now turning to our fourth quarter results in more detail.
Speaker Change: Total revenue grew to $169 million up 9%.
Speaker Change: Subscription revenue growth was 9% and service revenue declined 1% in line with our expectations.
Speaker Change: Annual recurring revenue or <unk> was $641 million up 6%.
Speaker Change: We sold approximately two point impact to <unk> in the quarter, primarily due to FX related revaluation at the end of the period.
Speaker Change: Remaining performance obligations or <unk> were up 4%.
Speaker Change: FX represented more than a one point headwind to <unk> growth.
Speaker Change: <unk> was up 5% with similar dynamics from FX.
Owen: As Owen mentioned earlier, we also saw some slowing in deal velocity in the quarter, which impacted both our and <unk>.
Owen: Calculated billings growth was 5% with trailing 12 month growth of 6% FX impacted billings growth in the quarter by one point.
Owen: Our customer count at the end of the quarter was 4443, as we still see moderate impacts to customer count growth as we shift our strategic focus in the middle market are.
Owen: Our revenue renewal rate in the fourth quarter was 96%, reflecting further improvement across both enterprise and mid market.
Owen: Net retention rate or <unk> was 102% this quarter, which included about a two point headwind from FX, we saw stability in price increases this quarter, but a number of opportunities moved into 2025, many of which were multi product expansion impacting at RR.
Owen: Strategic products represented a record 33% of sales in the quarter invoice the cash had a record number of deals in the quarter. We also saw solid performance from smart close.
Owen: Partners were involved in 80% of large deals this quarter with consistency across both new and existing opportunities.
Owen: <unk> performance was below our expectations in Q4, primarily due to the deal dynamics mentioned previously.
Owen: In the fourth quarter SAP partnership revenue represented 26% of total revenue.
Owen: Now turning to margin.
Owen: Our non-GAAP gross margin was nearly 80% with non-GAAP subscription gross margin at 82% in line with our expectations.
Owen: non-GAAP operating margin was 18% as reported FL.
Owen: Capex represented almost a three point drag on our operating margin in the quarter.
Owen: non-GAAP net income attributable to Black line was 35 billion, representing a 20% non-GAAP net income margin.
Owen: We generated $44 million of operating cash flow and $37 million in free cash flow in the quarter, representing a free cash flow margin of 22%.
Owen: And last regarding our balance sheet and capital allocation, we have approximately $886 billion in cash and cash equivalents versus $893 million in debt.
Owen: As planned we expect to begin our previously announced share repurchase program in the first quarter.
Owen: As we look to 2025, several items will shape our financial performance.
Owen: Foreign exchange impacts, particularly from a stronger U S. Dollar are expected to create approximately a one point headwind to our full year total revenue growth rate continuing the trends that we observed in Q4.
Owen: This headwind is embedded in our full year guidance range.
Owen: Additionally, our sustained profitability improvements over recent Arizona resulted a higher effective tax rate for 2025, which is also embedded in our non-GAAP net income guidance.
Owen: With these considerations in mind allow me to outline our guidance for the year.
Owen: For the first quarter of 2025, we expect total GAAP revenue to be in the range of $166 million to $168 million.
Owen: Representing approximately 5% to 7% revenue growth.
We expect non-GAAP operating margin to be in the range of 16 five to 17, 5%.
Owen: And we expect non-GAAP net income attributable to black line to be in the range of $28 million to $30 million or <unk> 36 to 39 on a per share basis.
Owen: Our share count is expected to be approximately $77 7 million diluted weighted average shares.
Owen: And for the full year 2025, our guidance is as follows we expect total GAAP revenue to be in the range of $699 million to $705 million.
Owen: Representing 7% to 8% growth.
Owen: We expect non-GAAP operating margin to be in the range of 21% to 22%.
Owen: And finally, we expect non-GAAP net income attributable to black line to be in the range of 155 to 165 billion.
Owen: Or $1 97 to $2 10 on a per share basis our.
Owen: Our share count is expected to be approximately $78 5 billion diluted weighted average shares.
Owen: With that I'll now ask the operator to open the discussion to take your questions.
Owen: Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone as.
Owen: Please wait for your name and company to be announced before you proceed with your question one moment, while we compile the Q&A roster.
Speaker Change: Our first question for today will come from Chris <unk> excuse me.
Owen: Quintero.
Owen: Morgan Stanley Your line is open.
Speaker Change: Hey, everyone. Thanks for taking our questions here, maybe to start I wanted to ask all in for you.
Speaker Change: I know macro and deal velocity was a little bit lower this quarter, but just curious how execution came in versus your expectations.
Speaker Change: How much youre expecting this macro to continue throughout fiscal year 'twenty five.
Yes, I would say, Chris the first of all good to hear your voice again.
Speaker Change: I was generally pretty pleased with the way we executed in the fourth quarter some of the things that.
Speaker Change: Sorry, I got in the way, we're more customer decisions around timing than it was our inability.
Speaker Change: To close deals and in fact.
Speaker Change: The first five weeks of this year have been pretty positive as we've closed a number of those deals.
Speaker Change: And so I wouldn't say it was.
Speaker Change: Execution from our R&D at all really.
Certainly a little bit of uncertainty a lot of changes going on in the U S market in particular, and where things are going to be a lot of conversations around tariffs and things of that that might have caused a little bit of a pause, but I think those are more timing issues than they are sort of permanent changes.
Speaker Change: Any level I will say.
Speaker Change: Some trips that both the reason I just did overseas the strength of the U S. Dollar is having a little bit of an impact in places like Japan, and Europe, and the U K, where people are trying to figure out.
Speaker Change: To make the economics work a little bit with the <unk>.
Speaker Change: Some of our deals, but again those are more issues that that will work through it in fact, what's interesting.
Speaker Change: As even though there's been some concern about our pipeline internationally has been growing quite nicely.
Speaker Change: Got it that's super helpful and then great to hear.
Speaker Change: Maybe one for Patrick on gross margins, how should we think about the linearity. There I know you have the duplicative costs, but how should we think about the phasing of gross gross margin throughout the year.
Patrick: Yes, Thanks, Chris I appreciate the question so.
Patrick: What you should expect from a gross margin standpoint is slight expansion throughout the year, but for the most part fairly consistent.
Patrick: We are planning to our own piece too deep.
Patrick: Decommission some of the older service centers or service centers.
Patrick: Later this year as part of the GCB migration and that will eliminate some of the redundancy.
Patrick: The other element at work there with gross margin is our fed ramp investment.
Patrick: That is an investment that.
Patrick: We will be about a half point.
Patrick: Drag on gross margin this year, but serve as a significant revenue opportunity in the future.
Speaker Change: Super helpful. Thanks, guys.
Patrick: Mhm.
Patrick: Thank you wouldn't really for the next question is.
Patrick Schultz: Our next question will be coming from the line of Patrick Schultz of Baird.
Patrick Schultz: Hi, Yes. Good afternoon. Thanks for taking my questions. Maybe just first on the <unk> relationship I. Appreciate all the color that you provided I know it starts coming in and having his background at <unk>.
Patrick Schultz: Obviously for Q3 to break for you guys.
Patrick Schultz: It sounds like more collaboration from our go to market and go into making standpoint, just any color on how we should be thinking about the contribution from S. APN quantify but are the right building blocks now in place. So that's relationship that really got right.
Speaker Change: Great question, Patrick good to hear from you I think.
Speaker Change: As I sort of said in the prepared remarks that there was a little bit of a reset as you know there was a lot of changes with an SAP.
Speaker Change: It took a while for those.
Speaker Change: Shares to settle down, but I think if you think.
Speaker Change: Think about the last three months as Theresa I have been spending a lot of time with them.
Speaker Change: And our teams have been spending a lot of time together working.
Really been able to sort of get laser focused on what we need to do in the marketplace.
Speaker Change: Some of the things that.
Speaker Change: We've all been waiting to sort of see as the pipeline building with opportunities.
Speaker Change: Around the move to the cloud and I think this concept of finance first.
Speaker Change: Black line are pushing in the market together serves as well because just doing an ERP migration is a lift and shift doesn't necessarily deliver the value that customers want so we're really being able to show that in a few cases and now get that into into the mind share. If you will in the minds of our respective reps.
Speaker Change: And we just spent a lot of time in each other's sales kick offs and other things to sort of really drive that message home.
Speaker Change: I want to tell you something else yet, but in May we'll have some more announcements on roadmaps and things that we think are really going to continue to accelerate what we're trying to do I think the other critical thing was just getting incentive plans line, allowing better so that were working more cohesively together.
Speaker Change: Support from the top has been nothing short of spectacular at this point in time, so we feel pretty confident that despite sort of that ending 2000 and for the way we would have liked it with SAP.
Speaker Change: All the building blocks are in the right things for 2025 and beyond.
Speaker Change: Okay. That's helpful and maybe one more for passenger you. If I can just could you provide a little bit more color on some of the puts and takes an embedded in the guidance for this year I mean, what type of demand environment and deal execution does the guidance assume and maybe talk about how we should expect growth in that retention rate that's run throughout the year. Thanks guys.
Speaker Change: Okay.
Speaker Change: So thanks Patrick.
Speaker Change: As you think about the guidance.
Speaker Change: Just looking at the sheer numbers regarding the 5% to 7% revenue growth in Q1 with a full year growth of 7% to eight which without FX to be clear would be denied.
Speaker Change: So as you think about that yes, there is a implicit.
Speaker Change: There is an implicit inflection point in the guidance for the year in terms of how we expect to Reaccelerate and exit 2025.
Speaker Change: So that's the way I would think about it just overall mathematically and then to a lot of the things that Owen spoke about and we will speak about a lot.
Speaker Change: Other initiatives from a strategy perspective, they are taking root and taking traction and that is part of the overall guidance.
Speaker Change: <unk> strategy for this year.
Okay.
Speaker Change: Thank you.
Speaker Change: Question.
And our next question will be coming from the line of Koji I cannot of Bank of America. Your line is open.
Koji: Yeah, Hey, guys. Thanks, so much for taking the question I wanted to follow up on that comment on the implicit inflexion in the guide and it sounds like you have a lot of confidence that that's going to be achievable. This year because of the guidance. So maybe could you walk us through what is giving you the confidence.
Koji: The visibility that the inflection is possible in 2025.
Koji: Yes, Hey, Koji.
Speaker Change: Thanks for the question I think what's giving us the confidence is if we sort of think about from September now through at the beginning of February there's just a number of things that.
Speaker Change: Sort of different than the company remember went to recent I stepped into the role we talked about becoming more relevant to the office of the CFO. The way that's beginning to manifest itself now is the quality of our pipeline is really quite strong it's growing rapidly.
Speaker Change: The mix of things that we wanted to see are much more in the Mega enterprise in the enterprise space.
Speaker Change: There is nice diversification from a geographic footprint perspective.
Speaker Change: And the size of the deals are just larger we're sitting on for us what would be a record level of seven and eight figure deals that we feel.
Speaker Change: Optimistic about that we're going to be able to.
Speaker Change: Bring into the organization and so when you start to think about those and these are much more transformative.
Speaker Change: End of opportunities where customers are looking at the broader platform not just a piece of what we have to offer it and so we're pretty we feel pretty good about.
Speaker Change: Whats going on there I think the other things that just sort of matter is what we're doing with our customers you heard us talk about the strong revenue renewal whats driving that well theres a number of things right. The go live velocity is increasing our touch points for our customers, which as you know them all.
Speaker Change: Maniacal about trying to make sure we spend time with our customers that was up 72% those customer touch points year over year.
Speaker Change: Seeing an improvement in the higher mix of well adopted customers that we really want to have our time to start a project from signing to kickoff is down by 40%. Our partners are leaning in in ways that really are helping to get these deals moving in.
Speaker Change: Embraced and even things like Black <unk> University double the number of usage year over year. So when you start to look at all of that feels very good then you get into the progress that we're making in industry. So we had five industries. We launched last year really important to what we were trying to do a proved our concept our belief of the value of industry. So.
Speaker Change: We've just rolled out five more industries. This year that will put most of the company and sort of an industry vertical which is import the things. We're seeing now everybody is talking about delusion that fed ramp space and Thats, certainly a huge opportunity, but maybe some haven't focused on as the state level. Those efforts that are now beginning and things that are starting to show.
Speaker Change: Up in our pipeline and our conversations where local and local and state governments are starting to put much more pressure on hey, what should we be doing to stamp out sort of inefficiency.
Speaker Change: And so we're seeing a nice pickup in those opportunities as well. So you start to look at all of that and you put it together the things we wanted to do the things. We said we would do on November 14th I think it was when we were all together 19th.
Speaker Change: We're that much more bullish on February 11th because of what we're seeing happening in the business.
Speaker Change: Okay.
Speaker Change: Thanks, Owen and just a follow up here if I may.
Speaker Change: We definitely like what we heard at beyond the black from a tax strategy perspective, and pricing and packaging and go to market and so on and so forth.
But hearing some of the commentary on the push deals I've wondered was too much introduced at one time for the end markets really absorbed in.
Speaker Change: That driving some of the push deals as customers are just trying to figure out why.
Speaker Change: What just what did we just hear with Black line and how do we deal with with all these changes from a positive perspective, we think that.
Speaker Change: How are they dealing with all of that change.
Speaker Change: Oh, Yes, I think thats, a great question, because it not only for our customers that's our own our people's ability.
Speaker Change: Absorb everything thats going on in our partners and listen to reason that the product and tech team have rolled out a lot of innovation in the last 12 to 15 months.
Speaker Change: Which has been fantastic, but the ability for everybody to digest that has proven to be a little bit of a challenge.
Speaker Change: It's just the reality that we're at and so we're working very hard to go through what we would call the commercialization process from very beginning all the way.
Speaker Change: To the end if you will and there are some lessons learned and things that we need there's messaging, we need to simplify and clarify.
But.
Speaker Change: If you don't innovate.
Speaker Change: Youre going to die and so we've chosen to sort of get the things we can into the marketplace, but theres definitely lessons learned about how best.
To bring that to the market I will say the other thing.
Speaker Change: Just from a timing perspective, and once we get out of these beyond the black contracts that we won't be doing these in November any longer. It's just too late in the year to have the conversations with customers to sort of get them acclimated.
Speaker Change: And I think thats, probably a lesson learned as well if we really wanted to be able to have.
Speaker Change: These conversations share what we're doing and then work through it with them with our partners.
Speaker Change: Doing that earlier in the year is probably a positive thing for us to move towards.
Speaker Change: Thank you.
Speaker Change: Thank you Juan Melissa next question.
Speaker Change: Okay.
Speaker Change: And our next question will be coming from the line of Steve Enders of Citi. Your line is open.
Steve Enders: Okay, great. Thanks for taking the taking the questions here.
Steve Enders: I guess I want to ask on <unk>.
Speaker Change: Pricing and packaging changes.
Speaker Change: They even starting to rollout to customers I guess, what's kind of the impact of those conversations so far and maybe how are you kind of thinking about what that means for potential.
Speaker Change: Revenue impact or potential.
Speaker Change: Impacting the model as we think about how the year comes together.
Speaker Change: Yeah, Bob I'll take the how it's being received in the market and then Patrick if you remind just talking about the some of the economics on it so.
Speaker Change: As a reminder, we're shifting to this model of changing pricing and its based upon the concept of the number of transactions. The amount of revenue company has the number of ERP as they work with and the number of legal entities.
Speaker Change: And so clearly it's one of these things that the bigger your company generally it seems to apply a little bit better we officially launched in early January.
Speaker Change: The reaction has been positive it certainly it helps to standardized and simplified pricing and gives us.
Speaker Change: Limited pricing agreement for our customers, which they they generally seem to like so far.
Speaker Change: It gives us flexibility as we work with our customers.
Speaker Change: To expand with them as they grow but also importantly, as we've learned already the ability to get into other parts of the organization beyond pure accounting matters.
Speaker Change: Beyond the pure accounting team and so as we think about again, becoming more relevant to the office of the CFO. We're seeing this as a positive development. We do expect it to be accretive as we move forward early adoption again, we're only five weeks into the year. We're slightly ahead of where we thought we would be the conversations by and large are.
Speaker Change: Pretty solid.
Speaker Change: I would say, there's always a little bit of confusion with our partners and our people, making sure they're exactly on message, but we're working through some of those quick lessons that we've learned but this is really consistent with what we need to do strategically again, we talked about this it beyond the black of Investor day, the perversity of our pricing.
Speaker Change: Model is the more efficient we make our customers less users. They need we saw some of that attrition in the fourth quarter.
Speaker Change: Some of our larger customers sort of downsized principally because they were using the technology. So well. So I think that's something that we've taken away and recognize we need to continue to accelerate moving to this new pricing model with Patrick could you maybe just talk about the economics of a share yes.
Speaker Change: Oh, and you covered most of it there, but one thing to highlight as part of this overall effort.
Speaker Change: <unk> been running a pilot for the last year to validate a lot of our assumptions about the success and validity of this model, which there are some good lessons learned and we've implemented that on a broader base.
Speaker Change: Keep in mind, though I think there was a question earlier is this too much too fast.
Speaker Change: As it relates to pricing. This is a model we are rolling out over the next three to four years in our Investor base. So that is consistent with the message. When we said at Investor Day, and we do expect to see a cumulative benefit of that as part of our overall account growth over that time as we.
Speaker Change: Achieve our 13% to 16% target model. So that is something that is embedded within the model over the next three to four years and we're rolling that out in Q1 of this year and then also introducing two new logos this year as well.
Speaker Change: Okay perfect.
Speaker Change: That's helpful context there.
Speaker Change: And then I wanted to ask on some of the deal.
Speaker Change: Deal push outs that happened here I guess is there whether maybe frame.
Speaker Change: Magnitude of impact that that may be had an.
Speaker Change: <unk> from like an <unk> or billings perspective, then I guess secondarily with the view of the sales pushing out like how do you kind of view.
Speaker Change: The impact that would have from the year coming together from a new IRR perspective, or the impact that would have on the pipeline development as we think about 25%.
Speaker Change: Well I guess, a couple of things there to reiterate what I said earlier, our pipeline development has been strong for several for quite some time now so that's a great indicator.
Speaker Change: From an overall demand environment perspective, and we don't believe that any of the slowdown in deal velocity at the end of the year was indicative of a slowing pipeline in fact pipeline built even faster.
Speaker Change: So.
Speaker Change: In that regard I don't think thats, an indicator of a broader demand matter.
Speaker Change: One thing to keep in mind when you are.
Speaker Change: I believe it was out there, but when youre thinking about <unk>.
Speaker Change: The largest driving factor in the quarter was FX.
Speaker Change: And it was a two point headwind on each one of those metrics. So that is something definitely to consider.
Speaker Change: When youre doing comparables period over period, and then the slipped deals were a subset or a smaller portion of that.
Speaker Change: Okay perfect appreciate the color there. So thanks again for taking the questions.
Speaker Change: Thank you.
Speaker Change: Thank you one moment for the next question.
Speaker Change: And our next question will be coming from the line of Alex scholar of Raymond James Your line is open.
Great. Thank you.
Speaker Change: Oh, and you brought on a new chief commercial <unk> III.
Speaker Change: Take me, but you brought a new commercial chief commercial officer to lead the go to market organization can you just talk about the process, but landed on Stewart and I know, we're just starting but bigger picture any changes to start the year. You said sales kickoff happened with the sales organization on plans or coverage I think you mentioned something about timing from compensation with solar So I just wanted to see what was happening there.
Speaker Change: Go to market.
Speaker Change: Thanks.
Speaker Change: Well, okay. So from a process perspective.
Speaker Change: If anything <unk> learned and we've now changed over the whole leadership team other than our Chief legal officer from where we were in these roles two years ago.
Speaker Change: We've looked for about a year.
Speaker Change: Two to find the successor, we interviewed a lot of different candidates, we knew the incumbent wanted to retire he.
Speaker Change: He was gracious in allowing us to work through that with him and our team.
Speaker Change: And so we were very very selective and we feel very very fortunate to have.
Speaker Change: Stuart joined by coincidence, we had here in New York Today, a meeting of our go to market leadership about 15 people across all different pieces of what we do it could probably couldnt have been a better meeting in the sense of here's where at here's what we know we want to get done this year and here's how we're going to drive it I think just.
Speaker Change: But it's into the meeting was pretty clear.
Speaker Change: There was going to lean in.
Speaker Change: <unk> provide some really good interesting perspectives and and so I think that was very encouraging for what we need to do obviously today was his first official day, but as you know we announced this a little bit back end.
Speaker Change: In between he was doing quite a bit of work with us in trying.
Speaker Change: Trying to.
Speaker Change: Make sure that people are getting connected helping facilitate things.
Speaker Change: In an appropriate way and so that's all been good so.
Speaker Change: Even though today was the first official day it feels like he's been on board with US now for five weeks, helping us try to move forward, but importantly.
Speaker Change: I think the team is really excited.
Speaker Change: To have him here.
Speaker Change: I do expect that and I want him to be with all of them be disruptive in a positive way, but you know.
Speaker Change: We have to continue to grow and get better at what we do and we think.
Speaker Change: <unk> is that he brings from what he did with SAP and his prior life is going to serve all of us at Black line and very very well, so we couldnt be more excited.
Speaker Change: To have him here and I think good things are on the horizon.
Speaker Change: Okay great.
Speaker Change: Just quickly so anything even before he joined though as far as just wanted to clarify the point earlier about tying compensation of solar because that just for that select group of that but for the broader or Oh, yes, okay sorry.
Speaker Change: Okay. So.
Speaker Change: So we did make some changes to our comp models. This year like everybody's tweak some every year, but we did form.
Speaker Change: And as SAP select catalysts group. So we have a team of people that are dedicated on all aspects of what has to be done to work effectively with.
Speaker Change: The SAP team, but we think thats a good differentiator for us got a lot of positive feedback from the SAP team around that our own team.
Is embracing it and so we're pretty encouraged about what we need to do there as far as just getting.
Speaker Change: SAP and Black line a line.
Speaker Change: It's all about cloud based revenue as you know what their strategy is what they're trying to do black line fits well into that there are some things that they've done by putting.
Speaker Change: And I think it was in <unk> prepared remarks, putting us into their SAP <unk> packaged so youll know that we already have all of our core financial close capabilities in there an intercompany, but getting sort of that group reporting foray into it because they call it MRO and to their package was important and then obviously getting studios 360 PQ.
Speaker Change: And again, we will.
Timing for that is as they go through their Sapphire conference a I believe it's in May or June being able to officially launch that there is.
Speaker Change: As a fully integrated products. So those are the things we're trying to do to drive drive behavior.
Speaker Change: And pretty excited about it.
Speaker Change: Thank you one moment for the next question.
Speaker Change: And our next question will be coming from the line.
Speaker Change: Of a pendulum Laura.
Speaker Change: <unk> of Jpmorgan Your line is open.
Speaker Change: Great. Thanks, Angela for pendulum, thanks for taking the question.
Speaker Change: Can you talk a bit about your assumptions around churn and retention to get to the 2025 Guide you.
Speaker Change: You mentioned, the FX headwind in Q4, but any more color about the dynamics of both through 2025 would be great.
Speaker Change: I'm trying to think about the things so well.
Speaker Change: We're continuing to work our way through the customer count churn at the lower end of the market.
Speaker Change: <unk>.
Speaker Change: I think that that is something that still probably for the better part of 25 will feel that on the customer count side now these tend to not be very large.
Speaker Change: But thats certainly something from a customer account will we'll see.
Speaker Change: From a churn in the enterprise space, that's not really the biggest issue for US there is much more on the topic of attrition.
Speaker Change: I'd go back to the things that we talked about earlier, our ability to touch our customers.
Speaker Change: With a greater frequency, whether it's through our own account executives.
Speaker Change: Management.
Speaker Change: Our customer success people are our partners is having a very positive impact and we know if we if we sort of touch our customers or certain number of times for the year before its time to renew or anything like that to make sure that they are on the right journey and we can help them.
Speaker Change: Then we reduce the churn and attrition substantially so a big piece of this is making sure that we're we're in those conversations earlier with our customers and making sure.
Speaker Change: <unk>.
Speaker Change: They are on the right journey, which has been a big piece of what we've been working on over the last 18 months, just making sure those customers understand the potential of Black line far beyond just pure financial close and all the other things that we can do to help and Thats, probably the greatest indicator of what will drive down churn and attrition.
Speaker Change: Year over year perspective.
Speaker Change: The percentages, we would expect would probably come down a little bit, but again more of what we will look for is seeing that much more in 2006%, maybe even 25.
Speaker Change: Got it okay. Thank you.
Speaker Change: And then last one.
Speaker Change: Q1 reflect the change in guidance philosophy, and if so how should we think about the magnitude of conservatism.
Speaker Change: Baked into the guidance. Thank you.
Speaker Change: Thank you for the question.
Speaker Change: I don't know of conservatism is the word to apply but I think this is the best way to capture the guidance philosophy for for Q1 and for the year.
Speaker Change: We.
Speaker Change: Have set appropriate and achievable targets for this year.
Speaker Change: I will provide.
Speaker Change: Clarity on assumptions within the guide so key risks that are out there and I think the keyword is probably some transparency.
Speaker Change: These risks and assumptions that could influence the numbers over the course of the year.
Speaker Change: Then I guess each quarter, we will continually reassess these targets.
Speaker Change: And reassess some of these assumptions then.
Speaker Change: The extent necessary signaled to the market if a change is warranted, but I would say overall from a philosophy standpoint.
Speaker Change: The key theme is transparency in the guide, it's both thoughtful and balanced but.
Speaker Change: If you look at what we've done here since our IPO eight nine years ago, we built a lot of credibility within the markets and my goal is to build upon that credibility as part of this philosophy.
Thank you Juan for the next questions.
Speaker Change: And the next question will be coming from the line of Daniel Jester of BMO capital markets. Your line is open.
Daniel Jester: Great. Thanks for taking my question this evening.
Speaker Change: It sounded like in the prepared remarks that invoice to cash was particularly strong in the quarter. Maybe can you just expand what's resonating there now there are some product enhancements announced at okay on.
Speaker Change: The black, but anything more you can share around the momentum of that pillar would be great.
Speaker Change: Yes, I think Theres a couple of things one is.
Speaker Change: I think we've made improvements in the product to we've upgraded the quality of the team three we've been able to bring in people from competitors that have decided that black line is better opportunity.
Speaker Change: And for I think.
Speaker Change: What we're doing so I was looking at sort of some net promoter scores yesterday and so for black line.
Speaker Change: Were a positive 5%.
Speaker Change: Our.
Speaker Change: Sort of a archrival if you will in an invoice to the negative.
Speaker Change: 'twenty one.
Speaker Change: Our partners are really stepping up their activities because they like what black line can bring and so that's been another critical piece of what we're starting to see an invoice to cash so that all comes together, we had a really nice quarter.
Speaker Change: We're pretty optimistic about getting even more momentum as we head into 2025.
Speaker Change: We will have some just said to me as we were on the phone here.
Speaker Change: Some interesting product updates and invoice to cash.
Speaker Change: By the time, we're talking to you in the.
Speaker Change: In the second quarter. So all good stuff going on in that regard and we're pleased because it always takes longer to get it done than you'd like but we're on the move.
Speaker Change: Great. Thank you and then Patrick to you I know you don't guide on free cash flow, but theres a lot of puts and takes.
Speaker Change: Regards to FX and also I think cash taxes. It's 25 progresses. So any color you can share about how we should be thinking about that going into this year. Thank you.
Speaker Change: Okay.
Speaker Change: Yes, there is.
Speaker Change: Probably two notable variables there on free cash flow one you hit the nail on the head you probably saw it already in our release, but ER.
Speaker Change: Yeah, We did released a valuation allowance at the end of the year.
Speaker Change: Which is an indication that not only are we profitable and have been profitable, but we intend to be for the foreseeable future.
Speaker Change: But with that comes a cash tax burden, which historically we.
Speaker Change: We do not have here at Black line, So I would think.
Speaker Change: But if you're estimating this or how to think about it.
Speaker Change: Probably a cash tax rate in the low to mid teens on a non-GAAP basis on a prospective basis.
Speaker Change: It is about we're a company with our profile with typically land.
Speaker Change: Other aspect to free cash flow as you can see we have a lower cash balance which was intentional as part of our refinancing that we went through in May of 2024, and that's coupled with a lower prevailing interest rate in the markets than last year.
Speaker Change: Thank you one moment for the next question.
Speaker Change: And our next question will be coming from the line of Adam Rodriguez of Goldman Sachs. Your line is open.
Speaker Change: Great. Thanks, so much for taking the questions has it gone.
Speaker Change: On the pipeline I wanted to ask how much of that picking up as the work you've done and the partner network outside of SAP I know they influence the vast majority of your large deals.
Speaker Change: You're starting to see that.
Speaker Change: For paying off there.
Speaker Change: Yes, no I would say well, let's say it is always important part of our pipeline of a couple of things one is sort of what I would call self generating.
Speaker Change: Our people are out there doing what we need them to do with more confidence about sort of the platform what the art of the possible is with black line.
Speaker Change: Three recent INR executives are in the field a lot more with those reps try to help them engage in those those high quality conversations we've seen a nice upturn in opportunities with workday a partnership that we referenced in the.
Speaker Change: The prepared remarks.
Speaker Change: And so it's pretty broad.
Speaker Change: Yes through SAP, <unk> and what's going on in the cloud migration, but equally important in what we're generating on our own and then also through.
Speaker Change: Strengthening relationship with workday.
Speaker Change: Okay. That's really helpful. And then the record strategic product quarter, just any additional color on the why now that's picking up as a percent of the business and then how youre thinking about that into next year would be really helpful.
Speaker Change: I'm glad you say why now on like why did it happen sooner, but yes.
Speaker Change: Eight.
Speaker Change: Yes, I think look at.
Speaker Change: And so we went through a process last year.
Speaker Change: There, we put pillar leaders in charge of certain things and so whether it was invoiced the cash intercompany foray. Even there are some sub leaders underneath our financial close when you get that additional focus when you have sort of I don't want to say the single throat to choke.
Speaker Change: But if you have that person that's waking up each and every day trying to drive that success in the market eventually starts to come to bear and so it's always a little bit lumpy, we're pretty pleased with the progress that our pillar leaders have made in driving more success in the market our reps have gotten more comfortable with the solution, so theyre more comfortable and introduce.
Speaker Change: <unk>, our pillar leaders at our pillar leaders are not shy at all the sort of go push their way into things to go <unk>.
Speaker Change: Have conversations plus our partners are much more comfortable and confident in what we have we spent a lot of time.
Speaker Change: With our partner Advisory board of what they like about the product what we need to do.
Speaker Change: And building their confidence and when they give their recommendation of black line, whether it's an invoice to cash on the intercompany or consolidation that they can do that with no regrets and that's been important to them and it has helped us.
Thank you one moment for the next question.
Speaker Change: And our next question will be coming from the line of Patrick Walsh Evans of citizens. Your line is open.
Speaker Change: Oh, great. Thank you so.
Speaker Change: A lot of good information on this call. What do you think is the single most important thing for you to focus on in 2025.
Speaker Change: Well.
Speaker Change: So in a simple word it would be execution I would say two things one is really making sure is and it goes back to <unk> question.
Speaker Change: With all the innovation, we've rolled out how do we make sure our sales teams our customer success teams, our pillar leaders our partners can effectively communicate and bring that to bear in the marketplace. So that's probably fair.
Speaker Change: First and foremost and then I think the second thing that Im always worried worried about because I never want to lose the cost for I told you that how do we make sure for those customers that feel likely installed on the journey and we see that we're being much more proactive in engaging with them how do we get those customers back.
Speaker Change: On track.
Speaker Change: To take full advantage of what they've already purchased and then what the opportunities are for black line to help them with down the road, we keep saying we want to help inspire power and guide digital finance transformation that is not just one part of our pillar. That's the whole platform that we're trying to build that we built out and are trying to execute against and so that's it.
Speaker Change: It's nothing more execute execute execute on those two things.
Speaker Change: Alright, if I could follow up.
Speaker Change: How do you do it on the second part for a customer who feels like they started on the journey.
Speaker Change: What's the playbook.
Speaker Change: Yes.
Speaker Change: I mean, we've gone back we look we've taken the information about where we can see our customers either purchase stuff and they are not using it well are not using at all what we're doing is through the industry lens, we're saying look you're a big.
Speaker Change: Airline, let's take <unk> as an example, youre not using black line anywhere near where your peer set is how can we help you get back on that journey and just using real information in real data using our partner network to have those conversations to figure out because it's sort of an aha moment. When you can say Gee I'm airline App and ABC DNA.
Speaker Change: I'll give it a whole lot better than I am and so that's what we're trying to use thats why industry and the benchmarking data and information that we are able to use with our customers has become increasingly important for us over this past year.
Speaker Change: We just came out of our own sales kickoffs over the last couple of weeks I mean, our people are thirsting for more information around the industries that they can go back to their customers and have these conversations so we're showing them the art of the possible, but also we're showing them a reality.
Speaker Change: Says you can do better and we can help you get there.
Speaker Change: Okay.
Dey: Thank you Mr. Dey next question.
Speaker Change: And the next question will be coming from the line of Jake <unk>.
Jake: <unk> of William Blair. Your line is open.
Jake: Yes, Thanks for taking my questions just wanted to follow up on the push deals it sounds like a lot of them have already closed in the new year, but just curious if youre seeing or if there's any potential for that slower deal velocity to continue in the new year with deals that you would've expected to close in Q1 are you to or if you feel.
Jake: Like that overhang has kind of cleared at this point.
Speaker Change: That's a really good question because I think what we're seeing in some of these particularly larger deals.
Jake: Is.
Jake: Some extra his eyes on these things at the company level.
Jake: And so there is a couple I could sort of walk through as examples.
Jake: Needless to say you know what our customers' customers and prospects are doing as her doing a little bit more blueprinting and road mapping before they go live. So they are sort of differing start dates so even though we've been verbally told we're going to win the work. We don't have a signed contract and the start date gets pushed out as they are trying to make sure.
Jake: Sure.
Jake: Their resource resources are aligned one of the things we're doing with our customers now has heard of what must be true for successful implementation is thats whats it must be true from a customer perspective, our partner perspective, and a black line perspective, and a more true boxes, you can check the higher the likelihood of success and I think that's a good thing for us to be doing with our.
Jake: <unk>, because we want them to get up and running the right way and you shared some stats before but how we're sort of accelerating from contract signing to project kickoff.
Is down 40% as the velocity of going live is increased and so those things while I think we're going to be able to get deals.
Jake: Executed more quickly the signing of the contract May take just a little bit longer I've got one that.
Jake: I sort of debated whether I would tell you guys about this or not Tonight. So we were awarded a very large contract.
Jake: At the end of January which is an eight figure deal.
Jake: And it was our expectation that we would sign the paperwork, probably the first or the second quarter and.
Jake: And then start and what the customers come back and asked us, but we're probably going to focus on the customer in the first 345 months of the year, but wed like to defer the start date till the end of the year.
Patrick Schultz: Because they have things they want to do and get in place and so again. This all sets up very nicely for 2026. It doesn't do much for me in 2025 in fact, Patrick were telling me there'd be no revenue recognition in 2025, the way we're talking about the construct of the.
Jake: The deal today, so I think that.
Speaker Change: The risk is that the.
Speaker Change: The customers may be a little bit more prudent and careful because of the size of the investment. They are now making with black line, but I think eventually that's a better thing for us because I think these customers are going to get off and running in the right way with the right partner support the right block client support and the right commitment from their own internal resources to improve the likelihood of success on the deal.
Speaker Change: Okay. That's really helpful. And then just on the retention front.
Speaker Change: Good to hear the improvements in your revenue renewal rate do you feel like that mid <unk> retention rate is kind of the right way to think about things moving forward and then now that churn seems to be stabilizing.
Speaker Change: Do you think we could start to see NR re expand as well.
Speaker Change: That's the goal.
Speaker Change: And I think that's really what we've been driving towards because again, if you think about our model.
Speaker Change: We have.
Speaker Change: Certain number of customers that pay us over $1 million and some of them pay as close to 10.
Speaker Change: And what we just sort of see is when you look at our customers by industry segment. As an example, why do we have some of them only spending a couple of hundred thousand versus $1 million and what's the opportunity to help them on that journey and the more that they buy with us. It's generally because we've made the more sticky because we provided more value.
Speaker Change: And so that's really what we're trying to do is make sure that the customers.
Speaker Change: Use what they've already purchased and help expand.
Speaker Change: Into that relationship.
Speaker Change: I think that the mid <unk> on a combined 96% basis is about right yes.
Speaker Change: Yes.
Speaker Change: First of all I'd like it to even be higher but that's what we're going to keep driving towards I do feel like we had a little bit of a turning point as we got to the back half of 2024, its mattered, who we've selected as customers in the mid market and I think what youre seeing from our customer success team and others is when you pick the right.
Speaker Change: Customer that's trying to do the right things you see that go live velocity increase and you see the time to get started decreasing and so customer selection matters and so I think we've gotten smarter doesn't mean, we don't have room to improve but that will have a positive impact, particularly in the mid market for us where sometimes you get more volatility with these.
Speaker Change: Customers that.
Speaker Change: Just.
Speaker Change: Can't really.
Speaker Change: Absorbed black line the way, we would like them to absorb black lines, So we're being smarter and more prudent about that.
Speaker Change: Thank you.
Speaker Change: And the last question for today's call.
Speaker Change: From the line of Terry Tillman of Chew Securities. Your line is open.
Speaker Change: Hi, This is Tom Heckman Salah on for Terry. Thanks for taking my question. So beyond fed ramp certification, what other specific investments or go to market motions are you, making to expand into the public sector and I guess, what the potential shift in the New administration you all mentioned, what's a realistic timeline for seeing meaningful revenue contribution from the segment.
Speaker Change: Yeah. So.
Speaker Change: So one of the things we've been doing so first of all we've got some resellers signed up so that are now in the marketplace representing us.
Speaker Change: We're looking to add some additional sales capacity internally with partnered up with a couple of the big <unk>.
Speaker Change: <unk> had a dominant federal space practices. So we've been spending a lot of time working with them about what agencies to target.
Speaker Change: That are most right for the kinds of things that we need to do and then we've also been very fortunate in that some of these partners have really introduced us to their state and large city practices and so that connective tissue has been something thats very important for what we're trying.
To do as well because.
Nobody is looking to sort of raise their budgets in this environment from a government perspective, so they can drive more efficiency through the use of technology. We certainly see some some real opportunities. There is a couple of decent sized ones. We're working already that started towards the back end of last year of.
Speaker Change: That are quite sizable and so we're pretty encouraged by what we're seeing.
Speaker Change: So far obviously patch.
Patrick Schultz: Patrick talked about the level of investment that goes into that.
Speaker Change: Fed ramp certified and then being at the highest level of Fred Fed ramp certification will matter, but we do think that.
Speaker Change: What's going on in Washington to try to again improve efficiency might create a little bit of short term noise in the medium to long term.
Speaker Change: Is positive we don't have a lot of revenue built into our plan for 2025 for fed ramp just out of an abundance of caution, but again I think.
Speaker Change: Don't want to Jinx, it, but I think we'll have more news to share when we get to our may call.
Owen: Thank you and this does conclude today's Q&A session I would like to turn the call over to Owen.
Speaker Change: Closing remarks. Please go ahead.
Speaker Change: Guys everyone. Thank you for your questions we really appreciate.
Speaker Change: The thoughtfulness with which you asked and.
Speaker Change: And we just want to thank you for your continued support and belief in what Black line is trying to do and we feel like we're on the right path and excited to take that journey with you have a good night everybody talk soon.
Speaker Change: Okay.
Speaker Change: Thank you for joining today's conference call you may all disconnect.
Speaker Change: Okay.