Q1 2025 BlackLine Inc Earnings Call
David
Copyright © Element Animation 2011
Good day and thank you for standing by. Bye.
Welcome to the Q1 2025 Blackline Erning's conference call.
At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a quick question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand to trace. To withdraw your question, please press star 11 again. You will need to press star 11 again. You will need to press star 11 again. You will need to press star 11 again.
Speaker Change: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Matt Humphries, SVP of Investor Relations. Please go ahead.
Speaker Change: Good afternoon and thank you for joining us today. With me on the call, our Owen Ryan, Entries Tucker, Koji Executive Officer of Blackline, as well as Patrick Villanova, Chief Financial
Speaker Change: Before we get started, I'd 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
Speaker Change: In particular, our guidance for Q2 in full year 2025 are forward-lifting statements within the meaning of the private securities litigation reform act of 1995 Before looking statements represent our outlook only as of the day of this call
Speaker Change: While we believe any forward-looking statements made during the call are reasonable, actual results could differ materially, as these statements are based on our current expectations as of today, and are subject to risks and uncertainties, including those stated in our periodic reports filed with the Securities and Exchange Commission, in particular our form 10K and form 10Q.
Speaker Change: We do not undertake and expressly disclaim in the obligation to update our author or forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
Speaker Change: Finally, unless otherwise stated, our financial measures disclosed in its call will be non-GAAP [inaudible]
Speaker Change: A discussion of these non-GAAP financial measures and information regarding reconciliation of our historical gap versus non-GAAP results is available in our earnings release.
Speaker Change: which may be found on our Invest Relations website at investors.blackline.com. We're in our Form A case file at the FCC today.
Speaker Change: Now I'm going to turn the call over to Blackline's Co-Chief Executive Officer, Owen Ryan. Owen?
Speaker Change: Overall, we are pleased with our performance in the first quarter as many of our operational priorities showed solid progress.
Speaker Change: We delivered 6% revenue growth in the first quarter with a non-GAAP operating margin of 21%.
Speaker Change: Booking's performance was solid, with average deal sizes increasing, both on a net new and average basis.
Speaker Change: And importantly, the number of customers generating over 1 million or more in ARR increased to 79 in this quarter, up from 71 in the fourth quarter, as we deepened and broadened relationships.
Speaker Change: Further, we saw momentum build through the adoption of Studio 360 where we find several deals with companies like tractor supply. Our new pricing model is tracking slightly ahead of our expectations.
Speaker Change: We saw several wins with customers such as USAA who value the flexibility and predictability this new pricing model provides.
Speaker Change: How to go to market execution in the first quarter showed meaningful improvement across all geographies driven in part by our new Chief Commercial Officers leadership, as well as our new leaders in Europe and Asia Pacific.
Speaker Change: We continue to see solid growth in our pipeline and within our solex partnership.
Speaker Change: We have implemented more rigorous deal qualification processes and strengthen coordination between our account management and customer support teams.
Speaker Change: These improvements are expected to help drive expansion while reducing future turn in attrition.
Speaker Change: Our digital first marketing approach is enhancing our commercial effectiveness as we introduce new features, functionality and AI capabilities to our users and prospects.
Speaker Change: These operational improvements give us confidence in our ability to create a more effective, efficient, and predictable sales motion.
Speaker Change: Our Sylex partnership outperformed in the first quarter and remains a strategic growth driver. We are leveraging improved organizational alignment to accelerate joint sales efforts.
Speaker Change: This includes expanding our offerings to SAP users, especially with Studio 360, to deliver a value of customers' transition from on-premise to cloud ERP environments.
Speaker Change: Our industry focused approach is delivering results by combining our finance expertise and solutions with industry specific knowledge.
Many Q1 wins directly resulted from our industry expertise. [inaudible]
Speaker Change: and as Therese will share, we plan to launch additional industry-specific solutions to build upon this early momentum.
Speaker Change: In public sector, we saw solid progress despite uncertainty. Our US teams have developed a strong pipeline across federal, state and local government while working closely with key partners.
Speaker Change: The public sector is a key investment area this year as we see this as a long-term opportunity [inaudible]
Speaker Change: We are applying the same discipline approach to marketing that we have implemented in sales, which has improved both the volume and quality of opportunities supporting aggregate pipeline growth.
Speaker Change: In fact, we have seen material improvements in website visits, demo requests, and lead generation through our dot com and digital marketing efforts, which is driving top of funnel activity.
Speaker Change: We continue to position ourselves as the Autonomous Finance Platform for the Office of the CFO .
Speaker Change: This leverages our established credibility and brand permission in record to report and invoice to cash processes while emphasizing how our platform and products are becoming increasingly critical to our customer's operations.
Speaker Change: We are reinforcing this positioning with a refreshed AI focus strategy that highlights our technological capabilities and roadmap.
Speaker Change: Customers continue to prioritize rapid results and measurable returns on their investments.
Speaker Change: Our ability to deliver value quickly has become a critical competitive advantage [inaudible]
Speaker Change: Customers need solutions that work immediately, not in one or two years, especially as technology
Speaker Change: A number of our wins this quarter related to customers restarting or accelerating their digital finance transformation journeys and using even more of the Blackline suite.
Speaker Change: We have made significant progress in accelerating our implementation timelines for customers.
Speaker Change: In Q1, go live volume increased by 20% compared to the same period last year Also, our implementation times have been substantially reduced for our financial reporting analytics and invoice to cash solutions
Speaker Change: and we are currently focused on more rapid time to value for our in your company solutions.
As mentioned, our SAP partnership continues to accelerate.
Speaker Change: We have implemented several key changes we announced last quarter. We have aligned our account executives, presales and customer success managers with SAP's market units.
Speaker Change: We have also succeeded in adding BlackLine solutions to SAP's channel price list, including our public sector strategy, Google Cloud Marketplace, CloudChoice Flex, and value-added reseller channels, which will be commercialized this quarter.
Speaker Change: As SAP and Blackline further align our unique finance transformation capabilities.
Speaker Change: We have achieved an important solution alignment step which allows the prepackaged bundling of both SAP authored solutions.
Speaker Change: and Blackline authored solutions into a single SAP SKU bundle that supports global finance transformation ERP offerings.
Speaker Change: Blackline is also now included as part of the fault SAP solution offerings and sales motions to add value to SAP Cloud, ERP customers.
Speaker Change: We believe this small but critical change can increase our catch rate and position our solutions earlier in ERP migrations [inaudible]
Speaker Change: This is a key part of our combined goals to deliver higher ROI and value for customers going to a digital transformation.
Speaker Change: We are a SAP's first ever select department to be included in the SKU package bundle with SAP authored solutions.
Speaker Change: This is expected to deliver greater value to customers that need powerful financial consolidation solutions.
Speaker Change: Looking ahead, we have a solid roadmap for launching additional products eligible for the SoulX program, especially Studio 360.
Speaker Change: We also are exploring opportunities to develop AI, an agenteic AI-specific excuse as part of this partnership as we continue to align our go-to-market vision.
Speaker Change: Our revenue renewal rate was 94% this quarter. While we could see some pressure on customer retention due to ongoing economic conditions, we have implemented several strategies to counteract and mitigate turn and nutrition, we could serve to deepen our importance with customers.
Speaker Change: First, our new platform pricing model helps protect against user-based attrition, which has been a headwind to NRR and revenue growth.
Speaker Change: Second, we are strategically shifting customers from annual to multi-year contracts as they renew.
Speaker Change: In Q1, the percentage of customers choosing multi-air renewals increased by 14 percentage points.
Speaker Change: This approach aligns with our strategy of guiding customers through transformation journeys while reducing turn and attrition and ultimately driving more consistent, predictable revenue growth.
Speaker Change: Our RPO performance discordor roof like some of our initial progress.
Speaker Change: Turning to key deal activity this quarter. In North America, we expanded with Marathon Petroleum. As a traditional financial close customer, Marathon was looking for additional automation across their invoice to cash processes to drive efficiency and improve their working capital cycle. [inaudible]
Speaker Change: Our invoice to cash often provided demonstrable ROI, especially when using conjunction with our financial closed solutions to give end-to-end connectivity and visibility across multiple teams and processes.
Speaker Change: Also in North America, we want a competitive enterprise rip and replace with a leading cyber security company for our suite of financial closed solutions leveraging our unlimited user pricing model.
Speaker Change: While initial conversations were focused on enhancing efficiency control and visibility at one division, our unlimited user model allowed the company to think bigger about global transformation and broaden their scope across the entire enterprise.
Speaker Change: The result is a classic win-win for both the customer and for Blackline.
Speaker Change: On the sole side, we saw solid performance in our international markets, a key focus area for Blackline.
Speaker Change: Specifically, we signed a net new deal with Rexle, a leading electrical distributor based in France for our financial closed solutions.
Speaker Change: Additionally, we signed Japan Tobacco to a net new financials closed deal. Further, we signed Mitsubishi Electric, and Idimetsu Kusan, again with core financial closed capabilities marking continued success in our partnership in Japan.
Speaker Change: We also saw several Studio 360 deals this quarter, with companies like AGL, a leading Australian electric company, who took advantage of not just our Studio 360 platform, but also our unlimited user pricing to drive real transformation across their business.
Speaker Change: We signed Hitachi Energy Holdings which chose to leverage the powerful capabilities that Studio 360 offers to elevate their existing financial clothes usage and drive even more efficiency and automation across their business.
Speaker Change: Now, balancing our enthusiasm for our first quarter progress are the realities of the current macro environment.
Speaker Change: Recent policy announcements have made it difficult for companies to plan long-term investments with competence. [inaudible]
Speaker Change: These policies could affect Blackline, as they may force customers in certain industries and geographies to postpone our reallocate investments until they gain more clarity about the future business environment. While we have not seen any impact across our pipeline, renewables base or implementations thus far...
Speaker Change: We are clear eyed that conditions may develop that influence our go-for results.
Speaker Change: These potential risks are captured in our updated revenue guidance which Patrick will speak to shortly. We believe that Blackline is better positioned than ever to help customers adapt to today's environment. We offer practical, reliable and trusted solutions.
Speaker Change: Our inner company and invoice to cash solutions directly help customers offset potentially higher operating costs by minimizing taxes, helping ensure compliance with trade policies, enhancing efficiency, and improving working capital.
Patrick Villanova: Combining these with our new Studio 360 platform, our pricing strategy, our enhanced partnership with SAP, our industry and public sector initiatives, and our budding relationship with Workday. Strengthens are important to the office of the CFO .
Speaker Change: This gives us the confidence to navigate the near term while remaining focused on delivering against our long-term goals.
Therese Tucker: With that, I would like to turn the call over to Therese.
Therese Tucker: Thank you, Owen. Blackline is accelerating rapidly, expanding our innovation initiatives across our entire platform and product ecosystem.
Therese Tucker: This year marks one of our largest product release calendars ever supporting the opportunity we see ahead.
Therese Tucker: Our Studio 360 platform showcases our innovation in action with continuous enhancements across every layer.
Therese Tucker: An important component is our strategic partnership with Snowflake, the foundation of our data layer.
Therese Tucker: Already, more than 400 customers are leveraging the data engine to increase performance and scalability, with many more poised to benefit from this over the next few months.
Therese Tucker: And this quarter, we plan to release our snowflake data sharing connector, unlocking powerful new capabilities for our customers.
Therese Tucker: We're also enhancing the utilization capabilities across Studio 360, giving customers precise control to customize Blackline dashboards that fit their unique financial workflows and requirements.
Therese Tucker: We've launched redesigned product dashboards with an improved interface and UI that customers love.
Therese Tucker: In our orchestration component of Studio 360, we've added new SAP and ServiceNow API integrations.
that simplify data management and workflow processes for users. [inaudible]
Therese Tucker: and our upcoming Workday Connector, launching later this year, is designed to extend these same powerful orchestration benefits to Workday customers, creating a truly connected financial ecosystem.
Therese Tucker: Across our entire platform, we're embedding AI-powered capabilities that amplify our existing automation engines.
Therese Tucker: We've all witnessed firsthand how large language models can transform organizations, evidence we see in both traditional and agentic experiences. This isn't just innovation, it's acceleration with purpose.
Therese Tucker: Our vision is clear. Accountants and finance professionals will evolve into strategic reviewers, while AI executes the routine work.
Therese Tucker: We're pioneering what we call autonomous finance by fusing the hour decades of automation expertise with cutting edge,
In today's landscape, data isn't just information, it's currency.
Therese Tucker: Our snowflake partnership creates a robust data lake that unlocks powerful, mental-agentic possibilities, connecting internal systems while opening gateways to external APIs.
Therese Tucker: The goal is to position Blackline as the backbone for the Office of the CFO where efficient and accurate data flows through and enables real transformation.
Speaker Change: A perfect example of the achievement of this goal is what Exxon Mobile said in a recent earnings call.
Speaker Change: Blackline has literally enabled them to save tens of thousands of hours of what was very manually intensive work because they can now automate it.
Speaker Change: Importantly, this has also allowed their teams to provide cleaner data across their company so that they can derive better insights while driving more efficiency.
Speaker Change: In the emerging ancient economy, our collaboration with customers, partners, and auditors addresses a critical need, governance frameworks
Speaker Change: that insured trust and security, while major AI model providers are pushing to eliminate structured APIs, our stakeholders recognize the opposite true.
Speaker Change: Trackable, Auditable Interfaces, Deliver Both Efficiency and Reliability For Accounting and Finance Professionals, 95% Accuracy Equals 100% Failure
Speaker Change: This zero-tolerance reality demands what we can provide, a sophisticated AI-powered automation platform with complete auditability and control.
The defining advantage in our market. [inaudible]
Speaker Change: To deliver on this, we have been strategically investing in three core AI technologies. [inaudible]
Adjunctic AI, predictive intelligence, and natural language exploration.
Speaker Change: Our platform now features four specialized agentic AI categories, insight agents, summarization agents, conversational querying agents, and matching agents.
Speaker Change: Insight agents transform raw financial data into actionable intelligence, improving accuracy, accelerating review cycles and driving proactive decision-making.
Speaker Change: These can improve data accuracy, accelerate close and reuse cycles, and drive proactive action.
Speaker Change: Summarization agents distill complex filings and extensive documentation into clear, insightful summaries, presenting drafts that maintain user control while eliminating resource drains and preserving auditability.
Speaker Change: Conversational querian agents enable users to analyze data using natural language and allow them to explore and explain key KPIs and trends allowing for faster and more informed decision making.
Speaker Change: And finally, we plan to release our matching agents in the second half of this year, delivering AI-powered transaction matching that surpasses our already powerful traditional capabilities, especially for high volume accounts.
Speaker Change: While our agent ecosystem excels with text and qualitative data, we're expanding our established machine learning capabilities.
Speaker Change: through predictive guidance and risk detection features that are ideal for handling large volumes of financial data. Predictive guidance is available for both Intercompany and invoice to cash.
Speaker Change: leveraging AI and machine learning to analyze transactional data and forecast future outcomes, providing recommendations and insights to help guide decision making.
Speaker Change: Our risk detection experiences proactively identify issues across financial data, preventing adjustments and audit problems before they occur with solutions like our journal's risk analyzer.
Speaker Change: We're also expanding our industry-specific solutions to meet specialized industry needs. Our high-frequency reconciliation solution is already driving results for multiple customers.
Speaker Change: We're launching operational reconciliation initially for oil and gas customers, transforming our proven account reconciliation technology to handle non-moditary inventory tracking.
Speaker Change: This evolution allows our customers to apply our powerful reconciliation capabilities.
Speaker Change: beyond traditional accounting, reconciling physical commodities with the same precision they use for financial accounting. Over time, we see opportunity to expand these capabilities to other industries like financial services and retail. [inaudible]
Speaker Change: And financial reporting analytics were strategically focusing on strengthening our modern consolidation platform to meet growing market demand as legacy systems reach end of life.
Speaker Change: With customer adoption steadily increasing, we're delivering thoughtful enhancements designed for complex global enterprises.
Speaker Change: This year brings meaningful improvements to currency translation, multi-dimensional segment reporting, inner company eliminations, and financial reporting frameworks.
Speaker Change: Our comprehensive record to report offering provides real value in today's marketplace, a significant advantage that sets us apart.
Speaker Change: Envoys to cash is evolving into a strategic value driver in our portfolio, delivering enhanced financial control precisely where customers need it most
Speaker Change: Our platform requirements throughout 2025 focus squarely on maximizing working capital efficiently from streamlined electronic invoicing to intelligent cash application and management solutions.
Speaker Change: By integrating both proven automation and contextual AI assistance, we're helping CFOs unlock previously inaccessible liquidity and gain the financial visibility essential in today's unpredictable economic landscape.
Speaker Change: As organizations increasingly prioritize cash preservation and cash flow management we believe our enhanced capabilities address their most pressing financial challenges while strengthening our position as their trusted partner.
Speaker Change: The close, responsible AI is delivering measurable benefits across internal Blackline operations, and we aim to create similar results for our customers. From engineering to customer service, our teams are increasingly adopting AI tools.
Speaker Change: We estimate that this has saved more than 60 FTE equivalents since we began using AI internally in 2024.
During this rapid pace of innovation, our priority remains clear.
Speaker Change: Stain connected with customers and accelerating their time to value and ROI
Speaker Change: I'm excited about the platform our team has built and what's to come an AI-powered platform that transforms financial operations when organizations need it most [inaudible]
Speaker Change: I'm inspired by how our teams are developing our solutions and engaging directly with customers and partners to drive the next wave of innovation for financial operations. With that, I'll turn it over to Patrick to cover our financials. Patrick?
Patrick Villanova: Thank you, Therese. As Owen highlighted, we had a solid start to the year as we continue to focus on discipline execution to deliver our longer term goals.
Patrick Villanova: Our proven ability to manage and expand margins is a key strength allowing us to adapt to market uncertainty efficiently while maintaining our strategic direction and financial position. Now, turning to our first quarter highlights in more detail.
Patrick Villanova: Total revenue grew to $167 million, up 6% including a slight FX headwind.
Subscription Revenue and Services Revenue, both grew by 6 percent.
Patrick Villanova: We saw higher than expected partner services max, which calls our services revenue to come in slightly below our expectations this quarter.
Patrick Villanova: Annual Recurring Revenue, or ARR, was $656 million, up over 8% with an approximate half-point benefit from FX in the quarter.
Patrick Villanova: Remaining performance obligations for RPO increased 11% with current RPO up 7%.
Patrick Villanova: RPO benefited from slightly longer contract duration due to new bookings to bind with our multi-year renewals efforts.
Patrick Villanova: Calculated Billings Growth was over 9% inclusive of a slight FX headwind. Trailing 12-month Billings Growth was above 7%
Patrick Villanova: Our customer count at the end of the quarter was 4,455, up 1%.
Patrick Villanova: Our revenue renewal rate in the footer was 94% up 1. versus the prior year. Our enterprise revenue renewal rate remains very healthy at 96% with mid-market in our expected low 90s range.
Patrick Villanova: Nat Retentionary, or NRR, was 104% this quarter, inclusive of a slight FX tailwind.
Patrick Villanova: We saw a healthy customer expansion particularly in enterprise and stable pricing.
Patrick Villanova: Offsetting this were a few large enterprise customers who recently underwent corporate reorganizations resulting in less entities and users.
Patrick Villanova: Strategic products represented 27% of sales in the quarter. We saw broad strength across our strategic product areas without performance from invoice to cash, transaction matching, and intercompany.
Patrick Villanova: Partners were involved in 81% of large deals this quarter, with a higher mix of partner involvement in new customer deals.
Patrick Villanova: Solex performance was above expectations in the quarter driven by larger expansion deals. SAP as a percentage of total revenue was 26%.
Patrick Villanova: Turning to margin, our non-GAAP gross margin was approximately 80%, with non-GAAP subscription gross margin of 82%, in line with our expectations as we move to the end of our cloud migration period.
Patrick Villanova: non-GAAP Operating Marching was 21% driven by cost benefits from our workforce action in March combined with an approximate one-point benefit from FX.
Patrick Villanova: non-GAAP net income attributable to Blackline was $36 million, representing a 22% non-GAAP net income margin.
Patrick Villanova: We generated $47 million in operating cashflow and $33 million in free cashflow in the quarter, representing a free cashflow margin of 20%.
Patrick Villanova: Above trend investments into strategic priorities like Ben Ramp and our India Development Center, along with restructuring expenses and taxes, drove our free cash flow margin lower than the prior period.
Patrick Villanova: On taxes, we expect that our effective tax rate for the full year will be similar to Q1 at approximately 12%
Patrick Villanova: Regarding our balance sheet and capital allocation, we have approximately $866 million in cash, cash equivalent to marginal securities versus $894 million in debt.
Patrick Villanova: Finally, we repurchase approximately 920,000 shares for a total of approximately $46 million in the quarter. Our share repurchase program remains a key part of our capital allocation framework going forward.
Patrick Villanova: In our updated full year 2025 financial guidance, we've expanded our revenue range to account for potential macro uncertainty we've expanded our revenue range, we've expanded our revenue range
Patrick Villanova: While we are currently seeing changes in customer buy behavior or in the demand environment, we are taking a prudent view for the balance of the year.
Our revenue guidance represents two distinct scenarios.
Patrick Villanova: The top half of our range of 7-8% growth reflects continued execution within a relatively stable macro environment consistent with our views from February
Patrick Villanova: The lower half of the range, 6 to 7% growth, assumes we see buyer caution and extended deal cycles develop.
Patrick Villanova: In either case, our updated guidance reflects our expectation for further margin expansion, despite continued strategic investments that drive growth beyond 2025 .
Patrick Villanova: For the second quarter of 2025, we expect total gap-revited to be in the range of 170 to 172 million dollars, representing approximately 6 to 7% growth.
Patrick Villanova: We expect non-GAF operating margin to be in a range of 20.5 to 21.5%.
Patrick Villanova: And we expect non-GAAP net income, attributable to Blackline to be in a range of $38-$49, or $51-$53 on a per share basis.
Patrick Villanova: Our share count is expected to be approximately 78.2 million diluted weighted average shares.
Patrick Villanova: and for the full year 2025, our updated guidance is as follows. We expect total gap revenue to be in a range of $692 to $705 million, representing 6 to 8% growth.
Patrick Villanova: We now expect that FX will be slightly less than a one-point headwind this year.
Patrick Villanova: We are raising our non-GAAP operating margin to 21.5 to 22.5% of 50 basis points at the midpoint versus the prior guide.
Patrick Villanova: And finally, we are raising our non-get net income attributable to Blackline to 159 to 167 million dollars, or $2.12 to $2.22 on a per share basis.
Patrick Villanova: Our share count is expected to be approximately 77.9 million diluted weighted average shares.
Patrick Villanova: With that, I'll now ask the operator to open the discussion to take your questions.
Speaker Change: Thank you. At this time, we will conduct the question and answer session. As a reminder to ask a question, you will need to press star
Speaker Change: To withdraw your question, please press star one one again. Please limit to one question each.
Please stand by while we can tile the Q&A roster. Thank you.
David
Speaker Change: Our first question comes from the line of Rob Oliver of Behrg, your line of travel pin.
Rob Oliver: Great. Thank you guys for taking the question. I appreciate it. Owen and Therese, this one is for you guys. Just on the solex numbers and some of the larger deal expansions being solid out. Obviously SAP has their Sapphire event coming up. And I was wondering if you guys could just give us sort of a level set, you know, given the macro, the environment on what you're seeing within the SAP channel and, you know, how we should expect. Blackline potentially set up for...
Er, you know, these moves towards S-400 ERP migrations and then I had a quick follow up as well.
Speaker Change: Stuart Robin, thanks for the question. Overall, we are really pleased with the progress we're making with SAP as we shared with you.
Rob Oliver: Starting at an investor day back in November , and then in the first quarter, there are a number of strategic things that say piecing your leadership and Blackline agreed.
Rob Oliver: that we would do, and we have executed on all those pretty well at this point in time, and what you're now beginning to see, what we're beginning to see is much more robust pipeline.
Much more work together in the marketplace.
trying to get existing customers to even be better.
adopted of what Blackline has to offer. [inaudible]
Rob Oliver: You know, more enthusiasm around what Blackline brings in the SAP community. Remember SAP had three big strategic priorities. One was AI, the other was in the office of the CFO , and the third was
Rob Oliver: Just around being more in the cloud and all the things that Blackline brings helps support that and so...
Rob Oliver: A lot of enthusiasm for what we're seeing. We expect the pipeline to continue to grow out.
Speaker Change: Very nicely, and as you know, I say, these biggest quarter is the fourth quarter where I think they do about 40% of their business and that's what we and our team are trying to build. It's been terrific to have Stuart, our new Chief Commercial Officer.
Speaker Change: in-house able to further further deepen and broaden those relationships. But also, what I think we feel really good about is how things are beginning to resonate on the front lines out in the battlefield because it's nice to talk about things that headquarters but where it really starts to gain traction is on the front lines and those are the things that we're seeing at this point time.
Speaker Change: That's really helpful. Thanks, Owen. I appreciate it. And the Patrick from you really appreciate the clarity around the guidance range and the different scenarios, risk adjusted. That's incredibly helpful. I wanted to just ask, you know, obviously positive you guys are calling out better margins on either front, which is great. I just wanted to get a sense, you know, one quarter into the year for, you know, what gives you that confidence on the margin side, you know, particularly relative to some of the growth. The motion is growth.
Thank you.
Yeah, thanks Rob, I appreciate it, so...
Speaker Change: Looking at Q1, you'll see that we had a pretty notable beat in our margin for the quarter and part of that was related to FX, but a majority of that was organic to the business.
Speaker Change: and we were able to achieve that without compromising or holding back on any investments that we have planned to do for growth in 2025 and beyond.
Speaker Change: So we passed some of the savings along into the guide for the remainder of the year, and the guide now does contemplate that we're going to continue to make all the investments that we talked about in past calls during the November and yesterday as well as in February and make those investments as it relates to. Thank you.
Not just growth for 2025, but for 2026 and beyond.
Speaker Change: To the extent that we see a changing demand environment in the future as a result of the macro, we do have the ability to pull on that margin lever if need be and slow down those investments. But as it stands today,
Speaker Change: Our Expanded Margin Guide, Conta Place that we are on plan. We're executing on our strategy and we're going to make all the investments we need to do to drive our growth initiatives.
Speaker Change: Thank you. Our next question comes from the line of Koji Ikeda of Bank of America. Your line is now open.
Koji Aikida: Hey guys, thanks so much for taking the questions. I wanted to ask or dig in a little bit more here on this.
Koji Aikida: New Platform Pricing Model, and it definitely sounds like things are beginning to shake, take tape there and...
Koji Aikida: You know, even visible with the total users being down, you know, being called out on the press release, that's a result of...
Koji Aikida: of platform pricing being adopted. And so it does feel like this might become one of the key metrics here. Users to help get visibility into how platform pricing is being adopted. And so maybe, maybe could you talk about some of the dynamics with that metric, you know, the total users out there and. [inaudible]
Koji Aikida: And how to think about kind of the sequential decline there and how does that translate into the adoption of the new pricing model?
Koji Aikida: Are you targeting certain types of customers to maybe adopt that pricing model first? Is it based on size? Is it based on geography or vertical? I mean, any sort of help there on this new platform pricing model. [inaudible]
Daniel, we'll be great, thank you.
Speaker Change: Thanks Koji, so when a customer adopts a new platform pricing model, we do take their users down to zero because they're no longer on a user-based pricing model, so that's what you see in our metrics.
Speaker Change: But more importantly, when we think about Q1 and beyond in terms of how things are working, we did. [inaudible]
Speaker Change: Ikseed our expectations for Q1 in terms of adoption of pricing model. [inaudible]
Speaker Change: Now I'll say that with a caveat that it is historically, we're three months into a multi-year plan and as we stand today we have rolled out the pricing model to new logos within North America as well as a renewal space in North America.
Speaker Change: Q2, we're going to see that expand to the Renault's base in Amia, and continue to roll it out in such a fashion. That is intentional. We never intended to do a big bang with a new pricing model, so we're slowly rolling it out and we're seeing traction slightly ahead of what we had planned.
Speaker Change: In terms of who we target, it is mostly Upperman Market and Enterprise.
and there is a rationale for that. [inaudible]
Speaker Change: Basically, who do we not target? It's lower mid-market. When you have low user count as a company, you typically do not sell an unlimited model there. But more importantly, when we look at our customers that have hundreds if not thousands of users. [inaudible]
Speaker Change: When we engage them and say, we never have to have the seat license conversation again, we never have to have the user count conversation again. It really resonates with them, and that's why we're seeing the level of adoption that we are. [inaudible]
Speaker Change: Thank you. Our next question comes from the line of Patrick Walravens of Citizens. Your line is now open.
Thank you.
Patrick Wall-Ravens: Oh, great. Thank you and congratulations on the quarter. Hey, Trice, would you mind sort of walking us through at a high level the difference in your approach?
to using AI and Blackline and then versus... [inaudible]
Speaker Change: I got a demo of what flowcast was doing with the AI agents for seems. [inaudible]
Patrick Wall-Ravens: Warren Bettin, Excel, among other things, but it seems like you guys are taking different approaches and I'd love to hear to start that.
Speaker Change: The key points. Yeah, I think that's a great call-out pat. We are taking a different approach. First off, we want to make sure that we approach it the way our market and our customers meet it.
Patrick Wall-Ravens: and I was just seeing a demo of one of our AI agents the other day. And...
Patrick Wall-Ravens: While I got very impatient with that, I recognize that our customers are going to do an order for auditors.
Patrick Wall-Ravens: to embrace AI. There has to be a very clear audit trail that shows them how certain things were done and how certain conclusions were arrived at. [inaudible]
Patrick Wall-Ravens: And so we're very much focused on sort of not the glitz of something like, ooh cool, it just did that for me. But we're really focused on how do we provide agents that give long lasting value that will be accepted by finance executives and cleared by auditors?
Patrick Wall-Ravens: Okay, we're really kind of taking a very long-term approach to this.
Patrick Wall-Ravens: Combines that sort of, we call it Responsible AI, I call it whatever you want, but we...
Patrick Wall-Ravens: Are combining that with, how do we leverage the fact that we have 20 years worth of SAS data?
across literally thousands of customers that we can... [inaudible]
Patrick Wall-Ravens: Do real learning on and rather than do a simple bank account wreck which everybody can do, how do we actually pull out real insights?
Patrick Wall-Ravens: and Real Value from the history of this information. So yeah, we're taking a bit of a methodical approach but I think that for longer term adoption and longer term value creation for our customers it's the right way to go.
Thank you.
Speaker Change: Our next question comes from the line of Pinjalim Bora, of JP Morgan, your line is now open.
Great. Thank you for taking the question.
Pinjalam Bora: Owen Patrick, maybe just one question on the renewal rate. It seems like it was moving in the right direction as a last quarter, but seems like it's taking a step back. So, I want to ask you what kind of groove that particularly is that would you attribute that to kind of the macro environment? Is there the new pricing model that you're rolling out? Did that? Yeah.
Speaker Change: Had any role to play? And then how should we think of that metric kind of trending over the next few quarters? Thank you very much.
Speaker Change: Patrick and I will answer this together if that's okay, I think a couple things, so one is we're still very pleased with where we are in the enterprise space.
We're going to continue to try to drive that higher.
Speaker Change: We're still going to have those pockets in the mid-market churn that we talked about a while ago is some of those customers that probably should have never come to Blackline a few years back that didn't get well adopted so that will work its way through this year and then our customer teams or renewal teams are really trying to focus on driving.
A higher mix of multi-year renewals and why that matters.
Speaker Change: is because we're having these conversations with our customers, are you going on a journey or not?
Speaker Change: and if you're going on a journey to really do digital finance transformation, Blackline is great for them because then we can create these plans, work with them jointly with our partners that are helping you do implementations along with their management team and so that shows up really the right way. Bye.
Speaker Change: The pricing model, you know, in some ways I think it helps with some...
Speaker Change: The renewal rate. I think we're doing a better job of trying to look at the rigor we want to have across our sales teams for the different things that we're doing in the conversations with our customers. Thank you very much.
Speaker Change: You know, that said, there's aspects of Patrick touched on on the prepared remarks.
Speaker Change: You know, we have a number of large customers, three of them in the first quarter that went through pretty significant.
Reorganization to restructurings.
Speaker Change: where they got rid of a lot of entities, their intercompany volumes went substantially down. And I do think the one thing we're continuing to watch is those customers at.
Speaker Change: Argonne, maybe beyond a additional strain in this environment.
and what impact that might have on.
Speaker Change: on a trition, again, in the enterprise space, it's not really turned. [inaudible]
but it's where customers are trying to...
and she scaled down in a tighter environment.
Speaker Change: but I think that pricing models should be able to help us a little bit. Patrick, I know you've been studying this left and right, so I don't want to add anything there. Yeah, just to be clear, the pricing model and what we've done thus far has only benefited turn interest. And now granted it is still early, but it has not been a headwind to that effort whatsoever. However, um,
The overall renewal rate is up one point, year over year, down.
Speaker Change: very slightly over the prior quarter, and that has a little bit to do with the renewal space and some of the things that Owen talked about. But overall, we expect to see the enterprise renewal rate and continue to be in the upper 90s with the mid market rate in the lower 90s, and we'll continue to work to push that up. But overall, we're...
It was a good outcome.
Speaker Change: Thank you. Our next call comes from Chris Quintero of Morgan Stanley . Your line is now open.
Therese Tucker: A.O. and Therese, Patrick. Congrats on the nice set of results here.
Speaker Change: I want to follow up on Koji's question around the pricing model. I think it was EON that mentioned that the unlimited model is now allowed for some rippin' replaces of competitors. I'm just curious, is that model helping you from a win rates perspective and going head to head against some of your competitors? Obviously, you all have been a bit more front-footed on the pricing change dynamics moving away from a seat-based model. So just curious about the competitive landscape.
Therese Tucker: Kate, implications of that at all. [inaudible]
Therese Tucker: Patrick and I are going to do it again on this. So if you don't mind. So look, I...
Therese Tucker: I don't know that it's the complete differentiator to get started. It might help in maybe some of the clothes. I mean I do think our larger customers like the fact that there's this opportunity and it again takes away that issue. How many seats do you have back and forth?
Therese Tucker: It's certainly not something we're leading with. We're still, you know, our value proposition is the quality of breath, the depth, the reliability, the trustworthiness of what Blackline brings [inaudible]
Therese Tucker: and that's the value proposition that we start with now. We do see some, you know, in particular, one competitor that is...
Therese Tucker: Very fixated on race to the bottom on pricing but you know that's a different way for us to sort of go off and compete against them because for us again it's about quality.
Therese Tucker: and you can tell a lot about the existing prospect of where their priorities are if it's about quality or the cheapest price they can get for it inferior product.
Therese Tucker: And so, I think pricing flexibility we have that Patrick and the team built in will help us, but I don't think it's the most determinative thing as we've been in the market with this now for, I guess, four or four months Patrick.
Speaker Change: Yeah, I would agree the most important thing is articulation of the value that we bring incrementally over our competitors and then our pricing model mirrors that value that we deliver. So I would say it's a competitive advantage but it's derivative of the fact of the value that we deliver. [inaudible]
Speaker Change: Thank you. Our next question comes from the line of Steve Enders of City. Your line is now open.
Steve Enders: Okay, great. Thanks for, thanks for taking the question here. I guess I'm going to ask on just pipeline dynamics that you're saying right now. It seems like maybe things are getting a little bit better at least with the SAP relationship evolving and some of the marketing initiatives that you're going through. But have you maybe seen any impact yet on the pipeline from? Yeah.
Steve Enders: You know, any of the uncertainty that you're maybe accounting for in the outlook or just any other factors that we should take into consideration as we think about the pipeline dynamics for the rest of the year.
Steve Enders: Hey Steve, good to hear from you and you can't hear me knocking wood on the table here right now but we've got about six seven straight months of really solid
Steve Enders: Gross in the pipeline, and that's I think it's a testament to what our marketing team is doing, what our sales team is doing, what our customer success team is doing, what our partners are doing, with us in our own professional services team. All those groups are really focused on trying to find those opportunities to help. [inaudible]
Steve Enders: Or if I was to expand our footprint with existing customers as well as that new opportunity. So we have not seen any fall off in the size of the pipeline, the quality of the pipeline and request for demos, all those numbers are up substantially. Thank you very much.
Steve Enders: Year over year and even just again in the last six, seven months, just so... [inaudible]
Speaker Change: Thank you. Our next question comes from the line of Alex Sklar of Raymond James. Your line is now open.
John
Alex Sklar: Thanks, Patrick. One for you, just on the commentary and by the growing multi-renewal bookings I appreciate the call out on RPO. Is there any duration impact to factor for revenue that would make kind of billings, and I know you've talked to TTM Billings as a good leading indicator, just become a little bit less reliable in the past, or is the multi-year-only impacting RPO? Thanks.
Alex Sklar: Yeah, the short answer there is it's only impacting RPO, you know, TTM Billings, the metric remains the same, maybe just to give a little color, you know, when we engage our customers.
Alex Sklar: You know, our customers these days, you know, they want to be on a multi-year journey with us.
Alex Sklar: while it might take just a few months to do an implementation of our products.
Alex Sklar: The overall journey for transformation takes multiple years. So when we have that conversation with them and they want to partner with us and we want to be there for them, it's mutually advantageous for both us and our customers to sign a multi-year extension or sign a multi-year initial deal.
Alex Sklar: For us it provides revenue assurance and it gives us time to work with them and for them it provides call to shortness which is something that is really important in this current economic environment. [inaudible]
Alex Sklar: to provide that a shortness and continue on the journey with us. That doesn't change how we invoice them, but it does change overall duration and overall RPO. [inaudible]
Alex Sklar: Patrick, I could just add to that. I think one of the things that we feel good about is from a partner-powered strategy perspective as we've talked to all of our top partners in the last week or so. They are really busy right now.
Alex Sklar: Totally has things like they expect 20 to 30 plus percent growth in their business that got more opportunities. I think they're brimming with opportunities when we describe another and said to me that their opportunities are almost double where they were a year ago and so I think. [inaudible] are going to have a lot of opportunities. They're going to have a lot of opportunities.
Alex Sklar: What we're seeing from there is not only in that new but importantly again these customers reigniting getting started again. . .
Alex Sklar: and Digital Finance Transformation, and that I give a lot of kudos to...
Alex Sklar: our own team and our partners who are trying to have those conversations.
Alex Sklar: because we're using our information and insight where we can see.
How quickly a customer is moving vis-a-vis their others. First.
Alex Sklar: and get them back on the journey of where they need to go. And I think using that benchmark data, that industry insight that Therese touched on a little bit.
Alex Sklar: does help customers say, hey, maybe there is more we can do here, or prospect saying, hey, maybe there is more that Blackline can bring out, we're not getting from somewhere else. So, those are all positive things that we're seeing in the business right now. [inaudible]
Thank you.
Speaker Change: Our next question comes from the line of Ryan Krieger of Wolf Research. Your line is now open.
David
Speaker Change: Hey guys, thanks for taking the question. I just wanted to follow up on Koji and Chris' question earlier around the pricing model. Really great to hear that migration volume is ahead of plan, but
Speaker Change: We're early ACV up list tracking against plan, just given I think it accounts for about one to two points of growth acceleration in your long-term model bridge. And then Patrick, one for you, just how should we be thinking about net retention for the rest of the year? Yeah.
Speaker Change: in the context of the guide, you know, on one hand, you're calling for a little bit of a more uncertain environment, but it sounds like, you know, there's a lot more stabilization and tailwinds coming into the business, so how should we think about that? Thanks [inaudible]
Thank you for your time. Thank you.
Speaker Change: Okay, I'll start with the second question. In terms of net retention, I guess on the guide that we talked about in February , assuming that
Speaker Change: The macro environment does not provide any notable headwinds. We still feel very confident that we're going to plot a path from 104 to 109, which is our target model over the next three to five years. So, one would expect, well, that's not going to be perfectly linear. Here.
Speaker Change: You're going to see a consistent uptake as we continue to execute on our strategy.
Speaker Change: Going back to the first question there in terms of pricing, you're correct in terms of what we communicated in November and I believe again in February
Thank you.
Thank you. Our next question comes from the line of
Terry Tillman of Trua Securities. Your line is now open.
Speaker Change: Hi, this is Dominique Manansala, I'm for Terry, thanks for taking my question. So, you all mentioned traction with St. Local Governments. So, beyond just bedramp timing, how are you equipping the team to build advanced public sector opportunities and can we realistically see meaningful contributions from that segment in the second half?
So...
Good to hear from you, Dominique.
Couple things, so one is...
Speaker Change: We're working very closely with a number of our partners that have pretty extensive state and local practices, right? So there's no way we could ramp up to cover all 50 states in the top 50 cities across the country, but our partners who are walking the halls of those. I don't know, I don't know, I don't know.
Speaker Change: and a government agencies are the ones that we're really trying to use. I think we might have shared the last time you're seeing a lot of the equivalent of doge type efforts at state and local levels that we are. Thank you for your time.
Speaker Change: explaining the value of Blackline, how you can capture value, whether it's at a municipality level, a state level depending on the nature of the agency. And so we're doing much more in that regard. Also, you know, SAP has a pretty extensive federal state and local government business as well. So we're tying into all that. So those are the things that we're trying to do. We did not build much. And so we're going to move on to the next.
Speaker Change: If anything, into the financial plan, this year I think was quite nominal and so anything that hits this year will be better than we had anticipated, but it really was setting us up more for next year than it was for this year Dominique.
Thank you
Speaker Change: Our next question comes from the line of Daniel Jester, of BMO. Your line is now open.
http://TheBusinessProfessor.com
Speaker Change: Great. Thank you for taking my questions. So it sounded like in the beginning of the
Speaker Change: Some of the investments you've been making in different verticals have been helping...
Speaker Change: Closed Steel, and so I wonder in the current environment where some verticals may be more exposed than others. Are you reprioritizing in terms of where you're investing this year? Sounds like maybe not, but if you could share some color that that'd be helpful. Thank you. Yeah.
Speaker Change: Thanks, Daniel. I would say we're not reprioritizing any of the verticals at this particular point time.
that we started with five last year.
Speaker Change: The results in the first quarter would show that, you know...
Speaker Change: but more than a small majority of our success came in those. [inaudible]
Those five industry verticals and in some ways. [inaudible]
Speaker Change: You know those industries that might be under the most pressure.
Speaker Change: So if you think about some of the manufacturing and retail customers that we support some of the toy manufacturers...
As an example. [inaudible]
Speaker Change: You know, there may be more that we can do to try to help them from a use case and get more efficiency out of it by the same token some of the places where you know we're doing quite well.
Speaker Change: and we see a lot of opportunity, we just continue to trouble down.
Speaker Change: and that regard. So we're going to stick with the verticals that we had. [inaudible]
The use cases are resonating very well.
Speaker Change: with our customers, the insights that Therese sort of talked about earlier.
Speaker Change: are real, they're meaningful when we start to take some of our best examples of what we can do with our customers, our prospects of real data. It becomes a very interesting conversation very quickly. And so we'll keep doing that because we know it's a differentiator for us in the marketplace.
Thank you.
Speaker Change: Our next question comes from the line of Adam Hotchkiss of Goldman Sachs. Your line is now open.
Adam Hotchkiss: Great, thanks for taking the question. Therese, one for you, and maybe Owen as well. This is a business that's obviously been through a number of varying environments over the years with the core financial closed solution. Just curious what in your mind are some of the most important past practices for you as you navigate an environment like this, maybe informed by things that have happened in past cycles. Thanks so much. Thank you.
Adam Hotchkiss: Time to value, Adam, time to value. We've got two people are willing to invest if they're going to see a payback on it.
Adam Hotchkiss: and so this is why industries is helping us so much.
Adam Hotchkiss: because we have very focused business cases where other customers, you may have seen in the Exxon mobile recent earnings call. They said they've literally saved tens of thousands of hours.
Installing Blackline. [inaudible]
Adam Hotchkiss: Okay, I mean, Anne, they've gotten better data and and and, right? So when you have those kind of proof points and you kind of need them for this environment because nobody wants to make a bad investment right now. So you've got the proof points that you can deliver value, then you've got to do that in a very expeditious way.
Adam Hotchkiss: So Adam, I'm going to take this a little bit different and one of the advantages of having two relatively older CEOs is we've seen a lot of downturns if you want to go all the way back and I think
Speaker Change: I think that this team is doing really well.
is staying disciplined and focused on executing.
Speaker Change: And I think what Theresa and I talked with our leadership team about, and I was going to use the Bill Bell check example, but given he's been in the news a little bit too much lately, I'll just sort of we created
Our playbook of how we want to run this company. [inaudible]
Speaker Change: and then we have brought in a leadership team that I would call sort of the lunch bucket brigade. They are hardworking. They're in the trenches. They know what to do. They understand it and they're doing it really well. And we're not getting distracted by things that sort of take us away. So it is about discipline. And I think you know, I was watching the interview.
Speaker Change: Daniel Meaning, a Berkshire Hathaway over the weekend and I had the privilege and my prior life of serving that company and that board and leadership team. [inaudible]
Speaker Change: And if there's one thing I learned from them, it was discipline and patience. And I think those are the things that Therese are trying to bring here to this organization is making sure we keep that discipline and the patience of what we need to do to make sure we're not reacting to things.
Speaker Change: in the short term because we're here to build a big hub. [inaudible]
A big, important franchise for the Office of the CFO.
Thank you
Speaker Change: Our next question comes from the line of Jake Roberge of William Blair. Your line is now open.
Jake Roberge: Yeah, thanks for taking a question. Great to hear about the Strong Solics performance this quarter. I know there's been some leadership changes that SAP with your key contacts over there. So curious what the feedback has been from those new leaders that are in place and whether you feel like that type of performance you saw this quarter is kind of the new normal. Now those relationships are getting more established.
Jake Roberge: Quintero is right after they put their results out and we're ours weren't out yet and I think we are both very pleased with the progress that we're making and I know Teresa is spending time with their leadership teams. Still we're spending time with their leadership team. I think we really feel good about
Jake Roberge: What we're trying to do going forward is a very clear game plan. It's a win-win for both of us, and more importantly, it's a win for our customers when we do it right. I think Therese just gave the example of ExxonMobile as a perfect...
Jake Roberge: a case study and all that, and so I think there's, you know, I don't want to say blue skies ahead, but I think better days are ahead as we move forward. And the only reason I want to say blue skies is because you just don't know what the next couple of months are going to look like. But certainly, you know, medium term, long term, we feel very, very bullish about what we're trying to accomplish together.
Thank you.
Thank you.
Speaker Change: Our last question comes from the line of William Jellison, of DA David Sinanko. Your line is now open.
Great. Thanks for squeezing me in.
William Jellison: Owen, I wanted to ask about a statistic you gave at the beginning of the call, which I thought was interesting, which was that go live volume was up 20% year over year. I'm curious how you think about
William Jellison: The progression of that improvement as you do some more work in inter-company, it sounds like, and the kind of impact you have, you expect it to have on momentum and revenue.
Patrick Wall-Ravens: Yeah, really good question. And I think one of the things that Therese has said a couple times and Patrick said during the show as well, it's like I'm the value. And I think a lot of what we were looking at is
Speaker Change: Under our new leadership, Jimmy Duwan, and Victor Perez, and our professional services and customer success, I think they took a really hard look at.
Speaker Change: How quickly are we getting our customers live? What are the...
Speaker Change: We've been doing that across financial close for quite a while. We really have made a lot of progress in acceleration in FRA, financial reporting and analytics consolidation, as well as invoice to cash.
Speaker Change: Intercompany is probably our biggest most complex solution in so many ways.
I think there's been a lot of lessons learned.
over the last 12 or so months of COVID-19.
what we have to do.
Speaker Change: A lot of this because of the complexity and uniqueness of many of our customers. Thank you very much.
Speaker Change: really understanding requirements, requirements, requirements up front. If we can get that right, these things go that much quicker and better and more value for our customers more quickly. I think the other thing that we're starting to see in some conversations is since the US election. You know, we all knew that there was going to be conversations around tariffs and trade and things of that nature. That has gotten more conversations going with our customers and with our partners because the way supply chains might change. [inaudible] We're going to get that right. We're going to get that right. We're going to get that right.
the way that, you know, tax policies might change.
Those have real financial impact for our customers.
Speaker Change: And I don't think there's about fact we know, there's nobody better positioned with the solution.
Speaker Change: that's done with our partners and our customers and our own personal services team to drive and help our customers capture.
Captain of that value, so...
Speaker Change: You know, the inner company is sort of, I don't want to say the last frontier of what we need to do, but there's lessons learned that we're trying to apply to accelerate what we're doing for our customers in that regard and we feel pretty good about what's coming up the pike on that one.
Thank you.
Speaker Change: This concludes our question and answer session. I would now like to turn it back to Owen Ryan for closing remarks.
Speaker Change: Thank you, operator, and thank you all of you for being on the phone and for following Blackline. We truly appreciate you doing that. We look forward to continuing our dialogue with you as we move forward. Have a great night, everybody. Take care. Thank you.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.