Good day, and thank you for standing by. Welcome to the BlackLine Q4 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to turn the call over to Matthew Humphries. Please begin, sir.

Good afternoon, and thank you for joining us today. With me on the call are Owen Ryan and Therese Tucker, Co-Chief Executive Officer of BlackLine; as well as Mark Partin, Chief Financial Officer; and Patrick Villanova, Chief Accounting Officer. 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, in particular, our guidance for Q1 and full year 2025, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent our outlook only as of the date of this call. 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, particularly our Form 10-K and Form 10-Q. We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. All 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 on this call 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 our earnings release, which may be found on our Investor Relations website at investors.blackline.com or in our Form 8-K filed with the SEC today. Now, I'll turn the call over to BlackLine's Co-Chief Executive Officer, Owen Ryan. Owen?

Thank you, Matt, and good afternoon, everyone. Thank you for joining us on today's call. Like you, we have seen the devastating impacts the wildfires have had across Los Angeles. 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. 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. We are providing direct support to our affected employees and are working with local relief organizations to assist the broader community. Now, turning to our fourth quarter performance. BlackLine met or exceeded our revenue and non-GAAP guidance despite notable currency headwinds due to a strong U.S. dollar. We delivered 9% revenue growth in the fourth quarter with a non-GAAP operating margin of 18%. Patrick will provide a detailed breakdown of our performance and the specific impact of FX movements shortly. As we enter the year, our strategic evolution and momentum remain right on track following our successful BeyondTheBlack event. Our pipeline has seen healthy growth across multiple dimensions. We are seeing an increase in both volume and critically in opportunity size, driven in part through platform or multi-pillar opportunities. The quality of these opportunities has improved, driven in part by our strategic channel partnerships. The combination of higher volume, larger deals, and enhanced opportunity quality reflects the growing market recognition of our platform's comprehensive value proposition. That being said, we did see instances in the fourth quarter where deal velocity, especially in larger late-stage opportunities, slowed. This caused some opportunities to extend into 2025. Some of these deals have closed in January, and most we expect to close in the coming months. We remain optimistic that the momentum that has been building will continue. Our new Chief Commercial Officer, Stuart Van Houten, started today and is expected to drive relentless execution across the business. His experience with enterprise customers and with our largest go-to-market partner, SAP, will only enhance and accelerate our strategy and, ultimately, our results. At Investor Day, we shared key strategic initiatives, and I am pleased to report substantial progress across these priorities. Our journey towards FedRAMP certification continues according to plan, positioning us to serve public sector organizations at a crucial time. Government agencies increasingly recognize their critical need for modern technology to fulfill their missions effectively, and we're seeing promising opportunities emerge in this space. One word of caution is the changing environment in Washington, D.C. We are gaining momentum with state and local governments who are eager to not just adopt our technology but to partner deeply with BlackLine through their digital finance transformation. While our public sector initiative is early, I am very pleased with the early momentum we have seen and large greenfield opportunity ahead. Our new packaging and pricing model recently launched has seen positive early traction. Interest began building during the BeyondTheBlack conference even before the formal launch. 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 are a little over 1 month in, we are tracking to our initial targets and expect that this multi-year initiative will be accretive to our growth. On retention, we saw further improvement in our revenue renewal rate, which has been our priority at BlackLine. In the fourth quarter, our revenue renewal rate was 96% in what was a heavy renewals quarter. Our enterprise performance was strong at 97%, coupled with a notable improvement in our mid-market business, which came in at 92%. These levels are much more in line with our expectations. At BeyondTheBlack, 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. Two years ago, we set out to elevate our brand to the CFO. The launch of our Studio360 platform enables us to reach that goal. This enhanced positioning has catalyzed deeper engagement with our key system integrators and SAP, who see expanded potential in our go-to-market strategy. Though, still in its early stages, we anticipate Studio360 will be a critical growth driver. 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. By delivering enhanced customer value and demonstrable ROI, we have strengthened our value proposition to both CFOs and CIOs, positioning us to pursue larger, more strategic opportunities. As mentioned, our evolution has driven deeper engagement with partners, and we continue to see major global systems integrators increasing their investments in BlackLine practices and aligning with our platform vision for the office of the CFO. We also are focused on increasing our reach to select new go-to-market partners while enhancing existing partner relationships. For example, we recently entered Workday's partner program to elevate our message and reach to CFOs and CIOs globally. In my discussions with their senior leaders, we believe their global positioning and success in strategic industries and markets aligns well with our competitive strength and strategy. We have also focused on deepening and enhancing our strategic relationship with SAP, our primary go-to-market partner. Given SAP's significance to our future growth strategy and the accelerating digital financial transformation trends, allow me to provide additional context about this partnership. Since November, we have had numerous meetings to discuss how we can enhance this partnership going forward? The focus was on driving even more value to customers as they move to the cloud and stronger results for our companies. Let me outline just a few of the items we have committed to going forward. First, we have begun the premium qualification process for Studio360, as part of the SolEx program, with a formal launch scheduled in the second quarter. Coupling our powerful Studio360 platform together with SAP solutions to offer comprehensive orchestration and automation capabilities for SAP's customers globally will resonate in the market. Second, we have been included in SAP's EPM package as part of their RISE initiative, which is a recommended SAP package for customers planning to migrate from ECC to S/4HANA. As part of this package, BlackLine Studio360 and Financial Reporting Analytics solutions will be included and offered to SAP customers. Next, we launched our SAP Catalysts group, which is a dedicated team of BlackLiners whose sole focus will be on making all aspects of the relationship work. We are more tightly aligning our compensation structure to support our SolEx efforts, especially for those moving to the Public Cloud. Finally, we are jointly positioning Finance-First as a strategic entry point for ERP modernization. This allows for BlackLine deployments before ERP migrations, delivering early ROI in customers' digital transformation journeys. Early implementations show promise, and we expect this sequencing to drive growth in our SAP partnership over the next several years. 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. Turning to broader deal activity this quarter, in Europe, we expanded with BAE Systems, a large global aerospace and defense company. 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 S/4HANA transformation. In North America, we were able to replace a mid-market competitor at Snowflake, a new customer. This multi-pillar deal, including both financial close and Financial Reporting Analytics, was driven by their desire to have a partner that could support them as they grow in scale, something our competitors could not match. As they shared, they knew they had significant limitations with their existing vendor with a great deal of waste of time and lack of capabilities in advanced automation and consolidation. BlackLine's capabilities were a natural evolution for the customer as they continue to grow, a story we see regularly. We also saw further examples of success with both our platform and industry strategy, particularly in financial services. At Zopa, a fast-growing European fintech company, we won a competitive deal and replaced legacy solutions as they sought to remove many of the pain points and inefficiencies that had built over the years. With a view on scaling their business even further into the future, they recognized they needed to reengineer their financial and operational processes to enhance end-to-end orchestration, controls, and visibility. This multi-pillar and platform deal includes financial close, financial reporting analytics, and Studio360. On the SolEx side, we saw solid performance in our international markets, a key focus area for BlackLine. Specifically, we signed a net new deal with Sandvik Coromant, 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 recognized the complex challenges BlackLine can help solve, especially when aligned with their SAP landscape. Also in Europe, we expanded with a leading consumer goods customer in the UK. The customer is looking for a modern alternative to an existing homegrown intercompany solution to solve the growing challenges faced by their finance, tax, and treasury teams. Given our track record of delivering ROI previously, this company was keen to adopt IFM to streamline, automate, and integrate their intercompany processes. In Japan, we signed TANAKA Holdings to a net new deal, supporting their transformation and automation mandate. 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 BlackLine and SAP offering to enable future success. We also expanded our Japanese market presence by signing a major automotive manufacturer. 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. This deal represents a notable breakthrough in the Japanese market where 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. With that, I would like to turn the call over to Therese.

Thank you, Owen. Innovation remains the cornerstone of our strategy and the primary catalyst for unlocking further market opportunities. Our commitment to technological advancement extends beyond individual product improvements. It represents our vision for digital finance transformation across the enterprise. Through our platform evolution, AI integration, and enhanced automation capabilities, we're 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 bring this to life, our Studio360 launch in November has generated significant market enthusiasm for its ability to orchestrate, connect and automate financial systems at scale. 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. Several large Fortune 100 companies are already implementing Studio360 and providing additional valuable feedback. The initial response has been compelling. Customers report saving significant time and process administration through Studio360's powerful automation and orchestration capabilities. Beyond the established benefits of our closed solutions, they are achieving further acceleration of close timelines and creating additional team capacity through more efficient workflow automation. These low-code orchestration capabilities are specifically designed to afford finance and accounting departments greater autonomy, reducing their dependence on internal IT resources. A recent example from 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 of our goals: allowing customers to control their own transformation journey and ultimately driving faster time-to-value and enhanced ROI. Similarly, we have received great customer feedback on how Studio360's visualization capabilities greatly enhance and improve both visibility into and control of their financial operations in a more timely manner. For example, through Power BI and other visualization tools that are native to Studio360, we are eliminating the need for customers to export their data out of BlackLine. They can save time in their processes, reduce reliance on third-party tools, and generate the real-time insights they demand. Our strategic partnership with Snowflake has become a key differentiator, particularly through the integration of their data share capabilities into Studio360. This resonates deeply within our customer base, many of whom are existing Snowflake users. 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 part of the Snowflake partner program, expand our market reach. Turning to our pillars. Financial close continues to be the primary entry point for digital finance transformation with Studio360 poised to amplify its impact. We're enhancing 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 Studio360's 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, and comprehensive generative AI functionality. We've also developed enterprise consolidation capabilities to strengthen our record-to-report offering, positioning us to capitalize on opportunities arising from legacy consolidation solution end-of-life transitions and broader ERP migration initiatives. Financial reporting analytics has seen great success in North America, consistently ranking as one of our fastest-growing solutions. The compelling value of an end-to-end close and consolidation package has resonated well beyond the North American markets. Our recent 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. We are seeing increasing demand for our intercompany solutions as organizations face increasingly complex cross-border transactions and regulatory requirements. At BeyondTheBlack, customer discussions emphasize the pressing need for solutions that can adapt to evolving global regulations 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, enabling customers to navigate these complex regulatory challenges effectively. Our strategic SAP partnership amplifies this opportunity, providing a pathway to accelerate IFM adoption across our shared customer base. Our invoice to cash solutions market leadership was recently validated by IDC's recognition of BlackLine as a leader. We're strategically focused on deepening its integration with Studio360, which will both streamline implementations and deliver a comprehensive solution that addresses CFOs' end-to-end requirements. The strength of our solution and strategic roadmap is attracting premier talent from competitors, further validating our market position and vision. Moreover, our partners are making significant investments in their practices, demonstrating their confidence in our solutions and creating additional momentum to accelerate our growth in this strategic market. 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're proud of our achievements thus far, they represent just the beginning of our journey. 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. With that, I'll turn it over to Patrick to cover our financials.

Thank you, Therese. As discussed previously, we are making meaningful progress on 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 targets. Also, our financial foundation remains very strong, characterized by healthy operating margin expansion and a robust balance sheet. This foundation enables us to maintain our commitment to innovation while delivering incremental value to our customers. Now turning to our fourth quarter results in more detail. Total revenue grew to $169 million, up 9%. Subscription revenue growth was 9% and service revenue declined 1%, in line with our expectations. Annual recurring revenue, or ARR, was $641 million, up 6%. We saw an approximate two-point impact to ARR in the quarter, primarily due to FX-related revaluation at the end of the period. Remaining performance obligations, or RPO, were up 4%. FX represented more than a one-point headwind to RPO growth. Current RPO was up 5%, with similar dynamics from FX. As Owen mentioned earlier, we also saw some slowing in deal velocity this quarter, which impacted both ARR and RPO. Calculated billings growth was 5% with trailing 12-month growth of 6%. FX impacted billings growth in the quarter by one point. Our customer count at the end of the quarter was 4,443, as we still see moderate impacts to customer count growth shift our strategic focus in the middle market. Our revenue renewal rate in the fourth quarter was 96%, reflecting further improvement across both enterprise and mid-market. Net retention rate, or NRR, 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 expansions impacting NRR. Strategic products represented a record 33% of sales in the quarter. Invoice to cash had a record number of deals this quarter. We also saw solid performance from Smart Close. Partners were involved in 80% of large deals this quarter, with consistency across both new and existing opportunities. SolEx performance was below our expectations in Q4, primarily due to the deal dynamics mentioned previously. In the fourth quarter, SAP partnership revenue represented 26% of total revenue. Now turning to margin. Our non-GAAP gross margin was nearly 80%, with non-GAAP subscription gross margin at 82%, in line with our expectations. Non-GAAP operating margin was 18% as reported. FX represented almost a three-point drag on our operating margin in the quarter. Non-GAAP net income attributable to BlackLine was $35 million, representing a 20% non-GAAP net income margin. 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%. And last, regarding our balance sheet and capital allocation, we have approximately $886 million in cash and cash equivalents versus $893 million in debt. As planned, we expect to begin our previously announced share repurchase program in the first quarter. As we look to 2025, several items will shape our financial performance. 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. This headwind is embedded in our full-year guidance range. Additionally, our sustained profitability improvements over recent years will result in a higher effective tax rate for 2025, which is also embedded in our non-GAAP net income guidance. With these considerations in mind, allow me to outline our guidance for the year. For the first quarter of 2025, we expect total GAAP revenue to be in the range of $166 million to $168 million, representing approximately 5% to 7% revenue growth. We expect non-GAAP operating margin to be in the range of 16.5% to 17.5%. And we expect non-GAAP net income attributable to BlackLine to be in the range of $28 million to $30 million, or $0.36 to $0.39 on a per share basis. Our share count is expected to be approximately 77.7 million diluted weighted average shares. 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, representing 7% to 8% growth. We expect non-GAAP operating margin to be in the range of 21% to 22%. And finally, we expect non-GAAP net income attributable to BlackLine to be in the range of $155 million to $165 million, or $1.97 to $2.10 on a per share basis. Our share count is expected to be approximately 78.5 million diluted weighted average shares. With that, I'll now ask the operator to open the discussion to take your questions.

Thank you. Our first question for today will come from Chris Quintero of Morgan Stanley. Your line is open.

Hi, everyone. Thanks for taking our questions here. Maybe to start, I want to ask, Owen, for you, I know macro and deal velocity was a little bit lower this quarter. But just curious how execution came in versus your expectations? And how much you're expecting this macro to continue throughout fiscal year 2025?

Yeah. I would say, Chris, first of all, good to hear your voice again. I was generally pretty pleased with the way we executed in the fourth quarter; some of the things that sort of gotten in the way were more customer decisions around timing than it was our inability to close deals. In fact, the first five weeks of this year have been pretty positive as we've closed a number of those deals. And so I wouldn't say it was execution on our end at all really. There is 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 pause, but I think those are more timing issues than they are permanent changes at any level. I will say in some trips that both Therese and 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 UK, where people are trying to figure out how to make economics work a little bit with some of our deals. But again, those are more issues that we will work through. And in fact, what's interesting is even though there's been some concern about it, our pipeline internationally has been growing quite nicely.

Got it. That's super helpful and great to hear. Maybe one for Patrick, on the gross margins, how should we think about the linearity there? I know you have the duplicative costs, but should we think about the phasing of gross margin throughout the year?

Yeah. Thanks, Chris. I appreciate the question. What you should expect from a gross margin standpoint is slight expansion throughout the year, but for the most part, fairly consistent. We are planning to decommission some of the older service centers later this year as part of the GCP migration, and that will eliminate some of the redundancy. The other element at work there with gross margin is our FedRAMP investment. That is an investment that will be about a 0.5-point drag on gross margin this year but serve as a significant revenue opportunity in the future.

Super helpful. Thanks again.

Thank you. One moment for the next question. Our next question will be coming from the line of Patrick Schulz of Baird.

Good afternoon. Thanks for taking my question. Maybe just first on the SAP relationship. I appreciate all the color that you provided. I know Stuart's coming in and having the background with SAP. And obviously, it's a key strategic priority for you guys, and sounds like more collaboration from a go-to-market co-innovation standpoint. Just any color on how we should be thinking about the contribution from SAP in 2025? Are the right building blocks now in place for this relationship to really accelerate?

Yes, great question, Patrick. It's good to hear from you. As I mentioned in the prepared remarks, next year will be somewhat of a reset. There have been many changes within SAP, and it took some time for those shares to stabilize. However, over the last three months, Therese and I, along with our teams, have spent significant time collaborating. We have managed to focus clearly on what we need to achieve in the marketplace. Some key areas we have been monitoring include the pipeline building around the transition to the cloud. The finance-first approach that both SAP and BlackLine are promoting together is beneficial because merely migrating ERP as a lift and shift does not provide the value that customers seek. We’ve been able to demonstrate this in a few instances, allowing us to reach the minds of our respective teams. We have also invested considerable time in each other's sales kickoffs to reinforce this message. I can't share everything right now, but in May, we’ll have further announcements regarding roadmaps that we believe will help accelerate our efforts. Another important factor was aligning our incentive plans better so that we can work together more effectively. The support we’ve received from leadership has been extraordinary. Despite not concluding 2024 with SAP as positively as we would have liked, we are confident that the foundational elements for 2025 and beyond are in place.

Okay. Helpful. And maybe one more for Patrick too, if I can. Just could you provide a little bit more color on some of the puts and takes embedded in the guidance for this year? I mean what type of demand environment and deal execution does the guidance assume, and maybe you talk about how we should expect growth and net retention rates to trend throughout the year? Thanks guys.

Thanks, Patrick. So as you think about the guidance, just looking at the sheer numbers, we're guiding to 5% to 7% revenue growth in Q1 with a full-year growth of 7% to 8%, which without FX, to be clear, would be $8 million to $9 million. So as you think about that, there's an implicit inflection point in the guidance for the year in terms of how we expect to reaccelerate and exit 2025. 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 will speak about, many of the initiatives from a strategy perspective are taking root and gaining traction, and that is part of the overall guidance strategy for this year.

Thank you. One moment for the next question. And our next question will be coming from the line of Koji Ikeda of Bank of America. Your line is open.

Yeah. Hey, thanks so much for taking the question. I wanted to follow-up on that comment on the implicit inflection 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 and the visibility that the inflection is possible in 2025?

Yes, thank you for your question, Koji. Our confidence stems from several developments within the company from September to early February. When I took on this role, we aimed to enhance our relevance to CFOs, and we're seeing that reflected in the strength of our pipeline, which is growing swiftly. We are focusing more on mega enterprise and enterprise segments, with better geographic diversification and larger deal sizes. We're currently facing a record number of seven and eight-figure deals that we believe we can successfully close. These opportunities are more transformative, as customers are looking at our entire platform rather than just individual components, giving us optimism about our position. Additionally, we're seeing strong revenue renewal driven by several factors: our go-live velocity is increasing, and our customer interactions, which I prioritize, increased by 72% year-over-year. We are also witnessing a higher proportion of well-adopted customers, and our project initiation time has improved by 40%. Our partners are actively engaging, facilitating deal progress, and initiatives like BlackLine University saw a doubling in usage year-over-year. Moreover, we launched five new industries last year and have just introduced five more this year, positioning most of the company in industry verticals. There’s significant attention on DOGE in the FedRAMP space, but we’re also noting increased opportunities at the state level, where local and state governments are seeking solutions to improve efficiency. When we consider all these factors together, we're more optimistic now than we were on November 14 about our trajectory moving forward.

Thanks, Owen. And just a follow-up here, if I may. We definitely like what we heard at BeyondTheBlack from a tech 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 market to really absorb? And is that driving some of the push deals as customers are just trying to figure out, what did we just hear with BlackLine and how do we deal with all these changes from a positive perspective, I think? But how are they dealing with all that change?

Koji, that's an excellent question. It's not just about our customers; it's also about our team's capacity to manage everything happening, along with our partners. Therese and the product and tech team have launched a lot of innovations over the past 12 to 15 months, which is great, but it has been somewhat challenging for everyone to fully digest that. This is just the current situation we find ourselves in. We're putting in significant effort to navigate what we call the commercialization process from start to finish. We have learned some valuable lessons and identified areas where our messaging needs to be simplified and clarified. However, if we stop innovating, we risk stagnation. We've decided to get as much as possible into the market, but there are definitely things we've learned about the best ways to introduce these innovations. Additionally, from a timing perspective, once we complete the BeyondTheBlack contracts, we will no longer engage in discussions in November. It's simply too late in the year to have conversations with customers to help them adapt. This is probably another lesson learned. To effectively share what we're doing and collaborate with our partners, having these discussions earlier in the year would be beneficial for us going forward.

Thank you.

Thank you. One moment for the next question, and our next question will be coming from the line of Steve Enders of Citi. Your line is open.

Okay. Great. Thanks for taking my question here. I guess I want to ask on the pricing and packaging changes that you've been 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 revenue impact or potential impact to the model as we think about how the year comes together?

I will address how the changes are being received in the market, and Patrick can elaborate on the economic aspects. As a reminder, we are transitioning to a new pricing model based on factors such as the number of transactions, the company’s revenue, the number of ERPs they utilize, and the number of legal entities involved. Generally, this model works better for larger companies. We officially launched it in early January, and the initial response has been positive. This approach standardizes and simplifies pricing and provides an unlimited pricing agreement that customers seem to appreciate. It also offers us the flexibility to grow alongside our customers. Importantly, we are already seeing opportunities to engage with other areas of organizations beyond just accounting, which is a positive change as we aim to be more relevant to CFOs. We anticipate this will contribute positively as we progress. Although we are only five weeks into the new year, we are slightly ahead of our expectations. Most conversations have been strong, although there is occasionally some confusion among partners and staff regarding the messaging. We are addressing those lessons quickly. This aligns with our strategic goals discussed at BeyondTheBlack and Investor Day. The diversity in our pricing model allows us to make our customers more efficient, which reduces the need for users. We observed some attrition among larger customers in the fourth quarter because they were using the technology so effectively. This insight reinforces our need to accelerate the shift to the new pricing model. Patrick, could you discuss the economics of share?

Yes. I think Owen covered most of it there. But one thing to highlight as part of this overall effort is we've 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 were some good lessons learned that we've implemented on a broader basis. Something to keep in mind, though, I think there was a question earlier, is this too much too fast? Well, as it relates to pricing, this is a model we're rolling out over the next three to four years in our investor base, and that is consistent with the message that we said at Investor Day. We do expect to see a cumulative benefit of that as part of our overall account growth over that time, as we 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 are rolling that out in Q1 of this year and then also introducing it to new logos this year as well.

Okay. Perfect. That's helpful context there. And then I wanted to ask on some of the deal pushouts that happened here. I guess, is there a way to maybe frame the magnitude of impact that, that maybe had for 4Q from like an ARR or billings perspective? And I guess with the sales pushing out, how do you view the impact that would have from the year coming together from a new ARR perspective or the impact that would have on the pipeline development as we think about 2025?

A few points to highlight. First, I want to emphasize that our pipeline development has remained robust for quite a while, which is a positive sign for overall demand. We don’t think the slowdown in deal velocity at the end of the year reflects a declining pipeline; in fact, the pipeline has been growing even more quickly. Therefore, I don’t see this as a sign of broader demand issues. It’s important to note that when considering DBNRR and ARR, the main factor affecting these numbers this quarter was foreign exchange, which had a two-point negative impact on both metrics. This is an important consideration when comparing periods. Additionally, the deals that were pushed back represent a smaller part of the overall picture.

Okay. Perfect. Appreciate the color. Thanks again for taking the questions.

Thank you.

Thank you. One moment for the next question. And our next question will be coming from the line of Alex Sklar of Raymond James. Your line is open.

Thank you. Owen, you appointed a new Chief Commercial Officer to guide the go-to-market organization. Can you discuss how you chose Stuart for this role? I know we’re just getting started, but looking at the broader context, can you share any updates from the sales kickoff at the beginning of the year regarding plans or coverage? You mentioned some changes to compensation related to SolEx, so I'm curious about the go-to-market strategy compared to last year. Thanks.

From a process perspective, Theresa and I learned a lot, and we have now changed the entire leadership team, except for our Chief Legal Officer, since we were in these roles two years ago. We spent about a year looking for a successor and interviewed many candidates. We were aware that the incumbent wanted to retire and he kindly allowed us to work through that with him and our team. We were very selective in our choice and feel fortunate to have Stuart join us. Coincidentally, we had a meeting today in New York with our go-to-market leadership team of about 15 people, covering all aspects of our operations. The meeting was timed perfectly to discuss our current status, our goals for the year, and our strategy to achieve them. It became evident during the meeting that Stuart would contribute valuable perspectives, which was very encouraging. Although today marked his first official day, he had already been working with us at SAP to ensure connectivity and facilitate our efforts appropriately. It feels like he has been part of the team for about five weeks, aiding our progress. Importantly, the team is excited to have him. I believe he is going to be positively disruptive, and I've encouraged him to do so. We need to continue improving our operations, and I believe his experience from his time at SAP will greatly benefit us at BlackLine. We are very excited to have him onboard and look forward to the positive developments ahead.

Okay, great. Just quickly, I want to clarify the earlier point about tying compensation of SolEx. Is that just for that select group or for the broader organization? I have a follow-up.

Okay. So we did make some changes to our comp models this year like everybody tweaks them every year, but we did form an SAP SolEx catalyst group. So, we have a team of people now that are dedicated on all aspects of what has to be done to work effectively with the SAP team. We think that's a good differentiator for us. We got a lot of positive feedback from the SAP team around that. Our own team is embracing it. So, we're pretty encouraged about what we need to do there. As far as just getting SAP and BlackLine aligned, it's all about cloud-based revenue. As you know, what their strategy is and what they're trying to do. BlackLine fits well into that. There are some things that they've done by putting us into their SAP EPM package. So, you know that we already have all our core financial close capabilities in there and intercompany. But getting that group reporting FRA into it, they call it FRO, into their package was important. Getting Studio360 integrated as well. The timing for that is as they go through their Sapphire Conference, I believe it's in May or June, being able to officially launch that there as a fully integrated product. So those are the things we're trying to do to drive behavior, and we're pretty excited about it.

Thank you. One moment for the next question. Our next question will be coming from the line of Pinjalim Bora of JPMorgan. Your line is open.

Great. This is Cheung Hun for Pinjalim. Thanks for taking the questions. Can you talk a bit about the assumptions around churn and retention to get to the 2025 guide? You mentioned the FX headwind in Q4, but any more color about the dynamics of both through 2025 would be great.

I'm trying to think about the things. So we're continuing to work our way through the customer count churn at the lower end of the market. I think that is something that still probably for a better part of 2025 we'll feel on the customer count side. Now, these tend to not be very large dollars but that's certainly something from a customer count, we'll see. From a churn in the enterprise space, that's not really the biggest issue for us, it is much more on the topic of attrition. I'd go back to the things we talked about earlier. Our ability to touch our customers with greater frequency, whether it's through our own account executives, our account management, our customer success people, or our partners is having a very positive impact. We know if we sort of touch our customers a certain number of times the year before it's time to renew or anything like that to make sure that they're on the right journey, and we can help them then we reduce the churn and attrition substantially. A big piece of this is making sure that we're in those conversations earlier with our customers and making sure that they're 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 BlackLine far beyond just pure financial close and all the other things that we can do to help them. That’s probably the greatest indicator of what will drive down churn and attrition sort of from a year-over-year perspective, the percentages we would expect would probably come down a little bit. But again, more of what we'll look for is seeing that much more in 2026 than maybe even 2025.

Got it. Okay. Thank you. And then last one, does Q1 reflect a change in guidance philosophy? And if so, how should we think about the magnitude of conservatism baked into the guide? Thank you.

Thank you for the question. I don't know if conservatism is the word to apply, but I think this is the best way to capture the guidance philosophy for Q1 and for the year. I have set appropriate and achievable targets for this year. I will provide clarity on assumptions within the guide, some key risks that are out there. I think the key word is probably some transparency on these risks and assumptions that could influence the numbers over the course of the year. Then, I guess, each quarter, we will continually reassess these targets and reassess some of these assumptions. To the extent necessary, we will signal to the market if a change is warranted. Overall, from a philosophy standpoint, the key theme is transparency in the guide. It's both thoughtful and balanced. But if you look at what we've done here since our IPO eight, nine years ago, we've built a lot of credibility within the markets. My goal is to build upon that credibility as part of this philosophy.

Thank you. One moment for the next question. And the next question will be coming from the line of Daniel Jester of BMO Capital Markets. Your line is open.

Thank you for taking my question this evening. It seems that invoice to cash performed particularly well in the quarter. Could you elaborate on what is driving that success? There were some product enhancements announced recently, but any additional insights on the momentum of that area would be appreciated.

I believe there are a few key points to consider. First, we have made enhancements to our product. Second, we have strengthened our team. Third, we've attracted talent from competitors who view BlackLine as a superior opportunity. Additionally, I reviewed some Net Promoter Scores recently, and BlackLine stands at a positive five, whereas our main competitor in invoice to cash is at negative 21. Our partners are increasingly active because they appreciate what BlackLine offers. Overall, we had a strong quarter and are quite optimistic about gaining more momentum as we approach 2025. We expect to share some exciting product updates in invoice to cash by the time we speak again in the second quarter. All these developments are encouraging, and while progress can take longer than anticipated, we are making strides.

Great. Thank you. And then, Patrick, to you, I know you don't guide on free cash flow, but there's a lot of puts and takes with regards to FX and also I think cash taxes at 2025 progresses. So any color you can share about how we should be thinking about that going into this year? Thank you.

Yeah. There's 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 we did release a valuation allowance at the end of the year, which is an indication that not only are we profitable and have been profitable, but we intend to be for the foreseeable future. But with that comes a cash tax burden, which historically, we did not have here at BlackLine. I would think that if you're estimating this or how to think about it, probably a cash tax rate in the low to mid-teens on a non-GAAP basis, on a prospective basis is about where a company with our profile would typically land. The 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.

Thank you. One moment for the next question. And our next question will be coming from the line of Adam Hotchkiss of Goldman Sachs. Your line is open.

Thanks so much for taking the question. How is it going? On the pipeline, I wanted to ask, how much of that picking up is the work you've done in the partner network outside of SAP? I know they influence the vast majority of your large deals? Are you starting to see the fruit paying off there?

Yes. No, I would say, well, SAP's always an important part of our pipeline. A couple of things. One is sort of what I would call self-generating, so our people are out there doing what we need them to do with more confidence about sort of the platform and what the art of the possible is with BlackLine. Theresa and I and our executives are in the field a lot more with those reps trying to help them engage those high-quality conversations. We've seen a nice upturn in opportunities with Workday, a partnership that we referenced in the prepared remarks. So it's pretty broad. So, yes, it's through SAP and what's going on in the cloud migration, but equally important, what we're generating on our own and then through the strengthening relationship with Workday.

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 you're thinking about that into next year would be really helpful.

I'm glad you said why now. I'm like, why didn't it happen sooner? But appreciate it. Yes, I think, look, we went through a process last year where we put pillar leaders in charge of certain things. So whether it's invoice to cash intercompany, FRA, 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, 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. 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 they're more comfortable in introducing our pillar leaders, and our pillar leaders are not shy at all to sort of go push their way into things to go have conversations, plus our partners are much more comfortable and confident in what we have. We spent a lot of time with our partner advisory board on what they like about the product, what we need to do, and building their confidence in when they give the recommendation of BlackLine, whether it's in invoice to cash, intercompany, or consolidation that they can do that with no regrets, and that's been important to them, and it's helped us.

Thank you. One moment for the next question. And our next question will be coming from the line of Patrick Walravens of Citizens. Your line is open.

Great. Thank you. So a lot of good information on this call. Owen, what do you think is the single most important thing for you to focus on in 2025?

Well, so yes, in a simple word, it would be execution. I would say, two things. One is really making sure and it goes back to Koji's question, 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 first and foremost. The second thing that I'm always worried about because I never want to lose a customer. I told you that, how do we make sure that for those customers that feel like they stalled on their journey, and we see that we're being much more proactive and engaging with them? How do we get those customers back on track to take full advantage of what they've already purchased and then what the opportunities are for BlackLine to help them with down the road? Now 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. That's it. It's nothing more than execute, execute, execute on those two things.

All right. If I could follow up, how do you do it on the second part for a customer who feels like they stalled on the journey? What's the playbook?

Yes. That's it. 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're not using it well or not using it at all. What we're doing is through the industry lens we're saying, look, you're a big airline, let's say, use that as an example. You're not using BlackLine anywhere near where your peer set is, how can we help you get back on that journey? Using real information and real data, utilizing 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 F and ABCDE are doing a whole lot better than I am.' So, that's what we're trying to use. That's why industry and the benchmarking data and information that we're able to use with our customers has become increasingly important for us over this past year. We just came out of our own sales kickoffs over the last couple of weeks. Our people are thirsting for more information around industries that they can go back to their customers and have these conversations. We're showing them the art of the possible, but also showing them reality that says you can do better, and we can help you get there.

Thank you. One moment for the next question. And the next question will be coming from the line of Jake Roberge of William Blair. Your line is open.

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 you're seeing or if there's any potential for that slower deal velocity to continue in the new year with deals that you would have expected to close in Q1 or Q2? Or if you feel like that overhang has kind of cleared at this point?

That's a really good question because I think what we're seeing in some of these particularly larger deals is some extra eyes on these things at the company level. There are a couple I could sort of walk through as examples. But needless to say, what our customers and prospects are doing is here doing a little bit more blueprinting and road mapping before they go live. So they're deferring the start date. 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're trying to make sure their resources are aligned. One of the things we're doing with our customers now is sort of what must be true for successful implementation is what must be true from a customer perspective, a partner perspective, and a BlackLine perspective. The more true boxes you can check, the higher the likelihood of success. I think that's a good thing for us to be doing with our customers because we want them to get up and running the right way. I shared some stats before, how we're sort of accelerating from contract signing to project kickoff is down 40%. The velocity of going live has increased. Those things, while I think we're going to be able to get deals executed more quickly, the signing of the contract may take just a little bit longer. I've got one that I sort of debated whether I tell you guys about this or not tonight. We were awarded a very large contract at the end of January, which is an eight-figure deal. It was our expectation that we would sign the paperwork probably in the first or the second quarter. The customers come back and asked, 'Well, we're probably going to still sign the customer in the first three, four, or five months of the year, but we'd like to defer the start date until the end of the year,' because they have things they want to do and get in place. Again, this all sets up very nicely for 2026. It doesn't do much for me in 2025. In fact, Patrick would tell there'd be no revenue recognition in 2025, the way we're talking about the construct of the deal today. The risk is that the customers may be a little bit more prudent and careful because of the size of the investment they're now making with BlackLine. 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 BlackLine support, and the right commitment from their internal resources to improve the likelihood of success on the ideal.

Okay. That's really helpful. And then just on the retention front, good to hear the improvements in your revenue renewal rate. Do you feel like that mid-90s retention rate is the right way to think about things moving forward? And then now that churn seems to be stabilizing, do you think we could start to see NRR re-expand as well?

That’s the goal. I think that's really what we've been driving towards because, again, if you think about our model, we have a certain number of customers that pay us over $1 million and some of them pay us close to $10 million. When we 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? What's the opportunity to help them on that journey? The more that they buy with us, it's generally because we've made them more sticky because we've provided more value. That's really what we're trying to do: make sure that the customers use what they've already purchased and help expand that relationship. Do I think that the mid-90s on a combined 96% basis is about right? Yeah. Personally, I 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. It's mattered who we've selected as customers in the mid-market. What you're seeing from our customer success team and others is when you pick the right customer that's trying to do the right things, you see that go-live velocity increasing and you see the time to get started decreasing. Customer selection matters. We've gotten smart. It doesn't mean we don't have room to improve, but that will have a positive impact, particularly in the mid-market for us. Sometimes you get more volatility with these customers that just can't absorb BlackLine the way we would like them to. We're being smarter and more prudent about that.

Thank you. And the last question for today comes from the line of Terry Tillman of Truist Securities. Your line is open.

This is Dominique Manansala on for Terry. Thanks for taking my question. So beyond FedRAMP certification, what other specific investments or go-to-market motions are you making to expand into the public sector? And I guess with a potential shift in the new administration, you all mentioned, what's the realistic time line for seeing meaningful revenue contribution from the segment?

Yeah. So one of the things we've been doing. First of all, we've gotten some resellers signed up that are now in the marketplace representing us. We're looking to add some additional sales capacity internally. We've partnered up with a couple of the big SIs that have dominant federal space practices. We’ve been spending a lot of time working with them about what agencies to target that are most right for the kind of things that we need to do. We've also been very fortunate in that some of these partners have introduced us through their state and large city practices. The connective tissue has been important for what we're trying to do as well because nobody is looking to sort of raiding their budgets in this environment from a government perspective. If they can drive more efficiency through the use of technology, we see some real opportunities. There are a couple of decent sized ones we're working already that started towards the back end of last year that are quite sizable. We're pretty encouraged by what we're seeing so far. Obviously, Patrick has talked about the level of investment that goes into that first being FedRAMP certified and then being at the highest level of FedRAMP certification will matter. We do think that 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 is positive. We don't have a lot of revenue built into our plan for 2025 for FedRAMP, just out of an abundance of caution. But again, I think I don't want to jinx it, but I think we'll have more news to share when we get to our May call.

Thank you. This does conclude today's Q&A session. I would like to turn the call over to Owen for closing remarks. Please go ahead.

Guys, everyone, thank you for your questions. We really appreciate the thoughtfulness with which you asked. We just want to thank you for your continued support and belief in what BlackLine is trying to do. We feel like we're on the right path and excited to take that journey with you. Have a good night, everybody. Talk soon.

Thank you for joining today's conference call. You may all disconnect.