Blackline, Inc. Q4 FY2025 Earnings Call

Good day, and thank you for standing by. Welcome to the BlackLine Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question and answer session. To ask a question, please press 11 on your telephone, and wait for your name to be announced. To withdraw your question, please press 11 again. One moment for questions. I would now like to hand the conference over to your speaker today, SVP of Investor Relations, Matt Humphries.

Good afternoon, and thank you for joining us today. With me on the call are Owen Ryan, Chief Executive Officer of BlackLine, as well as Patrick Villanova, Chief Financial Officer. For the Q and A portion of today's call, we'll also have Jeremy Young, BlackLine Chief Technology Officer join us. Before we get started, I'd like to note that certain statements made during this conference call are not historical facts, including those regarding our future plans, objectives, and expected performance, in particular, our guidance for Q on the full year 2026, 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, in particular, 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. 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 and presentation, 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 Chief Executive Officer, Owen Ryan.

Thank you, Matt. Good afternoon, everyone. Over two years ago, we committed to a fundamental transformation of BlackLine. We have been executing a methodical multi-year plan to reposition this company to drive revenue growth back into the double digits while expanding operating margins in line with our multi-year financial targets. It began in 2023 when we laid out a new strategic vision to evolve from a suite of solutions for the controller into a unified intelligent platform for the CFO. By early 2024, we implemented a new operating model to support this vision. We modernized our go-to-market engine and introduced industry-specific sales motions. We focused our efforts on larger mid-market enterprise and mega enterprise customers, where our value is most differentiated, and shifted to a partner-first approach with the world's leading system integrators in SAP. Throughout 2024 and into early 2025, we completed the build-out of our new leadership team to drive this strategy forward. As we enter 2026, our twenty-fifth anniversary, we believe the business is structurally stronger than it has ever been. Supported by a healthy growing pipeline, a disciplined and cohesive team, an amazing partner network, and our most comprehensive product portfolio to date, we are well-positioned to execute our strategy and extend our market leadership. Today, we are pleased to report that those intentional choices are translating into tangible results. We have established BlackLine as a critical partner for the world's most complex organizations, now serving approximately 70% of the Fortune 100, up from 50% in 2022. This validation supports our strategic goal of elevating our presence within the office of the CFO. We saw broad-based success in the fourth quarter, driven by our platform strategy and strategic products. By combining the innovation of Studio 360 with the commercial model aligned to value and not seats, we delivered our strongest booking quarter and year in our history. With full-year bookings growth of 22%, we believe this performance validates the investments we made to grow our pipeline, modernize our go-to-market engine, and accelerate innovation. We finished the year with higher close rates and solid demand, confirming that our execution is gaining traction. We saw notable strength within our installed base, with nearly three-quarters of our bookings coming from existing customers. BlackLine customers are realizing immediate value from our platform, which allows them to fully leverage our latest innovations without user constraints. We are also investing in the future, specifically our Verity AI agents. This is translating directly into predictability and visibility. Remaining performance obligations, or RPO, grew 23% driven by platform adoption and continued success driving multi-year renewals. Simply put, customers are making long-term contractual commitments to BlackLine as their strategic partner in the office of the CFO. While our expansion motion shows solid progress, we remain clear-eyed on retention. We believe Q4 was the peak of our churn and attrition cycle, driven largely by the expected impact from our strategic choices in the lower middle market. However, our underlying business remains healthy. To underscore the strength of our core, our enterprise customer cohort maintained a revenue renewal rate of 95% and also delivered a net revenue retention rate of 107% this quarter. We are actively bending the arc on retention through deliberate structural changes. First, our shift to a platform model and success with multi-year renewals is fundamentally changing the nature of our customer relationships. We are moving away from transactional subscriptions based on seats toward long-term strategic partnerships anchored on business value. Second, we have optimized our customer success model, leveraging technology and aligning compensation internally and with key partners to ensure the ecosystem is financially incentivized to drive adoption. As we move through the first half of 2026, we expect the lower mid-market headwinds to subside, combined with these structural initiatives, we have high confidence in an improving retention profile in 2026. We are also proving that trust, partnership, and innovation command a premium with new customer deal sizes up 35% driven largely by enterprise wins. We're seeing solid growth in the number of customers paying over $1,000,000 in ARR, up 20% to 85. Notably, customers paying over $250,000 were up 14%. This confirms that when we focus on transformation outcomes rather than features, customers invest more deeply in BlackLine. We continue to balance this acceleration with discipline. Even as revenue growth accelerated to 8% in the quarter, we delivered a 25% non-GAAP operating margin along with a 25% non-GAAP net income margin. This efficiency is by design. Over the last three years, we have grown revenue by approximately 34% while our total headcount has grown by only just 2%, adding 40 net new roles. We believe we have effectively broken the linear relationship between headcount and revenue growth, establishing a model that allows us to scale more efficiently. Importantly, sales productivity continues to improve, driving a notable 30% decrease in customer acquisition costs this quarter. Additionally, with our Google Cloud migration now complete, we are beginning to stand down legacy data centers unlocking further margin potential and opportunities for strategic investments. While the team and I are pleased with this progress, we are far from satisfied. We expect to continue to drive revenue growth back into the double digits along with further operating margin expansion, in line with our multi-year financial targets. Let's dig deeper into how we are winning. First, platform strategy. We have aligned our commercial model with our platform vision. Our shift to platform pricing is the mechanism that unlocks the value of Studio 360. It aligns with how CFOs want to buy, focusing on outcomes and value not seats. In Q4, nearly three-quarters of all new bookings leveraged our platform, with existing customers also accelerating their migrations. This platform-first approach changes the customer relationship. Once customers standardize on BlackLine as their financial operating system, it becomes the natural foundation for broader transformation. This is helping to drive demand for our strategic products, which represented 33% of sales. Intercompany and Invoice to Cash each had record quarters and years, as customers trust us to deliver end-to-end outcomes. A prime example is Brown and Brown, a long-standing customer who expanded their financial close relationship with us by adopting our full Invoice to Cash suite. In 2026, we are moving towards a standard initial offer for all new customers that includes reconciliations tasks, matching, general risk analyzer, and consolidation, underpinned by Studio 360, all on platform pricing. We expect this approach will drive larger initial deal sizes, enhance customer stickiness, and create more opportunities to cross-sell and drive AI adoption. Second, enterprise momentum. We are winning deals with complex global enterprises by speaking their language. Our focus on industry-specific outcomes is delivering results, allowing us to demonstrate unique operational and domain expertise that differentiates BlackLine in the market. In the fourth quarter, we signed multiple large platform deals, driving average new enterprise deal sizes up 41%. Nearly every one of these deals focused on how customers can leverage our Verity AI. Let's look at a few notable examples. In the consumer sector, we signed a seven-figure ACP deal with a global leader in food services operating in an industry defined by massive transaction volumes and decentralized operations. They needed to centralize visibility across thousands of locations, leveraged our full financial close solutions with Studio 360 and platform pricing to drive that efficiency. In the oil and gas industry, we secured a large enterprise win with National Oilwell Varco, where our deep industry expertise and platform approach were critical to drive their digital finance transformation. In technology, we also signed a platform deal with a global leader in memory and data storage. Facing the financial complexity inherent in global manufacturing and supply chains, they chose BlackLine because they wanted to see value today but also have a framework to adopt AI going forward. This initial win validates our core value proposition. We are already engaged in strategic discussions to expand their footprint with our intercompany solutions and Verity AI. In financial services, we resigned Invesco, a former BlackLine customer who had moved to a lower-cost ERP competitor. They recognized the need for automation, scale, and auditor trust that BlackLine provides. Third, partners. Our partner ecosystem is a critical differentiator driving demand in extending our global reach. In 2025, every single deal over $500,000 was won with a partner, and our two largest deals of the year were direct partner referrals. These firms are now evangelizing Studio 360 our Verity AI offerings and our strategic products, helping us secure major wins at companies like Raytheon and National Australia Bank. Fourth, SAP. Our golden architecture strategy is beginning to deliver results. Select bookings performance was strong, highlighted by new wins with Siemens Energy and Caterpillar, and a large expansion with Hitachi Energy. Proving that our joint pipeline is maturing into significant commercial value. Coming into 2026, I believe our alignment with SAP has never been stronger. We secured full product qualification for Studio 360, unlocking the ability to sell directly into SAP's installed base of advanced financial close customers through our AFC integration. We are currently engaged with SAP leaders to explore integration for SAP's Jewel Copilot with BlackLine majority agents to create a single, unified digital workforce for finance. The objective is to create a seamless user experience while establishing a commercial framework to directly sell and monetize our Verity agents through a strategic proof of concept. Our shared goal is to define the future of the AI-powered autonomous close. Critically, we have aligned BlackLine's KPIs as one of the measures of the compensation plans for both BlackLine and SAP customer success managers, ensuring our post-sales teams are financially incentivized to drive joint customer success. We are also deepening our channel strategy in the public by partnering with SAP and a leading public sector reseller to accelerate growth and adoption in this large market. We have expanded globally, launching dedicated coverage in The Kingdom Of Saudi Arabia with a combination of SAP, our local team, and our new local Google Cloud instance has already helped us sign our first deals in the region. We expect our deepening and broadening collaboration with SAP to continue to drive momentum throughout 2026 and beyond. We are seeing the early stages of an important evolution in the office of the CFO, as leaders look to move beyond simple automation toward intelligent, AI-driven orchestration. The requirements for success are clear. AI in finance and accounting must be accurate, transparent, auditable, and secure. We believe BlackLine is uniquely positioned to lead we have built our platform on three essential pillars: data, context, and agency. Together, these form a proprietary intelligence layer that allows BlackLine to build on its reputation and expand its market leadership. The foundation of our AI strategy is our data and connectivity. For over twenty years, BlackLine has served as the centralized hub where the world's most complex organizations turn raw data into financial truth. The scale of this continues to grow. Last year, we processed tens of billions of transactions across our platform. We ingest data from thousands of disparate ERPs, subledgers, and third-party financial systems. We cleanse it, sanitize it, and normalize it creating a unified financial dataset that acts as a single source of truth. To extend this further, we continue to expand connectivity via APIs and connectors. We have launched new connectors for Microsoft Dynamics 365, Oracle Fusion, and Workday, and are leveraging deeper integrations with Snowflake and upcoming integrations with Databricks. This allows us to harness data from across the enterprise creating the high-quality fuel required for trusted AI. We supplement this with intelligence and context. A generic model can summarize a document, but it lacks the specific human-enriched processing data needed to reconcile a balance sheet or manage industry-specific accounting challenges. BlackLine has two decades of operational context from thousands of customers, including historical reconciliation decisions, justification narratives, and review and approval actions along with successful and failed transaction matches and historical exception handling and auditor interactions. This proprietary intelligence allows us to deliver context-aware predictions and automation providing the necessary context to turn generative text into financial truth. Importantly, our AI operates within a framework of proven governance, with embedded controls, audit trails, segregation of duties, and institutional experience that gives us the brand permission to be the trusted choice in the market. We offer a managed digital workforce via our Verity agents, which are prepackaged, pre-trained, and fully auditable with a clear chain of thought. We've architected our platform so that every act the AI takes leaves a digital footprint identical to a human user. This directly addresses the single biggest barrier to AI adoption in finance: the trust gap. CFOs cannot sign off on financial statements generated by a black box. By ensuring every AI agent leaves a standard immutable audit trail, providing the clear chain of thought that auditors require, we transform AI from an unacceptable risk into a compliant asset. This allows our customers to pursue productivity gains without compromising their controls environment. We are leveraging these three pillars to evolve our platform from traditional automation to agentic workflow orchestration. By embedding intelligence directly into workflows, we deliver the outcomes customers prioritize: speed, accuracy, and continuous audibility. We're seeing the impact in the field. Nearly every deal in Q4 involved discussions around Verity and our innovation roadmap. Customers are focused on how we are developing AI for them and how it naturally fits into their unique processes to deliver ROI quickly and safely. We are also seeing growing adoption of our AI, with customer usage of our AI capabilities more than doubling quarter over quarter, with nearly 20% of all customers now using at least some form of our AI features. We have an accelerating product cycle this year with an emphasis on launching and monetizing our Verity AI agents, a key part of our platform strategy. First is Verity Prepare. This is our AI-powered reconciliation agent that we previewed in Q4 and is now in early access for our platform customers. Several large enterprise customers are already using it. Customers can elevate their users from preparers to reviewers, with even more planning to adopt this in Q1, offloading repetitive work and freeing accountants to focus on high judgment analysis. This helps to bridge the talent gap and allows customers to handle growing complexity without adding headcount. Next is Verity Collect, planned for Q2. This agent automates many of the manual tasks of the collections process, like predicting payment behaviors and autonomous dunning. The excitement from our partner ecosystem is notable, as this targets high volume, repetitive work where agents thrive, directly impacting working capital. And finally, Verity Accruals. This agent targets high judgment areas within the accruals process. Unlike standard rules-based automation, this agent interprets context to manage complex estimates. We are actively selling this today, and it pairs perfectly with our existing journal solution to drive automation into the last mile of the close. We look forward to sharing a deeper dive into these capabilities at a virtual investor session in March. Beyond commercial products, we are using AI to transform our own delivery. We have released a new category of implementation agents for our professional services team. These agents standardize the engagement process from qualification to architecture and testing, rapidly accelerating time to value and ROI for customers. Internal usage of AI is also allowing our engineering teams to accelerate product delivery and further enhance and expand our existing solutions across financial close, intercompany, and invoice to cash. This transformation goes beyond our products. By modernizing both our technology and our delivery models, we are building a significantly more agile and efficient company. We are increasingly excited and confident in our ability to win in a rapidly shifting market, and I want to thank our partners and my fellow Blackliners for their extraordinary efforts. With that, I'll turn it over to Patrick to discuss the financial results and outlook in more detail.

Thank you, Owen. Our fourth quarter financial results and metrics reflect the progress we've made and the confidence we have in the business as we focus on delivering in 2026 and into 2027. Turning to our financial results this quarter, total revenue grew to $183,000,000, up 8%. Subscription revenue grew 8% with services revenue growth of 17%, due to accelerated customer go-lives and implementations, a direct result of our improved services delivery engine. Annual recurring revenue or ARR was $702,000,000, up nearly 10%, an approximate 1.5 benefit from FX in the quarter. We saw material strength with customers doubling down on their commitment and partnership with BlackLine in the quarter, driven by platform adoption and continued success with multi-year renewals. As a result, total RPO grew 23% to $1,100,000,000. Additionally, current RPO accelerated further to 13% reflecting current market demand. At the end of Q4, platform pricing ARR was 11% of eligible ARR, which is ARR that excludes SOLEX and public sector. This was up from 4% at the end of the third quarter, illustrating the market's initial acceptance of our new commercial model and the momentum we are seeing. Calculated billings grew by over 9% in the quarter. Our trailing twelve-month billings growth, which helps normalize for quarterly variations, improved to 9%. Our customer count of 4,394 remains in line with our expectations as we move to the end of our strategic shift further upmarket. Despite this headline number, we saw net customer growth versus the prior quarter and year in our enterprise customer base. Our revenue renewal rate in the fourth quarter was 92%, with continued impact from lower middle market churn. Additionally, we saw some expected churn associated with external M&A this quarter, which impacted this rate by about two points. Net revenue retention for the quarter was 105%, reflecting strength from expansion with existing customers, particularly those moving to our platform. Notably, NRR for enterprise customers saw material growth to 107% this quarter. This reflects the health of our core business and our success in cross-selling into our largest accounts. The strategic products attach rate was healthy again, representing 33% of sales this quarter. This growth is a direct result of our go-to-market teams leveraging our platform to drive larger deals. Demand was notably strong for intercompany and invoice to cash, which both had record years. We had a strong close to the year with our SOLEX partnership as we are starting to see our joint efforts materialize in bookings. At the end of the quarter, SAP customers accounted for 26% of revenue. Turning to margin, our non-GAAP subscription gross margin remained strong at 82%. Our non-GAAP gross margin was approximately 80%. As mentioned earlier, we have completed our GCP migration and expect to see improvement in gross margin as we move through the year. Non-GAAP operating margin was nearly 25%, driven by better productivity across the business, especially within our GTN teams which showed material improvement in productivity and lower customer acquisition costs this quarter. Non-GAAP net income attributable to BlackLine was $45,000,000, representing a 25% non-GAAP net income margin. We delivered operating cash flow of $27,000,000 and free cash flow of $20,000,000 largely driven by variability in working capital. For 2026, we expect free cash flow growth in the mid-teens, with free cash flow per share growth in the high teens. Regarding our balance sheet, we have approximately $778,000,000 in cash, cash equivalents, and marketable securities versus $896,000,000 in debt. As a reminder, our 2026 notes are due in March. We expect to retire them with cash on hand. This will decrease our fully diluted share count by approximately 1,000,000 shares and is incorporated into our guidance. Finally, we continue to execute our capital allocation strategy. In the quarter, we returned approximately $34,000,000 to shareholders through the repurchase of 632,000 shares. This brings our full year 2025 total repurchase to over $235,000,000 or 4,500,000 shares, and underscores our confidence in the long-term value of our business. Turning to guidance, our outlook for 2026 reflects a prudent approach. We are confident in the momentum we are seeing with platform adoption and the launch of our AgenTeq AI offerings. Our guidance assumes a steady ramp as these growth levers continue to gain traction in the market. For 2026, we expect total GAAP revenue to be in the range of $180,000,000 to $182,000,000, representing approximately 8% to 9% growth. We expect non-GAAP operating margin to be in the range of 18.5% to 19.5%. And we expect non-GAAP net income attributable to BlackLine to be in the range of $31,000,000 to $33,000,000 or 44 to 46 cents on a per-share basis. Our share count is expected to be about 74,500,000 diluted weighted average shares. And for the full year 2026, we expect total GAAP revenue to be in the range of $764,000,000 to $768,000,000 representing approximately 9.1% to 9.6% growth. We expect non-GAAP operating margin to be in the range of 23.7% to 24.3%. And finally, we expect our non-GAAP net income attributable to BlackLine to be $172,000,000 to $180,000,000 or $2.37 to $2.48 on a per share basis. Our share count is expected to be about 75,000,000 diluted weighted average shares.

As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. One moment for questions. Our first question comes from Chris Quintero with Morgan Stanley. You may proceed.

Hey, Owen. Hey, Pat. Thank you for taking the questions, and congrats on the acceleration here; I know it's been a long time coming. I wanted to ask about RPO and the customer adds above $250k. I thought those were the two most interesting metrics in the quarter. Can you kind of unpack the drivers there and what really drove that kind of inflection on those two?

On the RPO, it was obviously the multi-year renewal strategy that we've had in place, which is working out pretty well. In addition, a lot of the newer customers we brought in have tended to have longer contracts. So we've seen both of those coming together, which has been a very positive development. So I think it tells the story of us really trying to take customers on a digital finance transformation journey, not just looking for a quick fix. And so we're certainly seeing a lot of the buildup in regards to that.

To elaborate on that, we're landing bigger deals with our platform pricing model and having product-led growth. So we're seeing a significant increase in our average selling price. More importantly, those customers are signing longer-term contracts because they want to be part of the finance transformation and partner with us over multiple years. You combine that with our strategy to extend renewals longer, and those two factors, more importantly, our product-led growth, is what's driving that 23% that you're seeing there, Chris.

Look, I think Jeremy and I tag team this together a little bit, but certainly, there's a lot of opportunity to help take out some of the mundane work that some of the accountants go through. And we are certainly seeing that that is becoming more and more part of the conversation with our customers. You know, as you think about how our AI footprint has grown so far, over the past year, we certainly saw more of a pickup in the use of generative AI with our customers. And we expect now to see that shift more into a Genetic AI. From my experiences so far, our customers are being very measured and methodical in how they're thinking about the use of AI. There are definitely lots of cost savings that we see are there, but it's also the value and the accuracy and the timeliness of what we think we're going to be able to provide for our customers going forward.

The increase in adoption from AI specifically you saw Owen call out earlier is really resonating with our customers. They're excited about adopting it, but they understand that they need to do so cautiously with respect to policies and controls. So there's a lot of interest. There's a lot of excitement. It's a validation that there's work and time to be saved from our AI solutions.

Our next question comes from Steve Andrews with Citi. You may proceed.

Okay. Great. Thanks for taking the question. Maybe just following up on the AI question. You know, you called out that 20% of customers are now adopting some level of AI. Guess, what are kind of the things that you're typically seeing them take on? And as you're having those conversations and talking through the customers' AI strategy, what does the typical deal dynamic or discussion look like? Are there any competitor considerations when you're having those conversations?

From what we're seeing, again, we talked about more of the generative AI versus agentic. Think about things like our journal risk analyzer, our Verity flag, the ability to sort of help summarize documents, those things where you still have a pretty good level of human interaction to review and understand what's come out without just accepting it. So that's sort of the biggest piece of what we've seen. But there are still some complexities, and it's not just what the CFO and the controller want to do; it's the CIO as well as the chief legal officer. That triumph that we're trying to work through is companies trying to figure out how quickly to move forward with AI, particularly given the requirements they have to deal with their auditors and the SEC.

I think when we land with our solutions, I think there's a spectrum of AI capabilities that they're able to adopt, meeting them where they are in their customer journey from a digital transformation standpoint. So whether it's our matching solutions or the AI extensions to those capabilities, we can meet them where they are in that journey, but they can also see the accelerations they'll get from these AI products.

Okay, great. That's helpful. And then, I guess, maybe just on the guide dynamics. I think primarily looking at the margin profile. Anything we should keep in mind for the Q1 margin dynamics versus the rest of the year or maybe some expense timing dynamics as we look at how '26 might play out?

If you look back over the years, Q1 has always historically been the operating margin for this company, and there's a very explainable reason. For one, payroll taxes bear the highest burden like most companies in the first quarter of the year as you pay out year-end bonuses and commissions. Additionally, we do our sales kickoff in January of each year around the world, which carries a cost. More importantly, throughout the rest of the year, there is a very high confidence model to reach a 24% operating margin with that margin growing throughout the year. So this is not unlike any other year; you will see the expansion of that margin notably in the next three quarters.

Perfect. Glad to hear. Thanks for taking the questions.

Thanks, Steve.

Our next question comes from Alex Sklar with Raymond James. You may proceed.

Great. Thank you. Owen, maybe one more AI question for me here. Just in terms of what you're seeing in terms of defined AI budgets within your enterprise customer base, how incremental of an area is that for BlackLine to tap into? How are you positioning your solutions broadly to capture those budgets?

I'm not sure I can tell you that there's necessarily a defined budget, but I think in the conversations we're having, if we can show real demonstrable value for what our AI can bring, then the CFOs and their teams seem to be able to find the budget for what they're looking to accomplish. The hurdle for us is really being able to demonstrate strong ROI along with the reliability, trust, accuracy, and security that our customers expect from us.

It's really been embedded in the motion over the last year. We launched platform pricing in North America in the quarter, then we introduced it to the rest of the world in the second quarter. The acceleration we saw in the fourth quarter illustrates how this momentum is building. We expect to see about 25 to 35% of our customers on platform pricing by the end of this year. I do want to note, however, that our largest renewal cohort throughout the year is in the second and fourth quarter, so that's not going to be linear throughout the year. But by the end of the year, that's where we expect to be, and that's what's embedded in the guidance.

Thanks, Alex. Our next question comes from Patrick Walravens with Citizens. You may proceed.

Great. Thank you, and congratulations, you guys. Owen, can we address the whole issue of creating shareholder value and maybe do it from the perspective of being a long-term shareholder? Can you talk about how BlackLine thinks about it, what governance mechanisms you have in place and how open you are to considering strategic options as they come your way?

As you can imagine, those are the issues that the Board is dealing with. They well understand their fiduciary responsibilities and take that very seriously. They will exercise their responsibilities appropriately for the management team. What I talk to them about is we can only control what we can control. We don't have the ability to influence the stock market other than through performance that we deliver on behalf of our customers and the benefits hopefully accruing to our shareholders. I can't say much more about it than that.

Okay, fair enough. I noticed it was interesting that people are so doom and gloom about how AI is going to impact SaaS companies like you; yet interestingly, one of the competitors who went out of business yesterday was a tiny company. If you look at the transition from SaaS to AI, who do you think makes it through that transition in the best shape? What characteristics should we look for? How does BlackLine fit into that?

You start with a very simple premise, which is whether you have a mission-critical platform or not. It has to be beyond basic features and functionality. You need domain knowledge that your customers require, and for us, that's in the office of the CFO as well as understanding particular industries that we serve. You have to have a trusted, reliable brand. Your systems must be secure and deliver accuracy, efficiency, and intelligence. All those things matter. You have to have proprietary data to what you're doing with your customer set. We're approaching upwards of a trillion transactions that we have in our own data, and we use it to help figure out solutions with our customers. Those are the things that matter more than anything else. You have to have a partner network that is comfortable because many of our customers rely on the professional opinions of implementation partners. All of that factors together, and I think for us, we're in our twenty-fifth year in business. The original slogan of BlackLine was something about trust being in the balance, and I think that still rings true today. We want to ensure that we do things that are secure, reliable, accurate, and intelligent for our customers.

Thank you very much.

Thanks, Pat.

Our next question comes from Adam Hotchkiss with Goldman Sachs. You may proceed.

Great. Thanks so much for taking the question. I wanted to ask Pat's question in a bit of a different way. When you're hearing from your customers about the broader landscape of technology offerings in the office of the CFO, what is your process for ingesting customer feedback for features they've seen either from smaller companies, upstarts, or companies like LLMs and financial analyst assistants? How do you prioritize which investment areas make the most sense for putting them into your product and driving ROI for the business?

I think Jeremy and I will tag team this a little bit. We work with the world's leading companies. We spend a lot of time getting their feedback on existing products and what they'd like to see. Our partners are instrumental in helping us understand the marketplace. They see things across industries in a way that no individual company can recognize. We have a competitive intelligence group that tracks and tries to understand what everyone is doing out there. We're looking to see how our roadmap compares. If we haven't figured something out before someone else has, how do we become a fast follower? Those are the things we're trying to do.

Customer obsession is a key part of what drives our product development. We're seeing the customers but also gathering data from how they operate within our system. Across our customer base, we have a great operational lens into how different customers operate, which allows us to see trends, build benchmarks, and optimize processes. This ultimately informs our SaaS products and our AI offerings.

Okay, great. That's really helpful. Then about the WiseLayer acquisition. While it looked like it was a pretty small acquisition, could you discuss what that brings to BlackLine and what it tells us about your build versus buy mentality as you look at AI and the ecosystem?

There were a couple of reasons that made WiseLayer very attractive. First, the quality of the people they had; really good, smart, innovative individuals doing interesting things. Second was the quality of the product. We were using the product and could see the value that it was bringing for our team. The combination of their market goals fit nicely with our objectives. It helped accelerate our efforts. From the build versus buy perspective, we always think about whether we can build it and how long it will take. We believed this acquisition was a good accelerant for us.

Our internal accounting department did a proof of concept. As Owen pointed out, the technology and team are impressive. The acquisition cost was under $25,000,000, and there's a lot of enthusiasm internally about what this technology can do and how we will incorporate it into our overall platform. It's about rapid demonstrable AI ROI driven by an accelerated time value, which is very exciting.

Our next question comes from Patrick Soles with Baird. You may proceed.

Maybe first on the platform pricing. I appreciate the disclosure, but for those customers who've already transitioned to the new pricing model, can you talk about what kind of spending uplift you have realized? And last quarter, you called out some larger customers pausing their buying decisions to have more strategic conversations. How did this play out during the quarter, and what were some of the learnings from those customers?

We're excited about the acceleration we seen in platform pricing uptake. There was a slight pause last quarter as some customers thought through whether they wanted to add additional users to the traditional per seat pricing or move to the platform. Our customer base is now recognizing the value we're delivering, and they're willing to pay that additional base fee going forward. That fee is an immediate uplift on day one, and that's the first source of monetization as we move through this platform pricing transition. The second piece is as those customers access more agents through the platform, that will be the second level of monetization on a consumption basis. So it's an immediate uplift on day one, and it provides future revenue growth.

Okay, very helpful. And then a quick follow-up just on retention rates. You’ve called out some moving pieces there, whether Q4 might have been the peak of attrition in the market churn cycle and at the same time seeing very strong net retention rates with enterprise customers. As we look towards your '26 guidance, what are you assuming for both growth and net retention rates?

We landed this quarter at a 92% retention, but in the enterprise level, we were at 95%. We had mentioned we had some M&A coming up in Q4 that impacted retention by about two points. When you look at our enterprise customer base, exclusive of those one-off M&A transactions, that retention rate was above 97%. We see a transition of improvement throughout the year and return to the mid-90s overall retention rate, including the mid-market.

Our next question comes from Daniel Jester with BMO Capital Markets. You may proceed.

In the fourth quarter, I think you said that 75% of new bookings chose the platform. For the 25% that didn't, are there any commonalities? As you transition to a standardized bundle next year, what considerations do you have about meeting customers where they are versus the platform approach?

In looking through the commonality, we still have some customers that were a little larger, but still trying to figure out what digital finance transformation means for them. As you can imagine, there are companies across a wide spectrum. For us, we've tried to be smarter about selecting the right customers. Part of our evaluation is are these customers that will move to the platform over time, and so we're willing to invest in them. It’s a matter of how ready they are to make those changes.

Another part of that story for the 25% that did not take up platform pricing within new logos is the lower mid-market and mid-market contingent where they aren't ready for the level of finance transformation that the platform delivers. We've been messaging for the last year that we expect long term the uptake of this model to be focused on the upper mid-market and enterprise space. We're embedding this approach into our guide for the coming year. As we go through 2026, we expect that to be north of 75% uptake in platform pricing, and that is built into the guidance. As you think about gross margin throughout the year, it's a similar story to operating margin, but for different reasons. We did complete the GCP migration in Q1, and there were some redundant costs as we shut down redundant servers. As a result, you can expect to see generally expanding gross margin throughout the year, with an overall improvement in gross margin for the full year.

Thank you. I would now like to turn the call back over to Owen Ryan for any final remarks.

Thank you, operator, and thank you all for taking the time to listen tonight. I look forward to catching up with many of you in the next couple of days to answer further questions. Take care, everyone, and we'll talk soon. Thank you.

This concludes the conference. Thank you for your participation. You may now disconnect.