Good day and thank you for standing by. Welcome to the Black Line 4th 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 speaker's presentation, there will be a question and answer session. To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. I would not like to hand the conference over to your speaker today, SVP of Investor Relations, Matt Humphreys.

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&A portion of today's call, we'll also have Jeremy Ung, Blackline Chief Technology Officer, join us. 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 Q on the full year 2026, our forward-looking statements within the meaning of the Private Security Litigations 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 report filed with the Securities and Exchange Commission, in particular, our Form 10-K and Form 10-Q. We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. 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 8K file with the SEC today. Now, I'll turn the call over to Blackline's Chief Executive

Officer, Owen Ryan. Owen. 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 the fall of 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, 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 and SAP. Throughout 2024 and into early 2025, we completed the build-out of our new leadership team to drive this strategy forward. As we entered 2026, our 25th 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 conversation 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 a 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 install 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. They are also investing in the future, specifically our Verity AI agent. 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 towards 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 and 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 million in ARR up 20% to 85%, and notably, customers paying over $250,000 were up 14%. This confirms that when we focus on transformational 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 product, 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 & Brown, a longstanding 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 offering for all new customers that includes reconciliations tasks matching journal risk analyzer and consolidation underpinned by studio 360 and ai 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 percent. Nearly every one of these deals focused on how customers can leverage our Verity AI offerings. Let's look at a few notable examples. In the consumer sector, we signed a seven-figure ACV 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. They leveraged our full financial closed 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 Oil Well Barco, 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, and we are already engaged in strategic discussions to expand their footprint with our intercompany solutions and Verity AI. And in financial services, we re-signed 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 and 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 Nashua Australia Bank. Fourth, SAP. Our golden architecture strategy is beginning to deliver results. Solex Booking's 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 install base of advanced financial closed customers through our AFC integration. We are currently engaged with SAP leaders to explore integrations for SAP's dual co-pilot with Blackline's Verity 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 to 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 sector by partnering with SAP and a leading public sector reseller to accelerate growth and adoption in this large market. And last, 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 because 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 strategies are data and connectivity. For over 20 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 from 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. And 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 clear chain of thought. We have architected our platform so that every action 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 Preparer. This is our AI-powered reconciliation agent that we previewed in Q4, and is now an early access for our platform customers. Several large enterprise customers are already using it, with even more planning to adopt this in Q1. Customers can elevate their users from preparers to reviewers, 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 partners and 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 this 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. Patrick? 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 million, 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 million, up nearly 10%, with an approximate one-and-a-half point 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 $1.1 billion. Additionally, current RPO accelerated further to 13%, reflecting current market demand. At the end of Q4, platform pricing ARR was 11% of eligible ARR. This 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 nine percent in the quarter. Our trailing 12-month billings growth, which helps normalize for quarterly variations, improved to nine percent. Our customer count of 4,394 remains in line with our expectations as we move to the end of our strategic shift further up market. 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 improvement 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 GTM teams, which showed material improvement in productivity and lower customer acquisition costs this quarter. Non-GAAP net income attributable to Blackline was $45 billion, representing a 25% non-GAAP net income margin. We delivered operating cash flow of $27 million and free cash flow of $20 million, 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 million in cash, cash equivalents, and marketable securities versus $896 million in debt. As a reminder, our 2026 notes are due in March of this year, and we expect to retire them with cash on hand. This will decrease our fully diluted share count by approximately 1 million shares and is incorporated into our guidance. Finally, we continue to execute our capital allocation strategy. In the quarter, we returned approximately $34 million to shareholders through the repurchase of 632,000 shares. This brings our full year 2025 total repurchases to over $235 million, or 4.5 million 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 agentic AI offerings. Our guidance assumes a steady ramp as these growth levers continue to gain traction in the market. For the first quarter of 2026, we expect total GAAP revenue to be in the range of $180 million to $182 million, 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 the black line to be in the range of $31 to $33 million, or 44 to 46 cents on a per-share basis. Our share count is expected to be about 74.5 million diluted weighted average shares. And for the full year, 2026, we expect total GAAP revenue to be in the range of $764 to $768 million, representing approximately 9.1 to 9.6 percent growth. We expect non-GAAP operating margin to be in the range of 23.7 to 24.3 percent. And finally, we expect our non-GAAP net income attributable to Blackline to be $172 to $180 million dollars, or $2.37 to $2.48 on a per share basis. Our share count is expected to be about 75 million diluted weighted average shares. Owen? Thank you. As a reminder, to ask a question,

please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for questions. And our first question comes from Chris Quintero with Morgan Stanley. You may proceed. Hey, Owen. Hey, Patrick.

Thanks 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 ads 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? I think 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 very positive development. 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. And so that was the first piece of it.

Yeah, Owen, to elaborate on that, we're landing bigger with our platform pricing model and having product-led growth. So we're seeing a significant increase in our average selling price and our new customers. And 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,

That's super helpful.

And then I wanted to ask about AI and your strategy there. You know, we've seen some data points that 50 to 65% of an accountant's time can be automated and saved by leveraging AI. So I'm curious if that's kind of similar to what you're seeing and how you ultimately capture some of that value, whether that's through Verity or the WiseLayer acquisition.

Yeah, look, I think Jeremy and I will 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 so we are certainly seeing that that is becoming more and more part of the conversation with our customers. You know, as you think about, you know, how our AI footprint has grown so far, you know, over the past year, we certainly saw more of a pickup in the use of generative AI with our customers. and, you know, we expect now to see that shift more into authentic AI. I think, you know, from my experiences so far, our customers are being very measured and methodical in how they're thinking about the use of AI. And so there's 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. Remember, Chris, the way we've gone about, you know, building our AI capabilities was really with, you know, the world's leading companies out there as well as the world's leading auditing and accounting firms. So we think we've got the right model that will help our customers achieve more savings for what they're trying to do. But Jeremy, anything you want to add to that?

Yeah, 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.

Thank you.

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

Okay, great. Thanks for taking the questions here. Maybe just following up on the AI question. And, you know, I think you've called out, what, 20% of customers or so adopting some level of AI. I guess, what are kind of the things that you're typically seeing them taking on? And I guess as you're kind of having those conversations and talking through the customer's AI strategy, what is kind of the typical, you know, deal dynamic or discussion look like? And is there kind of any other, I guess, you know, competitor considerations when you're having those conversations?

I think from, you know, what we're seeing, again, we talked about more of the generative AI versus agentic. And so you can 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. um, without just sort of, uh, accepting it. So that's sort of the biggest piece of what we've seen. But again, I think interestingly, after we released, uh, um, our visions around Verity Repair at Beyond the Black and, uh, in the fall, there was a lot of interest in that. And we saw that really manifest itself in the fourth quarter and now in the beginning, beginning of this year. So, um, there's definitely a lot of interest. Um, there are some, still some complexities though, Steve, just to be clear, you know, it's not just what the CFO and the controller want to do. It's the CIO as well as the chief legal officer. So that triumvirate you're working through as companies are trying to figure out how quickly to move forward with AI, particularly given, you know, the requirements that they have to deal with with their auditors and the FCC and things of that nature. So, but Jeremy, again, anything you want to add? It's about the customer

journey on AI. I think when we land with our solutions, I think there's a spectrum of AI capabilities that they're able to adopt. And I think that's helping them meet them where they are in terms of their customer journey from a digital transformation standpoint. So whether it's our matching solutions and traditional matching, or whether it's the AI extensions to those capabilities, we can meet them where they are in their customer journey, but they can see the acceleration they're going to get from these AI products as well. Okay, great. That's helpful.

And then, I guess, maybe just on the guide dynamics, I think primarily looking at kind of in the margin profile, just anything that we should kind of keep in mind for maybe the one key margin dynamics for the rest of the year or maybe some kind of expense timing, you know, dynamics as we look at how 26 might play out?

Yeah, so, I mean, if you look back over the years, Q1 has always historically been probably the lowest operating margin for this company, and there's a very explainable reason. For one, payroll taxes, we bear the highest burden like most companies in the first quarter of the year as you pay out year-end bonuses and commissions. And then the second element to that is we do our sales kickoff in January of each year around the world, and that carries a cost to it as well. I think more importantly, though, like if you look through 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, and you'll see expansion of that margin notably in the next three quarters.

Okay, perfect. Great to hear. Thanks for taking the questions.

Thanks, Jason. Thank you. Our next question comes from Alex Clark with Raymond James. You may proceed.

Oh, and maybe one more AI question for me here. Just in terms of what are you seeing in terms of defined AI budgets at some of your enterprise customer base? How incremental of an area is that for Blackline to tap into? And how are you positioning your solutions, maybe not just the Verity one, but your solutions broadly to capture those budgets?

Yeah, I'm not sure I can tell you that it's necessarily a defined budget, but I think in the conversations that we're having and our teams are having in the field is 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. So I think the hurdle for us is really being able to demonstrate a very strong ROI along with the reliability, trust, accuracy, and security that our customers have already come to expect from us. But Jeremy, again, I don't know what you're seeing when you're out talking to customers.

What I see is, especially with our acquisition of WiseLayer and Verity Cruels, is that there's an opportunity for us to expand upstream in some of the use cases that have traditionally not happened in Blackline but feed data in Blackline. So Crules is a great example of this. And so there's appetite for customers to take that work on with Blackline as they see the value and ROI from these.

Great, great. And, Patrick, I appreciate the disclosure on the 11% of the eligible base on new platform pricing. Can you help provide some color? What's embedded in the 26 Outlook in terms of the percent of the base that we'll adopt in 26? And any change to how the sales force is approaching renewals this year on platform pricing versus last year?

yeah it's really been embedded in the motion over the last year if you recall we we launched platform pricing in north america in the first quarter and then we introduced it to the rest of the world in the second quarter and as you can see from where we went in the fourth quarter that acceleration is really picking up so when you think through the guide for this year we're you know we expect to see about 25 to 35 percent of our customers on platform pricing by the end of this year. I do want to be clear, though, our largest renewal cohorts throughout the year are 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 guide.

Great. Thank you. Thanks, Al. Thanks. Our next question comes from Patrick

Walravens with Citizens. You may proceed. Oh, great. Thank you, and congratulations, So, Owen, can we address the whole issue of creating shareholder value and maybe do it from the perspective of, you know, if you're a long-term shareholder, can you just talk about how Blackline thinks about it, what government mechanisms you have in place, you know, how open you are to considering strategic options as they come your way? I think that would be super helpful for everyone.

Yeah, Pat, as you can imagine, those are the issues that the board is dealing with, and I think they well understand their fiduciary responsibilities, take that very seriously, and will exercise their responsibilities appropriately. for the management team, you know, what I talk to them about is we can only control what we can control. We don't necessarily, you know, have the ability to influence the stock market other than through the performance that we deliver on behalf of our customers and then the benefits hopefully accruing to our shareholders as appropriate. So I don't know that I can say much more about it than that, Pat. I think that's really all I'll say at this point. Okay, fair enough. And then,

So I did, though, and I think I sent you this yesterday. It was interesting to me that, you know, 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. And so, you know, if you look at, we're obviously in a transition. You know, the last transition was from on-prem to SaaS. This one's from SaaS to AI. Who do you think makes it through that transition in the best shape, Owen? What are the characteristics you look for or that we should look for? And then how does Blackline fit in the best?

I think you start with a very simple premise, which is do you have a mission-critical platform or not? It's got to be beyond basic features and functionality. Do you really have the domain knowledge that your customers require? So for us, it's in the office of the CFO as well as understanding the particular industries that we serve our customers with. You have to have a trusted, reliable brand. Your systems have to be secure. You have to deliver accuracy, efficiency, intelligence. All those things matter. You have to have the data that's proprietary to what you're trying to do with your customer set. Somebody told me, I'm not sure I know the exact number, but we're approaching upwards of a trillion transactions that we have in our own data that we use to help figure out things with our customers. So I think those are the things that matter more than anything else. You have to have a partner network that is, you know, very comfortable because many of our customers rely on the professional opinions of implementation partners of what are they seeing in the marketplace and things of that nature. So all that factors together. I think for us, you know, Pat, we're in business 25 years, you know, I think the original slogan of Blackline was something around trust is in the balance, and I think that's still true today. You know, we want to make sure that we do things that are secure, reliable, accurate, intelligent for our customers, and that goes a long, long way. And I think one last thing that I've observed in the last couple of years that we've really focused on within Blackline is to be very, you know, client-centric, customer-centric, and understanding where they were trying to get to and then working to create solutions that support that. So all of that is, I think, what matters today, and I think that's where, you know, we're going to thrive as an organization.

Thank you very much.

Thanks, Pat.

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

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 that they've seen, either from smaller companies, upstarts, companies like LLMs, financial analyst assistants, and how do you go about prioritizing 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, but I think there's a couple pieces to it. One is, as you know, we work with the world's leading companies, right? So we spend a lot of time with them on site, getting their feedback, you know, both on the existing product and what they'd like to see. We get feedback from what they're seeing in the marketplace, so that all factors in. We have a very strong customer advisory board that meets on a regular basis that helps inform us. Our partners are amazing in helping us to understand what they're seeing in the marketplace. that helps influence what we do because they tend to see things not just company-specific but across an industry or cohort in a way that no individual company can sort of look at. There are things that we do internally. We have a competitive intelligence group that tracks and tries to understand what everyone else is doing out there from maybe a more traditional competitor to upstarts, and then we're looking to see how does our roadmap compare to that. So if we haven't figured it out before somebody else has, how do we become a fast follower to make sure that there's no gap that somebody else gets ahead of us on something? So those are all the things that we're trying to do, but, Jeremy, I'm sure there's more that you've certainly experienced.

Yeah, customer obsession is a key part of what drives our product development, listening to customers, but also gathering data from how they operate within our system. So across the cohort of customers that we have, we have a great operational lens into how these different customers across oil and gas, financial services, and other industries operate. And that allows us to see trends and build benchmarks and optimize processes that then ultimately go into our SaaS product, but also our AI offerings as well. And this provides what you might have heard about as context that informs our agents to operate more accurately, more efficiently, and that these ultimately help drive more effective outcomes for our customers as well.

Okay, great. That's really helpful. And then I guess on the WiseLayer acquisition, I know it looked like it was a pretty small acquisition, but just maybe talk a little bit about that, what that brings to Blackline, and then maybe what it tells us about your build versus buy mentality as you look at AI and the ecosystem. Thank you.

Yeah, look, I think there was really a couple things that made WiseLayer very attractive for us, and I'll sort of say 1A and 1B. 1A was the quality of the people that they had. I mean, really good, smart, innovative people doing some very, very interesting things, and then the second was the quality of the product, and we actually were using the product, and we could see the value that it was bringing for our own team, and so it took the combination of what they were trying to accomplish in the marketplace with how we could see the usability of that product and how it fit into the things we were doing across, you know, our own financial close capabilities, particularly sort of marrying this with our journal's capabilities all made it very, very attractive, and it helped to accelerate a lot of what we were trying to do. And so from the build versus buy perspective, we're always thinking about, you know, can we build it, how long will it take? and we really thought this was a very good accelerant to what we were trying to do in the marketplace. But, you know, listen, Jeremy, you were up to your eyeballs in this one, and so was Patrick.

Yeah, just to elaborate even further, you know, our own internal accounting department did a proof of concept. And to Owen's point, really impressive technology, very impressive team. You know, it was just an overall, you know, very impressive company. And just to provide a little more clarity around the numbers of that, But the contribution to the guide that was provided earlier today is de minimis. This is largely a technology buy. You'll see in our 10K in a couple weeks that the purchase price was a little under $25 million. But, you know, there's a lot of enthusiasm internally in terms of what this company, what this technology can do and how we're going to incorporate it into our overall platform.

I'll just add, it's a rapidly demonstrable AI ROI to our customers. rapid time to value driven by an AI solution, and that was extremely exciting.

Okay, great. Thank you very much. Thanks, Adam.

Our next question goes from Patrick Sills with Baird. You may proceed.

Hey, guys. Yeah, thanks for taking my questions this afternoon. Maybe first on the platform pricing, and I appreciate all the disclosures you've provided here, but for those customers who have already transitioned to the new platform pricing model, can you talk about what kind of spending uplift you have realized? And I think last quarter, you guys called out some larger customers maybe pausing their buying decision to have more strategic conversations around platform pricing and AI. How did this play out during the quarter and what were some of the

learnings from those customers? Yeah, so what we're seeing is twofold here and very excited about the acceleration that we've seen in the uptake in platform pricing. And yes, there was a slight pause last quarter as some customers thought through if they wanted to add additional users to the traditional per-seat pricing or if they want to move to the platform. What we're seeing is with our customer base, the value is becoming more obvious to them. The product that we're delivering to them has uptake, and they're willing to pay that additional price per year or 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. And then the second piece of that, as those customers access more and more of our 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 as they adopt the platform, and then it provides future revenue growth through consumption as they use more and more of our agents.

Okay, very helpful. And then maybe a quick follow-up just on retention rates. I know you guys have called out some moving pieces there, whether it's Q4 maybe being the peak of attrition in the market turn cycle, and at the same time seeing very strong net retention rates with the enterprise customers. Just as we look at that 26th guide, what are you guys assuming for both growth and net retention rates? Just any color there would be helpful.

Appreciate it. Yeah, just to provide a little color there, I know we landed this quarter at 92% retention, but one thing that was highlighted at the enterprise level, that was 95%. And I believe we signaled last quarter that we had some M&A that was coming up in the fourth quarter, and that was also a two-point headwind. So when you look at our enterprise customer base, exclusive of these one-off M&A transactions, that retention rate was 97 plus percent. So when you think through our guide for this year and into the future, we see a transition of improvement throughout the year and that return to the mid-90s overall retention rate,

inclusive of mid-market. Our next question comes from Daniel Jester with BMO Capital Markets. You

may proceed. Great. Thank you for taking my question. Maybe another one on the platform. You know, in the fourth quarter, I think if I caught this right, you said 75% of new bookings

chose the platform. I guess for the 25% that didn't, are there any sort of commonalities? And as you shift to a more standardized bundle next year, you know, what considerations do you have about sort of meeting customers where there are versus the platform approach?

Yeah, I think, you know, Pat, you can take the second half of that question. I'll take the first half, which, you know, where I say there's any commonality to it is I've tried to look through and understand it with our sales teams. I think we still had some customers that were a little bit of a larger size, but still trying to work their way through what digital finance transformation was truly going to mean for them. As an organization, as you can imagine, you have companies from A to Z to spread out where they are. And so for us, I think one of the things we've tried to be smarter about is selecting the right customers. And part of our evaluation is are these customers that will, in our view, move to the platform over time. And so we're willing to invest in them, work through that with our partners typically. And so that was sort of underlying it is just customary where they were at as an organization, how much they thought they might want to be able to bite off and start with at the very, very beginning. But for us recognizing, we truly believe that they would go on a digital finance transformation journey. We'll cover the second half for 26. I know you're thinking about it.

Yeah, and another part of that story for that 25% that did not take up platform pricing within new logos, you still have the lower mid-market and mid-market contingent there where maybe they're not ready for this level of finance transformation and delivery of a platform. And to be clear, that was something that we assumed and had been messaging over the last year, that we knew long-term the uptake of this model would lay largely in the upper mid-market and enterprise space. So that was in line with our expectations. As we think through 2026, and I think you used to comment how we meet customers where they are, I think the one difference going to 2026, which is embedded in the guide, is the platform itself and the agents that are built within and the value that they provide to our customers. As customers see that and as they see the value that is delivered through the platform, it's built into the guide that they are more willing to uptake our new model. So we expect that to be north of 75% going through 2026, and that is built into the guide.

Okay, that's great context. Thank you. And then maybe, Patrick, just sticking with you on the GCP finally coming to a conclusion, I'm sure you're probably happy to not have to talk about that too much more with us. how should you be considering sort of the flow of the year for gross margin in 26 and maybe any puts and takes as you're ramping up all of your AI capabilities and any impact or your precious view on impact on gross margin there? Thank you so much.

Yeah, so 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 any redundant servers. And so what you'll expect to see or what you will see is a generally expanding gross margin throughout the year and an overall improvement in gross margin for the full year. I know or we realize the GCP migration has garnered quite a bit of attention, but there's other elements within gross margin as well, such as improved case deflection through alternate technologies or AI, which is driving down our cost to serve. So you will see, as we message over the last year or two, generally improving gross margin throughout the year.

Great.

Thanks, Dan.

Our next question comes from Matt VanVleet with Cantor. You may proceed.

Hey, good afternoon. Thanks for taking the question. Because, Owen, since you've been here, you've had definitely a lot more focus on kind of the rigor throughout the sales organization and execution there. And certainly bringing in Stewart has reinforced that. But curious on where you feel like the business is today in terms of sort of reengineering some of that go-to-market process and getting the right people in the door versus now 26 being just sort of executing on that playbook and where you feel like that level of execution is coming in right now.

Yeah, I think it's a good question. And believe it or not, Stuart is not even here technically a year yet. I think on Wednesday or tomorrow, it's his one-year anniversary. I think a lot of heavy lifting was done this past year and even, you know, part of the prior year where we've made a lot of improvements in the underlying technology, the use of that technology, getting rid of things that didn't matter and moving the organization forward. You know, in one of the stats we talked a little bit about, we've added 40 people over the last three years, or 2% drive, 34% revenue growth. But interestingly, if you look underneath that, almost 60% of the black liners in the company are new. So we've done a lot of transformation to people in the organization, and that's no disrespect to those that were here previously. It's just what we needed to move to that next level. We needed to bring in a new cohort of individuals. I don't want to speak for Stuart and the leadership team, but I would say I think they feel pretty good, by and large, about the leadership they have in place around the globe at this particular point in time. There's been a lot of changes made. We've made a lot of upgrades in the individual quota carrying reps, the BDRs, customer success, all of that has been part of the transformation. I don't know that you're ever done because you're always continuing to try to upgrade in that regard. We've done a lot of work around our business value architects and things of that nature, pre-sales. And so I feel pretty good about it, but I recognize we're never completely done. And I think the one thing I'm continuing to focus on, so we just did a sort of quick internal pulse survey for all of our people and a lot of really good feedback on the organization. The biggest thing that they're continuing to sort of push us on is further enabling them to keep driving all the things we're trying to do in the organization because the level of innovation that's coming out of Jeremy's team in product and tech is pretty amazing, but then how do you make sure the rest of the organization keep up with that and bring it into the marketplace? And I'm very encouraged by what we saw over the past year and pretty confident as we head into this year, but that will be the thing that will keep driving. All right. Thank you. Thanks, Matt.

But our next question comes from Robert Simmons with Rosenblatt. You may proceed.

Hey, thanks for taking my questions. I was wondering, how much revenue contribution are you assuming from your agentic offerings this year? How material can they be to your ECP bookings?

Over the course of the year, the primary revenue contribution coming out of our agentic offerings and other AI offerings is the uplift that we referenced earlier today. in terms of moving to the platform in that day one uplift. Throughout the year, we're going to be releasing agents, I guess through each quarter, and then evaluating how customers consume those agents, developing trust with our customers with those agents, and then once we get to that point, we will begin monetizing those agents through consumption. So within our guide, the prominent contribution from AI is the uplift, and we call it platform pricing, but it is product-led growth, and that results in an uplift in platform pricing. And then the contribution from consumption is not overly material for 2026, but it is definitely built into our target model.

Got it. That makes sense. And then I believe you talked previously to 20% of use growth in 26. Are you still expecting that kind of growth this year? Yes, I think, yes, we are.

Okay, great. Thank you very much. Thanks, Rob.

And our next question comes from Billy Fitzsimmons with Piper Sandler. You may proceed.

Thanks for fitting me and appreciate it. Maybe I'll ask about any color on what the guide implies from an SAP contribution perspective or anything notable to flag within that pipeline, any significant upticks or volatility and activity there.

I think we've made good progress with SAP. we're very, very proud of what we've been able to accomplish over the last couple of years. You've seen a sort of steady state of SAP customers being roughly about 25%, 26% of our revenue. I don't think you're going to see that materially change in the upcoming year. We've got a very strong pipeline. We're seeing a lot of progress with what we're doing, but I think, interestingly, we're having really great success through non-SAP customers as well. So I don't think you should expect to see much of a shift in that mix of SAP versus non-SAP over the course of this year. That said, we're going to keep doing everything we can to drive that partnership to be as successful as we possibly can on behalf of our customers and our shareholders.

Appreciate it. Thanks, Billy.

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

No, I just thank you, Operator, and thank you all for taking the time to listen tonight. I look forward to catching up with many of you tonight and the next couple of days to answer further questions. So everybody take care, and we'll talk soon.

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