Financial Data and Key Metrics Changes - Total revenue grew to over $178 million, up 7.5% year-over-year [28] - Subscription revenue increased by 7%, while services revenue grew by 13% due to accelerated project delivery [28] - Annual recurring revenue (ARR) reached $685 million, up 7.3% [28] - Non-GAAP operating margin was 21.4%, and free cash flow margin was 32% [6][31] - Non-GAAP net income attributable to BlackLine was $38 million, representing a 21% margin [31] Business Line Data and Key Metrics Changes - New customer bookings increased by 45%, with the average new deal size more than doubling by 111% [7] - Strategic products accounted for 36% of sales, up from 32% last year [30] - Solex channel performance accounted for 26% of total revenue, remaining steady [30] Market Data and Key Metrics Changes - Customer count reached 4,424, reflecting a strategic resegmentation away from lower-end customers [29] - Revenue renewal rate was 93%, up from the prior year, driven by strong enterprise performance [29] - Net retention rate for the quarter was 103%, despite a headwind from foreign exchange [29] Company Strategy and Development Direction - The company has re-architected its leadership, go-to-market engine, and technology structures to drive revenue growth and margin expansion [5] - Focus on larger, more strategic platform deals, with a new platform-based pricing model accounting for nearly three-quarters of new customer bookings [9] - Continued progress in the public sector, with expectations for FedRAMP approval in early 2026 [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering sustained, profitable growth, supported by a strong pipeline and operational improvements [26][34] - The strategic transition to platform pricing is expected to decouple revenue growth from seat count, aligning revenue with customer value [10] - Anticipated reduction in churn and improved gross bookings growth, projecting a 20% growth rate for the next year [63] Other Important Information - The company returned approximately $113 million to shareholders through share repurchases, totaling over $200 million year-to-date [32] - The migration to a modern technology stack is nearing completion, unlocking significant operating leverage [15][16] Q&A Session Summary Question: Impact of large customers pausing user adds - Management acknowledged that some deals slipped into the next quarter, costing a couple of million dollars, but noted an increase in interest and pipeline for larger deals [41][42] Question: Automation and customer attrition - Management explained that success-based attrition is occurring as customers achieve higher efficiency, requiring fewer licenses, and emphasized the importance of transitioning to platform pricing [59][60] Question: Factors driving expected bookings growth - Management highlighted the shift in conversations to higher organizational levels, deeper partnerships, and product-led growth as key drivers for the anticipated 20% bookings growth next year [71][74] Question: Competitive takeaways - Management confirmed an uptick in competitive wins, attributing it to the company's proven track record, improved implementation quality, and industry-specific expertise [75][76] Question: SAP relationship and pipeline - Management reported a solid relationship with SAP, focusing on joint customer success and reducing attrition through dedicated resources [82][84] Question: Macro environment considerations for 2026 - Management characterized the current macro environment as stable, with potential tailwinds from corporate job layoffs creating opportunities for efficiency discussions with customers [86][88]

Financial Data and Key Metrics Changes - Total revenue grew to over $178 million, up 7.5% year-over-year [38] - Subscription revenue increased by 7%, while services revenue grew by 13% due to accelerated project delivery [38] - Annual recurring revenue (ARR) reached $685 million, up 7.3% [39] - Non-GAAP operating margin was 21.4%, reflecting improved productivity [43] - Non-GAAP net income attributable to BlackLine was $38 million, representing a 21% margin [44] Business Line Data and Key Metrics Changes - New customer bookings increased by 45%, with the average new deal size more than doubling by 111% [7] - Strategic products accounted for 36% of sales, up from 32% last year [42] - SOLEX revenue accounted for 26% of total revenue, remaining steady [42] Market Data and Key Metrics Changes - Customer count reached 4,424, reflecting a strategic resegmentation away from lower-end customers [41] - Revenue renewal rate was 93%, up from the previous year, driven by strong enterprise performance [41] - Net retention rate for the quarter was 103%, despite a headwind from foreign exchange [41] Company Strategy and Development Direction - The company is focused on accelerating revenue growth and margin expansion as it transitions to a platform-based pricing model [6][12] - Emphasis on winning larger, more strategic platform deals against major competitors [7] - Continued progress in the public sector, with expectations for FedRAMP approval in early 2026 [11] - The company is modernizing its technology stack to support scalable, efficient, and AI-powered innovation [18][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering sustained profitable growth, supported by a strong pipeline and operational improvements [36][48] - The macro environment is currently stable, with potential tailwinds from corporate job layoffs creating opportunities for efficiency discussions with customers [100] - The strategic transition to platform pricing is expected to take time but is viewed positively for long-term customer commitment [13][72] Other Important Information - The company returned approximately $113 million to shareholders through share repurchases, reflecting confidence in long-term value [44] - The planned churn from the strategic de-emphasis of lower-end market customers is nearing completion [14] Q&A Session Summary Question: Impact of large customers pausing user ads - Management acknowledged that some deals slipped into Q4, costing a couple of million dollars, but noted an increase in larger enterprise deals [53][54] Question: Automation and customer attrition - Management explained that success-based attrition is occurring as customers achieve higher efficiency with fewer licenses, which is a positive long-term trade-off [72] Question: Factors driving expected bookings growth - Management highlighted the importance of changing conversations to focus on digital finance transformation and deepening relationships with partners [85][86] Question: Competitive takeaways - Management noted an uptick in competitive wins, attributing it to the company's proven track record and improved implementation quality [88][89] Question: SAP relationship and pipeline building - Management confirmed a solid relationship with SAP, focusing on joint customer success and reducing attrition [96][97] Question: Macro environment characterization - Management indicated that the current macro environment is stable, with no significant impacts from tariffs, and noted potential tailwinds from job layoffs [100]

Financial Data and Key Metrics Changes - Total revenue grew to over $178 million, up 7.5% year-over-year [28] - Non-GAAP operating margin was 21.4% and free cash flow margin was 32% [5][31] - Annual recurring revenue (ARR) was $685 million, up 7.3% [28] - Non-GAAP net income attributable to BlackLine was $38 million, representing a 21% non-GAAP net income margin [31] Business Line Data and Key Metrics Changes - Subscription revenue grew 7%, while services revenue grew 13% due to accelerated project delivery [28] - New customer bookings increased by 45%, with the average new deal size more than doubling by 111% [6] - Strategic products accounted for 36% of sales this quarter, up from 32% last year [30] Market Data and Key Metrics Changes - Customer count reached 4,424, reflecting a strategic resegmentation of the market [29] - Revenue renewal rate in Q3 was 93%, up from the prior year and quarter [29] - Net retention rate for the quarter was 103%, including a headwind from foreign exchange [29] Company Strategy and Development Direction - The company has re-architected its leadership team, go-to-market engine, and technology structures to drive revenue growth and margin expansion [5] - Focus on winning larger, more strategic platform deals against major competitors [6] - The transition to platform pricing is designed to decouple growth from seat count and align revenue with the value delivered [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering sustained, profitable growth, supported by a strong pipeline and operational improvements [27][33] - The macro environment is currently stable, with no significant impacts from tariffs observed [63] - The company expects gross bookings growth of approximately 20% next year, driven by larger enterprise deals [42] Other Important Information - The company has approximately $804 million in cash and cash equivalents, with $895 million in debt [31] - A record quarter for cash flow was reported, with operating cash flow at $64 million and free cash flow at $57 million [31] - The company returned approximately $113 million to shareholders through share repurchases [32] Q&A Session Summary Question: Impact of large customers pausing user ads - Management acknowledged that some deals slipped into Q4, costing a couple of million dollars in late deals at the end of Q3, but noted an increase in interest in AI offerings [36][37] Question: Automation and customer seat versus platform - Management confirmed that they are experiencing success-based attrition, where customers achieve efficiency with fewer licenses, which is a positive trade-off for long-term growth [40][45] Question: Factors driving booking strength into next year - Key drivers include changing conversations to higher organizational levels, deepened partner relationships, and product-led growth [52][55] Question: Competitive takeaways - Management noted an uptick in competitive wins, attributing this to the company's proven track record and improved implementation quality [56][57] Question: SAP relationship and pipeline opportunities - The health of the SAP relationship is solid, with ongoing joint proof of concept work and dedicated customer success teams to reduce attrition [60][61] Question: Macro environment characterization for 2026 - The macro environment is stable, with potential tailwinds from corporate job layoffs creating opportunities for efficiency discussions with customers [63]

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Investor Presentation Third Quarter 2025 November 6th, 2025 Safe Harbor This presentation contains forward-looking statements. These statements may relate to, but are not limited to, expectations of future operating results or financial performance of BlackLine, Inc. ("BlackLine" or the "Company"), the calculation of certain key financial and operating metrics, capital expenditures, introduction of new solutions or products, expansion into new markets, plans for growth and future operations, technological c ...

Core Insights - BlackLine met Wall Street's revenue expectations for Q3 CY2025, reporting a 7.5% year-on-year sales increase to $178.3 million, with a forecast of approximately $183 million for the next quarter, aligning with analyst estimates [1][6] - The company's non-GAAP profit of $0.51 per share matched analysts' consensus [1][6] - CEO Owen Ryan highlighted the company's focus on improved execution, reflected in increasing revenue growth, solid margins, and strong free cash flow [3] Company Overview - BlackLine provides cloud-based software aimed at automating and streamlining financial processes for accounting departments, eliminating tedious manual spreadsheet work [4] Revenue Growth - Over the past five years, BlackLine achieved a compounded annual growth rate of 15.3% in sales, although this growth is slightly below the standards for the software sector [5][7] - The annualized revenue growth over the last two years was 9.4%, indicating a slowdown in demand compared to the five-year trend [7] Financial Performance - Q3 CY2025 revenue was $178.3 million, slightly above analyst estimates of $178.1 million, with an adjusted EPS of $0.51 also in line with expectations [6] - Adjusted operating income was $38.14 million, representing a 21.4% margin, exceeding analyst estimates [6] - Free cash flow margin improved to 35.8%, up from 14.8% in the previous quarter [6] - The company reported a net revenue retention rate of 103%, down from 105% in the previous quarter, and a decrease in customers from 4,451 to 4,424 [6]

Financial Performance - Total GAAP revenues for Q3 2025 were $178.3 million, a 7.5% increase compared to Q3 2024[6] - GAAP net income attributable to BlackLine was $5.3 million, or $0.09 per diluted share, down from $17.2 million, or $0.27 per diluted share in Q3 2024[6] - Non-GAAP net income attributable to BlackLine was $37.6 million, or $0.51 per diluted share, compared to $44.4 million, or $0.60 per diluted share in Q3 2024[6] - Net income for Q3 2025 was $8.61 million, compared to $14.57 million in Q3 2024, showing a decrease of 41%[32] - Basic net income per share attributable to BlackLine, Inc. for Q3 2025 was $0.09, down from $0.28 in Q3 2024[32] - Net income attributable to BlackLine, Inc. for Q3 2025 was $5,285, compared to $17,238 in Q3 2024, reflecting a decrease of 69%[35] Revenue and Growth Metrics - Billings reached $161.6 million, a 4.4% increase compared to Q3 2024, impacted by a higher mix of customers on quarterly billings[6] - Remaining performance obligation was $964.1 million, reflecting a 12.4% increase compared to Q3 2024[6] - Subscription and support revenue for Q3 2025 was $168.21 million, up from $157.01 million in Q3 2024, reflecting a growth of 7.7%[31] - The company achieved a dollar-based net revenue retention rate of 103% as of September 30, 2025[6] - Total revenues for Q3 2025 reached $178.29 million, an increase of 7% compared to $165.91 million in Q3 2024[31] Cash Flow and Assets - Operating cash flow was $63.8 million, up from $55.9 million in Q3 2024[6] - Free cash flow increased to $57.0 million, compared to $49.4 million in Q3 2024[6] - Total current assets decreased to $983.82 million as of September 30, 2025, from $1.09 billion at the end of 2024[28] - Cash and cash equivalents decreased to $419.90 million as of September 30, 2025, from $885.92 million at the end of 2024[28] - Total cash provided by operating activities for the nine months ended September 30, 2025, was $142,887, compared to $147,042 for the same period in 2024, a decrease of 2.3%[35] - Cash, cash equivalents, and restricted cash at the end of Q3 2025 totaled $419,900, down from $725,515 at the end of Q3 2024, a decline of 42.2%[36] Expenses and Liabilities - Operating expenses for Q3 2025 totaled $126.29 million, an increase from $116.44 million in Q3 2024[31] - Total liabilities as of September 30, 2025, were $1.34 billion, slightly down from $1.34 billion at the end of 2024[29] - Stock-based compensation for the nine months ended September 30, 2025, was $66,625, compared to $63,911 for the same period in 2024, an increase of 4.0%[35] - General and administrative expense was $85,684 million, down from $89,315 million, indicating a decrease of 4.0%[40] Operational Metrics - BlackLine had 4,424 customers and 385,336 users as of September 30, 2025, indicating continued customer migrations to the platform pricing model[6] - The number of customers as of September 30, 2025, is a critical indicator of market penetration and business growth[25] Non-GAAP Metrics - Non-GAAP gross profit for Q3 2025 was $141,526, up from $131,736 in Q3 2024, representing an increase of 7.0%[38] - Non-GAAP gross margin for Q3 2025 was 79.4%, consistent with Q3 2024[38] - Total non-GAAP operating income increased to $111,095 million, up from $96,155 million year-over-year, reflecting a growth of 15.5%[39] - Non-GAAP operating margin was 21.5%, compared to 19.9% in the previous year, indicating an improvement of 1.6 percentage points[39] - Basic non-GAAP net income per share attributable to BlackLine, Inc. was $1.80, down from $2.06, a decrease of 12.6%[39] Future Guidance - Full year 2025 guidance includes total GAAP revenue expected in the range of $699 million to $701 million[12]

Core Insights - BlackLine, Inc. reported strong financial results for the third quarter of 2025, highlighting increased revenue growth, solid margins, and robust free cash flow, indicating effective execution of strategic changes [2][6]. Financial Performance - Total GAAP revenues reached $178.3 million, marking a 7.5% increase compared to the third quarter of 2024 [6]. - GAAP operating margin was 4.3%, down from 5.0% in the same quarter last year [6]. - Non-GAAP operating margin was 21.4%, compared to 22.7% in the third quarter of 2024, primarily affected by the timing of the BeyondTheBlack customer event [6]. - GAAP net income attributable to BlackLine was $5.3 million, or $0.09 per diluted share, a decrease from $17.2 million, or $0.27 per diluted share, in the third quarter of 2024 [6]. - Non-GAAP net income attributable to BlackLine was $37.6 million, or $0.51 per diluted share, down from $44.4 million, or $0.60 per diluted share, in the same quarter last year [6]. - Billings totaled $161.6 million, a 4.4% increase year-over-year, influenced by a higher mix of customers on quarterly billings [6]. - Remaining performance obligation increased by 12.4% to $964.1 million compared to the third quarter of 2024 [6]. - Operating cash flow was $63.8 million, up from $55.9 million in the third quarter of 2024 [6]. - Free cash flow reached $57.0 million, compared to $49.4 million in the same period last year [6]. Customer Metrics - BlackLine had a total of 4,424 customers as of September 30, 2025 [6]. - The number of users reached 385,336, reflecting ongoing customer migrations to the platform pricing model [6]. - The dollar-based net revenue retention rate was 103%, including a one-point headwind from foreign exchange [6]. Product and Innovation - The company launched Verity, an AI-powered solution tailored for the Office of the CFO [6]. - BlackLine achieved ISO 42001 certification for its AI management system [6]. - The company received an Exemplary rating in the ISG Buyer's Guides for Record to Report, Financial Close & Financial Consolidation [6]. - BlackLine was awarded the SAP Global Finance and Spend Management Partner Excellence Award for 2025 [6]. Financial Outlook - For the fourth quarter of 2025, total GAAP revenue is expected to be between $182 million and $184 million [7]. - Non-GAAP operating margin is projected to be in the range of 24.0% to 25.0% [7]. - Non-GAAP net income attributable to BlackLine is anticipated to be between $42 million and $44 million, or $0.58 to $0.61 per share [7]. Summary of Financial Position - As of September 30, 2025, total assets were $1.703 billion, down from $1.825 billion at the end of 2024 [28]. - Total liabilities were $1.337 billion, slightly decreased from $1.342 billion at the end of 2024 [29]. - Stockholders' equity was $328.3 million, down from $446.7 million at the end of 2024 [29].

Core Viewpoint - The market anticipates BlackLine (BL) will report a year-over-year decline in earnings despite an increase in revenues for the quarter ending September 2025, with actual results being crucial for stock price movement [1][2]. Earnings Expectations - BlackLine is expected to post quarterly earnings of $0.51 per share, reflecting a year-over-year decrease of 15% [3]. - Revenue projections stand at $178.01 million, indicating a 7.3% increase from the same quarter last year [3]. Estimate Revisions - The consensus EPS estimate has remained unchanged over the past 30 days, suggesting stability in analyst expectations [4]. - The Most Accurate Estimate aligns with the Zacks Consensus Estimate, resulting in an Earnings ESP of 0%, indicating no recent differing analyst views [12]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that a positive or negative reading can predict deviations from consensus estimates, but its predictive power is stronger for positive readings [9][10]. - BlackLine's current Zacks Rank is 3, making it challenging to predict an earnings beat conclusively [12]. Historical Performance - In the last reported quarter, BlackLine exceeded the expected earnings of $0.50 per share, achieving $0.51, resulting in a surprise of +2.00% [13]. - Over the past four quarters, BlackLine has surpassed consensus EPS estimates three times [14]. Market Sentiment - An earnings beat or miss alone may not dictate stock price movement, as other factors can influence investor sentiment [15]. - While BlackLine does not appear to be a strong candidate for an earnings beat, other considerations should be evaluated before making investment decisions [17].

Core Viewpoint - Engaged Capital urges BlackLine, Inc. to explore strategic alternatives, particularly in light of renewed acquisition interest from SAP SE, believing that a sale would be the best outcome for stockholders due to BlackLine's inability to generate sustainable value in the public market [1][5]. Summary by Sections Engagement with BlackLine - Engaged Capital is a significant stockholder of BlackLine and has faced challenges in meaningful engagement with the company's management, which has been unresponsive and difficult to schedule meetings with [2][3]. - Despite these challenges, Engaged Capital continues to hold shares, believing in BlackLine's strategic value, which has been trading at a substantial discount to its fair value [2][3]. Acquisition Interest - Reports indicate that SAP SE made a formal offer to acquire BlackLine earlier this year, which was rejected by BlackLine's Board of Directors [3]. - Engaged Capital expresses disappointment over the rejection, especially given BlackLine's poor performance in creating stockholder value and its underperformance compared to relevant software indices [3][4]. Stock Performance - BlackLine's total stockholder return has been negative over various time frames: -8% over 1 year, 0% over 3 years, and -47% over 5 years, contrasting sharply with the positive returns of the IGV Software Index and S&P Software & Services Select Industry Index [4][5]. - The company has significantly underperformed relative to these indices, with a relative performance of -35% over 1 year against the IGV Software Index [4]. Call to Action - Engaged Capital calls for the Board to act urgently and engage financial advisors to run a strategic alternatives process to maximize stockholder value [5]. - The firm emphasizes that the Board's fiduciary duties are to all stockholders, not just management, and expresses readiness to hold the Board accountable if necessary [6].