Investor Presentation Fourth Quarter 2025 February 10th, 2026 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 ...

Revenue Performance - Total GAAP revenues for Q4 2025 reached $183.2 million, an increase of 8.1% compared to Q4 2024[6] - Total GAAP revenues for the full year 2025 were $700.4 million, a 7.2% increase from 2024[6] - Billings for Q4 2025 amounted to $226.9 million, reflecting a 9.5% increase year-over-year[6] - Total revenues for the year ended December 31, 2025, reached $700,427, an increase from $653,336 in 2024, representing a growth of approximately 7.2%[33] Profitability Metrics - Non-GAAP operating margin for Q4 2025 was 24.7%, up from 18.1% in Q4 2024[6] - Non-GAAP net income for Q4 2025 was $45.2 million, or $0.63 per diluted share, compared to $34.6 million, or $0.47 per diluted share in Q4 2024[6] - Non-GAAP net income attributable to BlackLine for the year ended December 31, 2025, was $24,518, compared to $161,174 for the year ended December 31, 2024[33] - The diluted net income per share attributable to BlackLine, Inc. for the year ended December 31, 2025, was $0.39, down from $1.45 in 2024[33] - Non-GAAP net income attributable to BlackLine, Inc. for the year ended December 31, 2025, was $157,035 thousand, slightly down from $162,067 thousand in 2024[39] Cash Flow and Liquidity - Free cash flow for the quarter was $19.88 million, a decrease of 45% from $36.53 million in the previous quarter[40] - Total cash provided by operating activities for the year ended December 31, 2025, was $169,567 thousand, compared to $190,836 thousand for the previous year, showing a decline of about 11.1%[38] - Cash and cash equivalents decreased to $390,034 as of December 31, 2025, from $885,915 in 2024, reflecting a significant reduction in liquidity[32] - Net cash provided by operating activities was $26.68 million, down from $43.79 million in the previous quarter, a decrease of 39%[40] Operational Metrics - Remaining performance obligation as of Q4 2025 was $1.1 billion, a 23.5% increase compared to Q4 2024[6] - The company achieved a dollar-based net revenue retention rate of 105% as of December 31, 2025[12] - The dollar-based net revenue retention rate is a key metric for measuring long-term customer value and retention, reflecting the company's ability to maintain and grow existing customer relationships[29] - The number of customers contributing to subscription and support revenue increased, indicating growth in market penetration[27] Expenses - Operating expenses for the year ended December 31, 2025, totaled $501,490, compared to $472,835 in 2024, indicating an increase of approximately 6.1%[33] - Stock-based compensation for the year ended December 31, 2025, was $92,590 thousand, compared to $83,251 thousand in 2024, reflecting an increase of approximately 11.5%[37] - Total non-GAAP operating expenses for the quarter were $100.5 million, down from $104.2 million in the previous quarter, a decrease of approximately 7%[40] - Research and development expenses increased to $28.18 million from $24.59 million in the previous quarter, representing a 10% increase[40] - Sales and marketing expenses decreased to $63.66 million from $64.77 million in the previous quarter, a reduction of approximately 1.7%[40] - General and administrative expenses decreased to $33.05 million from $32.48 million in the previous quarter, a slight increase of 1.7%[40] Guidance - Guidance for Q1 2026 projects total GAAP revenue between $180 million and $182 million[13] - Full year 2026 guidance estimates total GAAP revenue between $764 million and $768 million[13] Acquisitions and Strategic Moves - BlackLine acquired WiseLayer to enhance its AI capabilities and expanded its global cloud footprint to Saudi Arabia[12]

Core Insights - BlackLine, Inc. reported strong financial results for Q4 and full year 2025, highlighting record bookings and a successful strategic transformation initiated over two years ago [2][6]. Financial Highlights Fourth Quarter 2025 - Total GAAP revenues reached $183.2 million, marking an 8.1% increase from Q4 2024 [6]. - GAAP operating margin remained stable at 3.7%, while non-GAAP operating margin improved to 24.7% from 18.1% in Q4 2024 [6]. - GAAP net income attributable to BlackLine was $4.9 million, or $0.08 per diluted share, a decrease from $56.4 million, or $0.79 per diluted share in Q4 2024 [6]. - Non-GAAP net income attributable to BlackLine was $45.2 million, or $0.63 per diluted share, up from $34.6 million, or $0.47 per diluted share in Q4 2024 [6]. - Billings increased by 9.5% to $226.9 million compared to Q4 2024 [6]. - Remaining performance obligation rose by 23.5% to $1.1 billion [6]. - Operating cash flow was $26.7 million, down from $43.8 million in Q4 2024 [6]. - Free cash flow decreased to $19.9 million from $36.5 million in Q4 2024 [6]. Full Year 2025 - Total GAAP revenues for the year were $700.4 million, a 7.2% increase from 2024 [6]. - GAAP operating margin improved to 3.6% from 2.8% in 2024 [6]. - GAAP net income attributable to BlackLine was $24.5 million, or $0.39 per diluted share, compared to $161.2 million, or $1.45 per diluted share in 2024 [6]. - Non-GAAP net income attributable to BlackLine was $157.0 million, or $2.13 per diluted share, slightly down from $162.1 million, or $2.18 per diluted share in 2024 [6]. - Operating cash flow for the year was $169.6 million, down from $190.8 million in 2024 [6]. - Free cash flow decreased to $134.9 million from $164.0 million in 2024 [6]. Customer Metrics and Business Developments - BlackLine had a total of 4,394 customers as of December 31, 2025 [5]. - The company achieved a dollar-based net revenue retention rate of 105% [12]. - BlackLine expanded its global cloud footprint to Saudi Arabia and secured an official listing on the FedRAMP Marketplace [12]. - The acquisition of WiseLayer, an AI-powered accounting and finance automation company, was completed to enhance BlackLine's AI capabilities [12]. Financial Outlook First Quarter 2026 - Total GAAP revenue is expected to be in the range of $180 million to $182 million [13]. - Non-GAAP operating margin is projected to be between 18.5% and 19.5% [13]. - Non-GAAP net income attributable to BlackLine is anticipated to be between $31 million and $33 million, or $0.44 to $0.46 per share [13]. Full Year 2026 - Total GAAP revenue is expected to be in the range of $764 million to $768 million [13]. - Non-GAAP operating margin is projected to be between 23.7% and 24.3% [13]. - Non-GAAP net income attributable to BlackLine is anticipated to be between $172 million and $180 million, or $2.37 to $2.48 per share [13].

Group 1 - Piper Sandler downgraded ratings for three enterprise software stocks: Adobe, Freshworks, and Vertex, from "Overweight" to "Neutral" and significantly reduced their target prices to $330, $12, and $20 respectively [1] - The rationale for the bearish outlook includes concerns that AI-driven efficiency will suppress or reduce employee growth, negatively impacting software companies that charge per seat [1] - The report anticipates that 2026 will mark the fifth consecutive year of slowing growth in the software industry, leading to valuation downgrades for companies on their coverage list [1] Group 2 - Target prices were also lowered for several other companies including Amplitude, Asana, BlackLine, Braze, Figma, HubSpot, Salesforce, Oracle, Klaviyo, monday.com, ServiceTitan, and ZoomInfo [2] - Despite the overall pessimism in the software sector, Piper Sandler remains optimistic about Microsoft and ServiceTitan, naming them as top picks for 2026 [2] - The analysis suggests that Microsoft is potentially the best pure play in the current AI application space, with positive sentiment emerging from CIO surveys regarding Azure and Copilot activities [2]

Core Viewpoint - BlackLine has received a notice of nomination from Engaged Capital for three director candidates to be elected at the 2026 Annual Meeting of Stockholders, with the meeting date yet to be announced [1] Group 1: Board of Directors and Governance - The Nominating and Corporate Governance Committee will review the proposed nominees and present formal recommendations in the definitive proxy statement [2] - The Board has engaged in multiple discussions with Engaged Capital over the past year, aiming for constructive dialogue to enhance stockholder value [3] - The Board plans to reduce its size from 12 to 11 directors following Tom Unterman's decision not to seek reelection, resulting in three Class I director seats available for election [4] Group 2: Strategic Initiatives and Financial Outlook - BlackLine introduced several initiatives in November 2024 to support its refreshed strategy, with updates expected during the upcoming quarterly earnings call [3] - The Board has maintained an independent strategic committee for over a year, with Morgan Stanley & Co. LLC serving as financial advisor [3] Group 3: Company Overview - BlackLine is a platform for the Office of the CFO, focusing on digital finance transformation through accurate and efficient financial operations [5] - The company has over 4,400 customers across various industries, emphasizing its collaborative approach and innovation supported by significant R&D investment [6]

Core Viewpoint - Engaged Capital has formally nominated three independent director candidates to the BlackLine Board for the 2026 Annual Meeting, aiming to enhance shareholder value and explore strategic options [1][2]. Group 1: Nomination Details - Engaged Capital submitted a nomination notice for three director candidates: Storm Duncan, Christopher Hallenbeck, and Christopher L. Young, all of whom possess significant expertise in the software industry, mergers and acquisitions, and corporate governance [1]. - BlackLine has confirmed that only three board seats will be contested at the upcoming Annual Meeting, including one held by the company's founder, Therese Tucker [1]. Group 2: Strategic Intent - The nomination is intended to provide shareholders with credible alternatives focused on evaluating strategic options that align with their best interests [1]. - Engaged Capital is also advocating for BlackLine to explore strategic alternatives in light of renewed acquisition interest from SAP SE [2]. Group 3: Company Background - Engaged Capital, established in 2012 and based in Newport Beach, California, focuses on enhancing the value of small- and mid-cap North American companies through active engagement with management and boards [1]. - The firm aims to build sustainable businesses that create long-term shareholder value and deliver superior, risk-adjusted returns for its partners [1].

Group 1 - BlackLine, Inc. will release its financial results for Q4 and the full year ended December 31, 2025 on February 10, 2026, after market close [1] - A conference call will follow the financial results announcement at 2:00 p.m. PT / 5:00 p.m. ET, with a live webcast available on BlackLine's investor relations website [1] - Participants are encouraged to join the conference call fifteen minutes early to avoid delays [1] Group 2 - BlackLine is a platform designed for the Office of the CFO, focusing on digital finance transformation through accurate and efficient financial operations [2] - The platform, built on Studio360, integrates data, streamlines processes, and provides real-time insights using automation and AI capabilities [2] - BlackLine has over 4,400 customers across various industries, showcasing its collaborative approach and commitment to innovation [3]

Core Viewpoint - Engaged Capital is actively pushing for BlackLine's board to evaluate a recent acquisition offer from SAP SE, emphasizing the need for a strategic alternatives process to assess shareholder interests and potential value creation [2][5][6]. Group 1: Engaged Capital's Involvement - Engaged Capital, founded by Glenn Welling, holds a 2.02% stake in BlackLine and has a history of successful small-cap investments with an average return of 20.56% [1]. - The firm has initiated a proxy fight by nominating four director candidates for BlackLine's board at the 2026 Annual Meeting, including individuals with significant experience in technology and finance [2][7]. Group 2: BlackLine's Business Overview - BlackLine operates in the financial accounting solutions sector, primarily offering Software as a Service (SaaS) with high gross margins of 80% and a strategic partnership with SAP SE, which accounts for approximately 30% of its revenue [3]. - The company experienced rapid growth prior to the COVID-19 pandemic, with revenue compounding at over 20% annually, but has since faced a decline in growth rates and stock price, dropping to around $61 in December 2022 [3][4]. Group 3: Recent Developments and Strategic Context - SAP SE reportedly made an acquisition offer of $66 per share for BlackLine in June 2025, representing over a 30% premium to the 60-day trading average at that time, but BlackLine rejected the offer [4][5]. - Engaged Capital's push for a strategic review comes amid concerns about BlackLine's declining growth and the need for the board to act in the best interests of shareholders, particularly given the strategic relationship with SAP [5][6]. Group 4: Board Dynamics and Proxy Fight Considerations - The upcoming proxy fight will be influenced by the impending departure of board member Tom Unterman, creating a vacancy that Engaged Capital can leverage [8]. - Engaged Capital is likely to gain support from Clearlake Capital, which holds a 9.6% stake in BlackLine, and there are indications of shareholder discontent with the current management [8].

Core Thesis - BlackLine, Inc. is facing operational stagnation and pressure on its equity due to slowing revenue growth and margin concerns, creating an activist-driven investment opportunity centered on Engaged Capital [2][4] Company Overview - BlackLine, Inc. specializes in financial close and accounting automation, but its stock has been under pressure since 2022 [2] - As of January 16th, BlackLine's share price was $52.65, with a trailing P/E ratio of 47.86 [1] Activist Involvement - Engaged Capital has criticized BlackLine's management for not pursuing strategic alternatives, including rejecting an acquisition offer from SAP at $66 per share, which represents a 27% upside from current levels [3] - The activist campaign intensified in late 2025, starting with a public letter demanding a strategic review and a Section 220 request for board records [3] Management Response - BlackLine's management reduced the board size, which Engaged Capital views as an entrenchment tactic, escalating the conflict [4] - In January 2026, Engaged nominated four independent directors for the upcoming proxy vote, indicating a direct challenge to the current board [4] Sale Probability - The likelihood of a sale is supported by historical shareholder letters advocating for a transaction, BlackLine's significant revenue ties with SAP (approximately 25%), and SAP's ongoing interest in acquisitions [4] - If Engaged secures board representation, a sale process is highly probable, potentially leading to a significant rerating of the stock towards previous bid levels [5]

Summary of Conference Call Notes Industry Overview - **Industry**: Application Software, specifically focusing on Software as a Service (SaaS) in North America - **2025 Performance**: Application SaaS underperformed due to muted revenue growth, limited upward estimate revisions, and multiple compression driven by AI-related concerns. The valuation discount on application SaaS relative to broader software increased to approximately 37% from 20% a year ago [3][7][21]. Key Insights - **AI Concerns**: Peak AI fears were noted in 2025, leading to a shift in investor sentiment. Companies emphasized competitive advantages such as proprietary data and large installed bases but struggled to improve investor confidence [3][23]. - **Bull Case for 2026**: The bull case hinges on application software becoming the primary delivery mechanism for AI capabilities, potentially expanding the total addressable market and improving growth trajectories. However, the lack of clear growth inflection in 2025 left many vendors perceived as disrupted by AI [3][23][35]. - **CIO Survey Insights**: A survey indicated that 19% of CIOs operationalizing AI/ML technologies view application vendors as primary partners, an increase from 13% in the previous quarter. This suggests a shift in perception towards application software as a vehicle for AI functionalities [26][29]. Investment Recommendations - **Selective Approach**: A selective investment strategy is recommended, favoring companies with strong positioning in the "AI Success Framework" and idiosyncratic growth stories. Preferred companies include HUBS, KVYO, WIX, AMPL, BL, DSGX, and NAVN [2][7][52]. - **Price Target Adjustments**: Price targets for several companies were updated, reflecting changes in growth outlooks and market conditions. For example, HUBS was adjusted to $577, while KVYO was set at $42 [5][54]. Risks and Considerations - **AI Risks**: The report outlines three core areas of AI-related risks: DIY risk, start-up risk, and seat-based model risk. Evidence suggests that fears regarding these risks may be overstated, but ongoing monitoring is necessary [24][26][27]. - **Cyclical Headwinds**: The optimization cycle that began in 2022 is largely digested, with stabilization in key performance indicators like ARR and billings growth. However, broad-based positive spending revisions remain absent, necessitating a cautious approach [35][36]. - **2026 Spending Growth**: Software is expected to see modest growth in spending, projected at 3.8%, compared to declines in hardware and communications sectors. This indicates a relatively healthier positioning for software in IT spending plans [43][44]. Conclusion - **Outlook for 2026**: The outlook for application SaaS in 2026 is cautiously optimistic, with potential for improved sentiment as AI risks are reassessed and growth trajectories begin to stabilize. However, the absence of broad-based positive revisions in spending necessitates a selective investment approach [2][35][52].