BlackLine Q2 2025 Earnings Report

BlackLine EPS Results

• Actual EPS: $0.51
• Consensus EPS: $0.50
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: $0.58

BlackLine Revenue Results

• Actual Revenue: $172.03 million
• Expected Revenue: $170.87 million
• Beat/Miss: Beat by +$1.15 million
• YoY Revenue Growth: +7.20%

BlackLine Announcement Details

• Quarter: Q2 2025
• Date: 8/5/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, August 5, 2025
• Conference Call Time: 5:00PM ET

BlackLine (NASDAQ:BL), Inc. operates a cloud-based software platform which is designed to transform accounting and finance operations for organizations of all types and sizes. Its scalable platform supports critical accounting processes such as the financial close, account reconciliations, intercompany accounting, and controls assurance. The company was founded by Therese Tucker in May 2001 and is headquartered in Woodland Hills, CA.

BlackLine Q2 2025 Earnings Call Transcript

Key Takeaways

• Neutral Sentiment: Leadership transition: Owen Ryan was named sole CEO and Therese Tucker will focus on customer success, representing an internal role evolution rather than a major strategic shift.
• Positive Sentiment: Q2 financial outperformance: Revenue grew 7% to $172 million with a 22% non-GAAP operating margin, while ARR rose over 9% to $677 million, driven by strong subscription bookings.
• Positive Sentiment: Large-deal momentum: Average new deal size increased 35% year-over-year, $1 million-plus customers rose 24% to 84, and the company closed its largest ever eight-figure contract with a global media brand.
• Positive Sentiment: New pricing model traction: About half of eligible new logos adopted the unlimited-user platform pricing in Q2, boosting deal sizes and serving as a key differentiator in enterprise and mid-market wins.
• Positive Sentiment: Raised guidance: BlackLine lifted its full-year revenue outlook to $696 million-$705 million (6.5%-8% growth) and sees non-GAAP operating margins of 21.5%-22.5%, reflecting confidence in continued execution.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Q2 twenty twenty five BlackLine Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone.

[Operator]

You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Matt Humphries, SVP of Investor Relations. Please go ahead.

[Matt Humphries, SVP - IR & Strategic Accounts, Aerospace & Defense Industry Lead at BlackLine]

Good afternoon, and thank you for joining us today. With me on the call are Owen Ryan and Therese Tucker, Co Chief Executive Officers of BlackLine as well as Patrick Villanova, Chief Financial Officer. Before we get started, I'd like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans, objectives and expected performance, in particular our guidance for Q3 and full year 2025, are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements represent our outlook only as of the date of this call. While we believe any forward looking statements made during the call are reasonable, actual results could differ materially as the statements are based on our current expectations as of today and are subject to risks and uncertainties, including those stated in our periodic reports filed with the Securities and Exchange Commission, in particular our Form 10 ks and Form 10 Q.

[Matt Humphries, SVP - IR & Strategic Accounts, Aerospace & Defense Industry Lead at BlackLine]

We do not undertake and expressly disclaim any obligation to update or alter our forward looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. All comparisons we make on the call today relate to the corresponding period of last year, unless otherwise noted. Finally, unless otherwise stated, our financial measures disclosed in this call will be non GAAP. A discussion of these non GAAP financial measures and information regarding reconciliations of our historic GAAP versus non GAAP results is available in our earnings release, which may be found on our Investor Relations website at investors.blackline.com or in our Form eight ks filed with the SEC today. Now, I'll turn the call over to BlackLine's Co Chief Executive Officer, Owen Ryan. Owen?

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Thank you, Matt, and good afternoon, everyone. Thank you all for joining us on today's call. For the past two years, Therese and I, alongside our dedicated colleagues, have relentlessly focused on shaping the next era of BlackLine. This journey, while demanding and not without its challenges, has only deepened our resolve to guide, power and inspire our customers' finance transformations. The substantial progress you will hear about today has led to an important strategic evolution in our leadership.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

With great confidence in BlackLine's trajectory, Therese will now dedicate even more of her time and expertise to directly supporting our customer success. In turn, the board has entrusted me as BlackLine's sole CEO. This transition is a testament to the profound partnership the board has overseen between Therese and me, built on mutual respect and a shared commitment to BlackLine's mission. I am deeply grateful for her leadership, trust and ongoing collaboration. To be clear, Therese remains a vital part of BlackLine, and this is an evolution of her role in maximizing its impact where it matters most, with our customers.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Turning to the quarter, BlackLine delivered 7% revenue growth and a 22% non GAAP operating margin. Our strategic shift to a platform company serving the Office of the CFO is driving accelerated success, visible in our forward financial metrics and KPIs and underpinned by disciplined go to market execution. As a reminder, in November, we laid out a number of strategic initiatives that support the company's refresh strategy. First, was to deliver a platform, Studio three sixty, that can accelerate the adoption of new BlackLine solutions while allowing us to introduce a new pricing model. Second was to enhance our go to market strategy, targeting markets with the highest opportunity, accelerating our industry focus, improving the efficiency of our spend, and ultimately driving long term customer value.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

And third was to refine our partner network to drive further leverage and global reach. Our second quarter results demonstrate substantial progress against all of these. Therese will speak about Studio three sixty later, but as we look at our performance this quarter, you will see the tangible results of our improved go to market strategy and enhanced partner network. We saw significant strength in both the volume and size of net new deals, with the average new deal size growing by an impressive 35% year over year. This growth was driven by the increased adoption of our full Record to Report capabilities and critically, our new pricing model.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Notably, our $1,000,000 customer count rose to 84, up 24% versus last year. This quarter, we leveraged the powerful combination of our platform, new pricing and industry strategy to secure significant wins. First, we signed the largest deal in company history with an existing Invoice to Cash customer. This 8 figure partner led expansion with an iconic global media and entertainment brand encompass financial close, intercompany and the adoption of our new pricing model. Our strong referenceability demonstrated by serving eight of the top 10 Fortune 1,000 media and entertainment brands, coupled with this customer's proven success, were key in unlocking this expansion and underscores the power of our end to end offerings.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

In oil and gas, where we also serve eight of the top 10 Fortune 1,000 companies, our platform positioning and industry expertise led to a new win with one of Europe's top three players. We also signed a 7 figure expansion with Marathon Petroleum, expanding our relationship by unlocking more of our solutions and platform for their global teams. This demonstrates the scalable value of our offerings and the embedded opportunity within our customer base. With our deep industry expertise and via our SOLEX partnership, we secured a new top five North American life sciences customer. This deal replaces legacy point solutions with our unified financial close and intercompany solutions, demonstrating our platform's power in a massive Sfour migration.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

We've demonstrated why BlackLine was the first choice, best choice, safe choice, and ultimately, only choice for this company's critical transformation journey. In manufacturing, we signed the Dutch company NXP Semiconductors to a multi solution financial close deal. BlackLine's platform, bolstered by our golden architecture with SAP, provided confidence for their finance operating model transition. Importantly, NXP is already live on several solutions, which reaffirms our continued progress in reducing implementation timelines and delivering quicker time to value for our customers. Finally, we secured two significant wins in APAC.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

We won a new deal with one of the top three largest Japanese banks and landed our largest ever win in APAC, a high 7 figure expansion with a top three Australian bank. Strong interest continues from major financial institutions, offering significant opportunities to build on this momentum. These large deals collectively demonstrate how the successful combination of our market leading technology, domain and industry expertise, and customer driven innovation are unlocking opportunities for BlackLine at a size and a pace we have not previously seen. Building on this success and underpinning our confidence in the future, we generated strong pipeline growth again this quarter, with our created pipeline up 70% year over year. This remarkable growth, a direct outcome of our refined platform messaging and strategy, is fueling broader market demand.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

We also improved our ability to generate and win deals with stronger close rates this quarter. This performance across the entire sales cycle from pipeline creation to closing deals underscores our enhancing ability to deliver predictable, effective results firmly rooted in our platform centric approach. Our new pricing model introduced earlier this year has proven to be a clear winner, amplifying our comprehensive platform strategy. Q2 adoption exceeded expectations, especially with new customers. About half of eligible new logos in the second quarter adopted our new pricing model, a strong early result.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

This model not only drives adoption in higher deal sizes, but also served as a key differentiator from multiple large enterprise and upper mid market deals, demonstrating BlackLine's broad appeal across customer segments. Our success also stems from a clear strategy of value based selling, positioning our brand around transformational conversations. This approach is resonating, reflected in our expanding pipeline and larger deal sizes. Our differentiated value proposition is gaining significant traction. This led to strong win rates against legacy point solution competitors in the enterprise segment.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Crucially, we are seeing incremental market demand as we focus on delivering outcomes and not just selling software. Our strategic focus on the public sector is also yielding tangible results. We recently secured our first public sector win with a federal agency. We have also seen demand building from a number of other federal agencies and bureaus, as well as from large states. While early, this validates our progress and investment, establishing a critical foothold to drive additional growth from this greenfield market.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Our partner channel continues to be a growing differentiator, playing a pivotal role in securing numerous larger partner sourced or partner influenced deals. This partner led growth spanning BPOs, system integrators, resellers and SAP is driving increased pipeline activity, market interest and growth. In the second quarter, partner source bookings exceeded expectations, delivering record performance. And importantly, we saw stronger partner enablement and advocacy trends in Q2, with noteworthy growth across all of our solutions, Studio three sixty and industry verticals. Our SAP partnership showed solid performance across sales, pipeline generation, and deal sizes.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

We expect this momentum to translate to bookings and revenue growth in Q4 and into next year. The benefits of this partnership, especially as we move to commercialize our Studio three sixty platform and our positioning to lead with finance first, are critical to unlocking the full potential of this partnership and ultimately higher growth. As part of our strategy, we are intentionally targeting larger and mid market customers while moving away from smaller, less complex accounts. This strategic pivot is being validated by our results. Q2 mid market new deal sizes grew 55% year over year, with three of our top five largest mid market deals adopting our new pricing model.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

For the first half of the year, new customer deal sizes in the mid market are 60% to 70% larger than those leaving BlackLine, validating this strategic choice. We acknowledge this pivot will not immediately be reflected in metrics customer count and revenue renewal rates as we deprioritize smaller accounts in favor of larger accounts who are more willing and ready to transform. While our Q2 renewal rate was 91% and continues to be around the mid-90s for enterprise and in the 80s for mid market, this is an expected outcome. We are confident in the long term accretion and enhanced profitability from the strategic shift. Beyond this strategic resegmentation, we are deepening customer relationships and seeing strong market willingness to commit to BlackLine for longer terms.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Customer commitment deepened this quarter, evidenced by strong multiyear renewal performance. Through the first half of this year, over 40% of our renewals were multiyear, a significant increase over the prior year period. This, combined with our new pricing model, which is well ahead of targets, strengthens our market positioning and is expected to drive accelerated revenue growth in the quarters and years ahead. While I am incredibly pleased with our results, our team remains far from satisfied. Our remit going forward is to execute on the strategy we have articulated with a clear focus on outcomes for customers.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Make no mistake, while we still have much to deliver on, it is beginning to feel like the black is back. With that, I would like to turn the call over to Therese.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

Thank you, Owen, and good afternoon. Following the announcement of my transition at the end of Q3, I want to reiterate my excitement for this next phase. This isn't a step back. It's a strategic refocus on what has always been key to BlackLine's success, direct engagement with our customers and prospects. The past two years have cemented my confidence in Owen's leadership ability, and we are completely aligned going forward.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

While I value my partnership with Owen in the co CEO role, this new chapter allows me to dedicate more time to driving our strategy in the market with a specific focus on accelerating growth in Europe. Now, let's talk about innovation, which truly drives everything we do at BlackLine. Our customer conversations confirm a growing problem in the office of the CFO. Companies face ever escalating data quantities, lack proper orchestration, run antiquated systems, and lack centralized command and control. From day one, we have designed Studio three sixty to address these challenges and bring order to this chaos.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

Recently, we've made considerable enhancements to Studio three sixty and are accelerating our progress. We believe Studio three sixty will serve as the strategic foundation for the future of modern finance, offering an integrated AI powered platform with accurate data at its core. To achieve this, we powered Studio three sixty with Snowflake. Impressively, over 1,100 of our customers now use it to drive their reporting, providing unparalleled scale and performance while simultaneously lowering our cost to serve. This data layer deepens BlackLine's relationships with customers, allowing us to serve as their trusted partner, one who can handle their continued growth and increasingly complex automation needs on our platform.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

Furthermore, it enables us to rapidly build new use cases based on their data and launch innovative next generation products like big data matching, which supports matching volumes over 30 times our current offerings. This empowers several industry use cases, such as financial services, while also allowing us to scale and expand our AgenTic AI offerings. Looking ahead, we're excited about AgenTic analytics capabilities and the introduction of highly configurable dashboards, which will offer even deeper, more intuitive data visualization. A core component of Studio three sixty is the integrate module, and we've made substantial progress expanding its connectivity. Specifically, our Snowflake data sharing connector is available now to early adopters with general availability this quarter.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

Our early access program for the Oracle Fusion Connector went live in q two with Workday and enhanced d three sixty five connectors slated for early access in the second half of this year. We've also added API support for triggering workflows from external systems within BlackLine to facilitate end to end automation with third party systems. This continued expansion and enhancement of our connectivity further differentiates us in the market and supports a wide variety of ERPs and third party financial systems. To provide greater visibility into Studio three sixty's capabilities, we've enhanced and expanded BlackLine process automations within Studio three sixty's blueprint module. Many of these completed automations are now also featured on BlackLine's website, enabling users and prospects to easily discover and understand the breadth of solutions and use cases we offer.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

This extends our platform, facilitating partner driven use cases and helping build the ecosystem that will ultimately surround our platform. Importantly, we are moving fast to commercialize Studio three sixty with SAP. This will enable us to sell Studio three sixty to our joint SAP customers and prospects, significantly expanding our market reach and partnership potential. The results are already tangible. We see market demand for Studio three sixty evidenced by pipeline growth and strong early adoption of our pricing strategy.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

Our partner training initiatives are also up 50% quarter over quarter, indicating robust ecosystem engagement and readiness for scaled adoption. Now, let's delve into the specific innovations across our core products, all contributing to the overall platform value. In financial close, we've seen tremendous success with early adopters of our high frequency reconciliations with general availability coming in Q3. We're also pleased to announce our first customer for our non monetary reconciliation solution for the oil and gas industry. We've also released new journals enhancements that drive more self-service, reduce implementation times, and importantly, extend our platform to enable partners to drive customer adoption on our behalf.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

Looking ahead, we have major releases planned for the second half of the year, including advanced big data matching and additional industry tailored solutions, along with new agentic AI experiences that dramatically increase automation for our customers. We plan to unveil a number of these at our upcoming Beyond the Black Conference in September, so stay tuned. Consolidation continues to be a major strategic investment for BlackLine. We are dedicated to enhancing and expanding our offerings to serve enterprise customers. We complement these complex consolidation enhancements with robust reporting functionality to meet the demands of the largest global organizations.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

Intercompany had a very strong sales quarter As a solution seamlessly integrated into the overall platform, its power and value clearly resonate in the market. We are deeply integrating our intercompany products with Studio three sixty's Orchestrate module to initiate automated intercompany transactions as part of the financial close. This will significantly enhance end to end automation and accelerate our customers' time to value. Invoice to cash also saw strong performance. Our customers and partners view this not as a standalone tool, but as a key solution within a broader platform that solves their most complex challenges.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

To deepen our offering, we are adding new payment gateways and enhancing tax integration for our EIPP components. Invoice to cash remains a top priority in the office of the CFO, and we are well positioned to meet the demand for automated solutions that address cash and working capital needs. We continue to accelerate AI focused innovation and use cases across our platform, leveraging both AgenScik and more traditional AIML capabilities. Recently, we delivered several summarization and natural language querying experiences for customers across our solutions, enhancing productivity and driving insights and decision making. Our thoughtful approach is a key differentiator.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

We focus on data structure, scalability, and ensuring that all AI driven results are completely verifiable, auditable, and transparent to users. This builds critical trust with customers and ensures our AI offerings meet their enterprise needs. Internally, we also drive efficiency with AI. We recently rolled out a new agent AI platform to our entire company, empowering black liners to build their own agents to handle routine work. While live for only a short time, the majority of our workforce has adopted and actively leverages its capabilities.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

This internal adoption is not only a testament to our technology, but is expected to drive even higher levels of productivity. On the infrastructure front, our GCP migration is nearing completion. All European customers are now on GCP, and we are on track to finish North American migrations in the second half of this year. This migration enhances performance, lowers our future cost to serve by removing duplicative hosting costs, and unlocks further AI innovation with our technology partners. We are also strategically building out our presence in Saudi Arabia to support growth in that critical region.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

Furthermore, we are making significant progress on our FedRAMP journey and the build out of our secure instance. As Owen mentioned, these efforts are vital to expanding our position in the public sector and unlocking new opportunities for growth. Our vision of a platform and product portfolio that solves huge problems for the office of the CFO is being realized. What we're hearing from our customers confirms that this is the right set of business problems to focus on. I am immensely proud of our team and our strategic positioning.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

We are translating customer feedback into market value at an unprecedented rate, and our momentum is building. With that, I'll turn it over to Patrick to cover our financials. Patrick?

[Patrick Villanova, CFO at BlackLine]

Thank you, Therese. Owen and Therese have provided a comprehensive overview of how our strategic choices are driving significant market traction and innovation. Their commentary underscores the tangible progress and improved execution we're seeing across the business. And to echo their sentiment, while we are pleased with our results, we recognize that there is further opportunity ahead. Our commitment is to balance the growth we see with disciplined margin expansion, aligned with our multi year financial targets.

[Patrick Villanova, CFO at BlackLine]

Now, let's review the financial highlights that demonstrate this progress in more detail. Total revenue grew to $172,000,000 slightly above 7%. Subscription revenue grew 7%, with service revenue growing 3%. Annual recurring revenue, or ARR, was $677,000,000 up over 9%, growing ahead of revenue due to accelerated bookings, which influenced all forward looking metrics this quarter. FX was about a point tailwind to ARR this quarter.

[Patrick Villanova, CFO at BlackLine]

Remaining performance obligations, or RPO, increased over 11%, with current RPO increasing by 9%. RPO growth was driven by solid sales performance combined with multi year renewals. Calculated billings growth was 11%, inclusive of about a half point of FX benefit. Trailing twelve month billings growth was 7%. Our customer count at the end of the quarter was 4,451, up slightly from the previous year and down from Q1, reflecting our strategic choices that Owen spoke about earlier.

[Patrick Villanova, CFO at BlackLine]

Our revenue renewal rate in the second quarter was 91%, with healthy enterprise performance. Our aggregate rate continued to see planned churn from lower mid market customers and was in the 80s. Net retention rate, or NRR, was 105, where we saw healthy customer expansion, particularly in enterprise, driven by larger deal sizes and some benefit from FX. Strategic products represented 30% of sales, up compared to 28% last year, as our platform and new pricing model are unlocking cross sell opportunities while improving our go to market efficiency. We saw particular strength this quarter from intercompany, invoice to cash, and transaction matching.

[Patrick Villanova, CFO at BlackLine]

Select's performance was steady, with a higher mix of net new sales. SAP as a percentage of total revenue was 26%. Turning to margin. Our non GAAP gross margin was approximately 80%, with non GAAP subscription gross margin of 83%, in line with our expectations as we move through the end of our cloud migration. Non GAAP operating margin was 22%, driven by gross margin performance combined with improved productivity from our teams.

[Patrick Villanova, CFO at BlackLine]

Non GAAP net income attributable to BlackLine was $38,000,000 representing a 22% non GAAP net income margin. We generated $32,000,000 in operating cash flow and $25,000,000 in free cash flow in the quarter. Restructuring payments from our Q1 workforce action, lower interest income driven by our share repurchase program, and higher taxes were drivers of lower free cash flow this quarter. We expect to see free cash flow to outpace operating income in the second half of this year. Regarding our balance sheet and capital allocation, we have approximately eight fifty seven million dollars in cash, cash equivalents and marketable securities versus $894,000,000 in debt.

[Patrick Villanova, CFO at BlackLine]

Finally, we repurchased approximately 796,000 shares for approximately $43,000,000 in the quarter, bringing our year to date total to nearly $89,000,000 Our share repurchase program remains a key part of our capital allocation framework going forward. Regarding guidance, our strong second quarter performance, execution and pipeline trends are enabling us to raise our full year revenue guidance. Our outlook on margins for the full year reflects measured investments into strategic growth initiatives like Saudi Arabia as well as the public sector that can further accelerate growth in 2026 and beyond. For the 2025, we expect total GAAP revenue to be in the range of 177,000,000 to $179,000,000 representing approximately 7% to 8% growth. We expect non GAAP operating margin to be in the range of 20% to 21%.

[Patrick Villanova, CFO at BlackLine]

This range includes approximately two points of operating margin headwind due to our Beyond the Black Conference. And we expect non GAAP net income attributable to BlackLine to be in the range of 36,000,000 to $38,000,000 or $0.48 to $0.51 on a per share basis. Our share count is expected to be about 77,300,000.0 diluted weighted average shares. And for the full year 2025, our updated guidance is as follows: We expect total GAAP revenue to be in the range of $696,000,000 to $7.00 $5,000,000 representing 6.5% to 8% growth. We expect non GAAP operating margin to be in the range of 21.5% to 22.5%.

[Patrick Villanova, CFO at BlackLine]

And finally, we expect our non GAAP net income attributable to BlackLine to be $159,000,000 to $167,000,000 or $2.13 to $2.24 on a per share basis. Our share count is expected to be about 77,300,000.0 diluted weighted average shares. With that, I'll now ask the operator to open the discussion to take your questions.

[Operator]

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone Our first question comes from the line of Chris Quintero of Morgan Stanley. Your line is now open.

[Chris Quintero, VP & Equity Research Analyst at Morgan Stanley]

Hey, Owen, Therese, Patrick. Thanks for taking the questions here and congrats on solid quarter. Wanted to hit on the large deal momentum that you're seeing. Curious, Owen, maybe in the past you talked about some of those deals that flipped out of Q4. So just curious if you can maybe break down how much of the strength came from those slipped deals closing versus new deals that ended up coming to fruition in the quarter as well as kind of stack rank all the different drivers for the growth rate there?

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

So Chris, as we've been talking, our pipeline really started to grow September, which we've been messaging. There's usually a nine to twelve month cycle for us to get things right before the deals close. And so we saw things that certainly slipped at the end of last year, but then also things that just started in the fourth quarter that finally hit their maturation point this year. And so we've seen good progress with those kind of larger deals Our pipeline is filling up with many more of those opportunities. And it's just a combination of the things that we've been talking about.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

It's having different conversations at a higher level in the organization about a broader solution capability of the Black and White platform and all the enabling solutions that we have. And so all of that is coming to manifest itself in the pipeline build. It's showing up in the numbers, but gives us confidence as we head into the back half of the year. Geographically, we're seeing good dispersion around the globe, and we're seeing it across industries. And also importantly, we're seeing it with the powerful partner network that we've built.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

So all the things that we said we would do are starting to come to fruition, and that's what's really propelling the growth.

[Chris Quintero, VP & Equity Research Analyst at Morgan Stanley]

Awesome. That's really helpful. Then I want to ask around given the new pricing model, of an unlimited user pricing model. I'm curious what you're seeing in terms of customers proliferating BlackLine licenses across the organization, maybe into other areas that aren't historically user bases that you have historically gotten into? And is that impacting net retention rate and upsell as well?

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Yes. Patrick's going to take that. So go ahead, Patrick.

[Patrick Villanova, CFO at BlackLine]

Yes, Chris, thank you. So we are closely monitoring that, Chris, obviously. And part of the approach when we talk about delivering a platform and delivering a platform pricing model is that individuals within an organization outside of the accounting and the traditional accounting and finance department can yield benefit from the overall platform. We are starting to see some of that proliferation, but I want to reiterate that it is early. We launched the model in the first quarter in North America and in the second quarter in EMEA, but we are closely tracking that.

[Patrick Villanova, CFO at BlackLine]

Overall, it's part of our model, but we do anticipate that as more different types of individuals within an organization has access to the platform that we would expect to see that to drive consumption going forward. So that is something we are closely monitoring.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

And Chris, if you think about the words that Suresh talked about, our first customer using operational accounting, that's where the real opportunity then begins to sort of give us the chance to truly proliferate around this platform pricing.

[Chris Quintero, VP & Equity Research Analyst at Morgan Stanley]

Excellent. Thank you.

[Operator]

Thank you. Our next question comes from the line of Rob Oliver of Baird. Your line is now open.

[Rob Oliver, Senior Research Analyst at Robert W. Baird & Co]

Great. Good afternoon. I also wanted to ask about the new pricing model. A really nice progress. I think you guys said half of new wins coming in on the new pricing model.

[Rob Oliver, Senior Research Analyst at Robert W. Baird & Co]

And I'd be curious to hear what you heard from customers in terms of the attractiveness of it and why they chose it? And also when you think about the half that didn't, what sort of learnings that the sales force and the go to market team is absorbing that could help us perhaps see that number rise in the coming quarters?

[Patrick Villanova, CFO at BlackLine]

Yes. Thanks, Rob. This is Patrick. So we are ahead of plan as it relates to our pricing strategy and the implementation of our pricing model. And that is generating a tailwind that you see in a lot of our leading metrics for the quarter.

[Patrick Villanova, CFO at BlackLine]

What we saw was a much more transformative conversation rather than engaging enterprise customers that could literally have thousands of accountants. It was a conversation not about how many seats they needed or how many license they needed, but how they could transform the overall office of the CFO going forward by giving access to the platform to everyone. So it was a much more strategic conversation with those customers and it was a much more transformative conversation rather than getting maybe caught up in license counts. And then one other thing there, I would not say that the 50% of the customers that we did not sell the platform to chose the former model. Some of those customers were introduced to the seat license model in past quarters and that was part of the negotiation.

[Patrick Villanova, CFO at BlackLine]

So we are openly pushing the platform model and we are seeing increasing rates of adoption, which we would expect going forward as it becomes part of our sales motion or a more embedded part of our sales motion.

[Rob Oliver, Senior Research Analyst at Robert W. Baird & Co]

Great. Thanks. And I just had a quick follow-up for Therese, your second time passing on the CEO role. So I wanted to congratulate you. And, also just stepping back for a second, you know, you guys have done a lot to, kind of rebuild a lot of things here over the last few years, and it appears that some many of those things are coming to fruition.

[Rob Oliver, Senior Research Analyst at Robert W. Baird & Co]

So as we head, to the upcoming Beyond the Black, I just wanted to get your thoughts as to maybe some of the changes over the last couple of years and what you're most excited about heading into that event. Thanks.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

Thanks Rob and thank you for your kind words. The last two years, I think it feels like sometimes Owen and I worked nonstop. But the result of that is I think we have the strongest management team that this company has ever had. Most talented, most willing to roll up their sleeves and work. I mean, we are we are really excited about the management team that we have.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

I think secondly, my confidence in Owen is just so very strong. I mean, I I just absolutely adore how he runs a company. And so I just have so much confidence that he is the right choice for being the CEO. And this gives me a chance to go and do the things that I love the most. Right?

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

I love working with our customers. I love trying to figure out where the best place it is to apply technology to solve business problems. And that will be also what I'm very focused on at b to b. Because my best part of b to b is to have my one on ones with all of my different customers to figure out if what we're building is going to solve their problems. And so, yeah, I hope we see you there, Rob.

[Rob Oliver, Senior Research Analyst at Robert W. Baird & Co]

Thank you very much.

[Operator]

Thank you. Our next question comes from the line of Koji Ikeda of Bank of America. Your line is now open.

[Koji Ikeda, Senior Research Analyst - Software, Small & Midcap at Bank of America]

Hey, guys. Thanks so much for taking the question. I too have a question on kind of the CEO announcement here today. Super exciting news. Congrats, Therese.

[Koji Ikeda, Senior Research Analyst - Software, Small & Midcap at Bank of America]

Congrats, Owen. I guess the big picture question is like, what's really changing? Therese, I've always kind of viewed you as the technologist, Owen as the operator. So, while official titles are moving, it doesn't sound like things are changing all that much, which in our view sounds like it's a pretty good thing. So, maybe some color on what actually might be changing here.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

I think you're right. It's not going to be a huge change. It's simply that I get to step back from some of the operational things. I get to step back from things like earnings calls, COGI. I get to focus on what I'm really good at.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

And so, it's probably not a huge shift in terms of the public eye, but it's just a it's more a change in focus.

[Koji Ikeda, Senior Research Analyst - Software, Small & Midcap at Bank of America]

Got it. And if this is your last public call, Therese would love to hear your thoughts on the adoption curve of AI and agentic AI in the office of the CFO. I think understanding this curve would be really helpful in thinking about BlackLine's platform versus consumption revenue trends over the long term.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

Absolutely, Koji. The problem with any cool new technology is that you have to separate hype from reality. Right? And you have to figure out what the guardrails are around it to make it be really successful. And I think that that's actually something that, and you've got to do those things before you're really going to get strong adoption.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

For our particular market, where you have to be able to prove each and everything, right, it's really important that, as I mentioned in my remarks, that things be auditable. That you can explain exactly how you got to a particular conclusion. Alright. So the sort of responsible approach to it is to make sure that you detail out how you got to any conclusion in a way that an auditor could support. That's one.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

Number two is, you know, Jeremy has said before that data is the new currency. And it's been something I've been focused on for years that we have, you know, almost twenty years of data going back in this market as the creator of the financial close software market. We have more data going back further than anyone else. How do we properly structure that so that AI can actually learn well? Because you can build an agent in about an hour using any one of the platforms out there, and they're very cool.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

Right? But if you don't actually have the data to back it up so that it learns properly, then you're just not going to get consistent results. And consistency is super important to our market. So I think there's a number of things that have to be, you know, excused upon, accounted for before you're going to see much of an adoption curve. And I think that that's been our focus, is to make sure that what we're building not only delivers real value, but all of the auditability auditability behind it.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

And I could go on for days on this one. Yeah.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Actually Koji, Beyond the Black, we have a session with a CAO, a head of an audit practice that deals with the PCAOB and the FCC all the time and what the regulators are talking about, where they'll accept AI and where they won't. And then a consultant who's talking about how they're advising the office of the CFO to implement AI. And it's going to be very interesting because the opportunities are great, but there are some real barriers that companies are going to have to overcome to be able to show that there's that audibility, traceability, reliability that Therese mentioned. There can't be a black box when it comes to AI in the preparation of your financial statements.

[Koji Ikeda, Senior Research Analyst - Software, Small & Midcap at Bank of America]

Got it. Thanks, Therese. Thanks, Owen.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

Thanks.

[Operator]

Thank you. Our next question comes from the line of Alex Sklar of Raymond James. Your line is now open.

[Alexander Sklar, Vice President at Raymond James Financial]

Great. Thank you. Owen, I want to follow-up on Chris' question earlier on strong big deal activity and your commentary more than backfilling that pipeline. Can you just provide some more context on what you saw actually change in the quarter that helped drive those faster close rates? And then maybe a related one for Patrick.

[Alexander Sklar, Vice President at Raymond James Financial]

Did all of those book deals that were in the prepared remarks, did all those hit billings RPO this quarter or some are still expected for the back half? Thanks.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Yeah, look, I think you guys all know we've added a new Chief Commercial Officer, Stuart Van Houten, and many of you get a chance to meet him next month in Las Vegas at our Beyond the Black Conference. What he has brought is a real discipline and rigor to how to run a go to market operation. And it's something that I think the team has really embraced. Their execution has just gotten that much better. Our articulation of value, one of the things that we have been focused laser focused on is time to value for customers, right?

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

So if I were to look from a year ago today to where we are now, every one of our solutions can be implemented at least 30% quicker than it was a year ago. And that's by us and it's by our partners. And so that ability to gain the confidence of CFOs and his or her teams that they can spend bigger money on doing things that are more transformative and get the payback in a reasonable amount of time has proven to be very, very compelling. And look, we all know there's been a lot of choppiness in the markets as to whatever comes out of different world capitals and how people are responding to different things. But right through thick and thin, we've been building our pipeline every month.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

The opportunities are getting bigger, they're getting broader, and they're getting done at the right levels, which is really critical to what we're seeing driving our success. It doesn't mean that there can be something that comes out of, again, when these world capitals that destabilizes the markets, but it hasn't stopped us at this point in time and there's nothing that we see right now that's going to have a big negative effect on us. That said, there were some large deals that did get stalled at the end of the second quarter that we thought were over the goal line, but they just for the different political reasons, they got put on hold. But we're going to continue to work that and be creative in how we try to get those deals across the finish line. And again, that's what Stuart and his leadership team I think are excellent at doing on behalf of BlackLine and our customers.

[Patrick Villanova, CFO at BlackLine]

And then to address the second part of that question, yes, there are a couple of few deals that will be a tailwind to RPO and billings in future quarters.

[Alexander Sklar, Vice President at Raymond James Financial]

Okay, great context there. Maybe just one follow-up for you Owen on SAP. I appreciate the commentary of it being more Q4 weighted, but just maybe an update in terms of what you've seen in terms of momentum from that channel that's kind of underlying your favorable commentary. And any change in activity from some of the newer opt out relationship in certain of those SAP bundles? Thanks.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Yeah. Look, I think there was a lot of things that we've shared with you that we've been trying to work through with SAP leadership. It's not just in opportunities in the marketplace, but it's on the product roadmap, how reps are compensated, where we wound up on a bill of materials and a whole host of things. Right across the board, we continue to make really good progress. They're a terrific partner.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

But we always knew that this was not going to be a first half, first three quarter event for BlackLine and us, BlackLine and SAP as we move forward. So we're seeing the pipeline building. We saw it starting at the end of last year. We certainly saw it coming out of the SAPPHIRE conferences in North America and Europe. I think there's a lot of enthusiasm.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Obviously, the success stories like with an Exxon and the Delta got a lot of people's attention that we're really having the ability to capitalize on. And so that's just continuing to move forward. And I don't look at this and I don't think we look at this as a one quarter, hey, we're going to nail the fourth quarter twenty twenty, twenty five or anything like that. We look at this as a change in how we're driving that relationship over the long term for the benefit of our customers. And that's what we're doing.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

And I think it's going to be a win win win win for SAP, win for BlackLine and win for our customers.

[Alexander Sklar, Vice President at Raymond James Financial]

Great. Thanks for all the color.

[Operator]

Thank you. Our next question comes from the line of Kincaid LaCorte of Citizens. Your line is now open.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

I think that'll be Pat from Citizens.

[Pat Walravens, Director - Technology Research & Senior Analyst at Citizens JMP Securities, LLC]

Thank you. Congratulations, Therese, and to you well.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

From, like It's one of my associates.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

Hi, Pat. Hi.

[Pat Walravens, Director - Technology Research & Senior Analyst at Citizens JMP Securities, LLC]

Hi. Okay. So, Therese, can you talk more about Studio three sixty? So it unifies financial close, invoice cash consolidation analytics, and intercompany. Right?

[Pat Walravens, Director - Technology Research & Senior Analyst at Citizens JMP Securities, LLC]

What what is involved in getting there if you're an existing customer? Like, do have to pay more? Do you need services to get there? And then if you could also talk about the role of Snowflake in Studio three sixty, why that why that's important, that would be awesome.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

Okay. How much time do we have, Pat?

[Pat Walravens, Director - Technology Research & Senior Analyst at Citizens JMP Securities, LLC]

Well, you know, you you have to decide that. Not Okay.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

So there's a couple of things. First off, Studio three sixty was implemented to be the platform underneath all of our products. And we pulled various things from different areas. We, you know, basically pulled it into a single platform. We added additional capabilities.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

We looked at where we needed more strength. And so it is already a part of what every customer is experiencing. Now, how much they can actually utilize some of the more in-depth capabilities of the platform, that's where how much they pay comes into play. Okay? So for example, you could have BlackLine Visualize, which is one of the five platform components, and see some very cool product dashboards.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

However, if you want your own custom dashboards that describe exactly the metrics that you need for your business, now you've got a layer a level up to pay for the platform. Okay? And it's across that on all of the different components. If you want event based scheduling, Orchestrate will do that for you. If you want to start combining 15 different ERPs and scheduling within those systems and other external systems and triggering things from one to another, you're gonna need to pay a level up for Orchestrate.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

So it's really we wanted to put a lot of it out there now so that our customers can take advantage of it. But also with a bit of a carrot for if you can do these cool things for free, imagine what you can do if you actually bought the platform. Now, Snowflake. Snowflake is part of, a reality check-in the world. Data volumes are growing exponentially in every single customer out there.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

Okay? And the ability to have things like high volumes of matching transactions, literally in the billions. Okay? It's becoming more and more of a common use case. So Snowflake, and by the way, they are a customer, Snowflake is part of our strategy to be able to really handle incredibly large volumes of data.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

And when I say handle, I mean things like data sharing with Snowflake. Okay? Some of their great reporting that they've got in there. Just a lot of the capabilities are really becoming must haves in today's world of huge data volumes. I think that kinda sums it up.

[Pat Walravens, Director - Technology Research & Senior Analyst at Citizens JMP Securities, LLC]

Yeah. No. That's great. That's great.

[Pat Walravens, Director - Technology Research & Senior Analyst at Citizens JMP Securities, LLC]

That's great. And then Owen, the follow-up for you is if we go back to that 8 figure deal, I I was thinking maybe you can walk us through sort of how that ended up coming together, and it's it's a SAP is involved, and there's a partner. Right?

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

So I just thought it would be a a great way to sort of It is not a no. No. It is not an SAP deal.

[Pat Walravens, Director - Technology Research & Senior Analyst at Citizens JMP Securities, LLC]

Oh, it's not.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Okay.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

It's through a partner, and it's one of the partners that we have a very deep long standing relationship with. And when the opportunity presented itself, we did a lot of teaming, you know, as you can imagine, and it was well over a year process to get to where we got to. But I think it's the testament that the testament to the confidence our partners have and capabilities of BlackLine, the reliability and the deep trust because they're so intimately involved with the roadmap that Therese and the team are building and rolling out. And so it becomes part of very compelling narrative in the conversations with the customer. So I would say it was in my view, I would always like these things to go a little bit quicker than they take, but it was a textbook example of us using our partner powered strategy to really move the needle for a very, very important global media and entertainment company.

[Pat Walravens, Director - Technology Research & Senior Analyst at Citizens JMP Securities, LLC]

Great. Thank you both.

[Operator]

Thank you. Our next question comes from the line of Steve Enders of Citi. Your line is now open.

[Steve Enders, Equity Research Analyst at Citigroup]

Okay. Great. Thanks for taking the questions here. I guess maybe just to start, I just wanna dig into a little bit more. It sounds like maybe there were some, I guess, large deal delays that took place or, you know, some some impact from from that.

[Steve Enders, Equity Research Analyst at Citigroup]

So I just maybe what are you seeing out there from, the macro perspective? Like, were those deals that slip? Is it kind of outsized versus what you would typically see? And I guess I'm trying to compare that versus the strong bookings and ARR commentary and the actual numbers you were put up there. So yeah, it'd be great to get a little bit more detail on kind of like what actually happened versus

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Yeah. I don't know if I gave you the perfect clear answer, because at one level, we have just been executing a whole lot better as a team. And so that has been probably the thing that I think both Therese and I as well as the rest of the leadership team feel really good about. That said, I mean, I'm still sitting here thinking about the end of the quarter, and we had one really large deal that deferred. It was a big, big global brand, tight margin business and they just didn't think they had the resources and budget given the uncertainty of what they were going to do.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

And then the flip side of it, we had a decent sized investment bank and to quote the CFO, I won't use the full word, F it, let's just do it, and move forward. I hope that wasn't recorded. But so like you kind of got a little bit of both in the reactions as to how people were looking for it. I think the thing that we keep looking through is we are doing a much better job as a team trying to create the narrative, talk about the value we can truly create for customers that need to get back on that digital finance transformation. I think it's two things.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

I think one is within our existing portfolio, reengaging. We talk about like we're trying to resell to our customers every day. Win their hearts and minds every day a way that we haven't maybe done as well as we could have in the last couple of years, but that's been a part of it. And then the confidence again that our partners have in us, the confidence that our own team has, what we've been able to accomplish on the product roadmap is making us much more compelling when we go into these net new opportunities. And we did really well in the enterprise space this last quarter, but for the first half of the year, beating some of our legacy competitors And just because we're full breadth, there's more confidence in what we can do.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

And the referenceability from other customers are willing to advocate on behalf of BlackLine in addition to those system integrators and those consultants.

[Steve Enders, Equity Research Analyst at Citigroup]

Okay. No, that's great context. Appreciate that there. And then I guess just to follow-up on, I guess, enterprise versus mid market. I guess, I don't know if shift is the right word, but I guess the incremental focus on bigger mid market customers and allowing some of the smaller ones to roll off.

[Steve Enders, Equity Research Analyst at Citigroup]

But just how do we maybe think about what that kind of path from here looks like or the timeline for how that maybe shakes out over the next couple of years?

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Yeah, so Patrick and I are going to tag team on this issue. And look, think it's important thing here is the conversations our people are having with prospective customers. And now I'm talking about the ones that want to come with BlackLine are the ones that we're trying to sort of get to renew. And you have to think about like we're not interested in selling you a software package and calling it a day. What we're trying to really do is help our customers, these prospects to transform.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

And so we go in and we have conversations that are different that talks about the what must be trues. Must be true from what BlackLine does? What must be true from a partner if they use one? And then what must be true from a customer? And we're pretty good at figuring out who has a better likelihood to want transform that has the right resources, has the right executive support to move things forward.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

And then again our ability now to just get smarter and better, lessons learned, to get more quickly time to value. And so what's happening in the portfolio, and Patrick will keep me honest here, but if I were to look at the net new wins, I think in the second quarter, it might be year to date, they're roughly 100% larger than the customers who are leaving. And so think about that for every new customer we're adding, it's significantly larger than the customer that's going. What it's telling us those customers that are going, are not going to transform. They haven't demonstrated an issue, but we are finding those places in those conversations with customers about where there's a greater likelihood of success amongst and between BlackLine a partner and the prospect.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

And that I give a ton of credit to our marketing team. They're doing a phenomenal job of really identifying those places where there's a real likelihood of us being able to deliver meaningful impact. Now how long does this continuing wind down take? I'll turn that over to Patrick to answer, but he keeps telling me we're in the seventh inning. So I'll let Patrick talk about the seventh inning.

[Patrick Villanova, CFO at BlackLine]

Yes. Mean, Owen, I know we joke about it that sometimes we're in the sixth or the seventh inning stretch. But I feel quite confident we're two thirds of the way through the lower mid market in terms of working through those customers that are not thinking about transformation. But I think Owen, just to elaborate on a couple of things you said there. One, you're absolutely right.

[Patrick Villanova, CFO at BlackLine]

We're on net new logos, we are landing much larger than the customers that are churning out. That's a testament to our landing a platform, and it's a testament to our pricing strategy and the conversations that we're having. The customers that are leaving are not thinking about strategy. They're thinking about a handful of accountants and users. The customers that are coming in want to be with us for life.

[Patrick Villanova, CFO at BlackLine]

They want to engage in a platform. They want to introduce the platform to everyone within their organization. So that's a key takeaway here. And then the second element where we're seeing this, our renewal strategy that we've implemented over the last couple of quarters, we're seeing significant success in the customers that want to stay with us to extend three or more years with us. And you're seeing that in all of our leading indicators, RPO long term RPO is up 15%.

[Patrick Villanova, CFO at BlackLine]

So you're seeing that come through in terms of how we're setting ourselves up for the future to drive that long term growth and to drive that stickiness that we with customers that want to stay with BlackLine.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Yes. Just one thing to note, because this is important, right? So the definition of insanity is doing the same thing over and over expecting a different outcome. Of the things I give a lot of credit to our professional services team, our customer success team is for all the new customers that have joined BlackLine in the last two years, whilst the recent IR in the role, is we are like zealots making sure those customers get up and running so that we don't run into a risk when they get up to their third year and it's time to renew and they're not sure. So that's really where I think the leadership team should feel very good about the progress they're making.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

So we're not just solving part of one problem then creating a problem on the other end. We're dealing with this the right way on both ends if you will.

[Operator]

Thank you. Our next question comes from the line of Daniel Jester of BMO Capital Markets. Your line is now open.

[Kyle Aberasturi, Equity Research Senior Associate at BMO Capital Markets]

Hi, good afternoon. This is Kyle Ambarella on for Dan Jester. Thanks for squeezing us in. Quick one for me. I was wondering if you had initial thoughts on the impact the new R and D tax credit policy could have on the business cash flows? Thanks.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Patrick, we talked about this yesterday. So go ahead.

[Patrick Villanova, CFO at BlackLine]

We did. And thanks, Daniel. So yes, the BBB bill will have a beneficial impact on the business to the tune of about $10,000,000 in free cash flow in the second half of this year and a more notable amount in 2026 and beyond.

[Operator]

Thank you.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Okay. Next.

[Operator]

Our next question comes from the line of Adam Hotchkiss of Goldman Sachs. Your line is now open.

[Adam Hotchkiss, VP - Emerging Software Equity Research at Goldman Sachs]

Great. Thanks so much for taking the questions. I'll keep it to one as well in the interest of time. But I wanted to follow-up on Pat's question on the Snowflake piece. I noticed you talked about Snowflake, Oracle Fusion, Workday, Enhanced Dynamics three sixty five connectors that are in some form of early access are coming generally available this year.

[Adam Hotchkiss, VP - Emerging Software Equity Research at Goldman Sachs]

And I'm just curious if you could elaborate on the added value that those provide and maybe what the data connectivity products or process looked like prior to these connectors? I'm just curious, you know, what what value this adds for you, in the sort of perspective at existing customer base going forward.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

Yeah. In general, okay, when you've got something like Snowflake data share or a connector, it basically gets you live more quickly. Okay? And it's a more reliable ongoing interface. So in the beginning, we basically had, you know, create an extract file and put it on an FTP site.

[Therese Tucker, Founder, Executive Director & Co-CEO at BlackLine]

And that works beautifully, and many customers still use that. However, a connector will get your data in more quickly, sometimes in real time, okay, more reliably, and it gets you up and running faster. It's just it makes things more smooth.

[Adam Hotchkiss, VP - Emerging Software Equity Research at Goldman Sachs]

Very clear. Thanks, Therese.

[Operator]

Sure. Thank you. Our last question comes from the line of Jake Roberge of William Blair. Your line is now open.

[Jake Roberge, Equity Research Analyst at William Blair & Company, L.L.C]

Yeah. Thanks for fitting me in. I'll keep it to to one as well. You referenced signing your first federal agency during the quarter. Can you talk about the learnings from from getting that first deal over the finish line and just how pipeline in the public sector is trending now that you're live in that market?

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Yeah. So Matt and I will answer that question together. There's a lot of lessons that have been learned. We were very fortunate, think as part of that to have a great partner in this case with Deloitte that really did a lot of work to help us secure the win. But Matt, why don't you take this because Matt's been living this one day in and day out with the team.

[Matt Humphries, SVP - IR & Strategic Accounts, Aerospace & Defense Industry Lead at BlackLine]

Yeah, so I think it's a lot of lessons applied to our commercial business across 4,400 customers that going into the public sector, you may have thought you would have to have taken a different approach to sell to the federal agencies. And what we have been seeing is that whether by EO, by ACT, etcetera, these agencies are becoming increasingly more curious. But they don't want to buy technology just to buy technology. So they're kind of applying some lessons learned from the commercial sector over the past ten, twenty years. But they do want to solve real business problems.

[Matt Humphries, SVP - IR & Strategic Accounts, Aerospace & Defense Industry Lead at BlackLine]

They want to increase productivity, especially when there's challenges for headcount. And then more importantly, they're really focused on auditability, both getting ready for an audit, passing an audit, and then maintaining that audit over a period of time. So what we are seeing is, yes, there is a growing appetite for change leveraging technology in the public sector. And we're basically applying the playbook we've had for the past two plus decades across all our customers globally and some of the most complex biggest organizations globally into the public sector. And then we leverage our partnership with the relationships we have across our commercial base, some big global SIs that have a lot of relationships with the federal, the state, the local levels.

[Matt Humphries, SVP - IR & Strategic Accounts, Aerospace & Defense Industry Lead at BlackLine]

And that helps your distribution, your pipeline growth, and enhances the opportunities and the qualities that we see. So we see that pipeline. Owen talked about it. We see that building on the public sector side at the federal level, both with our existing agency that we talk to, but then also potentially selling further across that agency. We see it with some of our key partners who have significant footprints in the public sector.

[Matt Humphries, SVP - IR & Strategic Accounts, Aerospace & Defense Industry Lead at BlackLine]

And we're also seeing it at the state and local level with a number of large states that are having some challenges from an auditability standpoint. So it's pretty broad based. It's early, acknowledging that. But we talked about the public sector opportunity in November. You fast forward eight months from now, we have our first deal.

[Matt Humphries, SVP - IR & Strategic Accounts, Aerospace & Defense Industry Lead at BlackLine]

We have our pipeline. We have a building team in place. So from our standpoint, we are very, very excited about the progress we've made, the promises kept, the opportunity going forward.

[Jake Roberge, Equity Research Analyst at William Blair & Company, L.L.C]

Great. Thanks for taking the question.

[Operator]

Thank you. This concludes our question and answer session. I would now like to turn it back to Owen Ryan for closing remarks.

[Owen Ryan, Chairman of the Board & Co-CEO at BlackLine]

Great. Thank you. And thank you all for dialing in and your questions. We look forward to connecting in the follow ups. Talk soon, everybody. Take care.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Participants

Executives

• Matt Humphries, SVP - IR & Strategic Accounts, Aerospace & Defense Industry Lead
• Owen Ryan, Chairman of the Board & Co-CEO
• Therese Tucker, Founder, Executive Director & Co-CEO
• Patrick Villanova, CFO

Analysts

• Chris Quintero, VP & Equity Research Analyst at Morgan Stanley
• Rob Oliver, Senior Research Analyst at Robert W. Baird & Co
• Koji Ikeda, Senior Research Analyst - Software, Small & Midcap at Bank of America
• Alexander Sklar, Vice President at Raymond James Financial
• Pat Walravens, Director - Technology Research & Senior Analyst at Citizens JMP Securities, LLC
• Steve Enders, Equity Research Analyst at Citigroup
• Kyle Aberasturi, Equity Research Senior Associate at BMO Capital Markets
• Adam Hotchkiss, VP - Emerging Software Equity Research at Goldman Sachs
• Jake Roberge, Equity Research Analyst at William Blair & Company, L.L.C