BLACKLINE, INC. Q1 FY2025 earnings call

• Overall, pleased with Q1 performance: 6% new growth, non-GAAP operating margin 21%. Bookings solid, average deal size up, customers with >$1M ARR increased to 79. - Studio360 adoption strong, new pricing model tracking ahead. Go-to-market execution improved across geographies. - SolEx partnership outperformed; leveraging partnership to accelerate joint sales efforts, including expanding offerings to SAP users. - Public sector showed solid progress with strong pipeline across federal, state, and local governments. - Product innovation: Studio360 enhancements, Snowflake partnership, AI-powered capabilities, industry-specific solutions (e.g., operational reconciliations for oil and gas), and upcoming Workday Connector. - SAP partnership accelerated, with BlackLine solutions included in SAP's SKU bundle, positioning solutions earlier in ERP migrations.

Total revenue grew to $167 million, up 6%, including a slight FX headwind. Subscription revenue and services revenue both grew by 6%. ARR was $656 million, up over 8% with an approximate 0.5 point benefit from FX in the quarter. Remaining performance obligations (RPO) increased 11% with current RPO up 7%. Calculated billings growth was over 9%, inclusive of a slight FX headwind. Customer count at the end of the quarter was 4,455, up 1%. Revenue renewal rate was 94%, up 1 point versus the prior year. NRR was 104% this quarter. Strategic products represented 27% of sales in the quarter. Non-GAAP gross margin was approximately 80%, non-GAAP operating margin was 21%, non-GAAP net income attributable to BlackLine was $36 million, operating cash flow was $47 million, and free cash flow was $33 million.

• Q2 2025: Expected total GAAP revenue in the range of $170 million to $172 million (6% to 7% growth), non-GAAP operating margin 20.5% to 21.5%, and non-GAAP net income attributable to BlackLine in the range of $38 million to $40 million. - Full year 2025: Expected total GAAP revenue in the range of $692 million to $705 million (6% to 8% growth), non-GAAP operating margin 21.5% to 22.5%, and non-GAAP net income attributable to BlackLine in the range of $159 million to $167 million. FX headwind slightly less than 1 point this year.

• Macro environment uncertainty: Recent policy announcements making it difficult for companies to plan long-term investments, potentially affecting BlackLine as customers in certain industries/geographies may postpone or reallocate investments.

Q: Just on the SolEx numbers and some of the larger deal expansions being solid, obviously, SAP has the sapphire event coming up. And I was wondering if you guys could just give us sort of a level set given the macro, the environment, what you're seeing within the SAP channel and how we should expect BlackLine potentially set up for these moves towards S/4HANA and ERP migrations?

A: Sure. Robin, thanks for the question. Overall, we are really pleased with the progress we're making with SAP. As we shared with you turning at an Investor Day back in November and then in the first quarter, here of our strategic things, SAP senior leadership and BlackLine agreed that we would do, and we have executed on all those pretty well at this point in time. And what you're now beginning to see, well, we're beginning to see is a much more robust pipeline, much more work together in the marketplace, trying to get existing customers to even be better adopted of what BlackLine has to offer. More enthusiasm around what BlackLine brings in the SAP community. If you remember, SAP had 3 strategic priorities. One was AI, the other was in the office of the CFO. And the third was just around being more in cloud and all the things that BlackLine brings helps support that. And so a lot of enthusiasm for what we're seeing. We expect the pipeline to continue to grow very nicely. And as you know, SAP's biggest quarter was a fourth quarter -- where I think they've got 40% of their business. And that's what we are trying to build. It's been terrific to have Stewart, our new Chief Commercial Officer, in-house able to sort of further deepen and broaden those relationships. But also what I think we've really good about is how things are beginning to resonate on the front lines out in the battlefield because it's nice to talk about things at headquarters, but really starts to gain traction is on the frontlines, and those are the things that we're seeing at this point in time.

Q: I wanted to ask or dig in a little bit more here on the new platform pricing model. And it definitely sounds like things are beginning to take shape there. And even visible with the total users being down, being called out in the press release that, that's a result of platform pricing being adopted. And so it does feel like this might become one of the key metrics here, users to help get visibility into how platform pricing is being adopted. And so maybe could you talk about some of the dynamics with that metric, the total users out there? And how to think about kind of the sequential decline there? And how does that translate into adoption of the new pricing model? And are you targeting certain types of customers to maybe adopt that pricing model first? Is it based on size? Is it based on geography or vertical?

A: Yeah. Thanks, Koji. So when a customer adopts a new platform pricing model, we do take their users down to 0 because they're no longer on a user-based pricing model. So that's what you see in our metrics. But more importantly, when we think about Q1 and beyond in terms of how things are working, we did exceed our expectations for Q1 in terms of adoption of the pricing model. Now I'll say that with the caveat that it is too early. We're 3 months into a multiyear plan. And as we stand today, we have rolled out the pricing model to new logos within North America as well as a renewal space in North America. Q2, we're going to see that expand to the renewals base in EMEA and continue to roll it out in such a fashion. That is intentional. We never intended to do a big bang with a new pricing model. So we are slowly rolling it out, and we're seeing traction slightly ahead of what we had planned. In terms of who we target, it is mostly upper mid-market and enterprise. And there is a rationale for that. Basically, who do we not target? It's lower mid-market. When you have low user count as a company, you typically do not sell an unlimited model there. But more importantly, when we look at our customers that have hundreds, if not thousands of users, when we engage them and say, we never have to have the seat license conversation again. We never have to have the user count conversation again. It really resonates with them, and that's why we're seeing the level of adoption that we are.