BlackLine Aktie

Good day, and thank you for standing by. Welcome to the Q1 2026 BlackLine Earnings Conference Call. [Operator Instructions] 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.

Good afternoon, and thank you for joining us today. With me on the call are Owen Ryan, Chief Executive Officer of BlackLine; as well with Patrick Villanova, Chief Financial Officer. With the Q&A portion of today's call, we'll also have Jeremy Ung, BlackLine's Chief Technology Officer, join us.

Before we get started, I'd like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans, objectives and expected performance, in particular, our guidance for Q2 and full year 2026 and 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 this call are reasonable, actual results could differ materially, and these statements are based on our current expectations as of today and are subject to risks and uncertainties, including those stated in our periodic report filed with the Securities and Exchange Commission, in particular, our Form 10-K and Form 10-Q. We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. All comparisons we make today on the call relate to our corresponding period of last year, unless otherwise noted. Unless otherwise stated, our financial measures disclosed on this call will be non-GAAP. A discussion of these non-GAAP financial measures and information regarding reconciliations of our historical GAAP versus non-GAAP results is available in our earnings release and presentation, which may be found on our Investor Relations website at investors.blackline.com or in our Form 8-K filed with the SEC today.

Now I'll turn the call over to BlackLine's Chief Executive Officer, Owen Ryan. Owen?

Thank you, Matt. Good afternoon, everyone. At our AI investor session in March, we shared our technology vision in detail and made our case for why BlackLine is positioned to be the trusted governance and control layer for CFOs and deploying AI across their financial operations.

Today is about sharing with you the momentum we are building as we translate that vision into reality. Our Q1 results demonstrated that our strategy is working, delivering solid top line growth and profitability. Revenue grew to 9.7% year-over-year and non-GAAP operating margin improved to 21.6%. These results are underpinned by progress on our key strategic initiatives. The adoption of our platform, Studio 360 continues to build with the metric reaching 13% of eligible AR up from 11% in Q4. More importantly, we are seeing this strategy translate into deeper customer commitments. This is best reflected in our remaining performance obligations, or RPO, which grew 18% and driven by the longer contract terms that are inherent to our new platform strategy.

Let me go deeper into our platform strategy and commercial model. Platform adoption maintained a healthy pace following Q4 seasonality with 94% of the eligible new bookings landing on platform pricing, a strong signal that our commercial model is becoming the standard for how customers buy BlackLine. We also saw continued migration activity from existing customers in Q1. Our teams are actively engaged with customers preparing for platform conversion ahead of their upcoming renewals.

This new model is also positively changing our deal economics. Average new deal size this quarter was up 85% to $162,000 driven by platform and strategic product sales. Our standard offering now includes a broader set of capabilities on Studio 360, which naturally increases the initial land. Our platform model allows us to sell units of financial productivity rather than seeds, which, over time, we believe opens access to labor and operational budgets beyond traditional software spend. It also creates the natural expansion path for our genic AI offerings. The model works like this. As customers adopt our platform, they commit to a platform fee that provides access to the full breadth of our capabilities within a framework of governance, reliability and control that they and their auditors already trust. As they then deploy Verity agents and automate work that was previously manual, consumption-based pricing layers on top of that base, similar to how we price capabilities like matching today.

That alignment between how our customers drive efficiency and how we capture value, all within a trusted control environment is fundamental to what we are building.

When we look at the full picture, we believe that a platform that provides broad access, embedded AI driving deeper daily engagement and a genic offerings layering consumption on top meaningfully increases the lifetime value of a BlackLine customer.

This brings me to what I believe is the most important topic on today's call, AI and our Verity portfolio. Last month at our Beyond the Black Conference in London, we introduced agentic financial operations, a new operating model that defines how the office of the CFO harnesses AI safely, strategically and at scale. The response from customers, partners and the broader market has reinforced our conviction that we are addressing the right problem at the right time and with the right approach.

The opportunity is straightforward. As an enterprise deploys AI agents across their business in procurement, sales operations, accounts payable, they are creating new uncontrolled financial touch points that need to be governed. Every 1 of those AI-generated transactions eventually hits the general ledger. Everyone must be reconciled, validated and audited.

For a CFO, who personally attest to the accuracy of financial statements, that is a responsibility that requires a trusted platform. Agentic Financial Operations is designed to close this governance and trust gap. Every action in AI agent takes within BlackLine leaves a digital footprint identical to a human user, full chain of thought, immutable audit trails and bedded controls. This is what CFOs demand what audit committees rely upon and what auditors require. The market reaction from customers and partners since our London launch has been encouraging. Customers are telling us they want to leverage what we are building and provide input on our road map rather than try to build these capabilities themselves.

Their ROI framework is clear, make their finance operations more durable and competitive and let a trusted partner handle their AI infrastructure so they can focus on running their business.

Before I walk you through what Verity is delivering commercially, I want to spend a moment on how we build because the pace of our innovation is becoming a strength. We are using AI to fundamentally accelerate our own product development. Our engineering teams have adopted AI augmented coding practices across our development workflows and the results are measurable. The time from idea to production has decreased 22% versus last year. We are shipping capabilities faster with fewer resources and at a higher quality. This is a structural improvement in R&D productivity that we expect to compound over time. That increased velocity is translating directly into how we deliver value. Our customers have benefited from our foundational AI capability since last year. We are expanding further into Agentic AI.

A year ago, Verity agents were a strategic vision. Today, we have multiple purpose-built agents in market in preview are launching in the near term. Combined with our new AI innovation hub and a fully integrated AI native acquisition, we are executing against our AI road map with clear deliberate focus.

Now let me share what this engine is producing for our customers. Over the past year, we have been building and refining our embedded Verity AI capabilities like Verity Assist, Verity Narrate and Verity Flag and close collaboration with our customers, their auditors and our partners. That feedback loop has been critical, allowing us to validate not just performance, but the trust and governance bring work around them.

Even before we brought in access, adoption among early users was doubling every quarter. In Q1, with that validation in hand, we made these capabilities standard across most of our customer base. Over 2/3 of our customers are now actively using these tools, a 285% increase in adoption quarter-over-quarter. In Q1 alone, unique users grew 68% and total usage grew 183%. What this tells us is that AI is moving beyond experimentation for our customers and into their day-to-day workflows. As they embed these capabilities into how they operate, it deepens their relationship with BlackLine. Over time, we expect that to support both stronger retention and additional consumption under our platform pricing model.

Verity Prepare, our AI-powered reconciliation agent is now available to customers and is deployed with several mega enterprise customers. The validated outcomes customers are seeing are significant, over 90% reduction in reconciliation processing time. One customer that had been spending 3 hours manually executing certain reconciliations as seen that fall to 10 minutes and 95% time savings. Based on their experience, they are now ready to enable Verity prepare broadly across their business. That progression from pilot to enterprise-wide rollout is exactly the adoption pattern we are building toward. Early usage data shows the cost to serve as efficient at current scale with clear paths to optimize further as adoption grows. Our multi-model architecture allows us to deliver meaningful customer value at margins consistent with our financial targets.

Verity Match is now in its early adopter phase. Our existing matching solution is a powerful capability as it handles high-volume, complex data sets across multiple ERPs and source systems and deliver strong automation rates for our customers.

Verity Match builds on that foundation by applying AI to the long tail of complex exceptions like combined vendor payments, transposed invoice numbers, missing remittance details. Rules-based systems have historically left these for accountants to resolve manually. In early customer testing, we see a 64% reduction in transactions requiring manual investigation. And by running our models on NVIDIA GPUs, we can process matches up to 25x more cost efficiently and faster than on prior architectures, improving both the customer experience and unit economics as this scales.

Verity Collect will launch this quarter and the demand signal has been stronger than expected. We had to close our early adopter program because customer demand exceeded our planned capacity. The value proposition is direct. Predicting payment delinquency before an invoice becomes past due and autonomously managing the collections outreach across voice, e-mail and digital channels.

For CFOs, this translates directly to working capital improvement, which in the current macro environment is a top priority. While it is still early, we believe the initial proof points are compelling in 1 early adopter scenario our AI agent completed collections outreach activities in under 30 minutes that would have taken a human team of approximately 45 hours. That kind of efficiency gain, freeing collection teams to focus on high-value accounts and complex disputes is exactly what is driving the demand we are seeing. We expect Verity Collect to be a meaningful accelerant to our broader invoice to cash momentum as it scales.

Verity Accruals has seen a significant acceleration in customer interest and pipeline growth as its value proposition resonates in the market anchored by initial successes including closed deals and proof of concepts with key targets in both the enterprise and mid-market. These are largely existing customers looking to expand their footprint, which validates the cross-sell motion we have been building. Customers land on Studio 360 and then adopt additional Verity agents as they see results. One advantage worth highlighting is that our customers do not need to build a new governance framework to deploy Verity. BlackLine already is that framework. Verity agents operate within the same SOX compliant controls, audit trails and approval workflows our customers have relied on for years. Customers can begin deploying AI within a controlled environment today and their auditors already trust, which we believe lowers the barrier to adoption and supports a faster path from pilot to broader rollout.

Turning to how this strategy aligns with our Q1 execution, our platform and AI approach is showing consistent progress in the enterprise. This sustained focus is reflected in our metrics. First, we saw an increase in customers with over $1 million in ARR. We closed the first quarter with 86 customers at this level, an increase of 9% year-over-year along 14% growth in our $250,000-plus customer cohort.

Second, this strategy is driving deeper adoption and additional cross-sell across our portfolio. Our strategic products represented 37% of sales in Q1, up from 33% last quarter and 27% in the prior year. This proves that when we lead with value and outcomes, customers invest more deeply in BlackLine, adopting more solutions with less friction.

And third, you can see the strategy and action and key wins from the quarter. Within our existing customer base, we saw a significant validation for our AI offerings, particularly Verity Accruals. We secured a major renewal and expansion with a leading billing company, demonstrating their deep loyalty to BlackLine and strong interest in our AI capabilities. We saw similar momentum with a leading global mobility and car sharing company, which also expanded its footprint with a strategic win for variety accruals. Our upmarket motion and governance thesis also continues to resonate strongly in highly regulated and complex environments. This quarter, we welcomed 1 of the nation's largest health care providers as a new logo replacing an ERP competitor, which is a powerful validation of our trusted control framework and innovation. We also saw significant expansion within our enterprise base, including a premier global construction services company that added our invoice to cash solution. Additionally, we executed a major rip and replace at a leading fintech provider, successfully displacing multiple competitors to consolidate their financial operations on to BlackLine, adopting Studio 360, Journals, reconciliations and Transaction Matching.

Last, we delivered highly strategic wins, particularly among companies at the forefront of the AI revolution. We secured a net new agreement with a global leader in memory and data storage for AI, successfully migrating their processes of an ERP competitor and on to BlackLine. Through that same channel, we also expanded our footprint with 1 of the world's premier data and AI platform companies. The fact that organizations building the future of AI rely on BlackLine for their own financial governance speaks to the strength and trust of our platform. We believe our customer base is healthier than our headline retention metrics suggest and it is getting stronger. The lower mid-market churn we have discussed in prior quarters is running through a finite and shrinking pool of at-risk accounts.

At the same time, the changes we have made platform pricing that creates stickier customer relationships, a broader solution footprint per customer, increasing multiyear renewal commitments and a redesigned customer success model are fundamentally improving the quality of our installed base. We expect the cumulative effect of these changes to become more visible in our retention metrics as we move throughout the year and into next.

Finally, our partner ecosystem and our SAP relationship continue to be meaningful contributors to growth. Our integration with SAP's advanced financial close is now generating pipeline as we were able to sell into SAP's installed base of ASC customers. Our Joule, Verity proof of concept is also progressing toward a commercial framework, and we are actively working to launch platform pricing within SolEx. We are also seeing acceleration in our public sector business through SAP with several active deals in the pipeline. We see our partner ecosystem as a force multiplier across demand generation, delivery and customer success and is critical to scaling our growth.

In closing, our path forward is clear. AI is creating more financial activity across the enterprise, not less. All of it must be governed, reconciled and audited. We are the system of record and control that makes this possible. Our customers are telling us they want to move fast with AI, but they also tell us that trust, reliability and security are nonnegotiables. This is exactly what 25 years of BlackLine expertise delivers.

With that, let me turn it over to Patrick for a detailed review of our financial results and our guidance.

Thank you, Owen. As discussed, our strategy is building clear momentum, and our Q1 financial results reflect that progress. We delivered solid top line growth, demonstrate the quality and durability of that growth through our key strategic metrics and showed significant leverage in our operating model.

Let me walk you through the details. Total revenue was $183 million, up 10% and with subscription revenue growing 10% and service revenue growing 11%. The acceleration in services reflects the faster implementation time lines and go-live activity we are driving through our delivery engine.

ARR reached $712 million, up 9%, reflecting the bookings momentum we saw in Q4, carrying forward and continued strength in platform and strategic product adoption.

Importantly, we believe the quality and predictability of our future revenue growth is strengthening. This is best illustrated by our RPO, which grew 18% to $1.1 billion fueled by larger deal sizes and longer contract terms inherent to our platform model.

Similarly, the health of our near-term pipeline is also reflected in our current RPO growth of 12%. We which underscores the solid market demand for our solutions. This momentum is directly linked to the steady adoption of platform pricing, which reached 13% of ARR at quarter end, up from 11% in Q4.

Calculated billings growth was 9% in the quarter, our trailing 12-month billings growth, which helps normalize for quarterly variations, improved to 9%.

Turning to the health of our customer base. Our key metrics remained solid across our 4,300 customers. Net revenue retention was 105%, which includes an approximate 1 point headwind from FX. Underlying expansion within our installed base remains solid, driven by 2 dynamics: customers migrating to platform pricing, which naturally expands the scope of their relationship with us and strong attach rates for our strategic products, which represented 37% of sales this quarter. Customers are investing more broadly in BlackLine and our platform model is making that expansion easier and faster.

On retention, our revenue renewal rate was 93%. Enterprise renewal rates remained strong at 96%, consistent with the durability we have seen in this segment, the lower mid-market headwind we have discussed in prior quarters continue to weigh on the overall rate, though the remaining at-risk pool is finite and shrinking. We expect this drag to diminish as we move through the year.

Our SolEx channel delivered 1 of its strongest new bookings quarters as our joint go-to-market with SAP continues to mature. SAP customers now account for over 26% of our total revenue, and we see further opportunity ahead as our broader platform strategy opens new avenues into SAP's installed base of commercial and public sector customers.

Now let me turn to profitability and cash flow. Our non-GAAP subscription gross margin improved to 83%. Our non-GAAP gross margin improved to 80.2%, in line with our expectations.

Non-GAAP operating margin was 21.6%, reflecting the continued productivity improvements we are driving across the business. We are seeing meaningful efficiency gains from our own adoption of AI and automation in areas like customer onboarding, implementation delivery and internal operations. This enables us to grow revenue faster than expenses while maintaining our investment in innovation.

Non-GAAP net income attributable to BlackLine was $40 million, representing a 22% non-GAAP net income margin with adjusted earnings per share growing 14% to $0.56. We delivered operating cash flow of $46 million and free cash flow of $36 million or a 20% free cash flow margin. After paying off our 2026 convertible notes in March, we have approximately $525 million in cash, cash equivalents and marketable securities versus $667 million in debt.

Finally, we continue to execute our capital allocation strategy. In the quarter, we returned approximately $47 million to shareholders through the purchase of 1.2 million shares.

Before I get into guidance, I want to step back and frame where we are against our multiyear financial targets. We entered the year with a clear objective continue accelerating revenue growth toward double digits, expand operating margin and do both while increasing our pace of innovation.

Q1 demonstrated progress on all 3 fronts. Revenue growth accelerated, margins expanded and the pace of our product delivery has never been faster. These results give us confidence to raise our full year outlook.

On the specifics, I want to call out a few dynamics that are important for modeling purposes. The first quarter's top line performance included about a $1 million benefit from certain items related to specific customer deployments and timing. These are nonrecurring in nature.

Looking ahead, we anticipate a modest revenue headwind of roughly $1 million to $2 million over the balance of the year due to FX. After accounting for both of these dynamics, our Q2 and full year guidance reflect continued acceleration in our underlying revenue growth rate as we move through the year.

On the macro, we are not immune to the external environment, and we have built our guidance with that in mind.

That said, the financial close is a regulatory obligation, not a discretionary spend item. Our customers cannot defer compliance and the complexity of their financial operations is increasing, not decreasing. Combined with our growing RPO strong multiyear renewal trends and an expanding enterprise pipeline, we have good visibility into the rest of the year. Our raised guidance reflects both that visibility at an appropriate level of prudence given the uncertainty in the broader environment.

With that context, for the second quarter, we expect total GAAP revenue to be in the range of $186 million to $188 million, representing 8.1% to 9.3% growth. We expect non-GAAP operating margin to be in the range of 21.5% to 22.5%, and we expect non-GAAP net income attributable to BlackLine to be in a range of $40 million to $42 million, or $0.57 to $0.59 on a per share basis. Our share count is expected to be about 73.3 million diluted weighted average shares. And for the full year 2026, we expect total GAAP revenue to be in the range of $765 million to $769 million, representing 9.2% to 9.8% growth. We expect non-GAAP operating margin to be in the range of 24% to 24.5%. And finally, we expect our non-GAAP net income attributable to BlackLine to be $174 million to $182 million, or $2.42 to $2.53 on a per share basis. Our share count is expected to be 74.4 million diluted weighted average shares.

Operator, We're ready for questions.

[Operator Instructions] And our first question comes from Alex Sklar of Raymond James.

Great. Owen, maybe first for you on Verity and some of the adoption you've seen there. You spoke to it being a big factor in the majority of the large deals in the last 2 quarters you seeing in terms of adoption and usage from spend new customer cohorts, specifically as they've gone live on BlackLine? And Patrick, maybe can you remind us if there's any consumption revenue embedded in the 2026 outlook?

Yes, Alex, first of all, good to hear from you. Thanks for the question. I think whether it's a new customer or even an existing customer, things that we're hearing from our from that cohort is basically. One is they want to move at a good pace with AI, move a little bit faster. But what they're also telling us is that they do not want to compromise anything on trust and governance. And so what they're trying to figure out with us when we go in and talk with them is they first tell us that the AI that we're rolling out needs to work within an existing controls environment, which is what we have and what they really appreciate. They want to make sure that the AI that they're deploying has actually been built by people in the business that understand their business. So they're not necessarily enamored with sort of generic AI. And so when we sit there and we can talk about the hundreds of billions of transactions that we processed over for all of our customers over all these years and can show the accuracy and effectiveness and efficiency with which that works and then the ability for their auditors to know and rely on it and trust it. That all becomes really important in all of the conversation.

And the last thing that we hear from them, Alex, it's not like what we bought today on February 25, and is the end all be all. So what they're really looking for is also trying to understand what is our road map? How does it align to their interest? And then how can they potentially weigh in with others in their industry to sort of move forward. And 1 of the examples of a big win we had this quarter was with a very, very large health care company. Well, if you look at the largest health care companies in the United States, we probably have 9 out of the 10 at this point in time. And so bringing that cohort together to show that experience because they all have those common issues and they're all trying to figure out how to use AI the right way in that environment. So those are the things that we sort of really hear. It's like yes, we wanted to be cutting edge, but more importantly or just as importantly, they want to be able to trust it. They want to make sure it's accurate. It's auditable, reliable and secure. And then emerging probably after the quarter, but there's a lot more conversation now about the total cost of ownership and cost certainty, because what's happening with AI and other parts of the market where people are consuming tokens at a very, very high level without really understanding what they're getting from an ROI perspective. That's what I'm seeing in those conversations.

But Patrick, over to you.

Yes, Alex, to answer the second part of your question, just to hit the nail on the head, there is a nominal amount of consumption revenue included in the 2026 guide for the remainder of the year.

Now with that said, you should start to see that in our leading indicators. The reason for that -- for all the reasons that Owen just said, our customers right now are uptaking these Agentic offerings as well as other AI offerings, testing them out, getting comfortable with them, increasing consumption. As they move up through the consumption tiers, we expect to see that show up in our leading indicators, which materializes in revenue in 2027. And the way we're seeing it now, the pace that we're at, we can reassert that at least 50% of our ARR exiting 2026 will be non-seat-based as a result of everything that we just discussed.

Okay. That's great color from both there. I appreciate that. Maybe just a follow-up on the strategic product bookings mix. I think that's a new record, can you just talk about the commonality you saw in terms of solution adoption? And then I heard faster adoption of strategic products for those customers under platform pricing. Can you elaborate what you're seeing there with the 13% of the base now on platform? How much of an unlocked that is?

So I think, Alex, just -- and I want to make sure I understood your question, which was what's driving the strategic product sales into the platform. And I mean, basically, it's the work that Jeremy and his team are doing with Stuart and his team to sort of make sure that the whole system works together seamlessly that can be implemented by our partners. Our teams are sometimes jointly with our customers who are able to demonstrate faster time to value for what they're being -- what they're asking for. And then I think importantly, as we continue to innovate in those products, we're widening the gap, quite frankly, with anybody that would have been a competitor. So those are the things that I think we're seeing in the market so far. And hopefully, that was responsive to your question, Alex.

Great.

Patrick, do you want to talk about the acceleration of 11% to 13%?

Yes, Alex, the second part of your question there, I think what I heard was, does our continual increase in the strategic product mix is that derivative of our platform approach. And the short answer is, yes, they are related. We would expect to see a continued increase in mix of our strategic products versus nonstrategic because most, if not all of our strategic products are consumption based.

Now the second part of that, as customers migrate to our platform, that enables a smoother sales motion of our strategic products. It is a connective tissue, connected fiber between all of our solutions, which allows data to flow seamlessly between them, and that allows us to sell into that customer base with less obstacles. So as we see more and more customers move to the platform, we would expect to see that mix of strategic products continue to increase as well.

Our next question comes from Chris Quintero of Morgan Stanley.

I want to ask about RPO, a really nice growth rate to see there. And at a time when there's so much innovation going on in the space. I'm curious from your perspective at a high level, why are customers existing and you like making these such deep longer-term commitments and really tying themselves to the BlackLine story and product road map here?

Yes. Look, I think, Chris, it's sort of what I just said at the beginning, right? So we've been -- we're in our 25th anniversary, actually officially June 2 for those who are paying attention to that. But I think it's when you've been a trusted partner for the world's leading companies for as long as we have been, there's a lot of safety and security and you think about the profile of our customer that buy. So there is a confidence in that. And then when you sit there and you think about the way BlackLine innovates amongst and between our customer base, our partners, staying close to what the auditors are requiring, what BPOs are trying to do. You bring all that together and you have that much more of a collaborative effort. That's why we announced the innovation hub that we said we were putting out, I guess, about a month ago, we announced that. But all of that is sort of giving them a high degree of confidence about what it is that we're doing. And again, I think we're hearing more and more frequently. We don't want to have to build this ourselves. We'd rather partner with a company like BlackLine. And so you're seeing that longer commitment because these things are not 1 year 1 and done kind of activities. The rollout, the building of AI isn't going to stop 12, 18, 24 months in the future. And so you're seeing a lot of that from a commitment perspective, as to our customers wanting to just partner and go on that journey with us. But Patrick, anything you'd add to that?

Yes, Chris, for all the reasons Owen just said, our RPO story is a very good story right now. Delivering 18% overall RPO growth, 12% CRPO growth year-over-year. It's indicative that our customers or new customers that we're landing, they're larger in nature. They're signing up for longer terms right out of the gates. And then coupling that with our existing customers that have been with us for years, they're coming up for renewal and they want to be with us for several more years. They want to continue the journey. They're intrigued by the innovation. They want to be part of this, so they want to partner with us. And per se go at it alone. So it's a very positive story underpinning our RPO growth rate and it's indicative that our existing and new customers want to be with us for several more years.

Excellent. Super helpful. And then I want to follow up on Verity. Within that early customer cohort that you have adopting the product. What are you seeing from a transaction volume perspective for those customers that are adopting it? And how does that compare versus customers that haven't quite gone there yet?

Jeremy, you want to take that question?

Yes. I think we are definitely seeing repeat engagement from customers using Verity. So that's extremely promising. And with the customers that are doing this, Owen mentioned the 90% time savings in things like preparations activities, that's really what's driving the repeat usage of these capabilities, the value being delivered. And so in the cohort, we definitely see people who are using very come back to use Verity again. for risk analysis, for narration capabilities for other analyses. And so that's what's really driving the usage and the transactions from these customers.

And our next question comes from Patrick Walravens of Citizens.

Great. Congratulations you guys on the progress here. Owen I would love to talk a little bit more about SAP, in particular, when you talk about the public sector opportunity with SAP, there's a couple of things there. I mean, I guess I don't usually think about the public sector and BlackLine because the public sector has kind of different accounting. And then secondly, I did notice that 1 of your SolEx salespeople moved to SAP focusing on the public sector recently, so I figured there's some connection there. But I'd just love to hear your thoughts.

Yes. So first of all, the relationship with SAP, in my view, just continues to get stronger and better. I think the collaboration around product road map, customer success work that we're doing around AI together are all things that, from my vantage point, I just -- I couldn't be more pleased with that. Obviously, we all wanted to go faster, but that's just par for the course. But I will say to you, 1 of the privileges of working with SAP is they're very professional and they're very thorough in what they do. And so sometimes, you might give up a little bit of speed for that professionalism and the thoroughness with which it's done, but it works particularly well. As it relates to public sector. I think we've been signaling now for a couple of years, our move to becoming an IL-2 compliant than IL-4. We've had some wins now in the public sector space. We are going to continue to invest in. We've had a very nice growing pipeline of opportunities with various federal agencies. Those in many ways, is a bit of a tailwind for us in the sense that the government is trying to modernize. And Pat, if you're as a taxpayer, I'm going to say this, the government really has a hard time producing any kind of audited financial statements. And so no matter the basis of accounting, you still have to get it right. And so that's where we've been able to find a real opportunity to grow into that organization. And so yes, so we're excited about that opportunity.

Okay. Are there any really big deals in the pipeline on this?

There's always big deals, Pat. I got to just get them across the finish line. The government spends big when they spend. But they have their killing season, as you know. So that's not until the end of the third quarter.

And our next question comes from George Kurosawa of Citi.

I'm On for Steve Enders. Maybe you could talk about this move that you discussed on the Verity side from POCs into more scaled enterprise production. How hands-on is that transition process? Is there a component of or deployed engineers or some similar construct that's required here? How turnkey is it? Maybe you could talk about what the learnings have been in customers making that migration?

Yes. So I can take that question. So in terms of adoption, obviously, with the earlier capabilities and in the agent capability, we've been fairly hands-on with our customers. But we've always had a forward deployed engineered style motion in terms of how we've used custom customer engineering resources to customize solutions to customize goal entry capabilities to fit the needs of businesses. And so we're taking the same hands-on approach with the earliest cohort customers adopting these agentive capabilities, but we are set up well to expand this to a forward deployed engineer motion in the future based on what we already do today with our customers.

Okay. Great. And then I did want to touch on the platform pricing cadence here. I apologize if I missed this earlier in the call, but I think if it was a 7% increase in percent of ARR in Q4 and in Q1. I'm sure this is going to be a bit of a lumpy metric. I'm just wondering if you could just comment maybe there's some seasonality, just the number of app bats you had and just the dynamics under the hood there and your confidence in doubling the ARR on that pricing model.

Yes. Thank you. We're very confident that we're going to reach 25-plus percent by the end of the year in terms of the amount of eligible ARR we have on the platform model. With that said, you hit the nail on the head. Our largest renewal cohorts are in Q2 and Q4, and Q1 is by far the lightest. So we did not expect it to be a linear path from 11 to 25-plus percent by the end of the year, and we're right where we thought we'd be coming out of what is traditionally a lighter quarter in this industry.

And our next question comes from Matt VanVliet of Cantor.

Maybe a follow-up on the SolEx partnership and then kind of a broader question on the overall go-to-market side I think coming into the year or beyond the black last year, you talked about maybe greater alignment with senior executives at SAP. Curious how much of that is sort of already coming through the pipeline versus being maybe a little bit back half weighted just given the seasonality of that business. And then wrapped around that, just sort of the execution that Stuart had talked about coming in to have more accountability on sort of a daily basis. How is that playing out on both sides of the SolEx and the rest of the go-to-market team?

Yes. A couple of things. So I'll say again, I think we're very pleased with the progress we're making in trying to team with SAP. As I think you know, I think they report something like their second and fourth quarter, they're very large, and I think 40% of their bookings come in the fourth quarter. So there is a bit of a tail to this, but you're not buying a big ERP systems for the moment the sales cycles are even longer than ours, as I understand it. But there's great alignment. The teams are working really well. I think you would see it in presales, the incentives are aligned the right way. And there's just more and more success stories that are being created amongst and between SAP system integrators, BlackLine and customers. And so those stories become very compelling when you hear them together because when you're spending the kind of money you have to do an ERP upgrade and then implement BlackLine, you want to make sure the is there. So I feel very, very good about that. I think the -- you look at the work that Stuart is driving on behalf of our team, I think it's going well. I think the 1 thing that we're learning from our own experience as our deal sizes get larger, there's a few more people around the table and making or that we understand the different constituencies. So would be a place that a year ago, we're not necessarily as much of a focus for us. We're having to spend more time with CIOs. Some companies now have the equivalent of a and AIs are. And so we're having to sort of learn how to work with some of that. And then obviously, the deal sizes are bigger. So they're just takes a little bit longer to work your way through that. But I think Stuart is the right guy doing the right things with this team to drive the success that we want. So I feel quite good about that.

All right, helpful. And then as you look at customers that are already on the platform pricing or maybe on the next list to potentially migrate over to that, is there any different margin structure that you're assuming in sort of year 1, year 2 of those deals that ultimately sort of maybe builds back up? Or how do those -- how does that pricing around both the usage of the platform, but also kind of encompassing the size of the organization and the complexity there, have a margin profile that maybe differs from the seat-based model?

Yes. So as we just talked about, we're about 13% of our way through. We look at our customer cohorts very carefully that are coming up for renewal in terms of who's eligible for the platform. in terms of what customers are most likely to adopt and then which customers are going to consume the platform and at what rate. We've been looking at data for the last year. And early on, but right now, we are not seeing any margin compression as a result of adopting the platform. The cost of delivery on day 1 is not that significant. And so we see the immediate uplift and then we're now monitoring the secondary element of the revenue generation of the platform, which is consumption. So far, based upon what we're seeing, we are not seeing margin compression. In fact, I believe if you see in Q1, we had our highest gross margin in years, and that was as planned. That's part of our migration completion to GCP. We still had some redundancy in data centers in Q1. And for the time being, we expect gross margin to expand throughout the year, and we're not seeing any data points that are contrary to that. But we will continue to closely monitor the impact of AI.

Our next question comes from Daniel Jester of BMO Capital Markets.

This is Kyle Aberasturi on for Dan Jester. It sounded like a solid quarter for both Verity and for platform deals. I guess just how do you see customers allocating resources between pure AI products and more broader digital transformation trends?

So I would say our customers are not just looking at buy AI for the sake of AI. I mean I think for our customer base, it's about being part of digital financial transformation journey that happens to have more power being provided because of AI, but people are just not buying cream without wanting the cake, if you will. So there's got to be a real foundation underneath all of this is as we move forward. And so I think that continuing to underline everything will be the complete platform cross record to report or invoice to cash then further powered by what the AI capabilities that Jeremy and the team are building. That's my experience with the market right now, but I'm going to -- I'm looking at both my other presenters here and seeing if they're hearing anything different from our teams in the field.

Yes. I think overall, AI, there's excitement about our road map and vision but it needs to tie to their overall objectives as an organization. And so it's really in support of the transformation objectives. BlackLine has always supported and accelerated. And AI is an accelerant to that. It enables that to happen more quickly and with less resources on their side. But ultimately, it ties to the transformation objectives we are already part of.

I think, Jeremy, so it ties to being able to fit into the control environment as well, right? Our customers need to understand that there's not going to be anything introduced into the control structure that's going to create an issue for them.

Okay. Great. And just a quick follow-up. The Middle East was an area of investment last year. I guess, just has there been any impact today hitting the business?

As they like to say timing and life is everything, right? So we -- as for those of you who don't know, really sort of opened up operations at the tail end of last year in Saudi Arabia. We had our first nice win in February, if I remember correctly. And then obviously, the war broke out in Iran at the end of February. So it has had an impact on the environment in the Middle East. We didn't have lots of big numbers built into our financial plan for this year. I think saying that Patrick and the team and I are watching very closely is the impact on Europe. That's the 1 area where we saw some slowdown at the end of the quarter that we're watching to see if there's going to be much more of an impact in that part of the world. as the troubles in the Middle East continue to unfold.

And our next question comes from Rob Oliver of Baird.

Great. You guys hosted a really cool AI event this quarter and some longtime customers that we've talked to over the years like Quest and others like Bristol-Myers were there. And as you talk about the usage ramp and Verity, maybe provide for us a sense or an update for -- as you think about the outlook for this year and the next couple of years, how that Verity usage ramps as you move towards your 27 targets. Within that call, it was fascinating because 1 of the customers was like, yes, we're all in on it. The other was like we're still dabbling. So just would love to get some more color around the customers that know you and love you, what they're doing with the AI components of the platform.

Yes. Rob, first of all, good to hear your voice, and thanks for the question. And these we have customers that run every end of the spectrum, right? So -- and whether they love it or not, there's still some governance that these companies have in place and how quickly they want to evolve with partly just to their own ability to digest it, part of it, just making sure that every Ts crossed every I is dotted as they move through the alphabet, if you will. And so the thing that we saw out of the first quarter again, which was important from my vantage point, as we may have taken longer to get everything into the market. But when it went, we had very, very high confidence that it was going to work. It was reliable, as trusted because our customers have already kicked the tires as many times as they possibly could. The auditors that sort of I won't use the word blessed, but had a high degree of confidence in it. And so I think that's the approach that we're going to continue to see. There's going to be some customers that army and his team want to experiment with us. And I guess maybe the way I would sort of describe it is, we've got customers that want to ride into Peloton, some of them want to be at the front of the Peloton. Some of them want to be at the back of the Peloton. They don't want to be in Group 2, right? So they don't want to have fallen away from the pack, but they're sorted some of them on a drift for a little bit of time just to see how things are unfolding. And I think 1 of the things that we are trying to do is take advantage of our industry capabilities and get some of these customers to talk to 1 another, that they're in the same industry sector so that they get a higher degree of confidence of what's being used, how it's being used and why they can rely on.

But Jeremy, please add.

That's also part of why we launched that AI hub. The -- Owen alluded to the fact that we have some customers who really want to be designed partners with us. and want to think about be forward leaning about how they expand usage of AI into their organizations, but also how they define it for finance and account discipline as a whole. And so that's really what the intent behind that hub and builds upon our narrative from our AI day, but it's really about pushing the envelope with these customers in a safe, governed and trustworthy manner and being able to design together with them as part of what the leaders in these spaces are looking to.

And our next question comes from Patrick O'Neill of Wolfe research.

Just a quick 1 for me. I wanted to ask about the mid-market churn? And maybe can you quantify the growth headwind attributed to that churn, both in the results and then maybe what's factored in the guidance? And then when that does subside, it sounds like towards the end of this year, how should we think about the potential for net retention to expand as we look into next year and beyond?

Yes, Patrick. So a couple of data points there. No surprises in terms of where we're going or the results from a customer account perspective. we've been signaling for well over a year now that there's going to be churn in the lower bid market. and we expect that to slow down in the second half of this year. We're tracking that cohort very carefully and feel very confident that, that number will trend down from a customer churn count perspective as this year evolves. It's a good data point to note that it is a headwind for lack of a return that we've baked into the guide. There's no surprises there. We've baked it into the plan. We saw this coming. For every customer that we land, the average customer size for new logo is over 3x the size of a customer we lose. So that gives you -- that's a very key data point, not just in terms of our success of the nature and size of customers that we're landing and landing on the platform, but it also is a good indicator in terms of the general size and nature of the customers that are leaving us. So as the year evolves, we would expect some expansion on DBNRR as well as GRR as we work through that cohort and enter 2027.

And our next question comes from Billy Fitzsimmons of Piper Sandler.

I want to double click, I was going to ask about kind of the demand environment outside of North America and the opportunity there came up in 1 of the prior questions. And in the answer, there was a commentary kind of around Europe and some of the macro impacts there that -- can we please double-click on that? What was kind of the impact there, if any, in 1Q? And what are you kind of seeing positive or negative in 2Q since that because it's come up in investor conversations about the potential for maybe elevated push up relative to other geos?

So first of all, broadly, pipeline in the business continues to grow at a very healthy pace all around the globe. So we're not really seeing a significant difference between 1 geography versus the other. And so that for what we are trying to do in the marketplace. That said, as we said, the end of March was a little bit less than we would have expected. And so some pretty large deals did get pushed out. I would say to you that business throughout North America looks very solid. Asia Pac, there's parts of that look really good. So for Japan, it seems to be doing well for us. And then Europe is okay. I think the thing that I worry more about than the war because that doesn't work its way through when businesses still need to implement BlackLine as we move forward is the tension -- the geopolitical tensions between the U.S. and Europe and what that might mean for us for infrastructure we have to build in Europe compared to what we have in North America now. So I know Patrick and Jeremy have been sort of modeling that out. If data sovereignty becomes a bigger, more pressing issue, then we're ready to deal with it. We know how to do it. We just obviously built something in Saudi Arabia. But that is the 1 thing that I am watching. I think we can work our way through the macroeconomics pretty well. But I want to make sure we also don't lose sight of is the geopolitical issues that could have an impact on investments we would need to make in the business maybe later this year or to '27 or '28.

Super helpful. Glad to hear about some of the momentum at specific geos like Japan.

Our next question comes from Adam Hotchkiss of Goldman Sachs.

Patrick, I just wanted to start with you. I think you mentioned the $1 million nonrecurring benefit to Q1. Could you just maybe help us understand that a little bit better what that was and why that's not recurring?

Yes, Adam, it has a little bit to do with the timing of implementations, the timing of delivery, it's onetime in nature. But I think, Adam, the key takeaway is even though we had $1 million of onetime benefits in Q1 from a top line perspective, we're passing along all of that into the guide less FX headwinds. So overall, we did not view it as a headwind to the update and increase of the guide for the full year. And of the $2.1 million beat, we're passing about half of that into the full year guide. The other half being an FX headwind from where rates were at the time we established the guide for the year.

Okay. Yes, that's helpful color, Patrick. And then, Owen, just any updated thoughts on win rates or the broader competitive environment? I know way down market, there are some AI native full-stack ERPs that are getting a lot of funding that are probably serving companies nowhere near the size of where you are. But curious, just broadly for the enterprise players and sort of where you stand, how that's going?

Yes, I'm going to say this, and I'm probably going to regret it in some ways, but it feels to us like our ability to compete at the enterprise, we've distinguished ourselves even more from our traditional competitor set. I think the robustness of which Germany has built, the completeness of the road map, the work that we've been able to do to improve time to value, provide more certainty around cost of ownership, continuing to be viewed as a very collaborative player as to what we do has been good to see in the enterprise space. And you can see that in our pipeline as it's growing. The number of opportunities isn't necessarily growing very large, but the dollar size is increasing nicely, and that's in the enterprise space, and we're pretty encouraged by the number of 7-figure deals that we have in front of us for this year and next year.

I'm showing no further questions at this time. I'd like to turn it back to BlackLine's CEO, Owen Ryan, for closing remarks.

Thank you, and thank you all for taking the time to listen to our call today and to ask questions about our company. We appreciate your interest in us, and we look forward to catching up and talking more soon. Thanks, everybody. Have a great night.

This concludes today's conference call. Thank you for participating, and you may now disconnect.

All right. Let's go ahead and get started here. Thank you, everyone, for joining. My name is Chris Quintero. I am the office of the CFO software analyst here at Morgan Stanley. And really excited to be joined by the BlackLine team here. We've got Owen Ryan, CEO; and Patrick Villanova, CFO. Thanks for being here, guys.

Thank you.

Thank you.

For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

So Owen, Patrick, maybe for the investors that are less familiar with the BlackLine story, give us a quick overview of the business. What are some of your core products, your core customers?

Okay. So our core products are really financial closing consolidation and then invoice to cash. And that's all run on a platform called Studio360. We've been in business, it will be 25 years this year, shocking. We serve 70% of the Fortune 100 and about 60% of the Fortune 500. And if you go to any major capital market around the world, we tend to have about half of the publicly traded companies that are in those markets, the larger ones in particular. We continue to focus on growing mostly through organic activities. And most of our innovation really comes through the voice of our customers, our SI partners, the BPOs who tend to run BlackLine in a back-office way and then the auditing firms because what we do matters to all 4 of those constituencies as we move forward.

Got it. That's a helpful overview. Let's jump right into AI. Clearly, a lot of investors are concerned about the terminal risk for a lot of software vendors. So from the BlackLine perspective, what do you view as your competitive moat, your key defensibility against some of these AI start-ups, large language model risk here?

If you've got 20 minutes, so I can give you the answer to all of this. Look, I think -- and we're doing a special day in 2 weeks for our investors and the analysts because they wanted to understand at a deeper level what's different about BlackLine versus maybe a marketing company or something like that. So we start with first is BlackLine is a mission-critical system for our customers. We've got about $60 trillion of market cap runs through BlackLine every day, not an insignificant number by any stretch. But people talk about being a system of record. Yes, we are that. But maybe even more importantly, we're a system of control for our customers, which you cannot underestimate.

We tend to do all our work through about 20-plus years, as we mentioned, the proprietary data that helps inform the decisions that our customers make. As Patrick will tell you, we live in a world of complete precision. Some people want to talk about deterministic versus probabilistic. All I know is we need to be 100% right. And that's really critical to our customers. Why does that matter? Because as a CEO, I sign a rep letter every quarter that says my financial statements are completely 100% right. My CFO does the same thing and the controller. You take on a tremendous personal financial liability, if anything is not correct. And so that's a big piece of reliability that matters for our customers. We've got 20-plus years of auditor trust and reliability.

One of the things most people don't understand is many audits are conducted where our customers give the auditors licenses to use BlackLine in conducting of a financial statement audit. We've built the platform to be more extensible and configurable based upon feedback from customers in the last couple of years that allow them to do what they need to do to sort of get the reporting and information out that they're looking for. We've embedded AI pretty much across the platform in all of our solutions. We've been rolling that out in the marketplace, had some really good nice uptake in the fourth quarter, and that continues so far in the beginning of the year.

And then you just get into sort of simple math, and I give an example of -- we have a customer that joins us last year. They got $65 billion of revenue. They pay BlackLine $0.5 million as a customer. And somebody walks in and says, well, we could do that for $300,000 or whatever and name your price. Well, okay, do you want to give up all the system security, reliability, the accuracy, the brand, the trust? We are both like an insurance policy and insurance policy for our customers and a CFO pretty quickly goes, yes, we're not going to mess with that no matter what a CIO might say that he or she can do pretty quickly. So I can keep going on and on and on, Chris, but I think we feel very comfortable and confident that we have the right people doing the right things based upon what our customers, partners, BPOs and auditors expect and want and have come to trust and rely on in the marketplace. And that makes us very different and unique than other companies in the office of the CFO.

Yes. So a really critical -- mission-critical system. You need to have the 100% accuracy, the auditability, the risk compliance, all that stuff needs -- is a must-have for your customers. Let's talk about the opportunity front for AI. How are you all bringing AI capabilities to your customers? Maybe talk a little bit about Verity and that launch and how it's going.

Yes. And we'll tag team on it. I mean, obviously, we've been working on AI for a number of years. Therese, our founder, she would sit up here on stage with me the last couple of years and talk about if there's a company with 20,000 accountants, I want to take out 18,000 of them, probably not the nicest way to sort of communicate that, but that was sort of the messaging. And so we've been on that journey. And we see that in the productivity from our customers over the last couple of years. It's why we've been moving so quickly to get away from sort of a user-based model to a consumption-based model because that attrition based on the way customers were using BlackLine more effectively.

What's been interesting is when AI started to really get sort of mind share, we were very quick, we believe, to sort of try to figure out how to begin to embed that both from a generative perspective into our solutions. And so we've done that. We released a number of things over the last year or so, but then maybe the most critical thing was then moving into agentic capabilities, which we announced in the fourth quarter of last year.

We've got some really big enterprises that are using some of our agentic capabilities, for example, around Verity Prepare, which helps you do lots of your reconciliations and things of that nature through Verity Collect, which will be out in the market very shortly. And so -- again, the things that we're doing are the things that our customers have asked for, and it meets their standards. It meets the standards of not only the CFO and the controller, but the CIO and increasingly the Chief Legal Officer, which is the other aspect that's been interesting with the advent of AI. But you live this much more closely every day.

No, I do. And something you touched on there, Owen. Let's talk about probably one of the most important things in the room, how are we monetizing all this. So I think we sat in this very room last year today, almost the same exact day, and we had just launched our new pricing model, our platform pricing model. We launched it in North America in Q1. We launched it in the rest of the world in Q2. And so an update as to how that's going and how that fits into the bigger AI picture is very important.

So what we saw as proof points when we launched this model was an immediate uptake, a successful uptake with our new logos. For customers that weren't used to paying for software on a user base or seat-based licenses, they loved it. They said, "Oh, I can deliver this to the entire office of the CFO. I can deliver this to anybody within my organization, and it's the same price. I don't have to worry about adding accountants, subtracting accountants. I don't have to worry about taking 1 accountant out of California and putting 2 in India and getting charged more money." It was a great conversation, a great handshake with our new logo customers.

Now as we messaged to the market over several quarters there, it was a little slower on the uptake with our existing customers. A lot of our existing customers were fully implemented, fully adopted. They didn't care about unlimited users. If anything, they were reducing users. This is why we launched this new pricing model. We saw a phenomenon long before AI that as customers became better adopted when they came up for a renewal and they faced a 3% to 5% CPI increase or whatever is in their contract, they would find a way to reduce their license count by 3% to 5%. It became a revenue-neutral transaction, which is obviously not something that we wanted.

So we knew years ago, we had to move to a platform pricing model. We did a ton of work on it and launched it in 2025. Now what we saw second phase of this with our existing customer base, it really took off in the fourth quarter because it became not just unlimited users, but it became product-led. During our annual conference in September, we brought Studio360 to the masses. We showed it to everyone. There were thousands of individuals there, existing customers, new prospects, and they were really impressed by it. And the reason for that was Studio360 brought together our 4 primary solutions that Owen noted earlier.

Our core financial close, invoice to cash are the 2 largest. You also have intercompany and financial reporting and analytics, pretty much our consolidation tool. But nevertheless, it brought a single source of truth, a single data layer to our -- all of our solutions. That was the first captivating moment. Then for AI to be successful, you have to release agents into an environment where you have a single source of truth. We know of customers out there or noncustomers that have 40 ERPs and they're trying to do it themselves. And they spend a lot of -- a lot of time and capital trying to build their own agents.

And what happens when they release an agent into an ecosystem of 40 ERPs, they get 40 different answers. So there's the value of Studio360 as the platform, one single source of data, one single source of truth. And then we said, okay, if you want access to these agents, if you want to become even more efficient without compromising accuracy, which is paramount to our profession, then you got to move to the platform pricing model. And what we saw in the fourth quarter was that we had of eligible ARR, 4% of eligible ARR was on our platform model going into the quarter, 11% emerging from the quarter. And that was mostly from our existing customer base that wanted this new product, that wanted this innovation, that wanted to test it. So that's key.

Now there's a second element to it. We said it on our earnings call in February. Where do we expect that number to go for 2026? Well, we expect it to be at least 25% by the end of '26, giving a range of 25% to 35% on our platform model, which yields at least a 10% uplift on average at least, and it's product-led, which is key. This is something that the customers want. This is a pull for AI. And when you're dealing with accountants and finance professionals that are risk averse, you need them to pull, you need them to adopt, you need them to want it. So we're very excited about that. And here's the key takeaway here.

By the end of this year, we'll have at least 25% of our customers on a platform pricing model. Well, if you remember, 30% of our customers already are on a strategic product that is consumption-based. So by the end of 2026, at least 50% of all of our revenue and ARR will not be seat-based dependent whatsoever. It will be eliminated. And we're very excited about that. We know the industry is moving away from it. We are ahead of the curve. And by the end of this year, those seats will -- over half of our revenue will not be at risk for seats going away.

Yes. No, you guys have definitely been quite ahead of the curve on and move away from that seat-based model towards more of a hybrid type of pricing model here. Patrick, you mentioned a little bit 10% uplift on that kind of like-for-like switch from the old model to the new one. How should we think about the consumption element of that, how that ramps over time?

Yes. So there's 3 monetization events that occur here. Step one, you move to the platform pricing model. That's at least a 10% uplift compared to your standard inflationary uplift. That happens immediately, that's built in your subscription, and that only goes up if your revenue as a customer goes up, you move up in price. If you're successful, we're successful. That's monetization event, number one.

Number two, before we even get to consumption, one of the encumbrances to cross-selling our 4 solutions was that they were in silos. They operated great and they automated great within themselves, but they didn't talk to each other. Studio360 eliminates that. It brings a data layer naturally flowing between our 4 solutions. And when you're a CFO, that's what you want to hear. You don't want 4 silos, you want a single source of truth. What you also want to hear is a CIO, which are becoming more and more prominent in our buying decisions. That CIO no longer has to support 4 solutions. They're supporting one platform. And that's key from an internal cost and effort perspective. So the second monetization event is it opens up and removes encumbrances to cross-sell.

And then three, what you touched on, Chris. So our agents. We have a couple of agents out there in the ecosystem right now that we give away as part of the platform uplift, a small volume. It's de minimis in cost to us, but it's very important to our customers because for everything that Owen said, customers have to test those agents. They have to run them in parallel for multiple quarters against their current manual processes to make sure that the outcome is identical. They have to get sign off from their internal auditors. They have to get sign off from their Chief Legal Officer. They have to get sign off from their external auditors. They have to get multiple sign-offs and get comfortable with it themselves that, that agent is producing the same output as their traditional manual processes.

Once that happens, which in a SOX world, I can say this, I used to be the Chief Accounting Officer, it takes a couple of quarters to do that. You got to see this happen several months, several closes in a row. Once that happens, you're now feeling comfortable like, "Oh, I'm using this agent on a test basis for a handful of transactions. Now I can release it into the entire ecosystem and let it perform for all of my transactions." And once that agent gets above a certain threshold, the giveaway threshold and start hitting transactional levels, we start charging for that. That's monetization event #3, which you'll start to see -- show up in our forward-looking metrics at the end of 2026 and appears revenue in '27 and beyond. And that is growth above just the platform price. That is predictable subscription revenue. And as they consume more, they move up those tiers.

Yes. A big concern from investors is when you move from that seat-based model to a new type of pricing model, is that really net positive? Is it net negative? Is it neutral? You all are talking about a 10% uplift here. So I'm just curious like why are customers willing to pay that extra 10%? What's the value they get from moving over to this new model?

Yes. I think it's a couple of things. Again, we can tag team on this. One is because everybody gets to use it now, right? So we're not fighting that constant battle, right, raise the price 5%, we're going to reduce 5% of the seats. Over the last couple of years, we have really found our innovation genes again. And so the amount of stuff that we're bringing out to our customers is something they really want. And so when they see what they can get and then what they see what's on the road map and then they see the collaboration we do to build more capability, that gives them a lot of confidence.

I mean, that's the beauty when you've been around for 25 years, and you can -- you have a reputation of delivering what you promise. And so our customers are finding that very attractive. So the cost is not really the hurdle that you might be what you think it is. It's less of a battle than we had anticipated.

It's -- in addition to what Owen just said, why are our customers embracing this so far? It's 2 things, which in my mind are synonymous. It's delivery of value and it's delivery of outcomes and that's what customers ultimately pay for. They don't care what it costs to us. They call -- they care what they're willing to pay, what it's worth to them. So without compromising quality, precision and accuracy, these agents allow accountants to be more off the hands off the keyboard, more efficient, faster close.

And then those professionals, those accounting and finance professionals internally that have so much talent, you're unlocking that talent to either scale better, potentially reduce headcount or repurpose them to do other things within the business that are more analytical that maybe AI can't do yet. So if you're a CFO or a CIO, you look at what these agents are capable of doing and how they deliver these outcomes and deliver this value so much more effectively and efficiently, while you pay more for that. And that's why they've embraced this new model.

Yes. No, it resonates with me because when I was at the conference, I was speaking with one of your customers, and she was telling me that she's the only one with a BlackLine license, but there are other people in the accounting group that basically tell her what to put into the system so that they don't pay for the additional seats. But now because of the new model, they're able to...

You figured it out...

I figured it out.

Like sharing a password and...

Yes, exactly my Netflix account until they figured that out. Great. Let's move away from the pricing model. Owen, you came into the CEO role 3 years ago with a clear mission to turn the company around. So maybe for those investors who aren't familiar with the strategic changes you've been making over the past 3 years, what have been some of those? And what's been the net impact of those today?

Yes. Look, it's hard to believe it's 3 years. Time goes fast when you're having fun. I think the key things that we really made a conscious series of choices on where we wanted to play in the marketplace. So we've been very clear that we wanted to move much more upmarket and get out of the lower end of the mid-market. So very focused on upper end of middle market, enterprises and mega enterprises. And again, an example of how that sort of played out is the move from 50% of the Fortune 100 to 70% running on BlackLine is sort of a testament to the sort of the focus that we've driven there.

We made a lot of choices around industries and how we would approach that. So very successful in big places like an oil and gas industry or retail, banking, insurance, like we're really very focused now, much more by industry. We've made some very clear choices from a geographic perspective. So it's pretty much sort of like the G7 marketplaces and really making sure we can be successful there. We made choices around the ERPs that we would sort of work with and partner and then those that we wouldn't focus on.

So it was a lot about, honestly, Chris, taking this company in what I would call choices out versus choices in. We were trying to be everything to everybody, and you can't do that. And so we've been very clear about the execution of how we would run the business. We wanted revenue growth to far outstrip the cost of people, and we've done, I think, a pretty good job of getting that disconnect finally in place. We made choices around using offshore capabilities versus onshore. California is an expensive place to operate. No criticism of those of you that reside in California. But man, it's expensive. And so moving to places like India and Poland, Romania, we have about 25% of our workforce there from just a few years ago when it was low single digits. So we've made sort of all those strategic choices. But maybe more than anything else, we got back to innovating around the product.

And to Patrick's point before, I think we lost our way about what was most important, and that was outcomes for customers. And so I'd like to say, I know it upsets some of the investors, we're not in the business of selling software, we're in the business of delivering outcomes. And over the long term, that is the right thing for us to go do. And we've got that maniacal focus on customer success in a way that I think we had lost our direction on. And so we feel very good about that. And you'll start to see that not only manifest itself in gross bookings growth, but reducing that churn and attrition because we're really getting back to helping our customers be successful in achieving the value of what BlackLine brings. And so if we do that, keep doing that, we're going to drive the kind of success that we want for our customers and our shareholders.

Yes. It's Software as a Service. Everyone focuses on the software piece and forgets about the service piece.

Yes. Good point.

So a lot of that hard work has culminated now to this past quarter, seeing some really strong acceleration across your key metrics. ARR, 9%; CRPO, 13%; RPO, 23% year-over-year. And you're guiding next year to an acceleration on top line, 9% to 10%. So curious, what have been those key drivers that have really driven that acceleration you're seeing right now?

Yes. Look, I think it's a few things. When it comes to net new logos, it's being able to demonstrate the value of Studio360, the platform, what it can do, the interconnectedness of all the solutions that we have. It's the innovation road map and people are excited about that. Our partners are incredibly important to us. So it's nice for us to say how good we are and what we do, but it's even better when an Accenture or Deloitte or an E&Y or an IBM or KPMG advocate on your behalf. And so we're seeing sort of that. The pipeline, we have -- as you guys know, it's a long cycle. But we see the pipeline that started to build at the end of '24, build throughout '25. It's still building in '26. We saw the success of that finally closing in the fourth quarter. It gives us a lots of confidence of 20-plus percent gross bookings sort of in this upcoming year and continuing on that path.

And then it's getting back to our existing customers and getting them to get back on that finance transformation journey. We've gone back to every customer we have and looked at how well are they using BlackLine. And if they're not using it to its potential, how do we get back in there either through our own teams or with our partners to reinvigorate that journey. So we're having what I feel like is pretty good success on that. And then, of course, we now have more to bring to them. So 2, 3 years ago, I think our quota-carrying reps and others would say, we don't have enough innovation. I think now they don't say that any longer. Now it's like, wow, how do we get everything? How can we be better and able to bring this to the market? So we've got all of that kind of coming together in the right way.

And again, now taking a consulting mindset to this is so as a consultant, you don't get hired for your next project unless you've done the last one really well. And our organization is really, really fixated and focused on delivering the outcome. What did we say the ROI would be to that customer? And how well are we tracking on driving that for you? And that's what's giving them more confidence in the capabilities and buying bigger programs with us. I think the other thing, Chris, is we've been much more selective on the customers who we want to do business with.

Very early on, I ask our teams to figure out when you're talking to a customer, are they really serious about doing a transformation? And the answer is no, get out. Because we don't want them because they're not going to be successful and stick. It's like finding the right customers with the right executive sponsorship and leadership and we sat here a few years ago, and we talked about we wanted to move up in the office of the CFO. Why? Because the CFO and the controller care about digital finance transformation much more than somebody that might just be a user. And so we've had a lot of success in that regard. So those are some of the things.

Yes. You also brought forward your medium-term target of 13% to 16% total revenue growth, now pointing towards 2027 versus 2028 before. So what really gives you the confidence to do that?

You want me dive in on this one?

Well, you can in a second, but one word, execution. Simple as that. We have a nice strategy. Now it's execute, execute, execute. We've got a really good leadership team doing what they need to do. They work very well together, and we understand what we're trying to drive. But you can go through the math of it.

Yes. Yes, no problem. So if you look at what we did in 2025, a lot of the building blocks were put in place in 2024 and strategically in terms of what was going to grow this company. And we entered 2025 at about a 7% growth rate. And we exited 2025 based upon the metrics that you just shared there, Chris, all triangulating around 10-plus percent growth, leading indicators. So we came into the year at 7%, we exited at 10%. And we were able to achieve that turnaround, that inflection point that we signaled to the market at this time last year by a lot of the platform pricing. That's great, but still only 11% of our eligible ARR. There's a ton of opportunity there.

Our average selling price is up. We're landing bigger. We're landing with more products. We're landing with more mega and enterprise accounts. Those were some of the growth drivers, but those weren't all of them. And so that's why when we look at the investments we made in '25, just like we made investments in '24 around pricing and innovation and moving upmarket that benefited '25, we made investments in '25 such as FedRAMP, more innovation around agentic AI. Those things have not materialized yet, which is great because that's -- those are more growth levers for 2026.

So if we took a 7% to 10% in 2025, that's how we take it from 10% to 13% plus going into 2027. And that's how we're going to go about doing this. We still have a ton of opportunity with that remaining 89% not on platform pricing. We have a ton of opportunity in monetizing agentic AI. FedRAMP, while we won a couple of accounts, there's much more opportunity in the future, much larger opportunities in the future. So we pulled a few growth levers in '25, but not all of them, and that's why we expect to see compounding growth through next year.

Yes. I wanted to ask on the new customer front. We've coined this term the ERP super cycle, talking about the companies that are on, on-premise SAP, for example, and are moving to the cloud over the next few years. Curious kind of what you see within that pipeline within SAP, which obviously you've had a closer go-to-market relationship with, but also the other players in the space, Oracle, Workday.

Yes. So our pipeline, we've been clear about this, I think, at our last Investor Day with SAP has grown very nicely. Again, going back to November '24, when we sort of went through a reset in that relationship, trying to figure out what the path forward. I couldn't be more pleased with the progress we've seen in the last 15, 16 months on what we've been trying to do, not only on the product side, but in the go-to-market and customer success, top-to-top leadership and things like that we're working on now with sort of a joint proof of concept around their jewel AI with BlackLine AI capabilities. And so we've definitely seen a nice large uptick in that pipeline. But interestingly, it's still proportional.

We keep growing just as quickly in the rest of our portfolio, whether they're working with Oracle or Workday. Now we have been deepening that relationship with Workday. We expect that to continue to go forward. But of all the things we talked about of why BlackLine matters in the enterprise space, the mega enterprise space is our brand reputation is really strong compared to anybody else in that regard. And so if you want the best choice, first choice, safe choice, only choice, you come to BlackLine when it comes to that financial close capability. So we're very confident, as Patrick pointed out, about where we see the growth coming from, and it will be across all of the mega ERP players.

Yes. Let's shift over to margins. Operating margin expanded to 22% in '25 versus 19% a year ago. You're guiding to about 24% in 2026. So where do you expect to continue to get that additional operating leverage from?

So we can tag team this together. Look, I think the biggest cost in our P&L is people. We sort of shared at the end of the year, our revenue growth in the last 3 years is about 34%, 35%. The cost of the number of people that we've added was about 2%. We've made a significant shift of resources from high-cost geographies into lower-cost geographies. Every hire that happens in this company, I know some of you will smile when I say this, I approve every one of them. And it's a lot easier to figure out how to use AI than it is to come -- ask me to approve a hire. And then if you're going to do a hire, can we do that in a low-cost geography?

And so we've been very thoughtful about making sure that we're walking the talk with AI. And every executive leader has specific goals that they need to achieve around their use of AI before adding people. And there are certain parts of the company like quota-carrying reps. We're not in the world where we can sell enterprise software without people going out there. But in every area that Patrick drives from a back-office perspective with all those other back-office leaders to what the marketing team is doing to what customer success is doing, to what engineering is doing, we are figuring out how to use more and more AI to drive that performance that we need. And if we need to add people before we put them in high-cost geographies, can we look at low-cost geographies. So that will drive some of the expansion, but you've got much more that you deal with on this.

Yes. No, I think you touched on a lot of it. I mean, at the end of the day, our P&L is mostly people costs. And so the more we can move to offshore low cost or the more we can replace with AI, we evaluate that on an ongoing basis. And that's something -- that's not new. In 2021, we were a breakeven company. And we've been evaluating this for years to get to a 24% margin already. And that there's definitely more opportunity in future years to continue to expand that margin.

But if you think about it, AI, we're talking about in the realm of finance and accounting, but it was here from a customer service perspective years ago. It was here from an augmenting engineering and making them more efficient years ago. It was here from a case deflection standpoint years ago in terms of marketing and developing marketing material, and we did that. We embraced that. We were able to hold down headcount, hold down costs and inject technology in those areas to make our engineers more effective and more efficient to have a higher rate of case deflection, so we didn't need as many heads for customer support to be -- to generate more pipeline more aggressively with the same marketing spend by augmenting it with technology and AI.

We've been doing this for years. Now we're just crossing that next threshold in terms of other opportunities to continue to expand our margins. One thing though that is not specific to people and AI is our Google Cloud migration. We've been up here talking about it for years. Happy to report as of the first quarter, we completed that migration. 100% of our customers are on the Google Cloud. The redundancy of server costs is gone -- will be gone starting in the second quarter. So you will see a gradual expansion of gross margin as well coupled with all the things that Owen and I talked about from a people cost perspective.

Last question here, a similar kind of topic, capital allocation, driving shareholder value. How do you guys think about that every day?

You didn't ask me how frequently just I want to know what we're doing. So look, we have ongoing conversations with the Board as what's the best way to deploy our capital. Right now, we still think our best deployment is investing in the business organically, those things that we need to do. If we can find attractive tuck-in acquisitions like we did with the WiseLayer, we'll certainly pursue that. And then we're going to continue to buy back shares in the marketplace. And all the things you would expect us to be doing on behalf of our shareholders, we're trying to drive that. And I don't think we'll ease up on any of that in the near term.

Awesome. I think we can end it there. Thank you, Owen. Thank you, Patrick.

Thank you so much. Great being with you again.

Thanks.

Good day, and thank you for standing by. Welcome to the BlackLine Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, SVP of Investor Relations, Matt Humphries.

Good afternoon, and thank you for joining us today. With me on the call are Owen Ryan, Chief Executive Officer of BlackLine; as well as Patrick Villanova, Chief Financial Officer. For the Q&A portion of today's call, we'll also have Jeremy Ung, BlackLine, Chief Technology Officer, joined us.

Before we get started, I'd like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans, objectives and expected performance, in particular, our guidance for Q1 and full year 2026 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 mid of this call.

While we believe any forward-looking statements made during the call are reasonable, actual results could differ materially as these statements are based on our current expectations as of today and are subject to risks and uncertainties, including those stated in our periodic reports filed with the Securities and Exchange Commission, in particular, our Form 10-K and Form 10-Q. We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

All comparisons we make on the call today relate to the corresponding period of last year, unless otherwise noted. Unless otherwise stated, our financial measures disclosed on this call will be non-GAAP. A discussion of these non-GAAP financial measures and information regarding reconciliations of our historical GAAP versus non-GAAP results is available in our earnings release and presentation, which may be found on our Investor Relations website at investors.blackline.com or on our Form 8-K filed with the SEC today.

Now I'll turn the call over to BlackLine's Chief Executive Officer, Owen Ryan. Owen?

Thank you, Matt. Good afternoon, everyone. Over 2 years ago, we committed to a fundamental transformation of BlackLine. We have been executing a methodical multiyear plan to reposition this company to drive revenue growth back into the double digits while expanding operating margins in line with our multiyear financial targets.

It began in the fall of 2023 when we laid out a new strategic vision to evolve from a suite of solutions for the controller into a unified intelligent platform for the CFO.

By early 2024, we implemented a new operating model to support this vision. We modernized our go-to-market engine, introduced industry-specific sales motions, we focused our efforts on larger mid-market, enterprise and mega enterprise customers where our value is most differentiated and shifted to a partner-first approach with the world's leading system integrators and SAP.

Throughout 2024 and into early 2025, we completed the build-out of our new leadership team to drive this strategy forward. As we enter 2026, our 25th anniversary, we believe the business is structurally stronger than it has ever been, supported by a healthy growing pipeline, a disciplined and cohesive team, an amazing partner network and our most comprehensive product portfolio to date, we are well positioned to execute our strategy and extend our market leadership.

Today, we are pleased to report that those intentional choices are translating into tangible results. We have established BlackLine as a critical partner for the world's most complex organizations, now serving approximately 70% of the Fortune 100, up from 50% in 2022. This validation supports our strategic goal of elevating our conversation within the new office of the CFO.

We saw broad-based success in the fourth quarter, driven by our platform strategy and strategic products. By combining the innovation of Studio360 with the commercial model aligned to value and not seats, we delivered our strongest booking quarter and year in our history, with full year bookings growth of 22%. We believe this performance validates the investments we made to grow our pipeline, modernize our go-to-market engine and accelerate innovation. We finished the year with higher close rates and solid demand, confirming that our execution is gaining traction.

We saw notable strength within our installed base, with nearly 3/4 of our bookings coming from existing customers. BlackLine customers are realizing immediate value from our platform, which allows them to fully leverage our latest innovations without user constraints. They are also investing in the future, specifically our Verity AI agents. This is translating directly into predictability and visibility. Remaining Performance Obligations, or RPO, grew 23%, driven by platform adoption and continued success driving multiyear renewals. Simply put, customers are making long-term contractual commitments to BlackLine as their strategic partner in the office of the CFO.

While our expansion motion shows solid progress, we remain clear eyed on retention. We believe Q4 was the peak of our churn and attrition cycle driven largely by the expected impact from our strategic choices in the lower middle market. However, our underlying business remains healthy.

To underscore the strength of our core, our enterprise customer cohort maintained a revenue renewal rate of 95% and also delivered a net revenue retention rate of 107% this quarter.

We are actively bending the arc on retention through deliberate structural changes. First, our shift to a platform model and success with multiyear renewals is fundamentally changing the nature of our customer relationships. We are moving away from transactional subscriptions based on seats towards long-term strategic partnerships anchored on business value. Second, we have optimized our customer success model leveraging technology and aligning compensation internally and with key partners to ensure the ecosystem is financially incentivized to drive adoption.

As we move through the first half of 2026, we expect the lower mid-market headwinds to subside, combined with these structural initiatives, we have high confidence in an improving retention profile in 2026.

We are also proving that trust, partnership and innovation command a premium with new customer deal sizes up 35%, driven largely by enterprise wins. We're seeing solid growth in the number of customers paying over $1 million in ARR, up 20% to 85. And notably, customers paying over $250,000 were up 14%. This confirms that when we focus on transformational outcomes rather than features, customers invest more deeply in BlackLine.

We continue to balance this acceleration with discipline. Even as revenue growth accelerated to 8% in the quarter, we delivered a 25% non-GAAP operating margin along with a 25% non-GAAP net income margin.

This efficiency is by design. Over the last 3 years, we have grown revenue by approximately 34%, while our total head count has grown by only just 2%, adding 40 net new roles. We believe we have effectively broken the linear relationship between head count and revenue growth, establishing a model that allows us to scale more efficiently.

Importantly, sales productivity continues to improve, driving a notable 30% decrease in customer acquisition costs this quarter. Additionally, with our Google Cloud migration now complete, we are beginning to stand down legacy data centers unlocking further margin potential and opportunities for strategic investments.

While the team and I are pleased with this progress, we are far from satisfied. We expect to continue to drive revenue growth back into the double digits along with further operating margin expansion in line with our multiyear financial targets.

Let's dig deeper into how we are winning. First, platform strategy. We have aligned our commercial model with our platform vision. Our shift to platform pricing is the mechanism that unlocks the value of Studio360. It aligns with how CFOs want to buy, focusing on outcomes and value not seats.

In Q4, nearly 3/4 of all new bookings leveraged to our platform with existing customers also accelerating their migrations. This platform first approach changes the customer relationship. Once customers standardize on BlackLine as their financial operating system becomes the natural foundation for broader transformation. This is helping to drive demand for our strategic products, which represented 33% of sales.

Intercompany and invoice to cash each had record quarters and years as customers trust us to deliver end-to-end outcomes. A prime example is Brown & Brown, a long-standing customer who expanded their financial close relationship with us by adopting our full invoice to cash suite. In 2026, we are moving towards a standard initial offering for all new customers that includes reconciliations, tasks, matching, journal risk analyzer and consolidation underpinned by Studio360 and AI, all on platform pricing. We expect this approach will drive larger initial deal sizes, enhance customer stickiness and create more opportunities to cross-sell and drive AI adoption.

Second, enterprise momentum. We are winning deals with complex global enterprises by speaking their language. Our focus on industry-specific outcomes is delivering results, allowing us to demonstrate unique operational and domain expertise that differentiates BlackLine in the market.

In the fourth quarter, we signed multiple large platform deals driving average new enterprise deal sizes up 41%. Nearly every one of these deals focused on how customers can leverage our Verity AI offerings.

Let's look at a few notable examples. In the consumer sector, we signed a 7-figure ACV deal with a global leader in food services. Operating in an industry defined by massive transaction volumes and decentralized operations, they needed to centralize visibility across thousands of locations. They leveraged our full financial close solutions with Studio360 and platform pricing to drive that efficiency.

In the oil and gas industry, we secured a large enterprise win with National Oilwell Varco where our deep industry expertise and platform approach were critical to drive their digital finance transformation.

In technology, we also signed a platform deal with a global leader in memory and data storage. Facing the financial complexity inherent in global manufacturing and supply chains, they chose BlackLine because they wanted to see value today, but also have a framework to adopt AI going forward.

This initial win validates our core value proposition, and we are already engaged in strategic discussions to expand their footprint with our intercompany solutions in Verity AI.

And in Financial Services, we resigned Invesco a former BlackLine customer who had moved to a lower-cost ERP competitor. They recognize the need for automation, scale and auditor trust that BlackLine provides.

Third, partners. Our partner ecosystem is a critical differentiator, driving demand and extending our global reach. In 2025, every single deal over $500,000 was one with a partner and our two largest deals of the year were direct partner referrals. These firms are now evangelizing Studio360, our Verity AI offerings and our strategic products, helping us secure major wins at companies like Raytheon and National Australia Bank.

Fourth, SAP. Our golden architecture strategy is beginning to deliver results. SolEx bookings performance was strong, highlighted by new wins with Siemens Energy and Caterpillar and a large expansion with Hitachi Energy, proving that our joint pipeline is maturing into significant commercial value.

Coming into 2026, I believe our alignment with SAP has never been stronger. We secured full product qualification for Studio360, unlocking the ability to sell directly into SAP's installed base of advanced financial close customers through our AFC integration. We are currently engaged with SAP leaders to explore integrations for SAP's [ JUUL ] copilot with BlackLine Verity agents to create a single unified digital workforce for finance. The objective is to create a seamless user experience while establishing a commercial framework to directly sell and monetize our Verity agents through a strategic proof of concept. Our shared goal is to define the future of the AI-powered autonomous close.

Critically, we have aligned BlackLine's KPIs as one of the measures of the compensation plans for both BlackLine and SAP customer success managers, ensuring our post-sales teams are financially incentivized to drive joint customer success.

We are also deepening our channel strategy in the public sector by partnering with SAP and a leading public sector reseller to accelerate growth and adoption in this large market.

And last, we have expanded globally, launching dedicated coverage in the Kingdom of Saudi Arabia with a combination of SAP, our local team and our new local Google Cloud [indiscernible] has already helped us sign our first deals in the region.

We expect our deepening and broadened collaboration with SAP to continue to drive momentum throughout 2026 and beyond. We are seeing the early stages of an important evolution in the office of the CFO. And as leaders look to move beyond simple automation toward intelligent AI-driven orchestration. The requirements for success are clear, AI in finance and accounting must be accurate, transparent auditable and secure.

We believe BlackLine is uniquely positioned to lead because we have built our platform on three essential pillars: data, context and agency. Together, these form a proprietary intelligence layer that allows BlackLine to build on its reputation and expand its market leadership.

The foundation of our AI strategy is our data and connectivity for over 20 years, BlackLine has served as the centralized hub where the world's most complex organizations turn raw data into financial truth. The scale of this continues to grow.

Last year, we processed tens of billions of transactions across our platform. We ingest data from thousands of disparate ERPs, subledgers and third-party financial systems. We cleanse it, sanitize it and normalize it, creating a unified financial data set that acts as a single source of truth.

To extend this further, we continue to expand connectivity via APIs and connectors, we have launched new connectors for Microsoft Dynamics 365, Oracle Fusion and Workday and are leveraging deeper integrations with Snowflake and upcoming integrations with Databricks. This allows us to harness data from across the enterprise, creating the high-quality fuel required for trusted AI.

We supplement this with intelligence and context. A generic model can summarize a document but lack the specific human and rich processing data needed to reconcile our balance sheet or manage industry-specific accounting challenges.

BlackLine has two decades of operational context from thousands of customers including historical reconciliation decisions, justification narratives and review and approval actions along with successful and failed transaction matches and historical exception handling and auditor interactions. This proprietary intelligence allows us to deliver context to wear predictions and automation, providing the necessary contracts to turn generative text into financial truth.

And importantly, our AI operates within a framework of proven governance with embedded controls, audit trails, segregation of duties and institutional experience that gives us the brand permission to be the trusted choice in the market.

We offer a managed digital workforce via our Verity agents, which are prepackaged, pretrained and fully auditable with clear chain of thought. We have architected our platform so that every action the AI take leaves a digital footprint identical to a human user.

This directly addresses the single biggest barrier to AI adoption in finance, the trust gap. CFOs cannot sign off on financial statements generated by a black box. By ensuring every AI agent leaves a standard immutable audit trail, providing the clear team of thought that auditors require we transform AI from an unacceptable risk into a compliant asset. This allows our customers to pursue productivity gains without compromising their controls environment. We are leveraging these three pillars to evolve our platform from traditional automation to Agentic workflow orchestration. By embedding intelligence directly into workflows, we deliver the outcomes customers prioritize, speed, accuracy and continuous audibility.

We're seeing the impact in the field. Nearly every deal in Q4 involved discussions around Verity and our innovation road map. Customers are focused on how we are developing AI for them and how it naturally fits into their unique processes to deliver ROI quickly and safely.

We are also seeing growing adoption of our AI with customer usage of our AI capabilities more than doubling quarter-over-quarter with nearly 20% of all customers now using at least some form of our AI features. We have an accelerating product cycle this year with an emphasis on launching and monetizing our Verity AI agents, a key part of our platform strategy.

First is already to prepared, this is our AI-powered reconciliation agent that we previewed in Q4 and is now in early access for our platform customers. Several large enterprise customers are already using it. With even more planning to adopt this in Q1.

Customers can elevate their users from preparers to reviewers offloading repetitive work and freeing accountants to focus on high judgment analysis. This helps to bridge the talent gap and allows customers to handle growing complexity without adding headcount.

Next is Verity collect, planned for Q2 and this agent automates many of the manual tasks of the collections process like predicting payment behaviors and autonomous dunning. The excitement from our partner ecosystem is notable as this targets high-volume repetitive work where agents thrive, directly impacting working capital.

And finally, Verity accruals, this agent targets hydro [indiscernible] areas within the accruals process. Unlike standard rules-based automation, this agent interprets context to manage complex estimates. We are actively selling this today and it pairs perfectly with our existing journal solutions to drive automation into the last mile of the close.

We look forward to sharing a deeper dive into these capabilities at a virtual investor session in March.

Beyond commercial products, we are using AI to transform our own delivery. We have released a new category of implementation agents for our partners and professional services team. These agents standardize the engagement process from qualification to architecture and testing, rapidly accelerating time to value and ROI for customers. Internal usage of AI is also allowing our engineering teams to accelerate product delivery and further enhance and expand our existing solutions across financial close, intercompany and invoice to cash. This transformation goes beyond our products by modernizing both our technology and our delivery models, we are building a significantly more agile and efficient company.

We are increasingly excited and confident in our ability to win in this rapidly shifting market and I want to thank our partners and my fellow BlackLiners for their extraordinary efforts.

With that, I'll turn it over to Patrick to discuss the financial results and outlook in more detail. Patrick?

Thank you, Owen. Our fourth quarter financial results and metrics reflect the progress we've made and the confidence we have in the business as we focus on delivering in 2026 and into 2027.

Turning to our financial results this quarter. Total revenue grew to $183 million, up 8%. Subscription revenue grew 8% with services revenue growth of 17% due to accelerated customer [ go-lives ] and implementations a direct result of our improved services delivery engine.

Annual Recurring Revenue, or ARR, was $702 million, up nearly 10% and with an approximate 1.5 point benefit from FX in the quarter. We saw material strength with customers doubling down on their commitment and partnership with BlackLine in the quarter, driven by platform adoption and continued success with multiyear renewals. As a result, total RPO grew 23% to $1.1 billion. Additionally, current RPO accelerated further to 13%, reflecting current market demand.

At the end of Q4, platform pricing ARR was 11% of eligible ARR. This is ARR that excludes SolEx and public sector. This was up from 4% at the end of the third quarter, illustrating the market's initial acceptance of our new commercial model and the momentum we are seeing. Calculated billings grew by over 9% in the quarter. Our trailing 12-month billings growth, which helps normalize for quarterly variations improved to 9%.

Our customer count of 4,394 remains in line with our expectations as we move through the end of our strategic shift further upmarket. Despite this headline number, we saw net customer growth versus the prior quarter and year in our enterprise customer base. Our revenue renewal rate in the fourth quarter was 92% with continued impact from lower middle market churn. Additionally, we saw some expected churn associated with external M&A this quarter, which impacted this rate by about 2 points.

Net revenue retention for the quarter was 105% and reflecting strength from expansion with existing customers, particularly those moving to our platform. Notably, NRR for enterprise customers saw a material improvement to 107% this quarter. This reflects the health of our core business and our success in cross-selling into our largest accounts. The strategic products attach rate was healthy again, representing 33% of sales this quarter. This growth is a direct result of our go-to-market teams, leveraging our platform to drive larger deals. Demand was notably strong for intercompany and invoiced to cash, which both had record years.

We had a strong close to the year with our SolEx partnership as we are starting to see our joint efforts materialize in bookings. At the end of the quarter, SAP customers accounted for 26% of revenue.

Turning to margin. Our non-GAAP subscription gross margin remained strong at 82%. Our non-GAAP gross margin was approximately 80%, as mentioned earlier, we have completed our GCP migration and expect to see improvement in gross margin as we move through the year. Non-GAAP operating margin was nearly 25%, driven by better productivity across the business, especially within our GTM teams, which showed material improvement in productivity and lower customer acquisition costs this quarter.

Non-GAAP net income attributable to BlackLine was $45 million, representing a 25% non-GAAP net income margin. We delivered operating cash flow of $27 million. and free cash flow of $20 million, largely driven by variability in working capital. For 2026, we expect free cash flow growth in the mid-teens, with free cash flow per share growth in the high teens.

Regarding our balance sheet, we have approximately $778 million in cash, cash equivalents and marketable securities versus $896 million in debt. As a reminder, our 2026 notes are due in March of this year. and we expect to retire them with cash on hand. This will decrease our fully diluted share count by approximately 1 million shares and is incorporated into our guidance.

Finally, we continue to execute our capital allocation strategy. In the quarter, we returned approximately $34 million to shareholders through the repurchase of 632,000 shares. This brings our full year 2025 total repurchases to over $235 million or 4.5 million shares and underscores our confidence in the long-term value of our business.

Turning to guidance. Our outlook for 2026 reflects a prudent approach we are confident in the momentum we are seeing with platform adoption and the launch of our Agentic AI offerings. Our guidance assumes a steady ramp as these growth levers continue to gain traction in the market.

For the first quarter of 2026, we expect total GAAP revenue to be in the range of $180 million to $182 million, representing approximately 8% to 9% growth. We expect non-GAAP operating margin to be in the range of 18.5% to 19.5%. And we expect non-GAAP net income attributable to BlackLine to be in the range of $31 million to $33 million. Or $0.44 to $0.46 on a per share basis. Our share count is expected to be about 74.5 million diluted weighted average shares.

And for the full year 2026, we expect total GAAP revenue to be in the range of $764 million to $768 million, representing approximately 9.1% to 9.6% growth. We expect non-GAAP operating margin to be in the range of 23.7% to 24.3%.

And finally, we expect our non-GAAP net income attributable to BlackLine to be $172 million to $180 million. Or $2.37 to $2.48 on a per share basis. Our share count is expected to be about 75 million diluted weighted average shares. Owen?

[Operator Instructions] And our first question comes from Chris Quintero with Morgan Stanley.

Congrats on the acceleration here. I know it's been a long time coming. I wanted to ask about RPO and the customer adds above $250,000, I thought those were the two most interesting metrics in the quarter. Can you unpack the drivers there and what really drove that kind of inflection on those two?

I think on the RPO, it was obviously, the multiyear renewal strategy that we've had in place, which is working out pretty well. In addition to a lot of the newer customers we brought in have tended to have longer contracts. So we've seen both of those coming together, which has been very positive development. So I think it tells the story of us really trying to take customers on a digital finance transformation journey, not just looking for a quick fix. And so we're certainly seeing a lot of the buildup in regards to that. And so that was the first piece of it.

Yes. Owen, to elaborate on that. We're landing bigger with our platform pricing model and having product-led growth. So we're seeing a significant increase in our average selling price and our new customers. And more importantly, those customers are signing longer-term contracts because they want to be part of the finance transformation and partner with us over multiple years. You combine that with our strategy to extend renewals longer and those two factors. More importantly, our product-led growth is what's driving that 23% that you're seeing there, Chris.

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

Yes. Look, I think Jeremy and I will tag team this together a little bit. But certainly, there's a lot of opportunity to help take out some of the mundane work that some of the accountants go through. And so we are certainly seeing that, that is becoming more and more part of the conversation with our customers.

As you think about how our AI footprint has grown so far, over the past year. We certainly saw more of a pickup in the use of Generative of AI with our customers, and we expect now to see that shift more into Agentic AI.

I think from my experiences so far, our customers are being very measured and methodical on how they're thinking about the use of AI. And so there's definitely lots of cost savings that we see are there, but it's also the value and the accuracy and the timeliness of what we think we're going to be able to provide for our customers going forward.

Remember, Chris, the way we've gone about building our AI capabilities was really with world-leading companies out there as well as the world's leading auditing and accounting firm. So we think we've got the right model that will help our customers achieve more savings for what they're trying to do. But Jeremy, anything you want to add to that?

Yes. The increasing adoption from AI specifically you saw we call out earlier is really resonating with our customers. They're excited about adopting it, but they understand that they need to do so cautiously with respect to policies and controls. So there's a lot of interest, there's a lot of excitement. It's a validation that there's work and time to be saved from our AI solutions.

Our next question comes from Steven Enders with Citi.

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

I think from what we're seeing, again, we talked about more of the Generative AI versus Agentic. And so you can think about things like our journal risk analyzer are already flagged, the ability to sort of help summarize documents, those things where you still have a pretty good level of human interaction to review and understand what's come out without just sort of accepting it. So that's sort of the biggest piece of what we've seen.

But again, I think interestingly, after we released our visions around Verity Prepare at BeyondTheBlack in the fall, there was a lot of interest in that, and we saw that really manifest itself in the fourth quarter and now in the beginning of this year.

So there's definitely a lot of interest. There are some -- still some complexities, though, Steve, is just to be clear. It's not just what the CFO and the controller want to do, it's the CIO as well as the Chief Legal Officer. So that trial for working through as companies are trying to figure out how quickly to move forward with AI, particularly given the requirements that they have to deal with, with their auditors and the SEC and things of that nature. So -- but Jeremy, again, anything you want to add?

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

Okay. Great. That's helpful. And then I guess maybe just on the guide dynamics I think primarily looking at kind of the margin profile, just anything that we should kind of keep in mind for maybe the 1Q margin dynamics versus the rest of the year or maybe some kind of expense timing dynamics as we look at how '26 might play out?

Yes. So I mean, if you look back over the years, Q1 has always historically been probably the lowest operating margin for this company, and there's a very explainable reason, for one, payroll taxes, we bear the highest burden like most companies in the first quarter of the year, as you pay out year-end bonuses and commissions.

And then the second element to that is we do our sales kickoff in January of each year around the world. and that carries a cost to it as well. I think more importantly, though, like if you look through throughout the rest of the year, there is a very high confidence model to reach 24% operating margin with that margin growing throughout the year. So this is not unlike any other year, and you'll see expansion of that margin notably in the next 3 quarters.

Our next question comes from Alex Sklar with Raymond James.

Great I want -- maybe one more AI question for me here. Just in terms of what are you seeing in terms of defined AI budgets at some of your enterprise customer base, how incremental of an area that for BlackLine to happen to? And how are you positioning your solutions, maybe not just the Verity one, but your solutions broadly to capture those budgets?

Yes, I'm not sure I can tell you that it's necessarily a defined budget. But I think in the conversations that we're having and our teams are having in the field is if we can show real demonstrable value for what our AI can bring than the CFOs and their teams seem to be able to find the budget for what they're looking to accomplish.

So I think the hurdle for us is really being able to demonstrate a very strong ROI along with the reliability, trust accuracy and security that our customers have already come to expect from us. [indiscernible] time Jeremy [indiscernible] again. I don't know what you're seeing when you're out talking to us?

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

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

Yes. It's really been embedded in the motion over the last year. If you recall, we launched platform pricing in North America in the first quarter, and then we introduced it to the rest of the world in the second quarter. And as you could see from where we went in the fourth quarter, that acceleration is really picking up. So when you think through the guide for this year, SP640721348 We're -- we expect to see about 25% to 35% of our customers on platform pricing by the end of this year. I do want to be clear, though, our largest renewal cohorts throughout the year are in the second and fourth quarter. So that's not going to be linear throughout the year. But by the end of the year, that's where we expect to be, and that's what's embedded in the guide. .

Our next question comes from Patrick Walravens with Citizens.

Great. And congratulations, you guys. So Owen, do we address the whole issue of creating shareholder value? And maybe do it from the perspective of if you're a long-term shareholder, can you just talk about how BlackLine thinks about it, what governance mechanisms you have in place, how open you are to considering strategic options as they come our way. I think that would be super helpful for everyone.

Yes, Pat, as you can imagine, those are the issues that the Board is dealing with. And I think they well understand their fiduciary responsibilities take that very seriously and we'll exercise their responsibilities appropriately.

For the management team what I talk to them about is we can only control what we can control. We are not necessarily have the ability to influence the stock market other than through the performance that we deliver on behalf of our customers and then the benefits, hopefully accruing to our shareholders. as appropriate. So I don't know I can say much more about it than that, Pat. I think that's really I'll say at this point.

Okay. Fair enough. And then -- so I did not -- and I think I sent you this yesterday. It was interesting to me that people are so devalue about how AI is going to impact SaaS companies like you, yet interestingly, one of the competitors who went out of business yesterday was a tiny company. And so if you look at -- we're obviously in the transition, the last transition was from on-prem to SaaS on from SaaS to AI. Who do you think makes it through that transition in the best shape? And what are the characteristics you look for or that we sulfur? And then how does BlackLine fit into that?

Okay. I think you start with a very simple premise, which is what is the -- do you have a mission-critical platform or not, it's got to be beyond basic features and functionality. Do you really have the domain knowledge that your customers require. So for us, it's in the office of the CFO as well as understanding the particular industries that we serve our customers with you have to have a trusted, reliable brand, your systems have to be secure. You have to deliver accuracy, efficiency, intelligence all those things matter. You have to have the data that's proprietary to what you're trying to do with your customer set. Somebody told me, I'm not sure I know the exact number, but we're approaching upwards of 1 trillion transactions that we have in our own data that we use to help figure out things with our customers.

So I think those are the things that matter more than anything else. You have to have a partner network that is very comfortable because many of our customers rely on the professional opinions of implementation partners of what are they seeing in the marketplace and things of that nature. So all that factors together.

And I think for us, Pat, we're in business 25 years. I think the original slogan of BlackLine was something around trust is in the balance. And I think that's still true today. We want to make sure that we do things that are secure, reliable, accurate intelligence our customers, and that goes a long, long way. And I think one last thing that I've observed in the last couple of years that we've really focused on within BlackLine is to be very client-centric, customer-centric and understanding where they were trying to get to and then working to create solutions that support that. So all of that is, I think, what matters today, and I think that's where we're going to thrive as an organization.

Our next question comes from Adam Hotchkiss with Goldman Sachs.

Great. I wanted to ask Pat's question in a bit of a different way. When you're hearing from your customers about the broader landscape of technology offerings and office of the CFO, what is your process for ingesting customer feedback for features that they've seen either from smaller companies, upstarts, companies like LLM, financial analyst assistance. And how do you go about prioritizing which investment areas make the most sense for putting them into your product and driving ROI for the business?

I think Jeremy and I will tag team this a little bit. But I think there's a couple of pieces to it. One is -- as you know, we work with the world's leading companies, right? So we spend a lot of time with them on site, getting their feedback, both on the existing product and what they'd like to see. Good feedback from them from what they're seeing in the marketplace. So that all factors in. We have a very strong customer advisory board that meets on a regular basis that helps inform us our partners are amazing in helping us to understand what they're seeing in the marketplace that helps influence what we do because they tend to see things not just company specific, but across an industry or cohort in a way that no individual company can sort of look at.

There are things that we do -- internally, we have a competitive intelligence group that tracks and tries to understand what everyone else is doing out there from maybe a more traditional competitor to upstarts and then we're looking to see how does our road map compare to that.

So if we haven't figured out before somebody else has, how do we become a fast follower to make sure that there's no gap that somebody else gets ahead of us on something. So those are all the things that we're trying to do. But Jeremy, I'm sure there's more that you've certainly experienced.

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

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

Yes. Look, I think there was really a couple of things that made WiseLayer are very attractive for us and also sort of say 1A and 1B, 1A was the quality of the people that they had. I mean, really good, smart, innovative people, doing some very, very interesting things. And then the second was the quality of the product, and we actually were using a product, and we could see the value that it was bringing for our own team.

And so it took the combination of what they were trying to accomplish in the marketplace with how we could see the usability of that product and how it fit into the things we were doing across our own financial close capabilities, particularly sort of marrying this with our journals capabilities all made it very, very attractive. And it helped to accelerate a lot of what we were trying to do. And so from the build versus buy perspective, we're always thinking about can we build it, how long will it take? And we really thought this was a very good accelerant to what we were trying to do in the marketplace. But Jeremy, we're up to our eyeballs in this one. So it was Patrick [indiscernible].

Yes. Just to elaborate even further. Our own internal accounting department did a proof of concept. And to Owen's point, really impressive technology, very impressive team. It was just an overall very impressive company. .

And just to provide a little more clarity around the numbers of that, the contribution to the guide that was provided earlier today is de minimis. This is largely a technology buy. You'll see in our 10-K in a couple of weeks that the purchase price was a little under $25 million. But there's a lot of enthusiasm internally in terms of what this company, what this technology can do and how we're going to incorporate it into our overall platform.

I'll just add, is rapidly demonstrable AI ROI to our customers. [indiscernible] value driven by AI solution, and that was extremely exciting.

Our next question comes from Patrick Schulz with Baird.

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

Yes. So what we're seeing is twofold here and very excited about the acceleration that we've seen in the uptake in platform pricing. And yes, there was a slight pause last quarter as some customers thought through if they want to add additional users to the traditional per-seat pricing or if they want to move to the platform.

What we're seeing is with our customer base, the value is becoming more obvious to them. The product that we're delivering to them has uptake and they're willing to pay that additional price per year or base fee going forward.

That fee is an immediate uplift on day 1, and that's the first source of monetization as we move through this platform pricing transition.

And then the second piece of that, as those customers access more and more of our agents through the platform, that will be the second level of monetization on a consumption basis. So it's an immediate uplift on day 1 as they adopt the platform, and then it provides future revenue growth through consumption as they use more and more of our agents.

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

Yes. Just to provide a little color there. I know we landed this quarter at 92% retention. But one thing that was highlighted at the enterprise level that was 95%. And I believe we signaled last quarter that we had some M&A that was coming up in the fourth quarter, and that was also a 2-point headwind. So when you look at our enterprise customer base, exclusive of these one-off M&A transactions, that retention rate was 97-plus percent.

So when you think through our guide for this year and into the future, we see a transition of improvement throughout the year, and that return to the mid-90s overall retention rate, inclusive of mid-market.

Our next question comes from Daniel Jester with BMO Capital Markets.

Great. Maybe another one on the platform. In the fourth quarter, I think if I caught this right, you said 75% of new bookings chose the platform I guess for the 25% that didn't, are there any sort of commonalities and as you shift to a more standardized bundle next year, what considerations do you have about sort of meeting customers where they are versus the platform approach?

Yes. I think Pat, you can take the second half of that question, I'll take the first half, which where I say there's any commonality to it as I've tried to look through and understand it with our sales team. I think we still have some customers that were a little bit of a larger size, but still trying to work their way through what digital finance transformation was truly going to mean for them.

As an organization, as you can imagine, you have companies from A to Z is to spread out where they are. And so for us, I think one of the things we've tried to be smarter about is selecting the right customers and part of our evaluation is are these customers that will, in our view, move to the platform over time. And so we're willing to invest in them, work through that with our partners typically.

And so that was sort of underlying it. It's just customer where they were at as an organization, how much they thought they might want to be able to fight off and start with at the very, very beginning. But for us recognizing we truly believe that they would go on a digital finance transformation journey. Cover the second half for '26 and how you're thinking about it?

Yes. And another part of that story for that 25% that did not take up platform pricing within new logos, you still have the lower mid-market and mid-market contingent there, where maybe they're not ready for this level of finance transformation and delivery of a platform. And to be clear, that was something that we assumed and have been messaging over the last year that we knew long term, the uptake of this model would lay largely in the upper mid-market and enterprise space. So that was in line with our expectations.

As we think through 2026, and I think you used to comment how we meet customers where they are. I think the one difference going to 2026, which is embedded in the guide is the platform itself and the agents that are built with it and the value that they provide to our customers. as customers see that. And as they see the value that is delivered through the platform, they would be -- they -- it's built into the guide that they are more willing to uptake our new model. So we expect that to be north of 75% going through 2026, and that is built into the guide.

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

Yes. So as you think about gross margin throughout the year, it's a similar story to operating margin, but for different reasons. We did complete the GCP migration in Q1, and there were some redundant costs as we shut down any redundant servers. And so what you'll expect to see or what you will see is a generally expanding gross margin throughout the year. and an overall improvement in gross margin for the full year.

I know where we realized the GCP migration has garnered quite a bit of attention, but there's other elements within gross margin as well, such as improved case deflection, through alternate technologies or AI, which is driving down our cost to serve. So you will see, as we messaged over the last year or 2, generally improving gross margin throughout the year.

Our next question comes from Matt VanVliet with Cantor.

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

Yes. I think it's a good question. And believe it or not, Stuart, not even here technically a year yet. I think, on Wednesday or tomorrow hits his 1-year anniversary. I think a lot of heavy lifting was done this past year and even part of the prior year where we've made a lot of improvements in the underlying technology, the use of that technology, getting rid of things that didn't matter in moving the organization forward.

In one of the stats we talked a little bit about -- we've added 40 people over the last 3 years or 2% drive 34% revenue growth. But interestingly, if you look underneath that, almost 60% of the BlackLiners in the company are new. So we've done a lot of transformation to people in the organization. That's no disrespect to those that were here previously. It's just what we needed to move to that next level. We needed to bring in a new cohort of individuals.

I don't want to speak for Stuart and the leadership team. But I would say I think they feel pretty good, by and large about the leadership they have in place around the globe at this particular point in time. There's been a lot of changes made. We've made a lot of upgrades in the individual quota-carrying reps, the BDRs, customer success, all of that has been part of the transformation. I don't know that you're ever done because you're always continuing to try to upgrade in that regard. We've done a lot of work around our business value architects and things of that are presales.

And so I feel pretty good about it, but I recognize we're never completely done. And I think the one thing I'm continuing to focus on, so we just did a sort of quick internal pulse survey for all of our people. And a lot of really good feedback on the organization. The biggest thing that they're continuing to sort of push us on is further enabling them to keep driving all the things we're trying to do in the organization because the level of innovation that's coming out of Jeremy's team and product and tech is pretty amazing. But then how do you make sure the rest of the organization to keep up with that and bring it into the marketplace.

And I'm very encouraged by what we saw over the past year and pretty confident as we head into this year, but that will be the thing that we'll keep driving.

Our next question comes from Robert Simmons with Rosenblatt.

I was wondering how much revenue contribution are you assuming from your agent patterns this year? How material can they be to your ECC bookings?

So over the course of the year, the primary revenue contribution coming out of our Agentic offerings and other AI offerings is the uplift that we referenced earlier today. in terms of moving to the platform in that day 1 uplift.

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

Got it. That makes sense. And then I believe you talked previously to 20% for us growth in '26. Are you still expecting that kind of growth this year?

Yes. I think yes, we are.

And our next question comes from Billy [ Fitzsimmons ] with Piper Sandler.

Appreciate it. Maybe I'll ask about any color on what the guide implies from an SAP contribution perspective? Or anything notable to flying within that pipeline any significant upticks or volatility in activity there?

I think we've made good progress with SAP. We're very, very proud of what we've been able to accomplish over the last couple of years. as you've seen a sort of steady state of SAP customers being roughly about 25%, 26% of our revenue.

I don't think you're going to see that materially change in the upcoming year. We've got a very strong pipeline. We're seeing a lot of progress with what we're doing. But I think interestingly, we're having really great success through non-SAP customers as well.

So I don't think you should expect to see much of a shift in that mix of SAP versus non-SAP over the course of this year. That said, we're going to keep doing everything we can to drive that partnership to be as successful as we possibly can on behalf of our customers and our shareholders.

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

I just thank you, operator, and thank you all for taking the time to listen tonight. Look forward to catching up with many of you this night in the next couple of days to answer further questions. So everybody, take care, and we'll talk soon. Thank you.

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

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Third Quarter 2025 BlackLine Earnings Conference Call. [Operator Instruction] As a reminder, this conference call is being recorded.

At this time, I would like to turn the conference over to Mr. Matt Humphries, Senior Vice President, Investor Relations. Sir, please begin.

Good afternoon, and thank you for joining us today. With me on the call are Owen Ryan, Chief Executive Officer of BlackLine as well as Patrick Villanova, Chief Financial Officer. For the Q&A portion of today's call, we'll also have Jeremy Young, BlackLine's Chief Technology Officer joining us.

Before we get started, I'd like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans, objectives and expected performance, in particular, our guidance for Q4 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 these 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-K and Form 10-Q. We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

All comparisons we make on the call today relate to the corresponding period of last year, unless otherwise noted. Finally, unless otherwise stated, our financial measures disclosed on this call will be non-GAAP. A discussion of these non-GAAP financial measures and information regarding reconciliations of our historical GAAP versus non-GAAP results is available in our earnings release and presentation, which may be found on our Investor Relations website at investors.blackline.com or on our Form 8-K filed with the SEC today.

Now I'll turn the call over to BlackLine's Chief Executive Officer, Owen Ryan. Owen?

Thank you, Matt. Good afternoon, everyone. Today, I will detail the changes we have made across our business that are beginning to deliver tangible results.

Over the past 2-plus years, we have methodically rearchitected our leadership team, our go-to-market engine and our technology and operational structures. That foundational work is now largely complete. These changes give us greater confidence that we can deliver accelerating revenue growth and margin expansion as we exit this year and move into 2026. But first, let's start with this quarter's performance.

We delivered another solid quarter of improving execution. Revenue growth increased to 7.5%. We achieved a non-GAAP operating margin of 21.4% and a free cash flow margin of 32%. Patrick will provide a more detailed discussion on the financials shortly.

The strength this quarter was from new customer acquisition. New customer bookings were up 45% and the quality of these wins is evident with the average new deal size more than doubling by 111% and the median new deal size up by approximately 50%.

New customer bookings mix accounted for 41% of overall bookings. This is not just about closing more deals, is about winning larger, more strategic platform deals often against our biggest competitors.

Let me put this into perspective with some examples. Through our direct sales efforts, we secured our largest ever total contract value deal with a leading global commercial real estate services company. This deal took 2 years to close and was multifaceted, with intercompany serving as an entry point and includes a multiyear expansion across our financial close suite, leveraging Studio360 and our new platform pricing.

We directly landed another new logo with a Fortune 20 company who chose our entire financial close suite, Studio360 and our platform pricing model, replacing existing tools and solutions. This was a great example of perseverance and leveraging past success as the CFO's previous experience with BlackLine translated into a meaningful new win.

And in the insurance industry, we won a multi-solution deal with Accelerate, a leading middle-market specialty insurance exchange, looking for a scalable platform across both invoice-to-cash and financial close, the customer move forward with BlackLine recognizing that a platform approach with Studio360 was the optimal solution to support their future revenue growth versus remaining with multiple legacy vendors.

On the partner side, our SolEx channel performance is improving. We closed mega company deals this quarter with Coca-Cola Europe Pacific Partners and with Boots U.K. Limited, proving the strength of our golden architecture with SAP.

A key driver in many of these wins was our new platform-based pricing model, which accounted for nearly 3/4 of new customer bookings and is seeing solid international adoption after only 2 quarters.

Our strategy is not just about winning in established markets, it is also important to unlock new growth opportunities. We have continued to make progress within the public sector. Despite the federal government shutdown, our pipeline continues to grow and we successfully delivered the production instance for our sponsoring agency in October. We anticipate completing final testing by mid-December and are on track to receive final FedRAMP approval in early 2026.

Now turning to our existing account base. The interest in our Studio360 platform, new pricing model and our Verity AI offerings created some noise this quarter. We are seeing 2 dynamics play out as we see more customers evaluate or adopt platform pricing. First, as we succeed in delivering higher levels of automation, customers can achieve their outcomes with the need for fewer licenses, which is leading to user attrition.

Second, we saw several large customers pause user ads to instead engage in deeper, more strategic discussions about moving to Studio360, platform-based pricing and our Verity AI offerings.

Our platform pricing model is designed to decouple our growth from a simple seat count and align our revenue directly with the value we deliver. While this strategic transition will take time to work through our installed base, we believe the outcome is clear and more committed customer base providing more predictable value-aligned revenue.

Although these dynamics created a slight headwind to net revenue retention, we view it as a leading indicator of a positive transition. In fact, the most telling indicator of long-term customer confidence came for our renewal activity, along with our solid platform pricing adoption. Importantly, the mix of multiyear renewals has increased to represent over half of all renewal bookings this quarter, demonstrating that customers are buying into our long-term vision and locking in their partnership, which increases the predictability and durability of our revenue.

Finally, the planned churn from our strategic deemphasis of the lower end of the market is nearing its conclusion. We expect this headwind to be largely complete in the first half of next year. These outcomes are not an accident, they are the direct output of the foundational transformation I mentioned earlier. With much of this foundational work now complete, I want to detail the 3 pillars driving these outcomes.

First is our go-to-market engine. Much of our success this quarter comes directly from the methodical work we have done to re-architect our go-to-market engine for scalable, efficient growth, focusing on 3 key areas.

We have invested heavily in the tools and the processes our teams need to win. Our entire sales motion is now powered by modern billing, prospecting, contracting and CRM systems that remove friction and provide better insight. For example, our experience with a new AI-powered prospecting tool has shown that a BDR can nearly triple their pipeline generation. All of our BDRs will now use this tool to more quickly create and qualify opportunities.

We've also transformed our marketing efficiency. Our teams are leveraging new digital campaigns and tools to drive a significantly higher ROI on our spend. In fact, despite a decrease in aggregate marketing spend since 2023, we have seen strong growth in pipeline generation through the end of Q3, which is up approximately 50%.

And while it's important to leverage new technologies and reengineered processes, it comes down to people. With new leadership has now established across the globe, we've actioned a more rigorous performance management program, elevating the bar and adding seasoned sales professionals. This focus is already paying off. Rep productivity is improving. And by the end of 2025, we expect it to improve by nearly 30% versus last year.

These coordinated efforts are delivering clear results. As I mentioned, rep productivity is up and importantly, our competitive win rates, especially in takeaways approved again in Q3. We believe this is direct evidence that our Studio360, platform pricing and improving go-to-market execution are enabling us to win more in the market.

The ultimate outcome is clear. We are building a more productive growth engine that costs less to operate. We expect these changes will drive a 10% improvement in our customer acquisition costs in 2025 and even greater improvements next year.

Second is our progress in product and technology. We have modernized our technology stack to support a future scale, efficiency and AI-powered innovation. It starts with infrastructure. A critical milestone is the near completion of our multiyear GCP migration. I'm pleased to report we only have a few customers remaining before we can fully decommission our private data centers.

Finishing this project will unlock significant operating leverage and provides a modern, scalable foundation for our future innovation. This serves as the foundation for our Studio360 platform, as the central nervous system for modern finance, its power begins with a unified data layer. Powered by our partnership with Snowflake, this layer is now leveraged by 90% of our customer base for advanced reporting in less than 1 year. This helped us achieve an approximately 80% cost reduction in data storage.

The real game changer for Studio360 is our progress in open connectivity. Our platform was architected from the ground up to be ERP-agnostic and our Studio 360 integrated capability extends his vision far beyond ERPs to third-party financial systems. This ability to rapidly connect to any data source can allow customers to realize financial transformation much more quickly.

We're also seeing good momentum with our ERP connectors. Our Oracle Fusion Connector is already live with over 50 customers and our Workday and D365 connectors are already being used by paying early adopter clients. This success is now unlocking the full potential of Studio360 for our large portfolio of Oracle, Workday and Microsoft customers.

This powerful platform infrastructure is enhancing our entire solution portfolio from our newest technology for our most established products. The performance improvements are dramatic. For example, our new big data matching solution built on this modern stack delivers a 98% reduction in match times and handles nearly 30x the data volume or our previous solution, which we see as tangible proof of our ability to deliver at any scale.

We are also accelerating the delivery of new innovation. Our high-frequency reconciliation solution was adopted by 10 customers shortly after its general availability in Q3 and is already helping build a multimillion-dollar pipeline. And this just isn't about new products, we are also driving product-led growth within our core. For established solutions like Journals, we've introduced new self-service capabilities for several common use cases, allowing customers to realize value faster and at a lower cost.

And importantly, this unified trusted data ecosystem is the essential fuel for our Igentic AI capabilities named Verity. Now I want to spend a moment on this because in a world of intense AI hype and uncertainty, it is critical to understand why we see AI as a significant opportunity that deepens our competitive advantage. Our moat is not built on a single attribute on a powerful combination of our proprietary data and our deep expertise in delivering trusted, auditable solutions to the office of the CFO.

First is our expertise and trust and auditability. In the office of the CFO, Black Box AI is a nonstarter, trust, transparency and auditability are paramount. Our entire platform was built from the ground up to be a system of record with a complete unbroken auto trial.

Our approach is validated by our recent ISO 4201 certification for responsible AI which formalizes our commitment to governance, risk management and human oversight. In a world of increasing regulation, we view our deep, culturally ingrained expertise in building auditable enterprise-grade systems that finance leaders and their auditors trust is a massive competitive advantage.

And second is data, AI models are only as good as the data they are trained on, and we believe our data is unique. It is not just that we have data from over 4,000 customers of all sizes across all industries and all geographies, is that we have the historical financial and operational data set for our customers going back to the day they started with BlackLine.

This proprietary data set represents the accumulated knowledge of what thousands of companies have done to close their books and manage their financial operations. We believe we are sitting on a wealth of process-specific data, which we are only at the early stages of utilizing. This can allow us to deliver unparalleled value. We can provide industry-specific benchmarking that shows the customer how their processes compare to their peers and where they can improve. We are able to train our AI models on the most intricate cases by industry in a secure, auditable way because we have the real world historical data to do so.

This combination of proprietary data and our leadership in trusted auditable systems is precisely why we believe we are positioned to win with AI in the office of the CFO. And this is just not a theoretical advantage. We are translating this directly into product reality. We began deploying Vera, our conversational AI to our customer base in October, just one month after its debut at BeyondtheBlack.

With Vera as the supervisor of our agentic workforce, we are launching a suite of powerful agents to execute high-value tasks. For example, we already prepare our agent for account reconciliations has shown they can deliver even higher levels of automation for customers in a trusted and auditable manner. Soon, we will deploy VeritoCollect to deliver agenda capabilities to our invoice to cash customers, automating customer outreach and accelerated cash collection cycles.

These initial agents are the first step in our broader strategy to address the full spectrum of financial operations. Future releases will target other complex areas across record-to-report and invoice-to-cash, including agents focused on high-volume transaction matching, variance analysis, remittance automation and on-demand financial analysis.

In parallel, we are executing a proof of concept with SAP to ensure the seamless technical and commercial integration of our AI-powered solutions into their ecosystem. This is a critical step in aligning our platforms and preparing to monetize our joint offering for our shared customer base.

And finally, our focus on innovation and AI also extends to the implementation process. Our efforts to reinvent the implementation process are already delivering significant results. In Q3, the number of customer go lives increased by nearly 70% year-over-year and 17% sequentially. This is a powerful proof point of our team's improved execution and directly contributed to our services revenue this quarter.

More importantly, it means our customers are realizing the value of their investments faster. We are also applying our AI strategy to go to the next level. We are preparing to launch implementation agents designed to automate and standardize the most common phases of deployment. We will begin piloting these agents with customers later this month before scaling them globally in the first quarter of 2026.

Our focus on efficiency extends across the entire business and is organized around 2 key initiatives, creating a more efficient operational structure and leveraging AI to drive internal productivity.

We have further adjusted our cost base for greater operating leverage. We have aggressively optimized our global footprint by moving headcount from high-cost to lower-cost locations.

When I joined as co-CEO, our workforce was overly concentrated in high-cost locations. As we exit this year, approximately 25% of our BlackLine professionals are delivering for customers in lower-cost geographies. This strategic shift provides a significant and durable structural advantage on margin as we move forward. In parallel, we closed offices in high-cost areas while opening or expanding talent hubs in lower cost centers like India, Poland, Romania and Mexico.

Our confidence in AI comes from firsthand experience, we are not just selling this transformation, we are living it. Internally, we have aggressively created and deployed AI tools to become a more efficient and innovative company. Today, BlackLiners are leveraging our internal AI platform or third-party AI tools in their daily work.

The results in our product organization are promising. Nearly all of our engineers are leveraging AI tools today and our most active developers are completing over 100% more poll requests than less active users. This is not just about coding faster. It is about delivering value to customers faster.

Our innovation cycle time, the time from an initial idea to that feature being in a customer's hands, has improved by 23% year-over-year, with over 160 features and products being released this year.

We have also created our own AI tools to drive efficiency, reduce costs and better serve our customers globally. Our recent example is our own internal AI translation services for our solutions that can rapidly create and provide documentation and training for customers in multiple languages, allowing us to not only reduce costs but ensure we provide consistent and high-quality experiences for our customers. This internal adoption is a powerful efficiency engine. We view it as an opportunity to bend the curve on future costs and accelerate revenue growth through innovation.

In summary, while operational improvements are never done, we have made real strides in how we run the business. Our strategy is clear and our execution is showing tangible results. While I am pleased with this progress, our team remains intensely focused on the execution that lies ahead.

The leading indicators we have seen this year all point to a business that is accelerating. These factors give us great confidence in our ability to deliver sustained profitable growth consistent with what we have previously shared at our past 2 Investor Days.

With that, I will turn the call over to Patrick to provide more detail on the financials and our outlook.

Thank you, Owen. Our third quarter financial results reflect the execution Owen has laid out. Disciplined operational management, combined with steady progress across key indicators that point to continued acceleration through the end of this year and into next.

I'll walk through the details of the quarter and our guidance for the remainder of this year as well as a preliminary view into 2026. Total revenue grew to over $178 million, up 7.5%. Subscription revenue grew 7%, with services revenue growth of 13% due to accelerated project delivery in the quarter.

Annual recurring revenue, or ARR, was $685 million, up 7.3%. We continue to see tangible evidence of deepening customer commitment in our forward-looking metrics. Total RPO growth was 12.4% and current RPO was up 8%. For reference, our average contract length was 27 months this quarter, up versus last year and sequentially. And more importantly, new customer contract length was up nearly 10 months versus the prior year.

Calculated billings grew 4% in the quarter. This figure has an embedded 4-point headwind, which is largely timing related. As we continue to win larger, more complex enterprise deals, we have seen some customers move forward with quarterly versus annual billing terms.

Our trailing 12-month billings growth, which helps normalize for these effects was 7%. Our customer count of 4,424 this quarter reflects our strategic resegmentation of the market moving away from lower-end customers. We project this transition to be substantially complete in the first half of next year.

Our revenue renewal rate in the third quarter was 93%, up versus the prior year and the prior quarter driven by healthy enterprise performance in the upper 90s with middle market in the mid-80s.

Net retention rate for the quarter was 103%, which includes a full point of headwind from FX. On NRR, we also saw net user adds slow in advance of customers adopting our platform pricing model and evaluating our AI road map.

We continue to see a positive shift in our sales mix towards higher-value solutions. Our strategic products accounted for 36% of sales this quarter, up from 32% last year. This growth is a direct result of our go-to-market teams leveraging our unified platform to drive larger multi-solution deals. Demand was particularly strong for our market-leading intercompany and invoice to cash solutions.

SolEx was seasonally steady in Q3, accounting for 26% of total revenue. Looking ahead, our Q4 SolEx pipeline is solid, and we are executing against it with several deals already closed in October, positioning us for a solid finish to the year.

Turning to margin. Our non-GAAP subscription gross margin remained strong at 82%. Our aggregate non-GAAP gross margin was approximately 79%, reflecting a higher mix of services revenue this quarter due to the strong performance at accelerated project delivery from our teams. Non-GAAP operating margin was 21.4%, driven by better productivity across our GTN teams this quarter and reflects costs from our BeyondTheBlack event, which took place in September.

Non-GAAP net income attributable to BlackLine was $38 million, representing a 21% non-GAAP net income margin. We delivered a record quarter for cash flow. Operating cash flow was $64 million and free cash flow was $57 million. This performance was driven by the combination of strong collections execution from our team and the timing of certain payments within the quarter.

Regarding our balance sheet and capital allocation, we have approximately $804 million in cash, cash equivalents and marketable securities versus $895 million in debt.

Finally, we continue to execute on our capital allocation strategy this quarter. We returned approximately $113 million to shareholders through the repurchase of 2.1 million shares. This brings our year-to-date total to over $200 million and underscores our confidence in the long-term value of our business.

Now turning to guidance for the fourth quarter of 2025. We expect total GAAP revenue to be in the range of $182 million to $184 million, representing approximately 7.4% to 8.6% growth. We expect non-GAAP operating margin to be in the range of 24% to 25%. And we expect non-GAAP net income attributable to BlackLine to be in a range of $42 million to $44 million or $0.58 to $0.61 on a per share basis. Our share count is expected to be about 75.1 million 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 $699 million to $701 million, representing approximately 7% to 7.3% growth. We expect non-GAAP operating margin to be in the range of 22% to 22.5%. And finally, we expect our non-GAAP net income attributable to BlackLine to be $153 million to $157 million or $2.08 to $2.13 on a per share basis. Our share count is expected to be about 76.6 million diluted weighted average shares.

While we still have 2 months left in the year, the trends we see across the business give us increasing confidence in our preliminary outlook for 2026. Based on our strong pipeline, the adoption of our platform pricing model and operational improvements, we expect to deliver a combination of accelerating revenue growth and continued margin expansion next year, assuming a stable macro environment. The balanced approach to growth and profitability gives us increasing confidence on our path to achieving the Rule of 40 targets we outlined at our Investor session recently. Owen?

Thank you, Patrick. And before we go to Q&A, let me just say that we are obviously aware of the recent market commentary about BlackLine. As a matter of policy, we do not comment on market rumors or speculation. The Board and management team engaged with shareholders routinely as well as constructively, and we will continue to do so, and that is all we intend to say on this topic.

Operator, could you please now open up the line for questions. Operator? Operator.

[Operator Instructions]

Operator, we're ready for questions when you are.

Our first question or comment comes from the line of Patrick O'Neill from Wolfe Research.

Just kind of wanted to touch on the commentary around some large customers pausing user adds as they weigh options around Studio360 platform pricing in some of your AI offerings, is sort of the right way to read that? Is that maybe some fields or some net new ARR slipped in the quarter as a result? And maybe -- can you just help us quantify in terms of net new ARR, the impact on these dynamics? And is that something you expect to continue into 4Q? Or is that just sort of idiosyncratic to the quarter?

Yes. No. So I think it's a good question. And we did see some deals slip at the end of the quarter. Obviously, with the Verity announcement, in particular, a lot of interest in in AI. And so -- and we have seen that continuing uptick in conversations right through today. And so a lot of, as you can imagine, interested in what BlackLine has to offer, did cost us probably a couple of million dollars of delay deals at the end of the third quarter that are now in the fourth quarter. Some of them have closed during the month of October, others will close, we think over the balance of the next couple of quarters.

I do think that what we're seeing in the pipeline certainly is showing a real increase on the larger end of deals for mega enterprise and the enterprise space. Those deals tend to take a bit longer but they are much more important for what we're trying to do as an organization as we move customers onto our platform and take a full advantage of all of the capabilities that underline the Studio360 platform.

[Operator Instructions]

Operator, do you have more questions? Operator?

Just a second, sir.

For all the listeners, apologies, it seems the operator is having some technical difficulties that he's trying to get sorted out, so please just bear with us again, apologies.

We have Patrick O'Neill from Wolfe Research in the queue.

Operator, we just completed that one. The next person in the queue should be Rob Oliver from Baird. Can you please let him then to ask his question. Thank you.

Thank you. Mr. Oliver? Our next question comes from the line of Rob Oliver from Baird.

Can you guys hear me okay?

Yes. And I'm very sorry about what's going on here.

Awesome. No problem, as well. So I guess I wanted to go back to flesh out the previous question just a little bit. So as you guys -- I guess something this quarter took you guys by surprise. And as you move through this transition, I just wanted to ask philosophically about this issue of automation and customers and seat versus platform? Because what it seems to me is what you guys laid out last year was a strategic shift, which enables customers to capture value without necessarily needing to commit on the seat side. So is it a logo churn that you guys are seeing of size as well as seat count internally around the model transition and the new platform? And then I had a quick follow-up for Patrick. Just wanted to better understand that.

Yes. Thanks, Rob. I think that here's what we're seeing in the business and what gives the team and me confidence that makes us really increasingly confident that we can deliver on the commitments that we said we would do for the business. We have laid out, as you know, guidance to return to our growth rates to the mid-teens as well as improve operating margin and return capital through share repurchases. When you think about all of this together, right, there's obviously 4 pieces. There's gross bookings, there's churn, there's what we're doing on the expense side and then obviously, attrition management.

From a gross bookings perspective, what you should understand is our performance this year is showing the ability to land larger, more transformational deals with customers. New customer bookings, as we said, were up over 40% this quarter, and our net average deal sizes have doubled since last year. The pipeline has continued to grow, and it is really beginning to ripen, a continuation of the trend that we see. Now obviously, the bigger deals we do, particularly the mega enterprise, the enterprise space, take 10, 12 months to happen.

For us, what we're seeing now is on a year-to-date basis through the third quarter, our gross bookings growth was about 15%, and we expect to go through the fourth quarter with growth in gross bookings at about approximately 20%. And we expect that growth rate to continue throughout next year on the gross bookings side. So what that is showing and improving is that we can win in the market. We're taking market share. We know all about that.

The second piece of this then you talked about is churn. On churn, the headwind for us has been and will be for a couple more quarters, is that strategic deemphasis of the lower-end customer base that is really beginning to near its conclusion. We expect that the abatement to take place by the midyear of next year. And what's really driving that is the rigorous qualification and customer selection processes that we put in place in the middle of '23 when Therese and I stepped into the role. So remember, most of our deals are 3 years back then, they are now sort of rolling off the books.

The other key thing besides the change in customer selection is we have radically revamped how we do implementations with our partners and our own team, focusing much more on just go lives. We're really focused on the outcomes for our customers and all indications of all new customers that have now come in, in the last couple of years, they're very well adopted as we move forward. We talked a little bit in message about expenses as well. So we've made a lot of changes to the organization to strengthen the foundation. This work really focused on operational efficiency.

I know I get a lot of questions about effectiveness of go-to-market. But what this now allows us to do is scale very efficiently with a very modern platform stack of things that we're trying to do to optimize the cost base and importantly, we've been able -- beginning to be able to decouple revenue growth from operating costs. So we expect that to drive further expansion -- margin expansion and greater levels of free cash flow next year. That's what's sort of giving us confidence on the margin side.

Now let me turn to the last piece, which was part of your question, Rob, and that relates to attrition. This is an area of intense focus for us around the leadership team, something we expect to work through this year and into next. And we really are experiencing 2 types of attrition that we're working our way through.

The first, for lack of a better term, is success-based attrition, where customers have really been achieving very high levels of efficiency and effectiveness with BlackLine that are actually requiring fewer user licenses. It's what the core value of the proposition is the value proposition what BlackLine delivers, but it's suboptimal for us for long term. It's the reason we've been trying to drive towards platform pricing because we recognize we have to decouple our growth from seat count and align that with the values and outcomes we're driving on behalf of our customers.

With the release of Verity AI, along with the accelerated innovation across our core product and Studio360 platform, it allows us to go deeper and broader with customers leveraging the trust and brand permission that we've built. So we view that as a positive trade-off for the medium to long term, even if it's impacted us a little bit on attrition this year.

Now the other piece that's really critical is attrition that relates to underadoption of our solutions. We have been dealing with that really through 2 parts of what we're trying to accomplish. One is we've been aggressively leveraging the data that we now have to better understand our customers' usage and engage with these less adopted customers to get them back on a path via our Studio360 platform and the underlying solutions. We're using this information in a way that allows us to have very meaningful and candidly, sometimes very difficult conversations amongst and between our customers, the ERP providers, the implementation partners and BlackLiners.

The second piece of this really relates to our multiyear renewal efforts, which have been coupled also with the changes we've made around implementations to the processes, what we're doing with our partners, with our customers as well as the optimization of what work we're doing. This combination has really allowed us to reengage with customers and deepen and broaden the relationships that we have with them.

If you remember when Therese and I stepped into the role, we talked about elevating in the office of the CFO. That is happening now. And the positive of that, again, is it allows us to have these deeper, broader conversations. But in the short term, we've still been dealing with some attrition. But as I mentioned before, we expect to see gross bookings grow about 20% next year. And we expect to see based on the actions we're taking on churn and attrition, at least a reduction of 10%, if not 15% in CNA for 2026.

So when you put all that together, as we think about where we're going, the increase the stronger gross bookings growth, the declining churn, the greater expense management and a very clear plan on reducing attrition is giving us the confidence that we're sort of communicating to deliver the top line and the bottom line results we have committed at Investor Day, and we expect to deliver that in 2027 compared to the range where we gave you from 2027 through 2029 in the long-range plan.

So I know, Rob, that was a long question. I think you -- or a long answer, you said you had a follow-up question, so what's the next part of your question, please?

Yes. I appreciate it. It was going to be for Patrick. Patrick, just on I guess, catching up with you guys kind of over the last couple of quarters, there's been some positive indications around customers that do adopt the new pricing model and kind of what the kind of like-for-like pricing is. So I know that you guys have had -- you broke out some nice numbers on the bookings side of customers taking the new platform? And any early indications there of kind of on the pricing side, if you're still seeing -- I mean, obviously, notwithstanding the fact that you're seeing some seat-based churn, are there customers where you're still seeing the kind of uplifts you expected to see?

Thanks, Rob. Yes, we are. So when we started I guess, introducing this platform pricing, which we started domestically here in the United States in Q1 and then internationally in Q2, we had a plan. And we continue to be ahead of that plan in terms of the amount of bookings or conversions what we've had to that. We are well ahead of that plan from a new logo standpoint.

As you heard in the prepared remarks, we landed a large deal, our largest deal ever in terms of TCV, and that was on platform pricing. So from a new logo perspective, we are well ahead of our plan. We have seen an uptick in Q3 in our installed base, our existing customers adopting this. And in combination, we still continue to be ahead of our plan that we laid out earlier this year from a platform pricing perspective.

[Operator Instructions] And I see our next question comes from the line of Chris Quintero from Morgan Stanley.

Really great to hear about the expected acceleration into next year. I guess as you kind of just mentioned bookings growth of about 20% expected next year. If you would kind of distill that into maybe the top 3 factors, what's really driving that booking strength and improvement here as you go into next year?

Yes. Thanks, Chris. I would say the biggest thing, again, has been us changing the conversations and having them at higher levels in organizations, and seeing and being able to talk to our customers truly about digital finance transformation. So we've been sort of working our way through being viewed as a point solution to more of a platform. Those conversations, the capabilities, the innovation that we've been able to bring to the market in the last 2 years is resonating very well.

One of the things that Jeremy and the team have done has listened very closely to our customers. And so you look at the amount of new product and innovation we rolled out last year, that same thing this year, and then the road map we have, our customers are really starting to see us in a way that says we are going to be a true partner for them as they go through digital finance transformation.

I think the other thing is the work we do with our partners. If you remember, one of the strategic choices we made a couple of years ago was to call out a lot of partners, and we have deepened the relationships with the blue chip firms that are out there in the world. And they also are part of those conversations we're having with customers about digital financial information. Many of those folks are working with CFOs and Chief Accounting Officer, Corporate Controllers every day. And so that is certainly a piece of it. It's the access and the conversations at a higher level. Our guys have really raised their game in the conversations when they're out there talking with customers.

And then candidly, so much of it is about the product-led growth that we've been trying to drive. I mean, again, one of the things that, that we've gotten back to doing really well is listening to the voice of our customer and building solutions that work for what they're trying to accomplish, but now doing that through the lens of a platform versus just a point solution. So those are the things, Chris, that are showing up.

And again, when you look at our pipeline and how it's maturing, so much of that is on the higher end of the market, which is really where we see we can deliver a lot of value for our customers.

Awesome. And then I wanted to follow up on the competition angle. It seems like on this call in your prepared remarks, you were talking more about kind of competitive takeaways than you have in the past. Is that kind of the right takeaway here? And I guess, like what's really working well for you to take some deals away from your competitors here?

Yes. Yes. So we are seeing a nice uptick in competitive wins. I think, again, a lot of this talks about -- I think at one level, BlackLine is viewed as a very safe choice in the office CFO. We've got a proven track record. The quality of our implementations continues to get better with our partners, the optimization, the trust and brand that we built, the products that we're bringing to bear, the scale with which we can operate. It was talked about some of the new things we can do in the marketplace. And so all of that is sort of just giving our customers that much more confidence that we can deliver on our promises.

I think one of the things that I like to tell our team all the time, we're not necessarily in the business of selling software or in the business of delivering outcomes for our customers and doing that with our partners and our clients, that's really starting to show very, very nicely, and that's helping us in our win rates and obviously being able to rely on existing customers to serve as references to other customers. It's very compelling.

And then the last piece of that, that we are seeing is we are really deep in a lot of different industries and the ability to sort of connect those experiences. So when we're going in, we're not just talking about accounting and finance. We're talking about accounting and finance specific to that industry. And then, by the way, when we can show where we've done it elsewhere for a peer set, it gives our customer base, which tends to be a little bit risk-averse, that much more confident on what we can deliver because we've proven we can do it elsewhere already.

Our next question comes from the line of Alex Sklar from Raymond James.

Owen, maybe for you on SAP, a lot of optimism on building pipeline throughout the year with some of the changes there. I think the comments where you've got a good start to the Q4 selling season, but what else from the BlackLine side, are you still focused on to really inflect that opportunity?

Yes. Look, I think the health of the SAP relationship overall is really solid. And I think we mentioned in the prepared remarks, the joint proof of concept that we're working with them from an AI perspective, we continue to put the innovation that we're creating here through their PQ process. Obviously, having Stuart Van Houghton and a number of other people that have joined from SAP be part of the go-to-market framework, has all worked very, very well.

I think we mentioned in one of the earlier calls, the point that we were now sharing customer success or customer usage between BlackLine and SAP, which was something brand new. We now have sort of dedicated customer success people on both sides of the SAP BlackLine relationship that will really help us to reduce some of the attrition we sometimes see in that partnership because now we're focusing in a way that, quite frankly, we hadn't been able to do in the past and again, gives us that confidence we're going to see the attrition rate drop in 2026 and beyond.

So those are all the things that are going on. There's lots of activity taking place in each of the markets. I just came back from a couple of weeks in Asia Pac. Some of my other colleagues also went over to Asia Pac, where we met with the leaders in the different countries over there. So obviously, it's nice to hear things coming out of L.A. and Waldorf, but what's more important or what's the boots on the ground, I think those are where the relationships are getting better and deeper. And so we're seeing nice progress there across the board.

Okay. Great. And maybe a follow-up for Patrick. Just in terms of kind of the 2026 outlook. You think you said kind of factor and consistent macro. I know it's something that's been tougher to project this year. How would you kind of -- how are you characterizing the macro? So we've talked about some of the things your customers are facing with kind of platform pricing and Studio360 adoption. But from a macro standpoint, like how has that progress since Q1 when we kind of started talking about the different scenarios through third quarter November here? And what are you exactly factoring for next year?

Yes. Thank you. So with regard to the macro environment that would lead to the 20% growth rate that Owen indicated, it would be the environment that we're in today. So when we were thinking about back in April and evaluating the potential impact of tariffs, we found that, that largely did not have an impact on the business this year. So when we talk about a macro environment going forward, if we maintain the current state that we're in today, that is the basis for the projection that we were casting upon 2026.

Look, I think the one thing that we're all trying to work with our customers on here is you've probably seen there's about 1 million corporate job layoffs, I think, over the last couple of months. A lot of that necessarily -- or not necessarily, but it's in the back office, and that's certainly creating some opportunities for us to talk with our customers about how they can use BlackLine because of the efficiency that we're driving for our customers and you power that with what the -- what we're demonstrating to them around AI. And so it could become a little bit of a tailwind versus a headwind depending on how these companies choose to move forward.

Fascinating to me in my trips around the world in the last month, and I've spent a lot of time on the road in markets that I would have thought would have been slower or more resistant to adopting the kinds of change that you sort of sometimes see in North America, that is accelerating throughout the rest of the world. And so I think again, that sort of is a bit of a positive tailwind from where I sit today.

And I show our next question comes from the line of Patrick Walravens from Citizens.

Great. And it's nice to see that the -- you're starting to see the signs of what you've been working on for so long.

I'm right, Patrick.

We're well impatient over here. I'm sure you are, too.

I hadn't noticed.

My question for you is you made an interesting comment. You said that the conversations between the ERP providers, the customers and the implementation partners can be very difficult, why is that?

Well, because you wind up with customers serve have sometimes these views of how quick their transformation is going to go, how easy it's going to be. You replaced an ERP system. That's a complicated project. People change priorities change, things get emphasized, deemphasized and everybody wants to think it's, well, just slam in the technology, and it will be in Nevada. And it's not -- that's not the answer. It's about not only changing the technology, it's making sure you change all the processes that go with that and then also helping people through the change management of what all this takes.

And so it's very easy for somebody to say, well, it's only because of X, but it often is because of X, Y, Z and A, B, C. And so what we're trying to do more of now is engaged and lean into those conversations. And what we're seeing is positive, it's showing up in the multiyear renewals because we're forcing things that maybe we had in the past wouldn't have done is getting these customers back on that journey and showing them what the art of the possible is. It's so critical from my vantage point around Studio360 to have the blueprints that are part of that. It's so critical that we can now talk about the ability to integrate, the ability to sort of orchestrate what they're doing to visualize it and then have the control and compliance that's on top of all that, those things that we're forcing into a conversation that, candidly, it isn't always the easiest thing to do, but sitting there are not engaging doesn't do anybody any good.

And again, where we're seeing, I think, the uptick is our customers signing up for multiple years because they know they got to get back on this journey. And I think the other thing that's interesting about this a little bit, Patrick, I'm not sure it's scientific, I also think now that people are getting back in offices, face-to-face conversations are a good thing to have and are sort of driving some of the changes in how things are beginning to unfold.

Yes. I agree with that. Okay. And then Patrick, 2 quick ones for you. So first of all, I mean, why does -- you're in line on EPS this quarter. So you took the EPS for the year down by $0.05 to $0.11 bottom top of the range, so for Q4. Why is that?

There's 2 factors there, Patrick. The first one is you're talking about non-GAAP net income is the interest that we earn on our cash balance. And as we indicated earlier, we have purchased $200 million plus in stock this year as part of our share buyback program, which is driving down the interest that we earn on that. The second driver is the big beautiful bill. while that has provided an infusion of cash flow for us and many other businesses, it does not change our non-GAAP tax expense. So the expense remains constant from a provision standpoint, but we do have a cash flow benefit from that bill.

Okay. And then the second question is just so we understand clearly what you guys are saying about the -- about next year. So at your financial analyst session, you presented 2 slides. One was the target model framework. I'm sure you know it by heart, right, which starts with total revenue growth of 13% to 16%. I think it goes all the way down to your operating margin. And then you had another slide which showed your commitment to the Rule of 40, which had you at 38% in '27 and 40% in '28. So what exactly is it that we're going to see in '26 now?

In 2026, you will see at least a Rule of 33 as we committed to in Las Vegas.

Okay. So is there any acceleration of this framework?

For 2027, yes, Patrick. That's where, again, we talked about what we're seeing from a gross bookings perspective, what we're doing on the churn and what we're seeing on the expense side. So as we think about the revenue growth, that's really when we get to that teen growth number in '27, we'll see an acceleration of revenue throughout the year. We think we'll see an acceleration on the bottom line. But the real impact of that will work its way throughout the financial statements throughout the course of the year and again, then show up pretty clearly starting in 2027.

Okay. So target model framework slide now, that's now through '27?

Yes. Yes.

And I show our next question comes from the line of Steve Enders from Citi.

Okay. Great. I guess I want to go back to just the 20% kind of bookings commentary and I guess the view of that kind of accelerating from where we're at today. Just I guess, what is it that you're seeing like gives the confidence around that picking up going into Q4 and then going into next year?

And then I guess, on the other side of that, you also the commentary around this kind of transition going from the headcount impacts to kind of driving that platform model? I'm just trying to understand, I guess, the kind of like puts and takes to kind of make that 20% happen there?

Yes. So on the on the gross bookings side. If you remember, starting in September of last year, we started to communicate that the pipeline was starting to grow. And that has grown even right through the month of October. Every month, we continue to see progress on the size of the opportunities and the brands that we want to be doing business with. That's what's driving that growth is the conversations that our people are engaging within customers as well as a great work that our marketing team is doing in the marketplace.

So you watch that and you can see how it's progressing through the stages of sales. And so that's what gives us the confidence of what we expect to see in the fourth quarter and then what we're seeing heading into next year.

Remember, it takes a good 10, 12 months for stuff in the mega enterprise space, the enterprise space to make its way to what we do in the pipeline compared to the mid-markets, maybe 4 to 6 months. And so everything we would have expected -- or we're trying to drive, excuse me, not expected, from the quality of that pipeline, from the customers we're engaging with, the partners that we're pursuing those opportunities with and the level of engagement from those customers will give us a much higher degree of confidence as we work our way through, and we've seen the acceleration of gross bookings throughout the course of the year and now beginning to really see that pick up in the fourth quarter.

And when you start to then look at the beginning, or into next year, you can see the pipeline that started in January, working its way right up through the end of October continuing to mature its way through. And so that is what gives us confidence because we have enough pipeline to deliver what we've just said around an increase in the gross bookings. So that's the first piece. And hopefully, that's responsive to your question.

The second piece is there was a lot of work that we had to do to reposition BlackLine to get to become a $1 billion company. I would say that when I look back with where the infrastructure was, it was probably better suited for a $250 million company than somebody trying to get to $1 billion. And so all the things that have taken place in go-to-market in the G&A part of the business and the product and tech, that has been being worked on through multiple angles, really culminating for where we are today and the ability to move forward with much more operating leverage in the business going forward.

And so it's just the investments you would make that accelerate, make it easier for our people to conduct their jobs and we are seeing the increases in productivity. I'm thrilled to see a 30% increase in productivity from a quota-carrying rep. And I think Stuart and his team are just getting started on that as we move forward. The things that Jeremy Young and his team are doing about productivity from our engineers is phenomenal.

And so we're seeing us taking advantage of revamping our processes, using technology as well as the change management we need to drive in the organization. So we feel pretty comfortable that we're going to be able to decouple revenue growth by adding heads all the time to drive that revenue. If we don't need to do that as we scale out the business. It doesn't mean we won't add quota-carrying wraps, doesn't mean that we won't add product and tech professionals as appropriate, but it's not going to be that high correlation that you would have seen from BlackLine previously. And I think that's where we see, again, the opportunity to both accelerate top line growth as well as accelerate bottom line performance.

Okay. That's great to hear. And then maybe to follow up on past question on just the next year kind of view. I guess appreciate saying that 33% number. I guess maybe asked a little bit differently, like if I'm looking at where consensus numbers are for next year, I think it's at high 8%, almost 9% growth. Is that the right ballpark in terms of how you're thinking about now? Or how should we maybe think about the mix of growth and margin to get to that 33% number?

I think you're largely thinking about it correctly. But obviously, we're -- our target of a Rule of 33 for 2026 is our minimum expectation in terms of what we're going to achieve next year. So yes, we're aware that the consensus number is 8.8%. We do have confidence in our growth profile for next year and our ability to achieve at least the Rule 33.

And I show our next question comes from the line of Jake Roberge from William Blair.

Great to hear about the pipeline strength, but can you give us some more color on what you're seeing with close rates and win rates, just given the divergence between pipeline, gross bookings and then also ARR growth would just be helpful to understand what you're seeing on that front.

Yes. Look, I think our win rate is probably up about percentage points from where it was. So if -- and I'm just going to use a number, if it was 20%. Now you could look at it maybe 22%, right? Those are lower than they actually are, but just using it that way. So we see that uptick and close in win rates. And we can tell we're taking share from somebody out in the marketplace. And so that has been very encouraging. And we expect that, that is going to continue, if not accelerate even a little bit more, just again, given all the things that the responsiveness we're getting from our customers around the platform pricing, understanding better what Studio360 really is all about and then all the work that the team has done around very AI.

It's sometimes hard for me to process the amount of change that we've driven into the company last year and this year, just on the product and tech side. It's 1 thing to sell that into the marketplace -- delivered to the marketplace, all of the things to get your own people enabled on it, to understand it, buy into it, get comfortable with it and go out and tell that story. And again, we're seeing that our team is getting better and better at articulating that value proposition and engaging in conversations at a higher level in a broader as well as deeper way. And so that's what we're seeing. I don't know, Patrick, anything you want to add on particular numbers, but that's what's going on in the business right now.

And I show our next question comes from the line of Koji Ikeda from Bank of America. Colin.

Sorry about that, I was on mute. So I totally appreciate right before the Q&A that you don't comment on media speculation. And I really do appreciate that level setting. And so -- but I do think it's important to ask, and I wanted to ask about how you're thinking about driving shareholder value from here. Whatever you can talk about from that lens would be really helpful, because I look at the third quarter growth, I look at the profitability, but balance against the duration adjusted billings growth of 7%. But then really, it sounds like bookings is having some good momentum, too. So whatever you could share on how you're thinking about driving shareholder value would be really helpful.

Look, Koji, I think we're all fixated and focused on that every day, and I appreciate that you're not going to ask me about the market rumors. I think we meet with the Board on a regular basis. The Board is well aware of our responsibilities, fiduciary responsibilities to drive shareholder value and that's what we're trying to do by reaccelerating growth the way we've talked about it, driving bottom line performance, returning cash to shareholders. Those are the things that are within our control that we are executing every day. And we feel really good about that.

And no one's asked me yet about AI, so hopefully, somebody will and why that's -- we don't view that as a threat to our business because I think that's the other thing that's held the share price down a little bit. I know certainly, when I talk to investors and analysts, they're always saying, "Well, isn't an AI going to put you out of business?"

And so Koji, as I answer, so I'm going to try to do it in 2 parts. I think we're doing everything we can. We're doing it even quicker now because things are finally converged on getting the bookings machine going, really dealing with the CNA challenge and managing expenses.

On the AI side, where we seem to have been lumped in with everybody else and taking our lumps from that, we said in the prepared remarks, we believe we have 2 strong parts that reinforce and widen the moat as we operate around AI. First, we are viewed by our customers, but also by the world's leading accounting and auditing firms as well as the implementation partners as a very safe, reliable, trustworthy pair of hands.

As Patrick says all the time, 95% right in accounting is 100% wrong. So we understand that responsibility clearly and has been in our DNA since the founding of the company. Actually, even earlier today, I had a meeting with the leadership of one of the most critical bodies that works with companies, auditing firms and regulators, and the topic was about the role of AI in accounting and auditing because we want to make sure we're staying very closely aligned with the latest thinking and even shaping the thinking of what policies and guidance will be as AI makes its way forward.

The second piece that we talked about was the data that we have. And we are sitting on a information that we are really just beginning to use and our customers are beginning to see the power of that information. Interestingly, as we talk with finance teams and IT teams, 2 things are generally cropping up: First is these companies seem to be interested in buying proven solutions rather than taking a chance on less established brands as it relates to the financial close and consolidation; and second, and this is important is the IT team and their initiatives -- AI initiatives seem focused more on their bigger business opportunities that could have an impact for their companies, and it is not centered on financial close and reporting as our priority. In fact, we're aware of a paper that's going to come out next week that's sort of just going to emphasize that, and it wasn't a paper, by the way, created by us.

So the key for us as we move forward with AI is going to be able to provide AI solutions that remain reliable, transparent, auditable as well as cost effective for our customers. Now one other data point that I would just share with you that is worth noting. Our roster of customers includes the world's leading technology companies. We have a who's who, it's incredible. And these companies are engaging with us on what we can do for them with AI. Even though they're selling AI out in the marketplace, the place they are not -- they don't seem to be interested in selling AI is in financial close and reporting. And so while there's no guarantee that they're going to use BlackLine AI, it does seem to support the statements I made above that their priorities are elsewhere, and they have an interest in what we're doing. And I think if we can convince the market that there is different pockets of who are going to be the winners and losers in the AI war, then we feel like we're going to be a winner in that. And hopefully, we'll get some pop out of that for our share price.

And again, on these conversations that I'm having with the various bodies that oversee public companies, auditors and the like, the regulation is going to take a really long time to get going. And so if anybody thinks that publicly traded companies and no matter what market they're operating in, are going to go do something really crazy around the financial close and consolidation and what they're willing to sign off on for a rep letter and everything else and in what they're communicating to the capital markets, we just don't see it happening anytime soon. And we see that we are really well positioned for the conversations that the customers who trust us and understand what we're doing. And so I think for us, we look at this as a real positive, but we have to obviously show that to the market.

And I show our next question comes from the line of Terry Tillman with Truist Securities.

This is Dominique Manansala on for Terry. So just considering the federal motion of early and FedRAMP unlocks future opportunity, how does adoption typically sequence here? Do you expect it to expand horizontally into additional agencies or more so very within a single agency into workloads like intercompany or impose to cash?

And on top of that, are there specific things that show in time to live once FedRAMP has achieved like maybe a shared service model or a preexisting or preexisting footprint?

Yes. It's a really good question, Dominique. And I think the answer to the first part of the question is both. What we're seeing is, like, for example, with the DOJ win that we had, I mean, that is now available to multiple agencies where they can -- within the DOJ, I forgot how many there are, but there are quite a few that have access and a number of them are now looking at what we have to offer. But I think the other thing that's been interesting is being able now to have more conversations across different federal agencies where there's a keen interest in what a BlackLine can offer.

And I think some of the very interesting conversations earlier on for what I would have argued were sort of our more traditional financial close capabilities around REX and matching and journals but I never think of the federal government as an intercompany opportunity. But interestingly, it has proven to be an intercompany opportunity because of all the interagency building and activity that goes on. So we're seeing plenty of opportunities very quickly across the federal space and even picking up now in the state space as well.

So I think we sit here we're very confident that based on the feedback, BlackLine is a really terrific fit for the federal government space. The ability for to deliver automation, control, auditability for these agencies is really incredibly important to them. And given the pressure on the federal workforce, the opportunity for what BlackLine can do seems to be resonating very, very well as we're pursuing that marketplace.

Great. That's helpful. And then just as a follow-up, in building an elite partner group and then being selective in where you invest or enablement dollars, how do you determine which partners get priority here? Is it -- does it influence on transformational deal formation, industry specialization or maybe contribution to source pipeline?

It's a couple of different things. So obviously, if you think about many of the partners that we work with, they often have dedicated teams that are almost sitting in the office of the CFO and Controller. So we try to work with those that have the strongest brand permission in those customers. We try not to sole source things. We tend to -- if a customer asks us for recommendation, we try to provide them at least 3 names, typically 3 names of partners that we work with, and we try to match that up with the organization's preference for their own customers.

But again, we work with a sort of a who's who list, but it's it's their permission in the space, it's their industry capabilities. If they've made the investments to really deepen their capabilities around certain products within BlackLine. So we've seen a real uptick in our critical partners trying to learn and understand even more about intercompany our invoice to cash solution. And so the better equipped they are for those, the higher the likelihood that we are to make a recommendation of them as at least one potential player in any opportunity. So that's sort of how it's worked so far.

I will say it's a lot easier with a smaller list of partners to navigate than the dog's breakfast of partners we had previously. And I think that those deeper relationships are certainly opening up where those partners are that much more confident to recommend BlackLine. I think we have seen a real breaking apart of the partners sort of saying, well, you could pick this provider or you could pick that one with a more firm BlackLine is the best at this and here's why we would recommend you go with them versus someone else?

And I'm sure our last question in the queue comes from the line of Adam Hotchkiss from Goldman Sachs.

I'll keep it to one quick one. I just wanted to ask on the 10- to 12-month sales cycles you mentioned, Owen. Obviously, that makes us given the size of some of these opportunities. But what are you doing from the perspective of trying to automate some of the implementation work in order to lower sales cycles? And do you have any sense for how quickly and by what magnitude do you think you can reduce time and cost of implementation for customers would be really helpful to get some context.

Yes. Adam, that's a great question because, look, the CFO has a project and he's got 2 that can deliver 20% return just making it up, and one is in the office of CFO and one's on sales, they're going to pick sales all the time. So we have to find ways to deliver greater value even more quickly. So over the last sort of -- when Therese and I stepped into the role, we changed out pretty much all of the leadership team of -- on our professional services side. We've changed a lot of our customer success leadership, all with the idea of trying to drive greater implementation, greater optimization. And that was sort of just revamping the way we do things, right? Just being crisper, cleaner of how you go about it.

In the last 6, 8 months, 9 months, whatever it is at this point in time. The next phase of that was then how do you take all the lessons and experiences from all these implementations we've done, all these optimizations we've done by industry, by size of company, by workflow to then say, "Hey, here is a quicker, better way we can help you do this." We will be making that available to our partners to use. We'll be making that available to our customers to use because, again, what we want to do is drive that value for our customers that much faster.

So you heard us talk about how many more go-lives we've had sequentially as well as just year-over-year, but critically, the time to get those implementations is continuing to drop. And I'll have a better answer for you in February by how much we think that's going to drop, but it will not be an insignificant cutoff of time that goes from sort of when the customer signs the contract to when they go live, so they begin to really optimize what we're doing with them.

That concludes our Q&A session. At this time, I'd like to turn the call back over to Owen Ryan, CEO, for closing remarks.

So thank you all for joining the call tonight. Sorry about the little bit of technology glitches at the beginning, but we really do appreciate your interest in following BlackLine. Look forward to continuing to talk with you, share more about our journey and how we're going to make the plans that we've committed to you. Everybody, have a great night. Take care.

Thank you. Thank you for attending today's conference call. This concludes the program. You may all disconnect.

All right. Thanks, everybody, for coming today. Appreciate you coming and taking time out of your day. I know it's a busy week with a lot of different events going on. So having you here, we appreciate you joining us. Just to give you a quick summary of what you'll see today in our investor session. A lot of similar themes that we talked about earlier on the main stage. You're going to have Owen up here for a few minutes. But really, the core of the discussion is going to be around product and tech with Jeremy as well as our Head of Product, Charlie, and then go-to-market with Stuart, who I know some of you have seen, but maybe not met before. So a really good opportunity to see and listen to his story. And then as we kind of finish up the day, we're going to have Patrick Villanova on stage to give a quick financial update. We'll take a quick break. We're going to reset the stage. We're also going to play our Verity prepare video as well. I know a lot of you saw that already today. But for those listening at home, they may not have had the opportunity. So we'll play that, and then we'll do a short Q&A panel at the end, and then we'll conclude the day, and then we can go next door and chat a little bit more. So that's what we're doing today. As most investor sessions, investor days go, this is our safe harbor. We may be making some forward-looking statements today. Risk factors are found in our filings with the SEC, the Form 10-Ks or 10-Qs. If you have any questions, please take a look at those. Otherwise, I'm going to turn it over to Owen Ryan, our CEO, who's going to kick us off. Owen?

Thank you for being here. And listen, for the investors and the analysts, we do really appreciate the interest that you have in BlackLine following us and supporting us, giving us feedback. It's just been terrific. I'd like to listen to all sources of input to try to figure out how we should be thinking about the organization. And so we certainly appreciate that, all of the things that you do for us. What I really wanted to try to do is just give a short update from where we were in November to where we are today. As we mentioned, BlackLine was really going into what we called our platform era as we move to Studio 360. And then a lot of our focus really has been around execution. If you think about the last 2 years, a little over 2 years now with Therese and myself, we spent a lot of time trying to figure out the strategic direction of the company, how we would operate the company, building the leadership team and then really focusing on the execution of that. And so we are really in the throes of execution at this particular point in time. And then obviously, we're going to sort of end my piece with AI as we turn it over to Jeremy and talk about how we see that as an opportunity. For those of you who have gotten to know me pretty well at this particular point in time, I take a lot of pride in what BlackLine has accomplished, but I'm actually never satisfied. And we tried to build that into the team here, which is, look, we should feel good about the things we're getting done, but there's no resting. In fact, we recognize that we got to keep working harder and faster for what we're trying to do. We talked over last November about the things we started to need to do within the go-to-market model. Obviously, bringing in Stuart was a big piece of that. But what we're starting to see and driving is -- are the things we would say -- said we would do, landing much larger deals, much more strategic companies. The pipeline is growing exponentially. But more importantly, it's a real pipeline. It's not pipeline that just gets created and throw something and hope something sticks. We're being very selective about what we pursue and how we figure out where we're going in the marketplace. We rolled out the pricing initiative, still early stages, but a lot of good progress that's coming out of that. And obviously, things like we said we would do in public sector, had our first big win. Any second now, we should be on the federal marketplace. We keep wondering why it's not up there, but it's coming. A really big thing that we have focused on as an organization in the last couple of years is being partner powered. There's no way a company of our size, scale can cover the globe without having really the best partners in the world. If you'll forgive me, I am a DieHard Yankees fan. My Board member is a diehard L.A. Dodger fan, so I'm still not past last year's world series. But the important thing is we tried to build a partner roster that looks like the 1927 Murderers' Row. So the who's who, best baseball players of all time, in my view, that really can help drive and help BlackLine punch above its weight. And you saw that in some of the wins that we've announced, some of the things that we have shared that they're doing with us. They are helping influence and shape our direction as an organization, and that's really mattered a lot. We've talked a lot over the last couple of years about SAP. And you would have seen that if you were in the audience this morning around again, how that relationship keep getting stronger as we move forward. And that's not going to stop. Once we got to that golden architecture and being able to be in the market together, that was a really critical next step in the evolution of that relationship. And we know that, that's not going to end anytime soon. From an innovation perspective, I won't get into all of it because Jeremy is going to cover a lot of it. But what we understand is that we have to innovate based upon what our customers want. And all the things that Therese should be particularly proud of over the last 2 years is getting this company's focus back on innovation and innovation that mattered in the marketplace. What did our customers want? We just hosted a a luncheon for our Executive Advisory Board. So a bunch of Chief Accounting Officers, some CFOs, and they talked a lot in that session about how we're listening better. In fact, in the audience was an executive from Exxon, who talked about the operational reconciliation tool that we've got in the marketplace. That was their idea co-created with BlackLine. So you're seeing good things like that, continuing to drive through industry and then operational excellence. Obviously, we need to keep driving top line and bottom line performance. Some people say you can only have one or the other. I actually think we can drive both on behalf of our shareholders, and we certainly are looking to do that. Things that we said we would get done, the cloud migration, any second now, that should be done, driving quicker time to value, ultimately, I say it all the time, we're not in the business of selling software. I know that's what you guys evaluate us on. But we're in the business of delivering outcomes for our customers and driving that quicker time to value. If you heard Therese's remarks this morning, she talked about finance being the shoemakers kids. And so what we recognized in the world is if we don't figure out a way to get shoes on the shoemakers kids, we're not going to be successful. And so that's really what we've been trying to figure out, how do we drive quicker, more meaningful ROI for our customers so that, that business case is so compelling. There's no way you would ever want to defer it. So those are the things that we said we would do. We promised you we do those. We're continuing to try to drive that. You won't see any let up in that at all. Relentless execution, maniacal execution is really critical for any business. And I think that, that's a big part of the way BlackLine is operating today. every CEO you guys probably listen to tells you about how great the opportunity of AI is. And in some ways, they're probably really worried about the disruptive force that's there. What we believe is that actually when you think about the position we play in the office of the CFO, that the ability to combine our platform with the infrastructure that protects the data of our customers, that ability to continue to innovate. And then when you combine domain expertise with industry expertise, that really does make a difference for our customers. But importantly, if you listen this morning and you'll listen now, it's not just that we have all that. We do this through the eyes and the ears and the feedback of the biggest accounting and auditing firms in the world, right? They have to rely on things that BlackLine doesn't. So how do we go through that together on our behalf -- not on our behalf, but they talk to the regulators, what's going to work, what's not in this world, right? So everybody is worried somebody is going to create an agent and it's going to be able to reconcile something, it's probably true. But who's going to rely on it if you're in a management team and sign off on it, who from your auditing firm is going to sign off on that? And then what regulator, whether it's the PCOB or the SEC or the International Auditing Standards Board is going to accept that kind of work without understanding what it is. If you let everybody running all over the place creating agents and things of that nature, imagine what your audit costs are going to be if you don't have that through one platform and one controlled environment and things that truly matter. So we look at this as we've moved forward, and thought about AI, we just thought about it in the sense of AI had to be embedded into this Studio 360 platform. It had to be embedded into our solutions because AI on its own isn't the product. If you remember, if you're old enough, the BASF commercials, they didn't make the product, they made the product better. The way we thought about AI is, in fact, through the idea of how do we make the BlackLine platform and solutions better, more reliable, more trustworthy for our customers. Because if you're sitting there and you're a CFO, you could talk about zero tolerance. Patrick will get up here in a few minutes. He likes to say, 95% right doesn't do you any good, right? There's 100% wrong. So you can have no mistakes because you don't want to wind up with -- if you're a CFO, you don't want to have journal entries that need to be booked that are found by the auditors. You don't want to have a material weakness. You want to have a significant deficiency. Our God worse, you get a restatement. Those are the things that they can have. They know they have to have complete auditability, right? The fact that when somebody comes in and says you need to sign this rep letter that says the financial statements have been prepared in a certain way, the internal control structure worked in a certain way, you need to have that. And then you think about protecting the capital markets. One of the things I'd love to sort of brag about is I think as of this year, there's roughly $40 trillion of market cap that runs on BlackLine every day. That's a pretty important role in the capital markets, at least from my vantage point. Most people wouldn't think of us that way, but that reliability and helping to sort of protect the integrity of the capital markets is something that we take very seriously with our customers. Again, I've talked about our AI framework already, really trying to get the best and leading brands from the leading firms about what will and won't be accepted when you think about financial close, consolidation, reporting, things of that nature, it had to be there. And they've told us over and over again, you could not do this in a black box. It will not work. The management teams won't sign off. We as the auditors won't sign off and certainly, the regulators won't sign off. So you think about that. And so we've gone through all that, and we built our whole platform around the concept of data integrity. And Jeremy has talked about that a lot. Therese has talked about that. Data is the new currency. I think we really understood that and embrace that in everything we've done. Obviously, the release of Verity is now out there. But again, I think the things that I remember when I met Therese the first time and BlackLine slogan was trust is in the balance. And as long as I've known her and as long as this company has been around, it's always about trust. And that is the role that BlackLine plays in the office of the CFO. It's the reason we named Verity what we did because we knew we needed to be trustworthy. We needed -- we knew everything needed to be auditable, and we knew it needed to be accurate. And so that's sort of the genesis of how we got to where we got to. And with that, I'd really like to bring up Jeremy Young, our Chief Technology Officer, to take you through much more of this. So thank you very much for your attention.

Thank you, Owen. It's bright up here. Thank you, Owen, for the introduction, Chief Technology Officer at BlackLine. I spent a lot of time thinking about how to make our technology serve the office of the CFO. And to really reiterate -- what are we doing here? Our goal is to be the platform for the office of the CFO. And I think to really cement this opportunity, we're utilizing data. And we're continuously moving our ability to bring in data from upstream, not just ERPs, but all other systems, source systems as well as unstructured data. And our view is that this is going to create a hub or a platform to allow automation, particularly AI to become increasingly powerful, but also trustworthy, as Owen mentioned, in the CFO office. So Studio 360 was our big announcement last year, and we've continued to build on this platform in the last 9 months since release -- 6, 9 months since release. There's been a lot of validation of this strategy. And I think to go back and just lay the foundation for this, we have to answer why. Why was data. Data is a new currency. Data is critical for automation and AI. We leveraged our partnership with Snowflake to create a scalable data platform. I think what's critical here is what I mentioned, it's not just bringing in data from ERPs. It's about bringing all data. And I think what becomes critical here is when you can bring in things like contracts, supporting documents, it's going to help feed AI to continue to automate activities that are traditionally manual tasks today. And that's why we built an expansive and scalable data platform. Snowflake also allows us to natively scale in the cloud as a scalable data layer. And it's also AI-enabled, playing nicely with large language models and other AI technology from across all cloud hyperscalers and other vendors. In terms of what we've been able to do so far since launch 6 months ago, we have roughly 110 customers on Studio 360. These are split roughly 80%, 20% between our mega enterprise and mid-market customers. So we're seeing some customer pockets indicative of our traditional customer base. The interest is clear that there's a lot of opportunity to automate activities in the office of the CFO through Studio. A great example is we have a customer with over 4,500 manual tasks spread across 103 different entities that they've been able to automate in Studio today. This saved hours or days off their financial close time on top of the savings they are already getting from BlackLine. In fact, across people who have adopted Studio, we're seeing up to 16% reduction in average total financial cycle close time. That's hundreds of hours saved. So the question is, what's next for our platform? And this scalable platform has been foundational in helping us drive greater efficiency. The scalable platform, we have over 75% of our customers running on Snowflake to date. They've actually seen improvements not just in performance and reliability, lower latency and serving up data. But to BlackLine, we've actually been able to reduce our spend, 80% for serving up these reporting use cases for customers on Snowflake. So we're getting increased scale at a reduced cost. And I think that's an exciting thing for us to continue to build on. The other piece, this modern data architecture we've created allows us to do is scale to be more event-driven. In a lot of the conversations I've been having with customers, especially as this conversation extends to the office of the CIO, they are looking to power a digital transformation. And they realize that it's not just about having the right enterprise systems or software, but it's about being able to effectively connect the workflows in a real-time or event-driven manner. We see this a lot in some of the retail use cases or financial services use cases where they're looking to do transaction matching in real time at greater and greater volumes. The rearchitecture of our matching engine on Snowflake has allowed us to scale from 200 million transactions per month to 200 million per day, and that's a fairly conservative estimation in my mind already, and that's roughly already a 3,000% increase in the volumes we've been able to handle. But not just the volumes, our new platform is now able to match more quickly. There's been a 98% reduction in matching times going from 4 hours to 4 minutes for comparable volumes. This is only going to continue to get better as we further optimize and build out this platform. So we have a scalable data layer and event-driven architecture that can harness this and are moving to more real-time use cases. The next piece is how do we make it easier for people to connect data to BlackLine. I talked about the importance of bringing that data in. This is where our ecosystem of connectors comes in. We've partnered with SAP traditionally to build best-of-breed SAP connectors and our Workday connector. They're in early access right now, and we have over 80 customers eager to adopt these connectors. These connectors are not just a connection to a source system like an ERP, but they actually rapidly accelerate time to value. They serve as a templatized implementation standard so that you can connect to the ERP, understand the metadata coming out of them, normalize them to the BlackLine standard. And then once it's normalized, we can utilize this against our standard machine learning models and artificial intelligence to power automation rapidly. That's the power of the platform we've been building. Now I mentioned the CIO office. And I think why it's become increasingly important is the transformation initiative has become co-owned between the CFO and the CIO. And so we've also extended support to the systems that the CIO traditionally works in. With broad API support, we're now able to connect to systems like ServiceNow, Pega, SharePoint and others. Anything with an API, you can now connect to BlackLine. You're not going to necessarily get the same benefit as the bespoke connectors that accelerate time to value, but you get the flexibility of bringing in any data you need. So we're seeing IT organizations look to orchestrate workflows that start -- that are end-to-end. So whether they're triggered from a system like Pega or ServiceNow, BlackLine can respond automatically to process data, whether it's transaction matching use cases or feeding another enterprise system. We are now critical in those workflows for customers that are adopting these studio capabilities. This takes it from a manual task to end-to-end automation, and it's resonating with people looking to digitally transform their workflows. Owen mentioned our cloud migration. And so what's powering our increased speed of innovation, Cloud migration is a key part of this. We're aiming to be complete our cloud migrations by end of the year. We're actually over 95% done our cloud migration to date. And this has allowed us to more rapidly embrace the new technologies of the cloud. This includes AI and machine learning models, but also things like elastic compute services so that we're able to be more effective to scale up, but also -- and scale down when these resources are not needed. This elasticity gives us flexibility and also allows us to now expand to new markets and regions with greater efficiency. A great example of this expansion is with our FedRAMP moderate build-out. We were able to complete the infrastructure build-out in 9 months. And without the cloud technologies, this would have taken longer. And what we've actually been able to do is set the stage for IL4 as well. As part of our FedRAMP moderate build-out, we completed 323 controls roughly 90% of the total required to satisfy both FedRAMP moderate and 90% of the controls required for IL-4. So we're well on our way to satisfying the technical requirements for that market. It's also allowed us to target new markets like KSA at a lower cost. So this cloud infrastructure allows us to expand our reach into new markets and new regulated markets, in particular, at a lower cost and with greater speed. But a lot of focus has been on AI. And so I do want to talk about our foundation and our AI strategy. We are here to deliver future-ready financial operations through Agentic AI. Our aim is to go beyond just automation and to help our customers act -- anticipate, act and decide faster. And so this approach is really an extension of our core philosophy. It's what we've spent a lot of time on our main stage here BeyondTheBlack, talking to our users and our customers about. But it's really foundational that we talk about the foundational application and control layer. Therese and Owen have talked about trust. And we're utilizing BlackLine's existing application and control layer to create a trustworthy framework for AI to operate in. We're already trusted by auditors and regulators in what we're able to do today and the automation that we're able to serve. And so our AI automation and expertise carries through to that. Our AI solutions utilize this application and control layer to be auditable, trustworthy and ultimately indispensable for our customers. I spent some time on stage today talking about how generic AI is dangerous. And what I really mean by this is that ultimately, the blackbox of large language models isn't auditable. You don't understand what data has fed these machine learning models. They're proprietary for the different vendors. And that black box can lead to uncertainty. And so our role is to provide the tools or the framework to make these large language models auditable, deterministic and domain-specific in how they understand finance. This leverages the data we have in BlackLine, the application and control layer that we've built over 20 years and proven with over 50% of the Fortune 100 is trustable and auditable and uses AI and gives it the tools to leverage this to accelerate automation workflows and activities. I think the best example I've given to our users and customers is around new hires. Hiring a new accountant, maybe a college grad, you can't drop them into your business without any context of how your business operates. They need tools, they need governance, they need process, they need supervision. BlackLine acts as that supervision, that control, that framework so that these new hires or AI in this case can be effective in the office of the CFO. So we're able to make large language models like GPT-5, Gemini and others more powerful through the framework we have here at BlackLine. Today, we unveiled Verity Beyond the Black. Verity represents BlackLine's capabilities. It's rooted in the Aladdin word for truth. It's woven throughout all of our products, and it's a core part of BlackLine's platform. And it's our commitment to ensure that we are making trustworthy AI available to the office of the CFO and creating a future where humans and AI workers can be together working as a single team and ultimately elevating the role of finance teams to be more strategic. We also know it's important to not just be AI for AI's sake. So here's our AI in action. Here are the 4 key areas where Verity is delivering value for our customers. First is intelligent insights. Verity transforms raw financial data into strategic, actionable intelligence. This helps teams be more forward-looking and risk aware. A great example of this is when I talked about our insights capabilities with natural language. Verity can help find data easily without needing a BI analyst, an expert in Tableau. Verity helps our users find that information right away. The second area is content generation. Generative AI, that's the name sake, but we excel at using large language models to generate content on behalf of our customers, and it's accelerating their ability to do work. A great example is our financial narratives that we're able to generate using AI. We can distill information down from key documents, supporting evidence and the data to create balance sheet and summary reports. We can draft the narrative summaries for financial statements. We can create footnotes. We can explain variances using the data in BlackLine, all using AI. 50% of our financial reporting and analytics customers already use these capabilities today. Another area that I'm particularly happy about and proud of is Verity Summarize. With Verity Summarize, we're able to turn drafts using AI summaries to generate drafts and descriptions from supporting documents. So any supporting evidence that's in BlackLine, we can summarize for you. We have roughly a 65% acceptance rate of these summaries today. This means that 65% of the drafts and summaries generated by our Verity summarized capability are accepted without human intervention. I think for all of us, we're roughly familiar with code generation tools as being the benchmark for where large language models excel. With code generation, I think industry acceptance rates are roughly 20% to 30%. So we're 2 to 3x the acceptance rate of code generation tools. And so this is only going to continue to improve as advancements in large language models and how we harness them improve our ability to do this work. The next piece is process automation. BlackLine, we've excelled at process automation, whether it's in the matching space or automated journals definitions. We're continuously automating work in the office of the CFO. But we're now layering through Verity new AI capabilities here. Verity Match is our AI-based transaction matching solution. Using AI, we're now able to suggest pass rules on behalf of users to tackle unmatched transactions automatically. This gives teams the ability to scale and handle more complex scenarios without as many people. We also have Agentic experiences that we'll be talking about. Verity goes beyond just simple automation and is also AI agents that can manage complex end-to-end workflows. We're thinking about this as a new digital workforce for finance and accounting. So this is really the future of finance. It's not just automation as a point solution, but it's end-to-end workflows, these agentic experiences. And we've started first with our Verity Prepare and Verity Collect agents. These are agents that our users can customize and control and they can create multiple agents. But to manage this team, we've also been giving our users a new tool, meet Vera. Vera is BlackLine's Agentic supervisor. So what this is, is an agent of agents. So BlackLine's Vera can distribute work to teams of agents, can understand which agent to target for the right task, especially since our agents can span geographies. So for example, if you're a team in Japan or a team in the U.K. or the team in Australia, you can customize and create agents that use your language, locale, preferences, but also the controls that your organization has in terms of access control, data privileges and things like that, all the security controls that a traditional user has. So Vera can navigate that for you. Vera takes away the complexity of having to find the right agent to talk to and distribute the work for our users. To make these agents come to life, we partnered with Google Cloud. We're leveraging the Gemini platform to power our agents using the agent development kit. This agent development kit gives our agents key capabilities, especially agent-to-agent communication. So these aren't just point solution agents that handle a singular task. These agents can work together singular or multiple agents as a team. And so this agge-to-agent protocol allows them to pass on work to the right agent to get the task done. So whether it's summarization, preparation, document collection or other activities, the agents can actually coordinate work through this framework and protocol. And this is powerful if we think about how we're going to build this ecosystem of work in BlackLine. I think there's also further opportunities to extend these agent protocols to partners in the future as well. And we're going to talk about how this work looks like. And so this is an ecosystem of collaboration we're creating in BlackLine through these agents and agentic protocols. And this happens without human intervention. I think part of this story to tie together as well is that our move to the cloud has allowed us to adopt these technologies, whether it's Google Cloud and Gemini, whether it's Anthropic and Claude, whether it's OpenAI and GPT-5, we're always evaluating best-of-breed large language models. and we have a framework to ensure that we can continuously evaluate and leverage them in BlackLine's framework so that whether the best-of-breed models continue to be Gemini or move to a different provider, our system of controls, our framework that we're creating to allow these agents to operate on top of the data we have allows us to benefit from any advancements that we're seeing in the field. This is the view of what the new digital workforce looks like powered by BlackLine. At BeyondTheBlack today, we gave our users and customers a view of a world where finance teams work together with AI agents. And you can see here that we're trying to fill out the different roles within the office of the CFO with agentic capabilities. The differentiator here, though, is that the work is auditable. Each of these agents that does agentic work will be a user in BlackLine. So they have the permissions, the controls and the visibility and auditability that auditors and others will rely on. Here's a peek at Verity Prepare. For those of you who didn't see the video or joining through the webcast, Verity Prepare is our agentic preparation capability. Verity Prepare can pick the accounts to reconcile and can automate the preparation of manual account recs so that our users only need to focus on what's high risk. I think the pieces that are most important here are that we highlight and elevate chain of thought. What this means is our agents document and describe what they're thinking and how they're arriving at their conclusion. They show this to users in the user interface, but they're also using BlackLine's comments audit trail to document and leave an auditable record of work. so any changes are documented, they're reviewable. And so reviewers, supervisors or audit firms will all have a view on what the agents are doing and can trace and trust that work. With Verity Collect, we demoed our capabilities around an AI collection agent and how we're looking to take a low-yield activity and time-consuming task of calling customers around outstanding invoices. We're now putting that work on AI's plate. Our AI agent is able to understand sentiment. It's not just placing the call, but we're also handling how does the user feel? Is the customer responsive? What's their propensity to pay? Are they committing to pay? We're able to follow up with e-mails and craft detailed e-mails and follow-up. And so we're also able to handle a lot of the workflow without a human being involved. But we've also accounted for when a human does need to be involved and handle those exceptions. This allows teams to scale without adding more headcount or capacity. And I think this is critical is that these are the first 2 of our Agentic experiences that we're targeting. As I showed the org chart earlier, we are looking to build and flesh out teams of agents within the office of the CFO, and we're targeting just these 2 to start, but looking for more to come. I think the other key concept we talked about today is our command and control center, which we built in Studio 360. This command and control center is really targeted for CFOs. I think ultimately, we are trying to up-level this conversation to be around the business KPIs. We're helping CFOs to understand where AI agents are able to help them get work done, but also what opportunity remains? How do they further optimize their organization and get more value from BlackLine. We're giving them the tools to see where there are further opportunities to adopt BlackLine capabilities to get greater ROI from our products and increase scale from their teams. I think this is really setting up the stage for our product-led growth motion. We think it's critical that we continue to highlight the capabilities of AI, get our users and executive teams comfortable with these technologies and allow them to adopt this technology in a way that's trustworthy, but can continue to scale. And I think this is really critical in that we're able to now create a world where our finance teams work together with AI, get the comfort around that, but also have the trust that this work is going to be auditable and defensible and trustworthy. And now we're going to have Charlie Gaulke, our Head of Product, come talk more about what we're doing in our road map.

It is bright. Okay. All right. So thank you, Jeremy. So how do Verity and Studio 360 combine together to solidify our vision as the platform for the office of the CFO. In my view, it's actually by becoming the intelligent platform for the office of the CFO. To understand how we will deliver on this mission, I will walk you through our product strategy and our key investment opportunities. What's important is this just isn't a road map of features. This is a blueprint for how we are building the future of finance and accounting. It is a strategy designed for long-term growth. It's designed to solve our customers' biggest challenges, create a competitive moat and drive sustainable long-term growth for our company. It means expanding beyond our leadership of just financial close to become the most critical platform for a modern finance organization. It's about empowering our customers to move beyond historical recordkeeping and into strategic business partners. And it's a vision that solidifies our position as the foundation for intelligent financial operations. So let me walk you through our investment priorities. First, with Studio 360, we are expanding our footprint across the office of the CFO, enabling seamless integrated experiences throughout our platform. Second, we are building differentiated AI at scale to augment our customers' workforce and empower their teams to deliver more value with more efficiency. Next, we are continuing to reinforce our position as best-in-breed in record to report while broadening our capabilities in invoice to cash. And finally, we are ensuring extensibility and frictionless adoption of our entire platform. So let me break down for you what each of these means to our customers and our business. First, our vision requires a platform that can handle the full spectrum of financial operations. That platform is Studio 360. As Jeremy mentioned, it is our engine for expansion across the office of the CFO. We are enabling complex workflow orchestration, allowing our customers to design, automate and manage processes that span the entire finance function. And a key part of this is that it can be owned by the business, not the IT department, which is a critical differentiator compared to other companies in this space. And at the foundation of this is data flexibility. Through our partnership with Snowflake, we are delivering unified self-service dashboards and reporting, giving the customers to unlock deep AI-powered intelligence from their own data. This, combined with our investment in Agentic analytics means happened, it will tell our customers why it happened and what they should do next. Now on to AI. AI is the single most powerful force shaping enterprise software. And our strategy here is what differentiates us apart. We aren't just sprinkling AI features across our platform, we are building differentiated monetizable Agentic AI. Like Jeremy said, we are creating a digital workforce. Our investment in Agentic AI allows us to automate entire end-to-end processes, not just discrete tasks. These are AI agents that can reason, plan and execute complex finance and accounting work. And to manage this, we are building a command and control center, giving CFOs visibility and governance over their human and digital teams. And through these investments in an agent-to-agent ecosystem, we are creating a network effect where our customers and our partners can build on top of the BlackLine platform to truly harness the power of AI. This isn't where we're just making our products better. This is about creating entirely new high-value services that we can monetize, driving new revenue streams. And while we expand, we will not sacrifice our core. We are the leader in record to report, and we are accelerating our investment to stay #1. We are deepening our expertise with a focus on vertical use cases and industry specialization, creating tailored solutions that solve unique challenges of industries like banking, insurance and energy. And our investment in enhanced financial consolidation and reporting ensures we are the only choice for large global enterprises with complex multi-entity structures. And we're continuing to innovate at the core with products like our new AI-powered accruals engine to improve accuracy and reduce manual efforts across the accruals process. These innovations fuel a product-led growth motion, making it easier for our customers to adopt and realize enhanced value from our platform while increasing stickiness across all of BlackLine's products. Invoice to cash represents a large adjacent market opportunity for BlackLine, and we are attacking it with an AI-first strategy. Our first key investment is in AI-powered collection management with an upgraded user experience. We are streamlining workflows and automating one of the most labor-intensive and error-prone processes within the AR cycle. By deploying specialized agents like Verity Collect for voice, e-mail and data analytics, we will transform the collections process, moving from manual intervention to proactive action. This will free up our customer teams to focus on value-added activities and most importantly, accelerate their cash flow. And also, we are engineering a direct path for growth with the expansion of cross-sell into our Record-to-reort installed base. This makes adopting the invoice-to-cash solution a natural next step for the thousands of our existing customers. It's a targeted strategy that turns our installed base into another growth engine. And finally, our investment in robust and comprehensive APIs and task libraries allows our platform to be the central orchestrator for any financial task regardless of what ERP or system it touches. We are building a true ecosystem, a marketplace of blueprints and connectors, making it seamless for customers and partners to build on and integrate with BlackLine. But maybe even most importantly, we are focused on self-service capabilities and accelerating faster time to value. We are building brand-new implementation and optimization agents, which will streamline the onboarding process, reducing implementation times and costs. This frictionless adoption will further accelerate customer acquisition and market penetration. So to bring it all together, our 5 investment priorities form a cohesive mutually reinforcing strategy. They build on our core strengths, extend us into new markets and cement our leadership position within the office of the CFO. We are building a company that is not just a market leader but a true platform for transformation. And we are confident this is the right strategy to deliver exceptional value to our customers. So with that, I will hand it over to Stuart. He is going to show us how we are amplifying our commercial excellence at BlackLine.

Thank you, Charlie. Good afternoon. Waiting for the slides to change, but perhaps that's on me. Yes, it is. So again, Stuart Van Houten, Chief Commercial Officer here at BlackLine. As I was thinking about this presentation as I'm the newest executive in, I thought I'd spend a few minutes at the beginning of the presentation, giving you a sense for why I made the decision to leave SAP and come to BlackLine and what was the mental gymnastics I went through in terms of making that decision. And I'm going to tell you the end of the movie first, and then we'll go back and work through the sequences of the movie that got us to the end. And that end perception was that this is a company that had a solid foundation with immense potential in terms of accelerating growth. I did deep due diligence in terms of leaving SAP because I didn't take that lightly after being there 10 years, and it was a really good 10-year run. And so that deep due diligence was about -- is there a set of competitors I don't think we can compete with? Is there not the right white space or TAM? Is there a product market fit issue? And in all cases, I found the right answers that gave me a ton of confidence that BlackLine was the right place to be. It's not a product market issue -- product market fit issue. It's not lack of TAM. Our brand recognition and brand equity in terms of winning in the market is tremendous. I always have healthy respect for competitors, but I would much rather be going to market with our set of cards than theirs, frankly, much better. And so I just looked around at the strategic moats that this company has built and is building. And when I combine that with what I see as my core skill set and that is optimizing go-to-market teams for Lyft, I was super confident that we could drive growth here. The other point I want to make here because it's super important for me, and I think it says a lot about this environment of AI is, look, you guys know better than I do, AI is causing a ton of choppiness for enterprise SaaS software companies, unwarranted in my opinion, or at least way premature in my opinion. But the reality is we've got this metamorphosis that's taken place over the last couple of years with enterprise customers where they had to be doing AI POCs because you looked tone-def and you look like you lacked situational awareness if you weren't. And that is now morphed into real money being spent on real AI projects. But the reality of those events is most of them are not providing a return today. And so that is going to create headwinds. for some enterprise SaaS companies and certainly for some native AI companies. But from my perspective, this is a huge tailwind for BlackLine because when I was getting ready to leave SAP, I was named CRO of the Americas for what is a newly formed organization called Finance and spend. It was the combination of my old intelligent spend management organization and the new OCFO technologies. And so I spent a ton of time with CAOs and CFOs there and continue to do so in my first 7 months here. And what is absolutely clear is that CAOs, CFOs want to take advantage of the intelligent -- these AI technologies, but they're certainly not going to do so as a constituent where you can't provide auditability, traceability, transparency and trust. And if nothing else, those are the foundations of the AI that BlackLine is building. So the way I'm wired, there's never a shortage of things that keep me awake at night, but 7 months in, I could not be happier with my choice to join BlackLine nor could I be happier with the early returns in terms of some of the management systems I've put in place to overhaul this go-to-market motion, and we'll talk more about that in a moment. I'm not going to spend a ton of time here. I've actually been running go-to-market teams outside of SaaS for close to 3.5 decades. It makes -- it really pains me to say it's been that long because it just means I'm bloody old. But I've been involved in enterprise SaaS for almost 20 years. The last 10 of those at SAP, again, running what was the largest cloud division outside of ERP called Intelligent Spend Management. And the team I built there doubled revenue in my time in that space. So this is how I see my core skill set, taking under-optimized go-to-market teams, whether it's people, process, culture, and I'll talk more about that in a moment, and getting those things fixed to allow you to start to scale effectiveness in terms of your go-to-market motions. Look, growth is never easy at any time, anywhere, except for today, perhaps a handful of native AI companies. But when I looked at the strategy that was presented last November here in relation to platform amplification, partnership amplification and combine that with what I do, I was really, really positive that we could drive growth. So many that have come before me have spent time waxing poetic about the studio strategy, and I'm not going to spend time doing that. What I am going to spend time doing is speaking to the cultural shift that has been created both in terms of our product strategy, but also my own assessment of needs within the company in terms of how we showed up differently in the markets with our customers. And what that means is, yes, we've got a Studio 360 platform. Yes, we've got AI nicely coupled with that. We've also got a set of really nice software solution assets, the full financial close platform, intercompany, IDC, FRA that I didn't feel like we had enough heat light intensity on, and I talk about all of those from the sales organization. And I talk about all of those things as sort of our end-to-end positioning in the market. We are enabling the hell out of the sales organization. to position our end-to-end capabilities across all the things that I just mentioned because what I know is after having been here for 7 months, it's compelling, it's differentiating and it's value laden. And so what that changes for us is reactions in the markets that are really, really powerful for us. It changes the dynamic of our sales teams walking into a CFO office and saying, "I'm here to help you figure out how to solve that point problem with a point solution." And don't get me wrong, for many, many years, we've done that exceptionally well. But now it allows us to walk in and have a strategic conversation about what end-to-end capabilities really means. That's not always easy. I want to be super clear and any of you that have spent a lot of time in this space, you know that's not easy. Sometimes customers want to solve a point problem. Transformation is hard. But when you have the assets to enable transformation as we do, and you combine that with the right right value framework from presales, the right messaging framework from all sales organizations, the right quantifiable ROI built on of getting to transformation with your customers. So now we get to what is the holy grail in my opinion, when you do all those things, you're entering into long-term road maps with your customers that sequences the value takeout along that road map because you've established that. It's not easy to do. We did it forever at SAP. I know how to do it. We will get there. As Owen said, we're pleased but not satisfied in terms of our progress. This is going to be a huge differentiator in terms of how we show up in the market. And we're already seeing early results. We're seeing rise in our pipeline around average ACV. We're seeing rise in our deals around average ACV. So we can see the green shoots in terms of positioning a bigger bill of materials, a bigger transformation effort. So let's talk about some of the things I'm doing and focused on from a go-to-market perspective. I want to be really clear when I came in with the team, complete overhaul in terms of what I call a management operating rhythm, which I'm happy to talk at nauseam about because I'm a go-to-market nerd, but a management operating rhythm that we layered across our global organizations. On top of that, we established a sales methodology. If you pay any attention to this stuff, think of it as Med pick, but it's my own sales methodology program. But this is a complete refresh for this organization. And ultimately, well-run go-to-market organizations are about accountability, management, measurement, rigor, relentlessness and culture. And what we are accomplishing is all of those things. And it leads to pipe generation is our cultural North Star. I'm super impressed with the amount of pipe we've created through the first half of this year and frankly, through summer months in July and August, which my experience at SAP never happens. Pipe in enterprise SaaS software companies usually goes up to half 1 and then down as people try to close out their fiscal year. We continue to go up. So pipe is the culturally defining North Star for us. But then equally as important and training our leadership to drive rigor around this is pipe maturation. How effectively are we moving that pipe that we've worked so hard to create through our cycles. This stuff wasn't happening before. And so measuring pipe, but not measuring pipe maturation is akin to investing in analytics, being given insights and doing nothing and taking no action with those insights. It's the same thing. The third leg of that stool then is the value equation, and I'm going to talk about what I've done with the presales organization here in a moment. But a value advisory presale solution consulting, whatever you want to call it, it's called many things, that is committed to being value first, delivering creative and passionate demos, but most importantly, being committed to world-class discovery. And again, I'll talk about this in a moment, is a really powerful tool in helping sales enable their activities. So it's about pipe, it's about pipe maturation. It's about value. It's about being able to quantify that value and scale and keep doing it over and over and over again. The second thing I want to speak to on this slide is AI-enabled sales teams. We are using technology to drive greater efficacy in terms of how we operate our markets. The first is conversational intelligence because now we're spending so much time enabling all of our sales organization on the things we want them to change and how they message our strengths and our value, we can now seek for it with AI technologies, especially early with BDRs when it's critical to start setting that impression of the broad-based capabilities of Blackline.

But then on the other end of that spectrum is you're hopefully getting closer to an executed project are the AEs and AEMs delivering on the value that we've created. And so what I know, when you do this correctly, when you create a rigorous, relentless science-based go-to-market motion with heavy management and measurement and accountability, it's as, in my opinion, it's as differentiating a competitive asset as any company has.

Now I'm a commercial guy. I'm sure Jeremy and Charlie would say it's product that is the differentiating aspect, and we would both be right, frankly. And that's what we're building, and that's what's driving some of our early wins in terms of KPIs. Again, please not satisfied. So now I want to talk about talent, organization of talent. So when I -- again, I've probably said 3x, presales. There's 2 organizational boxes I care about more than any other in an enterprise selling organization and absolutely committed to having rock stars in those 2 organizational boxes.

One is pre-sales and the other is first-line sales managers. Why? Because when we set the value agenda, our rockstar presales are the people that bring that to life every single day and never allow us to sell products but sell outcomes that are associated with ROI and value. On the other hand, the first-line sales managers are the people that bring the rigor to make sure they never take their foot off the pedal in terms of implementing my management operating rhythm.

Go to market. Most people think of go-to-market as being largely art and everybody understands it because it's not that complicated. It's not rocket science. The skill is never relenting in terms of the expectations driven down into the entire organization. on managing monthly pipe, on managing that pipe's maturation on managing a value articulation and framework. If you never stop, it becomes self-reinforcing. So I got off base there a little bit. presales. When I joined presale sat in every 1 of my regional sales organizations, my presales leaders reported my senior VPs that roll up to me. So one, a presales team in AsiaPAC, 1 in EMEA, 1 in North America, so on and so forth. And what I know from having done this so long and built presales organizations is you lose the culture of best practices you lose the comradery of passionate and creative demos. You certainly lose a standardization around the processes around world-class discovery.

So I hired a gentleman that was with me at SAP performing the same function. Global presales head, absolute rock star. We have consolidated all of those presales activities and are doing all those things. He's flying around the world, providing boot camps, talking about what is value selling look like. selling outcomes, what does that look like? World-class discovery, what does that look like. And this is going to pay huge evidence, no matter how good I am, how good Owen is, anybody else, if we don't have rock stars in presales and first-line sales managers, we won't be successful.

And so we are starting to upgrade where we need to, and we will continue to do that. But those are some of the early focus areas in terms of go-to-market. So let's talk about some growth vectors. We've got 3 of them for the most part. One is industry. and then markets and then how we're sort of bringing it all together across technology, partnerships and ecosystems. So there are some redundancies in terms of the benefit that an industry-focused sales team brings to some of the things I've already mentioned, but it just puts it on steroids in my estimation.

I come from a heavy industry-focused background at SAP. I haven't worked for a Salesforce. I haven't worked for an Oracle, but I was -- I've been in a lot of other places. I am as impressed with the industry focus that SAP has of any company I've worked for. And we're going to get there. We're not there today. But the industry focus allows you to do a bunch of the things I spoke of earlier. When you do it right with the right industry principles and sales organizations and presales is a tip of the spear on this as well, you're creating stickier use cases. You're more adequately differentiating yourself from your competitors. You're able to maintain pricing power more because the ROI is so great and you're able to control deals better because the opportunity cost did not move when you've created a real clear return is in your favor versus allowing the customer to control the quarterly outcome.

Super excited about industry, and we already -- I don't know how many different verticals we have like the top 5, 6 7 already, incredible blue-chip customers, but excited about expanding this even further. Markets, entering a new one and expanding in another one, I'll start with public sector. We got our first win in public sector. DOJ, huge event for us. because we've not been in this market all that long. But if you've spent time staring at the federal space, you know that this is a massive durable market that allows real staying power if you do it correctly, right?

And I think our right to win is tremendous here because every agency is under so much pressure to demonstrate fiscal transparency, improve accountability and eliminate waste. So I do think our right to win here is huge. And frankly, a shout out to the P&T team, how quickly they got our technology to FedRAMP Moderate. If you know this stuff in terms of the certs to be able to sell cloud products in the federal government, FedRAMP Moderate is huge. You can sell to all the civilian agencies. Is it high, Jeremy? I think it's FedRAMP High, that allows you to sell to the big defense and intelligence agencies, which we will get there.

This is going to be a huge driver of growth for us. I don't even think I can conceptualize yet how big it's going to be. It's going to take a couple of years, but we are super excited about the opportunity for public sector. International markets in terms of expansion.

I'll start with EMEA, and Owen already mentioned some of this. Look, we're going to grow nicely, 24 to 25 in EMEA. New leader there that we brought in from Salesforce. He is also a rock star we are getting on a better glide path. But we still think the TAM in EMEA is huge. We're barely cracking the Germany market. It doesn't make any sense in terms of our relationship with SAP, we'll get that right. We're investing in KSA and we're rapidly moving towards a POC with a very large company in KSA, tremendous developments there. And then in Asia Pac and Japan in terms of driving nice growth in '25. We will springboard off that growth with all the things that I've spoken about to date in terms of the right end-to-end messaging the right commitment to value the right people doing the right things. And then finally, Japan. Look, Japan is also going to grow in '25 from '24, but we need it to be orders of magnitude larger and moving more quickly. And we think we're starting to figure out what are the impediments to allow us to do that. And then finally, look, I've got 1 more slide after this, I'll sort of bring it all together. But moving left to right, look, AI really impressed with the AI we've announced. I'm anxious to get with customers tonight and hear their views as well.

It's the newest sharpest tip of our spear in terms of our go-to-market teams. But again, I want to be super clear well before Studio and AI. We have been training the teams to sell the end-to-end set of solutions, full financial close platform, intercompany IDC FRA, we have some really nice assets there. For the second quarter in a row, Q2, Q3, our largest deal by a long shot will be intercompany. We are going to rapidly grow around intercompany.

SAP, man, I could not be more excited about SAP. Having come from there, I know the amount of organizational change they were going through at the beginning of this year because I was involved with a lot of that planning for the Americas for finance and spend. My view is they've been somewhat distracted through the first half of this year. And still in that environment, we saw really nice pipe uptick in terms of Solex opportunities. We saw a lot of things that really matter in the market in terms of the golden standard architecture that everyone in SAP understands.

More importantly, is the auto attach of SKUs into finance packages for both private cloud and public cloud [indiscernible]. That is huge. Prior AEs had the right to pull those SKUs out of those bundles and now they've got to get a special exception to do so. But even independent of that, I speak to people that used to work for me and they're like, man, I've been measuring it in February of this year when we took over the OCFO BlackLine Technologies. We had 20 opportunities amongst the sales force of 125. They're now like 170 in terms of total opportunities a short few months later. I really feel like we're going to drive a nice Q4 and see acceleration in 2026.

And then partners. Look, every time I enter an organization -- newly entering an organization, I'm looking for effective scale and all the levers that I want to pull to drive and optimize go-to-market motion. That's what partners should represent for us. And there's a lot of work we still have to do in terms of getting them fully enabled on our new messaging and our new thinking in terms of how we go to market, but we're making a ton of progress there. So I think in general, we think there's a real force multiplier effect across these 3 dimensions is our last point on our growth vectors.

And then I'm going to just close it up and tell you what I've already told you sort of told you the end of the movie, told you how I got through the movie, and we're back to the end of the movie. I just think there's tremendous opportunity here. We've built really nice technologies that are the best in the record to report space. I think we haven't been as focused on driving transformational deals in the past as we will be going forward. But then you start to combine that with studio and AI and intercompany we're going to have a really nice opportunity for growth. And so start to lay on that management operating framework with the new sales methodologies we've deployed in combination with our new solutions and our new adherence to end-to-end messaging, we really feel like the opportunity to really grow through '26, '27 and '28 is very, very doable, Super excited about it.

So now I think I'm turning it over to Patrick Villanova.

Thanks, Stuart, and good afternoon, everyone. So you heard from Owen today about our powerful AI vision for the future and the present. You heard from Charlie and Jeremy about all the innovation that's going on as it relates to Studio 360, as it relates to Verity and it relates to several other aspects to our solution and our platform. You just heard from Stuart about the world-class GTM engine that he's built in conjunction with his team and more importantly, how he's going to take all this innovation, all this AI to market. So my role today, my job is to link this strategy, to link this innovation to the numbers. I'm here to provide financial proof points that demonstrate not only is our strategy working, but we have reached a clear inflection point. where years of deliberate investment are now culminating in a reacceleration of growth and a clear path to sustained expanding margins. So as a brief refresher, I presented this chart back in November at our last Investor Day. And we laid out these targets, and we continue to execute towards them with confidence. back in November was that 2025 would be an inflection year where we begin to see signs of progress across our leading indicators and in our revenue growth and our path to achieving these targets over the next several years. Well, so I'm here today to say we're no longer talking about a future event. We're no longer talking about 3 to 5 years out. The reacceleration is visible in our results today. Our key forward-looking indicators are demonstrating our momentum. ARR, CRPO, RPO, growing in the range of 9% to 11% through the first half of this year on a year-over-year basis. It gives us great visibility, stronger visibility into the future revenue that we will recognize and it's reflective of the GTM motion and pricing strategy that we've implemented this year. And so when you look at our full year guidance for 2025, it implies a certain performance for Q4. And the message is clear. We are absolutely confident that we will grow more in the fourth quarter than we did in the first quarter. We will exit this year growing faster and as a stronger company than we did entering this year. And I want to be very clear, this is not a temporary spike. This is a new foundation from which we will build upon for 2026 and over the next several years. And I can say that with confidence because of all the powerful growth levers that we've been investing in and will invest in. So as a quick recap on those growth levers, these were presented as well. Obviously, platform and packaging has been a great tailwind to this year. Studio 360, you saw a slide earlier in terms of the uptake from our customer base and how that's driving more bookings and revenue growth. And then, of course, partners. We've had a lot of large partner-led deals even outside of SAP this year, and we'll continue to. Those are investments that are paying off in 2025 and contributing to the leading indicators that you saw earlier. Now for 2026 and beyond, we've made an investment this year in the public sector. We've closed one deal already, and we see building pipeline in that area. And that was part of the plan, invest this year in FedRAMP in the public sector to see growth in '26 and beyond. You heard Jeremy and Charlie talk about all the Agentic AI that they're building and how that's going to stimulate growth in the fourth quarter and beyond, '26 and beyond. And then lastly, you heard Stuart talk about his relationship with SAP and our relationship with SAP and how we continue to invest there, continue to go to market stronger, better, and that is an opportunity for us in 2026 as well to turn the pipe that he referred to into bookings and then eventually revenue. And so what's important here is that there's no big bet up here. None of these levers represent 90% of our future growth. Each one of these levers have a stand-alone ROI model that would -- that is going to yield about 0.5 point to 1.5 points of growth compounding upon itself over the next several years. And that's what continues to contribute to our confidence in executing on our model. So let's look at some deeper metrics here and first half results that demonstrate that the strategy is working. If you look to the upper right, our average new deal size is up 39% year-over-year. This is a testament that we're landing with a platform and that we're landing with multiple pillars within that platform. You can see on the upper left, when we have 2 pillars or 3 pillars within that platform that the ACV goes up exponentially for that customer and the net NRR also increases. As a result of this, we now see strategic products contributing to 29% of our sales, and that will continue to increase. We've had a 24% growth in our number of $1 million customers in just 1 year. And then more importantly, in the second quarter, over half of our new logos are taking up our new platform pricing model. It's being well received in the market. It makes sense. The value is obvious. So these are indicators that our strategy is working, and it continues to strengthen our confidence and that what we're doing from an investment standpoint has taken root and proven to be successful in 2025. So let's talk a little bit more about our pricing model. It was primarily designed to do 2 things. One was to unlock the power of our Studio 360 platform and the value that it brings to our customers. And then two, it was meant to be a commercial vehicle to monetize the powerful AI that once again, you heard about this morning in the keynote and earlier in this meeting and how we're going to go about monetizing that. I want to reiterate, we are ahead of our plan as it relates to our pricing strategy. We had a multiyear plan of adoption for our existing base of customers as well as assumptions around the number of new logos we would land under this model. We are ahead of that plan, and it continues to be successful and well received in the market. And so what this leads to is a foundation to set the stage for our AI monetization strategy. the value of our AI agents, the digital workforce, the virtual accountant or finance professional will be captured through a consumption-based model that links directly into our platform technology and platform pricing framework. Our AI agents are capable of doing much more work much more efficiently than a human being. And with that comes ROI to our customers. And the higher the ROI to our customers, the more revenue it generates for us. And I'd like to use examples that will resonate with, hopefully, everybody in the room. Right now, on our traditional user-based pricing model, if you're an accountant or a finance professional using that platform, you can perform reconciliation a month or 1,000 reconciliations a month. the price doesn't change. That means our revenue doesn't change. However, in order to get access to the agents that Jeremy was talking about, the Agentic AI, we will require our customers to move to our platform pricing model. That is an immediate uplift over the user and seat-based pricing that we have in place today. That is a day 1 uplift upon adoption. In addition to this, because of the ROI provided by or generated by these agents, we will begin charging for the number of reconciliations that are being performed by one of these agents. So just looking at a singular agent, a single example, we have 2 opportunities within one agent to monetize, to migrate to the platform model and begin charging for something that we've never charged for before, performing reconciliations almost completely independently of an accountant. So moving from growth to expanding margins. Not only are we selling AI, as Stuart talked about earlier, but we're using AI internally. And you can see this story pervasively throughout our P&L. As Jeremy noted earlier, we will be done with our GCP migration before the end of this year. Well, that unlocks potential, more than just eliminating redundancy of server costs. It allows us to use AI to optimize our entire data set for all of our customers. That helps us plot a path to mid-80s gross margin that we've been talking about since last year. From a sales and marketing perspective, Stuart highlighted several things we're doing in presales, and pipeline generation and go-to-market motion, all AI-enabled that is generating more productivity for a lower cost. Product and technology. We've been moving individuals or placing individuals in lower-cost locations, engineers, and that's provided a benefit. But just as importantly, we've enabled those engineers with AI tooling. And those engineers are producing more output, more code, more innovation than they ever have before without compromising quality. And if you want evidence of it because it's all about proof is in the numbers, well, just look at our P&L. All the innovation we've been talking about over the last year or 2, Studio 360, Agentic AI, it goes on and on that Jeremy and Charlie talked about. We've been able to do all that with P&T costs as a percent of revenue not changing. And that's a proof point to the efficiency that we're generating in that area. And then finally, G&A. Our own back office, our own backyard, we will continue not only to use our own product, but to use IT and AI to continue to generate economies of scale to enable better scalability so that our G&A costs do not grow in proportion to revenue. All of this leads to a clear path, a clear path to expanding margins and a clear path to our target model. So the combination of accelerating growth as well as expanding margin puts us on a clear path to the Rule of 40. If you remember back in November, we talked about reaching our target model of 13% to 16% growth in 3 to 5 years and 26% to 30% operating margin. Well, today, I can sit here confidently and provide even more transparency in terms of that time line and how we're going to achieve our Rule of 40. Our guide this year is 29% to 30%. There's a clear path to 33% next year, 38% in '27 and then by 2028, achieving a Rule of 40 of 40% or better through a combination of the growth levers and strategy, coupled with expanding margin. And so that financial model obviously is going to generate more cash flows than we're generating today. So it's very important to understand what is our capital allocation strategy. Well, I think you might have heard it in the keynote this morning and a Warren Buffett quote, but there's no better person to invest in than yourself. So our #1 use of capital is to invest in this company, to invest in our own innovation. That will always be our North Star, our guiding light because there's no better ROI than innovation and investing in your company. Number two, we will continue to look at opportunities for tuck-in M&A that helps us build out the office of the CFO -- and then three, our third use of capital. I'm happy to announce this today, but our Board has authorized a $200 million expansion of our share buyback program. Similar to before, we will continue to be opportunistic in terms of how we buy those shares back, but more importantly, have the mindset of returning capital to our shareholders. And then lastly, as it's just a few months out, our 2026 convertible notes, the remaining $230 million becomes due in March of next year, and we intend to pay that down and continue to deleverage our balance sheet. So to bring the formal portion of the day to a close, I want to leave you with this. Everything you've heard today from the strategic vision to our product innovation to the GTM engine and execution that Stuart is implementing as well as the financial framework that I just took you through points to one clear conclusion. BlackLine has -- BlackLine's position in the office of the CFO has never been stronger. Our Studio 360 platform supercharged by Verity gives us a durable and defensible competitive moat. Our GTM engine is executing with precision and our financial discipline ensures that we can translate this strategy into long-term growth with expanding margins. Thank you. I do want to say if we could just have a few minutes to get set up for Q&A, but I don't know, Matt, if there's anything else there. But yes, so just give us a few minutes to get set up, and we'll start the Q&A session. Thanks.

[Break]

All right. So we're going to replay the video you saw or maybe you didn't see earlier today about Verity Prepare. We know a lot of the viewers at home did not get a chance to see this. But before we dive right into the Q&A. We're going to play out one more time for you.

[Presentation]

On each side. If you have a question, please raise your hand. State your name and firm and then go for it.

All right. Thanks for having us. Matt VanVliet from Cantor. It seems like now the products or at least a couple of them are very much ready for customers to start using. And you talked quite a bit about AI monetization. But what are the impediments today, whether they're out of your control or within your customers' deployments today to be ready to really utilize these and start driving revenue growth from that? And maybe more importantly, there is how do you overcome some of those impediments? Is it just a go-to-market execution element? Is there an education of your customers of how and why to make these moves and sort of get to the Studio360 approach?

Do you want to start Jeremy or Stuart?

So I think when I talked about Studio 360 earlier, it was really about laying the foundation of data. And across our customer base, that data is present. I think the impediments to AI we typically see are around control and governance. That's one of the big ones that comes up. I think increasingly over the last year that -- sorry, that has decreased over the last year. We see that in less requests to have clauses and contracts that talk about data specificity or around AI specifically. So it is now about showing the possibility that AI is going to bring and the ROI there. And I think that's where as we begin to up-level the conversation, CIOs and CFOs have a charter to adopt AI or to transform their businesses, and this gives us the capability to do that now.

Stuart, do you want to touch on that go to market.

Well, I just want to make sure I'm not answering a question that wasn't asked. The question is, do we have certain embedded base technologies in our customers that make it more difficult to adopt AI. I'm trying to make sure I don't miss the...

If that is an impediment, I mean, if you're sort of past that now with where you're at, it's just a matter of getting that in the next deal conversation, the next renewal or the next new deal scope, like where do you focus most on monetizing today?

I'm not worried about embedding AI in customer environments that may be well adopted or not well adopted. So where I start from that perspective is I do think there's portions of our financial close platform that are not well adopted. And so that creates -- they solve a very specific problem, and they did it very, very well, but it's sort of lost the vision of the CFO, right? And so we've got -- and we talked about our ecosystem as being a great enabler of this in terms of how we message this jointly. There's lost value wedges and not more fully buying into and investing in the financial close, and it's incumbent upon close products. It's incumbent upon us to be able to tell those stories and wrap the right sort of commercial and services packages around that. I don't think those impediments today are going to slow down studio AI, but that's yet to be determined at scale.

Chris?

Chris Quintero from Morgan Stanley. I want to ask kind of on a similar topic here on AI and Verity. It's a really interesting approach and framework that you all are laying out and makes a lot of sense given who your customers and users are. But how do you think about the medium, longer-term kind of AI adoption curve within the office of the CFO, given you have, on the one hand, those kind of more risk-averse buyers and users. But on the flip side, you also have clearly a lot of ROIs to be had within the office of the CFO. So kind of how do you think about those 2 dynamics with adoption?

Jeremy, do you want to take that?

Yes. Sure. I think this is -- again, to anchor on the strategy around Studio360, what we're creating is a platform for the office of the CFO. And so I think while we excel at our differentiated capabilities in financial close, record report and invoice to cash like in that collective, what Studio 360 opens up is our ability to expand to automate more activities that happen, right? Like in just conversations with Patrick's team, there's a lot of work that happens that isn't automated today. It isn't captured by existing solutions, but we're connected to those source systems already. We started that journey with Studio360 Orchestrate to begin orchestrating some of those activities. And this is why I brought up earlier why we're extending to other repositories. You saw on the video, SharePoint, other things that are unstructured data because we can then take AI, which is great at interpreting that unstructured data marry that with our normalized data models that when I talked about connectors and how they really rapidly extract normalized data, combining those 2 allow you to automate that in a meaningful manner. And that's where I think we can extend that conversation in the office of the CFO to orchestrate and automate more of that activity.

Next. I can't see. George?

George Kurosawa from Citi. Thanks for this event. Kind of a 2-parter on the platform pricing, Patrick, I think you alluded to being ahead of plan. Maybe just more details on how that's going. And then the idea that you have to take on platform pricing in order to adopt the AI products, I think it's interesting. I wonder if could that serve as another potential impediment to AI adoption.

Yes. So to address the first question there, we had a multiyear model in terms of how our pricing strategy will be taken up. And without going into the excruciating details, we broke our existing customer base into cohorts with certain expectations in terms of when certain customers would adopt it from a renewal strategy. Then we had a separate model on new logo. And what we're seeing is, notably with new logo, we are way ahead of where we thought we would be in terms of how it's being adopted. And you might have heard Owen and others talk about some of the large 8-figure deals we won. And our pricing model was core to winning that, not stand-alone, but it was a major driver. And when you're sitting down with a CFO or a CIO that has 10,000 employees within their office, in multiple countries. The last thing you want to do is start counting how many seats you need. It just takes away from the strategic aspect to the conversation. You take that off the table, you deliver a platform with a platform fee, and then you start talking about automation and transformation. And that impediment -- the more impediments you can remove from the sales process, I'm not a GTM expert, but I'm pretty darn sure that's a good thing. Take as many obstacles out of this as you can. That's why we're really seeing the uptake with new logo. And then yes, there are certain customers within our renewal base. It is a 3-year plan because that's our average contract length. But we're pulling as much of that forward as we can, identifying customers that are ripe for that and then working through that renewal space. So that's ultimately why we're ahead. I don't -- the second part of that, there's a financial answer to your question, and then there's a technological answer to your question. I'm going to answer it through the lens of a practitioner. And as somebody that has used BlackLine as well as other tools out there and platforms out there, solutions, I guess, is a better word, to bring more automation to my team, if you can go out there and prove the ROI, which we can, and you can do the business value assessment and show how it's going to change the lives of everybody within your team and unlock the potential of your team, when you do that successfully as a vendor and I want that technology, I'm going to uplift. to that technology. I mean, because you have the brand permission as BlackLine. You have the CIO and CFO permission. You have to have an AI strategy. So if you have a proven technology that's going to speed up your close even more and speed up your overall office of the CFO, you're absolutely going to pay a little bit more to move on to that platform. It's a no-brainer.

Yes. I just want to add to that because I spent a lot of time talking to executives, and I was on the phone with the CFO of a $15 billion revenue company last week. His cost of finance is 2%. He needs to get it to 1.5% based upon what the private equity owners wanted to drive it down to. And the whole conversation we were having was being on our platform pricing, but seeing the return that can drive that cost down. And in that conversation was how many people can I eliminate by using what BlackLine has, right, from an AI perspective. And so people don't originally love the idea of maybe being platform pricing versus user-based if you have an old model, but it's just where the world is going. And then if you talk to executives at larger companies, you talk to people around here, the customers today, the CFOs are all under immense pressure to use AI somehow in their organization. And the ability to sort of work with BlackLine where you know you can trust it, it rely upon it is so important to them. It's so important. And so yes, there will be probably some resistance, but I think it's not going to be that great of a wall of resistance, particularly as more and more companies get comfortable with platform pricing and moving away from a user-based model.

John Messina, Raymond James. Just maybe for Owen or Stuart, I just wanted to ask, given the success stories you guys now have on Studio360 with 110 customers on that with spread across mid-market and enterprise, how do you envision that adoption curve looking? How do you expect that segmentation will look as far as adoption with mid-market versus enterprise? And then is that coming on renewal? Or is it intracontract? And then maybe for Patrick, sorry for the multiparter here. But for Patrick, can you remind us what the uplifts look like on Studio360?

You want to start?

Yes. And I want to make sure I don't miss all of the 3 pieces of that question. Look, do I think that studio acceleration happens in enterprise versus mid-market? My sense right now is it happens in enterprise. I don't -- I still think we have a tremendous opportunity in upper mid-market, but I think it absolutely happens more rapidly in enterprise. And I apologize, I forgot the second part of the question.

There's 3 parts.

Just on the adoption curve more broadly. And then also on just when are the conversations happening? Are they happening more at renewal? Or are they intercontract, just any color there?

So look, I think the adoption curve would have already been more up and to the right. based on some lack of execution issues in terms of being really committed to telling the end-to-end story. I think you're going to see that through Q4, and I think you're going to see that in 2026.

Sorry, it's been a long day. The third question was -- it's going to Patrick.

I guess the way to think through the uplift, we've never put a number out there, and there's a rationale for that. So I have a 2-part answer to this one to the one-part question. For one, there is a base fee for Studio360 dependent upon the size and complexity of your organization. It's not one single flat fee. So that right there, right out of the gates, you land bigger. What really drives the uplift, though, long term is the fact that Studio360 connects our 4 pillars or 4 solutions together. And you saw the slide that I presented earlier that showed when you have 2 pillars versus 3-plus pillars, how exponentially your ACV goes up as an organization and you become so sticky, your NRR is notably higher than the rest of the base. And so the connectivity of data that Studio360 provides, that is the bigger of the 2 value propositions. Historically, years ago, we had 4 pillars, 4 solutions, 4 silos. They didn't talk to each other as well as we would have liked them to. Now they do. And when you remove that encumbrance, when you have that flow of data, that's yet another obstacle that you remove from the selling motion. And you say, okay, you only have this one pillar. Now you have Studio360, you can link these other 3 in seamlessly. And when you can say that, not just to a CFO where data is king, but to a CIO, now you got both of them working in tandem in your favor, and that's where the true uplift occurs.

I think one of the things I've learned in this business is it takes some time to get your own people trained on what the messaging is. And I think Studio 360 isn't that intuitive right out of the box. It takes a bit of learning and understanding. And because Studio 360 in some ways is -- it's like the universe, it's going to ever expand. I think it's taken our team some time to catch up and really digest it. And then what I love what Stuart has done with Riaz, who's coming in and running presales is they've really stepped back and thought about the value proposition and how this all fits together and then getting that back out into all the professionals that touch our customers, whether it's a sales team, our account management or customer success and professional services or our partners, there's been an immense amount of investment in learning and education for Home people this year to get there. And I think that it just takes some time to work its way through, but we like the progress we've seen, particularly because we didn't get to put all the big logos that were up there. There were some big logos that have already gone to Studio360. We just don't have the permission to use that brand, but they're more comfortable talking to other customers about the possibility, and that's probably the greatest sales team we have in the sense of when one can talk to another.

The other question I think you asked that I now remember and we did not answer is the renewal cycle. I don't think there's a tight alignment of studio deals to renewals. I think it's more about when you're beginning that cycle based on what's going on in that customer environment that drives the timing of that studio transaction. It can be a time of renewal, but I see that a lot of other points throughout the renewals as well and then perhaps you're bringing those contracts together concurrently. So I don't think it's only at a renewal cycle.

Time for one more. We're running a little late. So Austin, you're up.

Yes, quick for Stuart. This is Austin Cole, Citizens. On SAP specifically, just given your background, I'm wondering kind of how you view that relationship today, where you see it going? You mentioned doing more in EMEA and in Germany in particular. Where do you see kind of the biggest opportunities to go further with that channel?

Look, I think it still exists in every one of our markets. I don't at all think that we've tapped North America. I think EMEA, we will see a real acceleration. As I said before, I think we're -- the TAM there, both direct and through SolEx is tremendous. Germany, we got to figure out. I think this is more about an execution people issue than it is about the opportunity. And then, look, I think Asia Pac will be a little slower. Japan, we're seeing real uptick in terms of SolEx activity. So across the board -- so if I then pivot back from the question to talk about the environment that leads to the question, I mean, a lot of the things I spoke of -- we're the only SolEx partner that is in -- as an attached SKU to a finance, public and private cloud environment. Nobody else has that. It's significant. You don't see them releasing the golden standard architecture to provide real clarity in the market on how all our solutions play together. These are all foundational things that have taken a while to manifest through 2025. I think we're going to see it in the back half of Q4 in terms of Lyft and certainly through '26 in Lyft as well.

I just want to add one thing about Europe. Please don't forget, we've asked Therese to spend a lot more time over there because of what the market opportunity is and that would be another accelerator the things that we're trying to do over there, and she's got great relationships with the SAP executives as well. So that really should be a positive development for us.

Well, that concludes the formal event for today. Thank you again, everybody, for coming. In a few minutes, you can walk next door to Joshua [indiscernible] and have some further conversations with everybody on stage today.

So again, rather you listening at home. Thank you for joining us. And we'll talk soon.

Thank you.

All right. Awesome. Well, welcome, everybody, to day 1 of the [Audio Gap] we have the team from BlackLine. So Owen and Matt, I want to thank you so much for joining us today.

Thank you for having us.

Good to be here.

Maybe just to start, I think, Owen, you've been in the CEO seat at about 2.5 years now, something like that. Maybe just in that time here, how has the opportunity evolved? And maybe what have you seen over the past couple of years as CEO?

Well, this is a good question. There's a couple of pieces to it. So the market has evolved where we're starting to see customers get back on finance transformation journeys. I think for a while, things had sort of slowed down a little bit. And from what we're seeing and experiencing in the conversations we're having with customers directly, with the big ERP players. And then very importantly, the consulting firms, what they're doing and what they're seeing, you're starting see that companies are trying to get more out of the monies they have spent in technology and working with companies like BlackLine and others to then try to figure out how to get more out of it. And so that has definitely been the biggest shift. Now obviously, AI has sort of left everybody with lots of questions, seeing opportunities and threats and all of this. We see it much more as an opportunity than a threat, particularly for where we play in the office of the CFO. So that's probably the biggest thing. I think the other thing that we're seeing in our business a little bit more is there are certain things where North America, the U.S. in particular, leads the world and other parts of the world follow along. And I think what we're seeing in Europe and parts of Asia would sort of show that the opportunities there are starting to get richer. That's why we've asked Therese, my co-CEO, to spend more time in Europe because we're seeing more opportunities begin to emerge there.

Okay. Maybe we touch on Therese a little bit. Recently announced that she's moving away from a co-CEO and you're the sole CEO now. And she's going to be focusing on her founder role, I think, is how she put it. But maybe -- can you -- how is it different from a day-to-day perspective in terms of how the business is run? And maybe what are some of the implications of some of the leadership and other kind of Board changes that have happened over the past couple of quarters?

So I'd like to believe that Therese and I had broken the mold that show that co-CEOs can work because it's been a phenomenal partnership. And even though her title is going to change, the way we interact won't. I speak to her pretty much every day, sometimes 3, 4, 5 times a day as we're trying to work through different things, and I wouldn't expect that, that would change so much. For her, what she really loves doing is spending time with customers and innovating with customers. And what she doesn't like is like sitting in chairs like this and having to answer questions and deal with HR matters and all the other stuff that goes along with it. So She's probably the happiest I've ever seen her when she said, she didn't really want to do the co-CEO role any longer, but I think she's going to continue to be a great contributor in the leadership team. She's still staying on our Executive Committee. She's still going to be on our Board of Directors. And I think if she was sitting here, she'd say to you, Owen, when I haven't had this much fun since I founded the company in the last 2 years. So hasn't been easy, but I think we're going to keep on -- moving on. That will change some of the reporting lines a little bit in the leadership. So previously, sort of she had the product and tech leaders reporting to her and I had -- everybody else will obviously take responsibility for them. But not much of a shift there. And then from a boardroom perspective, we have made a number of changes to the Board. We added 2 former CEOs in the last couple of months. One was the CEO of Deloitte Consulting, the other CEO of a SaaS technology company. And what we're really looking for in the boardroom, there's people that have walked into shoes, understand the issues and can help really drive change forward. And then the other thing that we did was we asked David Henshall, somebody that many of you may know from the investor community to take over as our Lead Independent Director. Our current Lead Independent Director was -- is 80 years old, he has said, I don't want to meet -- he said, I don't want to be Joe Biden. And so it's time for me to step aside. And so he's still on the Board. I'm hoping that he continues to want to be on the Board because he's a great resource but that's the other change we've made.

Okay. All right. That makes complete sense. Maybe talk a little bit about the ERP upgrade cycle, that opportunity in the -- I think you -- as you mentioned earlier, kind of the financial transformation is starting to kick-off a little bit again just maybe what have you seen out there from the customers that are -- that's given you kind of confidence in this opportunity? And maybe how has the dealer environment shifted over the past few quarters?

Yes. I think the thing that's been most remarkable for BlackLine is the mindset that we're seeing from the big ER players, but particularly SAPs, which are -- is our most important strategic relationship. And as we have shared, we went through a pretty major reset at the end of last year with SAP and then throughout this year, that's continuing to evolve. But I think there's a couple of things that have happened that will benefit BlackLine. So the CEO of SAP, Christian Klein, a great guy, he's very hands on with customers. He experienced firsthand the concept of finance first. So the big ERP system integrator on that project, which was a combination of Deloitte and Clearsulting, they really encouraged Exxon to move forward with finance at the core because just doing a big ERP lift and shift doesn't add a lot of value, but you can get a lot of value out of what what BlackLine can bring to those customers. That was great to have. It was a great success, but what really then propelled that was 2 things. One is unbeknown to any of us, the CFO of Exxon got on their earnings call in May and talked about the power of BlackLine. And what that has done for their organization from an accuracy of information, the timeliness of information, the confidence that she and her team could have in making decisions based on really reliable data was very important. And then there was the Sapphire Conference for SAP, where both Delta and Exxon did these case studies and Delta has done another really great success. And so what's happened is the [ quota-carrying ] reps at places like SAP have now said, wait a minute, if I start with finance first, there's this really powerful tool with these great solutions out there that is going to help me -- to help my customer more. And so that's been the shift. It's not necessarily a larger percentage of deals that SAP and other ERPs are pursuing, but where we're positioned in that narrative has changed dramatically. And I think we've shared with you previously, BlackLine was sort of almost like an opt-in on a bill materials, if you read -- just pleasure of having to read one, they go on and on and on. And in the last couple of items, there is something like for what BlackLine would bring. That's now more of -- it's an opt-out versus an opt-in. So a customer literally has to say, no, we're not going to go with BlackLine. Again positioning us more importantly because of the importance of finance first and the transformation. So that's the biggest shift we've seen that in our conversations with Workday and some of the other ERP players that are out there. So that's, that's it more than anything else for us.

Okay. I mean, that's interesting. I mean Exxon probably a great reference customer that, that can begin to -- or that's using you, and I'm sure that probably gets the message out there a little bit more so in kind of the opt-in versus opt-out kind of dynamic. I guess with both those things going on, like when does that maybe start to show up a little bit more? How do you think about the time line of what that could actually look like?

So again, you kind of got to go through the reset, and I try to remind people, January of '24 SAP made some pretty big strategic decisions about reducing a lot of people in their organization. Then in July of last year, our key sponsor left and that's when in August, Therese and I went over to see Christian and say, where do we want to go with this relationship? What can we do? And we built that literally over the last 9, 10 to 12 months. So then how does that begin to manifest itself? Well, if you start to look internally what we see, it's the number of opportunities that are now showing up with SAP. It's the size of those opportunities. It's the positioning, their sales cycle is long, a BlackLine is roughly 9 to 12 months. SAP is even longer than that. But you're starting to see that now working its way through. I'd like to see some positive news in the fourth quarter, remember, SAP does 40% of its business in the fourth quarter of the year. And then again, as we start to get into next year, I think that's when we really we'll see even more of the momentum. But everything that we would want to see is working its way through the pipe, the team and the collaboration, getting to a golden architecture that we go into the market, which in the past, this might sound odd to you, we go into a room to pitch SAP and BlackLine and it wouldn't be on 1 page. You have an SAP page, a BlackLine page and you left the customer to figure it out. Now we're able to sort of show that in a -- in what we call a golden architecture. And I think that is again, going to start to show up meaningfully in next year, but I'm expecting some good results for us in the fourth quarter.

Okay. No, that's great to hear. And maybe we will start to then connect this to the medium-term, longer-term model that you have out there. I guess, can you help us maybe bridge the gap in terms of what may be -- does the macro need to get better for you to be able to make that happen? Is -- are we kind of seeing like the early stages of it with this pipeline development that you're talking about that maybe that helps kind of get back to a low to mid-teens kind of growth outlook? Just can you help us bridge the gap there from where we're at?

So Matt knows, I say this, I don't ever blame the macro for anything. If it's -- there are macroeconomic realities that we all have to deal with. But I think for us, and we've -- Matt and I will tag team on this because he can maybe walk you through the bridge. But what we're seeing in our pipeline build is better opportunities with the right customers, our win rates are starting to improve because if you pick the right customers, you're going to generally have a better chance of driving success. So that's all sort of taking place in the market. I would have my head buried in the sand if I didn't worry about tariffs and what might go on with interest rates and Federal Reserve and geopolitics and all that other stuff, but those are the things we can't control. But what we can control is, can we deliver a world-class platform to our customers where they can really achieve greater returns on investment and drive down total cost of ownership. So I'm a bit maniacal on certain things. And so for me, when I think about what can make BlackLine successful is what can we do for our customers. And that is for us to continue to innovate. We've got a slew of announcements next week, we're going to share with AI and why that's a beneficiary tailwind for BlackLine versus a headwind? And then also, how do we drive that value into our customers quicker through our partners, through our own experiences with professional services, our customer success team, all empowered by Agenetic implication and optimization tools that will accelerate the capture value much more quickly. And that's a big reveal for next week, and then you got a sneak preview. So Matt, you want to talk about the...

Yes. So on the bridge, I think last November when we had our last Analyst Day, we talked about the path to that 13% to 16% growth in that 2027 to 2029 time frame. And so kind of there's a lot of component pieces across existing customers, new customers and pricing and packaging, how we delineate there. So if you think about all the different investments that we have made and some of the initial results we've seen, things like our new platform pricing model starting to show up. Studio360 in the release of that earlier this year, our industry initiatives, our new market like public sector that we had our first win for sponsorship and moving forward with the FedRAMP authorization process there. The international opportunity, net new innovation, things like high-frequency recs, operational recs, from the AI announcements that will be coming next week. So there's 6, 7, 8 different levers, if you will, that support growth going forward? And the interesting thing, and I'm sure everybody can appreciate there's not 1 big bet that is 90% of the growth. It's fairly evenly distributed, 0.5 point to 1.5 points of incremental growth coming from all of those different buckets, knowing, of course, some will outperform, some may underperform a little bit. And of course, there's different time horizons as well, right? Pricing showing up this year, FedRAMP, SAP probably more materially in '26 and beyond. But you're seeing sort of the early indications of that inflection point building, right? Our full year guide is around 7%. And we had 6% in Q1, 7% in Q2; guide for Q3 IS 7% plus ,implied guide for Q4 is 8% plus. You kind of think that correlated to a lot of the forward-looking metrics that we delivered in Q2 across RPO of 11% growth, billings of 11%, CRPO and ARR at 9%, and you take what -- you just talked about from a pipeline perspective. And so it gives us a lot of confidence in terms of continuing to build off of the initial acceleration we're seeing this year and into '26 and into that 13% to 16% target range.

I do want to keep this interactive. So if there's any questions in the audience, we want to make sure to get to those. But on the revenue side of the equation, you did talk about an acceleration in the second half as maybe we think about '26, '27, what are maybe the things we should be thinking about are keeping in mind as we think about a further potential for acceleration, especially as you have all these kind of newer initiatives ramping up?

Yes. I think maybe Matt and I can tag team because we don't always give the same answer. So I think from my vantage point, what our customers are asking for us to do and what we are doing with them is continuing to co-create, ideate, innovate whatever word you want to use, solutions that matter to them. And we shared the first large win we've had with what I would call nonfinancial accounting solutions, right? So working with very large oil and gas major to handle all their recs and inventory accounts and things of that nature, not from the dollars, but all the other things that are associated with the actual accounts of those things. That opportunity for us is very, very large with our customers, whether they are banks with security accounts or whatever they may be, there's all these kinds of things that we're starting to see the opportunity that we're creating with our customers based upon their demand. I think, again, what we're going to share from an AI perspective and the tools that will further -- we don't release AI as a separate thing. We're just -- I said to somebody this morning, our AI approach is like the old BASF commercial. It's not going to make our product, it's going to make it better. And that's what we're trying to do and we're still going to allow the humans to still control what the AI does, but that is going to be a big differentiator for us. And I think it's going to accelerate the shift from user-based pricing to platform pricing and consumption-based pricing, which is an important piece for us to move forward. The federal space is a very, very large opportunity. And it's not just in the U.S. federal government. It's -- government is the largest industry everywhere in the world in every country. And so plenty of opportunity for us to -- once we complete our FedRAMP certification here to use that in other marketplaces. Industry has been a huge accelerant for us. When you serve 8 of the top 10 oil and gas majors or 8 of the top 10 media and entertainment companies, pick your favorite 8 or anything. And when you can get those customers to talk to 1 another share experiences and you can also show your customer, hey, you're only doing half as well as these other customers. Do you want me to connect to where we can connect you to your peers and help you figure out how to get more out of BlackLine and we can help you do that or your partner can help you do that. So those are the things that are just going to drive the revenue growth and I think we're pretty confident that absent some great market catastrophe, we're well on the way for what we should be, what we said we would do and are doing, and I think we're going to be taking market share from others.

That's great. I guess while we have you, and we're talking about the Fed side of the equation, can we talk a little bit about that opportunity? And maybe what's -- what BlackLine can do in that space? Maybe why is now the right time to kind of go after the federal side of the equation? How do you kind of think about executing on that?

Yes. I mean it's the public sector broadly, Fed stay local. And we've had, call it, dabble, we have some customers, some quasi government entities that we've had for a while. But really, from our perspective, it looks and feels a lot like our enterprise, mega enterprise base maybe a few years ago. They're a little bit behind on the technology curve. They have a lot of disjointed processes and systems that they're using in their financial systems landscape. And 1 of the bigger things that has kind of come to fruition at least with the latest administration is using more technology instead of just hiring people. And then two is to prepare for, achieve and maintain auditability going forward, which is a huge piece at the federal, state and the local level. And so our financial close solutions sold into that large market where we have de minimis penetration today. It's really all greenfield net new opportunity for us. Sizable deals, our first customer sponsor, right, is a -- one of many component parts of a larger agency. And so it's very natural to continue to spread amongst that agency as they implement and use and see benefits from it. And so -- it's us doing it directly, but the partner network that we've spent years cultivating whether that be the big SIs or even SAP have large footprints in that space who just helps us to move quicker and to speak the language of the public sector, which, to be fair, is a bit different than the commercial sector in terms of their needs, demands and requirements, more importantly, whether that's security, whether that's the types of people that can interact with those agencies, et cetera. So we've seen the success other companies have had. There's no doubt that it's a big opportunity set. So from our standpoint, we like what we see. We've had a lot of really good progress in a fairly short amount of time, and we're just going to continue to leverage that success going forward to not just serve the civilian agencies, but also look to serve the non-civilian more defense-related agencies as we move forward.

Okay. That makes sense. I'm going to pause there and see if there's any questions in the room here.

I want to ask on the product side a little bit more. It does feel like there has been quite a lot of innovation that's come out over the past few years. And it seems like the pace has definitely picked up quite a bit from that perspective. Just I guess, what has maybe changed internally that's enabled that? How much of that is driven by some of the AI initiatives that are supporting that? And just how do you think about the future road map and what the product set looks like from here?

Yes. And we're going to share a lot of the product road map again next week. But so what's changed? Look, when Therese and I came back into the company. Remember, I was sitting on the Board, she was on the Board, we could see the company was not as focused on innovation through the lens of a customer. We were innovating, but not necessarily on things that we're going to resonate with the customer. So we really got back to the roots of what is it that customers need. We changed out a large percentage of our product and tech team, tried to get people that are focused on, again, what mattered. There's a rigor discipline what we're trying to do. We manage -- again, I'm a recovering consultant. And so it's all about the discipline and rigor of getting stuff done and meeting the milestones. And so yes, we've created more -- it's an approach culturally philosophically, and we're testing it with our customers and our partners all along the way. So there's very little wasted effort on things that are not going to have some level of market receptivity. So we're not just innovating for the sake of innovating. So that's probably the biggest change, that accountability. We've got a great Chief Technology Officer in Jeremy Ung. I couldn't be more pleased with what he's done. Great to here on our product side, Charlie Gaulke, and she's done an unbelievable job. So we're -- we feel pretty fortunate. I think the hardest thing for us is we're innovating so quick, keeping our own organization up to speed and then keeping our partners up to speed and then how do we tell that to customers who -- they've got -- they all have day jobs, right? So how do you make sure what you're creating and get into their hands and they can use it. And again, for me, that's been the biggest thing I've been trying to focus on the last 6 months or so is how do we just make it easier? How do we help our customers take what we're creating and get it into their organization, recognizing the constraints that they're operating under. And the better we can demonstrate a lower cost of ownership and a higher ROI, the better off we're going to be to help them succeed.

Sure. I guess with all those products, has there been anything that has been maybe resonating a little bit more so recently with them -- with customers? Or as you kind of like look at the pipeline, like what areas are maybe showing a little bit more right now?

I think the thing that's most interesting for us right now is Studio360 because it's not your traditional record to report or invoice to cash, and I'm finding that we have to spend a fair bit of time explaining the power of what it does and what it can go do because it's -- you've got to look at Studio360 almost like the universe. It's going to continuously expand. It's never going to be done because of all the things we're trying to do that we can connect it to, the information it can take and analyze. And so that is the thing that's most promising. We've got, I want to say, maybe 100 or so customers at this time in various stages of using it. And we need -- we're trying to accelerate that even more. But that does take us trying to get a little bit higher in an organization because it's not the users, it's like it's more of interest to more senior executives. So that's certainly the one with the most interest. Obviously, we'll share our AI story next week, which we're very confident is going to be received well in the market. And then interestingly enough, it's been the enhancements we've made to our core products. The volumes that we can handle today compared to where we were 24 months ago, the frequency with which things can be done is significantly different and better. And those matter to industries like retail and financial services where it's billions and billions of transactions being done quite regularly. And so that's it. And then I think the other thing that -- the tariffs may have a positive impact. We'll see. We've certainly had some good successes so far year-to-date is in intercompany. You might say why? Well, if you think about supply chains and how they're being disrupted and 1 of the things with our intercompany solution is it helps you to minimize your tax liability by taking your tax strategy and then making sure that the accounting follows all of that so that whatever your lawyers and your accountants and other people come up with to create your tax minimization plan, BlackLine software can be configured to support that. And that saves companies a lot of time, money dealing with auditors. If you wind up paying a tax bill in country A, and you overpaid in country A, good luck trying to get your money back from country B if that's where you thought the refund was coming from, you're never going to see it. And so we've been able to sort of really demonstrate some very good value to our customers in that regard. So those are probably just a few, like picking which is your favorite child?

Yes, I guess it's a bit of a good problem to...

Yes. Right now, not good problems.

Yes. I want to touch on Studio360 a little bit more. I think for a while, that seemed like that was Therese's baby and she really kind of owned that. But as you think about kind of the next step in terms of monetizing that, getting that into the hands of customers, it seems like it is a bit more of kind of a platform customers need to kind of figure out how to utilize and leverage it. So how do you make that easy for them to understand the use cases, how it can really kind of help enable them and make them, I guess, more productive?

Yes. I mean I think, again, that's where the partnership with Snowflake came in. So I don't know the exact numbers, [ Matt ], but we're probably going to have more than half of our 4,400 customers now using some combination of Snowflake with BlackLine's Studio360, if I have my facts right on that. And so the thing that Studio will do is it's going to allow the CFO and the controller and she and her teams to see everything across the office of CFO. And it started with SAP, BlackLine, it's expanding into Oracle and Workday, it will expand into FP&A tools and treasury tools. Interestingly, we've had a number of CEOs come talk to us about being trying to connect in some way, shape or form for what their solutions are because remember, what's important about BlackLine and all this is we are sort of the single source of truth. We're as close to the head water as you can be to keep information and data right. And so if you're further downstream, our information is going to flow into your solutions, and there's a real power to that. And so again, we're engaging in those conversations. But that's what's going to be most valuable to our customers.

Okay. That makes sense. I want to ask on the AI opportunity for BlackLine. I guess, how do you think about where the portfolio sits today and maybe how customers would think about leveraging those capabilities from BlackLine.

Again, we've got a lot of announcements we're going to share next week with all of this. Some people said, why is BlackLine taking so long to get more out in the marketplace with AI? And the answer to that is it's not that we've taken longer. It's -- we've kind of done it what I view it the right way. Remember, for what our solution is, it can't be 95% right. It has to be 100% right because the risk if you have, a blow in your financial statements is anything from significant efficiency, material weakness, restatement to somebody's going to jail. And so for us, we've been building our AI capabilities in conjunction with conversations with the world's largest auditing firms, working through them with regulators trying to understand. So I was on the phone yesterday with the Head of Audit and Regulatory for 1 of the big 4 firms. And we were talking about the criticality of what we're releasing next week and how they feel good about the auditability, the transparency, the reliability of what we've been able to build because auditors can't take things in a black box, management certainly can. And the regulators will never accept the black box. And so what makes BlackLine unique in this regard is we understand what it takes for all those different constituencies to sign off. And we built our capabilities that way. So you'll see a solution next week, which does all the work for the user and then she or he can say, show me the work if they want to see it and then they can sort of validate and check all that. It's kind of like the old days when you're in school and you had to show your math work. I couldn't just give the answer, you had to show how you got there. And that's what we've built in and that's what matters to finance teams, to the auditors and to the regulators. And so I don't -- I'm sure no 1 else has done what we've done because we've talked to the firms. They are partners, and I like to brag about the fact that if you take the largest firms in the world, almost all of them run on BlackLine internally. They all rely on BlackLine for all their audits and almost all of them implement BlackLine on behalf of customers from a consulting perspective. So that, to me, is is what is our competitive advantage and what we're going through here.

Yes. That makes sense. I guess maybe high level from like an AI adoption perspective, to your point, like this is something that needs to be 100% right, you can't risk it. We think about the cloud transition historically that was maybe a little bit slower within the ERP financial...

Coming to an end Steve, I promise. Coming to an end. Coming [indiscernible] on high water.

With that context, how do you think about what the AI rollout would look like within the office as CFO? Like how do you think about the risk versus the opportunity around that?

Yes. So I happen to sit on the public -- a Board of a public company, and I asked our auditor partner, I said, John, what are you guys telling your customers, your CFO customers about the adoption of AI and their advice is to go slow and be careful. And I think you're going to hear next week, so we have a panel discussion at BeyondTheBlack with a Chief Accounting Officer and what he is using his business, what ahead of a Big 4 regulatory practice is advising customers. and then a consulting partner that runs technology for Ernst & Young. And all we're going to talk about how that's all evolving in the marketplace. I think it's going to start slower and then it will accelerate. I think it's been cautious so far. Even things like our document summarizer which we rolled out a little over a year ago, which basically takes contracts and information just write through a summary so you don't have to write it. It's progressing, but it went slower than we thought. And people were just very cautious. Right now, it's like -- I think it's about a 65% acceptance rate for those that are using it, say, they don't even change a word. And that keeps getting better month by month. But there's just still a cautious nature of that. And that's -- I would say that's a pretty low-risk value proposition having something summarize what's been written. So when we start to do reconciliations and matching and other things using AI, I'm sure there's going to be just a little bit more of the Missouri Approach, show me like and that's why we built the software the way we have, so that you can see it versus just relying on what the output is.

Okay. We've got about a last minute here, BeyondTheBlack is next week, what should we be looking forward to? What are you kind of most excited about?

Yes. So I think we're most excited about what we're going to release around the product road map, both for things that are now in the market and then things that we've got coming over the next couple of quarters. so that will be one. The second will be some of the announcements we're making about how we're going to help drive time to value for our customers through implementation and optimization tools. And then the third is, many of you have not met our new Chief Commercial Officer. So I think you're going to really enjoy him, he brings an intensity to the business that I feel really good about, and our team really is enjoying the privilege of working with him. So I think those would be the 3 things that may be the most exciting. And if you're a gambler, [ maybe he's going ] to win some money.

Yes, sounds like a plan. I think we're out of time here, but Owen and, Matt, I want to thank you so much for being here, and I want to thank everybody in the room for attending as well. So thanks again.

Thank you very much. Thank you.

Good day, and thank you for standing by. Welcome to the Q2 2025 BlackLine Earnings Conference Call. [Operator Instructions] 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.

Good afternoon, and thank you for joining us today. With me on the call are Owen Ryan and Therese Tucker, Co-Chief Executive Officer of BlackLine; as well as Patrick Villanova, Chief Financial Officer.

Before we 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-K and Form 10-Q.

We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. All comparisons we make on the call today relate to the corresponding period of last year, unless otherwise noted.

Finally, unless otherwise stated, our financial measures disclosed on this call will be non-GAAP. A discussion of these non-GAAP financial measures and information regarding reconciliations of our 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 on our Form 8-K filed with the SEC today.

Now I'll turn the call over to BlackLine's Co-Chief Executive Officer, Owen Ryan. Owen?

Thank you, Matt, and good afternoon, everyone. Thank you all for joining us on today's call. For the past 2 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. With great confidence in BlackLine's, Therese will now dedicate even more of her time and expertise to directly supporting our customers' 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.

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 of last year, we laid out a number of strategic initiatives that support the company's refreshed strategy. First was to deliver a platform, Studio360, 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. 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. Teresa will speak about Studio360 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. Notably, our $1 million 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 in our company and the adoption of our new pricing model. Our strong referenceability demonstrated by serving 8 of the top 10 Fortune 1000 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.

In oil and gas, where we also serve 8 of the top 10 Fortune 1000 companies, our platform positioning and industry expertise led to a new win with one of Europe's top 3 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 5 North American life sciences customer. This deal replaces legacy point solutions with our Unified Financial Close and Intercompany solutions, demonstrating our platform's power and a massive S4 migration. We've demonstrated why BlackLine was the first choice, best choice, safe choice and ultimately, the only choice for this company's critical transformation journey.

In manufacturing, we signed a Dutch company, NXP Semiconductors to a multi-solution financial closed 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 time lines and delivering quicker time to value for our customers.

Finally, we secured 2 significant wins in APAC. We won a new deal with one of the top 3 largest Japanese banks and landed our largest ever win in APAC, a high 7-figure expansion with a top 3 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 the success and underpinning our confidence in the future, we generated strong pipeline growth in can this quarter with our creative pipeline up 70% year-over-year. This remarkable growth, a direct outcome of our refined platform messaging and strategy is fueling broader market demand. 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. This model not only drives adoption and 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. 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 in investment establishing a critical foothold to drive additional growth from this greenfield market.

Our partner channel continues to be a growing differentiator playing a pivotal role in securing numerous larger partners 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 part enablement and advocacy trends in Q2 with noteworthy growth across all of our solutions, Studio360 and industry verticals.

Our SAP partnership showed solid performance across sales, pipeline generation and deal sizes. 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 Studio360 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 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 3 of our top 5 largest mid-market deals adopting our new pricing model. 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 the strategic choice. We acknowledge this pivot will not immediately be reflected in metrics like 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 enhance 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. 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. 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.

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 2 years have cemented my confidence in Owen's leadership ability, and we are completely aligned going forward. 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 1, we have designed Studio360 to address these challenges and bring order to this chaos.

Recently, we've made considerable enhancements to Studio360 and are accelerating our progress. We believe Studio360 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 Studio360 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.

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 30x our current offerings. This empowers several industry use cases such as financial services, while also allowing us to scale and expand our genetic 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 Studio360 is the integrated 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. Our early access program for the Oracle Fusion Connector went live in Q2. With Workday and enhanced D365 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 Studio360's capabilities, we've enhanced and expanded BlackLine process automations within Studio360'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. 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 Studio360 with SAP. This will enable us to sell Studio360 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 Studio360, evidenced by pipeline growth and strong early adoption of our pricing strategy. Our partner training initiatives are also up 50% quarter-over-quarter, indicating robust ecosystem engagement and readiness for scale 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 nonmonetary 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.

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 increased automation for our customers. We plan to unveil a number of these at our upcoming BeyondTheBlack 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.

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 Studio360'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 a strong performance. Our customers and partners view this not as a stand-alone tool, but as a key solution within a broader platform that solves their most complex challenges. 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 agentic and more traditional AI/ML 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. 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 agentic 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. 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. 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. 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?

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 multiyear financial targets.

Now, let's review the financial highlights that demonstrate this progress in more detail. Total revenue grew to $172 million, slightly above 7%. Subscription revenue grew 7% with service revenue growing 3%. Annual recurring revenue, or ARR, was $677 million, 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.

Remaining performance obligations, or RPO, increased over 11% with current RPO increasing by 9%. RPO growth was driven by solid sales performance combined with multiyear renewals. Calculated billings growth was 11%, inclusive of about 0.5 point of FX benefit. Trailing 12-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.

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. SolEx 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. Non-GAAP net income attributable to BlackLine was $38 million, representing a 22% non-GAAP net income margin. We generated $32 million in operating cash flow and $25 million 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 $857 million in cash, cash equivalents and marketable securities versus $894 million in debt. Finally, we repurchased approximately 796,000 shares for approximately $43 million in the quarter, bringing our year-to-date total to nearly $89 million. 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 third quarter of 2025, we expect total GAAP revenue to be in the range of $177 million to $179 million, representing approximately 7% to 8% growth. We expect non-GAAP operating margin to be in the range of 20% to 21%. This range includes approximately 2 points of operating margin headwind due to our BeyondTheBlack conference. And we expect non-GAAP net income attributable to BlackLine to be in the range of $36 million to $38 million or $0.48 to $0.51 on a per share basis. Our share count is expected to be about 77.3 million 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 million to $705 million, representing 6.5% to 8% growth. We expect non-GAAP operating margin to be in the range of 21.5% to 22.5%. And finally, we expect our non-GAAP net income attributable to BlackLine to be $159 million to $167 million, or $2.13 to $2.24 on a per share basis. Our share count is expected to be about 77.3 million diluted weighted average shares.

With that, I'll now ask the operator to open the discussion to take your questions.

[Operator Instructions] Our first question comes from the line of Chris Quintero of Morgan Stanley.

Owen, Therese, Patrick, congrats on a solid quarter. I 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 flip out of Q4. So just curious if you can maybe break down how much of the strength came from the slip 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?

So Chris, as we've been talking, our pipeline really started to grow in September of last year, which we've been messaging. There's usually a 9- to 12-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 with then North 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, and 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. It's having different conversations at a higher level in the organization about a broader solution capability at the BlackLine 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, what 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. 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.

Awesome. That's really helpful, Owen. And then I want to ask around given the new pricing model, kind 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 it? And is that impacting net retention rate and upsell as well?

Yes. Patrick is going to take -- so go ahead, Patrick.

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. 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.

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

Our next question comes from the line of Rob Oliver of Baird.

Great. 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. 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 the go-to-market team is absorbing that could help us perhaps see that number rise in the coming quarters?

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. 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 need it, 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. 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.

Great. And I just had a quick follow-up for Therese, your second time passing on the CEO role. So I want to congratulate you. And also just stepping back for a second, you guys have done a lot to kind of rebuild a lot of things here over the last few years, and it appears that many of those things are coming to fruition. 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, Rob, and thank you for your kind words. The last 2 years, I think it feels like sometimes Owen and I work 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 really excited about the management team that we have.

I think, secondly, my confidence in Owen is just so very strong. I mean 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? 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 B2B. Because my best part of B2B 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 -- yes, I hope we see you there, Rob.

Our next question comes from the line of Koji Ikeda of Bank of America.

I do have a question on kind of the CEO announcement here today. Super exciting news. Congrats, Therese. 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, it sounds like it's a pretty good thing. So maybe some color on what actually might be changing here.

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, Koji. I get to focus on what I'm really good at. And so it's probably not a huge shift in terms of the public eye, but it's just -- it's more a change in focus.

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?

Absolutely, Koji. The problem with any cool new technology is that you have to separate height 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. 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. All right. 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.

Number two is 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 almost 20 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, 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 excuse the pun, 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 behind it. And I can go on to your days on this one. Yes.

Actually, Koji, we're beyond the Black. We have a session with CIO, head of an audit practice that deals with the PCO being 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 is 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 blackbox when it comes to AI and the preparation of your financial statements.

Our next question comes from the line of Alex Sklar of Raymond James.

Owen, I want to follow up on Chris' question earlier on the 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. 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?

Yes. Look, I think you guys all know, we've added a new Chief Commercial Officer, Stuart And many of you will get a chance to meet him next month in Las Vegas on our BeyondTheBlack 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? And so if I were to look from a year ago today to where we are now, every 1 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. The opportunities are getting bigger. They're getting broader and they're getting done at the right level, which is really critical to what we're seeing in driving our success. It doesn't mean that there can be something that comes out of, again, one of these broad capital that destabilizes the market, 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 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 and 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.

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.

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?

Yes. 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 road map, how reps are compensated where we wound up on building materials and a whole host of things. Right across the board, we continue to make really good progress. They're a terrific partner. But we always knew that this was not going to be a first half, first 3 quarter event for BlackLine and -- 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. 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 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. And I think it's going to be a win-win-win, win for SAP, win for BlackLine and win for our customers.

Our next question comes from the line of Ken key La Corte of Citizens.

I think that will be passed from Citizens. Congratulations, Therese. [indiscernible] Okay. So Therese, can you talk more about Studio360. So it unifies financial close, Invoice-to-Cash consolidated analytics and Intercompany, right? What is involved in getting there if you're an existing customer? Like do you have to pay more? Do you need services to get there? And then if you could also talk about the role of Snowflake in Studio360, why that's important, that would be awesome.

Okay. How much time do we have, Pat.

Well, you have to decide that.

Okay. So there's a couple of things. First off, Studio360 was implemented to be the platform underneath all of our products. And we pulled various things from different areas. We basically pulled it into a single platform. We added additional capabilities. 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 5 platform components and see some very cool product dashboards. However, if you want your own custom dashboards that describe exactly the metrics that you need for your business, now you've got to 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, Orchestra 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 going to need to pay a level up for orchestrate. 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 carat 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. Okay. And the ability to have things like high volumes of matching transactions, literally in the billions, okay, is 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. 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-have in today's world of huge data volumes. I think that kind of sums it up.

Yes. No, that's great. That's great. That's great. And then Owen, the follow-up for you is, if we go back to that 8-figure deal, I was thinking maybe you can walk us through sort of how that ended up coming together and it's SAP is involved and there's a partner, right? So I just thought it would be a great way to sort of...

Not No. No, it is not a necessity deal -- to a partner. And it's 1 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 as you can imagine, and it was well over a year process to get to where we got to. But I think it's a testament to the confidence our partners have capabilities of BlackLine, the reliability and the deep trust because they're so intimately involved with the road map that Therese and the team are building and rolling out. And so it becomes part of a very compelling narrative in the conversations with the customer. So I would say, 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.

Our next question comes from the line of Steven Enders of Citi.

Okay. Great. I guess maybe just to start, I just wanted to dig into a little bit more. It sounds like maybe there were some, I guess, large deal delays that took place or some impact from that. So 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've put up there? So yes, it would be great to just get a little bit more detail on kind of like what actually happened versus...

Yes. 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 post 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 mobile brand, tight margin business, and they just didn't think they had the resources in budget given the uncertainty of what they were going to do. And then the foot side of it, we had a decent-sized investment bank and to quote the CFO, we he was a full word 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. And I think it's 2 things. I think one is within our existing portfolio, reengaging that we talk about like we're trying to resell to our customers every day. We win their hearts and minds every day in a way that we haven't maybe done as well as we could over the last couple of years, but that's been -- and 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 road map is making us much more compelling when we go into the -- that 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 and the referenceability from other customers are willing to advocate on behalf of BlackLine in addition to those system integrators and those consultants.

Okay. No, that's great context. I appreciate that there. And then I guess just a follow up on, I guess, the enterprise versus mid-market. I guess, this 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. But just how do we maybe think about what that kind of path from here looks like or the time line for how that maybe shakes out over the next couple of years?

Yes. So Patrick and I go to tag team on this issue. And look, I think it's an 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 a software package and calling it a day. What we're trying to really do is help our customers, these prospects to transform. And so we go in and we have conversations that are different that talks about what must be true. What must be true from what BlackLine does, what must be true for 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 to transform that has the right resources, has the right executive support to move things forward. 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 you're -- 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 to partner and the prospect. 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...

Yes. I mean, Owen, we joke about it that sometimes you were into 6, so the seventh inning stretch. But I feel quite confident we're 2/3 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. 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. 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 3 or more years with us. And you're seeing that in all of our leading indicators, RPO -- long-term RPO is up 15%. 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.

I just -- one thing to note because this is important, right? So definitions and say doing the same thing over expecting a different outcome. One 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 2 years, a lot of the recent IR in the role is we are like Zelus 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. So we're not just solving part of one problem than creating a problem on the other one. We're dealing with this -- the right way on both ends, if you will.

Our next question comes from the line of Daniel Jester of BMO Capital Markets.

This is Kyle Aberasturi on for Dan Jester. Quick one from me. I was wondering if you had initial thoughts on the impact of the new R&D tax credit policy could have on the business cash flows?

Patrick, we talked about this yesterday.

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

Our next question comes from the line of Adam Hotchkiss of Goldman Sachs.

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 365 connectors that are in some form of early access are coming generally available this year. 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 what value this adds for you in the sort of prospective and existing customer base going forward?

Yes. 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 created an extract file and put it on an FTP site. 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.

Our last question comes from the line of Jake Roberge of William Blair.

I'll keep it to one as well. Your reference signing your first federal agency during the quarter, can you talk about the learnings 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?

Yes. So -- so Matt and I will answer that question together. There's a lot of lessons I haven't learned. We were very fortunate. I 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 that's been living this 1 day in and day out with the teams.

Yes. 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 had to take any different approach to sell to the federal agencies. And what we have been seeing is that whether by -- by act, et cetera, 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 10 to 20 years. But they do want to solve real business problems. They want to increase productivity, especially when there's challenges for headcount. And then more importantly, they are 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 2-plus decades across all our customers globally in 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 state, the local levels. 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. You 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. 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 of last year. You fast forward 8 months from now, we have our first deal. 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 promise is kept in the opportunity going forward.

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

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

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