BLACKLINE, INC. Q3 FY2024 earnings call

• Brand Repositioning: Begun finalizing broader rebranding aligning with platform, innovation roadmap, and office of the CFO success. Validated by third-party research firms as leaders.
• Platform Innovation: Launched new industry-specific financial close solution, advanced financial statement attestation, generative AI-powered analytics, AI-powered payment prediction in invoice to cash, generative AI-powered predictive guidance in intercompany. Internal GenAI companion achieved high adoption with measurable ROI.
• Partner Channel: Progress made with partner channel, increasing partner influence and source opportunities globally, driving higher win rates, especially in enterprise business. Accelerating global adoption of combined closing consolidation offerings with traction in Europe and Japan.
• Deal Activity: Saw multi-pillar wins, e.g., net new multi-pillar deal with Kroll, expanded relationship with a leading Fortune 100 pharmaceutical customer, strong mid-market performance with wins like Kindevadd and top in photomask.

Total revenue grew to $166 million, up 10% with subscription revenue growth of 11% and services revenue growth of 3%. Remaining performance obligations (RPO) was up 12% and driven by account growth and longer contract terms from renewing customers. Current RPO was up 11%, with total annual recurring revenue (ARR) of $638 million up 10%. Calculated billings growth was 4% with trailing 12-month billings growth of 9%. Customer count at the end of the quarter was 4,433. There was 27% growth in customers generating over $1 million and 12% growth in customers above $250,000 in ARR. Enterprise renewal rate in Q3 was 97%, and net retention rate (NRR) was 105% this quarter. Strategic product performance was a highlight this quarter and represented 31% of sales above the target range.

• Full Year 2024: Expected total GAAP revenue in the range of $651 million to $653 million (10%-11% growth), non-GAAP operating margin 19.4%-19.6%, non-GAAP net income attributable to BlackLine $164 million to $168 million.
• Fourth Quarter 2024: Expected total GAAP revenue in the range of $167 million to $169 million (7%-9% growth), non-GAAP operating margin 18%-19%, non-GAAP net income attributable to BlackLine $36 million to $40 million.

Q: Patrick Walravens of Citizens JMP asked about the macro environment and if things are getting better.

A: Owen Ryan responded that conversations are happening, partners are ramping up, and the BeyondTheBlack conference is sold out but still early to declare victory.

Q: Alex Sklar of Raymond James asked about the growth framework and pricing.

A: Mark Partin mentioned the upcoming Investor Day to lay out strategy, and they're refining pricing for 2025 to simplify and bundle.

Q: Daniel Jester of BMO Capital Markets asked about cohort analysis and innovation pipeline.

A: Mark Partin and Owen Ryan discussed growth vectors within customer base, innovation driving upsell, and co-creation of innovation with customers.

Q: Rob Oliver of Baird asked about growth in customers over $1 million in ARR and divergence between enterprise and mid-market.

A: Therese Tucker talked about innovation like FRA and Studio driving growth, and Mark Partin explained purposeful focus on enterprise and higher-value mid-market customers with renewal rate differences.

Q: Ryan Krieger of Wolfe Research asked about strategic portfolio and free cash flow.

A: Mark Partin said strategic product portfolio is picking up and free cash flow was strong with no onetime events, driven by digital transformation in office of the CFO.

Q: Chris Quintero of Morgan Stanley asked about SAP business and competitive landscape.

A: Owen Ryan discussed SAP partnership opportunities and competitive effectiveness, emphasizing customer alignment and focus on ideal customer profile.

Q: Koji Ikeda of Bank of America asked about accounting studio and SAP as growth priorities.

A: Therese Tucker and Owen Ryan talked about Studio's growth potential and SAP partnership alignment as key medium-term priorities.

Q: Dominique Manansala of Truist Securities asked about studio rollout and retention efforts.

A: Therese Tucker discussed studio rollout and positive adoption, and Owen Ryan mentioned retention efforts showing impact on customer satisfaction and renewals.

Q: Jake Roberge of William Blair asked about lapping down-market headwinds.

A: Mark Partin said there are stabilization signals but details in February, with focus on cohesive storytelling around office of CFO and CIO.

Q: George Kurosawa of Citi asked about SAP deal timing and billings.

A: Owen Ryan explained BlackLine coming on front end of SAP migrations for quick wins, and Mark Partin discussed billings volatility due to seasonality and timing.