BlackLine, Inc.

Good day, and thank you for standing by. Welcome to the Q3 2022 Black Line Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today. Please go ahead, sir.

Good afternoon, and thank you for joining us today. With me on this call is Mark Huffman, Chief Executive Officer of Blackline, and Mark Parton, Chief Financial Officer. Before we get started, I'd like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans, objectives, and expected performance, in particular our guidance for Q4 and whole year 2022, 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 we may make are reasonable, actual results could differ materially because 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. Also, 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 currently available in our earnings release, which may be found on our investor relations website at investors.blackline.com or in our form 8-K filed at the SEC today. I'll turn the call over to Blackline's Chief Executive Officer, Mark Huffman. Mark?

Thank you, Matt, and good afternoon, everyone. Thank you for joining us today. Blackline delivered solid financial results this quarter, with revenue growing 23% year-over-year to $134 million. Additionally, we saw continued margin in free cash flow improvement due to further operating efficiencies and disciplined expense management. Turning to the broader macro environment, while we are experiencing some elongation of sales cycles, we are seeing healthy demand signals across our pipeline as customer engagement and interest remains high. Our strategic product portfolio continues to generate positive momentum as solutions that drive high automation and efficiency become even more top of mind for customers. Additionally, our competitive win rates remain strong in the quarter, reaffirming the fact that our solutions continue to differentiate us in the market. As noted, customer engagement and top of funnel activity remains healthy as customers and prospects look to leverage software and automation to help them operate successfully during periods of uncertainty. One of the more relevant topics of conversations today with customers is on cash management and automation. particularly solutions that optimize working capital, reduce cash collection time, and provide incremental revenue opportunities. A recent study conducted by the Hackett Group found that the 1,000 largest public companies had nearly $1.7 trillion tied up in excess working capital, capital that could be deployed more efficiently and drive improved cash flow. Blackline's powerful accounts receivable automation capabilities enable our customers to reduce collection times and unlock trapped working capital. We recently released the new AR intelligence capability that leverages customers' payment behavior to provide valuable data intelligence to organizations on both the opportunities and risks associated with their customer base. Our recently announced customer attractiveness scoring capability enables companies to identify customers within their base that have minimal risk, allowing for potentially higher credit limits, which provide incremental revenue opportunities. Additionally, the capability identifies higher risk customers that are likely to default or delay payments, enabling companies to engage with their customers proactively while mitigating potential cash flow challenges. Features such as these have become extremely relevant in today's environments. Innovation continues to be a strength for Blackline, whether it's in our core financial closed solutions or across our strategic product portfolio. Our commitment to developing and delivering solutions that address unmet market needs remains as strong as ever. In Intercompany, for example, we recently released the industry's first tax hyper-automation capabilities for Intercompany financial management. These capabilities offer a range of new functionality designed to optimize and automate an organization's total tax incidents across multiple legal entities and billing routes, thereby maximizing staff efficiency and accounting accuracy. Weaving tax considerations into how intercompany processes are optimized helps significantly improve control, transparency, and overall business outcomes. In our core financial closed solutions, we continue to develop and release new functionality to improve and enhance and automate closed process activity. For example, our focus on improving and enhancing our ERP connectors, which are vital to the seamless transfer of data from multiple ERP instances to Blackline software, have proven themselves to be extremely important to our customer base and to Blackline. We see substantial opportunity to increase connector uptake across our install base, leading to both revenue growth and higher net revenue retention. For reference, the average NRR improvement from connector utilization is five points favorable to our company-wide dollar-based net revenue retention. Our commitment to innovation and delivering solutions that drive real value for our customers and black lines remains steadfast. Next week, we're hosting our annual customer conference, Beyond the Black, where many of the world's greatest companies will join us to learn more about the innovation we are delivering and how we are further differentiating ourselves. We expect to announce innovative new solutions such as financial reporting analytics and BlackLines Accounting Studio while expanding the modern accounting playbook to our cash application solution and As part of the event, our customers will be sharing their digital transformation stories and the substantial ROI they achieved by partnering and trusting with Blackline. We're excited about next week and look forward to your participation. Now let's take a moment to review our Q3 highlights and dive deeper into our results. Total revenue in the third quarter was $134 million up 23% versus the prior year. Average deal sizes increased this quarter, up 12% versus the prior year to $127,000. Notably, we are seeing further success expanding within our customer base and upselling higher ticket strategic products. Our average enterprise deal size is now above $200,000 and increased by 15% versus last year. And at the end of the quarter, we had 49 customers that generate $1 million or more in ARR, up 58% year over year. Turning to our markets for a moment, we saw a modest year over year increase in North America sales, leading to some great expansion and new customer wins. APAC performance in the quarter was strong, and saw an acceleration in deal activity across the region. However, in EMEA, sales activity was softer, driven by regional macroeconomic challenges and seasonal weakness from our Solex partnership. We continue to see examples of great wins and competitive takeaways across the business, despite the uncertain sales environment. In North America, for example, we signed a great new deal and competitive takeaway with the largest transportation and ride-sharing company. The customer was looking to improve their financial close process while driving additional operating efficiencies, freeing up their staff to focus on more strategic and value-added work. In strategic products, our performance was solid again as customers demand innovative new solutions that solve large, complex and unaddressed problems. We signed some great expansion and new customer deals this quarter. For example, we were able to expand beyond financial close with a large UK-based, mostly national, oil and gas company. Having seen the benefits of partnering with Blackline previously, the customer wanted to expand our relationship while improving and automating their intercompany processes. Working with one of their key consulting partners, we were able to showcase how our best-in-class intercompany solution can improve efficiency and deliver high automation to complex, labor-intensive, and time-consuming business activities. Continuing to build on our success in intercompany, we're pleased to announce that we also signed a leading EMEA-based insurance and financial services provider. As a brand-new customer, they were seeking to move away from manual, inefficient, and high-risk intercompany processes. They quickly recognized that a best-in-breed intercompany solution from a partner with a strong reputation and focused on customer success was the best path forward. In AR automation, we also saw some great expansion wins as well. In one example, a leading automobile manufacturer and longtime Blackline customer was looking to move away from manual and labor-intensive AR tasks and into an automated and efficient and to end process. From day one, we laid out the benefits that our modern AR solutions offer and how these complement our existing financial closed solutions. Whether it's reducing DSO, unlocking working capital, or reducing bad debt expense, our AR solutions were exactly what the customer was looking for. Expanding Blackline's partner network remains a priority and is a key component of our broader go-to-market strategy. As part of this, we recently signed a global consulting partnership with Accenture to strengthen our partner network, increase our global footprint, and extend our competitive positioning. Our Solex partnership is seeing success driving new pipeline opportunities and deals around the world. However, as noted, we saw some seasonal weakness in Q3 attributed to SAP. We expect to see heightened deal activity from this partnership in Q4 based on our historical experience combined with our near-term pipeline visibility. Turning to some of our recent Solex wins, especially in EMEA, we signed a new deal with a leading Dutch multinational retail and wholesaling company focused on bringing automation, control, and efficiency into their financial close process. Leveraging our relationship with SAP and other key partners, we demonstrated the value we could provide and how our solutions fit into their long-term digital transformation roadmap. In another example from EMEA, we were able to win an expansion deal with a global luxury goods designer and manufacturer. The customer's previous success with our core financial close solution and the desire to further automate their finances and accounting processes provided the perfect opportunity for us to leverage our SAP partnership to upsell additional use cases for our transaction matching solution. These examples were great wins for Blackline and reinforced the long-term opportunity that we see. Our proven ability to deliver value, drive efficiency, and deliver automation to customers across markets and geographies is a key reason why we continue to win. In closing, I want to thank all of our talented employees globally for their efforts and dedication. Serving our customers and delivering on our promise is vital to our success. Blackline is positioned to capture multiple long-term opportunities while driving profitable growth. With that, I'll turn it over to Mark Parton to discuss the details of our financial performance and our outlook.