BlackLine, Inc.

Good day, and thank you for standing by. Welcome to Blackline's fourth quarter 2023 earnings conference call. At this time, all participants are in 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 1 1 on your telephone. You will then hear an automatic message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to Matt Humphreys, Vice President of Investillations. 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 Officers of Blackline, as well as Mark Parton, Chief Financial Officer. Before we get started, I would 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 2024, 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 currently available in our earnings release, which may be found on our investor relations website at investors.blackline.com, or in our Form 8K 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 today. We exceeded revenue and profitability expectations in the fourth quarter, with $156 million in total revenue and $52 million in non-GAAP net income. Notably, we ended the year with $603 million in annual recurring revenue, or ARR. Our performance this quarter was driven by continued success with partners, including our Solex relationship, and consistent sales performance from our mid-market teams. We also saw higher close rates and improvement in Salesforce productivity this quarter. Last year, Teresa and I took the reins at Blackline and embarked on a journey to refresh our long-term strategy and vision. Together, we spent a great deal of time working across the business, speaking with customers, and re-energizing relationships with our most trusted and strategic partners. On the back of these efforts, we took action to implement a more disciplined and refined corporate strategy and activate a new operating model for 2024. Our go-forward strategy is simple. We plan to lead with our solutions across our markets, financial close, FRA and consolidation, intercompany accounting, and invoice to cash. One note here, invoice to cash is the new name for our end-to-end solutions which contains our electronic invoicing, presentment, and payment, as well as accounts receivable automation solutions. Over the longer term, we expect to either build or acquire additional capabilities that can deepen and extend our platform consistent with the highest priorities within the Office of the CFO. To support this, we're becoming a more partner-powered organization. harnessing the deep and embedded relationships our partners have with key decision makers at our customers. We are also prioritizing certain markets and geographies that have the highest long-term potential for success. As we move through this year and into next, we are implementing an industry-equipped sales motion that leverages our deep domain expertise and brand permission within select industries and sub-industries to capture further market share. We also expect to be more disciplined in our customer targeting, especially in the mid-market, where today we have a much greater understanding of what they need, what works, and how to help them. We will focus on growth-oriented companies who can capitalize on black-line solutions as they execute their digital finance transformation. In the near term, we anticipate certain smaller customers who do not see the value in transforming their business potential might choose to discontinue with us. While I hate to lose customers, this is the best strategy for the long-term health and success of both our business and for our customers with different priorities or value drivers. To execute our refresh strategy, we implemented a new operating model. This model is solution-led and aligned to our typical buyer profiles within the office of the CFO. Each solution pillar across financial close, consolidation, invoice to cash, and intercompany as a defined leader who is directly responsible and accountable for driving revenue growth while ensuring that the voice of the customer is prioritized in all aspects of innovation and product development. They are working in tight collaboration with our go-to-market organization to drive sales growth and guide our customers on their journeys with Blackline. Over time, the additional accountability and rigor across our business is expected to support the results we demand. Now let's review the fourth quarter, particularly around the five key areas I continue to prioritize. First, on execution, our go-to-markets team's performance was solid this quarter. We signed a number of large global enterprise deals, giving us early indications that our partner-powered approach is building momentum. In fact, the number of Blackline customers with 1 million or more in ARR increased 33% to 64 customers. We also saw consistent sales performance from our mid-market teams, landing some larger customers while experiencing further adoption of our FRA and consolidation solution, which is a true differentiator in the mid-market. We also saw higher close rates and improvement in Salesforce productivity this quarter. Next, our market message and branding are beginning to amplify and surround our new operating model. led in part by our new chief marketing officer who recently joined the company. Our teams are beginning to drive a unified message that addresses not just the unique buyer profiles around each of our solution pillars, but also elevates our platform to key decision makers both directly and via our partner network. We will have several customer events this year, beginning with our Beyond the Black EMEA event in late March. which will give us additional opportunities to listen and engage with our customers and partners. Our focus in the fourth quarter and for 2024 is on ensuring our customers receive the value of the Blackline promise, maximizing both value and ROI. Our teams are working closely with key customers to drive further adoption of our platform via optimization and success plans. We are seeing promising early indicators that customers are reengaging with us and we are progressing discussions towards additional use cases that can be leveraged for future cross-sell opportunities. At the same time, this close engagement enables us to gather detailed feedback on our solutions and identify future use cases for our product roadmap. Our distribution efforts and focus on partners and seeing early signs of success is mentioned. We will cover examples of this shortly, but at a high level, More consistent success here should be supportive of better close and competitive win rates and larger deal sizes. We also expect a more efficient sales cycle given the influence these large partners have on key decision makers within the office of the CFO. Finally, on retention, we saw consistency in our renewal rates versus the third quarter and experienced a slight improvement in net revenue retention, or NRR. While we are pleased with these outcomes, we are continuing to double down on our efforts to improve engagement, adoption, and satisfaction for our customers. In the year ahead, our teams will be focused on implementing process optimizations with existing customers and identifying those in our base that could benefit from deepening their use of existing solutions and broadening the adoption of new ones to drive digital finance transformation. Our operating model, which places an elevated level of accountability on customer success, is a core part of our go-forward efforts to improve outcomes for our customers and ultimately for Blackline. Despite ongoing market uncertainty, which we expect to continue in 2024, we closed several large global deals, including numerous competitive takeaways in our enterprise business. In North America, for example, We signed a leading defense and aerospace company via our Solex partnership while working hand in hand with a major partner. This multi-solution deal, including our intercompany solution, was in advance of an S4 HANA conversion and will support their move as they transition over the coming years. We also signed the world's largest retail and health insurance company as part of a competitive replacement. The customer is in the process of migrating a large acquisition from Oracle to SAP and needed a partner that could support them as they rapidly grow and scale. Importantly, our partner in the deal was crucial in validating Blackline as the provider of choice and demonstrated not just why the customer should change, but how it can be done successfully to deliver real value for the long term. In Germany, we signed a large multi-solution Solex deal with a leading global retailer and one of the world's largest private companies. Working with a team of leading consulting firms, we jointly showcased why Blackline was the only choice to meet the scale and connectivity needs of their global business while supporting their long-term transformation vision. In APAC, we expanded our relationship with a top three metals and mining customer via our Solex partnership. As part of a shift from an outsourced shared services model to an in-source model, the company sought a long-term partner capable of helping them realize their vision of true digital finance transformation. Leveraging our Black Line 9 optimization strategy, we were able to demonstrate not just why they should be modernizing their processes, but how. Giving them a blueprint for success and a much better appreciation of the value and ROI they could achieve. A competitive deal from the start, Blackline's differentiation via deep automation across areas like journals was key to supporting the overall business case. In the middle market, we saw a number of large deals close as we reshaped our focus in this fast-growing market. In Canada, we signed a leading Canadian financial services company to a multi-solution deal to address the growing complexity and lack of automation across their business processes. Additionally, we signed a leading healthcare-focused real estate firm to a multi-solution deal, leveraging our partners' insight and validation to support another competitive replacement. In addition, the company was looking beyond just their closed process and towards consolidation, which was another pain point. They wanted real-time visibility on their financials, and our FRA and consolidation solution was the perfect complement and another powerful differentiator for Blackline. Finally, we had a great year from our invoice to cash business as customers recognized the need for improved control and visibility of working capital and cash management in a higher interest rate environment. Due to the changing regulatory landscape, we are beginning to see interest building and electronic invoicing from customers and prospects alike. From a deal perspective, we signed several deals this quarter, both with new and existing customers. In a highly competitive deal, we signed HH Global, a leading tech-enabled creative production and procurement firm based in Europe. The company was looking to modernize their collections and dispute processes, as well as their overall customer experience. They were also interested in a partner that has EIPP capabilities they could leverage to further advance their vision of real transformation across their business, a great future opportunity to continue expanding our partnerships. With that, I will turn it over to Therese to discuss how we're driving innovation across our business this year. Therese?