BlackLine, Inc.

Good day and thank you for standing by. Welcome to second quarter 2026 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. 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.

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'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 Q3 and full year 2026, our forward-looking statements within the meeting 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. 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 8K 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. I want to start this quarter with a short overview of the financial results before Patrick does a deeper dive. I also want to walk through the deal timing dynamics that shape this quarter and then give you a sense of the period we have just lived through, because I believe the first half of 2026 is likely the most consequential period in this company's 25-year history. This was a good quarter on the measures that matter for discipline and durability. Revenue grew 9.2%, Non-GAAP operating margin came in at 23.3%, and we generated 37 million of free cash flow. Now, on deal timing, it has become harder to predict this year. AI has put every finance organization in the position of reevaluating what they spend on and why, and that evaluation takes longer. Here is an example. We were recently selected for our first-ever Sovereign Cloud opportunity with a large European company whose security and data requirements are among the most stringent in the world. We won the competitive evaluation and cleared the legal, security, and technical reviews, and we are now working through the final details to close on this five-year, eight-figure deal. Even with both sides aligned and committed to a June 30th close, a deal of this size and complexity simply takes longer to get across the line than either party would like, which is exactly the dynamic I am describing. This elongated timeline shows up mostly in our mega enterprise pursuits. Customers are evaluating more than just software now. They are also going much deeper into Blackline's AI governance model, our product roadmap, and how we sit inside their control environment before they sign. That pulls even more security, risk, compliance, and IT professionals into the room alongside finance, and everything is simply taking longer. More of these conversations have become formal build versus buy assessments, and buying is beginning to come out far ahead. That clarity does not shorten the evaluation itself, so the timeline stretches even when the outcome is clear. In total, approximately 8 million of opportunities we expected to close in the second quarter slipped for similar reasons. This business has not been lost, we have already closed half of it, and we are making solid progress on the rest. There is a second dynamic we are seeing, which is expected. Our platform pricing offers unlimited users. As more of our base moves to platform, we're seeing less lift from user ads. We are making that trade on purpose. Usage and value over seat count. And it means near-term growth will understate actual demand until platform and AI adoption reach scale. We are winning long-term strategic relationships. RPO grew 17% to over 1.1 billion Clear validation that underlying demand is strong. Nearly 90% of net new business this quarter landed directly on platform pricing. New deal sizes are up 24%. Multi-year commitments were 56% of this quarter's renewal book, up from 45% a year ago. This is a customer base making bigger, longer commitments. Platform adoption is broadening across the base, too. Eligible ARR on platform crossed 17%. Up from 13% last quarter and current RPO, the piece we will recognize over the next 12 months grew 11%. That is the near-term picture. Now to the period we have just lived through. AI is going to be a multi-year transformation in the office of the CFO. I will walk through it in four parts. The context, our platform strategy, the validation showing up with customers, and what we are seeing across the market. On context, the pace of AI, our own product development, and the time we have spent in market has been more intense than anything that ever came before it. Over the past two quarters, we have had hundreds of meetings with CFOs, CAOs, and CTOs, met with capital markets regulators, accounting standards setters, and the leadership of the seven largest global audit firms. We also met with the CEOs of adjacent office of the CFO companies, large European enterprises focused on data sovereignty, BPO firms reinventing themselves, and the frontier labs building the models everyone is working to deploy responsibly. Those conversations reinforced our confidence in Blackline's direction and the pace at which we are building. On platform strategy, across these conversations, the same theme kept surfacing. When AI scales, governance must scale with it. Studio 360 is our platform layer for the office of the CFO, and we have embarked on its next evolution to meet that need. We call what it enables agentic financial operations, a model where humans and AI work inside the close, equally visible, and equally governed. Here is why this matters. Gartner expects the average Fortune 500 company to be running more than 150,000 AI agents by 2028, up from fewer than 15 last year, and fewer than one in five companies believe they have the governance to manage that scale. That is the gap Studio 360 closes in accounting and finance. In June, we unveiled Finance Control Console, the control and governance plan for the office of the CFO. Every agent, regardless of who built it, runs from a single registry, must be Blackline certified before acting in a live process and operates inside a policy layer no customer can override. Every action and every human decision writes through an immutable audit trail, so any close can be reconstructed exactly as it happened, working alongside the deterministic, rule-bound workflows underneath. That combination is what management teams, auditors, audit committees, and regulators are asking for. The deterministic Engine Bs and all already runs multiple autonomous close workflows simultaneously. and because the governance layer is built independent of any single model, our customers' investment in it only grows more valuable as foundation or open source models change and improve. That is what extends our lead over anyone building this from scratch and why Blackline is the long-term partner for this transformation. We hear this directly. We are in the room with the big four audit firms, the standard setters for internal auditors and the regulators who matter most and their message is consistent. AI cannot be a black box. Every step has to be evidenced. Our models are tested for bias and failure modes and signed off before reaching production, with humans reviewing, approving, overriding, or halting the process at every stage. AI proposes, people decide, and is covered by the same internal controls over financial reporting framework as everything else in the close. That is the kind of trust the CFO requires from the partner behind the financial statements they personally attest to. and that trust takes years to earn. That trust does not happen by assertion alone. I want to be clear about where that friction still sits. It is an adoption, not the product. Customers are careful about trusting AI inside closed critical accounting processes. Security and risk teams are getting involved earlier in the sales cycle, partly because many regulators still have not finalized guidance for AI. We are not waiting for this to resolve on its own. We expect AIUC-1 certification in September, an independent third-party standard built for AI agent security and reliability. I am proud to say we helped shape this standard as a member of the consortium. That gives customers real upfront validation about BlackLine's trustworthiness. We'll go much deeper on all of this at our Beyond the Black conference in November. On the validation, here's what our customers are telling us and doing. The Studio 360 platform is what our AI runs on, and adoption across our base is now measurable. Roughly 3,500 of our eligible customers above 90% of that base are AI-enabled today, and roughly 3,000, about 77%, are actively using AI in their financial operations. Feature usage reached nearly 13 million actions in the quarter, up over 220% sequentially. Customers are embedding these capabilities into how they close the books every day inside the same controls and audit trails they have trusted us with for years and validating the results through parallel testing. This usage is already showing up in revenue. Verity Prepare alone has been a key lever in more than 20 million of platform ACV to date, and a growing number of customers now pay for it directly as a standalone product. That is driving further platform upsell with over 80% of that interest tied to our maturing Verity suite as the primary reason. And because full access to Verity requires platform pricing, this is exactly why Platform ARR is tracking toward our 25% full-year target with Mega Enterprise already above 21%. Platform adoption drives agent adoption, and together we expect these to contribute at least two points of incremental revenue growth next year on top of the acceleration already visible in our contracted backlog. On the breadth of what is driving growth, we started by embedding a generative AI capabilities across the platform, and we have since built a full suite of agentic capabilities natively into that foundation. This suite is a set of complex multi-agent systems working across the customer's full set of accounts. As they run, they are servicing new use cases, hundreds already, with more emerging every month. Each one is a further opportunity to monetize our AI. That surface spans both record to report and invoice to cash. New business is where this becomes concrete. Two of our agentic offerings, Verity Accruals and Verity Prepare, show the clearest evidence. This quarter we closed multiple Verity Accruals deals, including with a multi-billion dollar U.S. hospital system, a global consumer technology company, and a leading cybersecurity company, alongside a steady stream of mid-market wins. This is one product adopted across every tier of our customer base. Verity Accruals is expanding quickly. We are adding new agents for payroll and prepaid accruals this year, extending into two of the most manual, judgment-heavy parts of the close. Early customers are already closing up to three days faster and spending 80% less time on accruals work. Verity Prepare coordinates a team of specialized agents that ingest documentation, identify reconciling items, and assemble a complete, audit-ready package for human sign-off, delivering up to 94% reductions in preparation time. Customer count grew nearly fourfold quarter over quarter. Revenue is not yet material, but growing nicely. The pattern we expect is emerging as customers start narrow and then expand use cases as their confidence builds. Three examples show why this is resonating. One of the largest pharmaceutical companies in the world tested whether they could build its record-to-report workflows on a general-purpose LLM. They learned quickly that a model generating suggestions cannot coordinate a full workflow the way our multi-agent architecture does, but the transparency auditors require a built-in from the start, so the company chose to go deeper with Blackline instead. Another top-tier pharmaceutical company already live on our intercompany platform, is deepening its use of Verity because it is built on a real accounting logic and compliance. And a major healthcare company converted to platform pricing this quarter to gain full access to capabilities that are already seen work as an early adopter. Three companies, three different reasons, one conclusion. A customer does not need to build a new governance framework to deploy AI and finance because Blackline already is that framework. Platform pricing is the gate customers pass through to access our agenda capabilities. That is why deepening agent adoption inside an already converted customer is a natural driver of expansion revenue. Proof of value that extends platform adoption across that customer's business. Verity Match makes the same case elsewhere in the close. It is an early adopter testing with general availability expected soon. Our rules-based matching solution already resolves most transactions automatically but the remaining exceptions, a small share of volume, take up a disproportionate amount of time as each one requires manual investigation. Verdi Match targets that tail directly. Running at production volumes with our early adopter customers, it brings total match transactions, automated and AI resolved combined, to 90% while cutting manual investigation time by roughly two-thirds. The same governance model extends into invoice to cash as well. Verity Collect is our multimodal agentic collections offering that is being tested by customers currently. Verity Remit, our agentic remittance agent, is cutting manual effort by more than 95% for our best performing customers. Verity Remit is on track for general availability this quarter and Verity Collect in the fourth quarter. Our largest partners, such as Accenture, Capgemini, Deloitte, E&Y, and KPMG, have had strong years with Blackline, building record practice revenue. They see the opportunity to build an evergreen business on our controls layer instead of trying to build their own. Our relationship with SAP is deepening too, with two milestones expected in the third quarter. We are working to enable platform pricing for SOLEX customers, and we expect Verity Accruals and Verity Prepare to retrieve SAP premium qualifications. Finally on the market, the clearest signals that the largest, most complex enterprises in the world are standardizing on Blackline as their control layer for finance, and this quarter's wins prove it. We won new customers including Vodafone and the leading global market data platform. We also expanded major relationships with Royal Dutch Shell, a mega German healthcare company, and a large private telecommunications company. Subsequent to quarter end, we also closed two of the top six largest U.S. banks both who signed long-term seven-figure deals with Blackline. Net new business has been a bright spot in the first half. Verity adoption has been growing across every segment and platform adoption is scaling fastest with net new business where customers are landing directly on platform pricing from day one. Platform conversion inside our existing base is moving on each customer's own timeline. Customers are timing their move, often with their renewal date. Many customers want additional proof points before moving. More time in market for our new agentic offerings, a referenceable peer they can point to, and support from their audit committees and auditors. We are now putting our own professionals inside customer environments, building a working proof of concept on the customer's data to overcome reticence. That same conviction in the enterprise extends to the middle market, where our agentic offerings are built for faster time to value with less implementation overhead. We are refreshing how we package and price for this segment to match how mid-market companies are evaluating and buying. We also see real opportunity in new markets. Public sector has been a strong area of progress with new deals closed and multiple proofs of concept underway with civilian and defense agencies. In the Middle East, the war has slowed our progress, though we still see it as an attractive market given our infrastructure investments, the depth and breadth of our go-to-market partner network, and continued interest from prospects. To close, I believe this has been the most consequential period in our history. Our urgentic financial operations strategy is rapidly maturing. The proof is showing up in real product, real adoption and real new business. The market has tested us with more scrutiny than ever, scrutiny we are built to meet. We are responding with speed, our position is strong, and we believe the opportunity for Blackline is larger now than what we described last year. With that, let me now turn it over to Patrick Villanova.