All right, awesome. Well, welcome everybody to day one of 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 about two and a half 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, that's a good question. There's a couple of pieces 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 for what they're doing and what they're seeing, you're starting to 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, both 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's certain things where North America, the U.S. in particular, leads the world, and then 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, our Co-CEO, to spend more time in Europe because we're seeing more opportunities begin to emerge there.
Okay. Maybe we'll 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 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 have 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 three, four, five 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 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 were sitting here, she'd say to you, "Oh, and I haven't had this much fun since I've just founded the company in the last two years." So it hasn't been easy, but I think we're going to keep on moving on. They'll 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 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 two former CEOs in the last couple of months.
One was the CEO of Billy 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 in these 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 is 80 years old. He said, "I don't want to be." 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 we can talk a little bit about the ERP upgrade cycle, that opportunity, and I think, 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's given you kind of confidence in this opportunity? And maybe how has the dealer environment shifted over the past few quarters?
Yeah. I think the thing that's been most remarkable for BlackLine is the mindset that we're seeing from the big players, but particularly SAP, which is our most important strategic relationship. 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. I think there's a couple of things that have happened that will benefit BlackLine. 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 BlackLine can bring to those customers. That was great to have. It was a great success. But what really then propelled that was two things. One is, unbeknownst 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.
Then there was the Sapphire Conference for SAP where both Delta and Exxon did these case studies. Delta is another really great success. 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. There's these great solutions out there that is going to help me to help my customer more." 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. I think we've shared with you previously, BlackLine was sort of almost like an opt-in on a bill of materials. If you've ever had the displeasure of having to read one, they go on and on and on.
And then the last couple of items, there was 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 it more than anything else for us.
Okay. I mean, that's interesting. I mean, Exxon is probably a great reference customer 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, when does that maybe start to show up a little bit more? How do you think about the timeline 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 2024, 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've built that literally over the last nine, 10, 12 months. So then how does that begin to manifest itself? Well, if you start to look internally at 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. BlackLine is roughly nine 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 a year. And then again, as we start to get into next year, I think that's when we really will see even more of the momentum. But everything that we would want to see is working its way through the pipe, the teaming, the collaboration, getting to a golden architecture that we go into the market, which in the past, this might sound odd to you, we'd go into a room to pitch SAP and BlackLine, and it wouldn't be on one page. You'd 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 what we call a golden architecture.
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. 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 maybe does the macro need to get better for you to be able to make that happen? Are we kind of seeing 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. Listen, there are macroeconomic realities that we all have to deal with. But I think for us, and 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 agentic implementation and optimization tools that will accelerate the capture of value much more quickly? And that's the big reveal for next week. So now you got a sneak preview. So Matt, you want to talk about the.
Yeah. So on the bridge, I think last November when we had our last analyst day, we talked about the path to that 13%-16% growth and that 2027-2029 timeframe. 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, Studio 360 and 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, and the AI announcements that will be coming next week.
So there's six, seven, eight different levers, if you will, that support growth going forward. And the interesting thing, and I'm sure everybody can appreciate, there's not one big bet that is 90% of the growth. It's fairly evenly distributed, half a point to a point and a half 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 2026 and beyond. But you're seeing sort of the early indications of that inflection point building, right? Our full year guide is around 7%. We did 6% in Q1, 7% in Q2. Guide for Q3 is 7% plus. Implied guide for Q4 is 8% plus.
You kind of take that and correlate it 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 2026 and into that 13%-16% target range. Okay. 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 2026, 2027, what are maybe the things we should be thinking about or keeping in mind as we think about a further potential for acceleration, especially as you have all these kind of newer initiatives ramping up?
Yeah. 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 non-financial accounting solutions, right? So working with a very large oil and gas major to handle all their recs and inventory counts 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're 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. 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.
It's not just in the U.S. federal government. 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 eight of the top 10 oil and gas majors or eight of the top 10 media and entertainment companies, pick your favorite eight of anything. And when you can get those customers to talk to one another and 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 you or 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 BlackLine can do in that space? Maybe why is now the right time to kind of go after the federal side of the equation? Just how do you kind of think about executing on that?
Yeah. I mean, it's the public sector broadly: Fed, state, local. And we've had, I mean, 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 one 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, the state, and the local level.
And so our financial close solutions sold into that large market where we have de minimis penetration today is really all greenfield, net new opportunity for us, sizable deals. Our first customer sponsor, right, is 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.
So it 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, etc. 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 to 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 roadmap and what the product set looks like from here?
Yeah. And we're going to share a lot of the product roadmap again next week. 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 innovations through the lens of a customer. We were innovating, but not necessarily on things that were going to resonate with customers. 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 were focused on, again, what mattered. There's a rigor and discipline to 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. I couldn't be more pleased with what he's done. Great leader on our product side, Karli Galkas, and she's done an unbelievable job. So 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 all have day jobs, right?
So how do you make sure that what you're creating can 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 six 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 organizations, recognizing the constraints that they're all 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 customers? Or as you kind of look at the pipeline, what areas are maybe showing a little bit more right now?
I think the thing that's most interesting for us right now is Studio 360 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 you've got to look at Studio 360 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're trying to accelerate that even more.
But that does take us trying to get a little bit higher in our organization because it's not the users. 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?" If you think about supply chains and how they're being disrupted. One 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. 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 in 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. It's like picking what is your favorite child?
Yeah. I guess I'd say it's a bit of a good problem to have.
Yeah. Right. Yes. Right now, not good problems.
Yeah. I want to touch on Studio 360 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 it 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?
Yeah. 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 Studio 360, 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, and it's expanding into Oracle and Workday. It'll 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 headquarters 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?
Yeah. 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 is 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 deficiency, 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 one of the Big Four 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't. And the regulators will never accept a 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 were in school and you had to show your math work. You 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'm sure no one else has done what we've done because we've talked to the firms. They're our 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 the audits, and almost all of them implement BlackLine on behalf of customers from a consulting perspective. So that, to me, is what is our competitive advantage and what we're going through here.
Yeah. That makes sense. I guess maybe high level from an AI adoption perspective, to your point, 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 finance.
Coming to an end, Steve. I promise. Coming to an end. Come hell or high water.
With that context, how do you think about what the AI rollout will look like within the office of CFO? How do you think about the risk versus the opportunity around that?
Yeah. So I happen to sit on 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 Beyond the Black with a chief accounting officer on what he is using in his business, what the head of a Big Four regulatory practice is advising customers, and then a consulting partner that runs technology for Ernst & Young. And 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 writes you 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. 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 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." 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. Beyond the Black next week. What should we be looking forward to? What are you kind of most excited about?
Yeah. So I think we're most excited about what we're going to release around the product roadmap, both for things that are now in the market and things that we've got coming over the next couple of quarters. So that'll 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 three things that may be the most exciting. And if you're a gambler, maybe you can win some money.
Yeah. 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.
Thanks, Steve. Thank you.