UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________
FORM 10-K
______________________________________
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-37924
______________________________________
BlackLine, Inc.
(Exact name of Registrant as specified in its charter)
______________________________________________________________
Delaware
46-3354276
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
21300 Victory Boulevard, 12th Floor
Woodland Hills, CA 91367
(Address of principal executive offices, including zip code)
(818) 223-9008
(Registrant’s telephone number, including area code)
______________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
BL
Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act:
None
______________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”
“accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of
the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15
U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period
pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant, based on the closing price of a share of the registrant’s common stock on June 30, 2024 as reported by the Nasdaq Global Select
Market on such date was $2.787 billion. Shares of the registrant’s common stock held by each executive officer, director and holder of 5% or more of the outstanding common stock have been excluded in that such persons may be
deemed to be affiliates. This calculation does not reflect a determination that certain persons are affiliates of the registrant for any other purpose.
At February 14, 2025, 62,814,333 shares of the registrant’s common stock, $0.01 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the information called for by Part III of this Annual Report on Form 10-K where indicated are hereby incorporated by reference from the Definitive Proxy Statement for the registrant’s Annual Meeting of Stockholders to be held
in 2025, which will be filed with the Securities and Exchange Commission not later than 120 days after the end of the registrant’s fiscal year ended December 31, 2024.
1
BLACKLINE, INC.
2024 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Page No.
PART I
Item 1.
Business
3
Item 1A.
Risk Factors
11
Item 1B.
Unresolved Staff Comments
36
Item 1C.
Cybersecurity
36
Item 2.
Properties
38
Item 3.
Legal Proceedings
38
Item 4.
Mine Safety Disclosures
38
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
39
Item 6.
[Reserved]
40
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
40
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
57
Item 8.
Financial Statements and Supplementary Data
59
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
98
Item 9A.
Controls and Procedures
98
Item 9B.
Other Information
98
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
99
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
100
Item 11.
Executive Compensation
100
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
100
Item 13.
Certain Relationships and Related Transactions, and Director Independence
100
Item 14.
Principal Accountant Fees and Services
100
PART IV
Item 15.
Exhibits and Financial Statement Schedules
101
Item 16.
Form 10-K Summary
103
Signatures
104
2
PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risk and
uncertainties. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,”
“plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “would,” “continue,” “ongoing” or the negative of these terms or other
comparable terminology. All statements other than statements of historical fact are statements that could be deemed forward-looking
statements, including, but not limited to, statements regarding future financial and operational performance; statements concerning growth
strategies including acquisitions, extension of distribution channels and strategic relationships, product innovation, international expansion,
customer growth and expansion, customer service initiatives, expectations regarding our acquisitions, expectations regarding contract size
and increased focus on strategic products, expectations for hiring new talent; our ability to accurately forecast revenue and appropriately plan
expenses and investments; the demand for and benefits from the use of our current and future solutions; market acceptance of our solutions;
the impact of the macroeconomic environment on our business; and changes in the competitive environment in our industry and the markets
in which we operate and our liquidity and capital resources. These statements are based upon our historical performance and our current
plans, estimates and expectations and are not a representation that such plans, estimates, or expectations will be achieved. Forward-looking
statements are based on information available at the time those statements are made and/or management’s good faith beliefs and
assumptions as of that time with respect to future events and are subject to risks and uncertainty. If any of these risks or uncertainties
materialize or if any assumptions prove incorrect, actual performance or results may differ materially from those expressed in or suggested
by the forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks,
uncertainty, and assumptions that are difficult to predict, including those identified below, under “Item 1A. Risk Factors” and elsewhere
herein. Forward-looking statements should not be read as a guarantee of future performance or results, and you should not place undue
reliance on such statements. Furthermore, we undertake no obligation to revise or update any forward-looking statements for any reason,
except as required by applicable law.
Unless the context otherwise requires, the terms “BlackLine, Inc.,” “BlackLine,” “the Company,” “we,” “us,” and “our” in this Annual
Report on Form 10-K refer to the consolidated operations of BlackLine, Inc. and its consolidated subsidiaries as a whole.
Item 1. Business
Overview
The Office of the Chief Financial Officer (“CFO”) is relied upon to deliver timely and accurate financial reporting and business insights.
Yet finance and accounting teams are facing unprecedented system and process complexity, growing data volumes, and evolving regulatory
requirements, coupled with expanding roles and responsibilities. As a result, digital transformation has become a top priority for CFOs, as
they require powerful technology to meet these demands.
At BlackLine, our mission is to inspire, power, and guide digital finance transformation for the Office of the CFO. Our secure, flexible,
and scalable cloud-based platform empowers finance and accounting teams to achieve future-ready financial operations, modernizing
processes for mid-size and enterprise organizations across all industries.
For many organizations, enterprise resource planning (“ERP”) systems manage general ledger activities but do not address end-to-end
processes performed across other systems and outside those systems in spreadsheets, impeding organizations’ ability to provide reliable
data and insights. Our platform connects data and processes at their origin, enhancing financial reporting integrity, streamlining activities, and
delivering faster insights. This approach drives immediate impact and sustained value, maximizing cash flows, and accelerating the record-
to-report and invoice-to-cash cycles.
BlackLine integrates with over 30 leading ERP systems, including SAP SE (“SAP”), Oracle Corporation, Microsoft Dynamics 365
(“Microsoft Dynamics”), an application offered by Microsoft Corporation (“Microsoft”), Sage Intacct, Inc., and NetSuite, Inc. It also connects
with diverse financial data sources, such as banks, point-of-sale, treasury, payroll, procurement, and other systems, bringing data into unified
workflows. This deep connectivity provides finance and accounting teams with accurate, actionable insights, reducing errors, improving
compliance, and freeing time for strategic analysis.
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For over 20 years, BlackLine has pioneered customer-centric innovation in financial software, optimizing mission-critical processes for
the Office of the CFO. Our latest innovation, the BlackLine Studio360 Platform, uniquely addresses the increasing complexity of data,
systems, and processes.
BlackLine was founded in 2001. We are a holding company and conduct our operations through our wholly-owned subsidiary,
BlackLine Systems, Inc. (“BlackLine Systems”) and its subsidiaries.
On September 12, 2023, we acquired Data Interconnect (“DI”), hereinafter referred to as the “DI Acquisition”. DI is a cloud-based
invoice-to-cash automation vendor within the electronic invoice presentment and payment (“EIPP”) market. The primary purpose of the DI
Acquisition was to complete our existing accounts receivable automation solution by adding EIPP capabilities to our platform. In doing so, we
now offer a complete end-to-end invoice-to-cash process within the platform.
On January 26, 2022, we acquired FourQ Systems, Inc. (“FourQ”), which we refer to as the “FourQ Acquisition.” The primary purpose
of the FourQ Acquisition was to enhance our existing intercompany accounting automation capabilities by driving end-to-end automation of
traditionally manual intercompany accounting processes.
Our cloud-based applications, increasingly powered by our BlackLine Studio360 Platform, include Account Reconciliations, Transaction
Matching, Task Management, Financial Reporting Analytics, Journal Entry, Variance Analysis, Compliance, Smart Close for SAP, Cash
Application, Credit & Risk Management, Collections Management, Disputes & Deductions Management, Team & Task Management, AR
Intelligence, Electronic Invoicing & Payments, Intercompany Create, Intercompany Balance & Resolve, and Intercompany Net & Settle.
These applications address many use cases across our customers’ financial operations and include comprehensive and flexible solutions
that deliver best practices for end-to-end record-to-report and invoice-to-cash processes.
Our Growth Strategy
Our principal growth strategies include the following:
Continue to Innovate and Expand our Solutions. Our ability to internally develop or make strategic acquisitions of new, market-
leading applications and functionalities is integral to our success. We intend to deepen our existing capabilities and extend the functionality
and range of our applications to bring new solutions to the Office of the CFO.
Enhance our Leadership Position within the Marketplace. We intend to focus on customer expansion, geography, and industry to
maintain and grow our leadership position.
•
Customer Expansion: We believe we have a leading position in the market with both enterprise and select mid-size companies.
We intend to leverage our brand recognition, history of innovation, and customer focus to maintain and grow our leadership
position with enterprise market businesses. We pursue a land-and-expand sales model and believe there is significant
opportunity to increase sales of our solutions within our existing customer base. Our pricing model is designed to allow us to
capture additional revenue as our customers’ usage of our platform grows, providing us with an opportunity to increase the
lifetime value of our customer relationships.
•
Geography: We believe that we have a significant opportunity to expand the use of our cloud-based solutions outside the United
States (“U.S.”). We intend to invest in further expanding our global footprint through organic growth activities and strategic
acquisitions.
•
Industry: We continue to leverage our customer scale to innovate with industry-specific product extensions, specifically for
industries where we have large total addressable market opportunities and strong brand permission with customers and
partners.
Extend Our Relationships with Partners. We have established strong relationships with technology vendors such as SAP and
Microsoft, Google LLC (“Google”), and Snowflake, Inc. (“Snowflake”), professional services firms such as Accenture plc (“Accenture”),
Deloitte Touche Tohmatsu Limited (“Deloitte”), and Ernst & Young Global Limited (“Ernst & Young”), and business process outsourcers, such
as CapGemini SE (“CapGemini”), GenPact Ltd (“GenPact”), and RSM US LLP (“RSM”). We intend to deepen our relationships with our
current partners, foster a thriving ecosystem of partnerships and partner with resellers who are well versed in the BlackLine suite and select
software firms.
ERP Connectivity. We intend to leverage our BlackLine Studio360 Platform to further extend our technology integration capabilities
with large ERP players, and maintain connectivity to other ERPs and third-party data sources.
4
Cloud Marketplaces. We have established the ability to buy BlackLine solutions via Cloud Marketplaces by Google Cloud Platform
(“GCP”), Microsoft Azure (“Azure”), and Amazon AWS (“AWS”). This enables our customers to leverage their committed spend with those
cloud providers for a software purchase with BlackLine.
BlackLine Platform, Products, and Capabilities
We provide a unified, scalable, and flexible platform tailored to the evolving needs of the Office of the CFO and deliver purpose-built
applications that address critical processes, including financial close & consolidation, intercompany accounting, and invoice-to-cash. Our
software and services provide the critical technology and industry-leading practices that deliver accurate, efficient, and intelligent financial
operations.
BlackLine Studio360 Platform
In today’s dynamic business environment, the Office of the CFO faces unprecedented challenges: managing complex systems, siloed
data, and demands for real-time, accurate insights to enable strategic decision-making. Traditional, fragmented solutions cannot keep up with
the increasing complexity of data, systems, and processes. The need for a unified, comprehensive, flexible, and scalable platform has never
been greater.
BlackLine’s recently launched Studio360 Platform addresses these challenges by providing an infrastructure and capabilities to further
unify our products and services that includes:
•
Studio360 Integrate: Powerful and flexible capabilities for unifying, cleansing, and transforming data through pre-built
connectors and APIs, ensuring a single source of truth for finance and accounting teams;
•
Studio360 Orchestrate: The industry’s most extensive capabilities to map, optimize, and automate workflows across BlackLine
applications, ERPs, and other applications like procurement, payroll, revenue, treasury, fixed assets, and more, with real-time
progress tracking and event-based scheduling;
•
Studio360 Visualize: Real-time, AI-powered insights, anomaly detection, exception handling, and KPI monitoring through
customizable dashboards and reports, enabling CFOs to make fast, data-driven decisions;
•
Studio360 Blueprint: An extensive library of proven process design templates grounded in customer-informed industry best
practices, enabling rapid deployment and achievable transformation outcomes. BlackLine and its world’s-leading partners
continuously contribute to and expand this library, ensuring it remains up-to-date and adaptable to evolving customer needs; and
•
Studio360 Control: A centralized hub for administering and enforcing financial data hierarchies, policies, and certifications to
strengthen governance and risk management.
Solutions
Our cloud-based solutions for the Office of the CFO are designed to be the primary system of interaction for accounting and finance
professionals. Our solutions unify systems and data and work to drive accuracy, collaboration, efficiency, and control. Our solutions enable
accounting and finance professionals to execute their work continuously, empowering real-time insights and business partnership.
Products and Services
Our products are comprised of financial close & consolidation, intercompany accounting, and invoice-to-cash. We also provide
resources and services for implementation.
Financial Close & Consolidation
The collection of processes by which organizations reconcile, consolidate, and report their financial information at the end of each
period is referred to as record-to-report. For organizations of any size, traditional processes are heavily manual and rely upon error-prone
spreadsheets, increasing risk and threatening the accuracy of financial reporting. Our Financial Close & Consolidation solutions allow
customers to standardize and automate key steps across the record-to-report process to ensure accuracy and control. Our products include:
•
Account Reconciliations provides a centralized workspace from which users can collaborate to substantiate their balance
sheet by completing account reconciliations. Features include standardized templates, workflows for review and approval,
linkage to policies and procedures, and integrated storage of supporting documentation. The product automates otherwise
manual activities in the substantiation process, significantly reducing time and effort and increasing productivity. It also enhances
internal controls by facilitating the appropriate segregation of duties, simplifying reconciliation audits and adding transparency
and visibility to the reconciliation process;
5
•
Transaction Matching analyzes and reconciles high volumes of individual transactions from different sources of data based
upon user-configured logic. Our rules engine automatically identifies exceptions, errors, missing data, and variances within large
data sets. The matching engine processes millions of records per minute, can be used with any type of data, and allows
customers to reconcile transactions in real time;
•
Journal Entry allows users to generate, review, and post manual journal entries. Many postings can be fully automated and
calculated based on complex, customer-defined logic or automatically allocated across multiple business units. Validation and
approval checkpoints help ensure the integrity of information passed to other financial applications, including hundreds of ERPs
and subsystems, in a configurable, standardized format;
•
Task Management enables users to create and manage processes and task lists. The solution provides automatic and recurring
task scheduling, includes configurable workflow, and provides a management console for accounting and finance activities.
Though most commonly used with the financial close, users can create task lists and projects for hundreds of different use cases
ranging from external audits to environmental impact surveys. The solution can be used as a cloud-based, controlled checklist
that includes reporting and alerts to drive greater collaboration, accountability, and visibility;
•
Smart Close for SAP is a fully embedded, purpose-built solution to streamline and automate the close directly in SAP. Smart
Close complements our cloud financial close management solutions to achieve end-to-end automation. Purpose-built automation
allows customers to automate task and job scheduling, verify the correctness of closing transactions, and take action, like raising
alerts, making corrections, or pushing the closing process to the next step with job scheduling;
•
Financial Reporting Analytics is a modern solution that enables analysis and validation of group level or consolidated financial
data with direct, real-time visibility into the local or underlying details. The solution provides a centralized workspace with end-to-
end transparency and automates ledger-to-ledger, statutory-to-GAAP, tax-to-GAAP, and system-to-system reconciliation to
ensure the completeness and accuracy of consolidated fluctuation results;
•
Variance Analysis automatically calculates, identifies, and provides anomalous fluctuations in balance sheet and income
statement account balances with “always-on” monitoring. Once an item needing investigation is identified, users are
automatically alerted so they can research and determine the source of the fluctuation. Users can then document and sign off on
explanations, enabling stronger control; and
•
Compliance is an integrated solution that facilitates compliance-related initiatives, consolidates project management, and
provides visibility over control self-assessments and testing.
Intercompany
Intercompany transactions occur when entities within a corporate parent organization transact with each other. These transactions are
some of the most complex and frequent sources of uncertainty and process inefficiency for the controller organization, frequently causing
imbalances that must be resolved. The intricate nature of intercompany transactions often drives accounting operations to process a
substantial volume of intercompany charges within the constraints of the fiscal calendar, leaving insufficient time for enhancing the quality of
the underlying data. This prevalent operational practice results in heightened stress for accounting and finance professionals, originating from
an unproductive and avoidable workload. Often manual, time-consuming, and resource-intensive processes, intercompany transactions can
have material impacts on costs if not managed properly. Our intercompany solutions manage the entire intercompany transaction lifecycle
within our platform, from the initial creation of a transaction through the settlement. We believe it is the only widely-available, automated end-
to-end intercompany solution maintained in a single platform. These solutions include:
•
Intercompany Create increases visibility into transaction-level data by originating transactions directly within our software.
Intercompany transactions are configured and executed with a simple process that uses billing routes to facilitate the flow of a
transaction and the appropriate tax and transfer pricing mark-ups. The application stores permissions and business logic
exceptions by entity, service, and transaction type, ensuring that both the seller and the buyer of the intercompany transaction
are authorized to conduct business, while billing in a manner that optimizes process efficiency and minimizes tax leakage.
Transactions are booked via Journals directly into the ledger. Invoices are automatically generated for each respective
jurisdiction and e-invoicing capabilities can send intercompany data to country-specific portals. Workflow capabilities exist for ad
hoc transactions as well as non-invoiceable transactions;
6
•
Intercompany Balance & Resolve centralizes, streamlines, and automates intercompany reconciliation complexity and dispute
management by capturing all intercompany transactions within the virtual subledger and providing resolution actions to reconcile.
This feature reduces intercompany reconciliation risk, effort, and last-minute plugs by automatically flagging out-of-balance
trading pairs and underlying transactions that create exceptions on a continuous basis. Open intercompany transactions are
continuously analyzed to verify offsetting transactions on the respective trading partner books. Exceptions are flagged and users
are automatically notified for investigation and resolution. Automated or workflow-based resolution actions and adjustments bring
the balance back into line for settlement-ready balances; and
•
Intercompany Net and Settle enables real-time visibility into open intercompany transactions that integrate with treasury
systems to facilitate and streamline netting, settlement, and clearing to optimize working capital. Using bilateral and multilateral
netting to reduce the number of transactions that typically incur bank fees, treasury teams can effectively manage the manner
that intercompany balances are closed out using cash and non-cash settlement methodologies to effectively manage the cash
positions of each entity. Users can filter the information by transaction type, hold type, currency, or business relationship. This
feature facilitates the process of netting transactions and helps users make informed, strategic decisions, while managing cash
reporting and forecasting.
Invoice-to-Cash
Cash is vital to every business, and invoice-to-cash is central to improving cash flow. Managing invoice-to-cash well means maximizing
working capital by collecting cash and minimizing credit losses. This critical process is often highly manual. Our unified suite helps customers
collect cash, provide credit, and better understand cash flow.
•
Cash Application transforms the order-to-cash cycle by significantly reducing the time it takes to apply cash receipts to open
invoices, resulting in significant reductions in unapplied cash. BlackLine Cash Application drives an automated and effective end-
to-end process from an invoice-to-cash in the bank and fully applied in the subledger. It uses intelligent automation to help
customers accurately apply payments to customers’ invoices in an ERP. Embedded machine learning then reduces the manual
effort involved in the process and releases working capital for our customers;
•
Credit & Risk Management brings customer and payment behavior data together to enable optimal risk strategies and real-time
risk profiling. Managing the balance between sales and risk of non-payment is critical to profitability. Credit & Risk Management
brings together data from numerous sources, such as credit reference agencies, credit insurers, and payment performance to
understand historical indebtedness and behavior trends of the companies with whom our customers work. This solution works in
tandem with our Collections Management solution to help organizations better understand their customer base and make
informed decisions around collection strategies, recovery sequences, and the prioritization of team tasks;
•
Collections Management helps customers design collection strategies to fit each of their customer’s sales ledger profile.
Releasing cash from customers is the fastest way to increase working capital. Collections Management streamlines the
collections process and unlocks more cash from companies with automated escalating recovery sequences that enable
collections teams to better prioritize their work by understanding which customers require attention. Customers gain real-time
clarity into what actions and collection strategies are working at each stage of the collection process and can use this information
to collect payments more efficiently, leading to reduced days sales outstanding and improved customer relationships;
•
Disputes & Deductions Management helps our customers track payment disputes to drive prompt response and resolution.
Unresolved disputes lead to uncollected revenue and can threaten profitability. Disputes & Deductions logs, monitors, and
analyzes invoice disputes and provides our customers automated workflows to accelerate dispute resolution and protect their
customer relationships;
•
Team & Task Management automates accounts receivable teams’ tasks while ensuring timely execution by using data to drive
priority of actions. The historically manual work behind accounts receivable processes can lead to siloed work and a lack of end-
to-end visibility. Team & Task Management provides full visibility into the accounts receivable process, monitors critical actions
against the volume of work, and allocates resources based on team capacity to prioritize risk management and cash collection;
•
AR Intelligence automatically processes, analyzes, and surfaces critical information, such as sales and payment performance
data, customer payment trends, and days sales outstanding. This solution unifies the data across BlackLine’s Invoice-to-Cash
suite to provide data typically difficult to obtain in real-time;
7
Customers using this solution gain insights into customer behavior, as well as the ability to measure the impact of extended
payment terms to cash collections and cash flow, and understand the predictability of customer payments when building cash
flow forecasts; and
•
Electronic Invoicing & Payments helps our customers generate, send, and monitor invoices in diverse e-invoice formats
through a multitude of delivery channels. Customers can download invoices through secure, branded, customer invoice portals.
BlackLine’s Electronic Invoicing & Compliance can provide financial flexibility with the ability to service inbound customer
payments through a range of versatile payment channels. BlackLine Invoicing & Compliance allows customers to adapt and
adhere to country-specific requirements with evolving e-invoicing regulations across various countries.
Services
Customer service is essential to our customers' success and we are focused on driving long-term partnership and value by offering the
following services:
•
Implementation: With a focus on configuration over customization, our implementation approach favors rapid and efficient
deployments led by accounting experts, rather than technical resources. A typical project will focus on mapping our application to
a customer’s current or ideal process, coaching them on best practices, and helping organizations become self-sufficient, instead
of dependent on additional professional services. For customers that elect to work with a partner or business process outsourcer
for implementation services, BlackLine provides partner training and certification, as well as support for partner-led projects;
•
Optimization: Our transformation team assists with optimization strategies for transformation projects through the BlackLine
Optimization Academy where we teach accountants how to optimize their accounting and reporting processes. Customers learn
what processes can benefit from optimization and can choose to undertake the optimization process themselves or choose our
consulting services or strategic customer advisory services to continue their journey;
•
Training & Education: We offer a variety of live and web-based training options through BlackLine University. Many customers
consume their training through our e-learning environment, while others select both live and e-learning. Courses cover solutions
functionality, as well as the underlying concepts and demonstrate the power of our platform like financial close & consolidation,
intercompany accounting, and invoice-to-cash;
•
Customer Success: Our customer success managers, many of whom are former users, provide customers with best practices
and create a success plan for expanded usage of our platform for process optimization. A success plan is central to increased
customer value and customer adoption. This approach positively impacts our retention and upsell efforts; and
•
Global Support: From our offices in Australia, Canada, England, India, Japan, Mexico, the Netherlands, Poland, Romania, and
the U.S., we provide tiered customer support, ranging from support provided during business hours to 24/7/365 support. All
customers have access to essential support through our support and community portal, included as part of their subscription. In
2023, we rolled out two additional tiers of support that customers can purchase based on their needs.
Across our platform, products and services, BlackLine stands out through its integration, scalability and flexibility, ease of use, and
commitment to innovation. Our solutions securely and automatically connect with ERPs and various financial data sources, simplifying data
consolidation for complex environments. Unlike solutions tied to specific systems, BlackLine is ERP and data source agnostic, ensuring
compatibility and adaptability as organizations evolve. Designed by finance and accounting professionals with years of industry experience,
our user-friendly interface offers intuitive dashboards, collaboration tools, and streamlined workflows for all skill levels. With a history of
proven innovation and a commitment to continued investment, BlackLine continues to address more challenges across the Office of the
CFO, meeting the diverse and dynamic needs of today’s businesses.
Key Benefits
Our platform is designed to provide the following benefits to our customers:
•
Automated Processes: Our solutions leverage AI and automation to streamline manual finance and accounting activities such
as reconciliations, journal entries, and cash application. By seamlessly integrating with ERP systems and other data sources, our
solutions eliminate manual work, prevent errors, and free up teams to focus on strategic activities;
8
•
Strengthened Controls & Improved Compliance: By embedding controls, segregation of duties, out of the box workflows, and
audit trails across our platform and applications, we help organizations address the complexities of their global regulatory
requirements and reduce risk of non-compliance. Our ability to scale across multiple currencies, languages, and unify financial
data across sources ensures accuracy and greater confidence in financial reporting;
•
Reduced Costs: Our solutions replace resource-intensive, often spreadsheet-based processes with automated workflows and
leading practices, leading to cost savings. Our platform’s extensibility, flexibility, and scalability enable enterprises to optimize
their financial operations, reducing bottlenecks and delivering value across diverse organizational setups, including those
managing high transaction volumes;
•
Accelerated Insights: Our platform and solutions provide real-time dashboards, configurable reports with drilldown capabilities,
and unparalleled visibility into financial data and operations, empowering teams to make informed decisions faster and support
improved forecasting; and
•
Proactive Anomaly & Risk Detection: Powerful business rules and AI-driven anomaly detection help customers identify
potential risks or unusual patterns in their financial operations and results. We enable a proactive approach that prevents issues
before they escalate, safeguarding financial integrity.
By combining automation, real-time insights, embedded controls, and flexible and scalable design, our solutions ensure organizations
can meet the increasing demands on the Office of the CFO, despite system complexity and evolving regulatory landscape. Our future-ready
platform enables financial operations excellence and empowers the Office of the CFO to deliver strategic value to their organizations.
Customers
Our customers include multinational corporations, large enterprises, and mid-size companies across a broad array of industries. These
businesses include publicly-listed entities and privately-owned enterprises, as well as non-profit entities. At December 31, 2024, we had
397,477 individual users across 4,443 customers, exclusive of on-premise software. We define a customer as an entity with an active
subscription agreement as of the measurement date. In situations where an organization has multiple subsidiaries or divisions, each entity
that is invoiced as a separate entity is treated as a separate customer. However, where an existing customer requests its invoice be divided
for the sole purpose of restructuring its internal billing arrangement without any incremental increase in revenue, such customer continues to
be treated as a single customer.
Sales and Marketing
We sell our solutions through our direct sales force. Our direct sales force leverages our relationships with technology vendors such as
SAP and Microsoft, professional services firms such as Accenture, Deloitte, and Ernst & Young and business process outsourcers, such as
CapGemini, Genpact, and RSM, to influence and drive customer growth. Since 2018, we have partnered with SAP, incorporating them into
the reseller channel that we use in the ordinary course of business. SAP has the ability to resell our solutions as SAP solutions-extensions
(“SolEx”), for which we receive a percentage of the revenues. SolEx allows us to provide the highest level integration with SAP ERP
solutions. Going forward, we intend to become a more partner-powered organization, harnessing the deep and embedded relationships our
partners have with key decision-makers at our customers.
Our marketing efforts are focused on demand generation, establishing and extending our brand proposition, generating product
awareness, and cultivating our community of users. We generate demand primarily through word-of-mouth, search engine marketing,
campaigns and events, and our network of business process outsourcers, business services organizations and resellers. We leverage online
and offline marketing channels on a global basis, organize customer roundtables and user conferences, and release white papers, case
studies, blogs, and other resources. We execute co-marketing activities with partners such as SAP, Ernst & Young, and Deloitte. We further
extend our brand awareness through sponsorships with leading industry organizations such as the American Institute of Certified Public
Accountants, or AICPA, the Institute of Management Accountants, or IMA, the Financial Executives International, or FEI, the Institute of
Chartered Accountants in England and Wales, or ICAEW, and the Association of Chartered Certified Accountants, or ACCA.
Competition
The market for accounting and financial software and services is competitive, rapidly evolving and requires a deep understanding of the
industry standards, financial operations processes, accounting rules, and global financial regulations.
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We compete with vendors of financial operations, financial automation, record-to-report, and invoice-to-cash software, including
software offered by certain ERP vendors. Further, other established software vendors not currently focused on accounting and finance
software and services, including some of our partners, resellers, and other parties with which we have relationships, may expand their
services to compete with us.
We believe the principal competitive factors in our market include the following:
•
depth and breadth of solutions;
•
level of customer satisfaction;
•
ease of deployment and use of applications;
•
ability to integrate with multiple legacy enterprise infrastructures and third-party applications;
•
domain expertise on accounting and finance best practices;
•
ability to innovate and respond to customer needs rapidly;
•
capability for configurability, integration, and scalability of applications;
•
cloud-based delivery model;
•
advanced security and reliability features;
•
brand recognition and historical operating performance; and
•
price and total cost of ownership.
We believe we are positioned favorably against our competitors based on these factors. However, certain of our competitors may have
greater name recognition, longer operating histories, more established customer and marketing relationships, larger marketing budgets, and
significantly greater resources.
Intellectual Property and Proprietary Rights
Our intellectual property and proprietary rights are important to our business. We currently have two patents. We primarily rely on
copyright, trade secret and trademark laws, trade secret protection, and confidentiality or license agreements with our employees, customers,
partners, and others to protect our intellectual property rights. Though we rely in part upon these legal and contractual protections, we believe
that factors such as the skills and ingenuity of our employees and the functionality and frequent enhancements to our solutions are larger
contributors to our success in the marketplace.
Despite our efforts to preserve and protect our intellectual property and proprietary rights, unauthorized third parties may attempt to
copy, reverse engineer, or otherwise obtain portions of our software. Competitors may attempt to develop similar solutions that could
compete in the same market as our solutions. Unauthorized disclosure of our confidential information by our employees or third parties could
occur. Laws of other jurisdictions may not protect our intellectual property and proprietary rights from unauthorized use or disclosure in the
same manner as the U.S. The risk of unauthorized use of our proprietary and intellectual property rights may increase as we continue to
expand outside of the U.S.
Third-party infringement claims are also possible in our industry, especially as software functionality and features expand, evolve and
overlap with other industry segments.
Human Capital
BlackLine's approximately 1,830 employees worldwide contribute their unique talents, experience, and backgrounds to inspire, power,
and guide digital finance transformation. We are committed to driving a culture of inclusion and innovation through our programs designed to
attract, develop, retain, and engage exceptional talent aligned with our values of Think, Create, Serve, and Deliver.
Through a focus on inclusion, health and safety, comprehensive compensation and benefits, employee engagement, and training and
development, we strive to cultivate a culture where employees thrive. Our workforce strategy is driven by a continued focus on our employee
culture, including how we find, develop, and retain talent. Every BlackLine employee has access to resources designed to help them improve
their well-being, understand the value of their work, develop their career, and thrive professionally.
Attract
Our core values of Think, Create, Serve, and Deliver, and our embedded approach to inclusion, are the underpinnings of our culture.
We embrace the unique value of each person’s life experiences and seek candidates
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from a wide range of backgrounds to join our team because we believe that fostering an inclusive environment better positions us to recruit
strong talent and unlock innovation. We focus on building an inclusive culture through a variety of company initiatives, beginning with our
hiring practices and our commitment to continually attract candidates from a broad range of backgrounds into our recruiting pipeline.
Develop
We believe that one of the primary reasons candidates join BlackLine is for career development opportunities, and we have several
programs and resources to help our employees explore, develop, and achieve their career goals. We invest in our employees’ career growth
and provide a wide range of development opportunities, self-directed learning, and support for continuing education through access to
professional development and reimbursement programs. BlackLine employees are also offered robust training related to BlackLine products
and formal and informal on-the-job training. Career growth and development opportunities are available to all employees, including internal
promotions and transfers.
Retain
To retain our workforce, we strive to offer competitive compensation and comprehensive benefits programs. We review our
compensation practices, both in terms of our overall workforce and individual employees, to ensure our pay practices are fair and
competitive. Our compensation program is built on a pay-for-performance foundation that is designed to attract, motivate, reward, and retain
talented individuals who possess the skills and domain expertise necessary to support our business, contribute to our strategic goals, and
create long-term value for our stockholders. We provide employees with competitive compensation packages that include base salary plus a
bonus, commission, or incentive plan, access to our employee stock purchase plan, where applicable, and equity awards to encourage
performance and retention of our top talent.
Corporate Information
We were incorporated in May 2001. Our principal executive offices are located at 21300 Victory Blvd, 12th Floor, Woodland Hills,
California 91367, and our telephone number is (818) 223-9008.
The names “BlackLine,” “BlackLine Systems,” “BlackLine Cash Application,” and our logo are our trademarks. This Annual Report on
Form 10-K also contains trademarks and trade names of other businesses that are the property of their respective holders. We have omitted
the ® and ™ designations, as applicable, for the trademarks we name in this Annual Report on Form 10-K.
Available Information
Our website is located at www.blackline.com, and our investor relations website is located at http://investors.blackline.com. We have
used, and intend to continue to use, our Investor Relations website as a means of disclosing material public information and for complying
with our disclosure obligations under Regulation FD. Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934, as amended, or the Exchange Act, are available, free of charge, on our investor relations website as soon as reasonably practicable
after we file such material electronically with or furnish it to the Securities and Exchange Commission, or the SEC. The SEC also maintains a
website that contains our SEC filings. The address of the site is www.sec.gov.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below,
together with all of the other information in this Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our consolidated financial statements and related notes, before making a decision to invest in our
common stock. The risks and uncertainties described below are not the only ones we face. Additional risk and uncertainties not presently
known to us or that we presently deem less significant may also impair our business operations. If any of the events or circumstances
described in the following risk factors actually occurs, our business, operating results,
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financial condition, cash flows, and prospects could be materially and adversely affected. In that event, the market price of our common stock
could decline, and you could lose part or all of your investment.
Summary Risk Factors
Our business is subject to numerous risks and uncertainties that you should consider before investing in BlackLine, as fully described
below. The principal factors and uncertainties that make investing in BlackLine risky include, among others:
•
If we are unable to attract new customers and expand sales to existing customers, our growth could be slower than we expect
and our business may be harmed.
•
Our business and growth depend substantially on customers renewing their subscription agreements with us, and any decline in
our customer renewals could adversely affect our operating results.
•
Economic uncertainty and other unfavorable conditions in our industry or the global economy could limit our ability to grow our
business and negatively affect our operating results.
•
If we fail to manage growth in our operations and organizational change effectively, we may be unable to execute our business
plan.
•
If we are not able to provide successful enhancements, new features or modifications to our software solutions, our business
could be adversely affected.
•
We derive substantially all of our revenues from a limited number of software solutions, and our growth is dependent on their
success.
•
If our relationships with technology vendors and business process outsourcers are not successful, our business and growth may
be harmed.
•
If our security controls are breached or if unauthorized, or inadvertent access to customer, employee or other confidential data is
otherwise obtained, our software solutions may be perceived as insecure, we may lose existing customers or fail to attract new
customers, our business may be harmed and we may incur significant liabilities.
•
We depend and rely upon Software as a Service (“SaaS”) applications from third parties to operate our business and provide our
software solutions, and interruptions, outages, or performance problems with these technologies may adversely affect our
business and operating results.
•
Our increased focus on the development and use of generative artificial intelligence and machine learning technologies (“AI/ML”)
in our platform and our business, as well as our potential failure to effectively implement, use, and market these technologies,
may result in reputational harm or liability, or could otherwise adversely affect our business.
•
Interruptions or performance problems associated with our software solutions, platform and technology may adversely affect our
business and operating results.
•
If our software contains serious errors or defects, we may lose revenue and market acceptance and may incur costs to defend or
settle product liability claims.
•
The market in which we participate is intensely competitive, and if we do not compete effectively, our business and operating
results could be harmed.
•
Our quarterly results may fluctuate, and if we fail to meet the expectations of analysts or investors, our stock price and the value
of your investment could decline substantially.
•
We have a history of losses and we may not be able to generate sufficient revenue to achieve or sustain profitability.
•
The market price of our common stock may be volatile, and you could lose all or part of your investment.
Risks Related to Our Business and Industry
If we are unable to attract new customers and expand sales to existing customers, our growth could be slower than we expect and
our business may be harmed.
Our growth depends in part upon increasing our customer base. Our ability to increase our revenues will depend, in large part, upon the
effectiveness of our sales and marketing efforts, both domestically and internationally. We may have difficulty attracting potential customers
that rely on inexpensive tools such as Excel, or that have already invested substantial personnel and financial resources to integrate
internally-developed or other
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software solutions into their businesses, as such organizations may be reluctant or unwilling to invest in a new product. If we fail to attract
new customers or maintain and expand those customer relationships, our revenues will grow more slowly than expected and our business
will be harmed.
Our growth also depends upon our ability to add users and sell additional products to our existing customers. It is important for the
growth of our business that our existing customers make additional significant purchases of our products and add additional users to our
platform. Although our customers, users, and revenue have grown rapidly in the past, in recent periods our slower growth rates have
reflected the size and scale of our business. In addition, our growth rates may be impacted by changing customer preferences, such as
customer preference for platform offerings that unify upstream and downstream activities versus less broadly-focused solutions, increased
competition across many of our product offerings, and diversion of IT budgets toward other technologies and priorities. We cannot be
assured that we will achieve similar growth rates in future periods as our customers, users, and revenue could decline, or grow more slowly
than we expect. Our business also depends on retaining existing customers. If we do not retain customers, including due to the acquisition of
our customers by other companies, or our customers downgrade or fail to renew their agreements with us, or move to our competitors, or if
our customers do not purchase additional products, our revenues may grow more slowly than expected, may not grow at all or may decline.
Additionally, increasing incremental sales to our current customer base may require additional sales efforts that are targeted at senior
management of such customers, which efforts are often associated with complex customer requirements and additional time to evaluate and
test our products, and can lead to long and unpredictable sales cycles. There can be no assurance that our efforts will result in increased
sales to existing customers or additional revenues.
Our sales and marketing efforts have been and may continue to be impacted by geopolitical developments and other events beyond
our control, including economic volatility and macroeconomic trends. Such events have resulted in increased price sensitivity on the part of
certain current and prospective customers, and could negatively impact sales for certain of our premium-priced offerings.
Our business and growth depend substantially on customers renewing their subscription agreements with us and any decline in
our customer renewals could adversely affect our operating results.
Our initial subscription period for the majority of our customers is one to three years. In order for us to continue to increase our revenue,
it is important that our existing customers renew their subscription agreements when the contract term expires. Although our agreements
typically include automatic renewal language, our customers may cancel their agreements at the expiration of the term. In addition, our
customers may renew for fewer users, renew for shorter contract lengths or renew for fewer products or solutions. Renewal rates may
decline or fluctuate as a result of a variety of factors, including satisfaction or dissatisfaction with our software or professional services, our
pricing or pricing structure or changes in pricing structures, the pricing or capabilities of products or services offered by our competitors, the
effects of economic conditions, or reductions in our customers’ budgets and spending levels. For example, macroeconomic trends and
changing customer preferences have impacted and may continue to impact our renewal rate. Any prolonged downturn in the global economy
in general, or in particular sectors, such as technology or financial services, would adversely affect the industries in which our customers
operate, which could adversely affect our customers’ ability or willingness to renew their subscription agreements or could cause our
customers to downgrade the terms of their subscription agreements. Even in the absence of unfavorable macroeconomic trends, changes in
the size and mix of IT spend, such as favoring newer technologies like AI/ML at the expense of digital transformation, could negatively impact
customers’ ability or willingness to renew their subscription agreements or could cause our customers to downgrade the terms of their
subscription agreements.
Further, as the markets for our existing solutions mature, or as current and future competitors introduce new products or services that
compete with ours, we may experience pricing pressure and be unable to renew our agreements with existing customers or attract new
customers at prices that are profitable to us. As a result, we may in the future be required to change our pricing model, reduce our prices or
accept other unfavorable contract terms, any of which could affect our revenue. For example, we recently introduced a platform pricing
model, which is no longer tied to the amount of users and is instead driven by the size and complexity of the customer. We are uncertain as
to how this new model will be received by our customers and certain customers may view this model unfavorably and decline to renew their
agreements. If our customers do not renew their agreements with us or renew on terms less favorable to us, our revenues may decline.
Economic uncertainty and other unfavorable conditions in our industry or the global economy could limit our ability to grow our
business and negatively affect our operating results.
Our operating results may vary based on the impact of changes in our industry or the global economy on us or our customers. The
revenue growth and potential profitability of our business depend on demand for business software applications and services generally, and
for accounting and finance systems in particular. We have been operating in a period of economic uncertainty and cannot predict the timing,
strength, or duration of any economic
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recovery. The global economy has been, and may in the future be adversely affected by concerns of inflation and fluctuating interest rates,
adverse business conditions and liquidity concerns, as well as macroeconomic volatility and uncertainty. Such general macroeconomic
conditions have contributed to a more restrained and selective IT spending environment that could adversely affect demand for our products
and make it difficult to accurately forecast and plan our future business activities. For example, since the second quarter of 2022, we have
observed certain customers delaying and deferring purchasing decisions, which has resulted in the deterioration of near-term demand. In
addition, professional services revenue may decrease as new implementation projects are delayed. To the extent that there are unfavorable
conditions in the national and global economy, our business could be negatively impacted. Current and potential customers may reduce their
budgets for accounting, finance, and technology, or they may postpone or decide not to purchase or renew subscriptions to our products,
which they might view as discretionary. This would limit our ability to grow and negatively affect our operating results. Additionally, corporate
cost-cutting and tighter budgets could reduce the rate of spending on accounting, finance, and information technology. This could affect our
customers’ ability or willingness to purchase our cloud platform, delay purchasing decisions, reduce the value or duration of their subscription
contracts, or increase attrition rates, all of which would adversely affect our operating results. The occurrence of a natural disaster, global
public health crisis, geopolitical uncertainty or war has caused, and in the future may cause, customers to request concessions, including
extended payment terms, free modules or better pricing. Uncertain economic conditions may also adversely affect third parties with which we
have entered into relationships and upon which we depend in order to grow our business, such as technology vendors and public cloud
providers. Prolonged economic uncertainties relating to macroeconomic trends could limit our ability to grow our business and negatively
affect our operating results.
In addition, our customers may be affected by changes in trade policies, treaties, government regulations and tariffs, as well as
geopolitical volatility. Trade protection measures, retaliatory actions, tariffs and increased barriers, policies favoring domestic industries, or
increased import or export licensing requirements or restrictions, such as trade sanctions against Russia in response to the war in Ukraine,
could have a negative effect on the overall macro economy and our customers, and our ability to sell to certain customers, which could have
an adverse impact on our operating results.
If we fail to manage growth in our operations and organizational change effectively, we may be unable to execute our business
plan.
Growth in our customer base and operations has placed, and may continue to place, a significant strain on our managerial,
administrative, operational, financial and other resources, particularly as we focus on cost discipline and efficiency. We anticipate that
additional investments in our infrastructure will be necessary to support the growth of our operations both domestically and internationally.
These additional investments will increase our costs, with no assurance that our business or revenue will grow sufficiently to cover these
additional costs. Labor shortages and increased employee mobility may make it more difficult to hire and retain certain types of employees.
For example, labor shortages have, at times, created greater competition for engineering talent, and we have had to expend additional
resources to address the retention of such employees. Additionally, our workforce continues to be partially remote, and we expect that it will
remain partially remote for the near term. We may experience difficulties onboarding new employees remotely, and maintaining a global
organization and managing a geographically dispersed workforce requires substantial management effort, the allocation of valuable
management resources, and significant additional investment in our infrastructure. We may be unable to improve our operational, financial
and management controls and our reporting procedures to effectively manage our operations and growth, which could negatively affect our
results of operations and overall business. In addition, we may be unable to manage our expenses effectively in the future, which may
negatively impact our gross margins or operating expenses and cause us to realign resources in order to improve operational efficiency,
which may include a slowdown in hiring or reduction in force, such as workforce reductions we initiated in December 2022 and August 2023.
Moreover, if we fail to manage our anticipated growth or any realignment of resources, such as a restructuring or reduction in force, in a
manner that preserves the key aspects of our corporate culture, employee morale, productivity and the quality of our software solutions may
suffer, which could negatively affect our brand and reputation and harm our ability to retain and attract customers.
If we are not able to provide successful enhancements, new features or modifications to our software solutions, our business
could be adversely affected.
If we are unable to provide enhancements and new features for our existing solutions or new solutions that achieve market acceptance
or that keep pace with rapid technological developments, our business could be adversely affected. For example, advancements in
technology and the introduction of products by our competitors or others incorporating new technologies, such as AI/ML, the emergence of
new industry standards, or changes in customer requirements, may alter the market for our products, and businesses that are slow to adopt
or fail to adopt these new technologies may face a competitive disadvantage. The success of enhancements, new products and
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solutions depends on several factors, including timely completion, introduction and market acceptance. We must continue to meet changing
expectations and requirements of our customers and, because our platform is designed to operate on a variety of systems, we need to
continuously modify and enhance our solutions to keep pace with changes in internet-related hardware and other software, communication,
browser and database technologies. Our platform is also designed to integrate with existing ERP systems such as Microsoft Dynamics,
Oracle, and SAP, and will require modifications and enhancements as these systems change over time. Any failure of our solutions to
operate effectively with future platforms and technologies could reduce the demand for our solutions or result in customer dissatisfaction.
Furthermore, uncertainties about the timing and nature of new solutions or technologies, or modifications to existing solutions or
technologies, could increase our research and development expenses. If we are not successful in developing modifications and
enhancements to our solutions or if we fail to bring them to market in a timely fashion, our solutions may become less marketable, less
competitive or obsolete, our revenue growth may be significantly impaired and our business could be adversely affected.
We derive substantially all of our revenues from a limited number of software solutions, and our growth is dependent on their
success.
We currently derive, and expect to continue to derive, a majority of our revenue from our Financial Close & Consolidation solutions. As
a result, the continued growth in market demand for these solutions is critical to our continued success. We cannot be certain that any new
software solutions or products we introduce will generate significant revenues. Accordingly, our business and financial results have been and
will be substantially dependent on a limited number of solutions.
If our security controls are breached or unauthorized, or inadvertent access to customer, employee or other confidential data is
otherwise obtained, our software solutions may be perceived as insecure, we may lose existing customers or fail to attract new
customers, our business may be harmed and we may incur significant liabilities.
Use of our platform involves the storage, transmission and processing of our customers’ proprietary data, including highly confidential
financial information regarding their business and personal or identifying information of their customers or employees. Additionally, we
maintain our own proprietary, confidential and otherwise sensitive information. Our platform is at risk for security breaches and incidents as a
result of third-party action, employee, vendor or contractor error or malfeasance, cyberattacks (including from nation states and affiliated
actors) and other forms of hacking, denial of service attacks, malfeasance, ransomware, viruses and other malicious software, or other
factors. The risk of a cybersecurity incident occurring has increased as more companies and individuals work remotely, potentially exposing
us to new, complex threats and increasing the potential for security breaches or incidents relating to phishing and other social engineering
attacks, use of personal devices, and employee, vendor, or service provider error or malfeasance. Additionally, geopolitical events and an
uncertain political climate, including war and political and social upheaval in certain regions of the world, may create heightened risks of
cybersecurity incidents for us and our service providers, and we and they may be unable to defend against any such attacks. If any
unauthorized or inadvertent access to, or a security breach or incident impacting our platform or other systems or networks used in our
business occurs, such event could result in significant interruptions or other disruptions to our software solutions, platform and technology,
the loss, alteration, or unavailability of data, unauthorized access to, or use, disclosure, or unauthorized processing of data, including
proprietary, personal, or confidential data, and any such event, or the belief or perception that it has occurred, could result in a loss of
business, severe reputational damage adversely affecting customer or investor confidence, regulatory investigations and orders, litigation,
indemnity obligations, and damages for contract breach or penalties for violation of applicable laws or regulations. Additionally, service
providers who store or otherwise process data on our behalf, including third-party and public-cloud infrastructure, also face security risks. As
we rely more on third-party and public-cloud infrastructure, we are increasingly dependent on third-party security measures to protect against
unauthorized access, cyberattacks, and the mishandling of customer, employee and other confidential data, and we may be required to
expend significant time and resources to address any incidents related to the failure of those third-party security measures to prevent, detect,
remediate, and otherwise address security breaches or incidents. Our ability to monitor our third-party service providers' security measures is
limited, and in any event, attackers may be able to circumvent our third-party service providers' security measures. There have been and
may continue to be significant attacks on certain third-party service providers, and we cannot guarantee that our or our third-party service
providers' systems and networks have not been breached or otherwise compromised, or that they do not contain exploitable defects or bugs
that could result in a breach of or disruption to our systems and networks or the systems and networks of third parties that support us and our
platform. We have experienced incidents targeting our internal systems, and we may also in the future suffer breaches of, or incidents
impacting, our internal systems. Security breaches or incidents impacting our platform or our internal systems could create significant
interruptions or other disruptions of our software solutions, platform and technology, and may result in significant costs incurred in order to
remediate or otherwise respond to a breach or incident, which may include liability for stolen assets or information,
15
repair of system damage, incentives offered to customers or other business partners in an effort to maintain business relationships after a
breach, and other costs, expenses and liabilities. We may be required to or find it appropriate to expend substantial capital and other
resources to alleviate problems caused by any actual or perceived security breaches or incidents. Further, while we have expended, and will
continue to expend, significant resources to enhance and improve our cybersecurity posture and capabilities, these efforts, and any other
efforts we may make, may not prevent or significantly mitigate risk in the way we expect, and may require us to incur substantial costs and
may require significant resources.
We have incorporated and may continue to incorporate AI/ML solutions and features into our platform and otherwise within our
business, which may create additional cybersecurity risks or increase cybersecurity risks, including risks of security breaches and incidents.
Further, AI/ML technologies may be used for certain cybersecurity attacks, and may increase their frequency and intensity, resulting in
heightened risks of security breaches and incidents.
Additionally, many jurisdictions have enacted or may enact laws and regulations requiring companies to notify individuals of data
security breaches involving certain types of personal data. These or other disclosures regarding a security breach or incident could result in
negative publicity to us, which may cause our customers to lose confidence in the effectiveness of our data security measures which could
impact our operating results.
We incur significant expenses in our efforts to minimize the risks presented by security breaches and incidents, including deploying
additional personnel and protection technologies, training employees annually, engaging in phishing simulation exercises, and engaging
third-party experts and contractors. We continually increase our investments in cybersecurity to counter emerging risks and threats and to
address certain other identified matters, and we anticipate being required to make substantial additional investments in our cybersecurity
measures. If a publicized security breach or incident occurs with respect to another SaaS provider or other technology company, our current
and potential customers may lose trust in the security of our platform or in the SaaS business model generally, which could adversely impact
our ability to retain existing customers or attract new ones. Such a breach or incident, or series of breaches or incidents, could also result in
regulatory or contractual security requirements that could make compliance challenging. Even in the absence of any actual or perceived
security breach or incident, customer concerns about privacy, security, or data protection may deter them from using our platform for
activities that involve personal or other sensitive information.
Because the techniques used to obtain unauthorized access or to sabotage systems change frequently, and often are not identified
until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.
We may also experience security breaches and incidents that may remain undetected for an extended period of time. Periodically, we
experience cyber security events including phishing attacks targeting our employees, web application and infrastructure attacks, and other
information technology incidents. These threats continue to evolve in sophistication and volume and are difficult to detect and predict due to
advances in electronic warfare techniques, advances in cryptography and other technologies including AI/ML, and new and sophisticated
methods used by criminals including phishing, social engineering or other illicit acts. We have and may experience security breaches or
incidents introduced through the tools and services we use. We continuously monitor our infrastructure, adjust our intrusion detection
capabilities, and practice security-by-design principles in our software development lifecycle to help prevent and detect security breaches and
incidents, including those relating to tools and services provided by third parties. However, there can be no assurance that our defensive
measures will prevent cyber attacks or other security breaches or incidents, or allow us to identify, remediate, or otherwise respond to them
in a timely or effective manner. Any such attacks, breaches or incidents, or perception that any have occurred, could damage our brand and
reputation and negatively impact our business.
Our customers upload sensitive data to our platform, and data security is therefore a critical competitive factor in our industry. We make
numerous statements in our privacy policy and customer agreements, through our certifications to standards and in our marketing materials,
providing assurances about the security of our platform, including descriptions of security measures we employ. Should any of these
statements be untrue, be perceived to be untrue, or become untrue, even through circumstances beyond our reasonable control, we may
face claims of misrepresentation or deceptiveness by the U.S. Federal Trade Commission, state and foreign regulators and private litigants.
Our errors and omissions insurance policies covering certain security and privacy damages and claim expenses may not be sufficient to
compensate for all potential liability. Although we maintain cyber liability insurance, we cannot be certain that our coverage will be adequate
for liabilities actually incurred, or that insurance will continue to be available to us on economically reasonable terms, or at all.
Our increased focus on the development and use of generative artificial intelligence and machine learning technologies in our
platform and our business, as well as our potential failure to effectively implement, use,
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and market these technologies, may result in reputational harm or liability, or could otherwise adversely affect our business.
We have incorporated and may continue to incorporate AI/ML solutions and features into our platform, and otherwise within our
business, and these solutions and features may become more important to our operations or to our future growth over time. There can be no
assurance that we will realize the desired or anticipated benefits from AI/ML, or at all, and we may fail to properly implement or market our
AI/ML solutions and features. Our competitors or other third parties may incorporate AI/ML into their products, offerings, and solutions more
quickly or more successfully than we do, which could impair our ability to compete effectively, and adversely affect our results of operations.
Additionally, our AI/ML solutions and features may expose us to additional claims, demands, and proceedings by private parties and
regulatory authorities and subject us to legal liability as well as brand and reputational harm. For example, the AI/ML models that we use are
trained using various data sets, and if our models are incorrectly designed, the data we use to train them is incomplete or inadequate, or we
do not have sufficient rights to use the data on which our models rely, the performance of our AI/ML solutions and features, as well as our
reputation, could suffer or we could incur liability through the violation of contractual or regulatory obligations. The legal, regulatory, and
policy environments around AI/ML are evolving rapidly. For example, the EU AI Act (the “AI Act”), which achieved approval by the European
Council on February 2, 2024, and the European Parliament on March 13, 2024, will impose obligations on providers and users of artificial
intelligence technologies. The AI Act may impact the development and adoption of our AI/ML solutions in Europe. Additionally, several U.S.
states have proposed, and in certain cases have enacted, legislation imposing obligations in connection with the development or use of, or
otherwise regulating, AI/ML technologies. Other countries also are contemplating laws regulating AI/ML technologies. We may become
subject to new legal and other obligations in connection with our use of AI/ML, which could require us to make significant changes to our
policies and practices, necessitating expenditure of significant time, expense, and other resources.
Interruptions or performance problems associated with our software solutions, platform and technology may adversely affect our
business and operating results.
Our continued growth depends in part on the ability of our current and potential customers to access our platform at any time. Our
platform is proprietary, and we rely on the expertise of members of our engineering, operations and software development teams for its
continued performance. We have experienced, and may in the future experience, disruptions, outages and other performance problems due
to a variety of factors, including infrastructure changes, introductions of new functionality, human or software errors, capacity constraints due
to an overwhelming number of users accessing our platform simultaneously, denial of service attacks or other security related incidents. In
some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time.
Because of the seasonal nature of financial close activities, increasing complexity of our platform and expanding user population, it may
become difficult to accurately predict and timely address performance and capacity needs during peak load times. If our platform is
unavailable or if our users are unable to access it within a reasonable amount of time or at all, our business will be harmed. Therefore, in the
event of any of the factors described above, or other failures of our infrastructure, customer data may be permanently lost. Our customer
agreements typically include performance guarantees and service level standards that obligate us to provide credits in the event of a
significant disruption in our platform. To the extent that we do not effectively address capacity constraints, upgrade our systems and
continually develop our technology and network architecture to accommodate actual and anticipated changes in technology, our business
and operating results may be adversely affected.
If our software contains serious errors or defects, we may lose revenue and market acceptance and may incur costs to defend or
settle product liability claims.
Complex software such as ours often contains errors or defects, particularly when first introduced or when new versions or
enhancements are released. Despite internal and third-party testing and testing by our customers, our current and future software may
contain serious defects, which could result in lost revenue or a delay in market acceptance.
Since our customers use our platform for critical business functions such as assisting in the financial close or account reconciliation
process, errors, defects or other performance problems could result in damage to our customers. They could seek significant compensation
from us for the losses they suffer. Although our customer agreements typically contain provisions designed to limit our exposure to product
liability claims, existing or future laws or unfavorable judicial decisions could negate these limitations. Even if not successful, a product
liability claim brought against us would likely be time-consuming and costly and could seriously damage our reputation in the marketplace,
making it harder for us to sell our products.
We depend on our executive officers and other key employees and the loss of one or more of these employees or an inability to
attract and retain highly-skilled employees could adversely affect our business.
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Our success depends largely upon the continued services of our executive officers and other key employees. We rely on our leadership
team, some of whom are new, in the areas of research and development, operations, security, marketing, sales and general and
administrative functions. Changes in our executive management team resulting from the hiring or departure of executives, or our leadership
structure, could disrupt our business, and could impact our ability to preserve our culture, which could negatively affect our ability to recruit
and retain personnel. For example, we recently announced certain transitions in our finance department, including the promotion of our Chief
Accounting Officer to Chief Financial Officer, in connection with the planned retirement of our Chief Financial Officer, to be effective March 1,
2025. Our executive officers and other key personnel are at-will employees and, therefore, they could terminate their employment with us at
any time. Any such departure could be particularly disruptive in light of the leadership transition. Competition for executive management is
high, and it may take months to find a candidate that meets our requirements. Such recruiting efforts could divert the attention of our existing
management team. Accordingly, the loss of one or more of our executive officers or key employees could have an adverse effect on our
business.
In addition, to execute our growth plan, we must attract and retain highly-qualified personnel. Competition for personnel is intense,
especially for engineers experienced in designing and developing software applications, and experienced sales professionals. We have from
time to time experienced, and we expect to continue to experience, difficulty in hiring and retaining employees with appropriate qualifications,
and this difficulty may be heightened by labor shortages, higher employee turnover and slower hiring rates associated with hybrid work. In
addition, we may need to increase our employee compensation levels in response to competition, rising inflation or labor shortages, which
would increase our operating costs and reduce our profitability. Many of the companies with which we compete for experienced personnel
have greater resources than we have. If we hire employees from competitors or other companies, their former employers may attempt to
assert that these employees or we have breached legal obligations, resulting in a diversion of our time and resources. Likewise, if
competitors hire our employees, we may divert time and resources to deter any breach by our former employees or their new employers of
their respective legal obligations. Given the competitive nature of our industry, we have both received and asserted such claims in the past.
In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their
employment. If the perceived value of our equity awards declines, due to volatile market conditions, stock price fluctuations or otherwise, it
may adversely affect our ability to recruit and retain highly-skilled employees. Further, if we fail to attract new personnel or fail to retain and
motivate our current personnel, our business and growth prospects could be adversely affected.
If our industry does not continue to develop as we anticipate or if potential customers do not continue to adopt our platform, our
sales will not grow as quickly as expected, or at all, and our business and operating results and financial condition would be
adversely affected.
We operate in a rapidly evolving industry focused on modernizing financial and accounting operations. Some of our solutions are
relatively new and have been developed to respond to an increasingly global and complex business environment with more rigorous
regulatory standards. Additionally, some of our solutions now incorporate AI-enabled features. While the use of AI/ML is leading to
advancements in technology, if our new solutions are not widely adopted and accepted, or fail to operate as expected, our business and
reputation may be harmed. Additionally, as AI/ML capabilities continue to evolve, our customers and potential customers may leverage AI/ML
to develop their own solutions that could reduce or eliminate the need for our solutions. If organizations do not increasingly allocate their
budgets to financial automation software as we expect or if we do not succeed in convincing potential customers that our platform should be
an integral part of their overall approach to their accounting processes, our sales may not grow as quickly as anticipated, or at all. Our
business is substantially dependent on enterprises recognizing that accounting errors and inefficiencies are pervasive and are not effectively
addressed by legacy solutions. During the past twelve months, we continue to observe new and existing customers halt or decrease
investment in work transformation, including the decision to continue operating legacy solutions, which has negatively impacted our business.
In addition, deterioration in general economic conditions in the U.S. or worldwide, including as a result of uncertainty in the financial markets,
fluctuating inflation or interest rates, or uncertainty in the financial services markets associated with geopolitical events and political
uncertainty, such as war and political and social upheaval in certain regions of the world, may also cause our customers to reduce their
overall information technology spending, and such reductions may disproportionately affect software solutions like ours to the extent
customers view our solutions as discretionary. If our sales and revenue do not increase for any of these reasons, or any other reason, our
business, financial condition and operating results may be materially adversely affected.
The market in which we participate is intensely competitive, and if we do not compete effectively, our operating results could be
harmed.
The market for accounting and financial software and services is highly competitive and rapidly evolving. Our competitors vary in size
and in the breadth and scope of the products and services they offer. We often compete
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with other vendors of financial automation software, and we also compete with large, well-established, enterprise application software
vendors whose software contains components that compete with our platform. In the future, a competitor offering ERP software could include
a free service similar to ours as part of its standard offerings or may offer a free standalone version of a service similar to ours. Further, other
established software vendors not currently focused on accounting and finance software and services, including some of our partners,
resellers, and other parties with which we have relationships, may expand their services to compete with us.
Some of our competitors have greater name recognition, longer operating histories, more established customer and marketing
relationships, larger marketing budgets and significantly greater resources than we do. They may be able to respond more quickly and
effectively than we can to new or changing opportunities, technologies, standards, or customer requirements. In addition, some of our
competitors have partnered with, or have acquired, and may in the future partner with or acquire, other competitors to offer services,
leveraging their collective competitive positions, which makes, or would make, it more difficult to compete with them.
Market acceptance of our products may also be affected by customer confusion associated with the introduction of new and emerging
technologies by us and our competitors, or changes in technological trends, such as the increase in the use of AI/ML. With the introduction of
new technologies, the evolution of our platform and new market entrants, we expect competition to intensify in the future. Increased
competition generally could result in reduced sales, reduced margins, losses or the failure of our platform to achieve or maintain more
widespread market acceptance, any of which could harm our business.
Failure to effectively organize and motivate our sales resources could harm our ability to increase our customer base.
Increasing our customer base and sales will depend, to a significant extent, on our ability to effectively organize and drive our sales and
marketing operations and activities. As we have grown and scaled our operations, we have aligned our sales team to help streamline the
customer experience. We rely on our direct sales force, which includes an account management team, to obtain new customers and to
maximize the lifetime value of our customer relationships through retention and upsell efforts. Our success will depend, in part, on our ability
to support new and existing customer growth and maintain customer satisfaction. As we and many of our customers have transitioned to a
hybrid or fully remote workplace, our sales and marketing teams have continued to primarily engage with customers online and through other
communication channels, including virtual meetings. There is no guarantee that our sales and marketing teams will be as successful or
effective using these other communication channels as they try to build relationships. If we cannot provide our teams with the tools and
training to enable them to do their jobs efficiently and satisfy customer demands, we may not be able to achieve anticipated revenue growth
as quickly as expected.
In addition, we believe that there is significant competition for experienced sales professionals with the sales skills and technical
knowledge that we require. Our ability to achieve significant revenue growth will depend, in part, on our success in recruiting, training, and
retaining a sufficient number of experienced sales professionals. New hires require significant training and time before they achieve full
productivity, particularly in new sales segments and territories. Sales professionals that we hire may not become as productive as quickly as
we expect, or they may not achieve the levels of productivity we anticipate, and we may be unable to hire or retain sufficient numbers of
qualified individuals in the markets where we do business. Our business will be harmed if our sales professionals are not as successful as we
anticipate at driving and completing sales.
If we are not able to maintain and enhance our brand, our business, operating results and financial condition may be adversely
affected.
We believe that maintaining and enhancing our reputation for accounting and finance software is critical to our relationships with our
existing customers and to our ability to attract new customers. The successful promotion of our brand attributes will depend on a number of
factors, including our marketing efforts, our ability to continue to develop high-quality software, and our ability to successfully differentiate our
platform from competitive products and services. Our brand promotion activities may not ultimately be successful or yield increased revenue.
In addition, independent industry analysts provide reviews of our platform, as well as products and services offered by our competitors, and
perception of our platform in the marketplace may be significantly influenced by these reviews. If these reviews are negative, or less positive
as compared to those of our competitors’ products and services, our brand may be adversely affected.
The promotion of our brand requires us to make substantial expenditures, and we anticipate that the expenditures will increase as our
market becomes more competitive, as we expand into new markets and as more sales are generated. To the extent that these activities yield
increased revenue, this revenue may not offset the increased expenses we incur. If we do not successfully maintain and enhance our brand,
our business may not
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grow, we may have reduced pricing power relative to competitors, and we could lose customers or fail to attract potential customers, all of
which would adversely affect our business, results of operations and financial condition.
We may be unable to integrate acquired businesses and technologies successfully, or achieve the expected benefits of these
transactions and other strategic transactions.
We regularly evaluate and consider potential strategic transactions, including acquisitions of, or investments in, businesses,
technologies, services, products, and other assets. We also may enter into relationships with other businesses to expand our products and
services, which could involve preferred or exclusive licenses, additional channels of distributions or discount pricing.
Negotiating these transactions can be time-consuming, difficult, and expensive, and our ability to complete these transactions may be
subject to approvals and conditions that are beyond our control. Consequently, these transactions, even if announced, may not be
completed. In connection with a strategic transaction, we may:
•
issue additional equity or convertible debt securities that would dilute our existing stockholders;
•
use cash that we may need in the future to operate our business;
•
incur large charges or substantial liabilities;
•
incur debt on terms unfavorable to us or that we are unable to repay;
•
become subject to new or conflicting laws, regulations or legal requirements; or
•
become subject to adverse tax consequences, substantial depreciation, and amortization, or deferred compensation charges.
Any acquisition, investment or business relationship may result in unforeseen operating difficulties and expenditures. In particular, we
may encounter difficulties and incur significant costs assimilating or integrating the businesses, technologies, products, policies, personnel or
operations of the acquired companies, particularly if the key personnel of the acquired company choose not to work for us, their software is
not easily adapted to work with our platform, or we have difficulty retaining the customers of any acquired business due to changes in
ownership, management or otherwise. Acquisitions may also disrupt our business, divert our resources, and require significant management
attention that would otherwise be available for development of our existing business. Moreover, the anticipated benefits of any acquisition,
investment, or business relationship may not be realized or we may be exposed to unknown risks or liabilities, which may lead to additional
expenses, impairment charges or write-offs, restructuring charges, or other adverse impacts to our business, results of operations, or
financial condition.
Incorrect or improper implementation or use of our solutions could result in customer dissatisfaction and negatively affect our
business, results of operations, financial condition, and growth prospects.
Our platform is deployed in a wide variety of technology environments and into a broad range of complex workflows. Our platform has
been integrated into large-scale, enterprise-wide technology environments, and specialized use cases, and our success depends on our
ability to implement our platform successfully in these environments. We often assist our customers in implementing our platform, but many
customers attempt to implement even complex deployments themselves or use a third-party service firm. If we or our customers are unable
to implement our platform successfully, or are unable to do so in a timely manner, customer perceptions of our platform and company may be
impaired, our reputation and brand may suffer, and customers may choose not to renew or expand the use of our platform.
Our customers and third-party resellers may need training in the proper use of our platform to maximize its potential. If our platform is
not implemented or used correctly or as intended, including if customers input incorrect or incomplete financial data into our platform,
inadequate performance may result. Because our customers rely on our platform to manage their financial close and other financial tasks,
the incorrect or improper implementation or use of our platform, our failure to train customers on how to use our platform efficiently and
effectively, or our failure to provide adequate product support to our customers, may result in negative publicity or legal claims against us.
Also, as we continue to expand our customer base, any failure by us to properly provide these services will likely result in lost opportunities
for additional subscriptions to our platform.
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Any failure to offer high-quality product support may adversely affect our relationships with our customers and our financial
results.
In deploying and using our solutions, our customers depend on our support services team to resolve complex technical and operational
issues. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for product support. We
also may be unable to modify the nature, scope and delivery of our product support to compete with changes in product support services
provided by our competitors. Increased customer demand for product support, without corresponding revenue, could increase costs and
adversely affect our operating results. Our sales are highly dependent on our business reputation and on positive recommendations from our
existing customers. Any failure to maintain high-quality product support, or a market perception that we do not maintain high-quality product
support, could adversely affect our reputation, our ability to sell our solutions to existing and prospective customers, our business, operating
results, and financial condition.
We provide service level commitments under our customer contracts, and if we fail to meet these contractual commitments, our
revenues could be adversely affected.
Our customer agreements typically provide service level commitments. If we are unable to meet the stated service level commitments
or suffer extended periods of unavailability for our applications, we may be contractually obligated to provide these customers with service
credits, refunds for prepaid amounts related to unused subscription services, or we could face contract terminations. Our revenues could be
significantly affected if we suffer unscheduled downtime that exceeds the allowed downtimes under our agreements with our customers. Any
extended service outages could adversely affect our reputation, revenues and operating results.
Risks Related to Our Financial Performance or Results
We have a history of losses and we may not be able to generate sufficient revenue to achieve or sustain profitability.
We may not maintain profitability in future periods, or if we are profitable, we may not fully achieve our profitability targets. We have
incurred net losses attributable to BlackLine, Inc. in recent periods, including $29.4 million for the year ended December 31, 2022. We had an
accumulated deficit of $49.0 million at December 31, 2024. We expect our costs to increase in future periods as we continue to expend
substantial financial and other resources on:
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development of our cloud-based platform, including investments in research and development, product innovation, including
AI/ML technologies, to expand the features and functionality of our software solutions and improvements to the scalability and
security of our platform;
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sales and marketing, including expansion of our direct sales force and enabling the selling of a wider breadth of specialized
products and our relationships with technology vendors, professional services firms, business process outsourcers and resellers;
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additional international expansion in an effort to increase our customer base and sales; and
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general administration, including legal, accounting and other expenses related to being a public company.
These investments may not result in increased revenue or growth of our business or any growth in revenue and may not be sufficient to
offset the expense and may harm our profitability. If we fail to continue to grow our revenue, we may not achieve or sustain profitability.
Our quarterly results may fluctuate, and if we fail to meet the expectations of analysts or investors, our stock price and the value of
your investment could decline substantially.
Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control. If our quarterly
financial results fall below the expectations of investors or any securities analysts who may follow our stock, the price of our common stock
could decline substantially. Some of the important factors that may cause our revenue, operating results and cash flows to fluctuate from
quarter to quarter include:
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our ability to attract new customers and retain and increase sales to existing customers;
•
the amount and timing of operating costs and capital expenditures;
•
the number of new employees added;
•
the rate of expansion and productivity of our sales force;
•
the length of sales cycles and the timing of large contracts;
•
changes in our or our competitors’ pricing policies;
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•
new products, features or functionalities introduced by us and our competitors;
•
significant security breaches, technical difficulties or interruptions to our platform;
•
the timing of customer payments and payment defaults by customers;
•
general economic conditions that may adversely affect either our customers’ ability or willingness to purchase additional products
or services, delay a prospective customer’s purchasing decision or affect customer retention, including the macroeconomic
environment, uncertainty in the financial services market, inflation, fluctuating interest rates or geopolitical events;
•
the impact and timing of expenses related to restructuring actions or other employee terminations that may result in severance
expense;
•
changes in foreign currency exchange rates;
•
the impact of new accounting pronouncements;
•
the impact and timing of taxes or changes in tax law;
•
the timing and the amount of grants or vesting of equity awards to employees;
•
seasonality of our business; and
•
changes in customer budgets and buying patterns.
Many of these factors are outside of our control, and the occurrence of one or more of them might cause our revenue, operating results,
and cash flows to vary widely. As such, we believe that quarter-to-quarter comparisons of our revenue, operating results and cash flows may
not be meaningful and should not be relied upon as an indication of future performance.
We typically add fewer customers in the first quarter of the year than other quarters. We also experience a higher volume of sales at the
end of each quarter and year, which is often the result of buying decisions by our customers. Seasonality may be reflected to a much lesser
extent, and sometimes may not be immediately apparent, in our revenue, due to the fact that we recognize subscription revenue over the
term of our agreements. We may also increase expenses in a period in anticipation of future revenues. Changes in the number of customers
and users in different periods will cause fluctuations in our financial metrics and, to a lesser extent, revenues. Those changes and
fluctuations in our expenses will affect our results on a quarterly basis, and will make forecasting our operating results and financial metrics
difficult.
Our financial results may fluctuate due to our long and increasingly variable sales cycle.
Our sales cycle generally varies in duration between four to nine months and, in some cases, even longer depending on the size of the
potential customer, the size of the potential contract and the type of solution or product being purchased. The sales cycle for our global
enterprise customers is generally longer than that of our mid-size customers. In addition, the length of the sales cycle tends to increase for
larger contracts and for more complex, strategic products like Intercompany Financial Management. As we continue to focus on increasing
our average contract size and selling more strategic products, we expect our sales cycle to lengthen and become less predictable. This could
cause variability in our operating results for any particular period.
A number of other factors that may influence the length and variability of our sales cycle include:
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the need to educate potential customers about the uses and benefits of our software solutions;
•
the need to educate potential customers on the differences between traditional, on-premise software and SaaS solutions;
•
the relatively long duration of the commitment customers make in their agreements with us;
•
the discretionary nature and timing of potential customers’ purchasing and budget cycles and decisions;
•
the competitive nature of potential customers’ evaluation and purchasing processes;
•
announcements or planned introductions of new products by us or our competitors; and
•
lengthy purchasing approval processes of potential customers, including due to increased scrutiny of spending.
We may incur higher costs and longer sales cycles as a result of large enterprises representing an increased portion of our revenue. In
this market, the decision to subscribe to our solutions may require the approval of more technical and information security personnel and
management levels within a potential customer’s organization, and if so, these types of sales require us to invest more time educating these
potential customers. In addition, larger
22
organizations may demand more features and integration services and have increased purchasing power and leverage in negotiating
contractual arrangements with us, which may contain restrictive terms favorable to the larger organization. As a result of these factors, these
sales opportunities may require us to devote greater research and development, sales, product support and professional services resources
to individual customers, resulting in increased costs and reduced profitability, and would likely lengthen our typical sales cycle, which could
strain our resources.
In addition, more sales are closed in the last month of a quarter than other times. If we are unable to close sufficient transactions in a
particular period, or if a significant amount of transactions are delayed until a subsequent period, our operating results for that period, and for
any future periods in which revenue from such transactions would otherwise have been recognized, may be adversely affected.
Uncertainty around general macroeconomic conditions has in the past and may in the future cause customers to delay and defer
purchasing decisions, which has and may lead to a deterioration in near-term demand. In addition, we may devote greater research and
development, sales, product support, and professional services resources to potential customers that do not result in actual sales or revenue,
resulting in increased costs and reduced profitability, and which could strain our resources.
We recognize subscription revenue over the term of our customer contracts and, consequently, downturns or upturns in new sales
may not be immediately reflected in our operating results and may be difficult to discern.
We recognize subscription revenue from our platform ratably over the terms of our customers’ agreements, most of which have one-
year terms but an increasing number of which have up to three-year terms. As a result, most of the revenue we report in each quarter is
derived from the recognition of deferred revenue related to subscriptions entered into during previous quarters. Consequently, a decline in
new or renewed subscriptions in any single quarter may have a small impact on our revenue results for that quarter. However, such a decline
will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our
platform, and potential changes in our pricing policies or rate of expansion or retention, may not be fully reflected in our results of operations
until future periods. We may also be unable to reduce our cost structure in line with a significant deterioration in sales. In addition, a
significant majority of our costs are expensed as incurred, while revenue is recognized over the life of the agreement with our customer. As a
result, increased growth in the number of our customers could continue to result in our recognition of more costs than revenue in the earlier
periods of the terms of our agreements. Our subscription model also makes it difficult for us to rapidly increase our revenue through
additional sales in any period, as revenue from new customers must be recognized over the applicable subscription term.
We face exposure to foreign currency exchange rate fluctuations that could harm our results of operations.
We conduct transactions, particularly intercompany transactions, in currencies other than the U.S. Dollar, primarily the British Pound
and the Euro. As we grow our international operations, we expect the amount of our revenues that are denominated in foreign currencies to
increase in the future. Accordingly, changes in the value of foreign currencies relative to the U.S. Dollar could affect our revenue and
operating results due to transactional and translational remeasurements that are reflected in our results of operations. As a result of such
foreign currency exchange rate fluctuations, it could be more difficult to detect underlying trends in our business and results of operations. In
addition, to the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the
expectations of our investors, the trading price of our common stock could be adversely affected.
We do not currently maintain a program to hedge exposures in foreign currencies. However, in the future, we may use derivative
instruments, such as foreign currency forward and option contracts, to hedge exposures to fluctuations in foreign currency exchange rates.
The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in
foreign exchange rates over the limited time the hedges are in place. Moreover, the use of hedging instruments may introduce additional
risks if we are unable to structure effective hedges with such instruments.
If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings.
We review our goodwill and intangible assets for impairment when events or changes in circumstances indicate the carrying value may
not be recoverable. Goodwill is required to be tested for impairment at least annually. At December 31, 2024, we had goodwill and intangible
assets with a net book value of $508.5 million primarily related to acquisitions. An adverse change in market conditions, particularly if such
change has the effect of changing one of our critical assumptions or estimates, could result in a change to the estimation of fair value that
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could result in an impairment charge to our goodwill or intangible assets. Any such charges may have a material negative impact on our
operating results.
Our ability to use our net operating losses to offset future taxable income may be subject to limitations.
As of December 31, 2024, we had state net operating loss carryforwards (“NOLs”) of $68.0 million. In general, under Section 382 of the
Internal Revenue Code of 1986, as amended (the “Code”) a corporation that undergoes an “ownership change” is subject to limitations on its
ability to utilize its NOLs to offset future taxable income. Our existing NOLs may be subject to limitations arising from previous ownership
changes, and if we undergo an ownership change, our ability to utilize NOLs could be further limited by Section 382 of the Code. Future
changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the
Code. Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations. There is also a
risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire
or otherwise be unavailable to offset future taxable income. For example, California recently enacted legislation which suspends the use of
NOLs for taxable years 2024, 2025, and 2026. For these reasons, we may not be able to realize a tax benefit from the use of our NOLs,
whether or not we attain profitability. The legislation commonly referred to as the Tax Cuts and Jobs Act of 2017, as modified by the
Coronavirus Aid, Relief, and Economic Security Act, includes changes to the U.S. federal corporate income tax rate and changes to the rules
governing the deductibility of certain NOLs, which may impact our ability to utilize such NOLs.
Risks Related to Our Dependence on Third Parties
If our relationships with technology vendors and business process outsourcers are not successful, our business and growth will
be harmed.
We depend on, and anticipate that we will continue to depend on, various strategic relationships in order to sustain and grow our
business. We have established strong relationships with technology vendors such as SAP and Microsoft Dynamics to market our solutions to
users of their ERP solutions, and professional services firms such as Deloitte and Ernst & Young, and business process outsourcers such as
Cognizant, Genpact and IBM to supplement delivery and implementation of our applications. We believe these relationships enable us to
effectively market our solutions by offering a complementary suite of services. In particular, our solution integrates with SAP’s ERP solutions.
SAP is part of the reseller channel that we use in the ordinary course of business, and accounts for a material portion of our total revenue.
SAP has the ability to resell our solutions as SAP SolEx, for which we receive a percentage of the revenues. If we are unsuccessful in
maintaining our relationship with SAP, if our reseller arrangement with SAP is less successful than we anticipate, if our customers that use an
SAP ERP solution do not renew their subscriptions directly with us and instead purchase our solution through the SAP reseller channel or if
we are unsuccessful in supporting or expanding our relationships with other companies, our business would be adversely affected.
Additionally, while we continue to build relationships with a variety of third-party partners and will continue to support all ERP solutions, to the
extent that our partnership with SAP continues to expand, this partnership may be a deterrent to other potential partners.
Identifying, negotiating and documenting relationships with other companies require significant time and resources. Our agreements
with technology vendors are typically limited in duration, non-exclusive, cancellable upon notice and do not prohibit the counterparties from
working with our competitors or from offering competing services. For example, our agreement with SAP can be terminated by either party
upon six months’ notice and there is no assurance that our relationship with SAP will continue. If our solution is no longer resold by SAP as a
solution extension, our business could be adversely affected. Our competitors may be effective in providing incentives to third parties to favor
their products or services or to prevent or reduce subscriptions to our platform. If we are unsuccessful in establishing or maintaining our
relationships, or if the counterparties to our relationships offer competing solutions, our ability to compete in the marketplace or to grow our
revenue could be impaired and our operating results could suffer. Even if we are successful, we cannot assure you that these relationships
will result in improved operating results.
We rely on third-party computer hardware and software that may cause errors or failure of our software solutions, or may be
difficult to replace.
We rely on computer hardware purchased or leased and software licensed from third parties, including third-party SaaS applications, in
order to deliver our software solutions. Errors or defects in third-party hardware or software used in our software solutions could result in
errors or a failure, which could damage our reputation, impede our ability to provide our platform or process information, and adversely affect
our business. Furthermore, certain third-party hardware and software may not continue to be available on commercially reasonable terms, if
at all. Any loss of the right to use any of this hardware or software could result in delaying or preventing our ability to
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provide our software solutions until equivalent technology is either developed by us or, if available, identified, obtained and integrated.
We rely on GCP, Azure, AWS, Snowflake, and third-party data centers (collectively, “public cloud providers”) to deliver our cloud-
based software solutions, and any disruption of our use of public cloud providers could negatively impact our operations and
harm our business.
We manage our software solutions and serve most of our customers using a cloud-based infrastructure that has historically been
operated in a limited number of third-party data center facilities in North America and Europe. We are currently migrating all Financial Close
& Consolidation clients from our third-party data centers to GCP, increasing our reliance on this cloud provider. Additionally, we rely on Azure
to serve Invoice-to-Cash customers, and we rely on AWS to serve our intercompany customers. As we implement the transition to GCP,
there could be occasional planned or unplanned downtime for our cloud-based software solutions and potential service delays, all of which
will impact our customers’ ability to use our solutions. Our Customer Data Platform is built on Snowflake for Financial Close & Consolidation,
Invoice to Cash, and Intercompany solutions, allowing customers to access their data, reports, and integrations. We may also need to divert
resources away from other important business operations, which could harm our business and growth. Additionally, if the costs to migrate to
GCP are greater than we expect or take significantly more time than we anticipate, our business could be harmed.
We do not control the operation of our public cloud providers. Any changes in third-party service levels or any disruptions or delays
from errors, defects, hacking incidents, security breaches, computer viruses, denial of service attacks, bad acts or performance problems
could harm our reputation, damage our customers’ businesses, and adversely affect our business and operating results. Our public cloud
providers are also vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, war, public health crises, terrorist attacks,
power losses, hardware failures, systems failures, telecommunications failures and similar events. We may have limited remedies against
third-party providers in the event of any service disruptions. If our third-party public cloud providers are compromised or unavailable or our
customers are unable to access our solutions for any reason, our business would be materially and adversely affected.
Our customers have experienced minor disruptions and outages in accessing our solutions in the past, and may experience
disruptions, outages, and other performance problems. Although we expend considerable effort to ensure that our platform performance is
capable of handling existing and increased traffic levels, the ability of our cloud-based solutions to effectively manage any increased capacity
requirements depends on our public cloud providers. Our public cloud providers may not be able to meet such performance requirements,
especially to cover peak levels or spikes in traffic, and as a result, our customers may experience delays in accessing our solutions or
encounter slower performance in our solutions, which could significantly harm the operations of our customers. Interruptions in our services
might reduce our revenue, cause us to issue credits to customers, subject us to potential liability, and cause customers to terminate their
subscriptions or harm our renewal rates.
If we do not accurately predict our infrastructure capacity requirements, our customers could experience service shortfalls. The
provisioning of additional cloud hosting capacity requires lead time. As we continue to restructure our data management plans, and increase
our cloud hosting capacity, we have and expect to in the future move or transfer our data and our customers’ data. Despite precautions taken
during such processes and procedures, any unsuccessful data transfers may impair the delivery of our service, and we may experience costs
or downtime in connection with the transfer of data to other facilities which may lead to, among other things, customer dissatisfaction and
non-renewals. Our public cloud providers have no obligations to renew their agreements with us on commercially reasonable terms, or at all.
If any of our public cloud providers increases pricing terms, terminates or seeks to terminate our contractual relationship, establishes more
favorable relationships with our competitors, or changes or interprets their terms of service or policies in a manner that is unfavorable with
respect to us, we may be required to transfer to other providers. If we are required to transfer to other providers, we would incur significant
costs and experience possible service interruption in connection with doing so.
We depend and rely upon SaaS applications from third parties to operate our business and provide our software solutions,
and interruptions, outages, or performance problems with these technologies may adversely affect our business and operating
results.
We rely heavily upon SaaS applications from third parties in order to operate critical functions of our business, including billing and
order management, enterprise resource planning, and financial accounting services. If these services become unavailable due to extended
outages, interruptions, or because they are no longer available on commercially reasonable terms, our expenses could increase, our ability to
manage finances could be interrupted and our processes for managing sales of our solutions and supporting our customers could be
impaired until equivalent services, if available, are identified, obtained, and implemented, all of which could adversely affect our business.
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If we are unable to develop and maintain successful relationships with resellers, our business, operating results and financial
condition could be adversely affected.
We believe that continued growth in our business is dependent upon identifying, developing, and maintaining strategic relationships
with companies that resell our solutions. We plan to expand our growing network of resellers and to add new resellers, in particular to help
grow our mid-size business globally. Our agreements with our existing resellers are non-exclusive, meaning resellers may offer customers
the products of several different companies, including products that compete with ours. They may also cease marketing our solutions with
limited or no notice and with little or no penalty. We expect that any additional resellers we identify and develop will be similarly non-exclusive
and not bound by any requirement to continue to market our solutions. If we fail to identify additional resellers in a timely and cost-effective
manner, or at all, or are unable to assist our current and future resellers in independently selling our solutions, our business, results of
operations, and financial condition could be adversely affected. If resellers do not effectively market and sell our solutions, or fail to meet the
needs of our customers, our reputation and ability to grow our business may also be adversely affected.
Risks Related to Our Legal and Regulatory Environment
Our long-term success depends, in part, on our ability to expand the sales of our solutions to customers located outside of the
U.S., and thus our business is susceptible to risks associated with international sales and operations.
We currently maintain offices and/or have personnel in Australia, Canada, France, Germany, India, Japan, Mexico, the Netherlands,
Poland, Romania, Singapore, and the United Kingdom, and we intend to build out our international operations. We have also executed
several acquisitions and strategic transactions as part of our ongoing international expansion strategy. We derived approximately 30%, 28%,
and 29% of our revenues from sales outside the U.S. during the years ended December 31, 2024, 2023, and 2022, respectively. Any
international expansion efforts that we may undertake, including acquisitions of businesses outside the U.S., may not be successful. In
addition, conducting international operations in new markets subjects us to new risks that we have not generally faced in the U.S. These risks
include:
•
localization of our solutions, including translation into foreign languages and adaptation for local practices and regulatory
requirements;
•
lack of familiarity and burdens of complying with foreign laws, legal standards, regulatory requirements, tariffs and other barriers;
•
changes in legal and regulatory requirements, taxes, trade laws, tariffs, export quotas, custom duties or other trade restrictions,
such as sanctions against Russia in response to the war in Ukraine;
•
differing technology standards;
•
longer accounts receivable payment cycles and difficulties in collecting accounts receivable;
•
difficulties in managing and staffing international operations and differing employer/employee relationships;
•
fluctuations in exchange rates that may increase the volatility of our foreign-based revenue;
•
potentially adverse tax consequences, including the complexities of foreign value-added tax (or other tax) systems and
restrictions on the repatriation of earnings;
•
uncertain political and economic climates, including the significant volatility in the global financial markets and increasing
inflation;
•
the impact of natural disasters, climate change, geopolitical events and political uncertainty, including war and political and social
upheaval in certain regions in the world, and public health pandemics, on employees, customers, partners, third-party
contractors, travel and the global economy; and
•
reduced or varied protection for intellectual property rights in some countries.
These factors may cause our international costs of doing business to exceed our comparable domestic costs. Operating in international
markets also requires significant management attention and financial resources. Any negative impact from our international business efforts
could negatively impact our business, results of operations and financial condition as a whole.
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Privacy and cybersecurity concerns and evolving domestic or foreign laws and regulations, including increased restrictions of
cross-border data transfers, may limit or reduce the adoption of our services, result in significant costs and compliance
challenges, and adversely affect our business.
Global legal and regulatory requirements related to collecting, storing, handling, transferring, and otherwise processing personal data
are rapidly evolving in ways that require our business to adapt to support our compliance and our customers’ compliance. As the regulatory
focus on privacy, data protection, and cybersecurity intensifies worldwide, and jurisdictions increasingly consider and adopt laws and
regulations relating to these matters, the potential risks related to processing personal data by our business may grow. In addition, possible
adverse interpretations of existing laws and regulations by governments in countries where we or our customers operate, as well as the
potential implementation of new legislation, could impose significant obligations in areas affecting our business or prevent us from offering
certain services in jurisdictions where we operate. Any failure or perceived failure to comply with applicable laws or regulations relating to
privacy, data protection, or cybersecurity may adversely affect our business.
Privacy, data protection, and cybersecurity have become significant issues in the U.S., Europe, and in many other jurisdictions where
we offer our products. Following the European Union’s passage of the General Data Protection Regulation (“GDPR”), which became effective
in May 2018, the global regulatory landscape relating to privacy, data protection, and cybersecurity has grown increasingly complex and
fragmented and is rapidly evolving. As a result, our business faces current and prospective risks related to increased regulatory compliance
costs, reputational harm, negative effects on our existing business and on our ability to attract and retain new customers, and increased
potential exposure to regulatory enforcement, litigation, and/or financial penalties for non-compliance. For example, in July 2020, the Court of
Justice of the European Union (“CJEU”) invalidated the Privacy Shield framework, which enabled companies to legally transfer data from the
European Economic Area (“EEA”) to the U.S. This ruling from the CJEU and recent rulings from various European Union (“EU”) member
state data protection authorities have created complexity and uncertainty regarding processing and transfers of personal data from the EEA
to the U.S. and certain other countries outside the EEA.
Moreover, on June 4, 2021, the European Commission adopted new Standard Contractual Clauses (“SCCs”), which impose additional
obligations relating to personal data transfers out of the EEA. The new SCCs, and similar standard contractual clauses adopted in the UK,
may increase the legal risks and liabilities associated with cross-border data transfers, and result in material increased compliance and
operational costs. Following issuance of a U.S. Executive Order, a new framework, the EU-U.S. Data Privacy Framework (“DPF”) was
created. Following an adequacy decision issued by the European Commission on July 10, 2023, the DPF, along with a UK extension to the
DPF that allows the transfer of personal data from the UK to the U.S. (the “UK DPF Extension”) and the Swiss-U.S. Data Privacy Framework
(“Swiss-U.S. DPF”), are available for companies to make use of to legitimize personal data transfers to the U.S. from the EEA, Switzerland,
and UK. We have certified to the U.S. Department of Commerce that we adhere to the DPF, UK DPF Extension, and Swiss-U.S. DPF.
However, the DPF has been subject to a legal challenge, and it, the UK DPF Extension, and the Swiss-U.S. DPF may be subject to legal
challenges in the future from privacy advocacy groups or others. The European Commission's adequacy decision regarding the DPF also
provides that the DPF will be subject to future reviews and may be subject to suspension, amendment, repeal, or limitations in scope by the
European Commission. More generally, uncertainty may continue about the legal requirements for transferring customer personal data to and
from the EEA, UK, Switzerland, and other regions, an integral process of our business. Other countries have passed or are considering
passing laws imposing varying degrees of restrictive data residency requirements, which have created additional costs and complexity, and
any new requirements may result in additional costs and complexity.
In addition, the UK has established its own domestic regime with the UK GDPR and amendments to the Data Protection Act. While the
UK GDPR so far mirrors the obligations in the GDPR and imposes similar penalties, the UK government is considering amending its data
protection legislation. If UK regulation of data protection diverges significantly from the EU, new obligations and data flow issues could
emerge, creating costs and complexity. Actual or alleged failure to comply with the GDPR or the UK GDPR can result in private lawsuits,
reputational damage, loss of customers, and regulatory enforcement actions, which can result in significant fines, including, under the GDPR,
fines of up to EUR 20 million (or GBP 17.5 million under the UK GDPR) or four percent (4%) of global revenue, whichever is greater.
Further, cybersecurity laws and regulations continue to evolve worldwide. For example, the EU’s Digital Operational Resilience Act
(“DORA”) creates an information and communication technology (“ICT”) risk management framework for financial institutions and their critical
ICT service providers. DORA introduces obligations regarding risk assessments, technical standards, mandatory penetration testing, staff
training, and incident notification. It also requires due diligence on third-party ICT service providers and the inclusion of specific provisions in
ICT service agreements. DORA took effect on January 17, 2025, and compliance with the regulation may require changes in our services
and may require us to incur significant costs. Further, the EU revised its
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Cybersecurity Directive (“NIS2”), with EU member states having been obligated to transpose it into national law by October 17, 2024, but with
some member states’ transpositions yet to be finalized. NIS2, among other things, obligates companies to adopt or update policies and
procedures on issues such as incident handling and supply chain security, implementing certain administrative measures, and requires top
management’s involvement in cybersecurity risk management measures, with top management potentially held liable for noncompliance.
Regulatory developments in the U.S. present additional risks. For example, the California Consumer Privacy Act, as amended by the
California Privacy Rights Act, gives California consumers, including employees, certain rights similar to those provided by the GDPR, and
also provides for statutory damages or fines on a per violation basis that could be very large depending on the severity of the violation.
Numerous other states have also enacted or are in the process of enacting or considering state-level data privacy and security laws, rules
and regulations. Furthermore, the U.S. Congress is considering privacy legislation, and the U.S. Federal Trade Commission continues to use
its enforcement authority under Section 5 of the FTC Act against companies for privacy and cybersecurity practices alleged to be unfair or
deceptive.
Globally, virtually every jurisdiction in which we operate has established its own frameworks governing privacy, data protection, and
cybersecurity with which we, and/or our customers, must comply. These laws and regulations often are more restrictive than those in the U.S.
Regulatory developments in these countries may require us to modify our policies, procedures, and data processing measures in order to
address requirements under these or other applicable privacy, data protection, or cybersecurity regimes, and we may face claims, litigation,
investigations, or other proceedings regarding them, initiated by private parties and governmental authorities, and may incur related liabilities,
expenses, costs, and operational losses. Our compliance efforts are further complicated by the fact that laws and regulations relating to
privacy, data protection, and cybersecurity around the world are rapidly evolving, may be subject to uncertain or inconsistent interpretations
and enforcement, and may conflict among various jurisdictions.
In addition to government activity, privacy advocacy and other industry groups have established or may establish various new,
additional, or different self-regulatory standards that may place additional burdens on us. Our customers may require us, or we may find it
advisable, to meet voluntary certifications or adhere to other standards established by them or third parties, such as the SSAE 18, SOC1,
and SOC2 audit processes. If we are unable to maintain such certifications, comply with such standards, or meet such customer requests, it
could reduce demand for our services and adversely affect our business.
Compliance with applicable laws and regulations relating to privacy, data protection, and cybersecurity may require changes in our
services, business practices, or internal systems that result in increased costs, lower revenue, reduced efficiency, or negative effects on our
ability to attract and retain customers in certain industries and foreign countries, which could adversely affect our business. The costs of
compliance with, and other obligations imposed by, these laws and regulations may require modification of our services, limit use and
adoption of our services, reduce overall demand for our services, lead to significant fines, penalties, or liabilities for actual or alleged
noncompliance, or slow the pace at which we close sales transactions, any of which could harm our business. Privacy, data protection, and
cybersecurity concerns, whether valid or not valid, may inhibit the market adoption, effectiveness, or use of our services, particularly in
certain industries and foreign countries.
We are subject to governmental export and import controls that could impair our ability to compete in international markets due to
licensing requirements and subject us to liability if we are not in full compliance with applicable laws.
Our solutions are subject to export controls, including the Commerce Department’s Export Administration Regulations and various
economic and trade sanctions regulations established by the Treasury Department’s Office of Foreign Assets Control. Obtaining the
necessary authorizations, including any required license, for a particular export or sale may be time-consuming, is not guaranteed, and may
result in the delay or loss of sales opportunities. The U.S. export control laws and economic sanctions laws prohibit the export, re-export or
transfer of specific products and services to U.S. embargoed or sanctioned countries, regions, governments and persons. Even though we
take precautions to prevent our solutions from being provided to U.S. sanctions targets, our solutions could be sold by resellers or could be
used by persons in sanctioned regions despite such precautions. Failure to comply with the U.S. export control, sanctions and import laws
could have negative consequences, including government investigations, penalties and reputational harm. We and our employees could be
subject to civil or criminal penalties, including the possible loss of export or import privileges, fines, and, in extreme cases, the incarceration
of responsible employees or managers. In addition, if our resellers fail to obtain appropriate import, export or re-export licenses or
authorizations, we may also be adversely affected through reputational harm and penalties.
In addition, various countries could enact laws that could limit our ability to distribute our solutions or could limit our customers’ ability to
implement or access our solutions in those countries. Changes in our solutions or changes in export and import regulations may create
delays in the introduction and sale of our solutions in
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international markets, prevent our customers with international operations from accessing our solutions or, in some cases, prevent the export
or import of our solutions to some countries, governments or persons altogether. Any change in export or import regulations, economic
sanctions or related laws, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or
technologies targeted by such regulations, could result in decreased use of our solutions, or in our decreased ability to export or sell our
solutions to current or potential customers with international operations. Any decreased use of our solutions or limitation on our ability to
export or sell our solutions would likely adversely affect our business, financial condition and results of operations.
Changes in laws and regulations related to the internet and cloud computing or changes to internet infrastructure may diminish
the demand for our solutions, and could have a negative impact on our business.
The success of our business depends upon the continued use of the internet as a primary medium for commerce, communication, and
business applications. Federal, state, or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws
or regulations affecting the use of the internet as a commercial medium. Regulators in some industries have also adopted and may in the
future adopt regulations or interpretive positions regarding the use of SaaS and cloud computing solutions. For example, some financial
services regulators have imposed guidelines for the use of cloud computing services that mandate specific controls or require financial
services enterprises to obtain regulatory approval prior to utilizing such software. Changes in these laws or regulations could require us to
modify our solutions in order to comply with these changes. In addition, government agencies or private organizations have imposed and
may impose additional taxes, fees, or other charges for accessing the internet or commerce conducted via the internet. These laws or
charges could limit the growth of internet-related commerce or communications generally, or result in reductions in the demand for internet-
based solutions and services such as ours. In addition, the use of the internet as a business tool could be adversely affected due to delays in
the development or adoption of new standards and protocols to handle increased demands of internet activity, security, reliability, cost, ease-
of-use, accessibility, and quality of service. The performance of the internet and its acceptance as a business tool has been adversely
affected by “viruses,” “worms,” and similar malicious programs and the internet has experienced a variety of outages and other delays as a
result of damage to portions of its infrastructure. If the use of the internet is adversely affected by these issues, demand for our solutions
could decline.
Changes in laws or regulations that adversely affect the growth, popularity, or use of the internet, including laws impacting net neutrality
or requiring payment of network access fees, could decrease the demand for our service and increase our cost of doing business. Certain
laws intended to prevent network operators from discriminating against the legal traffic that traverse their networks have been implemented in
many countries, including across the European Union. Furthermore, favorable laws may change, including for example, in the United States
where net neutrality regulations were recently repealed. Given uncertainty around these rules, including changing interpretations,
amendments, or repeal, coupled with potentially significant political and economic power of local network operators, we could experience
discriminatory or anti-competitive practices that could impede our growth, cause us to incur additional expense, or otherwise negatively affect
our business.
Our international operations may subject us to potentially adverse tax consequences.
We report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. Our
intercompany relationships are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. The
relevant taxing authorities may disagree with our determinations as to the value of assets sold or acquired or income and expenses
attributable to specific jurisdictions. If such a disagreement were to occur, and our position were not sustained, we could be required to pay
additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower
overall profitability of our operations. We believe that our financial statements reflect adequate reserves to cover such a contingency, but
there can be no assurances in that regard.
The enactment of legislation implementing changes in the U.S. and global taxation of international business activities or the
adoption of other tax reform policies could materially impact our financial position and results of operations.
Any changes in the U.S. or global taxation of our activities may increase our worldwide effective tax rate and adversely affect our
financial position and results of operations. For example, the Inflation Reduction Act includes, among other provisions, an alternative
minimum tax on adjusted financial statement income and a 1% excise tax on stock buybacks. Further, beginning in 2022, Section 174 of the
Code eliminates the right to deduct research and development expenditures and requires taxpayers to capitalize and amortize U.S. and
foreign research and development expenditures over five and fifteen years, respectively. In addition, the Organization for Economic
Cooperation and Development has proposed a global minimum tax of 15%, which has been adopted by or is being
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considered by EU member states and certain other jurisdictions. These and other proposed or implemented changes in the U.S. and global
taxation could adversely impact our financial position and results of operations.
Taxing authorities may successfully assert that we should have collected, or in the future should collect, sales and use, value-
added or similar taxes, and we could be subject to liability with respect to past or future sales, which could adversely affect our
results of operations.
Sales and use, value-added and similar tax laws and rates vary greatly by jurisdiction and are subject to change from time to time.
Some jurisdictions in which we do not collect such taxes may assert that such taxes are applicable, which could result in tax assessments,
penalties and interest, and we may be required to collect such taxes in the future. Such tax assessments, penalties and interest or future
requirements may adversely affect our results of operations.
Risks Related to Our Intellectual Property
Any failure to protect our intellectual property rights could impair our ability to protect our proprietary technology and our brand.
Our success and ability to compete depend, in part, upon our intellectual property. We currently have two patents and primarily rely on
copyright, trade secret and trademark laws, trade secret protection, and confidentiality or license agreements with our employees, customers,
partners and others to protect our intellectual property rights. However, the steps we take to protect our intellectual property rights may be
inadequate.
In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights.
In the past, we have utilized demand letters as a means to assert and resolve claims regarding potential misuse of our proprietary or trade
secret information. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to
management, and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our
intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our
intellectual property rights. Our failure to secure, protect and enforce our intellectual property rights could adversely affect our brand and
adversely impact our business.
Lawsuits or other claims by third parties for alleged infringement of their proprietary rights could cause us to incur significant
expenses or liabilities.
There is considerable patent and other intellectual property development activity in our industry. Our success depends, in part, on not
infringing upon the intellectual property rights of others. From time to time, our competitors or other third parties may claim that our solutions
and underlying technology infringe or violate their intellectual property rights, and we may be found to be infringing upon such rights. We may
be unaware of the intellectual property rights of others that may cover some or all of our technology. Any claims or litigation could cause us to
incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty
payments, prevent us from offering our solutions or require that we comply with other unfavorable terms. We may also be obligated to
indemnify our customers or other companies in connection with any such litigation and to obtain licenses, modify our solutions, or refund
subscription fees, which could further exhaust our resources. In addition, we may incur substantial costs to resolve claims or litigation,
whether or not successfully asserted against us, which could include payment of significant settlement, royalty or license fees, modification of
our solutions, or refunds to customers of subscription fees. Even if we were to prevail in the event of claims or litigation against us, any claim
or litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our management and other
employees from our business operations. Such disputes could also disrupt our solutions, adversely impacting our customer satisfaction and
ability to attract customers.
We use open source software in our products, which could subject us to litigation or other actions.
We use open source software in our products and may use more open source software in the future. From time to time, there have
been claims challenging the use of open source software against companies that incorporate open source software into their products. As a
result, we could be subject to suits by parties claiming misuse of, or a right to compensation for, what we believe to be open source software.
Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition or require us to devote
additional research and development resources to change our products. In addition, if we were to combine our proprietary software products
with open source software in a certain manner, we could, under certain of the open source licenses, be required to release the source code
of our proprietary software products. If we inappropriately use open source software, we may be required to re-engineer our products,
discontinue the sale of our products or take other remedial actions.
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Risks Related to Ownership of Our Common Stock
The market price of our common stock may be volatile, and you could lose all or part of your investment.
The market price of our common stock since our initial public offering has been and may continue to be subject to wide fluctuations in
response to various factors, some of which are beyond our control and may not be related to our operating performance. Factors that could
cause fluctuations in the market price of our common stock include the following:
•
actual or anticipated fluctuations in our operating results;
•
the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;
•
changes in estimates by any securities analysts who follow BlackLine or our failure to meet the estimates or expectations of
analysts and investors;
•
ratings changes by any securities analysts who follow BlackLine or failure of such analysts to initiate or maintain coverage of
BlackLine;
•
announcements by us or our competitors of significant technical innovations, acquisitions, strategic relationships, joint ventures,
or capital commitments;
•
changes in operating performance and stock market valuations of other technology companies generally, or those in our industry
in particular;
•
price and volume fluctuations in the overall stock market from time to time, including as a result of trends in the economy as a
whole;
•
changes in accounting standards, policies, guidelines, interpretations or principles;
•
actual or perceived privacy, security, data protection, or cybersecurity incidents;
•
actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;
•
developments or disputes concerning our intellectual property, or our products or third-party proprietary rights;
•
announced or completed acquisitions of businesses or technologies by us or our competitors;
•
new laws or regulations, or new interpretations of existing laws or regulations applicable to our business;
•
any major change in our Board of Directors (the “Board”) or management;
•
sales of shares of our common stock by us or our stockholders;
•
issuances of shares of our common stock, including in connection with an acquisition or upon conversion of some or all of our
outstanding Notes (as defined below);
•
lawsuits threatened or filed against us;
•
actual or rumored stockholder activism; and
•
other events or factors, including instability in the banking and financial services sector, geopolitical events and political
uncertainty, including war and political and social upheaval, incidents of terrorism, outbreaks of pandemic diseases, presidential
elections, civil unrest, or responses to these events.
In addition, the stock markets, and in particular the Nasdaq market on which our common stock is listed, have experienced extreme
price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies.
Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those
companies. In the past, stockholders have instituted securities class action litigation following periods of market volatility. If we were to
become the target of this type of litigation in the future, it could subject us to substantial costs, divert resources and the attention of
management, and adversely affect our business, results of operations, financial condition and cash flows.
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Provisions of our corporate governance documents could make an acquisition of BlackLine more difficult and may impede
attempts by our stockholders to replace or remove our current management, even if beneficial to our stockholders.
Our amended and restated certificate of incorporation and amended and restated bylaws and the Delaware General Corporation Law
(the “DGCL”) contain provisions that could make it more difficult for a third-party to acquire us or preventing a change in our management,
even if doing so might be beneficial to our stockholders. Among other things:
•
we have authorized but unissued shares of undesignated preferred stock, the terms of which may be established and the shares
of which may be issued without stockholder approval, and which may include supermajority voting, special approval, dividend, or
other rights or preferences superior to the rights of stockholders;
•
we have a classified board of directors with staggered three-year terms;
•
stockholder action by written consent is prohibited;
•
any amendment, alteration, rescission or repeal of our amended and restated bylaws or of certain provisions of our amended
and restated certificate of incorporation by our stockholders requires the affirmative vote of the holders of at least 75% of the
voting power of our stock entitled to vote thereon, voting together as a single class outstanding; and
•
stockholders are required to comply with advance notice requirements for nominations for elections to our Board or for proposing
matters that can be acted upon by stockholders at stockholder meetings.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it
more difficult for stockholders to replace members of our Board of Directors, which is responsible for appointing the members of our
management. In addition, institutional stockholder representative groups, stockholder activists and others may disagree with our corporate
governance provisions or other practices, including anti-takeover provisions, such as those listed above. We generally will consider
recommendations of institutional stockholder representative groups, but we will make decisions based on what our Board and management
believe to be in the best long-term interests of our company and stockholders; however, these groups could make recommendations to our
stockholders against our practices or our Board members if they disagree with our positions. Further, as a Delaware corporation, we are also
subject to provisions of Delaware law, which may impair a takeover attempt that our stockholders may find beneficial. These anti-takeover
provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of
BlackLine, including actions that our stockholders may deem advantageous, or negatively affect the trading price of our common stock.
We do not intend to pay dividends on our common stock so any returns will be limited to changes in the value of our common
stock.
We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for
the development, operation, and expansion of our business, and do not anticipate declaring or paying any cash dividends for the foreseeable
future. Any return to stockholders will therefore be limited to the increase, if any, of our stock price, which may never occur.
Our amended and restated bylaws designate a state or federal court located within the State of Delaware as the exclusive forum for
substantially all disputes between us and our stockholders, and also provide that the federal district courts will be the exclusive
forum for resolving any complaint asserting a cause of action arising under the Securities Act, each of which could limit our
stockholders’ ability to choose the judicial forum for disputes with us or our directors, officers, or employees.
Pursuant to our amended and restated bylaws, unless we consent in writing to the selection of an alternative forum, the sole and
exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty
owed by any of our directors, officers or other employees to us or our stockholders, (3) any action arising pursuant to any provision of the
DGCL, our amended and restated certificate of incorporation, or our amended and restated bylaws, or (4) any other action asserting a claim
that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not
have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable
parties named as defendants and provided that this exclusive forum provision will not apply to suits brought to enforce any liability or duty
created by the Exchange Act.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions.
Accordingly, both state and federal courts have jurisdiction to entertain such claims. To
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prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other
considerations, our amended and restated bylaws also provide that the federal district courts of the United States of America will be the
exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. However, while the Delaware
Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in
federal court are “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce our federal forum provision. If
the federal forum provision is found to be unenforceable, we may incur additional costs associated with resolving such matters.
Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of
and consented to this provision. This exclusive forum provision in our amended and restated bylaws may limit a stockholder's ability to bring
a claim in a judicial forum of its choosing for disputes with us or any of our directors, officers, or other employees, which may discourage
lawsuits against us and our directors, officers, and other employees. If a court were to find the exclusive forum provision in our amended and
restated bylaws to be inapplicable or unenforceable in an action, we could incur additional costs associated with resolving such action in
other jurisdictions, which could harm our results of operations.
Risks Related to Our Outstanding Convertible Senior Notes
Servicing our Notes may require a significant amount of cash and we may not have sufficient cash to settle conversions of the
Notes in cash, to repurchase the Notes upon a fundamental change, or to repay the principal amount of the Notes in cash at their
maturity, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the Notes.
As of December 31, 2024, we had $230.2 million aggregate principal amount of our 0.00% Convertible Senior Notes due in 2026 (the
“2026 Notes”) and $675.0 million aggregate principal amount of our 1.00% Convertible Senior Notes due in 2029 (the “2029 Notes” and,
together with the 2026 Notes, the “Notes” or “convertible senior notes”) outstanding.
Holders of each series of the Notes will have the right to require us to repurchase all or a portion of such Notes upon the occurrence of
a fundamental change before the applicable maturity date at a repurchase price equal to 100% of the principal amount of such Notes to be
repurchased, plus accrued and unpaid interest or special interest, if any, as described in the applicable indenture governing such Notes. In
addition, upon conversion of the Notes of the applicable series, unless we elect to deliver solely shares of our common stock to settle such
conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of such
Notes being converted, as described in the applicable indenture governing such Notes. Moreover, we will be required to repay the Notes of
the applicable series in cash at their respective maturity unless earlier converted, redeemed, or repurchased. However, we may not have
enough available cash on hand or be able to obtain financing at the time we are required to make repurchases of such Notes surrendered
therefor or pay cash with respect to such series of Notes being converted or at their respective maturity. Our ability to repay or refinance the
Notes will depend on market conditions and our future performance, which is subject to economic, financial, competitive, and other factors
beyond our control. Further, if any series of the Notes convert and we elect to issue common stock in lieu of cash upon conversion, our
existing stockholders could suffer significant dilution.
In addition, our ability to repurchase the Notes of the applicable series or to pay cash upon conversions of the Notes or at their
respective maturity may be limited by law, regulatory authority, or agreements governing our future indebtedness. Our failure to repurchase
such Notes at a time when the repurchase is required by the applicable indenture governing such Notes or to pay cash upon conversions of
such Notes or at their respective maturity as required by the applicable indenture governing such Notes would constitute a default under such
indenture. A default under such indenture or the fundamental change itself could also lead to a default under agreements governing our
existing and future indebtedness. Moreover, the occurrence of a fundamental change under the applicable indenture governing the Notes
could constitute an event of default under any such agreement. If the payment of the related indebtedness were to be accelerated after any
applicable notice or grace periods, we may not have sufficient funds to repay such indebtedness and repurchase such series of Notes or pay
cash with respect to such series of Notes being converted or at maturity of such series of Notes, which could harm our business, results of
operations, or financial conditions.
Our current and future indebtedness may limit our operating flexibility or otherwise affect our business.
Our existing and future indebtedness could have important consequences to our stockholders and significant effects on our business.
For example, it could:
•
make it more difficult for us to satisfy our debt obligations, including the Notes;
•
increase our vulnerability to general adverse economic and industry conditions;
33
•
require us to dedicate a substantial portion of our cash flows from operations to payments on our indebtedness, thereby reducing
the availability of our cash flows to fund working capital and other general corporate purposes;
•
limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
•
restrict us from exploiting business opportunities;
•
place us at a competitive disadvantage compared to our competitors that have less indebtedness; and
•
limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, debt service requirements,
execution of our business strategy or other general purposes.
Any of the foregoing could have a material adverse effect on our business, results of operations or financial condition.
The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results.
In the event the conditional conversion feature of any series of Notes is triggered, holders of the Notes of such series will be entitled
under the applicable indenture governing the Notes to convert such Notes at any time during the specified periods at their option. Our
0.125% Convertible Senior Notes became convertible on May 1, 2024 and were repaid on August 1, 2024. As of December 31, 2024, the
conditional conversion features of the remaining Notes were not triggered. If the conditional conversion feature of any series of Notes is
triggered and one or more holders of a series elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering
solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion
or all of our conversion obligation in cash, which could adversely affect our liquidity. In addition, in certain circumstances, such as
conversions by holders or redemption, we could be required under applicable accounting rules to reclassify all or certain of the outstanding
principal of such series of Notes as a current rather than long-term liability, which would result in a material reduction of our net working
capital.
The Capped Calls may affect the value of our common stock and we are subject to counterparty risk with respect to the Capped
Calls.
In connection with the issuance of the Notes, we entered into the Capped Calls with the counterparties with respect to each series of
Notes.
The counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with
respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions at
any time prior to the respective maturity of the Notes (and are likely to do so on each exercise date of the Capped Calls). This activity could
also cause or prevent an increase or a decrease in the market price of our common stock.
In addition, global economic conditions have in the past resulted in the actual or perceived failure or financial difficulties of many
financial institutions. The counterparties to the Capped Calls are financial institutions and we will be subject to the risk that one or more of the
counterparties may default or otherwise fail to perform, or may exercise certain rights to terminate, their obligations under the Capped Calls.
If a counterparty to one or more Capped Calls becomes subject to insolvency proceedings, we will become an unsecured creditor in those
proceedings with a claim equal to our exposure at the time under such transaction. Our exposure will depend on many factors but, generally,
it will increase if the market price or the volatility of our common stock increases. Upon a default or other failure to perform, or a termination
of obligations, by a counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our
common stock. We can provide no assurances as to the financial stability or viability of the counterparties.
General Risk Factors
We may require additional capital to support business growth, and this capital may not be available on acceptable terms, if at all.
We intend to continue to make investments to support our business growth and may require additional funds to respond to business
challenges, such as refinancing needs, the need to develop new features or enhance our existing solutions, or to improve our operating
infrastructure or acquire complementary businesses and technologies. Accordingly, from time to time we have engaged in, and we may in the
future need to engage in, equity or debt financing to secure additional funds, or we may opportunistically decide to raise capital. If we raise
additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution,
and any new equity or convertible debt securities we issue could have rights, preferences
34
and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive
covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain
additional capital and to pursue business opportunities, including potential acquisitions. In addition, we may not be able to obtain additional
financing or refinancing on terms favorable to us, or at all. If we are unable to obtain adequate financing or financing on terms satisfactory to
us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly
impaired.
The requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to
attract and retain executive management and qualified board members.
As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,
the listing requirements of Nasdaq, and other applicable securities rules and regulations. Compliance with these rules and regulations
increases our legal and financial compliance costs, make some activities more difficult, time-consuming, or costly, and increase demand on
our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to
our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and
procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures
and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. We are
required to disclose changes made in our internal control and procedures on a quarterly basis and are required to furnish a report by
management on, among other things, the effectiveness of our internal control over financial reporting on an annual basis. Additionally, our
independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting pursuant
to Section 404. As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our
management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results.
Although we have hired additional employees to assist us in complying with these requirements, we may need to hire more employees or
engage outside consultants, which will increase our operating expenses.
In addition, as a public company we have been targeted by activist stockholders from time to time. Responding to actions by activist
stockholders could be costly and time-consuming, and could disrupt our operations and divert the attention of management and our
employees. Additionally, perceived uncertainties as to our future direction as a result of stockholder activism, or changes to the composition
of our Board of Directors, may lead to the perception of a change in the direction of our business or other instability, which may be exploited
by our competitors, cause concern to our current or potential customers, and make it more difficult to attract and retain qualified personnel. If
customers choose to delay, defer or reduce transactions with us or do business with our competitors instead of us, then our business,
financial condition and operating results would be adversely affected. In addition, our share price could experience periods of increased
volatility as a result of stockholder activism.
Furthermore, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty
for public companies, increasing legal and financial compliance costs, and making some activities more time-consuming. These laws,
regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their
application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing
uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We
intend to invest substantial resources to comply with evolving laws, regulations, and standards, and this investment may result in increased
general and administrative expenses and a diversion of management’s time and attention from business operations to compliance activities.
If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to
ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business,
financial conditions, and operating results may be adversely affected.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our
stock price and trading volume could decline.
The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish
about us. If few securities analysts commence coverage of us, or if industry analysts cease coverage of us, the trading price for our common
stock would be negatively affected. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or
unfavorable research about our business, our common stock price would likely decline. If one or more of these analysts cease coverage of
us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause our common stock price and
trading volume to decline.
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We may fail to maintain an effective system of internal control over financial reporting in the future and may not be able to
accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us
and the price of our common stock.
As a public company, we are required to maintain internal control over financial reporting and to report any material weaknesses in
such internal controls. Section 404 of the Sarbanes-Oxley Act requires that we evaluate and determine the effectiveness of our internal
control over financial reporting and provide a management report on internal control over financial reporting.
The process of designing and implementing internal control over financial reporting required to comply with Section 404 of the
Sarbanes-Oxley Act has been and will continue to be time-consuming, costly and complicated. If, during the evaluation and testing process,
we identify one or more material weaknesses in our internal control over financial reporting, our management will be unable to assert that our
internal control over financial reporting is effective. Even if our management concludes that our internal control over financial reporting is
effective, our independent registered public accounting firm may conclude that there are material weaknesses with respect to our internal
controls or the level at which our internal controls are documented, designed, implemented, or reviewed. If we are unable to assert that our
internal control over financial reporting is effective, or when required in the future, if our independent registered public accounting firm is
unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the
accuracy and completeness of our financial reports, the market price of our common stock could be adversely affected, and we could
become subject to stockholder lawsuits, litigation or investigations by the stock exchange on which our securities are listed, the SEC, or other
regulatory authorities, which could require additional financial and management resources, and cause investor perceptions to be adversely
affected and potentially resulting in restatement of our financial statements for prior periods and a decline in the market price of our stock.
Natural disasters, climate change, and other events beyond our control could harm our business.
Natural disasters, climate change, political instability, or other catastrophic events may cause damage or disruption to our operations,
international commerce, and the global economy, and thus could have a strong negative effect on us. Our business operations are subject to
interruption by natural disasters, climate-related events, pandemics, terrorism, political unrest, geopolitical instability, war, and other events
beyond our control. Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible
for us to deliver our solutions to our customers, could decrease demand for our solutions, and could cause us to incur substantial expense.
The majority of our research and development activities, corporate headquarters, information technology systems and other critical business
operations are located in California, which has experienced, and is projected to continue to experience, major earthquakes, floods, droughts,
heat waves, wildfires, and power shutoffs associated with wildfire prevention. Significant recovery time could be required to resume
operations and our business could be harmed in the event of a major earthquake or other catastrophic event. Our insurance may not be
sufficient to cover related losses or additional expenses that we may sustain. In addition, we may be subject to increased regulations,
reporting requirements, standards, or expectations regarding the environmental impacts of our business, and failure to comply with such
regulations, requirements, standards or expectations could adversely affect our reputation, business or financial performance.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Cybersecurity is a key component of BlackLine’s overall cross-functional approach to risk management. Our cybersecurity risk
management practices are integrated into our overall risk management practices, and cybersecurity risks are among the core enterprise risks
identified for oversight by our Board through our annual enterprise risk assessment. Our cybersecurity policies and practices are designed
with the cybersecurity framework of the National Institute of Standards and Technology and certain other applicable industry standards in
mind, and BlackLine maintains an information security management system, which is certified against certain international standards, such
as ISO 27001 and ISO 27017.
Our cybersecurity program includes:
•
Vigilance: We maintain a global cybersecurity threat operation that endeavors to detect, contain, and respond to cybersecurity
threats and incidents in a prompt and effective manner with the goal of minimizing disruptions to the business.
36
•
Collaboration: We have established collaboration mechanisms with public and private entities, including intelligence and
enforcement agencies, industry groups, and third-party service providers to identify and assess cybersecurity risks.
•
Systems Safeguards: We deploy technical safeguards that are designed to protect our information systems from cybersecurity
threats, including firewalls, intrusion detection systems, anti-malware functionality, access controls, and ongoing vulnerability
assessments.
•
Third-Party Management: We maintain a risk-based approach to identifying and overseeing cybersecurity risks with respect to
third parties, including third parties who provide solutions we rely upon for our security measures. This includes contractually
obligating third-party service providers with access to our systems or processing sensitive data on our behalf to implement and
maintain reasonable security measures in connection with their work with us, and to promptly report any suspected security
breach that may affect BlackLine.
•
Education: Employees outside of our corporate information security organization also have a role in our cybersecurity defenses,
which we believe improves our cybersecurity. We provide training upon onboarding, and annually thereafter, for all personnel
regarding cybersecurity threats, with additional role-based security training as applicable. We also provide periodic cybersecurity
newsletters and updates to all employees, have a phishing awareness program that includes monthly simulations, and
periodically host tabletop exercises with management and other employees to practice rapid cyber incident response.
•
Incident Response Planning: We have established and maintain an incident response plan that addresses our response to
suspected cybersecurity incidents and is tested periodically.
•
Communication and Coordination: We utilize a cross-functional approach to addressing the risk from cybersecurity threats,
involving management personnel from the information security, technology, operations, legal, risk management, internal audit,
and other key business functions, as well as members of our Board and the Audit Committee of the Board (the “Audit
Committee”) and Technology and Cybersecurity Committee of the Board (the “Technology and Cybersecurity Committee”)
regarding cybersecurity threats and incidents.
•
Governance: The Board’s oversight of cybersecurity risk management is supported by the Audit Committee, which regularly
interacts with our risk management function and Chief Information Security Officer (“CISO”). In February 2024, the Board formed
a standing Technology and Cybersecurity Committee, which is comprised of independent members of the Board and assists the
Board in fulfilling its oversight responsibilities with respect to risks relating to our information security, data privacy and disaster
recovery capabilities.
A key part of our strategy for managing risks from cybersecurity threats is the ongoing assessment and testing of our processes and
practices through auditing, assessments, tabletop exercises, and other exercises focused on evaluating effectiveness. We periodically
engage third parties to perform assessments on our cybersecurity measures, including information security maturity assessments and
independent reviews of our information security control environment and operating effectiveness. The results of such assessments and
reviews are reported to the Board, the Audit Committee, and the Technology and Cybersecurity Committee, and we make adjustments to our
cybersecurity processes and practices as necessary based on the information provided by the third-party assessments and reviews.
The Audit Committee and the Technology and Cybersecurity Committee are responsible for oversight relating to cybersecurity. The
Board, the Audit Committee, and the Technology and Cybersecurity Committee regularly receive presentations and reports on cybersecurity
risks from the CISO, which address a wide range of topics including, for example, recent developments, evolving standards, vulnerability
assessments, third-party and independent reviews, the threat environment, technological trends, and cybersecurity considerations arising
with respect to our peers and vendors. Our incident response process includes escalation of potentially material cybersecurity incidents to
relevant members of our executive management team. The Board, the Audit Committee, and the Technology and Cybersecurity Committee
are updated as appropriate. Periodically, the Audit Committee discusses our approach to cybersecurity risk management with our CISO. Our
Technology and Cybersecurity Committee receives regular reports from our CISO as part of its assessment of our cybersecurity threat
landscape, and the quality and effectiveness of our information security programs.
Our CISO is the member of our management who is principally responsible for overseeing our cybersecurity risk management program,
in partnership with other business leaders across BlackLine. She has over 15 years of experience as a chief information security officer
responsible for enterprise-wide oversight of information security programs. She holds CISSP and CISM certifications, and a BS in Computer
Science. She leads a team of
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information security professionals, and works in coordination with the Chief Information Officer, the Chief Legal and Administrative Officer, the
Chief Technology Officer, the Senior Vice President, Cloud Engineering and Operations, and other members of management.
The CISO, in coordination with the other members of the executive management team, works collaboratively across BlackLine to
implement programs designed to protect our information systems from cybersecurity threats and to promptly respond to cybersecurity
incidents. To facilitate the success of such programs, we designate certain employees as security champions throughout BlackLine to
respond to cybersecurity incidents in accordance with our incident response plan. Through communications with these employees, the CISO
monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents, and reports such incidents to the Board, the Audit
Committee, and the Technology and Cybersecurity Committee, when appropriate, as discussed above.
As of the date of this report, and based on facts currently known, the risks from previously occurring cybersecurity threats have not
materially affected, nor do we believe that they are reasonably likely to materially affect BlackLine, including its business strategy, results of
operations or financial condition. Notwithstanding our investment in cybersecurity, however, we may not be successful in identifying a
cybersecurity risk or preventing or mitigating a cybersecurity incident or product security vulnerability that could have a material adverse
effect on our business, results of operations, or financial condition.
We are at risk for cybersecurity breaches and incidents, including as a result of third-party action, employee, vendor or contractor error,
cyberattacks (including from nation states and affiliated actors) and other forms of hacking, malfeasance, ransomware, and other malicious
software, or other factors. If our security controls are breached or circumvented, or unauthorized or inadvertent access to, modification to, or
processing of customer, employee, or other confidential data otherwise occurs, our software solutions may be perceived as insecure, or may
become unavailable or inaccessible to our end users. As a result, we may lose existing customers or fail to attract new customers, our
business may be harmed, and we may incur significant liabilities. These and other risks could affect BlackLine, including our business
strategy, results of operations, or financial condition. For more detailed information about these and other cybersecurity risks, please see Part
I, Item 1A, “Risk Factors”, including the risk factor entitled “If our security controls are breached or unauthorized, or inadvertent access to
customer, employee or other confidential data is otherwise obtained, our software solutions may be perceived as insecure, we may lose
existing customers or fail to attract new customers, our business may be harmed and we may incur significant liabilities.”
Item 2. Properties
Our principal executive offices are located in Woodland Hills, California where we occupy approximately 89,000 square feet of space
under a lease that expires in January 2029. We have additional U.S. leased offices in Pleasanton, California; New York, New York; and
Westport, Connecticut. We also have international office locations in Australia, Canada, France, Germany, India, Japan, the Netherlands,
Poland, Romania, Singapore, and the United Kingdom. We believe that our properties are generally suitable to meet our needs for the
foreseeable future. In addition, to the extent we require additional space in the future, we believe that it would be readily available on
commercially reasonable terms.
Item 3. Legal Proceedings
From time to time, we may be subject to legal proceedings, including claims, litigation, investigations, and inquiries arising in the
ordinary course of business. In addition, from time to time, third parties may assert intellectual property infringement claims against us in the
form of letters and other forms of communication. As of the date of this Annual Report on Form 10-K for the year ended December 31, 2024,
we are not a party to any litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably
expected to have a material adverse effect on our results of operations, prospects, cash flows, financial position or brand.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market for Our Common Stock and Related Stockholder Matters
Our common stock trades on the Nasdaq Global Select Market under the symbol “BL”.
Holders of Record
At February 14, 2025, there were 3 stockholders of record. The number of record holders does not include beneficial holders who hold
their shares in “street name,” meaning that the shares are held for their accounts by a broker or other nominee. Accordingly, we believe that
the total number of beneficial holders is higher than the number of our stockholders of record.
Dividend Policy
We have never declared or paid any cash dividends on our common stock. We currently intend to retain our future earnings, if any,
primarily to finance our operations and effect share repurchases and do not anticipate paying any cash dividends on our common stock in the
foreseeable future. Any future determination as to the declaration and payment of dividends will be at the discretion of our Board and will
depend on then-existing conditions, including our financial condition, operating results, contractual restrictions, capital requirements,
business prospects, and other factors our Board may deem relevant.
Stock Price Performance Graph
This performance graph shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, or the
SEC, for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the
liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act of 1933,
as amended, or the Securities Act.
The following graph compares (i) the cumulative total stockholder return on our common stock with (ii) the cumulative total return of the
S&P 500 Index and (iii) the cumulative total return of the S&P Software & Services Select Industry Index (SPSISS), all over the period from
December 31, 2019 through December 31, 2024, assuming the investment of $100 in our common stock and in both of the other indices on
December 31, 2019 and the reinvestment of dividends. The graph uses the closing market price on December 31, 2019 of $51.56 per share
as the initial value of our common stock. As discussed above, we have never declared or paid a cash dividend on our common stock and do
not anticipate declaring or paying a cash dividend in the foreseeable future.
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COMPARISON OF CUMULATIVE TOTAL RETURN*
*Returns are based on historical results and are not necessarily indicative of future performance. See the disclosure in Part I, Item 1A. “Risk
Factors.”
Unregistered Sales of Equity Securities
None.
Use of Proceeds
None.
Issuer Purchases of Equity Securities
On November 17, 2024, our Board of Directors authorized the repurchase of up to $200.0 million of our common stock. The
authorization will expire at the end of the first quarter of fiscal year 2027. Repurchases may be made from time to time through open market
repurchases or through privately-negotiated transactions subject to market conditions, applicable legal requirements and other relevant
factors. Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18 of the Securities
Exchange Act of 1934, as amended. We may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares
under this authorization. The repurchase program does not obligate us to acquire any particular amount of our common stock, and it may be
suspended at any time in our discretion. The timing and actual number of shares repurchased may depend on a variety of factors, including
price, general business and market conditions, and alternative investment opportunities.
As of December 31, 2024, we have not repurchased any shares under the repurchase program.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read together with the financial statements and
the related notes set forth in Item 8, “Financial Statements and Supplementary Data.” The following discussion also contains forward-looking
statements, which are based upon current plans, expectations,
40
and beliefs. These statements involve risks and uncertainties. See Part I, “Special Note Regarding Forward-Looking Statements” for a
discussion of the forward-looking statements contained below and Part I, Item 1A, “Risk Factors” for a discussion of certain risks that could
cause our actual results to differ materially from the results anticipated in such forward-looking statements.
This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for fiscal 2024 and
fiscal 2023. For the comparison of fiscal 2023 and fiscal 2022, see Management's Discussion and Analysis of Financial Condition and
Results of Operations in Part II, Item 7 of our 2023 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on
February 23, 2024.
Overview
We provide a unified, scalable, and flexible platform tailored to the evolving needs of the Office of the CFO and deliver purpose-built
applications that address critical processes, including financial close & consolidation, intercompany accounting, and invoice-to-cash. Our
software and services provide the critical technology and industry-leading practices that deliver accurate, efficient, and intelligent financial
operations. We are a holding company and conduct our operations through our wholly-owned subsidiary, BlackLine Systems.
At December 31, 2024, we had 397,477 individual users across 4,443 customers. Additionally, we continue to build strategic
relationships with technology vendors, professional services firms, business process outsourcers, and resellers.
Our cloud-based applications, increasingly powered by our BlackLine Studio360 Platform, include Account Reconciliations, Transaction
Matching, Task Management, Financial Reporting Analytics, Journal Entry, Variance Analysis, Compliance, Smart Close for SAP, Cash
Application, Credit & Risk Management, Collections Management, Disputes & Deductions Management, Team & Task Management, AR
Intelligence, Electronic Invoicing & Payments, Intercompany Create, Intercompany Balance & Resolve, and Intercompany Net & Settle.
These applications address many use cases across our customers’ financial operations and include comprehensive and flexible solutions
that deliver best practices for end-to-end record-to-report and invoice-to-cash processes.
We derived approximately 95% of our revenue from subscriptions to our cloud-based software platform and approximately 5% from
professional services for the year ended December 31, 2024. Our subscription contracts have initial non-cancellable terms of one year to
three years with renewal options. The majority of new contracts in 2024 and 2023 had an initial term of three years. We price our
subscriptions based on a number of factors, primarily the number of users having access to the products and the number of products
purchased by the customer. We typically invoice customers annually in advance for subscriptions, which is initially recorded as deferred
revenue and recognized ratably over the term of the customer contract. The first year of subscription fees are typically payable within 30 days
after execution of a contract, and thereafter upon renewal.
Professional services consist primarily of implementation and consulting services. With the exception of our intercompany accounting
solutions acquired as part of our acquisition of FourQ, our product offerings are available for immediate use on our platform after granting
access to a new customer. We typically help customers implement our solutions, and we also provide consulting services to help customers
optimize the use of our products. We invoice customers for our consulting services on a time-and-materials basis and recognize that revenue
as services are performed. A limited number of our customers are provided professional services for a fixed fee which we invoice in advance
and is initially recorded as deferred revenue and recognized on a proportional-performance basis as the services are rendered.
We sell our solutions primarily through our direct sales force, which leverages our relationships with technology vendors, professional
services firms and business process outsourcers. In particular, our solution integrates with SAP’s ERP solutions, and SAP is part of the
reseller channel that we use in the ordinary course of business. SAP has the ability to resell our solutions as SolEx, for which we receive a
percentage of the revenues. We also have an agreement with Google Cloud in which we collaborate with them on joint selling and go-to-
market activities and bring enhanced automation solutions for finance and accounting to new and existing customers.
Our ability to maximize the lifetime value of our customer relationships will depend, in part, on the willingness of customers to purchase
additional user licenses and products from us. We rely on our sales and customer success teams to support and grow our existing customers
by maintaining high customer satisfaction and educating customers on the value all our products provide.
The length of our sales cycle depends on the size of a potential customer and contract, as well as the type of solution or product being
purchased. The sales cycle for our global enterprise customers is generally longer than that of our mid-size customers. In addition, the length
of the sales cycle tends to increase for larger contracts and for more complex, strategic products like Intercompany Financial Management.
As we continue to focus on
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increasing our average contract size and selling more strategic products, we expect our sales cycle to lengthen and become less predictable,
which could cause variability in our results for any particular period.
We have historically signed a high percentage of agreements with new customers, as well as renewal agreements with existing
customers, in the fourth quarter of each year and usually during the last month of the quarter. This can be attributed to buying patterns typical
in the software industry. As the terms of most of our customer agreements are measured in full year increments, agreements initially entered
into during the fourth quarter or last month of any quarter will generally come up for renewal at that same time in subsequent years. This
seasonality is reflected in our revenues, though the impact to overall annual or quarterly revenues is nominal due to the fact that we
recognize subscription revenue ratably over the term of the customer contract.
For the years ended December 31, 2024, 2023, and 2022, we had revenues totaling $653.3 million, $590.0 million, and $522.9 million,
respectively. We generated net income attributable to BlackLine, Inc. of $161.2 million and $52.8 million and incurred a net loss attributable
to BlackLine, Inc. of $29.4 million for the years ended December 31, 2024, 2023, and 2022, respectively.
Global Macroeconomic Factors
Our operating results may vary based on the impact of changes in our industry or the global economy on us or our customers. General
macroeconomic conditions, such as a recession, inflation or rising interest rates, an economic downturn in the U.S. or internationally, adverse
business conditions and liquidity concerns, or bank failures or instability in the financial services sector, has and could continue to adversely
affect demand for our products and make it difficult to accurately forecast and plan our future business activities. As a result of economic
uncertainty, we have seen customers delay and defer purchasing decisions, which has adversely impacted our near-term demand.
Acquisition of Data Interconnect
On September 12, 2023, we completed the DI Acquisition for cash consideration of $11.4 million, which was paid at the closing of the
acquisition. The DI Acquisition enhances our existing accounts receivable automation solution capabilities through EIPP. Transaction-related
costs, which include, but are not limited to, accounting, legal, and advisory fees related to the transaction, totaled approximately $1.2 million
and were expensed as incurred during the year ended December 31, 2023.
BlackLine accounted for the transaction as a business combination using the acquisition method of accounting. The total purchase
price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair
values on the acquisition date and the purchase price allocation was final.
Acquisition of FourQ
On January 26, 2022, we completed the FourQ Acquisition and paid cash consideration of $160.2 million upon closing of the
acquisition. In addition, we agreed to pay a maximum of $73.2 million of contingent consideration if certain earnout conditions were met. At
December 31, 2024, the related liability for the FourQ Acquisition was zero. As of the filing date of this Annual Report on Form 10-K, the
financial performance milestones were not met, and we are no longer obligated to pay the contingent consideration of $73.2 million.
Restructuring Costs
Fiscal 2023 Restructuring Program
On August 23, 2023, we announced a restructuring plan that was designed to support our growth, scale, and profitability objectives. As
part of the restructuring, we reduced our global workforce by approximately 9.0%, or 166 total employee positions. Restructuring costs
related to the August 2023 restructuring consisted of one-time termination benefits. Refer to “Note 12 - Restructuring Costs” for additional
information.
Fiscal 2022 Restructuring Program
On December 7, 2022, we announced our decision to commit to a restructuring plan that was designed to focus on key growth
priorities. Restructuring costs related to the December 2022 restructuring consisted of one-time termination benefits. Refer to “Note 12 -
Restructuring Costs” for additional information.
Key Metrics
We regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our performance,
identify trends affecting our business, formulate financial projections, and make strategic decisions.
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Year Ended December 31,
2024
2023
2022
Dollar-based net revenue retention rate
102 %
106 %
107 %
Number of customers
4,443
4,398
4,188
Number of users
397,477
386,814
366,522
Dollar-based net revenue retention rate. We believe that dollar-based net revenue retention rate is an important metric to measure
the long-term value of customer agreements and our ability to retain and grow our relationships with existing customers over time. We
calculate dollar-based net revenue retention rate as the implied monthly subscription and support revenue at the end of a period for the base
set of customers from which we generated subscription revenue in the year prior to the calculation, divided by the implied monthly
subscription and support revenue one year prior to the date of calculation for that same customer base. This calculation does not reflect
implied monthly subscription and support revenue for new customers added during the one-year period but does include the effect of
customers who terminated during the period. We define implied monthly subscription and support revenue as the total amount of minimum
subscription and support revenue contractually committed to, under each of our customer agreements over the entire term of the agreement,
divided by the number of months in the term of the agreement. At December 31, 2024, our dollar-based net revenue retention rate declined
from the year ended December 31, 2023 due to the adverse impact of foreign exchange rates, higher attrition, and a more moderate rate of
acquiring customer accounts. Our ability to maximize the lifetime value of our customer relationships will depend, in part, on the willingness
of the customer to purchase additional user licenses and products from us. We rely on our customer success and sales teams to support and
grow our existing customers by maintaining high customer satisfaction and educating the customer on the value our products provide.
Number of customers. We believe that our ability to expand our customer base is an indicator of our market penetration and the
growth of our business. We define a customer as a company that contributes to our subscription and support revenue as of the measurement
date. In situations where an organization has multiple subsidiaries or divisions, each entity that is invoiced as a separate entity is treated as a
separate customer. However, where an existing customer requests its invoice be divided for the sole purpose of restructuring its internal
billing arrangement without any incremental increase in revenue, such customer continues to be treated as a single customer. For the years
ended December 31, 2024, 2023, and 2022, no single customer accounted for more than 10% of our total revenues.
Number of users. Since our customers generally pay fees based on the number of users on our platform within their organization, we
believe the total number of users is an indicator of the growth of our business. While the fees for the majority of the products we sell are user-
based, we are seeing an increasing volume of transactions for our non-user based strategic products, such as eInvoicing & Payments,
Transaction Matching, Intercompany, and BlackLine Cash Application.
Key Components of our Results of Operations
Revenues
Subscription and support. Our subscription contracts have initial non-cancellable terms of one year to three years with renewal
options. The majority of new contracts in 2024 and 2023 had an initial term of three years. Fees are based on a number of factors, including
the solutions subscribed to by the customer and the number of users having access to the solutions. The first year of subscription fees are
typically payable within 30 days after execution of a contract, and thereafter upon renewal. We initially record the subscription fees as
deferred revenue and recognize revenue ratably over the term of the contract. At any time during the subscription period, customers may
increase their number of users and add products. Additional fees are payable for the remainder of the initial or renewed contract term.
Customers may only reduce their number of users or subscription to products upon renewal of their arrangement. Revenues from
subscriptions to our cloud-based software platform composed approximately 95% of our revenues for the year ended December 31, 2024.
Subscription and support revenues also include revenues associated with sales of on-premise software licenses and related support,
but we no longer develop any new applications or functionality for our legacy on-premise software, and anticipate that this component of our
revenues will continue to decline relative to total revenue.
Professional services. We offer our customers implementation and consulting services. With the exception of our intercompany
accounting solutions acquired from the FourQ Acquisition, our product offerings are available for immediate use on our platform after granting
access to a new customer. We typically help customers implement our solutions, and we also provide consulting and training services to help
customers optimize the use of our products.
43
These services are considered distinct performance obligations. Professional services do not result in significant customization of the
subscription service. We apply the practical expedient to recognize professional services revenue when we have the right to invoice based
on time and materials incurred. A limited number of our customers are provided professional services for a fixed fee, which is initially
recorded as deferred revenue and recognized on a proportional-performance basis as the services are rendered. Professional services
revenues composed approximately 5% of our revenues for the year ended December 31, 2024.
For a description of our revenue accounting policies, see “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Critical Accounting Estimates.”
Cost of Revenues
Subscription and support cost of revenues. Subscription and support cost of revenues primarily consist of amortization of acquired
developed technology costs, salaries, benefits, and stock-based compensation associated with our hosting operations and support
personnel, amortization of capitalized internal-use software costs, cloud hosting costs, and data center costs related to hosting our cloud-
based software. We also allocate a portion of overhead to subscription and support cost of revenues.
Professional services costs of revenues. Costs associated with providing professional services primarily consist of salaries, benefits
and stock-based compensation associated with our implementation personnel. These costs are expensed as incurred when the services are
performed. We also allocate a portion of overhead to professional services cost of revenues.
Operating Expenses
Sales and marketing. Sales and marketing expenses consist primarily of compensation and employee benefits, including stock-based
compensation of sales and marketing personnel and related sales support teams, sales and partner commissions, marketing events,
advertising costs, computer software-related costs, travel, trade shows, other marketing materials, transaction-related costs, and allocated
overhead. Sales and marketing expenses also include amortization of customer relationship intangible assets and impairment of cloud
computing implementation costs. We defer sales and partner commissions and amortize them over an estimated period of benefit of five
years. We expect a decline in sales and marketing expenses as a percentage of revenue in 2025 as we leverage efficiencies in sales support
and further improve productivity.
Research and development. Research and development expenses are comprised primarily of salaries, benefits and stock-based
compensation associated with our engineering, product and quality assurance personnel, and transaction-related costs. Research and
development expenses also include third-party contractors and supplies, computer software-related costs and allocated overhead. Other
than software development costs that qualify for capitalization, as discussed above, research and development costs are expensed as
incurred. We expect research and development costs to remain consistent in 2025 as we execute our product roadmap and invest in
strategic initiatives, including AI.
General and administrative. General and administrative expenses consist primarily of personnel costs associated with our executive,
finance, legal, human resources, compliance, and other administrative personnel, as well as accounting and legal professional fees, other
corporate-related expenses and allocated overhead. General and administrative expenses also include amortization of trade name intangible
assets, the change in the fair value of contingent consideration, transaction-related costs, and impairment of cloud computing implementation
costs. We expect general and administrative costs to remain consistent in 2025, with targeted investments in corporate IT to support
innovation and automation initiatives.
Restructuring costs. Restructuring costs consist of one-time termination benefits. Refer to “Note 12 - Restructuring Costs” for
additional information.
Interest income. Interest income primarily consists of earnings on our cash and cash equivalents and our marketable securities.
Interest expense. Interest expense consists primarily of interest expense associated with our Notes issued in May 2024, March 2021,
and August 2019.
Provision for (benefit from) income taxes.
We are subject to federal and state income taxes in the United States and taxes in foreign jurisdictions. We use the liability method of
accounting for income taxes. Under the liability method, deferred taxes are determined
44
based on the temporary differences between the financial statement and tax bases of assets and liabilities, using tax rates expected to be in
effect during the years in which the bases differences are expected to reverse.
We record a valuation allowance against our deferred tax assets to the extent that realization of the deferred tax assets, including
consideration of our deferred tax liabilities, is not more likely than not. During the quarter ended December 31, 2024, we determined that a
U.S. valuation allowance was no longer required. This determination was based on an evaluation of positive and negative factors, including,
but not limited to, our achievement of adjusted pre-tax income resulting in a three-year cumulative income position as of December 31, 2024,
our full utilization of our federal net operating loss carryforward during 2024, and our projections of future pre-tax income. Based upon our
assessment of all available evidence, we concluded that it is more likely than not that the remaining deferred tax assets will be realized. We
recognized an income tax benefit of $43.1 million in 2024, including $89.1 million related to the reversal of the previously-recorded valuation
allowance. We have also recorded a valuation allowance against certain foreign deferred tax assets.
Non-GAAP Financial Measures
In addition to our results determined in accordance with GAAP, we believe the non-GAAP measures below are useful to us and our
investors in evaluating our business. These non-GAAP financial measures are useful because they provide consistency and comparability
with our past performance, facilitate period-to-period comparisons of operations and facilitate comparisons with other peer companies, many
of which use similar non-GAAP financial measures to supplement their GAAP results.
Year Ended December 31,
2024
2023
(in thousands, except percentages)
GAAP gross profit
$
491,371
$
443,203
GAAP gross margin
75.2 %
75.1 %
GAAP operating income
$
18,536
$
14,348
GAAP operating margin
2.8 %
2.4 %
GAAP net income attributable to BlackLine, Inc.
$
161,174
$
52,833
Diluted net income per share attributable to BlackLine, Inc.
$
1.45
$
0.81
Year Ended December 31,
2024
2023
(in thousands, except percentages)
Non-GAAP gross profit
$
518,239
$
468,559
Non-GAAP gross margin
79.3 %
79.4 %
Non-GAAP operating income
$
126,807
$
97,517
Non-GAAP operating margin
19.4 %
16.5 %
Non-GAAP net income attributable to BlackLine, Inc.
$
162,067
$
145,195
Diluted non-GAAP net income per share attributable to BlackLine, Inc.
$
2.18
$
1.96
Non-GAAP Gross Profit and Non-GAAP Gross Margin. Non-GAAP gross profit is defined as GAAP revenues less GAAP cost of
revenue adjusted for amortization of acquired developed technology, stock-based compensation, and transaction-related costs (including, but
not limited to, accounting, legal, and advisory fees related to the transaction, as well as transaction-related retention bonuses). Non-GAAP
gross margin is defined as non-GAAP gross profit divided by GAAP revenues. We believe that presenting non-GAAP gross profit and non-
GAAP gross margin is useful to investors as it eliminates the impact of certain non-cash expenses and allows a direct comparison between
periods.
Non-GAAP Income (Loss) from Operations and Non-GAAP Operating Margin. Non-GAAP income (loss) from operations is defined as
GAAP income (loss) from operations adjusted for amortization of intangible assets, stock-based compensation, change in fair value of
contingent consideration, transaction-related costs, legal settlement gains or costs, and restructuring costs. Non-GAAP operating margin is
defined as non-GAAP income (loss) from operations divided by GAAP revenues. We believe that presenting non-GAAP income (loss) from
operations and non-GAAP operating margin is useful to investors as it eliminates the impact of items that have been impacted by
45
our acquisitions and other related costs in order to allow a direct comparison of income (loss) from operations between all periods presented.
Non-GAAP Net Income (Loss) Attributable to BlackLine and Diluted Non-GAAP Net Income (Loss) Per Share Attributable to BlackLine,
Inc. Non-GAAP net income (loss) attributable to BlackLine is defined as GAAP net income (loss) attributable to BlackLine adjusted for the
impact of the provision for (benefit from) income taxes related to acquisitions, amortization of intangible assets, stock-based compensation,
amortization of debt issuance costs from our 0.125% Convertible Senior Notes paid in 2024 (the “2024 Notes”), 0.00% Convertible Senior
Notes due in 2026 (the “2026 Notes”), and 1.00% Convertible Senior Notes due in 2029 (the “2029 Notes” and, together with the 2024 and
2026 Notes, the “Notes” or “convertible senior notes”), change in fair value of contingent consideration, transaction-related costs, legal
settlement gains or costs, restructuring costs, adjustment to the redeemable non-controlling interest to the redemption amount, and gain on
extinguishment of convertible senior notes. Diluted non-GAAP net income (loss) per share attributable to BlackLine, Inc. includes the
adjustment for shares resulting from the elimination of stock-based compensation. We believe that presenting non-GAAP net income (loss)
attributable to BlackLine is useful to investors as it eliminates the impact of items that have been impacted by our acquisitions and other
related costs to allow a direct comparison of net income (loss) between all periods presented.
46
Reconciliation of Non-GAAP Financial Measures
The following table presents a reconciliation of gross profit, gross margin, operating income, operating margin, and net income, the
most comparable GAAP measures, to non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating
margin, and non-GAAP net income:
Year Ended December 31,
2024
2023
(in thousands, except percentages)
Non-GAAP Gross Profit:
Gross profit
$
491,371
$
443,203
Amortization of acquired developed technology
13,370
12,438
Stock-based compensation
13,347
12,440
Transaction-related costs
151
478
Total non-GAAP gross profit
$
518,239
$
468,559
Gross margin
75.2 %
75.1 %
Non-GAAP gross margin
79.3 %
79.4 %
Non-GAAP Operating Income:
Operating income
$
18,536
$
14,348
Amortization of intangible assets
19,886
20,608
Stock-based compensation
86,097
80,068
Change in fair value of contingent consideration
—
(33,549)
Transaction-related costs
568
5,078
Restructuring costs
1,720
10,964
Total non-GAAP operating income
$
126,807
$
97,517
GAAP operating margin
2.8 %
2.4 %
Non-GAAP operating margin
19.4 %
16.5 %
Non-GAAP Net Income Attributable to BlackLine, Inc.:
Net income attributable to BlackLine, Inc.
$
161,174
$
52,833
Benefit from income taxes
(50,948)
(1,196)
Amortization of intangible assets
19,886
20,608
Stock-based compensation
85,654
79,588
Amortization of debt issuance costs
4,486
5,535
Change in fair value of contingent consideration
—
(33,549)
Transaction-related costs
568
5,078
Restructuring costs
1,720
10,964
Adjustment to redeemable non-controlling interest
4,639
5,334
Gain on extinguishment of convertible senior notes
(65,112)
—
Total non-GAAP net income attributable to BlackLine, Inc.
$
162,067
$
145,195
Results of Operations
The following tables set forth selected historical consolidated statements of operations data, which should be read in conjunction with
Critical Accounting Estimates, Liquidity and Capital Resources, and Contractual Obligations and Commitments included in this Item 7, as well
as Quantitative and Qualitative Disclosures About Market Risk and the Consolidated Financial Statements and Notes thereto included
elsewhere in this Annual Report on Form 10-K.
On August 23, 2023 and December 7, 2022, respectively, we announced our decision to commit to restructuring plans designed to
focus on key growth priorities. Refer to “Note 12 - Restructuring Costs” for additional information on these events.
47
Year Ended December 31,
2024
2023
(in thousands)
Revenues
Subscription and support
$
619,287 $
555,516
Professional services
34,049
34,480
Total revenues
653,336
589,996
Cost of revenues
Subscription and support
135,308
121,308
Professional services
26,657
25,485
Total cost of revenues
161,965
146,793
Gross profit
491,371
443,203
Operating expenses
Sales and marketing
248,347
243,154
Research and development
100,973
103,207
General and administrative
121,795
71,530
Restructuring costs
1,720
10,964
Total operating expenses
472,835
428,855
Income from operations
18,536
14,348
Other income (expense)
Interest income
49,808
52,059
Interest expense
(8,758)
(5,898)
Gain on extinguishment of convertible senior notes
65,112
—
Other income, net
106,162
46,161
Income before income taxes
124,698
60,509
Provision for (benefit from) income taxes
(43,067)
1,450
Net income
167,765
59,059
Net income attributable to redeemable non-controlling interest
1,952
892
Adjustment attributable to redeemable non-controlling interest
4,639
5,334
Net income attributable to BlackLine, Inc.
$
161,174 $
52,833
Revenues
Year Ended December 31,
Change
2024
2023
$
%
(in thousands, except percentages)
Subscription and support
$
619,287 $
555,516 $
63,771
11 %
Professional services
34,049
34,480
(431)
(1 %)
Total revenues
$
653,336 $
589,996 $
63,340
11 %
Year Ended December 31,
2024
2023
Dollar-based net revenue retention rate
102 %
106 %
Number of customers
4,443
4,398
Number of users
397,477
386,814
The increase in revenues for the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily
driven by revenue from existing customers, which also grew from additional users and product expansion. The total number of customers
and users increased by 1% and 3%, respectively, as compared to December 31, 2023.
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Cost of revenues
Year Ended December 31,
Change
2024
2023
$
%
(in thousands, except percentages)
Subscription and support
$
135,308
$
121,308
$
14,000
12 %
Professional services
26,657
25,485
1,172
5 %
Total cost of revenues
$
161,965
$
146,793
$
15,172
10 %
Gross margin
75.2 %
75.1 %
The increase in total cost of revenues for the year ended December 31, 2024, compared to the year ended December 31, 2023, was
primarily due to the following:
•
$10.8 million increase in computer software expenses due to higher spend on cloud hosting services as customers continue to
migrate to GCP, as well as upgrades to support business growth;
•
$3.5 million increase in amortization of developed technology due to net additions of software placed into service; and
•
$2.0 million increase in employee compensation and benefits driven primarily by an increase in average compensation per
employee, partially offset by a decrease in average headcount; partially offset by
•
$1.0 million decrease in depreciation and amortization due to certain assets being fully amortized; and
•
$0.8 million decrease in professional fees.
Sales and marketing
Year Ended December 31,
Change
2024
2023
$
%
(in thousands, except percentages)
Sales and marketing
$
248,347
$
243,154
$
5,193
2 %
Percentage of total revenues
38.0 %
41.2 %
The increase in sales and marketing expenses for the year ended December 31, 2024, compared to the year ended December 31,
2023, was primarily due to the following:
•
$2.0 million increase in employee compensation and benefits driven primarily by an increase in average compensation per
employee, partially offset by a decrease in average headcount;
•
$1.8 million increase in professional fees;
•
$1.2 million increase in costs related to strategic internal projects;
•
$1.2 million increase in computer software expenses to support automation and scalability; and
•
$0.8 million increase in sales-related events held in-person compared to virtual events in the prior year; partially offset by
•
$1.1 million decrease in marketing expenses due to streamlined marketing efforts; and
•
$0.9 million decrease in depreciation and amortization due to certain assets being fully amortized.
Research and development
Year Ended December 31,
Change
2024
2023
$
%
(in thousands, except percentages)
Research and development, gross
$
126,643
$
124,546
$
2,097
2 %
Capitalized internally-developed software costs
(25,670)
(21,339)
(4,331)
20 %
Research and development, net
$
100,973
$
103,207
$
(2,234)
(2 %)
Percentage of total revenues
15.5 %
17.5 %
The decrease in research and development expenses for the year ended December 31, 2024, compared to the year ended
December 31, 2023, was primarily due to the following:
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•
$4.3 million increase in capitalized software costs due to a focus on the development of new solution offerings and initiatives,
cloud-based solutions, and enhancements to the overall platform user experience. Collectively, these increases resulted in a
decrease in net expenses;
•
$2.5 million decrease in transaction-related costs related to the FourQ Acquisition; and
•
$0.5 million decrease in professional fees; partially offset by
•
$4.6 million increase in employee compensation and benefits driven primarily by an increase in bonuses; and
•
$0.6 million increase in rent expense for additional leasehold facilities.
We remain committed to innovation and investing in artificial intelligence to enhance our platform and business.
General and administrative
Year Ended December 31,
Change
2024
2023
$
%
(in thousands, except percentages)
General and administrative
$
121,795
$
71,530
$
50,265
70 %
Percentage of total revenues
18.6 %
12.1 %
The increase in general and administrative expenses for the year ended December 31, 2024, compared to the year ended
December 31, 2023, was primarily due to the following:
•
$33.5 million increase due to the decrease in the fair value of FourQ contingent consideration recorded in the year ended
December 31, 2023 (refer to “Note 8 - Fair Value Measurements”);
•
$16.8 million increase in employee compensation and benefits primarily related to an increase in average headcount and
average compensation per employee that includes strategic initiatives to support long-term growth;
•
$4.5 million increase due to net foreign currency losses resulting from the weakening of multiple currencies against the U.S.
Dollar; and
•
$0.6 million increase in computer software expenses to support automation and scalability; partially offset by
•
$2.8 million decrease in costs related to the Data Interconnect Acquisition and internal strategic projects;
•
$2.0 million decrease in professional fees; and
•
$1.1 million decrease in depreciation and amortization primarily due to certain assets being fully amortized.
Restructuring costs
Year Ended December 31,
Change
2024
2023
$
%
(in thousands, except percentages)
Restructuring costs
$
1,720 $
10,964 $
(9,244)
(84 %)
The decrease in restructuring costs during the year ended December 31, 2024, compared to the year ended December 31, 2023, was
primarily due to lower additional one-time termination benefits for the fiscal 2023 and fiscal 2022 restructuring programs. Refer to “Note 12 -
Restructuring Costs” for additional information.
Interest income
Year Ended December 31,
Change
2024
2023
$
%
(in thousands, except percentages)
Interest income
$
49,808 $
52,059 $
(2,251)
(4 %)
50
The decrease in interest income during the year ended December 31, 2024, compared to the year ended December 31, 2023, was due
to a decrease in average balances, partially offset by an increase in average interest rates on our investments and cash balances.
Interest expense
Year Ended December 31,
Change
2024
2023
$
%
(in thousands, except percentages)
Interest expense
$
8,758 $
5,898 $
2,860
48 %
The increase in interest expense during the year ended December 31, 2024, compared to the year ended December 31, 2023, was
primarily due to the amortization of debt issuance costs and cash interest expense related to our 2029 Notes issued in May 2024, partially
offset by a decrease in interest expense resulting from the partial repurchase of our 2026 Notes and the repayment of our 2024 Notes in
August 2024. Refer to “Note 11 - Convertible Senior Notes” for additional information. We do not expect interest expense to fluctuate
significantly over the next 12 months as the interest rates on our Notes are fixed.
Gain on extinguishment of convertible senior notes
Year Ended December 31,
Change
2024
2023
$
%
(in thousands, except percentages)
Gain on extinguishment of convertible senior notes
$
65,112 $
— $
65,112
N/M
The gain on extinguishment of convertible senior notes during the year ended December 31, 2024 resulted from the partial repurchase
of our 2026 Notes in May 2024. Refer to “Note 11 - Convertible Senior Notes” for additional information.
Provision for (benefit from) income taxes
Year Ended December 31,
Change
2024
2023
$
%
(in thousands, except percentages)
Provision for (benefit from) income taxes
$
(43,067) $
1,450 $
(44,517)
N/M
We are subject to federal and state income taxes in the U.S. and taxes in foreign jurisdictions. During the quarter ended December 31,
2024, we determined that our U.S. deferred tax asset valuation allowance was no longer required. This determination was based on an
evaluation of positive and negative factors, including, but not limited to, our achievement of pre-tax income during the quarter ended June 30,
2023 and each subsequent quarter since, our full utilization of our federal net operating loss carryforward during 2024, and our projections of
future pre-tax income. For the year ended December 31, 2024, our annual estimated effective tax rate differed from the U.S. federal statutory
rate of 21% primarily as a result of the $89.1 million release of our U.S. valuation allowance, along with state and foreign taxes. For the years
ended December 31, 2024 and 2023, we recorded $43.1 million in income tax benefit and $1.5 million in income tax expense, respectively.
The decrease in income taxes for the year ended December 31, 2024, compared to the year ended December 31, 2023, resulted primarily
from the 2024 release of $89.1 million of the 2023 U.S. valuation allowance, partially offset by our 2024 current and deferred federal and
state income taxes of $44.6 million, and changes in the mix of profitable foreign jurisdictions.
Liquidity and Capital Resources
At December 31, 2024, our principal sources of liquidity were an aggregate of $885.9 million of cash and cash equivalents. Our cash
equivalents consist of short-term, money market mutual funds.
We believe our existing cash and cash equivalents and cash from operations will be sufficient to meet our working capital needs, capital
expenditures, financing obligations, and share repurchases, if any, for at least the next 12 months.
51
Contractual Obligations and Commitments
Convertible senior notes and capped calls
We had $905.2 million aggregate principal amount of Notes outstanding at December 31, 2024. We plan to, and believe we are able to,
make all expected interest payments in the next 12 months.
In connection with the offering of the 2026 Notes, we entered into privately-negotiated capped call transactions (the “2026 Capped
Calls”) with certain counterparties covering, subject to anti-dilution adjustments, approximately 6.9 million shares of our common stock, and
are generally expected to offset the potential economic dilution of our common stock upon any conversions of the 2026 Notes up to the initial
cap price. The 2026 Capped Calls have an initial strike price of $166.23 per share subject to certain adjustments, which corresponds to the
initial conversion price of the 2026 Notes and an initial cap price of $233.31 per share, subject to certain adjustments. As of December 31,
2024, all of the 2026 Capped Calls remained outstanding.
In connection with the offering of the 2029 Notes, we entered into privately-negotiated capped call transactions (the “2029 Capped
Calls” and together with the 2026 Capped Calls, the “Capped Calls”) with certain counterparties covering, subject to anti-dilution adjustments,
approximately 9.9 million shares of our common stock and are generally expected to offset the potential economic dilution of our common
stock upon any conversions of the 2029 Notes up to the initial cap price. The 2029 Capped Calls have an initial strike price of $68.47 per
share subject to certain adjustments, which corresponds to the initial conversion price of the 2029 Notes and an initial cap price of $92.17 per
share, subject to certain adjustments. As of December 31, 2024, all of the 2029 Capped Calls remained outstanding.
Lease Liabilities
As of December 31, 2024, we have obligations totaling $23.9 million related to existing property and equipment leases.
Purchase Obligations
Purchase obligations represent our most significant contractual obligations in the ordinary course of business for which we have not
received the related goods or services, in whole or in part. At December 31, 2024, we have $216 million of contractual obligations related to
eleven commitments, with $60 million payable within 12 months, and have additional contractual obligations with other vendors that are
individually immaterial and which we can readily settle given our liquidity position and capital resources.
Contingent Consideration
As a condition of the FourQ Acquisition, we agreed to pay a maximum of $73.2 million of contingent consideration between January
2022 and January 2025 if certain financial performance milestones were met. At December 31, 2024, the related liability for the FourQ
Acquisition was zero. As of the filing date of this Annual Report on Form 10-K, the financial performance milestones were not met, and we
are no longer obligated to pay the contingent consideration of $73.2 million. Refer to “Note 16 - Contingent Consideration” for additional
information.
Unrecognized Tax Liabilities
At December 31, 2024, while we have liabilities for unrecognized tax benefits of $18.7 million, due to their nature, there is a high degree
of uncertainty regarding the timing of future cash outflows and other events that extinguish these liabilities.
Letters of Credit
Commitments under letters of credit at December 31, 2024 were scheduled to expire as follows (in thousands):
Total
Less than 1 Year
1-3 Years
3-5 Years
Thereafter
Letters of credit
$
603 $
32 $
403 $
168 $
—
Letters of credit are maintained pursuant to certain of our lease arrangements. The letters of credit remain in effect at varying levels
through the terms of the related agreements.
Repurchase Program
On November 17, 2024, our Board of Directors authorized the repurchase of up to $200.0 million of our common stock. The
authorization will expire at the end of the first quarter of fiscal year 2027. Repurchases may be made from time to time through open market
repurchases or through privately-negotiated transactions subject to market conditions, applicable legal requirements and other relevant
factors. Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18 of the Securities
Exchange Act of 1934, as
52
amended. We may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares under this authorization. The
repurchase program does not obligate us to acquire any particular amount of our common stock, and it may be suspended at any time in our
discretion. The timing and actual number of shares repurchased may depend on a variety of factors, including price, general business and
market conditions, and alternative investment opportunities.
As of December 31, 2024, we have not repurchased any shares under the repurchase program.
Off-Balance Sheet Arrangements
As part of our ongoing business, we do not have any relationships with other entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities that have been established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes. We are therefore not exposed to any financing, liquidity, market or credit risk
that could arise if we had engaged in those types of relationships.
In the ordinary course of business, we may provide indemnification of varying scope and terms to customers, vendors, investors,
directors and officers with respect to certain matters, including, but not limited to, losses arising out of our breach of such agreements,
services to be provided by us, or from intellectual property infringement claims made by third parties. These indemnification provisions may
survive termination of the underlying agreement and the maximum potential amount of future payments we could be required to make under
these indemnification provisions may not be subject to maximum loss clauses. The maximum potential amount of future payments we could
be required to make under these indemnification provisions is indeterminable. We have never paid a material claim, nor have we been sued
in connection with these indemnification arrangements. At December 31, 2024, we have not accrued a liability for these indemnification
arrangements because the likelihood of incurring a payment obligation, if any, in connection with these indemnification arrangements is not
probable or reasonably estimable.
Future Capital Requirements
Our future capital requirements will depend on many factors, including our growth rate, strategic relationships and international
operations, the timing and extent of spending to support research and development efforts, future merger and acquisition activities,
repurchase or refinancing of our existing indebtedness, repurchases of our common stock, and the continuing market acceptance of our
solutions. From time to time, we have required, and may in the future require or opportunistically raise, additional equity or debt financing.
Sales of additional equity or equity-linked securities could result in dilution to our stockholders. If we raise funds by borrowing from third
parties, the terms of those financing arrangements would require us to incur interest expense and may include negative covenants or other
restrictions on our business that could impair our operating flexibility. We can provide no assurance that financing will be available at all or, if
available, that we would be able to obtain financing on terms favorable to us. If we are unable to raise additional capital when needed, we
would be required to curtail our operating activities and capital expenditures, and our business operating results and financial condition would
be adversely affected.
Cash Flows
The following table sets forth a summary of our cash flows for the periods indicated:
Year Ended December 31,
2024
2023
(in thousands)
Net cash provided by operating activities
$
190,836 $
126,613
Net cash provided by (used in) investing activities
$
924,440 $
(62,483)
Net cash provided by (used in) financing activities
$
(500,145) $
6,146
Net Cash Provided By Operating Activities
Our cash flows provided by operating activities are primarily influenced by our net income, as applicable, and cash generated from
collections in accordance with our subscription-based revenue model wherein billings occur in advance of revenue recognition, as well as the
substantial amount of non-cash charges that we incur. Non-cash activities primarily include stock-based compensation, a gain on
extinguishment from the partial repurchase of our 2026 Notes, deferred taxes, depreciation and amortization, accretion of discounts on
marketable securities, changes in fair value of contingent consideration, non-cash lease expense, and amortization of debt issuance costs.
For the year ended December 31, 2024, cash provided by operating activities was $190.8 million, resulting from net income of $167.8
million, net cash flow provided by changes in our operating assets and liabilities of $16.8
53
million, and net non-cash expenses of $6.3 million. The $16.8 million net cash flow provided by changes in our operating assets and liabilities
reflected primarily the following:
•
$19.0 million increase in deferred revenue was primarily driven by customer and user growth, and timing of collections for
subscription and support;
•
$7.1 million increase in accrued expenses and other current liabilities primarily due to annual bonus accruals, cloud-based data
storage services, and timing of foreign tax payments;
•
$2.7 million net decrease in prepaid expenses and other current assets primarily due to a decrease in accrued interest and
amortization of prepaid balances, partially offset by the timing of tax payments and prepaid cloud-based data storage costs to
support our suite of solutions; and
•
$2.5 million decrease in other assets due to a net decrease in prepaid commissions, partially offset by cloud computing costs.
These changes in our operating assets and liabilities were partially offset by the following:
•
$7.6 million increase in accounts receivable primarily due to increased sales, partially offset by customer payments;
•
$6.0 million decrease in operating lease liabilities; and
•
$1.1 million decrease in accounts payable due to timing of payments.
For the year ended December 31, 2023, cash provided by operating activities was $126.6 million, resulting from net non-cash expenses
of $71.9 million and net income of $59.1 million, partially offset by a net cash outflow from changes in operating assets and liabilities of $4.4
million. The $4.4 million net cash outflow from changes in our operating assets and liabilities reflected the following:
•
$20.9 million increase in accounts receivable due to increased sales, partially offset by customer payments;
•
$7.2 million decrease in operating lease liabilities;
•
$6.6 million increase in prepaid expenses and other current assets primarily due to increased insurance and software
subscriptions, higher accrued interest, and increased capitalized commissions, partially offset by amortization of prepaid
balances and interest received;
•
$5.1 million decrease in accounts payable due to timing of payments;
•
$2.4 million paid for the 2013 Acquisition contingent consideration in excess of the acquisition date fair value (refer to “Note 16 -
Contingent Consideration” for additional information);
•
$2.3 million decrease in other long-term liabilities primarily related to the FourQ Acquisition; and
•
$0.6 million increase in other assets due to increased prepaid commissions, partially offset by related amortization.
These changes in our operating assets and liabilities were partially offset by a $41.3 million increase in deferred revenue primarily due
to customer and user growth and timing of collections.
Net Cash Provided By (Used In) Investing Activities
Our investing activities consist primarily of investments in, and maturities and sales of marketable securities, capitalized software
development costs, acquisitions of business entities, and capital expenditures for property and equipment.
For the year ended December 31, 2024, cash provided by investing activities was $924.4 million, primarily as a result of the following:
•
$951.3 million of proceeds from maturities and sales, net of purchases of marketable securities; partially offset by
•
$24.7 million for capitalized software development costs; and
•
$2.1 million in purchases of property and equipment.
For the year ended December 31, 2023, cash used in investing activities was $62.5 million as a result of the following:
•
$23.5 million of purchases of marketable securities, net of proceeds from maturities;
54
•
$21.6 million in capitalized software development costs;
•
$11.4 million paid for the DI Acquisition, net of cash acquired; and
•
$6.0 million in purchases of property and equipment.
Net Cash Provided By (Used In) Financing Activities
For the year ended December 31, 2024, cash used in financing activities was $500.1 million, primarily as a result of the following:
•
$848.5 million for the partial repurchase of the 2026 Notes;
•
$250.0 million for the repayment of the 2024 Notes with cash on hand;
•
$59.7 million for the purchase of the associated Capped Calls for the 2029 Notes; and
•
$17.5 million for acquisitions of common stock for tax withholding obligations; partially offset by
•
$662.0 million of proceeds, net of debt issuance costs, from the issuance of the 2029 Notes;
•
$7.6 million of proceeds from exercises of stock options; and
•
$7.0 million of proceeds from the employee stock purchase plan.
For the year ended December 31, 2023, cash provided by financing activities was $6.1 million, primarily as a result of the following:
•
$19.8 million of proceeds from exercises of stock options; and
•
$8.0 million of proceeds from the employee stock purchase plan.
These changes in our financing activities were partially offset by the following:
•
$15.0 million of acquisitions of common stock for tax withholding obligations;
•
$5.6 million paid for the 2013 Acquisition contingent consideration (refer to “Note 16 - Contingent Consideration” for additional
information); and
•
$1.0 million for finance lease payments.
Backlog
We enter into both single and multi-year subscription contracts for our solutions. The timing of our invoices to the customer is a
negotiated term and thus varies among our subscription contracts. For multi-year agreements, it is common to invoice an initial amount at
contract signing followed by subsequent annual invoices. Backlog represents remaining revenue to be recognized under a non-cancelable
contract with customers. At December 31, 2024 and 2023, we had backlog of approximately $879.4 million and $842.7 million, respectively.
We expect backlog will change from period to period for several reasons, including the timing and duration of customer agreements, varying
billing cycles of subscription agreements, and the timing and duration of customer renewals. Because revenue for any period is a function of
revenue recognized from deferred revenue under contracts in existence at the beginning of the period, as well as contract renewals and new
customer contracts during the period, backlog at the beginning of any period is not necessarily indicative of future revenue performance. We
do not utilize backlog as a key management metric internally.
Critical Accounting Estimates
Our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K are prepared in
accordance with GAAP. The preparation of consolidated financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at
the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. We
evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other
assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
We believe that the following critical accounting policies and estimates involve a greater degree of judgment or complexity than our
other accounting policies and estimates, and are essential to a full understanding and evaluation of our consolidated financial condition and
results of operations. Refer to “Note 2 - Basis of Presentation, Significant Accounting Policies, and Recently-Issued Accounting
Pronouncements” of the accompanying notes to our consolidated financial statements for additional information.
55
Deferred Customer Acquisition Costs
We recognize an asset for the incremental and recoverable costs of obtaining a contract with a customer if we expect the benefit of
those costs to be one year or longer. We have determined that certain sales incentive programs to our employees (“deferred customer
contract acquisition costs”) and our partners (“partner referral fees”) meet the requirements to be capitalized. Deferred customer acquisition
costs related to new revenue contracts and upsells are deferred and then amortized on a straight-line basis over the expected period of
benefit that we have determined to be five years, based upon both the product turnover rate and estimated customer life, which involves
some level of judgment in terms of the inherent assumptions used. Partner referral fees are deferred and then amortized on a straight-line
basis over a period ranging from one year to five years. Deferred customer acquisition costs and partner referral fees are included within
other assets on the consolidated balance sheets. There were no impairment losses in relation to the costs capitalized for the periods
presented.
Capitalized Software Costs
We account for the costs of computer software obtained or developed for internal use in accordance with Accounting Standards
Codification 350, Intangibles—Goodwill and Other. We capitalize certain implementation costs incurred in a hosting arrangement that is a
service contract. These capitalized costs exclude training costs, project management costs, and data migration costs. We capitalize certain
costs in the development of our SaaS subscription solutions when (i) the preliminary project stage is completed, (ii) management has
authorized further funding for the completion of the project, and (iii) it is probable that the project will be completed and performed as
intended. These capitalized costs include estimated personnel and related expenses for employees as well as costs of third-party contractors
who are directly associated with and who devote time to internal-use software projects and, when material, interest costs incurred during the
development. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended
purpose. Costs incurred for significant upgrades and enhancements to our SaaS software solutions are also capitalized. Costs incurred for
post-configuration training, maintenance and minor modifications or enhancements are expensed as incurred. Capitalized software
development costs are amortized on a straight-line basis over an estimated useful life of three years.
Business Combinations
The results of businesses acquired in business combinations are included in our consolidated financial statements from the date of the
acquisition. Purchase accounting results in assets and liabilities of an acquired business being recorded at their estimated fair values on the
acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill.
We perform valuations of assets acquired and liabilities assumed and allocate the purchase price to its respective assets and liabilities.
Determining the fair value of assets acquired and liabilities assumed requires our management to use significant judgment and estimates,
including the selection of valuation methodologies, estimates of future revenue, costs and cash flows, discount rates, and selection of
comparable companies. We engage the assistance of valuation specialists in concluding on fair value measurements in connection with
determining fair values of assets acquired and liabilities assumed in business combinations.
Contingent consideration payable in cash arising from business combinations is recorded at fair value as a liability on the acquisition
date and remeasured at each reporting date. Changes in fair value are recorded in general and administrative expenses in the consolidated
statements of operations. Determining the fair value of the contingent consideration each period requires management to make assumptions
and judgments. These estimates involve inherent uncertainties, and if different assumptions had been used, the fair value of contingent
consideration could have been materially different from the amounts recorded. The significant inputs used in the fair value measurement of
contingent consideration was the amount and timing of new and incremental combined bookings from FourQ and BlackLine, and revenues
from a specified FourQ customer over a three-year period subsequent to the acquisition.
Significant changes in these estimates and the periods in which they are generated would significantly impact the fair value of the
contingent consideration liability. As of the filing date of this Annual Report on Form 10-K, the financial performance milestones were not met,
and we are no longer obligated to pay the contingent consideration of $73.2 million. Refer to “Note 16 - Contingent Consideration” for
additional information.
Transaction-related costs incurred by us are expensed as incurred and are included in general and administrative expenses in our
consolidated statements of operations.
56
Recent Accounting Pronouncements
Refer to “Note 2 - Basis of Presentation, Significant Accounting Policies, and Recently-Issued Accounting Pronouncements” contained
in the “Notes to Consolidated Financial Statements” in Part II, Item 8 of this Annual Report on Form 10-K for a full description of the recent
accounting pronouncements, and our expectation of their impact, if any, on our results of operations and financial condition.
Item 7A. Quantitative and Qualitative Disclosures About Market Risks
We have operations both within the U.S. and internationally, and we are exposed to market risks in the ordinary course of our business.
These risks primarily include interest rate, foreign exchange, and inflation risks, as well as risks relating to changes in the general economic
conditions in the countries where we conduct business. To reduce these risks, we monitor the financial condition of our customers and limit
credit exposure by collecting in advance and setting credit limits as we deem appropriate. In addition, our investment strategy has historically
been to invest in financial instruments that are highly liquid and readily convertible into cash for use in our operations. To date, we have not
used derivative instruments to mitigate the impact of our market risk exposures. We have also not used, nor do we intend to use, derivatives
for trading or speculative purposes.
Interest Rate Risk
We are exposed to market risk related to changes in interest rates.
In March 2021, we issued $1.150 billion aggregate principal amount of the 2026 Notes and partially repurchased $919.8 million
aggregate principal amount in May 2024. The 2026 Notes have a fixed annual interest rate of 0.0%; therefore, we do not have economic
interest rate exposure with respect to the 2026 Notes. However, the fair value of the 2026 Notes is exposed to interest rate risk.
In May 2024, we issued $675.0 million aggregate principal amount of the 2029 Notes. The 2029 Notes have a fixed annual interest rate
of 1.00%; therefore, we do not have economic interest rate exposure with respect to the 2029 Notes. However, the fair value of the 2029
Notes is exposed to interest rate risk. Generally, the fair market value of the Notes will increase as interest rates fall and decrease as interest
rates rise. In addition, the fair value of the Notes is affected by our common stock price. The fair value of the Notes will generally increase as
our common stock price increases and will generally decrease as our common stock price declines. Additionally, we carry the Notes at face
value less unamortized issuance costs on our consolidated balance sheet, and we present the fair value for required disclosure purposes
only.
We had cash and cash equivalents of $885.9 million at December 31, 2024. Our cash equivalents consist of highly liquid money market
mutual funds. At December 31, 2024, we had no marketable securities, which prior to maturity, consisted of money market mutual funds,
commercial paper, U.S. treasury securities, and U.S. government agencies.
The carrying amount of our cash equivalents reasonably approximates fair value due to the highly liquid nature of these instruments.
The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs and the fiduciary control of
cash and investments. We do not enter into investments for trading or speculative purposes. Given the liquidity of our cash equivalents at
December 31, 2024, we do not believe we have exposure to material risks due to changes in market interest rates. When we invest our
excess cash in marketable securities in the future, our interest rate risk may increase.
We do not believe our cash equivalents have significant risk of default or illiquidity. While we believe our cash equivalents do not
contain excessive risk, we cannot provide absolute assurance that in the future, our investments will not be subject to adverse changes in
market value. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in
excess of federally insured limits. We cannot be assured that we will not experience losses on these deposits.
Foreign Currency Risk
While we primarily transact with customers in the U.S. Dollar, we also transact in foreign currencies, including the Australian Dollar,
British Pound, Canadian Dollar, Euro, Indian Rupee, Japanese Yen, Mexican Peso, Romanian Leu, and Singapore Dollar due to foreign
operations and customer sales. We expect to continue to grow our foreign operations and customer sales. Our international subsidiaries
maintain certain asset and liability balances that are denominated in currencies other than the functional currencies of these subsidiaries,
which is the U.S. Dollar for all international subsidiaries, with the exception of our Japanese subsidiary, for which the Japanese Yen is the
functional currency. Changes in the value of foreign currencies relative to the U.S. Dollar can result in fluctuations in our total assets,
liabilities, revenue, operating expenses, and cash flows. The effect of a hypothetical 10% increase
57
or decrease in foreign currency exchange rates applicable to our business would have reduced by approximately $3.8 million or increased by
approximately $3.8 million, respectively, our cash balances at December 31, 2024.
As our international operations grow, our risks associated with fluctuation in currency rates will become greater, and we will continue to
reassess our approach to managing this risk. In addition, currency fluctuations or a weakening U.S. Dollar can increase the costs of our
international expansion. To date, we have not entered into any foreign currency hedging contracts, since exchange rate fluctuations have not
had a material impact on our operating results and cash flows. Based on the current level of foreign operations and customer sales, we do
not plan on engaging in hedging activities in the near future.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. Nonetheless, if
our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price
increases. Our inability or failure to do so could harm our business, financial condition and results of operations.
58
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
60
Consolidated Balance Sheets at December 31, 2024 and 2023
62
Consolidated Statements of Operations for the Years Ended December 31, 2024, 2023, and 2022
63
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2024, 2023, and 2022
64
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2024, 2023, and 2022
65
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023, and 2022
66
Notes to Consolidated Financial Statements
68
59
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of BlackLine, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of BlackLine, Inc. and its subsidiaries (the "Company") as of December 31,
2024 and 2023, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and of cash
flows for each of the three years in the period ended December 31, 2024, including the related notes (collectively referred to as the
"consolidated financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2024,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period
ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 11 to the consolidated financial statements, the Company changed the manner in which it accounts for convertible
senior notes in 2022.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual
Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s
consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or
fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
60
with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that
was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to
the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of
critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to
which it relates.
Revenue Recognition – Certain Subscription and Support Revenue
As described in Note 2 to the consolidated financial statements, customers pay subscription and support fees for access to the Company’s
software as a service (SaaS) platform. The Company's subscription contracts have initial terms of one year to three years with renewal
options. Fees are based on a number of factors, including the solutions subscribed for by the customer and the number of users having
access to the solutions. Subscription services, which includes support, is recognized on a straight-line basis over the non-cancellable
contractual term of the arrangement, generally beginning on the date that the Company’s service is made available to the customer. The
Company’s subscription and support revenue for the year ended December 31, 2024 was $619.3 million, of which a majority pertains to
certain of the Company’s subscription and support revenue.
The principal consideration for our determination that performing procedures relating to revenue recognition for certain subscription and
support revenue is a critical audit matter is a high degree of auditor effort in performing procedures related to revenue recognized on certain
of the Company’s subscription and support revenue.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the
consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition
process, including controls over the initiation, billing and recording of certain new and recurring subscriptions and the related subscription and
support revenue. These procedures also included, among others (i) testing certain subscription and support revenue transactions, on a
sample basis, by obtaining and inspecting source documents, such as contracts, invoices, and cash receipts, and recalculating revenue
recognized and the ending deferred revenue balance; (ii) confirming, on a sample basis, outstanding customer invoice balances as of
December 31, 2024 and, for confirmations not returned, obtaining and inspecting source documents, such as contracts, invoices, subsequent
cash receipts, and other source documents to support collectability of outstanding customer invoice balances; and (iii) testing the issuance of
credit memos, on a sample basis, by obtaining and inspecting source documents, such as credit memos, original invoices, and re-issued
invoices.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
February 21, 2025
We have served as the Company’s auditor since 2014.
61
BLACKLINE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except shares and par values)
December 31, 2024
December 31, 2023
ASSETS
Current assets:
Cash and cash equivalents
$
885,915 $
271,117
Marketable securities (amortized cost of $0 and $932,850 at December 31, 2024 and 2023,
respectively)
—
933,355
Accounts receivable, net of allowances of $2,964 and $5,064 at December 31, 2024 and 2023,
respectively
178,141
171,608
Prepaid expenses and other current assets
28,348
31,244
Total current assets
1,092,404
1,407,324
Capitalized software development costs, net
45,448
37,828
Property and equipment, net
11,840
14,867
Intangible assets, net
59,520
79,056
Goodwill
448,965
448,965
Operating lease right-of-use assets
22,772
19,173
Deferred tax assets, net
53,208
145
Other assets
90,879
93,407
Total assets
$
1,825,036 $
2,100,765
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$
8,463 $
8,623
Accrued expenses and other current liabilities
71,574
59,690
Deferred revenue, current
338,615
320,133
Finance lease liabilities, current
66
778
Operating lease liabilities, current
3,525
4,108
Convertible senior notes, net, current
—
249,233
Total current liabilities
422,243
642,565
Finance lease liabilities, noncurrent
53
4
Operating lease liabilities, noncurrent
20,283
15,738
Convertible senior notes, net, noncurrent
892,675
1,140,608
Deferred tax liabilities, net
4,532
6,394
Deferred revenue, noncurrent
1,390
904
Other long-term liabilities
708
3,608
Total liabilities
1,341,884
1,809,821
Commitments and contingencies (Note 17)
Redeemable non-controlling interest (Note 4)
36,483
30,063
Stockholders' equity:
Common stock, $0.01 par value, 500,000,000 shares authorized, 62,813,352 and 61,515,105 issued
and outstanding at December 31, 2024 and 2023, respectively
628
615
Additional paid-in capital
495,391
474,863
Accumulated other comprehensive income (loss)
(361)
205
Accumulated deficit
(48,989)
(214,802)
Total stockholders' equity
446,669
260,881
Total liabilities, redeemable non-controlling interest, and stockholders' equity
$
1,825,036 $
2,100,765
The accompanying notes are an integral part of these consolidated financial statements.
62
BLACKLINE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Year Ended December 31,
2024
2023
2022
Revenues
Subscription and support
$
619,287 $
555,516 $
491,187
Professional services
34,049
34,480
31,751
Total revenues
653,336
589,996
522,938
Cost of revenues
Subscription and support
135,308
121,308
102,132
Professional services
26,657
25,485
27,253
Total cost of revenues
161,965
146,793
129,385
Gross profit
491,371
443,203
393,553
Operating expenses
Sales and marketing
248,347
243,154
256,862
Research and development
100,973
103,207
108,893
General and administrative
121,795
71,530
80,155
Restructuring costs
1,720
10,964
3,841
Total operating expenses
472,835
428,855
449,751
Income (loss) from operations
18,536
14,348
(56,198)
Other income (expense)
Interest income
49,808
52,059
14,637
Interest expense
(8,758)
(5,898)
(5,850)
Gain on extinguishment of convertible senior notes
65,112
—
—
Other income, net
106,162
46,161
8,787
Income (loss) before income taxes
124,698
60,509
(47,411)
Provision for (benefit from) income taxes
(43,067)
1,450
(13,520)
Net income (loss)
167,765
59,059
(33,891)
Net income (loss) attributable to redeemable non-controlling interest (Note 4)
1,952
892
(369)
Adjustment attributable to redeemable non-controlling interest (Note 4)
4,639
5,334
(4,131)
Net income (loss) attributable to BlackLine, Inc.
$
161,174 $
52,833 $
(29,391)
Basic net income (loss) per share attributable to BlackLine, Inc.
$
2.59 $
0.87 $
(0.49)
Shares used to calculate basic net income (loss) per share
62,129
60,849
59,539
Diluted net income (loss) per share attributable to BlackLine, Inc.
$
1.45 $
0.81 $
(0.49)
Shares used to calculate diluted net income (loss) per share
73,503
72,045
59,539
The accompanying notes are an integral part of these consolidated financial statements.
63
BLACKLINE, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
Year Ended December 31,
2024
2023
2022
Net income (loss)
$
167,765 $
59,059 $
(33,891)
Other comprehensive income (loss):
Net change in unrealized gains (losses) on marketable securities, net of (provision
for) benefit from taxes of $123, $(123), and $0, for the years ended December 31,
2024, 2023, and 2022, respectively
(393)
1,755
(1,450)
Foreign currency translation
(355)
(136)
(624)
Other comprehensive income (loss)
(748)
1,619
(2,074)
Comprehensive income (loss)
167,017
60,678
(35,965)
Less comprehensive income (loss) attributable to redeemable non-controlling interest:
Net income (loss) attributable to redeemable non-controlling interest
1,952
892
(369)
Foreign currency translation attributable to redeemable non-controlling interest
(182)
(58)
(304)
Comprehensive income (loss) attributable to redeemable non-controlling interest
1,770
834
(673)
Comprehensive income (loss) attributable to BlackLine, Inc.
$
165,247 $
59,844 $
(35,292)
The accompanying notes are an integral part of these consolidated financial statements.
64
BLACKLINE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
Common Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Shares
Amount
Balance at December 31, 2021
58,984 $
590 $
625,883 $
298 $
(301,735) $
325,036
Cumulative-effect adjustment related to
adoption of ASU 2020-06, net of tax
—
—
(324,418)
—
62,288
(262,130)
Balance at January 1, 2022
58,984
590
301,465
298
(239,447)
62,906
Stock option exercises
246
2
4,679
—
—
4,681
Vesting of restricted stock units
634
6
—
—
—
6
Issuance of common stock through
employee stock purchase plan
153
2
6,994
—
—
6,996
Acquisition of common stock for tax
withholding obligations
—
—
(9,544)
—
—
(9,544)
Stock-based compensation
—
—
77,984
—
—
77,984
Other comprehensive loss
—
—
—
(1,770)
—
(1,770)
Net loss attributable to BlackLine, Inc.,
including adjustment to redeemable non-
controlling interest
—
—
4,131
—
(33,522)
(29,391)
Balance at December 31, 2022
60,017
600
385,709
(1,472)
(272,969)
111,868
Stock option exercises
583
7
19,749
—
—
19,756
Vesting of restricted stock units
738
6
—
—
—
6
Issuance of common stock through
employee stock purchase plan
177
2
8,008
—
—
8,010
Acquisition of common stock for tax
withholding obligations
—
—
(15,029)
—
—
(15,029)
Stock-based compensation
—
—
81,760
—
—
81,760
Other comprehensive income
—
—
—
1,677
—
1,677
Net income attributable to BlackLine, Inc.,
including adjustment to redeemable non-
controlling interest
—
—
(5,334)
—
58,167
52,833
Balance at December 31, 2023
61,515
615
474,863
205
(214,802)
260,881
Stock option exercises
386
3
7,580
—
—
7,583
Vesting of restricted stock units
756
8
—
—
—
8
Issuance of common stock through
employee stock purchase plan
156
2
7,004
—
—
7,006
Acquisition of common stock for tax
withholding obligations
—
—
(17,465)
—
—
(17,465)
Stock-based compensation
—
—
87,786
—
—
87,786
Other comprehensive loss
—
—
—
(566)
—
(566)
Purchase of capped calls
—
—
(59,738)
—
—
(59,738)
Net income attributable to BlackLine, Inc.,
including adjustment to redeemable non-
controlling interest
—
—
(4,639)
—
165,813
161,174
Balance at December 31, 2024
62,813 $
628 $
495,391 $
(361) $
(48,989) $
446,669
The accompanying notes are an integral part of these consolidated financial statements.
65
BLACKLINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
2024
2023
2022
Cash flows from operating activities
Net income (loss) attributable to BlackLine, Inc.
$
161,174
$
52,833
$
(29,391)
Net income (loss) and adjustment attributable to redeemable non-controlling interest (Note 4)
6,591
6,226
(4,500)
Net income (loss)
167,765
59,059
(33,891)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization
50,345
50,099
42,816
Change in fair value of contingent consideration
—
(33,549)
(35,130)
Amortization of debt issuance costs
4,486
5,535
5,511
Stock-based compensation
83,251
77,970
75,884
Gain on extinguishment of convertible senior notes
(65,112)
—
—
Noncash lease expense
6,221
6,453
5,593
Accretion of purchase discounts on marketable securities, net
(18,441)
(33,884)
(8,874)
Net foreign currency (gains) losses
279
853
(1,470)
Deferred income taxes
(54,802)
(1,525)
(14,404)
Provision for (benefit from) credit losses
84
(18)
115
Impairment of cloud computing implementation costs
—
—
5,330
Changes in operating assets and liabilities, net of impact of acquisition:
Accounts receivable
(7,552)
(20,855)
(23,033)
Prepaid expenses and other current assets
2,742
(6,599)
1,059
Other assets
2,505
(595)
(10,112)
Accounts payable
(1,123)
(5,104)
4,376
Accrued expenses and other current liabilities
7,087
(924)
5,893
Deferred revenue
18,968
41,271
36,646
Contingent consideration paid in excess of original estimates
—
(2,393)
—
Operating lease liabilities
(5,963)
(7,171)
(6,949)
Lease incentive receipts
—
240
812
Other long-term liabilities
96
(2,250)
5,841
Net cash provided by operating activities
190,836
126,613
56,013
Cash flows from investing activities
Purchases of marketable securities
(396,104)
(1,343,331)
(1,599,945)
Proceeds from maturities of marketable securities
1,023,286
1,319,821
1,392,250
Proceeds from sales of marketable securities
324,098
—
—
Capitalized software development costs
(24,714)
(21,644)
(19,208)
Purchases of property and equipment
(2,126)
(5,953)
(10,974)
Acquisition, net of cash acquired
—
(11,376)
(157,738)
Net cash provided by (used in) investing activities
924,440
(62,483)
(395,615)
Cash flows from financing activities
Proceeds from issuance of convertible senior notes, net of issuance costs
661,979
—
—
Partial repurchase of convertible senior notes
(848,519)
—
—
Repayment of convertible senior notes
(250,000)
—
—
Purchase of capped calls related to convertible senior notes
(59,738)
—
—
Principal payments under finance lease obligations
(999)
(990)
(619)
Proceeds from exercises of stock options
7,591
19,762
4,687
Proceeds from employee stock purchase plan
7,006
8,010
6,996
Acquisition of common stock for tax withholding obligations
(17,465)
(15,029)
(9,544)
Financed purchases of property and equipment
—
—
(84)
Payment of contingent consideration for the 2013 Acquisition
—
(5,607)
—
Net cash provided by (used in) financing activities
(500,145)
6,146
1,436
Effect of foreign currency exchange rate changes on cash, cash equivalents, and restricted cash
(347)
(120)
(618)
Net increase (decrease) in cash, cash equivalents, and restricted cash
614,784
70,156
(338,784)
Cash, cash equivalents, and restricted cash, beginning of period
271,363
201,207
539,991
Cash, cash equivalents, and restricted cash, end of period
$
886,147
$
271,363
$
201,207
Reconciliation of cash, cash equivalents, and restricted cash to the consolidated balance sheets
Cash and cash equivalents at end of period
$
885,915
$
271,117
$
200,968
Restricted cash included within other assets at end of period
232
246
239
Total cash, cash equivalents, and restricted cash at end of period shown in the consolidated statements of cash flows
$
886,147
$
271,363
$
201,207
The accompanying notes are an integral part of these consolidated financial statements.
66
BLACKLINE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SUPPLEMENTAL CASH FLOWS DISCLOSURE
(in thousands)
Year Ended December 31,
2024
2023
2022
Supplemental disclosures of cash flow information
Cash paid for interest
$
3,819
$
313
$
313
Cash paid for income taxes
$
11,529
$
3,097
$
1,123
Non-cash financing and investing activities
Adjustment for adoption of ASU 2020-06
$
—
$
—
$
262,130
Estimated fair value of contingent consideration
$
—
$
—
$
55,947
Stock-based compensation capitalized for software development
$
4,534
$
3,481
$
2,379
Capitalized software development costs included in accounts payable and accrued expenses and other current
liabilities at end of period
$
2,813
$
1,510
$
1,816
Purchases of property and equipment included in accounts payable and accrued expenses and other current
liabilities at end of period
$
2,400
$
60
$
847
Leased assets obtained in exchange for new financing lease liabilities
$
385
$
—
$
1,223
Leased assets obtained in exchange for new operating lease liabilities
$
10,092
$
10,438
$
3,866
Leasehold improvements paid directly by landlord
$
—
$
271
$
—
The accompanying notes are an integral part of these consolidated financial statements.
67
BLACKLINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – The Company
BlackLine, Inc. and its subsidiaries (the “Company” or “BlackLine”) provide financial accounting close solutions delivered primarily as
Software as a Service (“SaaS”). The Company’s solutions enable its customers to address various aspects of their critical processes,
including financial close & consolidation, intercompany accounting, and invoice-to-cash.
The Company is a holding company and conducts its operations through its wholly-owned subsidiary, BlackLine Systems, Inc.
(“BlackLine Systems”).
On September 12, 2023, the Company acquired Data Interconnect (“DI”), hereinafter referred to as the “DI Acquisition”. DI is a cloud-
based Invoice-to-Cash automation vendor within the electronic invoice presentment and payment (“EIPP”) market. The primary purpose of
the DI Acquisition was to enhance the Company's existing accounts receivable automation solution by adding EIPP capabilities. This
acquisition was not a significant acquisition under Regulation S-X, and the purchase accounting allocation is final.
On January 26, 2022, the Company acquired FourQ Systems, Inc. (“FourQ”), hereinafter referred to as the “FourQ Acquisition.” The
primary purpose of the FourQ Acquisition was to enhance our existing intercompany accounting automation capabilities by driving end-to-end
automation of traditionally manual intercompany accounting processes. This acquisition was not a significant acquisition under Regulation S-
X, and the purchase accounting allocation is final.
The Company is headquartered in Woodland Hills, California. The Company has other local offices in Pleasanton, California; New York,
New York; and Westport, Connecticut, as well as international office locations in Australia, Canada, France, Germany, India, Japan, the
Netherlands, Poland, Romania, Singapore, and the United Kingdom.
Note 2 – Basis of Presentation, Significant Accounting Policies, and Recently-Issued Accounting Pronouncements
Principles of consolidation and basis of presentation
The accompanying consolidated financial statements were prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) and include the operating results of its wholly-owned subsidiaries. All intercompany accounts and
transactions have been eliminated on consolidation.
Use of estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the
consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.
On an ongoing basis, management evaluates its estimates, primarily those related to determining the stand-alone selling price for
separate deliverables in the Company’s subscription revenue arrangements, allowance for doubtful accounts, cancellations and credits, fair
value of assets and liabilities assumed in a business combination, recoverability of goodwill and long-lived assets, useful lives associated
with long-lived assets and right-of-use assets, income taxes, contingencies, fair value of contingent consideration, fair value of the 0.00%
Convertible Senior Notes due in 2026 and 1.00% Convertible Senior Notes due in 2029, redemption value of redeemable non-controlling
interest, and the valuation and assumptions underlying stock-based compensation. These estimates are based on historical data and
experience, as well as various other factors that management believes to be reasonable under the circumstances. Actual results could differ
from those estimates.
The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context
with the information reasonably available to the Company at December 31, 2024 and through the date of this report. The accounting matters
assessed included, but were not limited to, the Company’s valuation of contingent consideration, the allowance for credit losses, and the
carrying value of goodwill and other long-lived assets. While there was not a material impact to the Company’s consolidated financial
statements for the year ended December 31, 2024, the Company’s future assessment of these accounting matters and other factors could
result in material impacts to the Company’s consolidated financial statements in future reporting periods.
68
Segments
Management has determined that the Company has one operating segment. Together, our Co-Chief Executive Officers are the Chief
Operating Decision Maker (“CODM”) and review the financial information on a consolidated and aggregate basis, together with certain
operating metrics principally to make decisions about how to allocate resources and to measure the Company’s performance.
Concentration of credit risk and significant customers
Financial instruments that potentially subject the Company to a significant concentration of credit risk consist of cash and cash
equivalents, investments in marketable securities, and accounts receivable.
The Company maintains the majority of its cash balances with one major commercial bank in interest-bearing accounts, which exceeds
the Federal Deposit Insurance Corporation, or FDIC, federally insured limits. The Company invests its excess cash in money market mutual
funds with two major investment banks. To date, the Company has not experienced any impairment losses on its investments.
For the years ended December 31, 2024, 2023, and 2022, no single customer comprised 10% or more of the Company’s total
revenues. No single customer had an accounts receivable balance of 10% or greater of total accounts receivable at December 31, 2024 or
2023.
Cash and cash equivalents
The Company considers all highly liquid investments with an original or remaining maturity of three months or less at the date of
purchase to be cash equivalents. Cash includes cash held in checking and savings accounts. Cash equivalents are comprised of
investments in money market mutual funds. The carrying value of cash and cash equivalents approximates fair value.
Restricted cash
Included in other assets and prepaid expenses and other current assets was $0.2 million and $0.2 million of restricted cash at
December 31, 2024 and 2023, respectively. The cash was required to be restricted for use by the Company’s office leaseholder to
collateralize a standby letter of credit.
Investments in marketable securities
The Company periodically assesses its portfolio of marketable securities for impairment. For debt securities in an unrealized loss
position, this assessment first takes into account the Company’s intent to sell, or whether it is more likely than not that it will be required to
sell the security before recovery of its amortized cost basis. If either of these criteria are met, the debt security’s amortized cost basis is
written down to fair value through other income (expense), net.
For debt securities in an unrealized loss position that do not meet the aforementioned criteria, the Company assesses whether the
decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which
fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and any adverse conditions specifically
related to the security, among other factors. If this assessment indicates that a credit loss may exist, the present value of cash flows expected
to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be
collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses will be recorded through other income
(expense), net, limited by the amount that the fair value is less than the amortized cost basis. Any additional impairment not recorded through
an allowance for credit losses is recognized in accumulated other comprehensive loss in the consolidated statements of stockholders’ equity.
Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged
against the allowance when the Company believes the uncollectibility of an available-for-sale security is confirmed or when either of the
criteria regarding intent or requirement to sell is met. The Company has not recorded any credit losses for the year ended December 31,
2024. The Company has not recorded any impairment charges for unrealized losses in the periods presented.
Accounts receivable and credit losses
Accounts receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts.
The Company makes estimates of expected credit losses and cancellations and credits based upon its assessment of various factors,
including historical experience, the age of the accounts receivable balances, credit quality of its customers, current economic conditions,
reasonable and supportable forecasts of future economic conditions, and other factors that may affect its ability to collect from customers.
The estimated credit loss allowance is recorded as general and administrative expenses, while the estimated credit loss
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allowance for cancellations and credits is recorded as a reduction in revenue on the consolidated statements of operations.
Leases
The Company has leases for office space, equipment, and data centers. The Company determines whether an arrangement is a lease,
or contains a lease, at inception if the Company is both able to identify an asset and can conclude it has the right to control the identified
asset for a period of time. Leases are included in property and equipment, operating lease right-of-use (“ROU”) assets, finance lease
liabilities, and operating lease liabilities on the Company’s consolidated balance sheets.
The Company has made accounting policy elections, including a short-term lease exception policy, permitting the Company to not apply
the recognition requirements of this standard to short-term leases (i.e. leases with expected terms of 12 months or less), and an accounting
policy to account for lease and certain non-lease components as a single component for certain classes of assets. The portfolio approach,
which allows a lessee to account for its leases at a portfolio level, was elected for certain equipment leases in which the difference in
accounting for each asset separately would not have been materially different from accounting for the assets as a combined unit.
Finance lease assets and operating lease ROU assets represent the Company's right to control an underlying asset for the lease term.
Finance lease liabilities and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease,
both of which are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s
leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at
commencement date or remeasurement date to determine the discount rate used to present value lease payments for finance and operating
leases. The incremental borrowing rate used is estimated based on what the Company would be required to pay for a collateralized loan over
a similar term. Additionally, the Company generally uses the portfolio approach when applying the discount rate selected based on the dollar
amount and term of the obligation. The Company’s leases typically do not include any residual value guarantees, bargain purchase options,
or asset retirement obligations.
The Company’s lease terms are only for periods in which it has enforceable rights. The Company generally uses the base, non-
cancellable lease term when determining the lease assets and liabilities. A lease is no longer enforceable when both the lessee and the
lessor each have the right to terminate the lease without permission from the other party with no more than an insignificant penalty. The
Company’s lease terms are impacted by options to extend or terminate the lease when it is reasonably certain that the Company will exercise
that option.
The Company’s agreements may contain variable lease payments. The Company includes variable lease payments that depend on an
index or a rate and excludes those which depend on facts or circumstances occurring after the commencement date, other than the passage
of time. Additionally, for certain equipment leases, the Company applies a portfolio approach to effectively account for the lease assets and
liabilities.
Judgment is required when determining whether any of the Company’s data center contracts contain a lease. The Company concluded
a lease exists when the asset is specifically identifiable, substantially all the economic benefit of the asset is obtained, and the right to direct
the use of the asset exists during the term of the lease.
Property and equipment
Property and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets, which is generally three to five years for machinery and equipment and purchased software, and five
years for furniture and fixtures. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or
seven years. Expenditures for repairs and maintenance are expensed as incurred, while renewals and improvements are capitalized.
Depreciation expense is charged to operations on a straight-line basis over the estimated useful lives of the assets.
Capitalized internal-use software costs
The Company capitalizes certain costs in the development of its SaaS subscription solution when (i) the preliminary project stage is
completed, (ii) management has authorized further funding for the completion of the project, and (iii) it is probable that the project will be
completed and performed as intended. These capitalized costs include personnel and related expenses for employees and costs of third-
party contractors who are directly associated with and who devote time to internal-use software projects. Capitalization of these costs ceases
once the project is substantially complete and the software is ready for its intended purpose. Costs incurred for significant upgrades and
enhancements to the Company’s SaaS software solutions are also capitalized. Costs incurred for
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training, maintenance and minor modifications or enhancements are expensed as incurred. Capitalized software development costs are
amortized using the straight-line method over an estimated useful life of three years.
During the years ended December 31, 2024, 2023, and 2022, the Company amortized $22.6 million, $19.1 million, and $13.6 million,
respectively, of internal-use software development costs to subscription and support cost of revenues. At December 31, 2024 and 2023, the
accumulated amortization of capitalized internal-use software development costs was $83.2 million and $60.6 million, respectively.
The Company capitalizes certain implementation costs incurred in a hosting arrangement that is a service contract. These capitalized
costs exclude training costs, project management costs, and data migration costs. Capitalized software implementation costs are amortized
using the straight-line method over the terms of the associated hosting arrangements.
Intangible assets
Intangible assets primarily consist of developed technology, customer relationships, and trade names, which were acquired as part of
purchase business combinations, as well as a defensive patent that was acquired through a purchase agreement. The Company determines
the appropriate useful life of its intangible assets by performing an analysis of expected cash flows of the acquired assets. Intangible assets
are amortized on a straight-line basis over their estimated useful lives, ranging from three to 11 years.
Impairment of long-lived assets
Management evaluates the recoverability of the Company’s property and equipment, finite-lived intangible assets and capitalized
internal-software costs when events or changes in circumstances indicate a potential impairment exists. Events and changes in
circumstances considered by the Company in determining whether the carrying value of long-lived assets may not be recoverable include,
but are not limited to, significant changes in performance relative to expected operating results, significant changes in the use of the assets,
significant negative industry or economic trends, and changes in the Company’s business strategy. Impairment testing is performed at an
asset level that represents the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and
liabilities (an “asset group”). In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from
the use and ultimate disposition of the asset group. If the undiscounted cash flows for the asset group are less than its net book value, an
impairment loss is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. For the years
ended December 31, 2024 and 2023, the Company did not record any charges for the impairment of cloud computing implementation costs.
For the year ended December 31, 2022, the Company recognized charges for the impairment of cloud computing implementation costs of
$5.3 million.
Business combinations
The results of businesses acquired in business combinations are included in the Company’s consolidated financial statements from the
date of the acquisition. Purchase accounting results in assets and liabilities of an acquired business generally being recorded at their
estimated fair values on the acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is
recognized as goodwill.
Transaction costs associated with business combinations are expensed as incurred and are included in general and administrative
expenses in the consolidated statements of operations.
The Company performs valuations of assets acquired and liabilities assumed and allocates the purchase price to its respective assets
and liabilities. Determining the fair value of the identifiable assets acquired, and liabilities assumed, and the contingent consideration liability
requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future
revenue, costs and cash flows, discount rates, and selection of comparable companies. The Company engages the assistance of valuation
specialists in concluding on fair value measurements in connection with determining fair values of assets acquired and liabilities assumed in
a business combination.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of net assets acquired in a business combination. Goodwill is
tested for impairment at least annually at the reporting unit level or whenever events or changes in circumstances indicate that goodwill might
be impaired. Events or changes in circumstances which could trigger an impairment review include a significant adverse change in legal
factors or in the business climate, unanticipated competition, loss of key personnel, significant changes in the use of the acquired assets or
the Company’s strategy, significant negative industry or economic trends, or significant underperformance relative to expected historical or
projected future results of operations.
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An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a
determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality
of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying
amount, then additional impairment testing is not required. However, if an entity concludes otherwise, then it is required to perform an
impairment test.
The first step involves comparing the estimated fair value of a reporting unit with its book value, including goodwill. If the estimated fair
value exceeds book value, goodwill is considered not to be impaired and no additional steps are necessary. If, however, the fair value of the
reporting unit is less than book value, then an impairment charge is recorded for the difference between the reporting unit’s fair value and
carrying amount, not to exceed the carrying amount of the goodwill.
The Company has one reporting unit, and it tests its goodwill for impairment annually, during the fourth quarter of the calendar year. At
December 31, 2024 and 2023, the Company used the quantitative approach to perform its annual goodwill impairment test. The fair value of
the Company's reporting unit significantly exceeded the carrying value of its net assets and, accordingly, goodwill was not impaired.
Redeemable non-controlling interest
The Company's Japanese subsidiary (“BlackLine K.K.”) is not wholly owned. The agreements with the minority investors of BlackLine
K.K. contain redemption features whereby the interest held by the minority investors are redeemable either (i) at the option of the minority
investors or (ii) at the option of the Company, both beginning on the seventh anniversary of the initial capital contribution. If the interest of the
minority investors were to be redeemed under these agreements, the Company would be required to redeem the interest based on a
prescribed formula derived from the relative revenue of BlackLine K.K. and the Company. The balance of the redeemable non-controlling
interest is reported at the greater of the initial carrying amount adjusted for the redeemable non-controlling interest's share of earnings or
losses and other comprehensive income or loss, or its estimated redemption value. The resulting changes in the estimated redemption
amount (increases or decreases) are recorded with corresponding adjustments against retained earnings or, in the absence of retained
earnings, additional paid-in capital. These interests are presented on the consolidated balance sheets outside of equity under the caption
“Redeemable non-controlling interest.”
Convertible senior notes
The Company accounts for the issued Notes as a liability at face value less unamortized debt issuance costs. The debt issuance costs
are being amortized to expense over the respective term of the Notes. To the extent that the Company receives conversion requests prior to
the maturity of the Notes, upon settlement of the conversion requests, the difference between the fair value and the amortized book value of
the Notes requested for conversion is recorded as a gain or loss on early conversion. The fair value of the Notes are measured based on a
similar liability that does not have an associated convertible feature based on the remaining term of the Notes, which requires significant
judgment.
Restructuring costs
The Company records a charge for restructuring when management commits to a restructuring plan, the restructuring plan identifies all
significant actions, the period of time to complete the restructuring plan indicates that significant changes to the restructuring plan are not
likely, and employees who are impacted have been notified of the pending involuntary termination.
Fair value of financial instruments
ASC 820, Fair Value Measurement, requires entities to disclose the fair value of financial instruments, both assets and liabilities
recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the exchange
price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the measurement date.
Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable
inputs. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last
unobservable, that may be used to measure fair value, which are the following:
Level 1: Quoted prices in active markets for identical or similar assets and liabilities.
Level 2: Quoted prices for identical or similar assets and liabilities in markets that are not active or observable inputs other
than quoted prices in active markets for identical or similar assets or liabilities.
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Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the
assets or liabilities.
At December 31, 2024 and 2023, the carrying values of cash equivalents, accounts receivable, accounts payable, and accrued
expenses approximate their fair values due to the short-term nature of such instruments.
Contingent consideration related to acquisitions is recorded at fair value as a liability on the acquisition date and is remeasured at each
reporting date, based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value
hierarchy. The valuation of contingent consideration uses assumptions management believes would be made by a market participant.
Management assesses these estimates on an ongoing basis as additional data impacting the assumptions becomes available. Changes in
the fair value of contingent consideration related to updated assumptions and estimates are recognized within general and administrative
expenses in the consolidated statements of operations.
To determine the fair value of the contingent consideration related to the FourQ Acquisition, management utilized a Monte Carlo
simulation model to value the earnout based on the likelihood of reaching firm-specific targets. Significant inputs used in the fair value
measurement of contingent consideration are the amount and timing of new and incremental combined bookings from FourQ and BlackLine,
and revenues from a specified FourQ customer over a three-year period subsequent to the acquisition date, as well as the discount rate.
Certain assets, including goodwill and long-lived assets, are also subject to measurement at fair value on a non-recurring basis if they
are deemed to be impaired as a result of an impairment review. Refer to “Impairment of long-lived assets” section above for additional
information.
Revenue recognition
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the
consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can
include various combinations of subscription and support services and professional services, which are generally capable of being distinct
and accounted for as separate performance obligations. The Company’s agreements do not contain any refund provisions other than in the
event of the Company’s non-performance or breach.
The Company determines revenue recognition through the following steps:
•
Identification of the contract, or contracts, with a customer;
•
Identification of performance obligations in the contract;
•
Determination of the transaction price;
•
Allocation of the transaction price to performance obligations in the contract; and
•
Recognition of revenue when, or as, performance obligations are satisfied.
The Company recognizes revenue net of any applicable value added or sales tax.
Subscription and support revenue – Customers pay subscription and support fees for access to the Company’s SaaS platform. Our
subscription contracts have initial terms of one year to three years with renewal options. Fees are based on a number of factors, including the
solutions subscribed for by the customer and the number of users having access to the solutions. Subscription services, which includes
support, is recognized on a straight-line basis over the non-cancellable contractual term of the arrangement, generally beginning on the date
that the Company’s service is made available to the customer.
Subscription and support revenue also includes software and related maintenance and support fees on perpetual licenses. Revenues
from perpetual licenses are recognized immediately at the time the Company provides the customer with a right to use the software as it
exists when made available to the customer. Customers may have purchased perpetual licenses or term-based licenses, which provide
customers with the same functionality and differ mainly in the duration over which the customer benefits from the software.
Professional services revenue – Professional services consist of implementation and consulting services to assist the Company’s
customers as they deploy our solutions. These services are considered distinct performance obligations. Professional services do not result
in significant customization of the subscription service. The Company applies the practical expedient to recognize professional services
revenue when it has the right to invoice based on time and materials incurred. The Company applies the optional exemption and has
excluded the variable consideration from the disclosure of remaining performance obligations.
Contracts with Multiple Performance Obligations – The Company’s contracts with customers often contain multiple performance
obligations. For these contracts, the Company accounts for individual performance obligations
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separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price
(“SSP”) basis. Determining whether products and services are considered distinct performance obligations that should be accounted for
separately versus together, as well as the determination of SSP for each distinct performance obligation, may require significant judgment.
The Company typically has more than one SSP for its SaaS solutions and professional services. Additionally, management has determined
that there are no third-party offerings reasonably comparable to the Company’s solutions. Therefore, the Company determines the SSPs of
subscriptions to the SaaS solutions and professional services based on numerous factors including the Company’s overall pricing objectives,
geography, customer size, number of users, and discounting practices. The Company uses historical maintenance renewal fees to estimate
SSP for maintenance and support fees bundled with software licenses. The Company uses the residual method to estimate SSP of software
licenses, because license pricing is highly variable and not sold separately from maintenance and support.
Contract balances – Timing of revenue recognition may differ from the timing of invoicing to customers. The Company records an
unbilled receivable when revenue is recognized prior to invoicing, and deferred revenue when revenue is recognized subsequent to
invoicing. The Company generally invoices customers annually at the beginning of each annual contract period.
Deferred revenue is comprised mainly of billings in advance of revenue being recognized related to the Company’s subscription and
support services and professional services arrangements.
Changes in deferred revenue for the years ended December 31, 2024, 2023, and 2022 were primarily due to additional billings in the
periods, partially offset by revenue recognized of $316.7 million, $274.3 million, and $239.9 million, respectively, that was previously included
in the deferred revenue balance at December 31, 2023, 2022, and 2021, respectively.
The transaction price is generally determined by the stated fixed fees in the contract, excluding any related sales taxes. Transaction
price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized (“contracted not
recognized”), which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Contracted not
recognized revenue was $879.4 million at December 31, 2024, of which the Company expects to recognize approximately 57.6% over the
next 12 months and the remainder thereafter.
Fees are generally due and payable within 30 days. None of the Company’s contracts include a significant financing component.
Assets recognized from the costs to obtain a contract with a customer – The Company recognizes an asset for the incremental
and recoverable costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be one year or longer. The
Company has determined that certain sales incentive programs to the Company’s employees (“deferred customer contract acquisition costs”)
and its partners (“partner referral fees”) meet the requirements to be capitalized. Deferred customer acquisition costs related to new revenue
contracts and upsells are deferred and then amortized on a straight-line basis over the expected period of benefit, which the Company has
determined to be five years, based upon both the product turnover rate and estimated customer life. The Company enters into partnership
arrangements where partner referral fees are paid either on the initial contract or on both the initial contract and renewal of the contract. The
Company assesses whether the renewal fee is commensurate with the initial fee. When the renewal fee is commensurate with the initial fee,
the Company amortizes the deferred costs over the initial year of the contract. Otherwise, the initial fee is amortized over five years. Deferred
customer acquisition costs and partner referral fees are included within other assets on the consolidated balance sheets. There were no
impairment losses in relation to the costs capitalized for the periods presented.
Amortization expense related to the asset recognized from the costs to obtain a contract with a customer is included in sales and
marketing expenses in the consolidated statements of operations and was $37.0 million, $34.1 million, and $29.7 million for the years ended
December 31, 2024, 2023, and 2022, respectively.
Cost of revenues
Cost of revenues primarily consists of costs related to hosting the Company’s cloud-based application suite, salaries and benefits of
operations and support personnel, including stock-based compensation, professional fees, and amortization of capitalized internal-use
software costs. The Company allocates a portion of overhead, such as rent, information technology costs and depreciation and amortization
to cost of revenues. Costs associated with providing professional services are expensed as incurred when the services are performed. In
addition, subscription and support cost of revenues includes amortization of acquired developed technology.
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Sales and marketing
Sales and marketing expenses consist primarily of compensation and employee benefits, including stock-based compensation, of sales
and marketing personnel and related sales support teams, sales and partner commissions, marketing events, advertising costs, computer
software-related costs, travel, trade shows, other marketing materials, and allocated overhead. Sales and marketing expenses also include
amortization of customer relationship intangible assets, transaction-related costs, and impairment of cloud computing implementation costs.
Advertising costs are expensed as incurred and totaled $11.6 million, $11.8 million, and $9.5 million for the years ended December 31, 2024,
2023, and 2022, respectively.
Research and development
Research and development expenses are comprised primarily of salaries, benefits and stock-based compensation associated with the
Company’s engineering, product and quality assurance personnel. Research and development expenses also include third-party contractors
and supplies, computer software-related costs, transaction-related costs, and allocated overhead. Other than software development costs
that qualify for capitalization, as discussed above, research and development costs are expensed as incurred.
General and administrative
General and administrative expenses consist primarily of personnel costs associated with the Company’s executive, finance, legal,
human resources, compliance, and other administrative personnel, as well as accounting and legal professional fees, other corporate-related
expenses and allocated overhead. General and administrative expenses also include amortization of covenant not-to-compete and trade
name intangible assets, the change in value of the contingent consideration, transaction-related costs, and impairment of cloud computing
implementation costs.
Stock-based compensation
The Company accounts for stock-based compensation awards granted to employees and directors based on the awards’ estimated
grant date fair value. The Company estimates the fair value of its stock options using the Black-Scholes option-pricing model. For awards
that vest solely based on continued service (“service-only vesting conditions”), the resulting fair value is recognized on a straight-line basis
over the period during which an employee is required to provide service in exchange for the award, usually the vesting period, which is
generally four years.
The Company recognizes the fair value of restricted stock units with performance and service conditions based upon the probability of
the performance conditions being met, using the graded vesting method. The Company recognizes the fair value of restricted stock units with
market and service conditions based upon the achievement of total stockholder return (“TSR”) relative to an industry index being met, using
the graded vesting method. The Company estimates the fair value of its restricted stock units with market and service conditions using the
Monte Carlo simulation valuation model, which requires the use of various assumptions, including the stock price volatility and risk-free
interest rate as of the valuation date corresponding to the length of time remaining in the performance period. The Company accounts for
forfeitures when they occur rather than estimating a forfeiture rate.
The Company recognizes the fair value of ESPP shares using the Black-Scholes option valuation model based on the following
assumptions:
Expected volatility. The expected volatility is based on a weighted average of the historical volatility of the Company’s common stock
over the expected term.
Expected term. The expected term represents the amount of time remaining in the offering period.
Risk-free interest rate. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant corresponding to the
expected term of the ESPP share.
Estimated dividend yield. The estimated dividend yield is zero, as the Company does not currently intend to declare dividends in the
foreseeable future.
Share Repurchase Program
On November 17, 2024, the Board of Directors (“the Board”) authorized the repurchase of up to $200.0 million of the Company’s
common stock. The authorization will expire at the end of the first quarter of fiscal year 2027.
Repurchases may be made from time to time through open market repurchases or through privately-negotiated transactions subject to
market conditions, applicable legal requirements and other relevant factors. Open market repurchases may be structured to occur in
accordance with the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The Company may also, from time to
time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares under this authorization. The repurchase program does not obligate
the
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Company to acquire any particular amount of its common stock, and it may be suspended at any time at the Company’s discretion. The
timing and actual number of shares repurchased may depend on a variety of factors, including price, general business and market
conditions, and alternative investment opportunities.
Income taxes
The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities. Deferred income tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
effect of a change in tax rates on deferred tax assets and liabilities is recognized in the consolidated statements of operations in the period
that includes the enactment date. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will
not be realized.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the
consolidated financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood
of being realized. The Company recognizes interest and penalties accrued with respect to uncertain tax positions, if any, in the provision for
income taxes in the consolidated statements of operations.
Net income (loss) per share
Basic net income per share is calculated by dividing net income attributable to BlackLine, Inc. by the weighted average number of
shares of common stock outstanding.
For periods where the Company reports net income, the Company will calculate diluted net income per share attributable to BlackLine,
Inc. by adjusting the denominator for potentially dilutive common shares, which are based on the weighted average number of shares of
common stock underlying stock options and unvested stock awards using the treasury stock method, as well as for the potential impact of
our Notes using the if-converted method or the treasury stock method, as applicable. Under the if-converted method, the numerator is
adjusted by adding back interest expense, net of any tax impact.
For periods where the Company reports net losses, the Company will calculate diluted net loss per share attributable to BlackLine, Inc.
by excluding from the denominator potentially dilutive common shares, which are based on the weighted average number of shares of
common stock underlying stock options and unvested stock awards, as well as the potential impact of our Notes, as they are antidilutive. For
these periods, basic net loss per share attributable to BlackLine, Inc. is equivalent to diluted net loss per share attributable to BlackLine, Inc.
Foreign currency
The Company’s functional currency for its foreign subsidiaries is the U.S. Dollar (“USD”), with the exception of its BlackLine K.K.
subsidiary, for which the Japanese Yen is the functional currency. The foreign exchange impacts of remeasuring the local currency of the
foreign subsidiaries to the functional currency is recorded in general and administrative expenses in the Company’s consolidated statements
of operations. Monetary assets and liabilities of foreign operations are remeasured at balance sheet date exchange rates, non-monetary
assets and liabilities and equity are remeasured at the historical exchange rates, while results of operations are remeasured at average
exchange rates in effect for the period. Foreign currency transaction gains and losses consist of both realized and unrealized gains and
losses. Foreign currency transaction losses totaled $3.6 million for the year ended December 31, 2024, foreign currency transaction gains
totaled $0.9 million for the year ended December 31, 2023, and foreign currency transaction losses totaled $2.1 million for the year ended
December 31, 2022. The financial statements of BlackLine K.K. are translated to USD using balance sheet date exchange rates for monetary
assets and liabilities, historical rates of exchange for non-monetary assets and liabilities and equity, and average exchange rates in the
period for revenues and expenses. Translation gains and losses are recorded in accumulated other comprehensive income (loss) as a
component of stockholders’ equity in the consolidated balance sheets.
Recently-adopted accounting pronouncements
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment
Disclosures. This standard expands annual and interim disclosure requirements for reportable segments, primarily through enhanced
disclosures about significant segment expenses. For public business entities, it is effective for fiscal years beginning after December 15,
2023, and interim periods within fiscal years
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beginning after December 15, 2024. The Company adopted the standard for the year ended December 31, 2024. Refer to “Note 3 - Segment
Information” for additional information.
Recently-issued accounting pronouncements not yet adopted
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense
Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the
FASB issued Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the
Effective Date ("ASU 2025-01"). ASU 2024-03 requires public companies to disclose, in interim and reporting periods, additional information
about certain expenses in the financial statements. For public business entities, ASU 2024-03, as clarified by ASU 2025-01, is effective for
the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning
after December 15, 2027. Early adoption of ASU 2024-03 is permitted. The Company is currently evaluating the impact that the updated
standard will have on our disclosures within our consolidated financial statements. The Company does not intend to early adopt.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, which
requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income
taxes paid. The amendment in the ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. For
public business entities, it is effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact
that the updated standard will have on our disclosures within our consolidated financial statements.
Note 3 – Segment Information
Management has determined that the Company has one operating and reportable segment. The Company provides subscription and
support services that consist of a cloud-based platform designed to unify, automate, and streamline accounting and finance operations, and
also provides professional services that consist of implementation and consulting services. The technology used in the subscription and
support services is based on a single software platform that is deployed to and implemented by customers. The Company manages the
business activities on a consolidated basis, and operating segments have not been aggregated. The accounting policies of the operating
segment are the same as those described in the summary of significant accounting policies.
Our CODM assesses performance for the operating segment and decides how to allocate resources based on the review of net income
(loss). The CODM uses net income (loss), among other measures, for budgeting and resource allocation purposes. Expenses significant to
the segment were determined to be cost of revenues, sales and marketing expenses, research and development expenses, general and
administrative expenses, interest expense, and the provision for (benefit from) income taxes, which are all presented in the consolidated
statements of operations for the years ended December 31, 2024, 2023, and 2022. Other significant expenses include depreciation expense
of $30.5 million, $29.5 million, and $23.1 million for the years ended December 31, 2024, 2023, and 2022, respectively, as well as
amortization expense of $19.9 million, $20.6 million, and $19.7 million for the years ended December 31, 2024, 2023, and 2022, respectively.
The Company’s intra-entity sales are eliminated upon consolidation.
The Company disaggregates its revenue from contracts with customers by geographic location, as it believes it best depicts how the
nature, amount, timing, and uncertainty of its revenues and cash flows are affected by economic factors.
The following table sets forth the Company’s revenues by geographic region (in thousands):
Year Ended December 31,
2024
2023
2022
United States
$
457,955 $
422,192 $
373,423
International
195,381
167,804
149,515
$
653,336 $
589,996 $
522,938
No countries outside the U.S. represented 10% or more of total revenues.
77
The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets. The following table sets
forth the Company’s long-lived assets, which consist of property and equipment, net, and operating lease ROU assets by geographic region
(in thousands):
December 31,
2024
2023
United States
$
18,399 $
21,831
International
16,213
12,209
$
34,612 $
34,040
Note 4 – Redeemable Non-Controlling Interest
In September 2018, the Company entered into an agreement with Japanese Cloud Computing and M30 LLC (the “Investors”) to
engage in the investment, organization, management, and operation of BlackLine K.K. that is focused on the sale of the Company's products
in Japan. The Company initially contributed approximately $4.5 million in cash in exchange for 51% of the outstanding common stock of
BlackLine K.K. and subsequently invested a further $2.3 million, maintaining the Company's majority ownership of 51%. As the Company
continues to control a majority stake in BlackLine K.K., the entity has been consolidated.
All of the common stock held by the Investors is callable by the Company or puttable by the Investors upon certain contingent events.
Should the call or put option be exercised, the redemption value will be determined based upon a prescribed formula derived from the
discrete revenues of BlackLine K.K. and the Company, and may be settled, at the Company’s discretion, with Company stock or cash. As a
result of the put right available to the Investors in the future, the redeemable non-controlling interest in BlackLine K.K. is classified outside of
permanent equity in the Company’s consolidated balance sheets, and the balance is reported at the greater of the initial carrying amount
adjusted for the redeemable non-controlling interest's share of earnings, or its estimated redemption value. The resulting changes in the
estimated redemption amount are recorded within retained earnings or, in the absence of retained earnings, additional paid-in capital.
Activity in the redeemable non-controlling interest was as follows (in thousands):
December 31,
2024
2023
2022
Balance at beginning of period
$
30,063 $
23,895 $
28,699
Net income (loss) attributable to redeemable non-controlling interest (excluding
adjustment to non-controlling interest)
1,952
892
(369)
Foreign currency translation
(171)
(58)
(304)
Adjustment to redeemable non-controlling interest
4,639
5,334
(4,131)
Balance at end of period
$
36,483 $
30,063 $
23,895
Note 5 – Business Combinations
Acquisition of Data Interconnect
On September 12, 2023, the Company completed the DI Acquisition for cash consideration of $11.4 million, which was paid at the
closing of the acquisition. The DI Acquisition enhances the Company's existing accounts receivable automation solution capabilities through
EIPP. Transaction-related costs, which include, but are not limited to, accounting, legal, and advisory fees related to the transaction, incurred
by the Company totaling approximately $1.2 million were expensed as incurred during the year ended December 31, 2023.
The Company accounted for the transaction as a business combination using the acquisition method of accounting. The total purchase
price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair
values on the acquisition date. The purchase price allocation was finalized as of the filing date of the Annual Report on Form 10-K for the
year ended December 31, 2023.
The purchase consideration and major classes of assets and liabilities to which the Company allocated the total fair value of purchase
consideration of $11.4 million were as follows (in thousands):
78
Cash consideration
$
11,394
Post-acquisition working capital adjustment
9
Total cash purchase consideration
$
11,403
Cash and cash equivalents
$
27
Accounts receivable, net
916
Prepaid expenses and other current assets
893
Property and equipment, net
49
Intangible assets, net
8,800
Goodwill
5,104
Operating lease right-of-use assets
402
Other assets
58
Accounts payable
(665)
Accrued expenses and other current liabilities
(1,570)
Deferred revenue, current
(98)
Operating lease liabilities
(402)
Deferred tax liabilities, net
(2,111)
Total consideration
$
11,403
The Company believes the amount of goodwill resulting from the acquisition is primarily attributable to increased offerings to customers
and enhanced opportunities for growth and innovation. The goodwill resulting from the acquisition is not tax deductible.
To determine the estimated fair value of intangible assets acquired, the Company engaged a third-party valuation specialist to assist
management. All estimates, key assumptions, and forecasts were either provided by, or reviewed by, the Company. While the Company
chose to utilize a third-party valuation specialist for assistance, the fair value analysis and related valuations reflect the conclusions of the
Company and not those of any third party. The fair value measurements of the intangible assets were based primarily on significant
unobservable inputs and thus represent a Level 3 measurement as defined in ASC 820. The acquired intangible asset categories, fair value,
and amortization periods, were as follows:
Amortization Period
Fair Value
(in years)
(in thousands)
Developed technology
5
$
8,110
Customer relationships
3
690
$
8,800
The weighted average lives of intangible assets at the acquisition date was 4.8 years.
The estimated fair value of developed technology and customer relationships acquired of $8.1 million and $0.7 million, respectively,
was determined through the use of a third-party valuation firm using the cost approach methodology. The cost approach considers the cost to
replace (or reproduce) the assets and the effects on the assets' values of functional and/or economic obsolescence that has occurred with
respect to the asset. The direct transaction costs of the acquisition were accounted for separately from the business combination and
expensed as incurred.
The revenue and earnings of the acquired business were included in the Company’s results since the acquisition date and have not
been presented separately using pro forma revenues and results of operations as its impact is not material to the Company’s consolidated
financial statements for the periods presented.
FourQ Systems, Inc.
On January 26, 2022, the Company completed the FourQ Acquisition for cash consideration of $160.2 million payable at the closing of
the acquisition. In addition, the Company agreed to pay a maximum of $73.2 million of contingent consideration if certain earnout conditions
were met. At January 26, 2022, the fair value of the contingent consideration liability was $55.9 million and was included in contingent
consideration on the accompanying consolidated balance sheet. As of the filing date of this Annual Report on Form 10-K, the financial
performance milestones were not met, and the Company is no longer obligated to pay the contingent consideration of
79
$73.2 million. See “Note 16 - Contingent Consideration” for additional information regarding the valuation of the contingent consideration at
December 31, 2024.
The FourQ Acquisition enhances the Company's existing intercompany accounting automation capabilities by driving end-to-end
automation of traditionally manual intercompany accounting processes. The Company incurred transaction-related costs, which include, but
are not limited to, fees for accounting, legal, and advisory services of $3.4 million during the year ended December 31, 2022. The
transaction-related costs were expensed as incurred.
The Company accounted for the transaction as a business combination using the acquisition method of accounting. The total purchase
price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair
values on the acquisition date.
The purchase consideration and major classes of assets and liabilities to which the Company allocated the total fair value of purchase
consideration of $214.2 million are considered final. The following table presents the final allocation of the purchase price (in thousands):
Cash consideration
$
160,224
Post-acquisition working capital adjustment
(635)
Contingent consideration
55,947
Less: One-time expense related to accelerated vesting
(1,322)
Purchase consideration
$
214,214
Cash and cash equivalents
$
1,164
Accounts receivable, net
1,853
Prepaid expenses and other current assets
410
Other assets
143
Property and equipment
659
Intangible assets
74,400
Goodwill
154,151
Accounts payable
(1,537)
Accrued liabilities
(2,585)
Deferred revenue
(231)
Deferred tax liabilities, net
(14,213)
Total consideration
$
214,214
The Company believes the amount of goodwill resulting from the acquisition is primarily attributable to increased offerings to customers,
and enhanced opportunities for growth and innovation. The goodwill resulting from the acquisition is not tax deductible.
To determine the estimated fair value of intangible assets acquired, the Company engaged a third-party valuation specialist to assist
management. All estimates, key assumptions, and forecasts were either provided by, or reviewed by the Company. While the Company
chose to utilize a third-party valuation specialist for assistance, the fair value analysis and related valuations reflect the conclusions of the
Company and not those of any third party. The fair value measurements of the intangible assets were based primarily on significant
unobservable inputs and thus represent a Level 3 measurement as defined in ASC 820. The acquired intangible asset categories, fair value,
and amortization periods, were as follows:
Amortization Period
Fair Value
(in years)
(in thousands)
Developed technology
7
$
64,900
Customer relationships
3
9,500
$
74,400
The weighted average lives of intangible assets at the acquisition date was 6.5 years.
The identified intangible assets, developed technology and customer relationships, were valued as follows:
Developed technology – The Company valued the finite-lived developed technology using the multi-period excess earnings model
under the income approach. This method estimates an intangible asset’s value based on the
80
present value of the incremental after-tax cash flows attributable to the intangible asset. The Company applied judgment which involves the
use of significant assumptions with respect to the discount rate, obsolescence rate, revenue forecasts, research and development costs for
future technology, and EBITDA forecasts.
Customer relationships – The Company valued the finite-lived customer relationships using the differential cash flow (with-and-without)
model, an income approach. This method assumes that the value of the intangible asset is equal to the difference between the present value
of the prospective cash flows with the intangible asset in place and the present value of the prospective cash flows without the intangible
asset. The Company applied judgment, which involved the use of significant assumptions with respect to the discount rate and the customer
ramp-up rate.
Note 6 – Intangible Assets and Goodwill
The carrying value of intangible assets was as follows (in thousands):
December 31, 2024
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Trade name
$
15,977 $
(15,977) $
—
Developed technology
137,718
(80,284)
57,434
Customer relationships
26,779
(25,528)
1,251
Defensive patent
2,333
(1,498)
835
$
182,807 $
(123,287) $
59,520
December 31, 2023
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Trade name
$
15,977 $
(15,977) $
—
Developed technology
137,368
(66,900)
70,468
Customer relationships
26,779
(19,342)
7,437
Defensive patent
2,333
(1,182)
1,151
$
182,457 $
(103,401) $
79,056
Amortization expense is included in the following functional statements of operations expense categories. Amortization expense was as
follows (in thousands):
Year Ended December 31,
2024
2023
2022
Cost of revenues
$
13,370 $
12,438 $
11,315
Sales and marketing
6,201
6,791
6,505
General and administrative
315
1,379
1,911
$
19,886 $
20,608 $
19,731
The following table presents the Company’s estimate of remaining amortization expense for each of the five succeeding fiscal years
and thereafter for finite-lived intangible assets at December 31, 2024 (in thousands):
2025
$
14,128
2026
13,713
2027
13,178
2028
12,412
2029
2,615
Thereafter
3,474
$
59,520
81
The following table represents the changes in goodwill (in thousands):
Balance at December 31, 2022
$
443,861
Additions from acquisitions
5,104
Balance at December 31, 2023
448,965
Additions from acquisitions
—
Balance at December 31, 2024
$
448,965
Note 7 – Balance Sheet Components
Investments in Marketable Securities
The Company had no marketable securities at December 31, 2024.
At December 31, 2023, investments in marketable securities presented within current assets on the consolidated balance sheets
consisted of the following (in thousands):
December 31, 2023
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Marketable securities
U.S. treasury securities
$
523,344 $
737 $
(107) $
523,974
Commercial paper
241,428
1
—
241,429
U.S. government agencies
168,078
2
(128)
167,952
$
932,850 $
740 $
(235) $
933,355
The Company recognized accretion on its marketable securities in interest income, and also recognized net gains and losses related to
maturities of marketable securities that were reclassified from accumulated other comprehensive loss in interest income, which totaled $18.4
million, $33.9 million, and $8.9 million for the years ended December 31, 2024, 2023, and 2022, respectively.
Net gains and losses are determined using the specific identification method. During the years ended December 31, 2024, 2023, and
2022, there were nominal realized gains and losses related to sales of marketable securities recognized in the Company's accompanying
consolidated statements of operations.
Marketable securities in a continuous loss position for less than 12 months had an estimated fair value of $286.6 million, and unrealized
losses of $0.2 million at December 31, 2023. There were no marketable securities in a continuous loss position for greater than 12 months at
December 31, 2023.
The Company's marketable securities were considered to be of high credit quality and accordingly, there was no allowance for credit
losses related to marketable securities as of December 31, 2023.
Other Assets
Deferred customer contract acquisition costs are included in other assets in the accompanying consolidated balance sheets and totaled
$86.1 million and $89.9 million at December 31, 2024 and 2023, respectively.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities were comprised of the following (in thousands):
December 31,
2024
2023
Accrued salaries and employee benefits
$
41,833 $
33,344
Accrued income and other taxes payable
11,297
9,408
Accrued restructuring costs
—
1,569
Other accrued expenses and current liabilities
18,444
15,369
$
71,574 $
59,690
82
Note 8 – Fair Value Measurements
The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis by level,
within the fair value hierarchy. Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is
significant to the fair value measurement (in thousands):
December 31, 2024
Level 1
Level 2
Level 3
Total
Cash equivalents
Money market funds
$
809,906 $
— $
— $
809,906
Total assets
$
809,906 $
— $
— $
809,906
Liabilities
Contingent consideration
$
— $
— $
— $
—
Total liabilities
$
— $
— $
— $
—
December 31, 2023
Level 1
Level 2
Level 3
Total
Cash equivalents
Money market funds
$
148,298 $
— $
— $
148,298
Commercial paper
—
38,926
—
38,926
U.S. government agencies
—
19,987
—
19,987
Marketable securities
U.S. treasury securities
523,974
—
—
523,974
Commercial paper
—
241,429
—
241,429
U.S. government agencies
—
167,952
—
167,952
Total assets
$
672,272 $
468,294 $
— $
1,140,566
Liabilities
Contingent consideration
$
— $
— $
— $
—
Total liabilities
$
— $
— $
— $
—
The following table summarizes the changes in the contingent consideration liability (in thousands):
Year Ended December 31,
2024
2023
2022
Beginning fair value
$
— $
41,549 $
20,732
Additions in the period
—
—
55,947
Payments in the period
—
(8,000)
—
Change in fair value
—
(33,549)
(35,130)
Ending fair value
$
— $
— $
41,549
The Company classified the marketable debt securities as available-for-sale debt securities at the time of purchase and reevaluated
such classification as of each balance sheet date. The valuation techniques used to measure the fair values of our instruments that were
classified as Level 1 were derived from quoted market prices for identical instruments in active markets. The valuation techniques used to
measure the fair values of Level 2 instruments were derived from broker reports that utilized quoted market prices for similar instruments.
As a condition of the FourQ Acquisition that occurred on January 26, 2022, the Company agreed to pay additional cash consideration if
FourQ realized certain firm-specific targets, including the amount and timing of new and incremental combined bookings from FourQ and
BlackLine, and revenues from a specified FourQ customer over a three-year period subsequent to the acquisition date. The maximum cash
consideration to be distributed is $73.2 million. Changes in the significant inputs used in the fair value measurement, specifically a change in
new and incremental actual and forecasted combined bookings from FourQ and the Company, can significantly impact the fair value of the
contingent consideration liability. At December 31, 2024, the related liability for the FourQ Acquisition was zero. As of the filing date of this
Annual Report on Form 10-K, the financial performance milestones were not met, and the Company is no longer obligated to pay the
contingent consideration of $73.2 million.
Increases and decreases in the fair value of contingent consideration are recorded as expense or reversals of expense, respectively,
within general and administrative expenses in the consolidated statements of operations.
83
Note 9 – Property and Equipment
Property and equipment, net consisted of the following (in thousands):
December 31,
2024
2023
Computers and equipment
$
23,354 $
22,396
Purchased software
13,990
14,007
Furniture and fixtures
4,511
4,197
Leasehold improvements
16,316
16,198
Data center equipment - finance lease
1,297
1,231
Building - finance lease
1,521
1,219
Construction in progress
2,638
—
Property and equipment, gross
63,627
59,248
Less: accumulated depreciation and amortization
(51,787)
(44,381)
Property and equipment, net
$
11,840 $
14,867
Depreciation and amortization expense related to property and equipment was $7.9 million, $10.4 million, and $9.5 million for the years
ended December 31, 2024, 2023, and 2022, respectively.
Note 10 – Leases
The Company has entered into various operating and finance lease agreements for office space and data centers. As of December 31,
2024, the Company had 18 leased properties with remaining lease terms of less than one year to ten years, some of which include options to
extend or terminate the leases.
The components of the lease expense recorded in the consolidated statements of operations were as follows (in thousands):
Year Ended December 31,
2024
2023
2022
Finance lease cost:
Amortization of assets
$
1,007 $
1,020 $
652
Interest on lease liabilities
19
45
44
Operating lease cost
7,519
6,663
5,767
Short-term lease cost
532
378
388
Variable cost
1,343
1,237
1,190
Total lease cost
$
10,420 $
9,343 $
8,041
Cash flow and other information related to leases was as follows (in thousands, except percentages):
Year Ended December 31,
2024
2023
2022
Cash paid for amounts included in the measurement of lease liabilities
Financing cash flows from finance leases
$
1,046
$
1,036
$
662
Operating cash flows from operating lease liabilities
$
7,899
$
7,467
$
5,338
Weighted average remaining lease term at end of period (in years):
Finance leases
2.6
0.8
1.7
Operating leases
6.2
4.2
3.9
Weighted average discount rate:
Finance leases
7.8 %
3.5 %
3.7 %
Operating leases
7.4 %
5.7 %
2.8 %
84
Maturities of lease liabilities at December 31, 2024, for each of the five succeeding fiscal years and thereafter, were (in thousands):
Finance Leases
Operating Leases
2025
$
72 $
4,800
2026
16
6,126
2027
16
5,318
2028
16
4,285
2029
12
1,994
Thereafter
—
8,057
Total lease payments
132
30,580
Less imputed interest
(13)
(6,772)
Total lease obligations
$
119 $
23,808
Refer to “Note 9 - Property and Equipment” for additional information on finance leases.
Note 11 – Convertible Senior Notes
2029 Notes
On May 24, 2024 and June 5, 2024, the Company issued $600.0 million aggregate principal amount, and an additional aggregate
principal amount in connection with the initial purchasers’ option of $75.0 million, respectively, of 1.00% Convertible Senior Notes due in 2029
(the “2029 Notes” and, together with the 0.125% Convertible Senior Notes due in 2024 (the “2024 Notes”) and the 0.00% Convertible Senior
Notes due in 2026 (the “2026 Notes”), the “Notes”), in a private placement to qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933 (the “Securities Act”). The 2029 Notes were sold to the initial purchasers pursuant to an exemption from the
registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act. The 2029 Notes were issued pursuant to an
indenture (the “2029 Indenture”), by and between the Company and U.S. Bank Trust Company, National Association, as trustee (the
“Trustee”).
Interest on the 2029 Notes is payable semi-annually in cash at a rate of 1.00% per annum on June 1 and December 1 of each year,
beginning on December 1, 2024. The 2029 Notes will mature on June 1, 2029, unless redeemed, repurchased, or converted prior to such
date in accordance with their terms.
The initial conversion rate of the 2029 Notes is 14.6047 shares of common stock per $1,000 principal amount of the 2029 Notes,
equivalent to an initial conversion price of approximately $68.47 per share of common stock.
The conversion rate is subject to adjustment for certain events. Upon conversion, the Company will pay, or deliver, as the case may be,
cash, shares of its common stock or a combination of cash and shares of its common stock, at its election. It is the Company’s current intent
to settle conversions of the 2029 Notes through “combination settlement”, which involves repayment of the principal portion in cash and any
excess of the conversion value over the principal amount in shares, cash, or a combination for any further value.
Prior to the close of business on the business day immediately preceding March 1, 2029, the 2029 Notes will be convertible only under
the following circumstances:
(1) during any calendar quarter and only during such calendar quarter, if the last reported sale price of the Common Stock for at least
20 trading days (whether or not consecutive) in a period of 30 consecutive trading days ending on, and including, the last trading
day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price for the 2029 Notes on
each applicable trading day;
(2) during the five business-day period after any five consecutive trading-day period in which the trading price per $1,000 principal
amount of 2029 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale
price of the Common Stock and the conversion rate on each such trading day;
(3) if the Company calls any or all of the 2029 Notes for redemption, at any time prior to the close of business on the second scheduled
trading day immediately preceding the redemption date; or
(4) upon the occurrence of specified corporate events set forth in the 2029 Indenture.
If the Company undergoes a fundamental change, as described in the 2029 Indenture, prior to the maturity date, holders may require
the Company to repurchase all or a portion of the 2029 Notes for cash at a price equal to
85
100% of the principal amount of the 2029 Notes to be repurchased, plus any accrued and unpaid special interest, if any, to, but excluding, the
fundamental change repurchase date.
The 2029 Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of the Company’s
indebtedness that is expressly subordinated in right of payment to the 2029 Notes; equal in right of payment to any of the Company’s
unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness to
the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including
trade payables) of current or future subsidiaries of the Company.
The 2029 Indenture contains customary events of default with respect to the 2029 Notes and provides that upon certain events of
default occurring and continuing, the Trustee may, and the Trustee at the request of holders of at least 25% in principal amount of the 2029
Notes shall, declare all principal and accrued and unpaid interest, if any, of the 2029 Notes to be due and payable. In case of certain events
of bankruptcy, insolvency or reorganization, involving the Company, all of the principal of, and accrued and unpaid interest on the 2029 Notes
will automatically become due and payable.
The 2029 Notes consisted of the following (in thousands):
December 31
2024
Liability:
Principal
$
675,000
Unamortized debt issuance costs
(11,494)
Net carrying amount
$
663,506
The effective interest rate of the 2029 Notes, excluding the conversion option, was 1.40% at December 31, 2024.
The Company carries the 2029 Notes at face value less unamortized debt issuance costs on the accompanying consolidated balance
sheets and presents the fair value for disclosure purposes only. The estimated fair value was determined based on the actual bids and offers
of the 2029 Notes in an over-the-counter market on the last trading day of the period. The estimated fair value of the 2029 Notes, based on a
market approach at December 31, 2024, was approximately $729.4 million, which represents a Level 2 valuation.
During the year ended December 31, 2024, the Company recognized $1.5 million of interest expense related to the amortization of debt
issuance costs and $4.1 million of coupon interest expense.
The 2029 Notes were not convertible at December 31, 2024.
2026 Notes
In March 2021, the Company issued $1.150 billion aggregate gross proceeds, which included the initial purchasers’ option of
$150.0 million aggregate principal amount, of the 2026 Notes in a private placement to qualified institutional buyers pursuant to Rule 144A
under the Securities Act. The 2026 Notes were sold to the initial purchasers pursuant to an exemption from the registration requirements of
the Securities Act afforded by Section 4(a)(2) of the Securities Act. The 2026 Notes were issued pursuant to an indenture (the “2026
Indenture”), by and between the Company and the Trustee.
The 2026 Notes do not bear regular interest, and the principal amount of the 2026 Notes does not accrete. The 2026 Notes may bear
special interest under specified circumstances related to the Company’s failure to comply with its reporting obligations under the 2026
Indenture or if the 2026 Notes are not freely tradeable as required by the 2026 Indenture. The 2026 Notes will mature on March 15, 2026,
unless redeemed, repurchased, or converted prior to such date in accordance with their terms.
The initial conversion rate of the 2026 Notes is 6.0156 shares of common stock per $1,000 principal amount of the 2026 Notes,
equivalent to an initial conversion price of approximately $166.23 per share of common stock.
The conversion rate is subject to adjustment for certain events. Upon conversion, the Company will pay or deliver, as the case may be,
cash, shares of its common stock, or a combination of cash and shares of its common stock, at its election. It is the Company’s current intent
to settle conversions of the 2026 Notes through “combination settlement”, which involves repayment of the principal portion in cash and any
excess of the conversion value over the principal amount in shares of its common stock.
Prior to the close of business on the business day immediately preceding December 15, 2025, the 2026 Notes will be convertible only
under the following circumstances:
86
(1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2021, and only during such calendar
quarter, if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) in a period of
30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is
greater than or equal to 130% of the conversion price for the 2026 Notes on each applicable trading day;
(2) during the five business-day period after any five consecutive trading-day period in which the trading price per $1,000 principal
amount of 2026 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale
price of the common stock and the conversion rate on each such trading day;
(3) if the Company calls any or all of the 2026 Notes for redemption, at any time prior to the close of business on the second scheduled
trading day immediately preceding the redemption date; or
(4) upon the occurrence of specified corporate events set forth in the 2026 Indenture.
If the Company undergoes a fundamental change, as described in the 2026 Indenture, prior to the maturity date, holders may require
the Company to repurchase all or a portion of the 2026 Notes for cash at a price equal to 100% of the principal amount of the 2026 Notes to
be repurchased, plus any accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date.
The 2026 Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of the Company’s
indebtedness that is expressly subordinated in right of payment to the 2026 Notes; equal in right of payment to any of the Company’s
unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness to
the extent of the value of the assets securing such indebtedness; and structurally junior to all indebtedness and other liabilities (including
trade payables) of current or future subsidiaries of the Company.
The 2026 Indenture contains customary events of default with respect to the 2026 Notes and provides that upon certain events of
default occurring and continuing, the Trustee may, and the Trustee at the request of holders of at least 25% in principal amount of the 2026
Notes shall, declare all principal and accrued and unpaid interest, if any, of the 2026 Notes to be due and payable. In case of certain events
of bankruptcy, insolvency or reorganization, involving the Company, all of the principal of, and accrued and unpaid interest on the 2026 Notes
will automatically become due and payable.
Prior to the adoption of ASU 2020-06 on January 1, 2022, in accounting for the issuance of the 2026 Notes, management allocated the
proceeds of the 2026 Notes between liability and equity components. To estimate the fair value of the liability component, management
measured the fair value of a similar liability that did not have an associated conversion feature by discounting the contractual cash flows of
the 2026 Notes at an estimated interest rate for a comparable non-convertible note. The Company applied judgment to determine the interest
rate of 5.65%, which was estimated based on the credit spread implied by the 2026 Notes issuance. Significant inputs used in the model to
determine the applicable interest rate include implied volatility over the term of the 2026 Notes. The equity component representing the
conversion option was determined by deducting the fair value of the liability component from the principal amount of the 2026 Notes. The
difference between the principal amount of the 2026 Notes and the equity component totaling $276.3 million was recorded as a debt
discount. In addition, the Company incurred $21.2 million of transaction costs related to the 2026 Notes, of which $16.1 million and
$5.1 million, respectively, was allocated to the liability and equity components of the 2026 Notes. Transaction costs allocated to the equity
component were recorded as additional debt discount. The equity component of the 2026 Notes was not remeasured as it continued to meet
the conditions for equity classification. The debt discount was amortized to interest expense over the term of the 2026 Notes using the
effective interest method. Additionally, the Company recorded, through equity, a deferred tax liability of $2.4 million, net of the related change
in the valuation allowance, related to the debt issuance costs on the 2026 Notes.
In connection with the adoption of ASU 2020-06 on January 1, 2022, the Company reclassified the remaining balance of the conversion
feature of $271.2 million from additional paid-in capital to convertible debt for $233.4 million and retained earnings for $37.8 million.
Accordingly, the Company no longer carries an equity component of the Notes, and no longer incurs non-cash interest expense related to the
accretion of the debt discount associated with the embedded conversion option.
In connection with the issuance of the 2029 Notes, the Company used approximately $662.6 million of the net proceeds from the
offering of the 2029 Notes, as well as liquid investments on hand of $185.9 million to repurchase $919.8 million aggregate principal amount
of the 2026 Notes. The difference between the consideration paid and the carrying value of the repurchased 2026 Notes, inclusive of any
unamortized debt issuance costs, was recognized as a gain on extinguishment of $65.1 million in other income in the consolidated statement
of operations for the year ended December 31, 2024.
87
The 2026 Notes consisted of the following (in thousands):
December 31
2024
2023
Liability:
Principal
$
230,196 $
1,150,000
Unamortized debt issuance costs
(1,027)
(9,392)
Net carrying amount
$
229,169 $
1,140,608
The effective interest rate of the 2026 Notes, excluding the conversion option, remained unchanged at 0.37% for December 31, 2024
and 2023.
The Company carries the 2026 Notes at face value less unamortized debt issuance costs on the accompanying consolidated balance
sheets and presents the fair value for disclosure purposes only. The estimated fair value was determined based on the actual bids and offers
of the 2026 Notes in an over-the-counter market on the last trading day of the period. The estimated fair value of the 2026 Notes, based on a
market approach at December 31, 2024, was approximately $212.9 million, which represents a Level 2 valuation.
During the years ended December 31, 2024 and 2023, the Company recognized $2.2 million and $4.2 million of interest expense
related to the amortization of debt issuance costs, respectively.
The 2026 Notes were not convertible at December 31, 2024.
2024 Notes
In August 2019, the Company issued the 2024 Notes for aggregate gross proceeds of $500.0 million, which included the initial
purchasers’ option of $65.0 million aggregate principal amount, in a private placement in reliance on Section 4(a)(2) of the Securities Act of
1933, as amended (the “Securities Act”).
In connection with the issuance of the 2026 Notes (as defined above) in March 2021, the Company used approximately $432.2 million
of the net proceeds to repurchase $250.0 million aggregate principal amount of the 2024 Notes.
On August 1, 2024, the scheduled maturity date, the Company repaid the total outstanding $250.0 million aggregate principal amount
and related $0.2 million of accrued interest pursuant to the terms of the 2024 Notes with cash on hand. The 2024 Notes consisted of the
following (in thousands):
December 31,
2023
Liability:
Principal
$
250,000
Unamortized debt issuance costs
(767)
Net carrying amount
$
249,233
Net carrying amount as of December 31, 2023 presented within total current liabilities on the consolidated balance sheet.
The effective interest rate of the 2024 Notes, excluding the conversion option, remained unchanged at 0.65% through the maturity date
of August 1, 2024 and December 31, 2023.
The Company carried the 2024 Notes at face value less unamortized debt issuance costs on the accompanying consolidated balance
sheets.
During the year ended December 31, 2024, the Company recognized $0.8 million of interest expense related to the amortization of debt
issuance costs and $0.2 million of coupon interest expense. During the year ended December 31, 2023, the Company recognized
$1.3 million of interest expense related to the amortization of debt issuance costs and $0.3 million of coupon interest expense.
2029 Capped Calls
In connection with the offering of the 2029 Notes, the Company entered into capped call transactions (the “2029 Capped Calls” and
together with the 2024 and 2026 Capped Calls, the “Capped Calls”) with certain counterparties at a cost of approximately $59.7 million,
which was recorded as a reduction of the Company’s additional paid-in capital in the accompanying consolidated financial statements.
(1)
(1)
88
Under the 2029 Capped Calls, the Company purchased capped call options that initially cover in the aggregate the total number of
shares of the Company’s common stock that initially underlie the 2029 Notes, with an exercise price equal to the initial conversion price of
the 2029 Notes, and a cap price of $92.17 per share of common stock, subject to certain adjustments under the terms of the 2029 Capped
Calls.
By entering into the 2029 Capped Calls, the Company expects to reduce the potential dilution to its common stock upon any conversion
of the 2029 Notes (or, in the event a conversion of the 2029 Notes is settled in cash, to reduce its cash payment obligation) in the event that
at the time of conversion of the 2029 Notes, the market value per share of its common stock exceeds the conversion price of the 2029 Notes,
with such reduction subject to the cap price.
The cost of the 2029 Capped Calls is not expected to be tax deductible as the Company did not elect to integrate the 2029 Capped
Calls into the 2029 Notes for tax purposes.
As of December 31, 2024, all of the 2029 Capped Calls remained outstanding.
2026 Capped Calls
In connection with the offering of the 2026 Notes, the Company entered into privately-negotiated capped call transactions (the “2026
Capped Calls”) with certain counterparties covering, subject to anti-dilution adjustments, approximately 6.9 million shares of our common
stock and are generally expected to offset the potential economic dilution of our common stock up to the initial cap price. The 2026 Capped
Calls have an initial strike price of $166.23 per share - subject to certain adjustments, which corresponds to the initial conversion price of the
2026 Notes - and an initial cap price of $233.31 per share, subject to certain adjustments.
The Company entered into the 2026 Capped Calls at a cost of approximately $102.4 million, which was recorded as a reduction of the
Company’s additional paid-in capital in the accompanying consolidated financial statements. By entering into the 2026 Capped Calls, the
Company expects to reduce the potential dilution to its common stock upon any conversion of the 2026 Notes (or, in the event a conversion
of the 2026 Notes is settled in cash, to reduce its cash payment obligation) in the event that at the time of conversion of the 2026 Notes, the
market value per share of its common stock exceeds the conversion price of the 2026 Notes, with such reduction subject to the cap price.
The cost of the 2026 Capped Calls is not expected to be tax deductible as the Company did not elect to integrate the 2026 Capped Calls into
the 2026 Notes for tax purposes.
As of December 31, 2024, all of the 2026 Capped Calls remained outstanding.
2024 Capped Calls
In connection with the offering of the 2024 Notes, the Company entered into privately-negotiated capped call transactions (the “2024
Capped Calls”). All remaining 2024 Capped Calls expired upon the maturity of the 2024 Notes on August 1, 2024.
Note 12 – Restructuring Costs
Fiscal 2023 Restructuring Program
On August 23, 2023, the Company announced its intention to reduce its global workforce by approximately 9%, or approximately 166
total positions. The actions were designed to support the Company’s growth, scale and profitability objectives. The actions were substantially
completed in the fourth quarter of fiscal year 2023 subject to local law and consultation requirements.
During the years ended December 31, 2024 and 2023, the Company recorded $1.7 million and $9.8 million, respectively, primarily for
severance and other termination benefits, which occurred in the U.S. and various international locations. The charges were recorded as one-
time termination benefits pursuant to ASC 420, Exit or Disposal Cost Obligations. The Company does not anticipate incurring additional
expenses.
Fiscal 2022 Restructuring Program
On December 7, 2022, the Company announced its intention to reduce its global workforce by approximately 5%, or approximately 95
total positions. The actions were primarily in response to cost reduction initiatives to focus on key growth priorities. The actions were
substantially completed in the fourth quarter of fiscal year 2022 subject to local law and consultation requirements.
During the years ended December 31, 2024, 2023, and 2022 the Company recorded zero, $1.1 million, and $3.8 million, respectively,
primarily for severance and other termination benefits, which occurred in the U.S. and various international locations. The charges were
recorded as one-time termination benefits pursuant to ASC 420. The Company does not anticipate incurring additional expenses.
89
The liability for the fiscal 2023 and 2022 restructuring programs was included in accrued expenses and other current liabilities in the
consolidated balance sheet, and the following tables summarize the related activity for the respective plans for the years ended
December 31, 2024 and 2023 (in thousands):
Year Ended December 31, 2024
Restructuring Program
Fiscal 2023
Fiscal 2022
Total
Accrual balance as of December 31, 2023
$
1,562 $
7 $
1,569
Restructuring charges
1,720
—
1,720
Cash payments and adjustments
(3,282)
(7)
(3,289)
Accrual balance as of December 31, 2024
$
— $
— $
—
Year Ended December 31, 2023
Restructuring Program
Fiscal 2023
Fiscal 2022
Total
Accrual balance as of December 31, 2022
$
— $
1,737 $
1,737
Restructuring charges
9,815
1,149
10,964
Cash payments and adjustments
(8,253)
(2,879)
(11,132)
Accrual balance as of December 31, 2023
$
1,562 $
7 $
1,569
Restructuring charge adjustments were changes in estimates whereby increases and decreases in charges were generally recorded to
operating expenses in the periods of adjustments.
Note 13 – Equity Awards
2014 and 2016 Plans
On March 3, 2014, the Company adopted the 2014 Stock Incentive Plan (the “2014 Plan”). In November 2016, upon the completion of
the Company’s initial public offering, the Company adopted the 2016 Equity Incentive Plan (the “2016 Plan”) and determined that it will no
longer grant any additional awards under the 2014 Plan. However, the 2014 Plan continues to govern the terms and conditions of the
outstanding awards previously granted under the 2014 plan. Upon the adoption of the 2016 Plan, the maximum number of shares issuable
was 6.2 million, plus a number of shares equal to the number of shares subject to outstanding awards granted under the 2014 Plan after the
date the 2014 Plan is terminated without having been exercised in full. The Company’s Board may grant stock options and restricted stock
units to employees, directors and consultants under the 2016 Plan. The aggregate number of shares available under the 2016 Plan and the
number of shares subject to outstanding options automatically adjusts for any changes in the Company’s outstanding common stock by
reason of any recapitalization, spin-off, reorganization, reclassification, stock dividend, stock split, reverse stock split, or similar
transaction. Stock options and restricted stock units generally vest over three to four years and have contractual terms of ten years.
At December 31, 2024, 20.4 million shares were available for issuance under the 2016 Plan.
Stock options - service-only vesting conditions
The following table summarizes activity for awards that contain service-only vesting conditions:
Shares
Weighted-
Average
Exercise Price
Weighted-Average
Remaining
Contractual Term
Aggregate
Intrinsic Value
(in thousands)
(in years)
(in thousands)
Outstanding at December 31, 2023
1,693 $
45.67
4.6
$
37,077
Exercised
(396) $
19.61
Forfeited/canceled
(60) $
107.89
Outstanding at December 31, 2024
1,237 $
50.96
4.1
$
18,242
Exercisable at December 31, 2024
1,229 $
50.56
There were no stock options granted during the years ended December 31, 2024, 2023, and 2022. The aggregate intrinsic value of
options exercised that contain service only vesting conditions during the years ended December 31, 2024, 2023, and 2022 was $14.3 million,
$15.2 million, and $13.4 million, respectively. Cash received
90
from the exercise of stock options for the years ended December 31, 2024, 2023, and 2022 was $7.6 million, $19.8 million, and $4.7 million,
respectively.
Unrecognized compensation expense relating to stock options that contain service only vesting conditions was $0.3 million at
December 31, 2024, which is expected to be recognized over a weighted-average period of 0.6 years.
Restricted stock units - service-only vesting conditions
The following table summarizes activity for restricted stock units that contain service-only vesting conditions:
Restricted
Stock Units
Weighted-Average
Grant Date
Fair Value
(in thousands)
Nonvested at December 31, 2023
2,208 $
68.82
Granted
1,905 $
62.87
Vested
(1,004) $
70.13
Forfeited/canceled
(298) $
68.11
Nonvested at December 31, 2024
2,811 $
64.40
At December 31, 2024, the intrinsic value of service-based nonvested restricted stock units was $170.8 million. At December 31, 2024,
total unrecognized compensation cost related to nonvested restricted stock units was $154.5 million and was expected to be recognized over
a weighted-average period of 2.7 years.
Restricted stock units - performance and service conditions
Grants of performance and service-based restricted stock units vest over a three-year period. The total fair value of the grants made
during the year ended December 31, 2024 was $12.5 million.
The following table summarizes activity for restricted stock units with performance and service vesting conditions with grant dates (in
thousands):
Restricted
Stock Units
Weighted-Average
Grant Date
Fair Value
(in thousands)
Nonvested at December 31, 2023
113 $
67.17
Granted
206 $
60.43
Performance adjustment
(62) $
67.17
Vested
(51) $
67.17
Forfeited/canceled
(8) $
58.57
Nonvested at December 31, 2024
198 $
60.51
The following table summarizes activity for restricted stock units with performance and service vesting conditions with no grant dates
established (in thousands):
Restricted
Stock Units
Weighted-Average
Grant Date
Fair Value
(in thousands)
Nonvested at December 31, 2023
235
N/A
Granted (legal grant with no grant date established)
147
N/A
Granted (accounting grant date established)
(133)
N/A
Forfeited/canceled
(5)
N/A
Nonvested at December 31, 2024
244
N/A
At December 31, 2024, the intrinsic value of performance and service-based nonvested restricted stock units with established grant
dates was $12.0 million. At December 31, 2024, total unrecognized compensation cost related to performance and service-based nonvested
restricted stock units with established grant dates was $0.8 million and was expected to be recognized over a weighted-average period of 0.2
years.
At December 31, 2024, the intrinsic value of performance and service-based nonvested restricted stock units with no grant dates
established was $14.8 million.
91
Restricted stock units - market and service conditions
Grants of market and service-based restricted stock units vest subject to the achievement of TSR relative to an industry index over a
three-year period. The total fair value of the grants made during the year ended December 31, 2024 was $19.0 million.
The following table summarizes activity for restricted stock units with market and service-based conditions:
Restricted
Stock Units
Weighted-Average
Grant Date
Fair Value
(in thousands)
Nonvested at December 31, 2023
—
N/A
Granted
202 $
93.89
Vested
—
N/A
Forfeited/canceled
—
N/A
Nonvested at December 31, 2024
202 $
93.89
At December 31, 2024, the intrinsic value of market and service-based nonvested restricted stock units was $12.3 million. At
December 31, 2024, total unrecognized compensation cost related to market and service-based nonvested restricted stock units was
$14.6 million and was expected to be recognized over a weighted-average period of 2.2 years.
Employee Stock Purchase Plan
Under the Company’s 2018 Employee Stock Purchase Plan (“ESPP”), eligible employees are granted the right to purchase shares at
the lower of 85% of the fair value of the stock at the time of grant or 85% of the fair value at the time of exercise. The right to purchase
shares is granted twice yearly for six month offering periods in May and November and exercisable on or about the succeeding November
and May, respectively, of each year. Under the ESPP, 0.6 million shares remained available for issuance at December 31, 2024. The
Company recognized stock-based compensation expense related to the ESPP of $3.2 million, $3.3 million, and $3.3 million for the years
ended December 31, 2024, 2023, and 2022, respectively.
The fair value of ESPP shares granted was estimated using the Black-Scholes option pricing model with the following weighted-
average assumptions:
Year Ended December 31,
2024
2023
2022
Risk-free interest rate
4.4% - 5.4%
4.5% - 5.4%
1.4% - 4.5%
Expected term (in years)
0.5 - 1
0.5 - 1
0.5 - 1
Volatility
33.4% - 41.5%
39.8% - 58.5%
39.3% - 65.5%
At December 31, 2024, total unrecognized compensation cost related to the 2018 ESPP was $2.1 million and was expected to be
recognized over a weighted-average period of approximately one year.
Stock-based compensation expense
Stock-based compensation expense recorded in the Company’s consolidated statements of operations was as follows (in thousands):
Year Ended December 31,
2024
2023
2022
Cost of revenues
$
10,501 $
10,342 $
8,595
Sales and marketing
25,428
24,152
26,310
Research and development
13,345
13,095
14,382
General and administrative
33,977
30,381
26,597
$
83,251 $
77,970 $
75,884
Stock-based compensation capitalized as an asset was $4.5 million, $3.5 million, and $2.4 million during the years ended
December 31, 2024, 2023, and 2022, respectively.
The Company recorded $0.8 million of foreign tax provisions attributable to equity awards for the year ended December 31, 2024, and
$0.1 million and $0.1 million of foreign tax benefits attributable to equity awards for the years ended December 31, 2023 and 2022,
respectively.
92
Note 14 – Income Taxes
The components of loss before income taxes were as follows (in thousands):
Year Ended December 31,
2024
2023
2022
United States
$
126,341 $
62,745 $
(41,534)
International
(1,643)
(2,236)
(5,877)
$
124,698 $
60,509 $
(47,411)
The components of the total provision for (benefit from) income taxes were as follows (in thousands):
Year Ended December 31,
2024
2023
2022
Current
Federal
$
4,474 $
272 $
—
State
3,872
859
316
Foreign
3,361
1,844
564
Total current tax expense
11,707
2,975
880
Deferred
Federal
(35,071)
202
(12,709)
State
(17,791)
100
(1,503)
Foreign
(1,912)
(1,827)
(188)
Total deferred tax provision
(54,774)
(1,525)
(14,400)
Total provision for (benefit from) income taxes
$
(43,067) $
1,450 $
(13,520)
A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate for the years ended December 31,
2024, 2023, and 2022 was as follows:
Year Ended December 31,
2024
2023
2022
Federal statutory income tax rate
21.0 %
21.0 %
21.0 %
State tax, net of federal benefit
(11.8)%
2.7 %
(1.2)%
Federal tax credits
(2.5)%
(9.8)%
10.0 %
De-recognized tax credit carryforwards
2.6 %
— %
— %
Unrecognized tax benefit remeasurement
4.3 %
— %
— %
Change in valuation allowance
(53.2)%
(13.8)%
(1.8)%
Foreign tax differential
0.9 %
2.0 %
(2.3)%
Windfall tax benefits, net related to stock-based compensation
1.8 %
4.1 %
1.1 %
Nondeductible officer compensation
3.9 %
6.8 %
(11.1)%
Nondeductible transaction costs
— %
0.3 %
(1.5)%
Contingent consideration
— %
(11.6)%
15.7 %
Nondeductible meals and entertainment
0.5 %
0.7 %
(1.1)%
Foreign-derived intangible income tax benefit
(1.8)%
— %
— %
Other
(0.2)%
— %
(0.3)%
(34.5)%
2.4 %
28.5 %
93
Significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands):
December 31,
2024
2023
Deferred tax assets
Net operating loss carryforwards
$
14,906 $
55,779
Research and other credits
17,288
39,248
Capitalized R&D
40,131
28,455
Stock-based compensation
7,570
7,811
Operating and finance leases
3,382
3,343
Accrued expenses and other current liabilities
7,300
5,445
Other
2,962
779
Total deferred tax assets
93,539
140,860
Less: valuation allowance
(4,677)
(92,079)
Deferred tax assets, net of valuation allowance
88,862
48,781
Deferred tax liabilities
Intangible assets
(13,801)
(18,698)
Prepaid expenses
(23,194)
(24,861)
Operating lease right-of-use and finance lease assets
(3,191)
(2,973)
Accretion on investment
—
(8,253)
Other
—
(245)
Total deferred tax liabilities
(40,186)
(55,030)
Net deferred taxes
$
48,676 $
(6,249)
ASC 740, Income Taxes, requires that the tax benefit of net operating losses, temporary differences, and credit carryforwards be
recorded as an asset to the extent that management assesses that realization is “more likely than not.” A valuation allowance is recorded
when it is more likely than not that some of the deferred tax assets will not be realized. Realization of future tax benefits is dependent on the
Company’s ability to generate sufficient taxable income within the carryforward period. During the quarter ended December 31, 2024, the
Company determined that the $89.1 million U.S. deferred tax asset valuation allowance was no longer required. This determination was
based on an evaluation of positive and negative factors, including, but not limited to, the Company’s achievement of adjusted pre-tax income
resulting in a three-year cumulative income position as of December 31, 2024, the Company’s full utilization of its federal net operating loss
carryforward during 2024, and the Company’s projections of future pre-tax income. Based on available objective evidence, the Company has
recorded a valuation allowance against certain foreign deferred tax assets at December 31, 2024.
The changes in the valuation allowance were as follows (in thousands):
Year Ended December 31,
2024
2023
2022
Valuation allowance, at beginning of year
$
92,079 $
99,476 $
32,279
Increase (decrease) in valuation allowance recorded through earnings
(87,402)
(7,063)
2,880
Increase (decrease) in valuation allowance recorded through equity
—
(334)
64,317
Valuation allowance, at end of year
$
4,677 $
92,079 $
99,476
The decrease in valuation allowance recorded through equity of $0.3 million during the year ended December 31, 2023 is related to
unrealized gains reported in other comprehensive income. The increase in valuation allowance recorded through equity of $64.3 million
during the year ended December 31, 2022 resulted from the adoption of ASU 2020-06, which required the reversal of deferred tax liabilities
associated with the Company’s 2024 and 2026 Notes.
The decrease in valuation allowance recorded through earnings of $87.4 million during the year ended December 31, 2024 resulted
primarily from the release of valuation allowance previously recorded against its U.S. deferred tax assets, partially offset by an increase in
valuation allowance recorded against certain foreign deferred tax assets.
The decrease in valuation allowance recorded through earnings of $7.1 million for the year ended December 31, 2023 resulted
primarily from the utilization of federal and state net operating loss carryforwards due
94
to domestic profitability, along with the valuation allowance decrease associated with net deferred tax liabilities from the DI Acquisition, which
are a source of taxable income to support the recognition of existing UK deferred tax assets. The valuation allowance release resulted in a
UK deferred tax benefit of $1.7 million for the year ended December 31, 2023.
The increase in valuation allowance recorded through earnings of $2.9 million for the year ended December 31, 2022 resulted primarily
from the effects of the capitalization and amortization of research and development expenses as required by the 2017 Tax Cuts and Job Act,
partially offset by the valuation allowance decrease associated with net deferred tax liabilities acquired from FourQ which are a source of
taxable income to support the recognition of existing BlackLine deferred tax assets. The Company elected to consider the recoverability of
the acquired deferred tax assets before existing BlackLine deferred tax assets. The valuation allowance release associated with the acquired
FourQ net deferred tax liabilities resulted in a U.S. deferred tax benefit of $14.2 million for the year ended December 31, 2022.
The Company did not provide for U.S. income taxes on the undistributed earnings and other outside temporary differences of foreign
subsidiaries as they are considered indefinitely reinvested outside the U.S. At December 31, 2024 and 2023, the amount of temporary
differences related to undistributed earnings and other outside temporary differences upon which U.S. income taxes have not been provided
is immaterial to these consolidated financial statements.
At December 31, 2024, the Company had consolidated state net operating loss carryforwards available to offset future taxable income
of approximately $68.0 million. The state losses will begin to expire between 2031 and 2041, depending on the jurisdiction. The Company
has federal research and development credits of $5.9 million, which begin to expire in 2043. The Company has state research and
development credits of $10.7 million, which are indefinite in expiration. Pursuant to Internal Revenue Code Section 382, use of the
Company’s net operating loss carryforwards may be limited if the Company experiences a cumulative change in ownership of more than 50%
over a three-year period.
The following is a rollforward of the Company’s total gross unrecognized tax benefits (in thousands):
Year Ended December 31,
2024
2023
2022
Beginning gross unrecognized tax benefits
$
7,104 $
5,513 $
4,266
Increases related to prior year tax positions
9,243
274
162
Increases related to current year tax positions
2,351
1,317
1,085
Ending gross unrecognized tax benefits
$
18,698 $
7,104 $
5,513
At December 31, 2024, included in the balance of unrecognized tax benefits is $18.7 million, that if recognized, would affect the
effective tax rate. The Company recorded less than $0.1 million interest and penalties in its provision for income taxes for the years ended
December 31, 2024, 2023, and 2022, respectively, and less than $0.1 million was accrued in interest and penalties at December 31, 2024,
2023, and 2022, respectively.
The Company files U.S. federal, various state, and foreign income tax returns. In the normal course of business, the Company is
subject to examination by taxing authorities. The tax years from 2013 forward remain subject to examination for federal purposes. Generally,
state and foreign tax authorities may examine the Company’s tax returns for four years and five years, respectively, from the date an income
tax return is filed. However, the taxing authorities may continue to examine the Company’s federal and state net operating loss carryforwards
until the statute of limitations closes on the tax years in which the federal and state net operating losses are utilized.
The Company regularly evaluates any necessary changes to their uncertain tax positions. During 2024 the Company remeasured their
uncertain tax position reserve which resulted in an increase to prior year positions of $9.2 million. The Company does not anticipate material
changes in the total amount or composition of its unrecognized tax benefits within 12 months of the reporting date.
95
Note 15 – Net Income (Loss) per Share
The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except per share
amounts):
Year Ended December 31,
2024
2023
2022
Basic net income (loss) per share
Numerator:
Net income (loss) attributable to BlackLine, Inc.
$
161,174 $
52,833 $
(29,391)
Denominator:
Weighted average shares
62,129
60,849
59,539
Basic net income (loss) per share attributable to BlackLine, Inc.
$
2.59 $
0.87 $
(0.49)
Diluted net income (loss) per share
Numerator:
Net income (loss) attributable to BlackLine, Inc.
$
161,174 $
52,833 $
(29,391)
Interest expense, net of taxes
7,804
5,716
—
Gain on extinguishment of convertible senior notes, net of taxes
(62,147)
—
—
Net income (loss) attributable to BlackLine, Inc. for diluted calculation
$
106,831 $
58,549 $
(29,391)
Denominator:
Weighted average shares
62,129
60,849
59,539
Dilutive effect of securities
691
872
—
Dilutive effect of convertible senior notes
10,683
10,324
—
Shares used to calculate diluted net income (loss) per share
73,503
72,045
59,539
Diluted net income (loss) per share attributable to BlackLine, Inc.
$
1.45 $
0.81 $
(0.49)
The Company computes basic earnings per share attributable to BlackLine, Inc. using the weighted average number of common shares
outstanding. The Company computes diluted earnings per share attributable to BlackLine, Inc. using the weighted average number of
common shares outstanding plus the effect of potentially dilutive shares, which is based on the weighted-average shares of common stock
underlying stock options and unvested stock awards using the treasury stock method, and the effect of the convertible senior notes using the
if-converted method.
The weighted average impact of potentially dilutive securities that were excluded from the diluted per share calculations because they
were anti-dilutive were as follows (in thousands):
Year Ended December 31,
2024
2023
2022
Stock options - service-only vesting conditions
330
1,062
2,431
Restricted stock units - service-only vesting conditions
1,813
1,834
2,202
Restricted stock units - performance and service conditions
55
16
207
Restricted stock units - market and service conditions
153
—
—
Restricted stock units - performance, market, and service conditions
—
73
189
Total shares excluded from net income (loss) per share
2,351
2,985
5,029
The denominator for diluted net income per share attributable to BlackLine, Inc. does not include any effect from the Capped Calls as
this effect would be anti-dilutive. In the event of conversion of the Notes, shares delivered to the Company under the Capped Calls would
offset the dilutive effect of the shares that the Company would issue under the Notes. Refer to “Note 11 - Convertible Senior Notes” for
additional information on the Notes and the related Capped Calls.
Note 16 – Contingent Consideration
As a condition of the FourQ Acquisition that occurred on January 26, 2022, the Company agreed to pay additional cash consideration if
FourQ realized certain firm-specific targets, including the amount and timing of new and incremental combined bookings from FourQ and
BlackLine, and revenues from a specified FourQ customer
96
over a three-year period subsequent to the acquisition date. The maximum cash consideration to be distributed is $73.2 million. Changes in
the significant inputs used in the fair value measurement, specifically a change in new and incremental actual and forecasted combined
bookings from FourQ and the Company, can significantly impact the fair value of the contingent consideration liability. As of December 31,
2024, the FourQ contingent consideration was zero. As of the filing date of this Annual Report on Form 10-K, the financial performance
milestones were not met, and the Company is no longer obligated to pay the contingent consideration of $73.2 million. Refer to “Note 2 -
Basis of Presentation, Significant Accounting Policies, and Recently-Issued Accounting Pronouncements” for additional information regarding
the valuation of the contingent consideration.
In conjunction with the 2013 Acquisition, option holders of BlackLine Systems were allowed to cancel their stock option rights and
receive a cash payment equal to the amount of calculated gain (less applicable expense and other items) had they exercised their stock
options and then sold their common shares as part of the 2013 Acquisition. As a condition of the 2013 Acquisition, the Company was
obligated to pay additional cash consideration to certain equity holders since the Company realized taxable income for the year ended
December 31, 2022. The maximum contingent cash consideration of $8.0 million was paid during the year ended December 31, 2023, which
reduced the liability to zero.
Increases and decreases in the fair value of contingent consideration are recorded as expense or reversals of expense, respectively,
within general and administrative expenses in the consolidated statements of operations.
Note 17 – Commitments and Contingencies
Litigation—From time to time, the Company may become subject to legal proceedings, claims, and litigation arising in the ordinary
course of business. The Company is not currently a party to any legal proceedings, nor is it aware of any pending or threatened litigation that
would have a material adverse effect on the Company’s business, operating results, cash flows, or financial condition should such litigation
be resolved unfavorably.
Indemnification—In the ordinary course of business, the Company may provide indemnification of varying scope and terms to
customers, vendors, investors, directors, and officers with respect to certain matters, including, but not limited to, losses arising out of its
breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third parties.
These indemnification provisions may survive termination of the underlying agreement and the maximum potential amount of future
payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses. The
maximum potential amount of future payments the Company could be required to make under these indemnification provisions is
indeterminable. The Company has never paid a material claim, nor has it been sued in connection with these indemnification arrangements.
At December 31, 2024 and 2023, the Company has not accrued a liability for these indemnification arrangements because the likelihood of
incurring a payment obligation, if any, in connection with these indemnification arrangements was not probable or reasonably estimable.
Note 18 – Defined Contribution Plan
The Company sponsors a defined contribution retirement plan (the “Plan”) that covers substantially all domestic employees. The
Company makes matching contributions of 100% of each $1 of the employee’s contribution up to the first 3% of the employee’s semi-monthly
compensation and 50% of each $1 of the employee’s contribution up to the next 2% of the employee’s semi-monthly compensation.
Matching contributions to the Plan recorded in the Company’s consolidated statements of operations totaled $7.2 million, $7.6 million, and
$7.4 million for the years ended December 31, 2024, 2023, and 2022, respectively.
Note 19 – Subsequent Events
On February 12, 2025, the Compensation Committee approved restricted stock unit grants to employees totaling 0.1 million shares.
Each restricted stock unit entitles the recipient to receive one share of common stock upon vesting of the award. The restricted stock units
are service-based and will vest as to one-fourth of the total number of units awarded on the first anniversary of February 20, 2025 and
quarterly thereafter for 12 consecutive quarters.
On February 12, 2025, the Compensation Committee approved the performance metrics for the 2025 performance period, resulting in
the establishment of accounting grant dates for the third tranche of the 2023 and second tranche of the 2024 performance and service-based
restricted stock units totaling 0.2 million target shares.
97
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended, or “the Exchange Act” means controls and other procedures of a company that are designed to provide reasonable assurance that
information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed,
summarized, and reported, within the time periods specified in the SEC’s rules and forms; and that such information is accumulated and
communicated to the company’s management, including its principal executive officers and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. Our management, with the participation of our principal executive officers and principal
financial officer, evaluated the effectiveness of our disclosure controls and procedures at December 31, 2024, the last day of the period
covered by this Annual Report. Based on this evaluation, our principal executive officers and principal financial officer have concluded that, at
December 31, 2024, our disclosure controls and procedures were effective at a reasonable assurance level.
Limitations on the Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures and internal control over financial reporting, management
recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute,
assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over
financial reporting must reflect the fact that there are resource constraints and our management is required to apply judgment in evaluating
the benefits of possible controls and procedures relative to their costs. The design of any disclosure controls and procedures and internal
control over financial reporting also is based in part upon certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) of the Exchange Act).
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in
“Internal Control - Integrated Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based
on this evaluation, management concluded that the Company’s internal control over financial reporting was effective at December 31, 2024.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2024 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-
15(d) and 15d-15(d) under the Exchange Act that occurred during the quarter ended December 31, 2024 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
On December 6, 2024, Mark Partin, our Chief Financial Officer, adopted a "Rule 10b5-1 trading arrangement" as defined in Regulation
S-K Item 408. The trading arrangement provides for the sale, from time to time, of an aggregate of up to 260,660 shares of our common
stock, and was intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until December 8,
2025, or earlier if all transactions under the trading arrangement have been completed.
On November 21, 2024, Thomas Unterman, our Lead Independent Director, adopted a "Rule 10b5-1 trading arrangement" as defined
in Regulation S-K Item 408. The trading arrangement provides for the sale, from time to time, of an aggregate of up to 9,100 shares of our
common stock, and was intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading arrangement is until
November 21, 2025, or earlier if all transactions under the trading arrangement have been completed.
98
No other officers or directors, as defined in Rule 16a-1(f), adopted, modified, or terminated a Rule10b5-1 trading arrangement as
defined in Regulation S-K Item 408, during the last fiscal quarter.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
99
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The Company has adopted an insider trading policy applicable to our directors, officers, and employees, that we believe is reasonably
designed to promote compliance with insider trading laws, rules, and regulations, as well as applicable listing standards. A copy of our insider
trading policy is filed as Exhibit 19 to this Annual Report on Form 10-K. From time to time, we may engage in transactions in our own
securities. We comply with all applicable securities laws when engaging in transactions in our securities.
The information required by this item will be included in our Definitive Proxy Statement for the 2025 Annual Meeting of Stockholders to
be filed with the Securities and Exchange Commission, or the SEC, within 120 days of the fiscal year ended December 31, 2024, and is
incorporated herein by reference.
Item 11. Executive Compensation
The information required by this item will be included in our Definitive Proxy Statement for the 2025 Annual Meeting of Stockholders to
be filed with the SEC within 120 days of the fiscal year ended December 31, 2024, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be included in our Definitive Proxy Statement for the 2025 Annual Meeting of Stockholders to
be filed with the SEC within 120 days of the fiscal year ended December 31, 2024, and is incorporated herein by reference.
Securities Authorized for Issuance under Equity Compensation Plan
The information required by this item will be included in our Definitive Proxy Statement for the 2025 Annual Meeting of Stockholders to
be filed with the SEC within 120 days of the fiscal year ended December 31, 2024, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be included in our Definitive Proxy Statement for the 2025 Annual Meeting of Stockholders to
be filed with the SEC within 120 days of the fiscal year ended December 31, 2024, and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
Our independent registered public accounting firm is PricewaterhouseCoopers LLP, Los Angeles, CA.
The information required by this item will be included in our Definitive Proxy Statement for the 2025 Annual Meeting of Stockholders to
be filed with the SEC within 120 days of the fiscal year ended December 31, 2024, and is incorporated herein by reference.
With the exception of the information incorporated in Items 10, 11, 12, 13, and 14 of this Annual Report on Form 10-K, our Definitive
Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed with the SEC within 120 days of the fiscal year ended December 31,
2024 is not deemed “filed” as part of this Annual Report on Form 10-K.
100
PART IV
Item 15. Exhibits and Financial Statement Schedules
Documents filed as part of this report are as follows:
1.
Consolidated Financial Statements:
Our Consolidated Financial Statements are listed in the “Index to Consolidated Financial Statements” under Part II,
Item 8 of this Annual Report on Form 10-K.
2.
Financial Statement Schedules:
Financial Statement Schedules have been omitted as information required is inapplicable or the information is
presented in the consolidated financial statements and the related notes.
3.
Exhibits:
The documents listed in the accompanying index to exhibits are filed or incorporated by reference as part of this
Annual Report on Form 10-K.
Exhibit Index
Incorporated by Reference
Exhibit
Number
Description
Form
File No.
Exhibit
Filing Date
2.1
Agreement and Plan of Merger, by and among SLS Breeze
Holdings, Inc., SLS Breeze Intermediate Holdings, Inc., SLS
Breeze Merger Sub, Inc. and BlackLine Systems, Inc., dated as
of August 9, 2013.
S-1
333-213899
2.1
September 30, 2016
3.1
Certificate of Amendment to the Second Amended and Restated
Certificate of Incorporation of the Registrant, effecting a one-for-
five reverse stock split.
S-1/A
333-213899
3.2
October 17, 2016
3.2
Amended and Restated Certificate of Incorporation of the
Registrant.
10-Q
001-37924
3.2
December 12, 2016
3.3
Amended and Restated Bylaws of the Registrant.
8-K
001-37924
3.1
March 13, 2023
4.1
Specimen Common Stock Certificate of the Registrant.
S-1
333-213899
4.1
September 30, 2016
4.2
Description of Registrant’s Securities.
10-K
001-37924
4.2
February 23, 2023
4.3
Amended and Restated Stockholders’ Agreement, by and among
the Registrant, Silver Lake Sumeru, Iconiq, Therese Tucker and
Mario Spanicciati.
10-Q
001-37924
4.2
December 12, 2016
4.4
Amended and Restated Registration Rights Agreement, by and
among the Registrant, Silver Lake Sumeru, Iconiq, Therese
Tucker and Mario Spanicciati.
10-Q
001-37924
4.3
December 12, 2016
4.5
Indenture, dated May 15, 2021, between BlackLine, Inc. and U.S.
National Association.
8-K
001-37924
4.1
March 15, 2021
4.6
Indenture, dated May 24, 2024, between BlackLine, Inc. and U.S.
Bank Trust Company, National Association.
8-K
001-37924
4.1
May 24, 2024
4.7
Form of 0.00% Convertible Senior Note due 2026 (included in
Exhibit 4.1).
8-K
001-37924
4.2
March 15, 2021
4.8
Form of 1.00% Convertible Senior Note due 2029 (included in
Exhibit 4.1).
8-K
001-37924
4.2
May 24, 2024
10.1^
Software Development Cooperation Agreement, by and between
the Company and SAP AG, effective as of October 1, 2013.
S-1
333-213899
10.1
September 30, 2016
10.2
Amendment No. 1 to Software Development Cooperation
Agreement, by and between the Company and SAP AG, effective
as of October 31, 2018.
10-K
001-37924
10.2
February 28, 2019
10.3+
2014 Equity Incentive Plan and form of equity agreements
thereunder.
S-1
333-213899
10.6
September 30, 2016
10.4+
Amendment No. 1 to the 2014 Equity Incentive Plan.
S-1
333-213899
10.7
September 30, 2016
10.5+
Amendment No. 2 to the 2014 Equity Incentive Plan.
S-1
333-213899
10.8
September 30, 2016
101
Incorporated by Reference
Exhibit
Number
Description
Form
File No.
Exhibit
Filing Date
10.6+
Amendment No. 3 to the 2014 Equity Incentive Plan.
S-1
333-213899
10.9
September 30, 2016
10.7+
2016 Equity Incentive Plan and the form of equity award
agreements thereunder.
S-1/A
333-213899
10.10
October 17, 2016
10.8+
Employee Incentive Compensation Plan of the Company.
S-1
333-213899
10.11
September 30, 2016
10.9+
2018 Employee Stock Purchase Plan.
10-Q
001-37924
10.2
August 8, 2018
10.10+
Form of Change of Control and Severance Policy.
S-1
333-213899
10.13
September 30, 2016
10.11+
Executive Employment Agreement, by and between the
Registrant and Therese Tucker, effective as of January 1, 2016.
S-1
333-213899
10.14
September 30, 2016
10.12+
Employment Offer Letter, by and between the Company and
Karole Morgan-Prager, dated as of May 4, 2015.
S-1
333-213899
10.16
September 30, 2016
10.13+
Confirmatory Offer Letter, by and between the Registrant and
Karole Morgan-Prager, dated as of September 29, 2016.
S-1
333-213899
10.18
September 30, 2016
10.14+
Employment Offer Letter, by and between the Company and
Mark Partin, dated as of December 25, 2014.
S-1
333-213899
10.19
September 30, 2016
10.15+
Confirmatory Offer Letter, by and between the Registrant and
Mark Partin, dated as of September 29, 2016.
S-1
333-213899
10.20
September 30, 2016
10.16+
Employment Agreement between the Company and Therese
Tucker, signed March 5, 2023.
8-K
001-37924
10.1
March 6, 2023
10.17+
Employment Agreement between the Company and Owen Ryan,
signed March 5, 2023.
8-K
001-37924
10.2
March 6, 2023
10.18+
Form of Indemnification Agreement between the Registrant and
each of its directors and executive officers.
S-1
333-213899
10.22
September 30, 2016
10.19^
Office Lease, by and between the Company and Douglas Emmet
2008, LLC, dated November 22, 2010.
S-1
333-213899
10.25
September 30, 2016
10.20^
First Amendment to Office Lease, by and between the Company
and Douglas Emmett 2008, LLC, dated August 14, 2012.
S-1
333-213899
10.26
September 30, 2016
10.21^
Second Amendment to Office Lease, by and between the
Company and Douglas Emmett 2008, LLC, dated December 26,
2013.
S-1
333-213899
10.27
September 30, 2016
10.22^
Third Amendment to Office Lease, by and between the Company
and Douglas Emmett 2008, LLC, dated June 24, 2014.
S-1
333-213899
10.28
September 30, 2016
10.23
Fourth Amendment to Office Lease, by and between the
Company and Douglas Emmett 2008, LLC, dated January 29,
2015.
S-1
333-213899
10.29
September 30, 2016
10.24
Fifth Amendment to Office Lease, by and between the Company
and Douglas Emmett 2008, LLC, dated October 6, 2016.
S-1/A
333-217981
10.26
May 22, 2017
10.25
Sixth Amendment to Office Lease, by and between the Company
and Douglas Emmett 2008, LLC, dated May 10, 2017.
S-1/A
333-217981
10.27
May 22, 2017
10.26
Seventh Amendment to Office Lease, by and between the
Company and Douglas Emmett 2008, LLC, dated May 18, 2017.
S-1/A
333-217981
10.28
May 22, 2017
10.27
Eighth Amendment to Office Lease, by and between the
Company and Douglas Emmett 2008, LLC, dated May 26, 2021.
10-K
001-37924
10.29
February 23, 2024
10.28
Ninth Amendment to Office Lease, by and between the Company
and Douglas Emmett 2008, LLC, dated June 15, 2023.
10-Q
001-37924
10.1
August 9, 2023
10.29
Form of Capped Call Confirmation.
8-K
001-37924
10.2
March 15, 2021
10.30
Form of Capped Call Confirmation.
8-K
001-37924
10.2
May 24, 2024
102
Incorporated by Reference
Exhibit
Number
Description
Form
File No.
Exhibit
Filing Date
19**
BlackLine, Inc. Insider Trading Policy.
21.1**
List of subsidiaries of the Company.
23.1**
Consent of Independent Registered Public Accounting Firm.
24.1**
Power of Attorney (included in signature pages hereto).
31.1**
Certification of Chief Executive Officer pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2**
Certification of Chief Executive Officer pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.3**
Certification of Chief Financial Officer pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
32.1†
Certifications of Chief Executive Officers and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
97.1+
Registrant’s Compensation Recovery Policy dated November 7,
2023.
10-K
001-37924
97.1
February 23, 2024
101.INS**
Inline XBRL Instance Document
101.SCH**
Inline XBRL Taxonomy Extension Schema Document
101.CAL**
Inline XBRL Taxonomy Extension Calculation Linkbase
Document
101.DEF**
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE**
Inline XBRL Taxonomy Extension Presentation Linkbase
Document
104
Cover Page Interactive Data File (formatted as inline XBRL and
contained in Exhibit 101)
^ Portions of this exhibit (such portions indicated by “[***]”) have been omitted as the Company has determined the omitted information (i) is
not material and (ii) would be competitively harmful to Registrant if publicly disclosed.
** Filed herewith.
+ Indicates management contract or compensatory plan.
† The certifications attached as Exhibit 32.1 that accompany this Annual Report on Form 10-K are deemed furnished and not filed with the
Securities and Exchange Commission and are not to be incorporated by reference into any filing of BlackLine, Inc. under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of
this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing.
Item 16. Form 10-K Summary
Not applicable.
103
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual
Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on February 21, 2025.
BLACKLINE, INC.
By:
/s/ Therese Tucker
Name:
Therese Tucker
Title:
Co-Chief Executive Officer
By:
/s/ Owen Ryan
Name:
Owen Ryan
Title:
Co-Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Therese Tucker, Owen Ryan, and Mark Partin, and each of
them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents, or any of them, or their or his substitutes, may lawfully do or cause to be done by
virtue thereof.
104
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the Company and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Therese Tucker
Co-Chief Executive Officer and Director
(Co-Principal Executive Officer)
February 21, 2025
Therese Tucker
/s/ Owen Ryan
Co-Chief Executive Officer and Director
(Co-Principal Executive Officer)
February 21, 2025
Owen Ryan
/s/ Mark Partin
Chief Financial Officer
(Principal Financial Officer)
February 21, 2025
Mark Partin
/s/ Patrick Villanova
Chief Accounting Officer
(Principal Accounting Officer)
February 21, 2025
Patrick Villanova
/s/ Camille Drummond
Director
February 21, 2025
Camille Drummond
/s/ David Henshall
Director
February 21, 2025
David Henshall
/s/ Brunilda Rios
Director
February 21, 2025
Brunilda Rios
/s/ Thomas Unterman
Director
February 21, 2025
Thomas Unterman
/s/ Sophia Velastegui
Director
February 21, 2025
Sophia Velastegui
/s/ William Wagner
Director
February 21, 2025
William Wagner
/s/ Barbara Whye
Director
February 21, 2025
Barbara Whye
/s/ Mika Yamamoto
Director
February 21, 2025
Mika Yamamoto
105
Exhibit 19
INSIDER TRADING POLICY
Version 2.0
Effective January 21, 2025
INTRODUCTION
Over the course of your involvement with BlackLine, Inc. (“BlackLine” or the “Company”), you may be provided with confidential
information regarding many aspects of our business, as well as the businesses of our customers, vendors, and partners. Unauthorized
disclosure or use of that information, including misuse in securities trading, is illegal, and will result in disciplinary action, up to and
including termination of your involvement with BlackLine. We have adopted this Insider Trading Policy (“Policy”) to comply with the laws
governing (i) trading in BlackLine securities while in possession of material nonpublic information concerning BlackLine and (ii) tipping or
disclosing material nonpublic information to outsiders. Because we place the highest priority on maintaining our integrity, and because we
want to help you avoid situations that could put you at risk, this Policy also provides guidelines for preventing even the appearance of
improper trading or tipping.
BlackLine reserves the right to prohibit any transaction from being completed, if necessary, to enforce compliance with this Policy.
The trading prohibitions and restrictions in this Policy will be superseded by any greater prohibitions or restrictions prescribed by federal or
state securities laws and regulations, or contractual restrictions on the sale of securities.
This Policy will be delivered to all directors, officers, employees and agents of the Company when they begin service with the Company. In
addition, this Policy (or a summary of this Policy) is available on our intranet. Each director, officer, employee and agent of the Company is
required to acknowledge that he or she understands, and agrees to comply with, this Policy.
BlackLine reserves the right to amend this Policy at any time, for any reason, subject to applicable law.
1.
Who does this policy apply to?
This Policy applies to all officers, directors, employees, consultants, contractors and advisors of BlackLine (“BlackLiners” or “you”)
worldwide. References in this Policy to “we,” “our,” “BlackLine” or the “Company” refer to BlackLine and its subsidiaries.
Not only are you responsible for complying with this Policy; you are also responsible for making sure that the following people comply:
•
Members of your immediate family;
•
People sharing your household;
•
Your dependents;
•
Any other individuals or entities whose securities transactions you influence, direct, or control.
Do my obligations under this Policy change if I leave BlackLine?
No. As long as you hold BlackLine securities or possess any BlackLine material nonpublic information, you must comply
with this Policy. If you leave BlackLine, you must continue to abide by any applicable trading restrictions for as long as you
have material nonpublic information. If you’re subject to a trading blackout at the time you cease to be affiliated with
BlackLine, you must abide by the applicable trading restrictions until at least the end of the blackout period.
2.
What types of transactions are covered by this Policy?
This Policy applies to all direct or indirect transactions involving the securities of BlackLine, including purchases, sales, gifts,
distributions and other transfers of common stock, options, warrants, debt securities
and other securities, as well as transactions in derivative securities (such as exchange-traded put or call options), hedging transactions,
short sales and certain decisions with respect to participation in benefit plans. This Policy also applies to any transactions made on your
behalf by money managers, and any offers with respect to the transactions listed above.
Are very small transactions still subject to this Policy? What about transactions that don’t result in a profit?
This policy applies to all trades, no matter how small in monetary value or number of shares, and regardless of whether the trade
results in a profit.
3.
What is BlackLine’s Policy on Insider Trading?
(a) Do not trade using material nonpublic information.
You may not, directly or through others, engage in any transaction involving BlackLine securities while you are aware of material
nonpublic information about BlackLine. Similarly, f you become aware of material nonpublic information through your service with
BlackLine that could be expected to affect the trading price of the securities of another company, you cannot use that information to
engage in transactions in the securities of that company, directly or indirectly. For example, you may be involved in a proposed
transaction involving a prospective business relationship or transaction with a BlackLine customer, vendor, or partner. If information
about that transaction constitutes material nonpublic information for that company, you are prohibited from engaging in transactions
involving the securities of that company. It is important to note that “materiality” can be different for different companies, and that the
kind of information that is not material for BlackLine may nonetheless be material for another company. When in doubt, talk to a
Compliance Officer.
Who are our Compliance Officers?
Our Compliance Officers are our Chief Legal and Administrative Officer and our Chief Financial Officer.
(b) Do not disclose material nonpublic information.
Nonpublic information about BlackLine is subject to your Employee Confidential Information and Inventions Assignment Agreement, and
you may not disclose it to friends, family members or any other person or entity who is not authorized to receive such information. Any
material nonpublic information you learn in the course of your work with BlackLine may only be used for legitimate BlackLine business
purposes. In addition, you are required to handle the material nonpublic information of others in accordance with the terms of any
relevant nondisclosure agreements, and limit your use of material nonpublic information to the purpose for which it was disclosed.
Can I anonymously post opinions or recommendations about our stock on social media?
No, and the same holds true for the stock of any other company about which you may have material nonpublic information. This
includes posting on chat rooms or message boards, whether you do so anonymously or not, and even if you don’t derive any
profit or other personal benefit from it.
(c) Do not respond to outside inquiries for information.
If you receive an inquiry for material nonpublic information or other confidential information from someone outside of BlackLine, such as
a stock analyst, you should refer the inquiry to a Compliance Officer or a member of our communications team. Responding to a
request yourself is a violation of this Policy and, in some circumstances, may be a violation of the law. Please also refer to our External
Communications Policy, the most recent version of which is available on Bullhorn.
(d) Take personal responsibility
The ultimate responsibility for complying with this Policy and applicable laws rests with you. As in all aspects of your work with
BlackLine, please use your best judgment at all times and consult a Compliance Officer if you have questions.
4.
What does “material nonpublic information” mean?
Information is “material” if a reasonable investor would consider it important in making a decision to buy, sell or retain securities. Both
positive and negative information may be material. Information is “nonpublic” until it has been widely disseminated to the public
(through, for example, a press conference or release) and the public has had a chance to absorb and evaluate it.
Examples of information that could be regarded as “material” include the following, although the list is not exclusive:
•
financial results, financial condition, projections or forecasts;
•
known but unannounced future earnings or losses;
•
plans to launch new products or features, or other market initiatives of a significant nature;
•
the status of BlackLine’s progress toward achieving significant goals;
•
significant developments involving business relationships with customers or other business partners;
•
site challenges, such as infrastructure stability or technical scalability issues;
•
significant corporate events, such as a pending or proposed acquisition;
•
new equity or debt offerings;
•
positive or negative developments in outstanding litigation or regulatory matters; or
•
changes in senior management;
•
data breaches or other cybersecurity events; or
•
material updates regarding any prior disclosure.
Financial information is particularly sensitive. For example, nonpublic information about the results of our operations for even a portion
of a quarter might be material in helping an analyst predict our results of operations for the quarter.
Information is “nonpublic” until it has been widely disseminated to the public market and the public has had a chance to absorb and
evaluate it. Unless you have seen material information publicly disseminated, you should assume the information is nonpublic.
When in doubt, you should assume that information is material and nonpublic. If you have any questions about whether information
should be considered “material” or “nonpublic,” you should ask a Compliance Officer.
5.
What types of transactions in BlackLine stock are subject to restrictions?
•
Open orders. Open orders are not allowed because they could result in the execution of a trade of BlackLine stock during a
blackout period. This includes “limit orders” to buy or sell at a specific price or higher, as well as “stop orders” to buy or sell at
the market price once the stock reaches a specified price. It also includes open orders placed on behalf of your immediate
family members, household
members, economic dependents, or any entity whose transactions in securities you influence, direct, or control.
•
Short sales. Short sales are not allowed because they could signal to the market possible bad news about BlackLine, or a
general lack of confidence in our prospects. This is true of both traditional short sales, where securities must be borrowed, and
short sales “against the box,” where delivery is delayed.
•
Trading in derivatives or hedging transactions. Trading in publicly traded options, such as puts and calls, and other
BlackLine related derivative securities is not allowed, except for stock options and other compensatory equity awards issued to
you by BlackLine. This prohibition includes any hedging or similar transaction designed to decrease the risks associated with
holding BlackLine securities.
•
Using BlackLine stock as collateral. Pledging BlackLine securities as collateral for loans is not allowed.
•
Holding BlackLine stock in margin accounts. Holding BlackLine stock in margin accounts is not allowed because it could
result in your broker selling our stock during a blackout period.
6.
When am I allowed to trade in BlackLine stock?
Even if you are not in possession of any material nonpublic information, you may only trade in BlackLine stock under the following
circumstances:
(a) Open trading window
You may only engage in transactions involving BlackLine stock during an open trading window. Our trading window usually opens at
the start of the second full trading day after our quarterly financial results are publicly disclosed, and continues until the 15th day of
the third month of the quarter. In addition to regular quarterly blackout periods, there may be additional special blackout periods, and
we will notify you if a special blackout period that applies to you goes into effect.
(b) 10b5-1 Plans
The Securities and Exchange Commission (the “SEC”) has enacted rules that provide an affirmative defense against alleged
violations of insider trading laws for transactions made pursuant to trading plans that meet certain requirements, commonly referred
to as 10b5-1 trading plans. These trading plans must be entered into when you are not aware of material nonpublic information,
must meet the requirements set forth in Rule 10b5 1 of the Securities Exchange Act of 1934 (“Rule 10b5-1”), as well as any other
guidelines established by the Company. Transactions made pursuant to a 10b5-1 trading plan that has been pre-approved and filed
with a Compliance Officer are not subject to the restrictions in this Policy, even if you are aware of material nonpublic information at
the time of the transaction or a blackout period is in effect.
Officers and directors are strongly encouraged, should they wish to trade in BlackLine stock, to do so via a 10b5-1 Plan. Anyone
else desiring to trade via such a plan may also do so.
Trading plans must be pre-approved by and filed with a Compliance Officer and be accompanied by an executed certificate stating
that the trading plan complies with Rule 10b5 1 and any other criteria established by BlackLine. Information regarding trading plans
may be publicly disclosed, if required by law.
Please also see “Section 8. Are there any exceptions to this Policy?”
7.
When are our blackout periods?
To limit the likelihood of trading at times when there is a significant risk of insider trading exposure, BlackLine has instituted quarterly
trading blackout periods and may institute special trading blackout periods from time to
time. Whether or not a blackout period is in effect, you must comply with this Policy and may not trade on the basis of material
nonpublic information. If a quarterly or special blackout period applies to you, it also covers your immediate family members, household
members, economic dependents, and any entity whose transactions in securities you influence, direct or control.
(a) Quarterly blackout periods
Except as discussed in Section 8 (“Are there any exceptions to this Policy?”), you may not engage in transactions involving
BlackLine securities during quarterly blackout periods. Quarterly blackout periods begin on the 15th day of the third month of each
fiscal quarter and end at the start of the second full trading day following the date of public disclosure of the financial results for that
fiscal quarter. This period is a particularly sensitive time for transactions involving BlackLine securities from the perspective of
compliance with applicable securities laws due to the fact that, during this period, individuals may often possess or have access to
material nonpublic information relevant to the expected financial results for the quarter.
(b) Special blackout periods
In addition to quarterly blackout periods, we may implement additional blackout periods when, in the judgment of a Compliance
Officer, a trading blackout is warranted. We will generally impose special blackout periods when there are material developments
known to us that have not yet been disclosed to the public. Special blackout periods may be declared for any reason, but some
specific examples include a special blackout period in anticipation of announcing interim earnings guidance or a significant
transaction or business development.
We will notify you if you are subject to a special blackout period. If you receive this notification, you may not disclose to others the
fact that you are subject to the special blackout period and may not engage in any transaction involving BlackLine securities until
approved by one of our Compliance Officers.
8.
Are there any exceptions to this Policy?
There are limited exceptions to this Policy, which are described below. Please note that there may be instances where you suffer
financial harm or other hardship or are otherwise required to forgo a planned transaction because of the restrictions imposed by this
Policy. Personal financial emergency or other personal circumstances are not mitigating factors under securities laws and will not
excuse a failure to comply with this Policy.
(a) Stock Option Exercises and Restricted Stock Units
The trading restrictions under this Policy do not apply to the receipt or vesting of stock options, restricted stock or stock appreciation
rights, or the exercise of stock options for cash or net exercise of stock options in a stock-for-stock transaction directly with the
company under our option plans, in each case where there is no associated market activity. However, this Policy does apply to any
open market sale of underlying shares acquired pursuant to the exercise of an option or upon: (i) vesting of other equity awards; (ii)
a cashless exercise of a stock option through a broker, since this involves selling a portion of the underlying shares to cover the
costs of exercise; or (iii) any other market sale for the purpose of generating the cash needed to pay the exercise price of an option.
(b) Employee Stock Purchase Plan
This Policy does not apply to purchases of BlackLine’s common stock under our Employee Stock Purchase Plan (“ESPP”) resulting
from your periodic contribution of money to the ESPP pursuant to the election you made at the time of your enrollment in the ESPP.
However, this Policy does apply to any open market sale of shares of our stock purchased pursuant to the ESPP.
(c) Stock splits, stock dividends and similar transactions
The trading restrictions under this Policy do not apply to a change in the number of securities held as a result of a stock split or
stock dividend applying equally to all securities of a class, or similar transactions.
(d) Inheritance, or change in form of ownership
The trading restrictions under this Policy do not apply to transfers by will or the laws of descent and distribution or transfers for tax
planning purposes in which your beneficial ownership and pecuniary interest in the transferred BlackLine securities does not
change. Some transactions that involve merely a change in the form in which you own securities may be permitted.
(e) Tax withholding
The trading restrictions under this Policy do not apply to transfers due to:
Net share withholding with respect to equity awards where shares are withheld by the Company in order to satisfy tax
withholding requirements, (x) as required by either the Company’s board of directors (or a committee thereof) or the award
agreement governing such equity award; or (y) as you elect, if permitted by the Company, so long as the election is irrevocable
and made in writing at a time when a trading blackout is not in place and you are not in possession of material nonpublic
information.
Sell-to-cover transactions where shares are sold on your behalf upon vesting of equity awards in order to satisfy tax
withholding requirements, (x) as required by either the Company’s board of directors (or a committee thereof) or the award
agreement governing such equity award; or (y) as you elect, if permitted by the Company, so long as the election is irrevocable
and made in writing at a time when a trading blackout is not in place and you are not in possession of material nonpublic
information. This exception does not apply to any other market sale for the purpose of paying required withholding.
(f) Transactions pursuant to 10b5-1 trading plans
The trading restrictions under this Policy do not apply to transactions made pursuant to a valid 10b5-1 trading plan approved by the
Company (see “Section 6(b). 10b5-1 Trading Plans” above).
(g) Other exceptions
Any other exception from this Policy must be approved by a Compliance Officer.
Please be aware that even if a transaction falls within one of the exceptions described above, you will still need to separately assess
whether the transaction complies with applicable law. If you have any questions, please talk to a Compliance Officer.
9.
Special restrictions for Designated Insiders
The restrictions outlined in this section apply to all members of our Board of Directors, all Section 16 Officers (including former Section
16 Officers, for a period of six months following termination of their Section 16 status), and any other person who is determined to be an
insider by the Board of Directors or Compliance Officers because of their regular access to insider information. A list of these
“Designated Insiders” is jointly maintained by our Compliance Officers, and may be revised by them at any time. You will be notified in
writing if you become a Designated Insider.
BlackLine’s Section 16 Officers are our directors, our executive officers, and anyone who is directly or indirectly a beneficial
owner of over 10% of our stock.
All Section 16 Officers and Designated Insiders must receive pre-clearance from a Compliance Officer, and each Compliance Officer
must receive pre-clearance from the other Compliance Officer, in order to trade in BlackLine securities. These restrictions apply even
during open trading windows. To request pre-clearance, please use our online Pre-Clearance Request Form, which can be accessed on
the Legal Bullhorn Page and the Accounting and Finance Bullhorn Page, no less than two business days before your proposed
transaction. Pre-clearance approval is generally valid for ten business days, unless you become aware of material nonpublic information
during that time.
Even with pre-clearance authorization, no one can trade in BlackLine stock while in possession of material nonpublic information, and
the Compliance Officers may reject any transaction submitted for pre-clearance. Other legal and tax consequences may apply for
transactions involving the purchase or sale of our stock by Section 16 Officers. BlackLine is not responsible for the failure to comply with
Section 16 requirements, or any other laws applicable to such transactions, and Section 16 Officers are encouraged to consult their own
advisors.
10. What are the consequences of insider trading and tipping?
Penalties for violating insider trading and tipping laws can include:
•
paying back any profit made or loss avoided by trading;
•
paying the loss suffered by the persons who purchased securities from, or sold securities to the insider;
•
civil and/or criminal penalties;
•
jail time.
The Company and/or supervisors of the person violating the rules may also be required to pay civil or criminal penalties and could be
subject to private lawsuits.
Giving someone an illegal stock tip puts them at risk too. While a stock tip might be given with good intentions, both the
tipper and the person who trades on that tip could be subject to substantial fines, or even jail time.
A violation of this Policy may not necessarily be a violation of law. In fact, for reasons explained in this Policy, it is not necessary for us
to wait for the filing or conclusion of any civil or criminal action against an alleged violator before taking disciplinary action as your
employer. In addition, please remember that we may prohibit a transaction from being completed in order to enforce compliance with
this Policy.
Being suspected of insider trading has reputational costs. Even if you’re never prosecuted for insider
trading, just the fact that you’ve been investigated by the SEC can damage your reputation. Regulators examine trades with
20/20 hindsight, so it’s best to avoid even the appearance of wrongdoing.
11. Who do I contact with questions and concerns?
You can always talk to a Compliance Officer, the Stock Plan Administrator, or the Legal Department if you have any questions about this
Policy. You should note, however, that the ultimate responsibility for complying with this Policy is yours alone, so it’s important to use
your best judgment.
If you know of or even suspect a violation of this Policy, you should report it to a Compliance Officer. You may also report through our
Reporting Hotline at http://blackline.ethicspoint.com/, or 844-229-8515. BlackLine strictly prohibits retaliation against anyone making a
good faith complaint about actual or suspected wrongdoing. For more information, see our Whistleblower Policy, the most recent
version of which is available on Bullhorn.
Nothing in this Policy, or any related guidelines or other documents or information provided in connection with this Policy, is in any way
intended to limit or prohibit you from engaging in any of the protected activities described in our Whistleblower Policy, as amended from
time to time.
Exhibit 21.1
LIST OF SUBSIDIARIES OF THE COMPANY
Name of Subsidiary
Jurisdiction of Incorporation
BlackLine Systems, Inc.
California
BlackLine Intermediate, Inc.
Delaware
FourQ Systems Inc.
Delaware
FourQ Systems International LLC
Delaware
BlackLine Systems Pty Ltd.
Australia
BlackLine Systems, Ltd.
Canada
BlackLine Systems S.A.R.L.
France
BlackLine Systems Germany GmbH
Germany
BlackLine Systems Development & Services Private Limited
India
BlackLine K.K.
Japan
BlackLine Modern Accounting Solutions, S. de R.L. de C.V.
Mexico
BlackLine C.V.
Netherlands
BlackLine Holdings B.V.
Netherlands
BlackLine International B.V.
Netherlands
BlackLine Sp. z.o.o.
Poland
BlackLine Systems SRL
Romania
BlackLine Systems Pte. Ltd.
Singapore
BlackLine Systems Limited
United Kingdom
Data Interconnect Ltd.
United Kingdom
Rimilia Holdings Ltd.
United Kingdom
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-214309, 333-217985, 333-
223528, 333-226818, 333-229968, 333-236715, 333-253522, 333-263045, 333-269957 and 333-277328) and Form S-3 (No. 333-221500) of
BlackLine, Inc. of our report dated February 21, 2025 relating to the financial statements and the effectiveness of internal control over
financial reporting, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
February 21, 2025
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Therese Tucker, certify that:
1.
I have reviewed this Annual Report on Form 10-K of BlackLine, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: February 21, 2025
BLACKLINE, INC.
By:
/s/ Therese Tucker
Name:
Therese Tucker
Title:
Co-Chief Executive Officer
(Co-Principal Executive Officer)
Exhibit 31.2
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Owen Ryan, certify that:
1.
I have reviewed this Annual Report on Form 10-K of BlackLine, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: February 21, 2025
BLACKLINE, INC.
By:
/s/ Owen Ryan
Name:
Owen Ryan
Title:
Co-Chief Executive Officer
(Co-Principal Executive Officer)
Exhibit 31.3
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a),
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Mark Partin, certify that:
1.
I have reviewed this Annual Report on Form 10-K of BlackLine, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the
equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: February 21, 2025
BLACKLINE, INC.
By:
/s/ Mark Partin
Name:
Mark Partin
Title:
Chief Financial Officer (Principal
Financial Officer)
Exhibit 32.1
CERTIFICATIONS OF PRINCIPAL EXECUTIVE OFFICERS AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Therese Tucker, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that
the Annual Report on Form 10-K of BlackLine, Inc. for the fiscal year ended December 31, 2024 fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly
presents, in all material respects, the financial condition and results of operations of BlackLine, Inc.
Date: February 21, 2025
By:
/s/ Therese Tucker
Name:
Therese Tucker
Title:
Co-Chief Executive Officer
(Co-Principal Executive Officer)
I, Owen Ryan, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the
Annual Report on Form 10-K of BlackLine, Inc. for the fiscal year ended December 31, 2024 fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents, in
all material respects, the financial condition and results of operations of BlackLine, Inc.
Date: February 21, 2025
By:
/s/ Owen Ryan
Name:
Owen Ryan
Title:
Co-Chief Executive Officer
(Co-Principal Executive Officer)
I, Mark Partin, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the
Annual Report on Form 10-K of BlackLine, Inc. for the fiscal year ended December 31, 2024 fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Annual Report on Form 10-K fairly presents, in
all material respects, the financial condition and results of operations of BlackLine, Inc.
Date: February 21, 2025
By:
/s/ Mark Partin
Name:
Mark Partin
Title:
Chief Financial Officer (Principal
Financial Officer)