My name's Rich Hilliker. I'm a software analyst here at UBS. We're really grateful you're all joining us here live in person and online, and we're very, very excited to have BlackLine with us. We've got Owen Ryan, Chairman of the Board and Co-CEO, and Mark Partin, the Chief Financial Officer. So guys, thank you both so much for being here. Thank you. Well, why don't we dive in? We'll start at kind of a high level, and then we'll kind of get a little bit more granular. So I thought a good way to start would be to talk about macro budgets. As we look across the software space, we've seen some mixed results, some good, some not as good. And I guess, like, we've seen incremental signs of caution, continued macro pressure, but then pockets of brightness. So I guess I'm wondering, like, what are you guys seeing amongst your customers? What are some of the key themes, some of the conversations, and how has that all shifted as the year progressed to where we are now? Yeah, I think the conversations that we've been participating in with our customer base is a few things that sort of stick out. So one is, companies have been a little bit cautious about where they're going to spend their money. I would say, as I think about it, putting a CEO hat on, a number of our customers tend to be the CFO's office, and they tend to spend a little bit less money compared to maybe what might get spent on product or go-to-market or elsewhere, and so sometimes the shoemaker's kids are the last to get the shoes. So we've certainly experienced a little bit of that as things have been a bit more cautious. I think as we head into 2024, as we've listened and talked to our customers, I think we think budgets will be up a little bit. Okay. Broadly, the question will be: where will it get spent? On IT, from a particular perspective of... I think some companies are really thinking about how much money they should be spending on AI or generative AI. Some are thinking they got to be all in, others are being more cautious and thoughtful about it. Certainly, our conversations with our customers would suggest that there's definitely application for AI, but not across the board in the office of the CFO. And being smart about that, we're certainly seeing in the conversation so far. Okay, got it. And as we kind of dissect that a little bit further, are there, like, specific areas within the portfolio where you're having, you know, more conversations than you were earlier this year? Like, how, if you were to kind of break that demand and those discussions up amongst your portfolio, where are people spending the most time? And maybe how has the strategic roadmap kind of evolved? Yeah, I think there's a couple things that we've certainly seen in the last six to nine months that are beginning to create a little bit of a tailwind for us. So, a few years ago, we bought an accounts receivable company. Most recently, we bought an electronic invoicing company. The reason we've done that is because of some of the European regulation that's out there, where you're starting to see, you know, all invoicing having to go through the government, as well as the customers. And so- Okay ... that regulatory requirement is creating a lot of opportunity for companies like us. But just as important, if not more important, is where interest rates are. All of a sudden, again, cash is king, cash is blood. Companies are looking to collect their receivables every day. You can improve your working capital. It has a real impact to the bottom line. And so we're definitely seeing more opportunity around that this year than last year. That's shown up in our numbers so far year to date, and we would expect that that's going to continue into next year. Now, the other product that we had on our roadmap, which we really love, is our Intercompany Capabilities. We actually put out a press release this morning for those of you who have seen it. But I think from our vantage point, again, it's a product that is going to help, you know, solve a number of issues for our customers. And we recognize it's a much more complicated sale because you have multiple constituencies around the table. So you have finance, legal, treasury, accounting, the CIO, and they don't always like each other. As I said this morning to some of our colleagues in the room here, they don't always like each other. And so trying to get them to collaborate, work together is not always the easiest thing. But again, with a Global Minimum Tax rate regime now in place, these organizations are gonna have to solve for that, and we think the BlackLine solution is gonna help us quite a bit in that regard, because we're really, I don't want to say the only game in town, but by far the best game in town, and we think it's, to some degree, really the only game in town. And then we continue to look at and evaluate our roadmap. A lot of what we do around innovation candidly comes from two sources. It comes from our existing customers, who give us a lot of feedback. BlackLine is really good at listening to its customers, so that's the first place. So we think about that. And the second is our partner network. So whereas our customer base can give us their vertical view of the world, if you will, as to what's important to that particular company, the partner network is able to say, "Hey, here's what we're seeing across all of pharmaceutical- Okay ... or all across insurance, and here's where you have opportunities to do things. And so we're constantly evaluating and processing that in our thinking. Excellent. Okay. Well, why don't we dig a little bit deeper now, hit on maybe the go-to-market, some of the model impacts, that we're seeing. I wanted to quickly touch on retention. I think that dipped slightly in Q3. Was wondering if you can kind of just remind us of the dynamics there. You've talked about, you know, some optimization among, you know, within your customer engagement process. Can you maybe talk to that as well, some of the efforts? What needs to be optimized? What's the near-term cost? Kind of unpack that whole discussion for us. Sure. Yeah, sure. Our software inside the office of the CFO is super sticky. Our renewal rates, dollar renewal rates within the enterprise is typically in the mid- to high-90s, and in the mid-market, in the low- to mid-90s. And our- ... gross dollar renewal rate dipped down in this last quarter, and partly because of some macro headwinds around vendor consolidation, expense rationalization. And those are areas where we're really taking the time to work with our customers on optimizing to retain them, so that we can then build and follow their journey on BlackLine's platform. So for us, we brought to market over the last several years, and some of the things Owen's talked about, an opportunity for our enterprise and our mid-market customers to buy and land with BlackLine, and then expand through not just the office of the controller, but the office of the CFO, through many of these sort of platform capabilities. So retaining them and building them and driving that expansion is a big part of our growth strategy. Got it. Yeah. That's helpful. So another thing, we talked a little bit when we walked in about how, you know, we've seen a lot of change at our firm this year, and I know that you guys have as well. So I wanted to maybe talk a little bit about some of the changes. I think in the last 12 months, there's been a couple of layoffs and reductions in funding that you announced. Owen, congratulations on your appointment as Co-CEO. I mean, that was, I think, nine months ago almost, give or take now. Yeah. And then at the same time, a couple of execs decided to leave- Mm. CPO, CMO. So, a lot of change to digest. I guess maybe the first one, can you kind of walk us through the thinking and the logic behind the layoffs? I think you talked about a $28 million gross savings from the RIF, but I'm wondering if you can kind of maybe first walk us through you know, exactly where we'll see that, and maybe how, you know, we bounce back after. Yeah, look, I think there, there's a couple pieces to unpack in there. So one is the reductions in force that we've done. Yeah. I think, you know, with Mark and Therese, who's not here, who's our co-CEO, and myself, we all agree on driving efficiency and effectiveness and getting a return on every dollar we spend in the organization. We looked at where we were and concluded that we had too much investment in areas that we didn't think we were gonna get an appropriate return on, and so we pruned that. It was the right thing to do. We're glad we did it. We're gonna make sure we're disciplined as we move forward around where we spend dollars. You know, like, Mark will joke or tease me a little bit, but I always sit saying, "Our team, for every dollar we spend, we better get a $1.20 back. If you can't justify $1.20 or more, don't come to us and ask for it, 'cause we're not gonna, we're not gonna approve it. Okay. We're trying to drive much more rigor and discipline around where we spend money as an organization. Obviously, we went through a CEO change, not the easiest thing to do. You know, the board felt like we needed a change. I think it was around, you know, the strategic direction we were trying to drive, the fact that we're trying to play more in the office of the CFO than in the office of the controller, you know, more in the enterprise space. Those were things that were critical for how we thought we needed to reshape the team. Yes, there have been some executives that have left. We're okay with that, more than okay with that, to be quite honest. We will, you know, fill some of those positions very soon. We like the candidates that we've been able to find in the marketplace. We have been very thoughtful and patient. We don't wanna bring people in just to fill a seat. We were very comfortable with what we were trying to do. It allowhd, quite candidly, Therese and myself and Mark and others, to dig deeper into some of those areas- Yeah ... to understand what was truly working and what wasn't. So, you know, I think when we get into, you know, early parts of next year, we'll have a bit more news to share on some of those positions. And, you know, our evolution as a company isn't done. The team that, you know, formed BlackLine and got us to go public is different than the company today, and will be different than, you know, what we're gonna have down the road tomorrow, because if you're not constantly upgrading and improving the quality of your team, you're probably not gonna be moving forward. That's fair. Maybe could you hit on the gross costs? Yeah. So look, I thInk the fundamental behind the right sizing of the company, which many technology companies were faced with, and sort of meeting the demand where it was, particularly in the demand-driven expenses, with the reality that we wanna start next year with the right capacity, the right team. We wanna upskill the labor in the GTM and all parts of the organization, but particularly in the market-facing and customer-facing people. And also to keep the pedal on for the R&D. And so you'll see a consistent sort of investment in our R&D and in our innovation, in our platform, in our growth. We've got a lot of work to do to maintain our leadership, and so keeping the investments there was key. But we feel like We're coming out of this year, and you've seen BlackLine do this before. We've got a really elegant business model that's high recurring, high growth margin, 80% with 95% recurring revenue, which gives us the footing to retract and expand when and where we see demand signals. So we'll start the next year with a real sort of eye to where are we seeing opportunity and demand, and to Owen's point, making investments that get this sort of immediate return. Got it. Yeah. That's helpful, Mark. Yeah. So Owen, I want to go back to your appointment as Co-CEO. A lot's been going on. I'm wondering, now that you're, you know, arguably settled and you guys are, you know, catching your stride here, what are your top three priorities maybe? Or like, what are you gonna be where are you allocating most of your time now that you've kind of... You're in the seat, you know, we've got a lot of these items we just talked about behind us for the most part. What are you focused in on? Well, if it was, put it one way, it'd be customers, customers, customers. That said, it's obviously the customers and prospects that we're looking at in the marketplace. So Mark, Therese, myself, we're spending more time listening and learning, hearing the feedback, understanding what's important to our customers, how satisfied they are with the product, how well it's been implemented. So that's, that's issue number one. I love the fact that we have a leadership team that understands we don't exist without customers. Right. We have to be a client-centric organization. Everybody says it. I've seen thousands of organizations over my professional career. BlackLine actually walks that talk pretty well, so I'm good with that. The second area where I've been spending a lot of my time is with partners. The reason to do that, for us, is that when you look at BlackLine's customer base, so many of our customers have the blue-chip consultancies that are their go-to providers, that walk the halls every day with the C-suite, the CEO, the CFO, the CIO, you name it. They have those relationships, and while we might get to see those executives two or three times a year, they're seeing them two to three times a month. They're on the ground, they know what's going on, they have a better line of sight, and they're a bigger part of the solution, because they're really helping the customer understand and digest the problem. Our relationship with them is so critical because we then become part of the solution that they deliver to help our customers. So that's the second area where I'm spending quite a bit of my time. And then the third area where I'm spending a lot of my time is with our own internal sales and customer support team. I came out of an industry that you had to sell your book of business every year and then add 15%. There was no annuity in the part of the firm that I worked in. And so you learned how to compete against some of the best brands in the world, and I think trying to help our team learn how to compete and what customer service truly means from a professional services firm and trying to bring that mindset into a software firm has been the area where I've spent another significant part of my time. Okay, very clear. One area of prioritization that you've talked about is your market message and branding. So, you've also talked about bringing someone in with modern skills, and maybe exploring new tech. So I guess, where do you need to spend the most attention here when it comes to market message and brand? I think there's a few things that we've been thinking about, and candidly, as we've been interviewing, CMO candidates. And one of our newest board members, who Mark used to work with, started his career as a chief marketing officer before becoming a CEO, and so we have two former... Well, a current chief marketing officer on our board, and a former chief marketing officer. So I get lots of feedback on what and how we should be doing to build out our brand. You know, that said, I think the things that BlackLine has to continue to promote, to push, to be proud of, is the fact that we created the financial close space. Therese and her vision, what she did, was remarkable at the time; it's still remarkable today. We have to sort of carry ourselves as the blue-chip standard in the market to drive, you know, more success. The last number I looked at is our customers, just our public company customers, and about half are public, half are private. We have over $15 trillion of market cap that are on the BlackLine platform- Okay which is a staggering number when I look at it. And so trying to sort of promote that and get people to understand that and be comfortable with it in the marketplace is one thing that we're trying to do. The other thing that, you know, we have to recognize is that not all BlackLine products are reviewed the same way in the marketplace. So our Financial Close Suite is. There, we're second to none. We're relatively newer to accounts receivable. We bought that, and we've been building that. We don't have quite the same brand permission, so we're spending a lot of time with our partners, trying to make sure our product is going to be best-in-class. We don't want to be just as good, we want to be best-in-class. And then the same thing with what we've done recently on FRA, and consolidation. The FRA tool, there's really not anything that we've seen that competes particularly well with it, but it's relatively new, and so you always... When you go into the market with anything new, not everybody wants to go first, and so trying to build that brand approval there is another piece of what we're trying to drive in the marketplace. So there's things we need to do around the product side, and then there's you know, for those of you who work globally, and I've had the good fortune of working and living around the world, you know, every market's different, and our brand acceptance, awareness, and permission is different geography by geography. So what do we have to do in each of those markets to drive that successfully? 'Cause if we just see the world through our headquarters in L.A., we don't see the world at all. And so there's a lot more customization we're trying to do in our messaging, consistent with the brand, but allowing to have the local flavor, seep into that and into the marketplace. So those are some of the things we're doing. Mark, would you add anything to that or? No, I think that's, that's good. Okay. Helpful. Okay, another thing that we've talked about, or that you guys rather have talked about, is, is- ... I think it's the transition from your, your private cloud environment to the Google public cloud environment, and I was I think you said you're, you're targeting the end of calendar 2024 for that transition. Was wondering if you can kind of quantify the impact to margins, both in terms of maybe duplication costs in the interim, but then also the potential uplift to, to gross margins as you kind of target that long-term, low 80% gross margin. Yeah, sure. We've been running private, you know, cloud for, for many, many years, since our inception, and years ago, we set out a plan for the long term to drive to a public cloud, helping us scale, to get to where we need to be to be a global company. At the moment, given this macro environment, we're well on our way sort of through this migration, really prioritizing first the customer experience, making sure that we can be there for them. We're gonna run well into 2024. We're gonna run both the private and the public cloud environments while we make this migration happen, and we'll probably smooth it out a little bit longer, keep a longer tail on it, 'cause we think that's what our customers are looking for at the moment. which means we'll run an additional cost, and this will be an embedded sort of gross margin opportunity in that midterm target model as we move forward. It's the right thing for our customers right now to do what we're doing. Got it. Okay. Maybe sticking with costs and margins here, there were a number of AI-powered announcements earlier this year at your Beyond the Black conference. First, I guess, where are you guys seeing the most interest following this conference around these AI offerings, and then are there any specific features that you're getting a lot of requests around at this stage? Yeah, I think I was just on the phone with Therese before I came in here. So, just to reaffirm the way we've been thinking about a lot of innovation at BlackLine, and I've said this to a couple of you this morning, really comes through our customers and our partners. Yeah. We don't have a lab in the background where we're gonna create the next iPhone or Apple Watch or something. That's not the way we think about innovation. We think about innovation as to: what do our customers want? What are they telling us? What are they asking for? And so we've had a lot of conversations with them about AI, where they see the opportunities, where they would rely upon it and use it. Then we've had a lot of conversations with our partners, who do want to co-create with us, solutions that we can bring into the marketplace. There's no one thing that right now we're sitting here going, "Well, that's the magic bullet." There's things that we find in the area of accounts receivable, where there's definitely been more interest, where we, our customers believe that there's more insight and information that we should be able to glean from AI that will help them improve their credit risk, their credit risks with the, with customers, the ability to, you know, receive cash more timely, things of that nature. So that's on the one side of it. The other side is where we might be able to, you know, find and detect anomalies, whether it's in reconciliations or journal entries or things of that nature, where our customers, again, they would feel comfortable in relying on that in part, and they'd still would have their other controls that they would necessarily have in place. So there's another piece to that, but as I shared it in the session just before here with some of the people that were asking questions, one of the things that the folks that are all excited about AI are forgetting is, you know, our customers are generally regulated by the SEC or an equivalent body somewhere around the world, and almost all of them have the equivalent of a PCAOB or something like that. Mm-hmm. And when you talk to the audit partners from some of these big firms, and what their CFOs will and won't rely upon, and how the regulators might think about that, there is a gap between what the art of the possible might be versus what the regulatory realities are going to be far what these firms are going to be able to do. I think that that's gonna take a little bit longer for those to meet up, quite frankly, in the middle. Doesn't mean to say that they won't, but I think that, you know, within the office of the CFO, I think CFOs are gonna be looking to use artificial intelligence outside their own unit, more so than within their own function in the short term. But you're a CFO and much smarter about this, so... No, I think that's the playbook. Let's go find the efficiencies and the, you know, the customer teams, the sales team, the development teams, the things that are already probably likely being used where there's vendors, and I can drive margin enhancement over the long term. I want to upskill the labor in the company first. I want to focus on, you know, mhat's outside, that I can drive longer-term, sustainable margin enhancement, and those are the areas where I'll invest first- Got it. -while I do a very appropriate review of inside my own mission-critical, highly compliant- Right ... and regulated office of the CFO. Got it. Okay. So sticking with the AI-powered investments, but I also want to kind of incorporate some pricing discussion here. I guess, first, how are you thinking about factoring AI into your product pricing and also your cost structure? And then I guess, more broadly on pricing, you've been pretty vocal about your pricing being very attractive, you know, for the value that you're delivering. So I guess, how are you considering shifting that dynamic? And can you maybe highlight the core of why you drive so much value relative to some of the other solutions out there? Well, sure. I think maybe just on a very early, sort of preliminary basis, BlackLine's got a strategic product portfolio, which is high automation, high ROI products. And in some of that, like in our AR, there's already AI being used. So the way that's priced is not on a user base, frankly. It's based on a subscription plus consumption. It might be transaction volume; essentially, it's the more successful they are, the more of it they will use pricing. And so that's how we are already pricing it and using it there. For the- ... long-term sort of margin model and how we will get there, it's essentially, like I said, Rich, it's looking around the enterprise where we can use it effectively to where we have significant cost investments or friction in the business, or where we have trusted in vendors who are already starting to work with us, where I believe that I can or other CFOs can use it to drive enhancement over the longer term. Got it. Yeah. And you quickly touched on the midterm to longer term model. Yeah. On the sales and marketing expense line, I was wondering if we could dig into, you know, I think it's, I think it's sitting in the high 30s right now. I guess what I'm wondering is, like, as you think about these longer term ambitions, is there something structural that prevents it from being in the mid-20s at some point? I'm not asking you to give guidance per se, but, why couldn't we, at some point, see BlackLine with sales and marketing expense in somewhere in the 20s, instead of almost near 40% of revenue? Yeah, look, that's right. Our midterm target model today is at a 38-40. We are going to be, in the near term, under that, while we look for market signals. But to your point about whether could we be higher and more efficient, yes, partners are a big part of that flywheel motion. It's a high recurring revenue business, and so being able to synthesize lower cost expansion, part of the sales and marketing model, those are certainly longer term opportunities that you get when you have a business like BlackLine, that's high recurring. One of the reasons today that we think the direct sales model is appropriate- Yeah ... is because we are the leader in the space, we are educating and even making awareness of the things that we sell. That's essentially how nascent the office of the CFO is in automation, that it still requires education and awareness spending. Right. Okay, very clear. I guess on go-to-market productivity, we talked a little bit, you know, about high efficiency here. I think across a lot of software expansion has been a little bit pressured. I think, you know, your net new customer add, I think, decelerated for the last couple of years here. I guess what I'm wondering is, can you give us a sense of what you're doing to drive success, landing new accounts, expanding these accounts, despite some of the backdrop that we discussed earlier? And then, I guess, the second part is, like, how does that all factor into the re-acceleration of revenue growth towards your midterm 20%-25% growth target? Just- Yeah. I'll start that. So, there's a couple of things in there that we're trying to work our way through. So one is, we have a customer base that is significantly under-penetrated. As our product platform has expanded, we're still in the very, very early moments of trying to expand that footprint. So we see that as the richest, ripest target area for us, because we have strong brand permission because of the quality of what we've already delivered, right? So, our customer base is usually typically cautious. They want the best choice and the safest choice- Right ... and we're trying to be both. Okay. We will be both, ultimately, to become the only choice. So we see that as a huge opportunity in front of us, and we know that there's plenty of opportunity for us to expand there, both within new products, as well as even deepening our penetration within our existing customers. So for example, within the financial close space, if a customer has recs and tasks, you know, what else do we need to do to get them to compliance, to matching, to journal entries? We have a number of customers that they use part of our suite only in certain geographies. Okay. Well, how do we get the global expansion complete? If you're a global company, why don't you have BlackLine in all of your operations around the world? So we're working towards driving to that. And then obviously, there's just the expansion into our strategic products that we've, you know, built and/or bought over the last couple of years, where again, we're very early stages with that. We like the opportunities in front of us in accounts receivable and intercompany, and really been very, very pleased with the market acceptance of our FRA solution. As I understand it, it's probably had the quickest acceptance of a new thing that we've innovated of any product. So we're looking forward to what those all bring for our customer base. A big piece of the mind shift that we've tried to drive in the organization is stop selling software and start delivering solutions. Start listening to our customers more closely, walk in their shoes, ask the right questions, have the right empathy, and then help them get to what is the right solution that BlackLine can help them, support them with. And we're doing that again with our own team, as well as with our partners to try to drive that. Okay. And then, maybe quickly before we end the session here, if you could talk about, you know, how that all factors into the 20%-25% growth guidance, and maybe your confidence in re-accelerating towards that range. Sure. We laid out a midterm market model for sort of a three to five years. We're on the tail end of that, going in, or actually in this macro environment of 20% revenue growth and 20% on the operating income margin. We are below that today, partly from a macro headwind. Our journey back are a number of the things that Owen has been talking about and focused on now for many quarters. Right. and they are getting the partners, getting the go-to-market model, you know, rejuvenated and selling and cross- and upselling the products that we have in our portfolio, which are great high ROI automation products for our customers. Got it. Yeah. Very helpful. Thanks for all the really insightful answers. We're really appreciative that you made it down and joined us here. Thank you. Thanks, everyone, for joining and tuning in. Thank you.