BlackLine, Inc. (BL) Earnings Call Transcript & Summary

Welcome, everyone, and thanks for joining us today. Great to see you all in person, and I hope you're enjoying [indiscernible] Beyond the Black event today. Those of you watching via webcast, since you're taking time to learn more about BlackLine. We crafted a great agenda, and we're going to walk through our business and the opportunities ahead for BlackLine. First, we're going to start with Marc Huffman, BlackLine's Chief Executive Officer, who can talk about our markets and our vision. And then we're going to hear from Mark Woodhams and talk about our go-to-market engine, and then Lisa is going to come up and talk about why customer success is such a differentiator for BlackLine. We'll take a short break, and then Pete Hirsch is going to come onstage and outline our product and technology strategy. And from there, we're going to turn it over to Mike Polaha, a new face to many of you investors but an expert on our strategic product portfolio, especially in our company. Take another break, and then we're going to bring up some fantastic customers and our Chief Accounting Officer, Patrick Villanova. Following him, Mark Partin, BlackLine's Chief Financial Officer, to walk through our financial model. And then one final quick break, and we're going to bring all of our speakers up today on stage for our Q&A session, and we'll close out the day. Of course, no Investor Day to be complete without a few cautionary statements. We are going to be making some forward-looking statements today. If you have any questions on our risk factors, please reference our most recent Form 10-Q on November 4 or our Form 10-K. A few housekeeping items for the audience. [Operator Instructions]. With that, let me introduce Marc Huffman, BlackLine's Chief Executive Officer.

Thank you. You guys do clap. Thank you. I'm going to try not to yell at you all because it's a small room, I have a big voice. And coming off the energetic stage this morning, it's easy to just project. So thank you, and thank you for joining us. Hopefully, you got a chance to see the announcements we made this morning, listen to it and learn a lot about some customer stories. It's always so rewarding to have our ability to tell a story about BlackLine through the success of those customers. And so those modern accounting award winners, each have just really unique success and it gave you the opportunity to tangibly see how BlackLine can impact individuals. People get emotional about the change in the work that they're engineering for their teams. And you saw that, I think, in a couple of unique examples. So very, very cool for us to do. And then obviously, a lot of fun thousands of people tuning in. Obviously, a large audience there full of customers, prospects, partners, yourselves, and then a large audience in the digital world as well. And that was Beyond the Black. So I'll start by giving some of you a reminder and refresher on just what we do and where we play, starting with BlackLine's market in the office of the CFO. We purposely focus our efforts historically on the role of the controller and all of the processes that exist right there underneath the controller's mandate. But we have this view towards the broader operations and the beneficiaries that are involved in the office of the CFO, which I think is really important. And those data lengths that come underneath is really, really critical for us. So the more data that comes into the BlackLine system validates just how critical the real estate that we own in the financial closes. Starting the company focused on owning the financial close and creating the category leader with a class of customers that hopefully you had a chance to see and hear in the main stage room this morning is a strategic position for us. Everything that gets accumulated in an organization's business, all the data that works its way from transaction systems, recording things, flows through the arteries of an organization, and it all comes to rest some place. And the financial statements, and it goes through a financial close where BlackLine has the ability to serve those customers really successfully as well as start to create adjacencies where we feel we have permission to better serve those organizations. And then when you do that, with -- getting upstream a little bit with our focus on cash application and accounts receivable automation, we think that's strategic and broadens our perspective into other parts of the organization. As well as a strategic move into the top side or creation of intercompany transactions, which now we're starting to talk to people and influence, again, broader in the CFO's office, people in tax, people in treasury. You saw this slide arguably several times today, it speaks to everything as to why we exist as a company because throughout time, complexity has been created in these accounting technology landscapes. The systems, starting back with the advent of accounting itself, the processes for doing accounting, all the way up to modern systems that got built to support that as people built accounting systems, ERP systems. None of them actually contemplated the fact that individuals would go through these complex processes to close the book nor the controls and governance that would be imposed upon people. And so this chaos exists in every company out there, mid-sized companies and then the largest and those complex companies in the world. I hope you heard and felt some of the challenges some of them experienced with this very complexity right here, which leads people to spend a lot of their resources, their capacity to solve this complexity or do it manually. And that comes with a lot of risks. Risks that you see eventually show up in the financial statements, potentially through significant deficiencies or material weaknesses. And now, we believe there is going to be even more compelling reason why people will want to solve this complexity and reduce the risk. Last week, I learned that -- congratulations, Mark Partin, we get to sign these financial statements. If somebody can come back and claw back my compensation if we were to make even just errors, no fraud -- of course, we wouldn't participate in that -- but errors based on that complexity. So I have the belief that BlackLine was a topic of conversation in audit committees, in boardrooms. We'll also become a conversation of compensation committees now, because they have the ability to come back and claw back compensation. We have historically focused our efforts on the Corporate Controller, whose job is to try to align their capacity and their efforts to support the overall strategy organization led by the CFO. And there is an ongoing need and desire and interest from finance executives to go through digital transformation. The challenges are, again, the complexity that's built up over the years. And processes and systems that have been put in place to do this manually under the guise of auditors, so change comes somewhat measured, which leads me to my next point. BlackLine, though creating the category leader and a great, great story in changing the way accounts do work, is still in the early innings of the overall picture of how this landscape should play out over time. We began obviously creating the financial close category and we built the largest franchise based on that, but have consumed a fraction of the $18.5 billion financial close TAM. We got ourselves into the accounts receivable space through the purchase of Rimilia in 2020. Investing in that innovation, you have a chance to learn a little bit more about some of those stories applicable to mid-market companies, as well as some of the largest organizations in the world like [indiscernible], really compelling story there. And that, we believe, is a $10 billion TAM. And then hopefully, you got a chance to listen to the discussion this morning about the potential for intercompany financial management and how critical that is, how risk fraught that is for some of the largest and most complex organizations in the world. And that TAM, we believe, is $11 billion, and that is just getting started. Not only do we have that TAM based on a view of the products, categories that we're in, we think we have a potential great opportunity in spite of the fact that we have great share, beautiful brands across the world, and a lot of them in North America. We're still very early in this opportunity from a global perspective. So when we are out there, the way we compete and the way we win, I think, is a critical part of the story to understand. We try to get people to execute on a well-worn path. You'll hear Mark Woodhams come up and talk about our distribution strategies to cover that well-worn path in a moment, but that well-worn path is our method for landing customers with the proper use cases, with the right automation built in so that we can leverage our investments in customer success. You heard from Lisa earlier. Lisa Schreiber, our Chief Customer Officer, will be up here in a moment to talk about those investments and how we drive customer success through adoption and initiatives which lead to the introduction of additional use cases. You should think about our strategic products there. And those additional use cases put these customers on this Land & Expand motion that drives up ASP, and it leads to a significant increase over time in those customers as they gain more traction and get more value from our high automation strategic products going on an expansion journey, and then we see that result in customers who start to really spend more money with us. So I believe we've shared this with you. We have a cohort data that says companies that spend more than x $250,000 have grown substantially. And my recollection in the most recent quarter as we reported year-over-year growth of 58% in companies that spend over $1 million with us. That is the manifestation of this Land & Expand model, customer success. And then lastly, we continue to invest in that innovation. You heard several examples of those on the stage today with some announcements that we've made, some pent-up innovation that we've been doing across a variety of categories. And you'll hear from Pete Hirsch here momentarily about some of the additional areas of innovation that we're driving in the platform. When we execute like that, when we win, we believe we unlock operational efficiencies at scale. We get better unit economics and power with the customer base that we have and leverage by creating this truly indispensable platform, and we can put customers on a journey that can deliver strong net revenue retention, all of those things driving that sustained and profitable growth. One of the other things I think it's important to consider about our longer-term strategy. And you've seen this, for those of you following our story, we began as a single product company. Created the category, made our name, earned our reputation in the financial close. Subsequently, we felt like from that important real estate that I talked about earlier, we have permission and capabilities to do something more broadly. So we started to expand our category, and we've moved from a single product company to a multi-product company. And today, we've talked about our vision for financial operations management that we're calling the first iteration of BlackLine Accounting Studio. And that is our multi-year goal to move from a multiproduct company to a platform where people, simply put, it's the place where they do their accounting, and it's called BlackLine. On that whole journey, we feel like with the TAM, that Land & Expand model, the innovation, customer success that we have, and we have the ability to drive great sustainable growth and great unit economics. A little later on, again, you'll hear from Pete Hirsch, get a chance to learn more about the building of the financial operations management platform. The announcement that we made about the BlackLine Accounting Studio and how it's long-term power with us. You'll learn hopefully more -- you'll learn some things today about some innovation that our founder, Therese, is doing that is really compelling about financial reporting analytics, as well as some other innovations that we've done in intercompany and other categories that we're in. And so we continue to build this platform through investing innovation. We began modernization of our platform several years ago, that is ongoing. And there's 3 ways to think about our innovation. It's that platform-driven innovation, which is a combination of the accounting innovation we do, the human capacity and people that we have, and a forward-looking technology view of what a platform will become. It's by continuing to invest in the adjacencies that we've created, adding more capabilities to accounts receivable, adding more capabilities to our existing intercompany hub by acquiring FourQ and moving upstream in our company transactions. And then lastly, we'll continue to innovate, finding manual work, areas for optimization and monetization within our financial close base that we'll consider customer-driven innovation. Which, in the most recent iteration, is what we've had Therese focused on. We'll be able to deliver that, and you'll hear more from Mark Woodhams about this again with our Land & Expand model, a tremendous amount of embedded white space in our existing customer base, breadth and depth in using strategic products there, expansion with the adjacency. And then obviously, we'll be driving long-term sales efficiency. So we'll get more throughput, more leverage from the investment that we have in our distribution organization over time. So BlackLine is built to succeed today. Where we are today, where we can help customers reach their goals of automation doing more with less, focusing on that capacity, managing cash and working capital in difficult times for them, helping them assess credit risk, help them apply cash, free up working capital, et cetera, et cetera, and we're poised for tomorrow. We're the industry leader. We have a large, unpenetrated TAM across multiple product categories. We have this vision that I believe we can fulfill to create this accounting platform, a place where accountants do their work. And we believe that will lead to sustainable revenue growth, you'll hear from Mark Partin about our models, how we're thinking about the dimensions of our growth, 20% to 25% medium-term revenue growth. And our objectives, commitment to move towards profitable business model in the Rule of 40. With that, it's my pleasure to welcome Mr. Mark Woodhams to the stage, talk about our go-to-market strategy.

So in an effort to bring some excitement to the proceedings, they've introduced somebody that doesn't have an American accent. I came to the U.S. 4.5 years ago to join BlackLine. I swapped the rain and the cold of the U.K. for the sun, tarantulas and rattlesnakes of California. I'm pleased to be here. We'll start off with the structure. It's pretty simple. But in effect, I've got 2 new business teams and an account management organization. The 2 new business teams, one focused below $750 million, above $100 million, that's my Mid-Market team. One focused above $750 million. That's my Enterprise team, not complex. The critical part of it is the creation of the account management organization because that's the bid that drives the adoption. That's the bid that drives the customer value and the customer success, and the opportunity that we have within our existing customer base. Pretty much everybody should know that SAP has the right to resell our software. Majority of our products sit on their price list. And we'll talk about that a little bit later on, but they are a strategic partner to us. And then we have the criticality of a partner ecosystem to support us, because they influence so much of everything that we do. They inference the market, they influence our customers, and they help us. The bottom of the schematic here, you can see -- you see things talking about customer success, customer management. And Lisa, who follows me, is going to talk about that so I'm not going to dwell on that particularly. Well, actually, at all. This is our go-to-market engine, yes. Marc spoke about Land & Expand, and it's -- we have in front of us a large opportunity within our existing customer base. I'll talk about that a little bit more in a second. Actually, all of these points, I'm going to talk about it a little bit more detail. I just want to skip around it, you know. We have an approach to customer acquisition because obviously, there is a market out there for us to win and an account management organization to feed. We have an opportunity within international that, if I can use the phrase early innings. Despite the fact it's uncomfortable for Englishmen to use that phrase, I think everybody understands what I mean by it. I've spoken to the criticality of partnerships and the ability to create more value for our customers and the ability to create more TAM for our sales organization through strategic M&A is vital. So let's start off with Land & Expand -- with the customer expansion. Two examples. One on the left, one on the right. And I'm sure you can read as well as I can, but let's take you through it. We have an enterprise customer in the retail space, landed quite small from an ACV perspective, expanded over time, adding more product, expanding a bit more, added strategic product and then define ourselves. We've got a customer that's reasonably well down the path of financial -- digital finance transformation, but still has opportunity to grow. Similar story where the industrials go. Okay, they landed a bit bigger. They've taken on 2 of the strategic project -- not projects, products, as opposed to just the one. But they're still in that journey, and we're still there holding their hands helping them achieve that. So look on the slide there, it doesn't really bring it to life. I had a conversation yesterday with a customer and they've been a long -- customer for a long time. They just deployed one of our strategic products and it's all going very, very well. But rather than them say, well, what else did you have to sell me or what else do you want to talk about? The Chief Accounting Officer basically said to me, look, okay, now I've done that. I'm in a good place, but I now I got this problem. We transact or we have to manage something in the region of 100 million transactions every week, and we're doing it currently on 2 Microsoft Access databases. Who do I have to talk to in your organization -- sorry, in my organization so that we can embrace your cash product? So that conversation is really interesting because it's not one of a vendor and a sales organization. We're a trusted partner because we've delivered, and they will help to actually deliver more of our software. I'll ask if I can tell you their names, but it's a large medical instrumentation company. When we talk about customer acquisition, we can talk about the -- we call it MAP, the Modern Accounting Playbook. We recognized a couple of years ago that in order to be successful, we needed to give our customers almost a predictable way in which to start their finance transformation journey. They wanted to ensure that if we do this, when we come out at the end of it, we're going to see value, we're going to see success. It's the well-worn path that Marc has talked about. So we introduced this into our customers, this outcome-based combination of products that's connected together into a playbook, to give our customers the beginning of that path, and it worked incredibly well. So we're very, very well in Mid-Market. A year ago, we introduced it into Enterprise. And now, we've just introduced it into the AR world. It does a number of things. For the customer, it's a much faster time to value, quicker implementation. For us, it gives us a reduced sales cycle and they introduced some significant efficiencies in our sales process because now, I've got all of my salespeople operating in the same way, talking about business issues, delivering to a business issue and a business outcome. I haven't forgotten my lines, my mouth is drying up. Maybe a second. So the Modern Accounting Playbook underpins everything that my sales organization does and every part of the organization that's connected to it every day. Again, the well-worn path that you may become bored with, but we like it. Here's an example of -- I think this was the first Enterprise customer, actually. And as you can see, well, for us, the original investment, they landed bigger. So $95,000 sale, above average for us. We took them live, or Lisa's team took them live in less than a quarter. That was -- that's pretty much unheard of in the Enterprise space. We took them live in less than a quarter. They expanded -- they're expanding again in the next quarter and then a year later, we've doubled the ACV. Forward-looking statements aside, I think they're on the road to becoming a $1 million customer because they get it, they get the process and they bought into the process, and they see the value. When we talk about our international markets, there is a significant opportunity. They've done pretty well, 36% CAGR. It's showing some growth. But we still got a great opportunity out there in from our existing investments. Even when I talk about places like the U.K., [indiscernible], Northern, Southern Europe out into APJ into Australia and New Zealand, into ASEAN and Japan. We've got a great opportunity just to grow our return there even before we start thinking about other countries and where we expand next. Part of what we'll do there is an expansion both through direct and indirect, and I'll talk about that a little bit later on as well. So when we talk about the levers, we've made some significant investments in this organization in the last few years. We've created this well-worn path for us to say that we've got a repeatable sales model with the intention to be able to drive -- to land larger, reduce sales cycles and drive some efficiencies. We talk about our, what is actually enormous, embedded white space. So I use the phrase embedded white space, but what I mean is, so every customer that we have has an expansion opportunity from a user perspective, from a usage perspective, from a product perspective, and so that's what I'm talking about. This is a massive TAM that sits with our own customer base. Maybe I didn't need to explain that, but I just thought it was relevant. So we talk about the lever there. And actually, my cost of sale into my customer base is far less because I have permission because I've built trust. And that trust as you saw today, wherever the room is, that way is enormous. The conversation that I shared with you. I have many more yesterday, and I'll have many more tomorrow. It's a natural thing, that trust that we build gains us the permission to help us drive those -- to drive into that market and drive those efficiencies. And we are looking at other where else can we make efficiencies within the sales force? How do we make it more productive? Well, I give somebody the ability to sell in the way we are through the Modern Accounting Playbook, actually, I can sell more every year. I can drive quotes up of the royalty. I can reduce territories. I can -- so Matt brings some efficiencies, the Land & Expand brings some efficiencies, our partners really help us bring some efficiencies. But there's another side to it as well. So I don't know if I need to explain the chart particularly, but it gives you a look at growth in sales reps over a time period, with -- and I tend to show you ramp to unramped QCRs because the most effective quota-carrying reps that I have are those people who have been here for a while that have ramped, yes? Ramped that they are fully capable, carry a full quota, completely understand it, et cetera, et cetera. Now, we invested ahead of the game. So in 2021, we made some significant investments to grow our sales and marketing capacity. So we hired ahead, and we continue to hire even the early part of this year. So what we're seeing is we're seeing a ramping sales capacity which has had some impact on our -- driving down some of our sales efficiency metrics when we've been historically strong. So yes, we'll continue to take those investments. We'll look at quotas. We look at things that we can change, things where we can drive more efficiency and more productivity. But with this and the Modern Accounting Playbook, our landing larger, our Land & Expand capability and the role that our partners bring to this, we expect to drive strong improvement in efficiency in the next few years. Talk about our partners. We have made a strategic investment in the partner community for some -- what I feel are some obvious reasons. Our partners give me breadth and -- what's the word I'm looking for -- reach into market because they carry influence. Our customers are looking for advice from people. They don't always want to take advice from us until they trust us, and so the partners have a big influence. Actually, they influence something like 70% of all the new business deals, are influenced in some way by a partner. So it's significant. But you've seen slides like this before, I'm sure. There are 2 things I want to draw your attention to on this slide. Number one is the word Solution Providers that sits under channel. Solution providers are in effect resellers, okay? Domestically, they're operating in the mid-market. Internationally, we'll give them more freedom to sell in other places. But what it allows me to do is to accelerate my sales force, accelerate my brand, accelerate into the market faster than I can do with my own resources. It enables the partner to create a market for us that we may move into the future, and I don't have to carry the cost. I carry the cost of commission, but I don't carry the cost of head count or office space or any of those kind of things. So that's something that we are investing. We've got about 20 solution providers at the moment, and we are accelerating that. The other one is Partner Enablement and Programs, so that's been a big investment for us over the last 2 years. To the point now where my partners come back to me and say this is one of the best programs in the marketplace. And the reason it's there because we have to make our partners successful because if we don't, we'll sign them up and there'll be a noise for 6 months and then they disappear. So part of making our sales success is we have to make our partners successful as well. When you look out at the market, and I'll flip on to a busy slide. When you look out at the market, we've now got somewhere in the region of 2,000 certified implementation consultants, people that can implement BlackLine without our help. So that gives you some idea of the reach. And the more I can make that engine bigger and almost self-fulfilling, the more opportunity they drive to me. Really busy slide. I promise you I'm not going to spend very long on it. I can give you a story about every logo on here if you want me to, but I'm not going to. You start in the Mid-Market, start at the bottom. We've got partners there in that space to support our mid-market efforts. RSM may or may not be -- I know you're familiar with, but RSM has got 13,000 people globally focused on the mid-market space and focused in the finance, audit and tax market, and they're just perfect partners for us. They just get it. As you go up through the pyramid, the triangle, we've got implementation partners, we've got alliance partners, we've got technology partners, all of which bring us something. They might bring us some introduction, they may bring us a connector, they may bring us access the IT side of the house, but they all bring us something and they're all active, good, solid working relationships. Talk about SAP in a second, next slide. I just want to talk about Accenture. So as you can tell by looking at me, I'm quite old or I've been selling software for a long time. Two previous companies, one of them Oracle, I failed to get the Accenture [indiscernible] to move in my direction. Yesterday, I'm setting the meeting with Accenture and they said to me, we're a bit concerned, we're a bit late for this train. How can you help me accelerate Accenture, which is like trying to boil an ocean. How can you help me accelerate Accenture so that we can take advantage of it, so that we can be part of your strategy? I've never had that kind of feedback before from Accenture. It's early days. We're starting, but the point is they signed these alliances, they see the opportunity and they want to work with us. I keep wanting to say any questions after the slide, I know that happens at the end. Too much of a sales go, I'm sorry. So let's talk about SAP. SAP, our strategic partner, have been now since I've been here for 4.5 years. It's always been a big opportunity for us. It remains a big opportunity for us, yes? There are 10,000 SAP customers with over $1 billion of revenue where we focus primarily. If you look out there at the numbers, it gives you sort of -- you can sort of map on the size of SAP across it and figure out well. We've got our influence a lot of people in SAP to get this engine moving. And we've worked and we've enabled thousands of people in SAP to really understand who we are, what we are and where we fit. And some of them get it, some of them really starting to get it. And yes, starting to put BlackLine before the [indiscernible] upgrade, and it's really starting to resonate. If you look at the numbers, it says 1,300 SAP customers in North America. Well, between ourselves and SAP, we've got 500 of them using BlackLine. Look at EMEA, when the number is 220. Look at APJ, 170. You look out at the rest of the world, and it's a handful. So point being that the opportunity out there, whilst we've been working this for 4, 4.5 years, it's still there. It's still powerful. And they like working with us, by the way. All those presents or accolades they keep giving us, as you can see down the bottom. Best in Region, Best et cetera, et cetera, I'm very confident we're going to get a big one this year. But the point being, it's just that we work hand in glove with these guys, and it's working very well. So the point is it's okay if it works well for me from a revenue point of view. It works well for SAP, but it works well for our customers as well. You've got an e-commerce customer, an SAP customer, with a 70% reduction in time to close by implementing BlackLine. You got food and beverage customer that saw a 30x reduction in the intercompany balances. And the reason I pulled that one out is because it highlights they sell our focus products, too. Strategic -- sorry. I use the phrase focused internally. Marc spoke about acquisitions. We've spoken about FourQ, we spoke about Rimilia. We spoke about the importance of it. You heard it this morning. You heard it from Marc a minute ago. Moving now into those product adjacencies into -- from our core, what was financial close market into those adjacent markets brings more value to the customer, more TAM for me, more competitiveness for me. And the opportunity in front of us, I mean, just those 2 markets alone, is significant. I've told you the story earlier about one of our customers. Big customer wanted to talk to us about cash that's been replicated 2 or 3 times today. We have a big opportunity in front of us. So my takeaway slide before I hand over to Lisa, who's going to talk you through how this happens is we are focused on being strategically indispensable to the office of the CFO. That's what we do. We had a significant TAM, as Marc spoke to, that's expanding with the acquisition of AR and IFM or FourQ and Rimilia. We have a massive TAM even within our existing customer base for us to go after. We have a big opportunity internationally. We have a partner ecosystem that I told you before, I think, influences 70% of all of our deals which is why we have to make them successful. And a focus on driving real efficiency now within our sales organization to make people more productive to really get some of that flywheel acceleration. And perhaps the most important thing for me is I'm still really excited to be here. I can't think of a better place to be today than this company. And with that, Lisa. I'll hand over to Lisa, our Chief Customer Officer.

So I'm very happy to be here. This is my third presentation in 2 days, completely different audiences. So I'm going to try to change some of the things that I've said, but you still care about some of the same content. You don't know me, so I thought I would open up. Just letting you know a little bit about me and why I love the work I do. I in a previous life, or early part of my career, was a technology consumer. I bought technology to solve business problems at the companies I was at. I later went over to the vendor side, but it's that passion to take care of the customer that I used to be because I know them is what drives me to do what I do today, and I'm very happy to be doing it at BlackLine. I have great support to take care of the customer really, really well. Today, I'm going to share a few things with you, and there's a few themes I want to try to focus you on. I'm going to talk about the knowledgeable customer. It's not just about the trained customer, it's about the knowledgeable customer. Talk about our outreach. These are things that affect our NRR, so they're very important. They also set the stage for upsell and cross-sell. They fertilize the field, so to speak, so that Woody and his team can take the customer further. The other thing is new service offerings. We're trying to expand customers, the services team, and the best way to expand it is within organic growth within the customer base. So 4 of the -- if you listen to me today, 4 of the offerings we came out with today and announced are really about driving more into the -- from the customer base that we have, not just new customers. Are you good with that? Okay. The customer team. I have everything post the sale pretty much. That's my -- that's the area that I look over and help lead. We want to drive value realization. Helping our customers continue to articulate that, especially within their own companies, is really important. Building user confidence and knowledge. Knowledge is going to be a big theme, I'm going to talk about today. Provide critical support when needed, we have a very dedicated and passionate team that does that. And then help guide their digital transformation journey. It's not just about how do you -- do you know how to use BlackLine. It's really can you see what's next for you to do, and let us help you with that. I'm going to have -- I have a couple of customer stories today, too. Let me -- sorry, let me go back. I'm going to define a term for you right now. Can we go back one? We're a data-driven organization and we talk about adoption, but I'm going to define it for you because everyone uses adoption, but what they really mean here is automation adoption. So to me, usage is different than automation adoption. You need both. I want both. We have really high usage. It's really that are they using our product to the best of their ability to solve business problems? So for example, automated journals would be of use of an automated -- kind of an automation piece that we have. So I look at that because I know when customers are using these automation features, they're really sticky. They stay with us. They see the value. They continue to get value, and we can cross-sell. A happy customer getting value, easy to upsell, right? One -- I have a good example. One of the largest hotel chains in the world were using our products, but they really weren't well adopted. And they came to one of our workshops. This is one of the things we offer, out of the many things we offer is outreach to the customer. And they -- it jump-started their journey. And so not only did they start on their transformation journey, but they dug in deeper and they've bought one of our -- I'm going to explain this shortly, a strategic customer adviser and our optimization consulting because they came up with 5 more optimizations to go after. Really, really successful customer. But this happens all the time, all the time, most of the time. This automation adoption is so important that we've moved it into our implementation methodology. So to the extent that we can lay the groundwork for the customer to become better automated, we're implementing them, we put it there. And then we also started this year more onboarding of the customer. So post implementation, we're taking the customer and we're getting them to a healthy, confident state where they feel really good about the business value they're getting and they walk out with a success plan in hand, and they know what the next steps are. Some are ready to take them right away, some are not. It's customer driven. It's based on what's important in their organization, and we're there with them. This is around customer knowledge. The whole organization is focused on this. Woody and his team have increased subscription training that we sell to our customers. This is nicely -- this is above the industry average. So our new customers come in with a subscription for training, right, 44% of them. You heard my story today about Home Depot who built a training strategy. Let me finish this and I can go over that quickly again. Live training. We've been focusing on that, look at that increase. That's year-over-year increase, right, Q3 numbers. And then the Optimization Academy. I have to tell you, I think this is some of the most important stuff we do. The Optimization Academy teaches really great accountants how to be really great in identifying process optimizations for them using our product. I think you heard me today, I talked about the 4 ways we offer it. Anyway they want it, we'll get it to them. But we see customers coming out of there ready to go after optimization opportunities, and then they want to buy the consulting services that we've put on the end of this to help them. So Home Depot, I think you remember 3 parts of their strategy. Every employee that comes in is trained within 30 days. Subscription training 4 times a year. Live training gets the whole organization together. They're worldwide, right? Home Depot's everywhere. Everybody has a home. Worldwide to fix their -- to really solidify the processes and the consistency and the use of our platform to solve their problems, and they bring forward topics that they'd like to dive into. Many people on my team are former accountants. There's an accountant teaching them in this class, right? So it's very -- we very much know them, we understand their challenges, and we deliver that kind of training. And then they went to the Optimization Academy, and they came out with more to do. But this took them from just pockets of success at Home Depot to a worldwide success. It's a great story. Okay. supporting our customers. Scale is really important to us, so I'm going to talk about customer success for scale. There is an account manager on every account, and so my customer success team does not have full account assignments. The top ones do, everything over 750, they have a name, CSM. But everything else, we have to figure out how to do the scale part right. So we're a data-driven organization. I look at many, many points of information across the organization, and we figure out outreach, specific outreach to them because when it's specific, it's often received better, right? And so we do that, we get customers engaged the workshop that I talked about, that hotel chain would have been an example. And across the bottom are all kinds of outreach that we have. Webinars, Try-it-Nows, coffee breaks. We even go over the next set of releases with you, right? Communities, we continue to make that more vibrant and a place that the customers want to go to get answers and also to share their knowledge. This Customer Ambassador Program that we started is terrific, and they're raising their hands to take their time to answer their colleagues' questions, if you will, right, other accountants' questions. We talked about the Optimization Academy. And then I don't always know when a customer or an account manager wants a CSM, so they can let me know. We set up a way, they just raise their hand, we'll call you and work with you. So we try to anticipate when the customer needs us, not always 100%, right? But we give them a way to tell us, yes, yes, I need you now. So there's a lot of activity and the customers are touched very often. And we know that customers that are touched by a CSM, and one of this, this outreach has DBNRR higher than our current numbers, that it's a very rich place to be. Our new customer service offerings, and again, this is to increase the services revenue, selling into the base. Premium services, you like your IC, you can keep them for a while. You wouldn't be surprised how many customers like, I'm not ready to take the training wheels off. I know I'm implemented, but I really like this person that's helped me get there stay with me a little longer. Admin-as-a-Service. I think every customer that I've spoken to at the conference is talking to me about their admins. It's a really important role because you really can't introduce more change without the admin anyway. So it's important to us, it's important to them. This Optimization Consulting, again, you come out of the academy. You have all of these optimizations you want to go after, you've ordered them. But maybe you don't have the staff or the knowledge to pull you through it. We'll consult with you. And these are not big expensive consulting SOWs. They'll just be a couple of weeks, perhaps, but it gets the customer into that optimization to see that value and use BlackLine more. This optimization consulting, again, you come out of the academy. You have all of these optimizations you want to go after, you've ordered them. But maybe you don't have the staff or the knowledge to pull you through it. We'll consult with you. And these are not -- these are not big expensive consulting SOWs. They'll just be a couple of weeks, perhaps but it gets the customer into our -- gets them into that optimization to see that value and use BlackLine more. And then the strategic customer adviser, look, this is for large enterprises that really want someone on their team from us, helping them on a regular basis, both being an advocate within BlackLine, helping them with new ideas, optimizations, all of that, they can have someone. And we sold some of those already this year. So those are all new this year. We're really pleased with the uptake so far. Okay. So we know customer success is a differentiator. We can tell how the customers feel about us. We're measuring their health, what they're using. We know when they're in a very good position for we need to go back in and sell some more because they're really happy customers. The data -- the happy customers buy more. And also we've seen when they move to other companies, they'll bring us with them. If that new company doesn't have BlackLine, they'll bring us with them, and we're starting to track that now. Look, I was really excited to share BlackLine's customer success story with you, and I look forward to your questions at the end of the day. Thank you. Thank you.

All right. We're at our first break. 10 minutes, we'll reconvene about 10 minutes. So please refresh your drinks, which you need to do and we'll come back. Thank you. [Break]

All right. Welcome back. I'd like to introduce our Chief Technology Officer, Peter. Pete?

All right. Thank you, Matt. All right. Hello. Yes, I'm Pete Hirsch, Chief Technology Officer for BlackLine. I lead our product and technology teams within the company. I've been here since about -- since early 2019. And I've been speaking in front of investors and analysts since then. I'm excited to be talking to you again. And for those of you who have been with us following us since 2019 when I joined, I'm pleased to report that we've been executing against the strategy that I outlined back then. I think we've made a lot of really great progress. And I think that this is probably one of the most consequential beyond the blacks we've had in our recent history because of the significance of the investments we've been making and the modernization of our platform and our cloud. And we'll talk about those things. For those of you who are new to BlackLine, I'm going to share how our understanding of the market and our customers has really allowed us to reimagine and redefine how accounting work gets done. We're very excited about this vision. And then for all of you, I wanted to talk a little bit about how we're continuing to invest in our leadership position and our competitive advantage to distance ourselves from our competitors. So very pleased to be able to talk about that. As Mark Woodhams said earlier, it's still exciting to be with BlackLine. I think we're on to some really big things here, tremendous market opportunity. So I think everybody is aware, BlackLine is the category leader for financial close. We invented it. We pioneered it, and we continue to lead it today for both the mid-market and enterprise customers. And I wanted to pull together some numbers. But before I do that, it's also clear that we are expanding beyond the financial close to the broader solution set within the office of the CFO. We're now a multiproduct company. We now also have solutions in accounts receivable automation and intercompany financial management. And together, that's caused us to broaden the definition of the category we serve, as Mark was talking about earlier, to financial operations management. And I think we have a very unique approach to doing that, that I'm going to talk about. But I wanted to throw up a few stats kind of to illustrate the scale of the leadership that we already have today. Starting with the first column, financial close, our customers in the first 9 months of this year imported over 14.2 billion transactions, and that's up 57% year-over-year. So incredible growth, lots of value that our customers are seeing in our transaction matching product, as well as journals and other products. In our accounts receivable, customers have processed over $200 billion in payments with remittances coming in and getting matched against invoices so that companies can recognize the cash coming in and make that available for other purposes. So tremendous 32% year-over-year increase and over 200,000 intercompany transactions in our IFM suite, growing about 34% year-over-year. So clearly, some serious growth in these 3 areas. And this sort of magnitude of scale can only really be achieved by a category leader. So we're very happy with where we are right now. BlackLine is deeply invested with our customer, deeply embedded within the core of their processes. And we're talking about some of the biggest companies in the world. I mean it is absolutely a who's who list of the customers we serve. Seriously, the biggest customers in the world. You don't do that overnight. That requires trust, requires deep integration with their data, understanding their processes and all that. And so the theme of data and integration is super important. We need to be tight with the ERPs and the systems that we interoperate with. So that starts with the strong partnerships we have with some of those ERP providers. Of course, you're all very familiar. The fact that we're an award-winning solution extension with SAP. Earlier this year, we signed a strategic relationship partnership agreement with Microsoft as well. And we're showing -- one of the proof points in that relationship is this quarter, we've announced a brand new Microsoft Dynamics 365 Connector, that is on our new integration platform that we also just released this quarter. But these companies, not only enterprise, but the mid-market typically have multiple ERPs, even BlackLine, we've got a couple of ERPs. I mean -- it's incredibly important to be able to support the breadth of ERPs that companies have. We've heard companies on stage this morning, 300 ERPs. These are sometimes different brands, different types, different versions. So it's incredibly important that we're interoperable with all of these ERPs, and we are. We have a long list of connectors that provide us deep integration, not only with SAP and Microsoft but Oracle, NetSuite, Intacct, QuickBooks, a broad set of other ERPs, and we support them all. But -- just as important as breadth of support is the depth of support. It's not sufficient to integrate only with the general ledger. Lots of the interesting data, a lot of the interesting processes within a company are stored within the subledgers, within these ERPs. And so if we want to be relevant and deeply integrated in these companies, we have to be tied into these subledgers. And that's hard to do. And so we've made a concerted effort in integrating deeply with AP, AR subledgers, supply chain, sales and distribution, fixed assets, a number of other subledgers. And this is really important for the companies. So -- and our approach to doing that is that we provide connectors. We provide connectors that we either build ourselves or we partner to have someone else build or they sell or we sell, but it's a broad set of connectors that are unique to the needs of our customers and to bring data into our platform. So we have now over 1,200 of our 4,000 customers that are on one of our connectors, and that's really critical. Other customers have other ways of getting at it. We have APIs. We have FDP. There are other ways of doing it. But we found that those customers that use our connectors, on average, get more value out of BlackLine and they grow faster. Our revenue, our dollar-based net retention rate, I think, was discussed on the last analyst call. It's about 5 points higher. So our revenue grows 5 points faster per customer who has a connector. They get value, we get value. So lots of great focus on that. So -- I also want to talk about our investments in R&D and our cloud. We've been increasing the investments we've been making over the last several years since I joined in 2019, we're now about 17% of revenue for R&D. And that's for several reasons, but there are 2 big drivers to that. One is the acquisitions we've made with Rimilia and FourQ. We've gotten some fantastic expertise in AR and intercompany, fantastic R&D teams. And so we've been accelerating for the new solution pillars to be able to build out our full -- the full suite that we have right now. That's one driver. The other driver is our platform modernization. This is a very significant investment we've been making over the last few years. And to do that, we chose to move to the public cloud. And so what we're doing is we're modernizing all this infrastructure, all of our capabilities, making deep -- taking deep advantage of all the capabilities. We chose Google Cloud as our strategic partner for a number of reasons. And so we're modernizing that. And that's been a key enabler of all the innovation that's coming to life now. Again, BlackLine Accounting Studio would not have been possible. A lot of the big data things that we're doing right now would not be possible. Huge advantages to modernizing the architecture and everything. And so that has been a central driver of scale, an accelerator for our innovation, and it's been -- and it's also enhanced security as well. So some real important strategic value. We had a major milestone last quarter in our migration. We now have over 2,000 customers live on GCP today, more than half. So half of our entire customer base is now live on GCP. Every new customer that we deploy goes direct to GCP. We are no longer bringing customers into our private data centers. We have capability to be able to leverage all the new innovation that we're building in the public cloud that can be taken advantage of no matter where you are as a customer. So if you're in the public cloud, if you're in GCP or if you're still in our private data centers, we've created some hybrid capabilities that allow customers to take advantage of that. So -- so right now, if you're a customer, it doesn't matter where you are, you can take advantage of this capability, you will eventually be on GCP. But for now, our journey is to continue that migration and to be largely complete sometime in 2024. So -- and those platform investments we've been making have been enablers -- key enablers for our next wave of growth. You can see this is highlighting where we're investing in our overall products in our financial close. We're continuing on the theme of platform modernization. We've made lots of progress. There's still more that we're planning on doing going forward, continuing to enhance our existing solutions, lots of customer-driven innovation that we can do with our existing products in financial close. We're also making some investments in big data matching. This is really key. Certain customers, consumer financial services and more have huge data volumes. I mean some customers are wanting to do 1 billion data points a month, I mean those are the kind of scales that we've heard. And by moving to public cloud, we can do some really interesting things using object storage and other really interesting capabilities. So -- so we're investing in that big data matching. And you've heard, I think, in previous calls maybe how important transaction matching is in terms of an enabler of our reconciliation capabilities. So it's very important. You also heard -- if you were in this morning's keynote, heard Therese talk about financial reporting analytics. Very exciting capabilities right there with preconsolidation analysis of grouped accounts. For AR automation and intercompany financial management, we have similar themes. We want to continue building out those suites. The -- some of the early-stage capabilities we're just tapping into some of the capabilities that -- that can be done. So we're going to continue investing very heavily in those as well as integrating them more deeply into our overall platform. Really important that we're able to get data into and out of those in the same way we do with our financial close management suite through our connectors and APIs. Very important. And we want common look and feel, user experience. I want to make sure that's consistent and that we can drive synergies across those as well. So -- anyway, very exciting capabilities ahead. But we see a bigger opportunity for bringing these together, very big. You've heard about our focus on financial operations management. We have an exciting vision that I think is a real driver of scale and opportunity for the company going forward. If you look at the history, our accounting teams, you see the building complexity, you see the amount of data, the amount of challenges that accounting teams have, and it's hard to keep up with that. So the industry has gone through different levels of investment at first in what I call the 1.0 version of this, company was just setting off -- setting up shared service centers, throwing people at the problem. And that helps -- and it will continue to be the case, but it doesn't scale. You can't keep on throwing people at a problem, creates very -- first of all, you can't keep up with the amount of data. Second of all, you create errors, inconsistencies and all that. So the industry moved to 2.0. Robotic process automation, RPA, bots. It served a purpose. It was good. Integrated solutions around the edges, getting data into and out of between applications and all that stuff, but created challenges. Companies are starting to see that, that's very brittle. The bots break when you change the systems, change a process, you're going to break your bots, you're going to have to go and you're going to have to retool them. The costs are pretty expensive, right? And they're somewhat limited in the focus of what they could do. So we're taking a new approach. We're looking at what you've heard Mark talk about, BlackLine Accounting Studio, a new approach to providing deeply embedded capabilities that the -- that these customers can use that will take them end to end. And we're excited about this category, and we intend to be a leader in it. So a little bit -- a little bit about BlackLine Accounting Studio. We think it will change the way companies do work. It will allow companies to, of course, unify, orchestrate and automate what they do, starting with unifying the systems, masking the complexity of the underlying systems, all the disconnected systems they have in place underneath, masking that complexity, providing a single viewpoint into the accounting operations. Being able to orchestrate complex processes, multistep processes without requiring IT and the ability to automate these processes to be able to move faster, process more data and only involve accounting teams when judgment is needed. When decisions need to get made when exceptions are encountered in data. So -- we've had to build a new platform to be able to support this. And that's what's at the foundation of BlackLine Accounting Studio. If you get a chance to attend tomorrow's keynote, I highly encourage it. There's a lot of really exciting stuff that we're going to be talking about. So -- but it's important that, that we have an ability for these customers with a solution that sits on top of all this complexity. Initially with BlackLine and in our solutions, but then eventually across the ERPs, the broader ERP landscape and, ultimately, across other finance and accounting solutions. So that's kind of our vision. And we've captured it here. It's going to be a brand-new offering that we bring to market next year. It's going to be a separately priced offering. And in spite of the fact that it's called Studio, which may suggest that it's only a tool that sits on top. It's supported by deep platform capabilities underneath to unify the accounting systems, all those ERPs, that landscape. We sit at the center of the ERP ecosystem, I'd like to refer to it as providing visibility on the status of the processes, powerful tools to orchestrate these processes and then to automate them end to end. So we've been working on this for the last couple of years, and we've been involving our customers along the way. We've selected some design partners. We've been very close to them to make sure that we're meeting their needs, that they're excited about it. We're getting their feedback. And right now, we're in design or the final stages of early rollout. We're going into early access for customers, starting in Q1 of next year. And then we are intending to go general availability in the second quarter. And that's going to provide a lot of great initial capabilities. The single-pane visibility of processes, an event-based architecture that triggers downstream operations once things are complete. So it's very automated. And that can involve either additional automations, additional processes or humans. Maybe we need somebody to come and take a look at something. We need to let you know that we need approval on this, whatever. So it can orchestrate that optimal mix of systems and people to provide that level of efficiency and accuracy and judgment. So we're very excited about that. But as excited as we are on what we'll be launching next year, we're even more excited about where this takes us beyond in '23. Very exciting road map for integrating additional systems, providing the ability to automate end-to-end processes across not just BlackLine but other systems as well. And that results in the opportunity to build a best practices library and even marketplace that we can provide for our partners to add to, for our customers to add to. And ultimately, we achieve our real goal of becoming a true platform company, and so we're super excited about that. So I used the word excited a lot. I am excited. We're uniquely positioned, I think, to execute on this vision. We don't believe that any of our competitors can match us either in terms of the vision or our ability to execute. Only BlackLine has the single comprehensive solution to unify, orchestrate and automate. We have the broad ERP support, unmatched experience and relationship with our customers, that deep partnership to understand the needs of the industry and the continued investment, $100 million and more a year investing in this -- in our solutions. And I think probably combined all of our competitors together, we're investing more than they are, and we're making some great progress. So just like we pioneered the automated financial close, we're poised to really create and dominate this new category, and we're very excited about it. So thank you very much. That's about it.

All right. Good afternoon, everybody. Just by way of introduction, my name is Mike Polaha. I'm Senior Vice President of Finance Solutions and Technology at BlackLine. I've been at BlackLine for about 1 year. I come to BlackLine from Johnson & Johnson as a former CFO. At J&J, I had accountability for finance data, finance process and finance technology and was the key thought leader for their finance transformation. And part of my role at BlackLine, I interact with our larger enterprise customers relative to how BlackLine can support their overall finance transformation goals. So what I'm going to talk to you today about is our strategic products. And then I'll stay on the stage to provide you with a double-click on our intercompany financial management product, in particular. So as we think about it, what's the -- why do we focus on these products? What's the case for us to really try to grow these particular products? Well, we identify a significant market need. So these are products that would solve for known problems within the finance and accounting function. They also allow us to move upstream in the process, right? And that, for many of our CFOs and customers, is becoming increasingly important. As digital finance transformation takes hold, CFOs are being asked to provide more timely, more accurate data more frequently. So our ability to move up that automation curve to support more streamlined monthly closes to support rolling forecasting and different ways of planning are becoming increasingly important to the CFO's overall goals. From a BlackLine lens, this strengthens our overall competitive position. It's a broader platform. Many of our users sit within shared services centers. And these solutions provide great utility within that organizational group. It's a terrific platform opportunity. It really rounds out elements of our solution for our customer base. So just definitionally, I'll be talking about 4 products today. The first being Transaction Matching, second is Smart Close. Both of those would fall within the financial close management pillar of our product pillars. And then I will move into Accounts Receivable Automation and Intercompany Financial Management. All right. Let's start with Transaction Matching. So -- this is a product that really enhances our overall strategic indispensability. And why would I say that? It allows us to bring more data into the BlackLine ecosystem. It allows our customers to match and reconcile more frequently. And some of that matching process could yield journal entries as well. So it's very symbiotic and symmetrical to the whole of our solution, all right? And to Pete's point on big data matching, having more data real estate within BlackLine allows for greater visibility of that data. It can be used for multiple purposes. Many of our customers are looking to leverage data, obviously, to turn it into information, and this is all part of that particular use case. There's always and there will always be an automation component here, right? That really allows our customers to do more with less. This is especially true with many of our retail customers that are looking to settle every day their cash receipts and have those reconciled and doing that with an automated process is very value accretive for them. On the right-hand side of the slide, you can see how we progressed with our overall year-over-year transaction matched automatically within BlackLine. So we're seeing customers on their journey recognize the need that matching is a very important part of their overall program. What's different about our solution? I would say it's very flexible, all right? Very configurable, all right? It allows you to do more than you can ever do within an ERP context. We can bring in data from multiple sources, all right? We can bring it in, match it, reconcile it and then leverage our workflow capability for the exception handling. This is really important because it allows customers to get out in front of exceptions sooner and move to more of a continuous accounting mindset, and that's where the market is really moving. You could see some of the value proposition on the subsequent boxes in the slide. So the enablement through automation, 99.9% with a reference customer that were matched automatically, reducing 70% of manual effort. And it really does strengthen the overall value proposition of our BlackLine ecosystem. Product #2 is Smart Close. So really exceptional product. It's a premise agent that sits natively on an SAP platform that automates over 400 manual steps in a close. And again, as more customers look to close more frequently, this automation capability for customers becomes more important. And this is where this product really, really plays. And as part of the product strategy that Pete just articulated, this product in an SAP ecosystem is going to have durational value. We are going to have the ability through the BlackLine Accounting Studio to orchestrate the Smart Close product in a multiple ERP landscape, which is very, very powerful. It enables a faster, better close. And our customer satisfaction on this product is very, very high. Accounts Receivable Automation. So just to set maybe some trends of what's happening within the marketplace in general. I think all of us realize the inflationary situation that we currently find ourselves in. So our customers recognize the value proposition of rapidly transforming accounts receivable into cash, irrespective of whether they're in a cash favorable position where they can then generate interest income or if they're working off a line of credit, faster cash, they can reduce interest expense. So this is a very important focal point that we're seeing within our customer base. Of course, doing more with less is always going to be important. And automation in all these product suites is a key theme, all right? Driving more auto matching capability from a cash application perspective is very important. Then lastly, the ability to generate actionable insights and intelligence off of that database, okay? This informs payment patterns of our -- of the customers in terms of how they're paying, to inform collection strategies for our customers where they can optimize working capital. It's a very powerful product and very interesting for our customers. So you can see in the marketplace, 83% of users are willing to pay for AR applications with modern architecture. This is really an unmet need in the market. As a practitioner in this space for many years, this has not been done overtly well. So a big opportunity for us. How does our product differentiate itself? I think due to the completeness of the platform, cash application, credit, collections, dispute management, AR intelligence. For invoice to cash, it provides a full baked, fully suited solution for that process area. You can see then our strong growth profile, 33% growth in managed transaction volume for the first 3 quarters. We're seeing more volume through the platform. You can see it on the next box as well relative to the $200 billion of payments and cash managed through this particular platform. So becoming a very important area and our product is really standing out. Intercompany financial management, all right? This is an opportunity area that's near and dear to my heart coming from a large complex multinational, all right? How does our product differentiate itself? One is really touchless automation, and we're going to double click on this particular product next. This notion of tax hyperautomation, the ability to ensure tax compliance all the way from sales and use tax and VAT tax through to the preservation of effective tax rate through insurance that the right transfer pricing has been effected on each of these transactions. It really is the only tax-centric intercompany automation product on the market. This capability was enhanced when we bought FourQ, all right? It's increasingly important given the rise of complexity and legislation in this particular tax space. There's a lot going on here, whether it be BEPS, BEATS, whether it be the e-invoicing that companies have to comply with. This product really helps ensure all of that compliance, which then subsequently mitigates regulatory and reputational risk. You can see highlighted here some of the examples where companies did not do this process well and failed and failed how they needed to address compliance within this particular process space. So very excited about this particular space. And where I'm going to go next is to provide a double-click on this particular product. But prior to that, let me just wrap up this particular section by saying our strategic products are an increasingly important part of BlackLine revenue growth. Mark Partin will talk to some of the details of that. They're strategically valuable because, again, they're upstream in that process. Intercompany occurs as the business cycle occurs, being able to make sure that's correct and reconciled in a more real-time basis, together with cash application, more real time, transaction matching, more upstream, more real time, extremely valuable to the overall transformation objectives. It expands BlackLine solution offerings into these adjacent areas, very important. Critically important, it expands the total addressable market, okay, opens a large white space through upsell and cross-sell opportunities with our existing customers as well as new opportunities with any prospects. And these solutions and products are purpose-built to solve these particular challenging areas that customers have. We don't need to create a market for them. The market exists for us. Okay. So we will pivot next into intercompany financial management. Simply put, for many large enterprises, intercompany processes are simply unsustainable, okay? There exists in many of our customers and these companies very complex trading partner relationships, parents, subsidiaries, plants, transfer pricing as companies endeavor to optimize compliantly their effective tax rate through transfer pricing. What gets difficult in this particular process is that what the tax planning folks come up with is at times very difficult for the accounting people to support in the underlying financial systems architecture, leading to a very disaggregated outcome, heavy manual work and some of the fines and penalties that were previously referenced. There's a lot of use cases that exist from an intercompany perspective, right? If you think about it for the large multinationals, I talked about trade, okay? But even below GP, you can see some of the use cases that we have with our customers. These are below-the-line types of activity, we would call them non-trade, that ultimately, a company, to be compliant, needs to charge out and needs to have an associated transfer price for them. Through the acquisition of FourQ, we've identified many of these transaction types from an indirect perspective and have already had the ability to quickly model billing routes and automation in these particular areas. And really, our solutions are built to support all of the processes in this particular space. So why is intercompany important, all right? One is the cost of the business administration side of this particular process. And interestingly enough, right, not a single dollar of reportable revenue is generated with this, right? It's all right pocket, left pocket, but it's a heck of a lot of activity. And the volumes -- the dollar volumes here supersede even reported revenue, just with the number of stops that goods and services make in order to optimize that effective tax rate. Clean books and records, right? So you got to be compliant here. It tends to be, in most large multinationals, one of the key pain points in the closing process. It -- does it allow companies to get to where they want to be there ultimately. So the ability to get out in front of this becomes very important. You can see that 99% of CFO's reference point there that it's becoming increasingly complex. We talked previously the regulatory and reputational risk if something goes off the rails here. You can see some of those fines and penalties referenced. So what are some of the -- what are we seeing in the market? We are seeing that there's powerful dynamics driving intercompany adoption. So M&A activity, foreign direct investment continues, all right? Companies are looking to expand their businesses, expand their footprint. Through these acquisitions, they acquire legal entities. They put them into their shared services network. They get on their payroll systems and much of this then needs to be charged back out. We talked about the tailwinds related to tax and regulatory changes, all right? This notion of e-invoicing is becoming very important in many countries where in real time, companies have to send both third-party invoices and intercompany invoices to governmental authorities to ensure visibility to the authority and the associated tax treatment on those invoices. On the far right, the enterprise dynamics are another tailwind, right? There's many companies that have a high number of legal entities with the spaghetti financial systems, right, many ERPs. These legal entities are trading across ERPs, getting both sides of that entry booked, ensuring that the transfer pricing is appropriate is overtly challenging and almost impossible without a technological solution. It is one of those process areas that at times has a lack of ownership, right, who really owns intercompany? There's the tax planning part that sets up what the optimal strategy is, and there's the accounting department that reconciles. But oftentimes, no one has been singularly assigned to drive this process area forward. So the market opportunity that appears here is significant. It's $11 billion from an addressable market perspective. We have about 2,000 existing BlackLine customers that adequately fit a target profile to adopt IFM capability. We have an experienced go-to-market team. I think this has been further bolstered through our acquisition of FourQ and some of the expertise now that we have to support our existing capability that we had from an intercompany hub perspective. We are clearly the recognized thought leader in this space. Many of my customer interactions, and I typically get involved with the larger enterprises, this topic is front and center. They want to know how to go about solving it, in what sequence and how to think about getting started here. I think everyone knows it's very difficult to boil the ocean here on a problem statement that could be significant in its starting out complexity. What helps us here as well is our dedicated partner support. So whether it be Deloitte, Ernst & Young, any of our other partners, I think that they also afford capability to help customers think and work their way through the optimal way to approach solutioning in this particular space. And we continue to work very closely with them with all of our opportunities. So what does our solution look like relative to the process, all right? And there's 2 slides here, and I'll spend, I would say, more time on this particular slide versus the one that will be forthcoming. But really, when you think about intercompany, where BlackLine originally focused out of the gate was in the middle portion, balance and resolve. The ability to more frequently match these transactions prospectively, handle the exception processing through workflow in a much more automated and focused way to ensure by the time that the month end or quarter end close came, that there was no substantive mismatches, imbalances in that intercompany space that would cause plug entries to suspense accounts. With the acquisition of FourQ, we've been able to bolster significantly our upstream create capability. This is the ability to avoid the mess downstream. And this capability ensures that the buyer and the seller have an agreement, okay? They come together, leveraging automation. We would work to identify these arrangements prospectively with the customer. And then we would ensure that they have the right tax treatment relative to sales use in that tax as well as the right transfer pricing. Many of these agreements are typically build monthly or quarterly. So once we understand all of this, that the entirety of that create life cycle can be automated. What does that do? It strengthens the overall compliance and provides efficiency. The back end of the process is where we would then Net & Settle these transactions, all right? And that's where we would be able to have prospective visibility to any type of hedging situation given the currencies involved with these transactions, and we can ensure that if you're settling with cash, right? We're getting the cash to the right legal entity where it's expected to be. Okay. This was the double click to which I referred. I'm not going to spend in a word amount of time here since I spent it on the previous slide. But you could see in that create space how all of that automation occurs through our solutions suite, how we make sure then that we post to the general ledger for these particular transactions. And that's where it becomes very important to the customer because once those agreements are made, we can then simultaneously get the debits and the credits across a multi faceted ecosystem, ERP ecosystem and get those postings done correctly to avoid the mess, which then leads into ultimate settlement of those transactions. So as we think about our differentiation in this particular market space, clearly, it's the touchless process automation to which I referred the configurable and dynamic billing routes based upon known intercompany transaction types and really allowing that to flow through in an end-to-end way. We talked a few times about the Tax Hyperautomation, okay? Very, very important to avoid tax leakage across the ecosystem. And then, of course, the business insights and reporting. I think as tax legislation changes, it's never static. Many large enterprises globally oftentimes look at their network to see how they may need to adjust it, maybe change the physical and financial flows of either goods or services to see if they can optimize their tax rate further. The capability of the reporting really allows them to work through some of that scenario and modeling. All right. So how BlackLine customers go Beyond Zero? You can see what that payback is. Let me just define Beyond Zero because I know it's a big theme for us at BlackLine. We would say that Zero is to ensure that we have a balanced set of intercompany transactions, right, that support compliant external reporting. That's kind of table stakes, right? But where we go beyond Zero is in the automation that we can conduct that process with. You can see some of the customer metrics referenced here from an improved operational efficiency perspective. In the middle here, where we talk about tax control and preservation of operating margins, this is significantly Beyond Zero. This is where we're ensuring all of the tax compliance to which I previously referred, okay, unique in the market. And what it does, it really broadens the aperture of the BlackLine solutions suite within the office of the CFO, many times with many customers, our controller and operational side of this process is coming hand in glove with the tax lead that reported the CFO to recommend our solutions. And in the last box, we talked about the achievement of cash precision. Making sure that we're settling -- we're settling timely. And where we settle in cash is landing in the right legal entity in the right country, in the right currency as that company would expect. So from a case study perspective, to bring it to life a little bit more for you, this is a case study from a mega cap insurance customer. On the left-hand side, you can see what the problem statement was. I would say this is very indicative of what we would see in the market. 4 shared services, manual process, lack of intercompany policy, and the business consequences included inefficient operating model, audit risk and VAT leakage, right? I would say, very customary. And then how do we approach a solution suite in this area. One is to really understand what their current state of process is, whom are their trading partners, on what ERPs do those trading partners sits? What are the nature? What are the types of those transactions? Where do we have critical volumes okay, making sure we have the right policy on materiality as it relates to intercompany. And then in this case, we started with that non-trade component, okay? Because they saw a quick win, speed to value as it pertains to the non-trade. Our ability to then configure billing routes between those buyer and seller transactions, and supported by the right tax strategies and automating that process end to end as well affording through our workflow, that dispute management capability to ensure that if something goes wrong in this particular process, there's an effective way for the company to disposition it. From a benefits perspective, you can see -- in this example, what was realized. We had a 45% reduction of FTEs that were operating in this particular space as a result of the automation. Of course, when you automate upfront and you have agreements, you will eliminate unreconciled balances downstream, a natural consequence. And that third checkmark is very significant. You can see the prevention of VAT leakage that this customer accrued as a result of our solution. And now they have this intercompany platform, they can grow with it. And as business conditions change or if tax regulation change, they can then model what an optimized approach could be to their intercompany process and tax optimization goals. So to bring it all home from an intercompany perspective, it's a huge greenfield opportunity for us, targeting the largest, most complex global enterprises. These are big names, big brands in the market. As I mentioned, it is the only tax-focused intercompany solution in the market. No one else has this particular capability. We have the capability to expand and to cross-sell this within our existing customer base. Many customers fit the profile close to 2,000, extremely sticky. It's a highly valued solution once it's in place. Many large multinationals themselves try to solve this with their own development. I can tell you many of my customer interactions, we're talking about grandfathering those developments because they don't provide anywhere near the full capability as they replatform as part of their ERP programs, they are looking for SaaS offerings in this particular space. Has a very quick payback period and a high return on investment. So we are super excited about the opportunity within this particular space. Okay. [indiscernible] back here in 10 minutes. [Break]

Hi, everyone. Welcome to Investor Day, and welcome to our panel here. We are really excited -- sorry, -- my name is Patrick Villanova, I'm the Chief Accounting Officer of BlackLine. I'm clearly very excited about this, as you can see. We're really excited to bring 3 panelists to you today. These are panelists from 3 of our customers that have extremely well adopted our product, 1 or more of our products. So each 1 of them will tell you a little story about their experiences with the BlackLine product, the benefits brought to their organization and how they went about doing that. Before we dive into the conversation, I often assert that nobody is better introducing themselves or talking about themselves than themselves. So I would allow each person here to introduce themselves, give a little background, what brought you here and who you represent. Start with the Helene.

Well, good afternoon. My name is Helene Carrier, I'm the Value Stream Owner from Record-to-Report for SLB. SLB is a global technology company driving energy improvement for, let's say, a balanced planet. So we just rebrand ourselves. So you might be more familiar with Schlumberger, but our new name is now SLB. I've been with the company almost 29 years. And during those years, I did some controllership. And just before heading the transformation, I was the Director of Internal Audit. So I had a lot of needs during my 29 years of new product so that's what brought me to BlackLine when I came to the transformation for all different reasons, efficiency as a controller and also internal control to help as the Director of Internal Audit. And then now I'm tried to maximize and accelerate our finance transformation with the BlackLine, which I will elaborate a little bit later.

Great. I'm Vince Garlati, I'm the Global Controller for Kraft Heinz, which is a global food company. We operate hundreds of different brands in different countries. I'm responsible for all of the accounting, technical accounting policy, external reporting, internal controls and stocks for our company. When I came to Kraft Heinz in 2016, they had already been using BlackLine, but I actually implemented at my prior company before that. And for me, it's a nice tool to have visibility into a very disparate kind of global company where you have operations in different ERPs and a lot of different companies -- countries. A lot of the modules serve as a little bit of a universal adapter where you can see in one spot, have visibility in a lot of different areas. It's also helped us a bit on our global center of excellence and global process journey where we've centralized certain activities in different markets to perform them in an efficient manner and a better controlled manner.

Hello, everyone. I'm Jon Bell, I'm an Executive Vice President at Capgemini Business Services. And most of all, I'm working at the moment with BlackLine Cash, the AR automation product. My role at Capgemini is Head of Strategic client relationships. And as part of what I've done with Cap over the last 17 years, I've helped to set out the technology and platforms and automation strategy for our business services organization, and part of that could contribute into what we call our frictionless finance offering, which is a combination of process enhancement, root-cause analysis and data insights to really remove blockages to give our customers the best experience and combining that with digital platforms and artificial intelligence. So on our AR side of our finance offering, BlackLine is our platform partner of choice, okay? And we've been implementing BlackLine within our portfolio of customers, and one particular large program over the last 18 months that I'll talk a bit more about today.

Great. Well, thank you. The first question I had applies to each of you, all right? I'd like each one of you to address it in your own way. I think, generally speaking, we always hear about companies that are well adopted with BlackLine. They're a well-oiled machine, as we call it, when it comes to closing the books, and that's the current state scenario. What I want to really double-click on though was, obviously, it wasn't always that way. And when you arrived at your organizations or you first were looking out there, maybe could you describe kind of the conditions or the situations that were present. That made you think I really got to evaluate a technological solution for a broken process or a really manual closing procedure. Maybe describe how you went about that process, you would call problem solving. We would call it demand generation. But how did you go about evaluating what tools were out there? Why did you choose BlackLine? And then maybe how did you augment your team throughout that process, if at all, when going through that entire evaluation. I'll start with Helene.

So also part of the transformation even before what the finance usually department, we want to shift when we say ship the paradigm. So we want to completely eliminate the transactional transaction and really focus on the business inside. So really, the value proposal is when you actually start removing the task in all -- mostly now we centralize more and more, people create the hubs. So the tool that can work is not Excel. You need a stronger tools for internal control, the value. And you really -- when you talk about digitization, you need a partner to really do under controlled environment. So the first tool we win, when we decide to go in the hub was the reconciliation and right away also from an internal control because I was just coming out of my director of internal control, that's where you have most of the weakness because without a control then ensure integrity of your balance sheet, you have a lot of risk. So that was the first one. And the fact that you centralize, you become so much efficient. The second one was the matching because that everything that you can replace an Excel sheet, you bring value and within 2 or 3 months, the matching eliminated outsourcers. So with the -- today, the economic situation, you try also to have the function as a less cost of the service delivery. The idea is to remove the transactional, that was the case for the matching. The third one was the Smart Close. When we are in our process of deploying SAP, we're deploying so many legal entity that we had, if we had to continue with our current -- the system we had before, we would have had to increase about 17 FTE just because we are deploying. We need a solution to avoid a cost increase. Within 2 months, we actually were able to deliver on time, our version of SAP because the Smart Close came in just in time. So each time we had a problem, either it was efficiency, internal control because and eliminating that way all our transactions.

In my experience was about 12 years ago prior to coming to Kraft Heinz that we implemented BlackLine primarily with the business case being the reconciliation module, which the environment back then, it was very much Excel spreadsheets or in some cases, binders, SharePoint sites, things like that, that supported things locally, but you didn't have a lot of insight from the global center. And then also if you wanted to find out insights or see something, it was usually an internal audit would come look at it 6 months later and you'd find something late. So it enabled us to bring better visibility and use it as the backbone for our shared service center. And then also just integrating the various modules, how they work together, kind of -- is very synergistic, so things like the journal modules and the TaaS modules some of those coming together really helped us there. And a similar thing at Kraft Heinz with where we are just having the ability to have that -- I can't even imagine over the last couple of years when we've all worked remotely, how we would have even functioned in the old environment, just having something where you have global visibility. We have people who do some transaction support for us on the other side of the world and it's all very integrated and you can have workflows going between different countries and geographies, driving consistency, driving visibility into efficiency and process. So how many hours is it taking you to do this activity here versus this other one and you're constantly trying to be efficient.

Okay. So from my perspective, as a provider, what we're looking at is providing services to big global organizations, multi-country, lots of different tax regulations, lots of different compliance regulations, different payment types, different bank account files. So we were looking at something which was really scalable that could deal with very high transactional volumes for matching on the AR side, but also allowed us to support our clients and our customers in terms of their growth projections as well, particularly over the last couple of years. Some particular business areas seeing explosive growth, and we're trying to keep up with that with the platform strategy. So what we were looking for was a platform that was very scalable, could deal with all of those different functional challenges that I've talked about, different languages, payment types, bank files, et cetera, et cetera. We did some extensive research on the market about 3 or 4 years ago, so that BlackLine Cash could cope with those types of aspects. We put it through a proof of concept. We've got very good auto natural results right out of the box, exceeded our expectations. But probably most of all, when we started to work with the BlackLine team, we had some good shared value sets, right? So we were looking for not a vendor or a supplier, but a partner and a partner that could provide the agility to overcome the types of problems in all of the organizations that I'm talking about doing an implementation. So that was very important to us as well that partnership mentality.

Great. Great. Well, maybe next question, I'll start with Vince. I'd like to tell you introduce Kraft Heinz as a food company. It's ubiquitous. It's in every country in the world. And I got to imagine that gives rise to an unbelievably complex legal entity structure and accounting structure. And I know that Kraft Heinz is an intercompany customer. Maybe can you talk a little bit about what your intercompany process used to be pre intercompany hub versus what it is now and just the benefits it's brought to you as a controller in the organization.

Yes, this one is going to be really exciting. Everybody is waiting to hear about Intercompany. But if you think about it, so we operate in about essentially every country in the world. And a lot of times, we might manufacture products in one country, ship them across border to another country. Sometimes we might do services in one country, build them to another country. What our landscape was about 4 years ago before we started with the Intercompany Hub was you would literally have a company -- country that was kind of originating those services, generate an invoice and send it to the other side, and we operate in a little over a dozen ERP system, so it wasn't fully integrated. And so what you have is this company would record revenue over here, $1,000. Then this company over here might like say, you know what, I [indiscernible] like 20%, I'm only going to record $800 of expense or use a different currency or say, Hey, guess what? In China, I need specific documentation to allow this transaction, so I'm not going to record it. So that would happen in isolation. And then we consolidate all our results in a consolidated manner and then you look our Intercompany receivables and payables right about, so what happened? And you'd be going back and trying to figure that out and then they bring them to my team to kind of adjudicate, is this a legitimate transaction or not. That would happen sometimes months after the transaction happens, sometimes a year. Just because it was too many -- you think of a process where you have multiple touches where you don't need to do it. So what the intercompany hub enables us to do is we just move that decision process on the front end. So on the front end, it has to go through the intercompany hub, both sides agree to it, then it interfaces to the ERP systems at the exact offsetting amount and then you never touch it again. So it forced us to basically change that process. We're not going to second guess all these things. If we don't have the right documentation upfront, then guess what the transaction doesn't exist. It doesn't clear the Intercompany Hub, it doesn't get recorded anymore. So we had about 4 years ago, just a sizable Intercompany out of balance that we would adjust in consolidation, make sure that it was right in our consolidated books, but then we would spend months kind of reinvestigating what this is. So the Intercompany Hub enabled us to minimize that. We have better visibility into things like our transfer pricing and our cross-border transactions. And I know you guys are talking about some of the tax benefits. That's a big area of focus a lot of the tax leakage that you might have if you're not doing those inefficiently. The other thing, too, is if you take too long to identify these transactions, we might not end up settling them on time like actually moving the cash back and forth. And then you might end up in a situation where that's an unallowable deduction in one right jurisdiction, and it's still revenue to another one. So it could be just -- it's a hidden one that people who aren't really into it, don't really realized probably, but it can be a big issue.

And it's with the timely deductions, I mean, that's one of the many ways that the product pays for itself amongst -- all the efficiencies it brings. And then you heard Mike Polaha earlier talking about, well, you were here, but he's talking about intercompany and all the risk that's associated with it. I believe if you look at the top 3 reasons for a restatement, it's revenue, taxes, and Intercompany and 2 and 3 are typically interrelated. So having a product like that when you are -- when you exist in such a complex structure brings so much value from risk mitigation from efficiency and cost savings. So Helene, I listen to your answer earlier, a couple of things just jumped out at me. I heard that you're using Smart Close and that you're using Matching and that you're using not just [ REX ] but the cash [indiscernible] template, which drives a lot of efficiency. And I think I caught this correctly, you did an analysis that by implementing Smart Close, you didn't have to add 17 full-time equivalents to manage the close process through SAP. Smart Close replace that or mitigate that. Could you talk about maybe an example of automation where those 3 products or 2 of those 3 products are working together?

Sure. And I think that's really exciting because I think that's where the value is. It's really combining the product together, you can really get automation and efficiency where we just -- actually, we just went live of doing our bank reconciliation. So when we look at our cost of service delivery, we also look as an indicator or cycle time. So some time on cycle time to do a balance sheet, we started at 15 days and in the process, we try to go to 5 days, even one day. So we imagine the visibility in the CFO office if he has all those reconciliation done on the same day. So we decided to do the most important is cash. So this is the first 1 we've done and we actually was very fast to deploy it in 3 months. And in the last quarter, we actually reconciled 1,000 bank reconciliation in 2 days. Pretty much half of it, and I think on the next one, 70 were auto reconciled by our deduction. It's really looking at all those tools together bring so much value. So you have your cost of service delivery, you have the visibility of how your closing. So this is just the beginning. So we're very, very excited about it.

That's great. That's great. So we've talked a lot about because we've got a lot of accountants on stage here, which is great. We always talk about the use of BlackLine in terms of efficiency. We always talk about in terms of risk mitigation, which obviously are 2 very critical things. We talked about accelerating close process. But I think there's another element. And Jon, I had a pleasure to meet you early this morning. And maybe could you talk about your experiences with the Cash App and maybe the benefit it's brought to multiple stakeholders that are impacted by the use of that product.

Yes, sure, Patrick. I mean I think where we are trying to look at using the platform across our customer portfolio is really to look at driving key business outcomes. So we're all aware of the fact that if we get a high match rate that can bring efficiencies, it can bring the compliance that we've talked about. But I'm also talking about areas about saying, with that faster turnaround time, with that greater accuracy, with the fact that you can get the statement for the customer up to date. You're really giving them a better customer experience. And what that allows them to do is it allows them to be happier with -- our customer that we've provided the platform to and they can buy more and the revenue will increase. Right? There's also the situation from our customers' point of view, that they're getting more confidence around that turnaround time. They can open up more credit lines more quickly. So that can improve their revenue growth as well because they can sell more, right? And if you look about it from our employees' point of view, what it's allowing us to do is let the technology take care of more of the rule-based mundane activity, if you like. So they can be freed up in their capacity for process enhancement for dealing with exceptions, for stakeholder management, all of which, again, is improving that quality of service that we're able to deliver to our customer and our customers' customers. So I think we're seeing that we're using the platform, not just as the basics of high-volume transaction turnover, which, of course, is very good at, we're seeing an ability to do more for less in terms of growth periods, but also directly support that end customer experience, reduce the number of disputes and inaccurate -- inaccuracies that we get sometimes in managing that service and really have some beneficial addition to top line as well, which I think is really important.

I think that's really great because we talk about the AR product, which I can personally speak to, yes, it reduces DSO. It auto applies cash. It reduces the mundane and the amount of work that your team has to do. But I think what I heard there is it's also improving the experience for the very end customer. And that makes sense because traditional way of collecting, right? You bombard a customer with e-mails and phone calls, it's unpleasant. And it's not been within the realm of collections. Nobody likes asking people for money. So.

Also it turns to generate more work because what they -- what they start to do is complain that they've already paid. If you haven't been able to match or get that cash up to date, get the statement up to date. So this gives us the ability to really turn around on time, prevent those types of disputes coming in. And therefore, you get a much more frictionless, touchless experience, which, of course, the end customer prefers. And when you're talking about some of the -- some of the clients that we are dealing with, that is their big differentiation on the marketplace, right? If they're in a very cost-competitive business, the customer experience becomes everything to them. right? So it really does contribute to the way they win on the market with us as a service provider.

That's great. That's great. I guess moving back to here, I'm still mesmerized. Yes, Smart Close is a product that we've owned for 6 years. Maybe can you talk about exactly what the product does for your organization in terms of managing the workflow through the close process and roughly how that equated to -- it's doing the work of 17 people. And maybe how you thought through that internally and did that analysis?

Well, the way we looked at it, it avoids us had to hire 17 because we were going in one of our biggest release of SAP, and we had more than 70 legal entities. And the number of jobs that was creating was not sustainable. So we had to run too many jobs. But the Smart Close, what it permit is to have one person doing about all of close worldwide. And also having -- starting the automation of how -- who needs to do what? It's like a really, I was going to say, a view -- and they want we've never had any issue with it. Like I said, we actually deploy it in 2 months because we have no choice. We were going with a release in 3 months, and we had to find a solution. If not, we would have to postpone the whole go live. The training was easy, the setup was easy. And today, what we have to do is generate more value out of it to automate more tasks that is done outside of the month and close. But today, it's also concentrated a lot of our -- what all the closing that we do at the end of the month.

That's pretty darn impressive just when you think through that. It's hiring avoidance, if you want to call it that?

It was. It was. And even if we would have delayed our SAP release, it will have been very expensive because every time you delay plus 17 to train, and it's a tool is very, very easy to implement, which is -- it's a big value for us.

Vince, I remember we're talking yesterday. And of course, we talk about our products a lot within the context of financial close, and now Jon just highlighted in terms of its benefit to the end-to-end customer. I found the interesting matching is, obviously, if you use it properly, it is wildly beneficial to your close process. But you were talking about something because matching is pretty much a big data engine. We use it, we talk about it in the realm of accounting, but you brought up a use case the other day in terms of how Kraft Heinz is using matching, which really isn't part of the close process, some that more like internal reporting or analysis. Could you maybe touch on that a little bit?

Yes. I mean, I shared with you, just because I'm sure it was a bit unique how our team that likes the tools found a different use work. But we had the need to have more detailed product profitability reporting internally. So we built an internal system, we call single source of truth. And it allows us to have all the way down to net income, margin results by SKU, and we have tens of thousands of SKUs in the U.S. alone. So really important, particularly over the last year when some of our ingredients might be might be seeing in excess of 20% inflation by a particular ingredient. So really, our old method of assuming things stayed static, wasn't going to work. So we have a lot much more granular view and sometimes you can see in the internal management reporting view -- internal management reports might be adjusted to reflect certain things and maybe might not -- may not be the whole complete picture. So it's really important to me that our internal management reporting tied to our external reports. So anytime we set up a product if it gets a little bit out of whack and somebody doesn't set it up right, and it doesn't work with our allocation module. Our data assurance team uses BlackLine Matching actually to compare that and say, oh, you know what, during the week of month-end close, this product didn't get set up right, so it's not going to be right in our internal management reports and fixes it. So they're actually using the matching module to kind of prove the data integrity of our internal kind of product profitability reporting.

That's great. We have a few minutes left here, this half hour flew by. But I guess before we part, I'll start with Jon, I've been starting with Helene the whole time. But any final thoughts in terms of your experiences with -- for you that the AR product and where you see it maybe going in the future?

I think first thing is we'd like to obviously explore the benefits of getting a bigger scale as possible in terms of the implementation of the AR product. That's both in terms of the cash application because I think the more scale that we have, more volume that goes through the better the commercial case becomes. In addition to that, I would say one of the things that attracted us about the platform was the integrated aspect of the modules. So an opportunity to move more into the collections area into the disputes area, use the full integrated aspect of the platform and also obviously, as a provider of end-to-end finance services and supply chain services really use the full integration into the types of intercompany and the closed product that we've been talking about across the platform here. So I think there's plenty of scope for us to grow. In terms of our partnership, what I really like about it is the agility to overcome problems. You can't -- in any big program, you can't scope out every type of incident or every type of challenge that you're going to come across. So the working together, the agility that's shown in the partnership is what I really appreciate.

Great. Great. I guess for Vince or Helen, there's no wrong answer here, but maybe as we close out, based upon what you've seen at the conference, based upon your experiences with our products and as we continue to expand, what do you see in terms of the next steps in terms of use of -- using one of our products? Or what are you thinking about internally in terms of potential uses of our product.

Yes. I mean we've just -- at Kraft Heinz just started scratching the surface on the Journal module. We started that in Europe, and we're going to move that globally. So I mean that's one we want to continue to use, like I said, TaaS, we've used a different tool before, one of our -- actually one of our outside providers use their tool. You end up starting with this fragmentation of tools, it's a little bit harder to maneuver. So having one dashboard there will be important. So we're looking at that as well. Also variances. I mean, we look at things more so off-line in Excel and Tableau and use certain dashboards, but looking at some of those ones to leverage those as well.

And for me, one of the best investment I think we did is creating a BlackLine innovation team in SLB so you really try to have the people that understand more digital versus normal. And since we did that, we deploy a lot faster, the integration of our tools. So the team is here learning the experience. So I will say priority #1, we just deployed Journal using more and more automation of the journal, keep reducing a cycle time because that's value for the company. Every day, we remove of the cycle time, it's money saved and better visibility of the balance sheet. I'm very also -- very, very excited of the new FRA product to see the balance sheet, which is the link between the CAO in the detail and I'm starting to look at the intercompany, but we're using matching for the intercompany with the whole platform would follow what you're going to do. But there are a lot of exciting to come over.

Matching is extremely agile.

It's very agile.

It's rules based, and you can configure design it almost to your liking. Well, I believe we're at about a half hour now or -- so I want to thank each of you for your time for being great customers for being great representatives and adopters of our product, and I can't thank you enough.

Thank you, guys. Thank you, Patrick. I think there's a few takeaways for me and these guys are our heroes, it's -- what they've just talked about and what they've done is really, really hard in a world of accounting, which is risk asymmetry. The small things can create big problems in their world, and they have done this for very large organizations. So they're unfortunately though, they're the cream of the crop. There aren't enough of them. We need 4,000 and 33 more of them, right? You're -- and you're going to hear this from me and you've heard this these last couple of days, is that digital transformation is still in its and see at most of our company. You could turn this down a bit. It's a little loud. So it's infancy. And so that's a big secular thesis or a macro driver for us. And so, anyway, I really appreciate that. Another takeaway was Vince sounded to me like he bought this 12 years ago, as a repeat buyer. That's more and more common. When you get mobility for accountants, particularly accountants of substance that can see continuous improvement that have positions of power or/are moving to a new company where they want to establish themselves, new process, new procedures. And so you start to see these sort of repeat buyers for us. And then one last thing, Patrick. I think one of the smartest accountants alive, great and what better job than the head accountant at a company that sells accounting software. So our customers love them. Our employees love him to. So I appreciate you guys doing that. Thank you to those customers. Is [indiscernible] here? Did he make it back? Pat? No, okay. So he was here this morning. Pat and I were in the conference room. And I swear, I could see it in his face. He had a Mr. Miyagi moment. Because all of these products that we have and these services sort of came together for him in the accounting studio with the wax on and off and the paint defense to scrub the floor sort of all was these aren't just stand-alone independent things, right? These operate very effectively in our overall strategy in this accounting studio or this FOM, and our ability to really own this important real estate in the controllership and in the accounting, the most important part, we think, of the office of the CFO. And so many of you are creating this sort of a thesis around the office of the CFO in that transformation, and that's why we think you need to pay a lot of attention to BlackLine. So let me move on. I'm the CFO, Mark, the third mark on the stage tonight. It's nice to have all of you here in person. I appreciate that you're here for us, and you're getting the chance to meet our customers. I think the -- sort of main pillars of our story that you've heard today and from us many times, is the size of our market and where we are in that market. Second is the business model, this elegant land-and-expand business model that I heard this morning, and I like it. It allows us the ability to meet the customers where they are on their journey because of that. And then third, a long history driving profitable growth, cash flow, a DNA and a culture of responsible balanced growth profile, and that informs our future. So you don't have to look much further than our last quarter. Our last quarter, we think, demonstrates sort of the strength and resiliency of our business model, strong growth, solid profitability and retention in the business, gross margin, bottom line cash flow and an increasing customer commitment to BlackLine and our future through the RPO. Additionally, we're introducing a new metric that will -- in the future be part of our financial disclosures, ARR, annual recurring revenue. We just tipped over $500 million or at $515 million at the end of Q3. So a sense for our size and momentum. Mark introduced this earlier. Introduced the concept of our medium-term model. Growth profile with a target range and medium term for us is 3 to 5 years. Medium-term growth profile of 20% to 25%. Gross margin 80% to 82%. We will continue to drive operating leverage in all aspects of the P&L, including sales and marketing, R&D and G&A. We'll talk about those in a moment as well. This yields an operating income margin target of 15% to 20% with a free cash flow of 16% to 21%. There's repeating. You've heard it multiple times, but it's about the size of the market, the innings of where we are in that market and the green space and white space that exists in that market that makes it so exciting for us with our business model. So for example, I mentioned earlier about digitally transforming customers. For customers, we estimate today 10% to 15% are in some sort of more mature stage of digitally transforming people like the ones you've heard on stage they're buying more product. They've got somebody who's in charge of digital transformation, they're buying and accelerating their user rollout, they're working with our connectivity. They've got partners on their engagement. Think of this as leading edge and they are on their journey further along. And so what we see in the results of a digitally transformed customer in this small subset of customers is over 2x the average deal size, almost 3x the rate of growth annually. More than 2x the number of users, 50% more products purchase, and it yields a higher retention rate, 114%, which is 5 points above our customer average. But it's also worth pointing out the white space, right? So the other 80-plus percent that for one reason or another have not yet begun their journey, but we feel that they must. It's not if, it's when. And the reason for that is so many things that we've talked about, the need to deal with capacity problems with retention, with speed, efficiency, you name it. The problems don't get easier over time. And more and more people, we think, are going to be like these guys that were on stage earlier. So we're positioned, and we're poised for that. And I think you can go back in our cohort slide and look at how we've grown our customer base since 2012. This shows the land and expand model. On the left side, 1.8x average deal size landing increase from '12 in to '21. So 80% greater average when we land on the curve. And then on the right side, the growth multiple over time. They continue to grow over time. Would I put a slide on with 2 examples of customers. I don't know if you noticed, but those were 10-year old customers. And even on the stage earlier tonight, you heard when we were a customer for 10 years, and then we really didn't use it or utilize it or buy it until maybe 3 or 4 years ago. That's a long journey. That's a good and bad. The good is they stay with us because we were delivering value and the -- it's sticky, and it's high value to them. And it's -- for us, the opportunity is to be there when they're ready. It can be frustrating. I know you could be frustrated about it, but these are sticky customers that have great opportunity in the white space. Anyway, what drove this in the past has been user expansion through global rollouts has been price increases, even expansion within the core platform. You've heard already about journal entries and other products within the core platform. But it wasn't until recently and then also what we believe to be the future that the driver of these cohorts will be strategic product uptake. So I want to talk about that in a minute, not right now. So in this slide, you'll see the importance of larger deal sizes. We talked about big bricks, building a big company. If companies are digitally transforming, generally speaking, they're spending more than $250,000 a year with us okay? And the group of customers that have grown over 250,000 just finished over 400 number at a 28% growth clip over this period of time. And for $1 million-plus customers, that would be a 74% CAGR over that same period of time. So a little more than 10%. But this is really important because the more we have here, we believe we're strategic partners with these companies. We are embedded. They're buying, as I showed you earlier, more than just an acute problem solution. They're buying the platform and buying into our journey. Here's the strategic product attach rate. So this is how we believe we can deepen our strategic position within our customer base. In 2019, 13% of our ARR was strategic products. Mike Polaha talked to you about what those 4 were. Today, that's 22%, 45% growth rate but on the right side, you can see the opportunity. It's nascent in terms of our penetration within our own existing base. So the white space for strategic products and the ability for us to drive we think has never been better. Again, digital transformation, all of these experiences and investment in customer success, the knowledge, the training, the service, the ecosystem partnership helps drive this. Okay. Dollar-based net retention, 109%. I think I've already spoken to you many times about what's been driving this over the years. The future of this to increase it is through a strategic product uptake. It's all built though on a high renewal gross dollar renewal rate. Enterprise is above that number. Mid-market would be below that number, in the low to mid-90s. I think we put that in our IR deck generally. World-class for both. We think -- but we're never happy. We always want everyone to stay with us forever, if they can, and some have been here for a very long time. But the way that we drive this is to continue upsell, cross-sell, strategic products and prove that value, continue to innovate and deliver this unparalleled experience for the customer. I mean, we have a buyer enablement. We have to help them understand what they have. Fred Lee with CS was at the customary lunch today. And what he heard if you're talking to customers is probably the same thing, is that they want to do more, right? So he took away from that underutilized. That's the opportunity. For us to drive more product, more user expansion is better experience, better training, better service. So it's not rocket science, but it's not easy, right? What you heard today is sort of all comes together in this alchemy of having customers trained, ready, trusting you, proving out their value over time. It's mission-critical. Do they have the partner and the resource to achieve that project. And so we're there for them to help drive that. So nevertheless, retention rate at 109%, we believe the opportunity is to continue to drive that, like I said. Now to turn to profitability and margin. I'm trying to get you guys to the Q&A, so you can spend more time with the executives but to turn to the margin. High gross margin business consistently over the years. Primarily, premium product, BlackLine delivers great value to our customers, product mix, low services as a percent -- 94% of our revenue is higher recurring subscription revenue. As you know, a couple of years ago, we committed to a multiyear Google Cloud migration to drive our customers to the public cloud. So we're halfway through that experience, a little more than halfway. We've been managing it efficiently. Nevertheless, the combination of running private and public takes a bit of a headwind to the gross margin. We'll see this come back to us. Our medium-term target model is to get back to the higher end of that medium-term range, 80% to 82%. In the last quarter, we were at 80%, I believe. So that's the sort of the long-term view -- medium-term view of gross margin and our ability to do that. Now that's really important because everything else rest on this, right? To have that kind of leadership position that drives high gross margins and recurring revenue gives you the power to invest in the business still. I mean, look at the investment profile. We're continuing to invest for that 20% to 25% target growth. But we can get efficiencies in key areas, starting with G&A. We have high confidence and visibility that we can drive down G&A. The last several years, we've built a strong world-class global public company infrastructure. We can moderate and are already doing so, moderate those investments to start to drive and then we've got some automation opportunities in the future as well. Just as importantly in the sales and marketing, I thought Woody did an excellent job as a sales leader talking about how he's going to get more out of the team and the investments that we have. But they're pretty straightforward. Sales rep productivity, we're already seeing it. We've driven down our -- in the early part of this year, we forward invested, so we were at peak unramped capacity. And then coming out of this year, we'll be at peak rent capacity. So we will be positioned. And what we get for that is operating leverage in the sales and marketing with also the opportunity to grow. So sales and marketing provides ecosystem, high recurring revenue, larger share of wallet, lots of areas for us to start to drive more efficiency to get to that low part of that margin range. And then R&D, not a lot of operating efficiency planned here. We want to continue to invest. We think that levers for efficiency will include Google Cloud migration, that allows us to be more nimble and more agile in the investments in the R&D and also sort of a global work structure, labor structure. So these are things that we will be working towards and committed to and management team has already seen results on this as are you. Okay? And then this is the final slide. This is just a recap again of the pillars of BlackLine being positioned for long-term sustained profitable growth. The long-term nature of this is that it's a very large market, we want and intend to maintain our leadership position and invest. We'll do so profitably. We love that this business model allows us to meet our customers where they are and for example, in this last year-to-date, we're running at 60% to 65% of our growth profile is coming from the white space. And in the past, that's been where that much was coming from the green space. So we have these growth levers that we can be nimble with. So that's yet. So we're going to have a break now. Thank you guys very much. I hope that sort of pulled together, brought it home for what you've heard from everyone today. I'd also like to personally before I ask the executives to come up, thank them, it is really hard for them when I plant this in the middle of the customer event and then ask them to come and do all of this work because they are spending a lot of quality time with our customers. I know you want them running the business. But it's so valuable to you to spend time with the customers and for them to see the kinds of questions and the kind of people that own our company and partner with us. And so thank you for being here. Thank you to the executives. Now if you guys want to come on up. Do we have to have a break? Or you want to break? Okay. I'm told we have to have a break. We must. Okay. 5-minute break. See you guys back here, and we'll be on the chairs. [Break]

You have our Q&A panel now, just a couple of house rules. We do have 2 mic runners. So if you do have a question, please raise your hand. One of the mic runners will present the mic. If you do speak, please give us your name and the firm you're with so that the presenters can know who they're speaking with. I'll let you know when we have time for one more question, and then Mark will wrap this up.

VanVliet from BTIG. Thanks, everyone, for doing this. Very helpful. I guess when you're looking at the strategic product uptake, I think you showed 22% today, but it looks like mostly with the transaction matching. So what's currently sort of the limiting factor of all these customers that if they go talk to anyone that's using it, they see tremendous value. You guys are up here talking about it. It seems to have a very short payback period. So is there something structurally at the companies? Is it the complexity of it? Is the defining the problem to which you then have a product to attack. Why isn't that higher? And how quickly can you ramp it up from here?

Yes. Thank you. I'm going to turn it over to a former practitioner, Mr. Polaha. I think he's best suited to answer that for you.

Yes. Thank you for the question. I think when we look at the portfolio of products that we identify as strategic, I think from an IFM perspective, I think it just takes a little bit of a sales cycle to go through and ensure that the customer understands what the correct order of operation is, right? Because there's a lot of complexity there. It can't be solved in a big bang manner. So normally, we have to take them through a cycle of understanding how we can create quick wins, accretive value over time and take them on a journey. But I think once they get there, they are committed to it because they understand that the problem is not going to self-solve for sure. For the accounts receivable, I think it's just more of a matter of prioritization, right? We have to make sure that, that has the right visibility, the right focus within the organization to be able to look at that and fund that as a priority.

Aaron Kimson with JMP Securities. I have a question for Mark Partin on the balance sheet. So given that you have the 2 tranches of convertible notes with $250 million due in '24 that may or may not convert and then the 1.14 due in 2026 that are currently pretty far out of the money. Can you talk a little bit about how you're thinking about the convertible debt, especially if the '24 notes don't convert and if there's a point where it may hamper your ability to make acquisitions in cash?

Great. Thanks. [indiscernible]. Patrick, go ahead.

Yes. I think I could tackle this one. So I guess break it up into pieces here. The 2024 notes, $250 million. If our stock price is over $73 when they come due, we -- it's an instrument. We have optionality to settle in cash or equity. If our stock price is at $73, we have more than enough cash to pay off the $250 million. I think if you look between where our current cash balance is now versus where our debt balance is, there's about a $300 million gap. So if you think out to 2026, that gap will shrink to about $200 million by the end of 2024 because you have to think about these things a full year in advance. So we're always planning through 2024 for this. I think at that point where our free cash flow will be, which everybody is familiar with the model, we have a couple of options. Depending upon where our stock price is, we could do another convert for a smaller amount to close that gap, or we could do something we've never done before and go the path of a traditional term loan or potentially a line of credit, which with our free cash flow, where it will be at that point will be very manageable to close that gap.

Rob Oliver with Baird. Thanks for the great session. I'm not sure who this question is exactly directed to, so I'll just throw it out there. Mark Partin, in your comments at the end, sort of -- I think you touched on some of the investor sensitivity around timing and deals and stuff basically saying, "Hey, this stuff takes time." But you're right, obviously, with a lot of customers here are customers that -- we've known your company for a while, we've gotten to know them as well. So you can see that trajectory. And we also heard earlier from, say, Lisa, about the customer ambassador program, like I heard a couple of times today talking to people, like one customer told me at what got me over the edge as they put me on with Boeing. And then someone said, Oh, they put me on with Quest Labs. So like I'm just wondering, as you guys think about -- your customers really like you, right? Unlike most of our SaaS companies, right? And so that's a unique attribute, right? And do they like you too much? Like, are you not aware -- could you be a push more? Like are there ways, I guess, to think about that? Because meeting the customers where they are and being there when they're ready. Maybe there's something else that is good for them that they just don't quite know yet.

Yes. So maybe I'll start with the answer, but I do appreciate the appreciation of the fact that there's this love between the two parties. And that I think this whole team takes great pride in. I think there's a uniqueness to the buyer and the segment that is a little bit more pragmatic, and they're under the gun with the capacity constraints that they have with all the things they have to get done. You heard from the panel that Patrick led earlier, these are really great practitioners who have been long customers, who are people who are spending significant amounts of money on BlackLine who are just getting to it as they are able to digest it in the environments that they operate in, which are, again, controlled environments, were same as last year is rewarded traditionally from an audit standpoint. And so I think that's a little bit of stickiness. I have great confidence that Mark Woodhams runs an organization that is commercially demanding on our behalf. I've been in meetings and sometimes I feel like I might have to pull them back a little bit because they're that commercially demanding about pushing things with customers. So I think that explains the growth trajectory that we're able to get ourselves into and the profitable growth trajectory that we're able to sustain for a long period of time.

Natalie Howe with BofA. So my first question is, is the 20% to 25% target CAGR? Or is it for each of the next 3 to 5 years? And how much of that is reliant on acquisitions? And how is that philosophy going to change or feel so to say?

So that's the rate of growth that we are targeting when we get to that 3- to 5-year period of time, not the CAGR. Okay? And then organic growth.

Adam Hotchkiss, Goldman Sachs. I wanted to touch on the Accounting Studio because I think when we look at software companies across the space, when a company goes from a point solution to a platform, often that involves an elevation of the conversation to higher levels of organizations and a lot of times can lead to sort of a second derivative and adoption. Marc, how do you think about that? And what are the customer conversations early on in discussions and sort of with your bigger customers has been around that. And then Mark Partin, I think Pete touched on the fact that this was going to be priced separately. How is that impacting your view on the revenue growth model.

Thank you. So I'll start. I think you said the Accounting Studio. So it's catching on. I've had the chance to preview that plan. We've had a number of customers who are design partners that have been working with Pete and his team. So the receptivity is really strong to the concepts that we're investing in. I do think you're right. As we move from -- we've already seen it that we had to add maturity to the go-to-market organizations as we move from single product to multiproduct. Because we -- the buyer persona might have changed a little bit. The same principles apply, operating efficiency, risk capacity, et cetera. And then as we move up into this platform play, which is intentional, I think that we'll continue to have to evolve as an organization. And that evolution will look like a maturity level that involve a greater ecosystem and reliance upon third parties to help create that influence up in the executive ranks. I think it will also evolve to a blended approach that gets us out of finance and accounting as well as into IT organizations and leaderships who, in many organizations control this sort of IT architecture and landscape around finance and accounting. It will be incumbent upon us and this guy sitting next to me to develop the right people and processes to be able to support the growth through that.

I think same answer for pricing where we can evolve our pricing to move beyond the where we are today, we think there's opportunity for greater wallet share. So as we evolve, that we'll also be looking at the pricing differently.

Dan Jester, Bank of Montreal. So maybe 2 questions, if I can sneak them in. So first, I appreciate all the context on your penetration rates by geography for SAP. I noticed US, 500 customers, if I wrote that down but only 250 in Europe, and there's obviously a massive opportunity there. So can you speak specifically to what you're doing to deepen the penetration in Europe. And then secondly, on sort of pricing philosophy. It was telling on the Intercompany slides that from a tax savings perspective, one customer saved $6 million on that. That's a huge number even compared to some of the other things you talked about in terms of saving FTE. So philosophically, how do you think about Intercompany given the magnitude of the potential tax savings for some of your customers?

So I'll start with the Intercompany and the pricing, and then I think you want to chat on the other one. I think that we've learned -- well, we've historically driven high ASP and land and expand rates in Intercompany Hub. Many of our largest organizations, the largest spend profiles with our -- within BlackLine are from the Intercompany Hub customers. So yes, I think there's a validation of great value there. And we've learned a lot about our ability to drive pricing based on a more fluid metric like based on the value that will be derived. And so we've started to apply that in IFM and I think we'll continue to do that. Significant savings potential when you move upstream into that. Planning stream of those -- the orchestration of how those transactions originate. And we think that a lot of that value will accrue to us. So that's part of the reason why we're investing so much, why we invested in buying FourQ, adding that complementary capability as well as the belief that IFM will be one of the leading growth engines for us on the strategic product side going forward because it's going to drive such significant share of wallet with these large companies. In terms of Europe...

Can I clarify the question? Is it purely SAP? Or is it general?

Yes. It is just SAP as there's so much opportunity there, [indiscernible].

Let's talk about SAP first. So SAP and motivating them to work with you is not quite hand-to-hand combat -- maybe that's the wrong phrase. But it's man-to-man, manager-to-manager, VP-to-VP and every country operates in its own right, and therefore, you have to focus. So in every region where we've got a direct sales force, so in the U.K., in France, in Spain, in Germany, et cetera. I won't list them all. You have to make sure that all of those relationships are local and they're built really, really strong. What happens every year, of course, is that they change everybody and move everybody around. But we've got -- we could become wise to that. And so what we've learned is that the real sphere of influence there is within the [indiscernible] management organization and a real top-down approach. So the more we can embed in things like RISE which is their S4, the more we can get in front of the S4 development and put BlackLine in first, the more we can show success in each country and publish it -- the fastest acceleration we get, and we're starting to see it. So yes, -- you're right, 250 out of 3,000 isn't wonderfully exciting, but the opportunity is. They haven't run Europe or run EMEA for a different company before. There are 157 countries that I can sell to in EMEA. There is no way that I can do that in one go. So that's -- that therefore drives back to the focus piece. If anybody else wants to add to that. I really feel you've been ignored.

So Matt Stotler, William Blair. Thank you guys for all time today. It's super helpful. Maybe one on the platform and the adjacencies and the expansion of functionality with the platform. So good to hear more about the vision there. I think some things that stood out to me were specific to IFM. You're expanding in terms of outside of typical filler ship, typical financial close, bringing tax in that case in that department or for FRA. Something that's adjacent to the controller, but not really served by the consolidation engines or whoever else they are out there today. So as you think about kind of the development road map going forward, I would love to get your view on the, I guess, what are the most compelling opportunities in terms of, one, adjacent functionality that is not currently well served by other systems or a functionality that currently exists within other systems that you think could be subsumed into the controller ship or into BlackLine over time.

Well, I think that we've been investing in a lot of innovation. Hopefully, that resonated with you in some of the announcements that we've shared with you. And many of those things are sort of an ongoing thing that we'll be involved with, and there's a lot there. If you look at how much we'll invest to complete the picture in the financial operations management platform, just post the Accounting Studio, which is first release coming out in 2023, there's plenty of work to be done there. So it's premature, I would say, to speculate as to what else will drive innovation in. It will be on that map that I showed earlier in terms of the processes that surround the controller and how that will accrue benefit to the broader office of the CFO. That's I think the best I can give you right now.

Pinjalim, JPMorgan. One question on Studio. I was looking at it. It seems super interesting to me with the designer and everything. But I'm trying to understand how is it different from a generic workflow automation to like a ServiceNow or OutSystems or something like that. Why can they connect with BlackLine or other systems to kind of do similar things, especially when you're talking about getting outside of BlackLine's boundaries, right, you're talking about connecting with other ERPs. Help me understand that difference. And maybe second part to that is, I think you said Smart Close can be used to extend to kind of use over other ERPs using studio. How is that -- help us understand how is that going to happen?

For you, Pete?

Yes, yes. So yes, we're really excited about the architecture. What we're doing is making sure that the orchestration that can be provided. First, we're focused on the internal modules, making sure that we enable everything inside of BlackLine, starting with the financial close, adding in IFM, adding in AR, making sure that you can programmatically orchestrate across each of those and exposing -- think of any block in a process diagram as being a function on the back end that has events and settings and all that kind of stuff. And so one by one, we're building up this repository of blocks beginning with our own but then also with the native connectivity we have -- or not the native, the high fidelity integration that we have with the ERPs, that gives us access to the information deep inside of the ERP. And our connectivity is not read-only. It's bidirectional. So we cannot only read information in, but we can post information back out to the ERPs. So I think there is a minor analogy between what you call the ServiceNow orchestration for IT. We're kind of doing that for the CFO but in a higher fidelity manner to be able to provide that deep -- the knowledge of the kind of things that you want to do between the operations and expose those so that business users can connect up those sort of boxes and then have all the reporting and dashboards in transparency and how those progress along the way. So it is -- again, you're designing with the focus of the accountant in mind, the kind of functionality that's needed there. And that's central of our thinking. What do our users want to be able to do, how are they orchestrating their processes today, what would they like to be able to do? And then make those configurable so that they can build their own process. They can edit our process, they can build their own. So that's kind of our approach.

And then Pinjalim, with regard to Smart Close, you heard from Helene from I continue to call Schlumberger, SLB, earlier, just the great value and the ease of implementation and how powerful that is from an FTE hiring avoidance standpoint, from all the tasks and the orchestration there. Smart Close, on-premise agent deeply embedded into on-premise SAP. We believe our platform will enable us to deliver that type of control, visibility across cloud versions of SAP, non-SAP, the rest of the ERP portfolio delivered through the cloud on our portfolio in the future.

Alex Sklar with Raymond James. So Marc, when we think about the platform vision, I think there's customers who can have a lot of different places they can start, so places to land. So when you think about your new logos or even your pipeline, any color on how many are starting outside of REX now and how that's changed over the past couple of years?

Sorry, I'm not used to being called Marc. That's all it is. We are seeing people land with focused products. We're seeing people land within the company, whether that's just -- whether it's direct or whether it's from SAP. We're seeing people land holistically -- sorry, a much wider footprint when you look at the SAP relationship. I mean, they've taken that's into -- converted our competitors' customers into our customers through I won't say nonstandard, but Core Plus, the strategic product, yes. And so we're starting to see more and more of it. I can't give you a precise number, but I could, but I'd be guessing. I can't give you a precise number, but we're seeing them and the prevalence of starting actually with an intercompany is somewhat more than I expected.

The reason is an interesting question. We have such a great track record of Land & Expand. And what I spoke of earlier is this important real estate being the financial close. We'll be planning how we land an AR customer and then have that same expansion that includes the rest of the focus on strategic products because I think that's a future growth engine for us that we'll look to capitalize on.

Andrew DeGasperi from Berenberg. I just had a question about the unramped sales capacity numbers you showed earlier in that slide and it showed that it appears you were mid-teens maybe pre-COVID or around COVID and then obviously group significantly when you invested. I was just wondering in terms of the midterm targets where you have, the marketing getting the 38% to 40%. What does that imply for that number?

Yes. We like that range, and you saw sort of this historical range at 29% of unramped capacity in front of us. We like that in the 25% to 30%-plus so that we have always a ramp in group of people coming online for a growth rate in the 20% to 25%. We like it in that range. And it's a 12-month ramp. Enterprise reps that come on board, the training and getting them up and running is 12 months. It can be shorter, it can be longer, but that's the average. And so that's the kind of business model we look for moving forward. It's a good question. Thank you.

Steve Enders with Citi. I just want to ask a little bit on how you're thinking about that 80-plus percent of customers that haven't taken this financial transformation journey. Do you think there's things that are in your control, either it's something on the services side or sales and marketing and map that could help catalyze that adoption curve? Or how should we think about what a catalyst could be to potentially drive that?

Okay. One of the catalysts we see is the Academy. And you heard Starbucks, if you were there on the stage today where they said, look, we had the product, but we weren't really using it. Until we got to them and we said, look, what more you can do. And so it's that customer knowledge and trying to empower them with what can be the next steps on their transformation journey. They have to want to take it. We're here to help push them into it. I think there was a question earlier about pushing our customers. We are pushing them. I wouldn't say this outside the room, but adoption -- automation adoption is our measure of how well they're using our product. We're pushing them there. They'll get the benefit of it, but no one knocks on my door saying, help me with this automation adoption, please, right? So we do have a push-and-knowledge strategy.

Matt Stotler, William Blair again. Maybe one for Mike, just kind of double-clicking on the intercompany financial management. So ICH, I think it was announced back in end of 2014, it's been around for a while. Adoption has been slow. You talk to customers that are using it. It's clearly a very compelling product, very high ROI, but it's large, it's expensive, a lot of stakeholders and customers that I talked to, a good number of them that are looking at are just very intimidated by the prospect of undertaking that. So we would love to kind of get your perspective on if the broadening to this IFM framework is making customers more willing to initiate that journey? Or do you think there are any changes needed from a go-to-market perspective or from -- the way you package IFM to make it more consumable for customers.

Yes. Thank you for the question. I'd say based upon my interaction with customer, I think that our pre-configurable ability in that create space is driving customers to really look at it in a very much accelerated way, right? Because they understand that they can get quick time to value, benefits from automation and get that level of tax compliance that they're all looking for. I think where the complexity comes is working with them to develop a holistic road map. But I think with the FourQ acquisition now, we are seeing the customer recognize it. Now, we have the ability to really help them out of the box in a very material way.

Again repeat question. Mark Partin, I wanted to try digging into that 20% to 25% number that you put out there. It seemed like -- correct me if I'm wrong, it seemed like you're talking about the growth rate after 3 to 5 years. As of this year, I think the guidance is somewhere around 23%. That target is somewhere around 23%, right? How do we think about that journey between this year and next year. Obviously, we have a tough macro environment coming up. Is it going to be a little bit of an U curve? How do we -- help us understand, think about that journey?

No, I understand the question. I don't want to give you the answer to that. We're still early in the fourth quarter. Fourth quarter is a big contributor. We will provide guidance, of course, for next year when the time comes in February. But the stated goal for us was important, I think, for our investors and for you guys to know that. But the question about how the pace of the market movement, right? We've talked before where we think we could be. And based on the rule of 40, that target, based on the profitability and the growth between 20% to 25%, that's where we find the right place in that medium term while macro sorts itself out, that's where we think this business can grow in that Land & Expand model. Clearly, there are things that can move the needle, right? Things like SAP partnership or other opportunities. But the place for us that we feel like this business moves at the right pace, profitably is the 20% to 25%. And I think giving ourselves that kind of time to move past macro volatility is the right approach in that 3- to 5-year range. And that's where we want to land. And I think importantly, this is one of those markets that can drive that for a very long time. That's why we kept putting up the TAM, you guys are sick of that, right, is that -- this is early. We can maintain our market leadership position, we can invest, we continue to innovate and then we can be a long-term grower in that range. That was our target.

Rob Oliver from Baird again. I had a couple of questions for Pete Hirsch, if you don't mind me squeezing in to. One was, Pete, you talked about the importance of the connectors and the customers with connectors grow faster. And can you explain why that is? I mean, why does an API cut it here? Because clearly, one of the maybe I'm late to the game, but it really seems like this is an important part of the expansion motion for you guys here? And is a connector available to all of your customers? Or is there a revenue level at which it doesn't make sense? Or is that not the right way to think about it? And then the second is you put up data about the amount of data being processed or the amount of transactions. I think it was 57% year-over-year. And I remember when I first met you a few years ago when you first came out and you were doing the GCP move, it seems as if the move to strategic products right now is like maybe moving even faster than perhaps you initially thought? Or I don't know if that's the case, but just wanted to get your sense for how you feel relative to what could be a big hockey stick in those volumes as these initiatives come on board?

Sure. Great, great questions. So with regard to the connectors, a customer can always do their own customized integration. They can take on that. That's a big project. And we do have customers, some of our bigger customers have taken on that custom integration work. That requires them to know detailed internals of their ERPs. And so they've got to know the right queries to build. They've got to know how to post journals. They've got to know all this stuff. So it's a big barrier, right? And so if you can get an out-of-box Connector that can be tailored pretty quickly, your customers can immediately get access to that data, go deep into the subledgers. Again, not just superficially, anybody can export their general ledgers and stuff. But we're talking about going deep, and it requires that kind of knowledge. And so it's an accelerator. And it's an accelerator for companies to adopt and integrate that into their process. But having said that, there's nothing that prevents them from doing that themselves. And so -- and no, I think that when we look at the connectors that we built and partnered to build, we think of it kind of as a Pareto and we focused on SAP connector first because it was our biggest customers on that. And then, of course, we took on Oracle and NetSuite and all these others. And so we're building out these according to customer volume and all that. So it's not a matter of how big a customer has to be to take one on. We make these connectors available at a price we charge for connectors. It's not a big barrier for customers to do that. It's just an accelerator for that to do. And the more we invest in that integration, we're coming out with not only the connectors, but an integration platform this quarter that's going to make that even higher fidelity and they can do more with that. That just -- it makes it easier for customers and allows us to do more with it. So that was the question. And then the other one -- the other question was on the growth of the transaction volume. We've seen this opportunity from the beginning. We've had interactions with quite a few customers about their long-term desires and what kind of problems they want to solve. So we've known that this has been out there, and that's why we took it on early to set some big goals for us to be able to support an order of magnitude, scale growth over where we started off at. At some point, you outgrow the database really quickly. So you have to look at new storage ends on the back end, how you process that. That's why the public cloud has been such an important enabler for us. But no, we've seen this opportunity. We're excited about it. And of course, it ties back, in this case, mostly the transaction matching because that's where you get those kind of volumes. And yes, we see them in consumer, we see them in financial service, banking. We see much higher volumes of that kind of transaction. So we see a big opportunity.

Matt VanVliet from BTIG again. I guess when you're thinking about the overall time frame for completing the GCP migration, what's been the catalyst so far for companies to go ahead and do that? How much are you pushing them versus kind of offering the upside of the scalability and some of the things you just talked about of the newer products, maybe function better there. And then how frequently or how successful are you using that as an upsell, cross-sell mechanism of saying, look, we're going to go in, there's going to be work that has to get done. This is probably the opportune time to add some of these new specialty strategic products. And sort of how much can that be a driver over the next several quarters as you wrap that up?

Well, in terms of our migration, what we've done is we're building all new capabilities in the public cloud so that it's centrally accessible regardless of where you are, and that gives us freedom to place on where our customer is and where they can adopt that. Remember, our goal for the public cloud was not a lift and shift. We're not looking at it as just another data center. And I think maybe a lot of companies get sucked into that trap. Got the two extremes. You've got the lift and shift model where you're just thinking new data center. You've got the other extreme, where you've got companies that completely reimagine their architecture, and so they never make any progress because they never -- they're not tangibly scheduling and moving their customers. We think we found a good balance. Critical in our strategy is a modernization, building out all this new capability, the big data, the accounting studio all the new things that we're doing there. So it's that mix of pragmatism and new modernization at the same time. And that's given us the flexibility to be able to gauge our migration speed. And our goal is to make it as transparent for our customers as possible. We do not want them to feel they're interrupted. We want to make sure it's as seamless as it can be. So we started in North America, and we got that moving nice and smoothly. We're progressing through those and a nice healthy clip. We have not seen a lot of resistance from our customers. Our customers are accepting the public cloud. It's not news like it was 5 years ago or 10 years ago. People, customers, in fact, almost every customer has something going on in the public cloud anyway. So that's not a big deal. After we did North America, we moved to Europe. We're just progressing on. We're kind of giving customers notice, 90 days' notice. This is the next wave of customers going out. It will be on this particular day. They're ready for it. We migrate them over. We've got all the automation scripts. It's a very painless process. So seems going pretty well.

Fred Lee from Credit Suisse. Since we don't get much airtime from Pete...

We don't get to meet him that often. One more question for you.

If you had twice the R&D budget, what are some of those things that you would be -- some of those projects you'd be working on today? And going back to when you did launch on GCP, philosophically, why not the other hyperscalers and where are you in that relationship today? And then moving over to Woody, do you ever get any pushback or any feedback that they wish you had your product on -- launched on Azure and or another hyperscaler. And then last question for Lisa. So internally, as you work with your customers, what's that tipping point? Where you begin to see broad adoption internally, right? So is it something along some journal entry or they see some rapid ROI and some great automation and then they adopt the rest of the -- across the rest of the organization. Just curious on that front?

All right. Since yesterday -- I will try to keep mine short. So I quickly said I would love it. But you know what, something about having a fixed budget is very focusing. It lets you really spend the time that you need to focus specifically on the key things, prioritize that and make sure that you don't spread yourself too thin because it's not a body problem. When you're innovating -- if it's incremental innovation, you can throw bodies at it, you can staff up easily. But when you're doing big-ticket items and talking about Studio, I mean that was dramatic integration platforms, you're talking about all the connectivity, you're talking about the big things that we do, you need to be focused and that requires leadership involvement and everything. So yes, it'd be nice to have twice the budget. But on the other hand, I think it's also very focusing, and it gets us to have the right conversations to establish the right priorities.

One prospect in 4.5 years did not want to use GCP. They wanted to choose AWS, extended the length of the contract negotiate by 3 months.

They might be self-interested.

But we reserve it.

That was an easy answer. Okay. So mine is not so easy. Your question was the tipping point for customers. So there's a few aspects to this. I think first is the value realization they have and their ability to articulate that within their company. We have been on stage today to talk about that. So that they get more behind them. They're not always the best at articulating the value. So we continue to repeat and help them, right? So that's one. The other is they have to be ready. I can't always control that. It could be changes in their environment. It could be a merger. They could be moving to a shared services model, all of a sudden they're going to be like, oh, my gosh, how are we going to do this? Help us. Another is I'm going to go back to the optimization Academy. Customers coming out of there, a high percentage of them want to follow up with other optimizations because now they can see what they can do. When I was speaking to a customer last night, and they said, I realized that it wasn't just in my department. But if I work with these other departments that influence the work on my department, and we automated that, everybody would win. Now I'm not used to going over there and convincing them of it, but I need to go do that now. And then I'd say the last piece is all of the outreach we have for our customers, we target it. We know what they own, what they don't own, what they're using and we can predict what their next logical step should be, so they're going to start getting bombarded with some of those great ideas. So that's how we do it. The tipping point comes a few ways.

On behalf of all of us, whether you're on the buy side, the sell side or whatever you do. Thank you for your interest, ongoing interest in support of BlackLine. Hopefully, today's session, your ability to interact more broadly with our management team. As well as these lovely customers that we have in support and learn about our plans for the future are informative and appreciate your support. Thank you.