BlackLine, Inc. (BL) Q4 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2018 BlackLine Incorporate Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host for today, Maria Riley with Investor Relations. You may begin.

Good afternoon and thank you for your participation today. With me on the call is Therese Tucker, Founder and Chief Executive Officer of BlackLine; and Mark Partin, Chief Financial Officer. Before we get started, I would like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans, objectives and expected performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent our outlook only as of the date of this call. While we believe any forward-looking statements we have made are reasonable, actual results could differ materially because the statements are based on our current expectations and are subject to risks and uncertainties. We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Also, unless otherwise stated, all financial measures discussed on this call will be non-GAAP. A discussion of why we use non-GAAP financial measures and a reconciliation schedule showing GAAP versus non-GAAP results is currently available in our press release, which may be found on our Investor Relations website at investors.blackline.com or on our Form 8-K filed with the SEC today. Now, I will turn the call over to Therese to begin.

Good afternoon, everyone, and thank you for joining us today. We delivered a strong finish to a year of many changes for BlackLine. Throughout, we remained focused on our customers, while executing on our plan to scale the business. We accomplished much of what we set out to do this past year. I am proud of the team that we have built and their tremendous efforts in 2018 to effect change while minimizing disruption to our customers and our business. This can be seen in the results, which included a 30% revenue growth and increased profit on the bottom line. We are executing a focused multi-year, multi-pronged strategy to drive long-term sustainable growth. We appreciate that our investors understand and support our long-term view. I would like to take this opportunity to recap our progress on our 2018 initiatives. In 2018, this included taking care of our customers, which is always number one. In addition to delivering great software, we want our customers to have the best user experience and become lifelong advocates for BlackLine. We are striving to be the model for superlative customer experience amongst all SaaS companies. We invested in customer success teams, digital transformation teams, and strategic account managers with the express purpose of helping our customers and users be more productive and successful with our products and have a great experience as they advance on their transformation journey. During the year, we were pleased to see that we maintained our high renewal rate and NPS scores and increased the ACV of our largest customers as they embraced more of our products. Expanding our leadership team for the next phase of growth was another top priority in 2018. This began with the addition of Marc Huffman as Chief Operating Officer in February, and included a new Head of Global Sales, a new sales leader in Asia-Pacific, a new Chief Marketing Officer, and a new Chief People Officer. We have successfully onboarded a new world-class management team while minimizing disruption to both our customers and our employees. I could not be prouder of the leadership team and the employees of BlackLine. Over the past couple of years, we put a lot of effort into product innovation and bringing to market new products that drive real accounting and finance transformation and help expand our strategic value. Balancing the growing interest in our strategic products like the Intercompany Hub, Smart Close, and Transaction Matching with the large market opportunity for our core products was a key initiative for us in 2018. During the year, we built an Intercompany Hub specialized team to manage sales and support for new ICH customers. An additional benefit was the acceleration of implementations to ensure faster time to value and happier customers. Approximately 19% of our sales for the year came from strategic products, which was within our range of balanced expectations of 15% to 20%. Q4 was a record sales quarter for our strategic products and we see robust demand for ICH as we head into 2019. Last year, we also focused on building our partner ecosystem. We now have formal partnerships with three of the big four consulting firms in the world. We can officially go-to-market with them to help companies digitally transform and automate the CFO's office. We are well positioned and expect digital financial transformation to be a driver of our growth for many years to come. Over 60% of our largest deals of the year included a partner and the average deal size for partner involved deals is demonstrably higher. In 2018, we also laid groundwork for global expansion. We expanded our sales offices in Paris and Singapore, and signed a joint venture with Japan Cloud computing to help build BlackLine's presence in Japan, which is one of the world's largest software markets. In Q4, we announced a new reseller agreement with SAP, which I'm sure you are eager to hear more about. We were added to SAP’s price list and went to market with the new partnership in the last week of November. By the end of the quarter, SAP had landed several new customers on multiple continents. These customers are new to BlackLine and as expected are large and strategic global opportunities. SAP demonstrated in a very short time that their partnership can help us efficiently expand our reach, accelerate our sales cycle, and obtain larger deals through expanded product offerings and digital transformation budgets. While it is still early and we only have a small number of data points, I am pleased with what we have seen so far, and I'm encouraged by the additional pipeline of opportunities as we engage more closely with local SAP teams around the world. Additionally, consistent with our expectations, our existing SAP customers renewed and expanded their accounts on BlackLine paper in Q4. There is no revenue share or royalty fees on these renewals, now that the previous SAP agreement was amended. While we are encouraged by what we have seen so far and believe it creates a great long-term opportunity for us to expand our global footprint. As with any partnership, it will take time to ramp. We delivered tangible results in 2018, made solid progress towards our longer-term goals, and exited the year with strong momentum. As we move into 2019, we will build on these initiatives and incorporate our learnings from the past year and from trends that we have seen developing in the market. Our focus in 2019 is on driving growth and scaling the business. With that in mind, I want to discuss two important initiatives for the coming year. First, we introduced the whole product offering as a concept to you at our Analyst Day in November. Financial transformation is top of mind for forward thinking CFOs around the globe. They are looking for a transformational solution, partner, and ecosystem that can scale as they – as their businesses grow and evolve. BlackLine's whole product offering encompasses three areas: complete software, visionary roadmaps, and high touch services. Our consulting partners are key to delivering effective digital transformation. We expect this construct will help us deliver a more complete solution for those customers that are ready to take the journey. Another high priority for 2019 is ensuring that our new reseller agreement with SAP is successful by having the right resources focused on supporting our partners. In Q4, we saw good early proof points. However, it is important to remember that this is just one of our growth levers, and our strategic value to our customers remains our ERP agnostic approach. We will continue to invest in our connectivity with multiple ERPs and financial systems. Now, before I turn the call over to Mark, I wanted to talk briefly about our Annual Customer Conference and some of our customers. This year, we had a record number of customers, prospects and partners at our North American InTheBlack Conference. Their feedback reinforce some key themes that we believe validate our whole product offering initiative. Namely, our thought leadership in continuous accounting and disruptive new technologies continues to resonate with our customers. Customers ready for digital transformation want a solution and ecosystems that incorporates process automation and machine learning and scales with their needs as their businesses grow and evolve. And most importantly, BlackLine is increasingly being recognized as their strategic trusted partner on this journey. A few fourth quarter customer engagements that highlight our growing momentum included, a large European software company recently completed an ambitious acquisition, listed on multiple stock exchanges. They recognize the need to enhance financial controls and optimize close process efficiency to continue their impressive growth and transformation. The Company found that its existing technology stack was far too complicated with too many source systems for integration with NetSuite and a patchwork of excel, email and point solutions used for the financial close. The company chose BlackLine for our solution completeness and strong business and technical partnership with NetSuite which positioned us ahead of the competition. A clinical research organization was dealing with an excel-driven manual close and the CFO wanted to drive financial transformation to create better controls, more automation, reduced risk, faster close and better visibility. The close processes also needed the ability to scale to keep up with the Company's consistent growth. This Company evaluated multiple vendors and chose BlackLine for three key reasons. Number one, they wanted a solution that could address their risk management, compliance and automation needs; two, they deemed BlackLine’s technology as best-in-class; and three, they learned from customer references that we could deliver the matching functionality, scalability and reliability that they needed. Our North American software company had started a large project to upgrade their ERP. They have been a BlackLine customer since 2014 using account reconciliations and task management. As part of their ERP upgrade, they wanted to add additional functionality, including journal entry and transaction matching. This Company had a complex journal entry process and was using a series of spreadsheets in shared folders, paper files, scanned documents and emails. One of their biggest challenges with managing this workflow and they focused on BlackLine’s workflow approval features during their evaluation. Our rich functionality and integration with their new ERP helped us expand our business with this customer and increased ACV. I am happy to report that this customer also purchased our recently launched compliance product due to its functionality and ease of implementation. Overall, we made really good progress and built momentum going into 2019. The demand environment and the fundamentals of the business remain strong and consistent in Q4. We are seeing tremendous enthusiasm for BlackLine’s products and vision with our customers and partners. I could not be more pleased with the leadership team that we have built and the changes that we have made in 2018. Looking ahead, we will remain focused on executing our long-term strategy for growth and continue to strengthen BlackLine’s position as a leader at the forefront of financial transformation. Now I will turn the call over to Mark.

Thank you, Therese, and good afternoon, everyone. As a quick reminder, unless otherwise noted, all numbers mentioned during my remarks today are non-GAAP. Additionally, our results and guidance discussed on this call are on the ASC 606 standard that went into effect at the beginning of 2018. The impact of ASC 606 on the Q4 2017 comparative results were as expected. The restated Q4 2017 revenue had an approximate $200,000 decrease or less than 1% impact. The Q4 2017 reduction to operating expenses was approximately $1.7 million. We will publish a retrospective of Q4 2017 historical financials for comparison purposes in our quarterly filing. For the full-year of 2018, total revenue grew 30% to $228 million. Gross margin was 82% and we delivered on our commitment to make 2018 a profitable and cash flow positive year. We generated over $6 million in non-GAAP net income attributable to BlackLine and $16 million in cash from operations. Total fourth quarter revenue grew 25% year-over-year to $62 million. This growth was driven by strong and consistent global demand for our solutions and we delivered a solid performance across the business. There are a few areas I would like to highlight. We delivered a record Q4 performance in mid-market completing the solid 2018 for that team. We saw higher partner participation rates and expanded product offering, including transaction matching, all which helped the team deliver a solid year-on-year performance. Our International business has continued to grow rapidly. We finished the year with a strong performance in Europe as we increased our investments and added sales reps and partners in the region. We've also made quick progress in Asia-Pac under our new leadership there and are seeing a growing level of interest and demand being generated. Our International business represented 22% of the total in Q4, up from 20% last year. Revenue from our SAP partnership with 24% of total revenue in Q4 up consecutive from 22% in Q3 and 20% in Q4 last year. This includes renewables and growth from existing SAP customers under the prior EBS agreement and net revenue paid to BlackLine for new customers sold by SAP under the new reseller partnership. We will continue to report this figure in 2019. Moving to our key performance metrics for the quarter. The quality of new logos remained very high with strong expansion opportunities. We added a record 137 net new customers across both enterprise and mid-market. We now serve over 2,600 customers globally. The total number of BlackLine users grew to over 222,000 representing 13% growth year-over-year. Sales of strategic products in the quarter were strong and they did not increase the number of users, but increase the deal size. Our dollar-based net revenue retention rate was 108% well within our range of 108% to 110% for the year. We saw a strong underlying renewal rate of approximately 98%. We are pleased with our progress on customer churn and believe many of the customer focused initiative that we began implementing last year to raise the level of satisfaction, drive higher utilization and higher lifetime value or working. Gross margin for the quarter remains strong and consistent at 82% overall with subscription gross margins at 85%. In Q4 we generated net income attributable to BlackLine of $1.5 million, which is our six quarters in a row of positive net income. We generated approximately $5 million in operating cash flow and $2 million in free cash flow for the quarter. We ended the year with approximately $133 million of cash and cash equivalents and marketable securities. Before I moved to our outlook, I would like to make a few comments from modeling purposes. In 2019, we anticipate overall gross margin will trend more towards our target model of approximately 80%. As we continue to build-out our services and support team and invest in our cloud infrastructure to support our global growth. On the operating expense side, we generally see a step-up in operating expenses in the first quarter driven by annual salary increases, the payroll tax reset at the beginning of the year and annual kickoff events. We anticipate a few timing differences in expenses between 2018 and 2019. First, we are moving the date of our annual user conference from the fourth quarter to the third quarter. So you will see expenses associated with the event shift accordingly. Second, as we announced last quarter, effective October 1, 2018 we stopped incurring the fee on SAP revenue that we were paying under our prior EBS agreement. As those fees are amortized over a one-year period, we will see a gradual reduction in this expense in 2019. Our 2019 net income guidance reflects this change and we will see a gradual quarterly step up and net income margin throughout the year. Overall, we expect to see operating leverage weighted to the second half of the year. Lastly, the midpoint of our annual guidance assumes we will deliver free cash flow margin between 3% and 4% for the full-year. Now let's move to our first quarter and full-year 2019 outlook. As Therese mentioned, we are making great progress on our initiative and are pleased with our momentum exiting the year. We have a global sales team that is stronger than ever, a new leadership team with a playbook for growth, a new and exciting reseller partnership with SAP, and momentum on key strategic initiatives. While these initiatives are exciting, they are new. Consistent with prior year, we will approach our annual guidance with pragmatism and guide to arrange that we are confident that we can execute on. For the first quarter of 2019, total GAAP revenue is expected to be in the range of $62.8 million to $63.8 million. On the bottom line, we expect to report a non-GAAP net loss attributable to BlackLine of $1.1 million to $100,000 or $0.02 to breakeven on a per share basis. Our share count will be approximately 55 million basic shares. For the full-year 2019, total GAAP revenue is expected to be in the range of $275 million to $280 million. Non-GAAP net income attributable to BlackLine in 2019 is expected to be in the range of $8 million to $10 million. Utilizing diluted weighted average shares of 58.9 million, we expect non-GAAP net income per share between $0.14 and $0.17. Now, Therese and I would be happy to take your questions.

Thank you. [Operator Instructions] Our first question comes from Bhavan Suri of William Blair. Your line is now open.

Thank you. And thanks for taking my question and congrats Therese, Mark, and team. I guess I'd love to just touch on some of the demand trends here, as you think about 2019 here on the large deal side, so large deals have been a huge themes throughout 2018, just some sense of what you are seeing in terms of large deal close rates, pipeline, sales cycles, and color around that? And so as I put it all together, I guess the fundamental question is do you feel like predictability is improving? I'd love to understand how you guys are thinking about that? Thank you.

Yes. Hi, Bhavan. Thanks. It's improving. But remember last year, very unpredictable, very early, but regions were a little more confidence and – in 2019 is some of the pipeline development we've seen, we think the discipline and rigor of the sales team under the new leadership gives us better visibility and consistency in that area. It has been also an initiative for us to drive to this place, and we feel like our ability with our partners to execute and move them over the finish line is much better. And whether that's strategic product deals, like ICH, where we’ve built and invested in that team or whether it's just larger deals that we are seeing globally with partners, our view today is that we have a little better visibility on that than we did say back in 2018.

That's helpful, Mark. And again, just with a quick follow-up there for either of you guys. My favorite question on partners, because I think that's just so much to reach and breadth, so maybe not SAP, but sort of you SI and your accounting partners. I guess as you look at that partner ecosystem, were there any changes during the quarter from a partner perspective, and where did partner contribution come in relative to expectations? Thank you.

Thanks, Bhavan, and nice to speak with you. So our partner engagement on large deals this quarter was 68%, which is right around where it always lands. So exactly, where we'd like to see it. Now partners in general, I would say the one thing that really stood out this year is that we are seeing our partners invest in their BlackLine practices. They are hiring, they are training, they are marketing. So we're seeing a high level of partner engagement, which I think is just very positive.

That’s great to hear. Thanks for taking my question guys, and nice job. Thank you.

Thank you.

Thanks Bhavan.

Thank you. Our next question comes from Rob Oliver of Baird. Your line is now open.

Hi. Thank you guys for taking my question. Appreciate it. On the large U.S. software company that you mentioned Therese as an expansion. I was wondering, if you or Mark could talk a little bit more about that particular win. And then what I'd love to hear is a little bit about, I know you mentioned there when account recs and tasks customers I believe already. And kind of what percentage or a ballpark sense of what that expansion was on kind of a volume based strategic versus fee basis, and then maybe talk a little bit about whether that's representative of other expansion type opportunities at large accounts? And I had a really quick follow-up. Thank you.

Okay, great. That's it. Well, there is a reason that we highlighted that one Rob. And it's really interesting, because as digital transformation becomes sort of a thing that people are really interested in, we're starting to see within our customer base a migration of – yes, we use account recs and tasks to how can we use this software more strategically? How can we address other processes that are manual and labor and spreadsheet intensive within our organization with the BlackLine Suite of products? And so that's actually why we highlighted this particular customer, because they were very happy with recs and tasks for years and years and years, okay? And then when they started to really look at how they could transform their business is when they then decided to expand with us substantially. So it was a nice ACV win, okay? I think there's still a lot of potential within our current client base for additional add-on ACV, as our customers really start to go after digital transformation.

Great. Thanks, Therese. And just a quick follow-up on the compliance product. Because I believe you said that they also took the compliance product unless I'm mixing them up with the European software company, I think it was the U.S. Company, if I'm mistaken? And I just – I know traditionally that hadn't been something that was creating a land or expand opportunity for you guys and now with the addition of that product and with certainly conversations that your user went around, people focus on compliance and stuff like that. Can you talk about the pipeline of interest for expanded opportunities within core accounts on compliance as well? Thanks.

Great. Thanks Bob, and thanks for that kind of soft pitch, where I get to talk about compliance. We actually approached compliance a little bit differently than we have with products in the past. We basically started growing it out to interested customers before we started talking about it. So this last User Conference, when we started talking about it, we already had about 30 customers signed up, okay? So we're already seeing some very nice traction with this product. This is not a full scale GRC product. This is really around compliance and internal controls, so not a massive price point okay? But definitely, a very nice completion and additional piece to our platform. It's really about serving the customers here, okay? And what we had heard from our customers was in many cases, they were downloading information from BlackLine to upload into a compliance module somewhere else. And given that we operate on a single platform, we thought it would be a very powerful value proposition for our customers to be able to actually have it all in one place. And so, we're seeing a nice uptick on that product. We're seeing really good satisfaction, and I think it will continue to gain momentum.

Great. Thanks guys. Appreciate it.

Thank you. Our next question comes from Pat Walravens of JMP Securities. Your line is now open.

Hey Pat.

Hi, Therese. Hi, Mark. Hey, Mark, can I ask about, I just want to get a sense for how conservative the guidance is? And where I'm coming from on that is I think in your script you had something about, as we always do, we're being conservative. And so that prompted me to go look at what you guided for 2018 and where you came out? So you guided $219 million to $224 million, and you came out $228 million, which is 3%. But – so that doesn't seem super conservative. So if you could just characterize it a little bit for us? And may be 2018 was harder or maybe you feel better about 2019 relatively? But some color around that I think would be great.

Yes, that's a great question. I think there are two different things that affect close years. Last year, there was the sales transition taking place and I think that was a little bit more difficult to predict at the beginning of the year. Our – we call it the pragmatic approach, but we were very prudent about some of our assumptions given that, and I think it proved to be the right approach, because while the sales transition was going on, it was very difficult to achieve some of the things that we wanted to. And going into 2019, I think similarly we have these very new initiatives including SAP. Now we're very optimistic about the long-term potential, but as I look at 2019, our guide philosophy is consistent with what we were doing last year, that I believe or we believe that we can execute on the range that we started with, and that there could be opportunities for us as we go through the year if get accelerated ramp, we get partnership contribution, higher strategic product uptake that I can't see right now, then we have the ability to move that up similar to what we did last year. So I can't give you a range or rating on conservatism. But I can tell you that the philosophy was very similar is that we're – we feel good about executing on that range we've given now.

Great. And then Therese, I guess sort of a follow-up to that is Huffman is not there, right? So I'm going to ask you what he thinks, which is how happy do you think he was with the sales execution in Q4? And how does he feel about sort of the pieces he has in place looking for 2019?

I am going to speak for Marc, but I think he feels was very good about the progress that he's made to date. I do. I think he feels like he has made substantial contributions, and I think we all feel that way in fact. I think that like the rest of us at BlackLine, he's probably still looking at how he can get better for 2019.

Okay. All right. Thank you.

Thank you. Our next question comes from Brian Peterson of Raymond James. Your line is open.

Hi, and thanks for taking the question. So Mark, are you able to help us size the impact and how much the new agreement with SAP impacted 4Q 2018 and the 2019 revenue outlook? And as we think about the savings from the royalty payments, how should we think about that getting reinvested in growth or maybe flowing through to the bottom line?

Sure. Thanks. I'll start with the last question. The EBS will or the fees from the prior arrangement will amortize out over the year, and it's most weighted to the back half of the year. Our view is that we are reinvesting in some of these key initiatives that we've talked about, including customer service, and success and support. We're investing in diversifying our sales and marketing for example. We mentioned Japan partnership and that new market, and we think that investment there is money well spent. At the same time, still able to get a little operating leverage in the year on the sales and marketing line. So it's sort of a mix of both operating leverage and reinvestment. On the first part of that, related to SolEx and its impact, we were only in market with that partnership 30 days. It started in the last month of the quarter. We didn't have tremendous visibility going into that last quarter – last month, but we'd already been working with them. We were really pleased with what we saw, and we are also pleased that we validated some key assumptions, and that is that the SolEx partnership is meant to drive new logo acquisition, large, strategic global opportunities that we would not have had a shot at right now anyway. And that's what we got. So we were really pleased with that and also with BlackLine's portion of that. So that's number one. And then number two also validated in the fourth quarter was that existing SAP customers that we have a relationship with on our paper renewed and they grew on BlackLine paper. There is no royalty fee and no revenue share on that business. And that's our expectation in the guidance that we have given and in our growth assumption going into 2019 is that, that is going to continue through the year. Now it's still early and there aren't a lot of data points. But so far, we've been very pleased that it's validated our two key assumptions.

Got it. Thanks, Mark. And I just wanted to clarify, you mentioned a record for strategic products this quarter. Did that include any ICH deals? I know we were focusing on implementations, but that's pretty impressive record for strategic products, if it didn't include in ICH. Just curious where we are there?

It absolutely included ICH deals.

Got it. Thanks for the clarification.

Yes, you're welcome. I would just say that in – during last year, we talked to you on several occasions about how we were building our internal team for ICH and that the way we were governing that process was first we build the team, we accelerate our muscle internally, better engage with our partner. And I believe in Q4, we really saw the benefits of that we were then able to open the aperture a little and start to move those through. So that was positive.

Got it. Thanks Mark.

Thank you. Our next question comes from Mark Murphy of JPMorgan. Your line is now open.

Yes. Thank you, Therese, what are you seeing with respect to your new business trying to cross the various general ledgers to which BlackLine is connecting. In other words, is there any observable trend, where you will be seeing more or less of SAP, Oracle, Workday, NetSuite, Microsoft, et cetera?

I would say – it's really interesting, that's a really interesting question Mark, because we do pay attention to that. Now I think by virtue of the partnership with – that we do have with SAP, we've been seeing that share of the business creep up, but still, it represents a minority of our overall customer set all right? Now SAP in general, does also typically represent larger global companies. But across the board, the mix of ERPs and our customers has stayed relatively the same. And we're super committed to making sure that we retain our own ERP agnosticism. We just recently put out a press release for a new Oracle connector, we're working on connectors for other ERPs. I think it's really important to our customers that we service all of them equally well rather than focusing on one or two ERPs.

Okay. Thank you. As a follow-up, Mark, I wanted to ask you about – just trying to quantify some of the impact of the strategic products. And so when we look at Q4, I think you have 13% growth in the users. It's about 18% billings growth, and then I think you're guiding topline of about 20% on revenue for the year. Is it fair to think of it kind of that spread between the 13% user growth and say like that the 18% to 20% topline trajectory. Is that spread pre-representative of the kind of the overall uplift that you're getting out of those strategic products that don't really drive user growth?

Yes, that's a good question. I think I would say yes, with a couple of caveats. We are getting really strong price point increase and have had that for some time. Our view in – so that's number one that also has to be taken into account for not just core but all product. I think also, our view in 2019 at least in the guide is that we'd have a similar balance between core and strategic. I think that's the right approach now. If we get acceleration on either end, we will talk about that, but it's at least our view today that, that would be a good balance kind of an 80-20 split spread between core and strategic products.

Thank you very much.

Thanks Mark.

Thank you. Our next question comes from Brent Bracelin of KeyBanc Capital Markets. Your line is now open.

Thank you. I wanted to drill down into SAP. I had actually two questions and a follow-up. I guess for Therese, the first SAP question is just as you think about early observations in Q4, do you feel like maybe you got some deals that you were able to kind of close in a shorter length of time now that you're on SAP papers, it's just too early – any early observation? And then Mark, if you could talk about what the specific SAP mix was in the quarter? And given the rev share did have an impact on kind of deferred revenue or the billings in the quarter? Thanks.

Thanks, Brent. Hey, so thank you for that entree. Because one of the reasons that we did this partnership with SAP is we thought that sort of their presence in the market would help us with accelerated sales cycle. Now granted we were only in market with SAP last quarter for about 30 days. So it's not – I don't think I could declare a victory or anything at this point, but we absolutely did see deals move through faster than we ever could've done, had we been in a contracting process on our own. So I think that one of those reasons for doing that SAP partnership has some very nice early indicators.

Yes. Also I'll also – I'll add on the second part of your question is that we finished the quarter with 24% of our revenue through an SAP partnership and that included the EBS partners and now the new SolEx. If I look at the quarter, that's up from previous quarters throughout last year, we got an uptick of a point or so every quarter as SAP contributed. My view although, it was early in a few data points is that the contribution from SAP under the partnership was consistent with previous quarters even with the net revenue split on the new economic deal. That was in large measure we were able to close the gap with larger deals, the SAP price left. So we were pretty excited about the early proof points. And then also the renewals and growth that we saw in the quarter were on our paper and there was no revenue share.

Certainly, a lot of moving parts on this deal. But early 30 days in does sound encouraging. I guess my follow-up for you Mark last question here is just on that net dollar retention trend. What we have seen is kind of down tick here for four or five quarters in a row. As you think about just the trend is this going to continue to down tick just because of larger lands, the mix of the business? I'm just trying to think about the trend around net dollar kind of retention, and in other factors, we should think about that continue to trend down going forward?

Yes. Well, we've talked in the past about long-term decisions we've made that have some short-term consequences particularly related to this, whether it's the pricing or landing larger. So I think you've talked about the right way. So if it's within a point of where we exited 2018 going into 2019 up or down, I think it just be consistent. We would be – we wouldn't be surprised with that. And I also think that the underlying renewal rate that is 98% continues to be strong and that is again our expectation.

Okay, very helpful. Thank you.

Okay.

Thank you. Our next question comes from Chris Merwin of Goldman Sachs. Your line is now open.

Okay. Thanks for taking my question. Hi, there. So just – I guess a follow-up on billings, we could see a really nice pick up in growth there to the mid-20s up from I think high teens last quarter. Just as you would might calling out some of the specific drivers, whether it'd be strategic products or anything else. And then just another question on the guidance. I guess, and sort of been asked problematic one other way of asking it would be, if – what would the guidance have been if you had continued to book the SAP revenue on a gross basis. So in terms of anticipating from new business on a net basis this year, if you were to gross that up what would that guidance have look like? And to offset the accounting impact, is there any contemplation of higher prices on the SAP price list? Thanks.

Yes, okay. Thank you. I understand both questions. On the first one, we don't often talk about or – and we definitely don't guide to billings, because they can vary quarter-to-quarter. I think your point about Q4 is right. I would say it was a balanced quarter for us on the sales side, where we saw good global growth mid-market growth, strategic products growth. I think internally the feeling was pretty good. But in general, so many things can affect the billings from a quarter-to-quarter basis. I wouldn't say too much more about it. I think the more interesting point on the SAP guide is first that we think the reseller partnership with SAP will obviously help us in 2019, even though, it's early. And we do expect SAP will continue to be a contributor to growth, which will be consistent with last year. So closing that gap between net and gross, we need to execute and get more velocity and ramp. So I can't or won't give you specifics on what the difference might have been. But the 21% to 23% or the revenue guide that we've given assumes that we can get reach distribution, large global deals from SAP on new logo acquisition that can help us drive more velocity. And it will also assume that SAP's existing customers will renew on our paper. And that there won't be a revenue share. So in some ways, that mitigates your question and in other ways, we're pretty bullish on our partnership over the long-term, and that ramp for this year is just about execution.

Great. Thanks. And just to follow-up on pricing or any changes there, the price of your product in SAP is priceless?

Can you say that again please?

Was there any change to how the product is going to be priced on SAP is priceless?

I don't…

If I could jump in here.

Yes.

It's not really an apples-to-apples comparison Chris. Because we've got kind of an expanded matrix of products that SAP is able to offer out to their client base and their prospects. So it's difficult to do an apples-to-apples comparison.

Okay, fair enough. Thank you.

Thank you. [Operator Instructions] Our next question comes from Terry Tillman of SunTrust Robinson Humphrey. Your line is now open.

Hey, Therese and Mark. Thanks for taking my questions. I think I've exhausted my SAP list of questions surprisingly. So you're going to be saved on SAP. I might go ahead and foretell that I might ask about a workload. But that I'll hold off on my second one with Oracle. I guess Therese, in terms of kind of organizational change and 18 is a theme, maybe a shock to the system in terms of bringing in some heavy hitters, some folks that really can help elevate your all's game and help you all scale the business. And obviously that was going on throughout 2018. Some of them they'll didn't come on till, I don't know, maybe middle of the year or later on. And so what do you think you are in terms of the disruption, the positive disruption you expect as you move into 2019 because it's a New Year, so maybe there's reorg to territories anyways, but these people are also going to hire some of their own people. How far along do you think you are through some of that disruptive faith?

I think we've made really good progress, Terry. And that's a really astute question because a couple of things, we hired in as I think you just called them some real heavy hitters. And there's a couple of characteristics that go with heavy hitters. One is they know how to impact change without causing really negative disruption, right. I mean so even though 2018 was a year of transition for us, I think that they navigated it really well given the amount of changes that were happening. The second thing that you just highlighted as well, which I think is a very important point and kind of indicated when you've got people that have been in a particular industry for a long time, they know people, they have also brought in some amazing talent from their networks. All right, we've already gotten through – and finally to address your third point, we've already gotten through our sales kickoffs for the year. Our sales force is back in the field and I think they've just done a really terrific job of getting the year rolling.

Okay. And as I promised, I wouldn't ask about SAP, but maybe around Oracle in the connector. I mean there are some very large global Oracle GL shops. So could you maybe talk about post some of the work you've done there? Any kind of demand gen activities or could this move the needle or help incrementally on some large deals as we move into 2019? Thank you.

Thanks. Yes, connectivity in general is kind of one of my favorite topics because the easier that you make it to get information out of one system and in the BlackLine, the better the projects go. Okay. So Oracle is simply one of the first set of connectors that we plan on releasing and we're already seeing a really good receptivity to that. Remember about a third of our customers right now utilize Oracle products. And that's actually exclusive of NetSuite because we started that classification before they became one in the same. Okay. So we already have a huge Oracle client base and we want to continue to service them with just great, great, great connectors and service. Did I answer okay? Did I miss anything Terry? Okay, good.

No, you didn’t. Thanks a lot.

Thank you.

Thank you. And our last question comes from Koji Ikeda of Oppenheimer. Your line is now open.

Great. Thanks for taking my questions. I just had a quick question here on the dollar-based net revenue retention metric here. I'm curious to hear, was there any churn in that number, any unexpected churn in that number that maybe contributed to that downtick in this quarter?

No. I think it is a net rate, so we do include churn in there. But in Q3, we called out a particularly large customer. We did not see that same impact in Q4. So it's a relatively sort of clean quarter from that standpoint.

Okay.

And just to add to that Koji, we did mention also that we had a 98% renewal rate, which is just world-class.

Okay, thanks for that. And I was wondering if you could provide some color on the strategic account management team, how has that ramping? What is the capacity looking like there for 2019? Thanks.

We are definitely focusing on our strategic accounts and here's why, because bigger companies and sort of more forward-looking companies are really looking at digital transformation, and they have budgets to go with that, okay. So it's important for us to make sure that we can address those needs and frankly take advantage of sort of the, the desire to have software that incorporates process automation and machine learning. We think we're super well positioned to do that. And so we've sort of – we have invested in resources. They can both take that from a sales perspective as well as a vision and an implementation perspective. It really is sort of the heart of what we're doing with the whole product offering.

Got it. Thank you for that Therese. And just one more if I could, got a little over $130 million on the balance sheet, just curious to hear your thoughts on M&A and any M&A strategy going into 2019 and beyond? Thank you for taking my questions.

Well, we really want to do to get through 2018. That was for me. I wanted to get the right team in place. I wanted to get a lot of initiatives underway. I would say that 2018 had not been the time. So looking forward, I think we always evaluate and we always see what's going to make us a better partner to our customers going forward.

Great. Thank you for taking my question.

Thanks, Koji.

Thank you. This does conclude our question-and-answer session. I would now like to turn the call back over to Therese Tucker for any closing remarks.

Okay. Thank you everyone so much for joining us today. We really appreciate your ongoing support of BlackLine and your evangelism is still bringing us new customers and we very much would like you to keep that up. So thank you for joining us and talk to you next quarter.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.