BlackLine, Inc. (BL) Q4 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. And welcome to the Fourth Quarter 2020 BlackLine Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session [Operator Instructions] I would now hand the conference over to your speaker today, Alex Geller, Vice President of Investor Relations.

Good afternoon and thank you for your participation today. With me on the call is Marc Huffman, Chief Executive Officer of BlackLine; Mark Partin, Chief Financial Officer; and Therese Tucker, Founder and Executive Chair. 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, in particular, our guidance for Q1 and the full year 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 may make are reasonable, actual results could differ materially because the statements are based on our current expectations as of today and are subject to risks and uncertainties, including those stated in our periodic reports filed with the Securities and Exchange Commission, in particular, our Form 10-K and Form 10-Q. 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 disclosed on this call will be non-GAAP. A discussion of why we use non-GAAP financial measures and information regarding reconciliations of our 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 Marc to begin.

Good afternoon, everyone, and thank you for joining us today. As I look back on 2020, what began as a year of such promise, quickly shifted to a year that tested our resilience and our ability to adapt. I’m incredibly proud of what BlackLine was able to accomplish in 2020, as we continued to drive growth, scale the business and maintain a strong leadership position, all while leading with compassion towards our colleagues, our partners, and of course, our customers. I’d now like to take an opportunity to highlight the initiatives that enabled our success throughout the pandemic and that we believe will continue to drive future growth. First, our commitment to serve our customers has grown stronger than ever. Throughout the year, we showcase just how much we care for our customers with outreach efforts supported by nearly every department in BlackLine, in spanning a variety of programs, from education, training and development, to coaching sessions, relief programs and some complimentary products and services. We have received multiple accolades for these efforts. But the greatest reward comes from our customer testimonials and hearing how BlackLine enabled a seamless month in close in the face of an unprecedented pandemic. In these difficult times, we remain true to our founding principles to serve our customers, which has strengthened our relationships and driven expansion of existing accounts. I’m very proud of our efforts to serve our customers and our commitment to their success, and I believe this compassion will continue to differentiate BlackLine. Second, we invested in key areas such as talent, product, customer success and M&A to make our organization stronger. In 2020, we increased our pace of hiring, adding senior leaders across the organization in strategy, alliances, product, technology and R&D. We accelerated our investment in R&D and product innovation, resulting in new products, new functionality and an aggressive product roadmap to maintain our leadership position. We retained our capacity and services and sales, and added headcount to our customer success teams driving strong results in customer account growth. And last, but certainly not least, we made a strategic investment in our long-term vision to best serve the controller with our largest acquisition ever. The acquisition of Rimilia marked our entry into the adjacent market of accounts receivables automation and grew our total addressable market to more than $28 billion. History has shown that companies who invest in a downturn are often better equipped to respond to demand when the economy recovers. We believe these investments have made BlackLine stronger and well-positioned to capitalize on an improving macro economy in 2021. Third, we continue to use our expertise to bring value to the market. When you engage with a customer or prospect around their corporate goals, the conversation changes to a strategic discussion of proven use cases, processes that scale and real value creation. Our Modern Accounting Playbook or MAP offering is one example of how BlackLine uses its expertise and leadership to some value and has been a strong growth lever for us in the mid-market. At our BeyondTheBlack event in November, we extended this initiative with the introduction of our collaborative accounting experience as a framework to guide customers and prospects along every step of their modern accounting journey. We have turned the insights and learnings from nearly 300,000 accountants across more than 3,400 customers into leading practices that accelerate time to value and create great customer experiences. Our ability to lead our customers has continued to generate returns as we land new accounts, expand our footprint with existing customers, generate goodwill and further strengthen our competitive position. And fourth, we came up with new and innovative ways to virtually engage with and connect to the finance and accounting community. From webinars to finance transformation series, to best practice summits and strategic clients forums, we continue to host educational and world class events that focused on urgent topics, such as the remote close and cache optimization. Our BeyondTheBlack event was our largest virtual event yet and it was a huge success. BeyondTheBlack attracted 12 times as many attendees, compared to the in-person event we held last year. With the nearly 18,000 registrants, we had representatives from more than 70% of our existing customers and more than 700 new prospects. This event is about bringing our community of accounting and finance leaders together to educate them on how modern accounting can support their organizational goals. Nearly 4,000 attendees participated in the SAP Track to learn how to enable financial close excellence within their SAP Instance. We had more than 2,000 attendees tuned into our newly introduced BlackLine Cash Application Breakout session, formerly known as Rimilia Cash. We received hundreds of positive reviews from customers in G2, TrustRadius and Gartner Peer Insights, as well as a best-in-class virtual event Net Promoter Score of 62 for the event. And of course, the event generated new opportunities and interest from both new and existing customers. These touch points have enabled us to reach a broader audience in 2020 than we could have in prior years. We believe this degree of engagement and awareness will continue to enhance our brand recognition and drive future opportunities. These initiatives combined with a continued improvement in the demand environment drove another quarter of strong results. We saw momentum across all facets of the business, resulting in better than expected performance for the quarter. For instance, we continue to see an increasing trend of large deals both new and expansion, suggesting companies are committing to large digital transformation projects. Our existing customers continue to progress on their finance transformation journeys with upsells, cross-sells and the addition of strategic products. Following three consecutive quarters of large deal momentum, we feel good about the pipeline for large transformational deals in 2021. Our MAP offering continues to gain strong traction in the mid-market. MAP generated a record number of new logos in Q4, eclipsing the earlier record and commanding a higher average sales price. From a sheer volume perspective, nearly half of our new logo volume in 2020 came from MAP logos alone. As mentioned earlier, our MAP offering is aligned with our value approach to selling, which is making it easier for customers to buy and creating greater consistency for our mid-market sales engine. SOLEX was another strong performer resulting in its largest quarter today. As our SOLEX partnership has matured, it continues to drive more revenue at a greater volume of new logo adds. In 2020, SOLEX added nearly twice as many new logos when compared to 2019. What’s more, now that this partnership is two years in we also started to see account expansion with the SOLEX add-on business throughout the year. We have a very strong land and expand model, and although, the primary goal of the SOLEX partnership is to generate new logo ads, we expect SOLEX customers will experience account growth similar to that of our direct customers. Given the continued progress with this relationship, we believe we have a good setup for growth in 2021. Our new cash application product has generated a significant amount of interest among existing customers. We signed our first BPO joint deals in the quarter as extensions to existing contracts which allowed for accelerated sales cycles. We also captured a small number of new cash applications logos due to the urgent need surrounding cash optimization. Cash application has only been available for a short time. But early indicators are strong and we like what we’re seeing in the market. And of course, our partner ecosystem continues to drive new logos and account expansion, and we saw that trend continue in the fourth quarter. Our partners tell us that their customers urgently need help, with a remote closing cash optimization. We believe our partner ecosystem will continue to validate our value proposition and influence key decision makers in 2021. Throughout 2020, we’ve seen continual improvement and Q4 marked yet another quarter of increasing activity and momentum, albeit not at the same level we experienced pre-COVID. With that said, we exceeded expectations in the current macro environment and delivered strong Q4 2020 results that we’re really pleased with. Looking to 2021, in January, we held our company-wide kickoff event, where I shared with our employees around the globe, how committed we are to them, to our customers and to their future success. Just as importantly, we laid out our strategy for the upcoming year. Let me share with you now what I shared with them. Our strategy for 2021 is to continuing to invest and to build on our long-term initiatives to fuel accelerated growth. From a product perspective, our vision is to improve and automate finance and accounting processes to be the most indispensable platform for the controller ship. In 2020, we introduce new functionality, new products, such as cash app and account analysis, and we discussed our vision for the touchless close. In 2021, we will sustain and extend investments in our existing products and assess the market for adjacent opportunities to deepen our product offering and drive adoption of our platform. As the pioneer and leader in our space, we take that role very seriously. As such, we will continue to focus on strengthening our competitive advantages. We believe our ability to serve our customers, and our commitment to customer success is a huge differentiator for BlackLine. In 2021, we will continue to leverage our partner ecosystem, invest in our customer success teams and use our expertise through offerings such as MAP and a customer journey framework to help more companies make the move to modern accounting, accelerate their time to value and ensure great customer experiences. And of course, we will continue to drive our organization and build a more inclusive, equitable and diverse workplace. We entered 2021 stronger than we were a year ago and we believe we’re well positioned to capitalize on the huge market opportunity ahead of us. The key to success in this upcoming year is continued improvement in the demand environment. Throughout 2020 we saw this increase and as we move into 2021, we are confident that CFOs and controllers are wrestling with these same challenges more than ever before. However, timing in this macro environment will affect everything. Our expectation is to continually come up the curve throughout the year. We look forward to sharing more about our 2021 and long-term strategy at our Analyst Day on March 9th. Before we discuss financial performance, I wanted to thank and congratulate Therese on building such a strong and unique company. Therese started this journey that became BlackLine nearly 20 years ago. The position we have in our space, our brand, reputation, market leading products and customer loyalty are all a reflection of the past 20 years of her life’s work. When I woke up on January 1st, my inaugural day a CEO of BlackLine, Therese was the first person to reach out with an encouraging and supportive message. I’m grateful to be in a position to grow this company and incredibly excited to have a front row seat for the opportunity ahead. And now, I’ll turn it over to Therese.

Thank you, Marc, and good afternoon, everyone. I’d like to remind everyone that this transition has been long in the works and has been very deliberate. Mr. Huffman and I are now going on nearly three years of working together. So this feels more like a natural next step versus a big change. Over these past several years, I have seen Marc demonstrate great leadership and drive effective change of BlackLine. And I have every confidence in his ability to scale BlackLine as we entered this next phase of growth. Now that I am in my new role as Executive Chair, my primary responsibility is to facilitate Board discussions and support Marc. And of course, when called upon by the team, I am always happy to assist with serving our customers and deepening our product offering to areas that will continue to define and differentiate BlackLine in the years to come. Finally, I wanted to thank all of the investors and analysts who have supported BlackLine on this journey, you have all been a major part of our success. I have really enjoyed my time as a public company CEO and I have enjoyed meeting with you, working with you and I have truly learned so much. And with that, I’ll turn the call over to Mark Partin.

Thank you, Therese, Marc, and good afternoon, everyone. I’d like to start off by reiterating Marc’s praise for our employees and what they have been able to accomplish over this past year. I am so proud of how BlackLine has been able to adapt, lead and show strength and resilience in a year of such unprecedented challenges. This is a testament to our culture, our foundation to serve and our role as the market leader. Now on to the numbers. For the full year 2020, total revenue grew 22% to $351.7 million. Given the difficult and challenging environment, this was a good result. We saw an improving demand environment throughout the year and that recovery continued into Q4 to close out a solid end to the year. Our gross margins remained high at 83% and with the help of work-from-home mandates for our employees and virtual marketing events we achieved record profitability and cash flow with $46 million in net income and $55 million in cash from operations. For the fourth quarter, total revenue grew 19%. This growth represents a decline from the prior year resulting from the macro environment in 2020. We continue to see increasing demand with strong elements of growth returning to the business, such as an improving demand environment for large deals, continued progress with SOLEX and the success of our MAP initiative. We remain optimistic about long-term growth given the progress that we are seeing across our initiatives, and the continued strength and stability in the underlying fundamentals of our business model in the fourth quarter. For instance, our international business was 26% of total revenue, up from 24% in the prior year. Revenue from our SAP partnership totaled 24% of total revenue, up from 23% in Q3, and as Marc mentioned, we saw revenue from our SOLEX partnership accelerate in Q4. 70% of large deals in the quarter involve the partner, which is in line with the prior year and it’s consistent with our go-to-market model expectations. Strategic products represented 19% of sales for the quarter, come in at -- coming in at the high end of our anticipated range of 15% to 20% with solid performances from all strategic products. Moving on to our key performance metrics for the quarter, we added 207 net new customers in the quarter for a total of 3,433 customers, including the addition of approximately 100 net new customers from the Rimilia acquisition. As we anticipated, our dollar base net revenue retention rate ticked down slightly in Q4 to 106%. The macro environment through the year has impacted demand, especially at the high end of the enterprise and it limited our near-term expansion efforts within our existing customers. We do expect demand to return upon market recovery. In Q4, we generated net income attributable to BlackLine a $13 million. We generated $15 million in app operating cash flow and $8 million in free cash flow for the quarter. We finished the year with approximately $543 million in cash equivalents and marketable securities. Over the past several years, we’ve seen consistent improvement in net income, driven predominantly by operating leverage. In 2020, we accelerated well above trend to a 13% net income margin. Even with increased investment and customer success, and our technology and product roadmap, primarily due to cost savings associated with mandatory work-from-home regulations and virtual events. In 2021, we anticipate margin compression, as we intend to make targeted investments in our public cloud infrastructure to support the integration of Rimilia, and capture the large and growing AR automation opportunity and to build out our services and support team for evolving customer and product mix. These expenses will ramp through the year and we expect the impact on overall gross margin will be 2 points to 3 points in the near-term. Additionally, operating expenses vary on a quarterly basis, with a step up in the first quarter driven by annual salary increases, payroll tax reset and annual kickoff events. We expect to generate operating leverage and additional margin throughout the year as we execute on the topline and the demand environment improves. Finally, we are modeling return to travel costs in the back half of 2021 for many areas of our business. This remains uncertain in our business, but modeling the cost gives us appropriate flexibility as the year develops. We remain on track to achieve our long-term target model. Turning now to guidance, we feel good about where we ended the year and are set up going into 2021. At this point in time, though, there’s still uncertainty regarding when the broader economy will return to a normal cadence. As such, our approach to our 2021 guidance remains pragmatic. For the first quarter of 2021, total GAAP revenue is expected to be in the range of $95.5 million to $96.5 million. On the bottomline, we expect to report net income attributable to BlackLine in the range of $2.5 million to $3.5 million or $0.04 to $0.06 on a per share basis. Our share count will be approximately 62.3 million diluted weighted average shares. For the full year 2021, total GAAP revenue is expected to be in the range of $410 million to $415 million. On the bottomline, we expect to report net income attributable to BlackLine in the range of $24 million to $26 million or $0.38 to $0.41 on a per share basis. Our share count will be approximately 62.7 million diluted weighted average shares. In summary, we are very pleased to see an improving demand environment and continued execution from the company to close out a solid end to the year. We remain focused on capitalizing on the long-term opportunities for accounting transformation and driving further momentum in our business. And now, we will take your question.

Thank you. [Operator Instructions] Our first question is from Matt VanVliet with BTIG. Your question, please.

Yeah. Hi, everyone. Thanks for taking the question and great job on closing out a strong year there. I guess, looking at the overall partner community, tremendous involvement on the overall deal flow. Maybe as you think about the SOLEX agreement, what are you hearing most from customers driving demand and what areas from a functionality standpoint are you landing most frequently with, and then what’s maybe more common as kind of a follow up land and expand?

Thank you. With regard to SOLEX, we saw continued progress in Q4, strong logo ads. And so to answer one of your questions there, what are we landing with? We’re landing sort of with our traditional base use case, helping customers organize and digitize their close, provide more visibility, as well as core balance sheet substantiation type activities. That’s the typical land. Occasionally, there are some other unique attributes to it that will land there. But our base use cases are what we land most frequently with SOLEX and that’s driven some nice logo volume. The additional question that you had in there was, what are we seeing? We’re seeing a return and improvement over time, which seems to month-by-month reveal itself a little more and more to us. That companies who may have gone to the sidelines during the early time of a pandemic have reassessed their priorities and it seems that investing in digital transformation in some of our customers is just too important to pause and so we’re seeing that trend broadly throughout our customers and new customer lands.

And then following up on some of the investments, you talked about the pace of hiring really picked up and we’ve seen a number of releases about the go-to-market team, in some parts kind of backfilling from what you had responsibility for Marc. Just curious in terms of the rate on the quarter carrying rep side and then where do you feel like your capacity is given the potential for an increase -- further increase in end market demand in ‘21? Do you feel like you have to add even more headcount there or is it some more kind of support services around customer success, sales engineers, things of that nature? Thanks.

Yeah. Thanks for the question. So one of the benefits we had going into the pandemic is that we had made a very large pattern of hiring into the go-to-market, we had gotten people where we needed them and really hired off and started the year with a good cohort of sales leaders and sales people around the world. Our focus during the year was really to keep them deployed in the areas where they could help our customers, where they could build their markets and work with partners as demand returns. And so we’re really proud of the retention of that group of people and they remain at the end of the year, pretty consistent with where we started the year. And so as we -- but the hiring also in the sales and marketing team came in the customer support organization for serving the customers and success and particularly around the account management area as well. So as we move into 2021, our goal was to have the capacity and the strength to meet the demand. So we’ll move through the first part of this year with enough capacity and then we’ll be hiring sales and marketing teams, as we move through the year at pace with the demand returning. I’ll also add that our hiring success in other parts of the business like in our tech leadership and then parts of the business that drove our sort of leadership in product and tech was also very strong for the year, which we’re equally proud of.

Right. Well, thanks for taking the questions and congrats again.

Thank you.

Thank you. Our next question comes from Rob Oliver with Baird. Your question, please.

Great. Good evening. Thank you very much. And just, Therese, thanks to you as well and enjoyed working with you as well. So I just wanted to echo your comments and say, thank you. And also congrats to Mark Woodhams on his promotion. Marc Huffman, I’ll start with you and then one follow up. The commentary around the partner channel, it sounds like it’s continuing to evolve really nicely, Therese put in a lot of groundwork and building out that partner channel early on. And some of our checks have shown that, partners are clearly getting more engaged in the financial suite, particularly on remote close. So just curious if I know you guys have a pretty loyal cadre of partners around your ecosystem. But have some of the circumstances of remote close and the pain caused some of -- maybe the partners that have been a little less active with you guys to start to get more active and how do you think about the -- that partner channel evolving and contributing in 21? And then I had a follow up. Thanks.

Yeah. Thank you. So, consistent performance in our partner community in 2020 and in Q4, specifically, they’re involved in a pretty consistent percentage of our largest deals in the quarter. I think, to your point regarding areas of expertise, I think, largely customers and companies in general, even prospects, in such a unique time sought out expertise and experience. And a lot of the people who possess that expertise and experience are either our employees or employees of our partners. And so with the concept of the remote close or having to endure something for the first time, I think it drove a lot of hand razors and eyeballs towards some of our partners, who possess that expertise and performed admirably on behalf of us and those customers. I think that it will continue to be a phenomenon that will drive us. We try to take and serve our customers broadly with our own talent, as well as that talent from the partner community. I don’t I don’t think that’ll diminish over time. I think it’ll be a consistent strategy that we’ll have to offer expertise either to us or third-parties, to help customers who are engaging in digital finance transformation. The expertise this year was just unique, because it was the first time I think anyone’s in during the pandemic and the effect on accounting.

Great. Thanks, Marc. Appreciate that. And Mark Partin, I had a follow up for you. I appreciate the -- a lot of the detail that you gave around the numbers and the thought process on ‘21. Just regarding the customer count, which again, really nice growth for you guys on the customer count, it’s really becoming a nice trend here. What -- did that include any inorganic element relative to Rimilia, and if so, just wondering if you could provide any color there? Thanks.

Yeah. Of course. Thanks, Rob. So out of the little over 200 customers added about 100 were from the acquisition of Rimilia. We had some complimentary customers as well, as you know. Those were already included in the numbers. So these were net new from the acquisition. And in Q4, the growth in customer logos was something we were very pleased with.

Great. Thanks again, guys.

Thank you, Rob.

Thanks, Rob.

Thank you. Our next question comes from Matt Stotler with William Blair. Your question, please.

Hi, everybody. Thank you for taking my questions. I guess, first, I would like to touch on maybe the bigger picture here, a bigger picture question. So Rimilia is obviously a really solid addition, really interesting expansion opportunity there. But when you think about the process cycles that you’re ultimately looking to consolidate and automate, whether that’s record report, procure to pay, quote to cash and there’s a lot there. So how do you think about optimizing the value proposition for your customers and what’s most important to own versus where you can partner to provide that value?

Yeah. So we have set a strategy that really revolves around serving the needs of the controller. And so that’s an area, obviously, in our original category creating and leading space that we do quite well. We have great brand permission in that space. We look at both the product that we build organically ourselves through that lens and dimensions, as well as any further activity we may perform. We provide that same strategic lens to it. You mentioned a number of areas in there that are of interest in us -- to us. We’re primarily -- we’re looking to make sure we stay close to the controller. There’s just a great number of areas, processes that require additional modernization, optimization and automation that we have our eyes on and we’re excited about the future of building a company that can really serve that controller.

That’s helpful. And then maybe one on the competitive landscape, we’d love to just get an update on, if you’re seeing any significant changes and behavior in this environment, especially given it’s a pretty unique environment that you’re operating in at this point. They’ve obviously been a couple of interesting partnership announcements in the competitive landscape over the past few months. So look to get any update or color on what you’re seeing there? Thank you.

No real meaningful change in the competitive environment. I would -- I believe that the demand environments improving over time, that spills over into every bucket out there and so I’m sure that there are other organizations who are beneficial to that improving demand environment. We believe that as the market creator, the category leader that a lot of that value accrues to us. And so the only thing I can tell you realistically in the competitive landscape, inertia status quo continues to be the number one manner that we deal with from a competitive standpoint. We win our fair share based on our experience. Our modern accounting playbook has really boosted win rates for us, based on sort of proven value, our expertise measured across 1000s of companies that use our software and that’s really resonating in this current environment. And so we’re pleased with where we stand from a competitive standpoint.

Great. Thanks again.

Thank you.

Thank you. Our next question comes from Alex Sklar with Raymond James. Your question, please.

Thanks. I also want to follow up here on the MAP program and some of the announcements that you made at BeyondTheBlack, which seemed to kind of build on that and by taking some of those learnings and bundles and moving them up market. I’m curious what you can tell us about the early feedback around accelerators and any additional details around catalysts that you can use at the conference? Thanks.

Yeah. So thank you for that question. Appreciate you’re tuning in to BeyondTheBlack. The modern accounting playbook is still in its early innings itself as a concept for us. We’ve added in the market for four quarters, reflecting us as a leader in the space, leveraging our experience, it’s driven great customer logo expansion for us, win rates are up versus initial inertia, the days to close metric, all these things really performance for us. So we’re excited to begin the journey towards that same expertise leverage into the enterprise. And then what do you refer to is our collaborative accounting experience where we’re taking now packaging, that experience in a way that takes customers where they are on the journey of digital finance transformation and applying our expertise for having the right solution at the right time with the right deliverable for them. It’s just kicking off realistically in Q1 and way too early for us to give you any sense of market reception. There will be something that hopefully you’ll check back with us on in the future.

Okay. Thanks. And then, I guess, given kind of we’re four quarters into MAP, is -- are you seeing any of those early adopters kind of graduate from the initial bundle and taking additional products? Is that kind of part of your confidence behind the reacceleration of the net retention revenue metric? Thanks.

The simple answer is, yes, from a -- them coming back to us and looking for expansion in terms of its impact on.

Yeah. We see really positive influence on the impact is larger deal sizes, uptake of strategic products down in the in the mid-market, like a transaction matching. So those are positive trends that we think that comes from that leadership to that program. Those are happening.

Great. Thank you.

Our next question comes from Pat Walravens with JMP. Your question, please.

Oh! Great. Thank you. So, Marc, I have sort of a big picture question for you, which is, so when I covered you at NetSuite, you guys were really good in the SMB. You had to make your way up market, right? And you had that whole capturing the subsidiaries first approach. But at BlackLine, it’s a really good at enterprise need to make your way down market. So I just love to hear your thoughts on how those are different and what you’ve learned and what you’re applying?

Yeah. Thanks, Pat. I would say that, BlackLine is an -- it’s a premier product, a premier solution and we serve some of the largest organizations in the world at scale. And so what we build is that sort of class. What we’ve strategically done, is taken and finding -- we’re finding ways to drive a very efficient deliverable based on that same technology set and then our experience to apply it to a mid-market company, a mid-market organization. I wouldn’t necessarily say they are SMB companies in that.

No.

That’s a really inefficient way to build a company. And so we operate in a traditional mid-market segment. We try to win companies that are -- the revenue size and complexity that we have great value for. And we try to make sure we win the right logos, customers that are well backed high growth companies and get them on their way up and then we can serve them for an essence their lifespan.

And how do you, I’m sure there’s exceptions but just sort of generally speaking, how do you draw that line?

Well, I think, the -- I think, we’re good at understanding what we do really, really well and what we don’t, and we have a good discipline in our go-to-market organization. Yeah, we’re really aware of how we spend our money and spending, SaaS organizations spend a decent amount of money on sales and marketing, you know that very, very well, Pat, and spending that to chase after somebody who’s not going to stick with you and love you for a long time is probably not the most efficient spend. And so we -- I think we’re really disciplined at it. Usually it’s based on the complexity of the customers’ organization measured in accountants that the type and complexity of their ERP environment and the type of work that they do.

Great. Okay. Thank you.

Thank you. Our next question comes from Josh Beck with KeyBanc. Your question, please.

Thanks for taking the question team. I wanted to go back to some of your earlier comments around digital transformation. Certainly, I think, early in the pandemic it certainly got put on the backburner and more front office collaboration types of project, probably, took priority, but it feels like maybe as we went through the year there was a change there. So just curious if that’s what you saw, and then, as you enter ‘21, would you describe the -- because you did say that, certainly, you felt like you were an area of strength, that more or less it’s at a similar or higher priority to where it was pre-COVID. Just would like to hear some of the antidotes and feedbacks that you’re having with your customers on that topic?

Sure. Thanks, Josh, I -- it -- I think it’s a little premature to try to identify where it is versus pre-COVID. But what I can tell you it from the experience and talking to our customers and prospects, and talking to our sales team and leaders, is a gradual improvement over time and customers returning to the marketplace and reprioritizing where they spend their money. There was a number of people who went to the sidelines, if you will, post-pandemic that existed throughout the quarter. We saw some of them start to return to the having these priorities in Q4. We were the beneficiary of that from the demand environment improving and we see that continue on a forward looking basis in our pipeline and our opportunities. Our sales teams excited about heading into 2021, having people come back, having people prioritize digital finance transformation. And I made the statement earlier, because we’ve heard it a couple times from our customers and virtually the same words that digital trend -- transformation of finance was too important and too big to pause. And so they took a pause, they reprioritize what they were going to invest and spend money on and then have returned.

Okay. That’s very helpful. And then I’m just curious with Rimilia, now that you’ve had it under the umbrella a little bit longer, what has been maybe some of the synergies and go-to-market? I know it’s very early, but just would be curious there? And then just anything you can share on maybe revenue, how we should be thinking about that from Rimilia as we go through the year?

Great. Yeah. It’s still early, as you mentioned, and I have to say, first off that, when you buy an organization, you buy, obviously, their intellectual property and their brand and all these things. But you also, you acquire a team of people who really loved the team that we got as a part of it. We started out really purposely focused and concentrated on their cash application business that they had in the market. And we put that in the hands of our sales team early and we drove collaboration with our sales team around that with their existing sales team in sort of an overlay fashion. So we view that as a product to put into the distribution organization that’s more vast and global in nature have BlackLine. Beyond that, we also wanted to make sure we took advantage of our largest conference of the year, BeyondTheBlack, where we really highlighted cash application and accounts receivable by BlackLine. And we had 2,000 attendees at the BeyondTheBlack session that we have. We mentioned that we’re already transacting there and we feel cautiously optimistic, I would say, that the trends that we’re seeing in that business, with the collaboration of our sales team with their expertise is going to really pay off for us.

The closer the acquisition was effective, the first day of the fourth quarter, we didn’t expect it to be material in the quarter and it wasn’t to our overall revenue growth. However, it did beat our expectations. We’re out of the gate pretty quick, we’ve been super pleased with the performance in the market and we did get better than expectation. But given the purchase accounting rules, it’s not material to our growth rate in this -- in that period.

Really helpful. Thank you.

Thank you.

Thanks. Our next question comes from Mike -- Mark Murphy with JPMorgan. Your question, please.

Hey. Good afternoon. This is Matt Coss on behalf of Mark Murphy. Thank you for taking my questions. Maybe just to follow up on Josh’s question about Rimilia, you said it’s not meaningful to your -- material to your growth rate. Were you talking about in Q4 only or was that also for 2021?

Yeah. Thanks, Matt. We’ve said this before too is that, it’s not material in Q4 nor do we expect it to be a meaningful contributor in 2021 given the purchase accounting rules. We think that as we move into 2022, we’ll see the contribution from that acquisition at the top end. We are investing in that business. That is a part of the margin expectation and our guide as we move forward.

Got it. Got it. Okay. And then given the acquisition of Rimilia, should we expect any difference in the mix of the services component of your revenue for 2021 or should it be kind of similar to what we’ve seen historically?

It’s going to be similar, you’re not going to see the same acceleration in our services revenue that we’ve seen in the last couple years. It will moderate in this upcoming year. We mentioned that as a percentage of our revenue and customer mix, we’d like it in this range and so which we would expect to see that again this year. Rimilia as a business model is very similar to BlackLine, whereas high subscription, high renewal, high retention rate and small services.

Got it. Okay. And then, last one, are there any changes -- I know you’ve described a lot of the hiring that you’ve done and put in place last year, but are there any changes you expect Mark Woodhams to make as your new Chief Revenue Officer?

The short answer to that is no. Mark is a very experienced and disciplined sales leader. He’s going to continue to execute our multiyear growth initiatives. He added to his team with by hiring a new leader for our large partnerships in SOLEX, we announced that. In terms of staffing changes or go-to-market changes, I would say, nothing substantial there. More of the same that the things that were working for us before the pandemic, the things that worked to help us get us through the pandemic, be the things you’ll see in 2021.

Okay. Thank you very much.

Thank you.

Thank you. Our next question comes from Terry Tillman with Truist. Your question, please.

Hey, folks. This is David Unger filling in for Terry Tillman. Thanks for your time. So just going back to spending, we’ve talked about it a bunch here in the Q&A session. You’ve definitely been investing smart. I believe we’re actually now at the midpoint of your sales and marketing long-term target. And I know you’re being prudent with your forecast and also focusing on growth, but just thinking longer term about G&A efficiency opportunities, maybe as we look out 12 months to 24 months. So I’m just trying to get a handle on the support side in terms of synergy opportunities and striking that delicate balance? Thanks.

Yeah. I think good question. Our -- look, we think that’s economies of scale and as we continue to build our global infrastructure and support, which we think is world class today to support our growth around the globe, that will get synergy and economies of scale over time in the G&A. And that’s why when you look at where it is today versus where our target is, that’s a big area of incremental operating leverage as we move forward.

Okay. Understood. Thanks for that. And then, I know you just did a big acquisition, obviously, where we’re talking about it a bunch here, it’s great and you’re very selective, and you do have a healthy balance sheet. So just wondering broadly, your view on the product opportunity set in the marketplace to complement your offerings? And just generally how you’re seeing valuations are out there in the marketplace at this point in the recovery? Thank you.

Yeah. I’ll start, look, we continue to believe that we have a complete product that operate really well and financial close with a very large opportunity that remains new and unpenetrated. So there’s an incredible amount of headroom for us to invest in what makes us great in those products that are today ready and in market. The AR automation was an example of Marc’s strategy he described earlier about being able to serve as a place for the controller within the financial close, as they go through this macro trend of digital transformation. Earlier someone asked about the cycle management processes. That’s exactly the process you would go through. If you’re a controller, you are working from a place of financial controls, looking at these different cycles and trying to automate them similar to the ones that we do. Our view is that we’re investing in our platform today. A lot of that is to drive innovation. We’ve -- we are innovating now more than ever and we are willing to do acquisitions where it makes sense to serve our customers and to drive that strategy of serving the controller.

Excellent. Thank you very much.

Thank you.

Thanks. Our next question comes from Chris Merwin with Goldman Sachs. Your question, please.

Hi. Thanks very much for taking my question. So I wanted to ask about the partner ecosystems involvement with Rimilia and that opportunity for you? Obviously, you have long standing relationships with the core financial close? How much are the partners helping right now in educating companies about the AR automation opportunity and is that an area where you can invest more to push them as you think about selling this product into some of your larger customers? Thank you.

Yeah. Thank you. So, it’s interesting. To answer your question is, yes. They’re integral to the strategy of Rimilia and educating the market and providing services and expertise. Rimilia as you may remember, from our announcement was a U.K.-based company and they had great awareness and traction in Europe. And so there was a slight nuance to the partnerships not being just directly overlapped to ours. There was a couple of organizations, really successful organizations that they were better aligned with, which we believe will start to draw some synergies with our category leading Close Process Automation space. Alternatively, what we really liked about it was BlackLine strength and brand awareness and customer portfolio here in North America and the fact that we have some of these really great and productive advisory firms that we work with. And the ability to now have them assist and provide more reach, more expertise for clients is something we’re really, really excited about.

Great. Thanks, Marc.

Thank you.

Thank you. And our, excuse me, and our last question comes from Brent Bracelin with Piper Sandler. Please go ahead.

Hi, guys. This is Hannah Rudoff on for Brent today. Thank you for taking my questions. First, I wanted to ask about what pipeline builds is like coming out of BeyondTheBlack relative to prior years and thus far? How our pipeline close rates trending relative to historical rates with in-person conferences?

Yeah. Look, that’s a -- it’s a great question. We spent a lot of time and analytics around that. It’s still early we’re -- we’ve built a pipeline beginning at the very front of the COVID. But, look, what we saw in Q3 and Q4 was improving close rates and pipelines behavior, better consistency in the virtual. We started to see things that are very promising, great potential, we’ve been efficient in the marketing and sales organization through -- throughout the year and are actually confident and feel good about the level of interaction, dialog and demand that we put into the pipeline.

Great. That’s super helpful. And then…

Yeah.

… clearly, there’s a tremendous opportunity here to modernize the back office and it seems like 2021 could really be the beginning of this major upgrade cycle. So I was wondering, what are you most excited for in 2021 and do you feel that there any underappreciated levers of growth going into the year?

Hannah, I think you said that very well. Thank you. We’re equally excited about that. There’s a tremendous opportunity. I don’t know if it’s the first step or not. I can just tell you, on behalf of all the employees I’ve talked about, I think 2021 is going to be a year of change. Perhaps this will be the year where we see progress made against this pandemic and so people are -- I think are really excited about more traditional means of working together, even though they’re prepared to continue to operate in this unique model that we’re in. The return of a normal economic cycle, the return of or the continuation, I guess, of the improving demand environment. Everybody is really rallied around initiatives that we have as a company. We took a lot of effort in 2020, making sure that our employees and our customers were cared for. I think we built a great bit of loyalty around that. They’re ready for an improving demand environment and to execute the plans that we have in place.

Great. Thank you.

Thank you.

Thank you. And this concludes our Q&A session for today. I would like to turn the call back to our CEO, Marc Huffman for his final remarks.

Thank you and thank you for joining us today. We appreciate your ongoing support of BlackLine and to continue with the tradition that was established by our Founder, Therese. I’d like to remind you all of you and ask that as you run into them, refer your portfolio companies to BlackLine and we will take really good care of them. We’re excited about the opportunities for accounting transformation and driving further momentum in our business. We look forward to continuing this discussion at our Analyst Day and other investor events during the year with you. Thank you.

And thank you, ladies and gentlemen, for your participation in today’s conference. You may now disconnect.