BlackLine, Inc. (BL) Q1 2021 Earnings Report, Transcript and Summary

Good day. Thank you for standing by. And welcome to the BlackLine First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today Alex Geller, Vice President of Investor Relations. Please go ahead.

Good afternoon and thank you for your participation today. With me on the call is Marc Huffman, 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, in particular, our guidance for Q2 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 the 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. Our performance in Q1 represented a strong start to the year. We executed on our go-to-market strategy and made early progress on our 2021 initiatives. On a macro level, we saw yet another quarter of increasing momentum as demand improved globally across all facets of the business. As a result, we saw billings growth increase for a third consecutive quarter and grew first quarter revenue by 20%. These strong results were demand-driven. We remain focused on execution and saw good progress from our key initiatives. Let's start with the initiatives that drove our results in Q1. There's a large embedded opportunity in our existing customer base. At our Investor Day conference in March, we sized it at an incremental $800 million in ARR for strategic products alone. To capitalize on that opportunity, we continue to invest in our account management team to lead our customers, help them realize value and align with their business objectives. Our ability to expand the wallet share amongst our customers was a durable growth lever throughout the pandemic and we saw that demand strengthened in Q1. As a result, we added to the growing list of customers spending $1 million or more in ARR with BlackLine and saw continued momentum as other large customers grew their BlackLine footprint with acceleration of their global rollouts and product expansion. Strategic products, in particular, had an impressive quarter, accelerating to 23% of sales coming in above the high end of our anticipated range of 15% to 20% with solid performances from all strategic products, including Cash Application. In Q1, we added a number of large quality new logos. These customers are prioritizing digital finance transformation and turning to BlackLine to guide them on their journey. We closed deals with new customers and saw the return of some deals that stalled early last year. The quality and size of the new logos we are seeing in the quarter signals to us that budgets for finance transformation are opening back up. And we feel good about the momentum through 2021 as CFOs gain more confidence in the macro environment. Another area of the business where demand is beginning to return is on the international front. Our sales performance in major European and Asia Pacific markets improved in Q1 driving international revenue to 27% of the total, up from 24% in the prior year. Our international success is largely tied to an improving demand environment focused execution efforts with our global partners and our expanded presence abroad from the Rimilia acquisition. Our international performance is returning, but still trailing at the levels we are seeing in the North America market. SOLEX contributed to our international success and delivered a strong quarter as measured by growth in new logos and continued expansion deals, resulting in SAP partnership revenue increasing to 25% of total revenue. Our SOLEX relationship continues to mature as we tighten sales alignment across our joint accounts. We're seeing progress across nearly all regions with improved engagement, strong demand generation and large digital transformation wins. This is a great start to the year. And we believe SAP's new RISE initiative puts cloud front and center and positions BlackLine very well. Another area of strong Q1 demand was in accounts receivable automation with a growing number of cash application deals for both new and existing customers. We now have two quarters under our belt since we entered the accounts receivable space. And we feel good about the momentum we're seeing for AR to automation due to the urgent need surrounding cash optimization. Cash remains king in today's environment and you can see further validation of that with the recent influx of investment dollars to the accounts receivable market. We are really excited to be innovating in this space and believe this will enhance our value proposition and drive greater stickiness of our platform. Throughout the pandemic, our marketing campaigns and virtual events have been very successful in generating opportunities across a large audience. Now that we are one year in with virtual events we have the proof point that these opportunities are converting and yielding positive results. As such, we plan to host all significant 2021 events virtually. Next I'd like to speak to the progress we've made on our product strategy. As we outlined in our Investor Day, our vision is to become the most indispensable platform for the controller. As such we are innovating for the controller in three ways. First is our existing product enhancement for the financial close. We are investing development resources to innovate and rapidly advance our platform functionality. Our new product throughout this year Account Analysis remains on track for general availability and will deliver synergies across our platform and help drive adoption of other modules. Second, is product adjacencies. We are committed to expanding our solution to bring end-to-end optimization and automation to other areas that touch the controller. In Q1, we further extended our platform with the release of AR Intelligence, the latest product in our portfolio of accounts receivable automation solutions. AR Intelligence is a natural complement to cash application and helps our customers harness real-time data with powerful analytics. We are excited about this new product and the early feedback is positive. This product is one of several AR automation offerings to come as we continue to build our portfolio of accounts receivable solutions. And third is platform modernization. We remain on track with our public cloud migration efforts. Starting in Q1, new U.S.-based customers are now being deployed in Google Cloud. And we will begin migrations of existing U.S. customers this month. Our migration to the public cloud is a multiyear journey to modernize our platform and provide scalability, so we can stay ahead of our customers and their growing business needs. Last but certainly not least, I wanted to share some Q1 customer wins. One of our largest deals in the quarter was a new Fortune 50 company based in Southeast Asia. This company was looking to introduce automation to transform their manual processes around the financial close following a surge of online e-payment demand. Their CIO had strategically implemented BlackLine at a former company and led the effort to engage BlackLine in this deal. This company had already implemented S/4HANA. And we're able to leverage our SAP relationship as well as one of our global SIs who is advising the company's executive stakeholders around their business initiatives. We showcased BlackLine's ability to load and match high transaction volumes within rapid time frames, up to 30 million transactions in an hour and identified synergies with S/4HANA. In Q1, this customer became our largest SolEx win in APAC to date with the purchase of our Full Finance Transformation solution including our Transaction Matching engine to automate nearly one billion reconciliations per month between their e-payment transactions and merchant statements. A Fortune 500 automotive distributor first became a BlackLine customer in February 2020 to drive significant improvement in process and technology and support a move to shared services. Throughout 2020, they went live with our Close Process Management solution. Following successful implementation and clear ROI, they added more users and Transaction Matching to automate complex bank statements in Q1. One year and this customer has consistently expanded their BlackLine footprint, all four quarters since they became a customer and they did this throughout the pandemic. They also have future plans to explore new products and additional rollouts across all of their 33 global markets. A Canadian professional services firm was challenged by significant manual accounting pain points including decentralized multicurrency accounts, limited visibility into real-time data and high staffing costs associated with frequent staff turnover. We identified a framework for a modern accounting transformation that included automating their accounting workflows, unlocking real-time visibility and managing their business complexity. As part of their procurement process, they also looked at a point solution provider and determined that even though we were the premium price provider, there was better alignment across project goals, desired outcomes and higher ROI. We were able to identify cost savings across many parts of their business, amounting to a total quantifiable ROI of more than 400% over a five-year period with an estimated payback period of less than eight months. We added this customer as a new logo in Q1 with the purchase of our Finance Transformation suite and Transaction Matching across a variety of use cases including cash and bank management, intercompany processing and complex vendor statement and reconciliation processes. Beyond these examples, we continue to see companies prioritize BlackLine. The remote work environment is dominating many conversations with some companies fearful of the risks associated with closing remotely, while others want to modernize to be successful in a remote work environment. Other companies are focused on scaling effectively and moving away from manual processes. And of course, many companies are looking to digital transformation to modernize their back office. Our partners are telling us that they are having the same conversations with their customers. These conversations are generating momentum and demand for our platform and driving growth in our business. As we look to the rest of 2021, the key to our success is continued improvement in the demand environment. Our performance in the first quarter gives us increasing confidence in our ability to execute, particularly as the market continues to recover and the pandemic drives a long overdue investment cycle into the back office. As the market leader in this space, we believe BlackLine is well positioned to capitalize on these favorable market trends and drive long-term growth. And now, I'll turn it over to Mark Partin.

Thank you, Marc and good afternoon everyone. Q1 marks the one-year anniversary of the pandemic. I remember during Q1 2020, we were coming off a record Q4 and a strong year-end. For the majority of Q1, we were operating well above plan. And then of course COVID hit in March and you all know what happened next. The reason I bring this up is because our January and February this year were right in line with the strong performances we saw pre-COVID in 2020. And then, March came in even stronger than we expected, resulting in three consecutive quarters of billings growth acceleration. Our strength in the quarter came from solid sales execution, with consistently strong close rates from our virtual pipeline and broad-based improvements in the global demand environment. As a result, Q1 came in ahead of expectations for revenue, profitability and cash flow. Total revenue grew 20% in the quarter, with broad-based performance across the business. Moving to our key performance metrics for the quarter, we added 49 net new customers in the quarter for a total of 3,482 customers. Our strength up market generated a record number of new large deals for a Q1, as defined by $100,000 or more in ARR, with growth in average new deal size, benefiting from our outperformance, with strategic products and a strong quarter from our SolEx partnership. Our renewal rate was strong at 98%. And as we anticipated our dollar-based net revenue retention rate remained flat at 106%. While we are seeing an improving demand environment, which will impact this metric in the long run this is a 12-month metric that continues to be impacted by a lower demand environment from earlier in the pandemic. Partners were involved in 76% of large deals in the quarter, which is in line with our range of expectations. Gross margin has trended to the 80% target, reflecting the impact of the planned Google Cloud migration, and the integration of the Rimilia acquisition. We will see pressure on this metric as we maintain a dual cloud environment during our transition to the public cloud. We expect to return to above 80% gross margin in the long run. In Q1, we generated net income attributable to BlackLine of $7 million. We generated $29 million in operating cash flow and a record $23 million in free cash flow due to higher-than-expected profitability and cash collections. In the quarter, we executed a $1.15 billion convertible note offering at 0% interest due in 2026. And we used approximately $432 million to repurchase half of our existing convertible notes due in 2024. The remainder of the proceeds will be used to execute on our future growth strategy, including M&A. We believe this convertible debt transaction strengthens our balance sheet and gives us ample cash to execute on our long-term vision. We ended the quarter with approximately $1.16 billion in cash, cash equivalents and marketable securities. Turning now to guidance. We feel good about the trends we have seen in Q1 and anticipate continued improvement in the demand environment throughout 2021. For the second quarter of 2021, total GAAP revenue is expected to be in the range of $100.5 million to $101.5 million. On the bottom line, we expect to report net income attributable to BlackLine in the range of $4.5 million to $5.5 million or $0.07 to $0.09 on a per share basis. Our share count will be approximately 62.7 million diluted weighted average shares. For the full year 2021, total GAAP revenue is expected to be in the range of $415 million to $420 million. On the bottom line, we expect to report net income attributable to BlackLine in the range of $27 million to $29 million, or $0.43 to $0.46 on a per share basis. Our share count will be approximately 62.8 million diluted weighted average shares. In summary, we are very pleased to see an improving demand environment and strong execution drive growth. 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 questions.

[Operator Instructions] Our first question will come from the line of Matt Stotler with William Blair. You may begin.

Hi, everybody. Thank you for taking my questions. May I ask a couple on strategic products. Obviously, some really nice performance in the quarter. First question will be on Cash App. Just we'd love to double-click on kind of the progress with that solution both in terms of the front-end demand generation kind of layering that in, in terms of go-to-market and then regarding the back-end investments that you've talked about previously to expand the underlying infrastructure and support so you can facilitate scale adoption of that solution? Any updates or thoughts on the time line there would be helpful.

Yeah. Sure. Thank you, Matt. We're pleased with overall the integration of those businesses the growth engine that we think we've invested in here and its performance. We saw some of that performance hits in Q4. We are the beneficiary of some wins there. That continued into Q1 for us and contributed to that high degree of strategic products as a percentage of overall. And we're excited about the potential represented by the pipeline. I think we are fortunate of the timing of that transaction and that we were able to highlight that at our large user conference drive a bunch of eyeballs and demand through that user conference into our installed base. And then on top of that, we were pleasantly surprised by the uptick in pipeline from new non-BlackLine customers as well. So, just to reiterate we're pleased with the performance of our AR business. We're investing in that as a potential growth engine. We just released AR Intelligence. So there's a pipeline of products in front of us to sort of grow into as we look to that growth engine to help us grow our organization.

Got it. That's helpful. Very exciting to see the early traction there. And then, the second question, I haven't asked a question on intercompany here in a couple of quarters so just give it a shot. Historically, this has been a more complex sales process just given the number of stakeholders involved. Are you seeing that process become easier in this environment, just given the accelerated push towards digital transformation and modernization of the finance stack in this environment as you mentioned. Is that getting any easier, or is that helping to kind of spur conversations or kind of compress the sales cycles here?

Sure. So I wouldn't say it's easier, because you've described it correctly. It's a complex environment that you're trying to sell into and it involves multiple stakeholders. What I would tell you is I think that BlackLine's team is getting better and better at that, reaching into various other buyer personas in the organization, more complex processes around that. We've got more expertise as we've taken on more customers, more proof points. And then, in conjunction with that, also not easier, but beneficiaries of I think eyeballs and interest into that type of automation and transformation given what people have been through in the pandemic.

Got it. That's helpful. Thanks again.

Thank you.

Our next question will come from the line of Rob Oliver from Baird. You may begin.

Great. Hey. Thank you, guys. Thank you very much for taking my question. First one for Marc Huffman, really interesting color on that premier Fortune 50 win, you mentioned in Asia Pac. And you mentioned how that had been an S/4HANA customer. And I'm curious Marc, if it sounds like that aided in the win and it sounds like it was a multi-product win as well. So I'd be curious if you feel like you're starting to see a bit of an inflection on S/4HANA activity as spending returns as we emerge from the pandemic. And then in particular relative to you guys, whether that's raising that initial land or that product opportunity that ACV opportunity for you guys as it appears that it did in this Asia Pac deal? And then I had one follow-up.

Yes. Great, thank you, Rob. Well, we were the beneficiary of some larger new customer wins across the globe. And then that's part of what I would describe as one of the reasons we had better than expected results. That one, in particular you've got, SAP really focused on cloud migration and S/4HANA. You've got really tightly well coupled go-to-market activities based on a track record of investment in BlackLine and SAP getting it right. And then, in that particular case, we had one of our large global SIs involved, who had a deep understanding of that company's strategic imperatives. And then, if I just go a step further and we had their CIO, who had prior great experience with BlackLine. And so, those things are a testament to our standing as a category leader, our expertise and people eyeballs and interests in digital finance transformation. And I think that's part of the reason why we've had such a good quarter.

Great, thanks. And then, Mark Partin, just one for you. It sounds like the GCP migration activity is doing pretty well. And I know you said new US customers deployed this quarter, existing customers next. I know you guys have said this is a multiyear plan, but just -- I don't -- this was looking back at some of the Analyst Day commentary strikes me that at least it sounds like you guys are running maybe a little bit ahead of plan there. Just was curious for any color on that, if I read that right and how that might impact kind of that dual cost structure. Thank you, guys.

Yes. That's right. We are ahead of plan out of the gate. It's still early in the process though. So our assumption was that we would spend this year and then a large part of next year going through that migration of the customers. And that the impact of the gross margin would be this year and next year. And so far so good rob. We're out of the gate early on the migration. The team is doing a great job. The customer feedback has been positive.

Right. Appreciate it. I was looking forward to comment. I guess, we’re going all digital again this year. So well, see you guys on Zoom.

Thanks.

Thank you.

Our next question will come from the line of Andrew DeGasperi from Berenberg. You may begin.

Thanks for taking my question. First, just on the accounts receivable. Just curious to know how did that product do this quarter? Can you give any quantitative or qualitative data on that? And then just wondering if you -- when you -- in the conversations you have with your partners, how has that been trending so far?

Yes. Great. Thanks. I'll start with the question on the quantifiable contribution. So out of the gate in Q4 and Q1, we've been really pleased with the momentum in the sales and pipeline demand and how the team is executing on that and integrating. And what that's helped to do is to contribute to billings in Q1 a little bit. As we said, it's a small company. It won't contribute materially to this year. However, coming out of the gate, we're pleased with the progress. It will be a revenue contributor in 2022. And then on the…

Yes Andrew on the -- in terms of partners and Rimilia, there's a strong interest. It's still early innings of how that's developing. There's a cross-training initiative to make sure they're up to speed on our offering there. But I'd say, it's just -- it's early. Overall, partner engagement across all of our products remains strong as you saw with 76% of our large opportunities had these large SIs in Q1. And these global SIs are really reporting an uptick in customer interest and finance transformation coming out of the pandemic.

That's helpful. And then just as a follow-up on the strategic products, is there anyway you can maybe rank, which one was more popular this quarter?

Well, I can tell you they all contributed in the quarter. Matching is such an excellent product for us that contributes, because it is sold up and down our customer base from new enterprises and mid-market who find great value in that product, particularly through our MAP initiative, which leads them in that direction to the large enterprises, which in the example Marc gave is one of the largest companies in the world that is using that to a great extent. So Transaction Matching continues to be one of the more material contributors. But what we are pleased about is that in the products that we sold like ICH, we're now seeing expansion in those products. So these products have been sold to customers. They've been using them operationally successful and now we're expanding on them. And we saw that again in Q1 with our ICH product.

Great. Thank you.

You’re welcome.

Our next question will come from the line of Koji Ikeda from Bank of America. You may begin.

Hi, Koji.

Koji, your line is open. You maybe on mute, Koji. And our next question will come from the line of Brent Bracelin from Piper Sandler. You may begin.

Hi, guys. This is Hannah Rudoff on for Brent today. Thanks for taking my question. Just first, given the strength that you're seeing with new customer growth and the improving demand environment, how are you thinking about hiring for the remainder of the year?

Yes. We've been very aggressive in our hiring over the last year again in Q1, where we had a very strong hiring quarter. The vast majority of our hiring is in the tech product areas as well as the customer areas. As the demand comes up the curve, which we've been seeing, we're now investing at a greater extent in the demand-driven parts of our business, like sales and marketing. So our expectation for this year is that we'll have a fairly aggressive hiring profile as we move through the year.

Great. And then, since you're witnessing a lot of enterprise strength, I guess, is there anything that you've heard from the mid-market that maybe differs from what you're seeing in the enterprise landscape in terms of demand recovery?

None, whatsoever. We're very pleased with our mid-market business as well. The continued success and adoption of our modern accounting playbook, our leading practices, that was a strong business unit for us as well, both domestically here, in the United States as well as globally.

Thanks.

And our next question will be from of Koji Ikeda from Bank of America. You may begin.

Hey, guys. Can you hear me okay?

Yes, we got you.

Loud and clear, Koji.

Sorry. Trying a new wireless headset, I think I pressed the mute on there. Hey. Really great start to the year. Maybe a question for Mr. Partin here. When I look at the guidance on a sequential basis, it looks like it's about a $2.2 million at the midpoint from first quarter over the second quarter. And that's actually better than what we've seen over the past few quarters. I mean, I guess, what is the read-through there? I know in the past you've really kind of only guided to what you can see with high visibility. So it sounds like the end market is improving maybe with the mid-market or the enterprise, or is there maybe a little bit of the enterprise in that guidance there, that we should be thinking about. Any sort of color on that magnitude of the sequential add on this quarter versus maybe the past few quarters.

Yes, that's great. And a very astute observation, I might add. Our guidance is consistent philosophically with how we've done this for every year. What's different from the last quarter's guidance to now is that, the large deals really signaled to us at the high end of the enterprise that the demand for digital transformation has returned. And that has been -- prior to COVID, had been the big accelerator in our business, to driving billings above 30% growth. And as we come out of the gate and look at the -- where the demand is coming from that's a big contributor to the overall confidence that we have in raising our guidance to where it is today. The second component of that is the SAP partnership was very strong in Q1, one of our stronger quarters -- one of our stronger Q1s that we've ever had. And that also is a second signal that that partnership is gaining traction early in the year, as opposed to waiting to such a back-end loaded case. So we are raising the guidance based on the confidence in that part of the business.

Got it, got it. And maybe just one follow-up, if I could. On professional services this quarter, it was the highest as a percentage of revenue in quite a while. And I was looking back at my notes and I thought I wrote down somewhere that, it might be coming down as an overall percentage of revenue. I guess did I have that wrong? And maybe, is there anything we should be aware of in the professional services strategy that might be potentially adding some better growth than expected?

Yes. Well, I can't speak to your notes, but I can tell you, this is exactly where we have thought it should be. It's within our range of expectations. In Q1, in particular, where most accounting departments are closing the books, we found this to be a very positive result. It was driven by high utilization great efforts by a strong team, the addition of Rimilia, the addition of our strategic product portfolio which has been ramping nicely for quarters coming even through the COVID environment. So those things are driving our services revenue. It still today represents around 6% or 7% of overall revenue, because we are still very high subscription revenue base. And that's within our expectation, Koji. So we were pleased to see Q1 so strong in that area.

Got it. Thanks, guys. Great quarter. Thanks for taking my questions.

Thank you.

Thank you.

[Operator Instructions] Our next question will come from the line of Alex Sklar from Raymond James. You may begin.

All right. Great. Thank you. Marc Huffman, a bigger picture question here on the enterprise strength. But I'm curious, if you've got any customer partner feedback post Rimilia and some of the recent product announcements where taking a step back they're seeing you execute on being a more strategic partner to the office of the controller and if that broadening of your product suite is helping you win deals at the enterprise?

Well it's certainly strengthening relationships Alex. The -- there's an excitement that has come out of BeyondTheBlack and sort of has haloed us into Q1 as well as we're able to have these conversations about BlackLine's tech initiatives product initiatives the modernization and the direction we're going with that the broadening of the platform to include AR with the closed process automation and our intercompany governance is exciting with customers. So I think what they're seeing is a company that's investing for the future. We got stronger last year during the pandemic. We used our balance sheet strength and our product strength to invest in the organization across a lot of facets and that allows us to have conversations that sort of give them a greater degree of confidence of our innovation and product leadership.

Okay. Great. And one more for you. I know one of your big areas of focus has kind of been on customer success and you've talked about operating the sales and marketing and success teams as kind of one cohesive organization. You just brought in a Chief Customer Officer a couple of months ago. And I'm curious, if you could just provide some color on where she's been focused and bigger picture how you're progressing towards that goal of the cohesive team? Thanks.

Well great. I appreciate you noticing that. She's 60-ish days in doing a phenomenal job. And I would just say it's an evolution of our existing strategy of trying to marry up the right resources at the right time with the right expertise. What we hear from clients consistently is a lot of what goes on in these transformation projects is new to a lot of organizations and people. This is an area that's been underinvested in and under innovated in. And our ability to have to marry those resources up to someone who may be stuck in time and place in their accounting process and help them modernize those things or are looking for a large-scale transformation is a big priority for us. And that's one area that she's really, really focused getting the right skills expertise at the right time with the right clients, meeting them where they are leading them on these transformation initiatives.

All right. Great color. Thank you.

Thank you.

Next question will come from the line of Mark Murphy from JPMorgan. You may begin.

Hey. Good afternoon. This is Matt Coss on behalf of Mark Murphy. Thank you for taking my questions. Marc Huffman, you mentioned Account Analysis as being generally available this year. And you hope it will drive adoption of other modules. Can you sort of double-click on how you expect that to be a catalyst for the adoption of other modules?

Sure. Thank you, Matt. Account Analysis is sort of the next generation and next step of deep accounting expertise that BlackLine brings to bear for accounting organizations. A lot of what we do is designed with automation to identify things that are nonstandard and Account Analysis allows accountants to once those things have been identified to take action and communicate that and share that across an organization. Oftentimes that level of depth of analysis is still done in Excel still really manually done and is disconnected organizationally. So we believe this is a good innovation something that's rare in the marketplace. And what it does is it sort of perfects the use cases that preceded in the series of events that is involved in reconciling some of these accounts. And so we believe it will tightly couple with our matching engine which is that automation engine, which helps identify these nonstandard transactions and it will sort of perfect the usage and drive greater matching attach rates.

Got it. That's very helpful. And then one for you Mark Partin. It looks like the only thing standing between you and your target operating model is G&A maybe a tiny bit on the sales and marketing side. But is there a certain revenue scale where you expect to be prior to hitting your target operating model, or can steps be taken to get more leverage out of G&A in the near term? Thank you.

Yes. Thanks for that question. We've talked about our target model as being a number of years out, but still as a growth orientation model. You're right. We've made great progress over the last number of years in driving operating leverage in parts of the business including our gross margin, our sales and marketing, leverage through our ecosystem and partners. So we've made great progress. G&A will come with more sort of critical mass. And what we've been determined to do as a global company serving these large global companies is to have the right infrastructure as a public global company so that we can operate best-in-class up and down the stack including in the back-end office. So just like companies out there today, we will be driving leverage and G&A through automation. We'll be driving leverage through sort of critical mass as we move. And I think it's a number of years out in order to achieve that leverage. But we're highly confident that the trend towards that is -- and can go in the right direction.

Thanks very much.

And our last question will be from the line Matt VanVliet from BTIG. You may begin.

Hi. Thanks for taking the question. Maybe just wanted to dig in a little bit on the SAP, SOLEX partnership. Obviously, it's been a huge driver lately and in an area of huge investment. But just curious kind of what you're seeing as some of the biggest drivers of growth there? And maybe what you might incrementally invest in or sort of around whether it's any kind of headcount necessary or really probably more on the product side kind of highlighting some of the key features where that integration really stands out?

Yes. Good question and thank you. So I think we're fairly well invested in that initiative. We've -- and maybe you would consider that a front-loaded investment to sort of build the momentum. And we should be in a position where we're moving towards more leverage out of it. I think we were beneficial to the demand environment improving and that's sort of a global phenomenon because that SOLEX partnership is a global relationship. And it was designed to give us some coverage in areas of the world that may be harder to reach for us. So we're the beneficiary of that. We've made a lot of investment in people and processes and initiatives partnering and educating SAP. And I think we're seeing that pay-off where more and more parts of their business have seen success and it's sort of self-fulfilling. On top of that we sort of moved into the era of being the beneficiary, since 2020 of account expansion in that relationship, which has been good. And then clearly, they've really focused on the move to the cloud and their products portfolio and BlackLine has been front and center of that in their partnership through their Rise initiative which recently led to us being awarded their Pinnacle Award for SOLEX partners based on our performance and our deep partnerships. So we're really pleased with it.

All right. Great. Thank you.

Thank you.

Now I'll turn the call back over to Marc Huffman, CEO for any closing remarks.

Well, thank you all for joining us today and your interest in BlackLine. We appreciate your ongoing support. And to continue with the tradition that was established by our founder Therese, I'd like to remind all of you to please refer to your portfolio companies to BlackLine. We're excited about the opportunities for accounting transformation and driving further growth in our business. Thank you very much.

This concludes today's conference call. Thank you for participating. You may now disconnect.