BLACKLINE, INC.

Note 1 –The Company

BlackLine, Inc. and its subsidiaries (the “Company” or “BlackLine”) provide intelligent financial accounting solutions delivered primarily as Software as a Service (“SaaS”). The Company’s solutions enable its customers to address various aspects of their critical processes, including financial close & consolidation, intercompany accounting, and invoice-to-cash.

The Company is a holding company and conducts its operations through its wholly-owned subsidiary, BlackLine Systems, Inc. (“BlackLine Systems”).

The Company is headquartered in Woodland Hills, California. The Company has other local offices in Pleasanton, California; New York, New York; and Westport, Connecticut, as well as international office locations in Australia, Canada, France, Germany, India, Japan, the Netherlands, Poland, Romania, Singapore, and the United Kingdom.

Note 2 –Basis of Presentation, Significant Accounting Policies, and Recently-Issued Accounting Pronouncements

The accompanying unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024, which was filed with the Securities and Exchange Commission (“SEC”) on February 21, 2025. The unaudited condensed consolidated financial statements are unaudited and have been prepared on a basis consistent with that used to prepare the audited annual consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair statement of the unaudited condensed consolidated financial statements. The unaudited condensed consolidated balance sheet at December 31, 2024 was derived from audited financial statements, but does not include all disclosures required by GAAP. The operating results for the quarter ended March 31, 2025 are not necessarily indicative of the results expected for the full year ending December 31, 2025.

Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period.

On an ongoing basis, management evaluates its estimates, primarily those related to determining the stand-alone selling price for separate deliverables in the Company’s subscription revenue arrangements, allowance for doubtful accounts, cancellations and credits, fair value of assets and liabilities assumed in a business combination, recoverability of goodwill and long-lived assets, useful lives associated with long-lived assets and right-of-use assets, income taxes, contingencies, fair value of the 0.00% Convertible Senior Notes due in 2026 and 1.00% Convertible Senior Notes due in 2029, redemption value of redeemable non-controlling interest, and the valuation and assumptions underlying stock-based compensation. These estimates are based on historical data and experience, as well as various other factors that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company at March 31, 2025 and through the date of this report. The accounting matters assessed included, but were not limited to, the allowance for credit losses and the carrying value of goodwill and other long-lived assets. While there was not a material impact to the Company’s unaudited condensed consolidated financial statements for the quarter ended March 31, 2025, the Company’s future assessment of these accounting matters and other factors could result in material impacts to the Company’s consolidated financial statements in future reporting periods.

Significant accounting policies

The Company’s significant accounting policies are detailed in “Note 2 - Basis of Presentation, Significant Accounting Policies, and Recently-Issued Accounting Pronouncements” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. There have been no material changes to the Company’s significant accounting policies.

Recently-adopted accounting pronouncements

There have been no recently-adopted accounting pronouncements since the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

Recently-issued accounting pronouncements not yet adopted

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses(“ASU 2024-03”), and in January 2025, the FASB issued Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date("ASU 2025-01"). ASU 2024-03 requires public companies to disclose, in interim and reporting periods, additional information about certain expenses in the financial statements. For public business entities, ASU 2024-03, as clarified by ASU 2025-01, is effective for the first annual reporting period beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2024-03 is permitted. The Company is currently evaluating the impact that the standard will have on our disclosures within our consolidated financial statements. The Company does not intend to early adopt.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The amendment in the ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. For public business entities, it is effective for annual periods beginning after December 15, 2024. The adoption of this standard only impacts annual disclosures and is not expected to have a material impact on the Company’s consolidated financial statements.

Note 3 –Segment Information

Management has determined that the Company hasone operating and reportable segment. The Company provides subscription and support services that consist of a cloud-based platform designed to unify, automate, and streamline accounting and finance operations, and also provides professional services that consist of implementation and consulting services. The technology used in the subscription and support services is based on a single software platform that is deployed to and implemented by customers. The Company manages the business activities on a consolidated basis, and operating segments have not been aggregated. The accounting policies of the operating segment are the same as those described in “Note 2 - Basis of presentation, significant accounting policies, and recently-issued accounting pronouncements” included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

Our Chief Operating Decision Maker (“CODM”) assesses performance for the operating segment and decides how to allocate resources based on the review of net income. The CODM uses net income, among other measures, for budgeting and resource allocation purposes. Expenses significant to the segment were determined to be cost of revenues, sales and marketing expenses, research and development expenses, general and administrative expenses, interest expense, and the provision for income taxes, which are all presented in the unaudited condensed consolidated statements of operations for the quarters ended March 31, 2025 and 2024. Other significant expenses include depreciation expense of $7.8 million and $7.5 million for the quarters ended March 31, 2025 and 2024, respectively, as well as amortization expense of $3.7 million and $5.2 million for the quarters ended March 31, 2025 and 2024, respectively.

The Company’s intra-entity sales are eliminated upon consolidation.

The Company disaggregates its revenue from contracts with customers by geographic location, as it believes it best depicts how the nature, amount, timing, and uncertainty of its revenues and cash flows are affected by economic factors.

The following table sets forth the Company’s revenues by geographic region (in thousands):

No countries outside the U.S. represented 10% or more of total revenues.

The measure of segment assets is reported on the unaudited condensed consolidated balance sheets as total consolidated assets. The following table sets forth the Company’s long-lived assets, which consist of property and equipment, net, and operating lease ROU assets by geographic region (in thousands):

Note 4 –Redeemable Non-Controlling Interest

In September 2018, the Company entered into an agreement with Japanese Cloud Computing and M30 LLC (the “Investors”) to engage in the investment, organization, management, and operation of BlackLine K.K. that is focused on the sale of the Company's products in Japan. The Company initially contributed approximately $4.5 million in cash in exchange for 51% of the outstanding common stock of BlackLine K.K. and subsequently invested a further $2.3 million, maintaining the Company's majority ownership of 51%. As the Company continues to control a majority stake in BlackLine K.K., the entity has been consolidated.

All of the common stock held by the Investors is callable by the Company beginning September 3, 2025, or puttable by the Investors upon certain contingent events. Should the call or put option be exercised, the redemption value will be determined based upon a prescribed formula derived from the discrete revenues of BlackLine K.K. and the Company, and may be settled, at the Company’s discretion, with Company stock or cash. As a result of the put right available to the Investors in the future, the redeemable non-controlling interest in BlackLine K.K. is classified outside of permanent equity in the Company’s consolidated balance sheets, and the balance is reported at the greater of the initial carrying amount adjusted for the redeemable non-controlling interest's share of earnings, or its estimated redemption value. The resulting changes in the estimated redemption amount are recorded within retained earnings or, in the absence of retained earnings, additional paid-in capital.

Activity in the redeemable non-controlling interest was as follows (in thousands):

Note 5 –Intangible Assets and Goodwill

The carrying value of intangible assets was as follows (in thousands):

The following table represents the changes in goodwill (in thousands):

Note 6 –Balance Sheet Components

Investments in Marketable Securities

At March 31, 2025, investments in marketable securities presented within current assets on the unaudited condensed consolidated balance sheets consisted of the following (in thousands):

The Company hadno marketable securities at December 31, 2024.

The Company’s marketable securities at March 31, 2025 have a contractual maturity of less than one year. All of our available-for-sale securities are available for use in our current operations and are categorized as current assets. Refer to “Note 7 - Fair Value Measurements” for additional information.

The Company recognized accretion on its marketable securities of $2.0 million in interest income for the quarter ended March 31, 2025. The Company recognized accretion on its marketable securities in interest income, and also recognized net gains and losses related to maturities of marketable securities that were reclassified from accumulated other comprehensive loss in interest income of $8.5 million for the quarter ended March 31, 2024.

Net gains and losses are determined using the specific identification method. During the quarters ended March 31, 2025 and 2024, there were no realized gains and losses related to sales of marketable securities recognized in the Company's unaudited condensed consolidated statements of operations.

Marketable securities in a continuous loss position for less than 12 months had an estimated fair value of $87.2 million at March 31, 2025, and unrealized losses were nominal at March 31, 2025. There wereno marketable securities in a continuous loss position for greater than 12 months at March 31, 2025.

The Company's marketable securities are considered to be of high credit quality and accordingly, there wasno allowance for credit losses related to marketable securities at March 31, 2025.

Other Assets

Deferred customer contract acquisition costs are included in other assets in the unaudited condensed consolidated balance sheets and totaled $86.5 million and $86.1 million at March 31, 2025 and December 31, 2024, respectively.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities were comprised of the following (in thousands):

Note 7 –Fair Value Measurements

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis by level, within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):

The Company classified the marketable debt securities as available-for-sale debt securities at the time of purchase and reevaluated such classification at each balance sheet date. The valuation techniques used to measure the fair values of our instruments that were classified as Level 1 were derived from quoted market prices for identical instruments in active markets. The valuation techniques used to measure the fair values of Level 2 instruments were derived from broker reports that utilized quoted market prices for similar instruments.

Note 8 –Convertible Senior Notes

2029 Notes

At March 31, 2025, the Company had $675.0 million aggregate principal amount of our 1.00% 2029 Notes (the “2029 Notes” and, together with the 2026 Notes (as defined below), the “Notes”) outstanding. The 2029 Notes consisted of the following (in thousands):

The effective interest rate of the 2029 Notes, excluding the conversion option, was 1.40% at March 31, 2025.

The Company carries the 2029 Notes at face value less unamortized debt issuance costs on the unaudited condensed consolidated balance sheets and presents the fair value for disclosure purposes only. The estimated fair value was determined based on the actual bids and offers of the 2029 Notes in an over-the-counter market on the last trading day of the period. The estimated fair value of the 2029 Notes, based on a market approach at March 31, 2025, was approximately $668.7 million, which represents a Level 2 valuation.

During the quarter ended March 31, 2025, the Company recognized $0.6 million of interest expense related to the amortization of debt issuance costs and $1.7 million of coupon interest expense.

The 2029 Notes were not convertible at March 31, 2025. It is the Company’s current intent to settle conversions of the 2029 Notes through “combination settlement”, which involves repayment of the principal portion in cash and any excess of the conversion value over the principal amount in shares, cash, or a combination for any further value.

In connection with the offering of the 2029 Notes, the Company entered into privately-negotiated capped call transactions (the “2029 Capped Calls” and together with the 2026 Capped Calls (as defined below), the “Capped Calls”). There have been no changes to the condition of the 2029 Notes since December 31, 2024, and the 2029 Capped Calls were unchanged and still outstanding at March 31, 2025.

2026 Notes

At March 31, 2025, the Company had $230.2 million aggregate principal amount of our 0.00% 2026 Notes (the “2026 Notes”) outstanding. The 2026 Notes consisted of the following (in thousands):

(1)Net carrying amount at March 31, 2025 presented within total current liabilities on the unaudited condensed consolidated balance sheets.

The effective interest rate of the 2026 Notes, excluding the conversion option, was 0.37% at March 31, 2025.

The Company carries the 2026 Notes at face value less unamortized debt issuance costs on the unaudited condensed consolidated balance sheets and presents the fair value for disclosure purposes only. The estimated fair value was determined based on the actual bids and offers of the 2026 Notes in an over-the-counter market on the last trading day of the period. The estimated fair value of the 2026 Notes, based on a market approach at March 31, 2025, was approximately $221.0 million, which represents a Level 2 valuation.

During the quarters ended March 31, 2025 and 2024, the Company recognized interest expense related to the amortization of debt issuance costs of $0.2 million and $1.1 million, respectively.

The 2026 Notes were not convertible at March 31, 2025. It is the Company’s current intent to settle conversions of the 2026 Notes through “combination settlement”, which involves repayment of the principal portion in cash and any excess of the conversion value over the principal amount in shares, cash, or a combination for any further value.

In connection with the offering of the 2026 Notes, the Company entered into privately-negotiated capped call transactions (the “2026 Capped Calls”). There have been no changes to the condition of the 2026 Notes since December 31, 2024, and the 2026 Capped Calls were unchanged and still outstanding at March 31, 2025.

Note 9 –Restructuring Costs

Fiscal 2025 Restructuring Program

On March 4, 2025, the Company announced a restructuring program that reduced its global workforce by approximately 7%, or 130 total positions. All of the actions are part of ongoing organizational alignment and performance management initiatives as the Company continues to focus on key strategic priorities.

In connection with the restructuring program, the Company currently estimates that it will incur expenses of up to $6.0 million, primarily for severance and other termination benefits. The Company expects to recognize these anticipated expenses primarily during the first and second quarters of fiscal year 2025, and to have substantially completed the planned actions during fiscal 2025, subject to local law and regulatory requirements, which may extend the process in certain countries.

During the quarter ended March 31, 2025, the Company recorded $5.3 million for one-time termination benefits related to the Fiscal 2025 restructuring program, which occurred in the United States and various international locations. The charges were recorded pursuant to ASC 420, Exit or Disposal Obligations.

The liability for the Fiscal 2025 restructuring program was included in accrued expenses and other current liabilities in the unaudited condensed consolidated balance sheets, and the following table summarizes the related activity for the quarter ended March 31, 2025 (in thousands):

Note 10 –Stockholders’ Equity

Stock-based compensation expense

Stock-based compensation expense was as follows (in thousands):

For the quarters ended March 31, 2025 and 2024, stock-based compensation capitalized as an asset was $0.9 million and $0.9 million, respectively.

Stock options - service-only vesting conditions

The following table summarizes activity for awards that contain service-only vesting conditions (in thousands):

Restricted stock units - service-only vesting conditions

The following table summarizes activity for restricted stock units that contain service-only vesting conditions (in thousands):

Restricted stock units - performance and service conditions

The following table summarizes activity for restricted stock units with performance and service vesting conditions with grant dates established (in thousands):

The following table summarizes activity for restricted stock units with performance and service vesting conditions with no grant dates established (in thousands):

Restricted stock units - market and service conditions

The following table summarizes activity for restricted stock units with market and service-based conditions (in thousands):

Common Stock Repurchases

On November 17, 2024, the Company's Board of Directors authorized the repurchase of up to $200.0 million of the Company’s common stock. During the quarter ended March 31, 2025, the Company repurchased and retired approximately 0.9 million shares of common stock for $45.5 million as part of the share repurchase program under which approximately $154.5 million of buyback capacity remained at March 31, 2025.

Note 11 –Income Taxes

In determining quarterly provisions for income taxes, the Company uses the annual estimated effective tax rate applied to the actual year-to-date income, adjusted for discrete items arising in that quarter. The Company’s annual estimated effective tax rate differs from the United States (“U.S.”) federal statutory rate of 21% primarily as a result of non-deductible officer compensation, stock-based compensation shortfalls, foreign taxes, and changes in the Company’s valuation allowance for income taxes.

For the quarters ended March 31, 2025 and 2024, the Company recorded income tax expense of $4.7 million and $0.9 million, respectively. The increase in income tax expense for the quarter ended March 31, 2025, compared to the quarter ended March 31, 2024, resulted primarily from stock-based compensation shortfalls for the quarter ended March 31, 2025, along with changes in valuation allowance and changes in the mix of profitable foreign jurisdictions.

Note 12 –Net Income per Share

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share amounts):

The Company computes basic earnings per share attributable to BlackLine, Inc. using the weighted average number of common shares outstanding. The Company computes diluted earnings per share attributable to BlackLine, Inc. using the weighted average number of common shares outstanding plus the effect of potentially dilutive shares, which is based on the weighted-average shares of common stock underlying stock options and unvested stock awards using the treasury stock method, and the effect of the convertible senior notes using the if-converted method. For the quarter ended March 31, 2025, diluted earnings per share attributable to BlackLine, Inc. excludes the impact of the 2029 Notes as their inclusion would have been antidilutive.

The weighted average impact of potentially dilutive securities that were excluded from the diluted per share calculations because they were anti-dilutive were as follows (in thousands):

The denominator for diluted net income per share attributable to BlackLine, Inc. does not include any effect from the Capped Calls as this effect would be anti-dilutive. In the event of conversion of the Notes, shares delivered to the Company under the Capped Calls would offset the dilutive effect of the shares that the Company would issue under the Notes. Refer to “Note 8 - Convertible Senior Notes” for additional information on the Notes and the related Capped Calls.

Note 13 –Commitments and Contingencies

Litigation—From time to time, the Company may become subject to legal proceedings, claims, and litigation arising in the ordinary course of business. The Company is not currently a party to any legal proceedings, nor is it aware of any pending or threatened litigation that would have a material adverse effect on the Company’s business, operating results, cash flows, or financial condition should such litigation be resolved unfavorably.

Indemnification—In the ordinary course of business, the Company may provide indemnification of varying scope and terms to customers, vendors, investors, directors, and officers with respect to certain matters, including, but not limited to, losses arising out of its breach of such agreements, services to be provided by the Company, or from intellectual property infringement claims made by third parties. These indemnification provisions may survive termination of the underlying agreement and the maximum potential amount of future payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is indeterminable. The Company has never paid a material claim, nor has it been sued in connection with these indemnification arrangements. At March 31, 2025 and December 31, 2024, the Company has not accrued a liability for these indemnification arrangements because the likelihood of incurring a payment obligation, if any, in connection with these indemnification arrangements was not probable or reasonably estimable.

Note 14 –Unearned Revenue and Performance Obligations

Revenue totaling $138.4 million and $129.6 million was recognized during the quarters ended March 31, 2025 and 2024, respectively, that was previously included in the deferred revenue balance at December 31, 2024 and 2023, respectively.

Contracted but unrecognized revenue was $913.2 million at March 31, 2025, of which the Company expects to recognize approximately 56% over the next 12 months and the remainder thereafter.

Note 15 –Subsequent Events

On April 2, 2025, the Compensation Committee of the Board of Directors of BlackLine, Inc. approved restricted stock unit grants totaling 1.7 million shares. Each restricted stock unit entitles the recipient to receiveone share of common stock upon vesting of the award. The majority of the restricted stock units will vest as to one-fourth of the total number of units awarded on the first anniversary of February 20, 2025 and quarterly thereafter for 12 consecutive quarters.

On April 2, 2025, the Compensation Committee approved grants of performance and service-based restricted stock units totaling 0.2 million target shares. Once specified performance metrics are met, each performance stock unit entitles the recipient to receive one share of common stock upon vesting of the award. The performance and service-based restricted stock units will vest as to one-third of the total number of units awarded equally over the next three years. Grant dates will be established upon approval of the performance metrics for the respective years of the performance period, and the grant-date fair value per share will be equal to the closing price on the grant date for each tranche.

On April 2, 2025, the Compensation Committee approved grants of market and service-based restricted stock units totaling 0.2 million target shares. The awards are tied to relative total shareholder return measured over athree-year performance period with vesting occurring in February of the year following the end of the performance period. Grant dates were established upon award approval, and the grant-date fair value per share was estimated using the Monte Carlo valuation simulation model that incorporates various assumptions, including stock price volatility, risk-free interest rate, and the performance of our stock price relative to the applicable peer group.