Blackline Inc.
11/06/2026 | Press release | Distributed by Public on 11/06/2026 15:08
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with the financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission (the "SEC") on February 26, 2026 ("Annual Report on Form 10-K"). This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those discussed in the section entitled "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q.
Overview
BlackLine's Agentic Financial Operations Platform drives digital finance transformation by empowering organizations with accurate, efficient, and intelligent financial operations. Powered by Studio360 and using intelligence powered by Verity - a comprehensive suite of embedded, auditable artificial intelligence ("AI") capabilities - BlackLine unifies data, streamlines processes, and delivers real-time insights. Our platform is built on an architecture that separates the system processing transactions from the system that independently validates and controls them.
The platform is comprised of four primary functional layers that work as one:
•The Unified Financial Data Foundation: Aggregates and harmonizes transactional data from disparate enterprise resource planning ("ERP") and banking systems into a consolidated, extensible data model.
•The Auditable Trust and Governance Layer: Enforces configurable rules, permissions, and financial controls to ensure system and user actions remain traceable and compliant.
•The Event-Driven Orchestration Engine: Sequences and automates workflows in real time across systems, personnel, and AI agents.
•The Embedded Intelligence Layer (Verity AI): Integrates machine learning, generative AI, and agentic reasoning directly into financial workflows to assist with risk detection, proposing solutions, and automating decision-making under the direction and oversight of finance and accounting teams.
We are a holding company and conduct our operations through our wholly-owned subsidiary, BlackLine Systems, Inc.
At September 30, 2026, we had 4,316 customers, exclusive of on-premise software. Additionally, we continue to build strategic relationships with technology vendors, providers of large language models, professional services firms, business process outsourcers, and resellers.
Our cloud-based solutions, delivered through our Agentic Financial Operations Platform, span three primary areas: Financial Close and Consolidation, Intercompany, and Invoice-to-Cash. These solutions help organizations automate, standardize, and manage critical financial and accounting processes, including financial close and reporting, account reconciliations, financial consolidation, intercompany accounting and settlement, and accounts receivable management.
On September 18, 2026, we acquired NetNow Financial Inc. ("NetNow" and such acquisition, the "NetNow Acquisition"), a provider of AI-enabled business-to-business customer onboarding and credit risk management solutions, to expand our Invoice-to-Cash capabilities.
We derived approximately 95% of our revenue from subscriptions to our cloud-based software platform and approximately 5% from professional services for the nine months ended September 30, 2026. Our subscription contracts have initial non-cancellable terms of one year to three years with renewal options. The majority of new contracts in 2025 and during the nine months ended September 30, 2026 carried an initial non-cancellable term of three years. In 2025, we updated our pricing model to reflect the value of our solutions based on factors such as product mix, organization size, and volumetrics (e.g., number of transactions or entities). We typically invoice subscription fees annually in advance, which are initially recorded as deferred revenue and recognized ratably over the contract term. First-year subscription fees are generally payable within 30 days of contract execution, with subsequent fees due upon renewal.
Professional services consist primarily of implementation and consulting services. Our products are available for immediate use upon granting customer access. We typically assist customers with implementation and provide
consulting services to help them optimize the use of our solutions. We invoice customers for our consulting services on a time-and-materials basis and recognize that revenue as services are performed. A limited number of our customers are provided professional services for a fixed fee, for which we invoice in advance. The fee is initially recorded as deferred revenue and recognized on a proportional-performance basis as the services are rendered.
We sell our solutions primarily through our direct sales force, which leverages our relationships with technology vendors, professional services firms, and business process outsourcers. Our solutions integrate with SAP's ERP systems, and SAP resells our product as SAP SolEx, for which we receive a percentage of the related revenues. We also maintain a strategic agreement with Google Cloud through which we jointly engage in selling and go-to-market activities to bring enhanced automation capabilities to customers.
Our ability to maximize the lifetime value of our customer relationships depends, in part, on the willingness of customers to purchase additional licenses and products from us. Our sales and customer success teams focus on maintaining high satisfaction and educating customers on the value and use of our full product portfolio to support account expansion.
The length of our sales cycle depends on the size of a potential customer and contract, as well as the type of solution or product being purchased. Sales cycles for global enterprise customers are generally longer than those for mid-size customers, and cycle duration increases for larger or more strategic products, such as our Intercompany solutions. As we focus on increasing average contract size and expanding adoption of strategic products, we have seen and expect the sales cycle to lengthen and remain less predictable which may contribute to variability in period-to-period results.
We have historically signed a high percentage of agreements with new customers, as well as renewal agreements with existing customers, in the fourth quarter of each year and usually during the last month of the quarter. Because a significant number of contracts have renewal terms of one year, agreements entered into late in the year typically renew during the same period in subsequent years. While this seasonality is reflected in our billings and bookings, the impact on overall revenue is minimal due to our ratable revenue recognition model.
For the quarters ended September 30, 2026 and 2025, we had revenues totaling $193.4 million and $178.3 million, respectively. We generated net income attributable to BlackLine, Inc. of $10.6 million and $5.3 million for the quarters ended September 30, 2026 and 2025, respectively.
For the nine months ended September 30, 2026 and 2025, we had revenues totaling $564.4 million and $517.2 million, respectively. We generated net income attributable to BlackLine, Inc. of $35.2 million and $19.6 million for the nine months ended September 30, 2026 and 2025, respectively.
Global Macroeconomic Factors
Our operating results may vary due to the impact of industry or global economic conditions on us or our customers. General macroeconomic conditions, such as political conflicts, recession, inflation or rising interest rates, an economic downturn in the United States ("U.S.") or internationally, adverse business conditions and liquidity concerns, have and could continue to adversely affect demand for our products and make it difficult to accurately forecast and plan our future business activities. As a result of economic uncertainty, and protracted vendor selection processes associated with our customers' analysis of our, and others' AI offerings, we may see customers delay and defer purchasing decisions, which could adversely impact our near-term demand.
Key Metrics
We regularly review a number of metrics, including the following key metrics, to evaluate our business and performance, identify trends affecting our business, formulate financial projections, and make strategic decisions.
| Sep. 30, 2025 | Dec. 31, 2025 | Mar. 31, 2026 | Jun. 30, 2026 | Sep. 30, 2026 | ||||||||||||||||||||||||||||
| Dollar-based net revenue retention rate | 103 | % | 105 | % | 105 | % | 102 | % | 103 | % | ||||||||||||||||||||||
| Platform pricing ARR as a percentage of eligible ARR | N/A | 11 | % | 13 | % | 17 | % | 23 | % | |||||||||||||||||||||||
| Number of customers | 4,424 | 4,394 | 4,301 | 4,260 | 4,316 | |||||||||||||||||||||||||||
Dollar-based net revenue retention rate. We believe that dollar-based net revenue retention rate is an important metric to measure the long-term value of customer agreements and our ability to retain and grow our relationships with existing customers over time. We calculate dollar-based net revenue retention rate as the implied monthly subscription and support revenue at the end of a period for the base set of customers from which we generated subscription revenue in the year prior to the calculation, divided by the implied monthly subscription and
support revenue one year prior to the date of calculation for that same customer base. This calculation does not reflect implied monthly subscription and support revenue for new customers added during the one-year period but does include the effect of customers who terminated during the period. We define implied monthly subscription and support revenue as the total amount of minimum subscription and support revenue contractually committed to, under each of our customer agreements over the entire term of the agreement, divided by the number of months in the term of the agreement. At September 30, 2026, our dollar-based net revenue retention rate increased from the quarter ended June 30, 2026, primarily due to reductions in churn and attrition. Our ability to maximize the lifetime value of our customer relationships will depend, in part, on the willingness of the customer to purchase additional products from us. We rely on our customer success and sales teams to support and grow our existing customers by maintaining high customer satisfaction and educating the customer on the value our products provide.
Platform pricing ARR as a percentage of eligible ARR. Platform pricing ARR as a percentage of eligible ARR is calculated as platform annual recurring revenue ("ARR") divided by our eligible ARR. We define eligible ARR as total ARR, excluding revenue from SAP SolEx and the public sector. Management believes that this metric is useful for tracking the progress of the new pricing strategy launched in 2025.
Number of customers. We believe that our ability to expand our customer base is an indicator of our market penetration and the growth of our business. We define a customer as a company that contributes to our subscription and support revenue as of the measurement date. In situations where an organization has multiple subsidiaries or divisions, each entity that is invoiced as a separate entity is treated as a separate customer. However, where an existing customer requests its invoice be divided for the sole purpose of restructuring its internal billing arrangement without any incremental increase in revenue, such customer continues to be treated as a single customer. For the quarters and nine months ended September 30, 2026 and 2025, no single customer accounted for more than 10% of our total revenues.
The total number of customers at September 30, 2026 declined marginally compared to September 30, 2025, primarily due to our strategic prioritization of enterprise and mega-enterprise customers, partially offset by the customers acquired in the NetNow Acquisition.
Non-GAAP Financial Measures
In addition to our results determined in accordance with U.S. generally accepted accounting principles ("GAAP"), we believe the non-GAAP measures below are useful to us and our investors in evaluating our business. These non-GAAP financial measures are useful because they provide consistency and comparability with our past performance, facilitate period-to-period comparisons of operations and facilitate comparisons with other peer companies, many of which use similar non-GAAP financial measures to supplement their GAAP results.
| Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| GAAP gross profit | $ | 146,487 | $ | 133,901 | $ | 428,315 | $ | 389,311 | |||||||||||||||
| GAAP gross margin | 75.7 | % | 75.1 | % | 75.9 | % | 75.3 | % | |||||||||||||||
| GAAP operating income | $ | 16,723 | $ | 7,609 | $ | 33,948 | $ | 18,729 | |||||||||||||||
| GAAP operating margin | 8.6 | % | 4.3 | % | 6.0 | % | 3.6 | % | |||||||||||||||
| GAAP net income attributable to BlackLine, Inc. | $ | 10,622 | $ | 5,285 | $ | 35,229 | $ | 19,632 | |||||||||||||||
| Diluted net income per share attributable to BlackLine, Inc. | $ | 0.18 | $ | 0.09 | $ | 0.57 | $ | 0.31 | |||||||||||||||
| Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Non-GAAP gross profit | $ | 154,139 | $ | 141,526 | $ | 452,036 | $ | 411,505 | |||||||||||||||
| Non-GAAP gross margin | 79.7 | % | 79.4 | % | 80.1 | % | 79.6 | % | |||||||||||||||
| Non-GAAP operating income | $ | 50,093 | $ | 38,135 | $ | 133,509 | $ | 111,095 | |||||||||||||||
| Non-GAAP operating margin | 25.9 | % | 21.4 | % | 23.7 | % | 21.5 | % | |||||||||||||||
| Non-GAAP net income attributable to BlackLine, Inc. | $ | 44,725 | $ | 37,590 | $ | 127,240 | $ | 111,816 | |||||||||||||||
| Diluted non-GAAP net income per share attributable to BlackLine, Inc. | $ | 0.64 | $ | 0.51 | $ | 1.81 | $ | 1.51 | |||||||||||||||
Non-GAAP Gross Profit and Non-GAAP Gross Margin. Non-GAAP gross profit is defined as GAAP revenues less GAAP cost of revenue adjusted for amortization of acquired developed technology, stock-based compensation, and transaction-related costs (including, but not limited to, accounting, legal, and advisory fees related to the transaction, as well as transaction-related retention bonuses). Non-GAAP gross margin is defined as non-GAAP gross profit divided by GAAP revenues. We believe that presenting non-GAAP gross profit and non-GAAP gross margin is useful to investors as it eliminates the impact of certain non-cash expenses and allows a direct comparison of gross profit between periods.
Non-GAAP Income from Operations and Non-GAAP Operating Margin. Non-GAAP income from operations is defined as GAAP income from operations adjusted for amortization of intangible assets, stock-based compensation, change in fair value of contingent consideration, transaction-related costs, restructuring costs, and legal settlement gains or costs. Non-GAAP operating margin is defined as non-GAAP income from operations divided by GAAP revenues. We believe that presenting non-GAAP income from operations and non-GAAP operating margin is useful to investors as it eliminates the impact of items that have been impacted by our acquisitions and other related costs in order to allow a direct comparison of income from operations between all periods presented.
Non-GAAP Net Income Attributable to BlackLine and Diluted Non-GAAP Net Income Per Share Attributable to BlackLine, Inc. Non-GAAP net income attributable to BlackLine is defined as GAAP net income attributable to BlackLine adjusted for the income tax effects of acquisitions, stock-based compensation shortfalls and windfalls, and the discrete tax impact of other non-GAAP adjustments, amortization of intangible assets, stock-based compensation, amortization of debt issuance costs from our 1.00% Convertible Senior Notes due in 2029 (the "2029 Notes") and 0.00% Convertible Senior Notes, which matured and were paid off in 2026 (the "2026 Notes" and, together with the 2029 Notes, the "Notes" or "convertible senior notes"), change in fair value of contingent consideration, transaction-related costs, restructuring costs, legal settlement gains or costs, adjustment to the redeemable non-controlling interest to the redemption amount, and gain on extinguishment of convertible senior notes. Diluted non-GAAP net income per share attributable to BlackLine, Inc. includes the adjustment for shares resulting from the elimination of stock-based compensation. We believe that presenting non-GAAP net income attributable to BlackLine is useful to investors as it eliminates the impact of items that have been impacted by our acquisitions and other related costs to allow a direct comparison of net income between all periods presented.
Reconciliation of Non-GAAP Financial Measures
The following table presents a reconciliation of gross profit, gross margin, operating income, operating margin, and net income, the most comparable GAAP measures, to non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income, non-GAAP operating margin, and non-GAAP net income:
| Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Non-GAAP Gross Profit: | |||||||||||||||||||||||
| Gross profit | $ | 146,487 | $ | 133,901 | $ | 428,315 | $ | 389,311 | |||||||||||||||
| Amortization of acquired developed technology | 3,615 | 3,243 | 10,678 | 9,623 | |||||||||||||||||||
| Stock-based compensation | 4,037 | 4,382 | 13,043 | 12,563 | |||||||||||||||||||
| Transaction-related costs | - | - | - | 8 | |||||||||||||||||||
| Total non-GAAP gross profit | $ | 154,139 | $ | 141,526 | $ | 452,036 | $ | 411,505 | |||||||||||||||
| Gross margin | 75.7 | % | 75.1 | % | 75.9 | % | 75.3 | % | |||||||||||||||
| Non-GAAP gross margin | 79.7 | % | 79.4 | % | 80.1 | % | 79.6 | % | |||||||||||||||
| Non-GAAP Operating Income: | |||||||||||||||||||||||
| Operating income | $ | 16,723 | $ | 7,609 | $ | 33,948 | $ | 18,729 | |||||||||||||||
| Amortization of intangible assets | 3,847 | 3,505 | 11,431 | 10,623 | |||||||||||||||||||
|
Stock-based compensation
|
22,838 | 24,353 | 76,189 | 69,343 | |||||||||||||||||||
| Transaction-related costs | 1,251 | - | 4,174 | 3,138 | |||||||||||||||||||
| Restructuring and legal settlement costs | 5,434 | 2,668 | 7,767 | 9,262 | |||||||||||||||||||
| Total non-GAAP operating income | $ | 50,093 | $ | 38,135 | $ | 133,509 | $ | 111,095 | |||||||||||||||
| GAAP operating margin | 8.6 | % | 4.3 | % | 6.0 | % | 3.6 | % | |||||||||||||||
| Non-GAAP operating margin | 25.9 | % | 21.4 | % | 23.7 | % | 21.5 | % | |||||||||||||||
| Non-GAAP Net Income Attributable to BlackLine, Inc.: | |||||||||||||||||||||||
| Net income attributable to BlackLine, Inc. | $ | 10,622 | $ | 5,285 | $ | 35,229 | $ | 19,632 | |||||||||||||||
| Provision for (benefit from) income taxes | 427 | (632) | 3,477 | (1,298) | |||||||||||||||||||
| Amortization of intangible assets | 3,847 | 3,505 | 11,431 | 10,623 | |||||||||||||||||||
| Stock-based compensation | 22,838 | 24,231 | 76,189 | 68,986 | |||||||||||||||||||
| Amortization of debt issuance costs | 650 | 856 | 2,096 | 2,535 | |||||||||||||||||||
| Transaction-related costs | 1,251 | - | 4,174 | 3,138 | |||||||||||||||||||
| Restructuring and legal settlement costs | 5,434 | 2,668 | 7,767 | 9,262 | |||||||||||||||||||
| Adjustment to redeemable non-controlling interest | (344) | 1,677 | (13,123) | (1,062) | |||||||||||||||||||
| Total non-GAAP net income attributable to BlackLine, Inc. | $ | 44,725 | $ | 37,590 | $ | 127,240 | $ | 111,816 | |||||||||||||||
Results of Operations
The following table sets forth our statements of operations information for each of the periods indicated:
| Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Subscription and support | $ | 183,127 | $ | 168,210 | $ | 534,697 | $ | 489,699 | |||||||||||||||
| Professional services | 10,269 | 10,080 | 29,676 | 27,547 | |||||||||||||||||||
| Total revenues | 193,396 | 178,290 | 564,373 | 517,246 | |||||||||||||||||||
| Cost of revenues | |||||||||||||||||||||||
| Subscription and support | 38,900 | 37,130 | 112,845 | 106,449 | |||||||||||||||||||
| Professional services | 8,009 | 7,259 | 23,213 | 21,486 | |||||||||||||||||||
| Total cost of revenues | 46,909 | 44,389 | 136,058 | 127,935 | |||||||||||||||||||
| Gross profit | 146,487 | 133,901 | 428,315 | 389,311 | |||||||||||||||||||
| Operating expenses | |||||||||||||||||||||||
| Sales and marketing | 64,888 | 67,493 | 200,798 | 195,268 | |||||||||||||||||||
| Research and development | 30,566 | 27,331 | 92,420 | 81,020 | |||||||||||||||||||
| General and administrative | 29,315 | 29,201 | 93,344 | 85,684 | |||||||||||||||||||
| Restructuring costs | 4,995 | 2,267 | 7,805 | 8,610 | |||||||||||||||||||
| Total operating expenses | 129,764 | 126,292 | 394,367 | 370,582 | |||||||||||||||||||
| Income from operations | 16,723 | 7,609 | 33,948 | 18,729 | |||||||||||||||||||
| Other income (expense) | |||||||||||||||||||||||
| Interest income | 4,160 | 8,200 | 14,356 | 25,647 | |||||||||||||||||||
| Interest expense | (2,377) | (2,545) | (7,231) | (7,600) | |||||||||||||||||||
| Other income, net | 1,783 | 5,655 | 7,125 | 18,047 | |||||||||||||||||||
| Income before income taxes | 18,506 | 13,264 | 41,073 | 36,776 | |||||||||||||||||||
| Provision for income taxes | 7,310 | 4,653 | 16,718 | 15,500 | |||||||||||||||||||
| Net income | 11,196 | 8,611 | 24,355 | 21,276 | |||||||||||||||||||
| Net income attributable to redeemable non-controlling interest | 918 | 1,649 | 2,249 | 2,706 | |||||||||||||||||||
| Adjustment attributable to redeemable non-controlling interest | (344) | 1,677 | (13,123) | (1,062) | |||||||||||||||||||
| Net income attributable to BlackLine, Inc. | $ | 10,622 | $ | 5,285 | $ | 35,229 | $ | 19,632 | |||||||||||||||
Comparison of Quarters and Nine Months Ended September 30, 2026 and 2025
Revenues
| Quarter Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Subscription and support | $ | 183,127 | $ | 168,210 | $ | 14,917 | 9 | % | $ | 534,697 | $ | 489,699 | $ | 44,998 | 9 | % | |||||||||||||||||||||||||||||||
| Professional services | 10,269 | 10,080 | 189 | 2 | % | 29,676 | 27,547 | 2,129 | 8 | % | |||||||||||||||||||||||||||||||||||||
| Total revenues | $ | 193,396 | $ | 178,290 | $ | 15,106 | 8 | % | $ | 564,373 | $ | 517,246 | $ | 47,127 | 9 | % | |||||||||||||||||||||||||||||||
| September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Dollar-based net revenue retention rate | 103 | % | 103 | % | |||||||
| Platform pricing ARR as a percentage of eligible ARR | 23 | % | N/A | ||||||||
| Number of customers | 4,316 | 4,424 | |||||||||
The increase in revenues for the quarter and nine months ended September 30, 2026, compared to the quarter and nine months ended September 30, 2025, was primarily driven by revenue from product expansion from existing customers and bookings from new customers. The total number of customers at September 30, 2026 declined marginally compared to September 30, 2025, primarily due to our strategic prioritization of enterprise and mega-enterprise customers, partially offset by the customers acquired in the NetNow Acquisition.
Cost of revenues
| Quarter Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Subscription and support | $ | 38,900 | $ | 37,130 | $ | 1,770 | 5 | % | $ | 112,845 | $ | 106,449 | $ | 6,396 | 6 | % | |||||||||||||||||||||||||||||||
| Professional services | 8,009 | 7,259 | 750 | 10 | % | 23,213 | 21,486 | 1,727 | 8 | % | |||||||||||||||||||||||||||||||||||||
| Total cost of revenues | $ | 46,909 | $ | 44,389 | $ | 2,520 | 6 | % | $ | 136,058 | $ | 127,935 | $ | 8,123 | 6 | % | |||||||||||||||||||||||||||||||
| Gross margin | 75.7 | % | 75.1 | % | 75.9 | % | 75.3 | % | |||||||||||||||||||||||||||||||||||||||
The increase in total cost of revenues for the quarter ended September 30, 2026, compared to the quarter ended September 30, 2025, was primarily due to the following:
•$2.4 million increase in computer software expenses and our embedded product solutions due to higher cloud hosting costs that deliver our platform to customers;
•$0.6 million increase in amortization of developed technology due to net additions to software placed into service; and
•$0.3 million increase in amortization due to the addition of developed technology from the 2025 acquisition of WiseLayer ("WL"), net of certain assets becoming fully amortized in prior periods; partially offset by
•$0.8 million decrease in employee compensation and benefits.
The increase in total cost of revenues for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, was primarily due to the following:
•$8.4 million increase in computer software expenses and our embedded product solutions due to higher cloud hosting costs that deliver our platform to customers;
•$1.9 million increase in amortization of developed technology due to net additions to software placed into service; and
•$0.7 million increase in amortization due to the addition of developed technology from the 2025 acquisition of WL, net of certain assets becoming fully amortized in prior periods; partially offset by
•$2.6 million decrease in employee compensation and benefits; and
•$0.6 million decrease in professional fees.
Sales and marketing
| Quarter Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Sales and marketing | $ | 64,888 | $ | 67,493 | $ | (2,605) | (4 | %) | $ | 200,798 | $ | 195,268 | $ | 5,530 | 3 | % | |||||||||||||||||||||||||||||||
| Percentage of total revenues | 33.6 | % | 37.9 | % | 35.6 | % | 37.8 | % | |||||||||||||||||||||||||||||||||||||||
The decrease in sales and marketing expenses for the quarter ended September 30, 2026, compared to the quarter ended September 30, 2025, was primarily due to the following:
•$2.6 million decrease primarily due to a change in the timing of our annual user conference; partially offset by
•$0.7 million increase in employee compensation and benefits.
The increase in sales and marketing expenses for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, was primarily due to the following:
•$8.8 million increase in employee compensation and benefits; and
•$1.5 million increase in travel-related expenses from in-person customer engagements; partially offset by
•$3.1 million decrease primarily due to a change in the timing of our annual user conference, partially offset by an increase in digital advertising and regional events; and
•$1.3 million decrease in professional fees and partner referral fees.
Research and development
| Quarter Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Research and development, gross | $ | 37,909 | $ | 33,978 | $ | 3,931 | 12 | % | $ | 113,950 | $ | 100,357 | $ | 13,593 | 14 | % | |||||||||||||||||||||||||||||||
| Capitalized internally developed software costs | (7,343) | (6,647) | (696) | 10 | % | (21,530) | (19,337) | (2,193) | 11 | % | |||||||||||||||||||||||||||||||||||||
| Research and development, net | $ | 30,566 | $ | 27,331 | $ | 3,235 | 12 | % | $ | 92,420 | $ | 81,020 | $ | 11,400 | 14 | % | |||||||||||||||||||||||||||||||
| Percentage of total revenues | 15.8 | % | 15.3 | % | 16.4 | % | 15.7 | % | |||||||||||||||||||||||||||||||||||||||
The increase in research and development expenses for the quarter ended September 30, 2026, compared to the quarter ended September 30, 2025, was primarily due to the following:
•$3.1 million increase in employee compensation and benefits; and
•$1.1 million increase in computer software expenses due to higher spend on AI tools and data warehouse services supporting our development activities; partially offset by
•$0.7 million increase in capitalized software costs primarily due to the continued development of new solution offerings. Collectively, these increases resulted in a decrease in net expenses; and
•$0.4 million decrease in professional fees.
The increase in research and development expenses for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, was primarily due to the following:
•$11.1 million increase in employee compensation and benefits;
•$2.9 million increase in computer software expenses due to higher spend on data services and continued investment in AI and automation tools; and
•$0.4 million increase in travel-related expenses; partially offset by
•$2.2 million increase in capitalized software costs primarily due to the continued development of new solution offerings. Collectively, these increases resulted in a decrease in net expenses; and
•$1.2 million decrease in professional fees.
General and administrative
| Quarter Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| General and administrative | $ | 29,315 | $ | 29,201 | $ | 114 | - | % | $ | 93,344 | $ | 85,684 | $ | 7,660 | 9 | % | |||||||||||||||||||||||||||||||
| Percentage of total revenues | 15.2 | % | 16.4 | % | 16.5 | % | 16.6 | % | |||||||||||||||||||||||||||||||||||||||
The increase in general and administrative expenses for the quarter ended September 30, 2026, compared to the quarter ended September 30, 2025, was primarily due to the following:
•$1.6 million increase in advisory and legal-related expenses, including transaction-related costs for the NetNow Acquisition; and
•$0.7 million increase in professional fees; partially offset by
•$2.2 million decrease in employee compensation and benefits.
The increase in general and administrative expenses for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, was primarily due to the following:
•$4.1 million increase primarily due to lower net foreign currency gains, after the effect of our foreign currency forward contracts;
•$2.1 million increase in advisory and legal-related expenses, including transaction-related costs for the NetNow Acquisition; and
•$1.3 million increase in professional fees; partially offset by
•$0.4 million decrease in employee compensation and benefits.
Restructuring costs
| Quarter Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Restructuring costs | $ | 4,995 | $ | 2,267 | $ | 2,728 | 120 | % | $ | 7,805 | $ | 8,610 | $ | (805) | (9 | %) | |||||||||||||||||||||||||||||||
Restructuring costs increased during the quarter ended September 30, 2026, compared to the quarter ended September 30, 2025, primarily due to higher additional one-time termination benefits under the Fiscal 2026 restructuring program. The decrease in restructuring costs during the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025, was primarily due to lower additional one-time termination benefits under the Fiscal 2025 restructuring program.
Refer to "Note 10 - Restructuring Costs" in our unaudited condensed consolidated financial statements for additional information.
Interest income
| Quarter Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest income | $ | 4,160 | $ | 8,200 | $ | (4,040) | (49 | %) | $ | 14,356 | $ | 25,647 | $ | (11,291) | (44 | %) | |||||||||||||||||||||||||||||||
The decrease in interest income during the quarter and nine months ended September 30, 2026, compared to the quarter and nine months ended September 30, 2025, was primarily due to decreased average balances on our investments and cash balances, and to a lesser extent, a decrease in average interest rates on our investments and cash balances.
Interest expense
| Quarter Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Interest expense | $ | 2,377 | $ | 2,545 | $ | (168) | (7 | %) | $ | 7,231 | $ | 7,600 | $ | (369) | (5 | %) | |||||||||||||||||||||||||||||||
Interest expense for the quarter and nine months ended September 30, 2026, compared to the quarter and nine months ended September 30, 2025, decreased slightly due to the repayment of our 2026 Notes in March 2026. Refer to "Note 9 - Convertible Senior Notes" in our unaudited condensed consolidated financial statements for additional information.
Provision for income taxes
| Quarter Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | $ | % | 2026 | 2025 | $ | % | ||||||||||||||||||||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
| Provision for income taxes | $ | 7,310 | $ | 4,653 | $ | 2,657 | 57 | % | $ | 16,718 | $ | 15,500 | $ | 1,218 | 8 | % | |||||||||||||||||||||||||||||||
We are subject to federal and state income taxes in the U.S. and taxes in foreign jurisdictions. For the quarter ended September 30, 2026, our annual estimated effective tax rate differed from the 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 our valuation allowance for income taxes.
For the quarters ended September 30, 2026 and 2025, we recorded $7.3 million and $4.7 million in income tax expense, respectively. For the nine months ended September 30, 2026 and 2025, we recorded $16.7 million and $15.5 million in income tax expense, respectively. The increase in income tax expense for the quarter ended September 30, 2026, compared to the quarter ended September 30, 2025, resulted primarily from the 2025 release of valuation allowance with respect to the BlackLine K.K. deferred tax assets. The increase in income tax expense for the nine months ended September 30, 2026, compared to nine months ended September 30, 2025, resulted primarily from the 2025 release of valuation allowance with respect to BlackLine K.K. deferred tax assets, along with changes in the mix of profitable jurisdictions, partially offset by a one-time tax benefit associated with the base erosion and anti-abuse tax recognized in 2026.
Liquidity and Capital Resources
At September 30, 2026, our principal sources of liquidity were an aggregate of $531.9 million of cash and cash equivalents and marketable securities, which primarily consist of short-term, money market mutual funds, U.S. treasury securities, commercial paper, and corporate bonds.
We believe our existing cash and cash equivalents, investments in marketable securities, and cash from operations will be sufficient to meet our working capital needs, capital expenditures, financing obligations, and share repurchases for at least the next 12 months.
Contractual Obligations and Commitments
Convertible senior notes and capped calls
At September 30, 2026, we had $675.0 million aggregate principal amount of 2029 Notes outstanding. We plan to, and believe we are able to, make all expected interest payments on the 2029 Notes in the next 12 months.
In connection with the offering of the 2029 Notes, we entered into privately-negotiated capped call transactions (the "2029 Capped Calls") with certain counterparties covering, subject to anti-dilution adjustments, approximately 9.9 million shares of our common stock, and are generally expected to offset the potential economic dilution of our common stock upon any conversions of the 2029 Notes up to the initial cap price. The 2029 Capped Calls have an initial strike price of $68.47 per share subject to certain adjustments, which corresponds to the initial conversion price of the 2029 Notes and an initial cap price of $92.17 per share, subject to certain adjustments. At September 30, 2026, all of the 2029 Capped Calls remained outstanding.
Lease Liabilities
At September 30, 2026, we have obligations totaling $21.5 million related to existing property and equipment leases. As of September 30, 2026, we committed $25.0 million for a lease signed but not yet commenced. This lease is expected to commence within the next six months and has an initial non-cancellable term of ten years with an option to extend for an additional five years, which we are reasonably certain to exercise.
Purchase Obligations
Purchase obligations represent our most significant contractual obligations in the ordinary course of business for which we have not received the related goods or services, in whole or in part. At September 30, 2026, we had $143 million of contractual obligations, with approximately $63 million payable within 12 months, and have additional contractual obligations with other vendors that are individually immaterial and which we can readily settle given our liquidity position and capital resources.
Unrecognized Tax Liabilities
At September 30, 2026, while we have liabilities for unrecognized tax benefits of $23.9 million, due to their nature, there is a high degree of uncertainty regarding the timing of future cash outflows and other events that extinguish these liabilities.
Letters of Credit
Commitments under letters of credit at September 30, 2026 were scheduled to expire as follows (in thousands):
| Total | Less than 1 Year | 1-3 Years | 3-5 Years | Thereafter | |||||||||||||||||||||||||
| Letters of credit | $ | 1,010 | $ | 824 | $ | 186 | $ | - | $ | - | |||||||||||||||||||
Letters of credit are maintained pursuant to certain of our lease arrangements. The letters of credit remain in effect at varying levels through the terms of the related agreements.
Repurchase Program
Under our stock repurchase program, which authorizes the periodic repurchase of our common stock, the Board of Directors (the "Board") approved two $100 million increases, on March 13, 2026 and July 31, 2026, raising the total authorization from $400 million to $500 million, and subsequently to $600 million.
Repurchases may be made from time to time through open market repurchases or through privately-negotiated transactions subject to market conditions, applicable legal requirements and other relevant factors. Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of our shares under this authorization. The repurchase program does not obligate us to acquire any particular amount of our common stock, and it may be suspended at any time in our discretion. The timing and actual number of shares repurchased may depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities.
We repurchased and retired approximately 1.3 million shares of common stock for $39.1 million during the quarter ended September 30, 2026, and 3.7 million shares for $123.9 million during the nine months ended September 30, 2026. At September 30, 2026, $240.6 million remained available for repurchases under this program.
Future Capital Requirements
Our future capital requirements will depend on many factors, including our growth rate, strategic relationships and international operations, the timing and extent of spending to support research and development efforts, future merger and acquisition activities, repurchase or refinancing of our existing indebtedness, repurchases of our common stock, and the continuing market acceptance of our solutions. From time to time, we have required, and may in the future require or opportunistically raise, additional equity or debt financing. Sales of additional equity or equity-linked securities could result in dilution to our stockholders. If we raise funds by borrowing from third parties, the terms of those financing arrangements would require us to incur interest expense and may include negative covenants or other restrictions on our business that could impair our operating flexibility. We can provide no assurance that financing will be available at all or, if available, that we would be able to obtain financing on terms favorable to us. If we are unable to raise additional capital when needed, we would be required to curtail our operating activities and capital expenditures, and our business operating results and financial condition would be adversely affected.
Cash Flows
The following table sets forth a summary of our cash flows for the periods indicated:
| Nine Months Ended September 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| (in thousands) | |||||||||||
| Net cash provided by operating activities | $ | 158,365 | $ | 142,887 | |||||||
| Net cash provided by (used in) investing activities | $ | 27,674 | $ | (403,485) | |||||||
| Net cash used in financing activities | $ | (364,603) | $ | (205,912) | |||||||
Net Cash Provided By Operating Activities
Our cash flows provided by operating activities are primarily driven by net income, and cash generated from collections in accordance with our subscription-based revenue model wherein billings occur in advance of revenue recognition, adjusted for significant non-cash activity. Non-cash activity primarily includes depreciation and amortization, stock-based compensation, non-cash lease expense, amortization of debt issuance costs, accretion of purchase discounts on marketable securities, and deferred taxes.
For the nine months ended September 30, 2026, cash provided by operating activities was $158.4 million, resulting from net non-cash expenses of approximately $119.1 million and net income of $24.4 million, and net cash flows provided as a result of changes in operating assets and liabilities of $14.9 million. The $14.9 million of net cash flows provided as a result of changes in our operating assets and liabilities reflected primarily the following:
•$43.1 million decrease in accounts receivable primarily due to increased collections and lower billings;
•$4.9 million decrease in other assets primarily due to a net decrease in prepaid commissions;
•$3.6 million decrease in prepaid expenses and other current assets primarily due to the amortization of annual contracts renewed in the prior year and a reduction in prepaid subscription fees and partner referral fees; and
•$1.5 million increase in accrued expenses and other current liabilities primarily due to higher accrued vendor and professional fees, the timing of payroll, and accrued interest on our convertible senior notes, partially offset by lower accrued bonuses and commissions.
These increases in the changes to our operating assets and liabilities were partially offset by the following:
•$26.9 million decrease in deferred revenue primarily due to revenue recognized on subscription and support contracts exceeding billings during the period, including billings from new and expanded customer contracts;
•$5.7 million decrease in accounts payable due to timing of payments; and
•$5.7 million decrease in operating lease liabilities.
For the nine months ended September 30, 2025, cash provided by operating activities was $142.9 million, resulting from net non-cash expenses of approximately $109.0 million, net income of $21.3 million, and net cash flows provided as a result of changes in operating assets and liabilities of $12.6 million. The $12.6 million of net cash flows provided as a result of changes in our operating assets and liabilities reflected primarily the following:
•$24.1 million decrease in accounts receivable primarily due to increased collections;
•$4.4 million decrease in prepaid expenses and other current assets primarily due to timing of renewals for IT and insurance contracts, partially offset by timing of tax payments;
•$3.1 million increase in accrued expenses and other current liabilities due primarily to employee termination benefits and other exit costs related to the Fiscal 2025 restructuring programs in addition to other current liabilities, partially offset by a decrease in bonus accruals; and
•$1.2 million increase in accounts payable due to timing of payments.
These changes in our operating assets and liabilities were partially offset by the following:
•$14.3 million decrease in deferred revenue primarily due to lower billings and higher revenue recognition;
•$4.6 million decrease in operating lease liabilities; and
•$1.2 million increase in other assets due to net capitalization related to strategic projects and software upgrades.
Net Cash Provided By (Used In) Investing Activities
Our investing activities consist primarily of investments in, and maturities and sales of marketable securities, capitalized software development costs, business combinations, and capital expenditures for property and equipment.
For the nine months ended September 30, 2026, cash provided by investing activities was $27.7 million primarily as a result of the following:
•$73.8 million of proceeds from maturities and sales of marketable securities, net of purchases; partially offset by
•$22.0 million for capitalized software development costs;
•$17.5 million paid for the NetNow Acquisition, net of cash acquired; and
•$6.6 million in purchases of property and equipment.
For the nine months ended September 30, 2025, cash used in investing activities was $403.5 million primarily as a result of the following:
•$375.6 million of purchases of marketable securities, net of proceeds from maturities;
•$20.4 million for capitalized software development costs; and
•$7.5 million in purchases of property and equipment.
Net Cash Used In Financing Activities
For the nine months ended September 30, 2026, cash used in financing activities was $364.6 million primarily as a result of the following:
•$230.2 million for the repayment of the 2026 Notes with cash on hand;
•$123.1 million for repurchases of common stock;
•$14.2 million for acquisitions of common stock for tax withholding obligations; and
•$3.3 million for the purchase of additional shares of common stock in BlackLine K.K., resulting in a decrease in the redeemable non-controlling interest; partially offset by
•$4.1 million of proceeds from the employee stock purchase plan; and
•$1.9 million of proceeds from exercises of stock options.
For the nine months ended September 30, 2025, cash used in financing activities was $205.9 million primarily as a result of the following:
•$200.7 million for repurchases of common stock; and
•$14.9 million for acquisitions of common stock for tax withholding obligations; partially offset by
•$5.2 million of proceeds from exercises of stock options; and
•$4.6 million of proceeds from the employee stock purchase plan.
Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with GAAP, which requires us to make estimates and assumptions about future events that affect the amounts reported in our unaudited condensed consolidated financial statements and the accompanying notes included elsewhere in this Quarterly Report on Form 10-Q. During the quarter ended September 30, 2026, there were no significant changes to our critical estimates as detailed in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2025.
Recent Accounting Pronouncements
Refer to "Note 2 - Basis of Presentation, Significant Accounting Policies, and Recently-Issued Accounting Pronouncements" contained in the "Notes to Unaudited Condensed Consolidated Financial Statements" in Part I, Item 1 of this Quarterly Report on Form 10-Q for a full description of the recent accounting pronouncements, and our expectation of their impact, if any, on our results of operations and financial condition.
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