Blackline Inc.
02/26/2026 | Press release | Distributed by Public on 02/26/2026 05:06
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read together with the financial statements and the related notes set forth in Item 8, "Financial Statements and Supplementary Data." The following discussion also contains forward-looking statements, which are based upon current plans, expectations, and beliefs. These statements involve risks and uncertainties. See Part I, "Special Note Regarding Forward-Looking Statements" for a discussion of the forward-looking statements contained below and Part I, Item 1A, "Risk Factors" for a discussion of certain risks that could cause our actual results to differ materially from the results anticipated in such forward-looking statements.
This discussion and analysis deals with comparisons of material changes in the consolidated financial statements for fiscal 2025and fiscal 2024. For the comparison of fiscal 2024and fiscal 2023, see Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2024 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 21, 2025.
Overview
We provide a unified, scalable, and flexible platform tailored to the evolving needs of the Office of the CFO and deliver a purpose-built suite of applications that address critical processes, including record-to-report and invoice-to-cash. Our software and services provide critical technology and industry-leading practices that deliver accurate, efficient, and intelligent financial operations. We are a holding company and conduct our operations through our wholly-owned subsidiary, BlackLine Systems.
At December 31, 2025, we had 4,394 customers, exclusive of on-premise software. Additionally, we continue to build strategic relationships with technology vendors, professional services firms, business process outsourcers, and resellers.
Our cloud-based solutions, delivered by our BlackLine Studio360 Platform, include Account Reconciliations, Transaction Matching, Task Management, Reporting & Analysis, Journal Entry, Journals Risk Analyser, Account Analysis, Consolidation, Compliance, Smart Close for SAP, Cash Application, Credit & Risk Management, Collections Management, Disputes & Deductions Management, Team & Task Management, AR Intelligence, Electronic Invoicing & Payments, Intercompany Create, Intercompany Balance & Resolve, and Intercompany Net & Settle.
In September 2025, we launched Verity, a comprehensive suite of AI capabilities that provides finance and accounting teams with a digital workforce of embedded and auditable AI. Verity is integrated throughout our solutions and supports a broad range of use cases across our customers' financial operations, offering flexible capabilities that help deliver best practices across end-to-end record-to-report and invoice-to-cash processes.
We derived approximately 95% of our revenue from subscriptions to our cloud-based software platform and approximately 5% from professional services for the year ended December 31, 2025. 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 2024 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 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 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 most contracts have annual terms, 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 years ended December 31, 2025, 2024, and 2023, we had revenues totaling $700.4 million, $653.3 million, and $590.0 million, respectively. We generated net income attributable to BlackLine, Inc. of $24.5 million, $161.2 million, and $52.8 million for the years ended December 31, 2025, 2024, and 2023, respectively.
Global Macroeconomic Factors
Our operating results may vary due to the impact of industry or global economic changes on us or our customers. General macroeconomic conditions, such as a recession, inflation or rising interest rates, an economic downturn in the 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, we have seen customers delay and defer purchasing decisions, which has adversely impacted our near-term demand.
WiseLayer Acquisition
On December 15, 2025, we acquired WL for total purchase consideration of $23.7 million, comprising $18.3 million in cash and $5.4 million in common stock issued at closing. The acquisition was driven by WL's unique value proposition in developing a digital workforce of AI-powered agents to automate complex, judgment-based finance and accounting processes. Transaction-related costs, which include, but are not limited to, accounting, legal, and advisory fees, totaled $1.2 million and were expensed as incurred during the year ended December 31, 2025.
We accounted for the transaction as a business combination using the acquisition method of accounting. The total purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition date. The purchase consideration allocation is preliminary as of the filing date of this Annual Report on Form 10-K for the year ended December 31, 2025.
Restructuring Costs
Fiscal 2025 Restructuring Programs
On March 4, 2025, we initiated a global restructuring program that was designed to reduce our workforce by approximately 130 total positions, or 7%. During September 2025 and December 2025, we approved additional workforce reductions of 25 and 75 positions, respectively, including the planned closure of selected facilities (the "Fiscal 2025 restructuring programs"). All of the actions are part of our global restructuring program to align resources with strategic priorities and enhance operational efficiency through talent optimization.
Fiscal 2023 Restructuring Program
On August 23, 2023, we announced a restructuring plan that was designed to support our growth, scale, and profitability objectives. As part of the restructuring, we reduced our global workforce by approximately 166 total positions, or 9.0%. Restructuring costs related to the August 2023 restructuring consisted of one-time termination benefits. Refer to "Note 12 - Restructuring Costs" for additional information.
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.
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Dollar-based net revenue retention rate | 105 | % | 102 | % | 106 | % | |||||||||||
| Platform pricing ARR as a percentage of eligible ARR | 11 | % | - | - | |||||||||||||
| Number of customers | 4,394 | 4,443 | 4,398 | ||||||||||||||
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 December 31, 2025, our dollar-based net revenue retention rate increased from the year ended December 31, 2024 due to the impact of favorable foreign exchange rates and account expansion with existing customers, particularly those adopting our platform pricing model. Our ability to maximize the lifetime value of our customer relationships will depend, in part, on the willingness of the customer to purchase additional licenses and 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 divided by our eligible annual recurring revenue. We define eligible ARR as total annual recurring revenue, 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 years ended December 31, 2025, 2024, and 2023, no single customer accounted for more than 10% of our total revenues.
Users. Effective during the quarter ended December 31, 2025, we ceased using "users" as a key metric following the introduction of an updated pricing model that is based on other factors, including product mix, customer size, and volumetrics, such as transactions or entities.
Key Components of our Results of Operations
Revenues
Subscription and support.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 2024 had an initial non-cancellable term of three years. Fees are based on a number of factors, including the solutions subscribed to by the customer. The first year of subscription fees are typically payable within 30 days after execution of a contract, and thereafter upon renewal. We initially record the subscription fees as deferred revenue and recognize revenue ratably over the term of the contract. At any time during the subscription period, customers may add products. Additional fees are payable for the remainder of the initial or renewed contract term. Customers may only reduce their subscription to products upon renewal of their arrangement. Revenues from subscriptions to our cloud-based software platform composed approximately 95% of our revenues for the year ended December 31, 2025.
Subscription and support revenues also include revenues associated with sales of on-premise software licenses and related support, but we no longer develop any new applications or functionality for our legacy on-premise software, and anticipate that this component of our revenues will continue to decline relative to total revenue.
Professional services.We offer our customers implementation and consulting services. With the exception of our intercompany accounting solutions acquired from the FourQ Acquisition, our product offerings are available for immediate use on our platform after granting access to a new customer. We typically help customers implement our solutions, and we also provide consulting and training services to help customers optimize the use of our products. These services are considered distinct performance obligations. Professional services do not result in significant customization of the subscription service. We apply the practical expedient to recognize professional services revenue when we have the right to invoice based on time and materials incurred. A limited number of our customers are provided professional services for a fixed fee, which is initially recorded as deferred revenue and recognized on a proportional-performance basis as the services are rendered. Professional services revenues composed approximately 5% of our revenues for the year ended December 31, 2025.
For a description of our revenue accounting policies, see "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates."
Cost of Revenues
Subscription and support cost of revenues.Subscription and support cost of revenues primarily consist of amortization of acquired developed technology costs, salaries, benefits, and stock-based compensation associated with our hosting operations and support personnel, amortization of capitalized internal-use software costs, cloud hosting costs, and data center costs related to hosting our cloud-based software. We also allocate a portion of overhead to subscription and support cost of revenues.
Professional services costs of revenues.Costs associated with providing professional services primarily consist of salaries, benefits and stock-based compensation associated with our implementation personnel. These costs are expensed as incurred when the services are performed. We also allocate a portion of overhead to professional services cost of revenues.
Operating Expenses
Sales and marketing.Sales and marketing expenses consist primarily of compensation and employee benefits, including stock-based compensation of sales and marketing personnel and related sales support teams, sales and partner commissions, marketing events, advertising costs, computer software-related costs, travel, trade shows, other marketing materials, transaction-related costs, and allocated overhead. Sales and marketing expenses also include amortization of customer relationship intangible assets and impairment of cloud computing implementation costs. We defer sales and partner commissions and amortize them over an estimated period of benefit of five years. We expect a decrease in sales and marketing expenses as a percentage of revenue in 2026 as we continue to rationalize our sales initiatives and improve productivity.
Research and development.Research and development expenses are comprised primarily of salaries, benefits and stock-based compensation associated with our engineering, product and quality assurance personnel, and transaction-related costs. Research and development expenses also include third-party contractors and supplies, computer software-related costs and allocated overhead. Other than software development costs that qualify for capitalization, as discussed above, research and development costs are expensed as incurred. We expect a modest increase in research and development as a percentage of revenue in 2026 as we further invest in strategic initiatives, including AI, to accelerate our growth.
General and administrative.General and administrative expenses consist primarily of personnel costs associated with our executive, finance, legal, human resources, compliance, and other administrative personnel, as well as accounting and legal professional fees, other corporate-related expenses and allocated overhead. General and administrative expenses also include amortization of trade name intangible assets, the change in the fair value of contingent consideration, if any, transaction-related costs, and impairment of cloud computing implementation costs. Excluding the impact of foreign exchange, we expect general and administrative costs to remain consistent in 2026.
Restructuring costs. Restructuring costs consist of one-time termination benefits. Refer to "Note 12 - Restructuring Costs" for additional information.
Interest income. Interest income primarily consists of earnings on our cash and cash equivalents and our marketable securities.
Interest expense. Interest expense consists primarily of interest expense associated with our 2026 and 2029 Notes.
Provision for (benefit from) income taxes. We are subject to federal and state income taxes in the U.S. and taxes in foreign jurisdictions. We use the liability method of accounting for income taxes. Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities, using tax rates expected to be in effect during the years in which the bases differences are expected to reverse.
We record a valuation allowance against our deferred tax assets to the extent that realization of the deferred tax assets, including consideration of our deferred tax liabilities, is not more likely than not. During the year ended December 31, 2025, we determined that the BlackLine K.K. valuation allowance was no longer required. This determination was based on an evaluation of positive and negative factors, including, but not limited to, our achievement of adjusted pre-tax income resulting in a three-year cumulative income position and our projections of future pre-tax income. We have also recorded a valuation allowance against certain other foreign deferred tax assets. Refer to "Results of Operations-Provision for (benefit from) income taxes" for additional information.
Non-GAAP Financial Measures
In addition to our results determined in accordance with 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.
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands, except percentages) | |||||||||||
| GAAP gross profit | $ | 527,042 | $ | 491,371 | |||||||
| GAAP gross margin | 75.2 | % | 75.2 | % | |||||||
| GAAP operating income | $ | 25,552 | $ | 18,536 | |||||||
| GAAP operating margin | 3.6 | % | 2.8 | % | |||||||
| GAAP net income attributable to BlackLine, Inc. | $ | 24,518 | $ | 161,174 | |||||||
| Diluted net income per share attributable to BlackLine, Inc. | $ | 0.39 | $ | 1.45 | |||||||
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands, except percentages) | |||||||||||
| Non-GAAP gross profit | $ | 557,187 | $ | 518,239 | |||||||
| Non-GAAP gross margin | 79.5 | % | 79.3 | % | |||||||
| Non-GAAP operating income | $ | 156,279 | $ | 126,807 | |||||||
| Non-GAAP operating margin | 22.3 | % | 19.4 | % | |||||||
| Non-GAAP net income attributable to BlackLine, Inc. | $ | 157,035 | $ | 162,067 | |||||||
| Diluted non-GAAP net income per share attributable to BlackLine, Inc. | $ | 2.13 | $ | 2.18 | |||||||
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 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 0.00% Convertible Senior Notes due in 2026 (the "2026 Notes") and 1.00% Convertible Senior Notes due in 2029 (the "2029 Notes" and, together with the 2026 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:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands, except percentages) | |||||||||||
| Non-GAAP Gross Profit: | |||||||||||
| Gross profit | $ | 527,042 | $ | 491,371 | |||||||
| Amortization of acquired developed technology | 12,905 | 13,370 | |||||||||
|
Stock-based compensation
|
17,232 | 13,347 | |||||||||
| Transaction-related costs | 8 | 151 | |||||||||
| Total non-GAAP gross profit | $ | 557,187 | $ | 518,239 | |||||||
| Gross margin | 75.2 | % | 75.2 | % | |||||||
| Non-GAAP gross margin | 79.5 | % | 79.3 | % | |||||||
| Non-GAAP Operating Income: | |||||||||||
| Operating income | $ | 25,552 | $ | 18,536 | |||||||
| Amortization of intangible assets | 14,168 | 19,886 | |||||||||
|
Stock-based compensation
|
96,325 | 86,097 | |||||||||
| Transaction-related costs | 4,780 | 568 | |||||||||
| Restructuring and legal settlement costs | 15,454 | 1,720 | |||||||||
| Total non-GAAP operating income | $ | 156,279 | $ | 126,807 | |||||||
| GAAP operating margin | 3.6 | % | 2.8 | % | |||||||
| Non-GAAP operating margin | 22.3 | % | 19.4 | % | |||||||
| Non-GAAP Net Income Attributable to BlackLine, Inc.: | |||||||||||
| Net income attributable to BlackLine, Inc. | $ | 24,518 | $ | 161,174 | |||||||
| Benefit from income taxes | (782) | (50,948) | |||||||||
| Amortization of intangible assets | 14,168 | 19,886 | |||||||||
|
Stock-based compensation
|
95,850 | 85,654 | |||||||||
| Amortization of debt issuance costs | 3,394 | 4,486 | |||||||||
| Transaction-related costs | 4,780 | 568 | |||||||||
| Restructuring and legal settlement costs | 15,454 | 1,720 | |||||||||
| Adjustment to redeemable non-controlling interest | (347) | 4,639 | |||||||||
| Gain on extinguishment of convertible senior notes | - | (65,112) | |||||||||
| Total non-GAAP net income attributable to BlackLine, Inc. | $ | 157,035 | $ | 162,067 | |||||||
Results of Operations
The following tables set forth selected historical consolidated statements of operations data, which should be read in conjunction with Critical Accounting Estimates, Liquidity and Capital Resources, and Contractual Obligations and Commitments included in this Item 7, as well as Quantitative and Qualitative Disclosures About Market Risk and the Consolidated Financial Statements and Notes thereto included elsewhere in this Annual Report on Form 10-K.
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Revenues | |||||||||||
| Subscription and support | $ | 662,928 | $ | 619,287 | |||||||
| Professional services | 37,499 | 34,049 | |||||||||
| Total revenues | 700,427 | 653,336 | |||||||||
| Cost of revenues | |||||||||||
| Subscription and support | 144,038 | 135,308 | |||||||||
| Professional services | 29,347 | 26,657 | |||||||||
| Total cost of revenues | 173,385 | 161,965 | |||||||||
| Gross profit | 527,042 | 491,371 | |||||||||
| Operating expenses | |||||||||||
| Sales and marketing | 258,930 | 248,347 | |||||||||
| Research and development | 109,202 | 100,973 | |||||||||
| General and administrative | 118,732 | 121,795 | |||||||||
| Restructuring costs | 14,626 | 1,720 | |||||||||
| Total operating expenses | 501,490 | 472,835 | |||||||||
| Income from operations | 25,552 | 18,536 | |||||||||
| Other income (expense) | |||||||||||
| Interest income | 32,825 | 49,808 | |||||||||
| Interest expense | (10,149) | (8,758) | |||||||||
| Gain on extinguishment of convertible senior notes | - | 65,112 | |||||||||
| Other income, net | 22,676 | 106,162 | |||||||||
| Income before income taxes | 48,228 | 124,698 | |||||||||
| Provision for (benefit from) income taxes | 20,971 | (43,067) | |||||||||
| Net income | 27,257 | 167,765 | |||||||||
| Net income attributable to redeemable non-controlling interest | 3,086 | 1,952 | |||||||||
| Adjustment attributable to redeemable non-controlling interest | (347) | 4,639 | |||||||||
| Net income attributable to BlackLine, Inc. | $ | 24,518 | $ | 161,174 | |||||||
Revenues
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Subscription and support | $ | 662,928 | $ | 619,287 | $ | 43,641 | 7 | % | |||||||||||||||
| Professional services | 37,499 | 34,049 | 3,450 | 10 | % | ||||||||||||||||||
| Total revenues | $ | 700,427 | $ | 653,336 | $ | 47,091 | 7 | % | |||||||||||||||
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Dollar-based net revenue retention rate | 105 | % | 102 | % | |||||||
|
Platform pricing ARR as a percentage of eligible ARR
|
11 | % | - | ||||||||
| Number of customers | 4,394 | 4,443 | |||||||||
The increase in revenues for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily driven by revenue from product expansion from existing customers and bookings from new customers. The total number of customers at December 31, 2025 remained relatively flat as compared to December 31, 2024.
Cost of revenues
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Subscription and support | $ | 144,038 | $ | 135,308 | $ | 8,730 | 6 | % | |||||||||||||||
| Professional services | 29,347 | 26,657 | 2,690 | 10 | % | ||||||||||||||||||
| Total cost of revenues | $ | 173,385 | $ | 161,965 | $ | 11,420 | 7 | % | |||||||||||||||
| Gross margin | 75.2 | % | 75.2 | % | |||||||||||||||||||
The increase in total cost of revenues for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to the following:
•$6.6 million increase in computer software expenses due to upgrades to support business growth and penetration in the public sector and overseas markets;
•$3.8 million increase in amortization of developed technology due to net additions to software placed into service;
•$1.5 million increase in professional fees; and
•$1.5 million increase in employee compensation and benefits; partially offset by
•$2.2 million decrease in depreciation and amortization due to certain assets becoming fully amortized in prior periods and an overall operational shift from traditional data centers to a cloud environment.
Sales and marketing
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Sales and marketing | $ | 258,930 | $ | 248,347 | $ | 10,583 | 4 | % | |||||||||||||||
| Percentage of total revenues | 37.0 | % | 38.0 | % | |||||||||||||||||||
The increase in sales and marketing expenses for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to the following:
•$13.7 million increase in employee compensation and benefits;
•$1.1 million increase in computer software expenses to support internal automation and scalability initiatives; and
•$1.0 million increase in digital marketing expenses, partially offset by streamlined marketing efforts; partially offset by
•$5.3 million decrease in depreciation and amortization due to certain assets becoming fully amortized in prior periods.
Research and development
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Research and development, gross | $ | 134,977 | $ | 126,643 | $ | 8,334 | 7 | % | |||||||||||||||
| Capitalized internally-developed software costs | (25,775) | (25,670) | (105) | - | % | ||||||||||||||||||
| Research and development, net | $ | 109,202 | $ | 100,973 | $ | 8,229 | 8 | % | |||||||||||||||
| Percentage of total revenues | 15.6 | % | 15.5 | % | |||||||||||||||||||
The increase in research and development expenses for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to the following:
•$8.0 million increase in employee compensation and benefits, partially offset by a decrease in average compensation per employee due to an increase in offshore headcount; and
•$1.2 million increase in computer software expenses due to higher spend on cloud hosting services, as well as upgrades to support business growth; partially offset by
•$1.9 million decrease in professional fees.
We remain committed to innovation and investing in AI to enhance our platform and business.
General and administrative
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| General and administrative | $ | 118,732 | $ | 121,795 | $ | (3,063) | (3 | %) | |||||||||||||||
| Percentage of total revenues | 17.0 | % | 18.6 | % | |||||||||||||||||||
The decrease in general and administrative expenses for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to the following:
•$8.2 million decrease primarily due to a favorable change in foreign currency, net of the impact of foreign currency forward contracts; and
•$0.5 million decrease in employee compensation and benefits; partially offset by
•$5.1 million increase in advisory and legal-related expenses; and
•$0.7 million increase in computer software expenses due to higher spend to enhance automation and support scalability of our operations.
Restructuring costs
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Restructuring costs | $ | 14,626 | $ | 1,720 | $ | 12,906 | N/M | ||||||||||||||||
Restructuring costs of $14.6 million were incurred during the year ended December 31, 2025, primarily related to one-time termination benefits under the Fiscal 2025 restructuring programs, while restructuring costs of $1.7 million were incurred during the year ended December 31, 2024 related to one-time termination benefits under the Fiscal 2023 restructuring program. Refer to "Note 12 - Restructuring Costs" for additional information.
Interest income
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Interest income | $ | 32,825 | $ | 49,808 | $ | (16,983) | (34 | %) | |||||||||||||||
The decrease in interest income during the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to decreased average balances on our investments, as well as a decrease in average interest rates on our investments and cash balances.
Interest expense
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Interest expense | $ | 10,149 | $ | 8,758 | $ | 1,391 | 16 | % | |||||||||||||||
The increase in interest expense during the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to the cash interest expense and amortization of debt issuance costs related to our 2029 Notes issued in May 2024, partially offset by a decrease in interest expense from the partial repurchase of our 2026 Notes and the repayment of our 2024 Notes in August 2024. Refer to "Note 11 - Convertible Senior
Notes" for additional information. We do not expect interest expense to fluctuate significantly over the next 12 months as the interest rates on our Notes are fixed.
Gain on extinguishment of convertible senior notes
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Gain on extinguishment of convertible senior notes | $ | - | $ | 65,112 | $ | (65,112) | (100 | %) | |||||||||||||||
The gain on extinguishment of convertible senior notes during the year ended December 31, 2024 resulted from the partial repurchase of our 2026 Notes in May 2024. Refer to "Note 11 - Convertible Senior Notes" for additional information.
Provision for (benefit from) income taxes
| Year Ended December 31, | Change | ||||||||||||||||||||||
| 2025 | 2024 | $ | % | ||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Provision for (benefit from) income taxes | $ | 20,971 | $ | (43,067) | $ | 64,038 | (149 | %) | |||||||||||||||
For the year ended December 31, 2025, 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, changes in the mix of profitable foreign jurisdictions, and changes in our valuation allowance for income taxes. For the years ended December 31, 2025 and 2024, we recorded $21.0 million in income tax expense and $43.1 million in income tax benefit, respectively. The increase in income taxes for the year ended December 31, 2025, compared to the year ended December 31, 2024, resulted primarily from the 2024 release of the $89.1 million U.S. valuation allowance, as compared with the 2025 release of $2.3 million of the BlackLine K.K. valuation allowance, increases in non-deductible officer compensation and stock-based compensation shortfalls, and changes in the mix of profitable foreign jurisdictions.
On July 4, 2025, the legislation formally titled "An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14" and commonly referred to as the "One Big Beautiful Bill" ("OBBB") was enacted. The OBBB adjusted a number of provisions affecting businesses, including the immediate expensing of domestic research and development costs, limitations on deductions for interest expense, and accelerated fixed asset depreciation. The OBBB provisions did not have a material impact on our effective tax rate; however, several timing provisions results in significant 2025 cash savings.
Liquidity and Capital Resources
At December 31, 2025, our principal sources of liquidity were an aggregate of $778.2 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
We had $905.2 million aggregate principal amount of Notes outstanding at December 31, 2025, of which $230.2 million is due in March 2026. We plan to, and believe we are able to, make all expected principal and interest payments 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" and together with the 2026 Capped Calls (as defined below), the "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 December 31, 2025, all of the 2029 Capped Calls remained outstanding.
In connection with the offering of the 2026 Notes, we entered into privately-negotiated capped call transactions (the "2026 Capped Calls") with certain counterparties covering, subject to anti-dilution adjustments, approximately 6.9 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 2026 Notes up to the initial cap price. The 2026 Capped Calls have an initial strike price of $166.23 per share subject to certain adjustments, which corresponds to the initial conversion price of the 2026 Notes and an initial cap price of $233.31 per share, subject to certain adjustments. At December 31, 2025, all of the 2026 Capped Calls remained outstanding.
Lease Liabilities
At December 31, 2025, we have obligations totaling $24.3 million related to existing property and equipment leases.
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 December 31, 2025, we have $176 million of contractual obligations, with approximately $60 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 December 31, 2025, while we have liabilities for unrecognized tax benefits of $22.0 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.
OBBB
The OBBB provisions did not have a material impact on our effective tax rate, but several timing provisions resulted in significant 2025 cash tax savings. Refer to "Note 14 - "Income Taxes" for additional information.
Letters of Credit
Commitments under letters of credit at December 31, 2025 were scheduled to expire as follows (in thousands):
| Total | Less than 1 Year | 1-3 Years | 3-5 Years | Thereafter | |||||||||||||||||||||||||
| Letters of credit | $ | 354 | $ | - | $ | 354 | $ | - | $ | - | |||||||||||||||||||
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
On November 17, 2024, our Board authorized the repurchase of up to $200 million of our common stock. On September 4, 2025, our Board approved an increase to our stock buyback program of an additional $200 million, for a total overall authorization to repurchase up to $400 million of our common stock. Our Board also approved the elimination of the expiration date of the program, which was previously set to expire on March 31, 2027.
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. We may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its 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 4.5 million shares of common stock for $235.5 million during the year ended December 31, 2025. At December 31, 2025, $164.5 million of buyback capacity remained under this program.
Off-Balance Sheet Arrangements
As part of our ongoing business, we do not have any relationships with other entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities that have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We are therefore not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in those types of relationships.
In the ordinary course of business, we 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 our breach of such agreements, services to be provided by us, 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 we could be required to make under these indemnification provisions may not be subject to maximum loss clauses. The maximum potential amount of future payments we could be required to make under these indemnification provisions is indeterminable. We have never paid a material claim, nor have we been sued in connection with these indemnification arrangements. At December 31, 2025, we have not accrued a liability for these indemnification arrangements because the likelihood of incurring a payment obligation, if any, in connection with these indemnification arrangements is not probable or reasonably estimable.
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:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Net cash provided by operating activities | $ | 169,567 | $ | 190,836 | |||||||
| Net cash provided by (used in) investing activities | $ | (425,289) | $ | 924,440 | |||||||
| Net cash used in financing activities | $ | (240,113) | $ | (500,145) | |||||||
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 premiums on marketable securities, and deferred taxes.
For the year ended December 31, 2025, cash provided by operating activities was $169.6 million, resulting from net non-cash expenses of $152.5 million and net income of $27.3 million, partially offset by net cash outflow from changes in our operating assets and liabilities of $10.2 million. The $10.2 million net cash outflow from changes in our operating assets and liabilities reflected primarily the following:
•$38.2 million increase in accounts receivable primarily due to billings outpacing cash collections from customers;
•$5.9 million decrease in operating lease liabilities; and
•$3.7 million increase in other assets primarily due to net increase in prepaid commissions and capitalization related to strategic IT projects and software upgrades.
These changes in our operating assets and liabilities were partially offset by the following:
•$29.2 million increase in deferred revenue primarily due to the higher bookings in 2025 coupled with timing of billings for subscription and support;
•$5.3 million increase in accounts payable due to timing of payments; and
•$3.2 million increase in accrued expenses and other current liabilities. This was primarily driven by costs for employee termination benefits and other exit activities related to our Fiscal 2025 restructuring programs and increased accrued commissions, partially offset by decreased bonus accruals.
For the year ended December 31, 2024, cash provided by operating activities was $190.8 million, resulting from net income of $167.8 million, net cash flow provided by changes in our operating assets and liabilities of $16.8 million, and net non-cash expenses of $6.3 million. The $16.8 million net cash flow provided by changes in our operating assets and liabilities reflected primarily the following:
•$19.0 million increase in deferred revenue was primarily driven by customer and user growth, and timing of collections for subscription and support;
•$7.1 million increase in accrued expenses and other current liabilities primarily due to annual bonus accruals, cloud-based data storage services, and timing of foreign tax payments;
•$2.7 million net decrease in prepaid expenses and other current assets primarily due to a decrease in accrued interest and amortization of prepaid balances, partially offset by the timing of tax payments and prepaid cloud-based data storage costs to support our suite of solutions; and
•$2.5 million decrease in other assets due to a net decrease in prepaid commissions, partially offset by cloud computing costs.
These changes in our operating assets and liabilities were partially offset by the following:
•$7.6 million increase in accounts receivable primarily due to increased sales, partially offset by customer payments;
•$6.0 million decrease in operating lease liabilities; and
•$1.1 million decrease in accounts payable due to timing of payments.
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 acquisitions, and capital expenditures for property and equipment.
For the year ended December 31, 2025, cash used in investing activities was $425.3 million, primarily as a result of the following:
•$374.4 million of purchases of marketable securities, net of proceeds from maturities and sales;
•$26.6 million for capitalized software development costs;
•$16.2 million paid for the WL Acquisition, net of cash acquired; and
•$8.1 million in purchases of property and equipment.
For the year ended December 31, 2024, cash provided by investing activities was $924.4 million, primarily as a result of the following:
•$951.3 million of proceeds from maturities and sales, net of purchases of marketable securities; partially offset by
•$24.7 million for capitalized software development costs; and
•$2.1 million in purchases of property and equipment.
Net Cash Used In Financing Activities
For the year ended December 31, 2025, cash used in financing activities was $240.1 million, primarily as a result of the following:
•$235.5 million for repurchases of common stock; and
•$16.9 million for acquisitions of common stock for tax withholding obligations; partially offset by
•$7.2 million of proceeds from the employee stock purchase plan; and
•$5.2 million of proceeds from exercises of stock options.
For the year ended December 31, 2024, cash used in financing activities was $500.1 million, primarily as a result of the following:
•$848.5 million for the partial repurchase of the 2026 Notes;
•$250.0 million for the repayment of the 2024 Notes with cash on hand;
•$59.7 million for the purchase of the associated Capped Calls for the 2029 Notes; and
•$17.5 million for acquisitions of common stock for tax withholding obligations; partially offset by
•$662.0 million of proceeds, net of debt issuance costs, from the issuance of the 2029 Notes;
•$7.6 million of proceeds from exercises of stock options; and
•$7.0 million of proceeds from the employee stock purchase plan.
Backlog
We enter into both single and multi-year subscription contracts for our solutions. The timing of our invoices to the customer is a negotiated term and thus varies among our subscription contracts. For multi-year agreements, it is common to invoice an initial amount at contract signing followed by subsequent annual invoices. Backlog represents remaining revenue to be recognized under a non-cancelable contract with customers. At December 31, 2025 and 2024, we had backlog of approximately $1.1 billion and $879.4 million, respectively. We expect backlog will change from period to period for several reasons, including the timing and duration of customer agreements, varying billing cycles of subscription agreements, and the timing and duration of customer renewals. Because revenue for any period is a function of revenue recognized from deferred revenue under contracts in existence at the beginning of the period, as well as contract renewals and new customer contracts during the period, backlog at the beginning of any period is not necessarily indicative of future revenue performance. We do not utilize backlog as a key management metric internally.
Critical Accounting Estimates
Our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K are prepared in accordance with GAAP. 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. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
We believe that the following critical accounting policies and estimates involve a greater degree of judgment or complexity than our other accounting policies and estimates, and are essential to a full understanding and evaluation of our consolidated financial condition and results of operations. Refer to "Note 2 - Basis of Presentation, Significant Accounting Policies, and Recently-Issued Accounting Pronouncements" of the accompanying notes to our consolidated financial statements for additional information.
Deferred Customer Acquisition Costs
We recognize an asset for the incremental and recoverable costs of obtaining a contract with a customer if we expect the benefit of those costs to be one year or longer. We have determined that certain sales incentive programs to our employees ("deferred customer contract acquisition costs") and our partners ("partner referral fees") meet the requirements to be capitalized. Deferred customer acquisition costs related to new revenue contracts and upsells are deferred and then amortized on a straight-line basis over the expected period of benefit that we have determined to be five years, based upon both the product turnover rate and estimated customer life, which involves some level of judgment in terms of the inherent assumptions used. Partner referral fees are deferred and then amortized on a straight-line basis over a period ranging from one year to five years. Deferred customer acquisition costs and partner referral fees are included within other assets in the consolidated balance sheets. There were no impairment losses in relation to the costs capitalized for the periods presented.
Capitalized Software Costs
We account for the costs of computer software obtained or developed for internal use in accordance with Accounting Standards Codification 350, Intangibles-Goodwill and Other. We capitalize certain implementation costs incurred in a hosting arrangement that is a service contract. These capitalized costs exclude training costs,
project management costs, and data migration costs. We capitalize certain costs in the development of our SaaS subscription solutions when (i) the preliminary project stage is completed, (ii) management has authorized further funding for the completion of the project, and (iii) it is probable that the project will be completed and performed as intended. These capitalized costs include estimated personnel and related expenses for employees as well as costs of third-party contractors who are directly associated with and who devote time to internal-use software projects and, when material, interest costs incurred during the development. Capitalization of these costs ceases once the project is substantially complete and the software is ready for its intended purpose. Costs incurred for significant upgrades and enhancements to our SaaS software solutions are also capitalized. Costs incurred for post-configuration training, maintenance and minor modifications or enhancements are expensed as incurred. Capitalized software development costs are amortized on a straight-line basis over an estimated useful life of three years.
Business Combinations
The results of businesses acquired in business combinations are included in our consolidated financial statements from the date of the acquisition. Purchase accounting results in assets and liabilities of an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill.
We perform valuations of assets acquired and liabilities assumed and allocate the purchase price to its respective assets and liabilities. Determining the fair value of assets acquired and liabilities assumed requires our management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue, costs and cash flows, discount rates, and selection of comparable companies. We engage the assistance of valuation specialists in concluding on fair value measurements in connection with determining fair values of assets acquired and liabilities assumed in business combinations.
Contingent consideration, if any, payable in cash arising from business combinations is recorded at fair value as a liability on the acquisition date and remeasured at each reporting date. Changes in fair value are recorded in general and administrative expenses in the consolidated statements of operations. Determining the fair value of the contingent consideration each period requires management to make assumptions and judgments. These estimates involve inherent uncertainties, and if different assumptions had been used, the fair value of contingent consideration could have been materially different from the amounts recorded. The significant inputs used in the fair value measurement of contingent consideration was the amount and timing of new and incremental combined bookings from FourQ and BlackLine, and revenues from a specified FourQ customer over a three-year period subsequent to the acquisition.
Significant changes in these estimates and the periods in which they are generated would significantly impact the fair value of the contingent consideration liability. At January 26, 2025, the financial performance milestones were not met, and we were no longer obligated to pay the contingent consideration of $73.2 million.
Transaction-related costs incurred by us are expensed as incurred and are included in general and administrative expenses in our consolidated statements of operations.
Recent Accounting Pronouncements
Refer to "Note 2 - Basis of Presentation, Significant Accounting Policies, and Recently-Issued Accounting Pronouncements" contained in the "Notes to Consolidated Financial Statements" in Part II, Item 8 of this Annual Report on Form 10-K 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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