Q1 2024 Blackline Inc Earnings Call

Participants

Matt Humphries; IR; Blackline, Inc.

Owen Ryan; Chairman and Co-CEO; Blackline, Inc.

Therese Tucker; Co-CEO and Founder; Blackline, Inc.

Mark Partin; CFO; Blackline, Inc.

Rob Oliver; Analyst; Robert W. Baird & Co., Inc.

Chris Quinteros; Analyst; Morgan Stanley

Pinjalim Bora; Analyst; JPMorgan Chase & Co.

Adam Hotchkiss; Analyst; Goldman Sachs Group, Inc.

Brent Bracelin; Analyst; Piper Sandler Companies

Koji Ikeda; Analyst; Bank of America Corp.

Steven Enders; Analyst; Citigroup, Inc.

Pat Walravens; Analyst; Citizens JMP Group, LLC

Alex Sklar; Analyst; Raymond James Financial, Inc.

Ryan Krieger; Analyst; Wolfe Research, LLC

Matt VanVliet; Analyst; BTIG, LLC

Presentation

Matt Humphries

Good afternoon and thank you for joining us today. With me on the call are Owen Ryan, and Therese Tucker, Co-Chief Executive Officer of BlackLine; as well as Mark Partin, Chief Financial Officer. Before we get started, I would like to note that certain statements made during this conference call that are not historical facts, including those regarding our future plans, objectives and expected performance. In particular, our guidance for Q2 and full year 2024 are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements represent our outlook only as of the date of this call. While we believe any forward-looking statements made during the call are reasonable, actual results could differ materially as these statements are based on our current expectations as of today and are subject to risks and uncertainties, including those stated in our periodic reports filed with the Securities and Exchange Commission, in particular, our Form 10-K and Form 10-Q. We do not undertake and expressly disclaim any obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. All comparisons we make on the call today relate to the corresponding period last year, unless otherwise noted.
Finally, unless otherwise stated, all financial measures disclosed on this call will be non-GAAP. A discussion of these non-GAAP financial measures and information regarding reconciliations of our historical GAAP versus non-GAAP results is currently available in our earnings release, which may be found on our Investor Relations website at investors dot blackline.com in our Form eight K filed with the SEC today. Now I will turn the call over to Owen Ryan, Co-Chief Executive Officer, Owen run.

Owen Ryan

Our Thank you, Matt, and good afternoon, everyone. Thank you all for joining us today. Blackline exceeded revenue and profitability expectations in the first quarter with $157 million in total revenue, a 17% non-GAAP operating margin and $40 million in non-GAAP net income. While we are still in the early stages of implementing our new operating model. We are pleased with the progress we are seeing. I will review this progress highlighting areas of early success and identifying those areas. It require a bit more time to achieve operational maturity.
Regarding execution, we are seeing an uptick in activity at the top end of our sales funnel. While the volume of deals is still lower than we want. This improvement in activity gives us some early indications of demand stabilization in the first quarter. Specifically, we encountered several instances where larger multi-solution deals pushed out as part of this, we still see customers and prospects maintaining their prudent and thoughtful purchasing behavior going forward. We expect to aggressively pursue these opportunities either directly or jointly with our partner.
Next efforts around elevating our market message and brand are progressing well. We are receiving positive feedback from both customers and partners, indicating that our message, particularly around artificial intelligence and our industry focused strategy is generating favorable interest on a I hope this was evident during our recent beyond the black event in London, our innovation in AI dominated discussions among attendees we believe that our innovation here, which Teresa will detail shortly, is beginning to stand as a meaningful differentiator with the opportunity to drive and accelerate even deeper accounting and finance automation for our customers. We are also seeing signs that our industry approach is resonating strongly with our customers, partners and prospects who see numerous opportunities to address their industry-specific challenges.
In fact, because our approach has garnered such positive reception, we are accelerating and broadening our deployment schedule. Our commitment to delivering on the black line promise remains steadfast with progress being made while external metrics, reflecting these efforts are still evolving. We see progress across our customer base, particularly in areas like adoption and engagement, but also with respect to customer experience with additional innovation being embedded within our solutions, along with a refined and streamlined approach to pricing, which we expect to move forward with later this year, we see opportunities to enhance the value and ROI that customers receive while simultaneously making it easier to do business with BlackLine.
Next, we are seeing notable progress in our distribution efforts as we transition towards a more partner powered model globally, we are experiencing more comprehensive engagement with our partners, especially within our solution pillars, for instance, with an invoice to cash partners are expressing interest in expanding their practices and collaborating with BlackLine, particularly in light of competitors' shifting strategies or unmet promises. Also, we are seeing a building interest among our partners with our electronic invoicing presentment and payment offering partners are also actively seeking out leaders in the AI space to align for mutual growth opportunities. We are confident that our focus on innovating for the office of the CFO will not only align with our collective objectives, but also stands to support our differentiation and market leadership on retention.
We are advancing various programmatic initiatives aimed at enhancing customer adoption and stickiness. These initiatives gained momentum late last year and have further accelerated with the implementation of our new operating model. As an example, we know that there are significant benefits from partner engagement at the start of a customer journey, including better adoption and elevated value delivery. As such, we have taken steps to more closely integrate our partners and customers at the outset of that process. While our first quarter retention rate fell slightly below expectations, we believe there is tangible progress being made.
Our key focus on customer adoption underscores its significance as one of my top priorities as testament to our commitment here, we recently appointed industry veteran, Jimmy Taiwan as our new Chief Customer Officer to spearhead these efforts and ensure that additional focus scrutiny and partner engagement remain paramount across our company.
Turning to deal activity in the first quarter, while our net customer additions are not where we would like mostly due to changes to our lower middle market targeting. We were pleased to see that many of our new logos were influenced are driven by partners, including SAP and one example. We signed a federally owned electric utility company that was burdened by too many manual processes and an outdated ERP through the combination of BlackLine, SAP and a key partner, we're able to offer a better way forward one that offered modern technology, robust automation and trusted partners to support their transformation journey. Notably, this is our second customer within the federal government.
Great in Europe, we signed a competitive multi-solution deal, again, leveraging our SolEx partnership with a global biotechnology company. As part of an ERP replacement, BlackLine was selected to standardize, automate and govern their critical finance and accounting processes serving as a key partner during a multiyear transformation as part of a phased approach, this deal provides us additional opportunities are their needs as they grow.
Also in Europe, we signed a net new deal with a leading chemical manufacturer as part of an ERP migration. Historically, the customer has leveraged Accel as their primary tool to support their accounting and finance processes. Which had become unsustainable and lack of proper global controls framework. Further, the customer understood that there were real benefits to both attracting and retaining talent by modernizing their financial technology landscape. In effect, alleviating many executive level concerns choosing to partner with BlackLine in invoice to cash, which remains a very topical set of solutions.
In today's interest rate environment, we saw some solid wins and customer expansions as well. Specifically, we expanded with an existing customer, a multinational food products company who saw such success with their initial purchase. They chose to expand even further and add our complete invoice to cash offer into additional geographies and business lines. We expect that over time, our relationship with this customer will continue to grow in the middle market, we saw a number of competitive replacements driven by an interest in a more modern approach to both their close and consolidation processes.
In one instance, a North American financial institutions sought to replace an incumbent vendor due to a poor experience with a lack of real transformation and the office of the CFO, BlackLine's close and consolidation solution for exactly what the customer's looking for and gave the customer the confidence to partner with a trusted leader. With that, I will turn it over to Therese to discuss how we are continuing to drive and deliver meaningful innovation for our customers.

Therese Tucker

Three Q oh one. As the demands and challenges within the office of the CFO continue to evolve, there is a critical need for innovative solutions that deliver tangible results and drive business outcomes. We firmly believe that artificial intelligence will be pivotal in meeting these needs and will rapidly become integral to modern finance and accounting operations as leaders in the market who are committed to providing an AI-driven platform for the office of the CFO, we are moving swiftly to fulfill our promises and execute on our strategy. This entails not only integrating AI into our platform, but also introducing new AI powered solutions to better serve our customers. It brings to light, I want to outline how we are doing this today and what we plan to release over the coming quarters to support our customers and greatly enhanced the value that they receive from BlackLine in our financial close pillar, we've recently introduced a new solution aimed at identifying and mitigating risks within the journal entry process.
Our journal Risk Analyzer utilizes generative AI to visually present accounting teams with key trends, insights and anomaly detection related to manual journal entries. This solution efficiently captures and assesses journal entries from various ERPs and sub ledger systems, providing dynamic actionable insights for customers proactively address potential areas of fraud and policy violations. Given the large volumes of data spread across our customers' technology landscape, generative AI. serves as an invaluable tool to empower informed decision making and minimize compliance and audit risks currently available to early adopters.
We anticipate making this solution generally available later this year or next within both our financial close and consolidation and financial analytics pillars we are launching BlackLine's document descriptions summarized are integrated seamlessly into our current solutions. This represents a productivity enhancement to our customers' workflows and processes. This feature streamlines repetitive tasks involved in account reconciliations and during consolidations by autonomously scanning, supporting documentation of any type and generating concise summaries of their contents. As a result, our customers can significantly cut down and preparation time for their clothes while strengthening their controls and potentially mitigating audit risk.
Furthermore, within our consolidation and financial analytics pillar, we're developing a comprehensive and cohesive suite of AI powered enhancements aimed at delivering even more value to our customers. Initially, we plan to unveil a financial statements summarized here and footnote generator capable of automatically summarizing financial statement data and providing key insights. This empowers customers to proactively analyze account behavior at a consolidated level and conduct comparisons across different time periods. Additionally, it will facilitate the creation of financial statements footnotes to annotate material items. Looking forward, we plan to introduce a variance automation feature in the latter half of the year. This feature will identify account fluctuations utilize these AI generated footnotes and offer automated explanations for accounting and finance teams to quickly identify and explain drivers of financial performance.
Lastly, within our invoice to cash pillar, we're gearing up to unveil an upgraded AI powered payment forecasting tool for our customers. The enhanced payment forecasting tool empowers customers to convert Accounts Receivable data into actionable insights, significantly enhancing collection forecast accuracy by up to 40% compared to our previous version. Further, we are also working to release a predictive guidance tool that features natural language processing to produce visual responses for our accounting and finance teams based on natural language queries. The ability to transform data into insights and drives business decisions is a powerful and real use case for modern technologies like AI. Undoubtedly, AI. stands as a powerful enabler, capable of accelerating automation and delivering additional efficiency within any organizational framework.
However, it's equally undeniable that apprehension often accompanies the unfamiliar, especially when it comes to integrating AI into core financial operations. Recognizing this, we are committed to a deliberate and responsible deployment of this technology. Our strategy aims not only to instill confidence but also fosters familiarity and most importantly, cultivate deeper trust with our customers. Through this, we seek to bridge the gap between technological advancement and human adoption, ensuring a balanced approach that aligns with our customers' willingness and ability you adopt AI.
Shifting to broader platform innovation, we're excited to announce the long-awaited release of the BlackLine accounting studio. This updated solution has been enhanced. We offer unparalleled visibility control and orchestration for finance and accounting processes that span disparate ERP and third party systems at its core. The BlackLine accounting studio is a user friendly solution that helps to visualize and orchestrate processes efficiently, ensuring that dependencies are captured and control and the processes move forward at the right time. And in the right order, one of its key strengths is its versatility and integrating with various systems, both with BlackLine and externally, leveraging our integration platform and extensive API library. This gives customers the unique ability to visualize and control their workflows across their entire financial technology landscape, something that doesn't exist in the market today.
With this solution, we can become the indispensable partner for the office of the CFO and one It supports customers through every stage of their transformation journey regardless of how their technology teams or strategy evolves. As Owen mentioned earlier, we are moving rapidly to deploy our focused go-to-market strategy to support this. From an innovation perspective, we have three initiatives in flight. First, we are building a community of users within industries to identify current challenges and opportunities that are unique. Second leveraging the configurable nature of our software. We are highlighting customer-specific use cases that can benefit others in the industry. Maximizing our software is utility and value. And third, we plan to deliver new solutions and enhancements that are high value to these industries. For example, we are developing a high frequency account reconciliation solution tailored specifically for the financial services and retail industries this targeted approach demonstrates our commitment to addressing the unique needs of these industries while also strengthening our broader go-to-market efforts.
And last but certainly not least, we recently announced that we hired a new Chief Technology Officer, Jeremy on who is charged with leading and supporting many of these efforts, Jeremy and I will partner closely to drive our innovation agenda faster and further than before. One of the benefits of hiring a like-minded leader is that I can spend more time on customer-centric innovation, helping customers progress on adopting and using technology like AI on exploring further use cases for the BlackLine accounting studio and on our industry-specific innovation.
Before I close, I would like to say that I am immensely proud of our team's achievements thus far, and I'm even more excited about the opportunities that we have ahead to reshape how accounting and finance work gets done. With that, I'd like to turn it over to Marc Partin, who will review our financial results and updated financial guidance. Mark?

Mark Partin

Thank you to read our financial results this quarter highlight our disciplined approach as we navigate both the current market environment as well as our ongoing business transition. Despite this, we expect to continue to invest into strategic parts of our business to support our long term growth drivers, especially innovation Further, we remain committed to aggressively pursuing opportunities to drive even higher levels of efficiency and productivity across the business.
With that in mind, let's review the financial results for the first quarter in a bit more detail. Total revenue grew to $157 million, up 13%, with subscription revenue growing 15%. Services revenue declined 7%, primarily due to progress on our partner-driven services delivery model. Calculated billings growth was 6% with trailing 12-month billings growth of 11%. As Owen mentioned, we experienced a number of larger deals slip this quarter, which was a driver of the lower than expected billings performance. Remaining performance obligations or RPO was up 7% with current RPO growing 10%. We closed the quarter with total annual recurring revenue or ARR of $605 million, up 10%. Net new customers increased by 13 in the quarter, bringing our total customer count to 4,411. As discussed previously, our strategy to become more targeted in the middle market is expected to influence this metric in the near term. Our revenue renewal rate in the first quarter was 93%. And we are still seeing recurring themes here, such as vendor consolidation and cost discipline from customers, especially within the enterprise net retention rate or NRR was 105% and in line with our expectations, driven primarily by modest account growth and user adds this quarter, strategic product performance represented 20% of sales and came in below our target range of 25% to 30%. This was influenced by large deal slippage this quarter as many of these were multi solution deals with strategic products attached, particularly intracompany partners were involved in 75% of large new and expansion deals this quarter with a higher mix of partner involvement in new deals, giving us some early but positive indications that our partner powered approach is gaining traction. Solex performance was below expectations, driven primarily by deal slippage. In Q1, SAP partnership revenue represented 26% of total revenue, a slight increase versus last year.
Turning to margin, our non-GAAP gross margin was 79%, with non-GAAP subscription gross margin of 82% benefiting from leverage on cloud spend this quarter. Non-gaap operating margin was 17% due to better than expected revenue performance, along with efficiency and productivity gains, especially within our product and technology teams who continued to drive agility across the organization. Non-gaap net income attributable to BlackLine was $40 million, representing a 25% non-GAAP net income margin. Operating income outperformance combined with favorable net interest income drove bottom line strength. Yet again, we generated $50 million in operating cash flow and $44 million in free cash flow in the quarter. For the free cash flow margin of 28%. Record cash collections this quarter was a key driver of our better than expected cash flow performance.
Finally, we ended the quarter with $1.2 billion in cash, cash equivalents and marketable securities. Our strong financial position affords us the ability to invest strategically while also addressing our near term convertible maturities on this point, we expect to retire our 2024 convertible notes in cash when they mature on August 1st of this year.
Now on guidance, I want to remind everyone that we continue to take a disciplined and thoughtful approach considering the recent rollout of our operating model, broader economic factors and our performance in the first quarter. As such, we are raising the midpoint of our full year revenue guidance while also raising our full year non-GAAP operating margin and non-GAAP net income ranges. Finally, we continue to expect that services revenue will be an approximate one point headwind to our full year revenue growth rate.
Now for the second quarter of 2024, we expect total GAAP revenue to be in the range of 157 to $159 million, representing approximately 9% to 10% growth. We expect non-GAAP operating margin to be in a range of 16.5% to 17.5%. And we expect non-GAAP net income attributable to BlackLine to be in a range of 37 to $39 million or 49 to $0.51. On a per-share basis, our share count is expected to be approximately 76 million diluted weighted average shares and for the full year 2020 for our updated guidance is as follows. We expect total GAAP revenue to be in a range of 641.5 to $649.5 million, representing 9% to 10% growth. We expect non-GAAP operating margin to be in a range of 17.5% to 18.5%, and we expect non-GAAP net income attributable to BlackLine to be in a range of 158 to $168 million or $2.12 to $2.26. On a per-share basis, our share count is expected to be approximately 74.5 million diluted weighted average shares. With that, I'll now ask the operator to open the discussion and take your questions.

Question and Answer Session

Operator

(Operator Instructions) Rob Oliver, Baird.

Rob Oliver

Yes, great. Hi. Thanks, guys. Thanks for taking my question on of mark. My first one for you on just your on the deal slippage in the quarter on it, can you talk a little bit about I mean, Q1's never traditionally the strongest quarter for you guys. So I was wondering if you could last but not least give us a little bit deeper insight into how much of this is just sort of general macro and confidence that deals are going to close versus, you know, incremental weakness and or less spending from some of your customers or less partner pull through, say, from SAP?

Owen Ryan

And then I had a job quick follow-up remainder of the year and staying focused on that. The fact that there are some that they're in the pipeline. We are actively working with our customers and our sales team on driving those deals. That's where we are now. So for for your question is that those deals continue to move through the pipeline today.

Matt Humphries

Great, thanks. I am not sure if it was me, I apologize. I missed the first part of your answer. Could have been me. And then Owen, just want to step back a little bit on Pito as we've anniversaried now your arrival and I wanted for and I wanted to just talk a little bit about some of your strategic initiatives. When you look at the kind of things that you laid out, whether it be go to market and revamping sales, you know, the SAP partnership and some of the work you're doing, the SIs and stuff. Where do you feel you've made the most progress and where we could see that manifest in activity as we move through this year versus where you still have more work to do. Thank you for.

Therese Tucker

Thanks, Rob. A couple of things. I think one is we feel like we made a tremendous amount of progress with our partners over the last year. As I think we've shared with you, we've rationalized the number that we have, the partners that we're working with our really all and I'll share a story from the Scripps. One of our partners who we have not done as much work within one of our strategic products has basically taken 50 of its offshore resources recently and redeployed them to working on the BlackLine solution versus a competitor that will take time for itself to work its way through the system.
But again, I think it's a good indication of our partners being really committed and focused to what we're trying to do. So I'd say that's probably been the area where I feel like we've made really the greatest amount of success so far. I think second would be the progress we continue to make with SAP. The relationship continues to grow in the marketplace. Around the product road map, the opportunities too, on a really improve our win rates together, which is which is just terrific. And then the last thing would be industry and Therese touched on it a little bit. Mark touched on it. We knew we had something in industry when we really started to dive in and look at our customer portfolio and recognize that we have a very compelling story.
And again, maybe I'm sorry, if you tell the stories, I'll give you another one. So you mail, you're sure you all know that most big firms of companies when they're going out for an RFP, they hire a third party to write the RFP for typically and in so not too long ago, three, cyber over overseas. And we were meeting with one of these consulting firms who was writing the RFP for a major major company, probably top top 50 global enterprise. And we spent probably an hour going through on the industry and helping these service providers are prepared to write the RFP and telling the story about how BlackLine helps its customers in this particular industry in a way that was, I think, eye-opening for a business consulting firm.
But I as I sit here today, I have a very high degree of confidence when the RFP comes out and the winner gets selected, whether it's in the fourth quarter of this year or the first two quarters of next year. So the way that we were able to articulate for this firm, how BlackLine could help a customer through all aspects of what it had a company needs to do. And it's that particular industry is going to be a differentiator. We're starting to speak that are speaking the language of our customers in their industry language, which is making a big difference for us, what we're trying to accomplish.

Rob Oliver

Really helpful. Appreciate the story. Thanks.

Operator

Chris Quinteros, Morgan Stanley.

Chris Quinteros

Hey, Ron, thanks for taking our questions here on a you mentioned you're taking a more streamlined approach to pricing that will go live later this year. Do I have that right? And if so, what changes are you making? And what do you expect the impact of these changes to be? And I've got a follow-up.

Owen Ryan

Yes, a couple of things. So we've completed most of the pricing study work at this particular point in time, we'll be rolling that out over the course of this year and as renewals come up over the succeeding years, I think a couple of things that that were important for us to sort of step back and think about it with our fuller platform of what we offer. Some of them are more certain user based Some are more usage-based and we had gotten feedback from our customers asking for us to make it that easier and simpler for us to go ahead and price and do work with them. So that's a lot of what we had been focused on trying to drive. And I think overall, we feel pretty good about the results of that work.
We've tested with several hundred customers and prospects to sort of validate what we were seeing and experiencing. And so we'll get that rolled out again very, very soon. Obviously change management with these things are important. And we're also doing in an environment where we still have to compete against the certain companies as we go up against them in the marketplace. But overall, we like the work that's been done. We feel good about the outcome and ultimately you do this so you can charge more for the product that you're delivering. And that's ultimately we expect to be able to do. I think we've learned a lot about how to articulate our value to our customers, and that's based upon the feedback from our customer. So we'll make sure we we get that done.

Chris Quinteros

Got it. That's that's very helpful. And it may from Mark, great to see the free cash flow margin of 28%. Is there anything one-time in nature impacting that number? And how should we think about free cash flow conversion for the rest of the year?

Mark Partin

Yes. I think the team did an excellent job in Q1, collecting AR. That was really a great effort from everyone as we move through the year, I think we'll see some free cash flow margin at or around our operating margin rate. So I don't expect our cash generation from AR to continue like that. So it'll be it will come down here for the remainder of the year.

Chris Quinteros

Excellent. Thank you so much.

Operator

Pinjalim Bora, JPMorgan.

Pinjalim Bora

Great. Thanks for taking the questions of J.D. Retail loan for pendulum on ARR came in a little bit of a little bit below expectations. You mentioned that there was large deals that got pushed out. Is there any way to quantify those deals? And in all of those, do you think there's a certain percentage that will close in Q2?

Therese Tucker

Yes. Thanks, Jean. You know, with yes, we will close some of those deals and already have in Q2? Yes, we'll continue to work them through the remainder of the year. It's not uncommon to have slipped deals from quarter to quarter. We saw more in Q1 around the large deals. And in some ways, I think in our earlier remarks, we talked about those related to be in macro as well as our ability to get our arms around them with our new operating model has strengthened as we move through the year on our new operating model. So quantifying that, I think would be difficult at the moment. So thanks.

Pinjalim Bora

Great. Thanks for the question.

Operator

Adam Hotchkiss, Goldman Sachs.

Adam Hotchkiss

Great. Thanks for taking the questions. And I guess to start, could you just give us an update on the product education aspect of your customer success efforts? I know this is something that's been a focus for you in the past and in particular around cross-sell opportunities and platform usage within your existing base. But I'm just curious how you think about that within the context of some of the things you're doing with AINAI. being such a focus for folks in the office of the CFO that allow you to get your foot in the door around continuing to educate customers and drive more usage of the platform?

Owen Ryan

Thanks, Adam. We have spent a lot of time in the last year, making sure that our entire organization is extremely customer-centric and focused on the value that BlackLine can actually deliver. As a result of that, we've done a number of different training programs that are really being extremely well received by our customers. They include a number of recurring webinars on new features to make sure that our customers know what the road map is entailing as well as some bottom line events that have been going on in person where we get both prospects and customers together. And there's a fair amount of education that happens during those. And then there's also the BlackLine Academy with its corresponding consulting events, where we actually will take a different accounting practices processes and help them transform them because when people really use BlackLine well, the result is digital finance transformation. And so these are hands-on workshops that our customers can attend to really get deep knowledge on how to use BlackLine to transform their organizations. So it has been a big push of ours over the last year, and it's been very well received by our customers.

Adam Hotchkiss

Okay, great. That's really helpful. Therese Thank you. And then within that context context, how are you broadly thinking about monetizing some of these AAI. investments, particularly as you think about seat or usage-based pricing within within the context of the productivity improvements that, hey, I might bring your customers, how your how you ensure that you're going to be extracting the value.

Therese Tucker

You think some of these investments have been more well, you know, one of the best things about including productivity enhancements is that the software becomes more sticky. People cannot imagine giving it up for something that's free. Okay. So I love the stickiness factor. And for me, that's worth more than sort of extracting another dollar out of somebody. And that's really for the places where we are embedding AI. You know, I think it was Rob Kugel, then China who said productivity by 1,000 cuts loved it right, just like everywhere where people are doing things manually where can you introduce AI to really make their jobs go faster and be more accurate?
So in the imbedding part, I think it just becomes part of the fabric of what we offer to our customers and makes them delighted in terms of new products, we're still sort of learning our way here. We just came out with the journals Risk Analyzer and that we've already got more than 20 early adopters signed up for that, and we're going to use them to help us determine what the value that they are receiving is and that will help us determine how to price it.

Adam Hotchkiss

Okay. That's really helpful color. Thanks, Therese.

Operator

Brent Bracelin, Piper Sandler.

Brent Bracelin

Thank you. Good afternoon, all. Mark, I wanted to start with you around the pipeline build today versus three months ago. I get there some deals that slipped not uncommon in Q1, but can you just characterize visibility in the pipeline and how much build you saw the last three months?

Owen Ryan

I can I think you Brent we've got them a handful of new great leaders in the company. One of them is run in marketing and has been instrumental in already beginning to accelerate our pipeline coming out of Q1 and into Q2. So what I would say about the pipeline is that in Q1, we talked about the top end of the funnel being strong, big deals, multi product having really good influence with partners. Our ability to close those deals in Q1 was challenged as we move into Q2, our ability to hold onto those nurture them and get them over the finish line is part of where we're spending a lot of time and then creating new accounts, new logos, new customers and expanding in to our customer base across the globe is a concerted effort now with Emily and the rest of the sales team. And that has actually picked up quite nicely heading here into the sort of middle to the end of Q2.

Brent Bracelin

Helpful color. And then maybe Therese for you. If I go back a couple of years ago, the pandemic clearly drove a higher spend priority around from these finance transformation projects. You know, obviously in the last year and a half, we've seen a priority go down as people focused on kind of the economic macro headwinds. We are now looking at as for Hana end of life and 2027. And I know SAP starting to get a little more excited about some migrations to the cloud. How do you think that could be the next catalyst that could drive maybe an increased priority around finance transformation. Just trying to think through that is that the tailwind you saw the pandemic, some of the headwinds you've been challenged with on the macro side and just thinking through maybe that is a potential catalyst or DOT for increasing priority around these finance transformation projects?

Therese Tucker

Well, you know, we do certainly see the potential that the SAP partnership could bring us, especially with the migrations to S4 Hana. But, you know, Brent, you break you raised a really interesting point, and it's one that we wrestle with as well. Companies, CFOs in particular, have been very focused on digital finance transformation. But at the same time, they've not always gotten sort of the results that they had hoped for. And it's really been one of our focuses is how can we actually deliver that kind of value in a way that makes people want to continue that journey with BlackLine and invest more. So I think that some part of it is how do we communicate better with our customers and with our prospects on how to have effective digital finance transformation as opposed to in our result that disappoints.
So we have been internally thinking about that a lot and that really driving a lot of the work that we're doing around case studies around the Academy around different trainings. You know, even the product road map itself is how do we deliver digital finance transformation in a way that's going to keep people engaged and keep them on that journey. So I think, you know, we're hoping for the macro to get better. You know, that's disappointing in and of itself. We certainly do appreciate the partnership with SAP. It always has great potential, especially as people move to S/4 Hana. And then I think there's work that we ourselves can do to better prove out the value proposition to our customers.

Brent Bracelin

Helpful color. Thanks for the update. Thank you.

Operator

Koji Ikeda, Bank of America.

Koji Ikeda

Yes. Hey, everyone. Thanks for taking the questions. I got two. So the first one big picture question on accounting studio Congrats on the long-awaited release there. I know that's quite a milestone. I'm sure the question is around is the platform such a meaningful change to what BlackLine has offered in the past and that it could require your partners and the buyers out there to really digest all the new innovation. And that I assume is packed into this new accounting studio before they're really ready to buy.

Owen Ryan

As you know, we've been working with partners as part of the process of getting a really cool product out there, Koji. And so I don't know that they're going to need a ton of time for digestion. I think with the accounting studio on one of our plans for it is that our partners. So our experts at process transformation will have the opportunity to embed their very specific intellectual property into a library of potential template.
Okay. Now in order to turn that on and actually utilize that of course, they would have to work with the partner. And so it's really the idea of the accounting studios to really give our partners a forum for bringing their expertise to a lot of customers very quickly now that that may take some planning and some work on their part to actually detail out the steps and the various API.'s necessary. But I think overall, we've been we've been keeping them informed as we go.

Koji Ikeda

Got it. Got it. And maybe another question for you, Therese or Owen on for Mark is really around how ready the end market is for generative AI. I've found over the years that your your end market and really kind of the accountants out there that I've spoken with, can be very loyal to their software vendors and but also can be very resistant to change at the same time. And it does sound like some of the demand can be pinned to how ready the end market is ready to adopt generative AI. So just curious on your thoughts on the overall. Yes, acceptance of generative AI out there. Thank you.

Therese Tucker

Boy, I am I am so familiar with our market and our buyers and they don't love change. That is 100% true. It's why we're taking the approach that we are with the embedding of different features that are just incredibly useful. And by the way, they all have flags that allow you to turn them off. And we're going to use that as a way of building trust in generative AI with our customer base. So in other words, we're taking them on that journey. We're a little here a little there, a little more build the trust, make them familiar. And then over time, we can increase their productivity by embedding it more and more and more. So I would say that you're correct. People do change slowly. But if you take them on a journey with you and show them the benefits as they go, they'll be much more apt to adopt overall.

Owen Ryan

I think Tristan, just adding to that. I mean, if you think about we rolled out an executive sponsor program at the end of last year and so talking about our top 100 customers. So a number of ours has executives. They're out meeting with the CFOs and the Corporate Controller of our largest customers. And I think there's a couple of things that come out at it. One is they are under pressure to use AI in some way, shape or form trying to figure it out. They've got some budget set aside for it, but not sure exactly where and how to use it. And I think is the conversations that we're engaging with them in which sort of help us pinpoint the places where they'll be most comfortable most comfortable where their orders will be as well because they have to sign off on it. And so that's what we're trying to drive and mitigate as we look at it and there's a question mark a couple of moments ago, but the encouraging things that we've seen at least I've seen in the first couple of months of the year, particularly March and April.
And I think about it is going out and talking with customers about their road map and they've got a BlackLine roadmap that goes out 24 to 30 months of the different products that they're sort of thinking about when they would bring them in to start working with them. And I think we've shared in the past that the way buyers behave today is different. The Big Bang projects that tended to have a much higher likelihood of failure are not the way customers are doing it any longer. They're new. They're chunking it all piece-by-piece, making sure it works can demonstrate value to others in the organization and then they go on to the next piece. And so the good news for us is have the horizon looks very nice because of these opportunities and where we sit on their roadmaps. The challenge always as you wish, it all would happen, happened sooner, but that's just not the way the world is going to operate for the foreseeable future from our vantage point.

Koji Ikeda

Thank you very much.

Operator

Steven Enders, Citi.

Steven Enders

Brian, thanks for taking the questions. I'm on for Steve Enders on. Wanted to ask about kind of the changes to the go-to-market organization. Sounds like those are playing out and well so far, if you could talk about what seems you're working and what changes there left to be made?

Owen Ryan

Yes, it's finance. I had a meeting with a slight top some of our top producers this morning about what else we need to be doing in the marketplace. And it was a really great session on ideation and things that we could we could do together how we continue to tell our story on in the marketplace. The short version of this is we feel very good about the changes into the marketing leadership team. You might have all seen yesterday we announced a new chief customer officer named it, and we knew it was going to be great. I've been following all the products has been getting on. Linkedin is clearly an executive Jimmy Choo on that is going to bring a lot of value to our customers, we're making much more progress in helping ensure that our customers get both well implemented as well as adopted in that handoff. Home is going more smooth down smoothly than maybe some time in the past and it occurred.
I think we're getting better around our collateral, differentiating the things that matter to buyers, not just the product, but it's everything else that also goes along with it. It's that customer experience, it's their confidence with security. It's when you think about it, you know, BlackLine, I think it's five of the top seven accounting firms in the world. Not only do they sell BlackLine as a provider, they use it in their own firms. That's a pretty damn compelling story. When you when you sort of want to think about things like that. And so we're trying to make sure that we're going out there.
We're continuing to tell story, not just about the great product we have and all the innovation we have, but also the other things that may make a difference. And I think the one thing that's still it's still early, but there's a huge opportunity for us is to accelerate that story of what we can do for customers around industry and the use cases and connecting those people to each other, those customers to each other as well as prospects because that is proving to be and a significant differentiator for us.

Steven Enders

So far, a lot of them do ourselves, but right?

Owen Ryan

Yes, go ahead with that focus that we're going to continue to make us easier to do business with and we're going to just keep keep driving real hard.

Steven Enders

That's great color. And then one quick follow-up. If I may the new user metrics came in a little below what we had penciled in. Maybe if you could just double-click on kind of the trends you're seeing underneath the hood and you know, it's kind of the shift to the pricing strategy. To what extent are you guys even managing business to Sika? Thank you.

Owen Ryan

Yes, accounts, this is a proxy for one aspect of growth of our business, and it did not do well in Q1. We do expect that to pick back up in the coming years. But recall that a lot of our pricing, in particular industry strategic products and some of the big ticket items are not seat priced. So so you're right about your Q1 number. And it's still again, is a great opportunity for us to expand in the financial close and the core platform, which we intend to do moving forward.

Steven Enders

Great. Thanks for taking the questions, guys.

Operator

Pat Walravens, Citizens, JMP.

Pat Walravens

Okay, great. Thank you. And so let me apologize about it because the tough question, but I think it's important to ask. So I mean and on April 11th, one stream put out a press release saying that they're at for 50 in ARR. and they grew 34% in Q1. And they also say they target the office of the CFO. So what's why is there this divergence in the result is at the part of the office of the CFO here targeting? Or is it something else? What would you say?

Owen Ryan

Yes, Pat, I think you just nailed it. It's where in the office of the CFO, the opportunities are. And so there's been a lot of spend, as you might see, and it's not just with them with one stream, but also some of the other players in the CPM space have had pretty good first quarters. If you look at where the priorities seem to be based upon the office of the CFO, and CPMs is right now. Number one doesn't mean that finance transformation where we are in the financial close and inter-company and consolidation in voice, the cash doesn't matter. It's just that particular space right now is a bit hotter, and that's where a little bit more of the spend is going. And we see it and we know it, but that's really what it is is where in the offer the CFO priorities are.

Pat Walravens

Okay, great. And is there any plan on your part to to come to get more exposure there and we're always looking at our platform and that will never stop. And we were we always are talking with our customers what they want, where they need to last week three, Mark and I hosted a customer advisory board. It was a phenomenal day of a lot of insight into the things that they they would like us to continue to focus on and build out and so just stay tuned as we continue to evolve the platform.

Therese Tucker

Thank you.

Operator

Alex Sklar, Raymond James.

Alex Sklar

Alex, please go ahead Harbor for taking the question. This is Jonathan on for Alex. I wanted to start with product innovation. I'm curious you had several big product road map launches in 2020 for accounting studio, the financial close Central Command, the Journal Risk Analyzer, just name a few. So two-part question here of the new products you're rolling out which do you think has the most potential to play the biggest swing factor to drive more near term adoption?

Therese Tucker

And if the answer is different, which are you most excited for long term through an update and what is actually, yes, you're right about the innovation roadmap. It's really been a focus of mine over the last year, and it's not just the accounting studio or the journals Risk Analyzer. It's also the new and combined version of the inter-company financial management product. And there's a lot of other things that we're doing as well in terms of FRA and consolidation. So it's sort of like asking me, which one is my favorite child, John, I think probably the one that I'm the most excited about right now.
So it could change next week is some probably the accounting studio, okay? The ability to visually orchestrate all of the different processes that are going on inside of the office of the CFO is pretty exciting and the visibility that you get into where the roadblocks are or how ridiculously complicated, sometimes people make things is pretty game changing.
Okay. On expanding that. So it includes our library of process transformation so that people can get in a real transformation in a very, very tangible results driven way is pretty cool because I'm very much about let's show the value. And so I think that one probably has the most show the value factor to it, although the journals Risk Analyzer is also pretty cool because today, auditors are asking for a full set of manual journals in order to run analytics on those and being able to get ahead of that game and know ahead of time where the anomalies are, where the key trends are, where the out of policy violations are. That's also a level of visibility that people don't have today. So those are probably my top two. But if you give me another 10 minutes, I can extol the virtues of the others and sets us up well to grow.

Alex Sklar

I appreciate the operational cash. Yes, Mike, thank you very much for the color there. I would just like to end my part again, it does.

Operator

Ryan Krieger, Wolfe Research.

Ryan Krieger

Hey, guys, thanks for sneaking me in here at the end. Just two quick ones for me on the customer side, if we look at the $1 million cohort, just a little surprising to see that number actually go down this quarter. So anything to call out there. And then on the gross retention side, can you just break down how gross retention shook out from an enterprise versus mid-market perspective and maybe how that compared to last quarter or the last couple of quarters?

Owen Ryan

Yes. Thank you. On that number that you mentioned. We had a fairly material impact on ARR in Q1 related to FX impact. And so as a result, you see a number of the over 1 million customers slide back as a result of that FX calculation. Otherwise it was flat on a year-over-year basis. On your second question, you might need to repeat that for us we've had in our having some technical difficulties, it looks like on those sites, there's yes, go ahead.
Sorry, just by roughly repeated.Yes, just on the gross retention side, if we look at the number, how did it break down on an enterprise versus mid-market basis? And how did that compare to the last quarter of the last couple of quarters?

Ryan Krieger

Thank you. Yes, our mid-market hanging in the low 90s, and that's pretty typical for us. It even ticked up a little bit in Q1 where we saw a bit of a step back is on the enterprise side in Q one, and we've talked a little bit about those in the prepared remarks at that time that has hit us in both Q4 and Q1.

Operator

Matt VanVliet, BTIG.

Matt VanVliet

Yes, thanks for taking the question here on just real quick. I guess as you're looking at the headcount over the next year plus here, now that you've backfilled a lot of the open senior positions, what is the general head count and how should we think about your opportunities and go to market to either add head count or add sort of sales support to improve efficiency and productivity there.

Owen Ryan

Thank you. Yes, where we are today, we feel we've got really strong and adequate sales capacity for not just where the market demand is today and coming out of the first part of this year, but well into the second half. So we don't expect to have to hire or build a lot of QCPR capacity. In fact, we have one of the most tenured and ramped rep forces we've ever had. And we find that to be a competitive and differentiated strategy as we're in the market with some of these great new innovative projects. So we're really proud of that team and expect to get productivity as we move through this year with the remainder of the Company.
Our goal at least in the near term and to hit our midterm target models is to continue to grow different areas of the Company, keep our pedal on the metal or metal on the pedal in the R & D as we invest in some of the initiatives that Therese is talking about and you see that already in the numbers. And then as we move forward, we'll work to drive continued operating leverage in other aspects of the business. And we've talked about where some of those are including not just our cloud and our data centers but in G&A as well.

Matt VanVliet

All right. Great. Thank you.

Operator

That does conclude the Q&A portion. I would now like to hand the call back over to Owen Ryan.

Owen Ryan

Thank you operator, and thank you, everyone, for joining the call today. We appreciate your questions. And following us as a company, we look forward to talking to you soon. Have a great rest of the day. Take care.

Operator

Thank you, and thank you for your participation in today's conference. This does conclude the program. You may now disconnect.