BLACKLINE, INC. (BL)

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with the financial statements and related notes that are included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 26, 2026 (“Annual Report on Form 10-K”). This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to, those discussed in the section entitled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.

Overview

BlackLine’s Agentic Financial Operations Platform drives digital finance transformation by empowering organizations with accurate, efficient, and intelligent financial operations. Powered by Studio360 and using intelligence powered by Verity - a comprehensive suite of embedded, auditable AI capabilities - BlackLine unifies data, streamlines processes, and delivers real-time insights. Our platform is built on an architecture that separates the system processing transactions from the system that independently validates and controls them.

The platform is comprised of four primary functional layers that work as one:

•The Unified Financial Data Foundation: Aggregates and harmonizes transactional data from disparate enterprise resource planning (“ERP”) and banking systems into a consolidated, extensible data model.

•The Auditable Trust and Governance Layer: Enforces configurable rules, permissions, and financial controls to ensure system and user actions remain traceable and compliant.

•The Event-Driven Orchestration Engine: Sequences and automates workflows in real time across systems, personnel, and artificial intelligence agents.

•The Embedded Intelligence Layer (Verity AI): Integrates machine learning, generative artificial intelligence, and agentic reasoning directly into financial workflows to assist with risk detection, proposing solutions, and automating decision-making under the direction and oversight of finance and accounting teams.

We are a holding company and conduct our operations through our wholly-owned subsidiary, BlackLine Systems, Inc.

At June 30, 2026, we had 4,260 customers, exclusive of on-premise software. Additionally, we continue to build strategic relationships with technology vendors, providers of learning language models, 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, Verity Accruals, 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.

We derived approximately 95% of our revenue from subscriptions to our cloud-based software platform and approximately 5% from professional services for the six months ended June 30, 2026. Our subscription contracts have initial non-cancellable terms of one year to three years with renewal options. The majority of new contracts in 2025 and during the six months ended June 30, 2026 carried an initial non-cancellable term of three years. In 2025, we updated our pricing model to reflect the value of our solutions based on factors such as product mix, organization size, and volumetrics (e.g., number of transactions or entities). We typically invoice subscription fees annually in advance, which are initially recorded as deferred revenue and recognized ratably over the contract term. First-year subscription fees are generally payable within 30 days of contract execution, with subsequent fees due upon renewal.

Professional services consist primarily of implementation and consulting services. Our products are available for immediate use upon granting customer access. We typically assist customers with implementation and provide consulting services to help them optimize the use of our solutions. We invoice customers for our consulting services on a time-and-materials basis and recognize that revenue as services are performed. A limited number of our

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customers are provided professional services for a fixed fee, for which we invoice in advance. The fee is initially recorded as deferred revenue and recognized on a proportional-performance basis as the services are rendered.

We sell our solutions primarily through our direct sales force, which leverages our relationships with technology vendors, professional services firms, and business process outsourcers. Our solutions integrate with SAP’s ERP systems, and SAP resells our product as SAP SolEx, for which we receive a percentage of the related revenues. We also maintain a strategic agreement with Google Cloud through which we jointly engage in selling and go-to-market activities to bring enhanced automation capabilities to customers.

Our ability to maximize the lifetime value of our customer relationships depends, in part, on the willingness of customers to purchase additional licenses and products from us. Our sales and customer success teams focus on maintaining high satisfaction and educating customers on the value and use of our full product portfolio to support account expansion.

The length of our sales cycle depends on the size of a potential customer and contract, as well as the type of solution or product being purchased. Sales cycles for global enterprise customers are generally longer than those for mid-size customers, and cycle duration increases for larger or more strategic products, such as our Intercompany solutions. As we focus on increasing average contract size and expanding adoption of strategic products, we have seen and expect the sales cycle to lengthen and remain less predictable which may contribute to variability in period-to-period results.

We have historically signed a high percentage of agreements with new customers, as well as renewal agreements with existing customers, in the fourth quarter of each year and usually during the last month of the quarter. Because a significant number of contracts have renewal terms of one year, agreements entered into late in the year typically renew during the same period in subsequent years. While this seasonality is reflected in our billings and bookings, the impact on overall revenue is minimal due to our ratable revenue recognition model.

For the quarters ended June 30, 2026 and 2025, we had revenues totaling $187.8 million and $172.0 million, respectively. We generated net income attributable to BlackLine, Inc. of $16.5 million and $8.3 million for the quarters ended June 30, 2026 and 2025, respectively.

For the six months ended June 30, 2026 and 2025, we had revenues totaling $371.0 million and $339.0 million, respectively. We generated net income attributable to BlackLine, Inc. of $24.6 million and $14.3 million for the six months ended June 30, 2026 and 2025, respectively.

Global Macroeconomic Factors

Our operating results may vary due to the impact of industry or global economic conditions on us or our customers. General macroeconomic conditions, such as political conflicts, recession, inflation or rising interest rates, an economic downturn in the U.S. or internationally, adverse business conditions and liquidity concerns, have and could continue to adversely affect demand for our products and make it difficult to accurately forecast and plan our future business activities. As a result of economic uncertainty, and protracted vendor selection processes associated with our customers’ analysis of our, and others’ AI offerings, we may see customers delay and defer purchasing decisions, which could adversely impact our near-term demand.

Key Metrics

We regularly review a number of metrics, including the following key metrics, to evaluate our business and performance, identify trends affecting our business, formulate financial projections, and make strategic decisions.

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

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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 June 30, 2026, our dollar-based net revenue retention rate declined from the quarter ended March 31, 2026, primarily due to the impact of unfavorable foreign exchange rates. Our ability to maximize the lifetime value of our customer relationships will depend, in part, on the willingness of the customer to purchase additional products from us. We rely on our customer success and sales teams to support and grow our existing customers by maintaining high customer satisfaction and educating the customer on the value our products provide.

Platform pricing ARR as a percentage of eligible ARR. Platform pricing ARR as a percentage of eligible ARR is calculated as platform annual recurring revenue 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 quarters and six months ended June 30, 2026 and 2025, no single customer accounted for more than 10% of our total revenues.

The total number of customers at June 30, 2026 declined

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Item 7.    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 2025 and fiscal 2024. For the comparison of fiscal 2024 and 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

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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.

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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.

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 o

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